(e)(5)
May 7, 2000
Xxxx X. Xxxxxx
VP Corporate Development
0000 X. Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Dear Xx. Xxxxxx:
As you know, Verio Inc. ("Verio") is entering into the Agreement and
Plan of Merger among NTT Communications Corporation, Chaser Acquisition, Inc.
("Acquisition Sub") and Verio Inc. dated as of May 7, 2000 (the "Merger
Agreement") pursuant to which it is anticipated that Acquisition Sub will
acquire all the outstanding capital stock of Verio. As you also know, Xxxxx has
offered to continue your current employment after the consummation of the Offer
and the Merger (both as defined in the Merger Agreement). Therefore, in
consideration of such continued employment and the mutual covenants and
agreements contained herein, Xxxxx and you agree as follows:
1. Effective immediately after consummation of the Offer (as defined
in the Merger Agreement), Section 2.5 of the Compensation Protection Agreement
between Verio and you dated April 1, 1998, (the "Protection Agreement") is
amended by adding the following new subsection (f) immediately following
subsection (e) appearing therein:
"(f) Notwithstanding anything contained in this Agreement to the
contrary, no acquisition of the Company's voting securities by, nor
any merger, consolidation or reorganization of the Company with,
any entity (or entities) that directly or indirectly is controlled
by or is under common control with the NTT Communications
Corporation shall constitute a Change in Control."
2. Subsections (i) through (iv) of Section 2.8(a) of the Protection
Agreement are amended in their entirety to read as follows:
"(i) (A) a change in Protected Officer's title, position or
responsibilities (including reporting responsibilities) which
represent a material adverse change from Protected Officer's title,
position or responsibilities as in effect at the execution of the
Agreement and Plan of Merger dated as of May 7, 2000
(the "Merger Agreement") among NTT Communications Corporation
("NTT"), Chaser Acquisition Inc., and the Company; (B) the
assignment to Protected Officer of any material duties or
responsibilities which are significantly inconsistent with
Protected Officer's title, position or responsibilities as in
effect at the execution of the Merger Agreement; or (C) any removal
of Protected Officer from or failure to reappoint or reelect
Protected Officer to any of such offices or positions, except in
connection with the termination of Protected Officer's employment
for Disability, Cause, as a result of Protected Officer's death or
by Protected Officer other than for Good Reason;
(ii) reduction in Protected Officer's base salary to a level below
that in effect at the execution of the Merger Agreement (except to
the extent such reduction is part of a comprehensive reduction in
salary applicable to employees of the Company generally so long as
the reduction applicable to Protected Officer is comparable to the
reduction applied to other senior executives of the Company), or
any failure to pay Protected Officer any compensation or benefits
to which Protected Officer is entitled within five (5) days of the
date due other than an inadvertent failure, administrative error or
on account of events beyond the control of the Company;
(iii) the Company's requiring Protected Officer to be based at any
place outside the farther of a 50-mile radius Protected Officer's
job location and a 50-mile radius of the Protected Officer's
residence prior to the execution of the Merger Agreement, except
for reasonably required travel on the Company's business which is
not materially greater than such travel requirements prior to the
execution of the Merger Agreement, determined without regard to
travel to meet with representatives of Parent (as defined in the
Merger Agreement); or
(iv) the failure by the Company to provide Protected Officer with
compensation and benefits (other than any compensation or benefits
under any stock option, stock purchase or other compensation or
benefit plans, programs or practices payable in or measured by the
value of the Company's common stock) in the aggregate, not
significantly less (in terms of benefit levels and/or reward
opportunities) to those provided under the employee benefit plans,
programs and practices, including,
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but not limited to, the plans listed on Appendix A, in which
Protected Officer was participating at the execution of the Merger
Agreement or which are provided to other similarly situated
executives of the Company, except to the extent such failure is
part of a comprehensive reduction in compensation or benefits
applicable to employees of the Company generally so long as the
reduction applicable to Protected Officer is comparable to the
reduction applied to other senior executives of the Company."
3. Subsection (viii) of Section 2.8(a) of the Protection Agreement is
amended in its entirety to read as follows:
"(viii) the failure of the Company to obtain an agreement,
satisfactory to Protected Officer, from any Successors and Assigns
(as hereinafter defined) to assume and agree to perform this
Agreement, as contemplated by Section 11.1 hereof, provided,
--------
however, that Good Reason shall not include a failure by NTT or any
-------
of its affiliates to assume and perform this Agreement in
connection with the Merger."
4. The following new Section 2.8(d) is added immediately after
Section 2.8(c) of the Protection Agreement:
"(d) For purposes of this Agreement, notwithstanding anything
contained herein to the contrary, neither (i) any change in the
Protected Officer's position or responsibilities that results
primarily from the change in the status of the Company from a
company the common stock of which is registered under the
Securities Act of 1934 and traded on a national securities exchange
or the NASDAQ National Market to a subsidiary of NTT, nor (ii) any
change in the Protected Officer's amount or level of participation
in the retention and incentive plan referred to in Section 6.14(a)
of the Merger Agreement, as compared to the amount or level of
participation in incentive plans of Verio prior to consummation of
the transactions contemplated by the Merger Agreement, shall by
itself or in combination with any other event or events constitute
Good Reason."
5. Subsection (iv) of Section 4.1(b) of the Protection Agreement is
amended in its entirety to read as follows:
"(iv) the restrictions on any outstanding incentive awards
(including restricted stock and granted performance shares or
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units) granted prior to the execution of the Merger Agreement to
Protected Officer under the Company's stock option and other stock
incentive plans or under any other incentive plan or arrangement
shall lapse and such incentive award shall become 100% vested, all
stock options and stock appreciation rights granted prior to the
execution of the Merger Agreement to Protected Officer shall become
immediately exercisable and shall become 100% vested and all
performance units granted prior to the execution of the Merger
Agreement shall become 100% vested."
6. If you are employed by Xxxxx:
(i) thirteen months after the date the Offer (as defined in the
Merger Agreement) is consummated and have been continuously
employed by Xxxxx since the date of this letter agreement, Xxxxx
will pay to you an amount equal to one-half of the Employment Bonus
(as defined below); and
(ii) twenty-five months after the date the Offer (as defined in
the Merger Agreement) is consummated and have then been
continuously employed by Xxxxx since the date of this letter
agreement, Xxxxx will pay to you the remainder of the Employment
Bonus.
You acknowledge and agree that any amounts that may become payable to
you (or your successors) pursuant to the grants made as of the Effective Time
(as defined in the Merger Agreement) under the retention and incentive plans
adopted by Verio pursuant to Section 6.14(a) of the Merger Agreement shall be
reduced by the amounts paid to you pursuant to this paragraph 6.
For purposes of this paragraph 6, the "Employment Bonus" shall mean
(a) two times the sum of:
(i) the amount of your annual base salary in effect immediately
prior to the consummation of the Offer (as defined in the Merger
Agreement), including all amounts of your annual base salary that
are then deferred under the qualified and non-qualified employee
benefit plans of Verio or any other agreement or arrangement; and
(ii) the greater of (i) 100% of the last annual incentive payment
paid or payable to you prior to the consummation of the Offer (as
defined in the Merger Agreement) under Xxxxx's
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cash bonus incentive plan; and (ii) your incentive target for the
fiscal year in which such Offer is consummated.
7. You acknowledge and agree that your continued employment by Xxxxx
after consummation of the Offer (as defined in the Merger Agreement) and your
participation in Xxxxx's incentive and retention programs thereafter shall be
subject to your execution prior to consummation of the Offer of (i) an agreement
to remain employed by Xxxxx immediately after the consummation of the Offer,
(ii) a written covenant not to compete with or solicit employees of Xxxxx and
its affiliates in the United States for a period ending at the later of two
years following the consummation of the Offer and one year after termination of
employment and (iii) an agreement to maintain the confidentiality of
confidential information and data of Verio and its affiliates, each in a form
reasonably satisfactory to NTT and Verio.
8. You acknowledge and agree that prior to consummation of the Offer
you will enter into a Stock Option Deferral Agreement substantially in the form
attached hereto as Exhibit A with respect to each "Company Stock Option" (as
defined in the Merger Agreement) held by you that waives acceleration and
defers vesting of 20% of the unvested options held by you that would otherwise
automatically become vested immediately prior to consummation of the Offer.
9. This letter agreement (and the amendments to the Protection
Agreement contained herein) shall cease to be effective upon the termination of
the Merger Agreement pursuant to its terms.
10. Nothing in this letter agreement entitles you to be employed by
Xxxxx for any specific period of time or otherwise interferes with your status
as an employee at will of Verio.
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Please indicate your acceptance of the terms hereof by executing a
copy of this letter agreement and returning it to the undersigned.
Very truly yours,
/s/ Xxxxxx X. Xxxxxxx
---------------------
Name: Xxxxxx X. Xxxxxxx
Title: Chief Executive Officer
Accepted:
/s/ Xxxx Xxxxxx
---------------
Name: Xxxx Xxxxxx Date: May 7, 2000
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EXHIBIT A
---------
STOCK OPTION DEFERRAL AGREEMENT
This STOCK OPTION DEFERRAL AGREEMENT (this "Agreement"), entered into
by _____________________________ (the "Optionee") and VERIO INC. ("Verio") as of
this ___ day of May, 2000.
WHEREAS, Xxxxx has heretofore granted to Optionee options to purchase
shares of common stock of Verio ("Verio Stock") pursuant to a Stock Option
Agreement dated ________________, 19______ (the "Option Agreement");
WHEREAS, pursuant to the terms of the Option Agreement, the option
evidenced thereby shall become fully vested and exercisable with respect to all
shares of Verio Stock subject thereto upon consummation of the "Offer" as
defined in the Agreement and Plan of Merger among NTT Communications
Corporation, Chaser Acquisition, Inc. and Verio Inc. dated as of May _____, 2000
(the "Merger Agreement");
WHEREAS, the Optionee has agreed that, in return for Xxxxx's promise
to pay to the Optionee certain additional compensation pursuant and subject to
the terms of this Agreement, the vesting and exercisability of such option with
respect to ______ shares of Verio Stock subject thereto shall be deferred; and
WHEREAS, the Optionee and Xxxxx desire to amend the Option Agreement
to reflect such deferral of vesting and exercisability.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged by the parties, the Optionee and Xxxxx
agree as follows:
1. All capitalized terms used but not defined herein shall have the
respective meetings assigned to such terms by the Option Agreement and the Verio
[1998][1997 California] [1996] Stock Incentive Plan, both of which are hereby
incorporated herein by reference.
2. Section 3 of the Option Agreement is amended by adding the
following new subsection (g) immediately following subjection (f) appearing
therein:
"(g) "Retention Shares" means ____ of the Shares subject to this
----------------
Option Agreement."
3. The first sentence of Section 4(a) is amended to read as follows:
"In the event of a Corporate Transaction pursuant to the Agreement and
Plan of Merger among NTT Communications Corporation, Chaser
Acquisition, Inc. and the Company (the "Merger Agreement"), the Option
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automatically shall become vested and exercisable immediately prior to
the effective date of such Corporate Transaction with respect to all
Shares subject hereto other than the Retention Shares, and the
Retention Shares shall be subject to the provisions of Section 4(e)
hereof."
4. The first sentence of Section 4(b) is amended to read as follows:
"In the event of a Change in Control pursuant to the Merger Agreement,
the Option automatically shall become vested and exercisable
immediately prior to the effective date of such Corporate Transaction
with respect to all Shares subject hereto other than the Retention
Shares, and the Retention Shares shall be subject to the provisions of
Section 4(e) hereof."
5. Section 4 is amended by adding the following new subsections (e),
(f) and (g) following subsection (d) appearing therein:
"(e) With respect to the Retention Shares, in the event of a Corporate
Transaction pursuant to the Merger Agreement, the Option shall not
fully vest and be exercisable immediately before such Corporate
Transaction and the Option shall be replaced with a cash incentive
program of the Company that preserves the compensation element of the
Option existing at the time of such Corporate Transaction pursuant to
the Merger Agreement and provides for subsequent payout in accordance
with the vesting schedule provided in the Notice; but for purposes of
Section 6.5(a) of the Merger Agreement become vested and exercisable
with respect to one-half of the Retention Shares thirteen (13) months
after consummation of the "Offer" (as defined in the Merger Agreement)
and with respect to the remainder of the Retention Shares twenty-five
(25) months after such date if, in each case, the Optionee's
continuous status as an Employee has not yet terminated; provided,
--------
however, that for purposes of Section 6.14(a) of the Merger Agreement,
-------
this Option automatically shall become fully vested and exercisable
immediately upon termination of the Optionee's Continuous Status as an
Employee if such Continuous Status as an Employee is terminated by the
Company or Related Entity, as the case may be, without Cause or
voluntarily by the Optionee with Good Reason (as defined below) within
twelve (12) months of such Corporate Transaction.
(f) As used herein, "Good Reason" means the occurrence after a
-----------
Corporate Transaction described in the Merger Agreement of any of the
following events or conditions unless consented to by the Optionee:
(i) (A) a change in Protected Officer's title, position or
responsibilities (including reporting responsibilities) which
represent a material adverse change from Protected Officer's
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title, position or responsibilities as in effect at the execution
of the Agreement and Plan of Merger dated as of May 7, 2000 (the
"Merger Agreement") among NTT Communications Corporation ("NTT"),
Chaser Acquisition Inc., and the Company; (B) the assignment to
Protected Officer of any material duties or responsibilities which
are significantly inconsistent with Protected Officer's title,
position or responsibilities as in effect at the execution of the
Merger Agreement; or (C) any removal of Protected Officer from or
failure to reappoint or reelect Protected Officer to any of such
offices or positions, except in connection with the termination of
Protected Officer's employment for Disability, Cause, as a result
of Protected Officer's death or by Protected Officer other than for
Good Reason;
(ii) reduction in Protected Officer's base salary to a level below
that in effect at the execution of the Merger Agreement (except to
the extent such reduction is part of a comprehensive reduction in
salary applicable to employees of the Company generally so long as
the reduction applicable to Protected Officer is comparable to the
reduction applied to other senior executives of the Company), or
any failure to pay Protected Officer any compensation or benefits
to which Protected Officer is entitled within five (5) days of the
date due other than an inadvertent failure, administrative error or
on account of events beyond the control of the Company;
(iii) the Company's requiring Protected Officer to be based at any
place outside the farther of a 50-mile radius Protected Officer's
job location and a 50-mile radius of the Protected Officer's
residence prior to the execution of the Merger Agreement, except
for reasonably required travel on the Company's business which is
not materially greater than such travel requirements prior to the
execution of the Merger Agreement, determined without regard to
travel to meet with representatives of Parent (as defined in the
Merger Agreement);
(iv) the failure by the Company to provide Protected Officer
with compensation and benefits (other than any compensation or
benefits under any stock option, stock purchase or other
compensation or benefit plans, programs or practices payable in
or measured by the value of the Company's common stock) in the
aggregate, not
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significantly less (in terms of benefit levels and/or reward
opportunities) to those provided under each employee benefit
plan, program and practice, including, but not limited to, the
plans listed on Appendix A, in which Protected Officer was
participating at the execution of the Merger Agreement or which
are provided to other similarly situated executives of the
Company, except to the extent such failure is part of a
comprehensive reduction in compensation or benefits applicable to
employees of the Company generally so long as the reduction
applicable to Protected Officer is comparable to the reduction
applied to other senior executives of the Company;
(v) the insolvency or the filing (by any party, including the
Company) of a petition for bankruptcy of the Company, which
petition is not dismissed within sixty (60) days;
(vi) any material breach by the Company of any provision of this
Agreement;
(vii) any purported termination of Protected Officer's
employment for Cause by the Company which does not comply with
the terms of Section 2.4;
(viii) the failure of the Company to obtain an agreement,
satisfactory to Protected Officer, from any Successors and
Assigns (as hereinafter defined) to assume and agree to perform
this Agreement, as contemplated by Section 11.1 hereof, provided,
--------
however, that Good Reason shall not include a failure by NTT or
-------
any of its affiliates to assume and perform this Agreement; or
(ix) For purposes of this Agreement, notwithstanding anything
contained herein to the contrary, neither (x) any change in the
Protected Officer's position or responsibilities shall include any
such change that results primarily from the change in the status of
the Company from a company the common stock of which is registered
under the Securities Act of 1934 and traded on a national
securities exchange to a subsidiary of NTT, nor (y) any change in
the Protected Officer's amount or level of participation in the
retention and incentive plan referred to in Section 6.14(a) of the
Merger Agreement, as compared to the amount or level of
participation in incentive plans of Verio prior to
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consummation of the transactions contemplated by the Merger
Agreement, shall by itself or in combination with any other event
or events constitute Good Reason."
(g) As used herein, "Cause" means the termination of the Optionee's
-----
Continuous Status as an Employee for "Cause" as such term is defined
in the Optionee's employment agreement, or in the absence of such
definition, then as in the determination of the Company, the Optionee:
(i) acts in bad faith and to the detriment of the Company; (ii)
refuses or fails to act in substantial accordance with any material
direction or order of the Company; (iii) exhibits in regard to his
employment unfitness or unavailability for service, unsatisfactory
performance, disregard of Company rules or policies, or misconduct,
but not Disability; (iv) exhibits dishonesty, habitual neglect, or
incompetence, but not Disability; or (v) is convicted of a crime
involving dishonesty, breach of trust, or physical or emotional harm
to any person.
6. All other provisions of the Option Agreement shall remain in full
force and effect.
7. (a) If the Optionee is employed by Verio or its affiliates
thirteen (13) months after the date of the Offer (as defined in the Merger
Agreement) and has been continuously so employed since such date, then Verio
shall pay to the Optionee a bonus equal to fifty percent (50%) of the "Option
Consideration" (as defined in the Merger Agreement) payable to the Optionee on
such date.
(b) If the Optionee is employed by Verio or its affiliates twenty
five (25) months after the date such Offer is consummated and has been
continuously so employed since such date, then Verio shall pay to the Optionee a
bonus equal to one hundred percent (100%) of such Option Consideration payable
on such date.
(c) If the Optionee's Continuous Status as an Employee is terminated
by the Company or Related Entity, as the case may be, voluntarily by the
Optionee with Good Reason (as defined above) within twenty-five (25) months of
the Corporate Transaction described in the Merger Agreement, then a pro rata
--------
portion of the unpaid amount of the bonus payable under clause (a) and/or (b)
shall become immediately payable.
(d) If the Optionee's Continuous Status as an Employee is terminated
by the Company without Cause (as defined above) with in twenty-five (25) months
of the Corporate Transaction described in the Merger Agreement, the unpaid
amount of the bonus payable under clause (a) and/or (b) shall become immediately
payable.
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8. This Agreement (and the amendments to the Option Agreement
contained herein) shall become effective immediately before the consummation of
the Offer and shall cease to be effective upon termination of the Merger
Agreement pursuant to its terms.
9. Nothing in this Agreement entitles you to be employed by Xxxxx for
any specific period of time or otherwise interferes with your status as an
employee at will of Verio.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
this ___ day of _____, 2000.
_____________________________
Optionee
Verio Inc.
By___________________________
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