EXHIBIT 10.12
GLOBIX CORPORATION
EMPLOYMENT AGREEMENT WITH XXXXX XXXXXXXXX
This EMPLOYMENT AGREEMENT (this "Agreement") is made as of April 15,
2002, by and between GLOBIX CORPORATION, a Delaware corporation with its
principal place of business located at 000 Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000 (the "Company"), and Xxxxx Xxxxxxxxx, a resident of the Commonwealth of
Virginia (the "Executive"; Executive and Company, together the "Parties" and
each a "Party").
WHEREAS, Company desires to employ Executive as its President and Chief
Executive Officer and Executive desires to accept such employment, on and
subject to the terms and conditions hereof.
NOW, THEREFORE, in consideration of the foregoing, the mutual
provisions contained in this Agreement, and for other good and valuable
consideration, the Parties agree as follows:
1. Employment. Company hereby employs Executive, and Executive hereby
accepts such employment, on the terms and subject to the conditions set forth in
this Agreement.
2. Duties. Executive is engaged as the President and Chief Executive
Officer of the Company. Executive shall report to the Board of Directors of the
Company.
3. Term. The term of employment (the "Term") under this Agreement
begins on the date hereof (the "Commencement Date") and ends on July 31, 2003.
Thereafter, this Agreement may be extended for one or more successive 6-month
periods with the written consent of the Parties executed not less than 90 days
prior to the end of the then-current term.
4. Compensation; Reimbursement.
(a) Compensation. Beginning on the Commencement Date, Executive will
be paid an annualized salary (the "Base Salary") of $280,000 per year. Such Base
Salary shall be reviewed no less frequently than annually during the Term of
this Agreement and may be increased but not decreased by the Company's board of
directors in its sole and absolute discretion, after taking into consideration a
variety of factors, including, without limitation, the performance of the
Executive and the Company and the base salary (and raises) paid by comparable
companies to executives having comparable responsibilities. In the event of any
increase, the increased amount shall become the Base Salary. Such Base Salary
shall be payable in accordance with the Company's normal business practices or
in such other amounts and at such other times as the Parties may mutually agree.
(b) Expenses. During the Term of this Agreement, the Company shall
reimburse Executive for the reasonable business expenses incurred by Executive
in the course of performing his duties for the Company hereunder, in accordance
with the procedures then in
place for such reimbursement. The Parties agree that during the initial Term
hereof, the Company shall reimburse Executive for reasonable expenses incurred
by him for lodging within the New York City metropolitan area during the work
week and for weekly roundtrip transportation between New York and Northern
Virginia. Such reimbursement shall be in accordance with the Company's
reimbursement procedures then in place.
(c) Benefits. Executive will be entitled to such fringe benefits,
including, but not limited to, medical, 401(k) and insurance benefits, as may be
provided from time to time by Company to other senior officers of Company. To
the extent reasonably requested by Executive, the Company will reimburse
Executive for existing COBRA coverage maintained by Executive for the benefit of
him and his dependents, in lieu of providing medical insurance coverage to
Executive and his dependents. Company agrees to indemnify Executive to the
fullest extent permitted under law and its by-laws, certificate of incorporation
or otherwise.
(d) Bonuses. Executive shall be eligible for an annual bonus (the
"Initial Bonus") equal to up to 50% of the Base Salary, which bonus shall be
payable by the Company upon the Executive and Company achieving the performance
targets set forth on Schedule A (the "Initial Performance Targets") attached to
this Agreement and incorporated herein by this reference. The Initial Bonus, to
the extent payable, will be payable not more than 45 days following the end of
the Company's 2002 fiscal year, and will be pro rated to reflect the period from
the Commencement Date to the end of the Company's 2002 fiscal year. Beginning on
October 1, 2002, Executive shall be eligible for an annual bonus (the
"Subsequent Bonus") equal to not less than 50% of the Base Salary, with the
actual percentage being determined by the Company not later than 15 days
following the beginning, of the Company's fiscal year, which bonus shall be
payable by the Company upon the Executive and Company achieving performance
targets (the "Subsequent Performance Targets") agreed upon by the Parties not
later than 15 days following the beginning of the Company's fiscal year. Except
as provided below and as contemplated by Sections 8 and 9, any Subsequent Bonus,
to the extent payable, will be payable not more than 45 days following the end
of the Company's then-applicable fiscal year. In the event that this Agreement
is not renewed at the end of the Initial Term hereof, (i) the Company's
obligation to pay the Subsequent Bonus for the Company's fiscal year ending
September 30, 2003 (the "2003 Bonus") will be determined by the Company by
reference to the Subsequent Performance Targets and whether or not Executive and
Company have achieved the Subsequent Performance Targets set for the period from
October 1, 2002 through July 31, 2003, and (ii) the 2003 Bonus, to the extent
payable, will be payable not more than 45 days following the end of the Initial
Term hereof, and will be pro rated to reflect the period from October 1, 2002
through July 31, 2003. In establishing performance targets and target bonus
percentages for the Executive, the Company will consider a variety of factors,
including, without limitation, performance targets set for, and bonus payments
paid to, executives having comparable responsibilities at comparable companies.
In addition to the bonuses contemplated by the foregoing paragraph,
Executive shall be eligible for a bonus from time to time relating to certain
extraordinary items, as more fully set forth on Schedule B attached to this
Agreement and incorporated herein by this reference.
5. Options. As an incentive to encourage extraordinary efforts on behalf
of the Company, the Company will issue to Executive options under the Company's
employee stock option plan to acquire 3% of the outstanding shares of common
stock of the Company (calculated at the time that the Company consummated the
Plan of Reorganization approved in the Company's Chapter 11 case) at an exercise
price equal to the fair market value of such common stock determined by the
Compensation Committee of the Board of Directors of the Company. The
non-qualified options, which will be issued under the Company's [2002 Stock
Option Plan] pursuant to a separate written agreement, will vest in two equal
installments on each of (i) the date that is six (6) months from the date hereof
and (ii) the date that is the first anniversary of the date hereof; provided,
however, that 50% of each tranche of options scheduled to vest on the dates set
forth in clauses (i) and (ii) above shall be subject to the additional
requirement that the applicable related Performance Targets are achieved by
Executive and Company. In the event the Performance Targets are not met in one
of the vesting periods, Executive will have the right to recover the last
options in the subsequent vesting period so long as the year-end Performance
Targets are met. The 10-year options will vest in their entirety upon (a) a
change of control of Globix, or (b) termination of the Executive, without Good
Cause (defined below).
6. Extent of Services; Vacations and Days Off.
(a) During the term of his employment under this Agreement,
Executive will devote substantially all of his professional time, energy and
attention during regular business hours to the benefit and business of Company
in performing his duties pursuant to this Agreement.
(b) Executive will be entitled to four (4) weeks of paid vacation
and to paid personal/sick/bereavement days in accordance with Company policy.
7. Facilities. Company will provide Executive with a fully furnished
office, and the facilities of Company will be generally available to Executive
in the performance of his duties pursuant to this Agreement; it being understood
and contemplated by the Parties that all equipment, supplies and office
personnel required for performance of Executive's duties under this Agreement
will be supplied by Company.
8. Termination on Death, Illness or Incapacity.
(a) If Executive dies during the Term of this Agreement, Company
will pay to Executive's estate the Base Salary that would have otherwise been
paid to Executive through the end of the initial Term of this Agreement,
together with a pro rated bonus for such period of time. Company will have no
additional financial obligation under this Agreement to Executive or Executive's
estate. After receiving the payments provided in this subparagraph (a),
Executive and Executive's estate will have no further rights under this
Agreement.
(b) (i) During any period of disability, illness or incapacity
during the Term of this Agreement which renders Executive at least temporarily
unable to perform the services required under this Agreement for a period which
does not exceed forty-five (45) continuous days in any one-year period,
Executive will receive the compensation payable under
Section 4(a) of this Agreement plus any pro rated bonus far such period, less
any benefits received by him under any disability insurance carried by or
provided by Company. Upon Executive's permanent disability (as defined below),
Executive will be subject to termination as set forth in subsection 8(b)(ii)
below, and if so terminated Company will pay to Executive any and all
compensation (including Base Salary, bonus and options) earned but not paid to
Executive prior to the effective date of such termination and will not be
responsible for any additional payments hereunder. Notwithstanding any such
termination, Executive will continue to receive any disability benefits to which
he may be entitled under any disability income insurance which may be carried by
or provided by Company from time to time.
(ii) The term "permanent disability" as used in this Agreement will
mean the inability of Executive, as determined by the Board of Directors of
Company, by reason of physical or mental disability to perform the duties
required of him under this Agreement for a period of ninety (90) days in any
one-year period. Successive periods of disability, illness or incapacity will be
considered separate periods unless the later period of disability, illness or
incapacity is due to the same or related cause and commences less than six
months from the ending of the previous period of disability. Upon such
determination, the Board of Directors may terminate Executive's employment under
this Agreement upon ten (10) days' prior written notice. If any determination of
the Board of Directors with respect to permanent disability is disputed by
Executive, the Parties hereto agree to abide by the decision of a panel of three
physicians. Executive and Company will each appoint one member, and the third
member of the panel will be appointed by the other two members. Executive agrees
to make himself available for and to submit to examinations by such physicians
as may be directed by Company. Failure to submit to any such examination will
constitute Executive's acceptance of the determination made by the Board of
Directors.
9. Other Terminations.
(a) Executive may terminate his employment hereunder upon giving 30
days' prior written notice to Company. In addition, Executive will have the
right to terminate his employment hereunder on the conditions and at the times
provided for in Section 9(c) below.
(b) if Executive gives notice pursuant to Section 9(a) above,
Company will have the right to relieve Executive, in whole or in part, of his
duties under this Agreement (without any reduction in the compensation to be
paid to Executive through the termination date).
(c) If Company terminates the employment of Executive without Good
Cause (as defined below) effective on a date earlier than the termination date
provided for in Section 3 above, Executive will have the nonforfeitable right to
receive the then current Base Salary, paid monthly, to which Executive could
otherwise have been entitled but for such termination of employment for six (6)
months, plus reimbursement of any cost Executive incurs under COBRA in
connection with continuing health care coverage for Executive and Executive's
dependents for a period of one year following such termination, plus that
portion of the earned but unpaid bonuses contemplated by Section 4 above to the
date of termination.
In the event Company materially diminishes Executive's rights or
responsibilities hereunder without his consent, such conduct shall constitute a
constructive termination of this Agreement, without Good Cause and, solely in
the event of such a constructive termination, Executive shall give Company
written notice specifying the manner in which his rights or responsibilities
have been so materially diminished and providing the Company with a reasonable
opportunity to cure such constructive termination before such termination
becomes effective.
(d) (i) If the employment of Executive is terminated for Good Cause,
or if Executive voluntarily terminates his employment by written notice to
Company under Section 9(a) above without reliance on Section 9(c), Company will
pay to Executive any compensation earned but not paid to Executive prior to the
effective date of such termination. Under such circumstances, such payment will
be in full and complete discharge of any and all liabilities or obligations of
Company to Executive hereunder, and Executive will be entitled to no further
benefits under this Agreement.
(ii) "Good Cause" means:
(A) Executive's conviction of a felony or misdemeanor that has
a material adverse effect upon the business or reputation or Company or any
affiliate of Company;
(B) that Company has determined, after investigation by its
counsel, that Executive has committed an act constituting a material breach of
fiduciary duty, gross negligence or gross misconduct which has had a material
adverse effect on the Company or its business; and
(C) Executive's willful failure or refusal to perform his
assigned duties as reasonably assigned by the board of directors, which willful
refusal has had, or if continued, could reasonably be expected to have, a
material adverse effect on Company or the affiliates of Company or their
respective businesses or prospects, and which willful refusal has continued
after Executive has received at least two written warnings specifically advising
him of his shortcomings and providing him with an opportunity to resume
performance in accordance with his assigned duties.
(iii) Termination of the employment of Executive for reasons
other than those expressly specified in this Agreement as good cause will be
deemed to be a termination of employment "without Good Cause."
(e) Notwithstanding the foregoing, the Patties agree that if either
Party notifies the other of its intention not to renew this Agreement as
provided in Section 3 above, such non-renewal will not be deemed to be a
termination of employment giving rise to the rights and obligations of the
Parties contemplated by this Section 9. The parties further agree that if this
Agreement is not renewed and otherwise expires by its terms, any termination of
Executive's employment after such expiration shall be governed by the employment
termination and severance policies of the Company then in effect for its
employees.
(f) The provisions of Section 9(c) and Section 9(d) are mutually
exclusive and Executive will be entitled to payment only under one of those
Sections.
(g) The Parties agree that, because there can be no exact measure of
the damage that would occur to Executive as a result of a termination by Company
of Executive's employment without Good Cause, the payments and benefits paid and
provided pursuant to this Agreement will be deemed to constitute, in part,
liquidated damages and not a penalty for Company's termination of Executive's
employment without Good Cause. Further the Company agrees that any and all
payments required to be made to Executive hereunder are not and shall not be
subject to any duty of mitigation.
10. Disclosure. Executive agrees that during the Term of his employment by
Company, he will disclose and disclose only to Company all material ideas,
methods, plans, developments or improvements known by him which relate directly
or indirectly to the business of Company, whether acquired by Executive before
or during his employment by Company. Nothing in this Section 10 will be
construed as requiring any such communication where, in Executive's reasonable
judgment, the idea, plan, method or development is lawfully protected from
disclosure, whether as a trade secret or otherwise.
11. Confidentiality. Executive agrees to keep in strict secrecy and
confidence any and all information Executive assimilates or to which he has
access during his employment by Company and which has not been publicly
disclosed and is not a matter of common knowledge in the fields of work of
Company, and/or to which Executive would not have been exposed but for his
employment by the Company. Executive agrees that both during and after the Term
of his employment by Company, he will not, without the prior written consent of
Company, disclose to any third person, partnership, joint venture, company,
corporation or other organization, or use for such third party's or his own
benefit any such confidential information. Each Party also agrees that it will
not disparage the other Party following a termination of Executive's employment
hereunder.
12. Non-Competition; Non-Solicitation. Executive acknowledges that, during
and solely as a result of his employment by Company, he has received and will
continue to have access to confidential information and business and
professional contacts related to the business of Company. In consideration of
the special and unique opportunities afforded to Executive by Company as a
result of Executive's employment, as outlined in the previous sentence,
Executive hereby agrees as follows:
(a) In the event Executive is terminated with Good Cause or
voluntarily terminates his employment with Company under Section 9(d)(i) of this
Agreement, for a period ending three (3) months following such termination of
his employment under this Agreement, Executive will not, without the prior
written consent of Company, (1) directly or indirectly engage in any business
the primary focus of which is the provision of web hosting and collocation
services (a "Competing Business"), or otherwise receive compensation for any
services rendered regarding any aspect of a Competing Business anywhere within
the geographic area of any such business operated by Company, or (2) engage or
participate, directly or indirectly, in any such business which is substantially
similar to that of Company, including, without limitation, serving as a
consultant, administrator, officer, director, employee, manager,
landlord, lender, guarantor, or in any similar or related capacity or otherwise
receive compensation for services rendered regarding any aspect of such a
business anywhere within the geographic area of such business operated by
Company. The mere ownership of a de minimus amount of securities in any
competitive enterprise and exercise of rights appurtenant thereto, and
participation in management of any such enterprise or business operation other
than in connection with the competitive operation of such enterprise, are not
prohibited. Notwithstanding the foregoing, the Parties agree that if Executive
notifies Company of his intention not to renew this Agreement as provided in
Section 3 above, such non-renewal will not be deemed to be a termination of
employment giving rise to the rights of Company and obligations of Executive
contemplated by this Section 12(a); provided, that the parties hereto
acknowledge that the provisions of Section 11 shall survive termination of this
Agreement and of Executive's employment with the Company under any
circumstances.
(b) During his employment with Company and, except as may be
otherwise herein provided, for a period of one year following the termination of
his employment with Company, regardless of the reason for such termination,
Executive agrees he will refrain from and will not, directly or indirectly, as
an individual, partner, officer, director, stockholder, employee, advisor,
independent contractor, joint venturer, consultant, agent, representative,
salesman or otherwise solicit any of employees of Company to terminate their
employment.
(c) The period of time during which Executive is prohibited from
engaging in certain business practices pursuant to Sections 12(a) or (b),
respectively, will be extended by any length of time during which Executive is
in breach of such covenants, respectively.
(d) It is understood by and between the Parties hereto that the
restrictive covenants set forth in Sections 12(a) through (c) are essential
elements of this Agreement, and that, but for the agreement of Executive to
comply with such covenants, Company would not have agreed to enter into this
Agreement.
(e) It is agreed by Company and Executive that if any portion of the
covenants set forth in this Section 12 are held to be invalid, unreasonable,
arbitrary or against public policy, then such portion of such covenants xxxx be
considered divisible both as to time and geographical area. Company and
Executive agree that, if any court of competent jurisdiction determines the
specified time period or the specified geographical area applicable to this
Section 12 to be invalid, unreasonable, arbitrary or against public policy, a
lesser time period or geographical area which is determined to be reasonable,
non-arbitrary and not against public policy may be enforced against Executive.
Company and Executive agree that the foregoing covenants are appropriate and
reasonable when considered in light of the nature and extent of the business
conducted by Company.
13. Injunctive Relief. Executive agrees that damages at law may be an
insufficient remedy to Company if Executive violates the terms of Sections 11 or
12 of this Agreement and that Company would suffer irreparable damage as a
result of such violation. Accordingly, it is agreed that Company will be
entitled, upon application to a court of competent jurisdiction, to obtain
injunctive relief to enforce the provisions of such Sections, which injunctive
relief will be in addition to any other rights or remedies available to Company.
14. Compliance with Other Agreements. Executive represents and warrants
that the execution of this Agreement by him and his performance of his
obligations hereunder will not conflict with, result in the breach of any
provision of or the termination of or constitute a default under any Agreement
to which Executive is a party or by which Executive is or may be bound.
15. Waiver of Breach. The waiver by a Party of any breach by the other
Party of any of the provisions of this Agreement will not be construed as a
waiver of any subsequent breach by the other Forty.
16. Assignment. The rights and obligations of Company under this Agreement
will inure to the benefit of and will be binding upon the successors and assigns
of Company. This Agreement is a personal employment contract and the rights,
obligations and interests of Executive hereunder may not be sold,
assigned, transferred, pledged or hypothecated.
17. Entire Agreement. This Agreement contains the entire agreement and
supersedes all prior agreements and understandings, oral or written, between
Company (or its subsidiaries) and Executive, with respect to the subject matter
hereof. This Agreement may be changed only by an agreement in writing signed by
the Party against whom any waiver, change, amendment, modification or discharge
is sought.
18. Construction and Interpretation.
(a) This Agreement will be governed by and construed pursuant to the
laws of the State of New York.
(b) The headings of the various sections in this Agreement are
inserted for convenience of the Parties and will not affect the meaning,
construction or interpretation of this Agreement.
(c) Any provision of this Agreement which is determined by a court
of competent jurisdiction to be prohibited, unenforceable or not authorized in
any jurisdiction will, as to such jurisdiction, be ineffective to the extent of
such prohibition, unenforceability or non-authorization without invalidating the
remaining provisions hereof or affecting the validity, enforceability or
legality of such provision in any other jurisdiction. In any such case, such
determination will not affect any other provision of this Agreement, and the
remaining provisions of this Agreement will remain in full force and effect. If
any provision or term of this Agreement is susceptible to two or more
constructions or interpretations, one or more of which would render the
provision or term void or unenforceable, the Parties agree that a construction
or interpretation which renders the term or provision valid will be favored.
19. Notice. All notices which are required or may be given under this
Agreement will be in writing and will be deemed to have been duly given when
received if personally delivered; when transmitted if transmitted by telecopy or
similar electronic transmission method; one working day after it is sent, if
sent by recognized expedited delivery service; and five days after it is sent,
if mailed, first-class mail, certified mail, return receipt requested, with
postage prepaid. In each case notice will be sent:
To Company: Globix Corporation
Attention: Chief Financial Officer
000 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
To Executive: at his address on the records of Company
20. Venue; Process. The parties agree that jurisdiction and venue in any
action brought pursuant to this Agreement to enforce its terms or otherwise with
respect to the relationships between the parties will properly lie in the
District Court of the State of New York in and for New York County. Such
jurisdiction and venue are merely permissive; jurisdiction and venue will also
continue to lie in any court where jurisdiction and venue would otherwise be
proper. Each Party agrees that it will not object that any action commenced in
the foregoing jurisdiction is commenced in a forum non convenient. The Parties
further agree that the mailing by certified or registered mail, return receipt
requested, of any summons or similar initiatory process required by any such a
court will constitute valid and lawful service of process against them, without
the necessity for service by any other means provided by statute or rule of
court, if mailed to the addresses set forth in Section 19 of this Agreement or
otherwise on file in the Company's records.
The Parties have executed this Agreement as of the date stated in the
introductory paragraph.
GLOBIX CORPORATION EXECUTIVE
By:/S/ XXXX X. XXXXXXXX /S/ XXXXX XXXXXXXXX
-------------------- -------------------
Name: Xxxx X. XxXxxxxx Xxxxx Xxxxxxxxx
Title: SVP Business Development
Schedule A
"The Performance Targets"
FYTD 02 RESULTS AND JUNE - SEPTEMBER FORECAST
Q1 02 Q2 02 APR-02 MAY-02 FYTD JUNE-02 Q3 02
ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL FORECAST FORECAST
------ ------ ------ ------ ------ -------- --------
Revenue 23.4 21.4 6.5 6.6 57.9 6.3 19.4
COGS 9.7 9.7 2.5 2.4 24.3 2.3 7.2
----- ------ ----- ----- ----- ----- -----
Gross Profit 13.7 11.7 4.0 4.2 33.6 4.0 12.2
Gross Profit % 58.7% 163.6% 61.9% 63.6% 58.0% 63.5% 63.0%
SG&A 24.7 48.1 10.5 5.6 88.9 5.0 21.1
SG&A EXCL. RESTRUCTURING/ONE-TIME/SEVERANCE 24.7 21.4 5.3 5.1 56.5 4.7 15.1
XXXXXX -00.0 -00.0 -0.0 -0.0 -00.0 -0.0 -0.0
XXXXXX EXCL. XXXXXXXXXXXXX/XXX-XXXX/XXXXXXXXX -00.0 -0.0 -0.0 -0.0 -22.9 -0.7 -2.9
Xxx-xx -00.0 -00.0 -0.0 -0.0 -00.0 -0.0 -0.0
----- ------ ----- ----- ----- ----- -----
Change in Cash -22.5 -32.5 -3.8 -0.8 -59.6 -1.9 -6.5
CASH BALANCE ESTIMATES 89.0 56.5 52.7 51.9 51.9 50.0 50.0
JUL-02 AUG-02 SEP-02 Q4 02 FISCAL 2002
FORECAST FORECAST FORECAST FORECAST FORECAST
-------- -------- -------- -------- --------
Revenue 6.3 6.3 6.3 18.9 83.1
COGS 2.2 2.1 2.1 6.4 33.0
----- ------ ----- ----- -----
Gross Profit 4.1 4.2 4.2 12.5 50.1
Gross Profit % 65.1% 66.7% 66.7% 66.1% 60.3%
SG&A 4.5 4.3 4.2 13.0 106.9
SG&A EXCL. RESTRUCTURING/ONE-TIME/SEVERANCE 4.5 4.3 4.2 13.0 74.2
EBITDA -0.4 -0.1 0.0 -0.5 -56.8
EBITDA EXCL. RESTRUCTURING/ONE-TIME/SEVERANCE -0.4 -0.1 0.0 -0.5 -24.1
Cap-ex -0.3 -0.3 -0.3 -0.8 -26.4
---- ---- ---- ---- -----
Change in Cash -3.0 -3.0 -3.0 -9.0 -70.5
CASH BALANCE ESTIMATES 47.0 44.0 41.0 41.0 41.0
Schedule B
SPECIAL BONUS: 1.75%-2.0% of proceeds for disposition of certain assets
including, but not limited to, Xxxxxxxxx Xxxxxx, Xxxxxx Xxxxxx facilities
