Exhibit 10.3
EMPLOYMENT AGREEMENT
(Xxxxx XxXxx)
This EMPLOYMENT AGREEMENT, dated February 19, 2002 (this "AGREEMENT"), is
between VerticalNet, Inc., a Pennsylvania corporation (the "COMPANY"), and Xxxxx
XxXxx (the "EMPLOYEE").
The Company and the Employee, each intending to be legally bound by this
Agreement, agree as follows:
1. Employment
This Agreement is effective February 19, 2002 (the "EFFECTIVE DATE"). The
Employee shall be the President and Chief Executive Officer of the Company and
shall perform duties consistent with this position as are assigned by the Board
of Directors of the Company (the "BOARD"). The Employee shall be a member of the
Board.
The Employee shall be employed by the Company as of the Effective Date, and
shall begin his full-time duties at the Company's headquarters on or before
March 5, 2002.
2. Performance
The Employee shall devote substantially all of his business time and efforts to
the performance of his duties under this Agreement; however, the Employee may
(a) serve on civic or charitable boards or committees, (b) serve on corporate
boards as a non-employee board member and (c) manage Employee's personal
investments. The Employee must inform the Company of any corporate boards on
which he serves. The Employee cannot serve on any corporate board that would
violate the Employee's non-competition restrictions.
3. Term
The initial term of employment under this Agreement (the "INITIAL TERM") begins
on the Effective Date and extends for 2 years. This Agreement renews
automatically for one-year renewal terms (a "RENEWAL TERM") unless either the
Employee or the Company gives the other party written notice of nonrenewal at
least one year before the end of the Initial Term or any Renewal Term then in
effect. The Initial Term plus any Renewal Term then in effect are the term of
this Agreement (the "EMPLOYMENT TERM"). The Employment Term may be terminated
early as provided in Sections 7 through 12 of this Agreement.
4. Salary
The Employee's annual salary (the "SALARY") is payable in installments when the
Company customarily pays its officers (but no less often than twice per month).
The Salary is at the initial rate of $415,000.
On January 1, 2003, the Salary shall increase to $440,000 (the "2003 SALARY").
The Board or the Compensation Committee shall review the Salary at least once a
year. After January 1, 2003, the Salary shall never be less than the 2003
Salary.
5. Bonus and Benefits
During each year of the Employment Term, the Employee shall be entitled to
participate in any bonus programs established by the Board or the Compensation
Committee for executive officers generally. The Employee's target bonus shall be
equal to 50% of the Salary (the "TARGET BONUS"). Except as provided below, all
bonus programs are established at the discretion of the Board or the Board's
Compensation Committee. The performance milestones will be determined between
the Employee and the Company promptly, but in any event not later than 90 days
after the commencement of any fiscal year of the Company. Any bonus earned will
be paid no later than March 31st of the year following the calendar year to
which the bonus relates, provided that the Employee is employed by the Company
on the payment date except as provided below.
For 2002, $100,000 of the Employee's Target Bonus award will be guaranteed (the
"GUARANTEED 2002 BONUS PAYMENTS"), and shall be paid to the Employee as follows:
$25,000 on each of June 1, 2002, September 1, 2002, December 1, 2002 and March
1, 2003 (or on the date that 2002 bonus awards are paid to other senior
executives, if earlier than March 1, 2003); provided that the Employee is
employed by the Company on such payment date except as provided below.
For 2002, the remainder of the Employee's Target Bonus will based upon the
achievement of Company performance milestones to be determined between the
Employee and the Company promptly, but in any event not later than 90 days after
the Effective Date.
In addition to any annual bonus, the Employee shall be entitled to a signing
bonus payment of $125,000 on the 3 month anniversary of the Effective Date if
the Employee is employed by the Company on that date (the "SIGNING BONUS")
except as provided below.
During the Employment Term, the Employee shall be entitled to participate in and
receive benefits under all employee and retirement benefit plans and programs
maintained by the Company for employee or executives generally. Notwithstanding
the foregoing, the Company shall at all times during the Employment Term
maintain for the Employee (i) life insurance coverage in an amount not less than
two multiplied by the Salary (the Employee recognizes that the cost of the
coverage, in excess of that normally provided to executives generally as a
percentage of their salary, shall be imputed as income to the Employee for
Federal and state income tax purposes), and (ii) short and long term disability
coverage equal to not less than 60% of the Salary (the Employee recognizes that
the cost of the coverage shall be imputed as income to the Employee for Federal
and state income tax purposes, but the Company shall provide the Employee with
an annual additional cash bonus such that there will be no after-tax cost to the
Employee for this coverage).
6. Confidential Information, Non-Competition and Non-Solicitation
The Employee agrees to be covered by the terms of the Confidential Information,
Invention and Non-Competition Agreement that the Employee has entered into upon
the commencement of employment with the Company (the "CONFIDENTIAL INFORMATION,
INVENTION AND NON-COMPETITION AGREEMENT"), which subject to the next following
paragraph, includes a one year period of non-solicitation of employees and
customers, and non-competition after termination of employment.
The sections of the Confidential Information, Invention and Non-Competition
Agreement that provide for a one year period of non-solicitation of employees
and customers, and non-
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competition after termination of employment, shall not become effective unless
the Employee is employed by the Company on the 91st day after the Effective
Date.
7. Death
If the Employee dies during the Employment Term, then the Employment Term shall
terminate, and, thereafter, the Company shall not have any further liability or
obligation to the Employee, the Employee's executors, administrators, heirs,
assigns or any other person claiming under or through the Employee, except (a)
that the Employee's estate shall receive any unpaid Salary and vacation that has
accrued through the date of termination, (b) the Employee's outstanding options
are accelerated for an additional period of 6 months that shall be applied
between scheduled vesting dates to accelerate vesting on the pro rata portion of
the option vesting schedule using a monthly basis instead of the scheduled
vesting dates, (c) a life insurance benefit equal to at least two times the
Employee's then Salary, (d) a pro rata portion of any bonus that the Employee
would have earned for the fiscal year of the Company in which the Employee died,
paid no later than March 31st of the year following the calendar year to which
the bonus relates or, if earlier, when bonuses for such year are paid to
executives generally, (e) the Employee's group healthcare (medical, dental,
vision and prescription drug) coverage will be continued for one year, to be
paid in full by the Company so that there is no after-tax cost to the Employee's
spouse or dependents, and (f) any other benefits due under any programs of the
Company in which the Employee participated and under which the Employee was due
a benefit at the time of his death.
8. Total Disability
If the Employee becomes "totally disabled," then the Employment Term shall
terminate, and, thereafter, the Company shall have no further liability or
obligation to the Employee hereunder, except as follows: the Employee shall
receive (a) any unpaid Salary and vacation that has accrued through the date of
termination, (b) continued Salary for 3 months following the date the Employee
is considered totally disabled, (c) whatever benefits that he may be entitled to
receive under any then existing disability benefit plans of the Company, but
consistent with Section 3 above, (d) a pro rata portion of any bonus that the
Employee would have earned for the fiscal year of the Company in which the
Employee became totally disabled, paid no later than March 31st of the year
following the calendar year to which the bonus relates or, if earlier, when
bonuses for such year are paid to executives generally, (e) the Employee's group
healthcare (medical, dental, vision and prescription drug) coverage will be
continued for one year, to be paid in full by the Company so that there is no
after-tax cost to the Employee, and (f) any other benefits due under any
programs of the Company in which the Employee participated and under which the
Employee was due a benefit at the time of his becoming totally disabled.
The term "TOTALLY DISABLED" means: (a) if the Employee is considered totally
disabled under the Company's group disability plan in effect at that time, if
any, or (b) in the absence of any such plan, under applicable Social Security
regulations.
9. Termination for Cause
The Company may terminate the Employee for "cause" immediately upon notice from
the Company. If the Employee is terminated for "cause", then the Employment Term
shall terminate and thereafter the Company shall not have any further liability
or obligation to the Employee, except that the Employee shall receive (a) any
unpaid Salary and vacation that has accrued through the date of termination and
(b) and any other benefits due under any programs of the
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Company in which the Employee participated and under which the Employee was due
a benefit at the time of termination.
The term "CAUSE" means: (a) the Employee is convicted of a felony, or (b) the
Employee has done any one of the following: (1) committed an act of fraud,
embezzlement, or theft in connection with the Employee's duties in the course of
his employment with the Company, (2) caused intentional, wrongful damage to the
property of the Company, (3) materially breached (other than by reason of
illness, injury or incapacity) the Employee's obligations under this Agreement
or under any written confidentiality, non-competition, or non-solicitation
agreement between the Employee and the Company, that the Employee shall not have
remedied within 30 days after receiving written notice from the Board specifying
the details of the breach, or (4) engaged in gross misconduct or gross
negligence in the course of the Employee's employment with the Company.
10. Termination by the Employee
The Employee may terminate this Agreement by giving the Company written notice
of termination one month in advance of the termination date. The Company may
waive this notice period and set an earlier termination date. If the Employee
terminates this Agreement, then on the termination date, the Employment Term
shall terminate and, thereafter, the Company shall have no further liability or
obligation to the Employee under this Agreement, except that the Employee shall
receive (a) any unpaid Salary and vacation that has accrued through the
termination date and (b) and any other benefits due under any programs of the
Company in which the Employee participated and under which the Employee was due
a benefit at the time of termination. After the termination date, the Employee
shall be required to adhere to the covenants against non-competition and
non-solicitation described in Section 6 of this Agreement.
Notwithstanding the first paragraph of this Section 10, if without the
Employee's prior written consent or resignation, the Company or the Board takes
an action that constitutes "Good Reason," as defined in Section 12, then during
the period beginning with any such action and ending 6 months thereafter, the
Employee shall have the right to terminate this Agreement by giving the Company
written notice of termination, and upon termination the Employee shall receive
the same compensation and benefits as if the Employee were terminated without
"cause" by the Company under Section 11.
Notwithstanding this Section 10, after a Change of Control, the Employee shall
have the right to terminate this Agreement and receive the compensation and
benefits set forth under Section 11.
11. Termination without Cause by the Company
The Company may determine not to renew this Agreement or terminate the Employee
without "cause" by giving the Employee written notice of termination one month
in advance of the termination date. The Employee may waive this one-month notice
period and set an earlier termination date in the event of a termination without
"cause." If the Agreement is not renewed or the Employee is terminated without
"cause," then the Employment Term shall terminate at the end of the notice
period and thereafter the Employee shall be entitled, in consideration of the
Employee's undertakings under Section 6 of this Agreement and as damages for the
termination or non-renewal, only to the following under this Agreement:
(1) if the termination date is prior to January 1, 2003, then the
Company will pay to the Employee a lump sum severance payment in the
amount equal to: (a) one year
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of the Salary then in effect, plus (b) the Signing Bonus if the Signing
Bonus has not previously been paid to the Employee, plus (c) the Target
Bonus for 2002, less any Guaranteed 2002 Bonus Payments that have
previously been paid to the Employee; and
(2) if the non-renewal or termination date is on or after January
1, 2003, then the Company will pay to the Employee a lump sum severance
payment equal to: (a) two years (one year in the case of non-renewal) of
the Salary then in effect, (b) any Guaranteed 2002 Bonus Payments that
have not previously been paid to the Employee, and (c) a pro rata portion
of any bonus that the Employee would have earned for the fiscal year of
the Company in which the Employee terminated or the non-renewal occurs,
paid no later than March 31st of the year following the calendar year to
which the bonus relates or, if earlier, when bonuses for such year are
paid to executives generally; and
(3) the Employee's group healthcare (medical, dental, vision and
prescription drug) coverage will be continued for one year, to be paid in
full by the Company so that there is no after-tax cost to the Employee;
and
(4) the Employee's covenants against non-competition and
non-solicitation (as described in Section 6 of this Agreement) shall be
reduced to a 6 month period from the non-renewal or termination date, from
the 12 month period contained in Section 6 of this Agreement; and
(5) unvested options and restricted stock units granted to the
Employee on the Effective Date, are accelerated for a total period equal
to 6 months plus one additional month for each month that the Employee has
been employed by the Company, that shall be applied between scheduled
vesting dates to accelerate vesting on the pro rata portion of the vesting
schedule using a monthly basis instead of the scheduled vesting dates; and
(6) all options granted to the Employee on the Effective Date that
are vested (including those the vest on an accelerated basis) at
termination will remain exercisable for 5 years after non-renewal or
termination of employment, but not longer than the total life of the
options; and
(7) the Employee will not receive any accrued vacation or bonus
payments, except as set forth in subparagraphs (1) and (2) of this
Section; and
(8) the Employee will receive any other benefits due under any
programs of the Company in which the Employee participated and under which
the Employee was due a benefit at the time of termination or non-renewal;
and
(9) the Employee and the Company will enter into a mutual general
release.
12. Change of Control
Upon a Change of Control, the Employee's outstanding Company stock options and
restricted stock units granted on the Effective Date will become fully vested,
even if the Employee continues to be employed by the Company.
During the 3 month period after a Change of Control, if the Employee terminates
this Agreement for any reason by giving the Company written notice of
termination (which the Employee shall
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have the right to do during this 3 month period), then all the rights, benefits
and obligations under Section 11 of this Agreement for termination without
"cause" by the Company shall apply.
During the 2 year period after a Change of Control, if the Employee terminates
this Agreement for "Good Reason" by giving the Company written notice of
termination one month in advance of the termination date (which the Employee
shall have the right to do during this 2 year period), then all the rights,
benefits and obligations under Section 11 of this Agreement for termination
without "cause" by the Company shall apply.
The term "CHANGE OF CONTROL" means:
(a) any sale, lease, exchange, or other transfer of all or
substantially all of the assets of the Company to any other person or
entity other than a wholly-owned subsidiary of the Company (in one
transaction or a series of related transactions),
(b) dissolution or liquidation of the Company,
(c) when any person or entity, including a "group" as contemplated
by Section 13(d)(3) of the Securities Exchange Act of 1934, as amended,
acquires or gains ownership or control (including, without limitation,
power to vote) of more than 50% of the outstanding shares of the Company's
voting securities (based upon voting power), or
(d) any reorganization, merger, consolidation, or similar
transaction or series of transactions that results in the record holders
of the voting stock of the Company immediately prior to such transaction
or series of transactions holding immediately following such transaction
or series of transactions less than 50% of the outstanding shares of any
of the voting securities (based upon voting power) of any one of the
following: (1) the Company, (2) any entity which owns (directly or
indirectly) the stock of the Company, (3) any entity with which the
Company has merged, or (3) any entity that owns an entity with which the
Company has merged.
The term "GOOD REASON" means:
(a) the transfer, without the Employee's prior written consent, to a
location that is more than 50 miles from the Employee's principal place of
business immediately preceding the transfer,
(b) a material reduction of the Employee's authority, duties or
responsibilities after the Employee has provided the Company with
reasonable notice and an opportunity to cure,
(c) any failure of the Company materially to comply with and satisfy
the terms of this Agreement, or
(d) any action resulting in the Employee no longer being the Chief
Executive Officer of the Company.
13. Parachute Payment
Notwithstanding anything to the contrary in this Agreement, if the Employee is a
"disqualified individual" (as defined in Section 280G(c) of the Code), and any
severance benefit provided for
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in this Agreement, together with any other payments or benefits that Employee
has the right to receive from the Company and its affiliates, would constitute a
"parachute payment" (as defined in Section 280G(b)(2) of the Code), then the
payments under this Agreement (the Employee shall have the right to specify
which) shall be either:
(a) reduced (but not below zero) so that the present value of the
total amount to be received by the Employee under this Agreement and
otherwise will be one dollar ($1.00) less than three times the Employee's
"base amount" (as defined in Section 280G of the Code) and so that no
portion of such amounts received by the Employee shall be subject to the
excise tax imposed by Section 4999 of the Code; or
(b) paid in full,
whichever of (a) or (b) produces the better net after-tax position for the
Employee (taking into account any applicable excise tax under Section 4999
of the Code and any applicable income tax).
The determination as to whether the reduction provided in clause (a) shall occur
shall be made initially by the Company in good faith. If a reduced payment is
made and through error or otherwise that payment, when aggregated with other
payments from the Company (or its affiliates) used in determining if a
"parachute payment" exists, exceeds one dollar ($1.00) less than three times the
Employee's base amount, then the Employee shall immediately repay such excess to
the Company upon notification that an overpayment has been made and in the event
that the reduction was more than was required, the Company shall immediately pay
the amount that should have been paid to the Employee in the first instance.
14. Equity-based Compensation Review
The Employee is being granted stock options and shares of restricted stock units
under the Company's equity compensation plans as of the Effective Date. If
during the Employment Term, the Company's common stock shall be delisted from
the Nasdaq National Market, then within 90 days after the delisting, the Board
or the Compensation Committee of the Board will review the Employee's
equity-based compensation and determine to what extent the Employee's
equity-based compensation has been adversely affected and, therefore, whether
any further equity-based compensation is required to make the Employee whole.
15. Governing Law
This Agreement is governed by Pennsylvania law.
16. Entire Agreement; Amendments
This Agreement, the Confidential Information, Invention and Non-Competition
Agreement and the option and restricted stock units grant letter dated the
Effective Date, set forth the entire understanding among the parties hereto, and
shall supercede all prior employment, severance and change of control agreements
and any related agreements that the Employee has with the Company or any
subsidiary, or any predecessor company.
This Agreement may not be modified or amended in any way except by a written
amendment executed by the Employee and the Company.
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17. No Assignment
All of the terms and provisions of this Agreement shall be binding upon and
inure to the benefit and be enforceable by the respective heirs,
representatives, successors (including any successor as a result of a merger or
similar reorganization) and assigns of the parties hereto, except that the
duties and responsibilities of the Employee hereunder are of a personal nature
and shall not be assignable in whole or in part by the Employee.
18. Arbitration
The Company and the Employee mutually consent to the resolution by arbitration,
in accordance with the National Rules for the Resolution of Employment Disputes
of the American Arbitration Association, to be held in Philadelphia,
Pennsylvania, of all claims or controversies arising out of this Agreement other
than a claim which is primarily for an injunction or other equitable relief. The
Company shall pay the fees and costs of the arbitrator and all other costs of a
party in connection with any arbitration, including legal fee and expenses,
shall be borne by the party incurring the cost(s) except as otherwise provided
by the arbitrator or, if the Employee prevails on any material issue, as
determined by the arbitrator, then the Company shall pay the Employee's
reasonable counsel fees and related expenses. Any such arbitration proceedings
must be instituted by the party requesting a resolution within twelve months of
the time that party knew, or should have known, of the events or facts giving
rise to the dispute requiring resolution. The failure to institute arbitration
proceedings within such period shall constitute an absolute bar to the
institution of any proceedings and a waiver of all claims.
19. Indemnification
The Employee shall be entitled, during the Employment Term and thereafter, to
the broadest indemnification rights and insurance coverages, for service to the
Company as an officer and director of the Company, that are permitted under
applicable law and the bylaws of the Company.
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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have hereunto duly executed this Employment Agreement as of the day and year
first written above.
VERTICALNET, INC:
By: _______________________________
Name: Xxxxx X. XxXxxxxx, Xx.
Title: Executive Vice President
EMPLOYEE:
_______________________________
Name: Xxxxx XxXxx
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