EXHIBIT 10.6
June 9, 1997
Mr. Xxxx XxXXxxxx
Chicago, Illinois
Re: Employment With Clarent Corporation
-----------------------------------
Dear Xxxx:
Clarent Corporation (the "Company") is pleased to offer you a position as
Vice President, Worldwide Sales, on the terms set forth in this letter
agreement, effective as of June 6, 1997 upon your acceptance by execution of a
counterpart copy of this letter where indicated below.
1. Reporting; Duties and Responsibilities; Employment At Will; Employee
--------------------------------------------------------------------
Invention Assignment and Confidentiality Agreement. In this position you will
--------------------------------------------------
report to Xxxxx Xxxxx, President. This offer is for a full time position,
headquartered in Chicago, except as travel to other locations may be necessary
to fulfill you responsibilities. Your employment with the Company is on an "at
will" basis, and either you or the Company may terminate your employment with
the Company at any time, for any reason.
2. Salary; Commission; Benefits and Vacation. Your base salary will be
-----------------------------------------
$150,000 per year, payable in accordance with the Company's customary payroll
practice as in effect from time to time. In addition, you are also entitled to
receive sales commission based on the 1997 Sales Plan for your territories.
This Sales Plan is a draft and may need to be approved by Xxxxxxx's Board of
Directors. The general parameters of this plan are as follows:
. You will have a July through December 1997 sales quota of US$8,000,000
revenue. The revenue will be based on all revenues from any customers
whose headquarters are based anywhere except in the Asia Pacific
------
region. Xxxxx made to AT&T Xxxx, whose headquarters is in Tokyo, are
specifically excluded from this territory.
. The quota will be spread over the remaining months in 1997 by Xxxxx
Xxxxxx, Vice President, Marketing. This spread will be made with your
direct input, via a forecast that you provide to Xxxxx within 1 week
after your initial day of employment.
You will have the opportunity to earn sales commission as follows:
----------------------------------------------------------------------
YEAR TO DATE INCREMENTAL % OF REVENUE PAID TO YOU IN
------------------------ ---------------------------
QUOTA ATTAINMENT IN YOUR SALES COMMISSION
------------------------ ----------------
TERRITORY
---------
---------------------------------- ----------------------------------
0 0%
----------------------------------------------------------------------
1-30% .25%
----------------------------------------------------------------------
31-100% 1.5%
----------------------------------------------------------------------
101% -120% 2.0%
----------------------------------------------------------------------
121%+ 2.5%
----------------------------------------------------------------------
1.
. Sales commissions will be calculated and paid monthly, if
applicable. They will be paid within 6 weeks following the close
of business for a given month.
For example, commissions for January sales will be paid to you no
later than March 15.
. The percentage will be calculated based on year to date
attainment. The actual commission to be paid will be based on
that month's booked revenues in your territory. For example, if
revenues in a given month are $400,000 in your territory, and if
you are at 65% of year to date attainment, you will be paid
$400,000 times 1.5%, or $6,000 that month.
. Quota will be retired on revenue earned through direct system or
service sale and system lease. If you sign up third party
channels to sell in your territory, you will retire quota based
on the revenue that is booked to Clarent from the 3rd party.
. If any customers disconnect our systems and request refunds, any
customer refunds in your territory will be debited against your
revenue attainment.
. Sales will count as sales based on when generally accepted
accounting practices allow Clarent Corporation to book the sale
as revenue to the Corporation.
. Any disputes that you have regarding sales territory or quota
attainment will be resolved by Xxxxx Xxxxx, President, within 1
month from when you submit the dispute in writing.
Clarent Corporation will use its best efforts to make quota or other
compensation plan changes on an annual basis. However, if there are significant
and material changes in the market that will affect Clarent's position, Clarent
reserves to right to modify the compensation plan at the beginning of any
quarter. If this happens, a quarterly (not annual change) will not affect the
current or the next quarter's commissions unless it falls at the same time as
the annual quota adjustment.
You will be eligible to take vacation under the terms of the Clarent Corporation
vacation policy. If you need extra vacation beyond what is stated in the
company policy, please make your request to Xxxxx Xxxxx.
You will be eligible to receive health, dental, vision and life insurance
through the company's plan. You will be eligible for any other applicable
employee benefits if and when they become available. Also, because you are
interested in maintaining your current medical coverage, Clarent will pay for
COBRA coverage on your current health plan for a period of 18 months after you
join Clarent Corporation by reimbursing you for your out-of-pocket COBRA
expenses.
Also, Clarent Corporation will pay up to $2,000 per year for your supplemental
life insurance.
2.
3. Stock Option. Effective at the next Company Board of Directors
------------
meeting after the date of this letter, the President/CEO of the Company will
recommend that the Board grant you an incentive stock option, effective upon the
date of your commencement of employment pursuant to this letter agreement, to
purchase up to 125,000 shares of the Company Common Stock pursuant to the
Company's Stock Option Plan. The exercise price for this option will be the
then-current fair market value of the Company Common Stock at the date of the
grant. The option will become exercisable according to the Company's standard
4-year exercise schedule, which calls for an initial vesting of 25% of the total
(i.e. 31,250 shares) after the first I year of continuous service to the
Company, and thereafter an additional 1/48th of the initial grant (2604 per
month) will become exercisable, at the close of each month during which you
remain employed with the Company, over the remainder of the exercise term.
Additionally, over the next two years, you have the option to earn up to an
additional 125,000 shares under the following formula:
TIME PERIOD QUOTA ATTAINMENT SHARES EARNED
----------- ---------------- -------------
First 12 months with 101%+ 62,500 shares
Clarent 81-100% 40,000 shares
0-80% 0 additional shares
Second 12 months with 101%+ 62,500 shares
Clarent 81-100% 40,000 shares
0-80% 0 additional shares
These additional stock options will be priced at the price the board sets at
your initial grant of 125,000 shares, and, if earned, will vest on the same
dates that your initial 125,000 shares vest.
If Clarent Corporation is acquired by another company the terms and conditions
of outstanding vested and unvested Clarent stock options will be negotiated as
part of the acquisition. Clarent Corporation will include in any acquisition
the fact that we have committed to you that, unless 100% of your Clarent options
are vested, if the acquiring company lets you go at will (without cause), that
they will pay you $250,000.
4. Confidential Information. As an employee of the Company, you will
------------------------
have access to certain Company confidential information and you may, during the
course of your employment, develop certain information or inventions which will
be the property of the Company. To protect the interest of the Company, you
will need to sign the Company's standard "Employee Inventions and
Confidentiality Agreement" as a condition of your employment.
5. At-Will Employment. While we look forward to a long and profitable
------------------
relationship, should you decide to accept our offer, you will be an at-will
employee of the Company, which means the employment relationship can be
terminated by either of us for any reason at any time. Any statements or
representations to the contrary (and, indeed, any statements contradicting any
provision in this letter) should be regarded by you as ineffective. Further,
your participation in any stock option or benefit program is not to be regarded
as assuring you of continuing employment for any particular period of time.
However, if Clarent
3.
Corporation terminates the relationship without cause, Clarent Corporation will
pay you a severance of 100% of your annual salary.
6. Authorization to Work. Because of Federal regulations adopted in
---------------------
Immigration Reform and Control Act of 1986, you will need to present
documentation demonstrating that you have authorization to work in the United
States. If you have any questions about this requirement, which applies to U.S.
citizens and non-U.S, citizens alike, please contact our human resources
department.
7. Term of Offer. This offer will remain open until June 11, 1997. If
-------------
you decide to accept our offer, please sign the enclosed copy of this letter in
the space indicated and return it to me. Upon your signature below, this will
become our binding agreement with respect to the subject matter of this letter,
superseding in their entirety all other or prior agreements by you with the
Company as to the specific subjects of this letter, will be binding upon and
inure to the benefit of our respective successors and assigns, and your heirs,
administrators, and executors, will be governed by California law, and may only
be amended in a writing signed by you and the Company.
8. Other. You will receive a monthly car allowance of $650. Clarent
-----
will also pay for nationwide paging service and for a cellular telephone and
cellular service, to be used judiciously. You will be responsible for paying
for your personal cellular calls.
We are excited to have you join us and look forward to working with you.
Very Truly Yours,
/s/ Xxxx: X. Xxxxxx
Xxxxx Xxxx Xxxxxx
Vice President, Sales and Marketing
Clarent Corporation
Acknowledged, Accepted and Agreed
By: /s/ Xxxx XxXxxxxx Date: June 10, 1997
--------------------------
Xxxx XxXxxxxx
4.
June 1, 1998
Xxxx XxXxxxxx
Vice President, WW Sales
Clarent Corporation
Naperville, IL. 60563
Dear Xxxx:
As you know, on June 9, 1997, Xxxxxxx entered into a letter agreement with
you, which defined certain terms and conditions of your employment. We have
agreed to amend the June 9 letter agreement in certain respects as follows.
WE HAVE AGREED to modify the penultimate paragraph of Section 3 of the June
9 letter agreement to read as follows:
"Additionally, at the end of the second year of your employment with
Clarent, you have the option to earn up to an additional 45,000 shares
under the following formula:
TIME PERIOD QUOTA ATTAINMENT SHARES EARNED
-------------------------------------------------------------------------
Second 12 months 101% 45,000 shares
With Clarent 81-100% 30,000 shares
0-80% 0 additional shares
These additional stock options will be priced at the fair market value of
the Company's Common Stock on the date the Board approved this grant and
will vest on the same dates That your initial 125,00 shares vest."
WE HAVE AGREED that after you sign this amendment, the Company will grant
you an additional incentive stock option to purchase up to 80,000 shares of the
Company Common Stock pursuant to the Company's Stock Option Plan. These
additional stock options will be priced at the fair market value of the
Company's Common Stock on the date the board approves this grant and will vest
on the same dates that your initial 125,000 shares vest, except as to the
initial vesting of 25% of shares, which shall be accelerated to occur effective
upon the signing of this Amendment.
WE HAVE AGREED to delete the last paragraph of Section 3 of the June 9
letter agreement in its entirety. This is because this paragraph presents
certain accounting issues that have been brought to Xxxxxxx's attention, which
we have discussed with you and we reached the above agreement after our
discussion.
WE HAVE AGREED that the following definition of "cause" should be added to
the end of Section 5 of the June 9 letter agreement:
"For purposes of this letter agreement, "cause" will be determined in the
sole discretion of Clarent Corporation, based upon its objective reasonable
belief that you have committed one or more of the following:
1.
1. Failure to achieve the mutual agreed-upon Measured Business Objects
(MBO) between you and the Company. The MBO will be determined
quarterly between you and the Company. There will be a time schedule
associated with each MBO, which will be used to measure the success or
failure for the achievement. The MBO will include the annual sales
quota.
2. Conviction of any felony or crime involving moral turpitude or
dishonesty.
3. Participation in a fraud or material act of dishonesty against Clarent
--------
Corporation.
4. Willful breach of Clarent Corporation's policies which is materially
injurious to Clarent Corporation.
5. Intentional damage to Clarent Corporation's property which is
materially injurious to Clarent Corporation..
6. Material breach of this letter agreement, provided that Clarent
Corporation has given you written notice and (30) days' opportunity
to cure the breach. If Clarent Corporation terminates your
employment for any of the reasons set forth in this Section 5 and you
do not consent to such termination, such termination shall be
considered effective and your right under this agreement shall
continue until the existence of such cause has been determined by an
independent arbitrator appointed by the American Arbitration
Association and either party's rights to petition a court of law for a
decision in the matter have been exhausted. In connection with the
appointment of an arbitrator, both parties agree to submit the
question first to arbitration by an appointee of the American
Arbitration Association and to cooperate with the arbitrator, with all
costs of arbitration paid by Clarent Corporation.
WE HAVE AGREED that the agreement will be effective upon execution.
Please review the above listed items entirely. Should any description
raise your concern, please contact me at your earliest convenience so we can
have further discussion. Otherwise, please sign to acknowledge this agreement.
Thanks.
Regards,
Xxxxx Xxxxx
President & CEO
Acknowledged and agreed: /s/ Xxxx XxXxxxxx Date: June 1, 1998
---------------------
Xxxx XxXxxxxx
2.
