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EXHIBIT 10.14
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
this 15th day of July, 1999, to be effective August 1, 1999, by and between
FUTURELINK DISTRIBUTION CORP., a Colorado corporation (the "Company"), and
XXXXXXX XXXXXX (the "Executive"), an individual residing in Annandale, Virginia.
I
EMPLOYMENT
1.1 Position and Duties. The Company hereby engages and employs the
Executive as Executive Vice-President Sales and Marketing, with his principal
office to be located in Tyson's Corner, Virginia, for the term set forth in this
Agreement.
The Company's Board of Directors (the "Board") may provide
such additional designations of title to the Executive as the Board, in its
discretion, may deem appropriate. The Executive shall perform the executive
duties and functions related to the above positions, subject to the reasonable
limitations of authority set forth from time to time in the resolutions of the
Board and applicable law.
1.2 Best Efforts. The Executive agrees to devote his full time and
attention to the Company, to use his best efforts to advance the business and
welfare of the Company, to render his services under this Agreement fully,
faithfully, diligently, competently and to the best of his ability, and not to
engage in any other employment activities. Notwithstanding anything herein to
the contrary, the Executive shall not be precluded from (a) engaging in
charitable activities and community affairs; (b) managing his personal
investments and affairs, provided that such activities do not materially
interfere with the proper performance of his duties and responsibilities under
this Agreement; or (c) owning up to 1% of a publicly-held company engaged in the
same or similar business as the Company.
II
COMPENSATION AND BENEFITS
2.1 Base Salary. For all services to be rendered by the Executive under
this Agreement, the Company agrees to pay the Executive an annual base salary of
not less than $180,000, less deductions required by law, payable in accordance
with the normal payroll practices of the Company.
2.2 Cash Bonus. The Executive shall be entitled to receive a bonus
payment upon execution of this Agreement and also be eligible for ongoing
performance bonuses during the life of the contract, as follows:
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(a) A signing bonus of $95,000, less deductions required by law,
shall be paid by the Company to the Executive upon the
execution of this Agreement and all ancillary documents and
agreements attached as Schedules hereto, and in no event, no
later than two (2) business days following the Executive's
execution of this Employment Agreement. Should the Executive
voluntarily terminate this Agreement within the first six (6)
months of employment, $50,000 of this signing bonus shall be
repayable by the Executive to the Company. In addition, upon
the Executive's execution of this Agreement and the ancillary
agreement(s) attached hereto as schedules, the Company shall
pay the Executive's legal counsel, Xxxxx X. Xxxx, $5,000
towards his legal fees and disbursements incurred representing
the Executive in this matter; and
(b) A performance bonus plan with cash compensation up to a
further $180,000 per annum (100% of base salary), less
deductions required by law, based on achieving measurable
performance targets to be set by the Board of Directors. These
measures include sales revenue, margin and other defined
factors. The bonus plan shall be so structured that partial
performance will yield a partial bonus. The performance bonus
will be prorated and paid semi-annually for 1999, and paid
quarterly in 2000, 2001, and 2002;
2.3 Other Benefits. The Company shall further provide to the Executive
the following other benefits:
(a) An annual vacation leave of a minimum of four (4) weeks per
calendar year at full pay; and
(b) Full participation, on a basis commensurate with his position
with the Company, in all plans of life, accident, disability
and health insurance that generally are made available to
senior executives of the Company.
2.4 Share Purchase and Loan. Upon execution of this Employment
Agreement and ancillary agreements, including but not limited to, the
Confidentiality and Non-Competition Agreement attached as Schedule "A" hereto,
the Loan Agreement attached as Schedule "B" hereto (the "Loan Agreement") and
the Escrow Agreement attached as Schedule "C" hereto (the "Escrow Agreement"),
the company shall immediately loan to the Executive the sum of $2,000,000 in
accordance with the terms of the Loan Agreement. The Loan Agreement shall
provide that the Executive pay a simple (not compounded), fixed rate of interest
of five and five-eighths (5.625%) percent per annum, payable annually. Upon
receipt of funds advanced pursuant to the Loan Agreement, the Executive shall
immediately thereafter pay to the Company $2,000,000 as a subscription for
shares in accordance with the Subscription Agreement attached as Schedule "D"
hereto (the "Subscription Agreement"). As provided in the Subscription
Agreement, the Executive shall be issued a number of shares of the Company's
common stock equal to the $2,000,000 of subscription funds divided by a "market
value" price per share equal to the average of the closing bid and ask prices as
quoted on the over-the-counter bulletin board regulated by the National
Association of Securities Dealers, five (5) trading immediately preceding the
date of execution of this Agreement.
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The shares of the Company's common stock issued in accordance
with the Subscription Agreement shall be deposited in escrow in accordance with
the Escrow Agreement. Subject to the terms of the Escrow Agreement, one-eighth
of this escrowed common stock ("Escrowed Shares") shall be released from escrow
on the first day following the end date of each of the next eight quarters
beginning October 1, 1999 and ending July 1, 2001. Similarly, under the terms of
the Loan Agreement, so long as the Executive remains employed by the Company,
$250,000 of the principal amount of the original $2,000,000 loan shall be
forgiven on the day following the last day of each of the said eight fiscal
quarters hereafter. Furthermore, the annual interest payable by the Executive on
the principal amount of the loan shall be forgiven at the end of each annual
period hereafter when due should the Executive remain employed by the Company at
such time. The forgiveness of any principal or interest due under the Loan
Agreement shall constitute a benefit to the Executive under the terms of this
Employment Agreement and shall be subject to deductions required by law.
Should the employment of the Executive be terminated by the
Company without cause prior to all of the Escrowed Shares being released from
escrow under the Escrow Agreement and prior to the full amount of the loan being
forgiven or repaid under the terms of the Loan Agreement, any further release of
Escrowed Shares shall cease and the remaining principal amount of the loan shall
become immediately due and payable under the demand provisions of the Loan
Agreement. Thereafter, the Executive shall have ten (10) business days to
provide the Company with payment of all or a portion of the outstanding
principal amount of the loan, by certified check, bank draft or wire transfer.
If, at the end of ten (10) business days following termination of the
Executive's employment, any principal amount of the loan remains outstanding,
the Company shall seize the collateral securing the loan, being Escrowed Shares
held pursuant to the Escrow Agreement, and cancel the said shares of common
stock. The parties hereto agree that value per share of any common stock seized
and cancelled by the Company in accordance with the above shall be identical to
the price per share originally paid by the Executive for the common stock in
accordance with this Agreement and the Subscription Agreement, regardless of the
market price of the Company's common stock on the date of termination or the
date of realization on the collateral by the Company. Any Escrowed Shares not
seized as security under the Loan Agreement and cancelled by the Company as a
result of the Executive repaying all or a portion of the principal amount of the
loan in accordance with the above provisions shall remain held in escrow under
the Escrow Agreement and released in accordance with the terms thereof.
Should the Executive voluntarily terminate his employment with
the Company or be terminated by the Company with Cause, any remaining Escrowed
Shares shall be immediately seized by the Company as collateral for the loan
which shall be immediately retired thereby. The parties hereto agree that value
per share of any common stock seized and cancelled by the Company in accordance
with the above shall be identical to the price per share originally paid by the
Executive for the common stock in accordance with this Employment Agreement and
the Subscription Agreement, regardless of the market price of the Company's
common stock on the date of voluntary termination or termination for Cause
and/or the date of realization on the Escrowed Shares by the Company (as
security under the Loan Agreement) and cancellation of such shares.
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The Executive acknowledges, that in respect to any Escrowed
Shares to which the Executive is otherwise entitled under this paragraph 2.4 of
this Employment Agreement and in respect to the Escrowed Shares issued in the
name of the Executive and not yet released from escrow under the terms of the
Escrow Agreement, these Escrowed Shares are specifically subject to the
following terms:
(a) Escrowed Shares which have been released from escrow under the
terms of the Escrow Agreement effective the actual day of the
Executive's termination of employment are the only Shares of
the Escrowed Shares originally deposited in escrow under the
terms of the Escrow Agreement to which the Executive is
entitled under this Employment Agreement on the termination of
the Executive's employment or office, unless the Executive is
terminated by the Company without just cause and the Executive
elects to pay out any outstanding principal amount owing to
the Company advanced to the Executive pursuant to the terms of
the Loan Agreement so as to remain eligible to receive
Escrowed Shares pursuant to the Escrow Agreement; and
(b) In the event of the termination of the Executive's employment
or office in circumstances under which the Executive may be
entitled at law or in equity to reasonable notice of
termination of employment or compensation in lieu thereof, or
is entitled to a specific period of notice or compensation in
lieu thereof, the Executive is not entitled to claim any right
to further unreleased Escrowed Shares or further time for
Escrowed Shares to be released from escrow during the said
reasonable notice period or during the said specific notice
period, or compensation in lieu thereof by way of general
damages, or special damages, whether in contract, in tort or
otherwise.
The Escrowed Shares issued to the Executive pursuant to the
Subscription Agreement shall be issued in accordance with exemptions from
registration in accordance with applicable securities laws and shall be
"legended" appropriately. However, these Escrowed Shares, whether or not
released from escrow in accordance with the Escrow Agreement, shall be entitled
to the following registration rights:
(a) The Company hereby agrees with the Executive that it shall
include the Escrowed Shares in a subsequent Registration
Statement on Form S-1 or such other form as the Company deems
appropriate, with the Securities and Exchange Commission (the
"SEC"), covering the resale of the Escrowed Shares. The
Escrowed Shares shall be entitled to "piggy-back" registration
rights and be included on either the Registration Statement
currently being prepared by the Company or on the next
Registration Statement to be filed by the Company, at the
Company's discretion;
(b) The Company shall use its best efforts to cause the
Registration Statement provided for above to be filed with the
SEC no later than January 31, 2000 and to effective no later
than March 31, 2000;
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(c) Should the Company fail to cause a Registration Statement with
respect to the registration of the Escrowed Shares to be filed
on or before January 31, 2000, the Executive shall thereafter
have the right to demand that the Company prepare and file a
Registration Statement covering the resale of the Escrowed
Shares immediately thereafter; and
(d) The Company shall file any Registration Statement including
the registration for resale of the Escrowed Shares without
charge to the Executive. The Executive shall, however, bear
the fees of his own counsel and any transfer taxes applicable
to the resale of the Escrowed Shares sold by the Executive
pursuant thereto.
2.5 Options. The Executive shall receive grant of stock options to
acquire up to 250,000 shares of common stock of the Company at an exercise price
of US$6.08 per share exercisable on or before June 30, 2004 upon execution of
this Agreement. The Company shall prepare its standard form Stock Option
Agreement evidencing the grant of Stock Options to vest as follows:
(a) 62,500 stock options immediately vested;
(b) 62,500 stock options vesting June 30, 2000;
(c) 62,500 stock options vesting June 30, 2001; and
(d) 62,500 stock options vesting June 30, 2002
The total number of stock options granted by the Company
currently exceeds the number of stock options, which may be granted under the
Company's existing Stock Option Plan, and, as such, this grant of stock options
to the Executive remains subject to shareholder ratification and approval of a
revised Stock Option Plan, which is anticipated prior to the end of September,
1999. Should the above grant of stock options fail to be ratified at the next
meeting of the Company's shareholders, the Company shall compensate the
Executive based on the price differential between the exercise price of the
above grant of stock options and the exercise price stock options granted to the
Executive at a later date in accordance with a shareholder approved stock option
plan, should the later grant, if necessary, be effected at a higher exercise
price.
The Executive acknowledges, that in respect to any shares of
common stock to which the Executive is otherwise entitled to receive upon
exercise of stock options granted under this paragraph 2.5 of this Agreement and
in respect to the stock options granted to the Executive and not yet vested
under the terms of this Agreement and the Stock Option Agreement, these stock
options and the shares of common stock underlying same are specifically subject
to the following terms:
(a) Stock options which have vested under the terms of this
Agreement and the Stock Option Agreement effective the actual
day of the Executive's termination of employment are the only
stock options which the Executive will be entitled to exercise
under this Employment Agreement following the termination of
the Executive's employment or office; and
(b) In the event of the termination of the Executive's employment
or office in circumstances under which the Executive may be
entitled at law or in equity to
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reasonable notice of termination of employment or compensation
in lieu thereof, or is entitled to a specific period of notice
or compensation in lieu thereof, the Executive is not entitled
to claim any right to further unreleased or unvested stock
options or the shares of common stock underlying same or
further time for the stock options to be exercised during the
said reasonable notice period or during the said specific
notice period, or compensation in lieu thereof by way of
general damages, or special damages, whether in contract, in
tort or otherwise.
2.6 Expense Reimbursement. The Company shall promptly reimburse the
Executive for all actual and reasonable business expenses incurred by the
Executive in promoting the business of the Company, including expenditures for
entertainment, travel, or other expenses, provided that (a) such expenditures
are of a nature qualifying them as legitimate business deductions and (b) the
Executive furnishes to the Company adequate records and other documentary
evidence reasonably required by the Company to substantiate such expenditures.
III
TERMINATION; SEVERANCE
3.1 At Will. The Executive and the Company acknowledge and agree that
the Executive's employment with the Company is expressly "at-will" both during
and after the term of this Agreement. This means that either party may terminate
the Executive's employment with or without cause with minimal or no notice.
3.2 Benefits. Following termination, the Executive shall cease to be a
Company employee and shall not be entitled to any employee benefits. This shall
not preclude the Executive from exercising his COBRA benefits under applicable
law.
3.3 No Severance on Termination. In the event the Executive's
employment terminates prior to the expiry of the term, whether such termination
results from the Executive's voluntarily termination of his employment, or the
Company terminates the Executive with or without "just cause", the Executive
shall not be entitled to severance pay. The Executive hereby expressly waives
any and all entitlement he may have at law or in equity to any severance, pay in
lieu of notice or retiring allowance upon termination of this Agreement for any
reason.
3.4 Death. In the event of the Executive's death, this Agreement shall
automatically terminate and shall be of no further force and effect. Termination
of the Executive's employment as a result of his death shall not result in any
obligation by the Company to pay severance pay or other benefits to the
Executive's estate or heirs.
3.5 Disability. In the event of the Executive's Disability (as defined
below) during the term of this Agreement for any period of at least three (3)
consecutive months, the Company shall have the right, which may be exercised in
its sole discretion, to terminate this Agreement. In the event the Company does
elect to terminate this Agreement, the Executive shall not be entitled to any
severance pay at any time but shall be entitled to normal disability benefits in
accordance with the policies established from time to time by the Company. For
purposes of this Agreement, "Disability" shall mean the inability of the
Executive to perform his employment services hereunder by reason of physical or
mental illness or incapacity as determined by a
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physician chosen by the Company and reasonably satisfactory to the Executive or
his legal representative.
IV
TERM
4.1 Term. Subject to the provisions of Article III hereof, the term of
the Executive's employment under this Agreement shall commence on the date
hereof and shall continue for three (3) years from the date hereof, as such date
may be extended from time to time. After expiration of the initial three (3)
year period of this Agreement, the Executive's employment will automatically
renew for a period of one year, each year, on the same terms and conditions as
are set forth herein, unless either party gives the other notice of non-renewal
at least six months prior to the end of the initial term of employment, or for
any year in which the employment was renewed, whichever the case may be.
V
CONFIDENTIALITY AND NON-COMPETITION
5.1 Please refer to Schedule "A" attached hereto.
VI
INDEMNITY
6.1 During the initial three (3) year term of this Agreement, the
Company shall indemnify the Executive for any and all legal costs incurred by
the Executive to defend any action brought by USinternetworking, Inc. ("USi"),
excluding any third party action brought by USi. The Executive hereby represents
that he has lawfully terminated his employment with his prior employer, USi, and
there are no pending or threatened actions by USi against the Executive. The
Executive shall continue to comport himself in accordance with any Agreements
between the Executive and USi and in the event that a court of law determines
that the Executive breached his agreement or applicable law regarding his
employment by USi or his activities after termination of employment, the
Executive shall not be entitled to indemnification for the amount of any
judgment, including damages and cost awarded to USi, hereunder. The Executive
further represents that the only written agreements between USi and himself are
as follows:
(a) Offer of Employment Letter Agreement dated June 4, 1998 and
accepted by the Executive on June 7, 1998; and
(b) Incentive Stock Option Agreement dated July 16, 1998,
True and correct copies of which having been provided to the Company by the
Executive; and
(c) Limited Power of Attorney executed by the Executive with
regard to USi's initial public offering in April, 1999.
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VII
REPRESENTATIONS AND WARRANTIES
7.1 The Executive hereby represents and warrants to the Company, which
representations and warranties constitute a material inducement to the
Company to offer employment to the Executive, the following:
(a) The Executive has never been suspended or expelled from
membership or barred from association with a member of a
national securities exchange;
(b) The Executive has never been subject to United States Postal
Service false representation order or subject to a restraining
order or a preliminary injunction with respect thereto;
(c) The Executive has never been convicted of felony, or any
misdemeanor in connection with the purchase or sale of any
security or involved in the making of any false filing with
the Securities Exchange Commission, or misdemeanors arising
out of the conduct of the business of an underwriter broker,
dealer, municipal securities dealer or investment advisor;
(d) The Executive is not currently engaged as an Employee or
consultant to any other business;
(e) The Executive is not currently engaged in any litigation as a
plaintiff or defendant;
(f) The Executive has not declared bankruptcy within the prior
five years;
(g) The execution of this Employment Agreement is not a breach or
default under any other Agreement to which the Executive is a
party.
VIII
MISCELLANEOUS
8.1 Successors; Binding Agreement. This Agreement shall not be
terminated by the voluntary or involuntary dissolution of the Company or by any
merger or consolidation, whether or not the Company is the surviving or
resulting corporation, or upon any transfer of all or substantially all of the
assets of the Company. In the event of any such merger, consolidation or
transfer of assets, the provisions of this Agreement shall bind and inure to the
benefit of the surviving or resulting corporation, or the corporation to which
such assets shall have been transferred, as the case may be; provided, however,
that the Company will require any successor
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to all or substantially all of the business and/or assets of the Company, by
agreement in form and substance satisfactory to the Executive, to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place.
8.2 Arbitration. Any disputes or controversy between the parties to
this Agreement, including allegations of fraud and misrepresentation arising
from or as a result of this Agreement, the resulting business dealings between
Company and the Executive, the Executive's employment or the termination
thereof, including any claims of discrimination or other claims under any
federal, state, or local law or regulation now in existence or hereinafter
enacted concerning in any way the subject of the Executive's employment with
Company or its termination, shall be resolved, after the parties attempt
informal resolution, exclusively by arbitration in accordance with the National
Rules for the Resolution of Employment Disputes of the American Arbitration
Association. All arbitration hearings shall be held in Orange County, California
within one hundred twenty (120) days from the date arbitration is demanded by
any of the parties and the arbitrator shall render his/his written decision
within thirty days after the arbitration hearing has concluded. The decision of
the arbitrator shall be final and binding on all parties, and may be entered as
a judgment by any party with any federal or state court of competent
jurisdiction. The parties to the arbitration hearing shall share any filing fees
and arbitrator's fees which must be paid in advance of the hearing equally;
however, as set forth below the prevailing party shall be entitled to recover
from the losing party all costs that it has incurred as a result of the
arbitration hearing, including fees paid to the arbitrator, travel costs and
attorneys' fees. This provision shall not alter the rights of the parties to
seek and obtain the provisional equitable remedies provided under any applicable
state or federal law. The Executive represents, by his signature, that he is
making a voluntary and knowing waiver of his right to pursue any and all
employment-related claims in court.
8.3 No Waiver. The waiver by either party of a breach of any provision
of this Agreement shall not operate as or be construed as a waiver of any
subsequent breach thereof.
8.4 Governing Law. This Agreement shall be construed and enforced in
accordance with the laws and decisions of the State of California.
8.5 Entire Agreement; Modifications. This Agreement, the Schedules
attached hereto, together with the written offer of employment dated July 12,
1999 sent by the Company to the Executive (the "Offer Letter") represent the
entire agreement between the parties with respect to the matters set forth
herein and supersedes all prior agreements and understandings between the
parties relating to the employment of the Executive by the Company, and it may
not be changed or terminated orally. In the event of any conflict between the
terms of this Agreement and the Offer Letter, the terms of this Agreement shall
prevail. No modification, termination, or attempted waiver of any other
provisions of this Agreement shall be valid unless in writing signed by the
party against whom the same is sought to be enforced.
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8.6 Jurisdiction; Venue. The parties do hereby agree and submit to
personal jurisdiction in the State of California for the purposes of any
proceedings brought to enforce or construe the terms of this Agreement or to
resolve any dispute or controversy relating to the Executive's employment or
arising under, as a result of, or in connection with this Agreement, and do
hereby agree and stipulate that any such proceedings shall be venued and held in
Orange County, California.
IN WITNESS WHEREOF, the parties have executed and delivered
this Agreement as of the day and year first above written.
The "Company":
FUTURELINK DISTRIBUTION CORP.
Per: /s/ XXXXX XXXXXXX
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Xxxxx Xxxxxxx, Chief Financial Officer
Per: /s/ XXXX X.X. XXXXX
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Xxxx X.X. Xxxxx, Secretary
) The "Executive":
)
/s/ )
---------------------- ) By: /s/ XXXXXXX XXXXXX
Witness ) --------------------------------------
XXXXXXX XXXXXX
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