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EXHIBIT 10.4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of this
19th day of May, 1995, by and between Spectra-Physics Lasers, Inc. (the
"Company"), and Xxxx X. Xxxxx ("Executive").
BACKGROUND
1. The Company desires to develop a new business to be operated by a new
company to be formed as a subsidiary of the Company ("Newco") for the purpose of
developing a new end-users system business for the company (the "Business").
2. Employer desires to employ Executive, and Executive is willing to be
employed by Employer, upon the terms and subject to the conditions hereinafter
set forth. As used herein, "Employer" shall mean the Company prior to the
formation of Newco and Newco after its formation.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein, and intending to be legally bound hereby, the parties agree as follows:
TERMS
SECTION 1. Employment. Employer hereby employs Executive, and Executive
hereby accepts such employment and agrees to serve initially as the Company's
Vice President - New Business Development and, upon formation of Newco, as
Newco's President during the Employment Period set forth in Section 6, subject
to the terms and conditions hereinafter set forth.
SECTION 2. Management Duties. Prior to the formation of Newco, Executive
shall work with those employees designated by the Company to identify a target
market and develop a five-year plan for the Business satisfactory to the Company
in its sole discretion and shall perform such additional duties relating
thereto, which duties shall however, in all cases be subject to policies set by,
and at the direction and control of, the Company's Board of Directors. Once such
five-year plan has been approved by the Company and the Company has formed
Newco, Executive will become an employee of Newco. As President of Newco,
Executive shall work to establish and operate Newco in accordance with the
five-year plan for the Business approved by the Company (the "Plan") and shall
carry out such duties as are customarily associated with such position, which
duties shall however, in all cases be subject to policies set by, and at the
direction and control of, Newco's Board of Directors.
SECTION 3. Extent of Services. During the Employment Period, Executive
shall devote his full time and attention and give his best efforts, skills and
abilities exclusively to the development, management and operations of Employer
and the Business. Executive shall perform his services hereunder at such places
as are required for the effective development and management of Employer and the
Business.
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SECTION 4. Compensation and Benefits.
(a) During the Employment Period, Executive shall receive as
compensation for his services a salary at the rate of One Hundred Forty-Five
Thousand Six-Hundred Dollars ($145,600) per annum or such greater amount as
determined by the Board of Directors of Employer from time to time in its
absolute and sole discretion (the "Base Salary"), which Base Salary shall be
payable in equal installments at such intervals as Employer pays its employees
generally.
(b) During the Employment Period, Executive shall be entitled to
participate in all employee benefit plans and programs approved by the Company's
Board of Directors as the Company shall provide generally to other employees of
the Company from time to time; provided, however, that Executive shall not be
entitled to participate in any bonus or profit-sharing plans of the Company
after formation of Newco but shall be entitled to participate in all employee
benefit plans and programs approved by Newco's Board of Directors as Newco shall
provide generally to other employees of Newco from time to time. Upon formation
of Newco, Newco shall adopt an employee equity incentive plan substantially upon
the terms outlined on Exhibit A hereto and consistent therewith and, subject to
the execution by Executive of an equity incentive agreement in a form acceptable
to Newco and Executive (the "Equity Agreement"), Executive shall be granted
equity incentive rights covering the common stock of Newco equal to the Covered
Interest. For purposes of this Agreement, "Covered Interest" shall mean: (i) 10%
of Newco's outstanding common stock (as measured on a fully-diluted basis) so
long as Newco's contributed capitalization is equal to or less than the
contributed capitalization projected in the Plan for such time; and (ii) in the
event that Newco's contributed capitalization exceeds the amount projected in
the Plan for such time, 10% of Newco's outstanding common stock (as measured on
a fully-diluted basis) immediately prior to such contribution.
(c) Executive shall be entitled to those holidays and that amount of
vacation that are permitted under and are consistent with policies of the
Employer.
(d) All payments to Executive or his estate made pursuant to this
Agreement shall be subject to such withholding as may be required by any
applicable laws.
SECTION 5. Expense Reimbursements. During the Employment Period,
Employer shall reimburse Executive for all reasonable and itemized out-of-pocket
expenses incurred by Executive in the ordinary course of the Business, provided
such expenses are properly reported to Employer in accordance with its
accounting procedures.
SECTION 6. Term. The period of Executive's employment under this
Agreement (the "Employment Period") shall commence as of the date hereof and,
unless sooner terminated pursuant to Section 7 of this Agreement, shall continue
until the close of business on the earlier of (a) the fifth anniversary hereof
and (b) the fourth anniversary of the formation of Newco, and the Employment
Period shall terminate upon the earlier of such time; Provided however that the
Employment Period shall be extended for additional periods of one-year unless
either Employer or the Executive shall have given written notice to the other,
no later than 90
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days prior to the last day of the then-existing Employment Period, that the term
of this Agreement shall not be so extended.
SECTION 7. Termination.
(a) The Employment Period may be terminated by either Employer (or its
successor) or the Executive at any time or for any reason, as provided in this
Section 7(a). The Employment Period shall terminate upon the earliest to occur
of the following:
(i) the close of business on the last day of the then-existing
Employment Period (as such Employment Period may be extended from time to time
pursuant to Section 6);
(ii) the Executive's death;
(iii) delivery by Employer to Executive of a written notice of
Employer's election to terminate Executive's employment hereunder because of
Executive's Disability (as defined below);
(iv) delivery by Employer to Executive of a written notice of
Employer's election to terminate Executive's employment hereunder for Cause (as
defined below);
(v) delivery by Employer to Executive of a written notice of
Employer's election to terminate Executive's employment hereunder and such
termination is not for Cause or as a result of Executive's death or Disability;
(vi) the close of business on the day which is 90 days after the
date on which the Executive shall have delivered to Employer written notice of
Executive's election to terminate Executive's employment hereunder and such
termination is not Justifiable Termination (as defined below), or
(vii) the close of business on the day on which the Executive
shall have delivered to Employer written notice of Executive's intent to
terminate Executive's employment hereunder due to Justifiable Termination.
(b) For purposes of this Agreement, "Disability" shall mean that
Executive suffers from an illness or other physical or mental impairment which,
in the judgment of the Board of Directors of Employer, prevents Executive from
performing his duties hereunder for a period of ninety (90) consecutive days.
For purposes of this Agreement, "Cause" means termination of Executive's
employment with Employer (i) due to willful neglect by Executive of, or willful
refusal by Executive to perform, his duties with Employer or due to willful
misconduct by Executive relating to, or materially adversely affecting his
ability to perform, his duties with Employer or materially adversely affecting
Employer, in each case as determined by Employer's Board of Directors in good
faith; or (ii) in connection with any material breach by Executive of the terms
of this Agreement; or (iii) any termination by Executive of his employment
hereunder which is not due to Justifiable Termination. For purposes of this
Agreement, "Justifiable
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Termination" shall mean termination of Executive's employment with Employer due
to (x) any material adverse change in the position held by Executive with Newco
or in Executive's principal place of employment with Newco (in no event to
include relocation within Newco's then-existing metropolitan area); or (y) any
material failure of the Employer to perform its obligations under this
Agreement.
(c) Following any termination of Executive's employment hereunder, all
obligations of the Company and Newco under this Agreement (other than (x) any
obligations with respect to the payment of accrued and unpaid salary, accrued
and unpaid vacation, and expense reimbursement under Sections 4 and 5 hereof
through the date of Executive's termination of employment hereunder, (y) as set
forth in Section 7(d), and (z) any rights granted pursuant to the Equity
Agreement which survive termination in accordance with the terms thereof) shall
terminate.
(d) In the event of any termination of Executive's employment hereunder
prior to the close of business on the last day of the Employment Period pursuant
to Section 7(a)(v) or pursuant to Section 7(a)(vii) as a result of Justifiable
Termination, the Employer shall pay to Executive severance compensation in an
amount equal to 100% of Executive's Base Salary as in effect on the date of such
termination. All cash severance compensation amounts owed pursuant to this
Section 7(d) shall be paid within ten (10) days following the effective date of
Executive's termination, as applicable. In addition: (x) in the event of any
termination of Executive's employment hereunder prior to the close of business
on the last day of the Employment Period for any reason other than pursuant to
Section 7(a)(iv) or Section 7(a)(vi), the Employer shall pay to Executive a
payment equal to the pro rata portion of any aggregate bonus payment (owed under
the terms of any Employer bonus plan in effect for the fiscal year of such
termination) earned or accrued and unpaid through the date of termination,
payable promptly after calculation following the end of such fiscal year; and
(y) in the event of any termination of Executive's employment hereunder prior to
the close of business on the last day of the Employment Period pursuant to
Section 7(a)(v) or pursuant to Section 7(a)(vii) as a result of Justifiable
Termination, the Employer shall pay for health insurance benefit programs for
Executive comparable to those which Executive participated in immediately prior
to his termination for the one year period following such termination (except to
the extent Executive receives comparable benefits from another employer).
(e) Any termination by Employer or by Executive of Executive's
employment hereunder shall be communicated by written notice which shall
indicate the specific termination provision in this Agreement relied upon.
(f) Any severance compensation granted in this Section 7 (together with
the rights granted under the Equity Agreement referred to in Section 7(C) above
and any rights granted under any written option agreement with Executive) shall
be the sole and exclusive compensation or benefit due to Executive upon
termination of Executive's employment.
SECTION 8. Representations, Warranties and Acknowledgments of Executive.
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(a) Executive represents and warrants that he is not a party to or
otherwise subject to or bound by the terms of any contract, agreement or
understanding which in any manner would limit or otherwise affect his ability to
perform his obligations hereunder, including without limitation any contract,
agreement or understanding containing terms and provisions similar in any manner
to those contained in Section 9 hereof. Executive further represents and
warrants that his employment with Employer will not require him to disclose or
use any confidential information belonging to prior employers or other persons
or entities.
(b) Executive represents and warrants that his experience and
capabilities are such that the provisions of Section 9 will not prevent him from
earning his livelihood, and acknowledges that it would cause the Company and
Newco and their respective affiliates (including Spectra-Physics AB and its
direct and indirect subsidiaries, the "Group") serious and irreparable injury
and cost if Executive were to use his ability and knowledge in competition with
the Group or to otherwise breach the obligations contained in Section 9.
(c) Executive recognizes and acknowledges that: (i) in the course of
Executive's employment by Employer, it will be necessary for Executive to
acquire information which could include, in whole or in part, information
concerning the Group's experimental and development plans, trade secrets, secret
procedures, information relating to ideas, improvements, and inventions,
disclosures, processes, systems, formulas, composition, patents, patent
applications, machinery, materials research activities and plans, customers or
vendors and prospective customers, the Group's product costs, the Group's
prices, profits and volume of sales, and future business plans, and other
confidential or proprietary information belonging to the Group or relating to
the Group's affairs, even if such information has been disclosed to one or more
third parties pursuant to distribution agreements, joint research agreements or
other agreements entered into by any member of the Group (collectively, such
information is referred to herein as the "Confidential Information"); (ii) the
Confidential Information is the property of the Group; (iii) the use,
misappropriation or disclosure of the Confidential Information would cause
irreparable injury to the Group; and (iv) it is essential to the protection of
the Group's good will and to the maintenance of the Group's competitive position
that the Confidential Information be kept secret and that Executive not disclose
the Confidential Information to others or use the Confidential Information to
Executive's own advantage or the advantage of others (except as may be necessary
for the performance of Executive's duties hereunder).
(d) Executive further recognizes and acknowledges that his duties at the
Company and Newco may include the preparation of materials, including written or
graphic materials, and that any such materials conceived or written by him shall
be done as "work made for hire" as defined and used in the Copyright Act of
1976, 17 U.S.C. Section 1 et seq. In the event of publication of such materials,
Executive acknowledges that since the work is "work made for hire," Employer
will solely retain and own all rights in said materials, including right of
copyright.
SECTION 9. Executives Covenants and Agreements.
(a) Executive agrees to hold and safeguard the Confidential Information in trust
for the Company, Newco, and their successors and assigns and agrees that he
shall not, without the prior written consent of the Board of Directors of the
Company or Newco, disclose
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or make available to anyone for use outside the Company's or Newco's
organization at any time, either during his employment with Employer or
subsequent to the termination of his employment with Employer for any reason,
any of the Confidential Information, whether or not developed by Executive,
except as required in the performance of Executive's duties to Employer.
(b) Executive shall disclose promptly to Employer any and all Employer
Inventions (as defined below) authorized, conceived or made by Executive during
the period of Executive's employment by Employer and related to the business or
activities of Employer, and hereby assigns and agrees to assign all his right,
title and interest world-wide in all Employer Inventions and in all intellectual
property rights based upon Employer Inventions to Employer. Whenever requested
to do so by Employer, Executive shall execute any and all applications,
assignments or other instruments which Employer shall deem necessary to apply
for and obtain letters patent or copyrights of the United States or any foreign
country or to otherwise protect Employer's interest therein or to evidence the
assignment thereof to Employer. Such obligations shall continue beyond the
termination of Executive's employment with Employer for any reason with respect
to Employer Inventions authored, conceived or made by Executive during the
period of Executive's employment by Employer, and shall be binding upon
Executive's assigns, executors, administrators and other legal representatives.
In the event that the Company or Newco is unable for any reason to secure
Executive's signature to any lawful and necessary document required to apply for
or execute any patent, copyright or other applications with respect to any
Employer Inventions (including but not limited to any renewals, extensions,
continuations, divisions or continuations in part thereof), Executive hereby
irrevocably appoints Employer and its duly authorized officers and agents as his
agents and attorneys-in-fact to execute and file any such application and to do
all other lawfully permitted acts to further the prosecution and issuance of
patents, copyrights or other rights relating to such Employer Inventions with
the same legal force and effect as if executed by Executive. Executive
represents and warrants to Employer that there are at present no works,
software, inventions, discoveries or improvements which were recorded, written,
conceived, invented, made or discovered by Executive before entering into this
Agreement and which Executive desires to remove from the provisions of this
Agreement. As provided in Section 2870 of the California Labor Code, Executive
shall not be required to assign to Employer any Inventions (as defined below)
which are (i) conceived and developed entirely on his own time; (ii) not related
to any actual or anticipated business of Employer; (iii) not the result of work
done in the course of his employment with Employer; and (iv) conceived and made
without any Employer equipment, supplies, facilities or Confidential
Information. Employer shall have the irrevocable, royalty-free, worldwide right
to use in its business, and to use, make, have made and sell products,
processes, and/or services derived from any Employer Inventions.
(c) As used in this Agreement: (i) "Inventions" means any new or useful
art, discovery, contribution, finding, and improvements thereof or know-how
related thereto, whether patentable or not, including but not limited to
contributions, concepts, ideas, developments, discoveries, processes, formulas,
or methods, composition, techniques, articles, machines, designs, or software;
and (ii) "Employer Inventions" means all Inventions conceived or made by
Executive, alone or with others, which (i) relate or may relate in any manner to
the Business or its research and development, (ii) were conceived or made, in
whole or in part, on Employer's time or with any of Employer's equipment,
supplies, facilities or Confidential Information, or (iii) result from tasks
assigned to Executive by Employer.
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(d) Upon the termination of Executive's employment with Employer for any
reason Executive shall promptly deliver to Employer all correspondence,
drawings, blueprints, manuals, letters, notes, notebooks, reports, flow-charts,
programs, proposals, price lists, customer lists, company credit cards, company
vehicles and any documents concerning Employer's customers or concerning
products or processes used by Employer and, without limiting the foregoing, will
promptly deliver to Employer any and all other documents or materials containing
or constituting Employer Inventions or Confidential Information.
(e) Executive covenants and agrees that during the period of Executive's
employment hereunder and for the Post-Termination Period thereafter (as defined
below) following the termination of Executive's employment hereunder, Executive
shall not, anywhere in the world, directly or indirectly, engage (whether as
principal, agent, officer, director, employee, consultant, shareholder, or
otherwise, whether alone or in association with any other person, corporation or
other entity) in any business or other enterprise which sells or attempts to
sell in competition with the Company or Newco any products or services which are
the same as or substantially similar to the products or services sold or
proposed to be sold by the Company or Newco at any time during the last two (2)
years prior to the termination of Executive's employment hereunder. For purposes
of this Agreement, "Post-Termination Period" shall mean (x) in the event that
Executive is terminated by Employer other than for Cause or Executive terminates
employment for Justifiable Termination, 180 days, and (y) in the event that
Executive's employment is terminated for any reason other than as set forth in
clause (x), two (2) years.
(f) Executive agrees that during his employment with Employer, he shall
not, directly or indirectly, solicit the trade of, or trade with, any customer,
prospective customer or supplier of Employer for any purpose other than for the
benefit of Employer.
(g) Executive agrees that, for two (2) years following termination of
Executive's employment with Employer hereunder for any reason, Executive shall
not, directly or indirectly, solicit or induce, or attempt to solicit or induce,
any employee of the Company or Newco to leave the employ of the Company or Newco
for any reason whatsoever nor shall Executive offer or provide employment
(whether such employment is with the Executive or any other business or
enterprise), either on a full-time basis or part-time or consulting basis, to
any person who then currently is, or who within one year prior thereto had been,
employed by the Company, Newco or any of their subsidiaries.
SECTION 10. Remedies. Executive acknowledges that his promised services
hereunder are of a special, unique, unusual, extraordinary and intellectual
character, which give them peculiar value the loss of which cannot be reasonably
or adequately compensated in an action of law, and that, in the event there is a
breach hereof by Executive, Employer will suffer irreparable harm, the amount of
which will be impossible to ascertain. Accordingly, Employer shall be entitled,
if it so elects, to institute and prosecute proceedings in any court of
competent jurisdiction, either at law or in equity, to obtain damages for any
breach or to enforce specific performance of the provisions or to enjoin
Executive from committing any act in breach of this Agreement. The remedies
granted to Employer in this Agreement are cumulative and are in addition to
remedies otherwise available to Employer at law or in equity. If Employer is
obliged to resort to the courts for the enforcement of any of the covenants of
Executive contained in
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Section 9 hereof, each such covenant shall be extended for a period of time
equal to the period of such breach, if any, which extension shall commence on
the later of (i) the date on which the original (unextended) term of such
covenant is scheduled to terminate or (ii) the date of the final court order
(without further right of appeal) enforcing such covenant.
SECTION 11. Waiver of Breach. The waiver by Employer of a breach of any
provision of this Agreement by Executive shall not operate or be construed as a
waiver of any other or subsequent breach by Executive of such or any other
provision. No delay or omission by Employer or Executive in exercising any
right, remedy or power hereunder or existing at law or in equity shall be
construed as a waiver thereof, and any such right, remedy or power may be
exercised by Employer or Executive from time to time and as often as may be
deemed expedient or necessary by Employer or Executive in its or his sole
discretion.
SECTION 12. Notices. All notices required or permitted hereunder shall
be made in writing by hand-delivery, certified or registered first-class mail,
or air courier guaranteeing overnight delivery to the other party at the
following addresses:
To Employer:
Spectra-Physics Lasers, Inc.
0000 Xxxxx Xxxxx
Xxxxxxxx Xxxx, XX 00000
Attention: President
To Executive:
Xx. Xxxx X. Xxxxx
00 Xxxxxx Xxxx
Xxx Xxxxxx, XX 00000
or to such other address as either of such parties may designate in a written
notice served upon the other party in the manner provided herein. All notices
required or permitted hereunder shall be deemed duly given and received when
delivered by hand, if personally delivered; on the third day next succeeding the
date of mailing if sent by certified or registered first-class mail; and on the
next business day, if timely delivered to an air courier guaranteeing overnight
delivery.
SECTION 13. Severability. If any term or provision of this Agreement or
the application thereof to any person or circumstance shall, to any extent, be
held invalid or unenforceable by a court of competent jurisdiction, the
remainder of this Agreement or the application of any such term or provision to
persons or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby, and each term and provision of
this Agreement shall be valid and enforceable to the fullest extent permitted by
law. If any of the provisions contained in this Agreement shall for any reason
be held to be excessively broad as to duration, scope, activity or subject, it
shall be construed by limiting and reducing it, so as to be valid and
enforceable to the extent compatible with the applicable law or the
determination by a court of competent jurisdiction.
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SECTION 14. Governing Law; Exclusive Choice of Forum. The implementation
and interpretation of this Agreement shall be governed by and enforced in
accordance with the laws of the State of California without giving effect to the
conflicts of law provisions thereof. Each party irrevocably submits to the
exclusive jurisdiction of any court located in the State of California, for
purposes of any action, suit or other proceeding arising out of this Agreement
or any transaction contemplated hereby and agrees not to raise any objection in
any court located in the State of California to the laying or maintaining of the
venue of any such action, suit or proceeding in such court.
SECTION 15. Binding Effect and Assignability. The rights and obligations
of both parties under this Agreement shall inure to the benefit of and shall be
binding upon their heirs, successors and assigns. Executive's rights under this
Agreement shall not, in any voluntary or involuntary manner, be assignable and
may not be pledged or hypothecated without the prior written consent of
Employer.
SECTION 16. Attorneys' Fees; Costs. If a party hereto prevails in a
proceeding for damages or injunctive relief, that party, in addition to other
relief, shall be entitled to reasonable attorneys' fees, costs and the expenses
of litigation incurred by such party in securing the relief granted by the
Court.
SECTION 17. Counterparts; Section Headings. This Agreement may be
executed in any number of counterparts each of which shall be deemed to be an
original, but all of which together shall constitute one and the same
instrument. The section headings of this Agreement are for convenience of
reference only.
SECTION 18. Survival. Notwithstanding the termination of this Agreement
or Executive's employment hereunder for any reason, Sections 5, 7, 8, 9, 10, 13,
14, 15, 16 and 18 hereof shall survive any such termination.
SECTION 19. Entire Agreement. This instrument constitutes the entire
agreement with respect to the subject matter hereof between the parties hereto
and replaces and supersedes as of the date hereof any and all prior oral or
written agreements and understandings between the parties hereto. This Agreement
may only be modified by an agreement in writing executed by both Executive and
Employer.
IN WITNESS WHEREOF, the undersigned have executed this Agreement the
date and year first written above.
Company:
SPECTRA-PHYSICS LASERS, INC.
By /s/ Xxxxxxx X. Xxxxxx
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Executive:
/s/ Xxxx X. Xxxxx
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Xxxx X. Xxxxx
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Exhibit A
STOCK OPTION PLAN SUMMARY
A. PROPOSED INITIAL CAPITALIZATION
Newco
Common Stock
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Spectra-Physics No less than 80% of shares
Management No more than 20% of shares*
Shares would be granted subject to options.
B. NONQUALIFIED STOCK OPTION PLAN: PRINCIPAL TERMS
After formation of Newco, options to purchase common stock of Newco ("options")
will be made available to key managers of Newco selected by the Company
("Managers"). The Options will be granted to Managers in consideration for their
services to Newco.
Exercise Price
The exercise price under the options shall be the price per share that
the Company initially pays for its shares of Newco common stock
(expected to be $0.05 per share) for Managers who are granted options
within the first six months after formation of Newco and the fair market
value at the time of grant for Managers who are granted Options
thereafter.
Vesting
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Upon Grant - 10% of total granted to each Manager.
Time-Based - 40% of the total granted to each Manager,
with 25% of this a-mount vesting at the end
of each fiscal year for each of the first
four years that a Manager is employed by
Newco.
Performance - 50% of the total granted to each Manager,
with 25% of this amount eligible for vesting
at the end of each fiscal year for each of
the first four years that a Manager is
employed by Newco if Newco's actual sales
and ORAD performance meet the targets set
forth in the business plan adopted by
Newco's board of directors for such fiscal
year.
Accelerated - See "Sale of Newco" below.
Option Exercise
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Managers will not be entitled to exercise the Options unless, prior to
their lapse or purchase by Newco, an IPO occurs, which generally shall
mean a sale of Newco's equity securities pursuant an effective SEC
registration statement, if as a result of such sale (x) Newco becomes a
reporting company under Section 12 of the Securities Exchange Act of
1934, as amended, (y) Newco receives at least $10 million in net
proceeds and the common stock sold pursuant to such registration
statement represents at least 35% of the common stock of Newco
outstanding after such sale, and (z) the common stock of Newco is traded
on the New York Stock Exchange or the American Stock Exchange, or quoted
on the NASDAQ National Market System.
Sale of Newco
If Newco engages in a "sale of control" transaction (e.g., merger, sale
of all of Newco's stock or sale by Newco of substantially all of its
assets), holders of vested Options will be entitled to receive the net
consideration per share received by Newco's existing holders of common
stock (after deducting the applicable exercise price) in cancellation of
such Options. In the event of a sale of control, all unvested options
which are eligible to vest over time as described above under
"Vesting-Time-Based" shall immediately vest. In the event of a sale of
control, if the acquiror elects in its sole discretion to continue the
option program described in this Stock Option Plan Summary following
such a sale of control, then all unvested options which are eligible to
vest over time as described above under "Vesting - Performance" shall
continue and be assumed following the sale of control transaction.
Purchase Rights
The Options will be subject to purchase by Newco (unless Newco shall
have consummated an IPO or sale of control or the Options shall have
lapsed) as follows:
During initial four years of Newco employment
If a Manager's employment with Newco is terminated by Newco
(other than for cause) or is terminated by the Manager due to
Justifiable Termination after the grant of the Options but during
the initial four years of a Manager's employment with Newco, then
Newco will determine the reasonable value of the shares subject
to such Manager's vested Options as of the time of termination as
described below. The valuation of shares of Newco's common stock
shall be determined by Newco's board of directors in good faith,
and such valuation shall be binding on the parties. If such
Manager has not been engaged in any business or activity in
competition with Newco or the Company at any time following
termination in breach of the Manager's obligations under any
written employment agreement (the "Employment Agreement"), then
Newco will be required to purchase all of such Manager's Options
at the determined value of the shares (net of the applicable
exercise price): (x) promptly following the valuation of such
shares in the event that the Manager's employment with Newco is
terminated by Newco (other than
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for cause) or as a result of the Manager's death or disability;
and (y) on the first anniversary of the Manager's termination of
employment in all other cases.
After fourth anniversary of Newco Employment
Newco shall be required to purchase all Options then held by a
Manager on a date selected by Newco between the fourth and fifth
anniversary, of the date of employment of such Manager with Newco
(with thirty days notice to Manager). The purchase price for a
Manager's Options shall be an amount equal to the percentage of
shares represented by such Manager's Options multiplied by the
value of all of Newco's shares of common stock as described below
(net of the applicable exercise price), payable promptly
following valuation unless such Manager engages in any business
or activity in competition with Newco or the Company prior
thereto in breach of the Manager's obligations under the
Employment Agreement. The valuation of shares of Newco's common
stock shall be deter-mined by Newco's board of directors in good
faith. In the event of any disagreement with such valuation,
Newco shall select an arbitrator (who is an independent banking
firm or other appraiser) to review the reasonableness of Newco's
valuation. The cost of arbitration will be borne by Newco. If the
arbitrator determines that Newco's valuation is reasonable, then
Newco's valuation shall be binding on the parties; if the
arbitrator determines that Newco's valuation is not reasonable,
then the arbitrator will determine a value for which Newco will
purchase the Manager's Options.
Antidilution
The number of shares of common stock subject to the Options and
the exercise price per share shall be appropriately adjusted if
Newco declares or effects any stock dividend or subdivision or
combination of shares.
Transferability
The Options will not be transferable except by will or the laws
of descent and distribution.
Lapse of Options
If a Manager is terminated for cause at any time or if such
Manager terminates employment for any reason prior to January 1,
1998 (other than due to Justifiable Termination) or if such
Manager engages in any business or activity in competition with
Newco or the Company in breach of the Manager's obligations under
the Employment Agreement at any time following termination or
valuation of shares subject to Options and prior to payment of
the consideration described above, then all such Options shall
lapse and be cancelled without any consideration. If a Manager's
employment with Newco ceases for any reason (other than for
Cause) on or after January 1, 1998 or if Newco engages in a "sale
of control", then the
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Manager shall receive the consideration described above under
"Purchase Rights" in exchange for cancellation of the Manager's
Options; provided, however, the provisions of "Sale of Newco"
shall be operative as described above with respect to unvested
Options.
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