EMPLOYMENT AGREEMENT - SCOTT MARTIN
1
EMPLOYMENT AGREEMENT
This Employment Agreement is made and entered into by and between
Telocity,
Inc. (the "Company") and Scott E. Martin (the "CAO") on December 8,
1999.
1. Position and Duties: CAO shall be employed by the Company as its
Executive Vice President, Chief Administrative Officer and Corporate
Secretary,
reporting only to the Company's Chief Executive Officer or President and
Chief
Operating Officer (COO) beginning no later than December 8, 1999 (the
"Effective
Date"). CAO shall serve on the most senior management or executive
committee of
the Company. CAO agrees to devote his full business time, energy and
skill to
his duties at the Company. These duties shall include, without
limitation,
senior executive responsibility for the legal and regulatory, human
resources,
facilities, materials, procurement, Corporate Secretary functions and
all those
senior executive duties customarily performed by the Chief
Administrative
Officer and Corporate Secretary, as well as those senior executive
duties that
may be assigned by the CEO (or COO as the case may be) from time to time
(collectively, the "Duties").
2. Term of Employment: CAO's employment with the Company will be
for no
specified term, and may be terminated by CAO or the Company at any time,
for any
reason, with or without cause, and neither CAO nor the Company shall
have any
further obligation or liability whatsoever under this Employment
Agreement to
the other, except as may be specifically set forth herein.
3. Compensation: CAO shall be compensated by the Company for his
services
as follows:
A. Base Salary: CAO shall be paid a monthly Base Salary of
$15,800 per
month ($190,000 on an annualized basis), subject to applicable
withholding, in
accordance with the Company's normal payroll procedures. CAO's salary
shall be
reviewed on at least an annual basis and may be increased as
appropriate. In the
event of such an increase, the new amount shall become CAO's Base
Salary.
B. Benefits: CAO shall have the right, on the same basis as
other
members of the Company's senior management, 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. By way of description and not limitation,
CAO shall
be entitled to the benefits afforded to other members of senior
management under
the Company's Bonus Program, which shall be defined with sixty (60) days
of the
Effective Date and which shall, in any case, contain a bonus amount of
up to
100% of CAO's Base Salary with a target bonus of 50% of CAO's Base
Salary. CAO
shall be entitled to the benefits afforded to other members of senior
management
under the Company's vacation, holiday and business expense reimbursement
policies.
C. Signing Bonus: Within thirty (30) days of the Effective
Date, the
Company will pay CAO a signing bonus in the total amount of $150,000,
less
applicable withholding. In the event that CAO voluntarily resigns from
his
employment other than for Good Reason during
2
the first year following the Effective Date, CAO agrees that he shall
repay a
pro-rata share of the signing bonus based on the time remaining in the
first
year of service.
4. Stock Options: CAO shall be granted the option to purchase
245,000
shares of the Company's Common Stock (the "Stock Options"), at an
exercise price
per share equal to the fair market value of the Company's Common Stock
on the
date of grant as determined by the Board in its sole discretion. Such
grant and
determination shall be made no later than twenty (20) days after the
Effective
Date. To the extent possible, such Option will be an incentive stock
option. The
Stock Options shall vest monthly at the rate of 1/48 per month, however
there
shall be a six (6) month cliff, upon which the first 1/8 of the Stock
Options
shall vest. Upon the termination of CAO's employment in accordance with
the
provisions of Section 7, below, the Stock Options shall vest as
described in
such provisions. Except as provided in Section 7, below, the Stock
Options shall
be subject to the terms of the Company's Stock Option Plan and the
Company's
standard incentive and non-statutory Stock Option Purchase Agreements
(the
"Standard Agreements"), provided pursuant to the Company's Stock Option
Plan.
CAO will be entitled to participate in future stock option award
programs and
equity incentive programs that may exist for senior management of the
Company.
CAO will be permitted to exercise the option in full prior to vesting in
the
underlying shares, subject to the Company's right to repurchase any
unvested
shares at CAO's original cost upon his termination of employment, as
provided in
the Standard Agreements. In addition, the Company shall permit CAO 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 CAO to exercise the Stock
Options.
Such loan shall be repayable upon the earlier of (i) the fifth year
anniversary
of the Effective Date; (ii) the termination of CAO's employment for any
reason;
or (iii) the date twelve (12) months after CAO is first eligible to sell
shares
of the Company's stock that he holds following an initial public
offering of the
Company's shares; provided, however, that in the event of CAO's
termination
without Cause, Death or Disability or Resignation for Good Reason, such
loan
shall be repayable upon the earlier of the events stated in clauses (i)
or (iii)
immediately preceding.
5. Housing Allowance: In addition to the Base Salary, beginning on
December
6, 1999 and continuing through June 30, 2000, Provided that CAO is
continuously
employed as the Company's Chief Administrative Officer, Company shall
provide,
at Company's expense, lodging in a corporate apartment within a
reasonable
distance of the Company and suitable for a member of the senior
management team
of other similarly situated companies.
6. Definitions Applicable to Terminations: For the purposes of
other
terminations as described in Section 7, the following definitions shall
apply:
A. A "Change of Control" is defined as and shall be deemed to
have
occurred if any of the following occurs with respect to the Company
(except as
may occur with a reincorporation of the Company in Delaware in advance
of an
initial public offering of the Company's stock): (i) 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;
(ii) a merger or consolidation in which the Company is a party; (iii)
the
2
3
sale, exchange, or transfer of all or substantially all of the assets of
the
Company; or (iv) liquidation or dissolution of the Company.
B. "Good Reason" shall be defined as and shall be deemed to
exist if
any of the following conditions occur, provided that such conditions
persist for
fifteen (15) business days after written notice to the Board from CAO
and
reasonable opportunity for the Company to cure: (i) the Company, its
successor
or assign decreases CAO's Base Salary or Benefits as defined above; (ii)
the
Company its successor or assign makes an adverse change in CAO's
Position and
Duties, as defined above, or to any additional title, authority,
responsibilities or duties that CAO assumes during the course of his
employment
with the Company (provided that the Company or its successor may provide
an
equivalent position, with the consent of CAO, which consent will not be
unreasonably withheld); (iii) the Company its successor or assign
requires the
relocation of CAO's work place to a location outside of the San
Francisco Bay
Area (i.e., outside Marin County, Contra Costa County, Alameda County,
San
Francisco County, San Mateo County or Santa Clara County); (iv) the
Company its
successor or assign breaches any provision of this Employment Agreement;
or (v)
the Company fails to obtain the assumption of this Employment Agreement
by any
successor or assign of the Company.
C. Termination "for Cause" is defined as a termination of CAO
based
upon: (i) willful and serious misconduct injurious to the Company,
provided the
Company gives written notice to the CAO describing the manner in which
it
believes the CAO may have violated this provision and an opportunity to
respond;
(ii) conviction of a crime that constitutes a felony; (iii) CAO's
willful
refusal to perform any of the Duties as set forth in Section 1, above,
provided
the Company gives written notice to the CAO describing the manner in
which it
believes the CAO may have violated this provision and an opportunity to
correct
such willful refusal; (iv) improper disclosure of the Company's
confidential or
proprietary information; (v) any act by CAO undertaken by CAO with the
intent to
materially harm the Company's reputation or business, provided the
Company gives
written notice to the CAO describing the manner in which it believes the
CAO may
have violated this provision and an opportunity to respond; or (vi) 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.
7. Benefits Upon Termination. CAO agrees that his employment may
be
terminated by the Company at any time, for any reason, with or without
cause,
and he shall be entitled as his sole remedy and compensation only the
compensation provided, below, in this Section 7. In the event of the
termination
of CAO's employment by the Company for any of the reasons set forth
below, he
shall be entitled to the following:
A. Termination for Cause: If CAO's employment is terminated by
the
Company For Cause, CAO shall be entitled to no compensation or benefits
from the
Company other than those under Section 3 earned up until such
termination and,
in the case of the Stock Options under Section 4, shares vested through
the date
of termination.
B. Voluntary Resignation: In the event of CAO's voluntary
resignation
from employment with the Company, other than for Good Reason, CAO shall
be
entitled to no compensation or benefits from the Company other than
those under
Section 3 earned up until
3
4
such termination and, in the case of the Stock Options under Section 4,
shares
vested through the date of his resignation.
C. Death or Disability: In the event that CAO's employment
terminates
as a result of his death or continued disability for ninety (90) days
("disability" being defined as the inability to perform the essential
functions
of CAO's position), CAO shall be entitled solely to the following as of
the date
of death or disability:
i. all accrued compensation and benefits earned through such
date;
ii. the removal of any "cliff date" in calculating the number
of Stock
Options vested upon the date of death or disability;
iii. an immediate doubling of the number of Stock Options
vested as of
the date of death or disability, but in no event more than
100% of the
Stock Options granted.
D. Change in Control: Termination Without Cause or Resignation
for
Good Reason: If within one (1) month prior to or within one (1) year
after a
Change in Control, provided that such conditions persist for fifteen
(15)
business days after written notice to the CAO, CAO's employment is
terminated by
the Company without Cause, or if CAO resigns as CAO of the Company for
Good
Reason, then CAO shall be entitled, on such date, as sole remedy, to all
of the
following:
i. all accrued compensation, benefits and vesting earned
through the
date of termination or resignation,
ii. continued payment of CAO's salary at his Base Salary rate,
less
applicable withholding, for six months year following his
termination
or resignation;
iii. the removal of any "cliff date" in calculating the number
of
Stock Options vested upon such date; and
iv. Fifty percent (50%) of the unvested Stock Options shall be
deemed
to have vested immediately upon such termination or
resignation
(provided that Company fails to cure the cause of such
resignation
after notice from CAO).
E. Absent Change in Control: Termination Without Cause or
Resignation for
Good Reason: If there has not been a Change in Control, but CAO's
employment is
terminated by the Company without Cause, or if CAO resigns as CAO of the
Company
for Good Reason, then CAO shall be entitled, on such date, as sole
remedy, to
all of the following:
i. all accrued compensation, benefits and vesting earned
through the
date of termination or resignation;
ii. the removal of any "cliff date" in calculating the number
of Stock
Options vested upon such date; and
4
5
iii. a lump sum payment from the Company in the amount of One
Hundred
Fifty Thousand Dollars ($150,000); and
iv. continued medical and dental benefits for six (6) months.
8. Employee Inventions and Proprietary Rights Assignment Agreement:
CAO
agrees to abide by the terms and conditions of the Company's standard
Employee
Inventions and Proprietary Rights Assignment Agreement.
9. Non-Solicitation: CAO agrees that for a period of one year after
the
date of the termination of his employment for any reason, he 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.
10. Indemnification: The Company will indemnify CAO to the fullest
extent
of applicable law and pursuant to its by-laws and any standard form of
indemnification agreement that may be signed by the Company's other
officers and
directors from time to time.
11. Dispute Resolution: In the event of any dispute or claim
relating to or
arising out of this Employment Agreement, CAO and the Company agree that
all
such disputes shall be fully and finally resolved by binding arbitration
conducted by the American Arbitration Association in Santa Clara County,
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). CAO acknowledges that by accepting this arbitration provision
he is
waiving any right to a jury trial in the event of such dispute.
Provided,
however, that this arbitration provision shall not apply to: (1) any
disputes or
claims relating to or arising out of the misuse or misappropriation of
trade
secrets or proprietary information; or (2) (without acknowledging
whether or not
such claims would be viable under the "sole remedy" language set forth
in
Section 7, above) any disputes or claims relating to any federal, state
or local
law establishing or relating to the rights of employees.
12. Attorneys' Fees: The prevailing party shall be entitled to
recover from
the losing party its attorneys' fees and costs incurred in any action
brought to
enforce any right arising out of this Employment Agreement.
13. Interpretation: CAO and the Company agree that this Employment
Agreement shall be interpreted in accordance with and governed by the
laws of
the State of California.
14. Successors and Assigns: This Employment Agreement shall inure
to the
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 CAO, he shall not have the right to assign or
transfer
any of his rights, obligations or benefits under this Employment
Agreement,
except as otherwise noted herein. This agreement may be assigned to the
Company's successor without consent of CAO.
5
6
15. Entire Agreement: This Employment Agreement constitutes the
entire
employment agreement between CAO and the Company regarding the terms and
conditions of his employment with the Company, with the exception of the
Stock
Option Agreement described in Section 4 and the Employee Inventions and
Proprietary Rights Assignment Agreement referred to in Section 8, which
shall
be modified as necessary to reflect the term relating to options set
forth in
the Employment Agreement. To the extent that there is any inconsistency
between
this Employment Agreement and any other agreement between CAO and the
Company,
the terms of this Employment Agreement will govern. This Employment
Agreement
supersedes all prior negotiations, representations or agreements between
CAO and
the Company, whether written or oral, concerning CAO's employment by the
Company.
16. Validity: If any one or more of the provisions (or any part
thereof) 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.
17. Modification: This Employment Agreement and its Addenda may
only be
modified or amended by a supplemental written agreement signed by CAO
and the
Company.
18. Counterparts: This Employment Agreement may be executed in any
number
of counterparts, each of which shall be an original, but all of which
together
shall constitute one instrument.
IN WITNESS WHEREOF, the parties have executed this Employment
Agreement as
of the date and year written below.
Date: 12/13/99 TELOCITY, INC.
---------------------
By: /s/ PATTI S. HART
------------------------------------
Name: Patti Hart
Date: December 13, 1999 Its: President and Chief Executive
Officer
/s/ SCOTT E. MARTIN
----------------------------------------
Scott E. Martin
6
