Re: Employment Agreement
Exhibit 10.14
Xx. Xxx X. Xxxxxxxx
0000 Xxxxxxxx Xx.
Xxxx, XX 00000
0000 Xxxxxxxx Xx.
Xxxx, XX 00000
Dear Guy:
This letter agreement sets forth the terms of your employment with Xxxxxx Stratex Networks,
Inc. (the “Company”), as well as our understanding with respect to any termination of that
employment relationship. This Agreement will become effective on your first day of employment with
the Company, which we anticipate will be January 27, 2007.
1. Position and Duties. You will be employed by the Company as its President & Chief
Executive Officer, reporting to the Company’s Board of Directors (the “Board”). This position will
be based at our corporate headquarters in Morrisville, North Carolina. You accept employment with
the Company on the terms and conditions set forth in this Agreement, and you agree to devote your
full business time, energy and skill to your duties at the Company. Your primary responsibilities
will be to assume the top leadership of the Company, direct the organization to ensure the
attainment of revenue and profit goals, drive optimal return on invested capital, and grow
shareholder value.
2. Term of Employment. Your employment with the Company is for no specified term,
and may be terminated by you or the Company at any time, with or without cause, subject to the
provisions of Paragraphs 4 and 5 below.
3. Compensation. You will be compensated by the Company for your services as
follows:
(a) Salary: You will be paid a monthly base salary of $41,667 ($500,000 per
year), less applicable withholding, in accordance with the Company’s normal payroll procedures. In
conjunction with your annual performance review, which will occur at or about the start of each
fiscal year (currently July 1), your base salary will be reviewed by the Board, and may be subject
to adjustment based upon various factors including, but not limited to, your performance and the
Company’s profitability. Any adjustment to your salary shall be made by the Board in its sole
discretion.
(b) Annual Incentive Plan: Subject to the Board’s approval of such a plan for
Company employees you will be eligible to participate in the Company’s Annual Incentive Plan
(“AIP”), with an initial target annual bonus of 100% of your annual base salary.
(c) Long Term Incentive Plan: You will be entitled to participate in the Company’s
initial (associated with the formation of the Company) LTIP program in the form which is approved
by the Board for Executive Officers and with a target value you of at least $950,000 for fiscal
2007 and 2008, with the amount pro-rated for the partial fiscal year 2007. After fiscal year 2008,
the target value under the LTIP program will be established on a per-fiscal year basis.
(d) Benefits: You will have the right, on the same basis as other employees of the
Company, to participate in and to receive benefits under any Company group medical, dental, life,
disability or other group insurance plans, as well as under the Company’s business expense
reimbursement, educational assistance, holiday, and other benefit plans and policies. You will
also be eligible to participate in the Company’s 401(k) plan, and, if implemented by the Company,
an enhanced contribution plan for highly compensated individuals.
(e) Vacation: You will be credited with your unused paid vacation of Xxxxxx on your
first day of employment with the company. Once your employment begins you will also accrue paid
vacation at the rate of five weeks per year in accordance with the Company’s vacation policy.
However, the number of accrued vacation hours at any one time shall not exceed 400 hours.
4. Voluntary Termination. In the event that you voluntarily resign from your
employment with the Company (other than for Good Reason as defined in Paragraphs 5(d) and 6(b)), or
in the event that your employment terminates as a result of your death, you will be entitled to no
compensation or benefits from the Company other than those earned under Paragraph 3 through the
date of your termination. You agree that if you voluntarily terminate your employment with the
Company for any reason, you will provide the Company with at least 10 business days’ written notice
of your resignation. The Company shall have the option, in its sole discretion, to make your
resignation effective at any time prior to the end of such notice period, provided the Company pays
you an amount equal to the base salary you would have earned through the end of the notice period.
5. Other Termination. Your employment may be terminated under the circumstances set
forth below.
(a) Termination by Disability. If, by reason of any physical or mental incapacity,
you have been or will be prevented from performing your then-current duties under this Agreement,
with or without reasonable accommodation, for more than six consecutive months, then, to the extent
permitted by law, the Company may terminate your employment without any advance notice. Upon such
termination, if you sign a general release of known and unknown claims in a form satisfactory to
the Company, the Company will provide you with the severance payments and benefits described in
Paragraph 5(c). Nothing in this paragraph shall affect your rights under any applicable Company
disability plan; provided, however, that your severance payments will be offset by any disability
income payments received by you so that the total monthly severance and disability income payments
during your severance period shall not exceed your then-current base salary.
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(b) Termination for Cause or Death: The Company may terminate your employment at any
time for cause (as described below). If your employment is terminated by the Company for cause, or
if your employment terminates as a result of your death, you shall be entitled to no compensation
or benefits from the Company other than those earned under Paragraph 3 through the date of your
termination. Provided, however, that if your employment terminates as a result of your death, the
Company will pay your estate the prorated portion of any incentive bonus that you would have earned
during the incentive bonus period in which your employment terminates; such prorated bonus will be
paid at the time that such incentive bonuses are paid to other Company employees.
For purposes of this Agreement, a termination “for cause” occurs if you are terminated for any
of the following reasons: (i) theft, dishonesty, misconduct or falsification of any employment or
Company records; (ii) improper disclosure of the Company’s confidential or proprietary information;
(iii) any action by you which has a material detrimental effect on the Company’s reputation or
business; (iv) your refusal or inability to perform any assigned duties (other than as a result of
a disability) after written notice from the Company to you of, and a reasonable opportunity to
cure, such failure or inability; or (v) your conviction (including any plea of guilty or no
contest) for any criminal act that impairs your ability to perform your duties under this
Agreement.
(c) Termination Without Cause: The Company may terminate your employment without
cause at any time. If your employment is terminated by the Company without cause, and you sign a
general release of known and unknown claims in a form satisfactory to the Company, and you fully
comply with your obligations under Paragraphs 7, 8, and 10, you will receive the following
severance benefits:
(i) severance payments at your final base salary rate for a period of thirty (30) months
following your termination; such payments will be subject to applicable withholding and made in
accordance with the Company’s normal payroll practices;
(ii) payment of the premiums necessary to continue your group health insurance under COBRA (or
to purchase other comparable health insurance coverage on an individual basis if you are no longer
eligible for COBRA coverage) until (x) the date on which you reach the age of 65 or (y) the date on
which you are eligible to participate in another employer’s group health insurance plan, whichever
comes first;
(iii) if you are terminated without cause the Company will pay you the prorated portion of any
incentive bonus that you would have earned, if any, during the incentive bonus period in which your
employment terminates (the pro-ration shall be equal to the percentage of that bonus period that
you are actually employed by the Company), and such prorated bonus will be paid to you at the time
that such incentive bonuses are paid to other Company employees.
(iv) with respect to any stock options or restricted stock granted to you by the Company, you
will cease vesting upon your termination date; however, you will be entitled to purchase any vested
shares of stock that are subject to those options until the earlier of (x) thirty (30) months
following your termination date, or (y) the date on which the applicable
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option(s) or restricted stock expire(s); except as set forth in this subparagraph, your
Company stock options will continue to be subject to and governed by the Plan and the applicable
stock option agreements between you and the Company;
(v) outplacement assistance selected and paid for by the Company; and
(vi) Executive shall not be required to mitigate damages with respect to the severance
payments and benefits described in subparagraphs (i) — (v) by seeking employment or otherwise, and
there shall be no offset against amounts due Executive under subparagraphs (i) — (v) on account of
his subsequent employment (except as provided in Paragraph 10).
(d) Resignation for Good Reason: If you resign from your employment with the Company
for Good Reason (as defined in this paragraph), and such resignation does not qualify as a
Resignation for Good Reason Following a Change of Control as set forth in subparagraph (e) below,
and you sign a general release of known and unknown claims in a form satisfactory to the Company,
and you fully comply with your obligations under Paragraphs 7, 8, and 10, you shall receive the
severance benefits described in Paragraph 5(c). For purposes of this Paragraph, “Good Reason”
means any of the following conditions, which condition(s) remain in effect 60 days after written
notice from you to the Chairman of the Board of said condition(s):
(i) a reduction in your base salary of 20% or more, other than a reduction that is similarly
applicable to a majority of the members of the Company’s executive staff; or
(ii) a material reduction in your employee benefits, other than a reduction that is similarly
applicable to a majority of the members of the Company’s executive staff; or
(iii) a material reduction in your responsibilities or authority without your written consent;
or
(iv) a material breach by the Company of any material provision of this Agreement;
(v) the relocation of your main workplace without your concurrence to a location that is more
than 75 miles from the Company’s current workplace in Morrisville, North Carolina; or
(vi) any other acts or omissions by the Company that constitute constructive discharge under
federal or North Carolina law.
The foregoing condition(s) shall not constitute “Good Reason” if you do not provide the
Chairman of the Board with the written notice described above within 45 days after you first become
aware of the condition(s).
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(e) Termination or Resignation For Good Reason Following a Change of Control: If,
within 18 months following any Change of Control (as defined below), your employment is terminated
by the Company without cause, or if you resign from your employment with the Company for Good
Reason Following a Change of Control (as defined below), and you sign a general release of known
and unknown claims in a form satisfactory to the Company, and you fully comply with your
obligations under Paragraphs 7, 8, and 10, you shall receive the severance benefits described in
Paragraph 5(c); provided, that the time periods set forth in subparagraphs 5(c)(i), and (iv)(x)
shall each be increased by an additional twelve (12) months. In addition you shall receive a
payment equal to the greater of (i) the average of the annual incentive bonus payments received by
you, if any, for the previous three years, or (ii) your target incentive bonus for the year in
which your employment terminates. Such payment will be made to you within 15 days following the
date on which the general release of claims described above becomes effective. The Company will
also accelerate the vesting of all unvested stock options granted to you by the Company such that
all of your Company stock options will be fully vested as of the date of your
termination/resignation.
6. Change of Control/Good Reason.
(a) For purposes of this Agreement, a “Change of Control” of the Company shall mean:
(i) any merger, consolidation, share exchange or Acquisition, unless immediately following
such merger, consolidation, share exchange or Acquisition of at least 50% of the total voting power
(in respect of the election of directors, or similar officials in the case of an entity other than
a corporation) of (i) the entity resulting from such merger, consolidation or share exchange, or
the entity which has acquired all or substantially all of the assets of the Company (in the case of
an asset sale that satisfies the criteria of an Acquisition) (in either case, the “Surviving
Entity”), or (ii) if applicable, the ultimate parent entity that directly or indirectly has
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50%
or more of the total voting power (in respect of the election of directors, or similar officials in
the case of an entity other than a corporation) of the Surviving Entity (the “Parent Entity”) is
represented by Company securities that were outstanding immediately prior to such merger,
consolidation, share exchange or Acquisition (or, if applicable, is represented by shares into
which such Company securities were converted pursuant to such merger, consolidation, share exchange
or Acquisition), or
(ii) any person or group of persons (within the meaning of Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended and in effect from time to time) directly or indirectly acquires
beneficial ownership (determined pursuant to Securities and Exchange Commission Rule 13d-3
promulgated under the said Exchange Act) of securities possessing more than 30% of the total
combined voting power of the Company’s outstanding securities pursuant to a tender or exchange
offer made directly to the Company’s stockholders that the Board does not recommend such
stockholders accept, other than (i) Xxxxxx if it beneficially owns more than 50% of such total
voting power immediately prior to such acquisition, (ii) the Company or an Affiliate who is an
Affiliate immediately prior to such acquisition, (iii) an employee benefit plan of the Company or
any of its Affiliates, (iv) a trustee or other fiduciary holding securities under an employee
benefit plan of the Company or any of its
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Affiliates, or (v) an underwriter temporarily holding securities pursuant to an offering
of such securities or
(iii) over a period of 36 consecutive months or less, there is a change in the composition of
the Board such that a majority of the Board members (rounded up to the next whole number, if a
fraction) ceases, by reason of one or more proxy contests for the election of Board members, to be
composed of individuals each of whom meet one of the following criteria: (i) have been a Board
member continuously since the adoption of this Plan or the beginning of such 36 month period, (ii)
have been appointed by Xxxxxx Corporation, or (iii) have been elected or nominated during such 36
month period by at least a majority of the Board members that (x) belong to the same class of
director as such Board member and (y) satisfied the criteria of this subsection (c) when they were
elected or nominated, or
(iv) a majority of the Board determines that a Change of Control has occurred.
(v) the complete liquidation or dissolution of the Company;
For the purposes of this Agreement, the terms “Continuing Directors,” “Corporate Transaction,”
“Affiliate” and “Associate” shall have the meanings ascribed to such terms in the Plan.
(b) For purposes of this Agreement, “Good Reason Following a Change of Control” means any of
the following conditions, which condition(s) remain in effect 60 days after written notice from you
to the Chairman of the Board of said condition(s):
(i) a material and adverse change in your position, duties or responsibilities for the
Company, as measured against your position, duties or responsibilities immediately prior to the
Change of Control; or
(ii) a reduction in your base salary as measured against your base salary immediately prior to
the Change in Control; or
(iii) a material reduction in your employee benefits, other than a reduction that is similarly
applicable to a majority of the members of the Company’s executive staff;
(iv) the relocation of the Company’s workplace to a location that is more than 75 miles from
the Company’s current workplace in Morrisville, North Carolina; or
(v) any other acts or omissions by the Company that constitute constructive discharge under
federal or North Carolina law.
The foregoing condition(s) shall not constitute “Good Reason Following a Change of Control” if you
do not provide the Chairman of the Board with the written notice described above within 45 days
after you first become aware of the condition(s).
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7. Confidential and Proprietary Information: As a condition of your employment, you
agree to sign and abide by the Company’s standard form of employee proprietary
information/confidentiality/assignment of inventions agreement.
8. Termination Obligations.
(a) You agree that all property, including, without limitation, all equipment, proprietary
information, documents, books, records, reports, notes, contracts, lists, computer disks (and other
computer-generated files and data), and copies thereof, created on any medium and furnished to,
obtained by, or prepared by you in the course of or incident to your employment, belongs to the
Company and shall be returned to the Company promptly upon any termination of your employment.
(b) Upon your termination for any reason, and as a condition of your receipt of any severance
benefits hereunder, you will promptly resign in writing from all offices and directorships then
held with the Company or any affiliate of the Company.
(c) Following the termination of your employment with the Company for any reason, you shall
fully cooperate with the Company in all matters relating to the winding up of pending work on
behalf of the Company and the orderly transfer of work to other employees of the Company. For
three years after the termination of your employment with the Company, you shall also cooperate in
the defense of any action brought by any third party against the Company.
9. Limitation of Payments and Benefits.
To the extent that any of the payments and benefits provided for in this Agreement or
otherwise payable to you (the “Payments”) constitute “parachute payments” within the meaning of
Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), the amount of such
Payments shall be either:
(a) the full amount of the Payments, or
(b) a reduced amount that would result in no portion of the Payments being subject to the
excise tax imposed pursuant to Section 4999 of the Code (the “Excise Tax”), whichever of the
foregoing amounts, taking into account the applicable federal, state and local income taxes and the
Excise Tax, results in the receipt by you, on an after-tax basis, of the greatest amount of
benefit. In the event that any Excise Tax is imposed on the Payments, you will be fully
responsible for the payment of any and all Excise Tax, and the Company will not be obligated to pay
all or any portion of any Excise Tax.
10. Other Activities. In order to protect the Company’s valuable proprietary
information, you agree that during your employment and for a period of eighteen (18) months
following the termination of your employment with the Company for any reason, you will not, as a
compensated or uncompensated officer, director, consultant, advisor, partner, joint venturer,
investor, independent contractor, employee or otherwise, provide to any person or entity in
competition with the Company any labor, services, advice or assistance regarding the design,
manufacture, distribution (directly or indirectly), or integration of any digital microwave
products substantially similar to current Company products in form, fit, or function and used in
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xxxxxxxxxxx xxxxxxxxx xxxxx-xx-xxxxx telecommunications networks anywhere in the world. You
acknowledge and agree that the restrictions contained in the preceding sentence are reasonable and
necessary, as there is a significant risk that your provision of such labor, services, advice or
assistance to a competitor could result in the disclosure of the Company’s proprietary information.
You further acknowledge and agree that the restrictions contained in this paragraph will not
preclude you from engaging in any trade, business or profession that you are qualified to engage
in. In the event of your breach of this Paragraph, the Company shall not be obligated to provide
you with any further severance payments or benefits subsequent to such breach.
11. Dispute Resolution. The parties agree that any suit, action, or proceeding
arising out of or relating to this Agreement, the parties’ employment relationship, or the
termination of that relationship for any reason, shall be brought in the United States District
Court for the Middle District of North Carolina (or should such court lack jurisdiction to hear
such action, suit or proceeding, in North Carolina Superior Court for the County of Durham) and
that the parties shall submit to the jurisdiction of such court. The parties irrevocably waive, to
the fullest extent permitted by law, any objection they may have to the laying of venue for any
such suit, action or proceeding brought in such court. If any one or more provisions of this
Paragraph 11 shall for any reason be held invalid or unenforceable, it is the specific intent of
the parties that such provisions shall be modified to the minimum extent necessary to make it or
its application valid and enforceable.
12. Compliance With Section 409A. Notwithstanding any inconsistent provision of this
Agreement, to the extent the Company determines in good faith that (a) one or more of the payments
or benefits you would receive pursuant to this Agreement in connection with your termination of
employment would constitute deferred compensation subject to the rules of Section 409A of the Code,
and (b) you are a “specified employee” under Section 409A, then only to the extent required to
avoid your incurrence of any additional tax or interest under Section 409A of the Code, such
payment or benefit will be delayed until the date which is six (6) months after your “separation
from service” within the meaning of Section 409A. Any payments or benefits that would have been
payable but are delayed under the previous sentence shall be payable at that time. You and the
Company agree to negotiate in good faith to reform any provisions of this Agreement to maintain to
the maximum extent practicable the original intent of the applicable provisions without violating
the provisions of Section 409A of the Code, if the Company deems such reformation necessary or
advisable in order to avoid the incurrence of any such additional tax, interest and/or penalties
under Section 409A. Such reformation shall not result in a reduction of the aggregate amount of
payments or benefits provided to you under this Agreement.
13. Severability. If any provision of this Agreement is deemed invalid, illegal or
unenforceable, such provision shall be modified so as to make it valid, legal and enforceable, and
the validity, legality and enforceability of the remaining provisions of this Agreement shall not
in any way be affected.
14. Applicable Withholding. All salary, bonus, severance and other payments
identified in this Agreement are subject to applicable withholding by the Company.
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15. Assignment. In view of the personal nature of the services to be performed under
this Agreement by you, you cannot assign or transfer any of your obligations under this Agreement.
16. Entire Agreement. This Agreement and the agreements referred to above constitute
the entire agreement between you and the Company regarding the terms and conditions of your
employment, and they supersede all prior negotiations, representations or agreements between you
and the Company regarding your employment, whether written or oral. This Agreement sets forth our
entire agreement regarding the Company’s obligation to provide you with severance benefits upon any
termination of your employment, and you shall not be entitled to receive any other severance
benefits from the Company pursuant to any Company severance plan, policy or practice.
17. Governing Law. This Agreement shall be governed by and construed in accordance
with the law of the State of North Carolina.
18. Modification. This Agreement may only be modified or amended by a supplemental
written agreement signed by you and an authorized representative of the Board.
Guy, we look forward to having you join us at Xxxxxx Stratex Networks, Inc. Please sign and
date this letter on the spaces provided below to acknowledge your acceptance of the terms of this
Agreement.
Sincerely,
Xxxxxx Stratex Networks, Inc.
| By: | /s/ Xxxxxxx X. Xxxxxxx | |||
| Xxxxxxx X. Xxxxxxx | ||||
| Chairman of the Board | ||||
I agree to and accept employment with Xxxxxx Stratex Networks, Inc. on the terms and
conditions set forth in this Agreement.
Date:
January 26, 2007
|
/s/ Xxx X. Xxxxxxxx
|
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