Exhibit 10.1

 

[LETTERHEAD APPEARS HERE]

 

Avici Systems Inc.

   978.964.2074 Phone

101 Billerica Avenue

   978.964.2650 Fax

N. Billerica, MA 01862

   http://www.avici.com

 

December 8, 2004

 

VIA HAND DELIVERY

 

Mr. Steven Kaufman

116 E. Emerson Road

Lexington, MA 02420

 

Re: Separation Agreement and Release

 

Dear Steve:

 

In recognition of your four plus years of employment and contributions to the
Company as President, CEO and director and previously as COO, and as
acknowledgement that this separation was prompted by the rapidly changing
landscape in the telecommunications equipment business and was not for cause,
the Company agrees with you to the following separation terms. This letter
summarizes the terms of your separation and release agreement with Avici Systems
Inc. (hereinafter the “Company” or “Avici”). The date on which you execute this
Agreement shall be the “Effective Date”.

 

1. Separation Date, Final Payments and Outstanding Loan:

 

(a) Separation: This letter agreement confirms your last day of employment by
the Company was Monday, November 15, 2004 (the “Separation Date”).

 

(b) Final Payments: As of the Separation Date, your salary ceased, and, except
as provided below, any entitlement you had or might have had under a Company
provided benefit plan, program or practice terminated, except as required by
federal or state law. The Company has provided you all wages due up through this
date, including all accrued and un-used vacation time and reimbursement from the
Employee Stock Purchase Plan. As of the Separation Date, you are no longer
eligible to participate in the Employee Stock Purchase Plan. Under separate
cover you have been or will be provided with information regarding COBRA and
401(k) distribution.

 

(c) Outstanding Loan: You agree that you shall pay to the Company $1,000.00 on
or before December 10, 2004 and that 25,000 shares of Avici Common Stock owned
by you (the applicable stock certificate for which is held by the Company as
security) shall be forfeited, returned to the Company and cancelled, in full
satisfaction of the Secured Promissory Note dated July 27, 2000, between you and
the Company.

 

2. Equity Matters:

 

(a) Restricted Stock: As of the Separation Date, your vested holdings of Avici
Restricted Stock are as follows:

 

Grant Date

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

 

Granted

Shares

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

 

Vested

Shares

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

 

Status as of

Separation Date

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

7/27/00

  25,000   25,000   To be returned and cancelled as set forth in Paragraph 1(c)
above

10/30/01

  21,531   21,531   Fully vested

6/11/04

  30,000   0   Unvested, to be returned and cancelled

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

 

You agree to sign any stock power reasonably requested of the Company in
connection with the return of such shares.

 

Your stock option holdings are addressed in Paragraph 3.

 

3. Consideration:

 

In consideration for your execution of this Agreement, including but not limited
to the release provision set forth in Paragraph 5 and your compliance with your
obligations in your Invention, Non-Disclosure and Non-Competition Agreement with
the Company (the “Non-Competition Agreement”), the Company agrees to the
following:

 

(a) Salary Continuation: The Company agrees to pay you your current base salary
from and after the Separation Date through November 15, 2005 in accordance with
the Company’s normal payroll practices. These severance payments will commence
upon the first regularly scheduled Company payday on or following the Effective
Date and payments will be made in accordance with the Company’s normal pay
practices (currently on a bi-weekly basis), including direct deposit of
payments, as established or modified from time to time.

 

The Company will continue your 401(k) deductions from these severance payments
in accordance with your current instructions and the terms of the plan, unless
instructed otherwise by you in writing.

 

(b) Stock Options; Extension of Exercise Period: As of November 15, 2004, you
have 339,348 vested stock options, which represents normal vesting through the
Separation Date. In accordance with the Company’s stock option plans, all
unvested stock options will be cancelled and forfeited effective as of the
Separation Date, and you may exercise your vested stock options in accordance
with the stock option agreements presently in effect between the Company and
you, except as otherwise provided herein. A summary of your vested options is
set forth in the below chart.

 

Grant Date

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

   # Shares

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

   Strike Price

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

   Description

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

   Vested thru
11/15/2004

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

   Exerciseable
through

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

   Exercise
Period

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

 

03/30/01

   25,000    $ 32.00    NQSO    25,000    2/15/2005    (90 days )

05/01/02

   193,780    $ 7.68    NQSO    169,557    12/15/2004    (30 days )

05/21/02

   25,000    $ 7.56    NQSO    25,000    12/15/2004    (30 days )

05/21/02

   100,000    $ 7.56    NQSO    60,416    12/15/2004    (30 days )

03/24/03

   150,000    $ 3.49    NQSO    59,375    12/15/2004    (30 days )      493,780
               339,348            

 

- 2 -

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

However, in consideration for your execution of this Agreement, and
notwithstanding the exercise period as referenced in the above chart, the
Company will amend the terms of your stock option agreements such that you will
have up to and until November 15, 2005 to exercise any vested stock options as
of the Separation Date, subject to the applicable stock option plan.

 

(c) Payment of Health and Life Insurance Premiums: The month end of your
Separation Date (November 30, 2004) shall be the date of the “qualifying event”
under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”). If
you elect to continue health, dental and vision insurance coverage after the
Separation Date in accordance with the provisions of COBRA, the Company will
continue to pay the monthly premium payments, less the twenty percent (20%)
employee co-payment/contribution amount, until the earlier of (a) the period of
time that you are eligible to receive salary continuation payments (i.e.,
through November 15, 2005) or (b) the date on which you enroll in comparable
health, dental and vision insurance benefits. Thereafter, medical, vision and
dental plan coverage will be continued only to the extent required by COBRA and
only to the extent you timely pay the full premium payments yourself.

 

Based on your current health insurance elections, the per-pay-period premium
payments will be as follows:

 

Insurance Coverage

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

        Your Contribution (pre-tax)

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

   Avici’s Contribution

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

BC/BS HMO

   Family    $ 60.15/pay period    $ 340.61/pay period

Delta Dental

   Family    $ 10.93/pay period    $ 55.76/pay period

VSP Vision

   Single    $ 0.00    $ 2.59/pay period

 

Please note that contribution rates will be changing effective January 3, 2005
based on new premium rates. Your contribution will be deducted from the salary
continuation payments set forth above.

 

The Company will pay the premium on your Company Basic Life Insurance (benefit
of $750,000) up to and until November 15, 2005. You agree that you will
cooperate in the execution of any documents necessary to continue the Company
Basic Life Insurance policy. Your Supplemental & Spouse life insurance coverage
ceased on November 15, 2004.

 

(d) Outplacement Assistance: Avici also agrees that upon the Effective Date, it
will pay for outplacement services for you for an amount up to $15,000.00 at the
outplacement organization of your choice. It will be your responsibility to
arrange for the outplacement service to bill Avici directly up to the $15,000.00
cap. Upon selecting an outplacement organization, your Avici voice mail and
electronic mail will end.

 

(e) Avici will reimburse you for up to $8,000 for documented legal expenses
incurred in connection with review and execution of this Agreement.

 

(f) Cell Phone: Subject to Company policy regarding such equipment and
notwithstanding Section 7(b) below, Avici agrees that you may retain and use the
AT&T cellular phone

 

- 3 -

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

that you have been using through February 15, 2005, and that you may transfer
your cellular phone number to your personal account for your ongoing use. Avici
will pay the flat monthly rate of $89.99 for cellular phone service through
February 15, 2004, and you will reimburse Avici for any charges in excess of the
flat monthly rate.

 

4. Reimbursements:

 

The Company agrees that, consistent with Company’s expense reimbursement policy,
it will reimburse you for all expenses reflected in the Expense Reports
submitted to the Company by you for reasonable Company expenses incurred through
November 15, 2004.

 

5. Release:

 

(a) In exchange for the amounts and benefits provided in Paragraph 3 of this
letter agreement, and other good and valuable consideration, the receipt of
which you hereby acknowledge, you hereby agree that you and your
representatives, agents, estate, heirs, successors and assigns (“You”) release,
remise, discharge, indemnify and hold harmless the Releasees (defined to include
Avici Systems Inc. its predecessors, successors, parents, subsidiaries,
divisions, affiliates, assigns, plan sponsors and plan fiduciaries, and its and
their current and former directors, shareholders, insurers, officers, employees,
representatives, attorneys and/or agents, in any and all capacities), of and
from any and all actions or causes of action, suits, claims, complaints,
obligations, demands, liabilities, contracts, agreements, promises, judgments,
rights, demands, controversies, debts and damages, whether existing or
contingent, known or unknown, up to and including the Effective Date, including,
but not limited to, (i) any and all claims arising out of or in connection with
your employment, change in employment status, and/or termination of employment
with the Company; (ii) any and all claims arising out of or in connection with
any relationship between You and the Company; (iii) any and all claims based on
any federal, state or local law, constitution or regulation regarding either
securities, employment, employment benefits, or employment discrimination and/or
retaliation including, without limitation, those laws or regulations concerning
discrimination on the basis of race, color, creed, religion, age, sex, sex
harassment, sexual orientation, genetic information, national origin, ancestry,
handicap or disability, veteran status or any military service or application
for military service; (iv) any contract, whether oral or written, express or
implied, any tort, or common law; and (v) any and all claims relating to your
ownership of the Company’s stock. This release is intended by You to be all
encompassing and to act as a full and total release of any claims, whether
specifically enumerated herein or not, that You have, may have or have had
against the Releasees up to the Effective Date.

 

(b) Notwithstanding the foregoing, you do not release (1) any rights under this
Agreement, (2) any benefit rights which vested on or before the Separation Date
as specified in this Agreement, (3) any rights to indemnification or exculpation
under the Company’s charter or by-laws, (4) any rights under any applicable
insurance policies or (5) any rights which by law cannot be waived.

 

(c) You not only release and discharge the Releasees from any and all claims as
stated above that You could make on your own behalf or on behalf of others, but
also those claims that might be made by any other person or organization on your
behalf, and You specifically waive any right to recover any damage awards as a
member of any class in a case in which any claim(s) against the Releasees are
made involving any matters. And while nothing in

 

- 4 -

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

this letter agreement shall bar or prohibit You from contacting, seeking
assistance from or participating in any proceeding before any federal or state
administrative agency to the extent permitted by applicable federal, state
and/or local law, notwithstanding this provision, You will be prohibited to the
fullest extent authorized by law from obtaining monetary damages in any agency
proceeding in which you do so participate.

 

(d) You also represent that you have not been subject to any retaliation or any
other form of adverse action by the Releasees for any action taken by you as an
employee or resulting from your exercise of or attempt to exercise any statutory
rights recognized under federal, state or local law.

 

6. Accord and Satisfaction:

 

You agree that the payments and benefits set forth in this letter agreement,
together with payments and benefits the Company previously provided to you, are
complete payment, settlement, accord and satisfaction with respect to all
obligations and liabilities of the Releasees to You, and with respect to all
claims, causes of action and damages that could be asserted by You against the
Releasees regarding your employment with, change in employment status with,
and/or termination from employment with the Company, including, without
limitation, all claims for wages, salary, commissions, draws, car allowances,
incentive pay, bonuses, business expenses, paid time off, stock and stock
options, severance pay, attorneys’ fees, compensatory damages, exemplary
damages, or other compensation, benefits, costs or sums.

 

7. Nondisclosure Obligations and Return of Company Property:

 

(a) Nondisclosure: You confirm the existence and continued validity of your
Non-Competition Agreement, which you executed as a condition of your employment.
You agree that the Company’s provision of the amounts and benefits in Paragraph
3 are additional consideration for your obligations pursuant to the
Non-Competition Agreement. You acknowledge that your non-competition obligations
as set forth in Section 4 of the Non-Competition Agreement shall continue until
November 15, 2005 or, if applicable, such longer period as provided in Section
4(b) of the Non-Competition Agreement. The obligation of the Company to provide
the consideration in Paragraph 3 hereof, including to make payments to or on
your behalf, is expressly conditioned upon your continued performance of the
Non-Competition Agreement.

 

(b) Company Files, Documents and Other Property: On or before December 10, 2004,
you will return to the Company all Company property and materials, including but
not limited to, personal computers, laptops, fax machines, scanners, copiers,
cellular phones, Company credit cards and telephone charge cards, manuals, keys,
cardkeys, building keys and passes, courtesy parking passes, diskettes,
intangible information stored on diskettes, software programs and data compiled
with the use of those programs, software passwords or codes, tangible copies of
trade secrets and confidential information, sales forecasts, names and addresses
of Company customers and potential customers, customer lists, customer contacts,
sales information, sales forecasts, memoranda, sales brochures, business or
marketing plans, reports, projections, and any and all other information or
property previously or currently held or used by you that is or was related to
your employment with the Company (“Company Property”). You agree that in the
event that you discover any other Company Property in your possession after the
Separation Date, you will immediately return such materials to the Company.

 

- 5 -

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

8. Future Conduct:

 

(a) Nondisparagement: You agree not to make disparaging, critical or otherwise
detrimental comments to any person or entity concerning the Company, its
officers, directors or employees; the products, services or programs provided or
to be provided by the Company; or the business affairs or the financial
condition of the Company.

 

(b) Nothing herein shall prohibit or bar you from providing truthful testimony
in any legal proceeding or in communicating with any governmental agency or
representative or from making any truthful disclosure required, authorized or
permitted under law; provided however, that in providing such testimony or
making such disclosures or communications, you will use your best efforts to
ensure that this Section is complied with to the maximum extent possible.

 

9. Representations and Governing Law:

 

(a) This letter agreement sets forth the complete and sole agreement between the
parties and supersedes any and all other agreements or understandings, whether
oral or written, except for the Non-Competition Agreement, a copy of which has
been provided to you, and which shall remain in full force and effect in
accordance with its terms. This letter agreement may not be changed, amended,
modified, altered or rescinded except upon the express written consent of the
Company and you.

 

(b) If any provision of this letter agreement, or part thereof, is held invalid,
void or voidable as against public policy or otherwise, the invalidity shall not
affect other provisions, or parts thereof, which may be given effect without the
invalid provision or part. To this extent, the provisions, and parts thereof, of
this letter agreement are declared to be severable. Any waiver of any provision
of this letter agreement shall not constitute a waiver of any other provision of
this letter agreement unless expressly so indicated otherwise. The language of
all parts of this letter agreement shall in all cases be construed as a whole
according to its fair meaning and not strictly for or against any of the
parties.

 

(c) This letter agreement shall be deemed to be made and entered into in the
Commonwealth of Massachusetts. This letter agreement and any claims arising out
of this letter agreement (or any other claims arising out of the relationship
between the parties) shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts and shall in all respects be
interpreted, enforced and governed under the internal and domestic laws of
Massachusetts, without giving effect to the principles of conflicts of laws of
such state. Any claims or legal actions by one party against the other shall be
commenced and maintained in any state or federal court located in Massachusetts,
and you hereby submit to the jurisdiction and venue of any such court. This
letter agreement shall be binding upon and inure to the benefit of the
respective representatives, heirs, agents and successors of the parties and, as
to the Company, shall also be binding on and inure to the benefit of its
assigns.

 

10. Taxation:

 

All payments set forth in this letter agreement shall be subject to all
applicable federal, state and/or local withholding obligations and payroll,
income and other taxes, and You shall be

 

- 6 -

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

responsible for the payment of all such taxes. The Company may withhold from any
amounts payable to You in order to comply with any withholding obligations.

 

[REMAINDER OF PAGE INTENTIONALLY BLANK]

 

- 7 -

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

If this letter agreement correctly states the understanding we have reached,
please indicate your acceptance by countersigning the enclosed copy and
returning it to me no later than 12:00 p.m. EST on Thursday, December 9, 2004.
Thereafter, the terms of the Company’s offer shall expire.

 

Very truly yours,

 

AVICI SYSTEMS INC.

 

/s/ Paul Brauneis

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

By: Paul Brauneis, Senior Vice President, Finance

 

YOU REPRESENT THAT YOU HAVE READ THE FOREGOING AGREEMENT, THAT YOU FULLY
UNDERSTAND THE TERMS AND CONDITIONS OF SUCH AGREEMENT AND THAT YOU ARE
VOLUNTARILY EXECUTING THE SAME. IN ENTERING INTO THIS AGREEMENT, YOU DO NOT RELY
ON ANY REPRESENTATION, PROMISE OR INDUCEMENT MADE BY THE RELEASEES WITH THE
EXCEPTION OF THE CONSIDERATION DESCRIBED IN THIS DOCUMENT.

 

Accepted and agreed to:

 

/s/ Steven Kaufman

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

 

December 8, 2004

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

Steven Kaufman

  Date

 

- 8 -