Common Stock of Entrade, at $9.00 per share, effective on the Closing Date. The option shall be fully vested as of the grant date and will be immediately exercisable as to all 200,000 shares on the grant date. The terms and conditions of the option...
Exhibit 10.5
ENTRADE INC.
000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
As of
October 15, 1999
Dear Xxxxx:
This letter is intended to set forth the terms and conditions under
which Entrade Inc., a Pennsylvania corporation ("Entrade"), and Asset
Liquidation Group, Inc. and Public Liquidation Systems, Inc., both California
corporations and wholly owned subsidiaries of Entrade (together, "Nationwide"),
are offering to employ you as an executive officer of Nationwide, effective as
of the closing date of the acquisition of Nationwide by Entrade (the "Closing
Date"). Entrade hereby irrevocably and unconditionally guarantees the prompt
payment, performance and satisfaction of all of the obligations of Nationwide
hereunder.
Parties: Entrade, Nationwide and Xxxxx X.
Xxxxxxxxxxx ("you").
Position: You will be an executive officer
of Nationwide, reporting to the Nationwide
Board of Directors.
Compensation: Your base salary ("base
salary") will be at a rate not less than
$162,000 per year, payable in accordance
with Nationwide's usual payroll policies.
You will be entitled to receive such
increases in your base salary as may be
approved by the Nationwide Board of
Directors.
Stock Options: You will be granted an option
to acquire 200,000 shares of the
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Common Stock of Entrade, at $9.00 per share,
effective on the Closing Date. The option
shall be fully vested as of the grant date
and will be immediately exercisable as to
all 200,000 shares on the grant date. The
terms and conditions of the option shall
otherwise be in accordance with the
Non-Qualified Stock Option Agreement by and
between you and Entrade, of even date
herewith.
Reimbursement of Business Expenses:
Nationwide will reimburse you for all
documented business-related expenses that
you incur in connection with the performance
of your responsibilities to Nationwide.
Other Benefits: You will be eligible to
participate in all Nationwide employee
benefit plans including any group health,
dental, pension, long-term disability,
short-term disability, 401(k), and group
life insurance plans in effect from time to
time.
Vacation Allowance: You will have an annual
vacation allowance of four calendar weeks.
Bonus: While you are in the employ of
Nationwide, you may be entitled to such
bonus awards as determined from time to time
by the Nationwide Board of Directors.
Additional Options: While you are in the
employ of Nationwide, you may be granted
such
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additional stock option awards as determined
from time to time by Entrade's Board of
Directors.
Board Nomination: While you are in the
employ of Nationwide, you will serve on the
Board of Directors of Nationwide.
Term: The initial term of your employment
shall commence as of the Closing Date and
end on the day prior to the third
anniversary of the Closing Date (the
"Initial Term"). Unless sooner terminated
pursuant to the terms hereof, commencing on
the third anniversary of the Closing Date,
and on each anniversary of the Closing Date
thereafter, the term of your employment
shall automatically be extended for one
additional year ("extended term") unless,
not later than ninety (90) days preceding
such date, you or Nationwide shall give
written notice to the other that you or it
does not wish to extend the term of
employment for such additional one year
period.
Termination: If at any time during the
Initial Term, Nationwide should terminate
your employment for reasons other than Cause
(hereinafter defined) or if you terminate
your employment for Good Reason (hereinafter
defined), you or your estate will be
entitled post-termination to a continuation
of your base salary, at its then current
rate, through and until the later of (i) the
end of the Initial Term, or (ii) a period of
six (6)
3
months from the date of the notice of
termination (which date shall be deemed and
hereafter referred to as the "effective date
of termination"). If Nationwide elects not
to renew the term of your employment for any
additional one year period for any reason
other than Cause, or if your employment
shall be terminated during any extended term
either by Nationwide for any reason other
than Cause or by you for Good Reason, you
shall be entitled post-termination to a
continuation of your base salary then in
effect through and until the later of (i)
the end of the current extended term, or
(ii) a period of six (6) months after the
effective date of termination. Upon any
termination described in this Section, you
will be entitled to continue to participate
in all of the employee benefit plans and
programs in which you were participating
prior to the termination of your employment
during the period in which you are entitled
to a continuation of your base salary as
herein provided. If at any time following
the first twelve (12) months of the term of
this Agreement the Board of Directors of
Nationwide determines, in its sole
discretion, that your Outside Business
(hereinafter defined) activities are
interfering with the performance of your
duties hereunder, Nationwide shall so notify
you in writing. Unless you discontinue your
Outside Business activities effective within
sixty calendar days following the date of
your receipt of such notice and so notify
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Nationwide, then at the option of Nationwide
this Agreement shall terminate and be of no
further force or effect as of such sixtieth
calendar day. In such event, Nationwide
shall pay to you your compensation, expense
reimbursements, accrued vacation and other
benefits accrued through the effective date
of such termination and shall have no
further obligations to you under this
Agreement except to the extent provided
below under "Indemnification."
Duties: As an executive officer of
Nationwide, you shall perform such duties as
are consistent with your position and as you
shall be directed to perform by the Board of
Directors. In addition, you shall have the
discretion to perform such other duties that
are required by the laws of the
jurisdictions in which Nationwide operates
or by the contracts and agreements to which
Nationwide is subject. You acknowledge that
your office will require your primary
efforts and attention, and that you shall
not, during the Initial Term or any
extension, engage in any other business
activity, whether or not such other business
activity is for your own behalf or for any
other person, firm, corporation or other
entity (together, a "Person") and whether or
not such other Person is in competition with
Nationwide or Entrade. Notwithstanding the
foregoing, you shall be allowed to manage
and oversee passive investments in
noncompeting businesses, and you may
continue to retain an
5
interest in Brentwood Management Group and
in the accounting practice of Xxxxxx,
Xxxxxxxx & Schlossmann, LLP and to perform
services for their respective clients and to
receive and retain compensation therefor
(your "Outside Business"), provided that
your Outside Business does not require more
than ten percent (10%) of your business time
or otherwise interfere with the performance
of your duties for Nationwide
Cause: Your employment may be terminated at
any time for Cause, which is hereby defined
as (i) conduct, at any time, which has
involved criminal dishonesty, conviction of
any felony, or conviction of any lesser
crime or offense involving the property of
Nationwide or Entrade, or any of their
respective subsidiaries or affiliates, or
misappropriation of any money or other
assets or properties of Nationwide or
Entrade, or that of their respective
subsidiaries or affiliates, (ii) any willful
violation of specific, lawful written
directions from Nationwide's Board of
Directors that are consistent with your
duties described above, (iii) any material
breach of any covenant or agreement
contained in this Agreement, unless the same
is promptly remedied to Nationwide's
reasonable satisfaction, or (iv) a material
violation of any policy regarding substance
abuse as may be promulgated by Nationwide
from time to time.
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Good Reason: Good Reason includes any of the
following:
i. Failure by Entrade or Nationwide to
perform its material obligations under this
Agreement, unless the same is promptly
remedied to your reasonable satisfaction;
ii. Failure by the Nationwide Board of
Directors at any time to elect you as an
executive officer of Nationwide, or your
removal at any time from such office;
iii. Failure to ensure your appointment
or election as a member of the Board of
Directors of Nationwide throughout the term
of your employment;
iv. Material diminution in your duties
with Nationwide, or assignment to you of
duties that are inconsistent in any material
respect with your position as an executive
officer of Nationwide, unless the same is
promptly remedied to your reasonable
satisfaction;
v. Your death or disability;
Non-Disclosure. You acknowledge that in the
course of performing services for
Nationwide, you will obtain knowledge of
Entrade's and Nationwide's business plans,
products, processes, software, know-how,
trade secrets, formulas, methods, models,
prototypes, discoveries, inventions,
improvements, disclosures, names and
positions of employees and/or other
proprietary and/or confidential information
(collectively, the "Confidential
Information"). You agree to keep the
7
Confidential Information secret and
confidential and not to publish, disclose or
divulge it to any other party, and you agree
not to use any of the Confidential
Information for your own benefit or to the
detriment of the companies, whether or not
such Confidential Information was discovered
or developed by you. You also agree not to
divulge, publish or use any proprietary
and/or confidential information of others
that Nationwide is obligated to maintain in
confidence. The provisions of this paragraph
shall survive any termination of this
Agreement.
Non-Solicitation. You agree that for a
period of one (1) year following the date of
termination of your employment hereunder,
you will not, directly or indirectly, for
yourself or on behalf of any third party, at
any time or in any manner, solicit, hire,
contract for services or otherwise employ,
directly or indirectly, any of the employees
of Entrade or Nationwide or their affiliates
or call upon, solicit, divert, accept or
take away from Entrade, Nationwide or their
affiliates, directly or indirectly, any
account, customer or client to whom Entrade,
Nationwide or their affiliates rendered
services during the course of your
employment by Nationwide; provided, however,
that nothing contained in this paragraph
shall prevent you from soliciting any such
client or customer solely for purposes of
providing accounting, tax preparation and
related
8
financial services similar in nature to the
services you presently provide clients
through your Outside Business.
Non-Competition. You agree that, during your
employment by Nationwide and, if you make
the election under sub-section (i) below,
for the applicable period following the date
of termination of your employment hereunder,
neither you nor any corporation or other
entity in which you may be interested as a
partner, trustee, director, officer,
executive, employee, agent, shareholder,
lender of money or guarantor, or for which
you perform services in any capacity
(including as a consultant or independent
contractor) shall at any time during such
period be engaged, directly or indirectly,
in any Competitive Business (as that term is
hereinafter defined). Nothing herein
contained shall be deemed to prevent you
from (i) investing in or acquiring two per
cent or less of any class of securities of
any company if such class of securities is
listed on a national securities exchange or
is quoted on the Nasdaq Stock Market or (2),
at any time following the date of
termination of your employment hereunder,
providing any third party with accounting,
tax preparation and related financial
services similar in nature to the services
you presently provide clients through your
Outside Business. For purposes hereof, the
term "Competitive Business" shall mean any
business that engages in any respect in the
sale of real or
9
personal property through public or private
auctions (via internet or otherwise), any
business that engages in any respect in the
sale (by auction or otherwise) of motor
vehicles, or any business which engages in
any other activities that are competitive
with the business or proposed business of
Entrade or Nationwide or their affiliates at
the time of termination of your employment
hereunder. If you violate any provision of
this covenant, the post-termination
restrictive period set forth herein (to the
extent applicable) shall be extended for the
duration of any such violation, so that
Entrade and Nationwide enjoy the full term
of such restrictive period. Upon any
termination of your employment by Nationwide
under circumstances that would otherwise
entitle you to receive payment of your Base
Salary ("Severance Payment")for any period
beyond the date of such termination
("Restrictive Period"), you shall have the
option to elect either (i) or (ii) below by
written notice thereof to the Board of
Directors of Nationwide within ten (10) days
following the date of termination of your
employment. In the event no such election is
made within such time period, you will be
deemed to have elected option (i) below:
(i) Nationwide shall pay you the
Severance Payment, to the extent and
in the manner provided for under the
applicable provisions of this
Agreement, in which event you shall
remain subject to the
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non-competition covenants hereof for
the Restrictive Period; or
(ii) you shall forfeit any right to the
Severance Payment, in which event
the foregoing non-competition
covenant shall terminate from and
after the date of such termination.
Company Documentation. You shall hold in a
fiduciary capacity for the benefit of
Nationwide all documentation, disks,
programs, data, records, drawings, manuals,
reports, sketches, blueprints, letters,
notes, notebooks and all other writings,
electronic data, graphics and tangible
information and materials of a secret,
confidential or proprietary information
nature relating to Nationwide, Entrade or
their respective businesses that are in your
possession or under your control.
Injunctive Relief. You acknowledge that your
compliance with the foregoing covenants is
necessary to protect the good will and other
proprietary interests of Entrade and
Nationwide and that you as an employee of
Nationwide will be conversant with its
affairs, its trade secrets and other
proprietary information. You acknowledge
that a breach of any of the foregoing
covenants will result in irreparable and
continuing damage to Entrade and Nationwide
for which there will be no adequate remedy
at law; and you agree that in the event of
any
11
breach of the aforesaid covenants, Entrade
and/or Nationwide and their respective
successors and assigns shall be entitled to
injunctive relief and to such other and
further relief as may be proper.
Governing Law;
Arbitration: This Agreement shall be
governed by, and construed and enforced in
accordance with, the internal laws of the
State of California, applicable to
agreements made and to be performed entirely
therein, exclusive of its choice of law
provisions. You, Entrade and Nationwide each
agree that any controversy or claim arising
out of or relating to your employment by
Nationwide, or the termination of that
employment, will be settled by binding
arbitration in accordance with the terms and
conditions of that certain Arbitration
Agreement of even date herewith by and
between you, Entrade and Nationwide, a copy
of which is attached hereto and made a part
hereof as Exhibit A (the "Arbitration
Agreement"). You acknowledge and agree that
the Arbitration Agreement constitutes a
material aspect of this Agreement.
Indemnification: Nationwide will indemnify
you to the fullest extent permitted by law,
and will advance to you defense costs to the
fullest extent permitted by law, in
connection with any and all actions, suits
and proceedings to which you may at any time
be made or threatened to be made a party by
12
reason of (i) the commencement of your
employment with Nationwide or the fact that
you are or were at any time serving or
designated to serve as a director, officer
or employee of Entrade or Nationwide or any
of its subsidiaries or affiliated entities
or in any other capacity at the request or
on behalf of Entrade or Nationwide or any of
its subsidiaries or affiliated entities, or
(ii) any act or nonact on your part in
connection therewith. The obligations of
Nationwide under this Paragraph are absolute
and unconditional, will survive your death
or disability, and will survive the
termination of your employment with
Nationwide for any reason (whether such
termination is during your term of
employment or after the expiration of the
term of your employment).
Attorneys' Fees: The prevailing party will
be entitled to recover from the other all
attorneys' fees and other costs and expenses
in connection with enforcing this Agreement.
Binding Effect: This Agreement supersedes
all prior negotiations and represents the
entire agreement of the parties, and our
signatures hereon will bind us hereto. It is
understood and agreed that this Agreement
expressly supersedes any employment
agreement you may have had with Nationwide
prior to the Closing Date. The guaranty of
Entrade contained herein is a guaranty of
payment and not of collection. Entrade
hereby waives notice of the acceptance of
this guaranty and
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of performance or non-performance by
Nationwide, demand for payment or
performance from Nationwide and notice of
non-payment or failure to perform. This
Agreement inures to the benefit of Entrade
and Nationwide, their respective successors
and assigns and will be binding upon, and
enforceable against, Entrade and Nationwide
and their respective successors, including
any successor by merger or consolidation and
any entity or entities that acquire all or
substantially all of Entrade's or
Nationwide's assets, and, unless Entrade or
Nationwide make other arrangements
satisfactory to you for the performance of
its obligations under this Agreement,
Entrade or Nationwide will obtain the
express written assumption of this Agreement
by each of its successors. This Agreement
and the obligations created hereunder may
not be assigned by you, but all your rights
hereunder will inure to the benefit of, and
be enforceable by, you and your heirs,
legatees, executors, and personal
representatives and, to the extent that they
are entitled to receive any compensation,
benefit, payment or reimbursement under any
provision of this Agreement, your spouse and
any other beneficiaries; provided, however,
that after your acceptance of this
Agreement, you will have the right at any
time to amend, modify or terminate this
Agreement and any provision hereof
(including any provision of this Agreement
granting any rights to your spouse or any
other beneficiary) without the consent or
approval of your spouse or any other
beneficiary.
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If the foregoing is acceptable to you, please sign and return a copy to
me.
Sincerely,
/s/ Xxxx Xxxx
-------------------------
Xxxx Xxxx
Executive Vice President
ACKNOWLEDGED:
/s/ Xxxxx Xxxxxxxxxxx
-------------------------
XXXXX XXXXXXXXXXX
Dated: October 15, 1999
----------------------------
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