William O'Brien

 

                              EMPLOYMENT AGREEMENT

 

         THIS EMPLOYMENT AGREEMENT (the "AGREEMENT") is made and entered into as

of April 1, 2002, by and between Enterasys Networks, Inc., a Delaware

corporation (the "Company"), and William O'Brien (the "Executive").

 

         1.       Term of Employment; Executive Representation.

 

                  (a)      Employment Term. Executive shall be employed by the

Company in the capacity described in Section 2 of this Agreement for a term

commencing on April 1, 2002 (the "Effective Date") and ending December 31, 2002.

 

                  (b)      Executive Representation. Executive hereby represents

to the Company that the execution and delivery of this Agreement by Executive

and the performance by Executive of his duties hereunder shall not constitute a

breach of, or otherwise contravene, the terms of any statute, law, regulation,

or of any employment agreement or other agreement or policy to which Executive

is a party or otherwise bound. Executive further agrees and represents that he

will duly, punctually and faithfully perform and observe any and all rules and

regulations that the Company may now or shall hereafter establish governing the

conduct of its business and/or the performance of Executive's duties hereunder.

 

         2.       Position.

 

                  (a)      While employed hereunder, Executive shall serve as

the Company's Interim Chief Executive Officer and shall report directly to the

Company's Board of Directors (the "Board"). In such position, Executive shall

have such authority as is customarily associated with the position of chief

executive officer at other publicly held companies similar to the Company and

shall have such duties, consistent with his position, as may be assigned from

time to time by the Board. Executive shall be nominated to serve on the Board

and shall serve in such capacity for so long as Executive remains an employee of

the Company. While Executive remains an employee of the Company or serves as a

consultant to the Company, Executive agrees to serve as a member of the Board

without additional compensation.

 

                  (b)      While employed hereunder, Executive will devote

Executive's full business time and best efforts to the performance of

Executive's duties hereunder and will not engage, either directly or indirectly,

in any other business, profession or occupation for compensation or otherwise

that would conflict with the rendering of such services, without the prior

written consent of the Board. Executive may be an outside board member for other

companies that do not compete with the Company, its subsidiaries and/or

affiliates, provided that such services do not interfere with Executive's

responsibilities to the Company, with the prior written approval of the Company,

which shall be in the Company's sole discretion, provided that approval shall

not be unreasonably withheld. It is hereby acknowledged and approved by the

Company that Executive currently serves on the Boards of Directors of Camp,

Dresser & McKee, Inc., Caritas Christi, Inc., and Key Commerce, Inc.

<PAGE>

         3.       Base Salary. While employed hereunder, the Company shall pay

Executive a base salary (the "Base Salary") at the monthly rate of $100,000,

payable in regular installments in accordance with the Company's usual payment

practices. Executive shall be entitled to such increases in Executive's Base

Salary, if any, as may be determined from time to time by the Board. In the

event that Executive remains employed by Company beyond the first anniversary of

the Effective Date, Executive's basic compensation structure will be adjusted to

be competitive with overall compensation packages for Chief Executive Officers

of comparable publicly traded companies, which may include a change in

Executive's annualized base salary and which likely would include an annual cash

incentive bonus.

 

         4.       Equity Arrangements. Within thirty (30) days following the

Effective Date, Executive shall be granted a stock option (the "Option") to

purchase 500,000 shares of the Company's Common Stock ("Common Stock"). Except

as otherwise provided herein, the Option shall in all respects be subject to

terms and conditions substantially similar to the Company's 1998 Equity

Incentive Plan. The per share exercise price of the Option shall be equal to

the fair market value of a share of Common Stock on the grant date of the

Option. At such time as the Company is eligible to utilize Form S-8, it will use

its best efforts to file and cause to become effect a registration statement on

Form S-8 to register shares issuable upon exercise of the Options.

 

    The Option shall vest and become exercisable in twelve (12) equal

monthly installments, beginning upon the last day of April, 2002 and in equal

monthly installments over the succeeding eleven (11) months of continued service

with the Company. The vesting and exercisability of the Option shall be

accelerated in the following circumstances:

 

                  (a)      If for any of the Company's last three fiscal

quarters of the Company's 2002 fiscal year the Company achieves its Revenue

target for such quarter as set forth in the Enterasys Performance Incentive

Plan, the Option shall vest as to 100,000 shares as of the last day of such

quarter and any portion of the option so vested shall become exercisable upon

the determination by the Board of Directors of the Company (in their sole

discretion) that the Company has achieved the applicable Revenue target. For the

avoidance of doubt, the maximum possible cumulative acceleration pursuant to the

immediately preceding sentence is 300,000 shares. For purposes of this

Paragraph, "Revenue" shall have the meaning set forth in the Enterasys

Performance Incentive Plan, a copy of which is attached hereto as Exhibit A, and

"Revenue Target" shall mean the revenue target set forth in the Fiscal Year 2002

Addendum dated June, 2002 to the Enterasys Performance Incentive Plan, a copy of

which is attached hereto as Exhibit B.

 

                  (b)      The Option shall become vested as to 80,000 shares if

the Company achieves break-even or positive Cash Flow from Operations in any of

the last three quarters of its 2002 fiscal year and any portion of the option so

vested shall become exercisable upon the determination by the Board of Directors

of the Company (in their sole discretion) that the Company has achieved such

Cash Flow from Operations target. For purposes of the foregoing sentence, "Cash

Flow from Operations" shall have the meaning set forth in the Enterasys

Performance Incentive Plan attached hereto as Exhibit A.

<PAGE>

                  (c)      The Option shall become vested as to 70,000 shares if

the Company achieves break-even or positive Operating Income in any of the last

three quarters of the Company's 2002 fiscal year, and any portion of the option

so vested shall become exercisable upon the determination by the Board of

Directors of the Company, or by the Audit Committee thereof, (in their sole

discretion) that the Company has achieved such Operating Income target. For

purposes of the foregoing sentence, "Operating Income" shall have the meaning

set forth in the Enterasys Performance Incentive Plan attached hereto as Exhibit

A.

 

                  (d)      The shares, if any, as to which the Option vests on

an accelerated basis pursuant to subsections (a), (b) or (c) above shall be

those as to which the Option otherwise would have vested last in time based upon

continued service to the Company.

 

                  (e)      Notwithstanding the foregoing, the Option shall

immediately vest and become exercisable in the event of a Change in Control (as

defined below). No more than a total of 500,000 shares may become vested under

the Option. The scheduled term of the Option shall be ten (10) years, subject to

earlier termination in the event that Executive terminates continued service to

the Company. In the event that Executive is no longer serving as a member of the

Board and is no longer an employee or consultant to the Company prior to the

tenth (10th) anniversary of the grant date of the Option, the Option shall

terminate on the last to occur of the following dates: (i) the first anniversary

of Executive's termination of service as an employee, consultant and member of

the Board, or (ii) December 31, 2004. Notwithstanding the terms of the previous

sentence, in no event shall the Option be exercisable subsequent to the tenth

(10th) anniversary of the grant date of the Option.

<PAGE>

         As used in this Section 4, the term "Change in Control" shall mean the

occurrence of any of the following events:

 

                  (a)      the sale or disposition, in one or a series of

related transactions, of all or substantially all, of the assets of the Company

to any "person" or "group" (as such terms are defined in Sections 13(d)(3) or

14(d)(2) of the Securities Exchange Act of 1934, as amended, or any successor

thereto) (the "Act") other than the Permitted Holders (as defined below);

 

                  (b)      any person or group, other than the Permitted

Holders, is or becomes the Beneficial Owner (as such term is defined in Rule

13d-3 under the Act or any successor rule thereto, except that a person shall be

deemed to have "beneficial ownership" of all shares that any such person has the

right to acquire, whether such right is exercisable immediately or only after

the passage of time), directly or indirectly, of more than 50% of the total

voting power of the voting stock of the Company (or any entity which controls

the Company), including by way of merger, consolidation, tender or exchange

offer or otherwise; or

 

                  (c)      during any period of two consecutive years,

individuals who at the beginning of such period constituted the Board (together

with any new directors whose election by such Board or whose nomination for

election by the shareholders of the Company was approved by a vote of a majority

of the directors of the Company, then still in office, who were either directors

at the beginning of such period or whose election or nomination for election was

previously so approved) cease for any reason to constitute a majority of the

Board, then in office.

 

         As used in this Section 4, the term "Permitted Holders" shall mean, as

of the date of determination, (i) an employee benefit plan (or trust forming a

part thereof) maintained by the Company, its parent, subsidiary or affiliates,

or (ii) Silver Lake Partners its parent, subsidiary and/or affiliates.

 

         5.       Employee Benefits. During the Employment Term, Executive shall

be entitled to participate in the Company's employee benefit plans, including

non-qualified programs, as in effect from time to time (collectively "Employee

Benefits"), commensurate with his position and compensation level, in accordance

with the requirements and terms of such Employee Benefits plans, programs and

arrangements; provided, however, that Executive shall at all times be entitled

to Employee Benefits on a basis that is no less favorable in the aggregate than

is provided to any other senior executive of the Company. Beginning on the

Effective Date and continuing for the period of Executive's employment by the

Company, Executive shall accrue paid vacation time and personal days in

accordance with Company policies applicable to it senior executives. In

addition, Executive shall be entitled to the perquisites and other fringe

benefits made available to senior executives of the Company.

 

         6.       Business Expenses. Executive is authorized to incur reasonable

expenses in carrying out his duties and responsibilities under this Agreement,

including, without limitation, expenses for travel and similar items related to

such duties and responsibilities. The Company will reimburse Executive for all

such expenses upon presentation by Executive from time to time of appropriately

itemized (consistent with the Company's policy) accounts of such expenditures.

<PAGE>

         7.       Relocation Benefits. Executive shall be entitled to

participate in the Company's relocation program on a basis, which is no less

favorable in the aggregate than is provided to any other senior executive of the

Company. Alternatively, for a period not to exceed one year, the Company will

provide temporary housing, mutually acceptable to the Executive and the Company.

 

         8.       Termination. The Employment Term and Executive's employment

hereunder may be terminated by either party at any time and for any reason or no

reason. Notwithstanding any other provision of this Agreement, the provisions of

this Section 8 shall exclusively govern Executive's rights upon termination of

employment with the Company and its affiliates.

 

                  (a)      By the Company For Cause.

 

                           (i)      For purposes of this Agreement, "Cause"

shall be defined as (i) the Executive's continued failure substantially to

perform the material duties of his office (other than as a result of total or

partial incapacity due to physical or mental illness) if such failure continues

following Executive's receipt of written notice from the Company and a period of

thirty (30) days to cure such failure, (ii) the embezzlement or theft by the

Executive of the property of the Company, its subsidiaries or affiliates, (iii)

the commission of any act or any omission on the Executive's part resulting in

the conviction of Executive or a plea of nolo contendre with respect to a

felony, a crime involving moral turpitude, or a crime that materially adversely

affects the performance or the reputation of the Company, its subsidiaries or

affiliates, (iv) Executive's willful malfeasance or willful misconduct in

connection with Executive's duties to the Company, its subsidiaries or

affiliates or any other act or omission which is materially injurious to the

financial condition or business reputation of the Company, its subsidiaries or

affiliates, or (v) a material breach by Executive of the terms of this

Agreement, or any non-compete, non-disclosure, or non-solicitation provisions to

which Executive is subject.

 

                           (ii)     If Executive's employment is terminated by

the Company for Cause, Executive shall be entitled to receive, reduced by any

amounts owed to the Company by Executive, the amounts described in the following

clauses (A) through (C) set forth below:

 

                                    (A)      the Base Salary through the date of

         termination;

 

                                    (B)      reimbursement for any unreimbursed

         business expenses properly incurred by Executive in accordance with

         Company policy prior to the date of Executive's termination; and

 

                                    (C)      such employee benefits, if any, as

         to which Executive may be entitled under the Employee Benefits plans

         (the amounts described in clauses (A) through (C) hereof, reduced by

         any amounts owed to the Company by Executive, being referred to as the

         "Accrued Rights").

 

                  Following such termination of Executive's employment by the

Company for Cause, except as set forth in this Section 8(a), Executive shall

have no further rights to any compensation or any other benefits under this

Agreement.

<PAGE>

                  (b)      By the Company Without Cause Prior to December 31,

2002.

 

                           (i)      The Executive's employment hereunder may be

terminated by the Company without Cause.

 

                           (ii)     If Executive's employment is terminated by

the Company without Cause (other than by reason of total or partial incapacity

due to physical or mental illness) prior to January 1, 2003, then contingent

upon Executive's full compliance with the provisions set forth in Section 9 of

this Agreement and contingent upon Executive's execution of an effective release

of all claims against the Company in a form reasonably satisfactory to the

Company, Executive shall be entitled to receive:

 

                                    (A)      the Accrued Rights; and

 

                                    (B)      continued payment of the Base

         Salary through December 31, 2002;

 

         Executive shall not be required to mitigate the amount of any payments

or benefits provided for pursuant to this Section 8(b) by seeking other

employment. Following such termination of Executive's employment by the Company

without Cause prior to January 1, 2003, except as set forth in this Section

8(b), Executive shall have no further rights to any compensation or any other

benefits under this Agreement. The benefits described in this Section 8(b) shall

not survive beyond December 31, 2002. In the event that Executive remains

employed by the Company subsequent to December 31, 2002, Executive will not be

entitled to the benefits described in this Section 8(b) unless such benefits are

the subject of a separate agreement between the parties.

 

                  (c)      Notice of Termination. Any purported termination of

employment by the Company (other than due to Executive's death) shall be

communicated by written Notice of Termination to the other party hereto in

accordance with Section 13(g) hereof. For purposes of this Agreement, a "Notice

of Termination" shall mean a notice which shall indicate the specific

termination provision in this Agreement relied upon and shall set forth in

reasonable detail the facts and circumstances claimed to provide a basis for

termination of employment under the provision so indicated.

 

         9.       Nondisclosure of Confidential Information; Non-Competition.

 

                  (a)      At any time during or after Executive's employment

with the Company, Executive shall not, without the prior written consent of the

Company, use, divulge, disclose or make accessible to any other person, firm,

partnership, corporation or other entity any Confidential Information (as

hereinafter defined) pertaining to the business of the Company or any of its

subsidiaries or affiliates, except (i) while employed by the Company, in the

business of and for the benefit of the Company, or (ii) when required to do so

by a court of competent jurisdiction, by any governmental agency having

supervisory authority over the business of the Company, or by any administrative

body or legislative body (including a committee thereof) with jurisdiction to

order Executive to divulge, disclose or make accessible such information. For

purposes of this Section 9(a), "Confidential Information" shall mean information

(whether or not in written form) which relates to Silver Lake Partners, the

Company or any of their

<PAGE>

respective subsidiaries or affiliates, or any of their respective businesses or

products (including, without limitation, their financial data, strategic

business plans, and other proprietary information) or to this Agreement, and

which is not known to the public generally (excluding public knowledge which

occurs as a result of Executive's breach of this covenant or the wrongful acts

of others who were under confidentiality obligations as to the item or items

involved), except in the conduct of the business of the Company, as in existence

as of the date of Executive's termination of employment.

 

                  (b)      As Interim Chief Executive Officer of the Company,

Executive will acquire knowledge of Confidential Information and trade secrets.

Executive acknowledges that the Confidential Information and trade secrets that

the Company has provided and will provide to Executive could play a significant

role were Executive to directly or indirectly be engaged in any business in

competition with the Company or its subsidiaries. For so long as the Executive

is employed by the Company and continuing for one (1) year thereafter, (A)

Executive shall not, directly or indirectly, as a sole proprietor, member of a

partnership, stockholder or investor (other than a stockholder or investor

owning not more than a 5% interest), officer or director of a corporation, or as

an employee, associate, consultant or agent of any person, partnership,

corporation or other business organization or entity other than the Company or

any of its subsidiaries, render any service to or in any way be affiliated with

a competitor (or any person or entity that is reasonably anticipated (to the

general knowledge of the Executive or the public) to become a competitor) of the

Company or any of its subsidiaries or affiliates in the business in which the

Company or any of its subsidiaries or affiliates is engaged and (B) Executive

shall not, on Executive's own behalf or on behalf of any person, firm or

company, directly or indirectly, solicit or offer employment to any person who

has been employed by the Company or its subsidiaries at any time during the 12

months immediately preceding such solicitation. Notwithstanding anything

contained in this Section 9(b) to the contrary, the period of applicability of

this Section 9(b) shall be extended an additional day for each day on which the

Executive is in breach of this Section 9(b).

 

                  (c)      The results and proceeds of Executive's services

hereunder, including, without limitation, any works of authorship resulting from

Executive's services during Executive's employment with the Company, its

subsidiaries and/or its affiliates and any works in progress, will be

works-for-hire and the Company will be deemed the sole owner throughout the

universe of any and all rights of whatsoever nature therein, whether or not now

or hereafter known, existing, contemplated, recognized or developed, with the

right to use the same in perpetuity in any manner the Company determines in its

sole discretion without any further payment to Executive whatsoever. If, for any

reason, any of such results and proceeds will not legally be a work-for-hire

and/or there are any rights which do not accrue to the Company under the

preceding sentence, then Executive hereby irrevocably assigns and agrees to

assign any and all of Executive's right, title and interest thereto, including,

without limitation, any and all copyrights, patents, trade secrets, trademarks

and/or other rights of whatsoever nature therein, whether or not now or

hereafter known, existing, contemplated, recognized or developed, to the

Company, and the Company will have the right to use the same in perpetuity

throughout the universe in any manner the Company determines without any further

payment to Executive whatsoever. Executive will, from time to time as may be

requested by the Company, (i) during the term of Executive's employment without

further consideration, and (ii) thereafter at Executive's then current hourly

rate, do any and all things which the Company may deem useful

<PAGE>

or desirable to establish or document the Company's exclusive ownership of any

and all rights in any such results and proceeds, including, without limitation,

the execution of appropriate copyright and/or patent applications or

assignments. To the extent Executive has any rights in the results and proceeds

of Executive's services that cannot be assigned in the manner described above,

Executive unconditionally and irrevocably waives the enforcement of such rights.

This subsection is subject to and will not be deemed to limit, restrict, or

constitute any waiver by the Company of any rights of ownership to which the

Company may be entitled by operation of law by virtue of the Company being

Executive's employer.

 

          10.     Specific Performance. Executive and the Company agree that the

covenants set forth in this Agreement are reasonable covenants under the

circumstances, and further agree that if in the opinion of any court of

competent jurisdiction such restraints are not reasonable in any respect, such

court shall have the right, power and authority to excise or modify such

provision or provisions of such covenant as to the court shall appear not

reasonable and to enforce the remainder of the covenant as so amended. Executive

agrees that any breach of the covenants contained in Section 9 would irreparably

injure the Company. Accordingly, Executive agrees the Company's remedies at law

for a breach or threatened breach of any of the provisions of Section 9 would be

inadequate and, in recognition of this fact, Executive agrees that, in the event

of such a breach or threatened breach, the Company may, without posting any

bond, in addition to pursuing any other remedies it may have in law or in

equity, cease making any payments otherwise required by this Agreement and

obtain equitable relief in the form of specific performance, temporary

restraining order, temporary or permanent injunction or any other equitable

remedy which may then be available against Executive from any court having

jurisdiction over the matter, restraining any further violation of the covenants

set forth in Section 9 by Executive.

 

          11.     Payment of Legal Fees. The Company agrees to pay Executive's

reasonable legal fees associated with entering into this Agreement upon

receiving an invoice for such legal services.

 

          12.     Miscellaneous.

 

                  (a)      Governing Law. This Agreement shall be governed by

and construed in accordance with the laws of the State of New Hampshire,

without regard to conflicts of laws principles thereof.

 

                  (b)      Entire Agreement/Amendments. This Agreement and the

other documents referenced in this Agreement contain the entire understanding of

the parties with respect to the employment of Executive by the Company. There

are no restrictions, agreements, promises, warranties, covenants or undertakings

between the parties with respect to the subject matter herein other than those

expressly set forth herein. This Agreement may not be altered, modified, or

amended except by written instrument signed by the parties hereto. This

Agreement supersedes all prior agreements and understandings (including verbal

agreements) between Executive and the Company regarding the terms and conditions

of Executive's employment with the Company, its subsidiaries and/or its

affiliates (collectively, the "Prior Agreements").

<PAGE>

                  (c)      No Waiver. The failure of a party to insist upon

strict adherence to any term of this Agreement on any occasion shall not be

considered a waiver of such party's rights or deprive such party of the right

thereafter to insist upon strict adherence to that term or any other term of

this Agreement.

 

                  (d)      Severability. The parties intend that the covenants

and agreements contained in the provisions of this Agreement shall be deemed to

be a series of separate covenants and agreements. If, in any judicial

proceeding, a court shall refuse to enforce all of the separate covenants deemed

included in the provisions of this Agreement, then such unenforceable covenants

shall be deemed eliminated from the provisions of this Agreement for the purpose

of such proceeding to the extent necessary to permit the remaining separate

covenants to be enforced in such proceeding. If any one or more of the covenants

contained in this Agreement is for any reason held to be excessively broad as to

duration, geographical scope, activity or subject, it will be construed by

limiting and reducing it, so as to be enforceable to the extent compatible with

the applicable law as it then appears.

 

                  (e)      Assignment. This Agreement shall not be assignable by

Executive. This Agreement may be assigned by the Company to a company that is a

successor in interest to substantially all of the business operations of the

Company. Such assignment shall become effective when the Company notifies the

Executive of such assignment or at such later date as may be specified in such

notice. Upon such assignment, the rights and obligations of the Company

hereunder shall become the rights and obligations of such successor company,

provided that any assignee expressly assumes the obligations, rights and

privileges of this Agreement.

 

                  (f)      Successors; Binding Agreement. This Agreement shall

inure to the benefit of and be binding upon personal or legal representatives,

executors, administrators, successors, heirs, distributes, devises and legatees.

 

                  (g)      Notice. For the purpose of this Agreement, notices

and all other communications provided for in the Agreement shall be in writing

and shall be deemed to have been duly given if (1) personally delivered, (2)

transmitted by facsimile (with written confirmation), (3) delivered by an

express courier (with written confirmation), or (4) mailed by United States

registered mail (in which case notice shall be deemed given on the third day

after such mailing), return receipt requested, postage prepaid, to the parties

at the addresses set forth below, or to such other address as either party may

have furnished to the other in writing in accordance herewith, except that

notice of change of address shall be effective only upon receipt.

 

                           If to the Company:

 

                           Enterasys Networks, Inc.

                           50 Minuteman Road

                           Andover, MA 01810

                           Attention: Chief Legal Officer

<PAGE>

                           If to Executive:

 

                           To the most recent address of Executive set forth in

                           the personnel records of the Company.

 

                  (h)      Withholding. The Company may withhold from any

amounts payable under this Agreement such Federal, state and local taxes or

other amounts as may be required to be withheld pursuant to any applicable law,

regulation or other authority to which the Company is subject.

 

                  (i)      Counterparts. This Agreement may be signed in

counterparts, each of which shall be an original, with the same effect as if the

signatures thereto and hereto were upon the same instrument.

 

                            [Signatures on next page]

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have duly executed this

Agreement as of the day and year first above written.

 

                                              ENTERASYS NETWORKS, INC.

 

                                              By: /s/ Gerald M. Haines II

                                                  -----------------------

                                              Name: Gerald M. Haines II

                                              Title: EVP

 

                                              EXECUTIVE:

 

                                                   /s/ William O'Brien

                                              ---------------------------

                                              William O'Brien

 

                                              ___________________________

 

                                              ___________________________

                                              Address