Exhibit 10.10
CHANGE IN CONTROL AGREEMENT
This Change in Control Agreement (the "Agreement") is made and entered
into effective as of May 6, 1998, by and between Netcom Systems, Inc., a
California corporation (the "Company") and the employee of the Company whose
name appears on the last page hereof (the "Employee").
R E C I T A L S
A. The Employee is and has been employed by the Company.
B. The Company and the Employee desire to enter into this Agreement to
provide additional financial security and benefits to the Employee and to
encourage the Employee to continue his employment with the Company.
C. Certain capitalized terms used in the Agreement are defined in
Section 3 below.
A G R E E M E N T
In consideration of the mutual covenants herein contained, and in
consideration of the continuing employment of the Employee by the Company,
the parties agree as follows:
1. EMPLOYMENT RELATIONSHIP. The Company and the Employee acknowledge
that the Employee's employment is and shall continue to be at-will, as
defined under applicable law. If the Employee's employment terminates for
any reason, the Employee shall not be entitled to any payments, benefits,
damages, awards or compensation other than as provided by this Agreement, or
as may otherwise be available in accordance with the Company's established
employee plans and policies at the time of termination.
2. SEVERANCE BENEFITS.
(a) TERMINATION AS PART OF OR FOLLOWING A CHANGE OF CONTROL.
Subject to Sections 4 and 5 below, if the Employee's employment with the
Company terminates at any time within twenty-four months after a Change of
Control, then the Employee shall be entitled to receive severance benefits as
follows:
(i) INVOLUNTARY TERMINATION. If the Employee's employment
terminates as a result of Involuntary Termination other than for Cause, the
Employee shall be entitled to receive a severance payment equal to one year
of the Employee's base compensation for the Company's fiscal year then in
effect plus Employee's bonus calculated at one hundred percent of target for
the Company's fiscal year then in effect. Any severance payments to which
the Employee is entitled pursuant to this Section 2(a)(i) shall be paid to
the Employee (or to the Employee's estate or beneficiary in the event of the
Employee's death) in a lump sum on or prior to the Employee's Termination
Date. In addition, if the
Employee's employment terminates as a result of Involuntary Termination other
than for Cause, then for the one year period commencing on the Employee's
Termination Date, Employee shall continue to participate in the Company's
health and dental insurance benefit plans in accordance with the rules
established for individual participation in such plans, as such rules may be
amended from time to time.
(ii) VOLUNTARY RESIGNATION; TERMINATION FOR CAUSE. If the
Employee voluntarily resigns from the Company (other than as an Involuntary
Termination), or if the Company terminates the Employee's employment for
Cause, then the Employee shall not be entitled to receive severance or other
benefits except for those (if any) as may then be established under the
Company's then existing severance and benefits plans and policies at the time
of such resignation or termination.
(iii) DISABILITY; DEATH. If the Company terminates the
Employee's employment as a result of the Employee's Disability, or if the
Employee's employment terminates due to the death of the Employee, then the
Employee shall not be entitled to receive severance or other benefits except
for those (if any) as may then be established under the Company's then
existing severance and benefits plans and policies at the time of such
Disability or death.
(b) OPTIONS. Subject to Sections 4 and 5 below, in the event
Employee becomes entitled to severance benefits pursuant to Section 2(a)(i)
above, then the unvested portion of any stock option(s) held by the Employee
granted by the Company (or any successor in interest thereto to the extent
that such options were granted in exchange for options granted by the
Company), shall, as of Employee's Termination Date, immediately vest and
become exercisable in full, and the Employee shall have the right to exercise
such additional vested portion of such stock option(s) at such time.
3. DEFINITION OF TERMS. The following terms referred to in this
Agreement shall have the following meanings:
(a) CAUSE. "Cause" shall mean (i) any act of personal dishonesty
taken by the Employee in connection with his responsibilities as an employee
and intended to result in substantial personal enrichment of the Employee,
(ii) conviction of a felony that is demonstrably injurious to the Company,
(iii) a willful act by the Employee which constitutes gross misconduct and
which is demonstrably injurious to the Company, and (iv) continued violations
by the Employee of the Employee's obligations as an employee of the Company
that are demonstrably willful and deliberate on the Employee's part after
there has been delivered to the Employee a written demand for performance
from the Company which describes the basis for the Company's belief that the
Employee has not substantially performed his duties, and Employee has been
given fourteen (14) days to perform after receipt of such written demand.
(b) CHANGE OF CONTROL. "Change of Control" shall mean the
occurrence of any of the following events:
(i) The acquisition by any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act) (other than the Company or a
person that directly or indirectly controls,
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is controlled by, or is under common control with, the Company) of the
"beneficial ownership" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing fifty percent (50%) or
more of the total voting power represented by the Company's then outstanding
voting securities; or
(ii) A change in the composition of the Board of Directors of
the Company (the "Board") as a result of which fewer than a majority of the
directors are Incumbent Directors. "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; or
(iii) A merger or consolidation of the Company with any
other corporation, other than a merger or consolidation which would result in
the voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least fifty
percent (50%) of the total voting power represented by the voting securities
of the Company or such surviving entity outstanding immediately after such
merger or consolidation, or the approval by the stockholders of the Company
of a plan of complete liquidation of the Company or of an agreement for the
sale or disposition by the Company of all or substantially all the Company's
assets.
(c) DISABILITY. "Disability" shall mean that the Employee has been
unable to substantially perform his duties under this Agreement as the result
of his incapacity due to physical or mental illness for at least 26 weeks,
and such incapacity is determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the Employee or the
Employee's legal representative (such Agreement as to acceptability not to be
unreasonably withheld).
(d) EXCHANGE ACT. "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended.
(e) INVOLUNTARY TERMINATION. "Involuntary Termination" shall mean (i)
without the Employee's express written consent, the significant reduction of
the Employee's duties, authority or responsibilities relative to the
Employee's duties, authority and responsibilities as in effect immediately
prior to such reduction or the assignment to the Employee of such reduced
duties, authority or responsibilities; (ii) without the Employee's express
written consent, a substantial reduction, without good business reasons, of
the facilities and perquisites (including office space and location)
available to the Employee immediately prior to such reduction; (iii) without
the Employee's express written consent, a reduction by the Company in the
base compensation of the Employee as in effect immediately prior to such
reduction; (iv) a material reduction by the Company in the kind or level of
employee benefits to which the Employee is entitled immediately prior to such
reduction with the result that the Employee's overall benefits package is
significantly reduced; (v) the relocation of the Employee to a facility or a
location more than 30 miles from the Employee's then present location,
without the Employee's express written consent; (vi) any purported
termination of the Employee by the Company which is not effected for
Disability or for Cause, or any purported termination for which the grounds
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relied upon are not valid; or (vii) the failure of the Company to obtain the
assumption of this agreement by any successors contemplated in Section 6
below.
(f) TERMINATION DATE. "Termination Date" shall mean (i) if the
Employee's employment is terminated by the Company for Disability, thirty
(30) days after notice of termination is given to the Employee (provided that
the Employee shall not have returned to the performance of the Employee's
duties on a full-time basis during such thirty (30)-day period), (ii) if the
Employee's employment is terminated by the Company for any other reason, the
date on which the Company delivers notice of termination to the Company or
such later date, not to exceed ninety (90) days, specified in the notice of
termination, or (iii) if the Agreement is terminated by the Employee, the
date on which the Employee delivers notice of termination to the Company.
4. LIMITATION ON PAYMENTS.
(a) In the event that the severance and other benefits provided
for in this Agreement or otherwise payable to the Employee (i) constitute
"parachute payments" within the meaning of Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code") and (ii) but for this Section 4
would be subject to the excise tax imposed by Section 4999 of the Code, then
the Employee's severance benefits under Section 2 shall be payable either (i)
in full, or (ii) as to such lesser amount which would result in no portion of
such severance benefits being subject to excise tax under Section 4999 of the
Code, whichever of the foregoing amounts, taking into account the applicable
federal, state and local income taxes and the excise tax imposed by Section
4999, results in the receipt by the Employee on an after-tax basis, of the
greatest amount of severance benefits under this Agreement, notwithstanding
that all or some portion of such severance benefits may be taxable under
Section 4999 of the Code.
(b) If a reduction in the payments and benefits that would
otherwise be paid or provided to the Employee under the terms of this
Agreement is necessary to comply with the provisions of Section 4(a), the
Employee shall be entitled to select which payments or benefits will be
reduced and the manner and method of any such reduction of such payments or
benefits (including but not limited to the number of options that would vest
under Section 2(b)) subject to reasonable limitations (including, for
example, express provisions under the Company's benefit plans) (so long as
the requirements of Section 4(a) are met). Within fifteen (15) days after
the amount of any required reduction in payments and benefits is finally
determined in accordance with the provisions of Section 4(c), the Employee
shall notify the Company in writing regarding which payments or benefits are
to be reduced. If no notification is given by the Employee, the Company will
determine which amounts to reduce. If, as a result of any reduction required
by Section 4(a), amounts previously paid to the Employee exceed the amount to
which the Employee is entitled, the Employee will promptly return the excess
amount to the Company.
(c) Unless the Company and the Employee otherwise agree in
writing, any determination required under this Section 4 shall be made in
writing by the Company's independent public accountants (the "Accountants"),
whose determination shall be conclusive and binding upon the Employee and the
Company for all purposes. For purposes of making the calculations required
by this Section 4, the Accountants may make reasonable assumptions and
approximations concerning applicable taxes and
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may rely on reasonable, good faith interpretations concerning the application
of Sections 280G and 4999 of the Code. The Company and the Employee shall
furnish to the Accountants such information and documents as the Accountants
may reasonably request in order to make a determination under this Section.
The Company shall bear all costs the Accountants may reasonably incur in
connection with any calculations contemplated by this Section 4.
5. CERTAIN BUSINESS COMBINATIONS. In the event it is determined by
the Board, upon receipt of a written opinion of the Company's independent
public accountants, that the enforcement of any Section or subsection of this
Agreement, including, but not limited to, Section 2(b) hereof, which allows
for the acceleration of vesting of options to purchase shares of the
Company's common stock upon a termination in connection with a Change of
Control, would preclude accounting for any proposed business combination of
the Company involving a Change of Control as a pooling of interests, and the
Board otherwise desires to approve such a proposed business transaction which
requires as a condition to the closing of such transaction that it be
accounted for as a pooling of interests, then any such Section of this
Agreement shall be null and void, but only if the absence of enforcement of
such Section would preserve the pooling treatment. For purposes of this
Section 5, the Board's determination shall require the unanimous approval of
the disinterested Board members.
6. SUCCESSORS.
(a) COMPANY'S SUCCESSORS. Any successor to the Company (whether
direct or indirect and whether by purchase, lease, merger, consolidation,
liquidation or otherwise) to all or substantially all of the Company's
business and assets shall assume the obligations under this Agreement and
agree expressly to perform the obligations under this Agreement in the same
manner and to the same extent as the Company would be required to perform
such obligations in the absence of a succession. For all purposes under this
Agreement, the term "Company" shall include any successor to the Company's
business and assets which executes and delivers the assumption agreement
described in this Section 6(a) or which becomes bound by the terms of this
Agreement by operation of law.
(b) EMPLOYEE'S SUCCESSORS. The terms of this Agreement and all
rights of the Employee hereunder shall inure to the benefit of, and be
enforceable by, the Employee's personal or legal representatives, executors,
administrators, successors, heirs, devisees and legatees.
7. NOTICE.
(a) GENERAL. Notices and all other communications contemplated by
this Agreement shall be in writing and shall be deemed to have been duly
given when personally delivered or when mailed by U.S. registered or
certified mail, return receipt requested and postage prepaid. In the case of
the Employee, mailed notices shall be addressed to him at the home address
which he most recently communicated to the Company in writing. In the case
of the Company, mailed notices shall be addressed to its corporate
headquarters, and all notices shall be directed to the attention of its Chief
Financial Officer.
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(b) NOTICE OF TERMINATION. Any termination by the Company for
Cause or by the Employee as a result of an Involuntary Termination shall be
communicated by a notice of termination to the other party hereto given in
accordance with Section 7(a) of this Agreement. Such notice shall indicate
the specific termination provision in this Agreement relied upon, shall set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination under the provision so indicated, and shall specify the
Termination Date (which shall be not more than ninety (90) days after the
giving of such notice). The failure by the Employee to include in the notice
any fact or circumstance which contributes to a showing of Involuntary
Termination shall not waive any right of the Employee hereunder or preclude
the Employee from asserting such fact or circumstance in enforcing his rights
hereunder.
8. MISCELLANEOUS PROVISIONS.
(a) NO DUTY TO MITIGATE. The Employee shall not be required to
mitigate the amount of any payment contemplated by this Agreement (whether by
seeking new employment or in any other manner), nor shall any such payment be
reduced by any earnings that the Employee may receive from any other source.
(b) WAIVER. No provision of this Agreement shall be modified,
waived or discharged unless the modification, waiver or discharge is agreed
to in writing and signed by the party hereto whose interests are adversely
affected thereby (provided that Employee may not sign on behalf of the
Company for such purpose). No waiver by either party of any breach of, or of
compliance with, any condition or provision of this Agreement by the other
party shall be considered a waiver of any other condition or provision or of
the same condition or provision at another time.
(c) WHOLE AGREEMENT. No agreements, representations or
understandings (whether oral or written and whether express or implied) which
are not expressly set forth in this Agreement have been made or entered into
by either party with respect to the subject matter hereof. This Agreement
shall replace and supersede any prior agreement between the parties hereto
relating to the accrual of any benefits to the Employee in connection with a
change in control or organic change to the Company (other than stock option
agreements, if any) and all such agreements shall henceforth be void and of
no further force and effect.
(d) CHOICE OF LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
California.
(e) SEVERABILITY. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full
force and effect.
(f) ARBITRATION. Any dispute or controversy arising out of,
relating to or in connection with this Agreement shall be settled exclusively
by binding arbitration in San Jose, California, in accordance with the
California Code of Civil Procedure section 1280 et seq., as amended,
including, but not limited to, sections 1283, 1283.05 and 1283.1, such that
the full degree of discovery permitted under the
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aforementioned statutes will be allowed in any dispute hereunder. Judgment
may be entered on the arbitrator's award in any court having jurisdiction.
The prevailing party shall be awarded its counsel fees and expenses,
including costs of arbitration. Punitive damages shall not be awarded.
(g) NO ASSIGNMENT OF BENEFITS. The rights of any person to
payments or benefits under this Agreement shall not be made subject to option
or assignment, either by voluntary or involuntary assignment or by operation
of law, including (without limitation) bankruptcy, garnishment, attachment or
other creditor's process, and any action in violation of this Section 8(g)
shall be void.
(h) EMPLOYMENT TAXES. All payments made pursuant to this
Agreement will be subject to withholding of applicable income and employment
taxes.
(i) ASSIGNMENT BY COMPANY. The Company may assign its rights
under this Agreement to an affiliate, and an affiliate may assign its rights
under this Agreement to another affiliate of the Company or to the Company;
provided, however, that no assignment shall be made if the net worth of the
assignee is less than the net worth of the Company at the time of assignment.
In the case of any such assignment, the term "Company" when used in a
section of this Agreement shall mean the corporation that actually employs
the Employee.
(j) COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.
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IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of the Company by its duly authorized officer, as of the day and
year first above written.
COMPANY: NETCOM SYSTEMS, INC.
By:
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Title:
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EMPLOYEE: -------------------------------
Name:
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