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Exhibit 10.1
[LETTERHEAD OF TVN ENTERTAINMENT CORPORATION]
July 14, 2000
Ian Aaron Personal & Confidential
649 Fremont Street -----------------------
Menlo Park, CA 94025
Dear Ian:
We are very pleased that you have agreed to accept the position as President and
Chief Executive Officer of TVN Entertainment Corporation (referred to herein as
"the Company" or "TVN"). This position is vital to the continued development,
implementation, launch and growth of the Company, so you will be a most
important and valued member of our senior management team.
Set forth below are the terms agreed upon for your employment by the Company:
1. Effective August 6, 2000 you will be employed on a full time basis as the
President and Chief Executive Officer ("CEO") of the Company, reporting to
the Company's Chairman and Board of Directors.
2. As the CEO of the Company, your duties will include those usually attendant
to that position, including (i) devoting your full business efforts and
time to the oversight, planning, and management of the Company's
businesses, including it Broadband Internet Group ("BIG"), Video-on Demand
("VOD") and Digital Content Express ("DCX") businesses, (ii) completion of
TVN's annual Business Plans (including for BIG, VOD and DCX) for approval
by TVN's Board and the implementation of each such Plan after such
approval, (iii) oversight, direction and supervision of all TVN operations
and personnel, and (iv) such other duties consistent with your position as
CEO of the Company as may be assigned to you from time-to-time by the
Chairman and/or Board of Directors, all under the overall direction and
control of its Board of Directors. All of the Company's businesses and
operations are and will be within your area of responsibility as CEO, and
you will also have fiscal responsibility for TVN's investments in, and will
interface as needed with, TVN's affiliated businesses (NetSmart, New Media
Network, Digital Support Solutions and Chromazone) and oversee the services
which will be provided by TVN to those affiliates.
3. Your employment hereunder will be for an initial three (3) year term (the
"Initial Term") beginning August 6, 2000 and continuing thereafter through
August 5, 2003 unless earlier terminated with or without cause as set forth
below. The Company shall have the option to renew your employment under
this agreement for one (1) additional two (2) year term (the "Option
Term"), by written notice exercising such option sent to you at least
ninety (90) days prior to the expiration of the Initial Term.
4. You will be paid a salary at the pre-tax rate of $300,000 per year (Annual
Salary) in accordance with the Company's payroll policies (currently bi-
weekly) for the first year of the Initial Term, with appropriate
withholding and deductions. For each year of the initial Term
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Ian Aaron
July 14, 2000
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thereafter, the Annual Salary payable in that year will be increased by no
less than five percent (5%) per annum (i.e., in the second year $315,000
and $330,750 in the third year, but that percentage increase shall not set
a ceiling if a greater increase is merited as determined in the discretion
of the Board of Directors. Your Annual Salary payable during the first year
of the Option Term, if exercised by the Company, will be no less than 105%
of your third year Annual Salary for the first option year, and during each
subsequent option year no less than 105% of the first option year Annual
Salary.
5. The Company shall provide you with a $300,000 interest free loan upon
signing this agreement to facilitate your transition to employment with the
Company, and this loan will be forgiven in equal amounts over the term of
this agreement on the first, second and third anniversary of your
employment. Any unpaid balance of the loan shall be forgiven in the event
of a change of control of the Company or termination of your employment
without cause, or termination by you for good reason. You will also be
eligible to receive a performance/merit bonus annually for each fiscal year
("Annual Bonus") in accordance with TVN's policies for its senior
executives, for up to 100% of your Annual Salary. The amount of the Annual
Bonus will be determined by TVN's Board of Directors based your performance
as President and CEO of TVN, and the achievement of the goals set by TVN's
senior management (with your participation) and the Board for each fiscal
year (currently ending March 31). This Annual Bonus will be payable after
TVN's financial department has compiled the relevant financial performance
data after the end of each fiscal year, beginning with fiscal year end
March 31, 2001, but in any event your Annual Bonus shall be guaranteed at
no less than 50% of your Annual Salary in each such fiscal year (prorated
for fye 2001).
6. You will be reimbursed for reasonable out-of-pocket expenses incurred by
you on behalf of the Company and in the conduct of its business, upon
presentation of appropriate receipts or other suitable documentation, in
accordance with the Company's expense reimbursement policies applicable to
its senior executives, including (i) first class or upgraded airplane
travel as appropriate, (ii) an auto allowance of $1,000 per month, and
(iii) the reasonably incurred costs to move your family and possessions to
Los Angeles, and the cost to rent a home in the Los Angeles area for six
(6) months, to allow you adequate time to sell your existing home and to
find and buy a new home in the greater Los Angeles area. You will not be
required to relocate from the greater Los Angeles area for this position.
7. You will also be included in the Company employee benefit plans then
available to other senior executive employees. The Company provides a 401k
Plan and a health and dental care plan that has a first complete calendar
month waiting period for eligibility.
8. Subject to meeting eligibility requirements, you will participate in a
newly created Company incentive Stock Option Plan ("the new Option Plan")
and your stock option grant shall be, to the extent permitted under the
applicable rules of Section 422(d) of the Internal Revenue Code of 1986, as
amended, an "incentive stock option" to purchase a total of 1,200,000
shares of the Company's Common Stock ("Option Shares"). The Option Shares
will be granted from a stock option pool which will be authorized pursuant
to the new Option Plan to be adopted by the
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Ian Aaron
July 14, 2000
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Board of Directors for this option grant, for other new hires, and for
refresher option grants to be issued to other senior level TVN executives.
Your per share exercise price for the Option Shares shall be equal to the
lesser of (i) $2.75 per share, or (ii) an amount equal to ninety percent
(90%) of the per share price set in the next round of equity financing for
the Company in excess of $25 Million. The new Option Plan shall provide for
repriced incentive stock options to be issued for refresher grants and for
existing and new senior management employees, all as approved by the Board
of Directors. Your stock option shall be exercisable for a term of ten (10)
years (or shorter upon any termination of your employment other than for
cause) and shall vest as follows: (i) twenty five percent (25%) of the
Options Shares (300,000 shares) shall vest when this Agreement is mutually
signed, and (ii) the balance of the Option Shares (900,000 shares) shall
vest ratably over the period provided for in the new Option Plan,
conditioned upon your continued employment with TVN as of each vesting
date; provided, however, that all unvested Option Shares shall vest upon a
change of control as defined herein below. This option grant will be
subject to the terms, definitions and provisions of the new Option Plan,
and the standard form related Stock Option Agreement which will be entered
into by you and the Company, both of which will provided to you after
signing this letter agreement. You will also participate in all other
regular option grants to senior executives for an amount of shares that is
commensurate with your position relative to the others receiving such
option grants.
9. You will be entitled to a total of fifteen (15) days per year of paid
vacation, for use at your discretion upon reasonable advance notice to the
Chairman. During the term of your employment hereunder, the Company will
obtain and pay the premiums when due for a term life insurance policy on
your life in the amount of $1,000,000 payable to your designated
beneficiary. You shall be fully "grossed-up" by the Company for this life
insurance benefit, so that the economic effects to you are the same as if
this benefit was provided to you on a non-taxable basis. You also
understand and agree that the Company may obtain additional term life
insurance on you with benefits payable to the Company ("key-man life
insurance") and you agree to cooperate with the Company in applying for
such coverage and with respect to the medical examinations required to
obtain such policies.
10. If you become totally disabled during the term of this Agreement, your
employment hereunder shall automatically terminate and you shall receive
post-termination disability payments equal to twelve (12) months of
continuation of your then current Annual Salary and guaranteed portion of
your Annual Bonus, and your Option Shares shall continue to vest during
such period of disability. You shall be deemed to have suffered a "Total
Disability" ninety (90) days following written notice by the Company to you
of a determination by an independent physician acceptable to the Board of
Directors and you (which acceptance will not be unreasonably withheld) that
your disability is such that you cannot render services as provided for
hereunder; provided, however, that if you resume work on a regular basis
prior to the end of such 90 day period, you shall not be deemed to have
suffered a "Total Disability."
11. During the term of this Agreement, if you become disabled by reason of
illness or other incapacity extending for a period of more than three (3)
consecutive months during which you
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Ian Aaron
July 14, 2000
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are unable to perform your duties hereunder on a full-time basis (as
determined by an independent physician acceptable to both you and the Board
of Directors), but you are able to perform your duties hereunder on a part-
time basis ("Partial Disability"), all Annual Salary and guaranteed Annual
Bonus amounts otherwise payable shall be paid to you, and your Option
Shares shall continue to vest, during this period of disability.
12. If you die during the term of this Agreement, this Agreement shall
terminate immediately; provided, however, that in such event, your spouse,
if living, or your dependents, if your spouse is not living, shall receive
twelve (12) months of continued Annual Salary payments hereunder.
13. While you are employed by the Company, you agree that without first
disclosing to and obtaining the prior written consent of the Chairman, you
will not (i) engage in any business or be employed by any third person or
entity, (ii) advise or consult with any person or entity which competes,
directly or indirectly, with any of the Company's businesses or any
businesses in which the Company maintains a financial interest, (iii)
accept any gift, gratuity, benefit or interest of a material or substantial
amount or nature (other than commonly accepted business practices for
senior level executives in this industry, i.e., small gifts at holiday
time, attending social events or seminars paid for by others), directly or
indirectly, from any person or entity which does business with the Company,
or its affiliates, or (iv) engage in any activity which creates or may
create an actual or potential conflict of interest between such activity
and your duty to act at all times in the best interests of the Company and
not for your separate personal gain or profit; provided, however, that you
may (a) be employed for a brief period, not to exceed three (3) months,
from time-to-time as a consultant by your current employer, and/or (b)
serve in any civic, educational or charitable organization without the
approval of the Board, so long as such consulting or other activities do
not interfere with the full-time performance of your duties and obligations
under this Agreement. Company hereby acknowledges and agrees that you
currently serve on the Boards of Directors of the companies listed on
Schedule A and your continued service on such Boards is expressly permitted
and will not be deemed a violation of this paragraph for so doing.
14. You acknowledge and agree that the Company shall own, in perpetuity and
throughout the universe, all creative and ownership rights in and to all
materials created, written, produced or worked on by you, or under your
direction, during the course of and in connection with your employment by
the Company including, without limitation, all Company business and
financial plans, computer systems and interfaces, technology, operating
systems and manuals, designs and diagrams, and all sales, marketing and
promotional materials developed or created by you or under your direction,
and all property rights of any kind therein emanating from your work. You
hereby assign to the Company all such rights and materials, and the
copyright, publishing, trademark, domain name, intellectual property and
other enumerated and related rights pertaining thereto or to the Company's
businesses, which the Company shall own and be entitled to register, as it
sees fit, in its or an affiliate's name, and for its sole benefit.
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Ian Aaron
July 14, 2000
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15. Your employment may be terminated other than for "cause" as defined in
paragraph 15 hereof, in which event the Company's sole obligations to you
shall be a) to pay you (i) the unpaid portion of the agreed Annual Salary
then in effect for your work performed prior to termination, (ii) your
Annual Salary payable during each month of the remaining Initial Term (but
not any Option Term unless the Company has exercised its renewal option and
the Option Term has begun), plus the guaranteed portion only of your Annual
Bonus payable during such period, less applicable payroll withholding and
deductions, all payable ratably during the remaining Initial Term (or
Option Term if exercised), (iii) unpaid auto allowance and reimbursable
expenses, if any, properly incurred and documented prior to the date of
such termination; and (iv) your auto allowance for the remaining Initial or
Option Term, and b) to provide for the continuation of all of your then
existing employee benefits for a period of twenty-four (24) months from
such termination date unless you obtain substantially similar benefits with
another employer at an earlier date. In addition, your unvested Option
Shares shall all immediately accelerate and vest as of the date of any such
non-cause termination.
16. In the event of your termination by the Company for "cause" as defined
below, you shall be entitled only to payment for the items in paragraphs
15(i) and 15(ii) above, and the right to exercise your stock option for
only those Option Shares which have fully vested as of the date of such
termination, subject to offset for any material damage caused to the
Company as a result of the conduct giving rise to such termination for
cause. Upon any termination of your employment, whether with or without
cause, you shall (a) return to the Company all of its materials in your
possession or under your control, including all work in progress, work
papers, computer discs and files, information and documents created or
worked on by you for the Company, (b) provide a final report, if requested
on the status of any work in progress or remaining to be done and (c)
continue to comply with your non-disclosure and confidentiality
obligations. For purposes of this agreement, "cause" is defined as (i) an
act of dishonesty in connection with your duties and responsibilities as an
employee and which either causes harm to the Company, or results in your
substantial personal enrichment (ii) conviction of a felony, (iii) a
material violation of the conflict of interest provisions of paragraph 12
hereof, (iv) a willful act or gross misconduct which results in material
damage to the Company, or (v) continued, substantial or willful failure to
perform your employment duties after you have received one or more written
notices, warnings or demands for performance from the Company or its Board
of Directors which set forth the factual basis for the determination that
you have a) continually, substantially or willfully failed to perform your
duties, and b) had a reasonable time period in which to cure such defaults
as are capable of being cured by subsequent curative action and you have
failed to do so. Termination for cause shall be effective upon delivery to
you of a notice from the Company's Board of Directors stating that you have
engaged in any of the above described "for cause" conduct and specifying
the particulars thereof, and for cause under Section (v) that you have not
timely cured such defaults after such notice.
17. You may terminate your employment for "good reason" upon written notice to
the Company, and in such event, such employment termination shall be
treated as a termination by the Company for reasons other than cause, and
you shall receive the payments referred to in
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Ian Aaron
July 14, 2000
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paragraph 15 hereof governing a termination without cause. For purposes of
this agreement, "good reason" shall be defined as:
(a) A material diminution of your title, office, position
or authority;
(b) The assignment to you of any duties inconsistent with
your position, title, authority or material
responsibilities, or the removal of your authority,
title or material responsibilities;
(c) The failure of the Company to (i) timely make any
payment due to you hereunder or (ii) comply with any of
the material provisions of this agreement after written
notice from you of such failure and the Company's
failure to make such payment within five (5) business
days of such notice, or to effect such compliance
within a reasonable period of time.
(d) The occurrence of a change of control of the Company;
and
(e) The failure of the Company to elect or re-elect you as
a director of the Company, or your removal as a
director of the Company.
18. For purposes of this Agreement, a "change of control" shall mean (A) the
acquisition of the Company by another equity by means of any transaction or
series of related transactions (including, without limitation, a
reorganization, merger or consolidation but, excluding any merger effected
exclusively for the purpose of changing the domicile of the Company); or
(B) a sale of all or substantially all of the assets of the Company in any
transaction or series of related transactions, unless the Company's
stockholders of record as constituted immediately prior to such acquisition
or sale will, immediately after such acquisition or sale (by virtue of
securities issued as consideration for such acquisition or sale or
otherwise) hold at least a majority of the voting power of the surviving or
acquiring entity; or (C) if you are required to report to a Chairman of the
Board of the Company other than the current Chairman, or (D) one or more
related transfers of capital stock of the Company which results, singly or
in the aggregate, in a transfer of more than fifty percent (50%) of the
voting power of the Company, other than transfers by any stockholder of
voting power to any such stockholder's affiliates (as such term is defined
in Rule 12 (b)(2) promulgated under the Securities Exchange Act of 1934, as
amended, or such successor regulation). For the purpose of this Paragraph,
the term "affiliates" shall include any individual, partnership,
corporation, limited liability company, business trust, joint stock
company, trust, unincorporated association or joint venture which directly
or indirectly, is in control of, is controlled by, or is under common
control with, such stockholder. For purposes of the preceding sentence, the
term "control" shall mean the power, directly or indirectly, to (i) vote
51% or more of the voting securities of an entity, or (ii) direct or cause
the direction of the management or policies of an entity as the sole
trustee, general partner or sole managing member of such entity.
19. This contains our entire agreement for your employment by the Company; all
prior and contemporaneous discussions, conversations and/or negotiations
are merged herein. No representations have been made to you by the Company,
or by any agent or representative thereof, or by you to the Company, other
than those set forth herein and no agreements have
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Ian Aaron
July 14, 2000
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been entered into, other than those expressly set forth herein. The terms
of this employment agreement may not be modified or amended except by a
document signed both by you and on behalf of the Company, and mutually
executed fax copies shall be deemed originals, and may be used by either
party as an original agreement. The laws of the State of California
applicable to agreements which are to be performed wholly within such state
shall govern this agreement, including its interpretation, construction,
performance and enforcement.
20. All claims, disputes or issues relating to your employment, including
without limitation, your hiring, work, performance, compensation, bonuses,
stock options, benefits, and/or termination for any reason, or based upon a
claim of discrimination of any kind (each "a dispute" herein), shall be
resolved, if mutually desired, initially by non-binding mediation efforts
conducted by the parties with the aid of an independent impartial mediator
or mediation service, to be paid for equally by the parties. If such
mediation efforts are unsuccessful in resolving such dispute in a mutually
acceptable manner, or if either party does not wish to participate in or
continue with mediation efforts, each and every dispute shall be finally
resolved solely by binding arbitration in Burbank, California under the
applicable Employment Arbitration Rules of the American Arbitration
Association then in effect. Arbitration shall be the sole and exclusive
method for resolving any employment, hiring or termination related dispute,
and both you and the Company acknowledge and agree that each is giving up
any right that either otherwise might have for a judge or jury to decide
such dispute, but neither the arbitrator nor any court which may be asked
to enforce any arbitration award shall have jurisdiction or authority to
award any punitive, exemplary or incidental damages; provided, however,
either you or the Company may seek (i) equitable relief, including but not
limited to injunctive relief, and (ii) an order compelling arbitration of
any dispute, or enforcing any arbitration award,from a court of competent
jurisdiction. The prevailing party in any such arbitration, as determined
by the arbitrator(s), shall be entitled to his or its reasonable attorney's
fees incurred in connection with, and the cost of, such arbitration
proceeding, including the costs for the arbitrator(s).
21. All disputes must be arbitrated pursuant to this Agreement, including, but
not limited to, tort and negligence claims, bad faith claims, contract
claims, wage claims, benefit claims, demands, liabilities, debts, accounts,
obligations, damages, compensatory damages, liquidated damages, costs,
expenses, actions and causes of action arising out of or in connection with
your hiring, our employment relationship, the performance or non-
performance of your duties, any disciplinary matters, including termination
of the employment relationship, and/or retaliation and defamation claims,
including but not limited to any claims for wrongful termination or
discharge, breach of the covenant of good faith and fair dealing, and/or
for violation of any and all federal and state civil rights laws,
ordinances, regulations or orders, based on charges of discrimination or
harassment on account of race, color, religion, sex, sexual orientation,
age, citizenship, national origin, mental or physical disability, medical
condition, marital status, pregnancy or any other discrimination prohibited
by such laws, ordinances, regulations or orders (including, but not limited
to, Title VII of the Civil Rights Act of 1964, as amended, 42 USC Section
2000, et seq.; Americans with Disabilities Act; Civil Rights Act of 1866,
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and Civil Rights Act of 1991; 42 USC Section 1981, et seq.; Age
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Discrimination in Employment Act, as amended, 29 USC Section 621, et seq.;
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Equal Pay Act, as amended.
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Ian Aaron
July 14, 2000
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20 USC Section 206(d); regulations of the Office of Federal Contract
Compliance, 41 CFR Section 60, et seq.; and applicable state equal
-- ---
protection and/or equal employment opportunity laws).
22. You further understand and acknowledge that during the course of your
employment by the Company, you have had and will continue to have access to
its confidential business information and trade secrets, including without
limitation: service, operations, ordering, billing and sales data, records
and reports; customer, affiliate and vendor information; pending projects
or proposals, business methods, systems, technology, plans and financial
projections; the methods and techniques used in, approaches to, or results
of market research; employee salaries, contracts and wage information;
legal files and records; computer and engineering data, software,
programming, diagrams and schematics; and accounting and financial
information, whether written or verbal, or contained on paper, computer
hardware or software, disk, tape, microfiche or other media ("Confidential
Information"). This information is of substantial value and highly
confidential, is not known to the general public, is the subject of Company
efforts to maintain its secrecy, constitutes its professional and trade
secrets, and is being provided and disclosed to you solely for use in
connection with your employment by the Company. Since you will continue to
have access to the Company's Confidential Information during the course of
performing your duties, as a material condition of your continuing
employment by the Company, concurrently with signing this Agreement you
agree to sign the Confidentiality and Non-Disclosure Agreement which is
attached hereto.
Welcome aboard. We're delighted that you have agreed to take on this very
important position and we all look forward to working with you to achieve the
Company's goals.
Sincerely
/s/ Stuart Levin
Stuart Levin
Attachment - Non Disclosure Agreement
ACCEPTED AND AGREED:
The foregoing offer of employment is accepted. I agree to the terms and
conditions of my employment by the Company contained therein and the provisions
of the attached Company Confidentiality and Non-Disclosure Agreement, both of
which I have signed after obtaining advice from my legal counsel.
/s/ Ian Aaron
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Ian Aaron
