REPRINTED WITH PERMISSION FROM VOLUMES ONE AND TWO OF The Emerging Growth Companies Series From Glasser Legal Works Order From 1-800-308-1700
Employee Offer Letter MODEL CORPORATION, INC. [ADDRESS] _________ ___, 199__ [Offeree] [Address] Dear ________________: Model Corporation, Inc. (the “Company”) is pleased to offer you employment on the following terms: 1. Position. You will serve in a full-time capacity as __________________ of the Company. You will report to _________________________. [Your primary duties will be _______________.] 1 . A description of the employee’s duties is not commonly provided as they may change over time. If the employee desires a statement of duties, a brief description could be added.1 By signing this letter agreement, you represent and warrant to the Company that you are under no contractual commitments inconsistent with your obligations to the Company. 2 . The statement is intended to elicit information from the employee concerning contractual commitments, such as non-compete agreements and proprietary information protections. The latter could also be addressed by the Proprietary Information and Inventions Agreement.2 2. Salary. You will be paid a salary at the annual rate of $_______, payable in semi-monthly installments in accordance with the Company’s standard payroll practices for salaried employees. This salary will be subject to adjustment pursuant to the Company’s employee compensation policies in effect from time to time. 3 . The employee may desire a statement that the salary will not be reduced in the future. It is rare to reduce salaries, but it is in the employer’s best interest to retain flexibility in case of poor performance as well as for times when cash flow limitations require across-the-board salary reductions.3 3. Stock Options. Subject to the approval of the Company’s Board of Directors or its Compensation Committee, you will be granted an option to purchase __________ shares of the Company’s Common Stock. 4 . Where an option is to be granted, it is frequently a key component of the compensation package and should be stated in the offer letter. An option can be prospectively approved by the Board or Compensation Committee, but more typically the option will be proposed to the Board or Compensation Committee after the employee has commenced employment, and the contingency should be noted.4 The exercise price per share will be equal to the fair market value per share on the date the option is granted or on your first day of employment, whichever is later. 5 . It is critical that the offer letter not state at what price the option will be offered, since fair market value can increase between the date of the offer letter and the date when the Board or Compensation Committee approves the grant.5 The option will be subject to the terms and conditions applicable to options granted under the Company’s 199_ Stock Plan, as described in that Plan and the applicable stock option agreement. The option will be immediately exercisable, but the purchased shares will be subject to repurchase by the Company at the exercise price in the event that your service terminates before you vest in the shares. You will vest in ___% of the option shares after 12 months of service, and the balance will vest in monthly installments over the next __ months of service, as described in the applicable stock option agreement. 6 . The offer letter need not state the vesting schedule for the option, but this is likely to be a term of key importance to the offeree.6 4. Proprietary Information and Inventions Agreement. Like all Company employees, you will be required, as a condition to your employment with the Company, to sign the Company’s standard Proprietary Information and Inventions Agreement, a copy of which is attached hereto as Exhibit A. 7 . A separate Proprietary Information and Inventions Agreement sets forth the understanding of the parties with respect to the protection of trade secrets and proprietary information.7 5. Period of Employment. Your employment with the Company will be “at will,” meaning that either you or the Company will be entitled to terminate your employment at any time and for any reason, with or without cause. Any contrary representations which may have been made to you are superseded by this offer. This is the full and complete agreement between you and the Company on this term. Although your job duties, title, compensation and benefits, as well as the Company’s personnel policies and procedures, may change from time to time, the “at will” nature of your employment may only be changed in an express written agreement signed by you and a duly authorized officer of the Company. 8 . In California as in many other states, an employee is deemed to be “at will” unless otherwise agreed by the parties, that is, either party may terminate the employment relationship with no notice. The “at will” language should be included in all cases where a specific term is not agreed to. Moreover, every effort should be made to avoid the implication of a long-term relationship. An emerging growth company should generally eschew a stated term, since it is not likely to be in a position to keep an employee on payroll who is not performing as desired or if business conditions no longer permit. Moreover, the employee’s promise to stay for a particular term may prove to be an illusory promise.8 6. Outside Activities. While you render services to the Company, you will not engage in any other gainful employment, business or activity without the written consent of the Company. While you render services to the Company, you also will not assist any person or organization in competing with the Company, in preparing to compete with the Company or in hiring any employees of the Company. 9 . It is advisable to state the parties’ expectations concerning outside work at the outset of the relationship.9 7. Withholding Taxes. All forms of compensation referred to in this letter are subject to reduction to reflect applicable withholding and payroll taxes. 8. Entire Agreement. This letter and the Exhibit attached hereto contain all of the terms of your employment with the Company and supersede any prior understandings or agreements, whether oral or written, between you and the Company. 10 . A strong merger clause is important, since in the recruiting process and subsequent negotiations the parties may have discussed a variety of compensation packages or employment conditions. It is important that both parties understand that the offer letter contains the entire agreement of the parties.10 9. Amendment and Governing Law. This letter agreement may not be amended or modified except by an express written agreement signed by you and a duly authorized officer of the Company. The terms of this letter agreement and the resolution of any disputes will be governed by California law. We hope that you find the foregoing terms acceptable. You may indicate your agreement with these terms and accept this offer by signing and dating both the enclosed duplicate original of this letter and the enclosed Proprietary Information and Inventions Agreement and returning them to me. As required by law, your employment with the Company is also contingent upon your providing legal proof of your identity and authorization to work in the United States. 11 . Under Federal law, every employee must sign a Form I-9 and present proper proof of his or her right to work in the United States. The requirement applies to every employee and should not be waived. A discrimination claim could arise if the employer were to waive the requirement for an individual who the employer assumes is an American citizen.11 This offer, if not accepted, will expire at the close of business on _____________ __, 199_. We look forward to having you join us on _________ __, 199_. If you have any questions, please call me at ________________. Very truly yours,Model Corporation, Inc. By: ______________________________ Chief Executive Officer I have read and accept this employment offer: Signature of [Offeree’s Name]Dated: __________ __, 199_