Sample Letter for
Responding to an Offer

Dear John:

      Thank you for the offer of employment contained in your letter dated July 1, 2002. I am excited about this opportunity and look forward to joining your executive team. Based upon our meetings over the course of the past month, I am convinced that this is the right fit for both of us. In thinking through the offer, there are a number of items I would like to discuss with you, and I appreciate the invitation in your letter to discuss the terms.

      I view our discussions in this regard as our first business project and decision together. Accordingly, I would like to conclude an arrangement that is reasonable and attractive to both of us. I have the following thoughts and suggestions:

      1. Title. We should discuss the proposed title of Vice President of Program Management, Transportation and Stationary Power. In terms of the functions we have talked about and as outlined in the offer letter, should the title be Chief Operating Officer and Senior Vice President? This would likely give me greater credibility in my business development role cultivating customers and strategic partners. I also think it would be beneficial to the company in utilizing my relationships with utility and energy companies to attract financing and joint ventures. From my standpoint and in terms of overall career management, it is also important that I have a title that reflects progress in my professional career from position to position. As you know, at Global Energy Company, I was President and CEO, so I would be concerned about taking a new title at less than the COO and Senior Vice President level. Let me know your thoughts.

      2. Base Salary. As we have discussed, I have had the opportunity to review current trends in executive pay. It is important to me to move forward in my career on compensation, and that my package is competitive with current market trends based upon industry, position and location. Under my most recent employment contract with Global Energy, my base salary was $225,000, and my total cash compensation was $275,000. Naturally, I would like to improve on this package based upon the level of experience I am bringing to the company. I have reviewed current market data on compensation trends for similarly situated executives in the energy industry. I find that a base salary in the range of $200,000 to $250,000 is consistent with several studies. It would help my family and me a great deal if we could discuss a base salary in this range.

      3. Bonus. We have discussed an incentive bonus plan, but there is no reference to such a plan in the offer. As you know, I am highly motivated by incentive compensation plans and would like to discuss this further with you.

     4. Signing Bonus. Does the company offer such a recruiting incentive? I understand from reviewing the current data that signing bonuses in the range of 15 to 25 percent of base salary are quite common. Also, I have previously received a $30,000 signing bonus, and this was quite helpful in making the transition to the new job.

     5. Relocation. I would like to discuss a relocation package that would insure that the company pays all reasonable and necessary expenses incurred in connection with the move (with gross up for tax purposes). I understand that this is the norm in the market these days, so that the executive does not incur any financial losses to join a company. The most significant expense I would incur would be the real estate commission on the sale of my present home, and I would estimate that the total cost of the relocation would be in the range of $90,000. I would also like to discuss the timing of the relocation.

      6. Benefits. Could you please provide me with the details on the corporate benefits package referenced in your letter? For example, does the plan cover all members of my family. Also, I understand that, at the senior executive level, entitlement to benefits typically occurs on the first day of the employment.

      7. Stock Options. As you know, I am very excited by the equity opportunities available at the company. I understand that equity compensation for senior management is typically related to a percentage of the authorized and outstanding stock. Are the 150,000 incentive stock options referenced in your letter tied to a certain percentage of ownership in the company that is related to what other senior executives joining the company have received? I am also told that a 4 year vesting schedule is the current market norm. Additionally, I would like to discuss the exercise price with you.
      8. Vacation. I am accustomed to receiving 3 weeks of paid vacation each year, and I understand that this is consistent with what other senior executives are receiving. Can we discuss this?

      9. 401(k). Could you please provide me with the details on the company's plan? I understand that, at the senior executive level, eligibility typically occurs on the first day of employment.

      10. Confidentiality and Non-Compete. The agreement you have sent to me is acceptable.

      11. Severance. I understand that it is quite common for severance benefits to be tied to the length of the non-compete agreement. The company's agreement is for 2 years, and I am also told that severance for a period of 1 to 3 years is the norm at the senior executive level. Severance packages typically include base salary, accrued bonuses, and continuation of benefits for 6 to 12 months. Entitlement to severance typically occurs when the executive is discharged without cause or in the event of change of control. In addition to the other elements of the severance package, the executive ordinarily receives immediate vesting of all equity. Can we discuss these matters?

      12. Start Date. Let's firm up a start date.

      13. Contract. Does the company utilize a standard employment contract to formalize arrangements regarding the compensation package and other matters? In my discussions with Harold Perkins, I understand that he utilizes a number of different employment contracts based upon the industry, size of company, and position. I am sure he would be happy to help us with appropriate documentation for our employment relationship. In closing, John, let me reiterate my appreciation for the offer to join your organization. I look forward to a long and mutually profitable relationship with you.

      Very truly yours,

      James R. Smith