Employment
Agreement (this “Agreement”) dated as of
November 14, 2006 (the “Effective Date”), by and
between Internap Network Services Corporation (the
“Company”) and Jack Waterman (“Executive”)
(collectively the “Parties”). This agreement becomes
effective upon the closing of the merger (the “Merger”)
contemplated by that certain Agreement and Plan of Merger, dated as
of October 12, 2006, by and among the Company, Ivy Acquisition
Corp., and VitalStream Holdings, Inc. (the “Merger
Agreement”). This Agreement supersedes in its entirety the
Employment Agreement dated as of October 12, 2006, which is
hereby terminated. This Agreement shall be null and void upon the
termination of the Merger Agreement.
1. Position and Duties . Executive shall serve as
President for the Company, with such duties, authorities and
responsibilities as are commensurate with such position. Executive
shall report to the Company’s Chief Executive Officer
(“CEO”) and shall work from the Company’s offices
in Costa Mesa, California.
2. Base
Salary. Executive shall receive an annual base salary of
$375,000 (“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 from time to time by
the CEO 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 . You will be eligible to
participate in the Internap’s annual incentive plan as in
effect for any calendar year during the Term (“Incentive
Plan”), which is based on the achievement of company goals
established by senior management and approved by the Board of
Directors, as well as your individual performance. Your initial
bonus opportunity under the Incentive Plan will be up to 50% of
your annual base salary, subject to the terms of the Incentive Plan
and pro-rated for the length of your employment by Internap as a
portion of the full fiscal year.
4. Equity
Compensation. The Company and Executive acknowledge that the
CEO shall recommend to the Board that the Company issue to
Executive an initial restricted stock award consisting of shares of
the Company’s common stock having an aggregate value as of
the date of issuance equal to $1,000,000, subject to the
determination of the Board in its sole discretion and to the terms
and conditions of the relevant plan(s) and related restricted stock
agreement(s) (the “Awards”), provided that if the grant
is not made within 30 days after the closing of the Merger,
any transfer restrictions not mandated by Rule 145 under the
Securities Act of 1933, as amended, of the Affiliate Agreement
shall terminate.
5. Employee Benefits. Executive shall be entitled to
participate in all
employee
benefit, welfare and other plans and programs generally applicable
to other senior executives of the Company. Except as provided
herein, the Company reserves the right to modify Executive’s
benefits from time to time, as it deems necessary, so long as they
remain consistent with those of generally applicable to other
senior executives. Company will continue to pay on behalf of
Executive a car allowance payment equivalent to his car allowance
in effect immediately prior to the Merger, which car allowance will
continue for the remainder of the current car lease.
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.
Jack Waterman will
be appointed as a director of the Company, subject to the
Company’s Board of Directors’ approval of such
appointment in accordance with its nomination
procedures.
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 an 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 Awards
shall lapse and expire, and all of Executive’s vested Awards
shall remain exercisable until three months after the date of
termination. No payment or acceleration of Awards 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. Notwithstanding the
above, upon Executive’s involuntary termination by the
Company of his employment without Cause any transfer restrictions
of the Affiliate Agreement not mandated by Rule 145 under the
Securities Act of 1933, as amended, shall terminate
immediately.
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 the sum of Executive’s then-current Base Salary and
maximum target Bonus and (ii) all
of
Executive’s unvested Awards shall become vested, free of
restrictions and immediately exercisable for the remaining term of
the relevant grant or award and (iii) any transfer
restrictions not mandated by Rule 145 under the Securities Act
of 1933, as amended, of the Affiliate Agreement shall
terminate.
Payment of such
severance payments shall be subject to standard payroll tax
withholdings and deductions.
No payment or
acceleration of Awards 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”), 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
nomina
|
