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EXHIBIT 10.36
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as
of the 16th day of February, 2001 by and between Net2000 Communications, Inc.
(the "Employer" or the "Company") and Xxxxx Xxxxxxxxxx (the "Executive").
WITNESSETH:
WHEREAS:
(1) Employer desires to retain Executive's services, upon the terms
and conditions hereafter described, and Executive desires to be employed
by Employer upon such terms and conditions;
(2) Executive understands and acknowledges that, in connection with
this proposed employment, Executive will meet important customers and
referral sources of Employer, and learn of confidential business
information, ways of doing business, and trade secrets of Employer of
which Executive was not aware, and that, accordingly, Executive's
agreement to and compliance with the covenants and terms set forth in
Sections 7 and 8 of this Agreement are a material and essential
condition to Employer's agreement to employ Executive;
NOW, THEREFORE, in consideration of the premises, and the promises,
covenants and agreements hereinafter described, Employer and Executive agree as
follows:
1. Employment. Employer hereby employs Executive, and Executive
hereby accepts employment with Employer, upon and subject to the terms and
conditions set forth in this Agreement.
2. Duties. Executive shall serve as the Executive Vice President of
Sales and Marketing, and perform, under and according to Employer's direction
and control and to the best of Executive's abilities, all executive, advisory,
administrative, and/or managerial duties which may be assigned or delegated to
Executive from time to time by Xxxxxxx Xxxxxx, Xx., the Chief Executive Officer
("CEO") of Employer. Executive shall report directly to Xxxxxxx Xxxxxx, Xx., the
CEO, during the Term of this Agreement. If Xxxxxxx Xxxxxx, Xx. ceases being the
CEO during the Term of this Agreement, Executive shall report to the replacement
CEO. Executive shall carry out, follow and comply with all directives, rules,
and policies of Employer and Employer's Board of Directors ("Board") and,
subject to the CEO's direction and control, shall have the authority and
responsibilities customarily exercised by an Executive Vice President of Sales
and Marketing. Executive's authorities and responsibilities shall include,
without limitation, the following:
- Managing all day to day operations of Employer's direct sales and
marketing personnel;
- Assisting the Company in attempting to meet corporate objectives for top
line revenue, gross margin, customer retention and other enumerated
milestones;
- Leadership in setting strategy for new markets, product development,
pricing, and differentiation while executing customer acquisition and
retention for direct sales;
- Further develop the sales and marketing organizations.
- Work to develop, implement or improve processes, procedures and systems
necessary to facilitate and improve customer care functions in support
of Employer's business;
- Work with the Information Technology Department to lead sales force
automation including database management, pricing tools and assist with
customer relationship management initiatives; and
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- Manage sales and marketing P/L to budget.
Executive shall exert best reasonable efforts and devote substantially
all of Executive's working time, attention and energies to Employer's business
and the performance of Executive duties, and shall not engage in any other
business activity, whether or not such employment or business activity is
pursued for gain, profit or other pecuniary advantage, without Employer's
express prior written consent; provided that the foregoing shall not prohibit
Executive from winding down his existing Nextjobstep business entity or from
receiving amounts still owed him in respect of prior employment.
3. Term of Employment.
(a) Executive's employment with Employer commences as of
February 16, 2001 and, unless earlier terminated pursuant to the provisions of
Section 3(b) below, terminates at the close of business on February 15, 2004
(the "Term"), provided, however, that commencing on February 15, 2004, and on
each annual anniversary of such date (such date and each annual anniversary
being called a "Renewal Date"), this Agreement automatically shall extend for an
additional one-year period upon the terms described in this paragraph, unless
six (6) months or more prior to the Renewal Date, either party gives notice to
the other in accordance with Section 14 that such party elects not to renew the
employment term. If such notice of non-renewal is given, then Executive's
employment shall terminate at the expiration of the then current term. In the
case of each such renewal all terms of this Agreement (including those
respecting termination) shall remain in full force and effect.
(b) Notwithstanding the foregoing, prior to the expiration
of the Term (as the same may be extended): (i) Employer may terminate
Executive's employment, without prior notice unless otherwise noted, for
"Cause". For purposes of this Agreement, grounds for termination for "Cause"
shall include only the following: (1) Executive's failure or refusal to perform
any lawful stated duty or responsibility; (2) misconduct or dishonesty by
Executive in connection with the performance of this Agreement or any other of
Executive's duties hereunder; (3) disloyalty, misappropriation of Company's or
any of its affiliate's funds by Executive, Executive being convicted of a felony
or crime involving moral turpitude, or fraudulent or unethical conduct by
Executive related to or affecting Executive's employment; (4) failure of
Executive to meet or achieve specific business plans or objectives as determined
by the CEO or Board of Directors of Employer and which have been made known to
Executive (which is not remedied within 45 days after receipt of written notice
of the same is given by Employer to Executive); or (5) any other breach of this
Agreement by Executive (which is not remedied within 45 days after receipt of
written notice of the same is given by Employer to Executive specifying the
particular circumstances alleged to constitute Cause and Employer's intention to
terminate Executive's employment); (ii) Executive's employment terminates
immediately upon Executive's death; (iii) Executive's employment may be
terminated, at Employer's option, if, due to physical or mental illness, injury,
or condition, Executive is unable to perform any essential function of
Executive's position with reasonable accommodation for a period of more than 90
consecutive days; (iv) Executive may terminate his employment for "Good Reason"
as defined as follows: (x) any violation of a material term of this Agreement by
Employer (which is not remedied within 45 days after receipt of written notice
of the same is given by Executive to Employer specifying the particular
circumstances alleged to constitute Good Reason and Executive's intention to
terminate his employment); (y) any reduction in or failure to pay Executive's
Base Salary in accordance
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with this Agreement; (z) relocation of Executive's principal place of business
more than thirty (30) miles from Herndon, Virginia; or (zz) a reduction in
Executive's title or the assignment of Executive to duties which result in a
substantial diminution of Executive's position, duties or responsibilities as
provided for in this Agreement, excluding an isolated and/or inadvertent action
which is remedied by Employer within 45 days after written notice of the same is
given by Executive to Employer or a temporary or occasional assignment by the
Board or the Chairman of the Board made for reasons of business necessity in the
good faith judgment of the Board or its Chairman.
(c) Upon termination of Executive's employment hereunder,
Executive shall be entitled to receive any Base Salary accrued but unpaid as of
such date, any unused accrued vacation, and unreimbursed business expenses
incurred in accordance with Employer's existing policies, and shall promptly
return to Employer all of Employer's tangible and intangible property that is in
Executive's possession (other than personal files, rolodex, cellular telephone,
and cellular telephone number of Executive).
(d) If Executive legitimately terminates Executive's
employment for Good Reason as defined in Section 3(b) above, or if Employer
terminates Executive's employment, excluding a termination under Section
3(b)(i), (ii) or (iii), without Cause or in violation of this Agreement prior to
the expiration of the Term, then Executive shall be entitled to receive: (i) an
amount equal to one time the then current rate of Base Salary being paid to
Employer (excluding bonuses, benefits, or other compensation) on the effective
date of such termination, contingent upon and subject to Executive's continuing
and full compliance with the provisions of Sections 7 and 8 herein. This sum
will be paid to Executive within ten (10) business days of the termination of
Executive's employment. and (ii) a one-time payment of the pro-rated portion of
the Executive's Bonus (as described below) under the bonus plan for Executive in
effect for that fiscal year provided the corporate performance goals for that
Bonus plan for the entire fiscal year are in fact achieved. The pro-rated
portion shall be paid at the same time the Bonus otherwise would have been
payable under the Agreement if Executive had remained in Employer's employ, and
shall be equal to pro-rated percentage of the Bonus equal to the percentage of
the fiscal year during which Executive was employed by Employer. In addition,
Executive shall continue to receive medical coverage, to the extent offered and
provided pursuant to Section 4(e), in effect as of the termination of
Executive's employment for an additional six (6) months from the termination
date.
(e) The provisions of Sections 3, 7, 8, 9, and 14 of this
Agreement, and any related provisions, shall survive and continue after the
termination of this Agreement and after the termination of Executive's
employment.
4. Compensation. For the services rendered pursuant to this
Agreement's terms, during Executive's employment Executive shall receive the
following:
(a) Base Salary. Executive shall be compensated at an annual
rate of two hundred thousand dollars ($200,000) ("Base Salary").
(b) Bonus. (a) Executive shall be entitled to receive a
bonus ("Bonus"), payable and determined as described below, for each calendar
year in which Executive: (i) meets the enumerated
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individual and corporate performance goals established by the Employer's CEO and
Compensation Committee of the Board after consultation with Executive for such
calendar year; and (ii) was employed by Employer at the end of the calendar
year. The Bonus will be paid by April 15th of the following calendar year. With
respect to any such Bonus plan and goals established by Employer, Executive
shall be eligible to qualify for a bonus as follows: (i) Executive's bonus
target shall be seventy-five percent (75%) of Executive's Base Salary in effect
at the beginning of the calendar year; (ii) of the seventy-five percent (75%) of
Base Salary bonus target described immediately above, one-third (1/3) (i.e.,
twenty-five percent (25%) of the Base Salary), shall be based on Employer
achieving and satisfying the corporate goals established by the CEO and
Compensation Committee of the Board, and two-thirds (2/3) (i.e., fifty percent
(50%) of the Base Salary) shall be based on Executive achieving and satisfying
the individual goals and objectives established by the CEO and Compensation
Committee of the Board; provided, however, that, for the Year 2001, Executive
shall be guaranteed a minimum bonus payment of fifty thousand dollars ($50,000)
for his individual goals and objectives.
(c) Review. Employer will review the compensation spelled
out above, on an annual basis.
(d) Withholding. Employer shall withhold from Executive's
compensation all amounts owed Employer (if any) and all amounts required to be
withheld under federal, state or local law.
(e) Benefit Plans, Vacation. During Executive's employment
with Employer, Employer will pay the cost of participation by Executive and his
immediate family in any group health insurance plan (PPO or equivalent) then
maintained by Employer to the same extent provided to employees of Employer
generally. Executive will be entitled to participate in any other benefit plan
of Employer offered by Employer to its employees generally, provided Executive
is eligible to participate under the terms of any such plan subject to
applicable terms and conditions. Executive shall be entitled to receive three
(3) weeks paid vacation per annum.
(f) Options. Executive shall be granted an option (the
"Option") under the Net2000 Communications, Inc. 1999 Stock Incentive Plan
("Stock Option Plan"), subject to the terms of the Incentive Stock Option Grant
Agreement ("Stock Option Agreement"), as described below.
1. The Option will be to purchase One Hundred Fifty Thousand (150,000)
shares of the Company's common stock. The exercise price of these stock
options will be at a strike price of $5.25 per share, and thirty-seven
thousand five hundred (37,500) of the options granted pursuant to the
Stock Option Agreement shall vest immediately when the option is granted
and Executive has executed and delivered to Employer this Agreement and
the Stock Option Agreement, with the balance to vest as follows,
provided that Executive must be in continuous employ of the Company from
the stock option grant date through the applicable date upon which
vesting is scheduled to occur: (i) an additional thirty-seven thousand
five hundred (37,500) stock options will vest on the first anniversary
date of the Stock Option Agreement date; and (ii) the remainder of
unvested stock options shall vest at a rate of 1/24 per month
thereafter, subject to the terms of the Stock Option Plan and the Stock
Option Agreement.
2. Executive will be eligible to receive a bonus option ("Bonus Option") to
purchase up to an
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additional sixty thousand (60,000) shares of the Company's common stock
contingent upon and subject to the full achievement of the following
specific individual performance goals:
(a) An additional ten thousand (10,000) stock options if,
within six (6) months of the date of this Agreement, the aggregate sales
personnel headcount for all direct sales branch offices meets or exceeds one
hundred percent (100%) of targeted headcount for all of the overall designated
direct sales positions. Executive acknowledges that the sales headcount targets
for each direct sales branch office have been disclosed to Executive in writing.
(b) An additional twenty thousand (20,000) stock options if,
within six (6) months of the date of this Agreement, the total amount of booked
revenue (as that term is defined in the 2001 Sales Compensation Plan) for direct
sales of the Company is at least one hundred and twenty-five percent (125%) of
the Company's Wall Street sales revenue plan as publicly communicated to Wall
Street analysts. Executive acknowledges that he has received a copy of such
sales revenue plan for direct sales and further acknowledges that sales made by
Alternate Channel Sales, Carrier Sales, and/or sales agents shall not count in
calculating direct sales revenue.
(c) An additional thirty thousand (30,000) stock options if,
within six (6) months of the date of this Agreement, the total amount of booked
revenue (as that term is defined in the 2001 Sales Compensation Plan) for direct
sales of the Company is at least one hundred and fifty percent (150%) of the
Company's Wall Street sales revenue plan as publicly communicated to Wall Street
analysts. Executive acknowledges that he has received a copy of such sales
revenue plan for direct sales and sales made by Alternate Channel Sales, Carrier
Sales, and/or sales agents shall not count in calculating direct sales revenue.
(d) If any portion of the Bonus Option is earned by
Executive in accordance with the requirements and specific individual
performance milestones described above, the stock options received by Executive
shall vest as follows: 33% of the shares shall vest on the first anniversary of
that date that the shares are earned by Executive, with the remainder of the
shares vesting 1/24 per month thereafter; provided, however, that the Bonus
Option is subject to the terms of the Stock Option Plan and the Stock Option
Agreement and Executive must be in continuous employ of the Company from the
Bonus Option grant date through the applicable date upon which vesting is
scheduled to occur.
3. In the event of a Change of Control, all of Executives stock
options granted hereunder and otherwise shall automatically vest upon the
closing date of the Change of Control and become immediately exercisable in
accordance with the terms of the applicable Stock Option Agreement. For the
purposes of this Agreement, the term "Change in Control" shall mean (i) the
acquisition by any individual, entity or group within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (a "Person"), of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 50% or more of either (A) the
then outstanding shares of common stock of Net2000 Communications, Inc.; or (B)
the combined voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities); (ii) the closing of a sale or
conveyance of all or substantially all of the assets of the Company; or (iii)
the effective time of any merger, share exchange, consolidation
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or other reorganization or business combination of the Company if, immediately
after such transaction, persons who hold a majority of the Outstanding Company
Voting Securities entitled to vote generally in the election of directors of the
surviving entity are not the same persons who held a majority of Outstanding
Company Voting Securities immediately prior to such transaction; provided,
however, that for purposes of this Agreement, the following acquisitions shall
not constitute a Change in Control: (y) any acquisition by the Company or an
affiliate in which the Company or the affiliate is the surviving entity; or (z)
any acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company.
(h) Automobile Allowance. During his employment with
Employer. Executive shall receive an automobile allowance of six hundred dollars
($600) per month.
(i) Telephone Service. During the period Executive remains
employed by Employer, Employer will provide, at no additional cost to Executive
(i) an ISDN telephone line at Executive's residence for purposes of conducting
Company business; (ii) reimbursement to Executive for the cellular phone usage
on Executive's cellular phone provided that Executive subscribes to an
appropriate usage plan designed to minimize cost to the Company.
5. Office. During Executive's employment, unless otherwise agreed
to by Executive in writing, Executive shall be entitled to an office at, and
perform Executive's duties principally out of, a corporate office maintained by
Employer in Herndon, Virginia or the immediately surrounding area.
6. Expenses. During Executive's employment, Employer shall
reimburse Executive for reasonable, ordinary and necessary business expenses
incurred by Executive in the performance of his duties for Employer subject to
any budgetary limitations established from time to time by Employer and provided
Executive provides such documentation and information as may then be required by
Employer's business expense reimbursement policy and as may be required to
satisfy the standards necessary to deduct such expenses for federal income tax
purposes.
7. Confidential Information.
(a) Executive acknowledges that Employer is a developing
company that offers services in a competitive industry and that, in the course
of developing its business, Employer has developed and will continue to develop
and/or acquire, and Executive will learn, valuable Confidential Information
(described below), which was unknown to Executive prior to Executive's
employment, or which has been developed by Executive on behalf of Employer;
which Confidential Information only was and will be disclosed to Executive in
and under a relationship of trust and confidence under restrictions of
confidentiality. As used in this Agreement, Confidential Information includes,
without limitation (i) names, addresses, phone numbers, dates and any and all
other information regarding the customers or potential customers and key
contacts at customers of Employer; and (ii) trade secrets, business, sales and
financial data, pricing, costs, financial statements, programs, property, lists,
diagrams and drawings, information concerning the design, components and
manufacture of Employer's products, market information, vendor information,
supplier information, research reports, technical data, test data, forecasts,
financial statements, price and cost data, financial and marketing plans,
manuals, strategies, and projections of Employer;
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provided that Confidential Information shall not include (x) any of the
foregoing or other information in the public domain or previously known or held
by Executive, (y) information required by law to be disclosed by Executive; or
(z) Executive's personal files and rolodex in his possession and ownership prior
to commencement of his employment at the Company. Executive agrees that the
Confidential Information is a trade secret for purposes of all applicable laws,
and that Confidential Information would not be disclosed to Executive but for
Executive's execution of this Agreement.
(b) Except as required by the duties of Executive's
employment with Employer, Executive shall never during his employment or for a
period of two (2) years after such employment terminates, directly or
indirectly, use, publish, or otherwise disclose any Confidential Information,
without Employer's prior written consent. This restriction shall not apply to
information which is already known in the industry generally other than by
reason of any actions of Executive.
(c) During Executive's employment with Employer, Executive
shall exercise all due and diligent precautions to protect the integrity and
non-disclosure of the Confidential Information and, upon termination of
employment, or otherwise before then upon request, Executive shall immediately
return to Employer all documents (whether stored in hard copy or electronically)
or materials embodying such Confidential Information or any part thereof
(including any copies thereof) in Executive's possession or control.
(d) Executive represents to Employer and agrees that
Executive has not provided, and will not provide to Employer (or utilize in
connection with the performance of his duties), any trade secrets of a prior
employer.
8. Restrictive Covenants.
(a) Executive acknowledges and agrees that Employer will
suffer great loss and damage if, during Executive's employment or at any time
subsequent to such employment, Executive were to improperly use or disclose
Confidential Information or goodwill of Employer, or if Executive were to use
Executive's contacts and relationships with any customer, potential customer, or
referral source of Employer, and therefore agrees that Executive must comply
with the restrictive covenants hereinafter set forth; it being understood at the
execution of this Agreement that the parties acknowledge and agree such
restrictions protect legitimate protectable interests of Employer, with respect
to its trade secrets, customers, and referral sources, are reasonable and
necessary to protect such interests, are compatible with their respective
rights, and do not impair or prevent Executive from earning a living.
(b) During Executive's employment with Employer and for the
continuous period of eighteen (18) months after such employment terminates
(whether the Term or any extension thereof expires, the employment term is
non-renewed by either party, or employment is terminated by Executive or
Employer and regardless of the reason for termination), Executive shall not
directly or indirectly, for any reason or purpose whatsoever (other than on
Employer's behalf in performing Executive's required duties for Employer),
whether for Executive's own benefit, or for the benefit or on behalf of, or in
conjunction with, any other corporation, partnership, proprietorship, or other
form of business entity, and whether as an employee (in any executive,
managerial, officer, exempt or sales position), partner, principal, officer,
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director, consultant, agent, stockholder or otherwise:
(i) contact, call on, solicit the business of, sell
any goods or services of a type then provided by
Employer or any of Employer's subsidiaries
and/or affiliates to Employer's current customer
base and/or prospects to whom Employer or any of
Employer's subsidiaries and/or affiliates is
engaged in proposing its services to;
(ii) solicit or encourage any director, officer, or
other employee or sales agent of Employer or any
of Employer's subsidiaries and/or affiliates to
discontinue that individual's status or
employment with Employer or any of Employer's
subsidiaries and/or affiliates, or encourage or
entice such individual to engage or participate
in any activity or employment in competition
with Employer.
(c) It is the intention of the parties to restrict
Executive's activities only to the extent necessary for the protection of
Employer's legitimate business interests. To the extent that any covenant set
forth in this Section 8, or in Section 7 of this Agreement, shall be determined
to be invalid or unenforceable in any respect or to any extent, the covenant
shall not be rendered invalid, but instead shall be automatically amended for
such lesser term or to such lesser extent, or in such other degree, as may grant
the Employer or other party seeking enforcement the maximum protection and
restrictions on Executive's activities permitted by applicable law in such
circumstances.
(d) Executive acknowledges and agrees that (i) the separate
and distinct promises in this Agreement are reasonable and necessary in order to
protect the legitimate business interests described above, (ii) any violation
would result in irreparable injury to Employer, and (iii) the enforcement of a
remedy by way of injunction or otherwise would not prevent Executive from
earning a living.
9. Non-Waiver of Covenants. Employer's failure to exercise any of
its rights to enforce the provisions of this Agreement shall not be affected by
the existence or non-existence of any other similar agreement for any other
person employed by Employer, or by Employer's failure to exercise any of its
rights under this Agreement or any other similar agreement. Employer's failure
to exercise any of its rights in the event Executive breaches any promise in
this Agreement shall not be construed as a waiver of such breach or prevent
Employer from later enforcing strict compliance with any and all promises,
obligations, and rights set forth in this Agreement.
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10. Assignment, Entire Agreement, Amendment. This Agreement may be
assigned only by Employer, and is freely assignable by Employer. This Agreement
constitutes the entire agreement between the parties concerning the subject
matter of this Agreement and supersedes all prior understandings, communications
and agreements concerning such subject matter; provided that, to the extent
there is any conflict between this Agreement and any stock option grant
agreement or plan, the provisions of this Agreement shall control. Neither this
Agreement, nor any of its terms, can be changed, added to, waived or
supplemented except in a written document signed by Executive and Employer,
except that Employer may adopt or change any vacation, benefit, rules or other
policy generally applicable to employees or a group or class of employees in its
discretion.
11. Governing Law, Assignment, Miscellaneous.
(a) This Agreement shall be governed by and construed and
interpreted according to the internal laws of the Commonwealth of Virginia
without reference to conflicts of law principles. The headings of the sections
are inserted for convenience of reference only and shall not be considered to
constitute a part of this Agreement nor to affect the meaning.
(b) If any one or more provisions contained in this Agreement,
or in the application thereof, shall be held to be invalid, illegal, or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions of this Agreement shall not in any way be affected or
impaired. Nothing in this Agreement shall be deemed to require Employer or
Executive to take any action or perform any obligation which would be contrary
to or inconsistent with a court order.
(c) In any suit to enforce this Agreement, both parties agree
that venue and jurisdiction is proper in the County in Virginia in which
Herndon, Virginia is located and, if federal jurisdiction exists, the federal
district court for the district in which Herndon, Virginia is located, and the
parties hereby waive any objection to jurisdiction and venue in any such forum
described in this Section 12(c) and any claim that such forum is not the most
convenient forum.
12. Acknowledgment; Indemnification. By signing this Agreement,
Executive and Employer each acknowledge and agree that they each have read the
Agreement, understand and intend to fulfill each and every one of the covenants
and obligations in this Agreement, understand this is a legally binding
agreement, and acknowledge receiving a copy of the Agreement.
13. Notice. Every notice, demand or other communication required or
contemplated by this Agreement shall be in writing and deemed to have been made
either when personally delivered to the respective party or sent via overnight
mail, return receipt requested, to the address set forth below under such
party's signature, or to such changed address as either party may have given by
written notice to the other party.
14. Indemnification. Executive shall be entitled to indemnification
to the extent provided under the Company's Articles of Incorporation and By-Laws
and to coverage under the Company's liability insurance for directors and
officers subject to the terms and conditions of such insurance coverage.
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IN WITNESS WHEREOF, the parties hereto have signed this Agreement below,
this 16th day of February, 2001.
NET2000 COMMUNICATIONS, INC.
By: /s/Xxxxx Xxxxxxxxxx By: /s/Xxxxxxx Xxxxxx
----------------------------------------- -------------------------------
Xxxxx Xxxxxxxxxx Xxxxxxx Xxxxxx
Chief Executive Officer & Chairman
Residing at:
0000 Xxxxxxx Xxxx 0000 Xxx Xxxx Xxxx
Xxxxxx, Xxxxxxxx 00000 Xxxxxxx, XX 00000
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