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Exhibit 10.08
FORM OF EMPLOYMENT AND
NON-COMPETITION
AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made as of this ___
day of ________________, 199__ between AppliedTheory Communications,
Inc./AppliedTheory Corporation (the "Company"), and ___________________ (the
"Executive"); and
WHEREAS, the parties hereto wish to enter into an employment
agreement to employ the Executive as the ____________________ of the Company and
to set forth certain additional agreements between the Executive and the
Company.
NOW, THEREFORE, in consideration of the mutual covenants and
representations contained herein, the parties hereto agree as follows:
1. Employment Period.
The Company will employ the Executive, and the Executive will
serve the Company, under the terms of this Agreement during a term of ______
(__) years (the "Employment Period") commencing as of the date first above
written (the "Commencement Date") and ending on the _____ anniversary thereof
(the "Expiration Date", and the period of time described in this Section 1 being
the "Term").
2. Duties and Status.
The Company hereby engages the Executive as the
___________________ of the Company on the terms and conditions set forth in this
Agreement. During the Employment Period, the Executive shall exercise such
authority, perform such executive duties and functions and discharge such
responsibilities as are reasonably associated with the Executive's position (or
if the Executive is promoted, with his new position), commensurate with the
authority vested in the Executive pursuant to this Agreement and consistent with
the Bylaws of the Company. During the Employment Period, the Executive shall
devote his full business time, skill and efforts to the business of the Company.
Notwithstanding the foregoing, the Executive may make and manage passive
personal business investments of his choice and serve in any capacity with any
civic, educational or charitable organization, or any trade association, without
seeking or obtaining approval by the Board of Directors, provided such
activities and service do not materially interfere or conflict with the
performance of his duties hereunder.
3. Compensation and Benefits.
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(a) Salary. During the Employment Period, the Company shall
pay to the Executive, as compensation for the performance of his duties and
obligations under this Agreement, a base salary of $______ per annum, payable in
arrears not less frequently than monthly and in accordance with the normal
payroll practices of the Company. Such base salary shall be subject to review
each year for possible increase by the Board of Directors in its sole
discretion, but shall in no event be decreased from its then existing level
during the Employment Period.
(b) Annual Bonus. During the Employment Period, the Board of
Directors may, at its sole discretion, establish an annual bonus program for
senior executives (the "Bonus Plan") and if such Bonus Plan is established, the
Executive shall have the opportunity to earn an annual bonus in accordance with
such Bonus Plan. The payment of any annual bonus under any such program, if
established, shall be contingent upon the achievement of certain performance
goals established by the Board of Directors in its discretion. The foregoing
does not constitute an agreement or representation by the Company that the
Executive's bonus opportunities under any such bonus program may not be changed
from time to time, nor that the Executive will be paid a bonus in any given
year.
(c) Equity Participation.
(i) During the Employment Period, the Executive shall
retain all rights, in accordance with the terms of
each respective award, under stock options
outstanding and held by the Executive on the first
day of the Employment Period.
(ii) In addition to the options described in the
foregoing clause (i), the Board of Directors in its
sole discretion may determine to grant the
Executive additional awards under any other stock
option or equity based incentive compensation plan
or arrangement adopted by the Company during the
Employment Period for which the Company's senior
executives are eligible. The level of the
Executive's participation in any such plan or
arrangement, if any, shall be determined by the
Board of Directors in its sole discretion.
(iii) To the greatest extent permissible in accordance
with applicable IRS regulations, options to acquire
Company stock which may be granted to the Executive
shall be in the form of qualified options. Any
options which cannot be granted in the form of
qualified options will be granted to the Executive
as non-qualified options.
(d) Other Benefits. During the Employment Period, the
Executive shall be entitled to participate in all of the employee benefit plans,
programs and arrangements of the Company in effect during the Employment Period
which are generally available to senior executives of the Company. Such
participation shall be subject to and on a basis consistent with the terms,
conditions and overall administration of such plans, programs and arrangements.
In addition, during the Employment Period, the Executive shall be entitled to
fringe benefits and perquisites comparable to those of other senior executives
of the Company.
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Such fringe benefits shall include, but not be limited to, 4 weeks of vacation
pay per year, to be used in accordance with the Company's vacation pay policy
for senior executives.
(e) Automobile Allowance. During the Employment Period, the
Company will reimburse the Executive for the costs of an automobile comparable
to that with which other senior executives are currently provided, up to a
maximum of $___ per month. This includes any car lease or similar expense,
insurance and tax costs paid by the Executive.
(f) Business Expenses. During the Employment Period, the
Company shall promptly reimburse the Executive for all appropriately documented,
reasonable business expenses incurred by the Executive in the performance of his
duties under this Agreement, in accordance with the Company's policies as then
in effect.
4. Termination of Employment.
(a) Termination for Cause. The Company may terminate the
Executive's employment hereunder for cause. For purposes of this Agreement and
subject to the Executive's opportunity to cure as provided in Section 4(c)
hereof, the Company shall have "cause" to terminate the Executive's employment
hereunder if such termination shall be the result of the Executive's:
(i) willfully engaging in conduct which is materially
injurious to the Company;
(ii) willful fraud or material dishonesty in connection
with his performance hereunder;
(iii) deliberate or intentional failure to substantially
perform his duties hereunder that results in
material harm to the Company;
(iv) the conviction for, or plea of nolo contendere to a
charge of, commission of a felony; or
(v) the continuous and habitual failure by the
Executive to substantially perform his duties under
this Agreement.
(b) Termination for Good Reason. The Executive shall have the
right at any time to terminate his employment with the Company for "good
reason". For purposes of this Agreement and subject to the Company's opportunity
to cure as provided in Section 4(c) hereof, the Executive shall have "good
reason" to terminate his employment hereunder in the following cases:
(i) a material diminution during the Employment Period
in the Executive's duties, responsibilities or
title as set forth in Section 2 hereof;
(ii) a breach by the Company of the compensation and
benefits provisions set forth in Section 3 hereof;
(iii) a material breach by the Company of any of the
terms of this Agreement, other than as specifically
provided herein; or
(iv) the relocation of Executive's principal place of
business at the request of the Company beyond 50
miles from its current location
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(c) Notice and Opportunity to Cure. Notwithstanding the
foregoing, except in the situations described in sections 4(a)(i) through
4(a)(iv), the Company may not terminate the Executive's employment for "cause"
and the Executive may not terminate his employment for "good reason" unless (1)
the party seeking to terminate the Executive's employment shall have first
provided the other party with written notice of the intended termination and the
reason for such termination ("breach") and (2) if such breach is susceptible of
cure or remedy, a period of twenty days shall have elapsed between the delivery
of such notice and the termination of this Agreement without the breaching party
having, in the opinion of the party alleging a breach, effectively cured or
remedied such breach.
(d) Termination Upon Death or Permanent and Total Disability.
The Employment Period shall be terminated by the death of the Executive. The
Employment Period may be terminated by the Board of Directors if the Executive
shall be rendered incapable of performing his duties to the Company by reason of
any medically determined physical or mental impairment that can be expected to
result in death or that can be expected to last for a period of either (i) six
or more consecutive months from the first date of the Executive's absence due to
the disability or (ii) nine months during any twelve-month period (a "Permanent
and Total Disability"). If the Employment Period is terminated by reason of
Permanent and Total Disability of the Executive, the Company shall give 30 days'
advance written notice to that effect to the Executive.
5. Consequences of Termination.
(a) Without Cause or for Good Reason. In the event of a
termination of the Executive's employment during the Employment Period (i) by
the Company other than for "cause" (as provided for in Section 4(a) hereof),
(ii) by the Executive for "good reason" (as provided for in Section 4(b) hereof)
or (iii) due to death or disability (as provided for in Section 4(d) hereof) the
Company shall pay the Executive and provide him with the following:
(i) Payments.
(A) SALARY. The Executive's then-current base
salary payable for the Non-Compete Period
(as defined in Section 8 hereof); plus
(B) BONUSES A pro rata portion of any goal-based
bonus pursuant to the Bonus Plan provided
that, in the sole opinion of the Chief
Executive Officer, by the date of
termination the Executive would have been
likely to meet bonus plan goals had he not
been terminated; plus
(C) EARNED BUT UNPAID AMOUNTS. Any previously
earned but unpaid salary through the
Executive's final date of employment with
the Company, and any previously earned but
unpaid bonus amounts pursuant to the Bonus
Plan for any completed fiscal year prior to
the date of the Executive's termination of
employment.
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Payments of the amounts described above will
be made in accordance with the timetable and
schedule contemplated for such payments, as
though such termination had not occurred.
(ii) Equity. Any existing stock options or other similar
awards outstanding at the date of termination shall
immediately vest and will, in all other respects,
continue to be governed by, and continued in
accordance with, their applicable plan and grant
documents.
(iii) Other Benefits. Continued coverage under all
health, life, disability and similar employee
benefit plans and programs of the Company on the
same basis as the Executive was entitled to
participate immediately prior to such termination
for the Non-Compete Period; provided that the
Executive's continued participation is possible
under the general terms and provisions of such
plans and programs. In the event that the
Executive's participation in any such plan or
program is barred, the Company shall arrange to
provide the Executive with benefits substantially
similar to those which the Executive would
otherwise have been entitled to receive under such
plans and programs from which his continued
participation is barred. If Executive is covered
under substitute benefit plans of another employer
prior to the expiration of the Non-Compete Period,
the Company will no longer be required to continue
the respective coverage described in this Section
5(a)(iii).
(b) Other Termination of Employment. In the event that the
Executive's employment with the Company is terminated during the Employment
Period (i) by the Company for "cause" (as provided for in Section 4(a)
hereof),or (ii) by the Executive other than (a) for "good reason" (as provided
for in Section 4(b) hereof), the Company shall pay the Executive (or his legal
representative) any earned but unpaid salary and annual bonus amounts for any
completed fiscal year prior to the date of the Executive's termination of
employment, but only to the extent such amounts are payable in accordance with
the terms of any such plan, through the Executive's final date of employment
with the Company, and the Company shall have no further obligations to the
Executive.
(c) Withholding of Taxes. All payments required to be made by
the Company to the Executive under this Agreement shall be subject to the
withholding of such amounts, if any, relating to tax, social security, excise
tax and other payroll deductions as the Company may reasonably determine it
should withhold pursuant to any applicable law or regulation.
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(d) No Other Obligations. The benefits payable to the
Executive under this Agreement are not in lieu of any benefits payable under any
employee benefit plan, program or arrangement of the Company, except as provided
specifically herein, and upon termination the Executive will receive such
benefits or payments, if any, as he may be entitled to receive pursuant to the
terms of such plans, programs and arrangements. Except for the obligations of
the Company provided by the foregoing and this Section 5, the Company shall have
no further obligations to the Executive upon his termination of employment.
(e) No Mitigation or Offset. Subject to Section 6(c)(ii), the
Executive shall be required to mitigate the damages provided by this Section 5
by seeking substitute employment or otherwise and there shall be offset by the
Executive with respect to the payments or benefits set forth in this Section 5,
except for the payments described in Sections 5(a)(i)(B) and 5(a)(i)(C) and
except as otherwise qualified in Section 5(a)(iii).
6. Change of Control.
(a) Definition. For purposes of this agreement, a "Change of
Control" shall mean:
(i) the approval by the stockholders of the Company,
and the completion of the transaction resulting
from such approval, of (A) the sale or other
disposition of all or substantially all the assets
of the Company or (B) a complete liquidation or
dissolution of the Company;
(ii) the approval by the stockholders of the Company,
and the completion of the transaction resulting
from such approval, of a merger, consolidation,
reorganization or similar corporate transaction,
whether or not the Company is the surviving
corporation in such transaction, in which the
outstanding shares of common stock of the Company
are converted into (A) shares of stock of another
company, other than a conversion into shares of
voting common stock of the successor corporation
(or a holding company thereof) representing fifty
percent (50%) or more of the voting power of all
capital stock thereof outstanding immediately after
the merger or consolidation or (B) other securities
(of either the Company of another company) or cash
or other property;
(iii) pursuant to an affirmative vote of a holder or
holders of seventy five percent (75%) of the
capital stock of the Company entitled to vote on
such a matter, the removal of a majority of the
individuals who are at that time members of the
Board of Directors; or
(iv) the acquisition by any entity or individual of one
hundred percent of the capital stock of the
Company.
Notwithstanding the foregoing, it is understood by the parties to this Agreement
that a "Change of Control" shall not include any transaction the purpose of
which is to reorganize the Company's corporate structure, reincorporate the
Company in another jurisdiction or undertake
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any other action which does not materially affect the ownership and control of
the Company at the time of such transaction.
(b) Vesting of options upon a Change of Control.
Notwithstanding anything to the contrary in any stock option contract between
the Company and the Executive or in any stock option plan or similar plan of the
Company, upon the occurrence of a Change of Control, all options held by the
Executive which shall not yet have vested will vest and become immediately
exercisable. After such a Change of Control, the Executive's options shall
remain exercisable for the period remaining under the relevant stock option
contract and shall not have a shortened period of exercisability as a result of
the Change of Control, except for statutory stock options which shall, if the
Executive's employment is terminated, expire 90 days after his termination (or 1
year if the Executive's termination results from his death or permanent and
total disability).
(c) Severance upon a Change of Control.
(i) If the Executive's employment is terminated within
one year of a Change of Control for any reason
other than by the Company for "cause", the
Executive shall be entitled to the payments
described in the preceding Section 5(a), except
that the Non-Compete Period (as defined in Section
8 hereof) applicable for the purposes of Sections
5(a) and 8 hereof shall increase by a factor of
two.
(ii) If the Executive's employment is terminated within
one year of a Change of Control for any reason
other than by the Company for "cause", the
Executive shall be not be required to mitigate the
damages provided by this Section 5 of this
Agreement by seeking substitute employment or
otherwise and there shall be no offset by the
Executive with respect to the payments and benefits
set forth in this Section 5 of this Agreement,
except as otherwise qualified in Section 5(a)(iii).
7. Indemnity.
The Company shall, to the fullest extent permitted by law and
by its Certificate of Incorporation and Bylaws, indemnify Executive and hold him
harmless for any acts or decisions made by him in good faith while performing
his duties pursuant to this Agreement.
8. Restrictive Covenants.
(a) Obligations of the Parties. In the event that the
Executive's employment with the Company is terminated for any reason, the
Executive and the Company shall negotiate in good faith the terms and conditions
under which the Executive may seek future employment. If a good faith agreement
thereon cannot be reached, the terms of this Section 8 shall govern.
(b) Non-Compete Covenant. Subject to 8(a) herein, the
Executive covenants and agrees that for the period of [18/12] months (or 6
months, if prior to termination date the Executive has been an employee of the
Company under this Agreement or any other employment agreement for less than 6
months) from the date the Executive is no longer an
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employee of the Company (the "Non-Compete Period") for any reason other than
because of a termination by the Executive for "good reason" or a termination by
the Company without cause, the Executive will not, directly or indirectly,
compete with the Company by carrying on anywhere in the United States of America
(the "Territory") a line of business substantially similar to the business and
activities of the Company as conducted at the time of termination (the
"Business"). All of the foregoing of this Section 8(b) shall be qualified by
Section 6(c) of this Agreement. In addition, the Executive shall continue to be
bound by the restrictions and obligations arising under this Section 8 for the
duration of the Non-Compete Period, notwithstanding the fact that such
Non-Compete Period shall extend beyond the Term of this Agreement.
(c) Definition of Compete. For purposes of this Agreement, the
term "compete" shall mean (a) calling on, soliciting or taking away, as a client
or customer any individual, partnership, corporation or association that was a
client or customer of the Company during the 12-calendar month period
immediately preceding any such act for the purpose of competing with the
Company; (b) hiring, soliciting, taking away or attempting to hire, solicit or
take away any employee of the Company either on behalf of himself or any other
person or entity for the purpose of competing with the Company; or (c) for the
period of this Agreement, entering into or attempting to enter into any business
offering goods and services which are substantially similar to or competing in
any way with the goods and services which are then being offered by the Company.
(d) Direct or Indirect Competition. For purposes of this
Agreement, the words "directly or indirectly" as they modify the word "compete"
shall mean: (a) acting as an agent, representative, consultant, officer,
director, independent contractor or employee of any entity or enterprise, which
is competing (as defined in Section 2, above) with the Business; (b)
participating in any such competing entity or enterprise, or the Affiliate of
such entity or enterprise, as an owner, partner, limited partner, joint
venturer, creditor or stockholder (except as a stockholder holding less than a
five percent interest in a corporation whose shares are actively traded on a
regional or a national securities exchanged or in the over-the-counter market);
or (c) communicating to any such competing entity or enterprise the names or
addresses or any other information concerning any past, present or identified
prospective client or customer of the Company or any entity having title to the
goodwill of the Company with respect to the Business.
(e) Confidential Data. For purposes of this Agreement, "Trade
Secrets" shall mean any scientific or technical information, design, process,
procedure, formula or improvement, or any portion or phase thereof, whether or
not patentable, that is owned by, or that has, at the time of determination of
its status, been used by the Company and that is not generally known to
competitors of the Company, and information concerning proposed new products,
software and marketing processes, market feasibility studies, and proposed or
existing marketing techniques or plans relating to the Business that are not
generally known to competitors of the Company. The term "Confidential
Information" shall mean any data or information, other than Trade Secrets, that
is owned by, or that has, at the time of termination of its status, been used by
the Company relating to the Business and is not generally known to competitors
of the Company, including, but not limited to, Proprietary Customer Information
(as defined below), information relating to the Business, the identity of
suppliers, customers, subscribers, advertisers, sales methodology, software and
information about the personnel of the Company. The term "Proprietary Customer
Information" shall mean all information
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concerning the identity and purchasing habits of customers of the Company with
respect to the Business to the extent that such information is a valuable
component of the Business and is not generally ascertainable by parties
unaffiliated with the Company. The terms Trade Secrets, Confidential Information
and Proprietary Customer Information are hereinafter sometimes collectively
referred to as "Confidential Data."
The Executive agrees that, during the period set forth in
8(b), above, and thereafter for so long as such information remains Confidential
Data, he will keep confidential and not directly or indirectly divulge, furnish,
make accessible to anyone or appropriate for his own use any Confidential
Information, and that at no time will he or it divulge, furnish and make
accessible to anyone or appropriate for his own use any Trade Secrets. Executive
further acknowledges and agrees that the Company has a legitimate interest in
protecting Proprietary Customer Information from misappropriation or diversion
by Executive or any competitor. Executive hereby acknowledges and agrees that
the prohibitions against disclosure of Confidential Data recited herein are in
addition to, and not in lieu of, any rights or remedies which the Company may
have available pursuant to the laws of any jurisdiction or at common law to
prevent the disclosure of trade secrets and other confidential proprietary data,
and the enforcement by the Company of their rights and remedies pursuant to this
Agreement shall not be construed as a waiver of any other rights or available
remedies which it may possess in law or equity absent this Agreement.
(f) Reasonableness of Restrictions. Executive recognizes that
the territorial and time limitations set forth in Section 8(b), above, are
reasonable, not burdensome and are properly required by law for the adequate
protection of the Company, and in the event that such territorial or time
limitations are deemed to be unreasonable by a court of competent jurisdiction,
then Executive agrees and submits to the reduction of either said territorial or
time limitation, or both, to such an area or period as said court shall deem
reasonable.
(g) Injunctive Relief. Executive acknowledges that Executive's
expertise in the Business is of a special, unique, unusual, extraordinary and
intellectual character, which gives said expertise a peculiar value, and that a
breach of the provisions of this Agreement cannot be reasonably or adequately
compensated in damages in an action at law and that such breach will cause the
Company irreparable injury and damage. Executive further acknowledges that
Executive possesses unique skills, knowledge and ability and that competition in
violation of this Agreement would be extremely detrimental to the Company. By
reason thereof, Executive agrees that the Company shall be entitled, in addition
to any other remedies they may have under this Agreement or otherwise, to
temporary, preliminary and/or permanent injunctive and other equitable relief to
prevent or curtail any breach of this Agreement, without proof of actual damages
that have been or may be caused to the Company by such breach or threatened
breach; provided, however, that no specification in this Agreement of a specific
legal or equitable remedy shall be construed as a waiver or prohibition against
the pursuing of other legal or equitable remedies in the event of a breach.
(h) Meaning of "Company". For purposes of this Section 8, the
term "Company" shall mean the Company and/or any present or future subsidiary,
parent or affiliate.
9. Renewal.
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This Agreement shall automatically renew for successive [1,
1.5 or 2] year terms, and the Term shall thereby be modified to include any and
all periods arising from renewal, unless the Company shall deliver to the
Executive a notice of its election not to renew on that date which is [1, 1.5 or
2] years before the Expiration Date.
10. Notices.
All notices, requests and other communications pursuant to
this Agreement shall be in writing and shall be deemed to have been duly given,
if delivered in person or by courier, telegraphed, telexed or by facsimile
transmission or sent by express, registered or certified mail, postage prepaid,
addressed as follows:
If to the Executive:
[complete name of the Executive]
[address]
If to the Company:
AppliedTheory Communications, Inc.
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▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: Controller / Treasurer
Either party may, by written notice to the other, change the address to which
notices to such party are to be delivered or mailed.
11. Arbitration.
Except as specifically provided herein, any dispute or
controversy arising under or in connection with this Agreement shall be settled
exclusively by arbitration, conducted before a single arbitrator in the State of
New York, in accordance with the rules of the American Arbitration Association
then in effect. Judgment may be entered on the arbitrator's award in any court
having jurisdiction. Except in the case of disputes or controversies arising
from circumstances described in sections 4(a)(i) through 4(a)(iv) of this
Agreement, the Company shall bear the expense of any such arbitration proceeding
and shall reimburse the Executive, regardless of the outcome, for all of his
reasonable costs and expenses relating to such arbitration proceeding,
including, without limitation, reasonable attorneys' fees and expenses.
12. Waiver of Breach.
Any waiver of any breach of this Agreement shall not be
construed to be a continuing waiver or consent to any subsequent breach on the
part either of the Executive or of the Company.
13. Non-Assignment; Successors.
Neither party hereto may assign his or its rights or delegate
his or its duties under this Agreement without the prior written consent of the
other party; provided, however, that the parties hereto hereby agree in advance
that (i) this Agreement may be assigned to, and
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shall inure to the benefit of and be binding upon, the successors and assigns of
the Company upon any sale of all or substantially all of the Company's assets,
or upon any merger, consolidation or reorganization of the Company with or into
any other corporation, all as though such successors and assigns of the Company
and their respective successors and assigns were the Company; and (ii) this
Agreement shall inure to the benefit of and be binding upon the heirs, assigns
or designees of the Executive to the extent of any payments which may become due
to them hereunder. As used in this Agreement, the term "Company" shall be deemed
to refer to any such successor or assign of the Company referred to in the
preceding sentence.
14. Severability.
To the extent any provision of this Agreement or portion
thereof shall be invalid or unenforceable, it shall be considered deleted
therefrom and the remainder of such provision and of this Agreement shall be
unaffected and shall continue in full force and effect.
15. Counterparts.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
16. Governing Law.
This Agreement shall be construed, interpreted and enforced in
accordance with the laws of the State of New York, without giving effect to the
choice of law principles thereof.
17. Survivability.
Any covenant or agreement of the parties which by its term
contemplates performance after the Expiration of this Agreement shall survive
and remain in full force and effect notwithstanding the fact that the Employment
Period has lapsed or that this Agreement or Executive's employment hereunder,
has been terminated.
18. Entire Agreement.
This Agreement constitutes the entire agreement by the Company
and the Executive with respect to the subject matter hereof and except as
specifically provided herein, supersedes any and all prior agreements or
understandings between the Executive and the Company with respect to the subject
matter hereof, whether written or oral. This Agreement may be amended or
modified only by a written instrument executed by the Executive and the Company.
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
EXECUTIVE:
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Name:
APPLIEDTHEORY COMMUNICATIONS, INC.
By:
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Chief Executive Officer
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