Exhibit 10.4
CONSULTING
AGREEMENT
THIS CONSULTING AGREEMENT (this
“ Agreement ”), dated July 7, 2005 between
ZHONE TECHNOLOGIES, INC. , a Delaware corporation (the
“ Company ”), and Patrick M. Murphy (the “
Consultant ”).
WHEREAS, Consultant and Paradyne
Networks, Inc., a Delaware corporation (“ Paradyne
”), are parties to an employment agreement dated December 8,
2000 (the “ Employment Agreement ”) pursuant to
which Consultant is employed by Paradyne;
WHEREAS, pursuant to an Agreement
and Plan of Merger by and among the Company, Parrot Acquisition
Corp., a Delaware corporation and a wholly owned subsidiary of the
Company (“ Merger Sub ”), and Paradyne dated as
of the date hereof, Merger Sub will merge with and into Paradyne,
and Paradyne will become a wholly owned subsidiary of the Company
(the “ Merger ”);
WHEREAS, effective as of the
effective time of the Merger (the “ Effective Date
”) Consultant’s employment with Paradyne will terminate
without “Cause” as defined in the Employment Agreement;
and
WHEREAS, due to Consultant’s
valuable customer relationships and knowledge of the Paradyne
business, the Company desires to retain the Consultant as a
consultant to the Company to perform such duties as the Company may
direct for the purpose of retaining Paradyne’s customers
following the Merger and to assist with the transition of the
manufacturing operations of Paradyne to the Company’s
in-house or contract manufacturing model and the Consultant desires
to accept such retention upon the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of
the mutual promises contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Termination of Employment
. Effective as of the Effective Date, Consultant’s employment
with Paradyne will be terminated without “Cause” (as
defined in the Employment Agreement). The Company acknowledges and
agrees that as a result of such termination Consultant shall be
entitled to all amounts and benefits due under the terms of the
Employment Agreement subject to the conditions set forth
therein.
2. Consulting Relationship .
Effective as of the Effective Date, the Company hereby engages the
Consultant to perform such duties as the Company may direct in
order to assist the Company in the retention of Paradyne customers
following the Merger and to assist with the transition of the
manufacturing operations of Paradyne to the Company’s
in-house or contract manufacturing model, and the Consultant agrees
to accept such engagement, upon the terms and conditions set forth
herein. The Company and Consultant do hereby acknowledge that after
the Effective Date the relationship between Company and Consultant
shall be solely that of an independent contractor and that
Consultant shall not be treated as an employee for any
purpose.
3. Consulting Period . The
term of this Agreement hereunder shall commence on the Effective
Date and continue for a period of two years thereafter, unless
earlier terminated as provided herein (the “ Consulting
Period ”).
4. Other Activities . During
the Consulting Period, the Consultant may engage in any other
business or professional activities, either on a full-time or
part-time basis, so long as such activities, either singly or in
the aggregate, (i) do not interfere with the proper performance of
his duties and responsibilities to the Company, (ii) violate
Section 13 of the Employment Agreement, or (iii) violate the terms
of the Restrictive Covenant Agreement of even date herewith by and
between the Company and Consultant (the “ Restrictive
Covenant Agreement ”).
5. Compensation and Other Terms
of Engagement .
(a) Compensation . In
consideration of the performance of his services for the Company as
required hereunder, during the Consulting Period, Consultant shall
be entitled to the following as compensation:
(i) Two Hundred Ninety Five Thousand
and Eighteen Dollars ($295,018) (the “ Consulting Fee
”) for each year of the Consulting Period in which Consultant
performs services on behalf of the Company, which amount represents
the amount Consultant would have earned as base salary and bonus
under the terms of the Employment Agreement if Consultant had
remained as an employee of Paradyne. The Consulting Fee shall be
payable in substantially equal monthly installments in
arrears.
(ii) Options to purchase Three
Hundred Nineteen Thousand Four Hundred and Fifty Eight (314,458)
shares of the Company’s common stock, representing an amount
equal to two times the annual grants on a converted basis that
Consultant would have received under the terms of the Employment
Agreement if Consultant had remained as an employee of Paradyne.
The options shall be granted at an exercise price equal to the fair
market value per share on the date of grant, with terms and
conditions applicable to options typically granted by the Company,
including that such options will vest and become exercisable
ratably over a period of four years provided Consultant continues
to perform services for the full two-year term of the Consulting
Period, and thereafter Consultant does not violate the terms of the
Restrictive Covenant Agreement.
(iii) Consultant shall receive no
other compensation for his services hereunder.
(b) Taxes . Consultant shall
be responsible for all taxes, including self-employment taxes due
on payments made under this Agreement.
(c) Business Expenses . The
Company shall reimburse the Consultant for expenses (including,
without limitation, travel and accommodations at the
2
level, class and manner provided to
senior executives of the Company), which the Consultant may from
time to time reasonably incur on behalf of, and at the request of
the Company in the performance of services under this Agreement;
provided, however, that the Consultant shall be required to account
to the Company for such expenses in the manner prescribed by the
Company. In determining expenses reasonably incurred in the
performance of his duties, the Consultant shall be reimbursed
consistent with the Company’s policy on reimbursement as
applied to its senior executives.
6. Termination of Agreement .
Either party may terminate Consultant’s engagement hereunder
at any time and for any reason by providing the other party written
notice of such t
