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Exhibit 10.35
SENIOR EXECUTIVE TERMINATION BENEFITS AGREEMENT
AGREEMENT, dated as of October 4, 1989 between TELCO SYSTEMS, INC., a
Delaware corporation (the "Company"), and John A. Ruggiero (the "Executive").
RECITALS
A. The Company considers it essential to the best interests of the Company
and its stockholders that its management be encouraged to remain with the
Company and to continue to devote full attention to the Company's business in
the event that an effort is made to obtain control of the Company through a
tender offer or otherwise. In this connection, the Company recognizes that the
possibility of a change in control and the uncertainty and questions which it
may raise among management may result in the departure or distraction of
management personnel to the detriment of the Company and its stockholders.
Accordingly, the Company's board of directors (the "Board") has determined that
appropriate steps should be taken to reinforce and encourage the continued
attention and dedication of members of the Company's management to their
assigned duties without distraction in the fact of the potentially disturbing
circumstances arising from the possibility of a change in control of the
Company.
B. The Executive is a key executive of the Company, and the Company
believes that the Executive has made valuable contributions to the productivity
and profitability of the Company.
C. in the event that the Company receives any proposal from a third person
concerning a possible business combination with,
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or acquisition of equity securities of, the Company, the Board believes it
imperative that the Company-and the Board be able to rely upon the Executive to
continue in his position and that the Company be able to receive and rely upon
his advice, if so requested, as to the best interests of the Company and its
stockholders without concern that he might be distracted by the personal
uncertainties and risks created by such a proposal.
D. should the Company receive any such proposal, in addition to the
Executive's regular duties, he may be called upon to assist in the assessment of
such proposals, advise management and the "Board as to whether such proposals
would be in the best interests of the Company and its stockholders, and to take
such other actions as the Board might determine to be appropriate.
NOW, THEREFORE, to assure the Company that it will have the continued
undivided attention and services of the Executive and the availability of his
advice and counsel notwithstanding the possibility, threat or occurrence of a
bid to take over Control of the Company, and to induce the Executive to remain
in the employ of the Company, and for other good and valuable consideration, the
Company and the Executive agree as follows:
1. Services During Certain Events
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In the event that a third person begins a tender or exchange offer,
circulates a proxy to stockholders, or takes other steps seeking to effect a
Change-in Control (as hereafter defined), the Executive agrees that he will not
voluntarily leave the employ of the Company, and will render the services
contemplated in the recitals to this Agreement, until the third person has
abandoned
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or terminated his or its efforts to effect a Change in Control or until after
such a Change in Control has been effected.
2. Change in Control
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For purposes of this Agreement, a Change in Control of the Company shall be
deemed to have taken place if: (a) a third person, including a "group" as
defined in Section 13(d)(3) of the Securities Exchange Act of 1934, becomes the
beneficial owner of shares of any class of the Company's stock having 40% or
more of the total number of votes that may be cast for the election of directors
of the Company; or (b) the stockholders of the Company approve a definitive
agreement for the sale or other disposition of all or substantially all of the
assets of the Company, the merger or other business combination of the Company
with or into another corporation pursuant to which the Company will riot survive
or will-survive only as a subsidiary of another corporation, in either case with
the stockholders of the Company prior to the merger or other business
combination holding less than 50% of the voting shares of the merged or combined
companies after such merger or other business combination, or any combination of
the foregoing.
3. Circumstances Triggering Receipt of Severance Benefits
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(a) The Company shall provide the Executive with the benefits set forth in
sections 5 and 6 upon any termination, of the Executive's employment by the
Company within three years following a Change in Control for any reason except
the following
(i) Termination by reason of the Executive's death, provided the Executive
has not previously given a valid
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Notice Of Termination (as defined in Section 4) pursuant to Subsection
3(b);
(ii) Termination by reason of the Executive's disability. For the purposes
hereof, "disability" shall be defined as the Executive's inability by
reason of illness or other physical or mental disability to perform
the duties required by his employment for any consecutive period of
180 calendar days, provided that notice of any termination by the
Company because of the Executive's disability shall have been given to
the Executive prior to the full resumption by him of the performance
of such duties;
(iii) Termination for cause. For the purposes hereof, "cause" shall be
defined as the willful and continued failure of the Executive to
perform substantially his duties or action by the Executive involving
willful misfeasance, gross negligence or the commission of any
felonious action; provided, however, that termination for cause based
on the Executive's willful and continued failure to substantially
perform his duties shall not.be effective unless the Executive shall
have received written notice from the Board of such failure
(specifying in detail the facts and circumstances on which the Board
is relying) and a demand for substantial performance 30 days prior to
such termination and the Board determines that the Executive shall
have
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failed during such 30-day period to resume the diligent performance of
his,duties.
(b) The Company shall also provide the Executive with the benefits set
forth in Sections 5 and 6 upon any termination of the Executive's employment
with the Company at the option of the Executive within three years after a
Change in Control followed by the occurrence of any one of the following events:
(i) Without the express written consent of the Executive, the assignment
of the Executive to any duties substantially inconsistent with his
positions, duties, responsibilities or status with the Company
immediately prior to the Change in Control, a substantial reduction of
his duties or responsibilities or assignment of the Executive to a
business location more than 20 miles from the regular business
location of the Executive prior to the Change in Control, in each case
as determined in good faith by the Executive;
(ii) A reduction by the Company in the amount of the Executives salary as
compared to that which was paid immediately prior to the Change in
Control, or any failure to maintain or provide benefit plans covering
the Executive providing benefits at least equal to the level of
benefits paid or available to the Executive under the Company's
benefit plans immediately prior to the Change in Control;
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(iii) The failure of the Company to obtain the assumption of the obligation
to perform this Agreement by any successor as required by Section 11;
(iv) The failure by the Company or its stockholders, as the case may be, to
re-elect the Executive to a corporate office held by him immediately
prior to the Change in Control or his removal from any such office
including any seat held at such time on the Board; or
(v) Any material breach by the Company of any of the provisions of this
Agreement or any material failure by the Company to carry out any of
its obligations hereunder.
4. Notice of Termination
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Any termination of the Executive's employment with the Company by the
Company.as contemplated by Subsection 3(a) or by the Executive as contemplated
by Subsection 3(b) shall be communicated by written Notice of Termination to the
other part,. Any Notice of Termination given by the Executive pursuant to
Subsection 3(b) or given by the Company in connection with a termination as to
which the Company believes it is not obligated to provide the Executive with the
benefits set forth herein shall set forth the effective date of termination (the
"Termination Date"), the specific provision in this Agreement relied upon and,
in reasonable detail, the facts and circumstances claimed to provide a basis for
such termination.
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5. Termination Benefits
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Subject to the conditions set forth in Sections 3 and 10, the following
benefits (subject to any applicable payroll or similar taxes required to be
withheld) shall be paid in a lump sum, or in the case of fringe benefits shall
continue to be provided, to the Executive:
(a) Compensation
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The sum of (i) one and one-half times the Executive's effective annual
base salary as of the Termination Date plus (ii) an amount equal to
the highest annual. bonus paid or payable under the Company's
Management Incentive Compensation Plan, or otherwise paid or payable
to the Executive by the Company as a bonus, with respect to any
consecutive 12-month period during the -three years prior to the
Termination Date.
(b) Insurance Benefits, etc.
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The Executive's participation (including dependent coverage) in the
life, accident, disability, health and dental insurance plans, vision
care plans, and, any other fringe benefits of the Company in effect
immediately prior to the Change in Control (including, but not limited
to, tax preparation service and financial planning service) shall be
continued, or equivalent benefits provided, by the Company, at no cost
to the Executive, for a period of 18 months commencing on the
Termination Date.
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(c) Company Automobile
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The Executive shall be entitled to purchase, within 30 days after the
Termination Date, the Company-owned automobile assigned to the
Executive for a purchase price equal to the projected book value of
the vehicle as of the end of three years from the date of its
acquisition by the Company. If this option is not exercised, such
automobile shall be returned to the Company at the end of such 30-day
period.
6. Stock Options
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In the event of a Change in Control, each outstanding option held by the
Executive pursuant to any stock option plan of the Company shall, without
further action by the Company., accelerate and become immediately exercisable in
full not later than 15 days prior to the effective date of such Change in
Control, and shall remain exercisable until 15 days after such effective date,
without. regard to the terms of the plan or of any such stock option requiring
the passage of time as a condition precedent to the right to the exercise of the
option to purchase a portion of the optioned shares. other terms and conditions
of the applicable stock option agreements shall not be affected by such
acceleration.
7. "Gross-Up" for Excise or Surtax Payable
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In the event that the aggregate of the payments to be made to
the-Executive, and the compensation deemed to be received by the Executive,
pursuant to or by reason of the provisions of Sections 5 and 6 of this Agreement
give rise to any excise tax or
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surtax payable by the Executive pursuant to Sections 280G or 4999 of the
Internal Revenue Code of 1986 or any similar federal tax law, the Company shall
pay an additional amount to the Executive so that, after payment or provision
for payment of such excise tax or surtax, the net amount realized by the
Executive shall equal the aggregate amount payable or deemed to have been
received by the Executive under Sections 5 and 6 without regard to such excise
tax or surtax.
8. Effect of Subsequent Employment
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None of the benefits provided for or payable pursuant to this Agreement
shall be affected or reduced in the event that the Executive obtains other
employment after the Termination Date.
9. Continuing obligations
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In order to induce the Company to enter into this Agreement, the Executive
hereby ratifies and confirms his Invention, NonDisclosure and Non-Competition
Agreement with the Company. Without limiting the generality of the foregoing,
the Executive agrees that all documents, records, techniques, business secrets
and other information which have come into his possession from time to time
during his employment hereunder shall be deemed to be confidential and
proprietary to the Company and that. he shall retain in confidence any
confidential information known to him concerning the Company and its
subsidiaries and their respective businesses so long as such information is not
publicly disclosed.
10. Successors
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(a) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to
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all or substantially all of the business and/or assets of the Company, by
agreement in form and substance satisfactory to the Executive, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that Company would be required to perform it if no such transaction had
taken place. Failure of the Company to obtain such agreement prior to the
effective date of any such transaction shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Company in the same amount
and on the same terms as the Executive would be entitled hereunder if he were to
terminate his employment pursuant to Subsection 3(b), except that for purposes
of implementing the foregoing, the date on which any such transaction becomes
effective shall be deemed the Termination Date. As used in this Agreement,
"Company" shall mean the Company as defined herein and any successor to its
business and/or assets as aforesaid which executes and delivers the agreement
provided for in this Section 10 or which otherwise becomes bound by all the
terms and provisions of this Agreement by operation of law.
(b) This Agreement shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive should
die while any amounts are payable to him hereunder, all such amounts, unless
other-wise provided herein, shall be paid in accordance with the terms; of this
Agreement to his designee or, if there be no such designee, to his estate.
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11. Notices
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For the purposes of this Agreement; notices and all other communications
provided for herein shall be in writing anti shall be deemed to have been duly
given when delivered or mailed by United States registered or certified mail,
return receipt: requested, postage prepaid, addressed as follows:
If-to the Executive: John A. Ruggiero
13 Commonwealth Avenue
Apt. 4F
Boston, MA 02116
If to the Company: Telco Systems, Inc.
63 Nahatan Street
Norwood, MA 02062
Attention: Secretary
or to such- other address as either party may have furnished to the other in
accordance herewith, except that notices of change of address shall be effective
only upon receipt.
12. Governing Law
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The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Delaware.
13. Arbitration
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Any controversy or claim arising out of or relating to this Agreement or
the breach thereof shall be settled by arbitration to be conducted in Boston,
Massachusetts in accordance with the Commercial Arbitration Rules of the
American Arbitration Association, and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. The
arbitrators shall award costs and reasonable fees of counsel to
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the Executive if the arbitrators consider the,. Executive to be the prevailing
party in any such arbitration proceeding.
14. Miscellaneous
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No provisions of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing signed by
the Executive and on behalf of the Company. No waiver by either party hereto of,
or compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of the same or any other provisions
or conditions at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not set forth expressly in this
Agreement.
15. Separability
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The invalidity or unenforceability of any provisions of this Agreement
shall not affect the validity or enforceability of any other provisions of this
Agreement, all of which shall remain in full force and effect.
16. Non-Assignability
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This Agreement is personal in nature and neither of the parties hereto
shall, without the consent of the other, assign or transfer this Agreement or
any rights or obligations hereunder, except as provided-in Section 10. Without
limiting the foregoing, the Executive's right to receive payments hereunder
shall not be assignable or transferable, whether by pledge, creation of a
security interest or otherwise, other than to a person or per-
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sons designated in writing by the Executive or-a transfer by his will or by the
laws of descent or distribution, and in the event of any attempted assignment or
transfer contrary.to this Section the Company shall have no liability to pay any
amount so attempted to be assigned or transferred.
17. Termination
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The Company may terminate this Agreement at any time by 30 days' written
notice of such termination given to the Executive; EXCEPT THAT such termination
shall not be made, and if made shall have-no effect, (a) within three years
after the Change in Control in question or (b) during any period of time when
the Company has knowledge that any third person has taken steps reasonably
calculated to effect a Change in Control until, in the opinion of the Board, the
third person has abandoned or terminated his efforts to effect a Change in
Control. Any decision by the Board that the third person has abandoned or
terminated his efforts to effect a change in control shall be conclusive and
binding on the Executive.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered as of the day and year first above set forth.
TELCO SYSTEMS, INC.
By /s/ Paul D. Lazay
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President
/s/ John M. Ruggiero
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John M. Ruggiero
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