Exhibit 10.86

 

LOGO [g6193785img.jpg]

 

March 17, 2005

 

PRIVATE & CONFIDENTIAL

 

Mr. Harry L. You

[Address]

 

Employment Letter and Terms and Conditions of Employment

Full-Time, Salaried CEO and Managing Director

 

Dear Harry:

 

On behalf of BearingPoint, Inc. (the “Company”), by this letter (the “Employment
Letter”), I am pleased to offer you the position of Chief Executive Officer and
Managing Director of the Company in our headquarters office, effective March 21,
2005 (the “Effective Date”). Your annualized salary will be $750,000.00, paid
semi-monthly, subject to standard withholdings and deductions. You will also be
eligible to participate in the Company’s 2000 Long-Term Incentive Plan (the
“LTIP”) and be eligible for future compensation adjustments, but in no event
will your annualized salary be decreased below $750,000. You will report
directly to the Board of Directors (the “Board”) of the Company and your
performance will be reviewed by the Board at least annually. You will also serve
as a member of the Board and, within a reasonable period of time after the
Effective Date, will serve as Chairman of the Board. You will have such duties
and responsibilities as are commensurate with your position. You will have
meaningful input with respect to the Company’s general performance goals. Your
employment shall be “at-will.” Your employment may be terminated by the Company
at any time and for any or no reason. Your employment may be terminated by you
with three months’ prior notice, as provided in your Managing Director
Agreement.

 

Equity. Effective on the first business day after you sign this Employment
Letter (the “Option Grant Date”), you will be provided an initial grant of
2,000,000 options (the “Options”) to purchase shares of Company common stock
under the Company’s LTIP, a copy of which was previously provided to you, or
otherwise. The Options shall vest 25% each year commencing on the one-year
anniversary of the grant date. The exercise price of the Options will be equal
to the last available closing price of the Company’s common stock on the first
business day prior to the Option Grant Date. The attached Award Notice of Stock
Option Grant and Stock Option Agreement detail the various terms of your initial
grant, and require your signature of acceptance. If the grant of Options is not
done under the LTIP, the Company agrees that it will register the shares
underlying the Options on a Form S-8.

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Mr. Harry L. You

March 17, 2005

Page 2

 

Effective on the Option Grant Date, you also shall receive an award of 750,000
restricted stock units (“Restricted Stock”). The Restricted Stock shall vest
each year commencing on the second anniversary of the Option Grant Date as
follows:

 

End of Year 2

   8.33% (62,500)

End of Year 3

   16.67% (125,000)

End of Year 4

   25% (187,500)

End of Year 5

   25% (187,500)

End of Year 6

   16.67% (125,000)

End of Year 7

   8.33% (62,500)

 

Prior to the Effective Date, you will receive a Restricted Stock Agreement
substantially in the form attached hereto that details the various terms of your
grant, and requires your signature of acceptance. If the grant of Restricted
Stock is not done under the LTIP, the Company agrees that it will register the
shares underlying the Restricted Stock on a Form S-8.

 

All unvested Options and Restricted Stock will immediately vest upon the
occurrence of a Change in Control of the Company, as such term is defined in the
LTIP on the date hereof or a termination of employment due to death or
“Disability” (as such term is defined in the LTIP on the date hereof). On a
termination of your employment by the Company without Cause or by you for Good
Reason, the portion of the Option and/or Restricted Stock award scheduled to
vest on the anniversary of the grant date following your termination shall vest
on the date of your termination.

 

You are also eligible to receive additional annual grants of stock options,
and/or other equity awards on at least the same basis as other senior executives
of the Company. To the extent shares are not available under the Company’s
equity plans to provide for the equity grants described herein, the Company
agrees to use its best efforts to satisfy all conditions required to add the
required shares to the applicable plans or to provide equivalent value to you.

 

Annual Bonus. You will be eligible to receive an annual bonus with a target
amount equal to at least 100% of your base salary (the “Target Bonus”) upon
achievement of reasonable pre-established performance goals. You will have
meaningful input with respect to the formulation of the performance goals. Your
annual bonus may be paid in cash or any other form in which (and at such time
as) annual bonuses are paid to other

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Mr. Harry L. You

March 17, 2005

Page 3

 

senior executives of the Company. Any such payment shall be subject to standard
withholdings and deductions.

 

Sign-On Bonus. Within 30 days following the Effective Date of your employment,
you will receive a cash lump sum sign-on bonus in the amount of $1,000,000 (the
“Sign-On Bonus”), less standard withholdings and deductions; provided, that you
shall repay the Sign-On Bonus within 10 business days following termination of
your employment by the Company for Cause or your voluntary termination without
Good Reason prior to the first anniversary of the Effective Date.

 

Benefits/Long-Term Incentives. You will be entitled to participate in all
employee benefit (including long-term incentives), fringe and perquisite plans,
practices, programs policies and arrangements generally provided to senior
executives of the Company at a level commensurate with your position.

 

Personal Days/Holidays. You will be entitled to 25 annual personal days, accrued
monthly, to use for vacation, illness or other personal absences. These personal
days are in addition to eight Company-designated holidays. As a full-time
employee, you will also be eligible to participate in our Personal Benefits
Program.

 

Relocation. As of the Effective Date, you will provide services full-time at the
Company’s headquarters. The Company recognizes that it will require a period of
time for you to fully transition your family and your residence. As a result,
for expenses incurred during the period of time commencing on the date hereof
and ending 90 days after your relocation, the Company will pay all reasonable,
documented relocation and transitional housing and travel expenses, including a
tax gross-up payment to cover all applicable taxes relating thereto, in
connection with your relocation near the Company’s headquarters, which shall
occur no later than January 31, 2006. The Company will also offer to purchase
your current residence in Dallas based on a price determined by a mutually
agreed upon appraisal firm. In addition, the Company will reimburse you for your
real estate commissions incurred in connection with the sale of your Atherton,
California residence and the expenses of moving your personal property from
California. If the Company’s principal executive office is relocated from the
Virginia / D.C. area, the Company will provide you with all of the benefits and
payments described in this section with respect to your relocation to any such
area.

 

Business Expenses. The Company will reimburse you for the travel, entertainment
and other business expenses incurred by you in the performance of your duties in
accordance with the Company’s policies applicable to senior executives as in
effect from time to time.

 

Severance. Upon termination of your employment, the Company will pay you:
(i) any earned but unpaid base salary through the date of termination, the
Sign-On Bonus if then

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Mr. Harry L. You

March 17, 2005

Page 4

 

payable pursuant to the section titled “Sign-On Bonus” above, and any earned but
unpaid annual bonus for any preceding year, provided, however, that your
employment terminates after the payment date for the annual bonus, (ii) any
unpaid accrued personal days or unreimbursed business expenses, (iii) in the
circumstances specified below in the section titled “Termination without Cause
or for Good Reason,” the payments specified in that section, and (iv) any other
amounts due under any of the Company’s benefit plans. Payment of the amounts
specified in subsection (iii) above shall be conditioned upon your execution of
a full and binding unilateral Release of all claims arising from or associated
with your employment with the Company, which will include a release of all known
claims against you, a form of which is attached hereto (the “Release
Agreement”). You will have no obligation to mitigate any payments made under
this section of this Employment Letter, and any such payments will not be
subject to offset, except as to claims that the Company has against you.

 

Termination without Cause or for Good Reason. Upon your termination of
employment by the Company without Cause, or by you for Good Reason, the Company
will pay you a lump sum cash amount equal to two times the sum of your
(i) annual base salary and (ii) your then current Target Bonus (if established
at such time) or, if the Target Bonus is not yet established, then the prior
year’s actual bonus. The lump sum cash payment shall be made within 30 days of
the date of receipt by the Company of your fully executed Release Agreement as
specified in the “Severance” section above, but in no event will the Release
Agreement be signed and payment made later than March 17 following the calendar
year in which the termination occurs. The Company will also pay your premiums
under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, on
your behalf for 18 months after termination of your employment without Cause or
for Good Reason.

 

Special Termination Agreement. Upon a Change of Control of the Company, you
shall be entitled to receive the payments and other benefits specified in your
Special Termination Agreement, a copy of which is attached, and while eligible
to receive such payments and other benefits you shall not be eligible to receive
any payment or benefits under the above sections titled “Severance” and
“Termination without Cause or for Good Reason.”

 

Indemnification. The Company will indemnify you to the fullest extent permitted
by (i) law with respect to your activities on behalf of the Company and (ii) for
any failure by the Company to comply with Section 409A of the Internal Revenue
Code of 1986, as amended (the “Code”), unless such failure is a result of your
act or omission. It is the policy and practice of the Company to reasonably
ensure that the Company and all new employees honor the terms of any reasonable
post-employment restrictions contained in agreements with prior employers of
such new employees. By accepting this offer of employment, you affirmatively
warrant and represent to the Company that: (1) the duties associated with your
prior executive positions over the past five years have not included

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Mr. Harry L. You

March 17, 2005

Page 5

 

providing consulting services to the clients and prospective clients (as those
terms are defined in the relevant contractual agreement(s) with such prior
employers) of any prior employer or meeting with, soliciting or marketing such
clients or prospective clients for the purpose of your prior employer providing
consulting services to them other than interacting with such clients or
prospective clients as a representative of the senior management team or
providing such clients with information in connection with your duties as Chief
Financial Officer and (2) you have previously disclosed in writing to the
Company all documentation associated with prior employers which may have the
effect of restricting your post-employment activities on behalf of the Company.
Although it is expected that your duties as Chief Executive Officer will not be
restricted as a result of any agreements with your prior employer, in good
faith, within 30 days of the Effective Date of your employment with the Company,
you shall review a list of “Clients” and “Prospective Clients” of the Company,
as those terms are defined in your Managing Director Agreement with the Company.
You shall then identify to the General Counsel of the Company in writing, any
and all such Clients and Prospective Clients which are, or may reasonably be
deemed to be, entities from which you should recuse yourself from dealing during
some portion of your employment with the Company (which are expected to be
none).

 

Furthermore, you will never be asked to share, utilize or disclose in any way
the proprietary or confidential information of a prior employer as part of your
duties on behalf of the Company. You agree to promptly notify the General
Counsel of the Company in the event you find yourself in a position of possibly
violating your contractual agreement(s) with prior employers. If you undertake
activity that is challenged by a prior employer as being in violation of any
such agreement, the Company will indemnify you for any claims that such previous
employer may assert against you based on such agreement, including, without
limitation, any claim that a previous employer may assert to recover any amounts
paid or equity granted to you and for any amounts you are required to forfeit or
to pay to any previous employer. You will promptly notify the General Counsel in
writing upon being made aware of any such claim, arbitration or litigation, and
you shall immediately tender the defense and choice of legal counsel to the
Company, which shall have full authority to negotiate, settle or defend any such
action in its sole discretion. The Company agrees that it will consult with you
prior to the selection of such legal counsel. The aggregate amount the Company
shall pay to provide indemnity under this section to reimburse you for
(i) amounts you are required to forfeit or to pay to any previous employer,
including as damages, and (ii) equity granted to you by a prior employer that
you are required to forfeit or return shall not, in the aggregate with respect
to clauses (i) and (ii), exceed $3,500,000, and such reimbursement by the
Company shall be paid by the Company in cash within 30 days after such
forfeiture or reimbursement occurs as a result of a final, nonappealable court
order, at the written direction of the Company, or as a result of the Company
deciding not to contest such forfeiture or reimbursement.

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Mr. Harry L. You

March 17, 2005

Page 6

 

You will be covered under the Company’s D & O liability insurance on the same
basis as other senior level executives of the Company.

 

Legal Fees. The Company will pay your reasonable legal fees in connection with
the negotiation and drafting of the documents associated with the commencement
of your employment with the Company.

 

Definitions. Solely for purposes of this Employment Letter and your Managing
Director Agreement, the following definitions apply:

 

  1. Notwithstanding the provisions of your Managing Director Agreement, “Cause”
shall mean the occurrence, failure to cause the occurrence or failure to cure
after the occurrence (when a cure is permitted), as the case may be, of any of
the following circumstances after your receipt of written notification from the
General Counsel which includes a detailed description of the claimed
circumstance: (i) your embezzlement, misappropriation of corporate funds , or
your material acts of dishonesty; (ii) your commission or conviction of any
felony or of any misdemeanor involving moral turpitude, or entry of a plea of
guilty or nolo contendre to any felony or misdemeanor involving moral turpitude;
(iii) your engagement, without a reasonable belief that your action was in the
best interests of the Company, in any activity that could harm the business or
reputation of the Company in a material manner; (iv) your willful failure to
adhere to the Company’s material corporate codes, policies or procedures that
have been communicated to you ; (v) your material breach of any provision of the
Managing Director Agreement or this Employment Letter; or (vi) your violation of
any statutory or common law duty or obligation to the Company, including,
without limitation, the duty of loyalty, provided, however, that in the case of
subsections (iii), (iv), (v) and (vi), the Company shall provide you with the
opportunity to cure any Cause event during the 15-day period after your receipt
of written notice describing the Cause event, provided, however, that a Cause
event shall be considered to be cured only if all adverse consequences of the
Cause event have been fully remedied.

 

  2. Except as otherwise provided herein, “Change of Control” shall have the
meaning specified in your Special Termination Agreement with the Company.

 

  3.

“Good Reason” shall mean the occurrence or failure to cause the occurrence, as
the case may be, without your express written consent, of any of the following
circumstances for more than 15 days after receipt by the General Counsel of the
Company of your written notification and description of the claimed
circumstance: (i) any adverse change in your then positions, titles or reporting
obligations, or a material diminution of your duties, responsibilities

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Mr. Harry L. You

March 17, 2005

Page 7

 

 

or authority (including, without limitation, a failure to elect you, or nominate
you for re-election, to the Board) or the assignment to you of duties or
responsibilities that are materially adversely inconsistent with your position,
(ii) a relocation of the Company’s principal executive office to any location
outside the continental United States or a relocation of your office away from
the Company’s principal executive office, (iii) any material breach by the
Company of any provision of this Employment Letter or the Managing Director
Agreement or Special Termination Agreement you enter into with the Company, or
(iv) the failure of any successor to the Company (whether direct or indirect and
whether by merger, acquisition, consolidation or otherwise) to assume in a
writing delivered to you upon the successor becoming such, the obligations of
the Company under this Employment Letter, provided, however, that this clause
shall not apply if the transaction results in the successor becoming legally
required to fulfill the obligations of the Company under this Employment Letter,
whether by operation of law or otherwise.

 

Other Considerations.

 

There are a number of other important items we wish to cover in this Employment
Letter. They are:

 

  •   Contributory benefits (such as medical, dental, supplemental life
insurance, long-term disability and optional accidental death and dismemberment
insurance) are effective the first day of the calendar month following the
Effective Date, unless you are hired on the first day of the month, in which
case they will be effective immediately. All other non-contributory benefits
(such as business travel accident insurance, short-term disability and personal
days) are effective upon the Effective Date.

 

  •   Please read this Employment Letter and the accompanying Managing Director
Agreement and exhibits thereto carefully. Signing these documents is a condition
of employment. As noted therein, employment with the Company is not for a
specific term and may be terminated (i) by you, upon three months’ notice as
specified in your Managing Director Agreement or (ii) by the Company at any
time, for any or no reason, with or without Cause.

 

  •   In compliance with the Immigration Reform and Control Act, federal law
requires employers to verify work authorization upon hire. We have provided you
with information that describes these requirements and the documents you need to
bring on your first day of work.

 

  •  

In compliance with the Fair Credit Reporting Act, employment with the Company is
contingent upon satisfactory completion of the Company’s employment

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Mr. Harry L. You

March 17, 2005

Page 8

 

 

screening process. This includes a public source background inquiry and receipt
of satisfactory information regarding your employment history. You have signed a
Disclosure and Authorization for Release of Information form authorizing the
Company to compile a background report. If the Company finds that you have made
any misrepresentation or is dissatisfied with the results of any review of your
background, the Company may withdraw any offer of employment or terminate your
employment without obligation whatsoever on the part of the Company except
payment to you for any services rendered.

 

Miscellaneous.

 

1. Notwithstanding any provisions of the Managing Director Agreement, the
Company and you hereby agree as follows:

 

  •   Notwithstanding the representation in Section 1 of the Managing Director
Agreement, the Company acknowledges that you have delivered to it agreements
with your prior employers that contain certain purported post employment
restrictions.

 

  •   Notwithstanding Section 6(c) of the Managing Director Agreement, you shall
not be required to provide any transition services for more than 15 business
days following the last day of your employment as required by the Managing
Director Agreement. The performance of any such transition services shall be
subject to your other business and personal commitments, and you shall be
reimbursed for any expenses incurred by you in providing such services.

 

  •   Notwithstanding Section 7 of the Managing Director Agreement, except as
otherwise determined by a court or arbitrator, as applicable, each party shall
be responsible for all of its own costs (including, without limitation,
attorneys’ fees and court costs) incurred in enforcing any agreement against the
other party.

 

  •   Notwithstanding the provisions of Section 2 of the Managing Director
Agreement, the Company acknowledges that the Compensation Committee of the Board
has the authority to determine the terms of any equity award granted to you,
subject to the terms of this Employment Letter.

 

2. This Employment Letter can be amended only by a writing signed by both you
and the Company. This Employment Letter shall be governed by and construed in
accordance with the internal, domestic laws of the Commonwealth of Virginia.

 

3. In the event of any conflict between the provisions of this Employment Letter
and the provisions of your Managing Director Agreement, the terms and provisions
in this Employment Letter shall control.

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Mr. Harry L. You

March 17, 2005

Page 9

 

4. This Letter Agreement is assignable by the Company only to a successor
(whether by merger, consolidation, purchase or otherwise) to all or
substantially all of the stock, assets or business of the Company, and the
Company will require any such successor, by written agreement in form and
substance reasonably satisfactory to you, to expressly assume and agree to
perform this Employment letter in the same manner and to the same extent that
the Company would be required to perform it if no successor had taken place,
provided, however, that no such written agreement shall be required if the
transaction results in the successor becoming legally required to fulfill the
obligations of the Company under this Employment Letter, whether by operation of
law or otherwise. Except as expressly provided herein, you may not sell,
transfer, assign, or pledge any of your rights or interests under this
Employment Letter, provided that any amounts due hereunder shall, upon your
death, be paid to your estate unless you have designated a beneficiary therefore
in accordance with any applicable plan.

 

5. For the purpose of this Employment Letter, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered personally or by overnight service
or delivered or mailed by United States certified or registered mail, return
receipt requested, postage prepaid, addressed to the Company at its executive
office or to you at the address on the records of the Company; provided that all
notices to the Company shall be directed to the attention of the General
Counsel, or to such other address as either party may have furnished to the
other in writing in accordance herewith, except that notice of change of address
shall be effective only upon receipt.

 

6. If any provision of this Employment Letter or any portion thereof is declared
invalid, illegal, or incapable of being enforced by any court of competent
jurisdiction, the remainder of such provisions and all of the remaining
provisions of this Agreement shall continue in full force and effect. Failure to
insist upon strict compliance with any of the terms, covenants, or conditions of
this Employment Letter shall not be deemed a waiver of such term, covenant, or
condition, nor shall any waiver or relinquishment of, or failure to insist upon
strict compliance with, any right or power hereunder at any one or more times be
deemed a waiver or relinquishment of such right or power at any other time or
times. This Employment Letter 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.

 

7.

To the extent applicable, the Company will use its reasonable good faith efforts
to structure the applicable terms of your employment arrangements, including
this Employment Letter, the Special Termination Agreement and your equity grants
to comply with Section 409A of the Code, as amended, and such agreements or
grants, as the case may be, will be amended as necessary to comply therewith,

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Mr. Harry L. You

March 17, 2005

Page 10

 

 

provided, however, that the Company shall not be liable for any failure to
comply with Section 409A as a result of your act or omission.

 

The items in this Employment Letter, your Managing Director Agreement and
exhibits thereto, your Special Termination Agreement and the other items
referred to above represent the Company’s entire offer of employment to you. Any
contrary representations that may have been made to you at any time are
superseded by this Employment Letter. By signing below, you accept this offer of
employment in accordance with the terms and conditions of employment specified
in this Employment Letter. This offer of employment will remain open through
March 18, 2005.

 

Harry, we are excited about having you join us. To inform us of your decision,
please sign and return this Employment Letter, your Managing Director Agreement
and your Special Termination Agreement.

Should you have any questions, please contact me at (703) 747-6800, or David
Black, the Company’s General Counsel, at (703) 747-5728.

 

Very truly yours,

/s/ Roderick C. McGeary

Roderick C. McGeary Chairman and Chief Executive Officer BearingPoint, Inc.

 

ACCEPTED: /s/ Harry L. You Harry L. You