EXHIBIT 10.6
EMPLOYMENT AGREEMENT
THIS AGREEMENT, entered into and effective February 7, 2000
(the "Effective Date") is made by and between Cogent Communications, Inc., a
Delaware corporation (the "Company") and Xxxxx Xxxxxxxxx (the "Executive").
RECITALS:
A. It is the desire of the Company to assure itself of the
services of the Executive by engaging the Executive as its Chairman, Chief
Executive Officer and President.
B. The Executive desires to serve the Company on the terms
herein provided.
NOW, THEREFORE, in consideration of the foregoing and of the
respective covenants and agreements set forth below, the parties hereto agree as
follows:
1. CERTAIN DEFINITIONS.
(a) "Annual Base Salary" shall have the meaning set
forth in Section 5(a).
(b) "Board" shall mean the Board of Directors of the
Company.
(c) "Bonus" shall have the meaning set forth in
Section 5(b).
(d) The Company shall have "Cause" to terminate the
Executive's employment hereunder upon the Executive's:
(i) fraud, embezzlement, or any other illegal
act committed intentionally by the Executive in connection
with the Executive's duties as an executive of the Company,
(ii) conviction of or plea of NOLO CONTENDRE to,
any felony , or
(iii) willful or grossly negligent infliction of
material economic injury to the Company.
(iv) willful failure to perform his duties
under Section 3 hereof (other than any such failure resulting
from a material breach of the obligations of the Company
hereunder or the death or Disability of Employee or any such
failure occurring after any of the events constituting "Good
Reason" hereunder has occurred) if such failure is not
corrected within thirty (30) business days after receipt by
Employee of a written notice which identifies in reasonable
detail the manner in which the Company believes that Employee
has not performed his duties hereunder, or
(v) any material breach of Employee's obligations
under the Confidentiality and Non-Compete Agreement executed
pursuant to Section 9 hereof.
(e) "Change in Control" shall mean any of the
following events:
(i) any consolidation, share exchange, merger,
issuance or transfer of the Securities of the Company (a
"Change of Control Transaction") (A) in which the shareholders
of the Company immediately prior to such Change of Control
Transaction do not own at least a majority of the voting power
of the entity which survives/results from such Change of
Control Transaction or (B) in which a shareholder of the
Company immediately before such Change of Control Transaction,
who does not own a majority of the voting stock of the Company
immediately prior to such Change of Control Transaction, owns
a majority of the Company's voting stock after such Change of
Control Transaction other than any such change resulting from
a sale by Employee of his shares of the Company;
(ii) any sale, lease, exchange or other transfer
(in one transaction or a series of related transactions) of
all or substantially all the assets of the Company, including
stock held in subsidiary corporations or interests held in
subsidiary ventures, or
(iii) after registration of the Company's
securities, the Company shall file a report with the
Securities and Exchange Commission on Form 8-K (or any
successor thereto), that a change in control (other than any
such change resulting from a sale by Employee of his shares
of the Company) of or over the Company has occurred.
(f) "Code" shall mean the Internal Revenue Code of
1986, as amended.
(g) "Committee" shall mean the Compensation Committee
of the Board.
(h) "Company" shall have the meaning set forth in the
preamble hereto.
(i) "Company Stock" shall mean the $.001 par value
common stock of the Company.
(j) "Contract Year" shall mean each twelve month
period beginning on the Effective Date or an annual anniversary
thereof.
(k) "Date of Termination" shall mean (i) if the
Executive's employment is terminated by his death, the date of his
death and (ii) if the Executive's
2
employment is terminated pursuant to Section 6(a)(ii) - (vi) the date
specified in the Notice of Termination.
(l) "Disability" shall mean any mental or physical
illness, condition, disability or incapacity which:
(i) prevents the Executive from discharging
substantially all of the essential job responsibilities and
employment duties,
(ii) continues for a period of 180 days (whether
or not consecutive) during any 12 month period, and
(iii) results in a written determination that the
Executive is "totally disabled" for the purpose of receiving
disability income payments pursuant to the disability policy
for the benefit of Executive in effect at such time.
A Disability shall be deemed to have occurred on the 180th consecutive
day of such Disability and shall be determined in accordance with
applicable law relating to disability.
(m) "Executive" shall have the meaning set forth in
the preamble hereto.
(n) "Extension Term" shall have the meaning set forth
in Section 2.
(o) "Good Reason" shall mean:
(i) any assignment of duties inconsistent with
the Executive's position(s) with the Company or any subsidiary
of the Company, or a change in the Executive's reporting
responsibilities, titles or offices or any removal of the
Executive from or any failure to reelect him to his
position(s) (other than any such change resulting from the
election by the Board of a non-executive Chairman, as approved
by 2/3 of the Board then sitting), or any material change by
the Company or any subsidiary in the Executive's functions,
duties, or responsibilities, which change would cause the
Executive's position to become one of lesser responsibility,
importance or scope from the position(s) (each "Constructive
Termination");
(ii) any violation or breach of this Agreement
by the Company in any material respect and the failure of the
Company to correct such breach within thirty (30) business
days after the receipt by the Company of a written notice from
Employee specifying in reasonable detail the nature of such
breach);
(iii) any change in the Company's principal place
of business to a place outside the Washington, DC metropolitan
area, other than for good faith business reasons; or
3
(iv) the failure by the Company or any
subsidiary of the Company to continue any benefit plan, life
insurance plan, health and accident plan or disability plan
in which the Executive is participating or the taking of any
action by the Company or any subsidiary which would materially
and adversely affect the Executive's participation in or
materially reduce benefits under any of such plans, unless
(except in the case of a pension plan) such plan is generally
available to all employees of the Company or any such
subsidiary, as the case may be, and any such failure or
action similarly affects all similarly situated participants
in such plan.
(p) "Initial Term" shall have the meaning set forth in
Section 2.
(q) "Notice of Termination" shall have the meaning set
forth in Section 6(b).
(r) "Term" shall have the meaning set forth in
Section 2.
2. EMPLOYMENT. The Company shall employ the Executive and
the Executive shall enter the employ of the Company, for the period set forth in
this Section 2, in the positions set forth in the first sentence of Section 3
and upon the other terms and conditions herein provided. The initial term of
employment under this Agreement (the "Initial Term") shall be for the period
beginning on the Effective Date and ending on December 31, 2003, unless earlier
terminated as provided in Section 6. The Initial Term shall automatically be
extended for a single additional period expiring December 31, 2006 (the
"Extension Term") unless either party hereto gives written notice of
non-extension to the other no later than September 1, 2003. (The Initial Term
and any Extension Term shall be collectively referred to as the "Term"
hereunder). Failure to elect or reelect to the Board the Executive designees or
any other designee whom the Executive is entitled to designate pursuant to
agreements with the Company shall constitute a material breach of this
Agreement.
3. POSITION AND DUTIES. The Executive shall serve as
Chairman, Chief Executive Officer and President of the Company, reporting to the
Board, with such responsibilities, duties and authority as are customary for
such role. The Executive shall devote substantially his full business time and
attention toward the fulfillment and execution of all assigned duties. The
Executive may devote such time and attention to (i) community and civic
activities, of various organizations of which he may be a director, officer or
member; (ii) serving as a fiduciary of an estate or trust for the benefit of a
member of his family or a friend; (iii) plan or engage in business activities or
ventures related to his personal, real estate and other investments; or (iv)
other activities appropriate and not inconsistent with his duties and
responsibilities hereunder.
4. PLACE OF PERFORMANCE. In connection with his employment
during the Term, the Executive shall be based at the Company's principal place
of business in the metropolitan DC area (the "Corporate Headquarters"), except
where such principal place of business is changed for good business reasons.
4
5. COMPENSATION AND RELATED MATTERS.
(a) ANNUAL BASE SALARY. During the Term the Executive
shall receive a base salary at a rate of $250,000 per annum (the
"Annual Base Salary"), paid in accordance with the Company's general
payroll practices for executives, but no less frequently than monthly.
No less frequently than annually during the Term, the Board and the
Committee shall review the rate of Annual Base Salary payable to the
Executive, and may increase, but may not decrease, the rate of Annual
Base Salary payable hereunder; PROVIDED, HOWEVER, that any increased
rate shall thereafter be the rate of "Annual Base Salary" hereunder.
(b) BONUS. Except as otherwise provided for herein,
for each calendar year on which the Executive is employed hereunder on
the last day, the Executive shall be eligible to receive a Bonus (the
"Bonus") in such amount as may be determined by the Committee.
(c) BENEFITS. The Executive shall be entitled to
receive such benefits and to participate in such employee group
benefit plans, including health insurance, as provided by the Company
to its executives in accordance with the plans, practices and programs
of the Company. The Company shall provide the Executive with life
insurance with a death benefit equal to $2,000,000, the proceeds of
which are payable to the Executive or any Executive designated
beneficiary. The Company shall also provide long-term disability
insurance to replace two-thirds of the Executive's Annual Base Salary.
The Company shall pay the cost of all premiums associated with such
life and disability insurance.
(d) EXPENSES. The Company shall reimburse the
Executive for all reasonable and necessary expenses incurred by the
Executive in connection with the performance of the Executive's duties
as an employee and Director of the Company. Such reimbursement is
subject to the submission to the Company by the Executive of
appropriate documentation and/or vouchers in accordance with the
customary procedures of the Company for expense reimbursement, as such
procedures may be revised by the Company from time to time hereafter.
(e) VACATIONS. The Executive shall be entitled to paid
vacation in accordance with the Company's vacation policy as in effect
from time to time. However, in no event shall the Executive be
entitled to less than three (3) weeks vacation per Contract Year. The
Executive shall also be entitled to paid holidays and personal days in
accordance with the Company's practice with respect to same as in
effect from time to time. To the extent any paid vacation days are not
used by Executive during any calendar year, those unused vacation days
shall be carried forward from year to year and used in any succeeding
year, but in no event shall executive be entitled to more than six (6)
weeks vacation in any single year. To the extent there are any unused
vacation days at the termination of Executive's employment, Executive
shall receive a lump sum payment for up to six (6) weeks of such
unused vacation days (including any vacation days carried
5
forward from prior years) within thirty (30) days after the effective
date of the termination and any additional vacation days shall be
forfeited.
(f) ADDITIONAL BENEFITS. Anything to the contrary
hereinabove stated notwithstanding, if the Company continues or adopts
any plan or plans of any nature including but without limiting the
generality of the foregoing pension plan, profit sharing plan, bonus
plans, or insurance plans, by the terms of which Executive would be
eligible to participate therein, then Executive shall be entitled to
receive all emoluments or benefits as may be provided thereby as are
provided to similarly situated senior executives of the Company, in
addition to all of his other rights and benefits hereunder. Nothing
paid to the Executive under any such plan(s) or arrangement(s) will be
deemed to be in lieu of other compensation to which the Executive is
entitled under this Agreement.
6. TERMINATION. The Executive's employment hereunder may be
terminated by the Company, on the one hand, or the Executive, on the other hand,
as applicable, without any breach of this Agreement only under the following
circumstances:
(a) Terminations.
(i) DEATH. The Executive's employment
hereunder shall terminate upon his death.
(ii) DISABILITY. If the Executive has incurred
a Disability, the Company may give the Executive written
notice of its intention to terminate the Executive's
employment. In such event, the Executive's employment with
the Company shall terminate effective on the 30th day after
receipt of such notice by the Executive.
(iii) CAUSE. The Company may terminate the
Executive's employment hereunder for Cause. Any such
termination for Cause may only be effected by the
affirmative vote of a two-thirds majority of the Board of
Directors (other than the Executive), after written notice
to the Executive and an opportunity to appear before the
Board (with counsel) to respond to the allegations which are
in such written notice, that the Executive has engaged in
the alleged conduct and that in their good faith judgment
such conduct warrants termination for Cause.
(iv) GOOD REASON. The Executive may terminate
his employment for Good Reason.
(v) WITHOUT CAUSE. The Company may terminate
the Executive's employment hereunder without Cause.
6
(vi) RESIGNATION WITHOUT GOOD REASON. The
Executive may resign his employment without Good Reason upon
30 days written notice to the Company.
(b) NOTICE OF TERMINATION. Any termination of the
Executive's employment by the Company or by the Executive under this
Section 6 (other than termination pursuant to paragraph (a)(i)) shall
be communicated by a written notice to the other party hereto
indicating the specific termination provision in this Agreement relied
upon, setting forth in reasonable detail any facts and circumstances
claimed to provide a basis for termination of the Executive's
employment under the provision so indicated, and specifying a Date of
Termination which, except in the case of termination for Cause or
Disability, shall be at least thirty days following the date of such
notice (a "Notice of Termination").
7. SEVERANCE PAYMENTS.
(a) TERMINATION WITHOUT CAUSE OR FOR GOOD REASON. If
the Executive's employment shall terminate without Cause (pursuant to
Section 6(a)(v)) (which for this purpose shall include any termination
by reason of the Company's non-extension or non-renewal of this
Agreement beyond the Initial Term), or for Good Reason (pursuant to
Section 6(a)(iv)), the Company shall:
(i) pay to the Executive, in a lump sum cash
payment as soon as practicable following the Date of
Termination, an amount equal to his then current rate of
Annual Base Salary, and
(ii) continue to provide the Executive with all
employee benefits and perquisites which he was participating
in or receiving at the time of the Termination of Employment
for a period of one (1) year. If such benefits cannot be
provided under the Company's programs, such benefits and
perquisites will be provided on an individual basis to the
Executive such that his after-tax costs will be no greater
than the costs for such benefits and perquisites under the
Company's programs.
(b) SURVIVAL. The expiration or termination of the
Term shall not impair the rights or obligations of any party hereto
which shall have accrued hereunder prior to such expiration.
(c) MITIGATION OF DAMAGES. In the event of any
termination of the Executive's employment by the Company, the
Executive shall not be required to seek other employment to mitigate
damages, and any income earned by the Executive from other employment
or self-employment shall not be offset against any obligations of the
Company to the Executive under this Agreement.
7
8. PARACHUTE PAYMENTS.
(a) If it is determined (as hereafter provided) that
by reason of any payment or Option vesting occurring pursuant to the
terms of this Agreement (or otherwise under any other agreement, plan
or program) upon a change in control (for the purposes of this
Section 8, as defined under applicable law) (collectively a "Payment")
the Executive would be subject to the excise tax imposed by Code
Section 4999 (the "Parachute Tax"), then the Executive shall be
entitled to receive an additional payment or payments (a "Gross-Up
Payment") in an amount such that, after payment by the Executive of
all taxes (including any Parachute Tax) imposed upon the Gross-Up
Payment, the Executive retains an amount of the Gross-Up Payment equal
to the Parachute Tax imposed upon the Payment, provided, however, that
the Gross-Up Payment hereunder shall be capped at 20% of the Payment.
(b) Subject to the provisions of Section 8(a) hereof,
all determinations required to be made under this Section 8, including
whether a Parachute Tax is payable by the Executive and the amount of
such Parachute Tax and whether a Gross-Up Payment is required and the
amount of such Gross-Up Payment, shall be made by the nationally
recognized firm of certified public accountants (the "Accounting Firm")
used by the Company prior to the change in control (or, if such
Accounting Firm declines to serve, the Accounting Firm shall be a
nationally recognized firm of certified public accountants selected by
the Executive).
9. COMPETITION AND CONFIDENTIALITY. Concurrently herewith,
the Executive and the Company shall enter into a Confidentiality and Non-Compete
Agreement.
10. INDEMNIFICATION. The Executive shall be entitled to
indemnification set forth in the Company's Amended and Restated Certificate of
Incorporation to the maximum extent allowed under the laws of the State of
Delaware, and he shall be entitled to the protection of any insurance policies
the Company may elect to maintain generally for the benefit of its directors and
officers against all costs, charges and expenses incurred or sustained by him in
connection with any action, suit or proceeding to which he may be made a party
by reason of his being or having been a director, officer or employee of the
Company or any of its subsidiaries or his serving or having served any other
enterprise as a director, officer or employee at the request of the Company.
11. NO DELEGATION. The Executive shall not delegate his
employment obligations under this Agreement to any other person.
12. ASSIGNMENT. Neither party may assign any of its
obligations hereunder without the prior written consent of the other party.
13. NOTICES. Any written notice required by this
Agreement will be deemed provided and delivered to the intended recipient
when (a) delivered in person by hand; or (b) three days after being sent via
U.S. certified mail, return receipt requested; or (c) the day after
8
being sent via by overnight courier, in each case when such notice is
properly addressed to the following address and with all postage and similar
fees having been paid in advance:
If to the Company: Cogent Communications, Inc.
0000 00xx Xxxxxx, X.X.
Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Fax: (000) 000-0000
with a copy to: Xxxx X. Xxxxxx
Xxxxxx & Xxxxxxx
0000 Xxxxxxxxxxxx Xxx., X.X.
Xxxxx 0000
Xxxxxxxxxx, X.X. 00000
Fax: (000) 000-0000
If to the Executive: to him at the address set forth below under his
signature.
Either party may change the address to which notices, requests, demands and
other communications to such party shall be delivered personally or mailed by
giving written notice to the other party in the manner described above.
14. BINDING EFFECT. This Agreement shall be for the benefit
of and binding upon the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and, where applicable,
assigns.
15. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the listed parties with respect to the subject matter
described in this Agreement and supersedes all prior agreements, understandings
and arrangements, both oral and written, between the parties with respect to
such subject matter. This Agreement may not be modified, amended, altered or
rescinded in any manner, except by written instrument signed by both of the
parties hereto; provided, however, that the waiver by either party of a breach
or compliance with any provision of this Agreement shall not operate nor be
construed as a waiver of any subsequent breach or compliance.
16. SEVERABILITY. In case any one or more of the provisions
of this Agreement shall be held by any court of competent jurisdiction or any
arbitrator selected in accordance with the terms hereof to be illegal, invalid
or unenforceable in any respect, such provision shall have no force and effect,
but such holding shall not affect the legality, validity or enforceability of
any other provision of this Agreement provided that the provisions held illegal,
invalid or unenforceable does not reflect or manifest a fundamental benefit
bargained for by a party hereto.
17. CHOICE OF LAW. The Executive and the Company intend and
hereby acknowledge that jurisdiction over disputes with regard to this
Agreement, and over all aspects
9
of the relationship between the parties hereto, shall be governed by the laws of
the District of Columbia without giving effect to its rules governing conflicts
of laws.
18. SECTION HEADINGS. The section headings contained in
this Agreement are for reference purposes only and shall not affect in any
manner the meaning or interpretation of this Agreement.
19. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument.
[signature page follows]
10
IN WITNESS WHEREOF, the parties have executed this Agreement
on the date and year first above written.
COGENT COMMUNICATIONS, INC.
By:
-------------------------------------
Its:
-------------------------------------
-----------------------------------------
Xxxxx Xxxxxxxxx
In his individual capacity
11
