CHANGE OF CONTROL SEVERANCE
AGREEMENT
This Change of
Control Severance Agreement (the “ Agreement ”)
is made and entered into effective as of
(the “ Effective Date ”), by and between
(the “ Executive ”) and LoopNet, Inc., a
Delaware corporation (the “ Company
”).
WHEREAS, the
Company considers it essential to the best interests of its
stockholders to foster the continuous employment of key management
personnel;
WHEREAS, the Board
of Directors of the Company (the “ Board ”)
recognizes that, as is the case with many publicly-held
corporations, the possibility of a Change in Control (as defined
below) exists and that such possibility, and the uncertainty and
questions which it may raise among management, could result in the
departure or distraction of management personnel to the detriment
of the Company and its stockholders; and
WHEREAS, the Board
has determined that appropriate steps should be taken to reinforce
and encourage the continued attention and dedication of members of
the Company’s management, including the Executive, to their
assigned duties without distraction in light of the possibility of
a Change in Control;
NOW THEREFORE, in
consideration of the premises and the mutual covenants herein
contained, the Company and the Executive hereby agree as
follows.
1.
Definitions . The following terms referred to in this
Agreement shall have the following meanings.
“
Cause ” shall mean (i) any act of personal
dishonesty taken by the Executive in connection with his or her
responsibilities as an employee which is intended to result in
substantial personal enrichment of the Executive and is reasonably
likely to result in material harm to the Company, (ii) the
Executive’s conviction of a felony, (iii) a willful act
by the Executive which constitutes misconduct and is materially
injurious to the Company, or (iv) continued willful violations by
the Executive of the Executive’s obligations to the Company
after the Executive has received a written demand for performance
from the Company which describes the basis for the Company’s
belief that the Executive has not substantially performed his or
her duties.
“ Change
of Control ” shall mean the first to occur of any of the
following events after the date hereof:
(i) the
consummation of a merger or consolidation of the Company with any
other corporation, other than a merger or consolidation which would
result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted
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into or
exchanged for voting securities of the surviving entity) more than
sixty percent (60%) of the total voting power represented by the
voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation;
or
(ii) (A) any
approval by the stockholders of the Company of a plan of complete
liquidation of the Company, other than as a result of insolvency or
(B) the consummation of the sale or disposition (or the last
in a series of sales or dispositions) by the Company of all or
substantially all of the Company’s assets, other than a sale
or disposition to a wholly-owned direct or indirect subsidiary of
the Company and other than a sale or disposition which would result
in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (by being converted into or
exchanged for voting securities of the entity to which such sale or
disposition was made) more than sixty percent (60%) of the total
voting power represented by the voting securities of the entity to
which such sale or disposition was made after such sale or
disposition; or
(iii) any
“ person ” (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended)
becoming the “ beneficial owner ” (as defined in
Rule 13d-3 under said Act), directly or indirectly, of
securities of the Company representing 40% or more of the total
voting power represented by the Company’s then outstanding
voting securities; or
(iv) during
any period of two consecutive years after the Effective Date,
Incumbent Directors cease for any reason to constitute a majority
of the Board.
“
Compensation Continuation Period ” shall mean the
period of time commencing with the date of the Executive’s
Involuntary Termination at any time within the period two (2)
months prior to a Change of Control and twelve (12) months
after a Change of Control, and ending with the expiration of twelve
(12) months following the date of the Executive’s
Involuntary Termination.
“ Good
Reason ” shall mean the occurrence of any of the
following: (i) without the Executive’s express written
consent, a material reduction of the Executive’s duties,
title, authority or responsibilities relative to the
Executive’s duties, title, authority or responsibilities in
effect immediately prior to the Change of Control; (ii) a
reduction by the Company of the Executive’s base salary or
bonus opportunity as in effect immediately prior to such reduction;
(iii) a material reduction by the Company in the kind or level
of employee benefits to which the Executive is entitled immediately
prior to such reduction with the result that the Executive’s
overall benefits package is materially reduced; (iv) without
the Executive’s express written consent, the relocation of
the Executive to a facility or a location more than five
(5) miles from his or her current facility and the new
location is more than fifty (50) miles the Executive’s
current residence; or (v) the failure of the Company to obtain
the assumption of this Agreement by a successor.
“
Incumbent Directors ” shall mean directors who either
(A) are directors of the Company as of the Effective Date, or
(B) are elected, or nominated for election, to the
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Board with the
affirmative votes of at least a majority of those directors then
still in office who either were directors on the Effective Date or
whose election or nomination for election was so
approved.
“
Involuntary Termination ” shall mean a termination of
the Executive by the Company without Cause or a resignation by the
Executive within 90 days of any event constituting Good
Reason.
2. Term
of Agreement . This Agreement shall be in effect for the period
commencing on the Effective Date and ending on the third
anniversary of the Effective Date provided that if a Change
of Control shall have occurred during the term of this Agreement,
this Agreement shall remain in effect to give effect to its
provisions.
3.
At-Will Employment . The Company and the Executive
acknowledge that the Executive’s employment is and shall
continue to be at-will, as defined under applicable law. If the
Executive’s employment terminates for any reason, the
Executive shall not be entitled to any payments, benefits, damages,
awards or compensation other than as provided by this Agreement, or
as may otherwise be established under the Company’s then
existing employee benefit plans or policies at the time of
termination.
4. Change
of Control and Severance Benefits; Non-solicitation
.
(a) Involuntary
Termination Following Change of Control . If the
Executive’s employment with the Company terminates as a
result of an Involuntary Termination at any time during the period
commencing two (2) months prior to a Change of Control and
ending twelve (12) months after a Change of Control, then the
Executive shall be entitled to receive from the Company the
following benefits, contingent upon the Executive’s
execution, delivery and non-revocation of the Company’s
standard form of release attached hereto as Exhibit A
(the “ Release ”) within 45 days from the
Executive’s “separation from service,” within the
meaning of Section 409A of the Internal Revenue Code (as
defined below) (the “ Release Deadline
”).
(i) Cash
Severance Payments . Executive shall receive an aggregate
amount (the “ Severance Amount ”) equal to one
times the sum of (i) the Executive’s annual base salary
in effect on the date of termination plus (ii) the average of
the annual bonuses paid to the Executive in the two most recently
completed fiscal years preceding the date of termination. The
Company shall pay the Severance Amount to the Executive in a lump
sum within 15 days after the expiration of the Release
Deadline.
(ii) Health
Benefits Continuation . During the Compensation Continuation
Period, through COBRA, the Company shall continue to make available
to the Executive and Executive’s spouse and dependents
covered under any group health plans of the Company on the date of
such termination of employment, all group health insurance plans in
which Executive or such covered dependents participate on the date
of the Executive’s termination at the same cost to the
Executive as the Executive paid for such benefits prior to
termination of employment. To the extent the Company cannot
continue to provide such benefits
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through COBRA,
within 15 days after the expiration of the Release Deadline,
it will pay the Executive a lump sum amount that would be
sufficient to enable the Executive to purchase such benefits from a
third party at the same cost to the Executive on an after-tax basis
as the Executive paid for such benefits prior to the termination of
employment.
(iii)
Forfeiture upon Breach of Covenants . Notwithstanding any of
the foregoing, if the Executive breaches his or her obligations
under paragraph (e) or (f) of this Article 4, from
and after the date of such breach, (x) the Executive will no
longer be entitled to, and the Company will no longer be obligated
to pay, any remaining unpaid portion of the Severance Amount and
(y) the Executive will no longer be entitled to, and the
Company will no longer be obligated to make available to Executive
or Executive’s spouse or dependents, any group health
insurance plans or any payment in respect of such plans to the
extent the Company cannot continue to provide such
benefits.
(iv) Equity
Acceleration . Upon the expiration of the Release Deadline, the
vesting and exercisability of each option, restricted stock award,
restricted stock unit or other stock based award (each, a “
Stock Award ”) shall be automatically accelerated in
full and the forfeiture provisions and/or Company right of
repurchase of each Stock Award shall automatically lapse in full.
In no event shall the Stock Awards be amended to reflect this
clause (iv) unless and until there has been an Involuntary
Termination after a Change of Control. Additionally, the Executive
will have eighteen (18) months following his or her
Involuntary Termination after a Change of Control to exercise any
vested stock options not to exceed the expiration date of such
options.
(b) Other
Termination in Connection with a Change of Control. If the
Executive’s employment with the Company terminates other than
as a result of an Involuntary Termination at any time within twelve
(12) months after a Change of Control, then the Executive
shall not be entitled to receive the Severance Amount or other
benefits hereunder, but may be eligible for those benefits (if any)
as may then be established under the Company’s then existing
severance and benefits plans and policies.
(c) Termination
Apart from a Change of Control . If the Executive’s
employment with the Company terminates for any or no reason other
than within twelve (12) months following a Change of Control,
then the Executive shall not be entitled to receive the Severance
Amount or other benefits hereunder, but may be eligible for those
benefits (if any) as may then be established under the
Company’s then existing severance and benefits plans and
policies at the time of such termination.
(d) Accrued
Wages and Vacation; Expenses . Without regard to the reason
for, or the timing of, Executive’s termination of employment:
(i) the Company shall pay the Executive any unpaid base salary
due for periods prior to the date of termination; (ii) the
Company shall pay the Executive all of the Executive’s
accrued and unused vacation through the date of termination; and
(iii) following submission of proper expense reports by the
Executive, the Company shall reimburse the Executive for
all
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expenses
reasonably and necessarily incurred by the Executive in connection
with the business of the Company prior to the date of termination.
These payments shall be made promptly upon termination and within
the period of time mandated by law.
(e)
Confidentiality and Non-Solicitation . In consideration of
the benefits and protections conferred under this Agreement, the
Executive agrees that he or she will continue to abide by the
confidentiality provisions in the Company’s Proprietary
Information and Inventions, as executed by the Executive, including
but not limited to the obligations upon termination of employment
set forth in Section 7 of such agreement.
5.
Limitation on Benefits .
(a)
Notwithstanding anything contained in this Agreement to the
contrary, to the extent that the payments and benefits provided
under this Agreement and benefits provided to, or for the benefit
of, the Executive under any other employer plan or agreement (such
payments or benefits are collectively referred to as the “
Benefits ”) would be subject to the excise tax (the
“ Excise Tax ”) imposed under Section 4999
of the Internal Revenue Code of 1986, as amended (the “
Code ”), the Benefits shall be reduced (but not below
zero) if and to the extent that a reduction in the Benefits would
result in Executive retaining a larger amount, on an after-tax
basis (taking into account federal, state and local income taxes
and the Excise Tax), than if Executive received all of the Benefits
(such reduced amount is hereinafter referred to as the “
Limited Benefit Amount ”). Unless Executive shall have
given prior written notice specifying a different order to the
Company to effectuate the Limited Benefit Amount, the Company shall
reduce or eliminate the Benefits, by first reducing or eliminating
those payments or benefits which are not payable in cash and then
by reducing or eliminating cash payments, in each case in reverse
order beginning with payments or benefits which are to be paid the
farthest in time from the “ Determination ” (as
hereinafter defined). Any notice given by the Executive pursuant to
the preceding sentence shall take precedence over the provisions of
any other plan, arrangement or agreement governing the
Executive’s rights and entitlements to any benefits or
compensation.
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