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EXHIBIT 10.11
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
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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
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Section 4, the Accountants may make reasonable assumptions and approximations
concerning applicable taxes and 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,
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including, but not limited to, sections 1283, 1283.05 and 1283.1, such that the
full degree of discovery permitted under the 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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