1
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "AGREEMENT"), is entered into by IDG
Books Worldwide, Inc. ("IDG BOOKS") and its parent company International Data
Group (collectively the "COMPANY") and Xxxx Xxxxxxxxx (the "EXECUTIVE") as of
this 1st day of July, 1998, and will be effective on such date.
IDG Books desires to employ the Executive and the Executive desires to
be employed by IDG Books. In consideration of the mutual covenants and promises
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Term of Employment: The term of employment of Executive by IDG Books
hereunder shall commence upon the date of this Agreement (the
"COMMENCEMENT DATE") and shall continue thereafter on the same terms and
conditions for a period of three years unless earlier terminated
pursuant to Section 6 (such term being hereinafter referred to as the
"EMPLOYMENT PERIOD"). The Employment Period shall be extended
automatically without further action by either party as of the first
anniversary of the Commencement Date for a period of one year, unless
prior to such date IDG Books or the Executive shall notify the other in
writing of its or his intention not to renew the Agreement, in which
case the Agreement shall terminate at the end of the original term. If
the Employment Period is extended, it shall thereafter be referred to as
the Employment Period.
2. Title; Duties: The Executive shall serve as Chief Executive Officer and
Chairman of the Board of IDG Books reporting to the Board of Directors
of IDG Books. Executive shall perform those duties and responsibilities
inherent in such position, including such duties and responsibilities as
the Board of Directors of IDG Books shall assign. The Executive agrees
to devote his full time and best efforts, attention and energies to the
business and interests of IDG Books. During the Employment Period, IDG
Books shall use its best efforts to continue to nominate and elect
Executive as a director, and Executive shall continue to serve in such
capacity without additional consideration. Executive shall serve IDG
Books faithfully and to the best of his ability in such capacities,
devoting his full business time, attention, knowledge, energy and skills
to such employment; provided, however, IDG Books acknowledges that
Executive may serve on the board of directors of other companies with
the prior approval of the Board. Executive shall travel as reasonably
required in connection with the performance of his duties hereunder.
3. Compensation: IDG Books shall pay and Executive shall accept as full
consideration for the his services hereunder, compensation consisting of
the following:
3.1 Base Salary. Effective October 1, 1998, $289,000 per year base
salary, payable in installments in accordance with IDG Books'
normal payroll practices, less such
2
deductions or withholdings required by law, and until October 1,
1998, the base salary shall be the base salary in effect for
Executive on the Commencement Date.
3.2 Bonus. Participation in the IDG Books' Bonus Plan; the targets
for such Bonus Plan are attached hereto as Exhibit A. Such bonus
participation shall commence on October 1, 1998. The Bonus Plan
in place on the Commencement Date shall remain in effect for
fiscal 1998.
3.3 Stock Options. Executive was previously granted a stock option
for 250,000 shares (the "OPTION") under the IDG Books Stock
Option Plan (the "STOCK OPTION PLAN"). The Option shall become
vested to the extent of 25% on the first anniversary of the
Commencement Date and 2.08% monthly for thirty-six months
thereafter (the "OPTION EXERCISE PERIOD") on the last day of
each month during which Executive remains employed with IDG
Books.
4. Benefits: Subject to all applicable eligibility requirements, and legal
limitations, Executive will be able to participate in any and all ESOP,
401(k), vacation, medical, dental, life and long-term disability
insurance and/or other benefit plans which from time to time may be
established for other employees of IDG Books.
5. Reimbursement of Expenses: IDG Books will reimburse Executive for all
reasonable travel, entertainment and other expenses incurred or paid by
the Executive in connection with, or related to, the performance of his
duties, responsibilities or services under this Agreement subject to
review by the compensation committee of the Board of Directors of IDG
Books.
6. Benefit Upon Termination of Employment Period.
6.1 Disability. In the event of the permanent disability (as
hereinafter defined) of Executive during the Employment Period,
IDG Books shall have the right, upon written notice to
Executive, to terminate Executive's employment hereunder,
effective upon the 30th calendar day following the giving of
such notice (or such later day as shall be specified in such
notice). Upon the effectiveness of such termination, (i) IDG
Books shall have no further obligations hereunder, except to pay
and provide, subject to applicable withholding, (A) all amounts
of Base Salary accrued, but unpaid, at the effective date of
termination, less any amounts payable under the IDG Book's
short-term and long-term disability policies for any period
prior to termination, (B) Executive's maximum or "stretch"
target bonus set forth in Exhibit A attached hereto, and (C) all
reasonable unreimbursed business-related expenses, (ii)
Executive's Option shall immediately vest and become exercisable
to the extent of twelve additional months of vesting and shall
remain exercisable for twelve months following termination of
employment and (iii) Executive shall have no further obligations
hereunder other than those provided for in Sections 9 and 10
hereof. All amounts payable to Executive pursuant to this
Section 6(a) shall be payable within 30 days following the
2
3
effectiveness of the termination of Executive's employment. For
purposes of this Agreement, "PERMANENT DISABILITY" shall be
determined in the same manner as such term is determined under
IDG Book's long-term disability insurance policy by the policy
provider; provided that termination shall occur only if
Executive is incapable in any material respect of performing the
services required of him in accordance with his obligations
under Section 2 for a period of 180 consecutive days, or for 180
days in any 360 day period.
6.2 Death. In the event of the death of Executive during the
Employment Period, this Agreement shall automatically terminate
and IDG Books shall have no further obligations hereunder,
except to pay and provide to Executive's beneficiary or other
legal representative, subject to applicable withholding, (i) all
amounts of Base Salary and bonus accrued but unpaid, at the date
of death, (ii) an amount equal to Executive's maximum or
"stretch" target bonus, (iii) Executive's Option shall
immediately vest and become exercisable to the extent of twelve
additional months of vesting and shall remain exercisable for
twelve months following termination of employment and (iv) all
reasonable unreimbursed business-related expenses. All amounts
payable to Executive pursuant to this Section 6(b) shall be
payable within 30 days following the date of death.
6.3 Termination Without Cause. In the event of the termination of
Executive's employment by IDG Books without Cause (as defined
below) or upon the Executive's voluntary termination of his
employment for Good Reason (as defined below), (i) all amounts
of Base Salary and bonus accrued but unpaid on the date of
termination, (ii) an amount equal to Executive's Base Salary on
the date of termination for a period of twelve months shall be
paid by IDG Books in twelve equal monthly installments, (iii) an
amount equal to Executive's maximum or "stretch" target bonus
set forth in Exhibit A attached hereto and (iv) the Option shall
immediately vest and become exercisable to the extent of
twenty-four additional months of vesting and shall remain
exercisable for 180 days following termination of employment;
provided that if Executive's employment terminates pursuant to
this Section 6.3 within in the first twelve months following the
Commencement Date, Executive shall receive an amount equal to
the Base Salary and maximum or "stretch" target bonus amount
that would be paid but for such termination for the remainder of
the Employment Period and such option vesting and exercisability
shall continue as set forth in subparagraph (iv) above. Such
payment and additional vesting shall be in lieu of any claims
Executive may have had with respect to termination benefits or
additional vesting.
6.4 Circumstances Under Which Termination Benefits Would Not Be
Paid. IDG Books shall not be obligated to pay Executive the
termination benefits or continue the option vesting described in
subparagraphs 6.3 (ii) through (iv) above if the Employment
Period is terminated for Cause or if Executive voluntarily
terminates his employment other than for Good Reason (as defined
below). For purposes of this Agreement, "CAUSE" shall be limited
to:
3
4
(A) Willful failure by Executive to substantially perform
his duties hereunder, other than a failure resulting
from his complete or partial incapacity due to physical
or mental illness or impairment;
(B) A material and willful violation of a federal or state
law or regulation applicable to the business of the
company or that adversely affects the image of the
Company;
(C) Commission of a willful act by Executive which
constitutes gross misconduct and is injurious to the
Company;
(D) A willful breach of a material provision violation of
this Agreement; or
(E) Executive's death, or permanent disability pursuant to
Section 6 above.
6.5 Constructive Termination. Notwithstanding anything in Section 3
or in this Section 6 to the contrary, for purposes of this
Agreement the Employment Period will be deemed to have been
terminated and Executive will be deemed to have Good Reason for
voluntary termination of the Employment Period ("GOOD REASON"),
if there should occur in lieu of the provisions of Section 6.3:
(A) A material adverse change in Executive's position
causing it to be of materially less stature or
responsibility without Executive's written consent, and
such a materially adverse change shall in all events be
deemed to occur if Executive no longer serves as Chief
Executive Officer reporting to the Board of Directors of
IDG Books but shall not be deemed to occur if Executive
no longer serves as Chairman of the Board of IDG Books;
(B) A material reduction, without Executive's written
consent, in his level of base compensation (including
base salary and fringe benefits) by more than ten
percent (10%);
(C) A Change in Control (as defined below) of IDG Books
(other than IDG assuming control of IDG Books);
(D) A relocation of Executive's principal place of
employment (other than a relocation of the Company's
headquarters with the concurrence of Management) outside
the Bay Area without Executive's consent other than at
the recommendation of management.
6.6 Notwithstanding anything in this Section 6 to the contrary, upon
Executive's permanent disability, death or termination of
employment for any reason other than for Cause, all "long-term
executive bonuses", deferred compensation, phantom stock and
shadow equity arrangements for the benefit of Executive that are
in effect immediately prior to the Commencement Date shall
immediately become vested, and Executive shall be entitled to a
cash lump sum payment in an amount equal to the cash value of
such amounts either immediately following the
4
5
Company's initial public offering or within thirty (30) days of
Executive's termination of employment hereunder for any reason,
the time of such payment to be determined by the Board of
Directors of IDG Books in its sole discretion.
7. Change in Control Benefits:
Should there occur a Change in Control (as defined below), then the
following provisions shall become applicable in lieu of the provisions of
Section 6.3:
(A) During the period (if any) following a Change in Control that
Executive shall continue to remain employed, then the terms and provisions of
this Agreement shall continue in full force and effect, and Executive shall
continue to vest in all of his unvested stock options; or
(B) In the event of (i) a termination of the Executive's employment by
IDG Books other than for Cause within twelve (12) months after a Change in
Control or (ii) Executive voluntarily terminates his employment for Good Reason
within twelve (12) months after a Change in Control:
(i) IDG Books shall pay to Executive an amount equal to
(A) all amounts of Base Salary and bonus accrued to the date of termination and
(B) two hundred percent (200%) of Executive's Base Salary and "stretch" target
bonus set forth in Exhibit A attached hereto on the date of termination in one
lump sum amount, on or before the fifth business day following the effective
date of Executive's termination; and
(ii) All of the unvested options held by Executive on the
date of such Change in Control shall immediately vest and become exercisable in
full and shall remain exercisable for the period of 180 days following
termination of employment.
For purposes of this Section 7, the term "CHANGE OF CONTROL" shall mean:
(x) The sale, lease, conveyance, liquidation or other
disposition of all or substantially all of IDG Books'
assets as an entirety or substantially as an entirety to
any person, entity or group of persons acting in concert
other than in the ordinary course of business;
(y) Any transaction or series of related transactions (as a
result of a tender offer, merger, consolidation or
otherwise) that results in any Person (as defined in
Section 13(h)(8)(E) under the Securities Exchange Act of
1934) becoming the beneficial owner (as defined in Rule
13d-3 under the Securities Exchange Act of 1934), directly
or indirectly, of more than 50% of the aggregate voting
power of all classes of common equity of IDG Books, except
if such Person is (A) a subsidiary of IDG Books, (B) an
employee stock ownership plan for employees of IDG Books
or (C) a company formed to hold IDG Books' common equity
securities and whose shareholders constituted, at the time
such company became such holding company, substantially
all the shareholders of IDG Books; or
5
6
(z) A change in the composition of IDG Books' Board of
Directors over a period of thirty-six (36) consecutive
months or less (other than in connection with IDG Books'
initial public offering) such that a majority of the then
current Board members ceases to be comprised of
individuals who either (a) have been Board members
continuously since the beginning of such period, or (b)
have been elected or nominated for election as Board
members during such period by at least a majority of the
Board members described in clause (a) who were still in
office at the time such election or nomination was
approved by the Board.
In the event that the severance and other benefits provided to
Executive pursuant to Section 6 of this Agreement (i) constitute
"parachute payments" within the meaning of Section 280G of the Internal
Revenue Code of 1986, as amended (the "CODE") and (ii) but for this
Section 7, such severance and benefits would be subject to the excise
tax imposed by Section 4999 of the Code, then Executive's severance
benefits under this Section 7 shall be payable either:
(a) in full,
(b) as to such lesser amount which would result in no portion
of such severance and other benefits being subject to
excise tax under Section 4999 of the Code, whichever of
the foregoing amounts, taking into account the applicable
federal, state and local income taxes and the excise tax
imposed by Section 4999, results in the receipt by
Executive on an after-tax basis, of the greatest amount of
severance benefits under this Agreement. Unless IDG Books
and Executive otherwise agree in writing, any
determination required under this Section 7 shall be made
in writing by independent public accountants agreed to by
IDG Books and Executive (the "ACCOUNTANTS"), whose
determination shall be conclusive and binding upon
Executive and IDG Books for all purposes. For purposes of
making the calculations required by this Section 7, the
Accountants may make reasonable assumptions and
approximations concerning applicable taxes and may rely on
reasonable, good faith interpretations concerning the
application of Sections 280G and 4999 of the Code. IDG
Books and Executive shall furnish to the Accountants such
information and documents as the Accountants may
reasonably request in order to make a determination under
this Section 7. IDG Books shall bear all costs the
Accountants may reasonably incur in connection with any
calculations contemplated by this Section 7.
8. Arbitration: To the fullest extent permitted by law all controversies
between Executive and the Company including whether any termination is
with or without cause, will be submitted for resolution to binding
arbitration, in accordance with the attached Arbitration Agreement
attached hereto as Exhibit B. This means that except as otherwise
stated, both the Company and the Executive understand that arbitration
will be their exclusive forum for resolving disputes between them, and
that both parties waive their entitlement, if any, to have controversies
between them decided by a court or a jury.
6
7
9. Cooperation with IDG Books After Termination of the Employment Period:
Following termination of the Employment Period by Executive, Executive
shall fully cooperate with IDG Books in all matters relating to the
winding up of his pending work on behalf of IDG Books and the orderly
transfer of any such pending work to other employees of IDG Books as may
be designated by IDG Books.
10. Confidentiality; Return of Property; NonSolicitation:
(a) The Executive acknowledges that during the Employment Period he
will receive confidential information from IDG Books and
subsidiaries of IDG Books and the respective clients thereof
(each a "RELEVANT ENTITY"). Accordingly, the Executive agrees
that during the Employment Period (as it may be extended from
time to time) and thereafter for a period of two years, the
Executive and his affiliates shall not, except in the
performance of his obligations to IDG Books hereunder or as may
otherwise be approved in advance by IDG Books, directly or
indirectly, disclose or use (except for the direct benefit of
IDG Books) any confidential information that he may learn or has
learned by reason of his association with any Relevant Entity.
Upon termination of this Agreement, the Executive shall promptly
return to IDG Books any and all properties, records or papers of
any Relevant Entity, that may have been in his possession at the
time of termination, whether prepared by the Executive or
others, including, but not limited to, confidential information
and keys. For purposes of this Agreement, "confidential
information" includes all data, analyses, reports,
interpretations, forecasts, documents and information concerning
a Relevant Entity and its affairs, including, without limitation
with respect to clients, products, policies, procedures,
methodologies, trade secrets and other intellectual property,
systems, personnel, confidential reports, technical information,
financial information, business transactions, business plans,
prospects or opportunities, (i) that IDG Books reasonably
believes are confidential or (ii) the disclosure of which could
be injurious to a Relevant Entity or beneficial to competitors
of a Relevant Entity, but shall exclude any information that the
Executive is required to disclose under any applicable laws,
regulations or directives of any government agency, tribunal or
authority having jurisdiction in the matter or under subpoena or
other process of law. For purposes of this Agreement,
"affiliate" means any entity that, directly or indirectly, is
controlled by, or under common control with, the Executive. For
purposes of this definition, the terms "controlled" and "under
common control with" means the possession, direct or indirect,
of the power to direct or cause the direction of the management
and policies of such person, whether through the ownership of
voting stock, by contract or otherwise.
(b) For a period of one (1) year following the termination of his
employment with IDG Books for any reason, he will not, without
IDG Books' express written consent, either on his own behalf or
on behalf of another, solicit employees of IDG Books or any
subsidiary of IDG Books for the purpose of hiring them.
7
8
11. General:
11.1 Indemnification. In the event Executive is made, or threatened
to be made, a party to any legal action or proceeding, whether
civil or criminal, solely by reason of the fact that Executive
is or was a director or officer of IDG Books or serves or served
any other corporation fifty percent (50%) or more owned or
controlled by IDG Books in any capacity at IDG Books' request,
Executive shall be indemnified by IDG Books, and IDG Books shall
pay Executive's related expenses when and as incurred, all to
the fullest extent permitted by law.
11.2 Waiver. Neither party shall, by mere lapse of time, without
giving notice or taking other action hereunder, be deemed to
have waived any breach by the other party of any of the
provisions of this Agreement. Further, the waiver by either
party of a particular breach of this Agreement by the other
shall neither be construed as, nor constitute a, continuing
waiver of such breach or of other breaches by the same or any
other provision of this Agreement.
11.3 Severability. If for any reason a court of competent
jurisdiction or arbitrator finds any provision of this Agreement
to be unenforceable, the provision shall be deemed amended as
necessary to conform to applicable laws or regulations, or if it
cannot be so amended without materially altering the intention
of the parties, the remainder of the Agreement shall continue in
full force and effect as if the offending provision were not
contained herein.
11.4 Notices. All notices and other communications required or
permitted to be given under this Agreement shall be in writing
and shall be considered effective upon personal service or upon
transmission of a facsimile or the deposit with Federal Express
or in Express Mail and addressed to the Chairman of the Board of
IDG Books as its principal corporate address, and to Executive
at his most recent address shown on IDG Books' corporate
records, or at any other address which he may specify in any
appropriate notice to IDG Books.
11.5 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all
of which taken together constitutes one and the same instrument
and in making proof hereof it shall not be necessary to produce
or account for more than one such counterpart.
11.6 Entire Agreement. The parties hereto acknowledge that each has
read this Agreement, understands it, and agrees to be bound by
its terms. The parties further agree that this Agreement and the
referenced stock option agreements shall constitute the complete
and exclusive statement of the agreement between the parties and
supersedes all proposals (oral or written), understandings,
representations, conditions, covenants, and all other
communications between the parties relating to the subject
matter hereof.
11.7 Governing Law. This Agreement shall be governed by the law of
the State of California.
8
9
11.8 Assignment and Successors. IDG Books shall have the right to
assign its rights and obligations under this Agreement to an
entity which acquires substantially all of the assets of IDG
Books. The rights and obligation of IDG Books under this
Agreement shall inure to the benefit and shall be binding upon
the successors and assigns of IDG Books.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
Dated:____________________________ _________________________________________
Executive
Dated:____________________________ IDG Books Worldwide, Inc.
By:______________________________________
Dated:____________________________ International Data Group
By:______________________________________
9
