-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EhzJBXEyuihb+rgkLfJ5uh51NICfYTMHsjM+e91nBh15poRdXgfW9WYKkjLLH9nA SILFyNCJq9vJ4oPTrPMj0Q== 0000891092-07-001491.txt : 20070417 0000891092-07-001491.hdr.sgml : 20070417 20070417171315 ACCESSION NUMBER: 0000891092-07-001491 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20061231 FILED AS OF DATE: 20070417 DATE AS OF CHANGE: 20070417 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DYNABAZAAR INC CENTRAL INDEX KEY: 0001053676 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 043351937 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-29423 FILM NUMBER: 07771579 BUSINESS ADDRESS: STREET 1: 888 SEVENTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 212-974-5730 MAIL ADDRESS: STREET 1: 888 SEVENTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10019 FORMER COMPANY: FORMER CONFORMED NAME: FAIRMARKET INC DATE OF NAME CHANGE: 19991209 10-K/A 1 e26966_10ka.txt FORM 10-K/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K/A Amendment No. 1 [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER 000-29423 DYNABAZAAR, INC. (Exact name of registrant as specified in its charter) DELAWARE 04-3351937 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 888 SEVENTH AVENUE, NEW YORK, NY 10019 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (212) 974-5730 Securities Registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to COMMON STOCK, $0.001 PAR VALUE Section 12(g) of the Act: (Title of each class) ------------- Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X] Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 and Section 15(d) of the Act. Yes [ ] No [X] Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in the definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [X] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X] As of June 30, 2006, the aggregate market value of the registrant's voting stock held by non-affiliates was approximately $8,884,408 based on the closing sales price of the registrant's common stock as reported on the Over-the-Counter Bulletin Board as of such date. The number of shares outstanding of the registrant's common stock as of March 14, 2007 was 23,691,756. DOCUMENTS INCORPORATED BY REFERENCE The Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2006, which was filed with the Securities and Exchange Commission on April 4, 2007. Dynabazaar, Inc. (the "Company" or "Dynabazaar") hereby amends and restates in its entirety each of the following items of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2006 (the "Original Form 10-K") filed with the Securities and Exchange Commission (the "SEC") on April 4, 2007. This Amendment No. 1 on Form 10-K/A to the Annual Report on Form 10-K filed on April 4, 2007 does not reflect any events occurring after the filing of the Original Form 10-K, and does not modify or update the disclosures therein in any way other than as required to reflect the amendments described above and set forth below. Terms used but not defined herein have the meanings given to them in the Original Form 10-K. i DYNABAZAAR, INC. FORM 10-K/A FOR THE YEAR ENDED DECEMBER 31, 2006 PAGE ---- PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE......... 1 ITEM 11. EXECUTIVE COMPENSATION......................................... 4 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS................... 12 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE........................................ 15 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES......................... 16 PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES..................... 17 SIGNATURES................................................................. 19 ii PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Directors Our board of directors (the "Board") is currently comprised of three directors. Each Board member holds office for a term of three years or until his or her respective successor has been duly elected and qualified. Our Board is divided into three classes, consisting of one Class I director (Raymond Steele); one Class II director (Rory J. Cowan); and one Class III director (James A Mitarotonda). Set forth below is certain information regarding the directors of Dynabazaar, Inc. Name Age Position with the Company Director Since - ------------------------ --- ------------------------- -------------- James A. Mitarotonda.... 52 President, Chief Executive 2003 Officer and Director Rory J. Cowan........... 54 Chairman of the Board of 2001 Directors(1)(2)(3) Raymond Steele.......... 72 Director(1)(2)(3) 2004 - ---------- (1) Member of Audit Committee (2) Member of Nominating and Corporate Governance Committee (3) Member of Compensation Committee Mr. Mitarotonda has served as one of our directors since September 2003 and as our President and Chief Executive Officer since May 2006. He also served as our President and Chief Executive Officer from January 2004 to December 17, 2004. Mr. Mitarotonda is Chairman of the Board, President and Chief Executive Officer of Barington Capital Group, L.P., an investment firm that he co-founded in November 1991. Mr. Mitarotonda is also Chairman of the Board, President and Chief Executive Officer of Barington Companies Investors, LLC, the general partner of Barington Companies Equity Partners, L.P., a small capitalization value fund. In addition, he is the Chairman of the Board, President and Chief Executive Officer of Barington Offshore Advisors II, LLC, the investment advisor of Barington Companies Offshore Fund, Ltd., a small capitalization value fund. Mr. Mitarotonda is also a director of The Pep Boys - Manny, Moe & Jack (NYSE:PBY) and A. Schulman, Inc. (NASDAQ:SHLM). He also has served as L Q Corporation, Inc.'s Co-Chief Executive Officer and Co-Chairman from April 2003 to May 2004, its sole Chief Executive Officer from May 2004 to October 2004, a director from September 2002 through October 2006 and as its sole Chairman from May 2004 to October 2006. In May 1988, Mr. Mitarotonda co-founded Commonwealth Associates, an investment banking, brokerage and securities trading firm. Mr. Mitarotonda served as Chairman of the Board and Co-Chief Executive Officer of JMJ Management Company Inc., the general partner of Commonwealth Associates. Mr. Cowan has served as one of our directors since March 2001. Mr. Cowan is the founder of Lionbridge Technologies, Inc. ("Lionbridge"), a provider of globalization products and services for worldwide deployment of technology and information-based products, where he has served as Chairman of the Board and Chief Executive Officer since September 1996. From September 1996 to March 2000, Mr. Cowan also served as President of Lionbridge. Before founding Lionbridge, Mr. Cowan served as Chief Executive Officer of Interleaf, Inc., a document automation software services company, from October 1996 to January 1997. From May 1995 to June 1996, Mr. Cowan served as Chief Executive Officer of Stream International, Inc., a software and services provider and a division of R.R. Donnelley & Sons ("R.R. Donnelley"), a provider of commercial print and print-related services. Mr. Cowan joined R.R. Donnelley in 1988 and served most recently as Executive Vice President from 1991 to June 1996. Before joining R.R. Donnelley, Mr. Cowan was founder of CSA Press, a software duplication firm, and held positions at Compugraphic Corporation, an automated publishing hardware firm. Mr. Steele has served as one of our directors since December 2004. Mr. Steele is a retired businessman. Prior to his retirement, he held various senior positions such as Executive Vice President of Pacholder Associates, Inc. (from 1 August 1990 until September 1993), Executive Advisor at the Nickert Group (from 1989 through 1990), and Vice President, Trust Officer and Chief Investment Officer of the Provident Bank (from 1984 through 1988). Mr. Steele currently serves on the board of directors of American BankNote Corporation (OTCBB:ABNTQ), Globix Corporation (AMEX:GEX), Motient Corporation (PNK:MNCP) and Horizon Offshore, Inc. (PNK:HOFF). He is also a member of the board of directors of Newcastle Holdings, Inc. There are no family relationships among any of our directors or executive officers. Executive Officers As of March 29, 2007, the following persons were serving as our executive officers: Name Age Position with the Company Held Office Since - ------------------------ --- ------------------------- ----------------- James A. Mitarotonda.... 52 President, Chief Executive 2006 Officer and Director Melvyn Brunt............ 63 Chief Financial Officer 2004 and Secretary Sebastian E. Cassetta... 57 Chief Executive Officer 2006 of Costar James D. Pritchett...... 60 President of Costar 2006 Mr. Mitarotonda's biographical information is detailed above. Mr. Mitarotonda has served as our President and Chief Executive Officer since May 2006, replacing William J. Fox who resigned as President and Chief Executive Officer and from the Board of Directors during that same month. Mr. Mitarotonda also served as our President and Chief Executive Officer from January 2004 to December 17, 2004. Mr. Brunt has served as our Chief Financial Officer and Secretary since January 2004. He has also served as Chief Financial Officer of Barington Capital Group, L.P. since January 2002 and as Chief Financial Officer and Secretary to L Q Corporation, Inc. (OTCBB:LQCI.OB) since April 2003. In addition, from January 2002 to May 2004, he served as Chief Financial Officer and Secretary to MM Companies, Inc., now known as George Foreman Enterprises, Inc. (PNK:GFME.PK). From 1985 to 2001, Mr. Brunt was a Director and Chief Financial Officer of Davies Turner & Co., an international freight forwarding company. From 1996 to 2001, Mr. Brunt was President of Air Mar, Inc. and a Director of TCX International Inc. Both of those companies provided logistics support services to a wide variety of importing and exporting companies. Mr. Cassetta has served as the Chief Executive Officer of Costar Video Systems, LLC, a wholly-owned subsidiary of the Company ("Costar"), since June 2006. He has also served as a director, President and Chief Executive Officer of L Q Corporation, Inc. (OTCBB:LQCI) since May 2006. Mr. Cassetta was the Chairman and Chief Executive Officer of SmartServ Online, Inc., a company specializing in the delivery of content to desktop and wireless devices, from August 1992 to July 2003. Prior to that, he was the President of Burns and Roe Securacom Inc., a company specializing in engineering and large-scale systems integration, and a director and vice president of Brinks Inc., an international security company. He is a former Special Assistant to New York Governor and Vice President Nelson A. Rockefeller. Mr. Cassetta currently also serves as a Senior Managing Director and the Chief Operating Officer of Barington, a position he has held since August 2003. Mr. Pritchett has served as the President of Costar since June 2006. Prior to that, he was the President of Video Solutions Technology Center, LLC and a director of Southern Imaging, Inc. from March 2001 until June 2006. Mr. Pritchett served as an independent business consultant from 1999 until March 2001. From 1988 until March 1999, Mr. Pritchett was an executive officer of Ultrak, Inc., a publicly-traded company that manufactured and sold products for the security and surveillance and industrial video markets, serving as the Executive Vice-President and Chief Operating Officer from 1988-1997 and as the President and Chief Executive Officer from 1997 until March 1999. 2 Audit Committee The Company has a separately-designated standing audit committee. The members of the audit committee are Raymond Steele and Rory Cowan. The Board has determined that each member is "independent" under the Nasdaq listing standards and the applicable rules of the SEC, that each member is "financially literate" under the Nasdaq's listing standards and that Mr. Steele qualifies as an Audit Committee Financial Expert under the applicable rules of the SEC. The Audit Committee hires our independent accountants and is charged with the responsibility of overseeing our financial reporting process. In the course of performing its functions, the Audit Committee reviews, with management and the independent accountants, our internal accounting controls, the annual financial statements, the report and recommendations of the independent accountants, the scope of the audit and the qualifications and independence of the auditors. A copy of the Audit Committee charter is available upon request to the following address: Dynabazaar, Inc., 888 Seventh Avenue, 17th Floor, New York, NY 10019 Attn: Secretary. Nominating and Corporate Governance Committee The Nominating and Corporate Governance Committee currently consists of Raymond Steele and Rory Cowan. The Board has determined that each member is independent under the Nasdaq's listing standards. The Committee is responsible for identifying individuals who are qualified to become directors, recommending nominees for membership on the Board and committees of the Board, promulgating minimum qualifications that it believes must be met by director nominees, establishing policies for considering director candidates recommended by stockholders, implementing procedures for stockholders in submitting recommendations for director candidates and developing and recommending to the Board corporate governance guidelines. The Committee has established the following minimum qualifications for prospective nominees: (1) high accomplishments in his or her respective field, with superior credentials and recognition, (2) if applicable, a demonstrated history of actively contributing at board meetings, (3) high personal and professional integrity, exceptional ability and judgment, and effectiveness, in conjunction with the other nominees to the Board, in serving the long-term interests of the stockholders and (4) sufficient time and availability to devote to the affairs of the Company, particularly in light of the number of boards on which the nominee may serve. In addition, the Committee may consider a variety of other qualities and skills, including whether the nominee has direct experience in the industry or in the markets in which we operate and the definition of independence within the meaning of Rule 4200 of the Nasdaq listing standards. Nominees must also meet any applicable requirements of the SEC's regulations, state law and our charter and by-laws. The Committee has established a process for identifying and evaluating nominees for director. The Committee may solicit recommendations from any or all of the following sources: non-management directors, the Chief Executive Officer, other executive officers, third-party search firms or any other source it deems appropriate. The Committee will then, without regard to the source of the initial recommendation of such proposed director candidate, review and evaluate the qualifications of any such proposed director candidate, and conduct inquiries it deems appropriate. Upon identifying individuals qualified to become members of the Board, consistent with the minimum qualifications and other criteria approved by the Board from time to time, and provided that we are not legally required to provide third parties with the ability to nominate individuals for election as a member of the Board, the Committee will then recommend that the Board select the director nominees for election at each annual meeting of stockholders. The Committee will consider director candidates recommended by our stockholders. A stockholder wishing to propose a nominee should submit a recommendation in writing to our Secretary at least 120 days before the mailing date for proxy material applicable to the annual meeting for which such nomination is proposed for submission, setting forth, among other things required by the Committee's charter, (i) the name, age, business address and, if known, residence address of each nominee, (ii) the principal occupation or employment of each such nominee for the past five years, (iii) the consent of the proposed director candidate to be named in the proxy statement relating to our annual meeting of stockholders and to serve as a director if elected at such annual meeting and (iv) any additional information regarding director nominees pursuant to the rules of the SEC. The Committee anticipates that it would use these sources as well as stockholder recommendations to identify candidates in the future. 3 Copies of the Nominating and Corporate Governance Committee charter and the Corporate Governance Guidelines are available upon request to the following address: Dynabazaar, Inc., 888 Seventh Avenue, 17th Floor, New York, NY 10019 Attn: Secretary. Compensation Committee The Compensation Committee currently consists of Raymond Steele and Rory Cowan. The Board has determined that each member is independent under the Nasdaq's listing standards. The Compensation Committee sets the compensation of our Chief Executive Officer and other senior executives, administers our stock option plans and executive compensation programs, determines eligibility for, and awards under, such plans and programs, and makes recommendations to the Board with regard to the adoption of new employee benefit plans, stock option plans and executive compensation plans. A copy of the Compensation Committee charter is available upon request to the following address: Dynabazaar, Inc., 888 Seventh Avenue, 17th Floor, New York, NY 10019 Attn: Secretary. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Exchange Act requires our executive officers and directors and persons who beneficially own more than 10% of our common stock to file reports of ownership and changes in ownership with the SEC and to furnish copies to us. Based upon a review of the Forms 3, 4 and 5 furnished to us and certain representations made to us, we believe that, for the fiscal year ended December 31, 2006, all reports required by Section 16(a) of the Exchange Act to be filed by our officers and directors and 10% beneficial owners were filed on a timely basis. Code of Business Conduct and Ethics The Company has adopted a Code of Business Conduct and Ethics which applies to directors, officers, senior management and certain other employees of the Company, including its principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. The Company shall provide a copy of its Code of Business Conduct and Ethics to any person without charge, upon request. Requests for a copy of the Code of Business Conduct and Ethics can be made in writing to the following address: Dynabazaar, Inc., 888 Seventh Avenue, 17th Floor, New York, New York 10019, Attn: Secretary. ITEM 11. EXECUTIVE COMPENSATION Compensation Discussion and Analysis We compensate our executive management through a combination of base salaries, merit based performance bonuses and long-term equity compensation. Our executive compensation is structured to align management's incentives with the long-term interests of our shareholders, and to maximize profitability and shareholder value. We adhere to the following compensation policies, which are designed to support the achievement of our business strategies: o Our executive compensation should strengthen the relationship between compensation, both cash and equity-based, and performance by emphasizing variable compensation that is dependent upon the successful achievement of corporate and individual performance goals. o A portion of each executive's total compensation should be comprised of long-term compensation to focus management on the long-term interests of shareholders. o An appropriately balanced mix of incentive cash and equity-based compensation aligns the interests of our executives with that of our shareholders. The equity-based component promotes a continuing focus on building profitability and shareowner value. 4 o Total compensation should enhance our ability to attract, retain, motivate and develop knowledgeable and experienced executives upon whom, in large part, our successful operation and management depends. A core principle of our executive compensation is the belief that compensation paid to executive officers should be closely aligned with our near- and long-term success, while simultaneously giving us the flexibility to recruit and retain qualified key executives. Our compensation program is structured so that it is related to our stock performance and other factors, direct and indirect, which may influence long-term shareholder value. As a result, we have designed our executive compensation to include the following elements: o Annual Base Salaries; o Annual Performance-Based Cash Bonuses; and o Long-Term Equity-Based Compensation. We utilize each of these elements of executive compensation to ensure proper balance between our short- and long-term success as well as between our financial performance and shareholder return. In this regard, we believe that the executive compensation for our named executive officers is consistent with our financial performance and the performance of each named executive officer. Elements of Compensation Base Salaries The base salaries of the Company's named executive officers are evaluated annually. In evaluating appropriate pay levels and salary increases for such officers, the Compensation Committee considers achievement of the Company's strategic goals, level of responsibility, individual performance and time commitment, and internal equity and external pay practices. In addition, the Committee considers the scope of the executives' responsibilities, taking into account to the extent deemed appropriate competitive market compensation for similar positions, the seniority of the individual, our ability to replace the individual and other primarily judgmental factors deemed relevant by our Board of Directors and Compensation Committee. The Compensation Committee and our Board have also taken into account the contribution certain executive officers made to the Acquisition as well as the fact that, from September 2003 until June 2006, we did not operate any business. In 2006, James Mitarotonda, our President and Chief Executive Officer, agreed to not be paid a base salary, Melvyn Brunt, our Chief Financial Officer, was paid a salary of $10,500, Sebastian Cassetta, the Chief Executive Officer of Costar, was paid a salary of $35,000 and James Pritchett, the President of Costar, was paid a salary of $78,978. Bonuses Bonus awards are designed to focus management attention on achieving key operational and performance goals for the current fiscal year. Cash bonus awards are distributed based upon the Company and the individual's performance. The final determination for all bonus payments is made by our Compensation Committee. The Compensation Committee and our Board have also taken into account the contribution certain executive officers made to the Acquisition as well as the fact that, from September 2003 until June 2006, we did not operate any business. In 2006, James Mitarotonda, our President and Chief Executive Officer, agreed to not be paid a bonus, Melvyn Brunt, our Chief Financial Officer, was paid a bonus of $5,000, Sebastian Cassetta, the Chief Executive Officer of Costar, was paid a bonus of $35,000 and James Pritchett, the President of Costar, was not paid a bonus but received an incentive payment of $2,660 under the terms of the employment agreement between him and Costar. Equity Incentive Grants Long-term incentives also comprise an important component of our executives' total compensation package. These incentives are designed to motivate and reward executives for maximizing shareowner value and encourage the long-term employment of key employees. 5 To date, stock options have been our primary long-term compensation vehicle for our executive officers. Stock options are granted at the prevailing market price on the date of grant and will have value only if our stock price increases. Grants of stock options generally are based upon our performance, the level of the executive's position, and an evaluation of the executive's past and expected future performance. In connection with the Aquisition, James Pritchett, President of Costar, was granted 37,000 options subject to four year vesting at the rate of 25% per annum. James A. Mitarotonda, President and Chief Executive Officer of the Company, was granted 25,000 options in his capacity as a non-executive director. None of our other Named Executive Officers received stock option grants in their capacity as such in 2006. No decision has been made whether or not stock options will continue to be used as the predominant form of stock-based compensation. The Compensation Committee is in the process of considering all forms of long-term equity compensation, including restricted stock grants. Other Benefits There are no other benefits provided to employees at this time, including pension, severance or change in control benefits. 6 Summary Compensation Table for Year Ended December 31, 2006 The following table provides information as to compensation paid by the Company to our Chief Executive Officer, former Chief Executive Officer, Chief Financial Officer, Chief Executive Officer of our Costar subsidiary and the President of our Costar subsidiary (collectively, the "Named Executive Officers") for services rendered for the fiscal year ended December 31, 2006.
Annual Compensation -------------------------------- Salary Bonus Options All other Name and Principal Position Year ($) ($) Awards ($) Compensation($) Total ($) - --------------------------- ---- ------- ------- ---------- --------------- --------- William J. Fox 2006 $20,000 -- -- $30,855(2) $50,855 Former President and Chief Executive Officer (1) James A. Mitarotonda 2006 -- -- $ 4,000(4) $ 1,000 $ 5,000 President and Chief Executive Officer (principal executive officer)(3) Melvyn Brunt 2006 $10,500 $ 5,000 -- -- $15,500 Chief Financial Officer (principal financial officer) Sebastian Cassetta 2006 $35,000 $35,000 -- -- $70,000 Chief Executive Officer (Costar) James Pritchett 2006 $78,978 -- -- $ 2,660(5) $81,638 President (Costar)(5)
- ---------- (1) Mr. Fox resigned as our President and Chief Executive Officer and from our Board of Directors, effective the close of business on May 15, 2006. (2) In May, 2006, the Company repurchased all stock options held by Mr. Fox for $30,855, the market value of all vested stock options held by Mr. Fox at such time. (3) In 2006, Mr. Mitarotonda was granted 25,000 options and paid $1,000 in meeting fees in his capacity as a non-executive director during such year. (4) Reflects the dollar amount recognized for financial statement reporting purposes for the fiscal year ended December 31, 2006 in accordance with SFAS 123(R). A discussion of valuation assumptions used for purposes of the SFAS 123(R) calculation is included under Note 2 to the Company's Consolidated Financial Statements set forth in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2006. (5) Mr. Pritchett has served as the President of Costar since June 2006. In April 2007, Mr. Prtichett received a 2006 incentive payment of $2,660 under the terms of the employment agreement between him and Costar dated June 20, 2006. Grants of Plan-Based Awards for Year Ended December 31, 2006 - -------------------------------------------------------------------------------- All Other Option Awards: Exercise Number of or Base Securities Price of Underlying Option Grant Date Options Awards Fair Value Name Grant Date (#) ($/Sh) of Stock - -------------------------------------------------------------------------------- James A. 3/28/2006 25,000 $ 0.36 $0.36 Mitarotonda - -------------------------------------------------------------------------------- James Pritchett 6/20/2006 37,000 $0.5475 $0.36 - -------------------------------------------------------------------------------- 7 Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table We do not have employment agreements or contracts with any of our Named Executive Officers other than James Pritchett. Mr. Mitarotonda was granted 25,000 options in his capacity as a non-executive director. The stock option award granted to Mr. Pritchett, Costar's president, was given to him in connection with the Acquisition. Employment Contracts and Termination of Employment Arrangements Costar is party to an employment agreement with James Pritchett dated June 20, 2006. The agreement has a three year term ending June 20, 2009. The agreement provides that Mr. Pritchett is to receive a base salary of $150,000 per annum, at least 3 weeks paid vacation and reimbursement of travel and business expenses incurred in connection with the performance of his duties. In addition, Mr. Pritchett is eligible to receive an annual incentive payment to the extent that the consolidated net income of Costar before interest, income taxes, depreciation and amortization exceeds certain established annual targets. The agreement is subject to early termination as follows: (a) by Costar (i) due to Mr. Pritchett's death or total disability, (ii) without "cause" or (iii) for "cause," and (b) by Mr. Pritchett for "good reason." "Cause" and "good reason" are as defined in the employment agreement. In the event that the agreement is terminated by reason of the death or total disability of Mr. Pritchett, by the Company for "cause" or by Mr. Pritchett other than for "good reason," then Costar shall be obligated to pay Mr. Pritchett (or his spouse or estate, as the case may be) (a) any accrued but unpaid base salary for services rendered to the date of termination, (b) any accrued but unpaid reimbursable expenses, (c) any accrued but unpaid vacation time and (d) for each full bonus eligible year worked by Mr. Pritchett, any incentive payment due and payable under the agreement. In the event the agreement is terminated by Costar without "cause," then Costar shall be obligated to pay Mr. Pritchett (a) any accrued but unpaid base salary for services rendered to the date of termination, (b) any accrued but unpaid reimbursable expenses, (c) any accrued but unpaid vacation time, (d) Mr. Pritchett's base salary for a period of six (6) months following the date of termination and (e) for each full bonus eligible year worked by Mr. Pritchett, any incentive payment due and payable under the agreement, and for each partial bonus eligible year worked by Mr. Pritchett, a pro-rated portion of any incentive payment that would be due and payable under the agreement assuming that Mr. Pritchett had worked for Costar for the full bonus eligible year. In the event that the agreement is terminated by Mr. Pritchett for "good reason," then Costar shall be obligated to pay Mr. Pritchett (a) any accrued but unpaid base salary for services rendered to the date of termination, (b) any accrued but unpaid reimbursable expenses, (c) any accrued but unpaid vacation time, (d) Mr. Pritchett's base salary for a period of six (6) months following the date of termination and (e) for each full bonus eligible year worked by Mr. Pritchett, any incentive payment due and payable under the agreement. 8 Outstanding Equity Awards at Fiscal Year-End Table The following table provides summary information concerning stock options held by the Named Executive Officers as of December 31, 2006. - -------------------------------------------------------------------------------- Option Awards - -------------------------------------------------------------------------------- Number of Number of Securities Securities Underlying Underlying Unexercised Unexercised Option Option Options (#) Options (#) Exercise Expiration Name Exercisable Unexercisable Price ($) Date - -------------------------------------------------------------------------------- William J. Fox (1) -- -- -- -- - -------------------------------------------------------------------------------- James A Mitarotonda (2) 320,000 -- $ 0.33 12/1/2008 298,000 -- $ 0.31 12/17/2014 25,000 -- $ 0.36 3/28/2016 - -------------------------------------------------------------------------------- Sebastian Cassetta 80,000 -- $ 0.31 12/17/2014 - -------------------------------------------------------------------------------- Melvyn Brunt 100,000 -- $ 0.31 12/17/2014 - -------------------------------------------------------------------------------- James Pritchett -- 37,000 $0.5475 6/20/2016 - -------------------------------------------------------------------------------- - ---------- (1) In May 2006, the Company repurchased all stock options held by Mr. Fox for $30,855, the market value of all vested stock options held by Mr. Fox at such time. (2) In 2006, Mr. Mitarotonda was granted 25,000 options in his capacity as a non-executive director during such year. Option Exercises and Stock Vested Table for Fiscal Year Ended December 31, 2006 None of our Named Executive Officers exercised any stock options during 2006. In May 2006, the Company repurchased all stock options held by Mr. Fox for $30,855, the market value of all vested stock options held by Mr. Fox at such time. 2000 Stock Option and Incentive Plan In February 2000, our Board of Directors and stockholders approved the 2000 Stock Option and Incentive Plan (the "2000 Plan"), which provides for the issuance of up to 4,017,250 shares of common stock plus the number of shares as to which options granted under the Amended and Restated 1997 Stock Option Plan, as amended and the 1999 Stock Option Plan are forfeited or otherwise terminate unexercised. The 2000 Plan provides for awards in the form of ISOs, NSOs, restricted stock awards and other forms of awards to officers, directors, employees and consultants of the Company. At December 31, 2006, there were 5,385,662 shares available for issuance under the 2000 Plan. The Board of Directors determines the term of each option, the option price, the number of shares for which each option is granted and the times at which each option vests. For holders of 10% or more of our outstanding common stock, ISOs may not be granted at less than 110% of the fair market value of the common stock at the date of grant. 9 2000 Employee Stock Option and Incentive Plan In October 2000, our Board of Directors approved the 2000 Employee Stock Option and Incentive Plan (the "2000 Employee Plan"), which originally provided for the issuance of up to 1,500,000 shares of common stock, under NSOs to our employees and key persons other than any member of our Board of Directors or any other individual who is subject to the reporting and other provisions of Section 16 of the Securities Exchange Act of 1934. In January 2001, in connection with the one-time employee option exchange incentive program, the Board of Directors amended this plan to increase the number of shares of common stock available for issuance under the plan to 2,654,750. At December 31, 2006, there were 2,250,374 shares available for issuance under this plan. The Board of Directors determines the term of each option, the option price, the number of shares for which each option is granted and the times at which each option vests. The Company calculates the fair value of each option grant on the date of grant using the Black-Scholes option pricing method as set forth in SFAS No. 123(R) using the following assumptions: Year Ended December 31, ------------------------- 2006 2005 2004 ---- ---- ---- Risk-free interest rate ....................... 4.34% 4.30% 4.20% Weighted-average expected life (in years) ..... 10 10 10 Expected dividend yield ....................... 0.0% 0.0% 0.0% Expected stock price volatility ............... 55% 55% 55% Director Compensation Table for Year Ended December 31, 2006 The following table contains information concerning the compensation of our directors for the fiscal year ended December 31, 2006. DIRECTOR COMPENSATION (For the Year Ended December 31, 2006) Fees Earned or Paid Option Name in Cash Awards(1) Total - ---- ----------- ---------- ------- James A. Mitarotonda $ 1,000 $ 4,000(2)(4) $ 5,000 Rory J. Cowan $ 9,000 $ 8,000(3)(4) $17,000 Raymond Steele $11,000 $ 4,000(2)(4) $15,000 - ---------- (1) Reflects the dollar amount recognized for financial statement reporting purposes for the fiscal year ended December 31, 2006 in accordance with SFAS 123(R). A discussion of valuation assumptions used for purposes of the SFAS 123(R) calculation is included under Note 2 to the Company's Consolidated Financial Statements set forth in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2006. (2) Awards consist of grants made to Mr. Mitarotonda and Mr. Steele as non-executive directors in March 2006. (3) Amount includes stock options due to Mr. Cowan for service as Chairman in 2005 and 2006. (4) As of December 31, 2006, James A. Mitarotonda, Rory J. Cowan and Raymond Steel have received in the aggregate 643,000, 100,000 and 75,000 option awards, respectively. Narrative to Director Compensation Table In June 2004, our Board approved a plan that entitles our Chairman to cash compensation of $20,000 upon initial election and upon the anniversary of being appointed and entitles our other non-employee directors to cash compensation of $10,000 upon initial election and on each anniversary of becoming a director during their term of service. The plan also provides non-employee directors with $1,000 per meeting of the Board attended during their term of service. In addition, the plan provides that attendance at committee meetings will be compensated at the rate of $1,000 per meeting for members and $2,000 per meeting for the chairperson. While the Company has paid the 10 Chairman and our other non-employee directors meeting fees during the fiscal year ended December 31, 2006, it has not paid such directors their base compensation during this time period but expects to do so in the future. Non-employee directors are entitled to fully vested options to purchase 50,000 shares of common stock upon initial election and a fully vested option to purchase 25,000 shares of common stock on each anniversary of becoming a director during their term of service. Compensation Committee Interlocks and Insider Participation The Compensation Committee is currently composed of independent, non-employee directors. No interlocking relationships exist among our Board, Compensation Committee or executive officers and the Board, Compensation Committee or executive officers of any other company, nor has an interlocking relationship existed in the past. Compensation Committee Report The Compensation Committee of the Board of Directors has reviewed and discussed with our management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K promulgated by the SEC. Based on such review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Annual Report on Form 10-K. Compensation Committee: Rory J. Cowan Raymond Steele 11 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The following table presents information with respect to beneficial ownership of the common stock as of April 1, 2007 by o each person known by us to beneficially own more than 5% of the common stock; o individuals serving as our Named Executive Officers; o each of our directors and the nominees for director; and o all executive officers and directors as a group. Except as otherwise noted, the address of each person/entity listed in the table is c/o Dynabazaar, Inc., 888 Seventh Avenue, 17th Floor, New York, NY 10019. The table includes all shares of common stock issuable within 60 days of April 1, 2007 upon the exercise of options and other rights beneficially owned by the indicated stockholders on that date. Beneficial ownership is determined in accordance with the rules of the SEC and includes voting and investment power with respect to all shares of common stock. To our knowledge, except under applicable community property laws or as otherwise indicated, the persons named in the table have sole voting and sole investment control with respect to all shares of common stock beneficially owned. The applicable percentage of ownership for each stockholder is based on 23,691,756 shares of common stock outstanding as of April 1, 2007 together with applicable options for that stockholder. Shares of common stock issuable upon exercise of options and other rights beneficially owned are deemed outstanding for the purpose of computing the percentage ownership of the person holding those options and other rights, but are not deemed outstanding for computing the percentage ownership of any other person. Shares Beneficially Owned - -------------------------------------------------------------------------------- Name of Beneficial Owner Number Percent - ------------------------ ------ ------- Barington Capital Group, L.P. and 2,612,775(1) 11.03 related entities 888 Seventh Avenue, 17th Floor New York, NY 10019 Jay Gottlieb 2,000,000(2) 8.44 27 Misty Brook Lane New Fairfield, CT Lloyd I. Miller, III 2,843,000(3) 12.00 Melvyn Brunt 100,000(4) * Sebastian E. Cassetta 80,000(5) * Rory J. Cowan 100,000(6) * James Mitarotonda 2,612,775(7) 11.03 Raymond Steele 75,000(8) * All executive officers and directors as a group consisting of 6 persons) (4)-(9) 2,967,775(9) 12.53 - ---------- (*) Represents less than 1% of the outstanding shares of common stock. 12 (1) This information is based solely on a Schedule 13D, as amended, filed with the SEC on March 14, 2007 by Barington Companies Equity Partners, L.P., Barington Companies Investors, LLC, Barington Companies Offshore Fund, Ltd., Barington Offshore Advisors II, LLC, Barington Capital Group, L.P., LNA Capital Corp. and James Mitarotonda. Includes 1,969,775 shares of common stock beneficially owned by Barington Capital Group, L.P., Barington Companies Offshore Fund, Ltd. and Barington Companies Equity Partners, L.P., entities which are directly or indirectly controlled by Mr. Mitarotonda. Mr. Mitarotonda disclaims beneficial ownership of such shares except to the extent of his pecuniary interest therein. Also includes 643,000 shares of common stock issuable upon the exercise of options granted to Mr. Mitarotonda. (2) This information is based on a Schedule 13D, as amended, filed by Jay Gottlieb with the SEC on July 20, 2006. According to such Schedule 13D, 1,509,030 of these shares are owned by Mr. Gottlieb, and 490,970 are beneficially owned by the Laurick Trust. The trust is for the benefit of Mr. Gottlieb's adult children. Mr. Gottlieb, as trustee of both trusts, has sole responsibility to vote and dispose of these shares as well as the shares in his name. Mr. Gottlieb disclaims beneficial ownership of any such shares held by him as trustee for the benefit of his adult children (3) This information is based on a Schedule 13G filed by Lloyd I. Miller, III with the SEC on October 10, 2006. According to such Schedule 13G, Mr. Miller has sole voting and dispositive power with respect to 2,205,500 of the reported securities as (i) a manager of a limited liability company that is the general partner of a certain limited partnership and (ii) as an individual. The reporting person has shared voting and dispositive power with respect to 637,500 of the reported securities as an investment advisor to the trustee of a certain family trust. (4) Consists of 100,000 shares of common stock issuable upon the exercise of options. (5) Consists of 80,000 shares of common stock issuable upon the exercise of options. (6) Consists of 100,000 shares of common stock issuable upon the exercise of options. (7) Includes 1,969,775 shares of common stock beneficially owned by Barington Capital Group, L.P., Barington Companies Offshore Fund, Ltd. and Barington Companies Equity Partners, L.P., entities which are directly or indirectly controlled by Mr. Mitarotonda. Mr. Mitarotonda disclaims beneficial ownership of such shares except to the extent of his pecuniary interest therein. Also includes 643,000 shares of common stock issuable upon the exercise of options granted to Mr. Mitarotonda. (8) Consists of 75,000 shares of common stock issuable upon the exercise of options. (9) Includes 1,048,000 shares of common stock issuable upon the exercise of options. 13 Equity Compensation Plan Information The following table provides information as of December 31, 2006 regarding shares of common stock of the Company that may be issued under our existing equity compensation plans, including the Company's 1997 Stock Option Plan (the "1997 Plan"), 1999 Stock Option Plan (the "1999 Plan"), and 2000 Stock Option and Incentive Plan (the "2000 Plan") and the Company's 2000 Employee Stock Purchase Plan (the "ESPP").
Number of securities remaining available for Number of future issuance securities Weighted average under equity to be issued exercise price compensation upon exercise of outstanding plan (excluding of outstanding options, securities options, warrants warrants and referenced in Plan category and rights (a) rights (b) column (a)) (c) - ------------------- ----------------- ---------------- --------------- Equity compensation plans approved by security holders (1) 1,313,000(2) $0.32 4,624,840(3) Equity compensation plans not approved by security holders(4) 100,000 $0.55 2,549,740 --------- ----- --------- TOTAL 1,413,000 $0.39 7,174,580 ========= ===== =========
- ---------- (1) Consists of shares from the 1997 Plan, the 1999 Plan and the 2000 Plan. (2) Does not include purchase rights accruing under the ESPP because the purchase price (and therefore the number of shares to be purchased) will not be determined until the end of the purchase period. (3) Includes shares available for future issuance under the ESPP. (4) Consists of shares from the 2000 Employee Plan. 14 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Transactions with Related Persons In connection with the Company's cessation of its online auction business, the Company relocated its principal executive offices as of January 1, 2004 to 888 Seventh Avenue, 17th Floor, New York, New York 10019, an office maintained by Barington, a limited partnership whose general partner is a corporation of which James Mitarotonda is Chairman, President and Chief Executive Officer. Mr. Mitarotonda is a director of the Company and our President and Chief Executive Officer. Pursuant to an administrative services agreement we entered into with Barington in December 2003 (which ran through December 31, 2004), the Company paid Barington a monthly fee of $8,000 for performing certain administrative services on behalf of the Company. In connection with the agreement, the Company granted to Mr. Mitarotonda an option to purchase 320,000 shares of our common stock. The option is fully exercisable and was granted with an exercise price per share equal to $0.33, the fair market value of our common stock on the grant date. The Company entered into an amended administrative services agreement with Barington dated as of December 17, 2004. Under the amended agreement, which ran through December 31, 2006, Barington was to be paid a fee of $15,000 per month for performing certain administrative, accounting and other services on behalf of the Company. As of March 1, 2006, the Company and Barington agreed to reduce the fee to $7,500 per month. In addition, Barington is to be paid a fee of $175 an hour for any legal services provided by Barington on behalf of the Company at the Company's request. The Company has also agreed that in the event that Barington identifies for the Company at its request a business transaction such as a merger, acquisition or joint venture, and/or provides the Company with financial consulting or merger and acquisition services in connection with such business transaction, the Company will pay Barington a fee to be agreed upon between Barington and the Board of Directors of the Company. In connection with the amended agreement, the Company granted options to certain designees of Barington to purchase, in the aggregate, 320,000 shares of the Company's common stock. The options were granted with an exercise price per share equal to $0.31, the fair market value of the Company's common stock on the grant date. On March 30, 2007, the Company entered into an amendment to the administrative services agreement with Barington, effective as of January 1, 2007. Under the amended agreement, which runs through December 31, 2007, Barington is to continue to be paid a fee of $7,500 per month for performing certain administrative, accounting and other services on behalf of the Company until the closing of the transactions contemplated by the Amended and Restated Merger Agreement, at which point the fee is to increase to a rate of $10,000 per month. Barington and certain of its affiliates which have joined with Barington in the filing of a statement on Schedule 13D, collectively own greater than 10% of the outstanding common stock of both Dynabazaar and L Q Corporation. Pursuant to a letter agreement dated February 26, 2007, Barington agreed to vote, and to cause its affiliates to vote, all of our shares now owned or hereafter acquired by Barington and its affiliates in favor of the transactions contemplated by the Amended and Restated Merger Agreement, in proportion to the votes of our other stockholders. James A. Mitarotonda, who serves as a director and our President and Chief Executive Officer, is Chairman, President and Chief Executive Officer of a corporation that is the general partner of Barington. Sebastian E. Cassetta, who serves as the Chief Executive Officer of Costar, is a Senior Managing Director and the Chief Operating Officer of Barington. Mr. Cassetta is also a director, President and Chief Executive Officer of L Q Corporation. Dianne K. McKeever, a research analyst at Barington, serves as a director of L Q Corporation, and Michael McManus, a director of L Q Corporation, holds an equity interest in certain affiliates of Barington. Barington is party to separate administrative services agreements with us and L Q Corporation, pursuant to which Barington performs certain administrative, accounting and other services on behalf of each company. Our and L Q Corporation's principal executive offices are maintained by Barington. Review, Approval or Ratification of Transactions with Related Persons Pursuant to the Charter of the Audit Committee, the Audit Committee is charged, on behalf of the Board, with conducting an appropriate review of all related party transactions for potential conflict of interest situations on an 15 ongoing basis, and the approval of the Audit Committee is required for all such transactions. Director Independence Our Board has determined that Rory Cowan and Raymond Steele qualify as independent under Nasdaq listing standards. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The public accounting firm of Rothstein Kass & Company, P.C. has served as our independent accountant to perform the audit of our financial statements for the fiscal year ended December 31, 2006 and December 31, 2005. The table below sets forth the aggregate audit fees, audit-related fees, tax fees and all other fees billed for services rendered by our principal accountants in our fiscal years ended December 31, 2006 and 2005. Fiscal Fiscal Fee Category 2006 2005 ---------------------- -------- -------- Audit Fees (1) $122,000 $ 76,000 Audit-Related Fees (2) 76,000 -- Tax Fees (3) 28,000 12,000 -------- -------- Total Fees $226,000 $ 88,000 ======== ======== - ---------- (1) Audit Fees. These consist of fees billed for professional services rendered for the audit of our annual financial statements and review of the interim financial statements included in quarterly 10-Q reports and for services normally provided in connection with statutory and regulatory filings. (2) Audit-Related Fees. These consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements that are not reported under "Audit Fees." These services include accounting consultations in connection with acquisitions and consultations concerning financial accounting and reporting standards. (3) Tax Fees. These consist of fees billed for professional services for tax compliance, tax advice and tax planning. PRE-APPROVAL POLICIES AND PROCEDURES OF AUDIT COMMITTEE The Audit Committee has responsibility for the appointment, compensation and oversight of the work of the independent accountant. As part of this responsibility, the Audit Committee must pre-approve all permissible services to be performed by the independent accountant. The Audit Committee has adopted an auditor pre-approval policy which sets forth the procedures and conditions pursuant to which pre-approval may be given for services performed by the independent auditor. Under the policy, the Committee must give prior approval for all auditing services and the terms thereof (which may include providing comfort letters in connection with securities underwritings) and non-audit services (other than non-audit services prohibited under Section 10A(g) of the Exchange Act or the applicable rules of the SEC or the Public Company Accounting Oversight Board) to be provided. Prior approval need not be given with respect to the provision of non-audit services if certain "de minimis" provisions of Section 10A(i)(1)(B) of the Exchange Act are satisfied. The Audit Committee may delegate to one or more of its members authority to approve a request for pre-approval provided the member reports any approval so given to the Audit Committee at its next scheduled meeting. 16 PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (b) EXHIBITS The following exhibits are incorporated herein by reference or are filed with this report as indicated below. Exhibits indicated with (+) constitute all of the management contracts and compensation plans and arrangements required to be filed as exhibits to the Report on Form 10-K. EXHIBIT NO. TITLE - ----------- ------------------------------------------------------------ 2.1 Asset Purchase Agreement dated as of June 20, 2006 by and among Southern Imaging, Video Solutions, the shareholders of Southern Imaging, Costar and VSTC(5) 2.2 Agreement and Plan of Merger dated as of January 5, 2007 among Dynabazaar, L Q Corporation and LMC(6) 2.3 Letter Agreement dated January 5, 2007(6) 2.4 Amended and Restated Agreement and Plan of Merger dated as of February 26, 2007 by and among Dynabazaar, L Q Corporation and LMC(7) 2.5 Letter Agreement dated February 26, 2007(7) 3.1 Form of Fifth Amended and Restated Certificate of Incorporation of the Company(1) 3.2 Composite Amended and Restated Bylaws of the Company as amended by Amendment to Bylaws adopted May 16, 2001(2) 4.1 Form of Specimen Certificate for the Company's Common Stock(2) 10.1 Form of Indemnity Agreement entered into by the Company with each of its directors(1) 10.2 Amended and Restated 1997 Stock Option Plan(1)+ 10.3 October 2001 Amendment to Amended and Restated 1997 Stock Option Plan(2)+ 10.4 1999 Stock Option Plan(1)+ 10.5 2000 Stock Option and Incentive Plan(1)+ 10.6 Composite Transaction Bonus Plan adopted August 28, 2001 as amended on March 12, 2002(2)+ 10.7 Employee Stock Purchase Plan(1)+ 10.21 Services Agreement dated as of November 17, 2004 between the Company and Barington Capital Group, L.P.(3) 10.22 Amendment to Administrative Services Agreement dated as of March 23, 2006 between the Company and Barington Capital Group, L.P.(4) 10.23 Amendment to Administrative Services Agreement dated as of March 30, 2007 between the Company and Barington Capital Group, L.P.(8) 10.30 Employment Agreement between Costar Video Systems, LLC and James Pritchett dated June 20, 2006* 21.1 Subsidiaries(8) 23.1 Consent of Rothstein, Kass & Company(8) 31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(8) 31.2 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(8) 31.3 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* 31.4 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* 32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(8) 32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(8) - ---------- * Filed with this Report. (1) Included as an exhibit to, and incorporated in this Report by reference to, the Company's Registration Statement on Form S-1 (No. 333-92677), as amended, filed with the SEC. 17 (2) Included as an exhibit to, and incorporated in this Report by reference to, the Company's Annual Report on Form 10-K for the year ended December 31, 2001 filed with the SEC on March 29, 2002. (3) Included as an exhibit to, and incorporated in this Report by reference to, the Company's Annual Report on Form 10-K for the year ended December 31, 2004 filed with the SEC on March 30, 2005. (4) Included as an exhibit to, and incorporated in this Report by reference to, the Company's Quarterly Report on Form 10-Q for the quarter ended March 6, 2006 filed with the SEC on May 15, 2006. (5) Included as an exhibit to, and incorporated in this Report by reference to, the Company's Current Report on Form 8-K dated June 20, 2006 filed with the SEC on June 26, 2006. (6) Included as an exhibit to, and incorporated in this Report by reference to, the Amendment to the Company's Current Report on Form 8-K dated January 5, 2007 filed with the SEC on January 11, 2007. (7) Included as an exhibit to, and incorporated in this Report by reference to, the Company's Current Report on Form 8-K dated February 26, 2007 filed with the SEC on February 27, 2007. (8) Included as an exhibit to, and incorporated in this Report by reference to, the Company's Annual Report on Form 10-K for the year ended December 31, 2006 filed with the SEC on April 4, 2007. 18 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on April 17, 2007. DYNABAZAAR, INC. By: /s/ James A. Mitarotonda ------------------------------------- James A. Mitarotonda President and Chief Executive Officer (Principal Executive Officer) Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. - -------------------------------------------------------------------------------- SIGNATURE TITLE DATE - -------------------------------------------------------------------------------- /s/ James A, Mitarotonda President, Chief April 17, 2007 - ------------------------ Executive Officer James A. Mitarotonda and Director (Principal Executive Officer) - -------------------------------------------------------------------------------- /s/ Melvyn Brunt Chief Financial Officer April 17, 2007 - ---------------- and Treasurer (Principal Melvyn Brunt Financial and Accounting Officer) - -------------------------------------------------------------------------------- /s/ Rory J. Cowan Director and Chairman of April 17, 2007 - -------------------- the Board Rory J. Cowan - -------------------------------------------------------------------------------- /s/ Raymond Steele Director April 17, 2007 - ------------------- Raymond Steele - -------------------------------------------------------------------------------- 19 EX-10.30 2 e26966ex10_30.txt EX-10.30 EMPLOYMENT AGREEMENT Exhibit 10.30 EMPLOYMENT AGREEMENT This EMPLOYMENT AGREEMENT (this "Agreement") is made as of the 20th day of June, 2006, by and between Costar Video Systems, LLC, a Delaware limited liability company (the "Company"), and James Pritchett (the "Executive"). W I T N E S S E T H : WHEREAS, Southern Imaging, Inc., a Texas corporation ("Southern Imaging"), and its Affiliates (including Video Solutions Technology Center, Inc., a Nevada corporation ("Video Solutions") are engaged in the business of designing, developing, sourcing, selling and distributing, video and imaging products and accessories (the "Business"); WHEREAS, the Company intends to acquire substantially all of the assets and certain of the liabilities of Southern Imaging and its Affiliates pursuant to the Asset Purchase Agreement, dated as of the date hereof (the "Asset Purchase Agreement"), by and among the Company, Video Solutions Technology Center, LLC, Southern Imaging and Video Solutions; WHEREAS, Executive is currently employed as the Vice President, Sales of Southern Imaging; WHEREAS, the Company wishes to ensure that it will continue to have the benefits of Executive's services after the closing (the "Closing") of the transactions contemplated by the Asset Purchase Agreement on the terms and conditions hereinafter set forth, and therefore desires to enter into this Agreement with Executive, to be effective upon the Closing; WHEREAS, the Company and Executive acknowledge and agree that the retention of Executive's services and Executive's agreement to enter into and adhere to the noncompetition, nonsolicitation and nondisclosure of proprietary information provisions contained in this Agreement are material conditions to the Company entering into the Asset Purchase Agreement and consummating the transactions contemplated thereby; and WHEREAS, Executive desires to work for the Company on the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the mutual covenants hereinafter contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows: 1. Employment; Term. The Company hereby employs Executive, and Executive hereby accepts employment with the Company, in accordance with and subject to the terms and conditions set forth herein. The term of this Agreement shall commence upon the Closing (the "Effective Date") and shall continue for a period of thirty-six (36) months (the "Initial Term"), unless earlier terminated in accordance with Section 6 hereof. The Initial Term may be extended for subsequent twelve (12) month periods upon mutual agreement of the Company and Executive at any time prior to the end of the then-current term, it being understood and agreed that the Company shall endeavor to provide the Executive with at least six (6) months notice of its desire to extend the agreement and that the Executive will endeavor to agree or disagree to extend the agreement within 30 days thereafter. The Initial Term, as it may be adjusted or extended pursuant to the terms and conditions hereof, may be referred to herein as the "Term"). 2. Employment. (a) The Company hereby agrees to employ Executive as its President, and Chief Operating Officer for Sales for the Term. Executive agrees to serve in such capacity with the duties and responsibilities reasonably requested by the Company consistent with such position in a company of the size and nature of the Company. During the Term, Executive shall report to the Chief Executive Officer of the Company, or his designee. (b) Executive shall perform his duties with diligence and faithfulness to the best of his abilities and shall devote his full business time (excluding periods of vacation and sick leave), attention and energy to such duties. 3. Compensation. The Company shall pay Executive a base salary (the "Base Salary") of One Hundred Fifty Thousand Dollars ($150,000) per annum, payable at least semi-monthly, in accordance with the Company's then existing payroll practices and subject to all legally required or customary withholdings and other applicable taxes. 4. Incentive Payment. (a) Provided that the Executive's employment under this Agreement is not terminated pursuant to the provisions of Section 6(a), (b), (d) or (e) prior to the end of the calendar year for each of the Bonus Eligible Years (as hereinafter defined), the Executive shall be eligible to receive from the Company as additional compensation an incentive payment (the "Incentive Payment") pursuant to and subject to the terms of this Section 4. (b) Calculation of Incentive Payment. (i) For each of the Bonus Eligible Years, the Incentive Payment shall equal 40% of the Annual Available Bonus Pool calculated in accordance with the provisions set forth on Schedule A hereto. (ii) For the avoidance of doubt, the parties acknowledge that the Incentive Payment shall never be less than zero. (c) Annual EBITDA Statement. The Company shall prepare or cause to be prepared, (i) audited consolidated financial statements of the Company for such Bonus Eligible Year, (ii) a statement which shall explain in reasonable detail the calculations of Annual EBITDA and the Incentive Payment (the "Incentive Payment Statement") and (iii) reasonable supporting documentation sufficiently detailed to enable Executive to verify in all material respects the calculations of Annual EBITDA and the Incentive Payment, and deliver or cause to be delivered each of the forgoing to Executive promptly after the audited consolidated financial statements of the Company for such Bonus Eligible Year have been completed. (d) Payment of Incentive Payment. The Incentive Payment shall be paid by the Company to the Executive in cash no later than 35 days after the issuance of the audited financial statements of the Company for each Bonus Eligible Year. (e) Definitions. The following terms used in this Agreement shall have the meanings indicated: (i) "Affiliate" with respect to any Person shall mean any other Person which, directly or indirectly, is in control of, is controlled by or is under common control with such specified Person. For the purposes of this definition, "control," when used with respect to any Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise. (ii) "Annual EBITDA" shall mean the EBITDA of the Company during each of the Bonus Eligible Years. (iii) "Bonus Eligible Years" shall mean the 2006, 2007, 2008 and 2009 calendar years. (iv) "EBITDA of the Company" shall mean the consolidated net income of the Company before interest, income taxes, depreciation and amortization. For purposes hereof the EBITDA for the year ended December 31, 2006, shall be equal to the sum of (i) the EBITDA of Southern Imaging and Video Solutions for the period commencing on January 1, 2006 and ending on the Closing and (ii) the EBITDA of the Company for the period from and after the Closing and ending on December 31, 2006. (v) "GAAP" shall mean United States generally accepted accounting principles in effect on the date hereof applied on a consistent basis. (vi) "Person" shall mean an individual, partnership, venture, unincorporated association, organization, syndicate, corporation, limited liability company, or other entity, trust, trustee, executor, administrator or other legal or personal representative or any government or any agency or political subdivision thereof. 5. Benefits. (a) The Company agrees to reimburse Executive for all reasonable and necessary documented out-of-pocket travel and other business expenses incurred by Executive in connection with the performance of his duties under this Agreement in accordance with the Company's corporate policy regarding such expenses as it may be amended from time to time. Such reimbursements shall be made by the Company within a reasonable amount of time after submission by Executive of vouchers in accordance with the Company's then applicable policies and procedures. It is understood and agreed between the parties that (i) the Executive shall only be required to travel for reasonable business purposes and (ii) the Executive shall only be entitled to reimbursement of travel and business expenses incurred in connection with business activities and prospects that are in accordance with the Company's business plan, as approved by Dynabazaar, Inc., the Company's parent ("Dynabazaar"). (b) Executive shall be entitled to participate in any and all medical insurance, group health, dental and vision care programs, disability insurance, pension, and other benefit plans which are made generally available by the Company to its senior executives, as the same may be amended or modified from time to time. The Company may at any time amend or terminate its benefit plans or programs, subject to the written consent of Dynabazaar, provided, however, that the Company shall not terminate any health plan or program provided to the Executive during the Term unless it shall provide the Executive with comparable benefits under a replacement plan or program. (c) Executive shall be entitled to an annual paid vacation in accordance with the Company's vacation policy applicable to senior executives, but in no event less than three (3) weeks per calendar year. Paid vacation may not be accrued from year-to-year. 6. Termination. Executive's employment hereunder may be terminated prior to the end of the Term under the following circumstances: (a) Death. Executive's employment hereunder shall terminate upon Executive's death. (b) Total Disability. The Company may terminate Executive's employment hereunder at any time after Executive becomes "Totally Disabled." For purposes of this Agreement, Executive shall be "Totally Disabled" upon the earlier of (i) the date Executive becomes entitled to receive disability benefits under the Company's long-term disability plan, if any, or (ii) Executive's inability to perform the duties and responsibilities contemplated under this Agreement for a period of more than 90 consecutive days, or 120 days in any 365-day period, due to physical or mental incapacity or impairment. Such termination shall become effective five days after the Company gives notice of such termination to Executive, or to his spouse or legal representative, in accordance with Section 10 hereof. (c) Termination by the Company without Cause. The Company may terminate Executive's employment hereunder without Cause (as hereinafter defined) at any time after providing written notice to Executive. (d) Termination by the Company for Cause. The Company may terminate Executive's employment hereunder for Cause at any time after providing written notice to Executive. For purposes of this Agreement, the term "Cause" shall mean any of the following: (i) Executive's willful or intentional failure or refusal to perform or observe any of his duties, responsibilities or obligations set forth in, or as contemplated under, this Agreement, unless such failure or refusal is susceptible to cure and is corrected within thirty (30) days following written notice by the Company or Dynabazaar specifying the details thereof; (ii) acts or omissions by Executive involving Executive's gross negligence related to the discharge of his duties; (iii) any act or failure to act involving fraud, a material, knowing or intentional misrepresentation, theft, embezzlement, dishonesty or moral turpitude; (iv) conviction of (or a plea of nolo contendere to) an offense which is a felony in the jurisdiction involved or which is a misdemeanor in the jurisdiction involved but which involves an act set forth in Section 6(d)(iii) above; (v) any willful or intentional act or omission which could reasonably be expected to materially injure the reputation, business or business relationships of the Company, or Executive's reputation or business relationships; or (vi) Executive's willful or intentional failure to comply with any reasonable request or direction of the Company not contrary to the provisions of this Agreement, unless such failure to comply is susceptible to cure and is corrected within thirty (30) days following written notice by the Company or Dynabazaar specifying the details thereof. (e) Termination by Executive for Good Reason. Executive may terminate his employment hereunder at any time if Executive has "Good Reason" and gives written notice thereof to the Company within 30 days after the occurrence of such Good Reason. For purposes of this Agreement, the term "Good Reason" shall mean: (i) a material reduction in Executive's salary or other benefits, except to the extent permitted pursuant to the terms of this Agreement; or (ii) a material breach by the Company of any material provision of this Agreement; which, in each case, is not cured by the Company within 30 days after the Company receives written notice thereof from Executive. 7. Compensation Following Termination Prior to the End of the Initial Term. In the event that Executive's employment hereunder is terminated prior to the end of the Initial Term, Executive shall be entitled only to the following compensation and benefits upon such termination: (a) Termination by Reason of Death or Total Disability, by the Company for Cause, or by Executive other than for Good Reason. In the event that Executive's employment is terminated prior to the expiration of the Term by reason of Executive's death or Total Disability, or termination by the Company for Cause, or termination by Executive other than for Good Reason, respectively, the Company shall pay the following amounts to Executive (or Executive's spouse or estate, as the case may be): i. any accrued but unpaid Base Salary (as determined pursuant to Section 3 hereof) for services rendered to the date of termination, which amount shall be paid to the Executive within thirty (30) days following the date of termination; ii. any accrued but unpaid expenses required to be reimbursed pursuant to Section 5(a) hereof, which amount shall be paid to the Executive within thirty (30) days following the date of termination; iii. any accrued but unpaid vacation time pursuant to Section 5(c) hereof, which amount shall be paid to the Executive within thirty (30) days following the date of termination; and iv. for each full Bonus Eligible Year worked by the Executive for the Company, any incentive payment due and payable pursuant to Section 4 hereof in accordance with the provisions thereof. Except as otherwise specifically provided herein, in the event Executive's employment is terminated pursuant to this Section 7(a), the benefits to which Executive and/or his family may be entitled upon such termination pursuant to the plans, programs and arrangements referred to in Section 5(b) hereof shall be determined and paid in accordance with the terms of such plans, programs and arrangements. (b) Termination by the Company Without Cause. In the event that Executive's employment is terminated by the Company without Cause, the Company shall pay the following amounts to Executive: i. any accrued but unpaid Base Salary (as determined pursuant to Section 3 hereof) for services rendered to the date of termination, which amount shall be paid to the Executive within thirty (30) days following the date of termination; ii. any accrued but unpaid expenses required to be reimbursed pursuant to Section 5(a) hereof, which amount shall be paid to the Executive within thirty (30) days following the date of termination; iii. any accrued but unpaid vacation time pursuant to Section 5(c) hereof, which amount shall be paid to the Executive within thirty (30) days following the date of termination; iv. the Executive's Base Salary (as determined pursuant to Section 3(a) hereof) for a period of six (6) months following the termination of Executive's employment, to be paid in accordance with the Company's standard payroll practices then in effect; and v. for each full Bonus Eligible Year worked by the Executive for the Company, any incentive payment due and payable pursuant to Section 4 hereof in accordance with the provisions thereof, and for each partial Bonus Eligible Year worked by the Executive for the Company, a pro-rate portion of any incentive payment that would be due and payable pursuant to Section 4 in accordance with the provisions thereof assuming that the Executive worked for the Company for the full Bonus Eligible Year. In the event Executive's employment is terminated pursuant to this Section 7(b), Executive and/or his family shall continue to be entitled to coverage under the plans, programs and arrangements referred to in Section 4(b) hereof for so long as Executive continues to receive payments from the Company pursuant to clause (iv) of this Section 7(b). (c) Termination by the Executive for Good Reason. In the event that Executive's employment is terminated by the Executive for Good Reason, the Company shall pay the following amounts to Executive: i. any accrued but unpaid Base Salary (as determined pursuant to Section 3 hereof) for services rendered to the date of termination, which amount shall be paid to the Executive within thirty (30) days following the date of termination; ii. any accrued but unpaid expenses required to be reimbursed pursuant to Section 5(a) hereof, which amount shall be paid to the Executive within thirty (30) days following the date of termination; iii. any accrued but unpaid vacation time pursuant to Section 5(c) hereof, which amount shall be paid to the Executive within thirty (30) days following the date of termination; iv. the Executive's Base Salary (as determined pursuant to Section 3(a) hereof) for a period of six (6) months following the termination of Executive's employment, to be paid in accordance with the Company's standard payroll practices then in effect; and v. for each full Bonus Eligible Year worked by the Executive for the Company, any incentive payment due and payable pursuant to Section 4 hereof in accordance with the provisions thereof. In the event Executive's employment is terminated pursuant to this Section 7(c), Executive and/or his family shall continue to be entitled to coverage under the plans, programs and arrangements referred to in Section 4(b) hereof for so long as Executive continues to receive payments from the Company pursuant to clause (iv) of this Section 7(c). (d) No Other Benefits or Compensation. Except as may be provided under this Agreement or under the terms of any incentive compensation, employee benefit or fringe benefit plan applicable to Executive at the time of the termination of Executive's employment prior to the end of the Term, Executive shall have no right to receive any other compensation, or to participate in any other plan, arrangement or benefit, with respect to any future period after such termination. (e) General. (i) In the event that Executive's employment is terminated for any reason, the Company's payment of salary and other amounts specifically provided for in the applicable previous paragraph of this Section 7 shall constitute complete satisfaction of all payment obligations of the Company to Executive pursuant to this Agreement. Upon any such termination, Executive shall cease to be an employee of the Company for all purposes and (except as otherwise expressly set forth in this Agreement) the Company shall have no obligation to Executive to provide Executive with any employee benefits or perquisites hereunder. (ii) Executive's rights set out in this Agreement shall constitute Executive's sole and exclusive rights and remedies as a result of Executive's actual or constructive termination of employment. 8. Noncompetition and Nonsolicitation; Nondisclosure of Proprietary Information; Surrender of Records. (a) Noncompetition; Nonsolicitation. (i) Executive acknowledges and recognizes the highly competitive nature of the Company's business and that his position with the Company and access to the Company's confidential records and proprietary information renders him special and unique. In consideration of payments made and to be made by the Company to Executive pursuant to this Agreement (including, without limitation, pursuant to Section 3 hereof), Executive agrees not to, directly or indirectly, by ownership of securities or otherwise (other than as a stockholder of not more than five percent (5%) of any class of securities of any other corporation, which class of securities shall have been registered under Section 12 of the Securities Exchange Act of 1934, as amended), for a period equal to the later of (A) five (5) years after the Closing Date (as defined in the Asset Purchase Agreement) and (B) three (3) years after the termination or expiration of this Agreement, engage in any business competitive with the business of the Company located in North America (the "Geographic Region") or become associated with or render services in connection therewith to any person, firm, corporation, association or other entity so engaged (other than Dynabazar and its Affiliates and their respective successors and assigns) in such Geographic Region. (ii) In further consideration of the payments made and to be made by the Company to Executive pursuant to this Agreement (including, without limitation, pursuant to Section 3 hereof), Executive agrees that during the Term of this Agreement and for a period of two (2) years thereafter, he shall not, directly or indirectly, (A) advise or encourage any employee, agent, consultant, representative or customer of, or vendor or supplier to, the Company to terminate his, her, or its relationship with the Company or to reduce the amount of business customarily done with the Company, or (B) solicit or attempt to solicit or participate in the solicitation of or employ or otherwise engage any employee of the Company, or otherwise advise or encourage any employee to become an employee, agent, representative or consultant of or to any other Person. (iii) Executive understands that the provisions of this Section 8(a) may limit his ability to earn a livelihood in a business similar to the business of the Company but nevertheless agrees and hereby acknowledges that the consideration provided under this Agreement, including any amounts provided under Section 3 hereof, are sufficient to justify the restrictions contained in such provisions. In consideration thereof and in light of Executive's education, skills and abilities, Executive agrees that he will not assert in any forum that such provisions prevent him from earning a living or otherwise are void or unenforceable or should be held void or unenforceable. (iv) For purposes of any provision of Section 8 hereof, "directly or indirectly" means in Executive's individual capacity for his own benefit or for the benefit of a third party, or as a shareholder, partner, member, principal, officer, director, trustee, employee, representative, agent or consultant of or to any Person whatsoever. (b) Proprietary Information. Executive acknowledges that during the course of his employment with the Company he will necessarily have access to and make use of proprietary information and confidential records of the Company and its affiliates. Executive covenants that he shall not, during the Term or at any time thereafter (irrespective of the circumstances under which Executive's employment with the Company terminates), directly or indirectly, use for his own purpose or for the benefit of any Person other than the Company and its affiliates, nor otherwise disclose, any proprietary information of which he has knowledge to any Person, unless such disclosure has been authorized in writing by the Company or such affiliates or is otherwise required by law. Executive acknowledges and understands that the term "proprietary information" includes, but is not limited to, patents, copyrights and trade secrets such as: (i) designs, drawings, sketches, fabrics, accessories and ornaments utilized or incorporated in or proposed to be utilized or incorporated in any product of the Company or its affiliates; (ii) the software products, programs, applications and processes utilized by or on behalf of the Company and its affiliates (other than off-the-shelf software programs); (iii) the name and/or address of any customer or vendor of the Company and its affiliates or any information concerning the transactions or relations of any customer or vendor of the Company and its affiliates with the Company or any of its shareholders, principals, directors, officers, employees or agents; (iv) any information concerning any product, technology or procedure employed by or on behalf of the Company and its affiliates but not generally known to its customers, vendors or competitors, or under development by or being tested by or on behalf of the Company and its affiliates but not at the time offered generally to customers or vendors; (v) any information relating to the Company's computer software, computer systems, pricing or marketing methods, sales margins, cost or source of raw materials, supplies or goods, capital structure, operating results, borrowing arrangements or business plans; (vi) any information which is generally regarded as confidential or proprietary in any line of business engaged in by or on behalf of the Company and its affiliates; (vii) any business plans, budgets, advertising or marketing plans of the Company or its affiliates; (viii) any information contained in any of the written or oral policies and procedures or manuals of the Company or its affiliates; (ix) any information belonging to customers, vendors or affiliates of the Company and its affiliates or any other individual or entity which the Company and its affiliates has agreed to hold in confidence; and (x) all written, graphic and other material (whether in writing on magnetic tape or in electronic or other form) relating to or containing any of the foregoing. Executive acknowledges and understands that information that is not novel or copyrighted or trademarked or patented may nonetheless be proprietary information. The term "proprietary information" shall not include information generally available to and known by the public or information that is or becomes available to Executive on a non-confidential basis from a source other than the Company (or any of its affiliates) or the Company's shareholders, principals, directors, officers, employees or agents (other than as a result of a breach of any obligation of confidentiality). (c) Confidentiality and Surrender of Records. Following the expiration or termination of this Agreement, Executive shall not retain, and will deliver promptly to the Company, all confidential records. The term "confidential records" means all correspondence, memoranda, files, manuals, books, designs, sketches, lists, financial, operating, or marketing records, magnetic tape, or electronic or other media or equipment or records of any kind which may be in Executive's possession or under his control or accessible to him which contain any proprietary information. All confidential records shall be and remain the sole property of the Company during the Term and thereafter. (d) Disclosure Required by Law. In the event Executive is required by law or court order to disclose any proprietary information or confidential records of the Company, Executive shall provide the Company with prompt written notice so that the Company may seek a protective order or other appropriate remedy, and if such protective order or other remedy is not obtained, Executive shall furnish only that portion of the proprietary information or confidential records that is legally required and, upon request, shall assist the Company (at the Company's expense) in obtaining assurance that confidential treatment will be accorded such information or records. (e) No Other Obligations. Executive represents and warrants to the Company that he is not precluded or limited in his ability to undertake or perform the duties described herein by any contract, agreement or restrictive covenant. Executive covenants that he shall not employ the trade secrets or proprietary information of any other person in connection with his employment by the Company. (f) Confidentiality. Executive agrees to keep confidential the terms of this Agreement. This provision does not prohibit Executive from providing this information to his attorneys or accountants for purposes of obtaining legal or tax advice or as otherwise required by law; provided, however, the Executive shall be responsible for breaches of the confidentiality restrictions contained herein by such people as if Executive herself had breached such restrictions. The Company shall not disclose the terms of this Agreement except as necessary in the ordinary course of its business, as required by law or as required by any governmental or quasi-governmental entity or any self regulatory organization. (g) Developments the Property of the Company. All discoveries, inventions, designs, drawings, sketches, products, processes, methods and improvements conceived, developed or otherwise made by Executive at any time, alone or with others, and in any way relating to the present or future business or products of the Company and its Affiliates, including fabric or other designs, whether or not subject to copyright protection and whether or not reduced to tangible form during the period of Executive's employment with the Company (collectively referred to as "Developments"), shall be the sole property of the Company. Executive agrees to, and hereby does, assign to the Company all of Executive's right, title and interest throughout the world in and to all Developments. Executive agrees that all such Developments that are copyrightable shall constitute works made for hire under the copyright laws of the United States and Executive hereby assigns to the Company all copyrights and other proprietary rights Executive may have in any such Developments to the extent that they might not be considered works made for hire. There shall be excluded from this Section 8(g) any Development made by Executive (i) which is developed by Executive without the use of the Company's property or facilities, (ii) which does not make use of any confidential or proprietary information of the Company or any of its Affiliates and (iii) which does not relate to the Company's business or to the ongoing or planned product development efforts of the Company and its affiliates. Executive shall make and maintain adequate and current written records of all Developments, and shall disclose all Developments fully and in writing to the Company promptly after development of the same, and at any time upon request; provided, however, that Developments excluded under the preceding sentence shall be received by the Company in confidence. (h) Enforcement. Executive acknowledges and agrees that, by virtue of his position, his services, and access to and use of confidential records and proprietary information, any violation by his of any of the undertakings contained in this Section 8 would cause the Company or its Affiliates immediate, substantial and irreparable injury for which it or any of them has no adequate remedy at law. Accordingly, Executive agrees that in the event of a breach by him of any said undertakings, the Company will be entitled to temporary and permanent injunctive relief in any court of competent jurisdiction (without the need to post any bond and without proving that damages would be inadequate). Rights and remedies provided for in this Section 8 are cumulative and shall be in addition to rights and remedies otherwise available to the parties hereunder or under any other agreement or applicable law. 9. No Third Party Rights. Except as set forth in Section 7(a), the parties do not intend the benefits of this Agreement to inure to any person or entity not a party to this Agreement and notwithstanding anything contained in this Agreement, or any conduct or course of conduct by either party before or after signing this Agreement, this Agreement shall not be construed as creating any right, claim or cause of action against either party by any person or entity not a party to this Agreement. 10. Notices. Any notice, consent, request or other communication made or given in accordance with this Agreement shall be in writing and shall be deemed to have been duly given when actually received if delivered in person, sent by Federal Express or equivalent courier service, or if mailed, three (3) business days after mailing by registered or certified mail, return receipt requested, to those listed below at their following respective addresses, or at such other address as each may specify by notice to the others: To the Company: Costar Video Systems, LLC 2720 Commodore Drive Suite 150 Carrollton, Texas 75007 With copies to: Barington Capital Group, L.P. 888 Seventh Avenue, 17th Floor New York, New York 10019 Attention: General Counsel To Executive: James Pritchett 5136 Briargrove Lane Dallas, Texas 75287 11. Assignability; Binding Effect. This Agreement is a personal contract calling for the provision of unique services by Executive, and Executive's rights and obligations hereunder may not be sold, transferred, assigned, pledged or hypothecated. In the event of any attempted assignment or transfer of rights hereunder by Executive contrary to the provisions hereof, the Company will have no further liability for payments hereunder. The rights and obligations of the Company hereunder will be binding upon and run in favor of the successors and assigns of the Company. 12. Complete Understanding; Amendment; Waiver. This Agreement constitutes the complete understanding between the parties with respect to the employment of Executive and supersedes all other prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof, and no statement, representation, warranty or covenant has been made by either party with respect thereto except as expressly set forth herein. All prior employment, consulting or other agreements between the Company and Executive with respect to the performance of any services by Executive to the Company or any of its Affiliates (including, without limitation, Video Solutions) or the payment of any royalties, license fees or other similar fees to Executive, are terminated as of the Effective Date. This Agreement shall not be altered, modified, amended or terminated except by a written instrument signed by each of the parties hereto. Any waiver of any term or provision hereof, or of the application of any such term or provision to any circumstances, shall be in writing signed by the party charged with giving such waiver. Waiver by either party hereto of any breach hereunder by the other party shall not operate as a waiver of any other breach, whether similar to or different from the breach waived. No delay on the part of the Company or Executive in the exercise of any of their respective rights or remedies shall operate as a waiver thereof, and no single or partial exercise by the Company or Executive of any such right or remedy shall preclude other or further exercise thereof. 13. Severability. If any provision of this Agreement or the application of any such provision to any party or circumstances shall be determined by any court of competent jurisdiction to be invalid or unenforceable to any extent, the remainder of this Agreement, or the application of such provision to such person or circumstances other than those to which it is so determined to be invalid or unenforceable, shall not be affected thereby, and each provision hereof shall be enforced to the fullest extent permitted by law. To the extent that a court of competent jurisdiction determines that Executive breached any undertaking in Section 8 hereof, any and all of the Company's obligations to make payments hereunder shall immediately cease, provided that the Company shall be liable for such payments in the event that the determination of such court is overturned or reversed by any higher court. If the final judgment of a court of competent jurisdiction declares that any item or provision hereof is invalid or unenforceable, the parties hereto agree that the court making the determination of invalidity or unenforceability shall have the power, and is hereby directed, to reduce the scope, duration or area of the term or provision, to delete specific words or phrases and to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified. 14. Survivability. The provisions of this Agreement which by their terms call for performance subsequent to termination of Executive's employment hereunder, or of this Agreement, shall so survive such termination. 15. Governing Law; Consent to Jurisdiction. This Agreement shall be governed by, and construed and enforced in accordance with, the internal laws of the State of New York applicable to contracts made and to be entirely performed therein, without regard to principles of conflicts of laws. In the event of any controversy or claim arising out of or relating to this Agreement or the breach or alleged breach hereof, each of the parties hereto irrevocably (a) submits to the exclusive jurisdiction of any New York state court sitting in the County of New York or any federal court sitting in U.S. District Court for the Southern District of the State of New York, (b) waives any objection which it may have at any time to the laying of venue of any action or proceeding brought in any such court, (c) waives any claim that such action or proceeding has been brought in an inconvenient forum, and (d) agrees that service of process or of any other papers upon such party by registered mail at the address to which notices are required to be sent to such party under Section 10 shall be deemed good, proper and effective service upon such party. 16. Counterparts; Facsimile. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Each counterpart may consist of a number of copies hereof each signed by less than all, but together signed by all of the parties hereto. Facsimile transmission of any signed original counterpart and/or retransmission of any signed facsimile transmission shall be deemed the same as the delivery of an original. 17. Interpretation. The headings and captions used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. The parties hereto acknowledge and agree that: (i) each party and its counsel reviewed and negotiated the terms and provisions of this Agreement and have contributed to its revision; (ii) the rule of construction to the effect that any ambiguities are resolved against the drafting party shall not be employed in the interpretation of this Agreement; and (iii) the terms and provisions of this Agreement shall be construed fairly as to all parties hereto and not in favor of or against any party, regardless of which party was generally responsible for the preparation of this Agreement. 18. WAIVER OF JURY TRIAL. EACH PARTY HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY. [SIGNATURES ON NEXT PAGE] IN WITNESS WHEREOF, each of the parties hereto has duly executed this Agreement as of the date first above written. COSTAR VIDEO SYSTEMS, LLC By: /s/ James A. Mitarotonda ----------------------------------- Name: James A. Mitarotonda Title: President JAMES PRITCHETT /s/ James Pritchett ----------------------------------- Schedule Intentionally Omitted EX-31.3 3 e26966ex31_3.txt EX-31.3 CERTIFICATION PURSUANT TO SECTION 302 Exhibit 31.3 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, James A. Mitarotonda, certify that: 1. I have reviewed this annual report on Form 10-K/A of Dynabazaar, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: April 17, 2007 By: /s/ James A. Mitarotonda ------------------------ James A. Mitarotonda Chief Executive Officer EX-31.4 4 e26966ex31_4.txt EX-31.4 CERTIFICATION PURSUANT TO SECTION 302 Exhibit 31.4 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Melvyn Brunt, certify that: 1. I have reviewed this annual report on Form 10-K/A of Dynabazaar, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: April 17, 2007 By: /s/ Melvyn Brunt ------------------------ Melvyn Brunt Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----