Exhibit 10.5
EMPLOYMENT AGREEMENT
(Xxxx X. Xxxxxx)
This EMPLOYMENT AGREEMENT, dated February 7, 2002 (this "AGREEMENT"), is
between VerticalNet, Inc., a Pennsylvania corporation (the "COMPANY"), and Xxxx
X. Xxxxxx (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 7, 2002 (the "EFFECTIVE DATE"). The
Employee shall be the Chief Financial Officer of the Company and shall perform
duties consistent with this position as are assigned by the Chief Executive
Officer or the Board of Directors of the Company (the "BOARD"). The Employee
shall report directly to the Chief Executive Officer and be an executive officer
of the Company.
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 Agreement renews automatically for a 2 year Renewal Term upon a
Change of Control, as defined in Section 12, beginning on the date of the Change
of Control. 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.
The parties agree that the Employee's pre-existing employment agreement with
Atlas Commerce dated July 1, 2001 (the "PRIOR AGREEMENT") shall be terminated
simultaneously with the Effective Date of this Agreement and shall in all
respects be superceded by this Agreement.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 $250,000 (the "INITIAL SALARY"). The Board
or the Compensation Committee shall review the Salary at least once a year. The
Salary shall never be less than the Initial Salary.
5. Bonus and Benefits
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 annual target bonus (the "TARGET BONUS") shall be equal to 40% of the
Salary for 2002, and thereafter shall be equal to 60% of the Salary. All bonus
programs, as well as the goals for achieving the Target Bonus, are at the
discretion of the Board or the Compensation Committee.
For 2002, in addition to any Target Bonus for 2002, the Employee shall be
entitled to a $150,000 guaranteed bonus (the "GUARANTEED 2002 BONUS PAYMENTS"),
that shall be paid to the Employee as follows: $75,000 on August 15, 2002, and
$75,000 on February 1, 2003(or on the date that 2002 bonus awards are paid to
other senior executives, if earlier than February 1, 2003); provided that the
Employee is employed by the Company on each such payment date, except as
provided below.
The Target Bonus will be 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 March 31, 2002 for 2002, and thereafter not later
than one month after the commencement of any fiscal year of the Company.
Benefits and perquisites under this agreement will, at a minimum, be consistent
with other Company Executive Vice Presidents. Vacation shall be in accordance
with Company policy, but not less than 4 weeks per year.
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,
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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.
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 that has accrued
through the date of termination, plus any unpaid portion of the Guaranteed 2002
Bonus Payments, and 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, evaluated
and paid in the case of individual MBOs for the Employee, no later than one
month after the date of termination, and in the case of MBOs applying generally
to senior officers, 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, (b) the Employee's outstanding options are
accelerated for an additional period of 6 months so that any of the Employee's
options that were scheduled to vest over the 6 month period after the Employee's
death shall accelerate and be vested on the date of death. By the terms of the
options, all vested options (included accelerated options) are exercisable for
one year from the date of 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 that has accrued through the date of termination,
(b) continued Salary for 3 months following the date the Employee is considered
totally disabled, (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 became
totally disabled, evaluated and paid in the case of individual MBOs for the
Employee, no later than one month after the date of termination, and in the case
of MBOs applying generally to senior officers, 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, (d) any unpaid portion
of the Guaranteed 2002 Bonus Payments, and (e) whatever benefits that he may be
entitled to receive under any then existing disability benefit plans of the
Company.
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.
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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 any unpaid
Salary that has accrued through the date of termination.
The term "CAUSE" means: (a) the Employee is convicted of a felony, or (b) in the
reasonable determination of the Board, 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 any unpaid Salary that has accrued through the termination date. 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.
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11. Termination without Cause by the Company
The Company may 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 notice period and set an earlier termination date.
(A) If the Employee is terminated without "cause" on or prior to February 7,
2004, then the Employment Term shall terminate and thereafter the Employee shall
be entitled only to the following under this Agreement:
(1) the Company will pay to the Employee a lump sum severance
payment in the amount equal to: (a) two times the Salary then in effect,
plus (b) two times the Target Bonus then in effect, minus (c) any
Guaranteed 2002 Bonus Payments that have previously been paid to the
Employee, plus (d) the unpaid portion, if any, of any earned Target Bonus
for the fiscal year prior to the fiscal year in which the termination of
employment occurs; and
(2) the Company will also pay to the Employee the pro rata portion
of any Target Bonus that the Employee would have earned for the fiscal
year of the Company in which the Employee was terminated, which shall be
paid within 90 days after the end of such fiscal year, or at the time that
bonuses are paid to senior executives for such fiscal year, if earlier
than 90 days after the fiscal year; and
(3) the Employee's group healthcare (medical, dental, vision and
prescription drug) coverage for himself, his spouse and his dependents
will be continued for 24 months after termination on the same basis and
cost to the Employee as then participating before termination, and
(4) unvested options granted to the Employee on the Effective Date
shall be accelerated in full, and
(5) all options granted on the Effective Date that are vested
(including accelerated vesting) at termination will remain exercisable by
their terms for 90 days after termination of employment, but not longer
than the total life of the options, and
(6) the Employee and the Company will enter into a mutual general
release.
(B) If the Employee is terminated without "cause" after February 7, 2004, then
the Employment Term shall terminate and thereafter the Employee shall be
entitled only to the following under this Agreement:
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(1) the Company will pay to the Employee a lump sum severance
payment (the "SEVERANCE PAYMENT") in the amount equal one year of the
Salary then in effect plus the Target Bonus for the year in which the
termination occurs, and
(2) the Employee's group healthcare (medical, dental, vision and
prescription drug) coverage will be continued for one and one-half years ,
to be paid in full by the Company, and
(3) the Employee's covenants against non-competition (as described
in Section 6 of this Agreement) shall be reduced to a 6 month period from
the termination date, from 12 month period contained in Section 6 of this
Agreement, and
(4) unvested options granted to the Employee on the Effective Date
shall be accelerated in full, and
(5) all options granted on the Effective Date that are vested
(including accelerated vesting) at termination will remain exercisable for
5 years after termination of employment, but not longer than the total
life of the options, and
(6) the Employee will not receive any accrued vacation or bonus
payments, and
(7) the Employee and the Company will enter into a mutual general
release.
12. Change of Control
During the 2 year period after a Change of Control, if the Company terminates
the Employee without cause, or 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:
(1) all the rights, benefits and obligations under Section 11 of
this Agreement for termination without "cause" by the Company shall apply,
and
(2) if the termination of employment is after February 7, 2004, in
addition to the Severance Payment, the Company will pay the Employee a
lump sum payment at the same time as the Severance Payment (the "CHANGE OF
CONTROL PAYMENT") equal to: (a) the Target Bonus for the year in which the
termination occurs, plus (b) one additional year of the Salary then in
effect.
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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 (4) 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 (which shall be Malvern,
Pennsylvania as of the Effective Date),
(b) if without the Employee's prior written consent or resignation,
the Company or the Board takes an action resulting in the Employee no
longer being the Chief Financial Officer of the Company,
(c) 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,
(d) any failure of the Company materially to comply with and satisfy
the terms of this Agreement, or
(e) the nonrenewal of this Agreement by the Company.
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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 in this Agreement, together with any other
payments or benefits that the 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. Governing Law
This Agreement is governed by Pennsylvania law.
15. Entire Agreement; Amendments
This Agreement, the Confidential Information, Invention and Non-Competition
Agreement and the option grant letter dated the Effective Date, set forth the
entire understanding among the parties hereto, and shall supercede all prior
employment,
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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.
16. 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.
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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: Xxxxxxx X. Xxxxx
Title: President and CEO
EMPLOYEE:
_____________________________
Name: Xxxx X. Xxxxxx
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