Exhibit 10.5
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") dated January 16, 1997 but effective as
of December 1, 1996 by and between THE RECOVERY NETWORK, INC., a Colorado
corporation ("Company"), and XXXXXX X. XXXXXXX, XX., an individual residing in
Denver, Colorado ("Employee"),
WITNESSETH:
WHEREAS, Company desires to employ Employee to serve as He chairman of its board
of directors on the terms and conditions set forth herein; and
WHEREAS, as an inducement to Company to offer such employment, Employee agrees
to enter into certain covenants, including without limitation a covenant not to
compete with Company if his employment is terminated;
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 on December 1, 1996 and (unless sooner terminated pursuant to
section 4) ending on November 30, 1998.
2. Position and Duties. Employee shall serve as chairman of the board
of directors of Company, and he shall be principally responsible for interaction
between Company and the recovery and prevention community as more specifically
described in clauses (a) and (b) below. Employee shall report to and be
responsible directly to the board of directors 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 board of
directors of Company from time to time may assign to him, in each case not
inconsistent with his principal responsibility. In addition, Employee shall
serve on the executive committee of the board of directors of Company. Without
limiting the generality of the foregoing, Employee shall have the following
duties:
(a) Advisory Board. Oversee Company's efforts to create and utilize an
advisory board;
(b) National Recovery and Prevention Partnership. Oversee Company's
efforts to create and sponsor a national recovery and prevention partnership;
and
(c) Execive Committee. Serve on the executive committee of Company.
Except with the prior written consent of the board of directors, which consent
shall not be unreasonably withheld, during his employment Employee shall devote
such of his time, attention, and best efforts to Company as he and the president
and chief executive officer deem
necessary and appropriate 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 director, 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.
3. Compensation. (a) Employee shall receive a base salary of $10,000
per month through November 30, 1997, payable in substantially equal semi-monthly
installments on the fifteenth and the last day of each calendar month during the
term of this Agreement.
(b) 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 senior officers of Company or the 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 in
lieu of the base salary payable to Employee under section 3(a).
(c) Employee shall be entitled to 15 business days of paid
vacation and holidays in accordance with Company policy, as determined by the
chief operating officer of Company from time to time. Vacation days shall accrue
at the rate of 1.25 days per month commencing on December 1, 1996, but no
vacation may be taken until June 1, 1997.
(d) If and when the 1997 Management Bonus is adopted by the
board of directors and the shareholders, Company shall grant Employee an option
to purchase 12,915 shares of the Common Stock, par value $0.01 per share, of
Company at a price of $5.00 per share. Such option shall vest monthly over one
year commencing as of December 1, 1996.
4. Termination. The term of Employee's employment hereunder may be
terminated before November 30, 1998 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 and vacation compensation earned
and unpaid as of Employee's last day of work;
(b) By mutual agreement of Company and Employee, with such
compensation as may be mutually agreed upon, but in no event to
exceed the amount of severance compensation to which Employee
would be entitled if the termination occurred pursuant to section
4(d);
(c) By Company for "good cause" (as hereinafter defined), upon 30
days written notice, with Company's only liability being the
payment of base salary and vacation compensation earned and
unpaid as of Employee's last day of work;
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(d) By Company without "good cause," upon 30 days written notice, and
with severance compensation, at the option of Company, equal to
any of the following: (i) base salary and vacation compensation
due through November 30, 1998, (ii) base salary and vacation
compensation for one year, or (iii) base salary and vacation
compensation for two years; provided with respect to the
compensation described in clauses (i) and (ii) that one-half of
such severance compensation shall be payable on the date of
termination and the balance shall be payable ratably over the six
months following the date of termination and with respect to the
compensation described in clause (iii) that one-quarter of such
compensation shall be payable on the date of termination,
one-quarter shall be payable one year thereafter, and the balance
shall be payable ratably over the six months following one year
from the date of termination; or
(e) If a private placement of equity securities of Company with gross
proceeds of at least $1,000,000 has not been consummated by March
31, 1997.
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
Nondisclosure/Inventions Agreement, or (given the nature of Company's mission)
alcohol or substance abuse.
5. Competitive Activity. (a) During the term of this Agreement and for
two years 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, 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 by
(i) working for or otherwise affiliating with a for-profit television network
whose programming primarily addresses or relates to issues regarding people
afflicted with or affected by alcoholism, substance abuse, eating disorders,
depression, and other behavioral health problems ("Recovery Issues"), (ii)
acting as a host or regularly scheduled guest on a nationally syndicated
for-profit radio program whose regular focus is primarily to address Recovery
Issues, (iii) working for or otherwise affiliating with a for-profit interactive
media company whose content or services primarily address or relate to Recovery
Issues, or (iv) working for or otherwise affiliating with a for-profit
organization or company whose primary business is offering goods or services
that address or relate to Recovery Issues. 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. Employee represents and warrants that he is under no competitive
restrictions or obligations to third parties that affect his performance
hereunder.
(b) During the term of this Agreement and for two years 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
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indirectly, any customer of Company with whom Employee had contact during the
term of this Agreement.
(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 following provision of Colorado law, as
set forth in section 8-2-113(2) of the Colorado Revised Statutes:
Any covenant not to compete which restricts the right of any person to
receive compensation for performance of skilled or unskilled labor for
any employer shall be void, but this subsection (2) shall not apply
to:
(a) Any contract for the purchase and sale of a business or the
assets of a business;
(b) Any contract for the protection of trade secrets;
(c) Any contractual provision providing for the recovery of the
expense of educating and training an employee who has served an
employer for a period of less than two years;
(d) Executive and management personnel and officers and employees who
constitute professional staff to executive and management
personnel.
Employee acknowledges that this Agreement is a contract for the protection of
trade secrets under clause (b) and that he is an executive and management
employee within the meaning of clause (d).
(e) Employee acknowledges the possibility that his standard of living
may be reduced during the two years following the termination of this Agreement
and assumes the risk associated with that possibility.
(f) 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
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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.
(g) Notwithstanding anything to the contrary in this Agreement, the
covenant not to compete set forth in this section 5 shall not apply to Employee
(i) if, without the consent of Employee, Company significantly modifies its
existing mission statement or its commitment to the board of advisors or the
National Recovery Partnership as contemplated on the date hereof, (ii) if
Company breaches section 4(d) by failure to pay any installment of the severance
described therein within 10 days after written demand therefor by Employee,
(iii) if the employment of Employee is terminated and thereafter Company
abandons its commitment to the board of advisors or the National Recovery and
Prevention Partnership as contemplated on the date hereof, or (iv) this
Agreement is terminated pursuant to section 4(e). Additionally, in the event
that this Agreement is terminated by Company without "good cause," then the term
of the covenant not to compete shall last for the period of time for which
Company pays severance compensation to Employee under section 4(d).
6. Change of Control. If a Change in Control (as hereinafter defined)
occurs, Employee shall be considered to have been terminated without "good
cause" as provided in section 4(d) and the covenant not to compete set forth in
section 5 shall have no further force and effect. A "Change in Control" is
deemed to have occurred if (a) a "person" (as defined in section 13(d) of the
Securities Exchange Act of 1934) becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934) of shares of Common Stock
representing 30 percent or more of the shares as to which votes may be cast for
the election of directors of Company or (b) individuals who are directors of
Company at the beginning of a 24-month period cease to constitute at least
two-thirds of all directors of Company at any time during such period.
7. Successors and Assigns. This Agreement and all rights hereunder
shall inure to the benefit of and be enforceable by Employee's personal or 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.
8. 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 000 Xxxxx Xxxxxx Xxxxxxxxx, Xxxxx 000,
Xxxxx Xxxxxx, Xxxxxxxxxx 00000 and (b) if to Employee at 000 Xxxxx Xxxxxx,
Xxxxxx, Xxxxxxxx 00000, or to such other address as either party may have
furnished to the other in writing in accordance herewith.
9. Governing Law. This Agreement shall be construed in accordance with
and governed by the laws of the State of Colorado. Venue for any action arising
out of this Agreement shall be proper in Denver County, Colorado.
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10. 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.
11. 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.
12. Waiver. No term or condition of this Agreement shall be deemed to
have been waived, nor shall there be an 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 that 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/ Xxxxxxx X. Xxxxx
-----------------------
Xxxxxxx X. Xxxxx
President and Chief Executive Officer
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/s/ Xxxxxx X. Xxxxxxx, Xx.
--------------------------
Xxxxxx X. Xxxxxxx, Xx.
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