Annual Report — Form 10-K
Filing Table of Contents
Document/Exhibit Description Pages Size
1: 10-K Annual Report 87 583K
2: EX-2.2 Plan of Acquisition, Reorganization, Arrangement, 38 238K
Liquidation or Succession
3: EX-10.12 Material Contract 13 68K
4: EX-10.13 Material Contract 2 13K
5: EX-10.14 Material Contract 13 64K
6: EX-10.15 Material Contract 12 61K
7: EX-10.16 Material Contract 16± 73K
8: EX-10.17 Exibit 10.17 13 68K
9: EX-10.18 Material Contract 11 46K
10: EX-10.19 Material Contract 3 18K
11: EX-10.20 Material Contract 12 61K
12: EX-12 Statement re: Computation of Ratios 1 9K
13: EX-21 Subsidiaries of the Registrant 4 21K
14: EX-23 Consent of Experts or Counsel 1 8K
EX-10.17 — Exibit 10.17
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Exhibit 10.17
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT, dated as of November 6, 2000
(hereinafter "Agreement"), by and between PSINet Inc. (hereinafter "the
Company"), a New York corporation with its principal place of business located
at 44983 Knoll Square, Ashburn, Virginia 20147 and James F. Cragg (hereinafter
"the Executive").
WHEREAS, the Company has determined that it is in the best
interests of the Company to delegate certain management responsibilities of the
Company to the Executive;
WHEREAS, the Executive is willing to provide his services as
an employee of the Company for the inducements and on the terms and conditions
set forth below in this Agreement; and
NOW, THEREFORE, in consideration of the mutual covenants set
forth herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. EMPLOYMENT POSITION.
(a) POSITION AND DUTIES. The Company hereby employs the
Executive to serve as Executive Vice President of the Company
and President and Chief Operating Officer, North America, and
the Executive hereby accepts such employment in the capacity
and subject to the terms and conditions hereinafter set forth.
This position is a corporate officer position and, as an
officer of the Company, the Executive must stand for election
by the Company's Board of Directors (the "Board") each year of
the Term (as defined in Section 2 hereof). The Executive shall
have such powers, duties, authority, and responsibilities as
are (i) consistent with such position, (ii) assigned to such
offices in the Company's By-laws, and (iii) reasonably
assigned to the Executive by the Chairman and Chief Executive
Officer of the Company. The Executive accepts such employment
and agrees to remain in the employ of the Company and provide
management services to the Company, as determined by and under
the direction of the Chairman and Chief Executive Officer.
(b) LOCATION OF EMPLOYMENT. The principal place of employment
of the Executive shall be in the greater Washington, D.C.
area. The Executive shall be available to travel to the extent
reasonably required to carry out the duties and
responsibilities as President and Chief Operating Officer,
North America or as otherwise may be reasonably required by
the business of the Company.
(c) MANAGEMENT RESPONSIBILITIES. The Executive shall at all
times perform his responsibilities and duties with appropriate
care and consistent with his position as may be assigned by
the Chairman and Chief Executive Officer of the Company and
shall at all times exercise reasonable judgment and discretion
in the performance of such responsibilities and duties.
2. TERM OF EMPLOYMENT. The initial term of the Executive's
employment under this Agreement shall commence as of the date of this Agreement
and shall terminate on the third anniversary hereof (the "Initial Term") subject
to earlier termination as provided in Section 6. After the Initial Term, this
Agreement shall be automatically extended each year for an additional
one (1) year period (each, a "Renewal Term"). The Initial Term together with any
Renewal Term are referred to herein collectively as the "Term."
3. COMPENSATION.
(a) BASE SALARY. The Company shall pay the Executive a base
salary at a rate of $360,000.00 per year beginning on the date
hereof. Beginning on January 1, 2001 and January 1 of each
subsequent year thereafter, the Executive's base salary shall
be increased at a minimum by an amount equal to five percent
(5%) of the Executive's then current base salary. The
Executive's base salary shall be subject to additional
increases at the discretion of the Chairman and Chief
Executive Officer of the Company subject to the approval of
the Compensation Committee of the Board (the "Compensation
Committee"). The Executive's base salary shall be payable in
such installments as the Company regularly pays its other
salaried employees. All payments shall be subject to the
deduction of payroll withholdings taxes and similar
assessments as required by law or by further agreement with
the Executive.
(b) PERFORMANCE BONUS. The Company will pay the Executive a
bonus subject to the successful completion of the objectives
established for the Executive's performance for each calendar
year during the Term. The performance criteria will be issued
separately by the Chairman and Chief Executive Officer of the
Company with respect to each calendar year during the Term,
and may be changed, with mutual fairness, from time to time as
situations develop. The target bonus for the one-year period
ending December 31, 2000 will be a total of up to $360,000.00.
Separate criteria will be established for the Executive's
entitlement for the year starting January 1, 2001. Bonuses in
subsequent years during the Term will be at least equal to the
amount of the bonus during the previous calendar year.
(c) STOCK OPTIONS. On the first anniversary date of this
Agreement and each subsequent anniversary date during the
Term, the Company shall grant the Executive options to
purchase 25,000 shares of the Company's common stock (the
"Options") pursuant to the Company's Executive Stock Incentive
Plan (the "Plan") or another option plan of the Company, such
grant being subject to the terms of this Agreement and the
Executive's continued employment at the time of the grant and
evidenced by an option agreement in such form and under the
terms and conditions set forth in the applicable plan.
(d) VESTING OF STOCK OPTIONS. In the event of (i) a Change in
Control (as defined in Section 3(e) hereof); (ii) the
termination of the Executive's employment by the Company for
any reason other than for Cause (as defined in Section 6(c)
hereof); or (iii) the termination of the Executive by the
Company because of the Executive's death or disability, the
Company shall immediately vest all of the unvested stock
options the Executive has received prior to the date of the
Change in Control or Date of Termination (as defined in
Section 6(j) hereof), as applicable.
(e) CHANGE IN CONTROL. As used in this Agreement, "Change in
Control" shall mean: (i) the shareholders of the Company
approve an agreement for the sale of all or substantially all
of the assets of the Company; or (ii) the
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shareholders of the Company approve a merger or consolidation
of the Company with any other corporation (and the Company
implements it), other than (A) a merger or consolidation which
would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent
more than eighty percent (80%) of the combined voting power of
the voting securities of the Company, or such surviving
entity, outstanding immediately after such merger or
consolidation, or (B) a merger or consolidation effected to
implement a recapitalization of the Company (or similar
transaction) in which no "person" (as defined below) acquires
more than thirty percent (30%) of the combined voting power of
the Company's then-outstanding securities; or (iii) any
"person," as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act") (other than (1) the Company or (2) any corporation
owned, directly or indirectly, by the Company or the
shareholders of the Company in substantially the same
proportions as their ownership of stock in the Company), is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of
the Company representing thirty percent (30%) or more of the
combined voting power of the Company's then outstanding
securities.
4. FRINGE BENEFITS; AUTOMOBILE ALLOWANCE.
(a) During the Term, the Executive shall be entitled to the
maximum benefits that are generally provided to all senior
executives of the Company under any life insurance, group
insurance, medical, retirement, pension or other employee
benefit or incentive plans or pursuant to other arrangements
or understandings (excluding any equity, equity option or
equity bonus plans), so long as any such plan, benefit,
arrangement or understanding remains generally available to
all other senior executive officers of the Company.
(b) During the Term, the Executive shall also receive an
automobile allowance of $800 per month or whatever greater
amount the Company pays to its Executives as a matter of
standard practice from time to time.
(c) During the Term, the Executive shall be entitled to
financial and tax advice at the Company's expense through the
Mason Companies up to a maximum amount of $7,000.00 per year.
(d) During the Term, the Executive shall be entitled to four
(4) weeks paid vacation each year which can accumulate to a
maximum of six (6) weeks.
(e) The Company shall reimburse the Executive up to
$100,000.00 ("Relocation Amount") for his reasonable moving,
packing, and travel expenses (including reasonable travel by
the Executive and his spouse to prospect for a home) incurred
in connection with the Executive's relocation from St. Louis,
Missouri to the greater Washington, D.C. area ("Relocation").
The Executive's "target" date for completing his Relocation to
the greater Washington D.C. area shall be July 31, 2001. The
Company agrees to provide the Executive with a gross up for
income taxes due by the Executive for the Relocation Amount
(the "Gross Up Amount"). In consideration of the Company
paying said Relocation Amount and Gross Up Amount to the
Executive, the Executive agrees that should he terminate his
employment with the Company without Good Reason
3
pursuant to Section 6(e) herein within two (2) years after the
date of his Relocation or be terminated by the Company for
Cause (as defined in Section 6(c) herein) within two (2) years
after the date of his Relocation, the Executive shall pay the
Company the Relocation Amount plus the Gross Up Amount within
thirty (30) days of his Date of Termination with the
understanding that the Relocation Amount and Gross Up Amount
for which the Executive shall be liable will be reduced by
one-twenty fourth (1/24th) for each full month of continuous
employment after the date of his Relocation. If the Executive
terminates its employment without Good Reason pursuant to
Section 6(e) herein at any time prior to his Relocation or is
terminated by the Company for Cause (as defined in Section
6(c) herein) at any time prior to his Relocation, then the
Executive is not entitled to any Relocation Amount or Gross Up
Amount.
5. EXPENSE REIMBURSEMENT. In addition to the compensation and
benefits provided in Sections 3 and 4, the Company shall, upon receipt of
appropriate documentation, reimburse the Executive for his reasonable travel,
lodging, entertainment, and other ordinary and necessary business expenses
incurred in the course of his duties on behalf of the Company during the Term.
6. TERMINATION. The Term is subject to early termination as
provided below:
(a) TERMINATION BY THE COMPANY BECAUSE OF THE EXECUTIVE'S
DISABILITY. If at any time during the Term, the Company
determines in good faith that the Executive has been unable,
as a result of physical or mental illness or incapacity, to
perform his duties hereunder for a period of either (i) one
hundred eighty (180) consecutive days during any twelve-month
period or (ii) ninety (90) consecutive days during any
twelve-month period if the Executive's physical or mental
illness or incapacity would reasonably be expected to continue
for another consecutive ninety (90) day period after such
initial ninety (90) day period, the Term may be terminated by
the Company upon thirty (30) days' written notice to the
Executive. Should the Executive be terminated pursuant to this
Section 6(a), he shall be entitled to Termination Payments as
provided for in Section 6(g).
(b) TERMINATION BY THE COMPANY BECAUSE OF THE EXECUTIVE'S
DEATH. In the event that the Executive's death occurs prior to
the expiration of the Term, the Term shall terminate as of the
date of the Executive's death. Should the Executive be
terminated pursuant to this Section 6(b), he shall be entitled
to Termination Payments as provided for in Section 6(g).
(c) TERMINATION BY THE COMPANY FOR CAUSE. The Executive's
employment may be terminated by the Company at any time for
"Cause." In the event of a termination for Cause, all salary
and benefits otherwise payable to the Executive shall cease
immediately upon such termination. For purposes of this
Agreement, the Company shall have Cause for termination of the
Executive's employment under this Agreement by reason of (i)
any breach by the Executive of his agreement not to compete or
solicit pursuant to Section 7 hereof; (ii) any violation of
Company policy which materially and adversely affects the
business or reputation of the Company; (iii) any act or
omission by the Executive constituting willful misconduct or
gross negligence, (iv) the Executive's conviction of a felony
(or a plea of guilty or NOLO CONTENDRE thereto); (v) the
Executive's conviction of any other criminal action (or a plea
of guilty or NOLO CONTENDRE thereto) that has or might
reasonably be expected to have an adverse
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effect on the business or reputation of the Company or its
subsidiaries; (vi) the Executive's commission of an act of
fraud; (vii) a material breach by the Executive of any
provision of this Agreement which breach and the effects
thereof remain uncured for a period of thirty (30) days after
written notice, specifically identifying the breach, is given
to the Executive by the Company (however, it being expressly
understood that the Company need not provide any notice and
may terminate the Executive immediately where the Company in
good faith believes that the Executive's material breach is
not curable within thirty (30) days); or (viii) the
Executive's voluntary resignation without Good Reason and
without having given the Company at least thirty (30) days
prior written notice.
(d) TERMINATION BY THE COMPANY WITHOUT CAUSE. The Company may
terminate the employment of the Executive under this Agreement
at any time without cause with thirty (30) days' prior written
notice. Should the Executive be terminated pursuant to this
Section 6(d), he shall be entitled to Termination Payments as
provided for in Section 6(g).
(e) TERMINATION BY THE EXECUTIVE WITHOUT GOOD REASON. The
Executive may terminate his employment at any time without
Good Reason (as that term is defined in Section 6(f)),
provided that the Executive shall have given the Company at
least thirty (30) days prior written notice of such
termination. In the event of termination by the Executive
without Good Reason, the Executive's salary and benefits shall
continue during the notice period specified by the Executive
and shall cease thereafter.
(f) TERMINATION BY THE EXECUTIVE FOR GOOD REASON. The
Executive may terminate his employment at any time for Good
Reason. For purposes of this Agreement, "Good Reason" shall
mean any of the following occurrences but only if occurring
within twelve (12) months after a Change in Control:
(i) the diminution or change, without the Executive's
written consent, of his position, title, authority,
duties or responsibilities as indicated in
Section 1(a) hereof;
(ii) the Company requiring the Executive, without his
written consent, to be based at any office or
location or to relocate to any location other than
the Company's headquarters which shall be located in
the Washington, D.C. area;
(iii) any material breach by the Company of this Agreement
which is not cured within thirty (30) days after
notice is given to the Company in accordance with
this Agreement.
(g) TERMINATION PAYMENTS. A. If the Executive's employment is
terminated by the Company (1) without Cause pursuant to
Section 6(d) or (2) because of the Executive's death or
disability pursuant to Section 6(a) or (b) (each of the
circumstances in Section 6(g)(A)(1) and (2) being known as a
"Termination Event"), the Company shall provide the Executive
(or, in the case of his death, his estate, heirs or legal
representatives) the following (collectively, the "Termination
Payments"), to be paid or given
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within thirty (30) days of the Date of Termination (except
with respect to item (iii) below which will be granted and
given in accordance with Section 3(d) herein):
(i) a lump sum representing (1) the Executive's monthly base
salary as derived from the Executive's annual salary and
giving effect to all annual increases thereto as provided in
Section 3(a) herein, times the greater of (Y) the number of
months remaining in the current Term and (Z) twenty-four (24)
months; and (2) all other accrued and unpaid amounts due to
the Executive as of the Date of Termination (including,
without limitation, accrued vacation pay and reimbursement of
business expenses);
(ii) a lump sum representing all annual bonus amounts, as
provided for in Section 3(b) hereof, calculated on the
assumption that all performance criteria objectives would have
been exceeded, such that the Executive would receive the
maximum bonus established by the President and Chief Operating
Officer of the Company to which the Executive would have been
entitled had he remained employed by the Company for the
longer of (Y) the remainder of the current Term or (Z)
twenty-four (24) months after the Date of Termination; and
(iii) the vested options provided in Section 3(d).
Moreover, should the Company terminate the Executive without
Cause pursuant to Section 6(d) herein, the Executive shall be entitled
to the immediate vesting of such number of options as are equal to the
number which would have vested, ratably, monthly, had the Executive
remained employed for the longer of the remainder of the current Term
or twenty-four (24) months after the Date of Termination.
B. If the Executive terminates his employment for Good Reason
as defined in Section 6(f) or a Termination Event occurs within twelve
months after a Change in Control, the Executive is entitled to the
Termination Payments as stated in Section 6(g)(A)(i) (ii) and (iii)
above as well as the following:
(iv) continuation of all life insurance and health benefits,
disability insurance and benefits and reimbursement
theretofore being provided to the Executive and/or his family,
or such other more favorable benefits applicable to any senior
executive officer of the Company, to which the Executive would
have been entitled had he remained employed by the Company for
the longer of (Y) the remainder of the current Term or (Z)
twenty-four (24) months after the Date of Termination, with
the exception of the car allowance as provided in Section 4(b)
herein;
(v) Company contributions, to the extent permitted by
applicable law, to a SEP-IRA, Keogh or other retirement
mechanism reasonably selected by the Executive sufficient to
provide the same level of retirement benefits the Executive
would have received if he had remained employed by the Company
for the longer of (Y) the remainder of the current Term or (Z)
twenty-four (24) months after the Date of
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Termination provided, however, that the Company shall make up
the difference in cash payments directly to the Executive to
the extent that applicable law would not permit it to make
such contributions;
C. In consideration of the Termination Payments provided in
this Section 6(g)(A) and (B), the Executive agrees to execute a
termination of employment agreement under which the Executive agrees to
fully release all claims against the Company.
(h) TAX PROVISIONS. In the event that any payments under this Agreement
or any other compensation, benefit or other amount from the Company for
the benefit of the Executive are subject to the tax imposed by Section
4999 of the Internal Revenue Code of 1986, as amended (the "Code")
(including any applicable interest and penalties, the "Excise Tax"), no
such payment ("Parachute Payment") shall be reduced (except for
required tax withholdings) and the Company shall pay to the Executive
by the earlier of the date such Excise Tax is withheld from payments
made to the Executive or the date such Excise Tax becomes due and
payable by the Executive, an additional amount (the "Gross-Up Payment")
such that the net amount retained by the Executive (after deduction of
any Excise Tax on the Parachute Payments, taxes based upon the Tax Rate
(as defined below) upon the payment provided for by this Section 6(h)
and Excise Tax upon the payment provided for by this Section 6(h)),
shall be equal to the amount the Executive would have received if no
Excise Tax had been imposed. A Tax counsel chosen by the Company's
independent auditors, provided such person is reasonably acceptable to
the Executive ("Tax Counsel"), shall determine in good faith whether
any of the Parachute Payments are subject to the Excise Tax and the
amount of any Excise Tax, and Tax Counsel shall promptly notify the
Executive of its determination. The Company and the Executive shall
file all tax returns and reports regarding such Parachute Payments in a
manner consistent with the Company's reasonable good faith
determination. For purposes of determining the amount of the Gross-Up
Payment, the Executive shall be deemed to pay taxes at the Tax Rate
applicable at the time of the Gross-Up Payment. In the event that the
Excise Tax is subsequently determined to be less than the amount taken
into account hereunder at the time a Parachute Payment is made, the
Executive shall repay to the Company promptly following the date that
the amount of such reduction in Excise Tax is finally determined the
portion of the Gross-Up Payment attributable to such reduction (without
interest). In the event that the Excise Tax is determined to exceed the
amount taken into account hereunder at the time a Parachute Payment is
made (including by reason of any payment the existence or amount of
which cannot be determined at the time of the Gross-Up Payment), the
Company shall pay the Executive an additional amount with respect to
the Gross-Up Payment in respect of such excess (plus any interest or
penalties payable in respect of such excess) at the time that the
amount of such excess is finally determined. The Company shall
reimburse the Executive for all reasonable fees, expenses, and costs
related to determining the reasonableness of any Company position in
connection with this paragraph and preparation of any tax return or
other filing that is affected by any matter addressed in this
paragraph, and any audit, litigation or other proceeding that is
affected by any matter addressed in this Section 6(h) and an amount
equal to the tax on such amounts at the Executive's Tax Rate. For the
purposes of the foregoing, "Tax Rate" means the Executive's effective
tax rate based upon the
7
combined federal and state and local income, earnings, Medicare and any
other tax rates applicable to the Executive, all at the highest
marginal rate of taxation in the country and state of the Executive's
residence on the date of determination, net of the reduction in federal
income taxes which could be obtained by deduction of such state and
local taxes.
(i) NOTICE OF TERMINATION. Any termination of the Executive's
employment during the Term by the Company or by the Executive shall be
communicated by Notice of Termination to the other party hereto given
in accordance with Section 16 of this Agreement. For purposes of this
Agreement, a "Notice of Termination" means a written notice which (i)
indicates the specific termination provision in this Agreement relied
upon, (ii) to the extent applicable, sets forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination
of the Executive's employment under the provision so indicated, and
(iii) if applicable, specifies a termination date. The failure by the
Executive or the Company to set forth in the Notice of Termination any
fact or circumstance which contributes to a showing of Good Reason or
Cause shall not waive any right of the Executive or the Company
hereunder or preclude the Executive or the Company, as applicable, from
asserting such fact or circumstance in enforcing the Executive's or the
Company's rights hereunder.
(j) DATE OF TERMINATION. For purposes of this Agreement, "Date of
Termination" means (i) if the Executive's employment is terminated by
reason of death, the date of death; or (ii) if the Executive's
employment is terminated under any other circumstances, the date of
receipt of the Notice of Termination by the party being so notified or
any later date specified therein. For purposes of this Agreement, the
Executive will be deemed to be employed through the end of the calendar
day on the Date of Termination.
7. COVENANTS OF EXECUTIVE
(a) COVENANT NOT TO COMPETE. In consideration of the Executive's
employment pursuant to this Agreement and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the Executive agrees that, so long as the Executive is
employed by the Company under this Agreement and for a period of
twelve (12) months following the termination of such employment (but
only if the Company has elected to enforce the restriction), the
Executive shall not, without the prior written consent of the
Company, either for the Executive or for any other person, firm or
corporation, own, manage, operate, control, be employed by,
participate in or be associated in any manner with the ownership,
management, operation or control of any business providing
Internet-related, E-commerce, web-hosting, network or communication
services competitive with the Company as of the Date of Termination
or within six (6) months thereafter. The foregoing shall in no event
restrict the Executive from: (i) writing or teaching, whether on
behalf of for-profit, or not-for-profit institution(s); (ii)
investing (without participating in management or operation) in the
securities of any private or publicly traded corporation or entity;
or (iii) after termination of employment, becoming employed by a
hardware, software or other vendor to the Company, provided that
such vendor does not offer Internet-related, E-commerce,
web-hosting, network
8
or communication services that are competitive with the services
offered by the Company as of the Date of Termination or within six
(6) months thereafter.
(b) NONSOLICITATION. In consideration of the Executive's employment
pursuant to this Agreement and for other good and valuable
consideration, the receipt and adequacy of which is hereby
acknowledged, the Executive agrees that, so long as the Executive is
employed by the Company under this Agreement and for a period of
eighteen (18) months following the termination of such employment,
the Executive agrees not to hire, solicit, nor attempt to solicit
for himself or any third party, the services of any employee or
subcontractor of the Company or any of the Company's subsidiaries or
affiliates without the Company's prior written consent; provided,
however, that the Executive is not prevented from employing such
person who contacts the Executive on his or her own initiative and
without any direct or indirect solicitation by the Executive.
(c) BREACH/THREATENED BREACH. The Executive may request permission
from the Company's Board of Director's to engage in activities which
would otherwise be prohibited by Section 7(a) or (b). The Company
shall respond to such request within thirty (30) days after receipt.
The Company shall notify the Executive in writing if it becomes
aware of any breach or threatened breach of any of the provisions in
Section 7(a) or (b), and the Executive shall have thirty (30) days
after receipt of such notice in which to cure or prevent the breach,
to the extent that the Executive is able to do so. The Executive and
the Company acknowledge that any breach or threatened breach by the
Executive of any of the provisions in Section 7(a) or (b) above
cannot be remedied by the recovery of damages, and agree that in the
event of any such breach or threatened breach which is not cured
with such 30-day period, the Company may pursue injunctive relief
for any such breach or threatened breach. If a court of competent
jurisdiction determines that the Executive breached any of such
provisions, the Executive shall not be entitled to any Termination
Payments from and after date of the breach. In such event, the
Executive shall promptly repay any Termination Payments previously
made plus interest thereon from the date of such payment(s) at 12%
per annum. If, however, the Company has suspended making such
Termination Payments and a court of competent jurisdiction finally
determines that the Executive did not breach such provision or
determines such provision to be unenforceable as applied to the
Executive's conduct, the Executive shall be entitled to receive any
suspended Termination Payment, plus interest thereon from the date
when due at 12% per annum. The Company may elect (once) to continue
paying the Termination Payments before a final decision has been
made by the court.
(d) OWNERSHIP OF WORK PRODUCt. All copyrights, patents, trade
secrets, or other intellectual property rights associated with any
ideas, concepts, techniques, inventions, processes, or works of
authorship developed or created by the Executive during the course
of performing the Company's work (collectively the "Work Product")
shall belong exclusively to the Company and shall, to the extent
possible, be considered a work made for hire for the Company within
the meaning of Title 17 of the United States Code. The Executive
automatically assigns, and shall assign at the time of creation of
the Work Product, without any requirement of further consideration,
any right, title, or interest the Executive may have in such Work
Product, including any copyrights or other intellectual
9
property rights pertaining thereto. Upon request of the Company, the
Executive shall take such further actions, including execution and
delivery of instruments of conveyance, as may be appropriate to give
full and proper effect to such assignment.
(e) EQUITABLE RELIEF. The Executive acknowledges and agrees that the
covenants and obligations of Executive contained in Section 7 hereof
relate to special, unique and extraordinary matters and are
reasonable and necessary to protect the legitimate interests of the
Company and that a breach of any of the terms of such covenants and
obligations will cause the Company irreparable harm and injury for
which adequate remedies at law are not available. The Executive
therefore agrees that the Company need not prove actual damages in
order to obtain injunctive relief, a restraining order, an order of
specific performance or any other equitable relief (together,
"Equitable Relief") with respect to any of Executive's obligations
under Section 7. The Executive hereby waives any claim or defense
therein that the Company has an adequate remedy at law or that money
damages would provide an adequate remedy. It shall, however, be the
option of the Company whether or not to seek Equitable Relief.
8. REPRESENTATION AND WARRANTIES.
(a) THE COMPANY. The Company hereby represents and warrants
to the Executive as follows:
(i) the Company is duly organized, validly existing and
in good standing under the laws of the State of New
York;
(ii) this Agreement has been duly authorized, executed and
delivered by the Company and will constitute the
legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with
its terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws
affecting the rights of creditors generally and to
general principles of equity whether considered in a
suit at law or in equity; and
(iii) the execution and delivery of this Agreement by the
Company, the performance by the Company of its
obligations hereunder and the consummation by the
Company of the transactions contemplated hereby will
not violate any agreement to which the Company is a
party.
(b) EXECUTIVE. The Executive hereby represents and warrants to
the Company as follows:
(i) this Agreement has been duly executed and delivered
by the Executive and will constitute the legal, valid
and binding obligation of the Executive, enforceable
against the Executive in accordance with its terms,
subject to applicable bankruptcy, insolvency,
moratorium or other similar laws affecting the rights
10
of creditors generally and to general principles of
equity whether considered in a suit at law or in
equity;
(ii) the execution and delivery of this Agreement by
Executive, the performance by the Executive of his
obligations hereunder and the consummation by the
Executive of the transactions contemplated hereby
will not violate any agreement to which he is a
party; and
(iii) the Executive has made such investigations of the
business and properties of the Company as he deems
necessary or appropriate before entering into this
Agreement.
9. TRANSFERABILITY.
(a) This Agreement is personal to the Executive and without
the prior written consent of the Company shall not be
assignable by the Executive otherwise than by will or the laws
of descent and distribution. This Agreement shall inure to the
benefit of and be enforceable by the Executive's legal
representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company, its successors and assigns.
(c) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation, share exchange
or otherwise) to all or substantially all of the business
and/or assets of the Company to expressly assume in writing
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. As used in this
Agreement, "Company" shall mean the Company as defined herein
and any successor to its businesses and/or assets as aforesaid
that assumes and agrees to perform this Agreement by operation
of law, or otherwise. A failure of the Company to cause a
successor to assume this Agreement in any such transaction
shall be a breach of this Agreement by the Company.
10. NONEXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any
benefit, plan, program, policy or practice provided by the Company and for which
the Executive may qualify (except with respect to any benefit to which the
Executive has waived his rights in writing), nor shall anything herein limit or
otherwise affect such rights as the Executive may have under any other contract
or agreement entered into after the date of this Agreement with the Company.
Amounts which are vested benefits or which the Executive is otherwise entitled
to receive under any benefit, plan, policy, practice or program of, or any
contract or agreement entered into with, the Company shall be payable in
accordance with such benefit, plan, policy, practice or program or contract or
agreement except as explicitly modified by this Agreement.
11. FULL SETTLEMENT; MITIGATION; COSTS AFTER A CHANGE IN CONTROL.
In no event shall the Executive be obligated to seek other employment or take
any other action by way of mitigation of the amounts (including amounts for
damages for breach) payable to the Executive under any of the provisions of this
Agreement, and such amounts shall not be reduced whether or
11
not the Executive obtains other employment. In addition, following a Change in
Control only, the Company's obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive or others.
Notwithstanding any other provisions in this Agreement to the contrary, in the
event that, following a Change in Control, any successor in interest to the
Company unsuccessfully contests and/or challenges any of the Executive's rights
under this Agreement, then the successor in interest to the Company shall pay
the Executive's reasonable attorney's fees and costs incurred in such contest or
challenge.
12. NO WAIVER. The Executive's or the Company's failure to
insist upon strict compliance with any provision of this Agreement or the
failure to assert any right the 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.
13. ARBITRATION. With the exception of disputes arising under
Section 7 hereof, any dispute arising under this Agreement shall be settled by
arbitration in accordance with the rules of the American Arbitration Association
and judgment upon the award rendered by the arbitrator may be rendered in any
court having jurisdiction thereof. Arbitration hereunder shall be by a single
arbitrator appointed by agreement of the parties. The parties shall agree that
any arbitration award shall be final and binding on the parties. Except as
stated otherwise in Paragraph 11 of this Agreement, each party shall bear its
own costs and attorneys' fees associated with the arbitration.
14. SEVERABILITY. The provisions of this Agreement will be
deemed severable, and if any part of any provision is held to be illegal, void,
voidable, invalid, nonbinding, or unenforceable in its entirety or partially or
as to any party, for any reason, such provision may be changed, consistent with
the intent of the parties hereto, to the extent reasonably necessary to make the
provision, as so changed, legal, valid, binding, and enforceable. If any
provision of this Agreement is held to be illegal, void, voidable, invalid,
nonbinding, or unenforceable in its entirety or partially or as to any party,
for any reason, and if such provision cannot be changed consistent with the
intent of the parties hereto to make it fully legal, valid, binding, and
enforceable, then such provision will be stricken from this Agreement, and the
remaining provisions of this Agreement will not in any way be affected or
impaired, but will remain in full force and effect.
15. ENTIRE AGREEMENT/AMENDMENTS. This Agreement contains and
its terms constitute the entire agreement of the parties and supersedes all
prior agreements regarding the subject matter herein. This Agreement supersedes
and replaces any prior or contemporaneous agreements, negotiations,
correspondence, undertakings and communications of the parties, oral or written
regarding the subject matter herein. No amendment or modification of any
provision of this Agreement shall be effective unless in writing and signed by
the party against whom enforcement of such amendment or modification is sought.
16. NOTICES. All notices required to be given or which may be
given under this Agreement shall be in writing, delivered in accordance with one
or more of the following and deemed received upon the earlier of (i) when it is
personally delivered to the party, (ii) three (3) days after having been mailed
by certified mail, postage prepaid, return receipt requested, (iii) two (2) days
after having been sent via overnight delivery by a recognized overnight delivery
service or (iv) one (1) day after having been sent via facsimile transmission,
in each case
12
addressed to the party intended to be notified at the address of such party as
set forth in the records of the Company or such other address as such party may
designate in writing to the other.
17. GOVERNING LAW. This Agreement shall be governed by the
laws of the Commonwealth of Virginia without giving effect to the conflicts of
law principles thereof.
18. SURVIVAL. All provisions which may reasonably be
interpreted or construed to survive the expiration or termination of this
Agreement shall survive the expiration or termination of this Agreement.
19. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original and all of which
shall be one and the same instrument.
20. EXECUTION. This Agreement shall be deemed effective upon
the execution by the Company and the Executive.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered as the date first written above.
Executive:
/S/ JAMES F. CRAGG
--------------------------------------------
James F. Cragg
PSINet Inc. ("Company"):
By: /S/ WILLIAM L. SCHRADER
---------------------------------
Title: Chairman and Chief Executive Officer
Dates Referenced Herein and Documents Incorporated by Reference
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