Exhibit 10.2
EXECUTIVE EMPLOYMENT AGREEMENT
AGREEMENT made and entered into by
and between First Avenue Networks, Inc., a Delaware corporation,
(the “Company”) and Michael Gallagher (the
“Executive”) on the 7th day of September,
2005.
WHEREAS, the operations of the
Company and its Affiliates are a complex matter requiring direction
and leadership in a variety of arenas, including financial,
strategic planning, regulatory, community relations and
others;
WHEREAS, the Executive is possessed
of certain experience and expertise that qualify him to provide the
direction and leadership required by the Company and its
Affiliates; and
WHEREAS, subject to the terms and
conditions hereinafter set forth, the Company therefore wishes to
employ the Executive as its Chief Executive Officer and the
Executive wishes to accept such employment;
NOW, THEREFORE, in consideration of
the foregoing premises and the mutual promises, terms, provisions
and conditions set forth in this Agreement, the parties hereby
agree:
1. Employment . Subject to
the terms and conditions set forth in this Agreement, the Company
hereby offers and the Executive hereby accepts
employment.
2. Term . Subject to earlier
termination as hereafter provided, this Agreement shall have an
original term of one (1) year commencing on September 7, 2005 (the
“Effective Date”) and shall be automatically extended
thereafter for successive terms of one (1) year each, unless either
party provides notice to the other at least thirty (30) days prior
to the expiration of the original or any extension term that the
Agreement is not to be extended. The term of this Agreement, as
from time to time extended or renewed, is hereafter referred to as
“the term of this Agreement” or “the term
hereof.”
3. Capacity and Performance
.
(a) During the term hereof, the
Executive shall serve the Company as its Chief Executive Officer.
In addition, and without further compensation, during the term
hereof, if so elected or appointed from time to time, the Executive
shall serve as a member of the Board of Directors of the Company
(the “Board”) and, if so elected or appointed from time
to time, also shall serve as a director and/or officer of one or
more of the Company’s Affiliates.
(b) During the term hereof, the
Executive shall be employed by the Company on a full-time basis and
shall perform the duties of his position and such other duties on
behalf of the Company and its Affiliates, reasonably consistent
with his position, as may be designated from time to time by the
Board or its designee.
-1-
(c) During the term hereof, the
Executive shall devote his full business time and his best efforts,
business judgment, skill and knowledge exclusively to the
advancement of the business and interests of the Company and its
Affiliates and to the discharge of his duties and responsibilities
hereunder. The Executive shall not engage in any other business
activity or serve in any industry, trade, professional,
governmental or academic position during the term of this
Agreement, except as may be expressly approved in advance by the
Board in writing. Notwithstanding the foregoing, (i) Executive may
serve as a consultant to Flarion Technologies, Inc. and any
successor thereof for a period of up to 12 months from the
Effective Date so long as such role does not interfere with his
performance hereunder and (ii) Executive may serve as a member of
the Board of Directors of Enterasys Networks, Inc. so long as such
role does not interfere with his performance hereunder.
4. Compensation and Benefits
. As compensation for all services performed by the Executive under
and during the term hereof and subject to performance of the
Executive’s duties and of the obligations of the Executive to
the Company and its Affiliates, pursuant to this Agreement or
otherwise:
(a) Base Salary . The Company
shall pay the Executive a base salary at the rate of Three Hundred
and Fifty Thousand Dollars ($350,000) per annum, payable in
accordance with the payroll practices of the Company for its
executives and subject to increase from time to time by the Board,
in its sole discretion. Such base salary, as from time to time
increased, is hereafter referred to as the “Base
Salary.”
(b) Incentive and Bonus
Compensation.
(i) The Executive shall be
considered annually by the Board for a bonus (the “Annual
Bonus”) with a target (the “Target Bonus”) of One
Hundred and Fifty Thousand Dollars ($150,000). The amount of the
bonus shall be determined by the Board, based on its assessment, in
its reasonable discretion, of the Executive’s performance and
that of the Company against appropriate and reasonably obtainable
goals established annually by the Compensation Committee of the
Board after consultation with the Executive; which bonus, if any,
shall be payable not later than two and one-half months following
the end of the fiscal year during which the bonus was earned. Any
bonus or incentive compensation paid to the Executive shall be in
addition to the Base Salary.
(ii) Executive shall be paid a
signing bonus in the amount of Two Hundred Thousand Dollars
($200,000), payable the first pay day following Executive’s
commencement of employment with the Company, in accordance with
normal payroll practices.
(c) Stock Options . In
connection with the Executive’s appointment as President and
Chief Executive Officer, the Company shall grant to the Executive
an option (the “Option”) to purchase 1,500,000 shares
of the common stock of the Company at a price per share equal to
the greater of (i) Seven Dollars ($7.00), or (ii) Fair Market Value
(as defined in the Company’s Stock Option Plan, as amended
from time to time (the “Plan”)). Twenty-five percent
(25%) of the shares which are subject to the Option shall become
exercisable on the first
-2-
anniversary of the date of grant, provided that
the Executive is still employed by the Company on such date.
Thereafter, 1/36 of the unvested shares which are subject to the
Option shall become vested monthly, provided that the Executive is
still employed by the Company on each such date. The stock options
granted the Executive under this Agreement shall be subject to the
Plan, to any applicable stock option certificate, stock option
agreement or shareholder agreement and to such other restrictions
as are generally applicable to stock options issued to employees of
the Company, as in effect from time to time. The grant of the
Option to the Executive is subject to the Executive signing an
acknowledgment of the terms of the applicable stock option
agreement and the Plan. The Executive shall not be eligible to
receive any stock options, restricted stock or other equity of the
Company, whether under an equity incentive plan or otherwise,
except as expressly provided in this Agreement or as otherwise
expressly authorized for him individually by the Board or the
Compensation Committee.
(d) Vacations . The Executive
shall be entitled to three (3) weeks of vacation per year, to be
taken at such times and intervals as shall be determined by the
Executive, subject to the reasonable business needs of the Company
and with the approval of the Board. Vacation shall otherwise be
governed by the policies of the Company, as in effect from time to
time.
(e) Other Benefits . During
the term hereof and subject to any contribution therefor generally
required of employees of the Company, the Executive shall be
entitled to participate in any and all employee benefit plans from
time to time in effect for employees of the Company generally,
except to the extent such plans are in a category of benefit
otherwise provided to the Executive ( e.g ., severance pay).
Such participation shall be subject to the terms of the applicable
plan documents and generally applicable Company
policies.
(f) Business Expenses . The
Company shall pay or reimburse the Executive for all reasonable
customary business expenses incurred or paid by the Executive in
the performance of his duties and responsibilities hereunder,
subject to any maximum annual limit and other restrictions on such
expenses set by the Board and to such reasonable substantiation and
documentation as may be specified by the Company from time to time.
For up to one year following the Effective Date, the Company shall
reimburse the Executive for expenses for housing, mutually
acceptable to the parties, in Virginia.
5. Termination of Employment and
Severance Benefits . Notwithstanding the provisions of Section
2 hereof, the Executive’s employment hereunder shall
terminate prior to the expiration of the term hereof under the
following circumstances:
(a) Death . In the event of
the Executive’s death during the term hereof, the
Executive’s employment hereunder shall immediately and
automatically terminate. In such event, the Company shall pay to
the Executive’s designated beneficiary or, if no beneficiary
has been designated by the Executive, to his estate, (i) the Base
Salary earned but not paid through the date of termination, (ii)
pay for any vacation time earned but not used through the date of
termination, (iii) any Annual Bonus awarded for the year preceding
that in which termination occurs but unpaid on the date of
termination and (iv) any business expenses incurred by the
Executive but un-reimbursed on the date of termination, provided
that such expenses and required substantiation and documentation
are submitted within ninety (90) days of termination and that such
expenses are reimbursable under Company policy (all of the
foregoing, “Final Compensation”). The Company shall
have no further obligation to the Executive.
-3-
(b) Disability .
(i) The Company may terminate the
Executive’s employment hereunder, upon notice to the
Executive, in the event that the Executive becomes disabled during
his employment hereunder through any illness, injury, accident or
condition of either a physical or psychological nature and, as a
result, is unable to perform substantially all of his duties and
responsibilities hereunder for one hundred and eighty (180) days
during any period of three hundred and sixty-five (365) consecutive
calendar days. In the event of such termination, the Company shall
have no further obligation to the Executive, other than for payment
of Final Compensation and Severance Pay, as defined
below.
(ii) The Board may designate another
employee to act in the Executive’s place during any period of
the Executive’s disability. Notwithstanding any such
designation, the Executive shall continue to receive the Base
Salary in accordance with Section 4(a) and benefits in accordance
with Section 4(e), to the extent permitted by the then-current
terms of the applicable benefit plans, until the Executive becomes
eligible for disability income benefits under the Company’s
disability income plan or until the termination of his employment,
whichever shall first occur.
(iii) Subject to the next sentence,
while receiving disability income payments under the
Company’s disability income plan the Executive shall not be
entitled to receive any Base Salary under Section 4(a) hereof, but
shall continue to participate in Company benefit plans in
accordance with Section 4(e) and the terms of such plans, until
the
termination of his employment. In
the event the disability income payments under the Company’s
disability income plan during the term hereof are less than
Executive’s Base Salary, the Company shall pay to Executive,
in accordance with Company’s standard payroll practices, an
amount equal to Executive’s Base Salary less the disability
income payments.
(iv) If any question shall arise as
to whether during any period the Executive is disabled through any
illness, injury, accident or condition of either a physical or
psychological nature so as to be unable to perform substantially
all of his duties and responsibilities hereunder, the Executive
may, and at the request of the Company shall, submit to a medical
examination by a physician selected by the Company to whom the
Executive or his duly appointed guardian, if any, has no reasonable
objection to determine whether the Executive is so disabled and
such determination shall for the purposes of this Agreement be
conclusive of the issue. If such question shall arise and the
Executive shall fail to submit to such medical examination, the
Company’s determination of the issue shall be binding on the
Executive.
(c) By the Company for Cause
. The Company may terminate the Executive’s employment
hereunder for Cause at any time upon notice to the Executive
setting forth in
-4-
reasonable detail the nature of such Cause. The
following, as determined by the Board in its reasonable judgment,
shall constitute Cause for termination:
(i) The Executive’s failure to
perform (other than by reason of disability), or serious negligence
in the performance of, his material duties and responsibilities to
the Company or any of its Affiliates;
(ii) Material breach of Section 7, 8
or 9 hereof or breach of any fiduciary duty owed to the Company or
any of its Affiliates:
(iii) Fraud or embezzlement or other
dishonesty which is material (monetarily or otherwise) with respect
to the Company or any of its Affiliates; or
(iv) Indictment, conviction or plea
of nolo contendere to a felony or other crime involving moral
turpitude.
Upon termination of the Executive’s
employment hereunder for Cause, the Company shall have no further
obligation to the Executive, other than for Final
Compensation.
(d) By the Company Other than for
Cause . The Company may terminate the Executive’s
employment hereunder other than for Cause at any time upon notice
to the Executive. In the event of such termination, in addition to
Final Compensation, the Company shall provide the Executive
severance pay equal to the sum of the Base Salary at the rate in
effect on the date of termination and the Target Bonus
(“Severance Pay”), payable in approximately equal
installments at the Company’s regular paydays for its
executives during the period from the date of termination through
the one-year anniversary thereof; provided, however, that if
required pursuant to Section 409A of the Internal Revenue Code of
1986, as amended (“Section 409A”), the timing of such
payments shall be adjusted as necessary to comply with Section
409A. In addition, on the date of termination, the Company will
cause to become vested that portion of the Option which would have
vested by passage of time during the period from the date of
termination through the one-year anniversary thereof, had the
Executive remained in the employ of the Company during that period
(the “Accelerated Shares”). Any obligation of the
Company to the Executive hereunder is conditioned, however, on the
Executive signing a timely and effective release of claims in the
form attached hereto as Attachment A (the “Employee
Release”). The first installment of the Severance Pay shall
be due and payable at the Company’s next regular payday which
is at least five business days following the later of the effective
date of the Employee Release or the date the Employee Release,
signed by the Executive, is received by the Company, but shall be
retroactive to the next business day following the date of
termination; provided, however, that if required by Section 409A,
the first installment of the Severance Pay shall be due and payable
at the Company’s first regular payday as permitted
