Document:

exv10w12

 

Exhibit 10.12

CONFIDENTIAL SETTLEMENT AGREEMENT

AND RELEASE

by and between

NORTEL NETWORKS LIMITED, NORTEL NETWORKS INC.,

 
FOUNDRY NETWORKS, INC.,

BOBBY R. JOHNSON, Jr., H. EARL FERGUSON, deceased, and JEFFREY PRINCE.

Effective Date: 25 October 2004

 

 

CONFIDENTIAL

SETTLEMENT AGREEMENT

AND RELEASE

               This Confidential Settlement Agreement and Release (“Settlement Agreement”) is entered
into as of October 25, 2004 (“Effective Date”), by and
between Foundry Networks, Inc., a Delaware
corporation (“Foundry”); Bobby R. Johnson, Jr., a natural person (“Johnson”); the Estate of H. Earl
Ferguson, deceased (“Ferguson”); Jeffrey Prince, a natural person (“Prince”); Nortel Networks
Limited, a corporation organized under the laws of Canada, and Nortel Networks Inc., a Delaware
corporation. Nortel Networks Limited, Nortel Networks Inc., Foundry, Johnson, Ferguson and Prince
are hereinafter referred to jointly as the “Parties” and
each individually as a “Party”.

RECITALS

     A. On
March 14, 2001, Nortel Networks Inc. and Nortel Networks Limited filed the
action entitled Nortel Networks Inc. and Nortel Networks Limited, Plaintiffs, v. Foundry
Networks, Inc., Defendant, in the United States District Court, District Court of
Massachusetts, Case No. 0110441WGY. In its answer, Foundry denied the allegations and asserted various
counterclaims against Nortel Networks Inc. and Nortel Networks Limited (the “Massachusetts
Action”).

     B. On
October 9, 2002, Foundry filed the action entitled Foundry Networks, Inc.,
Plaintiff, v. Nortel Networks Inc. and Nortel Networks Limited, Defendents, in the United
States District Court, Northern District of California, Case No. C0204909. In their answer, Nortel
Networks Inc. and Nortel Networks Limited denied the allegations and asserted counterclaims
against Foundry and third party complaints against Johnson, Ferguson and Prince (the
“California Action”).

     C. The
Parties desire to settle all issues arising out of or relating to the Actions (as
such term is defined below) without any admission of fault or liability by any Party.

AGREEMENT

     NOW, THEREFORE, in consideration of the mutual covenants and promises set forth herein, the
Parties hereto agree as follows:

     1. Definitions.

               1.1
“Actions” means the Massachusetts Action and the California Action above.

               1.2 “Affiliate” of an entity means another entity which, directly or indirectly,
controls, is controlled by, or is under common control with the first entity, where “control”
means ownership or control of at least fifty percent (50%) of the voting power of securities or
interests in the entity controlled. Without limiting the foregoing, Affiliates of Nortel Networks
Limited include Nortel Networks Corporation and all of its Affiliates.

               1.3
“License Agreement” means the License Agreement in the form
attached hereto as Exhibit B.

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               1.4 “Nortel” means, collectively, Nortel Networks Limited and Nortel
Networks Inc. (and includes all companies, assets and/or liabilities merged into Nortel
Networks Limited or Nortel Networks Inc.).

               1.5
“Individual Defendants” means, individually and collectively, Jeffrey
Prince, H. Earl Ferguson, deceased, and Bobby R. Johnson, Jr. and, to the extent relevant,
their estates and heirs.

     2. Dismissals. In consideration of the mutual promises set forth herein, the Parties
will dismiss the Actions by filing with the applicable United States District Courts the
forms attached hereto as Exhibit A (Forms of Dismissal). The dismissals for the Massachusetts
Action and the California Action shall be filed within five days of the execution by the Parties of
the Settlement Agreement and the License Agreement.

     3. Releases/Covenants Not to Sue

               3.1
Releases. In consideration of the mutual promises set forth herein, the
Parties agree and covenant as follows:

                         (a) Nortel, on behalf of itself and its Affiliates, owners, predecessors,
successors in interest, divisions, assigns, agents, directors, officers, employees,
representatives, attorneys, and all persons acting by, through, under, or in concert with any
of them, hereby releases, acquits and forever discharges, and irrevocably agrees never to assert
a claim against Foundry, its predecessors, successors in interest, agents, directors, officers,
employees, and current Affiliates, for (1) any and all claims
for patent infringement, known or
unknown, arising prior to the Effective Date of this Settlement Agreement, and (2) any and all
claims, which were set forth in the pleadings at any time by Nortel in the Actions.

                         (b) Nortel,
on behalf of itself and its Affiliates, owners, predecessors,
successors in interest, divisions, assigns, agents, directors, officers, employees,
representatives, attorneys, and all persons acting by, through,
under, or in concert with any
of them, hereby releases, acquits and forever discharges, and irrevocably agrees never to assert
a claim against the Individual Defendants, their successors in interest, agents, directors,
officers and employees, for any and all claims or liability, known or unknown, arising prior to the
Effective Date of this Settlement Agreement. This release includes, without limitation, all
claims identified in any pleadings in any dispute between the Parties, all common law claims, claims
under any federal or state statute, and claims under the law of any
foreign country.

                         (c) Foundry, on behalf of itself and its Affiliates, owners,
predecessors, successors in interest, divisions, assigns, agents, directors, officers, employees,
representatives, attorneys, and all persons acting by, through,
under, or in concert with any of
them, hereby releases, acquits and forever discharges, and irrevocably agrees never to assert a
claim against Nortel, its predecessors, successors in interest, agents, directors, officers,
employees, and current Affiliates, for (1) any and all claims
for patent infringement, known or
unknown, arising prior to the Effective Date of this Settlement Agreement, and (2) any and all
claims, which were set forth in the pleadings at any time by Foundry in the Actions

                         (d) Each
of the Individual Defendants, on behalf of himself and his
predecessors, successors in interest, assigns, agents, directors, officers, employees,
representatives, attorneys, and all persons acting by, through,
under, or in concert with any of them, hereby releases, acquits and
forever discharges, and irrevocably agrees never to assert a

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claim
against Nortel, its current Affiliates, predecessors, successors in interest, agents,
directors, officers and employees, from any and all claims or liability, known or unknown, arising
prior to the Effective Date of this Settlement Agreement. This release includes, without limitation,
all claims identified in any pleadings in any dispute between the Parties, all common law claims,
claims under any federal or state statute, and claims under the law of any foreign country.

                         (e) Nothing in this release shall be construed to release any Party or
any Party’s Affiliate from its representations and obligations under this Settlement
Agreement.

                         (f) Nothing contained within this Settlement Agreement shall prevent or
be construed to prevent (i) an assertion of claims, including patent infringement claims,
which accrue upon the termination of the License Agreement attached hereto as Exhibit B, and/or (ii)
the assertion of defenses and declaratory judgment claims of non-infringement, invalidity, and
unenforceability, including those made in the Actions hereby released, in opposition to any
such assertion of claims.

               3.2
Covenants not to sue.

                         (a) Nortel, on behalf of itself and its Affiliates, owners, predecessors,
successors in interest, assigns, agents, directors, officers, employees, representatives,
attorneys, and all persons acting by, through, under, or in concert with any of them, hereby
covenants and agrees not to (and not to assist any other person to) maintain or initiate any
claim, suit, challenge, reexamination or other proceedings against Foundry, its current Affiliates,
predecessors and successors in interest, agents, directors, officers, employees, distributors
and all licensees and customers, direct and indirect, in which the basis of the proceedings is
related to any of the claims made by either Party in the Massachusetts Action or the California Action
provided however, this covenant shall not apply with respect to any future claim, or any
defense thereto (including defenses and declaratory judgment claims as asserted in the Actions), for
any future infringement damages that may be incurred as the result of conduct occurring after the
expiration or termination of the License Agreement.

                         (b) Nortel, on behalf of itself and its Affiliates, owners, predecessors,
successors in interest, assigns, agents, directors, officers, employees, representatives,
attorneys, and all persons acting by, through, under, or in concert with any of them, hereby
covenants and agrees not to (and not to assist any other person to) maintain or initiate any
claim, suit, challenge, reexamination or other proceedings against the Individual Defendants in which
the basis of the proceedings is related to any of the claims made by either Party in the
Massachusetts Action or the California Action, provided however, this covenant shall not apply
with respect to any future claim, or any defense thereto, for any future infringement damages
that may be incurred as the result of conduct occurring after the expiration or termination of
the License Agreement.

                         (c) Each
of the Individual Defendants, on behalf of himself and his,
predecessors, successors in interest, assigns, agents, representatives, attorneys, and all
persons acting by, through, under, or in concert with any of them, hereby covenants and agrees
not to (and not to assist any other person to) maintain or initiate any claim, suit,
challenge, reexamination or other proceedings against Nortel, its current Affiliates, predecessors and
successors in interest, agents, directors, officers, employees, distributors and all
licensees and customers, direct and indirect, in which the basis of the proceedings is related to any of the
claims made by either Party in the Massachusetts Action or the California Action.

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                         (d) Foundry, on behalf of itself and its Affiliates, owners, predecessors,
successors in interest, assigns, agents, directors, officers, employees, representatives, attorneys,
and all persons acting by, through, under, or in concert with any of them, hereby covenants and
agrees not to (and not to assist any other person to) maintain or
initiate any claim, suit, challenge, reexamination or other proceedings against Nortel, its current Affiliates, predecessors
and successors in interest, agents, directors, officers, employees, distributors and all licensees
and customers, direct and indirect, in which the basis of the proceedings is related to any of the
claims made by either Party in the Massachusetts Action or the California Action, provided however,
this covenant shall not apply with respect to any future claim, or any defense thereto (including
defenses and declaratory judgment claims as asserted in the Actions), for any future infringement
damages occurring after the expiration or termination of the License Agreement. With regard to US
Patent No. 5,732,080, the ongoing reexamination of such patent shall not be considered as Foundry
maintaining a reexamination; provided, however, Foundry shall not take any additional action in
furtherance of such reexamination.

                         (e) For a period of 24 months from the Effective Date (“the Hold Off Period”), Nortel, on behalf
of itself and its Affiliates, owners, predecessors, successors in interest, assigns, agents,
representatives, and all persons acting on their behalf, hereby covenants and agrees not to (and
not to assist any other person to) assert any claim, suit, or other proceedings against Foundry,
its predecessors and successors in interest, agents, directors, officers, employees, and its
current Affiliates arising from any activity or conduct, known or unknown, occurring prior to the
Effective Date. All statutes of limitation will be tolled during the Hold Off Period.

                         (f) For a period of 24 months from the Effective Date (“the Hold Off Period”), Foundry, on behalf of
itself and its Affiliates, owners, predecessors, successors in interest, assigns, agents,
representatives, and all persons acting on their behalf, hereby covenants and agrees not to (and
not to assist any other person to) assert any claim, suit, or other proceedings against Nortel, its
predecessors and successors in interest, agents, directors, officers, employees, and its current
Affiliates arising from any activity or conduct, known or unknown, occurring prior to the Effective
Date. All statutes of limitation will be tolled during the Hold Off Period.

               3.3
Waiver. All rights under Section 1542 of the Civil Code
of the State of
California, and under any and all similar laws of any governmental entity, relating to the claims
released in Section 3.1 (Release) are hereby expressly waived. Each Party and its Affiliates is
aware that said Section 1542 of the Civil Code provides as follows:

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.

     4. Not
an Admission. It is understood that this Settlement Agreement does
not constitute an admission of any liability by any Party or any
Party’s Affiliate, but is a
compromise of disputed claims.

     5. Full Settlement. The Parties agree that this Settlement Agreement is a full
and complete settlement of the rights and liabilities of the Parties in connection with the claims
released in Section 3.1 (Release). This Settlement Agreement
constitutes a full and complete defense
to, and may be used to obtain an injunction against, any action,
suit, claim, or other proceeding
of any type, which may be prosecuted, initiated or attempted in violation of the terms

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hereof. Each of the Parties, each of their Affiliates, and any party released in Section 3.1
Release shall be entitled to receive, as determined by a court of competent jurisdiction,
reasonable attorneys’ fees and other related legal expenses incurred in defending against any suit,
action or claim brought or attempted in violation of the terms of
this Settlement Agreement.

     6. License
Agreement. Foundry and Nortel shall execute and deliver, concurrently
with the execution of this Settlement Agreement, the License
Agreement. In the event of a
conflict between the License Agreement and the Settlement Agreement, the terms of the
License Agreement shall prevail.

     7.
Payment. In partial consideration for this Settlement Agreement, Foundry shall
pay Nortel in accordance with the provisions of the License Agreement.

     8. Breach. Nothing herein shall be construed as relieving a Party or any Party’s
Affiliate of obligations to perform as required herein. The failure of either Party or any Party’s
Affiliate to perform obligations set forth herein shall constitute a material breach hereof. If a
material breach remains uncorrected for more than thirty (30) days after a Party’s receipt of
written notice specifying in reasonable detail the nature of the material breach, the non-breaching
Party may sue the breaching Party and any applicable Affiliate in any court of competent
jurisdiction for breach of this Settlement Agreement and shall have all rights and remedies
available to it at law or equity, including, without limitation, assessment of damages or
termination of one or more provisions hereof.

     9. Confidentiality.
No sooner than October 26, 2004, the Parties shall issue a joint
press release in the form attached hereto as Exhibit C. Furthermore, the confidentiality
provisions set forth in Section 8.2 Confidentiality of the License Agreement shall also apply
to this Settlement Agreement.

     10. Miscellaneous.

           10.1
Attorneys’ Fees. Each Party shall be responsible for its own attorneys
fees and costs incurred in connection with the Actions and their settlement, including the
drafting of this Settlement Agreement, the License Agreement and the dismissals.

           10.2
Representation. Each Party hereby declares and represents that
it is executing this Settlement Agreement after consultation with its
own independent legal counsel.

           10.3
Entire Agreement. This Settlement Agreement (including the License
Agreement and the other Exhibits) constitutes the entire agreement
between the Parties concerning the subject matter thereof. All prior
agreements, promises or negotiations between
the Parties with respect hereto are merged into this Settlement Agreement. The Parties can
only modify this Settlement Agreement in writing. This Settlement
Agreement shall be governed by the law of the Commonwealth of Massachusetts, excluding its conflict of law provisions.

           10.4
Authority. Each Party represents that it has the power and authority to
enter into this Settlement Agreement, to perform all transactions, duties and obligations and
to grant all rights and releases herein set forth.

           10.5
Successors, Assigns and Beneficiaries. This Settlement Agreement shall
inure to the benefit of and shall bind the successors, assigns, representatives, beneficiaries
and

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attorney(ies) of the Parties, and each of them. Each entity identified in Sections 3
(Release) is an intended third party beneficiary of this Settlement Agreement.

               10.6 Counterparts. This Settlement Agreement may be executed in any
number of original, fax or copied counterparts, each of which shall be deemed to be an
original and all of which together shall be deemed to be one and the same instrument.

               10.7 Further Acts. Each Party to this Settlement Agreement agrees to perform
any further acts and to cause its Affiliates to perform such further acts, and execute and
deliver and to cause its Affiliates to execute and deliver any further documents that may be
reasonably necessary to carry out the provisions of this Settlement Agreement.

               10.8 Notices. Notices pursuant to this Settlement Agreement shall be provided
to the appropriate Party at the following address/number by means of (a) hand delivery, (b)
overnight courier, (c) certified (or its equivalent), return receipt requested, prepaid mail,
or (d) facsimile (provided a confirmation copy is mailed within one (1) business day thereafter by
means of certified (or its equivalent), return receipt requested, prepaid mail)):

If to Nortel:

	 	 	 
	

	 	Nortel Networks Limited
	

	 	8200 Dixie Road, Suite 100
	

	 	Brampton, Ontario, Canada L6T 5P6
	

	 	Attention: Licensing Team
	

	 	Fax: (905) 863-8431
	 
	 	 
	

	 	with a copy to:
	 
	 	 
	

	 	Nortel Networks Inc.
	

	 	2221 Lakeside Blvd.
	

	 	Richardson, Texas 75082
	

	 	Attention: Licensing Team Lead
	

	 	Fax: (972) 684-3127
	 
	 	 
	If to Foundry:

	 	Foundry Networks. Inc.
	

	 	Chief Financial Officer
	

	 	P.O. Box 649100
	

	 	San Jose, California 95164-9100
	 
	 	 
	

	 	with a copy to:
	 
	 	 
	

	 	Vice President/Legal Department
	

	 	P. O. Box 649100
	

	 	San Jose, California 95164-9100
	 
	 	 
	

	 	Facsimile: 408-586-1909

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	For the Individual Defendants:

	 	RUBY & SCHOFIELD
	

	 	Allen Ruby, Esq. (SBN 47109)
	

	 	125 South Market Street, Suite 1001
	

	 	San Jose, California 95113
	

	 	Telephone: (408) 998-8500

Notices
are deemed effective upon the data of delivery, in the case of hand delivery and
facsimile, provide however, such delivery is prior to 5:00 p.m. Eastern time on a business day; the
next business day, in the case of overnight courier, and three (3) business days after being
mailed, if sent by certified (or its equivalent), return receipt requested, prepaid mail. If notice
is provided by hand delivery or facsimile after 5:00 p.m. Eastern time on the date of delivery,
then notice shall be deemed effective on the next business following the date of delivery.

               10.9
Section Headings. Section headings are inserted for convenience only,
and shall not be used in any way to construe the terms of this Settlement Agreement.

               10.10
Severability. If any provision of this Settlement Agreement is
held to be
invalid or unenforceable, such provision shall be treated as though it were deleted from this
Settlement Agreement and this Settlement Agreement and the remainder
of its provisions shall
remain in full force and effect, and the Parties shall mutually agree upon a new, valid and
enforceable provision which most closely approximates the effect and
intent of the invalid or
unenforceable provision, including its economic impact, to replace the invalid or
unenforceable provision.

               10.11
No Waiver. No failure to take action on account of any default or breach
of this Settlement Agreement, or to exercise any right under this Settlement Agreement, shall
constitute a waiver. A waiver of rights can only be effected by means of a written document
executed by the Party waiving such rights.

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IN WITNESS WHEREOF, the Parties hereto have executed this Settlement
Agreement as of the date set forth in the preamble above.

	 	 	 	 	 
	FOUNDRY NETWORKS, INC.

	 	FOUNDRY NETWORKS, INC.
	 	 	 
	By:
	/s/ Bobby R. Johnson, Jr.

	 	By:	 /s/ Timothy D. Heffner
	 
	

	 	 	

	Its:
	President and CEO.
	 
	Its:	Chief Financial Officer
	 
	 	 	 	 
	 
	 	 	 
	BOBBY R. JOHNSON, JR.
	 	 	 
	 
	 	 	 
	By:
	/s/ Bobby R. Johnson, Jr.	 	 	 
	 
	
	 	 	 
	 
	 	 	 
	ESTATE OF H. EARL FERGUSON
	 	 	 
	 
	 	 	 
	By:
	/s/ Barbara J. Ferguson	 	 	 
	 
	
	 	 	 
	 
	 	 	 
	JEFFREY PRINCE
	 	 	 
	 
	 	 	 
	By:
	/s/ Jeffrey Prince	 	 	 
	 
	
	 	 	 
	 
	 	 	 
	NORTEL NETWORKS INC.

	 	NORTEL NETWORKS LIMITED
	 
	 	 	 
	By:
	/s/ Ernest R. Higginbatham

	 	By:	/s/ Nicholas J. DeRoma
	 
	

	 	 	

	Its:
	ASSISTANT SECRETARY
	 
	Its:	Chief Legal Officer
	 
	 	 	 	

	 	 
	 	 	 
	 	

	 	By:	/s/ Blair E. Morrisson
	 	

	 	 	

	 	

	 	Its:	Assistant Secretary
	 	

	 	 	

8exv10w23

 

EXHIBIT 10.23

PLUMTREE SOFTWARE, INC.

2005 EMPLOYEE BONUS PLAN

1. EFFECTIVE DATE; PURPOSE OF THE PLAN

     1.1 Effective Date. Plumtree Software, Inc. and its wholly-owned subsidiaries (the “Company”)
adopted the 2005 Employee Bonus Plan (the “Plan”) effective as of January 1, 2005.

     1.2 Purpose. The purpose of the Plan is to increase stockholder value and promote the success
of the Company by ensuring that the efforts of key employees are aligned with Company strategy and
vision. By providing incentive compensation for key employees, the Plan will enable the Company to
attract, retain and reward critical skills and high performing employees, thereby leveraging and
sustaining the Company’s competitive advantages.

2. ADMINISTRATION OF THE PLAN

     2.1 Administrator. The Plan will be administered by the Company’s Board of Directors (the
“Board,” and the “Plan Administrator”); provided, however, that the Board may delegate to any
officer or officers of the Company the responsibility (in whole or in part) for Plan
administration.

     2.2 Powers of the Administrator. The interpretation and construction of the Plan and the
adoption of rules and regulations for administering the Plan will be made by the Plan
Administrator. The Plan Administrator will have all powers and discretion necessary or appropriate
to administer the Plan and to control its operation, including, but not limited to, the power to
(1) determine which employees will be granted bonuses, (2) prescribe the applicable period, terms
and conditions of bonuses, (3) interpret the Plan and the bonuses, (4) adopt rules for the
administration, interpretation and application of the Plan as are consistent therewith, and (5)
interpret, amend or revoke any such rules. Decisions of the Plan Administrator will be final and
binding on all parties who have an interest in the Plan.

     2.3 Modification, Suspension and Termination. The Company reserves the right to modify, amend,
suspend or terminate the Plan at any time and for any reason. The amendment, suspension or
termination of the Plan will not, without the consent of any participant, alter or impair any
rights or obligations under any bonus already earned. No bonus may be awarded during any period of
suspension or after termination of the Plan.

3. DETERMINATION OF PARTICIPANTS

     3.1 Eligible Individuals. An individual employed by the Company who has been notified by the
Company’s HR department will be eligible to participate in the Plan. Notwithstanding the foregoing,
an individual will not be eligible to participate in the Plan if the individual is on another
incentive compensation plan (including, but not limited to, a Company sales commission plan).
Individuals designated as participants will be referred to as “Participants.”

     3.2 Termination of Employee Status. For purposes of the Plan, and unless otherwise determined
by the Plan Administrator at its discretion, an individual will be considered an employee for so
long as such individual remains employed, on a full-time basis by the Company.

4. DETERMINATION OF AWARDS

     4.1 Amount of Target Bonus. The Plan Administrator will determine each Participant’s target
bonus; provided, however, that the total amount of all target bonuses may not exceed an amount
determined by the Plan Administrator.

     4.2 Performance Goals. A portion (as determined by Plan Administrator) of a target bonus will
be earned by achieving individual or team goals (the “Individual Performance Portion”). The
remaining portion of a target bonus will be earned if the Company meets Company-specific performance objectives (the “Company Performance Portion”). The
allocation of the target bonus among the Individual Performance Portion and Company Performance
Portion may be established by the Plan Administrator for all eligible Participants or individually
for certain Participants.

          (a) Individual Performance Portion. Every Participant will develop and establish quarterly
goals in conjunction with the Participant’s manager. The goals, recommended to be between three and
five in number, must be approved by the Participant’s manager, who will assign relative weights to
each goal.

          (b) Company Performance Portion. Annual or semi-annual Company goals, based on revenue and
earnings and other criteria as may be determined by the Plan Administrator will be set by the Plan
Administrator; provided, however, that no Company goal will be deemed achieved if pro-forma
earnings per share is less than an amount set by the Company at the beginning of each year. Company
goals may be amended or modified at any time (including the minimum threshold on earnings).

5. PAYMENT OF AWARDS

     5.1 Individual Performance Portion. The Individual Performance Portion of a target bonus will
be earned on a quarterly basis, based on the Participant’s achievement of his or her specified
goals and the weightings assigned to each goal. A Participant must achieve a weighted average of at
least 50% of his or her quarterly goals, as determined by and in the discretion of the
Participant’s manager, or as otherwise determined by the Plan Administrator, to earn a payment. A
Participant may earn no more than 100% of the Individual Performance Portion of his or her target
bonus as a result of meeting or exceeding individual goals.

     5.2 Company Performance Portion. The Company Performance Portion of a target bonus will be
earned on an annual or semi-annual basis, subject to the Company meeting the performance criteria
established by the Plan Administrator pursuant to Section 4.2(b). A Participant may be entitled to
payments in excess of target bonus amounts if the Company’s performance exceeds targets. A
Participant must average at least a 50% rating with respect to his or her individual goals, or as
otherwise determined by the Plan Administrator (over the course of the annual or semi-annual
Company performance period) to be eligible to receive the Company Performance Portion.

     5.3 Pro-Rata Eligibility. Participants who become eligible during a quarter must be employed
for at least two (2) months during the quarter to receive a quarterly bonus. Quarterly bonuses (the
Individual Performance Portion) will be pro-rated based on the amount of time the Participant was
bonus-eligible during the quarter. In addition, Participants who become eligible during the annual
or semi-annual period during which Company performance is measured must have been an eligible
individual for at least three (3) months prior to the end of the semi-annual period to receive an
semi-annual bonus and for at least six (6) months prior to the end of the annual period to receive
and annual bonus. Annual or semi-annual bonuses (the Company Performance Portion) will be pro-rated
based on the amount of time the Participant was bonus-eligible during the applicable period.

 

 

     5.4 Timing and Form of Payment. Bonuses will be paid as soon as administratively practicable
after the end of the applicable period (quarterly, semi-annually, or annually). A Participant must
be employed on the last day of the applicable period to receive a payment. Payment will be made by
payroll check, which is separate from the Participant’s regular payroll check, and will be subject to applicable federal, state and local
tax withholding. Notwithstanding anything in the Plan to the contrary, the Plan Administrator, in
its sole discretion, may decide at any time and for any reason, on a per-Participant basis, that
bonuses may be reduced or no bonuses will be paid.

6. GENERAL PROVISIONS

     6.1 Funding Obligations. No amounts awarded or accrued under this Plan will actually be
funded, set aside or otherwise segregated prior to payment. The obligation to pay bonuses will at
all times be an unfunded and unsecured obligation of the Company. Participants will have the status
of general creditors and may look solely to the general assets of the Company for the payment of
their bonuses.

     6.2 Transferability. No Participant will have the right to alienate, pledge or encumber his or
her interest in this Plan, and such interest will not (to the extent permitted by law) be subject
in any way to the claims of the Participant’s creditors or to attachment, execution or other
process of law.

     6.3 Beneficiaries. A Participant may designate a beneficiary to receive any bonuses earned up
to the time of death. If such designation is not made, the beneficiary named for regular employee
benefit plans will be deemed to be the name beneficiary.

     6.4 Continuing Employment Status. Neither the action of the Company in establishing the Plan,
nor any action taken under the Plan by the Plan Administrator, nor any provision of the Plan itself
will be construed to grant any Participant the right to remain in the employ of the Company for any
period of specific duration. Each eligible employee will remain an “at-will” employee, which means
that either such eligible employee or the Company may terminate the employment relationship at any
time for any reason, with or without cause.

     6.5 Integration. The Plan will be the full and complete agreement between the eligible
employees and the Company on the terms described herein.

     6.6 Validity. In the event any provision of the Plan is held illegal or invalid for any
reason, the illegality or invalidity will not affect the remaining parts of the Plan, and the Plan
will be construed and enforced as if the illegal or invalid provision had not been included.

     6.7 Applicable Law. The granting of bonuses under the Plan will be subject to all applicable
laws, rules and regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required. The Plan and all bonuses will be construed in accordance
with and governed by the laws of the State of California, without regard to the conflict of law
provisions.

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