Exhibit 10.1
EXECUTIVE EMPLOYMENT AGREEMENT
------------------------------
This Executive Employment Agreement is made as of this 16 day of November,
2000, by and between Focal Communications Corporation and its Subsidiaries, a
Delaware corporation (the "Company"), and Xxxx Xxxxxx whose address is 0 Xxxxxxx
Xxxx, Xx. Xxxxx, Xxx Xxxxxx (the "Executive").
WHEREAS, the Company and the Executive wish to enter into an agreement for
employment which shall provide certain terms of employment. The parties
acknowledge that all terms of employment may not be contained in this Agreement,
but that as to other conflicting terms of employment, which may be initiated
from time to time by the Company, the terms contained herein, or as amended from
time to time by the parties hereto, shall control.
NOW THEREFORE, in accordance with the premise above, the parties agree as
follows:
1. Terms of Executive's Employment.
-------------------------------
(a) Employment. The Company hereby employs Executive, and Executive
----------
hereby accepts employment and agrees to perform his duties and
responsibilities hereunder, in accordance with the terms and
conditions hereinafter set forth. The Company shall have the
right to terminate the Executive's employment for any reason, at
any time, with or without Cause (defined below). Executive shall
have the right to terminate his employment for any reason,
including Good Reason (as hereinafter defined), at any time, upon
giving the Company written notice two weeks prior to such
termination.
(b) Duties and Responsibilities. Executive shall serve as President
---------------------------
of Telecom Services, a division of the Company, and so long as
Executive is employed by the Company or any of its Subsidiaries,
Executive shall serve in such position as may be determined by
the Board of Directors ("Board") and shall perform all duties and
accept all responsibilities incident to such position or as may
be assigned to him by the Board, and shall at all times comply
with the policies and procedures adopted by the Company for its
employees.
(c) Extent of Service. So long as Executive is employed by the
-----------------
Company or any of its Subsidiaries, the Executive agrees to use
his best efforts to carry out his duties and responsibilities
under paragraph 1(b) hereof and to devote his full professional
time and attention thereto.
(d) Base Compensation. For all the services rendered by the
-----------------
Executive hereunder, the Company shall, commencing on the date of
this agreement, and continuing so long as Executive is employed
by the Company or any of its Subsidiaries, pay the Executive an
annual salary at the rate of $225,000
per year, plus any additional amounts, if any, as may be approved
by a majority of the Board, less withholding required by law or
agreed to by the Executive, and payable in installments at such
times as is customary with the Company but in any event no less
frequently than monthly. The Company agrees that the Executive's
salary will be reviewed annually by the Board to determine if any
adjustment is appropriate. For purposes of paragraph 1(f) and
Section 3 herein, Executive's annual salary shall not be less
than $225,000. So long as Executive is employed by the Company or
any of its Subsidiaries, the Executive shall also be entitled to
participate in such vacation pay and any other fringe benefit
plans as may from time to time be adopted by a majority of the
Board and as are made available generally to other senior
executives of the Company.
(e) Incentive Compensation. In addition to the compensation set forth
-----------------------
in paragraph 1(d) above, so long as the Executive is employed by
the Company or its Subsidiaries the Executive shall be entitled
to participate in a discretionary annual bonus plan providing for
the payment to Executive of an annual bonus, in an amount to be
determined by a majority of the Board or another officer of the
Company as the Board determines. Executive shall be entitled to
provide his input on the terms of his annual bonus plan before it
is submitted to the Company's Board, but Executive acknowledges
that such plan is discretionary in nature and is determined in
the exclusive discretion of the Board or other officer so
designated by the Board. The Company may adopt from time to time
a bonus program, in which the Executive shall participate, the
terms of which require the Company to achieve certain performance
goals which are set in advance each year in the sole discretion
of the Board.
(f) Severance Pay.
-------------
(i) Termination Generally If at any time after the date hereof
---------------------
Executive ceases to be employed by the Company and its
Subsidiaries ("Termination") for (A) death or disability, (B)
by the Company for any reason other than Cause, or (C) by
Executive for Good Reason (a "Covered Termination"),
Executive (or, in the case of death, Executive's estate)
shall, until the end of the Severance Pay Period (as defined
below), be entitled to receive a salary at the same rate of
pay as, and on the same schedule and terms as was customary
for, the salary Executive received under paragraph 1(d) above
immediately prior to the Termination, as well as (except in
the case of Executive's death) comparable medical benefits to
those provided by the Company to Executive immediately prior
to the Termination (such salary and benefits collectively,
the "Severance Pay"); and all stock options theretofore
granted to Executive and scheduled to vest within 12 months
of the Covered Termination shall vest immediately. The
payment of such Severance Pay shall in no way be construed as
a continuation of Executive's employment after the
Termination. The "Severance Pay
2
Period" shall be equal to, if Executive is terminated by the
Company for any reason other than Cause, or the Executive
terminates for Good Reason, death or disability, the 6-month
period commencing on the date of the Covered Termination. If
Executive resigns other than for Good Reason or is terminated
by the Company for Cause, the Company shall not be obligated
to pay any Severance Pay or provide vesting of any stock
options as provided in this paragraph.
(ii) Termination Upon Change in Control.
-----------------------------------
(A) If, in anticipation of or within twelve months after a Change
in Control, the Company terminates Executive's employment,
other than for Cause and whether or not Executive obtains
subsequent employment, or if Executive terminates his
employment under Section 1(f)(ii)(B), the Company will, from
and after the Termination Date for a period of one year, pay
Executive in accordance with the Company's biweekly payroll
practices an amount equal to (1) Executive's highest biweekly
salary or base compensation during the two-year period prior
to termination of employment plus (2) an amount equal to 1/26
multiplied by the greater of (i) Executive's targeted annual
bonus for the year in which termination occurs and (ii)
Executive's annual bonus for the year immediately preceding
the year in which termination occurs. In addition, the
Company will, from and after the Termination Date for a
period of one year, provide Executive with health, dental,
disability, and life insurance benefits substantially similar
to the benefits in effect immediately prior to the Change in
Control.
(B) In connection with or anticipation of such Change in Control
(regardless of whether any other reason, other than Cuase,
for such termination exists or has occurred), Executive may
terminate employment with the Company or a Subsidiary for
Good Reason within twelve months after the Change in Control
with the right to compensation as provided in Section
1(f)(ii)(A).
(g) Nondisclosure and Nonuse of Confidential Information.
----------------------------------------------------
(i) Nondisclosure Obligation. Executive shall not disclose or
------------------------
use at any time, either during his employment with the
Company or thereafter, any Confidential Information (as
defined below) of which Executive is or becomes aware,
whether or not such information is developed by him except to
the extent that such disclosure or use is directly related to
and required by Executive's performance of duties assigned to
Executive by the Company. Executive shall take all
appropriate steps to safeguard Confidential Information and
to protect it against disclosure, misuse, espionage, loss and
theft.
3
(ii) Confidential Information. As used in this Agreement, the
------------------------
term "Confidential Information" means information that is
not generally known to the public and that is used,
developed or obtained by the Company in connection with its
business, including but not limited to (i) products or
services, (ii) fees, costs and pricing structures, (iii)
designs, (iv) analysis, (v) drawings, photographs and
reports, (vi) computer software, including operating
systems, applications and program listings, (vii) flow
charts, manuals and documentation, (viii) data bases, (ix)
accounting and business methods, (x) inventions, devices,
new developments, methods and processes, whether patentable
or unpatentable and whether or not reduced to practice, (xi)
customers and clients and customer or client lists, (xii)
copyrightable works, (xiv) all technology and trade secrets,
(xv) business plans and financial models, and (xvi) all
similar and related information in whatever form.
Confidential Information shall not include any information
that has been published in a form generally available to the
public prior to the date Executive proposes to disclose or
use such information. Information shall not be deemed to
have been published merely because individual portions of
the information have been separately published, but only if
all material features constituting such information have
been published in combination.
(h) Cause. Cause means a finding by 2/3rds of the Board members then
-----
serving, after Executive has been given the opportunity for a
formal hearing, of (A) Executive's theft or embezzlement, or
attempted theft or embezzlement, of money or property of the
Company, Executive's perpetration or attempted perpetration of
fraud, or Executive's participation in a fraud or attempted
fraud, on the Company, or Executive's unauthorized appropriation
of, or attempt to misappropriate, any tangible or intangible
assets or property of the Company, (B) any act or acts of
disloyalty, misconduct or moral turpitude by Executive injurious
to the interest, property, operations, business or reputation of
the Company or Executives' conviction of a crime the commission
of which results in injury to the Company, or (C) Executive's
refusal or failure (other than by reason of disability) to carry
out reasonable instructions by his superiors or the Board and in
the case of subsection (C), the failure of Executive to cure the
same within 10 business days, after receipt of written notice
thereof from the Company.
(i) Good Reason. Good Reason means (A) a significant adverse change
-----------
by the Company in the nature or scope of the duties attached to
Executive's position as President, (B) the willful failure or
refusal of Company to perform its material obligations under
Sections 1(d) or (e) of this Agreement, or (C) the reduction by
the Company of its expenditures for the operation of the
Company's Telecom Services business in an amount that is
materially less than the expenditures set forth in the Company's
fiscal year 2001 budget unless such reduction is part of a
reduction applicable generally to the
4
Company's other operating units, or (D) the Company requires the
Executive to have his principal location of work changed to a
location which is in excess of 50 miles from either New York City
or Philadelphia without Executive's prior written consent, and,
in the case of subsections (A), (B) or (C), the failure of the
Company to cure the same within 10 business days after receipt of
written notice thereof from Executive.
(j) Change in Control. Change in Control shall mean if at any time
-----------------
any of the following events shall have occurred:
(i) The Company is merged or consolidated or reorganized with
or into another corporation or other legal person, and as a
result of such merger, consolidation, or reorganization
less than a majority of the combined voting power of the
then-outstanding securities of such corporation or person
immediately after such transaction are held in the
aggregate by the holders of securities entitled to vote
generally in the election of Directors immediately prior to
such transaction;
(ii) The Company sells or otherwise transfers all or
substantially all of its assets to any other corporation or
other legal person, and less than a majority of the
combined voting power of the then-outstanding securities of
such corporation or person immediately after such sale or
transfer is held in the aggregate by the holders of Common
Stock immediately prior to such sale or transfer;
(iii) There is a report filed on Schedule 13D or Schedule 14D-1
(or any successor schedule, form or report), as promulgated
in each case pursuant to the Securities and Exchange Act of
1934 (the "Exchange Act"), disclosing that any person (as
the term "person" is used in Section 13(d)(3) or Section
14(d)(2) of the Exchange Act) has become the beneficial
owner (as the term "beneficial owner" is defined in Rule
13d-3 promulgated under the Exchange Act or any successor
rule or regulation promulgated thereunder) of securities
representing 50% or more of the Voting Power; or
(vi) If during any period of two consecutive years, individuals
who at the beginning of any such period constitute the
Directors and any new Directors whose election or
nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds of the Directors
then still in office who either were Directors at the
beginning of the period or whose election was previously so
approved cease for any reason to constitute a majority of
the Directors. Notwithstanding the provisions of
subparagraph (c) above, a "Change in Control" shall not be
deemed to have occurred for the purposes of this Agreement
(i) solely because MDCP either files or becomes obligated
to file a report on Schedule 13D (or any successor schedule
or report), as promulgated
5
pursuant to the Exchange Act, disclosing beneficial
ownership by it of securities representing 50% or more of
the Voting Power, (ii) solely because the Company or any
Company-sponsored employee stock ownership plan or other
employee benefit plan of the Company either files or
becomes obligated to file a report or proxy statement under
or in response to Schedule 13D, Schedule 14D-1, Form 8-K,
or Schedule 14A (or any successor schedule, form or report
or item therein), as promulgated in each case pursuant to
the Exchange Act, disclosing beneficial ownership by it of
securities representing 50% or more of the Voting Power or
otherwise, or because the Company reports that a change in
control of the Company has or may have occurred or will or
may occur in the future by reason of such beneficial
ownership or (iii) solely because of a change in control of
any subsidiary (as the term "subsidiary" is defined in
Section 424(f) of the Code) of the Company.
2. The Company's Ownership of Intellectual Property.
------------------------------------------------
(a) Acknowledgment of Company Ownership. In the event that
-----------------------------------
Executive as part of his activities on behalf of the
Company generates, authors or contributes to any invention,
design, new development, device, product, method or process
(whether or not patentable or reduced to practice or
constituting Confidential Information), any copyrightable
work (whether or not constituting Confidential Information)
or any other form of Confidential Information relating
directly or indirectly to the Company's business as now or
hereinafter conducted (collectively, "Intellectual
Property"), Executive acknowledges that such Intellectual
Property is the exclusive property of the Company and
hereby assigns all right, title and interest in and to such
Intellectual Property to the Company. Any Intellectual
Property that is copyrightable work prepared in whole or in
part by Executive will be deemed "a work made for hire"
under Section 201(b) of the 1976 Copyright Act, and the
Company shall own all of the rights comprised by the
copyright therein. Executive shall promptly and fully
disclose to the Company all Intellectual Property he
generates, authors or contributes to the Company and shall
cooperate with the Company to protect the Company's
interests in and rights to such Intellectual property
(including, without limitation, providing reasonable
assistance in securing patent protection and copyright
registrations and executing all documents as reasonably
requested by the Company, whether such requests occur prior
to or after Termination of Executive's employment with the
Company).
(b) Executive Invention. Executive understands that paragraph 2
-------------------
of this Agreement regarding the Company's ownership of
Intellectual Property does not apply to any invention for
which no equipment, supplies, facilities or trade secret
information of the Company were used and which was
developed entirely on Executive's own time, unless (i) the
invention relates to the business of the Company or to the
Company's actual or demonstrably
6
anticipated research or development or (ii) the invention results
from any work performed by Executive for the Company.
(c) Delivery of Materials upon Termination of Employment. As
----------------------------------------------------
requested by the Company from time to time and upon the
Termination of Executive's employment with the Company for any
reason, Executive shall promptly deliver to the Company all
copies and embodiments, in whatever form, of all Confidential
Information and Intellectual Property in Executive's possession
or within his control (including, but not limited to, written
records, notes, photographs, manuals, notebooks, documentation,
program listings, flow charts, magnetic media, disks, diskettes,
tapes and all other materials containing any Confidential
Information or Intellectual Property) irrespective of the
location or form of such material and, if requested by the
Company shall provide the Company with written confirmation that
all such materials have been delivered to the Company.
3. Noncompetition and Nonsolicitation.
----------------------------------
(a) Noncompetition. Executive acknowledges and agrees with the
--------------
Company that Executive's services to the Company are unique in
nature and that the Company would be irreparably damaged if
Executive were to provide similar services to any person or
entity competing with the Company or engaged in a similar
business. For and in consideration of the terms contained herein
Executive covenants and agrees with the Company that during the
Noncompetition Period (as defined below), Executive shall not,
directly or indirectly, either for himself or for any other
individual, corporation, partnership, joint venture or other
entity, participate in any business division, group or franchise
(or if there are no divisions, any business) where such division,
group or franchise (or business, if applicable) engages or
proposes to engage in any business conducted by the Company or
proposed to be conducted pursuant to a Board resolution or
Subsequent Business Plan (including, but not limited to, the sale
or distribution of local switched dial tone telecommunication
services) in any metropolitan statistical area ("MSA") in which
the Company conducts such business or proposes to conduct such
business pursuant to a Board resolution or Subsequent Business
Plan. For purposes of this Agreement, the term "participate in"
shall include, without limitation, having any direct or indirect
interest in any corporation, partnership, joint venture or other
entity, whether as a sole proprietor, owner, stockholder,
partner, joint venturer, creditor or otherwise, or rendering any
direct or indirect service or assistance to any individual,
corporation, partnership, joint venture and other business entity
(whether as a director, officer, manager, supervisor, employee,
agent, consultant or otherwise), other than ownership of up to 2%
of the outstanding stock of any class which is publicly traded.
7
(b) Nonsolicitation. During the Noncompetition Period, Executive
---------------
shall not (i) induce or attempt to induce any employee of the
Company to leave the employ of the Company, or in any way
interfere with the relationship between the Company and any
employee thereof, (ii) hire directly or through another entity
any person who was an employee of the Company at any time during
the Noncompetition Period, or (iii) induce or attempt to induce
any customer, supplier, licensee or other business relation of
the Company to cease doing business with the Company, or in any
way interfere with the relationship between any such customer,
supplier, licensee or relation and the Company (including,
without limitation, making any negative statements or
communications concerning the Company).
(c) Noncompetition Period. The "Noncompetition Period" shall
---------------------
commence on the date hereof and continue (i) if Executive is
terminated by the Company with or without Cause, until such date
as shall be specified by the Company in writing within 14
calendar days after Termination, provided that such date shall
--------
not be later than the first anniversary of the Termination, or
(ii) otherwise, until such date as shall be specified by the
Company in writing within the 30 calendar days after Termination,
provided that such date shall not be later than the 18-month
--------
anniversary of the Termination. After the end of the Severance
Pay Period (or if there is no Severance Pay, the date upon which
the Company elects the duration of the Noncompetition Period),
the Company shall until the end of the Noncompetition Period pay
Executive his Noncompete Compensation (unless Executive breaches
his obligations under this paragraph 3, it being understood that
in such case Executive shall continue to be bound by such
obligations as if the Company were continuing to pay Noncompete
Compensation). If there is no Severance Pay, the Company shall
during the period from Termination until such time as the Company
elects the duration of the Noncompetition Period (the "Interim
Period"), pay Executive his Interim Compensation (unless
Executive breaches his obligations under this paragraph 3, it
being understood that in such case Executive shall continue to be
bound by such obligations as if the Company were continuing to
pay Interim Compensation). "Noncompete Compensation" shall
consist of 50% of the salary that Executive received under
paragraph 1(d) above as compensation from the Company and its
Subsidiaries immediately prior to termination (Executive's
"Previous Salary") together with the continuation of the medical
benefits that the Company provided to Executive immediately prior
to Termination (Executive's "Previous Benefits"); provided that
--------
if at any time during the Noncompetition Period Executive obtains
other employment (i) with comparable medical benefits to
Executive's Previous Benefits, Executive's Noncompete
Compensation shall during the period of such employment not
include the continued provision of medical benefits, and (ii)
with a salary exceeding 50% of Executive's Previous Salary,
Executive's Noncompete Compensation shall during the period of
such employment be reduced (but not below zero) by the
8
amount of such excess. "Interim Compensation" shall consist of
100% of Executive's Previous Salary and Previous Benefits,
provided that if at any time during the Interim Period Executive
--------
obtains other employment, Executive's Interim Compensation shall
during the period of such employment be reduced (but not less
than zero) by the amount of salary and benefits received as
compensation for such other employment.
4. Notices. Any notice provided for in this Agreement must be in writing
-------
and must be either personally delivered, mailed by first class mail
(postage prepaid and return receipt requested) or sent by reputable
overnight courier service (charges prepaid) to the recipient at the
address below indicated:
To the Company:
000 X. Xx Xxxxx, Xxx 0000
Xxxxxxx, XX 00000
Attn: General Counsel
with a copy to:
000 X. Xx Xxxxx, Xxx 0000
Xxxxxxx, XX 00000
Attn: Vice President Human Resources
To Executive:
or to such other address or to the attention of such other person as the
recipient party shall have specified by prior written notice to the sending
party. Any notice under this Agreement shall be deemed to have been given
when personally delivered, one business day after being sent by reputable
overnight courier service, or three business days after being deposited in
the U.S. mail.
5. General Provisions.
------------------
(a) Severability. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this
Agreement is held to be invalid, illegal or unenforceable in any
respect under any applicable law or rule in any jurisdiction,
such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained
herein.
(b) Complete Agreement. This Agreement, those documents expressly
------------------
referred to herein and other documents of even date herewith
embody the complete agreement and understanding among the parties
and supersede and preempt any prior understandings, agreements or
representations by or among the
9
parties, written or oral, which may have related to the subject
matter hereof, in any way.
(c) Counterparts. This Agreement may be executed in separate
------------
counterparts, none of which need contain the signature of more
than one party hereto but each of which shall be deemed to be an
original and all of which taken together shall constitute one and
the same agreement.
(d) Successors and Assigns. Except as otherwise provided herein,
----------------------
this Agreement shall bind the parties hereto and their respective
successors and assigns and shall inure to the benefit of and be
enforceable by the parties hereto and their respective successors
and assigns.
(e) Choice of Law. All questions concerning the construction,
-------------
validity, enforcement and interpretation of this Agreement and
the exhibits hereto shall be governed by the laws of the State of
Illinois.
(f) Remedies. Each of the parties to this Agreement shall be
--------
entitled to enforce its rights under this Agreement specifically,
to recover damages and cost (including reasonable attorney's
fees) caused by any breach of any provision of this Agreement and
to exercise all other rights existing in its favor. The parties
hereto agree and acknowledge that, money damages would not be an
adequate remedy for any breach of the provisions of this
Agreement and that any party may in its sole discretion apply to
any court of law or equity of competent jurisdiction (without
posting any bond or deposit) for specific performance and/or
other injunctive relief in order to enforce or prevent any
violations of the provisions of this Agreement.
(g) Amendment and Waiver. The provisions of this Agreement may be
--------------------
amended and waived only with the prior written consent of the
Company and Executive.
(h) Business Days. If any time period for giving notice or taking
-------------
action hereunder expires on a day which is a Saturday, Sunday or
legal holiday in the State of Illinois, the time period will be
automatically extended to the business day immediately following
such Saturday, Sunday or holiday.
10
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
FOCAL COMMUNICATIONS CORPORATION
By: /s/ Xxxxxx X. Xxxxxx, Xx.
Its: President and Chief Executive Officer
EXECUTIVE:
/s/ Xxxxxxx X. Xxxxxx, Xx.
11
