Document:

Consulting Agreement - Patrick M. Murphy

 Exhibit 10.4 
  
 CONSULTING AGREEMENT 
  

THIS CONSULTING AGREEMENT (this “Agreement”), dated July 7, 2005 between ZHONE TECHNOLOGIES, INC., a Delaware corporation (the
“Company”), and Patrick M. Murphy (the “Consultant”). 
  
 WHEREAS, Consultant and Paradyne Networks, Inc., a Delaware corporation (“Paradyne”), are parties to an employment agreement dated December 8, 2000 (the “Employment Agreement”)
pursuant to which Consultant is employed by Paradyne; 
  
 WHEREAS,
pursuant to an Agreement and Plan of Merger by and among the Company, Parrot Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of the Company (“Merger Sub”), and Paradyne dated as of the date hereof, Merger Sub
will merge with and into Paradyne, and Paradyne will become a wholly owned subsidiary of the Company (the “Merger”); 
  
 WHEREAS, effective as of the effective time of the Merger (the “Effective Date”) Consultant’s employment with Paradyne will
terminate without “Cause” as defined in the Employment Agreement; and 
  
 WHEREAS, due to Consultant’s valuable customer relationships and knowledge of the Paradyne business, the Company desires to retain the Consultant as a consultant to the Company to perform such duties as the
Company may direct for the purpose of retaining Paradyne’s customers following the Merger and to assist with the transition of the manufacturing operations of Paradyne to the Company’s in-house or contract manufacturing model and the
Consultant desires to accept such retention upon the terms and conditions set forth herein. 
  
 NOW, THEREFORE, in consideration of the mutual promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

  
 1. Termination of Employment.
Effective as of the Effective Date, Consultant’s employment with Paradyne will be terminated without “Cause” (as defined in the Employment Agreement). The Company acknowledges and agrees that as a result of such termination Consultant
shall be entitled to all amounts and benefits due under the terms of the Employment Agreement subject to the conditions set forth therein. 
  
 2. Consulting Relationship. Effective as of the Effective Date, the Company hereby engages the Consultant to perform such duties as
the Company may direct in order to assist the Company in the retention of Paradyne customers following the Merger and to assist with the transition of the manufacturing operations of Paradyne to the Company’s in-house or contract manufacturing
model, and the Consultant agrees to accept such engagement, upon the terms and conditions set forth herein. The Company and Consultant do hereby acknowledge that after the Effective Date the relationship between Company and Consultant shall be
solely that of an independent contractor and that Consultant shall not be treated as an employee for any purpose. 
  

 3. Consulting Period. The term of this Agreement hereunder shall commence on the
Effective Date and continue for a period of two years thereafter, unless earlier terminated as provided herein (the “Consulting Period”). 
  
 4. Other Activities. During the Consulting Period, the Consultant may engage in any other business or professional activities,
either on a full-time or part-time basis, so long as such activities, either singly or in the aggregate, (i) do not interfere with the proper performance of his duties and responsibilities to the Company, (ii) violate Section 13 of the Employment
Agreement, or (iii) violate the terms of the Restrictive Covenant Agreement of even date herewith by and between the Company and Consultant (the “Restrictive Covenant Agreement”). 
  
 5. Compensation and Other Terms of Engagement.

  
 (a) Compensation. In consideration of
the performance of his services for the Company as required hereunder, during the Consulting Period, Consultant shall be entitled to the following as compensation: 
  
 (i) Two Hundred Ninety Five Thousand and Eighteen Dollars ($295,018) (the “Consulting
Fee”) for each year of the Consulting Period in which Consultant performs services on behalf of the Company, which amount represents the amount Consultant would have earned as base salary and bonus under the terms of the Employment
Agreement if Consultant had remained as an employee of Paradyne. The Consulting Fee shall be payable in substantially equal monthly installments in arrears. 
  
 (ii) Options to purchase Three Hundred Nineteen Thousand Four Hundred and Fifty Eight (314,458) shares of the Company’s common
stock, representing an amount equal to two times the annual grants on a converted basis that Consultant would have received under the terms of the Employment Agreement if Consultant had remained as an employee of Paradyne. The options shall be
granted at an exercise price equal to the fair market value per share on the date of grant, with terms and conditions applicable to options typically granted by the Company, including that such options will vest and become exercisable ratably over a
period of four years provided Consultant continues to perform services for the full two-year term of the Consulting Period, and thereafter Consultant does not violate the terms of the Restrictive Covenant Agreement. 
  
 (iii) Consultant shall receive no other compensation for
his services hereunder. 
  
 (b) Taxes.
Consultant shall be responsible for all taxes, including self-employment taxes due on payments made under this Agreement. 
  
 (c) Business Expenses. The Company shall reimburse the Consultant for expenses (including, without limitation, travel and
accommodations at the 

  

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level, class and manner provided to senior executives of the Company), which the Consultant may from time to time reasonably incur on behalf of, and at the
request of the Company in the performance of services under this Agreement; provided, however, that the Consultant shall be required to account to the Company for such expenses in the manner prescribed by the Company. In determining expenses
reasonably incurred in the performance of his duties, the Consultant shall be reimbursed consistent with the Company’s policy on reimbursement as applied to its senior executives. 
  
 6. Termination of Agreement. Either party may terminate Consultant’s engagement hereunder at any
time and for any reason by providing the other party written notice of such termination. If Consultant terminates his services under this Agreement for any reason other than breach of this Agreement by the Company, or the Company terminates his
services for “cause” (as defined below), then Consultant shall not be entitled to any further payments under this Agreement. If the Company terminates Consultant’s engagement hereunder without cause, then as damages for breach of this
Agreement, Consultant shall be entitled to receive in a lump sum an amount equal to any unpaid Consulting Fee for the remainder of the Consulting Period and all options shall fully vest and become exercisable. For this purpose, “cause”
shall mean: (i) Consultant’s willful and continued failure to perform services reasonably requested by the Company under this Agreement, but only after the Company has provided written notice to Consultant reasonably describing such alleged
failure and Consultant fails to cure such failure after a period of ten (10) days, (ii) Consultant’s engaging in misconduct which is materially injurious to the Company, monetarily or otherwise, (iii) conviction of any felony, or (iv) breach of
Section 13 of the Employment Agreement or the Restrictive Covenant Agreement. 
  
 7. Cooperation. Company agrees to devote such personnel and other resources as Consultant may reasonably request in order for Consultant to adequately perform his services under this Agreement. 
  
 8. Restrictive Covenant Agreement. As a condition to
this Agreement, Consultant agrees to execute and abide by the terms of the Restrictive Covenant Agreement. 
  
 9. Excise Tax Agreement. 
  
 (a) Gross-Up. In the event that it shall be determined (as hereafter provided) that any payment by the Company or Paradyne to or
for the benefit of Consultant, whether paid or payable pursuant to the terms of this Agreement or otherwise pursuant to or by reason of any other agreement, policy, plan, program or arrangement, including without limitation any stock option, or the
lapse or termination of any restriction on or the vesting or exercisability of any of the foregoing (collectively, a “Payment”), would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code (or any
successor provision thereto) by reason of being considered “contingent on a change in ownership or control” of Paradyne, within the meaning of Section 280G of the Internal 

  

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Revenue Code (or any successor provision thereto), or to any similar tax imposed by state or local law, or any interest or penalties with respect to such tax
(such tax or taxes, together with any such interest and penalties, being hereafter collectively referred to as the “Excise Tax”), then Consultant shall be entitled to receive an additional payment or payments (collectively, a
“Gross-Up Payment”). The Gross-Up Payment shall be in an amount such that, after payment by Consultant of all taxes, including any Excise Tax (and including any interest or penalties imposed with respect to such taxes), imposed upon
the Gross-Up Payment, Consultant retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment. All determinations required to be made under this Section, including whether an Excise Tax is payable by Consultant and the
amount of such Excise Tax and whether a Gross-Up Payment is required to be paid by the Company to Consultant and the amount of such Gross-Up Payment, if any, shall be made in good faith by a nationally recognized accounting or law firm (the
“Accounting or Law Firm”) selected by the Company. For purposes of the computations required by this Section (i) to the extent not otherwise specified here, reasonable assumptions and approximations may be made with respect to
applicable taxes and reasonable good faith interpretations of the Code may be relied upon, and (ii) Consultant shall be deemed to pay federal, state and local income and, if applicable, payroll taxes at the highest marginal rate of taxation. If the
Accounting Firm determines that any Excise Tax is payable by Consultant, the Company shall pay the required Gross-Up Payment to Consultant within five (5) business days after receipt of such determination. If the Accounting or Law Firm determines
that no Excise Tax is payable by Consultant, it shall at the same time as it makes such determination, furnish the Company and Consultant an opinion that Consultant has substantial authority not to report any Excise Tax on his federal, state or
local income or other tax return. The Company and Consultant shall each provide the Accounting or Law Firm access to and copies of any books, records and documents in the possession of the Company or Consultant, as the case may be, reasonably
requested by the Accounting or Law Firm, and otherwise cooperate with the Accounting or Law Firm in connection with the preparation and issuance of the determination and calculations contemplated by this Section 9. 
  
 (b) As a result of the uncertainty of the application of
Section 4999 of the Code, it is possible that Gross-Up Payments which will not have been made by the Company should have been made (“Underpayment”). In that regard, if a claim by the Internal Revenue Service is made that would
require the payment by the Company of an amount in addition to the Gross-Up Payment, then the Company may either increase the Gross-Up Payment by the Underpayment, or may contest such claim. If the Company decides to contest the claim, the Company
shall bear and pay directly the costs and expenses (including additional interest and penalties) incurred in connection with such contest, shall indemnify and hold Consultant harmless on an after-tax basis for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a result of such claim, and payment of costs and expenses, including advancing any funds necessary to pay the claim while it is being contested up to an amount of five hundred thousand dollars
($500,000). In such case, Consultant agrees to 

  

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cooperate with and assist the Company in contesting such claim. In the event that the Company exhausts its remedies and Consultant is required to make a
payment of any Excise Tax, the Company in good faith shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for Consultant’s benefit, if not already paid during the
process of contesting the claim. 
  
 10.
Miscellaneous Provisions. 
  
 (a)
Notices. All notices, offers or other communications required or permitted to be given pursuant to this Agreement shall be in writing and shall be considered as properly given or made (i) if delivered personally, or (ii) after the expiration
of five days from the date upon which such notice was mailed from within the United States by certified mail, return receipt requested, postage prepaid, (iii) upon receipt by facsimile or other electronic transmission (with written or electronic
confirmation of receipt), or (iv) after the expiration of the second business day following deposit with documented overnight delivery service. All notices given or made pursuant hereto shall be so given or made to the parties at the following
addresses: 
  
 If to the Consultant: 
  
 Patrick M. Murphy 
 1106 Culbreath Isles Dr. 
 Tampa, FL 33629

  
 If to the Company: 
  
 Zhone Technologies, Inc. 
 7001 Oakport Street 
 Oakland, California
94621 
 Attn: Chief Executive Officer 
  
 With Copy to: 
  
 Latham & Watkins, LLP 
 12636 High Bluff
Drive, Suite 400 
 San Diego, California 92130 
 Attn: Craig Garner, Esq. 
  
 The
address of any party hereto may be changed by a notice in writing given in accordance with the provisions hereof. 
  
 (b) Severability. If any provision of this Agreement is held by a court of competent jurisdiction to be invalid, illegal or
unenforceable, such provision shall be severed and enforced to the extent possible or modified in such a way as to make it enforceable, and the invalidity, illegality or unenforceability thereof 

  

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shall not affect the validity, legality or enforceability of the remaining provisions of this Agreement. 
  
 (c) Governing Law. The validity, interpretation and
performance of this Agreement shall be governed by, and construed in accordance with, the internal laws of the State of Florida, without giving effect to conflict of law principles. Venue for any actions shall be in Hillsborough County, Florida.

  
 (d) Counterparts. This Agreement may
be executed in counterparts, each of which shall be an original, but all of which shall constitute one and the same instrument. 
  
 (e) Entire Understanding. This Agreement, including all Recitals hereto which are incorporated herein by this reference, together
with the other agreements and documents being executed and delivered concurrently herewith by the Consultant, the Company and certain of its affiliates, constitute the entire understanding among all of the parties hereto and supersedes any prior
understandings and agreements, written or oral, among them respecting the subject matter within. 
  
 (f) Pronouns and Headings. As used herein, all pronouns shall include the masculine, feminine, singular and plural thereof wherever
the context and facts require such construction. The headings, titles and subtitles herein are inserted for convenience of reference only and are to be ignored in any construction of the provisions hereof. 
  
 (g) Amendments. This Agreement shall not be changed
or amended unless in writing and signed by both the Consultant and an authorized officer of the Company. 
  
 IN WITNESS WHEREOF, this Agreement has been executed as of the date and year first above written. 
  

			
	ZHONE TECHNOLOGIES, INC.
		
	By:	 	/s/    KIRK MISAKA        

			
	Name:	 	Kirk Misaka

			
	Title:	 	Chief Financial Officer
	
	CONSULTANT:
	
	/s/    PATRICK M.
MURPHY        
	Patrick M. Murphy

  

 6Restrictive Covenant Agreement - Sean E. Belanger

 Exhibit 10.5 
  
 RESTRICTIVE COVENANT AGREEMENT 
  
 THIS RESTRICTIVE COVENANT AGREEMENT (this “Agreement”) is made and entered into as of the
7th day of July, 2005, by and between Sean E. Belanger (“Consultant”) and Zhone Technologies, Inc.,
a Delaware Corporation (“Zhone”). 
  
 W I T N E
S S E T H: 
  
 WHEREAS, Zhone has entered into an
Agreement and Plan of Merger (the “Merger Agreement”) by and among Zhone, Parrot Acquisition Corp., a Delaware corporation and wholly owned subsidiary of Zhone (“Merger Sub”) and Paradyne Networks, Inc., a Delaware
corporation (“Paradyne”), dated as of the date hereof, pursuant to which Merger Sub will merge with and into Paradyne and Paradyne will become a wholly owned subsidiary of Zhone (the “Merger”); 
  
 WHEREAS, the Consultant holds shares of common stock and options to
purchase common stock of Paradyne and as a result of the Merger will become vested in the options and will receive consideration for the purchase of Paradyne from Zhone; 
  
 WHEREAS, concurrently with the execution of this Agreement, Consultant and Zhone have entered into a Consulting
Agreement dated as of the date hereof (the “Consulting Agreement”), but effective upon the Merger; and 
  
 WHEREAS, the execution and delivery of this Agreement are conditions precedent to the Consulting Agreement, as well as the Merger; 
  
 NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each of the parties hereto, the parties hereby agree as follows: 
  
 1. Exposure to Proprietary Information. 
  
 (a) As used in this Agreement, “Proprietary
Information” means all information of a business or technical nature that relates to Zhone, Paradyne and/or their affiliates (the “Companies”) including, without limitation, all information about their businesses, clients,
potential clients, marketing plans, advertising, contracts, potential contracts, strategies, forecasts, pricing, methods, practices, techniques, business plans, financial plans, research, development, purchasing, accounting, know-how, technical
data, processes, product development, and trade secrets (as defined by the Uniform Trade Secrets Act, as amended), and any information regarding any client or customer of the Companies or any other information that the Companies are required to keep
confidential. Notwithstanding the preceding sentence, the term “Proprietary Information” does not include information that is or becomes publicly available through no fault of Consultant. 
  

 (b) Consultant acknowledges that the Proprietary Information constitutes a legitimate
protectable business interest of the Companies, and covenants and agrees that at all times he will not, directly or indirectly, disclose, furnish, make available or utilize any of the Proprietary Information, other than in the proper performance of
his duties for the Companies. Consultant’s obligations under this Section with respect to particular Proprietary Information will survive expiration or termination of his services as a Consultant and will terminate only at such time (if any) as
the Proprietary Information in question becomes generally known to the public other than through a breach of Consultant’s obligations under this Section. 
  

(c) Consultant acknowledges that all records, documents, and tangible embodiments containing Proprietary Information prepared by
Consultant or which came into his possession by virtue of his employment by Paradyne or consulting to the Companies are and will remain the property of the Companies. 
  
 (d) The parties acknowledge and agree that this Agreement is not intended to, and does not, alter any of the
Companies’ rights or Consultant’s obligations under any state or federal statutory or common law regarding trade secrets and unfair trade practices. 
  

2. Nonsolicitation of Clients. Consultant acknowledges and agrees that the relationship that the Companies have with their customers constitutes
a valuable asset of the Companies. Accordingly, Consultant agrees that during the Consulting Period (as defined in the Consulting Agreement) and for a period of two years thereafter (together with the Consulting Period, the “Restricted
Period”) he will not, directly or indirectly, call upon, solicit or otherwise contact any clients, customers or potential clients and customers of Paradyne with whom he had contact during the twelve months ending upon his termination of
employment with Paradyne or clients, customers or potential customers of the Companies with whom he had contact during the Consulting Period for the purpose of providing or selling DSLAMS and Broadband Loop Carriers to service providers in the telco
space inclusive of incumbent telcos and CLECS, as such terms are commonly used in the Companies’ industry. 
  
 3. Noncompetition. Consultant acknowledges and agrees that the Companies have a legitimate protectable interest in their customers and Proprietary
Information. Accordingly in order to protect the Companies interests in their customers and their Proprietary Information Consultant agrees that during the Restricted Period, he shall not, in any manner, directly or indirectly, individually or in
conjunction with any other individual, corporation, partnership, limited liability company or other entity (“Person”) or by assisting any other Person, engage in or have an equity or profit interest in, render services (of an
employee, marketing, manufacturing, research and development, administrative, financial, consulting or other nature) or lend money to, any Person that develops, manufactures or distributes broadband network access products, such as DSLAMS for
location in central offices and multi-dwelling units, as such terms are commonly used in the Companies’ industry (the “Business”), provided that Consultant shall not be deemed to be in violation of this Section 3 solely due to
(i) his ownership of any beneficial interest in one percent (1%) or less of any publicly held corporation whose stock is traded on a national securities exchange or in the over-the-counter market, or (ii) his providing services to the Companies
pursuant to the Consulting Agreement. 
  

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 4. Nonsolicitation of Employees. During the Restricted Period, Consultant shall not solicit or
attempt to solicit (or assist others to solicit) for employment any person who is, or at any time prior to or during the Restricted Period was, an officer, manager, employee, or consultant of any of the Companies. Public advertisements shall not be
considered to be soliciting in breach of this Agreement. 
  
 5.
Compensation for Covenants. As compensation for Consultant’s agreements and covenants set forth in Sections 1-4 of this Agreement, Zhone shall pay Consultant Two Hundred Fifty Five Thousand Dollars ($255,000) for each year of the
Restricted Period (the “Covenant Compensation”). 
  
 6. Remedy for Breach. Any remedy at law for any breach of the provisions contained in this Agreement shall be inadequate and Consultant hereby consents to injunctive or other equitable relief and waives any requirement of a bond or
other surety in connection therewith. In addition and not in lieu of any other remedies available, as liquidated damages for any breach of this Agreement, Consultant agrees to repay to Zhone all of the Covenant Compensation paid to him during the
period Consultant was in breach of this Agreement and shall forfeit the right to any future Covenant Compensation. 
  
 7. Acknowledgments. Consultant acknowledges and agrees that: 
  
 (a) The restrictions and covenants contained herein, and the rights and remedies conferred upon Zhone and
the Companies, are necessary to protect the goodwill and other value of the Business and the benefits bargained for by Zhone under the Merger Agreement; and 
  
 (b) The restrictions placed upon Consultant hereunder are narrowly drawn, are fair and reasonable in time and territory and place no
greater restraint upon Consultant than is reasonably necessary to secure the goodwill and other value of the Business, and the benefits bargained for by Zhone under the Merger Agreement. 
  
 8. Severability. In the event a determination is made that any provision of this Agreement constitutes an
unreasonable or otherwise unenforceable restriction against Consultant, the provisions of this Agreement shall be rendered void only to the extent that such judicial or arbitral determination finds such provisions to be unreasonable or otherwise
unenforceable with respect to Consultant. In this regard, any authority construing this Agreement shall be empowered to sever any prohibited business activity or any time period from the coverage of this Agreement, to impose geographic or other
restrictions and to apply the provisions of this Agreement to the remaining business activities and the remaining time period not so severed. The time period during which the prohibitions set forth in this Agreement shall apply shall be tolled and
suspended for a period equal to the aggregate time during which Consultant violates such prohibitions in any respect. 
  
 9. Governing Law; Amendment. This Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of
Florida without regard to conflict of law principles that would result in the application of any law other the laws 

  

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of the State of Florida. This Agreement may not be amended, modified or supplemented except by written agreement of the parties. 
  
 10. Arbitration. Notwithstanding anything herein to the contrary, in
the event that there shall be a dispute among the parties arising out of or relating to this Agreement, or the breach thereof, the parties agree that such dispute shall be resolved by final and binding arbitration administered by the American
Arbitration Association (the “AAA”), in accordance with AAA’s Employment ADR Rules. The arbitrator’s decision shall be final and binding upon the parties, and may be entered and enforced in any court of competent
jurisdiction by either of the parties. The arbitrator shall have the power to grant temporary, preliminary and permanent relief, including without limitation, injunctive relief and specific performance. Unless otherwise ordered by the arbitrator
pursuant to Section 10 of this Agreement, the arbitrator’s fees and expenses shall be paid equally by the parties. 
  
 11. Parties Bound by Agreement; Successors and Assigns. The terms, conditions and obligations of this Agreement shall inure to the benefit of and
be binding upon the parties hereto and Zhone’s respective successors and assigns. This Agreement is not assignable by Consultant but is freely assignable by Zhone. 
  
 12. Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall
constitute one instrument and delivery of the executed counterparts may be effected by a facsimile or other electronic transmission. 
  
 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed, as of the date first above written. 
  

			
	ZHONE TECHNOLOGIES, INC.
		
	By:	 	/s/    KIRK MISAKA        

			
	Name: 	 	Kirk Misaka

			
	Title: 	 	Chief Financial Officer
	
	CONSULTANT:
	
	/s/    SEAN E.
BELANGER        
	Sean E. Belanger

  

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