Exhibit 10.6
First Amendment to Employment Agreement dated as of March 1, 2001
between Registrant and Xxxxxx Xxxxxxx
First Amendment to Employment Agreement
This First Amendment to Employment Agreement (the "First Amendment") dated as of
March 1, 2001 between EarthWeb Inc. (the "Company") and Xxxxxx Xxxxxxx
("Employee");
Whereas, the Company and Employee entered into that certain Employment Agreement
and Addendum to Employment Agreement dated as of December 3, 1999 (the
"Employment Agreement");
Whereas, the Company and Employee desire to amend the Employment Agreement to
provide for certain protections on behalf of the Employee in the event that a
Change of Control of the Company (as defined herein) occurs;
Now, Therefore, for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the Company and Employee hereby agree as
follows:
Amendment. The following provisions apply only (i) in the event of the
occurrence of a Change of Control of the Company and (ii) to the extent that the
net after-tax amount of severance payable pursuant to this First Amendment
exceeds the net after-tax amount of severance payable under the change of
control protections, if any, contained in the Employment Agreement.
Section 1
Severance. In lieu of any severance pay or severance benefits otherwise payable
to the Employee under any plan, policy, program or arrangement of the Company or
its subsidiaries, the following shall apply:
(a) If there is a Termination (as herein defined) of the Employee's
employment with the Company at any time within twelve (12) months after
the occurrence of a Change of Control (as herein defined), such
Employee shall be entitled to receive a lump-sum severance payment
equal to (i) one hundred percent (100%) of such employee's then current
salary plus (ii) the amount of such employee's most recently paid
regular bonus (excluding special bonuses) attributable to a full
calendar year's service to the Company (or, if higher, the amount of
the bonus attributable to a calendar year's service which was paid to
the Employee immediately prior to the Change of Control). All
outstanding Stock Options granted to the Employee which are not vested
and exercisable as of the date of Termination shall become vested and
exercisable as of such date and shall remain exercisable for the
periods prescribed in the Stock Option Plan. The Employee, such
Employee's spouse and eligible dependents will continue to be provided
with medical and dental benefits for the twelve (12)-month period
following such Employee's Termination on the same basis as provided to
active employees of the Company. Following such twelve (12)-month
period, the Employee, such Employee's spouse and eligible dependents
will begin eligibility for
continuation of medical and dental coverage in accordance with Section
4980B of the Internal Revenue Code of 1986, as amended (the "Code").
The Employee shall have no duty to mitigate damages by seeking other
employment. The Company shall have no right to offset hereunder with
respect to any compensation or benefits received by the Employee from
or in connection with any employment subsequent to such Employee's
Termination of employment with the Company.
(b) If the Employee voluntarily terminates employment with the Company for
any reason other than "Good Reason" (as herein defined) during the
twelve (12)-month period following a Change of Control as described in
Section 2(a) below, the Employee will not be entitled to any severance
payment or acceleration of the vesting of any unvested Stock Options.
Section 2
Definitions.
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(a) For purposes of this First Amendment only, a "Change of Control"
of the Company shall be deemed to have occurred if at any time on
or after the date of the Employment Agreement one or more of the
following events shall have occurred:
(i) the direct or indirect acquisition by any person or related
group of persons (other than an acquisition from or by the
Company or by a Company-sponsored employee benefit plan or
by a person that directly or indirectly controls, is
controlled by, or is under common control with, the
Company) of beneficial ownership (within the meaning of
Rule 13d-3 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) of securities possessing more
than fifty percent (50%) of the total combined voting power
of the Company's outstanding securities; or
(ii) any stockholder-approved transfer or other disposition of
all or substantially all of the Company's assets; or
(iii) the Company adopts any plan of liquidation providing for
the distribution of all or substantially all of its assets;
or
(iv) the consummation by the Company of a reorganization, merger
or consolidation or sale or other disposition of all or
substantially all of the assets of the Company or the
acquisition of assets or stock of another corporation (a
"Business Combination"), in each case, unless, following
such Business Combination, (a) all or substantially all of
the individuals and entities who were the beneficial
owners, respectively, of the outstanding common stock and
outstanding company voting securities immediately prior to
such Business Combination beneficially own, directly or
indirectly, more than 60% of, respectively, the then
outstanding shares of common stock and the combined voting
power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation
which as a result of such transaction owns the Company or
all or substantially all of the Company's assets either
directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the
outstanding Company common stock and outstanding Company
voting securities, as the case may be, (b) no person
(excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust)
of the Company or such corporation resulting from such
Business
Combination) beneficially owns, directly or indirectly, 20%
or more of, respectively, the then outstanding shares of
common stock of the corporation resulting from such
Business Combination or the combined voting power of the
then outstanding voting securities of such corporation
except to the extent that such ownership existed prior to
the Business Combination and (c) at least a majority of the
members of the board of directors of the corporation
resulting from such Business Combination were members of
the incumbent board at the time of the execution of the
initial agreement, or of the action of the board of
directors, providing for such Business Combination; or
(v) a change in the composition of the Board over a period of
thirty-six (36) months or less such that a majority of the
Board members (rounded up to the next whole number) ceases,
by reason of one or more contested elections for Board
membership, to be comprised of individuals who are
continuing directors.
(b) For purposes of this First Amendment only, "Cause" shall mean (i)
embezzlement by the Employee, (ii) misappropriation by the
Employee of funds of the Company, (iii) conviction of a felony,
(iv) commission of any other act of dishonesty which causes
material economic harm to the Company, (v) acts of fraud or deceit
by the Employee which causes material economic harm to the
Company, (vi) material breach of any provision of the Employment
Agreement by the Employee, (vii) willful failure by the Employee
to substantially perform such Employee's duties hereunder, (viii)
willful breach of fiduciary duty by the Employee to the Company
involving personal profit or (ix) significant violation of Company
policy of which the Employee is made aware (or such Employee
should reasonably be expected to be aware) or other contractual,
statutory or common law duties to the Company. No act, or failure
to act on the part of the Employee, shall be deemed willful unless
it is done, or omitted to be done, by the Employee in bad faith or
without reasonable belief that the Employee's action or omission
was in the best interests of the Company.
(c) For purposes of this First Amendment only, "Good Reason" shall
mean (i) a diminution in the responsibilities, title, duties and
reporting lines of the Employee compared to those existing
immediately prior to a Change of Control, (ii) a reduction in
salary, incentive compensation and other employee benefits of the
Employee compared to those existing immediately prior to the
Change of Control, (iii) relocation of the Employee to an office
more than 40 miles from the principal office at which the Employee
is employed immediately prior to the Change of Control, (iv) any
breach by the Company of the Employment Agreement or (v) the
failure of any successor to assume, in writing, all obligations
under the Employment Agreement (including this Amendment thereto).
(d) For purposes of this First Amendment only, "Termination" shall
mean termination of the Employee's employment without Cause or by
the Employee for Good Reason.
Section 3
Excise Tax. In the event that the Employee becomes entitled to the payments and
benefits provided in Section 1 (the "Severance Payments") of this Amendment, if
any of the Severance Payments will be subject to the excise tax (the "Excise
Tax") imposed under Section 4999 of the Code, the Company shall pay to the
Employee an additional amount (the "Gross-Up Payment")
such that the net amount retained by the Employee, after deduction of any Excise
Tax on the Severance Payments and any Federal, state and local income and
employment tax and Excise Tax upon the payments and benefits provided for by
Section 3 of this Amendment, shall be equal to the Severance Payments. For
purposes of determining whether any of the Severance Payments will be subject to
the Excise Tax and the amount of such Excise Tax, (i) any other payments or
benefits received or to be received by the Employee in connection with a change
in ownership or control (within the meaning of section 280G of the Code and the
regulations promulgated thereunder) of the Company or the Employee's termination
of employment by the Company without Cause or by the Employee for Good Reason
(whether pursuant to the terms of the Employment Agreement and this Amendment or
any other plan, arrangement or agreement with the Company, any person whose
actions result in a change of control or any person affiliated with the Company
or such person) shall be treated as "parachute payments" within the meaning of
section 280G(b)(2) of the Code, and all "excess parachute payment" within the
meaning of section 280G(b)(1) of the Code shall be treated as subject to the
Excise Tax, unless in the opinion of tax counsel selected by the Company's'
independent auditors and reasonably acceptable to the Employee such other
payments or benefits (in whole or in part) do not constitute parachute payments,
including by reason of Section 280G(b)(4)(A) of the Code, or such excess
parachute payments (in whole or in part) represent reasonable compensation for
services actually rendered, within the meaning of section 280G(b)(4)(B) of the
Code, in excess of the "base amount" allocable to such reasonable compensation,
or are otherwise not subject to the Excise Tax, (ii) the amount of the Severance
Payments which shall be treated as subject to the Excise Tax shall be equal to
the lesser of (A) the total amount of the Severance Payments or (B) the amount
of excess parachute payments within the meaning of section 280G(b)(1) of the
Code (after applying clause (i), above), and (iii) the value of any non-cash
benefits or any deferred payment or benefit shall be determined by the Company's
independent auditors in accordance with the principles of sections 280G(d)(3)
and (4) of the Code. For purposes of determining the amount of the Gross-Up
Payment, the Employee shall be deemed to pay Federal income taxes at the highest
marginal rate of Federal income taxation in the calendar year in which the
Gross-Up Payment is to be made and state and local income taxes at the highest
marginal rate of taxation in the state and locality of the Employee's residence
on the date of termination, net of the maximum reduction in Federal income taxes
which could be obtained from the deduction of such state and local taxes.
Section 4
All amounts payable hereunder shall be subject to and paid net of, all required
withholding taxes.
Section 5
Except as otherwise expressly amended by this First Amendment, the Employment
Agreement remains in full force and effect and the Employment Agreement as
amended herein shall comprise the terms of Employee's employment with the
Company.
AGREED TO BY:
EARTHWEB INC. XXXXXX XXXXXXX
Sign: /s/ Xxxxx X. Xxxxx Sign: /s/ Xxxxxx X. Xxxxxxx
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President & CEO
