SEVERANCE AGREEMENT
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THIS AGREEMENT, dated November 18, 1999, is made by and between L90,
Inc., a Delaware corporation (the "Company"), and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (the
"Executive").
WHEREAS, the Company considers it essential to the best interests of its
stockholders to ▇▇▇▇▇▇ the continued employment of key management personnel; and
WHEREAS, the Board recognizes that the possibility of a Change in
Control exists and that such possibility, and the uncertainty and questions
which it may raise among management, may result in the departure or distraction
of management personnel to the detriment of the Company and its stockholders;
and
WHEREAS, the Board has determined that appropriate steps should be taken
to reinforce and encourage the continued attention and dedication of members of
the Company's management, including the Executive, to their assigned duties
without distraction in the face of potentially disturbing circumstances arising
from the possibility of a Change in Control;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Company and the Executive hereby agree as
follows:
1. Defined Terms. The definitions of capitalized terms used in this
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Agreement are provided in the last Section hereof.
2. Term of Agreement. The Term of this Agreement shall commence on
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the date hereof (the "Effective Date") and shall continue in effect through the
fourth anniversary of the Effective Date; provided, however, that commencing on
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each anniversary of the Effective Date during the Term of this Agreement, the
Term shall automatically be extended for one additional year unless, not later
than 90 days prior to any such anniversary, the company or the Executive shall
have given notice not to extend the Term; and further provided, however, that if
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one or more Change in Control events shall have occurred during the Term, the
Term shall expire twenty-four (24) months following the month in which the first
such Change in Control occurred.
3. Company's Covenants Summarized. In order to induce the Executive
to remain in the employ of the Company and in consideration of the Executive's
covenants set forth in Section 4 hereof, the Company agrees, under the
conditions described herein, to pay the Executive the Severance Payments and the
other payments and benefits described herein. Except as provided in Section 9.1
hereof, no benefits shall be payable under this Agreement unless during the Term
there shall have been (or, under the terms of the second sentence of Section 6.1
hereof,
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there shall be deemed to have been) (i) a termination of the Executive's
employment with the Company following a Change in Control or (ii) with respect
to the acceleration of stock options provided under Section 6.1(B) hereof, the
occurrence of an event that gives the Executive the right to terminate
employment with the Company for Good Reason regardless of whether such
employment is terminated. This Agreement shall not be construed as creating an
express or implied contract of employment and, except as otherwise agreed in
writing between the Executive and the Company, the Executive shall not have any
right to be retained in the employ of the Company.
4. The Executive's Covenants. The Executive agrees that, subject to
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the terms and conditions of this Agreement (a) in the event of a Potential
Change in Control during the Term, the Executive will remain in the employ of
the Company until the earliest of (i) a date which is six (6) months from the
date of such Potential Change in Control, or if a Change in Control occurs
during such six (6) month period, the date which is six (6) months from the date
of a Change in Control, (ii) the date of termination by the Executive of the
Executive's employment for Good Reason or by reason of death, Disability or
Retirement, or (iii) the termination by the Company of the Executive's
employment for any reason; and (b) in the event the Executive is terminated
under circumstances that would entitle the Executive to severance
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benefits under Section 6.1(A) of this Agreement, as a condition of the
Executive's receipt of such benefits, the Executive shall execute a release set
forth in Section 8.2 of this Agreement.
5. Compensation Other Than Severance Payments.
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5.1 Following a Change in Control and during the Term, during any
period that the Executive fails to perform the Executive's full-time duties with
the Company as a result of incapacity due to physical or mental illness, the
Company shall pay the Executive's full salary to the Executive at the rate in
effect at the commencement of any such period, together with all compensation
and benefits payable to the Executive under the terms of any compensation or
benefit plan, program or arrangement (other than the Company's short- or
long-term disability plan, as applicable) maintained by the Company during such
period, until the Executive's employment is terminated by the Company for
Disability.
5.2 If the Executive's employment shall be terminated for any reason
following a Change in Control and during the Term, the Company shall pay the
Executive's full salary to the Executive through the Date of Termination at the
rate in effect immediately prior to the Date of Termination or, if higher, the
rate in effect immediately prior to the first occurrence of an event or
circumstance constituting Good Reason, together with all compensation and
benefits payable to the Executive
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through the Date of Termination under the terms of the Company's compensation
and benefit plans, programs or arrangements as in effect immediately prior to
the Date of Termination or, if more favorable to the Executive, as in effect
immediately prior to the first occurrence of an event or circumstance
constituting Good Reason.
5.3 If the Executive's employment shall be terminated for any reason
following a Change in Control and during the Term, the Company shall pay to the
Executive the Executive's normal post-termination compensation and benefits as
such payments become due. Such post-termination compensation and benefits shall
be determined under, and paid in accordance with, the Company's retirement,
insurance and other compensation or benefit plans, programs and arrangements as
in effect immediately prior to the Date of Termination or, if more favorable to
the Executive, as in effect immediately prior to the occurrence of the first
event or circumstance constituting Good Reason.
6. Severance Payments.
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6.1 If the Executive's employment is terminated following a Change in
Control and during the Term, (A) by the Company other than for Cause, or (B) by
the Executive with Good Reason, the Company shall pay the Executive the amounts,
and provide the Executive the benefits, described in this Section 6.1
("Severance Payments") and Section 6.2, in addition to any payments
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and benefits to which the Executive is entitled under Section 5 hereof;
provided, however, that if following a Change in Control and event occurs that
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gives the Executive the right to terminate his employment with the Company for
Good Reason, the Executive shall be entitled to receive the benefits provided in
Section 6.1(B) regardless of whether such employment is terminated. For
purposes of this Agreement, the Executive's employment shall be deemed to have
been terminated following a Change in Control by the Company without Cause or by
the Executive with Good Reason, if (i) the Executive's employment is terminated
by the Company without Cause prior to a Change in Control (whether or not a
Change in Control ever occurs) and such termination was at the request or
direction of a Person who has entered into an agreement with the Company the
consummation of which would constitute a Change in Control, (ii) the Executive
terminates his employment for Good Reason prior to a Change in Control (whether
or not a Change in Control ever occurs) and the circumstance or event which
constitutes Good Reason occurs at the request or direction of such Person, or
(iii) the Executive's employment is terminated by the Company without Cause or
by the Executive for Good Reason and such termination or the circumstance or
event which constitutes Good Reason is otherwise in connection with or in
anticipation of a Change in Control (whether or not a Change in Control ever
occurs). For purposes of any
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determination regarding the applicability of the immediately preceding sentence,
any position taken by the Executive shall be presumed to be correct unless the
Company establishes to the board by clear and convincing evidence that such
position is not correct.
(A) The Company shall pay the Executive the amounts and
provide the Executive the benefits the Executive would be entitled to
receive under the Employment Agreement had the Executive been terminated
by the Company without cause.
(B) All stock options and restricted stock held by the
Executive under any stock option or incentive plan maintained by the
Company (including the Company's Stock Incentive Plan) shall immediately
vest and become exercisable as of (i) the Date of Termination or (ii) if
earlier, the date on which an event occurs that gives the Executive the
right to terminate employment with the Company for Good Reason
regardless of whether such employment is terminated, to be exercised in
accordance with the terms of the applicable plan.
6.2 (A) Whether or not the Executive becomes entitled to the
Severance Payments, if any payment or benefit received or to be received by the
Executive in connection with a Change in Control, the occurrence of a Good
Reason event or the termination of the Executive's employment (whether pursuant
to the terms of this Agree-
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ment or any other plan, arrangement or agreement with the Company, any Person
whose actions result in a Change in Control or any Person affiliated with the
Company or such Person) (all such payments and benefits, excluding the Gross-Up
Payment, being hereinafter called "Total Payments") will be subject (in whole or
part) to the Excise Tax, then, subject to the provisions of subsection (B) of
this Section 6.2, the Company shall pay to the Executive an additional amount
(the "Gross-Up Payment") such that the net amount retained by the Executive,
after deduction of any Excise Tax on the Total Payments and any federal, state
and local income and employment taxes and Excise Tax upon the Gross-Up Payment,
shall be equal to the Total Payments. For purposes of determining the amount of
the Gross-Up Payment, the Executive shall be deemed to pay federal income taxes
at the highest marginal rate of federal income taxation in the calendar year in
which the Gross-Up Payment is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality of the Executive's
residence on the Date of Termination (or if there is no Date of Termination,
then the date on which the Gross-up Payment is calculated for purposes of this
Section 6.2), net of the maximum reduction in federal income tax which could be
obtained from deduction of such state and local taxes.
(B) In the event that, after giving effect to any redeterminations
described in subsection (D) of this
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Section 6.2, a reduction in the Severance Payments to the largest amount that
would result in no portion of the Total Payments being subject to the Excise Tax
(after taking into account any reduction in the Total Payments provided by
reason of section 280G of the Code in such other plan, arrangement or agreement)
would produce a net amount (after subtracting the net amount of federal, state
and local income and employment taxes on such reduced Total Payments) that would
be greater than or equal to the net amount of unreduced Total Payments (after
deduction of the net amount of unreduced Total Payments (after deduction of the
net amount of federal, state and local income and employment taxes and the
amount of Excise Tax to which the Executive would be subject in respect of such
unreduced Total Payments), then subsection (A) of this Section 6.2 shall not
apply and the cash Severance Payments shall first be reduced (if necessary, to
zero), and the non cash Severance Benefits shall thereafter be reduced (if
necessary, to zero); provided, however, that the Executive may elect to have the
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noncash Severance Payments reduced (or eliminated) prior to any reduction of
the cash Severance Payments.
(C) For purposes of determining whether any of the Total Payments will
be subject to the Excise Tax and the amount of such Excise Tax, (i) all of the
Total Payments shall be treated as "parachute payments" within the meaning of
section 280G(b)(2) of the Code, unless in the opinion of tax counsel ("Tax
Counsel") reasonably
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acceptable to the Executive and selected by the accounting firm which was,
immediately prior to the Change in Control, the Company's independent auditor
(the "Auditor"), such other payments or benefits (in whole or in part) do not
constitute parachute payments, including by reason of section 280G(b)(4)(A) of
the Code, (ii) all "excess parachute payments" within the meaning of section
280G(b)(1) of the Code shall be treated as subject to the Excise Tax unless, in
the opinion of Tax Counsel, such excess parachute payments (in whole or in part)
represent reasonable compensation for services actually rendered, within the
meaning of section 280G(b)(4)(B) of the Code, in excess of the Base Amount
allocable to such reasonable compensation, or are otherwise not subject to the
Excise Tax, and (iii) the value of any noncash benefits or any deferred payment
or benefit shall be determined by the Auditor in accordance with the principles
of sections 280G(d)(3) and (4) of the Code. Prior to the payment date set forth
in Section 6.3 hereof, the Company shall provide the Executive with its
calculation of the amounts referred to in this Section 6.2(C) and such
supporting materials as are reasonably necessary for the Executive to evaluate
the Company's calculations. If the Executive disputes the Company's calculations
(in whole or in part), the reasonable opinion of Tax Counsel with respect to the
matter in dispute shall prevail.
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(D) In the event that (i) amounts are paid to the Executive pursuant to
subsection (A) of this Section 6.2, (ii) the Excise Tax is finally determined to
be less than the amount taken into account hereunder in calculating the Gross-Up
Payment, and (iii) after giving effect to such redetermination, the Severance
Payments are to be reduced pursuant to subsection (B) of this Section 6.2, the
Executive shall repay to the Company, within five (5) business days following
the time that the amount of such reduction in Excise Tax is finally determined,
the portion of the Gross-Up Payment attributable to such reduction (plus that
portion of the Gross-Up Payment attributable to the Excise Tax and federal,
state and local income and employment taxes imposed on the Gross-Up Payment
being repaid by the Executive), to the extent that such repayment results in (i)
no portion of the Total Payments being subject to the Excise tax and (ii) a
dollar-for-dollar reduction in the Executive's taxable income and wages for
purposes of federal, state and local income and employment taxes) plus interest
on the amount of such repayment at 120% of the rate provided in section 1274
(b)(2)(B) of the Code. In the event that (x) the Excise Tax is determined to
exceed the amount taken into account hereunder at the time of the termination
of the Executive's employment (including by reason of any payment the existence
or amount of which cannot be determined at the time of the Gross-Up Payment) and
(y) after
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giving effect to such redetermination, the Severance Payments should not have
been reduced pursuant to subsection (B) of this Section 6.2, the Company shall
make an additional Gross-Up Payment in respect of such excess and in respect of
any portion of the Excise Tax with respect to which the Company had not
previously made a Gross-Up Payment (plus any interest, penalties or additions
payable by the Executive with respect to such excess and such portion) within
five (5) business days following the time that the amount of such excess is
finally determined.
6.3 The payments provided in subsections (A) of Section 6.1 hereof and
in Section 6.2 hereof shall be made not later than the fifth day following the
Date of Termination (or if there is no Date of Termination, then the date as of
which the Gross-up Payment is calculated for purposes of Section 6.2 hereof);
provided, however, that if the amounts of such payments cannot be finally
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determined on or before such day, the Company shall pay to the Executive on such
day an estimate, as determined in good faith by the Executive or, in the case of
payments under Section 6.2 hereof, in accordance with Section 6.2 hereof, of the
minimum amount of such payments to which the Executive is clearly entitled and
shall pay the remainder of such payments (together with interest on the unpaid
remainder (or on all such payments to the extent the Company fails to make such
payments when due)
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at 120% of the rate provided in section 1274(b)(2)(B) of the Code) as soon as
the amount thereof can be determined but in no event later than the thirtieth
(30th) day after the Date of Termination. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by the Company to the Executive, payable on
the fifth (5th) business day after demand by the Company (together with interest
at 120% of the rate provided in section 1274(b)(2)(B) of the Code). At the time
that payments are made under this Agreement, the Company shall provide the
Executive with a written statement setting forth the manner in which such
payments were calculated and the basis for such calculations including, without
limitation, any opinions or other advice the Company has received from Tax
Counsel, the Auditor or other advisors or consultants (and any such opinion or
advice which are in writing shall be attached to the statement).
6.4 The Company also shall pay to the Executive all legal fees and
expenses incurred by the Executive in disputing in good faith any issue
hereunder relating to the termination of the Executive's employment, in seeking
in good faith to obtain or enforce any benefit or right provided by this
Agreement or in connection with any tax audit or proceeding to the extent
attributable to the application of section 4999 of the Code to any payment or
benefit provided hereunder; pro-
---
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vided that the Executive substantially prevails on the merits of the claim that
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is the subject of the legal proceeding. Such payments shall be made within five
(5) business days after delivery of the Executive's written requests for payment
accompanied with such evidence of fees and expenses incurred as the Company
reasonably may require and shall be made as such fees are incurred subject to
Executive's agreement to promptly return to the Company any amounts to which
the Executive is not entitled under the terms hereof.
7. Termination Procedures and Compensation During Dispute.
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7.1 Notice of Termination. After a Change in Control and during the
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Term, any purported termination of the Executive's employment (other than by
reason of death) shall be communicated by written Notice of Termination from one
party hereto to the other party hereto in accordance with Section 10 hereof. For
purposes of this Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall 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. A Notice of Termination for Good Reason must be given
within ninety (90) days following the occurrence of the Good Reason event.
Further, a Notice of Termination for Cause is
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required to include a copy of a resolution duly adopted by the affirmative vote
of not less than three-quarters (3/4) of the entire membership of the Board at
a meeting of the Board which was called and held for the purpose of considering
such termination (after reasonable notice to the Executive and an opportunity
for the Executive, together with the Executive's counsel, to be heard before the
Board) finding that, in the good faith opinion of the Board, the Executive was
guilty of conduct set forth in clause (i) or (ii) of the definition of Cause
herein, and specifying the particulars thereof in detail.
7.2 Date of Termination. "Date of Termination," with respect to any
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purported termination of the Executive's employment after a Change in Control
and during the Term, shall mean (i) if the Executive's employment is terminated
for Disability, thirty (30) days after Notice of Termination is given (provided
that the Executive shall not have returned to the full-time performance of the
Executive's duties during such thirty (30) day period), and (ii) if the
Executive's employment is terminated for any other reason, the date specified in
the Notice of Termination (which, in the case of a termination by the Company,
shall not be less than thirty (30) days (except in the case of a termination for
Cause) and, in the case of a termination by the Executive, shall not be less
than fifteen (15) days nor more than sixty (60)
15
days, respectively, from the date such Notice of Termination is given).
7.3 Dispute Concerning Termination. If within fifteen (15) days
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after any Notice of Termination is given, or, if later, prior to the Date of
Termination (as determined without regard to this Section 7.3), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be extended
until the earlier of (i) the date on which the Term ends or (ii) the date on
which the dispute is finally resolved, either by mutual written agreement of the
parties or by a final judgment, order or decree of an arbitrator or a court of
competent jurisdiction (which is not appealable or with respect to which the
time for appeal therefrom has expired and no appeal has been perfected);
provided, however, that the Date of Termination shall be extended by a notice
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of dispute given by the Executive only if such notice is given in good faith and
the Executive pursues the resolution of such dispute with reasonable diligence.
7.4 Compensation During Dispute. If a purported termination occurs
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following a Change in Control and during the Term and the Date of Termination is
extended in accordance with Section 7.3 hereof, the Company shall continue to
pay the Executive the full compensation in effect when the notice giving rise to
the dispute was given (including, but limited to, salary) and con-
16
tinue the Executive as a participant in all compensation, benefit and insurance
plans in which the Executive was participating when the notice giving rise to
the dispute was given, until the Date of Termination, as determined in
accordance with Section 7.3 hereof. Amounts paid under this Section 7.4 are in
addition to all other amounts due under this Agreement (other than those due
under Section 5.2 hereof); provided, however, the amounts payable under this
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Section 7.4 shall be reduced by the amount of any compensation of a similar type
earned by the Executive as the result of employment by another employer during
the period of the dispute.
8. No Mitigation; Release.
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8.1 The Company agrees that, if the Executive's employment with the
Company terminates during the Term, the Executive is not required to seek other
employment or to attempt in any way to reduce any amounts payable to the
Executive by the Company pursuant to Section 6 hereof or Section 7.4 hereof.
Further, except as provided in Section 7.4 above, the amount of any payment or
benefit provided for in this Agreement shall not be reduced by any compensation
earned by the Executive as the 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.
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8.2 In the event the Executive is terminated under circumstances that
would entitle the Executive to severance benefits under Section 6.1(A) of this
Agreement, as a condition of the Executive's receipt of such benefits, the
Executive shall release the Company from any and all claims, causes of action,
debts, contracts, promises and demands, whether in law or equity, that Executive
ever had or then has, relating solely to the termination of his employment with
the Company (but not including any rights to benefits accrued under any employee
benefit plan of the Company or any indemnification whether under law, pursuant
to the Company's Amended and Restated By-Laws or the Company's Certificate of
Incorporation, or any indemnification agreement between the parties).
9. Successors; Binding Agreement.
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9.1 In addition to any obligations imposed by law upon any successor
to the Company, the Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such assumption and agreement
prior to the effectiveness of any such succession shall be a breach of this
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Agreement and shall entitle the Executive to compensation from the Company in
the same amount and on the same terms as the Executive would be entitled to
hereunder if the Executive were to terminate the Executive's employment for Good
Reason after a Change in Control, except that, for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination.
9.2 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 shall
die while any amount would still be payable to the Executive hereunder (other
than amounts which, by their terms, terminate upon the death of the Executive)
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.
10. Notices. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed, if to the
Executive, to the address inserted below the Executive's signature on the
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final page hereof and, if to the Company, to the address set forth below, or to
such other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon actual receipt:
To the Company:
L90, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
11. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or of any lack of compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. This Agreement supersedes any other
agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof which have been made by either party;
provided, however that this Agreement shall supersede any agreement setting
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forth the terms and conditions of the Executive's employment with the Company
only in the event that the Executive's employment with
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the Company is terminated on or following a Change in Control, by the Company
other than for Cause or by the Executive for Good Reason. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of California. All references to sections of the
Exchange Act or the Code shall be deemed also to refer to any successor
provisions to such sections. Any payments provided for hereunder shall be paid
net of any applicable withholding required under federal, state or local law and
any additional withholding to which the Executive has agreed. The obligations
of the Company and Executive under this Agreement which by their nature may
require either partial or total performance after the expiration of the Term
(including, without limitation, those under Sections 6 and 7 hereof) shall
survive such expiration.
12. Validity. The invalidity or unenforceability of any provision of
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this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
13. Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. Settlement of Disputes; Arbitration.
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14.1 All claims by the Executive for benefits under this Agreement
shall be directed to and determined by the Board and shall be in writing. Any
denial by the Board 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 shall afford a reasonable opportunity to the Executive for a review of
the decision denying a claim and shall further allow the Executive to appeal to
the Board a decision of the Board within sixty (60) days after notification by
the Board that the Executive's claim has been denied.
14.2 Any further dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration in Los Angeles,
California in accordance with the rules of the American Arbitration Association
then in effect; provided, however, that the evidentiary standards set forth in
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this Agreement shall apply. Judgment may be entered on the arbitrator's award
in any court having jurisdiction. Notwithstanding any provision of this
Agreement to the contrary, the Executive shall be entitled to seek specific
performance of the Executive's right to be paid until the Date of Termination
during the pendency of any dispute or controversy arising under or in connection
with this Agreement.
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15. Definitions. For purposes of this Agreement, the following terms
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shall have the meanings indicated below:
(A) "Affiliate" shall have the meaning set forth in Rule 12b-2
promulgated under Section 12 of the Exchange Act.
(B) "Auditor" shall have the meaning set forth in Section 6.2 hereof.
(C) "Base Amount" shall have the meaning set forth in section
280G(b)(3) of the Code.
(D) "Beneficial Owner" shall have the meaning set forth in Rule 13d-3
under the Exchange Act.
(E) "Board" shall mean the Board of Directors of the Company.
(F) "Cause" for termination by the Company of the Executive's
employment shall mean (i) the willful and continued failure by the Executive to
substantially perform the Executive's duties with the Company (other than any
such failure resulting from the Executive's incapacity due to physical or mental
illness or any such actual or anticipated failure after the issuance of a Notice
of Termination for Good Reason by the Executive pursuant to Section 7.1 hereof)
that has not been cured within 30 days after a written demand for substantial
performance is delivered to the Executive by the Board, which demand
specifically identifies the manner in which the Board believes that the
Executive has not substan-
23
tially performed the Executive's duties, or (ii) the willful engaging by
the Executive in conduct which is demonstrably and materially injurious
to the Company or its subsidiaries, monetarily or otherwise. For
purposes of clauses (i) and (ii) of this definition, (x) no act, or
failure to act, on the Executive's part shall be deemed "willful" unless
done, or omitted to be done, by the Executive not in good faith and
without reasonable belief that the Executive's act, or failure to act,
was in the best interest of the Company and (y) in the event of a
dispute concerning the application of this provision, no claim by the
Company that Cause exists shall be given effect unless the Company
establishes to the Board by clear and convincing evidence that Cause
exists.
(G) A "Change in Control" shall be deemed to have occurred if the
event set forth in any one of the following paragraphs shall have
occurred:
(I) any Person is or becomes the Beneficial Owner, directly
or indirectly, of securities of the Company (not including in the
securities beneficially owned by such Person any securities acquired
directly from the Company or its affiliates) representing 25% or
more of the combined voting power of the Company's then outstanding
securities; or
(II) the following individuals cease for any reason to
constitute a majority of the
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number of directors then serving: individuals who, on the date hereof,
constitute the Board and any new director (other than a director whose
initial assumption of office is in connection with an actual or
threatened election contest, including but not limited to a consent
solicitation, relating to the election of directors of the Company)
whose appointment or election by the Board or nomination for election by
the Company's stockholders was approved or recommended by a vote of at
least two-thirds (2/3) of the directors then still in office who either
were directors on the date hereof or whose appointment, election or
nomination for election was previously so approved or recommended; or
(III) there is consummated a merger or consolidation of the Company
or any direct or indirect subsidiary of the Company with any other
corporation, other than a merger or consolidation which would result in
the voting securities of the Company outstanding immediately prior to
such merger or consolidation continuing to represent (either by
remaining outstanding or by being converted into voting securities of
the surviving entity or any parent thereof), in combination with the
owner-
25
ship of any trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any subsidiary of the Company,
at least a majority of the combined voting power of the securities of
the Company or such surviving entity or any parent thereof
outstanding immediately after such merger or consolidation; or
(IV) the stockholders of the Company approve a plan of
complete liquidation or dissolution of the Company or there is
consummated an agreement for the sale or disposition by the Company of
all or substantially all of the Company's assets.
Notwithstanding the foregoing, a "Change in Control" shall not be deemed to
have occurred by virtue of the consummation of any transaction or series of
integrated transactions immediately following which the record holders of the
common stock of the Company immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate ownership in
an entity which owns all or substantially all of the assets of the Company
immediately following such transaction or series of transactions.
(H) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
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(I) "Company" shall mean L90, Inc. and, except in determining under
Section 15(E) hereof whether or not any Change in Control of the Company had
occurred, shall include any successor to its business and/or assets which
assumes and agrees to perform this Agreement by operation of law, or otherwise.
(J) "Date of Termination: shall have the meaning set forth in Section
7.2 hereof.
(K) "Disability" shall be deemed the reason for the termination by
the Company of the Executive's employment, if, as a result of the Executive's
incapacity due to physical or mental illness, the Executive shall have been
absent from the full-time performance of the Executive's duties with the Company
for a period of six (6) consecutive months, the Company shall have given the
Executive a Notice of Termination for Disability, and, within thirty (30) days
after such Notice of Termination is given, the Executive shall not have returned
to the full-time performance of the Executive's duties.
(L) "Employment Agreement" shall mean the employment agreement
between the Company and the Executive dated September 15, 1999.
(M) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(N) "Excise Tax" shall mean any excise tax imposed under section 4999
of the Code.
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(O) "Executive" shall mean the individual named in the first
paragraph of this Agreement.
(P) "Good Reason" for termination by the Executive of the Executive's
employment shall mean the occurrence (without the Executive's express written
consent) after any Change in Control, or prior to a Change in Control under the
circumstances described in clauses (ii) and (iii) of the second sentence of
Section 6.1 hereof (treating all references in paragraphs (I) through (VII)
below to a "Change in Control" as references to a "Potential Change in
Control"), of any one of the following acts by the Company, or failures by the
Company to act, unless such act or failure to act is corrected prior to the Date
of Termination specified in the Notice of Termination given in respect thereof
which shall be no less than ten (10) days following the date of such notice:
(I) the assignment to the Executive of any duties
inconsistent with the Executive's status as Chief Financial Officer of
the combined enterprise that includes the Company or a substantial
adverse alteration in the nature or status of the Executive's
responsibilities from those in effect immediately prior to the Change
in Control;
(II) a reduction by the Company in the Executive's annual
base salary as in ef-
28
fect on the date hereof or as the same may be increased from time to
time;
(III) notice to the Executive of the relocation of the
Executive's principal place of employment to a location other than the
following major metropolitan areas: a) Los Angeles, California; b) San
Francisco, California; c) New York, New York; and d) Boston,
Massachusetts or the Company's requiring the Executive to be based
anywhere other than such principal place of employment (or permitted
relocation thereof) except for required travel on the Company's
business to an extent substantially consistent with the Executive's
present business travel obligations;
(IV) the failure by the Company to pay to the Executive any
portion of the Executive's current compensation, or to pay to the
Executive any portion of an installment of deferred compensation under
any deferred compensation program of the Company, within seven (7)
days of the date such compensation is due;
(V) the failure by the Company to continue in effect any
compensation plan in which the Executive participates immediately
prior to the Change in Control which is material to the Executive's
total compensation,
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including but not limited to the Company's stock option, bonus and
other plans or any substitute plans adopted prior to the Change in
Control, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with respect to such
plan, or the failure by the Company to 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 or
timing of payment of benefits provided and the level of the
Executive's participation relative to other participants, as existed
immediately prior to the Change in Control;
(IV) the failure by the Company to continue to provide the
Executive with benefits substantially similar to those enjoyed by the
Executive under any of the Company's pension, savings, life insurance,
medical, health and accident, or disability plans in which the
Executive was participating immediately prior to the Change in Control
(except for across the board changes similarly affecting all senior
executives of the Company and all senior executives of any Person in
control of the Company), the taking of any other action by
30
the Company which would directly or indirectly materially reduce any
of such benefits or deprive the Executive of any material fringe
benefit enjoyed by the Executive at the time of the Change in Control,
or the failure by the Company to provide the Executive with the number
of paid vacation days to which the Executive is entitled on the basis
of years of service with the Company in accordance with the Company's
normal vacation policy in effect at the time of the Change in Control;
or
(VII) any purported termination of the Executive's employment
which is not effected pursuant to a Notice of Termination satisfying
the requirements of Section 7.1 hereof; for purposes of this
Agreement, no such purported termination shall be effective. The
Executive's right to terminate the Executive's employment for Good
Reason shall not be affected by the Executive's incapacity due to physical or
mental illness. The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any act or failure to act
constituting Good Reason hereunder.
For purposes of any determination regarding the existence of Good
Reason, any claim by the Executive that Good Reason exists shall be presumed to
be correct
31
unless the Company establishes to the Board by clear and convincing evidence
that Good Reason does not exist.
(Q) "Gross-Up Payment" shall have the meaning set forth in Section
6.2 hereof.
(R) "Notice of Termination" shall have the meaning set forth in
Section 7.1 hereof.
(S) "Pension Plan" shall mean any tax-qualified, supplemental or
excess benefit pension plan maintained by the Company and any other plan or
agreement entered into between the Executive and the Company which is designed
to provide the Executive with supplemental retirement benefits.
(T) "Person" shall have the meaning given in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except
that such term shall not include (i) the Company or any of its subsidiaries,
(ii) a trustee or other fiduciary holding securities under an employee benefit
plan of the Company or any of its Affiliates, (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities, (iv) a
corporation owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company
or (v) a group of stockholders who have entered into a voting agreement or
similar arrangement provided that none of the purposes for which such
32
agreement or arrangement was entered into or maintained includes the
effectuation of a Change in Control.
(U) "Potential Change in Control" shall be deemed to have occurred if
the event set forth in any one of the following paragraphs shall have occurred:
(I) the Company enters into an agreement, the consummation of
which would result in the occurrence of a Change in Control;
(II) the Company or any Person publicly announces an intention
to take or to consider taking actions which, if consummated, would
constitute a Change in Control;
(III) any Person becomes the Beneficial Owner, directly or
indirectly, of securities of the Company representing 15% or more of
either the then outstanding shares of common stock of the Company or
the combined voting power of the Company's then outstanding securities
(not including in the securities beneficially owned by such Person any
securities acquired directly from the Company or its affiliates); or
(IV) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a Potential Change in Control has occurred.
33
(V) "Retirement" shall be deemed the reason for the termination by
the Executive of the Executive's employment if such employment is terminated in
accordance with the Company's retirement policy, including early retirement,
generally applicable to its salaried employees.
(W) "Severance Payments" shall have the meaning set forth in Section
6.1 hereof.
(X) "Tax Counsel" shall have the meaning set forth in Section 6.2
hereof.
(Y) "Term" shall mean the period of time described in Section 2
hereof (including any extension, continuation or termination described therein).
34
(Z) "Total Payments" shall mean those payments so described in
Section 6.2 hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
L90, INC.
By /s/ ▇▇▇▇ ▇▇▇▇▇
----------------------
Name ▇▇▇▇ ▇▇▇▇▇
Title: CEO
/s/ ▇▇▇ ▇▇▇▇▇▇▇▇▇
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▇▇▇ ▇▇▇▇▇▇▇▇▇
EXECUTIVE
Address:
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
-------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇
-------------------------
90254
-------------------------
(Please print carefully)
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