EMPLOYMENT AGREEMENT
Exhibit
99.1
Employment
Agreement (this "Agreement") dated as of July 10,
2007,
by and
between Internap Network Services Corporation, a Delaware corporation with
its
principal office in Atlanta, Georgia (the "Company"), and Xxxxx XxXxxxxx
("Executive") (collectively the "Parties").
1. Position
and Duties.
Executive shall serve as the President and Chief Executive Officer for the
Company, with such duties, authorities and responsibilities as are commensurate
with such position. Executive shall report to the Company's Board of
Directors.
2. Base
Salary.
Executive shall receive an annual base salary of $425,000 ("Base Salary").
Payment of Base Salary shall be subject to standard payroll tax withholdings
and
deductions. Executive's Base Salary shall be paid periodically in accordance
with the Company's standard payroll practices for senior executives. Executive's
Base Salary may be increased or decreased from time to time by the Company's
Board of Directors or the Compensation Committee of such Board of Directors
(in
either case, the "Board") in their sole and absolute discretion.
3. Performance-Based
Bonus.
The
Executive will be eligible to participate in the Company's annual incentive
plan
("Bonus") for senior executives, and performance metrics for and target amount
of the Bonus shall be established on or before March 31 of the year to which
the
Bonus relates. The Board in their sole and reasonable discretion, shall
determine, on or before March 31 of the year in which the Bonus would be
payable, whether a Bonus is payable and, if so, the amount of such Bonus.
Unless
otherwise determined by the Board, all Bonus payments shall be made on the
Company's first regular payroll date following such determination. To be
eligible for a Bonus, Executive must be continuously employed by the Company
through the date on which the Bonus is paid. Executive recognizes and agrees
that: (a) the Company may in its sole discretion and with reasonable notice
to
Executive determine that any Bonus, if payable, may be paid in whole or in
part
in the Company's common stock or other equity securities, including restricted
stock and stock options; and (b) the Company may in its sole discretion suspend
or discontinue any bonus program at any time without any liability on the
part
of the Company.
4. Equity
Compensation.
The
Board, in their sole discretion, may award equity-based compensation to
Executive on terms, in amounts and subject to performance goals as determined
by
the Board (any such equity or equity-based compensation being referred to
herein
as "Equity Compensation"). All Equity Compensation are governed by the terms
and
conditions of the relevant equity incentive plan(s) and related incentive
agreement(s).
5. Employee
Benefits.
Executive shall be entitled to participate in all employee benefit, welfare
and
other plans and programs generally applicable to senior executives of the
Company. Except as provided herein, the Company reserves the right to modify
or
terminate its employee benefit, welfare and other plans and programs from
time
to time, as it deems necessary and shall be entitled to terminate any such
plans
in its sole and absolute discretion so long as Executive continues to receive
healthcare and life insurance coverages that are comparable to other similarly
situated employees.
6. Vacation.
Executive shall accrue twenty (20) days of combined vacation/sick leave
annually. Executive also shall receive three (3) personal days each year.
Executive shall have the right to carry over unused vacation from any one-year
period to the next subsequent one-year period.
7. Nature
of Employment.
Executive's employment with the Company shall be at-will. Both Executive
and the
Company shall have the right to terminate the employment relationship
at
any
time,
with or without cause, and with or without advance notice. In the event that
Executive’s employment relationship terminates for any reason, upon request of
the Company Executive agrees to immediately resign as a director of the
Company.
8. Severance
Payments.
If
Executive’s employment is terminated by the Company without Cause (as defined
below), Executive shall receive a cash severance payment equal to one and
one-half (1.5) times Executive's then-current Base Salary. Payment of such
severance amount shall be subject to standard payroll tax withholdings and
deductions. In addition to the severance benefits provided above, if Executive’s
employment is terminated without Cause, all of Executive's unvested Equity
Compensation shall lapse and expire, and all of Executive's vested Equity
Compensation shall remain exercisable until the earlier of three months after
the date of termination and the original expiration date thereof.
Notwithstanding the immediately preceding sentence, Executive shall not be
entitled to any benefits or rights under this Section 8 if Executive also
is
eligible for payments and/or benefits under Section 9 hereof.
If
Executive dies while employed pursuant to this Agreement, all of Executive’s
unvested Equity Compensation that would, had he not have died, have become
vested within twelve months after the date of his death (assuming fulfillment
of
any performance criteria and his continued employment by the Company) shall
become vested, free of restrictions (other than those imposed by law) and
immediately exercisable for a period ending on the earlier of twelve months
after the date of death and the original expiration date thereof.
9. Change
in Control Payments and Acceleration.
If a
Change in Control occurs during the course of Executive’s employment, all of
Executive's unvested Equity Compensation shall become immediately vested,
free
of restrictions (other than those imposed by law) and immediately exercisable
for the remaining term of the relevant grant or award. If Executive's employment
is terminated by the Company without Cause or Executive terminates his
employment for Good Reason, in either case within 12 months after a Change
in
Control, then (i) the Company shall pay Executive a cash severance payment
equal
to two (2) times the sum of Executive's then-current Base Salary plus the
greater of (A) Executive’s target Bonus for the year in which the termination
occurs and (B) Executive’s average Bonus during the prior two completed years
(as a percentage of Executive’s Base Salary upon which his Bonus awards were
calculated) multiplied by Executive’s then-current Base Salary, and (ii) all of
Executive's unvested Equity Compensation shall become immediately vested,
free
of restrictions (other than those imposed by law) and immediately exercisable
for the remaining term of the relevant grant or award.
If
Executive’s employment is terminated pursuant to this Section 9, Executive will
continue to receive the healthcare and life insurance coverages in effect
on his
date of termination for twenty-four (24) months after the date of termination
pursuant to this Section 9 just as if he had remained an active employee
of the
Company, subject to Executive paying the customary employee portion of such
coverages, provided that if the Company cannot continue to cover Executive
under
its plans, the Company will separately provide Executive with comparable
coverages or pay Executive in a lump sum in advance the costs of such
coverages.
For
purposes of this Agreement, "Change in Control" shall mean the happening
of any
of the following events:
(i) An
acquisition by any individual, entity or group (within the meaning of Section
13
(d) (3) or 14 (d) (2) of the Exchange Act) (an "Entity") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
30% or
more of either (A) the then outstanding shares of common stock of the Company
(the Outstanding Company Common Stock") or (B) the combined voting power
of the
then outstanding voting securities of the Company entitled to vote generally
in
the election of directors (the "Outstanding Company Voting Securities");
excluding, however, the following: (1) any acquisition directly from the
Company, other than an acquisition by virtue of the exercise of a conversion
privilege unless the security being so converted was itself acquired directly
from the Company, (2) any acquisition by the Company, (3) any acquisition
by any
employee benefit plan (or related trust) sponsored or maintained by the Company
or any corporation controlled by the Company, or (4) any acquisition by any
corporation pursuant to a transaction which complies with clauses (A), (B)
and
(C) of subsection (iii) of this Section;
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(ii) A
change
in the composition of the Board such that the individuals who, as of the
date
hereof, constitute the Board (such Board shall be hereinafter referred to
as the
"Incumbent Board"), cease for any reason to constitute at least a majority
of
the Board; provided, however, that for purposes of this definition, any
individual who becomes a member of the Board subsequent to the date hereof,
whose election, or nomination for election, by the Company's stockholders
was
approved by a vote of at least a majority of those individuals who are members
of the Board and who were also members of the Incumbent Board (or deemed
to be
such pursuant to this proviso), shall be considered as though such individual
were a member of the Incumbent Board; and provided, further however, that
any
such individual whose initial assumption of office occurs as a result of
or in
connection with either an actual or threatened election contest (as such
terms
are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange
Act) or
other actual or threatened solicitation of proxies or consents by or on behalf
of an Entity other than the Board shall not be so considered as a member
of the
Incumbent Board;
(iii) The
approval by the stockholders of the Company of a merger, reorganization or
consolidation or sale or other disposition of all or substantially all of
the
assets of the Company (each, a "Corporate Transaction") or, if consummation
of
such Corporate Transaction is subject, at the time of such approval by
stockholders, to the consent of any government or governmental agency, the
obtaining of such consent (either explicitly or implicitly by consummation);
excluding however, such a Corporate Transaction pursuant to which (A) all
or
substantially all of the individuals and entities who are the beneficial
owners,
respectively, of the Outstanding Company Common Stock and Outstanding Company
Voting Securities immediately prior to such Corporate Transaction will
beneficially own, directly or indirectly, more than 60% of, respectively,
the
outstanding shares of common stock, and the combined voting power of the
then
outstanding voting securities entitled to vote generally in the election
of
directors, as the case may be, of the corporation resulting from such Corporate
Transaction (including, without limitation, a corporation or other Person
which
as a result of such transaction owns the Company or all or substantially
all of
the Company's assets either directly or through one or more subsidiaries
(a
"Parent Company")) in substantially the same proportions as their ownership,
immediately prior to such Corporate Transaction, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the case may be,
(B)
no Entity (other than the Company, any employee benefit plan (or related
trust)
of the Company, such corporation resulting from such Corporate Transaction
or,
if reference was made to equity ownership of any Parent Company for purposes
of
determining whether clause (A) above is satisfied in connection with the
applicable Corporate Transaction, such Parent Company) will beneficially
own,
directly or indirectly, 50% or more of, respectively, the outstanding shares
of
common stock of the corporation resulting from such Corporate Transaction
or the
combined voting power of the outstanding voting securities of such corporation
entitled to vote generally in the election of directors unless such ownership
resulted solely from ownership of securities of the Company prior to the
Corporate Transaction, and (C) individuals who were members of the Incumbent
Board will immediately after the consummation of the Corporate Transaction
constitute at least a majority of the members of the board of directors of
the
corporation resulting from such Corporate Transaction (or, if reference was
made
to equity ownership of any Parent Company for purposes of determining whether
clause (A) above is satisfied in connection with the applicable Corporate
Transaction, of the Parent Company); or
(iv) The
approval by the stockholders of the Company of a complete liquidation or
dissolution of the Company.
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For
purposes of this Agreement, "Cause" shall mean:
(i) Executive's
conviction (including a plea of guilty or nolo contendre) of a crime involving
theft, fraud, dishonesty or moral turpitude;
(ii) material
violation by Executive of the Company's Code of Conduct or other material
policies;
(iii) gross
omission or gross dereliction of any statutory, common law or other duty
of
loyalty to the Company or any of its affiliates; or
(iv) repeated
failure to carry out the duties of Executive's position despite specific
instructions to do so.
Executive
shall not be deemed to have been terminated for “Cause” until there shall have
been delivered to him written notice specifying the basis for such
termination.
For
purposes of this Agreement, Good Reason shall mean any one of the following
events which occurs without Executive's written consent: (i) any significant
diminution in Executive's title, authority or responsibility, including any
change in the reporting relationship between Executive and the Board; (ii)
any
significant reduction in Executive's then current total compensation from
that
compensation paid in the prior fiscal year; (iii) a change of more than fifty
(50) miles from Executive's permanent workplace without Executive's consent;
or
(iv) any material breach of this Agreement by the Company.
10. Certain
Tax Matters.
If any
cash compensation payment, employee benefits or acceleration of vesting of
stock
options or other stock awards Executive would receive in connection with
a
Change in Control ("Payment") would (i) constitute a "parachute payment"
within
the meaning of Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"), and (ii) but for this sentence, be subject to the excise tax
imposed by Section 4999 of the Code (the "Excise Tax"), then such Payment
shall
be equal to the Reduced Amount. The "Reduced Amount" shall be either (x)
the
largest portion of the Payment that would result in no portion of the Payment
being subject to the Excise Tax or (y) the largest portion, up to and including
the total, of the Payment, whichever amount, after taking into account all
applicable federal, state and local employment taxes, income taxes, and the
Excise Tax (all computed at the highest applicable marginal rate), results
in
Executive's receipt, on an after-tax basis, of the greater amount of the
Payment
notwithstanding that all or some portion of the Payment may be subject to
the
Excise Tax. If a reduction in payments or benefits constituting "parachute
payments" is necessary so that the Payment equals the Reduced Amount, reduction
shall occur in the following order unless Executive elects in writing a
different order: reduction of cash payments; reduction of employee benefits;
and
cancellation of accelerated vesting of stock awards. In the event that
acceleration of vesting of stock award compensation is to be reduced, such
acceleration of vesting shall be cancelled in the reverse order of the date
of
grant of Executive's stock awards unless Executive elects in writing a different
order for cancellation. The accounting firm engaged by the Company for general
audit purposes as of the day prior to the effective date of the Change in
Control shall perform the foregoing calculations. If the accounting firm
so
engaged by the Company is serving as accountant or auditor for the individual,
entity or group effecting the Change in Control, the Company shall appoint
a
nationally recognized accounting firm to make the determinations required
hereunder. The Company shall bear all expenses with respect to the
determinations by such accounting firm required to be made hereunder. The
accounting firm engaged to make the determinations hereunder shall provide
its
calculations, together with detailed supporting documentation, to the Company
and Executive within fifteen (15) calendar days after the date on which
Executive's right to a Payment arises (if requested at that time by the Company
or Executive) or at such other time as requested by the Company or Executive.
If
the accounting firm determines that no Excise Tax is payable with respect
to a
Payment, either before or after the application of the Reduced Amount, it
shall
furnish the Company and Executive with an opinion reasonably acceptable to
Executive that no Excise Tax will be imposed with respect to such Payment.
Any
good faith determination of the accounting firm made hereunder shall be final,
binding and conclusive upon the Company and Executive.
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It
is
expressly contemplated by the Parties that this Agreement will conform to,
and
be interpreted to comply with, Section 409A of the Internal Revenue Code,
as
amended (the “Code”).
If
Company determines that any benefit payable to Executive fails to satisfy
the
distribution requirement of Section 409A(a)(2)(A) of the Code, as a result
of
Section 409A(a)(2)(B)(i) of the Code, then the payment schedule will be modified
as follows: If the acceleration of a benefit that is payable but not yet
due
will avoid application of Section 409(a)(1) of the Code, then the Company
will
accelerate the payment of the benefit to the minimum extent necessary so
that
the benefit is not subject to the provisions of Section 409A(a)(1) of the
Code.
If acceleration of the benefit would not avoid the application of Section
409A(a)(1) of the Code, however, then the Company will delay the benefit
to the
minimum extent necessary(but not in excess of seven months) so that the benefit
is not subject to the provisions of Section 409A(a)(1) of the Code. If any
payments are delayed as a result of the previous sentence, all such delayed
payments shall become payable in a lump sum on the first day they can be
paid
following the date of termination of employment. Thereafter, payments will
resume in accordance with the payment schedule set forth in this
Agreement.
All
payments under this Agreement, including equity compensation, shall be subject
to standard payroll tax withholdings and deductions.
11. Release.
Notwithstanding anything to the contrary contained in this Agreement, upon
termination of Executive's employment, unless Executive shall have executed
and
provided the Company with an effective release in the form attached as Appendix
A by which Executive releases the Company and related persons from any and
all
claims of any kind, Executive shall not receive any severance payments or
benefits provided under this Agreement and no Equity Compensation shall vest
or
otherwise be exercisable.
12. Confidentiality.
Executive agrees that information not generally known to the public to which
he
will be exposed as a result of his employment by the Company is confidential
information that belongs to the Company. This includes information developed
by
Executive, alone or with others, or entrusted to the Company by its customers
or
others. The Company's confidential information includes, without limitation,
information relating to the Company's trade secrets, research and development,
inventions, know-how, software, procedures, accounting, marketing, sales,
creative and marketing strategies, employee salaries and compensation, and
the
identities of customers and active prospects to the extent not publicly
disclosed (collectively, "Confidential Information"). During the No Disclosure
Term (as defined below), Executive will hold the Company's Confidential
Information in strict confidence, and not disclose or use it except as
authorized by the Company and for the Company's benefit.
For
purposes of this Agreement, “No Disclosure Term” shall mean during the time
period Executive is employed by the Company and for a period of two (2) years
after Executive’s employment is terminated.
Executive
further acknowledges and agrees that in order to enable the Company to perform
services for its customers or clients, such customers or clients may furnish
to
the Company certain Confidential Information, that the goodwill afforded
to the
Company depends upon the Company and its employees preserving the
confidentiality of such information, and that such information shall be treated
as Confidential Information of the Company for all purposes under this
Agreement.
13. Non-Competition.
Executive recognizes and agrees that the Company has many substantial,
legitimate business interests that can be protected only by his agreement
not to
compete with Internap under certain circumstances. These interests include,
without limitation
5
and
on a
national basis, Internap's contacts and relationships with its clients and
active prospects, Internap's reputation and goodwill in the industry, and
Internap's rights in its Confidential Information. Therefore, Executive agrees
that during the term of his employment with the Company and for a period
of one
(1) year after his employment ends for any reason whatsoever and except as
provided in the paragraph immediately following, he shall not, voluntarily
or
involuntarily, directly or indirectly, on his own behalf or on the behalf
of
another, whether as an employee, contractor, consultant, director or agent
or in
another capacity, perform within the Restricted Territory (as defined herein)
any services which are the same as or similar to those he performed for the
Company, in competition with the Business (as defined herein). For purposes
of
this Agreement, “Business” shall mean the business of the Company and its
subsidiaries in providing (i) managed high performance Internet connectivity,
(ii) hosting or collocation services, (iii) virtual private network services,
or
(iv) content distribution network services. For purposes of this Agreement,
“Restricted Territory” shall mean the states within the United States in which,
as of the date hereof, the Company or its subsidiaries has
customers.
Executive
also agrees that during his employment with the Company and for a period
of two
(2) years after such employment ends for any reason whatsoever, he shall
not
directly or indirectly solicit or attempt to solicit any employee of the
Company
or any of its subsidiaries with whom Executive had material contact during
the
last two (2) years of Executive’s employment to terminate or resign such
employee’s employment with the Company or any of its subsidiaries.
14. Equitable
Relief.
Executive acknowledges that the breach or threatened breach of the above
noncompetition and/or confidentiality provisions would cause irreparable
injury
to the Company that could not be adequately compensated by money damages.
The
Company may obtain a restraining order and/or injunction prohibiting my breach
or threatened breach of the noncompetition and/or nondisclosure provisions,
in
addition to any other legal or equitable remedies that may be available.
Executive agrees that the above noncompetition provision, including its
duration, scope and geographic extent, is fair and reasonably necessary to
protect Internap's client relationships, goodwill, Confidential Information
and
other protectable interests.
15. No
Restrictions.
Executive represents to the Company that he has not executed or is not bound
by
any non-competition covenant or non-solicitation covenant or any other
undertaking similar to either of the foregoing that would prevent him from
performing the duties and responsibilities of the position set forth in Section
1 of this Agreement.
16.
Legal Expenses. The
Company shall reimburse Executive for reasonable attorneys’ fees and expenses
incurred by Executive in the negotiation and preparation of this Agreement,
such
amount not to exceed $5,000.
17.
Relocation. Executive
shall have a budget of (i) up to $150,000, including the tax gross-up that
will
be required, to be used for his relocation for expenses under the Internap
Domestic Relocation Program Benefits attached hereto as Exhibit A (the
“Relocation Program”) other than for expenses set forth in Sections 3.8 and
3.8-1 of the Relocation Program and (ii) up to $75,000 to be used for expenses
set forth in Sections 3.8 and 3.8-1 of the Relocation Program, all such expenses
subject to the terms of the Relocation Program that sets forth the relocation
terms and dollar limits applicable to Executive’s
circumstances.
18.
Arbitration. Except
as
specifically provided in this Agreement, the parties agree that any dispute
or
controversy arising out of, relating to or in connection with the
interpretation, validity, construction, performance, breach or termination
of
this Agreement, shall be resolved by submission to arbitration by the
American Arbitration Association in accordance with its Commercial
Arbitration Rules. The parties shall share the costs of the
arbitrator equally but shall each bear their own costs and legal fees associated
with the arbitration. The location of any such arbitration shall be in Georgia,
and judgment on the award rendered by the arbitrator(s) may be entered in
any
court having jurisdiction thereof.
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19. General
Provisions.
This
Agreement is intended to bind and inure to the benefit of and be enforceable
by
Executive, the Company and their respective successors, assigns, heirs,
executors, administrators, except that Executive may not assign any of his
duties hereunder and Executive may not assign any of his rights hereunder
without the written consent of the Company, which shall not be withheld
unreasonably.
This
Agreement, together with the Appendix, constitutes the complete, final and
exclusive embodiment of the entire agreement between the Parties with regard
to
the subject matter hereof. It is entered into without reliance on any promise
or
representation, written or oral, other than those expressly contained herein,
and it supersedes any other such promises or representations.
This
Agreement shall be governed by and construed in accordance with the laws
of the
State of Georgia, without reference to principles of conflict of laws. The
captions of this Agreement are not part of the provisions hereof and shall
have
no force or effect. This Agreement may not be amended or modified otherwise
than
by a written agreement executed by the Parties hereto or their respective
successors and legal representatives. The invalidity or unenforceability
of any
provision of this Agreement shall not affect the validity or enforceability
of
any other provision of this Agreement. If any provision in this Agreement
is
determined to be invalid, illegal, or unenforceable in whole or in part,
the
remaining provisions and any partially enforceable provisions shall remain
in
full force and effect.
A
failure
of Executive or the Company to insist upon strict compliance with any provision
of this Agreement or the failure to assert any right Executive or the Company
may have hereunder shall not be deemed to be a waiver of such provision or
right
or any other provision or right of this Agreement.
From
and
after the date hereof, this Agreement shall supersede any employment, severance,
change of control or other agreement, whether oral or written, between the
Parties with respect to the subject matter hereof (other than arrangements
effected under compensation plans generally applicable to other senior
executives of the Company).
This
Agreement may be executed in several counterparts, each of which shall be
deemed
to be an original but all of which together will constitute one and the same
instrument.
IN
WITNESS WHEREOF, the Parties have executed this Agreement effective as of
the
day and year first above written.
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XXXXX
XXXXXXXX
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By:
Xxxxxx Xxxxxxxxx, Chairman
/s/
Xxxxxx Xxxxxxxxx
7/6/07
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By:
Xxx XxXxxxxx
/s/
Xxx X. XxXxxxxx
7/10/07
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