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EXHIBIT 10.8
ELASTIC NETWORKS INC.
COMPENSATION CONTINUATION PLAN
This Elastic Networks Inc. Compensation Continuation Plan ("Plan") is
hereby effective as of the _____ day of May, 2000, by Elastic Networks Inc.,
a Delaware corporation ("Employer" or the "Company"), for the benefit of the
eligible employees described herein.
WITNESSETH:
WHEREAS, the Employees (as defined below) are currently employed by
Employer; and
WHEREAS, Employer desires to establish the Plan to provide security to the
Employees in connection with their employment with the Employer in the event of
a Change in Control (as defined below).
NOW, THEREFORE, Employer hereby establishes the Plan as set forth below.
1. DEFINITIONS.
For purposes of this Plan:
(a) "Affiliate" shall have the meaning set forth in Rule 12b-2 under the
Securities Exchange Act of 1934, as amended.
(b) "Beneficiary" shall mean the person or entity designated by an
Employee, by written instrument delivered to Employer, to receive the
benefits payable under this Plan in the event of Employee's death. If
an Employee fails to designate a Beneficiary, or if no designated
Beneficiary survives the Employee, such death benefits shall be paid:
(1) to Employee's surviving spouse; or
(2) if there is no surviving spouse, to Employee's living descendants
per stirpes; or
(3) if there is neither a surviving spouse nor living descendants, to
Employee's estate.
(c) "Cause" shall mean (i) the Employee's material breach of any provision
of the Employee's employment agreement or terms of employment; (ii) a
good faith finding by the Board of Directors of the Employee's
dishonesty, fraud, malfeasance, gross negligence or willful misconduct
with respect to the Employer or its Affiliates; (iii) the Employee's
continued failure to satisfactorily perform his duties with the
Employer, to follow the lawful direction (consistent with the
Employee's duties) of the Board of Directors or any Person to whom the
Employee reports or to follow the established and lawful policies,
procedures and rules of the Employer (other than any such failure
resulting from incapacity due to mental or physical illness or injury
that is certified by a physician to the satisfactory of the Employer);
or (iv) Employee's indictment for (or similar finding of probable
cause with respect to the Employee's commission of) or conviction of,
or the Employee's entry of a pleading of guilty or nolo contendre
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to, a crime involving moral turpitude or a felony (other than an
offense based solely on a traffic violation). With respect to clauses
(ii) and (iii) above, prior terminating the Employee for Cause, the
Board of Directors shall deliver a written notice to the Employee
stating in reasonable detail the facts and circumstances regarding the
Employee's offense or failure and provide the Employee with sixty (60)
days to correct such offense or failure; provided, however, that no
such notice shall be required, and the Board of Directors may
immediately terminate the Employee for Cause, if the Board of
Directors in good faith determines that the Employee's offense or
failure is or is likely to be immediately or materially injurious to
the Employer or its Affiliates or the Employee has previously received
a written notice of an offense or failure under clause (ii) or (iii)
above in the twelve (12) month period immediately preceding the
occurrence of the offense or failure at issue. The Employee shall not
participate in the Board of Director's determinations regarding Cause
with respect to the Employee even if the Employee is a member of the
Board of Director's. The Employee shall be considered to have been
discharged for Cause if the Company determines, within 30 days after
the Employee's resignation, that discharge for Cause was warranted, as
determined by the Company, which determination shall be conclusive.
(d) A "Change in Control" shall be deemed to take place on the occurrence
of any of the following events after the adoption of the Plan:
(1) any merger or consolidation which results in the voting
securities of the Company outstanding immediately prior thereto
representing immediately thereafter (either by remaining
outstanding or by being converted into voting securities of the
surviving or acquiring entity) less than 50% of the combined
voting power of the voting securities of the Company or such
surviving or acquiring entity outstanding immediately after such
merger or consolidation;
(2) any sale of all or substantially all of the assets of the
Company; or
(3) the complete liquidation of the Company.
Notwithstanding the foregoing, the election of any holder of any
Purchaser (as defined in the Right of First Offer and Co-Sale
Agreement, dated as of May 1999 and as amended from time to time, by
and among the Company, Nortel Networks Inc. ("Nortel Networks") and
the persons and entities listed on Exhibit A thereto (the "Right of
First Offer Agreement") to sell is Shares (as defined in the Right of
First Offer Agreement) to Nortel Networks pursuant to Section 6 of the
Right of First Offer Agreement, and the purchase of any such Shares by
Nortel Networks, shall not be deemed to be a Change in Control.
(e) "Disability" shall mean an individual is unable to engage in any
substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death
or which has lasted or can be expected to last for a continuous period
of not less than 12 months. An individual shall not be considered to
be permanently and totally disabled unless he furnishes proof to the
Company.
(f) "Employee" shall mean a common-law employee (whether or not an
officer) of Employer or an Affiliate who is compensated on a salaried
basis and whom
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the Board of Directors of the Employer selects to participate in and
be covered under the Plan.
(g) "Good Reason" shall mean a reduction of 20% or more in the annual
Total Target Compensation for which the Employee is eligible or, with
respect to the Employees who are employed in the position of Vice
President or higher, assignment to job responsibilities which are not
substantially equivalent in the aggregate tot those responsibilities
to which they were assigned prior to the Change in Control.
(h) "Notice Period" shall mean the ninety (90) calendar day period
immediately following the date on which the Employer receives the
Employee's written notice of his intent to terminate employment with
the Employer.
(i) "Retirement Plan" shall mean any qualified or supplemental employee
pension benefit plan, as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"),
currently made available by Employer or an Affiliate in which Employee
participates.
(j) "Severance Period" shall mean the period beginning on the date an
Employee's employment with the Employer or an Affiliate terminates
under the circumstances described in Section 2(a) and ending on the
date 12 months thereafter.
(k) "Total Target Compensation" shall mean annual base salary plus target
short term incentive compensation payable at 100% Employee performance
level whether sales incentive, bonus or otherwise.
(l) "Welfare Plan" shall mean any health and dental plan, disability plan,
survivor income plan, life insurance plan or similar plan, as defined
in Section 3(1) of ERISA, currently made available by Employer or an
Affiliate in which an Employee participates.
2. BENEFITS UPON TERMINATION OF EMPLOYMENT.
(a) The following provisions will apply if and only if, at any time within
one year after a Change in Control occurs, (i) the employment of an
Employee with Employer is terminated by Employer for any reason other
than Cause, Disability or death, or (ii) the Employee voluntarily
terminates his employment with Employer for Good Reason.
(1) Employer shall continue to pay Employee during the Severance
Period his normal Total Target Compensation on a monthly basis in
arrears consistent with normal payroll practices and subject to
all applicable withholdings and employment taxes.
(2) Employer shall pay or reimburse Employee during the Severance
Period for the monthly COBRA premiums for healthcare and dental
continuation coverage for Employee, Employee's spouse and
Employee's dependents to the extent Employee, Employee's spouse
or Employee's dependents, as applicable, are entitled to COBRA
continuation coverage under the health and dental plan of the
Employer as then in effect, grossed-up, at the maximum federal,
state and local tax rates to the extent such payment or
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reimbursement is includable in the Employee's income for federal,
state and local income tax purposes.
(3) The Employee or his Beneficiary, or any other person
entitled to receive benefits with respect to the Employee
under any Retirement Plan, Welfare Plan, or other plan or
program maintained by Employer in which Employee
participates at the date of termination of employment, shall
receive any and all benefits accrued under any such
Retirement Plan, Welfare Plan or other plan or program to
the date of termination of employment, the amount, form and
time of payment of such benefits to be determined by the
terms of such Retirement Plan, Welfare Plan, or other plan
or program.
(b) If the employment of an Employee with Employer and all Affiliates is
terminated by Employer or such Affiliates or by the Employee other
than under the circumstances set forth in Section 2(a), the Employee's
compensation shall be paid through the date of his termination, and
Employer shall have no further obligation with respect to the Employee
under this Plan. Such termination shall have no effect upon an
Employee's other rights, including but not limited to rights under any
Retirement Plan, Welfare Plan or other plan or program in which
Employee participates.
(c) Notwithstanding anything herein to the contrary, in the event that, at
any time within one year after a Change in Control occurs, Employer or
an Affiliate terminates the employment of an Employee for Cause,
Employer or such Affiliate shall give the Employee at least 30 days'
prior written notice specifying in detail the reason or reasons for
the Employee's termination.
(d) This Section 2 shall have no effect, and Employer shall have no
obligations hereunder with respect to, an Employee whose employment
terminates for any reason at any time other than within one year after
a Change in Control under the circumstances described above.
(e) The Employer that employs the Employee on his last day of employment
will fund the payments to be made under the Plan to such Employee from
its general assets.
3. RELEASE AND SETOFF.
Notwithstanding any other provision of this Plan, payments shall be made
under the Plan to any Employee or his Beneficiary only after the Employee
executes a release and waiver containing such terms and conditions as the
Employer and its Affiliates may reasonably require, including non-solicitation,
non-competition and confidentiality provisions. The Employer and its Affiliates
may reduce and set-off any payments to or with respect to an Employee pursuant
to this Plan by any amount the Employee or his Beneficiary may owe to Employer
or any Affiliate.
4. DEATH.
If an Employee's employment with Employer and all Affiliates terminates
under circumstances described in Section 2(a), then upon the Employee's
subsequent death, all unpaid amounts payable to the Employee under Section
2(a)(1) shall be paid to his Beneficiary. Any
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death benefits owing under Section 2(a)(2) shall be paid as specified by the
applicable Retirement Plan, Welfare Plan or other plan or program.
5. CLAIM FOR BENEFITS.
(a) In the event that an Employee desires to make a claim with respect to
any benefits provided hereunder, the Employee shall submit such claim
to the officer of the Employer that the Employer designates to receive
claims. Any claim with respect to any of the benefits provided under
the Plan shall be made in writing within 30 days of the event that the
Employee is asserting constitutes an entitlement to such benefits.
Failure by the Employee to submit his claim within the 30-day period
shall bar the Employee from any claim for benefits under the Plan as a
result of the occurrence of such event.
(b) In the event that a claim of an Employee is wholly or partially
denied, the Employee or his duly authorized representative may appeal
the denial of the claim to the Board of Directors of the Employer or
to any committee that such a Board of Directors designates at any time
within 90 days after the Employee receives written notice from the
Employer of the denial of the claim. In connection therewith, the
Employee or his duly authorized representative may request a review of
the denied claim, may review pertinent documents, and may submit
issues and comments in writing. Upon receipt of an appeal, the Board
of Directors or such designated committee shall make a decision with
respect to the appeal and, not later than 60 days after receipt of
such request for review, shall furnish the Employee with the decision
on review in writing, including the specific reasons for the decision
written in a manner calculated to be understood by the Employee, as
well as specific references to the pertinent provisions of the Plan
upon which the decision is based.
6. ADMINISTRATION OF THE PLAN.
The Employer shall interpret and administer the Plan. The Employer shall
establish rules for the administration of the Plan. The Employer shall have the
discretionary authority to construe the terms of the Plan and shall determine
all questions arising in its administration, interpretation and application,
including those concerning eligibility for benefits. All determinations of the
Employer shall be final and binding on all Employees and Beneficiaries. The
Employer may appoint a committee or an agent or other representative to act on
its behalf and may delegate to such committee or agent or representative any of
its powers hereunder. Any action that such committee or agent or representative
takes shall be considered to be the action of the Employer, when the committee
or agent or representative is acting within the scope of the authority that the
Employer delegated to it, and the Employer shall be responsible for all such
actions.
7. EMPLOYEE ASSIGNMENT.
No interest of any Employee, his spouse or any Beneficiary, under this
Plan, or any right to receive any payment or distribution hereunder, shall be
subject in any manner to sale, transfer, assignment, pledge, attachment,
garnishment, or other alienation or encumbrance of any kind, nor may such
interest or right to receive a payment or distribution be taken, voluntarily or
involuntarily, for the satisfaction of the obligations or debts of, or other
claims against, the
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Employee or his spouse or Beneficiary, including claims for
alimony, support, separate maintenance, and claims in bankruptcy proceedings.
8. BENEFITS UNFUNDED.
All rights under this Plan of the Employees and their spouses and
Beneficiaries, shall at all times be entirely unfunded, and no provision shall
at any time be made with respect to segregating any assets of Employer or any
Affiliate for payment of any amounts due hereunder. The Employees, their spouses
and Beneficiaries shall have only the rights, if any, of general unsecured
creditors of Employer and its affiliates and associates.
9. APPLICABLE LAW.
This Plan shall be construed and interpreted pursuant to the laws of the
State of Delaware.
10. NO EMPLOYMENT CONTRACT.
Nothing contained in this Plan shall be construed to be an employment
contract between an Employee and Employer or any Affiliate.
11. SEVERABILITY.
In the event any provision of this Plan is held illegal or invalid, the
remaining provisions of this Plan shall not be affected thereby.
12. SUCCESSORS.
The Plan shall be binding upon and inure to the benefit of Employer, its
Affiliates, the Employees and their respective heirs, representatives and
successors.
13. AMENDMENT AND TERMINATION.
Employer shall have the right to amend the Plan from time to time and may
terminate the Plan at any time; provided that after a Change in Control occurs
(i) no amendment may be made that diminishes any Employee's rights following
such Change in Control and (ii) the Plan may not be terminated.
14. NOTICE.
Notices under this Plan shall be in writing and sent by registered mail,
return receipt requested, to the following addresses or to such other address as
the party being notified may have previously furnished to the other party by
written notice:
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If to Employer:
Elastic Networks Inc.
6120 Windward Parkway
Suite 100
Alpharetta, Georgia 30005
Attention: Mr. Kevin D. Elop
If to an Employee:
The address last indicated on the records of Employer.
15. EXCISE TAXES.
Despite any other provisions of this Plan to the contrary, if the receipt
of any payments (including accelerated vesting) under this Plan would subject an
Employee to tax under Code Section 4999, the Employer may determine whether some
amount of payments (including accelerated vesting) would meet the definition of
a "Reduced Amount." If the Employer determines that there is a Reduced Amount,
the total payments to the Employee hereunder must be reduced to such Reduced
Amount, but not below zero. If the Employer determines that the payments must be
reduced to the Reduced Amount, the Employer must promptly notify the Employee of
that determination, with a copy of the detailed calculations by the Employer.
All determinations of the Employer under this Section 15 are binding upon the
Employee. It is the intention of the Employer and the Employee to reduce the
payments under this Plan only if the aggregate Net After Tax Receipts to the
Employee would thereby be increased. If as result of the uncertainty in the
application of Code Section 4999 at the time of the initial determination by the
Employer under this Section 15, however, it is possible that amounts will have
been paid under the Plan to or for the benefit of a Employee which should not
have been so paid ("Overpayment") or that additional amounts which will not have
been paid under the Plan to or for the benefit of a Employee could have been so
paid ("Underpayment") - in each case, consistent with the calculation of the
Reduced Amount. If the Employer, based either upon the assertion of a deficiency
by the Internal Revenue Service against the Employer or the Employee which the
Employer believes has a high probability of success or controlling precedent or
other substantial authority, determines that an Overpayment has been made, any
such Overpayment must be treated for all purposes as a loan which the Employee
must repay to the Employer together with interest at the applicable federal rate
under Code Section 7872(f)(2); provided, however, that no such loan may be
deemed to have been made and no amount shall be payable by Employee to the
Employer if and to the extent such deemed loan and payment would not either
reduce the amount on which the Employee is subject to tax under Code Section 1,
3101 or 4999 or generate a refund of such taxes. If the Employer, based upon
controlling precedent or other substantial authority, determines that an
Underpayment has occurred, the Employer must promptly notify the Employee of the
amount of the Underpayment, which then shall be paid to the Employee. For
purposes of this section, (i) "Net After Tax Receipt" means the Present Value of
a payment under this Plan net of all taxes imposed on Employee with respect
thereto under Code Sections 1, 3101 and 4999, determined by applying the highest
marginal rate under Code section 1 which applied to the Employee's taxable
income for the immediately preceding taxable year; (ii) "Present Value" means
the value determined in accordance with Code Section 280G(d)(4); and (iii)
"Reduced Amount" means the smallest aggregate amount of all payments under this
Plan which (a) is less than the sum of all payments under this Plan and (b)
results in aggregate Net After Tax Receipts which are equal to or greater than
the Net After Tax Receipts which would result if the aggregate payments under
this Plan were any other amount less than the sum of all payments to be made
under this Plan.
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16. MISCELLANEOUS.
(a) The failure of the Employer to enforce any provisions of the Plan
shall in no way be construed to be a waiver of those provisions, nor
in any way effect the validity of the Plan or any part thereof, or the
right of the Employer thereafter to enforce such provision.
(b) The benefits provided under this Plan shall be reduced or offset by
any other payments or benefits that the Employee may receive from the
Employer or any Affiliate pursuant to any agreement between the
Employee and the Employer or an Affiliate, or any other compensation
plan or arrangement, unless such agreement otherwise provides. The
benefits that this Plan provides shall not be reduced or offset by any
other payments or benefits that the Employee may receive from any
other third party or other employer after the termination of the
Employee's employment with the Employer or any Affiliate.
(c) Whenever any benefits become payable under the Plan, the Employer and
its Affiliates shall have the right to withhold such amounts as are
sufficient to satisfy any applicable federal, state or local
withholding, tax or similar requirements.
IN WITNESS WHEREOF, Employer has caused this instrument to be executed in
its name by its duly authorized officer, all as of the day and year first above
written.
ELASTIC NETWORKS INC.
By:
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Title:
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ELASTIC NETWORKS INC.
COMPENSATION CONTINUATION PLAN
SUMMARY PLAN DESCRIPTION
NAME OF PLAN:
Elastic Networks Inc. Compensation Continuation Plan
NAME, ADDRESS, AND TELEPHONE NUMBER OF SPONSOR AND PLAN
ADMINISTRATOR:
Elastic Networks Inc. ("Employer")
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( ) -
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The Employer administers the Plan.
EMPLOYER IDENTIFICATION NUMBER:
-
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PLAN NUMBER ASSIGNED TO THIS PLAN:
50
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EFFECTIVE DATE:
, 2000
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PLAN YEAR:
Calendar year
FISCAL YEAR FOR MAINTAINING PLAN RECORDS:
Calendar Year
TYPE OF WELFARE PLAN:
The Plan is a severance pay plan that provides benefits to certain employees in
the event of termination of their employment due to certain specified reasons.
TYPE OF ADMINISTRATION OF THE PLAN:
The Employer administers the Plan as described in Section 6.
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PROVISIONS FOR ELIGIBILITY REQUIREMENTS:
The Plan generally describes eligibility requirements in Section 2.
DESCRIPTION OF PLAN BENEFITS:
The Plan generally describes conditions for payment of benefits and the amount
of such benefits in Section 2.
SOURCES OF CONTRIBUTIONS TO THE PLAN AND FUNDING MEDIUM:
The general assets of the Employer or the Affiliate that employs Employee shall
fund the severance pay from the Plan.
PROCEDURES FOR PRESENTING CLAIMS AND REDRESS OF DENIED CLAIMS:
Section 5 provides detailed instructions for filing a claim and redress of a
denied claim.
AGENT FOR SERVICE OF PROCESS:
Elastic Networks Inc.
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Attn.:
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In addition to the agent listed above, service of process may be made upon the
Employer itself.
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YOUR RIGHTS UNDER ERISA
The following statement is required by law to be included in this Summary Plan
Description:
As a participant in the Elastic Networks Inc. Compensation Continuation Plan
(the "Plan") you are entitled to certain rights and protections under the
Employee Retirement Income Security Act of 1974, as amended ("ERISA").
ERISA provides that all Plan participants shall be entitled to:
Examine, without charge, at the Employer's office and at other
specified locations, such as worksites, all Plan documents and copies
of all documents filed by the Plan with the U.S. Department of Labor,
such as detailed annual reports and plan descriptions.
Obtain copies of all Plan documents and other Plan information upon
written request to the Employer. The Employer may make a reasonable
charge for the copies.
Receive a summary of the Plan's annual financial report. The Employer
is required by law to furnish each Employee with a copy of this summary
annual report.
In addition to creating rights for Plan participants, ERISA imposes duties upon
the people who are responsible for the operation of the Plan. The people who
operate your Plan, called fiduciaries, have a duty to do so prudently and in the
interest of you and other Plan participants. No one, including your employer or
any other person, may fire you or otherwise discriminate against you in any way
solely in order to prevent you from obtaining a benefit or exercising your
rights under ERISA. If your claim for a benefit is denied, in whole or in part,
you must receive a written explanation of the reason for the denial. You have
the right to have the Plan review and reconsider your claim. Under ERISA, there
are steps you can take to enforce the above rights. For instance, if you request
materials from the Plan and do not receive them within 30 days, you may file
suit in a federal court. In such a case, the court may require the Employer to
provide the materials and pay you up to $110 a day until you receive the
materials, unless the materials were not sent because of reasons beyond the
control of the Employer. If you have a claim for benefits which is denied or
ignored, in whole or in part, you may file suit in a state or federal court. If
it should happen that Plan fiduciaries misuse the Plan's money, or if you are
discriminated against for asserting your rights, you may seek assistance from
the U.S. Department of Labor, or you may file suit in a federal court. The court
will decide who should pay court costs and legal fees. If you are successful,
the court may order the person you have sued to pay these costs and fees. If you
lose, the court may order you to pay these costs and fees, for example, if it
finds your claim is frivolous. If you have any questions about your Plan, you
should contact the Employer. If you have any questions about this statement or
about your rights under ERISA, you can contact the nearest office of the Pension
and Welfare Benefits Administration, U.S. Department of Labor, listed in your
telephone directory or the Division of Technical Assistance and Inquiries,
Pension and Welfare Benefits Administration, U.S. Department of Labor, 200
Constitution Avenue, N.W., Washington, D.C. 20210.
