EXHIBIT 10.12
FORM OF RESTRICTED STOCK AGREEMENT
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This Agreement is made as of the ___ day of ____________, 2000, by and
between TELLIUM, INC., a Delaware corporation (the "Company"), having an address
at 0 Xxxxxxxx Xxxxx, Xxxxxxxxx, Xxx Xxxxxx 00000, and the employee of the
Company or a Subsidiary of the Company named on Annex I and who is a signatory
hereto, hereinafter referred to as "Employee".
WHEREAS, the Employee is the holder of the option(s) (the "Option") to
purchase the number of shares of the Company's common stock set forth on Annex
I, and Employee desires to exercise such Option(s) as to the number of shares of
the Company's common stock set forth on Annex I;
WHEREAS, in connection with such exercise, the Company has agreed to make a
loan to the Employee in the amount set forth on Annex I to pay the exercise
price of such Options; and
WHEREAS, it is a condition precedent to the Company's making of such loan
that Employee enter into this Agreement with the Company concerning the rights
and restrictions of the shares issuable upon exercise of the Options;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto, intending to be
legally bound, agree as follows:
I. OWNERSHIP OF SHARES
1.1 Shares. The Employee hereby exercises his Option(s) to purchase from
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the Company the number of shares of the Company's common stock, par value $0.001
per share (the "Shares"), set forth on Annex I, at the exercise price(s) (the
"Per Share Price") set forth on Annex I, for an aggregate consideration (the
"Purchase Price") equal to the amount set forth on Annex I, which Purchase Price
is being paid concurrently herewith in cash in the amount set forth on Annex I
and by delivery of a purchase-money promissory note (the "Note") in the form
attached hereto as Exhibit A, payment of which is being secured by a pledge of
the Purchased Shares under a Stock Pledge Agreement (the "Pledge Agreement")
being delivered herewith in the form attached hereto as Exhibit B. Employee
hereby agrees to deliver to the Secretary of the Company a duly executed blank
Assignment Separate from Certificate (in the form attached hereto as Exhibit C).
The certificates representing the Shares, subject to the Company's Repurchase
Rights under Articles IV hereof, shall be held in escrow by the Secretary of the
Company as provided in Article VI hereof.
1.2 Restricted Securities. Employee hereby confirms that Employee has
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been informed that the Shares are restricted securities under the Securities Act
of 1933, as amended (the "1933 Act") and may not be resold or transferred unless
the Shares are first registered under the federal securities laws or unless an
exemption from such registration is available. Accordingly, Employee hereby
acknowledges that Employee is prepared to hold the Shares for an indefinite
period and that Employee is aware that Rule 144 of the Securities and Exchange
Commission (the "Commission") issued under the 1933 Act is not presently
available to exempt the offer and sale of the Shares from the registration
requirements of the 1933 Act. Employee is aware of the adoption of Rule 144
promulgated under the 1933 Act by the Commission, which permits limited public
resales of securities acquired in a nonpublic offering, subject to the
satisfaction of certain conditions. Employee understands that Rule 144 is
conditioned upon,
among other things: (i) the availability of certain current public information
about the Company, (ii) the resale occurring not earlier than one (1) year after
the party has purchased and paid for the securities to be sold, (iii) the sale
being made through a broker in an unsolicited "broker's transaction", and (iv)
the amount of securities being sold during any three-month period not exceeding
specified limitations. Employee acknowledges and understands that the Company
may not be satisfying the current public information requirement of Rule 144 at
the time Employee wishes to sell the Shares or other conditions under Rule 144
which are required of the Company. If so, Employee understands that he will be
precluded from selling the securities under Rule 144 even if the one-year
holding period of said Rule has been satisfied. Prior to Employee's acquisition
of the Shares, Employee acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the Shares. Employee has
such knowledge and experience in financial and business matters so as to make
him capable of utilizing said information to evaluate the risks of the
prospective investment and to make an informed investment decision. Employee is
able to bear the economic risk of his investment in the Shares.
1.3 Disposition of Shares. Employee hereby agrees that Employee shall
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make no disposition of the Shares (other than a permitted transfer under Section
3.1 hereof) unless and until:
(a) Employee shall have notified the Company of the proposed
disposition and provided a written summary of the terms and conditions of the
proposed disposition; and
(b) Employee shall have complied with all requirements of this
Agreement and the terms and conditions set forth in the Plan, applicable to the
disposition of the Shares.
The Company shall not be required (i) to transfer on its books any Shares
that have been sold or transferred in violation of the provisions of this
Article I or (ii) to treat as the owner of the Shares, or otherwise to accord
voting or dividend rights to, any transferee to whom the Shares have been
transferred in contravention of this Agreement.
1.4 Restrictive Legends. In order to reflect the restrictions on
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disposition of the Shares, the stock certificates representing the Shares will
be endorsed with the following restrictive legends:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED,
SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF (A "TRANSFER")
EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF A RESTRICTED STOCK AGREEMENT DATED
AS OF _____ __, 2000, AS IT MAY BE AMENDED FROM TIME TO TIME. PURSUANT TO SUCH
AGREEMENT, THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
REPURCHASE RIGHTS, RIGHTS OF FIRST REFUSAL, AND MANDATORY SALE OBLIGATIONS
EXERCISABLE BY TELLIUM, INC. AND ANY TRANSFEREE OF THESE SECURITIES TAKES
SUBJECT TO SUCH REPURCHASE RIGHTS, RIGHTS OF FIRST REFUSAL, AND MANDATORY SALE
OBLIGATIONS. COPIES OF THE RESTRICTED STOCK AGREEMENT ARE ON FILE WITH THE
COMPANY.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR STATE SECURITIES LAWS AND NO
TRANSFER OF THESE SECURITIES MAY BE MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT, OR (B) PURSUANT TO
AN EXEMPTION THEREFROM WITH RESPECT TO WHICH THE COMPANY MAY, UPON REQUEST,
REQUIRE A SATISFACTORY OPINION OF COUNSEL FOR THE HOLDER THAT SUCH TRANSFER IS
EXEMPT FROM THE REQUIREMENTS OF THE ACT."
1.5 Definitions. Whenever the following terms are used in this Agreement,
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they shall have the meaning specified below unless the context clearly indicates
to the contrary.
"Board" shall mean the Board of Directors of the Company.
"Cause" shall mean the Employee's conviction of a crime or engagement in an
intentional wrongful act or fraud against the Company or any affiliated entity
or engagement in acts involving moral turpitude or filing a voluntary petition
for, or having a court order filed against him for, personal bankruptcy or
willfully failing to perform his duties as an employee of the Company after
having received written notice from the Board of Directors to do so.
"Committee" shall mean the Compensation Committee of the Board of Directors
of the Company, or another committee of the Board, appointed as provided in the
Company's Plan.
"Disability" shall mean, with respect to the Employee, (i) the suffering of
any mental or physical illness, disability or incapacity that shall in all
material respects preclude the Employee from performing his employment duties or
(ii) the absence of the Employee from his employment (which shall not
necessarily mean absence from the Employee's place of employment) by reason of
any mental or physical illness, disability or incapacity for a period of four
and one-half months during any nine-month period; provided, however, in either
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case, that such illness, disability or incapacity shall be reasonably determined
by the Board to be of a permanent nature based on the foregoing standards.
"Fair Market Value" shall be determined on a per share basis through good
faith negotiations between the Company and the Employee at and as of the time of
the event giving rise to the need to calculate Fair Market Value; provided,
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however, that in the event that the Company has retained a nationally-recognized
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accounting firm, investment bank or valuation expert for the purpose of
determining Fair Market Value for any reason, including pursuant to any other
option agreement, management subscription agreement or similar agreement to
which the Company is a party, and such determination was made as of a date that
is within 180 days prior to the date of the event giving rise to the need to
calculate Fair Market Value, then Fair Market Value shall mean the Fair Market
Value determined by such accounting firm, investment bank as of such date. In
the event that no such accounting firm, investment bank or valuation expert has
made such determination as of such a date and the parties are unable to reach
agreement on such determination, the Board shall appoint an independent
nationally-recognized accounting firm, investment bank or valuation expert (the
"Appraiser") to determine Fair Market Value, whose determination shall be
binding on the parties. At the time of retention of the Appraiser, the Company
shall deliver to the Appraiser and the Employee the Company's determination of
Fair Market Value, which shall be no greater than the amount offered to the
Employee in good faith negotiations (the "Company's Determination"). The fees
and expenses associated with the retention of the Appraiser shall be borne by
the Company in the event that the Fair Market Value determined by the Appraiser
is greater than 105% of the Company's Determination and shall be borne by the
Employee in the event that the Fair Market Value determined by the Appraiser is
equal to or less than 105% of the Company's Determination. In making a
determination of Fair Market Value, any appraiser
shall determine the amount per share that would be received with respect to each
share of the Common Stock to be transferred in a sale of all of the capital
stock of the Company in a single transaction to a third party, without regard to
any transfer or other restrictions on the capital stock and without regard to
the fact that less than all of the outstanding capital stock is being purchased
and sold in the transaction for which Fair Market Value is to be determined, and
no determination shall include the expenses of any appraisal in the calculation
of Fair Market Value.
"Qualified Offering" shall mean a firm commitment underwritten public
offering of shares of the Company's Common Stock under the 1933 Act, which
results in gross proceeds to the Company of not less than $50 million at an
offering price per share (as constituted on the date thereof) of not less than
$22.88 (subject to appropriate adjustment to reflect any stock splits, reverse
splits or similar recapitalizations affecting shares of Common Stock).
"Plan" shall mean the Amended and Restated 1997 Employee Stock Option Plan
of Tellium, Inc., as in effect from time to time.
"Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations other than
the last corporation in the unbroken chain then owns stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one (1) of the other corporations in such chain.
"Termination of Employment" shall mean the time when the employee-employer
relationship between an Employee and the Company or any Subsidiary is terminated
for any reason, with or without Cause, including, but not by way of limitation,
a termination by resignation, discharge, death, Disability or retirement; but
excluding (i) terminations where there is a simultaneous reemployment or
continuing employment of an Employee by the Company or any Subsidiary, (ii) at
the discretion of the Committee, terminations which result in a temporary
severance of the employee-employer relationship, and (iii) at the discretion of
the Committee, terminations which are followed by the simultaneous establishment
of a consulting relationship by the Company or a Subsidiary with the former
employee. The Committee, in its absolute discretion, shall determine the effect
of all matters and questions relating to Termination of Employment, including,
but not by way of limitation, the question of whether a Termination of
Employment resulted from a discharge for Cause, and all questions of whether
particular leaves of absence constitute Terminations of Employment.
Notwithstanding any other provision of this Agreement, the Company or any
Subsidiary has an absolute and unrestricted right to terminate an Employee's
employment at any time for any reason whatsoever, with or without Cause, except
to the extent expressly provided otherwise in writing.
"Vesting Measurement Date" shall mean the date set forth on Annex I as the
Vesting Measurement Date.
"Vesting Schedule" shall mean the Vesting Schedule set forth on Annex I.
II. SPECIAL PROVISIONS
2.1 Stockholder Rights. Subject to any repurchase rights of the Company
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under this Agreement, Employee (or any successor in interest) shall have all the
rights of a stockholder (including voting and dividend rights) with respect to
the Shares, including the Shares held in escrow under Article VI, but subject,
however, to the transfer restrictions of Article III.
2.2 Section 83(b) Election. Employee understands that under Section 83 of
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the Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder (the "Code"), upon the lapse of any forfeiture
restrictions applicable to the Shares, Employee must include as compensation
income the difference between the Purchase Price paid for the Shares and their
Fair Market Value on the date on which any such forfeiture restrictions
applicable to such Shares lapse. For this purpose, the term "forfeiture
restrictions" includes the right of the Company to repurchase the Shares
pursuant to its restrictions on transferability and Repurchase Rights under
Articles IV and V of this Agreement. Employee understands that he shall, at the
time of the execution and delivery of this Agreement, be required to elect to
include as compensation income an amount equal to the difference (if any)
between the Purchase Price paid for the Shares and the Fair Market Value of the
Shares at the time the Shares are acquired hereunder rather than when and as
such Shares cease to be subject to such forfeiture restrictions, by filing an
election under Section 83(b) of the Code, substantially in the form of Exhibit D
hereto, with the Internal Revenue Service (the "I.R.S.") within thirty (30) days
after the date of purchase of the Shares hereunder. If the Fair Market Value of
the Shares at the date of purchase does not exceed the Purchase Price paid (and
thus no amount must be included as compensation income), the election may avoid
potential adverse tax consequences in the future.
2.3 Market Stand-Off.
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(a) In connection with any underwritten public offering by the Company
of its equity securities pursuant to an effective registration statement filed
under the 1933 Act, including the Company's initial public offering, Employee
shall not sell, assign, make any short sale of, loan, hypothecate, pledge, grant
any option for the purchase of or otherwise dispose or transfer for value or
otherwise agree to engage in any of the foregoing transactions with respect to
any Shares without the prior written consent of the Company or its lead
underwriter a party to an underwriting agreement between (or among) the Company
and such underwriter(s) for such period of time from and after the effective
date of such registration statement as may be requested by the Company or such
underwriters; provided, however, that in no event shall such period exceed one
hundred eighty (180) days. This Section 2.3 shall only remain in effect for the
one (1) year period immediately following the effective date of the Company's
initial public offering and shall thereafter terminate and cease to be in force
or effect.
(b) In the event of any stock dividend, stock split, recapitalization,
or other change affecting the Company's outstanding Common Stock effected
without receipt of consideration, then any new, substituted, or additional
securities distributed with respect to the Shares shall be immediately subject
to the provisions of this Section 2.3, to the same extent the Shares are at such
time covered by such provisions.
2.4 Stop Transfer. In order to enforce the provisions of Section 2.3, the
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Company may impose stop-transfer instructions with respect to the Shares until
the end of the applicable stand-off period.
III. TRANSFER RESTRICTIONS
3.1 Restrictions on Transfer of Shares; Right of First Refusal. Employee
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shall not transfer, assign, encumber, or otherwise dispose of all or any part of
the Unvested Shares (as defined below), other than to the Company pursuant to
the Pledge Agreement. Such restrictions on transfer, however, shall not be
applicable provided the Employee receives from the Company, its prior written
consent to Transfers (as defined below) of the type described in Section 3.1(c)
below. In addition, Employee shall not transfer, assign, encumber, or otherwise
dispose of all or any part of the Vested Shares (as defined below), except in
compliance with the provisions of Sections 3.1(a) through (g) below.
(a) Except for Transfers otherwise permitted by Section 3.1(c) below, the
Employee agrees that he will not transfer, sell, assign, pledge, hypothecate or
otherwise dispose of (each, a "Transfer") any Shares in which he has vested in
accordance with the vesting provisions of Section 4.3 below ("Vested Shares") at
any time without complying with the right of first refusal set forth in Section
3.1(b) below.
(b) If at any time the Employee receives a bona fide offer ("Offer") to
purchase any or all of his Vested Shares from a third party (the "Offeror")
which the Employee wishes to accept, the Employee shall cause the Offer to be
reduced to writing and shall notify the Company in writing of his wish to accept
the Offer. The Employee's notice shall contain an irrevocable offer to sell
such Vested Shares to the Company (in the manner set forth below) at a purchase
price equal to the price contained in, and on the same terms and conditions of,
the Offer, and shall be accompanied by a true copy of the Offer (which shall
identify the Offeror). At any time within 30 days after the date of the receipt
by the Company of the Employee's notice, the Company shall have the right and
option to purchase all, but not less than all, of the Vested Shares covered by
the Offer either (i) at the same price and on the same terms and conditions as
the Offer or (ii) if the Offer includes any consideration other than cash, then,
at the sole option of the Company, at the all-equivalent cash price, determined
in good faith by the Board, by delivering a check or checks in the appropriate
amount to the Employee against delivery of certificates or instruments
representing the Vested Shares so purchased, appropriately endorsed by the
Employee; provided that the price to be paid as described above shall be paid
first by reducing the amount of any indebtedness due from the Employee to the
Company or any of its Subsidiaries. The Company may also elect (but shall have
no obligation) to cause its designee to purchase Vested Shares covered by the
Offer. Subject to Section 5.2 hereof, if at the end of such 30-day period the
Company has not tendered the purchase price for such Vested Shares in the manner
set forth above, the Employee may during the succeeding 30-day period sell not
less than all of the Vested Shares covered by the Offer to the Offeror on terms
no less favorable to the Employee than those contained in the Offer. No sale
may be made to any Offeror unless the Offeror agrees in writing with the Company
to be bound by the provisions of this Section 3.1. Promptly after such sale,
the Employee shall notify the Company of the consummation thereof and shall
furnish such evidence of the completion and time of completion of such sale and
of the terms thereof as may reasonably be requested by the Company. If, at the
end of 30 days following the expiration of the 30-day period during which the
Company may purchase the Vested Shares, the Employee has not completed the sale
of such Vested Shares as aforesaid, all the restrictions on Transfer contained
in this Agreement in effect at that time shall again be in effect with respect
to such Vested Shares.
(c) The provisions of Sections 3.1(a) and 3.1(b) shall not apply to the
following Transfers of Vested Shares:
(i) a Transfer made by the Employee to the Company; and
(ii) a Transfer made to any of the following "Permitted Transferees":
(1) upon the death of the Employee to his executors,
administrators, testamentary trustees, legatees or beneficiaries (the
"Employee's Estate") or a Transfer to the executors, administrators,
testamentary trustees, legatees or beneficiaries of a person who has
become a holder of Shares in accordance with the terms of this
Agreement;
(2) a Transfer made to a trust or custodianship the beneficiaries
of which include only the Employee, his spouse, his life partner, his
descendants, including adopted children, his ancestors, his siblings,
and spouses and life partners of his descendants, ancestors and
siblings (an "Employee's Trust"); or
(3) a Transfer made to a partnership, limited liability company,
corporation or other entity all of the owners of which are included in
subparagraph 2 above (an "Employee's Entity");
(4) a Transfer to the Employee's spouse, his life partner, his
descendants, including adopted children, his ancestors, his siblings,
spouses and life partners of his descendants, ancestors and siblings,
and persons with whom Employee has had a significant pre-existing
business or personal relationship;
(5) a Transfer to an organization which is exempt from federal
income taxation under Section 501(c)(3) of the Code;
(d) No Transfer of Shares, whether or not permitted by Sections 3.1(a),
3.1(b), or 3.1(c) hereof, shall be made or recorded on the books of the Company,
and any such Transfer shall be void and of no effect, unless:
(i) Such Transfer of the Shares is made pursuant to an effective
registration statement under the 1933 Act, or pursuant to an exemption
therefrom with respect to which the Company may, upon request, require a
satisfactory opinion of counsel retained by the Employee (which counsel
shall be acceptable to the Company) to the effect that such Transfer is
exempt from the provisions of Section 5 of the 1933 Act; and
(ii) The transferee of the Shares agrees to be bound by, and executes
a counterpart to, an agreement with the Company with terms substantially
similar to the terms set forth in this Section 3.1 and in Section 3.2.
(e) Immediately prior to any Transfer of Shares to an Employee's Trust or
an Employee's Entity, the Employee shall provide the Company with a copy of the
instruments creating the Employee's Trust with the identity of the
beneficiaries, partners, members or shareholders of the Employee's Trust or
Employee's Entity, as the case may be. The Employee shall notify the Company
prior to any change in
the identity of any beneficiary, partner, member or shareholder of the
Employee's Trust or Employee's Entity, as the case may be.
(f) No Transfer of Shares in violation of this Agreement shall be made or
recorded on the books of the Company and any such Transfer shall be void and of
no effect.
(g) The restrictions on Transfer set forth in Sections 3.1(a), (b), (c)
and (e) shall terminate upon a Qualified Offering by the Company.
3.2 Transferee Obligations. Each person (other than the Company) to whom
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the Shares are transferred by means of one of the permitted transfers specified
in Section 3.1(c) above shall, as a condition precedent to the validity of such
transfer, agree in writing to the Company to be bound by the terms and
provisions of this Agreement and acknowledge that any Shares which are
transferred pursuant to Section 3.1 hereof shall be subject to (i) the
restrictions on transfer contained in Section 3.1, (ii) the market stand-off
provisions of Section 2.3 above, and (iii) the Company's Vested Share Repurchase
Right pursuant to Article V hereof or otherwise, to the same extent as if such
Shares continued to be owned by the Employee.
3.3 Definition of Owner. For purposes of Articles IV and V of this
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Agreement, the term "Owner" shall include the Employee and all subsequent
holders of the Shares who own such Shares pursuant to a permitted transfer from
the Employee in accordance with Section 3.1 above or who otherwise derive their
ownership through a permitted transfer from Employee.
IV. UNVESTED SHARE REPURCHASE RIGHT
4.1 Grant. (a) Employee hereby grants the Company the right (the
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"Unvested Share Repurchase Right") to repurchase at a per share price equal to
the Per Share Price plus interest on the Per Share Price accruing at the
interest rate set forth in the Note from the date of purchase of the Unvested
Shares by Employee to the date of repurchase of the Unvested Shares by the
Company, all or (at the discretion of the Company and with the consent of the
Employee) any portion of the Shares in which the Employee has not acquired a
vested interest in accordance with the vesting provisions of Section 4.3 (such
shares to be herein called the "Unvested Shares"), which Unvested Share
Repurchase Right shall be exercisable at any time during the one year period
following the date of any of the following (each a "Repurchase Event"):
(i) the date of Termination of Employment of the Employee; or
(ii) except to the extent permitted hereby, the date on which
any or all of the Unvested Shares or any right or privilege relating
thereto is purported to be transferred (otherwise than by will or the laws
of descent and distribution), assigned, pledged, hypothecated, attached or
otherwise disposed of by the Employee.
(b) Anything contained herein to the contrary notwithstanding, the
Unvested Share Repurchase Right shall not be affected by any change of duties or
position of the Employee (including a transfer to or from the Company or one of
its Subsidiaries), so long as the Employee continues to be an officer or
employee of the Company or one of its Subsidiaries.
4.2 Exercise of the Unvested Share Repurchase Right. The Unvested Share
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Repurchase Right shall be exercisable by written notice delivered to the Owner
of the Unvested Shares prior to the expiration of the applicable one year period
specified in Section 4.1. The notice shall indicate the number of Unvested
Shares to be repurchased and the date on which the repurchase is to be effected,
such date to be not more than thirty (30) days after the date of notice. To the
extent one or more certificates representing Unvested Shares may have been
previously delivered out of escrow to the Owner, then the Owner shall, prior to
the close of business on the date specified for the repurchase, deliver to the
Secretary of the Company the certificates representing the Unvested Shares to be
repurchased, each certificate to be properly endorsed for transfer. The payment
of the amount of the appropriate repurchase price shall, concurrently with the
receipt of such stock certificates (either from escrow in accordance with
Section 6.3 or from Owner as herein provided), be paid first by reducing such
amount by the amount of any indebtedness and accrued interest thereon due from
the Owner to the Company and then the remainder shall be paid by delivery to the
Owner of a certified check payable to the Owner. In respect to any purchase of
Unvested Shares pursuant to this Section 4.2, the Company may elect (but shall
have no obligation) to cause its designee to purchase such Unvested Shares.
4.3 Termination of the Unvested Share Repurchase Right. The Unvested
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Share Repurchase Right shall terminate, and cease to be exercisable, with
respect to the Unvested Shares as described in subsections (a) and (b) of this
Section 4.3.
(a) The Unvested Share Repurchase Right shall terminate, and cease to
be exercisable, with respect to any Unvested Shares for which it is not timely
exercised under Section 4.2.
(b) The Unvested Share Repurchase Right shall terminate, and cease to
be exercisable, with respect to the Unvested Shares (the "Time Vested Shares")
in which the Employee vests in accordance with the Vesting Schedule set forth on
Annex I. Accordingly, provided no Repurchase Events or Corporate Transactions
shall have taken place, the Employee shall acquire a vested interest in, and the
Unvested Share Repurchase Right provided in Section 4.1 shall lapse with respect
to, the Time Vested Shares in accordance with such Vesting Schedule.
(c) All Time Vested Shares shall, however, continue to be subject to
the market stand-off provisions of Section 2.3 above and the Company's Vested
Share Repurchase Right pursuant to Article V hereof.
(d) The provisions of Section 4.3(b) above shall cease to apply to any
Unvested Shares that have not yet vested upon the occurrence of a Repurchase
Event described in Section 4.1 above.
4.4 Additional Shares or Substituted Securities. In the event of any
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stock dividend, stock split, recapitalization or other change affecting the
Company's outstanding Common Stock as a class effected without receipt of
consideration, any new, substituted or additional securities or other property
(including money paid other than as a regular cash dividend) which is by reason
of any such transaction distributed with respect to the Shares shall be
immediately subject to the Unvested Share Repurchase Right, but only to the
extent the Shares are at the time covered by such right. Appropriate
adjustments to reflect the distribution of such securities or property shall be
made to the number of Shares hereunder
and to the price per share to be paid upon the exercise of the Unvested Share
Repurchase Right in order to reflect the effect of any such transaction upon the
Company's capital structure; provided, however, that the aggregate Purchase
Price shall remain the same.
4.5 Corporate Transaction. Upon the occurrence of an event described in
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clause (i) below, the Unvested Share Repurchase Right shall lapse with respect
to 50% of the then-Unvested Shares. Upon the occurrence of an event described
in clause (ii) below following a Corporate Transaction, the Unvested Share
Repurchase Right shall lapse with respect to the remaining 50% of the Unvested
Shares.
(i) (A) A sale or acquisition of beneficial ownership of equity
securities of the Company constituting 50% or more of the total voting
power of the Company's shareholders to or by a party or group of related
parties (other than the Company or a person that directly or indirectly
controls, is controlled by, or is under common control with the Company) in
a transaction or series of related transactions, (B) a merger or
consolidation of the Company with or into another entity in connection with
which the holders of equity securities of the Company prior to such
transaction possess less than 50% of the total voting power of the
surviving company after such transaction, (C) a complete liquidation or
dissolution of the Company, (D) a sale of all or substantially all of the
assets of the Company or (E) a change in the composition of the Board over
a period of thirty-six (36) consecutive months (or less) such that a
majority of the Board members (rounded up to the nearest whole number)
ceases, by reason of one or more proxy contests for the election of Board
members, to be comprised of individuals who either (x) have been Board
members continuously since the beginning of such period or (y) have been
elected or nominated for election as Board members during such period by at
least a majority of the Board members described in clause (x) who were
still in office at the time such election or nomination was approved by the
Board or by persons who were nominated by such Board members (any of the
events in clauses (A) through (E), a "Corporate Transaction").
(ii) (A) A meaningful alteration, adverse to the Employee, in the
nature or status of his responsibilities or in his position with the
Company from those in effect immediately prior to the Corporate
Transaction; (B) a requirement by the Company, after the occurrence of the
Corporate Transaction, that the Employee perform his responsibilities for
the Company at a location which is more than sixty miles from the location
of his employment at the time of the Corporate Transaction; or (C) the
Company breaches any material term of this Agreement and fails to cure such
breach within 30 days after the receipt of written notice from the Employee
of such breach, which notice shall state in reasonable detail the facts and
circumstances claimed to be a breach and of the intent of the Employee to
terminate his employment upon the failure of the Company to cure such
breach.
The Company shall assign this Agreement and its rights, together with its
obligations, hereunder in connection with a Corporate Transaction.
4.6 Certain Additional Payments by the Company.
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(a) Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that as a result
of the acceleration of the vesting of 50% of the then-Unvested Shares (the
"Accelerated Shares") pursuant to Section 4.5 above upon the
occurrence of a Corporate Transaction, the Employee would be required to pay an
Excise Tax with respect to the Accelerated Shares, then the Employee shall be
entitled to receive an additional payment (a "Gross-Up Payment") in an amount
such that after payment by the Employee of all taxes (including any interest or
penalties imposed with respect to such taxes), including without limitation any
income taxes (and any interest and penalties imposed with respect thereto) and
Excise Tax imposed upon the Gross-Up Payment, the Employee retains an amount of
the Gross-Up Payment equal to the amount of the Excise Tax attributable to the
Accelerated Shares.
(b) Subject to the provisions of Section 4.6(c), all determinations
required to be made under this Section 4.6, including whether and when a Gross-
Up Payment is required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determination, shall be made by
Deloitte & Touche or such other nationally recognized certified public
accounting firm as may be designated by the Company (the "Accounting Firm")
which shall provide detailed supporting calculations both to the Company and the
Employee within 15 business days of the receipt of notice from the Employee that
he has received Accelerated Shares, or such earlier time as is requested by the
Company. Any determination by the Accounting Firm shall be binding upon the
Company and the Employee. As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments which will not
have been made by the Company should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the event that the
Company exhausts its remedies pursuant to Section 4.6(c) and the Employee
thereafter is required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Employee.
(c) The Employee shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than ten business days after the Employee is
informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The
Employee shall not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Employee in writing prior to the
expiration of such period that it desires to contest such claim, the Employee
shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to time,
including without limitation, accepting legal representation with respect
to such claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings related
to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Employee 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 representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 4.6(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Employee to pay the tax claimed and xxx for a refund or contest the
claim in any permissible manner, and the Employee agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Employee to pay
such claim and xxx for a refund, the Company shall advance the amount of such
payment to the Employee, on an interest-free basis and shall indemnify and hold
the Employee harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Employee with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount.
(d) If, after the receipt by the Employee of a Gross-Up Payment or an
amount advanced by the Company pursuant to Section 4.6(c), the Employee becomes
entitled to receive any refund with respect thereto, the Employee shall promptly
pay to the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto).
(e) Notwithstanding any other provision of this Section, the Company
may withhold and pay over to the Internal Revenue Service for the benefit of the
Employee all or any portion of the Gross-Up Payment that it determines in good
faith that it is or may be in the future required to withhold, and the Employee
hereby consents to such withholding.
(f) For purposes of this Section 4.6, the portion of the Excise Tax
attributable or applicable to the Accelerated Shares shall be deemed to be equal
to the product of (i) the aggregate Excise Tax payable in connection with the
relevant Corporate Transaction times (ii) a fraction, the numerator of which is
the "parachute payment" attributable to the Accelerated Shares under Section
280G(b)(2) of the Code and the denominator of which is the aggregate amount of
all payments that constitute "parachute payments" under Section 280G(b)(2) of
the Code with respect to such Corporate Transaction, as determined in each case
by the Accounting Firm.
(g) Definitions. For purposes of this Section 4.6, the term "Excise
-----------
Tax" shall mean the excise tax imposed by Section 4999 of the Code, together
with any interest or penalties imposed with respect to such excise tax.
V. VESTED SHARE REPURCHASE RIGHT
5.1 Vested Share Repurchase Right. Employee hereby grants the Company the
-----------------------------
right (the "Vested Share Repurchase Right", and together with the Unvested Share
Repurchase Right, the "Repurchase Rights") to repurchase at a per share price
equal to the Fair Market Value all or (at the discretion of the Company and with
the consent of the Employee) any portion of the Vested Shares, if (i) the
Employee's employment with the Company is or could be terminated by the Company
for Cause or (ii) the Employee shall purport to transfer any Vested Shares other
than as permitted in this Agreement. The Company shall have a period of one
year from the date of the event giving rise to the Company's Vested Share
Repurchase Right in which to give notice in writing to the Owner (the "Call
Notice") of the exercise of such Vested Share Repurchase Right.
(a) Subject to Section 5.2 below, the completion of the purchase
of Vested Shares shall take place at the principal office of the Company on
the tenth business day following the receipt by the Owner of a Call Notice.
The payment of the amount of the appropriate repurchase price shall be paid
first by reducing such amount by the amount of any indebtedness and accrued
interest thereon due from the Owner to the Company and then the remainder
shall be paid by delivery to the Owner of a certified check payable to the
Owner against delivery of certificates or other instruments representing
the Vested Shares, appropriately endorsed or executed by the Owner or the
duly authorized representative of the Employee's Trust, the Employee's
Entity or the Employee's Estate. On any purchase of Vested Shares pursuant
to this Section 5.1, the Company may elect (but shall have no obligation)
to cause its designee to purchase Shares covered by the Call Notice.
(b) The Company's Vested Share Repurchase Right as set forth in
this Section 5.1 shall terminate upon a Qualified Offering.
5.2 Continued Exercisability of the Company's Right to Exercise Right of
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First Refusal, Unvested Share Repurchase Right or Vested Share Repurchase Right;
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Right to Designate Purchaser; Legend. Notwithstanding anything to the contrary
------------------------------------
contained in Section 3.1, 4.1 or 5.1, if at the time of the exercise of the
right of the Company (i) to purchase Shares from the Owner pursuant to the
Company's right of first refusal set forth in Section 3.1(c) or (ii) to purchase
Shares from the Owner pursuant to Sections 4.1 or 5.1 (the "Time of Exercise"),
there exists and is continuing a default or an event of default on the part of
the Company or any subsidiary or such repurchase would result in a default or an
event of default on the part of the Company or any subsidiary under any loan or
other agreement, or if the repurchase would not be permitted under Section 170
of the Delaware General Corporation Law (the "DGCL") or would otherwise violate
the DGCL or any other applicable law or agreement to which the Company or any
subsidiary is a party (collectively, an "Event"), then the Company shall take
possession of the Shares to be repurchased and such Shares shall be suspended .
Payment for such shares shall be deferred until the first business day that it
may occur without any such Event existing or resulting. Interest shall accrue
upon the amount of such payment then outstanding at the rate of 6% per annum
from the Time of Exercise until payment in full is made. Such accrued interest
shall be paid to the Owner at the same time as, and on the same terms and
conditions as apply to, the deferred payment referred to above. If at any time
consummation of all purchases and payments to be made by the Company pursuant to
this Agreement or stock subscription or similar agreements would result in an
Event, then the Company shall make purchases from, and payments to, the Owner
and other
shareholders pro rata for the maximum repurchase amount which would be permitted
without resulting in an Event; provided, however, that the provisions of the
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first sentence of this Section 5.2 shall apply in respect of all Shares not
purchased. The Company may also elect (but shall have no obligation) to cause
its designee to purchase Shares covered by the Call Notice or Offer, as
applicable.
VI. ESCROW
6.1 Deposit. Upon issuance, the certificates for the Shares shall be
-------
deposited in escrow with the Secretary of the Company to be held in accordance
with the provisions of this Article VI. Each deposited certificate shall be
accompanied by a duly executed Assignment Separate from Certificate in the form
of Exhibit C. The deposited certificates, together with any other assets or
securities from time to time deposited with the Company pursuant to the
requirements of this Agreement, shall remain in escrow until such time or times
as the certificates (or other assets and securities) are to be released or
otherwise surrendered for cancellation in accordance with Section 6.3 below.
Upon delivery of the certificates (or other assets and securities) to the
Company, the Owner shall be issued an instrument of deposit acknowledging the
number of Shares (or other assets and securities) delivered in escrow to the
Secretary of the Company.
6.2 Recapitalization. All regular cash dividends on the Shares (or
----------------
regular cash dividends on any other securities at the time held in escrow) shall
be paid directly to the Owner and shall not be held in escrow. However, in the
event of any stock dividend, stock split, recapitalization or other change
affecting the Company's outstanding Common Stock as a class effected without
receipt of consideration or in the event of a Corporate Transaction, any new,
substituted or additional securities or other property which is by reason of
such transaction distributed with respect to the Shares shall be immediately
delivered to the Secretary of the Company to be held in escrow under this
Article VI, but only to the extent the Shares are at the time subject to the
escrow requirements of Section 6.1 above.
6.3 Release/Surrender. The Shares, together with any other assets or
-----------------
securities held in escrow hereunder, shall be subject to the following terms and
conditions relating to their release from escrow or their surrender to the
Company for repurchase and cancellation:
(a) Should the Company elect to exercise the Unvested Share Repurchase
Right under Article IV hereof with respect to any Unvested Shares, then the
escrowed certificates for such Unvested Shares (together with any other assets
or securities issued with respect thereto) shall be delivered to the Company for
cancellation, concurrently with the payment to the Owner, in cash or cash
equivalent (including the cancellation of any purchase-money indebtedness), of
an amount equal to the aggregate Purchase Price for such Unvested Shares, and
the Owner shall cease to have any further rights or claims with respect to such
Unvested Shares (or other assets or securities).
(b) As the interest of the Owner in the Shares (or any other assets or
securities issued with respect thereto) vests in accordance with the provisions
of Article IV hereof, the certificates for such vested shares (as well as all
other vested assets and securities) shall be released from escrow and delivered
to the Owner in accordance with the following schedule:
(i) Releases of the Time Vested Shares (or other vested assets and
securities) shall occur promptly after such shares vest in accordance with
the Vesting Schedule.
(ii) Upon any earlier termination of the Company's Unvested Share
Repurchase Right in accordance with the applicable provisions of Article IV
hereof, the Shares (or other assets or securities) at the time vested in
Owner and held in escrow hereunder shall promptly be released to the Owner
as fully vested shares (or other property).
(c) Notwithstanding anything to the contrary contained in this
Section 6.3, all Shares (or other assets or securities) released from escrow in
accordance with the provisions of Section 6.3(b) hereof shall nevertheless
remain subject to the market stand-off provisions of Section 2.3 above until
such provisions terminate in accordance therewith.
VII. GENERAL PROVISIONS
7.1 Assignment. The Company may assign its Repurchase Rights under
----------
Articles IV and V to any person or entity selected by the Company's Board of
Directors, including (without limitation) one or more stockholders, officers or
directors of the Company.
7.2 No Employment or Service Contract. Nothing in this Agreement shall
---------------------------------
confer upon the Employee any right to continue in the service of the Company (or
any subsidiary corporation of the Company employing or retaining Employee) for
any period of time or interfere with or restrict in any way the rights of the
Company (or any subsidiary corporation of the Company employing or retaining
Employee) or the Employee, which rights are hereby expressly reserved by each,
to terminate the employee status of Employee at any time for any reason
whatsoever, with or without Cause, subject to the provisions of any employment
agreement between the Company and the Employee.
7.3 Notices. Any notice required in connection with (i) the Repurchase
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Rights or (ii) the disposition of any Shares covered thereby shall be given in
writing and shall be deemed effective upon personal delivery or upon deposit in
the United States mail, registered or certified, postage prepaid and addressed
to the party entitled to such notice at the address indicated above or at such
other address as such party may designate by ten (10) days' advance written
notice under this Section 7.3 to all other parties to this Agreement.
7.4 No Waiver. The failure of the Company (or its assignees) in any
---------
instance to exercise the Repurchase Rights granted under Articles IV or V hereof
shall not constitute a waiver of any other repurchase rights and/or rights of
first refusal that may subsequently arise under the provisions of this Agreement
or any other agreement between the Company and the Employee. No waiver of any
breach or condition of this Agreement shall be deemed to be a waiver of any
other or subsequent breach or condition, whether of like or different nature.
7.5 Cancellation of Shares. If the Company (or its assignees) shall make
----------------------
available, at the time and place and in the amount and form provided in this
Agreement, the consideration for the Shares to be repurchased in accordance with
the applicable Repurchase Right, then from and after such time, the person from
whom such shares are to be repurchased shall no longer have any rights as a
holder of such shares (other than the right to receive payment of such
consideration in accordance with this Agreement), and such shares shall be
deemed purchased in accordance with the applicable provisions hereof and the
Company (or its assignees) shall be deemed the owner and holder of such shares,
whether or not the certificates therefor have been delivered as required by this
Agreement.
VIII. MISCELLANEOUS PROVISIONS
8.1 Employee Undertaking. Employee hereby agrees to take whatever
--------------------
additional action and execute whatever additional documents the Company may, in
its judgment, deem necessary or advisable in order to carry out or effect one or
more of the obligations or restrictions imposed on either the Employee or the
Shares pursuant to the express provisions of this Agreement.
8.2 Agreement Is Entire Contract. This Agreement and the Plan constitute
----------------------------
the entire agreement between the parties hereto with regard to the subject
matter hereof.
8.3 Governing Law. This Agreement shall be governed by, and construed in
-------------
accordance with, the laws of the State of Delaware, as such laws are applied to
contracts entered into and performed in such State, without regard to conflict
of laws principles thereof.
8.4 Counterparts. This Agreement may be executed in counterparts, each
------------
of which shall be deemed to be an original, but all of which, when taken
together, shall constitute one and the same instrument.
8.5 Successors and Assigns. The provisions of this Agreement shall inure
----------------------
to the benefit of, and be binding upon, the Company and its successors and
assigns and the Employee and the Employee's legal representatives, heirs,
legatees, distributees, assigns and transferees by operation of law, whether or
not any such person shall have become a party to this Agreement and have agreed
in writing to join herein and be bound by the terms and conditions hereof.
* * *
IN WITNESS WHEREOF, the Parties have executed this Agreement on the day and
year first indicated above.
THE COMPANY:
TELLIUM, INC.
By:____________________
Name:
Title:
THE EMPLOYEE:
_______________________
Name:
