EXHIBIT 10.5
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement"), is entered into as of August 16,
1999 ("Commencement Date") between Xxxxxxx Xxxxxxxxx, an individual residing at
00 Xxx Xxxxxx, Xxx, Xxx Xxxx 00000 ("Employee") and XXXXxxxx.xxx, Inc., d/b/a
Phase2Media, a Delaware corporation with its principal place of business at 000
Xxxxxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000 ("Company").
WHEREAS, the Company desires to employ Employee and Employee desires to be
employed in such capacity on the terms and conditions hereof;
NOW THEREFORE, in consideration of the mutual covenants contained herein,
and for other good and valuable consideration, the Company and the Employee
hereby agree as follows:
1. Employment Duties and Responsibilities
(1) The Company hereby agrees to employ Employee on the terms and
conditions hereof (the"Employment") as Chairman and Chief Executive Officer
("CEO") of the Company with such duties, responsibilities, obligations and
powers commensurate with such role, as are described herein and which are
reasonably required from time to time by the Board of Directors of the Company
(the "Board"), and Employee hereby accepts the Employment on the terms and
conditions hereof. However, this is subject to Section 4(a)(ii)'s language
relating to the Company's ability following a merger to change Employee's
position to President or COO of a standalone U.S. advertising sales operation or
business unit so long as within a twelve month period following the merger,
Employee is returned to his position as CEO and Chairman of the Company.
(2) During the Employment, Employee shall have primary responsibility for
the direction and management of the current and future affairs and business of
the Company as presently constituted and as same may from time to time hereafter
change, including primary responsibilities for the overall direction of the
Company, its day-to-day operations and management of the Company's business,
hiring and firing of personnel, developing and directing the Company's business
plan, budget, and business strategies, developing and appointing the Company's
management team, and such other duties and responsibilities as may be required
from time to time by the Board consistent with Employee's positions as Chairman
and CEO of the Company. Employee's duties and responsibilities shall be subject
only to the direction and authority of the Board. In the event that the Company
shall hereafter effect a merger in which it is the surviving entity, effect an
acquisition, or form a subsidiary, subject to Section 4(a) hereof, unless
Employee expressly consents in writing to the contrary Employee shall hold the
position of Chairman and CEO of any merged or acquired entity and of any wholly-
owned subsidiary (and in the event that the Company shall form or acquire a non-
wholly owned subsidiary, the Company shall vote all of its interests in such
subsidiary in favor of electing Employee as Chairman and CEO of such
subsidiary).
(3) The principal offices of Employee shall be in New York, New York.
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(4) During the Employment, Employee shall devote all of his business time,
attention, effort, skills and ability to the business and affairs of the Company
on an exclusive basis, and shall not engage in any other business activities for
any other person or entity, except that the foregoing shall not limit Employee
from performing charitable activities, managing personal passive investments, or
subject to the provisions of Section 6 hereof, serving on the Board of Directors
of another entity; provided that any such activities do not in any material way
substantially detract from Employee's performance of his duties hereunder and
provided Employee receives approval from the Board of Directors prior to
engaging in such. Employee shall faithfully and diligently endeavor to promote
the business, reputation, and best interests of the Company and shall make
available to the Company, when and if requested, all knowledge possessed by him
relating to any and all aspects of his duties and responsibilities hereunder.
(5) Employee hereby agrees to allow the Company to use his name, biography
and likeness in connection with information that may be disseminated concerning
the Company. Employee agrees to appear and actively participate on behalf of the
Company in the general promotion of its business.
2. Compensation
(a) Base Salary and Bonuses
(1) As compensation for the performance by Employee of his
obligations hereunder during the Employment, the Company shall
pay Employee, in addition to all other benefits provided for in
this Agreement, beginning on the Commencement Date, a base salary
equal to two hundred thousand dollars ($200,000.00) per annum
(the "Base Salary"), provided, however, that the Board, in its
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sole discretion, will consider increases in Employee's Base
Salary at the commencement of each calendar year. Employee's Base
Salary shall be payable in semi-monthly installments or otherwise
in accordance with the Company's payroll policies.
(2) The Company shall pay Employee a bonus, which shall be set by the
Board in its sole discretion (the "Annual Bonus"), and may be
paid in whole or in part in additional stock grants, or in cash,
as determined by the Board.
(b) Additional Benefits
(1) During the Employment, Employee shall be entitled to participate
in such medical, disability and dental insurance plans, 401(k) or
other retirement plans, employee stock option plans, and other similar
plans, programs or arrangements adopted by the Company and offered
generally to the Company's management employees.
(2) The Company shall pay or reimburse Employee for all reasonable and
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necessary business expenses incurred or to be incurred by Employee
which relate to the business of the Company, provided that such
expenses are adequately documented and vouchered in accordance with
the Company's policies, with such payments or reimbursements to be
made in accordance with the Company's policies.
(3) Employee shall be entitled to four (4) weeks paid vacation to be
taken by Employee at times mutually and reasonably agreed upon by the
Company and Employee, in addition to all other holidays established as
part of the Company's policies.
(c) Payments Subject to Withholding.
The compensation provided to Employee pursuant to this Agreement shall
be subject to any required federal, state, local and other governmental
withholdings or other deductions, and governmental filings and reporting
requirements, that may be required from time to time under applicable U.S. or
foreign laws and regulations.
3. Term
(1) The initial employment term ("Initial Term") shall be for a period of
three (3) years and shall commence on the Commencement Date and end on the third
anniversary of the Commencement Date. The Initial Term shall be renewable for
one or more additional terms (each a "Renewal Term") on such terms as mutually
agreed upon by Employee and the Board. Employee and the Board each shall notify
the other of his or its desire to negotiate the terms of a Renewal Term no later
than six (6) months prior to expiration of the Initial Term or the Renewal Term
in force, as the case may be. The Employment will continue for the Initial Term
and the Renewal Term(s) unless terminated by a "Termination Event," as defined
in Section 4 below.
4. Termination; Payments Due.
For purposes of this Agreement, each of the following events shall
constitute a "Termination Event", and this Agreement and the Employment shall
terminate upon the occurrence of any such Termination Event, with termination
payments due Employee as specified in this Section 4.
(a) Termination Without Cause; Good Reason. If this Agreement is
terminated (either during the Initial Term or during any Renewal Term) without
Cause (as such term is defined in Section 4(b) hereof) or by reason other than
as set forth in Section 4(c) hereof, or if this Agreement is not renewed in
accordance with the provisions of Section 3 hereof, or if Employee resigns for
"Good Reason" (as hereinafter defined), Employee shall receive, commencing on
the Company's next regular payroll, from the date of any such termination or
non-renewal of, or resignation by, Employee: payment of his Base Salary for a
twelve month period in an amount equivalent to that which he received for the
last full twelve (12) month period, as well as a continuation of the benefits
set forth in Section 2(b)(i), and any unreimbursed
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business expenses. In addition, thirty-three and one-third percent (33.3%) of
all unvested and or outstanding options, warrants or other contractual rights to
acquire equity securities of the Company shall automatically vest and become
exercisable. For purposes of this Agreement, "Good Reason" shall mean (i) a
relocation of Employee, without his prior written consent, outside of the New
York City metropolitan area, or (ii) a failure to maintain Employee as the CEO
and Chairman of the Company, including but not limited to, after any merger in
which the Company is the surviving entity or acquisition, or with respect to any
wholly-owned subsidiary, provided, however, after a merger, the Company may
change Employee's position to President or COO of a standalone U.S. advertising
sales operation or business unit so long as within a twelve month period
following the merger, Employee is returned to his position as CEO and Chairman
of the Company, or (iii) the failure to be nominated by management of the
Company for election to the Board, or (iv) a material diminution by the Company
of Employee's responsibilities, which change would cause Employee to report to
any person or persons other than the Board or cause Employee's position with the
Company or any subsidiary to become one of significantly less responsibility,
importance or scope from that contemplated by Section 1 hereof, or (v) a willful
failure in bad faith to pay the Base Salary, or the Annual Bonus to Employee
when due or another material breach of this Agreement by the Company. All
amounts due Employee under this Section 4(a) shall be paid to Employee without
offset for any amounts earned by Employee in any other employment or from any
other source; provided, however, that Employee's twelve month salary and
benefits continuation shall cease in the event he obtains another job during
that twelve month period, and if he does, Employee shall promptly notify the
Company. Whether Employee accepts another job during the twelve month period
shall be in his sole discretion. In the event that the Company breaches this
Agreement other than for a reason giving Employee the right to resign for Good
Reason, Employee and the Company shall be entitled to their respective rights at
law.
(b) Cause. Notwithstanding any other provision hereof, the Company may
terminate this Agreement for cause ("Cause") in the event (i) of Employee's
willful and repeated failure or refusal to materially perform his duties
hereunder with reasonable diligence or to follow lawful directives of the Board,
(ii) of Employee's commission of an act involving fraud, embezzlement, or theft
against the property or personnel of the Company, or (iii) Employee engages in
willful or grossly negligent conduct that the Board in good faith determines
will have a material adverse affect on the business, assets, properties, results
of operations, or financial condition of Employer, or (iv) Employee's conviction
of, or guilty plea, nolo contendere plea or confession to a felony or crime of
moral turpitude. In the event the Employment and this Agreement are terminated
pursuant to this Section 4(b), Employee's Base Salary shall terminate
immediately upon such termination (subject to applicable law such as COBRA), and
the Company shall have no further obligations to Employee except for payment and
reimbursement to Employee for any monies due to Employee which right to payment
or reimbursement accrued prior to such termination. Notwithstanding any
provision of this Section 4(b), prior to the Company having the right to
terminate the Employment pursuant to clauses (i) or (iii) of this Section 4(b),
the Company shall first be required to give Employee at least thirty (30) days'
prior written notice of any alleged breach under Sections 4(b)(i) or 4(b)(iii)
hereof (the "Notice"), and for such Notice to be effective it must specify in
reasonable detail the nature of, and facts and circumstances
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relative to, such alleged Cause, and Employee shall have a reasonable
opportunity to cure any such alleged improper actions within such thirty (30)
day period, and in the event Employee takes such curative actions, the Notice
shall automatically be deemed withdrawn. Employee shall not, under any
circumstances, be deemed to have been terminated for Cause unless and until
there shall have been delivered to him a copy of a resolution (the "Board
Resolution") duly adopted by the affirmative vote of not less than fifty one
(51%) percent of the Board (with Employee not being permitted to vote on this
matter) at a meeting of the Board held for that purpose. Any such Board
Resolution, which in the event of an alleged termination for Cause under
Sections 4(b)(i) or 4(b)(iii) hereof shall be dated no sooner than thirty (30)
days after the Notice has been deemed to have been given to Employee and
Employee shall have had an opportunity, together with counsel, to be heard
before the Board, shall find that in the good faith opinion of the Board,
Employee was guilty of conduct constituting Cause and specifying the particulars
thereof in detail.
(c) Death. This Agreement shall terminate immediately upon the death of
Employee. Upon such termination, Employee's spouse or other beneficiary shall
be entitled to receive a payment of Two Million Dollars ($2,000,000.00) payable
from a Key Man Life Insurance Policy in the total amount of Ten Million Dollars
($10,000,000.00) which shall be maintained in force by the Company for as long
as Xxxxxxxxx is employed. In addition, his beneficiary shall receive payment of
all unreimbursed expenses.
5. Ownership of Inventions, Work Product, and Business Opportunities
Any interest in any and all discoveries, inventions, patents, patent
applications, copyrights, trademarks, trademark applications, software,
materials, licenses, methods, processes, analyses, and reports ("Inventions")
relating to electronic or digital advertising or marketing content or services
or electronic or digital retailing of goods and services (collectively, the
"Industries"), whether over the Internet, on CD-ROM, or otherwise, whether or
not patentable or copyrightable and whether created and owned by Employee during
the Employment or during any prior employment with the Company or affiliates of
the Company, or owned by the Company prior or after the execution of this
Agreement ("Work Product"), and all business opportunities relating to the
Industries ("Opportunities") introduced to Employee during the Employment shall
be owned 100% by the Company. Employee shall disclose any Work Product and
Opportunities to the Company and, forthwith upon the request of the Board and
without additional compensation shall execute all such assignments and other
documents and take all such other action as the Board may reasonably request in
order to vest in the Company all right, title and interest in and to the
Inventions, Work Product, and Opportunities, free and clear of all liens,
charges, and encumbrances.
6. Non-Competition; Non-Solicitation.
(1) During his Employment, and in the event the Company terminates
Employee's employment, or if this Agreement is not renewed, or if Employee
resigns for "Good Reason", for a period of twelve (12) months following the
cessation of the Employment, Employee hereby agrees and covenants that he will
not directly or indirectly engage in or become interested
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(whether as an owner, principal, agent, stockholder, member, partner, trustee,
venturer, lender or other investor, director, officer, employee, consultant or
through the agency of any corporation, limited liability company, partnership,
association, agent or otherwise) in any business or enterprise engaged in the
business of an Internet Advertising Sales Rep Firm that sells inventory for
multiple sites they do not own, including, without limitation, companies such as
Doubleclick, 24/7, Adsmart and Flycast. In the event Employee voluntarily
resigns, this non-compete shall also be applicable during the Employment and for
twelve months following cessation of the Employment, but shall extend to any
business or enterprise that shall, at the time, be in whole or in substantial
part competitive with any part of the business conducted by the Company during
the period of employment (except that in either event, ownership of not more
than 5% of the outstanding securities of any class of any entity, which
securities are listed on a national securities exchange or traded in the over-
the-counter market, shall not be considered a breach of this Section 6(1)).
(2) Employee agrees and covenants that for a period of twelve (12) months
following the termination of the Employment, he will not (without first
obtaining the written permission of the Company) directly or indirectly
participate in the solicitation of any business of any type which was conducted
by the Company during the Employment, from any person or entity which was a
client or customer of the Company during the period of the Employment, or was a
prospective customer of the Company from which Employee solicited business or
for which a proposal for submission was prepared during the period of the
Employment.
(3) Employee agrees and covenants that for a period of twelve (12) months
following the termination of the Employment, he will not (without first
obtaining the written permission of the Company) directly or indirectly, hire,
recruit for employment, or induce or seek to cause such person to terminate his
or her employment with the Company, any person who then is an employee of the
Company or was an employee of the Company within three (3) months prior to the
time of such hiring or solicitation by Employee.
7. Protection of Proprietary Information
(1) Employee acknowledges that during the course of his Employment, he
will acquire Proprietary Information and Trade Secrets (as hereinafter defined)
of the Company. For purposes of this Agreement:
(1) "Proprietary Information" shall mean and include all unpublished
materials and all information and data created, discovered, owned
or otherwise controlled by the Company or its affiliates relating
to the operations, financial conditions, products, customers, or
business of the Company or its affiliates, including, but not
limited to, financial information, data, or statements, product
research and development, existing and future product plans,
designs and schematics, patents, trademark information, client
lists, computer data, documentation, algorithms, processes and
know-how (whether or not reduced to writing and whether or not
patentable or copyrightable), business and marketing
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plans and strategies, pricing policies, product packaging, cost
and profit information, supplier identities, and the like,
whether disclosed orally, in writing, or by inspection.
"Proprietary Information" also shall include all other materials
and information which have clearly been identified by the Company
as "Proprietary Information", "Trade Secrets" or confidential
information. The term "Proprietary Information" shall not include
any information which is now generally known or available or
which hereafter through no act or failure on the part of Employee
becomes generally known or available; and
(2) "Trade Secrets" shall mean and include information, without
regard to form, including, but not limited to, technical or non-
technical data, a formula, a pattern, a compilation, a program, a
device, a method, a technique, a drawing, a process, financial
data, financial plans, product plans, or a list of actual or
potential customers or suppliers which is not commonly known by
or available to the public and which information (i) derives
economic value, actual or potential, from not being known to, and
not being readily ascertainable by proper means by, other persons
who can obtain economic value from its disclosure or use; and
(ii) is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy.
(2) Non-Disclosure. Employee agrees and covenants that, at any
time during the Employment (which, for purposes of this Section 7 shall include
the Company's subsidiaries and affiliates) and for a period of twenty-four (24)
months thereafter, he will hold in the strictest confidence and not (without
first obtaining the written permission of the Company) (i) disclose to any
person or entity, nor use (either himself or in connection with any business)
any Proprietary Information or Trade Secrets; or (ii) disclose to any person or
entity, nor use (either himself or in connection with any business) any Trade
Secrets to which he may have had access or which were revealed to him during the
Employment, unless such disclosure is pursuant to a court order, disclosure in
litigation involving the Company or in any reports or applications required by
law to be filed with any governmental agency. Employee further agrees not to
disclose any Proprietary Information or Trade Secrets except to the Board and to
employees, advisors, counsel and consultants of the Company and its affiliated
companies, if any, on a "need to know basis", and then only to those persons who
reasonably require the same for the purposes hereof and who are bound by a
confidentiality agreement consistent in format and substance with this Section 7
and the policies of the Board.
(3) Return of Documents and Materials. Employee agrees to use his best
efforts to deliver promptly upon the termination of the Employment, and at any
and all other times as the Board may request, all documents, technology, Work
Product, source codes, object codes, hardware (and copies thereof), in whatever
medium, Proprietary Information, and Trade Secrets (including any and all
copies), in whatever medium, relating to the business of the Company, which he
possesses or has under his control.
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(4) Nothing in this Section 7 shall limit any protection, definition or
remedy provided to the Company under any law, statute or legal principle
relating to confidential information, proprietary information, or trade secrets.
8. Conflicting Agreement
Employee warrants and represents that he has disclosed to the Company any
existing or proposed agreements to which Employee is a party that may adversely
affect Employee's ability to render his services to the Company hereunder.
9. Resignation as a Director of the Board
Upon termination of the Employment in accordance with Section 4 hereof,
Employee shall immediately resign as a director of the Board unless otherwise
agreed to in writing by the Board and Employee.
10. Miscellaneous Provisions
(1) No provision of this Agreement shall be deemed to have been waived
unless such waiver is in writing signed by the waiving party. No failure by any
party to insist upon the strict performance of any provision of this Agreement,
or to exercise any right or remedy consequent upon a breach thereof, shall
constitute a waiver of any such breach of such provision or any other provision.
No waiver of any provision of this Agreement shall be deemed a waiver of any
other provision of this Agreement or wavier of such provision with respect to
any subsequent breach, unless expressly provided in writing.
(2) Any and all notices, demands, and requests required or permitted to be
given under this Agreement shall be in writing. Notices may be served by: (1)
certified or registered mail postage prepaid with return receipt requested, or
by private courier, prepaid; (2) by facsimile or other telecommunication device
capable of transmitting or creating a written record, with a copy sent by U.S.
mail or by personal delivery within three (3) business days after the initial
facsimile transmission; or (3) by hand. Mailed notices shall be deemed delivered
three days after mailing, if properly addressed, return receipt signed.
Couriered notices shall be deemed delivered on the date the courier warrants a
delivery has occurred. Facsimile notices shall be deemed delivered when receipt
is either confirmed by confirming transmission equipment or acknowledged by the
addressee or its office. Hand delivery shall be effective when accomplished upon
signature of receipt. All notices shall be given to the parties at the addresses
first given above unless a party changes his or its address by giving notice to
the other party in accordance with the provisions of this Section 10(2),
together with copies thereof as follows:
In the case of the Company, with a copy to:
Xxxxxxxx Xxxx & Brandeis, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
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Attention: Xxxxxx X. Xxxxxxxx, Esq.
(3) This Agreement constitutes the entire Agreement of the parties
relating to the subject matter hereof. This Agreement supersedes all prior
communications, representations or agreements between the parties relating to
the subject matter hereof. This Agreement expressly supersedes and replaces the
Agreement between the parties dated April 12,1999. As such, the April 12, 1999
Agreement is null and void once this Agreement is signed. This Agreement may not
be amended except in a writing executed by the parties.
(4) The invalidity or unenforceability of any particular provision of this
Agreement shall not effect the other provisions hereof; all of which shall
remain enforceable in accordance with their terms. Should any of the obligations
hereunder be illegal or unenforceable, such obligations shall be enforceable
within whatever terms a court of competent jurisdiction shall deem allowable by
law.
(5) This Agreement shall inure to the benefit of the successors and
assigns of the Company as if such Agreement had been originally negotiated and
entered into by and between Employee. As a condition to any merger, corporate
reorganization, sale of the Company's assets or comparable transaction, the
assignee, purchaser or successor, as the case may be, shall be required to
undertake in writing to perform all of the Company's obligations hereunder and
specifically to agree in writing to assume this Agreement. The Company may
assign this Agreement to any person, firm or corporation controlling, controlled
by, or under common control with the Company. Employee may not assign, sell,
subcontract, delegate or otherwise transfer this Agreement or any rights or
obligations of Employee under this Agreement, without the prior written consent
of the Board, and any attempted assignment or delegation shall be void and
without effect.
(6) This Agreement shall be governed by, construed and enforced in
accordance with the laws of the State of New York for agreements wholly
negotiated, entered into, and performed within the State of New York. Each of
the parties hereto irrevocably consents to the venue and jurisdiction of the
federal and state courts located in the State of New York, County of New York.
(7) Any dispute, disagreement or controversy of any kind arising out of or
relating to the Employment or the termination thereof shall be submitted for
resolution to arbitration before three arbitrators in accordance with the then
prevailing Commercial Rules of the American Arbitration Association. The
arbitration shall be held in the City of New York. The fees and expenses of the
arbitration shall be borne equally by the parties. However, the Company may also
pursue claims for injunctive relief against Employee in any appropriate court
for any breaches of the provisions of Sections 6 or 7 hereof.
(8) Employee acknowledges that the Company is a new and evolving company
in the Industries, and that protection of Proprietary Information, Work Product,
Trade Secrets, and Opportunities, as provided for in this Agreement are
important to future prospects for growth and
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business development of the Company. Employee acknowledges that the Company may
not have an adequate remedy at law in the event of any breach or threatened
breach by Employee of any provision of Sections 6 or 7 hereof, and that the
Company may suffer irreparable damage and injury as a result. Accordingly, in
the event of any such breach or threatened breach, Employee hereby consents to
the Company's application for injunctive relief against him by any court of
competent jurisdiction without the posting of any bond or security therefor.
(9) This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one agreement binding on all of the
parties, notwithstanding that all parties are not signatories to the same
counterpart. The section headings in this Agreement are included for convenience
only; they do not give full notice of the terms of any portion of this Agreement
and are not relevant to the interpretation of any provision of this Agreement.
(10) Facsimile signatures on this Agreement shall be deemed to be originals
and to be legally binding and effective.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first written above.
/s/ Xxxxxxx Xxxxxxxxx
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Employee
CKG XXXXX.XXX, INC. d/b/aPHASE2MEDIA
By: /s/ Xxxxxx Xxxxxx
--------------------------------
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