Exhibit 10.12
EMPLOYMENT AGREEMENT
THIS AGREEMENT (the "Agreement") is executed this 29 day of May,
1998, by and between USinternetworking, Inc., a Delaware corporation ("USi") and
Xxxxxxxxxxx X. XxXxxxxx ("Executive").
WITNESSETH:
WHEREAS, USi is engaged in the development of computing and
communications services for commercial customers;
WHEREAS, Executive is the founded USi in January 1998, provided
early stage financing and waived compensation through April 1, 1998;
WHEREAS, USi desires to employ Executive and Executive desires to
be employed by USi in such capacity and under such terms and conditions as
hereinafter set forth;
NOW THEREFORE, in consideration of the mutual covenants and
promises made by the parties and intending to be legally bound, the parties
agree as follows:
1. TERM. USi agrees to employ Executive, and Executive hereby accepts such
employment, on the terms and conditions set forth herein, for a period of three
(3) years. The terms and conditions effective as of and commencing on January 1,
1998 (the "Effective Date") and terminating on December 31, 2001 (the
"Termination Date"), unless earlier terminated in accordance with this
Agreement, with (i) the period from January 1, 1998 to December 31, 1998,
constituting the first contract year (the "First Contract Year"); (ii) the
period from January 1, 1999 to December 31, 1999, constituting the second
contract year (the "Second Contract Year"); and the period from January 1, 2000
to December 31, 2000, constituting the third contract year (the "Third Contract
Year", with the First Contract Year, Second Contract Year and Third Contract
Year being referred to collectively herein as the "Contract Years" or each a
"Contract Year").
2. EMPLOYMENT AND DUTIES.
(a) Executive has been duly elected chairman of the USi Board of
Directors, chief executive officer, director, and shall serve as, and have the
title of "Chairman and Chief Executive Officer". Executive shall have such
duties that are commensurate and consistent with those of board of director
chairmen and chief executive officers in the Internet industry, subject to the
authority and direction of the Board of Directors of USi. Executive shall serve
as chairman of any executive or operating committee if formed by USi or the
board of directors.
(b) Executive shall devote all skills solely and exclusively to
the business interests and affairs of USi. Executive shall not be a partner,
officer, director, stockholder, advisor, investor, creditor, or employee of any
business competitive with USi's business without the written consent of USi,
which consent may be withheld in USi's sole discretion, provided, however, that
nothing contained herein shall be deemed to prevent Executive from investing his
personal funds in the capital stock or other securities of any corporation whose
stock or securities are publicly owned or are regularly traded on any public
exchange, provided he does not own more than two percent (2%) thereof.
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(c) Executive acknowledges and agrees that Executive owes a
fiduciary duty of loyalty, fidelity, and allegiance to act at all times in the
best interests of USi and to do no act which would knowingly injure the
business, interests, or reputation of USi or, to the best of his knowledge, any
of its subsidiaries, affiliates or owners. In keeping with these duties,
Executive shall make full disclosure to USi of all business opportunities
pertaining to USi's business and shall not appropriate for Executive's own
benefit business opportunities concerning the subject matter of the fiduciary
relationship.
(d) Executive shall at all times comply with (i) all material
applicable laws, rules and regulations related to Executive's responsibilities
assumed hereunder and known to Executive, and (ii) all material written
corporate and business policies and procedures of USi whether generally
applicable to all of USi's employees or made specifically applicable to
Executive as advised in advance by USi to Executive in writing but only to the
extent such policies and procedures are not inconsistent with the other
provisions of this Agreement.
(e) Executive shall not, without the prior written approval of
USi, which approval may withhold in its sole discretion, receive compensation or
obtain any direct or indirect financial benefit for services rendered to any
Person other than USi while employed by USi hereunder. As used herein, the term
"Person" shall include all natural persons, corporations, business trusts,
associations, companies, partnerships, joint ventures and other entities and
governments and agencies and political subdivisions.
(f) Executive shall notify USi within twenty-four (24) hours of
any solicitation of or discussion with Executive for employment, including any
oral or written contract, offer or inquiry in which a position of employment,
consulting arrangement or affiliation is discussed. During the term of this
Agreement, Executive will neither enter into nor engage in negotiations or
discussions for any employment, consulting or affiliation with or for any
Internet company or a company in any business competitive with USi's business.
3. COMPENSATION.
(a) As compensation for Executive's services, USi hereby agrees to pay
Executive, and Executive agrees to accept, a base salary equal to $175,000 per
year (the "Base Salary") for the First Contract Year. In January 1999, the
Compensation Committee shall consult with an independent compensation consultant
and shall increase the Base Salary to a level consistent with the salary levels
of other executives with similar responsibilities (Adjusted Base Salary). The
Adjusted Base Salary shall become effective January 1, 1999 and a similar review
shall occur in January 2000 and January 2001.
(b) Executive shall be eligible to receive a bonus for each Contract
Year if Executive meets or exceeds certain management objectives (the "Bonus
Objectives") as determined by the Compensation Committee of the Board of
Directors in accordance with the following provisions:
(i) If Executive meets or exceeds the Bonus Objectives in
the First Contract Year, then Executive may be granted a performance bonus at
the discretion of and as determined by the Compensation Committee of the Board
of Directors in January 1999;
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(ii) If Executive meets or exceeds the Bonus Objectives in
the Second Contract Year, then Executive shall be entitled to receive a bonus of
$250,000 or such greater amount as may be determined by the Compensation
Committee of the Board of Directors in January 2000; and
(iii) If Executive meets or exceeds the Bonus Objectives in
the Third Contract Year, then Executive shall be entitled to receive a bonus of
$500,000 or such greater amount as may be determined by the Compensation
Committee of the Board of Directors in January 2001.
4. BENEFITS.
(a) Unless otherwise specified in this Agreement, Executive shall
be entitled to medical, dental and life insurance, and other such benefits
provided by USi, pursuant to its general employment policies. Said benefits may
be changed from time-to-time in USi's sole business discretion.
(b) Executive shall be entitled to fifteen (15) paid vacation
days per year. Unless USi consents in writing, Executive's vacation time shall
not be carried over from one contract year to another and Executive shall not be
compensated for any unused vacation time. Executive shall also received any
regular company holidays.
(c) Executive will be provided a company auto including all
operating expenses.
5. TERMINATION.
(a) USi may terminate Executive's employment for cause if
Executive is in breach of any of the terms and conditions of this Agreement.
Said termination for cause shall be preceded by a majority of the members of the
Compensation Committee or a majority of the members of the Executive Committee
notifying Executive in writing of the alleged breach and allowing a thirty day
period for the Executive to remedy said breach. During the thirty day remedy
period, a special session of Board of Directors will be convened to consider the
breach. In the event the Board of Directors, after considering the alleged
breach and rebuttal by Executive, vote with a 2/3 majority for cause, the
Executive will be considered terminated for cause.
(b) If USi completes a termination of the Executive's employment
for cause, Executive shall not be entitled to receive any compensation other
than his Base Salary earned but not yet paid as of the date of termination
PROVIDED, HOWEVER, that if Executive was awarded a bonus pursuant to Section 3
prior to the date of Executive's termination pursuant to this Section 5, then
Executive shall be entitled to receive such bonus.
(c) If USi terminates Executive's employment without cause or
Executive terminates his employment for Good Reason (as defined herein),
Executive shall receive his compensation, excluding bonuses, as provided herein
for the full term of this Agreement. Such compensation shall be payable in
accordance with the provisions of Section 3(a). "Good Reason" shall mean (i)
USi's material breach of any provision hereof, (ii) any material adverse change
in the Executive's job responsibilities, duties, functions, or reporting
relationships, or (iii) relocation of the Executive's regular work address to a
location that requires Executive to travel more than 50
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miles from his residence PROVIDED, HOWEVER, that it shall not constitute Good
Reason unless Executive (i) has given USi written notice of any actions alleged
to constitute Good Reason; and (ii) USi shall have nevertheless not cured any
such alleged Good Reason within a reasonable period of time.
(d) If Executive terminates his employment with USi other than
for Good Reason, his Base Salary and benefits will cease as of the termination
date and USi shall be relieved of all payments or other liabilities to Executive
as required by this Agreement, including bonuses, PROVIDED, HOWEVER, that if
Executive was awarded a bonus pursuant to Section 3 prior to the date of
Executive's termination pursuant to this Section 5, then Executive shall be
entitled to receive such bonus.
(e) If Executive is terminated for any reason or terminates this
Agreement for any reason, Executive shall still be subject to and have to comply
with Executive's obligations under Sections 8, 9, and 10 of this Agreement.
6. DEATH OR DISABILITY.
(a) This Agreement shall terminate effective immediately upon the
date of Executive's death.
(b) In the event Executive fails to perform the responsibilities
stated hereunder due to disability, USi shall have the right to terminate
Executive's employment upon written notice to Executive. Non-performance is
defined as failure to perform the duties hereunder for a cumulative total of
sixty percent (60%) or more of the normal working days during any two (2)
consecutive months, or failure to perform duties for sixty (60) or more
consecutive days. Nothing herein shall be construed to violate any Federal or
State law including the Family and Medical Leave Act of 1993, 29 U.S.C.S.
Sections 2601 et seq., and the Americans with Disabilities Act of 1990, 42
U.S.C.S. Sections 12101 et seq.
7. OTHER COVENANTS. Executive acknowledges that USi desires to obtain a key-man
life insurance policy on Executive's life. Executive agrees to cooperate and
work with USi in its efforts to obtain key-man life insurance.
8. PUBLIC STATEMENTS. Executive agrees not to directly or indirectly publish,
circulate, utter or disseminate any statements, comments, or material
whatsoever, which reflects unfavorably on USi or xxxxx, damages or impairs the
business or operations of USi unless required by law or by a valid order of a
Court of competent jurisdiction. This provision shall survive the termination of
this Agreement.
9. CONFIDENTIAL DOCUMENTS AND RECORDS.
(a) During the course of his employment, Executive will have
access to confidential information, including, but not limited to confidential
financial information, proprietary information of USi or its clients or
customers, technical information and other confidential information about USi's
business that is not known by actual or potential competitors of USi regardless
of whether such information qualifies as a "trade secret" under applicable law
("Confidential Information"). Executive shall not at any time use or divulge to
others any Confidential Information obtained as a result of his employment with
USi. Executive agrees either upon his termination or upon an earlier request of
USi, to return or deliver to USi all forms of such Confidential Information in
his possession or control including but not limited to
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drawings, specifications, documents, records, devices, models or any other
material and copies or reproductions thereof. Executive acknowledges that
monetary damages would not be adequate to compensate USi if Executive violates
this confidentiality agreement. Accordingly, Executive agrees that USi should be
entitled to injunctive relief to prevent the continued violation of this
provision.
(b) All memoranda, notices, files, records and other documents
made or compiled by Executive during the period of his employment in the
ordinary course of business, or made available to him concerning the business of
USi, shall be USi's property and shall be delivered to USi at its request
therefor or automatically on the termination of this Agreement.
(c) Executive agrees promptly to disclose to USi, and assign to
USi or its designee, his entire right, title, and interest in and to all
designs, trademarks, discoveries, formulae, processes, manufacturing techniques,
trade secrets, inventions, improvements, ideas or copyrightable works, including
all rights to obtain, register, perfect and enforce these proprietary interests.
("Inventions") which he may solely or jointly develop or reduce to practice
during the period of his employment with USi (a) which pertain to any line of
business activity of USi, (b) which are aided by the use of time, material or
facilities of USi, whether or not during working hours, or (c) which relate to
any of his work during the period of his employment with USi, whether or not
during normal working hours.
(d) Executive agrees to perform, during and after his employment,
all acts deemed necessary or desirable by USi to permit and assist it, in
obtaining and enforcing the full benefits, enjoyment, rights and title
throughout the world in the Inventions hereby assigned to USi as set forth
above. Such acts may include, but are not limited to execution of documents and
assistance or cooperation in legal proceedings. This provision shall survive the
termination of the Agreement.
10. COVENANT NOT TO COMPETE. Although this Agreement gives both parties
flexibility over the term of Executive's employment, USi's willingness to hire
Executive is based in material part on the understanding between the parties
that Executive will not utilize the skills or knowledge or that he develops as
part of his job to the competitive disadvantage of USi. Accordingly, Executive
agrees to the following promises not to compete, as set forth in subsections (a)
through (e) below, with USi during or after the termination of this Agreement.
Although these restrictions may prohibit or limit Executive's right or ability
to work in the Internet industry, Executive agrees that these restrictions are
reasonable and acceptable to him.
(a) Executive promises that for a period of one (1) year after
the termination of this Agreement for any reason, Executive will not compete
with USi or perform services involving or related to USi's primary product line.
(b) Executive promises for a period of twenty-four (24) months
after the termination of this Agreement for any reason, Executive will not have
any contact with or solicit clients of USi.
(c) Executive promises that for twenty-four (24) months after the
termination of this Agreement for any reason, Executive will not solicit the
services of any employee or independent contractor of USi or induce or encourage
any of USi's employees to leave its employ.
(d) Executive will notify USi within 24 hours of any
solicitation, contact, or discussion by any person concerning Executive for
potential employment by any other employer.
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(e) Executive acknowledges that if he violates this covenant not
to compete, USi is entitled to obtain a temporary restraining order or a
preliminary and permanent injunction (in addition to all other available
remedies) from a court enjoining Executive from violating this Agreement in
order to prevent immediate and irreparable harm to USi.
(f) Executive agrees that if any part of this covenant not to
compete is held to be unenforceable for any reason, this covenant shall be
interpreted in a manner that will render it enforceable.
11. FREEDOM TO CONTRACT. The Executive represents and warrants that he has the
right to negotiate and enter into this Agreement and that this Agreement does
not breach, interfere with or conflict with any other contractual agreement,
covenant not to compete, option, right of first refusal, or other existing
business relationship. Executive acknowledges that this representation is a
material inducement to USi entering into this Agreement and in the event
Executive breaches this warranty, Executive agrees to indemnify and hold
harmless USi from any and all claims, actions, losses, damages (including but
not limited to, reasonable attorney's fees and costs), and USi shall have the
right to terminate Executive for cause.
12. ASSIGNMENT. USi may assign this Agreement to a purchaser of substantially
all of the assets or capital stock of USi.
13. ARBITRATION. Except for breaches or threatened breaches of the provisions of
this Agreement relating to equitable relief, any controversy or claim arising
out of or in any way between the Executive and USi, shall be submitted to
arbitration. Said arbitration shall be conducted pursuant to the provisions of
the Federal Arbitration Act, 9 U.S.C. Section et. seq. in an expeditious manner.
The parties agree that a final arbitration hearing shall be conducted on the
first available date of the arbitrator after the parties have completed
discovery. In the event of any litigation or arbitration proceeding, the same
shall occur solely in Annapolis, Maryland. In the event of litigation or
arbitration arising out of this Agreement or the employment relationship or any
other claim between USi and Executive, the prevailing party shall be entitled to
recover any and all reasonable attorney's fees and costs incurred both on the
trial and appellate level as well as the arbitration level and/or any appeal of
the arbitration.
14. CONFIDENTIALITY. Executive hereby agrees to keep confidential and not
publish or publicly disclose in any manner the terms or provisions of this
Agreement including, without limitation, those relating to compensation, during
the employment term hereunder or at any time thereafter, except that Executive
may disclose this Agreement to his legal counsel or as required by a court or
governmental agency of competent jurisdiction.
15. GOVERNING LAW, VENUE AND WAIVER OF JURY TRIAL. This Agreement including any
disputes hereunder, and the interpretation, validity and/or enforcement of any
provision thereof, shall be governed by the laws of the State of Maryland. Any
action brought involving the arbitration and/or enforcement of any of the
covenants of this Agreement shall be brought only in a court of competent
jurisdiction in Maryland and the parties agree to waive any claim relating to
forum non conveniens. The parties further agree and hereby waive and release any
right to a trial by jury in any action arising out of the interpretation,
enforcement or breach of this Agreement or any arbitration provision.
16. ENTIRE AGREEMENT. This Agreement contains the entire understanding between
the parties and supersedes and replaces any and all previous agreements and/or
oral negotiations. The parties stipulate and agree that neither of them has made
any representations concerning the execution and delivery of this
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Agreement except such representations as specifically set forth herein and that
all the terms and conditions of this Agreement are set forth in this writing,
and there are no representations or agreements that are not so contained herein
and that neither party is relying upon any representation made by the other that
is not contained herein in connection with the negotiations and the terms of
this Agreement. The parties agree that this Agreement may only be changed or
modified by an agreement in writing signed by both parties.
17. SEVERABILITY. The invalidity or unenforceability of any term or provision of
this Agreement shall not affect the validity or enforceability of any other
terms of provisions and this Agreement shall be construed in all other respects
as if the invalid or unenforceable term or provision were omitted.
18. WAIVER. A waiver by either party of any term or condition of this Agreement
in any instance shall not be construed as a waiver of any other term or
condition. All remedies, rights and obligations contained in this Agreement
shall be cumulative, and none of them shall be in limitation of any other
remedy, right or obligations of either party.
IN WITNESS WHEREOF, the parties hereto have set their hands and
seals on the day and year first above written.
USi: Executive:
USinternetworking, Inc.
illegible
-------------------------
/s/ Xxxxx X. Xxxxx
--------------------------------
By Xxxxx X. Xxxxx
Chairman, Compensation Committee
USi
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Rider #1, effective as of March 19, 1999, to the Employment Agreement between
USINTERNETWORKING, INC., a Delaware Corporation ("USi") and Xxxxxxxxxxx X.
XxXxxxxx ("Executive") executed on May 29, 1998.
Section 1 shall be amended to read in its entirety as follows:
1. TERM. USi agrees to employ Executive, and Executive hereby accepts such
employment, on the terms and conditions set forth herein, for an initial term
of three (3) years (the "Initial Term"), with such employment, terms and
conditions effective as of and commencing on January 14, 1998 (the "Effective
Date") and terminating on December 31, 2000 (the "Termination Date"), unless
earlier terminated in accordance with this Agreement, with (i) the period
from January 1, 1998 to December 31, 1998, constituting the first contract
year (the "First Contract Year"); (ii) the period from January 1, 1999 to
December 31, 1999, constituting the second contract year (the "Second
Contract Year"); and the period from January 1, 2000 to December 31, 2000,
constituting the thrid contract year (the "Third Contract Year", with the
First Contract Year, Second Contract Year and Third Contract Year being
referred to collectively herein as the "Contract Years" or each a "Contract
Year"). The Initial Term under this Agreement shall automatically be extended
for successive one year periods ("Extension Terms" and, collectively with the
Initial Term, the "Term") unless Executive or USi's Board of Directors gives
notice of non-extension to the other no later than 90 days prior to the
expiration of the then-applicable Term.
Section (3)(a) shall be amended to read in its entirety as follows:
3. COMPENSATION.
(a) As compensation for Executive's services, USi hereby agrees to pay
Executive, and Executive agrees to accept, a base salary equal to $175,000
per year (the "Base Salary") for the First Contract Year. In January 1999,
the Compensation Committee shall consult with an independent compensation
consultant and shall increase the Base Salary to a level consistent with the
salary levels of other executives with similar responsibilities (Adjusted
Base Salary). The Adjusted Base Salary shall become effective January 1, 1999
and a similar review shall occur in January 2000 and each January thereafter
during the Term.
IN WITNESS WHEREOF, the parties have set their hands and seals on this __ day
of March, 1999.
USINTERNETWORKING, INC. Executive:
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By: Xxxxxxxxxxx X. XxXxxxxx
Member of the USi Compensation Committee
Witness:
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