February 20, 1997
Xxxxx Xxxxxx
CNET, Inc.
000 Xxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Re: Phase Out and Resignation Agreement
Dear Xxxxx:
This letter sets forth our agreement (the "Agreement") concerning
various matters related to your phase out as an officer and employee of
C|NET, Inc. (the "Company"). Reference is made to the letter agreement
between the Company and you dated September 14, 1995, as amended by the
Amendment to Employment Agreement between the Company and you dated May 23,
1996 (as so amended, the "Employment Agreement").
Both the Company and you desire that your separation from the
Company be on a friendly basis and want to avoid any disputes and
controversies concerning your employment and separation. Consequently, we
have agreed as follows:
1. PHASE OUT AND RESIGNATION. Effective as of March 1, 1997
(the "Phase Out Date"), you hereby resign as an officer of the Company and
your duties as an employee of the Company will be limited to the consulting
and advisory duties specified in paragraph 2 below. Effective as of May 1,
1997 (the "Resignation Date"), you hereby resign as an employee of the
Company.
2. ADVISORY SERVICES. From the Phase Out Date until November
30, 1997 (the "Advisory Period"), it is expected that you will continue to
serve as Executive Producer of the Company's XX.XXX television series and as
a director of E! Online, Inc. During the Advisory Period, you will also
provide consulting and advisory services to the Company in connection with
XX.XXX and other television programs, as reasonably requested by the Company
in order to ensure a successful transition. You may also serve as an
Executive Consultant for other television programs. In such capacities, you
will remain in close contact with the producers of XX.XXX and will provide
notes on general series direction and all scripts, rough cuts and final cuts
of XX.XXX and, to the extent requested, other television programs. During
the Advisory Period, you will be expected to devote approximately 40 hours
per month to the Company's business, including approximately 10 hours per
month in San Francisco. From the Phase Out Date to the Resignation Date, you
will be acting as an employee of the Company. From the Resignation Date
until the end of the Advisory Period, you will be acting as an independent
contractor, and not as an employee, of the Company. You understand that your
role as Executive Producer of XX.XXX may be on a non-exclusive basis, if
necessary. In addition,
1
notwithstanding the foregoing, at any time following the Resignation Date,
the Company will have the right to terminate your status as Executive
Producer of XX.XXX, your status as a director of E! Online, Inc. and your
other consulting and advisory activities if it determines, in good faith,
that a continuation of such status or activities would be detrimental to the
Company.
3. COMPENSATION PRIOR TO PHASE OUT. You will continue to
receive all salary, bonuses, profit participation rights and other benefits
to which you are entitled under the Employment Agreement based on services
rendered through and including February 28, 1997.
4. COMPENSATION FOLLOWING PHASE OUT. Beginning on the Phase
Out Date, you will have no further rights of any kind under the Employment
Agreement (including without limitation rights to salary, bonuses, profit
participations or benefits), except as follows:
(a) From the Phase-Out Date until the Resignation Date,
you will receive a monthly salary of $500.
(b) You will be entitled to receive 25% of any Net
Proceeds (as defined in the Employment Agreement) earned by the
Company during the four years following the Phase Out Date from
contingent compensation actually received by the Company. It is
expressly understood and agreed that you will have no right to
participate in the Net Proceeds of any other television programs
produced by the Company, now or in the future.
(c) To the extent permissible under the Company's
insurance plans, the Company will continue to provide medical
insurance to you, at your cost, until the end of the Advisory Period.
(d) All of your outstanding stock options will remain
effective and will be exercisable in accordance with their terms.
In particular,
(i) your option to purchase an aggregate of
214,284 shares at $1.87 per share pursuant to the Stock
Option Agreement dated April 30, 1994 (the "1994 Option")
will remain effective, and the Company acknowledges and
agrees that the modification of your duties between the
Phase Out Date and the Resignation Date will not affect the
vesting of the final installment of 53,571 shares under the
1994 Option on April 30, 1997; and
(ii) your option to purchase an aggregate of
8,100 shares at $13.00 per share pursuant to the Stock
Option Agreement dated June 5, 1996 (the "1996 Option"),
which was fully vested on the date of grant, will remain
exercisable in accordance with its terms.
(e) The Company hereby waives the termination payment
that would otherwise be required under Section 1(b) of the Amendment
to the Employment
2
Agreement dated May 23, 1996, which relates to 46,500 shares that
you were allowed to purchase at $2.41 per share.
(f) The Company will reimburse you, in accordance with
its reimbursement policies as in effect from time to time, for
reasonable business expenses (including travel expenses) incurred by
you in connection with performing your duties for the Company
hereunder; provided that any travel other than from Los Angeles to
San Francisco must be approved in advance. For purposes of applying
the Company's reimbursement policies to your duties hereunder,
Xxxxxx Xxxxxx will be considered your "manager." For so long as you
remain a director of the Company, you will have access to the
Company's electronic mail and voice mail systems and the Company
will provide you with use of a guest office in San Francisco (along
with related office supplies) and reasonable secretarial services in
San Francisco related to your duties hereunder.
5. Board Membership. Effective as of the Phase Out Date, you
hereby resign as a Class I director of the Company. Xxxxxx Xxxxxx has agreed
to resign as a Class II director of the Company, and the Company will use its
best efforts to cause you to be elected to fill the resulting vacancy among
the Class II directors, so that you would continue to serve as a director of
the Company until the Company's annual meeting of stockholders in 1998. You
will not receive any compensation for your duties as a director. The Company
acknowledges that you may resign as a director of the Company at any time,
without any penalty under this Agreement. You hereby agree, however, that
until the Company's annual meeting of stockholders in 1998 (and regardless of
whether you have resigned as a director of the Company prior to such date),
you will not sell any of your common stock in the Company unless such sale
complies with the volume limitations set forth in Rule 144(e)(1) under the
Securities Act of 1933, as amended, as if you were then an "affiliate" of the
Company; provided that such restriction will not apply if you are not
reappointed to the Board as a Class II director.
6. Confidential Information.
(a) In the course of performing services for the
Company, you have received and had access to, and may in the future
receive and have access to, commercially valuable, confidential or
proprietary information ("Confidential Information"). Confidential
Information means all information, whether oral or written, now or
hereafter developed, acquired or used by the Company or any
Affiliate (as hereinafter defined) and relating to the business of
the Company or any Affiliate that is not generally known to others
in the Company's or such Affiliate's area of business, including
without limitation (i) any trade secrets, work product, processes,
analyses or know-how of the Company or any Affiliate; (ii) ideas and
development plans related to new or improved television programs or
Internet sites or services; (iii) the Company's or any Affiliate's
marketing, development, strategic and business plans and
information; and (iv) the Company's or any Affiliate's financial
statements and other financial information. For purposes of this
Agreement, "Affiliate" means any entity directly or indirectly
controlling, controlled by, or under common control with the
Company. A person shall be deemed to control an entity if such
person owns 50% or more of the equity interests in such entity or
possesses, directly or indirectly, the power
3
to direct or cause the direction of management and policies of such
corporation, whether through the ownership of voting securities, by
contract, or otherwise.
(b) You acknowledge and agree that the Confidential
Information is and will be the sole and exclusive property of the
Company and its Affiliates. You will not use any Confidential
Information for your own benefit or disclose any Confidential
Information to any third party (except in the course of performing
your authorized duties for the Company), either during or subsequent
to your employment with the Company. At the Company's request at
any time following the Resignation Date, you will promptly deliver
to the Company all documents, computer disks and other computer
storage devices and other papers and materials (including all copies
thereof in whatever form) containing or incorporating any
Confidential Information or otherwise relating in any way to the
business of the Company or its Affiliates that are in your
possession or under your control.
7. Restrictive Covenant. In consideration of the benefits
provided to you hereunder following the Phase Out Date, and as a condition
precedent to the continued delivery of Confidential Information to you, you
hereby agree that, until March 1, 1998, you will not (except in the course of
performing your authorized duties for the Company and its Affiliates),
directly or indirectly, either as an employee, partner, owner, director,
adviser or consultant or in any other capacity:
(a) engage in (i) the creation, development or
production of television programming focused primarily on computers,
the Internet or digital technologies, (ii) the creation, development
or operation of any Internet site focused primarily on computers,
the Internet or digital technologies, or (iii) any other business
then conducted by the Company or any Affiliate (collectively, the
"Business");
(b) directly or indirectly influence or attempt to
influence any advertising customer or potential advertising customer
of the Company or any Affiliate to purchase advertising on any
competing television program or Internet site or for any competitive
Business; or
(c) employ or attempt to employ or solicit for any
employment competitive with the Company or any Affiliate any
individuals who are employees of the Company or such Affiliate at
such time, or who were employees of the Company or such Affiliate
within one year prior to such time, or influence or seek to
influence any such employees to leave the Company's or such
Affiliate's employment.
8. Enforcement.
(a) You acknowledge that the Company's agreement to pay
compensation to you pursuant to SECTION 4(b), which extends
throughout the term of the restrictive covenant set forth in SECTION
7, was included on the express condition that you agree to such
restrictive covenant. You represent to the Company that you are
willing and able to engage
4
in businesses other than Business and that enforcement of the
restrictions set forth in SECTION 7 would not be unduly burdensome
to you. The Company and you acknowledge and agree that the
restrictions set forth in SECTION 7 are reasonable as to time,
geographic area and scope of activity and do not impose a greater
restraint than is necessary to protect the goodwill and other
business interests of the Company, and you agree that that the
Company is justified in believing the foregoing.
(b) If any provisions of SECTION 7 are found by a court
of competent jurisdiction to contain unreasonable or unnecessary
limitations as to time, geographical area or scope of activity, then
such court is hereby directed to reform such provisions to the
minimum extent necessary to cause the limitations contained therein
as to time, geographical area and scope of activity to be reasonable
and to impose a restraint that is not greater than necessary to
protect the goodwill and other business interests of the Company.
(c) You acknowledge and agree that the Company would be
irreparably harmed by any violation of your obligations under
SECTIONS 6 and 7 hereof and that, in addition to all other rights or
remedies available at law or in equity, the Company will be entitled
to injunctive and other equitable relief to prevent or enjoin any
such violation.
(d) If you commit a material breach of your obligations
under SECTION 6 or SECTION 7 hereof, then (i) you will not be
entitled to the participation payments contemplated by SECTION 4(b);
and (ii) if such material breach occurs prior to December 1, 1997,
the waiver of the termination payment set forth in SECTION 4(e)
above will be revoked and you will be required to make such payment
within 30 days of demand by the Company. You acknowledge and agree
that the damages to the Company from any violation of your
obligations under SECTIONS 6 and 7 hereof would be difficult to
ascertain and that the termination payment referenced in SECTION
4(e) is a reasonable estimate of the actual amount of such damages
and is the best current estimate of the parties concerning the
actual amount of such damages.
9. MUTUAL RELEASE.
(a) You acknowledge and agree that you have voluntarily
requested the modification of your employment relationship
contemplated by this Agreement and that the Company has not
terminated your employment, actually or constructively. Except as
specifically provided in this Agreement, you understand and agree
that, beginning on the Phase Out Date, you will not be entitled to
any further salary, consulting fees, incentive compensation,
participation rights, equity interests, vacation or sick pay,
severance pay, health insurance, retirement benefits, disability or
life insurance or any other compensation or benefits of any kind.
You voluntarily and knowingly waive, release, and discharge the
Company, its successors, affiliates, employees, officers, directors,
owners and agents from all claims, liabilities, demands and causes
of action, known or unknown, fixed or contingent, that you may have
or claim to have against any of them as a result of your employment
and/or separation from employment with the Company, except for
amounts due and other rights and obligations provided for under this
Agreement. You
5
agree not to file a lawsuit to assert any such claims, and you
also agree not to seek reinstatement or future employment with the
Company. The foregoing includes, but is not limited to, the
following: (a) claims arising under federal, state, or local laws
prohibiting employment discrimination; (b) claims for breach of
contract; (c) claims for personal injury, harm, or damages (whether
intentional or unintentional); (d) claims arising out of any legal
restrictions on the Company's right to terminate its employees; and
(e) claims arising under the Employee Retirement Income Security
Act. In addition, you specifically waive all rights and benefits
afforded by any state laws that provide in substance that a general
release does not extend to claims of which a person does not know of
or suspect to exist at the time of executing a release. However,
you are not waiving rights or claims, if any, that may arise after
the date that you sign this Agreement out of facts or circumstances
not contemplated by this Agreement.
(b) The Company voluntarily and knowingly waives,
releases, and discharges you and your agents, successors, affiliates
and heirs from all claims, liabilities, demands and causes of
action, known or unknown, fixed or contingent, that the Company may
have or claim to have against any of them as a result of your
employment and/or separation from employment with the Company,
except for amounts due and other rights and obligations provided for
under this Agreement and claims arising out of your willful
misconduct not known to the Company on the date of this Agreement.
10. CIVIL CODE SECTION 1542. You hereby represent that you are
not aware of any claim against the Company that is not specifically addressed
and released by this Agreement. You also acknowledge that you have been
advised by legal counsel and are familiar with the provisions of California
Civil Code Section 1542, which provides as follows:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING
THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR."
You and the Company, being aware of said code section, agree to
expressly waive any rights they may have thereunder, as well as under any
other statute or common law principles of similar effect.
11. PUBLICITY. The Company and you will work together in good
faith to coordinate a public announcement by the Company concerning the
change in your employment status contemplated by this Agreement. Until such
public announcement, you agree to maintain the confidentiality of and not to
publicly disclose the existence or terms of this Agreement or the change in
your employment status contemplated hereby. You further agree not to make
any libelous, disparaging or otherwise injurious statements about the
Company, its business or operations or its officers, employees or
representatives, and the Company agrees not to make any libelous, disparaging
or otherwise injurious statements about you.
6
12. RIGHT TO ATTORNEY. You acknowledge and agree that you have
the right to discuss all aspects of this Agreement with a private attorney,
have been encouraged to do so by the Company, and have done so to the extent
you desire.
13. ENTIRE AGREEMENT. This Agreement contains all terms,
provisions and understandings between the Company and you and supersedes all
previous agreements, whether oral or in writing, between the Company and you.
You represent and agree that, in executing this Agreement, you have not
relied on any representations or statements, whether written or oral, not set
forth herein. No modification of this Agreement can be made except in
writing and signed by both parties. This Agreement is binding on you and
your representatives, heirs, and assigns.
14. SEVERABILITY. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain
in full force and effect.
15. INDEMNIFICATION. The Company agrees to indemnify you for
any claims brought against you in your capacity as a director, officer,
employee or agent of the Company or in any other capacity in which you are
acting (or have acted) on behalf of the Company, to the maximum extent
permitted under Delaware law.
16. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal substantive laws of the State of
California (with the exception of Section 15 hereof, which shall be governed
by the substantive laws of the State of Delaware), without regard to the
choice of law rules thereof.
If the foregoing accurately reflects all of the terms of our
agreement, please sign and date in the space provided. Upon signature, this
Agreement will constitute a legally binding agreement between you and the
Company on the terms set forth herein.
Very truly yours,
CNET, INC.
By: /s/ Xxxxxx X. Xxxxxx
-----------------------------
Xxxxxx X. Xxxxxx,
Executive Vice President
Agreed to and accepted:
/s/ Xxxxx Xxxxxx
--------------------
Xxxxx Xxxxxx
7
