Document:

Exhibit 10.2

 

	

  To:

  	

  Joseph S. Mohr

  
	

   

  	

   

  
	

  From:

  	

  David Housman

  
	

   

  	

   

  
	

  Date:

  	

  June 1, 2002

  
	

   

  	

   

  
	

  Subject:

  	

  First Amendment to Employment Offer Letter

  

 

                We

hereby agree that your Employment Offer Letter, dated September 5, 2001 and

comprised of the Offer Letter, the Inventions and Non-Disclosure Agreement and

the Non Compete and Non Solicitation Agreement (collectively, the “Offer

Letter”), be and hereby is amended effective June 1, 2002, as provided for

herein.  Except as specifically modified

herein, the terms of the Offer Letter, and all terms and conditions of your

employment with Variagenics, Inc. (including any of its successors or assigns,

the “Company”) shall remain in full force and effect.  This first amendment to your  Offer

Letter shall be referred to herein as the “Amendment.”

 

                Effective

June 1, 2002, the Offer Letter is revised by adding the following to the

conclusion of Paragraph “(a)”:

 

                “Vesting

on a Change in Control.

 

1)              Upon the

effective date of a Change in Control, 50% of the then outstanding unvested

options to purchase shares of common stock of the Company held by you as of

such date (whether granted to you prior to or after execution of this

Amendment) shall be immediately vested and shall be otherwise exercisable in

accordance with the terms of the stock option agreement pursuant to which they

were granted.  The remaining 50% of the

then outstanding unvested options shall vest monthly in six equal installments

beginning with the first day of the month following the effective date of the

Change in Control; provided that, all then remaining outstanding unvested

options shall immediately vest in their entirety if the Company terminates your

employment without Cause after the effective date of the Change in Control but

prior to the end of the six month period following such Change in Control.  Notwithstanding the prior sentence, your

employment with the Company remains an at-will relationship such that either

you or the Company may terminate the relationship at any time with or without

Cause or notice.  For purposes of the

Offer Letter, as modified by this Amendment, Cause shall be defined as set

forth in Section 11 of the Variagenics, Inc. Amended 1997 Employee, Director

and Consultant Stock Option Plan.

2)              Change in

Control Defined. A ‘Change in Control’ shall be deemed to have

occurred if (i) there is a sale or transfer of all or substantially all of the

assets of the Company in one or a series of transactions; (ii)  any ‘person,’ as such term is used in

Section 13(d) of the Securities Exchange Act of 1934, as amended (or any

successor provision) (the ‘Exchange Act’), together with all ‘affiliates’ and

‘associates’ (as such terms are defined in Rule 12b-2 under the Exchange Act or

any successor provision) of such person, shall become the ‘beneficial owner’ or

‘beneficial owners’ (as defined in Rules 13d-3 and 13d-5 under the Exchange Act

or any successor provision), directly or indirectly, of securities of the

Company representing in the aggregate thirty percent (30%) or more of either

(1) the then

 

1

                        outstanding

shares of common stock of the Company or (2) the combined voting power of all

then outstanding securities of the Company having the right under ordinary

circumstances to vote in an election of the Board of Directors of the Company

(hereafter referred to as an ‘Acquisition’); provided, that,

notwithstanding the foregoing, an Acquisition shall not be deemed to have

occurred for purposes of this clause (ii) solely as the result of an

acquisition of securities by the Company which, by reducing the number of

shares of common stock or other voting securities outstanding, increases (x)

the proportionate number of shares of common stock beneficially owned by any

person to thirty percent (30%) or more of the common stock then outstanding or

(y) the proportionate voting power represented by the voting securities

beneficially owned by any person to thirty percent (30%) or more of the

combined voting power of all then outstanding voting securities; or (iii) there

is a merger or consolidation between the Company and an entity other than a

subsidiary of the Company in which the Company is not the continuing or

surviving corporation and pursuant to which the holders of the Company’s voting

stock immediately prior to such merger or consolidation would not be the

holders immediately after such merger or consolidation of at least 50% of the

voting stock of the continuing or surviving corporation.

3)              All agreements

between you and the Company governing the grant to you of stock options shall

be and hereby are amended to the extent necessary to effectuate the provisions

of this Agreement.  You acknowledge that

the acceleration of Incentive Stock Options (“ISOs”) granted pursuant to section

422 of the Internal Revenue Code (the “Code”) may cause certain of those

options to fail to satisfy section 422(d) of the Code, which may result in less

favorable individual tax treatment on such option.  You understand and acknowledge such result and agree to the

conversion, as necessary, of ISOs to non-qualified stock options as a

precondition to the acceleration of the option grant described herein.  ISOs with the least difference between

exercise price and fair market value on the date of the conversion shall be

converted to non-qualified options first. 

In all other respects all such agreements between you and the Company

shall remain in full force and effect, and shall be administered in accordance

with their terms.

4)              Notwithstanding

anything provided herein, if you are considered to be a ‘disqualified

individual’ (as defined in Section 280G of the Code), and the acceleration of

vesting of options together with any other payments which you have a right to

receive from the Company (or its affiliates and subsidiaries) in the event of a

Change in Control (collectively the “Severance Compensation”), would constitute

a “parachute payment” (as defined in Section 280G(b)(2) of the Code), the

Severance Compensation shall be reduced. 

The reduction shall be in an amount so that the present value of the

total amount received by you from the Company will be one dollar ($1.00) less

than three (3) times the Base Amount (as defined in Section 280G of the Code)

so that no portion of the amounts received by you shall be subject to the

excise tax imposed by Section 4999 of the Code (excise tax).

The

determination as to whether any reduction in Severance Compensation is

necessary and the amount of any such reduction shall be made by the Company’s

independent public accountants (the “Accounting Firm”) which shall provide

detailed supporting calculations both to the Company and to you within fifteen

(15) business days of the date payment is made.  Any such determination by the Accounting Firm shall be conclusive

and binding upon you and the Company. 

You shall determine which part of the Severance Compensation shall

 

2

be

eliminated or reduced consistent with the requirements of this section and you

will notify the Company promptly in writing; provided, that if you do

not make such a determination within ten (10) business days of the receipt of

the calculations made by the Accounting Firm, the Company shall determine which

part of the Severance Compensation shall be eliminated or reduced consistent

with the requirements of this section and shall notify you promptly in writing

of such election.

If

through error or otherwise you should receive payments under this Agreement,

together with other payments you have the right to receive from the Company, in

excess of one dollar ($1.00) less than three times your Base Amount, you shall

immediately repay the excess to the Company upon notification that an

overpayment has been made.”

 

                It is understood and agreed that

this Amendment shall constitute a binding agreement upon execution by both

parties, and represents (along with the Offer Letter) the entire agreement and

understanding between us with respect to the subject matter contained herein.

If the terms of this Amendment are acceptable to you, please sign where indicated

below.  This Amendment is executed as an

instrument under seal as of the date indicated below.

 

 

 

	

   

  	

   

  	

   

  	

   

  	

  VARIAGENICS, INC.

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

  By:

  	

  /s/David Housman

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

  David

  Housman

  
	

  Acknowledged

  and Agreed:

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  /s/Joseph

  S. Mohr

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Joseph S. Mohr

  	

   

  	

   

  	

   

  	

   

  	

   

  

 

3Exhibit

10.1

 

HILTON

LODGENET AGREEMENT

 

This Hilton LodgeNet Agreement (the “Hilton LodgeNet

Agreement”) is entered into as of this 2nd day of August, 2002, by and between

Hilton Hotels Corporation (“Hilton”) and LodgeNet Entertainment Corporation

(“LodgeNet”).

 

WHEREAS, Hilton and LodgeNet are parties to an

InnMedia LLC Operating Agreement, dated as of October 9, 2000, as amended by a

letter agreement of the same date (as amended, the “Operating Agreement”);

 

WHEREAS, pursuant to the Operating Agreement, Hilton

and InnMedia LLC (“InnMedia”) entered into a Content Carriage Agreement dated

as of October 9, 2000 (the “CCA”);

 

WHEREAS, pursuant to the Operating Agreement, LodgeNet

and InnMedia entered a Distribution and Carriage Agreement dated as of October

9, 2000 (the “DCA”); 

 

WHEREAS, in addition to the Operating Agreement,

LodgeNet and Hilton entered into Master Services Agreement dated as of October

9, 2000 (the “MSA”);

 

WHEREAS, pursuant to the Operating Agreement, LodgeNet

and InnMedia entered into a Services Agreement dated as of October 9, 2000 (the

“Services Agreement”);

 

WHEREAS, Hilton, LodgeNet and InnMedia are entering

into an agreement providing for the dissolution of InnMedia and resolving

various issues that have arisen with respect to InnMedia (the “InnMedia Hilton

LodgeNet Agreement”);

 

WHEREAS, because the CCA, the DCA, and the Services

Agreement are being terminated with the execution of the InnMedia Hilton

LodgeNet Agreement dated this same date, and Hilton and LodgeNet now desire to

modify and clarify the terms of their commercial relationship going forward;

 

NOW, THEREFORE, the parties hereby agree as follows:

 

1.        Amendment to MSA. 

Concurrently with the execution of this Hilton LodgeNet Agreement by all

parties, Hilton and LodgeNet shall enter into an Amendment to Master Services

Agreement in the form attached hereto as Exhibit A (the “Amendment”).

 

2.        Payments to Hilton.

 

2.1.       Amount and Timing of Payments, LodgeNet

shall pay to Hilton $9 million (the “Payment Amount”) in six installments on

the following schedule:

 

2.1.1.       $1 million upon the execution of this

Hilton LodgeNet Agreement by all parties.

 

2.1.2.       $1.5 million on or before October 31,

2003;

 

2.1.3.       $1.5 million on or before October 31,

2004;

 

2.1.4.       $1.25 million on or before October 31,

2005;

 

1

 

2.1.5.       $1.25 million on or before October 31,

2006;

 

2.1.6.       $2.5 million on or before October 31,

2007.

 

2.1.7.       The payments specified above are made in

consideration of the following:

 

a.          $8 million as consideration for the acquisition by LodgeNet

of the following rights, assets and intangibles: Subject to the terms of the

MSA, as amended, the right to exploit the New Media business previously engaged

in by InnMedia both within the Hilton room base and the LodgeNet general room

base; and the opportunity to further develop the New Media business.  This includes, without limitation, the

opportunity to provide New Media Services to Hilton, as provided under the

MSA.  In addition, LodgeNet believes

that it will derive significant competitive and market benefits by being a

“one-stop” provider of all television-based video and internet services to the

lodging industry.

 

b.         $1 million as consideration for the six-month extension of

the term of certain Hotel Service License Agreements pursuant to the Amendment

and for the economic benefits granted LodgeNet pursuant to Section 4 of the

Amendment.

 

c.          In addition, LodgeNet has released claims against InnMedia,

which LodgeNet values at $2.4 million in net unpaid fees, in connection with

the dismissal of that certain lawsuit, as set forth in the InnMedia Hilton

LodgeNet Agreement.

 

2.2.       No Offset.  LodgeNet shall under no circumstances be permitted to offset any

of the foregoing payment obligations against any claims LodgeNet may have

against Hilton or any obligations Hilton may owe to LodgeNet, whether by way of

set-off, recoupment or otherwise.

 

2.3.       Default.

 

2.3.1.       Event of Default.  An “Event of Default” shall occur (i) in the

event LodgeNet fails to make any payment in full on or before its due date and

LodgeNet fails to cure such payment default within five days after written

notice from Hilton, or (ii) in the event LodgeNet fails to comply with

covenants referred to in Section 19.3 of the MSA, as amended, and LodgeNet does

not remedy such failure within ten (10) days thereafter.

 

2.3.2.       Acceleration.  If any Event of Default occurs, then each outstanding installment

of the Payment Amount shall become immediately due and payable without further notice

of any kind.

 

2.3.3.       Interest.  LodgeNet agrees that, upon and following the occurrence of any

Event of Default, it will pay interest on the remaining unpaid balance of the

Payment Amount at the rate of 15% per annum, compounded monthly, or the maximum

rate permitted by law, whichever is less, from the date of the Event of Default

through and including the date all of the Payment Amount plus applicable

interest has been paid in full.

 

2.3.4.       Hilton Right of Offset.  Upon and following an Event of Default, and

continuing until the entire Payment Amount plus applicable interest has been

paid, Hilton shall have the right to offset and withhold payment of any amounts

owing to LodgeNet under the MSA, and to direct any or all Hilton-owned

Participating Hotels to withhold such payments.  Any such offset or withholding of payment shall not constitute a

breach of or default under the MSA or any Hotel Service License Agreement or

other agreement entered into between LodgeNet and any Hilton-owned

Participating Hotel.

 

2

 

2.3.5.       LodgeNet Equipment.  Upon and following an Event of Default, and

continuing until the entire Payment Amount plus applicable interest has been

paid, LodgeNet shall have no right to remove or interfere with any LodgeNet

Equipment (as defined in the MSA) at any Participating Hotel (as defined in the

MSA) absent the written consent of Hilton or such Participating Hotel, which

consent may be withheld in Hilton’s or such Participating Hotel’s discretion.  The Participating Hotel in its sole

discretion may continue to use any and all LodgeNet Equipment during the

pendency of any default.  During any

such default, LodgeNet shall continue to provide all services required under

the MSA and/or any Hotel Services Licensing Agreement.

 

2.3.6.       Right of Whole or Partial Termination of

the MSA or Hotel Services License Agreements. 

Notwithstanding anything to the contrary contained in the MSA, upon and

following an Event of Default Hilton shall have the right to terminate the MSA,

and any Participating Hotel shall have the right to terminate its Hotel

Services License Agreement with LodgeNet, in each case without any further

liability to LodgeNet arising out of such termination.

 

2.3.7.       Cumulative Remedies.  Hilton’s rights as described herein upon and

following an Event of Default are cumulative and the exercise by Hilton of any

of its rights shall not preclude it from exercising any other right provided

for herein or otherwise available to Hilton under applicable law.  Any delay by Hilton in exercising any of the

rights available to it upon an Event of Default shall not constitute a waiver

or preclude it from later exercising such right.

 

2.4.       Change of Control.  Upon a Change of Control (as defined in

Schedule G to the MSA) of LodgeNet, and the surviving entity or the entity

controlling the surviving entity (i) is a competitor of Hilton in its core

lodging business, (ii) does not possess the same or greater economic viability

as LodgeNet currently possesses, (iii) is of such character that its reputation

could reasonably be expected to adversely affect or otherwise harm Hilton’s

business or reputation, (iv) lacks the operational or technical expertise

reasonably necessary to provide the Services, or (v) is an entity affiliated

with On Command or Liberty Media and the Change in Control occurs before

November 1, 2005 or before Hilton has been paid $5.25 million pursuant to

paragraph 2.1 above, the entire unpaid Payment Amount shall be accelerated and

shall become immediately due and payable. 

The failure by LodgeNet to pay such amount in full within three business

days following a Change of Control shall constitute an Event of Default.

 

2.5.       Future Hotels.  Upon an Event of Default, any obligations Hilton may have pursuant

to Sections 2.1, 2.2, and 2.3 of the MSA to deliver, recommend or support the

installation or expansion of LodgeNet VOD Services in Owned, Managed or

Licensed Hotels, and any obligations Hilton may have under Schedule H of the

MSA, shall terminate.

 

3.        Joint Drafting.  Each

party has cooperated and participated equally in the drafting of this Hilton

LodgeNet Agreement.  In the event any

construction of this Hilton LodgeNet Agreement is required, each of the parties

shall be deemed equally responsible for its preparation and drafting.

 

4.        Entire Agreement. 

This Hilton LodgeNet Agreement, including any letters delivered in

connection herewith and the Exhibits to be executed by the parties pursuant to

this Hilton LodgeNet Agreement, constitute the entire understanding of the

parties concerning the subjects contained herein and supersede any and all

prior or contemporaneous representations, promises, agreements or

understandings, whether written or oral, relating to its subject matter.  Each party to this Hilton LodgeNet Agreement

represents and warrants to the other that in entering into this Hilton LodgeNet

Agreement it has not relied upon any representations, promises, agreements or

understandings not contained in this Hilton LodgeNet Agreement.

 

5.        Amendment.  This

Hilton LodgeNet Agreement may not be amended except in a writing signed by all

parties.

 

3

 

6.        Attorneys’ Fees.  In

the event any party to this Hilton LodgeNet Agreement is required to take any

action to enforce its rights hereunder as a result of a breach by any other

party, it shall be entitled to recover from such breaching party its reasonable

attorneys’ fees, in addition to any other relief to which it is entitled.

 

7.        Counterparts and Facsimile Signatures.  This Hilton LodgeNet Agreement may be

executed in counterparts, but shall become effective and enforceable only when

both parties have signed this Hilton LodgeNet Agreement.  Any signature delivered by facsimile shall

be binding to the same extent as a manually signed original.

 

8.        Governing Law.  This

Hilton LodgeNet Agreement shall be governed by the internal laws of the State

of California, without resort to its choice of law principles.

 

9.        Choice of Forum.  Any

dispute arising under or relating to this Hilton LodgeNet Agreement shall be

brought exclusively in Los Angeles, California.

 

10.      Public Statements.  Hilton and LodgeNet shall each have the

right to issue public statements announcing this Hilton LodgeNet Agreement in

substantially the form attached hereto as Exhibit B.  Except to the extent legally required, no party shall make any

public statement about this Hilton LodgeNet Agreement or the business

relationship between Hilton and LodgeNet that is inconsistent with the description

contained in Exhibit B.

 

11.      Notices. 

All notices to be given pursuant to this Hilton LodgeNet Agreement shall

be provided in writing and delivered by overnight delivery and facsimile,

addressed as follows:

 

If to Hilton:

 

Hilton Hotels Corporation

9336 Civic Center Drive

Beverly Hills, CA 90210

Attn:  General

Counsel

Fax: 

310-205-7677

 

If to LodgeNet:

 

LodgeNet Entertainment Corporation

3900 Innovation Street

Sioux Falls, SD 57107

Attn:  Chief

Executive Officer

Fax: 

605-988-1771

 

and to:

 

Attn:  General

Counsel

Fax: 

605-988-1323

 

12.      Assignment.  LodgeNet may not assign this Hilton LodgeNet Agreement or any of

its obligations under this Hilton LodgeNet Agreement without Hilton’s prior

written consent, which may be withheld in Hilton’s sole discretion.  Any attempted assignment by LodgeNet in

violation of this provision shall constitute an Event of Default.  Hilton may freely assign its right to

receive the Settlement Payment, in whole or in part.  This Hilton LodgeNet Agreement shall be binding upon the parties

as well as their successors and assigns.

 

4

 

13.      Representations and Warranties.  Each party represents and warrants to the

other as follows: (i) it has the authority to enter into this Hilton LodgeNet

Agreement and no further consents or approval are required, (ii) the individual

executing this Hilton LodgeNet Agreement on its behalf is authorized to do so,

and (iii) this is a binding agreement, enforceable against such party in

accordance with its terms.

 

 

IN WITNESS WHEREOF, the parties have caused this

Hilton LodgeNet Agreement to be executed as of the date first above written.

 

	

  HILTON HOTELS CORPORATION

  	

   

  	

   

  	 

	

   

  	

   

  	

   

  	 

	

  /s/ Dieter Huckestein

  	

   

  	

   

  	

   

  
	

  Dieter Huckestein

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	 

	

  LODGENET ENTERTAINMENT CORPORATION

  	

   

  	

   

  	 

	

   

  	

   

  	

   

  	 

	

  /s/ Scott C. Petersen

  	

   

  	

   

  	

   

  	 

	

  Scott C. Petersen

  	

   

  	

   

  	

   

  	 

						

 

 

5

 

 

 

EXHIBIT

A

 

Form of Amendment to

Master Services Agreement

 

[See

Exhibit 10.2 to this Form 8-K]

 

6

EXHIBIT

B

 

 

[See

Exhibit 99.1 to foRm 8-K filed By registrant on August 5, 2002]

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