Exhibit 10.31
EMPLOYMENT AGREEMENT
This Employment Agreement dated as of October 8th, 1999, is
made by and between USinternetworking, Inc., a Delaware corporation (together
with any successor thereto, the "Company") and Xxxxx X. Xxxxxxx (the
"Executive").
RECITALS
A. It is the desire of the Company to assure itself of the
services of the Executive by engaging the Executive to perform such services
under the terms hereof.
B. The Executive desires to commit himself to serve the
Company on the terms herein provided.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and of the
respective covenants and agreements set forth below the parties hereto agree as
follows:
1. Certain Definitions.
(A) "Annual Base Salary" shall have the meaning set
forth in Section 4.
(B) "Board" shall mean the Board of Directors of the
Company.
(C) The Company shall have "Cause" to terminate the
Executive's employment hereunder upon the Executive's:
(I) failure to materially perform his
duties hereunder, other than any such failure resulting from the
Executive's Disability, after notice and reasonable opportunity for
cure, all as reasonably determined by the Board and as set forth in a
detailed written notice that shall be provided to the Executive
promptly following the Board's action,
(II) conviction of a felony; or
(III) fraud or personal dishonesty for
material personal gain involving the Company's assets.
(D) "Change of Control" shall mean, with respect to
any Person, the consummation of the first to occur of (i) the sale, lease or
other transfer of all or substantially all of the assets of such Person to any
person or group (as such term is used in Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended); (ii) the consummation of a plan relating to
the liquidation or dissolution of such Person; (iii) the merger or consolidation
of such Person with or into another entity or the merger of another entity into
such Person or any subsidiary thereof with the effect that immediately after
such transaction the stockholders of such Person immediately prior to such
transaction (or their Affiliates) hold less than 50% of the total voting
power of all securities generally entitled to vote in the election of directors,
managers or trustees of the entity surviving such merger or consolidation; or
(iv) the acquisition by any person or group (other than a stockholder of such
Person as of the date of this Agreement) of more than 50% of the voting power of
all securities of such Person generally entitled to vote in the election of
directors of such Person.
(E) "Company" shall have the meaning set forth in the
preamble hereto.
(F) "Compensation Committee" means the compensation
committee of the Board of Directors of the Company.
(G) "Xxxxxxx" shall mean Xxxxxxx & Xxxxxxx, Inc.
(H) "Contract Year" shall mean each twelve month
period beginning on the effective date hereof or an annual anniversary thereof.
(I) "Date of Termination" shall mean (i) if the
Executive's employment is terminated by his death, the date of his death, (ii)
if the Executive's employment is terminated pursuant to Section 5(a)(ii) - (vi)
the date specified in the Notice of Termination.
(J) "Disability" shall mean the absence of the
Executive from the Executive's duties to the Company on a full-time basis for a
total of six months during any twelve month period as a result of incapacity due
to mental or physical illness which is determined to be reasonably likely to
extend beyond the completion of the Term by a physician selected by the Company
and acceptable to the Executive or the Executive's legal representative (such
agreement as to acceptability not to be withheld unreasonably).
(K) "Executive" shall have the meaning set forth in
the preamble hereto.
(L) The Executive shall have "Good Reason" to
terminate his employment in the event that the Company (i) fails to make any
payment or provide any benefit hereunder or commits a material breach of this
Agreement and does not cure such failure or breach after notice and a reasonable
opportunity to cure; or (ii) is in material breach of a post-closing obligation
under that certain asset purchase agreement between the Company, Xxxxxxx, the
Executive, and the other shareholders of Xxxxxxx, dated September 20, 1999,
including without limitation its obligation to make payments to Xxxxxxx in
respect of the promissory note issued to Xxxxxxx by the Company pursuant to the
asset purchase agreement (the "Note"), and such breach has not been cured in
accordance with the terms of the asset purchase agreement.
(M) "Note" shall have the meaning set forth in the
definition of "Good Reason" set forth above.
(N) "Notice of Termination" shall have the meaning
set forth in Section 5(b).
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(O) "Payment Period" shall have the meaning set forth
in Section 7(a)(i).
(P) "Person" shall mean any individual, corporation,
partnership, limited liability company, joint venture, association, joint-stock
company, trust, or unincorporated organization.
(Q) "Term" shall have the meaning set forth in
Section 2.
2. Employment.
The Company shall employ the Executive and the Executive shall
enter the employ of the Company, for the period set forth in this Section 2, in
the position set forth in Section 3 and upon the other terms and conditions
herein provided. The term of employment under this Agreement (the "Term") shall
be for the period beginning on the effective date of this Agreement and ending
on the date twenty-six months from the effective date of this Agreement unless
earlier terminated as provided in Section 5. In the event that either party
intends to allow this Agreement to expire at the end of the twenty-six month
period without renewal or extension hereof, then such party shall provide notice
to the other at least six months prior to the expiration date hereof.
3. Position and Duties.
(A) The Executive shall serve as a President and
General Manager of the Company's Xxxxxx Business Unit with such customary
responsibilities, duties and authority as may from time to time be assigned to
the Executive by the Board. The Executive shall devote substantially all his
working time and efforts to the business and affairs of the Company. The
Executive's principal place of employment shall be at the Company's offices in
Milford, Connecticut, but the Executive shall travel as reasonably required by
his position.
(B) If elected or appointed thereto, and only for the
duration of such elected term or appointment, the Executive shall serve as a
director of the Company and any of its subsidiaries and/or in one or more
executive offices of any of such subsidiaries, provided that the Executive is
indemnified for serving in any and all such capacities on a basis consistent
with that provided by the Company to other directors of the Company or similarly
situated executive officers of any such subsidiaries. The Executive shall have
the right to decline to serve as director and the right to resign from such
position at any time.
4. Compensation and Related Matters.
(A) Annual Base Salary. During the Term the Executive
shall receive a base salary at a rate of $200,000 per annum, subject to increase
as determined by the Compensation Committee ("Annual Base Salary").
(B) Bonus. For each Contract Year, the Executive
shall be entitled to receive a bonus of 40% of the Annual Base Salary for such
Contract Year if Executive achieves the performance goals set forth in a plan
for the Executive for such Contract Year. Such plan
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will be consistent with the overall plans and objectives for the Company and
will contain financial, employee retention and business development targets as
mutually agreed upon by the Executive and the Company. At the sole discretion of
the Board or Compensation Committee, the Executive may receive a bonus up to 80%
of the Annual Base Salary for such Contract Year.
(C) Benefits. The Executive shall be entitled to
participate in the other employee benefit plans, programs and arrangements of
the Company (including 20 days of vacation plus holidays) now in effect which
are applicable to the senior officers of the Company, subject to and on a basis
consistent with the terms, conditions and overall administration thereof.
(D) Expenses. The Company shall reimburse the
Executive for all reasonable travel and other business expenses incurred by him
in the performance of his duties to the Company, in accordance with the
Company's documentation and other policies with respect thereto.
5. Termination. The Executive's employment hereunder may be
terminated by the Company or the Executive, as applicable, without any breach of
this Agreement only under the following circumstances:
(A) Circumstances.
(I) Death. The Executive's employment
hereunder shall terminate upon his death.
(II) Disability. If the Company reasonably
determines in good faith that the Executive has incurred a Disability,
the Company may give the Executive written notice of its intention to
terminate the Executive's employment. In such event, the Executive's
employment with the Company shall terminate effective on the 30th day
after receipt of such notice by the Executive, provided that within the
30 days after such receipt, the Executive shall not have returned to
full-time performance of his duties. The Executive shall continue to
receive his Annual Base Salary until the Date of Termination.
(III) Termination for Cause. The Company
may terminate the Executive's employment hereunder for Cause.
(IV) Termination without Cause. The Company
may terminate the Executive's employment hereunder without Cause.
(V) Resignation for Good Reason. The
Executive may terminate his employment for Good Reason.
(VI) Termination without Good Reason. The
Executive may resign his employment without Good Reason upon 60 days
written notice to the Company.
(B) Notice of Termination. Any termination of the
Executive's employment by the Company or by the Executive under this Section 5
(other than termination
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pursuant to paragraph (a)(i)) shall be communicated by a written notice to the
other party hereto indicating the specific termination provision in this
Agreement relied upon, setting forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated, and specifying a Date of
Termination which, except in the case of termination for Cause, shall be at
least fourteen days (or 60 days in the case of Termination without Good Reason
by the Executive) following the date of such notice (a "Notice of Termination").
6. Severance Payments.
(A) Termination without Cause or Resignation for Good
Reason: If the Company terminates the Executive's employment without Cause
(pursuant to Section 5(a)(iv) or the Executive terminates his employment by
resigning for Good Reason (pursuant to Section 5(a)(v)), the Company shall:
(I) pay to the Executive, in accordance
with its regular payroll practice, an amount equal to the Annual Base
Salary provided herein that the Executive would have been entitled to
receive had he continued his employment hereunder for the remainder of
the Term; and
(II) pay to the Executive a prorated amount
of bonus based on the Company's year-to-date performance in relation to
the performance targets set by the Board; and
(III) continue for the remainder of the
Term the Executive's coverage under all Company benefit plans and
programs in which the Executive was entitled to participate immediately
prior to the Date of Termination, to the extent permitted thereunder.
In the event that the Executive's participation in any such plan or
program is not permitted, the Company shall arrange to provide the
Executive with benefits substantially similar to those which the
Executive would otherwise have been entitled to receive under such
plans and programs.
(B) Survival. The expiration or termination of the
Term shall not impair the rights or obligations of any party hereto which shall
have accrued hereunder prior to such expiration.
7. Competition.
(A) The Executive hereby agrees, in consideration of
his employment hereunder and in view of the confidential position to be held by
the Executive hereunder, that during the Term and during the 12 month period
beginning on the Date of Termination, the Executive will not directly or
indirectly, by or for himself, or as the agent of another, or through others as
an agent,
(I) in any way solicit or induce or attempt
to solicit or induce any employee, officer, representative, consultant,
or other agent of the Company (whether such person is presently
employed by the Company or may hereinafter be so employed),
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to leave the Company's employ or otherwise interfere with the
employment relationship between any such person and the Company;
provided, however, that if (i) the Company breaches its payment
obligation with respect to the Note, and (ii) as a result thereof, the
Executive (A) exercises his right to terminate his employment hereunder
for Good Reason and (B) obtains as a result of a default under the Note
by the Company the assets of Xxxxxxx that are sold to the Company and
that are used to secure the Note, then the Executive shall be free to
communicate with or solicit former employees of Xxxxxxx for purposes of
becoming employed by Xxxxxxx and providing the types of services or
products that were provided by Xxxxxxx prior to the sale of such assets
to the Company;
(II) take any action to purchase or obtain
goods or services, from any of the Company's proprietary suppliers or
other supplier with whom the Company has developed an exclusive
relationship; or
(III) in any way solicit, or attempt to
divert, take away or call on, any customers of the Company; provided,
however, that if (i) the Company breaches its payment obligation with
respect to the Note, and (ii) as a result thereof, the Executive (A)
exercises his right to terminate his employment hereunder for Good
Reason and (B) obtains as a result of a default under the Note by the
Company the assets of Xxxxxxx that are sold to the Company and that are
used to secure the Note, then the Executive shall be free to contact or
solicit former customers of Xxxxxxx for purposes of providing the types
of services or products that were provided by Xxxxxxx prior to the sale
of such assets to the Company.
(B) The Executive shall not, at any time during the
Term, or (if his employment was terminated by the Executive without Good Reason
or by the Company for Cause) during the 12 month period following the Date of
Termination, without the prior written consent of the Board, directly or
indirectly engage in, or have any interest in, or manage or operate (i) any
person, firm, corporation, partnership or business (whether as director,
officer, employee, agent, representative, partner, security holder, consultant
or otherwise) that engages in the application services provider business
wherever located at the date of termination, or (ii) any of the companies listed
on Schedule A; provided, however, that the Executive shall be permitted to
acquire a stock interest in such a corporation provided such stock is publicly
traded and the stock so acquired is not more than five percent (5%) of the
outstanding shares of such corporation.
(C) In the event the terms of this Section 7 shall be
determined by any court of competent jurisdiction to be unenforceable by reason
of its extending for too great a period of time or over too great a geographical
area or by reason of its being too extensive in any other respect, it will be
interpreted to extend only over the maximum period of time for which it may be
enforceable, and/or over the maximum geographical area as to which it may be
enforceable and/or to the maximum extent in all other respects as to which it
may be enforceable, all as determined by such court in such action.
8. Nondisclosure of Proprietary Information.
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(A) Except as required in the faithful performance of
the Executive's duties hereunder or pursuant to subsection (c), the Executive
shall, in perpetuity, maintain in confidence and shall not directly, indirectly
or otherwise, use, disseminate, disclose or publish, or use for his benefit or
the benefit of any person, firm, corporation or other entity any confidential or
proprietary information or trade secrets of or relating to the Company,
including, without limitation, information with respect to the Company's
operations, processes, products, inventions, business practices, finances,
principals, vendors, suppliers, customers, potential customers, marketing
methods, costs, prices, contractual relationships, regulatory status,
compensation paid to employees or other terms of employment, or deliver to any
person, firm, corporation or other entity any document, record, notebook,
computer program or similar repository of or containing any such confidential or
proprietary information or trade secrets. The parties hereby stipulate and agree
that as between them the foregoing matters are important, material and
confidential proprietary information and trade secrets and affect the successful
conduct of the businesses of the Company (and any successor or assignee of the
Company).
(B) Upon termination of the Executive's employment
with Company for any reason and upon the Company's request, the Executive will
promptly deliver to the Company all correspondence, drawings, manuals, letters,
notes, notebooks, reports, programs, plans, proposals, financial documents, or
any other documents concerning the Company's customers, business plans,
marketing strategies, products or processes and/or which contain proprietary
information or trade secrets.
(C) The Executive may respond to a lawful and valid
subpoena or other legal process but shall give the Company the earliest possible
notice thereof, shall, as much in advance of the return date as possible, make
available to the Company and its counsel the documents and other information
sought and shall assist such counsel in resisting or otherwise responding to
such process.
9. Injunctive Relief. It is recognized and acknowledged by the
Executive that a breach of the covenants contained in Sections 7 and 8 will
cause irreparable damage to Company and its goodwill, the exact amount of which
will be difficult or impossible to ascertain, and that the remedies at law for
any such breach will be inadequate. Accordingly, the Executive agrees that in
the event of a breach of any of the covenants contained in Sections 7 and 8, in
addition to any other remedy which may be available at law or in equity, the
Company will be entitled to specific performance and injunctive relief.
10. Binding on Successors. This Agreement shall be binding
upon and inure to the benefit of the Company, the Executive and their respective
successors, assigns, personnel and legal representatives, executors,
administrators, heirs, distributees, devisees, and legatees, as applicable. This
Agreement may not be assigned without the consent of the other party.
11. Governing Law. This Agreement shall be governed,
construed, interpreted and enforced in accordance with the substantive laws of
the State of New York.
12. Validity. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain in
full force and effect.
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13. Notices. Any notice, request, claim, demand, document and
other communication hereunder to any party shall be effective upon receipt (or
refusal of receipt) and shall be in writing and delivered personally or sent by
telex, telecopy, or certified or registered mail, postage prepaid, as follows:
(A) If to the Company:
USinternetworking, Inc.
One USi Plaza
000 Xxxxxxx Xxxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Attn: Chief Executive Officer
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
(B) If to the Executive, to him at the address set
forth below under his signature;
or at any other address as any party shall have specified by notice in writing
to the other parties.
14. Counterparts. 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 Agreement.
15. Entire Agreement. The terms of this Agreement are intended
by the parties to be the final expression of their agreement with respect to the
employment of the Executive by the Company and may not be contradicted by
evidence of any prior or contemporaneous agreement. The parties further intend
that this Agreement shall constitute the complete and exclusive statement of its
terms and that no extrinsic evidence whatsoever may be introduced in any
judicial, administrative, or other legal proceeding to vary the terms of this
Agreement.
16. Amendments; Waivers. This Agreement may not be modified,
amended, or terminated except by an instrument in writing, signed by the
Executive and the Chairman of the Board. By an instrument in writing similarly
executed, the Executive or the Company may waive compliance by the other party
or parties with any provision of this Agreement that such other party was or is
obligated to comply with or perform, provided, however, that such waiver shall
not operate as a waiver of, or estoppel with respect to, any other or subsequent
failure. No failure to exercise and no delay in exercising any right, remedy, or
power hereunder preclude any other or further exercise of any other right,
remedy, or power provided herein or by law or in equity.
17. No Inconsistent Actions. The parties hereto shall not
voluntarily undertake or fail to undertake any action or course of action
inconsistent with the provisions or essential intent of this Agreement.
Furthermore, it is the intent of the parties hereto to act in a fair and
reasonable manner with respect to the interpretation and application of the
provisions of this Agreement.
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18. Arbitration. Any dispute or controversy arising under or
in connection with this Agreement shall be settled exclusively by arbitration,
conducted before a single arbitrator in the metropolitan area in which the
Executive is then based (or was last based during the Term if the Executive's
employment has been terminated) in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that the
Company shall be entitled to seek a restraining order or injunction in any court
of competent jurisdiction to prevent any continuation of any violation of the
provisions of Sections 7 or 8 of the Employment Agreement, and provided further
that the Executive shall be entitled to seek specific performance of his right
to be paid and/or damages until the Date of Termination during the pendency of
any dispute or controversy arising under or in connection with this Agreement.
The fees and expense of the arbitrator shall be borne by the Company. If the
Company shall terminate the Executive's employment pursuant to Section 1(c)(i)
of this Agreement, the Company shall submit to immediate and expedited
arbitration on the issue of whether such termination was proper. The Executive
may waive discovery or motion practice at the outset of such arbitration, in
which case the Company shall waive discovery or motion practice to the same
extent as waived by the Executive. Each party shall comply with any discovery
requests of the other party within seven (7) days of such request, as reasonably
possible. The Company further waives the right to make any judicial motion to
stay arbitration.
19. Attorney's Fees. In the event of any arbitration or
litigation arising under this Agreement, the prevailing party shall be entitled
to recover his or its reasonable attorney's fees from the other party.
IN WITNESS WHEREOF, the parties have executed this Agreement
on the date and year first above written.
THE COMPANY:
USINTERNETWORKING, INC.
By:------------------------------
Name:
THE EXECUTIVE:
By:------------------------------
Xxxxx X. Xxxxxxx
Address:
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Schedule A
Competitors
PeopleSoft
Siebel Systems
JDEdwards
SAP
Baan
Oracle
Quest
AboveNet
DIGEX
GTEinternetworking
Interliant
Exodus
GlobalCenter
WorldCom
CIBER
SMS
FutureLink
CriticalPath
DigitalIsland
Interpath
Asera
Agillion
