Schedule 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use
of the Commission Only
(as permitted by Rule
14a-6(e)(2))
|X| Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule 14a-12
RATEXCHANGE CORPORATION
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
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0-11.
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(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
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previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
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RATEXCHANGE
May 2, 2001
Dear RateXchange Corporation Stockholder:
You are cordially invited to attend RateXchange Corporation's 2001
annual meeting of stockholders to be held on Thursday, May 31, 2001 at 10:00
a.m., pacific standard time, at The Park Hyatt Hotel, 333 Battery Street, San
Francisco, California 94111.
An outline of the business to be conducted at the meeting is given in
the accompanying Notice of Annual Meeting of Stockholders and Proxy Statement.
In addition to the matters to be voted on, there will be a report on our
progress and an opportunity for stockholders to ask questions.
I hope you will be able to join us. To ensure your representation at
the meeting, I encourage you to complete, sign and return the enclosed proxy
card as soon as possible. Your vote is very important. Whether you own a few or
many shares of stock, it is important that your shares be represented.
Sincerely,
D. Jonathan Merriman
President and Chief Executive Officer
RATEXCHANGE CORPORATION
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 31, 2001
TO THE STOCKHOLDERS:
The 2001 annual meeting of stockholders of RateXchange Corporation will
be held on Thursday, May 31, 2001 at 10:00 a.m., pacific standard time, at The
Park Hyatt Hotel, 333 Battery Street, San Francisco, California 94111. At the
meeting, you will be asked:
1. To elect seven directors to serve until the 2002 annual meeting of
stockholders;
2. To approve the 2001 Stock Option and Incentive Plan; and
3. To transact such other business as may properly be presented at the
annual meeting.
The foregoing items of business are more fully described in the proxy
statement accompanying this notice.
If you were a stockholder of record at the close of business on April
25, 2001, you may vote at the annual meeting and any adjournment or
postponement.
We invite all stockholders to attend the meeting in person. If you
attend the meeting, you may vote in person even if you previously signed and
returned a proxy.
By Order of the Board of Directors
Christopher L. Aguilar
Secretary
San Francisco, California
May 2, 2001
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YOUR VOTE IS IMPORTANT. TO ASSURE REPRESENTATION OF YOUR SHARES, PLEASE
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED
ENVELOPE.
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RATEXCHANGE CORPORATION
185 Berry Street, Suite 3515
San Francisco, California 94107
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PROXY STATEMENT
FOR THE 2001 ANNUAL MEETING OF STOCKHOLDERS
GENERAL
RateXchange Corporation, a Delaware corporation, is soliciting this
proxy on behalf of its Board of Directors to be voted at the 2001 annual meeting
of stockholders to be held on Thursday, May 31, 2001, at 10:00 a.m., Pacific
standard time, or at any adjournment or postponement thereof. The 2001 annual
meeting of stockholders will be held at The Park Hyatt Hotel, 333 Battery
Street, San Francisco, California 94111.
METHOD OF PROXY SOLICITATION
These proxy solicitation materials were mailed on or about May 2, 2001
to all stockholders entitled to vote at the meeting. RateXchange will pay the
cost of soliciting these proxies. These costs include the expenses of preparing
and mailing proxy materials for the annual meeting and reimbursement paid to
brokerage firms and others for their expenses incurred in forwarding the proxy
materials. Directors, officers and employees of RateXchange may also solicit
proxies without additional compensation.
VOTING OF PROXIES
Your shares will be voted as you direct on your signed proxy card. If
you do not specify on your proxy card how you want to vote your shares, we will
vote signed returned proxies:
o FOR the election of the board's seven nominees for director; and
o FOR the approval of the 2001 Stock Option and Incentive Plan.
We do not know of any other business that may be presented at the
annual meeting. If a proposal other than those listed in the notice is presented
at the annual meeting, your signed proxy card gives authority to the persons
named in the proxy to vote your shares on such matters in their discretion.
REQUIRED VOTE
Record holders of shares of RateXchange's common stock and record
holders of Series A preferred shares, at the close of business on April 25,
2001, the voting record date, may vote at the meeting with respect to the
election of seven directors and the approval of the 2001 Stock Option and
Incentive Plan. Each share of common stock and each share of series A
convertible preferred stock outstanding on the record date has one vote. At the
close of business on April 25, 2001, there were 17,783,174 shares of common
stock outstanding and 2,000,000 shares of preferred stock outstanding.
RateXchange's bylaws provide that a majority of the shares entitled to
vote, represented in person or by proxy, constitutes a quorum for transaction of
business. Assuming the presence of a quorum at the annual meeting, the vote of
the holders of at least a majority of the stock having voting power present in
person or represented by proxy is required to elect the seven nominees of the
board as directors and to approve the 2001 Stock Option and Incentive Plan. An
automated system administered by RateXchange's transfer agent will tabulate the
votes. Each is tabulated separately. Abstentions and broker non-votes are
counted as present for purposes of establishing a quorum. Broker non-votes,
however, will not be considered as part of the voting power present or
represented at the annual meeting for purposes of any matter voted on at the
meeting. Abstensions will have the same effect as a vote against the proposal to
approve the 2001 Stock Option and Incentive Plan
REVOCABILITY OF PROXIES
You may revoke your proxy by giving written notice to the Secretary of
RateXchange or by delivering a later proxy to the Secretary, either of which
must be received prior to the annual meeting, or by attending the meeting and
voting in person.
PROPOSAL 1: ELECTION OF DIRECTORS
The board of directors has nominated seven directors for election at
the 2001 annual meeting. If you elect them, they will hold office until the next
annual meeting, until their respective successors are duly elected and qualified
or until their earlier resignation or removal. Cumulative voting is not
permitted. Unless you specify otherwise, your returned signed proxy will be
voted in favor of each of the board's nominees. In the event a nominee is unable
to serve, your proxy may vote for another person nominated by the board. The
board of directors has no reason to believe that any of the nominees will be
unavailable.
In addition to the seven nominees of the board of directors, the
holders of the outstanding shares of series A convertible preferred stock,
voting separately as a class, are entitled to elect two additional directors at
the annual meeting.
VOTE REQUIRED
The affirmative vote of the holders of at least a majority of the stock
having voting power present in person or represented by proxy is required to
elect the seven nominees of the board as directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" EACH
OF THE BOARD'S NOMINEES LISTED BELOW.
DIRECTORS
Set forth below are the principal occupations of, and other information
regarding, the seven director nominees of the board. Each of these persons is an
incumbent director.
D. Jonathan Merriman, 40, has served as our Chief Executive Officer and
President since October 2000. He has served as a Director since February 2000.
In June 1998, Mr. Merriman became Managing Director and Head of the Equity
Capital Markets Group and member of the Board of Directors at First Security Van
Kasper. In this capacity, he oversaw the Research, Institutional Sales, Equity
Trading, Syndicate and Derivatives Trading departments. He is currently on the
Boards of Directors of Leading Brands, Inc., Fiberstars, Inc., SSE Telecom, Inc.
and the Internet Venture Fund, LLC. From June 1997, Mr. Merriman served as
Managing Director and head of Capital Markets at The Seidler Companies in Los
Angeles, where he also served on the firm's Board of Directors. Before Seidler,
Mr. Merriman was Director of Equities for Dabney/Resnick/Imperial, LLC. In 1989,
Mr. Merriman co-founded the hedge fund company Curhan, Merriman Capital
Management, Inc., which managed money for high net worth individuals and
corporations. Before Curhan, Merriman Capital Management, Inc., he worked in the
Risk Arbitrage Department at Bear Stearns & Co. as a trader/analyst. He has
completed coursework at New York University's Graduate School of Business. Mr.
Merriman received his Bachelor of Arts in Psychology from Dartmouth College.
Patrick Arbor, 63, has served as Director of RateXchange since February
2000. Currently an independent futures trader, Mr. Arbor is a principal of the
trading firm of Shatkin, Arbor, Karlov & Co. He is a longtime member of the
Chicago Board of Trade (CBOT), the world's oldest derivatives exchange, serving
as the organization's Chairman from 1993 to 1999. During that period, Mr. Arbor
also served on the Board of Directors of the National Futures Association. Prior
to that, he served as Vice Chairman of the CBOT for three years and ten years as
a Director. Mr. Arbor's other exchange memberships include the Chicago Board
Options Exchange, the Mid-America Commodity Exchange and the Chicago Stock
Exchange. Mr. Arbor received his undergraduate degree in business and economics
from Loyola University.
Donald H. Sledge, 60, has served as Chairman of our Board of Directors
since February 2000. He also served as Chief Executive Officer from February
2000 until October 2000. He was a Director from September 1999 to February 2000,
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and from September 1999 until February of 2000 he served as President, Chief
Executive Officer and Chairman of our subsidiary RateXchange I, Inc. Mr. Sledge
is currently a general partner in Fremont Communications, a venture capital
fund, based in San Francisco. From 1996 to September 1999, Mr. Sledge was
president and Chief Executive Officer of TeleHub Communications Corporation, a
next generation ATM-based telecommunications company. From 1994 to 1995, Mr.
Sledge served as President and Chief Operating Officer of WCT, a $160-million
long distance telephone company that was one of Fortune Magazine's 25 fastest
growing public companies before it was acquired by Frontier Corporation. From
1993 to 1994, Mr. Sledge was head of operations for New T&T, a Hong Kong-based
start-up. He was Chairman and Chief Executive Officer of New Zealand Telecom
International from 1991 to 1993 and a member of the executive board of TCNZ,
where he led privatization and public offerings and served as managing director
of New Zealand's largest operating telephone company, Telecom Auckland Ltd. One
of the subsidiaries of Telehub Communications, Telehub Network Services
Corporation, filed for bankruptcy several months after Mr. Sledge resigned from
Telehub. Mr. Sledge also served as president and Chief Executive Officer of
Pacific Telesis International. Since November 1997, Mr. Sledge also has served
on the Board of Directors of eGlobe, Inc., a voice-based applications services
provider. Mr. Sledge holds a Masters of Business Administration and Batchelor of
Arts degree in industrial management from Texas Technological University.
Dean S. Barr, 40, has served as one of our Directors since November
2000. Mr. Barr is currently the Global Chief Investment Officer of Deutsche
Asset Management, a position he has held since 1999. In this role, Mr. Barr is
responsible for $600 billion in investment assets worldwide for Deutsche Bank.
Before joining Deutsche Bank, Mr. Barr served as Global Chief Investment Officer
of Active Strategies and Global Director of Research at State Street Global
Advisors where he was responsible for $120 billion in active investment assets.
Mr. Barr co-founded and served from 1988 to 1997 as Chief Executive Officer of
Advanced Investment Technology, a quantitative asset manager with $1 billion in
assets under management, until State Street Global Advisors purchased Advanced
Investment Technology. Mr. Barr began his career in 1984 at Goldman Sachs where
he worked on early trading applications for computer program trading. Mr. Barr
received his undergraduate degree from Cornell University and received his
Masters in Business Administration from New York University.
E. Russell "Rusty" Braziel, 50, has served as a Director of RateXchange
since February 2000. Mr. Braziel is founder and CEO of Netrana, LLC, a
consulting and software venture that brings innovative market services, software
solutions and liquidity formation methodologies to a broad range of vertical
electronic markets. Previously, in 1996, Mr. Braziel founded Altra Energy
Technologies, a world leader in enterprise-wide business solutions, delivering
electronic trading platforms, transaction management products and integration
services for the energy industry. Under Mr. Braziel's leadership, Altra grew
from a small project team to a company conducting billions in e-commerce each
month. Mr. Braziel serves on various Boards of Directors and advisory boards,
providing insight into the development of a number of B2B exchanges,
professional services firms, and software companies. Mr. Braziel received his
undergraduate degree in finance and his Masters in Business Administration from
Stephen F. Austin University.
Ronald E. Spears, 51, has served as one of our Directors since March
2000. Throughout his 20-year career, he has managed telecommunications and
professional service start-ups, as well as established long distance
powerhouses. Since June 2000, Mr. Spears has led the formulation and
implementation of corporate-wide development related to strategic planning,
marketing and communications, business alliances as Vaultus', formerly
MobileLogic, President and Chief Executive Officer. Mr. Spears joined Vaultus
after serving as the President and Chief Executive Officer of CMGI Solutions, an
enterprise focused Internet solutions provider from April 1999 to May 2000.
Before joining CMGI Solutions, Mr. Spears served as president and COO of e.spire
Communications, one of the nation's fastest growing integrated communications
providers, from February 1998 to April 1999 where he managed day-to-day business
operations and saw significant growth in revenue and market share. From June
1995 to January 1998 he was corporate vice president at Citizens Utilities,
managing that company's independent telephone company operations in 13 states.
He also served as President of MCI WorldCom, Inc.'s Midwest Division from 1984
to 1990. A pioneer of the competitive long distance industry, Mr. Spears began
his career in telecommunications as a manager of AT&T Longlines in 1978,
following eight years as an officer in the U.S. Army. He is a graduate of the
United Military Academy at West Point and also holds a Master's Degree in Public
Service from Western Kentucky University.
Steven W. Town, 40, has served as one of our Directors since October
2000. Mr. Town currently serves as Co-Chief Executive Officer of the Amerex
Natural Gas, Amerex Power and Amerex Bandwidth, Ltd. Mr. Town began his
commodities career in 1987 in the retail futures industry prior to joining the
Amerex Group of Companies. He began the Amerex futures and forwards brokerage
3
group in natural gas in 1990, in Washington D.C., and moved this unit of Amerex
to Houston in 1992. During Mr. Town's tenure as Co-Chief Executive Officer, the
Amerex companies have become the leading brokerage organizations in their
respective industries. Amerex currently provides energy, power and bandwidth
brokerage services to many of the energy companies. Mr. Town is a graduate of
Oklahoma State University.
In addition to the foregoing incumbent directors, in April
2001, David Boren and Michael Boren were appointed to the RateXchange board of
directors as the representatives of the holders of the series A convertible
preferred stock under the terms of the merger agreement pursuant to which the
series A convertible preferred stock was issued. Set forth below are the
principal occupations of, and other information regarding, these individuals.
Under the terms of the certificate of designation establishing the series A
convertible preferred stock, the holders of the outstanding shares of series A
convertible preferred stock, voting separately as a class (and in addition to
their right to vote together with the common stockholders on all other matters),
are entitled to elect two directors at the annual meeting. It is anticipated
that the holders of the series A convertible preferred stock will vote at the
annual meeting to re-elect Messrs. David Boren and Michael Boren as the director
representatives of the series A convertible preferred stock to terms of office
expiring at the 2002 annual meeting.
Michael Boren, 38, has served as one of our Directors since April 2001.
Mr. Boren is a founder of Xpit and co-owner and co-founder of Sawtooth
Investment Management, a limited liability company specializing in arbitrage
(low risk) and limited risk investment strategies in government debt, foreign
currencies and related derivative securities. Prior to the formation of Xpit in
1999 and Sawtooth in 1995, Mr. Boren was a co-owner and co-founder of Summit
Management, which he sold to Refco. Prior to the formation of Summit in 1992,
Mr. Boren was a trader and introducing broker specializing in basis trades
between various futures and cash securities. Prior to acting as an independent
broker, Mr. Boren worked at the Geldermann Group from 1984 where he developed
options trading strategies and hedging programs for institutional accounts. Mr.
Boren has a B.A. in economics from Brigham Young University.
David Boren, 41, has served as one of our Directors since April 2001.
Mr. Boren is a founder of Xpit and co-owner and co-founder of Sawtooth
Investment Management, a limited liability company specializing in arbitrage
(low risk) and limited risk investment strategies in government debt, foreign
currencies and related derivative securities. Prior to the formation of Xpit in
1999 and Sawtooth in 1995, Mr. Boren was involved in a variety of sophisticated
proprietary trading activities for Goldman Sachs in New York and Tokyo from
1986. Mr. Boren has a B.A. in Economics from Brigham Young University and an
M.B.A from Harvard Business School.
BOARD MEETINGS AND COMMITTEES
In 2000, the Board of Directors held four board meetings. During 2000,
no incumbent director attended fewer than 75% of the aggregate of (a) the total
number of meetings of the board of directors held during the period for which he
has been a director and (b) the total number of meetings held by all committees
of the board of directors on which he served during the period that he served.
RateXchange has the following board committees:
Audit Committee. The principal functions of the Audit Committee are to
recommend engagement of our independent auditors, to consult with our auditors
concerning the scope of the audit and to review with them the results of their
examination, to approve the services performed by the independent auditors, to
review and approve any material accounting policy changes affecting our
operating results and to review our financial control procedures and personnel.
The following board members served as Audit Committee members during 2000: John
Dixon, Edward Mooney, Douglas Cole, Christopher Vizas, D. Jonathan Merriman and
Gordon Hutchins. John Dixon and Edward Mooney resigned as committee members
pursuant to their resignations from the board in February 2000 and were replaced
by Christopher Vizas and D. Jonathan Merriman. Douglas Cole resigned as a
committee member pursuant to his resignation from the board in June 2000 and was
replaced by Gordon Hutchins. In April 2001, Mr. Merriman resigned from the
committee and was replaced by Patrick Arbor. In April 2001, Mr. Hutchins
4
resigned from the Committee and was replaced by E. Russell Braziel. The Audit
Committee held two meetings in 2000. The board of directors believes that each
of the current members of the Audit Committee is an "independent" director
within the meaning of the applicable rules of the American Stock Exchange. The
board of directors has adopted a written charter for the Audit Committee, a copy
of which is attached to this proxy statement as Annex A.
Compensation Committee. The Compensation Committee of the board of
directors has exclusive authority to establish the level of compensation paid to
the Company's executive officers and administers the Company's stock option
plans. The following board members served as Compensation Committee members
during 2000: Douglas Cole, John Dixon, Douglas Glen, Christopher Vizas, Ronald
Spears, Gordon Hutchins and D. Jonathan Merriman. John Dixon and Douglas Glen
resigned from the committee when they resigned from the board in February and
March 2000 and were replaced by Christopher Vizas and Ronald Spears. Christopher
Vizas resigned from the committee and was replaced by D. Jonathan Merriman in
June 2000. The Compensation Committee held two meetings in 2000.
Nominating Committee. RateXchange does not have a separate Nominating
Committee of the board of directors.
AUDIT COMMITTEE REPORT
The Audit Committee reviews our financial reporting process on behalf
of the board of directors. In fulfilling its responsibilities, the Audit
Committee has reviewed and discussed the audited financial statements contained
in the 2000 Annual Report on Form 10-K with RateXchange's management and the
independent auditors. Management is responsible for the financial statements and
the reporting process, including the system of internal controls. The
independent auditors are responsible for expressing an opinion on the conformity
of those audited financial statements with generally accepted accounting
principles.
The Audit Committee discussed with the independent auditors the matters
required to be discussed by Statement on Auditing Standards No. 61,
Communication with Audit Committees, as amended. In addition, the Audit
Committee has discussed with the independent auditors the auditors' independence
from RateXchange and its management, including the matters in the written
disclosures required by Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the board the inclusion of the audited financial
statements in RateXchange's 2000 Annual Report on Form 10-K for filing with the
Securities and Exchange Commission.
AUDIT COMMITTEE
Ronald Spears, Chairman
Patrick Arbor
E. Russell Braziel
COMPENSATION OF DIRECTORS
Directors may receive stock option grants for service on the board. In
connection with their appointment as board members in 2000, Mr. Hutchins
received an option to purchase 100,000 shares of common stock in June 2000 at an
exercise price of $5.69 per share and Messrs. Town and Barr each received an
option to purchase 100,000 shares of common stock in October 2000 at an exercise
price of $1.56 per share. Messrs. Arbor and Braziel each received an option to
purchase 100,000 shares of common stock in January 2001 at an exercise price of
$2.01 per share for their services as board members. Messrs. David Boren and
Michael Boren each received an option to purchase 100,000 shares of common stock
in April 2001 at an exercise price of $1.40 per share. Messrs. Sledge, Spears,
Vizas and Merriman also each received option grants for 100,000 shares of common
stock at the time of their initial appointment as directors in October 1999,
February 2000, February 2000 and February 2000, respectively. The per share
exercises prices of these options is$2.75 for Mr. Sledge and $7.00 for Messrs.
Spears, Vizas and Merriman. All of these options have terms of ten years and
vest over one year from the date of grant. Vesting is accelerated upon change of
control of the Company. RateXchange's directors also receive travel and other
out-of-pocket expenses related to board meeting attendance. In
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addition, Mr. Sledge receives $120,000 per year for serving as Chairman of our
board of directors. See "Employment Contracts and Termination of Employment and
Change in Control Agreements."
EXECUTIVE COMPENSATION
The following table sets forth information regarding the compensation
paid to each of the individuals who served as our Chief Executive Officer during
2000 and to our other executive officers whose total salary and bonus for 2000
exceeded $100,000.
SUMMARY COMPENSATION TABLE
Long-Term Compensation
Awards
Annual Compensation ----------------------
---------------------------------- Securities Underlying
Name and Principal Position Year Salary Bonus Options
---------------------------------------- ----- -------- -------- ---------------------
Douglas Cole (1) 2000 $133,000 $240,000 100,000
Chairman and Chief Executive 1999 $126,000 $125,000 100,000
Officer 1998 n/a n/a n/a
Donald H. Sledge (2) 2000 $238,040 $75,000 1,500,000
Chairman and Chief Executive 1999 $94,653 $75,000 100,000
Officer 1998 n/a n/a n/a
D. Jonathan Merriman (3) 2000 $59,039 0 2,100,000
President and Chief Executive 1999 n/a n/a n/a
Officer 1998 n/a n/a n/a
Ross Mayfield (4) 2000 $157,385 $97,745 300,000
President 1999 $87,619 $0 100,000
1998 n/a n/a n/a
Paul Wescott (5) 2000 $232,129 $25,000 250,000
Chief Operating Officer 1999 $64,230 $0 150,000
1998 n/a n/a n/a
Philip Rice (6) 2000 $152,052 0 250,000
Chief Financial Officer 1999 n/a n/a n/a
1998 n/a n/a n/a
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(1) Mr. Cole was hired as an officer on April 1, 1999 and resigned in February 2000. Mr. Cole's annual salary was
$168,000, plus a bonus, under his employment agreement. Mr. Cole's bonus of $125,000 accrued at year-end. However,
the bonus was not paid to Mr. Cole until 2000.
(2) Mr. Sledge was hired on September 15, 1999 as one of our directors and as the Chairman and Chief Executive Officer
of RateXchange I, Inc., one of our subsidiaries. Mr. Sledge was appointed our Chairman and Chief Executive Officer
in February 2000 and currently serves as Chairman of our Board of Directors. Mr. Sledge's annual salary with our
company was $300,000, plus a bonus, under his employment agreement. Mr. Sledge also received approximately $1,000
each month for car allowance and approximately $1,000 each month for payment of whole life insurance premiums.
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(3) Mr. Merriman was appointed to the Board of Directors in February 2000. Mr. Merriman was hired on October 5, 2000
as President and Chief Executive Officer. Mr. Merriman's annual salary is $300,000, plus a bonus under his
employment agreement. Effective March 15, 2001, Mr. Merriman reduced his annual salary to $1.00, plus a bonus tied
to performance.
(4) Mr. Mayfield was hired as an executive officer of RateXchange I, Inc., one of our subsidiaries, in July 1999.
While employed at RateXchange I, Mr. Mayfield served, at various times during 1999, as Vice President of Sales and
Marketing, Chief Operating Officer and President. Mr. Mayfield's annual salary at RateXchange I during 1999 was
$165,000, plus a bonus, under his employment agreement. We appointed Mr. Mayfield as our President in February
2000. Mr. Mayfield's employment with RateXchange and its subsidiaries was terminated effective August 15, 2000. A
portion of Mr. Mayfield's option grant vesting was accelerated under the terms of his severance agreement with the
Company. See "Employment Contracts and Termination of Employment and Change in Control Agreements."
(5) Mr. Wescott was hired as an executive officer of RateXchange I, Inc., one of our subsidiaries, in September 1999.
While employed at RateXchange I, Mr. Wescott served, at various times during 1999, as an Executive Vice President,
Chief Operating Officer and Vice President of Business Development. Mr. Wescott's annual salary at RateXchange I
during 1999 was $165,000, plus bonuses, under his employment agreement. We appointed Mr. Wescott our Chief
Operating Officer in February 2000. Mr. Wescott's employment with RateXchange and its subsidiaries was terminated
effective October 1, 2000. . A portion of Mr. Wescott's option grant vesting was accelerated under the terms of
his severance agreement with the Company. See "Employment Contracts and Termination of Employment and Change in
Control Agreements."
(6) Mr. Rice was hired as an executive officer of RateXchange Corporation in March 2000. While employed at RateXchange
Corporation Mr. Rice served as our Chief Financial Officer. Mr. Rice's annual salary at RateXchange during 2000
was $200,000, plus bonuses, under his employment agreement. Mr. Rice resigned from RateXchange, effective January
19, 2001. Mr. Rice's option grant terminated upon his resignation.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding options granted
during fiscal year 2000 to the named executive officers. No stock appreciation
rights were granted in 2000.
Individual Grants
--------------------------------------------------------
Number of Percent of
Securities Total Options Potential Realizable Value at
Underlying Granted to Exercise or Assumed Annual Rates of Stock Price
Options Employees in Base Price Per Expiration Appreciation for Option Term
Name Granted 2000 Share(1) Date 5% ($) 10% ($)
-------------------- ---------- ------------ -------------- --------- ----------------------------------
Douglas Cole(2) 100,000 1.3% $7.00 2/24/10 $1,140,226 $1,815,620
Donald H. Sledge(3) 1,500,000 20.0 7.00 2/24/10 17,103,394 27,234,296
Ross Mayfield(4) 300,000 4.0 7.00 2/24/10 3,420,679 5,446,859
Paul Wescott(5) 250,000 3.3 7.00 2/24/10 2,850,566 4,539,049
D. Jonathan Merriman(6) 100,000 1.3 7.00 2/24/10 1,140,226 1,815,620
2,000,000 26.6 3.19 10/5/10 4,235,126 6,743,730
Philip Rice (7) 250,000 3.3 7.00 2/24/10 2,850,566 4,539,049
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(1) The exercise prices of the options included in this table reflect the board's bona fide estimation of market value
of the shares on the various grant dates.
(2) Mr. Cole's option, received for service as a member of the board of directors, vests 50% immediately and 50% on the
first anniversary of the February 24, 2001 grant date.
(3) Mr. Sledge's option, received according to the terms of his employment agreement, vests 500,000 shares immediately;
300,000 on January 1, 2001 or upon a secondary public offering with a share price of $15.00 or higher; 300,000 on
January 1, 2002; and, 400,000 on January 1, 2003 or upon the Company's common stock closing at $20.00 or higher for
10 consecutive trading days.
(4) Mr. Mayfield's option, received according to the terms of his employment agreement, vests 25% on the first
anniversary of Mr. Mayfield's employment with the Company and then 1/36 of the remainder each month for the 36
months thereafter. Mr. Mayfield's date of hire was May 28, 1998. The vesting of a portion of Mr. Mayfield's option
grant was accelerated under the terms of his severance agreement with the Company. See "Employment Contracts and
Termination of Employment and Change in Control Agreements."
(5) Mr. Wescott's option, received according to the terms of his employment agreement, vests 25% on the first
anniversary of the grant and then 1/36 of the remainder each month for the 36 months thereafter. The vesting of a
portion of Mr. Wescott's option grant was accelerated under the terms of his severance agreement with the Company.
See "Employment Contracts and Termination of Employment and Change in Control Agreements."
(6) Mr. Merriman's option to purchase 100,000 shares, received for service as a member of the board of directors, vests
50% immediately and 50% on the first anniversary of the February 24, 2001 grant date. Mr. Merriman's option to
purchase 2,000,000 shares, received according to the terms of his employment agreement, vest 500,000 immediately;
500,000 on January 1, 2005 or upon completion of a financing for $15 million or more; 250,000 on the first
anniversary of Mr. Merriman's employment, October 5, 2001; 250,000 on the second anniversary of Mr. Merriman's
employment, October 5, 2002; 250,000 on January 1, 2007 or upon the Company's first fiscal quarter of positive
earnings before interest, taxes, depreciation and amortization; and 250,000 on January 1, 2006 or upon the
Company's common stock closing at $7.00 or higher for 30 consecutive trading days.
8
(7) Mr. Rice's option, received according to the terms of his employment agreement, vests 25% on the first anniversary
of the grant and then 1/36 of the remainder each month for the 36 months thereafter. Mr. Rice's option grant
terminated upon his resignation.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to each of the
named executive officers concerning the number of securities underlying
unexercised stock options at the end of fiscal year 2000 and the 2000 fiscal
year-end value of all unexercised in the money options held by such individuals.
No options were exercised by any named executive officer in fiscal year 2000.
Number of Value of
Securities Underlying Unexercised
Unexercised In-the-Money
Options (#) Options (1)
--------------------------------- -------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
----------- --------------- ------------- ----------- -------------
Douglas Cole 200,000 0 $0 $0
Donald H. Sledge 1,200,000 300,000 0 0
Ross Mayfield 300,000 0 0 0
Paul Wescott 72,916 26,040 0 0
P. Jonathan Merriman 600,000 1,500,000 0 0
Philip Rice 0 0 0 0
(1) Market value of underlying securities at year-end minus the exercise price.
9
COMPARATIVE STOCK PERFORMANCE CHART
The following graph compares our stockholder returns since July 10,
2000, the date our common stock began trading on the American Stock Exchange ,
with the AMEX US index and the NASDAQ US index. The graph assumes an investment
of $100 in each of RateXchange and the AMEX US and NASDAQ US indices on July 10,
2000.
[GRAPH]
The points on the graph represent the following numbers:
July 10, 2000 December 31, 2000
RateXchange $100.00 $37.24
AMEX US $100.00 $95.88
NASDAQ US $100.00 $61.66
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND
CHANGE IN CONTROL AGREEMENTS
Effective April 1, 1999, we entered into an employment agreement with
Douglas Cole. Mr. Cole's employment agreement provided for an annual base salary
of $168,000, an annual incentive bonus of up to 100% of Mr. Cole's base salary,
option rights and other employee benefits. Under this agreement, Mr. Cole's
employment could be terminated for cause or upon death, and all of our
obligations to pay compensation and provide benefits would thereafter cease. Mr.
Cole's employment also could be terminated without cause if we paid Mr. Cole's
base salary for 180 days following termination. As part of our restructuring to
focus on the business of RateXchange I, Inc., Mr. Cole agreed to resign his
position as an executive officer, effective February 2000. Under a severance
agreement entered into with him at that time, Mr. Cole received six-months'
severance pay.
In February 2000, we appointed Donald Sledge our Chairman and Chief
Executive Officer, Ross Mayfield our President and Paul Wescott our Chief
Operating Officer. Previously these individuals were officers of RateXchange I
since the fourth quarter of 1999. In March 2000, we appointed Philip Rice our
Executive Vice President and Chief Financial Officer. In connection with these
appointments, we entered into separate employment agreements with Messrs.
Sledge, Rice, Mayfield and Wescott.
Mr. Sledge's employment agreement provided for him to serve as Chairman
and Chief Executive Officer of RateXchange I with an annual base salary of
$300,000, an annual incentive bonus of up to 50% of base salary, a 10% interest
in RateXchange I, Inc., an expense reimbursement and other employee benefits.
Under this agreement, Mr. Sledge's employment may be terminated for cause or
upon death or disability so long as we pay all compensation owed as of the date
of termination. Mr. Sledge's employment may be terminated without cause if we
pay him severance pay equal to one year's annual salary and a bonus payment of
$150,000. In October 2000, Mr. Sledge resigned as Chief Executive Officer, but
continues to serve as Chairman at a salary of $120,000 per year.
Mr. Rice's employment agreement provided for an annual base salary of
$200,000, an annual incentive bonus of up to 50% of his base salary, option
rights and other employee benefits. Under this agreement, Mr. Rice's employment
could be terminated for cause, or upon death or disability, and all of our
obligations to pay compensation and provide benefits shall thereafter cease. Mr.
Rice's employment also could be terminated without cause if we paid Mr. Rice his
base salary for twelve months following termination, as well as a lump sum
payment of $100,000, and provide Mr. Rice other specified benefits. Effective
January 19, 2001, Mr. Rice resigned as Chief Financial Officer.
10
Mr. Mayfield's employment agreement provided for an annual base salary
of $165,000, an annual incentive bonus of up to 50% of Mr. Mayfield's base
salary, option rights and other employee benefits. Under this agreement, Mr.
Mayfield's employment could be terminated for cause or upon death or disability,
and all of our obligations to pay compensation and provide benefits would
thereafter cease. Mr. Mayfield's employment also could be terminated without
cause if we paid Mr. Mayfield's base salary for twelve months following
termination, as well as a lump sum payment of $100,000, and provided Mr.
Mayfield other specified benefits.
Mr. Wescott's employment agreement provided for an annual base salary
of $200,000, an annual incentive bonus of up to 50% of his base salary, option
rights and other employee benefits. Under this agreement, Mr. Wescott's
employment could be terminated for cause, or upon death or disability, and all
of our obligations to pay compensation and provide benefits would thereafter
cease. Mr. Wescott's employment also could be terminated without cause if we
paid to Mr. Wescott his base salary for twelve months following termination, as
well as a lump sum payment of $100,000, and provided Mr. Wescott other specified
benefits.
Effective August 15, 2000, Mr. Mayfield's employment was terminated.
Under a separation agreement entered into with Mr. Mayfield, he received or is
entitled to receive:
o His annual salary through February 15, 2001;
o Lump sum payments of $50,000 on August 18, 2000 and $82,250 on
February 15, 2001;
o Accelerated vesting of a total of 93,750 stock options previously
granted to him, together with an extension for two years from
August 15, 2000 within which to exercise the options; and
o Full benefits for Mr. Mayfield and his family through February 15,
2001.
Effective October 1, 2000, Mr. Wescott's employment was terminated.
Under a separation agreement entered into with Mr. Wescott, he received or is
entitled to receive:
o His annual salary through March 31, 2001;
o Lump sum payments of $50,000 on October 2, 2000, $25,000 on
January 2, 2001, $100,000 on April 1, 2001, and $50,000 on April
2, 2001; and
o Accelerated vesting of a total of98,956 stock options held by him,
together with an extension for two years following October 1, 2000
within which to exercise212,500 of the options and a 90-day
exercise period beginning on October 1, 2001 to exercise 36,456 of
the options.
Effective October 5, 2000, Mr. Sledge was named our Chairman and Mr.
Merriman was named our President and Chief Executive Officer. Effective on that
date, Mr. Sledge's employment agreement was amended to reflect his change in
status from Chairman and Chief Executive Officer to Chairman. As Chairman, Mr.
Sledge was employed on a part-time basis to render executive, policy and other
management services to us of the type customarily performed by persons serving
in such capacity. Under the amendment to his employment agreement, Mr. Sledge's
annual salary was reduced to $120,000 per year and any entitlement to a
guaranteed bonus for 2000 or for any future year was eliminated.
In connection with Mr. Merriman's appointment as our new President and
Chief Executive Officer, we entered into an employment agreement with Mr.
Merriman. His initial annual salary under his employment agreement was $300,000.
The agreement also included a $200,000 bonus paid to him on January 2, 2001,
expense reimbursement and other employee benefits. Effective March 15, 2001, Mr.
Merriman reduced his annual salary to $1.00, plus a bonus tied to performance.
Under his employment agreement, Mr. Merriman has been awarded ten-year stock
options, which are incentive options to the extent permissible under Section 422
of the Internal Revenue Code of 1986, as amended, to purchase a total of
2,000,000 shares of our common stock at an exercise price of $3.19 per share, as
follows:
o Options to purchase 500,000 shares vesting on October 5, 2000;
o Options to purchase 500,000 shares vesting on January 1, 2005,
subject to acceleration of vesting upon the completion of a
financing for $15 million and further subject, in either case, to
continued employment on such date;
o Options to purchase 250,000 shares vesting on October 5, 2001,
subject to continued employment on that date;
11
o Options to purchase 250,000 shares vesting on October 5, 2002,
subject to continued employment on that date;
o Options to purchase 250,000 shares vesting on January 1, 2007,
subject to acceleration of vesting immediately following the first
quarter of positive earnings before interest, taxes, depreciation
and amortization after January 2001 and further subject, in either
case, to continued employment on such date; and
o Options to purchase 250,000 shares vesting on January 1, 2006,
subject to acceleration of vesting immediately after the common
stock has traded on AMEX at a price of $7.00 per share or more for
30 consecutive trading days, subject, in either case, to continued
employment on such date.
The vesting of the stock options will accelerate, and Mr. Merriman will
additionally be entitled to receive a payment of $1.0 million from RateXchange,
upon:
o A sale of all or substantially all of our assets;
o A merger of our company with another entity where we are not the
surviving entity or where our stockholders immediately prior to
the merger own less than 50% of our voting stock following the
merger; or
o A change in the membership of the board of directors such that
individuals who, as of October 5, 2000, constitute our board of
directors cease for any reason to constitute at least a majority
of the board of directors; provided that any individual becoming a
director subsequent to October 5, 2000 whose election, or
nomination for election by our stockholders, 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 than our board of directors.
Under Mr. Merriman's employment agreement, Mr. Merriman's employment
may be terminated for cause or upon death or disability so long as we pay all
compensation owed as of the date of termination. Mr. Merriman's employment
agreement may be terminated by us without cause if we pay to Mr. Merriman his
base salary for twelve months following termination, any bonus that had been
earned but not paid at the time of termination and all other benefits and
compensation he would have been entitled to receive under the agreement had his
employment not been terminated. All stock options granted to him under his
employment also would immediately vest. Mr. Merriman would be entitled to
receive the same payments and acceleration of the vesting of his options if he
were to terminate his employment for "good reason," as that term is defined in
his employment agreement.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company formed a strategic alliance with Amerex Bandwidth, Ltd. in
September, 2000. Amerex is an over-the-counter broker, providing customers with
voice and electronic brokerage services, market liquidity, price discovery, and
data services around the globe. Under the terms of the agreement, Amerex
Bandwidth, Ltd. received warrants to purchase 2,300,000 shares of the Company's
common stock and also receives a monthly payment for expenses associated with
their bandwidth brokering services. In 2000, the Company paid Amerex Bandwidth,
Ltd. $113,225 in expense reimbursements. Steven Town, Co-CEO of Amerex, joined
the Company's board of directors in October 2000.
In March 2001, the Company acquired Xpit.com, Inc. in a merger
transaction that resulted in the formation of a wholly owned subsidiary, Xpit
Corporation. The shareholders of Xpit.com, Inc. received a total of 2,400,000
shares of series A convertible preferred stock of the Company, $500,000 in cash
and a promissory note from the Company in the amount of $500,000. The promissory
note matures on March 12, 2003 with interest only payable annually until
maturity at an annual rate of 7%. Michael Boren and David Boren, significant
shareholders of Xpit.com, Inc., joined the Company's board of directors in April
2001.
12
For certain other transactions with directors see, "Compensation
Committee Interlocks and Insider Participation."
BOARD COMPENSATION COMMITTEE 2000 REPORT ON EXECUTIVE COMPENSATION
General Compensation Policy
The Compensation Committee of the board of directors has exclusive
authority to establish the level of compensation paid to the Company's executive
officers and administers the Company's stock option plans. Compensation policies
of the Committee are designed to attract, retain and motivate highly skilled
executive officers by providing compensation that is comparable to that provided
by our competitors for key personnel. It is the Committee's policy to offer
executive officers competitive compensation that is based upon overall Company
performance, individual contributions to the Company's financial success and the
scope of responsibilities performed pursuant to particular offices.
Currently, the Committee does not use quantitative methods or
mathematical formulas to set any element of compensation for a particular
executive officer. Instead, the Committee administers the executive compensation
system through informal surveys of compensation programs of other similar
companies and application of the subjective business judgment of each Committee
member. In employing its discretion, the Committee principally considers for
each component of an executive's compensation factors such as previous and
anticipated Company performance, as well as demonstrated individual initiative
and performance. The principal components of the Company's executive
compensation include (a) annual base salary, (b) bonus programs and (c) equity
awards. Currently, we do not contribute to any retirement programs or pension
plans on behalf of our executive officers.
Base Salaries
Annual base salaries for executive officers are initially determined by
evaluating the scope of the responsibilities of the office and the experience
and knowledge of the individual officer. A secondary consideration is the
competitiveness of the marketplace for executive talent. The Committee
establishes base salaries of its executives with the objective of ensuring that
the salaries we offer remain competitive with those of similar companies.
In establishing the annual base salaries of our executive officers, the
Company's Board of Directors specifically assessed the responsibilities of the
offices, evaluated the officers' level of experience, skills and knowledge
relevant to the Company's business objectives and informally reviewed the
compensation for executive officers of comparable companies. The Committee
believes that the annual base salaries of our executive officers are appropriate
when compared to salaries paid by other companies for the same offices, and in
light of both the scope of responsibilities and anticipated performance, as well
as previous related work experience and level of skill and knowledge of our
officers.
The Committee anticipates that it will periodically review the
individual salaries of each of our executive officers. Adjustments to base
salaries are made at the discretion of the Committee, which takes into
consideration factors such as past and anticipated performance of the Company
and the Committee's subjective perception of the individual's performance.
Bonuses
Executive officer bonuses are designed to provide the Company
flexibility in devising incentives for exceptional performance by our executive
officers. Generally, cash bonus payouts are tied to achievement of company-wide
performance goals, including stock performance. At its sole discretion, the
Committee may award annual cash bonuses to the Company's executive officers. The
amount of the performance bonus awarded, if any, is tied to both the level of
our executive officers' performance and that of the Company.
Nevertheless, bonuses available to our executive officers reflect the
specific capitalization and development needs of the Company as a
development-stage company. Thus, the Company has utilized the incentive of
13
special cash fundraising bonuses for executive officers, which bonuses are
granted in the event the Company obtains certain levels of aggregate net
proceeds from borrowing and issuance of debt and equity securities. The Company
has also employed special acquisition bonuses as an incentive for our executive
officers to identify and consummate certain business combinations that promote
the business objectives of the Company.
Equity Awards
In granting stock options, the Company's goals are to attract, retain
and motivate the highest caliber of executives by offering long-term
compensation that links a meaningful portion of the executives' total
compensation to the best interests of stockholders. Making stock options a
significant component of executive compensation provides each executive officer
with incentive to manage the Company from the perspective of an owner with an
equity interest in the Company. The Committee also believes that, given the
emerging market in which the Company operates and the Company's early stage of
development, equity-based compensation provides the greatest incentive for
outstanding executive performance.
Chief Executive Officer Compensation
Douglas Cole
Mr. Cole's 2000 compensation, including salary and bonus, was based
upon his function as the Chief Executive Officer. Mr. Cole provided the Company
executive services beginning in September 1998 through February 2000. Mr. Cole's
annual salary was based upon a survey of salaries for executives in similar
businesses at the time. The salary amount given to Mr. Cole was reduced from the
survey amounts and a bonus provision was included. The bonus provision
contemplated earnings based upon securing financing for the Company. The Company
secured private financing in February 2000.
Donald Sledge
Mr. Sledge's 2000 compensation, including salary, bonus and equity in
the Company, was based upon his function as the Chief Executive Officer. Mr.
Sledge became the Company's chief executive in February 2000, following Mr.
Cole's resignation. Mr. Sledge guided the Company by building an executive team,
securing private financing, updating and executing on the business plan and
successfully listing the Company on the American Stock Exchange. Mr. Sledge
resigned from his position as chief executive officer in October 2000.
D. Jonathan Merriman
Mr. Merriman's 2000 compensation; including salary and equity in the
Company, was based upon his function as the President and Chief Executive
Officer. Mr. Merriman became the Company's chief executive in October 2000. Mr.
Merriman's compensation was negotiated based upon the then-current compensation
being given to executives in similar businesses. Mr. Merriman's equity interest
in the Company is earned based upon the performance goals set forth in his
employment agreement. See "Employment Contracts and Termination of Employment
and Change in Control Agreements."
$1 Million Pay Deductibility Limit
Section 162(m) of the Internal Revenue Code of 1986, as amended, prohibits
publicly traded companies from taking a tax deduction for compensation in excess
of $1 million paid to the chief executive officer or any of the four most highly
compensated executive officers for any fiscal year. Certain "performance-based
compensation" is excluded from this $1 million cap. At this time, none of the
Company's executive officer's compensation subject to the deductibility limit
exceeds $1 million. In the Committee's view, the Company is not likely to be
affected by the nondeductibility rules in the near future.
Conclusion
In conclusion, a significant portion of the Company's executive
compensation is linked directly to individual performance of our executive
officers as measured by the accomplishment of the Company's strategic goals and
14
stock price appreciation. The Committee intends to continue the practice of
linking executive compensation to Company performance, individual officer
performance and stockholder return, realizing, of course, that the business
cycle from time to time may result in an imbalance for a particular period.
COMPENSATION COMMITTEE DURING 2000
D. Jonathan Merriman*
Ronald Spears
* Mr. Merriman did not participate in decisions on his own compensation.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2000, the following directors served as compensation committee
members: Douglas Cole, John Dixon, Douglas Glen, D. Jonathan Merriman, Ronald
Spears and Gordon Hutchins. Currently, our compensation committee is composed of
Donald Sledge, Michael Boren and Steven Town. John Dixon, Douglas Glen, Douglas
Cole and Gordon Hutchins resigned from the compensation committee in 2000 when
they resigned from our board of directors.
Douglas Cole
As part of a transaction agreed to in October 1998, our board of directors
authorized the issuance to Douglas Cole and other unrelated parties a total of
666,574 shares of our common stock in exchange for a total of $66,657 in secured
notes dated January 2, 1999. Our board of directors has placed restrictions on
this stock so that the stock cannot be sold, traded, assigned, transferred or
pledged until we reach $10,000,000 in gross revenues in a one-year period. Mr.
Cole was one of our directors and executive officers. Interest on the notes was
6.5% APR and, together with any unpaid principal on the notes, was due on
January 2, 2001. The greatest aggregate amount outstanding on the notes during
1999 was $70,990, on December 31, 1999. Because Mr. Cole and the other unrelated
parties paid the entire principal amount owed under these notes early at our
request, we agreed to waive unpaid accrued interest in the approximate amount of
$4,700.
D. Jonathan Merriman
In conjunction with a private offering of our securities in February 2000,
we paid the investment banking firm First Security Van Kasper a commission
consisting of 7% of the aggregate proceeds of the offering and warrants to
purchase shares of our common stock in an amount equal to 7% of the common stock
purchased by investors at an exercise price of $12.00 per share and 7% of the
warrants purchased by investors at an exercise price of $14.40 per share. Mr.
Merriman has been a member of our board of directors since February 2000 and our
President and Chief Executive Officer since October 2000. He previously was
managing director and head of First Security Van Kasper's Equity Capital Markets
Group.
In February 2000, RateXchange I, Inc. closed a $2,000,000 convertible note
offering. The notes offered were convertible into RateXchange I, Inc. common
stock at a price per share to be determined in an anticipated subsequent
financing of RateXchange I, Inc. As a result of our new business strategy, we
offered to such note holders the right to convert their notes into our common
stock at an exchange rate of $5.00 per share. In addition, we agreed to issue
such holders an aggregate of 500,000 warrants to purchase common stock at $5.00
per share. Note holders have elected to convert $1,975,000 of the notes. Under
the offer to convert the RateXchange I, Inc. notes into our common stock and
warrants to purchase our common stock, First Security Van Kasper, Venture Fund I
elected to convert its $525,000 note into 105,000 shares of common stock, as
well as accepted a warrant to purchase an additional 131,250 shares at $5.00 per
share. Mr. Merriman was an investor in First Security Van Kasper, Venture Fund
I. In addition, we issued to First Security Van Kasper a warrant to purchase
40,770 shares of our common stock at $5.00 per share to compensate First
Security Van Kasper for its services as placement agent during the RateXchange
I, Inc. convertible note offering.
15
PROPOSAL 2: APPROVAL OF 2001 STOCK OPTION AND INCENTIVE PLAN
This section provides a summary of the terms of the 2001 Stock Option
and Incentive Plan and the proposal to approve the plan.
The board of directors approved the 2001 Stock Option and Incentive
Plan on April 30, 2001, subject to approval from our stockholders at this
meeting. The purpose of the 2001 Stock Option and Incentive Plan is to attract
and to encourage the continued employment and service of, and maximum efforts
by, officers, directors, key employees and other key individuals by offering
those persons an opportunity to acquire or increase a direct proprietary
interest in our operations and our future success. In the judgment of the board
of directors, an initial or increased grant under the 2001 Stock Option and
Incentive Plan will be a valuable incentive and will serve to the ultimate
benefit of stockholders by aligning more closely the interests of 2001 Stock
Option and Incentive Plan participants with those of our stockholders.
A total of 5,000,000 shares of common stock reserved for issuance under
the 2001 Stock Option and Incentive Plan. At March 30, 2001, the closing price
of our common stock was $1.75 per share. There are currently no participants in
the 2001 Stock Option and Incentive Plan. Because participation and the types of
awards under the 2001 Stock Option and Incentive Plan are subject to the
discretion of the Compensation Committee, the benefits or amounts that will be
received by any participant or groups of participants if the 2001 Stock Option
and Incentive Plan is approved are not currently determinable. At March 31,
2001, there was one executive officer, 30 employees and 8 non-employee directors
of the Company and its subsidiaries who were eligible to participate in the 2001
Stock Option and Incentive Plan.
Required Vote
The affirmative vote of the holders of a majority of the stock having
voting power present in person or represented by proxy at the Annual Meeting is
required to approve the 2001 Stock Option and Incentive Plan. Unless otherwise
indicated, properly executed proxies will be voted in favor of Proposal 2 to
approve the 2001 Stock Option and Incentive Plan.
The board of directors recommends that stockholders vote "FOR" the
approval of the 2001 Stock Option and Incentive Plan.
Description of the Plan
A description of the provisions of the 2001 Stock Option and Incentive
Plan is set forth below. This summary is qualified in its entirety by the
detailed provisions of the 2001 Stock Option and Incentive Plan, a copy of which
is attached as Annex B to this proxy statement.
Administration. The 2001 Stock Option and Incentive Plan is
administered by the Compensation Committee of the board of directors. Subject to
the terms of the plan, the Compensation Committee may select participants to
receive awards, determine the types of awards and terms and conditions of
awards, and interpret provisions of the plan.
Common Stock Reserved for Issuance under the Plan. The common stock to
be issued under the 2001 Stock Option and Incentive Plan consists of authorized
but unissued shares. If any shares covered by an award are not purchased or are
forfeited, or if an award otherwise terminates without delivery of any common
stock, then the number of shares of common stock counted against the aggregate
number of shares available under the plan with respect to the award will, to the
extent of any such forfeiture or termination, again be available for making
awards under the 2001 Stock Option and Incentive Plan.
Eligibility. Awards may be made under the 2001 Stock Option and
Incentive Plan to our directors, employees of or consultants to RateXchange or
any of our affiliates, including any such employee who is an officer or director
of us or of any affiliate.
16
Amendment or Termination of the Plan. The board of directors may
terminate or amend the plan at any time and for any reason. The 2001 Stock
Option and Incentive Plan will terminate in any event ten years after its
effective date. Amendments will be submitted for stockholder approval to the
extent required by the Internal Revenue Code or other applicable laws.
Options. The 2001 Stock Option and Incentive Plan permits the granting
of options to purchase shares of common stock intended to qualify as incentive
stock options under the Internal Revenue Code and stock options that do not
qualify as incentive stock options.
In the case of incentive stock options, the exercise price of each
stock option may not be less than 100% of the fair market value of our common
stock on the date of grant. In the case of certain 10% stockholders who receive
incentive stock options, the exercise price may not be less than 110% of the
fair market value of the common stock on the date of grant. An exception to
these requirements is made for options that we grant in substitution for options
held by employees of companies that we acquire. In such a case the exercise
price is adjusted to preserve the economic value of the employee's stock option
from his or her former employer. In no event will the exercise price be less
than the par value of a share of common stock on the date of grant.
The term of each stock option is fixed by the Compensation Committee
and may not exceed 10 years from the date of grant. Options may be made
exercisable in installments. The exercisability of options may be accelerated by
the Compensation Committee.
Unless the Compensation Committee provides otherwise in the applicable
option agreement, unvested options will expire immediately and vested options
will expire 90 days after a grantee terminates employment with us for a reason
other than for death or disability. Unless the Compensation Committee provides
otherwise in the applicable option agreement, in the case of a termination of
employment due to death or disability, options will fully vest and remain
exercisable for a period of one year following termination of employment. In the
case of a termination for cause, we may cancel the options upon the grantee's
termination.
In general, a grantee may pay the exercise price of an option by cash,
certified check, by tendering shares of common stock (which if acquired from us
have been held by the grantee for at least six months), or by means of a
broker-assisted cashless exercise.
Stock options granted under the 2001 Stock Option and Incentive Plan
may not be sold, transferred, pledged or assigned other than by will or under
applicable laws of descent and distribution. However, we may permit limited
transfers of non-qualified options for the benefit of immediate family members
of grantees to help with estate planning concerns.
Other Awards. The Compensation Committee also may award:
o restricted stock, which are shares of common stock subject to
restrictions.
o restricted stock units, which are common stock units subject to
restrictions.
Effect of Certain Corporate Transactions. Certain change of control
transactions involving us, such as a sale of RateXchange, may cause awards
granted under the 2001 Stock Option and Incentive Plan to vest, unless the
awards are continued or substituted for in connection with the change of control
transaction.
Adjustments for Stock Dividends and Similar Events. The Compensation
Committee will make appropriate adjustments in outstanding awards and the number
of shares available for issuance under the 2001 Stock Option and Incentive Plan,
including the individual limitations on options, to reflect common stock
dividends, stock splits and other similar events.
Section 162(m) of the Internal Revenue Code. Section 162(m) of the
Internal Revenue Code limits publicly-held companies such as RateXchange to an
annual deduction for federal income tax purposes of $1 million for compensation
17
paid to their covered employees. However, "performance-based compensation" is
excluded from this limitation. The 2001 Stock Option and Incentive Plan is
designed to permit the Compensation Committee to grant options that qualify as
performance-based for purposes of satisfying the conditions of Section 162(m).
To qualify as performance-based:
(a) the compensation must be paid solely on account of the attainment of one or
more pre-established, objective performance goals;
(b) the performance goal under which compensation is paid must be established
by a compensation committee comprised solely of two or more directors who
qualify as outside directors for purposes of the exception;
(c) the material terms under which the compensation is to be paid must be
disclosed to and subsequently approved by stockholders of the corporation
before payment is made in a separate vote; and
(d) the compensation committee must certify in writing before payment of the
compensation that the performance goals and any other material terms were
in fact satisfied.
In the case of compensation attributable to stock options, the
performance goal requirement (summarized in (a) above) is deemed satisfied, and
the certification requirement (summarized in (d) above) is inapplicable, if the
grant or award is made by the compensation committee; the plan under which the
option is granted states the maximum number of shares with respect to which
options may be granted during a specified period to an employee; and under the
terms of the option, the amount of compensation is based solely on an increase
in the value of the common stock after the date of grant. The maximum number of
shares of common stock subject to options that can be awarded under the 2001
Stock Option and Incentive Plan to any person is 1,000,000 shares per year.
Federal Income Tax Consequences
Incentive Stock Options. The grant of an option will not be a taxable
event for the grantee or for us. A grantee will not recognize taxable income
upon exercise of an incentive stock option (except that the alternative minimum
tax may apply), and any gain realized upon a disposition of the common stock
received pursuant to the exercise of an incentive stock option will be taxed as
long-term capital gain if the grantee holds the shares of common stock for at
least two years after the date of grant and for one year after the date of
exercise (the "holding period requirement"). We will not be entitled to any
business expense deduction with respect to the exercise of an incentive stock
option, except as discussed below.
For the exercise of an option to qualify for the foregoing tax
treatment, the grantee generally must be our employee or an employee of our
subsidiary from the date the option is granted through a date within three
months before the date of exercise of the option.
If all of the foregoing requirements are met except the holding period
requirement mentioned above, the grantee will recognize ordinary income upon the
disposition of the common stock in an amount generally equal to the excess of
the fair market value of the common stock at the time the option was exercised
over the option exercise price (but not in excess of the gain realized on the
sale). The balance of the realized gain, if any, will be capital gain. We will
be allowed a business expense deduction to the extent the grantee recognizes
ordinary income, subject to our compliance with Section 162(m) of the Internal
Revenue Code and to certain reporting requirements.
Non-Qualified Options. The grant of an option will not be a taxable
event for the grantee or for us. Upon exercising a non-qualified option, a
grantee will recognize ordinary income in an amount equal to the difference
between the exercise price and the fair market value of the common stock on the
date of exercise. Upon a subsequent sale or exchange of shares acquired pursuant
to the exercise of a non-qualified option, the grantee will have taxable gain or
loss, measured by the difference between the amount realized on the disposition
18
and the tax basis of the shares of common stock (generally, the amount paid for
the shares plus the amount treated as ordinary income at the time the option was
exercised).
If we comply with applicable reporting requirements and with the
restrictions of Section 162(m) of the Internal Revenue Code, we will be entitled
to a business expense deduction in the same amount and generally at the same
time as the grantee recognizes ordinary income.
A grantee who has transferred a non-qualified stock option to a family
member by gift will realize taxable income at the time the non-qualified stock
option is exercised by the family member. The grantee will be subject to
withholding of income and employment taxes at that time. The family member's tax
basis in the shares of common stock will be the fair market value of the shares
of common stock on the date the option is exercised. The transfer of vested
non-qualified stock options will be treated as a completed gift for gift and
estate tax purposes. Once the gift is completed, neither the transferred options
nor the shares acquired on exercise of the transferred options will be
includable in the grantee's estate for estate tax purposes.
Restricted Stock. A grantee who is awarded restricted stock will not
recognize any taxable income for federal income tax purposes in the year of the
award, provided that the shares of common stock are subject to restrictions
(that is, the restricted stock is nontransferable and subject to a substantial
risk of forfeiture). However, the grantee may elect under Section 83(b) of the
Internal Revenue Code to recognize compensation income in the year of the award
in an amount equal to the fair market value of the common stock on the date of
the award, determined without regard to the restrictions. If the grantee does
not make such a Section 83(b) election, the fair market value of the common
stock on the date the restrictions lapse will be treated as compensation income
to the grantee and will be taxable in the year the restrictions lapse. If we
comply with applicable reporting requirements and subject to the restrictions of
Section 162(m) of the Internal Revenue Code, we will be entitled to a business
expense deduction in the same amount and generally at the same time as the
grantee recognizes ordinary income.
Restricted Stock Units. There are no immediate tax consequences of
receiving an award of restricted stock units under the 2001 Stock Option and
Incentive Plan. A grantee who is awarded restricted stock units will be required
to recognize ordinary income in an amount equal to the fair market value of
shares issued to such grantee at the end of the restriction period or, if later,
the payment date. If we comply with applicable reporting requirements and
subject to the restrictions of Section 162(m) of the Internal Revenue Code, we
will be entitled to a business expense deduction in the same amount and
generally at the same time as the grantee recognizes ordinary income.
19
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding beneficial
ownership of each class of our voting securities as of April 25, 2001, by (a)
each person who is known by us to own beneficially more than five percent of
each of our outstanding classes of voting securities, (b) each of our directors,
(c) each of the named executive officers and (d) all directors and executive
officers as a group.
Series A
Convertible
Preferred
Common Stock Stock
Name and Address of Beneficially Beneficially
Beneficial Owner Owned Percent (1) Owned Percent (2)
---------------- ------------- ----------- ------------ -----------
Patrick Arbor (3) 65,000 * -- --
Dean S. Barr (4) 83,750 * -- --
David Boren (5) 1,641,512 8.5% 1,591,512 79.6%
Michael Boren (6) 1,641,512 8.5% 1,591,512 79.6%
E. Russell Braziel (7) 50,000 * -- --
Douglas Cole (8) 792,574 3.7% -- --
Ross Mayfield (9) 416,675 2.3% -- --
D. Jonathan Merriman (10) 1,114,400 6.1% -- --
Philip Rice (11) 34,514 * -- --
Donald H. Sledge (12) 1,305,000 6.8% -- --
Ronald E. Spears (13) 100,000 * -- --
Steven W. Town (14) 50,000 * -- --
Paul Wescott (15) 239,583 1.33% -- --
All directors and executive officers as a 7,534,520 36.0% 1,591,512 79.6%
group (13 persons) (16)
Sockeye Trading Company, LLC
250 S. 5th Street, Suite 150
Boise, Idaho 83702 1,591,512 -- 1,591,512 79.6%
-------------
* Less than one percent.
20
(1) Applicable percentage ownership is based on 17,783,174 shares of common stock outstanding as of
April 25, 2001. Pursuant to the rules of the Securities and Exchange Commission, shares shown
as "beneficially" owned include all shares of which the persons listed have the right to
acquire beneficial ownership within 60 days of April 25, 2001, including (a) shares subject to
options, warrants or any other right exercisable within 60 days of April 25, 2001, even if
these shares are not currently outstanding, (b) shares attainable through conversion of other
securities, even if these shares are not currently outstanding, (c) shares that may be obtained
under the power to revoke a trust, discretionary account or similar arrangement and (d) shares
that may be obtained pursuant to the automatic termination of a trust, discretionary account or
similar arrangement. This information is not necessarily indicative of beneficial ownership for
any other purpose. Our directors and executive officers have sole voting and investment power
over the shares of common stock held in their names, except as noted in the following
footnotes.
(2) Applicable percentage ownership is based on 2,000,000 shares of series A convertible preferred
stock outstanding as of April 25, 2001. At that date, the series A convertible preferred stock
was convertible on a one-for-one basis into common stock.
(3) Includes Mr. Arbor's currently exercisable option to purchase 50,000 shares of common stock at
$2.01 per share. Mr. Arbor also holds an option to purchase 50,000 shares of common stock at
$2.01 that is not currently exercisable.
(4) Includes 27,500 shares and 6,250 warrants (exercisable at $5.00) held by members of Mr. Barr's
family. Includes 50,000 currently exercisable options to purchase common stock at $1.56. Mr.
Barr also holds an option to purchase 50,000 shares of common stock at $1.56 that are not
currently exercisable.
(5) Includes Mr. Boren's currently exercisable option to purchase 50,000 shares of common stock at
$1.40 per shares. Mr. Boren also holds an option to purchase 50,000 shares of common stock at
$1.40 that are not currently exercisable. Includes 1,591,512 shares of series A convertible
preferred stock held of record by Sockeye Trading Company, LLC ("Sockeye"). Mr. Boren, along
with his brother, is a member of Sockeye and holds a substantial interest in that company and,
therefore, may be deemed to beneficially own the shares held of record by Sockeye.
(6) Includes Mr. Boren's currently exercisable option to purchase 50,000 shares of common stock at
$1.40 per shares. Mr. Boren also holds an option to purchase 50,000 shares of common stock at
$1.40 that are not currently exercisable. Includes 1,591,512 shares of series A convertible
preferred stock held of record by Sockeye. Mr. Boren, along with his brother, is a member of
Sockeye and holds a substantial interest in that company and, therefore, may be deemed to
beneficially own the shares held of record by Sockeye.
(7) Includes Mr. Braziel's currently exercisable option to purchase 50,000 shares of common stock
at $2.01 per share. Mr. Braziel also holds an option to purchase 50,000 shares of common stock
at $2.01 that is not currently exercisable.
(8) Includes 37,500 shares held by members of Mr. Cole's family. Includes currently exercisable
options to purchase 100,000 shares of common stock at $1.60 per share, and 100,000 shares of
common stock at $7.00 per share. Mr. Cole resigned as our Chief Executive Officer in February
2000 and as a director in June 2000.
(9) Includes Mr. Mayfield's currently exercisable options to purchase 40,000 shares of common stock
at $2.50 per share, 60,000 shares of common stock at $2.75 per share, and 300,000 shares of
common stock at $7.00 per share. Mr. Mayfield was terminated as President in August 2000.
(10) Includes Mr. Merriman's currently exercisable options to purchase 100,000 shares of common
stock at $7.00 per share and 500,000 shares of common stock at $3.19 per share. Mr. Merriman
also holds options to purchase 1,500,000 shares of common stock that are not currently
exercisable.
(11) Includes Mr. Rice's currently exercisable warrant to purchase 4,167 shares of common stock at
$14.40 per share. Mr. Rice resigned as our Chief Financial Officer in January 2001.
21
(12) Includes Mr. Sledge's currently exercisable options to purchase 100,000 shares of common stock
at $2.75 per share and 1,200,000 shares of common stock at $7.00 per share. Mr. Sledge holds
additional options to purchase 300,000 shares of common stock that are not currently
exercisable.
(13) Includes Mr. Spears' currently exercisable options to purchase 100,000 shares of common stock
at $7.00 per share.
(14) Includes Mr. Town's currently exercisable options to purchase 50,000 shares of common stock at
$2.87 per share. Mr. Town also holds option to purchase 50,000 shares of common stock that are
not currently exercisable.
(15) Includes Mr. Wescott's currently exercisable options to purchase 150,000 shares of common stock
at $2.75 per share, 83,332 shares of common stock at $7.00 per share and a currently
exercisable warrant to purchase 2,083 shares of common stock at $14.40 per share. Mr. Wescott
also holds options to purchase an additional 15,624 shares of common stock that are not
currently exercisable.
(16) The total for directors and executive officers as a group includes 7,534,520 shares of common
stock, 3,133,332 shares subject to outstanding stock options that are currently exercisable,
6,250 shares subject to outstanding warrants that are currently exercisable and 1,519,512
shares issuable upon conversion of a corresponding number of shares of series A convertible
preferred stock.
22
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 required the
Company's directors and executive officers to file reports with the SEC on Forms
3, 4 and 5 for the purpose of reporting their ownership of and transactions in
the Company's equity securities. During 2000, Jonathan Merriman was late in
filing Forms 4 for January and February to report the purchase of 40,000 and
30,000 shares of common stock, respectively.
AUDITORS
The board of directors has engaged Arthur Andersen LLP to serve as our
auditors for the fiscal year ending December 31, 2001. Arthur Andersen was first
engaged to serve as our auditors for the fiscal year ended December 31, 2000.
Representatives of Arthur Andersen are expected to be available at the Annual
Meeting. Such representatives will have an opportunity to make a statement if
they so desire and will be available to respond to appropriate questions.
Arthur Andersen's fees for providing services to us in 2000 were as
follows:
Audit Fees. The aggregate fees billed by Arthur Andersen for
professional services rendered for the audit of our annual financial statements
for 2000 and the reviews of the financial statements included in our Form 10-Q's
for 2000 was approximately $120,000.
Financial Information Systems Design and Implementation Fees. None.
All Other Fees. The aggregate fees billed by Arthur Andersen for all
other services rendered by it to us for 2000 was approximately $200,000.
The Audit Committee of the board of directors has considered whether
the provision of the foregoing non-audit services by Arthur Andersen is
compatible with maintaining Arthur Andersen's independence.
STOCKHOLDER PROPOSALS FOR 2002 ANNUAL MEETING
If you wish to submit proposals to be included in RateXchange's 2002 proxy
statement, we must receive them on or before January 2, 2002. Please address
your proposals to the Corporate Secretary.
If you wish to raise a matter before the stockholders at the year 2002
annual meeting, you must notify the Secretary in writing by not later than March
18, 2002. Please note that this requirement relates only to matters you wish to
bring before your fellow stockholders at the annual meeting. It is separate from
the SEC's requirements to have your proposal included in next year's proxy
statement.
23
ANNUAL REPORT ON FORM 10-K
Our 2000 Annual Report to Stockholders was prepared on an integrated
basis with our Annual Report on Form 10-K for the year ended December 31, 2000,
and accompanies this proxy statement. Stockholders may obtain a copy of the
exhibits to the Company's Form 10-K for the year ended December 31, 2000 upon
payment of a reasonable fee by writing to RateXchange Corporation, 185 Berry
Street, Suite 3515, San Francisco, California 94107, Attention: Corporate
Secretary.
By Order of the Board of Directors
Christopher L. Aguilar
Secretary
24
ANNEX A
RATEXCHANGE CORPORATION
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
Adopted June 21, 2000
I. PURPOSE
The primary purpose of the Audit Committee of the Board of Directors of
RateXchange Corporation is to provide independent and objective oversight of the
accounting functions and internal controls of RateXchange Corporation, its
subsidiaries and affiliates and to ensure the objectivity of RateXchange's
financial statements. The Committee and the Board will have the ultimate
authority and responsibility to select, evaluate and, where appropriate, replace
the independent accountants.
II. FUNCTIONS
The Audit Committee will perform the following functions:
1. Independent Accountants. Recommend to the Board the firm to be
employed by RateXchange as its independent accountants, which firm shall be
ultimately accountable to the Board and the Committee as representatives of the
shareholders.
2. Plan of Audit. Consult with the independent accountants regarding
the plan of audit. The Committee also will review with the independent
accountants their report on the audit and review with management the independent
accountants' suggested changes or improvements in RateXchange's accounting
practices or controls.
3. Accounting Principles and Disclosure. Review significant
developments in accounting rules. The Committee will review with management
recommended changes in RateXchange's methods of accounting or financial
statements. The Committee also will review with the independent accountants any
significant proposed changes in accounting principles and financial statements.
4. Internal Accounting Controls. Consult with the independent
accountants regarding the adequacy of internal accounting controls. Where
appropriate, consultation with the independent accountants regarding internal
controls will be conducted out of management's presence.
5. Financial Disclosure Documents. Review with management and the
independent accountants RateXchange's financial disclosure documents, including
all financial statements and reports filed with the Securities and Exchange
Commission or sent to stockholders. The review will include (a) a discussion of
any significant problems and material disputes between management and the
independent accountants, (b) a discussion with the independent accountants out
of management's presence of the quality of RateXchange's accounting principles
as applied in its financial reporting, the clarity of RateXchange's financial
disclosures and the degree of aggressiveness or conservatism of RateXchange's
accounting principles and underlying estimates, and (c) a frank and open
discussion of other significant decisions made by management in preparing the
financial disclosure.
6. Internal Control Systems. Review with management and internal
auditors RateXchange's internal control systems intended to ensure the
reliability of financial reporting and compliance with applicable codes of
conduct, laws, and regulations. The review will include discussions concerning
any significant problems and regulatory concerns. The Committee also will review
internal audit plans in significant compliance areas.
25
7. Ethical Environment. Consult with management on the establishment
and maintenance of an environment that promotes ethical behavior, including the
establishment, communication, and enforcement of codes of conduct to guard
against dishonest, unethical, or illegal activities.
8. Oversight of Executive Officers and Directors and Conflicts of
Interest. Review significant conflicts of interest involving directors or
executive officers. The Committee will review compliance with Company policies
and procedures with respect to officers' expense accounts and perquisites,
including their use of corporate assets, and consider the results of any review
of these areas by the independent accountant. The Committee also will review
significant questionable or illegal payments.
9. Oversight of Independent Accountants. Evaluate the independent
accountants on an annual basis and where appropriate recommend a replacement for
the independent accountants. In such evaluation, the Committee will ensure that
the independent accountants deliver to the Committee a formal written statement
delineating all relationships between the accountants and RateXchange. The
Committee also will engage in a dialogue with the accountants with respect to
any disclosed relationships or services that may impact the objectivity and
independence of the independent accountants and in response to the independent
accountant's report take, or recommend that the Board take, appropriate action
to satisfy itself of the independent accountant's independence.
10. Adequacy of Personnel. Review periodically the adequacy of
RateXchange's accounting and financial personnel resources.
11. Risk Management. Review and evaluate risk management policies in
light of RateXchange's business strategy, capital strength, and overall risk
tolerance.
12. Tax Policies. Review periodically RateXchange's tax policies and
any pending audits or assessments.
13. Offerings of Securities. Perform appropriate due diligence on
behalf of the Board of Directors with respect to RateXchange's offerings of
securities.
14. Legal Compliance. Review annually with RateXchange's legal counsel
any legal matters that could have a significant impact on RateXchange's
financial statements, RateXchange's compliance with applicable laws and
regulations, and inquiries received from regulators or government agencies.
15. Charter Amendments. Review this Charter annually, assess its
adequacy and propose appropriate amendments to the Board.
The Committee's function is one of oversight and review, and it is not
expected to audit RateXchange, to define the scope of the audit, to control
RateXchange's accounting practices, or to define the standards to be used in
preparation of RateXchange's financial statements.
III. COMPOSITION & INDEPENDENCE
The Committee shall consist of not less than three independent members,
who shall be appointed by the Board of Directors. Members of the Committee will
be independent nonexecutive directors, free from any relationship that would
interfere with the exercise of the member's independent judgment. All members of
the Audit Committee will have a basic understanding of finance and accounting
and be able to read and understand fundamental financial statements, and at
least one member of the Audit Committee will have accounting or related
financial management expertise.
In the event that a Committee member faces a potential or actual
conflict of interest with respect to a matter before the Committee, that
Committee member shall be responsible for alerting the Committee Chairman, and
in the case where the Committee Chairman faces a potential or actual conflict of
interest, the Committee Chairman shall advise the Chairman of the Board of
Directors. In the event that the Committee Chairman, or the Chairman of the
Board of Directors, concurs that a potential or actual conflict of interest
26
exists, an independent substitute Director will be appointed as a Committee
member until the matter, posing the potential or actual conflict of interest, is
resolved.
IV. QUORUM AND MEETINGS
A quorum of the Committee will be declared when a majority of the
appointed members of the Committee are in attendance. The Committee will meet at
least annually, or more frequently as circumstances dictate. Meetings will be
scheduled at the discretion of the Chairman. Notice of the meetings will be
provided at least ten days in advance. The Committee may ask members of
management or others to attend the meeting and provide pertinent information as
necessary.
V. REPORTS
The Committee will report to the Board from time to time with respect
to its activities and its recommendations. When presenting any recommendation or
advice to the Board, the Committee will provide such background and supporting
information as may be necessary for the Board to make an informed decision. The
Committee will keep minutes of its meetings and will make such minutes available
to the full Board for its review.
The Committee will report to shareholders in the Company's proxy
statement for its annual meeting whether the Committee has satisfied its
responsibilities under this Charter.
VI. OTHER AUTHORITY
The Committee is authorized to confer with Company management and other
employees to the extent it may deem necessary or appropriate to fulfill its
duties. The Committee is authorized to conduct or authorize investigations into
any matters within the Committee's scope of responsibilities. The Committee also
is authorized to seek outside legal or other advice to the extent it deems
necessary or appropriate, provided it will keep the Board advised as to the
nature and extent of such outside advice.
The Committee will perform such other functions as are authorized for
this Committee by the Board of Directors.
27
ANNEX B
2001 STOCK OPTION AND INCENTIVE PLAN
RateXchange Corporation, a Delaware corporation (the "Company"), sets
forth herein the terms of its 2001 Stock Option and Incentive Plan (the "Plan")
as follows:
1. PURPOSE
The Plan is intended to enhance the Company's and its subsidiaries' (as
defined herein) ability to attract and retain highly qualified officers,
directors, key employees, and other persons, and to motivate such officers,
directors, key employees, and other persons to serve the Company and its
affiliates and to expend maximum effort to improve the business results and
earnings of the Company, by providing to such officers, key employees and other
persons an opportunity to acquire or increase a direct proprietary interest in
the operations and future success of the Company. To this end, the Plan provides
for the grant of stock options, restricted stock and restricted stock units in
accordance with the terms hereof. Stock options granted under the Plan may be
non-qualified stock options or incentive stock options, as provided herein.
2. DEFINITIONS
For purposes of interpreting the Plan and related documents (including
Award Agreements), the following definitions shall apply:
2.1 "Affiliate" of, or person "affiliated" with, a person means any
company or other trade or business that controls, is controlled by
or is under common control with such person within the meaning of
Rule 405 of Regulation C under the Securities Act, including,
without limitation, any Subsidiary.
2.2 "Award Agreement" means the stock option agreement, restricted
stock agreement, restricted stock unit agreement or other written
agreement between the Company and a Grantee that evidences and
sets out the terms and conditions of a Grant.
2.3 "Benefit Arrangement" shall have the meaning set forth in Section
14 hereof.
2.4 "Board" means the Board of Directors of the Company.
2.5 "Change of Control" means (i) the dissolution or liquidation of
the Company or a merger, consolidation, or reorganization of the
Company with one or more other entities in which the Company is
not the surviving entity, (ii) a sale of substantially all of the
assets of the Company to another entity, or (iii) any transaction
(including without limitation a merger or reorganization in which
the Company is the surviving entity) which results in any person
or entity (other than persons who are stockholders or affiliates
of the Company at the time the Plan is approved by the Company's
stockholders) owning 80% or more of the combined voting power of
all classes of stock of the Company.
2.6 "Code" means the Internal Revenue Code of 1986, as now in effect
or as hereafter amended.
2.7 "Committee" means a committee of, and designated from time to time
by resolution of, the Board.
2.8 "Company" means RateXchange Corporation.
2.9 "Effective Date" means April 30, 2001, the date the Plan was
approved by the Board.
2.10 "Exchange Act" means the Securities Exchange Act of 1934, as now
in effect or as hereafter amended.
28
2.11 "Fair Market Value" means the closing price of the Stock on the
OTC Bulletin Board, the American Stock Exchange or the Nasdaq
Stock Market on the Grant Date or such other determination date
(or if there is no such reported closing price, the Fair Market
Value shall be the mean between the highest bid and lowest asked
prices or between the high and low sale prices on such trading
day) or, if no sale of Stock is reported for such trading day, on
the next preceding day on which any sale shall have been reported.
2.12 "Family Member" means a person who is a spouse, child, stepchild,
grandchild, parent, stepparent, grandparent, sibling, niece,
nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law, including adoptive
relationships, of the Grantee, any person sharing the Grantee's
household (other than a tenant or employee), a trust in which
these persons have more than fifty percent of the beneficial
interest, a foundation in which these persons (or the Grantee)
control the management of assets, and any other entity in which
these persons (or the Grantee) own more than fifty percent of the
voting interests.
2.13 "Grant" means an award of an Option, Restricted Stock or
Restricted Stock Unit under the Plan.
2.14 "Grant Date" means, as determined by the Board or authorized
Committee, (i) the date as of which the Board or such Committee
approves a Grant, (ii) the date on which the recipient of a Grant
first becomes eligible to receive a Grant under Section 6 hereof,
or (iii) such other date as may be specified by the Board or such
Committee.
2.15 "Grantee" means a person who receives or holds an Option,
Restricted Stock or Restricted Stock Unit under the Plan.
2.16 "Incentive Stock Option" means an "incentive stock option" within
the meaning of Section 422 of the Code, or the corresponding
provision of any subsequently enacted tax statute, as amended from
time to time.
2.17 "Option" means an option to purchase one or more shares of Stock
pursuant to the Plan.
2.18 "Option Period" means the period during which Options may be
exercised as set forth in Section 10 hereof.
2.19 "Option Price" means the purchase price for each share of Stock
subject to an Option.
2.20 "Other Agreement" shall have the meaning set forth in Section 14
hereof.
2.21 "Plan" means this 2001 Stock Option and Incentive Plan.
2.22 "Reporting Person" means a person who is required to file reports
under Section 16(a) of the Exchange Act.
2.23 "Restricted Period" means the period during which Restricted Stock
or Restricted Stock Units are subject to restrictions or
conditions pursuant to Section 12.2 hereof.
2.24 "Restricted Stock" means shares of Stock, awarded to a Grantee
pursuant to Section 12 hereof, that are subject to restrictions
and to a risk of forfeiture.
2.25 "Restricted Stock Unit" means a unit awarded to a Grantee pursuant
to Section 12 hereof, which represents a conditional right to
receive a share of Stock in the future, and which is subject to
restrictions and to a risk of forfeiture.
2.26 "Securities Act" means the Securities Act of 1933, as now in
effect or as hereafter amended.
29
2.27 "Stock" means the common stock of the Company.
2.28 "Subsidiary" means any "subsidiary corporation" of the Company
within the meaning of Section 424(f) of the Code.
3. ADMINISTRATION OF THE PLAN
3.1 Board.
The Board shall have such powers and authorities related to the
administration of the Plan as are consistent with the Company's certificate of
incorporation and by-laws and applicable law. The Board shall have full power
and authority to take all actions and to make all determinations required or
provided for under the Plan, any Grant or any Award Agreement, and shall have
full power and authority to take all such other actions and make all such other
determinations not inconsistent with the specific terms and provisions of the
Plan that the Board deems to be necessary or appropriate to the administration
of the Plan, any Grant or any Award Agreement. All such actions and
determinations shall be by the affirmative vote of a majority of the members of
the Board present at a meeting or by unanimous consent of the Board executed in
writing in accordance with the Company's certificate of incorporation and
by-laws and applicable law. The interpretation and construction by the Board of
any provision of the Plan, any Grant or any Award Agreement shall be final and
conclusive.
3.2 Committee.
The Board from time to time may delegate to a Committee such powers and
authorities related to the administration and implementation of the Plan, as set
forth in Section 3.1 above and in other applicable provisions, as the Board
shall determine, consistent with the certificate of incorporation and by-laws of
the Company and applicable law. In the event that the Plan, any Grant or any
Award Agreement entered into hereunder provides for any action to be taken by or
determination to be made by the Board, such action may be taken by or such
determination may be made by the Committee if the power and authority to do so
has been delegated to the Committee by the Board as provided for in this
Section. Unless otherwise expressly determined by the Board, any such action or
determination by the Committee shall be final, binding and conclusive.
3.3 Grants.
Subject to the other terms and conditions of the Plan, the Board shall
have full and final authority (i) to designate Grantees, (ii) to determine the
type or types of Grant to be made to a Grantee, (iii) to determine the number of
shares of Stock to be subject to a Grant, (iv) to establish the terms and
conditions of each Grant (including, but not limited to, the exercise price of
any Option, the nature and duration of any restriction or condition (or
provision for lapse thereof) relating to the vesting, exercise, transfer, or
forfeiture of a Grant or the shares of Stock subject thereto, and any terms or
conditions that may be necessary to qualify Options as Incentive Stock Options),
(v) to prescribe the form of each Award Agreement evidencing a Grant, and (vi)
to amend, modify, or supplement the terms of any outstanding Grant. Such
authority specifically includes the authority, in order to effectuate the
purposes of the Plan but without amending the Plan, to modify Grants to eligible
individuals who are foreign nationals or are individuals who are employed
outside the United States to recognize differences in local law, tax policy, or
custom. As a condition to any Grant, the Board shall have the right, at its
discretion, to require Grantees to return to the Company Grants previously
awarded under the Plan. Subject to the terms and conditions of the Plan, any
such subsequent Grant shall be upon such terms and conditions as are specified
by the Board at the time the new Grant is made. The Company may retain the right
in an Award Agreement to cause a forfeiture of the gain realized by a Grantee on
account of actions taken by the Grantee in violation or breach of or in conflict
with any non-competition agreement, any agreement prohibiting solicitation of
employees or clients of the Company or any affiliate thereof or any
confidentiality obligation with respect to the Company or any affiliate thereof
or otherwise in competition with the Company, to the extent specified in such
Award Agreement applicable to the Grantee. Furthermore, the Company may annul a
Grant if the Grantee is an employee of the Company or an affiliate thereof and
is terminated "for cause" as defined in the applicable Award Agreement. The
Board may permit or require the deferral of any award payment, subject to such
rules and procedures as it may establish, which may include provisions for the
payment or crediting of interest or dividend equivalents, including converting
such credits into deferred Stock equivalents.
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3.4 No Liability.
No member of the Board or of the Committee shall be liable for any
action or determination made in good faith with respect to the Plan or any Grant
or Award Agreement.
4. STOCK SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 17 hereof, the number of
shares of Stock available for issuance under the Plan shall be five million
(5,000,000). Stock issued or to be issued under the Plan shall be authorized but
unissued shares. If any shares covered by a Grant are not purchased or are
forfeited, or if a Grant otherwise terminates without delivery of any Stock
subject thereto, then the number of shares of Stock counted against the
aggregate number of shares available under the Plan with respect to such Grant
shall, to the extent of any such forfeiture or termination, again be available
for making Grants under the Plan.
5. EFFECTIVE DATE AND TERM OF THE PLAN
5.1 Effective Date.
The Plan shall be effective as of the Effective Date, subject to
approval of the Plan within one year of the Effective Date, by the stockholders
of the Company in accordance with Section 422(b) of the Code and the regulations
thereunder. Upon approval of the Plan by the stockholders of the Company as set
forth above, all Grants made under the Plan on or after the Effective Date shall
be fully effective as if the stockholders of the Company had approved the Plan
on the Effective Date. If the stockholders fail to approve the Plan within one
year after the Effective Date, any Grants made hereunder shall be null and void
and of no effect.
5.2 Term.
The Plan shall terminate on the tenth anniversary of the Effective Date.
6. OPTION GRANTS
6.1 Employees or Consultants.
Grants (including Grants of Incentive Stock Options, subject to Section
7.1) may be made under the Plan to any employee, officer or director of, or any
consultant or advisor to, the Company or any Subsidiary, as the Board shall
determine and designate from time to time.
6.2 Successive Grants.
An eligible person may receive more than one Grant, subject to such
restrictions as are provided herein.
7. LIMITATIONS ON GRANTS
7.1 Limitations on Incentive Stock Options.
An Option shall constitute an Incentive Stock Option only (i) if the
Grantee of such Option is an employee of the Company or any Subsidiary of the
Company; (ii) to the extent specifically provided in the related Award
Agreement; and (iii) to the extent that the aggregate Fair Market Value
(determined at the time the Option is granted) of the shares of Stock with
respect to which all Incentive Stock Options held by such Grantee become
exercisable for the first time during any calendar year (under the Plan and all
other plans of the Grantee's employer and its affiliates) does not exceed
$100,000. This limitation shall be applied by taking Options into account in the
order in which they were granted.
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7.2 Limitation on Shares of Stock Subject to Grants.
The maximum number of shares of Stock subject to Options that can be
awarded under the Plan to any person eligible for a Grant under Section 6 hereof
is one million (1,000,000) per year.
8. AWARD AGREEMENT
Each Grant pursuant to the Plan shall be evidenced by an Award
Agreement, in such form or forms as the Board shall from time to time determine.
Award Agreements granted from time to time or at the same time need not contain
similar provisions but shall be consistent with the terms of the Plan. Each
Award Agreement evidencing a Grant of Options shall specify whether such Options
are intended to be non-qualified stock options or Incentive Stock Options, and
in the absence of such specification such options shall be deemed non-qualified
stock options.
9. OPTION PRICE
The Option Price of each Option shall be fixed by the Board and stated
in the Award Agreement evidencing such Option. In the case of an Incentive Stock
Option the Option Price shall be the Fair Market Value on the Grant Date of a
share of Stock; provided, however, that in the event that a Grantee would
otherwise be ineligible to receive an Incentive Stock Option by reason of the
provisions of Sections 422(b)(6) and 424(d) of the Code (relating to ownership
of more than ten percent of the Company's outstanding shares of Stock), the
Option Price of an Option granted to such Grantee that is intended to be an
Incentive Stock Option shall be not less than the greater of the par value or
110 percent of the Fair Market Value of a share of Stock on the Grant Date. In
no case shall the Option Price of any Option be less than the par value of a
share of Stock.
10. VESTING, TERM AND EXERCISE OF OPTIONS
10.1 Vesting and Option Period.
Subject to Sections 10.2 and 17.3 hereof, each Option granted under the
Plan shall become exercisable at such times and under such conditions as shall
be determined by the Board and stated in the Award Agreement. For purposes of
this Section 10.1, fractional numbers of shares of Stock subject to an Option
shall be rounded down to the next nearest whole number. The period during which
any Option shall be exercisable shall constitute the "Option Period" with
respect to such Option.
10.2 Term.
Each Option granted under the Plan shall terminate, and all rights to
purchase shares of Stock thereunder shall cease, upon the expiration of ten
years from the date such Option is granted, or under such circumstances and on
such date prior thereto as is set forth in the Plan or as may be fixed by the
Board and stated in the Award Agreement relating to such Option; provided,
however, that in the event that the Grantee would otherwise be ineligible to
receive an Incentive Stock Option by reason of the provisions of Sections
422(b)(6) and 424(d) of the Code (relating to ownership of more than ten percent
of the outstanding shares of Stock), an Option granted to such Grantee that is
intended to be an Incentive Stock Option shall not be exercisable after the
expiration of five years from its Grant Date.
10.3 Acceleration.
Any limitation on the exercise of an Option contained in any Award
Agreement may be rescinded, modified or waived by the Board, in its sole
discretion, at any time and from time to time after the Grant Date of such
Option, so as to accelerate the time at which the Option may be exercised.
Notwithstanding any other provision of the Plan, no Option shall be exercisable
in whole or in part prior to the date the Plan is approved by the stockholders
of the Company as provided in Section 5.1 hereof.
10.4 Termination of Employment or Other Relationship.
Unless otherwise provided by the Board, upon the termination of a
Grantee's employment or other relationship with the Company or any Subsidiary
other than by reason of death or "permanent and total disability" (within the
32
meaning of Section 22(e)(3) of the Code), any Option or portion thereof held by
such Grantee that has not vested in accordance with the provisions of Section
10.1 hereof shall terminate immediately, and any Option or portion thereof that
has vested in accordance with the provisions of Section 10.1 hereof but has not
been exercised shall terminate at the close of business on the 90th day
following the Grantee's termination of employment or other relationship (or, if
such 90th day is a Saturday, Sunday or holiday, at the close of business on the
next preceding day that is not a Saturday, Sunday or holiday). Upon termination
of an Option or portion thereof, the Grantee shall have no further right to
purchase shares of Stock pursuant to such Option or portion thereof. Whether a
termination of employment or other relationship shall have occurred for purposes
of the Plan shall be determined by the Board, which determination shall be final
and conclusive. For purposes of the Plan, a termination of employment, service
or other relationship shall not be deemed to occur if the Grantee is immediately
thereafter a director of the Company or an affiliate.
10.5 Rights in the Event of Death.
Unless otherwise provided by the Board, if a Grantee dies while employed
by or providing services to the Company or Subsidiary, all Options granted to
such Grantee shall fully vest on the date of death, and the executors or
administrators or legatees or distributees of such Grantee's estate shall have
the right, at any time within one year after the date of such Grantee's death
and prior to termination of the Option pursuant to Section 10.2 above, to
exercise any Option held by such Grantee at the date of such Grantee's death.
10.6 Rights in the Event of Disability.
Unless otherwise provided by the Board, if a Grantee's employment or
other relationship with the Company or Subsidiary is terminated by reason of the
"permanent and total disability" (within the meaning of Section 22(e)(3) of the
Code) of such Grantee, all Options granted to such Grantee shall fully vest on
the date of permanent and total disability, and the Grantee shall have the
right, at any time within one year after the date of such Grantee's permanent
and total disability and prior to termination of the Option pursuant to Section
10.2 above, to exercise any Option held by such Grantee. Whether a termination
of employment or service is to be considered by reason of "permanent and total
disability" for purposes of the Plan shall be determined by the Board, which
determination shall be final and conclusive.
10.7 Limitations on Exercise of Option.
Notwithstanding any other provision of the Plan, in no event may any
Option be exercised, in whole or in part, prior to the date the Plan is approved
by the stockholders of the Company as provided herein, or after ten years
following the date upon which the Option is granted, or after the occurrence of
an event referred to in Section 17 hereof which results in termination of the
Option.
10.8 Method of Exercise.
An Option that is exercisable may be exercised by the Grantee's
delivery to the Company of written notice of exercise on any business day, at
the Company's principal office, addressed to the attention of the Board. Such
notice shall specify the number of shares of Stock with respect to which the
Option is being exercised and shall be accompanied by payment in full of the
Option Price of the shares for which the Option is being exercised. The minimum
number of shares of Stock with respect to which an Option may be exercised, in
whole or in part, at any time shall be the lesser of (i) 100 shares or such
lesser number set forth in the applicable Award Agreement and (ii) the maximum
number of shares available for purchase under the Option at the time of
exercise. Payment of the Option Price for the shares purchased pursuant to the
exercise of an Option shall be made (i) in cash or in cash equivalents
acceptable to the Company; (ii) to the extent permitted by law and at the
Board's discretion, through the tender to the Company of shares of Stock, which
shares, if acquired from the Company, shall have been held for at least six
months at the time of tender and which shall be valued, for purposes of
determining the extent to which the Option Price has been paid thereby, at their
Fair Market Value on the date of exercise; or (iii) to the extent permitted by
law and at the Board's discretion, by a combination of the methods described in
(i) and (ii). In addition and unless the Board provides otherwise in the Award
Agreement, payment in full of the Option Price need not accompany the written
notice of exercise provided that the notice of exercise directs that the
certificate or certificates for the shares of Stock for which the Option is
exercised be delivered to a licensed broker acceptable to the Company as the
agent for the individual exercising the Option and, at the time such certificate
33
or certificates are delivered, the broker tenders to the Company cash (or cash
equivalents acceptable to the Company) equal to the Option Price for the shares
of Stock purchased pursuant to the exercise of the Option plus the amount (if
any) of federal and/or other taxes which the Company may in its judgment, be
required to withhold with respect to the exercise of the Option. An attempt to
exercise any Option granted hereunder other than as set forth above shall be
invalid and of no force and effect. Unless otherwise stated in the applicable
Award Agreement, an individual holding or exercising an Option shall have none
of the rights of a shareholder (for example, the right to receive cash or
dividend payments or distributions attributable to the subject shares of Stock
or to direct the voting of the subject shares of Stock) until the shares of
Stock covered thereby are fully paid and issued to such individual. Except as
provided in Section 17 hereof, no adjustment shall be made for dividends,
distributions or other rights for which the record date is prior to the date of
such issuance.
10.9 Delivery of Stock Certificates.
Promptly after the exercise of an Option by a Grantee and the payment
in full of the Option Price, such Grantee shall be entitled to the issuance of a
stock certificate or certificates evidencing such Grantee's ownership of the
shares of Stock subject to the Option.
11. TRANSFERABILITY OF OPTIONS
11.1 Transferability of Options
Except as provided in Section 11.2, during the lifetime of a Grantee,
only the Grantee (or, in the event of legal incapacity or incompetence, the
Grantee's guardian or legal representative) may exercise an Option. Except as
provided in Section 11.2, no Option shall be assignable or transferable by the
Grantee to whom it is granted, other than by will or the laws of descent and
distribution.
11.2 Transfers.
If authorized in the applicable Award Agreement, a Grantee may
transfer, not for value, all or part of an Option which is not an Incentive
Stock Option to any Family Member. For the purpose of this Section 11.2, a "not
for value" transfer is a transfer which is (i) a gift, (ii) a transfer under a
domestic relations order in settlement of marital property rights; or (iii) a
transfer to an entity in which more than fifty percent of the voting interests
are owned by Family Members (or the Grantee) in exchange for an interest in that
entity. Following a transfer under this Section 11.2, any such Option shall
continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer. Subsequent transfers of transferred Options are
prohibited except to Family Members of the original Grantee in accordance with
this Section 11.2 or by will or the laws of descent and distribution. The events
of termination of employment or other relationship of Section 10.4 hereof shall
continue to be applied with respect to the original Grantee, following which the
Option shall be exercisable by the transferee only to the extent, and for the
periods specified in Sections 10.4, 10.5, or 10.6.
12. RESTRICTED STOCK AND RESTRICTED STOCK UNITS
12.1 Grant of Restricted Stock or Restricted Stock Units.
The Board may from time to time grant Restricted Stock or Restricted
Stock Units to persons eligible to receive Grants under Section 6 hereof,
subject to such restrictions, conditions and other terms as the Board may
determine.
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12.2 Restrictions.
At the time a Grant of Restricted Stock or Restricted Stock Units is
made, the Board shall establish a period of time (the "Restricted Period")
applicable to such Restricted Stock or Restricted Stock Units. Each Grant of
Restricted Stock or Restricted Stock Units may be subject to a different
Restricted Period. The Board may, in its sole discretion, at the time a Grant of
Restricted Stock or Restricted Stock Units is made, prescribe restrictions in
addition to or other than the expiration of the Restricted Period, including the
satisfaction of corporate or individual performance objectives, which may be
applicable to all or any portion of the Restricted Stock or Restricted Stock
Units. Such performance objectives shall be established in writing by the Board
prior to the ninetieth day of the year in which the Grant is made and while the
outcome is substantially uncertain. Performance objectives shall be based on a
number of factors including, but not limited to, Stock price, market share,
sales, earnings per share, return on equity or costs. Performance objectives may
include positive results, maintaining the status quo or limiting economic
losses. Subject to the fourth sentence of this Section 12.2, the Board also may,
in its sole discretion, shorten or terminate the Restricted Period or waive any
other restrictions applicable to all or a portion of the Restricted Stock or
Restricted Stock Units. Neither Restricted Stock nor Restricted Stock Units may
be sold, transferred, assigned, pledged or otherwise encumbered or disposed of
during the Restricted Period or prior to the satisfaction of any other
restrictions prescribed by the Board with respect to such Restricted Stock or
Restricted Stock Units.
12.3 Restricted Stock Certificates.
The Company shall issue, in the name of each Grantee to whom Restricted
Stock has been granted, stock certificates representing the total number of
shares of Restricted Stock granted to the Grantee, as soon as reasonably
practicable after the Grant Date. The Board may provide in an Award Agreement
that either (i) the Secretary of the Company shall hold such certificates for
the Grantees' benefit until such time as the Restricted Stock is forfeited to
the Company, or the restrictions lapse, or (ii) such certificates shall be
delivered to the Grantee, provided, however, that such certificates shall bear a
legend or legends that complies with the applicable securities laws and
regulations and makes appropriate reference to the restrictions imposed under
the Plan and the Award Agreement.
12.4 Rights of Holders of Restricted Stock.
Unless the Board otherwise provides in an Award Agreement, holders of
Restricted Stock shall have the right to vote such Stock and the right to
receive any dividends declared or paid with respect to such Stock. The Board may
provide that any dividends paid on Restricted Stock must be reinvested in shares
of Stock, which may or may not be subject to the same vesting conditions and
restrictions applicable to such Restricted Stock. All distributions, if any,
received by a Grantee with respect to Restricted Stock as a result of any stock
split, stock dividend, combination of shares or other similar transaction shall
be subject to the restrictions applicable to the original Grant.
12.5 Rights of Holders of Restricted Stock Units.
Unless the Board otherwise provides in an Award Agreement, holders of
Restricted Stock Units shall have no rights as stockholders of the Company. The
Board may provide in an Award Agreement evidencing a Grant of Restricted Stock
Units that the holder of such Restricted Stock Units shall be entitled to
receive, upon the Company's payment of a cash dividend on its outstanding Stock,
a cash payment for each Restricted Stock Unit held equal to the per-share
dividend paid on the Stock. Such Award Agreement may also provide that such cash
payment will be deemed reinvested in additional Restricted Stock Units at a
price per unit equal to the Fair Market Value of a share of Stock on the date
that such dividend is paid.
12.6 Termination of Employment or Other Relationship.
Unless otherwise provided by the Board, upon the termination of a
Grantee's employment or other relationship with the Company or Subsidiary other
than by reason of death or "permanent and total disability" (within the meaning
of Section 22(e)(3) of the Code), any shares of Restricted Stock or Restricted
Stock Units held by such Grantee that have not vested, or with respect to which
all applicable restrictions and conditions have not lapsed, shall immediately be
deemed forfeited. Upon forfeiture of Restricted Stock or Restricted Stock Units,
the Grantee shall have no further rights with respect to such Grant, including
but not limited to any right to vote Restricted Stock or any right to receive
35
dividends with respect to shares of Restricted Stock or Restricted Stock Units.
Whether a termination of employment or other relationship shall have occurred
for purposes of the Plan shall be determined by the Board, which determination
shall be final and conclusive. For purposes of the Plan, a termination of
employment, service or other relationship shall not be deemed to occur if the
Grantee is immediately thereafter a director of the Company or an affiliate.
12.7 Rights in the Event of Death.
Unless otherwise provided by the Board, if a Grantee dies while employed
by the Company or Subsidiary, all Restricted Stock or Restricted Stock Units
granted to such Grantee shall fully vest on the date of death, and the shares of
Stock represented thereby shall be deliverable in accordance with the terms of
the Plan to the executors, administrators, legatees or distributees of the
Grantee's estate.
12.8 Rights in the Event of Disability.
Unless otherwise provided by the Board, if a Grantee's employment or
other relationship with the Company or Subsidiary is terminated by reason of the
"permanent and total disability" (within the meaning of Section 22(e)(3) of the
Code) of such Grantee, such Grantee's Restricted Stock or Restricted Stock Units
shall continue to vest in accordance with the applicable Award Agreement for a
period of one year after such termination of employment or service, subject to
the earlier forfeiture of such Restricted Stock or Restricted Stock Units in
accordance with the terms of the applicable Award Agreement. Whether a
termination of employment or service is to be considered by reason of "permanent
and total disability" for purposes of the Plan shall be determined by the Board,
which determination shall be final and conclusive.
12.9 Delivery of Stock and Payment Therefor.
Upon the expiration or termination of the Restricted Period and the
satisfaction of any other conditions prescribed by the Board, the restrictions
applicable to shares of Restricted Stock or Restricted Stock Units shall lapse,
and, unless otherwise provided in the Award Agreement, upon payment by the
Grantee to the Company, in cash or by check, of the greater of (i) the aggregate
par value of the shares of Stock represented by such Restricted Stock or
Restricted Stock Units or (ii) the purchase price, if any, specified in the
Award agreement relating to such Restricted Stock or Restricted Stock Units, a
stock certificate for such shares shall be delivered, free of all such
restrictions, to the Grantee or the Grantee's beneficiary or estate, as the case
may be.
13. CERTAIN PROVISIONS APPLICABLE TO AWARDS
13.1 Stand-Alone, Additional, Tandem, and Substitute Grants
Grants under the Plan may, in the discretion of the Board, be granted
either alone or in addition to, in tandem with or in substitution or exchange
for, any other Grant or any award granted under another plan of the Company, any
affiliate or any business entity to be acquired by the Company or an affiliate,
or any other right of a Grantee to receive payment from the Company or any
affiliate. Such additional, tandem and substitute or exchange Grants may be
awarded at any time. If a Grant is awarded in substitution or exchange for
another Grant, the Board shall require the surrender of such other Grant in
consideration for the new Grant. In addition, Grants may be made in lieu of cash
compensation, including in lieu of cash amounts payable under other plans of the
Company or any affiliate, in which the value of Stock subject to the Grant is
equivalent in value to the cash compensation (for example, Restricted Stock), or
in which the exercise price, grant price or purchase price of the Grant in the
nature of a right that may be exercised is equal to the Fair Market Value of the
underlying Stock minus the value of the cash compensation surrendered (for
example, Options granted with an exercise price "discounted" by the amount of
the cash compensation surrendered).
13.2 Term of Grant.
The term of each Grant shall be for such period as may be determined by
the Board; provided that in no event shall the term of any Option exceed a
period of ten years (or such shorter term as may be required in respect of an
Incentive Stock Option under Section 422 of the Code).
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13.3 Form and Timing of Payment Under Grants; Deferrals.
Subject to the terms of the Plan and any applicable Award Agreement,
payments to be made by the Company or an affiliate upon the exercise of an
Option or other Grant may be made in such forms as the Board shall determine,
including, without limitation, cash, Stock, other Grants or other property, and
may be made in a single payment or transfer, in installments, or on a deferred
basis. The settlement of any Grant may be accelerated, and cash paid in lieu of
Stock in connection with such settlement, in the discretion of the Board or upon
occurrence of one or more specified events. Installment or deferred payments may
be required by the Board or permitted at the election of the Grantee on terms
and conditions established by the Board. Payments may include, without
limitation, provisions for the payment or crediting of a reasonable interest
rate on installment or deferred payments or the grant or crediting of dividend
equivalents or other amounts in respect of installment or deferred payments
denominated in Stock.
14. PARACHUTE LIMITATIONS
Notwithstanding any other provision of this Plan or of any other
agreement, contract, or understanding heretofore or hereafter entered into by a
Grantee with the Company or any affiliate, 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 plan or other arrangement for the direct or indirect
provision of compensation to the Grantee (including groups or classes of
participants or beneficiaries of which the Grantee 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 Grantee (a "Benefit Arrangement"), if the Grantee is a "disqualified
individual," as defined in Section 280G(c) of the Code, any Option, Restricted
Stock or Restricted Stock Unit held by that Grantee and any right to receive any
payment or other benefit under this Plan shall not become exercisable or vested
(i) 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
Grantee under this Plan, all Other Agreements and all Benefit Arrangements,
would cause any payment or benefit to the Grantee under this Plan to be
considered a "parachute payment" within the meaning of Section 280G(b)(2) of the
Code as then in effect (a "Parachute Payment") and (ii) if, as a result of
receiving a Parachute Payment, the aggregate after-tax amounts received by the
Grantee from the Company under this Plan, all Other Agreements and all Benefit
Arrangements would be less than the maximum after-tax amount that could be
received by the Grantee without causing any such payment or benefit to be
considered a Parachute Payment. In the event that the receipt of any such right
to exercise, vesting, payment or benefit under this Plan, in conjunction with
all other rights, payments or benefits to or for the Grantee under any Other
Agreement or any Benefit Arrangement would cause the Grantee to be considered to
have received a Parachute Payment under this Plan that would have the effect of
decreasing the after-tax amount received by the Grantee as described in clause
(ii) of the preceding sentence, then the Grantee shall have the right, in the
Grantee's sole discretion, to designate those rights, payments or benefits under
this Plan, any Other Agreements and any Benefit Arrangements that should be
reduced or eliminated so as to avoid having the payment or benefit to the
Grantee under this Plan be deemed to be a Parachute Payment.
15. REQUIREMENTS OF LAW
15.1 General.
The Company shall not be required to sell or issue any shares of Stock
under any Grant if the sale or issuance of such shares would constitute a
violation by the Grantee, any other individual exercising a right emanating from
such Grant, or the Company of any provision of any law or regulation of any
governmental authority, including without limitation any federal or state
securities laws or regulations. If at any time the Company shall determine, in
its discretion, that the listing, registration or qualification of any shares
subject to a Grant upon any securities exchange or under any governmental
regulatory body is necessary or desirable as a condition of, or in connection
with, the issuance or purchase of shares hereunder, no shares of Stock may be
issued or sold to the Grantee or any other individual exercising an Option
pursuant to such Grant unless such listing, registration, qualification, consent
or approval shall have been effected or obtained free of any conditions not
acceptable to the Company, and any delay caused thereby shall in no way affect
the date of termination of the Grant. Specifically, in connection with the
Securities Act, upon the exercise of any right emanating from such Grant or the
delivery of any shares of Restricted Stock or Stock underlying Restricted Stock
Units, unless a registration statement under such Act is in effect with respect
to the shares of Stock covered by such Grant, the Company shall not be required
to sell or issue such shares unless the Board has received evidence satisfactory
to it that the Grantee or any other individual exercising an Option may acquire
37
such shares pursuant to an exemption from registration under the Securities Act.
Any determination in this connection by the Board shall be final, binding and
conclusive. The Company may, but shall in no event be obligated to, register any
securities covered hereby pursuant to the Securities Act. The Company shall not
be obligated to take any affirmative action in order to cause the exercise of an
Option or the issuance of shares of Stock pursuant to the Plan to comply with
any law or regulation of any governmental authority. As to any jurisdiction that
expressly imposes the requirement that an Option shall not be exercisable until
the shares of Stock covered by such Option are registered or are exempt from
registration, the exercise of such Option (under circumstances in which the laws
of such jurisdiction apply) shall be deemed conditioned upon the effectiveness
of such registration or the availability of such an exemption.
15.2 Rule 16b-3.
During any time when the Company has a class of equity security
registered under Section 12 of the Exchange Act, it is the intent of the Company
that Grants pursuant to the Plan and the exercise of Options granted hereunder
will qualify for the exemption provided by Rule 16b-3 under the Exchange Act. To
the extent that any provision of the Plan or action by the Board does not comply
with the requirements of Rule 16b-3, it shall be deemed inoperative to the
extent permitted by law and deemed advisable by the Board, and shall not affect
the validity of the Plan. In the event that Rule 16b-3 is revised or replaced,
the Board may exercise its discretion to modify this Plan in any respect
necessary to satisfy the requirements of, or to take advantage of any features
of, the revised exemption or its replacement.
16. AMENDMENT AND TERMINATION OF THE PLAN
The Board may, at any time and from time to time, amend, suspend or
terminate the Plan as to any shares of Stock as to which Grants have not been
made; provided, however, that the Board shall not, without approval of the
Company's stockholders, amend the Plan such that it does not comply with the
Code. Except as permitted under this Section 16 or Section 17 hereof, no
amendment, suspension or termination of the Plan shall, without the consent of
the Grantee, alter or impair rights or obligations under any Grant theretofore
awarded under the Plan.
17. EFFECT OF CHANGES IN CAPITALIZATION
17.1 Changes in Stock.
If the number of outstanding shares of Stock is increased or decreased
or the shares of Stock are changed into or exchanged for a different number or
kind of shares or other securities of the Company on account of any
recapitalization, reclassification, stock split, reverse split, combination of
shares, exchange of shares, stock dividend or other distribution payable in
capital stock, or other increase or decrease in such shares effected without
receipt of consideration by the Company occurring after the Effective Date, the
number and kinds of shares for which Grants of Options, Restricted Stock and
Restricted Stock Units may be made under the Plan shall be adjusted
proportionately and accordingly by the Company. In addition, the number and kind
of shares for which Grants are outstanding shall be adjusted proportionately and
accordingly so that the proportionate interest of the Grantee immediately
following such event shall be, to the extent practicable, the same as
immediately before such event. Any such adjustment in outstanding Options shall
not change the aggregate Option Price payable with respect to shares that are
subject to the unexercised portion of an Option outstanding but shall include a
corresponding proportionate adjustment in the Option Price per share. The
conversion of any convertible securities of the Company shall not be treated as
an increase in shares effected without receipt of consideration.
17.2 Reorganization in Which the Company Is the Surviving Entity and in
Which No Change of Control Occurs.
Subject to Section 17.3 hereof, if the Company shall be the surviving
entity in any reorganization, merger or consolidation of the Company with one or
more other entities and in which no Change of Control occurs, any Option
theretofore granted pursuant to the Plan shall pertain to and apply to the
securities to which a holder of the number of shares of Stock subject to such
Option would have been entitled immediately following such reorganization,
merger or consolidation, with a corresponding proportionate adjustment of the
Option Price per share so that the aggregate Option Price thereafter shall be
the same as the aggregate Option Price of the shares remaining subject to the
Option immediately prior to such reorganization, merger or consolidation.
Subject to any contrary language in an Award Agreement evidencing a Grant of
38
Restricted Stock, any restrictions applicable to such Restricted Stock shall
apply as well to any replacement shares received by the Grantee as a result of
the reorganization, merger or consolidation.
17.3 Reorganization, Sale of Assets or Sale of Stock Which Involves a
Change of Control.
Subject to the exceptions set forth in the last sentence of this
Section 17.3, (i) upon the occurrence of a Change of Control, all outstanding
shares of Restricted Stock and Restricted Stock Units shall be deemed to have
vested, and all restrictions and conditions applicable to such shares of
Restricted Stock and Restricted Stock Units shall be deemed to have lapsed,
immediately prior to the occurrence of such Change of Control, and (ii) fifteen
days prior to the scheduled consummation of a Change of Control, all Options
outstanding hereunder shall become immediately exercisable and shall remain
exercisable for a period of fifteen days. Any exercise of an Option during such
fifteen-day period shall be conditioned upon the consummation of the event and
shall be effective only immediately before the consummation of the event. Upon
consummation of any Change of Control, the Plan and all outstanding but
unexercised Options shall terminate. The Board shall send written notice of an
event that will result in such a termination to all individuals who hold Options
not later than the time at which the Company gives notice thereof to its
stockholders. This Section 17.3 shall not apply to any Change of Control to the
extent that (A) provision is made in writing in connection with such Change of
Control for the assumption of the Options, Restricted Stock and Restricted Stock
Units theretofore granted, or for the substitution for such Options, Restricted
Stock and Restricted Stock Units of new options, restricted stock and restricted
stock units covering the stock of a successor entity, or a parent or subsidiary
thereof, with appropriate adjustments as to the number and kinds of shares or
units and exercise prices, in which event the Plan and Options, Restricted Stock
and Restricted Stock Units theretofore granted shall continue in the manner and
under the terms so provided or (B) a majority of the full Board determines that
such Change of Control shall not trigger application of the provisions of this
Section 17.3.
17.4 Adjustments.
Adjustments under this Section 17 related to shares of Stock or
securities of the Company shall be made by the Board, whose determination in
that respect shall be final, binding and conclusive. No fractional shares or
other securities shall be issued pursuant to any such adjustment, and any
fractions resulting from any such adjustment shall be eliminated in each case by
rounding downward to the nearest whole share.
17.5 No Limitations on Company.
The making of Grants pursuant to the Plan shall not affect or limit in
any way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge, consolidate, dissolve or liquidate, or to sell or
transfer all or any part of its business or assets.
18. DISCLAIMER OF RIGHTS
No provision in the Plan or in any Grant or Award Agreement shall be
construed to confer upon any individual the right to remain in the employ or
service of the Company or any affiliate, or to interfere in any way with any
contractual or other right or authority of the Company either to increase or
decrease the compensation or other payments to any individual at any time, or to
terminate any employment or other relationship between any individual and the
Company. In addition, notwithstanding anything contained in the Plan to the
contrary, unless otherwise stated in the applicable Award Agreement, no Grant
awarded under the Plan shall be affected by any change of duties or position of
the Grantee, so long as such Grantee continues to be a director, officer,
consultant or employee of the Company or any affiliate. The obligation of the
Company to pay any benefits pursuant to this Plan shall be interpreted as a
contractual obligation to pay only those amounts described herein, in the manner
and under the conditions prescribed herein. The Plan shall in no way be
interpreted to require the Company to transfer any amounts to a third party
trustee or otherwise hold any amounts in trust or escrow for payment to any
participant or beneficiary under the terms of the Plan. No Grantee shall have
any of the rights of a shareholder with respect to the shares of Stock subject
to an Option except to the extent the certificates for such shares of Stock
shall have been issued upon the exercise of the Option.
39
19. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan nor the submission of the Plan to the
stockholders of the Company for approval shall be construed as creating
any limitations upon the right and authority of the Board to adopt such
other incentive compensation arrangements (which arrangements may be
applicable either generally to a class or classes of individuals or
specifically to a particular individual or particular individuals) as the
Board in its discretion determines desirable, including, without
limitation, the granting of stock options otherwise than under the Plan.
20. WITHHOLDING TAXES
The Company or any affiliate, as the case may be, shall have the right
to deduct from payments of any kind otherwise due to a Grantee any Federal,
state or local taxes of any kind required by law to be withheld with respect to
the vesting of or other lapse of restrictions applicable to Restricted Stock or
Restricted Stock Units or upon the issuance of any shares of Stock upon the
exercise of an Option. At the time of such vesting, lapse or exercise, the
Grantee shall pay to the Company or affiliate, as the case may be, any amount
that the Company or affiliate may reasonably determine to be necessary to
satisfy such withholding obligation. Subject to the prior approval of the
Company or the affiliate, which may be withheld by the Company or the affiliate,
as the case may be, in its sole discretion, the Grantee may elect to satisfy
such obligations, in whole or in part, (i) by causing the Company or the
affiliate to withhold shares of Stock otherwise issuable to the Grantee in an
amount equal to the statutory withholding amount or (ii) by delivering to the
Company or the affiliate shares of Stock already owned by the Grantee. The
shares of Stock so delivered or withheld shall have an aggregate Fair Market
Value equal to such withholding obligations. The Fair Market Value of the shares
of Stock used to satisfy such withholding obligation shall be determined by the
Company or the affiliate as of the date that the amount of tax to be withheld is
to be determined. A Grantee who has made an election pursuant to this Section 20
may satisfy his or her withholding obligation only with shares of Stock that are
not subject to any repurchase, forfeiture, unfulfilled vesting or other similar
requirements.
21. CAPTIONS
The use of captions in this Plan or any Award Agreement is for the
convenience of reference only and shall not affect the meaning of any provision
of the Plan or such Award Agreement.
22. OTHER PROVISIONS
Each Grant awarded under the Plan may contain such other terms and
conditions not inconsistent with the Plan as may be determined by the Board, in
its sole discretion.
23. NUMBER AND GENDER
With respect to words used in this Plan, the singular form shall include
the plural form, the masculine gender shall include the feminine gender, etc.,
as the context requires.
24. SEVERABILITY
If any provision of the Plan or any Award Agreement shall be determined
to be illegal or unenforceable by any court of law in any jurisdiction, the
remaining provisions hereof and thereof shall be severable and enforceable in
accordance with their terms, and all provisions shall remain enforceable in any
other jurisdiction.
25. POOLING
In the event any provision of the Plan or the Award Agreement would prevent
the use of pooling of interests accounting in a corporate transaction
involving the Company and such transaction is contingent upon pooling of
interests accounting, then that provision shall be deemed amended or
revoked to the extent required to preserve such pooling of interests. The
Company may require in an Award Agreement that a Grantee who receives a
Grant under the Plan shall, upon advice from the Company, take (or refrain
from taking, as appropriate) all actions necessary or desirable to ensure
that pooling of interests accounting is available.
40
26. GOVERNING LAW
The validity and construction of this Plan and the instruments
evidencing the Grants awarded hereunder shall be governed by the laws of the
State of Delaware (excluding the choice of law rules thereof).
* * *
41
PROXY
RATEXCHANGE CORPORATION
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 31, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints D. Jonathan Merriman and Donald H. Sledge
and each of them, as proxies, with full power of substitution, and hereby
authorizes them to represent and vote, as designated on the reverse, all shares
of common stock and shares of series A convertible preferred stock of
RateXchange Corporation, a Delaware corporation, held of record by the
undersigned, on April 25, 2001, at the 2001 annual meeting of stockholders to be
held on Thursday, May 31, 2001, at 10:00 a.m., pacific standard time, at The
Park Hyatt Hotel, 333 Battery Street, San Francisco, California 94111, or at any
adjournment or postponement thereof, upon the matters set forth on the reverse,
all in accordance with and as more fully described in the accompanying Notice of
Annual Meeting of Stockholders and Proxy Statement, receipt of which is hereby
acknowledged.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED "FOR" THE ELECTION OF THE BOARD OF DIRECTORS' SEVEN NOMINEES
NAMED ON THE REVERSE AND "FOR" THE PROPOSAL TO APPROVE THE 2001 STOCK OPTION AND
INCENTIVE PLAN AND IN THE MANNER RECOMMENDED BY A MAJORITY OF THE BOARD OF
DIRECTORS AS TO OTHER MATTERS. PLEASE COMPLETE, SIGN AND DATE THIS PROXY WHERE
INDICATED AND RETURN PROMPTLY IN THE ACCOMPANYING PREPAID ENVELOPE.
(To be Signed on Reverse Side.)
SIDE 2
1. To elect seven directors.
FOR all nominees listed WITHHOLD AUTHORITY
(except as marked to the to vote for all nominees listed
contrary below)
[ ] [ ]
Nominees: D. Jonathan Merriman
Patrick Arbor
Dean Barr
E. Russell Braziel
Donald H. Sledge
Ronald Spears
Steven W. Town
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)
--------------------------------------------------------------------------------
2. To approve the 2001 Stock Option and Incentive Plan.
[ ] For [ ] Against [ ] Abstain
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the annual meeting or any
adjournment or postponement thereof.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD IN THE ENCLOSED ENVELOPE.
Signature Date Signature Date
------------- -------- ------------ -----------
Note: Please sign above exactly as the shares are issued. When shares are held
by joint tenants, both should sign. When signing as an attorney,
executor, administrator, trustee or guardian, please give full title as
such. If a corporation, please sign in full corporate name by president
or other authorized officer. If a partnership, please sign in partnership
name by authorized person.