EXECUTIVE EMPLOYMENT
AGREEMENT
This EXECUTIVE
EMPLOYMENT AGREEMENT (“ Agreement ”) is made and
entered into and shall be effective as of October 29, 2006,
between WEBSIDESTORY, INC ., a Delaware corporation (the
“ Company ”), and JAMES W. MACINTYRE, IV
(the “ Employee ”).
WHEREAS, the
Company desires to employ the Employee as the President and Chief
Executive Officer of the Company; and
WHEREAS, the
Employee and the Company desire to set forth in this Agreement
certain terms and provisions governing the employment relationship
between Employee and the Company.
NOW, THEREFORE, in
consideration of the mutual covenants and undertakings set out
herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the
Employee hereby agree as follows:
The following
words and terms shall have the meanings set forth below for the
purposes of this Agreement:
1.1.
Affiliates . “Affiliates” of a Person, or
Persons “affiliated” with such Person, shall mean any
Persons which, directly or indirectly, through one or more
intermediaries, controls or are controlled by or are under common
control with, such Person.
1.2.
Base Compensation . “Base Compensation” shall
mean the compensation payable to the Employee in accordance with
Section 3.1 hereof.
1.3.
Cause . “Cause” shall mean:
(a) any
action by the Employee involving willful misconduct which causes
material harm to the Company’s Business; or
(b) the
Employee’s conviction of a felony for conduct in connection
with the performance of his duties and responsibilities for the
Company or which is otherwise materially injurious to the
Company.
Any
determination of Cause for purposes of this Section 1.3 shall
be made by the Board of Directors of the Company at a
duly-constituted meeting thereof at which the Employee shall have
the right to be heard, to submit evidence, and to be represented by
counsel. Prior to such meeting, the Employee shall be entitled to
receive not less than ten (10) business days’ notice
(the “ Notice Period ”) of the conduct
purporting to constitute Cause. During the Notice Period, the
Employee shall have the right to conform his conduct so that Cause
does not exist, in
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which case any
Notice of Termination for such Cause shall be withdrawn and of no
effect. No determination of Cause hereunder, whether or not in
compliance with the process described herein, shall prevent or be
deemed to prevent judicial review of that determination.
1.4.
Change in Control . A “Change in Control” shall
occur on the date that there occurs: (a) a merger or
consolidation of the Company with or into another corporation or
other entity (with respect to which less than a majority of the
outstanding voting power of the surviving or consolidated
corporation is Beneficially Owned, directly or indirectly, by
persons who are stockholders of the Company immediately prior to
such event); (b) the sale or transfer of all or substantially
all of the properties and assets of the Company; (c) any
purchase by any party (or group of affiliated parties) of shares of
capital stock of the Company (either through a negotiated stock
purchase or a tender for such shares), the effect of which is that
such party (or group of affiliated parties) that did not
Beneficially Own a majority of the voting power of the outstanding
shares of capital stock of the Company immediately prior to such
purchase Beneficially Owns at least a majority of such voting power
immediately after such purchase; or (d) any other change of
control of fifty percent (50%) or more of the outstanding voting
power of the Company in a single transaction or series of related
transactions, but for purposes of this subsection
(d) excluding an underwritten public offering or
Rule 144A private placement by the Company of shares of common
stock or other securities. In all respects, the definition of
“Change in Control” shall be interpreted to comply with
Section 409A of the Code, and the provisions of Treasury
Notice 2005-1, Proposed Treasury
Regulation Section 1.409A and any successor statute,
regulation and guidance thereto. For purposes of this Agreement,
“Beneficial Ownership” shall have the meaning set forth
in Rule 13d-3 under the Securities Exchange Act of 1934, as
amended.
1.5.
Confidential Information . “Confidential
Information” shall mean all data and information, in whatever
form, whether or not originated by the Employee, relating to the
Company’s Business and its actual or any actively considered
business product, or service, provided that (i) such data and
information is not generally known by the public or by others with
no duty to maintain the confidentiality of such information (except
where such disclosure occurs as a result of a breach of this
Agreement or other act or omission of the Employee which the
Employee, as the Chief Executive Officer of the Company, does not
have authority to make such disclosure), (ii) the Company or
any of its Subsidiaries take reasonable steps, in the exercise of
its good faith judgment, to secure and maintain the confidentiality
of such data and information, and (iii) such data and
information derives independent economic value, actual or
potential, from not being generally known to, and not being readily
ascertainable through proper means by, other persons who could
obtain economic value from its disclosure.
1.6.
Code . “Code” shall mean the Internal Revenue
Code of 1986, as amended and in effect from time to time, and the
Treasury regulations and other guidance issued
thereunder.
1.7.
Company’s Business . “Company’s
Business” shall mean the business of the Company and any of
its Subsidiaries of developing and providing software or enabling
services for use by businesses to conduct web site or other system
usage analytics, web site search, web site content management and
keyword bid management, and any other products or services that,
during the Employee’s employment under this Agreement, are
actually put in use
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or designed
into products or services or are, to Employee’s knowledge, in
pre-commercial and documented research and development at the
Company or any of its Subsidiaries.
1.8.
Copyrights . “Copyrights” shall mean materials
used in the Company’s Business for which copyright protection
may be obtained including, but not limited to: literary works
(including all written material), computer programs, artistic and
graphic works (including designs, graphs, drawings, blueprints and
other works), recordings, models, photographs, slides, motion
pictures and audio-visual works, regardless of the form or manner
in which documented or recorded; and any domestic or foreign
copyright registrations and/or applications for such registrations,
including all or any portion of such materials or other subject
matter identified by any such registration or application, along
with any rights of renewal or extension.
1.9.
Date of Termination . “Date of Termination”
shall mean (i) if the Employee’s performance of services
is terminated for Cause or Disability, the date specified in the
Notice of Termination, or (ii) in the case of death, on the
date of death, or (iii) if the Employee’s performance of
services is terminated for any other reason, the date specified in
such Notice.
1.10.
Disability . “Disability” shall mean the
Employee’s inability to perform the essential functions of
his position with or without accommodation by reason of any
medically determinable physical or mental impairment which has
lasted or can reasonably be expected to last without material
interruption for a period of not less than 180 or more consecutive
days, as determined by the Employee’s Physician;
provided , however that in the event such
determination is challenged by the Company, such challenge will be
resolved by a panel of three licensed medical physicians (“
Physicians ”), whose decision shall be final and
binding on both parties. For this purpose, the Employee and the
Company shall each choose a Physician and the Physicians so chosen
shall select a third. Notwithstanding the foregoing, to the extent
that any payment under this Agreement that is subject to
Section 409A of the Code may become payable due to a
Disability, “Disability” shall mean the Employee
(A) is unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment
which can be expected to result in death or can be expected to last
for a continuous period of not less than twelve (12) months,
or (B) is, by reason of any medically determinable physical or
mental impairment which can be expected to result in death or can
be expected to last for a continuous period of not less than twelve
(12) months, receiving income replacement benefits for a
period of not less than six (6) months under a
Company-sponsored group disability plan.
1.11.
Employment Commencement Date . “Employment
Commencement Date” shall mean November 20,
2006.
1.12.
Good Reason . “Good Reason” shall mean any of
the following reasons unless Employee has provided specific written
consent to such occurrence in respect to this Agreement:
(a) The
failure to elect or to re-elect or to appoint or to re-appoint the
Employee to the offices of President and Chief Executive Officer
and as a member of the Board of Directors of the Company or its
successor; or
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(b) A
material diminution by the Company in the Employee’s
authority, functions, duties or responsibilities with the Company;
or
(c) Any
reduction in the Employee’s Base Compensation as the same may
be increased from time to time or, except to the extent permitted
by Section 3.5 hereof, any material adverse change in the
benefits provided to the Employee, taken as a whole, or any failure
of the Company to award a Performance Bonus to the Employee in
accordance with Section 3.2, except to the extent permitted by
Section 2.4(a) below; or
(d) Relocation
of the Company’s office in Herndon, Virginia prior to such
time as the Employee relocates to the Company’s headquarters
office pursuant to Section 2.4 (or of the Company’s
headquarters office after such time as the Employee relocates there
pursuant to Section 2.4) such that the Employee is required to
work in an office which is more than fifty (50) miles from the
location of such respective office; or
(e) The
failure of the Company to obtain the agreement from any successor
to the Company to assume and agree to perform this Agreement
pursuant to Section 10.1 hereof; or
(f) A
failure by the Company to pay any material amount due to the
Employee pursuant to the terms of this Agreement within a
reasonable time after it becomes due, except for an inadvertent
error to make such payment; or
(g) Any
purported termination of the Employee’s employment by the
Company which is not effected pursuant to a Notice of Termination
satisfying the requirements of this Agreement; or
(h) Any
change in the Employee’s reporting relationships, such that
the Employee no longer reports directly to the Board of Directors
of the Company; or
(i) A
material breach of this Agreement by the Company;
provided , that the Employee shall (A) provide to
the Company in writing, in reasonable detail, not less than ten
(10) business days’ prior written notice of any events
or circumstances constituting Good Reason and (B) afford the
Company a reasonable opportunity to remedy any such events or
circumstances, if such events or circumstances are capable of being
remedied, in which event the Employee shall determine in good faith
whether or not such events or circumstances have been
remedied.
1.13.
Intellectual Property . “ Intellectual Property
” shall mean, collectively, the Trademarks, Patents,
Copyrights, and Trade Secrets.
1.14.
Notice of Termination . For purposes of this Agreement, a
“Notice of Termination” shall mean a dated notice in
writing which (i) indicates the specific termination provision
in this Agreement relied upon, (ii) sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for
termination of the Employee’s employment under the provision
so indicated, (iii) specifies a Date of Termination, which
shall (except in the case of
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a termination
for Cause) be not more than thirty (30) days after the date of
the Notice of Termination, and (iv) is delivered in accordance
with the provisions of Section 10.2 hereof.
1.15.
Patents . “ Patents ” shall mean any
domestic or foreign patents used in the Company’s Business,
including any inventions, discoveries, improvements, designs and
ideas or other subject matter described or protected by such
patents, and any patents that are or may be granted from any
domestic or foreign application to obtain a patent, including any
inventions, discoveries, improvements, designs and ideas, or other
subject matter described or protected by such application,
including, without limitation, any continuations,
continuations-in-part, divisions, reissuances, reexaminations,
renewals, revisions and extensions thereof.
1.16.
Person . “ Person ” shall mean any
natural person or any legal, commercial or governmental entity such
as, but not limited to, any general or limited partnership, firm,
corporation, limited liability company, association, joint venture,
trust, unincorporated organization or person acting in a
representative capacity, as well as any syndicate or group that
would be deemed to be a person under Section 13(d)(3) of the
Exchange Act, any successor statutes thereto, and the rules and
regulations promulgated thereunder
1.17.
Qualifying Termination . A “Qualifying
Termination” shall mean termination of the Employee’s
employment by the Company other than for death, Disability or
Cause, or by the Employee with Good Reason (but only if Good Reason
for such termination arises as a result of one of the events
described in clauses (c), (d), (e), (f), (g) or (i) of
Section 1.12 above), which occurs within twelve (12) full
calendar months following the effective date of a Change in Control
of the Company or within six (6) full calendar months prior to
a Change in Control of the Company if it is reasonably demonstrated
by the Employee that such termination of employment was at the
request of a third party who has taken steps reasonably calculated
to effect a Change in Control of the Company.
1.18.
Residuals . “Residuals” means information in
non-tangible form, which may be retained in human memory by persons
who have had access to the Confidential Information and
Intellectual Property, including ideas, concepts, know-how or
techniques contained therein.
1.19.
Subsidiary . “Subsidiary” shall mean any direct
or indirect subsidiary of the Company.
1.20.
Trademarks . “ Trademarks ” means any
trademarks, service marks, trade names, domain names, logos, trade
dress, or other material used by the Company in the Company’s
Business for which trademark protection may be obtained including,
but not limited to, marks, designs, logos, slogans, terms, words,
phrases, and like subject matter, together with all translations,
adaptations, derivations and combinations thereof, and any common
law rights therein and goodwill associated therewith, and any
domestic or foreign trademark or service mark registrations and/or
applications for such registrations, including all or any portion
of a trademark, service mark or other subject matter identified by
any such registration or application.
1.21.
Trade Secrets . “Trade Secrets” shall mean
Confidential Information used in Company’s Business for which
the Company has not sought patent protection, explicitly
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excluding
Residuals, that the Company has reasonably determined:
(1) derives independent economic value, actual or potential,
from not being generally known to the public or to other Persons
who can obtain economic value from its disclosure or use; and
(2) is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy.
2. PERFORMANCE OF SERVICES
2.1.
Position . The Company agrees to employ the Employee as the
President and Chief Executive Officer of the Company, effective as
of the Employment Commencement Date, and the Employee agrees to
serve as the President and Chief Executive Officer of the Company,
on the terms and conditions set forth in this Agreement.
2.2.
Duties . During the Employee’s employment pursuant to
this Agreement, the Employee will perform the duties, undertake the
responsibilities and exercise the authority customarily performed,
undertaken and exercised by persons employed in a similar executive
capacity or as reasonably assigned by the Company’s Board of
Directors (the “ Board ”). Employee shall report
to the Board. Employee shall use his best efforts to further the
interests of the Company and, following the Employment Commencement
Date, to perform such services for the Company as are consistent
with his title of President and Chief Executive Officer of the
Company. Employee shall devote substantially all of his business
time and efforts to the performance of his duties. Subject to the
terms of the Non-Competition Agreement dated as of February 1,
2006 between Employee and the Company (the “
Non-Competition Agreement ”), this shall not preclude
the Employee from participating in any Permitted Outside Activities
(as defined below). The Employee expressly acknowledges and agrees
that during his employment he shall disclose to the Company in
advance the identity and general nature of each prospective
Permitted Outside Activity, provided that, the Company shall enter
into an appropriate nondisclosure agreement upon request of the
Employee in connection with such disclosure. The following are
“ Permitted Outside Activities ”: (1)
participation in venture capital and other investment companies and
partnerships; (2) participation in various holding and real
estate development companies and partnerships; (3) general and
ongoing research and development outside the Company’s
Business and not, during Employee’s employment pursuant to
this Agreement, involving material commercial transactions;
(4) devotion of time to personal and family investments; or
(5) service on community and civic boards, or participation in
industry associations; in each case provided such activities do not
interfere with his duties to the Company, as determined in good
faith by the Board.
2.3
Directorship . The Employee shall be appointed as a member
of the Board, effective as of the Employment Commencement Date, and
thereafter shall serve as a member of the Board, subject to
election and reelection by the Company’s stockholders in
accordance with the Company’s Certificate of Incorporation
and Bylaws. The Employee shall not be paid a fee or any other
additional compensation for serving as a member of the Board. The
Company shall reimburse the Employee for reasonable expenses
incurred in connection with the Employee’s service as a
member of the Board in accordance with the Company’s business
expense reimbursement policies as in effect from time to
time.
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2.4
Relocation and Travel .
(a) The
Employee and his family may continue to reside in Northern
Virginia, through December 31, 2007 with the Employee traveling to
and from the Company’s headquarters in San Diego, California
and other offices of the Company and other locations on Company
business as reasonably necessary to fulfill his responsibilities
under this Agreement. During such period, following the Employment
Commencement Date, the Company shall rent (or reimburse the
Employee for the rental of) a residence in the San Diego,
California area mutually agreeable to the Employee and the Company
for the Employee and his family, at the Company’s sole cost
and expense. Not later than December 31, 2007 the Employee shall
relocate his primary residence to the San Diego, California area.
The Board and the Employee will periodically evaluate the
Employee’s relocation plan, and the Board and the Employee
may make such changes to the Employee’s relocation plan, as
the parties may mutually agree. If (i) the Employee has not
relocated his primary residence to the San Diego, California area
by December 31, 2007, and (ii) after consultation with
the Employee, the Board requests Employee to relocate his primary
residence to the San Diego, California area but Employee fails to
do so within thirty (30) days after such request, then, upon
written notice to the Employee from the Board (the “
Relocation Notice ”) and continuing until such time as
the Employee relocates his primary residence to the San Diego,
California area, as the Company’s sole remedy for the
Employee’s failure to relocate his primary residence in
accordance with this paragraph, during the period beginning on the
first day following the Relocation Notice and continuing until such
time as the Employee relocates his primary residence to the San
Diego, California area, (i) the amount of the Employee’s
Performance Bonus shall be reduced by 50% as to such period only,
and (ii) for each vesting date during such period, the
Employee’s option to purchase shares of common stock of the
Company in accordance with Section 3.3 below shall, on the
first day of each month during such period, vest and become
exercisable as to only 50% of the shares that would otherwise vest
and become exercisable on each such vesting date, and shall be
terminated and cancelled in full as to the remaining 50% of the
shares, that would otherwise vest and become exercisable on each
such vesting date.
(b) Should
the Employee relocate to the San Diego, California metropolitan
area during his employment under this Agreement, the Company agrees
to reimburse the Employee for all Relocation Expenses (as defined
below) relating to such relocation. The Company shall make such
reimbursement promptly upon presentation of reasonably detailed
documentation of his Relocation Expenses. For purposes hereof,
“ Relocation Expenses ” shall mean the following
reasonable expenses incurred by the Employee related to moving his
and his family’s primary residence from Northern Virginia to
the San Diego, California metropolitan area: (i) costs of
looking for a new primary residence, including house hunting trips;
(ii) attorneys’ fees, closing costs and brokers’
commissions (up to 6%) associated with the sale of the
Employee’s Northern Virginia residence, if such residence is
sold on or prior to June 30, 2008; (iii) attorneys’
fees and closing costs associated with the purchase of the
Employee’s new residence in the San Diego, California area
(but excluding mortgage loan fees and points); (iv) temporary
family living expenses; (v) relocation travel expenses; and
(vi) the physical movement of furniture, clothing, household
effects, vehicles and other items from the Employee’s
Northern Virginia home to the San Diego, California area. To the
extent any Relocation Expenses are deemed to be taxable
compensation to the Employee, the Company will make a “gross
up” payment to the Employee sufficient to pay all federal,
state and local income taxes imposed on the Employee in connection
with the Company’s reimbursement of Relocation Expenses and
the payment of such taxes.
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3. COMPENSATION AND BENEFITS
3.1
Base Compensation . The Company will pay to the Employee for
his services hereunder an annual salary (“ Base
Compensation ”). As of the Employment Commencement Date,
the Employee’s Base Compensation shall be $375,000 per annum.
This Base Compensation will be reviewed annually and may be
increased from time to time in such amounts as may be determined by
the Compensation Committee of the Board (the “
Compensation Committee ”), but may not be decreased
without the Employee’s consent. The Base Compensation shall
be payable in conformance with the Company’s customary
payroll practices as established and in effect from time to
time.
3.2.
Bonus . The Employee shall be eligible for a bonus in
respect of the 2006 fiscal year of Visual Sciences, LLC under the
Visual Sciences, LLC bonus program in effect on the date hereof,
determined as if the Employee had continued his employment with
Visual Sciences, LLC under the Prior Agreement (as hereafter
defined) through the date of payment of such bonus. In addition to
the Base Compensation as set forth in Section 3.1, and
conditioned upon the Employee’s continued employment with the
Company and subject to Section 2.4(a), for each of the
Company’s fiscal years (commencing with the 2007 fiscal
year), the Employee will be eligible to earn an annual performance
bonus (“ Performance Bonus ”) based upon the
Employee’s achievement each fiscal year of goals and
objectives to be mutually agreed upon by Employee and the
Compensation Committee at the beginning of each such year. Such
Performance Bonus shall be paid to Employee during the first
quarter of each fiscal year following the fiscal year in which it
is earned. For 2007, the Employee shall be eligible for a
Performance Bonus of up to $225,000. The amount of the Performance
Bonus for which the Employee is eligible shall be reviewed annually
and may be increased from time to time by the Compensation
Committee, but may not be decreased without the Employee’s
consent.
3.3.
Equity Compensation . Effective on the third business day
following the Company’s announcement of its results of
operations for the third fiscal quarter of 2006, and subject to the
Employee’s continued employment with the Company, the Company
will grant to Employee a non-qualified stock option to purchase
400,000 shares of the Company’s common stock, par value
$0.001 per share, at a per
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