Exhibit 10.14
Aruba Networks, Inc.
Change of Control Severance Policy for Officers and Directors
Eligible Employee: You are an eligible employee under this Policy if, on the
date of a Change of Control of the Company (as defined below), you are either a
non-employee member of the Company’s Board of Directors or an employee at the
level of Vice President (grade 12) or above. This Change of Control Severance
Policy for Officers and Directors (the “Plan” or the “Policy”) is an “employee
welfare benefit plan,” as defined in Section 3(1) of the Employee Retirement
Income Security Act of 1974, as amended (“ERISA”). This document constitutes
both the written instrument under which the Plan is maintained and the required
summary plan description for the Plan.
Equity Vesting: If there is a Change of Control of the Company and you are an
eligible employee whose employment terminates as a result of an Involuntary
Termination (as defined below) without Cause (as defined below) within 12 months
following such Change of Control, then a percentage (as described in this
paragraph) of the then-unvested shares subject to each of your then-outstanding
equity awards shall immediately vest and, in the case of options and stock
appreciation rights, shall become exercisable (for avoidance of doubt, no more
than 100% of the shares subject to the outstanding portion of an equity award
may vest and, with respect to an option or stock appreciation right, become
exercisable pursuant to this provision). If you are an employee at the Vice
President level (grade 12) or above, the percentage will equal 50%. If you are a
non-employee member of the Board of Directors, the percentage will equal 100%
and termination of service on the Board will equate to employment termination
for purposes of determining if and when vesting of your equity awards will
accelerate.
Cash Severance: In addition, if you qualify for the equity vesting described
above and you are not a non-employee member of the Board, then subject to your
signing and not revoking a separation agreement and release of claims in favor
of the Company (the “Release”), you will receive a lump sum severance payment
equal to a percentage (as described in this paragraph) of your annual base
salary as in effect immediately prior to your termination date. No severance
will be paid or provided until the Release becomes effective, which must occur
within sixty (60) days following your termination of employment. Subject to any
payment delay necessary to comply with Section 409A (as defined below), your
severance payment will be paid in cash and in full on the 61st day following
your termination of employment. If you die before all amounts have been paid,
such unpaid amounts will be paid to your designated beneficiary, if living, or
otherwise to your personal representative in a lump-sum payment (less any
withholding taxes) as soon as possible following your death. If you are an
employee at the Vice President level (grade 12) or above (other than the Chief
Executive Officer), the percentage will equal 50%. If you are the Chief
Executive Officer, the percentage will equal 100%.
COBRA Reimbursement: In addition, if you qualify for the equity vesting
described above and you are not a non-employee member of the Board, then subject
to your signing and not revoking the Release and making a valid election under
COBRA to continue your health coverage, the Company will (for a limited time)
pay the cost of such coverage for you and any eligible spouse or dependents that
were covered under the Company’s health care plans immediately prior to the date
of your eligible termination (“Company-paid Health Continuation Coverage”). If
you are an employee at the Vice President level (grade 12) or above (other than
the Chief Executive Officer), the period of Company-paid Health Continuation
Coverage will equal six months. If you are the

 

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Chief Executive Officer, the period of Company-paid Health Continuation Coverage
will equal twelve months. Notwithstanding the preceding, if the Company
determines in its sole discretion that it cannot provide COBRA reimbursement
benefits without potentially violating applicable law (including, without
limitation, Section 2716 of the Public Health Service Act), the Company will
instead provide you a taxable monthly payment in an amount equal to the monthly
COBRA premium that you would be required to pay to continue your group health
coverage in effect on the date of termination of employment (which amount will
be based on the premium for the first month of COBRA coverage), which payments
will be made regardless of whether you elect COBRA continuation coverage and
will commence in the month following the month in which you terminate employment
and continue for the period of months indicated in this paragraph.
For purposes of this Policy, the following terms shall have the following
meanings:
“Change of Control” means the occurrence of any of the following events:
A. Change in Ownership of the Company. A change in the ownership of the Company
which occurs on the date that any one person, or more than one person acting as
a group (“Person”), acquires ownership of the stock of the Company that,
together with the stock held by such Person, constitutes more than fifty percent
(50%) of the total voting power of the stock of the Company; provided, however,
that the acquisition of additional stock by any one Person who is considered to
own more than fifty percent (50%) of the total voting power of the stock of the
Company will not be considered a Change of Control; or
B. Change in Effective Control of the Company. If the Company has a class of
securities registered pursuant to Section 12 of the Exchange Act, a change in
the effective control of the Company which occurs on the date that a majority of
members of the Board is replaced during any 12 month period by directors whose
appointment or election is not endorsed by a majority of the members of the
Board prior to the date of the appointment or election. For purposes of this
clause (B), if any Person is considered to be in effective control of the
Company, the acquisition of additional control of the Company by the same Person
will not be considered a Change of Control; or
C. Change in Ownership of a Substantial Portion of the Company’s Assets. A
change in the ownership of a substantial portion of the Company’s assets which
occurs on the date that any Person acquires (or has acquired during the 12 month
period ending on the date of the most recent acquisition by such person or
persons) assets from the Company that have a total gross fair market value equal
to or more than 50% of the total gross fair market value of all of the assets of
the Company immediately prior to such acquisition or acquisitions; provided,
however, that for purposes of this subsection, the following will not constitute
a change in the ownership of a substantial portion of the Company’s assets:
(i) a transfer to an entity that is controlled by the Company’s stockholders
immediately after the transfer, or (ii) a transfer of assets by the Company to:
(a) a stockholder of the Company (immediately before the asset transfer) in
exchange for or with respect to the Company’s stock, (b) an entity, fifty
percent (50%) or more of the total value or voting power of which is owned,
directly or indirectly, by the Company, (c) a Person, that owns, directly or
indirectly, fifty percent (50%) or more of the total value or voting power of
all the outstanding stock of the Company, or (d) an entity, at least fifty
percent (50%) of the total value or voting power of which is owned, directly or
indirectly, by a Person.
“Cause” means (a) unauthorized use or disclosure of the Company’s confidential
information or trade secrets, (b) a material failure to comply with the
Company’s written policies or rules,

 

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(c) conviction of, or plea of “guilty” or “no contest” to, a felony under the
laws of the United States or any state thereof or (d) gross misconduct.
“Involuntary Termination” means either (a) involuntary discharge by the Company
for reasons other than Cause or (b) voluntary resignation following (i) a change
in position with the Company that materially reduces Participant’s level of
authority or responsibility, (ii) a material reduction in Participant’s base
salary or (iii) receipt of notice that Participant’s principal workplace will be
relocated more than 35 miles.
Section 409A: The Company intends that all payments and benefits provided under
this Policy or otherwise comply with the requirements of Section 409A of the
Internal Revenue Code of 1986, as amended, and any guidance promulgated
thereunder (“Section 409A”) so that none of the payments or benefits will be
subject to the additional tax imposed under Section 409A, and any ambiguities
herein will be interpreted to so comply. No payment or benefits to be paid to
you, if any, pursuant to this Policy or otherwise, when considered together with
any other severance payments or separation benefits that are considered deferred
compensation under Section 409A (together, the “Deferred Payments”) will be paid
or otherwise provided until you have a “separation from service” within the
meaning of Section 409A. If, at the time of your termination of employment, you
are a “specified employee” within the meaning of Section 409A and the payment of
the Deferred Payments will be delayed to the extent necessary to avoid the
imposition of the additional tax imposed under Section 409A, which generally
means that you will receive payment on the first payroll date that occurs on or
after the date that is 6 months and 1 day following your termination of
employment. The Company reserves the right to amend the Policy as it deems
necessary or advisable, in its sole discretion and without the consent of any
eligible employee or any other individual, to comply with Section 409A the Code
or to otherwise avoid income recognition under Section 409A prior to the actual
payment of any benefits or imposition of any additional tax. To the extent that
any reimbursements payable pursuant to the Plan are subject to Section 409A, any
such reimbursements payable to you pursuant to the Plan shall be paid to you no
later than December 31 of the year following the year in which the expense was
incurred, the amount of expenses reimbursed in one year shall not affect the
amount eligible for reimbursement in any subsequent year, and your right to
reimbursement under the Plan will not be subject to liquidation or exchange for
another benefit.
In no event will the Company reimburse you for any taxes that may be imposed on
you as a result of Section 409A. Each payment and benefit payable hereunder is
intended to constitute a separate payment for purposes of Section 1.409A-2(b)(2)
of the Treasury Regulations.
Parachute Payments.
Reduction of Severance Benefits. Notwithstanding anything set forth herein to
the contrary, if any payment or benefit that an eligible employee would receive
from the Company or any other party whether in connection with the provisions
herein or otherwise (the “Payment”) would (i) constitute a “parachute payment”
within the meaning of Section 280G of the Internal Revenue Code of 1986, as
amended (the “Code”), and (ii) but for this sentence, be subject to the excise
tax imposed by Section 4999 of the Code (the “Excise Tax”), then such Payment
shall be equal to the Best Results Amount. The “Best Results Amount” shall be
either (x) the full amount of such Payment or (y) such lesser amount as would
result in no portion of the Payment being subject to the Excise Tax, whichever
of the foregoing amounts, taking into account the applicable federal, state and
local employment taxes, income taxes and the Excise Tax, results in the eligible
employee’s receipt, on an after-tax basis, of the greater amount notwithstanding
that all or some portion of the Payment may be subject to the Excise

 

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Tax. If a reduction in payments or benefits constituting “parachute payments” is
necessary so that the Payment equals the Best Results Amount, reduction shall
occur in the following order: reduction of cash payments; cancellation of
accelerated vesting of stock awards; reduction of employee benefits. In the
event that acceleration of vesting of stock award compensation is to be reduced,
such acceleration of vesting shall be cancelled in the reverse order of the date
of grant of the eligible employee’s stock awards unless the eligible employee
elects in writing a different order for cancellation. The eligible employee
shall be solely responsible for the payment of all personal tax liability that
is incurred as a result of the payments and benefits received under this Policy,
and the eligible employee will not be reimbursed by the Company for any such
payments.
Determination of Excise Tax Liability. The Company shall attempt to cause its
accountants to make all of the determinations required to be made under these
paragraphs relating to “Parachute Payments”, or, in the event the Company’s
accountants will not perform such service, the Company may select another
professional services firm to perform the calculations. The Company shall
request that the accountants or firm provide detailed supporting calculations
both to the Company and the eligible employee prior to the date on which the
event that triggers the Payment occurs if administratively feasible, or
subsequent to such date if events occur that result in parachute payments to the
eligible employee at that time. For purposes of making the calculations required
under these paragraphs relating to “Parachute Payments”, the accountants or firm
may make reasonable assumptions and approximations concerning applicable taxes
and may rely on reasonable, good faith determinations concerning the application
of the Code. The Company and the eligible employee shall furnish to the
accountants or firm such information and documents as the accountants or firm
may reasonably request in order to make a determination under these paragraphs
relating to “Parachute Payments”. The Company shall bear all costs the
accountants or firm may reasonably incur in connection with any calculations
contemplated by these paragraphs relating to “Parachute Payments”. Any such
determination by the Company’s accountants or other firm shall be binding upon
the Company and the eligible employee, and the Company shall have no liability
to the eligible employee for the determinations of its accountants or other
firm.
Administration: The Policy will be administered by the Compensation Committee of
the Board Directors or its delegate (in each case, an “Administrator”). The
Administrator will have full discretion to administer and interpret the Policy.
Any decision made or other action taken by the Administrator with respect to the
Policy, and any interpretation by the Administrator of any term or condition of
the Policy, or any related document, will be conclusive and binding on all
persons and be given the maximum possible deference allowed by law. The
Administrator is the “named fiduciary” of the Plan for purposes of ERISA and
will be subject to the fiduciary standards of ERISA when acting in such
capacity.
Non-Duplication of Benefits: This Policy is intended to be the only agreement
between you and the Company regarding severance payments or benefits to be paid
to you on account of a termination of employment concurrent with, or following,
a Change of Control. Notwithstanding any contrary provision in this Policy or
any other document, if you are entitled to any benefits other than the benefits
under this Policy by operation of applicable law or another Company-sponsored
plan, policy, contract, or arrangement, your benefits will be under the Policy
will be reduced by the value of the benefits that you receive by operation of
applicable law or under any company-sponsored plan, policy, contract, or
arrangement, as determined by the Administrator in its discretion.
Withholding: The Company is authorized to withhold from any payments or benefits
all federal,

 

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state, local and taxes required to be withheld therefrom and any other required
payroll deductions.
Amendment or Termination: The Company reserves the right to amend or terminate
the Policy at any time, without advance notice to any eligible employee or other
individual and without regard to the effect of the amendment or termination on
any eligible employee or on any other individual. Notwithstanding the preceding,
(a) any amendment to the Plan that causes an individual or group of individuals
to cease to be an eligible employee will not be effective unless it is both
approved by the Administrator and communicated to the affected individual(s) in
writing at least 6 months prior to the effective date of the amendment or
termination, and (b) no amendment or termination of the Policy shall be made
within 12 months following a Change of Control to the extent that such amendment
or reduction would reduce the benefits provided hereunder or impair an eligible
employee’s eligibility under the Policy (unless the affected eligible employee
consents to such amendment or termination). Any amendment or termination of the
Policy will be in writing. Any action of the Company in amending or terminating
the Plan will be taken in a non-fiduciary capacity.
Claims Procedure. Any eligible employee who believes he or she is entitled to
any payment under the Plan may submit a claim in writing to the Administrator.
If the claim is denied (in full or in part), the claimant will be provided a
written notice explaining the specific reasons for the denial and referring to
the provisions of the Plan on which the denial is based. The notice will also
describe any additional information needed to support the claim and the Plan’s
procedures for appealing the denial. The denial notice will be provided within
90 days after the claim is received. If special circumstances require an
extension of time (up to 90 days), written notice of the extension will be given
within the initial 90-day period. This notice of extension will indicate the
special circumstances requiring the extension of time and the date by which the
Administrator expects to render its decision on the claim.
Appeal Procedure. If the claimant’s claim is denied, the claimant (or his or her
authorized representative) may apply in writing to the Administrator for a
review of the decision denying the claim. Review must be requested within
60 days following the date the claimant received the written notice of their
claim denial or else the claimant loses the right to review. The claimant (or
representative) then has the right to review and obtain copies of all documents
and other information relevant to the claim, upon request and at no charge, and
to submit issues and comments in writing. The Administrator will provide written
notice of the decision on review within 60 days after it receives a review
request. If additional time (up to 60 days) is needed to review the request, the
claimant (or representative) will be given written notice of the reason for the
delay. This notice of extension will indicate the special circumstances
requiring the extension of time and the date by which the Administrator expects
to render its decision. If the claim is denied (in full or in part), the
claimant will be provided a written notice explaining the specific reasons for
the denial and referring to the provisions of the Plan on which the denial is
based. The notice shall also include a statement that the claimant will be
provided, upon request and free of charge, reasonable access to, and copies of,
all documents and other information relevant to the claim and a statement
regarding the claimant’s right to bring an action under Section 502(a) of ERISA.

 

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Additional Information.

     
Plan Name:
  Aruba Networks, Inc. Change of Control Severance Policy for Officers and
Directors
 
   
Plan Sponsor:
  Aruba Networks, Inc.
 
   
 
  1344 Crossman Avenue
Sunnyvale, CA 94089
 
   
Identification Numbers:
  EIN: 02-0579097
 
   
 
  PLAN: 501
 
   
Plan Year:
  Company’s Fiscal Year
 
   
Plan Administrator:
  Aruba Networks, Inc.
 
   
 
  Attention: Administrator of the Aruba Networks, Inc. Change of Control
Severance Policy for Officers and Directors
 
   
 
  1344 Crossman Avenue
Sunnyvale, CA 94089
 
   
 
  (408) 227-4500
 
   
Agent for Service of Legal Process:
  Aruba Networks, Inc.
 
   
 
  Attention: General Counsel
 
   
 
  1344 Crossman Avenue
Sunnyvale, CA 94089
 
   
 
  (408) 227-4500

 

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  Service of process may also be made upon the Plan Administrator.
 
   
Type of Plan
  Severance Plan/Employee Welfare Benefit Plan
 
   
Plan Costs
  The cost of the Plan is paid by the Company.

Statement of ERISA Rights.
Policy eligible employees have certain rights and protections under ERISA:
They may examine (without charge) all Policy documents, including any amendments
and copies of all documents filed with the U.S. Department of Labor, such as the
Policy’s annual report (Internal Revenue Service Form 5500). These documents are
available for review in the Company’s Human Resources Department.
They may obtain copies of all Policy documents and other Policy information upon
written request to the Plan Administrator. A reasonable charge may be made for
such copies.
In addition to creating rights for eligible employees, ERISA imposes duties upon
the people who are responsible for the operation of the Policy. The people who
operate the Policy (called “fiduciaries”) have a duty to do so prudently and in
the interests of eligible employees. No one, including the Company or any other
person, may fire or otherwise discriminate against an eligible employee in any
way to prevent them from obtaining a benefit under the Policy or exercising
rights under ERISA. If an eligible employee’s claim for a severance benefit is
denied, in whole or in part, they must receive a written explanation of the
reason for the denial. An eligible employee has the right to have the denial of
their claim reviewed. (The claim review procedure is explained above.)
Under ERISA, there are steps eligible employees can take to enforce the above
rights. For instance, if an eligible employee requests materials and does not
receive them within 30 days, they may file suit in a federal court. In such a
case, the court may require the Administrator to provide the materials and to
pay the eligible employee up to $110 a day until they receive the materials,
unless the materials were not sent because of reasons beyond the control of the
Plan Administrator. If an eligible employee has a claim which is denied or
ignored, in whole or in part, he or she may file suit in a state or federal
court. If it should happen that an eligible employee is discriminated against
for asserting their rights, he or she may seek assistance from the U.S.
Department of Labor, or may file suit in a federal court.
In any case, the court will decide who will pay court costs and legal fees. If
the eligible employee is successful, the court may order the person sued to pay
these costs and fees.

 

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If the eligible employee loses, the court may order the eligible employee to pay
these costs and fees, for example, if it finds that the claim is frivolous.
If an eligible employee has any questions regarding the Policy, please contact
the Plan Administrator. If an eligible employee has any questions about this
statement or about their rights under ERISA, they may contact the nearest area
office of the Employee Benefits Security Administration (formerly the Pension
and Welfare Benefits Administration), U.S. Department of Labor, listed in the
telephone directory, or the Division of Technical Assistance and Inquiries,
Employee Benefits Security Administration, U.S. Department of Labor, 200
Constitution Avenue, N.W. Washington, D.C. 20210. An eligible employee may also
obtain certain publications about their rights and responsibilities under ERISA
by calling the publications hotline of the Employee Benefits Security
Administration.