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EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT ("Agreement") is executed as of the
31st day of August, 1998, by and between ADVANCED SWITCHING COMMUNICATIONS,
INC., a Delaware corporation ("Employer") and XXXXXX X. XXXXXXX ("Executive"),
an individual resident of Virginia.
W I T N E S S E T H:
WHEREAS, the Executive has been the Chief Executive Officer of Employer
since the inception of ADVANCED SWITCHING COMMUNICATIONS, INC. and will benefit
in a significant way if the Employer continues to retain the services of
Executive for the future and accordingly the parties hereto have determined it
to be in their mutual best interest to enter into this Employment Agreement; and
WHEREAS, Executive is employed hereunder by Employer in a confidential
relationship wherein Executive, in the course of Executive's employment with
Employer, has and will continue to become familiar with and aware of information
as to Employer's customers, specific manner of doing business, including the
processes, techniques and trade secrets utilized by Employer, and future plans
with respect thereto, all of which has been and will be established and
maintained at great expense to Employer; this information is confidential,
proprietary and a trade secret of Employer and constitutes the valuable goodwill
of Employer.
NOW, THEREFORE, in consideration of the covenants and conditions
hereinafter stated, and intending to be legally bound, the parties hereto agree
as follows:
1. EMPLOYMENT: Employer hereby employs Executive and Executive hereby
accepts employment upon the terms and conditions set forth herein.
2. TERM: Subject to the provisions for termination as hereinafter
provided, the term of this Agreement shall begin on the date set forth above and
shall continue indefinitely until terminated as herein provided.
3. COMPENSATION:
a. BASE SALARY: For services rendered by Executive under this
Agreement, the Employer shall pay to the Executive base salary at the rate of
$150,000.00 per year, payable in bi-monthly installments consistent with
Employer's customary payroll practices ("Base Salary"). Upon completion of the
Milestone (as defined in the Securities Purchase and Stockholders Agreement (the
"Purchase Agreement"), of even date herewith, by and among Employer, Executive,
Mostafa Investments Limited Partnership, a Virginia limited
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partnership, and Xxxxx Communications Fund, L.P., a Delaware limited
partnership), the Base Salary shall be increased to the rate of $200,000.00 per
year, or such higher amount as a majority of the members of the Board of
Directors of Employer (the "Board") shall determine. The Board shall consider
the recommendation of the compensation committee of the Board (the
"Compensation Committee") in making such determination. Said Base Salary is
subject to annual increases as approved by consent of the majority of the
members of the Board. The Board shall consider the recommendation of the
Compensation Committee in making such determinations.
b. BONUSES: In addition to Base Salary, upon completion of the
Milestone and in subsequent fiscal years thereafter, Executive shall be
eligible to receive bonuses, not less than annually, as determined by consent
of the majority of the members of the Board. The Board shall consider the
recommendation of the Compensation Committee in determining such bonus amounts.
c. EXPENSES: In addition to Base Salary and Bonuses, Employer shall
reimburse Executive for all reasonably necessary business expenses actually
incurred by him in the performance of his duties, including, without
limitation, expenses for travel, meals, entertainment and other miscellaneous
business expenses in accordance with Employer's standard policy. Executive
shall submit to Employer written itemized expense accounts and such additional
substantiation and justification as Employer may reasonably request on account
of such expenses in any form required by Employer. Employer shall furnish
Executive with a credit card in the account name of Employer, which card may be
used for such reasonable and necessary expenses as described above.
d. RETIREMENT PLAN. The Employer agrees to maintain a 401(k)
retirement plan which includes Executive, or a similar plan, which is
reasonably acceptable to Executive.
e. OTHER EXECUTIVE BENEFITS. Executive shall be provided with such
other benefits as are made available to other executives of the Employer,
including but not limited to, medical and permanent disability insurance.
4. DUTIES: Executive is engaged for the purpose of (i) performing
services as the President, Chief Executive Officer and Chairman of the Board of
Employer and shall be responsible for directing the daily business of the
Employer, subject only to the control of the Board, and (ii) such other duties
as shall be agreed upon by Executive and Employer in writing. Executive shall
faithfully adhere to, execute and fulfill all policies established by the Board.
5. EXTENT OF SERVICES: Executive shall devote substantially his entire
time, and best efforts, to the performance of his duties hereunder and to
promote and further the business of Employer. This paragraph shall not be
construed so as to prevent the Executive from, in a manner not inconsistent
with this Agreement, investing or managing his assets and
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those of his family, in such form or manner as will not require any substantial
services on the part of the Executive or in the operation of the affairs of the
companies or businesses in which such investments are made.
6. WORKING FACILITIES: The Executive shall be furnished with
appropriate working facilities and tools necessary for the proper performance
of his duties.
7. BUSINESS CONDUCT OF THE EXECUTIVE. Executive shall be free to
engage in other business interests and investments, as long as (a) Executive
devotes his full time and attention and best efforts in a professional manner
to the business of Employer, in a manner consistent with Executive's duties
under Sections 4 and 5 hereof, (b) such other business interests and
investments will not require Executive's services in the operation or affairs
of the companies or enterprises in which such investments are made, and (c)
such business interests or investments do not violate any other provisions of
this Agreement, including, without limitation, Section 8 hereof.
8. RESTRICTIVE COVENANTS/PROTECTION OF PROPRIETARY INFORMATION:
a. INTENT. The parties hereto recognize that Executive's knowledge
and skill are a material factor in inducing the Employer to enter into this
Agreement. Further, in the course of his employment, and because of the nature
of his responsibilities, Executive will acquire valuable and confidential
information and trade secrets with regard to the Employer's business operation,
including, but not limited to, Employer's existing and contemplated services and
products, documentation, technical data, intellectual property and other
proprietary information, business and financial methods and practices, plans,
pricing, lists of Employer's customers and prospective customers, methods of
obtaining customers, financial and operational data of Employer's present and
prospective customers, and the particular business requirements of the
Employer's present and prospective customers. In addition, Executive may develop
on behalf of the Employer, a personal acquaintance with some of the Employer's
customers and prospective customers. As a consequence, Executive will occupy a
position of trust and confidence with respect to the Employer's affairs and its
services. In view of the foregoing, and in consideration of the remuneration
paid and to be paid to the Executive, Executive agrees that it is reasonable and
necessary for the protection of the goodwill and business of Employer that
Executive make the covenants contained in Sections 8(b), 8(c) and 8(d) below
regarding the conduct of Executive during and after his employment relationship
with the Employer, and that the Employer will suffer irreparable injury if
Executive engages in conduct prohibited thereby.
b. NON-COMPETITION. Executive covenants and agrees that during the
term of this Agreement and for a period of two (2) years from the termination
of his employment (the "Non-Compete Period"), he will not, within the United
States, directly or indirectly, as principal, agent, owner, joint venturer,
investor, employee, officer, director, shareholder, partner, member, advisor or
consultant, engage in any business activity for any business organization other
than Employer which (i) develops, manufactures, markets and sells a product or
service
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which competes with a product or service developed, manufactured, marketed or
sold by Employer prior to termination of Executive's employment and which
product or service is service enabling, carrier class switching, concentration
and multiplexing equipment, or a related product or service, and is sold or
marketed to network access and service providers; or (ii) engages in any other
business in which Employer is engaged prior to the termination of Executive's
employment or for which Employer had, prior to the termination of Executive's
employment, developed a written business plan to conduct such business.
Notwithstanding the foregoing, Executive may acquire, as an investment, not
more than 2% of the capital stock of a competing business, whose stock is
traded on a national securities exchange or over-the-counter. It is
specifically agreed that the period of two (2) years constituting the
Non-Compete Period shall be computed by excluding from such computation any
time during which Executive is in violation of this Section 8.
c. NON-SOLICITATION. During the Non-Compete Period, Executive shall
not, directly or indirectly, (i) solicit, in competition with Employer, any
person, group or class of persons who at any time either during the term of the
Agreement or during the Non-Compete Period is a customer of Employer, the loss,
diminution or moderation of which would be detrimental to Employer; (ii)
solicit or recruit, directly or indirectly, any employee of Employer for the
purpose of being employed by Executive, directly or indirectly, or by any
competitor of Employer on behalf of which Executive is acting as an agent,
representative, owner, investor or employee; (iii) interfere, for a purpose or
in a manner that would be detrimental to Employer, with the Employer's
relationship with any organization or individual which was a provider of
services or products to Employer during Executive's employment with Employer;
or (iv) assist or encourage any other person in carrying out, directly or
indirectly, any activity that would be prohibited by the provisions of this
Section 8(c) if such activity were carried out by Executive. Executive shall
have no liability to Employer under this Section 8(c) if Executive is not
engaged in a business in competition with Employer in violation of Section 8(b)
hereof and does not, directly or indirectly, affirmatively solicit customers or
employees of, or providers of services or products to, the Company inconsistent
with the provisions of this Section 8(c).
d. CONFIDENTIALITY.
(i) EMPLOYER'S INFORMATION. Executive agrees that any and all of
Employer's confidential and proprietary information, including, but not limited
to, the matters contained in Section 8(a) above, including all intellectual
property rights therein, are and shall remain the sole and exclusive property of
Employer. While in the employ of Employer, or at any time thereafter, Executive
will not, directly or indirectly, communicate or divulge to or use for the
benefit of himself or any other person, firm, association or corporation, any of
Employer's trade secrets or confidential information, including, by way of
illustration, the matters contained in Section 8(a) above, or which were
communicated to or otherwise learned of or acquired by Executive in the course
of his employment with Employer, except that Executive may disclose such matters
to the extent that disclosure is required, (i) in the course of his employment
with Employer or
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(ii) by a court or governmental agency of competent jurisdiction without proof
of specific damages. Executive will not use such trade secrets or confidential
information in any way or in any capacity other than as an Executive of the
Employer and to further the interest of the Employer.
(ii) OTHER INFORMATION. Executive shall not, directly, or indirectly,
communicate or divulge to or use for the benefit of himself or any other person,
firm, association or corporation, including Employer, any confidential, trade
secret or other proprietary information as set forth in Section 8(a), which
Executive may have obtained from another person, the disclosure of which
Executive knows or has reason to know would violate the terms of any
non-disclosure or confidentiality agreement between Employer and such other
person, or the disclosure of which Executive has reason to know is otherwise
prohibited.
e. BLUE PENCIL: In the event any court of competent jurisdiction shall
determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of Executive and Employer that such
restrictions be enforced to the fullest extent which the court deems
reasonable, and this Agreement shall thereby be reformed.
9. VACATION: Executive shall be entitled to receive such paid vacation
during each year of this Agreement, while employed full time as the Employer
shall approve from time to time, but in any event not less than three (3) weeks
per year. Vacation shall be taken at such time or times as will not
unreasonably hinder or interfere with Executive's representation of the
Employer's customers or Executive's role in the business or operations of
Employers.
10. DISABILITY: Executive's disability and/or sick leave shall be
covered by the usual and customary policies and procedures of Employer.
11. TERMINATION:
a. WITH CAUSE: Employer may, at any time, terminate this
Agreement "with cause" which includes:
(i) Executive's conviction of, or plea of guilty or nolo
contendere to, a felony or a crime of falsehood or involving
moral turpitude;
(ii) Executive's (a) perpetration of a fraud or (b) perpetration
of other act or acts of dishonesty against Employer or any
Affiliate of Employer (as defined in the Purchase
Agreement), provided such other act or acts resulted,
directly or indirectly, in personal gain or enrichment to
Executive or any other person at Employer's or its
Affiliate's expense;
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(iii) Executive's breach of the provisions of Section 8 hereof;
(iv) The willful failure by Executive to substantially perform
his duties to Employer, specifically excluding a failure
resulting from the Executive's disability (as defined
below), for a period of one hundred twenty (120) days
following written notice to Executive from the Board
specifying such failure and demanding the performance of
such specified duties. Notwithstanding the foregoing, the
Executive's conduct or failure to act will not be considered
willful and his Employment shall not be terminated pursuant
to this subparagraph (iv) if such failure to perform took
place as a result of:
(A) Any act or omission believed by the Executive, in good
faith, to have been in or not opposed to the best
interests of Employer; or
(B) Any act or omission in respect of which a determination
could properly be made that Executive met the
applicable standard of conduct prescribed for
indemnification or reimbursement or payment of expenses
under Employer's bylaws or the laws of the State of
Delaware, or the directors and officers' liability
insurance of Employer, in each case as in effect at the
time of such act or omission.
If Executive's Employment is terminated with cause, Employment shall not be
considered to be terminated with cause unless he shall have received a copy of a
resolution approved by not less than sixty percent (60%) of the members of the
Board (adopted at a meeting of the Board called and held for such purpose
following reasonable notice to Executive and providing Executive and his counsel
an opportunity to be heard) finding that Executive is guilty of conduct
described in (i), (ii), (iii) or (iv) above and specifying the same in detail.
Executive shall nevertheless be entitled to (i) receive accrued Base Salary and
Bonuses through the date of such termination and (ii) receive the payments and
benefits to which he is then entitled under the Executive benefit plans of
Employer or any Affiliate thereof as of the date of his termination.
b. WITHOUT CAUSE; GOOD REASON:
(i) WITHOUT CAUSE. Executive may terminate this Agreement voluntarily,
which termination shall be without cause, upon sixty (60) days
written notice to Employer. In such event, Executive shall continue
to render his services up to the date of termination. Executive may
also terminate for Good Reason.
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(ii) GOOD REASON. Executive may terminate this Agreement for Good Reason (as
defined below), upon written notice to Employer within sixty (60) days
after Executive knows or has reason to know of the occurrence of any event
which would constitute Good Reason, and Executive's notice under this
Section 8(b)(ii) shall specify in reasonable detail the event which would
constitute Good Reason. In the event the Good Reason is for events or
circumstances described in items (a) or (b) below, Employer shall have
thirty (30) days following receipt of such written notice from Executive to
effect a cure of the circumstance constituting Good Reason, and, upon cure
thereof by Employer (which cure shall be retroactive with respect to any
monetary matter), such event shall no longer constitute Good Reason.
As used herein, "Good Reason" shall mean the following: (a) if not approved
by Executive by written amendment to this Agreement, the assignment to
Executive of any duties inconsistent in any material respect with
Executive's position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities as contemplated by
this Agreement or any other action by Employer which results in a material
diminution in such position, authority, duties or responsibilities; (b) if
not approved by Executive in his capacity as member of the Board, any
change in the location of the performance of such duties, such that
Executive is required to travel or commute a substantially greater distance
than he does prior to the change; (c) establishment of a Base Salary for
Executive which is less than provided for in this Agreement, or failure to
pay the same other than an isolated, inadvertent or insubstantial failure,
not occurring in bad faith; (d) any purported termination of Executive's
employment by Employer, other than as specifically set forth herein; or (e)
a change of control of Employer, but only during the sixty (60) day period
beginning sixty (60) days after such a change of control. "Change of
control" shall mean the acquisition by a person (other than a person or
group of persons that beneficially own an equity interest in Employer on
the date hereof, including Purchaser (as defined in the Purchase Agreement)
or any person controlled thereby), of more than 50% control of the voting
securities (which shall include any securities entitled to vote as if such
securities were common shares of Employer) of Employer as a result of a
sale of voting securities after the date hereof by the persons who, on the
date hereof, have a beneficial interest in such voting securities (other
than as a result of a public offering by Employer), or (ii) the approval by
the
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shareholders of Employer of a reorganization, merger or
consolidation, sale or other disposition of all or
substantially all of the assets of Employer (other than a
merger (A) in which Employer is the surviving Company, or
(B) which involves only a change in Employer's state of
incorporation);
c. DEATH OR DISABILITY: This Agreement shall automatically
terminate upon the death or disability of Executive. In the event of death, this
Agreement shall terminate as of the date of death of Executive. In the event of
the determination by not less than sixty percent (60%) of the Board of Directors
of Employer in good faith that Executive is disabled, it may give Executive
notice of its intention to terminate employment and Executive's employment shall
terminate thirty (30) days after receipt of such notice by Executive. Disability
shall be defined as the absence of the Executive from the Executive's duties
with the Employer on a full time basis for one hundred eighty (180) consecutive
business days as a result of incapacity due to physical or mental illness. In
the event of a death or disability, all amounts due as accrued Base Salary and
prorated Bonus through the termination date and deferred amounts due, if any,
shall be paid thirty (30) days of the termination date as a lump sum payment.
12. OBLIGATIONS OF EMPLOYER UPON TERMINATION.
(a) BENEFITS UPON TERMINATION. For two (2) years after
Executive's date of termination for Good Reason or pursuant to Section 11(c)
hereof, or such longer period as may be provided by the terms of the appropriate
insurance and other benefits plan, program, practice or policy, Employer shall
continue such benefits to Executive and/or Executive's family at least equal to
those which would have been provided to him or them in accordance with the
insurance or benefits plan of Employer as if Executive's employment had not been
terminated, provided, however, that if Executive becomes reemployed with another
employer and is eligible to receive insurance or other benefits under another
employer, the medical and/or other insurance benefits described herein shall be
secondary to those provided under such other plan during such applicable period
of eligibility.
(b) SALARY UPON TERMINATION. If the Executive shall terminate
employment for Good Reason, then in addition to other amounts which may
otherwise be due to Executive hereunder, the Employer shall pay to the Executive
in twenty four (24) consecutive, equal monthly installments commencing on the
first of the month following Executive's termination, in cash, the aggregate of
the following amounts (i) a severance payment equal to the balance due in Base
Salary which would be due for three (3) years from the date of termination, with
Base Salary computed with respect to the then current annual Base Salary and
assuming Minimum Increases; (ii) a payment in respect of termination of his
performance Bonus rights equal to two times the average of the annual Bonuses
received in the past pursuant to this Agreement; and (iii) any compensation
previously deferred by Executive and any accrued vacation pay to the extent not
theretofore paid. In the event Employer shall fail to pay amounts due to
Executive hereunder within fifteen (30) days of any due date (other
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than an inadvertent failure which is cured by Employer within five (5) days of
notice by Executive of such failure to the Chief Operating Officer or the Chief
Financial Officer of Employer), then in addition to any other remedy that
Executive may have against Employer, including but not limited to the claim for
payments due hereunder: (x) all amounts due hereunder shall immediately become
due and payable without notice to Employer, and (y) the covenants contained in
Section 8(b) shall be terminated in their entirety.
(c) NO REQUIREMENT TO MITIGATE. The Executive shall not be required
to mitigate the amount of any payment provided for in this Agreement by seeking
other employment or otherwise, nor shall the amount of any payment or benefit
provided for in this Agreement be reduced by any compensation earned by the
Executive as the result of employment by another employer or by reason of the
Executive's receipt of or right to receive any retirement or other benefits
after the date of termination of employment or otherwise, except as otherwise
provided therein.
(d) GROSS UP PAYMENT. Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment or
distribution by the Employer to or for the benefit of the Executive would be
subject to excise tax imposed by Section 4999 of the Internal Revenue Code, or
any interest or penalties are incurred by the Executive with respect such
excise tax, then the Executive shall be entitled to receive an additional
payment ("Gross Up Payment") equal to the amount of the excise tax and
penalties related thereto together with any additional excise tax, income taxes
and penalties as a consequence of the Gross Up Payment.
(e) TERMINATION OF PAYMENTS. If, following the termination of his
employment with Employer, Executive is found by a court of competent
jurisdiction to have materially breached the provisions contained in Section 8
of this Agreement, Employer's obligation to make any further payments or
provide any further benefits to Executive pursuant to this Agreement shall be
deemed to have terminated as of the date of such material breach and Executive
shall be obligated to return any and all payments received since such date.
13. REMEDIES:
(a) INJUNCTIVE RELIEF. In the event of a breach or threatened
breach of this Agreement by Executive, Employer shall be entitled, in addition
to all other remedies otherwise available to Employer, to an injunction,
enjoining and restraining such breach or threatened or intended breach, and
the Executive hereby consents to the issuance thereof forthwith in any court of
competent jurisdiction without proof of specific damages.
(b) ATTORNEYS' FEES. In the event that either party shall enforce
any part of this Agreement through legal proceedings and the other shall have
been in default hereof, such defaulting party agrees to pay to nondefaulting
party any costs and attorneys' fees reasonably incurred in connection therewith.
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14. CUMULATIVE RIGHTS: All of the rights and remedies of the parties
hereto shall be cumulative with, and in addition to, any other rights, remedies
or causes of action allowed by law and shall not exclude any other rights or
remedies available to either of the parties hereto.
15. LIFE INSURANCE BENEFITS: During the term of Executive's
employment, and as an additional benefit to Executive, Employer agrees to cover
Executive under a term life insurance policy in the amount of $1,000,000.00
which will be paid for by Employer but the beneficiary of which will be
determined by Executive.
16. NOTICES: Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing, and if sent by certified mail,
return receipt requested, to his residence in the case of the Executive, or to
the principal office in the case of the Employer.
17. WAIVER OF BREACH: The waiver by either party of a breach of any
provision of this Agreement by the other party shall not operate or be construed
as a waiver of any subsequent breach by such party.
18. GOVERNING LAW: The validity of this Agreement, the construction
and enforcement of its terms, and the interpretation of the rights and duties of
the parties shall be governed by the laws of the Commonwealth of Virginia.
19. SEVERABILITY: In the event any one or more of the provisions of
this Agreement shall for any reason be held to be invalid, illegal or
unenforceable, the remaining provisions of this Agreement shall be unimpaired,
and shall continue in full force and effect.
20. ASSIGNMENT: The rights and obligations of Executive under this
Agreement are not assignable. The rights and obligations of Employer under this
Agreement inure to the benefit and shall be binding upon the successors and
assigns of Employer.
21. SURVIVAL OF PROVISIONS: The provisions of this Agreement set
forth in Sections 8 and 11 hereof shall survive termination of employment.
22. ENTIRE AGREEMENT: This instrument contains the entire agreement
of the parties with respect to employment of Executive. It may not be changed
orally, but only by agreement in writing, signed by the party against whom
enforcement of any such waiver, change, modification, extension or discharge is
sought.
23. ADVICE OF COUNSEL AND CONSTRUCTION. The parties acknowledge that
all parties to this Agreement have had the opportunity to be represented by
counsel. Accordingly the rule of construction of contract language against the
drafting party is hereby waived by all parties.
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IN WITNESS WHEREOF, the parties have executed this agreement on the day and year
first above written.
EMPLOYER:
ADVANCED SWITCHING
COMMUNICATIONS, INC., a Delaware
corporation
By: /s/ Xxxxxx Xxxxxxxxx
----------------------------
Xxxxxx Xxxxxxxxx
Chief Operating Officer
EXECUTIVE:
/s/ XXXXXX X. XXXXXXX
----------------------------
XXXXXX X. XXXXXXX
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