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TO: ALEX ROCKWELL (Annie Hodges) FROM: M.J. MARSHALL (Louann De Coursey) RE: MEETING 2/1/00 Alex, After meeting with Sam, Jerry, Bryce, and you on Thursday, Videopolis' positions became much clearer, and I know that we can resolve many of the issues facing this company. The following is an overview of the decisions made, and then we can proceed with delegating the various jobs later today and establishing a more concrete timeline. In regard to the employee issues: - We will lift the hiring freeze in order to meet production/sales goals. Jerry is already coordinating recruiting efforts with Sam in order to start hiring immediately so that production goals can come closer to sales goals this quarter. - All new employees will work under a tiered salary system with set benefits, bonuses, and stock options. Previous employees will be placed appropriately on the scaled system also with benefits, bonuses, and stock options. The longer you work for the company the more benefits you will receive. Bonuses will be linked to concrete goals such as performance, sales, or efficiency and will no longer be arbitrarily given. - We will schedule a companywide meeting to explain the new system and that previous promises made with TeleWide are no longer valid but, under the new system, they should be receiving comparable compensation in pay bonuses and stock options. - The employee handbook will also be redesigned to include the new salary and benefits package. - Sam has already started addressing these issues with the HR team. In regard to the copyright issues: - My team is developing two contracts, one for employees to sign and one for the customer that includes copyright infringement issues as well as forbidding the copying of any portion of the programs by the customer. (everyone reads) Videopolis was founded as VideoNow in 1993 by two former employees of RCA, where they had learned television broadcasting, electrical engineering, satellite downlinking, and telephone networking applications. Today, Videopolis is a communications company that specializes in connecting videoconferencing equipment over digital telephone lines to cities around the world. The company does not produce meetings, conferences, or programs, but instead facilitates the videoconferencing process. Videopolis' most profitable product, the "Broadcast Service," involves storing and playing prerecorded programs on its VCRs and broadcasting them through its computer equipment to clients' meeting rooms around the world. If a remote site is not immediately available to view a meeting or program from Videopolis, the client can record the program by connecting a VCR to a television monitor. Videopolis does not explicitly state that recording programs is forbidden. Company policy is that all viewing sites must obtain their own permissions from the owners of the content to record any copyrighted materials. There are some concerns that this policy may be facilitating the copying and distribution of copyrighted material. VideoNow became Videopolis after it was acquired by TeleWide Corp. 15 months ago. When VideoNow was started, the founders had a clear vision for growth, hiring only the best employees and purchasing the best equipment in more than sufficient quantities to ensure a high level of service and plenty of reserves for growth. Many of VideoNow's original employees joined the firm with high hopes of stock options, promotions, and bonuses based on future growth prospects. Many employees had purchased expensive homes and cars in anticipation of these bonuses and promotions. Unfortunately, the founding partners sold out directly to TelolWide before granting any options or bonuses to VideoNow employees. After the merger, TeleWide immediately instituted a hiring and equipment-purchasing freeze and virtually froze-all-salaries. The new corporate parent also set aggressive sales and growth goals for Videopolis and developed a highly incentive-based pay structure for upper managers who achieved their goals. This resulted in a considerable amount of turnover as those employees who could afford to leave promptly did so, placing tremendous stress on those who stayed and had to take up the slack. Many of the employees who remained after the buy out believe that promises have been broken and that they were misled about advancement opportunities. Videopolis' chief legal counsel has sent an e-mail message to arrange a meeting with the CEO, vice president of operations, vice president of human resources, and the vice president of marketing and sales to discuss a number of legal and ethical issues concerning potential legal issues at the company