EMPLOYMENT AGREEMENT
Exhibit
10.20
Employment
Agreement (this "Agreement") dated as of February 1, 2004 (the "Effective
Date"), by and between Internap Network Services Corporation (the "Company") and
Xxxxx Xxxxxx ("Executive") (collectively the "Parties").
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1.
Position and Duties.
Executive shall serve as the Financial Vice President, for the Company, with
such duties, authorities and responsibilities as are commensurate with such
position. Executive shall report to the Company's Chief Financial Officer
(“CFO”) and shall work from the Company's offices in Atlanta,
Georgia.
2.
Base Salary.
Executive shall receive an annual base salary of $ 160,000.00 ("Base Salary").
Payment of Base Salary shall be subject to standard payroll tax withholdings and
deductions. Executive's Base Salary shall be paid semi-monthly in accordance
with the Company's standard payroll practices. Executive's Base Salary may be
increased or decreased from time to time by the CFO in consultation with the
Company's Board of Directors or the Compensation Committee of such Board of
Directors (in either case, the "Board") in their sole discretion.
3.
Performance-Based Bonus. While
the Company has not decided to implement a bonus plan (“Bonus”) for Executive
and other senior executive officers at this time, should it do so in the future
its present intention is that Executive’s Bonus would be from 35% to up to 50%
of Executive's Base Salary, prorated if less than a full year. Performance
metrics for the Bonus, if any, for 2004 shall be established by the CFO in
consultation with the Board and in their sole and reasonable discretion as soon
as practicable after a determination has been made to implement a Bonus plan for
Executive and other senior executive officers. Performance metrics for and
target amount of the Bonus for 2005 and each subsequent calendar year shall be
established on or before February 28 of the year to which the Bonus relates. The
CFO, in consultation with the Board and in their sole and reasonable discretion,
shall determine, on or before February 28 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 and shall
be subject to standard payroll tax withholdings and deductions. 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
Company and Executive acknowledge that the Company will issue to Executive one
or more options to purchase 200,000 shares of the Company’s common stock,
subject to the terms and conditions of the relevant option plan(s) and related
stock option agreement(s) (the "Options") no later than March 31, 2004. The
Board, upon the recommendation of the CFO and in their sole discretion, may
award additional options or equity or other equity-based compensation to
Executive on terms, in amounts and subject to performance goals as determined by
the CFO and the Board (any such options also being referred to hereinafter as
“Options” and any such equity or equity-based compensation being referred to
herein as “Additional Equity Compensation”).
5.
Employee Benefits. Executive
shall be entitled to participate in all employee benefit, welfare and other
plans and programs generally applicable to employees of the Company. Except as
provided herein, the Company reserves the right to modify Executive's
compensation and benefits from time to time, as it deems necessary.
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 any other 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.
8.
Severance Payments. Upon
Executive's involuntary termination by the Company of employment without Cause
(as defined below), Executive shall receive a cash severance payment equal to
the product of (x) the number of days that Executive is am employee of the
Company, divided by 365 (provided that the foregoing ratio shall never exceed
one (1) and (y) Executive’s then-current Base Salary. Payment of such severance
amounts shall be subject to standard payroll tax withholdings and
deductions. In
addition to the severance benefits provided above, upon Executive's involuntary
termination of employment without Cause, all of Executive’s unvested Options and
Additional Equity Compensation shall lapse and expire, and all of Executive’s
vested Options shall remain exercisable no later than three months after the
date of termination. No payment or acceleration of Options or Additional Equity
Compensation shall be made pursuant to this Section 8 unless prior to or
concurrent with such payment a valid release has been executed and delivered by
Executive and becomes effective in accordance with Section 11 hereof.
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.
9.
Change in Control Payments and Acceleration. Upon
Executive's involuntary termination of employment without Cause (as defined
below) or voluntary termination of employment for Good Reason, in either case
within 12 months after a
Change in Control, (i) the Company shall pay Executive a cash severance payment
equal to two time the sum of Executive's then-current Base Salary and maximum
target Bonus and (ii) all of Executive’s unvested Options and Additional Equity
Compensation shall become vested, free of restrictions and immediately
exercisable for the remaining term of the relevant grant or award.
Payment
of such severance payments shall be subject to standard payroll tax withholdings
and deductions.
No
payment or acceleration of Options or Additional Equity Compensation shall be
made unless prior to or concurrent with such payment a valid release has been
executed and delivered by Executive and becomes effective in accordance with
Section 11 hereof.
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 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; (ii) A change in the composition of the
Board such that the individuals who, as of the Effective Date, constitute the
Board (such Board shall be hereinafter referred to as the "Incumbent Board"),
excluding the current members of the Board (“Series A Directors”) who have been
elected pursuant to the terms of the Company’s Series A Convertible Preferred
Stock (“Series A Stock”), 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 Effective Date,
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), excluding the Series A Directors, 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.
For
purposes of this Agreement, “Cause” shall mean:
(i)
Executive's conviction (including a plea of guilty or nolo contendere) of a
crime involving theft, fraud, dishonesty or
moral
turpitude;
(ii)
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, not less than ten (10) days prior to the
proposed termination date, 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
CFO; (ii) any significant reduction in Executive's then current total
compensation from that compensation paid in the prior fiscal year or calendar
year; or (iii) a change of more than fifty (50) miles from Executive's
permanent workplace without Executive's consent.
10.
Parachute Payments. 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.
11.
Release. Upon
termination of Executive's employment, unless Executive shall have executed and
provided the Company with an effective release in a form reasonably satisfactory
to the Company, Executive shall not receive any severance payments or benefits
provided under this Agreement.
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"). 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.
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 Internap 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 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 Internap 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, engage in the businesses of (i) managed high
performance Internet connectivity, (ii) hosting or collocation services, (iii)
virtual private network services (iv) content distribution network services or
(v) any other line of business in which the company is then engaged for (x) any
account that is a customer of Internap or its affiliates unless he is providing
substantially different services to any such customer from the services he
provided to Internap or (y) any competitor of Internap or its
affiliates.
If,
within one year after commencement of Executive’s employment with the Company,
Executive voluntarily terminates such employment or such employment is
terminated for any reason by the Company, the non-compete period shall be equal
to the number of days that Executive was an employee of the Company prior to
such termination.
Executive
also agrees that during the term of his employment with Internap and for a
period of one (1) years after such employment ends for any reason whatsoever, he
shall not directly or indirectly employ or seek to employ any person employed by
Internap nor directly or indirectly solicit or induce any such person to leave
Internap.
Executive
acknowledges that the breach or threatened breach of the above noncompetition
and/or nondisclosure provisions would cause irreparable injury to Internap that
could not be adequately compensated by money damages. Internap 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.
Provided
that Executive has been employed with the Company for at least one year, if
Executive wishes to compete with the Company during the one-year period after
his termination of employment, Executive will submit a bona fide written offer
of employment he has received from a prospective employer to the Company’s Chief
Executive Officer and General Counsel, who will analyze such proposed employment
in light of the then current facts and circumstances. The Chief Executive
Officer may, in his sole and reasonable discretion, provide a written waiver of
all or a portion of the non-compete limitations imposed on Executive. If such
written waiver is unreasonably withheld, Executive shall remain subject to the
non-compete limitations. The non-solicitation obligations set forth above are
not subject to the potential waiver described in the preceding sentence and will
remain in full force and effect pursuant to its terms. Executive will fully
defend, indemnify and hold harmless the Company for any claims brought against
it by Executive or third parties as a result of any decision the Company makes
not to waive Executive's non-compete obligations.
14.
No Restrictions. 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.
15.
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 Exhibits, 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 Delaware, 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. Any invalid or unenforceable provision
shall be modified so as to be rendered valid and enforceable in a manner
consistent with the intent of the Parties insofar as possible.
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 Effective Date, 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 executive officers 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.
|
Xxxxx
Xxxxxx | |||
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By |
/s/ Xxxxxxx X. Xxxxxx | ||
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Name: |
Xxxxxxx X. Xxxxxx | ||
|
Title: |
President and Chief Executive Officer | ||
