EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of January 1,
2002 between RATEXCHANGE CORPORATION, a Delaware corporation (the "Company") and
Xxxxxx X. Xxxx (the "Executive").
WHEREAS, the parties desire to enter into this Agreement setting forth the terms
and conditions for the employment relationship of the Executive with the
Company.
NOW, THEREFORE, it is AGREED as follows:
1. Employment. The Executive is hereby employed as President and Chief Operating
Officer of the Company for a period commencing on the date hereof and ending
three years after the date hereof. As President and Chief Operating Officer of
the Company, the Executive shall handle all day-to-day activities of the Company
as customarily performed by persons serving in such capacities. He shall also
perform such other duties as the Board of Directors of the Company may from time
to time direct. The Executive agrees to serve the Company faithfully and to the
best of his ability and to devote his full time, attention and efforts to the
business and affairs of the Company during the term of his employment. The
Executive hereby confirms that he is under no contractua1 commitments
inconsistent with his obligations set forth in this Agreement. The Executive
shall be entitled without prior written consent to hold positions on the Board
of Directors of entities that do not compete with the Company. The Executive
has, as of the date of this Agreement, disclosed to the Board of Directors of
the Company the positions the Executive currently holds on other Boards of
Directors, and the Company has consented to such positions.
2. Location of Services. During the term of this Agreement, the Executive shall
be principally located at the offices of the Board of Directors of the Company
located in the San Francisco, California metropolitan area.
3. Salary. The Company shall pay the Executive an annual Base Salary equal to
$125,000, which shall be increased to $175,000 upon the reaching of mutually
agreed upon milestones to be defined by the Executive an the Company's Chairman
and CEO sometime before the close of the first quarter 2002. The Base Salary of
the Executive shall not be decreased at any time during the term of this
Agreement from the amount then in effect unless the Executive otherwise agrees
in writing. Participation in deferred compensation, discretionary bonus,
retirement, and other employee benefit plans and in fringe benefits shall not
reduce the Base Salary. The Base Salary shall be payable to the Executive not
less frequently than monthly.
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4. Bonuses. Upon the signing of this Agreement, the Executive shall be entitled
to receive a bonus of $145,000, to be paid and recognized as follows:
(a) In Cash: $45,000 in cash will be paid to the Executive on the first
business day of January 2002 to make up for the ten (10) months of
deferred salary stemming from significant reductions in the
Executive's base salary during 2001.
(b) In Options: In lieu of the remaining $100,000 being paid in cash, the
Executive will be granted the number of options equal to the result
derived by dividing $100,000 by the share price at closing of the 2001
Private Placement overseen by Xxxxxx & Durieu "Private Placement";
this $100,000 represents the Executive's deferred signing bonus of
$25,000 for 2001 that has not been paid, plus $75,000 for the
Executive's 2001 annual bonus for meeting performance objectives in
2001, calculated as 50% of the Executive's 2001 annual base salary of
$150,000. These options will vest over two years; 50% on the date of
this Agreement, 25% on the first anniversary of this Agreement and 25%
on the second anniversary of this Agreement according to the terms of
the RateXchange 2001 Stock Option and Incentive Plan.
(c) If for any reason whatsoever the Private Placement is not closed at
any time, the $145,000 bonus described in (a) and (b) above shall
remain in effect, with terms and timing of payment subject to mutually
satisfactory rescheduling as determined by the Executive and the
Company's Chairman and CEO.
(d) 2002 Annual Bonus: The Executive will earn an Annual Bonus up to an
amount equal to 60% of his 2002 adjusted Base Salary of $175,000. The
2002 Annual Bonus will be earned upon the Company becoming EBITDA
positive by the end of the third quarter and continuing through the
fourth quarter of fiscal year 2002. The Company's Chairman and CEO
will determine the amount of the bonus, with approval from the
Company's Compensation Committee.
The Company's Chairman and CEO may, in his sole discretion, award additional
bonuses to the Executive based upon achievement of Company objectives. Such an
award is subject to Compensation Committee approval.
5. Participation in the Executive Benefit Plans. In addition to the benefits
noted below, the Executive shall be entitled to participate, on the same basis
as other executive employees of the Company, in any stock option, stock
purchase, pension, thrift, profit-sharing, group life insurance, medical
coverage, education, or other retirement or employee pension or welfare plan or
benefits that the Company has adopted or may adopt for the benefit of its
employees. The Executive shall be entitled to participate in any fringe
benefits, which are now or may be or become applicable to the Company's
executive employees generally.
The Executive shall promptly be reimbursed for all reasonable expenses which he
may incur in connection with his services hereunder in accordance with the
Company's normal reimbursement policies as established from time to time.
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6. Stock Options.
(a) Subject to approval by the Company's Board of Directors, in consideration of
the Executive's acceptance of employment hereunder, the Executive shall be
granted options to purchase an aggregate of 400,000 shares of the Company's
common stock, par value $.000l per share ("Common Stock"), at an exercise price
to be equal to the closing price of the Common Stock as listed on The American
Stock Exchange LLC on the date of the close of the Private Placement, and on
terms to be set forth in one of the Company's standard forms of stock option
agreement to be entered into between the Company and the Executive. These
options shall be granted within three (3) business days after the close of the
Private Placement. The vesting of such options shall be as follows:
(i) options to purchase 100,000 shares shall vest as of the date of this
Agreement.
(ii) options to purchase 100,000 shares shall vest on the first anniversary of
this Agreement, subject to continued employment as of such date.
(iii) the balance of 200,000 option shares shall vest 1/24th per month over the
remaining two years following the first anniversary of this Agreement, subject
to continued employment as of such date.
(b) Each of the options will have a term of ten years from the date of grant. To
the extent eligible, the options will be issued as incentive stock options
within the meaning and subject to the limitations of Section 422 of the Internal
Revenue Code.
7. Sale of the Company.
(a) During the term of this Agreement or the Severance Period (as defined
below), upon (i) a sale of all or substantially all of the assets of the
Company, (ii) a merger of the Company with another entity where the Company is
not the surviving entity or where the stockholders of the Company immediately
prior to the merger own less than fifty percent (50%) of the voting stock of the
Company following the merger, or (iii) a change in the membership of the Board
of Directors such that individuals who, as of the date hereof, constitute the
Board of Directors (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board of Directors; provided, however, that any
individual becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company's shareholders, was approved by a vote of
at least a majority of the directors then comprising the Incumbent Board shall
be considered as though the individual were a member of the Incumbent Board, but
excluding, for this purpose, any individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with respect to
the election or removal of directors or other actual or threatened solicitation
of proxies or consents by or on behalf of a person other
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than the Company's Board of Directors, the Executive shall receive $500,000 from
the Company and all of the Executive's options that have been granted pursuant
to the terms set forth in this Agreement shall vest immediately.
(b) Notwithstanding any other provision of this Agreement or of any other
agreement, contract, or understanding heretofore or hereafter entered into by
the Executive with the Company, except an agreement, contract, or understanding
hereafter entered into that expressly modifies or excludes application of this
paragraph (an "Other Agreement"), and notwithstanding any formal or informal
employment agreement or other arrangement for the direct or indirect provision
of compensation to the Executive (including groups or classes of participants or
beneficiaries of which the Executive is a member), whether or not such
compensation is deferred, is in cash, or is in the form of a benefit to or for
the Executive (a "Benefit Arrangement"), if the Executive is a "disqualified
individual," as defined in Section 280G(c) of the Internal Revenue Code (the
"Code"), any right to receive any payment or other benefit under this Agreement
shall not become exercisable or vested or shall be forfeited to the extent that
such right to exercise, vesting, payment, or benefit, taking into account all
other rights, payments, or benefits to or for the Executive under this
Agreement, all Other Agreements, and all Benefit Arrangements, would cause any
payment or benefit to the Executive under this Agreement to be considered a
"parachute payment" within the meaning of Section 280G(b)(2) of the Code as then
in effect (a "Parachute Payment"). In the event that the receipt of any such
right to exercise, vesting, payment, or benefit under this Agreement, in
conjunction with all other rights, payments, or benefits to or for the Executive
under any Other Agreement or any Benefit Arrangement would cause the Executive
to be considered to have received a Parachute Payment under this Agreement, then
the Executive shall have the right, in the Executive's sole discretion, to
designate those rights, payments, or benefits under this Agreement, any Other
Agreements, and any Benefit Arrangements that should be reduced or eliminated so
as to avoid having the payment or benefit to the Executive under this Agreement
be deemed to be a Parachute Payment.
8. Standards. The Executive shall perform the Executive's duties and
responsibilities under this Agreement in accordance with such reasonable
standards as may be established from time to time by the Chairman and CEO and
Board of Directors of the Company. The reasonableness of such standards shall be
measured against standards for executive performance generally prevailing in the
Company's industry.
9. Voluntary Absences: Vacations. The Executive shall be entitled to annual paid
vacation of at least four weeks (twenty days) per year or such longer period as
the Board of Directors of the Company may approve. The timing of paid vacations
shall be scheduled in a reasonable manner by the Executive.
10. Termination of Employment.
(a) The Executive may terminate his employment at any time after the 60-day
notice period in Section 11 has elapsed. The Board of Directors of the Company
may terminate
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the Executive's employment at any time, subject to payment of the compensation
described below.
(b) In the case of (i) any termination other than "termination for cause" as
defined below, or (ii) any termination by the Executive for "Good Reason" as
defined below, the Executive shall continue to receive for twelve months,
commencing on the date of such termination (the "Severance Period"), his full
Base Salary, any bonus that has been earned but not paid before termination of
employment, plus a lump sum payment of 50% of his full base salary; and all
other benefits and compensation that the Executive would have been entitled to
under this Agreement in the absence of termination of employment (collectively,
the "Severance Amount"); provided, further, that all of Executive's options that
have been granted pursuant to the terms set forth in this Agreement shall vest
immediately upon such termination.
(c) The Executive shall have no right to receive compensation or other benefits
from the Company for any period after termination for cause by the Company or
termination by the Executive other than termination with good reason, except for
any vested retirement benefits to which the Executive may be entitled under any
qualified employee pension plan maintained by the Company and any deferred
compensation to which the Executive may be entitled.
(d) The term "termination for cause' shall mean termination by the Company
because of the Executive's (i) fraud or material misappropriation with respect
to the business or assets of the Company; (ii) persistent refusal or failure
materially to perform his duties and responsibilities to the Company for a
period of at least ten (10) days, which continues after the Executive receives
notice of such refusal or failure; (iii) conduct that constitutes disloyalty to
the Company and which materially xxxxx the Company or conduct that constitutes
breach of fiduciary duty involving personal profit; (iv) conviction, or the
entry of a plea of guilty or nolo contendere by the Executive, of a felony or
crime, or willful violation of any law, rule, or regulation, involving moral
turpitude; (v) the use of drugs or alcohol which interferes materially with the
Executive's performance of his duties; or (vi) material breach of any provision
of this Agreement.
(e) The term resignation for "Good Reason" shall mean that Executive's
resignation occurs within three months of one of the following events: (i) an
involuntary reduction of Executive's job duties or responsibilities; (ii) the
Chairman and CEO or Board decides that Executive report to someone other than
the Chairman and CEO; or (iii) any involuntary reduction of Executive's Base
Compensation.
(f) The Executive's employment pursuant to this Agreement shall terminate
automatically prior to the expiration of the term of this Agreement in the event
of the Executive's death or disability. In the event the Executive's employment
terminates prior to the expiration of the term of this Agreement due to his
death or disability, the Executive shall not be entitled to any further
compensation under the provisions of this Agreement, except for his base salary
earned through the date of termination, and the portion of any bonus which
previously had been approved by the Company but was unpaid as of the
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Executive's death or disability. The Executive (or, in the event of death, the
Executive's estate) shall be entitled to such unpaid portion of any approved
bonus only if the Executive (or the authorized representative of the Executive's
estate) signs a comprehensive general release of claims in a form acceptable to
Company. Payments of such approved but unpaid bonus shall not commence until
after the Executive (or the authorized representative of his estate) signs such
a release, and after any revocation period referenced in such release has
expired. If the Executive (or the authorized representative of his Estate) does
not sign such a general release of claims, the Executive (or his estate) shall
not be entitled to receive any compensation under the provisions of this
Agreement except for the Executive's base salary earned through the date of
death or disability. In the case of disability, if the Executive violates any of
the provisions of Sections 13 or 14 of this Agreement, the Company's obligations
to pay the unpaid portion of any approved Bonus to the Executive shall cease on
the date of such violation.
11. Termination by the Executive. The Executive may terminate his employment at
any time during the term of this Agreement by giving sixty (60) days' prior
written notice thereof to the Board of Directors of the Company. In the event of
termination by the Executive under this Section 11, the Company may at its
option elect to have the Executive cease to provide services immediately,
provided that during such 60-day notice period the Executive shall be entitled
to continue to receive his base salary the Executive's salary and benefits will
terminate at the end of the 60-day notice period and his options will be subject
to the terms and conditions of the applicable RateXchange Stock Option and
Incentive Plan.
12. Return of Proprietary Property. The Executive agrees that all property in
the Executive's possession that he obtains or is assigned in the course of his
employment with the Company, including, without limitation, all documents,
reports, manuals, memoranda, customer lists, credit cards, keys, access cards,
and all other property relating in any way to the business of the Company, is
the exclusive property of the Company, even if the Executive authored, created,
or assisted in authoring or creating such property. The Executive shall return
to the Company all such property immediately upon termination of employment or
at such earlier time as the Company may request.
13. Confidential Information. Except as permitted or directed by the Board of
Directors of the Company, during the time the Executive is employed by the
Company or at any time thereafter, the Executive shall not divulge, furnish, or
make accessible to anyone or use in any way (other than in the ordinary course
of the business of the Company) any confidential or secret information or
knowledge of the Company, whether developed by himself or by others. Such
confidential and/or secret information encompassed by this Section 13 includes,
but is not limited to, the Company's customer and supplier lists, business
plans, and financial, marketing, and personnel information. The Executive agrees
to refrain from any acts or omissions that would reduce the value of any
confidential or secret knowledge or information to the Company, both during his
employment hereunder and at any time after the termination of his employment.
The Executive's obligations of confidentiality under this Section 13 shall not
apply to any knowledge or information that is now published publicly or that
subsequently becomes
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generally publicly known, other than as a direct or indirect result of a breach
of this Agreement by the Executive.
14. Patent and Related Matters.
(a) The Executive agrees to promptly disclose in writing to the Company complete
information concerning each and every invention, discovery, improvement, device,
design, process, or product made, developed, perfected, devised, conceived, or
first reduced to practice by the Executive, either solely or in collaboration
with others, during the Executive's term of employment by the Company, or within
six months thereafter, relating to the business, products, practices, or
techniques of the Company (hereinafter referred to as "Developments"). The
Executive, to the extent that the Executive has the legal right to do so, hereby
acknowledges that any and all of said Developments are the property of the
Company and hereby assigns and agrees to assign to the Company any and all of
the Executive's right, title, and interest in and to any and all of such
Developments.
(b) The provisions of this Section 14 shall not apply to any Development meeting
the following conditions:
(i) such Development was developed entirely on the Executive's own time; and
(ii) such Development was made without the use of any Company equipment,
supplies, facilities, or trade secret information; and such Development does not
relate at the time of conception or reduction to practice to (i) to the business
of the Company, or (ii) to the Company's actual or demonstrably anticipated
research or development; and
(iii) such Development does not result from any work performed by the Executive
for the Company.
(b) Upon request and without further compensation therefore, but at no
expense to the Executive, and whether during the term of the
Executive's employment by the Company or thereafter, the Executive
will do all lawful acts, including, but not limited to, the execution
of papers and the giving of testimony, that in the opinion of the
Company, its successors, or assigns, may be necessary or desirable in
obtaining, sustaining, reissuing, extending, or enforcing Letters
Patent, and for perfecting, affirming, and recording the Company's
complete ownership and title thereto, and to cooperate otherwise in
all proceedings and matters relating thereto.
15. Restrictive Covenants.
(a) During the employment of the Executive under this Agreement and for a period
of one year after termination of such employment, the Executive shall not at any
time (i) compete on his own behalf, or on behalf of any other person or entity,
with the Company
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or any of its affiliates within all territories in which the Company does
business with respect to the business of the Company or any of its affiliates as
such business shall be conducted on the date hereof or during the employment of
the Executive under this Agreement; (ii) solicit or induce, on his own behalf or
on behalf of any other person or entity, any employee of the Company or any of
its affiliates to leave the employ of the Company or any of its affiliates; or
(iii) solicit or induce, on his own behalf or on behalf of any other person or
entity, any customer of the Company or any of its affiliates to reduce its
business with the Company or any of its affiliates.
(b) The Executive shall not at any time during or subsequent to his employment
by the Company, on his own behalf or on behalf of any other person or entity,
disclose any proprietary information of the Company or any of its affiliates to
any other person or entity other than on behalf of the Company or in conducting
its business, and the Executive shall not use any such proprietary information
for his own personal advantage or make such proprietary information available to
others for use, unless such information shall have come into the public domain
other than through unauthorized disclosure.
(c) The ownership by the Executive of not more than 5% of a corporation,
partnership or other enterprise shall not constitute a violation hereof.
(d) If any portion of this Section 15 is found by a court of competent
jurisdiction to be invalid or unenforceable, but would be valid and enforceable
if modified, this Section 15 shall apply with such modifications necessary to
make this Section 15 valid and enforceable. Any portion of this Section 15 not
required to be so modified shall remain in full force and effect and not be
affected thereby. The Executive agrees that the Company shall have the right of
specific performance in the event of a breach by the Executive of this Section
15.
16. Assignment. The rights and obligations of the Company under this Agreement
shall inure to the benefit of and shall be binding upon the successors and
assigns of the Company. The Executive may not assign this Agreement or any
rights hereunder. Any purported or attempted assignment or transfer by the
Executive of this Agreement or any of the Executive's duties, responsibilities
or obligations hereunder shall be void.
17. Company Remedies. The Executive acknowledges that the remedy at law for any
breach of any of the provisions of Sections 12, 13 or 15 will be inadequate, and
that the Company shall be entitled, in addition to any remedy at law or in
equity, to preliminary and permanent injunctive relief and specific performance.
18. Other Contracts. The Executive shall not, during the term of this Agreement,
have any other paid employment other than with a subsidiary of the Company,
except with the prior approval of the Board of Directors.
19. Notices. All notices, requests, demands, consents, or other communications
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given if delivered by overnight courier or express mail
service or by postage prepaid
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registered or certified mail, return receipt requested (the return receipt
constituting prima facie evidence the giving of such notice request, demand or
other communication), by personal delivery, or by fax with confirmation of
receipt and a copy mailed with postage prepaid, to the following address or such
other address of which a party may subsequently give notice to the other party
in accord with the provisions of this Section. Notice is effective immediately
if by personal delivery or by fax with confirmation received and a copy mailed
the same day. Notice sent by overnight courier or by registered or certified
mail is effective the earlier of actual receipt or the fifth date after the date
mailed as evidenced by the sender's certified or registered receipt.
To the Company: RateXchange Corporation
000 Xxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, XX 00000
Attn: Chairman
To Employee: Xxxxxx X. Xxxx
0000 Xxxxx Xxxx Xxx
Xxx Xxxxxx, XX 00000
20. Attorneys Fees. Should any party hereto retain counsel for the purpose of
enforcing, or preventing the breach of, any provision hereof including, but not
limited to, the institution of any action or proceeding, whether by arbitration,
judicial or quasi-judicial action, or otherwise, to enforce any provision
hereof, or for damages for any alleged breach of any provision hereof, or for a
declaration of such party's rights or obligations hereunder, then whether the
matter is settled by negotiation, or by arbitration or judicial determination,
the prevailing party shall be entitled to be reimbursed by the losing party for
all costs and expenses incurred thereby, including, but not limited to,
reasonable attorney's fees for the services rendered to such prevailing party.
22. Amendments or Additions. No amendments or additions to this Agreement shall
be binding unless in writing and signed by all parties hereto.
23. Section Headings. The section headings used in this Agreement are included
solely for convenience and shall not affect, or be used in connection with, the
interpretation of this Agreement.
24. Severability. The provisions of this Agreement shall be deemed severable and
the invalidity or unenforceability of any provision shall not affect the
validity or enforceability of the other provisions hereof.
25. Governing Law. This Agreement shall be governed by the laws of the State of
Delaware (other than the choice of law rules thereof).
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RATEXCHANGE CORPORATION
By: D. Xxxxxxxx Xxxxxxxx
Chairman & CEO
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Signed:
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Title: President and COO
By: Xxxxxx X. Xxxx
---------------------------------
Signed:
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