Exhibit 13
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of February 21, 2001, by and between
Efficient Networks, Inc., with its principal place of business at ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ (the "Company"), and ▇▇▇▇ ▇▇▇▇▇▇▇ (the "Executive").
WHEREAS, pursuant to an Agreement and Plan of Merger, dated as of
February 21, 2001 (the "Merger Agreement"), among Siemens Corporation, a
Delaware corporation ("Siemens"), Memphis Acquisition Inc., a Delaware
corporation ("Acquisition"), and the Company, Acquisition will be merged with
and into the Company (the "Merger") and the Company will be the surviving
corporation in the Merger.
WHEREAS, the Executive's stock in the Company will be acquired by
Siemens in connection with the Merger.
WHEREAS, the Executive has been employed by the Company, and the
Company wishes to offer continuing employment to the Executive in connection
with the Merger and the Executive wishes to accept such offer, on the terms set
forth below.
Accordingly, the parties hereto agree as follows:
1. Term. The Company hereby employs the Executive, and the Executive hereby
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accepts such employment, for an initial term commencing as of the Effective Time
(as defined in the Merger Agreement) and ending on the third anniversary of such
date, unless sooner terminated in accordance with the provisions of Section 4 or
Section 5 (the "Term"). The parties agree that 180 days prior to the expiration
of the initial Term, they shall negotiate in good faith regarding whether to
extend the initial Term of the Agreement. Notwithstanding anything to the
contrary contained in this Agreement, in no event shall the Term commence, nor
any provision of this Agreement be effective, unless and until the Executive
executes a Non-Competition Agreement attached hereto as Exhibit A.
2. Duties. During the Term, the Executive shall initially be employed by the
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Company as Executive Vice President, Product Strategy for Access Solutions, of
the Company, and as such, the Executive shall faithfully perform for the Company
the duties of said office and shall perform such other duties of an executive
and managerial nature consistent with such office as shall be specified and
designated from time to time by ▇▇▇▇ ▇▇▇▇▇, or his successor, and the Board of
Directors of the Company (the "Board"). The Executive shall devote substantially
all of his business time and effort to the performance of his duties hereunder.
3. Compensation.
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3.1. Base Salary. The Company shall pay the Executive during the Term a
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base salary at the rate of $175,000 per annum (the "Annual Salary"), in
accordance with the customary payroll practices of the Company applicable to
senior executives. The Annual Salary shall be reviewed at least annually by the
Compensation Committee of the Board (the "Compensation Committee"), but shall
not be decreased during the Term.
3.2. Annual Bonus. During the Term, in addition to the Annual Salary, the
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Executive shall participate in the Company's annual cash bonus program and shall
have the opportunity to earn an annual bonus in a maximum amount of up to 72% of
the Executive's Annual Salary based on the achievement of certain individual and
corporate performance measures, as determined by the Compensation Committee.
3.3. Retention Program. The Executive shall be eligible to participate in
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the Efficient Networks Retention Plan ("MRP"), and the Efficient Networks
Discretionary Retention Plan ("DRP"), each in accordance with their respective
terms. The Executive shall receive an allocation of $500,000 under the MRP and
an allocation of $3,000,000 under the DRP. Certain of the material terms of the
MRP and DRP are outlined on Schedule 1 hereto.
3.4. Benefits - In General. The Executive shall be entitled during the
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Term to participate in any group life, hospitalization or disability insurance
plans, health programs, retirement plans, fringe benefit programs and similar
benefits that may be available to other senior executives of the Company or its
affiliates generally, on the same terms as such other executives, in each case
to the extent that the Executive is eligible under the terms of such plans or
programs, which plans and programs shall generally provide a level of benefits
that is at least as favorable as the benefits provided by the Company or its
affiliates on the date hereof.
3.5. Expenses. The Company shall pay or reimburse the Executive for all
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ordinary and reasonable out-of-pocket expenses actually incurred (and, in the
case of reimbursement, paid) by the Executive during the Term in the performance
of the Executive's services under this Agreement in accordance with the ordinary
policies of the Company with respect to reimbursement of senior executives for
such expenses.
3.6. Vacation. The Executive shall be entitled to four weeks of vacation
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annually.
4. Termination upon Death or Disability. If the Executive dies during the
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Term, the Term shall terminate as of the date of death, and the obligations of
the Company to or with respect to the Executive shall terminate in their
entirety upon such date except as otherwise provided under this Section 4. If
the Executive becomes disabled for purposes of the long-term disability plan of
the Company for which the Executive is eligible, the Company shall have the
right, to the extent permitted by law, to terminate the employment of the
Executive upon notice in writing to the Executive. Upon termination of
employment due to death or disability, the Executive (or the Executive's estate
or beneficiaries in the case of the death of the Executive) shall be entitled to
receive (i) any Annual Salary and other benefits earned under this Agreement but
unpaid prior to the termination of the Executive's employment, (ii) a pro-rata
payment of the Executive's target annual bonus through the date of the
termination of the Executive's employment due to death or disability, (iii)
payment in respect of accrued but unused vacation time prior to the termination
of the Executive's employment and (iv) reimbursement for expenses properly
incurred prior to the termination of the Executive's employment. In addition,
upon a termination due to death or disability, the Executive shall receive (i)
payment, at the time awards under the MRP are otherwise paid, of 100% of the MRP
award to the extent not previously paid, and (ii) payment, at the time the next
installment award would otherwise have been paid under the DRP, of the next
installment award under the DRP, which will be determined with individual
performance targets treated as if they were fully achieved and based on
corporate performance targets actually achieved in respect of that award. The
Executive shall also continue to receive payments in respect of those options
that were not vested immediately prior to the Effective Time but which have an
exercise price that is less than the Per Share Amount (as defined in the Merger
Agreement), at the time such payments would otherwise have been made in
accordance with the vesting schedule set forth in such option agreement. The
Executive (or, in the case of his death, his estate and beneficiaries) shall
have no further rights to any other compensation or benefits hereunder on or
after the termination of employment, or any other rights hereunder except as
required by law.
5. Certain Terminations of Employment.
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5.1. Termination by the Company for Cause.
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(a) For purposes of this Agreement, "Cause" shall mean the
Executive's: (i) commission of a felony, a crime of moral turpitude or
dishonesty, or any crime involving the Company; (ii) engagement in the
performance of his duties hereunder (or otherwise to the detriment of the
Company) in willful misconduct, willful neglect, fraud, misappropriation or
embezzlement; (iii) willful and continued failure to substantially perform the
Executive's duties (to the extent capable of being performed by the Executive by
exercising commercially reasonable efforts) or to follow the Company's written
policies and practices, which failure is not cured within 30 days after written
notice specifying the acts or omissions that constitute such failure is provided
to the Executive; or (iv) breach in any material respect of this Agreement or of
the agreement attached hereto as Exhibit A, which breach is not cured (to the
extent curable) within 30 days after written notice thereof is provided to the
Executive.
(b) The Company may terminate the Executive's employment hereunder
for Cause. If the Company terminates the Executive for Cause, the Executive
shall receive (i) any Annual Salary and other benefits earned under this
Agreement but unpaid prior to the termination of the Executive's employment (but
excluding any accrued bonuses not yet paid), (ii) payment in respect of accrued
but unused vacation time prior to the termination of the Executive's employment
and (iii) reimbursement for expenses properly incurred prior to the termination
of the Executive's employment. In such event, the Executive shall have no
further rights to any other compensation or benefits hereunder on or after the
termination of employment, or any other rights hereunder or under the MRP and
the DRP.
5.2. Termination by the Company without Cause; Termination by the Executive
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for Good Reason.
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(a) The Company may terminate the Executive's employment at any time for
any reason or no reason, subject to the approval of the Board. If the Company
terminates the Executive's employment and the termination is not covered by
Section 4 or 5.1 or the Executive terminates service for "Good Reason", (i) the
Executive shall receive (w) Annual Salary and other benefits earned under this
Agreement but unpaid prior to the termination of the Executive's employment, (x)
a pro-rata payment in respect of target bonus accrued through the termination of
the Executive's employment, (y) payment in respect of accrued but unused
vacation time prior to the termination of the Executive's employment and (z)
reimbursement for expenses properly incurred prior to the termination of the
Executive's employment; (ii) the Executive shall continue to receive payment of
100% of Annual Salary (as in effect immediately before such termination) and
shall receive reimbursement for his COBRA premiums with respect to medical and
dental benefits for one year following the termination of the Executive's
employment; and (iii) the Executive shall have no further rights to any other
compensation or benefits hereunder on or after the termination of employment, or
any other rights hereunder; provided that the Company's obligations with respect
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to the payments and benefits provided for in this Section 5.2(a) are conditioned
upon the Executive's execution of a Separation Agreement and General Release in
the standard form then used by the Company. In addition, upon a termination of
the Executive's employment without Cause or the Executive terminates employment
for Good Reason, the Executive shall receive (i) payment, at the time awards
under the MRP are otherwise paid, of 100% of the MRP award, to the extent not
previously paid, and (ii) with the exception of termination of service by the
Executive for Good Reason as defined in this Section 5.2(b)(i), payment, at the
time that the next installment award under the DRP is otherwise paid, of the
next installment award, owed under the DRP, which will be determined with
individual performance targets treated as if they were fully achieved and based
on corporate performance targets actually achieved in respect of that award. The
Executive shall also continue to receive payments in respect of those options
that were not vested immediately prior to the Effective Time but which have an
exercise price that is less than the Per Share Amount (as defined in the Merger
Agreement), at the time such payments would otherwise have been made in
accordance with the vesting schedule set forth in such option agreement. It is
expressly understood and agreed that any payment made pursuant to this Section
5.2(a) shall be in lieu of any other payments that may otherwise be due to the
Executive under any severance or separation agreement, plan, program or policy
of the Company.
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(b) For purposes of this Agreement, "Good Reason" shall mean (i) a
material reduction in the Executive's duties and responsibilities that occurs
following the Effective Time (provided that reductions in duties and
responsibilities that result from the Company no longer being a public reporting
company under the Securities Exchange Act of 1934, shall not constitute, by
itself, a material reduction in the Executive's duties and responsibilities),
(ii) a material breach by the Company of the terms and provisions of this
Agreement, which breach is not cured within 30 days after written notice thereof
is provided by the Executive, (iii) the relocation of the Executive's principal
place of business, without the consent of the Executive, by more than 35 miles
from such principal place of business on the date hereof, (iv) a reduction in
the Annual Salary, compensation or aggregate level of benefits provided to the
Executive, (v) the failure of the Company to pay compensation and benefits when
due, which is not cured promptly after demand for payment by the Executive or
(vi) failure of a successor to the Company to assume its obligations under the
Agreement.
5.3. Termination by the Executive Other Than For Good Reason.
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The Executive may terminate his employment on 30 days' written notice given
to the Company. If the Executive terminates his employment and the termination
is not covered by Section 4 or 5.2, the Executive shall receive (i) Annual
Salary and other benefits earned under this Agreement but unpaid prior to the
termination of the Executive's employment (but excluding any bonuses not yet
paid), (ii) payment in respect of accrued but unused vacation time prior to the
termination of the Executive's employment and (iii) reimbursement for expenses
properly incurred prior to the termination of the Executive's employment. In
such event, the Executive shall have no further rights to any other compensation
or benefits hereunder on or after the termination of employment, or any other
rights hereunder or under the MRP and the DRP, except as required by law.
6. Other Provisions.
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6.1. Severability. The Executive acknowledges and agrees that he has had
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an opportunity to seek advice of counsel in connection with this Agreement. If
it is determined that any of the provisions of this Agreement, or any part
thereof, is invalid or unenforceable, the remainder of the provisions of this
Agreement shall not thereby be affected and shall be given full effect, without
regard to the invalid portions.
6.2. Dispute Resolution.
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(a) Any and all claims, disputes, and controversies between the
Executive and the Company with respect to interpretation, construction, breach,
enforceability, and/or enforcement of the terms and provisions of this Agreement
(a "Dispute") shall be finally resolved as provided in this Section 6.2 by
binding arbitration. Arbitration shall be the exclusive means for determination
of all matters as above provided, and neither party shall otherwise institute
any action or proceeding in any court of law or equity, state or federal, other
than respecting enforcement of the arbitrator's decision or award hereunder. The
foregoing shall be a bona fide defense in any action or proceeding where the
matter in dispute was to be arbitrated or is being arbitrated pursuant to this
Agreement.
(b) The Company (or its successor in interest) or the Executive shall
have the right to submit a Dispute to arbitration, by delivery to the other, by
certified mail, of a written notice and demand for arbitration of such Dispute.
Arbitration shall be by the American Arbitration Association (the "AAA") in
accordance with its Rules applicable to such Disputes (the "Rules"), by a
neutral and impartial arbitrator acceptable to the Company and the Executive. If
such an arbitrator has not been selected by the Company and the Executive within
sixty days after AAA first provides a list of eligible arbitrators, or within
thirty days after the occurrence of a vacancy, a neutral and impartial
arbitrator shall be selected and appointed by AAA, in accordance with its Rules.
Unless otherwise required under applicable law, the arbitration proceedings
shall be conducted in the city where the principal place of business of the
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Company is situated at the date of this Agreement or a city mutually agreed to
by the parties, and the procedural rules of the place of arbitration shall
apply. Each party shall be entitled to be represented by legal counsel.
(c) The arbitration proceedings (including discovery and the giving
of testimony) shall be conducted in strictest confidence pursuant to a
confidentiality agreement signed by the parties and devised to protect the
confidentiality of and valuable rights of the Company in the Confidential
Information (as defined in that certain Confidential Information and Invention
Assignment Agreement between the Company and Executive) and trade secrets as
well as the confidentiality of any other confidential information included in
such proceedings. The arbitrator shall have the power and authority to make such
decisions and awards as he or she deems appropriate, consistent with applicable
law. To the extent applicable law sets particular requirements for the conduct
of such arbitration proceedings, such as, any with respect to discovery, cross-
examination, testimony, or availability of rights and remedies, the arbitration
proceedings shall be conducted in compliance with those requirements.
(d) Subject to applicable law, the arbitrator may grant compensatory
damages and costs to the prevailing party (but not punitive or exemplary damages
and attorneys' fees and costs related to punitive or exemplary damages) and
injunctions that he or she may deem necessary or advisable directed to or
against a party, including a direction or order requiring specific performance
of any covenant, agreement or provision of this Agreement as a result of a
breach or threatened breach. Any decision or award of the arbitrator shall be
final, binding, and conclusive upon the parties and said decision and award may
be entered as a final judgment in any court of competent jurisdiction.
(e) Subject to the foregoing, the costs of conducting the arbitration
shall be borne equally by the parties, except that each party shall bear its own
attorneys fees and costs.
6.3. Notices. Any notice or other communication required or permitted
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hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile transmission or,
if mailed, five days after the date of deposit in the United States mails as
follows:
(i) If to the Company, to:
Efficient Networks, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Board of Directors
with a copy to:
Siemens Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
(ii) If to the Executive, to his attention at:
Efficient Networks, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
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Any such person may by notice given in accordance with this Section 6.3 to the
other parties hereto designate another address or person for receipt by such
person of notices hereunder.
6.4. Entire Agreement. Other than with respect to (i) the agreement
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attached hereto as Exhibit A entered into by the Company and the Executive dated
as of the date hereof and (ii) that certain Confidential Information and
Invention Assignment Agreement between the Company and the Executive as they may
be amended from time to time, which agreements shall survive in their entirety
without regard to this Agreement, this Agreement contains the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
prior agreements, written or oral, with respect thereto.
6.5. Waivers and Amendments. This Agreement may be amended, superseded,
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canceled, renewed or extended, and the terms hereof may be waived, only by a
written instrument signed by the parties or, in the case of a waiver, by the
party waiving compliance. No delay on the part of any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, nor shall
any waiver on the part of any party of any such right, power or privilege nor
any single or partial exercise of any such right, power or privilege, preclude
any other or further exercise thereof or the exercise of any other such right,
power or privilege.
6.6. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
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ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW.
6.7. Assignment. This Agreement, and the Executive's rights and
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obligations hereunder, may not be assigned by the Executive; any purported
assignment by the Executive in violation hereof shall be null and void. In the
event of any sale, transfer or other disposition of all or substantially all of
the Company's assets or business, whether by merger, consolidation or otherwise,
the Company may assign this Agreement and its rights hereunder.
6.8. Withholding. The Company shall be entitled to withhold from any
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payments or deemed payments any amount of tax withholding required by law.
6.9. Binding Effect. This Agreement shall be binding upon and inure to the
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benefit of the parties and their respective successors, permitted assigns,
heirs, executors and legal representatives.
6.10. Counterparts. This Agreement may be executed by the parties hereto
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in separate counterparts, each of which when so executed and delivered shall be
an original but all such counterparts together shall constitute one and the same
instrument. Each counterpart may consist of two copies hereof each signed by one
of the parties hereto.
6.11. Survival. Anything contained in this Agreement to the contrary
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notwithstanding, the provisions of Sections 6.2, 6.3 and 6.8, as well as the
agreements and covenants set forth in Exhibit A hereto and that certain
Confidential Information and Invention Assignment Agreement, and the other
provisions of this Section 6 (to the extent necessary to effectuate the survival
of Sections 6.2, 6.3 and 6.8), shall survive termination of this Agreement and
any termination of the Executive's employment hereunder.
6.12. Non-Disparagement. While Executive's non-competition obligations
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under Exhibit A are in effect, the Executive shall not publish any statement or
make any statement under circumstances reasonably likely to become public that
is critical of the Company or any of its affiliates, or in any way adversely
affecting or otherwise maligning the Company's business or the reputation of the
Company or any of its affiliates. During such period, the Company shall not
publish any statement or make any statement under circumstances reasonably
likely to become public that is critical of the Executive, or in any way
adversely affects or otherwise maligns the Executive's reputation.
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6.13. Existing Agreements. The Executive represents to the Company that
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he is not subject or a party to any employment or consulting agreement, non-
competition covenant or other agreement, covenant or understanding which might
prohibit him from executing this Agreement (including Exhibit A hereto) or limit
his ability to fulfill his responsibilities hereunder.
6.14. Headings. The headings in this Agreement are for reference only and
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shall not affect the interpretation of this Agreement.
6.15. Effective Date. Notwithstanding anything to the contrary herein,
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this Agreement shall become effective only upon the Effective Time (as defined
in the Merger Agreement), and this Agreement shall automatically be void upon
any termination of the Merger Agreement prior to the Effective Time.
[signatures on following page]
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IN WITNESS WHEREOF, the parties hereto have signed their names as of the
day and year first above written.
EFFICIENT NETWORKS, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇
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Name: ▇▇▇▇ ▇▇▇▇▇
Title: Chairman of the Board
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇▇▇
EXHIBIT A
NON-COMPETITION AGREEMENT
AGREEMENT, dated as of February 21, 2001, by and between Efficient
Networks, Inc., with its principal place of business at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇ (the "Company"), and ▇▇▇▇ ▇▇▇▇▇▇ (the "Employee").
WHEREAS, pursuant to an Agreement and Plan of Merger, dated as of February
21, 2001 (the "Merger Agreement") among Siemens Corporation, a Delaware
corporation ("Siemens"), Memphis Acquisition Inc., a Delaware corporation
("Acquisition"), Acquisition will be merged with and into the Company (the
"Merger") and the Company will be the surviving corporation in the Merger;
WHEREAS, the Employee's stock in the Company will be acquired by Siemens in
connection with the Merger.
WHEREAS, simultaneously with the execution of this Agreement, the Employee
and the Company have entered into an Employment Agreement (the "Employment
Agreement"), setting forth the consideration for and the terms of the Employee's
employment following the Effective Time (as defined in the Merger Agreement).
WHEREAS, the Company deems it of significant importance to its Business (as
hereinafter defined) and the Company and Siemens deem it of significant
importance to the Merger to prohibit the Employee from engaging in a business in
competition with the Business, and, in order to accomplish such purpose,
believes it to be in its best interest to enter into an agreement with the
Employee restricting such actions; and
WHEREAS, Employee is willing to refrain from engaging in certain activities
that would be to the detriment of the Company in consideration of payments
received by the Employee in connection with the Merger.
Accordingly, the parties hereto agree as follows:
1. Term. This Agreement shall be for a term commencing at the Effective Time
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(as defined in the Merger Agreement) and ending on the date that is one year
following the date on which the Employee shall cease to be an employee of the
Company and its affiliates, but in no event shall the term extend beyond the
third anniversary of the Effective Time (the "Restricted Period"). Nothing
contained in this Agreement shall confer on the Employee any right to continue
in the employ of the Company or its affiliates.
2. Covenant Against Competition. The Employee acknowledges that (i) the
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principal business of the Company (which expressly includes for purposes of this
Section 2, its successors and assigns) is (v) the development and supply of
digital subscriber line ("DSL") customer premises equipment ("CPE"); (w) DSL
based CPE integrated access devices for the delivery of voice and data; (x) the
development and supply of software that provides network-wide fault management,
configuration management and performance management functions across
telecommunications and data networks; (y) the development and provision of
signalling gateway software that provides network switching functions on packet
based, circuit or other protocol based networks; or (z) any related business in
which the Company or any subsidiary of the Company may be engaged, or is
developing during the Employee's employment or at the time his employment ends
and in which the Employee was personally engaged (such business herein
being referred to as the "Business"); (ii) the Company's Business is, in part,
international in scope; (iii) the Employee's work for the Company has given and
will continue to give him access to the confidential affairs and proprietary
information of the Company and of Siemens; (iv) the value of all goodwill
resulting from the operation of the Business of the Company and its subsidiaries
and other affiliates should properly belong to the Company; (v) the covenants
and agreements of the Employee contained in this Section 2 are essential to such
goodwill of the Company; (vi) Siemens is acquiring the Employee's stock in the
Company pursuant to the Merger Agreement; and (vii) neither Siemens nor the
Company would have entered into the Merger Agreement but for the covenants and
agreements set forth in this Section 2. Accordingly, the Employee covenants and
agrees that:
By and in consideration of the salary and benefits to be provided by the
Company pursuant to the Employment Agreement, including the retention and
severance arrangements set forth therein, and further in consideration of the
Employee's exposure to the proprietary information of the Company, the Employee
covenants and agrees that, during the Restricted Period, he shall not within any
state in the United States or within any country in which the Company directly
or indirectly conducts, or reasonably expects to conduct, any aspect of the
Business, directly or indirectly, (i) engage in any element of the Business,
(ii) render any services to any person, corporation, partnership or other entity
(other than the Company, Siemens or the affiliates of either) engaged in any
element of the Business, or (iii) become financially interested in any such
person, corporation, partnership or other entity (other than the Company,
Siemens or the affiliates of either) as a partner, shareholder, principal,
agent, employee, consultant or in any other relationship or capacity; provided,
however, that, notwithstanding the foregoing, the Employee may (1) invest in
securities of any entity, solely for investment purposes and without
participating in the business thereof, if (A) the Employee is not a controlling
person of, or a member of a group which controls, such entity and (B) the
Employee does not, directly or indirectly, own 2% or more of any class of
securities of such entity. Nothing in this Section 2.1 shall prevent the
Employee from becoming employed by any division or separate operating unit of a
corporation if such division or operating unit is not itself engaged in the
Business and the Employee does not directly or indirectly perform any services
for the portion of such corporation's operations engaged in the Business.
Furthermore, notwithstanding any of the foregoing to the contrary, the Employee
may engage in any activity with the prior written consent of the Board of
Directors of the Company (the "Board"). If Employee requests the Company, in
writing in accordance with the notice provision set forth in Section 7 hereof,
that the Board inform the Employee whether a particular activity is permitted
under this Section 2.1, and the Board does not respond, in writing, to the
Employee within 60 days after such request, such activity shall automatically be
deemed not to be prohibited by (or otherwise violate) this Section 2.1.
3. Rights and Remedies upon Breach of the Agreement.
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3.1. The Employee acknowledges and agrees that any breach by him of any of
the provisions of Section 2 could result in irreparable injury and damage for
which money damages might not provide an adequate remedy. Therefore, if the
Employee breaches, or threatens to commit a breach of, any of the provisions of
Section 2, the Company and its affiliates shall have the following rights and
remedies, each of which rights and remedies shall be independent of the other
and severally enforceable, and all of which rights and remedies shall be in
addition to, and not in lieu of, any other rights and remedies available to the
Company and its affiliates under law or in equity (including, without
limitation, the recovery of damages):
(a) The right and remedy to seek to have the provisions of Section 2
specifically enforced (without posting bond and without the need to prove
damages) by any court having equity jurisdiction, including, without limitation,
the right to an entry against the Employee of restraining orders and injunctions
(preliminary, mandatory, temporary and permanent) against violations, threatened
or actual, and whether or not then continuing, of such covenants; and
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(b) The right and remedy to cease all future payments of all
compensation, profits, monies, accruals, increments or other benefits payable to
the Employee under the Employment Agreement or any other plan or program of the
Company.
3.2. The Employee acknowledges that any breach of the provisions of Section
2 will entitle the Company to seek specific performance and other equitable
relief. The existence of any claim or cause of action by the Employee, whether
predicated on this Agreement or otherwise, shall not constitute a defense to the
enforcement of the Restrictive Covenants.
4. Severability. The Employee acknowledges and agrees that (i) he has had an
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opportunity to seek advice of counsel in connection with this Agreement and (ii)
the provisions of Section 2 are reasonable in geographical and temporal scope
and in all other respects. If it is determined that any of the provisions of
this Agreement, including, without limitation, any of the provisions of Section
2, or any part thereof, is invalid or unenforceable, the remainder of the
provisions of this Agreement shall not thereby be affected and shall be given
full effect, without regard to the invalid portions.
5. Duration and Scope of Covenants. If any court, arbitrator or other
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decision-maker of competent jurisdiction determines that any of Employee's
covenants contained in this Agreement, including, without limitation, any of the
provisions of Section 2, or any part thereof, is unenforceable because of the
duration or geographical scope of such provision, then, after such determination
has become final and unappealable, the duration or scope of such provision, as
the case may be, shall be reduced so that such provision becomes enforceable
and, in its reduced form, such provision shall then be enforceable and shall be
enforced.
6. Dispute Resolution.
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6.1. Any and all claims, disputes, and controversies between the Employee
and the Company with respect to interpretation, construction, breach,
enforceability, and/or enforcement of the terms and provisions of this Agreement
(a "Dispute") shall be finally resolved as provided in this Section 6 by binding
arbitration. Arbitration shall be the exclusive means for determination of all
matters as above provided, and neither party shall otherwise institute any
action or proceeding in any court of law or equity, state or federal, other than
respecting enforcement of the arbitrator's decision or award hereunder. The
foregoing shall be a bona fide defense in any action or proceeding where the
matter in dispute was to be arbitrated or is being arbitrated pursuant to this
Agreement.
6.2. The Company (or its successor in interest) or the Employee shall have
the right to submit a Dispute to arbitration, by delivery to the other, by
certified mail, of a written notice and demand for arbitration of such Dispute.
Arbitration shall be by the American Arbitration Association in accordance with
its Rules applicable to such Disputes (the "Rules"), by a neutral and impartial
arbitrator acceptable to the Company and the Employee. If such an arbitrator
has not been selected by the Company and the Employee within 60 days after
giving of such written notice and demand for arbitration, or within 30 days
after the occurrence of a vacancy, a neutral and impartial arbitrator shall be
selected and appointed by the American Arbitration Association, in accordance
with its Rules. Unless otherwise required under applicable law, the arbitration
proceedings shall be conducted in the city where the principal place of business
of the Company is situated at the date of this Agreement or a city mutually
agreed to by the parties, and the procedural rules of the place of arbitration
shall apply. Each party shall be entitled to be represented by legal counsel.
6.3. The arbitration proceedings (including discovery and the giving of
testimony) shall be conducted in strictest confidence pursuant to a
confidentiality agreement signed by the parties and devised
3
to protect the confidentiality of and valuable rights of the Company in the
Confidential Information (as defined in the Confidential Information and
Invention Assignment Agreement referenced in Section 8) and trade secrets as
well as the confidentiality of any other confidential information included in
such proceedings. The arbitrator shall have the power and authority to make such
decisions and awards as he or she deems appropriate, consistent with applicable
law. To the extent applicable law sets particular requirements for the conduct
of such arbitration proceedings, such as, any with respect to discovery, cross-
examination, testimony, or availability of rights and remedies, the arbitration
proceedings shall be conducted in compliance with those requirements.
6.4. Subject to applicable law, the arbitrator may grant compensatory
damages and costs to the prevailing party (but not punitive or exemplary damages
and attorneys' fees and costs related to punitive or exemplary damages) and
injunctions that he or she may deem necessary or advisable directed to or
against a party, including a direction or order requiring specific performance
of any covenant, agreement or provision of this Agreement as a result of a
breach or threatened breach. Any decision or award of the arbitrator shall be
final, binding, and conclusive upon the parties and said decision and award may
be entered as a final judgment in any court of competent jurisdiction.
6.5. Subject to the foregoing, the costs of conducting the arbitration
shall be borne equally by the parties, except that each party shall bear its own
attorneys fees and costs.
6.6. Notwithstanding the foregoing, the Company or the Employee shall have
the right at any time to apply for and obtain injunctive relief and/or such
other remedies and relief, as may be available in a court of law or equity,
state or federal, including but not limited to restraining orders and
injunctions to protect the legitimate interests of the Company as set forth in
Section 3.1 of this Agreement, preserve the status quo, prevent a breach of
confidence, prevent irreparable damage, injury or loss, protect against actual
or threatened improper or unauthorized disclosure, use or misappropriation of
information or other proprietary rights of the Company, pending the conclusion
of such arbitration proceedings and final decision (award) of the arbitrator.
7. Notices. Any notice or other communication required or permitted hereunder
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shall be in writing and shall be delivered personally, telegraphed, telexed,
sent by facsimile transmission or sent by certified, registered or express mail,
postage prepaid. Any such notice shall be deemed given when so delivered
personally, telegraphed, telexed or sent by facsimile transmission or, if
mailed, five days after the date of deposit in the United States mails as
follows:
(i) If to the Company, to:
Efficient Networks, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Board of Directors
with a copy to:
Siemens Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
4
(ii) If to the Employee, to his attention at:
Efficient Networks, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Any such person may by notice given in accordance with this Section 7 to the
other parties hereto designate another address or person for receipt by such
person of notices hereunder.
8. Entire Agreement. Other than with respect to the Employment Agreement, of
----------------
which this Agreement forms a part, and that certain Confidential Information and
Invention Assignment Agreement between the Company and the Employee (which
agreements shall survive in their entirety without regard to this Agreement),
this Agreement contains the entire agreement between the parties with respect to
the subject matter hereof and supersedes all prior agreements, written or oral,
with respect thereto.
9. Waivers and Amendments. This Agreement may be amended, superseded,
----------------------
canceled, renewed or extended, and the terms hereof may be waived, only by a
written instrument signed by the parties or, in the case of a waiver, by the
party waiving compliance. No delay on the part of any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, nor shall
any waiver on the part of any party of any such right, power or privilege nor
any single or partial exercise of any such right, power or privilege, preclude
any other or further exercise thereof or the exercise of any other such right,
power or privilege.
10. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
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ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW.
11. Assignment. This Agreement, and the Employee's rights and obligations
----------
hereunder, may not be assigned by the Employee; any purported assignment by the
Employee in violation hereof shall be null and void. In the event of any sale,
transfer or other disposition of all or substantially all of the Company's
assets or business, whether by merger, consolidation or otherwise, the Company
may assign this Agreement and its rights hereunder.
12. Binding Effect. This Agreement shall be binding upon and inure to the
--------------
benefit of the parties and their respective successors, permitted assigns,
heirs, executors and legal representatives.
13. Counterparts. This Agreement may be executed by the parties hereto in
------------
separate counterparts, each of which when so executed and delivered shall be an
original but all such counterparts together shall constitute one and the same
instrument. Each counterpart may consist of two copies hereof each signed by
one of the parties hereto.
14. Survival. Anything contained in this Agreement to the contrary
--------
notwithstanding, the provisions of Sections 2, 3 and 6, and the other provisions
of this Agreement (to the extent necessary to effectuate the survival of
Sections 2, 3 and 6), shall survive termination of this Agreement.
15. Headings. The headings in this Agreement are for reference only and shall
--------
not affect the interpretation of this Agreement.
16. Effective Date. Notwithstanding, anything to the contrary herein, this
--------------
Agreement shall become effective only upon the Effective Time (as defined in the
Merger Agreement), and this Agreement shall automatically be void upon any
termination of the Merger Agreement prior to the Effective Time.
5
[signatures on following page]
6
IN WITNESS WHEREOF, the parties hereto have signed their names as of the
day and year first above written.
EFFICIENT NETWORKS, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇
----------------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇
Title: Chairman of the Board
EMPLOYEE
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇▇▇
Schedule 1
Employee Incentive Retention Programs
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MRP
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Vesting: MRP awards will vest in two equal tranches on the six month and
the one year anniversary of the Effective Time of the Merger (the
"Payment Dates").
Payment: MRP awards will generally become payable on the two respective
Payment Dates. Special provisions regarding the treatment of MRP
awards upon early termination of employment are set forth in the
Employment Agreement.
DRP
---
Valuation: The DRP calls for two equal payments, to be made on the second
and third anniversaries of the Effective Time. Earned awards will
be paid 50% on the second anniversary of the Effective Time and
50% on the third anniversary of the Effective Time.
One-half of each of the two payments will be based on the
achievement of certain corporate performance targets to be
established by the Compensation Committee. The remaining one-half
of each of the two payments will be based on the achievement of
individual performance criteria, to be established annually by
Efficient Networks management, subject to the approval of the
Compensation Committee.
Vesting: An Executive generally must be an employee of Efficient Networks
or an affiliate on the applicable payment date in order to
receive an Award under the DRP. Special provisions regarding the
treatment of DRP awards upon early termination of employment are
set forth in the Employment Agreement.
The foregoing are summaries of the terms of each of these programs, which
will be set forth in the governing plan documents to be adopted by the
Board. The plan documents will contain additional terms and conditions
regarding the payment of awards under the programs.