Document:

exv4w1

 

Exhibit 4.1

AMENDMENT NO. 1 TO

THE RIGHTS AGREEMENT

BETWEEN

ENTERAYS NETWORKS, INC.

AND

EQUISERVE TRUST COMPANY, N.A.

          This AMENDMENT NO. 1 TO THE RIGHTS AGREEMENT (this Amendment”) is made as of November 11,
2005, between Enterasys Networks, Inc., a Delaware corporation (the “Company”), and EquiServe Trust
Company, N.A. (the “Rights Agent”). Capitalized terms used but not otherwise defined in this
Amendment No. 1 shall have the meanings given them in the Rights Agreement.

          WHEREAS, the Company and the Rights Agent are parties to that certain Rights Agreement, dated
as of May 28, 2002 (the “Rights Agreement”);

          WHEREAS, the Company is contemplating entering into an Agreement and Plan of Merger (as the
same may be amended from time to time, the “Merger Agreement”), by and among the Company,
Gores ENT Holdings, Inc., and ENT Acquisition Corp., both Delaware corporations, pursuant to which
ENT Acquisition Corp. will be merged with and into the Company with the Company as the surviving
corporation thereof and following which the Company will become a wholly-owned subsidiary of Gores
ENT Holdings, Inc. (the “Merger”);

          WHEREAS, the Board of Directors of the Company has approved the Merger Agreement and the
Merger and determined that an amendment to the Rights Agreement as set forth herein is necessary
and desirable in connection with the execution and delivery of the Merger Agreement, and the
Company and the Rights Agent desire to evidence such amendment in writing;

          WHEREAS, upon the execution and delivery of the Merger Agreement, Gores ENT Holdings, Inc.,
ENT Acquisition Corp. and/or its Associates and Affiliates may be deemed to be an “Acquiring
Person” under the Rights Agreement, which would trigger certain events pursuant to the terms of the
Rights Agreement.

          WHEREAS, pursuant to Section 27 of the Rights Agreement, the Board of Directors of the Company
has approved this Amendment and authorized its appropriate officers to execute and deliver the same
to the Rights Agent.

          NOW, THEREFORE, in consideration of the promises and agreements set forth herein, and for
other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

	 	1.	 	AMENDMENT OF SECTION 1: DEFINITION OF “ACQUIRING PERSON”. The definition of
“Acquiring Person” set forth in Section 1 of the Agreement is hereby amended by adding the
following sentence to the end of that definition:

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“Notwithstanding anything in this Agreement to the
contrary, no Person shall be or become an Acquiring
Person by reason of (i) the execution and delivery of the
Merger Agreement (or any amendment thereto) or (ii) the
consummation of the transactions contemplated thereby,
including the Merger.”

	 	2.	 	AMENDMENT OF SECTION 1: DEFINITION OF “STOCK ACQUISITION DATE”. The
definition of “Stock Acquisition Date” set forth in Section 1 of the Agreement is hereby
amended by adding the following sentence to the end of that definition:

“Notwithstanding
anything in this Agreement to the
contrary, a Stock Acquisition Date shall not be deemed to
have occurred by reason of (i) the execution and delivery of
the Merger Agreement (or any amendment thereto) or (ii)
the consummation of the transactions contemplated
thereby, including the Merger.”

	 	3.	 	AMENDMENT OF SECTION 1: DEFINITION OF “DISTRIBUTION DATE”. The definition
of “Distribution Date” set forth in Section 1 of the Agreement is hereby amended by adding
the following sentence to the end of that definition:

“Notwithstanding anything in this Agreement to the
contrary, a Distribution Date shall not be deemed to
have occurred by reason of (i) the execution and delivery of the
Merger Agreement (or any amendment thereto) or (ii) the
consummation of the transactions contemplated thereby,
including the Merger.”

	 	4.	 	AMENDMENT OF SECTION 1: OTHER DEFINITIONS. Section 1 of the Rights
Agreement is hereby further amended by adding the following subparagraphs at the end
thereof:

     “(p)
“Amendment No. 1” shall mean
Amendment No. 1 to the Agreement dated as of November
11, 2005 between the Company and the Rights Agent.

     (q) “Gores ENT Holdings” shall have the
meaning set forth in Section 35 hereof.

     (r) “Merger” shall have the meaning set forth in
the Merger Agreement.

     (s) “Merger Agreement” shall have the meaning
set forth in Section 35 hereof.

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     (t) “Sub” shall have the meaning set forth in
Section 35 hereof.”

	 	2.	 	AMENDMENT OF SECTION 11(a)(ii). Section 11(a)(ii) of the Rights Agreement is
hereby amended by adding the following sentence to the end thereof:

“Notwithstanding anything in this Agreement to the contrary,
neither (i) the execution and delivery of the Merger Agreement
(or
any amendment thereto) nor (ii) the consummation of the
transactions contemplated thereby, including the Merger, shall be
deemed to be an event of the type described in this Section
11(a)(ii) or cause the Rights to be adjusted or to become
exercisable in accordance with this Section 11 or otherwise.”

	 	3.	 	AMENDMENT OF SECTION 13. Section 13 of the Rights Agreement is hereby
amended by adding the following sentence to the end thereof:

“Notwithstanding
anything in this Agreement to the contrary,
neither (i) the execution and delivery of the Merger Agreement
(or
any amendment thereto) nor (ii) the consummation of the
transactions contemplated thereby, including the Merger, shall be
deemed to be an event of the type described in this Section 13
or
cause the Rights to be adjusted or to become exercisable in
accordance with this Section 13 or otherwise.”

	 	4.	 	Addition of Section 35. The Rights Agreement is hereby further modified,
supplemented and amended by adding the following new Section 35:

“SECTION 35. MERGER WITH ENT ACQUISITION CORP.

          The Company, Gores ENT Holdings, Inc., a Delaware corporation (“Gores ENT Holdings”), and ENT
Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of Gores ENT Holdings, have
entered into an Agreement and Plan of Merger, dated on or about November 11, 2005, (as it may be
amended from time to time, the “Merger Agreement”) pursuant to which Company agrees, among
other things, to merge with ENT Acquisition Corp., with the Company being the surviving entity and
a wholly owned subsidiary of Gores ENT Holdings following the consummation of the merger, according
to the terms and conditions set forth in the Merger Agreement (the “Merger”).
Notwithstanding anything in this Agreement to the contrary, if the Merger Agreement shall be
terminated for any reason, then all of the amendments to this Agreement effected by Amendment No. 1
shall be deemed repealed and deleted without any further action on the part of the Company or the
Rights Agent.”

	 	5.	 	Effectiveness. This Amendment shall be deemed effective as of the date first
written above, as if executed on such date. The Rights Agreement, as amended

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	 	 	 	by this Amendment, shall remain in full force and effect in accordance with its terms and
shall be otherwise unaffected hereby.
	 
	 	6.	 	Successors. All the covenants and provisions of this Amendment by or for the
benefit of the Company or the Rights Agent shall bind and inure to the benefit of their
respective successors and assigns hereunder.
	 
	 	7.	 	Benefits of this Amendment. Nothing in this Amendment shall be construed to
give to any Person other than the Company, the Rights Agent and the registered holders of
the Right Certificates (and, prior to the Distribution Date, the associated Common Shares)
any legal or equitable right, remedy or claim under this Amendment or the Rights; but this
Amendment shall be for the sole and exclusive benefit of the Company, the Rights Agent and
the registered holders of the Rights (and, prior to the Distribution Date, the associated
Common Shares).
	 
	 	8.	 	Severability. The invalidity or unenforceability of any term or provision
hereof shall not affect the validity or enforceability of any other term or provision
hereof. If any term, provision, covenant or restriction of this Amendment is held by a
court of competent jurisdiction or other authority to be invalid, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions of this Amendment shall
remain in full force and effect and shall in no way be affected, impaired or invalidated.
	 
	 	9.	 	Governing Law. This Amendment shall be deemed to be a contract made under
the laws of the State of Delaware and for all purposes shall be governed by and construed
in accordance with the laws of said State applicable to contracts to be made and performed
entirely within said State.
	 
	 	10.	 	Counterparts. This Amendment may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to be an
original, and all such counterparts shall together constitute but one and the same
instrument.

[Remainder of Page Intentionally Left Blank]
 

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          IN WITNESS WHEREOF, the parties hereto have caused this Amendment to the Rights Agreement to
be duly executed, all as of the date and year first above written.

	 	 	 	 	 	 	 
	 	 	ENTERASYS NETWORKS, INC.
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ GERALD M. HAINES II	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Gerald M. Haines II
	 	 	Title: Chief Legal Officer
	 
	 	 	 	 	 	 
	 	 	EQUISERVE TRUST COMPANY, N.A.
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ KATHERINE ANDERSON	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Katherine Anderson
	 	 	Title: Managing Directorexv10w1

 

Exhibit 10.1

ENTERASYS PERFORMANCE INCENTIVE PLAN (EPIP)

PURPOSE

Provide an outcome-based annual cash incentive to key employees for their contributions to the
success and profitability of Enterasys Networks. This Plan is intended to provide participants with
an opportunity to receive above average incentive compensation for above average performance, with
lower levels of incentive compensation associated with lower levels of performance.

EFFECTIVE DATE

This plan is effective as of January 2, 2005, for the fiscal year ending December 31, 2005.

ELIGIBILITY

Full-time executives, managers and key employees not participating in any other cash incentive
compensation plan unless such other plan expressly provides for participation in EPIP. Non-exempt
employees are not eligible to participate in this plan.

INCENTIVE TARGETS

A participant’s target cash incentive compensation opportunity, which is set individually within
each Tier specified below, will range from 10% to 200% of base salary, depending upon position and
role (see guide chart below):

	 	 	 	 	 	 	 
	Tier	 	Position/Job Level	 	Incentive Target Range*
	I

	 	Executive Chairman
	 	As determined by Compensation Committee

	 

	 	President / Chief Executive Officer
	 	 	200	%
	II

	 	Senior / Executive Vice President
	 	 	60% — 100	%
	III

	 	Director / Vice President
	 	 	40% —  70	%
	IV

	 	Manager / Key Employee
	 	 	20% —  50	%
	V

	 	Individual Contributors
	 	 	10% —  20	%

 

			
	*	 	Expressed as a percentage of Base Salary

 

 

INCENTIVE PLAN ELEMENTS

EPIP has two elements: (i) overall funding of the EPIP on an aggregate basis, and (ii) individual
annual incentive awards (which, in the aggregate, may be less than but may not exceed actual
aggregate EPIP funding). Maximum aggregate EPIP funding will be equal to the aggregate of
individual participant target bonus amounts, plus any funding based on the occurrence of a
qualifying Business Combination as set forth below.

EPIP FUNDING

	•	 	Performance Objectives Funding Factor: The portion of EPIP funding
relative to aggregate target levels allocable for awards based on
Departmental KPI’s/Individual Performance objectives (as described
below) will be made in the exclusive discretion of the Board of
Directors of Enterasys Networks, Inc. The portion of EPIP funding
allocable for awards based on corporate financial performance
objectives established by the Enterasys Networks, Inc. Board of
Directors will be based on the Company’s actual achievement of such
financial performance objectives. The financial performance objectives
for 2005 will be based on quarterly and year-to-date metrics for
Revenue, Operating Profitability, and Free Cash Flow, and a relative
weight for each of these factors will be established by the Board at
the time the financial performance standards are established.
Achieving funding at aggregate target levels will require financial
performance substantially exceeding the Company’s base annual
operating plan objectives. Determination of achievement of specific
corporate financial performance metrics is subject to the sole and
exclusive discretion of the Board of Directors of Enterasys Networks,
Inc.

	•	 	Corporate Transaction Funding Factor: In addition to funding based on
achievement of Departmental KPI’s/Individual Performance objectives
and the Company’s financial performance objectives, in the event that
a merger or consolidation involving the Company, or a sale or other
disposition of all or substantially all of the stock or assets of the
Company (collectively, a “Business Combination”) is consummated at any
time during the current fiscal year, provided that such Business
Combination is approved in advance by the Enterasys Networks, Inc.
Board of Directors and results in a transfer of ownership of more than
50% of the equity or assets of the Company to an individual, entity,
or group of related individuals or entities, EPIP will be funded in an
amount equal to 20% of aggregate individual EPIP target amounts.

	•	 	Periodic Accrual of Funding. Accrual of funding will occur based on
Board discretion, achievement of corporate financial performance
targets and/or the occurrence of a qualifying Business Combination.
Accrual of EPIP funding based on Board discretion may be made
quarterly in the sole discretion of the Board. Accrual of EPIP
funding based on achievement of Board-approved corporate financial
performance objectives as determined by the Board will be made
quarterly. For each quarter, funding (if any) based on corporate
financial performance will increase by an amount equal to the lesser
of (a) the funding amount determined based on the results for such
quarter, and (b) the difference (but not less than zero) between (i)
the aggregate funding for all prior quarters of the fiscal year and
(ii) the funding amount determined based on year-to-date results for
the most recently completed quarter. Accruals based on corporate
financial performance targets will not be reduced in subsequent
periods based on failure to achieve corporate financial targets in
such subsequent periods. EPIP funding for corporate transaction
incentive awards will be made upon closing of a qualifying Business
Combination.

PRELIMINARY ALLOCATION OF AWARDS

	•	 	Preliminary allocation of EPIP funding based on achievement of
Board-approved corporate financial performance objectives will be made
quarterly.

	•	 	Preliminary allocation of EPIP funding for corporate transaction
incentive awards will be made upon closing of a qualifying Business
Combination.

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INDIVIDUAL INCENTIVE AWARDS

	 	•	 	Actual EPIP incentive awards will be based on:

	 	 	 	ü Achievement of the Company’s financial performance objectives;
	 
	 	 	 	ü Achievement of departmental Key Performance Indicators (“KPI’s”) and/or individual goals and objectives;
	 
	 	 	 	ü The occurrence of a qualifying corporate transaction;
	 
	 	 	 	ü Individual target bonus levels; and
	 
	 	 	 	ü Position/Job Level.

	 	•	 	Based on assigned Tier, and subject to funding criteria being met and satisfaction of all other terms and conditions set forth in this plan, actual incentive
awards that are funded based on achievement of corporate financial performance targets will be based on a combination of Company and Departmental KPI’s/Individual
performance.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	                            Incentive Target Distribution	 	 	 	 	 	 	 	 	 	 
	Metric	 	Tier I	 	Tier II	 	Tier III	 	Tier IV	 	Tier V
	Company Performance
	 	 	100	%	 	 	90	%	 	 	80	%	 	 	75	%	 	 	70	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Dept KPI / Individual Performance
	 	 	0	%	 	 	10	%	 	 	20	%	 	 	25	%	 	 	30	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total
	 	 	100	%	 	 	100	%	 	 	100	%	 	 	100	%	 	 	100	%

	 	 	 	Example: a Software Engineer Manager in Tier IV might have an
incentive of 30% of base salary, of
which 75% depends on Company performance and 25% depends on Departmental KPI’s/Individual Performance.

PRORATION FACTORS

	 	•	 	Individual annual incentive awards will be prorated for partial years in the following situations:

	 	 	 	ü Employees who were hired during the plan’s year
and who have at least 60 days of active service
in an eligible position.
	 
	 	 	 	 ü Employees who were transferred from ineligible
to eligible positions during the plan’s year and
who have at least 60 days of active service in
the eligible position within the year.
 
	 
	 	 	 	 ü Employees who transferred between positions for
which the incentive plans are different, and who
have at least 60 days of active service in an
eligible position within the year, will have
their bonuses prorated based on length of time
in each eligible position.
 
	 
	 	 	 	 ü Employees who were eligible for the plan,
terminated their employment, and were rehired
into plan-eligible positions during the plan
year.
 

	 	•	 	Incentive awards will be prorated on a weekly basis, not on working days during any given performance
measurement period.

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PAYMENT SCHEDULE

	•	 	Payment of annual incentive awards, if any, which are funded based on
achievement of individual, department and corporate financial
performance objectives, will be made following the end of the defined
plan year and the Company’s announcement of financial results for the
full year, determination by the Board of Directors of the achievement
of established metrics and funding of the plan, and determination by
management of the degree to which Departmental KPI’s and individual
goals have been achieved, but in any event no later than March 15 of
the following year.

	•	 	Payment of incentive awards funded based on closing of a qualifying
Business Combination will be made to participants (who were
participants on the date immediately preceding the date said Business
Combination was consummated), such payment to be made on the earliest
of (i) the date that annual EPIP payments are made based on corporate
financial performance, and (ii) March 15 of the year in which the
transaction occurred or March 15 of the next calendar year if the
transaction occurred after March 15 in any calendar year; provided,
however, that, notwithstanding the provisions of “Additional Terms
and Conditions – 2005 EPIP – Termination” below, any person who was a
participant on the date said Business Combination was consummated and
whose employment is terminated prior to payment of incentive awards
pursuant to (i) or (ii) above other than voluntarily by the
Participant or for cause by the Company, shall receive payment of his
or her incentive award within five business days of the date the
Participant’s employment with the Company is terminated.

SPECIAL PROVISIONS APPLICABLE IN THE EVENT OF A BUSINESS COMBINATION

In the event that a Business Combination is consummated prior to the time that EPIP individual
incentive awards have been made, notwithstanding anything to the contrary contained in the Plan:

	•	 	Actual incentive awards shall be paid as follows: (A) in accordance
with the preliminary funding or allocation, or individual bonus award,
determinations that have been made with respect to all or part of the
year, if such determinations have been made by the Board (but the
bonuses have not yet paid) prior to the date of the Business
Combination, and to the extent that, and for any periods for which,
such determinations have not been previously made (B) shall be
determined and paid assuming (i) that all EPIP funding and allocation
of awards shall be based solely upon achievement of Departmental
KPI’s/Individual Performance objectives and corporate financial
performance without application of Board discretion, (ii) a level of
EPIP funding for awards based upon achievement of Departmental
KPI’s/Individual Performance equal to 40% of maximum potential funding
for such awards for such periods, (iii) for purposes of EPIP funding
and allocation of awards based upon corporate financial performance, a
level of corporate financial performance consistent with the levels
contained in the annual operating plan as last approved by the Board
prior to the Business Combination, and (iv) that, for purposes of
payments of awards to individuals that are based on KPI’s/Individual
Performance, all individual and departmental performance requirements
necessary for payment of awards at a level equal to 40% of maximum
achievement. In the circumstances described in clause (B) of the
preceding sentence, if it is later determined that corporate
performance was greater than the levels contained in the annual
operating plan as last approved by the Board, the Participant’s bonus
shall be correspondingly adjusted.

	•	 	Payment of incentive awards based on achievement of
individual, departmental and corporate financial
performance objectives will be made in accordance with
the terms of the EPIP to all persons who were
participants on the date immediately preceding the
date of the Business Combination was consummated, such
payment to be made on the earliest of (i) the date
that annual EPIP payments are made based on corporate
financial performance, and (ii) March 15, 2006;
provided, however, that, notwithstanding the
provisions of “Additional Terms and Conditions – 2005
EPIP – Termination” below, any person who was a
participant on the date said Business Combination was
consummated and whose employment is terminated prior
to payment of incentive awards pursuant to (i) or (ii)
above other than voluntarily by the Participant or for
cause by the Company, shall receive payment of his or
her incentive award within five business days of the
date the Participant’s employment with the Company is
terminated.

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ADDITIONAL TERMS AND CONDITIONS – 2005 EPIP

	•	 	Base Salary: A Participant’s base salary in effect on the last Friday
of the fiscal year will be used for the purpose of EPIP calculations.
	 
	•	 	Incentive Target: a participant’s target incentive bonus, expressed as
a percentage of base salary, in effect on the last Friday of the
fiscal year will be used for the purpose of award calculations.
	 
	•	 	Eligibility: Employees become eligible to participate in this plan on
the date they become actively employed in an eligible position.
Eligible positions are specifically identified by HR and may change
from time to time in Enterasys’ sole discretion. Employee must be a
plan participant for a minimum of 60 days during 2005 to be eligible
to receive any award under the plan (including any award based on the
occurrence of a Business Combination).
	 
	•	 	Performance Notice: Plan participants placed on a Performance
Improvement Notice during the plan year are not guaranteed to receive
an award under any circumstance.
	 
	•	 	Termination: Plan participants who terminate employment voluntarily
or involuntarily prior to payment date will not receive an EPIP award
based on corporate financial performance or departmental/individual
performance. Participants who terminate employment voluntarily or
whose employment is terminated by the company for cause are not
eligible for any awards under this Plan.
	 
	•	 	Leave of Absence: Awards will be prorated based on number of weeks
worked during the plan year and paid upon return for those Plan
participants on Leave of Absence.
	 
	•	 	Funding: All payments are from funds made available to the plan as
prescribed by this document and any addendum hereto and in accordance
with performance against pre-established goals and objectives and
subject to the discretion of the Board of Directors described above.
	 
	•	 	Discretionary Awards: Awards are not guaranteed compensation and
employees eligible to participate in the plan are not guaranteed to
receive any award, except as expressly set forth herein in the event
of a Business Combination.
	 
	•	 	Tax Related Liabilities: Participants are responsible for determining
the tax consequences for incentive awards, which will be subject to
appropriate withholding by the Company.
	 
	•	 	Payment Disputes: Plan participants agree that payment disputes,
including but not limited to disputes relating to promotions,
demotions, changes in positions, prorating of payment, must be
submitted within 30 days of the earlier of (i) notice of the amount of
any earned award, and (ii) check receipt.
	 
	•	 	Acknowledgement of Receipt: Plan participants shall receive access to
a copy of the plan document or a communication outlining plan criteria
and guidelines.
	 
	•	 	No Contract of Employment: Participation in this plan does not
constitute a guarantee of employment in any way, for any given
performance period or other time period.
	 
	•	 	Plan Changes: The Company reserves the right to revise or terminate
this plan, with or without notice, at any time for any reason it deems
appropriate, provided however that Plan provisions relating to
incentive awards based on qualifying Business Combination or as
otherwise provided under “Special Provisions in the Event of a
Business Combination” may not be amended from and after the
consummation of such a Business Combination.

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