EMPLOYMENT AGREEMENT
Exhibit
99.1
Employment
Agreement (this "Agreement") dated as of May 22, 2007 (the "Effective Date"),
by
and between Internap Network Services Corporation (the "Company") and Xxxxxx
X.
Xxxxxx ("Executive") (collectively the "Parties"). This Agreement supersedes
in
its entirety any and all employment agreement(s) that Executive has entered
into
with VitalStream Holdings, Inc. or any other entity, including without
limitation that certain Employment Agreement dated as of October 12, 2006
between Executive and VitalStream Holdings, Inc.
1. Position
and Duties.
Executive shall serve as Vice President & Chief Strategy Officer for the
Company, with such duties, authorities and responsibilities as are commensurate
with such position. Executive shall work from the Company's offices in Costa
Mesa, California.
2. Base
Salary.
Executive shall receive an annual base salary of $235,000 ("Base Salary").
Payment of Base Salary shall be subject to standard payroll tax withholdings
and
deductions. Executive's Base Salary shall be paid semi-monthly in accordance
with the Company's standard payroll practices. Executive's Base Salary may
be
increased from time to time by the Company's Chief Executive Officer (“CEO”) and
in consultation with the Company's Board of Directors or the Compensation
Committee of such Board of Directors (in either case, the "Board") in their
sole
discretion.
3. Performance-Based
Bonus.
You
will
be eligible to participate in the Internap’s annual incentive plan as in effect
for any calendar year during the Term (“Incentive Plan”), which is based on the
achievement of company goals established by senior management and approved
by
the Board of Directors, as well as your individual performance. Your initial
bonus opportunity under the Incentive Plan will be up to 37% of your annual
base
salary, subject to the terms of the Incentive Plan and pro-rated for the length
of your employment by Internap as a portion of the full fiscal
year.
4. Equity
Compensation.
The
Company and Executive acknowledge that the CEO shall recommend to the Board
that
the Company issue to Executive one or more options to purchase 30,000 shares
of
the Company's common stock, subject to the determination of the Board in its
sole discretion and to the terms and conditions of the relevant option plan(s)
and related stock option agreement(s) (the "Options").
5. Employee
Benefits.
Executive shall be entitled to participate in all employee benefit, welfare
and
other plans and programs generally applicable to executives of the Company.
Except as provided herein, the Company reserves the right to modify Executive's
compensation and benefits from time to time to the extent plans change for
executives in general, as it deems necessary..
6. Paid
Time Off.
Executive shall accrue paid time off according to the Company’s then-current
policy, as such policy may be changed by the Company from time to
time.
7. Nature
of Employment.
Executive's employment with the Company shall be at-will. Both Executive and
the
Company shall have the right to terminate the employment relationship at any
time, with or without cause, and with or without advance notice.
8. Severance
Payments.
Upon
Executive's involuntary termination by the Company of employment without Cause
(as defined below) or voluntary termination of employment for Good Reason,
Executive shall receive a cash severance payment equal to the product of (x)
the
number of days that Executive is am employee of the Company, divided by 365
(provided that the foregoing ratio shall never exceed one (1)) and (y) one-half
of Executive's then-current Base Salary. Payment of such severance amounts
shall
be subject to standard payroll tax withholdings and deductions.
In
addition to the severance benefits provided above, upon Executive's involuntary
termination of employment without Cause, all of Executive's unvested Options
shall lapse and expire; with the exception of those Options originally granted
pre-merger on December 2, 2004 and December 16, 2005, which grants shall become
vested in their entirety upon such involuntary termination of employment without
Cause or voluntary termination of employment for Good Reason. And all of
Executive's vested Options shall remain exercisable no later than three months
after the date of termination. No payment or acceleration of Options shall
be
made pursuant to this Section 8 unless prior to or concurrent with such
payment a valid release has been executed and delivered by Executive and becomes
effective in accordance with Section 11 hereof. Notwithstanding the
immediately preceding sentence, Executive shall not be entitled to any benefits
or rights under this Section 8 if Executive also is eligible for payments
and/or benefits under Section 9 hereof.
9. Change
in Control Payments and Acceleration.
Upon
Executive's involuntary termination of employment without Cause (as defined
below) or voluntary termination of employment for Good Reason, in either case
within 12 months after
a
Change in Control, (i) the Company shall pay Executive a cash severance payment
equal to the sum of (A) Executive's then-current Base Salary, and (B)
Executive’s Target bonus under the Company’s then-current Incentive Plan; and
(ii) all of Executive's unvested Options shall become vested, free of
restrictions and immediately exercisable for the remaining term of the relevant
grant or award.
Payment
of such severance payments shall be subject to standard payroll tax withholdings
and deductions.
Executive
and dependents will continue to receive the healthcare and life insurance
coverages in effect on his date of termination for twenty-four (24) months
after
the date of termination pursuant to this Section 9 upon election of COBRA,
subject to Executive paying the customary employee portion of such coverages,
provided that if the Company cannot continue to cover Executive under its plans,
the Company will separately provide Executive with comparable coverages or
pay
Executive in a lump sum the costs of such coverages.
For
purposes of this Agreement, "Change in Control” shall mean the happening of any
of the following events:
(i)
An
acquisition by any individual, entity or group (within the meaning of Section
13
(d) (3) or 14 (d) (2) of the Exchange Act) (an "Entity") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30%
or
more of either (A) the then outstanding shares of common stock of the Company
(the "Outstanding Company Common Stock") or (B) the combined voting power of
the
then outstanding voting securities of the Company entitled to vote generally
in
the election of directors (the "Outstanding Company Voting Securities");
excluding, however, the following: (1) any acquisition directly from the
Company, other than an acquisition by virtue of the exercise of a conversion
privilege unless the security being so converted was itself acquired directly
from the Company, (2) any acquisition by the Company, (3) any acquisition by
any
employee benefit plan (or related trust) sponsored or maintained by the Company
or any corporation controlled by the Company, or (4) any acquisition by any
corporation pursuant to a transaction which complies with clauses (A), (B)
and
(C) of subsection (iii) of this Section; (ii) A change in the composition of
the
Board such that the individuals who, as of the Effective Date, constitute the
Board (such Board shall be hereinafter referred to as the "Incumbent Board"),
cease for any reason to constitute at least a majority of the Board; provided,
however, that for purposes of this definition, any individual who becomes a
member of the Board subsequent to the Effective Date, whose election, or
nomination for election, by the Company's stockholders was approved by a vote
of
at least a majority of those individuals who are members of the Board and who
were also members of the Incumbent Board (or deemed to be such pursuant to
this
proviso) shall be considered as though such individual were a member of the
Incumbent Board; and provided, further however, that any such individual whose
initial assumption of office occurs as a result of or in connection with either
an actual or threatened election contest (as such terms are used in Rule 14a-11
of Regulation 14A promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of an Entity
other than the Board shall not be so considered as a member of the Incumbent
Board;
(iii)
The
approval by the stockholders of the Company of a merger, reorganization or
consolidation or sale or other disposition of all or substantially all of the
assets of the Company (each, a "Corporate Transaction") or, if consummation
of
such Corporate Transaction is subject, at the time of such approval by
stockholders, to
the
consent of any government or governmental agency, the obtaining of such consent
(either explicitly or implicitly by consummation); excluding however, such
a
Corporate Transaction pursuant to which (A) all or substantially all of the
individuals and entities who are the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Corporate Transaction will beneficially own, directly
or indirectly, more than 50% of, respectively, the outstanding shares of common
stock, and the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case may be,
of
the corporation resulting from such Corporate Transaction (including, without
limitation, a corporation or other Person which as a result of such transaction
owns the Company or all or substantially all of the Company's assets either
directly or through one or more subsidiaries (a "Parent Company")) in
substantially the same proportions as their ownership, immediately prior to
such
Corporate Transaction, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities, as the case may be, (B) no Entity (other than the
Company, any employee benefit plan (or related trust) of the Company, such
corporation resulting from such Corporate Transaction or, if reference was
made
to equity ownership of any Parent Company for purposes of determining whether
clause (A) above is satisfied in connection with the applicable Corporate
Transaction, such Parent Company) will beneficially own, directly or indirectly,
50% or more of, respectively, the outstanding shares of common stock of the
corporation resulting from such Corporate Transaction or the combined voting
power of the outstanding voting securities of such corporation entitled to
vote
generally in the election of directors unless such ownership resulted solely
from ownership of securities of the Company prior to the Corporate Transaction,
and (C) individuals who were members of the Incumbent Board will immediately
after the consummation of the Corporate Transaction constitute at least a
majority of the members of the board of directors of the corporation resulting
from such Corporate Transaction (or, if reference was made to equity ownership
of any Parent Company for purposes of determining whether clause (A) above
is
satisfied in connection with the applicable Corporate Transaction, of the Parent
Company); or
(iv)
The
approval by the stockholders of the Company of a complete liquidation or
dissolution of the Company.
For
purposes of this Agreement, “Cause” shall mean:
(i)
Executive's conviction (including a plea of guilty or nolo contendere) of a
crime involving theft, fraud, dishonesty or moral turpitude;
(ii)
material violation by Executive of the Company's Code of Conduct or other
material policies;
(iii)
gross omission or gross dereliction of any statutory, common law or other duty
of loyalty to the company or any of its affiliates; or
(iv)
repeated failure to carry out the duties of Executive's position despite
specific instructions to do so.
Executive
shall not be deemed to have been terminated for “Cause” until there shall have
been delivered to him written notice, not less than ten (10) days prior to
the
proposed termination date, specifying the basis for such
termination.
For
purposes of this Agreement, Good Reason shall mean any one of the following
events which occurs without Executive's written consent: (i) any material
diminution in Executive's title, authority or responsibility; (ii) any
significant reduction in Executive's then current total compensation from that
compensation paid by the Company in the prior fiscal year or calendar year;
or
(iii) a change of more than fifty (50) miles from Executive's
permanent workplace without Executive's consent.
10. Parachute
Payments.
If any
cash compensation payment, employee benefits or acceleration of vesting of
stock
options or other stock awards Executive would receive in connection with a
Change in Control ("Payment") would (i) constitute a "parachute payment"
within the meaning of Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code"), and (ii) but for this sentence, be subject to the
excise tax imposed by Section 4999 of the Code (the "Excise Tax"), then
such Payment shall be equal to the Reduced Amount. The "Reduced Amount" shall
be
either (x) the largest portion of the Payment that would result in no
portion of the Payment being subject to the Excise Tax or (y) the largest
portion, up to and including the total, of the Payment, whichever amount, after
taking into account all applicable federal, state and local employment taxes,
income taxes, and the Excise Tax (all computed at the highest applicable
marginal rate), results in Executive's receipt, on an after-tax basis, of the
greater amount of the Payment notwithstanding that all or some portion of the
Payment may be subject to the Excise Tax. If a reduction in payments or benefits
constituting "parachute payments" is necessary so that the Payment equals the
Reduced Amount, reduction shall occur in the following order unless Executive
elects in writing a different order: reduction of cash payments; reduction
of
employee benefits; and cancellation of accelerated vesting of stock awards.
In
the event that acceleration of vesting of stock award compensation is to be
reduced, such acceleration of vesting shall be cancelled in the reverse order
of
the date of grant of Executive's stock awards unless Executive elects in writing
a different order for cancellation. The accounting firm engaged by the Company
for general audit purposes as of the day prior to the effective date of the
Change in Control shall perform the foregoing calculations. If the accounting
firm so engaged by the Company is serving as accountant or auditor for the
individual, entity or group effecting the Change in Control, the Company shall
appoint a nationally recognized accounting firm to make the determinations
required hereunder. The Company shall bear all expenses with respect to the
determinations by such accounting firm required to be made hereunder. The
accounting firm engaged to make the determinations hereunder shall provide
its
calculations, together with detailed supporting documentation, to the Company
and Executive within fifteen (15) calendar days after the date on which
Executive's right to a Payment arises (if requested at that time by the Company
or Executive) or at such other time as requested by the Company or Executive.
If
the accounting firm determines that no Excise Tax is payable with respect to
a
Payment, either before or after the application of the Reduced Amount, it shall
furnish the Company and Executive with an opinion reasonably acceptable to
Executive that no Excise Tax will be imposed with respect to such Payment.
Any
good faith determination of the accounting firm made hereunder shall be final,
binding and conclusive upon the Company and Executive.
11. Release.
Upon
termination of Executive's employment, unless Executive shall have executed
and
provided the Company with an effective release in a form reasonably satisfactory
to the Company, Executive shall not receive any severance payments or benefits
provided under this Agreement.
12. Confidentiality. Executive
agrees that information not generally known to the public to which he will
be
exposed as a result of his employment by the Company is confidential
information that belongs to the Company. This includes information developed
by
Executive, alone or with others, or entrusted to the Company by its customers
or
others. The Company's confidential information includes, without limitation,
information relating to the Company's trade secrets, research and development,
inventions, know-how, software, procedures, accounting, marketing, sales,
creative and marketing strategies, employee salaries and compensation, and
the
identities of customers and active prospects to the extent not publicly
disclosed (collectively, "Confidential Information"). Executive will hold the
Company's Confidential Information in strict confidence, and not disclose or
use
it except as authorized by the Company and for the Company's
benefit.
Executive
further acknowledges and agrees that in order to enable the Company to perform
services for its customers or clients, such customers or clients may furnish
to
the Company certain Confidential Information, that the goodwill afforded to
the
Company depends upon the Company and its employees preserving the
confidentiality of such information, and that such information shall be treated
as Confidential Information of the Company for all purposes under this
Agreement.
14. No
Restrictions.
Executive represents to the Company that he has not executed or is not bound
by
any non-competition covenant or non-solicitation covenant or any other
undertaking similar to either of the foregoing that would prevent him from
performing the duties and responsibilities of the position set forth in Section
1 of this Agreement.
15. General
Provisions.
This
Agreement is intended to bind and inure to the benefit of and be enforceable
by
Executive, the Company and their respective successors, assigns, heirs,
executors, administrators, except that Executive may not assign any of his
duties hereunder and Executive may not assign any of his rights hereunder
without the written consent of the Company, which shall not be withheld
unreasonably.
This
Agreement, together with the Exhibits, constitutes the complete, final and
exclusive embodiment of the entire agreement between the Parties with regard
to
the subject matter hereof. It is entered into without reliance on any promise
or
representation, written or oral, other than those expressly contained herein,
and it supersedes any other such promises or representations.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of California, without reference to principles of conflict of laws. The
captions of this Agreement are not part of the provisions hereof and shall
have
no force or effect. This Agreement may not be amended or modified otherwise
than
by a written agreement
executed
by the Parties hereto or their respective successors and legal representatives.
The invalidity or unenforceability of any provision of this Agreement shall
not
affect the validity or enforceability of any other provision of this Agreement.
Any invalid or unenforceable provision shall be modified so as to be rendered
valid and enforceable in a manner consistent with the intent of the Parties
insofar as possible.
A
failure
of Executive or the Company to insist upon strict compliance with any provision
of this Agreement or the failure to assert any right Executive or the Company
may have hereunder shall not be deemed to be a waiver of such provision or
right
or any other provision or right of this Agreement.
From
and
after the Effective Date, this Agreement shall supersede any employment,
severance, change of control or other agreement, whether oral or written,
between the Parties with respect to the subject matter hereof (other than
arrangements effected under compensation plans generally applicable to other
senior executive officers of the Company).
This
Agreement may be executed in several counterparts, each of which shall be deemed
to be an original but all of which together will constitute one and the same
instrument.
Executive
hereby agrees to execute the Affiliate Agreement attached as Exhibit A to the
Merger Agreement, in the form applicable to him.
IN
WITNESS WHEREOF, the Parties have executed this Agreement effective as of the
day and year first above written.
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XXXXXX
X. XXXXXX
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By:
/s/ Xxxx Xxxxxxx
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/s/
Xxxxxx X. Xxxxxx
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Name:
Xxxx Xxxxxxx
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Title:
Vice President, Human Resources
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