Vice President-business Development Employment Agreement

Exhibit 10.5


EMPLOYMENT AGREEMENT


This Employment Agreement ("Agreement") is made and entered into as of the 27th day of August, 1999 by and between NETCREATIONS, INC., a New York corporation (the "Company"), and Daniel C. Sweeney (hereinafter called the "Executive").


R E C I T A L S


A. The Executive desires to be employed as the Vice President - Business Development of the Company.


B. The Company desires to employ the Executive as the Vice President - Business Development 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 Vice President - Business Development of the Company, shall diligently perform all services as may be assigned to the Executive by the President, Chief Executive Officer, 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 Building and managing a network of partner Web sites


o Recruiting, training and managing a business
development staff


o Development and implementation of new products and
services


o General marketing and management


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. 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.


2. TERM.


2.1 INITIAL TERM. The initial Term of Employment under this Agreement, and the employment of the Executive hereunder, shall commence on Aug. 30, 1999 (the "Commencement Date") and shall expire on December 31, 2002, 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 $100,000 (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 $50,000 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 may 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 or fiscal quarter of the Company. The Maximum potential 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, specific sales objectives, business development goals and Company results. For purposes of this Agreement, the term "Representative of the Company means the Company's Chief Executive Officer, President or Chief Operating 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


-2-


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.


4.3 TRANSPORTATION ALLOWANCE. The Executive will not be entitled to reimbursement for his expenses in commuting to and from the Company's offices.


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. 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 non-qualified Stock Options to purchase the number of shares of the Company's Common Stock which will constitute 20,000 shares of the Company's outstanding Common Stock after completion of the restructuring, the recapitalization and the initial public offering referred to in the next sentence. In this connection, the Executive understands and agrees that: (x) the Company is in the process of adopting the Stock Option Plan, (y) that the Company must complete a restructuring of its capital structure prior to adopting the Stock Option Plan, and (z) that it is currently anticipated (but not certain) that the Company will have approximately 15.4 million shares outstanding at the conclusion of its currently planned 154,000 for 1 stock split and 19.2 million shares outstanding at the conclusion of its currently planned initial public (approximately 19.74 million shares outstanding if an overallotment option is exercised by the underwriters). Notwithstanding anything to the contrary contained in this Agreement, (i) the Stock Options may not be transferred or otherwise disposed of, nor may they be exercised, prior to the Company's currently contemplated initial public offering, and (ii) the grant of the Stock Options to be granted to the Executive shall be conditioned upon the consummation effectiveness of the initial public offering. The number of shares covered by the Stock Options will be adjusted proportionately downwards, to the effect that less shares than currently anticipated are outstanding immediately after those transactions, and upwards, in the event that more shares than currently anticipated are outstanding immediately after those transactions. Notwithstanding the foregoing, it the Company should (i) issue shares constituting up to 30% of the outstanding Common Stock of the Company to strategic or financial investors prior to the IPO or (ii) make other changes in its capital structure in connection with estate planning for certain


-3-


existing shareholders, there shall be no anti-dilution adjustment for those changes. All of the non-qualified Stock Options referred to in this paragraph (b) shall have certain characteristics:


(i) the Stock Options shall vest 1/3 after 1 year of continuous employment of the Executive by the Company as its Vice President - Business Development, a second 1/3 after 2 years of continuous employment by the Company as its Vice President - Business Development, and the balance after 3 years of continuous employment by the Company as its Vice President - Business Development;


(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 date which is five (5) years from the date hereof at $5.00 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 PROVIDED, that the there will be no antidilution adjustment with regard to the matters described in section 4.4(b) of this Agreement except as set forth in section 4.4(b), if at all;


(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 prior to the IPO unless the Executive has executed a written instrument, reasonably satisfactory to the Executive, the Company, and the Company's other shareholders, evidencing (a) the Executive's investment intent and customary investment representations to substantiate compliance with applicable securities laws, (b) the Executive's agreement that prior to the IPO the shares which may be acquired upon exercise of the Stock Options may not be hypothecated or pledged, and that the shares may not be sold, transferred or otherwise disposed of except after giving the other shareholders and the Company thirty (30) days prior written notice of a bona fide written offer for such shares and the right of first refusal to acquire such shares on the terms and conditions of such bona fide offer during such thirty day period; and (c) 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. The restrictions set forth in sub-clause (b) of this clause (vii) shall terminate upon the consummation of the IPO.


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, or (2) take any vacation time until the earlier of (x) the completion of the IPO or (y) four (4) months from the date of this Agreement, unless otherwise mutually agreed with the Chief Executive Officer of the Company.


-4-


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 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).


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 have sole discretion based upon advice of a licensed medical 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 en ...