EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement"), effective as of
July 1, 2003 (the "Effective Date"), is by and between Comtex
News Network, Inc. (the "Company" or "Comtex"), a Delaware
corporation, having offices at 4900 Seminary Road, Alexandria, VA
22311, and Stephen W. Ellis, who resides at 30 Hampton Road,
Chatham NJ 07928 ("Executive").
W I T N E S S E T H:
WHEREAS, the Company desires to employ the Executive on the
terms and conditions set forth in this Agreement; and
WHEREAS, the Executive desires to be employed by the Company
on the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual
covenants and promises herein contained, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I. EMPLOYMENT TERM AND DUTIES
SECTION 1.1 EMPLOYMENT. The Company hereby agrees to employ
the Executive, and the Executive hereby agrees to accept such
employment, upon the terms and conditions herein contained.
SECTION 1.2 TERM. The term of employment under this
Agreement (the "Employment Term") shall commence on the Effective
Date and shall continue until June 30, 2005. Thereafter, this
Agreement shall automatically renew for additional one-year terms
unless the Company gives the Executive written notice stating
that it does not desire to renew at least ninety (90) days before
the end of the Employment Term or any subsequent one-year term.
SECTION 1.3 DUTIES.
(a) During the Employment Term, Executive shall serve as
Chairman and Chief Executive Officer of the Company. Executive
shall diligently and faithfully perform such duties as are
reasonable and customary for an individual holding such offices
and shall report to the Board of Directors.
(b) Executive shall devote as much of his working time,
attention, energies, efforts and skills to the business of the
Company as necessary to fulfill his duties. Executive shall be
free to engage, directly or indirectly, in other non-competitive
business activity, whether or not for profit, gain or other
pecuniary advantages, including serving as an officer or on the
board of directors of any non-competing company and receiving
compensation therefore, provided that he promptly and fully
discloses any such activities to the Board of Directors of the
Company.
ARTICLE II. COMPENSATION
SECTION 2.1 BASE SALARY. The Company shall pay Executive
basic compensation of One Hundred Fifty Thousand Dollars
($150,000) per year, which shall accrue proportionately from day
to day and shall be payable in accordance with the Company's
usual payroll practices with respect to officers of the Company
("Base Salary"). Executive's Base Salary shall be subject to
required tax and payroll withholdings. Any incentive compensation
that may be paid to Executive from time to time shall have no
impact upon the Base Salary.
SECTION 2.2 ANNUAL PERFORMANCE REVIEWS AND BASE SALARY
INCREASES. On or about each anniversary of the Effective Date,
the Company shall conduct a performance evaluation of Executive,
at which time consideration shall be given to increasing
Executive's Base Salary, benefits and other forms of
compensation. Notwithstanding anything to the contrary in this
provision or this Agreement, on each anniversary of the Effective
Date, on which a favorable performance review is achieved,
Executive's then Base Salary shall be increased by at least five
percent (5%), which increased Base Salary shall remain at the
increased level until the next anniversary of the Effective Date,
unless earlier increased.
SECTION 2.3 INDUCEMENT PLAN AWARD.
(a) The Company shall grant Executive on the Effective Date an
award of fully vested options in the Company to purchase 250,000
common shares, with an exercise price per share which shall be
equal to the Fair Market Value of the common shares as of the
date of grant, under an Inducement Plan to be established by the
Company. The Company hereby represents that it has the authority
to establish such an Inducement Plan and to grant options to
Executive under such Inducement Plan without further approval by
the shareholders of the Company; and
(b) At its next meeting, the Board of Directors of the Company
shall (i) instruct outside counsel to promptly prepare and file a
Form S-8 registration statement with the SEC for all shares
issuable under the Inducement Plan, with the express intent to
thereby register all such stock as would be issued upon exercise;
and (ii) record via a resolution in the minutes at such meeting
its express intent to place the new Inducement Plan before
shareholders for a vote in order to approve such Plan for
statutory incentive stock option status at the next scheduled
annual shareholders' meeting via the proxy process, and will
likewise recommend same to the Company's shareholders if such
recommendation is in accordance with the fiduciary duties of the
Board of Directors of the Company.
SECTION 2.4 INCENTIVE STOCK OPTIONS. The Company shall
grant Executive on July 31,2003 incentive stock options ("Stock
Options") to acquire Five-Hundred Seventy-Five Thousand (575,000)
common shares of the Company's stock, in accordance with the
Company's Stock Option Plan (the "Plan"), with an exercise price
per share which shall be equal to the Fair Market Value of the
common shares as of the date of grant. For this purpose, Fair
Market Value equals the average of the trailing 10 day high and
low bids, as specified in the Plan. Subject to the acceleration
provisions pursuant to Article III below, Executive shall vest in
such Stock Options at the rate of 25,000 options for each full or
partial month of employment following the Effective Date.
SECTION 2.5 INCENTIVE CASH BONUS.
(a) In addition to the Base Salary, the Company shall pay
Executive an annual incentive cash bonus pursuant to the formula
attached hereto as Schedule A and based upon the satisfaction of
the revenue and EBITDA goals established under the fiscal 2004
budget attached hereto as Schedule B, adjusted for expenses
incurred outside of the budget solely at the discretion of the
Board and for all non-recurring expenses incurred outside of
budget associated in any way with the relocation of the Company
offices and data center facilities. Within 45 days following
each fiscal quarter end or 90 days following the fiscal year end,
as applicable, the Company will estimate the cumulative incentive
cash bonus due to Executive for the fiscal year-to-date, less a
reserve amount equal to 20% of such amount (the "Estimated
Cumulative Incentive Cash Payment"), except for the fourth fiscal
quarter whereupon no such reserve amount shall be deducted. On
such date, the Company will pay to the Executive the Estimated
Cumulative Incentive Cash Payment, less the total of all prior
Estimated Cumulative Incentive Cash Payments made thus far for
the fiscal year in question.
(b) The payment of an incentive cash bonus to Executive
with respect to the Company's fiscal 2005 will be conditioned, in
part, upon Executive's preparation and submission to the Board of
Directors of a fiscal 2005 budget to the Board of Directors on or
before June 1, 2004.
(c) If Executive's employment is terminated at other than
fiscal year end, the incentive cash bonus due Executive shall be
calculated by replacing the annual budget amounts stipulated in
Schedule A with the year-to-date budget amount that corresponds
to the month ended immediately preceding such Date of Termination
(the "Year-to-Date Budget") and comparing such Year-to-Date
Budget to the Company's actual revenue and EBITDA performance as
of such month end date, as stipulated in Schedule A, through the
comparable month end immediately preceding such Date of
Termination.
(d) The Executive need not be employed by the Company at
the time of payment in order to receive any incentive cash bonus
to which the Executive is otherwise entitled pursuant to the
terms of this Section 2.5.
SECTION 2.6 REIMBURSEMENT OF EXPENSES. Throughout the
period of Executive's employment hereunder, the Company shall
advance or reimburse Executive, upon presentment by Executive to
the Company of appropriate receipts and vouchers therefore, for
any reasonable out-of-pocket business expenses incurred by
Executive in connection with the performance of his duties and
responsibilities hereunder, in keeping with the Company's stated
practices.
SECTION 2.7 BENEFITS.
(a) During the Employment Term, Executive shall be entitled
to participate in all benefit plans of the Company, including
health care benefits, and life, disability and other benefits,
effective as of the Effective Date.
(b) During the Employment Term, Executive shall be entitled
to participate in any retirement and/or pension plan(s) offered
to the Company's employees generally in accordance with the terms
of such plan(s), as they may be modified at the Company's
discretion from time to time.
SECTION 2.8 VACATION. During the Employment Term, Executive
shall be entitled to paid vacation and sick days in accordance
with the plans, policies, programs and practices of the Company
applicable to other executives of the Company, which initially
provides for three (3) weeks of paid vacation and one (1) week of
personal days per year.
ARTICLE III. TERMINATION OF EMPLOYMENT
SECTION 3.1 EVENTS OF TERMINATION.
(a) DEATH. The Executive's employment shall terminate
automatically upon the Executive's death.
(b) WITHOUT CAUSE. Notwithstanding any other provision
hereunder, the Company shall have the right to terminate the
Executive's employment hereunder without "Cause" (as defined in
Section 3.1(c)) at any time during the Employment Term for any
reason and in the sole discretion of the Company.
(c) CAUSE. The Company may terminate the Executive's
employment during the Employment Term for Cause. For purposes of
this Agreement, "Cause" shall mean only the following: (i) gross
negligence or willful misconduct of the Executive in the
performance of any of his duties under this Agreement; (ii) the
failure by the Executive to perform his duties hereunder, which
failure is not cured within thirty (30) days of written notice of
the same given to Executive by the Company; (iii) any
embezzlement or misappropriation of funds or property or
intellectual property of the Company; (iv) any conviction or plea
of guilty or NOLO CONTENDERE in connection with fraud or any
crime that constitutes a felony in the jurisdiction involved; and
(v) any material breach by the Executive of the terms of this
Agreement, which is not cured within thirty (30) days of written
notice of the breach given to Executive by the Company.
(d) GOOD REASON. The Executive may terminate (resign) his
employment during the Employment Term for Good Reason upon thirty
(30) days advance notice to the Company. For purposes of this
Agreement, "Good Reason" shall mean the occurrence, without the
Executive's express written consent, of any one or more of the
following events:
(i) A material change in the Executive's title, duties
or reporting relationship as described in Article I of this
Agreement, which is not cured within thirty (30) days after
written notice from Executive, or immediately upon any
removal of the Executive from his position as Chairman and
Chief Executive Officer or as a member of the Company's
Board of Directors.
(ii) A failure, not caused by Executive, of the Company
to pay Executive's Base Salary, or any other form of
Compensation under Article II of this Agreement, which
failure to pay is not cured within ten (10) days after
written notice from Executive.
(iii) The filing of a voluntary or involuntary
petition of bankruptcy by or against the Company or the
insolvency of the Company.
(iv) The Company undergoes a "Change of Control", as
defined in Section 3.2(c).
(v) Executive is required to work outside of the New York
metropolitan area on a regular basis, with the exclusion of a
need for regular travel to the Company's regional office in the
Washington, D.C. metropolitan area.
(vi) The Company breaches any material term of this
Agreement, other than as described in 3.1d(ii) above, which
breach is not cured within thirty (30) days after written
notice from Executive.
(e) WITHOUT GOOD REASON. The Executive may voluntarily
terminate (resign) his employment during the Employment Term
without Good Reason upon thirty (30) days notice to the Company
and no further benefits or compensation will be due hereunder.
SECTION 3.2 TERMINATION PROCEDURES AND CERTAIN DEFINITIONS.
(a) NOTICE OF TERMINATION. Any termination by the Company
for Cause or without Cause or by the Executive for Good Reason or
without Good Reason shall be communicated by "Notice of
Termination" to the other party. For purposes of this Agreement,
Notice of Termination means a written notice which (i) indicates
the specific termination provision in this Agreement relied upon,
(ii) to the extent applicable, sets forth in reasonable detail
the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so
indicated, and (iii) if the Date of Termination (as defined
below) is other than the date of receipt of such notice,
specifies the Date of Termination. The failure by the Executive
or the Company to set forth in the Notice of Termination any fact
or circumstance which contributes to a showing of Good Reason or
Cause shall not waive any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting the fact or circumstance in
enforcing the Executive's or the Company's rights hereunder. The
Executive's continued employment with the Company after a Notice
of Termination is given shall not constitute consent to, or a
waiver of any rights with respect to, any circumstance
constituting Good Reason hereunder.
(b) DATE OF TERMINATION. "Date of Termination" means (i) if
the Executive's employment is terminated by the Company other
than for death, the date of receipt of the Notice of Termination
or any later date specified therein, as the case may be, (ii) if
the Executive terminates his employment for Good Reason, the Date
of Termination shall be the date not less than thirty (30) days
after the date on which the Executive notifies the Company of
such termination, and (iii) if the Executive's employment is
terminated by reason of death, the Date of Termination shall be
the date of death of the Executive.
(c) CHANGE OF CONTROL. The Company shall be deemed to have
undergone a "Change of Control", if:
(i) Any "person" within the meaning of Section 14(d)
of the Securities Exchange Act of 1934 (the "Exchange Act"),
other than the Company, a subsidiary or "affiliate" as
defined under the Exchange Act, any employee benefit plan
sponsored by the Company or any subsidiary of the Company,
becomes the "beneficial owner" as defined in Rule 13d-3
under the Exchange Act, directly or indirectly, of 51% or
more of the combined voting power of the securities of the
Company entitled to vote in an election of directors to the
Board; or
(ii) A merger or equivalent combination occurs after
which 51% or more of the voting stock of the surviving
Company is held by persons other than former stockholders of
the Company; or
(iii) The sale, assignment, transfer or other
disposition of assets of the Company having a value in
excess of 50% of the total assets of the Company.
SECTION 3.3 OBLIGATIONS OF THE COMPANY ON TERMINATION.
(a) TERMINATION UPON DEATH. If the Executive's Employment
is terminated upon his death, the amounts referenced hereafter
shall be paid to Executive's estate:
(i) IN GENERAL. The Company shall immediately pay to
the Executive's estate in cash the amount of Base Salary and
vacation previously earned but not yet paid.
(ii) INCENTIVE CASH BONUS. The Company shall pay to
the Executive's estate, within thirty (30) days of the
Executive's death, the incentive cash bonus otherwise due
Executive for the fiscal year during which the Date of
Termination occurs, calculated in accordance with the
provisions of Section 2.5.
(b) TERMINATION WITHOUT CAUSE OR FOR GOOD REASON. If
Executive's employment is terminated without Cause (as defined in
Section 3.1(c)) or for Good Reason (as defined in Section
3.1(d)):
(i) IN GENERAL. The Company shall immediately pay the
Executive in cash the amount of Base Salary and Vacation
previously earned but not yet paid.
(ii) SEVERANCE BENEFITS. The Company shall pay the
Executive an amount equal to two (2) months of the then-
current Base Salary if said termination occurs prior to the
first anniversary of the Effective Date, and four (4) months
of the then-current Base Salary if said termination occurs
after the first anniversary of the Effective Date, in either
instance payable in lump sum within thirty (30) days
following said termination.
(iii) INCENTIVE CASH BONUS. The Company shall pay
to the Executive within ten (10) days of the Date of
Termination an amount equal to 100% of the incentive cash
bonus then owed to Executive on a pro rata basis for the
fiscal year during which the Date of Termination occurs,
calculated in accordance with the provisions of Section 2.5.
(iv) ACCELERATION OF UNVESTED STOCK OPTIONS. Upon the
Date of Termination, all remaining unvested options held by
the Executive shall become immediately vested and
exercisable, and shall remain exercisable for the remainder
of the term thereof.
(c) TERMINATION FOR CAUSE OR TERMINATION WITHOUT GOOD
REASON. In case of a termination for Cause or termination without
Good Reason, the Executive shall be entitled to his Base Salary
and vacation accrued to the Date of Termination and any other
benefits so accrued. Executive shall also be entitled to receive,
within thirty (30) days following said termination, the incentive
cash bonus otherwise due Executive for the fiscal year during
which the Date of Termination occurs, calculated in accordance
with the provisions of Section 2.5. In addition, Company will
convert any and all previously vested incentive stock options
held by Executive as of the Date of Termination that have not
been exercised prior to the 90th day following the Date of
Termination into non-statutory stock options no later than the
90th day following the Date of Termination, with an expiration
date equal to the remainder of their term. Other than obligations
of the Company stipulated in this Section 3.3(c), no further
benefits or compensation will be due hereunder.
ARTICLE IV. CONFIDENTIALITY; NONCOMPETITION
SECTION 4.1 CONFIDENTIALITY AND NONCOMPETITION. Except as
to such actions within the ordinary course of the Executive's
employment by the Company which the Executive in good faith
believes to be in the best interests of the Company, the
Executive shall not at any time during the employment Term or at
any time thereafter, without the prior written consent of the
Company, disclose to any third party including, but not limited
to, any competitor or potential competitor of the Company or any
subsidiary or affiliate of the Company, any trade secret, know-
how or knowledge relating to costs, products, equipment,
merchandising and marketing methods, business plans, or research
results used by, or useful to, the Company or any subsidiary or
affiliate of the Company or other confidential information of the
Company (the "Confidential Information"). The Executive shall not
at any time during the Executive's actual Employment with the
Company or for four (4) months thereafter, if termination occurs
prior to the first anniversary of the Effective Date, or eight
(8) months thereafter, if termination occurs prior to the second
anniversary of the Effective Date, without the prior written
consent of the Company: (i) engage in competitive business
activity anywhere in the world either on Executive's own behalf
or that of any other business organization, (ii) request or
advise any supplier, or other person, firm, partnership,
association, Company or business organization, entity or
enterprise having business dealings with the Company or any
subsidiary or affiliate of the Company to withdraw, curtail or
cancel such business dealings; (iii) induce or attempt to
influence any executive of the Company or any subsidiary or
affiliate of the Company to terminate, or in any way violate the
terms of, his or her employment, (iv) employ or seek to employ or
cause any business organization engaged in competitive business
activity to employ or seek to employ any person or agent who is
then (or was at any time within six months prior to the date the
Executive or such business employs or seeks to employ such
person) employed or retained by the Company or its affiliates.
Notwithstanding the foregoing, nothing herein shall prevent the
Executive from providing a letter of recommendation to an
executive with respect to a future employment opportunity. For
purposes of this Section 4.1, Confidential Information shall not
include: (a) information that is in the public domain; provided
that Executive was not responsible for the disclosure to the
public; (b) information that was already known to Executive prior
to his employment by the Company; and (c) information required to
be disclosed in connection with any judicial or administrative
proceeding or inquiry; provided that Executive shall notify the
Company as promptly as practicable of such proceeding or inquiry
and cooperate with the Company in taking legally available steps
to resist or narrow the required disclosure.
ARTICLE V. MISCELLANEOUS
SECTION 5.1 ENFORCEABILITY. If the scope of any provision
of this Agreement is too broad to permit enforcement of such
provision to its fullest extent, then such provision shall be
enforced to the maximum extent permitted by applicable law, and,
if necessary, the scope of any such provision may be judicially
modified (to the extent necessary in any proceeding brought to
enforce such provision) and thereafter fully enforced.
SECTION 5.2 ARBITRATION. Any dispute arising out of or
relating to this Agreement or the validity, construction or
performance of this Agreement or the breach thereof, shall be
resolved by arbitration according to the rules and procedures of
the American Arbitration Association, as amended. The rules and
procedures of the American Arbitration Association, as amended,
are incorporated herein and made a part of this Agreement by
reference. The parties agree that the arbitration shall be
conducted in New York City and that they will abide by and
perform any award rendered in any such arbitration and that any
court having jurisdiction may issue a judgment based upon the
award. The Company shall be responsible for and shall timely pay
all applicable forum fees (including filing fees, hearing session
fees, and case service fees, however denominated) that relate to
or arise from such arbitration; however, if a judgment upon any
resulting arbitration award is entered to the detriment of
Executive, Executive shall be responsible for reimbursing the
company for one-half of the applicable forum fees within ten (10)
business days of his receipt of notice from the Company demanding
payment of such fees. With the exception of said forum fees,
each party shall bear its own costs, expenses and fees,
including, without limitation, attorney's fees and expert's fees
that relate to or arise from such arbitration. Judgment upon any
resulting arbitration award may be entered in any court of
competent jurisdiction.
SECTION 5.3 ASSIGNMENT BY THE EXECUTIVE; SUCCESSORS.
(a) This Agreement is personal to the Executive and without
the prior written consent of the Company shall not be assignable
by the Executive otherwise than by will or the laws of descent
and distribution. This Agreement shall inure to the benefit of
and be enforceable by the Executive's legal representatives.
(b) Except as is otherwise herein expressly provided, this
Agreement shall inure to the benefit of and be binding upon the
Company, its successors and assigns, and upon the Executive, his
spouse, heirs, executors and administrators.
(c) The Company shall require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business or assets of the Company
to assume expressly and agree to perform this Agreement in the
same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. As
used in this Agreement, "Company" shall mean Company as
hereinbefore defined and any successor to its business or assets
as aforesaid which assumes or agrees to perform this Agreement by
operation of law, or otherwise.
SECTION 5.4 WAIVER. Failure of either party hereto to
insist upon strict compliance by the other party with any term,
covenant or condition hereof shall not be deemed a waiver of such
term, covenant or condition, nor shall any waiver or
relinquishment or failure to insist upon strict compliance with
any right or power hereunder at any one time or more times be
deemed a waiver or relinquishment of such right or power at any
other time or times.
SECTION 5.5 SURVIVAL. Notwithstanding the expiration or
termination of this Agreement, Sections 3.3, 4.1 and 5.2 shall
survive.
SECTION 5.6 NOTICE. Except as otherwise provided herein,
any notice required or desired to be given pursuant to this
Agreement shall be sufficient if in writing sent by regular U.S.
mail or registered or certified mail to the addresses set forth
above or to such other address as any party hereto may designate
in writing, transmitted by hand delivery to the other; provided,
the failure by the Executive to observe the notice provisions
hereof shall not in any way limit, reduce or effect the
Executive's rights and benefits hereunder.
SECTION 5.7 APPLICABLE LAW. This Agreement shall be
governed by and construed in accordance with the laws of the
State of Delaware, without regard to any otherwise applicable
choice of law rules.
SECTION 5.8 TAXES. The Company may deduct from all amounts
paid under this Agreement all federal, state, local and other
taxes required by law to be withheld with respect to such
payments.
SECTION 5.9 RETURN OF COMPANY PROPERTY. When Executive
leaves the employ of the Company, Executive will deliver to the
Company (and will not keep in his possession, recreate or deliver
to anyone else) any and all devices, records, recordings, data,
notes, reports, proposals, lists, correspondence, specifications,
drawings, blueprints, sketches, materials, computer materials,
equipment, other documents or property, together with all copies
thereof (in whatever medium recorded), belonging to the Company,
its successors or assigns.
SECTION 5.10 ENTIRE AGREEMENT. The parties hereto agree
that this Agreement (together with, to the extent benefits or
rights are otherwise affected by this Agreement, any employee
benefit plan maintained or sponsored by the Company) contains the
entire understanding and agreement between them and supersedes
all previous agreements and arrangements, if any, relating to the
employment of the Executive. This Agreement shall not be amended,
modified or supplemented in any respect except by an agreement in
writing signed by the Executive and the Company.
SECTION 5.11 COUNTERPARTS. This Agreement may be signed in
counterparts, each of which shall be an original, and all of
which, taken together shall be deemed to be one instrument.
IN WITNESS WHEREOF, the Company and the Executive have duly
executed this Agreement as of the day and the year first above
written.
For: Comtex News Network, Inc.
By:
/S/ WILLIAM J. HOWARD 7/1/03
William J. Howard Date
Chairman, Compensation Committee
ACCEPTED AND AGREED BY:
/S/ STEPHEN W. ELLIS 7/1/03
Stephen W. Ellis Date
Executive