EXHIBIT 10.26
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made effective as of
November 3, 1997, by and between NETCO, COMMUNICATIONS Corporation ("NetCo"), of
Union Plaza - Suite 102, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ("Employee") of ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
BACKGROUND.
----------
A. NetCo is engaged in the business of high speed electronic courier
services for the transportation, storage and retrieval of large quantities of
data for print and CD-ROM prepress publishing industries as well as for medical
imaging;
B. NetCo desires to have the services of the Employee; and
C. The Employee is willing to be employed by NetCo.
Therefore, in consideration of the mutual promises set forth in this
Agreement, the parties agree as follows:
1. EMPLOYMENT. Effective November 3, 1997, Employee shall serve
NetCo as a Vice President of Operations and Engineering.
2. BEST EFFORTS OF EMPLOYEE. Employee agrees to perform
faithfully, industriously, and to the best of Employee's ability, experience,
and talents, all of the duties that may be required by the express and implicit
terms of this Agreement, to the reasonable satisfaction of NetCo. Such duties
shall be provided at such place(s) as the needs, business, or opportunities of
NetCo may require from time to time.
3. COMPENSATION OF EMPLOYEE. As compensation for the services
provided by Employee under this Agreement, NetCo will pay the Employee a monthly
salary of $8,333.34. An additional $20,000 during your first year of employment
based on achievement of specific operational objectives for service support,
deployment, engineering development and network maintenance derived during your
first month in this position by you and myself based on the 1997 Corporate
Priorities. Upon termination of this Agreement, payments under this paragraph
shall cease; provided, however, that the Employee shall be entitled to payments
for periods or partial periods that occurred prior to the date of termination
and for which the Employee has not yet been paid.
4. INCENTIVE STOCK OPTION. Subject to approval of the NetCo
Board of Directors, and in addition to any other compensation to which the
employee may be entitled by this agreement, Employee shall be entitled to
receive an incentive
Stock Option for up to Thirty Thousand (30,000) shares of NetCo Communications
Corporation under the NetCo 1996 Stock Option Plan according to the incentive
Stock Option Agreement in Exhibit 1. The exercise price of the incentive Stock
Option shall be fair market value as determined as of the date of grant by the
NetCo Board of Directors, which price shall be inserted into the appropriate
blank on Exhibit 1.
5. REIMBURSEMENT FOR EXPENSES IN ACCORDANCE WITH NETCO POLICY.
NetCo will reimburse Employee for "out-of-pocket" expenses in accordance with
NetCo policies in effect from time to time.
6. RECOMMENDATIONS FOR IMPROVING OPERATIONS. Employee shall
provide NetCo with all information, suggestions, and recommendations regarding
NetCo's business, of which Employee has knowledge, that will be of benefit to
NetCo.
7. CONFIDENTIALITY. Employee recognizes that NetCo has and will
have information regarding the following:
- inventions - business affairs
- machinery - processes
- products - trade secrets
- prices - technical matters
- apparatus - customer lists
- costs - product designs
- discounts - copyrights
- future plans
and other vital information (collectively, "Information") which are valuable,
special and unique assets of NetCo. Employee agrees that the Employee will not
at any time or in any manner, either directly or indirectly, divulge, disclose,
or communicate in any manner any Information to any third party without the
prior written consent of the NetCo. Employee will protect the Information and
treat it as strictly confidential. A violation by Employee of this paragraph or
of other sections or paragraphs of this Agreement relating to the protection or
non-disclosure of information shall be a material violation of this Agreement
and will justify legal and/or equitable relief.
TRADE SECRETS. Employee shall not at any time during the term of
this Agreement or thereafter, or in any manner, either directly or indirectly,
divulge, disclose or communicate to any person, firm or corporation in any
manner whatsoever any information concerning any matters affecting or relating
to the business of the Corporation, including without limiting the generality of
the foregoing, any of its customers, the prices it obtains or has obtained from
the sale of, or at which it sells or has sold, its products, or any other
information concerning the business of the Corporation, its manner of operation,
its plans, processes, or other data without regard to whether all of the
foregoing matters will be deemed confidential, material, or
-2-
important, the parties hereto stipulating that as between them, the same are
important, material, and confidential and gravely affect the effective and
successful conduct of the business of the Corporation, and the Corporation's
good will, and that any breach of the terms of the paragraph shall be a material
breach of this Agreement.
8. DISCLOSURE AND ASSIGNMENT. Except as provided elsewhere in
this Agreement, Employee shall treat as for the Corporation's sole benefit and
fully and promptly disclose to the Corporation, without additional compensation,
all ideas, discoveries, inventions and improvements, whether patentable or not,
which while the Employee is employed by the Corporation are made, conceived or
reduced to practice by Employee, alone or with others, during or after usual
working hours, either on or off the job, and Employee hereby assigns to the
Corporation all such ideas, discoveries, inventions and improvements to be the
Corporation's exclusive property.
9. DISCLOSURE AND RIGHT OF FIRST REFUSAL. Paragraph 9 of this
-------------------------------------
Agreement shall not apply to any ideas, discoveries, inventions and improvements
for which no equipment, supplies, facility or trade secret information of the
Corporation was used, and which was developed entirely on Employee's own time,
and (1) which does not relate (a) directly to the business of the Corporation or
(b) to the Corporation's actual or demonstrably anticipated research or
development, or (2) which does not result from any work performed by Employee
for the Corporation. Employee will, nonetheless, promptly disclose all such
ideas, discoveries, inventions and improvements to the Corporation and offer to
the Corporation the right of first refusal to enter into a license or purchase
agreement covering the subject idea, discovery, invention or improvement on
terms mutually agreed to by Employee and the Corporation, in the event the
Corporation and Employee cannot agree on terms and Employee receives an offer to
in the event the Corporation and employee cannot agree on terms and Employee
receives an offer to enter into a license or purchase agreement with some other
party on terms more favorable to that other party than the terms offered to the
Corporation, then the Corporation shall have the right and Employee shall have
the obligation to offer to the Corporation the idea, discovery, invention or
improvement on such favorable terms. When such an offer is made to the
Corporation pursuant to the preceding sentence, it must be accepted by the
Corporation within thirty (30) days; or if not accepted, the right of first
refusal hereunder as to that offer shall terminate.
NOTICE: Paragraph 9 hereof requires Employee to assign rights to
------ --------------------------------------------------------
inventions to the Corporation or its successors. Minnesota Statutes (S). 181.78
-------------------------------------------------------------------------------
limits the scope of agreements requiring the inventions be assigned to
----------------------------------------------------------------------
employers. The statute states that such assignment agreements do not apply:
--------------------------------------------------------------------------
-3-
"to an Invention for which no equipment, supplies,
------------------------------------------------
facility or trade secret information of the employer
----------------------------------------------------
was used and which was developed entirely on the
------------------------------------------------
Employee's own time, and (1) which does not relate (a)
------------------------------------------------------
directly to the business of the employer or (b) to the
------------------------------------------------------
employer's actual or demonstrably anticipated research
------------------------------------------------------
or development, or (2) which does not result from any
-----------------------------------------------------
work performed by the Employee for the employer."
-----------------------------------------------
(Underlining added).
-------------------
Please note that Paragraph 9 of this Agreement uses these
statutory terms to define the inventions which are not automatically assigned to
the Corporation but instead are subject to a right of first refusal in favor of
the Corporation.
10. UNAUTHORIZED DISCLOSURE OF INFORMATION. If it appears that
the Employee has disclosed (or has threatened to disclose) Information in
violation of this Agreement, NetCo shall be entitled to an injunction to
restrain Employee from disclosing, in whole or in part, such Information, or
from providing any services to any party to whom such Information has been
disclosed or may be disclosed. NetCo shall not be prohibited by this provision
from pursuing other remedies, including a claim for losses and damages.
11. CONFIDENTIALITY AFTER TERMINATION OF EMPLOYMENT. The
confidentiality provisions of this Agreement shall remain in full force and
effect for a One year period after the termination of Employee's employment.
During such One year period, neither party shall make or permit the making of
any public announcement or statement of any kind that Employee was formerly
employed by or connected with NetCo.
12. NON-COMPETE AGREEMENT. Recognizing that the various items of
Information are special and unique assets of the company, Employee agrees and
covenants that for a period of 12 months following the termination of his or her
employment, whether such termination is voluntary or involuntary, Employee will
not directly engage in any business competitive with NetCo, nor shall Employee
cause or solicit, directly or indirectly, for his or her own behalf or for the
benefit of a third party, any other employee or employees of the Company to
terminate their employment with the Company or to engage in such competitive
activities. This covenant shall apply to the geographical area that includes the
United States and Canada. Directly engaging in any competitive business
includes, but is not limited to, (i) engaging in a business as owner, partner or
agent, (ii) becoming an employee of any third party that is engaged in such
business, (iii) becoming interested directly in any such business, or (iv)
soliciting any customer of NetCo for the benefit of a third party that is
engaged in such business. Employee agrees that this non-compete provision will
not adversely affect the Employee's livelihood.
-4-
13. EMPLOYEE'S INABILITY TO CONTRACT FOR NETCO. Employee shall not
have the right to make any contracts or commitments for or on behalf of NetCo
without first obtaining the express written consent of NetCo.
14. TERM/TERMINATION. Employee's employment under this Agreement
shall be for an unspecified term on an "at will" basis. This Agreement may be
terminated, with or without cause, by either party. Each party will give notice
(as provided in the paragraph of this Agreement captioned "Notice") of such
action to other party. NetCo may terminate Employee's employment for cause
without prior notice and with compensation to Employee only to the date of the
last day of actual work by the Employee. For purposes hereof, "cause" means (i)
a violation of this Agreement or any other agreement between NetCo and Employee,
(ii) Employee's deliberate, willful or gross misconduct in the performance or
Employee's duties on behalf of the Corporation, or (iii) Employee's being
charged with a crime punishable by imprisonment. The compensation paid under
this Agreement shall be the Employee's exclusive remedy.
15. ARBITRATION. Any controversy or claim arising out of or relating
to this Agreement, or its breach, or to the employment relationship between the
Employee and the Company, shall be settled by final and binding arbitration,
upon the request of either party, in Minneapolis, Minnesota. Such arbitration
shall proceed in accordance with the then governing rules of the American
Arbitration Association (AAA) for Commercial Arbitration or Employment Law
Disputes, at the option of the petitioner. Judgment upon the award rendered may
be entered and enforced in any court of competent jurisdiction. It is agreed
that the parties shall choose a single, neutral arbitrator from among a panel of
not less than seven (7) proposed arbitrators, and that the parties may have no
more than two (2) panels of arbitrators presented to them by the AAA. The
parties agree that they shall each bear their own costs associated with the
arbitration, including any filing fee to be paid by them and their own legal
counsel expenses. The parties further agree that they shall share equally in
the reasonable costs and the fees of the neutral.
16. RETURN OF PROPERTY. Upon termination of this Agreement, the
Employee shall deliver all property (including keys, records, notes, data,
memoranda, models, and equipment) that is in the Employee's possession or under
the Employee's control which is NetCo's property or related to NetCo's business.
17. NOTICES. All notices required or permitted under this Agreement
shall be in writing and shall be deemed delivered when delivered in person or
deposited in the United States mail, postage paid, addressed as follows:
-5-
NetCo:
-----
Manager, Human Resources
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Employee:
--------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Such addresses may be changed from time to time by either party by providing
written notice in the manner set forth above.
18. ENTIRE AGREEMENT. This Agreement contains the entire agreement
of the parties and there are no other promises or conditions in any other
agreement whether oral or written. This Agreement supersedes any prior written
or oral agreements between the parties.
19. AMENDMENT. This Agreement may be modified or amended, if the
amendment is made in writing and is signed by both parties.
20. SEVERABILITY. If any provisions of this Agreement shall be held
to be invalid or unenforceable for any reason, the remaining provisions shall
continue to be valid and enforceable. If a court finds that any provision of
this Agreement is invalid or unenforceable, but that by limiting such provision
it would become valid or enforceable, then such provision shall be deemed to be
written, construed, and enforced as so limited.
21. WAIVER OF CONTRACTUAL RIGHT. The failure of either party to
enforce any provision of this Agreement shall not be construed as a waiver or
limitation of that party's right to subsequently enforce and compel strict
compliance with every provision of this Agreement.
-6-
22. APPLICABLE LAW. This Agreement shall be governed by the laws of
--------------
the State of Minnesota.
NETCO:
NetCo Communications Corporation
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------
Its: An Authorized Officer
or Agent
AGREED TO AND ACCEPTED
Employee:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------
Printed Name
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------
Signature of Employee
-7-
INCENTIVE STOCK OPTION AGREEMENT
THIS AGREEMENT, made and entered into effective this 10th day of
November, 1997, by and between NETCO COMMUNICATIONS CORPORATION, a Minnesota
corporation (hereinafter referred to as the "Corporation") and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, a
resident of the State of Minnesota (hereinafter referred to as the "Employee").
WHEREAS, the Corporation considers it desirable and in its best
interests that the Employee be given an inducement to acquire a proprietary
interest in the Corporation and an added incentive to advance the interests of
the Corporation, by possessing an option to purchase common shares of the
Corporation, in accordance with Netco Communications Corporation 1994 Stock
Option Plan (the "Plan") adopted by the Directors of the Corporation and
ratified by Shareholders of the Corporation, as amended and ratified.
NOW THEREFORE, in consideration of the premises and of the mutual
promises and consideration provided herein, the parties agree as follows:
1. Definitions. Words and phrases not otherwise defined herein
-----------
shall have the meanings ascribed to them, respectively, in the Plan.
2. Grant of Option. The Corporation grants to Employee an Option
---------------
(the "Option") to purchase Thirty Thousand (30,000) common shares of the
Corporation at a purchase price of $19.50 per share, in the manner and subject
to the conditions provided herein and in the Plan. The Option hereby granted
shall be an ISO as provided in the Plan.
3. Time of Exercise of Option. (a) Subject to earlier vesting and
--------------------------
exercise provisions as provided in subparagraph 3(b) hereof, Employee may
exercise the Option in three successive equal annual increments of ten thousand
(10,000) shares first commencing on October 1, 1998; all of which options shall
expire at midnight on September 30, 2004, as illustrated by the following table:
Number of Shares
From - To First Exercisable Cumulative Total
--------- ----------------- ----------------
October 1, 1997 -
September 30, 1998 0 0
October 1, 1998 -
September 30, 1999 10,000 10,000
October 1, 1999 -
September 30, 2000 10,000 20,000
Number of Shares
From - To First Exercisable Cumulative Total
--------- ----------------- ----------------
October 1, 2000
September 30, 2001 10,000 30,000
October 1, 2001 -
September 30, 2004 0 30,000
On and after
October 1, 2004 0 0
(b) In the event of an "Acquisition" or "Change of Control" (as those
terms are hereinafter defined), the vesting and exercise dates for the Option
shall be accelerated to the date and time upon which the Acquisition or Change
of Control becomes effective.
(c) For purposes hereof, (a) "Acquisition" means either (i) the
purchase of all or substantially all of the assets of the Corporation by a third
party, or (ii) the merger or consolidation of the Corporation with a third
party; and (b) "Change of Control" means the election by shareholders of the
Corporation of a majority of directors of the Corporation who were not nominated
for election by the Corporation's management.
(d) No provision of this Agreement to the contrary withstanding,
neither the Option nor any right claimed thereby or hereby, therein or herein or
thereunder or hereunder shall be exercisable by anyone on or after October 1,
2004.
(e) With respect to common shares that are purchasable for the first
time during any calendar year, the Employee may only exercise the Option to
purchase that number of common shares that have an aggregate fair market value
(as of the date first above written) which is less than or equal to $100,000.
The Employee may exercise the Option with respect to common shares valued in
excess of $100,000 in any calendar year to the extent the right to exercise the
Option to purchase such shares has accumulated over a period in excess of one
year.
4. Method of Exercise. The Option shall be exercised by written
------------------
notice to the Board of the Corporation, or the Committee if such exists, at the
Corporation's principal place of business. The notice shall be accompanied by
payment of the option price for the shares being purchased in cash or by
cashier's check or certified check or, in the sole discretion of the Board, or
the Committee if such exists, by such other form of payment as is permitted
under the Plan. The notice shall also be accompanied by any document reasonably
required by the Corporation to be executed by Employee, acknowledging the
applicable restrictions on the transfer of the common shares being purchased as
set forth under Section 8 of this Agreement. The Corporation shall make prompt
delivery of a certificate or
-2-
certificates representing such common shares, provided that if any law or
regulation requires the Corporation to take any action with respect to the
common shares specified in such notice before the issuance thereof, then the
date of delivery of such common shares shall be extended for the period
necessary to take such action. The Option must be exercised with respect to at
least 500 of the common shares, unless only a lesser number of the common shares
are then exercisable, in which case it must be exercised with respect to all of
such lesser number.
5. Termination of Option. Except as herein otherwise provided, the
---------------------
Option granted under this Agreement, to the extent not heretofore exercised,
shall terminate upon the first to occur of the following events:
(a) The expiration of three months after the date on which Employee's
employment by the Corporation is terminated, except if such
termination be by reason of permanent and total disability or death;
(b) The expiration of twelve months after the date on which
Employee's employment by the Corporation is terminated, if such
termination be by reason of the Employee's permanent and total
disability or death;
(c) The expiration of twelve months from the date of Employee's death
should Employee die within three months of termination of employment
by the Corporation;
(d) The termination of Employee's employment by the Corporation for
either (i) Employee's material breach of any agreement with the
Corporation or (ii) Employee's deliberate, willful or gross misconduct
in the performance of Employee's duties on behalf of the Corporation;
or
(e) October 1, 2004.
6. Reclassification, Consolidation or Merger.
-----------------------------------------
6.1 If and to the extent that the number of issued common shares of
the Corporation shall be increased or reduced by change in par value, split up,
reverse split, reclassification, distribution of a dividend payable in stock, or
the like, the number of common shares subject to the Option and the option price
per share shall be proportionately adjusted in accordance with the Plan.
6.2 If the Corporation is reorganized or consolidated or merged with
another corporation, the Employee shall be entitled to receive an option (the
"New Option") covering common shares of such reorganized, consolidated or merged
company in the same proportion, at an equivalent price, and subject to the same
conditions as the Option. For purposes of the preceding
-3-
sentence, the excess of the fair market value of the common shares subject to
the Option immediately after the reorganization, consolidation or merger over
the aggregate option price of such common shares shall not be more than the
excess of the aggregate fair market value of all common shares subject to the
Option immediately before such reorganization, consolidation or merger over the
aggregate option price of such common shares, and the New Option or assumption
of the Option shall not give the Employee additional benefits which he does not
have under this Option, or deprive him of benefits which he has under this
Option.
7. Rights Prior to Exercise of Option. This Option is non-
----------------------------------
transferable by Employee, except in the event of his death, and during his
lifetime is exercisable only by him. No person shall have any rights as a
stockholder with respect to any common shares purchasable hereunder until
payment of the option price and delivery to him of such common shares as herein
provided.
8. Restriction on Disposition. All common shares acquired by
--------------------------
Employee pursuant to this Agreement shall be subject to the restrictions on
sale, encumbrance and other disposition contained in the Company's By-Laws, or
imposed by applicable state and federal laws or regulations regarding the
registration or qualification of such acquisition of common shares, and may not
be sold or otherwise disposed of (i) within two years from the date of the
granting of the Option under which such common shares were acquired, (ii) within
one year after the exercise of the Option, and (iii) unless the Corporation has
received a prior opinion of Employee's counsel satisfactory in form and
substance to counsel for the Corporation that such transaction will not violate
the Securities Act of 1933 or any applicable state law regulating the sale of
securities.
9. Binding Effect - Plan Governs.
-----------------------------
9.1 This Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective heirs, executors, administrators,
successors and assigns.
-4-
9.2 This Agreement shall be construed in accordance with and shall be
governed by the terms of the Plan as adopted by the Board and approved or to be
approved by the shareholders of the Corporation within the meaning of Section
422 of the Internal Revenue Code of 1986, as the Plan may be amended from time
to time by the Board and the shareholders of the Corporation. Employee
acknowledges receipt of a copy of the Plan prior to the execution hereof. If
possible, this Agreement shall be construed along with and in addition to any
other agreement which the Corporation and Employee may enter into, but any
provision in this Agreement which contradicts any provision of any other
agreement shall take precedence and be binding over such other provision.
"Employee" "Corporation"
NetCo Communications Corporation
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ III
--------------------------- --------------------------------
President
-5-