Exhibit 10.18

 

REDBACK NETWORKS INC.

 

1999 STOCK INCENTIVE PLAN

 

RESTRICTED STOCK AGREEMENT

 

Unless otherwise defined herein, capitalized terms defined in the 1999 Stock
Incentive Plan shall have the same defined meanings in this Restricted Stock
Agreement (the “Agreement”).

 

I. NOTICE OF RESTRICTED STOCK GRANT

 

Name:                Roy D. Behren

 

Address:

 

The undersigned Outside Director has been granted Restricted Shares, subject to
the terms and conditions of the Plan and this Restricted Stock Agreement, as
follows:

 

Grant Date:

  

April 12, 2004

Vesting Commencement Date:    

  

April 12, 2004

Restricted Shares:

  

25,000

Vesting Schedule:

    

 

1/24th of the Restricted Shares shall vest after the expiration of each month
following the Vesting Commencement Date such that 100% of the Restricted Shares
shall be vested on the two-year anniversary of the Vesting Commencement Date,
subject to the Outside Director’s continued service as a member of the Company’s
Board through each relevant vesting date.

 

Notwithstanding the foregoing, if the Outside Director is removed from the Board
or voluntarily resigns from the Board at the request of the acquiror within one
year following a Change in Control, the Restricted Shares shall partially
accelerate and become vested and exercisable with respect to the number of
shares that would have otherwise vested within the 12 months following the date
of the Outside Director’s termination of service as though the Outside Director
had remained in service as a member of the Company’s Board through such date.

 

II. TERMS OF THE AGREEMENT

 

1. Grant. The Company hereby grants to the individual named in the Notice of
Restricted Stock Grant for past services and as a separate incentive in
connection with his or her service and not in lieu of any salary or other
compensation for his or her services, an award of that number of Restricted
Shares set forth in the Notice of Restricted Stock Grant at par value ($0.0001
per share), commencing on the date hereof, subject to all of the terms and
conditions in this Agreement and the Plan, which is incorporated herein by
reference.

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2. Shares Held in Escrow. Unless and until the Restricted Shares shall have
vested in the manner set forth in Sections 3 or 4 herein, such shares shall be
issued in the name of the Outside Director and held by the Secretary of the
Company as escrow agent (the “Escrow Agent”), and shall not be sold,
transferred, assigned, or otherwise disposed of, and shall not be pledged,
alienated, or otherwise hypothecated. The Company may instruct the transfer
agent for its Common Stock to place a legend on the certificates representing
the Restricted Shares or otherwise note on its records as to the restrictions on
transfer set forth in this Agreement and the Plan. The certificate or
certificates representing such shares shall not be delivered by the Escrow Agent
to the Outside Director unless and until the shares have vested and all other
terms and conditions in this Agreement have been satisfied. The Restricted
Shares will be released from escrow as soon as practicable after the shares
vest.

 

The Outside Director shall, upon execution of this Agreement, deliver and
deposit with the Escrow Agent the share certificates representing the Restricted
Shares, together with the Assignment Separate from Certificate (the “Stock
Assignment”) duly endorsed in blank, attached hereto as Appendix A. The unvested
Restricted Shares and Stock Assignment shall be held by the Escrow Holder until
such time as the Restricted Shares vest and are released from escrow.

 

3. Vesting Schedule. Except as provided in Section 4, and subject to Section 5,
the Restricted Shares awarded by this Agreement shall vest in the Outside
Director according to the vesting schedule set forth in the Notice of Restricted
Stock Grant.

 

4. Committee Discretion. The Committee, in its absolute discretion, may
accelerate the vesting of the balance, or some lesser portion of the balance, of
the unvested Restricted Shares at any time. If so accelerated, such shares shall
be considered as having vested as of the date specified by the Committee.

 

5. Forfeiture. Except as provided in Section 4, and notwithstanding any contrary
provision of this Agreement, the balance of the Restricted Shares which have not
vested at the time of the Outside Director’s termination of status as a member
of the Company’s Board (“Termination of Service”) shall thereupon be forfeited
and automatically transferred to and reacquired by the Company at no cost to the
Company. The Outside Director hereby appoints the Escrow Agent with full power
of substitution, as the Outside Director’s true and lawful attorney-in-fact with
irrevocable power and authority in the name and on behalf of the Outside
Director to take any action and execute all documents and instruments,
including, without limitation, stock powers which may be necessary to transfer
the certificate or certificates evidencing such unvested shares to the Company
upon such Termination of Service.

 

6. Death of Outside Director. Any distribution or delivery to be made to the
Outside Director under this Agreement shall, if the Outside Director is then
deceased, be made to the Outside Director’s designated beneficiary, or if no
beneficiary survives the Outside Director, to the administrator or executor of
the Outside Director’s estate. Any designation of a beneficiary by the Outside
Director shall be effective only if such designation is made in a form and
manner acceptable

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to the Committee. Any transferee must furnish the Company with (a) written
notice of his or her status as transferee, and (b) evidence satisfactory to the
Company to establish the validity of the transfer and compliance with any laws
or regulations pertaining to said transfer.

 

7. Rights as Stockholder. Neither the Outside Director nor any person claiming
under or through the Outside Director shall have any of the rights or privileges
of a stockholder of the Company in respect of any shares deliverable hereunder
unless and until certificates representing such shares shall have been issued,
recorded on the records of the Company or its transfer agents or registrars, and
delivered to the Outside Director or the Escrow Agent. Except as provided in
Section 8, after such issuance, recordation and delivery, the Outside Director
shall have all the rights of a stockholder of the Company with respect to voting
such shares and receipt of dividends and distributions on such shares.

 

8. Changes in Stock. In the event that as a result of a stock dividend, stock
split, reverse stock split, reclassification, recapitalization, combination of
shares or the adjustment in capital stock of the Company or otherwise, or as a
result of a merger, consolidation, spin-off, or other reoganization, the
Company’s shares shall be increased, reduced or otherwise changed, and by virtue
of any such change the Outside Director shall in his or her capacity as owner of
unvested Restricted Shares which have been awarded to him or her (the “Prior
Shares”) be entitled to new or additional or different shares of stock,
securities or cash; such new or additional or different shares, securities or
cash shall thereupon be considered to be unvested Restricted Shares and shall be
subject to all of the conditions and restrictions which were applicable to the
Prior Shares pursuant to this Agreement and the Plan. If the Outside Director
receives rights or warrants with respect to any Prior Shares, such rights or
warrants may be held or exercised by the Outside Director, provided that until
such exercise any such rights or warrants and after such exercise any shares or
other securities acquired by the exercise of such rights or warrants shall be
considered to be unvested Restricted Shares and shall be subject to all of the
conditions and restrictions which were applicable to the Prior Shares pursuant
to the Plan and this Agreement. The Administrator in its absolute discretion at
any time may accelerate the vesting of all or any portion of such new or
additional shares of stock, securities, cash, rights or warrants to purchase
securities or shares or other securities acquired by the exercise of such rights
or warrants.

 

9. Tax Consequences. Set forth below is a brief summary, as of the date of grant
of Restricted Shares, of some of the federal tax consequences arising from the
grant of Restricted Shares and the disposition of such shares. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.

 

9.1 Grant of Restricted Shares. Generally, no income will be recognized by the
Outside Director in connection with the grant of unvested Restricted Shares,
unless an election under Section 83(b) of the Internal Revenue Code of 1986, as
amended (the “Code”) is filed with the Internal Revenue Service within 30 days
of the Grant Date. Otherwise, as the Restricted Shares vest, the Outside
Director will recognize compensation income in an amount equal to the difference
between the fair market value of the Restricted Shares at the time the shares
vest and the amount paid for the stock, if any (the “Spread”). Generally, the
Spread will be subject to tax withholding by the Company, and the Company will
be entitled to a tax deduction in the amount and at the time the Outside
Director recognizes compensation income with respect to the Restricted Shares.

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9.2 Section 83(b) Election. The Outside Director may elect to be taxed (and
commence his capital gains holding period for the Restricted Shares) at the time
the Restricted Shares are granted rather than when any applicable forfeiture
expires by filing an election under Section 83(b) of the Code with the United
States Internal Revenue Service within 30 days from the Grant Date. The form for
making this election is attached as Appendix B hereto. THE OUTSIDE DIRECTOR
ACKNOWLEDGES THAT IT IS THE OUTSIDE DIRECTOR’S SOLE RESPONSIBILITY AND NOT THE
COMPANY’S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b), EVEN IF THE OUTSIDE
DIRECTOR REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON THE
HIS OR HER BEHALF. If the Outside Director files an election under Section
83(b), the Outside Director must pay the applicable income tax on any excess of
the fair market value of the Restricted Shares at the time of the Grant Date
over the amount paid for the unvested Restricted Shares, if any. However, if the
Outside Director’s service with the Company subsequently terminates before the
Restricted Shares vest, the Outside Director will not be entitled to any refund
of the taxes paid on the unvested Restricted Shares.

 

9.3 Disposition of Shares. Upon a disposition of the Restricted Shares, any gain
or loss is treated as capital gain or loss. If the shares are held for at least
one year, any gain realized on disposition of the shares will be treated as
long-term capital gain for federal income tax purposes. Long-term capital gains
are grouped and netted by holding periods. Net capital gains on assets held for
more than 12 months is currently capped at 15%. Capital losses are allowed in
full against capital gains, and up to $3,000 against other income.

 

The Outside Director has reviewed with the Outside Director’s own tax advisors
the federal, state, local and foreign tax consequences of this investment and
the transactions contemplated by this Agreement. The Outside Director is relying
solely on such advisors and not on any statements or representations of the
Company or any of its agents. The Outside Director understands that the Outside
Director (and not the Company) shall be responsible for the Outside Director’s
own tax liability that may arise as a result of the transactions contemplated by
this Agreement.

 

10. Address for Notices. Any notice to be given to the Company under the terms
of this Agreement shall be addressed to the Company, in care of its Secretary,
at Redback Networks Inc., 300 Holger Way, San Jose, CA 95134 (fax: 408-750-5599)
or at such other address as the Company may hereafter designate in writing.

 

11. Grant is Not Transferable. Except as provided in Section 6, this grant and
the rights and privileges conferred hereby shall not be transferred, assigned,
pledged or hypothecated in any way (whether by operation of law or otherwise)
and shall not be subject to sale under execution, attachment or similar process.
Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose
of this grant, or of any right or privilege conferred hereby, or upon any
attempted sale under any execution, attachment or similar process, this grant
and the rights and privileges conferred hereby immediately shall become null and
void.

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12. Binding Agreement. Subject to the limitation on the transferability of this
grant contained herein, this Agreement shall be binding upon and inure to the
benefit of the heirs, legatees, legal representatives, successors and assigns of
the parties hereto.

 

13. Conditions for Issuance of Certificates for Stock. The shares deliverable to
the Outside Director may be either previously authorized but unissued shares or
issued shares that have been reacquired by the Company. The Company shall not be
required to issue any certificate or certificates for shares hereunder prior to
fulfillment of all the following conditions: (a) the admission of such shares to
listing on all stock exchanges on which such class of stock is then listed; (b)
the completion of any registration or other qualification of such shares under
any state or federal law or under the rulings or regulations of the Securities
and Exchange Commission or any other governmental regulatory body, which the
Committee shall, in its absolute discretion, deem necessary or advisable; (c)
the obtaining of any approval or other clearance from any state or federal
governmental agency, which the Committee shall, in its absolute discretion,
determine to be necessary or advisable; and (d) the lapse of such reasonable
period of time following the date of grant of the Restricted Stock as the
Committee may establish from time to time for reasons of administrative
convenience.

 

14. Plan Governs. This Agreement is subject to all terms and provisions of the
Plan. In the event of a conflict between one or more provisions of this
Agreement and one or more provisions of the Plan, the provisions of the Plan
shall govern.

 

15. Captions. Captions provided herein are for convenience only and are not to
serve as a basis for interpretation or construction of this Agreement.

 

16. Agreement Severable. In the event that any provision in this Agreement shall
be held invalid or unenforceable, such provision shall be severable from, and
such invalidity or unenforceability shall not be construed to have any effect
on, the remaining provisions of this Agreement.

 

17. Modifications to the Agreement. This Agreement constitutes the entire
understanding of the parties on the subjects covered. The Outside Director
expressly warrants that he or she is not executing this Agreement in reliance on
any promises, representations, or inducements other than those contained herein.
Modifications to this Agreement or the Plan can be made only in an express
written contract executed by a duly authorized officer of the Company.

 

By Outside Director’s signature below, Outside Director represents that he or
she is familiar with the terms and provisions of the Plan, and hereby accepts
this Agreement subject to all of the terms and provisions thereof. Outside
Director has reviewed the Plan and this Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Agreement
and fully understands all provisions of this Agreement. Outside Director agrees
to accept as binding, conclusive and final all decisions or interpretations of
the Administrator upon any questions arising under the Plan or this Agreement.
Outside Director further agrees to notify the Company upon any change in the
residence indicated in the Notice of Restricted Stock Grant.

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OUTSIDE DIRECTOR

     

REDBACK NETWORKS INC.

 

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Signature

     

By

Roy D. Behren

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Print Name

     

Title

 

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Residence Address

       

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APPENDIX A

 

ASSIGNMENT SEPARATE FROM CERTIFICATE

 

FOR VALUE RECEIVED I,                                              , hereby
sell, assign and transfer unto Redback Networks Inc.
                                     (                    ) shares of the Common
Stock of Redback Networks Inc. standing in my name of the books of said
corporation represented by Certificate No.          herewith and do hereby
irrevocably constitute and appoint                                      to
transfer the said stock on the books of the within named corporation with full
power of substitution in the premises.

 

This Stock Assignment may be used only in accordance with the Restricted Stock
Purchase Agreement between Redback Networks Inc. and the undersigned dated
                        ,          (the “Agreement”).

 

Dated:                     ,         

 

Signature:                                         
                                            

 

INSTRUCTIONS: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise its
“repurchase option,” as set forth in the Agreement, without requiring additional
signatures on the part of the Outside Director.

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APPENDIX B

 

ELECTION UNDER SECTION 83(b)

OF THE INTERNAL REVENUE CODE OF 1986

 

The undersigned taxpayer hereby elects, pursuant to the above-referenced Federal
Tax Code, to include in taxpayer’s gross income for the current taxable year,
the amount of any compensation taxable to taxpayer in connection with his
receipt of the property described below:

 

1. The name, address, taxpayer identification number and taxable year of the
undersigned are as follows:

 

NAME:

  

TAXPAYER: Roy D. Behren

  

SPOUSE:

ADDRESS:

         

IDENTIFICATION NO.:

  

TAXPAYER:

  

SPOUSE:

TAXABLE YEAR:

         

 

2. The property with respect to which the election is made is described as
follows:                         shares (the “Shares”) of the common stock of
Redback Networks Inc. (the “Company”).

 

3. The date on which the property was transferred is:                     ,
200    .

 

4. The property is subject to the following restrictions:

 

The Shares may forfeited to the Company, or its assignee, on certain events.
This right lapses with regard to a portion of the Shares based on the continued
performance of services by the taxpayer over time.

 

5. The fair market value at the time of transfer, determined without regard to
any restriction other than a restriction which by its terms will never lapse, of
such property is: [                ]

 

6. The amount (if any) paid for such property is: [                ]

 

The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned’s receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.

 

The undersigned understands that the foregoing election may not be revoked
except with the consent of the Commissioner.

 

Dated:                     ,         

     

 

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Roy D. Behren, Taxpayer

 

The undersigned spouse of taxpayer joins in this election.

 

Dated:                     ,         

     

 

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Spouse of Taxpayer