Exhibit 10.23
EXECUTION COPY
EMPLOYMENT
AGREEMENT
THIS EMPLOYMENT AGREEMENT
(“Agreement”), dated as of December 14, 2005, and
effective as of January 1, 2006 (the “Effective Date”),
is entered into by and between Douglas R. Lebda
(“Employee”), IAC/InterActiveCorp (the
“Company”) and LendingTree, LLC
(“LendingTree”) (solely for purposes of Sections 1A,
3A(c), and 7A of this Agreement and Section 3 of the Standard Terms
and Conditions.
WHEREAS, Employee is currently
serving as Chief Executive Officer and a member of the Board of
Directors of LendingTree;
WHEREAS, the Company wishes to
promote the Employee to the position of President and Chief
Operating Officer of the Company, and Employee is willing to commit
himself to continue to serve the Company and its subsidiaries and
affiliates, on the terms and conditions herein provided;
WHEREAS, Employee and LendingTree
are parties to an Employment Agreement (the “Prior
Agreement”), dated as of May 5, 2003, which generally became
effective as of the effective date (as that term is defined in the
Prior Agreement), which the parties intend will be superseded
hereby;
WHEREAS, in order to effect the
foregoing, the Company and Employee wish to enter into an
employment agreement on the terms and conditions set forth
below;
NOW, THEREFORE, in consideration of
the mutual agreements hereinafter set forth, Employee, the Company
and LendingTree have agreed and do hereby agree as
follows:
1A.
EMPLOYMENT . The Company agrees to employ Employee as
President and Chief Operating Officer of the Company as of the
Effective Date and Employee accepts and agrees to such employment.
Effective as of the Effective Date, Employee shall cease to be an
employee and officer of LendingTree; provided ,
however , that Employee shall remain in employment with
LendingTree for a specified transition period following the
Effective Date (the duration of which to be mutually determined by
Employee and the Company) if and to the extent necessary to comply
with regulatory requirements applicable to LendingTree. During
Employee’s employment with the Company, Employee shall
perform all services and acts necessary or advisable to fulfill the
duties and responsibilities as are commensurate and consistent with
Employee’s position and shall render such services on the
terms set forth herein. During Employee’s employment with the
Company, Employee shall report to the Chief Executive Officer of
the Company (hereinafter referred to as the “Reporting
Officer”). Employee shall have such powers and duties with
respect to the Company as may reasonably be assigned to Employee by
the Reporting Officer, to the extent consistent with
Employee’s position and status. Without limiting the
foregoing, Employee shall have the following reporting
relationships: (i) the senior
executive of each of the principal businesses of
the Company shall report to Employee, subject to any existing
contractual obligations to the contrary, and (ii) the
Company’s corporate executive principally responsible for
human resource affairs of the Company’s businesses shall
report to Employee, provided it is understood that with respect to
such affairs that are of substantial corporate significance (like
major compensation programs, structures and initiatives) or that
might otherwise require involvement of the Company’s Board of
Directors or committees thereof, such human resource executive
shall jointly report to another corporate executive, and that with
respect to human resource affairs relating to the Company’s
corporate executives, the human resource executive may report
singly to another corporate executive. Employee agrees to devote
all of Employee’s working time, attention and efforts to the
Company and to perform the duties of Employee’s position in
accordance with the Company’s policies as in effect from time
to time. Employee’s principal place of employment shall be
the Company’s offices in New York, New York.
2A.
TERM OF AGREEMENT . The term (“Term”) of this
Agreement shall commence on the Effective Date and shall continue
through December 31, 2008, unless sooner terminated in accordance
with the provisions of Section 1 of the Standard Terms and
Conditions attached hereto; provided that Employee and the
Company will enter into good faith negotiations to extend the Term
no later than six months prior to the end of the Term,
provided , further , that Employee has provided
written notice to the Company between eight and six months prior to
the end of the Term which sets forth his interest in entering into
such negotiations.
3A.
COMPENSATION .
(a)
BASE SALARY . During the Term, the Company shall pay
Employee an annual base salary of $750,000 (the “Base
Salary”), payable in equal biweekly installments or in such
other installments as may be in accordance with the Company’s
payroll practice as in effect from time to time. The Base Salary
shall be reviewed by the Company, if requested by Employee in
writing, no less frequently than annually in a manner consistent
with similarly situated executives of the Company and may be
increased but not decreased. For all purposes under this Agreement,
the term “Base Salary” shall refer to Base Salary as in
effect from time to time.
(b)
DISCRETIONARY BONUS . During the Term, Employee shall be
eligible to receive discretionary annual bonuses in a manner
consistent with similarly situated executives of the
Company.
(c)
EQUITY COMPENSATION .
(i)
LendingTree Restricted Share Grant . The Company
acknowledges that LendingTree has granted to Employee 42.5
restricted common units of LendingTree (the “Shares”),
subject to the terms and conditions of the Amended and Restated
Restricted Share Grant and Shareholders’ Agreement dated July
7, 2003 and as subsequently amended, attached hereto as Exhibit
A (the “Shares Agreement”) . Upon the Effective
Date, the Employee’s Shares will be treated as
follows:
(A) 25% of the Shares will be
exchanged on the Effective Date for 200,000 shares of common stock
of the Company (“Company Common Stock”), which will
vest
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in equal installments on December
31, 2006, December 31, 2007 and December 31, 2008 (each, a
“Vesting Date”), based on Employee’s continued
employment with the Company and its subsidiaries and subject to
performance conditions (the “First Performance
Conditions”) set by the Company’s compensation
committee (subject to full and immediate vesting in the event of a
termination of employment by the Company without Cause, or a
termination of employment by Employee for Good Reason, and subject
to pro rated vesting in the event of Death or Disability based on
the amount of continued service between the date hereof and the end
of the Term). If Employee remains in employment to a Vesting Date
but the shares of Company Common Stock that are otherwise scheduled
to vest on that date do not vest because of a failure to satisfy
the First Performance Conditions for that Vesting Date, those
shares of Company Common Stock shall not be forfeited but shall
instead remain unvested, subject to later vesting if and to the
extent waiver of the First Performance Conditions is required
pursuant to Section 3A(c)(i)(C)(3) below. Employee shall have the
same rights with respect to the Exchange Stock as other holders of
Company Common Stock; provided that any dividends that are
declared and payable with respect to the Exchange Shares before
such shares have become vested shall not be paid to Employee but
shall instead be converted into additional Exchange Shares (based
on the fair market value of Company Common Stock on the date on
which the dividend would otherwise have been paid) and shall be
transferred to Employee subject to the same vesting conditions as
are applicable to the Exchange Shares with respect to which such
dividends were payable. The exchange of such Shares for such shares
of Company Common Stock (such shares, the “Exchange
Stock”) is intended to constitute a
“reorganization” within the meaning of Section
368(a)(1)(B) of the Internal Revenue Code of 1986, as amended (the
“Code”) and this Agreement is intended to constitute a
“plan of reorganization” within the meaning of Section
354 of the Code. The Company agrees to comply with the
record-keeping and filing rules of Treasury Regulation section
1.368-3 (and any similar rules of any relevant state or local
taxing jurisdiction) with respect to such exchange. In addition,
the Company agrees that if such exchange shall, in whole or in
part, fail to qualify as a reorganization solely by reason of (i)
the treatment of such exchange by the Company (or its subsidiaries
or affiliates), in whole or in part, as other than a reorganization
in Tax returns filed with the Internal Revenue Service or (ii) the
failure by the Company (or its subsidiaries or affiliates) to
comply with U.S. federal filing or reporting requirements to obtain
reorganization treatment for such exchange, the Company will
indemnify and hold harmless the Employee, on an after-tax basis,
against all U.S. federal, state and local income taxes to which
Employee may be subject, with respect to those shares of Company
Common Stock so exchanged but not so qualifying, in consequence of
such failure. It is agreed and understood that if the IRS alleges
that the transaction is taxable by virtue of any reason other than
(i) or (ii) in the preceding sentence, the Company shall not be
obligated to contest such determination and shall be entitled to
file an amended return or otherwise settle the issue with the IRS
and shall have no indemnity obligation hereunder. Additionally, at
the time of any disposition of the Exchange Stock by Employee
following an indemnification under this section, Employee will pay
to Company any realized tax savings resulting from the increased
basis associated with the alternative tax treatment giving rise to
the indemnification.
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(B) 40% of
the Shares, which have vested prior to the Effective Date, will
remain unchanged by this Agreement, and 10% of the Shares will vest
in equal installments on August 8, 2006, August 8, 2007 and
February 8, 2008, based on Employee’s continued employment
with the Company and its subsidiaries and will continue to be
subject to the terms of the Shares Agreement (including any
accelerated vesting provisions).
(C) 25% of
the Shares (the “Target Shares”) will vest in equal
installments on August 8, 2006, August 8, 2007 and February 8,
2008, based on Employee’s continued employment with the
Company and its subsidiaries (subject to full and immediate vesting
in the event of a termination of employment by the Company without
Cause, or a termination of employment by Employee for Good Reason,
and subject to pro rated vesting in the event of Death or
Disability based on the amount of continued service between the
date hereof and February 8, 2008). Additionally, the following
terms shall apply to the Target Shares:
(1) If
Employee remains employed by the Company past December 31, 2007,
the value of his vested Target Shares will be appraised as of
December 31, 2008 (the “Valuation Date”) pursuant to
the procedures set forth in Sections 4.2(a)(ii) and (a)(iv) of the
Shares Agreement. In the event Employee’s employment
terminates prior to the Fifth Anniversary Fiscal Year (as defined
in the Shares Agreement), the Valuation Date for the Target Shares
shall be the December 31st of the fiscal year of LendingTree in
which such termination of employment occurs; provided, that if
such termination of employment occurs on or after June 30th in any
given fiscal year, the Valuation Date shall be six months and one
day following such termination of employment, and the payment
described in (3) above shall occur on or about 90 days
following such Valuation Date. The valuation required by
this paragraph shall occur regardless of whether any put has been
exercised under the Shares Agreement, provided that if a put is
exercised under the Shares Agreement, then the appraisal for
purposes of the Target Shares shall be the appraisal associated
with the put under the Shares Agreement.
(2)
Employee acknowledges that by virtue of his position in the
Company, he may come into possession of information relating to the
value of LendingTree that is not publicly available or otherwise
available to employees of LendingTree, including, without
limitation, opinions of other members of Company management,
valuations of LendingTree undertaken for internal corporate
purposes and valuations of other companies for internal corporate
purposes. Employee recognizes that some of this information could
be prejudicial to the Company in the valuation/appraisal process
contemplated by this Agreement and the Shares Agreement, and hereby
agrees that he will not share, directly or indirectly, any such
information with the appraiser or any employees of LendingTree
other than, with respect to employees of LendingTree, as is
necessary in connection with the discharge of his duties to the
Company.
(3) If
Eighty Percent (80%) of the Vested Value (as defined below) is less
than the Company Share Amount (as defined below), then Employee
shall exchange
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his vested Target
Shares for a number of shares of Company Common Stock equal to the
Company Share Number (as defined below), and the First Performance
Conditions, to the extent unfulfilled, shall be waived. This
exchange shall occur on May 15, 2009 (or on such later date as the
Vested Value shall definitively be determined), unless
Employee’s employment terminated prior to January 1, 2008, in
which case it shall occur promptly following the definitive
determination of the value of the Target Shares.
The “Vested Value” shall
mean the value of the vested Target Shares as determined pursuant
to Section 3A(c)(i)(C)(1) above.
The
“Company Share Amount” shall mean the Company Share
Number (as defined below) multiplied by the trailing thirty day
average closing price of the Company Common Stock as of the date on
which the value of the Target Shares was definitively
determined.
The
“Company Share Number” shall mean, (i) 0, if
Employee’s employment terminates prior to December 31, 2006,
(ii) 100,000, plus up to an additional 166,667 to the extent that
certain performance conditions established by the Compensation
Committee of the Company (the “Second Performance
Conditions”) are satisfied, if Employee’s employment
terminates between December 30, 2006 and December 31, 2007, (iii)
200,000, plus up to an additional 333,334 to the extent that the
Second Performance Conditions are satisfied, if Employee’s
employment terminates between December 30, 2007 and December 31,
2008, (iv) 300,000, plus up to an additional 500,000 to the extent
that the Second Performance Conditions are satisfied, if
Employee’s employment terminates on or after December 31,
2008, Employee’s employment does not terminate prior to the
date on which the Company Share Number is determined, or
Employee’s employment terminates at any time under
circumstances that gave rise to acceleration of the Target Shares,
and (v) if Employee’s employment terminates for Death or
Disability, the same number as under (iv) directly above (300,000,
plus up to an additional 500,000 to the extent that the Second
Performance Conditions are satisfied), multiplied by a fraction,
the numerator of which is the number of days of continued
employment with the Company following the date hereof and the
denominator of which is the total number of days in the
Term.
(4) If the Vested Value is
greater than the Company Share Amount, then the vested Target
Shares shall be subject to the put/call provisions of the Shares
Agreement.
(5) The Target Shares
will no longer be subject to the “Come Along” and
“Take Along” provisions of Sections 4.3 and 4.4 of the
Shares Agreement.
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(6) In the event of a
“Transfer Event” (as defined in Section 4.3 of the
Shares Agreement) which results in a sale of 100% of the common
units of LendingTree, the Target Shares shall be purchased by the
Company immediately prior to the Transfer Event at a price
equivalent to the sales price of common units of LendingTree in the
Transfer Event, with the purchase price paid in the form of an
unsecured promissory note of the Company, maturing on December 31,
2008, bearing interest at the applicable federal rate specified in
Section 7872(f)(2) of the Code and providing for a gross-up on a
net after-tax basis (taking into account any deduction allowable
for any amount treated as interest under Section 453A(c)(5) of the
Code) solely for any amounts payable by Employee pursuant to
Section 453A(c) Code with respect to such note (assuming for this
purpose that Employee holds no installment obligations other than
such note). In such event, Section 3A(c)(i)(C)(3) shall be applied
as of December 31, 2008 (or as of such earlier date if
Employee’s employment is terminated) with the then face value
of such note (and any accrued interest) constituting the Vested
Value for such purposes.
(7) In the event of an event
which results in an adjustment of shares of Company Common Stock
subject to existing awards pursuant to the Company’s 2005
Stock and Annual Incentive Plan, the number of shares of Company
Common Stock deliverable to Employee under this Section 3A(c)(i)
shall be equitably adjusted.
(D) It is intended that if
Employee exchanges Target Shares for Company Common Stock pursuant
to section 3A(i)(c)(1)(C) hereof or returns Shares to the Company
and receives Company Common Stock pursuant to section
3A(i)(c)(1)(B) and the Shares Agreement, such exchange shall be
treated by the parties as a “reorganization” within the
meaning of Section 368(a)(1)(B) of the Code except to the extent,
if any, that independent tax advisors selected by the Company and
reasonably acceptable to Employee are unable to issue an opinion to
the effect that such treatment should more likely than not prevail.
For further clarification, if such independent tax advisors are
able to issue an opinion that reorganization treatment is more
likely than
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