EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This Agreement, dated as of August 4, 2000, is made and entered into by
and between Avanade Inc., a corporation organized under the laws of the State of
Delaware (the "Company"), and Xxxxxxxx X. Xxxx ("Employee"). For the definitions
of certain terms used in this Agreement, see Section 7 below.
The Company and Employee agree as follows:
SECTION 1. EMPLOYMENT
1.1 The Company hereby employs Employee, and Employee hereby accepts
employment, as an employee of the Company for the Term (as defined in Section
3.1), subject to and in accordance with the provisions of this Agreement.
1.2 Employee will report to the Board of Directors of the Company (the
"Board") or its designee. From the date of this Agreement through its
termination, Employee will serve in such positions as directed by the Board.
1.3 During the Term, Employee will devote his best efforts, special
expertise and full business time and attention to the Company's business to the
exclusion of all other employment, engagements, consulting or other business
activities, unless otherwise approved in writing by the Board or the President.
Subject to direction of the Board, Employee will have such duties,
responsibilities, powers and authority that are prescribed by the Board, the
President or the bylaws of the Company.
SECTION 2. COMPENSATION
2.1 From the date of this Agreement until otherwise directed by the Board,
the Company will pay Employee a base salary at the annual rate of $500,000
prorated on a daily basis for any period less than a full year. Unless otherwise
agreed upon by the parties, the Company will pay Employee's base salary accrued
in arrears twice monthly, subject to federal income tax and other applicable
withholding.
2.2 In addition to Employee's base salary under Section 2.1, the Company
will pay Employee such bonuses and other incentive compensation as may be
determined from time to time by the Board. The Employee is initially eligible
for a cash bonus with a target of 40% of base salary, subject to the sole and
complete discretion of the Compensation Committee of the Board.
2.3 The Company will grant Employee shares of the Company's common stock
and options to purchase shares of the Company's common stock as set forth in
this Section
EMPLOYMENT AGREEMENT
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2.3 The Company will grant Employee shares of the Company's common stock
and options to purchase shares of the Company's common stock as set forth in
this Section 2.3. Employee's stock and option grants will be subject in all
cases to Board or Compensation Committee approval, and subject to the
definitions and other terms and conditions of the Company's 2000 Stock Incentive
Plan (as the same may be amended from time to time, the "SIP") and Employee's
stock option agreement.
(a) A grant of 750,000 shares of common stock of the Company (the
"Grant Shares") at a fair market valuation to be determined by
the Board on the date the Board makes the grant and subject to
the terms and conditions set forth by the Board in a grant
letter to accompany the Grant Shares.
(b) An option to purchase 937,500 shares of the Company's common
stock at a price equal to the fair market value of the common
stock on the date the Board makes the grant. This option is
subject to a vesting schedule of 25% at the end of year 1 and
1/48th every month thereafter (a four-year vesting schedule).
(c) An option to purchase 312,500 shares of the Company's common
stock at a price equal to the fair market value of the common
stock on the date the Board makes the grant. This option is
subject to a vesting schedule of 25% at the end of year 2 and
1/48th every month thereafter (a five-year vesting schedule).
(d) The stock grant, the options and any shares acquired upon
exercise of the options will not be transferable or assignable
until the earliest of a qualified IPO of the Company, July 1,
2005, or in the event of certain corporate transactions (as
defined in the SIP, the stock option agreements or the grant
letter accompanying the Grant Shares).
(e) The options will be for a term of ten (10) years, subject to
earlier termination in the event of any termination of
Employee's employment and certain other events as provided for
in the SIP or the stock option agreement.
(f) If your employment terminates prior to a qualified IPO of the
Company, July 1, 2005, or certain corporate transactions (as
defined in the SIP or the stock option agreements), other than
for death or disability, then all of your options will
terminate regardless of whether they are vested or unvested,
and any shares acquired upon exercise of an option will be
subject to repurchase by the Company at the exercise price
paid.
EMPLOYMENT AGREEMENT
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(g) Your stock option agreement will provide that vesting will be
accelerated one-hundred percent (100%) in the event of certain
corporate transactions (excluding, for this purpose,
acquisitions of control by existing Company shareholders),
except that such acceleration will not occur if it would
prevent the corporate transaction from otherwise qualifying as
a pooling of interests for financial accounting purposes.
2.4 Upon Employee's receipt of the Grant Shares, the Company will loan
Employee the amount of Employee's income and payroll tax liability arising from
the receipt of the Grant Shares, which loan will be made pursuant to a
full-recourse promissory note in the form of Exhibit A hereto (the "Note"). The
Note shall provide for interest at the applicable federal rate on the date of
the execution of the Note, and the principal amount payable under the Note shall
be amortized as follows: 25% after the first year, and 2.0833% (1/48th) per
month thereafter; corresponding interest payments will be made at the time of
the principal payments. The Note will be secured by the shares of stock received
under Section 2.3(a) pursuant to the pledge agreement attached hereto as Exhibit
B.
(a) During the term of Employee's employment with the Company,
immediately prior to the due date of any payment of principal or interest
under the Note, the Company will pay to Employee a cash bonus such that,
after setting aside an amount equal to Employee's income tax liability on
the cash bonus, Employee is left with an amount equal to the loan payment
then owed to the Company. The Company's obligations under this Section
2.4(a) shall terminate as of the date of termination of Employee's
employment, and any bonus amounts owed by the Company with respect to the
first loan payment due following the date of termination shall be prorated
through the date of termination.
(b) For purposes of calculating Employee's income tax liability
under this Section 2.4, Employee will be deemed to be subject to taxation
at the highest marginal income tax rates imposed on individuals under
federal and any applicable state tax laws.
2.5 Termination of Employment
(a) Upon the termination of Employee's employment by the Company for
Cause prior to the earlier of (i) a qualified IPO or (ii) July 1, 2005
(such earlier date, a "Share Trigger Event"), all of the Grant Shares
shall be returned to the Company in exchange for the cancellation of all
amounts owing under the Note and the corresponding loan, and neither the
Company nor the Employee shall owe any further amounts to the other with
respect to the Grant Shares, such loan or the Note.
EMPLOYMENT AGREEMENT
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(b) Upon the termination of Employee's employment, other than by the
Company for Cause prior to a Share Trigger Event, the Company shall have
the right, at its election, to purchase from Employee, and Employee shall
have the right, at his or her election, to cause the Company to purchase,
the Grant Shares at a purchase price equal to their fair market value.
Either party may elect to exercise his, her or its right under this
Section 2.5(b) by a written notice to the other party. Upon receipt of
such written notice by either party, the loan underlying the Note shall
accelerate and the principal amount of the Note plus any accrued unpaid
interest shall be immediately due and payable in full by Employee. If the
Company and the Employee are unable to determine the fair market value of
the Grant Shares within 15 business days of the termination of Employee's
employment, then each party shall retain an investment banking firm of
national reputation to provide a determination of such valuation within 20
business days after the expiration of such 15 business day period. Each of
these investment banks shall be directed to consider the value a willing
buyer would pay a willing seller for the Company's shares as on an ongoing
business entity, without any discount for minority interests but
considering all other known facts, events and circumstances as then
existing relevant to the value of such interest. In the event that the
difference between the valuations provided by the two investment banking
firms to the parties (which amount shall be referred to as the "Valuation
Difference") does not exceed twenty percent (20%) of the larger of the two
valuations, the "fair market value" for purposes hereof shall be the
average of the two valuations. If the Valuation Difference exceeds twenty
percent (20%) of the larger of the two valuations, the two investment
banking firms shall select a third investment banking firm of national
reputation to calculate the valuation. If the difference between the
valuation determined by the third investment bank (the "Benchmark") and
the lower of the two initial valuations is less than one-third of the
Valuation Difference, "Fair Market Value" for purposes hereof shall be the
average of the Benchmark and the lower of the two initial valuations. If
the difference between the Benchmark and the higher of the two initial
valuations is less than one-third of the Valuation Difference, "Fair
Market Value" for purposes of this Section 2.5(b) shall be the average of
the Benchmark and the higher of the two initial valuations. In the event
fair market value is not determined by either of the previous two
sentences, the fair market value for purposes of this Section 2.5(b) shall
be the average of the three valuations. Notwithstanding the foregoing, in
no event shall "fair market value" as determined hereunder be greater than
the larger of the two initial valuations, or less than the lower of the
two initial valuations. The fees and expenses of the initial investment
banks selected by each of Employee and the Company in accordance with this
provision shall be borne by the party selecting such bank. The fees and
expenses of the third investment bank, if any, selected in accordance with
this provision shall be shared equally by Employee and the Company.
EMPLOYMENT AGREEMENT
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(c) Upon the termination of Employee's employment after a Share
Trigger Event, the loan shall accelerate and all amounts owed under the
Note shall be immediately due and payable in full by Employee.
2.6 During the Term, the Company will make available to Employee such
additional benefits (such as medical, dental, disability and life insurance;
vacation, leave and holidays) as the Company may make available to its other
employees, all subject to any terms, conditions and other requirements that may
be generally applicable to other executive employees of the Company or
prescribed by the Board.
2.7 Except as otherwise provided in Section 3.2 or required by applicable
law, all compensation and benefits set forth in Section 2 will cease accruing
upon termination of the Term.
2.8 As a condition to Employee's employment with the Company, Employee
shall enter into a stockholders' agreement, in substantially the form as is
attached hereto as Exhibit C (the "Stockholders' Agreement"), providing that
prior to a Qualified IPO (as that term is defined in the SEP), Employee agrees
to vote all his or her Grant Shares according to the terms thereof, and granting
certain drag-along and tag-along rights.
SECTION 3. TERM AND TERMINATION
3.1 Employee's employment with the Company is "at will" and may be
terminated by the Company or Employee at any time. Accordingly, the Term will
commence as of the date of this Agreement and will terminate upon the first of
the following to occur:
(a) either party gives the other notice of termination;
(b) the Company gives Employee notice of termination for
Dissatisfactory Performance;
(c) the Company gives Employee notice of termination for Cause;
(d) the Company gives Employee notice of termination in the event of
any disability of Employee, whether physical or mental, that prevents
Employee from satisfactorily performing his or her duties under this
Agreement; or
(e) the death of Employee.
3.2 If the Term terminates pursuant to Section 3.1(a), (b), (d), or (e),
then the Company will either
(a) pay to Employee severance payments equal to Employee's
then-current base salary under Section 2.1 for a period of
time from the end of the
EMPLOYMENT AGREEMENT
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Term until the earlier of (i) 12 months after the end of the
Term, (ii) the date upon which Employee commences employment
with any third party, or (iii) violation by Employee of the
Confidential Information, Inventions, and Noncompetition
Agreement; and
(b) accelerate the vesting and exercisability of all stock options
held by Employee under the SIP so that such options will
automatically become fully vested and exercisable with respect
to that portion of the unvested options that would have become
fully vested and exercisable in the next 12 months after the
need of the Term (for purposes of this Section 3.2(b), all
options held by Employee that are vested on the date of
termination of Employee's employment, including options or
unvested shares whose vesting is accelerated pursuant to this
Section 3.2(b), will not be subject to forfeiture under
Section 17 of the SIP); if Employee has acquired or acquires
any shares upon exercise of such accelerated options (the
"Options Shares"), then beginning six months and one day after
Employee acquired the Option Shares, Employee and the Company
will have the same rights of repurchase and sale with respect
to the Option Shares that are set forth in Section 2.5(b) of
this Agreement with respect to the Grant Shares; or
(c) release Employee's obligations under Section 3.1 of the
Confidential Information, Inventions, and Noncompetition
Agreement for any period after the end of the Term.
3.3 Employee will not be entitled to any other severance payments,
compensation, or release of any obligation under the Confidential Information,
Invention, and Noncompetition Agreement upon termination of employment or in any
other circumstance. Unless otherwise agreed upon by the parties, any severance
payments under Section 3.2 will be payable in installments twice monthly in the
same manner as Employee's base salary is payable to Employee during the Term
under Section 2.1, all subject to federal income tax and any other applicable
withholding.
SECTION 4. NO CONFLICTING OBLIGATIONS
4.1 Employee represents and warrants that Employee's execution, delivery
and performance of this Agreement and the performance of Employee's other
obligations and duties to the Company will not cause any breach, default or
violation under any other employment, nondisclosure, confidentiality, consulting
or other agreement to which Employee is a party or by which Employee may be
bound.
4.2 Employee will not use in performance of Employee's work for the
Company or disclose to the Company any trade secret or other confidential or
proprietary information
EMPLOYMENT AGREEMENT
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of any prior employer or other Person if and to the extent that such use or
disclosure may cause a breach, default or violation under any obligation or duty
that Employee owes to such other Person (e.g., under any agreement or applicable
law). Employee represents and warrants that Employee's compliance with this
Section 4 will not prohibit, restrict or impair the performance of Employee's
work, obligations and duties to the Company.
SECTION 5. MISCELLANEOUS
5.1 This Agreement will be enforced to the fullest extent permitted by
applicable law. If for any reason any provision of this Agreement is held to be
invalid or unenforceable to any extent, then
(a) such provision will be interpreted, construed or reformed to the
extent reasonably required to render the same valid, enforceable and
consistent with the original intent underlying such provision;
(b) such provision will be void to the extent it is held to be
invalid or unenforceable;
(c) such provision will remain in effect to the extent that it is
not invalid or unenforceable; and
(d) such invalidity or unenforceability will not affect any other
provision of this Agreement or any other agreement.
If the invalidity or unenforceability is due to the unreasonableness of the
scope or duration of the provision, the provision will remain effective for such
scope and duration as may be determined to be reasonable.
5.2 Employee will not assign this Agreement or any of his rights or
obligations hereunder, either during or after the Term, without the prior
written consent of the Company. Subject to the foregoing, this Agreement will be
enforceable by and binding upon each of the parties and their respective
successors and assigns.
5.3 The failure of either party to insist upon or enforce strict
performance of any of the provisions of this Agreement or to exercise any of its
rights or remedies under this Agreement will not be construed as a waiver or a
relinquishment to any extent of such party's rights to assert or rely upon any
such provision, right or remedy in that or any other instance; rather, the same
will be and remain in full force and effect.
5.4 This Agreement will be interpreted, construed and enforced in all
respects in accordance with the laws of the State of Washington. Employee hereby
irrevocably consents to personal jurisdiction and venue in the state and federal
courts located in the State of Washington, King County, in connection with any
action to interpret or enforce, or otherwise
EMPLOYMENT AGREEMENT
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arising out of or relating to, this Agreement. Employee will not bring any
action to interpret or enforce, or otherwise arising out of or relating to, this
Agreement, other than in the courts specified in this Section 5.4.
5.5 Any notice required or permitted under this Agreement will be given in
writing and will be deemed effectively given upon personal delivery or upon
delivery by confirmed fax to the party to be notified, two (2) business days
after deposit with recognized overnight courier service, or three (3) business
days after deposit with the United States Post Office, by registered or
certified mail, postage prepaid and addressed to the party to be notified at the
following address, or at such other address as such party may designate by
notice under this paragraph 5.5:
Company: Employee:
Xxxxx Xxxx Address Redacted
Chief Executive Officer
Avanade Inc.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx, XX 00000
5.6 Employee will sign concurrently with this Agreement the attached
Confidential Information, Inventions, and Noncompetition Agreement.
5.7 This Agreement and the Confidentiality Agreement set forth the entire
agreement, and supersede any and all prior agreements, of the parties with
regard to Employee's employment with the Company, with the exception of the
attached Confidential Information, Inventions, and Noncompetition Agreement,
which shall constitute a material term of, and is hereby incorporated into, this
Agreement. This Agreement may not be amended, except by a writing signed by both
parties.
SECTION 6. ARBITRATION OF DISPUTES
6.1 Any dispute among the parties arising out of or relating to Employee's
employment relationship with the Company, or to the termination of that
relationship, will be settled by final and binding arbitration as set forth in
this Agreement. The following are examples of allegations, claims or disputes
that may be arbitrated under this Agreement: constructive discharge or wrongful
discharge under statutory or common law; torts or breaches of contract;
employment discrimination or retaliation in violation of any applicable federal,
state or local statute, ordinance or regulation; violation of any other
applicable statute, ordinance or regulation affecting Employee's employment
relationship with the
EMPLOYMENT AGREEMENT
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Company; or any other claims or disputes that arise out of or relate to the
termination of Employee's employment relationship with the Company. However,
nothing in this Agreement will require arbitration of any statutory claim that
Employee may have if the applicable law precludes entering into a pre-dispute
agreement for binding arbitration of that claim. Further, either party may
commence litigation within thirty (30) days prior to the date after which the
commencement of litigation could be barred by any applicable statute of
limitations or other law, rule, regulation or order of similar import or in
order to request injunctive or other equitable relief necessary to prevent
irreparable harm or any breach or default under, or any threat of any breach or
default under the Confidential information, Inventions, and Noncompetition
Agreement dated [ILLEGIBLE] by Employee. In such event, the parties will (except
as may be prohibited by judicial order) nevertheless continue to follow the
procedures set forth in this Section 6.
6.2 The arbitration will be conducted under the National Rules for the
Resolution of Employment Disputes published by the AAA that are in effect at the
time the arbitration notice is given, to the extent that those rules do not
conflict with any provision of this Agreement. A copy of the current rules may
be obtained from the AAA.
6.3 Either party may initiate the procedures under this Section 6 by
giving the other party written notice of the dispute and invoking the provisions
of this Section 6. If, within thirty (30) days after such notification, the
parties cannot resolve the dispute, then either party may submit a written
demand for arbitration to the other party and to the AAA regional office serving
Seattle, which will administer the arbitration. The notice must be received
within the applicable statute of limitations if the dispute involves a statutory
claim. The written notice will contain a statement setting forth the nature of
the dispute, the dollar amount involved, if any, and the specific remedy sought.
6.4 Upon written demand for arbitration, the parties will attempt to agree
upon a mutually acceptable arbitrator. If they cannot arrive at such an
agreement, either party may request a list of seven (7) labor and employment
arbitrators from the AAA's panel of potential arbitrators. The parties will then
alternatively strike potential arbitrators from such list until one remains.
6.5 The arbitrator will have the authority only to interpret and apply the
applicable provisions of this Agreement, and will not add to, subtract from,
reform or modify any of the provisions of this Agreement.
6.6 The arbitrator will determine what discovery will be allowed,
consistent with the relevant AAA rules and the expedited nature of arbitration.
All discovery allowed will be completed within sixty (60) days of the
arbitration notice unless the parties agree otherwise or the arbitrator grants
an extension for good cause shown.
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6.7 The arbitration will be held in King County, Washington. If the
Company and Employee cannot agree on a specific location or a date and time for
the arbitration hearing, the AAA will set the specific location in King County,
or the hearing date and time, as necessary.
6.8 The Company and Employee each have the right to be represented during
the arbitration process by legal counsel, or by another representative of its
own choosing. Unless applicable law provides otherwise, each party will bear any
and all costs associated with its representation. The arbitrator may compel the
attendance of witnesses in accordance with RCW 7.04.110 and the relevant AAA
rules.
6.9 Each party will bear the costs of preparing and presenting its case in
the arbitration (e.g., costs of its witnesses and attorneys). All other costs of
the arbitration (e.g., any fees payable to the AAA, the arbitrator, and court
reporter, and the costs of any hearing room or facilities) will be divided
equally between the parties.
6.10 The arbitrator's decision will be final and binding on the parties
and their respective successors and assigns; provided, however, that the
arbitrator's decision will be subject to judicial review, and the reviewing
court may vacate, modify or correct the arbitrator's decision as appropriate,
(i) where the arbitrator's findings of fact are not supported by substantial
evidence, (ii) where the arbitrator's conclusions of law are clearly erroneous
or (iii) as otherwise provided by applicable law. The arbitrator will have the
authority to grant temporary or injunctive relief, specific performance, damages
and such other relief as may be appropriate in the circumstances. Judgment upon
the arbitration award may be entered in any court having jurisdiction.
SECTION 7. DEFINITIONS
Whenever used in this Agreement with initial letters capitalized, the
following terms will have the following specified meanings:
"AAA" means the American Arbitration Association, its successor or another
arbitration service agreed upon by the parties.
"BOARD" means the Company's board of directors.
"CAUSE" means (a) willful misconduct on the part of Employee that has a
materially adverse effect on the Company and its Subsidiaries, taken as a whole,
(b) Employee's engaging in conduct that could reasonably result in his or her
conviction of a felony or a crime against the Company or which would materially
compromise the Company's reputation, as determined in good faith by the Board,
or (c) unreasonable refusal by Employee to perform the duties and
responsibilities of his or her position in any material respect and the failure
of Employee to remedy such nonperformance within 30 days after receipt of
written
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notice from the Company. No action, or failure to act, will be considered
"willful" if it is done by Employee in good faith and with reasonable belief
that the action or omission was in the best interests of the Company.
"COMPETING BUSINESS" means any business whose commercial efforts involve
the development, marketing, sale, provision, or distribution of products or
services in competition with products or services developed, under development,
marketed, sold, provided or distributed by the Company.
"CONFIDENTIALITY AGREEMENT" means the attached Confidential Information,
Invention, and Noncompetition Agreement.
"DISSATISFACTORY PERFORMANCE" means dissatisfactory performance other than
Cause. Dissatisfactory Performance may include, without limitation, the failure
of the Company to achieve revenue, profit, growth, customer satisfaction or
other goals established by the Board.
"PERSON" means any corporation, partnership, trust, association,
governmental authority, educational institution, individual or other entity.
"QUALIFIED PUBLIC OFFERING" shall have the meaning set forth in the
Avanade Inc. 2000 Stock Incentive Plan.
"TERM" means the term of Employee's employment as an employee of the
Company pursuant to this Agreement.
* * *
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Employee hereby acknowledges that he or she has carefully read this
Agreement, understands its terms and that (i) the same are necessary for the
reasonable and proper protection of the Company's business; (ii) the Company has
been induced to enter into and continue its relationship with Employee in
reliance upon Employee's compliance with the provisions of this Agreement; (iii)
every provision of this Agreement is reasonable with respect to its scope and
duration; (iv) Employee has had ample opportunity to discuss this Agreement with
legal counsel of his or her own choosing, and has entered into this Agreement
knowingly and voluntarily, without relying on any promises or representations by
the Company other than those contained in the text of this Agreement; and (v)
Employee has received a copy of this Agreement.
In witness whereof, the parties have duly executed and entered into this
Agreement as of the date first set forth above.
EMPLOYEE: AVANADE INC.:
By: /s/ [ILLEGIBLE]
/s/ Xxxxxxxx X. Xxxx -------------------------------
------------------------------- Its: CFO
Xxxxxxxx X. Xxxx
EMPLOYMENT AGREEMENT
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AMENDMENT #1
Dated February 15, 2002 to
Xxxxxxxx Xxxx Employment Agreement (the "Agreement") dated August 4, 2000
This Amendment to the Xxxxxxxx Xxxx Employment Agreement dated August 4, 2000
(the "Agreement") is made and entered into by and between Avanade Inc., a
corporation organized under the laws of the State of Delaware (the "Company"),
and Xxxxxxxx X. Xxxx ("Employee"). The Amendment is entered into as of the date
last indicated below, and shall be effective from January 18, 2002.
Whereas the Compensation Committee on January 18, 2002 agreed to amend the
Agreement of Employee by changing the severance payment to a lump sum payment
rather than a salary continuation payment; and
Whereas Employee desires this amendment to his Agreement;
Now, Therefore, the parties agree as follows:
1. Section 3.2 (a) is amended as below:
(a) pay to Employee severance payments equal to Employee's then-current
base salary under Section 2.1. Unless otherwise agreed upon by the
parties, any severance payments under this Section 3.2 (a) will be payable
in a lump sum payment subject to federal income tax and any other
applicable withholding; and
2. All capitalized terms in this Amendment shall have the same meaning as
defined in the Agreement.
IN WITNESS WHEREOF, the Parties have entered into this Amendment effective the
date above specified.
Avanade Inc. Xxxxxxxx Xxxx
By (Signature): /s/ Xxxxx Xxxx By (Signature): /s/ Xxxxxxxx Xxxx
---------------------- --------------------
Name (Print): Xxxxx Xxxx Name (Print): Xxxxxxxx Xxxx
Title (Print): CAO & General Counsel Title (Print): CEO
Date signed: March 5, 2002 Date signed: 5 March 2002
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