EXHIBIT 10.3
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT, dated as of April 15, 2000 (the "Effective
Date"), is made by and between Xxxxxxx X. Xxxxxx, residing at 00 Xxxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx, 00000 ("Executive") and Razorfish, Inc., a Delaware
corporation having its principal executive offices at 00 Xxxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000 (the "Company").
WHEREAS, Executive has been serving the Company as President and Chief
Executive Officer pursuant to that employment agreement dated September 18, 1996
(the "Original Employment Agreement") a copy of which is attached hereto as
Exhibit A;
WHEREAS, pursuant to the Original Employment Agreement, the Executive has
agreed to furnish services to the Company through and including December 31,
2001 (the "Original Expiration Date") as that period may be extended in
accordance with the terms and conditions of the Original Employment Agreement;
WHEREAS, the Company, by it's Board of Directors (the "Board"), has
determined that it is advisable and in the best interests of the Company to
secure the continued service and employment of Executive on behalf of the
Company in accordance with the terms and conditions of this agreement (the
"Agreement") and Executive is willing to render such services to the Company on
the terms and conditions set forth herein; and
WHEREAS, this Agreement shall serve as a mutual termination and release
with respect to the Original Employment Agreement;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, receipt of which is hereby acknowledged, the parties
hereto agree as follows:
1. Position and Responsibilities.
------------------------------
1.01 Position. Executive shall serve as President, Chief Executive
--------
Officer and member of the Board of the Company. In this capacity Executive
shall, subject to the bylaws of the Company and to the reasonable direction of
the Board, have all the authority and responsibility customarily associated with
such positions in a company of the size and nature of the Company. Executive
shall report directly and solely to the Board. The Board shall either vote or
recommend to the shareholders of the Company at each meeting of shareholders of
the Company held for the election of directors, as appropriate, that during the
Term (as defined in paragraph 2.01 below) Executive be elected as a director of
the Company.
1.02 Responsibilities. During the Term hereof, Executive shall devote
----------------
substantially all of his business time and his efforts, business judgment, skill
and
knowledge exclusively to the advancement of the business and interests of
the Company and to the discharge of his duties and responsibilities hereunder
provided, however, that Executive may also engage in any or all of the following
activities so long as such engagement does not, in the aggregate, materially
interfere with the proper performance of his duties and responsibilities for the
Company:
(a) serve as a member of the board of directors of a reasonable
number of other business entities, trade associations and/or charitable
organizations (consistent with the policies, if any, adopted by the Board and
after giving notice to the Company's General Counsel);
(b) engage in charitable activities and community affairs;
(c) accept and fulfill a reasonable number of speaking engagements;
(d) manage his personal investments and affairs;
(e) continue his involvement with Razorfish Studios, Inc.; and
(f) devote time to other ventures in which the Company has a direct
or indirect equity interest.
2. Term, Termination and Expiration of Employment.
----------------------------------------------
2.01 Term. Subject to the terms of this Agreement, Executive's
----
employment under this Agreement shall commence as of the Effective Date and
continue through December 31, 2004, unless sooner terminated as provided for in
this Agreement (the "Initial Term"). Unless this Agreement shall have been
terminated earlier in accordance with the provisions hereof, at the end of the
Initial Term, and on each subsequent annual anniversary of that date thereafter,
the Agreement shall be extended automatically for an additional one (1) year
period unless either party hereto gives the other party written notice of non-
extension at least one hundred eighty (180) days prior to the otherwise
scheduled expiration of the term. The Initial Term together with any extended
periods shall be referred to herein as the "Term".
2.02 Termination for Cause.
---------------------
(a) The Company shall have the right to terminate the employment of
Executive for Cause (as defined in Section 2.02(b) below). Effective as of the
date that the employment of Executive terminates by reason of Cause:
(i) this Agreement shall terminate and no further payments of
the compensation described in Section 3 (except for such remaining payments of
Minimum Annual Compensation under Section 3.01 relating to periods during which
Executive was employed by the Company, Benefits which are required by
2
applicable law to be continued, a lump-sum payout for accrued, but unused,
vacation days and reimbursement of expenses incurred prior to the date of
termination under Section 3.03) shall be made; and
(ii) any stock options granted by the Company to Executive
during the Term hereof and during the term of the Original Employment Agreement,
which have not vested, shall be forfeited by Executive.
(b) "Cause" for termination shall mean:
(i) The Executive's repeated failure or refusal to materially
perform his duties and responsibilities as set forth in this Agreement, or,
subject to the engagement of the activities set forth in Section 1.02 above, the
failure of the Executive to devote substantially all of his business time and
attention to the business and affairs of the Company in accordance with the
terms hereof;
(ii) The willful misappropriation of the funds or property of
the Company;
(iii) Conviction in a court of law of, or entering a plea of
guilty or no contest to, any felony involving moral turpitude; and
(iv) The commission by the Executive of any willful or
intentional act which substantially injures the reputation, business or business
relationships of the Company, including without limitation, a willful or
intentional breach of the provisions of Section 5 of this Agreement.
(c) Notwithstanding the foregoing, there shall be no termination
for Cause without:
(i) Executive first being given written notice by the Board, an
opportunity to be heard before the Board and an opportunity to cure the actions
or omissions giving rise to "Cause" (to the extent such cure is reasonably
possible) within a reasonable time period; and
(ii) a determination, by vote of a number of the members of the
Board representing not less than two-thirds (2/3) of the total number of Board
members that such Cause exists, which determination shall be reviewable de novo
-------
in arbitration in accordance with Section 7.05 below.
2.03 Termination Without Cause or by Executive for Good Reason.
---------------------------------------------------------
(a) If during the Term hereof the Company terminates the employment
of Executive and such termination is not for Cause or due to a notice of non-
renewal pursuant to Section 2.01, or Executive terminates his employment
hereunder for "Good Reason" (defined in Section 2.03(d) below), then:
3
(i) The Company shall pay to Executive pursuant to Section
2.03(b) below an amount equal to the monthly portion of Executive's Minimum
Annual Compensation as in effect on the date of such termination for the greater
of thirty-six (36) months and the number of months remaining in the then-
scheduled term of this Agreement (the "Severance Period") plus a lump-sum payout
in respect of accrued, but unused, vacation days;
(ii) The Company shall pay to the Executive the Termination
Bonus (as defined in Section 2.03(c) below);
(iii) All stock options granted by the Company to Executive
during the Term hereof and during the term of the Original Employment Agreement
shall accelerate and become immediately exercisable and shall remain exercisable
pursuant to the terms of the applicable stock option plans;
(iv) Executive shall be entitled to continue his participation
in all medical, dental, vision, prescription drug, hospitalization and life
insurance coverages and in all other employee welfare plans, programs and
arrangements (collectively, "Health Benefit Plans") in which he was
participating on the date termination in accordance with 2.03(a) until the
sooner of the expiration of the Severance Period and the date (or dates) that
Executive receives equivalent coverages and benefits under the plans and
programs of any subsequent employer. In the event that any Health Benefit Plans
do not permit his continued participation, the Company shall provide to
Executive, on a quarterly basis, the economic equivalent of such Health Benefit
Plans in which Executive may not participate on an after-tax basis; and
(v) The Company shall pay to the Executive an amount equal to
the unused vacation days which have accrued (regardless of the Company's policy
regarding unused vacation day roll over) during any year up to the date of such
termination.
(b) Payments to be made to Executive pursuant to Section
2.03(a)(i), 2.03(a)(ii) and 2.03(a)(v) shall be payable promptly following
termination pursuant to Section 2.03(a).
(c) As used in this Agreement, "Termination Bonus" shall mean an
amount equal to the greater of (i) Executive's actual bonus earned for the year
preceding the year in which such termination occurs, and (ii) the Executive's
target bonus for the year of such termination multiplied by two (2).
(d) For purposes of this Agreement, Executive shall be deemed to
have "Good Reason" to terminate this Agreement following the occurrence without
Executive's consent of any of the events enumerated in this Section 2.03(d)
provided that Executive first deliver to the Company twenty (20) days written
notice of such intended termination and provided further that the Company fails
to cure any such events indicated
4
in such notice (to the extent such cure is reasonably possible) within a
reasonable time period:
(i) any reduction in Executive's Minimum Annual Compensation,
target percentage of Executive's Annual Bonus or any other material employee
benefit or perquisite enjoyed by Executive other than as part of an overall
reduction in such benefits or perquisites applying to the Company's senior
executives generally;
(ii) any failure to continue Executive as President, Chief
Executive Officer and member of the Board;
(iii) any material diminution in Executive's duties or the
assignment to Executive of duties that are materially inconsistent with
Executive's then current duties;
(iv) any other material breach by the Company of any of the
provisions described in this Agreement;
(v) the occurrence of a Change in Control (provided that
Executive remains employed with the Company for six (6) months thereafter); or
(vi) failure to obtain the assumption of Executive's employment
agreement by any successor to all or substantially all of the business or assets
of the Company.
2.04 Expiration or Voluntary Termination.
-----------------------------------
(a) In the event that this Agreement shall expire in accordance
with the terms of Section 2.01:
(i) no further payments of the compensation described in
Section 3 shall be due to the Executive by the Company (except for such
remaining payments of Minimum Annual Compensation under Section 3.01 relating to
periods during which Executive was employed by the Company, Benefits which are
required by applicable law to be continued, a lump-sum payout for accrued, but
unused, vacation days and reimbursement of expenses incurred prior to the date
of expiration of the Term under Section 3.03);
(ii) any vested stock options granted by the Company to
Executive during the Term hereof and during the term of the Original Employment
Agreement shall remain exercisable for a period of no less than two (2) years
following the date of expiration of the Term;
(iii) if the Term hereof expires pursuant to notice given by
the Company to Executive in accordance with Section 2.01, any unvested stock
option granted
5
granted by the Company to Executive during the Term hereof and during the
term of the Original Employment Agreement shall accelerate and become
immediately exercisable, as of the date of such termination, to the extent the
same was scheduled to become vested on or before the first anniversary of the
date of such termination; and
(iv) the Executive shall have a period (the "Cause Exercise
Period") of no less than the number of days reasonably required to permit the
sale of shares of the Company's stock acquired by Executive upon the exercise of
options due to the status of Executive as an "affiliate" of the Company as such
term is used under the Securities Act of 1933, as amended, together with all
rules and regulations promulgated pursuant thereto provided, however, that such
Cause Exercise Period shall in no event be less than thirty (30) days.
(b) In the event that Executive voluntarily terminates this
Agreement, Executive shall have the same rights as are set forth in Section
2.02(a) above. Notwithstanding anything set forth in this Agreement to the
contrary, voluntary termination of this Agreement by Executive shall not be
deemed a breach of this Agreement.
2.05 Death.
-----
(a) In the event of Executive's death during the Term hereof:
(i) This Agreement shall terminate except as provided in
this Section 2.05;
(ii) The Company shall pay promptly in one lump sum by wire
transfer of same day funds to Executive's beneficiary or beneficiaries (or to
his estate if he fails to make such designation):
(A) one fourth ( 1/4) of Executive's Minimum Annual
Compensation (as defined in paragraph 3.01 below) as in effect on the date of
his death;
(B) a Pro Rata Annual Bonus (as defined in Section 2.05(c)
below; and
(C) a lump-sum payout in respect of accrued, but unused,
vacation days;
(iii) All stock options granted by the Company to Executive
during the Term hereof and during the term of the Original Employment Agreement
shall accelerate and become immediately exercisable and shall remain exercisable
for a period no less than two (2) years following the date of Executive's death.
6
(b) Executive may designate one or more beneficiaries for the
purposes of this Section by making a written designation and delivering such
designation to the Chief Financial Officer or Treasurer of the Company. If
Executive makes more than one such written designation, the designation last
received before Executive's death shall control for purposes of determining
payments made pursuant to this Section 2.05.
(c) As used in this Agreement, "Pro Rata Bonus" shall mean the
greater of the Executive's target Annual Bonus (as defined in Section 3.02
below) for the year of termination and the amount of Executive's actual Annual
Bonus earned for the year preceding the year of such termination.
2.06 Disability.
----------
(a) In the event Executive shall sustain a Disability (as defined
in Section 2.06(b) below) during the Term hereof:
(i) This Agreement shall terminate as of the date of
certification of Executive's Disability except as provided in this Section 2.06;
(ii) The Company shall pay to Executive:
(A) for the period commencing as of the date of
certification of Executive's Disability (as more particularly described in
Section 2.06(b)) and continuing until the earliest of (i) the cessation of
Executive's Disability; (ii) Executive's death; or (iii) attainment of the age
of sixty-five (65) disability benefits in accordance with the Company's
applicable long-term disability program then in effect but in no event less than
sixty percent (60%) of Executive's Minimum Annual Compensation as in effect on
the date of such certification, subject to annual adjustment based upon
increases in the Consumer Price Index; and
(B) a Pro Rata Annual Bonus promptly in one lump sum by
wire transfer of same day funds; and
(C) a lump-sum payout in respect of accrued, but unused,
vacation days; and
(iii) All stock options granted by the Company to Executive
during the Term hereof and during the term of the Original Employment Agreement
shall accelerate and become immediately exercisable and shall remain exercisable
for a period no less than two (2) years following the date of certification of
Executive's Disability; and
(iv) Executive shall be entitled to continue his participation
in all Health Benefit Plans in which he was participating on the date
termination in accordance with 2.06(a)(i) until the earliest of (i) the
cessation of Executive's Disability; (ii) Executive's death; or (iii) attainment
of the age of sixty-five
7
(65). In the event that any Health Benefit Plans do not permit his continued
participation, the Company shall provide to Executive, on a quarterly basis, the
economic equivalent of such Health Benefit Plans in which Executive may not
participate on an after-tax basis.
(b) As used in this Agreement, "Disability" means the inability of
Executive to perform his duties for the Company because of mental or physical
incapacity for one hundred eighty (180) days in any two hundred seventy (270)
day period as shall have been certified by a licensed and qualified physician
selected by the Company.
2.07 Change of Control.
-----------------
(a) If at any time during the term of this Agreement there is a
"Change in Control" (defined below):
(i) All stock options granted by the Company to Executive
during the Term hereof and during the term of the Original Employment
Agreement shall accelerate and become immediately exercisable and shall
remain exercisable for the balance of any such option's stated term
pursuant to applicable stock option plans;
(ii) All perquisites more particularly set forth in Sections
3.03(b), 3.03(d), 3.03(e)(if any) and Benefits, if any, provided in
accordance with 3.04 below shall become immediately vested; and
(iii) Executive shall be entitled to receive other benefits,
if any, that apply in the event of a Change of Control in accordance with
applicable written plans, programs and arrangements of the Company; provided
that no such benefit is duplicative of the type of benefit provided for under
this Agreement.
(b) For purposes of this Agreement, "Change in Control" shall mean
the occurrence of one or more of the following three events:
(i) After the Effective Date, any Person becomes a beneficial
owner (as such term is defined in Rule 13d-3 promulgated under the
Securities Exchange Act of 1934, as amended) of a percentage of the voting
securities of the Company, measured either by number of voting securities
or by number of votes entitled to be cast, that is thirty-five percent
(35%) more than the percentage (if any) of the voting securities of the
Company, measured in either fashion, that such Person beneficially owned on
the Effective Date. For purposes of this Agreement, "Person" shall mean any
natural person, incorporated entity, limited or general partnership,
business trust, association, agency (governmental or private), division,
political sovereign, or subdivision or instrumentality, including those
groups identified as "persons" in Sections 13(d)(3) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended;
8
(ii) a majority of the Board consists of individuals other than
Incumbent Directors, which term means the members of the Board on the Effective
Date; provided, however, that any individual becoming a director subsequent to
such date whose election or nomination for election was supported by a two-
thirds of the directors who then comprised the Incumbent Directors shall be
considered to be an Incumbent Director; or
(iii) (x) the Company merges or otherwise combines with
another entity, or (y) all or substantially all of the assets or business of the
Company is disposed of pursuant to a sale, merger, consolidation, liquidation or
other transaction or series of transactions (collectively, a "Triggering
----------
Event"), unless the holders of voting securities of the Company immediately
----- ------
prior to such Triggering Event own, directly or indirectly, by reason of their
ownership of voting securities of the Company immediately prior to such
Triggering Event, more than 66 2/3% of the voting securities of: (A) in the case
of a merger or other combination involving the Company, the surviving
corporation therein, and (B) in any other case, the entity or entities, if any,
that succeed to the business of the Company.
2.08 No Mitigation or Offset. In the event of any termination of
Executive's employment hereunder, Executive shall be under no obligation to seek
other employment and the Company shall not be entitled to offset against any
amounts due to Executive (other than as expressly provided in Sections
2.03(a)(iv)) on account of any remuneration attributable to any subsequent
employment that Executive may obtain or any claims the Company may have against
Executive.
3. Compensation and Benefits.
-------------------------
3.01 Salary. During the period of this Agreement, the Company shall
------
pay to Executive a base salary at an annual rate of Four Hundred Fifty-Thousand
($450,000) ("Minimum Annual Compensation") and shall be payable in installments
in accordance with Company policy. The Board shall review the base salary
annually, and may in its sole discretion increase it to reflect performance,
appropriate industry guideline data and other factors. At no time during the
Term shall Executive's annual base salary fall below the Minimum Annual
Compensation without the prior written consent of Executive.
3.02 Bonus. (a) Executive shall receive an annual bonus in a target
-----
amount equal to One Hundred Percent (100%) (the "Target Percentage") of the
Minimum Annual Compensation (the "Annual Bonus"), as the same may be increased
during the Term upon the attainment by the Company of certain goals as
determined by mutual agreement of the Executive and the Compensation Committee
of the Board at the commencement of each year (the "Annual Targets"). In the
event that no Annual Targets are set in any year, the Annual Bonus for such year
shall be determined by the Compensation Committee of the Board based on
Executive's work performance and contribution to the Company and the Company's
performance, as evaluated by the Compensation Committee. The Company shall
conduct Executive performance reviews
9
in accordance with the Company policy. Annual bonuses shall be paid to Executive
no later than ninety (90) days following the conclusion of the preceding annual
period (the "Bonus Payment Date").
(b) (i) Executive shall receive options (each an "Initial
Option") to acquire one million seven hundred fifty thousand (1,750,000) shares
of the common stock of the Company (the "Common Stock") at the closing market
price of each such share as of the date of grant on the following dates: (A)
seven hundred fifty thousand (750,000) shares on or about Xxxxx 00, 0000, (X)
five hundred thousand (500,000) shares on February 15, 2001, and (C) five
hundred thousand (500,000) shares on February 15, 2002 (each such grant being
hereafter referred to as a "Tranche"). In addition to the Initial Options,
Executive shall receive an annual grant of bonus options (each a "Bonus Option")
consisting of a minimum of twenty-five percent (25%) of the amount of shares
subject to the Initial Option granted in the preceding annual period, as
determined by the Board in its sole discretion. The actual percentage of the
Bonus Options to be granted shall be determined as a part of a review process
conducted by the Compensation Committee of the Board during which the Board
shall, in its discretion, consider Executive's work performance and contribution
to the Company and the Company's performance for the immediately preceding
annual period, and such Bonus Option shall be granted no later than the Bonus
Payment Date following such annual period.
. (ii) (A) Any Initial or Bonus Option shall become exercisable
as to one-thirty sixth (1/36) of such option each month, beginning on the date
of the grant of such option.
(B) Notwithstanding the provisions of Section
3.02(b)(ii)(A) to the contrary, Initial and Bonus Options shall become fully
exercisable (if not already fully exercisable) and thereafter remain fully
exercisable for the balance of their ten-year term irrespective of any
subsequent termination of Executive's employment, on the first day on which the
twenty-trading-day-average closing market price of a share of Common Stock
equals, or exceeds two hundred percent (200%) of its market value on the date of
the grant of such option.
(C) Initial Options and Bonus Options granted to Executive
hereunder together with stock options granted to Executive during the term of
Executive's employment under the Original Employment Agreement shall be referred
to herein as Options.
(iii) Options may be transferred by Executive, in whole or in
part:
(A) gratuitously to any "family member" as such term is
currently defined in Section (A)(1)(a)(5) of the General Instructions to
Securities Exchange Commission Form S-8 (the "S8 Section");
10
(B) in any transfer described in clause (ii) of such S8
Section;
(C) by will; and
(D) by the laws of descent and distribution.
(iv) Executive may elect, on six (6) month's notice to the
Company, to defer gains realized upon (or in connection with) exercise of any
Option, consistent with limitations necessary to avoid any charge to the
Company's earnings or to defer taxation.
(v) Securities received on exercise of any Option shall be, and
shall remain fully registered on Form S-8 or qualified (both for issuance and
resale) under applicable federal and state securities laws to the extent such
securities are listed, or qualified for trading, on a national securities
exchange or national market system.
(vi) On any merger, consolidation, reorganization,
recapitalization, spin-off, combination, share exchange, liquidation,
distribution of securities or other property in respect of shares or other
securities (other than ordinary cash dividends) of the Company, or other change
in corporate structure or capitalization affecting the rights or value of the
securities subject to an Option, the Board shall make such appropriate
adjustments as it shall determine, reasonably and in good faith, in the number
and/or kind of securities subject to the Option and/or in the exercise price
and/or in its other terms and conditions, and/or shall make appropriate
provision(s), reasonably and in good faith, for supplemental payments of cash,
securities and/or other property, so as to avoid substantial dilution or
enlargement of the rights and economic value represented by the Options.
(c) Notwithstanding the provisions of Section 3.02(b) above,
Executive shall be eligible to receive additional equity in the form of stock
options or otherwise and other long-term incentive awards during the Term at
levels and on terms and conditions consistent with both his positions and with
corresponding awards (if any) to other senior executives of the Company.
(d) Notwithstanding any provision herein to the contrary, an Option
shall in all events comply with the terms of the stock option plan under which
the Option was granted.
3.03 Reimbursement of Expenses and Certain Other Benefits. (a)
----------------------------------------------------
The Company shall promptly reimburse Executive for reasonable business expenses
incurred on behalf of the Company in accordance with the Company policy for
senior Executives upon presentation of appropriate receipts. The Company shall
also reimburse Executive for all legal expenses reasonably incurred in
negotiating and documenting his employment arrangements with the Company.
11
(b) Commencing no later than January 1, 2001, Executive shall be
entitled to participate in a deferred compensation program under which Executive
may defer salary, annual bonuses and other cash compensation payments.
(c) During the term of this Agreement, Executive shall be entitled
to four (4) weeks of paid vacation per annum accrued in accordance with and
otherwise subject to the Company's vacation policies for senior executives, to
be taken at such times and intervals as shall be determined by the Executive,
subject to the reasonable business needs of the Company. In the event that any
portion of such four (4) weeks of paid vacation are not used by Executive in any
annual period, the Executive shall be entitled to carry forward such unused
vacation time in accordance with the Company's policies.
(d) The Company shall provide on Executive's behalf Directors and
Officers insurance coverage during the Term hereof and for the period of six (6)
years immediately following the expiration or sooner termination of the Term on
terms no less favorable than those applying to any other present or former Board
member or officer of the Company.
(e) In addition to the perquisites described in Section 3.03(a)
through 3.03(e) above, Executive shall participate in any other perquisites as
are generally made available to other senior executives, in each case at a level
and on terms and conditions consistent with his position and no less favorable
than those provided to other senior executives.
3.04 Benefits. In addition to the compensation payable to
--------
Executive pursuant to Section 3.01 and Section 3.02 above and the perquisites
provided to Executive in accordance with Section 3.03 above, Executive shall
participate in any Benefits (as defined in this Section 3.04 below) which the
Company from time to time may offer to or provide for its senior Executives in
each case at a level, an on terms and conditions, consistent with his positions
and no less favorable that those provided to any other senior executive. For
purposes of this Agreement, "Benefits" shall mean all the benefits approved by
the Board from time to time and established by the Company for the benefit of
Executives generally and/or for senior Executives of the Company as a class,
which may include, but not be limited to, retirement, deferred compensation and
savings plans, medical, dental, vision, prescription drug and hospitalization
plans, life insurance, short- and long-term disability programs, accidental
death and dismemberment protection and travel accident insurance. Benefits paid
to Executive shall not be deemed to be in lieu of other compensation to
Executive hereunder as described in this Section 3.
3.05 Taxes. (a) Executive recognizes that the compensation,
-----
benefits and other amounts provided by the Company under this Agreement may be
subject to federal, state or local income taxes. It is expressly understood and
agreed that all such taxes shall be the responsibility of Executive. To the
extent that federal, state or local law requires withholding of taxes on
compensation, benefits or other amounts provided under
12
this Agreement, the Company shall withhold the necessary amounts from the
amounts payable to Executive under this Agreement.
(b) If it is determined, by the Company's independent public
accountants in consultations with the Company's independent legal counsel, that
any amount payable to the Executive by the Company under this Agreement, would
constitute an "Excess Parachute Payment" within the meaning of Section 280G of
the Internal Revenue Code of 1986, as amended (the "Code") and be subject to the
excise tax imposed by Section 4999 of the Code, the Company shall pay to the
Executive a "gross up" amount equal to the amount of such excise tax and all
federal and state income or other taxes with respect to payment of such excise
tax, including all taxes with respect to such gross up amount. The highest
marginal tax rate applicable to individuals at the time of the payment of such
amount shall be used to determine the federal and state income and other taxes
with respect thereto. The Company shall withhold from any amounts paid under
this Agreement the amount of any such excise tax or other federal, state or
local taxes then required to be withheld.
4. Ownership of and Rights to Proprietary Information.
--------------------------------------------------
4.01 Executive hereby agrees to assign and does assign to the
Company all of Executive's right, title and interest in any and all proprietary
information discovered, conceived, developed, created or reduced to practice by
Executive personally or jointly with others in the course of performing services
under this Agreement. Executive agrees to disclose to the Company the existence
of all such proprietary information, and further agrees to execute and deliver
promptly all proper papers and perform all proper legal acts which the Company
deems necessary or desirable to vest in the Company all of Executive's right,
title and interest in and to such proprietary information, to enable the Company
to file patent applications, and obtain and maintain Letters Patent with respect
to patentable material and to enable the Company to confirm or perfect its
rights in copyrightable material. Executive agrees that all proprietary
information which is subject to United States Copyright Law is a "work made for
hire," and in the event that it is determined that any such work is deemed not
to be a work made for hire, the foregoing assignment and agreement to assign
shall apply.
4.02 The Company agrees that it shall have no right, title or
interest in any proprietary information for which no equipment, supplies,
facility or trade secret information of the Company was used, and which was
developed entirely apart from the services performed by Executive under this
Agreement, and which does not relate to or result from Executive's work under
this Agreement. Executive represents that, except as disclosed to the Company
in writing as of the date hereof and attached hereto, all material created or
submitted by Executive for or to the Company (excluding any material which is
assigned by the Company to Executive for preparation) shall not be subject to an
obligation of confidentiality in favor of, or infringe upon or violate any
rights of any third person, including but not limited to any right or interest
in any copyright, patent or trade secret rights.
13
4.03 "Proprietary information," for purposes of this Agreement,
includes but shall not be limited to any trade secret (as defined in the Uniform
Trade Secrets Act), any inventions, improvements and ideas, whether or not
patentable, or know-how relating thereto, any material which is protected by
copyright and any other Confidential Information (as defined in Section 5.02(c)
below).
5. Competition and Confidentiality.
-------------------------------
5.01 Competition. Executive agrees that his services hereunder
-----------
are of a special, unique, extraordinary and intellectual character, and his
position with the Company places him in a position of confidence and trust with
the clients and employees of the Company. Executive acknowledges that the
rendering of services to the clients of the Company necessarily requires the
disclosure to Executive of confidential information and trade secrets of the
Company (such as, without limitation, proprietary software programs, marketing
plans, media plans, budgets, corporate policies, client preferences and
policies, and the identity of appropriate personnel of clients with sufficient
authority to influence a shift in suppliers). The parties hereto agree that in
the course of Executive's employment with the Company, Executive has and shall
continue to develop a personal relationship with the Company's clients and a
knowledge of those clients' affairs and requirements, and that the relationship
of the Company with its established clientele shall therefore be placed in
Executive's hands in confidence and trust. Executive consequently agrees that
it is reasonable and necessary for the protection of the trade secrets, goodwill
and business of the Company that Executive make the covenants contained herein.
Accordingly, Executive agrees that while he is in the employ of the Company and
for a six (6) month period after the expiration or sooner termination of the
Term pursuant to Sections 2.02 and 2.04, he shall not except on behalf of the
Company, directly or indirectly, and regardless of the reason for his ceasing to
be employed by the Company:
(a) attempt in any manner to solicit from any client business of
the type performed by the Company or to persuade any client to cease to do
business or to reduce the amount of business which any such client has
customarily done or is reasonable expected to do with the Company, whether or
not the relationship between the Company and such client was originally
established in whole or in part through his efforts; or
(b) solicit to employ any employee or exclusive consultant who is
then or at any time during the preceding twelve months was an employee of or
exclusive consultant to the Company, or persuade or attempt to persuade any
employee of or exclusive consultant to the Company to leave the employ of the
Company or to become employed as an employee or retained as a consultant by
anyone other than the Company; or
(c) render to or for any client any services of the type rendered
by the Company.
14
As used in this Section 5.01, the "Company" shall include subsidiaries of the
Company and the term "client" shall mean (1) anyone who is a client of the
Company on the date of expiration or sooner termination of the Term hereof or,
if Executive's employment shall not have terminated, at the time of the alleged
prohibited conduct (the "Determination Date"); (2) anyone who was a client of
the Company at any time during the one year period immediately preceding the
Determination Date; and (3) any prospective clients to whom the Company had made
a new business presentation at any time during the one year period immediately
preceding the Determination Date.
5.02 Confidentiality. (a) Executive shall not, during the Term
---------------
and thereafter, disclose confidential information of the Company (other than to
an Executive of the Company or to a person to whom disclosure is reasonably
necessary or appropriate in connection with the performance by Executive of
services hereunder) and shall not use confidential information of the Company
for any purpose beyond the performance of services under this Agreement without
the prior written consent of the Company. Executive shall have no obligation
hereunder to keep confidential any confidential information if and to the extent
disclosure of any thereof is specifically required by law; provided, however,
that in the event disclosure is required by applicable law, Executive shall
provide the Company with prompt notice of such requirement, prior to making any
disclosure, so that the Company may seek an appropriate protective order. All
confidential information shall remain the property of the Company. Upon
expiration or sooner termination of the Term hereof, Executive shall return to
the Company all documents, records, plans, designs, notebooks and other
evidences, including all copies thereof, of information, including proprietary
information or confidential information, obtained by Executive during his
employment.
(c) "Confidential information," for purposes of this Agreement
shall mean all information maintained in confidence by the Company. It includes,
but is not limited to, all information that derives independent economic value,
actual or potential, from not being generally known to, and not being readily
ascertainable through proper means by, other persons who can derive economic
value from its disclosure or use. It includes, but is not limited to,
proprietary information and information relating to such business matters as
research and development, manufacturing processes, management systems and
techniques, the identity and profiles of customers and suppliers and sales and
marketing plans and information. Such information may be marked as confidential
or proprietary, or received under circumstances reasonably interpreted as
imposing an obligation of confidentiality. Such information does not lose its
status as confidential information merely because it was known by a limited
number of persons or entities other than Executive or because it was not
entirely originated by the Company. Confidential information does not include
information which Executive can show is or becomes generally available to the
public without fault of Executive, or which is obtained without restriction on
publication or use from a third party having the right to disclose the same.
Executive acknowledges that the confidential information of the Company is a
valuable, special and unique asset of the Company, and that any disclosure of
such confidential information may be materially damaging to the Company.
15
5.03 (a) The parties acknowledge that the type and periods
of restriction imposed in the provisions of Sections 5.01 and 5.02 above are
fair and reasonable and are reasonably required for the protection of the
Company and the goodwill associated with the business of the Company; and that
the time, scope, geographic area and other provisions of Sections 5.01 and 5.02
have been specifically negotiated by sophisticated commercial parties, it being
understood that the clients of the Company may be serviced from any location and
accordingly it is reasonable that the restrictive covenants set forth herein are
not limited by narrow geographic area but generally by the location of such
clients and potential clients. Executive specifically acknowledges that his
being restricted from servicing clients and prospective clients as contemplated
by this Agreement shall not prevent him from being employed or earning a
livelihood in the type of business conducted by the Company.
(b) If any of the covenants in Sections 5.01 or 5.02 above, or
any part thereof, is hereafter construed to be invalid or unenforceable, the
same shall not affect the remainder of the covenant or covenants, which shall be
given full effect, without regard to the invalid portions. If any of the
covenants contained in Sections 5.01 or 5.02, or any part thereof, is held to be
unenforceable because of the duration of such provision or the area covered
thereby, the parties agree that the court or arbitrator making such
determination shall have the power to reduce the duration and/or areas of such
provision and, in its reduced form, such provision shall then be enforceable.
The parties hereto intend to and hereby confer jurisdiction to enforce the
covenants contained in Sections 5.01 and 5.02 above upon the courts of any state
or other jurisdiction within the geographical scope of such covenants in which a
breach or alleged breach of a covenant contained in Section 5.01 or 5.02 has
been alleged to have occurred. In the event that the courts of any one or more
of such states or other jurisdictions shall hold such covenants wholly
unenforceable by reason of the breadth of such scope or otherwise, it is the
intention of the parties hereto that such determination not bar or in any way
affect the right of the Company to the relief provided above in the courts of
any other states or other jurisdictions within the geographical scope of such
covenants, as to breaches of such covenants in such other respective states or
other jurisdictions, the above covenants as they relate to each state or other
jurisdiction being, for this purpose, severable into diverse and independent
covenants. Notwithstanding anything set forth to the contrary express or implied
in this Section 5.03(b), nothing set forth in this Section 5.03(b) is intended
to limit, in any manner, the provisions of Section 7.03.
6. Equitable and Other Remedies. If Executive commits a breach,
----------------------------
or is about to commit a breach, of any of the provisions of Sections 4 or 5
above, the Company shall have the right to have the provisions of this Agreement
specifically enforced by any court having equity jurisdiction, it being
acknowledged and agreed that any such breach or threatened breach will cause
irreparable injury to the Company and that money damages will not provide an
adequate remedy to the Company. In addition the Company may take all such other
actions and remedies available to it under law or in equity and shall be
entitled to such damages as it can show it has sustained by reason of such
breach.
16
7. Miscellaneous.
-------------
7.01 Survival. Executive's duties under Sections 4, 5 and 6
--------
shall survive termination of Executive's employment with the Company to the
extent provided under such Section.
7.02 Assignment. This Agreement and the rights and obligations
----------
of the parties hereto shall bind and inure to the benefit of any successor or
successors of the Company by way of reorganization, or merger and any assignee
of all or substantially all of its business and properties, but, except as to
any such successor or assignee of the Company, neither this Agreement nor any
rights or benefits hereunder may be assigned by the Company or by Executive.
7.03 Interpretation. In case any one or more of the provisions
--------------
contained in the Agreement shall be held to be invalid, illegal or unenforceable
in any respect, for any reason, such invalidity, illegality or unenforceability
shall not affect the other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein. If, moreover, any one or more of the provisions
contained in this Agreement shall be held to be excessively broad, for any
reason, it shall be construed by limiting and reducing it so as to be
enforceable to the extent compatible with the applicable law as it shall then
appear.
7.04 Notices. Any notice which the Company is required or may
-------
desire to give to Executive shall be given by personal delivery, established
overnight courier service requiring signature for receipt or registered or
certified mail, return receipt requested, addressed to Executive at Executive's
address of record with the Company or at such other place as Executive may from
time to time designate in writing. Any notice which Executive is required or
may desire to give to the Company hereunder shall be given by personal delivery,
established overnight courier service requiring signature for receipt or by
registered or certified mail, return receipt requested, addressed to the General
Counsel of the Company at its principal office, or at such other office as the
Company may from time to time designate in writing. The date of personal
delivery, deposit with courier or the date of mailing such notice shall be
deemed to be the date of delivery thereof.
7.05 Arbitration. Any dispute, controversy or claim between the
-----------
parties arising out of this Agreement shall be settled by expedited arbitration
conducted in New York City in accordance with the American Arbitration
Association National Rules for the Resolution of Employment Disputes (the
"Rules") and the laws of the State of New York. In the event that a party
requests arbitration, it shall serve on the other party (the "Non-Requesting
Party") a written demand for arbitration stating the substance of the
controversy, dispute or claim, the contention of the party requesting
arbitration and the name and address of the arbitrator appointed by it. The
Non-Requesting Party, within twenty (20) days of such demand, shall accept the
arbitrator or appoint a second arbitrator and notify the other party of the name
and address of this second arbitrator so selected, in which case the two
arbitrators shall appoint a third. The decision or award of the single
17
arbitrator or, in the case of three arbitrators, the decision or award of any
two arbitrators, shall be final and binding upon the parties. In the event that
the two arbitrators fail in any instance to appoint a third arbitrator within
twenty (20) days of the appointment of the second arbitrator, either arbitrator
or any party to the arbitration may apply to the American Arbitration
Association for appointment of the third arbitrator in accordance with the
Rules. Should the Non-Requesting Party (upon whom a demand for arbitration has
been served) fail or refuse to accept the arbitrator appointed by the other
party or to appoint an arbitrator within twenty (20) days, the single arbitrator
shall have the right to decide alone, and such arbitrator's decision or award
shall be final and binding upon the parties. The decision of the arbitrator or
arbitrators shall be in writing and shall set forth the basis therefor. The
parties shall abide by all awards rendered in the arbitration proceedings, and
all such awards may be enforced and executed upon in any court having
jurisdiction over the party against whom enforcement of such award is sought.
The Company shall pay all administrative charges, arbitrator's fees, reasonable
legal fees and other related expenses of the arbitration (the foregoing fees and
expenses are collectively referred to herein as "Arbitration Costs"), provided,
--------
however, that Executive shall reimburse the Company for all Arbitration Costs to
the extent that his claims and defenses are found to lack any reasonable basis.
The foregoing, however, shall not limit the right of either party to seek
equitable relief from any court of competent jurisdiction as more particularly
described in Section 6 above or otherwise. For the purposes hereof, Executive
hereby submits to the jurisdiction of the federal and state courts in New York
and notice of demand, process and/or summons in connection with legal
proceedings, may be served upon Executive by registered or certified mail in
accordance with Section 7.04 with the same effect as if personally served.
7.05 Waiver. If either party should waive any breach of any
------
provisions of this Agreement, he or it shall not thereby be deemed to have
waived any preceding or succeeding breach of the same or any other provisions of
this Agreement.
7.06 Withholding. All payments made by the Company under this
-----------
Agreement shall be reduced by any tax or other amounts required to be withheld
by the Company under applicable law.
7.07 Complete Agreement and Amendments. This Agreement is the
---------------------------------
entire agreement of the parties hereto with respect to the subject matter
hereof. This Agreement may not be amended, supplemented, canceled or discharged
except by written instrument executed by both parties hereto.
7.08 Applicable Law. This Agreement has been negotiated in, and
--------------
shall be governed by the internal laws of the State of New York.
7.09 Headings. The headings of the sections hereof are inserted
--------
for convenience only and shall not be deemed to constitute a part hereof or to
affect the meaning thereof.
18
7.10 Expectations Regarding Employment and Service as Officer
--------------------------------------------------------
or Director.
-----------
(a) The Company and Executive agree that this Agreement
expresses all of the expectations between Executive and the Company regarding
the term of Executive's employment and Executive's and the Company's right to
terminate that employment and supersedes all other prior agreements whether
written or oral relating to the Executive's employment, including, without
limitation, the Original Employment Agreement. Without limiting the foregoing,
Executive acknowledges that the Company, in its sole discretion, may decline in
the future to renew his Employment upon termination of this Agreement for any
reason.
(b) Executive confirms that Executive has reviewed this
Agreement carefully and understands it. Executive further confirms that
Executive has consulted with or been afforded ample opportunity to consult with
legal counsel representing Executive concerning this Agreement and any other
agreements between or among Executive and the Company.
IN WITNESS WHEREOF, the parties have hereunto set their hand as of the
date first set forth above.
------------------------------------------------------
Xxxxxxx X. Xxxxxx (the "Executive")
RAZORFISH, INC.
BY:
---------------------------------------------------
ITS:
-----------------------------------------------
19
