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EXHIBIT 10.3
AGREEMENT
This Employment Agreement ("Agreement") is made and entered
into, at Irvine, California, as of the 17th day of December , 1998, between
xxxxxxxxx.xxx inc., a corporation duly organized under the laws of the State of
Delaware (the "Company"), with offices at 00000 XxxXxxxxx Xxxx., Xxxxxx,
Xxxxxxxxxx 00000-0000, and Xxx Xxxxx Xxxxxxxxxx (hereinafter referred to as the
"Executive"), who resides at 00000 Xxxxxxx Xxxxx, Xxxxxx, Xxxxxxxxxx 00000.
RECITALS
WHEREAS: The Company currently employs the Executive as Senior
Vice President and Chief Technology Officer, subject to the terms and conditions
contained in the Severance Agreement dated January 1, 1998 (the "Severance
Agreement");
WHEREAS: Each of the Executive and the Company desires to
terminate the Severance Agreement entered into between Executive and the Company
on January 1, 1998 and agree that Executive shall hereafter be employed as the
Executive Vice President and Chief Operating Officer of the Company, subject to
the following terms and conditions.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, and with reference to the above recitals, the
parties hereby agree as follows:
ARTICLE 1
TERM OF EMPLOYMENT
The Company hereby employs the Executive as Executive Vice President
and Chief Operating Officer of the Company and the Executive hereby accepts such
employment by the Company for a period of three (3) years (the "Term")
commencing from October 1, 1998 (the "Commencement Date") and expiring upon the
third anniversary of the Commencement Date, unless extended at the mutual option
of the parties.
ARTICLE 2
DUTIES AND OBLIGATIONS
2.1 During the Term of this Agreement, the Executive shall: (i) devote
her full business time, attention and energies to the business of the Company;
(ii) shall use her best efforts to promote the interests of the Company; (iii)
shall perform all functions and services as the Executive Vice President and
Chief Operating Officer of the Company, including general management and
supervision over the operations of the business and employees of the Company;
(iv) shall act in accordance with the policies and directives of the Company as
determined from time to time by the Chief Executive Officer and communicated to
the Executive in writing; and (v) shall report directly to the Chief Executive
Officer.
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2.2 The Executive covenants and agrees that, while actually employed by
the Company, she shall not engage in any other business duties or pursuits
whatsoever, or directly or indirectly render any services of a business or
commercial nature to any other person or organization, including, but not
limited to, providing services to any business that is in competition with or
similar in nature to the Company, whether for compensation or otherwise, without
the prior written consent of the board of directors of the Company (the
"Board"). However, the expenditure of reasonable amounts of time for
educational, charitable, or professional activities shall not be deemed a breach
of this Agreement, if those activities do not materially interfere with the
services required under this Agreement, and shall not require the prior written
consent of the Board. Notwithstanding anything herein contained to the contrary,
this Agreement shall not be construed to prohibit the Executive from making
passive personal investments or conducting personal business, financial or legal
affairs or other personal matters if those activities do not materially
interfere with the services required hereunder.
2.3 The principal location in which the Executive's services are to be
performed will be the Irvine, California area. The Executive shall not be
required to change such principal location without her consent.
ARTICLE 3
COMPENSATION
3.1 As compensation for the services to be rendered by the Executive
pursuant to this Agreement, the Company hereby agrees to pay the Executive a
base salary equal to at least Two Hundred Twenty Five Thousand Dollars
($225,000.00) per year during the Term of this Agreement, which rate shall be
reviewed by the Board at least annually and may be increased (but not reduced)
by the Board in such amounts as the Board deems appropriate. The base salary
shall be paid in substantially equal bimonthly installments, in accordance with
the normal payroll practices of the Company.
3.2 The Company shall provide the Executive with the opportunity to
earn an annual bonus for each fiscal year of the Company, occurring in whole or
in part during the Term. The annual bonus payable to the Executive shall be in
such amount and based on such criteria for the award as may be established by
the Board from time to time. Any bonus shall be paid as promptly as practicable
following the end of the preceding fiscal year. The Executive shall participate
also in all other short-term and long-term bonus or incentive plans or
arrangements in which other senior executives of the Company are collectively
eligible to participate from time to time. The provisions of this Section 3.2
shall be subject to the provisions of Section 3.5.
3.3 As further consideration for the services rendered by the Executive
during the Term, the Executive shall be granted stock options to purchase shares
of the Company's common stock on the terms and conditions set forth in the
attached Schedule A (each an "Option").
3.4 The Company shall have the right to deduct or withhold from the
compensation due to the Executive hereunder any and all sums required for
federal income and employee social security taxes and all state or local income
taxes now applicable or that may be enacted and become applicable during the
Term.
3.5 In the event the Company becomes a "publicly held corporation"
within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), the Company may provide for shareholder approval of any
performance based compensation provided herein which is first created after the
Company becomes so "publicly held," and may provide for the establishment of a
compensation committee to establish any applicable performance goals and
determine whether such performance goals have been met.
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ARTICLE 4
EMPLOYEE BENEFITS
4.1 The Company agrees that the Executive shall be entitled to all
ordinary and customary perquisites afforded to executive employees of the
Company, at the Company's sole expense (except to the extent employee
contribution may be required under the Company's benefit plans as they may now
or hereafter exist), which shall in no event be less than the benefits afforded
to the Executive on the date hereof and the other executive employees of the
Company as of the date hereof or from time to time, but in any event shall
include any qualified or non-qualified pension, profit sharing and savings
plans, any death benefit and disability benefit plans, life insurance coverages,
any medical, dental, health and welfare plans or insurance coverages and any
stock purchase programs that are approved by the Board on terms and conditions
at least as favorable as provided to the Executive on the date hereof and other
senior executives of the Company as of the date hereof or from time to time.
4.2 The Executive shall be entitled to four (4) weeks of paid vacation
for each year of her employment hereunder, which, to the extent unused in any
given year, may be carried over in accordance with the policies of the Company
then in effect. Notwithstanding anything to the contrary, however, the Executive
shall be entitled to carry over any unused vacation for a period not less than
two (2) years.
ARTICLE 5
BUSINESS EXPENSES
5.1 The Company shall pay or reimburse the Executive for all reasonable
and authorized business expenses incurred by the Executive during the Term; such
payment or reimbursement shall not be unreasonably withheld so long as said
business expenses have been incurred for and promote the business of the Company
and are normally and customarily incurred by employees in comparable positions
at other comparable businesses in the same or similar market. Notwithstanding
the above, and except as otherwise provided in Section 4.4 hereof, the Company
shall not pay or reimburse the Executive for the costs of any membership fees or
dues for private clubs, civic organizations, and similar organizations or
entities, unless such organizations and the fees and costs associated therewith
have first been approved in writing by the Board.
5.2 The Company shall reimburse the Executive for expenses incurred
with business-related travel.
5.3 As a condition to reimbursement under this Article 5, the Executive
shall furnish to the Company adequate records and other documentary evidence
required by federal and state statutes and regulations for the substantiation of
each expenditure. The Executive acknowledges and agrees that failure to furnish
the required documentation may result in the Company denying all or part of the
expense for which reimbursement is sought.
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ARTICLE 6
TERMINATION OF EMPLOYMENT
6.1 Termination for Cause. The Board may, during the Term, without
notice to the Executive, terminate this Agreement and discharge the Executive
for Cause, whereupon the respective rights and obligations of the parties
hereunder shall terminate; provided, however, that the Company shall immediately
pay the Executive any amount due and owing pursuant to Articles 3, 4, and 5,
prorated to the date of termination. As used herein, the term "for Cause" shall
refer to the termination of the Executive's employment as a result of any one or
more of the following: (i) any conviction of the Executive for a felony; (ii)
the gross willful misconduct of the Executive which has a direct and material
injurious effect on the business or reputation of the Company; (iii) the gross
dishonesty of the Executive which is directly and materially injurious to the
business and reputation of the Company; or (iv) Failure to consistently
discharge her duties under this Agreement or as assigned by the Company from
time to time which failure continues for thirty (30) days following written
notice from the Company detailing the Company's expectations of Executive's
performance and the area or areas in which such expectations have not been met.
For purposes of this Section 6.1, no act or failure to act, on the part of the
Executive, shall be considered "willful" if it is done, or omitted to be done,
by the Executive in good faith or with reasonable belief that her action or
omission was in the best interest of the Company.
6.2 Termination Without Cause. Anything in this Agreement to the
contrary notwithstanding, the Board shall have the right, at any time in its
sole and subjective discretion, to terminate this Agreement without Cause upon
not less than thirty (30) days prior written notice to the Executive. The term
"termination without Cause" shall mean the termination of the Executive's
employment for any reason other than those expressly set forth in Section 6.1,
or no reason at all, and shall also mean the Executive's decision to terminate
this Agreement by reason of any act, decision or omission by the Company or the
Board that: (A) materially modifies, reduces, changes, or restricts the
Executive's salary, bonus opportunities, options or other compensation benefits
or perquisites, or the Executive's authority, functions, services, duties,
rights, and privileges as, or commensurate with the Executive's position as,
Executive Vice President and Chief Operating Officer of the Company as described
in Section 2.1 hereof; (B) relocates the Executive without her consent from the
Company's offices located at 00000 XxxXxxxxx Xxxxxxxxx, Xxxxxx, Xxxxxxxxxx,
00000-0000 to any other location in excess of fifty (50) miles beyond the
geographic limits of Irvine, California; (C) deprives the Executive of her
titles and positions of Executive Vice President and Chief Operating Officer of
the Company; or (D) involves or results in any failure by the Company to comply
with any provision of this Agreement, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the Executive (each a
"Good Reason"). In the event the Company or the Executive shall exercise the
termination right granted pursuant to this Section 6.2, the Company shall,
within thirty (30) days of notice of termination to or from the Executive (as
the case may be), pay to the Executive in a single lump-sum payment the base
salary that would have been received by the Executive if she had remained
employed by the Company for the remaining balance of the Term. The Company also
shall (i) continue to provide to the Executive and her beneficiaries, at its
sole cost, the insurance coverages referred to in Section 4.1 above, and (ii)
pay to the Executive in a single lump-sum payment the aggregate cost of the
benefits (other than insurance coverages) under Section 4.1 hereof, in each case
to the extent she would have received such insurance coverages and benefits had
she remained employed by the Company for the remaining balance of the Term.
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6.3 Termination for Death or Disability. The Executive's employment
shall terminate automatically upon the Executive's death during the Term. If the
Company determines in good faith that the Disability (as defined below) of the
Executive has occurred during the Term, it shall give written notice to the
Executive of its intention to terminate her employment. In such event, the
Executive's employment with the Company shall terminate effective on the 30th
day after receipt of such notice by the Executive, provided that, within the
thirty (30) days after such receipt, the Executive shall not have returned to
full-time performance of her duties.
For purposes of this Agreement, "Disability" shall mean the
inability of the Executive to perform her duties to the Company on account of
physical or mental illness or incapacity for a period of sixty (60) consecutive
calendar days, or for a period of one hundred eighty (180) calendar days,
whether or not consecutive, during any three hundred sixty-five (365) day
period.
6.4 Termination by Executive. In the event the Executive voluntarily
terminates her employment hereunder other than for Good Reason, the respective
rights and obligations of the parties hereunder shall terminate; provided,
however, that the Company shall immediately pay the Executive any amount due and
owing pursuant to Articles 3, 4, and 5, prorated to the date of termination.
6.5 Anything in this Agreement to the contrary notwithstanding, upon
the Executive's termination under this Article 6, the Company's obligations with
respect to any stock option to purchase shares of the Company's common stock
granted to the Executive shall be determined by the terms and conditions of such
option as set forth in the Executive's written option agreement regarding such
option, which shall be fully consistent with the terms and conditions set forth
in attached Schedule A with respect to the options described therein.
ARTICLE 7
INDEMNIFICATION; INSURANCE
7.1 If the Executive is a party or is threatened to be made a party to
any threatened, pending or completed claim, action, suit or proceeding, or
appeal therefrom, whether civil, criminal, administrative, investigative or
otherwise, because she is or was an officer of the Company, or at the express
request of the Company is or was serving, for purposes reasonably understood by
her to be for the Company, as a director, officer, partner, employee, agent or
trustee (or in any other capacity of an association, corporation, general or
limited partnership, joint venture, trust or other entity), the Company shall
indemnify the Executive against any reasonable expenses (including attorneys'
fees and disbursements), and any judgments, fines and amounts paid in settlement
incurred by her in connection with such claim, action, suit, proceeding or
appeal therefrom to the extent such expenses, judgments, fines and amounts paid
in settlement were not advanced by the Company on her behalf pursuant to
subsection (b) below, to the fullest extent permitted under Delaware law
7.2 Provided that Executive shall first have agreed to in writing to
repay such amounts advanced if it is determined by an arbitrator or court of
competent jurisdiction that the Executive was not entitled to indemnification,
upon the written request of the Executive specifying the amount of a requested
advance and the intended use thereof, the Company shall indemnify Executive for
her expenses (including attorneys' fees and disbursements), judgments, fines and
amounts paid in settlement incurred by her in connection with such claim,
action, suit, proceeding or appeal whether civil, criminal, administrative,
investigative or otherwise,
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in advance of the final disposition of any such claim, action, suit, proceeding
or appeal therefrom to the fullest extent permitted under Delaware law.
ARTICLE 8
RESTRICTIVE COVENANTS
8.1 Covenant Not to Disclose Confidential Information. During the Term
and following termination of this Agreement, the Executive agrees that, without
the Company's prior written consent, she will not use or disclose to any person,
firm, association, partnership, entity or corporation, any confidential
information concerning: (i) the business operations or internal structure of the
Company; (ii) the customers of the Company; (iii) the financial condition of the
Company; and (iv) other confidential information pertaining to the Company,
including without limitation, trade secrets, technical data, marketing analyses
and studies, operating procedures, customer and/or inventor lists, or the
existence or nature of any of the Company's agreements (other than this
Agreement and any other option or compensation related agreements involving the
Executive); provided, however, that the Executive shall be entitled to disclose
such information: (i) to the extent the same shall have otherwise become
publicly available (unless made publicly available by the Executive); (ii)
during the course of or in connection with any actual or potential litigation,
arbitration, or other proceeding based upon or in connection with the subject
matter of this Agreement; (iii) as may be necessary or appropriate to conduct
her duties hereunder, provided the Executive is acting in good faith and in the
best interest of the Company; or (iv) as may be required by law or judicial
process.
8.2 Covenant Not to Compete. The Executive acknowledges that she has
established and will continue to establish favorable relations with the
customers, clients and accounts of the Company and will have access to trade
secrets of the Company. Therefore, in consideration of such relations and to
further protect trade secrets, directly or indirectly, of the Company, the
Executive agrees that during the Term and for a period of one (1) year from the
date of termination of the Executive, the Executive will not, directly or
indirectly, without the express written consent of the Board:
(i) own or have any interest in or act as an officer,
director, partner, principal, employee, agent, representative,
consultant or independent contractor of, or in any way assist in, any
business which is engaged, directly or indirectly, in any business
competitive with the Company in those automotive markets and/or
automotive products lines in which the Company competes within each
county of the State of California and in the United States at any time
during the Term, or become associated with or render services to any
person, firm, corporation or other entity so engaged ("Competitive
Businesses"); provided, however; that the Executive may own without the
express written consent of the Company not more than two (2) percent of
the issued and outstanding securities of any company or enterprise
whose securities are listed on a national securities exchange or
actively traded in the over-the-counter market;
(ii) solicit clients, customers or accounts of the Company
for, on behalf of or otherwise related to any such Competitive
Businesses or any products related thereto; or
(iii) solicit any person who is or shall be in the employ or
service of the Company (or within 12 months of any such solicitation
was in the employ or service of the Company) to leave such employ or
service for employment with the Executive or an affiliate of the
Executive or to become employed with any other business.
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Notwithstanding the foregoing, if any court determines that the covenant not to
compete, or any part thereof, is unenforceable because of the duration of such
provision or the geographic area or scope covered thereby, such court shall have
the power to reduce the duration, area or scope of such provision to the extent
necessary to make the provision enforceable and, in its reduced form, such
provision shall then be enforceable and shall be enforced.
8.3 Specific Performance. Recognizing the irreparable damage will
result to the Company in the event of the breach or threatened breach of any of
the foregoing covenants and assurances by the Executive contained in Sections
8.1 and 8.2 hereof, and that the Company's remedies at law for any such breach
or threatened breach may be inadequate, the Company and its successors and
assigns, in addition to such other remedies which may be available to them,
shall be entitled to an injunction to be issued by any court of competent
jurisdiction ordering compliance with this Agreement or enjoining and
restraining the Executive, and each and every person, firm or company acting in
concert or participation with her, from the continuation of such breach. The
obligations of the Executive and rights of the Company pursuant to this Article
8 shall survive the termination of this Agreement. The covenants and obligations
of the Executive set forth in this Article 9 are in addition to and not in lieu
of or exclusive of any other obligations and duties the Executive owes to the
Company, whether expressed or implied in fact or law.
ARTICLE 9
GENERAL PROVISIONS
9.1 This Agreement and attached schedules (which are incorporated
herein and shall be treated as part hereof) are intended to be the final,
complete and exclusive agreement between the parties relating to the employment
of the Executive by the Company with respect to the Term and all prior or
contemporaneous understandings, representations and statements, oral or written,
are merged herein. Notwithstanding anything to the contrary, the terms and
conditions of any stock option agreements signed by the Executive prior to the
date hereof shall remain in effect. No modification waiver, amendment, discharge
or change of this Agreement shall be valid unless the same is in writing and
signed by the party against which the enforcement thereof is or may be sought.
9.2 No waiver, by conduct or otherwise, by any party of any term,
provision, or condition of this Agreement, shall be deemed or construed as a
further or continuing waiver of any such term, provision, or condition nor as a
waiver of a similar or dissimilar condition or provision at the same time or at
any prior or subsequent time.
9.3 The rights under this Agreement, or by law or equity, shall be
cumulative and may be exercised at any time and from time to time. No failure by
any party to exercise, and no delay in exercising, any rights shall be construed
or deemed to be a waiver thereof, nor shall any single or partial exercise by
any party preclude any other or future exercise thereof or the exercise of any
other right.
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9.4 Except as otherwise provided in this Agreement, any notice,
approval, consent, waiver or other communication required or permitted to be
given or to be served upon any person in connection with this Agreement shall be
in writing. Such notice shall be personally served, sent by telegram, tested
telex, fax or cable, or sent prepaid by either registered or certified mail with
return receipt requested or Federal Express and shall be deemed given (i) if
personally served or by Federal Express, when delivered to the person to whom
such notice is addressed, (ii) if given by telegram, telex, fax or cable, when
sent, or (ii) if given by mail, two (2) business days following deposit in the
United States mail. Any notice given by telegram, telex, fax or cable shall be
confirmed in writing by overnight mail or Federal Express within forty-eight
(48) hours after being sent. Such notices shall be addressed to the party to
whom such notice is to be given at the party's address set forth below or as
such party shall otherwise direct.
If to the Company: xxxxxxxxx.xxx inc.
00000 XxxXxxxxx Xxxxxxxxx
Xxxxxx, Xxxxxxxxxx 00000-0000
Attn: Chief Executive Officer
If to the Executive: Xxx Xxxxx Xxxxxxxxxx
0000 Xxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxx 00000
9.5 The terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the successors and assigns of the parties hereto.
Notwithstanding the foregoing, Executive may not assign her obligations
hereunder.
9.6 This Agreement shall be construed and enforced in accordance with
the laws of the State of California, without giving effect to the principles of
conflict of laws thereof, except that the indemnification provisions of Section
8.2 shall be governed by Delaware law without regard to conflict of laws
principles.
9.7 This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original, but all of which shall constitute one
instrument.
9.8 The provisions of this Agreement are agreed to be severable, and if
any provision, or application thereof, is held invalid or unenforceable, then
such holding shall not effect any other provision or application.
9.9 As used herein, and as the circumstances require, the plural term
shall include the singular, the singular shall include the plural, the neuter
term shall include the masculine and feminine genders, and the masculine term
shall include the neuter and the feminine genders.
9.10 Any controversy or claim arising out of, or related to, this
Agreement, or the breach thereof, shall be settled by binding arbitration in the
City of Irvine, California, in accordance with the rules then in effect of the
American Arbitration Association, and the arbitrator's decision shall be binding
and final, and judgment upon the award rendered may be entered in any court
having jurisdiction thereof. Each party hereto shall pay its or their own
expenses incident to the negotiation, preparation and resolution of any
controversy or claim arising out of, or related to, this Agreement, or the
breach thereof, provided, however, the Company shall pay and be solely
responsible for any attorneys' fees and expenses and court or arbitration costs
incurred by the Executive as a result of a claim that the Company has breached
or otherwise
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failed to perform this Agreement or any provision hereof to be performed by the
Company if the Executive prevails in the contest in whole or in part.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
xxxxxxxxx.xxx inc.
By /s/ Xxxx X. Xxxxxxx
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Xxxx X. Xxxxxxx
President
Chief Executive Officer
Executive
/s/ Xxx Xxxxx Xxxxxxxxxx
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Xxx Xxxxx Xxxxxxxxxx
[Remainder of page intentionally left blank]
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SCHEDULE A
As further consideration for the services rendered by the Executive
during the Term, the Executive shall be granted Options on the terms and
conditions set forth below, effective as of December 17, 1998. Each such Option
shall be effective upon such grant effective date.
1. Regular 1998 Options. The Executive shall be granted Options to
purchase one hundred thousand (100,000) shares of the Company's common stock
(the "Regular 1998 Options") under the Company's 1998 Stock Option Plan. The
Regular 1998 Options shall have a ten (10) year term (the " Regular 1998 Option
Term") of exercise and, except as otherwise provided herein, shall remain
exercisable following vesting for the full term. The exercise price of an Option
granted as a Regular 1998 Option shall be equal to the fair market value per
share of the Company's common stock (as determined by the Company) as of the
date such Option is granted.
(a) Vesting. The Regular 1998 Options shall vest based on the continued
employment of the Executive in equal installments of fifty (50) percent of the
number of subject shares on each of December 17, 1999 and December 17, 2000.
(b) Payment Upon Exercise. Payment for the shares subject to any
Regular 1998 Option may be tendered in cash or by certified, bank cashier's or
teller's check or by shares of the Company's common stock (valued at fair market
value (as determined by the Company) as of the date of tender) already owned by
the Executive, or some combination of the foregoing or such other form of
consideration which has been approved by the Board, including any approved
cashless exercise mechanism or a promissory note given by the Executive.
(c) Termination for Cause. As of the date of the Executive's
termination for Cause under Section 6.1 of this Agreement, any unvested or
unexercised portion of the Regular 1998 Options shall terminate immediately and
shall be of no further force or effect.
(d) Termination Without Cause or for Good Reason. As of the date of the
Executive's termination by the Company without Cause or by the Executive for
Good Reason under Section 6.2 of this Agreement, any unvested portion of the
Regular 1998 Options shall become immediately and fully vested and exercisable
from such termination of employment until the date that is two (2) years
following the termination date.
(e) Termination due to Death or Disability. As of the date of the
Executive's termination due to death or Disability under Section 6.3 of this
Agreement, any unvested portion of the Regular 1998 Options shall become
immediately and fully vested and exercisable. Any previously vested but
unexercised Regular 1998 Options shall remain exercisable from the date of such
termination of employment until the end of the Regular 1998 Option Term or, if
earlier, the date that is two (2) years following the termination date.
(f) Termination Without Good Reason. As of the date of any voluntary
termination of employment with the Company by the Executive other than due to
death or Disability, and other than for Good Reason, any unvested portion of the
Regular 1998 Options shall terminate immediately and shall be of no further
force or effect. Any previously vested but unexercised Regular 1998 Options
shall remain exercisable from the date of such termination of employment until
the end of the Regular 1998 Option Term or, if earlier, the date that is one (1)
year following the termination date.
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(g) Termination Prior to or Following a Change of Control. In the event
of a Change of Control while the Executive is employed by the Company, or the
Executive's employment is terminated by the Company without Cause or by the
Executive for Good Reason within six (6) months prior to a Change of Control
during the Term, any unvested installment of the Regular 1998 Options shall
immediately vest and become exercisable from the date of such Change of Control,
or if earlier the date of termination, until the date that is two (2) years
following (i) the Change of Control date, or (ii) if earlier the date of
termination. For purposes of this Agreement "Change of Control" means the
occurrence of any of the following: (i) the sale, lease, transfer, conveyance or
other disposition (other than by way of merger or consolidation but not
including any initial or secondary public offering) in one or a series of
related transactions of all or substantially all of the assets of the Company
taken as a whole to any person (a "Person") or group of persons acting together
(a "Group") (other than any of the Company's wholly-owned subsidiaries, any
Company employee pension or benefits plan, or any person or entity owning at
least five (5) percent of the common stock of the Company as of October 1,
1998), (ii) the adoption of a plan relating to the liquidation or dissolution of
the Company, (iii) the consummation of any transactions (including any stock or
other purchase, sale, acquisition, disposition, merger or consolidation, but not
including any initial or secondary public offering) the result of which is that
any Person or Group (other than any of the Company's wholly-owned subsidiaries,
any Company employee pension or benefits plan, or any person or entity owning at
least five (5) percent of the common stock of the Company as of October 1,
1998), becomes the beneficial owners of more than 40 percent of the aggregate
voting power of all classes of stock of the Company having the right to elect
directors under ordinary circumstances; or (iv) the first day on which a
majority of the members of the Board are not individuals who were nominated for
election or elected to the Board with the approval of two-thirds of the members
of the Board just prior to the time of such nomination or election.
2. 1998 Performance Options. The Executive also shall be granted
Options to purchase two hundred thousand (200,000) shares of the Company's
common stock (the "1998 Performance Options") under the Company's 1998 Stock
Option Plan. The 1998 Performance Options shall vest in six (6) installments
with thirty thousand (30,000) shares subject to each of the first and second
installments and thirty-five thousand (35,000) shares subject to each of the
third, fourth, fifth and sixth installments. The 1998 Performance Options shall
have a ten (10) year term (the "1998 Performance Option Term") of exercise and,
except as otherwise provided herein shall remain exercisable following vesting
for the full term. The exercise price of an Option granted as a 1998 Performance
Option shall be equal to the fair market value (as determined by the Company)
per share of the Company's common stock as of the date of grant (the "Exercise
Price").
(a) Vesting. Each installment of 1998 Performance Options shall vest
based on the continued employment of the Executive through the seventh
anniversary of the date the installment of 1998 Performance Options vested;
provided, however, that following an effective initial public offering by the
Company (the "IPO") and based on the continued employment of the Executive the
vesting of the 1998 Performance Options shall accelerate as follows:
(i) the first installment will vest immediately and fully upon
the first six (6) month anniversary of the date of grant, or any six
month anniversary of such date thereafter, following the IPO if the
average trading price (as determined by averaging either the closing
price or bid-ask midpoint) of the Company's common stock for the ten
trading days (the "Average Trading Price") preceding any such
anniversary date exceeds the Exercise Price by at least Six Dollars and
Sixty Cents ($6.60);
(ii) the second installment will vest immediately and fully
upon the first one (1) year anniversary of the date of grant, or any
six month anniversary of such date thereafter, following the IPO if the
Average Trading Price preceding any such anniversary date exceeds the
Exercise Price by at least Thirteen Dollars and Twenty Cents ($13.20);
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(iii) the third installment will vest immediately and fully
upon the first eighteen (18) month anniversary of the date of grant, or
any six month anniversary of such date thereafter, following the IPO if
the Average Trading Price preceding any such anniversary date exceeds
the Exercise Price by at least Nineteen Dollars and Eighty Cents
($19.80);
(iv) the fourth installment will vest immediately and fully
upon the first two (2) year anniversary of the date of grant, or any
six month anniversary of such date thereafter, following the IPO if the
Average Trading Price preceding any such anniversary date exceeds the
Exercise Price by at least Twenty-Six Dollars and Forty Cents ($26.40);
(v) the fifth installment will vest immediately and fully upon
the first two and half year anniversary of the date of grant, or any
six month anniversary of such date thereafter, following the IPO if the
Average Trading Price preceding any such anniversary date exceeds the
Exercise Price by at least Thirty-three Dollars ($33.00); and
(vi) the sixth installment will vest immediately and fully
upon the first three (3) year anniversary of the date of grant, or any
six month anniversary of such date thereafter, following the IPO if the
Average Trading Price preceding any such anniversary date exceeds the
Exercise Price by at least Thirty-nine Dollars and Sixty Cents
($39.60).
(b) Payment Upon Exercise. Payment for the shares subject to any 1998
Performance Option may be tendered in cash or by certified, bank cashier's or
teller's check or by shares of the Company's common stock (valued at fair market
value (as determined by the Company) as of the date of tender) already owned by
the Executive, or some combination of the foregoing or such other form of
consideration which has been approved by the Board, including any approved
cashless exercise mechanism or a promissory note given by the Executive.
(c) Termination for Cause. As of the date of the Executive's
termination for Cause under Section 6.1 of this Agreement, any unvested or
unexercised portion of the 1998 Performance Options shall terminate immediately
and shall be of no further force or effect.
(d) Termination Without Cause or for Good Reason. If the Company has
not effected an IPO as of the date of the Executive's termination by the Company
without Cause or by the Executive for Good Reason under Section 6.2 of this
Agreement, any unvested portion of the 1998 Performance Options shall become
immediately and fully vested and exercisable as of the date of such termination.
Any shares subject to the 1998 Performance Options that become vested and
exercisable in accordance with the foregoing and any previously vested but
unexercised 1998 Performance Options shall remain exercisable from the date of
such termination of employment until the date that is one (1) year following the
termination date. If the Company has effected an IPO as of the date of the
Executive's termination by the Company without Cause or by the Executive for
Good Reason under Section 6.2 of this Agreement, any unvested portion of the
1998 Performance Options shall become immediately and fully vested and
exercisable to the extent the stock price targets in Paragraph 2.(a)(i)-(vi)
above are met on the termination date or as of the immediately preceding six (6)
month anniversary of the date of grant, or as of the six (6) month anniversary
of the grant date following such termination. Any shares subject to the 1998
Performance Options that become vested and exercisable in accordance with the
foregoing and any previously vested but unexercised 1998 Performance Options
shall remain exercisable from the date of such termination of employment until
the date that is one (1) year following the termination date, provided, however,
that if the Average Trading Price as of the date of termination exceeds the
Company's IPO initial offering price by at least thirty (30) percent, the vested
and unexercised 1998 Performance Options shall remain exercisable until the date
that is two (2) years following the termination date.
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(e) Due to Death or Disability. If the Company has not effected an IPO
as of the date of the Executive's termination due to death or Disability under
Section 6.3 of this Agreement, as of the date of such termination of the
Executive any unvested portion of the 1998 Performance Options shall become
immediately and fully vested and exercisable. If the Company has effected an IPO
as of such termination date, any unvested portion of the 1998 Performance
Options shall become vested and exercisable to the extent the stock price
targets in Paragraph 2.(a)(i)-(vi) above are met on the termination date or as
of the immediately preceding six (6) month anniversary of the date of grant, or
as of the six (6) month anniversary of the grant date following such
termination. Any shares subject to the 1998 Performance Options that become
vested and exercisable in accordance with the foregoing and any previously
vested but unexercised 1998 Performance Options shall remain exercisable from
the date of such termination of employment until the date that is one (1) year
following the termination date, provided, however, that if the Average Trading
Price as of the date of termination exceeds the Company's IPO initial offering
price by at least thirty (30) percent, the vested and unexercised 1998
Performance Options shall remain exercisable until the date that is two (2)
years following the termination date.
(f) Termination Without Good Reason. Regardless of whether the Company
has or has not effected an IPO as of the date of any voluntary termination of
employment with the Company by the Executive other than due to death or
Disability and other than for Good Reason, as of the date of such termination by
the Executive any unvested portion of the 1998 Performance Options shall
terminate immediately and shall be of no further force or effect. Any previously
vested but unexercised 1998 Performance Options shall remain exercisable from
the date of such termination of employment until the date that is one (1) year
following the termination date, provided, however, that if the Average Trading
Price as of the date of termination exceeds the Company's IPO initial offering
price by at least thirty (30) percent, the vested and unexercised 1998
Performance Options shall remain exercisable until the date that is two (2)
years following the termination date.
(g) Change of Control. In the event of a Change of Control while the
Executive is employed by the Company, or the Executive's employment is
terminated by the Company without Cause or by the Executive for Good Reason
within six (6) months prior to a Change of Control during the Term, any
otherwise unvested installment of the 1998 Performance Options shall immediately
vest and become exercisable to the extent (i) the installment meets the
applicable stock price targets in Paragraph 2.(a)(i)-(vi) above based on the
Average Trading Price at the time of or within six (6) months of the Change of
Control but without regard to any anniversary of the installment's grant date if
the Company has effected an IPO as of the date of the Change of Control; or (ii)
the fair market value (as determined by an independent appraiser designated by
the Company) per share of the Company's common stock exceeds the Exercise Price
of the installment by an amount equal to or greater than the applicable dollar
amount for the installment as set forth in 2.(a)(i)-(vi) above if the Company
has not effected an IPO as of the date of the Change of Control. Any shares
subject to the 1998 Performance Options that become vested and exercisable in
accordance with the foregoing and any previously vested but unexercised 1998
Performance Options shall be at the Executive's option either cashed out based
on a value per share determined in accordance with (i) or (ii) of this clause
(g), as applicable, or remain exercisable from the date of such Change of
Control until the date that is one (1) year following the Change of Control
date, provided, however, that if the Average Trading Price as of the date of the
Change of Control exceeds the Company's IPO initial offering price by at least
thirty (30) percent, the vested and unexercised 1998 Performance Options shall
remain exercisable until the date that is two (2) years following the Change of
Control date.
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