<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER: 001-14875
NETCREATIONS, INC.
(Exact Name of Registrant as Specified in its Charter)
NEW YORK 11-3300476
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
379 WEST BROADWAY, SUITE 202
NEW YORK, NEW YORK 10012
(Address of Principal Executive Officer and Zip Code)
(212) 625-1370
(Registrant's Telephone Number, Including Area Code)
Check whether the registrant: (1) filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act during the preceding 12
months (or for such shorter period that the Registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes |X| No |_|
As of May 8, 2000, there were 15,495,000 shares of the registrant's
Common stock outstanding, with a $.01 par value.
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
NetCreations, Inc.
Condensed Balance Sheets
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $41,730,942 $41,305,814
Accounts receivable (net of allowance for doubtful
accounts of $150,000) 8,127,123 5,636,967
Prepaid commissions 6,391,000 3,000,000
Other current assets 210,851 132,395
----------- -----------
Total current assets 56,459,916 50,075,176
Equipment (net of accumulated
depreciation and amortization) 3,071,530 2,268,225
Deferred income taxes 330,000 --
Other assets 123,706 48,014
----------- -----------
Total assets $59,985,152 $52,391,415
=========== ===========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Accounts payable $ 1,203,216 $ 1,825,896
Accrued expenses 1,039,978 939,405
Commissions payable 8,042,779 3,696,466
Current portion of capital lease obligations 109,086 112,350
Income taxes payable 2,048,989 325,552
Deferred income taxes -- 128,500
----------- -----------
Total current liabilities 12,444,048 7,028,169
Capital lease obligations 80,109 101,225
----------- -----------
Total liabilities 12,524,157 7,129,394
Common stock, $.01 par value; 50,000,000 shares authorized;
15,495,000 shares issued and outstanding 154,950 154,950
Additional paid-in capital 46,120,376 46,512,376
Deferred compensation (1,758,571) (2,313,171)
Retained earnings 2,944,240 907,866
----------- -----------
Total stockholders' equity 47,460,995 45,262,021
----------- -----------
Total liabilities and stockholders' equity $59,985,152 $52,391,415
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE>
NetCreations, Inc.
Condensed Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
2000 1999
----------- ----------
<S> <C> <C>
Net revenues $14,408,306 $1,694,505
Cost of revenues 7,872,280 827,152
----------- ----------
Gross profit 6,536,026 867,353
Operating expenses
Selling and marketing 1,379,899 294,328
Technology, support and development 429,957 85,981
General and administrative 1,217,746 135,886
Depreciation and amortization 270,160 17,354
----------- ----------
Total operating expenses 3,297,762 533,549
----------- ----------
Operating income 3,238,264 333,804
Interest income (expense) - net 563,610 (2,980)
----------- ----------
Income before income tax provision 3,801,874 330,824
Income tax provision 1,765,500 36,300
----------- ----------
NET INCOME $ 2,036,374 $ 294,524
=========== ==========
Net income per common share
Basic and diluted $0.13 $0.03
===== =====
Weighted-average common shares outstanding
For basic net income per share 15,495,000 11,700,000
For dilutive net income per share 15,881,592 11,700,000
Pro forma data
Historical income before income taxes $ 3,801,874 $330,824
Pro forma income tax provision 1,765,500 154,200
----------- ----------
Pro forma net income $ 2,036,374 $ 176,624
=========== ==========
Pro forma net income per common share
Basic and diluted $0.13 $0.02
===== =====
Pro forma weighted-average common shares
outstanding
For basic net income per share 15,495,000 11,700,000
For dilutive net income per share 15,881,592 11,700,000
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
NetCreations, Inc.
Condensed Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
2000 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities
Net income $ 2,036,374 $ 294,524
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and amortization 270,160 17,354
Deferred income taxes (458,500) (18,500)
Equity-based compensation 162,600 -
Changes in assets and liabilities
Accounts receivable (2,490,156) (43,574)
Prepaid commissions (3,391,000) -
Other current assets (78,456) (1,524)
Other assets (75,692) (12,608)
Accounts payable and accrued expenses (522,107) 29,632
Commissions payable 4,346,313 174,195
Income taxes payable 1,723,437 54,800
----------- -----------
Net cash provided by operating activities 1,522,973 494,299
----------- -----------
Cash flows from investing activities
Capital expenditures (1,073,465) (10,000)
----------- -----------
Net cash used in investing activities (1,073,465) (10,000)
----------- -----------
Cash flows from financing activities
Distributions to shareholders - (281,632)
Borrowings under line of credit - 25,000
Payments on capital lease obligations (24,380) (8,821)
----------- -----------
Net cash used in financing activities (24,380) (265,453)
----------- -----------
Net increase in cash and cash equivalents 425,128 218,846
Cash and cash equivalents at beginning of period 41,305,814 96,885
----------- -----------
Cash and cash equivalents at end of period $41,730,942 $ 315,731
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Income taxes $ 500,427 $ -
=========== ===========
Interest $ 3,709 $ 2,980
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements
4
<PAGE>
NetCreations, Inc.
Notes to Condensed Financial Statements (Unaudited)
NOTE A - NATURE OF OPERATIONS AND BASIS OF PRESENTATION
NetCreations, Inc. (the "Company") was incorporated and commenced
operations in 1995. NetCreations, Inc. provides Internet-based opt-in
email direct marketing services that enable direct marketers to target
promotional campaigns to consumers who have given their permission to
receive email messages in any of over 3,000 topical categories. The
technology allows real-time, online email address selection and
ordering by direct markets, as well as response tracking. The Company
maintains a Web site at www.postmasterdirect.com as a vehicle for its
services and another Web site that contains its corporate information
at www.netcreations.com.
The Company charges direct marketers a fee each time it sends marketing
materials on their behalf to an email address they have selected from
our database. The Company generates substantially all of its revenues
from the fees obtained from its direct marketing customers. Generally,
a percentage of that fee is paid to the third-party Web sites in the
Company's network each time an email address they own is used for a
particular email marketing campaign.
The accompanying financial statements should be read in conjunction
with the following notes and with the Financial Statements and related
notes included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1999. Information in the accompanying financial
statements for the three months ended March 31, 2000 and 1999 is
unaudited. The condensed financial statements as of March 31, 2000 have
been prepared in accordance with generally accepted accounting
principles applicable to interim financial information and the rules
and regulations promulgated by the Securities and Exchange Commission.
Accordingly, such condensed financial statements do not include all of
the information and footnote disclosures required by generally accepted
accounting principles. In the opinion of the Company's management, the
March 31, 2000 and 1999 unaudited condensed interim financial
statements include all adjustments, consisting of normal recurring
adjustments necessary for a fair presentation of such financial
statements. The results of operations for the three months ended March
31, 2000 and 1999 are not necessarily indicative of the results to be
expected for the entire year.
NOTE B - LIST MANAGEMENT AGREEMENTS
The Company has paid certain advances and fees under third-party list
management agreements that are accounted for as prepaid commissions. As
of March 31, 2000 the Company has recorded prepaid commissions of
$6,391,000. Commission expense is generally recognized as revenue is
earned by the Company upon the transmission of applicable email
messages and applied against the advances. Should management determine
that it is no longer probable that sufficient revenue will be generated
over the term of the agreement to meet the minimum amounts advanced,
the Company will amortize the remaining advances at the greater of the
method described in the preceding sentence or the straight-line basis
over the remaining term of the agreement. Management will continue to
assess the recoverability of prepaid commissions at each reporting
period. To the extent that it is probable that some or all of the
prepaid commissions have become nonrecoverable, a charge to operations
will be made in that period to reduce the balance to the amount
recoverable. There are no required charges as of March 31, 2000.
5
<PAGE>
NOTE C - INCOME TAXES AND PROFORMA INCOME TAXES
The Company was an S Corporation for Federal and state income tax
purposes through the consummation of its IPO on November 12, 1999.
Accordingly, no provision has been made for Federal and certain state
income taxes in the March 31, 1999 financial statements, since the
income of the Company was included in the personal income tax returns
of the stockholders. The Company was, however, responsible for taxes in
jurisdictions that do not recognize S Corporation status (e.g., New
York City). The Company has included proforma income taxes on its
income statement that reflect the tax expense if the Company were
subject to Federal and all state and local taxes. Effective November
12, 1999, the Company terminated its S Corporation status. The Company
converted to a C Corporation and is now subject to Federal and all
applicable state income taxes.
On January 1, 2000 the Company became an accrual basis taxpayer
pursuant to the Internal Revenue Code. This change resulted in a
reversal of the deferred tax liabilities of $128,500, the recognition
of a deferred tax asset of approximately $443,000 and an additional
current tax payable of $141,000 as of January 1, 2000.
NOTE D - STOCK OPTION PLAN
The Company granted 1,083,000 options covering shares during the three
months ended March 31, 2000 at exercise prices equal to the fair market
value of the common stock on the date of grant. Option activity under
the Plan for the three months ended March 31, 2000 is as follows:
For the Three
Months Ended
March 31,
2000
----
Options outstanding at beginning of period 546,500
Exercised -
Granted 1,083,000
Cancelled or forfeited (51,500)
---------
Options outstanding at end of period 1,578,000
=========
NOTE E - SUBSEQUENT EVENTS
In April 2000, 185,000 options were granted pursuant to employment
agreements. For such options, an aggregate of 16 2/3% of these options
vest on the six month anniversary of the date of grant while the
remainder vest in equal quarterly installments over the next ten
quarters. The exercise price of such options was equal to the fair
market value on the date of grant.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
This Quarterly Report on Form 10-Q contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, that are subject
to risks and uncertainties including, but not limited to, the impact of
competitive products and pricing, product demand and market acceptance, reliance
on key strategic alliances, fluctuations in operating results and other risks
detailed form time to time in the Company's filings with the Securities and
Exchange Commission.
Results of Operations: Three Months Ended March 31, 2000 Compared to the Three
Months Ended March 31, 1999
Net Revenues. Net revenues increased 750.3% to $14,408,306 for the three months
ended March 31, 2000, from $1,694,505 for the three months ended March 31, 1999.
This was the result of increased demand for email marketing services, resulting
in continued growth in the number of email messages delivered for our customers
as well as in the number of customers utilizing our opt-in email address
database. The number of opt-in email addresses in our database grew to over 7.7
million at March 31, 2000, from approximately 2.1 million at March 31, 1999,
primarily as a result of the addition of third-party Web sites added to our
NetCreations Network, which exceeded 250 at March 31, 2000.
For the three months ended March 31, 2000, volume and broker discounts were
$3,559,992 and $1,761,877, respectively. For the three months ended March 31,
1999, volume and broker discounts were $271,811 and $179,901, respectively. The
increase in volume discounts is attributable to the significant growth in demand
for our email marketing services and the increase in broker discounts is
attributable to the growth in utilization of our services by resellers. For the
quarter ended March 31, 2000, resellers accounted for approximately 51% of our
net revenues compared to approximately 36% of our net revenues for the
comparative 1999 period. The proportion of our marketing customers obtained
through our reseller channels has continued to increase. To the extent we
continue to increase the proportion of sales through resellers, our net revenues
and gross profits could decrease.
Cost of Revenues. Cost of revenues increased 851.7% to $7,872,280, or 54.6% of
net revenues for the three months ended March 31, 2000, from $827,152, or 48.8%
of net revenues of net revenues, for the comparative 1999 period. The increase
in the cost of revenues is directly attributable to the overall growth in net
revenues, while the increase in the cost of revenue to net revenue percentage is
the result of an increase in the utilization of our services by resellers,
resulting in higher broker discounts, as well as an increase in the proportion
of opt-in email addresses added to our database from third-party Web sites.
Selling and Marketing. Selling and marketing expenses increased 368.8% to
$1,379,899 for the three months ended March 31, 2000, from $294,328 for the
three months ended March 31, 1999. Selling and marketing expenses consisted
primarily of personnel costs and direct expenditures for advertising,
promotional programs and other related activities. This increase was the result
of our business expansion and is attributable to a period-to-period increase of
22 sales and marketing employees, as well as an increase in advertising
expenditures of $265,804 in connection with our efforts to broaden recognition
of our company and the services we provide.
7
<PAGE>
Technology, Support and Development. Technology, support and development
expenses increased 400.1% to $429,957 for the three months ended March 31, 2000,
from $85,981 for the three months ended March 31, 1999. Technology, support and
development expenses consisted primarily of personnel costs and expenditures for
software and related supplies. This increase was primarily attributed to the
addition of 10 employees from period-to-period, in connection with our efforts
to expand our capabilities and improve the efficiency of our
www.postmasterdirect.com Web site.
General and Administrative. General and administrative expenses increased 796.2%
to $1,217,746 for the three months ended March 31, 2000, from $135,886 for the
three months ended March 31, 1999. General and administrative expenses consisted
primarily of personnel, facilities, communication costs and professional fees.
This increase was primarily attributable to the addition of 9 employees to
support growth in business activity, space expansion at our current location,
increased costs for expenses that support our increased business activities,
professional fees in connection with various legal matters relating to customer
and employment agreements, intellectual property and employee benefit matters,
and accounting and auditing fees. In addition, a portion of the increase was
attributable to $162,600 of expense relating to the amortization of the cost of
options granted to employees in the third quarter of 1999 at less than fair
market value.
Depreciation and Amortization. Depreciation and amortization expenses increased
1,456.8% to $270,160 for the three months ended March 31, 2000, from $17,354 for
the three months ended March 31, 1999. Depreciation and amortization expenses
consisted primarily of depreciation of computer equipment. This increase was
primarily a result of investments in computer equipment during the later part of
1999.
Income Taxes. Income taxes for the three months ended March 31, 2000 reflect all
Federal, state and local taxes on an accrual basis pursuant to the Internal
Revenue Code for C corporations. As we had elected to be taxed as an S
corporation for Federal and certain state tax purposes until November 15, 1999,
the 1999 provision for income taxes represents state and local taxes only to the
extent that they do not recognize the S corporation status, based on the pre-tax
operating results for each year. As an S corporation, the Company was a cash
basis taxpayer through December 31, 1999.
Liquidity and Capital Resources
Net cash provided by operating activities was $1,522,973 for the three months
ended March 31, 2000 compared with $494,299 for the three months ended March 31,
1999. The increase in cash provided by operating activities for 2000 is
primarily attributable to net income from operations as well as increases in
commissions payable and income taxes payable balances. These increases are
offset by the increases in the accounts receivable and prepaid commission
accounts. The 1999 cash flow from operations is primarily attributed to net
income from operations.
Net cash used in investing activities was $1,073,465 for the three months ended
March 31, 2000 compared with $10,000 for the three months ended March 31, 1999.
Cash used in investing activities was used for capital expenditures consisting
primarily of computer hardware and software for the operation and support of our
business activities.
Net cash used in financing activities was $24,380 for the three months ended
March 31, 2000 compared with $265,453 for the three months ended March 31, 1999.
During 2000, the cash used in financing activities related to payments on
capital lease obligations, while the 1999 uses were primarily for distributions
to the shareholders relating to our election to be taxed as an S corporation.
8
<PAGE>
Cash and cash equivalents was $41,730,942 at March 31, 2000 compared with
$41,305,814 at December 31, 1999. We believe that our cash and cash equivalents
on hand will be sufficient to satisfy our working capital and the anticipated
capital expenditure requirements for at least the next 12 months.
Seasonality
The traditional postal direct marketing industry tends to have higher revenues
in the fourth quarter of the year, when direct marketers send out holiday
promotions, and somewhat lower revenues during the summer, when direct marketing
activity is reduced overall. To date, because of the rapid growth of the email
direct marketing industry, our revenues have grown sequentially from quarter to
quarter. Therefore, our revenues have not followed the seasonal patterns of the
traditional postal direct marketing industry. We anticipate, however, that as
our business matures, our revenues will track more closely the seasonal patterns
experienced in the traditional postal direct marketing industry.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
o Exhibits
10.1 Employment Contract with Brian Burlant
10.2 Employment Contract with Nicole Comeforo
27.1 Financial Data Schedule
o Reports on Form 8-K
None
9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized
Date: May 12, 2000 /s/ Rosalind B. Resnick
------------------------
Rosalind B. Resnick
Chief Executive Officer,
Chairman of the Board of Directors,
and Treasurer (Principal
Executive Officer)
Date: May 12, 2000 /s/ Gary Sindler
-----------------
Gary Sindler
Chief Financial Officer
(Principal Financial and
Accounting Officer)
10
<PAGE>
Exhibit 10.1
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and entered
into as of the 14th day of April, 2000 (the "Commencement Date") by and between
NETCREATIONS, INC., a New York corporation (the "Company"), and Brian Burlant
(hereinafter called the "Executive").
R E C I T A L S
A. The Executive desires to be employed as the Senior Vice
President and General Counsel of the Company.
B. The Company desires to employ the Executive as the Senior
Vice President and General Counsel of the Company.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual
covenants set forth herein, the parties agree as follows:
1. EMPLOYMENT.
1.1 EMPLOYMENT. The Company hereby agrees to employ the
Executive and the Executive hereby agrees to serve the Company on the terms and
conditions set forth herein.
1.2 DUTIES OF EXECUTIVE. During the Term of Employment
under this Agreement, the Executive shall serve as the Senior Vice President and
General Counsel of the Company, shall diligently perform all services as may be
assigned to the Executive by the Chief Executive Officer, the President, and the
Chief Operating Officer of the Company and by the Board of Directors (the
"Board") of the Company, and shall exercise such power and authority as may from
time to time be delegated to the Executive by the Board. Without limiting the
generality of the foregoing, the Executive duties shall include, among other
things, the following:
o Draft and review all Company contracts for business development arrangements,
employment matters, leases, securities, and all other contracts
o Work with and supervise outside counsel
o Advise management on potential mergers and acquisitions and other strategic
initiatives
o Advise management on all manner of risks the Company faces and develop plans
to mitigate those risks
o Participate as a member of the senior management team of the Company
1
<PAGE>
The Executive acknowledges and agrees that the Executive shall devote the
Executive's full business time and attention to the business and affairs of the
Company, render such services to the best of the Executive's ability, and use
the Executive's best efforts to promote the interests of the Company. It shall
not be a violation of this Agreement for the Executive to (i) serve on civic or
charitable boards or committees, (ii) deliver lectures, fulfill speaking
engagements or teach at educational institutions, or (iii) manage personal
investments, so long as such activities do not otherwise contravene the terms of
this Agreement or significantly interfere with the performance of the
Executive's responsibilities to the Company in accordance with this Agreement.
The Executive's duties will require the Executive's regular presence during
normal working hours on business days Monday through Friday at the Company's
principal executive offices, currently located at 379 West Broadway, New York,
New York, but the Executive's duties will also involve some business travel.
2. TERM.
2.1 INITIAL TERM. The initial Term of Employment under
this Agreement, and the employment of the Executive hereunder, shall commence on
the date hereof (the "Commencement Date") and shall expire at the close of
business on April 13, 2003, unless sooner terminated in accordance with Section
5 hereof (the "Initial Term").
2.2 RENEWAL TERMS. At the end of the Initial Term, the
Term of Employment automatically shall renew for successive one year terms
(subject to earlier termination as provided in Section 5 hereof), unless the
Company or the Executive delivers written notice to the other at least 90 days
prior to the last day of the Initial Term or any such applicable renewal period
(in either case, the "Expiration Date") of its or the Executive's election not
to renew the Term of Employment. For purposes of this Agreement, if the Term of
Employment expires as a result of the Company delivering written notice to the
Executive stating its intention not to renew the Term of the Employment pursuant
to this Section 2.2, the Executive shall be treated as if the Executive was
terminated by the Company without Cause, in accordance with Section 5.4 hereof,
upon the Expiration Date. In addition, if the Term of Employment expires as a
result of the Executive delivering written notice to the Company stating the
Executive's intention not to renew the Term of Agreement pursuant to this
Section 2.2, the Executive shall be treated as if the Executive had terminated
the Executive's employment with the Company without Good Reason, in accordance
with Section 5.5(b) hereof, upon the Expiration Date.
2.3 TERM OF EMPLOYMENT. The period during which the
Executive shall be employed by the Company pursuant to the terms of this
Agreement is sometimes referred to in this Agreement as the "Term of
Employment."
3. COMPENSATION.
3.1 BASE SALARY. The Executive shall receive a base salary
at the annual rate (prorated for any applicable period of less than one year) of
One Hundred and Sixty-Five Thousand Dollars ($165,000) (the "Base Salary")
during the Term of Employment, with such Base Salary payable in installments
consistent with the Company's normal payroll schedule, subject to applicable
withholding and other taxes. The Base Salary shall be reviewed, at least
annually, for merit increases and may, by action and in the discretion of the
Board, be increased (but not decreased) at any time or from time to time
3.2 BONUSES. During the term of this Agreement, the
Executive shall be eligible to receive performance and annual incentive awards
(the "Bonuses") of up to a maximum potential limit of Seventy Thousand Dollars
($70,000) per annum as described below. Bonuses shall be reviewed, at least
annually, for merit increases and, by action and in the discretion of the Board,
the limit on the potential size of Bonuses can be increased, but not decreased,
at any time or from time to time.
2
<PAGE>
Each period for which Bonuses are payable is sometimes
hereinafter referred to as a Bonus Period. Unless otherwise specified by the
Board, fiscal quarter of the Company shall be a Bonus Period. The maximum
portion of the Bonuses that may be awarded for any Bonus Period, if any, shall
be determined prior to the commencement of the relevant Bonus Period by the
Board, in its sole and absolute discretion, provided that the maximum achievable
Bonus limit of $70,000 is fully allocated among the quarters in each fiscal year
so that the Executive has the opportunity in each fiscal year to achieve the
maximum Bonus of $70,000 if applicable targets are met as described below.
However, the bonus plan for the Executive shall be predicated on the
establishment of quarterly goals, referred to as Key Initiatives, to be mutually
developed and signed-off on between the Executive and the Company's
Board/Representative of the Company prior to and/or adjusted during a quarter.
Key Initiatives will comprise, among other things, personal targets and Company
revenues and pretax income goals. The Key Initiatives for each quarter will
indicate what portion of the Bonus will be payable in respect of that quarter if
a particular Key Initiative is achieved for that quarter. For purposes of this
Agreement, the term "Representative of the Company" means the Company's Chief
Executive Officer. All Bonuses shall be payable to the Executive quarterly in
cash and/or to the extent determined by the Board and agreed upon by the
Executive, with common stock ("Common Stock") of the Company by no later than
ten (10) business days after the Company has completed its financial statements,
approved by the Company's Chief Financial Officer and its Chief Executive
Officer, for the preceding fiscal period. Bonuses shall be subject to proration
for periods of less than one quarter. Any bonuses payable pursuant to this
Section 3.2 are sometimes hereinafter referred to as "Incentive Compensation."
4. EXPENSE REIMBURSEMENT AND OTHER BENEFITS.
4.1 REIMBURSEMENT OF EXPENSES. Upon the submission of
proper substantiation by the Executive, and subject to such rules and guidelines
as the Company may from time to time adopt, the Company shall reimburse the
Executive for all reasonable expenses actually paid or incurred by the Executive
during the Term of Employment in the course of and pursuant to the business of
the Company.
The Executive shall account to the Company in writing for
all expenses for which reimbursement is sought and shall supply to the Company
copies of all relevant invoices, receipts or other evidence reasonably requested
by the Company.
4.2 COMPENSATION/BENEFIT PROGRAMS. During the term of
Employment, the Executive shall be entitled to participate in all medical,
dental, hospitalization, accidental death and dismemberment, disability, travel
and life insurance plans applicable to the Company's senior executives
generally, and any and all other plans as are presently and hereinafter offered
by the Company generally to its executives, including savings, pension,
profit-sharing and deferred compensation plans, subject to the general
eligibility and participation provisions set forth in such plans. The Company
will use its best commercial efforts to obtain an administrative exception to
permit the Executive to participate in the Company's 401K Plan effective as soon
as possible.
4.3 TRANSPORTATION ALLOWANCE. The Executive will not be
entitled to reimbursement for his expenses in commuting to and from the
Company's offices.
3
<PAGE>
4.4 STOCK OPTIONS.
a. During the Term of Employment, the Executive shall
be eligible to be granted options (the "Stock Options") to purchase the Common
Stock of the Company under (and therefore subject to) all terms and conditions
of the Company's Stock Option Plan, as the same may be amended from time to time
and any future plans (the current plan and any future plans are hereinafter
referred to as the "Stock Option Plan"). The number of Stock Options and terms
and conditions of the Stock Options shall be determined by the Committee
appointed pursuant to the Stock Option Plan, or by the Board of Directors of the
Company, in its discretion and pursuant to the Stock Option Plan.
b. Upon the execution and delivery of this Agreement
and approval of the same by the Company's Board of Directors (including its
relevant Board committee responsible for administration of the Stock Option
Plan), the Company shall grant to the Executive Stock Options, intended to be
incentive stock options under Section 422 of the Internal Revenue Code of 1986,
as amended, to purchase the number of shares of the Company's Common Stock which
will constitute 100,000 shares of the Company's outstanding Common Stock
provided, that this grant is subject to shareholder approval of amendments to
the Company's Stock Option Plan sufficient to permit that number of incentive
Stock Options to be granted to the Executive; and further provided, that the
Company undertakes to seek to obtain such shareholder approval no later than at
its next annual meeting of shareholders. All of the Stock Options referred to
in this paragraph (b) shall have certain characteristics:
(i) the Stock Options shall vest as follows for so
long as the Executive is continuously employed by the Company as its Senior Vice
President and General Counsel: 16.667% of the 100,000 Stock Options shall vest
on October 14, 2000, and the balance of the 100,000 Stock Options shall vest
thereafter in 8.334% increments on each quarterly anniversary of that date until
the entire 100,000 Stock Options have vested, in each case subject to continued
employment by the Company;
(ii) subject to clause (vii) below, the 100,000
Stock Options shall be exercisable from and after the date upon which the
100,000 Stock Options vest through the close of business on April 14, 2005 at an
initial exercise price of Twenty-Two Dollars ($22.00) per share;
(iii) the Stock Options shall be on such other
terms and conditions as may be set forth in the instrument granting the Stock
Options, including without limitation, the provisions concerning termination of
unvested Stock Options;
(iv) the option agreement shall provide that the
shares of common stock underlying those Stock Options shall be registered in the
first registration statement on Form S-8 or other form of registration statement
filed by the Company with the Securities Exchange Commission for the purpose of
registering options or other securities issued to executives or other employees
of the Company in their respective capacities as executive or employees of
(rather than shareholders of or investors in) the Company;
(v) the option agreement shall include certain
anti-dilution provisions customary in options granted by the Company;
(vi) the Stock Options may not be hypothecated or
pledged, and may not be sold, transferred or otherwise disposed of (except by
exercise in accordance with the terms of the option agreement) other than
through transfer by will or the laws of descent and distribution, and during the
lifetime of the Executive the Stock Options shall be exercisable only by the
Executive or, in the event of the Executive's incapacity, the Executive's legal
representative; and
(vii) the Stock Options shall not be exercisable at
any time unless the Executive has executed a written instrument, reasonably
satisfactory to the Executive and to the Company evidencing (a) the Executive's
investment intent and customary investment representations to substantiate
compliance with applicable securities laws, and (b) the Executive's agreement
that the sale, transfer, or other disposition of the shares shall be subject to
applicable securities law restrictions and applicable restrictions under this
Agreement and the option agreement, and that the certificates evidencing the
shares shall be legended to reflect the same.
4
<PAGE>
c. If the Executive has fulfilled (or, as determined
by the Compensation Committee of the Company's Board of Directors, in its sole
discretion, substantially attained) the Executive's applicable Key Initiatives
during the one year terminating on the first anniversary of the Commencement
Date, or the applicable Key Initiatives during the one year period terminating
on the second anniversary of the Commencement Date, or the applicable Key
Initiatives during the one year period terminating on the third anniversary of
the Commencement Date, then on each such anniversary on which the applicable
performance goals have been so fulfilled or so determined to have been
substantially attained additional Stock Options to purchase 10,000 shares of the
Company's outstanding shares of Common Stock (or a potential total of 30,000
shares for all three periods in the aggregate), shall be issued to the
Executive. These Stock Options are in addition to and not in substitution for
any other Stock Options granted to the Executive. These additional Stock Options
shall be exercisable at the average closing trading price of the Company's
common stock on the principal exchange or market on which its stock is traded
for the five (5) business days ending on the date of issuance, shall be vested
immediately upon grant, and shall otherwise be on substantially the same terms
and conditions as the other Stock Options granted to the Executive pursuant to
Section 4.4(b). Notwithstanding the foregoing, the grant of additional stock
options referred to in this paragraph is subject to shareholder approval of
amendments to the Company's Stock Option Plan sufficient to permit that number
of additional incentive Stock Options to be granted to the Executive. The
Company undertakes to seek to obtain such shareholder approval no later than at
its next annual meeting of shareholders.
4.5 VACATION BENEFITS. The Executive shall be entitled to
four (4) weeks of vacation time each calendar year during the term of this
Agreement, to be taken at such times as the Executive and the Company shall
mutually determine and provided that no vacation time shall interfere with the
duties required to be rendered by the Executive hereunder. Notwithstanding the
foregoing, in view of the Company's current circumstances the Executive will not
(i) take more than one week of vacation time in any 30-day period unless
otherwise mutually agreed with the Chief Executive Officer of the Company.
4.6 OTHER BENEFITS. The Executive shall receive such
additional benefits, if any, as the Board of the Company shall from time to time
determine.
5. TERMINATION.
5.1 TERMINATION FOR CAUSE. The Company shall at all times
have the right, upon written notice (which shall describe in general terms the
basis for dismissal per this Section) to the Executive, to terminate the Term of
Employment, for Cause. For purposes of this Agreement, the term "Cause" shall
mean (i) an action or omission of the Executive which constitutes a willful and
material breach of, or willful failure or refusal (other than by reason of the
Executive's disability) to perform the Executive's duties under, this Agreement
which is not cured within fifteen (15) days after receipt by the Executive of
written notice of same if such action or omission is capable of being so cured,
(ii) habitual insobriety or use of controlled substances (other than under the
supervision of a licensed physician); (iii) habitual absenteeism not excused in
writing by the Company; (iv) fraud, non-disclosed self-dealing, embezzlement or
misappropriation of funds or property or breach of trust in connection with the
Executive's services hereunder, (v) conviction of a felony; (vi) conviction of
any other crime or misdemeanor involving moral turpitude which, in the Company's
reasonable judgment, if the same were to become publicly known or known within
the Company or to its employees, suppliers or customers, may be materially
adverse to the reputation of the Company or the Executive, may materially impair
the standing of the Company or the Executive in the business community or local
community or with the employees, suppliers and customers of the Company, may
materially impair the Executive's ability to continue to be an effective officer
and representative of the Company, or may tend to expose the Company or the
Executive to ridicule; or (vii) gross negligence in connection with the
performance of the Executive's duties hereunder which is not cured, to the
extent that the same is curable, within fifteen (15) days after receipt by the
Executive of written notice of same. Upon any termination pursuant to this
Section 5.1, the Company shall pay to the Executive the Executive's Base Salary
through the date of termination, accrued and earned but unpaid Incentive
Compensation, if any, for any Bonus Period ending on or before the date of the
termination of the Executive's employment with the Company, and a prorated
portion of the Incentive Compensation earned, if any, for any incomplete
quarterly Bonus Period in which the termination occurs. The Company shall have
no further liability hereunder other than its obligations, if any, (i) in
accordance with the terms of options granted to the Executive through the date
of termination, (ii) reimbursement for reasonable business expenses incurred by
the Executive prior to the date of termination, subject, however, to the
provisions of Section 4.1, (iii) accrued and untaken vacation days, and (iv)
applicable statutes.
5
<PAGE>
5.2 DISABILITY. The Company shall at all times have the
right, upon written notice to the Executive, to terminate the Term of
Employment, if the Executive shall as the result of mental or physical
incapacity, illness or disability, become unable to perform the Executive's
obligations hereunder for a total of 180 days in any 12-month period. The
Company shall rely upon a certification performed by the Company's disability
insurer or by a physician jointly chosen by the Executive's doctor and the
Company's doctor to determine whether the Executive continues to be disabled
provided that if the Executive does not submit to examination by a licensed
medical doctor for such purpose (if requested by the Company) then the Company
may terminate the Executive's employment if the Executive shall become entitled
to benefits under the Company's disability plan as then in effect. Upon any
termination pursuant to this Section 5.2, the Company shall (i) pay to the
Executive any unpaid Base Salary through the effective date of termination
specified in such notice, (ii) pay to the Executive the Executive's accrued but
unpaid Incentive Compensation, if any, for any Bonus Period ending on or before
the date of termination of the Executive's employment with the Company, (iii)
continue to pay the Executive through the date which is six (6) months after the
termination (the "Continuation Period"), an amount equal to the Base Salary the
Executive was receiving at the time of the Executive's Disability, such amount
to be paid in the manner and at such times as the Base Salary otherwise would
have been payable to the Executive, and (iv) continue to pay the Executive
Incentive Compensation and continue to provide the Executive with the benefits
the Executive was receiving under Section 4.2 hereof (the "Benefits") through
the Continuation Period (to the extent permitted under the terms of applicable
insurance and other benefit programs of the Company then in affect and covering
the Executive, and provided further that the Company shall not take any
affirmative action from the time of giving notice of termination to the
Executive through the end of the Continuation Period which would cause the
relevant insurance and other benefits available to the Executive to be reduced
or eliminated) following the termination of the Executive's employment with the
Company, in the manner and at such times as the compensation or Benefits
otherwise would have been payable or provided to the Executive, provided that
the amounts payable to the Executive pursuant to the foregoing clauses (i)
through (iv) shall be reduced by the amount actually paid to the Executive
pursuant to the disability insurance referred to in Section 4.2 hereof. The
Company shall have no further liability hereunder other than its obligations, if
any, (i) in accordance with the terms of options granted to the Executive
through the date of termination, (ii) reimbursement for reasonable business
expenses incurred by the Executive prior to the date of termination, subject,
however, to the provisions of Section 4.1, (iii) accrued and untaken vacation
days, and (iv) applicable statutes.
5.3 DEATH. Upon the death of the Executive during the Term
of Employment, the Company shall (i) pay to the estate or the legal
representative of the deceased Executive any unpaid Base Salary through the
Executive's date of death, (ii) pay to the estate or the legal representative of
the deceased Executive the Executive's accrued but unpaid Incentive
Compensation, if any, for any Bonus Period ending on or before the Executive's
date of death, (iii) continue to pay to the estate or the legal representative
of the deceased Executive the Base Salary the Executive was receiving prior to
the Executive's death under Section 3.1 hereof through the Continuation Period
following the Executive's death, in the manner and at such times as the Base
Salary otherwise would have been payable to the Executive, and (iv) continue to
pay to the estate or the legal representative of the deceased Executive
Incentive Compensation through the Continuation Period following the termination
of the Executive's employment with the Company, in the manner and at such times
as the compensation would have been payable or provided to the Executive. The
Company shall have no further liability hereunder other than its obligations, if
any, (i) in accordance with the terms of options granted to the Executive
through the date of termination, (ii) reimbursement for reasonable business
expenses incurred by the Executive prior to the date of termination, subject,
however, to the provisions of Section 4.1, (iii) accrued and untaken vacation
days, and (iv) applicable statutes.
6
<PAGE>
5.4 TERMINATION WITHOUT CAUSE. At any time the Company
shall have the right to terminate the Executive's employment hereunder without
Cause by written notice to the Executive. Upon any termination pursuant to this
Section 5.4, the Company shall (i) pay to the Executive any unpaid Base Salary
through the effective date of termination specified in such notice, (ii) pay to
the Executive the accrued but unpaid Incentive Compensation, if any, for any
Bonus Period ending on or before the date of the termination of the Executive's
employment with the Company, (iii) continue to pay the Executive's Base Salary
and Incentive Compensation through the Continuation Period, in the manner and at
such time as the Base Salary and Incentive Compensation otherwise would have
been payable to the Executive, and (iv) continue to provide the Executive with
the Benefits the Executive was receiving under Section 4.2 hereof (to the extent
permitted under the terms of applicable insurance and other benefit programs of
the Company then in affect and covering the Executive, and provided further that
the Company shall not take any affirmative action from the time of giving notice
of termination to the Executive through the end of the Continuation Period which
would cause the relevant insurance and other benefits available to the Executive
to be reduced or eliminated) during the Continuation Period, in the manner and
at such times as the Benefits otherwise would have been payable or provided to
the Executive. The Company shall have no further liability hereunder other than
its obligations, if any, (i) in accordance with the terms of options granted to
the Executive through the date of termination, (ii) reimbursement for reasonable
business expenses incurred by the Executive prior to the date of termination,
subject, however, to the provisions of Section 4.1, (iii) accrued and untaken
vacation days, and (iv) applicable statutes.
5.5 TERMINATION BY EXECUTIVE.
a. The Executive shall at all times have the right,
upon ninety (90) days written notice to the Company, to terminate the Term of
Employment.
b. Upon termination of the Term of Employment pursuant
to this Section 5.5 (that is not a termination under Section 5.6) by the
Executive without Good Reason, the Company shall pay to the Executive any unpaid
Base Salary and the accrued but unpaid Incentive Compensation, if any, for any
Bonus Period ending on or before the date of termination specified in such
notice, and a prorated portion of the Incentive Compensation earned, if any, for
any incomplete quarterly Bonus Period in which such termination occurs. The
Company shall have no further liability hereunder other than its obligations, if
any, (i) in accordance with the terms of options granted to the Executive
through the date of termination, (ii) reimbursement for reasonable business
expenses incurred by the Executive prior to the date of termination, subject,
however, to the provisions of Section 4.1, (iii) accrued and untaken vacation
days, and (iv) applicable statutes.
c. Upon termination of the Term of Employment pursuant
to this Section 5.5 (that is not a termination under Section 5.6) by the
Executive for Good Reason, the Company shall pay to the Executive the same
amounts that would have been payable by the Company to the Executive under
Section 5.4, and provide to the Executive the same benefits (on the same terms
and conditions) that would have been provided to the Executive under Section 5.4
if the Term of Employment had been terminated by the Company without Cause. The
Company shall have no further liability hereunder other than its obligations, if
any, (i) in accordance with the terms of options granted to the Executive
through the date of termination, (ii) reimbursement for reasonable business
expenses incurred by the Executive prior to the date of termination, subject,
however, to the provisions of Section 4.1, (iii) accrued and untaken vacation
days, and (iv) applicable statutes.
d. For purposes of this Agreement, "Good Reason" shall
mean any of the following:
(i) the assignment to the Executive of any material
duties inconsistent in any material respect with the Executive's duties as
defined hereunder or any other action by the Company which results in a material
diminution in the Executive's position, authority, duties or responsibilities
from those contemplated by Section 1.2 of this Agreement, which is not remedied
by the Company within fifteen (15) days after receipt of written notice from the
Executive of the same, excluding for this purpose any isolated, insubstantial
and inadvertent action not taken in bad faith;
(ii) any material failure by the Company to comply
with any of the provisions of Article 3 of this Agreement which is not remedied
by the Company within fifteen (15) days after receipt of written notice thereof
given by the Executive, other than an isolated, insubstantial and inadvertent
failure not occurring in bad faith and which is remedied by the Company promptly
after receipt of notice thereof given by the Executive;
7
<PAGE>
(iii) the Company's requiring the Executive to be
based at any office or location more than 40 miles outside of New York City, NY,
except for business trips reasonably required in the performance of the
Executive's responsibilities; or
(iv) any purported termination by the Company of
the Executive's employment otherwise than pursuant to Sections 5.1 - 5.4 of this
Agreement.
5.6 CHANGE IN CONTROL OF THE COMPANY.
a. Unless otherwise provided in this Agreement, in the
event that a Change in Control (as defined in paragraph (b) of this Section 5.6)
in the Company shall occur during the Term of Employment, and prior to the first
anniversary of the date of the Change in Control, either (x) the Term of
Employment is terminated by the Company without Cause, pursuant to Section 5.4
hereof or (y) the Executive terminates the Term of Employment for Good Reason
pursuant to Section 5.5(c) hereof, the Company shall (1) pay to the Executive
any unpaid Base Salary through the effective date of termination, (2) pay to the
Executive the Incentive Compensation, if any, not yet paid to the Executive for
any Bonus Period prior to such termination, at such time as the Incentive
Compensation otherwise would have been payable to the Executive, and (3) pay to
the Executive in a lump sum payment an amount equal to the amount of the
Executive's Base Salary for the six (6) months preceding such termination. If,
during the Term of Employment, any Change in Control should occur and, prior to
the first anniversary of the date of the Change in Control, either (x) the Term
of Employment is terminated by the Company without Cause, pursuant to Section
5.4 hereof or (y) the Executive terminates the Term of Employment for Good
Reason pursuant to Section 5.5(c) hereof, the Executive's unvested Stock Options
shall be vested and become immediately exercisable. In addition, if a Change in
Control transaction shall occur in which the Company is not the surviving entity
and the acquiror does not agree to assume the obligations represented by the
Stock Option rights of the Executive on or prior to the closing of the Change in
Control transaction on such terms and conditions as shall be reasonably
satisfactory to the Company, then the Executive's unvested Stock Options shall
be vested and become immediately exercisable immediately prior to the
consummation of the closing of such Change in Control transaction so as to
permit the Executive to dispose of the shares of common stock underlying such
Stock Options in that Change in Control transaction on substantially the same
terms and conditions as are applicable to shareholders of the Company generally.
If any of the Executive's Stock Options shall vest according to the applicable
vesting schedule, the options which shall have vested after any such Change in
Control shall continue to be exercisable for a period of three months from the
date of any termination of the Executive's employment by the Company following
such Change in Control. The Company shall have no further liability hereunder
(other than for reimbursement for reasonable business expenses incurred prior to
the date of termination, subject, however, to the provisions of Section 4.1).
b. For purposes of this Agreement, the term "Change in
Control" shall mean:
(i) Approval by the shareholders of the Company of
(x) a reorganization, merger, consolidation or other form of corporate
transaction or series of transactions, in each case, with respect to which
persons who were the shareholders of the Company immediately prior to such
reorganization, merger or consolidation or other transaction do not, immediately
thereafter, own more than 50% of the combined voting power entitled to vote
generally in the election of directors of the reorganized, merged or
consolidated company's then outstanding voting securities, in substantially the
same proportions as their ownership immediately prior to such reorganization,
merger, consolidation or other transaction, or (y) a liquidation or dissolution
of the Company or (z) the sale of all or substantially all of the assets of the
Company (unless such reorganization, merger, consolidation or other corporate
transaction, liquidation, dissolution or sale is subsequently abandoned); or
8
<PAGE>
(ii) Individuals who, as of the Commencement Date
of this Agreement, constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board, provided that any person
becoming a director subsequent to the Commencement Date of this Agreement whose
election, or nomination for election by the Company's shareholders, was approved
by a vote of at least a majority of the directors then comprising the Incumbent
Board (other than an election or nomination of an individual whose initial
assumption of office is in connection with an actual or threatened election
contest relating to the election of the Directors of the Company, as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the Securities
Exchange Act) shall be, for purposes of this Agreement, considered as though
such person were a member of the Incumbent Board; or
(iii) the acquisition by any person, entity or
"group", within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act, of more than 30% of either the then outstanding shares of the
Company's Common Stock or the combined voting power of the Company's then
outstanding voting securities entitled to vote generally in the election of
directors (hereinafter referred to as the ownership of a "Controlling Interest")
excluding, for this purpose, any acquisitions by (1) the Company, (2) any
person, entity or "group" that as of the Commencement Date of this Agreement
owns beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Securities Exchange Act) of a Controlling Interest, (3) Rosalind Resnick
and/or Ryan Scott Druckenmiller or their respective affiliates, or (4) any
employee benefit plan of the Company.
c. Notwithstanding the foregoing, the term "Change in
Control" shall NOT include any transaction, event or circumstance as a result of
which or after which Rosalind Resnick, Ryan Scott Druckenmiller, and their
respective affiliates continue to own, in the aggregate, the largest percentage
of shares of the Company owned by any shareholder of the Company.
5.7 RESIGNATION. Upon any termination of employment
pursuant to this Article 5, the Executive shall be deemed to have resigned as an
officer, and if the Executive was then serving as a director of the Company, as
a director, and if required by the Board, the Executive hereby agrees to
immediately execute a resignation letter to the Board.
5.8 SURVIVAL. The provisions of this Article 5 shall
survive the termination of this Agreement, as applicable.
6. RESTRICTIVE COVENANTS.
6.1 NON-COMPETITION. At all times while the Executive is
employed by the Company and for a one (1) year period after the termination of
the Executive's employment with the Company for any reason (other than (a)
termination by the Company without Cause or (b) termination by the Executive for
Good Reason (as defined in Section 5.5(d) hereof) or (c) termination by the
Company prior to the first anniversary of a Change in Control other than for
Cause), the Executive shall not, directly or indirectly, engage in or have any
interest in any sole proprietorship, partnership, corporation or business or any
other person or entity (whether as an employee, officer, director, partner,
agent, security holder, creditor, consultant or otherwise) that directly engages
in competition with the Company (for this purpose, any business unit or division
that provides e-mail marketing services to third parties for compensation and
derives more than five percent (5%) of the division's or unit's revenues from
those activities shall be deemed to be in competition with the Company);
provided that such provision shall not apply to the Executive's ownership of
Common Stock of the Company or the acquisition by the Executive, solely as an
investment, of securities of any issuer that is registered under Section 12(b)
or 12(g) of the Securities Exchange Act of 1934, as amended, and that are listed
or admitted for trading on any United States national securities exchange or
that are quoted on the Nasdaq, or any similar system or automated dissemination
of quotations of securities prices in common use, so long as the Executive does
not control, acquire a controlling interest in or become a member of a group
which exercises direct or indirect control or, more than one percent (1%) of any
class of capital stock of such corporation.
9
<PAGE>
6.2 NONDISCLOSURE. The Executive shall not during the
Executive's employment under this Agreement or after the termination of such
employment divulge, communicate, use to the detriment of the Company or for the
benefit of any other person or persons, or misuse in any way, any Confidential
Information (as hereinafter defined) pertaining to the business of the Company.
Any Confidential Information or data now or hereafter acquired by the Executive
with respect to the business of the Company (which shall include, but not be
limited to, information concerning the Company's financial condition, prospects,
technology, customers, suppliers, sources of leads and methods of doing
business) shall be deemed a valuable, special and unique asset of the Company
that is received by the Executive in confidence and as a fiduciary, and
Executive shall remain a fiduciary to the Company with respect to all of such
information. For purposes of this Agreement, "Confidential Information" means
information disclosed to the Executive or known by the Executive as a
consequence of or through the Executive's employment by the Company (including
information conceived, originated, discovered or developed by the Executive)
prior to or after the date hereof (up to the date of termination of the
Executive's employment pursuant to this Agreement), and whose existence or
significance or utility in respect of the Company or its business is not
generally known. Notwithstanding the foregoing, nothing herein shall be deemed
to restrict the Executive from disclosing Confidential Information to the extent
required by law or in the valid performance of the Executive's duties.
6.3 NONSOLICITATION OF EMPLOYEES AND CLIENTS. At all times
while the Executive is employed by the Company and for a one (1) year period
after the termination of the Executive's employment with the Company for any
reason, the Executive shall not, directly or indirectly, for the Executive or
for any other person, firm, corporation, partnership, association or other
entity (a) employ or attempt to employ or enter into any contractual arrangement
with any employee or former employee of the Company, until a period of at least
six (6) months has elapsed from the date of termination of the employment of
such person with the Company, and/or (b) call on or solicit any of the actual or
targeted prospective clients of the Company on behalf of any person or entity in
connection with any business competitive with the business of the Company, while
the Executive is employed by the company, or in connection with any email direct
marketing business for a one-year period after the termination of the
executive's employment, nor shall the Executive make known the names and
addresses of such clients or any information relating in any manner to the
Company's trade or business relationships with such customers, other than in
connection with the performance of the Executive's duties under this Agreement.
6.4 OWNERSHIP OF DEVELOPMENTS. All copyrights, patents,
trade secrets, or other intellectual property rights associated with any ideas,
concepts, techniques, inventions, processes, or works of authorship developed or
created by the Executive during the course of performing work for the Company or
its clients (collectively, the "Work Product") shall belong exclusively to the
Company and shall, to the extent possible, be considered a work made by the
Executive for hire for the Company within the meaning of Title 17 of the United
States Code. To the extent the Work Product may not be considered work made by
the Executive for hire for the Company, the Executive agrees to assign, and
automatically assigns at the time of creation of the Work Product, without any
requirement of further consideration, any right, title, or interest the
Executive may have in such Work Product. Upon the request of the Company, the
Executive shall take such further actions, including execution and delivery of
instruments of conveyance, as may be appropriate to give full and proper effect
to such assignment.
6.5 BOOKS AND RECORDS. All books, records, and accounts
relating in any manner to the customers or clients of the Company, whether
prepared by the Executive or otherwise coming into the Executive's possession,
shall be the exclusive property of the Company and shall be returned immediately
to the Company on termination of the Executive's employment hereunder or on the
Company's request at any time, upon which the Executive shall not retain any
copies of the same in any media whatsoever.
10
<PAGE>
6.6 DEFINITION OF COMPANY. Solely for purposes of this
Article 6, the term "Company" also shall include any existing or future
subsidiaries of the Company that are operating during the time periods described
herein and any other entities that directly or indirectly, through one or more
intermediaries, control, are controlled by or are under common control with the
Company during the periods described herein.
6.7 ACKNOWLEDGMENT BY EXECUTIVE. The Executive
acknowledges and confirms that (a) the restrictive covenants contained in this
Article 6 are reasonable and necessary to protect the legitimate business
interests of the Company, and (b) the restrictions contained in this Article 6
(including without limitation the length of the term of the provisions of this
Article 6) are not overbroad, overlong, or unfair and are not the result of
overreaching, duress or coercion of any kind. The Executive further acknowledges
and confirms that the Executive's full, uninhibited and faithful observance of
each of the covenants contained in this Article 6 will not cause the Executive
any undue hardship, financial or otherwise, and that enforcement of each of the
covenants contained herein will not impair the Executive's ability to obtain
employment commensurate with the Executive's abilities and on terms fully
acceptable to the Executive or otherwise to obtain income required for the
comfortable support of the Executive and the Executive's family and the
satisfaction of the needs of the Executive's creditors. The Executive
acknowledges and confirms that the Executive's special knowledge of the business
of the Company is such as would cause the Company serious injury or loss if the
Executive were to use such ability and knowledge to the benefit of a competitor
or were to compete with the Company in violation of the terms of this Article 6.
The Executive further acknowledges that the restrictions contained in this
Article 6 are intended to be, and shall be, for the benefit of and shall be
enforceable by, the Company and its successors and assigns, including, without
limitation, any successor to the Company, whether by merger, consolidation, sale
of stock, sale of assets or otherwise.
6.8 REFORMATION BY COURT. In the event that a court of
competent jurisdiction shall determine that any provision of this Article 6 is
invalid or more restrictive than permitted under the governing law of such
jurisdiction, then only as to enforcement of this Article 6 within the
jurisdiction of such court, such provision shall be interpreted and enforced as
if it provided for the maximum restriction permitted under such governing law.
6.9 EXTENSION OF TIME. If the Executive shall be in
violation of any provision of this Article 6, then each time limitation set
forth in this Article 6 shall be extended for a period of time equal to the
period of time during which such violation or violations occur. If the Company
successfully obtains injunctive relief from such violation in any court, then
the covenants set forth in this Article 6 shall be extended for a period of time
equal to the pendency of such proceeding including all appeals by the Executive.
6.10 SURVIVAL. The provisions of this Article 6 shall
survive the termination of this Agreement, as applicable.
7. INJUNCTION. It is recognized and hereby acknowledged by the
parties hereto that a breach by the Executive of any of the covenants contained
in Article 6 of this Agreement will cause irreparable harm and damage to the
Company, the monetary amount of which may be virtually impossible to ascertain.
As a result, the Executive recognizes and hereby acknowledges that the Company
shall be entitled, without the necessity of proving damages or posting a bond,
to an injunction from any court of competent jurisdiction enjoining and
restraining any violation of any or all of the covenants contained in Article 6
of this Agreement by the Executive or any of the Executive's affiliates,
associates, partners or agents, either directly or indirectly, and that such
right to injunction shall be cumulative and in addition to whatever other
remedies the Company may possess. If the Company should fail to obtain any
injunction when the Company seeks an injunction pursuant to this Section (other
than due to the fact that the parties reach a settlement or the Executive ceases
the activities complained of by the Company without need of an injunction), then
the Company shall reimburse the Executive for the Executive's reasonable
attorney's fees and expenses pertaining to the proceedings to seek the
injunction.
11
<PAGE>
8. MEDIATION. In the event a dispute arises out of or relates
to this Agreement, or the breach thereof, and if the dispute cannot be settled
through negotiation, the parties hereby agree first to attempt in good faith to
settle the dispute by mediation administered by the American Arbitration
Association under its Employment Mediation Rules before resorting to arbitration
as set forth in Section 8 below. Notwithstanding the foregoing, (i) the Company
has the right to seek an injunction under Section 7 hereof, and (ii) either
party may seek an injunction or entry of judgment on an arbitration award under
Section 9 of this Agreement. The cost and expenses of mediators (but not the
fees and expenses of any counsel or other professional representing any party
other than the Company) shall be borne by the Company. If any dispute is settled
by mediation pursuant to this Section and the Company fails to achieve any
decision in its favor, then the Company shall reimburse the Executive for the
Executive's reasonable attorneys' fees and expenses pertaining to the mediation
proceedings.
9. ARBITRATION. In the event that mediation pursuant to
Section 8 of this Agreement has failed after thirty (30) days or the parties to
this Agreement both agree not to mediate, any dispute or controversy arising
under or in connection with this Agreement shall be settled exclusively by
arbitration in New York County, New York, in accordance with the Rules of the
American Arbitration Association then in effect with respect to arbitration of
commercial matters (except to the extent that the procedures outlined below
differ from such rules). Within ten (10) days after written notice by either
party has been given that a dispute exists and that arbitration is required,
each party must select an arbitrator and those two arbitrators shall promptly,
but in no event later than ten (10) days after their selection, select a third
arbitrator. The parties agree to act as expeditiously as possible to select
arbitrators and conclude the dispute. The selected arbitrators must render their
decision in writing. The cost and expenses of the arbitrators (but not the fees
and expenses of any counsel or other professional representing any party other
than the Company) shall be borne by the Company. Judgment may be entered on the
arbitrators' award in any court having jurisdiction. Pursuit of an injunction
shall not impair arbitration on all remaining issues. If any dispute is settled
by arbitration pursuant to this Section and the Company fails to achieve any
decision in its favor, then the Company shall reimburse the Executive for the
Executive's reasonable attorneys' fees and expenses pertaining to the
arbitration proceedings.
10. ASSIGNMENT. Neither party shall have the right to assign
or delegate their rights or obligations hereunder, or any portion thereof, to
any other person, except that the rights of the Company may, upon notice to the
Executive, be assigned by the Company to any person or entity acquiring a
substantial portion of the Company's assets or to any successor of the Company.
11. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
12. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof
and, upon its effectiveness, shall supersede all prior agreements,
understandings and arrangements, both oral and written, between the Executive
and the Company (or any of its affiliates) with respect to such subject matter.
This Agreement may not be modified in any way unless by a written instrument
signed by both the Company and the Executive.
12
<PAGE>
13. NOTICES: All notices required or permitted to be given
hereunder shall be in writing and shall be personally delivered by courier, sent
by registered or certified mail, return receipt requested or sent by confirmed
facsimile transmission addressed as set forth herein. Notices personally
delivered, sent by facsimile or sent by overnight courier shall be deemed given
on the date of delivery and notices mailed in accordance with the foregoing
shall be deemed given upon the earlier of receipt by the addressee, as evidenced
by the return receipt thereof, or three (3) days after deposit in the U.S. mail.
Notice shall be sent (i) if to the Company, addressed to NetCreations, Inc., 379
West Broadway, Suite 202, New York, New York 10012, attention: Chief Executive
Officer, with a copy to Greenberg Traurig, Met Life Building, 200 Park Avenue,
15th Floor, New York, New York 10166, Attention: Andrew J. Cosentino, Esq.; and
(ii) if to the Executive, to the Executive's address as reflected on the payroll
records of the Company, with a copy to Christine Carty, Schnader, Harrison Segal
& Lewis LLP, 330 Madison Avenue, 14th Floor, New York, New York 10017-5092, fax:
(212) 972-8798; or to such other address as either party hereto may from time to
time give notice of to the other.
14. BENEFITS; BINDING EFFECT. This Agreement shall be for the
benefit of and binding upon the parties hereto and their respective heirs,
personal representatives, legal representatives, and successors, including,
without limitation, any successor to the Company, whether by merger,
consolidation, sale of stock, sale of assets or otherwise.
15. SEVERABILITY. The invalidity of any one or more of the
words, phrases, sentences, clauses or sections contained in this Agreement shall
not affect the enforceability of the remaining portions of this Agreement or any
part thereof, all of which are inserted conditionally on their being valid in
law, and, in the event that any one or more of the words, phrases, sentences,
clauses or sections contained in this Agreement shall be declared invalid, this
Agreement shall be construed as if such invalid word or words, phrase or
phrases, sentence or sentences, clause or clauses, or section or sections had
not been inserted. If such invalidity is caused by length of time or size of
area, or both, the otherwise invalid provision will be considered to be reduced
to a period or area which would cure such invalidity.
16. WAIVERS. The waiver by either party hereto of a breach or
violation of any term or provision of this Agreement shall not operate nor be
construed as a waiver of any subsequent breach or violation.
17. DAMAGES. Subject to compliance with Sections 7, 8 and 9 of
this Agreement, to the extent applicable, nothing contained herein shall be
construed to prevent the Company or the Executive from seeking and recovering
from the other damages sustained by either or both of them as a result of its or
the Executive's breach of any term or provision of this Agreement. In the event
that either party hereto brings suit for the collection of any damages resulting
from, or the injunction of any action constituting, a breach of any of the terms
or provisions of this Agreement, then the party found to be at fault shall pay
all reasonable court costs and attorneys' fees of the other.
13
<PAGE>
18. SECTION HEADINGS. The section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
19. NO THIRD PARTY BENEFICIARY. Nothing expressed or implied
in this Agreement is intended, or shall be construed, to confer upon or give any
person any rights or remedies under or by reason of this Agreement, other than
the Company, the parties hereto and their respective heirs, personal
representatives, legal representatives, and successors, including, without
limitation, any successor to the Company, whether by merger, consolidation, sale
of stock, sale of assets or otherwise.
20. INDEMNIFICATION.
a. The Company shall indemnify and hold harmless the
Executive to the fullest extent permitted by law from and against any and all
claims, damages, expenses (including reasonable attorneys' fees), judgments,
penalties, fines, settlements, and all other liabilities incurred or paid by the
Executive in connection with the investigation, defense, prosecution, settlement
or appeal of any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative and to which the
Executive was or is a party or is threatened to be made a party by reason of the
fact that the Executive is or was an officer, employee or agent of the Company,
or by reason of anything done or not done by the Executive in any such capacity
or capacities, provided that the Executive acted in good faith, in a manner that
was not grossly negligent and did not constitute willful misconduct and in a
manner the Executive reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe the Executive's conduct was
unlawful. The Company also shall pay any and all reasonable expenses (including
attorney's fees) incurred by the Executive as a result of the Executive being
called as a witness in connection with any matter involving the Company and/or
any of its officers or directors (other than an action or suit by the Company
against the Executive).
b. The Company shall pay any reasonable expenses
(including attorneys' fees), judgments, penalties, fines, settlements, and other
liabilities incurred by the Executive in investigating, defending, settling or
appealing any action, suit or proceeding described in this Section 20 (other
than an action or proceeding by the Company against the Executive) in advance of
the final disposition of such action, suit or proceeding. The Company shall
promptly pay the amount of such expenses to the Executive, but in no event later
than ten (10) days following the Executive's delivery to the Company of a
written request for an advance pursuant to this Section 20, together with a
reasonable accounting of such expenses.
c. The Executive hereby undertakes and agrees to repay
to the Company any advances made pursuant to this Section 20 if and to the
extent that it shall ultimately be agreed by the parties or determined by a
court that the Executive is not entitled to be indemnified by the Company for
such amounts.
d. The Company shall make the advances contemplated by
this Section 20 regardless of the Executive's financial ability to make
repayment, and regardless of whether indemnification of the Indemnitee by the
Company will ultimately be required. Any advances and undertakings to repay
pursuant to this Section 20 shall be unsecured and interest-free.
e. The provisions of this Section 20 shall survive the
termination of this Agreement.
14
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
COMPANY:
NETCREATIONS, INC.
By: /s/ Rosalind B. Resnick
-------------------------
Name: Rosalind B. Resnick
Title: Chief Executive Officer, Chairman of the
Board of Directors, and Treasurer
EXECUTIVE:
By: /s/ Brian Burlant
-------------------------
Brian Burlant, individually
15
<PAGE>
Exhibit 10.2
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and entered
into as of the 17th day of April, 2000 (the "Commencement Date") by and between
NETCREATIONS, INC., a New York corporation (the "Company"), and Nicolle Comeforo
(hereinafter called the "Executive").
R E C I T A L S
A. The Executive desires to be employed as the Vice President
of Human Resources of the Company.
B. The Company desires to employ the Executive as the Vice
President of Human Resources of the Company.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual
covenants set forth herein, the parties agree as follows:
21. EMPLOYMENT.
21.1 EMPLOYMENT. The Company hereby agrees to employ the
Executive and the Executive hereby agrees to serve the Company on the terms and
conditions set forth herein.
21.2 DUTIES OF EXECUTIVE. During the Term of Employment
under this Agreement, the Executive shall serve as the Vice President of Human
Resources of the Company, shall diligently perform all services as may be
assigned to the Executive by the Chief Executive Officer, the President, and the
Chief Operating Officer of the Company and by the Board of Directors (the
"Board") of the Company, and shall exercise such power and authority as may from
time to time be delegated to the Executive by the Board. Without limiting the
generality of the foregoing, the Executive duties shall include, among other
things, the following:
o Create and manage a Human Resources Department within the Company
o Create, with management input, appropriate policies and procedures for
effective management of human resources within the Company
o Act as the primary recruiting officer of the Company, managing the process of
filling all open positions.
o Assure that the Company is in compliance with labor laws and regulations.
o Create employee training, retention, motivation, training, compensation and
other systems and processes that may be needed.
o Participate as a member of the senior management team of the Company.
1
<PAGE>
The Executive acknowledges and agrees that the Company may assign some of the
foregoing specific duties to other persons as the Company's management team
expands, and that such assignments of duties to other persons will not be viewed
by the Executive as constituting a diminution in the Executive's office, title,
and duties and responsibilities hereunder as long as the Executive's reporting
obligations and supervisory role in respect to those functions are not
materially changed. The Executive shall devote the Executive's full time and
attention to the business and affairs of the Company, render such services to
the best of the Executive's ability, and use the Executive's best efforts to
promote the interests of the Company. It shall not be a violation of this
Agreement for the Executive to (i) serve on corporate, civic or charitable
boards or committees, (ii) deliver lectures, fulfill speaking engagements or
teach at educational institutions, or (iii) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive's responsibilities to the Company in accordance with this Agreement.
The Executive's duties will require the Executive's regular presence during
normal working hours on business days Monday through Friday at the Company's
principal executive offices, currently located at 379 West Broadway, New York,
New York, but the Executive's duties will also involve some business travel.
22. TERM.
22.1 INITIAL TERM. The initial Term of Employment under
this Agreement, and the employment of the Executive hereunder, shall commence on
the (the "Commencement Date") and shall expire at the close of business on April
17, 2003, unless sooner terminated in accordance with Section 5 hereof (the
"Initial Term").
22.2 RENEWAL TERMS. At the end of the Initial Term, the
Term of Employment automatically shall renew for successive one year terms
(subject to earlier termination as provided in Section 5 hereof), unless the
Company or the Executive delivers written notice to the other at least 90 days
prior to the last day of the Initial Term or any such applicable renewal period
(in either case, the "Expiration Date") of its or the Executive's election not
to renew the Term of Employment. For purposes of this Agreement, if the Term of
Employment expires as a result of the Company delivering written notice to the
Executive stating its intention not to renew the Term of the Employment pursuant
to this Section 2.2, the Executive shall be treated as if the Executive was
terminated by the Company without Cause, in accordance with Section 5.4 hereof,
upon the Expiration Date. In addition, if the Term of Employment expires as a
result of the Executive delivering written notice to the Company stating the
Executive's intention not to renew the Term of Agreement pursuant to this
Section 2.2, the Executive shall be treated as if the Executive had terminated
the Executive's employment with the Company without Good Reason, in accordance
with Section 5.5(b) hereof, upon the Expiration Date.
22.3 TERM OF EMPLOYMENT. The period during which the
Executive shall be employed by the Company pursuant to the terms of this
Agreement is sometimes referred to in this Agreement as the "Term of
Employment."
23. COMPENSATION.
23.1 BASE SALARY. The Executive shall receive a base
salary at the annual rate (prorated for any applicable period of less than one
year) of One Hundred and Thirty-Five Thousand Dollars ($135,000) (the "Base
Salary") during the Term of Employment, with such Base Salary payable in
installments consistent with the Company's normal payroll schedule, subject to
applicable withholding and other taxes. The Base Salary shall be reviewed, at
least annually, for merit increases and may, by action and in the discretion of
the Board, be increased (but not decreased) at any time or from time to time
2
<PAGE>
3.2 BONUSES. During the term of this Agreement, the
Executive shall be eligible to receive performance and annual incentive awards
(the "Bonuses") of up to a maximum potential limit of Sixty-Five Thousand
Dollars ($65,000) per annum as described below. Bonuses shall be reviewed, at
least annually, for merit increases and, by action and in the discretion of the
Board, the limit on the potential size of Bonuses can be increased, but not
decreased, at any time or from time to time.
Each period for which Bonuses are payable is sometimes
hereinafter referred to as a Bonus Period. Unless otherwise specified by the
Board, the Bonus Period shall be the designated fiscal year or fiscal quarter of
the Company. The amount of the Bonuses that may be awarded for any period, if
any, shall be determined prior to the commencement of the relevant Bonus Period
by the Board, in its sole and absolute discretion. However, any bonus plan for
the Executive shall be predicated on the establishment of quarterly goals,
referred to as Key Initiatives, to be mutually developed and signed-off on
between the Executive and the Company's Board/Representative of the Company
prior to and/or adjusted during a quarter. Key Initiatives will comprise, among
other things, revenues and pretax income goals. For purposes of this Agreement,
the term "Representative of the Company"" means the Company's Chief Executive
Officer. All Bonuses shall be payable to the Executive quarterly in cash and/or
to the extent determined by the Board and agreed upon by the Executive, with
common stock ("Common Stock") of the Company by no later than ten (10) business
days after the Company has completed its financial statements, approved by the
Company's Chief Financial Officer and its Chief Executive Officer, for the
preceding fiscal period. Bonuses shall be subject to proration for periods of
less than one quarter. Any bonuses payable pursuant to this Section 3.2 are
sometimes hereinafter referred to as "Incentive Compensation."
24. EXPENSE REIMBURSEMENT AND OTHER BENEFITS.
24.1 REIMBURSEMENT OF EXPENSES. Upon the submission of
proper substantiation by the Executive, and subject to such rules and guidelines
as the Company may from time to time adopt, the Company shall reimburse the
Executive for all reasonable expenses actually paid or incurred by the Executive
during the Term of Employment in the course of and pursuant to the business of
the Company.
The Executive shall account to the Company in writing for
all expenses for which reimbursement is sought and shall supply to the Company
copies of all relevant invoices, receipts or other evidence reasonably requested
by the Company.
24.2 COMPENSATION/BENEFIT PROGRAMS. During the term of
Employment, the Executive shall be entitled to participate in all medical,
dental, hospitalization, accidental death and dismemberment, disability, travel
and life insurance plans applicable to the Company's senior executives
generally, and any and all other plans as are presently and hereinafter offered
by the Company generally to its executives, including savings, pension,
profit-sharing and deferred compensation plans, subject to the general
eligibility and participation provisions set forth in such plans.
24.3 TRANSPORTATION ALLOWANCE. The Executive will not be
entitled to reimbursement for his expenses in commuting to and from the
Company's offices.
3
<PAGE>
24.4 STOCK OPTIONS.
a. During the Term of Employment, the Executive shall
be eligible to be granted options (the "Stock Options") to purchase the Common
Stock of the Company under (and therefore subject to) all terms and conditions
of the Company's Stock Option Plan. The number of Stock Options and terms and
conditions of the Stock Options shall be determined by the Committee appointed
pursuant to the Stock Option Plan, or by the Board of Directors of the Company,
in its discretion and pursuant to the Stock Option Plan.
b. Reasonably promptly following the date of this
Agreement, the Company shall grant to the Executive Stock Options, intended to
be incentive stock options under Section 422 of the Internal Revenue Code of
1986, as amended, to purchase the number of shares of the Company's Common Stock
which will constitute 85,000 shares of the Company's outstanding Common Stock.
All of the Stock Options referred to in this paragraph (b) shall have certain
characteristics:
(i) the Stock Options shall vest as follows for so
long as the Executive is continuously employed by the Company as its Vice
President of Human Resources: 16.667% of the Stock Options shall vest on October
17, 2000, and the balance of the Stock Options shall vest thereafter in 8.334%
increments on each quarterly anniversary of that date until the entire 85,000
options have vested, in each case subject to continued employment by the
Company;
(ii) subject to clause (vii) below, the Stock
Options shall be exercisable from and after the date upon which the Stock
Options vest through the close of business on April 17, 2005 at an initial
exercise price of $22 per share;
(iii) the Stock Options shall be on such other
terms and conditions as may be set forth in the instrument granting the Stock
Options, including without limitation the provisions concerning termination of
unvested Stock Options;
(iv) the option agreement shall provide that the
shares of common stock underlying those Stock Options shall be registered in the
first registration statement on Form S-8 or other form of registration statement
filed by the Company with the Securities Exchange Commission for the purpose of
registering options or other securities issued to executives or other employees
of the Company in their respective capacities as executive or employees of
(rather than shareholders of or investors in) the Company;
(v) the option agreement shall include certain
anti-dilution provisions customary in options granted by the Company;
(vi) the Stock Options may not be hypothecated or
pledged, and may not be sold, transferred or otherwise disposed of (except by
exercise in accordance with the terms of the option agreement) other than
through transfer by will or the laws of descent and distribution, and during the
lifetime of the Executive the Stock Options shall be exercisable only by the
Executive; and
(vii) the Stock Options shall not be exercisable at
any time unless the Executive has executed a written instrument, reasonably
satisfactory to the Executive and to the Company evidencing (a) the Executive's
investment intent and customary investment representations to substantiate
compliance with applicable securities laws, and (b) the Executive's agreement
that the sale, transfer, or other disposition of the shares shall be subject to
applicable securities law restrictions and applicable restrictions under this
Agreement and the option agreement, and that the certificates evidencing the
shares shall be legended to reflect the same. c.
4
<PAGE>
24.5 VACATION BENEFITS. The Executive shall be entitled to
four (4) weeks of vacation time each calendar year during the term of this
Agreement, to be taken at such times as the Executive and the Company shall
mutually determine and provided that no vacation time shall interfere with the
duties required to be rendered by the Executive hereunder. Notwithstanding the
foregoing, in view of the Company's current circumstances the Executive will not
(i) take more than one week of vacation time in any 30-day period unless
otherwise mutually agreed with the Chief Executive Officer of the Company.
24.6 OTHER BENEFITS. The Executive shall receive such
additional benefits, if any, as the Board of the Company shall from time to time
determine.
25. TERMINATION.
25.1 TERMINATION FOR CAUSE. The Company shall at all times
have the right, upon written notice (which shall describe in general terms the
basis for dismissal per this Section) to the Executive, to terminate the Term of
Employment, for Cause. For purposes of this Agreement, the term "Cause" shall
mean (i) an action or omission of the Executive which constitutes a willful and
material breach of, or failure or refusal (other than by reason of the
Executive's disability) to perform the Executive's duties under, this Agreement
which is not cured within fifteen (15) days after receipt by the Executive of
written notice of same if such action or omission is capable of being so cured,
(ii) habitual insobriety or use of controlled substances (other than under the
supervision of a licensed physician); (iii) habitual absenteeism; (iv) fraud,
non-disclosed self-dealing, embezzlement or misappropriation of funds or
property or breach of trust in connection with the Executive's services
hereunder, (v) conviction of a felony or conviction of any other crime or
misdemeanor involving moral turpitude; or (vi) gross negligence in connection
with the performance of the Executive's duties hereunder, which is not cured, to
the extent that the same is curable, within fifteen (15) days after receipt by
the Executive of written notice of same. Upon any termination pursuant to this
Section 5.1, the Company shall pay to the Executive the Executive's Base Salary
to the date of termination. The Company shall have no further liability
hereunder (other than for reimbursement for reasonable business expenses
incurred prior to the date of termination, subject, however, to the provisions
of Section 4.1).
25.2 DISABILITY. The Company shall at all times have the
right, upon written notice to the Executive, to terminate the Term of
Employment, if the Executive shall as the result of mental or physical
incapacity, illness or disability, become unable to perform the Executive's
obligations hereunder for a total of 180 days in any 12-month period. The
Company shall rely upon a certification performed by the Company's disability
insurer or by a physician jointly chosen by the Executive's doctor and the
Company's doctor to determine whether the Executive continues to be disabled
provided that if the Executive does not submit to examination by a licensed
medical doctor for such purpose (if requested by the Company) then the Company
may terminate the Executive's employment if the Executive shall become entitled
to benefits under the Company's disability plan as then in effect. Upon any
termination pursuant to this Section 5.2, the Company shall (i) pay to the
Executive any unpaid Base Salary through the effective date of termination
specified in such notice, (ii) pay to the Executive the Executive's accrued but
unpaid Incentive Compensation, if any, for any Bonus Period ending on or before
the date of termination of the Executive's employment with the Company, (iii)
continue to pay the Executive through the date which is six (6) months after the
termination but no later than the Expiration Date) (the "Continuation Period"),
an amount equal to the Base Salary the Executive was receiving at the time of
the Executive's Disability, such amount to be paid in the manner and at such
times as the Base Salary otherwise would have been payable to the Executive, and
(iv) continue to pay the Executive Incentive Compensation and continue to
provide the Executive with the benefits the Executive was receiving under
Section 4.2 hereof (the "Benefits") through the Continuation Period (to the
extent permitted under the terms of applicable insurance and other benefit
programs of the Company then in affect and covering the Executive, and provided
further that the Company shall not take any affirmative action from the time of
giving notice of termination to the Executive through the end of the
Continuation Period which would cause the relevant insurance and other benefits
available to the Executive to be reduced or eliminated) following the
termination of the Executive's employment with the Company, in the manner and at
such times as the compensation or Benefits otherwise would have been payable or
provided to the Executive, provided that the amounts payable to the Executive
pursuant to the foregoing clauses (i) through (iv) shall be reduced by the
amount actually paid to the Executive pursuant to the disability insurance
referred to in Section 4.2 hereof. The Company shall have no further liability
hereunder (other than for reimbursement for reasonable business expenses
incurred prior to the date of termination, subject, however to the provisions of
Section 4.1).
5
<PAGE>
25.3 DEATH. Upon the death of the Executive during the
Term of Employment, the Company shall (i) pay to the estate of the deceased
Executive any unpaid Base Salary through the Executive's date of death, (ii) pay
to the estate of the deceased Executive the Executive's accrued but unpaid
Incentive Compensation, if any, for any Bonus Period ending on or before the
Executive's date of death, (iii) continue to pay to the estate of the deceased
Executive the Base Salary the Executive was receiving prior to the Executive's
death under Section 3.1 hereof through the Continuation Period following the
Executive's death, in the manner and at such times as the Base Salary otherwise
would have been payable to the Executive, and (iv) continue to pay to the estate
of the deceased Executive Incentive Compensation through the Continuation Period
following the termination of the Executive's employment with the Company, in the
manner and at such times as the compensation would have been payable or provided
to the Executive. The Company shall have no further liability hereunder (other
than for reimbursement for reasonable business expenses incurred prior to the
date of the Executive's death, subject, however to the provisions of Section
4.1).
25.4 TERMINATION WITHOUT CAUSE. At any time the Company
shall have the right to terminate the Executive's employment hereunder without
Cause by written notice to the Executive. Upon any termination pursuant to this
Section 5.4, the Company shall (i) pay to the Executive any unpaid Base Salary
through the effective date of termination specified in such notice, (ii) pay to
the Executive the accrued but unpaid Incentive Compensation, if any, for any
Bonus Period ending on or before the date of the termination of the Executive's
employment with the Company, and a prorated portion of the Bonus earned, if any,
for the quarterly Bonus Period, if any, in which the termination occurs, (iii)
continue to pay the Executive's Base Salary and Incentive Compensation through
the Continuation Period, in the manner and at such time as the Base Salary and
Incentive Compensation otherwise would have been payable to the Executive, and
(iv) continue to provide the Executive with the Benefits the Executive was
receiving under Section 4.2 hereof (to the extent permitted under the terms of
applicable insurance and other benefit programs of the Company then in affect
and covering the Executive, and provided further that the Company shall not take
any affirmative action from the time of giving notice of termination to the
Executive through the end of the Continuation Period which would cause the
relevant insurance and other benefits available to the Executive to be reduced
or eliminated) during the Continuation Period, in the manner and at such times
as the Benefits otherwise would have been payable or provided to the Executive.
The Company shall have no further liability hereunder (other than for
reimbursement for reasonable business expenses incurred prior to the date of
termination, subject, however, to the provisions of Section 4.1).
25.5 TERMINATION BY EXECUTIVE.
a. The Executive shall at all times have the right,
upon ninety (90) days written notice to the Company, to terminate the Term of
Employment.
6
<PAGE>
b. Upon termination of the Term of Employment pursuant
to this Section 5.5 (that is not a termination under Section 5.6) by the
Executive without Good Reason, the Company shall pay to the Executive any unpaid
Base Salary and accrued Incentive Compensation through the effective date of
termination specified in such notice. The Company shall have no further
liability hereunder (other than for reimbursement for reasonable business
expenses incurred prior to the date of termination, subject, however, to the
provisions of Section 4.1).
c. Upon termination of the Term of Employment pursuant
to this Section 5.5 (that is not a termination under Section 5.6) by the
Executive for Good Reason, the Company shall pay to the Executive the same
amounts that would have been payable by the Company to the Executive under
Section 5.4 of this Agreement if the Term of Employment had been terminated by
the Company without Cause. The Company shall have no further liability hereunder
(other than for reimbursement for reasonable business expenses incurred prior to
the date of termination, subject, however, to the provisions of Section 4.1).
d. For purposes of this Agreement, "Good Reason" shall
mean any of the following:
(i) the assignment to the Executive of any material
duties inconsistent in any material respect with the Executive's duties as
defined hereunder or any other action by the Company which results in a material
diminution in the Executive's position, authority, duties or responsibilities
from those contemplated by Section 1.2 of this Agreement, which is not remedied
by the Company within fifteen (15) days after receipt of written notice from the
Executive of the same, excluding for this purpose any isolated, insubstantial
and inadvertent action not taken in bad faith;
(ii) any material failure by the Company to comply
with any of the provisions of Article 3 of this Agreement which is not remedied
by the Company within fifteen (15) days after receipt of written notice thereof
given by the Executive, other than an isolated, insubstantial and inadvertent
failure not occurring in bad faith and which is remedied by the Company promptly
after receipt of notice thereof given by the Executive;
(iii) the Company's requiring the Executive to be
based at any office or location more than 60 miles outside of New York City, NY,
except for business trips reasonably required in the performance of the
Executive's responsibilities; or
(iv) any purported termination by the Company of
the Executive's employment otherwise than pursuant to Sections 5.1 - 5.4 of this
Agreement.
25.6 CHANGE IN CONTROL OF THE COMPANY.
a. Unless otherwise provided in this Agreement, in the
event that a Change in Control (as defined in paragraph (b) of this Section 5.6)
in the Company shall occur during the Term of Employment, and prior to the first
anniversary of the date of the Change in Control, either (x) the Term of
Employment is terminated by the Company without Cause, pursuant to Section 5.4
hereof or (y) the Executive terminates the Term of Employment for Good Reason
pursuant to Section 5.5(c) hereof, the Company shall (1) pay to the Executive
any unpaid Base Salary through the effective date of termination, (2) pay to the
Executive the Incentive Compensation, if any, not yet paid to the Executive for
any Bonus Period prior to such termination, at such time as the Incentive
Compensation otherwise would have been payable to the Executive, and (3) pay to
the Executive in a lump sum payment an amount equal to the amount of the
Executive's Base Salary for the six (6) months preceding such termination. If,
during the Term of Employment, any Change in Control should occur and, prior to
the first anniversary of the date of the Change in Control, either (x) the Term
of Employment is terminated by the Company without Cause, pursuant to Section
5.4 hereof or (y) the Executive terminates the Term of Employment for Good
Reason pursuant to Section 5.5(c) hereof, the Executive's unvested Stock Options
shall be vested and become immediately exercisable. In addition, if a Change in
Control transaction shall occur in which the Company is not the surviving entity
and the acquiror does not agree to assume the obligations represented by the
Stock Option rights of the Executive on or prior to the closing of the Change in
Control transaction on such terms and conditions as shall be reasonably
satisfactory to the Company, then the Executive's unvested Stock Options shall
be vested and become immediately exercisable immediately prior to the
consummation of the closing of such Change in Control transaction so as to
permit the Executive to dispose of the shares of common stock underlying such
Stock Options in that Change in Control transaction on substantially the same
terms and conditions as are applicable to shareholders of the Company generally.
If any of the Executive's Stock Options shall vest according to the applicable
vesting schedule, the options which shall have vested after any such Change in
Control shall continue to be exercisable for a period of three months from the
date of any termination of the Executive's employment by the Company following
such Change in Control. The Company shall have no further liability hereunder
(other than for reimbursement for reasonable business expenses incurred prior to
the date of termination, subject, however, to the provisions of Section 4.1).
7
<PAGE>
b. For purposes of this Agreement, the term "Change in
Control" shall mean:
(i) Approval by the shareholders of the Company of
(x) a reorganization, merger, consolidation or other form of corporate
transaction or series of transactions, in each case, with respect to which
persons who were the shareholders of the Company immediately prior to such
reorganization, merger or consolidation or other transaction do not, immediately
thereafter, own more than 50% of the combined voting power entitled to vote
generally in the election of directors of the reorganized, merged or
consolidated company's then outstanding voting securities, in substantially the
same proportions as their ownership immediately prior to such reorganization,
merger, consolidation or other transaction, or (y) a liquidation or dissolution
of the Company or (z) the sale of all or substantially all of the assets of the
Company (unless such reorganization, merger, consolidation or other corporate
transaction, liquidation, dissolution or sale is subsequently abandoned);
(ii) Individuals who, as of the Commencement Date
of this Agreement, constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board, provided that any person
becoming a director subsequent to the Commencement Date of this Agreement whose
election, or nomination for election by the Company's shareholders, was approved
by a vote of at least a majority of the directors then comprising the Incumbent
Board (other than an election or nomination of an individual whose initial
assumption of office is in connection with an actual or threatened election
contest relating to the election of the Directors of the Company, as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the Securities
Exchange Act) shall be, for purposes of this Agreement, considered as though
such person were a member of the Incumbent Board; or
(iii) the acquisition by any person, entity or
"group", within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act, of more than 30% of either the then outstanding shares of the
Company's Common Stock or the combined voting power of the Company's then
outstanding voting securities entitled to vote generally in the election of
directors (hereinafter referred to as the ownership of a "Controlling Interest")
excluding, for this purpose, any acquisitions by (1) the Company, (2) any
person, entity or "group" that as of the Commencement Date of this Agreement
owns beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Securities Exchange Act) of a Controlling Interest, (3) Rosalind Resnick
and/or Ryan Scott Druckenmiller or their respective affiliates, or (4) any
employee benefit plan of the Company.
c. Notwithstanding the foregoing, the term "Change in
Control" shall NOT include any transaction, event or circumstance as a result of
which or after which Rosalind Resnick, Ryan Scott Druckenmiller, and their
respective affiliates continue to own, in the aggregate, the largest percentage
of shares of the Company owned by any shareholder of the Company.
25.7 RESIGNATION. Upon any termination of employment
pursuant to this Article 5, the Executive shall be deemed to have resigned as an
officer, and if the Executive was then serving as a director of the Company, as
a director, and if required by the Board, the Executive hereby agrees to
immediately execute a resignation letter to the Board.
25.8 SURVIVAL. The provisions of this Article 5 shall
survive the termination of this Agreement, as applicable.
8
<PAGE>
26. RESTRICTIVE COVENANTS.
26.1 NON-COMPETITION. At all times while the Executive is
employed by the Company and for a one (1) year period after the termination of
the Executive's employment with the Company for any reason (other than (a)
termination by the Company without Cause or (b) termination by the Executive for
Good Reason (as defined in Section 5.5(d) hereof) or (c) termination by the
Company prior to the first anniversary of a Change in Control other than for
Cause), the Executive shall not, directly or indirectly, engage in or have any
interest in any sole proprietorship, partnership, corporation or business or any
other person or entity (whether as an employee, officer, director, partner,
agent, security holder, creditor, consultant or otherwise) that directly engages
in competition with the Company (for this purpose, any business unit or division
that provides e-mail marketing services to third parties for compensation and
derives more than five percent (5%) of the division's or unit's revenues from
those activities shall be deemed to be in competition with the Company);
provided that such provision shall not apply to the Executive's ownership of
Common Stock of the Company or the acquisition by the Executive, solely as an
investment, of securities of any issuer that is registered under Section 12(b)
or 12(g) of the Securities Exchange Act of 1934, as amended, and that are listed
or admitted for trading on any United States national securities exchange or
that are quoted on the Nasdaq, or any similar system or automated dissemination
of quotations of securities prices in common use, so long as the Executive does
not control, acquire a controlling interest in or become a member of a group
which exercises direct or indirect control or, more than one percent (1%) of any
class of capital stock of such corporation.
26.2 NONDISCLOSURE. The Executive shall not during the
Executive's employment under this Agreement or after the termination of such
employment divulge, communicate, use to the detriment of the Company or for the
benefit of any other person or persons, or misuse in any way, any Confidential
Information (as hereinafter defined) pertaining to the business of the Company.
Any Confidential Information or data now or hereafter acquired by the Executive
with respect to the business of the Company (which shall include, but not be
limited to, information concerning the Company's financial condition, prospects,
technology, customers, suppliers, sources of leads and methods of doing
business) shall be deemed a valuable, special and unique asset of the Company
that is received by the Executive in confidence and as a fiduciary, and
Executive shall remain a fiduciary to the Company with respect to all of such
information. For purposes of this Agreement, "Confidential Information" means
information disclosed to the Executive or known by the Executive as a
consequence of or through the Executive's employment by the Company (including
information conceived, originated, discovered or developed by the Executive)
prior to or after the date hereof (up to the date of termination of the
Executive's employment pursuant to this Agreement), and whose existence or
significance or utility in respect of the Company or its business is not
generally known. Notwithstanding the foregoing, nothing herein shall be deemed
to restrict the Executive from disclosing Confidential Information to the extent
required by law or in the valid performance of the Executive's duties.
26.3 NONSOLICITATION OF EMPLOYEES AND CLIENTS. At all
times while the Executive is employed by the Company and for a one (1) year
period after the termination of the Executive's employment with the Company for
any reason, the Executive shall not, directly or indirectly, for the Executive
or for any other person, firm, corporation, partnership, association or other
entity (a) employ or attempt to employ or enter into any contractual arrangement
with any employee or former employee of the Company, until a period of at least
six (6) months has elapsed from the date of termination of the employment of
such person with the Company, and/or (b) call on or solicit any of the actual or
targeted prospective clients of the Company on behalf of any person or entity in
connection with any business competitive with the business of the Company, while
the Executive is employed by the company, or in connection with any email direct
marketing business for a one-year period after the termination of the
executive's employment, nor shall the Executive make known the names and
addresses of such clients or any information relating in any manner to the
Company's trade or business relationships with such customers, other than in
connection with the performance of the Executive's duties under this Agreement.
9
<PAGE>
26.4 OWNERSHIP OF DEVELOPMENTS. All copyrights, patents,
trade secrets, or other intellectual property rights associated with any ideas,
concepts, techniques, inventions, processes, or works of authorship developed or
created by the Executive during the course of performing work for the Company or
its clients (collectively, the "Work Product") shall belong exclusively to the
Company and shall, to the extent possible, be considered a work made by the
Executive for hire for the Company within the meaning of Title 17 of the United
States Code. To the extent the Work Product may not be considered work made by
the Executive for hire for the Company, the Executive agrees to assign, and
automatically assigns at the time of creation of the Work Product, without any
requirement of further consideration, any right, title, or interest the
Executive may have in such Work Product. Upon the request of the Company, the
Executive shall take such further actions, including execution and delivery of
instruments of conveyance, as may be appropriate to give full and proper effect
to such assignment.
26.5 BOOKS AND RECORDS. All books, records, and accounts
relating in any manner to the customers or clients of the Company, whether
prepared by the Executive or otherwise coming into the Executive's possession,
shall be the exclusive property of the Company and shall be returned immediately
to the Company on termination of the Executive's employment hereunder or on the
Company's request at any time, upon which the Executive shall not retain any
copies of the same in any media whatsoever.
26.6 DEFINITION OF COMPANY. Solely for purposes of this
Article 6, the term "Company" also shall include any existing or future
subsidiaries of the Company that are operating during the time periods described
herein and any other entities that directly or indirectly, through one or more
intermediaries, control, are controlled by or are under common control with the
Company during the periods described herein.
26.7 ACKNOWLEDGMENT BY EXECUTIVE. The Executive
acknowledges and confirms that (a) the restrictive covenants contained in this
Article 6 are reasonable and necessary to protect the legitimate business
interests of the Company, and (b) the restrictions contained in this Article 6
(including without limitation the length of the term of the provisions of this
Article 6) are not overbroad, overlong, or unfair and are not the result of
overreaching, duress or coercion of any kind. The Executive further acknowledges
and confirms that the Executive's full, uninhibited and faithful observance of
each of the covenants contained in this Article 6 will not cause the Executive
any undue hardship, financial or otherwise, and that enforcement of each of the
covenants contained herein will not impair the Executive's ability to obtain
employment commensurate with the Executive's abilities and on terms fully
acceptable to the Executive or otherwise to obtain income required for the
comfortable support of the Executive and the Executive's family and the
satisfaction of the needs of the Executive's creditors. The Executive
acknowledges and confirms that the Executive's special knowledge of the business
of the Company is such as would cause the Company serious injury or loss if the
Executive were to use such ability and knowledge to the benefit of a competitor
or were to compete with the Company in violation of the terms of this Article 6.
The Executive further acknowledges that the restrictions contained in this
Article 6 are intended to be, and shall be, for the benefit of and shall be
enforceable by, the Company and its successors and assigns, including, without
limitation, any successor to the Company, whether by merger, consolidation, sale
of stock, sale of assets or otherwise.
10
<PAGE>
26.8 REFORMATION BY COURT. In the event that a court of
competent jurisdiction shall determine that any provision of this Article 6 is
invalid or more restrictive than permitted under the governing law of such
jurisdiction, then only as to enforcement of this Article 6 within the
jurisdiction of such court, such provision shall be interpreted and enforced as
if it provided for the maximum restriction permitted under such governing law.
26.9 EXTENSION OF TIME. If the Executive shall be in
violation of any provision of this Article 6, then each time limitation set
forth in this Article 6 shall be extended for a period of time equal to the
period of time during which such violation or violations occur. If the Company
seeks injunctive relief from such violation in any court, then the covenants set
forth in this Article 6 shall be extended for a period of time equal to the
pendency of such proceeding including all appeals by the Executive.
26.10 SURVIVAL. The provisions of this Article 6 shall
survive the termination of this Agreement, as applicable.
27. INJUNCTION. It is recognized and hereby acknowledged by
the parties hereto that a breach by the Executive of any of the covenants
contained in Article 6 of this Agreement will cause irreparable harm and damage
to the Company, the monetary amount of which may be virtually impossible to
ascertain. As a result, the Executive recognizes and hereby acknowledges that
the Company shall be entitled, without the necessity of proving damages or
posting a bond, to an injunction from any court of competent jurisdiction
enjoining and restraining any violation of any or all of the covenants contained
in Article 6 of this Agreement by the Executive or any of the Executive's
affiliates, associates, partners or agents, either directly or indirectly, and
that such right to injunction shall be cumulative and in addition to whatever
other remedies the Company may possess. If the Company should fail to obtain any
injunction when the Company seeks an injunction pursuant to this Section (other
than due to the fact that the parties reach a settlement or the Executive ceases
the activities complained of by the Company without need of an injunction), then
the Company shall reimburse the Executive for the Executive's reasonable
attorney's fees and expenses pertaining to the proceedings to seek the
injunction.
28. MEDIATION. In the event a dispute arises out of or relates
to this Agreement, or the breach thereof, and if the dispute cannot be settled
through negotiation, the parties hereby agree first to attempt in good faith to
settle the dispute by mediation administered by the American Arbitration
Association under its Employment Mediation Rules before resorting to arbitration
as set forth in Section 8 below. Notwithstanding the foregoing, (i) the Company
has the right to seek an injunction under Section 7 hereof, and (ii) either
party may seek an injunction or entry of judgment on an arbitration award under
Section 9 of this Agreement. The cost and expenses of mediators (but not the
fees and expenses of any counsel or other professional representing any party
other than the Company) shall be borne by the Company. If any dispute is settled
by mediation pursuant to this Section and the Company fails to achieve any
decision in its favor, then the Company shall reimburse the Executive for the
Executive's reasonable attorneys' fees and expenses pertaining to the mediation
proceedings.
29. ARBITRATION. In the event that mediation pursuant to
Section 8 of this Agreement has failed after thirty (30) days or the parties to
this Agreement both agree not to mediate, any dispute or controversy arising
under or in connection with this Agreement shall be settled exclusively by
arbitration in New York County, New York, in accordance with the Rules of the
American Arbitration Association then in effect with respect to arbitration of
commercial matters (except to the extent that the procedures outlined below
differ from such rules). Within ten (10) days after written notice by either
party has been given that a dispute exists and that arbitration is required,
each party must select an arbitrator and those two arbitrators shall promptly,
but in no event later than ten (10) days after their selection, select a third
arbitrator. The parties agree to act as expeditiously as possible to select
arbitrators and conclude the dispute. The selected arbitrators must render their
decision in writing. The cost and expenses of the arbitrators (but not the fees
and expenses of any counsel or other professional representing any party other
than the Company) shall be borne by the Company. Judgment may be entered on the
arbitrators' award in any court having jurisdiction. Pursuit of an injunction
shall not impair arbitration on all remaining issues. If any dispute is settled
by arbitration pursuant to this Section and the Company fails to achieve any
decision in its favor, then the Company shall reimburse the Executive for the
Executive's reasonable attorneys' fees and expenses pertaining to the
arbitration proceedings.
11
<PAGE>
30. ASSIGNMENT. Neither party shall have the right to assign
or delegate their rights or obligations hereunder, or any portion thereof, to
any other person, except that the rights of the Company may be assigned by the
Company to any person or entity acquiring a substantial portion of the Company's
assets or to any successor of the Company.
31. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
32. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof
and, upon its effectiveness, shall supersede all prior agreements,
understandings and arrangements, both oral and written, between the Executive
and the Company (or any of its affiliates) with respect to such subject matter.
This Agreement may not be modified in any way unless by a written instrument
signed by both the Company and the Executive.
33. NOTICES: All notices required or permitted to be given
hereunder shall be in writing and shall be personally delivered by courier, sent
by registered or certified mail, return receipt requested or sent by confirmed
facsimile transmission addressed as set forth herein. Notices personally
delivered, sent by facsimile or sent by overnight courier shall be deemed given
on the date of delivery and notices mailed in accordance with the foregoing
shall be deemed given upon the earlier of receipt by the addressee, as evidenced
by the return receipt thereof, or three (3) days after deposit in the U.S. mail.
Notice shall be sent (i) if to the Company, addressed to NetCreations, Inc., 379
West Broadway, Suite 202, New York, New York 10012, attention: Chief Executive
Officer, with a copy to Greenberg Traurig, Met Life Building, 200 Park Avenue,
15th Floor, New York, New York 10166, Attention: Andrew J. Cosentino, Esq.; and
(ii) if to the Executive, to the Executive's address as reflected on the payroll
records of the Company, or to such other address as either party hereto may from
time to time give notice of to the other.
34. BENEFITS; BINDING EFFECT. This Agreement shall be for the
benefit of and binding upon the parties hereto and their respective heirs,
personal representatives, legal representatives, and successors, including,
without limitation, any successor to the Company, whether by merger,
consolidation, sale of stock, sale of assets or otherwise.
35. SEVERABILITY. The invalidity of any one or more of the
words, phrases, sentences, clauses or sections contained in this Agreement shall
not affect the enforceability of the remaining portions of this Agreement or any
part thereof, all of which are inserted conditionally on their being valid in
law, and, in the event that any one or more of the words, phrases, sentences,
clauses or sections contained in this Agreement shall be declared invalid, this
Agreement shall be construed as if such invalid word or words, phrase or
phrases, sentence or sentences, clause or clauses, or section or sections had
not been inserted. If such invalidity is caused by length of time or size of
area, or both, the otherwise invalid provision will be considered to be reduced
to a period or area which would cure such invalidity.
36. WAIVERS. The waiver by either party hereto of a breach or
violation of any term or provision of this Agreement shall not operate nor be
construed as a waiver of any subsequent breach or violation.
37. DAMAGES. Subject to compliance with Sections 7, 8 and 9 of
this Agreement, to the extent applicable, nothing contained herein shall be
construed to prevent the Company or the Executive from seeking and recovering
from the other damages sustained by either or both of them as a result of its or
the Executive's breach of any term or provision of this Agreement. In the event
that either party hereto brings suit for the collection of any damages resulting
from, or the injunction of any action constituting, a breach of any of the terms
or provisions of this Agreement, then the party found to be at fault shall pay
all reasonable court costs and attorneys' fees of the other.
12
<PAGE>
38. SECTION HEADINGS. The section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
39. NO THIRD PARTY BENEFICIARY. Nothing expressed or implied
in this Agreement is intended, or shall be construed, to confer upon or give any
person any rights or remedies under or by reason of this Agreement, other than
the Company, the parties hereto and their respective heirs, personal
representatives, legal representatives, and successors, including, without
limitation, any successor to the Company, whether by merger, consolidation, sale
of stock, sale of assets or otherwise.
40. INDEMNIFICATION.
a. The Company shall indemnify and hold harmless the
Executive to the fullest extent permitted by law from and against any and all
claims, damages, expenses (including reasonable attorneys' fees), judgments,
penalties, fines, settlements, and all other liabilities incurred or paid by the
Executive in connection with the investigation, defense, prosecution, settlement
or appeal of any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative and to which the
Executive was or is a party or is threatened to be made a party by reason of the
fact that the Executive is or was an officer, employee or agent of the Company,
or by reason of anything done or not done by the Executive in any such capacity
or capacities, provided that the Executive acted in good faith, in a manner that
was not grossly negligent and did not constitute willful misconduct and in a
manner the Executive reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe the Executive's conduct was
unlawful. The Company also shall pay any and all reasonable expenses (including
attorney's fees) incurred by the Executive as a result of the Executive being
called as a witness in connection with any matter involving the Company and/or
any of its officers or directors (other than an action or suit by the Company
against the Executive).
b. The Company shall pay any reasonable expenses
(including attorneys' fees), judgments, penalties, fines, settlements, and other
liabilities incurred by the Executive in investigating, defending, settling or
appealing any action, suit or proceeding described in this Section 20 (other
than an action or proceeding by the Company against the Executive) in advance of
the final disposition of such action, suit or proceeding. The Company shall
promptly pay the amount of such expenses to the Executive, but in no event later
than ten (10) days following the Executive's delivery to the Company of a
written request for an advance pursuant to this Section 20, together with a
reasonable accounting of such expenses.
c. The Executive hereby undertakes and agrees to repay
to the Company any advances made pursuant to this Section 20 if and to the
extent that it shall ultimately be agreed by the parties or determined by a
court that the Executive is not entitled to be indemnified by the Company for
such amounts.
d. The Company shall make the advances contemplated by
this Section 20 regardless of the Executive's financial ability to make
repayment, and regardless of whether indemnification of the Indemnitee by the
Company will ultimately be required. Any advances and undertakings to repay
pursuant to this Section 20 shall be unsecured and interest-free.
e. The provisions of this Section 20 shall survive the
termination of this Agreement.
13
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
COMPANY:
NETCREATIONS, INC.
By: /s/ Rosalind B. Resnick
-------------------------
Name: Rosalind B. Resnick
Title: Chief Executive Officer, Chairman of the
Board of Directors, and Treasurer
EXECUTIVE:
By: /s/ Nicole Comeforo
---------------------
Nicole Comeforo, individually
14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> DEC-31-2000
<CASH> 41,730,942
<SECURITIES> 0
<RECEIVABLES> 8,127,123
<ALLOWANCES> (150,000)
<INVENTORY> 0
<CURRENT-ASSETS> 56,459,916
<PP&E> 3,570,536
<DEPRECIATION> (499,006)
<TOTAL-ASSETS> 59,985,152
<CURRENT-LIABILITIES> 7,028,169
<BONDS> 0
0
0
<COMMON> 154,950
<OTHER-SE> 47,306,045
<TOTAL-LIABILITY-AND-EQUITY> 59,985,152
<SALES> 0
<TOTAL-REVENUES> 14,408,306
<CGS> 0
<TOTAL-COSTS> 7,872,280
<OTHER-EXPENSES> 3,297,762
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,709
<INCOME-PRETAX> 3,801,874
<INCOME-TAX> 1,765,000
<INCOME-CONTINUING> 2,036,374
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,036,374
<EPS-BASIC> 0.13
<EPS-DILUTED> 0.13
</TABLE>
