Employment and Severance Agreement - NetGravity Inc. and Stephen E. Recht
NETGRAVITY, INC.
EMPLOYMENT AND SEVERANCE AGREEMENT
This Employment and Severance Agreement (the "Agreement") is made and
entered into effective as of March 31, 1998, by and between Stephen E. Recht
(the "Employee") and NetGravity, Inc., a Delaware corporation (the "Company").
RECITALS
A. The Company may from time to time need to address the possibility
of an acquisition transaction or change of control event. The Board of
Directors of the Company (the "Board") recognizes that such events can be a
distraction to the Employee and can cause the Employee to consider
alternative employment opportunities. The Board has determined that it is in
the best interests of the Company and its stockholders to assure that the
Company will have the continued dedication and objectivity of the Employee,
notwithstanding the possibility, threat or occurrence of a Change of Control
(as defined below) of the Company.
B. The Board believes that it is in the best interests of the Company
and its stockholders to provide the Employee with an incentive to continue
his employment and to motivate the Employee to maximize the value of the
Company upon a Change of Control for the benefit of its stockholders.
C. The Board believes that it is imperative to provide the Employee with
certain benefits upon a Change of Control and, under certain circumstances, upon
termination of the Employee's employment in connection with a Change of Control,
which benefits are intended to provide the Employee with financial security and
provide sufficient incentive and encouragement to the Employee to remain with
the Company notwithstanding the possibility of a Change of Control.
D. To accomplish the foregoing objectives, the Board has directed the
Company, upon execution of this Agreement by the Employee, to agree to the terms
provided herein.
E. Certain capitalized terms used in this Agreement are defined in
Section 6 below.
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AGREEMENT
In consideration of the mutual covenants herein contained, and in
consideration of the continuing employment of the Employee by the Company, the
parties agree as follows:
1. DUTIES AND SCOPE OF EMPLOYMENT. The Company shall employ the
Employee in the position of Chief Financial Officer and Vice President of
Finance, as such position has been defined in terms of responsibilities and
compensation as of the effective date of this Agreement; provided, however,
that the Board shall have the right, at any time prior to the occurrence of a
Change of Control, to revise such responsibilities and compensation as the
Board in its discretion may deem necessary or appropriate. The Employee
shall comply with and be bound by the Company's operating policies,
procedures and practices from time to time in effect during his employment.
During the term of the Employee's employment with the Company, the Employee
shall continue to devote his full time, skill and attention to his duties and
responsibilities, and shall perform them faithfully, diligently and
competently, and the Employee shall use his best efforts to further the
business of the Company and its affiliated entities.
2. BASE COMPENSATION. The Company shall pay the Employee as
compensation for his services a base salary at the annualized rate of
$159,000.00. Such salary shall be paid periodically in accordance with
normal Company payroll practices. The annualized compensation specified in
this Section 2, as such compensation may be increased or decreased by the
Board or the Compensation Committee of the Board, is referred to in this
Agreement as "Base Compensation."
3. EMPLOYEE BENEFITS. The Employee shall be eligible to participate
in the employee benefit plans and executive compensation programs maintained
by the Company applicable to other key executives of the Company, including
(without limitation) retirement plans, savings or profit-sharing plans, stock
option, incentive or other bonus plans, life, disability, health, accident
and other insurance programs, paid vacations, and similar plans or programs,
subject in each case to the generally applicable terms and conditions of the
applicable plan or program in question and to the sole determination of the
Board or any committee administering such plan or program.
4. EMPLOYMENT RELATIONSHIP. The Company and the Employee acknowledge
that the Employee's employment is and shall continue to be at-will, as defined
under applicable law. If the Employee's employment terminates for any reason,
the Employee shall not be entitled to any payments, benefits, damages, awards or
compensation other than as provided by this Agreement, or as may otherwise be
available in accordance with the Company's established employee plans and
policies at the time of termination.
5. TERMINATION BENEFITS. Subject to Sections 7 and 8 below, in the event
the Employee's employment terminates as a result of an Involuntary Termination
other than for
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Cause upon or within 12 months after a Change of Control, then the Employee
shall be entitled to receive severance and other benefits as follows:
(a) PAY CONTINUATION. The Employee shall be entitled to monthly
payments equal to the Employee's monthly Base Salary as in effect immediately
prior to the Change of Control. Such monthly amounts shall be paid according to
the normal payroll practice of the Company for eighteen months following the
date of termination (the "Termination Period").
(b) MEDICAL BENEFITS. The Company shall reimburse the Employee for
the cost of the Employee's group health and dental plan coverage in effect until
the end of the Termination Period. The Employee may use this payment, as well
as any other payment made under this Section 5, for such continuation coverage
or for any other purpose.
6. DEFINITION OF TERMS. The following terms referred to in this
Agreement shall have the following meanings:
(a) CAUSE. "Cause" shall mean (i) any act of personal dishonesty
taken by the Employee in connection with his responsibilities as an employee and
intended to result in substantial personal enrichment of the Employee, (ii)
conviction of a felony that is injurious to the Company, (iii) a willful act by
the Employee which constitutes gross misconduct and which is injurious to the
Company, and (iv) continued violations by the Employee of the Employee's
obligations under Section 1 of this Agreement that are demonstrably willful and
deliberate on the Employee's part after there has been delivered to the Employee
a written demand for performance from the Company which describes the basis for
the Company's belief that the Employee has not substantially performed his
duties.
(b) CHANGE OF CONTROL. "Change of Control" shall mean the occurrence
of any of the following events:
(i) The acquisition by any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act) (other than the Company or a
person that directly or indirectly controls, is controlled by, or is under
common control with, the Company) of the "beneficial ownership" (as defined in
Rule 13d-3 under said Act), directly or indirectly, of securities of the
Company representing fifty percent (50%) or more of the total voting power
represented by the Company's then outstanding voting securities; or
(ii) A merger or consolidation of the Company with any other
corporation, other than a merger of consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least fifty percent (50%) of
the total voting power represented by the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation, or the approval by the stockholders of the Company of a plan of
complete liquidation of the Company or of an
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agreement for the sale or disposition by the Company of all or substantially all
the Company's assets.
(c) DISABILITY. "Disability" shall mean that the Employee has been unable
to substantially perform his duties under this Agreement as the result of his
incapacity due to physical or mental illness, and such inability, at least 26
weeks after its commencement, is determined to be total and permanent by a
physician selected by the Company or its insurers and acceptable to the Employee
or the Employee's legal representative (such agreement as to acceptability not
to be unreasonably withheld).
(d) EXCHANGE ACT. "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
(e) INVOLUNTARY TERMINATION. "Involuntary Termination" shall mean (i)
without the Employee's express written consent, the significant reduction of the
Employee's duties or responsibilities relative to the Employee's duties or
responsibilities in effect immediately prior to such reduction; provided,
however, that a reduction in duties or responsibilities solely by virtue of the
Company being acquired and made part of a larger entity (as, for example, when
the Chief Financial Officer of Company remains as such following a Change of
Control and is not made the Chief Financial Officer of the acquiring
corporation) shall not constitute an "Involuntary Termination"; (ii) without the
Employee's express written consent, a substantial reduction, without good
business reasons, of the facilities and perquisites (including office space and
location) available to the Employee immediately prior to such reduction; (iii)
without the Employee's express written consent, a material reduction by the
Company in the Base Compensation of the Employee as in effect immediately prior
to such reduction, or the ineligibility of the Employee to continue to
participate in any long-term incentive plan of the Company; (iv) a material
reduction by the Company in the kind or level of employee benefits to which the
Employee is entitled immediately prior to such reduction with the result that
the Employee's overall benefits package is significantly reduced; (v) the
relocation of the Employee to a facility or a location more than 50 miles from
the Employee's then present location, without the Employee's express written
consent; (vi) any purported termination of the Employee by the Company which is
not effected for death or Disability or for Cause, or any purported termination
for which the grounds relied upon are not valid; or (vii) the failure of the
Company to obtain the assumption of this agreement by any successors
contemplated in Section 9 below.
7. LIMITATION ON PAYMENTS.
(a) In the event that the severance and other benefits provided for in
this Agreement or otherwise payable to the Employee (i) constitute "parachute
payments" within the meaning of Section 280G of the Internal Revenue Code of
1986, as amended (the "Code") and (ii) but for this Section 7 would be subject
to the excise tax imposed by Section 4999 of the Code, then the Employee's
severance benefits under Section 5 shall be payable either (i) in full, or (ii)
as to such lesser amount which would result in no portion of such severance
benefits being subject to excise
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tax under Section 4999 of the Code, whichever of the foregoing amounts, taking
into account the applicable federal, state and local income taxes and the excise
tax imposed by Section 4999, results in the receipt by the Employee on an
after-tax basis, of the greatest amount of severance benefits under this
Agreement, notwithstanding that all or some portion of such severance benefits
may be taxable under Section 4999 of the Code.
(b) The Company shall be entitled to select which payments or benefits
will be reduced and the manner and method of any such reduction of such payments
or benefits. If, as a result of any reduction required by Section 8(a), amounts
previously paid to the Employee exceed the amount to which the Employee is
entitled, the Employee will promptly return the excess amount to the Company.
(c) Unless the Company and the Employee otherwise agree in writing, any
determination required under this Section 8 shall be made in writing by the
Company's independent public accountants (the "Accountants"), whose
determination shall be conclusive and binding upon the Employee and the Company
for all purposes. For purposes of making the calculations required by this
Section 7, the Accountants may make reasonable assumptions and approximations
concerning applicable taxes and may rely on reasonable, good faith
interpretations concerning the application of Sections 280G and 4999 of the
Code. The Company and the Employee shall furnish to the Accountants such
information and documents as the Accountants may reasonably request in order to
make a determination under this Section. The Company shall bear all costs the
Accountants may reasonably incur in connection with any calculations
contemplated by this Section 7.
8. CERTAIN BUSINESS COMBINATIONS. In the event it is determined by the Board,
upon receipt of a written opinion of the Company's independent public
accountants, that the enforcement of any Section or subsection of this Agreement
would preclude accounting for any proposed business combination of the Company
involving a Change of Control as a pooling of interests, and the Board otherwise
desires to approve such a proposed business transaction which requires as a
condition to the closing of such transaction that it be accounted for as a
pooling of interests, then any such Section of this Agreement shall be null and
void, but only if the absence of enforcement of such Section would preserve the
pooling treatment. For purposes of this Section 8, the Board's determination
shall require the unanimous approval of the disinterested Board members.
9. SUCCESSORS.
(a) COMPANY'S SUCCESSORS. Any successor to the Company (whether direct or
indirect and whether by purchase, lease, merger, consolidation, liquidation or
otherwise) to all or substantially all of the Company's business and assets
shall assume the obligations under this Agreement and agree expressly to perform
the obligations under this Agreement in the same manner and to the same extent
as the Company would be required to perform such obligations in the absence of a
succession. For all purposes under this Agreement, the term "Company" shall
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include any successor to the Company's business and assets which executes and
delivers the assumption agreement described in this Section 9(a) or which
becomes bound by the terms of this Agreement by operation of law.
(b) EMPLOYEE'S SUCCESSORS. The terms of this Agreement and all rights of
the Employee hereunder shall inure to the benefit of, and be enforceable by, the
Employee's personal or legal representatives, executors, administrators,
successors, heirs, devisees and legatees.
10. NOTICE. Notices and all other communications contemplated by this
Agreement shall be in writing and shall be deemed to have been duly given when
personally delivered or when mailed by U.S. registered or certified mail, return
receipt requested and postage prepaid. In the case of the Employee, mailed
notices shall be addressed to him at the home address which he most recently
communicated to the Company in writing. In the case of the Company, mailed
notices shall be addressed to its corporate headquarters, and all notices shall
be directed to the attention of its Secretary.
11. MISCELLANEOUS PROVISIONS.
(a) WAIVER. No provision of this Agreement shall be modified, waived or
discharged unless the modification, waiver or discharge is agreed to in writing
and signed by the Employee and by an authorized officer of the Company (other
than the Employee). No waiver by either party of any breach of, or of
compliance with, any condition or provision of this Agreement by the other party
shall be considered a waiver of any other condition or provision or of the same
condition or provision at another time.
(b) WHOLE AGREEMENT. No agreements, representations or understandings
(whether oral or written and whether express or implied) which are not expressly
set forth in this Agreement have been made or entered into by either party with
respect to the subject matter hereof.
(c) CHOICE OF LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
California.
(d) SEVERABILITY. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision hereof, which shall remain in full force and effect.
(e) ARBITRATION. Any dispute or controversy arising out of, relating to
or in connection with this Agreement shall be settled exclusively by binding
arbitration in San Mateo County, California, in accordance with the National
Rules for the Resolution of Employment Disputes of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's award
in any court having jurisdiction. The Company and the Employee shall
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each pay one-half of the costs and expenses of such arbitration, and each shall
separately pay its counsel fees and expenses. Punitive damages shall not be
awarded.
(f) NO ASSIGNMENT OF BENEFITS. The rights of any person to payments or
benefits under this Agreement shall not be made subject to option or assignment,
either by voluntary or involuntary assignment or by operation of law, including
(without limitation) bankruptcy, garnishment, attachment or other creditor's
process, and any action in violation of this Section 11(f) shall be void.
(g) ASSIGNMENT BY COMPANY. The Company may assign its rights under this
Agreement to an affiliate, and an affiliate may assign its rights under this
Agreement to another affiliate of the Company or to the Company; provided,
however, that no assignment shall be made if the net worth of the assignee is
less than the net worth of the Company at the time of assignment. In the case
of any such assignment, the term "Company" when used in a section of this
Agreement shall mean the corporation that actually employs the Employee.
(h) COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together will constitute one
and the same instrument.
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IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the
case of the Company by its duly authorized officer, as of the day and year first
above written.
COMPANY: NETGRAVITY, INC.
By: /s/ John Danner
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John Danner, President
EMPLOYEE: /s/ Stephen E. Recht
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Stephen E. Recht
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