CHANGE OF CONTROL AND SEVERANCE
AGREEMENT
This Agreement is
made effective as of February 28, 2007 between Digital River,
Inc., a Delaware corporation (the “Company”), with its
principal administrative office at 9625 W. 76th Street, Eden
Prairie, MN 55344, and Thomas M. Donnelly (the
“Executive”).
WHEREAS, the
Company wishes to provide the Executive with an incentive to
continue his employment, to assure that the Company will have the
continued dedication and objectivity of the Executive,
notwithstanding the possibility or occurrence of a change of
control of the Company and to motivate the Executive to maximize
the value of the Company upon a change of control for the benefit
of its stockholders;
NOW, THEREFORE, in
consideration of the mutual covenants herein contained, the parties
hereby agree as follows:
1.
PAYMENTS TO EXECUTIVE UPON AN EVENT OF
TERMINATION.
The provisions of
this Section shall in all respects be subject to the terms and
conditions stated in Sections 4 and 11, and subject to the
execution by Executive of a general release of all claims against
the Company in a form reasonably acceptable to the
Company.
(a) Upon
the occurrence of an Event of Termination (as herein defined)
during the Executive’s employment by the Company, the
provisions of this Section 1 shall apply. As used in this
Agreement, an “Event of Termination” shall mean and
include any one or more of the following: (i) the termination by
the Company of Executive’s full-time employment by the
Company for any reason, other than a termination following a Change
in Control (as defined in Section 2(a) hereof), upon Retirement (as
defined in Section 3 hereof), upon death or Disability (as
defined in Section 3 hereof), or for Cause (as defined in
Section 4 hereof); and (ii) Executive’s resignation
from the Company’s employ, upon (A) any material change
in Executive’s function, duties, or responsibilities, which
change would cause Executive’s position to become one of
lesser responsibility, importance, or scope, unless consented to by
the Executive, (B) a relocation of Executive’s principal
place of employment by more than 30 miles from its location at the
effective date of this Agreement, or a material reduction in the
benefits and perquisites to the Executive from those being provided
as of the effective date of this Agreement, in each case, unless
consented to by the Executive, or (C) material breach of this
Agreement by the Company. Upon the occurrence of any event
described in clauses (ii)(A), (B) or (C) above (a
“resignation for Good Reason”), Executive shall have
the right to elect to terminate his employment with the Company by
resignation for Good Reason upon not less than thirty
(30) days prior written notice given within a reasonable
period of time not to exceed, except in case of a continuing
breach, three (3) calendar months after the event giving rise
to such right to elect. Notwithstanding any other provision of this
Section 4(a) to the contrary, no Event of Termination shall be
deemed to have occurred unless the Executive also has Separated
from Service with the Company, as defined in Exhibit A
, in accordance with Internal Revenue Code Section 409A and
the regulations promulgated thereunder
(“Section 409A”).
CHANGE OF
CONTROL AND SEVERANCE AGREEMENT
THOMAS M. DONNELLY
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(b) Subject
to Section 7 hereof, upon the occurrence of an Event of
Termination, the Company shall be obligated to pay Executive, as
severance pay or liquidated damages, or both, an amount equal to
twelve (12) months of the Executive’s base salary in
effect at the time of the occurrence of the Event of Termination.
Such payment shall be made in one lump sum on the date that is six
(6) months after the date of Executive’s Separation from
Service; provided, however, that in the event that, at the time of
such Separation from Service, Executive is not a “specified
employee” of the Company within the meaning of
Section 409A(a)(2)(B)(i) or the Company does not have a class
of stock that is publicly traded on an established securities
market or otherwise, and a six-month delay in payment of benefits
is not otherwise required by Section 409A, then such payment
shall be made in twelve (12) equal monthly installments during
the twelve (12) months following such Separation from
Service.
(c) Upon
the occurrence of an Event of Termination, the Company will cause
to be continued life, medical, dental and disability coverage (to
the extent available and effected in compliance with
Section 409A) substantially identical to the coverage
maintained by the Company for Executive prior to his termination
for twelve (12) months.
(d) Upon
the occurrence of an Event of Termination, the Executive will be
entitled to receive vested benefits due him under or contributed by
the Company on his behalf pursuant to any retirement, incentive,
profit sharing, bonus, performance, disability (if coverage is
available under the Company’s current policy) or other
employee benefit plans maintained by the Company on the
Executive’s behalf to the extent provided for by the terms
and conditions of the applicable plan documents and to the extent
that such benefits are not otherwise paid to Executive under a
separate provision of this Agreement.
(e) Upon
the occurrence of an Event of Termination, any unexercised stock
options, restricted stock, stock appreciation rights or other
equity incentive awards (“Incentive Equity”) granted to
the Executive by the Company that were outstanding as of the date
of this Agreement shall immediately vest and be immediately
exercisable and free from any right of repurchase upon the
Executive’s receipt of the Notice of Termination (as defined
below) relating to such Event of Termination, and any stock options
held by Executive shall remain exercisable for a period of ninety
(90) days thereafter, after which (unless otherwise provided
in the Incentive Equity agreement) they shall terminate.
(a) No
benefit shall be payable under this Section 2 unless there
shall have been a Change in Control of the Company as set forth
below and unless the Executive executed a general release of all
claims against the Company in a form reasonably acceptable to the
Company. For purposes of this Agreement, a “Change in
Control” of the Company shall mean any of the following, but
only to the extent that such change of control transaction is a
change in the ownership or effective control of Company or a change
in the ownership of a substantial portion of the assets of the
Company as defined under Section 409A: (A) individuals
who constitute the Board of Directors of the Company on the date
hereof (the “Incumbent Board”) cease for any reason to
constitute at least a majority thereof, provided that any person
becoming a director subsequent to the date hereof whose election
was approved by a vote of at least a majority of the directors
comprising the Incumbent Board (or directors elected by the process
set
CHANGE OF
CONTROL AND SEVERANCE AGREEMENT
THOMAS M. DONNELLY
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forth in this
clause (A)), shall be, for purposes of this clause (A), considered
as though he were a member of the Incumbent Board; or (B) a
sale of all or substantially all of the assets of the Company,
(C) a plan of reorganization, merger or consolidation or
similar transaction occurs in which the stockholders of the Company
prior to such transaction do not continue to hold, as a result of
shares of capital stock of the Company held by them prior to such
transaction, a majority of the voting power of the capital stock of
the surviving corporation or entity; (D) a proxy statement
shall be distributed soliciting proxies from stockholders of the
Company, by someone other than the current management of the
Company, seeking stockholder approval of a plan of reorganization,
merger or consolidation of the Company with one or more entities as
a result of which the outstanding shares of the class of securities
then subject to such a plan or transaction are subsequently
exchanged for or converted into cash or property or securities not
issued by the Company shall be distributed; or (E) a tender
offer is completed for 50% or more of the voting securities of the
Company then outstanding.
(b) If
any of the events described in Section 2(a) hereof constituting a
Change in Control have occurred or the Board of Directors has
determined that a Change in Control has occurred, Executive shall
be entitled to the benefits provided in paragraphs (c) and
(d) of this Section 2 upon his subsequent involuntary
Separation from Service with the Company or the Executive’s
Separation from Service with the Company on account of his
resignation for Good Reason or in the event of Executive’s
subsequent death, unless any such Separation from Service is
because of Termination for Cause.
(c) Upon
the occurrence of a Change in Control followed by the
Executive’s Separation from Service with the Company (other
than a Termination for Cause or a resignation without Good Reason),
or in the event of Executive’s subsequent death, the Company
shall pay Executive, or in the event of his subsequent death, his
beneficiary or beneficiaries, or his estate, as the case may be, as
severance pay or liquidated damages, or both, an amount equal to
twelve (12) months of the Executive’s base salary in
effect at the time of the occurrence of the Change in Control. Such
payment shall be made (A) immediately upon the
Executive’s death or (B) in one lump sum on the date
that is six (6) months after the date of Executive’s
Separation from Service; provided, however, that in the event that,
at the time of such Separation from Service, Executive is not a
“specified employee” of the Company within the meaning
of Section 409A(a)(2)(B)(i) or the Company does not have a
class of stock that is publicly traded on an established securities
market or otherwise, and a six-month delay in payment of benefits
is not otherwise required by Section 409A, then such payment
shall be made in twelve (12) equal monthly installments during
the twelve (12) months following such Separation from
Service.
(d) Upon
the occurrence of a Change in Control followed by the
Executive’s Separation from Service with the Company (other
than a Termination for Cause or a resignation without Good Reason),
the Company will cause to be continued life, medical, dental and
disability coverage (if coverage is available under the
Company’s current policy and subject to compliance with
Section 409A) substantially identical to the coverage
maintained by the Company for Executive prior to his termination
for twelve (12) months following termination.
(e) Upon
the occurrence of a Change in Control, any unvested Incentive
Equity granted to the Executive that were outstanding as of the
date of this Agreement shall
CHANGE OF
CONTROL AND SEVERANCE AGREEMENT
THOMAS M. DONNELLY
-3-
immediately
vest and be immediately exercisable and free from any rights of
repurchase, subject to the provisions of Section 2(f)
hereof.
(f) If
any payment or benefit Executive would r
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