EXHIBIT 99.5
[STARMEDIA, INC. LETTERHEAD]
October 31, 2001
Xx. Xxxxxx X. Xxxxxx
000X Xxxxx Xxxxxx, #0
Xxx Xxxx, Xxx Xxxx 00000
Re: SEPARATION AGREEMENT INCLUDING A GENERAL RELEASE
Dear Xxxxx:
This letter (the "Agreement") sets forth the terms of our agreement with
respect to your separation from employment with StarMedia Network, Inc. and its
subsidiaries (collectively and with their respective successors, "StarMedia"),
and the end of your tenure as Chief Financial Officer of StarMedia ("CFO"). This
Agreement will become effective as of the date that you sign and return this
letter in accordance with its terms (the "Effective Date"). I have enclosed a
counterpart original of this letter, signed by me, for your files.
1. (a) Your final date of employment with StarMedia will be November
15, 2001 (the "Separation Date"), at which time you will be deemed to have
resigned from all offices and positions, of any kind, that you then hold at
StarMedia. You will cease to be the CFO, and an officer, of StarMedia on the
earlier of (x) November 15, 2001 and (y) twenty-four hours prior to public
disclosure by StarMedia of its results for the third quarter of 2001. Until the
Separation Date, you will perform such services for StarMedia as the Chief
Executive Officer ("CEO") may from time to time reasonably request. As of the
Separation Date and except to the extent otherwise provided in this Agreement,
all of StarMedia's and your obligations under the Employment Agreement dated as
of December 28, 2000, between you and StarMedia, (the "Employment Agreement")
will expire and become null and void. Without limiting the generality of the
foregoing, all compensation, including bonuses, and all other benefits and
perquisites of employment with StarMedia, will (as of the Separation Date and
except to the extent otherwise provided in this Agreement) cease, and all stock
option agreements, stock option grants and other rights heretofore granted to
you to purchase or otherwise obtain equity securities of StarMedia will (as of
the Separation Date) terminate and be of no further force and effect. For
avoidance of doubt, you and StarMedia expressly confirm that the line of credit
provided pursuant to the Employment Agreement and the related letter agreement,
dated December 28, 2000, between you and StarMedia (the "Line of Credit"), will
also terminate as of the Separation Date and that any liability arising out of
or relating to such Line of Credit
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(including without limitation any liability from you to StarMedia or from
StarMedia to you) will (as of the Separation Date and except to the extent
otherwise provided in this Agreement) be extinguished.
(b) In consideration of StarMedia's complete discharge of all
amounts owed under the Line of Credit, and in exchange therefor, and full
satisfaction thereof, you further agree to deliver to StarMedia on or before the
Separation Date one or more certificates, together with one or more stock powers
duly endorsed for transfer to StarMedia, in the form enclosed with this letter,
representing 326,000 shares of common stock of StarMedia, (collectively, the
"Shares"), and to relinquish (as of the Separation Date) any and all ownership
rights you may have in said Shares, which Shares (x) represent all the shares of
capital stock of StarMedia, other than approximately 5,500 shares acquired under
StarMedia's Employee Stock Purchase Plan, owned by you (or by trusts for your
benefit) as of the date of this letter, (including, but not limited to, any
additional shares, securities or equity interests obtained by virtue of stock
dividends or "splits" on those shares), such Shares to be transferred to
StarMedia free and clear of all contractual liens, charges, pledges,
encumbrances, restrictions on rights to sell or vote, security interests or
other adverse contractual claims of any kind, other than pledges, liens and
repurchase rights in favor of StarMedia (collectively, "Liens"). StarMedia
acknowledges and agrees (i) that the Shares are the shares referred to as
collateral in the Line of Credit and (ii) all outstanding indebtedness
(inclusive of interest) owed under the Line of Credit shall be fully discharged
upon your delivery of the Shares pursuant to this Section 1(b).
(c) If you return to StarMedia (x) a fully executed original of this
Agreement on or before October 31, 2001 and (y) the certificate(s) and stock
power(s) described in Section 1(b) on or before the Separation Date, you will be
entitled to the following:
(i) On the Separation Date, StarMedia will pay you all unpaid
salary through the Separation Date and all reasonable unpaid
expenses incurred by you prior to the Separation Date in
connection with services for StarMedia for which you have
provided appropriate documentation to StarMedia prior to the
Separation Date.
(ii) On the Separation Date, StarMedia will, in addition, make
a one-time payment to you in the amount of Three Hundred Fifty
Thousand Dollars ($350,000.00), less applicable tax
withholdings as provided in Section 14(c) below. This payment
will, at your election, be made by wire transfer pursuant to
wire transfer instructions previously delivered by you to
StarMedia or by delivering to you a check (or checks) for the
amounts required, backed by sufficient funds.
(d) Delivery of the Shares, stock powers and payments referred to in
Sections 1(b) and 1(c) will be confirmed at a closing to be held at 12:00 noon
on the Separation Date at
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the Company's principal office in New York City or at such other time and place
as you and the CEO may mutually agree. StarMedia will, at the appropriate time,
issue you an IRS Form 1099B reporting the gain (or loss) you recognize in
connection with the transfer of the Shares to StarMedia pursuant to Section
1(b).
(e) In the event that either you or StarMedia materially breaches
any material obligation under Section 1(b) or 1(c), this Agreement will, at the
election of the non-breaching party, become null and void, and the Separation
Date (and the termination of your employment) will be deemed not to have
occurred.
2. You and StarMedia agree to the following General Release, and
related provisions, all to become effective as of the Separation Date:
(a) In return for the payments and other benefits described above as
well as the mutual promises contained herein, you completely release StarMedia
from all claims of any kind, known and unknown, which you may now have or have
ever had against StarMedia, including claims for compensation, bonuses,
severance pay, stock options, tax indemnity and all claims arising from your
employment with StarMedia, whether based on contract, tort, statute, federal or
state law, local or municipal ordinance, regulation or any comparable law in any
jurisdiction ("Released Claims"). By way of example and not in limitation, the
Released Claims shall include any claims arising under Title VII of the Civil
Rights Act of 1964, as amended, the Americans with Disabilities Act, and the New
York Human Rights Law, as well as any claims asserting wrongful termination,
breach of contract, negligent or intentional infliction of emotional distress,
negligent or intentional misrepresentation, negligent or intentional
interference with contract, and defamation. The Released Claims shall not,
however, include any claim that (i) is based upon willful indefensible
misconduct or willful indefensible inaction, (ii) arises under, or is preserved
by, this Agreement or (iii) is based on facts or events occurring after the
Separation Date.
(b) You represent that you have not filed or authorized to be filed
on your behalf any claims, administrative proceedings or lawsuits against
StarMedia, and you agree that you will not do so at any time in the future with
respect to the subject matter of any Released Claim. Prior to December 31, 2001,
you agree that you will not participate in or commence any election contest as
defined in Rule 14-11 of Regulation 14A of the Securities and Exchange Act of
1934. If you violate this Section 2(b) by instituting a claim, proceeding or
lawsuit, you will pay all costs and expenses incurred by StarMedia in defending
against such claim, proceeding or lawsuit, including its reasonable attorneys'
fees, disbursements and costs.
(c) StarMedia completely releases you from any and all claims,
causes of action, suits, proceedings, debts, accounts, accountings, demands,
liabilities, acts, omissions, and all other controversies of every type, kind,
nature, description and character whatsoever, at law or in equity (collectively,
"Claims"). The released Claims shall not, however, include any Claim to
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the extent that such Claim (i) is based upon willful indefensible misconduct or
willful indefensible inaction, (ii) arises under, or is preserved by, this
Agreement or (iii) is based on facts or events occurring after the Separation
Date.
(d) StarMedia represents that it has not filed or authorized to be
filed on its behalf any claims, administrative proceedings or lawsuits against
you, and StarMedia agrees that it will not do so at any time in the future with
respect to the subject matter of any Claim released under Section 2(c). If
StarMedia violates this Section 2(d) by instituting a claim, proceeding or
lawsuit, StarMedia will pay all costs and expenses incurred by you in defending
against such claim, proceeding or lawsuit, including your reasonable attorneys'
fees, disbursements and costs.
3. You understand and agree that you are not entitled to any severance,
debt discharge, or tax indemnity from StarMedia other than as provided in this
Agreement.
4. You hereby represent and warrant to StarMedia that:
(a) As of the Separation Date, you will be the beneficial owner of
the Shares; will, with the cooperation of StarMedia and its transfer agent as to
the proposed transfer of the Shares from your indirect to your direct ownership,
be the record owner of the Shares; and will own the Shares free and clear of any
Liens.
(b) You have the full legal capacity and unrestricted power to
execute and deliver this Agreement, and to perform, your obligations hereunder.
Your execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not violate any provision of law, any
order of any court or other agency of government, or any provision of any
indenture, agreement or other instrument to which you are a party or by which
you are bound.
(c) There is, to the best of your knowledge and belief, no action,
suit, investigation or proceeding pending against or affecting you before any
court or arbitrator or any governmental body which in any manner relates to your
ownership of the Shares.
(d) This Agreement has been duly executed and delivered by you and
constitutes your legal, valid and binding obligation, enforceable in accordance
with its terms, except as enforceability may be limited by bankruptcy,
reorganization, insolvency and similar laws, by moratorium laws from time to
time in effect and by general equity principles.
(e) StarMedia represents and warrants that: it is fully authorized
by action of any person or body whose action is required to enter into this
Agreement and to perform its obligations under it; the execution, delivery and
performance of this Agreement by it does not violate any applicable law,
regulation, order, judgment or decree or any agreement, plan or corporate
governance document to which it is a party or by which it is bound; and upon the
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execution and delivery of this Agreement by you, this Agreement will be a valid
and binding obligation of StarMedia, enforceable against it in accordance with
its terms, except to the extent that enforceability may be limited by applicable
bankruptcy, insolvency or similar laws affecting the enforcement of creditors'
rights generally.
5. You will retain any rights you may have under the terms of the
applicable StarMedia 401(k) plan and the StarMedia Employee Stock Purchase Plan.
In addition, (a) your statutory COBRA rights will commence as of the Separation
Date and (b) you will remain entitled to reimbursement for any business expense,
reasonably incurred by your prior to the Separation Date in connection with your
services for StarMedia, for which you have not yet been reimbursed pursuant to
Section 1(c)(i) or otherwise, with reimbursement due promptly following your
submission of appropriate documentation.
6. (a) You and StarMedia agree to characterize your separation
from employment with StarMedia as a resignation in order for you to pursue
other interests.
(b) You will not intentionally make any public statement to third
parties, the public, the press, the media, or any administrative agency that
disparages, or is likely to cause injury to, StarMedia. Likewise, StarMedia will
instruct its directors and officers, senior executives, investor relations
personnel and public relations personnel not to make any public statement to
third parties, the public, the press, the media, or any administrative agency
that disparages, or is likely to cause injury to, you.
(c) Notwithstanding the foregoing, nothing in this Section 6 will
prevent any person from making truthful public statements (i) in response to
incorrect, disparaging or derogatory public statements or (ii) to the extent (x)
necessary to enforce this Agreement or (y) required by law or by any court,
arbitrator, administrative or legislative body (including without limitation any
committee thereof), or other person or entity with apparent jurisdiction to
order such person to disclose information.
(d) You will be entitled to review and approve any internal
announcement, and any press release or other public statement, made or issued by
StarMedia in connection with the execution of this Agreement or the termination
of your employment with StarMedia (which approval may not be unreasonably
delayed or withheld).
7. On or before the Separation Date, you will return to StarMedia all
StarMedia property (including without limitation keys to all offices and
facilities, employee handbooks, business cards, client files, corporate credit
cards, telephone calling cards, files, sales material, Blackberry, etc. as well
as any and all reproductions thereof) that is in your possession.
Notwithstanding the foregoing, you shall be entitled to retain, and StarMedia
hereby transfers to you as of the Separation Date any ownership interest it may
have in, your StarMedia laptop computer and your StarMedia cell phone; provided,
however, that you agree that you will not
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delete or destroy any computer files, e-mail or documents of any kind whatsoever
prior to the Separation Date that relate to StarMedia in any way or that are
saved or cached in any way on such laptop or in StarMedia's computer equipment
or network, and that StarMedia shall be entitled to make a copy of the hard
drive of the laptop on or prior to the Separation Date. Nothing in this Section
7 will prevent your retaining papers and other materials of a personal nature,
including without limitation personal diaries, calendars and Rolodexes,
documents relating to your compensation, benefits, expenses, and the like, and
information reasonably believed by you to be required in connection with
obtaining tax or financial advice or preparing and filing your personal tax
returns.
8. (a) You agree that you will, upon a reasonable request made by the
CEO or by the Board of Directors of StarMedia (the "Board") or any committee
thereof, cooperate with StarMedia and its counsel (internal and external) in
connection with (x) any matter with which you were involved while employed with
StarMedia or of which you have knowledge as a result of your employment with
StarMedia and (y) any administrative proceeding or litigation relating to any
such matter, by providing information, answering questions, or appearing as a
witness.
(b) You further agree that, during a period of six months commencing
on the Effective Date, you will, upon a reasonable request made by the CEO or
the Board or any committee thereof, (x) cooperate with StarMedia in all matters
relating to the smooth transition of your duties to other or new StarMedia
employees and (y) will promptly cooperate with all reasonable requests for
information and assistance by StarMedia relating to any matter with which you
were involved while employed with StarMedia or of which you have knowledge as a
result of your employment with StarMedia.
(c) You agree to provide the cooperation referred to in Sections
8(a) and 8(b) at such times and places as the CEO or the Board or any committee
thereof may reasonably request consistent with your other obligations, including
without limitation the requirements of any new employment you undertake.
StarMedia will promptly reimburse you for, or promptly advance to you, any and
all properly documented costs and expenses reasonably incurred by you in
connection with any cooperation referred to in this Section 8, (except to the
the extent otherwise provided in Section 9), excluding the fees and
disbursements and other charges of any attorney you may choose to retain. Such
reimbursable costs and expenses will be reimbursed or advanced promptly after
your submission to StarMedia of statements in such detail as StarMedia may
reasonably require. You will not be required to render more than seventy (70)
hours of cooperation pursuant to Section 8(b) after the Separation Date.
9. (a) If you are made a party to, or are threatened to be made a party
to, any action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that you are or were a director, officer or
employee of StarMedia or are or were serving on behalf of, or at the request of,
StarMedia as director, officer, member, employee or agent of
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another corporation, partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans (an "Indemnified
Proceeding"), you will promptly be indemnified by StarMedia to the fullest
extent permitted or authorized by its Certificate of Incorporation or Bylaws, as
in effect on the Effective Date, or, if greater, by the laws of the State of
Delaware, against any and all costs, expenses, liabilities and losses
(including, without limitation, judgments, fines, reasonable attorney's fees,
XXXXX excise taxes or penalties and amounts paid or to be paid in settlement)
incurred or suffered by you in connection therewith, and such indemnification
will continue even though you have ceased to be a director, officer, member,
employee or agent of StarMedia or any other entity and will inure to the benefit
of your heirs, executors and administrators. StarMedia shall not be required to
pay any amounts to you under this Section 9(a) in connection with the settlement
of any claim unless StarMedia shall have consented in writing to the terms of
such settlement, which consent shall not be unreasonably withheld or delayed.
StarMedia will advance to you all reasonable costs and expenses incurred by you
in connection with an Indemnified Proceeding within 30 days after receipt by it
of a written request for such advance. Each such request shall include an
itemized list that sets forth in reasonable detail such costs and expenses. In
addition, as a condition to receiving an advance, each such request shall
include an unconditional, full-recourse undertaking in a form reasonably
satisfactory to StarMedia to repay the amount of such advance if it is
ultimately determined that you are not entitled to be indemnified against such
costs and expenses. Nothing in this Agreement, other than Section 9(b), shall
operate to limit or restrict any rights to indemnification, advancement of
expenses or contribution that you may have under StarMedia's Certificate of
Incorporation or Bylaws, as in effect on the Effective Date, or under applicable
law. You agree that StarMedia shall not be liable under this Section 9(a) for
the fees and expenses of more than one separate counsel at a time for you in any
one action, suit or proceeding, or in substantially similar actions, suits or
proceedings arising out of the same or related allegations, unless you furnish a
written opinion to StarMedia from respected counsel concluding that retention by
you of more than one separate counsel is necessary under the circumstances.
(b) If you are requested by StarMedia (x) to serve as a witness in
connection with any action, suit or proceeding, whether civil, criminal,
administrative or investigative, (including, without limitation, any internal
investigation at StarMedia), or (y) to render cooperation at the request of
StarMedia pursuant to Section 8(a) or otherwise, and if the provisions of
Section 9(a) do not otherwise apply, such action, suit, proceeding or requested
cooperation, shall be deemed to be an Indemnified Proceeding as to which you
will be entitled to the indemnification, and advancement of expenses, set forth
in Section 9(a) (subject to the terms specified therein), except that
StarMedia's indemnification obligation to you under this Section 9(b) with
respect to attorneys' fees and other charges of counsel will be limited to 75%
of the fees and other charges you reasonably incur. For clarity's sake,
StarMedia shall have no indemnification obligation under this Section 9(b) with
respect to any attorneys' fees or other charges of counsel which were
unreasonably incurred by you.
Page 8
(c) StarMedia agrees to continue and maintain a directors' and
officers' liability insurance policy (or policies) covering you at a level, and
on terms and conditions, no less favorable to you than the coverage then
provided to StarMedia's present or former directors and/or senior-level officers
generally until the later of (x) the sixth anniversary of the Effective Date and
(y) such time as StarMedia reasonably determines upon advice of counsel that
there is no longer any material risk of a claim being made against you that
would be covered by the policy (or policies) in question. You represent that you
have received all of the written information that you have requested from
StarMedia with respect to the insurance policies maintained by StarMedia
covering the liabilities of its officers and directors, and StarMedia represents
to you that all such written information is, to the best of StarMedia's
knowledge, accurate as of the date that it was provided to you.
10. (a) You agree to the following restrictive covenants:
(i) You will not, directly or indirectly and during a period
of one year commencing on the Separation Date (the "One Year
Period"), solicit, entice or encourage any individual who is
then an employee of StarMedia to leave StarMedia or to seek
other employment. In the event that you willfully hire,
directly or indirectly, any such person during the One Year
Period, you will pay to StarMedia $25,000, which amount
represents the cost of replacing such person.
(ii) You will not during the One Year Period solicit or take
away for the benefit of any direct competitor of StarMedia,
any person or entity that is known by you to have been, as of
the Separation Date, a material customer of StarMedia or to
have been, as of the Separation Date, in negotiations to
become a material customer of StarMedia.
(iii) You will not at any time improperly use, or improperly
disclose, any confidential or proprietary information of
StarMedia.
(b) If any of the restrictions contained in Section 10(a) are deemed
by a court or arbitrator to be unenforceable by reason of the extent, duration
or geographical scope thereof, or otherwise, then the parties agree that such
court or arbitrator may (x) modify such restriction to the extent necessary to
render it enforceable and (y) enforce such restriction in its modified form.
11. Any and all inventions, creations, ideas, improvements and software
of any nature whatsoever, whether or not patentable, developed by you prior to
the Separation Date in the course of your employment with StarMedia will always
be the property of StarMedia.
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12. This Agreement will be governed, construed and enforced in accordance
with its express terms, and otherwise in accordance with the laws of the State
of New York, without regard for its conflict of laws principles.
13. You and StarMedia agree that any controversy or claim arising out of
or relating to this Agreement, its breach, your employment with StarMedia, or
the termination thereof, will be submitted to be resolved by confidential
arbitration. You and StarMedia each waive any and all rights to trial by jury in
regard to such claims. Judgment may be entered on the arbitrator's award in any
court having jurisdiction thereof. Arbitration under this Agreement will be the
exclusive remedy. You and StarMedia agree that any arbitration will be held in
New York, New York, and will be conducted in accordance with the then-current
Commercial Arbitration Rules of the American Arbitration Association, before a
single arbitrator licensed to practice law in the State of New York. The
arbitrator will have authority to award or grant both legal, equitable, and
declaratory relief. Any arbitration award will be final and binding on the
parties to it. The Federal Arbitration Act will govern the interpretation and
enforcement of this Section 13.
14. MISCELLANEOUS.
(a) You and StarMedia also agree that this Agreement contains all of
the agreements and understandings between you and StarMedia concerning the
subject matter of this Agreement, and fully supersedes any prior agreements or
understandings that we may have had with respect thereto.
(b) No provision in this Agreement may be amended unless such
amendment is set forth in a writing that expressly refers to this Agreement and
that is signed by you and by an authorized (or apparently authorized)
representative of StarMedia. No waiver by any person of any breach of any
condition or provision contained in this Agreement will be deemed a waiver of
any similar or dissimilar condition or provision at the same or any prior or
subsequent time. To be effective, any waiver must be set forth in a writing
signed by the waiving person and must specifically refer to the condition(s) or
provision(s) of this Agreement being waived. In the event of any inconsistency
between this Agreement and the terms of any plan, program, arrangement or
agreement or other document of you or StarMedia, the terms of this Agreement
will govern and control.
(c) StarMedia shall be entitled to withhold from any amounts or
benefits payable under this Agreement or otherwise taxes that are required to be
withheld by applicable law, such withholding to be at the minimum statutory
rate(s) permitted by law. StarMedia acknowledges and agrees that no tax
withholding is required in connection with the discharge of your obligations
under the Line of Credit pursuant to Section 1(b) above.
(d) You will be under no obligation to seek other employment, or to
become self-employed, following the expiration of your employment with
StarMedia, and there will be
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no offset against amounts due you, under this Agreement or otherwise, on account
of any remuneration you may subsequently receive, or on account of any claim
that StarMedia may have against you (other than as expressly provided in this
Agreement).
(e) In the event of your death or a judicial determination of your
incompetence, references in this Agreement to you will be deemed, where
appropriate, to refer to your beneficiary, estate or other legal representative.
(f) Neither StarMedia nor any of its affiliates (each a "Company
Transferor") may assign or transfer any of its rights or obligations under this
Agreement except that such rights or obligations may be assigned or transferred
pursuant to a merger, consolidation or other combination in which the Company
Transferor is not the continuing entity, or a sale or liquidation of all or
substantially all of the business and assets of the Company Transferor, provided
that the assignee or transferee is the successor to all or substantially all of
the business and assets of the Company Transferor and such assignee or
transferee assumes the liabilities, obligations and duties of the Company
Transferor under this agreement, either expressly or by operation of law.
Page 11
(g) You acknowledge you have been represented by counsel of your own
choosing, and that you have chosen to enter into this Agreement and based upon
your own judgment and not in reliance upon any promises made by StarMedia other
than those contained in this Agreement.
If this letter comports with your understanding of our agreement, please
sign on the line provided below and return the original by hand delivery.
Sincerely,
/s/ Xxxxx X. Xxxxx
-------------------------------
Xxxxx X. Xxxxx
Vice Chairman of the Board of Directors
I, Xxxxx X. Xxxxx, affirm that I have
authority to execute this Agreement on
behalf of StarMedia
/s/ Xxxxx X. Xxxxx
----------------------------------
ENCLOSURES
(1) signed counterpart of letter
(2) form of stock power
I have read and understand the agreement above and agree to be bound by
its terms and conditions.
/s/ Xxxxxx X. Xxxxxx Dated: 10/31/01
-------------------- --------
Xxxxxx X. Xxxxxx
STOCK POWER
FOR VALUE RECEIVED, XXXXXX X. XXXXXX, hereby sells, assigns and transfers
unto STARMEDIA NETWORK, INC. (THE "COMPANY") _______ shares of the Company's
common stock, standing in his name on the books of the Company represented by
Certificate No.___ herewith, and does hereby irrevocably constitute and appoint
American Stock Transfer & Trust Company attorney to transfer said shares on the
books of the Company with full power of substitution in the premises.
Dated:
----------------------------
Name: Xxxxxx X. Xxxxxx
