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EXHIBIT 10.23
EMPLOYMENT AGREEMENT
This Employment Agreement is made this 1st day of January, 1996,
between Xxxxxxx X. Xxxxxxx ("Employee") and Phoenix Network, Inc., a Delaware
corporation ("Employer") and is intended to replace and supersede the
Employment Agreement currently existing between Employer and Employee dated
January 1, 1995.
1. Employment. Employee shall be retained as President and Chief Executive
Officer to perform such specific duties and have such responsibilities as the
Employer's Board of Directors will, from time to time, establish.
2. Term of Employment. Employee's employment in this position shall commence on
Monday, January 1, 1996 and shall continue thereafter for a term of three years
ending December 31, 1998. Upon each annual anniversary of this agreement the
term of this agreement will be automatically extended by one year so as to
continually extend the term of this agreement to include subsequent three year
periods, unless sooner terminated as provided herein.
3. Compensation and Benefits. (a) Upon execution of this agreement Employer
will pay to Employee a Bonus in the amount of $60,000 subject to all
appropriate withholdings or other deductions required by law or by Employer's
established policies.
Beginning January 1, 1996 Employee shall be paid at the rate of $250,000 per
year, beginning January 1, 1997 Employee shall be paid at the rate of $275,000
per year and beginning January 1, 1998 Employee shall be paid at the rate of
$300,000 per year which shall be Employee's compensation through the duration
of this agreement unless otherwise amended as provided for herein. All payments
of salary shall be paid on the regularly scheduled pay dates of the Employer
subject to all appropriate withholdings or other deductions required by law or
by Employer's established policies. Employer may increase Employee's salary at
Employer's sole discretion but shall not reduce such salary below the annual
rates established by this Agreement.
On January 1, 1996 Employee shall receive a stock option grant from Employer of
200,000 options to purchase Phoenix Network, Inc. common stock traded on the
American Stock Exchange subject to the rules and regulations as outlined in the
Employer's 1989 Stock Option Plan, as amended. These options will vest at a
rate of 12,500 options per quarter and will become fully vested on December 31,
2000, unless otherwise accelerated by other conditions as outlined herein or by
a decision of the Board of Directors of Employer. In the event of a merger,
reverse merger, pooling, consolidation, outright sale of the company or any
other event which constitutes a "change of control" of the Employer at any time
during the duration of this agreement Employee shall have the right to
terminate his employment with Employer at will. In the event Employee does
terminate his employment with Employer or if Employer elects to terminate
Employee's employment under paragraph 5(d.) herein, then at that time, all
un-vested options which have previously been granted or will subsequently be
granted, will immediately be granted and will immediately vest upon the closing
date of that merger, reverse merger, pooling, consolidation or sale or upon the
termination of Employee under paragraph 5(d.)
herein.
(d.) Employer agrees to provide to Employee an annual bonus beginning on
January 1, 1996, and on an annual basis thereafter, which shall be calculated
as one percent (1%) of Employer's Earnings Before Interest, Taxes, Depreciation
and Amortization (EBITDA) as reported in the Company's quarterly 10Qs and
annual 10K so long as EBITDA is equal to, or greater than, 70% of budgeted
EBITDA for each calendar year. Budgeted EBITDA, for purposes of this Agreement,
shall mean EBITDA as budgeted in the Employer's 1996 Pro-Forma Income
Statement, a copy of which is attached hereto as Exhibit A. EBITDA budgets for
subsequent years will be attached as subsequent exhibits to this Agreement at
the beginning of each subsequent year.
Said bonus is to be paid on a quarterly basis, subject to all appropriate
withholdings or other deductions required by law or by Employer's established
policies. It is the intent of the Employer that this bonus be equal to 1% of
Employer's EBITDA on an annual basis so long as actual EBITDA is at least 70%
of budgeted EBITDA. Because the bonus will be paid on a quarterly basis there
is the possibility that an actual EBITDA exceeding 70% of budget in one quarter
and an actual EBITDA below 70% in a subsequent quarter could produce a
situation where the Employee has actually been paid a bonus when no bonus was
earned. If this situation occurs it is understood that all bonus payments to
Employee by Employer will be suspended until such time as EBITDA is equal to or
greater than 70% of budgeted EBITDA on a year-to-date basis.
Employer agrees to purchase a "corporate membership" at the country club of
Employee's choice and to designate Employee
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as its "representative" with regard to this membership. Employer will pay all
assessments, if any, in connection with this membership, while Employee will
pay all monthly dues and charges incurred in connection with Employee's use of
the club's facilities.
Beginning upon Employee's first day of employment Employee shall have the right
to and be covered by all benefits normally afforded to Employer's full time
Employees. Such benefits may include, but not limited to, Medical, Dental and
Life insurance coverage, Sick and Disability income, 401K Plan, Pension and
Profit Sharing plans, Leave of Absence, personal days and paid holidays.
Employee shall have twenty (20) days of vacation. Employer shall reimburse
Employee for unused days or, at the option of Employee, any unused days may be
carried forward into the next calendar year.
Employer shall reimburse employee for such reasonable out-of-pocket expenses as
Employee may incur for and on behalf of the furtherance of Employer's business
provided that the Employee submits to the Employer satisfactory documentation
or other support for such expenses in accordance with Employer's expense
reimbursement policy.
4. Covenants of Employee. (a.) During the term of this agreement while Employee
is employed by Employer, Employee shall not directly or indirectly engage in
any business, whether as proprietor, partner, joint venturer, employer, agent,
employee, consultant, officer or beneficial or record owner of more than one
percent of the stock of any corporation or association which is competitive to
the business conducted by Employer.
During the term of this agreement or after termination of employment Employee
will not divulge or appropriate to Employee's own use or to the use of others
any trade secrets or confidential information or confidential knowledge
pertaining in any way to the business of Employer.
In the event Employee terminates this agreement by quitting or otherwise
resigning prior to the expiration of the term hereof as set forth in paragraph
5(e.) of this agreement, or if Employee's employment is terminated by Employer
pursuant to paragraph 5(a.) of this agreement, Employee separately agrees,
being fully aware that the performance of this agreement is important to
preserve the present value of the property and business of Employer, that for
12 calendar months following the date of such termination, Employee shall not
directly engage in any business, whether as proprietor, partner, joint
venturer, employer, agent, employee, consultant, officer or beneficial or
record owner of more than one percent of the stock of any corporation or
association which is competitive to the business conducted by Employer. During
such 12 month period, Employee shall not solicit or do business competitive to
the business conducted by Employer.
Employee agrees that the breach by Employee of any of the foregoing covenants
is likely to result in irreparable harm, directly or indirectly, to Employer
and Employee, therefore, consents and agrees that if Employee violates any such
covenants, Employer shall be entitled, among and in addition to any other
rights or remedies available under this agreement or at law or in equity, to
temporary and permanent injunctive relief to prevent Employee from committing
or continuing a breach of such covenant.
It is the desire, intent and agreement of Employee and Employer that the
restrictions placed on Employee by this paragraph 4 be enforced to the fullest
extent permissible under the law and public policy applied by any jurisdiction
in which enforcement is sought. Accordingly, if and to the extent that any
portion of this paragraph 4 shall be adjudicated to be unenforceable, such
portion shall be deemed amended to delete therefrom or to reform the portion
thus adjudicated to be invalid or unenforceable, such deletion or reformation
to apply only with respect to the operation of such portion in the particular
jurisdiction in which such adjudication is made.
5. Termination. (a.) Employer shall have the right to terminate Employee's
employment at any time for cause for any of the following reasons:
(1) Employee shall be convicted by a court of competent and final jurisdiction
of any crime that constitutes a felony in the jurisdiction involved.
(2) Employee shall commit any act of fraud, misappropriation, or embezzlement
against Employer.
(3) Employee shall materially breach this agreement or fail or refuse to
perform any of his material duties as instructed by
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the Board of Directors or as required by this agreement in any material respect.
In the event Employee is terminated under this agreement for cause the Employer
shall present to Employee, in writing, any and all reasons for this termination
for cause at the time such allegation is raised. Employee shall then have a
period not to exceed thirty (30) to respond to such allegations. Upon receipt
of such response Employer shall have as its option to exercise such termination
of Employee under paragraph 5 (a.) at its sole discretion
In the event Employee's employment is terminated by Employer for cause Employee
shall receive no severance pay.
Employer shall have the right to terminate the services of Employee without
cause.
In the event Employer terminates the Employee's employment without cause,
Employee shall receive as severance pay an amount equal to eighteen (18) months
of Employee's salary and bonus as provided for herein. Said salary will be paid
by Employer to Employee in a lump sum upon termination and said bonus will be
paid quarterly for six consecutive quarters as provided herein. In addition
Employer will pay Employee's relocation expenses from Denver to the location of
Employee's choice. Employer will pay directly to the provider or shall
reimburse Employee for Employee's reasonable relocation expenses based on the
actual amount of such expenses incurred up to a maximum amount of $20,000. for
purposes of this provision, relocation expenses consist of Employee's moving
costs and expenses incidental thereto. Regardless of the actual amount of these
incurred expenses the maximum expense to the Employer for the Employee's
relocation under this provision shall be $20,000.
In the event Employer or Employee, as outlined in 3(c), terminates the
Employee's employment as a result of a merger, reverse merger, pooling,
consolidation, outright sale of the company or any other event which
constitutes a "change of control" Employee shall receive as severance pay any
and all salary which Employee would have received had Employee remained
employed for the duration of the current three year term of this employment
Agreement. this severance pay will be paid by Employer to Employee in a lump
sum immediately upon termination of employment under 3(c.) herein. In addition
Employer will pay Employee's relocation expenses from Denver to the location of
Employee's choice. Employer will pay directly to the provider or shall
reimburse Employee for Employee's reasonable relocation expenses based on the
actual amount of such expenses incurred up to a maximum amount of $20,000. For
purposes of this provision, relocation expenses consist of Employee's moving
costs and expenses incidental thereto. regardless of the actual amount of these
incurred expenses the maximum expense to the Employer for the Employee's
relocation under this provision shall be $20,000.
Employee may terminate this agreement if Employer materially breaches any of
the provisions in this agreement. If Employee shall terminate this agreement as
provided in this paragraph 5(g.) then, provided that Employee is not materially
at fault, Employee shall not be liable to Employer for any damages as a result
thereof and shall not be bound by the provisions of paragraph 4(c.) of this
agreement. Additionally, Employee shall receive as severance pay an amount
equal to eighteen (18) months of Employee's salary and bonus as provided for
herein. Said salary will be paid by Employer to Employee in a lump sum upon
termination and said bonus will be paid quarterly for six consecutive quarters
as proved herein. In addition Employer will pay Employee's relocation expenses
from San Francisco to the location of Employee's choice. Employer will pay
directly to the provider or shall reimburse Employee for Employee's reasonable
relocation expenses based on the actual amount of such expenses incurred up to
a maximum amount of $20,000. for purposes of this provision, relocation
expenses consist of Employee's moving costs and expenses incidental thereto.
Regardless of the actual amount of these incurred expenses the maximum expense
to the Employer for the Employee's relocation under this provision shall be
$20,000.
6. Arbitration. Any controversy, claim or dispute arising out of or relating to
any paragraph or clause of this agreement shall be settled by arbitration in
San Francisco, California in accordance with the rules then in effect of the
American Arbitration Association and judgment upon the award or decision
rendered will be entered in any court having jurisdiction thereon.
7. Notices. Any notice, request or other communication to be given by any party
to this agreement shall be in writing and be sent by certified mail, postage
prepaid, addressed to the parties as follows:
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If to Employer: C/O Phoenix Network
0000 Xxxx Xxxx.
Xxxxxx, XX 00000
If to Employee: C/O Phoenix Network, Inc.
0000 Xxxx Xxxx.
Xxxxxx, XX 00000
or mailed to such other address as the parties respectively may designate by
notice given in a like manner and any such notice, request or other
communication shall be deemed to have been given when mailed as described
above.
8. Waiver of Breach. The waiver by Employee or Employer of any breach of any
provision of this agreement by Employer or Employee respectively shall not
operate or be construed as a waiver by Employee or Employer of any subsequent
breach by Employer or Employee respectively.
9. Entire Agreement. All prior negotiation and agreements between the parties
to this agreement with respect to the matters herein contained are superseded
by this agreement and there are no representations, warranties, understandings
or agreements other than those expressly set forth in this agreement.
10. Amendment. This agreement may be amended only by written instrument signed
by all parties hereto.
11. Governing Law. This agreement shall be governed by the laws of the state of
California without giving effect to the choice of law principles.
12. Partial Invalidity. The invalidity or unenforceability of any provision in
this agreement shall in no way affect the validity or enforceability of any
other provision.
IN WITNESS THEREOF, the parties have executed this agreement on the
date above set forth.
PHOENIX NETWORK, INC. (Employer)
BY: /s/ Xxxxxx X. Xxxx
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Xxxxxx X. Xxxx
Chairman, Compensation Committee
/s/ Xxxxxxx X. Xxxxxxx
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Xxxxxxx X. Xxxxxxx
Employee
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