FOUNDER'S EMPLOYMENT AGREEMENT
We include this agreement on our website to demonstrate that the founder is incentivized to serve in the best interests of our members, even without equity compensation.
Dear Matt:
This letter amends and restates the letter agreement entered into between you and User Cooperative on April 15, 2023, the date you began your employment with the Company. Your continued employment by the Company shall be governed by the following terms and conditions (this “Agreement”).
1. Duties and Scope of Employment.
(a) Position. For the term of your employment (“Employment”), User Cooperative (“Company”) agrees to employ you as President and Chief Executive Officer. You will report to the Board of Directors (“Board”), and you will have the duties that are customarily associated with your position. In addition, you will perform other duties that the Board may require, provided that such duties are also customarily associated with your position.
(b) Obligation to the Company. While you provide your services to the Company, you agree that you will not engage in any other employment, consulting, or other business activity for any direct or indirect remuneration without prior approval from the Board, which will not be unreasonably withheld. In addition, while you provide services to the Company, you will not assist any person or entity in competing with the Company, in preparing to compete with the Company, or in hiring any employees or consultants of the Company. As an employee, you will also be expected to comply with the Company’s policies and procedures.
(c) No Conflicting Obligations. You represent and warrant to the Company that you are under no obligations or commitments, whether contractual or otherwise, that are materially inconsistent with your obligations under this Agreement. In connection with your Employment, (i) you will not use or disclose any trade secrets or other proprietary information or intellectual property in which you or any other person has any right, title, or interest and (ii) your Employment will not infringe or violate the rights of any other person. You also represent and warrant to the Company that you have returned all property and confidential information belonging to any prior employer, other than confidential information that has become generally known to the public or within the relevant trade industry.
2. Compensation
(b) Annual Base Salary. The Company will terminate your Initial Stipend and pay you an annual base salary of two hundred thousand one dollars ($200,001) as compensation for your services when two conditions are met: (i) the Company reaches, for the first time, one million five hundred thousand (1,500,000) members and (ii) the Company collects in cash fifteen million dollars ($15,000,000) of cumulative gross revenue, which includes, but is not limited to, donations from the Company’s members. Such base salary will be paid biweekly or in accordance with standard Company payroll practices. The Board, or its compensation committee, will review your base salary at least annually and increase it when appropriate. This Agreement refers to your annual base salary, plus any increases to it, as your “Base Salary,” and this Agreement refers to the date upon which you begin receiving your Base Salary as your “Base Salary Date.”
(c) Early Milestone Bonuses. As compensation for your services in meeting the two conditions in section 2b above that cause your Base Salary Date, the Company will pay you a one-time after-tax bonus of two hundred ninety-six thousand nine hundred forty-one dollars ($296,941) on your Base Salary Date (“Foundation Bonus”). Your Base Salary Date is the date upon which the Company, pursuant to its bylaws, must begin to transition from having a Board that consists of you, by virtue of being President, as the sole director to a Board of three (3) to nine (9) directors, including you as President. Upon the date such transition is complete (“Board Transition Date”), the Company will pay you a one-time after-tax bonus of one hundred fifty thousand dollars ($150,000) as compensation for your services (“Board Transition Bonus”).
(d) Annual Performance Bonus. On the Board Transition Date, you will be eligible to receive an annual performance bonus. In order to receive such bonus, you will have to meet target performance criteria determined by the Board, or its compensation committee, after consultation with you within sixty (60) days of the Board Transition Date and each anniversary thereof (“Target Performance Criteria”). Your Target Performance Criteria can be based on, for example, a combination of strategic, operating, and/or financial objectives for the Company. If, for any bonus period, you over-achieve your Target Performance Criteria, your annual performance bonus will be increased for such bonus period by an amount determined by the Board, or its compensation committee, after consultation with you. Any annual performance bonus pursuant to this paragraph will be paid within sixty (60) days of the end of each bonus period. The Board, or its compensation committee, will review your annual performance bonus at least annually and increase it when appropriate. This Agreement refers to your annual performance bonus, plus any increases to it, as your “Annual Performance Bonus.”
(e) Long-Term Incentive Plans. Given the Company’s cooperative structure, the Company must and will, after consultation with you, establish competitive long-term cash incentive plans (“LTIP”) to attract and retain high-performing employees. Any such LTIP will link its pay to specific Company performance criteria over a period greater than one (1) year. Such criteria can be based on, for example, a combination of strategic, operating, and/or financial objectives for the Company. You will participate in the LTIP or LTIPs that are appropriate for your position when they are established.
3. Employee Benefits. You will be eligible to participate in employee benefit plans that are generally applicable and available to someone in your position when the Company begins offering such plans. Such plans will include, without limitation, group medical, dental, vision, disability, life insurance, and flexible-spending account plans, paid vacation, and retirement benefits. The Company reserves the right to cancel or change the benefit plans and programs it offers to its employees at any time.
4. Business Expenses. The Company will reimburse you for your necessary and reasonable business expenses incurred in connection with your duties upon presentation of an itemized account and appropriate supporting documentation.
5. Termination
(a) Employment at Will. Your Employment will be “at will,” which means that either you or the Company will be entitled to terminate your Employment at any time and for any reason, with or without Cause (defined in section 5c below). Any contrary representations that may have been made to you will be superseded by this Agreement. This Agreement constitutes the full and complete agreement between you and the Company on the “at-will” nature of your Employment, which may only be changed in an express written agreement signed by you and an authorized officer of the Company.
(b) Rights Upon Termination. If your Employment with the Company terminates (i) for Cause (defined in section 5c below) by the Company, (ii) due to your voluntary resignation Without Good Reason (defined in section 5d, ii below), or (iii) due to your death or Disability (defined in section 5e below), then you will only be eligible for severance benefits, if any, in accordance with the Company’s policies then in effect. However, if your Employment with the Company terminates Without Cause (defined in section 5d below), then you will be entitled to receive the following severance benefits:
(i) Severance Pay. You will receive severance pay at a rate equal to your Base Salary to be paid periodically in accordance with standard Company payroll practices for a period of twelve (12) months from the date of your termination (“Termination Date”). You will receive such severance pay even if the Termination Date precedes the Base Salary Date.
(ii) Performance Bonuses and LTIPs. You will receive the greater of (A) one hundred percent (100%) of your Annual Performance Bonus for the year of the Termination Date plus one hundred percent (100%) of your potential incentives under your LTIPs for the year of the Termination Date or (B) the Annual Performance Bonus you actually earned for the year prior to the year of the Termination Date plus the LTIP incentives you actually earned for the year prior to the year of the Termination Date. The following also applies: (A) if the Termination Date occurs before the Base Salary Date, then you will receive one hundred percent (100%) of the Foundation Bonus, one hundred percent (100%) of the Board Transition Bonus, and one hundred percent (100%) of the Annual Performance Bonus that you would otherwise be eligible for on the Board Transition Date and (B) if the Termination Date occurs after the Base Salary Date and before the Board Transition Date, then you will receive one hundred percent (100%) of the Board Transition Bonus plus one hundred percent (100%) of the Annual Performance Bonus that you would otherwise be eligible for on the Board Transition Date. Any amounts paid pursuant to this paragraph will be paid within thirty (30) days of the Termination Date.
(iii) Health Care. You will receive the same level of health coverage and benefits in effect for you on the day before the Termination Date for a period of twelve (12) months from the Termination Date.
(c) Termination for “Cause”. For the purposes of this Agreement, “Cause” means a determination by the Board that any of the following has occurred: (i) you committed an act of material dishonesty in connection with your responsibilities as an employee or director; (ii) you breached any material term of this Agreement or any of other written agreement between you and the Company and such breach is materially and demonstrably injurious to the Company; (iii) you were convicted of, or entered a plea of guilty or nolo contendere to, a felony; or (iv) you engaged in gross misconduct or gross neglect of your duties and such misconduct or neglect is materially and demonstrably injurious to the Company.
The termination of your Employment will not be deemed to be for Cause unless and until you are sent a written notice of the ground for the termination for “Cause” by the Board finding that, in the good faith opinion of the Board, you are guilty of the conduct described above, and specifying in detail the particulars thereof. If the Board does not deliver to you a notice of termination within ninety (90) days after the later of the date the Board has knowledge that an event constituting Cause has occurred and, where applicable, the date the Board has knowledge of the materiality of the injury to the Company, then the event will no longer constitute Cause. You will have fifteen (15) days to cure from the date you receive the notice.
(d) Termination “Without Cause”. For the purposes of this Agreement, termination “Without Cause” means that your Employment with the Company terminates for any of the following reasons:
(i) Involuntary Dismissal. Your involuntary dismissal or discharge by the Company, or by any acquiring or successor entity (or parent or any subsidiary thereof employing you), for reasons other than Cause.
(ii) Resignation for “Good Reason”. A resignation for “Good Reason” means your voluntary resignation of your Employment within one hundred eighty (180) days of the occurrence of any of the following conditions: (A) a material reduction in your Initial Stipend, Foundation Bonus, Board Transition Bonus, Base Salary, Annual Performance Bonus, potential incentives under your LTIPs, and/or rights upon termination pursuant to section 5b without your prior written consent; (B) a material change in the geographic location at which you must perform services (a change in location of your office will be considered material only if it increases your current one-way commute by more than fifty (50) miles) without your prior written consent; (C) any material adverse change in your duties, authorities, or responsibilities pursuant to section 1a above without your prior written consent; (D) any action or inaction of the Company that constitutes a material breach of the terms of this Agreement; or (E) a Change of Control (defined in section 7c below). Your voluntary resignation of your Employment for any other reason or in any other circumstance will be a resignation “Without Good Reason.”
(iii) Other. A termination of your Employment by the Company, or by any acquiring or successor entity (or parent or any subsidiary thereof employing you), for any other reason or in any other circumstance, except due to Cause or your death or Disability (defined in section 5e below).
(e) Definition of “Disability”. For the purposes of this Agreement, “Disability” means your inability to perform the essential functions of your position with or without reasonable accommodation for a period of one hundred eighty (180) consecutive days because of your physical or mental impairment.
6. Confidentiality Agreement. You agree to maintain the confidentiality of all confidential and proprietary information of the Company and agree, as a condition of your Employment, to enter into a confidential information and invention assignment agreement in the standard form utilized by the Company.
7. Successors
(a) Company’s Successors. This Agreement will be binding upon any successor (whether direct or indirect and whether by purchase, lease, merger, consolidation, liquidation, or otherwise) to all or substantially all of the Company’s business and/or assets. Any such successor will within a reasonable period of becoming the successor assume in writing and be bound by all of the Company’s obligations under this Agreement. For all purposes under this Agreement, the term “Company” shall include any successor to the Company’s business or assets that becomes bound by this Agreement.
(b) Your Successors. This Agreement and all of your rights hereunder will inure to the benefit of, and be enforceable by, your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees.
(c) Definition of “Change of Control”. For the purposes of this Agreement, “Change of Control” means: (i) any person or entity that gains, directly or indirectly through any contract, arrangement, understanding, relationship, or otherwise, the power to vote or direct the voting of fifty percent (50%) or more of the Company’s then total voting power; (ii) a change in the composition of the Board within a two (2)-year period that results in a majority of Board directors whose elections are in connection with actual or threatened “proxy contests” relating to the election of Board directors; (iii) the consummation of a merger or consolidation of the Company with any other corporation or entity that has been approved by the Company’s members; (iv) the consummation of a sale or disposition by the Company of all or substantially all the Company’s assets; or (v) the Company’s members approve a plan to completely liquidate the Company.
7. Miscellaneous Provisions
(a) Indemnification. The Company agrees that if you are made a party or threatened to be made a party to any action, suit, or proceeding, whether civil, criminal, administrative, or investigative (other than an action brought against you by the Company) by reason of the fact that you are or were an employee of the Company or are or were serving at the request of the Company, as a director, officer, member, employee, or agent of another corporation or a partnership, joint venture, trust, or other enterprise, you will be indemnified by the Company to the fullest extent permitted by applicable law and the Company’s articles of incorporation and bylaws, as the same exists or may hereafter be amended, against all reasonably and actually incurred legal expenses and related costs incurred or suffered by you in connection therewith provided that you cooperate with the Company in connection with such actual or threatened action, suit, proceeding, or investigation, and such indemnification will continue even if you have ceased to be an officer or are no longer employed by the Company and will inure to the benefit of your heirs, executors, and administrators. The Company will provide you with directors’ and officers’ liability insurance at least as favorable as the insurance coverage customarily provided to other directors and officers in your position respecting liabilities, and reasonable legal fees and costs, charges and expenses incurred or sustained by you (or your legal representative or other successors) in connection with any such proceeding. Unless otherwise provided in an indemnification agreement with the Company, no indemnity will be paid by the Company (i) if it shall be determined by a final judgment or other final adjudication that such remuneration was in violation of law; (ii) if it is finally determined that, in connection with the above action, suit, or proceeding, that your conduct was finally adjudged to have been knowingly fraudulent, deliberately dishonest, or willful; or (iii) if a final decision by a Court having jurisdiction in the matter shall determine that such indemnification is not lawful. Unless otherwise provided in an indemnification agreement with the Company, you agree to reimburse the Company for all reasonable expenses paid by the Company in defending any civil or criminal action suit or proceeding against you in the event and only to the extent that it shall be ultimately determined that you are not entitled to be indemnified by the Company for such expenses under the provisions of applicable law, the Company’s bylaws, this Agreement, or otherwise.
(b) Legal Fees. Following only a Change of Control, the Company will pay the legal fees incurred by you to enforce the terms of this Agreement or to dispute the legality of your termination.
(c) Notice. Notices and all other communications contemplated by this Agreement will be in writing and will be deemed to have been duly given when personally delivered or when mailed by U.S. registered or certified mail, return receipt requested, and postage prepaid. In your case, mailed notices will be addressed to you at the home address that you most recently communicated to the Company in writing. In the case of the Company, mailed notices will be addressed to its corporate headquarters, and all notices will be directed to the attention of its Secretary.
(a) Initial Monthly Stipend. The Company will pay you as initial compensation a monthly after-tax stipend of five thousand four hundred eighty-six dollars ($5,486) for your services so that you can make your student loan payments and pay for reasonable living expenses (“Initial Stipend”). The Initial Stipend will be paid biweekly or in accordance with standard Company payroll practices.
(iv) Severance Pay Following a Change of Control. If your Termination Date occurs after a Change of Control (defined in section 7c below), then you will receive in cash the greater of (A) fifteen million dollars ($15,000,000) or (B) one and a half percent (1.5%) of the consideration previously paid for the Company’s net assets, if such Change of Control is effected by a consummation of a merger or consolidation, the sale or disposition by the Company of all or substantially all the Company’s assets, or a similar transaction. Any amounts paid pursuant to this paragraph will be paid within thirty (30) days of the Termination Date.
(d) Modifications and Waivers. No provision of this Agreement will be modified, waived, or discharged unless the modification, waiver, or discharge is agreed to in writing and signed by you and by an authorized officer of the Company. No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party will be considered a waiver of any other condition or provision or of the same condition or provision at another time.
(e) Whole Agreement. No other agreements, representations, or understandings (whether oral or written and whether express or implied) which are not expressly set forth in this Agreement have been made or entered into by either party with respect to the subject matter hereof. This Agreement contains the entire understanding of the parties with respect to the subject matter hereof.
(f) Withholding Taxes. All payments made under this Agreement will be subject to reduction to reflect taxes or other charges required to be withheld by law.
(g) Choice of Law and Severability. This Agreement will be interpreted in accordance with the laws of the State of Colorado without giving effect to provisions governing the choice of law. If any provision of this Agreement becomes or is deemed invalid, illegal, or unenforceable in any applicable jurisdiction by reason of the scope, extent, or duration of its coverage, then such provision will be deemed amended to the minimum extent necessary to conform to applicable law so as to be valid and enforceable or, if such provision cannot be so amended without materially altering the intention of the parties, then such provision will be stricken and the remainder of this Agreement will continue in full force and effect. If any provision of this Agreement is rendered illegal by any present or future statute, law, ordinance, or regulation (collectively, the “Law”) then that provision will be curtailed or limited only to the minimum extent necessary to bring the provision into compliance with the Law. All the other terms and provisions of this Agreement will continue in full force and effect without impairment or limitation.
(j) Counterparts. This Agreement may be executed in two (2) or more counterparts; each of which will be deemed an original, but all of which together will constitute one and the same instrument.
To indicate your acceptance of this letter agreement, please sign and date this letter in the space provided below and return it to the Company.
Sincerely,
User Cooperative
ACCEPTED AND AGREED:
MATT MARTENSEN
/s/ Matt Martensen
Date: July 12, 2024