EXHIBIT 10.12
January 5, 2005
Mr. Xxxxx Xxxx
000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Re: RETENTION LETTER AGREEMENT
Dear Xxx:
In keeping with our discussions, this letter agreement memorializes the
terms of your continued retention by optionsXpress Holdings, Inc. (the
"Company").
1. TITLES AND DUTIES. Your title will be Chairman of the Board, and you
will report directly to the Board of Directors of the Company (the "Board"). As
such, you will be responsible for performing such duties and responsibilities as
are customarily assigned to such position, and to perform such other services as
assigned from time to time by the Board, not inconsistent with your position.
You will be expected to devote such business time and attention to the business
of the Company as you deem appropriate for your position as Chairman of the
Board and acting as such in a non-executive capacity.
2. COMPENSATION; TERM. You will receive an annual retainer of $167,000
(the "Base Remuneration") paid in accordance with the payroll procedures of the
Company, with annual increases (but not decreases) as may be determined by the
Compensation Committee of the Board in its discretion. The Remuneration payable
hereunder, as may be increased from time to time, and any other amounts payable
to you under this Agreement (including, without limitation, pursuant to Section
3 and Section 4 below), shall be subject to applicable withholding and payroll
taxes, if any, and such other deductions as may be required under the Company's
employee benefit plans. The term of your retention under this letter agreement
shall begin on the date hereof and shall continue until terminated in accordance
with Section 5 below..
3. BONUSES. Unless the Board or the Compensation Committee thereof
determines in good faith that you and/or the Company had significant performance
issues, during the term of your retention you will be eligible to receive annual
bonuses under, and historically consistent with, the Company's bonus plans for
senior level executives, and the grant and payment terms and the amount of any
such bonuses shall be determined by the Compensation Committee of the Board.
Your bonus opportunity shall be at least equal to the opportunities provided to
you under the Company's current and historical bonus plans for senior level
executives.
4. BENEFITS. During the term of your retention, you will be entitled to
participate in all welfare benefit plans of the Company applicable to senior
level executives. In addition, during the term of your retention, you will be
entitled to three (3) weeks paid vacation per year. Further, you shall be
entitled to reimbursement for expenses incurred by you in the ordinary course of
the Company's business (subject to the Company's policies with respect to
reporting and documentation of such expenses).
5. TERMINATION AND SEVERANCE.
(a) During the term of retention hereunder, your retention may be
terminated as follows:
(i) At any time upon prior written notice by the Company for any
reason other than Cause (as defined below) or no reason
("Termination Without Cause").
(ii) At any time upon three (3) months prior written notice by you for
any reason other than Good Reason (as defined below) or no
reason.
(iii) Automatically in the event of (A) your death or (B) your
inability to perform the essential duties, responsibilities and
functions of your position with the Company as a result of any
mental or physical incapacity, even with reasonable
accommodations for such disability or incapacity provided by the
Company, which inability lasts (or is likely to last, based on
competent medical evidence presented to the Board) for a
continuous period of six (6) months or longer. The reasoned and
good faith judgment of the Board as to your mental or physical
inability to perform shall be final so long as such judgment is
based on competent medical evidence presented to the Board by you
and by any physician or group of physicians engaged by you or the
Board to advise the Board on such matters.
(iv) Immediately upon written notice by the Company if such
termination is for Cause ("Termination for Cause").
(v) Immediately upon written notice by you if such termination is for
Good Reason.
(vi) At any time by mutual written agreement between you and the
Company.
(b) Upon termination of your retention hereunder for any reason, all
obligations of the Company shall cease upon such termination, except the
Company's obligations to (i) pay the compensation set forth in Section 2
hereof through the date of such termination, (ii) provide the benefits set
forth in Section 4 hereof through the date of such termination and to
comply with all state and federal laws and regulations applying to such
benefits and (iii) pay the severance benefits, if applicable, to you
pursuant to the terms and conditions set forth in Section 5(c) below. In
the event that your retention is terminated by you without Good Reason or
as a result of a Termination for Cause by the Company, you shall not be
entitled to any bonus compensation in respect of the calendar year of your
termination.
(c) In the event that your retention is terminated for Good Reason or
as a result of a Termination Without Cause, you shall be entitled to
receive an amount equal to twelve (12) months severance pay at the monthly
rate of your then-current retainer, payable in twelve (12) equal monthly
installments following such termination, unless increased pursuant to the
terms of Section 5(f) below, if and only if (i) you have executed
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and delivered to the Company a mutual general release of all claims against
you, on the one hand, and the Company and its other directors, officers and
affiliates, on the other hand, which general release shall be in the form
of EXHIBIT A attached hereto, and (ii) subsequent to such termination, you
shall not have (A) revoked or breached the provisions of such general
release or breached or otherwise failed to comply with the provisions of
Sections 6, 7 or 8 of this letter agreement, or (B) applied for
unemployment compensation chargeable to the Company during such severance
period.
(d) For purposes hereof, the term "Cause" means the following: (i)
the commission of fraud, theft or embezzlement by you in connection with
your duties to the Company or any of its customers or other material
business relations; (ii) your conviction of (or entry of a plea of guilty
or NOLO CONTENDERE to) a felony (other than minor traffic violations) (A)
in connection with your duties to the Company or any of its customers or
other material business relations, or (B) that materially and adversely
effects your ability to continue in your position and fulfill your duties
to the Company under applicable laws and regulations; (iii) your gross
mismanagement demonstrably and materially injurious to the Company, which
is not cured within thirty (30) days after a written demand is delivered to
you by the Board which identifies the grounds therefor; (iv) any material
breach by you of the provisions of this letter agreement (including any
breach by you of the provisions set forth in Sections 6, 7 or 8 hereof) or
any other material breach of any other agreement between or among you and
the Company, in either event which breach has not been cured within thirty
(30) days after a written demand is delivered to you by the Board which
identifies the grounds therefor. Any disagreement concerning whether there
has been "Cause" for termination will be resolved by the Board in its sole
discretion acting in good faith after providing you an opportunity to
address the Board at a full meeting thereof regarding whether or not there
has been "Cause" for termination.
(e) For purposes hereof, the term "Good Reason" means your
termination of retention by the Company as a result of the following: (i) a
material adverse alteration in the nature or status of your position,
duties or responsibilities with the Company without your prior written
consent; or (ii) the failure of the Company to comply in any material
respect with any of its obligations hereunder or under any other agreements
with you which remains uncured for a period of thirty (30) days following
your written notice to the Company of such failure.
(f) In the event your retention with the Company is terminated for
any reason, the Company shall have the option to elect in writing within
sixty (60) days after the date of termination to pay you, in equal monthly
installments, an additional amount equal to your then-current retainer for
up to twenty-four (24) additional months following the Noncompetition
Period, with any such additional period being referred to herein as the
"Additional Restriction Period" (which amount shall be in addition to any
other amounts payable to you under Section 5(c) hereof). If the Company
makes such election then the restrictions contained in Sections 7(a) and
(b) hereof shall commence on the date of such termination and extend for
the Additional Restriction Period. In the event the Company fails to make
such election in the manner and during the time period set forth above,
then the Company shall be deemed to have waived its rights to make an
election under this Section 5(f).
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6. CONFIDENTIALITY.
(a) You will not at any time during or after termination of your
retention with the Company disclose to anyone or make use of, directly or
indirectly, any Confidential Information (as defined below). All records of
every nature and description relating to the Company's business during your
retention, whether or not prepared by you, shall be and remain the property
of the Company. All records of every nature and description relating to the
Company's business during your retention shall be left with or delivered to
the Company upon termination of your retention.
(b) For purposes of this letter agreement, "Confidential Information"
means all information of a confidential or proprietary nature (whether or
not specifically labeled or identified as "confidential"), in any form or
medium, that relates to the Company or its subsidiaries or their business
relations and their respective business activities and includes, without
limitation, the following: (i) internal business information (including
historical and projected financial information and budgets and information
relating to strategic and staffing plans and practices, business, training,
marketing, promotional and sales plans and practices, cost, rate and
pricing structures and accounting and business methods); (ii) identities
and individual requirements of, and specific contractual arrangements with,
the Company's and its subsidiaries' customers, employees, independent
contractors, clearing agencies, joint venture partners and other business
relations and their confidential information; (iii) trade secrets,
know-how, compilations of data and analyses, techniques, systems, formulae,
research, records, reports, manuals, documentation, models, data and data
bases relating thereto; (iv) inventions, innovations, improvements,
developments, methods, designs, analyses, drawings, reports and all similar
or related information (whether or not patentable); and (v) information
related to any and all intellectual and proprietary property and rights and
rights in Confidential Information of every kind and description anywhere
in the world, including all (A) patents, patent applications, patent
disclosures and inventions, (B) internet domain names, trademarks, service
marks, trade dress, trade names, logos and corporate names and
registrations and applications for registration thereof together with all
of the goodwill associated therewith, (C) copyrights (registered or
unregistered) and copyrightable works and registrations and applications
for registration thereof, (D) mask works and registrations and applications
for registration thereof, (E) computer software, data, data bases and
documentation thereof, (F) trade secrets and other Confidential Information
(including ideas, formulas, compositions, inventions (whether patentable or
unpatentable and whether or not reduced to practice), know-how,
manufacturing and production processes and techniques, research and
development information, drawings, specifications, designs, plans,
proposals, technical data, copyrightable works, financial and marketing
plans and customer and supplier lists and information), (G) other
intellectual property rights and (H) copies and tangible embodiments
thereof (in whatever form or medium).
(c) Notwithstanding the provisions of this Section 6, information
shall not be deemed "Confidential Information" for purposes hereof if such
information is (i) in the public domain (other than as a result of a breach
of this Agreement by you), (ii) approved for release by the Company or
(iii) lawfully obtained by you after termination of your
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retention with the Company from third parties (other than the Company or
any of its affiliates or any of their respective employees, directors or
representatives) on a nonconfidential basis who, to your knowledge, are not
prohibited from disclosing such information to you by a legal, contractual
or fiduciary obligation to the Company or any of its affiliates.
7. NONCOMPETITION; NONSOLICITATION.
(a) You acknowledge that (i) you are one of the Company's founders
and that you are familiar with the Company's trade secrets and with other
confidential information concerning the Company, including the Company's
(A) inventions, technology and research and development, (B) customers and
vendors and customer and vendor lists, (C) products and services (including
those under development) and related costs and pricing structures, (D)
accounting and business methods and practices, and (E) similar and related
confidential information and trade secrets; (ii) your services have been
and shall continue to be of special, unique and extraordinary value to the
Company and that you have been substantially responsible for the growth and
development of the Company and the creation and preservation of the
Company's goodwill; and (iii) the Company would be irreparably damaged
(including a significant loss of goodwill) if you were to provide similar
services to any person or entity competing with the Company or engaged in a
similar business. You further acknowledge that your retention with the
Company was a material inducement to the Purchasers (as defined therein)
and the Company to enter into the Stock Purchase and Recapitalization
Agreement dated as of December 17, 2003 (the "Recapitalization Agreement")
and part of the consideration for the Repurchase Price paid to you
thereunder. Due to your access to the confidential proprietary information,
customer information and customer relationships and uniqueness of your
services to the Company and the consideration you received under the
Recapitalization Agreement as described and acknowledged in the preceding
sentences, and in consideration of the Company's agreements herein, you
agree that for the longer of (x) three (3) years from the date of the
closing under the Recapitalization Agreement and (y) the term of your
retention with the Company and a period of one (1) year after termination
of your retention as provided hereunder (the "Noncompetition Period"),
unless such one (1) year period is extended pursuant to the provisions of
Section 5(f) above, you shall not directly or indirectly, either for
yourself or for any other individual, corporation, partnership, joint
venture or other entity, own any interest in, manage, control, participate
in (whether as an officer, director, employee, partner, agent,
representative or otherwise), consult with or render services for any
entity that (in whole or in part) engages or proposes to engage in, or in
any other manner engage, anywhere in the world, in the on-line securities
industry for the retail, consumer customer base (including, for the
avoidance of doubt and without limitation, the service of retail brokerage
accounts through independent representatives) or any other business
conducted by the Company or any of its subsidiaries during your retention
term or proposed to be conducted by the Company or any of its subsidiaries
within the six (6) month period prior to the termination of your retention;
PROVIDED, HOWEVER, that nothing herein shall prohibit you from being a
passive owner of not more than ten percent (10%) of the outstanding stock
of any class of a corporation which is publicly traded so long as you do
not have any active participation in the business of such corporation; and,
PROVIDED FURTHER, that you shall not be deemed to have violated the
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provisions of this Section 7(a) as a result of any ordinary course trading,
investment or other business activities taken by or on behalf of G-Bar
Limited Partnership and its affiliates in connection with their respective
businesses so long as no significant portion of such ordinary course
trading, investment or other business activities are in direct competition
with the business of the Company or any of its subsidiaries relating to the
service of retail consumer customers or the service of retail brokerage
accounts through independent representatives.
(b) During the Noncompetition Period, you shall not directly or
indirectly (through any other individual, corporation, partnership, joint
venture or other entity or otherwise) (i) induce or attempt to induce any
employee of the Company or any of its subsidiaries to leave the employ of
the Company or any of its subsidiaries, or in any way interfere with the
relationship between the Company or any of its subsidiaries and any
employee thereof, (ii) hire any person who was an employee of the Company
or any of its subsidiaries at any time during the six (6) month period
immediately prior to the date on which such hiring would take place, or
(iii) call on, solicit or service any customer, supplier, licensee,
licensor or other business relation of the Company or any of its
subsidiaries in order to induce or attempt to induce such person to cease
doing business with the Company or any of its subsidiaries, or in any way
interfere with the relationship between any such customer, supplier,
licensee or business relation and the Company or any of its subsidiaries.
Each of you and the Company (on behalf of itself and its subsidiaries)
mutually agree not to make any negative statements or communications about
the other and, in the case of the Company, about any of its subsidiaries.
(c) If, at the time of enforcement of the covenants contained in this
Section 7 (the "Restrictive Covenants"), a court shall hold that the
duration, scope or area restrictions stated herein are unreasonable under
circumstances then existing, you agree that the maximum duration, scope or
area reasonable under such circumstances shall be substituted for the
stated duration, scope or area and that the court shall be allowed and
directed to revise the restrictions contained herein to cover the maximum
period, scope and area permitted by law. You acknowledge that you have
consulted with legal counsel regarding the Restrictive Covenants and, based
on such consultation, have determined and hereby acknowledge that the
Restrictive Covenants are reasonable in terms of duration, scope and area
restrictions and are necessary to protect the goodwill of the Company's
business and the on-line nature of the Company's business is such that it
is not conducted with respect to geographical boundaries.
(d) If you breach, or threaten to commit a breach of, any of the
Restrictive Covenants, the Company shall have the right and remedy to have
the Restrictive Covenants specifically enforced by any court of competent
jurisdiction, it being agreed that any breach or threatened breach of the
Restrictive Covenants would cause irreparable injury to the Company and
that money damages would not provide an adequate remedy to the Company.
(e) In the event of any breach or violation by you of any of the
Restrictive Covenants, the time period of such covenant shall be tolled
until such breach or violation is resolved.
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8. THE COMPANY'S OWNERSHIP OF INTELLECTUAL PROPERTY.
(a) In the event that you, as part of your activities on behalf of
the Company or any of its subsidiaries generate, author or contribute to
(whether before or after the date of this letter agreement) any invention,
design, new product or service development, device, product, method or
process (whether or not patentable or reduced to practice or comprising
Confidential Information), any copyrightable work (whether or not
comprising Confidential Information) or any other form of Confidential
Information relating directly or indirectly to the Company's or any of its
subsidiaries' business as now or hereinafter conducted (the "Intellectual
Property"), you acknowledge that such Intellectual Property is the
exclusive property of the Company and hereby assign all right, title and
interest in and to such Intellectual Property to the Company. Any
copyrightable work prepared in whole or in part by you will be deemed "a
work made for hire" under Section 201(b) of the 1976 Copyright Act, and the
Company shall own all of the rights comprised in the copyright therein. You
shall promptly and fully disclose to the Company all Intellectual Property
not generally known to the Company through the ordinary course of operation
of the business, and you shall cooperate with the Company to protect the
Company's interests in and rights to such Intellectual Property (including,
without limitation, providing reasonable assistance in securing patent
protection and copyright registrations and executing all documents as
reasonably requested by the Company, whether such requests occur prior to
or after termination of your retention with the Company). The Company
agrees to pay you for any reasonable costs, fees and expenses incurred by
you for providing your assistance pursuant to this Section 8, including,
but not limited to, any of your costs, expenses and your hourly fees if
such assistance is provided after your termination for any reason.
(b) In accordance with Section 2872 of the Illinois Employee Patent
Act, Ill. Rev. Stat. Chap. 140, Section 301 et seq. (1983), you are hereby
advised that Section 8 of this Agreement regarding the Company's ownership
of Intellectual Property does not apply to any invention for which no
equipment, supplies, facilities or trade secret information of the Company
was used and which was developed entirely on your own time, unless (i) the
invention relates to the business of the Company or any of its subsidiaries
or to the Company's or any of its subsidiaries actual or demonstrably
anticipated research or development or (ii) the invention results from any
work performed by you for or on behalf of the Company or any of its
subsidiaries.
9. BINDING EFFECT. The terms hereof shall be binding upon and shall inure
to the benefit of you and the Company, the successors and assigns of the
Company, and the heirs, executors, administrators, legal representatives and
assigns of you, PROVIDED THAT your rights and obligations hereunder may not be
delegated or assigned.
10. ENTIRE AGREEMENT. This letter agreement shall supersede any former
oral agreement and any former written agreement heretofore executed relating
generally to your retention with or employment by the Company or optionsXpress,
Inc., and this letter agreement can only be amended, altered or terminated and
its provisions can only be waived by an agreement in writing signed by you and
the Company; PROVIDED, HOWEVER, that, except for the
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definition of "Cause" in Section 5(d) hereof, this letter agreement shall not be
deemed to supersede any restricted stock, equity award or other agreement
between the Company and you.
11. REPRESENTATIONS. You hereby represent and warrant to the Company that
(a) the execution, delivery and performance of this Agreement by you does not
and shall not conflict with, breach, violate or cause a default under any
contract, agreement, instrument, order, judgment or decree to which you are a
party or by which you are bound, (b) you are not a party to or bound by any
retention agreement, employment agreement, noncompete agreement or
confidentiality agreement with any person or entity other than the Company
and/or its subsidiaries and (c) upon the execution and delivery of this
Agreement by the Company, this Agreement shall be the valid and binding
obligation of you, enforceable in accordance with its terms. You hereby
acknowledge and represent that you have consulted with independent legal counsel
regarding your rights and obligations under this Agreement and that you fully
understand the terms and conditions contained herein.
12. COOPERATION. During the term of your retention and for a period of two
(2) years after termination of your retention for any reason, you shall
reasonably cooperate with the Company in (a) any internal investigation or any
administrative, regulatory or judicial proceeding (so long as such investigation
or proceeding is not adversarial in nature between you and the Company) or (b)
any dispute with a third party, as reasonably requested by the Company
(including, without limitation, being available to the Company upon reasonable
advance notice for interviews and factual investigations, appearing at the
Company's request to give testimony without requiring service of a subpoena or
other legal process, volunteering to the Company all pertinent information and
turning over to the Company all relevant documents which are or may come into
your possession, all at times and on schedules that are reasonably consistent
with your other activities and commitments). In the event the Company requires
your cooperation in accordance with this Section, the Company shall reimburse
you for all reasonable travel and other out-of-pocket expenses (including
lodging and meals) incurred by you in connection therewith promptly upon
submission of receipts therefor.
13. REMEDIES. In the event that you violate any of the provisions hereof,
you hereby acknowledge that the Company will suffer irreparable damages and will
be entitled to full injunctive relief or such other relief against you as may be
provided by law or in equity.
14. ENFORCEABILITY. This letter agreement shall be construed and enforced
under the laws of the State of Illinois without giving effect to the principles
of conflicts of laws thereof. If any provision of this letter agreement is held
invalid or unenforceable by operation of law or otherwise, such circumstances
shall not have the effect of rendering any of the other provisions of this
letter agreement invalid or unenforceable.
15. NATURE OF SERVICES. Notwithstanding anything herein to the contrary,
your services hereby shall be performed in an autonomous and independent manner,
consistent with the obligations of a director under applicable law. Subject to
the provisions of such law, the Company shall have no power to control the means
and methods utilized by you in discharging your duties hereunder.
[SIGNATURE PAGE FOLLOWS]
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[SIGNATURE PAGE TO RETENTION LETTER AGREEMENT]
By signing below, the Company agrees to all of the terms and conditions of
this letter agreement. Please indicate your acceptance of these terms and
conditions by signing each enclosed copy of this letter agreement where
indicated below, and return an originally-executed copy of this letter agreement
to the undersigned.
Sincerely yours,
optionsXpress Holdings, Inc.
By: /s/ XXXXX XXXX
-------------------------------------
Xxxxx Xxxx, Chief Executive Officer
ACCEPTED AND AGREED as of
this 5th day of January, 2005.
/s/ XXXXX XXXX
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Xxxxx Xxxx
