EXHIBIT 10.11
NETWORK MANAGEMENT SERVICES, INC.
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement ("Agreement") dated as of _April 22,
1999, is made and entered into between Network Management Services, Inc., a
Minnesota corporation, ("the Company") and Xxxxx Xxxxxxxx, an individual
resident of the State of Minnesota, ("the Employee").
WHEREAS, the Company wishes to employ the Employee to render services for
the Company on the terms and conditions set forth in this Agreement, and the
Employee wishes to be retained and employed by the Company on such terms and
conditions.
NOW, THEREFORE, in consideration of the premises and the respective
undertakings of the Company and the Employee set forth below, the Company and
the Employee agree as follows:
Article 1.0 Definition. Capitalized terms in this Agreement shall have
their defined meaning throughout the Agreement. The following terms shall have
the meaning set forth below, unless the context clearly requires otherwise.
1.01 Board. "Board" shall mean the Board of Directors of the Company.
1.02 Cause. "Cause" shall mean termination by the Company of the Employee's
employment based upon: (i) the Employee's willful misconduct, dishonesty, or
other material violation of law or Company policies; or (ii) actions (or
failures to act) by the Employee in bad faith and to the detriment of the
Company.
1.03 Change in Control. A "Change in Control" of the Company shall be
deemed to have occurred if:
(a) Any "person" (as such term is used in Sections 13(d) and 14(d)(2) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act")) who did
not own shares of the capital stock of the Company on the date of grant of the
Option shall, together with his, her or its "Affiliates" and "Associates" (as
such terms are defined in Rule 12b-2 promulgated under the Exchange Act), become
the "Beneficial Owner" (as such term is defined in Rule 13d-3 promulgated under
the Exchange Act), directly or indirectly, of securities of the Company
representing fifty percent 50% or more of the combined voting power of the
Company's then outstanding securities (any such person being hereinafter
referred to as an "Acquiring Person");
(b) The "Continuing Directors" (as hereinafter defined) shall cease to
constitute a majority of the Board; or
(c) There should occur (i) any sale, lease, exchange or other transfer (in
one transaction or a series of related transactions) of all or substantially all
of the assets of the Company; or (ii) any liquidation or dissolution of the
Company; or (iii) any consolidation or merger involving the Company and the
Company shall not be the continuing or surviving corporation or the shares of
the Company's capital stock shall be converted into cash, securities or other
property; provided, however, that this subclause (iii) shall not apply to a
merger or consolidation in which (A) the Company is the surviving corporation
and (B) the shareholders of
the Company immediately prior to the transaction have the same proportionate
ownership of the capital stock of the surviving corporation immediately after
the transaction.
(d) The number of directors on the Board exceeds nine (9).
In the case of a Change of Control as described in Subsections (c)(i) or (iii),
the Options will be assumed by the surviving or acquiring corporation, as the
case may be.
1.04 Confidential Information. "Confidential Information" shall mean
information that is proprietary to the Company, or to others and is entrusted to
the Company, whether or not trade secrets. Confidential Information includes,
but is not limited to, information relating to designs, software (in source and
object code), technology strategies, business plans as to the business as
conducted or anticipated to be conducted by the Company, and to past or current
or anticipated products or services of the Company. Confidential Information
also includes, without limitation, information concerning the Company's
research, development, purchasing, accounting, marketing, selling, and services.
All information that the Employee has a reasonable basis to consider
confidential is Confidential Information, whether or not originated by the
Employee and without regard to the manner in which the Employee obtains access
to it.
1.05 Continuing Director. "Continuing Director" shall mean any person who
is a member of the Board, while such person is a member of the Board, who is not
an Acquiring Person, an Affiliate or Associate of an Acquiring Person or a
representative of an Acquiring Person or of any such Affiliate or Associate and
who (i) was a member of the Board on the date of grant of the Option or (ii)
subsequently became a member of the Board, upon the nomination or
recommendation, or with the approval of, a majority of the Continuing Directors.
1.06 Disability. "Disability" shall mean the Employee's inability to
perform the essential functions of the Employee's position, with or without
reasonable accommodation, provided the Employee has exhausted the Employee's
entitlement to any applicable leave, if the Employee desires to take and
satisfies all eligibility requirements for such leave.
1.07 Effective Date. "Effective Date" shall mean the date on page one
hereof.
1.08 Good Reason. "Good Reason" shall mean the occurrence of any of the
following events, except for the occurrence of such an event in connection with
the termination of the Employee's employment by the Company for Cause, for
Disability, or for death: (a) a material change in the employees job duties and
responsibilities, (b) a material reduction in the Employee's compensation,
including the Employee's salary, bonus target percentage, and stock option
grants and vesting; (b) a requirement that the Employee relocate the Employee's
place of work more than twenty-five (25) miles from the Company's current
location in Golden Valley, Minnesota.
1.09 Inventions. "Inventions" shall mean ideas, improvements, and
discoveries, whether or not such are patentable or copyrightable, and whether or
not in writing or reduced to practice.
1.10 Works of Authorship. "Works of Authorship" shall mean any writings,
drawings, diagrams, charts, tables, databases, software (in object or source
code and recorded on any medium), and any other works of authorship, whether or
not such are copyrightable.
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Article 2.0 Employment.
2.01 Service With The Company. Under the terms and conditions set forth
herein the Company hereby offers to continue to employ the Employee, and the
Employee accepts such employment, as Chief Financial Officer, commencing on or
about April 22, 1999, at the Company's principal place of business in Golden
Valley, Minnesota.
2.02 Performance of Duties. The Employee agrees to serve the Company
faithfully and to the best of the Employee's ability and to devote the
Employee's full-time, attention, and efforts to the business and affairs of the
Company during the term of the Employee's employment. The Employee hereby
confirms that he is under no contractual commitments inconsistent with the
Employee's obligation set forth in this Agreement and that, during the term of
this Agreement, the Employee will not render or perform any services for
compensation for any other corporation, firm, entity, or person. Notwithstanding
the exclusivity of Employee's duties to Company, Employee may serve on the
board(s) of directors of non-competitive companies, and receive remuneration for
such service, but will obtain the approval of Company's Board of Directors in
advance. Such approval will not be unreasonably withheld. To the extent
permitted by law, the Company shall indemnify Employee and will obtain, within
180 days, officers' and directors' liability insurance coverage in such amount
as the Company's Board of Directors shall determine to be appropriate.
Article 3.0 Compensation and Benefits.
3.01 Base Salary. As base compensation for all services to be rendered by
the Employee under this Agreement during the term of this Agreement, the Company
shall pay to the Employee an annualized salary of one hundred and thirty
thousand dollars (130,000) The Employee's salary shall be paid in accordance
with the Company's normal payroll procedures and policies, as such procedures
and policies may be modified from time to time and the Employee shall be
eligible for annual salary increases consistent with such policies and
procedures. Company's CEO and Board of Directors will review Employee's salary
on an annual basis and, in its discretion, make adjustments.
3.02 Incentive Compensation. The Company shall make the Employee eligible
for an annual bonus payment. Payment of an annual bonus to the Employee will be
subject to the Employee's achieving certain objectives set annually by the
Board. Subject to the foregoing, the Employee's target bonus for each year of
this Agreement will be thirty-five percent (35%) of the Employee's base salary,
with an opportunity for the Employee to receive as much as fifty percent (50%)
of his base salary if the Employee and Company greatly surpasses the objectives
for a given year. The CEO and the Company's Board of Directors will review
Employee's bonus target levels on an annual basis and, in its discretion, make
upward adjustments.
3.03 Equity Participation. The Company shall make the Employee eligible to
receive options to purchase the Company's common stock, subject to the terms and
conditions of the Company's stock option plan ("the Plan"). The CEO and the
Company's Board of Directors will periodically review Employee's stock option
grants and, in its discretion, make additional grants and awards. In the even of
a change of control, 50% of all unvested stock option shares will vest
immediately, and the vesting period for any remaining unvested shares will be
cut in half.
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3.04 Participation in Benefits. During the term of the Employee's
employment with the Company, the Employee shall be entitled to participate in
the employee benefits offered generally by the Company to its employees, to the
extent that the Employee's position, tenure, salary, health, and other
qualifications make the Employee eligible to participate. The Employee's
participation in such benefits shall be subject to the terms of the applicable
plans, as the same may be amended from time to time. The Company does not
guarantee the adoption or continuance of any particular employee benefit plan
during the Employee's employment, and nothing in this Agreement is intended to,
or shall in any way restrict the right of the Company, to amend, modify, or
terminate any of its benefits during the term of the Employee's employment.
Article 4.0 Term; Termination.
4.01 Term. The Term of this Agreement shall be five (5) years from the
Effective Date. The Employee's employment under this Agreement shall commence
upon the Effective Date and shall be terminable during the term of this
Agreement by either party for any reason or no reason upon a notice of thirty
(30) days.
4.02 Termination by the Company for Cause. Notwithstanding Section 4.01
above, the Company may terminate this Agreement without notice for Cause.
4.03 Termination by the Employee for Good Reason. Notwithstanding Section
4.01 above, the Employee may terminate this Agreement without notice for Good
Reason.
4.04 Termination in the Event of the Employee's Death or Disability.
Notwithstanding Section 4.01 above, the Employee's employment under this
Agreement shall terminate in the event of the Employee's death or Disability.
4.05 Termination by Mutual Agreement. Notwithstanding Section 4.01 above,
the parties may terminate this Agreement at any time and upon any other terms or
conditions by mutual written agreement.
4.06 Compensation Upon Termination. As the Employee's sole and exclusive
compensation upon termination of the Employee's employment by either party
during the term of this Agreement, the Company shall pay the Employee as
follows:
(a) If due to termination by the Company for Cause or by the Employee
without Good Reason, within ten (10) days after the termination date, the
Company shall pay the Employee any amounts due to him for base salary through
the termination date together with any other unpaid and pro rata amounts of
accrued vacation pay, sick leave, and/or business expenses reimbursements that
may be due under the Company's policies, and all unvested option shares will be
canceled immediately.
(b) If due to termination by the Company other than for Cause, the Company
shall pay the Employee his base salary in effect at the termination date for a
period of six months and fifty percent (50%) of the Employee's unvested option
shares will immediately vest. If such termination by the Company other than for
Cause occurs within one year after a Change of Control, the Company shall pay
the Employee his base salary in effect at the termination date for a period of
six months and one hundred percent (100%) of the Employee's unvested option
shares will immediately vest.
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(c) If due to termination by the Employee for Good Reason, the Company
shall pay the Employee his base salary in effect at the termination date for a
period of six months and fifty percent (50%) of the Employee's unvested option
shares will immediately vest. If such termination by the Employee for Good
Reason occurs within one year after a Change in Control, the Company shall pay
the Employee his base salary in effect at the termination date for a period of
six months and one hundred percent (100%) of the Employee's unvested options
shares will vest immediately.
(d) Company shall continue to pay or reimburse Employee's premiums for
health coverage accorded to Employee under Article 3.04 during any period of
salary continuation pursuant to subclause (b) or (c), above. In the event that
any payment or benefit required to be made by Company under this Article 4.06,
either alone or in combination with any other payment or benefit Employee is
then entitled to receive, would constitute a "parachute payment" (under Section
280(g) of the Internal Revenue Code), the Company and Employee will negotiate in
good faith a modification of this Article with the intention of maximizing
Employee's net after tax benefit, while at the same time not adversely affecting
the company. The Company shall have no duty or obligation to employ the Employee
following any termination by the Company or the Employee.
4.07 Survival. The provisions of Article 4.0 (relating to termination
rights and the provision of compensation and benefits beyond the termination of
this Agreement) shall survive termination of this Agreement for any reason. The
provisions of Article 5.0 (relating to confidential information and intellectual
property rights of the Company), the provisions of Article 6.0 (relating to
non-competition, no raiding, and non-solicitation), the provisions of Article
7.0 (relating to dispute resolution) and the provisions of Article 8.0 (relating
to miscellaneous terms and conditions) shall survive the expiration of the term
of this Agreement and the termination of this Agreement for any reason.
Article 5.0 Confidential Information; Intellectual Property.
5.01 Prohibitions Against Unauthorized Use. The Employee shall not use or
disclose, other than in connection with the Employee's employment with the
Company, any Confidential Information to any person not employed by the Company
or not authorized by the Company to receive such Confidential Information,
without the prior written consent of the Company during the term of this
Agreement or at any time thereafter. The Employee shall use reasonable and
prudent care to safeguard and prevent the unauthorized use and disclosure of
Confidential Information.
5.02 Exclusions. The obligations under Section 5.01 above shall not apply
to any information that: (a) is now or becomes generally available to the public
through no fault of the Employee; (b) was already known to the Employee, as
shown by his books and records, prior to disclosure of same by the Company; (c)
is or was independently developed or acquired by the Employee without any use of
or reliance on Confidential Information; (d) is or was provided to the Employee
by a third party not under any obligation of confidentiality to the Company; or
(e) is required to be disclosed by law, provided, however, the Employee shall
render reasonable cooperation, at the Company's expense, to lawfully prevent or
minimize any such public disclosure of Confidential Information through
protective orders or other similar matters.
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5.03 Ownership and Return of Company Property. All Confidential Information
or other Company property in the Employee's possession, custody, or control,
including, without limitation, all documents, reports, manuals, business plans,
minutes, memoranda, computer software, computer databases, computer print-outs,
member or customer lists, credit cards, keys, identification, products, access
cards, and all other tangible or intangible property relating in any way to the
business of the Company are the exclusive property of the Company, even if the
Employee authored, created, or assisted in authoring or creating such property.
The Employee shall return to the Company all such Confidential Information or
other property immediately upon termination of employment for any reason
whatsoever or at such earlier time as the Company reasonably requests.
5.04 Disclosure and Assignment of Inventions and Other Works. The Employee
shall promptly disclose to the Company in writing all Inventions and Works of
Authorship, which are conceived, made, discovered, written, or created by the
Employee alone or jointly with another person, group, or entity, whether during
the normal hours of his employment at the Company or on the Employee's own time,
during the term of this Agreement and for two (2) year following the termination
of the Employee's employment with the Company for any reason whatsoever. The
Employee hereby assigns all rights to such Inventions and Works of Authorship to
the Company. The Employee shall give the Company all the assistance it
reasonably requires for the Company to perfect, protect, and use its rights to
such Inventions and Works of Authorship. The Employee shall sign all documents,
take all actions, and supply all information that the Company considers
necessary or desirable to transfer or record the transfer of the Employee's
entire right, title, and interest in such Inventions and Works of Authorship and
to enable the Company to obtain exclusive patent, copyright, or other legal
protection for Inventions and Works of Authorship anywhere in the world,
provided, that the Company shall bear all reasonable expenses of the Employee in
rendering such cooperation.
5.05 Exclusions. Notwithstanding Section 5.04 above, the following shall
not be deemed Inventions or Works of Authorship assigned to the Company by the
Employee hereunder: any Invention or Work of Authorship for which no equipment,
supplies, facility, or Confidential Information of the Company was used and
which was developed entirely on the Employee's own time, and which (a) does not
relate (i) directly to the business of the Company or (ii) to the Company's
actual or demonstrably anticipated research or development, or (b) does not
result from any work performed by the Employee for the Company.
Article 6.0 Non-Competition, No Raid, and Non-Solicitation Covenants.
6.01 Non-Competition Covenant. Subject to Section 6.02 below, during the
term of this Agreement and for a period of one (1) year following the
termination of the Employee's employment with the Company for any reason
whatsoever, the Employee shall not, directly or indirectly, engage in any
business activity on his own behalf or as a partner, shareholder, director,
trustee, principle, agent, officer, employee, consultant, or otherwise of any
person or entity the business of which is the same as, similar to, or
competitive with any business of the Company, or which is engaged in the
development or production of products intended to compete with the Company, or
assist, solicit, entice, or induce any other person to engage in any such
activity. For purposes hereof, "shareholder" shall not include beneficial
ownership of less than five percent (5%) of the combined voting power of all
issued and outstanding voting securities of a publicly-held corporation whose
stock is traded on a major stock exchange or quoted on NASDAQ.
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6.02 Company's Option to Revise. At its sole option, the Company may, by
written notice to the Employee, after the termination of the Employee's
employment, waive or limit the line of business, time period, and/or geographic
area in which the Employee is prohibited from engaging in competitive activity
under Section 6.01 above.
6.03 Covenant Not to Recruit. The Employee hereby acknowledges that the
Company's employees, consultants, and other contractors constitute vital and
valuable aspects of its business and missions on a world-wide basis. In
recognition of that fact, for a period of two (2) years following the
termination of the Employee's employment with the Company for any reason
whatsoever, the Employee shall not solicit, or assist anyone else in the
solicitation of, any of the Company's then current employees, consultants, or
other contractors to terminate their respective relationships with the Company
and to become employees, consultants, or contractors of any enterprise with
which the Employee may then be associated, affiliated, or connected.
6.04 Covenant Not to Solicit. The Employee hereby acknowledges that the
Company's customers constitute vital and valuable aspects of its business on a
world-wide basis. In recognition of that fact, for a period of two (2) years
following the termination of the Employee's employment with the Company for any
reason whatsoever, the Employee shall not solicit, or assist anyone else in the
solicitation of, any of the Company's then current customers to terminate their
respective relationships with the Company and to become customers of any
enterprise with which the Employee may then be associated, affiliated, or
connected.
Article 7.0 Dispute Resolution.
7.01 Procedure for Arbitration. Except as provided in Section 7.02 below,
any dispute arising out of or relating to this Agreement or the alleged breach
of it, or the making of this Agreement, including claims of fraud in the
inducement, or any dispute arising from or related in any way to the Employee's
employment, including any statutory or tort claims, which has not been settled
through negotiation within a period of thirty (30) days after the date on which
either party shall first have notified the other party in writing of the
existence of a dispute, shall be settled by final and binding arbitration
pursuant to the provisions of this Agreement and under the then applicable
arbitration rules of the American Arbitration Association ("AAA"), unless such
rules are inconsistent with the provisions of this Agreement. Any such
arbitration shall be conducted by: (a) neutral arbitrator appointed by mutual
agreement of the parties; or (b) failing such agreement, in accordance with said
rules. The arbitrator shall be an experienced attorney with a background in
employment law. An arbitral award may be enforced in any court of competent
jurisdiction. Each party shall be permitted reasonable discovery, including the
production of relevant documents by the other party, the exchange of witness
lists, and a limited number of depositions, including depositions of any expert
who will testify at the arbitration. The summary judgment procedure applicable
in Hennepin County, Minnesota, District Court, shall be available and apply to
any arbitration conducted pursuant to this Agreement. The arbitrator shall have
the authority to award to the prevailing party any remedy or relief that a court
of the State of Minnesota could order or grant, including costs and attorneys'
fees. Unless otherwise agreed by the parties, the place of any arbitration
proceeding shall be Minneapolis, Minnesota.
7.02 Litigation Rights Reserved. If any dispute arises with regard to the
unauthorized use or infringement of Confidential Information by the Employee or
with regard to the
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Employee's breach or a threatened breach of the covenants in Article 6.0 hereof,
the Company may seek any available remedy at law or in equity from a court of
competent jurisdiction.
Article 8.0 General Provisions.
8.01 Governing Law. This Agreement is made under and shall be governed by
and construed in accordance with the laws of the State of Minnesota without
regard to conflicts of laws principles thereof.
8.02 Prior Agreements. This Agreement (including other agreements
specifically mentioned in this Agreement) contains the entire agreement of the
parties relating to the employment of the Employee by the Company and the other
matters discussed herein and supercedes all prior promises, contracts,
agreements, and understandings of any kind, whether express or implied, oral or
written, with respect to such subject matter (including, but not limited to, any
promise, contract, or understanding, whether express or implied, oral or
written, by and between the Company and the Employee) and the parties hereto
have made no agreements, representations, or warranties relating to the subject
matter of this Agreement which are not set forth herein or in the other
agreements mentioned herein.
8.03 Withholding Taxes. The Company may take such action as it deems
appropriate to ensure that all applicable federal, state, city, and other
payroll, withholding, income, or other taxes arising from any compensation,
benefits, or any other payments made pursuant to this Agreement, or any other
contract, agreement, or understanding which relates, in whole or in part, to the
Employee's employment with the Company, are withheld or collected from the
Employee. In connection with the foregoing, the Employee agrees to notify the
Company promptly upon entering into any contract, agreement, or understanding
relating to the Employee's employment with the Company and also to notify the
Company promptly of any payments or benefits paid or otherwise made available
pursuant to any such agreements.
8.04 Amendments. No amendment or modification of this Agreement shall be
deemed effective unless made in writing and signed by the Employee and the
Company.
8.05 No Waiver. No term or condition of this Agreement shall be deemed to
have been waived, nor shall there be any estoppel to enforce any provisions of
this Agreement, except by a statement in writing signed by the party against
whom enforcement of the waiver or estoppel is sought. Any written waiver shall
not be deemed a continuing waiver unless specifically stated, shall operate only
as to the specific term or condition waived, and shall not constitute a waiver
of such term or condition for the future or as to any act other than as
specifically set forth in the waiver.
8.06 Assignment. This Agreement shall not be assignable, in whole or in
part, by any party without the written consent of the other party, except that
the Company may, without the consent of the Employee, assign its rights and
obligations under this Agreement to any corporation, firm, or other business
entity with or into which the Company may merge or consolidate, or to which the
Company may sell or transfer all or substantially all of its assets, or of which
fifty percent (50%) or more of the equity investment and of the voting control
is owned, directly or indirectly, by, or is under common ownership with, the
Company. After any such assignment by the Company, the Company shall be
discharged from all further liability hereunder and such assignee shall
thereafter be deemed to be the Company for the purposes of all provisions of
this Agreement including this Section 8.06.
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8.07 Injunctive Relief. The Employee acknowledges and agrees that the
services to be rendered by the Employee hereunder are of a special, unique, and
extraordinary character, that it would be difficult to replace such services and
that any breach or threatened breach of the covenants in Article 6.0 hereof
would be highly injurious to the Company and that it would be extremely
difficult to compensate the Company fully for damages for any such violation.
Accordingly, the Employee specifically agrees that the Company shall be entitled
to temporary and permanent injunctive relief to enforce the provisions of the
covenants of Article 6.0 hereof, and that such relief may be granted without the
necessity of proving actual damages and without necessity of posting any bond.
This provision with respect to injunctive relief shall not, however, diminish
the right of the Company to claim and recover damages, or to seek and obtain any
other relief available to it at law or in equity, in addition to injunctive
relief.
8.08 Construction. Where ever 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 shall be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity without invalidating the remainder of
such provision or the remaining provisions of this Agreement. In furtherance of
and not in limitation of the foregoing, the parties agree that, should the
duration of, geographical extent of, or business activities covered by, any
provision of this Agreement be in excess of that which is valid or enforceable
under applicable law in a given jurisdiction, then such provision, as to such
jurisdiction only, shall be construed to cover only that duration, extent, or
activities that may validly or enforceably be covered. The Employee acknowledges
the uncertainty of the law in this respect and expressly stipulates that this
Agreement shall be construed in a manner that renders its provisions valid and
enforceable to the maximum extent (not exceeding its express terms) possible
under applicable law in each applicable jurisdiction.
8.09 Captions. The various headings or captions in this Agreement are for
convenience only and shall not affect the meaning or interpretation of this
Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
set forth in the first paragraph.
Dated: April 22, 1999 NETWORK MANAGEMENT SERVICES, INC.
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By /s/ Xxxx Xxxxxxx
--------------------------------
Its
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Dated: April 22, 1999 /s/ Xxxxx Xxxxxxxx
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Xxxxx Xxxxxxxx
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