Vice President, Strategic Development Severance Agreement - Michael Leo

EXHIBIT 10.19



SEVERANCE AGREEMENT AND RELEASE



This Severance Agreement and Release ("Agreement") is made, entered into and effective as of October 8, 1999 by and between R. Michael Leo, an individual ("Employee"), and Avenue A, Inc., a Washington corporation ("Employer"), and sets forth the terms upon which Employer and Employee have agreed to end Employee's employment with Employer.





A. Employee is a co-founder of Employer and served Employer as Vice President, Strategic Development.



B. On June 23, 1998, and September 8, 1998, during Employee's tenure with Employer, Employee was granted various stock options pursuant to Employer's 1998 Stock Incentive Compensation Plan as amended and restated on April 20, 1999, and three Option Letter Agreements, two dated June 23, 1998, and the third September 8, 1998. Employee received 503,000 options with an exercise price of $0.10 per share and 100,000 options at an exercise price of $0.50 per share. As of the Separation Date, 353,000 of these options will have vested, with 253,000 options having an exercise price of $0.10 per share and 100,000 having an exercise price of $0.50 per share. Employee exercised 303,000 of the vested share options on September 29, 1999. The remaining 50,000 vested share options will be exercised as provided in Paragraph 2(c) below. The remaining 250,000 options will expire on the Separation Date.



C. Pursuant to the Employer's 1998 Stock Incentive Compensation Plan as amended and restated on April 20, 1999 and the June 23, 1998 and September 8, 1998 Stock Option Letter Agreements, Employee's options must be exercised within three months of the Separation Date.



D. Employer and Employee have mutually agreed to end Employee's relationship with Employer under the terms set forth in this Agreement.





1. Separation Date. Employee's final day of employment will be October 9,

--------------- 1999 (the "Separation Date").



2. Severance Benefits.

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(a) Severance Payment. Employer will pay Employee as a severance benefit

----------------- $200,000 (the "Severance Payments"). This benefit shall be paid over a twelve- month





period commencing October 1, 1999 and ending September 30, 2000, and will be paid in accordance with the same time schedule that Employer makes its customary payroll. Employer may deduct customary withholdings including social security, federal and state income taxes, and state disability insurance from these Severance Payments; however, any and all such obligations shall be the primary responsibility of Employee. Employer shall issue and file appropriate Form 1099 or similar documents in connection with the contemplated Severance Payments. The parties acknowledge and agree that from the Separation Date, Employee shall no longer be an employee of Employer, and that the Severance Payments are being made in connection with the severance of Employee's employment.



The Severance Payments described in this paragraph are expressly contingent upon the Employee's full compliance with the terms of this Agreement and with Employee's Confidentiality, Inventions Assignment, Noncompetition and Nonsolicitation Agreement with Employer (the "Confidentiality Agreement"), a copy of which is attached to this Agreement as Exhibit A. Should Employee fail to fully comply with the terms of the Confidentiality Agreement, the Severance Payments will immediately cease, Employee shall forfeit rights to any future payments, and Employee shall immediately return to Employer any Severance Payments already made.



(b) Stock Options.

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(i) Vested Options. Employee understands that any unexercised vested

-------------- options held by Employee as of the Separation Date will remain exercisable for three months from the Separation Date. After such time, such options will terminate and cease to be exercisable.



(ii) Cancellation of Unvested Options; Grant of New Options. Employee

------------------------------------------------------ understands that the 250,000 options held by Employee that are unvested as of the Separation Date terminate on that date. Employee has no further rights under such options and Employer has no further obligations to Employee with respect to such options. Upon Board approval of this Agreement, Employer agrees to issue Employee a nonqualified stock option to purchase 250,000 shares of Employer's common stock, (the "New Option") such option to fully vest and become exercisable one year from the Separation Date. The exercise price for such option will be $4.00 per share. The option will automatically terminate and no longer be exercisable one year and three months from the Separation Date. The remaining terms of the option will be set forth in an option letter agreement in substantially the same form as the option letter agreement attached hereto as Exhibit B.





(iii) Forfeiture of New Options in the Event of Breach. Employee will

------------------------------------------------- forfeit all outstanding options and any shares received upon exercise of an option received pursuant to paragraph 2(b)(ii) above in the event of a material breach by Employee of this Agreement or the Confidentiality Agreement with Employer within one year from the Separation Date. Upon exercise of an option, Employee understands that the stock certificates for such shares will be held in escrow until such time as the Employer no longer has a right of first refusal with respect to the shares (such right of first refusal is described in the Incentive Plan). In exercising the New Option, Employee agrees to execute an appropriate stock purchase agreement to evidence Employer's repurchase and first refusal rights. Such stock purchase agreement shall be in the form being customarily used by Employer for stock purchase agreements at the time the New Option is exercised.



(iv) Corporate Transactions. In the event of a corporate transaction (as

---------------------- such term is defined in the Incentive Plan), the forfeiture conditions applicable to Employee's options and shares of common stock received upon exercise of an option and Employer's repurchase and first refusal rights will remain in full force and effect, unless such restrictions are subsequently waived by Employer or a successor corporation.



(c) Personal Loan. Within three days of the effective date of this

-------------- Agreement, as defined above, Employer will lend Employee $75,000 the proceeds of which shall be applied to the exercise of Employee's options as provided below. This loan will be secured by 18,750 shares of the stock Employee receives as a result of exercising vested stock options as provided in Paragraph 2(b)(i).(the "Pledged Shares"). The terms of this loan will be as provided in the Note attached to this Agreement as Exhibit C. Employer and Employee acknowledge and agree that $70,000 of the loan proceeds shall be applied toward the exercise of vested options effective September 29, 1999, and in lieu of the tender made by Employee on that date as follows: (i) $20, ...