Exhibit 10.16
EMPLOYMENT CONTRACT
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This Employment Contract (the "Contract"), effective as of the 22nd day of
March 1999, is by and between Splitrock Services, Inc., a Delaware Corporation
(the "Corporation" or "Employer"), and J. Xxxxxx Xxxxxx ("Employee").
1. Introduction. The Corporation employs Employee to perform the services
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described herein and Employee hereby accepts such employment, on the terms and
conditions set forth herein.
2. Position and Duties. Employee hereby agrees to accept and perform the
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duties of Executive Vice-President and Chief Financial Officer of the
Corporation and in that capacity agrees to exert his best efforts to the
prosecution of the duties of those offices ("Duties") and faithfully to perform
all such Duties.
3. Term. The term of this Contract (the "Employment Term") shall commence
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on the effective date of this Contract and shall end on March 21, 2001.
4. Compensation. For Employee's covenants included in this Contract and
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for all services rendered by Employee in any capacity during the Employment
Term, including services as an officer, or member of any committee of the
Corporation or of any subsidiary, division or affiliate thereof, Employee shall
be paid as compensation, the following:
(a) Base Salary. A base annual salary of $ 185,000 (a ratable part of
which annual salary shall be payable monthly). Such salary shall be subject to
customary payroll deductions and employment taxes.
(b) Incentive Bonus. In lieu of any other consideration or
reimbursement of any expenses for relocation, moving or related, Employee will
be paid a signing bonus of $ 50,000 payable on or before thirty (30) days
following the effective date. Additionally, Employee shall be eligible for a
performance incentive award, if any, that is made available to other similar
officers of the Corporation.
5. Stock Options. Corporation grants to Employee non-qualified stock
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options with the right to purchase Three Hundred Fifty Thousand (350,000) shares
of the Corporation's common stock. The grant date shall be March 22, 1999. The
option or exercise price will be $5.50 per share. The options will vest in equal
amounts over four
years, and will be exercisable for ten years from the grant date. If employment
terminates for any reason, the nonvested options will be forfeited and the
vested but unexercised options will terminate 180 days after termination of
employment. The full terms and conditions of the options are subject to the 1997
Incentive Share Plan adopted by the Corporation, and a formal stock option
agreement to be executed between Employee and the Corporation, a specimen of
which is attached hereto as Exhibit "A".
6. Benefits. During the Employment Term, Employee shall be furnished all
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Employee benefits customarily offered by the Corporation to its senior executive
employees, and reimbursement of all expenses incurred in the conduct of the
Corporation's business as are reasonable, prudent and necessary. Employee shall
have the right to reasonable vacation time in accordance with the Corporation's
standard policy. Health, life and disability insurance coverage afforded other
employees of the Corporation shall be made available to Employee, subject to
eligibility for such coverage.
7. Performance of Duties. During the Employment Term, Employee shall
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devote his best efforts to the business and affairs of the Corporation. It is
further understood and agreed that Employee shall take reasonable vacations, may
take time off due to illness or incapacity and may devote reasonable periods
required for engaging in charitable, professional, and community activities, in
each case so long as such activities do not interfere with the proper
performance of his Duties hereunder.
8. Termination. (a) The employment relationship between Employee and the
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Corporation shall be terminated upon the first to occur of any of the following
events:
(i) the death of Employee;
(ii) the permanent disability of Employee;
(iii) the voluntary resignation by Employee, which shall be made
by written notice to the Board specifying an effective date
of such resignation not less than 30 days after the date of
such notice; or
(iv) the termination by the Corporation of Employee's employment
with or without Cause, as defined below, which shall be made
by written notice to Employee specifying an effective date
of such termination and, if with Cause, specifying such
Cause.
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(b) As used in this Contract, "Cause" shall mean:
(i) final conviction of Employee for a felony-grade crime or any
crime involving moral turpitude; or
(ii) the willful or grossly negligent violation by Employee of
the provisions of Section 9.
(c) Upon termination of the employment relationship between Employee
and the Corporation for any reason other than (i) by the Corporation with Cause,
or (ii) by voluntary resignation by Employee, the Corporation will pay Employee
either 12 months of the base salary to be paid under this Contract if
termination occurs on or before March 21, 2000 or 6 months of the base salary to
be paid under this Contract if termination occurs after March 21, 2000 and
before March 21, 2001. All such payments shall be payable over the applicable
period of time at the designated payroll periods then in effect.
9. Confidential Information and Inventions. Employee agrees and covenants
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to use his best efforts and exercise utmost diligence to protect and safeguard
the trade secrets and confidential and proprietary information of the
Corporation. Employee further agrees and covenants that, except as may be
required by the Corporation in connection with this Contract, or with the prior
written consent of the Corporation, Employee shall not, either during the term
of this Contract or thereafter, use for Employee's own benefit or for the
benefit of another, or disclose, disseminate or distribute to another, any trade
secret or confidential or proprietary information (whether or not acquired,
learned, obtained or developed by Employee alone or in conjunction with another)
of the Corporation or of any other person with whom the Corporation has a
business relationship. All memoranda, notes, records, drawings, documents or
other writings whatsoever made, compiled, acquired or received by Employee
during the Employment Term, arising out of, in connection with, or related to
any activity or business of the Corporation are and shall continue to be, the
sole and exclusive property of the Corporation, and shall, together with all
copies thereof, be returned and delivered to the Corporation by Employee
immediately, without demand, when Employee ceases to be employed by the
Corporation, or at any time upon the Corporation's demand.
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10. Non-Competition.
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(a) Employer's Business and Assets. The Employer is in the business
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of selling, marketing, and distributing the "Employer's Products and Services,"
as that term is defined hereafter, throughout the United States. The term
"Employer's Products and Services" shall mean the sale, marketing and
distribution of various product lines and services in the data communications
industry and any other similar services and products in the telecommunications
industry.
The principal assets of Employer's business, each of which has been
acquired through the outlay of considerable time, effort and expense by
Employer, include without limitation the following: its goodwill, the names,
key contacts, addresses, continued patronage and particular needs and desire of
its customers, resellers and distributors; and other proprietary and
confidential trade information as described in Section 9 of this Agreement.
(b) Employer's Interest in Protecting Business and Assets. Employee
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acknowledges the Employer's vital business interest in protecting the base of
business it plans to develop nationwide as well as the Employer's current base
of business, customer contacts, accounts, and relationships throughout the
United States. Employee recognizes that the Employer's business is subject to
being severely and adversely affected, if the sources, availability, sales and
price information regarding the Employer's current customers, sources of new
customers and current customers which Employee has acquired or developed through
his employment relationship, were to be made available to a competitor, or to an
entity which could become a competitor. Employee also recognizes the Employer's
business interests in protecting the Employer's goodwill, trade secrets, and
confidential and proprietary information.
Further, Employee acknowledges that such business interests on the part of
the Employer give rise to the Employer's desire to restrain Employee from
competing with the Employer during the term of this Agreement and for a
reasonable period of time after Employee's employment with the Company is
terminated in those markets where Employee performed his duties during his
employment with Employer.
Employee hereby enters into this covenant not to compete (and non-
solicitation of customers and employees) with the Employer, in consideration of
the Employer's
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agreement to employ Employee at the compensation level described in Section 4 of
this Agreement, Employer's agreement to grant Employee non-qualified stock
options to purchase shares of stock of the Employer as described in Section 5 of
this Agreement, and the Employer's agreement to disclose its Confidential
Information and Trade Secrets to Employee during the term of this Agreement.
11. Covenant Not To Compete and Other Restrictions Following Termination.
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(a) Non-Compete. Employee covenants and agrees that, except as
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otherwise expressly and specifically consented to, approved or permitted in
writing by the Employer, during the Non-Competition Period (defined below)
Employee will not engage in the Business directly or indirectly, alone or with
any other person or entity, as a member of a partnership, limited liability
company, or other business entity or as an investor in any security of any class
(except as an investor in less than 2% of an outstanding publicly traded class
of equity securities listed on the New York Stock Exchange, the American Stock
Exchange or the NASDAQ National Market), or as a consultant, advisor, agent,
representative or in any other capacity to or for any employer or other business
entity engaged in the Business. This Section shall prohibit Employee from
engaging in a Business in those markets throughout the United States in which
the employer: (i) engages in as of the date of the Employee's termination of
employment and where Employee serviced customers, made customer contacts, or was
responsible for customer accounts while employed at the Employer; or (ii) has
developed in writing a concrete plan to engage in such Business during
Employee's employment which plan is still in effect as of the date of the
termination of Employee's employment and of which Employee has knowledge.
Employee specifically acknowledges that given the national scope and
extensive nature of the Employer's business, the scope of the non-compete herein
is reasonable for the protection of Employer's business, and Employee
specifically agrees, that Employee shall not compete in those areas set forth
above with respect to the Business during the Non-Competition Period.
(b) Non-Solicitation. In addition to the foregoing, during the Non-
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Competition Period and the Non-Solicitation Period, Employee shall not:
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(i) call on, solicit, divert or take away, or attempt to call
on, solicit, divert or take away any of the customers of the
Employer on whom Employee called upon or whom Employee
became acquainted with during the term of employment with
the Employer under this Agreement, either for himself or for
any other person, firm or employer;
(ii) effect or attempt to effect, directly or indirectly, any
transaction in the purchase or sale of products or services
similar to the Employer's products or services with any
Employer Customer;
(iii)request or advise any principal, reseller, distributor or
customer of the Employer, other person, firm or employer
having business dealings with the Employer to withdraw,
curtail, cancel or modify such business dealings;
(iv) induce or attempt to induce any employee of the Employer to
terminate his employment with the Employer.
(c) Certified Defined Terms. For purposes of Section 11: Non-
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Competition Period" and "Non-Solicitation Period" means:
(i) if Employee terminates or is terminated from employment for
any reason, during the period beginning upon the date of
separation from employment, and ending one (1) year
thereafter.
(ii) "Business" means all parts of the business of the Employer
being conducted on the date of Employee's termination of
employment with the Employer and that Employee was engaged
in.
(d) FURTHER ACKNOWLEDGMENT. EMPLOYEE FURTHER ACKNOWLEDGES AND AGREES
THAT THE LIMITATIONS SET FORTH HEREIN ARE REASONABLE IN EACH AND EVERY RESPECT.
(e) Scope. The parties hereto agree and request that in the event
that the scope of the Covenants set forth in this Section 11, including the
geographic scope or the length of the Non-Competition Period or the Non-
Solicitation, is deemed to be too broad in
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any court proceeding, the court or arbitrator may reduce such scope to that
which it deems reasonable under the circumstances.
12. Injunctive Relief for Breach of Covenant Not to Compete and Not to
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Solicit Customers and Employees Following Termination.
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(a) Employee and the Employer recognize and agree that the Employer's
enforcement of Employee's Covenant Not to Compete, and Non-Solicitation of
customers and employees shall be necessary to prevent irreparable harm and
damage to the business of the Company and that the limitations as to time,
geographical area and scope of activity to be restrained are reasonable and to
not impose a greater restraint on Employee than is necessary to protect the
goodwill and other business interests of the Employer.
(b) Because of the unique nature of the special training and knowledge
received by the Employee from the Company and because of the inadequacy of
monetary awards for breach of the obligations contained in this Section, if
Employee fails to comply with any such obligations or in the event of a breach
or threatened breach of any of the provisions herein, the Employer in addition
to any other remedies available to it at law or in equity, shall be entitled to
immediate injunctive relief to enforce the provisions of this Section and shall
be entitled to recover from Employee reasonable attorneys' fees and other
expenses incurred by the Employer in connection with such proceeding.
13. Agreement Ancillary to Other Agreements. The Covenant Not to Compete
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and the Covenants Not to Solicit set forth in Section 11 are ancillary to, and
part of, other agreements between the Employer and Employee, including:
(a) the agreement to engage Employer for the term described in Section
3 of this Agreement;
(b) the agreement to compensate Employee at the rate described in
Section 4 of this Agreement;
(c) the agreement to grant Employee non-qualified options to purchase
shares of stock of the Employer as described in Section 5 of this Agreement;
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(d) the agreement to disclose certain confidential and proprietary
information to Employer during the course of this Agreement, as described in
Sections 9 and 10 of this Agreement.
Furthermore, the parties acknowledge that the Employer's agreements as set
forth in Section 13 of this Agreement give rise to the Employer's interest in
restraining Employer from competing with the Employer and soliciting its
customers and employees for a one (1) year period after termination of such
employment.
14. Notice to Subsequent Employer. Employee expressly grants the Employer
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the right, within one (1) year after the termination of Employee's employment to
advise any subsequent employer/contractor or potential employer/contractor of
the Employee of the existence and contents of this Agreement, as well as
information about the Employee's assigned geographic area, scope of duties, and
job performance at the Employer. Employee waives any claims he/she may
otherwise have against Employer based on the release of this information.
15. Indemnification. The Corporation shall indemnify, and advance
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expenses to, Employee (whether or not then employed by the Corporation) against
all judgments, penalties (including excise and similar taxes), fines, amounts
paid in settlement and reasonable expenses actually incurred by Employee in
connection with or arising out of any action, suit or proceeding in which he may
be involved by reason of his being or having been an officer, employee or agent
of the Corporation (whether or not he continues to be an officer, employee or
agent at the time of incurring such expenses and liabilities) to the extent that
such indemnification is permitted by all valid and applicable laws, including,
without limitation, the Delaware Business Corporation Act; provided, however,
that the Corporation shall in no event be obligated to indemnify Employee or
advance expenses to Employee in connection with any action, suit or proceeding
in which Employee has been found liable for gross negligence, willful misconduct
or an intentional act. The indemnification and advancement of expenses provided
in this section shall (a) also extend to Employee who while serving as an
officer, director, employee or agent of the Corporation also served at the
Corporation's request as a director, officer, partner, venturer, proprietor,
trustee, employee, agent or similar functionary of another foreign or
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domestic corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise, (b) not be deemed exclusive of any other rights of Employee
arising under any law, by any agreement or vote of shareholders or directors, by
contract, under any insurance policy maintained by the Corporation, or
otherwise, and (c) not be required if and to the extent that the person
otherwise entitled to payment of such amounts hereunder has actually received
payment therefor under any insurance policy, contract or otherwise. Neither the
amendment or modification of, nor the termination of, this Contract or any
provision hereof shall in any manner terminate, reduce or impair the right of
Employee to be indemnified by the Corporation, or the obligation of the
Corporation to indemnify Employee under and in accordance with the provisions of
this Section 15 as in effect immediately prior to such amendment, modification
or termination with respect to claims arising from or relating to matters
occurring, in whole or in part, prior to such amendment, modification, or
termination, regardless of when such claims may arise or be asserted.
16. Survival of Covenants. In the event of termination of this Contract
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for any reason whatsoever, the Corporation shall remain bound by the provisions
of Sections 8(c) and 15 of this Contract and Employee shall remain bound by the
provisions of Sections 9 to 14 of this Contract.
17. Notices. Any notice or other communication hereunder shall be in
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writing and shall be delivered by (i) personal delivery, (ii) certified or
registered mail, postage prepaid or (iii) telex or telecopier. Any such notice
shall be deemed upon its receipt at the following address:
If to Employee:
Mr. J. Xxxxxx Xxxxxx
30 Noble Bend
The Xxxxxxxxx, Xxxxx 00000
If to the Corporation:
Splitrock Services, Inc.
0000 Xxx Xxxxxx Xxxxx
Xxx Xxxxxxxxx, Xxxxx 00000
Attn: Xxxxxxx X. Xxxxxx, President
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Any party may, by notice given in accordance with this Section 17 to the
other party, designate another address or person for receipt of notices
hereunder.
18. Parties Bound. This Contract shall inure to the benefit of and be
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binding upon the parties hereto, their respective heirs, legal representatives,
successors and permitted assigns. Without limiting the generality of the
foregoing, any corporation into or with which the Corporation shall merge or
consolidate or to which the Corporation shall transfer all or substantially all
of its assets shall be deemed a successor of the Corporation. Neither party may
assign any of its or his rights or obligations under this Contract unless the
other party agrees thereto in writing, provided, however, that this provision
shall not preclude Employee from designating one or more beneficiaries to
receive any amount that may be payable after his death and shall not preclude
the legal representative or his estate from assigning any right hereunder to the
person or persons entitled thereto under his will or, in the case of intestacy,
to the person or persons entitled thereto under the laws of intestacy applicable
to his estate.
19. Integration and Amendments. This Contract contains the entire
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agreement between the parties, and supersedes all prior and contemporaneous
written or oral agreements and understandings and may be amended only by an
instrument in writing signed by both parties hereto.
20. Captions. The headings herein are for convenience only and shall not
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affect the construction hereof.
21. Time of the Essence. The parties agree that time shall be of the
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essence in the performance of obligations hereunder.
22. Severability of Provisions. If any provision of this Contract is held
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by a court of competent jurisdiction to be illegal, invalid, or unenforceable,
the remainder of the terms, provisions, covenants and restrictions of this
Contract shall remain in full force and effect and shall in no way be affected,
impaired or invalidated thereby, and, in lieu of such illegal, invalid, or
unenforceable provision, there shall be added automatically as a part of this
Contract a provision as similar in terms to such illegal, invalid, or
unenforceable provision as may be possible and be legal, valid, and enforceable.
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23. Governing Law. THIS CONTRACT SHALL BE GOVERNED BY AND CONSTRUED IN
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ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO THE PRINCIPLES
OF CONFLICTS OF LAW.
24. Due Authorization. The Corporation represents and warrants to
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Employee that the Corporation has all necessary legal power and authority to
execute, deliver and perform this Contract, and has taken all necessary action
authorizing the execution, delivery and performance of same.
25. Alternative Dispute Resolution. The parties hereto agree that if a
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dispute arises under this Contract that they will join in a motion requesting
the court with jurisdiction over the dispute to refer the dispute for resolution
by an alternative dispute resolution procedure as established under Chapter 154
of the Texas Civil Practice and Remedies Code.
26. Fees and Expenses. The parties hereto agree that if a dispute over
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the terms or enforcement of this Contract is litigated or is settled by an
alternative dispute resolution procedure, the party that prevails shall be
entitled to recover all fees and expenses incurred in connection with the
dispute, including reasonable fees of attorneys and accountants.
IN WITNESS WHEREOF, the parties hereto have executed this Contract
effective as of the date first above written.
SPLITROCK SERVICES, INC., a Delaware Corporation
By:_____________________________________________
Name: Xxxxxxx X. Xxxxxx
Title: President & CEO
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Name: J. Xxxxxx Xxxxxx
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