Employment Agreement - Critical Path Inc. and William McGlashan
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into
effective as of August 1, 2001 between Critical Path ("Critical Path" or the
"Company") and William McGlashan ("McGlashan") (or collectively referred to as
the "Parties"). The Company desires to employ McGlashan to have the benefits of
his expertise and knowledge. McGlashan, in turn, desires employment with the
Company. The Parties, therefore, enter into this Agreement to establish the
terms and conditions of McGlashan's employment with the Company.
In consideration of the mutual covenants and representations
contained in this Agreement, the Company and McGlashan agree as follows:
1. EMPLOYMENT OF MCGLASHAN; DUTIES. The Company agrees to employ
McGlashan, and McGlashan agrees to be employed by the Company, as the President
and Chief Operating Officer of the Company and the President of the Company's
subsidiary to be formed, Critical Path International ("CPI"). As the President
and Chief Operating Officer of the Company and the President of CPI, McGlashan's
key duties will include the normal and customary duties of such positions and
such other duties as the Company shall determine from time to time. In the event
that the Company hires a President, McGlashan will become interim Chief
Executive Officer. McGlashan will use his specialized expertise, independent
judgment and discretion in executing his job duties.
McGlashan shall devote any and all time, interest and efforts
reasonably necessary to the fulfillment of his duties and responsibilities under
this Agreement.
Consistent with the offices of President and Chief Operating
Officer, or interim Chief Executive Officer, as the case may be, and the duties
typically attendant thereto, the Company reserves the right to change
McGlashan's job duties and responsibilities in its sole discretion at any time
upon reasonable notice, based on the needs of the Company and McGlashan's
expertise and skills.
2. EMPLOYMENT PERIOD. Subject to earlier termination, as provided
Section 11 below, the Employment Period shall begin on August 1, 2001 and shall
continue for a maximum period of one year.
3. PLACE OF EMPLOYMENT. McGlashan and the Company agree that during
the Employment Period, his services will be performed at the Company's principal
offices in San Francisco, California, subject to any necessary travel
requirements of his position and duties hereunder.
4. BASE SALARY. During the Employment Period, the Company shall pay
McGlashan at the rate of Three Hundred Thousand Dollars ($300,000.00) per year,
to be paid twice per month, subject to applicable withholding.
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5. BONUS COMPENSATION. So long as McGlashan has not been terminated
for Cause, as defined in Section 11.2 below, McGlashan will be eligible for
bonus compensation, subject to the following terms and conditions:
(a) McGlashan shall receive a bonus of Three Hundred and Fifty
Thousand Dollars ($350,000.00) if the Company attains a positive EBITDA from
operations for any fiscal quarter provided such positive EBITDA occurs for a
fiscal quarter on or before the end of the second fiscal quarter of 2002. EBITDA
will be determined by the Company's independent public accountants using the
Company's financial statements as reported in filings with the Securities and
Exchange Commission ("SEC"). EBITDA will include revenue from only normal
business operations and will not include any extraordinary or nonrecurring
income items. Such bonus will be paid promptly following the filing of the 10-K
or 10-Q which indicates such EBITDA goal has been attained.
(b) McGlashan shall receive a bonus of Three Hundred and Fifty
Thousand Dollars ($350,000.00) if the closing share price of the Company's stock
exceeds an average price of at least Five Dollars ($5.00) for at least
twenty-two (22) consecutive trading days by July 1, 2002. Such bonus will be
paid promptly after such average stock price is achieved.
6. EQUITY COMPENSATION. McGlashan has been granted stock options to
purchase 1.5 million shares of the Company's Common Stock for $.41/share
pursuant to the Critical Path Amended and Restated 1998 Stock Plan in accordance
with the terms of the Stock Option Agreement attached hereto. Subject to
McGlashan's continued employment by the Company at each vesting date, the
vesting schedule for such options is as follows: 500,000 shares on the first
date of employment; 500,000 shares 12 months from execution of this Agreement
and 500,000 shares on 12/31/04; provided, however, that if the Company achieves
a positive EBITDA on an operating basis, as provided in paragraph 5(a) above,
the final 500,000 shares will vest in full at the same time as the bonus
provided for in paragraph 5(a) is paid or as soon as possible thereafter
consistent with the terms of the Stock Option Agreement.
7. EMPLOYEE BENEFITS.
(a) For so long as McGlashan is employed by the Company,
McGlashan will be entitled to participate in the same employee benefits plans
generally available to the Company's other executive and managerial employees,
subject to the terms of the applicable plans, including: (i) all health
insurance benefits provided to the Company's exempt employees; (ii) paid
vacation in accordance with the Company's policies and procedures in effect with
respect to the Company's other senior officers (for which the days selected for
McGlashan's vacation shall be scheduled at a mutually agreeable time for the
Company and McGlashan); and (iii) eligibility to participate in any profit
sharing or other retirement plan maintained by the Company for its executive
employees.
(b) The Company shall make reasonable efforts to obtain
coverage for McGlashan under any director and officer insurance policy during
the term of his employment that is equal to or comparable to the same coverage
provided to the Company's other executive officers.
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8. INDEMNIFICATION BY THE COMPANY. To the fullest extent required by
law, the Company agrees to indemnify and hold McGlashan harmless for any actions
made in good faith while performing his duties as President and Chief Operating
Officer of the Company and President of CPI.
9. NON-DISCLOSURE OF CONFIDENTIAL AND PROPRIETARY INFORMATION.
McGlashan acknowledges and agrees that during his employment with the Company,
he will have access to, or become acquainted with the Company's "Confidential
and Proprietary Information." "Confidential and Proprietary Information"
includes, but is not limited to:
(a) The Company's trade secrets;
(b) Information developed by or on behalf of the Company such
as financial information, billing information, marketing strategies, price
lists, research, pending products and proposals, and proprietary materials; or
(c) Information of or concerning third parties including
customers, suppliers and business partners, customer lists, supplier lists, as
well as financial and billing information, and information about employees of
the Company, including salaries and personnel data.
McGlashan agrees that at all times during his employment and
after his employment ends, he will protect the confidentiality of Confidential
and Proprietary Information and will not directly use or disclose any
Confidential and Proprietary Information except as may be necessary in
connection with the services McGlashan provides to the Company.
McGlashan further agrees that all the Company property and
documents provided to him, including Confidential and Proprietary Information
produced by him or others in connection with his employment with the Company,
including copies thereof, shall remain the sole property of the Company and
shall be returned promptly to the Company upon request or when he leaves the
employment of the Company, including but not limited to, internal, proprietary,
financial, technical, employee, sales, and marketing information.
10. DEVELOPED INFORMATION. McGlashan agrees to promptly disclose and
assign to the Company, the rights to all ideas, improvements, inventions,
programs, surveys, trade secrets, know-how and data, whether or not patentable
or registrable under copyright or similar statutes that McGlashan makes,
conceives, reduces to practice or learn during McGlashan's employment which (a)
are within the scope of his employment and are related to or useful in the
business of the Company or its actual or demonstrably anticipated activities, or
(b) result from tasks assigned to McGlashan by the Company, or (c) are funded by
the Company, or (d) result from use of premises owned, leased or contracted for
by the Company (hereinafter "Developed Information"). Such disclosure shall
continue for one (1) year after termination of McGlashan's employment with
respect to anything that would be Developed Information if made, conceived,
reduced to practice or learned during the term of this Agreement.
This Agreement does not require assignment of any invention which
qualifies fully for protection under California Labor Code section 2870
(hereinafter "Section 2870").
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McGlashan understand that he bears the full burden of proving to the Company
that Developed Information qualifies fully under Section 2870.
11. TERMINATION.
11.1 AT-WILL EMPLOYMENT. McGlashan's employment pursuant to this
Agreement is "at-will." As such, either the Company or McGlashan shall have
right to terminate McGlashan's employment under this Agreement at any time, for
any reason, with or without notice. If neither party terminates McGlashan's
employment before the expiration of the Employment Period, McGlashan's
employment will automatically terminate as of August 1, 2002.
11.2 SEVERANCE; TERMINATION FOR "CAUSE". If McGlashan's employment is
terminated prior to August 1, 2002 other than for "Cause," then McGlashan shall
be offered, in exchange for a release of all claims, a lump sum severance
payment equal to six months salary under this Agreement or salary from the date
of termination to August 1, 2002 whichever is less. For purposes of this
Agreement, "Cause" means:
(a) Commission of a felony, an act involving moral turpitude,
or an act constituting common law fraud, and which has a material adverse effect
on the business or affairs of the Company or its affiliates or stockholders;
(b) Intentional or willful misconduct or refusal to follow the
lawful instructions of the Board of Directors; or
(c) Intentional breach of company confidential information
obligations which has an adverse effect on the Company or its affiliates or
stockholders.
For these purposes, no act or failure to act shall be considered "intentional or
willful" unless it is done, or omitted to be done, in bad faith without a
reasonable belief that the action or omission is in the best interests of the
Company.
11.3 CONTINUED AFFILIATION WITH THE COMPANY. McGlashan's stock options
granted pursuant to this Agreement shall continue to vest for so long as
McGlashan is affiliated with the Company as an employee or Board member.
11.4 EFFECT OF TERMINATION FOR "CAUSE." Upon any termination of this
Agreement for Cause, the Company will have no further obligation to make any
payment to McGlashan, under this Agreement or otherwise, except for the monthly
base salary accrued as of the date of termination. In addition, McGlashan's
entitlement to participate in any Company benefit plans shall immediately cease
as of the date of termination, except as otherwise required by law.
11.5 COOPERATION WITH COMPANY AT TERMINATION OF EMPLOYMENT. Upon
termination of this Agreement by either party, McGlashan shall cooperate fully
with Company in providing an orderly transition of all McGlashan's pending work.
Upon the mutual agreement of the Parties, McGlashan also may provide such
full-time or part-time services as Company may reasonably require during all or
any part of the period following any notice of termination given by either
party.
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11.6 RETURN OF COMPANY PROPERTY UPON TERMINATION. Upon termination of
McGlashan's employment, McGlashan shall return all originals and copies of the
Company's property in McGlashan's possession or control, including equipment,
devices, vehicles, keys, computers, and including materials, memoranda, records,
reports, recordings, customer lists or other documents, and specifically
including any documents or computer disks or records containing confidential
information, trade secrets or other proprietary information
12. NATURE OF EMPLOYMENT. McGlashan represents to the Company that he
has no other outstanding commitments inconsistent with any of the terms of this
Agreement or the services to be provided in accordance with this Agreement. In
addition, while employed with the Company, McGlashan shall not, whether for
compensation or otherwise, directly or indirectly perform any services or acts
for any person or entity who is in competition with any business, services or
products being offered for sale or produced by the Company. McGlashan shall not
own an interest in, participate in or be connected as an officer, employee,
agent, independent contractor, partner, shareholder or principal, of any
corporation, partnership, proprietorship, firm, association, person, or other
entity that directly or indirectly compete with the services and business of
Company. The parties understand and agree that McGlashan will devote a portion
of his business time and attention to the activities of Vectis Group, LLC, and
its portfolio concerns, provided however, that McGlashan will not seek or accept
employment with any other entity, other than Vectis Group, LLC, during the
course of his one year term of employment under this Agreement.
13. NONSOLICITATION UPON TERMINATION OF EMPLOYMENT.
13.1 NONSOLICITATION OF CLIENTS. McGlashan agrees all customers or
clients of the Company for which McGlashan provides services during McGlashan's
employment are solely the clients of the Company and not of McGlashan. McGlashan
agrees that both while employed and for a period of one (1) year after the
termination of this Agreement for any reason, McGlashan shall not, either
directly or indirectly, solicit business, as to products or services competitive
with those of the Company, from any of the Company's clients or prospective
clients.
13.2 NONSOLICITATION OF EMPLOYEES. McGlashan agrees the Company has
invested substantial time and effort and resources in assembling, training and
managing its present staff of personnel, which constitutes a significant asset
of the Company. Accordingly, McGlashan agrees that both while employed and for a
period of one (1) year after the termination of this Agreement for any reason,
McGlashan will not directly or indirectly induce or solicit or encourage any of
the Company's employees to leave their employment with the Company.
14. NOTICES. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and if sent by
registered or certified mail to McGlashan at the last address he has filed in
writing with the Company or, in the case of the Company, to the General Counsel
at the Company's principal executive offices.
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15. BINDING AGREEMENT. This Agreement shall be binding upon McGlashan
and the Company on and after the date of this Agreement. The rights and
obligations of the Company under this Agreement shall inure to the benefit of
the Company and any successor of the Company. The Company may assign this
Agreement to any subsidiary, parent or affiliate, without the consent of
McGlashan, and such assignment shall not, in and of itself, constitute a
termination of employment under this Agreement.
16. INTEGRATION. This Agreement constitutes the entire understanding
of McGlashan and the Company with respect to the subject matter herein and
supersedes and voids any and all prior agreements or understandings, written or
oral, regarding the subject matter hereof. This Agreement may not be changed,
modified, or discharged orally, but only by an instrument in writing signed by
the Parties.
17. CONSTRUCTION. Each party has reviewed this Agreement. Therefore
the normal rule of construction that any ambiguity or uncertainty in any writing
shall be interpreted against the party drafting the writing shall not apply to
any action on this Agreement.
18. GOVERNING LAW. This Agreement shall be governed by the laws of
the State of California, and the invalidity or unenforceability of any
provisions hereof shall in no way affect the validity or enforceability of any
other provision.
19. SEVERABILITY. Any provision of this Agreement which is prohibited
or unenforceable by any court of competent jurisdiction will immediately become
null and void, leaving the remainder of this Agreement in full force and effect.
Any such prohibition or unenforceability in any court of competent jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.
20. MANDATORY ARBITRATION. The Parties agree that any future
controversy, claim or dispute arising out of or related to McGlashan's
employment or the termination of his employment shall be resolved by binding
arbitration, except where the law specifically forbids the use of arbitration as
a final and binding remedy, or where Section 20(e) below specifically allows a
different remedy.
(a) The Parties agree that the dispute shall be resolved by
binding arbitration in San Francisco, California. If the Parties are unable to
jointly select an arbitrator, they will obtain a list from the Federal Mediation
and Conciliation Service and select an arbitrator by striking names from that
list.
(b) The arbitrator shall have the authority to determine
whether the conduct complained of violates the complainant's rights and, if so,
to grant any relief authorized by law; subject to the exclusions of Section
20(e) below. The arbitrator shall not have the authority to modify, change, or
refuse to enforce the terms of this Employment Agreement.
(c) The Company shall bear the costs of the arbitration,
except that McGlashan may be required to pay costs not to exceed the amount of
the then-current filing fee for a civil action filed in the court of general
jurisdiction in the State of California. Each party shall pay its own attorneys'
fees, unless the arbitrator orders otherwise, pursuant to applicable law.
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(d) Arbitration shall be the exclusive final remedy for any
dispute between the Parties including but not limited to any disputes or claims
for discrimination or harassment (such as claims under the Fair Employment and
Housing Act, Title VII of the Civil Rights Act of 1964, the Americans with
Disabilities Act, or the Age Discrimination in Employment Act), wrongful
termination, breach of contract, breach of public policy, physical or mental
harm or distress, or any other disputes.
(e) Notwithstanding the arbitration provisions set forth
herein, the Parties reserve their right to seek an injunction or other equitable
relief from a court with applicable authority. McGlashan acknowledges that in
the event of any breach of any provision of Sections 9, 10, 12 or 13 of this
Agreement, the Company would be irreparably and immediately harmed and could not
be made whole by monetary damages. It is accordingly agreed that the Company
shall be entitled to an injunction to prevent breach of this Agreement and to
compel specific performance of this Agreement, in addition to any other remedy
to which it may be entitled in law or equity. To the extent any portion of
Sections 9, 10, 12 or 13 of this Agreement is deemed by the court to be overly
restrictive as to time, scope or geographical area, the Parties agree that the
court shall have the authority to reform the unlawful provision to be in
conformance with the law, with the Parties' agreement that Sections 9, 10, 12
and 13 are to be given the fullest force and effect permissible by law.
(f) The arbitrator shall issue a written arbitration decision
stating the arbitrator's essential findings and conclusions upon which any award
is based. A party's right to review of the decision is limited to the grounds
provided under applicable law. The Parties agree that the arbitration award
shall be enforceable in any court having jurisdiction to enforce this Agreement.
IN WITNESS WHEREOF, the Parties have executed and delivered this
Agreement as of the date first above written.
CRITICAL PATH
Dated: By: /s/ David Hayden
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DAVID HAYDEN
Executive Chairman
Dated: By: /s/ William McGlashan
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William McGlashan, Personally
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