Exhibit (e)(3)
EMPLOYMENT AGREEMENT
This Employment Agreement is made and entered into by and between Telocity,
Inc. (the "Company") and Xxxxxxxx Xxxxxx ("Xxxxxx") as of May 5, 1999 (the
"Effective Date").
1. Position and Duties: Xxxxxx shall be employed by the Company as its
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President and Chief Executive Officer ("CEO"), reporting only to the Company's
Board of Directors (the "Board") effective as of Xxxxxxx Xxxxxxx'x resignation
which the Company expects to occur no later than July 22, 1999. As its
President and CEO, Xxxxxx agrees to devote her full business time, energy and
skill to her duties at the Company. These duties shall include all those duties
customarily performed by the President and CEO, as well as those duties that may
be assigned by the Board from time to time. In addition, the Company will
undertake its best efforts to have its shareholders approve the nomination and
election of Xxxxxx to the Board, which approval the Company anticipates will
occur.
As a member of the Company's Board, Xxxxxx shall be subject to the
provisions of the Company's bylaws and all applicable general corporation laws
relative to her position on the Board. In addition to the Company's bylaws, as a
member of the Board, Xxxxxx shall also be subject to the statement of powers,
both specific and general, as set forth in the Company's Articles of
Incorporation.
2. Term of Employment: Manuel's employment with the Company will be for
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no specified term, and may be terminated by Xxxxxx or the Company at any time,
with or without cause. Upon the termination of Manuel's employment with the
Company, for any reason, neither Xxxxxx nor the Company shall have any further
obligation or liability under this Employment Agreement to the other, except as
set forth in paragraphs 4, 5, 6, 7, 8 and 9, below.
3. Compensation: Xxxxxx shall be compensated by the Company for her
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services as follows:
(a) Base Salary: As Chief Executive Officer, Xxxxxx shall be paid a
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monthly Base Salary of $25,000 per month ($300,000 on an annualized basis),
subject to applicable withholding, in accordance with the Company's normal
payroll procedures. Manuel's salary shall be reviewed on at least an annual
basis and may be modified as appropriate. In the event of such a modification,
the new amount shall become Manuel's Base Salary.
(b) Benefits: Xxxxxx shall have the right, on the same basis as other
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members of senior management of the Company, to participate in and to receive
benefits under any of the Company's employee benefit plans, as such plans may be
modified from time to time. In addition, Xxxxxx shall be entitled to the
benefits afforded to other members of senior management under the Company's
vacation, holiday and business expense reimbursement policies.
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(c) Bonuses: Xxxxxx shall be entitled to the following bonuses:
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(i) Signing Bonus: Within ninety (90) business days of the
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Effective Date, the Company will pay Xxxxxx a signing bonus in the total amount
of $150,000, less applicable withholding. In the event that Xxxxxx voluntarily
resigns from her employment during the first year following the Effective Date,
Xxxxxx agrees that she shall repay a pro-rata share of the signing bonus based
on the time remaining in the first year of service.
(ii) Guaranteed Bonus: At the conclusion of her first year of
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service as CEO of the Company, Xxxxxx shall receive a bonus in the total amount
of $100,000, less applicable withholding. The bonus payment shall be made in
accordance with the Company's normal payroll procedures for bonuses.
(iii) Performance Bonus: At the conclusion of her second year of
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service as CEO of the Company, and each year of employment thereafter, Xxxxxx
shall have the opportunity to earn a Performance Bonus that will be payable in
accordance with the Company's Performance Bonus Plan, as such plan may be
adopted and modified over time. (Xxxxxx is expected to prepare and present a
form of Performance Bonus Plan for review and approval by the Board and it is
expected that such Performance Bonus Plan will set the minimum target bonus at
fifty percent (50%) of Manuel's then current base salary for the achievement of
minimum objectives approved by the Board). This Performance Bonus shall be based
upon the achievement of certain fiscal and performance-based objectives as
agreed to by Xxxxxx and the Board and such payment to be made in accordance with
the Company's normal payroll procedures for bonuses. All bonus payments made
pursuant to this subsection are subject to the approval of the Board.
(d) Attorneys' Fees In Negotiating Agreement: The Company shall
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reimburse Xxxxxx for all reasonable attorneys fees she incurs in the review and
negotiation of this Employment Agreement up to a maximum of $5000.
4. Stock Options: Xxxxxx shall be granted the option to purchase
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1,613,137 shares of the Common Stock of the Company, which represents seven
percent (7%) of the Company's fully-diluted, as converted equity, at an exercise
price per share equal to the fair market value of a share of Common Stock of the
Company on the date of grant as determined by the Board in its sole discretion.
To the extent possible, such Option will be an incentive stock option. The
Company currently anticipates (but does not guaranty) that the fair market value
of the Common Stock of the Company on the date of grant shall be $.70 per share.
Manuel's options shall vest monthly at the rate of 1/48 per month. Upon the
termination of Manuel's employment in accordance with the provisions of
paragraph 6(b), below, the options shall vest as described in those paragraphs.
Except as provided in paragraph 6(b), below, Manuel's options shall be subject
to the terms of the Company's Stock Option Plan, a copy of which is attached
hereto as Exhibit A, and the standard option agreement provided pursuant to the
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plan. Xxxxxx will be permitted to exercise the option in full prior to vesting
in the underlying shares, subject to the
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Company's right to repurchase any unvested shares at Manuel's original cost upon
her termination of employment. In addition, the Company shall permit Xxxxxx to
pay the option exercise price with a full recourse loan (secured by the shares
acquired with the loan) at the lowest interest rate available to avoid the
imposition of imputed income under the tax laws to assist Xxxxxx to exercise her
options. Such loan shall be repayable upon the earlier of: (i) the fifth year
anniversary of the Effective Date; (ii) the termination of Manuel's employment
for any reason; or (iii) the date twelve (12) months after Xxxxxx is first
eligible to sell shares of the Company's stock that she holds following an
initial public offering of the Company's shares; provided, however, that in the
event of Manuel's Termination Without Cause, such loan shall be repayable upon
the earlier of the events stated in clauses (i) or (iii) immediately preceding.
For purposes of the resale of the underlying shares under the Option, the
Company covenants to use itsgood faith efforts to make available Rule 701 under
the Securities Act of 1933, as amended (the "Securities Act"), or to register
the shares on Form S-1 or S-3 under the Securities Act (in the case where the
Company registers shares for its own account or for others holding registration
rights) or on Form S-8 under the Securities Act.
The agreement for the Options shall contain the following additional
provisions: (i) in the event that Xxxxxx resigns from her position for "Good
Reason" (as defined below) within twelve (12) months following a Change of
Control of the Company (as also defined below), one-half of the unvested shares
subject to the Options, or any other option grants made to Xxxxxx, shall become
vested immediately prior to Manuel's resignation. For purposes of this
Employment Agreement, a "Change of Control" shall mean an "Ownership Change
Event" (as defined below) or a series of related Ownership Change Events
(collectively, the "Transaction") wherein the stockholders of the Company
immediately before the Transaction do not retain immediately after the
Transaction direct or indirect beneficial ownership of more than fifty percent
(50%) of the total combined voting power of the outstanding voting stock of the
Company or the corporation or corporations to which the assets of the Company
were transferred (the "Transferee Corporation(s)"), as the case may be. For
purposes of the preceding sentence, indirect beneficial ownership shall include,
without limitation, an interest resulting from ownership of the voting stock of
one or more corporations which, as a result of the Transaction, own the Company
or the Transferee Corporation(s), as the case may be, either directly or through
one or more subsidiary corporations. The Board shall have the right to
determine whether multiple sales or exchanges of the voting stock of the Company
or multiple Ownership Change Events are related, and its determination shall be
final, binding and conclusive.
For purposes of this Employment Agreement, an "Ownership Change Event"
shall be deemed to have occurred if any of the following occurs with respect to
the Company:
(1) the direct or indirect sale or exchange in a
single or series of related transactions by the stockholders of the Company of
more than fifty percent (50%) of the voting stock of the Company;
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(2) a merger or consolidation in which the Company is
a party;
(3) the sale, exchange, or transfer of all or
substantially all of the assets of the Company; or
(4) a liquidation or dissolution of the Company.
For purposes of this Employment Agreement, "Good Reason" means any of the
following conditions, which condition(s) remain(s) in effect 15 days after
written notice to the Board from Xxxxxx of such condition(s):
(1) a decrease in Manuel's Base Salary and/or a
material decrease in Manuel's Performance Bonus Plan or employee benefits;
(2) a material, adverse change in Manuel's title,
authority, responsibilities or duties, as measured against Manuel's title,
authority, responsibilities or duties immediately prior to such change;
(3) the relocation of Manuel's work place to a
location outside the San Francisco Bay Area (i.e., Marin County, Contra Costa
County, Alameda County, San Francisco County, San Xxxxxxx County, San Mateo
County or Santa Xxxxx County);
(4) any material breach by the Company of any
provision of this Employment Agreement, which breach is not cured within thirty
(30) days following written notice of such breach from Xxxxxx; or
(5) any failure of the Company to obtain the
assumption of this Employment Agreement by any successor or assign of the
Company.
5. Benefits Upon Termination: In the event of Manuel's voluntary
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termination from employment with the Company, or in the event that Manuel's
employment terminates as a result of her death or continued disability for
ninety (90) days ("disability" defined as the inability to perform the essential
functions of Manuel's position), Xxxxxx shall be entitled to no compensation or
benefits from the Company other than those earned under paragraph 3 above
through the date of her termination or in the case of any stock options, vested
through the date of her termination. In the event that Xxxxxx voluntarily
resigns from her employment with the Company she shall simultaneously resign
from any position she holds on the Company's Board.
6. Benefits Upon Other Termination. Xxxxxx agrees that her employment may
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be terminated by the Company at any time, with or without cause. In the event of
the termination of Manuel's employment by the Company for the reasons set forth
below, she shall be entitled to the following:
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(a) Termination for Cause: If Manuel's employment is terminated
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by the Company for "Cause" as defined below, Xxxxxx shall be entitled to no
compensation or benefits from the Company other than those earned under
paragraph 3, or in the case of any stock options, vested through the date of her
termination.
For purposes of this Employment Agreement, a termination for "Cause" occurs
if Xxxxxx is terminated for any of the following reasons:
(1) theft, dishonesty, or falsification of any
employment or Company records;
(2) conviction of a felony or any act involving moral
turpitude;
(3) Manuel's refusal to perform any reasonable,
assigned duties after written notice from the Company of, and a reasonable
opportunity to correct, such refusal;
(4) improper disclosure of the Company's confidential
or proprietary information;
(5) any intentional act by Xxxxxx that has a material
detrimental effect on the Company's reputation or business; or
(6) any material breach of this Employment Agreement,
which breach, if curable, is not cured within thirty (30) days following written
notice of such breach from the Company.
(b) Termination Without Cause: If Manuel's employment is
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terminated by the Company for any reason other than for Cause, it shall be
deemed a "Termination Without Cause." In such case, Xxxxxx shall be entitled to
the following separation benefits:
(i) in the event that: (i) Manuel's employment is terminated
prior to the closing date of an initial public offering of the common stock of
the Company; and (ii) such termination is effective during the first year
following the Effective Date, Xxxxxx shall be entitled to receive the greater
of:
(A)
(1) all accrued compensation and benefits earned
through the date of termination;
(2) continued payment of Manuel's salary at her
Base Salary rate, less applicable withholding, for six (6) months following her
termination;
(3) payment of the Guaranteed Bonus described
above; and
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(4) additional vesting in the Options described
in paragraph 4, above, or any other options granted to Xxxxxx by the Board as if
Xxxxxx continued to vest in the options for an additional six months; or
(B)
(1) all accrued compensation and benefits earned
through the date of termination;
(2) continued payment of the Base Salary as
provided in paragraph 3(a) until the one year anniversary of the Effective Date;
(3) payment of the Guaranteed Bonus described in
paragraph 3(c)(ii), above, on the one year anniversary of the Effective Date;
and
(4) continued vesting in the Options described in
paragraph 4, above, and any other options granted to Xxxxxx by the Board until
the one year anniversary of the Effective Date.
(ii) in the event that: (i) Manuel's employment is
terminated prior to the closing date of an initial public offering of the common
stock of the Company; and (ii) such termination is effective following the one
year anniversary of the Effective Date, Xxxxxx shall receive:
(A) all accrued compensation and benefits earned
through the date of termination;
(B) continued payment of Manuel's salary at her Base
Salary rate, less applicable withholding, for six (6) months following her
termination;
(C) a pro rata portion of Manuel's target Performance
Bonus for the year in which the termination occurs; and
(D) an additional six (6) months vesting in the
Options described in paragraph 4, above and any other options granted to Xxxxxx
by the Board.
(iii) in the event that Manuel's employment is terminated
on or following the closing date of an initial public offering of the common
stock of the Company, Xxxxxx shall receive:
(A) all accrued compensation and benefits earned
through the date of termination;
(B) continued payment of Manuel's salary at her Base
Salary rate, less applicable withholding, for twelve (12) months following her
termination;
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(C) a pro rata portion of Manuel's target Performance
Bonus for the year in which the termination occurs; and
(D) an additional twelve (12) months' vesting in the
Options described in paragraph 4, above and any other options granted to Xxxxxx
by the Board.
(iv) in the event that Manuel's employment is terminated by
the Company or she voluntarily resigns from the Company for Good Reason within
sixty (60) days prior to or twelve (12) months following a Change of Control,
Xxxxxx shall receive in a lump sum:
(A) a severance payment equal to (1) twelve (12)
months salary at her then current Base Salary Rate and (2) her target annual
Performance Bonus for the term in which her employment terminated;
(B) continued benefits for up to twelve (12) months
following termination; and
(C) accelerated vesting as described in Paragraph 4.
7. Employee Inventions and Proprietary Rights Assignment Agreement:
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Xxxxxx agrees to abide by the terms and conditions of the Company's standard
Employee Inventions and Proprietary Rights Assignment Agreement.
8. Non-Solicitation: Xxxxxx agrees that for a period of one year after
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the date of the termination of her employment for any reason, she shall not,
either directly or indirectly: (i) solicit the services, or attempt to solicit
the services, of any employee of the Company to any other person or entity; or
(ii) solicit or otherwise encourage any customer, supplier or other business
contact of the Company to withdraw, curtail or cancel their business with the
Company.
9. Indemnification: The Company agrees to make Xxxxxx a party to its
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standard form of indemnification agreement as signed by the Company's other
officers and directors.
10. Dispute Resolution: In the event of any dispute or claim relating to
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or arising out of this Employment Agreement (including, but not limited to, any
claims of breach of contract, wrongful termination or age, sex, race or other
discrimination), Xxxxxx and the Company agree that all such disputes shall be
fully and finally resolved by binding arbitration conducted by the American
Arbitration Association in San Francisco, California in accordance with its
National Employment Dispute Resolution rules, as those rules are currently in
effect (and not as they may be modified in the future). Xxxxxx acknowledges that
by accepting this arbitration provision she is waiving any right to a jury trial
in the event of such dispute. Provided, however, that this arbitration provision
shall not apply to any disputes or claims relating to or arising out of the
misuse or misappropriation of trade secrets or proprietary information.
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11. Attorneys' Fees: The prevailing party shall be entitled to recover
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from the losing party its attorneys' fees and costs incurred in any action
brought to enforce any right arising out of this Employment Agreement.
12. Interpretation: Xxxxxx and the Company agree that this Employment
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Agreement shall be interpreted in accordance with and governed by the laws of
the State of California.
13. Successors and Assigns: This Employment Agreement shall inure to the
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benefit of and be binding upon the Company and its successors and assigns. In
view of the personal nature of the services to be performed under this
Employment Agreement by Xxxxxx, she shall not have the right to assign or
transfer any of her rights, obligations or benefits under this Employment
Agreement, except as otherwise noted herein.
14. Entire Agreement: This Employment Agreement constitutes the entire
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employment agreement between Xxxxxx and the Company regarding the terms and
conditions of her employment, with the exception of (i) the agreement described
in paragraph 7 and (ii) any stock option agreements between Xxxxxx and the
Company. To the extent that there is any inconsistency between this Employment
Agreement and any other agreement between Xxxxxx and the Company, the terms of
this Employment Agreement will govern. This Employment Agreement (including the
documents described in (i) and (ii) herein) supersedes all prior negotiations,
representations or agreements between Xxxxxx and the Company, whether written or
oral, concerning Manuel's employment by the Company.
15. Validity: If any one or more of the provisions (or any part thereof)
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of this Employment Agreement shall be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions (or any part thereof) shall not in any way be affected or impaired
thereby.
16. Modification: This Employment Agreement may only be modified or
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amended by a supplemental written agreement signed by Xxxxxx and the Company.
17. Counterparts: This Employment Agreement may be executed in any number
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of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
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IN WITNESS WHEREOF, the parties have executed this Employment Agreement as
of the date and year written below.
TELOCITY, INC.
Date: April 30, 1999 By: Xxxx Xxxxxxxxx
____________________________ ______________________________
Its: Director
_____________________________
Date: May 5, 1999 /s/ Xxxxxxxx Xxxxxx
____________________________ _________________________________
Xxxxxxxx Xxxxxx
EXHIBIT A
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