EMPLOYMENT AGREEMENT dated as of May 7, 1999 (the "Agreement"),
between FIBERNET TELECOM GROUP, INC., a Nevada corporation (the "Company"), and
XXXXXXX X. XXXX (the "Executive").
The parties hereto deem it to be in their best interests to enter
into an employment agreement whereby the Company will employ the Executive
pursuant to the terms set forth herein.
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, the parties hereto agree as follows:
1. Employment. The Company hereby employs the Executive, and the
Executive hereby accepts such employment by the Company, on the terms and
subject to the conditions hereinafter set forth. This Agreement shall be
effective immediately after (i) the closing of the transactions contemplated by
the Securities Purchase Agreement dated as of May 5, 1999 (the "Securities
Purchase Agreement") among the Company and the purchasers named therein and (ii)
the resignation by Executive from his current employer.
2. Term. Subject to earlier termination pursuant to the terms of
Section 6 below, the employment of the Executive hereunder shall be for a fixed
term (the "Employment Period") commencing as provided in Section (1) hereof and
terminating on the second anniversary of the execution of this Agreement (the
"Scheduled Termination Date").
3. Position.
(a) The Executive will be the President, Chief Executive
Officer and Board member of the Company reporting directly to the Board and
shall be responsible for the general management and affairs of the Company. So
long as Executive shall be on the Board, Executive will also serve on the
Compensation Committee of the Board.
(b) The Company understands that the Executive will conduct
substantially all of his duties and responsibilities on behalf of the Company
from the executive offices of the Company, which shall be located in the New
York metropolitan area.
4. Time to be Devoted to Employment. The Executive shall devote all
of his business time, attention and energies to the performance of his duties
and responsibilities under this Agreement. During the Employment Period, the
Executive shall not be engaged in any other business activity.
5. Compensation; Etc.
(a) Base Salary. The Company shall pay to the Executive an
annual base salary (the "Base Salary") of a minimum of $250,000, subject to
increase at the discretion of the Board of Directors (or a committee thereof) of
the Company (the "Board"). The Base Salary shall be payable in such installments
as is the policy of the Company with respect to its executive officers
generally, but no less frequently than monthly.
(b) At the reasonable discretion of the Board, the Company may
choose to pay a cash bonus to the Executive at year end based upon the
performance of the Executive during such period.
(c) Benefits. During the Employment Period, the Company shall
provide the Executive with such employee benefits as are provided by the Company
from time to time to its senior executive officers generally.
(d) Qualified Options. The Executive shall be entitled to
receive Incentive Stock Options ("ISOs") (as that term is defined in Section 422
of the Internal Revenue Code of 1986, as amended (the "Code")) for 25,000 shares
(or such greater or lesser amount then allowed under the Code) (the "1999
Options") of the Company's common stock, $.001 par value per share ("Common
Stock") with an exercise price equal to the fair market value of the Common
Stock as of May 5, 1999 pursuant to the Company's 1999 Stock Option Plan (the
"Option Plan"); provided, that, the issuance of 1999 Options is subject to
shareholder approval of the Option Plan. Any ISOs issued under this Section 5(d)
shall vest in accordance with the terms of the Option Plan, subject to any
earlier vesting as provided for hereunder.
(e) Non-Qualified Options. The Executive shall be entitled to
receive non-qualified options to purchase 100,000 shares of the Common Stock of
the Company at $4.75 per share in the form of attached hereto (the
"Non-Qualified Options") exercisable in full upon the earlier of (i) two years
(50,000 shares exercisable upon the first anniversary of this Agreement and
50,000 shares exercisable upon the second anniversary of this Agreement), and
(ii) immediately upon (A) a Qualified Public Offering (as defined in the
Securities Purchase Agreement), (B) a public or private offering of debt or
equity securities of the Company with net proceeds to the Company of not less
than $40,000,000 or any individual public or private offerings of debt and/or
equity securities that in the aggregate equals or exceeds $40,000,000 or (C) a
sale of all or substantially all of the assets of the Company or its
subsidiaries (each of the events in clauses (A), (B) and (C) known as a
"Liquidity Event"). The Non-Qualified Options shall be exercisable for up to ten
(10) years, and shall provide for "cashless exercise" and in the event of the
Executive's termination of employment for any reason, exercisable for up to one
year from the date of such termination. The Non-Qualified Options shall be
subject to accelerated vesting as provided for in this Agreement. If the
Executive's employment is terminated pursuant to a Termination for Cause or a
Voluntary Termination, all the then unvested Non-Qualified Options shall
immediately terminate and no longer be outstanding.
6. Termination of Employment.
(a) Involuntary Termination.
(i) Disability. If the Executive is incapacitated or
disabled by accident or sickness or otherwise so as to render him mentally
or physically incapable of performing the services required to be
performed by him or her under this Agreement for a period of 120
consecutive days or longer, or for an aggregate of 120 days during any
twelve-month period (such condition being hereinafter referred to as a
"Disability"), the Company may, at that time or any time thereafter, at
its option, to the extent not in violation of applicable state and federal
law, terminate the employment of the Executive
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under this Agreement immediately upon giving him notice to that effect
(such termination, as well as a termination under Section 6(a)(ii) below,
being hereinafter called an "Involuntary Termination"). In the event of an
Involuntary Termination, all options granted hereunder shall vest on a pro
rata basis for time served to the date of such Involuntary Termination
(including the 120 day disability qualifying period).
(ii) Death. If the Executive dies during the Employment
Period, his employment hereunder shall be deemed to cease as of the date
of his death, and all options granted hereunder shall vest as of the date
of his death, and shall be exercisable by his estate for a period of one
(1) year from the date of death.
(b) Termination for Cause. The Company may terminate the employment
of the Executive and all the Company's obligations under this Agreement at any
time during the Employment Period for "cause" (such termination being
hereinafter called a "Termination for Cause") after the Board has given the
Executive written notice of its intent to terminate the employment of the
Executive for cause, with reasonable specificity of the details thereof and
Executive shall have been provided a reasonable opportunity to cure any such
alleged occurrence constituting "cause" (not in excess of 30 days, provided that
in the event such occurrence cannot reasonably be expected to be cured in such
period then for such period as is reasonable and the Executive shall be using
his diligent best efforts to cure). For the purposes of this Agreement, "cause"
shall mean (i) the Executive's material breach of his material duties hereunder
or habitual neglect of his duties hereunder, (ii) the commission by the
Executive of an act constituting common law fraud, or a felony or criminal act
against the Company, or any shareholder, subsidiary or affiliate thereof or any
of the assets of any of them or (iii) the Executive's conviction of a crime
involving moral turpitude.
(c) Termination Without Cause. The Company may, with 30 days written
notice, terminate the employment of the Executive hereunder at any time during
the Employment Period without "cause" (such termination being hereinafter called
a "Termination Without Cause") by giving the Executive notice of such
termination, upon the giving of which notice such termination shall take effect
immediately.
(d) Voluntary Termination. Any termination of the employment of the
Executive hereunder other than as a result of an Involuntary Termination, a
Termination For Cause, a Termination Without Cause or a Termination by Executive
with Good Reason shall be deemed to be a "Voluntary Termination." A Voluntary
Termination shall be deemed to be effective immediately upon such termination.
(e) Termination by Executive with Good Reason. The following shall
constitute a "Termination by the Executive for Good Reason":
(i) relocation of Executive's principal office outside the New
York metropolitan area, or
(ii) "change of control" meaning (a) the sale of over 50% of
the securities owned by the Purchasers (as defined in the Securities
Purchase Agreement) as of the date hereof (other than to their respective
affiliates), (b) a change in majority
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control of the Board or (c) the sale of all or substantially all of the
assets of the Company, or a merger in which the Company or any of its
subsidiaries is not the surviving entity, or a liquidation or dissolution
of the Company.
(f) Effect of Termination of Employment.
(i) Except as otherwise provided in Section 6(f)(ii) below,
upon the termination of the Executive's employment hereunder for any
reason whatsoever prior to the expiration of the Employment Period,
neither the Executive nor his beneficiaries or estate shall have any
further rights or claims against the Company or any of its subsidiaries or
affiliates under this Agreement except to receive any earned and unpaid
portion of the Base Salary and any earned and unpaid portion of a declared
bonus provided for in Section 5(b), plus a cash payment for all accrued
and unused vacation time through the effective date of such termination,
and shall be entitled to exercise all options vested as provided for in
this Agreement.
(ii) Anything contained in this Agreement to the contrary
notwithstanding, upon the termination of the Executive's employment
hereunder prior to the Scheduled Termination Date pursuant to a
Termination Without Cause or a Termination by Executive for Good Reason,
the Executive shall have the right, in addition to the rights provided for
in Section 6(f)(i) above, to receive (i) twelve months severance (payable
in such installments as the Base Salary was being paid immediately prior
to such termination pursuant to Section 5(a)) equal to the then current
Base Salary and (ii) all options granted hereunder (including the 1999
Options and the Non-Qualified Options) shall vest and Executive shall have
12 months (unless with respect to the 1999 Options, the Option Plan shall
require a shorter period) thereafter to exercise such options.
(iii) Upon the termination of the Executive's employment
hereunder prior to the Scheduled Termination Date pursuant to a
Termination for Cause, the Executive shall be entitled to receive his Base
Salary pro rata to the date of his Termination for Cause plus any declared
but unpaid bonus and shall be entitled to exercise all options vested as
of the time of termination for 30 days.
7. Non-Competition.
(a) The Executive acknowledges and recognizes that during the
Employment Period he will be privy to trade secrets and confidential proprietary
information critical to the Company and the Company's business and further
acknowledges and recognizes that the Company would find it extremely difficult
to replace the Executive. So long as the Company is paying (or willing to pay in
the event the Executive shall refuse such payment) all amounts due hereunder,
the Executive shall not, during the Employment Period and for 12 months
thereafter (the "First Anniversary") (i) engage in any Competitive Business (as
defined below), whether such engagement shall be as an employer, officer,
director, owner, employee, partner or other participant, (ii) induce employees
of the Company or its affiliates or subsidiaries to terminate their employment
with the Company or such affiliate or subsidiary or engage in any Competitive
Business, or (iii) directly induce any entity or person with which the Company
or any of its
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subsidiaries or affiliates has a business relationship to terminate or alter
such business relationship; provided, however, that nothing contained in this
Section 7(a) shall (x) prevent, restrain or otherwise restrict the Executive
from owning not more than 1% of any class of securities of any competitor of the
Company or any subsidiary of affiliate thereof so long as such securities are
listed for trade on Nasdaq in the over-the-counter market or are traded on a
national securities exchange, or (y) prevent the Executive from engaging in the
business of investment banking for any business, individual or entity.
"Competitive Business" means and includes (i) any business that
builds or operates an in-building fiber or copper network or (ii) a
telecommunications carrier that operates a metropolitan area network in New York
City.
(b) The Executive understands that the foregoing restrictions
may limit his ability to earn a livelihood in a business similar that of the
Company, but he nevertheless believes that he has received and will receive
sufficient consideration and other benefits as an employee of the Company to
justify clearly such restrictions which, in any event (given his education,
skills and ability), the Executive does not believe would prevent him from
earning a livelihood.
8. Non-Disclosure, Assignment of Intellectual Property Rights and
Documentation.
(a) At all times, both during the Executive's employment by
the Company and after its termination, the Executive will keep in strict
confidence and will not disclose any confidential or proprietary information
relating to the business of the Company, or any client, customer, or business
partner of the Company, to any person or entity, or make use of any such
confidential or proprietary information for the Executive's own purposes or for
the benefit of any person or entity, except as may be necessary in the ordinary
course of performing his duties and responsibilities as an employee of the
Company.
(b) If at any time or times during his employment the
Executive shall conceive or discover any Intellectual Property (as defined
herein) whatsoever (herein called "Developments")or any interest therein
("Intellectual Property Rights") that in each case relates to the business of
the Company, such Developments and the benefits thereof shall immediately become
the sole and absolute property of the Company and its assigns, and the Executive
shall promptly disclose to the Company (or any persons designated by it) each
such Development and hereby assign any rights the Executive may have or acquire
in the Developments and benefits and/or rights resulting therefrom to the
Company and its assigns.
(c) As used herein, the term "Intellectual Property" shall
mean all industrial and intellectual property, including, without limitation,
computer programs and other software, and all documentation and media
constituting, describing or relating to the above.
9. Other Agreements. The Executive represents and warrants that the
execution and delivery of this Agreement and the performance of all the terms of
this Agreement do not and will not breach any agreement to keep in confidence
proprietary information acquired by the Executive in confidence or trust. The
Executive has not entered into and shall not enter
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into any agreement, either written or oral, in conflict with this Agreement. The
Executive represents that he has not brought and will not bring with him to the
Company or use at the Company any materials or documents of an employer or a
former employer that are not generally available to the public, unless express
written authorization from such employer for their possession and use has been
obtained. The Executive further understands that he is not to breach any
obligation of confidentiality that he has to any employer or former employer and
agrees to fulfill all such obligations during the period of his affiliation with
the Company.
10. Notices. All notices or other communications which are required
or permitted hereunder shall be in writing and sufficient if (a) delivered
personally or sent by telecopier, (b) sent by nationally-recognized overnight
courier or (c) sent by certified mail, postage prepaid, return receipt
requested, addressed as follows:
if to the Company, to:
FiberNet Telecom Group, Inc.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telephone: 000 000-0000
Facsimile: 000 000-0000
Attention: Secretary
if to the Executive, to the Executive's address on the books or
records of the Company;
or to such other address as the party to whom notice is to be given may have
furnished to each other party in writing in accordance herewith. Any such
communication shall be deemed to have been given (i) when delivered if
personally delivered or sent by telecopier, (ii) on the Business Day (as
hereinafter defined) after dispatch if sent by nationally-recognized, overnight
courier and (iii) on the fifth Business Day after dispatch if sent by mail. As
used herein, "Business Day" means a day that is not a Saturday, Sunday or a day
on which banking institutions in New York, New York are not required to be open.
11. Entire Agreement; Amendments. This Agreement contains the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior or contemporaneous negotiations, correspondence,
understandings and agreements between the parties with respect thereto. This
Agreement may be amended only by an agreement in writing signed by both parties
hereto.
12. Assignment; Successors; Benefits of Agreement. This Agreement is
personal in its nature and neither party hereto shall, without the consent of
the other, assign or transfer this Agreement or any rights or obligations
hereunder; provided, however, that subject to Termination by Executive with Good
Reason the Company shall have the right to assign its rights hereunder to any
subsidiary or affiliate of the Company or a successor to all or substantially
all of the Company's business as part of a merger with, or acquisition of the
Company by, another business entity subject to assumption. The provisions of
this Agreement
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shall be binding upon and inure to the benefit of the respective heirs,
executors, administrators and successors and permitted assigns of the parties
hereto. All amounts payable hereunder, and all option grants provided hereunder,
shall be payable to, and exercisable by, the Executive's estate.
13. Waiver of Breach. A waiver of any breach of any provision of
this Agreement shall not constitute or operate as a waiver of any other breach
of such provision or of any other provision, and any failure to enforce any
provision hereof shall not operate as a waiver of such provision or of any other
provision.
14. Counterparts; Headings. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument. Headings said herein are for
convenience of reference only and are not to affect the interpretation of this
Agreement.
15. Legal Fees. The Company will pay the reasonable attorney's fees
incurred by Executive in connection with the negotiation and execution hereof.
16. GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY, AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT
GIVING EFFECT TO PRINCIPLES GOVERNING CONFLICTS OF LAWS.
17. Severability. In the event that any provision of this Agreement
would be held in any jurisdiction to be invalid, prohibited or unenforceable for
any reason, such provision, as to such jurisdiction, shall be ineffective,
without invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
Notwithstanding the foregoing, if such provision could be more narrowly drawn so
as not to be invalid, prohibited or unenforceable in such jurisdiction, it
shall, as to such jurisdiction, be so narrowly drawn, without invalidating the
remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction.
18. Indemnification. The Executive shall be indemnified to the full
extent provided for by applicable law and the charter and by-laws of the
Company, which indemnification provisions may not be altered in any material
manner to the detriment of the Executive from those provisions in effect as of
the date hereof. The Company shall maintain D&O coverage during the Employment
Term (and for the applicable statute of limitations period thereafter), with
terms and conditions as in effect as of the date hereof; provided that such D&O
coverage may not be altered in any material manner to the detriment of the
Executive from those provisions in effect as of the date hereof.
19. Due Authorization. This Agreement has been duly authorized,
executed and delivered on behalf of the Company and represents the binding and
enforceable obligation of the Company, in accordance with its term.
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20. Remedies. The Executive acknowledges and understands that the
provisions of this Agreement are of a special and unique nature, the loss of
which cannot be adequately compensated for in damages by an action at law, and
that the breach or threatened breach of the provisions of this Agreement would
cause the Company irreparable harm. In the event of a breach or threatened
breach by the Executive of the provisions of this Agreement, the Company shall
be entitled to seek an injunction restraining him from such breach with a court
of law.
* * * * *
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first above written.
FIBERNET TELECOM GROUP, INC.
By: /s/ Xxxxx Xxxxxxx
-----------------------------------------
Name: Xxxxx Xxxxxxx
Title: President
/s/ Xxxxxxx X. Xxxx
--------------------------------------------
Xxxxxxx X. Xxxx
