Exhibit 10.07
December 16, 1998
PRIVATE & CONFIDENTIAL
Xx. Xxxx XxXxxxx
0000 Xxxxxxx Xxxx
Xxxx Xxxxxx, XX 00000
Dear Xxxx:
Xxxxxxx.xxx, Inc. (the "Company") is pleased to offer you a position as
President and Chief Executive Officer of the Company and a position on its Board
of Directors, on the terms set forth in this letter agreement, effective upon
your acceptance by execution of a counterpart copy of this letter where
indicated below.
1. Reporting Duties and Responsibilities; Employment at Will; Board
----------------------------------------------------------------
Matters. In this position you will report to the Board of Directors of the
-------
Company. This offer is for a full-time position, located at the offices of the
Company, except as reasonable travel to other locations may be necessary to
fulfill your responsibilities. Your employment with the Company is on an "at
will" basis, and either you or the Company may terminate your employment with
the Company at any time, for any or no reason. Upon your commencement of
employment as the Company's Chief Executive Officer, the Board of Directors will
elect you to fill a position on the Company's Board of Directors, and while you
remain the Chief Executive Officer of the Company, the Board of Directors will
continue to nominate you for a position on the Board of Directors of the
Company. Your full-time employment (at full pay and benefits) will begin on
January 1, 1999, although you will commence employment on a part-time basis
(without pay or benefits) upon execution of this letter agreement.
2. Salary and Vesting Continuation.
-------------------------------
(a) If the Company terminates your employment for any reason other
than Cause (as defined below), then the Company will (i) pay you a lump sum
payment in an amount equal to twelve (12) months of your then current salary,
and, if your termination occurs prior to December 31, 1999, you shall also be
entitled to the payment of the guaranteed bonus described below to the extent it
has not already been paid to you; (ii) allow you to continue to participate in
all pension, profit-sharing and any other retirement plans of the Company that
you are participating in at the time of your termination for the twelve (12)
month period following your termination, solely for the purpose of permitting
you to continue to vest in such plans; and (iii) allow you to continue to
participate in the Company's medical and other insurance plans for the twelve
(12) month period following your termination, at the Company's expense. In
exchange for the foregoing compensation, you agree for a period equal to the
lesser of one (1) year
following your termination or the number of months you were employed by the
Company as of your termination not to (i) engage or participate in any effort or
act to solicit the Company's customers, suppliers, employees or contractors to
cease doing business or their employment or association with the Company or (ii)
engage as an individual proprietor, partner, stockholder, officer, employee,
director, joint venturer, lender or in any capacity whatsoever (otherwise than
as a holder of not more than one percent (1%) of the total outstanding stock of
a publicly held company) in any business enterprise which offers products or
services that directly compete with products or services offered by the Company
at the time of your termination or resignation. "Business enterprise" for
purposes of the preceding sentence shall refer only to the division, subsidiary
or business unit that you are engaged with, and you shall not be deemed to be in
direct competition if the business enterprise you are engaged with is not in
direct competition with the Company even though some other business enterprise
that is affiliated with the business enterprise you are engaged with may be in
such competition. The Company further agrees to pay any "parachute payment"
excise tax which may be imposed on you as a result of any payments under this
paragraph.
(b) In the event of a Change of Control, seventy-five percent (75%)
of the greater of (i) the stock options to acquire Company securities granted to
you pursuant to this letter and (ii) the securities of the Company (including
stock options) that you hold as of the date of the Change of Control that are
unvested, will immediately vest on the date of the Change of Control.
(c) If during the first twelve (12) months following a Change of
Control, the Company (or the surviving company if the Company is not the
surviving company as a result of a merger or consolidation which is a Change of
Control) terminates your employment for any reason other than Cause or you
resign your employment with the Company as a consequence of a Constructive
Termination (as defined below), then any securities of the Company held by you
that are unvested as of the date of termination of your employment will
immediately vest.
(d) For purposes of this agreement, the following terms shall have
the following meanings:
(i) "Cause" shall mean (i) material and willful violation
of any federal or state law; (ii) conviction of any act of fraud with respect to
the Company; or (iii) conviction of a felony or a crime causing material harm to
the standing and reputation of the Company.
(ii) "Change of Control" shall mean (i) the sale, lease,
conveyance or other disposition of all or substantially all of the Company's
assets as an entirety or substantially as an entirety to any person, entity or
group of persons acting in concert; (ii) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended)
becoming the "beneficial owner" (as defined in Rule 13(d)-3 under said Act),
directly or indirectly, of securities of the Company representing more than 50%
of the total voting power represented by the Company's then outstanding voting
securities; (iii) a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing
2
to represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least 50% of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation; or (iv) the
liquidation or winding up of the business of the Company.
(iii) "Constructive Termination" shall mean that the
Company, without your prior written approval, has (i) materially reduced your
title, authority or responsibilities; (ii) reduced your salary or bonus plans;
or (iii) relocated your principal place of work by a distance of more than 50
miles.
You agree that the payments set forth in this offer letter, including paragraph
3 below, constitute all payments (except for accrued vacation and salary) that
you shall be entitled to in the event of any termination of employment.
3. Salary; Bonus; Benefits and Vacation; Relocation. Your base salary
------------------------------------------------
will be $250,000 per year payable in accordance with the Company's customary
payroll practice as in effect from time to time. Unless your employment is
terminated by the Company for Cause prior to December 31, 1999, you will also be
paid a $100,000 bonus as follows: $50,000 on June 30, 1999 and $50,000 on
December 31, 1999. In no event will your annual base salary be reduced below
$250,000 during your employment by the Company. The Company agrees that it shall
establish bonus plans each fiscal year during your employment in which you shall
be entitled to participate and pursuant to which you shall have the potential to
earn at least $100,000 per fiscal year, subject to achieving any performance
objectives or satisfying other requirements under the bonus plans. You will
receive the Company's standard employee benefits package, and will be subject to
the Company's vacation policy, as such package and policy are in effect from
time to time; provided that (i) you will immediately be entitled to three (3)
weeks of paid vacation each year and (ii) you will be entitled to immediate
coverage under the Company's health, dental, disability and life insurance plans
commencing January 1, 1999. You will also be entitled to be reimbursed for up to
$120,000 of reasonable documented commuting, interim living, relocation and
other miscellaneous expenses incurred by you and your family in connection with
traveling and relocating to the San Francisco Bay area in connection with
accepting employment with the Company.
4. Option and Stock Issuance.
-------------------------
(a) Option. Promptly following your commencement of employment
------
with the Company but in no event later than January 31, 1999, the Company will
issue you an option to purchase 923,210 shares of the Company's common stock at
an exercise price of $0.75 per share. This option will be an incentive stock
option to the maximum extent possible, will be immediately exercisable, and will
vest as follows: 25% will be vested upon grant and the balance will vest on a
pro rata monthly basis over three years commencing on the first anniversary of
the date of grant; provided that an additional 20% of the original stock option
grant will become vested upon the Company's initial underwritten public offering
of its securities. This option may be exercised by you at any time up to ten
(10) years following the
3
date of grant of the option, provided that following termination of your
employment you may only exercise the option to the extent it is vested.
(b) Stock. Until March 31, 1999, as long as you are an
-----
employee of the Company you will have the option to purchase up to 263,774
shares of the Company's Series D Preferred Stock at $3.55 per share. Your
payment for this stock may be in cash or, to the extent the Company's common
stock is publicly traded, with same day sale proceeds or pursuant to a net
exercise of the option. If the payment is in cash, it shall be in the amount of
no less than $250,000, with the balance, if any, to be financed by an interest
free full recourse promissory note secured by the stock. This note will be due
and payable on the third anniversary of the date of issuance of the stock.
5. Confidential Information. As an employee of the Company, you will
------------------------
have access to certain Company confidential information and you may, during the
course of your employment, develop certain information or inventions that will
be the property of the Company. To protect the interest of the Company, you will
need to sign the Company's standard "Employee Inventions and Confidentiality
Agreement" in the form previously provided to you as a condition of your
employment. We wish to impress upon you that we do not wish you to bring with
you any confidential or proprietary material of any former employer or to
violate any other obligation to your former employers.
6. At-Will Employment. While we look forward to a long and profitable
------------------
relationship, should you decide to accept our offer, you will be an at-will
employee of the Company, which means the employment relationship can be
terminated by either of us for any reason at any time, with or without cause or
advance notice. Any statements of representations to the contrary (and, indeed,
any statements contradicting any provision in this letter) should be regarded by
you as ineffective. Further, your participation in any stock option or benefit
program is not to be regarded as assuring you of continuing employment for any
particular period of time.
7. Authorization to Work. Because of Federal regulations adopted in
---------------------
the Immigration Reform and Control Act of 1986, you will need to present
documentation demonstrating that you have authorization to work in the United
States. If you have any questions about this requirement, which applies to U.S.
citizens and non-U.S. citizens alike, please contact our human resources
department.
8. Term of Offer. This offer will remain open until December 17,
-------------
1998. If you decide to accept our offer, and I hope that you will, please sign
the enclosed copy of this letter agreement in the space indicated and return it
to me. Upon your signature below, this will become our binding agreement with
respect to the subject matter of this letter, superseding in their entirety all
other or prior agreements by you with the Company as to the specific subjects of
this letter agreement, and will be binding upon and inure to the benefit of our
respective successors and assigns, and your heirs, administrators and executors.
This agreement may not be assigned by you. This agreement will be governed by
California law, and may only be amended
4
in a writing signed by you and the Company. In the event of any conflict between
the terms of this letter agreement and the relevant terms of relevant Company
benefit plans, the terms of this letter agreement shall control.
We are excited to have you join us and look forward to working with you.
Sincerely,
Xxxxxxx.xxx, Inc.
By: /s/ Xxxxx Xxxxxx
-------------------------------------------
Xxxxx Xxxxxx, Co-Founder, President and CEO
Acknowledged, Accepted and Agreed: Date:
/s/ Xxxx XxXxxxx 12-16-98
--------------------------------- --------------------------
Xxxx XxXxxxx
5
