EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement"), dated as of May 13, 1997, is by and
between THE RECOVERY NETWORK, INC., a Colorado corporation ("Company"), and ▇▇▇▇
▇▇▇▇▇▇▇ ("Employee").
WITNESSETH
WHEREAS, Company desires to employ Employee to manage and supervise all of its
sales and marketing operations and activities on the terms and conditions set
forth herein; and
WHEREAS, as an inducement to Company to offer such employment, Employee desires
to enter into certain covenants, including without limitation a covenant not to
compete with Company if his employment is terminated under certain circumstances
set forth below.
NOW, THEREFORE, in consideration of the mutual promises contained herein, the
parties agree as follows:
1. Employment. Company shall employ Employee, and Employee shall be
employed by Company, on the terms and conditions set forth herein for the period
commencing as of the date hereof and (unless sooner terminated pursuant to
Section 4) ending on May 31, 1999.
2. Position and Duties. Employee shall manage and supervise all of the
sales and marketing operations and activities of Company. Employee shall report
to and be responsible directly to the Chief Executive or Chief Operating Officer
of Company and shall have and perform such duties and responsibilities relating
to the business and operations of Company as may be appropriate to Employee's
position and as the Chief Executive or Chief Operating Officer of Company from
time to time may assign to him, which are not inconsistent therewith. Without
limiting the generality of the foregoing, Employee shall have the following
duties:
(a) To supervise and conduct strategic planning for the
acquisition of new affiliates; to negotiate and execute affiliate agreements and
use his best efforts to maintain these relationships when acquired; to develop a
comprehensive data base containing all cable television operators and the status
of their affiliations.
(b) To supervise and oversee creation of all collateral sales
and marketing materials, affiliate kits, presentations (affiliate and ad sales)
and all advertising; to develop community awareness and cross promotional
concepts with cable operators and partners.
-1-
(c) To supervise and oversee affiliate relations; to solicit,
maintain, care for and preserve trafficking procedures and ▇▇▇▇▇▇▇▇; to develop
market analysis and "hot lists" of potential affiliates and tie-ins.
(d) To monitor support of the Recovery Network web site as it
relates to marketing; to keep the web site fresh and current, while exploring
potential new avenues of merchandising and distribution.
(e) To supervise and oversee coordination and oversight of all
public relations for the Network; to disseminate information internally; to be
responsible for partnership relations and a Company newsletter.
(f) To supervise exploration of outside merchandising
regarding books, music, videos, etc.
(g) To supervise development of budgets and variance
procedures regarding such budgets for each of the areas under the control of
sales and marketing.
During the term of his employment, Employee shall
devote his full time, attention, and best efforts to Company and to the
furtherance of its interests and shall not directly or indirectly engage in, or
enter into the employment of, or otherwise render services to or for, or act as
a manager, member or officer of, any other business (other than established
trade associations of which Company is a member) except for non-remunerative
participation in charitable organizations, service as a director of
non-competitive businesses and occasional consulting for Parenthood Television
and Working America so long as those consulting duties do not materially
interfere with employee's duties under this Agreement.
3. Compensation.
(a) Company shall pay to Employee an annual base salary of
$144,000, payable $12,000 per month in equal semi-monthly installments during
the term of his employment.
(b) In addition to Employee's base salary, Company shall pay
to Employee a commission on the following basis:
(i) Company shall pay to Employee one cent for each
incremental household to which at least two hours per day of Company programming
is delivered during the term of his employment or within the first calendar
quarter thereafter other than pursuant to the existing agreement between Company
and Access TV or pursuant to any other agreement under which Company purchases
carriage rights for cash, equity in Company or other
-2-
consideration (together with Access TV, a "Company Cost Service"). Households
that receive Company programming through a Company Cost Service shall not be
deemed "households" for any purpose in connection with the calculation of the
commission payable hereunder. Accordingly, households that formerly received
Company programming through a Company Cost Service and thereafter receive
Company programming other than through a Company Cost Service shall be deemed
incremental households at the time they first receive Company programming other
than through a Company Cost Service. Each household that receives Company
programming other than through a Company Cost Service is referred to herein as a
"Company Household."
(ii) The amount of such commission shall be
increased, subject to the mutual agreement of Company and Employee, at such time
as the number of hours per day of Company programming is increased above two
hours. In addition, the terms of the delivery of Company programming shall be
subject to the approval of Company; and the amount of such commission may be
increased or decreased if the terms of the delivery of Company programming to
any particular household or group of households deviate from the standard terms
approved by Company ("Non-Standard Terms"). If Company is required to pay a fee,
commission or other compensation to any person or entity other than Employee (a
"Third Party") in connection with the delivery of Company programming to any
particular Company Households, the amount thereof shall be deducted from the
commission payable to Employee hereunder with respect to such Company
Households. Employee shall negotiate the terms of such fee, commission or other
compensation with the Third Party.
(iii) If Employee and Company are unable to reach
agreement on the amount of any adjustment to the commission payable hereunder to
Employee with respect to the delivery of Company programming to Company
Households on Non-Standard Terms or if Employee and a Third Party are unable to
reach agreement on the amount of the commission or other compensation payable to
the Third Party, in each case at least ten calendar days prior to the date
Company is required to pay to Employee the commission to which he is entitled
hereunder with respect to such incremental Company Households, the executive
committee of the Board of Directors shall determine the amount of the adjustment
to the commission payable to Employee hereunder, which, in the case of an
adjustment because of a fee, commission or other compensation payable to a Third
Party, shall be a deduction no greater than the amount of the fee, commission or
other compensation payable to such Third Party. Any such determination by the
executive committee shall be conclusive, final and binding on Employee and
Company.
(iv) Not later than fifteen days following the end of
each calendar quarter that ends during the term of Employee's employment or
within ▇▇▇
-▇-
▇▇▇▇▇▇▇▇ days immediately following the end of the term of Employee's
employment, Company shall deliver to Employee a statement of the number of
Company Households as of the last day of such calendar quarter, the number of
Company Households as to which Company has theretofore paid a commission
hereunder, any other fees, commissions or other compensation payable by Company
in connection with the delivery of Company programming to incremental Company
Households reflected on such statement and a calculation of the amount of the
commission then payable to Employee. Such calculation shall be the product of
$.01 times the excess of (a) the number of Company Households at the end of such
calendar quarter over (b) the number of Company Households as to which a
commission has theretofore been paid hereunder, subject to adjustment under
clauses (ii) and (iii) above. Company shall deliver to Employee, together with
such statement, payment of the commission shown to be payable pursuant thereto.
Delivery and acceptance of such payment shall not be deemed acceptance by
Employee of the accuracy of any statement delivered to Employee hereunder or the
waiver by Employee of any rights hereunder except with respect to the conclusive
determination of the executive committee of the Board of Directors of Company
referred to in clause (iii) above.
(c) Employee shall be entitled to participate in and receive
benefits under any employee benefit plans and arrangements from time to time
made available to the executive employees of Company, when and as implemented
and subject to and on a basis consistent with the terms, conditions and overall
administration of such plans and arrangements. Amounts paid to Employee under
any such plan or arrangement shall not be deemed to be made in lieu of any other
compensation payable to Employee hereunder.
(d) Employee shall be entitled to fifteen business days of
paid vacation each year during the term of his employment hereunder commencing
as of March 1, 1997 and additional holidays in accordance with Company policy,
as determined by the Chief Operating Officer of Company from time to time. The
timing of vacation days is subject to the reasonable advance approval of the
Chief Operating Officer of Company.
(e) Company shall pay directly, or reimburse Employee for, the
reasonable moving expenses, including carrier costs, short-term housing and
other incidental expenses, incurred by Employee in relocating himself and his
family to the Los Angeles metropolitan area in an amount not to exceed $15,000.
(f) Company shall pay directly, or shall reimburse Employee
for, the travel, food and lodging costs incurred by Employee to enable Employee
to be present at the offices of Company in Santa Monica, California, during
regular business hours prior to his relocation to the Los Angeles metropolitan
area,
-4-
provided, however, that Company shall be under no obligation to pay directly, or
to reimburse Employee for, any such costs incurred after June 30, 1997.
(g) Subject to the standard expense reimbursement policies of
Company. Company shall reimburse Employee for all reasonable expenses incurred
by Employee in connection with the performance of his duties and the discharge
of his responsibilities hereunder. Employee shall submit to the Chief Financial
Officer of Company, not more than thirty (30) days following the end of each
calendar month during the term of his employment, such information on such forms
as Company may request, which may include, but need not be limited to, an
itemized list of all expenses incurred by him during the preceding calendar
month, setting forth dates, the purposes for which incurred and the amounts
thereof, together with such receipts as Employee may reasonably be able to
obtain and such other documentation as may be required from time to time to
enable Company to deduct such expenses under the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder.
4. Termination. The term of this Agreement and Employee's employment
hereunder may be terminated before May 31, 1999, on the following terms and
conditions:
(a) By Employee for any reason, upon at least 30 days' advance
written notice, or upon Employee's death, with Company's only liability being
the payment of base salary, reimbursement for accrued and unpaid expenses and
vacation compensation earned and unpaid as of Employee's last day of work;
(b) By mutual agreement of Company and Employee, on such terms
and with such compensation as may be mutually agreed upon; provided however that
such severance compensation shall not exceed the amount payable under Section
4.(d) hereof;
(c) By Company for "good cause" (as hereinafter defined), such
termination to be effective immediately upon notice of such termination from
Company to Employee, with Company's only liability being the payment of base
salary, reimbursement for accrued and unpaid expenses and vacation compensation
earned and unpaid through the date of such termination; or
(d) By Company without "good cause," upon not less than 30
days' prior written notice, with reimbursement for accrued and unpaid expenses
plus severance compensation equal to the greater of (i) the base salary and
vacation compensation for which Company would have been liable hereunder had
such termination not occurred until the earlier of May 31, 1999, or one year
after the effective date of such termination, and (ii) base salary and vacation
compensation for 90 days following the effective date of such termination;
provided that one-half
-5-
of such severance compensation shall be payable on the effective date of such
termination and the balance shall be payable semi-monthly ratably over the
compensation reference period. If Company terminates the term of Employee's
employment hereunder without "good cause," the vesting of all options
theretofore granted to Employee shall be immediately accelerated to the
effective date of such termination and all such options shall then be
exercisable with respect to all shares covered thereby for the full term of such
options then remaining.
In addition, if Company terminates the term of Employee's
employment hereunder without "good cause" and, following the effective date of
such termination, Employee is required to relocate in order to accept new
employment, Company shall pay directly, or reimburse Employee for, the
reasonable moving expenses, including carrier costs, short-term housing and
other incidental expenses, incurred by Employee in such relocation of himself
and his family in an amount not to exceed $15,000.
For purposes of this Section 4, "good cause" shall
mean any act or omission of Employee constituting gross negligence or willful
misconduct in the conduct of his duties for Company, any breach by Employee of
the terms of his Non-Disclosure and Inventions Agreement, or (given the nature
of Company's mission as a disseminator of information, programs and the culture
of recovery from such abuse) alcohol or substance abuse.
5. Competitive Activity.
(a) During the term of this Agreement and for one year after
the termination of this Agreement for any reason set forth in Sections 4(a) or
(c) above only, Employee shall not directly or indirectly (as an officer,
director, employee, consultant, owner, shareholder, adviser, joint venturer or
otherwise), engage in any activities that could be deemed a conflict of interest
or in any way compete with Company or its affiliates within the United States in
(i) the development or provision of television, radio, interactive and other new
media programming services primarily offering information, direction or support
to people afflicted with or affected by alcoholism, chemical dependency, eating
disorders and other behavioral health problems ("Recovery Media Business"), (ii)
any other line of Recovery Media Business in which Company or its affiliates
shall be engaged, or shall have formed an intention to engage with the active
participation of Employee in planning or evaluation, at any time during the term
of Employee's employment, including without limitation sales and merchandising
of recovery related material. Employee shall not be precluded from owning less
than one percent of the securities of any competitor of Company or its
affiliates if such securities are publicly traded on a national securities
exchange or are quoted on an automated quotation system. Employee represents and
warrants that he is under no competitive restrictions or obligations to third
parties that affect his performance hereunder.
-6-
(b) During the term of this Agreement and for one year after
the termination of this Agreement for any reason, whether or not such
termination shall be alleged or later found to be unlawful, wrongful or in
breach of contract. Employee shall not contact, directly or indirectly, any
customer of Company with whom Employee had contact during the term of this
Agreement unless such contact by Employee is not related to the Recovery Media
Business.
(c) Employee acknowledges that, through his employment with
Company, he will acquire access to information suited to immediate application
by a business in competition with Company. Employee acknowledges that he has
executed concurrently with this Agreement a Non-Disclosure and Inventions
Agreement, the terms of which are incorporated herein by reference as if set
forth herein verbatim, that imposes obligations on Employee with respect to
information about Company. Employee considers the restrictions on his future
employment or business activities contained in this Section 5 to be in all
respects reasonable and necessary. Employee acknowledges that Company and its
affiliates and competitors operate throughout the United States, expressly
consents to the geographic restriction on competition contained in this Section
5, and believes that such restriction is reasonable given the nature of
Company's business.
(d) Employee acknowledges the possibility that his standard of
living may be reduced during the one year following the termination of this
Agreement and assumes the risk associated with that possibility.
(e) Employee acknowledges that, upon a breach of this Section
5, Company will suffer immediate and irreparable harm and damage for which money
damages alone cannot fully compensate. Employee therefore agrees that, upon such
breach or threat thereof, Company shall be entitled to a temporary restraining
order, preliminary injunction, permanent injunction and all other injunctive
relief, without posting any bond or other security, to bar employee from
violating this Agreement. Nothing in this section shall be construed as an
election of remedies or waiver of any right available to Company under this
Agreement or by law, including without limitation the right to seek damages from
Employee for breach of this Agreement.
(f) To the extent possible or required under applicable law,
including, without limitation, the U.S. Copyright Act, the results and proceeds
of any and all services and materials (collectively "Materials") written,
produced or created by Employee during the term of his employment hereunder
relating to the Recovery Media Business, and the content and use thereof, shall
be considered Works Made For Hire or, if not legally capable of being considered
as such, then and in such event Employee hereby assigns to Company in perpetuity
all right, title and interest, including copyright, he may have in or to such
Materials throughout the
-7-
universe free and clear of any and all claims for royalties or other
compensation other than that specified herein. Should Employee develop ideas,
scripts, concepts or other creative properties which do not relate to the
Recovery Media Business during the term of his employment, Employee shall give
Company the first right of negotiation and last matching right to develop such
property.
6. Successors and Assigns. This Agreement and all rights hereunder
shall inure to the benefit of and be enforceable by Employee's personal and
legal representatives, executors, administrators, heirs, distributees, devisees
and legatees and by Company's successors and assigns. This Agreement is personal
in nature, and neither party shall, without the prior written consent of the
other, assign or transfer this Agreement or any right or obligation hereunder.
7. Notice. Any notice or other communication hereunder to either party
shall be in writing and shall be deemed to have been duly given when delivered
personally or mailed by certified mail, return receipt requested, postage
prepaid, addressed (a) if to Company at ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ and (b) if to Employee at his address sent forth on the
personnel records of Company, or to such other address as either party may have
furnished to the other in writing in accordance herewith.
8. Governing Law. This Agreement shall be governed by, and construed
and enforced in accordance with, the internal laws of the State of California
applicable to agreements made and to be performed entirely in such state without
giving effect to the conflicts of laws and principles thereof. Venue for any
action arising out of this Agreement shall be proper in Los Angeles County,
California.
9. Severability. If any court of competent jurisdiction shall declare
any provision of this Agreement to be invalid or unenforceable, the remainder of
this Agreement shall remain fully enforceable. To the extent that any court
shall conclude that any provision of this Agreement is void or voidable, the
court shall reform such provision only to the extent necessary to render the
provision enforceable with a view to the parties' desire that Company be
protected to the greatest extent possible under applicable law from improper
competition and the disclosure of its trade secrets.
10. Integration. This Agreement constitutes the entire agreement of the
parties and a complete merger of prior negotiations and agreements. This
Agreement may be modified only in a writing signed by the parties.
11. Arbitration. Should the parties have a dispute regarding matters
which are the subject matter of this Agreement which they cannot resolve between
themselves, such dispute shall be submitted to binding arbitration pursuant to
local
-8-
rules in Los Angeles County in either Superior or Municipal Court. The
prevailing party in such an arbitration shall be entitled to legal fees and
costs of such arbitration.
12. Waiver. No term or condition of this Agreement shall be deemed to
have been waived nor shall there be any estoppel against the enforcement of any
provision of this Agreement, except by a written instrument signed by both
parties. No written waiver shall be deemed a continuing waiver unless
specifically stated therein, and a written waiver shall operate only as to the
specific term or condition waived and not for the future or as to any act other
than specifically waived.
13. Construction. The parties have reviewed this Agreement in its
entirety and acknowledge that each has had a full opportunity to negotiate its
terms and to consult concerning this Agreement with counsel of its own choosing.
The parties expressly waive any and all applicable common law and statutory
rules of construction to the effect that any provision of a contract should be
construed against the drafter. This Agreement and all provisions hereof shall in
all cases be construed as a whole, according to the fair meaning of the language
used. Any party contesting the validity, existence, adequacy, or terms of this
Agreement shall have the burden of proof as to fraud, concealment, the failure
to disclose material information, unconscionability, misrepresentation, mistake
of fact or law and any other matters. The headings contained herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
14. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
THE RECOVERY NETWORK, INC.
BY: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
President and Chief Executive Officer
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
-9-
