EXHIBIT 10.18
MAGINET CORPORATION
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into as of November
28, 1995, by and between MagiNet Corporation, a California corporation (the
"Company"), and Kenneth B. Hamlet (the "Executive").
WHEREAS, the Company desires to employ the Executive as of January 15,
1996, or such other date as the Executive shall first be employed by the Company
(the "Effective Date"), and the Executive desires to accept employment with the
Company on the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing recital and the
respective covenants and agreements of the parties contained in this document,
the Company and the Executive agree as follows:
1. EMPLOYMENT AND DUTIES. The Executive will serve as President and
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Chief Executive Officer of the Company. The duties and responsibilities of the
Executive shall include the duties and responsibilities for the Executive's
corporate offices and positions as set forth in the Company's Bylaws from time
to time in effect and such other duties and responsibilities as the board of
directors of the Company (the "Board of Directors") may from time to time
reasonably assign to the Executive, in all cases to be consistent with the
Executive's corporate offices and positions. The Executive shall perform
faithfully the executive duties assigned to him to the best of his ability. At
the next meeting of the Board of Directors, the Executive will be nominated to
serve as a director of the Company, and, when elected or appointed thereafter,
the Executive shall serve in such capacity without additional compensation.
2. EMPLOYMENT PERIOD.
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(a) BASIC RULE. The employment period shall begin upon the
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Effective Date and shall continue thereafter until terminated by the Company or
the Executive. The Executive acknowledges and agrees that his employment with
the Company is "at-will" and may be terminated by either party at any time,
subject only to the terms of this Agreement.
(b) EARLY TERMINATION. The Company may terminate the
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Executive's employment at any time. Except with respect to for-Cause
termination, the Company shall provide the Executive with thirty (30) days'
advance notice in writing of such termination. If the Company terminates the
Executive's employment for any reason other than Cause or Disability, each as
defined below, the provisions of paragraphs 13(a)(i), 13(b), and 13(c) shall
apply. The Executive may terminate his employment by giving the Company thirty
(30) days' advance written notice. If the Executive terminates his employment
with the Company, the provisions of paragraph 13(a)(ii) shall apply. Upon
termination of the Executive's employment with the Company, the Executive's
rights under any applicable benefit plans shall be determined under the
provisions of those plans. Any waiver of
notice shall be valid only if it is made in writing and expressly refers to the
applicable notice requirement of this subparagraph 2(b).
(c) DEATH. The Executive's employment will terminate in the
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event of his death. The Company shall have no obligation to pay or provide any
compensation or benefits under this Agreement on account of the Executive's
death, or for periods following the Executive's death, provided that the
Company's obligations applicable under such circumstance under paragraphs
13(a)(ii) and 13(c) shall not be interrupted as a result of the Executive's
death. The Executive's rights under the benefit plans of the Company in the
event of the Executive's death will be determined under the provisions of those
plans.
(d) CAUSE. The Company may terminate the Executive's employment
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for cause by giving the Executive notice in writing. For all purposes under this
Agreement, "Cause" shall mean (i) willful failure by the Executive to perform
his duties hereunder, other than a failure resulting from the Executive's
complete or partial incapacity due to physical or mental illness or impairment,
(ii) a willful act by the Executive which constitutes gross misconduct and which
is injurious to the Company, (iii) a willful breach by the Executive of a
material provision of this Agreement, or (iv) a material and willful violation
of a federal or state law or regulation applicable to the business of the
Company. No act, or failure to act, by the Executive shall be considered
"willful" unless committed without good faith without a reasonable belief that
the act or omission was in the Company's best interest. No compensation or
benefits will be paid or provided to the Executive under this Agreement on
account of a termination for Cause or for periods following the date when such a
termination of employment is effective. The Executive's rights under the benefit
plans of the Company shall be determined under the provisions of those plans.
(e) DISABILITY. The Company may terminate the Executive's
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employment for Disability by giving the Executive thirty (30) days' advance
notice in writing. For all purposes under this Agreement, "Disability" shall
mean that the Executive, at the time notice is given, has been unable to
substantially perform his duties under this Agreement for a period of not less
than ninety (90) days due to physical or mental illness. The determination of
the Executive's Disability hereunder shall be made by a two-thirds (2/3)
majority of the then current members of the Company's Board of Directors
(excluding the Executive) and shall be based upon advice from such medical
professionals and upon such medical and other records as the Company's Board of
Directors may deem appropriate. In the event that the Executive resumes the
performance of substantially all of his duties hereunder before the termination
of his employment under this subparagraph (e) becomes effective, the notice of
termination shall automatically be deemed to have been revoked. No compensation
or benefits will be paid or provided to the Executive under this Agreement on
account of termination for Disability, or for periods following the date when
such a termination of employment is effective. The Executive's rights under the
benefit plans of the Company shall be determined under the provisions of those
plans.
3. PLACE OF EMPLOYMENT. The Executive's services shall be performed at
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the Company's principal executive offices in Sunnyvale, California. The parties
acknowledge, however, that
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substantial foreign and domestic travel may be required in connection with the
performance of the Executive's duties hereunder.
4. BASE SALARY. For all services to be rendered by the Executive
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pursuant to this Agreement, the Company agrees to pay the Executive a base
salary (the "Base Salary") at an annual rate of not less than $250,000. During
the period of his employment by the Company, the Executive's annual base salary
shall not be less than $250,000. The Base Salary shall be paid in periodic
installments in accordance with the Company's regular payroll practices. The
Company agrees to review the Base Salary at least annually as of the payroll
payment date nearest each anniversary of the Effective Date (beginning in 1996)
and to make such increases therein as the Board of Directors may approve.
5. BONUS. Beginning with the Company's 1996 fiscal year, and for each
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fiscal year thereafter during the term of this Agreement, the Executive will be
eligible to receive an annual bonus (the "Bonus") based upon certain financial
criteria to be agreed upon by the Executive and the Board of Directors including
revenue and profitability targets and other organizational milestones. On or
before March 15, 1996, the Executive shall prepare and submit to the Board of
Directors for approval a management bonus program that will include the terms
and conditions of the Executive's Bonus opportunity. It is anticipated that the
Bonus plan established for the Executive for the year ending December 31, 1996
will provide for a cash portion of the Bonus equal to twenty-five percent (25%)
of the Executive's 1996 Base Salary, with a corresponding stock portion, should
the Company meet certain critical performance targets under its 1996 operating
plan. If the Company exceeds the critical preformance targets under such plan,
the Executive will be eligible to receive a substantially greater Bonus than
specified in the prior sentence.
The Bonus shall be paid part in cash and part in Common Stock of the
Company ("Common Stock"). The number of shares of Common Stock issuable in such
Bonus shall equal the quotient obtained by dividing (i) an amount equal to the
cash portion of the Bonus by (ii) $4.50 and rounding any fractional share to the
nearest whole share. The $4.50 divisor set forth in the prior sentence shall
apply to the Common Stock portion of the Bonus for each of the three (3) years
ending December 31, 1996, 1997, and 1998. Notwithstanding the foregoing, after
the earlier to occur of (i) the payment of the Common Stock portion of the Bonus
for the fiscal year ending December 31, 1998, or (ii) the closing of the sale of
the Company's Common Stock in an underwritten public offering registered under
the Securities Act of 1933, as amended, (the "Securities Act"), the divisor
shall be determined by negotiation between the parties. The Common Stock issued
in the Bonus shall be fully vested and shall be issued pursuant to an employee
stock incentive plan approved by the Board of Directors and shareholders of the
Company and such shares shall be exempt from the registration requirements of
the Securities Act. The Bonus shall be paid within thirty (30) days after the
applicable financial statements or other reports have been finally delivered to
the Board of Directors or as otherwise agreed by the Board of Directors and the
Executive.
6. STOCK OPTION.
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(a) INITIAL OPTION. Effective as of the Company's next Board of
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Director's meeting hereafter, the Company shall grant the Executive an option
(the "Executive Option") to purchase shares of the Company's Common Stock (the
"Executive Option Shares") at $2.00 per share. The number of shares subject to
the option shall be calculated to represent five percent (5%) of the sum of the
Company's outstanding shares plus the Company's outstanding securities
convertible into or exercisable for (regardless of vesting or similar
limitations on exercisability) any shares of the Company's capital stock (all on
an as-converted basis), including the Executive Option in such calculation as an
outstanding exercisable security. The Executive Option shall vest as described
in paragraph 6(b) below and shall be subject to such other terms and conditions
as are described in paragraph 6(c) below.
(b) VESTING. The Executive Option Shares shall vest and become
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exercisable monthly over a thirty-six- (36-) month period beginning on the
Effective Date and ending on the third (3rd) anniversary of the Effective Date.
In the event of a Change of Control (as defined below), the unvested portion of
the Executive Option shall automatically accelerate, and the Executive shall
have the right to exercise all or any portion of the Executive Option, in
addition to any portion of the Executive Option exercisable prior to such event.
For purposes of this Agreement, the term "Change of Control" shall mean the
occurrence of any of the following events subsequent to the Effective Date.
(i) Any "person" (as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
fifty percent (50%) or more of the total voting power represented by the
Company's then outstanding voting securities (except in a transaction or
transactions in which RRE Investors, LLC or its affiliates or successors
accumulates securities representing more than fifty percent (50%) of such voting
power;
(ii) A merger or consolidation of the Company with any other
corporation, other than a merger or consolidation that would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least fifty percent (50%) of
the total voting power represented by the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation; or
(iii) the shareholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all the Company's assets.
(c) OPTION PROVISIONS. The Executive Option shall be granted
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under the Company's Key Personnel Stock Option Plan (the "Stock Plan") and,
except as expressly provided otherwise in this paragraph 6, shall be subject to
the terms and conditions of the Stock Plan and form of option agreement;
provided, however, that the Company's Board of Directors may, in its discretion,
grant the Executive Option outside of the Stock Plan, and any such option shall
include such other terms as the Board of Directors may specify that are not
inconsistent with the terms hereof.
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7. COMMON STOCK. The Company agrees to issue and sell to the Executive,
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no later than January 31, 1996, a combination of shares of Common Stock and the
Company's Series D Preferred Stock ("Series D Preferred") having an aggregate
purchase price of between $250,000 and $1,000,000, determined by the Executive,
and a weighted-average purchase price per share of $4.50. The Series D Preferred
will be issued and sold at a price per share and on the terms at which Series D
Preferred Stock is sold in the Company's current round of financing, and the
Common Stock will be issued and sold at a price per share of $2.00. The Series D
Preferred will be sold to the Executive pursuant to a Series D Preferred Stock
Purchase Agreement in substantially the same form as entered by the Company and
the investors in the Series D Preferred and will be subject to such registration
rights as granted to such investors. The Common Stock will be sold and issued to
the Executive pursuant an employee stock incentive plan approved by the Board of
Directors and will be fully vested upon issuance. The issuance of the Common
Stock shall be exempt from the registration requirements of the Securities Act
pursuant to Rule 701 promulgated thereunder.
8. EXPENSES. The Executive shall be entitled to reimbursement by the
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Company for all reasonable, ordinary, and necessary travel, entertainment, and
other expenses incurred by the Executive during the term of this Agreement (in
accordance with the policies and procedures established by the Company for its
senior executive officers) in the performance of his duties and responsibilities
under this Agreement; provided, however, that the Executive shall properly
account for such expenses in accordance with the Company's policies and
procedures.
9. OTHER BENEFITS; INSURANCE. The Executive shall be entitled to
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participate in employee benefit plans or programs of the Company, if any, to the
extent that his position, tenure, salary, age, health, and other qualifications
make him eligible to participate, subject to the rules and regulations
applicable thereto. The Company agrees to evaluate and consider the advisability
of establishing a "split-dollar" insurance plan pursuant to which the Executive
would obtain life insurance benefits.
10. VACATIONS AND HOLIDAYS. The Executive shall be entitled to paid
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vacation time and Company holidays in accordance with the Company's policies in
effect from time to time for its senior executive officers.
11. MOVING EXPENSES. The Company agrees to reimburse the reasonable
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moving expenses of Executive, not to exceed $50,000, associated with relocating
to accept employment with the Company. Such reimbursable expenses shall include,
but not be limited to, the costs of packing, shipping, and unpacking the
Executive's personal goods and the closing costs associated with the Executive's
purchase of a new home. The Company further agrees to reimburse the reasonable
temporary living expenses of Executive in the San Francisco Bay Area for a
period of four (4) months.
12. OTHER ACTIVITIES. The Executive shall devote substantially all of his
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working time and efforts during the Company's normal business hours to the
business and affairs of the Company and its subsidiaries and to the diligent and
faithful performance of the duties and responsibilities duly assigned to him
pursuant to this Agreement, except for vacations, holidays, and sickness. The
Executive may, however, devote a reasonable amount of his time to civic,
community, or charitable activities and, with the prior written approval of the
Board of Directors, to serve as a director of other
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corporations and to other types of business or public activities not expressly
mentioned in this paragraph.
13. TERMINATION BENEFITS. In the event the Executive's employment
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terminates, then the Executive shall be entitled to receive severance and other
benefits as follows:
(a) SEVERANCE.
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(i) INVOLUNTARY TERMINATION. If the Company terminates the
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Executive's employment other than for Disability or Cause, then in lieu of any
severance benefits to which the Executive may otherwise be entitled under any
Company severance plan or program, the Executive shall be entitled to payment of
his Base Salary on the normal pay periods of the Company for a period of
eighteen (18) months following such termination; provided, however, that the
Company's obligations hereunder shall cease upon a breach by the Executive of
his obligations under paragraphs 14 or 15 hereof.
(ii) OTHER TERMINATION. In the event the Executive's
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employment terminates for any reason other than as described in paragraph
13(a)(i) above, including by reason of the Executive's death or disability or
resignation, then the Executive shall be entitled to receive severance and any
other benefits only as may then be established under the Company's existing
severance and benefit plans and policies at the time of such termination.
(b) OPTIONS. In the event the Executive's employment is
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terminated Executive shall be deemed vested in the unvested portion of the
Executive Option as follows:
(i) In the event of such an involuntary termination within
twelve (12) months of the Effective Date, the Executive Option shall become
immediately exercisable for that number of shares of the Company's Common Stock
equal to the number for which the Executive Option would have been exercisable
had the Executive remained employed with the Company on the date six (6) months
after the date of such involuntary termination;
(ii) In the event of such an involuntary termination after the
date twelve (12) months following the Effective Date and prior to the date
twenty-four (24) months after the Effective Date, the Executive Option shall
become exercisable for that number of shares for which it would have been
exercisable had the Executive remained employed with the Company on the date
twelve (12) months after the date of such involuntary termination; and
(iii) In the event of such an involuntary termination after the
date twenty-four (24) months after the Effective Date, the Executive Option
shall be deemed exercisable for all the shares subject thereto.
(c) BONUSES. In the event the Executive's employment is
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terminated by the Company as described in paragraph 13(a)(i) above, then the
Executive shall be entitled to receive the
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Bonus described in paragraph 5 to the extent he would have been entitled to such
Bonus had he remained an employee of the Company through the end of the fiscal
year for which the target Bonus had been established. In the event the
Executive's employment terminates for any other reason (other than Cause or
resignation) during any fiscal year of the Company, then the Executive (or his
estate) shall be entitled to payment of a portion of the Bonus determined, after
the end of such fiscal year, by multiplying the amount of the Bonus which would
have become payable to the Executive had he remained employed until the end of
such fiscal year, by a fraction, the numerator of which will be the number of
days in which he was employed by the Company (or any of its subsidiaries) in
such fiscal year, and the denominator of which shall be the number of days in
such fiscal year. To the extent all or any portion of the Bonus is payable to
the Executive pursuant to the preceding sentence, such amount shall be paid in
accordance with paragraph 5. In the event the Executive's employment is
terminated by the Company for Cause or by the Executive's resignation, then the
Executive shall not be entitled to any Bonus which has not accrued as of such
date.
(d) REGISTRATION RIGHTS. The shares of Series D Preferred Stock
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issued pursuant hereto will be issued under an agreement which will provide the
Executive with certain piggyback and other registration rights. The shares of
Common Stock to be issued hereunder will be issued pursuant to a plan or
agreement satisfying the requirements of Rule 701 promulgated under the
Securities Act, and will thereby have the resale benefits available under Rule
701(c). If (i) the Executive's employment is terminated under Section 13(a)(i)
hereof and (ii) for any reason, the Series D Preferred registration rights or
the Rule 701 resale provisions are not available to Executive for the resale of
his shares of Common Stock at such time as a public market exists for the
Company's Common Stock, then the Executive shall be entitled to such piggyback
and similar registration rights as have been provided to the Founders of the
Company under the terms of the Company's existing Shareholders' Agreement.
14. PROPRIETARY INFORMATION. The Executive shall not, without the prior
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written consent of the Board of Directors, disclose or use for any purpose
(except in the course of his employment under this Agreement and in furtherance
of the business of the Company or any of its affiliates or subsidiaries) any
confidential information or proprietary data of the Company. As an express
condition of the Executive's employment with the Company, the Executive agrees
to execute confidentiality agreements as requested by the Company, including but
not limited to the Company's standard form of Employee Proprietary Information
Agreement.
15. NON-SOLICIT. The Executive covenants and agrees with the Company that
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during his employment with the Company and for a period expiring one (1) year
after the date of termination of such employment, he will not solicit any of the
Company's then-current employees to terminate their employment with the Company
or to become employed by any firm, Company, or other business enterprise with
which the Executive may then be connected.
16. RIGHT TO ADVICE OF COUNSEL. The Executive acknowledges that he has
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consulted with counsel and is fully aware of his rights and obligations under
this Agreement.
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17. SUCCESSORS. The Company will require any successor (whether direct or
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indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such assumption agreement
prior to the effectiveness of any such succession shall entitle the Executive to
the benefits described in paragraphs 13(a)(i), 13(b) and 13(c) of this
Agreement, subject to the terms and conditions therein.
18. ARBITRATION. Any dispute or controversy arising under or in
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connection with this Agreement shall be settled exclusively by arbitration in
San Jose, California, in accordance with the rules of the American Arbitration
Association then in effect by an arbitrator selected by both parties within ten
(10) days after either party has notified the other in writing that it desires a
dispute between them to be settled by arbitration. In the event the parties
cannot agree on such arbitrator within such ten- (10-) day period, each party
shall select an arbitrator and inform the other party in writing of such
arbitrator's name and address within five (5) days after the end of such
ten-(10-)day period and the two arbitrators so selected shall select a third
arbitrator within fifteen (15) days thereafter; provided, however, that in the
event of a failure by either party to select an arbitrator and notify the other
party of such selection within the time period provided above, the arbitrator
selected by the other party shall be the sole arbitrator of the dispute. Each
party shall pay its own expenses associated with such arbitration, including the
expense of any arbitrator selected by such party and the Company will pay the
expenses of the jointly selected arbitrator. The decision of the arbitrator or a
majority of the panel of arbitrators shall be binding upon the parties and
judgment in accordance with that decision may be entered in any court having
jurisdiction thereover. Punitive damages shall not be awarded.
19. ABSENCE OF CONFLICT. The Executive represents and warrants that his
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employment by the Company as described herein shall not conflict with and will
not be constrained by any prior employment or consulting agreement or
relationship.
20. ASSIGNMENT. This Agreement and all rights under this Agreement shall
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be binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective personal or legal representatives, executors,
administrators, heirs, distributees, devisees, legatees, successors and assigns.
This Agreement is personal in nature, and neither of the parties to this
Agreement shall, without the written consent of the other, assign or transfer
this Agreement or any right or obligation under this Agreement to any other
person or entity; except that the Company may assign this Agreement to any of
its affiliates or wholly-owned subsidiaries, provided, however that such
assignment will not relieve the Company of its obligations hereunder. If the
Executive should die while any amounts are still payable to the Executive
hereunder, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the Executive's devisee, legatee,
or other designee or, if there be no such designee, to the Executive's estate.
21. NOTICES. For purposes of this Agreement, notices and other
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communications provided for in this Agreement shall be in writing and shall be
delivered personally or sent by United States certified mail, return receipt
requested, postage prepaid, addressed as follows:
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If to the Executive: Kenneth B. Hamlet
39 Aspen Ridge Road
P.O. Box 774140
Steamboat Springs, CO 80477
If to the Company: MagiNet Corporation
405 Tasman Drive
Sunnyvale, CA 94089
Attn: Chief Financial Officer
or to such other address or the attention of such other person as the recipient
party has previously furnished to the other party in writing in accordance with
this paragraph. Such notices or other communications shall be effective upon
delivery or, if earlier, three (3) days after they have been mailed as provided
above.
22. INTEGRATION. This Agreement and the Exhibit hereto represent the
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entire agreement and understanding between the parties as to the subject matter
hereof and supersede all prior or contemporaneous agreements whether written or
oral. No waiver, alteration, or modification of any of the provisions of this
Agreement shall be binding unless in writing and signed by duly authorized
representatives of the parties hereto.
23. WAIVER. Failure or delay on the part of either party hereto to
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enforce any right, power, or privilege hereunder shall not be deemed to
constitute a waiver thereof. Additionally, a waiver by either party or a breach
of any promise hereof by the other party shall not operate as or be construed to
constitute a waiver of any subsequent waiver by such other party.
24. SEVERABILITY. Whenever possible, each provision of this Agreement
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will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal, or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality, or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed, and enforced in such jurisdiction as if such invalid,
illegal, or unenforceable provision had never been contained herein.
25. HEADINGS. The headings of the paragraphs contained in this Agreement
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are for reference purposes only and shall not in any way affect the meaning or
interpretation of any provision of this Agreement.
26. APPLICABLE LAW. This Agreement shall be governed by and construed in
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accordance with the laws of the State of California as applied to agreements
between California residents entered and to be performed entirely within
California.
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27. COUNTERPARTS. This Agreement may be executed in one or more
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counterparts, none of which need contain the signature of more than one party
hereto, and each of which shall be deemed to be an original, and all of which
together shall constitute a single agreement.
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IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the
case of the Company by its duly authorized officer, as of the day and year first
above written.
"COMPANY" MAGINET CORPORATION
By: /s/ James A. Barth
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Title: Executive Vice President & CEO
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/s/ Kenneth B. Hamlet
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"EXECUTIVE" KENNETH B. HAMLET
[EMPLOYMENT AGREEMENT SIGNATURE PAGE]
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