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EXHIBIT 99.3
August 7, 2001
Fernando Espuelas
c/o StarMedia Network, Inc.
75 Varick Street
New York, NY 10013
Re: SEPARATION AGREEMENT INCLUDING A GENERAL RELEASE
Dear Fernando:
This letter sets forth the terms of our agreement (this "Agreement") with
respect to your separation from employment with StarMedia Network, Inc. and its
subsidiaries (collectively, "StarMedia"), and the end of your tenure as Chief
Executive Officer and Chairman of the Board of StarMedia.
1. Your final date of employment with StarMedia will be August 7, 2001
(the "Separation Date"). As of the Separation Date, except as specifically
provided in this Agreement, all compensation, including bonuses, and all other
benefits and perquisites of employment with StarMedia, including the vesting of
Stock Options pursuant to the 1997, 1998, 1999 and 2000 StarMedia Stock Option
Plans, will cease. As of the Separation Date, all of StarMedia's and your
obligations, except as otherwise provided in this Agreement, under the
Employment Agreement dated as of December 28, 2000 (the "Employment Agreement"),
between you and StarMedia, will cease.
If the terms of this Agreement are accepted by you and if you return a
fully executed original of this Agreement as described below you will be
entitled to the following:
You may remain Chairman of the Board of Directors of StarMedia until
November 7, 2001. During the period that you are Chairman (the "Transition
Period"), you agree to the following:
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o You will only speak about StarMedia in StarMedia scheduled
and managed interviews or at public speaking events, other
than to respond to questions asked of you. During StarMedia
scheduled and managed interviews and public speaking events,
("StarMedia venues"), you will limit your statements to
pre-written and pre-approved messages and statements provided
by StarMedia ("the StarMedia messages"). In the event you are
asked questions about StarMedia during non-StarMedia venues,
you agree to keep your comments to the StarMedia messages.
If StarMedia receives press inquiries directed at you
personally and not in your capacity as a representative of
StarMedia, StarMedia agrees to refer such inquiries to you;
o You understand and agree that you are not entitled or
authorized to and thus agree that you will not commit
StarMedia to any business opportunities.
o StarMedia will make available to you your current office for
your use during the Transition Period to conduct StarMedia
business. StarMedia will provide to you limited and reasonable
administrative support from the staff of StarMedia and
maintain for you an e-mail account on StarMedia's server and
voicemail at your former extension which will contain an
outgoing message acceptable to you and StarMedia. However,
after the Transition Period you will not be entitled to
maintain an office at StarMedia nor entitled to any further
administrative support or any other services.
(b) On or before November 7, 2001, you agree that you will resign from
your position as Chairman of the Board of Directors of StarMedia.
You will not receive any additional remuneration for service in
that capacity. You may remain a member of the Board of Directors.
(c) On or before the Separation Date, StarMedia will pay you any unpaid
salary through the Separation Date and all reasonable unpaid
expenses incurred by you in connection with service to the Company
on or prior to the Separation Date. StarMedia will pay any and all
reasonable expenses incurred by you in connection with your service
as Chairman of the Board during the Transition Period or thereafter
as a Director of the Company.
(d) StarMedia will pay you, via wire transfer to an account designated
by you, a one time payment in the amount of Six Hundred and
Fifty-Thousand Dollars ($650,000.00), less applicable taxes and
other legally required withholding amounts within two days of the
Separation Date. Payment will be deemed made on the date you receive
it.
(e) In addition, in the event that you elect COBRA coverage, for the
initial eighteen (18) months of the period provided pursuant to
COBRA, commencing on
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September 1, 2001 and ending February 28, 2003, StarMedia will pay
the applicable COBRA premiums on your behalf (including your
immediate family). As of March 1, 2003, you will be solely
responsible for all applicable COBRA premiums. In addition,
commencing on September 1, 2001 and ending February 28, 2003,
StarMedia will pay all applicable premiums on your behalf (including
your immediate family) to continue StarMedia's dental and vision
coverage on the same terms as active employees of StarMedia to the
extent such plans allow for continuation coverage. StarMedia
reserves the right to alter and amend its benefit plans at any time.
Your entitlement to COBRA continuation coverage paid for by
StarMedia shall cease if comparable coverage is made available to
you and your immediate family through your employment or your
spouse's employment or if the COBRA continuation period ends sooner
as provided in Section 4980(B) of the Internal Revenue Code of 1986
as amended. Likewise, your entitlement to continued dental or vision
coverage shall cease if comparable dental or vision coverage is made
available to you and your immediate family through your employment
or your spouse's employment.
(f) The Line of Credit provided pursuant to the letter agreement dated
December 28, 2000 between you and StarMedia, as amended and restated
by the letter agreement dated January 31, 2001, will remain in full
force and effect in accordance with its terms ("The Line of
Credit").
2. You and StarMedia agree to the following General Release:
(a) In return for the payments and other benefits described above as
well as the mutual promises contained herein, you completely release StarMedia
from all claims, other than the Excluded Claims as defined below, of any kind,
known and unknown, which you may now have or have ever had against StarMedia,
including claims for compensation, bonuses, severance pay, stock options, tax
indemnity and all claims arising from your employment with StarMedia, whether
based on contract, tort, statute, local or municipal ordinance, regulation or
any comparable law in any jurisdiction ("Released Claims"). By way of example
and not in limitation, the Released Claims shall include any claims arising
under Title VII of the Civil Rights Act of 1964, as amended, the Americans with
Disabilities Act, and the New York Human Rights Law, as well as any claims
asserting wrongful termination, breach of contract, negligent or intentional
infliction of emotional distress, negligent or intentional misrepresentation,
negligent or intentional interference with contract, and defamation.
As used in this paragraph (a), the term "Excluded Claims" means (i)
any and all claims for indemnification or insurance claims, including without
limitation claims under any of StarMedia's directors and officers liability
insurance policies, arising out of your service to StarMedia as an officer or
director pursuant to Section VIII of the Amended and Restated Certificate of
Incorporation and/or Section 21 of the Employment Agreement, (ii) any claims
under the Line of Credit and (iii) any and all claims arising on or after the
Separation Date,
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including without limitation claims arising out of this Agreement. StarMedia
reserves the right to amend and alter its directors and officers liability
insurance policies at any time, but in no event shall StarMedia reduce the
amount of such coverage for acts or omissions prior to the Separation Date.
(b) You represent that you have not filed or permitted to be filed
on your behalf any claims, administrative proceedings or lawsuits against
StarMedia, and you agree that you will not do so at any time in the future with
respect to the subject matter of the Released Claims. Prior to December 31,
2001, you agree that you will not participate in or commence any election
contest as defined in Rule 14-11 of Regulation 14A of the Securities and
Exchange Act of 1934. If you violate this Agreement by instituting any such
claims, proceedings or lawsuits, you agree to pay all costs and expenses
incurred by StarMedia in defending against the claim, proceeding or lawsuit,
including its reasonable attorneys' fees, disbursements and costs.
(c) StarMedia completely releases you from any and all claims,
causes of action, suits, proceedings, debts, accounts, accountings, demands,
liabilities, acts, omissions, and all other controversies of every type, kind,
nature, description and character whatsoever, whether known or unknown, foreseen
or unforeseen, liquidated or unliquidated, and whether based upon facts now
known or unknown, direct or derivative, in law, equity or bankruptcy, other than
the StarMedia Excluded Claims, arising at any time on or prior to the Separation
Date (collectively, the "StarMedia Released Claims").
As used in this paragraph (c), the term "StarMedia Excluded Claims"
means any claims under the Line of Credit.
(d) StarMedia represents that it has not filed or permitted to be
filed on its behalf any claims, administrative proceedings or lawsuits against
you, and it agrees that it will not do so at any time in the future with respect
to the subject matter of the StarMedia Released Claims. If StarMedia violates
this Agreement by instituting any such claims, proceedings or lawsuits,
StarMedia agrees to pay all costs and expenses incurred by you in defending
against the claim, proceeding or lawsuit, including your reasonable attorneys'
fees, disbursements and costs.
3. Other than as provided in this Agreement, you understand and agree
that you are not entitled to any additional severance, loan forgiveness and tax
indemnity from StarMedia as originally provided under any agreement with
StarMedia. You agree that you will not borrow any additional money under any
agreement with StarMedia.
4. You hereby represent and warrant to StarMedia that:
(a) As of the Separation Date, you were and are the record and
beneficial owner of the Collateral, as such term is defined in the Line of
Credit, free and clear of all liens, charges, pledges, encumbrances,
restrictions on rights to sell or vote, security interests or adverse claims of
any kind (collectively, "Liens"), and upon forclosure on the Collateral as
provided in
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the Line of Credit, you will transfer and deliver to StarMedia valid title to
the Collateral free and clear of any lien..
(b) You have the full legal capacity and unrestricted power to
execute and deliver this Agreement, and to perform, your obligations hereunder.
Your execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not violate any provision of law, any
order of any court or other agency of government, or any provision of any
indenture, agreement or other instrument to which you are a party or by which
you or any of your properties or assets is bound or affected, or conflict with,
result in a breach of or constitute (with due notice or lapse of time or both) a
default under any such indenture, agreement or other instrument, or result in
the creation or imposition of any Lien of any nature whatsoever upon any of your
properties or assets.
(c) There is no action, suit, investigation or proceeding pending
or, to your knowledge, threatened against or affecting you before any court or
arbitrator or any governmental body which in any manner relates to your
ownership of the Collateral.
(d) This Agreement has been duly executed and delivered by you and
constitutes your legal, valid and binding obligation, enforceable in accordance
with its terms, except as enforceability may be limited by bankruptcy,
reorganization, insolvency and similar laws, by moratorium laws from time to
time in effect and by general equity principles.
5. In addition you have been granted options to purchase shares of
StarMedia common stock pursuant to the several Option Agreements listed on
Schedule I (collectively, the "Option Agreements"). You understand that as of
the Separation Date, all vesting in all options of StarMedia under the Option
Agreements will cease. You and StarMedia agree that the expiration date with
respect to any and all vested stock options, including, without limitation, any
stock options granted as "incentive stock options," is hereby amended to August
7, 2006 and that all such options may be exercised on or before such date. Any
such exercise must be performed pursuant to the terms of the Option Agreement.
6. You agree to refrain from any disparagement, criticism, defamation
or slander, whether written or oral, direct or indirect (collectively,
"Disparagement"), of or relating to StarMedia, its officers or employees. You
further agree not to engage in any Disparagement to anyone regarding StarMedia
or its technical abilities, product plans, market plans, state of development,
costs, product performance, quality or reliability of its products, management,
management style or management's abilities. Likewise, StarMedia, its officers
and employees agree to refrain from any Disparagement to any party of you,
including without limitation with respect to your management style or abilities,
or any action taken or not taken by you during your term as Chief Executive
Officer or Chairman of StarMedia. StarMedia will make good faith reasonable
efforts to discourage and will prohibit those officers, employees and agents
that are aware of this Agreement from making any disparaging remarks. In
addition, StarMedia will make good faith reasonable efforts to prevent and
repair any Disparagement regarding such
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matters, engaged in by others, of which the directors or those officers who are
aware of this Agreement, become aware.
7. You and the Board of Directors agree to characterize your separation
from employment as a resignation in order for you to pursue other interests. You
and the Board of Directors will approve, in writing, language for any press
release or public statement regarding your separation. Each Party may withhold
such approval in its sole discretion.
8. You understand and acknowledge that as of the last day of the
Transition Period, you are not authorized to represent StarMedia or to hold
yourself out as an employee or representative of StarMedia. You further agree to
refer all strategic inquiries regarding StarMedia to the Chief Executive Officer
of StarMedia.
9. You represent that you have returned to StarMedia, all Company
property (including without limitation, keys to all offices and facilities,
employee handbooks, business cards, client files, corporate credit cards,
telephone calling card, files, sales material) in your possession and you have
not retained any reproductions of these items. You will be entitled to retain
your laptop computer, desktop computer, and your two cellular telephones, so
long as you arrange to have the cellular telephone accounts transferred to a
personal account in your name and at your cost no later than December 1, 2001.
10. Appropriate members of StarMedia's legal and/or human resources
departments will be given access to your desktop computer and laptop computer
hard drives to conduct a review and removal of Company information contained on
the hard drives. StarMedia will have the right to erase any confidential
information contained on such hard drives and will work with you to establish a
mutually acceptable review process. StarMedia agrees that the review process
will be completed by August 8, 2001.
11. You agree that you will make good faith reasonable efforts to
cooperate with StarMedia and its counsel (internal and external) in connection
with any matter with which you were involved while employed by StarMedia or of
which you have knowledge by providing information, answering questions, or
appearing as a witness, and that you will make good faith reasonable efforts to
cooperate in connection with any administrative proceeding or litigation
relating to any matter in which you were involved or about which you have
knowledge as a result of your employment with StarMedia. StarMedia agrees that
it will pay your reasonable expenses incurred in connection with such
cooperation, including reasonable attorney's fees. In addition to the foregoing,
StarMedia will pay you a per diem of $800 per day.
12. You agree to the following restrictive covenants:
(a) From the Separation Date until [information has been omitted and
filed separately with the Securities and Exchange Commission in connection
with a request for confidential treatment] (the "Restricted Period"), you
agree that you will not, directly or indirectly, as an employee, employer,
consultant, agent, principal, partner, manager, stockholder, officer,
director, or in any other
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individual or representative capacity, engage or participate in the ownership,
management, operation or control of any Restricted Enterprise, provided that in
no event shall ownership of less than four (4) percent of the outstanding equity
securities of any issuer whose securities are registered on a national
securities exchange be prohibited under this Section 5(a).
"Restricted Enterprise" shall mean [information has been omitted and
filed separately with the Securities and Exchange Commission in connection with
a request for confidential treatment].
(b) During the Restricted Period, you agree that you will not,
directly or indirectly, solicit for employment [information has been omitted and
filed separately with the Securities and Exchange Commission in connection
with a request for confidential treatment].
In the event that you hire or employ any such person during the
Restricted Period (without soliciting such person in violation of this foregoing
restriction), you shall pay to StarMedia $75,000, which amount represents the
cost of replacing such person.
(c) During the Restricted Period, you shall not solicit or take away
for the benefit of any Restricted Enterprise, any person or entity which, as of
the Separation Date, was a customer of StarMedia or was in negotiations to
become a customer of StarMedia.
(d) If any of the restrictions contained in this Section shall be
deemed by any applicable court to be unenforceable by reason of the extent,
duration or geographical scope thereof, or otherwise, then the parties agree
that such court shall modify such restriction, only to the extent necessary to
render it enforceable and, in its reduced form, such restrictions shall then be
enforced, and in its reduced form this Section shall be enforceable in the
manner contemplated hereby.
13. Any and all inventions, creations, ideas, improvements and software
of any nature whatsoever, whether or not patentable, and developed by the you in
connection with your activities and employment with StarMedia will always be the
property of StarMedia
14. (a) You understand and agree that this Agreement shall be maintained
by you in strict confidence, and that you shall not disclose this Agreement or
any of its terms to any other person unless required by law. You represent that
you have not disclosed the terms of this Agreement or the negotiations leading
up to this Agreement to anyone other than Jack Chen, his tax advisors and
attorneys, and your tax advisors and attorneys.
(b) StarMedia understands and agrees that this Agreement shall be
maintained by it in strict confidence, and that it shall not disclose, nor
permit its officers, directors or employees to disclose, this Agreement or any
of its terms to any other person unless required by law. StarMedia represents
that neither it, nor its officers, directors or employees have disclosed the
terms of this Agreement or the negotiations leading up to this Agreement to any
one other than its professional advisors and Jack Chen.
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15. (a) You acknowledge that your promise not to disclose
confidential and proprietary information belonging to StarMedia and your
promise not to disclose the terms of this Agreement are material terms of the
Agreement without which StarMedia would not provide the payments and benefits
discussed in this Agreement. In addition to any other remedy available to
StarMedia, in the event that you file a lawsuit or administrative charge
relating to any claim released by you in this Agreement, or if you disclose
confidential or proprietary information or disclose the terms of the
Agreement, you will pay to StarMedia liquidated damages in the amount of
$25,000.
(b) StarMedia acknowledges that its promise not to disclose and to
cause its officers, directors and employees not to disclose the terms of this
Agreement are material terms of the Agreement without which you would not agree
to the termination of the Employment Agreement. In addition to any other remedy
available to you, in the event that StarMedia files a lawsuit or administrative
charge relating to any claim released by it in this Agreement, or if StarMedia
discloses or permits its officers, directors or employees to disclose the terms
of the Agreement, StarMedia will pay to you liquidated damages in the amount of
$25,000.
16. This Agreement shall be governed by the laws of the State of New
York, without regard for its conflict of laws principles.
17. You and StarMedia mutually agree that any controversy or claim
arising out of or relating to this Agreement or its breach, or any other dispute
between the parties arising from or related to your employment or position as
Chief Executive Officer and Chairman of the Board of StarMedia, shall be
submitted to be resolved by arbitration. The claims covered by this Agreement
("Arbitrable Claims") include, but are not limited to, claims for any
compensation including stock or stock options or severance; claims for breach of
any contract (including this Agreement) or covenant (express or implied); tort
claims; claims for discrimination (including, but not limited to, race, sex,
religion, national origin, age, marital status, medical condition, or
disability); claims for benefits (except where an employee benefit or pension
plan specifies that its claims procedure shall culminate in an arbitration
procedure different from this one); and claims for violation of any federal,
state, or other law, statute, regulation, or ordinance. The parties hereby waive
any rights they may have to trial by jury in regard to Arbitrable Claims. A
judgment may be entered on the arbitrator's award in any court having
jurisdiction.
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Arbitration under this Agreement shall be the exclusive remedy for all
Arbitrable Claims. You and StarMedia agree that arbitration shall be held in or
near New York, New York and shall be in accordance with the then-current
Employment Dispute Resolution Rules of the American Arbitration Association,
before an arbitrator licensed to practice law in the State of New York. The
arbitrator shall have authority to award or grant both legal, equitable, and
declaratory relief. Such arbitration shall be final and binding on the parties.
The Federal Arbitration Act shall govern the interpretation and enforcement of
this section pertaining to Alternative Dispute Resolution.
18. You and StarMedia also agree that this letter contains all of our
agreements and understandings, and fully supersedes any prior agreements or
understandings that we may have had regarding the subject matter of this
Agreement; provided that, notwithstanding any provision to the contrary, the
Letter of Credit shall remain in full force and effect in accordance with its
terms as in effect on the date hereof.
19. You acknowledge you have been represented by counsel throughout the
negotiation and drafting of this Agreement, and that you have chosen to enter
into this Agreement and based upon your own judgment and not in reliance upon
any promises made by StarMedia other than those contained in this Agreement.
If this letter comports with your understanding of our agreement, please
sign on the line provided below and return the original by hand delivery.
Sincerely,
/s/ Enrique Narciso
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Enrique Narciso
Chief Executive Officer
I have read and understand the Agreement above and agree to be bound by
its terms and conditions.
/s/ Fernando Espuelas Dated: 8-7-01
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Fernando Espuelas