October 26, 1999
Mr. Robert Russo
1926 Clover Court
Pleasanton, CA 94588
At VA Linux Systems, we depend on the commitment, enthusiasm and skills of our
team members to lead the Company's growth. Each person has both the luxury and
the duty to contribute to the future success of the Company in the most
meaningful way he or she can.
With this in mind, we are pleased to offer you a position as Senior Vice
President and General Manager of Worldwide Field Operations, reporting to Larry
Augustin, President & CEO.
In this position, you will play a significant role in building the Company's
sales, support, and services businesses. Your areas of responsibility will
o Worldwide responsibility for all sales and sales support activities.
o Worldwide responsibility for all customer support (post sales
o Worldwide responsibility for all professional services activities.
o Representing the Company in your interactions with customers, the
Linux community, suppliers, investors, media representatives and
the general community.
Your compensation will consist of:
o BASE COMPENSATION -- You will receive a base salary of $175,000.
Such salary shall be paid periodically in accordance with normal
Company payroll practices.
o INCENTIVE COMPENSATION -- You will also be eligible to receive an
incentive based bonus that will be targeted at $125,000 upon
attainment of the Board approved Plan. Incentive compensation will
be based upon achievement of both quarterly and annual goals which
will be mutually determined for the new plan year. The plan will
provide accelerators for "over plan" performance. Again, the target
inventive bonus will be paid in accordance with normal Company
practices and policies.
o STOCK OPTIONS -- VA Linux is offering you an option to purchase
950,000 shares of common stock which reflects the Company's
forthcoming stock split, at an exercise price at the then-fair
market value, as determined by the Board at the date of grant.
Vesting of all options will commence immediately upon start of
employment and will continue at a rate of 1/48 per month.
o EMPLOYEE BENEFITS -- You will also receive the Company's normal
employee benefit package, including health insurance through
Lifeguard, dental insurance through Guardian, and a 401(k)
retirement plan. You will also receive two weeks paid vacation each
o EMPLOYMENT RELATIONSHIPS -- As with all VA Linux Systems staff, your
employment is "at will," meaning either you or the Company may terminate
your employment at any time, for any reason.
In the event of termination, the following severance benefits shall apply:
A) INVOLUNTARY RESIGNATION. If you are Involuntary Terminated from the
Company within the first year of employment, you will receive 6 months
base compensation inclusive of all benefits and 6 months vesting of
stock. If you are Involuntarily Terminated after the first year of
employment, you will receive three months base compensation and three
months continued vesting. In the event a new CEO is named during the
first 12 months of employment, the Employee will accelerate 25% of the
initial stock grant if employee is terminated for any reason within the
longer of (a) six months of the new CEO being named or; (b) 12 months
from employee start date.
B) CHANGE OF CONTROL TERMINATION. Accelerated vesting of initial option
grant on Change of Control and Involuntary Termination -- You will
receive 12 additional months of accelerated vesting of your initial
option grant upon (a) a Change of Control and (b) Involuntary
Termination within six months of Change of Control.
C) VOLUNTARY RESIGNATION: TERMINATION FOR CAUSE. If the Employee
voluntarily resigns from the Company (other than a resignation that is
an Involuntary Termination), or if the Company terminates the Employee's
employment for Cause, then the Employee shall not be entitled to receive
severance or other benefits except for those, if any, as may then be
established under the Company's then-existing severance and benefits
plans and policies at the time of such resignation or termination.
D) "INVOLUNTARY TERMINATION," "CAUSE" AND "CHANGE OF CONTROL" have the
meaning as defined in Section 2(b) of the Founders' Stock Repurchase
Agreement, dated October 30, 1998, except in so far as when the term
Founder is used, the term Employee is understood for this Agreement.
Bob, we are pleased to welcome you to VA Linux Systems. If you ever feel it
necessary to discuss issues of your employment, please feel free to raise them
frankly with us. Please signify your acceptance of this offer by signing below
and returning this letter to me no later than Wednesday morning, October 27,
/s/ LARRY M. AUGUSTIN /s/ TODD SCHULL
Larry M. Augustin, PhD Todd Schull
President & CEO Vice President & CFO
/s/ ROBERT RUSSO 10/27/99
Robert Russo Date