EXHIBIT 10.12
EMPLOYMENT AGREEMENT
AGREEMENT dated as of the 22nd day of October, 1998 between K2
DESIGN, INC., a Delaware corporation, with offices at 00 Xxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000 (the "Corporation"), and Xxxx Xxxxxx (the
"Executive");
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, it is agreed as follows:
1. Duties. The Corporation hereby employs the Executive in the
executive capacity as President and Chief Executive Officer. In
addition, upon the commencement of the Term (as defined below),
Executive shall be elected to the Corporation's Board of Directors, and
Executive agrees that the termination of her employment for any reason
shall be deemed to be her simultaneous resignation from the
Corporation's Board of Directors. The Executive shall report to the
Corporation's Board of Directors and to its Chairman, and shall
perform such reasonable executive, administrative and managerial
services consistent with her position, to the Corporation and each of
its subsidiaries as the Board of Directors of the Corporation (the
"Board") may from time to time prescribe. The Executive accepts such
employment and agrees to devote her full time and effort to the services
of the Corporation. Without Executive's prior written consent,
Executive's base of operations shall not be changed from New York City
(where Executive's duties shall be principally performed), although
Executive may be required to travel outside of the New York tri-state
area for reasonable periods of time to perform her duties.
2. Term. The term of this Agreement shall commence as of
November 16, 1998, and shall end on December 31, 2000, unless otherwise
extended by mutual agreement of the Executive and the Corporation.
3. Compensation and Benefits. (a) During the Term, the
Corporation shall pay to the Executive a base salary of $250,000 in
accordance with the Corporation's normal payroll policies. In addition,
should Executive provide services to the Corporation prior to the
commencement of the Term, the Corporation shall pay to the Executive the
ratable equivalent of her base salary for the days that she provides
such services.
(b) In addition, upon the commencement date of the term,
Executive and the Corporation shall enter into the Stock Option
Agreement attached hereto as Exhibit A, pursuant to which
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Executive shall be granted options to acquire 400,000 shares of the
Corporation's common stock, par value $.01 per share ("Common Stock") at
an exercise price equal to the closing ask price of the Common Stock on
such date; provided, however, that should the Corporation announce its
sale prior to such date, the exercise price of such options shall not
exceed $1.75 per share.
(c) In addition to the foregoing payments, Executive:
(i) may at her option participate in all fringe benefits,
bonus and any pension and/or profit sharing plans that may be provided
by the Corporation or any subsidiary for its key executive employees in
accordance with the provisions of any such programs or plans;
(ii) may at her option participate in any life or other similar
insurance plans, medical and health plans or other employee welfare
benefit plans that may be provided by the Corporation or any subsidiary
for its key executive employees in accordance with the provisions of any
such plans. The Corporation shall also use its reasonable efforts to
cause its health and its dental insurers to provide health and dental
insurance to Executive commencing on the first day of the Term through
the end of the Term. The Corporation shall bear the cost of all such
health and dental insurance premiums;
(iii) shall be entitled to four weeks paid vacation annually;
that without the consent of the Corporation's Chairman or its Board,
Executive shall not take more than two consecutive vacation weeks;
(iv) shall be entitled to sick leave and sick pay in accordance
with the policy of the Corporation or any subsidiary that may be applicable
to key executive employees;
(v) shall be entitled, for each of the years ending December 31,
1999 and 2000, to a formula bonus equal to 10% of the Corporation's
pre-tax profit; provided, however, that the bonus in either year shall not
exceed $75,000 unless the margin (i.e., pre-tax profit divided by net
revenues (excluding pass-throughs)) is at least 10%. The foregoing
notwithstanding, no bonus shall be payable unless the Corporation's
pre-tax profits for 1999 are at least $250,000 and for 2000 are at least
$500,000. This bonus shall be payable promptly after the completion of
the audit for the relevant period, and in no event more than 30 days
thereafter. For purposes of this Agreement, pre-tax profits shall be the
amount reflected as such in the Corporation's audited financial
statements for the relevant period.
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(vi) shall be entitled to reimbursement of all ordinary and
necessary business expenses against presentation of invoices or receipts
and otherwise in accordance with the Corporation's policies in effect
from time to time applicable to senior executives of the Corporation.
4. Conflict of Interest. The Executive agrees that during her
employment with the Corporation, the Executive will not, directly or
indirectly, engage in or have a substantial interest in any business
which at the time shall be in whole or substantial part competitive with
any substantial part of the business carried on by the Corporation now
or at the time until this Agreement shall be terminated, either for the
Executive's own benefit or for or with any person, firm or corporation
whatsoever other than the Corporation.
5. Confidentiality. The Executive agrees that the Executive will
not, at any time during or after the termination of employment with the
Corporation, reveal, divulge or make known to any person, firm,
corporation, or other business organization (other than the
Corporation), or use for its account, any information that relates to
the Corporation's existing or reasonably foreseeable business which is
not readily disclosed by inspection of the Corporation's products or
otherwise publicly available (other than as a result of Executive's
unauthorized disclosure), including, but not limited to, ideas,
inventions, discoveries, trade secrets, confidential information, good
will, improvements, information contained in or relating to the
Corporation's product designs, manufacturing processes and techniques,
marketing plans or proposals, sources and prices of inventory, equipment
and all other business related items, financial information, personnel
information and customer information (collectively, "Proprietary
Information"). Proprietary Information includes any such information,
whether or not obtained by the Executive with the knowledge and
permission of the Corporation, whether or not developed, devised or
otherwise created in whole or in part by the Executive's efforts, and
whether or not a matter of public knowledge unless as a result of
authorized disclosure, except as otherwise provided herein. The
Executive further agrees to retain such knowledge and information which
the Executive acquires and develops during the Executive's employment
respecting such Proprietary Information in trust for the sole benefit of
the Corporation and its successors and assigns.
6. Non-Competition. (a) The Executive agrees to not (i) at any
time during employment with the Corporation, and (ii) if Executive's
employment with the Corporation is terminated pursuant to Section 7(a)
or (b) or Executive terminates her employment hereunder other than (x)
for Good Reason or (y) as a result of an "Approved Transaction" (as
provided in the
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penultimate paragraph of Second 8), then for a one year period after
such termination (the "Prohibited Period"), directly or indirectly enter
into, participate in or engage in any business, or the solicitation of
any business, which is competitive with the business of the Corporation
within the territories in which the Corporation now or during the Term
conducts marketing or operational activities, whether as an individual
on the Executive's own account, as a partner or joint venturer, as the
owner of an interest in, or as a director or officer of, any entity, as
an executive, agent, salesman or consultant of any person or entity, or
otherwise. A business, including without limitation and by way of
example only, a direct marketing advertising agency or consultancy,
shall be deemed to not be competitive with the Corporation if it is not
primarily engaged in Internet advertising; and (b) the Executive further
agrees to not, at any time during or after the termination of the
Executive's employment with the Corporation (i) induce or attempt to
induce any employee of the Corporation to leave the Corporation's
employ, or (ii) interfere with the relationship of the Corporation with
any person or entity who or which at any time during his employment with
the Corporation was an employee or customer of, or in the habit of
dealing with the Corporation.
7. Termination for Cause, Death or Disability. The Corporation
shall have the right to immediately terminate this Agreemeent by written
notice to the Executive (which notice shall specify the effective date of
termination; the "Termination Date"), and this Agreement shall terminate
and the obligations and covenants of the Corporation and the Executive
hereunder (except those pursuant to Sections 5 and 6, which shall
survive termination of this Agreement, and except as otherwise provided
in this Agreement) shall be of no further force and effect upon the
Termination Date if any of the following occur: (a) the willful and,
after notice and an opportunity to cure, continued failure by Executive
to follow the reasonable directives of the Board of Directors of the
Corporation that are not inconsistent with the provisions of this
Agreement or her failure to otherwise substantially perform her duties
hereunder (other than such failure resulting from Executive's incapacity
due to physical or mental illness; (b) the commission by the Executive
of a (i) felony, or (ii) willful and, after notice and an opportunity to
cure, continued misconduct by Executive (which includes a willful breach
of a material term of this Agreement by Executive in the performance of
her duties hereunder); (iii) conviction of a felony or a plea of guilty
or nolo contendere relating thereto in connection with a crime relating
to the performance of Executive's duties to the Corporation or otherwise
impairing or negatively affecting her ability to perform such duties;
(iv) willful theft or fraud against the Corporation or any customer
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of, supplier to or other person or entity which has regular dealings
with, the Corporation; or (v) a willful violation of any law, rule or
regulation, or the imposition of a final order issued by any regulatory
authority against the Corporation, which in any event, prohibits the
Executive from holding an executive position with the Corporation or any
Subsidiary; and (c) the permanent disability of the Executive
("permanent disability" shall mean the Executive's inability to perform
the duties and responsibilities hereunder by reason of physical or
mental injury or illness for any 6 months in any consecutive 12 month
period). This Agreement shall terminate in the event of Executive's
death effective as of the date of death.
For purposes of this Agreement, no act, nor failure to act, on
Executive's part shall be considered "willful" unless done, or omitted
to be done, by Executive in bad faith and without a reasonable belief
that such action or omission by Executive was in the best interests of
the Corporation, and no termination for "Cause" shall be effective
unless Executive shall have been given written notice of the breaches of
this Section and a period of 30 days within which to cure any such
breach, or if not curable, Executive shall be given, within 10 days
after the giving of such notice by the Corporation, an opportunity to
make a presentation to the Board of Directors at a meeting thereof.
Following such meeting, the Board shall determine whether to terminate
Executive for "Cause" and shall notify Executive of its decision.
8. Other Termination. (a) Except as may otherwise be provided
in the Stock Option Agreements attached hereto as Exhibit A, if
Executive dies, becomes permanently disabled or terminates this
Agreement other than for Good Reason, the Corporation shall have no
further liability to Executive for compensation or benefits, except as
may otherwise be provided in the applicable benefit plan or as may
otherwise be required by law (e.g., COBRA) and that Executive shall
be paid accrued salary upon termination of this Agreement.
(b) In the event Executive's employment is terminated by the
Corporation other than pursuant to Section 7(a) or 7(b), or the
Executive initiates the termination for Good Reason, the Corporation
will pay severance (in addition to the amounts outlined in Section 8(a)
of this Agreement) to the Executive (or to Executive's surviving spouse,
or if Executive has no surviving spouse, then to Executive's estate) as
follows: (i) the greater of the salary for the unexpired Term of this
Agreement or $300,000, in either case in accordance with the
Corporation's normal payroll policy; (ii) if equity-based incentives are
held by the Executive or otherwise accrue to her but the Corporation's
stock is not publicly traded, Executive shall receive in cash the fair
market value of such equity-based incentives, which shall be determined
in good faith by the Corporation on the basis of such
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considerations as it reasonably deems appropriate; and (iii) all
benefits as described in Section 3(c) (ii) for which Executive would
otherwise have been eligible to receive as of the effective date of
Executive's termination of employment for the unexpired Term of this
Agreement. Notwithstanding the foregoing, if Executive becomes employed
by a third party during the unexpired Term, the Corporation's
obligations pursuant to clause (b) (iii) of this Section 8 shall
terminate, excewpt as may otherwise be provided in the Corporation's
benefit plans or as may otherwise be required by law.
In addition, in the event of an "Approved Transaction" (as defined in
the Stock Option Agreement attached as Exhibit A hereto), Executive
shall have the right to terminate this Agreement, in which case she
shall be entitled to (x) $300,000 lump sum payment in the absence of
Good Reason, or (y) $300,000 lump sum payment plus the severance set
forth in clauses b(i) through (iii) of the Section 8, if Good Reason
also exists; provided, however, that in no event shall any amount
payable to Executive subsequent to an "Approved Transaction" exceed the
threshold set forth in the Internal Revenue Code that triggers
additional excise and income taxes for excessive "golden parachute"
payments.
(c) For purposes of this Agreement, the term (i) "Good
Reason" shall mean and shall be deemed to exist if, without the prior
written consent of Executive, there is a (A) reduction in any component
of compensation below that which is required to be paid hereunder, (B) a
material difference in benefits below the level of other senior
executives, (C) a significant reduction in Executive's duties or
responsibilities, or a material diminution in Executive's status, office
or title, or assignment of inconsistent duties to be performed on a
regular basis, or (D) any material breach by the Corporation of any
material provision of this Agreement.
No termination for "Good Reason" shall be effective unless the
Corporation's Board shall have been given written notice of the breaches
of this Section and a period of 30 days within which to cure any such
breach, or if not curable, the Board shall be given, within 10 days
after the giving of such notice by the Executive, an opportunity to make
a presentation to the Executive at a meeting with her. Following such
meeting, the Executive shall determine whether to terminate her
employment "Good Reason" and shall notify the Board of her decision.
9. Arbitration. Any controversy or claim arising out of, or
relating to this Agreement, or the breach thereof, shall be settled by
arbitration in New York, New York, in accordance with the Rules of the
American Arbitration Association, and judgment upon the award rendered
by the arbitrator or arbitrators may be
entered in any court having jurisdiction thereof. Notwithstanding the
foregoing, no arbitrator shall have the authority to change any of the
obligations of either party.
10. Miscellaneous. (a) All notices, requests, offers, demands and other
communications hereunder shall be in writing and shall be effectively
given or made when mailed by registered or certified mail, return
receipt requested, and directed to the party at the address given herein
or to such address as either party may hereafter designate in writing;
(b) this Agreement is being delivered and executed in the State of New
York and shall be construed in accordance with and governed by its laws;
(c) this Agreement shall be binding upon and inure to the benefit of the
parties hereto, their heirs, executors, successors and assigns and the
Corporation shall cause its obligations hereunder to be assumed by any
person, corporation or other entity (1) resulting from the
reorganization, merger or consolidation of the Corporation with any
other corporation or entity or (2) any corporation or other entity to
which the Corporation may sell all or substantially all of its stock or
assets, (d) this Agreement shall not be assignable by the Executive, (e)
this Agreement constitutes the entire understanding between the parties
hereto and may not be modified, amended, altered or changed except in
writing signed by the parties. To the extent that any provision of this
Agreement conflicts with the Corporation's employee handbook, the
provisions of this Agreement shall govern; (f) if any provision of this
Agreement or the application thereof to any person(s) or circumstance(s)
shall be invalid or unenforceable to any exent, (1) the remainder of
this Agreement and the application of such provision to other person(s)
or circumstance(s) shall not be affected thereby, and (2) each such
provision shall be enforced to the greatest extent permitted by law; (g)
no waiver of any breach or failure to perform the terms, covenants and
conditions of this Agreement shall be binding upon the parties hereto
unless the same shall be in writing and any such waiver shall be for one
time only and shall not be for any future breach or failure to perform
under the terms of this Agreement; (h) preparation of this Agreement has
been a joint effort of the parties and this Agreement shall not be
construed more severly against either party; and (i) it is understood,
agreed and acknowledged by the Executive and the Corporation that any
threatened or actual breach by the other of any of the agreements
contained in this Agreement may cause irreparable damage to the
non-breaching party and that the remedy at law therefor may be
inadequate and that the non-breaching party shall be entitled to
injunctive and other equitable relief (as well as damages, if
applicable) in the case of any threatened or actual breach thereof. The
Corporation may in its sole discretion apply for specific performance
and/or injunctive relief in order to enforce or prevent any violations
of the provisions of Section 5 and 6 of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
K2 DESIGN, INC.
By: /s/ Xxxxxxx xx Xxxxx /s/ Xxxx Xxxxxx
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E.C. Xxxx Xxxxxx, Executive
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