Employment Agreement, dated as of
October 22, 1999 (the "Effective Date"), by and
between Total Network Solutions, Inc., a New York
corporation (the "Employer"), and Xxxxxxx Xxxxxxxx,
an individual (the "Employee").
In consideration of the agreements, provisions and covenants
herein contained, Employer and Employee hereby agree as follows:
1. EMPLOYMENT AND TITLE
The Employer engages and employs the Employee, and the
Employee hereby accepts engagement and employment, as Chief Financial Officer of
the Employer. The Employee shall devote his full professional time and efforts
to the proper discharge of his duties and responsibilities under this Agreement.
2. TERM
The Employee's employment hereunder shall, unless earlier
terminated in accordance with Section 9, be for a term of four years commencing
on the Effective Date and continuing through the fourth anniversary of such date
(the "Term").
3. COMPENSATION
(a) As compensation for the performance of his duties on
behalf of the Employer, the Employee shall be paid during the Term:
(i) a base salary of $200,000 per annum, subject to
increase at the discretion of the Compensation Committee (the
"Compensation Committee") of the Board of Directors of Employer (the
"Board");
(ii) a nondiscretionary signing bonus of $50,000 upon
execution of this Agreement;
(iii) a guaranteed bonus of $20,833 with respect to
the fourth quarter of 1999 (regardless of the date of commencement of
the Employee's employment with the Employer);
(iv) commencing with the first quarter of 2000, a
quarterly target bonus of $31,250, 80% of which shall be awarded based
upon the Employer achieving projected financial results for the quarter
with respect to which the bonus is awarded and 20% of which shall be
awarded based upon the Employee's achievement of major business
objectives; and
(v) a bonus with respect to any year in which the
Employer exceeds its projected financial results determined based on
parameters established by the executives
designated by the Chief Executive Officer as the "executive management
team" of the Employer.
The Chief Executive Officer of the Company shall meet with the
Employee as necessary to establish such goals and performance standards as the
Chief Executive Officer determines are to be taken into account in determining
the MBO portion of the Employee's bonus awards provided for in (iv) above.
The Employer shall withhold all applicable federal, state and
local taxes, social security and workers' compensation contributions and such
other amounts as may be required by law or agreed upon by the parties with
respect to the compensation payable to the Employee pursuant to this section
3(a) or otherwise in connection with his employment by the Employer.
(b) Simultaneously with the execution hereof by the parties,
the Employee will be granted options to purchase 404,463 shares of the Common
Stock, par value $0.001 per share, of the Employer ("Common Stock") pursuant to
the Employer's Amended and Restated 1998 Stock Option Plan. The terms of such
grant shall be specified in further detail in a notice of grant in the form of
Exhibit A hereto and shall be subject to the execution by the Employee of a
stock option agreement substantially in the form of Exhibit B hereto.
Notwithstanding the designation of any portion of any option granted to the
Employee under this Agreement as an incentive stock option, the provisions of
the Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder may prevent some or all of such option from being treated
as incentive stock options. The Employer shall have no liability to the Employee
with respect to the tax treatment of such option or the shares of Common Stock
purchasable upon exercise thereof.
(c) The Employer shall reimburse the Employee for all normal,
usual and necessary expenses incurred by the Employee in furtherance of the
business and affairs of the Employer, including reasonable travel and
entertainment, against receipt by the Employer of appropriate vouchers or other
evidence of the Employee's expenditures and otherwise in accordance with such
expense reimbursement policy as may from time to time be adopted by the Board.
(d) The Employee shall be entitled, during the Term, to not
less than three weeks per year of paid vacation time. The days selected for the
Employee's vacation must be mutually agreeable to the Employer and the Employee.
(e) During the Term, the Employee shall be entitled to
participate in any group insurance, hospitalization, medical, dental, health and
accident, disability or similar plan or program of Employer now existing or
established hereafter to the extent that he is eligible under the general
provisions thereof and in each other benefit program made available to executive
officers of the Employer generally.
(f) The Employee shall continue to be entitled to receive his
salary and benefits hereunder for each period during which he is unable to
perform his duties hereunder because of ill health or Disability (as defined
below). Subject to paragraphs (d), (e) and (g) of
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Section 9 below, the Employee must be an employee of the Employer at the time
that any compensation is due in order to receive such compensation.
4. REPRESENTATIONS AND WARRANTIES BY THE EMPLOYEE AND
EMPLOYER
The Employee hereby represents and warrants to the Employer
as follows:
(a) Neither the execution and delivery of this Agreement nor
the performance by the Employee of his duties and other obligations hereunder
violate or will violate any statute, law, determination or award, or conflict
with or constitute a default under (whether immediately, upon the giving of
notice or lapse of time or both) any prior employment agreement, contract, or
other instrument to which the Employee is a party or by which he is bound.
(b) The Employee has the full right, power and legal capacity
to execute and deliver this Agreement and to perform his duties and other
obligations hereunder. This Agreement constitutes the legal, valid and binding
obligation of the Employee enforceable against him in accordance with its terms.
The Employer hereby represents and warrants to the Employee as
follows:
(a) The Employer is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York, with all
requisite corporate power and authority to own its properties and conduct its
business in the manner presently contemplated.
(b) The Employer has full power and authority to enter into
this Agreement and to incur and perform its obligations hereunder. This
Agreement constitutes the legal, valid and binding obligation of the Employer
enforceable against the Employer in accordance with its terms.
(c) The execution, delivery and performance by the Employer of
this Agreement does not conflict with or result in a breach or violation of or
constitute a default under (whether immediately, upon the giving of notice or
lapse of time or both) the certificate of incorporation or by-laws of the
Employer, or any agreement or instrument to which the Employer is a party or by
which the Employer or any of its properties may be bound or affected.
5. NON-COMPETITION
(a) The Employee understands and recognizes that his services
to the Employer are special and unique and agrees that, during the Term and for
a period of one year after the date of termination of his employment hereunder,
he shall not in any manner, directly or indirectly, on behalf of himself or a
business unit of any person, firm, partnership, joint venture, corporation or
other business entity ("Person"), enter into or engage in any business directly
competitive with the Employer's business of providing consulting services
relating to the design and implementation of computer networks, either as an
individual for his own account, or as a partner, joint venturer, employee,
agent, consultant, salesperson, officer, director or shareholder
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of any Person (collectively, "Restricted Businesses"); provided, however, that
nothing herein will preclude the Employee from holding three percent (3%) or
less of the stock of any publicly traded company. A Person shall be deemed to be
engaged in a business that is "directly competitive" with the Employer if more
than 75% of the revenues of the relevant business unit are derived from
consulting services relating to the design and implementation of computer
networks. This paragraph 5(a) shall be null and void in the event the Employer
fails to make any payment due to the Employee pursuant to Section 9(d), 9(e) or
9(g) within five business days after notice of such failure by the Employee to
the Employer.
(b) During the Term and for one year thereafter, the Employee
shall not, directly or indirectly, without the prior written consent of the
Employer (i) interfere with, disrupt or attempt to disrupt (through solicitation
or otherwise) any past, present or prospective relationship, contractual or
otherwise, between the Employer and any of its licensors, licensees, clients,
customers, suppliers, employees or others, or solicit or induce for hire any of
the employees, agents, consultants or advisors of the Employer or any employee
who has left the employment of the Employer within one year of the termination
of said employee's employment with the Employer, (ii) solicit or accept
employment or be retained by any party who, at any time during the Term, was a
customer or client of the Employer or (iii) solicit or accept the business of
any customer or client of the Employer with respect to products or services
similar to those previously supplied by the Employer to such customer or client.
For purposes of this Section 5(b) a "customer" or "client" shall be a customer
or client of the Employer to whom invoices totaling at least $100,000 are issued
in respect of any fiscal year of the Employer.
6. DISCLOSURE AND ASSIGNMENT OF INVENTIONS
(a) During the Term, the Employee agrees that he will promptly
disclose to the Employer, or any persons designated by the Employer, all
improvements, inventions, designs, ideas, works of authorship, copyrightable
works, discoveries, trademarks, copyrights, trade secrets, formulas, processes,
structures, product concepts, marketing plans, strategies, customer lists,
information about the Employer's employees and/or Employees (including, without
limitation, job performance of such employees and/or Employees), techniques,
blueprints, sketches, records, notes, devices, drawings, know-how, data, whether
or not patentable, patent applications, continuation applications,
continuation-in-part applications, file wrapper continuation applications and
divisional applications, made or conceived or reduced to practice or learned by
him, either alone or jointly with others, during the Term (collectively, the
"Inventions").
(b) Employee agrees that all Inventions shall be the sole
property of the Employer to the maximum extent permitted by applicable law and
to the extent permitted by law shall be "works made for hire" as that term is
defined in the United States Copyright Act (17 USCA, Section 101). The Employer
shall be the sole owner of all patents, copyrights, trade secret rights, and
other intellectual property or other rights in connection therewith. Employee
hereby assigns to the Employer all right, title and interest he may have or
acquire in all Inventions. Employee further agrees to assist the Employer in
every proper way (but at the Employer's expense) to obtain and from time to time
enforce patents, copyrights or other rights on said Inventions in any and all
countries, and to that end the Employee will execute all
4
documents necessary to (i) apply for, obtain and vest in the name of the
Employer alone (unless the Employer otherwise directs) letters patent,
copyrights or other analogous protection in any country throughout the world and
when so obtained or vested to renew and restore the same and (ii) to defend any
opposition proceedings in respect of such applications and any opposition
proceedings or petitions or applications for revocation of such letters patent,
copyright or other analogous protection.
(c) The Employee's obligation to assist the Employer in
obtaining and enforcing patents and copyrights for the Inventions in any and all
countries shall continue beyond the Term, but the Employer agrees to compensate
the Employee at a reasonable rate after the expiration of the Term for time
actually spent by the Employee at the Employer's request on such assistance.
7. CONFIDENTIALITY
The Employee agrees that at any time during or after the
Employee's employment with the Employer, the Employee will not, directly or
indirectly, without the prior written authorization of the Employer, disclose or
make accessible to any person or entity other than the Employer any confidential
information or material of the Employer or its affiliates or any information or
material received during the course of the Employee's employment from third
parties such as the Employer's customers and suppliers (collectively, the
"Material"). The Employee agrees, during the Employee's employment with the
Employer, not to take any such Material or reproductions thereof from the
Employer's or its clients' facilities, except as required in the performance of
the Employee's duties to the Employer. The Employee agrees immediately to return
all such Material and reproductions thereof in the Employee's possession to the
Employer upon request and in any event upon termination of Employee's employment
with the Employer. In the event that the Employee is required as a matter of law
or pursuant to any subpoena or other legal process to disclose any Material, the
Employee shall take all reasonable steps to cause the confidential treatment of
such Material and shall promptly notify the Employer and shall use his or her
best efforts to assist the Employer in obtaining such confidential treatment.
8. EQUITABLE RELIEF
In the event that the Employee breaches any provisions of
Section 5, 6 or 7 or there is a threatened breach, then, in addition to any
other rights which the Employer may have, the Employer shall be entitled,
without the posting of a bond or other security, to injunctive relief to enforce
the restrictions contained herein. In the event that an actual proceeding is
brought in equity to enforce the provisions of Section 5, 6 or 7, the Employee
shall not urge as a defense that there is an adequate remedy at law nor shall
the Employer be prevented from seeking any other remedies which may be
available.
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9. TERMINATION
(a) The Employee's employment hereunder shall begin on the
Effective Date and shall continue for the period set forth in Section 2 hereof
unless sooner terminated upon the first to occur of the following events:
(i) The death of the Employee;
(ii) The Disability (as defined below) of the
Employee;
(iii) Termination by the Board of Directors of the
Employer for just cause. Any of the following actions by the Employee
shall constitute just cause:
(A) Material breach by the Employee of
Section 5, 6 or 7 of this Agreement;
(B) So long as no Change of Control (as
defined below) has occurred, material breach by the Employee
of any provision of this Agreement other than Section 5, 6 or
7 which is not cured by the Employee within 30 days of written
notice thereof from the Employer (or 90 days in the event such
cure cannot reasonably be effected within such 30-day period
and the Employee commences efforts to effect such cure within
such 30-day period);
(C) negligent (or, for one year after a
Change of Control, grossly negligent) performance by the
Employee of his duties as Chief Financial Officer of the
Employer, as determined in good faith by the Board after
notice to the Employee of the alleged negligence or gross
negligence and an opportunity for the Employee to confer with
the Board;
(D) Any misconduct or omission on the part
of the Employee intended to cause harm to the Employer; or
(E) The conviction of the Employee of any
felony or crime involving moral turpitude.
(iv) Termination by the Employee for good reason.
Any of the following actions or omissions by the Employer shall
constitute good reason:
(A) Material breach by the Employer of any
provision of this Agreement which is not cured by the Employer
within 30 days of written notice thereof from the Employee;
(B) Any misconduct or omission on the part
of the Employer intended to cause material harm to the
Employee;
6
(C) A determination by the Board to move the
headquarters of the Employer more than 30 miles from New York
City;
(D) Following a Change of Control (as
defined below), either
(I) The failure of the Employer to
provide the Employee with a position, authority or
duties at least equivalent to the most significant
position, authority or duties (other than those
relating to the Board of Directors or any committee
thereof) held by the Employee during the 120 days
ending on the date of the Change of Control; or
(II) The imposition of extraordinary
travel obligations on the Employee three times in any
six-month period. For such purpose, an "extraordinary
travel obligation" shall mean any requirement by the
Employer that the Employee travel outside the New
York City area for more than ten business days in any
30-business day period.
(b) For purposes hereof, a "Change of Control" shall be deemed
to have occurred in the event either
(i) any person or group acquires beneficial ownership
of more than 50% of the then outstanding common stock of the Employer;
or
(ii) a merger, consolidation or sale or other
disposition of all or substantially all of the assets of the Employer
(a "Business Combination") is consummated unless, following such
Business Combination, at least a majority of the members of the Board
of Directors of the surviving entity or transferee were members of the
Board of Directors of the Employer at the time of the initial action of
the Board of Directors providing for such Business Combination.
(c) For purposes hereof, a "Disability" of the Employee shall
be deemed to have occurred in the event (i) the Employee is absent from work or
otherwise substantially unable to perform his normal duties for a period of 30
successive days or an aggregate of 60 days during any 12-month period because of
physical or mental disability, accident, illness or other cause other than
approved vacation or leave of absence or (ii) the Employee is deemed by a
licensed physician designated by the Employer and reasonably acceptable to the
Employee to have a permanent disability such that Employee will be unable to
perform his duties under this Agreement (it being understood that the Employer
shall have the right to have the Employee examined by such physician).
(d) Upon termination by Employer pursuant to either
subparagraphs (i), (ii) or (iii) of paragraph (a) above or by Employee other
than pursuant to subparagraph (iv) of paragraph (a) above, the Employee (or his
estate in the event of termination pursuant to subparagraph (i)), shall be
entitled to receive the Employee's base salary accrued but unpaid as of the date
of termination.
7
(e) Upon termination by the Employer (other than within one
year following a Change of Control) for any reason other than as set forth in
subparagraphs (i), (ii) or (iii) of paragraph (a) above or by the Employee for
any reason set forth in clause (A), (B) or (C) of subparagraph (iv) of paragraph
(a) above, the Employer shall continue to pay the Employee, for one year
following such termination, at a per annum rate equal to 1.5 times the
Employee's highest base salary in effect during the 18 months preceding such
termination in accordance with the Employer's normal payroll practices, subject
to offset for amounts earned by the Employee from other sources during such
period. All unvested stock options granted to the Employee shall become
immediately vested in full upon such termination.
(f) Upon the occurrence of a Change of Control, a portion of
the stock options granted to the Employee that are unvested at the time of such
Change of Control but that would (assuming continued employment of the Employee)
vest on or prior to the first anniversary of such Change of Control shall become
immediately vested upon such Change of Control. Such acceleration shall have no
effect on the time or times at which the remainder of such stock options shall
vest in accordance with the vesting schedule applicable to such options.
(g) Upon termination by the Employer (other than as set forth
in subparagraph (i), (ii) or (iii) of paragraph (a) above) within one year
following a Change of Control or by the Employee pursuant to clause (D) of
subparagraph (iv) of paragraph (a) above within one year following a Change of
Control, the Employer shall pay the Employee, as the Employee's sole damages for
such termination, a lump sum payment equal to 1.5 times the annualized amount of
the Employee's highest base salary in effect during the 18 months preceding such
termination. In addition, all unvested stock options granted to the Employee
shall thereupon become immediately vested.
(h) It shall be a condition to the Employee's right to receive
the benefits provided for in paragraphs (d), (e) and (g) above that the Employee
shall have delivered to the Employer a general release (excluding Employee's
rights pursuant to this Agreement, any benefit plans of the Company explicitly
providing benefits subsequent to termination, rights under COBRA and rights
under stock option or comparable agreements) dated as of the date of termination
of the Employee's employment hereunder.
10. NOTICES
Each notice and other communication under this Agreement shall
be in writing and shall be deemed to have been given: when delivered personally
against receipt therefor; one (1) day after being sent by Federal Express or
similar overnight delivery; or three (3) days after being mailed registered or
certified mail, postage prepaid, return receipt requested, to either party
8
at the address set forth below, or to such other address as such party shall
give by notice hereunder to the other party.
If to Employer:
Total Network Solutions, Inc.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Att: Xxxx Xxxxxxxx
If to Employee:
Xxxxxxx Xxxxxxxx
000 Xxxx 00xx Xxxxxx, Xxx. 00X
Xxx Xxxx, Xxx Xxxx 00000
11. SEVERABILITY OF PROVISIONS
If any provision of this Agreement shall be declared by a
court of competent jurisdiction to be invalid, illegal or incapable of being
enforced in whole or in part, the remaining conditions and provisions or
portions thereof shall nevertheless remain in full force and effect and
enforceable to the extent they are valid, legal and enforceable, and no
provision shall be deemed dependent upon any other covenant or provision unless
so expressed herein.
12. ENTIRE AGREEMENT; MODIFICATION
This Agreement contains the entire agreement of the parties
relating to the subject matter hereof and supersede in their entirety any prior
employment agreements entered into between the parties, and the parties hereto
have made no agreements, representations or warranties relating to the subject
matter of this Agreement which are not set forth herein. No modification of this
Agreement shall be valid unless made in writing and signed by the parties
hereto.
13. BINDING EFFECT
The rights, benefits, duties and obligations under this
Agreement shall inure to, and be binding upon, the Employer, its successors and
assigns, and upon the Employee and his legal representatives. This Agreement
constitutes a personal service agreement, and the performance of the Employee's
obligations hereunder may not be transferred or assigned by the Employee.
9
14. NON-WAIVER
The failure of either party to insist upon the strict
performance of any of the terms, conditions and provisions of this Agreement
shall not be construed as a waiver or relinquishment of future compliance
therewith, and said terms, conditions and provisions shall remain in full force
and effect. No waiver of any term or condition of this Agreement on the part of
either party shall be effective for any purpose whatsoever unless such waiver is
in writing and signed by such party.
15. GOVERNING LAW
This Agreement shall be governed by, and construed and
interpreted in accordance with, the laws of the State of New York without regard
to principles of conflict of laws.
16. HEADINGS
The headings of paragraphs are inserted for convenience and
shall not affect any interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
-------------------------------
Xxxxxxx Xxxxxxxx
TOTAL NETWORK SOLUTIONS, INC.
By: __________________________
Name:
Title:
10
Amendment dated as of December 29,
1999 to the Employment Agreement dated as of October
22, 1999 (the "Employment Agreement"), by and between
Total Network Solutions, Inc., a New York corporation
(the "Employer"), and Xxxxxxx Xxxxxxxx, an individual
(the "Employee").
WHEREAS, pursuant to the Employment Agreement, the Employee
was to be granted options to purchase 1.125% of the fully-diluted equity of the
Employer based on the Employer's projected capitalization following the
completion of the sale of its Series C Convertible Preferred Stock to Cisco
Systems, Inc. and investment funds affiliated with Xxxxxx Xxxxxxx Xxxx Xxxxxx
(the "Series C Financing"); and
WHEREAS, as a consequence of certain changes in the terms of
the Series C Financing, the number of options granted to the Employee pursuant
to the Employment Agreement exceeds 1.125% of the Employer's fully-diluted
equity;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Section 3(b) of the Employment Agreement is hereby amended
in its entirety to read as follows:
(b) Simultaneously with the execution hereof by the parties,
the Employee will be granted options to purchase 398,849 shares of the Common
Stock, par value $0.001 per share, of the Employer ("Common Stock") pursuant to
the Employer's Amended and Restated 1998 Stock Option Plan. Notwithstanding the
designation of any portion of any option granted to the Employee under this
Agreement as an incentive stock option, the provisions of the Internal Revenue
Code of 1986, as amended, and the rules and regulations promulgated thereunder
may prevent some or all of such option from being treated as incentive stock
options. The Employer shall have no liability to the Employee with respect to
the tax treatment of such option or the shares of Common Stock purchasable upon
exercise thereof.
2. Except as set forth above, the Employment Agreement shall
remain unmodified and in full force and effect.
3. This Amendment shall be governed by and construed in
accordance with the laws of the State of New York without regard to conflicts of
law principles thereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
------------------------
Xxxxxxx Xxxxxxxx
TOTAL NETWORK SOLUTIONS, INC.
By: __________________________
Name:
Title:
2
