Employment Agreement - Avenue A Inc. and Michael Vernon
Employment Agreement
between
Avenue A, Inc.
and
Michael Vernon
Dated as of September 27, 2000
<PAGE>
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement"), dated as of September 27,
2000, (the "Effective Date") between Avenue A, Inc., a Washington corporation
("Avenue A"), and Michael Vernon ("Executive").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Avenue A desires to retain the services of Executive as Chief
Financial Officer upon the terms and conditions set forth herein; and
WHEREAS, Executive is willing to provide services to Avenue A 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 foregoing premises and for
other good and valuable consideration, the sufficiency and receipt of which are
hereby acknowledged, Avenue A and Executive hereby agree as follows:
1. EMPLOYMENT
Avenue A will employ Executive and Executive will accept employment by
Avenue A as Chief Financial Officer. During Executive's employment, Executive
shall serve Avenue A faithfully and to the best of his ability, devoting
substantially all his working time, attention and energies to the business of
Avenue A. Executive's status, duties and responsibilities shall be reasonably
commensurate with his title, and he shall perform such duties as lawfully
assigned to him. Executive shall not engage in any other business activity
(except the management of personal investments and charitable and civic
activities which in the aggregate do not interfere with the performance of
Executive's duties hereunder) without first obtaining the written consent of
Avenue A's Chief Executive Officer.
2. COMPENSATION AND BENEFITS
2.1. Compensation
Executive's annual salary shall be $225,000, payable in accordance with
Avenue A's normal payroll schedule.
<PAGE>
2.2. Stock Options
Executive shall be granted a stock option to purchase 300,000 shares of the
common stock of Avenue A at an exercise price equal to the price of Avenue A's
common stock at the close of trading on the date of grant. This option shall be
subject to a four-year vesting schedule and other conditions in accordance with
the terms of the option letter agreement evidencing such option and the terms of
the Avenue A, Inc., 2000 Stock Incentive Compensation Plan.
2.3. Benefits
During the term of his employment, Executive will be entitled to
participate in Avenue A's benefits made available to employees generally from
time to time, including, without limitation, health care benefits and 401k
Savings Plan. Avenue A will pay reasonable expenses (as defined in the
Company's Relocation Policy) associated with relocating Executive to Seattle.
The Company will also reimburse Executive up to $30,000 in real estate agency
fees paid by Executive in connection with the sale of his principal residence in
Oregon. Also, until January 31, 2001, or when Executive permanently relocates
his family to the Seattle area, whichever occurs first, Avenue A shall reimburse
Executive (a) for reasonable expenses incurred in traveling between Portland and
Seattle; and (b) for the costs of Executive's temporary living quarters in
Seattle. To the extent that any such travel and living expenses are not tax
deductible, Avenue A shall gross-up any such reimbursements in an amount
sufficient to cover state and federal taxes.
3. TERMINATION
Employment of Executive pursuant to this Agreement may be terminated as
follows:
3.1. By Avenue A or a Successor Company
With or without Cause (as defined below), Avenue A or a Successor Company
(as defined in Exhibit A hereto and incorporated by reference herein) , may
terminate the employment of Executive at any time upon giving Notice of
Termination (as defined below).
3.2. By Executive
Executive may terminate his employment at any time, for any reason, upon
giving Notice of Termination.
-2-
<PAGE>
3.3. Automatic Termination
This Agreement and Executive's employment hereunder shall terminate
automatically upon the death or total disability of Executive. The term "total
-----
disability" as used herein shall mean Executive's inability to perform the
----------
duties set forth in paragraph 1 hereof for a period or periods aggregating
ninety (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 Executive's
control, unless Executive is granted a leave of absence by the Board of
Directors of Avenue A or a Successor Company. Executive and Avenue A hereby
acknowledge that Executive's ability to perform the duties specified in
paragraph 1 hereof is of the essence of this Agreement. Termination hereunder
shall be deemed to be effective (a) at the end of the calendar month in which
Executive's death occurs or (b) immediately upon a determination by the Board of
Directors of Avenue A or a Successor Company of Executive's total disability, as
defined herein.
3.4. Notice
The term "Notice of Termination" shall mean at least thirty (30) days'
---------------------
written notice of termination, by either party, of Executive's employment,
during which period Executive's employment and performance of services will
continue; provided, however, that Avenue A or a Successor Company may, upon
-------- -------
notice to Executive and without reducing Executive's compensation during such
period, excuse Executive from any or all of his duties during such period. Such
a reduction in duties shall not constitute "good reason" for voluntary
termination so as to trigger termination payments in accordance with
subparagraph 4.2. The effective date of the termination (the "Termination Date")
of Executive's employment hereunder shall be the date on which such 30-day
period expires.
4. TERMINATION PAYMENTS
In the event of termination of the employment of Executive, all
compensation and benefits set forth in this Agreement shall terminate except as
specifically provided in this paragraph 4.
4.1. Termination by Avenue A or a Successor Company
(a) Upon termination by Avenue A or a Successor Company, Executive shall
be paid any unpaid annual base salary at the rate of pay in effect at the time
of termination (hereinafter "Base Salary") through the Termination Date. Such
payment will be made on the Termination Date or within 15 days thereafter.
-3-
<PAGE>
(b) If a Successor Company terminates Executive's employment without
Cause, as defined below, Executive shall be entitled to receive termination
payments equal to twelve (12) months annual Base Salary. The termination
payments will be paid semi-monthly in equal parts in accordance with the same
time schedule that the Successor Company makes its customary payroll. The
Successor Company may deduct customary withholdings including social security,
federal and state income taxes, and state disability insurance from these
severance payments; however, any and all such obligations shall be Executive's
responsibility. The Successor Company shall issue and file appropriate tax
documents in connection with any termination payments. The termination payments
described in this paragraph are expressly contingent upon Executive's signing
upon termination a release in the form attached hereto as Exhibit B, and are
further contingent upon Executive's full compliance with the terms of his
Confidentiality, Inventions Assignment, Noncompetition and Nonsolicitation
Agreement with Avenue A (the "Confidentiality Agreement"), a copy of which is
attached hereto as Exhibit C. In the event Executive were to materially breach
this Confidentiality Agreement, his right to any termination payments under this
paragraph shall be extinguished, the Successor Company shall cease payments, and
Executive shall immediately return to the Successor Company any termination
payments already made. If Executive is terminated by any Successor Company for
Cause, Executive shall not be entitled to receive any of the foregoing benefits,
other than those set forth in clause (a) above.
4.2. Termination by Executive
If Executive terminates his employment with Avenue A for any reason he
shall be paid the compensation set forth in clause 4.1(a), above, and shall not
be entitled to the benefits under clause 4.1(b). If Executive terminates his
employment with a Successor Company for "good reason," as defined below,
Executive shall be paid the compensation and termination benefits set forth in
clauses 4.1(a) and (b), above. If Executive terminates his employment with a
Successor Company for any other reason, Executive shall be paid the compensation
set forth in clause 4.1(a) and shall not be entitled to the benefits under
clause 4.1(b).
4.3. Termination as a Result of Death or Total Disability
In the event of termination of Executive's employment pursuant to
subparagraph 3.3, Executive or his estate shall be paid the compensation set
forth in clause 4.1(a) and shall not be entitled to any of the benefits under
clause 4.1(b).
-4-
<PAGE>
4.4. "Good Reason"
"Good reason" shall mean the occurrence of any of the following events,
without the consent of the Executive, in connection with or after a "Change of
Control" (as defined in Exhibit A hereto and incorporated by reference herein):
a) a demotion or other material reduction in the nature or status of
Executive's responsibilities; provided, however, that a change in
the person or office to which Executive reports, without a
corresponding reduction in duties, status and responsibilities,
shall not constitute "good reason;"
b) a non-voluntary reduction in the Executive's annual Base Salary;
c) requirement by a Successor Company that the Executive relocate
his principal place of employment to a location that is more than
50 miles from the principal place of employment where Executive
was employed immediately prior to the "Change of Control;" or
d) the failure of Avenue A to obtain a satisfactory agreement from
any Successor Company to assume and perform the obligations under
this Agreement.
4.5. Cause
Wherever reference is made in this Agreement to termination being with or
without Cause, "Cause" shall include, without limitation, the occurrence of one
or more of the following events in connection with or after a Change of Control:
a) Willful misconduct, insubordination, or dishonesty in the
performance of Executive's duties or other knowing and material
violation of Avenue A's or a Successor Company's policies and
procedures in effect from time to time which results in a
material adverse effect on Avenue A or a Successor Company;
b) The continued failure of Executive to satisfactorily perform his
duties after receipt of written notice that specifically
identifies the areas in which Executive's performance is
deficient;
c) Willful actions (or intentional failures to act) in bad faith by
Executive with respect to Avenue A or a Successor Company that
materially impair Avenue A's or a Successor Company's business,
goodwill or reputation;
-5-
<PAGE>
d) Conviction of Executive of a felony involving an act of
dishonesty, moral turpitude, deceit or fraud, or the commission
of acts that could reasonably be expected to result in such a
conviction;
e) Current use by the Executive of illegal substances; or
f) Any material violation by Executive of Executive's
Confidentiality Agreement with Avenue A.
5. CONFIDENTIALITY, INVENTIONS ASSIGNMENT, NONCOMPETITION AND NONSOLICITATION
AGREEMENT
Executive is subject to the terms of the Confidentiality Agreement entered
into concurrently with this Agreement and the terms of the Confidentiality
Agreement shall survive the termination of Executive's employment with Avenue A
or a Successor Company.
6. REPRESENTATIONS AND WARRANTIES; NO VIOLATION
In order to induce Avenue A to enter into this Agreement, Executive
represents and warrants to Avenue A that neither the execution nor the
performance of this Agreement by Executive will violate or conflict in any way
with any other agreement by which Executive may be bound, or with any other
duties imposed upon Executive by corporate or other statutory or common law.
7. 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, other than pursuant to the definition of "Cause" set forth in
subparagraph 4.5 hereof, 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.
8. 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 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:
-6-
<PAGE>
If to Executive: Michael Vernon
[Insert address]
----------------
If to Avenue A: Avenue A, Inc.
506 Second Avenue
Seattle, WA 98104
Facsimile: (206) 521-8808
Attention: President and CEO
Copy to: Perkins Coie LLP
1201 Third Avenue, 48/th/ Floor
Seattle, WA 98101-3099
Facsimile: (206) 583-8500
Attention: James Sanders
If notice is mailed, such notice shall be effective upon mailing, or if notice
is personally delivered or sent by telecopy or other electronic facsimile
transmission, it shall be effective upon receipt.
9. ASSIGNMENT
This Agreement is personal to Executive and shall not be assignable by
Executive. Avenue A may assign its rights hereunder to (a) any corporation
resulting from any merger, consolidation or other reorganization to which Avenue
A, or parent corporation thereof, is a party or (b) any corporation,
partnership, association or other person to which Avenue A may transfer all or
substantially all of the assets and business of Avenue A 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.
10. 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 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.
-7-
<PAGE>
11. ARBITRATION
Any controversies or claims arising out of or relating to this Agreement
shall be fully and finally settled by arbitration in the city of Seattle 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 Avenue A and Executive 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.
12. 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 Avenue A
and Executive, 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 Avenue A and Executive.
13. 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.
14. SEVERABILITY
If any provision of this Agreement shall be held invalid, illegal or
unenforceable in any jurisdiction, for any reason, including, without
limitation, the 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
-8-
<PAGE>
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.
15. 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.
16. COUNTERPARTS
This Agreement, and any amendment or modification entered into pursuant to
paragraph 12 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.
17. ENTIRE AGREEMENT
This Agreement on and as of the date hereof, together with the
Confidentiality Agreement, constitutes the entire agreement between Avenue A and
Executive with respect to the subject matter hereof and all prior or
contemporaneous oral or written communications, understandings or agreements
between Avenue A and Executive with respect to such subject matter are hereby
superseded and nullified in their entireties.
IN WITNESS WHEREOF, the parties have executed and entered into this
Agreement on the date set forth above.
EXECUTIVE:
Michael Vernon
/s/ Michael Vernon
----------------------------------
Avenue A, Inc.
By /s/ Brian P. McAndrews
-------------------------------
Brian McAndrews
Its President and CEO
-9-
<PAGE>
EXHIBIT A
1. Definition of "Change of Control"
For purposes of the Employment Agreement, a "Change of Control" means any
of:
(i) an event in which any person (including any individual, entity or
group within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended, (the "Exchange Act")) (a "Person"), shall
become the beneficial owner (within the meaning of Rule 13d-3 promulgated under
the Exchange Act), directly or indirectly, of fifty percent (50%) or more of the
combined voting power of the capital stock of Avenue A, Inc. ("Avenue A") then
outstanding; or
(ii) at any time during which Avenue A has a class of equity securities
which is listed on a national securities exchange or an automated quotation
system (including, without limitation, the Nasdaq Stock Market) ("publicly
traded"), the acquisition by a Person of equity securities representing more
than thirty percent (30%) of the combined voting power of the capital stock of
Avenue A outstanding as of the date of such transaction (or the first of a
series of related transactions), but only if such equity securities were
acquired in a transaction or series of related transactions which were not
approved by the Board of Directors of Avenue A in office prior to the date of
such first acquisition (provided, however that if such Person is entitled,
pursuant to Rule 13d-1 under the Exchange Act to file a Form 13G with respect to
its holdings of equity securities of Avenue A in lieu of a Form 13D, such event
will not constitute a Change of Control unless and until such Person files a
Form 13D with respect to such holdings); or
(iii) at any time during which Avenue A has a class of equity securities
which is publicly traded, the acquisition by a Person of equity securities
representing more than twenty percent (20%) of the combined voting power of the
capital stock of Avenue A outstanding prior to the date of such transaction (or
the first of a series of related transactions) in a transaction or series of
related transactions which were not approved by the Board of Directors of Avenue
A in office prior to the date of such first acquisition, and, within one year
---
thereafter, at least two individuals whose election to the Board of Directors
was proposed by such Person are members of the Board of Directors; or
(iv) the sale or other disposition of all or substantially all of Avenue
A's assets, other than to a corporation with respect to which immediately
following such sale or disposition (A) securities representing more than sixty
percent (60%) of the combined voting power the capital stock of such corporation
are then beneficially owned, directly or indirectly, by all or substantially all
of the beneficial owners of securities representing the combined voting power of
the capital stock of Avenue A (the "Company Voting Securities") immediately
prior to such sale or disposition in substantially the same proportion as their
ownership, immediately prior to such sale or other disposition, of Company
Voting Securities, (B) no Person (excluding Avenue A, any employee benefit plan
(or related trust) of Avenue A or such corporation and any Person beneficially
owning, immediately prior to such sale or other disposition, directly or
indirectly, securities representing 33% or more of Company Voting Securities)
beneficially owns, directly or indirectly, securities representing 33% or more
of the combined voting power of the capital stock of such corporation; and (C)
at least a majority of the members of the board of directors of the such
corporation were approved by majority of directors of the Incumbent Directors
(as defined below) on Avenue A's Board of Directors at the time such transaction
was initially approved by Avenue A; or
<PAGE>
(v) the reorganization, merger or consolidation of Avenue A with any
other corporation or entity, in each case unless immediately following such
reorganization, merger or consolidation (A) securities representing more than
60% of the combined voting power of the capital stock of the corporation
resulting from such reorganization, merger or consolidation are then
beneficially owned, directly, or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners of Company Voting
Securities immediately prior to such reorganization, merger or consolidation in
substantially the same proportion as their ownership, immediately prior to such
reorganization, merger or consolidation, of Company Voting Securities, (B) no
Person (excluding Avenue A, any employee benefit plan (or related trust) of
Avenue A or such corporation resulting from such reorganization, merger or
consolidation and any Person beneficially owning, immediately prior to such
reorganization, merger or consolidation, directly or indirectly, securities
representing 33% or more of Company Voting Securities) beneficially owns,
directly or indirectly, securities representing 33% or more of the combined
voting power of the corporation resulting from such reorganization, merger or
consolidation, and (C) at least a majority of the members of the board of
directors of the corporation resulting from such reorganization, merger or
consolidation were the Incumbent Directors at the time that the agreement for
such reorganization, merger or consolidation was initially executed; or
(vi) the dissolution or liquidation of Avenue A; or
(vii) a change in the composition of the Board of Directors of Avenue A in
which a majority of the seats (other than vacant seats) on the Board have been
occupied by individuals who were neither (a) nominated by a majority of the
Incumbent Directors nor (b) appointed by directors so nominated.
2 Definition of "Successor Company"
For purposes of the Employment Agreement, "Successor Company" shall mean
any of (i) any corporation that acquires all or substantially all of the assets
of Avenue A in a "Change of Control" described in clause (iv) of the definition
of "Change of Control" above or (ii) a successor corporation to Avenue A (or
parent corporation thereof) resulting from a "Change of Control" of Avenue A
described in clause (v) of the definition of "Change of Control" above.
3 Definition of "Incumbent Director"
An "Incumbent Director" is a member of Avenue A's Board of Directors (the
"Board") who has been either (i) nominated by a majority of the directors of
Avenue A then in office or (ii) appointed by directors so nominated, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of either an actual or threatened election contest (as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) or other
actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board.
-2-
<PAGE>
EXHIBIT B
WAIVER AND RELEASE
For and in consideration of the severance payments and benefits set out in
the Employment Agreement attached hereto, Executive, on behalf of himself and
his agents, heirs, successors and assigns, expressly waives any claims against
Employer and releases Employer (including its officers, directors, stockholders,
managers, agents and representatives) from any and all claims, demands,
liabilities, damages, obligations, actions or causes of action of any kind,
known or unknown, past or present, arising out of, relating to, or in connection
with Executive's employment, termination of employment, or the holding of any
office with Employer or any other related entity. The claims released by
Executive include, but are not limited to, claims for defamation, libel,
invasion of privacy, intentional or negligent infliction of emotional distress,
wrongful termination, constructive discharge, breach of contract, breach of the
covenant of good faith and fair dealing, breach of fiduciary duty, fraud, or for
violation of any federal, state or other governmental statute or ordinance,
including, without limitation, Title VII of the Civil Rights Act of 1964, the
federal Age Discrimination in Employment Act, the Americans with Disabilities
Act, the Family and Medical Leave Act, the Employment Retirement Income Security
Program or any other legal limitation on the employment relationship.
This waiver and release shall not waive or release claims (1) where the
events in dispute first arise after execution of this Release; (2) for rights or
benefits due under the Employment Agreement attached hereto; or (3) relating to
Executive's rights to indemnity as a corporate officer of Employer.
Executive agrees he has been provided the opportunity to consider for
twenty-one (21) days whether to enter into this Release, and has voluntarily
chosen to enter into it on this date. Executive may revoke this Release for a
period of seven (7) days following the execution of this Release; this Release
shall become effective following expiration of this seven (7) day period. This
Release shall be effective when signed. Executive acknowledges that he is
voluntarily executing this Release, that he has carefully read and fully
understands all aspects of this Release and the attached Employment Agreement,
that he has not relied upon any representations or statements not set forth
herein or made by Avenue A's agents or representatives, that he has been advised
to consult with an attorney prior to executing the Release, and that, in fact,
he has consulted with an attorney of his choice as to the subject matter and
effect of this Release.
_____________ ___________________________
-2-
<PAGE>
EXHIBIT C
CONFIDENTIALITY AGREEMENT