Employment Agreement - CacheFlow Inc. and John Scharber
CACHEFLOW INC.
October 10, 2000
John Scharber
Employment Agreement
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Dear John:
On behalf of CacheFlow Inc. ("Company" or "CacheFlow"), I am pleased to
offer you employment with the Company on the terms set forth below.
1. Position. You will be employed by Company effective as of the
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closing of a business combination transaction ("Merger") between CacheFlow and
the Company pursuant to which Merger Sub will merge with and into the Company
(the "Commencement Date") and continuing thereafter until termination pursuant
to Section 6. You will report directly to the Vice President of Engineering. You
will be expected to devote your full working time and attention to the business
of Company, and you will not render services to any other business without the
prior approval of the Board of Directors or, directly or indirectly, engage or
participate in any business that is competitive in any manner with the business
of Company. You will also be expected to comply with and be bound by the
Company's operating policies, procedures and practices that are from time to
time in effect during the term of your employment.
2. Base Salary/Bonus. Your initial base monthly salary will be
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$195,000, payable in accordance with Company's normal payroll practices with
such payroll deductions and withholdings as are required by law. Your base
salary will be reviewed by the Compensation Committee of the Board of Directors
effective twelve months from the Commencement Date and from time to time
thereafter, and adjusted in the discretion of the Compensation Committee. You
will be eligible for bonuses typically available to employees in comparable
positions.
3. CacheFlow Option. Subject to the approval of the Compensation
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Committee of the Company's Board of Directors, and on or after the date of the
closing of the Merger, you will be granted an option to purchase 100,000 shares
of the Company's Common Stock (the "CacheFlow Option"). The exercise price per
share will be equal to the fair market value per share on the date the option is
granted. The option will be subject to the terms and conditions applicable to
options granted under the Company's 1999 Stock Incentive Plan or 2000
Supplemental Stock Option Plan, as described in the applicable Plan and the
applicable stock option agreement. The option will become exercisable and vest
in twelve equal monthly increments for each monthly anniversary following the
Commencement Date that you are continuously employed with the Company.
4. Pre-existing Shares. Prior to the Merger, you hold vested and
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unvested shares of Entera. In connection with the Merger and in exchange for the
Entera shares you own as of the date of the Merger, you will receive CacheFlow
shares in accordance with the terms of the Merger Agreement ("Pre-existing
Shares") subject to equally proportionate vesting and at an equivalent rate to
that which was applicable to your Entera shares. As a result of this Agreement,
you hereby agree that 25% of your vested Pre-existing Shares shall become
unvested and subject to repurchase by the Company. Such newly unvested shares
shall vest in six equal monthly increments for each monthly anniversary
following the Commencement Date that you are continuously employed with the
Company. Should your employment with the Company terminate prior to your
completion of six continuous months of employment, then the Company shall have
the right to repurchase 1/6/th/ of the newly unvested shares for each full month
not completed at a price equal to the price you paid for such shares, adjusted
by the exchange ratio applicable in the Merger. The Company shall have 90 days
in which to effect the repurchase of any unvested shares
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pursuant to the preceding sentence. All other unvested Pre-existing Shares shall
vest in accordance with their original vesting schedule.
5. Other Benefits. You will be eligible for the normal vacation,
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health insurance, 401(k), employee stock purchase plan and other benefits
offered to all similarly-situated Company employees. For purposes of determining
Service under such plans you will receive credit for your service with Entera to
the extent permissible under such plans.
6. Employment and Termination. Employment with the Company is for no
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specific period of time. Your employment with the Company will be "at will,"
meaning that either you or the Company may 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 agreement. 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 the Chief Executive Officer of the Company.
7. Definitions. "Cause" means the commission of an act of
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theft, embezzlement, fraud, dishonesty, gross misconduct or a breach of
fiduciary duty to the Company or a Company or Subsidiary of the Company.
"Involuntary Termination" means your resignation due to a material reduction in
the scope of your duties or responsibilities, a reduction in your salary or
target bonus, or you are required to move your principal place of work outside
Santa Clara, San Mateo or San Francisco counties, California. "Termination for
Death or Disability" means the automatic termination of your employment upon
your death or upon your disability as determined by the Board of Directors;
provided that "disability" shall mean your complete inability to perform your
job responsibilities for a period of 180 consecutive days or 180 days in the
aggregate in any 12-month period.
8. Separation Benefits. Upon termination of your employment
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with Company for any reason, you will receive payment for all unpaid salary and
vacation accrued to the date of your termination of employment; and your
benefits will be continued under Company's then existing benefit plans and
policies for so long as provided under the terms of such plans and policies and
as required by applicable law. Under certain circumstances, you will also be
entitled to receive severance benefits as set forth below, but you will not be
entitled to any other compensation, award or damages with respect to your
employment or termination.
(a) In the event of your voluntary termination or termination
by the Company for Cause, you will not be entitled to any cash severance
benefits or additional vesting of shares of stock or options or any other
benefits beyond those provided in the first sentence of paragraph 8.
Notwithstanding the foregoing, if your employment is terminated by you or the
Company for any reason on or after six months of continuous employment with
CacheFlow, all of your unvested Pre-existing shares under paragraph 3 herein
shall become fully and immediately vested, and, if applicable, exercisable.
(b) In the event of the termination of your employment by
CacheFlow without Cause or your Termination for Death or Disability, (i) you or
your heirs, as applicable, will be entitled to a severance payment equal to six
months of your current annual base salary (less applicable deductions and
withholdings) payable in accordance with the Company's normal payroll practice
beginning after the effective date of your termination; and (ii) all your stock
of the Company (including any subject to an option to purchase) other than the
CacheFlow Option referred to in Section 3 above shall become fully and
immediately vested and, if applicable, exercisable by you or your heirs, as
applicable. You shall not be entitled to any severance payments or acceleration
of vesting pursuant to the foregoing unless you (i) have executed a general
release of all claims (in a form prescribed by CacheFlow) and (ii) have agreed
not to prosecute any legal action or other proceeding based upon any of such
claims.
In the event of your Involuntary Termination, all of your stock
in the Company (including any subject to an option to purchase) other than the
CacheFlow Option referred to in Section 3 above shall become fully and
immediately vested and, if applicable, exercisable. You shall not be entitled to
any acceleration of vesting unless you (1) have executed a general release of
all claims (in a form prescribed by CacheFlow) and (ii) have agreed not to
prosecute any legal action or other proceeding based upon any of such claims.
(c) No payments due you hereunder shall be subject to mitigation
or offset.
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9. Indemnification Agreement. Upon your commencement of employment
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with Company, Company will enter into its standard form of indemnification
agreement for officers and directors, a copy of which is attached to this letter
as Exhibit , to indemnify you against certain liabilities you may incur as an
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officer or director of Company.
10. Confidential Information and Invention Assignment Agreement.
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Upon your commencement of employment with Company, you will be required to sign
its standard form of you Agreement, a copy of which is attached to this letter
as Exhibit , to protect Company's confidential information and intellectual
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property.
11. Noncompete/Nonsolicitation.
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General Terms. This Agreement is entered into in connection with
CacheFlow's purchase from Entera of all of the issued and outstanding capital
stock of Entera. The parties acknowledge that it would be detrimental to
CacheFlow if you were to compete with CacheFlow within a specified period of
time in any part of the Business (as defined below) following the closing of the
Merger. The parties further understand and agree that you were a stockholder of
Entera prior to the closing; a key and significant employee of Entera prior to
the closing; and that, as of the closing, CacheFlow paid you consideration in
order to acquire your stock interest in Entera. In addition, the parties agree
that, prior to the Effective Date, Entera was engaged in business in each of the
fifty states of the United States and in the rest of North America, Europe,
Asia, South America, Africa and Australia. (This shall hereafter be referred to
as the "Geographic Region.") The parties further agree that CacheFlow, following
the closing, will continue conducting such business in all parts of the
Geographic Region. As a result of the foregoing, the parties expressly
understand and agree that the non-competition provisions contained in this
Agreement are permissible and enforceable pursuant to the provisions of
California law, including but not limited to Section 16601 of the California
Business and Professions Code.
Non-Competition during Employment. You agree that during your
employment with CacheFlow, you will not engage in any other employment,
business, or consulting activity unless you receive CacheFlow's prior written
approval to hold such outside employment or engage in such business or
consulting activity.
Non-Competition Following Termination of Employment. For purposes of
this Section 11, the Restricted Period shall mean twelve (12) months following
termination of your employment. During the Restricted Period, you shall not, as
an employee, agent, consultant, advisor, independent contractor, general
partner, officer, director, stockholder, investor, lender or guarantor of any
corporation, partnership or other entity, or in any other capacity, directly or
indirectly:
Participate or engage in the design, development, manufacture,
production, marketing, sale or servicing of any product, or the
provision of any service, that directly relates to the business of
Entera at the time of this Agreement or any area of business for which
you are directly responsible while employed at CacheFlow (the
"Business") in the Geographic Region; or
Permit your name to be used in connection with the Business: or
Own, directly or indirectly, solely as an investment, greater
than one percent (1%) of any class of "publicly traded securities" of
any person or entity that owns a business that relates to the Business.
For the purposes of this paragraph, the term "publicly traded
securities" shall mean securities that are traded on a national
securities exchange or listed on the Nasdaq.
Non-Solicitation. During the period commencing on the Commencement Date
and continuing until the first anniversary of the date when your employment
terminates, you shall not directly or indirectly, personally or through others,
induce, encourage, hire or solicit (on your own behalf or on behalf of any
other person or entity) any employee or consultant of CacheFlow.
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Savings Clause. If any restriction set forth in Section 11 herein is
held to be unreasonable, then you agree, and hereby submit, to the reduction and
limitation of such prohibition to the minimum extent necessary to render such
prohibition enforceable.
12. Arbitration. The parties agree that any dispute regarding the
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interpretation or enforcement of this agreement shall be decided by
confidential, final and binding arbitration conducted by Judicial Arbitration
and Mediation Services ("JAMS") under the then existing JAMS rules rather than
by litigation in court, trial by jury, administrative proceeding or in any other
forum. Any arbitration should be conducted in Santa Clara County, California.
13. Miscellaneous.
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(a) Authority to Enter into Agreement. Company represents that
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its President and CEO has due authority to execute and deliver this agreement
on behalf of Company.
(b) Absence of Conflicts. You represent that upon the
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Commencement Date your performance of your duties under this agreement will not
breach any other agreement as to which you are a party.
(c) Successors. This agreement is binding on and may be enforced
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by Company and its successors and assigns and is binding on and may be enforced
by you and your heirs and legal representatives. Any successor to Company or
substantially all of its business (whether by purchase, merger, consolidation or
otherwise) will in advance assume in writing and be bound by all of Company's
obligations under this agreement.
(d) Notices. Notices under this agreement must be in writing and
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will be deemed to have been given when personally delivered or two days after
mailed by U.S. registered or certified mail, return receipt requested and
postage prepaid. Mailed notices to you will be addressed to you at the home
address which you have most recently communicated to Company in writing. Notices
to Company will be addressed to its General Counsel at Company's corporate
headquarters.
(e) Waiver. No provision of this agreement will be modified or
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waived except in writing signed by you and an officer of Company duly authorized
by its Board of Directors. No waiver by either party of any breach of this
agreement by the other party will be considered a waiver of any other breach of
this agreement.
(f) Entire Agreement. This agreement, including the attached
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exhibits, and such other agreements expressly referred to herein, including the
applicable stock option plan, option agreement and related documents and
restricted stock purchase agreement and related documents represent the entire
agreement between us concerning the subject matter of your employment by
Company. To the extent of any conflict between the provision of this agreement
and other agreements referred to in the preceding sentence, the terms of this
agreement shall control.
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(g) Governing Law. This agreement will be governed by the laws
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of the State of California without reference to conflict of laws provisions.
(h) Severability. If any portion of this agreement shall be
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determined to be unenforceable, the remaining provisions of this agreement shall
remain in force.
John, we are very pleased to extend this offer of employment to you
and look forward to your joining Company. Please indicate your acceptance of
the terms of this agreement by signing in the place indicated below.
Very truly yours, Accepted October __, 2000:
/s/ Brian NeSmith /s/ John Scharber
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Brian NeSmith John Scharber
President and CEO
CacheFlow Inc.