Exhibit 10.1

 

Thomas J. Flahie

January 12, 2005

 

Mr. Tom Flahie

6060 Center Drive, Suite 300

Los Angeles, CA 90045

 

Re:    Transitional Employment Agreement with Intermix Media, Inc.

 

Dear Tom:

 

This letter agreement (the “Agreement”) will memorialize a change in your
position with Intermix Media, Inc. (“IMIX,” or “the Company”) and the terms of
your transitional employment by the Company on the terms and conditions set
forth herein. You may accept this Agreement by signing and returning a copy of
this Agreement to the Company as provided below.

 

1. Term and Condition Precedent. Your employment under this Agreement shall
commence as of January 7, 2005 (“Start Date”) and continue until March 31, 2005
(the “Separation Date”), at which time your employment by the Company shall
terminate. This Agreement shall not become effective unless and until you have
executed and delivered to the Company the release attached hereto as Exhibit A.

 

2. Position and Duties. You shall continue to report to the Company’s Chief
Executive Officer. Your duties shall include the tasks assigned to you from time
to time consistent with those assigned to a former Chief Financial Officer of a
company of comparable size and with a similar business as the Company who is
transitioning his responsibilities to other employees of the Company. You agree
to commit such working time, attention and effort to the position as is
reasonably required to perform the above-referenced duties and to observe and
comply with all Company policies and procedures applicable to employees of the
Company and of which you are duly advised. This Agreement is personal to you and
you may not assign or delegate any of your rights or obligations hereunder
without first obtaining the written consent of the Company.

 

3. Compensation and Benefits. In consideration for your services to the Company
during the time period in which you are employed under this Agreement, you shall
receive the following compensation and benefits from the Company:

 

(a) Base Salary. The Company shall pay you a monthly salary at the rate of
sixteen thousand six hundred sixty-six dollars and sixty-six cents ($16,666.66)
per month to be paid in installments according to the Company’s regular payroll
policy. The Company shall withhold and deduct all applicable federal and state
income and employment and disability taxes from your base salary as required by
applicable laws.

 

(b) Stock Options. The Board of Directors of IMIX has previously authorized and
approved the issuance to you of an option to purchase IMIX common stock under
and pursuant to IMIX’s 1999 Stock Awards Plan (the “Plan”) and as more fully
described in the Notice of Grant attached hereto as Exhibit B (the “Option”).
The Option and corresponding Stock Option Agreement shall survive the making of
this Agreement and your Option will continue to vest through the Separation Date
in accordance with its terms.

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(c) Benefits and Plans. You shall continue to receive such employment-related
benefits, including participation in 401K, life, medical, disability and dental
insurance plans, as have been provided to you in your capacity as CFO under and
subject in each instance to the terms and conditions of such plans and Company
policy.

 

(d) Termination Benefits. Provided you have and do comply with the terms of this
Agreement at all relevant times, you shall be entitled to payment of the cost of
continued medical benefits under COBRA for the period of time beginning on the
Separation Date and ending on the date that is the earlier of (i) 180 days after
the Separation Date and (ii) the date on which you begin new employment on a
full-time basis. You agree, in the event you are receiving payments under this
Section 3(d) and until the time such payments terminate, to immediately inform
the Company of any change in your employment status.

 

4. Employment and Post-Separation Covenants. By accepting the terms of this
Agreement, you hereby agree to the following covenants (in addition to any
obligations you may have by law) and make the following representations:

 

(a) Confidentiality. You acknowledge that, in connection with your employment by
the Company, you have had, and will have, access to trade secrets of the Company
and other information and materials which the Company desires to keep
confidential, including customer lists, supplier lists, financial statements,
business records and data, marketing and business plans, and information and
materials relating to the Company’s services, products, methods of operation,
key personnel, proprietary software and other proprietary intellectual property
and information disclosed to the Company by third parties to which the Company
owes a duty of nondisclosure (collectively, the “Confidential Information”);
provided, however, that Confidential Information does not include information
which (i) is or becomes publicly known other than as a result of your actions in
violation of this Agreement; (ii) is or becomes available to you from a source
(other than the Company) that you reasonably believe is not prohibited from
disclosing such information to you by a contractual or fiduciary obligation to
the Company, (iii) has been made available by the Company, directly or
indirectly, to a non-affiliated third party without obligation of
confidentiality; or (iv) you are obligated to produce as a result of a court
order or pursuant to governmental action or proceeding, provided that you give
the Company prompt written notice of such requirement prior to such disclosure
and assistance in obtaining an order protecting such Confidential Information
from public disclosure. You covenant and agree that, both during and after the
term of your employment with the Company, you will keep secret all Confidential
Information and will not disclose, reveal, divulge or otherwise make known any
Confidential Information to any person (other than the Company or its employees
or agents in the course of performing your duties hereunder) or use any
Confidential Information for your own account or for the benefit of any other
individual or entity, except with the prior written consent of the Company.

 

(b) Ownership of Intellectual Property. You agree that all inventions,
copyrightable material, software, formulas, trademarks, trade secrets and the
like which are or have been developed or conceived by you in the course of your
employment by the Company or on the Company’s time or property (collectively,
the “Intellectual Property”) have been and shall be disclosed promptly to the
Company and the Company shall own all right, title and interest in

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and to the Intellectual Property. The parties expressly agree that any and all
of the Intellectual Property developed by the Employee are and shall be
considered works made-for-hire for the Company pursuant to the United States
Copyright Act of 1976, as amended from time to time. In order to ensure that the
Company shall own all right, title and interest in and to the Intellectual
Property in the event that any of the Intellectual Property is not deemed a work
made-for-hire (as defined in the Copyright Act of 1976) and in any other event,
you hereby sell and assign all right, title and interest in and to all such
Intellectual Property to the Company, and you covenant and agree to affix to the
Intellectual Property appropriate legends and copyright notices indicating the
Company’s ownership of all Intellectual Property and all underlying
documentation to the extent reasonably appropriate, and shall execute such
instruments of transfer, assignment, conveyance or confirmation as the Company
reasonably considers necessary to transfer, confirm, vest, perfect, maintain or
defend the Company’s right, title and interest in and to the Intellectual
Property throughout the world. Your obligation under this Section 4(b) to assign
to the Company inventions created or conceived by you shall not apply to an
invention that you developed entirely on your own time without using the
Company’s equipment, supplies, facilities, or trade secret information, provided
that those inventions (1) do not or did not relate directly, at the time of
conception or reduction to practice of the invention, to the Company’s business
as conducted at such time or actual or demonstrably anticipated research or
development of the Company; and (2) do not or did not result from any work
performed by you for the Company.

 

(c) Non-Solicitation. You agree for a period ending no sooner than (i) one year
following the Separation Date or (ii) the date of the last receipt of any
payments by you under this Agreement, whichever is later, that you shall not
solicit the services or employment of the employees of the Company or any of its
affiliates and you shall not divert clients or customers of the Company or its
affiliates to their disadvantage; provided that (i) general advertisements not
specifically directed at employees of the Company or its affiliates shall not
constitute solicitation for purposes of this clause (c) and (ii) this clause (c)
shall not prohibit you from hiring employees of the Company or its affiliates
who first approach you seeking employment.

 

(d) Non-Competition. You agree not to compete directly or indirectly as a
principal, partner, shareholder, limited liability company member, agent,
officer, director, employee, consultant or in any other capacity, with any
current or future business of the Company during the period of your employment
with the Company; provided that this clause (d) shall not prohibit you from
acquiring securities representing less than 5% of the voting interests of any
entity (so long as you are not involved in the management of such entity).

 

(e) Authorization To Work for the Company. You represent that you have been and
are legally authorized to work in the United States and that your employment
with the Company has not and shall not constitute a violation of any contractual
or other legal obligation you may have to another entity or employer.

 

(f) Further Services & Cooperation. You agree that after the Separation Date you
will provide reasonable assistance and cooperation to the Company with respect
to matters for which you were responsible or in which you were involved, or
about which you have knowledge, in connection with your employment by the
Company; provided that you shall not be required to provide any further services
or cooperation in excess of the limits permitted by the terms of any

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future employment you may undertake. Your appearance, testimony or other
performance required pursuant to legal process shall not be considered services
performed pursuant to this provision.

 

(g) Non-Disparagement. You agree not to make disparaging, critical or otherwise
detrimental comments to any person or entity concerning the Company, its
officers, directors or employees; the products, services or programs provided or
to be provided by the Company; the business affairs, operation, management or
the financial condition of the Company; or the circumstances surrounding your
employment and/or separation from the Company. The Company agrees that it shall,
upon request for information concerning you by a third party, provide your dates
of employment, the titles and positions you held and your final salary rate and
that the Company’s officers and directors shall not otherwise make disparaging,
critical or detrimental comments to any third-party concerning your employment
by the Company or performance in connection therewith. Nothing in this Section
4(g) is intended nor shall be construed to prohibit you or the Company from
fulfilling any duty of disclosure or candor either may have under applicable
laws or regulations or from the provision of truthful and accurate testimony in
connection with any legal or regulatory process.

 

5. Business Expenses. You are and shall be entitled to reimbursement by the
Company for such customary, ordinary and necessary business expenses as are or
have been incurred by you in the performance of your duties and activities
associated with promoting or maintaining the business of the Company. All
expenses as described in this paragraph shall be reimbursed only upon
presentation by you of such documentation as may be reasonably necessary to
substantiate that all such expenses were incurred in the performance of your
duties in only in accordance with the Company’s policies governing same.

 

6. Return Of Company Property. On the Separation Date or as earlier requested by
the Company, you agree to return to the Company all Company documents (and all
copies thereof) and other Company property in your possession or control,
including, but not limited to, Company files, correspondence, memos, notebooks,
notes, drawings, records, business plans and forecasts, financial information,
specifications, computer-recorded information, tangible property and equipment,
credit cards, entry cards, identification badges and keys; and any materials of
any kind that contain or embody any proprietary or confidential information of
the Company (and all reproductions thereof in whole or in part) (collectively,
the “Company Property”). You agree to conduct a good faith and diligent search
of your belongings in advance of the aforementioned deadline to ensure your
compliance with the provisions of this Section 6.

 

7. Arbitration. You agree that any future disputes between you and the Company
(the “parties”) including but not limited to disputes arising out of or related
to your employment by the Company and/or this Agreement, shall be resolved by
binding arbitration except where the law specifically forbids the use of
arbitration as a final and binding remedy, or where section 8(g) below
specifically allows a different remedy.

 

(a) The complainant shall provide the other party a written statement of the
claim identifying any supporting witnesses or documents and the relief
requested.

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(b) The respondent shall furnish a statement of the relief, if any, that it is
willing to provide, and identifying supporting witnesses or documents. If the
matter is not resolved, the parties agree to submit their dispute to a
non-binding mediation paid for by the Company, provided, however, that if the
amount in dispute is $50,000 or less, this step may be waived at the election of
either party.

 

(c) If the matter is not resolved, the parties agree that the dispute shall be
resolved by binding arbitration according to the California Code of Civil
Procedure, including the provisions of Section 1283.05, pertaining to discovery.

 

(d) The arbitrator shall have the authority to determine whether the conduct
complained of in section 7(a) violates the complainant’s rights and, if so, to
grant any relief authorized by law; subject to the exclusions of section (g)
below. The arbitrator shall not have the authority to modify, change or refuse
to enforce any lawful term of this Agreement and Release of Claims.

 

(e) The Company shall bear the costs of the arbitration. If the Company
prevails, you shall pay any litigation costs of the Company to the same extent
as if the matter had been heard in a court of general jurisdiction. Each party
shall pay its own attorneys’ fees, unless the arbitrator orders otherwise,
pursuant to applicable law.

 

(f) Arbitration shall be the exclusive final remedy for any dispute between the
parties, such as disputes involving claims for discrimination or harassment
(such as claims under the Fair Employment and Housing Act, Title VII of the
Civil Rights Act of 1964, the Americans with Disabilities Act, or the Age
Discrimination in Employment Act), wrongful termination, breach of contract,
breach of public policy, physical or mental harm or distress or any other
disputes, and the parties agree that no dispute shall be submitted to
arbitration where the complainant has not complied with the preliminary steps
provided for in sections (a) and (b) above.

 

(g) The parties agree that the arbitration award shall be enforceable in any
court having jurisdiction to enforce this Agreement and Release of Claims, so
long as the arbitrator’s findings of fact are supported by substantial evidence
on the whole and the arbitrator has not made errors of law; however, either
party may bring an action in a court of competent jurisdiction, regarding or
related to matters involving the Company’s confidential, proprietary or trade
secret information, or regarding or related to inventions that you may claim to
have developed prior to or after joining the Company, seeking preliminary
injunctive relief in court to preserve the status quo or prevent irreparable
injury before the matter can be heard in arbitration.

 

(h) The arbitration shall be held in the city of Los Angeles, California, unless
the parties mutually agree to a different location for the arbitration.

 

8. Miscellaneous.

 

(a) This Agreement constitutes the complete, final and exclusive embodiment of
the entire agreement between you and the Company with regard to the terms and
conditions of your

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employment with the Company and your anticipated termination of employment. It
is entered into without reliance on any promise or representation, written or
oral, other than those expressly contained herein, and it supersedes any other
such promises, warranties or representations and any other written or oral
statements concerning your rights to any compensation, equity or benefits from
the Company, its predecessors or successors in interest. Notwithstanding the
foregoing, that certain Stock Option Agreement by and between you and IMIX and
applicable to the Option shall remain in full force and effect.

 

(b) Subject to the mandatory arbitration provided in Section 7 above,
jurisdiction and venue in any action to enforce any arbitration award or to
enjoin any action that violates the terms of this Agreement shall be in the
Superior Court of the County of Los Angeles or the U.S. District Court for the
Central District of California.

 

(c) This Agreement may not be modified or amended except in a writing signed by
both you and a duly authorized officer of the Company. This Agreement shall bind
the heirs, personal representatives, successors and assigns of both you and the
Company, and inure to the benefit of both you and the Company, their heirs,
successors and assigns. If any provision of this Agreement is determined to be
invalid or unenforceable, in whole or in part, this determination shall not
affect any other provision of this Agreement and the provision in question shall
be modified by the court so as to be rendered enforceable in a manner consistent
with the intent of the parties insofar as possible. Headings and subheadings in
this Agreement are solely for convenience and do not constitute terms of this
Agreement.

 

(d) This Agreement may be signed in counterparts and the counterparts taken
together shall constitute one agreement. Facsimile signatures shall be deemed as
effective as original signatures.

 

(e) This Agreement shall be deemed to have been entered into and shall be
construed and enforced in accordance with the laws of the State of California as
applied to contracts made and to be performed entirely within California.

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If this Agreement is acceptable to you, please sign below and return the
original, fully executed Agreement to Chris Lipp, General Counsel and Corporate
Secretary of IMIX. A copy of the Agreement is also being provided to you for
your records.

 

On behalf of IMIX, its Board of Directors and Management, we appreciate your
service and contributions to the Company and wish you the best in your
post-Intermix endeavors.

 

Sincerely,

 

INTERMIX MEDIA, INC. By:  

/s/ Richard Rosenblatt

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    Richard Rosenblatt, Chief Executive Officer

 

AGREED AND ACCEPTED:     

/s/ Thomas Flahie

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January 12, 2005

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Thomas Flahie    Date

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EXHIBIT A

 

GENERAL RELEASE

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EXHIBIT B

 

STOCK OPTION