SKYLYNX COMMUNICATIONS, INC.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, (the "Agreement") is entered into by and
between SKYLYNX COMMUNICATIONS, INC., a Colorado corporation, (the "Company")
and Xxx Xxxxx, an individual ("Xxxxx") as of this 1st day of December 1998.
The Company and Xxxxx shall be referred to collectively herein as "the
parties".
RECITALS
WHEREAS, the Company wishes to employ Xxxxx as Vice President of Mergers
and Acquisitions of the Company and Xxxxx wishes to serve the Company in this
capacity; and
WHEREAS, the Company and Xxxxx desire to set forth in this Agreement the
terms, conditions and obligations of the parties with respect to such
employment.
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants contained herein, the parties agree as follows:
1. EMPLOYMENT. The Company wishes to employ Xxxxx as Vice President of
Mergers and Acquisitions of the Company upon the terms and conditions
hereinafter set forth. Xxxxx shall perform such duties and responsibilities
for the Company which are commensurate with his capacity and as may be
assigned him by the Company's Board of Directors. In connection with
performance of his duties, Xxxxx shall report directly to the President and
Chief Executive Officer. Incident to the performance of such duties Xxxxx
shall be provided by the Company with office space, facilities and secretarial
assistance commensurate with his position. Xxxxx shall principally perform his
duties for the Company at the corporate headquarters to be located in Denver,
Colorado, or at such other location as the Board of Directors may determine in
consultation with Xxxxx and with his express consent.
2. TERM. The initial term of employment hereunder shall begin as of
the 1st day of December 1998. The initial term shall extend for a period of
approximately two years, terminating on November 30, 2000. Unless either party
gives the other at least sixty (60) days written notice prior to the
expiration of the initial term or any extended term of his or its intention to
terminate this Agreement, the term shall be extended for successive one-year
terms. For purposes of this Agreement, "Term" shall mean the initial term and
any applicable extended term(s).
3. COMPENSATION.
(a) Base Salary. The Company agrees to pay Xxxxx an annual base
salary of $108,000. The salary shall be payable at intervals not less often
than monthly and otherwise in accordance with the Company's policies. The
Compensation Committee shall increase Xxxxx'x base salary annually, at a rate
of not less than ten percent (10%) per year.
(b) Bonuses. The Company agrees to pay Xxxxx an annual cash bonus,
on or about March 31st of each year for his efforts in the prior calendar
year. The amount of such bonus shall be determined by the Compensation
Committee of the Company.
(c) Advance Incentives. On or before January 15, 1999, the Company
agrees to transfer to Xxxxx 50,000 shares of $.001 par value Common Stock of
the Company. These shares are priced at a value of $2.30 per share, as this
was the closing price of the stock on November 30, 1998. The Company agrees to
register such shares with the Securities and Exchange Commission at the time
of the next offering of common stock by the Company on an underwritten basis
at no cost to Xxxxx. This is subject to the requirements of the underwriter
of said offering. Provided the underwriter agrees the total number of shares
the Company must register for Xxxxx shall be no more than the aggregate number
of shares the Company is otherwise registering. Company shall bear all costs
of registration associated with such piggyback registration for Xxxxx.
(d) Incentive Stock Options. The Company has caused to be
established a qualified employee stock option plan (the "Plan") under Section
422 of the Internal Revenue Code of 1986, as amended. Xxxxx shall be entitled
to participate in said Plan.
In addition, Xxxxx is hereby granted the following added Stock Option
incentives under the Plan:
Upon the completion of a minimum of five (5) new acquisitions or
transactions generated by Xxxxx during the initial term of this Agreement,
Xxxxx is granted five year options to purchase up to 250,000 additional shares
at a price of $1.94 per share on the following basis:
(i) 50,000 options per transaction if the acquisition is at an
effective price of less than 2.2 times the annualized recurring revenues of
the acquired entity.
(ii) 35,000 options per transaction if the acquisition is at an
effective price of 2.2 times or greater than the annualized recurring revenues
of the acquired entity.
(iii) If five (5) transactions or acquisitions are completed on
or before December 31, 1999 Xxxxx will receive an option to purchase 100,000
more shares as an added bonus. Only a maximum of 350,000 options may be
granted under this section.
(iv) The five (5) transactions or acquisitions will be averaged
for the final determination of the number of options to be granted to Xxxxx
hereunder.
(v) These options will fully vest in the event of a non-
statutory merger, sale, acquisition, a discharge on a not for cause basis as
outlined in ?6(c) or a change in control of the Company.
(vi) Nothing in this item 3 will prevent participation by Xxxxx
in the ESOP Plan.
(e) Employee Benefit Plans. The Company has in place employee
benefit plans, which include, but shall not be limited to a Medical Insurance
plan, a Life Insurance plan, a Long Term Disability Insurance plan, and a
Section 125 Cafeteria Plan. By April 1, 1999, the Company shall use its best
efforts to also have in place a Section 401 K savings plan, a pension plan or
a profit sharing plan. During the Term of this Agreement, Xxxxx, his
dependents and beneficiaries, shall be entitled to participate in these plans,
benefits and programs in accordance with their terms and the terms of this
Agreement.
(f) Vacation. Xxxxx shall be entitled to four weeks of vacation
each year with full compensation. Xxxxx agrees to schedule his vacation in a
way that least interferes with the Company's business.
(g) Expenses. Xxxxx shall be reimbursed for his reasonable
expenses, commensurate with his position and related to the carrying out of
his duties, including expenses for entertainment, travel, hotel/motel, rental
car and similar items. The Company shall reimburse Xxxxx for such expenses in
a timely manner and in accordance with the policies and procedures of the
Company in effect from time to time.
(h) Perquisites. During the Term of this Agreement, Xxxxx shall
be entitled to perquisites and fringe benefits that are accorded senior
executives of the Company. Such perquisites shall include an automobile
allowance of $400 per month.
(i) Cumulative Compensation. The compensation provided for in
Paragraphs 3(a) - (h) herein are in addition to the benefits provided for upon
termination pursuant to Section 6 herein.
4. EXTENT OF SERVICE. Xxxxx will devote his full time, attention and
energy to the business of the Company and will not during the Term of this
Agreement be engaged in any other activity that directly competes with the
Company. This will not be construed as preventing Xxxxx from (a) investing his
personal assets in businesses which do not compete with the Company; (b)
purchasing securities in any corporation whose securities are publicly traded;
or (c) accepting appointments to the boards of directors of other companies
provided that the Chairman of the Company approves such appointments, which
will not be unreasonable withheld. This means that Xxxxx will be available
daily to the Board and the other executive officers of the Company.
5. CONFIDENTIAL INFORMATION AND COVENANT NOT TO COMPETE. All payments
and benefits to Xxxxx shall be subject to Xxxxx'x compliance with this
Agreement and the provisions of this Section 5. However, Xxxxx'x covenants
contained in this Section 5 shall terminate and shall be unenforceable and of
no further legal force or effect in the event the Company, its successors or
assigns, becomes insolvent, is liquidated or ceases for any reason to conduct
business operations for a continuous period of at least thirty (30) days,
except in the event of a sale or merger of the Company.
(a) Confidential Information. Xxxxx acknowledges that during the
Term of this Agreement he is or will be making use of, acquiring or adding to
the Company's confidential information which includes, but is not limited to,
memoranda and other materials or records of a proprietary nature; technical
information regarding the operations of the Company; and records and policy
matters relating to finance, personnel, management, and operations. Therefore,
in order to protect the Company's confidential information and to protect
other employees who depend on the Company for regular employment, Xxxxx agrees
that during the Term of this Agreement he will not in any way utilize any of
said confidential information except in connection with the business of the
Company, he will not copy, reproduce, or take with him the original or any
copies of said confidential information and will not directly or indirectly
divulge any of said confidential information to anyone without the prior
written consent of the Company.
(b) Litigation Support. During the Term of this Agreement, Xxxxx
shall, upon reasonable notice, furnish such information and proper assistance
to the Company as may reasonably be required in connection with any litigation
in which the Company or any of its subsidiaries is, or may become, a party.
Except for litigation that may be between the Company and Xxxxx, Xxxxx'x
reasonable expenses (including, but not limited to, travel and attorneys'
fees) incurred in complying with this covenant shall be either advanced or
promptly reimbursed by Company to Xxxxx.
(c) No Solicitation of Employees. Xxxxx agrees that during the
Term of this Agreement and continuing for a period of one (1) year after
termination under Paragraph 6(b) herein, neither Xxxxx nor any person or
enterprise controlled by Xxxxx will solicit for employment any person employed
by the Company.
(d) Covenant Not to Compete. Xxxxx agrees that during the Term of
this Agreement, neither Xxxxx nor any person or enterprise controlled by Xxxxx
will become a stockholder, director, officer, agent, consultant or employee of
a business, whether or not incorporated, or have any financial stake of any
nature in any of the foregoing or otherwise engage directly or indirectly in
any enterprise which competes with the Company in any geographic area in which
the Company does business during such period; provided, however, that the
foregoing shall not prohibit the ownership of less than one percent (1 %) of
the outstanding shares of stock of any corporation engaged in any business,
which shares are regularly traded on a national or international securities
exchange or in any over-the-counter market.
(e) Remedies for Breach of Covenants. In the event that a covenant
included in this Agreement shall be deemed by any court to be unreasonably
broad in any respect, it shall be modified in order to make it reasonable and
shall be enforced accordingly. However, in the event that any court of
competent jurisdiction shall refuse to enforce any of the covenants contained
in Paragraphs 5(a) through (d), the unenforceable covenant shall be deemed to
be eliminated from the provisions of this Agreement for the purpose of those
proceedings to the extent necessary to permit the remaining covenants to be
enforced so that the validity, legality or enforceability of the remaining
provisions of this Agreement shall not be affected thereby.
Xxxxx acknowledges that any material breach of his covenants
contained in this Section 5 will cause irreparable harm to the Company, which
will be difficult if not impossible to ascertain, and the Company shall be
entitled to equitable relief, including injunctive relief, against any actual
or threatened breach hereof, without bond and without liability should such
relief be denied, modified or vacated. Neither the right to obtain such relief
or the obtaining of such relief shall be exclusive of or preclude the Company
from any other remedy.
6. TERMINATION.
(a) Termination by Reason of Death or Disability. If Xxxxx should
die or become physically or mentally disabled and unable to perform duties
hereunder for a continuous period in excess of ninety (90) days, which event
shall result in the termination of Xxxxx'x employment with the Company, the
Company shall continue to pay Xxxxx'x then-current base salary (less the
amount of any disability benefit payments paid or payable to Xxxxx during such
period for disability benefits maintained and paid for by the Company) for the
balance of the calendar year in which such death or disability occurs, but in
no event for less than one hundred eighty (180) days, plus any bonus payments,
benefits or other items of compensation listed in Section 3 herein which are
vested, earned or fully accrued at the date of termination. In addition, in
the event of disability, Xxxxx'x participation in any medical, health,
accident, disability, death, life insurance or similar plan in which Xxxxx was
participating immediately prior to termination shall continue for the period
in which payments are being made under this Paragraph at the Company's expense
subject to any normal employee contributions, if any), although any
continuation of health coverage shall count toward the "COBRA" continuation of
coverage period. This Paragraph shall not be effective after any termination
pursuant to Paragraph 6(b).
(b) Termination by Company for Cause. The Company shall have the
right to terminate this Agreement for cause, including but not limited to
those as defined below. For purposes of this Paragraph, cause shall exist if
the Company reasonably determines that Xxxxx has deliberately engaged in any
of the following: (i) Xxxxx fails or refuses to perform his duties and
responsibilities as Vice President of Mergers and Acquisitions; (ii) Xxxxx
violates any of the Company's material policies or procedures, or engages in
any misconduct which interferes with the performance of his duties and
obligations under this Agreement; (iii) Xxxxx is convicted for a felony or
Xxxxx is shown to have engaged in any act of dishonesty or fraud upon the
Company, any of its subsidiaries, or any of its customers or clients; (iv)
Xxxxx engages in any act of misconduct which results in substantial loss to
the Company or substantial damage to the Company's reputation; or (v) Xxxxx
breaches any of his covenants contained in Sections 4 and 5 hereof. Unless
otherwise stated, if this Agreement is terminated for cause under this
Paragraph, both parties are relieved from further obligations under this
Agreement except for the Company's obligations under Section 7 herein and any
outstanding obligations under Section 3(a)-(h).
(c) Termination by Company Without Cause. If the Company or its
successors terminates the employment of Xxxxx for any reason other than cause,
the Company shall provide Xxxxx with ten (10) days prior written notice and
Xxxxx shall be entitled to the following liquidated damages: (i) severance
compensation equal to six (6) months' of Xxxxx'x then-current base salary,
(ii) any earned, prorated bonus payable hereunder which is fully accrued at
the time of termination, (iii) continued payment for all benefits, plans and
programs, as defined in Paragraph 3(e) above, in which Xxxxx is enrolled at
the time of termination, for a period equal to six (6) months, (iv) all other
items of compensation which are vested in Xxxxx or which he has earned or to
which he is entitled under Section 3 herein at the time of termination, and
(v) registration of all shares of the Company's common stock owned by Xxxxx at
the time of termination or purchasable by him upon exercise of outstanding,
vested Incentive Stock Options at the time of termination. The procedures for
registration and/or buyback are described in Paragraph 6(f) below.
(d) Termination by Xxxxx. During the Term of this Agreement, Xxxxx
may terminate this Agreement with or without cause. Xxxxx shall have the right
to terminate this Agreement for cause, as defined below, upon providing the
Company with a Cause Notice and an opportunity to cure as described in
Paragraph 6(e). For the purposes of this Paragraph, cause shall exist in any
of the following circumstances: (i) The alleged breach or violation by the
Company of any terms of this Agreement; (ii) Any significant change in
position, duties and responsibilities of Xxxxx to which Xxxxx does not
consent; (iii) Any action of the Company to which Xxxxx does not consent which
would require Xxxxx to permanently change his place of residence; or (iv) Any
change in the circumstances of Xxxxx'x employment which Xxxxx determines, in
good faith, results in his being unable to carry out his duties and
responsibilities as contemplated herein. In the event Xxxxx terminates his
employment for alleged cause, and the cause is not timely cured by the Company
as defined in Paragraph 6(e) below, then Xxxxx shall be entitled to the
liquidated damages specified in Paragraph 6(c) above. In the event Xxxxx
terminates this Agreement without cause, Xxxxx shall provide the Company with
written notice and the Agreement shall terminate forthwith. All obligations
of each party to the other shall terminate immediately, other than the
Company's obligation to pay base salary accrued to the date of termination, as
well as any unreimbursed expenses, any unpaid obligations under ?3 and the
Company's obligations to Xxxxx as specified in Section 7.
(e) Cause Notice/Right to Cure. Before Xxxxx may terminate this
Agreement for cause, as defined, Xxxxx shall provide the Company with a Cause
Notice and an opportunity to cure. A Cause Notice is defined as prior written
notice of at least thirty (30) days by Xxxxx upon the Company stating Xxxxx
desire to terminate the Agreement and setting forth in detail the
circumstances Xxxxx has determined constitute cause. After receipt of the
Cause Notice, the Company shall have a period of thirty (30) days within which
to cure the circumstances of cause as defined in the notice if the Company
agrees that cause exists. Whether the cure is sufficient or not shall be
determined by the Company in its sole and absolute discretion. In the event
the Company proposes to dismiss Xxxxx for the cause of not performing his job
duties and responsibilities, Xxxxx shall also have the same right to cure.
(f) Registration and/or Buyback of Securities. No later than 180
days following termination of this Agreement by Company without cause
(Paragraph 6(c)) or by Xxxxx with cause (Paragraph 6(d)), the Company shall
cause to be prepared and filed at its sole cost and expense registration
documents with the Securities and Exchange Commission for the purpose of
registering for sale under the Securities Act of 1933, as amended, all shares
of the Company's common stock owned by Xxxxx or purchasable by Xxxxx upon
exercise of outstanding Incentive Stock Options that are vested as of the date
of termination. In connection with such registration, the Company shall do the
following: (i) attempt to cause, and use its' best efforts for such
registration to be declared effective by the Securities and Exchange
Commission within one hundred twenty (120) days of the date of filing, (ii) if
successful in (i) above, maintain the effectiveness of such registration for a
minimum period of one hundred eighty (180) days, and (iii) qualify the sale of
all shares of the Company's common stock owned by Xxxxx or purchasable by
Xxxxx upon exercise of his outstanding, vested Incentive Stock Options in such
states and under such Blue Sky regulations as Xxxxx may reasonably request.
In the event said registration fails to become effective, Xxxxx shall be
permitted to sell in accordance with the provisions of Rule 144 and the
remaining shares shall be registered in accordance with 3(c) above.
7. INDEMNIFICATION AND DUTY TO DEFEND.
(a) Indemnification. Except for litigation between the Company and
Xxxxx, the Company agrees to indemnify Xxxxx to the fullest extent against any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative in which he is made party or is
threatened to be made a party by reason of his having been an officer or
director of the Company or any of its subsidiaries or affiliates, or for
actions taken purportedly on behalf of the Company or any of its subsidiaries
or affiliates. Indemnification shall include, but is not limited to: expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by Xxxxx as long as Xxxxx acted in good faith
and in a manner he reasonably believed to be in the best interests of the
Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe that his conduct was unlawful. Indemnification
shall extend to all matters that relate to Xxxxx'x employment beginning from
July 1, 1998, and such indemnification shall survive the termination of this
Agreement, regardless of the reason for termination. This provision will not
be extended to cover matters that would constitute crimes.
(b) Duty to Defend. Except for litigation between the Company and
Xxxxx, the Company will provide Xxxxx with a legal defense against any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative in which he is made party or is
threatened to be made a party by reason of his having been an officer or
director of the Company or any of its subsidiaries or affiliates, for action
taken purportedly on behalf of the Company or any of its subsidiaries or
affiliates. Additionally, upon request by Xxxxx, the Company will promptly
advance or pay any amounts for costs, charges, or expenses in respect to his
right to a defense and indemnification hereunder. This duty to defend shall
extend to all matters that relate to Xxxxx'x employment beginning from
November 1, 1998, and such duty shall survive the termination of this
Agreement.
8. WITHHOLDING OF TAXES. The Company may withhold from any benefits
payable under the Agreement all federal, state, city or other taxes as shall
be required pursuant to any law or governmental regulation or ruling.
9. FACILITY OF PAYMENT. If the Company shall find that Xxxxx is
unable to care for his affairs because of illness, accident or death, then the
Company, if it so elects, may direct that any payment due Xxxxx or his estate
(unless a prior claim therefore has been made by a duly appointed legal
representative) or any part thereof, be paid or applied for the benefit of
Xxxxx or to or for the benefit of his spouse, children or other dependents, or
to an institution maintaining or having custody of Xxxxx, or any other person
deemed by the Board to be a proper recipient on behalf of Xxxxx for payment.
Any such payment shall be in complete discharge of that particular liability
of the Company therefor.
10. SEVERABILITY. If any provision of this Agreement, as applied to any
party or to any circumstance, shall be found by a court to be void, invalid or
unenforceable, the same shall in no way affect any other provision of this
Agreement the application of any such provision in any other circumstance, or
the validity or enforceability of this Agreement.
11. ENTIRE UNDERSTANDING. This Agreement contains the entire
understanding of the parties hereto relating to the subject matter contained
herein and supersedes all prior and collateral agreements, understandings,
statements and negotiations of the parties. Each party acknowledges that no
representations, inducements, promises, or agreements, oral or written, with
reference to the subject matter hereof have been made other than as expressly
set forth herein. This Agreement cannot be changed, rescinded or terminated
orally.
12. NOTICES. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been given when
deposited in the U.S. mail in a registered, postage prepaid envelope or by
courier addressed as follows: If to Xxxxx, 000 Xxxxxxxxxx Xxxx, Xxxxxx Xxxx,
XX 00000, and if to the Company, c/o Chairman, 000 Xxxxxxxx Xxxx, Xxxxxxxx, XX
00000.
13. ASSIGNMENT. Neither Xxxxx nor the Company may assign this Agreement
or their obligations hereunder without the prior written consent of both
parties.
14. MISCELLANEOUS.
(a) This Agreement shall be subject to and governed by the laws of
the State of Colorado;
(b)Failure to insist upon strict compliance with any provisions
hereof shall not be deemed a waiver of such provisions or any other provision
hereof;
(c) The invalidity or unenforceability of any provision hereof
shall not affect the validity or enforceability of any other provision;
(d) Each of the signatories to this Agreement represents that he is
competent to sign this Agreement and that he has obtained any and all
permissions and authorities necessary to bind himself or his organization to
this Agreement.
15. EFFECTIVE DATE; MULTIPLE COUNTERPARTS. This Agreement shall be
effective as of the date of the last signature affixed hereto. This Agreement
may be signed in more than one counterpart, each of which shall be considered
an original but both of which, together, shall constitute one in the same
document.
16. ADJUSTMENTS TO INCENTIVE STOCK OPTIONS. For purposes of this
Agreement, the number of Incentive Stock Options referenced herein shall be
adjusted for stock splits or stock dividends, if any, as declared by the Board
of Directors and approved by a majority of the shareholders of the Company as
may be required by the Company's Articles of Incorporation and Bylaws.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
SKYLYNX COMMUNICATIONS, INC.
By: /s/ Xxxx X. Xxxxx /s/ Xxx Xxxxx
-------------------------- ------------------------------
Xxxx X. Xxxxx, Chairman Xxx Xxxxx
000 Xxxxxxxxxx Xxxx
Xxxxxx Xxxx, XX 00000
