Change-in-Control Agreement - Art Technology Group Inc. and Ed Terino
Change-in-Control Agreement
THIS EXECUTIVE RETENTION AGREEMENT by and between Art Technology., a
Delaware corporation (the "Company"), and Ed Terino (the "Executive") is made as
of December 1, 2002 (the "Effective Date").
WHEREAS, the Company recognizes that, as is the case with many
publicly-held corporations, the possibility of a change in control of the
Company exists and that such possibility, and the uncertainty and questions
which it may raise among key personnel, may result in the departure or
distraction of key personnel to the detriment of the Company and its
stockholders, and
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that appropriate steps should be taken to reinforce and encourage the
continued employment and dedication of the Company's key personnel without
distraction from the possibility of a change in control of the Company and
related events and circumstances.
NOW, THEREFORE, as an inducement for and in consideration of the
Executive remaining in its employ, the Company agrees that the Executive shall
receive the severance benefits set forth in this Agreement in the event the
Executive's employment with the Company is terminated under the circumstances
described below subsequent to a Change in Control (as defined in Section 1.1).
Key Definitions.
As used herein, the following terms shall have the following respective
meanings:
"Change in Control" means an event or occurrence set forth in any one or
more of subsections (a) through (d) below (including an event or occurrence that
constitutes a Change in Control under one of such subsections but is
specifically exempted from another such subsection):
the acquisition by an 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") of beneficial ownership of any capital stock
of the Company if, after such acquisition, such Person beneficially owns (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) 50% or more of
either (i) the then-outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (ii) the combined voting power of the
then-outstanding securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting Securities"); provided,
however, that for purposes of this subsection (a), the following acquisitions
shall not constitute a Change in Control: (i) any acquisition directly from the
Company (excluding an acquisition pursuant to the exercise, conversion or
exchange of any security exercisable for, convertible into or exchangeable for
common stock or voting securities of the Company, unless the Person exercising,
converting or exchanging such security acquired such security directly from the
Company or an underwriter or
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agent of the Company), (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company, or (iv)
any acquisition by any corporation pursuant to a transaction which complies with
clauses (i) and (ii) of subsection (c) of this Section 1.1; or
such time as the Continuing Directors (as defined below) do not constitute
a majority of the Board (or, if applicable, the Board of Directors of a
successor corporation to the Company), where the term "Continuing Director"
means at any date a member of the Board (i) who was a member of the Board on the
date of the execution of this Agreement or (ii) who was nominated or elected
subsequent to such date by at least a majority of the directors who were
Continuing Directors at the time of such nomination or election or whose
election to the Board was recommended or endorsed by at least a majority of the
directors who were Continuing Directors at the time of such nomination or
election; provided, however, that there shall be excluded from this clause (ii)
any individual whose initial assumption of office occurred as a result of an
actual or threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents, by
or on behalf of a person other than the Board; or
the consummation of a merger, consolidation, reorganization,
recapitalization or statutory share exchange involving the Company or a sale or
other disposition of all or substantially all of the assets of the Company in
one or a series of transactions (a "Business Combination"), unless, immediately
following such Business Combination, each of the following two conditions is
satisfied: (i) all or substantially all of the individuals and entities who were
the beneficial owners of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of the then-outstanding
shares of common stock and the combined voting power of the then-outstanding
securities entitled to vote generally in the election of directors,
respectively, of the resulting or acquiring corporation in such Business
Combination (which shall include, without limitation, a corporation which as a
result of such transaction owns the Company or substantially all of the
Company's assets either directly or through one or more subsidiaries) (such
resulting or acquiring corporation is referred to herein as the "Acquiring
Corporation") in substantially the same proportions as their ownership,
immediately prior to such Business Combination, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, respectively; and (ii)
no Person (excluding the Acquiring Corporation or any employee benefit plan (or
related trust) maintained or sponsored by the Company or by the Acquiring
Corporation) beneficially owns, directly or indirectly, 30% or more of the then
outstanding shares of common stock of the Acquiring Corporation, or of the
combined voting power of the then-outstanding securities of such corporation
entitled to vote generally in the election of directors (except to the extent
that such ownership existed prior to the Business Combination); or approval by
the stockholders of the Company of a complete liquidation or dissolution of the
Company.
"Change in Control Date" means the first date during the Term (as defined
in Section 2) on which a Change in Control occurs. Anything in this Agreement to
the
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contrary notwithstanding, if (a) a Change in Control occurs, (b) the Executive's
employment with the Company is terminated prior to the date on which the Change
in Control occurs, and (c) it is reasonably demonstrated by the Executive that
such termination of employment (i) was at the request of a third party who has
taken steps reasonably calculated to effect a Change in Control or (ii)
otherwise arose in connection with or in anticipation of a Change in Control,
then for all purposes of this Agreement the "Change in Control Date" shall mean
the date immediately prior to the date of such termination of employment.
"Cause" means:
the Executive's willful and continued failure to substantially perform his
reasonable assigned duties as an officer of the Company (other than any such
failure resulting from incapacity due to physical or mental illness or any
failure after the Executive gives notice of termination for Good Reason), which
failure is not cured within 30 days after a written demand for substantial
performance is received by the Executive from the CEO/Board of Directors of the
Company which specifically identifies the manner in which the CEO/Board of
Directors believes the Executive has not substantially performed the Executive's
duties; or
the Executive's willful engagement in illegal conduct or gross misconduct
which is materially and demonstrably injurious to the Company.
For purposes of this Section 1.3, no act or failure to act by the
Executive shall be considered "willful" unless it is done, or omitted to be
done, in bad faith and without reasonable belief that the Executive's action or
omission was in the best interests of the Company.
"Good Reason" means the occurrence, without the Executive's written
consent, of any of the events or circumstances set forth in clauses (a) through
(g) below. Notwithstanding the occurrence of any such event or circumstance,
such occurrence shall not be deemed to constitute Good Reason if, prior to the
Date of Termination specified in the Notice of Termination (each as defined in
Section 3.2(a)) given by the Executive in respect thereof, such event or
circumstance has been fully corrected and the Executive has been reasonably
compensated for any losses or damages resulting therefrom (provided that such
right of correction by the Company shall only apply to the first Notice of
Termination for Good Reason given by the Executive).
the assignment to the Executive of duties inconsistent in any material
respect with the Executive's position (including status, offices, titles and
reporting requirements), authority or responsibilities in effect immediately
prior to the earliest to occur of (i) the Change in Control Date, (ii) the date
of the execution by the Company of the initial written agreement or instrument
providing for the Change in Control or (iii) the date of the adoption by the
Board of Directors of a resolution providing for the Change in Control (with the
earliest to occur of such dates referred to herein as the "Measurement Date"),
or any other action or omission by the Company which results in a material
diminution in such position, authority or responsibilities;
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a reduction in the Executive's annual base salary as in effect on the
Measurement Date or as the same was or may be increased thereafter from time to
time;
the failure by the Company to (i) continue in effect any material
compensation or benefit plan or program (including without limitation any life
insurance, medical, health and accident or disability plan and any vacation or
automobile program or policy) (a "Benefit Plan") in which the Executive
participates or which is applicable to the Executive immediately prior to the
Measurement Date, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with respect to such plan or
program, (ii) continue the Executive's participation therein (or in such
substitute or alternative plan) on a basis not materially less favorable, both
in terms of the amount of benefits provided and the level of the Executive's
participation relative to other participants, than the basis existing
immediately prior to the Measurement Date or (iii) award cash bonuses to the
Executive in amounts and in a manner substantially consistent with past practice
in light of the Company's financial performance;
a change by the Company in the location at which the Executive performs his
principal duties for the Company to a new location that is both (i) outside a
radius of 35 miles from the Executive's principal residence immediately prior to
the Measurement Date and (ii) more than 20 miles from the location at which the
Executive performed his principal duties for the Company immediately prior to
the Measurement Date; or a requirement by the Company that the Executive travel
on Company business to a substantially greater extent than required immediately
prior to the Measurement Date;
the failure of the Company to obtain the agreement from any successor to
the Company to assume and agree to perform this Agreement, as required by
Section 6.1;
any failure of the Company to pay or provide to the Executive any portion
of the Executive's compensation or benefits due under any Benefit Plan within
seven days of the date such compensation or benefits are due, or any material
breach by the Company of this Agreement or any employment agreement with the
Executive.
For purposes of this Agreement, any good faith determination of "Good
Reason" made by the Executive shall be conclusive, binding and final. The
Executive's right to terminate his employment for Good Reason shall not be
affected by his incapacity due to physical or mental illness.
"Disability" means the Executive's absence from the full-time performance
of the Executive's duties with the Company for 180 consecutive calendar days as
a result of incapacity due to mental or physical illness which is determined to
be total and permanent by a physician selected by the Company or its insurers.
Term of Agreement. This Agreement, and all rights and obligations of the
parties hereunder, shall take effect upon the Effective Date and shall expire
upon the first to occur of (a) the expiration of the Term (as defined below) if
a Change in Control has not occurred during the Term, (b) the termination of the
Executive's employment prior to the Change in Control Date, (c) the date 12
months after the Change in Control Date, if the
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Executive is still employed by the Company as of such later date, or (d) the
fulfillment by the Company of all of its obligations under Sections 4 and 5.2 if
the Executive's employment with the Company terminates within 12 months
following the Change in Control Date. "Term" shall mean the period commencing as
of the Effective Date and continuing in effect provided, however, that
commencing on January 1, 2003 and each January 1 thereafter, the Term shall be
automatically extended for one additional year unless, not later than 90 days
prior to the scheduled expiration of the Term (or any extension thereof), the
Company shall have given the Executive written notice that the Term will not be
extended.
Employment Status; Termination Following Change in Control.
Not an Employment Contract. The Executive acknowledges that this Agreement
does not constitute a contract of employment or impose on the Company any
obligation to retain the Executive as an employee and that this Agreement does
not prevent the Executive from terminating employment at any time. If the
Executive's employment with the Company terminates for any reason and
subsequently a Change in Control shall occur, the Executive shall not be
entitled to any benefits hereunder except as otherwise provided pursuant to
Section 1.2.
Termination of Employment.
If the Change in Control Date occurs during the Term, any termination of
the Executive's employment by the Company or by the Executive within 12 months
following the Change in Control Date (other than due to the death of the
Executive) shall be communicated by a written notice to the other party hereto
(the "Notice of Termination"), given in accordance with Section 7. Any Notice of
Termination shall: (i) indicate the specific termination provision (if any) of
this Agreement relied upon by the party giving such notice, (ii) to the extent
applicable, set forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provision so indicated and (iii) specify the Date of Termination (as defined
below). The effective date of an employment termination (the "Date of
Termination") shall be the close of business on the date specified in the Notice
of Termination (which date may not be less than 15 days or more than 120 days
after the date of delivery of such Notice of Termination), in the case of a
termination other than one due to the Executive's death, or the date of the
Executive's death, as the case may be. In the event the Company fails to satisfy
the requirements of Section 3.2(a) regarding a Notice of Termination, the
purported termination of the Executive's employment pursuant to such Notice of
Termination shall not be effective for purposes of this Agreement.
The failure by the Executive or the Company to set forth in the Notice of
Termination any fact or circumstance which contributes to a showing of Good
Reason or Cause shall not waive any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or the Company, respectively,
from asserting any such fact or circumstance in enforcing the Executive's or the
Company's rights hereunder.
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Benefits to Executive.
Stock Acceleration.
(a) If the Change in Control Date occurs during the Term,
then, effective upon the Change in Control Date, (i) each outstanding option to
purchase shares of Common Stock of the Company held by the Executive shall
become immediately exercisable in full and will no longer be subject to a right
of repurchase by the Company and (ii) each outstanding restricted stock award
shall be deemed to be fully vested and will no longer be subject to a right of
repurchase by the Company.
Compensation. If the Change in Control Date occurs during the Term and the
Executive's employment with the Company terminates within 12 months following
the Change in Control Date, the Executive shall be entitled to the following
benefits:
Termination Without Cause or for Good Reason. If the Executive's employment
with the Company is terminated by the Company (other than for Cause, Disability
or Death) or by the Executive for Good Reason within 12 months following the
Change in Control Date, then the Executive shall be entitled to the following
benefits:
the Company shall pay to the Executive in a lump sum in cash within 30 days
after the Date of Termination the sum of (A) the Executive's base salary through
the Date of Termination as well as any bonus or portion thereof which has been
earned for the most recently completed fiscal year, (B) the amount of any
compensation previously deferred by the Executive (together with any accrued
interest or earnings thereon) and (C) any accrued vacation pay, in each case to
the extent not previously paid (the sum of the amounts described in clauses (A),
(B), and (C) shall be hereinafter referred to as the "Accrued Obligations");
for 12 months after the Date of Termination, the Company shall continue to
pay to the Executive (A) his annual base salary distributed at regular pay
period intervals.
for 12 months after the Date of Termination, or such longer period as may
be provided by the terms of the appropriate plan, program, practice or policy,
the Company shall continue to provide health benefits to the Executive and the
Executive's family at least equal to those which would have been provided to
them if the Executive's employment had not been terminated, in accordance with
the applicable Benefit Plans in effect on the Termination Date.
to the extent not previously paid or provided, the Company shall timely pay
or provide to the Executive any other amounts or benefits required to be paid or
provided or which the Executive is eligible to receive following the Executive's
termination of employment under any plan, program, policy, practice, contract or
agreement of the Company and its affiliated companies (such other amounts and
benefits shall be hereinafter referred to as the "Other Benefits"); and
Resignation without Good Reason; Termination for Death or Disability. If
the Executive voluntarily terminates his employment with the Company within 12
months
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following the Change in Control Date, excluding a termination for Good Reason,
or if the Executive's employment with the Company is terminated by reason of the
Executive's death or Disability within 12 months following the Change in Control
Date, then the Company shall (i) pay the Executive (or his estate, if
applicable), in a lump sum in cash within 30 days after the Date of Termination,
the Accrued Obligations and (ii) timely pay or provide to the Executive the
Other Benefits.
Termination for Cause. If the Company terminates the Executive's employment
with the Company for Cause within 12 months following the Change in Control
Date, then the Company shall (i) pay the Executive, in a lump sum in cash within
30 days after the Date of Termination, the sum of (A) the Executive's annual
base salary through the Date of Termination and (B) the amount of any
compensation previously deferred by the Executive, in each case to the extent
not previously paid, and (ii) timely pay or provide to the Executive the Other
Benefits.
Taxes.
(a) In the event that the Company undergoes a "Change in
Ownership or Control" (as defined below), the Company shall, within 30 days
after each date on which the Executive becomes entitled to receive (whether or
not then due) a Contingent Compensation Payment (as defined below) relating to
such Change in Ownership or Control, determine and notify the Executive (with
reasonable detail regarding the basis for its determinations) (i) which of the
payments or benefits due to the Executive (under this Agreement or otherwise)
following such Change in Ownership or Control constitute Contingent Compensation
Payments, (ii) the amount, if any, of the excise tax (the "Excise Tax") payable
pursuant to Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), by the Executive with respect to such Contingent Compensation Payment
and (iii) the amount of the Gross-Up Payment (as defined below) due to the
Executive with respect to such Contingent Compensation Payment. Within 90 days
after the due date of each Contingent Compensation Payment to the Executive, the
Company shall pay to the Executive, in cash, the Gross-Up Payment with respect
to such Contingent Compensation Payment.
(b) For purposes of this Section 4.3, the following terms
shall have the following respective meanings:
(i) "Change in Ownership or Control" shall mean a
change in the ownership or effective control of the Company or in the ownership
of a substantial portion of the assets of the Company determined in accordance
with Section 280G(b)(2) of the Code.
(ii) "Contingent Compensation Payment" shall mean any
payment (or benefit) in the nature of compensation that is made or made
available (under this Agreement or otherwise) to a "disqualified individual" (as
defined in Section 280G(c) of the Code) and that is contingent (within the
meaning of Section 280G(b)(2)(A)(i) of the Code) on a Change in Ownership or
Control of the Company.
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(iii) "Gross-Up Payment" shall mean an amount equal
to the sum of (i) the amount of the Excise Tax payable with respect to a
Contingent Compensation Payment and (ii) the amount necessary to pay all
additional taxes imposed on (or economically borne by) the Executive (including
the Excise Taxes, state and federal income taxes and all applicable withholding
taxes) attributable to the receipt of such Gross-Up Payment. For purposes of the
preceding sentence, all taxes attributable to the receipt of the Gross-Up
Payment shall be computed assuming the application of the maximum tax rates
provided by law.
(c) The provisions of this Section 4.3 are intended to apply
to any and all payments or benefits available to the Executive under this
Agreement or any other agreement or plan of the Company under which the
Executive receives Contingent Compensation Payments.
Mitigation. The Executive shall not be required to mitigate the amount of
any payment or benefits provided for in this Section 4 by seeking other
employment or otherwise. Further, except as provided in Section 4.2(a)(ii), the
amount of any payment or benefits provided for in this Section 4 shall not be
reduced by any compensation earned by the Executive as a result of employment by
another employer, by retirement benefits, by offset against any amount claimed
to be owed by the Executive to the Company or otherwise.
Outplacement Services. In the event the Executive is terminated by the
Company (other than for Cause, Disability or Death), or the Executive terminates
employment for Good Reason, within 12 months following the Change in Control
Date, the Company shall provide outplacement services through one or more
outside firms of the Company's choosing, with such services to extend until the
earlier of (i) 12 months following the termination of Executive's employment or
(ii) the date the Executive secures full time employment.
Disputes.
Settlement of Disputes; Arbitration. All claims by the Executive for
benefits under this Agreement shall be directed to and determined by the Board
of Directors of the Company and shall be in writing. Any denial by the Board of
Directors of a claim for benefits under this Agreement shall be delivered to the
Executive in writing and shall set forth the specific reasons for the denial and
the specific provisions of this Agreement relied upon. The Board of Directors
shall afford a reasonable opportunity to the Executive for a review of the
decision denying a claim.
Successors.
Successor to Company. The Company shall require any person or entity that
purchases all or substantially all of the assets of the Company expressly to
assume and agree to perform this Agreement to the same extent that the Company
would be required to perform it if no such purchase had taken place. As used in
this Agreement, "Company" shall mean the Company as defined above and any
successor to its business
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or assets as aforesaid which assumes and agrees to perform this Agreement, by
operation of law or otherwise.
Successor to Executive. This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive should die while any amount would still be payable to the Executive or
his family hereunder if the Executive had continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to the executors, personal representatives or administrators of
the Executive's estate.
Notice. All notices, instructions and other communications given hereunder
or in connection herewith shall be in writing. Any such notice, instruction or
communication shall be sent either (i) by registered or certified mail, return
receipt requested, postage prepaid, or (ii) prepaid via a reputable nationwide
overnight courier service, in each case addressed to the Company, at 25 First
Street, Cambridge, Massachusetts 02141, and to the Executive at his home (or to
such other address as either the Company or the Executive may have furnished to
the other in writing in accordance herewith). Any such notice, instruction or
communication shall be deemed to have been delivered five business days after it
is sent by registered or certified mail, return receipt requested, postage
prepaid, or one business day after it is sent via a reputable nationwide
overnight courier service. Either party may give any notice, instruction or
other communication hereunder using any other means, but no such notice,
instruction or other communication shall be deemed to have been duly delivered
unless and until it actually is received by the party for whom it is intended.
Miscellaneous.
Employment by Subsidiary. For purposes of this Agreement, the Executive's
employment with the Company shall not be deemed to have terminated solely as a
result of the Executive continuing to be employed by a wholly-owned subsidiary
of the Company.
Severability. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
Injunctive Relief. The Company and the Executive agree that any breach of
this Agreement by the Company is likely to cause the Executive substantial and
irrevocable damage and therefore, in the event of any such breach, in addition
to such other remedies which may be available, the Executive shall have the
right to specific performance and injunctive relief.
Governing Law. The validity, interpretation, construction and performance
of this Agreement shall be governed by the internal laws of the Commonwealth of
Massachusetts, without regard to conflicts of law principles.
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Waivers. No waiver by the Executive at any time of any breach of, or
compliance with, any provision of this Agreement to be performed by the Company
shall be deemed a waiver of that or any other provision at any subsequent time.
Counterparts. This Agreement may be executed in counterparts, each of which
shall be deemed to be an original but both of which together shall constitute
one and the same instrument.
Tax Withholding. Any payments provided for hereunder shall be paid net of
any applicable tax withholding required under federal, state or local law.
Entire Agreement. This Agreement sets forth the entire agreement of the
parties hereto in respect of the subject matter contained herein and supersedes
all prior agreements, promises, covenants, arrangements, communications,
representations or warranties, whether oral or written, by any officer, employee
or representative of any party hereto in respect of the subject matter contained
herein; and any prior agreement of the parties hereto in respect of the subject
matter contained herein is hereby terminated and cancelled. Notwithstanding the
foregoing, in the event that this Agreement is terminated as a result of (a) the
expiration of the Term prior to the occurrence of a Change in Control or (b) the
termination of the Executive's employment by the Company prior to the Change in
Control Date, the Option Acceleration Agreement shall not be superseded and
shall continue in full force and effect in accordance with its terms.
Amendments. This Agreement may be amended or modified only by a written
instrument executed by both the Company and the Executive.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first set forth above.
Art Technology Group, Inc.
By:__________________________________
Title:_______________________________