EXHIBIT 10.16
February 29, 2000
Xx. Xxxxx X. Xxxxxx
000 Xxxxx Xxxxxxx Xxxxx
Xxxxx, XX 00000
Re: Employment Agreement
Dear Xxxxx:
On behalf of xxxx.xxx, I am pleased and delighted to confirm the terms of our
agreement for you to become the President and Chief Executive Officer of
xxxx.xxx. This offer is conditional upon your acceptance of the terms and
conditions of this offer of employment and your execution a mutually agreeable
Employee Confidential Information and Inventions Agreement.
Your position with xxxx.xxx will be President and Chief Executive Officer. You
will also be a member of the xxxx.xxx Board of Directors. You will be
responsible for all of the strategic and operational activities of xxxx.xxx, and
report directly to the Board of Directors. As we discussed, your position is a
full-time position, and your employment will commence as soon as is practicable.
(The date your employment commences is referred to as your Start Date.)
Your initial base salary will be $500,000 per year, payable at the frequency and
in accordance with xxxx.xxx's regularly established payroll policies. You will
also receive, as we have discussed, a $1,000,000 "Sign-On" Bonus, payable on
your Start Date. However, if you would prefer, xxxx.xxx can issue you on your
Start Date $1,000,000 worth of restricted common stock, valued at $4.82 per
share. This restricted common stock will vest as follows: one-quarter on the
first anniversary of your Start Date, and the remainder in 1/36 increments over
the 36 months following the first anniversary of your Start Date. This bonus
(either in cash or restricted stock) is forfeitable by you only in the event you
voluntarily terminate your employment with xxxx.xxx, other than as a result of a
change in control, within the first year of your Start Date. We would suggest
that you seek the advice of your financial and legal advisors regarding the tax
implications for you of a restricted common stock grant. Additionally, you will
receive a guaranteed $250,000 bonus, payable within thirty (30) days of the
anniversary of your Start Date, as a first-year performance bonus. xxxx.xxx
will be establishing an annual cash performance incentive plan going forward, in
which all officers will be able to participate. All payments to you will be
subject to legally required withholding. It is xxxx.xxx's policy to review
salary, and overall compensation levels annually. Accordingly, your base salary
and other compensation, including cash performance bonuses and follow-on stock
option grants, may be reviewed and adjusted or provided annually at xxxx.xxx's
sole discretion based on company and individual performance; raises in
compensation are not guaranteed. In no way whatsoever, however, will your base
salary decline in any way.
Xxxxx X. Xxxxxx
February 29, 2000
Page 2
You will also be eligible to participate in the employee benefits generally made
available to our officer-level employees from time to time. At the present
time, those benefits include health, dental, and vision insurance for you and
your family, a 401(k) plan, a flexible spending plan, parking, a partial health
club membership, provision of a cell phone, use of a lap-top computer, and paid
time off in accordance with applicable benefit plans and xxxx.xxx's written
policies, as they may be amended from time to time at xxxx.xxx's discretion. We
will also provide to you a supplemental short-term disabiity, long-term
disability, and life insurance policy with a benefit equal to at least three
times your base salary.
xxxx.xxx has a company option plan that permits many of our employees to
participate in the equity ownership of xxxx.xxx. Our Board of Directors has
approved an option grant to you of 1,663,752 options, in the form of a
combination of ISO and NQ options, which represents 5% of the outstanding shares
of xxxx.xxx, on a fully-diluted basis (post-Series E and the Comfort Living
acquisition, both of which closed last week). The price of your options will be
at $4.82 per share, assuming a Start Date no later than April 1, 2000. These
options will be subject to the terms of the Option Plan and your execution of an
Option Agreement. One-quarter of these options will vest on the first
anniversary of your Start Date, and the remaining stock will vest in 1/36
increments over the 36 months following the first anniversary of your Start
Date.
In connection with a change of control, as that term is defined in the Option
Plan, you will receive those benefits that are enumerated in the Compensation
Protection Agreement (which includes a benefit of two years base salary and
bonus, as well as accelerated vesting of options, the latter subject only to
certain "pooling" restrictions), the form of which has been approved by the
Board of Directors, and will require your execution on your Start Date.
In connection with your relocation from Largo, Florida to the San Francisco Bay
area, xxxx.xxx will provide to you a one-time, up-front allowance of $500,000 to
use to pay for all of your relocation costs and needs. What you do not use of
this allowance for relocation is yours to keep. In addition, xxxx.xxx will
gross you up for the incremental federal and state income tax liability you
incur in connection with this $500,000 allowance, so that the impact of this
payment is tax-neutral to you. xxxx.xxx will not be responsible in any way for
any of your relocation expenses as a result of providing to you this allowance.
You will devote your best efforts to the performance of your job for xxxx.xxx.
While employed at xxxx.xxx, you will not undertake any other activity requiring
your business time and attention without Board approval, with the exception of
your current participation on the Boards of Directors of Jabil Circuit, AmSouth
Bank, XxXxx Stores, and the National Assocation of Chain Drug Stores.
Xxxxx X. Xxxxxx
February 29, 2000
Page 3
We agree that you intend to resign as soon as practicable from the Boards of
AmSouth Bank and XxXxx Stores. You agree that you will not support (by way of
investment* or otherwise) any activity that is competitive with xxxx.xxx's
business or pose a conflict of interest with that business. You will follow
xxxx.xxx's policies and procedures (including our policies protecting other
employees against discrimination and sexual harassment) as made available to
you from time to time. As a condition of your employment, you will execute a
mutually agreeable Employee Confidential Information and Inventions Agreement.
Your employment with xxxx.xxx will be "at will"; in other words, either you or
xxxx.xxx will have the right to terminate your employment with xxxx.xxx at any
time, for any reason, with or without notice and with or without cause, at your
or our discretion, subject to the terms of this paragraph and paragraph six
above. In the event, however, that you are terminated without cause (outside of
a change in control circumstance), you will receive a severance benefit equal to
twice your base salary. If you are terminated within one year from your Start
Date, 25% of your options will automatically vest upon the termination date.
In the unlikely event of a dispute between xxxx.xxx and you arising out of your
employment or the termination of your employment, we each agree to submit our
dispute to binding arbitration. This means that there will be no court or jury
trial of disputes between us concerning your employment or the termination of
your employment. Arbitration will be held in San Francisco, California in front
of three arbitrators in accordance with the Employment Arbitration Rules of the
American Arbitration Association. Each party will select an arbitrator of his
choice; both arbitrators will then select a third arbitrator. The arbitration
decision will be based on a majority decision by the three-person arbitration
panel. While this agreement to arbitrate is intended to be broad (and covers,
for example, claims under state and federal laws prohibiting discrimination on
the basis of race, sex, age, disability, family leave, etc.), it is not
applicable to your rights under the California Workers' Compensation Law, which
are governed under the special provisions of that law, or to enforcement of the
Employee Confidential Information and Inventions Agreement that you are signing.
Xxxxx, we are very excited about your joining us. Please sign and return a copy
of this letter to me, keeping a copy for your records. The terms set forth in
this letter supersede all prior agreements,
* other than ownership of less than 1% of publicly traded shares of competitors
(initialled) DMK FAN
Xxxxx X. Xxxxxx
February 29, 2000
Page 4
understandings and representations between us concerning the subject matter of
this letter. On behalf of the Board of Directors, we look forward to your
joining xxxx.xxx.
Sincerely,
/s/ Xxxxxx X. Xxxxxxx, Xx.
Xxxxxx X. Xxxxxxx, Xx.
Chief Executive Officer
I, Xxxxx Xxxxxx, understand and agree to the above terms. I understand that my
employment with xxxx.xxx is at will, and I acknowledge that no representations
or promises other than those set forth above have been made to me with regard to
the terms and conditions of my employment.
Signed: Xxxxx X. Xxxxxx
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