USinternetworking VP & President of ACR Subsidiary

EMPLOYMENT AGREEMENT



This Employment Agreement dated as of October 2, 1998, is made by and between USinternetworking, Inc., a Delaware corporation (together with any successor thereto, the "COMPANY") and Matthew D. Kanter (the "EXECUTIVE").





A. It is the desire of the Company to assure itself of the services of the Executive by engaging the Executive to perform such services under the terms hereof.



B. The Executive desires to commit himself to serve the Company on the terms herein provided.





NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and agreements set forth below the parties hereto agree as follows:



1. CERTAIN DEFINITIONS.



(a) "ANNUAL BASE SALARY" shall have the meaning set forth in SECTION 4.



(b) "BOARD" shall mean the Board of Directors of the Company.



(c) The Company shall have "CAUSE" to terminate the Executive's employment hereunder upon the Executive's:



(i) failure substantially to perform his

duties hereunder, other than any such failure resulting from the

Executive's Disability, after notice and reasonable opportunity for

cure, all as determined by the Board,



(ii) conviction of a felony or a crime

involving moral turpitude; or



(iii) fraud or personal dishonesty involving

Company's assets.



(d) "COMPANY" shall have the meaning set forth in the preamble hereto.



(e) "COMPENSATION COMMITTEE" means the compensation committee of the Board of Directors of the Company.





(f) "CONTRACT YEAR" shall mean each twelve month period beginning on the effective date hereof or an annual anniversary thereof.



(g) "DATE OF TERMINATION" shall mean (i) if the Executive's employment is terminated by his death, the date of his death, (ii) if the Executive's employment is terminated pursuant to SECTION 5(a) (ii) - (vi) the date specified in the Notice of Termination.



(h) "DISABILITY" shall mean the absence of the Executive from the Executive's duties to the Company on a full-time basis for a total of six months during any twelve mo nth period as a result of incapacity due to mental or physical illness which is determined to be reasonably likely to extend beyond the completion of the Term by a physician selected by the Company and acceptable to the Executive or the Executive's legal representative (such agreement as to acceptability not to be withheld unreasonably).



(i) "EXECUTIVE" shall have the meaning set forth in the preamble hereto.



(j) The Executive shall have "GOOD REASON" to terminate his employment in the event that the Company fails to make any payment or provide any benefit hereunder or commits a material breach of this Agreement and does not cure such failure or breach after notice and a reasonable opportunity to cure.



(k) "NOTICE OF TERMINATION" shall have the meaning set forth in SECTION 5(b).



(l) "PAYMENT PERIOD" shall have the meaning set forth in SECTION 7(a)(i).



(m) "TERM" shall have the meaning set forth in SECTION 2(b).



2. EMPLOYMENT. The Company shall employ the Executive and the Executive shall enter the employ of the Company, for the period set forth in this SECTION 2, in the position set forth in SECTION 3 an d upon the other terms and conditions herein provided. The term of employment under this Agreement (the "TERM") shall be for the period beginning on the effective date of this Agreement and ending on October 2, 2001, unless earlier terminated as provided in SECTION 5.



3. POSITION AND DUTIES.



(a) The Executive shall serve as a Vice President of the Company and President of Advanced Communication Resources, Inc. ("ACR") with such customary responsibilities, dutie s and authority as may from time to time be assigned to the Executive by the Board, provided that such responsibilities are substantially equivalent to those held by Executive with ACR. The Executive shall devote substantially all his working time and eff orts to the business and affairs of the Company.







(b) If elected or appointed thereto, and only for the duration of such elected term or appointment, the Executive shall serve as a director of the Company and any of its subsidia ries and/or in one or more executive offices of any of such subsidiaries, provided that the Executive is indemnified for serving in any and all such capacities on a basis consistent with that provided by the Company to other directors of the Company or si milarly situated executive officers of any such subsidiaries.



4. COMPENSATION AND RELATED MATTERS.



(a) ANNUAL BASE SALARY. During the Term the Executive shall receive a base salary at a rate of $175,000 per annum, subject to increase as determined by the Compensation Committee ("ANNUAL BASE SALARY").



(b) BONUS. For each Contract Year, the Executive shall receive a bonus equal to 25% of the Annual Base Salary applicable to such Contract Year, payable within thirty days after the end of the applicable Contract Year.



(c) BENE FITS. The Executive shall be entitled to participate in the other employee benefit plans, programs and arrangements of the Company (including vacation) now (or, to the extent determined by the Board, hereafter) in effect which are applicable to the senior officers of the Company, subject to and on a basis consistent with the terms, conditions and overall administration thereof.



(d) EXPENSES. The Company shall reimburse the Executive for all reasonable travel and other business ex penses incurred by him in the performance of his duties to the Company, in accordance with the Company's documentation and other policies with respect thereto.



5. TERMINATION. The Executive's employment hereunder may be terminated by the Company or the Executive, as applicable, without any breach of this Agreement only under the following circumstances:



(a) CIRCUMSTANCES.



(i) DEATH. The Executive's employment

hereunder shall terminate upon his death.



(ii) DISABILITY. If the Company determines

in good faith that the Executive has incurred a Disability, the Company

may give the Executive written notice of its intention to terminate the

Executive's employment. In such event, the Executive's employment with

the Company shall terminate effective on the 30th day after receipt of

such notice by the Executive, provided that within the 30 days after

such receipt, the Executive shall not have returned to full-time

performance of his duties. The Executive shall continue to receive his

Annual Base Salary until the Date of Termination.









(iii) TERMINATION FOR CAUSE. The Company may

terminate the Executive's employment hereunder for Cause.



(iv) TERMINATION WITHOUT CAUSE. The Company

may terminate the Executive's employment hereunder without Cause.



(v) RESIGNATION WITH GOOD REASON. The

Executive may terminate his employment for Good Reason.



(vi) TERMINATION WITHOUT GOOD REASON. The

Executive may resign his employment without Good Reason upon 90 days

written notice to the Company.



(vii) TERMINATION FOR NOTE DEFAULT. The

Executive may terminate his employment hereunder and his obligations

under Section 7 and 8 of this Agreement if an Event of Default (as

defined in the Note dated the date hereof executed by the Company in

favor of the Employee) has occurred and is continuing.



(b) NOTICE OF TERMINATION. Any termination of the Executive's employment by the Company or by the Executive under this SECTION 5 (other than termination pursuant to paragraph (a)(i)) shall be communicated by a written notic ...