EXHIBIT 10.26
EMPLOYMENT AGREEMENT
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EMPLOYMENT AGREEMENT (the "Agreement"), effective as of the 14th day of
December 1998, between Prodigy Communications Corporation, a Delaware
corporation (the "Company"), with its principal place of business at 00 Xxxxx
Xxxxxxxx, Xxxxx Xxxxxx, Xxx Xxxx 00000, and Xxxxx Xxxxxxxxxxxx, residing at 0000
00xx Xx. XX, Xxxxxxxxxx, XX 00000 (the "Executive").
WHEREAS, the Company desires to employ the Executive as President and Chief
Operating Officer of the Company, and the Executive desires to be employed in
that capacity;
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.
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The Company hereby agrees to employ the Executive, and the Executive hereby
accepts employment with the Company, upon the terms set forth in this Agreement,
for the period commencing on December 14, 1998 (the "Commencement Date"), and
ending on December 31, 2001 (the "Employment Period"), unless sooner terminated
in accordance with the provisions of Section 4.
2. Title; Capacity.
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The Executive shall serve as President and Chief Operating Officer of the
Company. The Executive shall be based in White Plains, New York or such other
place within the greater New York metropolitan area as the Board of Directors of
the Company (the "Board") shall determine. The Executive shall report to and be
subject to the supervision of, and shall have such authority as is delegated to
Executive by the Company's Chief Executive Officer.
The Executive hereby accepts such employment and agrees to undertake the
duties and responsibilities inherent in such position, and such other duties and
responsibilities as the Chief Executive Officer shall from time to time assign
to the Executive. The Executive shall devote Executive's entire business time,
attention and energies to the business and interests of the Company during the
Employment Period. The Executive shall abide by the rules, regulations,
instructions, personnel practices and policies of the Company and any changes
therein which may be adopted from time to time by the Company.
3. Compensation and Benefits.
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3.1 Salary. The Company shall pay the Executive, in accordance with its
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normal payroll practices, an annual base salary of $224,000 commencing on
the Commencement Date. Based on performance, such salary shall be subject
to increase consistent with existing merit increase guidelines.
3.2 Performance Bonuses. Effective January 1, 1999, the Executive shall
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be eligible to participate in an annual bonus plan and receive up to 50% of
his annual base salary as a
performance bonus during each calendar year of the Employment Period.
During each such year, 50% of such bonus shall be contingent upon the
successful completion of personal goals as mutually agreed between the
Executive and the Chief Executive Officer, and 50% of such bonus shall be
contingent upon the successful completion of corporate goals as determined
by the Company. Such performance bonus shall be determined and paid within
45 days after the end of each such calendar year during the Employment
Period.
3.3 Sign-On Bonus. The Company shall pay the Executive a guaranteed
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sign-on bonus of $74,000, less applicable withholdings, payable on the
Commencement Date.
3.4 Option Grant.
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(a) The Company shall grant the Executive stock options to purchase
375,000 shares of common stock of the Company at an exercise price equal to
$1.00 per share, and 125,000 shares of common stock of the Company at an
exercise price equal to $2.15 per share. These options shall vest in three
(3) equal annual installments (except as otherwise provided in Section
5.3), with the first vesting to occur on the first anniversary of the
Commencement Date, and the second and third vestings to occur on the second
and third anniversary dates, respectively. In the event of a change in
control of the Company (as defined in Section 4.3) the vesting schedule for
then unvested options will be accelerated so that a total of 50% of each
option grant (or such lesser amount as may then be outstanding) will vest
on the effective date of the change of control. Thereafter, the vesting
schedule for the remaining outstanding options shall remain unchanged.
(b) In addition to the option grant set forth in the preceeding section,
the Company agrees to consider in good faith on an annual bases the grant
of additional stock options to Executive.
(c) The Executive, if requested by the Company and the managing
underwriter of the initial public offering of the Company's securities (the
"IPO"), shall not sell publicly or otherwise transfer or dispose of any
securities of the Company held by the Executive for a specified period of
time (not to exceed 270 days), following the effective date of the
registration statement for the IPO; provided that all then executive
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officers, directors and holders of 5% or more of the outstanding stock of
the Company enter into similar agreements. The Executive acknowledges that
no representations have been made to him concerning the size, occurrence,
valuation or timing of any IPO.
3.5 Fringe Benefits. The Executive shall be entitled to participate in
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all fringe benefit programs that the Company establishes and makes
available to its employees from time to time to the extent that Executive's
position, tenure, salary, age, health and other qualifications make him
eligible to participate. The Executive's vacation entitlement shall be four
weeks per year.
3.6 Reimbursement of Expenses. The Company shall reimburse the
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Executive for all reasonable travel, entertainment and other expenses
incurred or paid by the Executive in connection with the performance of his
duties hereunder, upon presentation by the Executive of documentation,
expense statements, vouchers and/or such other supporting information as
the Company may request; provided, however, that the nature and amount of
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such expenses shall be subject to the Company's expense policies as in
effect from time to time.
3.7 Commutation Expenses: Executive shall use best reasonable efforts to
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relocate to the greater New York metropolitan area within six months of the
Commencement Date. For the first six months following the Commencement
Date (the "Commutation Period") the Company shall reimburse the Executive
for air or ground travel between Washington, D.C. and New York and related
ground transportation costs, not to exceed one round trip per week.
Executive agrees to use best efforts to minimize such commutation expenses
through advance bookings. Additionally, the Company will reimburse
Executive for other, reasonable and appropriate business related expenses
incurred during the Commutation Period, upon presentation by the Executive
of documentation, expense statements, vouchers and/or such other supporting
information as the Company may request.
3.8 Relocation Expenses ; Housing Allowance. During the Commutation
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Period, the Company shall reimburse Executive for his reasonable housing
expenses in the greater New York metropolitan area. The parties contemplate
that during the first few weeks of employment such expenses shall be
comprised of hotel charges. At such time as Executive identifies a suitable
furnished corporate apartment for lease, the Company shall make the lease
payments directly to the landlord for the remainder of the Commutation
Period.
The Company shall reimburse Executive for reasonable expenses incurred
by Executive in relocating to the greater New York metropolitan area.
Following relocation, the Company shall pay to Executive a housing
allowance of $3,500 per month. The housing allowance will be included in
the Executive's biweekly paychecks and will be subject to applicable
withholding.
3.9 Reimbursement for Legal Expenses. The Company will reimburse
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Executive for reasonable attorneys' fees incurred in connection with the
review of this Employment Agreement.
3.10 Car Allowance. The Company shall reimburse Executive for those
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amounts paid by Executive in connection with the cancellation of his
current car leasing arrangement, such amount not to exceed $5,000.
Additionally, the Company shall provide Executive with a car allowance of
$2,166 per month. The car allowance will be included in the Executive's
biweekly paychecks and will be subject to applicable withholding.
4. Employment Termination
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The employment of the Executive pursuant to this Agreement shall terminate
upon the occurrence of any of the following:
4.1 At the election of the Company, for Cause (as hereinafter defined)
immediately upon written notice by the Company to the Executive. For
purposes of this Agreement, "Cause" shall mean (a) a good faith finding by
the Board, after notice to the Executive and an opportunity to be heard, of
the failure of the Executive to perform his reasonably assigned duties, or
the Executive's gross dishonesty, gross negligence or gross misconduct, or
(b) the conviction of the Executive of, or the entry of a plea of guilty or
nolo contendere by the Executive to, any felony;
4.2 Thirty days after the death or Disability (as hereinafter defined) of
the Executive.
For purposes of this Agreement, "Disability" shall mean the inability of
the Executive, due to a physical or mental disability, for a period of 90
days, whether or not consecutive, during any 360-day period to perform,
with or without reasonable accommodation, the services contemplated under
this Agreement. A determination of Disability shall be made by a physician
satisfactory to both the Executive and the Company; provided that if the
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Executive and the Company do not agree on a physician, the Executive and
the Company shall each select a physician and these two together shall
select a third physician, whose determination as to Disability shall be
binding on all parties; or
4.3 At the election of the Executive, upon written notice of termination,
for Good Reason (as hereinafter defined). For purposes of this Agreement,
"Good Reason" shall mean (i) any significant diminution in the duties of
the Executive under this Agreement or (ii) the Company's requirement that
the Executive relocate beyond the greater New York metropolitan area, or
(iii) if there is a change in control of the Company so that a single
person or entity or an affiliated group of persons or entities has control
of the Company (as control is understood under the Internal Revenue Code or
securities laws of the US) as a result of which Executive's employment with
the Company is involuntarily terminated.
4.4 At the election of the Executive, upon not less than four (4) weeks'
prior written notice of termination, or at the election of the Company,
upon written notice of termination.
4.5 Upon the expiration of the Employment Contract.
5. Effect of Termination.
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5.1 Termination for Cause or at Election of the Executive. In the event
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the Executive's employment is terminated for Cause pursuant to Section 4.1,
or the Executive's employment is terminated at the election of the
Executive pursuant to Section 4.4, the Company shall, through the last day
of his actual employment by the Company, continue to pay to the Executive
his base salary as in effect on the date of notice of termination and
continue to provide to the Executive the fringe benefits available to him
under Section 3.5 hereof, as of the last day of actual employment.
5.2 Termination for Death or Disability. If the Executive's employment is
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terminated due to death or Disability pursuant to Section 4.2, the Company
shall continue to pay to the estate of the Executive or to the Executive,
as the case may be, for a period of 90 days after termination of employment
due to death or Disability, the Executive's base salary as in effect on the
date of termination.
5.3 Termination by the Executive for Good Reason or at Election of the
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Company. If the Executive's employment is terminated by the Executive for
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Good Reason pursuant to Section 4.3 or at the election of the Company
pursuant to Section 4.4, the Company shall, during the Severance Period (as
hereinafter defined), continue to pay to the Executive his base salary as
in effect on the date of notice of termination and continue to provide to
the Executive the fringe benefits available to him as of the date of notice
of termination under Section 3.5. In addition, the Company shall, for the
first six months of the Severance Period, continue to pay the allowances
specified in Sections 3.8 and 3.10. . Further, a pro rata share of the
performance bonus referenced in Section 3.2 shall be paid to the Executive
covering the period from the beginning of the calendar year up to the date
of termination. For the purposes of this Section 5.3, the performance bonus
referenced in Section 3.2 shall be calculated as 50% the Executive's annual
base salary. For purposes of this Agreement, the "Severance Period" shall
mean a period of six (6) months after such termination, increasing by one
month for every six months (or part thereof) of Executive's employment with
the Company, but in no event to exceed twelve months in the aggregate.
Additionally, option vesting shall be accelerated so that as of the
termination date, one-half of the then unvested options granted at each
strike price shall be vested. No further options shall vest within the
Severance Period. The Executive shall have one year after the termination
date to exercise the vested options. If this paragraph conflicts with any
applicable Stock Option Agreement, this paragraph shall control.
5.4 Termination at Expiration of Contract. If, prior to December 31,
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2001, the Company has not offered to renew the Employment Contract on terms
at least equal to those contained herein as modified during the Employment
Period by mutual agreement of the parties and for a term of not less than
one (1) year, the Company shall continue to pay the Executive his base
salary in effect on the date of termination for a period of six (6) months
after such termination and Executive shall remain eligible to receive a
performance bonus, calculated in accordance with Section 3.2. In addition,
during this six-month period, the Company shall also provide to the
Executive the fringe benefits available to him under Section 3.5 as well as
pay to the Executive, during the first three months of the six-month
period, the allowances specified in Sections 3.8 and 3.10. If Executive is
terminated under this Section 5.4, the "Severance Period" for the purposes
of Section 6 will be six (6) months.
5.5 Survival. The provisions of Sections 3.3, 5.2, 5.3 and 5.4 shall
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survive the expiration or termination of this Agreement under the
circumstances specified in those Sections for the periods specified in such
Sections. Sections 6 and 7 shall survive the termination of this Agreement.
6. Non-Compete.
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(a) During the Executive's active employment and for the Severance Period,
the Executive will not:
(i) be a partner, stockholder (other than as the holder of not more
than one percent (1%) of the total outstanding stock of), officer,
employee, consultant, director, joint venturer, investor or lender of
or to America Online, Inc., CompuServe Corporation, Microsoft Network,
AT&T WorldNet, Netcom On-Line Communications Services, Inc., EarthLink
Network, Inc., MindSpring Enterprises, Inc., or any corporation or
other entity acquiring any of the foregoing; or involved in providing
Internet Access ervices that compete directly with Prodigy; or
(ii) directly or indirectly recruit, solicit or induce, or attempt
to induce, any employee or employees of the Company to terminate their
employment with, or otherwise cease their relationship with the
Company; or
(iii) directly or indirectly solicit, divert or take away, or attempt
to divert or to take away, the business or patronage of any of the
clients, customers or accounts,
or prospective clients, customers or accounts, of the Company,
including but not limited to those clients, customers or accounts
which were contacted, solicited or served by the Executive while
employed by the Company.
(b) If any restriction set forth in this Section 6 is found by any court
of competent jurisdiction to be unenforceable because it extends for too
long a period of time or over too great a range of activities or in too
broad a geographic area, it shall be interpreted to extend only over the
maximum period of time, range of activities or geographic area as to which
it may be enforceable.
(c) The restrictions contained in this Section 6 are necessary for the
protection of the business and goodwill of the Company and are considered
by the Executive to be reasonable for such purposes. The Executive agrees
that any breach of this Section 6 will cause the Company substantial and
irrevocable damage and therefore, in the event of any such breach, in
addition to such other remedies which may be available, the Company shall
have the right to seek specific performance and injunctive relief.
(d) Unless the context otherwise requires, all references in this Section
6 and in Section 7 below to the "Company" shall include all current or
future subsidiaries or affiliates of the Company.
7. Proprietary Information and Developments.
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7.1 Proprietary Information.
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(a) The Executive agrees that all information and know-how related to
the activities of the Company, whether or not in writing, of a
private, secret or confidential nature concerning the Company's
business or financial affairs (collectively, "Proprietary
Information") is and shall be the exclusive property of the Company.
By way of illustration, but not limitation, Proprietary Information
may include inventions, products, processes, methods, techniques,
formulas, compositions, compounds, projects, developments, plans,
research data, clinical data, financial data, personnel data, computer
programs, and customer and supplier lists. The Executive will not
disclose any Proprietary Information to others outside the Company or
use the same for any unauthorized purposes without written approval by
an officer of the Company, either during or after his employment,
unless and until such Proprietary information has become public
knowledge without fault by the Executive.
(b) The Executive agrees that all files, letters, memoranda, reports,
records, data, sketches, drawings, laboratory notebooks, program
listings, or other written, photographic, or other tangible material
containing Proprietary Information, whether created by the Executive
or others, which shall come into his custody or possession, shall be
and are the exclusive property of the Company to be used by the
Executive only in the performance of his duties for the Company.
(c) The Executive agrees that his obligation not to disclose or use
information, know-how and records of the types set forth in paragraphs
(a) and (b) above, also extends to such types of information, know-
how, records and tangible property of customers of the Company or
suppliers to the Company or other third parties who
may have disclosed or entrusted the same to the Company or to the
Executive in the course of the Company's business.
7.2 Developments.
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(a) The Executive will make full and prompt disclosure to the Company
of all inventions, improvements, discoveries, methods, developments,
software, and works of authorship, related to the activities of the
Company, whether patentable or not, which are created, made, conceived
or reduced to practice by the Executive or under his direction or
jointly with others during his employment by the company, whether or
not during normal working hours or on the premises of the Company (all
of which are collectively referred to in this Agreement as
"Developments").
(b) The Executive agrees to assign and does hereby assign to the
Company (or any person or entity designated by the Company) all his
right, title and interest in and to all Developments and all related
patents, patent applications, copyrights and copyright applications.
The Executive also acknowledges that all work fixed in a tangible
medium of expression shall be deemed a work made for hire under the US
Copyright Act such that the work is owned by the Company at the moment
of creation.
(c) The Executive agrees to cooperate fully with the Company, both
during and after his employment with the Company, with respect to the
procurement, maintenance and enforcement of copyrights and patents
(both in the United States and foreign countries) relating to
Developments. The Executive shall sign all papers, including, without
limitation, copyright applications, patent applications, declarations,
oaths, formal assignments, assignment of priority rights, and powers
of attorney, which the Company may deem necessary or desirable in
order to protect its rights and interests in any Development.
7.3 Other Agreements. The Executive hereby represents that his
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performance of all the terms of this Agreement and as an employee of the
Company does not and will not breach the terms of any agreement with any
previous employer or other party to refrain from using or disclosing any
trade secret, confidential or proprietary information, knowledge or data
acquired by him in confidence or in trust prior to his employment with the
Company or to refrain from competing, directly or indirectly, with the
business of such previous employer or any other party.
8. Notices. All notices required or permitted under this Agreement shall be
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in writing and shall be deemed effective upon personal delivery or upon sending,
by registered or certified mail, postage prepaid, addressed to the other party
at the address shown above, or at such other address or addresses as either
party shall designate to the other in accordance with this Section 8.
9. Pronouns. Whenever the context may require, any pronouns used in this
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Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular forms of nouns and pronouns shall include the plural, and vice
versa.
10. Entire Agreement. This Agreement constitutes the entire agreement between
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the parties and supersedes all prior agreements and understandings, whether
written or oral, relating to the
subject matter of this Agreement, except that the Agreement Regarding
Confidential Information, the Prodigy Business Conduct Guidelines, and other
documents executed on the commencement of employment, shall remain in full force
and effect.
11. Amendment. This Agreement may be amended or modified only by a written
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instrument executed by both the Company and the Executive.
12. Governing Law. This Agreement shall be construed, interpreted and enforced
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in accordance with the laws of the State of New York in the United States,
without reference to conflict of law principles.
13. Successors and Assigns. This Agreement shall be binding upon and inure to
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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
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obligations of the Executive are personal and shall not be assigned by him.
14. Miscellaneous.
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14.1 No delay or omission by either the Company or the Executive in
exercising any right under this Agreement shall operate as a waiver of that
or any other right. A waiver or consent given by either the Company or the
Executive 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.
14.2 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.
14.3 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.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year set forth above.
PRODIGY COMMUNICATIONS CORPORATION
By: /s/ Xxxxx Xxxxxxx
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Title:____________________________
EXECUTIVE
/s/ Xxxxx Xxxxxxxxxxxx
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Xxxxx Xxxxxxxxxxxx
