Exhibit 10.7
EMPLOYMENT AGREEMENT
Employment Agreement dated October 23, 1998 and effective as of December 3,
1998 (the "Effective Date") by and between the HarvardNET, Inc., a Delaware
Corporation with its principal offices at One Harbour Place, Portsmouth, New
Hampshire (the "Company"), and Xxxx Xxxxxxx, 00 Xxxx Xxxxxx Xxxx, Xxxxxxxx, XX
00000 (the "Employee").
RECITALS
The Employee desires to be employed by the Company and the Company desires
to employ the Employee under the terms specified herein. The Employee and the
Company mutually desire to enter into this Agreement effective as of the date
hereof.
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements herein provided, the parties hereto agree, effective as of the
Effective Date, as follows:
1. EMPLOYMENT.
1.1. The Company hereby employs the Employee as its Chief Financial
Officer, and the Employee hereby accepts such employment with the Company, all
in accordance with the terms and conditions hereof.
2. DUTIES.
2.1. In his capacity as the Company's Chief Financial Officer, the
Employee shall be responsible for managing the day-to-day financial and
accounting operations of the Company, and in conjunction with the Chief
Executive Officer and Chief Operating Officer developing financial strategy and
plans for the Company. In addition, the Employee shall perform such other duties
and will have such further responsibilities as are delegated to him by the
Company's Chief Executive Officer or Board of Directors.
2.2. The Employee shall devote his entire business time, energies,
best efforts, attention and ability to the business of the Company, shall
faithfully and diligently perform the duties of his employment with the Company
and shall take all actions reasonably in his power to promote, develop and
extend the business of the Company.
3. COMPENSATION.
3.1. SALARY. The Company agrees to pay the Employee as compensation
for his services under this Agreement a salary (inclusive of amounts to be
deferred or contributed by the Employee from such salary to the Company's 401(k)
plan or deferred compensation plan in excess of the customary amounts
contributed by the Company) at the annual rate of One Hundred Sixty Thousand
Dollars ($160,000), less all applicable payroll tax and similar deductions,
payable in arrears in bi-weekly installments (the "Salary"). The Company will
review the Salary annually, with any Salary increase granted to Employee as a
result of such review to be in the Company's sole discretion.
3.2. DISCRETIONARY QUARTERLY/ANNUAL PERFORMANCE BONUS. The Employee
shall be eligible to earn a quarterly performance bonus (the "Bonus") in an
amount of up to Ten Thousand Dollars ($10,000). The amount, if any, of such
Quarterly Bonus shall be determined by the Company in its sole discretion and,
if determined to be paid, within fifteen days of the close of each quarter.
4. FRINGE BENEFITS.
4.1. The Company agrees to provide the Employee and his dependents
with such hospital, medical and major medical coverage and such other employee
benefits as the Company may have in effect, from time to time, under its
employee benefit plans for the benefit of its employees but only to the extent
that the Employee and his dependents may be eligible to receive such benefits
under the applicable provisions of the insurance policies or plans providing
such benefits.
4.2. The Employee shall be entitled to paid holidays and sick time in
accordance with the policies of the Company.
4.3 The Employee shall be granted, on January 1st of each year,
commencing with January 1, 1999, three (3) weeks of paid vacation for his use
during such year. Vacation unused at the end of any calendar year may not be
carried forward into the following calendar year.
5. EXPENSE REIMBURSEMENT. Upon submission of appropriate invoices,
receipts or vouchers, the Company shall pay or reimburse the Employee for all
reasonable and authorized expenses (including, but not limited to, expenses
associated with business travel) incurred by the Employee in the performance of
his duties hereunder in furtherance of the Company's business and in keeping
with the policies of the Company.
6. GRANT OF CLASS B STOCK. (a) In consideration of the Employee's
acceptance of employment in accordance with the provisions of this Agreement,
including, without limitation, the Employee's covenants set forth in Section 8
hereof, the Company is concurrently herewith
-2-
issuing to the Employee 560,780 shares of the Company's Class B Stock
(collectively, the "Shares"), which Shares shall be subject to the vesting
provisions set forth below and to certain other associated rights and
obligations as specified in the Stockholders' Agreement dated as of September 1,
1998 among the Company and its stockholders and option holder as of such date
(as the same may be amended from time to time, the "Stockholders' Agreement").
The Employee shall vest in 140,195 Shares (such number is to be equitably
adjusted to reflect any stock split, stock dividend, combination,
reorganization, recapitalization, reclassification or other similar event
involving the Company's Capital Stock) as of the first anniversary of the date
hereof, provided that as of such date the Employee is employed by the Company in
accordance with this Agreement. Thereafter, an additional 6.25% of the Shares
(the number of Shares to be equitably adjusted to reflect any stock split, stock
dividend, combination, reorganization, recapitalization, reclassification or
other similar event involving the Company's Capital Stock) shall vest at the end
of each calendar quarter following the first anniversary of this Agreement (each
a "Quarterly Vesting Date") until the fourth anniversary of this Agreement so
long the Employee is employed by the Company in accordance with this Agreement.
(b) Notwithstanding subsection (a) above to the contrary, in the event
an "Exit Transaction" or a "Qualified Public Offering" (as such terms are
defined in the Stockholders' Agreement) is consummated at a time when the
Employee is employed by the Company, the Employee shall thereupon be deemed to
have been fully vested into all of the Shares into which he shall not have
theretofore vested in accordance with this Agreement.
(c) Any Shares that fail to vest in accordance with the foregoing
provisions of this Section 6 shall thereupon immediately be deemed for all
purposes to have been forfeited and to have been automatically transferred to
and redeemed by the Company without the need for any payment to the Employee or
other action by the Company or any other Person. The Employee shall, immediately
upon request of the Company, deliver to the Company all stock certificates
evidencing such repurchased shares, duly endorsed by the Employee to the
Company.
(d) The Employee hereby becomes a party to and agrees to be bound by
and subject to the terms of the Stockholders' Agreement as a "Holder" and as a
"Restricted Holder" for all purposes thereof as fully as if the Employee were
originally named as a party to the Stockholders' Agreement as a "Holder" and as
a "Restricted Holder" thereunder. The Employee shall also be granted those
rights and privileges as granted to Xxxxxxxxxx in the Stockholders' Agreement at
paragraphs 4.1(b), 6.1, 6.2 and 10.4 as if the Employee were originally named in
those sections as a party to the Stockholders' Agreement. Without limitation of
the foregoing, (i) the Employee acknowledges that the Shares constitute "Company
Securities" for all purposes of the Stockholders' Agreement and (ii),
notwithstanding anything in the Stockholders' Agreement to the contrary, the
Employee agrees not to "Transfer" (as such term is defined in the Stockholders'
Agreement) any Shares or other Company Securities that remain subject to vesting
or risk of forfeiture in accordance with this Agreement. The Employee further
agrees that any share certificates issued to him to evidence the Shares shall
contain the legend contemplated by Section 10.3 of the Stockholders' Agreement.
-3-
(e) The Employee hereby becomes a party to and agrees to be bound by
and subject to the terms of the Registration Rights Agreement dated as of
September 1, 1998 among the Company and its stockholders and option holder as of
such date (as the same may be amended from time to time, the "Registration
Rights Agreement") as a "Holder" for all purposes thereof as fully as if the
Employee were originally named as a party to the Registration Rights Agreement
as a "Holder" thereunder. Without limitation of the foregoing, the Employee
agrees to be bound by the provisions of Section 4(c) ("Holdback Agreements") of
the Registration Rights Agreement with respect to the Shares and any shares of
the Company's Common Stock into which the Share may be converted.
(f) The parties agree that the Company's fair market value as of the
date hereof is not more than $24,000,000 (based on, among other things, the
valuation represented by the recently completed equity investment in the
Company). Consistent with such valuation and the "Minimum Enterprise Value" set
forth in the Company's Second Restated and Amended Certificate of Incorporation
that must be surpassed before shares of Class B Stock participate in dividends
and distributions that might be paid or made by the Company in the future, the
parties agree that the value of the Shares on the date hereof does not exceed
$5,610. Unless otherwise required by law, the parties agree to file their
respective income tax returns consistent with the foregoing valuation. The
Employee and the Company shall be solely responsible for their own respective
income tax liabilities arising from or in connection with the issuance of the
Shares in accordance herewith and neither shall have any liability to the other
on account thereof.
(g) While any of the Shares remain subject to vesting or risk of
forfeiture in accordance with this Agreement, the Company shall retain
possession of the stock certificates evidencing the unvested Shares or Shares
subject to a risk of forfeiture together with stock powers therefor executed by
the Employee in blank. The Employee hereby irrevocably authorizes and directs
the Company to complete such stock powers and otherwise retain and cancel such
stock certificates evidencing such number of Shares that shall fail to vest or
shall otherwise be forfeited in accordance with this Agreement upon such Shares
so failing to vest or otherwise being forfeited.
7. EMPLOYEE'S REPRESENTATIONS AND WARRANTIES. The Employee hereby
represents and warrants to and covenants with the Company as follows:
(a) The Employee is acquiring the Shares hereunder for investment for
the account of the Employee and not in connection with any public distribution
within the meaning of any applicable federal or state securities law, and the
Employee will not effect any sale, transfer or disposition of the Shares in
violation of any such law.
(b) The Employee understands that he will be unable to sell or
otherwise transfer the Shares unless they are registered under the Securities
Act of 1933 (the "Act") or an
-4-
exemption from such registration is then available, and that the Shares may have
to be held by the Employee indefinitely.
(c) The Employee acknowledges that the certificate(s) issued to him to
evidence the Shares will bear the following legends, in addition to any other
legend otherwise required with respect to the foregoing restrictions, and agrees
as set forth in such legend:
"The shares represented hereby have not been registered under the Securities Act
of 1933, as amended, (the "Act") or state securities laws, and such securities
may not be pledged, sold or in any other way transferred unless, at the time
they are presented to the Issuer for transfer, (a) a registration statement is
effective under the Act and applicable state securities laws with respect to
such securities or (b) an opinion of counsel, in form and substance reasonably
satisfactory to the Issuer, has been delivered to the Issuer stating that no
such registration is required under said federal and state securities laws,
together with such undertakings and agreements with the Issuer by the proposed
transferee as the Issuer or such counsel may reasonably require to ensure
compliance with the Act and state securities law."
(d) Neither the Employee's execution and delivery of this Agreement,
nor his working for the Company as contemplated hereby or performing his
obligations hereunder, violates any provision of law, any order, judgment or
decree of any court, arbitrator (or panel thereof) or government agency, or any
agreement or instrument to which the Employee is a party or by which the
Employee is bound.
8. NONCOMPETITION AND NONDISCLOSURE AGREEMENT.
(a) NONCOMPETITION. While the Employee is employed by or otherwise
engaged to provide services to the Company, and for a period of one year after
the date the Employee ceases for any reason to be employed by or engaged to
provide services to the Company (such date being referred to as the "Termination
Date"), subject to and conditioned upon the Company's obligations set forth in
Section 8(b) hereof, the Employee agrees that he will not, singly, jointly, or
as a partner, member, employee, agent, officer, director, stockholder (except as
a holder of not more than one percent of the outstanding stock of any company
listed on a national securities exchange, or actively traded in a national
over-the-counter market), consultant, independent contractor, or joint venturer
of any other Person, or in any other capacity, directly or indirectly, whether
through a family member or otherwise, do any of the following:
(i) own, manage, operate, join, control, or participate in the
ownership, management, operation or control of, or permit the use of his name
by, or work for, or provide consulting, financial or other assistance to a
Competing Business within the Protected Territory;
(ii) employ, retain or engage (as an employee, consultant or
independent contractor) any person who, on the date hereof or at any time prior
to the first
-5-
anniversary of the Termination Date, is an employee of the Company
or any of its Subsidiaries except for (x) persons who have not been employed by
the Company or any of its Subsidiaries in any capacity during the 365 days
immediately preceding the Termination Date and (y) persons who the Company
terminates and who the Employee has not induced or attempted to induce to
terminate their employment with the Company or any of its Subsidiaries in
violation of this Agreement;
(iii) induce or attempt to induce any person who, on the date
hereof or at any time prior to the first anniversary of the Termination Date, is
an employee of the Company or any of its Subsidiaries to terminate his or her
employment with the Company or any of its Subsidiaries; or
(iv) induce or attempt to induce any person that is a customer of
the Company or any of its Subsidiaries, or that otherwise is a contracting party
with the Company or any of its Subsidiaries, as of the date hereof or at any
time prior to the first anniversary of the Termination Date to terminate any
written or oral agreement with the Company or any of its Subsidiaries.
(b) COMPENSATION DURING THE NONCOMPETITION PERIOD. The Company agrees
that if the Employee's employment with the Company terminates for any reason
other than by the Company for "Cause" as that term is defined herein, (i) the
Employee shall be bound by the restrictions of Section 8(a) only for so long as
the Company continues to pay to the Employee his salary at the rate in effect at
the time of such termination and continues to provide to the Employee the
hospital, medical and major medical coverage benefits contemplated by Section
4.1 during the one year period of restriction, but in no event for longer than
one year and (ii) if the Company determines at any time on or after the date of
such termination to provide such compensation and benefits for less than one
year, the Company shall notify the Employee of such determination and the
Company shall be obligated to provide such compensation and benefits to Employee
for six months after the giving of such notice, provided that in no event shall
the Company be obligated to provide any compensation or benefits after the first
anniversary of such termination. However, in the event the Employee obtains any
subsequent employment during the one year period following his termination with
any business that does not constitute a Competing Business within the Protected
Territory, the Employee shall immediately notify the Company of said employment
and (x) the compensation earned by the Employee in connection with such
subsequent employment shall be applied as an offset to any monies to be paid by
the Company during his one year non-competition period under this Agreement and
(y) the Company shall no longer be required to continue to provide to the
Employee the benefits contemplated by Section 4.1 to the extent the Employee is
eligible to participate in substantially similar benefits in connection with
such subsequent employment.
(c) CONFIDENTIALITY; NONDISPARAGEMENT. The Employee hereby agrees that
while he is employed by the Company or at any time thereafter he will not,
directly or indirectly, disclose, divulge, render, offer or discuss any
Confidential Information or Trade Secrets of the
-6-
Company or any of its Subsidiaries except as may be necessary in the performance
of his duties hereunder and in no event shall he make or publish, either orally
or in writing, any disparaging, defamatory, derogatory or other negative
comments about the Company, its officers, directors or stockholders, products,
practices or operations, or the Company's business or financial condition, plans
or prospects. The Company hereby agrees that it shall not make or publish,
either orally or in writing, any disparaging, defamatory, derogatory or other
negative comments about the Employee.
9. NO RIGHT TO EMPLOYMENT. THE EMPLOYEE AGREES THAT THIS AGREEMENT DOES
NOT CREATE AN OBLIGATION ON THE PART OF THE COMPANY, ITS SUBSIDIARIES OR ANY
OTHER PERSON TO CONTINUE HIS EMPLOYMENT, NOR DOES IT GIVE RISE TO ANY RIGHT TO
OR EXPECTANCY OF EMPLOYMENT WITH THE COMPANY, ITS SUBSIDIARIES OR ANY OTHER
PERSON; IT BEING AGREED THAT THE EMPLOYEE IS FOR ALL PURPOSES AN EMPLOYEE AT
WILL OF THE COMPANY.
10. ENFORCEMENT. (a) The Company and the Employee agree that the covenants
set forth in this Agreement shall be enforced to the fullest extent permitted by
law. Accordingly if, in any judicial or similar proceedings, a court or any
similar judicial body shall determine that such covenant is unenforceable
because it covers too extensive a geographical area or survives too long a
period of time, or for any other reason, then the parties intend that such
covenant shall be deemed to cover only such maximum geographical area and
maximum period of time, and shall otherwise be deemed to be limited in such
manner, as will permit enforceability by such court or similar body. The Company
and the Employee further agree that covenants set forth in this Agreement are
reasonable in all the circumstances for the protection of the legitimate
interests of the Company and its stockholders. In the event that any one or more
of such covenants shall, either taken by itself or themselves together, be
adjudged to go beyond what is reasonable in all the circumstances for the
protection of the interests of the Company and its stockholders, but would be
adjudged reasonable if any particular covenant or covenants or parts thereof
were deleted, restricted or limited in a particular manner, then the said
covenants shall apply with such deletions, restrictions or limitations, as the
case may be.
(b) The Company and the Employee each agree that the breach of this
agreement by the other will cause irreparable damage to such party and that in
the event of such breach such party shall have, in addition to any and all
remedies of law, the right to an injunction, specific performance or other
equitable relief to prevent the violation of the other's obligations hereunder.
The seeking of any such injunction or other equitable relief shall not affect
the right of the party seeking the same to seek and obtain damages or other
equitable relief on account of any actual or threatened breach of this Agreement
by the other party.
11. DEFINITIONS.
"CAUSE" means any of the following: (a) the Employee's conviction of any crime
relating to the Company's business involving dishonesty, fraud, embezzlement,
securities laws violations, or theft or a felony of any type (excluding minor
acts outside of the Employee's employment with
-7-
the Company, such as minor traffic violations or minor domestic relations
matters); (b) a breach of fiduciary duties to the Company; (c) the Employee's
commission of an act of dishonesty with regard to the Company or any of its
Subsidiaries; (d) the adjudication of the mental incompetency of the Employee;
(e) the Employee's failure to diligently or substantially perform his duties for
the Company, which failure continues or ceases to be cured for a period of
thirty (30) days after the Company delivers to the Employee written notice
identifying the manner in which the Company reasonably believes that the
Employee has not substantially, diligently or successfully performed his duties;
(f) the Employee's prolonged absence from duty without the consent of the
Company other than as a result of illness, injury or death; or (g) any material
breach by the Employee of the terms of this Agreement or the Stockholders'
Agreement, such breach not being remedied within fifteen (15) days of the
Employee receiving written notice of the breach.
"COMPETING BUSINESS" means any one or more of the following: (i) internet
service provider or provider of other telephone or voice or data services
engaged anywhere in the Protected Territory; (ii) any other business in which
the Company or any of its Subsidiaries engages at the time the Employee's
employment with the Company terminates for any reason; or (iii) any other
business in which the Company or its Subsidiaries actively contemplate engaging
(as evidenced by the creation or ongoing development of a written business plan
with respect thereto) at the time the Employee's employment with the Company
terminates for any reason.
"CONFIDENTIAL INFORMATION OR TRADE SECRETS" means any of the trade secrets or
confidential information concerning the organization, business, technology or
finances of the Company or of any third party that the Company is under an
obligation to keep confidential (including, but not limited to, trade secrets or
confidential information respecting the Company's or any such third party's
inventions, products, designs, specifications, methods, know-how, techniques,
systems, processes, software programs, works of authorship, customer lists
projects, plans and proposals).
"PERSON" means an individual, partnership, corporation, limited liability
company, association, trust, joint venture, unincorporated organization and any
government, governmental department or agency or political subdivision thereof.
"PROTECTED TERRITORY" means the states of New York, New Hampshire, Maine,
Massachusetts, Connecticut, Vermont and Rhode Island.
"SUBSIDIARY" means any person that the Company now or hereafter shall at the
time own, directly or indirectly through any other Person, at least a majority
of the outstanding capital stock (or other beneficial interest) entitled to vote
generally; and the term "Subsidiaries" shall mean all of such persons
collectively.
"TERMINATION WITHOUT CAUSE" means the Company's termination of the Employee's
employment for any reason other than for Cause.
-8-
12. BINDING EFFECT; BENEFITS; ASSIGNMENT. This Agreement shall inure to
the benefit of, and shall be binding upon, the parties hereto and their
respective successors, assigns, heirs, and legal representatives. The Employee
may not assign his rights or delegate his duties under this Agreement in any
manner. In the event of a sale (including, without limitation, the sale of all
or substantially all of the Company's assets), merger or other reorganization of
the Company in which the Company is not the surviving or acquiring company, or
in which the Company is or becomes a wholly owned subsidiary of another Person,
the Company may assign its rights and delegate its duties under this Agreement
to the entity that results from or survives such sale, merger or other
reorganization, and this Agreement shall remain in full force and effect in
accordance with its terms following any such assignment and delegation.
13. NOTICES. All notices and other communications that are required or
permitted hereunder shall be in writing and shall be sufficient if delivered
personally or mailed by registered or certified mail, postage prepaid, or
delivered by a national, commercial overnight delivery service, to the following
addresses or such other address as any party hereto shall have specified by
notice in writing to the other party hereto:
If to the Employee:
Xxxx Xxxxxxx
00 Xxxx Xxxxxx Xxxx
Xxxxxxxx, XX 00000
If to the Company:
HarvardNET, Inc.
Xxx Xxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxxx, Chief Operating Officer
All such notices and communications shall be deemed to have been received on the
date of delivery thereof or the fifth business day after the mailing thereof by
certified mail, return receipt requested, or the first business day after the
delivery thereof by a national, commercial overnight delivery service, whichever
is earlier.
14. ENTIRE AGREEMENT. This Agreement, including the Exhibits hereto which
are incorporated herein by this reference, contains the entire agreement between
the parties hereto and supersedes all prior agreements and understanding, oral
or written, between the parties hereto with respect to the subject matter
hereof.
15. AMENDMENTS AND WAIVERS. This Agreement may not be modified or amended
except by an instrument or instruments in writing signed by the party against
whom enforcement of any such modification or amendment is sought. Either party
hereto may, by an instrument in
-9-
writing, waive compliance by the other party with any term or provision of the
Agreement on the part of such other party hereto to be performed or complied
with. The waiver by any party hereto of a breach of any term or provision of
this Agreement shall not be construed as a waiver or any subsequent breach.
16. SECTION AND OTHER HEADINGS. The section and other headings contained in
the Agreement are for reference purposes only and shall not be deemed to be a
part of this Agreement or to control or affect the meaning or construction of
any provision of this Agreement.
17. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts (without giving
effect to the conflict or choice of law provisions thereof that would cause the
application of the domestic substantive laws of any other jurisdiction).
18. CONSENT TO JURISDICTION. The Employee hereby agrees to submit to the
nonexclusive jurisdiction of the courts in and of the Commonwealth of
Massachusetts and to the courts to which an appeal of the decisions of such
courts may be taken and consents that service of process with respect to all
courts in and of the Commonwealth of Massachusetts may be made by registered
mail to the Employee's address set forth herein.
19. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY VOLUNTARILY AND
IRREVOCABLY WAIVES TRIAL BY JURY IN ANY ACTION OR OTHER PROCEEDING BROUGHT IN
CONNECTION WITH THIS AGREEMENT, THE STOCKHOLDERS' AGREEMENT, THE REGISTRATION
RIGHTS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
-10-
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first set forth above.
HARVARDNET, Inc. Employee:
By: /s/ Xxxx Xxxxxxxx /s/ Xxxx Xxxxxxx
------------------------------------ -------------------------------------
Xxxx X. Xxxxxxxx, Xxxx Xxxxxxx
Chief Operating Officer
-11-
