Employment Agreement - First Virtual Holdings Inc. and Michael D. Schauer
[FIRST VIRTUAL LETTERHEAD]
August 27, 1996
Mr. Michael D. Schauer
7281 Country Club Lane
West Chester, Ohio 45069
Dear Michael:
This letter is to formalize our offer to you for employment with First Virtual
Holdings Incorporated as President of Financial Services reporting directly to
the Chairman and CEO, or such other Officer as the Board of Directors may
designate.
SALARY AND BONUS.
The initial annual salary shall be $275,000 payable two times each month, and
we will give you a periodic review of performance and wages on not less than an
annual basis. We have also agreed that you will be eligible for a bonus, equal
to one hundred percent (100%) of your annual salary, after each full year of
employment. Any bonus will be at the sole discretion of the Company's Board of
Directors; provided however, that for the first year of your employment, the
Company shall guaranty fifty percent (50%) of your annual bonus, payable in a
lump sum payment of $137,500 on February 1, 1997. Thus after your first year
of employment, the Board of Directors of the Company shall decide whether you
are entitled to the remaining fifty percent (50%) of your annual bonus.
BUY-OUT OF FORMER EMPLOYER'S BONUS.
As an inducement for you to sign this Agreement, the Company agrees to pay you,
in addition to your salary, $22,917.00 per month for the first six (6) months
of your employment with the Company. This amount is intended to compensate you
for the amount you would have been paid by your former employer as an annual
bonus during this period.
OPTION GRANT.
We will also grant you an option to purchase 225,000 shares of the Company's
Common Stock, with a price per share of Common Stock at $11 per share
("Options"). 25,000 of the Options shall vest on September 1, 1997. In the
event the Company undertakes an Initial Public Offering ("IPO") and the
Company's stock is listed on NASDAQ the Company agrees to amend your option
agreement so that 50,000 of the Options shall vest upon the IPO provided that
you agree that all options are subject to any lock up agreement required by the
Company's underwriters ("Signing Options"). Subject to the terms of your
Severance Package, for any Options to vest, you must be an employee of the
Company on the applicable dates.
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Mr. Michael D. Schauer
August 26, 1996
Page 2
All remaining Options (150,000) shall vest in accordance with the 1995 Stock
Option Plan, which provides that 25% of the shares subject to the option shall
vest and become exercisable on the first anniversary of the vesting commencement
date, and an additional 1/48th of the shares subject to the option at the end of
each one-month period thereafter shall vest and become exercisable provided in
each case that the optionee remains an employee and/or consultant of the
Corporation. In the event the company does not complete an IPO within twelve
months of the date of this letter, the Signing Options shall vest along with all
other Options in accordance with the 1995 Stock Option Plan with the vesting
inception date the same as those of the Options.
RELOCATION EXPENSES.
The Company would further agree to pay all your Relocation Expenses incurred
during your first year of employment up to $100,000. Relocation Expenses shall
include all necessary and reasonable expenses and costs associated with the
relocation of you and your family, household goods and vehicles to San Diego and
shall include by way of explanation and not limitation, the following:
(1) trips to the San Diego area for you and your family to locate a suitable
residence; and,
(ii) commissions, fees, escrow fees, loan origination or assumption fees, and
all other closing costs associated with the sale of your residence in West
Chester, Ohio and purchase of a residence in the San Diego area; and,
(iii) moving expenses for all household goods; and,
(iv) temporary living expenses (rent, food, telephone) in the San Diego area
provided however, that all such expenses must be supported by receipts and must
be reasonable in light of the reimbursement sought; and,
(v) also included as a Relocation Cost shall be the amount paid by the Company
to assist you in selling your home located in West Chester, Ohio ("Home") or
the Equity in your Home.
In the event your Home remains unsold after listing your Home for sale with a
real estate broker for at least ninety (90) days ("List Period") the Company
shall purchase your Home for the Fair Market Value of your Home. The Company
shall have the right to assign this obligation to purchase your Home. The
Company's obligation is to pay you or have a third party pay you the Equity in
your Home in cash or cash equivalents within sixty (60) days of the ending of
the List Period. You shall cooperate with the Company in preparing and
executing any documents if the Company is required to pay you the Equity. You
understand that should the Company sell your Home to a third party and receive a
profit over what was paid you, the Company will be solely entitled to the
profit. For purposes of this paragraph, "Equity" shall be defined as the
monetary difference between all mortgages and other liens on the property and
the Fair Market Value. We shall define "Fair Market Value" as the average of
values determined by two independent appraisers working separately provided that
each value is within five percent of the other using the higher value as the
base to determine the percentage. In the event the appraiser's value is not
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Mr. Michael D. Schauer
August 26, 1996
Page 3
within five percent of each other as determined in the preceding sentence, we
shall retain a third appraiser and use that appraiser's valuation provided that
the value is between the values determined by the first two appraisers. If the
third appraiser's value is not between the first two appraiser's value we shall
average all three and use that as the Fair Market Value.
In the event your Relocation Expenses exceed $100,000.00 and the excess is
caused by the Company's payments to assist you in selling your Home or the
Equity, the Company will review in good faith this limitation of the Relocation
Expense and at the sole discretion of the Board of Directors increase the
limitation on the Relocation Expense.
The Company agrees to pay all federal and state income taxes due on said
reimbursement, to the extent that any reimbursement is not deductible against
your federal or state income taxes. This amount will be a separate payment
from the Relocation Expense payment.
OTHER BENEFITS.
You will be entitled to four weeks paid vacation during each year of
employment, provided that no more than one week is taken at a time without the
permission of the Company. You shall be eligible to participate in the
existing plans for group life, health and accident insurance plans, and as the
Company may adopt in the future. The Company agrees to maintain your health
insurance by paying your health insurance premiums for your health insurance
from your former employer during the period in which you are not eligible for
health insurance through the Company's insurance policies.
SEVERANCE PACKAGE.
You understand that the Company agrees that in the event the Company terminates
your employment for any reason other than Cause, the Company would continue
paying you your current monthly salary for twelve (12) months and would also
pay an amount equal to the prior year's bonus, paid pro rata over the
succeeding twelve months after your termination for any reason other than
Cause, provided however, that the bonus payment would be the greater of
$275,000 or your prior year's bonus. Further, if terminated for any reason
other than Cause during the first twelve months of employment, all Signing
Options granted in this Agreement shall vest and become exercisable on the
later of the date of termination or the underwriter's lock up period.
Thereafter, if terminated for any reason other than Cause, shares subject to
vesting within six months of your date of termination shall vest and become
exercisable on the date of termination. You understand that any accelerated
options may not qualify for Incentive Stock Option treatment. The payment of
salary and acceleration of options as provided herein in the event of your
termination for a reason other than Cause shall be your sole and exclusive
remedy in the event of your termination for a reason other than Cause
("Severance Package").
The Company further agrees that you have the right to terminate your employment
with the Company and will be entitled to the Severance Package if (x) fifty one
percent (51%) or more, of the outstanding shares of stock of the Company are
sold in any single transaction ("Change of Control"); and, (y) there is any
material adverse effect on your employment. Adverse effect may include change
of job location, reduced responsibilities, change in reporting relationships,
or any other impact that you in your sole discretion deem adverse, provided
however, that you must
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Mr. Michael D. Schauer
August 26, 1996
Page 4
notify the Company in writing within ninety (90) days of the Change in Control
of your election to terminate your employment and receive the Severance Package.
Upon the Company receiving said notification, it shall have fifteen (15) days
within which it may attempt to cure the adverse effect. Both parties shall act
in good faith and make reasonable efforts to resolve any disputes in this
regard. If, acting in good faith, you don't believe that the Company's efforts
at curing the adverse effect are reasonable, you shall have the right to elect
to receive the Severance Package, provided further that you in good faith assist
in a management transition plan for a mutually agreeable period, not to exceed
six (6) months from the Change in Control.
REPRESENTATIONS AND WARRANTIES.
You represent and warrant that no prior contract or agreement to which you are a
party or any prior performance of any such agreement will interfere in any
manner, or conflicts with, the terms of and complete performance of this
agreement.
This offer is subject to your agreement to the terms and conditions found in
Appendices A and B. Appendix A includes basic contractual terms and a
customary form of employee Proprietary Information and Confidentiality
Agreement. Appendix B includes the Company's Voice-mail Policy and E-mail
Policy. This letter along with Appendix A and B form your employment agreement
with the Company.
Your execution of this letter will create a binding agreement between you and
the Company. We would want you to provide your present employer with notice of
termination of employment with a copy to us. We would want you to begin work as
soon as possible. We should agree to a date as soon as we know the requirements
of GECC in finding a replacement, and balance that information in light of any
demands of the companies underwriters. Our goal is to cause GECC to be
satisfied with the professional manner in which you and in which First Virtual
handle the transition. We are excited to have you with us and look forward to
working together to ensure the continued success of First Virtual.
Sincerely,
First Virtual Holdings Incorporated
/s/ LEE STEIN
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Lee Stein
Chairman and Chief Executive Officer
Accepted: /s/ MICHAEL D. SCHAUER
-----------------------------
Michael D. Schauer
Date: 8/28/96