Exhibit 10.16
Employment Agreement
This Employment Agreement (this "Agreement"), dated as of September 2,
1999, between Avenue A, Inc., a Washington corporation ("Employer"), and ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇ ("Employee");
W I T N E S S E T H:
WHEREAS, Employer has entered into a Purchase Agreement (the "Purchase
Agreement"), dated the date hereof, with the members of I-Balls LLC, a New York
limited liability company (the "Company"), to purchase all of the outstanding
limited liability company membership interests of the Company; and
WHEREAS, Employee has been serving as a manager of the Company; and
Employer desires to retain the services of Employee upon the terms and
conditions set forth herein; and
WHEREAS, Employee is willing to provide services to Employer upon the terms
and conditions set forth herein;
A G R E E M E N T S:
NOW, THEREFORE, for and in consideration of the mutual promises contained
herein and for other good and valuable consideration, the sufficiency and
receipt of which are hereby acknowledged, Employer and Employee hereby agree,
subject to the execution of the Purchase Agreement and consummation of the
transactions contemplated thereunder, as follows:
1. EMPLOYMENT
Employer will employ Employee and Employee will accept employment by
Employer. Also, Employer will appoint and Employee will accept appointment as
Chairman of the Board of the Company and as an executive officer of the Company.
Employee will have the authority, subject to Employer's Articles of
Incorporation and Bylaws, as may be granted from time to time by the Board of
Directors of Employer. Employee will perform the duties as may be assigned from
time to time by the Board of Directors of Employer, which relate to the business
of the Company, Employer, its subsidiaries, or any business ventures in which
the Company, Employer or its subsidiaries may participate. Employee shall
perform his duties at Employer's facility located at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ (the "Facility"), or such
Employment Agreement
other similarly located location of Employer to which Employee may be assigned
from time to time by Employer, provided that nothing herein shall be construed
to require Employee to perform his duties at a facility located more than five
miles from the Facility.
2. MINIMUM HOURS
Employee will devote a minimum of 20 hours per week to the Company's
business and will skillfully serve its interests during the term of this
Agreement.
3. TERM
Unless otherwise terminated pursuant to paragraph 6 of this Agreement,
Employee's term of employment under this Agreement shall expire two years from
the date of this Agreement.
4. COMPENSATION
During the term of this Agreement, Employee agrees that he will work
without a base salary, and Employer agrees to pay or cause to be paid to
Employee, and Employee agrees to accept in exchange for the services rendered
hereunder by him, incentive payments of up to an aggregate of $750,000 for 1999
and $750,000 for 2000 (the "Incentive Payments") in accordance with the
following tables. The Incentive Payments will be made to Employee if and only if
the Company achieves annual gross income targets in accordance with the
following tables. In addition, on the date hereof Employer shall grant to
Employee, and Employee agrees to accept in exchange for the services rendered
hereunder by him, nonqualified options to purchase an aggregate of 600,000
shares of common stock, par value $0.01 per share (the "Common Stock"), of
Employer, at an exercise price of $2.50 per share (the "Options"). The Options
shall vest six years from the date of grant unless sooner vested in accordance
with the following tables or unless earlier terminated. The Options shall be
subject to the terms and conditions of a stock option letter agreement in
substantially the form attached hereto as Exhibit A.
1999 Targets and Incentives
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Amount of Incentive
1999 Annual "Gross Payment Paid to Number of Options to
Income" Target of Employee Within 90 days Employee Which Vest at 90
Company after December 31, 1999 days after December 31, 1999
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Less than $1.95 million None None
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At least $1.95 million but $250,000 100,000
less than $2.4 million
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At least $2.4 million but less An additional $250,000 An additional 100,000
than $3 million
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$3 million or greater An additional $250 000 An additional 100,000
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If the Company's 1999 Annual Gross Income Target of $1.95 million is not met for
the 12 months ended December 31, 1999, Employee may elect to seek to have the
Company meet the Annual Gross Income Target set forth in the table above for the
12-month period ending March 31, 2000 (the "Revised Period"), and if such
election is made and such targets are met for the Revised Period, the Incentive
Payments shall be paid and the Options shall vest in accordance with the table
above, except that the date December 31, 1999 shall be deemed to be replaced
with the date March 31, 2000 wherever it appears in such table.
2000 Targets and Incentives
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Amount of Incentive Number of Options to
2000 Annual "Gross Payment Paid to Employee Which Vest at 90
Income" Target of Employee Within 90 days days after December 31,
Company after December 31, 2000 2000
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Less than $3.45 million None None
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At least $3.45 million but $250,000 100,000
less than $4.2 million
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At least $4.2 million but less An additional $250,000 An additional 100,000
than $5.25 million
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$5.25 million or greater An additional $250,000 An additional 100,000
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For purposes of this Section 4, "Gross Income" means gross ad buy income, plus
commissions, less site payout, as reflected on the Company's financial
statements.
5. BENEFITS AND REIMBURSEMENT OF EXPENSES
5.1 General
During the term of this Agreement, Employee will be entitled to
participate, subject to and in accordance with applicable eligibility
requirements, in fringe benefit programs generally available to other members of
Employer's management. Employer shall pay or reimburse Employee for all
reasonable travel and other expenses incurred by Employee in performing his
obligations under this Agreement.
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5.2 Benefits Payable Upon Disability
If Employee shall be prevented during the term of this Agreement from
properly performing services hereunder by reason of illness or other physical or
mental incapacity, Employer shall continue to pay Employee any earned incentive
payments as set forth in Section 4 of this Agreement and reimbursement for any
unreimbursed business expenses hereunder during the period of Employee's
disability; provided, however, that (a) Employee shall not receive such payments
after the end of the term of this Agreement, and (b) if Employee is disabled
for a period or periods aggregating 90 calendar days, then Employee shall
receive the greater of (i) the earned incentive payments as set forth in Section
4 for such 90-day period, provided, however, that Employer's obligations
hereunder shall cease and terminate at the end of such 90-day period, and (ii)
any amounts Employee is entitled to receive pursuant to any Employer-sponsored
benefit plans by virtue of his disability or inability to perform his duties as
described in Section 1 herein ("Disability Plans").
5.3 Benefits Payable Upon Death
In the event of the death of Employee during the term of this Agreement,
Employee shall be entitled to receive the greater of (i) any earned incentive
payments due under Section 4 of this Agreement and reimbursement for any
unreimbursed business expenses payable hereunder, or (ii) any amount Employee
may be entitled to receive pursuant to any Disability Plan as a result of
Employee's death during the term of this Agreement. Any such amount payable
under this Section 5.3 shall be paid to Employee's surviving spouse, or if there
is no spouse surviving, then to Employee's designee or representative as the
case may be through the six-month period following the end of the calendar month
in which death occurs.
6. TERMINATION
Employment of Employee pursuant to this Agreement may be terminated as
follows, but in any case, the provisions of the Confidentiality Agreement
referenced in paragraph 8 hereof shall survive the termination of this Agreement
and the termination of Employee's employment hereunder:
6.1. By Employer
6.1.1 For Cause
Notwithstanding anything herein to the contrary, the Employer may,
without liability, terminate Employee's employment hereunder for Cause at any
time immediately upon written notice from the Board of Directors of the
Employer. As used herein the term "Cause" shall mean, without limitation, the
occurrence of one or
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more of the following events: (i) Employee's material misconduct or dishonesty
in the performance of Employee's duties or other knowing and material violation
of Employer's policies and procedures in effect from time to time; (ii) actions
(or failures to act) by Employee in bad faith with respect to Employer or that
materially impair Employer's business, goodwill or reputation; (iii) the
conviction of Employee for a felony involving an act of dishonesty, moral
turpitude, deceit or fraud; (iv) any breach of Section 8 of this Agreement; (v)
a material breach by Employee of one or more terms of this Agreement, other than
Section 8, which breach Employee has not cured within thirty days of Employee's
receipt of written notice from Employer of such breach; or (vi) Employee's
failure to perform his duties hereunder in a manner reasonably satisfactory to
the Board of Directors or senior management of Employer, provided that Employee
shall first be given written notice specifically describing such unsatisfactory
performance and recommending actions to be taken to cure such failure, and
Employee shall not have cured such failure within sixty days of receipt of such
notice.
6.1.2 Other Than for Cause
Notwithstanding anything herein to the contrary, Employer may also
terminate Employee's employment hereunder without Cause at any time, for any
reason.
6.2. By Employee
Employee may terminate his employment at any time, for any reason, upon
giving Notice of Termination (as defined below).
6.3. Automatic Termination
Subject to the provisions of Section 5 herein, this Agreement and
Employee's employment hereunder shall terminate automatically upon the death or
total disability of Employee. The term "total disability" as used herein shall
mean Employee's inability to perform the duties set forth in paragraph 1 hereof
for a period or periods aggregating 90 calendar days in any 12-month period as a
result of physical or mental illness, loss of legal capacity or any other cause
beyond Employee's control, unless Employee is granted a leave of absence by the
Board of Directors of Employer. Employee and Employer hereby acknowledge that
Employee's ability to perform the duties specified in paragraph 1 hereof is of
the essence of this Agreement. Subject to the provisions of Section 5 herein,
termination hereunder shall be deemed to be effective (a) at the end of the
calendar month in which Employee's death occurs or (b) immediately upon a
determination by the Board of Directors of Employer of Employee's total
disability, as defined herein.
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6.4 Notice
The term "Notice of Termination" shall mean at least 14 days' written
notice of termination of Employee's employment, during which period Employee's
employment and performance of services will continue; provided, however, that
Employer may, upon notice to Employee and without reducing Employee's
compensation during such period, excuse Employee from any or all of his duties
during such period. The effective date of the termination of Employee's
employment hereunder shall be the date on which such 14-day period expires.
6.5 Termination of Compensation and Benefits
6.5.1 Termination by Employer
If the Employer terminates Employee's employment other than for Cause
then, notwithstanding anything herein to the contrary, and in complete
satisfaction and discharge of all its obligations to Employee hereunder,
Employer shall pay Employee any incentive payments earned under Section 4 of
this Agreement for the balance of the period specified in Section 3 of this
Agreement. In addition, the Options shall continue to vest in accordance with
the tables set forth in Section 4 of this Agreement, and any unvested Options as
of 91 days after December 31, 2000 shall be terminated. If the Employer
terminates Employee's employment for Cause then, notwithstanding anything herein
to the contrary, and in complete satisfaction and discharge of all its
obligations to Employee hereunder, Employer shall pay Employee the pro rata
portion of any incentive payments for 1999 or 2000 (as applicable) earned under
Section 4 of this Agreement based on the period of time actually spent by
Employee as an employee of Employer during such year. In addition, the Options
shall continue to vest in accordance with the tables set forth in Section 4 of
this Agreement, and Employee shall retain the pro rata portion of any such
vested Options for 1999 or 2000 (as applicable) based on the period of time
actually spent as an employee of Employer during such year, and any other
Options (vested or unvested). shall be terminated.
6.5.2 Termination by Employee
If Employee resigns or otherwise voluntarily leaves Employer's
employment prior to the expiration of the Agreement, then, notwithstanding
anything herein to the contrary, and in complete satisfaction and discharge of
all its obligations to Employee hereunder, Employer shall pay Employee the pro
rata portion of any incentive payments for 1999 or 2000 (as applicable) earned
under Section 4 of this Agreement based on the period of time actually spent by
Employee as an employee of Employer during such year. In addition, the Options
shall continue to vest in accordance with the tables set forth in Section 4 of
this Agreement, and Employee
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shall retain the pro rata portion of any such vested Options for 1999 or 2000
(as applicable) based on the period of time actually spent as an employee of
Employer during such year, and any other Options (vested or unvested) shall be
terminated. Employee shall have no further obligations under this Agreement
except as set forth in Sections 7 and 8.
6.5.3. Change of Control
If there is a "Change of Control" of Employer (as such term is defined
below), Employee may, at his option, terminate his employment with the Company
and Employer shall pay Employee any incentive payments earned under Section 4 of
this Agreement for the balance of the period specified in Section 3 of this
Agreement. In addition, if Employee terminates his employment pursuant to the
preceding sentence, the Options shall continue to vest in accordance with the
tables set forth in Section 4 of this Agreement, and any unvested Options as of
91 days after December 3l, 2000 shall be terminated. For purposes of this
Agreement, "Change of Control" means (i) an event following the date of this
Agreement in which any sole person or entity, together with all "affiliates" and
"associates" of such person or entity (as such terms are defined in Rule 12b-2
of the General Rules and Regulations under the Securities Exchange Act of 1934,
as amended), shall become the beneficial owner, directly or indirectly, of a
majority of the voting power of the capital stock of Employer then outstanding;
(ii) the sale of all or substantially all of the Employer's assets; or (iii) the
merger or consolidation of the Employer with any other corporation or entity
(other than a wholly-owned subsidiary) where the Employer is not the surviving
corporation or survives only as a subsidiary of another corporation.
7. LIMITATION ON DISPOSITION OF SHARES; RIGHT OF FIRST REFUSAL
Any shares of Common Stock issued upon exercise of the Options shall be
subject to the limitations on disposition of shares set forth in Section 5.3 of
the Purchase Agreement, including, but not limited to, Employer's right of first
refusal with respect to such shares. Notwithstanding anything herein to the
contrary, such limitations shall survive the termination of Employee's
employment with Employer and the expiration of the term of this Agreement.
8. NONCOMPETITION AND NONSOLICITATION
Employee agrees to enter into a Confidentiality, Inventions Assignment,
Noncompetition and Nonsolicitation Agreement (the "Confidentiality Agreement")
in substantially the form attached as Exhibit B hereto. The Confidentiality
Agreement shall survive the termination of Employee's employment with Employer
and the expiration of the term of this Agreement. Employee and Employer
acknowledge and
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agree that consideration has been given for Employee entering into the
Confidentiality Agreement, such consideration including, without limitation, the
Incentive Payments. Violation by Employee of the Confidentiality Agreement shall
relieve Employer of any obligation it may have to make the Incentive Payments,
but shall not relieve Employee of his obligations, as required under the
Confidentiality Agreement, not to compete or solicit.
9. REPRESENTATIONS AND WARRANTIES; NO VIOLATION
In order to induce Employer to enter into this Agreement, Employee
represents and warrants to Employer that neither the execution nor the
performance of this Agreement by Employee will violate or conflict in any way
with any other agreement by which Employee may be bound, or with any other
duties imposed upon Employee by corporate or other statutory or common law.
10. INDEMNIFICATION
Employee shall be indemnified by Employer to the extent permitted by
applicable law and as provided by Section 10 of Employer's Bylaws. Employee
shall be entitled to coverage under Employer's director and officer insurance
policy to the extent that such coverage is provided to other officers of
Employer.
11. NOTICE AND CURE OF BREACH
Whenever a breach of this Agreement by either party is relied upon as
justification for any action taken by the other party pursuant to any provision
of this Agreement, before such action is taken, the party asserting the breach
of this Agreement shall give the other party at least 14 days' prior written
notice of the existence and the nature of such breach before taking further
action hereunder and shall give the party purportedly in breach of this
Agreement the opportunity to correct such breach during the 14-day period,
unless a longer period to correct such breach is specifically provided
hereunder.
12. FORM OF NOTICE
All notices given hereunder shall be given in writing, shall specifically
refer to this Agreement and shall be personally delivered or sent by telecopy or
other electronic facsimile transmission, by nationally recognized overnight
courier or by registered or certified mail, return receipt requested, at the
address set forth below or at such other address as may hereafter be designated
by notice given in compliance with the terms hereof:
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If to Employee: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, #▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Copy to: Camhy ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇, Esq.
If to Employer: Avenue A, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Copy to: ▇▇▇▇▇▇▇ Coie LLP
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
If notice is mailed, such notice shall be effective three business days after
mailing, or if notice is personally delivered or sent by telecopy or other
electronic facsimile transmission or by overnight courier, it shall be effective
upon receipt.
13. ASSIGNMENT
This Agreement is personal to Employee and shall not be assignable by
Employee. Employer may assign its rights hereunder to (a) any corporation
resulting from any merger, consolidation or other reorganization to which
Employer is a party or (b) any corporation, partnership, association or other
person to which Employer may transfer all or substantially all of the assets and
business of Employer existing at such time. All of the terms and provisions of
this Agreement shall be binding upon and shall inure to the benefit of and be
enforceable by the parties hereto and their respective successors and permitted
assigns.
14. WAIVERS
No delay or failure by any party hereto in exercising, protecting or
enforcing any of its rights, titles, interests or remedies hereunder, and no
course of dealing or performance with respect thereto, shall constitute a
waiver thereof. The express waiver by a party hereto of any right, title,
interest or remedy in a particular instance
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or circumstance shall not constitute a waiver thereof in any other instance
or circumstance. All rights and remedies shall be cumulative and not
exclusive of any other rights or remedies.
15. ARBITRATION
Subject to the provisions of the Confidentiality Agreement, any
controversies or claims arising out of or relating to this Agreement shall be
fully and finally settled by arbitration in New York City, New York in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association then in effect (the "AAA Rules"), conducted by one arbitrator either
mutually agreed upon by Employer and Employee or chosen in accordance with the
AAA Rules, except that the parties thereto shall have any right to discovery as
would be permitted by the Federal Rules of Civil Procedure for a period of 90
days following the commencement of such arbitration and the arbitrator thereof
shall resolve any dispute which arises in connection with such discovery. The
prevailing party shall be entitled to costs, expenses and reasonable attorneys'
fees, and judgment upon the award rendered by the arbitrator may be entered in
any court having jurisdiction thereof.
16. AMENDMENTS IN WRITING
No amendment, modification, waiver, termination or discharge of any
provision of this Agreement, nor consent to any departure therefrom by either
party hereto, shall in any event be effective unless the same shall be in
writing, specifically identifying this Agreement and the provision intended to
be amended, modified, waived, terminated or discharged and signed by Employer
and Employee, and each such amendment, modification, waiver, termination or
discharge shall be effective only in the specific instance and for the specific
purpose for which given. No provision of this Agreement shall be varied,
contradicted or explained by any oral agreement, course of dealing or
performance or any other matter not set forth in an agreement in writing and
signed by Employer and Employee.
17. APPLICABLE LAW
This Agreement shall in all respects, including all matters of
construction, validity and performance, be governed by, and construed and
enforced in accordance with, the laws of the state of Washington, without regard
to any rules governing conflicts of laws.
18. SEVERABILITY
If any provision of this Agreement shall be held invalid, illegal or
unenforceable in any jurisdiction, for any reason, including, without
limitation, the
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duration of such provision, its geographical scope or the extent of the
activities prohibited or required by it, then, to the full extent permitted by
law (a) all other provisions hereof shall remain in full force and effect in
such jurisdiction and shall be liberally construed in order to carry out the
intent of the parties hereto as nearly as may be possible, (b) such invalidity,
illegality or unenforceability shall not affect the validity, legality or
enforceability of any other provision hereof, and (c) any court or arbitrator
having jurisdiction thereover shall have the power to reform such provision to
the extent necessary for such provision to be enforceable under applicable law.
19. HEADINGS
All headings used herein are for convenience only and shall not in any way
affect the construction of, or be taken into consideration in interpreting, this
Agreement.
20. COUNTERPARTS
This Agreement, and any amendment or modification entered into pursuant to
paragraph 16 hereof, may be executed in any number of counterparts, each of
which counterparts, when so executed and delivered, shall be deemed to be an
original and all of which counterparts, taken together, shall constitute one and
the same instrument.
21. ENTIRE AGREEMENT
This Agreement on and as of the date hereof constitutes the entire
agreement between Employer and Employee with respect to the subject matter
hereof and all prior or contemporaneous oral or written communications,
understandings or agreements between Employer and Employee with respect to such
subject matter are hereby superseded and nullified in their entireties.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have executed and entered into this
Agreement on the date set forth above.
EMPLOYEE:
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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EMPLOYER:
AVENUE A, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Vice President, Finance & Administration,
and Secretary
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