1
EXHIBIT 10.5
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 Xxxxxx 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 President of IDG Books
reporting to the Chief Executive Officer of IDG Books. Executive shall
perform those duties and responsibilities inherent in such position,
including such duties and responsibilities as the Chief Executive
Officer 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. Executive shall serve IDG Books faithfully and
to the best of his ability in such capacity, 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, $235,000 per year base
salary, payable in installments in accordance with IDG Books'
normal payroll practices, less such 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
2
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 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 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
2
3
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:
(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
3
4
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:
(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 President reporting to the Chief Executive
Officer 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 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.
4
5
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
(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
5
6
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; Non Solicitation:
(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
