Exhibit 10.9
EXECUTION COPY
EXECUTIVE AGREEMENT
THIS EXECUTIVE AGREEMENT (this "Agreement") dated as of October 30,
1998, (the "Effective Date"), is made by and between Pac- West Telecomm, Inc., a
Californian corporation (the "Company") and Xxxxxxx Xxxxxx ("Executive").
Certain terms used herein and not otherwise defined herein have the meanings
given to such terms in Section 17 hereof.
WHEREAS, as of the Effective Date the Company desires to secure Executive's
services to the Company on the terms described herein and Executive desires to
provide such services to the Company on the terms described herein;
WHEREAS, the Company and Executive desire to enter into an agreement pursuant to
which the Company shall sell to Executive the number of shares set forth herein
of the Company's Common Stock, par value $.01 per share (the "Common Stock"),
upon the terms set forth herein; and
WHEREAS, certain provisions of this Agreement are intended for the benefit of,
and shall be enforceable by, the investors of the Company set forth on the
signature pages hereto (the "Investors").
NOW, THEREFORE, in consideration of the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency if which are
hereby acknowledged, the parties hereto agree as follows:
A. Provisions Relating to Employment.
1. Employment. The Company shall employ Executive, and Executive hereby
accepts employment with the Company, upon the terms and conditions set forth in
this Agreement for the period beginning on the Effective Date and ending as
provided in paragraph 4 below (the "Employment Period").
2. Positions and Duties.
(a) During the Employment Period, Executive shall serve as the "Chief Financial
Officer" of the Company and shall have such duties, responsibilities and other
authority as shall be determined by the Company's Chief Executive Officer.
(b) Executive shall report to the Company's Chief Executive Officer and the
Company's board of directors (the "Board") and Executive shall devote his best
efforts and his full business time and attention to the business and affairs of
the Company and its Subsidiaries. Executive shall perform his duties and
responsibilities to the best if his abilities in a diligent, trustworthy,
businesslike and efficient manner.
3. Compensation and Benefits.
(a) Base Salary. During the Employment Period, Executive's base salary shall be
$225,000 per annum or such higher rate as the Board determines in its sole
discretion may designate from time to time (the "Base Salary"), which salary
shall be payable in regular installments in accordance with the Company's
general payroll practices and shall be subject to customary withholding and
other customary deductions.
(b) Bonuses. The Board shall award a bonus (the "Annual Bonus") to Executive
during the Employment Period in an amount to be determined prior to each fiscal
year by the Board and Executive. The Annual Bonus may be structured, as agreed
upon by Executive and the Board in good faith, to provide for all or a portion
of the Annual Bonus to be paid upon the achievement by the Company of certain
separate specific objectives with such objectives generally designed to provide
Executive with a an Annual Bonus of 40% of the Base Salary in a normal year.
Such
objectives sell shall be set at levels that are reasonable and achievable. The
Annual Bonus may exceed 40% of the Base Salary as determined by the Board in its
sole discretion. Such Annual Bonus shall be payable within 90 days following the
end of each fiscal year during the Employment Period based upon the Company
having achieved such specific objectives for such fiscal year determined by the
Board and the Executive in good faith prior to such fiscal year and based upon
the Executive's performance during such fiscal year.
(c) Benefits.
(i) During the Employment Period, Executive shall be entitled to participate
in all of the Company's employee benefit plans and programs for which senior
executive employees of the Company are generally eligible (subject to the
Company's right to amend, modify or terminate any such plan or program in
accordance with its terms and applicable law and subject in each case to any
applicable waiting periods or other restrictions contained in such benefit plans
or programs), which shall include, but shall not be limited to, health
insurance, dental insurance and participation in the Company's 401(k) plan. The
Company shall match any contributions made by Executive to the Company's 401(k)
plan tot he extent consistent with the Company's past practice and the terms of
such plan and to the extent consistent with applicable law.
(ii) Due to the fact the Executive will be required to be on call continuously
for emergency response and to travel extensively by vehicle on company business,
during the Employment Period, the Company shall provide to Executive a
reasonable priced car consistent with the Company's past practice for other
senior executives. Such Company car shall be available for the Executive's use
in a manner consistent with past practice for other senior executives. Executive
acknowledges and agrees that the Company may report all or a portion of the cost
of such car and its operation as additional compensation to Executive if the
Company reasonably believes the same may be required by applicable law.
(iii) Executive shall be entitled to three (3) weeks of paid vacation during
each year of the Employment Period, in addition to legal holidays. Vacation
hereunder shall be accrue from year to year based upon the Company's then
current policy for all employee's as established from time to time by the board
in its sole discretion.
(iv) The Company shall reimburse Executive for all reasonable expenses incurred
by him in the course of performing his duties under this Agreement which are
consistent with the terms of this Agreement and the Company's policies in effect
from time to time with respect to travel, entertainment and other business
expenses, subject to the Company's general policies with respect to reporting
and reasonable documentation of such expenses. The Company shall reimburse
Executive for all reasonable expenses (including reasonable attorney's fees and
other expenses and accountant's fees and expenses) incurred by Executive in
connection with the negotiation and execution of this Agreement.
(v) The Company shall reimburse Executive for the expenses associated with
Executive's relocation to Stockton, California; provided that in no event shall
the aggregate amount of such expenses reimbursed during the Term of this
Agreement exceed $35,000. All reimbursements by the Company are subject to the
Company's reasonable requirements with respect to reporting and documentation of
expenses incurred.
(d) Stock Options. The Company hereby agrees to grant the Executive promptly
after the Effective Date, stock options to purchase a number of shares of the
Company's Common Stock equal to 1.25% of the total number of shares of common
stock outstanding on the Effective Date at an exercise price of $6.67 per share
which reflects the Company's good faith determination of that the outstanding
Common Stock of the Company has a value as of the date hereof approximately $8.3
million. The grant of such stock options shall be subjected to prior mutual
agreement of the parties as to the terms of such stock options and shall vest in
equal amounts on each of the first three anniversaries of the initial date of
grant of such stock options. The terms of such stock options shall be contained
in an option agreement issued pursuant to the Company's stock option plan as in
a effect as of the time of such grant. Such option agreement shall contain terms
and provisions regarding acceleration of vesting, expiration of options and
other terms identical to those contained in Xxxxxxx X. Xxxxxxx'x option
agreement.
(e) Key-Man Life Insurance. Executive agrees to cooperate at the request of
the Company in any efforts to obtain "key-man" life insurance on Executive's
life.
4. Terms and Termination
(a) The Employment Period pursuant to this Agreement shall be for a term ending
on the second anniversary of the Effective Date (the "Term"); provided that,
notwithstanding anything in this Agreement to the contrary, expressed or
implied, or Section 2924 of the Californian Labor Code or any similar provision
of applicable law, the Employment Period pursuant to this Agreement shall
terminate prior to the expiration of the Term upon (i) Executive's resignation
for any reason (with such resignation being effective 30 days after notice
thereof is delivered by Executive to the Company), (ii) Executive's death or
Disability or (iii) termination of Executive's employment by the Company with or
without Cause. The Employment Period may be extended in increments of one full
year by the mutual agreement of the parties.
5. Severance.
(a) If the Employment Period is terminated by the Company without cause,
Executive shall be entitled to receive (i) an amount equal to his Base Salary
for the one-year period after such termination and (ii) payment by the Company
of all health insurance premiums with respect to Executive's continuation
coverage rights under the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended, (i.e., "COBRA" payments), or any similar statute or regulation
then in effect, for the one-year period after such termination or such shorter
period until Executive obtains coverage under the medical plans of any
subsequent employer or otherwise fails to be eligible for continuation coverage
with respect to the Company's medical plans under COBRA (for purposes of this
Agreement, collectively the "Severance Period"), so long as Executive has not
breached and does not breach the provisions of any of paragraphs 6, 7, 8, 9, 10,
12, 15, or 16 below during the time period set forth therein or breached the
provisions of any agreement referenced thereby.
(b) If the Employment Period is terminated as a result of Executive's
Disability, Executive and/or his estate or beneficiaries, as the case may be,
shall be entitled to receive benefits under the Company's employee benefit
programs as in effect on the date of such termination to the extent permitted
thereunder and under applicable law and, in addition, shall be entitled to
receive (i) an amount equal to Executive's Base Salary at the times set forth in
this Agreement for the one-year period after the termination of the Employment
Period and (ii) the amount of any Annual Bonus otherwise payable to Executive
pursuant to paragraph 3(b) above for the fiscal year in which Executive's
employment is terminated, except that the amount of any such Annual Bonus
otherwise payable pursuant to this paragraph 5(b) shall be pro rated on the
basis of the number of days during such fiscal year that Executive was employed
by the Company; provided that in the event the Company establishes and maintains
disability insurance providing to Executive pursuant to clauses (i) and (ii) of
this paragraph 5(b), the Company shall be relieved of its obligation to make
such payments pursuant to this paragraph 5(b).
(c) If the Employment Period is terminated as a result of Executive's death,
Executive and/or his estate or beneficiaries, as the case may be, shall be
entitled to receive benefits under the Company's employee benefit programs as in
effect on the date of such termination to the extent permitted thereunder and
under applicable law and, in addition, shall be entitled to receive the amount
of any Annual Bonus otherwise payable to Executive pursuant to paragraph 3(b)
above for the fiscal year in which Executive's employment is terminated, except
that the amount of any such Annual Bonus otherwise payable pursuant to this
paragraph 5(c) shall be pro rated on the basis of the number of days during such
fiscal year that Executive was employed by the Company; provided that in the
event the Company establishes and maintains life insurance providing to
Executive and/or his estate or beneficiaries, as the case may be, a benefit at
least equal to the amount to be paid to Executive pursuant to this paragraph
5(c), the Company shall be relieved of its obligation to make such payments
pursuant to this paragraph 5(c).
(d) If the Employment Period is terminated by the Company for Cause or if the
Executive resigns for any reason, Executive shall be entitled to receive only
his Base Salary through the date of termination and the Company shall have no
further liability whatsoever to Executive.
(e) Except as otherwise expressively provided herein or as expressly required
by applicable law (including under Section 4980B of the Internal Revenue Code of
1986, as amended), all of Executive's rights to fringe benefits and bonuses
hereunder shall cease upon termination of the Employment Period.
6. Confidential Information; Nonsolicitation
(a) Executive agrees to execute on the date hereof and to be bound as of the
date hereof by the terms of the Company's form of confidentiality agreement
attached hereto as Exhibit A.
(b) Executive agrees that until the date which is one year after the
termination of the Employment Period, he shall not directly, or indirectly
through another person, (i) induce or attempt to induce any employee of the
Company or any of its Subsidiaries to leave the employ of the Company or any
such Subsidiary, or in any way interfere with the relationship between the
Company or any of its Subsidiaries and any employee thereof, (ii) hire any
person who was an employee of the Company or any of its Subsidiaries at any time
during the 180-day period immediately prior to the date on which such hiring
would take place (it being conclusively presumed by the Company and Executive so
as to avoid any disputes under this paragraph 6(b) that any such hiring within
such 180-day period is in violation of clause (i) above), or (iii) call on,
solicit or service any customer, supplier, licensee, licensor or other business
relation of the Company or any of its Subsidiaries in order to induce or attempt
to induce such Person to cease doing business, or to reduce the amount of
business conducted, with the Company or such Subsidiary. In addition, during the
Employment Period and thereafter, Executive shall not in any way interfere with
the relationship between any such customer, supplier, licensee or business
relation and the Company or any of its Subsidiaries (including making any
negative statements or communications about the Company or any of its
Subsidiaries).
7. Company's Ownership of Intellectual Property
(a) Executive acknowledges that all Work Product is the exclusive property of
the Company. Executive hereby assigns all right, title and interest in and to
such Work Product to the Company. Any copyrightable work prepared in whole or in
part by Executive will be deemed "a work made for hire" under section 201(b) of
the 1976 Copyright Act, and the Company shall own all of the rights comprised in
the copyright therein.
(b) The Company and the Executive each acknowledge the applicability of Section
2870 of the California Labor Code. Accordingly, the provisions of paragraph 7(a)
shall not apply to, and the term "Work Product" shall not include, any invention
that Executive developed entirely on his own time without using the Company's
equipment, supplies, facilities, or trade secret information except for those
inventions that either: (i) relate at the time of conception or reduction to
practice of the invention to the Company's or any Subsidiaries business, or to
the actual or demonstrably anticipated research or development of the Company or
any Subsidiary; or (ii) result from any work performed by Executive for the
Company or any Subsidiary. Set forth on the attached "Excluded Inventions
Schedule" are the inventions Executive believes meet the criteria for the
exclusions set forth above. Executive agrees to promptly advise the Company in
writing of any inventions developed after the Effective Date which Executive
believes meet the criteria for exclusion set forth above.
(c) Executive shall promptly and fully disclose all Work Product to the Company
and shall cooperate and perform all actions reasonably requested by the Company
(whether during or after the Employment Period) to establish, confirm and
protect that Company's right, title and interest in such Work Product. Without
limiting the generality of the foregoing, Executive agrees to assist the
Company, at the Company's expense, to secure the Company's rights in the Work
Product in any and all countries, including the execution of all applications
and all
other instruments and documents which the Company shall deem necessary in order
to apply for and obtain rights in such Work Product and in order to assign and
convey to the Company the sole and exclusive right, title and interest in and to
such Work Product. If the Company is unable because of Executive's mental or
physical incapacity or for any other reason (including Executive's refusal to do
so after request therefor is made by the Company) to secure Executive's
signature to apply for or to pursue any application for any United States or
foreign patents or copyright registrations covering Work Product belonging to or
assigned to the Company pursuant to paragraph 7(a) above, then Executive hereby
irrevocably designates and appoints the Company and its duly authorized officers
and agents as Executive's agent and attorney-in-fact to act for an in
Executive's behalf and stead to execute and file any such applications and to do
all other lawfully permitted acts to further the prosecution and issuance of
patents or copyright registrations thereon with the same legal force and effect
as if executed by Executive. Executive agrees not to apply for or pursue any
applications for any United States or foreign patents or copyright registrations
covering any Work Product other than pursuant to this paragraph in circumstances
where such patents or copyright registrations are or have been or are required
to be assigned to the Company.
8. Delivery of Materials Upon Termination of Employment. As requested by the
Company upon termination of Executive's employment with the Company for any
reason, Executive shall promptly deliver to the Company all copies and
embodiments, in whatever form, of all Confidential Information and Work Product
in Executive's possession or within his control irrespective of the location or
form of such material and, if requested by the Company , shall provide the
Company with written conformation that all such materials have been delivered to
the Company.
9. Subsequent Inventions. Executive understands and agrees that all
Intellectual Property Rights made, conceived, developed, or reduced to practice
by Executive, either alone or jointly with others, shall be disclosed to the
Company by the Executive for six (6) months following the termination of the
Employment Period. Employee further agrees that all Intellectual Property Rights
made, conceived, developed, or reduced to practice within six (6) months
following such termination shall be presumed to have been conceived during
Executive's employment with the Company and with the use of the Company
Confidential Information, but such presumption may be overcome by Executive by a
showing that such Intellectual Property Rights were conceived after the
Employment Period and without the use of any such Confidential Information. In
the event Executive is not able to rebut such presumption and prove that such
Intellectual Property Rights were conceived after the Employment Period and
without the use of Confidential Information, Executive agrees to assign all
right, title and interest in such Intellectual Property Rights to the Company.
10. Disclosure. Following the termination of Executive's employment with the
Company, Executive shall communicate the restrictions contained in this
Agreement to any Person he intends to be employed by, provide consulting
services to or otherwise represent. Executive hereby consents to the Company's
communication of the restrictions contained in this Agreement to any such
Person.
11. Enforcement; Remedies.
(a) If, at the time of enforcement of the covenants contained in paragraphs 6,
7, 8, 9, or 10 (the "Protective Covenants"), a court shall hold that the
duration or scope stated therein are unreasonable under circumstances then
existing, the parties hereto agree that the maximum duration or scope reasonable
under such circumstances shall be substituted for the stated duration or scope
permitted by law; provided that in no event shall the duration or scope
determined by such court exceed the duration or scope set forth in this
Agreement. Executive has consulted legal counsel regarding the Protective
Covenants and based on such consultation has determined and hereby acknowledges
that the Protective Covenants are reasonable in terms of duration and scope and
are necessary to protect the goodwill of the Company's business and the
Confidential Information.
(b) If Executive breaches, or threatens to commit a breach of, any of the
Protective Covenants, the Company shall have following rights and remedies, each
of which rights and remedies shall be independent of the others
and severally enforceable, and each of which is in addition to, and not in lieu
of, any other rights and remedies available to the Company at law or in equity:
(i) the right and remedy to have the Protective Covenants specifically enforced
by any court of competent jurisdiction (without the need to post a bond or other
security), it being agreed that any breach or threatened breach of the
Protective Covenants would cause irreparable injury to the Company and that
money damages would not provide an adequate remedy to the Company; and
(ii) the right and remedy to require Executive to account for and pay over to
the Company any profits, monies, accruals, increments or other benefits derived
or received by Executive as the result of any transaction(s) constituting a
breach of the Protective Covenants.
(c) In the event of any breach or violation by Executive of any of the
Protective Covenants, the time period of such covenant with respect to Executive
(to the extent such covenant is limited in duration) shall be tolled until such
breach or violation is resolved.
12. Loss of Severance due to Competition.
(a) The Executive shall not during the Employment Period and during the period
Executive is receiving any Severance Payment pursuant to paragraph 5(a) (the
"Noncompete Period"), for himself or on behalf of any other person, firm,
partnership, corporation, or other entity, engage, directly or indirectly,
either as an officer, director, employee, partner, consultant, individual
proprietor, agent, or otherwise (including, but not limited to, as an owner or
shareholder), in any business which (A) provides telecommunication services of
the type provided during the Employment Period by the Company and any of its
subsidiaries (including, without limitation, (i) switched local service, (ii)
switched long-distance service, (iii) dedicated transport services, (iv)
co-locate and interconnect services and (v) data switched services and
including, without limitation, telecommunication services of the type provided
by the Company and any of its Subsidiaries to information service providers) or
(B) provides services of the type which the Company and any of its Subsidiaries
have taken significant actions during the Employment Period
(b) For purposes of this Agreement, "Restricted Territories" shall mean (i) the
countries (or similar jurisdictions) in the United States of America, Canada and
Mexico and (ii) any other jurisdictions in which the Company or its Subsidiaries
are engaged in business during the Employment Period or have taken significant
actions to begin engaging in business during the Employment Period. Executive
acknowledges that the business of the Company is contemplated to be conducted in
the jurisdictions set forth in subparagraph 12(b)(i) (including as the same
relates to the production, promotion, marketing and sale of its products and
services), and that the geographic restrictions set forth above are reasonable
and necessary to protect the goodwill of the Company's business.
(c) If Executive breaches any of the provisions of this paragraph 12, Executive
and the Company acknowledge and agree that the Company's sole remedy for such
breach shall be the termination of the Severance Payments otherwise payable to
Executive pursuant to paragraph 5(a) hereof.
B. Provisions Relating to Executive Stock.
13. Purchase and Sale of Executive Stock
(a) On the Effective Date, the Company shall sell, and Executive shall
purchase, 6,247 shares of Common Stock of the Company for an aggregate purchase
price of $41,667. This sale of Common Stock shall be in addition to any other
stock or stock options granted to Executive. The Company shall deliver to
Executive a copy of, and a receipt for, the certificate representing such shares
of Common Stock, and Executive shall deliver to the Company a check or wire
transfer of funds in the aggregate amount of $8,333 (the "Cash Amount") and a
promissory note in the form of Exhibit B attached hereto in an aggregate
principal amount of $33,334 (the "Executive Note"). Executive's obligations
under the Executive Note shall be secured by a pledge of all of the shares of
Executive Stock to the Company, and in connection therewith, Executive shall
enter into a pledge agreement in the form of Exhibit C attached hereto (the
"Pledge Agreement").
(b) The Company shall hold each certificate representing Executive Stock until
such time as the Executive Stock represented by such certificate is released
from the pledge to the Company.
14. Representations and Warranties.
(a) Executive represents and warrants to the Company that:
(i) The Executive Stock to be acquired by Executive pursuant to this Agreement
shall be acquired for Executive's own account and not with a view to, or
intention of, distribution thereof in violation of the 1933 Act, or any
applicable state securities laws, and the Executive Stock shall not be disposed
of in contravention of the 1933 Act or any applicable state securities laws.
(ii) Executive is sophisticated in financial matters and is able to evaluate
the risks and benefits of the investment in the Executive Stock.
(iii) Executive is able to bear the economic risk of his investment in the
Executive Stock for an indefinite period of time because the Executive Stock has
not been registered under the 1933 Act and, therefore, cannot be sold unless
subsequently registered under the 1933 Act or an exemption from such
registration is available.
(iv) Executive has had an opportunity to ask and receive answers concerning the
terms and conditions of the offering of Executive Stock and has had full access
to such other information concerning the Company as he has reasonably requested.
Executive has reviewed, or has had an opportunity to review, a copy of the
Merger Agreement and Executive is familiar with the transactions contemplated
thereby. Executive has also reviewed, or has had an opportunity to review the
Company's articles of incorporation and bylaws.
(v) This Agreement constitutes the legal, valid and binding obligation of
Executive, enforceable in accordance with its terms, and the execution, delivery
and performance of this Agreement by Executive do not and shall not conflict
with, violate or cause a breach of any agreement, contract or instrument to
which Executive is a party or any judgement, order or decree to which Executive
is subject.
(vi) Executive is not a party to or bound by any employment agreement,
noncompete agreement or confidentiality agreement with any other person or
entity that conflicts with Executive's duties to the Company.
(vii) Upon execution and delivery of this Agreement by Executive and the other
parties hereto, this Agreement shall be the valid and binding obligations of
Executive, enforceable in accordance with its terms.
(b) As an inducement to the Company to issue the Executive Stock to Executive,
and as a condition thereto, Executive acknowledges and agrees that:
(i) Neither the issuance of the Executive Stock to Executive nor any provision
contained herein shall entitle Executive to remain in the employment of the
Company and its Subsidiaries or affect the right of the Company or its
Subsidiaries to terminate Executive's employment at any time.
(ii) Executive has consulted with independent legal counsel regarding his rights
and obligations under this Agreement and Executive fully understands the terms
and conditions contained herein.
15. Repurchase Option
(a) In the event of the termination of Executive's employment with the Company
for any reason (a "Termination"), the Executive Stock (whether held by Executive
or one or more of Executive's transferees, other than any Investor or the
Company) will be subject to repurchase by the Company and the Investors pursuant
to the terms and conditions set forth in this section 15 (the "Repurchaser
Option").
(b) In the event of a repurchase of the Executive Stock, the purchase price for
each share of Executive stock will be Fair Market Value of such share; provided
that in the event Executive's employment with the Company is terminated with
Cause, the purchase price for each share of Executive Stock shall be lesser of
the Original Cost or the Fair Market Value of such share.
(c) The Company may elect to purchase all or any portion of the Executive Stock
by delivering written notice (the "Repurchaser Notice") to the holder or holders
of the Executive Stock. The Repurchaser Notice will set firth the number of
shares and the time and place for the closing of the transaction. The number of
shares to be repurchased by the Company shall first be satisfied to the extent
possible from the Executive Stock held by the Executive at the time of delivery
of the Repurchaser Notice. If the number of shares of Executive Stock then held
by Executive is less than the total number of shares of Executive Stock which
the Company has elected to purchase, the Company shall purchase the remaining
shares elected to be purchased from the other holder(s) of Executive Stock under
this Agreement, pro rata according to the number of shares of Executive Stock
held by such other holder(s) at the time of delivery of such Repurchase Notice
(determined as nearly as practicable to the nearest share).
(d) If for any reason the Company does not elect to purchase all of the
Executive Stock pursuant to the Repurchase Option, the Investors shall be
entitled to exercise the Repurchase Option for the Executive Stock that the
Company has not elected to purchase (the "Available Shares"). As soon as
practicable after the Company has determined that there will be Available Shares
and the purchase price for the Available Shares. The Investors may elect to
purchase any or all of the Available Shares by giving written notice to the
Company within one month after the Option Notice has been given by the Company.
If more than one Investor elects to purchase any or all Available Shares and the
number of Available Shares is less then the aggregate number of shares elected
to be purchased by such electing Investors, each Investor shall be entitled to
purchase the lessor of (i) the number of Available Shares such Investor has
elected to purchase as indicated in the Election Notice or (ii) the number if
Available Shares obtained by multiplying the number of shares specified in the
Option Notice by a fraction, the numerator of which is the number of shares of
Common Stock (on a fully-diluted basis) held by such Investor and the
denominator of which is the aggregate number of shares in Common Stock (on a
fully-diluted basis) held by all electing Investors. In the event of all
Available Shares are not purchased by the Investors pursuant to the immediately
preceding sentence, the Available Shares remaining to be purchased shall be
allocated among the Investors who elect to purchase more Available Share (as
indicated in their respective Election Notices) then they are entitled to
purchase pursuant to the immediately preceding sentence as the Investors shall
agree in writing. As soon as practicable, and in any event within ten days.
After the expiration of the one-month period set forth above, the Company shall
notify each holder of Executive Stock as to the number if shares being purchased
from such holder by the Investors (the "Supplemental Repurchase Notice"). At the
time the Company delivers the Supplemental Repurchase Notice to the holder(s) of
Executive Stock, the Company shall also deliver written notice to the Investors
setting forth the number of shares such Investor is entitled to purchase, the
aggregate purchase price and the time of the closing of the transaction.
(e) The closing of the purchase of the Executive Stock pursuant to the
Repurchase Option shall take place on the date designated by the Company in the
Repurchase Notice or Supplemental Repurchase Notice, which date shall not be
more one month nor less than five days after the delivery of the later of either
such notice to be
delivered. The Company and/or the Investors shall pay for the Executive Stock to
be purchased pursuant to the Repurchase Option by delivery of, in case of any
Investor, a check or wire transfer of funds and in the case of a purchase by the
Company of Executive Stock, at its option, (A) a check or wire transfer of
funds, (B) a subordinate note or notes payable in up to three equal annual
installments (or as otherwise agreed by the Company and Executive) beginning on
the first anniversary of the closing of such purchase and bearing interest
(payable quarterly) at a rate per annum equal to the prime rate as published in
The Wall Street Journal from time to time or (c) both (A) and (B), in the
aggregate amount of the purchase price for such shares; provided that the
Company shall use reasonable efforts to make all such repurchases in full with a
check or wire transfer of funds. Any notes issued by the Company pursuant to
this Section 15 shall be subject to any restrictive covenants to which such
issuer is subject at the time of such purchase. In addition, the Company may pay
the purchase price for such shares by offsetting amounts outstanding under the
Executive Note issued to the Company hereunder and any other bona fide debts
owed by the Executive to the Company. The Company and the Investors will be
entitled to receive customary representations and warranties from the sellers
regarding such sale and to require all sellers' signature be guaranteed.
(f) Notwithstanding anything to the contrary contained in this Agreement, all
repurchases of Executive Stock by the Company shall be subject to applicable
restrictions contained in the California General Corporation Law and in the
Company's and its Subsidiaries debt and equality financing agreements. If any
such restrictions prohibit the repurchase of Executive Stock hereunder which the
Company is otherwise entitled or required to make, the Company may make such
repurchases as soon as it is permitted to do so under such restrictions.
(g) The right of the Company and the Investors to repurchase the Executive
Stock pursuant to this Section 15 shall terminate upon a Sale of the Company, a
Transfer pursuant to the participation rights set forth in paragraph 2(d) of the
Shareholders Agreement (as defined below), upon the consummation of a Public
Offering.
16. Restriction on Transfer.
(a) Until the third anniversary of the Effective Date, Executive shall not
Transfer any interest in any shares of Executive Stock, except for (i) Transfers
to members of Executive's Family Group, (ii) Transfers upon a Sale of the
Company, (iii) Transfers pursuant to the participation rights set forth in
paragraph 2(d) of the Shareholders Agreement (as defined below), and (iv)
Transfers of Option Shares after consummation of a Public Offering; provided
that prior to any such Transfer to a member of Executive's Family Member Group,
such member shall agree in writing to be bound by the provisions of this
Agreement with respect to the Executive Stock.
(b) Executive acknowledges and agrees that shares of Executive Stock are
subject to the restrictions on transfer set forth in the Shareholders Agreement
of the Company, dated as of the Effective Date, by and among Executive and each
of the other persons named therein, as the same may be amended and modified from
time to time (the "Shareholders Agreement").
(c) In addition to any other legend required pursuant to the Stockholders
Agreement or otherwise, the certificates representing the Executive Stock shall
bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON
OCTOBER 30, 1998, AND ARE SUBJECT TO RESTRICTIONS ON TRANSFER SET FORTH IN A
MANAGEMENT AGREEMENT AMONG THE ISSUER AND THE ORIGINAL HOLDER HEREOF DATED AS OF
OCTOBER 30, 1998, AS AMENDED AND MODIFIED FROM TIME TO TIME. A COPY OF SUCH
AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE ISSUER'S PRINCIPAL PLACE
OF BUSINESS WITHOUT CHARGE."
C. General Provisions
17. Definitions.
"Affiliate" of any particular Person means any other Person controlling,
controlled by or under common control with such particular Person, where
"control" means the possession, directly or indirectly, of the power to direct
the management and policies of a Person whether through the ownership of voting
securities, contract or otherwise.
"Cause" means (A) Executive's theft or embezzlement, or attempted theft or
embezzlement, of money or property of the Company or any of its Affiliates,
Executive's perpetration or attempted perpetration of fraud, or Executive's
participation in a fraud or attempted fraud, on the Company or any of its
Affiliates or Executive's unauthorized appropriation of, or Executives attempt
to misappropriate, any tangible or intangible assets or property of the Company
or any of its Affiliates; (B) Executive's conviction or commission of a felony
or conviction for any crime involving acts which tend to insult or offend
community moral standards or public decency or that materially and adversely
affect the reputation of business activities of the Company or its Affiliates;
(C) Executive's substance abuse, including abuse of alcohol or use of illegal
narcotics, or other illegal drugs or substances, for which Executive fails to
undertake and maintain treatment within 15 days after requested by the
Corporation; (D) Executive's refusal to carry out the lawful instructions of the
Company's Chief Executive Officer that are the consistent with a reasonable,
legitimate business purpose following receipt of written notice of such
instructions from the Chief Executive Officer; or (E) Executive's material
breach of any provisions of this Agreement that is reasonable likely to cause
harm to the Company and which is incapable of cure or which is not cured within
15 days after written notice thereof to Executive.
"Confidential Information" means all information of a confidential or
proprietary nature (whether or not specifically labeled or identified as
"confidential"), in any form or medium, that is or was disclosed to, or
developed or learned by, Executive in connection with Executive's prior
relationship with the Company or during Employment Period and that relates to
the business, products, services, research or development of the Company or its
suppliers, distributors or customers. Confidential Information includes but is
not limited to the following: (i) internal business information (including
information relating to strategic and staffing plans and practices, business,
training, marketing, promotional and sales planes and practices, cost, rate and
pricing structures and accounting and business methods); (ii) identities of,
individual requirements of, specific contractual arrangements with, and
information about, the Company's suppliers, distributors and customers and their
confidential information; (iii) trade secrets, know-how, compilations of data
and analyses, techniques, systems, formulae, research, records, reports,
manuals, documentation, models, data and data bases relating thereto; and (iv)
inventions, innovations, improvements, developments, methods, designs, analyses,
drawings, reports and all similar or related information (whether or not
patentable). Confidential information shall not include information that
Executive can demonstrate: (a) is publicly known through no wrongful act or
breach of obligation of confidentiality; (b) was lawfully known to Executive
prior to the time Executive began rendering services to the Company and its
predecessors; or (c) was rightfully received by Executive from a third party
without a breach of any obligation of confidentiality by such third party.
"Disability" means the inability, due to illness, accident, injury, physical or
mental incapacity or other disability, of Executive to carry out effectively his
duties and obligations to the Company or to participate effectively and actively
in the management of the Company for a period of at least 60 consecutive days or
for shorter periods aggregating at least 120 days (whether or not consecutive)
during any twelve-month period, as determined in the reasonable good faith
judgement of the Board.
"Executive Stock" means all shares of Common Stock purchased pursuant hereto and
all shares of Common Stock hereafter acquired by Executive (including upon the
exercise of any Stock Options or similar rights). Executive Stock will continue
to be Executive Stock in the hands of any holder other than Executive (except
for the Company and the Investors and except for transferees in a Public Sale or
pursuant to paragraph 2(d) of the Shareholders
Agreement), and except as otherwise provided herein, each such holder of
Executive Stock will succeed to all rights and obligations attributable to
Executive as a holder of Executive Stock hereunder.
"Fair Market Value" of any share of Executive Stock means:
(i) the average of the closing prices of the sales of such security on all
securities exchanges of which such security may at the time be listed, or, if
there have been no sales on any such exchange on any day, the average of the
highest bid and the lowest asked prices on all such exchanges at the end of such
day, or if on any day such security is not listed, the average of the
representative bid and asked prices quoted in the Nasdaq Stock Market as of 4:00
P.M., New York time, or, if on any day such security is not quoted in the Nasdaq
Stock Market, the average of the highest bid and lowest asked prices on such day
in the domestic over-the-counter market as reported by the National Quotation
Bureau Incorporated, or any similar successor organization, in each such case
averaged over a period of 21 days consisting of the day as of which the Fair
Market Value is being determined and the 20 consecutive days prior to such day;
or
(ii) If the Executive Stock is not listed on any securities exchange or quoted
in the Nasdaq Stock Market or the over-the-counter market for the entire 21-day
averaging period specified above, then the fair value of such security
determined jointly by the Company and Executive in good faith. If such parties
are unable to reach agreement within a reasonable period of time, such fair
value shall be determined by an independent appraiser experienced in valuing
securities jointly selected by the Company and Executive. If the parties are
unable to agree on an independent appraiser, a firm shall be selected bylot from
six nationally recognized investment banking forms, three of such firms are to
be selected by Executive and three such firms to be selected by the Company. The
expenses of such appraiser shall be borne by the Executive unless the appraisers
valuation is more than 10% greater than the amount determined by the Company, in
which case, the costs of the appraiser shall be borne by the Company. The
determination of such appraiser shall be final and binding upon all parties,
except that after the determination of Fair Market Value, any party that has
been offered to purchase shares of capital stock may rescind its offer to
purchase such shares at any time within ten business days after receiving
written notice of such determination of Fair Market Value. Fair Market Value
shall be determined as of the date the earlier of the Repurchase Notice or
Supplemental Repurchase Notice is delivered.
"Family Group" means Executive's spouse and descendants (whether natural or
adopted) and any trust solely for the benefit of such Executive and/or
Executive's spouse and/or descendants.
"Independent Third Party" means any person who, immediately prior to the
contemplated transaction, does not own in excess of 5% of the Company's Common
Stock on a fully-diluted basis, who is not controlling, controlled by or under
common control with any such 5% owner of the Company's Common Stock and who is
not the spouse or descendent (by birth or adoption) of any such 5% owner of the
Company's Common Stock.
"Intellectual Property Rights" means all inventions, innovations, improvements,
developments, methods, processes, designs, analysis, drawings, reports and all
similar or related information (whether or not patentable or reduced to
practice) and any copyrightable work, trade xxxx, trade secret or other
intellectual property rights which relate to the Company's or any of its
Subsidiaries' actual or anticipated business.
"Original Cost" of (i) each share of Common Stock purchased hereunder shall be
equal to $6.67 and (ii) each Option Share shall be the exercise price or similar
amount paid upon the issuance of such share to Executive (in each case as
proportionally adjusted for all subsequent stock splits, stock dividends and
other recapitalizations).
"Option Shares" shall mean all shares of Common Stock issued to Executive upon
exercise of any stock options or similar rights granted to Executive by the
Company.
"Person" means an individual, a partnership, a corporation, a limited liability
company, an association, a joint stock company, a trust, a joint venture, an
unincorporated organization and a governmental entity or an department, agency
or political subdivision thereof.
"Public Offering" means any offering by the Company of its Common Stock or
rights to purchase it Common Stock to the public pursuant to an effective
registration statement under the Securities Act, as then in effect, or in any
comparable statement under any similar federal statute then in force.
"Public Sale" means the sale of the Company to an Independent Third Party of
affiliated group of Independent Third Parties pursuant to which such party or
parties acquire (i) capital stock of the Company possessing the voting power to
elect a majority of the Company's board of directors (whether by merger,
consolidation or sale or transfer of the Company's capital stock) or (ii) all or
substantially all of the Company's assets determined on a consolidated basis.
"Securities Act" means the Securities Act of 1933, as amended from time to time.
"Subsidiary" means, with respect to any Person, any corporation, limited
liability company, partnership, association or other business entity of which
(i) if a corporation, a majority of the total voting power of shares of stock
entitled (without regard to the occurrence of any one contingency) to vote in
the election of directors, mangers, or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar ownership interest thereof is at the time
owned or controlled, directly, or indirectly, by that Person or one or more
Subsidiaries of that Person or a combination thereof. For purposes hereof, a
Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association or other business entity is
such Person or Persons shall be allocated a majority of limited liability
company, partnership, association or other business entity gains or losses or
shall be or control any managing director or general partner of suck limited
liability company, partnership, association or other business entity.
"Transfer" means to sell, transfer, assign, pledge, or otherwise dispose of
(whether with or without consideration and whether voluntarily or involuntarily
or by operation of law).
"Work Product" means all inventions, innovations, improvements, developments,
methods, processes, designs, analysis, drawings, reports, research and
development of existing or future products or services which were or are
conceived, reduced to practice, contributed to or developed or made by Executive
(whether alone or jointly with others) while employed (both before and after the
Effective Date) by the Company (or its predecessors, successors or assigns) and
its Subsidiaries and all similar or related information (whether or not
patentable or reduced to practice) and any copyrightable work, trade xxxx, trade
secrets or intellectual property rights, and of which relate to the Company's or
any of its Subsidiary's actual or anticipated business.
18a Survival. The provisions set forth in paragraphs 6 through 32 of this
Agreement shall survive and continue in full force and effect in accordance with
their terms notwithstanding any termination any termination of the employment
period.
19a Notices. Any notice provided for in this Agreement shall be deemed to have
been given when delivered personally to the recipient, send to the recipient by
reputable express courier (charges prepaid), telecopied (with hard copy to
follow) or 5 days after mailed to the recipient by certified or registered mail,
return receipt requested and postage prepaid. Such notice will be sent to
Executive or to the Company at the address set forth below:
Notice to Executive:
Xxxxxxx Xxxxxx
00 Xxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Telephone: ____________
Facsimile: ____________
Notice to the Company:
Pac-West Telecomm, Inc.
0000 Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Secretary
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement shall be deemed to have been given when so delivered
or 5 days after mailed.
20a Severability. Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, legal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or enforceability shall not effect any
other provision or any other jurisdiction, but this Agreement shall be reformed,
construed and enforced in such jurisdiction as if such invalid, illegal or
unenforceable provision has never been contained herein.
21a No Strict Construction. The language used in this Agreement shall be deemed
to be the language chosen by the parties hereto to express their mutual intent,
and no rule of strict construction shall be applied against any party. The use
of the word "Including" herein shall mean "Including without limitation."
22a Counterparts. This Agreement may be executed in separate counterparts
(including by means of telecopies signature pages), each of which is deemed to
be an original and all of which taken together constitutes one and the same
agreement.
23a Choice of Law. All issues and questions concerning the construction,
validity, enforcement and interpretation of this Agreement and any schedules
shall be governed by, and construed in accordance with, the laws of the State of
California, without giving effect to any choice of law or conflict of law rules
or provisions (whether of the State of California or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other then the
State of California.
24a Consent to Personal Jurisdiction. Executive hereby expressly consents to
the nonexclusive personal jurisdiction in venue of the state and federal courts
located in the federal Eastern District of California for any law suit filed
against Executive by the Company arising from or relating to this Agreement.
25a Transfers in Validation of Agreement. Any Transfer or attempted Transfer of
any Executive Stock in violation of any provision of this Agreement shall be
void, and the Company shall not record such Transfer on its books or treat any
purported transferee of such Executive Stock as the owner of such shares for any
purpose.
26a Complete Agreement. This Agreement, those documents expressly referred to
herein and other documents of even date herewith embody the complete Agreement
and understanding among the parties and supersede and
preempt any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to subject matter hereof in any
way, including, without limitation, the Consulting Agreement.
27a Successors and Assigns. Except as otherwise provided herein, this Agreement
shall bind and inure to the benefit of and be enforceable by Executive, the
Company, the Investors and their respective successors and assigns (including
subsequent holders of Executive Stock); provided that the rights and obligations
of Executive under this Agreement shall not be assignable except in connection
with a permitted Transfer of Executive Stock hereunder. The Investors shall be
permitted to assign any and all of their rights pursuant of this Agreement to
any other holder of Common Stock of the Company without obtaining the consent or
approval of any other party hereto.
28a Remedies. Each of the parties of this Agreement (including the Investors)
will be entitled to enforce its rights under this Agreement specifically, to
recover damages and costs (including attorney's fees) caused by any breach of
any provision of this Agreement and to exercise all other rights exciting in its
favor. The parties hereto agree and acknowledges money damages may not be an
adequate remedy for any breach of the provisions of this Agreement and that any
party may in its sole discretion apply to any court of law or equity of
competent jurisdiction (without posting any bond or deposit for specific
performance and/or other injunctive relief in order to enforce or prevent any
violations of the provisions of this Agreement. In any action arising under this
Agreement, the prevailing party shall be entitled to recover his/its full
attorney's fees and costs, including any expert's fees.
29a Amendment and Waiver. The provisions of this Agreement may be amended and
waived only with the prior written consent of the Company, the Investors owning
a majority of Common Stock held by the Investors and Executive.
30a Business Days. If any time period for giving notice or taking action
hereunder expires on a day which is a Saturday, Sunday or holiday in the State
in which the Company's chief executive office is located, the time period shall
be automatically extended to the business day immediately following such
Saturday, Sunday or holiday.
31a Adjustments of Numbers. All numbers set forth herein which refer to stock
prices or amounts will be appropriately adjusted to reflect stock splits, stock
dividends, combinations of stock and other recapitalizations effecting the
subject class of stock.
32a Third-Party Beneficiaries. Certain provisions of this Agreement are entered
into for the benefit of and shall be enforceable by the Investors as provided
herein.
* * * * *
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date
first written above which shall be effective as of the Closing Date.
PAC-WEST TELECOMM, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
-------------------------------
Name: Xxxxxxx X. Xxxxxxx
-----------------------------
Its: President
-----------------------------
/s/ XXXXXXX XXXXXX
----------------------------------
XXXXXXX XXXXXX
EXCLUDED INVENTIONS SCHEDULE
None.
