Employment Agreement - EarthWeb Inc. and Michael P. Durney
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 Michael P.
Durney ("Employee");
Whereas, the Company and Employee entered into that certain Employment Agreement
dated as of April 20, 2000 (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 target bonus for the
current calendar year (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
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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
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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
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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. MICHAEL P. DURNEY
Sign: /s/ Peter A. Derow Sign: /s/ Michael P. Duprey
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President & CEO