Exhibit 10.9
EMPLOYMENT AGREEMENT
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THIS EMPLOYMENT AGREEMENT (the "Agreement"), made this 25th day of
September, is entered into between Convergent Networks, Inc., a Delaware
corporation with its principal place of business at 000 Xxxxxxxxxx Xxxxxx, Xxxxx
0, Xxxxxx, XX 00000 (the "Company"), and Xxxx X. Xxxxxxxx, residing at 00 Xxxx
Xxxxx, Xxxxxxxxxx, XX 00000 (the "Employee").
WHEREAS, the Company and the Employee desire to set forth the terms and
conditions of the Employee's continued employment with the Company;
WHEREAS, the Company and the Employee entered into three separate stock
restriction agreements each dated February 15, 2000 (collectively, the "Stock
Restriction Agreements"), three separate escrow agreements each dated February
15, 2000 (collectively, the "Escrow Agreements") and the Employment Incentive
Compensation and Termination Agreement dated February 15, 2000 (the "Incentive
Compensation Agreement"); and
WHEREAS, this Agreement sets forth the terms and conditions of the
Employee's continued employment with the Company and supercedes and replaces
each of the Stock Restriction Agreements, each of the Escrow Agreements and the
Incentive Compensation Agreement.
NOW THEREFORE, in consideration of the mutual covenants and promises
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the parties
agree as follows:
1. Term of Employment. The Company hereby agrees to employ the Employee,
and the Employee hereby accepts employment with the Company, upon the terms set
forth in this Agreement, for the period commencing on September 1, 2000 (the
"Commencement Date") and ending on March 31, 2002 (such period, as it may be
extended, the "Employment Period"), unless sooner terminated in accordance with
the provisions of Section 9.
2. Title; Capacity. The Employee shall serve as Chairman, President and
Chief Executive Officer. The Employee shall be based at the Company's
headquarters in Lowell, Massachusetts. The Employee shall be subject to the
supervision of the Board of Directors.
The Employee hereby accepts such employment and agrees to undertake the
duties and responsibilities inherent in such position and such other duties and
responsibilities as the Board of Directors or its designee shall from time to
time reasonably assign to the Employee. The Employee agrees to devote his
entire business time, attention and energies to the business and interests of
the Company during the Employment Period.
3. Compensation and Benefits.
3.1 Salary. The Company shall pay the Employee, in periodic installments
in accordance with the Company's customary payroll practices, an annual base
salary of $200,000 for the one-year period commencing on the Commencement Date,
and commencing on January 1, 2001, Employee's annual base salary shall increase
to $250,000. After December 31, 2001, the Employee's salary shall be as
determined by the Board of Directors.
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3.2 Fringe Benefits. The Employee shall be entitled to participate in
all bonus and benefit programs that the Company establishes on no less favorable
terms than offered to other employees of the Company, except as otherwise
required under applicable law.
3.3 Reimbursement of Expenses. The Company shall reimburse the Employee
for all reasonable travel, entertainment and other expenses incurred or paid by
the Employee in connection with, or related to, the performance of his duties,
responsibilities or services under this Agreement, in accordance with policies
and procedures, and subject to limitations, adopted by the Company from time to
time.
3.4 Withholding. All salary, bonus and other compensation payable to the
Employee, including without limitation, payments due under Sections 4 and 7 of
this Agreement, shall be subject to applicable federal, state and local
withholding taxes.
4. Payments to the Employee Upon Certain Events.
4.1 Fiscal 2000 Performance Payment. In the event the Company achieves
the financial targets set forth in the FY2000 Plan, as determined by the Board
of Directors, the Employee shall be entitled to a payment of $275,000 ("FY2000
Bonus"), payable in lump sum on April 1, 2001.
4.2 Fiscal 2001 Performance Payment. During the 2001 fiscal year,
Employee shall be eligible to receive up to a $300,000 cash bonus if the Company
meets certain financial targets for the 2001 fiscal year ("FY2001 Plan"), such
target to be determined by the Board of Directors. The Board of Directors shall
determine the FY2001 Plan no later than March 31, 2001.
4.3 IPO Payment. In the event that the Company, prior to any Change of
Control, consummates an a public offering of its equity securities under the
Securities Act of 1933, as amended, resulting in gross proceeds to the Company
of at least Twenty Million Dollars ($20,000,000)(an "IPO") at any time prior to
January 1, 2002, while the Employee is employed with the Company, the Employee
shall be entitled to a payment equal to $275,000 ("IPO Payment"). Such payment
shall be payable in lump sum within ninety (90) days of the consummation of the
IPO.
5. Repurchase Agreement
5.1 For purposes of this Agreement, the "Shares" means the aggregate of
3,382,000 shares of the Company's Common Stock issued to the Employee on
February 15, 2000.
5.2 Subject to Section 6, in the event that the Employee ceases to be
employed by the Company for any reason or no reason, with or without cause, the
Company shall have the right and option (the "Repurchase Option") to repurchase
from the Employee, for the sum of
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$1.00 per share (the "Repurchase Price"), all Shares that have not vested in
accordance with the following:
DATE CESSATION OF EMPLOYMENT OCCURS: SHARES SUBJECT TO REPURCHASE OPTION
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Before March 31, 2002 100% as to all of the Shares, less 6.25% of
2,882,000 of the Shares (as represented by the
Certificate No. 150 as of the date of this
Agreement) for each full three-month period
from and after March 15, 2000 during which the
Employee is employed by the Company.
On March 31, 2002 but before 500,000 of the Shares (as represented by
January 31, 2005 Certificate No. 144 and Certificate No. 145,
each for 250,000 shares of Common Stock, as of
the date of this Agreement).
On January 31, 2005 0%
5.3 As used herein, "Vested Shares" at any particular time shall mean
Shares that are then no longer subject to the Repurchase Option and "Unvested
Shares" at any particular time shall mean all Shares that are subject to the
Repurchase Option.
5.4 Escrow of Unvested Shares.
(a) As security for the Employee's faithful performance of the
Employee's obligations under this Section 5, the Employee agrees, immediately
upon receipt of the stock certificates evidencing the Shares, to deliver such
certificates, together with a separate Stock Power and Assignment Separate from
Stock Certificate ("Stock Power") executed by the Employee (with the date and
number of Shares left blank) for each stock certificate representing the Shares,
to the Secretary of the Company or other designee of the Company ("Escrow
Holder"), who is hereby appointed to hold such certificates and Stock Powers in
escrow and to take all such actions and to effectuate all such transfers and/or
releases of such Shares as are in accordance with the terms of this Agreement.
All of the Shares will be released from escrow upon termination of the
Repurchase Option. Upon request of the Employee, the Escrow Holder shall arrange
with the Company for the release of any Vested Shares.
(b) The Escrow Holder will act solely for the Company as its agent and
not as a fiduciary. The Employee and the Company agree that the Escrow Holder
will not be liable to any party to this Agreement (or to any other party) for
any actions or omissions, and the Escrow Holder shall be indemnified and held
harmless by the Employee and the Company for all liability, costs and expenses
incurred in connection with the Escrow Holder's carrying out of its duties under
this Section 5.4, except for any liability, costs or expenses arising from the
Escrow Holder's gross negligence or intentionally fraudulent acts or omissions
in carrying out its duties under this Section 5.4. The Escrow Holder may rely
upon any letter, notice or other document
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executed by any signature purported to be genuine and may rely on the advice of
counsel and obey any order of any court with respect to the transactions
contemplated by this Agreement.
5.5 Exercise of Repurchase Option.
(a) The Company may exercise the Repurchase Option by delivering or
mailing to the Escrow Holder and the Employee within sixty (60) days after the
termination of the employment of the Employee with the Company, a written notice
of exercise of the Repurchase Option. Such notice shall specify the number of
Shares to be purchased. If and to the extent the Repurchase Option is not so
exercised by the giving of such a notice within such 60-day period, the
Repurchase Option shall automatically expire and terminate effective upon the
expiration of such 60-day period.
(b) Within 10 days after his receipt of the Company's notice of the
exercise of the Repurchase Option pursuant to subsection (a) above, the Escrow
Holder shall tender to the Company at its principal offices the certificate or
certificates representing the Shares which the Company has elected to purchase,
duly endorsed in blank by the Employee or with duly endorsed stock powers
attached thereto, all in form suitable for the transfer of such Shares to the
Company. Upon its receipt of such certificate or certificates, the Company shall
deliver or mail to the Employee a check in the amount of the aggregate
Repurchase Price therefor.
(c) After the time at which any Shares are required to be delivered to
the Company for transfer to the Company pursuant to subsection (b) above, the
Company shall not pay any dividend to the Employee on account of such Shares or
permit the Employee to exercise any of the privileges or rights of a stockholder
with respect to such Shares, but shall, insofar as permitted by law, treat the
Company as the owner of such Shares.
(d) The Repurchase Price may be payable, at the option of the Company,
in cancellation of all or a portion of any outstanding indebtedness of the
Employee to the Company or in cash (by check) or both.
(e) The Company shall not purchase any fraction of a Share upon exercise
of the Repurchase Option, and any fraction of a Share resulting from a
computation made pursuant to Section 2 of this Agreement shall be rounded to the
nearest whole Share (with any one-half Share being rounded upward).
5.6 Restrictions on Transfer.
(a) Except as otherwise provided in subsection 5.6(b) below, the
Employee shall not, during the term of the Repurchase Option, sell, assign,
transfer, pledge, hypothecate, or otherwise dispose of, by operation of law or
otherwise (collectively "transfer"), any of the Unvested Shares.
(b) Notwithstanding the foregoing, the Employee may transfer Shares to
or for the benefit of any spouse, child, or grandchild, or to a trust for the
benefit, provided that any Unvested Shares shall remain subject to this
Agreement (including without limitation the restrictions on transfer set forth
in this Section 5 and the Repurchase Option), and such permitted transferee
shall, as a condition to such transfer, deliver to the Company a written
instrument
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confirming that such transferee shall be bound by all of the terms and
conditions of this Agreement.
5.7 Effect of Prohibited Transfer. The Company shall not be required (a)
to transfer on its books any of the Shares which shall have been sold or
transferred in violation of any of the provisions set forth in this Agreement,
or (b) to treat as owner of such Shares or to pay dividends to any transferee to
whom any such Shares shall have been so sold or transferred.
5.8 Restrictive Legend. All certificates representing any Unvested
Shares shall have affixed thereto a legend in substantially the following form,
in addition to any other legends that may be required under federal or state
securities laws:
"The shares of stock represented by this certificate are subject to
restrictions on transfer and an option to purchase set forth in a certain
Employment Agreement between the Corporation and the registered owner of
these shares (or his predecessor in interest), and such Agreement is
available for inspection without charge at the office of the Secretary of
the Corporation."
6. Acceleration of Vesting Upon Certain Events.
6.1 Consummation of an IPO. In the event the Company consummates prior
to January 1, 2002, IPO , while the Employee is employed by the Company, 250,000
of the Shares (as represented by Certificate No. 144 on the date of this
Agreement) shall become Vested Shares upon the consummation of the IPO.
6.2 Meeting Fiscal 2000 Financial Targets. If the Company meets the
financial targets ("FY2000 Plan") approved by the Board of Directors on April
13, 2000 by December 31, 2000, as determined by the Board of Directors, and the
Employee continues to be employed by the Company through December 31, 2000,
250,000 of the Shares (as represented by Certificate No. 145 on the date of this
Agreement) shall become Vested Shares on April 1, 2001.
6.3 Change of Control. In the event of a Change of Control (as defined
below) of the Company while the Employee is employed by the Company, all of the
Shares shall become Vested Shares and the Repurchase Option as to all of the
Shares shall lapse upon the consummation of the Change of Control. For purposes
of this Agreement, a "Change of Control" shall be deemed to occur if any of the
following conditions have occurred: (1) the merger or consolidation of the
Company with another entity where the Company is not the surviving entity and
where after the merger or consolidation (i) its stockholders prior to the merger
or consolidation hold less than 50% of the voting stock of the surviving entity
and (ii) its Directors prior to the merger or consolidation are less than a
majority of the Board of Directors of the surviving entity; (2) the sale of all
or substantially all of the Company's assets to a third party and subsequent to
the transaction (i) its stockholders hold less than 50% of the stock of said
third party and (ii) its Directors are less than a majority of the Board of
Directors of said third party; or (3) a transaction or series of related
transactions, including a merger of the Company with another entity where the
Company is the surviving entity, whereby (i) 50% or more of the voting stock of
the Company after the transaction(s) is owned actually or beneficially by
parties
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who held less than thirty percent (30%) of the voting stock, actually or
beneficially, prior to the transaction(s) and (ii) its Board of Directors after
the transaction(s) or within 60 days thereof, is comprised of less than a
majority of the Directors serving prior to the transaction(s).
6.4 Termination of Employment.
(a) If the Company terminates the Employee's employment with the Company
without Cause on or before September 1, 2001, fifty person (50%) of all Unvested
Shares on the effective date of such termination shall become Vested Shares.
(b) If the Company terminates the Employee's employment with the Company
without Cause after September 1, 2001, all Unvested Shares on the effective date
of such termination shall become Vested Shares.
7. Forgiveness of Loan.
7.1 Continuation of Employment after IPO. In the event the Company,
prior to any Change of Control, consummates an IPO at any time prior to January
1, 2002 while the Employee is employed with the Company, and:
(a) the Employee remains continuously employed with the Company through
September 1, 2001, then $745,500 of the principal amount of the Company's
$2,982,000 loan to the Employee pursuant to the Promissory Note dated February
15, 2000, as amended on September 26, 2000 (the "Loan"), shall be forgiven on
the later of (i) September 1, 2001 or (ii) the date of the IPO.
(b) the Employee remains continuously employed with the Company through
January 1, 2002, then an additional $745,500 of the principal amount under the
Loan shall be forgiven on January 1, 2002.
(c) the Employee remains continuously employed with the Company through
March 31, 2002, then, $1,491,000, the balance of the principal amount under the
Loan shall be forgiven on March 31, 2002.
7.2 Change of Control. In the event of a Change of Control of the
Company while the Employee is employed by the Company, the entire principal
amount then outstanding under the Loan shall be forgiven upon the consummation
of such Change of Control.
8. Termination of Employment Period. The employment of the Employee by the
Company pursuant to this Agreement shall terminate upon the occurrence of any of
the following:
8.1 Expiration of the Employment Period; or
8.2 At the election of the Company, for Cause (as defined below),
immediately upon written notice by the Company to the Employee, which notice
shall identify the Cause upon which the termination is based. For the purposes
of this Section 8.2, "Cause" shall mean (a) the conviction of the Employee of
any felony, or (b) any fraud or actions by the
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Employee that are deemed by a majority of the Board of Directors to be
materially and grossly detrimental to the Company.
9. Effect of Termination.
9.1 Status of Employment Upon Expiration of Employment Period. If the
Employment Period expires pursuant to Section 1 hereof, and the Company and the
Employee have not reached any agreement regarding the extension of the term, the
Employee shall at his sole discretion continue his employment on an at-will
basis following the expiration of the Employment Period. Such at-will employment
relationship may be terminated by either party at any time and, except as to
Section 9.3, shall not be governed by the terms of this Agreement.
9.2 Payments Upon Termination of Employment.
(a) In the event the Employee's employment is terminated by the Company
with Cause or the Employee voluntarily terminates his employment, the Company
shall pay to the Employee the compensation and benefits otherwise payable to him
under Section 3 of this Agreement through the last day of his actual employment
by the Company.
(b) In the event the Employee's employment is terminated by the Company
without Cause, the Company shall pay to the Employee the compensation and
benefits otherwise payable to him under Section 3 of this Agreement through the
last day of his actual employment by the Company plus the balance of salary that
would have been paid to the Employee had he continued his employment of the
Company to the end of the Employment Period.
9.3 Survival. This Section 9.3 and Sections 5, 6 and 10 shall survive
any expiration or termination of this Agreement.
10. Miscellaneous.
10.1 Notices. Any notices delivered under this Agreement shall be
deemed duly delivered four business days after it is sent by registered or
certified mail, return receipt requested, postage prepaid, or one business day
after it is sent for next-business day delivery via a reputable nationwide
overnight courier service, in each case to the address of the recipient set
forth in the introductory paragraph hereto. Either party may change the address
to which notices are to be delivered by giving notice of such change to the
other party in the manner set forth in this Section 10.1.
10.2 Entire Agreement. This Agreement and the Key Employee
Noncompetition, Nondisclosure and Developments Agreement dated February 15, 2000
between the Company and the Employee constitute the entire agreement between the
parties and supersedes all prior agreements and understandings, whether written
or oral, relating to the subject matter of such agreements.
10.3 Termination of Prior Agreements. The Stock Restriction Agreements,
the Escrow Agreements and the Incentive Compensation Agreement are hereby
terminated and shall be of no further force and effect as of the date of this
Agreement.
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10.4 Amendment. This Agreement may be amended or modified only by a
written instrument executed by both the Company and the Employee.
10.5 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Massachusetts. Any action,
suit or other legal arising under or relating to any provision of this Agreement
shall be commenced only in a court of the Commonwealth of Massachusetts (or, if
appropriate, a federal court located within Massachusetts), and the Company and
the Employee each consents to the jurisdiction of such a court. The Company and
the Employee each hereby irrevocably waive any right to a trial by jury in any
action, suit or other legal proceeding arising under or relating to any
provision of this Agreement.
10.6 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of both parties and their respective successors and
assigns, including any corporation with which or into which the Company may be
merged or which may succeed to its assets or business, provided, however, that
the obligations of the Employee are personal and shall not be assigned by him.
10.7 Waivers. No delay or omission by the Company in exercising any
right under this Agreement shall operate as a waiver of that or any other right.
A waiver or consent given by the Company on any one occasion shall be effective
only in that instance and shall not be construed as a bar or waiver of any right
on any other occasion.
10.8 Captions. The captions of the sections of this Agreement are for
convenience of reference only and in no way define, limit or affect the scope or
substance of any section of this Agreement.
10.9 Severability. In case any provision of this Agreement shall be
invalid, illegal or otherwise unenforceable, the validity, legality and
enforceability of the remaining provisions shall in no way be affected or
impaired thereby.
THE EMPLOYEE ACKNOWLEDGES THAT HE HAS CAREFULLY READ THIS AGREEMENT AND
UNDERSTANDS AND AGREES TO ALL OF THE PROVISIONS IN THIS AGREEMENT.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year set forth above.
CONVERGENT NETWORKS, INC.
By: /s/ Xxxxxx X. Xxxxxxx
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Title: Vice President and Chief Financial Officer
EMPLOYEE
/s/ Xxxx X. Xxxxxxxx
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Xxxx X. Xxxxxxxx
[Signature page to Employment Agreement]
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