Contract
Exhibit 10.1
Employment
Agreement (this "Agreement") dated as of May 27, 2004 (the "Effective Date") by
and between lnternap Network Services Corporation (the "Company") and Xxxxx
Xxxxxx ("Executive") (collectively the "Parties").
1.
Position and Duties.
Effective as of May 27, 2004, Executive shall serve as the Vice President and
Chief Financial Officer for the Company, with such duties, authorities and
responsibilities as are commensurate with such position. Executive shall report
to the Company's Chief Executive Officer ("CEO") and work from the Company's
offices in Atlanta, Georgia.
2.
Base Salary.
Effective as of May 11, 2004, Executive shall receive an annual base salary of
$190,000.00 ("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 or decreased from time to time by the
CEO 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. While
the Company has not decided to implement a bonus plan ("Bonus") for Executive
and other senior executive officers at this time, should it do so in the future
its present intention is that Executive's Bonus would be from 35% to up to 50%
of Executive's Base Salary, prorated if less than a full year. Performance
metrics for the Bonus, if any, for 2004 shall be established by the CEO in
consultation with the Board and in their sole and reasonable discretion as soon
as practicable after a determination has been made to implement a Bonus plan for
Executive and other senior executive officers. Performance metrics for and
target amount of the Bonus for 2005 and each subsequent calendar year shall be
established on or before February 28 of the year to which the Bonus relates. The
CEO, in consultation with the Board and in their sole and reasonable discretion,
shall determine, on or before February 28 of the year in which the Bonus would
be payable, whether a Bonus is payable and, if so, the amount of such Bonus.
Unless otherwise determined by the Board, all Bonus payments shall be made on
the Company's first regular payroll date following such determination and shall
be subject to standard payroll tax withholdings and deductions. To be eligible
for a Bonus, Executive must be continuously employed by the Company through the
date on which the Bonus is paid. Executive recognizes and agrees that: (a) the
Company may in its sole discretion and with reasonable notice to Executive
determine that any Bonus, if payable, may be paid in whole or in part in the
Company's common stock or other equity securities, including restricted stock
and stock options; and (b) the Company may in its sole discretion suspend or
discontinue any bonus program at any time without any liability on the part of
the Company.
4.
Equity
Compensation. The
Company has heretofore granted Executive one or more options to purchase
1,150,000 shares of the Company's common stock, subject to the terms and
conditions of the relevant option plan(s) and related stock option agreement(s)
(the "Options"). The Board, upon the recommendation of the CEO and in their sole
discretion, may award additional options or equity or other equity-based
compensation
to Executive on terms, in amounts and subject to performance goals as determined
by the CEO and the Board (any such options also being referred to hereinafter as
"Options" and any such equity or equity-based compensation being referred to
herein as "Additional Equity Compensation").
5.
Employee
Benefits.
Executive shall be entitled to participate in all employee benefit, welfare and
other plans and programs generally applicable to employees of the Company.
Except as provided herein, the Company reserves the right to modify Executive's
compensation and benefits from time to time, as it deems necessary.
6.
Vacation.
Executive shall accrue twenty (20) days of combined vacation/sick leave
annually. Executive also shall receive three (3) personal days each year.
Executive shall have the right to carry over unused vacation from any one-year
period to any other subsequent one-year period.
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. If
Executive has been terminated involuntarily without Cause (as defined below) by
the Company prior to November 30,2004, Executive shall receive, in recognition
of his undertaking to effect significant operational improvements in the
company's finance organization beginning May 14, 2004, a cash severance payment
equal to 1.11 times his Base Salary. If Executive has been terminated
involuntarily without Cause after that date, Executive shall receive a cash
severance payment equal to one (1) times his 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 and Additional Equity Compensation shall lapse and
expire, 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 or Additional Equity Compensation 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 two time the sum of Executive's then-current
Base Salary and maximum target Bonus and (ii) all of Executive's unvested
Options and Additional Equity Compensation 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.
2
No
payment or acceleration of Options or Additional Equity Compensation shall be
made 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.
Executive
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 just as if he had remained an active
employee of the Company, 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"),
excluding the current members of the Board ("Series A Directors") who have been
elected pursuant to the terms of the Company's Series A Convertible Preferred
Stock ("Series A Stock"), 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 lncumbent Board (or deemed to be
such pursuant to this proviso), excluding the Series A Directors, shall be
considered as though such individual were a member of the lncumbent 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 lncumbent 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
3
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
60% 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)
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.
4
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 (1 0) 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 significant
diminution in Executive's title, authority or responsibility, including any
change in the reporting relationship between Executive and the CEO; (ii) any
significant reduction in Executive's then current total compensation from that
compensation paid 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 sewing 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.
5
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.
13.
Non-Competition.
Executive recognizes and agrees that lnternap has many substantial, legitimate
business interests that can be protected only by his agreement not to compete
with lnternap under certain circumstances. These interests include, without
limitation and on a national basis, Internap's contacts and relationships with
its clients and active prospects, Internap's reputation and goodwill in the
industry, and Internap's rights in its Confidential Information. Therefore,
Executive agrees that during the term of his employment with lnternap and for a
period of one (1)year after his employment ends for any reason whatsoever and
except as provided in the paragraph immediately following, he shall not,
voluntarily or involuntarily, directly or indirectly, on his own behalf or on
the behalf of another, whether as an employee, contractor, consultant, director
or agent or in another capacity, engage in the businesses of (i) managed high
performance Internet connectivity, (ii) hosting or collocation services, (iii)
virtual private network services (iv) content distribution network services or
(v) any other line of business in which the company is then engaged for (x) any
account that is a customer of lnternap or its affiliates unless he is providing
substantially different services to any such customer from the services he
provided to lnternap or (y) any competitor of lnternap or its affiliates.
If,
within one year after commencement of Executive's employment with the Company,
Executive voluntarily terminates such employment or such employment is
terminated for any reason by the Company, the non-compete period shall be equal
to the number of days that Executive was an employee of the Company prior to
such termination.
Executive
also agrees that during the term of his employment with lnternap and for a
period of one (1)
years
after such employment ends for any reason whatsoever, he shall
6
not
directly or indirectly employ or seek to employ any person employed by lnternap
nor directly or indirectly solicit or induce any such person to leave Internap.
Executive
acknowledges that the breach or threatened breach of the above noncompetition
and/or nondisclosure provisions would cause irreparable injury to lnternap that
could not be adequately compensated by money damages. lnternap may obtain a
restraining order and/or injunction prohibiting my breach or threatened breach
of the noncompetition and/or nondisclosure provisions, in addition to any other
legal or equitable remedies that may be available. Executive agrees that the
above noncompetition provision, including its duration, scope and geographic
extent, is fair and reasonably necessary to protect Internap's client
relationships, goodwill, Confidential Information and other protectable
interests.
Provided
that Executive has been employed with the Company for at least one year, if
Executive wishes to compete with the Company during the one-year period after
his termination of employment, Executive will submit a bona fide written offer
of employment he has received from a prospective employer to the Company's Chief
Executive Officer and General Counsel, who will analyze
such proposed employment in light of the then current facts and circumstances.
The Chief Executive Officer may, in his sole and reasonable discretion, provide
a written waiver of all or a portion of the non- compete limitations imposed on
Executive. If such written waiver is unreasonably withheld, Executive shall
remain subject to the non-compete limitations. The non- solicitation obligations
set forth above are not subject to the potential waiver described in the
preceding sentence and will remain in full force and effect pursuant to its
terms. Executive will fully defend, indemnify and hold harmless the Company for
any claims brought against it by Executive or third parties as a result of any
decision the Company makes not to waive Executive's non-compete obligations.
14.
No Restrictions. 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 Delaware, 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
7
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.
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.
IN
WITNESS WHEREOF,
the
Parties have executed this Agreement effective as of the day and year first
above written.
|
Xxxxx
Xxxxxx | |
|
| |
|
By:
/s/ Xxxxxxx X. Xxxxxx |
|
|
Name: Xxxxxxx X. Xxxxxx |
|
|
Title:
President & CEO |
8
