exv10w2



 





EXHIBIT 10.2




EMPLOYMENT AGREEMENT




     This Agreement, dated as of November 9, 2001, is made and entered into by and between Avanade
Inc., a corporation organized under the laws of the State of Delaware (the “Company”), and Dennis
Knapp (“Employee”). For the definitions of certain terms used in this Agreement, see Section 7
below.



     The Company and Employee agree as follows:



Section 1. Employment




     1.1 The Company hereby employs Employee, and Employee hereby accepts employment, as an
employee of the Company for the Term (as defined in Section 3.1), subject to and in
accordance with the provisions of this Agreement.



     1.2 Employee will report to the CEO, or his designee. From the date of this Agreement through
its termination, Employee will serve in such positions as directed by the the Board of Directors of
the Company (the “Board”) and/or the Chief Executive Officer.



     1.3 During the Term, Employee will devote his best efforts, special expertise and full
business time and attention to the Company’s business to the exclusion of all other employment,
engagements, consulting or other business activities, unless otherwise approved in writing by the
Board or the President. Subject to direction of the Board, Employee will have such duties,
responsibilities, powers and authority that are prescribed by the Board, the President or the
bylaws of the Company.



Section 2. Compensation




     2.1 From the date of this Agreement until otherwise directed by the Board, the Company will
pay Employee a base salary at the annual rate of $215,000 prorated on a daily basis for any period
less than a full year. Unless otherwise agreed upon by the parties, the Company will pay Employee’s
base salary accrued in arrears twice monthly, subject to federal income tax and other applicable
withholding.



     2.2 In addition to Employee’s base salary under Section 2.1, the Company will pay Employee
such bonuses and other incentive compensation as may be determined from time to time by the Board.
The Employee is initially eligible for an annual cash bonus with a target of 40% of base salary,
subject to the sole and complete discretion of the Compensation Committee of the Board.



     2.3 The Company will grant Employee shares of the Company’s common stock and options to
purchase shares of the Company’s common stock as set forth in this Section 2.3. Employee’s stock
and option grants will be subject in all cases to Board or Compensation



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Committee approval, and subject to the definitions and other terms and conditions of the Company’s
2000 Stock Incentive Plan (as the same may be amended from time to time, the “SIP”) and Employee’s
stock option agreement.





	 	(a)	 	A grant of 50,000 shares of common stock of the Company (the
“Grant Shares”) at a fair market valuation to be determined by the Board on
the date the Board makes the grant and subject to the terms and conditions set
forth by the Board in a grant letter to accompany the Grant Shares.
	 
	 	(b)	 	An option to purchase 50,000 shares of the Company’s common
stock at a price equal to the fair market value of the common stock on the
date the Board makes the grant. This option is subject to a vesting schedule
of 25% at the end of year 1 and 1/48th every month thereafter (a four-year
vesting schedule).
	 
	 	(c)	 	The stock grant, the options and any shares acquired upon
exercise of the options will not be transferable or assignable until the
earliest of a qualified IPO of the Company, July 1, 2005, or in the event of
certain transactions (as further defined in the SIP, the stock option
agreements and/or the grant letter accompanying the Grant Shares).
	 
	 	(e)	 	The options will be for a term of ten (10) years, subject to
earlier termination in the event of any termination of Employee’s employment
and certain other events as provided for in the SIP or the stock option
agreement.
	 
	 	(f)	 	If Employee’s employment terminates prior to a qualified IPO
of the Company, July 1, 2005, or certain corporate transactions (as defined in
the SIP or the stock option agreements), other than for death or disability,
then all of Employee’s options will terminate regardless of whether they are
vested or unvested, and any shares acquired upon exercise of an option will be
subject to repurchase, at Company’s discretion, by the Company at the exercise
price paid.
	 
	 	(g)	 	Employee’s stock option agreement will provide that vesting
will be accelerated






	 	(i)	 	one year in the event of certain corporate transactions
(excluding, for this purpose, acquisitions of control by existing
Company shareholders), and
	 
	 	(ii)	 	one-hundred percent (100%) if (i)
Employee’s options are not assumed or replaced by comparable options
or cash equivalents of the acquiring company in certain corporate
transactions or




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(ii) Employee’s options are assumed in certain corporate
transactions, but Employee’s employment is terminated by the
acquiring company without Cause or if Employee leaves for good
reason within three years after the corporate transaction,




except that such acceleration will not occur if it would prevent the
corporate transaction from otherwise qualifying as a pooling of
interests for financial accounting purposes.



     2.4 Upon Employee’s receipt of the Grant Shares, the Company will loan
Employee the amount of Employee’s income and payroll tax liability arising from the receipt
of the Grant Shares, which loan will be made pursuant to a full-recourse promissory note in
the form of Exhibit A hereto (the “Note”). The Note shall provide for interest at the
applicable federal rate on the date of the execution of the Note, and the principal amount
payable under the Note shall be amortized as follows: 25% after the first year, and 2.0833%
(1/48th) per month thereafter; corresponding interest payments will be made at the time of the
principal payments. The Note will be secured by the shares of stock received under
Section 2.3(a) pursuant to the pledge agreement attached hereto as Exhibit B.




     (a) During the term of Employee’s employment with the Company, immediately prior to
the due date of any payment of principal or interest under the Note, the Company will pay
to Employee a cash bonus such that, after setting aside an amount equal to Employee’s
income tax liability on the cash bonus, Employee is left with an amount equal to the loan
payment then owed to the Company. The Company’s obligations under this Section 2.4(a) shall
terminate as of the date of termination of Employee’s employment, and any bonus amounts
owed by the Company with respect to the first loan payment due following the date of
termination shall be prorated through the date of termination.




     (b) For purposes of calculating Employee’s income tax liability under this Section
2.4, Employee will be deemed to be subject to taxation at the highest marginal income tax
rates imposed on individuals under federal and any applicable state tax laws.



     2.5 Termination of Employment




     (a) Upon the termination of Employee’s employment by the Company for Cause prior
to the earlier of (i) a qualified IPO or (ii) July 1, 2005 (such earlier date, a “Share
Trigger Event”), all of the Grant Shares shall be returned to the Company in exchange for
the cancellation of all amounts owing under the Note and the corresponding loan, and
neither the Company nor the Employee shall owe any further amounts to the other with
respect to the Grant Shares, such loan or the Note.




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     (b) Upon the termination of Employee’s employment, other than by the Company for
Cause prior to a Share Trigger Event, the Company shall have the right, at its election, to
purchase from Employee, and Employee shall have the right, at his or her election, to cause
the Company to purchase, the Grant Shares at a purchase price equal to their fair market
value. Either party may elect to exercise his, her or its right under this Section 2.5(b)
by a written notice to the other party. Upon receipt of such written notice by either
party, the loan underlying the Note shall accelerate and the principal amount of the Note
plus any accrued unpaid interest shall be immediately due and payable in full by Employee.
If the Company and the Employee are unable to determine the fair market value of the Grant
Shares within 15 business days of the termination of Employee’s employment, then each party
shall retain an investment banking firm of national reputation to provide a determination
of such valuation within 20 business days after the expiration of such 15 business day
period. Each of these investment banks shall be directed to consider the value a willing
buyer would pay a willing seller for the Company’s shares as on an ongoing business entity,
without any discount for minority interests but considering all other known facts, events
and circumstances as then existing relevant to the value of such interest. In the event
that the difference between the valuations provided by the two investment banking firms to
the parties (which amount shall be referred to as the “Valuation Difference”) does not
exceed twenty percent (20%) of the larger of the two valuations, the “fair market value”
for purposes hereof shall be the average of the two valuations. If the Valuation Difference
exceeds twenty percent (20%) of the larger of the two valuations, the two investment
banking firms shall select a third investment banking firm of national reputation to
calculate the valuation. If the difference between the valuation determined by the third
investment bank (the “Benchmark”) and the lower of the two initial valuations is less than
one-third of the Valuation Difference, “Fair Market Value” for purposes hereof shall be the
average of the Benchmark and the lower of the two initial valuations. If the difference
between the Benchmark and the higher of the two initial valuations is less than one-third
of the Valuation Difference, “Fair Market Value” for purposes of this Section 2.5(b) shall
be the average of the Benchmark and the higher of the two initial valuations. In the event
fair market value is not determined by either of the previous two sentences, the fair
market value for purposes of this Section 2.5(b) shall be the average of the three
valuations. Notwithstanding the foregoing, in no event shall “fair market value” as
determined hereunder be greater than the larger of the two initial valuations, or less than
the lower of the two initial valuations. The fees and expenses of the initial investment
banks selected by each of Employee and the Company in accordance with this provision shall
be borne by the party selecting such bank. The fees and expenses of the third investment
bank, if any, selected in accordance with this provision shall be shared equally by
Employee and the Company.




     (c) Upon the termination of Employee’s employment after a Share Trigger Event,
the loan shall accelerate and all amounts owed under the Note shall be immediately due and
payable in full by Employee.



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     2.6 During the Term, the Company will make available to Employee such additional benefits
(such as medical, dental, disability and life insurance; vacation, leave and holidays) as the
Company may make available to its other employees, all subject to any terms, conditions and other
requirements that may be generally applicable to other executive employees of the Company or
prescribed by the Board.



     2.7 Except as otherwise provided in Section 3.2 or required by applicable law, all
compensation and benefits set forth in Section 2 will cease accruing upon termination of the
Term.



     2.8 As a condition to Employee’s employment with the Company, Employee shall sign concurrently
with this Agreement the attached Employee Stockholders Agreement, which provides that prior to a
Qualified IPO (as that term is defined in the SIP), Employee agrees to vote all his or her Grant
Shares according to the terms thereof, and grants certain drag-along and tag-along rights.



Section 3. Term and Termination




     3.1 Employee’s employment with the Company is “at will” and may be terminated
by the Company or Employee at any time. Accordingly, the Term will commence as of the
date of this Agreement and will terminate upon the first of the following to occur:




     (a) either party gives the other notice of termination;




     (b) the Company gives Employee notice of termination for Dissatisfactory Performance;




     (c) the Company gives Employee notice of termination for Cause;




     (d) the Company gives Employee notice of termination in the event of any disability of
Employee, whether physical or mental, that prevents Employee from satisfactorily performing
his or her duties under this Agreement; or




     (e) the death of Employee.



     3.2 If the Company terminates the Term pursuant to Section 3.1(a) or (b), then the
Company will either




     (a) pay to Employee a severance payment in the amount of Employee’s then-current
annual base salary. Employee acknowledges and agrees, however, that Employee must abide by
the terms and conditions of the Business Protection Agreement, including Employee’s
obligations under Section 3.1 of the Business Protection Agreement and that the Employee
will not engage in, be employed by, perform service for, participate in the ownership,
management, control or operation of, or otherwise be connected with, either directly or
indirectly, any competing



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business for a period of one year. Furthermore, Employee agrees that this severance payment
is forfeitable in full if the Employee does not abide by said agreements. Employer reserves
the right to pursue any other damages as a result of the Employee’s breach; or




     (b) release Employee from Employee’s obligations under Section 3.1 of the
Business Protection Agreement for any period after the end of the Term.



     3.3 Employee will not be entitled to any other severance payments, other compensation, or
release of any obligation under the Business Protection Agreement upon termination of employment or
in any other circumstance. Unless otherwise agreed upon by the parties, any severance payments
under Section 3.2 will be payable in a lump sum subject to federal income tax and any other
applicable withholding.



Section 4. No Conflicting Obligations




     4.1 Employee represents and warrants that Employee’s execution, delivery and performance of
this Agreement and the performance of Employee’s other obligations and duties to the Company will
not cause any breach, default or violation under any other employment, nondisclosure,
confidentiality, consulting or other agreement to which Employee is a party or by which Employee
may be bound.



     4.2 Employee will not use in performance of Employee’s work for the Company or disclose to the
Company any trade secret or other confidential or proprietary information of any prior employer or
other Person if and to the extent that such use or disclosure may cause a breach, default or
violation under any obligation or duty that Employee owes to such other Person (e.g., under any
agreement or applicable law). Employee represents and warrants that Employee’s compliance with this
Section 4 will not prohibit, restrict or impair the performance of Employee’s work, obligations and
duties to the Company.



Section 5. Miscellaneous




     5.1 This Agreement will be enforced to the fullest extent permitted by applicable law. If
for any reason any provision of this Agreement is held to be invalid or unenforceable to any
extent, then




     (a) such provision will be interpreted, construed or reformed to the extent reasonably
required to render the same valid, enforceable and consistent with the original intent
underlying such provision;




     (b) such provision will be void to the extent it is held to be invalid or
unenforceable;




     (c) such provision will remain in effect to the extent that it is not invalid or
unenforceable; and




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     (d) such invalidity or unenforceability will not affect any other provision of
this Agreement or any other agreement.


If the invalidity or unenforceability is due to the unreasonableness of the scope or duration of
the provision, the provision will remain effective for such scope and duration as may be determined
to be reasonable.




     5.2 Employee will not assign this Agreement or any of his or her
rights or obligations hereunder, either during or after the Term, without the prior written consent
of the Company. Subject to the foregoing, this Agreement will be enforceable by and binding upon
each of the parties and their respective successors and assigns.



     5.3 The failure of either party to insist upon or enforce strict performance of any of the
provisions of this Agreement or to exercise any of its rights or remedies under this Agreement will
not be construed as a waiver or a relinquishment to any extent of such party’s rights to assert or
rely upon any such provision, right or remedy in that or any other instance; rather, the same will
be and remain in full force and effect.



     5.4 This Agreement will be interpreted, construed and enforced in all respects in accordance
with the laws of the State of Washington. Employee hereby irrevocably consents to personal
jurisdiction and venue in the state and federal courts located in the State of Washington, King
County, in connection with any action to interpret or enforce, or otherwise arising out of or
relating to, this Agreement. Employee will not bring any action to interpret or enforce, or
otherwise arising out of or relating to, this Agreement, other than in the courts specified in this
Section 5.4.



     5.5 Any notice required or permitted under this Agreement will be given in writing and will be
deemed effectively given upon personal delivery or upon delivery by confirmed fax to the party to
be notified, two (2) business days after deposit with recognized overnight courier service, or
three (3) business days after deposit with the United States Post Office, by registered or
certified mail, postage prepaid and addressed to the party to be notified at the following address,
or at such other address as such party may designate by notice under this paragraph 5.5:



	 	 	 
	Company:

	 	Employee:
	 
	 	 
	Mitch Hill

Chief Executive Officer

Avanade Inc.

2211 Elliott Ave.

Seattle, WA 98121

	 	Dennis Knapp

5542 156th Avenue SE

Bellevue, WA 98003






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     5.6 This Agreement sets forth the entire agreement, and supersedes any and all prior
agreements, of the parties with regard to Employee’s employment with the Company, with the
exception of the Business Protection/Confidentiality Agreement, which shall constitute a material
term of, and is hereby incorporated into, this Agreement. This Agreement may not be amended,
except by a writing signed by both parties.



Section 6. Arbitration of Disputes




     6.1 Any dispute among the parties arising out of or relating to Employee’s employment
relationship with the Company, or to the termination of that relationship, will be settled by final
and binding arbitration as set forth in this Agreement. The following are examples of allegations,
claims or disputes that may be arbitrated under this Agreement: constructive discharge or wrongful
discharge under statutory or common law; torts or breaches of contract; employment discrimination
or retaliation in violation of any applicable federal, state or local statute, ordinance or regulation;
violation of any other applicable statute, ordinance or regulation affecting Employee’s employment
relationship with the Company; or any other claims or disputes that arise out of or relate to the
termination of Employee’s employment relationship with the Company. However, nothing in this
Agreement will require arbitration of any statutory claim that Employee may have if the applicable
law precludes entering into a pre-dispute agreement for binding arbitration of that claim. Further,
either party may commence litigation within thirty (30) days prior to the date after which the
commencement of litigation could be barred by any applicable statute of limitations or other law,
rule, regulation or order of similar import or in order to request injunctive or other equitable
relief necessary to prevent irreparable harm or any breach or default under, or any threat of any
breach or default under, the Confidentiality Agreement dated June 1, 2000 by Employee. In such
event, the parties will (except as may be prohibited by judicial order) nevertheless continue to
follow the procedures set forth in this Section 6.



     6.2 The arbitration will be conducted under the National Rules for the Resolution of
Employment Disputes published by the AAA that are in effect at the time the arbitration notice is
given, to the extent that those rules do not conflict with any provision of this Agreement. A copy
of the current rules may be obtained from the AAA.



     6.3 Either party may initiate the procedures under this Section 6 by giving the other party
written notice of the dispute and invoking the provisions of this Section 6. If, within thirty (30)
days after such notification, the parties cannot resolve the dispute, then either party may submit
a written demand for arbitration to the other party and to the AAA regional office serving Seattle,
which will administer the arbitration. The notice must be received within the applicable statute of
limitations if the dispute involves a statutory claim. The written notice will contain a statement
setting forth the nature of the dispute, the dollar amount involved, if any, and the specific
remedy sought.



     6.4 Upon written demand for arbitration, the parties will attempt to agree upon a mutually
acceptable arbitrator. If they cannot arrive at such an agreement, either party may



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request a list of seven (7) labor and employment arbitrators from the AAA’s panel of potential
arbitrators. The parties will then alternatively strike potential arbitrators from such list until
one remains.




     6.5 The arbitrator will have the authority only to interpret and apply the applicable
provisions of this Agreement, and will not add to, subtract from, reform or modify any of the
provisions of this Agreement.



     6.6 The arbitrator will determine what discovery will be allowed, consistent with the relevant
AAA rules and the expedited nature of arbitration. All discovery allowed will be completed within
sixty (60) days of the arbitration notice unless the parties agree otherwise or the arbitrator
grants an extension for good cause shown.



     6.7 The arbitration will be held in King County, Washington. If the Company and Employee
cannot agree on a specific location or a date and time for the arbitration hearing, the AAA will
set the specific location in King County, or the hearing date and time, as necessary.



     6.8 The Company and Employee each have the right to be represented during the arbitration
process by legal counsel, or by another representative of its own choosing. Unless applicable law
provides otherwise, each party will bear any and all costs associated with its representation. The
arbitrator may compel the attendance of witnesses in accordance with RCW 7.04.110 and the relevant
AAA rules.



     6.9 Each party will bear the costs of preparing and presenting its case in the arbitration
(e.g., costs of its witnesses and attorneys). All other costs of the arbitration (e.g., any fees
payable to the AAA, the arbitrator, and court reporter, and the costs of any hearing’ room or
facilities) will be divided equally between the parties.



     6.10 The arbitrator’s decision will be final and binding on the parties and their respective
successors and assigns; provided, however, that the arbitrator’s decision will be subject to
judicial review, and the reviewing court may vacate, modify or correct the arbitrator’s decision as
appropriate, (i) where the arbitrator’s findings of fact are not supported by substantial evidence,
(ii) where the arbitrator’s conclusions of law are clearly erroneous or (iii) as otherwise provided
by applicable law. The arbitrator will have the authority to grant temporary or injunctive relief,
specific performance, damages and such other relief as may be appropriate in the circumstances.
Judgment upon the arbitration award may be entered in any court having jurisdiction.



Section 7. Definitions




     Whenever used in this Agreement with initial letters capitalized, the following terms will
have the following specified meanings:



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     “AAA” means the American Arbitration Association, its successor or another arbitration
service agreed upon by the parties.



     “Board” means the Company’s board of directors.



     “Cause” means (a) willful misconduct on the part of Employee that has a materially adverse
effect on the Company and its Subsidiaries, taken as a whole, (b) Employee’s engaging in conduct
that could reasonably result in his or her conviction of a felony or a crime against the Company or
which would materially compromise the Company’s reputation, as determined in good faith by the
Board, or (c) unreasonable refusal by Employee to perform the duties and responsibilities of his or
her position in any material respect and the failure of Employee to remedy such nonperformance
within 30 days after receipt of written notice from the Company. No action, or failure to act, will
be considered “willful” if it is done by Employee in good faith and with reasonable belief that the
action or omission was in the best interests of the Company.



     “Competing Business” means any business whose commercial efforts involve the development,
marketing, sale, provision, or distribution of products or services in competition with products or
services developed, under development, marketed, sold, provided or distributed by the Company.



     “Confidentiality Agreement” means the attached Business Protection Agreement.



     “Dissatisfactory Performance” means dissatisfactory performance other than Cause.
Dissatisfactory Performance may include, without limitation, the failure of the Company to achieve
revenue, profit, growth, customer satisfaction or other goals established by the Board.



     “Person” means any corporation, partnership, trust, association, governmental authority,
educational institution, individual or other entity.



     “Qualified Public Offering” shall have the meaning set forth in the Avanade Inc. 2000 Stock
Incentive Plan.



     “Term” means the term of Employee’s employment as an employee of the Company pursuant to this
Agreement.



* * *




     Employee hereby acknowledges that he or she has carefully read this Agreement, understands its
terms and that (i) the same are necessary for the reasonable and proper protection of the Company’s
business; (ii) the Company has been induced to enter into and continue its relationship with
Employee in reliance upon Employee’s compliance with the provisions of this Agreement; (iii) every
provision of this Agreement is reasonable with respect to its scope and duration; (iv) Employee has
had ample opportunity to discuss this Agreement with legal counsel of his or her own choosing, and
has entered into this



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Agreement knowingly and voluntarily, without relying on any promises or representations
by the Company other than those contained in the text of this Agreement; and (v) Employee
has received a copy of this Agreement.




     In witness whereof, the parties have duly executed and entered into this Agreement as of
the date first set forth above.




	 	 	 	 	 
	Employee	 	AVANADE INC.:	 
	 
	/s/ Dennis Knapp	 	By:  	/s/
Mitchell Hill	 
	Dennis Knapp 	 	 	Its: CEO 	 
	 







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