Employment Agreement

Severance Agreement

 

 

 

AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT

 

This AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT (“Agreement”) is made as of the 31st day of December, 2008, between Finisar Corporation, a Delaware corporation (the “Company”), and Eitan Gertel (“Executive”).

 

WHEREAS, Executive is currently a party to an employment agreement with the Company (the “Prior Agreement”) dated as of April 14, 2006 (the “Commencement Date”).  The Prior Agreement was entered into with Optium Corporation and was assumed by the Company on August 29, 2008.

 

WHEREAS, the Company desires to continue to employ Executive, and Executive desires to continue to be employed by the Company.

 

WHEREAS, the Company and Executive desire to amend and restate the terms and conditions of the Prior Agreement in order to bring those terms and conditions into documentary compliance with the final Treasury Regulations under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and continue Executive’s employment with the Company in accordance with those amended and restated terms and conditions.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

 

1.             Employment.  The term of this Agreement shall extend from the Commencement Date until the third anniversary of the Commencement Date; provided, however, that the term of this Agreement shall automatically be extended for one additional year on the third anniversary of the Commencement Date and each anniversary thereafter unless, not less than 90 days prior to each such date, either party shall have given notice to the other that it does not wish to extend this Agreement; provided, further, that if a Change in Control occurs during the original or extended term of this Agreement, the term of this Agreement shall continue in effect for a period of not less than twelve (12) months beyond the month in which the Change in Control occurred.  The term of this Agreement shall be subject to termination as provided in Paragraph 6 and may be referred to herein as the “Period of Employment.”

 

2.             Position and Duties.  During the Period of Employment, Executive shall serve as the Chief Executive Officer and member of the Board of Directors of the Company, and shall have supervision and control over and responsibility for the day-to-day business and affairs of those functions and operations of the Company and shall have such other powers and duties as may from time to time be prescribed by the Board of Directors of the Company (the “Board”), provided that such duties are consistent with Executive’s position or other positions that he may hold from time to time.  Executive shall devote his full working time and efforts to the business and affairs of the Company.  Notwithstanding the foregoing, Executive may serve on other boards of directors, with the approval of the Board, or engage in religious, charitable or other community activities as long as such services and activities are disclosed to the Board and do not materially interfere with Executive’s performance of his duties to the Company as provided in this Agreement.

 



 

3.             Compensation and Related Matters.

 

(a)           Base Salary and Incentive Compensation.  Executive’s initial annual base salary shall be $444,000.  Executive’s base salary shall be redetermined annually by the Board or a Committee thereof; provided, that following a Change in Control (as defined below), Executive’s base salary may not be reduced except for across-the-board reductions similarly affecting all or substantially all management employees.  The base salary in effect at any given time is referred to herein as “Base Salary.” The Base Salary shall be payable in substantially equal bi-weekly installments.  In addition to Base Salary, Executive shall be eligible to receive cash incentive compensation as determined by the Board or a Committee thereof from time to time, and shall also be eligible to participate in such incentive compensation plans as the Board or a Committee thereof shall determine from time to time for employees of the same status within the hierarchy of the Company.

 

(b)           Expenses.  Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by him in performing services hereunder during the Period of Employment, in accordance with the policies and procedures then in effect and established by the Company for its senior executive officers.  Executive must submit to the Company receipts and other details of each such expense in the form required by the Company within 60 days after the later of (i) Executive’s incurrence of such expense or (ii) Executive’s receipt of the invoice for such expense.  If such expense qualifies for reimbursement, then the Company shall reimburse Executive the expense within 30 days thereafter.  In no event will such expense be reimbursed after the close of the calendar year following the calendar year in which that expense is incurred.  The amount of reimbursements to which Executive may become entitled in any one calendar year shall not affect the amount of expenses eligible for reimbursement hereunder in any other calendar year.  Executive’s right to reimbursement cannot be liquidated or exchanged for any other benefit or payment.

 

(c)           Other Benefits.  During the Period of Employment, Executive shall be entitled to participate in or receive benefits under all of the Company’s Employee Benefit Plans in effect for all executive level personnel or applicable generally to employees of the Company from time to time, subject to the terms and conditions of such plans.  As used herein, the term “Employee Benefit Plans” includes, without limitation, each pension and retirement plan; supplemental pension, retirement and deferred compensation plan; savings and profit-sharing plan; stock ownership plan; stock purchase plan; stock option plan; life insurance plan; medical insurance plan; disability plan; and health and accident plan or arrangement established and maintained by the Company on the date hereof for employees of the same status within the hierarchy of the Company.  To the extent that the scope or nature of benefits described in this section is determined under the policies of the Company based in whole or in part on the seniority of an employee’s service, Executive shall be deemed to have seniority with the Company equal to the actual time of Executive’s service with the Company.  During the Period of Employment, Executive shall be entitled to participate in or receive benefits under any employee benefit plan or arrangement which may, in the future, be made available by the Company to its executives and key management employees, subject to and on a basis consistent with the terms, conditions and overall administration of such plan or arrangement.  Any payments or benefits payable to Executive under a plan or arrangement referred to in this Subparagraph 3(c) in respect of any calendar year during which Executive is employed by the Company for less than the whole of

 

2



 

such year shall, unless otherwise provided in the applicable plan or arrangement, be prorated in accordance with the number of days in such calendar year during which he is so employed.  Should any such payments or benefits accrue on a fiscal (rather than calendar) year, then the proration in the preceding sentence shall be on the basis of a fiscal year rather than calendar year.

 

(d)           Paid Time Off.  Executive shall be entitled to twenty (20) days of paid time off in each calendar year usuable in accordance with the Company’s policies, which shall be accrued ratably during the calendar year.  Executive shall also be entitled to all paid holidays given by the Company to its executives.  To the extent that the scope or nature of benefits described in this section are determined under the policies of the Company based in whole or in part on the seniority or tenure of an employee’s service, Executive shall be deemed to have a tenure with the Company equal to the actual time of Executive’s service with Company.

 

4.             Termination.  Executive’s employment hereunder may be terminated without any breach of this Agreement under the following circumstances:

 

(a)           Death.  Executive’s employment hereunder shall terminate upon his death.

 

(b)           Disability.  If, as a result of Executive’s incapacity due to physical or mental illness, Executive shall have been absent from his duties hereunder on a full-time basis for one hundred eighty (180) calendar days in the aggregate in any twelve (12) month period, the Company may terminate Executive’s employment hereunder.

 

(c)           Termination by Company For Cause.  At any time during the Period of Employment, the Company may terminate Executive’s employment hereunder for Cause if such termination is approved by not less than a majority of the Board at a meeting of the Board called and held for such purpose.  For purposes of this Agreement, “Cause” shall mean: (A) conduct by Executive constituting a material act of willful misconduct in connection with the performance of his duties, including, without limitation, misappropriation of funds or property of the Company or any of its affiliates other than the occasional, customary and de minimis use of Company property for personal purposes; (B) criminal or civil conviction or indictment of Executive, a plea of nolo contendere by Executive or conduct by Executive that would reasonably be expected to result in material injury to the reputation of the Company if he were retained in his position with the Company, including, without limitation, conviction or indictment of a felony involving moral turpitude; (C) continued, willful and deliberate nonperformance by Executive of his duties hereunder (other than by reason of Executive’s physical or mental illness, incapacity or disability) which has continued for more than thirty (30) days following written notice of such non-performance from the Board; (D) a breach by Executive of any of the material provisions of the Executive’s Employee Agreement regarding Inventions, Confidentiality and Non-Competition (the “Employee Agreement”) which is not or cannot be cured within ten (10) days following written notice of such breach from the Board; or (E) a material violation by Executive of the Company’s employment policies which has continued following written notice of such violation from the Board.  In the event that the agreements or plans governing any of Executive’s stock-based grants and awards include and use a definition of “Cause”, the definition of Cause above shall supersede and apply in place of any such definition in the applicable agreement and/or plan with respect to Executive’s applicable stock-based grants and awards.

 

3



 

(d)           Termination Without Cause.  At any time during the Period of Employment, the Company may terminate Executive’s employment hereunder without Cause if such termination is approved by the Board at a meeting of the Board called and held for such purpose.  Any termination by the Company of Executive’s employment under this Agreement which does not constitute a termination for Cause under Subparagraph 4(c) or result from the death or disability of the Executive under Subparagraph 4(a) or (h) shall be deemed a termination without Cause.  If the Company provides notice to Executive under Paragraph 1 that it does not wish to extend the Period of Employment, such action shall be deemed a termination without Cause.

 

(e)           Termination by Executive.  At any time during the Period of Employment, Executive may terminate his employment hereunder for any reason, including but not limited to Constructive Termination.  If Executive provides notice to the Company under Paragraph 1 that he does not wish to extend the Period of Employment, such action shall be deemed a voluntary termination by Executive and one without Constructive Termination.  For purposes of this Agreement, “Constructive Termination” shall mean that Executive has complied with the “Constructive Termination Process” (hereinafter defined) following the occurrence of any of the following events:  (A) a substantial diminution or other substantive adverse change, not consented to by Executive, in the nature or scope of Executive’s responsibilities, authorities, powers, functions or duties; (B) any removal, during the Period of Employment, from Executive of his membership on the Board; (C) an involuntary, material reduction in Executive’s Base Salary except for across-the-board reductions similarly affecting all or substantially all management employees; (D) a breach by the Company of any of its other material obligations under this Agreement; (E) the involuntary relocation of the Company’s offices at which Executive is principally employed to a location more than fifty (50) miles from such offices, or the requirement by the Company that Executive be based anywhere other than the Company’s offices at such location on an extended basis, except for required travel on the Company’s business to an extent substantially consistent with Executive’s business travel obligations; or (F) the failure of the Company to obtain the agreement from any successor to the Company to assume and agree to perform this Agreement as required by Paragraph 9.  “Constructive Termination Process” shall mean that (i) Executive reasonably determines in good faith that a “Constructive Termination” event has occurred; (ii) Executive notifies the Company in writing of the occurrence of the Constructive Termination event within ninety (90) days following the initial occurrence of such event; (iii) Executive cooperates in good faith with the Company’s efforts, for a period not less than sixty (60) days following such notice, to modify Executive’s employment situation in a manner acceptable to Executive and Company; and (iv) notwithstanding such efforts, one or more of the Constructive Termination events continues to exist and has not been modified in a manner acceptable to Executive.  If the Company cures the Constructive Termination event in a manner acceptable to Executive during the sixty (60) day period, Constructive Termination shall be deemed not to have occurred.  In the event that the agreements or plans governing any of Executive’s stock-based grants and awards include and use a definition of “Constructive Termination”, the definition of Constructive Termination above shall supersede and apply in place of any such definition in the applicable agreement and/or plan with respect to Executive’s applicable stock-based grants and awards.

 

(f)            Notice of Termination.  Except for termination as specified in Subparagraph 4(a), any termination of Executive’s employment by the Company or any such termination by Executive shall be communicated by written Notice of Termination to the other party hereto.  For

 

4



 

purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon.

 

(g)           Date of Termination.  “Date of Termination” shall mean: (A) if Executive’s employment is terminated by his death, the date of his death; (B) if Executive’s employment is terminated on account of disability under Subparagraph 4(b) or by the Company for Cause under Subparagraph 4(c), the date on which Notice of Termination is given; (C) if Executive’s employment is terminated by the Company under Subparagraph 4(d), sixty (60) days after the date on which a Notice of Termination is given; and (D) if Executive’s employment is terminated by Executive under Subparagraph 4(e), thirty (30) days (sixty (60) days in case of Constructive Termination) after the date on which a Notice of Termination is given.

 

5.             Compensation Upon Termination or During Disability.

 

(a)           If Executive’s employment terminates by reason of his death, the Company shall, within ninety (90) days of death, pay in a lump sum amount to such person as Executive shall designate in a notice filed with the Company or, if no such person is designated, to Executive’s estate, Executive’s accrued and unpaid Base Salary to the date of his death, plus his accrued and unpaid incentive compensation, if any, under Subparagraph 3(a), plus his unused paid time off.  All stock-based grants and awards held by Executive shall be treated upon the death of the Executive in accordance with their terms.  For a period of one (1) year following the Date of Termination, the Company shall reimburse such health insurance premiums as may be necessary to allow Executive’s spouse and dependents to receive health insurance coverage substantially similar to coverage they received prior to the Date of Termination.  In addition to the foregoing, any payments to which Executive’s spouse, beneficiaries, or estate may be entitled under any employee benefit plan shall also be paid in accordance with the terms of such plan or arrangement subject to compliance with Code Section 409A.  Such payments, in the aggregate, shall fully discharge the Company’s obligations hereunder.

 

(b)           During any period that Executive fails to perform his duties hereunder as a result of incapacity due to physical or mental illness, Executive shall continue to receive his accrued and unpaid Base Salary and accrued and unpaid incentive compensation, if any, under Subparagraph 3(a), until Executive’s employment is terminated due to disability in accordance with Subparagraph 4(b) or until Executive terminates his employment in accordance with Subparagraph 4(e), whichever first occurs.  Any such payments shall be made upon Executive’s Separation from Service to the extent required by Section 409A.  All stock-based grants and awards held by Executive shall be treated upon the Date of Termination in accordance with their terms.  In the event that Executive’s employment is terminated due to disability in accordance with subparagraph 4(b), then for a period of one (1) year following the Date of Termination, the Company shall reimburse Executive for such health insurance premiums as may be necessary to allow Executive and Executive’s spouse and dependents to receive health insurance coverage substantially similar to coverage they received prior to the Date of Termination.  Upon termination due to death prior to the termination first to occur as specified in the preceding sentence, Subparagraph 5(a) shall apply.

 

(c)           If Executive’s employment is terminated by Executive other than for Constructive Termination as provided in Subparagraph 4(e), then the Company shall, through the Date of

 

5



 

Termination, pay Executive his accrued and unpaid Base Salary at the rate in effect at the time Notice of Termination is given, plus his unused paid time off.  Thereafter, the Company shall have no further obligations to Executive except as otherwise expressly provided under this Agreement, provided any such termination shall not adversely affect or alter Executive’s rights under any employee benefit plan of the Company in which Executive, at the Date of Termination, has a vested interest, unless otherwise provided in such employee benefit plan or any agreement or other instrument attendant thereto.  All stock-based grants and awards held by Executive shall be treated upon the Date of Termination in accordance with their terms.

 

(d)           If Executive terminates his employment for Constructive Termination as provided in Subparagraph 4(e) or if Executive’s employment is terminated by the Company without Cause as provided in Subparagraph 4(d), then the Company shall, through the Date of Termination, pay Executive his accrued and unpaid Base Salary at the rate in effect at the time Notice of Termination is given and his accrued and unpaid incentive compensation, if any, under Subparagraph 3(a), plus his unused paid time off.  In addition, subject to signing by Executive of a general mutual release of claims in a form and manner satisfactory to the Company (the “Release”) within 21 days (or 45 days if such longer period is required by applicable law) following termination and such Release becoming effective in accordance with its terms following the lapse of any applicable revocation period,

 

(i)            the Company shall pay Executive an amount equal to one (1) times the sum of Executive’s current Base Salary and his Average Incentive Compensation (the “Severance Amount”).  The Severance Amount shall be paid out in substantially equal biweekly installments over twelve (12) months, in arrears in accordance with the Company’s normal payroll schedule for salaried employees commencing on the first pay day following the 60th day after Executive’s Separation from Service.  For purposes of this Agreement, “Average Incentive Compensation” shall mean the average of the annual incentive compensation under Subparagraph 3(a) received by Executive for the three (3) immediately preceding fiscal years or such fewer number of complete fiscal years as Executive may have been employed by the Company.  In no event shall “Average Incentive Compensation” include any sign-on bonus, retention bonus or any other special bonus.  Notwithstanding the foregoing, if the Executive breaches any of the material provisions contained in the Employee Agreement, all payments of the Severance Amount shall immediately cease.  Furthermore, in the event Executive terminates his employment for Constructive Termination as provided in Subparagraph 4(e), he shall be entitled to the Severance Amount only if he provides the Notice of Termination provided for in Subparagraph 4(f) within thirty (30) days after the occurrence of the event or events which constitute such Constructive Termination as specified in clauses (A), (B), (C), (D) and (E) of Subparagraph 4(e); and

 

(ii)           in addition to any other benefits to which Executive may be entitled in accordance with the Company’s then existing severance policies, the Company shall, for a period of one (1) year commencing on the Date of Termination, reimburse Executive for such health insurance premiums as may be necessary to allow Executive and Executive’s spouse and dependents to continue to receive health insurance coverage substantially similar to coverage they received prior to the Date of Termination.

 

6



 

(e)           If Executive’s employment is terminated by the Company for Cause as provided in Subparagraph 4(c), then the Company shall, through the Date of Termination, pay Executive his accrued and unpaid Base Salary at the rate in effect at the time Notice of Termination is given, plus his unused paid time off.  Thereafter, the Company shall have no further obligations to Executive except as otherwise expressly provided under this Agreement, provided any such termination shall not adversely affect or alter Executive’s rights under any employee benefit plan of the Company in which Executive, at the Date of Termination, has a vested interest, unless otherwise provided in such employee benefit plan or any agreement or other instrument attendant thereto.  All stock-based grants and awards held by Executive shall be treated upon the Date of Termination in accordance with their terms.

 

(f)            Nothing contained in the foregoing Subparagraphs 5(a) through 5(e) shall be construed so as to affect Executive’s rights or the Company’s obligations relating to agreements or benefits which are unrelated to termination of employment.

 

(g)           For purposes of this Agreement, “Separation from Service” shall mean the date on which the level of Executive’s bona fide services as an Employee (or non-employee consultant) permanently decreases to a level that is not more than twenty percent (20%) of the average level of services Executive rendered as an Employee during the immediately preceding thirty-six (36) months (or any shorter period of such Employee service). Any such determination, however, shall be made in accordance with the applicable standards of the Treasury Regulations issued under Code Section 409A. In addition to the foregoing, a Separation from Service will not be deemed to have occurred while Executive is on a sick leave or other bona fide leave of absence if the period of such leave does not exceed six (6) months or any longer period for which Executive’s right to reemployment with the Company is provided by either statute or contract; provided, however, that in the event of a leave of absence due to any medically determinable physical or mental impairment that can be expected to result in death or to last for a continuous period of not less than six (6) months and that causes Executive to be unable to perform his  duties as an Employee, no Separation from Service shall be deemed to occur during the first twenty-nine (29) months of such leave.  If the period of the leave exceeds six (6) months (or twenty-nine (29) months in the event of disability as indicated above) and Executive is not provided with a right to reemployment by either statute or contract, then Executive will be deemed to have Separated from Service on the first day immediately following the expiration of the applicable six (6)-month or twenty-nine (29)-month period.  The Executive shall be deemed to remain an “Employee” for so long he remains in the employ of at least one member of the Employer Group, subject to the control and direction of the employer entity as to both the work to be performed and the manner and method of performance.  “Employer Group” shall mean the Company and each member of the group of commonly controlled corporations or other businesses that include the Company, as determined in accordance with Sections 414(b) and (c) of the Code and the Treasury Regulations thereunder, except that in applying Sections 1563(1), (2) and (3) for purposes of determining the controlled group of corporations under Section 414(b), the phrase “at least 50 percent” shall be used instead of “at least 80 percent” each place the latter phrase appears in such sections, and in applying Section 1.414(c)-2 of the Treasury Regulations for purposes of determining trades or businesses that are under common control for purposes of Section 414(c), the phrase “at least 50 percent” shall be used instead of “at least 80 percent” each place the latter phrase appears in Section  1.414(c)-2 of the Treasury Regulations.

 

7



 

(h)           The following provisions shall apply with respect to the reimbursement of healthcare premium payments under this Paragraph 5:  Executive (or Executive’s spouse or dependents, as applicable) must submit to the Company receipts and other details of each such periodic premium payment in the form required by the Company within 60 days after the payment date and the Company shall reimburse such person(s) for that payment within 30 days thereafter.  In no event will such payment be reimbursed after the close of the calendar year following the calendar year in which that payment is incurred.  The amount of reimbursements to which Executive (or Executive’s spouse or dependents, as applicable) may become entitled in any one calendar year shall not affect the amount of payment eligible for reimbursement hereunder in any other calendar year.  Such right to reimbursement cannot be liquidated or exchanged for any other benefit or payment.

 

6.             Change in Control Payment.  The provisions of this Paragraph 6 set forth certain terms of an agreement reached between Executive and the Company regarding Executive’s rights and obligations upon the occurrence of a Change in Control of the Company.  These provisions are intended to assure and encourage in advance Executive’s continued attention and dedication to his assigned duties and his objectivity during the pendency and after the occurrence of any such event.  These provisions shall apply in lieu of, and expressly supersede, the provisions of Subparagraph 5(d)(i) regarding severance pay upon a termination of employment, if such termination of employment occurs within twelve (12) months after the occurrence of the first event constituting a Change of Control, provided that such first event occurs during the Period of Employment.  These provisions shall terminate and be of no further force or effect beginning twelve (12) months after the occurrence of a Change of Control.

 

(a)           Change in Control.  If within twelve (12) months after the occurrence of the first event constituting a Change in Control, Executive’s employment is terminated by the Company without Cause as provided in Subparagraph 4(d) or Executive terminates his employment for Constructive Termination as provided in Subparagraph 4(e) and Executive signs the Release in accordance with the provisions of Subparagraph 5(d) and such Release becomes effective in accordance with its terms following any applicable revocation period, then

 

(i)            the Company shall pay Executive a lump sum in cash in an amount equal to his unused paid time off, plus two (2) times the sum of (A) Executive’s current Base Salary plus (B) Executive’s most recent annual incentive compensation under Subparagraph 3(a) for the most recent fiscal year, excluding any sign-on bonus, retention bonus or any other special bonus.  Such amount shall be paid within 60 days following Executive’s Separation from Service provided the Release has become effective following the expiration of any applicable revocation period;

 

(ii)           Executive shall be entitled to any rights and benefits with respect to stock-related awards, to the extent and upon the terms provided in the applicable incentive agreement or any agreement or other instrument attendant thereto pursuant to which such options or awards were granted; and

 

(iii)          the Company shall, for a period of one (1) year commencing on the Date of Termination, reimburse Executive for such health insurance premiums as may be necessary to allow Executive, Executive’s spouse and dependents to continue to receive

 

8



 

health insurance coverage substantially similar to the coverage they received prior to the Date of Termination.  The provisions of Section 5(h) shall apply to such reimbursements.

 

(b)           Gross Up Payment.

 

(i)            Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any compensation, payment or distribution by the Company to or for the benefit of Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, including, without limitation, pursuant to the terms of any stock options or other stock-related awards (the “Severance Payments”), would be subject to the excise tax imposed by Code Section 4999, or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), then Executive shall be entitled to receive an additional payment (a “Gross-Up Payment”) such that the net amount retained by Executive, after deduction of any Excise Tax on the Severance Payments, any Federal, state, and local income tax, employment tax and Excise Tax upon the payment provided by this subsection, and any interest and/or penalties assessed with respect to such Excise Tax, shall be equal to the Severance Payments.

 

(ii)           Subject to the provisions of Subparagraph 6(b)(iii), all determinations required to be made under this Subparagraph 6(b)(ii), including whether a Gross-Up Payment is required and the amount of such Gross-Up Payment, shall be made by Ernst & Young or any other nationally recognized accounting firm selected by the Company (the “Accounting Firm”), which shall provide detailed supporting calculations both to the Company and Executive within fifteen (15) business days of Executive’s Separation from Service, if applicable, or at such earlier time as is reasonably requested by the Company or Executive.  For purposes of determining the amount of the Gross-Up Payment, Executive shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation applicable to individuals for the calendar year in which the Gross-Up Payment is to be made, and state and local income taxes at the highest marginal rates of individual taxation in the state and locality of Executive’s residence on the Date of Termination, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes.  The initial Gross-Up Payment, if any, as determined pursuant to this Subparagraph 6(b)(ii), shall be paid to Executive within five (5) days of the receipt of the Accounting Firm’s determination or, if later, the date that the related Excise Tax is remitted to the tax authorities.  If the Accounting Firm determines that no Excise Tax is payable by Executive, the Company shall furnish Executive with an opinion of counsel that failure to report the Excise Tax on Executive’s applicable federal income tax return would not result in the imposition of a negligence or similar penalty.  Any determination by the Accounting Firm shall be binding upon the Company and Executive.  As a result of uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made (an “Underpayment”).  In the event that the Company exhausts its remedies pursuant to Subparagraph 6(b)(iii) and Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the

 

9



 

Underpayment that has occurred, consistent with the calculations required to be made hereunder, and any such Underpayment, and any interest and penalties imposed on the Underpayment and required to be paid by Executive in connection with the proceedings described in Subparagraph 6(b)(iii), shall be paid by the Company to or for the benefit of Executive within five (5) days of the receipt of the Accounting Firm’s determination or, if later, the date that the related Excise Tax is remitted to the tax authorities.

 

(iii)          Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-up Payment.  Such notification shall be given as soon as practicable but no later than ten (10) business days after Executive knows of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid.  Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which he gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due).  If the Company notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, provided that the Company has set aside adequate reserves to cover the Underpayment and any interest and penalties thereon that may accrue, Executive shall:

 

(A)          give the Company any information reasonably requested by the Company relating to such claim,

 

(B)           take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney selected by the Company,

 

(C)           cooperate with the Company in good faith in order to effectively contest such claim, and

 

(D)          permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or income tax, including interest and penalties with respect thereto, imposed as a result of such representation and payment of costs and expenses.  Without limitation on the foregoing provisions of this Subparagraph 6(b)(iii), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs Executive to pay such claim and sue for a

 

10



 

refund, the Company shall advance the amount of such payment to Executive on an interest-free basis and shall indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income tax, including interest or penalties with respect thereto, imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount.  Furthermore, the Company’s control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive shall be entitled to settle or contest, as the case may be, any other issues raised by the Internal Revenue Service or any other taxing authority.

 

(iv)          If, after the receipt by Executive of an amount advanced by the Company pursuant to Subparagraph 6(b)(iii), Executive becomes entitled to receive any refund with respect to such claim, Executive shall (subject to the Company’s complying with the requirements of Subparagraph 6(b)(iii)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto).  If, after the receipt by Executive of an amount advanced by the Company pursuant to Subparagraph 6(b)(iii), a determination is made that Executive shall not be entitled to any refund with respect to such claim and the Company does not notify Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset (subject to compliance with Code Section 409A), to the extent thereof, the amount of Gross-Up Payment required to be paid.

 

(v)           Notwithstanding anything to the contrary in the foregoing, any Gross-Up Payments due Executive under this subsection 6 shall be subject to the hold-back provisions of Paragraph 8. In addition, no Gross-Up Payment shall be made later than the end of the calendar year following the calendar year in which the related taxes are remitted to the appropriate tax authorities or such other specified time or schedule that may be permitted under Code Section 409A.  To the extent Executive becomes entitled to any reimbursement of expenses incurred at the direction of the Company in connection with any tax audit or litigation addressing the existence or amount of the Excise Tax, such reimbursement shall be paid to Executive no later than the later of (i) the close of the calendar year in which the Excise Tax that is the subject of such audit or litigation is paid by Executive or (ii) the end of the sixty (60)-day period measured from such payment date.  If no Excise Tax liability is found to be due as a result of such audit or litigation, the reimbursement shall be paid to Executive no later than the later of (i) the close of the calendar year in which the audit is completed or there is a final and non-appealable settlement or other resolution of the litigation or (ii) the end of the sixty (60)-day period measured from the date the audit is completed or the date the litigation is so settled or resolved.  Any payment of taxes by the Company to or on behalf of Executive as a result of payments under Subparagraph 6(b)(iii) shall be paid when the taxes are remitted to the tax authorities.

 

11



 

(c)           Definitions.  For purposes of this Paragraph 6, “Change in Control” shall have the following meaning:

 

(i)            any “person,” as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Act”) (other than the Company, any of its subsidiaries, or any trustee, fiduciary or other person or entity holding securities under any employee benefit plan or trust of the Company or any of its subsidiaries), together with all “affiliates” and “associates” (as such terms are defined in Rule 12b-2 under the Act) of such person, shall acquire (as such term is defined in Rule 13d-3 under the Act) (or has acquired during the twelve (12)-month period ending on the date of the most recent acquisition by such person), directly or indirectly, securities of the Company representing thirty percent (30%) or more of either (A) the combined voting power of the Company’s then outstanding securities having the right to vote in an election of the Company’s Board (“Voting Securities”) or (B) the then outstanding shares of Company’s stock; or

 

(ii)           during any twelve (12)-month period persons who, as of the Commencement Date, constitute the Company’s Board (the “Incumbent Directors”) cease for any reason, including, without limitation, as a result of a tender offer, proxy contest, merger or similar transaction, to constitute at least a majority of the Board, provided that any person becoming a director of the Company subsequent to the Commencement Date shall be considered an Incumbent Director if such person’s election was approved by or such person was nominated for election by a vote of at least a majority of the Incumbent Directors then constituting the Board or the nominating committee thereof; but provided further, that any such person whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of members of the Board or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board, including by reason of agreement intended to avoid or settle any such actual or threatened contest or solicitation, shall not be considered an Incumbent Director; or

 

(iii)          there shall occur (A) any consolidation or merger of the Company where the stockholders of the Company, immediately prior to the consolidation or merger, do not, immediately after the consolidation or merger, beneficially own (as such term is defined in Rule 13d-3 under the Act), directly or indirectly, shares representing in the aggregate fifty percent (50%) or more of the voting shares of the Company issuing cash or securities in the consolidation or merger (or of its ultimate parent corporation, if any) or (B) any sale, lease, exchange or other transfer (in one transaction or a series of transactions contemplated or arranged by any party as a single plan) of all or substantially all of the assets of the Company.

 

In the event that the agreements or plans governing any of Executive’s stock-based grants and awards include and use a definition of “Change of Control”, the definition of Change of Control above shall supersede and apply in place of any such definition in the applicable agreement and/or plan with respect to Executive’s applicable stock-based grants and awards.

 

12



 

7.             Stock-Based Grants and Awards.  All of the Executive’s stock-based grants and awards will continue to vest during any time of Executive’s incapacity due to physical or mental illness or during any time that the Executive is on leave from the Company pursuant to the federal Family and Medical Leave Act of 1993, as amended.

 

8.             Section 409A.

 

(a)           This Agreement is intended to comply with the requirements of Code Section 409A.  Accordingly, all provisions herein  shall be construed and interpreted to comply with Code Section 409A and if necessary, any such provision shall be deemed amended to comply with Code Section 409A and the regulations thereunder.  The right to a series of payments hereunder shall be treated as a right to a series of separate payments for purposes of Code Section 409A.

 

(b)           Notwithstanding any provision to the contrary in this Agreement, no payments or benefits to which Executive becomes entitled under Paragraph 5 of this Agreement (other than the reimbursement of healthcare premium payments during the applicable period of COBRA coverage) shall be made or paid to Executive prior to the earlier of (i) the first day of the seventh (7th) month following the date of his Separation from Service due to such termination of employment or (ii) the date of his death, if Executive is deemed, pursuant to the procedures established by the Compensation Committee in accordance with the applicable standards of Code Section 409A and the Treasury Regulations thereunder and applied on a consistent basis for all for all non-qualified deferred compensation plans of the Employer Group subject to Code Section 409A, to be a “specified  employee” at the time of such Separation from Service  and such delayed commencement is otherwise required in order to avoid a prohibited distribution under Code Section 409A(a)(2).  Upon the expiration of the applicable Code Section 409A(a)(2) deferral period, all payments deferred pursuant to this Subparagraph 8(b) shall be paid in a lump sum to Executive, and any remaining payments due under this Agreement shall be paid in accordance with the normal payment dates specified for them herein.   The specified employees subject to such a delayed commencement date shall be identified as of December 31 of each calendar year.  If Executive is so identified as of any such December 31, he shall have specified employee status for the twelve (12)-month period beginning on April 1 of the following calendar year.

 

9.             Notice.  For purposes 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 when delivered or mailed by United States certified mail, return receipt requested, postage prepaid, addressed as follows:

 

if to the Executive:

 

At his home address as shown
in the Company’s personnel records;

 

if to the Company:

 

Finisar Corporation
1389 Moffett Park Drive
Sunnyvale, CA 94089-1133
Attention: General Counsel

 

13



 

or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

 

10.           Successor to Company.  The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company expressly to assume and agree to perform this Agreement to the same extent that the Company would be required to perform it if no succession had taken place.  Failure of the Company to obtain an assumption of this Agreement at or prior to the effectiveness of any succession shall be a breach of this Agreement and shall constitute Constructive Termination if the Executive elects to terminate employment.

 

11.           Miscellaneous.  No provisions of this Agreement may be modified, waived, or discharged unless such waiver, modification, or discharge is agreed to in writing and signed by Executive and such officer of the Company as may be specifically designated by the Board.  No waiver by either party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.  No agreements or representations, oral or otherwise, express or implied, unless specifically referred to herein, with respect to the subject matter hereof have been made by either party which are not set forth (or in the case of the Employee Agreement, referenced) expressly in this Agreement.  The validity, interpretation, construction, and performance of this Agreement shall be governed by the laws of the Commonwealth of Pennsylvania (without regard to principles of conflicts of laws).

 

12.           Entire Agreement.  This Agreement, together with any agreements evidencing any outstanding equity awards made to Executive by the Company, constitutes the entire agreement between the parties and supersedes all prior oral and written agreements between the parties hereto with respect to the subject matter hereof, including, but not limited to, the Prior Agreement, which is terminated and no longer in force and effect.

 

13.           Validity.  The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.  The invalid portion of this Agreement, if any, shall be modified by any court having jurisdiction to the extent necessary to render such portion enforceable.

 

14.           Counterparts.  This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

 

15.           Arbitration; Other Disputes.  In the event of any dispute or controversy arising under or in connection with this Agreement, the parties shall first promptly try in good faith to settle such dispute or controversy by mediation under the applicable rules of the American Arbitration Association before resorting to arbitration.  In the event such dispute or controversy remains unresolved in whole or in part for a period of thirty (30) days after it arises, the parties will settle

 

14



 

any remaining dispute or controversy exclusively by arbitration in Philadelphia, Pennsylvania, in accordance with the rules of the American Arbitration Association then in effect.  Judgment may be entered on the arbitrator’s award in any court having jurisdiction.  Notwithstanding the above, the Company shall be entitled to such a restraining order or injunction in any court of competent jurisdiction to prevent any violation of the Employee Agreement.  Furthermore, should a dispute occur concerning Executive’s mental or physical capacity as described in Subparagraph 4(b), 4(c) or 5(b), a doctor selected by Executive and a doctor selected by the Company shall be entitled to examine Executive.  If the opinion of the Company’s doctor and Executive’s doctor conflict, the Company’s doctor and Executive’s doctor shall together agree upon a third doctor, whose opinion shall be binding.

 

16.           Third-Party Agreements and Rights.  Executive represents to the Company that Executive’s execution of this Agreement, Executive’s employment with the Company and the performance of Executive’s proposed duties for the Company will not violate any obligations Executive may have to any employer or other party, and Executive will not bring to the premises of the Company any copies or other tangible embodiments of non-public information belonging to or obtained from any such previous employment or other party.

 

17.           Litigation and Regulatory Cooperation.  During and after Executive’s employment, Executive shall reasonably cooperate with the Company in the defense or prosecution of any claims or actions now in existence or which may be brought in the future against or on behalf of the Company which relate to events or occurrences that transpired while Executive was employed by the Company; provided, however, that such cooperation shall not materially and adversely affect Executive or expose Executive to an increased probability of civil or criminal litigation.  Executive’s cooperation in connection with such claims or actions shall include, but not be limited to, being available to meet with counsel to prepare for discovery or trial and to act as a witness on behalf of the Company at mutually convenient times.  During and after Executive’s employment, Executive also shall cooperate fully with the Company in connection with any investigation or review of any federal, state or local regulatory authority as any such investigation or review relates to events or occurrences that transpired while Executive was employed by the Company.  The Company shall also provide Executive with compensation on an hourly basis (to be derived from the sum of his Base Compensation and Average Incentive Compensation) for requested litigation and regulatory cooperation that occurs after his termination of employment, and reimburse Executive for all costs and expenses incurred in connection with his performance under this Paragraph 17, including, but not limited to, reasonable attorneys’ fees and costs.

 

18.           Gender Neutral.  Wherever used herein, a pronoun in the masculine gender shall be considered as including the feminine gender unless the context clearly indicates otherwise.

 

19.           Right to Counsel.  Executive acknowledges that he has had the right to consult with counsel and is fully aware of his rights and obligations under this Agreement.

 

15



 

IN WITNESS WHEREOF, the parties have executed this Agreement effective on the date and year first above written.

 

 

FINISAR CORPORATION

 

 

 

 

 

 

 

By:

/s/ Christopher Brown

 

Its:

General Counsel

 

 

 

 

 

 

EXECUTIVE

 

 

 

/s/ Eitan Gertel

 

Name: Eitan Gertel

 

16


 

 

 

 

 

 

 

 

FINISAR CORPORATION
EXECUTIVE RETENTION AND SEVERANCE PLAN
AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2009

 

1.             ESTABLISHMENT AND PURPOSE

 

1.1           ESTABLISHMENT. The Finisar Corporation Executive Retention and Severance Plan (the “PLAN”) was established by the Compensation Committee of the Board of Directors of Finisar Corporation, effective February 25, 2003 (the “EFFECTIVE DATE”).  The Plan is amended and restated effective January 1, 2009 to bring the provisions of the Plan into documentary compliance with the applicable requirements of Section 409A of the Internal Revenue Code, as amended (the “Code”) and the Treasury Regulations issued thereunder.

 

1.2           PURPOSE. The Company draws upon the knowledge, experience and advice of its Officers and Key Employees in order to manage its business for the benefit of the Company’s stockholders. Due to the widespread awareness of the possibility of mergers, acquisitions and other strategic alliances in the Company’s industry, the topic of compensation and other employee benefits in the event of a Change in Control is an issue in competitive recruitment and retention efforts. The Committee recognizes that the possibility or pending occurrence of a Change in Control could lead to uncertainty regarding the consequences of such an event and could adversely affect the Company’s ability to attract, retain and motivate its Officers and Key Employees. The Committee has therefore determined that it is in the best interests of the Company and its stockholders to provide for the continued dedication of its Officers and Key Employees notwithstanding the possibility or occurrence of a Change in Control by establishing this Plan to provide designated Officers and Key Employees with enhanced financial security in the event of a Change in Control. The purpose of this Plan is to provide its Participants with specified compensation and benefits in the event of termination of employment under circumstances specified herein upon or following a Change in Control.

 

2.             DEFINITIONS AND CONSTRUCTION

 

2.1           DEFINITIONS. Whenever used in this Plan, the following terms shall have the meanings set forth below:

 

(a)           “BASE SALARY RATE” means a Participant’s monthly base salary determined at the greater of (1) the Participant’s monthly base salary rate in effect immediately prior to the Participant’s Termination Upon a Change in Control or (2) the Participant’s monthly base salary rate in effect immediately prior to the applicable Change in Control. For this purpose, base salary does not include any bonuses, commissions, fringe benefits, car allowances, other irregular payments or any other compensation except base salary.

 

(b)           “BENEFIT PERIOD” means (1) with respect to a Participant who is an Executive Officer a period of twenty-four (24) months and (2) with respect to a Participant who is a Key Employee, a period of months determined by the Committee and set forth in the Participant’s Participation Agreement.

 

(c)           “BOARD” means the Board of Directors of the Company.

 

1



 

(d)           “CAUSE” means the occurrence of any of the following, as determined in good faith by a vote of not less than two-thirds of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice to the Participant and an opportunity for the Participant, together with the Participant’s counsel, to be heard before the Board):

 

(1)           the Participant’s commission of any act of fraud, embezzlement or dishonesty;

 

(2)           the Participant’s unauthorized use or disclosure of confidential information or trade secrets of any member of the Company Group; or

 

(3)           the Participant’s intentional misconduct adversely affecting the business or affairs of any member of the Company Group.

 

(e)           “CHANGE IN CONTROL” means, except as otherwise provided in the Participation Agreement applicable to a given Participant, the occurrence of any of the following:

 

(1)           any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “EXCHANGE ACT”)), other than a trustee or other fiduciary holding securities of the Company under an employee benefit plan of the Company, becomes the “beneficial owner” (as defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%) of (i) the outstanding shares of common stock of the Company or (ii) the total combined voting power of the Company’s then-outstanding securities entitled to vote generally in the election of directors;

 

(2)           the Company is party to a merger, consolidation or similar corporate transaction, or series of related transactions, which results in the holders of the voting securities of the Company outstanding immediately prior to such transaction(s) failing to retain immediately after such transaction(s) direct or indirect beneficial ownership of more than fifty percent (50%) of the total combined voting power of the securities entitled to vote generally in the election of directors of the Company or the surviving entity outstanding immediately after such transaction(s);

 

(3)           the sale or disposition of all or substantially all of the Company’s assets or consummation of any transaction, or series of related transactions, having similar effect (other than a sale or disposition to one or more subsidiaries of the Company); or

 

(4)           a change in the composition of the Board within any consecutive two-year period as a result of which fewer than a majority of the directors are Incumbent Directors.

 

(f)            “CHANGE IN CONTROL PERIOD” means a period commencing upon the date of the consummation of a Change in Control and ending on the date occurring eighteen (18) months thereafter.

 

2



 

(g)           “COBRA” means the group health plan continuation coverage provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985 and any applicable regulations promulgated thereunder.

 

(h)           “CODE” means the Internal Revenue Code of 1986, as amended, or any successor thereto and any applicable regulations promulgated thereunder.

 

(i)            “COMMITTEE” means the Compensation Committee of the Board.

 

(j)            “COMPANY” means Finisar Corporation, a Delaware corporation, and, following a Change in Control, a Successor that agrees to assume all of the terms and provisions of this Plan or a Successor which otherwise becomes bound by operation of law to this Plan.

 

(k)           “COMPANY GROUP” means the group consisting of the Company and each present or future parent and subsidiary corporation or other business entity thereof.

 

(l)            “DISABILITY” means a Participant’s permanent and total disability within the meaning of Section 22(e)(3) of the Code.

 

(m)          “EXECUTIVE OFFICER” means an individual appointed by the Board as an executive officer of the Company and serving in such capacity both upon becoming a Participant (unless then serving as a Key Employee) and immediately prior to the consummation of a Change in Control.

 

(n)           “GOOD REASON” means the occurrence of any of the following conditions upon or following a Change in Control, without the Participant’s informed written consent, which condition(s) remain(s) in effect thirty (30) days after written notice to the Company from the Participant of such condition(s) delivered to the Company within ninety (90) days following the initial existence of such condition(s):

 

(1)           assignment of the Participant to a position that is not a Substantive Functional Equivalent of the position which the Participant occupied immediately prior to the Change in Control;

 

(2)           a material decrease in the Participant’s Base Salary Rate or a material decrease in the Participant’s target bonus amount (subject to applicable performance requirements with respect to the actual amount of bonus compensation earned by the Participant);

 

(3)           any material failure by the Company Group to (i) continue to provide the Participant with the opportunity to participate, on terms no less favorable than those in effect for the benefit of any employee group which customarily includes a person holding the employment position or a comparable position with the Company Group then held by the Participant, in any benefit or compensation plans and programs, including, but not limited to, the Company Group’s life, disability, health, dental, medical, savings, profit sharing, stock purchase and retirement plans, if any, in which the Participant was participating immediately prior to the date of the Change in Control, or their equivalent, or (ii) provide the Participant with all other fringe benefits (or their equivalent) from time to time in effect for the benefit of any employee

 

3



 

group which customarily includes a person holding the employment position or a comparable position with the Company Group then held by the Participant;

 

(4)           the relocation of the Participant’s work place for the Company Group to a location that increases the regular commute distance between the Participant’s residence and work place by more than fifty (50) miles (one-way), or the imposition of travel requirements substantially more demanding of the Participant than such travel requirements existing immediately prior to the Change in Control; or

 

(5)           any material breach of this Plan by the Company with respect to the Participant.

 

The existence of Good Reason shall not be affected by the Participant’s temporary incapacity due to physical or mental illness not constituting a Disability. The Participant’s continued employment shall not constitute consent to, or a waiver of rights with respect to, any condition constituting Good Reason hereunder. For the purposes of any determination regarding the existence of Good Reason hereunder, any claim by the Participant that Good Reason exists shall be presumed to be correct unless the Company establishes to the Board that Good Reason does not exist, and the Board, acting in good faith, affirms such determination by a vote of not less than two-thirds of its entire membership (excluding the Participant if the Participant is a member of the Board).

 

(o)           “INCUMBENT DIRECTOR” means a director who either (1) is a member of the Board as of the Effective Date, or (2) is elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination, but (3) was not elected or nominated in connection with an actual or threatened proxy contest relating to the election of directors of the Company.

 

(p)           “KEY EMPLOYEE” means an individual, other than an Executive Officer, who has been designated by the Committee as eligible to participate in the Plan, and who, immediately prior to the consummation of a Change in Control, is employed by the Company Group.

 

(q)           “OPTION” means any option to purchase shares of the capital stock of the Company or of any other member of the Company Group granted to a Participant by the Company or any other Company Group member, whether granted before or after a Change in Control, including any such option which is assumed by, or for which a replacement option is substituted by, the Successor or any other member of the Company Group in connection with the Change in Control.

 

(r)            “PARTICIPANT” means each Executive Officer and Key Employee designated by the Committee to participate in the Plan, provided such individual has executed a Participation Agreement.

 

(s)           “PARTICIPATION AGREEMENT” means an Agreement to Participate in the Finisar Corporation Executive Retention and Severance Plan in the form attached hereto as Exhibit A or in such other form as the Committee may approve from time to time; provided, however, that, after a Participation Agreement has been entered into between a Participant and

 

4



 

the Company, it may be modified only by a supplemental written agreement executed by both the Participant and the Company. The terms of such forms of Participation Agreement need not be identical with respect to each Participant. For example, a Participation Agreement may limit the duration of a Participant’s participation in the Plan or may modify the definition of “Change in Control” with respect to a Participant, or, in the case of a Key Employee, may specify a Benefit Period that is not identical to the Benefit Period specified for other Participants.

 

(t)            “RELEASE” means a general release of all known and unknown claims against the Company and its affiliates and their stockholders, directors, officers, employees, agents, successors and assigns substantially in the form attached hereto as Exhibit B (“General Release of Claims, Age 40 and Over”) or Exhibit C (“General Release of Claims, Under Age 40”), whichever is applicable, with any modifications thereto determined by legal counsel to the Company to be necessary or advisable to comply with applicable law or to accomplish the intent of Section 8 (Exclusive Remedy) hereof.

 

(u)           “RESTRICTED STOCK” means any shares of the capital stock of the Company or of any other member of the Company Group granted to a Participant by the Company or any other Company Group member or acquired upon the exercise of an Option, whether such shares are granted or acquired before or after a Change in Control, including any shares issued in exchange for any such shares by a Successor or any other member of the Company Group in connection with a Change in Control.

 

(v)           “SUBSTANTIVE FUNCTIONAL EQUIVALENT” means an employment position occupied by a Participant after a Change in Control that:

 

(1)           is in a substantive area of competence (such as, accounting, executive management, finance, human resources, marketing, sales and service, or operations, etc.) that is consistent with the Participant’s experience and not materially different from the position occupied by the Participant immediately prior to the Change in Control;

 

(2)           allows the Participant to serve in a role and perform duties that are functionally equivalent to those performed immediately prior to the Change in Control (such as business unit executive with profit and loss responsibility, product line manager, marketing strategist, geographic sales manager, executive officer, etc.); and

 

(3)           does not otherwise constitute a material, adverse change in the Participant’s responsibilities or duties, as measured against the Participant’s responsibilities or duties prior to the Change in Control, causing it to be of materially lesser rank or responsibility within the Company or an equivalent business unit of its parent.

 

(w)          “SUCCESSOR” means any successor in interest to substantially all of the business and/or assets of the Company.

 

(x)            “TERMINATION UPON A CHANGE IN CONTROL” means the occurrence of any of the following events:

 

(1)           termination by the Company Group of the Participant’s employment for any reason other than Cause during a Change in Control Period; or

 

5



 

(2)           the Participant’s resignation for Good Reason from employment with the Company Group during a the Change in Control Period, which resignation shall be deemed effective upon the expiration of the thirty (30) day period set fort in the definition of Good Reason above;

 

provided, however, that Termination Upon a Change in Control shall not include any termination of the Participant’s employment which is (i) for Cause, (ii) a result of the Participant’s death or Disability, or (iii) a result of the Participant’s voluntary termination of employment other than for Good Reason.

 

2.2           CONSTRUCTION. Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of the Plan. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise.

 

3.             ELIGIBILITY AND PARTICIPATION

 

The Committee shall designate those Executive Officers and Key Employees who shall be eligible to become Participants in the Plan. To become a Participant, an Executive Officer or Key Employee must execute a Participation Agreement.

 

4.             TREATMENT OF EQUITY AWARDS UPON A CHANGE IN CONTROL

 

4.1           OPTIONS AND RESTRICTED STOCK. Notwithstanding any provision to the contrary contained in any plan or agreement evidencing an Option granted to a Participant, the Participant shall be credited effective immediately prior to, but conditioned upon, the consummation of a Change in Control and thereafter, for purposes of determining the extent of the vesting and exercisability of each outstanding Option then held by the Participant and the vesting of any shares of Restricted Stock acquired by the Participant upon the exercise of an Option, with one (1) additional year of employment or service with the Company Group. Furthermore, in the event of a Change in Control in which the surviving, continuing, successor, or purchasing corporation or other business entity or parent thereof, as the case may be (the “ACQUIROR”), does not assume the Company’s rights and obligations under the then-outstanding Options held by the Participant or substitute for such Options substantially equivalent options for the Acquiror’s stock, then the vesting and exercisability of each such Option shall be accelerated in full effective immediately prior to, but conditioned upon, the consummation of the Change in Control.

 

4.2           OTHER EQUITY AWARDS. Except as set forth in Section 4.1 above, the treatment of stock-based compensation upon the consummation of a Change in Control shall be determined in accordance with the terms of the plans or agreements providing for such awards.

 

5.             BENEFITS UPON TERMINATION UPON A CHANGE IN CONTROL

 

In the event of a Participant’s Termination Upon a Change in Control, the Participant shall be entitled to receive the compensation and benefits described in this Section 5.

 

6



 

5.1           ACCRUED OBLIGATIONS. The Participant shall be entitled to receive:

 

(a)           all salary, bonuses, commissions and accrued but unused vacation earned through the date of the Participant’s termination of employment;

 

(b)           reimbursement within thirty (30) business days of submission of proper expense reports of all expenses reasonably and necessarily incurred by the Participant in connection with the business of the Company Group prior to his or her termination of employment.  The Participant must submit to the Company receipts and other details of each such expense in the form required by the Company within sixty (60) days after the later of (i) the Participant’s incurrence of such expense or (ii) the Participant’s receipt of the invoice for such expense.  If such expense qualifies for reimbursement, then the Company shall reimburse the Participant for the expense within thirty (30) days thereafter.  In no event will such expense be reimbursed after the close of the calendar year following the calendar year in which that expense is incurred.  The amount of reimbursements to which the Participant may become entitled in any one calendar year shall not affect the amount of expenses eligible for reimbursement hereunder in any other calendar year.  The Participant’s right to reimbursement cannot be liquidated or exchanged for any other benefit or payment; and

 

(c)           the benefits, if any, under any Company Group retirement plan, nonqualified deferred compensation plan, stock purchase or other stock-based compensation plan or agreement (other than any such plan or agreement pertaining to Options, Restricted Stock or other stock-based compensation whose treatment is prescribed by Section 5.2(c) below), health benefits plan or other Company Group benefit plan to which the Participant may be entitled pursuant to the terms of such plans or agreements, subject to compliance with Code Section 409A.

 

5.2           SEVERANCE BENEFITS. Provided that the Participant executes the Release applicable to such Participant within twenty-one (21) days (or forty-five (45) days if such longer period is required by applicable law) following the time of the Participant’s Termination Upon a Change in Control and such Release becomes effective in accordance with its terms following any applicable revocation period, and subject to the provisions of Section 6, the Participant shall be entitled to receive the following severance payments and benefits:

 

(a)           CASH SEVERANCE PAYMENT. Subject to Section 7, within sixty (60) days following the Participant’s Separation from Service, the Company shall pay to the Participant in a lump sum cash payment an amount equal to the product of (a) the Participant’s Base Salary Rate and (b) the number of months in the Benefit Period applicable to the Participant.

 

(b)           HEALTH AND LIFE INSURANCE BENEFITS. For the period commencing immediately following the Participant’s termination of employment and continuing for the duration of the Benefit Period applicable to the Participant, the Company shall reimburse the Participant for the costs of obtaining health (including medical and dental) and life insurance benefits for the Participant and his or her dependents substantially similar to those provided to the Participant and his or her dependents immediately prior to the date of such termination of employment (without giving effect to any reduction in such benefits constituting Good Reason).

 

7



 

Such reimbursement with respect to health benefits shall be limited to that portion of the Participant’s premiums required under COBRA (or to be paid to any other provider of such health benefits following the termination of the COBRA period) that exceed the amount of premiums that the Participant would have been required to pay for continuing coverage had he or she continued in employment, and such reimbursement with respect to life insurance benefits shall be limited to that portion of the Participant’s premium that exceeds the premiums that the Participant would have had to pay for  such coverage for the covered period had the Participant continued coverage under the Company’s life insurance plans.  If the Participant and/or the Participant’s dependents become eligible to receive any such coverage under another employer’s benefit plans during the applicable Benefit Period, the Participant shall report such eligibility to the Company, and the Company’s obligations under this subsection shall be secondary to the coverage provided by such other employer’s plans. For the balance of any period in excess of the applicable Benefit Period during which the Participant is entitled to continuation coverage under COBRA, the Participant shall be entitled to maintain coverage for himself or herself and the Participant’s eligible dependents at the Participant’s own expense.  The Participant must submit to the Company receipts and other details of each periodic premium payment in the form required by the Company within sixty (60) days after the payment date and the Company shall reimburse the Participant for that expense within thirty (30) days thereafter.  In no event will such expense be reimbursed after the close of the calendar year following the calendar year in which that expense is incurred.  The amount of reimbursements to which a Participant may become entitled in any one calendar year shall not affect the amount of expenses eligible for reimbursement hereunder in any other calendar year.  The Participant’s right to reimbursement cannot be liquidated or exchanged for any other benefit or payment.

 

(c)           ACCELERATION OF VESTING OF OPTIONS, RESTRICTED STOCK AND OTHER STOCK-BASED COMPENSATION; EXTENSION OF OPTION EXERCISE PERIOD. Notwithstanding any provision to the contrary contained in any agreement evidencing an Option, Restricted Stock or other stock-based compensation award granted to a Participant, the vesting and/or exercisability of each of the Participant’s outstanding Options, Restricted Stock and other stock-based compensation awards shall be accelerated in full effective as of the date of the Participant’s termination of employment so that each Option, share of Restricted Stock and other stock-based compensation award held by the Participant shall be immediately exercisable and/or fully vested as of such date; provided, however, that such acceleration of vesting and/or exercisability shall not apply to any stock-based compensation award where such acceleration would result in plan disqualification or would otherwise be contrary to applicable law (e.g., an employee stock purchase plan intended to qualify under Section 423 of the Code). Furthermore, each such Option, to the extent unexercised on the date on which the Participant’s employment terminated, may be exercised by the Participant (or the Participant’s guardian or legal representative) at any time prior to the later of the date specified in the agreement evidencing such Option or the expiration of one (1) year after the date on which the Participant’s employment terminated, but in any event no later than the date of expiration of the Option’s term as set forth in the agreement evidencing such Option.

 

5.3           INDEMNIFICATION; INSURANCE.

 

(a)           In addition to any rights a Participant may have under any indemnification agreement previously entered into between the Company and such Participant (a “PRIOR

 

8



 

INDEMNITY AGREEMENT”), from and after the date of the Participant’s termination of employment, the Company shall indemnify and hold harmless the Participant against any costs or expenses (including attorneys’ fees), judgments, fines, losses, claims, damages or liabilities incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, by reason of the fact that the Participant is or was a director, officer, employee or agent of the Company Group, or is or was serving at the request of the Company Group as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, whether asserted or claimed prior to, at or after the date of the Participant’s termination of employment, to the fullest extent permitted under applicable law, and the Company shall also advance fees and expenses (including attorneys’ fees) as incurred by the Participant to the fullest extent permitted under applicable law. In the event of a conflict between the provisions of a Prior Indemnity Agreement and the provisions of this Plan, the Participant may elect which provisions shall govern.

 

(b)           For a period of six (6) years from and after the date of termination of employment of a Participant who was an officer and/or director of the Company at any time prior to such termination of employment, the Company shall maintain a policy of directors’ and officers’ liability insurance for the benefit of such Participant which provides him or her with coverage no less favorable than that provided for the Company’s continuing officers and directors.

 

6.             FEDERAL EXCISE TAX UNDER SECTION 4999 OF THE CODE

 

6.1           EXCESS PARACHUTE PAYMENT. In the event that any payment or benefit received or to be received by the Participant pursuant to this Plan or otherwise (collectively, the “PAYMENTS”) would subject the Participant to any excise tax pursuant to Section 4999 of the Code (the “EXCISE TAX”) due to the characterization of such Payments as an excess parachute payment under Section 280G of the Code, then, notwithstanding the other provisions of this Plan, the amount of such Payments will not exceed the amount which produces the greatest after-tax benefit to the Participant.  Should a reduction in benefits be required to satisfy the benefit limit of this Section 6.1, then the portion of any Payment otherwise payable in cash under Section 5.2(a) to the Participant shall be reduced first to the extent necessary to comply with such benefit limit.  Should such benefit limit still be exceeded following such reduction, then the number of shares which would otherwise vest on an accelerated basis under each of the Participant’s options or other equity awards (based on the amount of the parachute payment attributable to each such option or equity award under Code Section 280G) shall be reduced to the extent necessary to eliminate such excess, with such reduction to be made in the same chronological order in which those awards were made.

 

6.2           DETERMINATION BY ACCOUNTANTS. Upon the occurrence of any event (the “EVENT”) that would give rise to any Payments pursuant to this Plan, the Company shall promptly request a determination in writing by independent public accountants (the “ACCOUNTANTS”) selected by the Company and reasonably acceptable to the Participant of the amount and type of such Payments which would produce the greatest after-tax benefit to the Participant. For the purposes of such determination, the Accountants may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and the Participant shall furnish to the Accountants such information and

 

9



 

documents as the Accountants may reasonably request in order to make their required determination. The Company shall bear all fees and expenses charged by the Accountants in connection with their services contemplated by this Section.

 

7.             SECTION 409A

 

7.1           This Plan is intended to comply with the requirements of Code Section 409A.  Accordingly, all provisions herein shall be construed and interpreted to comply with Code Section 409A and if necessary, any such provision shall be deemed amended to the extent necessary to comply with Code Section 409A and the regulations thereunder.

 

7.2           Notwithstanding any provision to the contrary in this Plan, no payments or benefits to which any Participant becomes entitled under this Plan in connection with the termination of such Participant’s employment with the Company shall be made or paid to the Participant prior to the earlier of (i) the first day of the seventh (7th) month following the date of the Participant’s Separation from Service due to such termination of employment or (ii) the date of the Participant’s death, if the Participant is deemed, pursuant to the procedures established by the Compensation Committee in accordance with the applicable standards of Code Section 409A and the Treasury Regulations thereunder and applied on a consistent basis for all for all non-qualified deferred compensation plans of the Employer Group subject to Code Section 409A, to be a “specified  employee” at the time of such Separation from Service and such delayed commencement is otherwise required in order to avoid a prohibited distribution under Code Section 409A(a)(2).  Upon the expiration of the applicable Code Section 409A(a)(2) deferral period, all payments deferred pursuant to this Section 7.2 shall be paid in a lump sum to the Participant, and any remaining payments due under this Plan shall be paid in accordance with the normal payment dates specified for them herein.

 

7.3           The specified employees subject to such a delayed commencement date shall be identified as of December 31 of each calendar year.  If a Participant is so identified as of any such December 31, he or she shall have specified employee status for the twelve (12)-month period beginning on April 1 of the following calendar year.

 

7.4           For purposes of this Plan, “Separation from Service” shall mean the date on which the level of the Participant’s bona fide services as an Employee (or non-employee consultant) permanently decreases to a level that is not more than twenty percent (20%) of the average level of services the Participant rendered as an Employee during the immediately preceding thirty-six (36) months (or any shorter period of such Employee service). Any such determination, however, shall be made in accordance with the applicable standards of the Treasury Regulations issued under Code Section 409A. In addition to the foregoing, a Separation from Service will not be deemed to have occurred while the Participant is on a sick leave or other bona fide leave of absence if the period of such leave does not exceed six (6) months or any longer period for which the Participant’s right to reemployment with the Company is provided by either statute or contract; provided, however, that in the event of a leave of absence due to any medically determinable physical or mental impairment that can be expected to result in death or to last for a continuous period of not less than six (6) months and that causes the Participant to be unable to perform his  duties as an Employee, no Separation from Service shall be deemed to occur during the first twenty-nine (29) months of such leave.  If the period of the leave exceeds six (6) months

 

10



 

(or twenty-nine (29) months in the event of disability as indicated above) and the Participant is not provided with a right to reemployment by either statute or contract, then the Participant will be deemed to have Separated from Service on the first day immediately following the expiration of the applicable six (6)-month or twenty-nine (29)-month period.

 

8.             CONFLICT IN BENEFITS; NONCUMULATION OF BENEFITS

 

8.1           EFFECT OF PLAN. The terms of this Plan, when accepted by a Participant pursuant to an executed Participation Agreement, shall supersede all prior arrangements, whether written or oral, and understandings regarding the subject matter of this Plan and shall be the exclusive agreement for the determination of any payments and benefits due to the Participant upon the events described in Sections 4, 5 and 6.

 

8.2           NONCUMULATION OF BENEFITS. Except as expressly provided in a written agreement between a Participant and the Company entered into after the date of such Participant’s Participation Agreement and which expressly disclaims this Section 8.2 and is approved by the Board or the Committee, the total amount of payments and benefits that may be received by the Participant as a result of the events described in Sections 4, 5 and 6 pursuant to (a) this Plan, (b) any agreement between the Participant and the Company or (c) any other plan, practice or statutory obligation of the Company, shall not exceed the amount of payments and benefits provided by this Plan upon such events (plus any payments and benefits provided pursuant to a Prior Indemnity Agreement, as described in Section 5.3(a)), and the aggregate amounts payable under this Plan shall be reduced to the extent of any excess (but not below zero).

 

9.             EXCLUSIVE REMEDY

 

The payments and benefits provided by Section 5 and Section 6 (plus any payments and benefits provided pursuant to a Prior Indemnity Agreement, as described in Section 5.3(a)), if applicable, shall constitute the Participant’s sole and exclusive remedy for any alleged injury or other damages arising out of the cessation of the employment relationship between the Participant and the Company in the event of the Participant’s Termination Upon a Change in Control. The Participant shall be entitled to no other compensation, benefits, or other payments from the Company as a result of any Termination Upon a Change in Control with respect to which the payments and benefits described in Section 5 and Section 6 (plus any payments and benefits provided pursuant to a Prior Indemnity Agreement, as described in Section 5.3(a)), if applicable, have been provided to the Participant, except as expressly set forth in this Plan or, subject to the provisions of Section 8.2, in a duly executed employment agreement between Company and the Participant.

 

10.          PROPRIETARY AND CONFIDENTIAL INFORMATION

 

The Participant agrees to continue to abide by the terms and conditions of the confidentiality and/or proprietary rights agreement between the Participant and the Company or any other member of the Company Group.

 

11



 

11.          NONSOLICITATION

 

If the Company performs its obligations to deliver the payments and benefits set forth in Section 5 and Section 6 (plus any payments and benefits provided pursuant to a Prior Indemnity Agreement, as described in Section 5.3(a)), then for a period equal to the Benefit Period applicable to a Participant following the Participant’s Termination Upon a Change in Control, the Participant shall not, directly or indirectly, recruit, solicit or invite the solicitation of any employees of the Company to terminate their employment relationship with the Company.

 

12.          NO CONTRACT OF EMPLOYMENT

 

Neither the establishment of the Plan, nor any amendment thereto, nor the payment of any benefits shall be construed as giving any person the right to be retained by the Company, a Successor or any other member of the Company Group. Except as otherwise established in an employment agreement between the Company and a Participant, the employment relationship between the Participant and the Company is an “at-will” relationship. Accordingly, either the Participant or the Company may terminate the relationship at any time, with or without cause, and with or without notice except as otherwise provided by Section 15. In addition, nothing in this Plan shall in any manner obligate any Successor or other member of the Company Group to offer employment to any Participant or to continue the employment of any Participant which it does hire for any specific duration of time.

 

13.          CLAIMS FOR BENEFITS

 

13.1         ERISA PLAN. This Plan is intended to be (a) an employee welfare plan as defined in Section 3(1) of Employee Retirement Income Security Act of 1974 (“ERISA”) and (b) a “top-hat” plan maintained for the benefit of a select group of management or highly compensated employees of the Company Group.

 

13.2         APPLICATION FOR BENEFITS. All applications for payments and/or benefits under the Plan (“BENEFITS”) shall be submitted to the Company’s General Counsel (the “CLAIMS ADMINISTRATOR”). Applications for Benefits must be in writing on forms acceptable to the Claims Administrator and must be signed by the Participant or beneficiary. The Claims Administrator reserves the right to require the Participant or beneficiary to furnish such other proof of the Participant’s expenses, including without limitation, receipts, canceled checks, bills, and invoices as may be required by the Claims Administrator.

 

13.3         APPEAL OF DENIAL OF CLAIM.

 

(a)           If a claimant’s claim for Benefits is denied, the Claims Administrator shall provide notice to the claimant in writing of the denial within ninety (90) days after its submission. The notice shall be written in a manner calculated to be understood by the claimant and shall include:

 

(1)           The specific reason or reasons for the denial;

 

(2)           Specific references to the Plan provisions on which the denial is based;

 

12



 

(3)           A description of any additional material or information necessary for the applicant to perfect the claim and an explanation of why such material or information is necessary; and

 

(4)           An explanation of the Plan’s claims review procedures and a statement of claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination.

 

(b)           If special circumstances require an extension of time for processing the initial claim, a written notice of the extension and the reason therefor shall be furnished to the claimant before the end of the initial ninety (90) day period. In no event shall such extension exceed ninety (90) days.

 

(c)           If a claim for Benefits is denied, the claimant, at the claimant’s sole expense, may appeal the denial to the Committee (the “APPEALS ADMINISTRATOR”) within sixty (60) days of the receipt of written notice of the denial. In pursuing such appeal the applicant or his duly authorized representative:

 

(1)           may request in writing that the Appeals Administrator review the denial;

 

(2)           may review pertinent documents; and

 

(3)           may submit issues and comments in writing.

 

(d)           The decision on review shall be made within sixty (60) days of receipt of the request for review, unless special circumstances require an extension of time for processing, in which case a decision shall be rendered as soon as possible, but not later than one hundred twenty (120) days after receipt of the request for review. If such an extension of time is required, written notice of the extension shall be furnished to the claimant before the end of the original sixty (60) day period. The decision on review shall be made in writing, shall be written in a manner calculated to be understood by the claimant, and, if the decision on review is a denial of the claim for Benefits, shall include:

 

(1)           The specific reason or reasons for the denial;

 

(2)           Specific references to the Plan provisions on which the denial is based;

 

(3)           A description of any additional material or information necessary for the applicant to perfect the claim and an explanation of why such material or information is necessary; and

 

(4)           An explanation of the Plan’s claims review procedures and a statement of claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination.

 

13



 

14.          DISPUTE RESOLUTION

 

14.1         WAIVER OF JURY TRIAL. In the event of any dispute or claim relating to or arising out of this Plan that is not resolved in accordance with procedure described in Section 13, the Company and the Participant, each by executing a Participation Agreement, agree that all such disputes or claims shall be resolved by means of a court trial conducted by the superior or district court in Santa Clara County, California or as otherwise required by ERISA. The Company and the Participant, each by executing a Participation Agreement, irrevocably waive their respective rights to have any such disputes or claims tried by a jury, and agree that such courts will have personal and subject matter jurisdiction over all such claims or disputes. Notwithstanding the foregoing, in the event of any such dispute, the Company and the Participant may agree to mediate or arbitrate the dispute on such terms and conditions as may they may agree in writing.

 

14.2         ATTORNEYS’ FEES. The prevailing party shall be entitled to recover from the losing party its attorneys’ fees and costs incurred in any action brought to enforce any right arising out of this Plan.

 

15.          SUCCESSORS AND ASSIGNS

 

15.1         SUCCESSORS OF THE COMPANY. The Company shall require any successor or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, expressly, absolutely and unconditionally to assume and agree to perform this Plan in the same manner and to the same extent that the Company would be required to perform it if no such succession or assignment had taken place.

 

15.2         ACKNOWLEDGMENT BY COMPANY. If, after a Change in Control, the Company fails to reasonably confirm that it has performed the obligation described in Section 14.1 within thirty (30) days after written notice from the Participant, such failure shall be a material breach of this Plan and shall entitle the Participant to resign for Good Reason and to receive the benefits provided under this Plan in the event of Termination Upon a Change in Control.

 

15.3         HEIRS AND REPRESENTATIVES OF PARTICIPANT. This Plan shall inure to the benefit of and be enforceable by the Participant’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devises, legatees or other beneficiaries. If the Participant should die while any amount would still be payable to the Participant hereunder (other than amounts which, by their terms, terminate upon the death of the Participant) if the Participant had continued to live, then all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Plan to the executors, personal representatives or administrators of the Participant’s estate.

 

16.          NOTICES

 

16.1         GENERAL. For purposes of this Plan, notices and all other communications provided for herein shall be in writing and shall be deemed to have been duly given when

 

14



 

personally delivered or when mailed by United States certified mail, return receipt requested, or by overnight courier, postage prepaid, as follows:

 

(a)           if to the Company:

 

Finisar Corporation
1389 Moffett Park Drive
Sunnyvale, California 94089
Attention: President

 

(b)           if to the Participant, at the home address which the Participant most recently communicated to the Company in writing.

 

Either party may provide the other with notices of change of address, which shall be effective upon receipt.

 

16.2         NOTICE OF TERMINATION. Any termination by the Company of the Participant’s employment during the Change in Control Period or any resignation by the Participant during the Change in Control Period shall be communicated by a notice of termination or resignation to the other party hereto given in accordance with Section 16.1. Such notice shall indicate the specific termination provision in this Plan relied upon, shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated, and shall specify the termination date.

 

17.          TERMINATION AND AMENDMENT OF PLAN

 

This Plan and/or any Participation Agreement executed by a Participant may not be terminated with respect to such Participant without the written consent of the Participant and the approval of the Board or the Committee. The Plan and/or any Participation Agreement executed by a Participant may be modified, amended or superseded with respect to such Participant only by a supplemental written agreement between the Participant and the Company approved by the Board or the Committee.

 

18.          MISCELLANEOUS PROVISIONS

 

18.1         UNFUNDED OBLIGATION. Any amounts payable to Participants pursuant to the Plan are unfunded obligations. The Company shall not be required to segregate any monies from its general funds, or to create any trusts, or establish any special accounts with respect to such obligations. The Company shall retain at all times beneficial ownership of any investments, including trust investments, which the Company may make to fulfill its payment obligations hereunder. Any investments or the creation or maintenance of any trust or any Participant account shall not create or constitute a trust or fiduciary relationship between the Board or the Company and a Participant, or otherwise create any vested or beneficial interest in any Participant or the Participant’s creditors in any assets of the Company.

 

18.2         NO DUTY TO MITIGATE; OBLIGATIONS OF COMPANY. A Participant shall not be required to mitigate the amount of any payment or benefit contemplated by this Plan by seeking employment with a new employer or otherwise, nor shall any such payment or benefit

 

15



 

(except for benefits to the extent described in Section 5.2(b)) be reduced by any compensation or benefits that the Participant may receive from employment by another employer. Except as otherwise provided by this Plan, the obligations of the Company to make payments to the Participant and to make the arrangements provided for herein are absolute and unconditional and may not be reduced by any circumstances, including without limitation any set-off, counterclaim, recoupment, defense or other right which the Company may have against the Participant or any third party at any time.

 

18.3         NO REPRESENTATIONS. By executing a Participation Agreement, the Participant acknowledges that in becoming a Participant in the Plan, the Participant is not relying and has not relied on any promise, representation or statement made by or on behalf of the Company which is not set forth in this Plan.

 

18.4         WAIVER. No waiver by the Participant or the Company of any breach of, or of any lack of compliance with, any condition or provision of this Plan by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time.

 

18.5         CHOICE OF LAW. The validity, interpretation, construction and performance of this Plan shall be governed by the substantive laws of the State of California, without regard to its conflict of law provisions.

 

18.6         VALIDITY. The invalidity or unenforceability of any provision of this Plan shall not affect the validity or enforceability of any other provision of this Plan, which shall remain in full force and effect.

 

18.7         BENEFITS NOT ASSIGNABLE. Except as otherwise provided herein or by law, no right or interest of any Participant under the Plan shall be assignable or transferable, in whole or in part, either directly or by operation of law or otherwise, including, without limitation, by execution, levy, garnishment, attachment, pledge or in any other manner, and no attempted transfer or assignment thereof shall be effective. No right or interest of any Participant under the Plan shall be liable for, or subject to, any obligation or liability of such Participant.

 

18.8         TAX WITHHOLDING. All payments made pursuant to this Plan will be subject to withholding of applicable income and employment taxes.

 

18.9         CONSULTATION WITH LEGAL AND FINANCIAL ADVISORS. By executing a Participation Agreement, the Participant acknowledges that this Plan confers significant legal rights, and may also involve the waiver of rights under other agreements; that the Company has encouraged the Participant to consult with the Participant’s personal legal and financial advisors; and that the Participant has had adequate time to consult with the Participant’s advisors before executing the Participation Agreement.

 

18.10       FURTHER ASSURANCES. From time to time, at the Company’s request and without further consideration, the Participant shall execute and deliver such additional documents and take all such further action as reasonably requested by the Company to be necessary or desirable to make effective, in the most expeditious manner possible, the terms of

 

16



 

the Plan and the Participant’s Participation Agreement, Release and Restrictive Covenants Agreement, and to provide adequate assurance of the Participant’s due performance thereunder.

 

19.          AGREEMENT

 

By executing a Participation Agreement, the Participant acknowledges that the Participant has received a copy of this Plan and has read, understands and is familiar with the terms and provisions of this Plan. This Plan shall constitute an agreement between the Company and the Participant executing a Participation Agreement.

 

IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies that the foregoing Plan was duly amended and restated by the Committee on                           , 2008.

 

 

 

 

17



 

EXHIBIT A

 

FORM OF

 

AGREEMENT TO PARTICIPATE IN THE

 

FINISAR CORPORATION

 

EXECUTIVE RETENTION AND SEVERANCE PLAN

 



 

AGREEMENT TO PARTICIPATE IN THE
FINISAR CORPORATION
EXECUTIVE RETENTION AND SEVERANCE PLAN
AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2009

 

In consideration of the benefits provided by the Finisar Corporation Executive Retention and Severance Plan (the “PLAN”), the undersigned employee of Finisar Corporation (the “COMPANY”) and the Company agree that, as of the date written below, the undersigned shall become a Participant in the Plan and shall be fully bound by and subject to all of its provisions. All references to a “Participant” in the Plan shall be deemed to refer to the undersigned.

 

[THE UNDERSIGNED IS A “KEY EMPLOYEE” (AS DEFINED BY THE PLAN) AS OF THE DATE OF THIS AGREEMENT. IF THE UNDERSIGNED REMAINS A KEY EMPLOYEE, BUT NOT AN “EXECUTIVE OFFICER,” FOR THE PURPOSE OF DETERMINING ANY SEVERANCE PAYMENTS OR BENEFITS TO WHICH THE UNDERSIGNED MAY BECOME ENTITLED UNDER THE PLAN, THEN THE “BENEFIT PERIOD” APPLICABLE TO THE UNDERSIGNED UNDER THE PLAN SHALL BE PERIODS OF                  MONTHS.]

 

The undersigned employee acknowledges that the Plan confers significant legal rights and may also constitute a waiver of rights under other agreements with the Company; that the Company has encouraged the undersigned to consult with the undersigned’s personal legal and financial advisors; and that the undersigned has had adequate time to consult with the undersigned’s advisors before executing this agreement.

 

The undersigned employee acknowledges that he or she has received a copy of the Plan and has read, understands and is familiar with the terms and provisions of the Plan. The undersigned employee further acknowledges that (1) the undersigned is waiving any right to a jury trial in the event of any dispute arising out of or related to the Plan and (2) except as otherwise established in an employment agreement between the Company and the undersigned, the employment relationship between the undersigned and the Company is an “at-will” relationship.

 

A-1



 

Executed on                                                   .

 

PARTICIPANT

 

FINISAR CORPORATION

 

 

 

 

 

 

 

 

By:

 

Signature

 

 

 

 

 

 

 

 

 

 

Title:

 

Name Printed

 

 

 

 

 

Address

 

 

 

 

 

 

 

 

 

A-2



 

EXHIBIT B

 

FORMS OF
GENERAL RELEASE OF CLAIMS

 



 

GENERAL RELEASE OF CLAIMS
[AGE 40 AND OVER]

 

This Agreement is by and between [EMPLOYEE NAME] (“Employee”) and [FINISAR CORPORATION OR SUCCESSOR THAT AGREES TO ASSUME THE EXECUTIVE RETENTION AND SEVERANCE PLAN FOLLOWING A CHANGE IN CONTROL] (the “Company”). This Agreement will become effective on the eighth (8th) day after it is signed by Employee (the “Effective Date”), provided that the Company has signed this Agreement and Employee has not revoked this Agreement (by written notice to [COMPANY CONTACT NAME] at the Company) prior to that date.

 

RECITALS

 

1.             Employee was employed by the Company as of                       ,         .

 

2.             Employee and the Company entered into an Agreement to Participate in the Finisar Corporation Executive Retention and Severance Plan (such agreement and plan being referred to herein as the “Plan”) effective as of                     ,          wherein Employee is entitled to receive certain benefits in the event of a Termination Upon a Change in Control (as defined by the Plan), provided Employee signs and does not revoke a Release (as defined by the Plan).

 

3.             A Change in Control (as defined by the Plan) has occurred as a result of [BRIEFLY DESCRIBE CHANGE IN CONTROL]

 

4.             Employee’s employment is being terminated as a result of a Termination Upon a Change in Control. Employee’s last day of work and termination are effective as of                               ,         . Employee desires to receive the payments and benefits provided by the Plan by executing this Release.

 

NOW, THEREFORE, the parties agree as follows:

 

Commencing on the Effective Date, the Company shall provide Employee with the applicable payments and benefits set forth in the Plan in accordance with the terms of the Plan. Employee acknowledges that the payments and benefits made pursuant to this paragraph are made in full satisfaction of the Company’s obligations under the Plan. Employee further acknowledges that Employee has been paid all wages and accrued, unused vacation that Employee earned during his or her employment with the Company.

 

Employee and Employee’s successors release the Company, its respective subsidiaries, stockholders, investors, directors, officers, employees, agents, attorneys, insurers, legal successors and assigns of and from any and all claims, actions and causes of action, whether now known or unknown, which Employee now has, or at any other time had, or shall or may have against those released parties based upon or arising out of any matter, cause, fact, thing, act or omission whatsoever directly related to Employee’s employment by the Company or the termination of such employment and occurring or existing at any time up to and including the Effective Date, including, but not limited to, any claims of breach of written contract, wrongful termination, retaliation, fraud, defamation, infliction of emotional distress, or national origin, race, age, sex, sexual orientation, disability or other discrimination or harassment under the Civil

 

B-1



 

Rights Act of 1964, the Age Discrimination In Employment Act of 1967, the Americans with Disabilities Act, the Fair Employment and Housing Act or any other applicable law. Notwithstanding the foregoing, this release shall not apply to any right of the Employee pursuant to Section 5.4 of the Plan or pursuant to a Prior Indemnity Agreement (as such term is defined by the Plan).

 

Employee acknowledges that he or she has read Section 1542 of the Civil Code of the State of California, which states in full:

 

A general release does not extend to claims which the creditor does not  know or suspect to exist in his favor at the time of executing the release,  which if known by him must have materially affected his settlement with the  debtor.

 

Employee waives any rights that Employee has or may have under Section 1542 and comparable or similar provisions of the laws of other states in the United States to the full extent that he or she may lawfully waive such rights pertaining to this general release of claims, and affirms that Employee is releasing all known and unknown claims that he or she has or may have against the parties listed above.

 

Employee and the Company acknowledge and agree that they shall continue to be bound by and comply with the terms and obligations under the following agreements: (i) any proprietary rights or confidentiality agreements between the Company and Employee, (ii) the Plan, (iii) any Prior Indemnity Agreement (as such term is defined by the Plan) to which Employee is a party, and (iv) any stock option, stock grant or stock purchase agreements between the Company and Employee.

 

This Agreement shall be binding upon, and shall inure to the benefit of, the parties and their respective successors, assigns, heirs and personal representatives.

 

The parties agree that any and all disputes that both (i) arise out of the Plan, the interpretation, validity or enforceability of the Plan or the alleged breach thereof and (ii) relate to the enforceability of this Agreement or the interpretation of the terms of this Agreement shall be subject to the provisions of Section 12 and Section 13 of the Plan.

 

The parties agree that any and all disputes that (i) do not arise out of the Plan, the interpretation, validity or enforceability of the Plan or the alleged breach thereof and (ii) relate to the enforceability of this Agreement, the interpretation of the terms of this Agreement or any of the matters herein released or herein described shall be resolved by means of a court trial conducted by the superior or district court in Santa Clara County, California. The parties hereby irrevocably waive their respective rights to have any such disputes tried to a jury, and the parties hereby agree that such courts will have personal and subject matter jurisdiction over all such disputes. Notwithstanding the foregoing, in the event of any such dispute, the parties may agree to mediate or arbitrate the dispute on such terms and conditions as may be agreed in writing by the parties. The prevailing party shall be entitled to recover from the losing party its attorneys’ fees and costs incurred in any action brought to resolve any such dispute.

 

This Agreement constitutes the entire agreement between the parties with respect to the

 

B-2



 

subject matter hereof and supersedes all prior negotiations and agreements, whether written or oral, with the exception of any agreements described in paragraph 4 of this Agreement. This Agreement may not be modified or amended except by a document signed by an authorized officer of the Company and Employee. If any provision of this Agreement is deemed invalid, illegal or unenforceable, such provision shall be modified so as to make it valid, legal and enforceable, and the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected.

 

EMPLOYEE UNDERSTANDS THAT EMPLOYEE SHOULD CONSULT WITH AN ATTORNEY PRIOR TO SIGNING THIS AGREEMENT AND THAT EMPLOYEE IS GIVING UP ANY LEGAL CLAIMS EMPLOYEE HAS AGAINST THE PARTIES RELEASED ABOVE BY SIGNING THIS AGREEMENT. EMPLOYEE FURTHER UNDERSTANDS THAT EMPLOYEE MAY HAVE UP TO 45 DAYS TO CONSIDER THIS AGREEMENT, THAT EMPLOYEE MAY REVOKE IT AT ANY TIME DURING THE 7 DAYS AFTER EMPLOYEE SIGNS IT, AND THAT IT SHALL NOT BECOME EFFECTIVE UNTIL THAT 7-DAY PERIOD HAS PASSED. EMPLOYEE ACKNOWLEDGES THAT EMPLOYEE IS SIGNING THIS AGREEMENT KNOWINGLY, WILLINGLY AND VOLUNTARILY IN EXCHANGE FOR THE COMPENSATION AND BENEFITS DESCRIBED IN PARAGRAPH 1.

 

 

Dated:

 

 

 

 

 

[Employee Name]

 

 

 

 

 

 

 

 

[Company]

 

 

 

 

 

Dated:

 

 

By:

 

 

B-3



 

EXHIBIT C

 

FORMS OF
GENERAL RELEASE OF CLAIMS
[Under Age 40]

 



 

GENERAL RELEASE OF CLAIMS
[UNDER AGE 40]

 

This Agreement is by and between [EMPLOYEE NAME] (“Employee”) and [FINISAR CORPORATION OR SUCCESSOR THAT AGREES TO ASSUME THE EXECUTIVE RETENTION AND SEVERANCE PLAN FOLLOWING A CHANGE IN CONTROL] (the “Company”). This Agreement is effective on the day it is signed by Employee (the “Effective Date”).

 

RECITALS

 

Employee was employed by the Company as of                         ,         .

 

5.             Employee and the Company entered into an Agreement to Participate in the Finisar Corporation Executive Retention and Severance Plan (such agreement and plan being referred to herein as the “Plan”) effective as of                       ,          wherein Employee is entitled to receive certain benefits in the event of a Termination Upon a Change in Control (as defined by the Plan), provided Employee signs a Release (as defined by the Plan).

 

6.             A Change in Control (as defined by the Plan) has occurred as a result of [BRIEFLY DESCRIBE CHANGE IN CONTROL].

 

7.             Employee’s employment is being terminated as a result of a Termination Upon a Change in Control. Employee’s last day of work and termination are effective as of                             ,          (the “Termination Date”). Employee desires to receive the payments and benefits provided by the Plan by executing this Release.

 

NOW, THEREFORE, the parties agree as follows:

 

1.             Commencing on the Effective Date, the Company shall provide Employee with the applicable payments and benefits set forth in the Plan in accordance with the terms of the Plan. Employee acknowledges that the payments and benefits made pursuant to this paragraph are made in full satisfaction of the Company’s obligations under the Plan. Employee further acknowledges that Employee has been paid all wages and accrued, unused vacation that Employee earned during his or her employment with the Company.

 

2.             Employee and Employee’s successors release the Company, its respective subsidiaries, stockholders, investors, directors, officers, employees, agents, attorneys, insurers, legal successors and assigns of and from any and all claims, actions and causes of action, whether now known or unknown, which Employee now has, or at any other time had, or shall or may have against those released parties based upon or arising out of any matter, cause, fact, thing, act or omission whatsoever directly related to Employee’s employment by the Company or the termination of such employment and occurring or existing at any time up to and including the Termination Date, including, but not limited to, any claims of breach of written contract, wrongful termination, retaliation, fraud, defamation, infliction of emotional distress, or national origin, race, age, sex, sexual orientation, disability or other discrimination or harassment under the Civil Rights Act of 1964, the Age Discrimination In Employment Act of 1967, the Americans with Disabilities Act, the Fair Employment and Housing Act or any other applicable

 



 

law. Notwithstanding the foregoing, this release shall not apply to any right of the Employee pursuant to Sections 5.4 of the Plan or pursuant to a Prior Indemnity Agreement (as such terms are defined by the Plan).

 

3.             Employee acknowledges that he or she has read Section 1542 of the Civil Code of the State of California, which states in full:

 

A general release does not extend to claims which the creditor does  not know or suspect to exist in his favor at the time of executing the  release, which if known by him must have materially affected his  settlement with the debtor.

 

Employee waives any rights that Employee has or may have under Section 1542 and comparable or similar provisions of the laws of other states in the United States to the full extent that he or she may lawfully waive such rights pertaining to this general release of claims, and affirms that Employee is releasing all known and unknown claims that he or she has or may have against the parties listed above.

 

4.             Employee and the Company acknowledge and agree that they shall continue to be bound by and comply with the terms and his obligations under the following agreements: (i) any proprietary rights or confidentiality agreements between the Company and Employee, (ii) the Plan, (iii) any Prior Indemnity Agreement (as such term is defined by the Plan) to which Employee is a party, and (iv) any stock option, stock grant or stock purchase agreements between the Company and Employee.

 

5.             This Agreement shall be binding upon, and shall inure to the benefit of, the parties and their respective successors, assigns, heirs and personal representatives.

 

6.             The parties agree that any and all disputes that both (i) arise out of the Plan, the interpretation, validity or enforceability of the Plan or the alleged breach thereof and (ii) relate to the enforceability of this Agreement or the interpretation of the terms of this Agreement shall be subject to the provisions of Section 12 and Section 13 of the Plan.

 

7.             The parties agree that any and all disputes that (i) do not arise out of the Plan, the interpretation, validity or enforceability of the Plan or the alleged breach thereof and (ii) relate to the enforceability of this Agreement, the interpretation of the terms of this Agreement or any of the matters herein released or herein described shall be resolved by means of a court trial conducted by the superior or district court in Santa Clara County, California. The parties hereby irrevocably waive their respective rights to have any such disputes tried to a jury, and the parties hereby agree that such courts will have personal and subject matter jurisdiction over all such disputes. Notwithstanding the foregoing, in the event of any such dispute, the parties may agree to mediate or arbitrate the dispute on such terms and conditions as may be agreed in writing by the parties. The prevailing party shall be entitled to recover from the losing party its attorneys’ fees and costs incurred in any action brought to resolve any such dispute.

 

8.             This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior negotiations and agreements, whether written or oral, with the exception of any agreements described in paragraph 4 of this

 

2



 

Agreement. This Agreement may not be modified or amended except by a document signed by an authorized officer of the Company and Employee. If any provision of this Agreement is deemed invalid, illegal or unenforceable, such provision shall be modified so as to make it valid, legal and enforceable, and the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected.

 

EMPLOYEE UNDERSTANDS THAT EMPLOYEE SHOULD CONSULT WITH AN ATTORNEY PRIOR TO SIGNING THIS AGREEMENT AND THAT EMPLOYEE IS GIVING UP ANY LEGAL CLAIMS EMPLOYEE HAS AGAINST THE PARTIES RELEASED ABOVE BY SIGNING THIS AGREEMENT. EMPLOYEE ACKNOWLEDGES THAT EMPLOYEE IS SIGNING THIS AGREEMENT KNOWINGLY, WILLINGLY AND VOLUNTARILY IN EXCHANGE FOR THE COMPENSATION AND BENEFITS DESCRIBED IN PARAGRAPH 1.

 

Dated:

 

 

 

 

 

[Employee Name]

 

 

 

 

 

 

 

 

[Company]

 

 

 

 

 

Dated:

 

 

By:

 

 

3