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Exhibit 10.3
EMPLOYMENT AGREEMENT
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 electi
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