CHANGE OF CONTROL AGREEMENT
Exhibit
10.1
This
Change of Control Agreement (the "Agreement") is made and entered into as of
__________ (the "Effective Date"), by and between Sycamore Networks, Inc., a
Delaware corporation (the "Company") and ___________("Executive").
RECITALS
The
Company recognizes that the possibility of a change of control or other event
which may change the nature and structure of the Company and that uncertainty
regarding the consequences of such events may adversely affect the Company's
ability to retain its key employees. The Company also recognizes that
Executive possesses an intimate and essential knowledge of the Company upon
which the Company may need to draw for objective advice and continued services
in connection with any acquisition of the Company or other change of control
that is potentially advantageous to the Company's stockholders. The
Company believes that the existence of this Agreement will serve as an incentive
to Executive to remain in the employ of the Company and will enhance its ability
to call on and rely upon Executive in connection with a change of
control.
The
Company and Executive desire to enter into this Agreement in order to provide
additional compensation and benefits to Executive and to encourage Executive to
continue to devote his full attention and dedication to the Company and to
continue his employment with the Company.
1. Definitions. As
used in this Agreement, unless the context requires a different meaning, the
following terms shall have the meanings set forth herein:
1.1. "Cause"
means:
1.1.1. The
willful engaging by Executive in illegal conduct or gross misconduct which is
materially injurious to the Company.
No
termination of Executive for Cause following a Change of Control shall be
effective unless (i) the Company has delivered a written statement to Executive
which specifically identifies the matters alleged to constitute Cause and which
provides Executive with a reasonable opportunity to cure the existence of such
Cause and (ii) a resolution is duly adopted by the affirmative vote of not less
than two-thirds (2/3) of the entire membership of the Board of Directors of the
Acquiror (as defined below) at a meeting of the Board which was called and held
for the purpose of considering the termination of Executive for Cause (after
reasonable notice to Executive and an opportunity for Executive, together with
Executive's counsel, to be heard before the Board) finding that, in the good
faith opinion of
the Board, Executive was guilty of conduct constituting Cause hereunder and
specifying the particulars thereof in detail.
1.2. "Change of Control"
means the occurrence, as the result of a single transaction or through a series
of transactions, of any of the following events:
1.2.1. Any
Person becomes the beneficial owner, directly or indirectly, of securities
of the Company representing thirty-five percent (35%) or more of the combined
voting power of the Company's then outstanding voting securities, excluding any
Person who becomes such a Beneficial Owner in connection with a transaction
described in Section 1.2.3(i). "Person" shall have the meaning given
in Section 3(a)(9) of the Exchange Act, as amended, as modified and used in
Sections 13(d) and 14(d) thereof, except that such term shall not include (i)
the Company or any of its subsidiaries, (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or any of its
subsidiaries, (iii) an underwriter temporarily holding securities pursuant to an
offering of such securities or (iv) a corporation owned, directly or indirectly,
by the stockholders of the Company in substantially the same proportions as
their ownership of stock of the Company; or
1.2.2. Incumbent
Directors cease at any time and for any reason to constitute a majority of the
number of directors then serving on the Board. "Incumbent
Directors" shall mean directors who either (A) are directors of the Company as
of the date hereof or (B) are elected, or nominated for election, to the Board
with the affirmative votes of at least a majority of the Incumbent Directors at
the time of such election or nomination (but shall not include an individual
whose election or nomination is in connection with an actual or threatened
election contest, including but not limited to a consent solicitation, relating
to the election of directors to the Board); or
1.2.3. there
is consummated a merger or consolidation of the Company or any direct or
indirect subsidiary of the Company with any other corporation, other than (i) a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior to such merger or consolidation continuing
to represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof (the “Acquiror”)) at
least a majority of the combined voting power of the securities of the Company
or the Acquiror outstanding immediately after such merger or consolidation as
appropriate, or (ii) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no Person
becomes the Beneficial Owner, directly or indirectly, of securities of the
Company representing thirty-five percent (35%) or more of the combined voting
power of the Company's then outstanding voting securities; or
1.2.4. the
stockholders of the Company approve a plan of liquidation or dissolution of the
Company or there is consummated an agreement for the sale or disposition by the
Company of all or a substantial portion of the Company's assets, other than a
sale or disposition by the Company of all or a substantial portion of the
Company's assets to an entity, at least a majority of the combined voting power
of the voting securities of which are owned by stockholders of the Company in
substantially the same proportions as their ownership of the Company
immediately prior to such sale.
1.3. "Constructive
Termination" means the termination by Executive of Executive's employment
following the occurrence of any of the following conditions, without Executive's
written consent:
1.3.1. Any
material diminution in Executive’s position, title or responsibilities;
or
1.3.2. Any
required relocation of Executive's primary work location by more than 35 miles;
or
1.3.3. Any
material diminution in Executive's annual salary or bonus potential from that in
effect immediately prior to the Change of Control.
The
Executive's right to terminate Executive's employment in a Constructive
Termination shall not be affected by Executive's incapacity due to physical or
mental illness. In addition, in order for a Constructive Termination
to take place hereunder, Executive must provide notice to the Company of the
existence of the condition or circumstance described above within ninety (90)
days of the initial existence of the condition or circumstance (or, if later,
within ninety (90) days of Executive's becoming aware of such condition or
circumstance), and the Company must have failed to cure such condition within
thirty (30) days of the receipt of such notice. Subject to the preceding
sentence, Executive's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any event entitling Executive to initiate a
Constructive Termination hereunder. It is the intention of the
parties to this Agreement that the definition of Constructive Termination
comply, and shall be construed in a manner so as to comply, with the safe harbor
"good reason" definition set forth in Treasury Regulation
1.409A-1(n)2(ii).
1.4. "Termination Upon a Change
of Control" means:
1.4.1. Any
termination of the employment of Executive by the Company (i) without Cause
prior to a Change of Control (whether or not such a Change of Control ever
occurs) if such termination was at the request or direction of a person who has
entered into an agreement with the Company the consummation of which would
constitute a Change of Control, (ii) by Executive pursuant to a Constructive
Termination prior to a Change of Control (whether or not such a Change of
Control ever occurs) and the circumstance or event which permits Constructive
Termination occurs at the request or direction of a person who has entered into
an agreement with the Company the consummation of which would constitute a
Change of Control, or (iii) Executive's employment is terminated by the Company
without Cause or by Executive pursuant to a Constructive Termination and such
termination or the circumstance or event which permits a Constructive
Termination is otherwise in connection with or in anticipation of a Change of
Control (whether or not such a Change of Control ever occurs);
1.4.2. Any termination of the employment of Executive by the Company
without Cause on or within the twenty four (24) month period following a Change
of Control;
1.4.3. Any
resignation by Executive due to an event constituting a Constructive
Termination, which resignation occurs on or within the twenty
four (24) month period following the date of any Change of Control.
1.4.4. "Termination
Upon Change of Control" shall not include any termination of Executive's
employment (a) by the Company for Cause or due to Executive's
Disability; or (b) as a result of (i) the voluntary termination of employment by
Executive for a reason other than Constructive Termination or (ii) Executive's
death. "Disability" shall be deemed the reason for the termination by
the Company of Executive's employment, if, as a result of Executive's incapacity
due to physical or mental illness, Executive shall have been absent from the
full time performance of Executive's duties with the Company for a period of one
hundred twenty (120) days, the Company shall have given Executive a notice of
termination for Disability, and, within thirty (30) days after such notice is
given, Executive shall not have returned to the full time performance of
Executive's duties.
2. Position and
Duties. Executive shall continue to be an at-will employee of
the Company employed in his/her current position at his/her then current salary
rate. Executive shall also be entitled to continue to participate in and to
receive benefits on the same basis as other executive or senior staff members
under any of the Company's employee benefit plans as in effect from time to
time. In addition, Executive shall be entitled to the benefits
afforded to other employees similarly situated under the Company's vacation,
holiday and business expense reimbursement policies. Executive agrees
to devote his/her full business time, energy and skill to his/her duties at the
Company. These duties shall include, but not be limited to, any
duties consistent with Executive's position which may be assigned to Executive
from time to time.
3. Equity Award Vesting Upon
Change of Control. All options, restricted stock and other
equity-based awards (“Equity Awards”) granted by the Company to Executive and
held by Executive shall, immediately prior to the effectiveness of the Change of
Control, become vested and exercisable (and no longer subject to forfeiture or
repurchase by the Company) as to an additional number of shares or options equal
to the number of shares or options as to which would have become vested and
exercisable (and no longer subject to forfeiture or repurchase by the Company)
on the date twelve months after the effectiveness of the Change of Control,
assuming Executive remained employed during such period. If the
provisions of this Section 3 are applicable to an Equity Award subject to the
provisions of Section 409A of the Internal Revenue Code of 1986, as amended (the
"Code") and the immediate payment of the Equity Award contemplated by this
Section 3 would result in taxation under Section 409A, payment of such Equity
Award shall be made upon the earliest date upon which such payment may be made
without resulting in taxation under Section 409A of the Code.
4. Termination Upon Change of
Control
4.1. In
the event of Executive's Termination Upon Change of Control, Executive shall be
entitled to the following severance
benefits:
4.1.1. Executive
shall be entitled to receive all salary and accrued vacation earned through the
date of Executive's termination for the year in which termination occurs, pro
rated through the date of Executive's termination, plus the Executive’s actual
incentive bonus earned through the date of Executive’s termination, all less
applicable withholding. In the event that any portion of the
Executive’s actual incentive bonus earned is not determinable as of the date of
termination, Executive shall receive for that portion an amount equal to the pro
rated portion of Executive’s annual target incentive bonus for the year in which
termination occurs, less applicable withholding;
4.1.2. Executive
shall be entitled to receive an additional eighteen (18) months' of Executive's
base salary as in effect on the date of such termination (without giving effect
to any reduction resulting in Constructive Termination), plus an additional
amount equal to one hundred fifty percent (150%) of Executive's annual incentive
bonus for the year in which the termination occurs at the target level of
performance, all less applicable withholding, paid, subject to the provisions of
Section 18.1.4, in a lump sum within thirty (30) days of termination of
employment;
4.1.3. Executive
shall be entitled to receive reimbursement for all expenses that Executive
reasonably and necessarily incurred by Executive in connection with the business
of the Company prior to Executive's termination of employment, within ten (10)
days of submission of proper expense reports by Executive, provided that such
reports are submitted not later than ninety (90) days following such termination
of employment;
4.1.4. Executive
and/or Executive's dependents shall be entitled to elect continued group health
plan coverage in accordance with the applicable provisions of the Consolidated
Omnibus Budget Reconciliation Act of 1985 ("COBRA") and the Health Insurance
Portability and Accountability Act of 1996 ("HIPAA"). The Company
will pay the full premium for continuation coverage for Executive and/or
Executive's dependents for a period of eighteen (18) months following the date
of Executive's Termination Upon Change of Control. Notwithstanding
the above, Company shall cease to pay the premium for continued group health
plan coverage for Executive and/or Executive's dependents, as the case may be,
in the event that, at any juncture during the period of continuation coverage
provided for herein, Executive and/or Executive's dependents become(s) covered
under another employer's group health plan that (i) has no preexisting condition
exclusions or (ii) has a preexisting condition exclusion that does not apply to
Executive and/or Executive's dependents or is satisfied by the creditable
coverage of Executive and/or Executive's dependents in accordance with
HIPAA;
4.1.5. Executive
shall be entitled to receive accrued benefits, if any, under the Company's
401(k) Plan and other Company benefit plans (other than any such plans providing
severance, termination or similar payments or benefits) to which he may be
entitled pursuant to the terms of such plans with respect to Executive's service
through the Termination Upon Change of Control, in accordance with the terms of
such plans; and
4.1.6. Executive shall be entitled to receive outplacement services
and career counseling at the Company's expense for a period of twelve (12)
months after the date of the Termination Upon Change of Control.
4.1.7. All
Equity Awards granted by the Company to Executive and held by Executive shall
become vested and exercisable (and no longer subject to forfeiture or repurchase
by the Company) in full, effective upon Executive’s Termination Upon Change of
Control. If the provisions of this Section 4.1.7 are applicable to an
Equity Award subject to the provisions of Section 409A of the Internal Revenue
Code of 1986, as amended (the "Code") and the immediate payment of the Equity
Award contemplated by this Section 4.1.7 would result in taxation under Section
409A, payment of such Equity Award shall be made upon the earliest date upon
which such payment may be made without resulting in taxation under Section 409A
of the Code.
5. 280G. If, due to the
benefits provided under this Agreement, Executive is subject to any excise tax
due to characterization of any amounts payable or benefits provided hereunder as
excess parachute payments pursuant to Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code"), the Company shall reimburse Executive in an
amount up to one million dollars ($1,000,000) of such excise tax;
provided, however, that, no reimbursement shall be made for any excise tax
payable with respect to the reimbursement made pursuant to this Section
5. The excise tax reimbursement made pursuant to this Section 5 shall
be subject to all applicable withholding and shall be made concurrent with or
within fifteen (15) days following the payment of any such excise tax by
Executive. Unless the Company and Executive otherwise agree in
writing, any determination required under this Section 5 shall be made in
writing by independent public accountants agreed to by the Company and Executive
(the "Accountants"), whose good faith determination shall be conclusive and
binding upon Executive and the Company for all purposes. For purposes
of making the calculations required by this Section 5, the Accountants may rely
on reasonable, good faith interpretations concerning the application of Sections
280G and 4999 of the Code. The Company and Executive shall furnish to
the Accountants such information and documents as the Accountants may reasonably
request in order to make a determination under this Section 5. The
Company shall bear all costs the Accountants may reasonably incur in connection
with any calculations contemplated by this Section 5.
6. Exclusive Remedy.
Except as expressly set forth herein, Executive shall be entitled to no
other compensation, benefits, or other payments from the Company as a result of
any termination of employment with respect to which the payments and/or benefits
described in Sections 3, 4 and, if applicable, 5 have been provided to
Executive.
7. Proprietary and Confidential
Information. Executive agrees to continue to abide by the terms and
conditions of the Company's confidentiality and/or proprietary rights agreement
between Executive and the Company.
8. Conflict of
Interest. Executive agrees that for a period of one (1) year
after termination of his/her employment with the Company, he/she will not,
directly or indirectly, solicit the services of or in any other manner persuade
employee or customers of the Company to discontinue that person's or entity's
relationship with or to the Company as an employee or customer, as the case may
be.
9. Arbitration. Any
claim, dispute or controversy arising out of this Agreement, the interpretation,
validity or enforceability of this Agreement or the alleged breach thereof shall
be submitted by the parties to binding arbitration by the American Arbitration
Association in Middlesex County in Massachusetts; provided, however, that this
arbitration provision shall not preclude the Company from seeking injunctive
relief from any court having jurisdiction with respect to any disputes or claims
relating to or arising out of the misuse or misappropriation of the Company's
trade secrets or confidential and proprietary information. Both
parties hereby waive any right to a jury trial to resolve such claims, disputes,
or controversies. All costs and expenses of arbitration or
litigation, including but not limited to attorneys fees and other costs
reasonably incurred by Executive, shall be paid by the
Company. Judgment may be entered on the award of the arbitration in
any court having jurisdiction.
10. Interpretation. Executive
and the Company agree that this Change of Control Agreement shall be interpreted
in accordance with and governed by the laws of The Commonwealth of
Massachusetts, without reference to the conflicts of law principles
thereof.
11. Conflict in
Benefits. This Agreement shall supersede all prior
arrangements, whether written or oral, and understandings regarding the subject
matter of this Agreement and shall be the exclusive agreement for the
determination of any payments and accelerated Equity Award vesting due upon a
Change of Control or Executive's termination of employment upon a Change of
Control; provided, however, that this Agreement is not intended to and shall not
affect, limit or terminate (i) any plans, programs, or arrangements of the
Company that are regularly made available to a significant number of employees
of the Company (other than those providing severance, termination or similar
payments or benefits), (ii) any agreement or arrangement with Executive that has
been reduced to writing and which does not relate to the subject matter hereof,
or (iii) any agreements or arrangements hereafter entered into by the parties in
writing, except as otherwise expressly provided therein.
12. Release of
Claims. No severance benefits shall be paid to Executive under
this Agreement unless and until Executive shall, in consideration of the payment
of such severance benefit, execute a customary release of claims in a form
reasonably satisfactory to the Company; provided however that such release shall
not apply to any right of Executive to be indemnified by the
Company. Such release shall be presented to Executive by the Company
within fifteen (15) days following a Termination Upon a Change of Control and
must be executed by Executive within forty five (45) days following such
presentation.
13. Successors and
Assigns.
13.1.
Successors of the
Company. The Company will require any successor or assign
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business
and/or assets of the Company, expressly, absolutely and unconditionally to
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 or
assignment had taken place. Failure of the Company to obtain such
agreement prior to the effectiveness of any such succession transaction shall be
a breach of this Agreement and shall entitle Executive to terminate his or her
employment with the Company within three months thereafter and to receive the
benefits provided under of this Agreement in the event of Termination Upon
Change of Control, subject to Executive's provision of notice and an opportunity
to cure in accordance with the last paragraph of Section 1.3. As used
in this Agreement, "Company" shall mean the Company as defined above and any
successor or assign to its business and/or assets as aforesaid which executes
and delivers the agreement provided for in this Section 13 or which otherwise
becomes bound by all the terms and provisions of this Agreement by operation of
law.
13.2.
Heirs of
Executive. This Agreement shall inure to the benefit of and be
enforceable by Executive's personal and legal representatives, executors,
administrators, successors, heirs, distributees, devises and
legatees.
14. Notices. For
purposes of this Agreement, notices and all other communications provided for in
the Agreement shall be in writing and shall be deemed to have been duly given
when delivered or mailed by United States registered mail, return receipt
requested, postage prepaid, as follows:
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if
to the Company:
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Sycamore
Networks, Inc.
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000
Xxxx Xxxx
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Xxxxxxxxxx,
XX 00000
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Attn: General
Counsel
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and
if to Executive at the address specified at the end of this
Agreement. Notice may also be given at such other address as either
party may have furnished to the other in writing in accordance herewith, except
that notices of change of address shall be effective only upon
receipt.
15. No Representations.
Executive acknowledges that he/she is not relying and has not relied on
any promise, representation or statement made by or on behalf of the Company
which is not set forth in this Agreement.
16. Validity. If any one
or more of the provisions (or any part thereof) of this Agreement shall be held
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions (or any part thereof) shall not in
any way be affected or impaired thereby.
17. Modification. This
Agreement may only be modified or amended by a supplemental written agreement
signed by Executive and the Company.
18. Section 409A
Compliance. It is the intention of the Company and Executive
that this Agreement not result in taxation of Executive under Section 409A of
the Code and the regulations and guidance promulgated thereunder and that the
Agreement shall be construed in accordance with such
intention. Without limiting the generality of the foregoing, the
Company and Executive agree as follows:
18.1.1 Notwithstanding
anything to the contrary herein, if Executive is a “specified employee” (within
the meaning of Section 409A(a)(2)(B)(i) of the Code) with respect to the
Company, any amounts (or benefits) otherwise payable to or in respect of
Executive under this Agreement pursuant to Executive's termination of employment
with the Company shall be delayed, to the extent required so that taxes are not
imposed on Executive pursuant to Section 409A of the Code, and shall be paid
upon the earliest date permitted by Section 409A(a)(2) of the Code.
18.1.2 For purposes of this
Agreement, Executive's employment with the Company will not be treated as
terminated unless and until such termination of employment constitutes a
"separation from service" for purposes of Section 409A of the Code.
18.1.3 To the extent
necessary to comply with the provisions of Section 409A of the Code and the
guidance issued thereunder, and without limiting the obligations of the Company
hereunder, reimbursements to or tax gross-ups payable to Executive as a result
of the operation of this Agreement shall be made not later than the end of the
calendar year following the year in which the reimbursable expense is incurred
or applicable tax is paid and shall otherwise be made in a manner that complies
with the requirements of Treasury Regulation Section
1.409A-3(i)(l)(iv).
18.1.4 In the event that
(i) Executive becomes entitled to a payment under Section 4.1.2 hereof, (ii)
there has not been a change in the ownership of the Company or a change in the
effective control of the Company (in each case for purposes of Section 409A of
the Code) and (iii) Executive is at such time party to or covered by a plan,
policy, arrangement or agreement which (1) provides severance benefits which
constitute nonqualified deferred compensation for purposes of Section 409A and
(2) provides for payout over time, rather than in a lump sum, then
notwithstanding Section 4.1.2 hereof, payments to Executive pursuant to such
section shall be paid ratably to Executive over the eighteen month period
following termination of Executive's employment in accordance with the Company's
payroll practices.
IN WITNESS WHEREOF, the parties hereto
have caused this Change of Control Agreement to be duly executed as of the day
and year first above written.
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SYCAMORE
NETWORKS, INC.
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By:
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Name:
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Title:
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Executive
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Name:
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Address:
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