Castelle Exhibit 10.16
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EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into on the __ day of April,
2002, by and between XXXXX X. XXXXXXXX ("Executive") and CASTELLE, a California
corporation (the "Company").
WHEREAS, the Company desires to employ Executive to provide personal services to
the Company, and wishes to provide Executive with certain compensation and
benefits in return for his services; and
WHEREAS, Executive wishes to be employed by the Company and provide personal
services to the Company in return for certain compensation and benefits;
NOW, THEREFORE, in consideration of the mutual promises and covenants contained
herein, it is hereby agreed by and between the parties hereto as follows:
EMPLOYMENT BY THE COMPANY.
The effective date of this Agreement shall be April 22, 2002.
Subject to terms set forth herein, the Company agrees to employ
Executive in the position of Chief Executive Officer and Executive
hereby accepts such employment effective as of April 22, 2002 (the
"Employment Date"). During the term of his employment with the Company,
Executive will devote his best efforts and substantially all of his
business time and attention (except for vacation periods as set forth
herein and reasonable periods of illness or other incapacities
permitted by the Company's general employment policies or as otherwise
set forth in this Agreement) to the business of the Company. Executive
will work at the Company's Morgan Hill, California headquarters.
Executive shall serve in an executive capacity and shall perform such
duties as are customarily associated with the position of Chief
Executive Officer and such other duties as are assigned to Executive by
the Company's Board of Directors (the "Board"). Executive will report
to the Board. Executive shall continue to serve on the Board and the
Company will use its best efforts to re-elect Executive to the Board.
The employment relationship between the parties shall also be governed
by the general employment policies and practices of the Company and
Executive will be expected to abide by Company rules and policies,
including those relating to protection of confidential information and
assignment of inventions, except that when the terms of this Agreement
differ from or are in conflict with the Company's general employment
policies or practices, this Agreement shall control.
COMPENSATION.
Salary. Executive shall receive for services to be rendered hereunder
an annualized base salary of two hundred thousand dollars ($200,000),
payable on a semi-monthly basis and subject to standard payroll
deductions and required withholdings.
Bonus. Executive will be eligible to earn quarterly performance
bonuses, in a total amount of up to one hundred thousand dollars
($100,000) per year, if performance criteria to be developed by the
Compensation Committee of the Board (the "Compensation Committee") are
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met as determined in the sole discretion of the Compensation Committee.
These performance criteria will be established by the Compensation
Committee prior to the end of the second quarter of the year. In the
event Executive exceeds the performance criteria established by the
Compensation Committee in a given year (as determined by the
Compensation Committee), Executive will be eligible to earn bonuses
that exceed a total of one hundred thousand dollars ($100,000) for the
year. The performance criteria will be measured quarterly, and the
performance bonuses will be earned and paid (to the extent earned) on a
quarterly basis.. During the first four (4) quarters of Executive's
employment, Executive will receive guaranteed bonus payments of
twenty-five thousand dollars ($25,000) per quarter so long as he
remains an employee in good standing as of the bonus payment date.
Standard Company Benefits. Executive shall be entitled to all rights
and benefits for which he is eligible under the terms and conditions of
the standard Company benefits and compensation practices which may be
in effect from time to time and provided by the Company to its
executive employees generally.
Stock Option Awards. Subject to approval by the Compensation Committee,
on April 5, 2002 the Board shall grant Executive a statutory stock
option to acquire two hundred thousand (200,000) shares of the Common
Stock of the Company (the "Initial Option"). The Initial Option shall
be granted under the Company's 1988 Incentive Stock Plan (the "Option
Plan"), and the exercise price per share will be equal to one hundred
percent (100%) of the fair market value of the Company's Common Stock,
as determined under the Option Plan on the date of grant. The Initial
Option shall be subject to the terms and conditions of the Option Plan,
any amendments thereto, and the corresponding grant agreement. Subject
to Executive's Continuous Service to the Company (as defined in the
Option Plan), one-fourth (1/4) of the Initial Option shares shall vest
on the date that is six (6) months after the Employment Date and an
additional one-twenty-fourth (1/24) of the Initial Option shares shall
vest each calendar month for eighteen (18) months thereafter . In
addition, at such time as enough shares of Common Stock become
available for grant under the Option Plan or under a new stock option
plan, subject to approval by the Compensation Committee, the Board
shall grant to Executive a second stock option grant to purchase an
additional one hundred thousand (100,000) shares of the Company's
Common Stock (the "Second Option") at an exercise price equal to the
fair market value of the Common Stock on the date of grant as
determined under the applicable option plan. The Second Option shall be
subject to the terms and conditions of the applicable stock option
plan, any amendments thereto, and the corresponding grant agreement.
The vesting commencement date for the Second Option shall be the second
anniversary of the Employment Date and, subject to Executive's
Continuous Service to the Company (as defined in the applicable stock
option plan), the Second Option shares will become fully vested on the
third year anniversary of the Employment Date. Vesting of shares of the
Initial Option and Second Option may be accelerated upon a termination
of Executive's employment with the Company to the extent provided by
the provisions of the Executive Severance and Transition Benefits
Agreement that Executive will enter into with the Company.
Executive Severance And Transition Benefits Agreement. Effective as of
the Employment Date, Executive will be eligible to enter into an
Executive Severance and Transition Benefits Agreement with the Company
in the form attached hereto as Exhibit A (the "Severance Agreement").
The Severance Agreement will provide the sole severance benefits that
Executive will be eligible to receive upon Executive's termination of
employment with the Company for any reason.
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PROPRIETARY INFORMATION OBLIGATIONS.
Agreement. As a condition of his employment, Executive agrees to
execute and abide by the Proprietary Information and Inventions
Agreement attached hereto as Exhibit B.
Remedies. Executive's duties under the Proprietary Information and
Inventions Agreement shall survive termination of his employment with
the Company. Executive acknowledges that a remedy at law for any breach
or threatened breach by him of the provisions of the Proprietary
Information and Inventions Agreement would be inadequate, and he
therefore agrees that the Company shall be entitled to injunctive
relief in case of any such breach or threatened breach.
OUTSIDE ACTIVITIES.
Except for Executive's current directorship positions with the
following two outside companies (Octant Technologies, Inc. and Epsilon
LLC), and with the prior written consent of the Board, Executive will
not during the term of this Agreement undertake or engage in any other
employment, occupation or business enterprise, other than ones in which
Executive is a passive investor. Executive may engage in civic and
not-for-profit activities so long as such activities do not materially
interfere with the performance of his duties hereunder.
During the term of his employment by the Company, except on behalf of
the Company, Executive will not directly or indirectly, whether as an
officer, director, stockholder, partner, proprietor, associate,
representative, consultant, or in any capacity whatsoever engage in,
become financially interested in, be employed by or have any business
connection with any other person, corporation, firm, partnership or
other entity whatsoever which were known by him to compete directly
with the Company, throughout the world, in any line of business engaged
in (or planned to be engaged in) by the Company; provided, however,
that anything above to the contrary notwithstanding, he may own, as a
passive investor, securities of any competitor corporation, so long as
his direct holdings in any one such corporation shall not in the
aggregate constitute more than one percent (1%) of the voting stock of
such corporation
AT-WILL EMPLOYMENT RELATIONSHIP.
Both the Company and Executive shall have the right to terminate
Executive's employment with the Company at any time, with or without
cause or prior notice. If Executive's employment with the Company is
terminated, Executive will be eligible to receive severance benefits
only to the extent provided by the Severance Agreement.
NONINTERFERENCE.
While employed by the Company, and for one (1) year immediately
following his employment termination date, Executive agrees not to
interfere with the business of the Company by soliciting, attempting to
solicit, inducing, or otherwise causing any employee of the Company to
terminate his or her employment in order to become an employee,
consultant or independent contractor to or for any competitor of the
Company.
GENERAL PROVISIONS.
Notices. Any notices provided hereunder must be in writing and shall be
deemed effective upon the earlier of personal delivery (including
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personal delivery by facsimile) or the third day after mailing by first
class mail, to the Company at its primary office location and to
Executive at his address as listed on the Company payroll.
Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable
law or rule in any jurisdiction, such invalidity, illegality or
unenforceability will not affect any other provision or any other
jurisdiction, but this Agreement will be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or
unenforceable provisions had never been contained herein.
Waiver. If either party should waive any breach of any provisions of
this Agreement, he or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of
this Agreement.
Right to Work. As required by law, this Agreement is subject to
satisfactory proof of Executive's right to work in the United States.
Complete Agreement. This Agreement, including its exhibits, constitutes
the complete, final and exclusive embodiment of Executive's employment
agreement with the Company. This Agreement is entered into without
reliance upon any promise, warranty or representation, written or oral,
on any subject concerning Executive's employment with the Company other
than those expressly contained herein, and it supersedes any other such
promises, warranties, representations or agreements. This Agreement
cannot be modified or amended except in a writing signed by the
Executive and a duly authorized member of the Board.
Counterparts. This Agreement may be executed in separate counterparts,
any one of which need not contain signatures of more than one party,
but all of which taken together will constitute one and the same
Agreement. Facsimile signatures shall suffice as original signatures.
Headings. The headings of the sections hereof are inserted for
convenience only and shall not be deemed to constitute a part hereof
nor to affect the meaning thereof.
Successors and Assigns. This Agreement is intended to bind and inure to
the benefit of and be enforceable by Executive and the Company, and
their respective successors, assigns, heirs, executors and
administrators, except that Executive may not assign any of his duties
hereunder and he may not assign any of his rights hereunder without the
written consent of the Company, which shall not be withheld
unreasonably.
Attorneys' Fees. If either party hereto brings any action to enforce
his or its rights hereunder, each party in any such action shall be
responsible for its own attorneys' fees and costs incurred in
connection with such action.
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Choice of Law. All questions concerning the construction, validity
and interpretation of this Agreement will be governed by the law of
the State of California
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
CASTELLE
By: /s/ Xxxxxx X. Xxxx
XXXXXX X. XXXX
Title: Chairman of the Board
Date :April 22, 2002
Accepted and agreed this
22nd day of April, 2002
/s/Xxxxx X. XxXxxxxx
XXXXX X. XXXXXXXX
EXECUTIVE SEVERANCE AND
TRANSITION BENEFITS AGREEMENT
THIS EXECUTIVE SEVERANCE AND TRANSITION BENEFITS AGREEMENT (the "Agreement") is
entered into effective as of the 22nd day of April, 2002, between XXXXX X.
XXXXXXXX, ("Executive") and CASTELLE, a California corporation (the "Company").
This Agreement is intended to provide Executive with the compensation and
benefits described herein upon the occurrence of specific events. Certain
capitalized terms used in this Agreement are defined in Article 5.
The Company and Executive hereby agree as follows:
Article 1
EMPLOYMENT BY THE COMPANY
1.1 The Company and Executive wish to set forth the compensation and
benefits which Executive shall be entitled to receive (i) in the event
Executive's employment with the Company terminates, or (ii) in the event there
is a Change in Control of the Company, under the circumstances described herein.
1.2 The duties and obligations of the Company to Executive under this
Agreement shall be in consideration for Executive's past services to the
Company, Executive's continued
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employment with the Company, and Executive's execution of the general waiver and
release described in Section 3.2.
1.3 This Agreement shall remain in full force and effect so long as
Executive is employed by the Company; provided, however, that Executive's rights
to payments and benefits under Article 2 shall continue until the Company's
obligation to provide such payments and benefits is satisfied.
1.4 This Agreement shall supersede any other agreements relating to
Executive's termination of employment with the Company.
Article 2
SEVERANCE, CHANGE IN CONTROL AND TRANSITION BENEFITS
2.1 Severance Benefits. If Executive's employment terminates due to an
Involuntary Termination Without Cause or a Voluntary Termination for Good Reason
after the date of execution of this Agreement, and without regard to any Change
in Control of the Company, the termination of employment will be a Covered
Termination. Executive shall receive Base Pay and bonus that have accrued but
are unpaid as of the date of such Covered Termination, and, within thirty (30)
days following such Covered Termination, Executive shall also receive a lump sum
payment equal to one hundred percent (100%) of Executive's Base Pay, all of the
foregoing subject to applicable tax withholding. In addition, following a
Covered Termination, Executive and Executive's covered dependents will be
eligible to continue their health care benefit coverage as permitted by COBRA
(Internal Revenue Code Section 4980B) at the same cost to Executive as in effect
immediately prior to the Covered Termination for the one (l)-year period
following the Covered Termination.
2.2 Transition Bonus.
(a) In the event there is a Change in Control of the Company and Executive
continues to render services to the Company for ninety (90) days
following the closing of the transaction resulting in such Change in
Control, then, if:
(i) Executive's employment has been terminated and such termination
is not a Covered Termination, Executive shall be entitled to a
lump-sum payment equal to fifty percent (50%) of Executive's Base
Pay, subject to applicable withholding; or
(ii) Executive's employment has been terminated and such termination
is a Covered Termination, Executive shall be entitled to a
lump-sum payment equal to the Severance Benefits set forth in
Section 2.1 of this Agreement, subject to applicable withholding.
(b) If Executive does not terminate employment with the successor company
on or before the ninetieth (90th) day after the closing of the
transaction resulting in a Change in Control and continues to render
services to the Company from and after the ninetieth (90th) day
following such closing, then Executive shall be entitled to a
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lump-sum payment equal to fifty percent (50%) of Executive's Base
Pay, subject to applicable withholding, and without regard to any
payment that might be received by Executive with respect to a Covered
Termination.
2.3 Acceleration of Vesting of Outstanding Options.
(a) If Executive's employment terminates and such termination is a Covered
Termination, the vesting of any options to purchase common stock of
the Company then held by Executive shall accelerate and such options
shall become immediately vested as to fifty percent (50%) of the total
number of unvested shares of common stock subject to such options.
2.4 Mitigation. Executive shall not be required to mitigate damages or the
amount of any payment provided under this Agreement by seeking other employment
or otherwise, nor shall the amount of any payment provided for under this
Agreement be reduced by any compensation earned by Executive as a result of
employment by another employer or by any retirement benefits received by
Executive after the date of the Covered Termination, or otherwise.
2.5 Possible Outcomes. The chart attached hereto as Exhibit B is intended
to summarize the possible cash benefits payable under this Article 2 in the
circumstances indicated and is incorporated into this Agreement for the
convenience of the parties.
Article 3
LIMITATIONS AND CONDITIONS ON BENEFITS
3.1 Withholding of Taxes. The Company shall withhold appropriate federal,
state, local (and foreign, if applicable) income and employment taxes from any
payments hereunder.
3.2 Employee Agreement and Release Prior to Receipt of Benefits. On or
promptly after the occurrence of a Covered Termination and prior to the receipt
of any benefits under this Agreement on account of the occurrence of such
Covered Termination, and prior to his receipt of any payments pursuant to
Sections 2.2(a)(ii) or 2.2(b), Executive shall execute the Employee Agreement
and Release (the "Release") in the form attached hereto as Exhibit A (or, at the
Company's election, in any other form provided by the Company). Such Release
shall specifically relate to all of Executive's rights and claims in existence
at the time of such execution (both known and unknown) and shall confirm
Executive's obligations under the Company's standard form of proprietary
information agreement. It is understood that Executive will have, as determined
by the Company, either twenty-one (21) or forty-five (45) days to consider
whether to execute such Release, and Executive may revoke such Release within
seven (7) calendar days after execution. In the event Executive does not execute
such Release within the required time period, or if Executive revokes such
Release within the subsequent seven (7) calendar day period, no benefits shall
be payable under this Agreement and this Agreement shall be null and void.
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Article 4
OTHER RIGHTS AND BENEFITS
4.1 Nonexclusivity. Except as otherwise expressly provided herein, nothing
in the Agreement shall prevent or limit Executive's continuing or future
participation in any benefit, bonus, incentive or other plans, programs,
policies or practices provided by the Company and for which Executive may
otherwise qualify, nor shall anything herein limit or otherwise affect such
rights as Executive may have under other agreements with the Company. Except as
otherwise expressly provided herein, amounts which are vested benefits or which
Executive is otherwise entitled to receive under any plan, policy, practice or
program of the Company at or subsequent to the date of a Covered Termination
shall be payable in accordance with such plan, policy, practice or program.
4.2 Parachute Payments. If the severance and other benefits provided to
Executive under this Agreement (i) constitute "parachute payments" within the
meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the
"Code") and (ii) but for this Section 4.2, such severance and other benefits
would be subject to the excise tax imposed by Section 4999 of the Code, then
Executive's benefits under this Agreement shall be payable either:
(a) in full; or
(b) as to such lesser amount which would result in no portion of such
severance and other benefits being subject to excise tax under Section
499 of the Code,
whichever of the foregoing amounts, taking into account the applicable federal,
state and local income taxes and the excise tax imposed by Section 4999, results
in the receipt by Executive, on an after-tax basis, of the greatest amount of
severance benefits under this Agreement. Unless the Company and Executive
otherwise agree in writing, any determination required under this Section 4.2
shall be made in writing by independent public accountants agreed to by the
Company and Executive (the "Accountants"), whose determination shall be
conclusive and binding upon Executive and the Company for all purposes. For
purposes of making the calculations required by this Section 4.2, the
Accountants may make reasonable, good faith interpretations concerning the
application of Sections 280G and 4999 of the Code. The Company and Executive
shall furnish to the Accountants such information and documents as the
Accountants may reasonably request in order to make a determination under this
Section 4.2. The Company shall bear all costs the Accountants may reasonably
incur in connection with any calculations contemplated by this Section 4.2.
Article 5
DEFINITIONS
For purposes of the Agreement, the following terms are defined as
follows:
5.1 "Base Pay" means Executive's annual base pay at the rate in effect
during the last regularly scheduled payroll period immediately preceding any
termination of Executive's employment or, if higher, Executive's annual base pay
in effect as of the date of this Agreement if
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subsequent to that time Executive has agreed to a reduction in base pay in
connection with a general reduction in the base pay of other similarly situated
employees of the Company.
5.2 "Change in Control" means (1) a dissolution, liquidation or sale of all
or substantially all of the assets of the Company; (2) a merger or consolidation
in which the Company is not the surviving corporation; (3) a reverse merger in
which the Company is the surviving corporation but the shares of the Company's
common stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise; or (4) the acquisition by any person, entity or group within
the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or any comparable successor provisions (excluding
any employee benefit plan, or related trust, sponsored or maintained by the
Company or any Affiliate of the Company) of the beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act, or comparable
successor rule) of securities of the Company representing at least fifty percent
(50%) of the combined voting power entitled to vote in the election of
directors.
5.3 "Covered Termination" means an Involuntary Termination Without Cause or
a Voluntary Termination for Good Reason.
5.4 "Involuntary Termination Without Cause" means Executive's dismissal or
discharge for reasons other than fraud, misappropriation, embezzlement or
intentional misconduct on the part of Executive which resulted in material loss,
damage or injury to the Company. The termination of Executive's employment will
not be deemed to be an "Involuntary Termination Without Cause" if such
termination occurs as a result of Executive's death or disability. For purposes
of the foregoing, "disability" means a disability, as that term is defined in
the long term disability plan maintained by the Company that covers Executive,
that continues for ninety (90) days.
5.5 "Voluntary Termination For Good Reason" means that the Executive
voluntarily terminates employment within ninety (90) days after any of the
following are undertaken without Executive's express written consent:
(a) the assignment to Executive of any duties or responsibilities which
result in a material diminution or adverse change of Executive's
position, status or circumstances of employment;
(b) a reduction by the Company in Executive's Base Pay;
(c) a material reduction in the amount of quarterly performance bonuses
Executive is eligible to receive, or the elimination of the bonus
program described in Executive's Employment Agreement with the Company
as it pertains to Executive;
(d) any failure by the Company to continue in effect any benefit plan or
arrangement, including incentive plans or plans to receive securities
of the Company, in which Executive is participating (hereinafter
referred to as "Benefit Plans"), or the taking of any action by the
Company which would adversely affect Executive's participation in or
reduce Executive's benefits under any Benefit Plans or deprive
Executive of any fringe benefit then enjoyed by Executive, provided,
however, that Executive may not terminate for Good Reason if the
Company
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offers a range of benefit plans and programs which, taken as a
whole, are comparable to the Benefit Plans as determined in good faith
by the Company;
(e) a relocation of Executive or the Company's principal business offices
to a location more than twenty (20) miles from the current location at
which Executive performs duties, except for required travel by
Executive on the Company's business to an extent substantially
consistent with Executive's business travel obligations;
(f) any breach by the Company of any provision of this Agreement or
Executive's Employment Agreement dated April 22, 2002; or
(g) any failure by the Company to obtain the assumption of this Agreement
by any successor or assign of the Company.
Article 6
GENERAL PROVISIONS
6.1 Employment Status. This Agreement does not constitute a contract of
employment or impose on Executive any obligation to remain as an employee, or
impose on the Company any obligation (i) to retain Executive as an employee,
(ii) to change the status of Executive as an at-will employee, or (iii) to
change the Company's policies regarding termination of employment.
6.2 Notices. Any notices provided hereunder must be in writing and such
notices or any other written communication shall be deemed effective upon the
earlier of personal delivery (including personal delivery by facsimile) or the
third day after mailing by first class mail, to the Company at its primary
office location and to Executive at Executive's address as listed in the
Company's payroll records. Any payments made by the Company to Executive under
the terms of this Agreement shall be delivered to Executive either in person or
at the address as listed in the Company's payroll records.
6.3 Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provisions had never been contained herein.
6.4 Waiver. If either party should waive any breach of any provisions of
this Agreement, he or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
6.5 Arbitration. Unless otherwise prohibited by law or specified below, all
disputes, claims and causes of action, in law or equity, arising from or
relating to this Agreement or its enforcement, performance, breach, or
interpretation shall be resolved solely and exclusively by final and binding
arbitration before a single arbitrator held in San Francisco, California through
Judicial Arbitration & Mediation Services/Endispute ("JAMS") under the then
existing JAMS
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employment arbitration rules. However, nothing in this section is intended to
prevent either party from obtaining injunctive relief in court to prevent
irreparable harm pending the conclusion of any such arbitration.
6.6 Complete Agreement. This Agreement, including Exhibit A, Exhibit B, and
any other written agreements referred to in this Agreement, constitutes the
entire agreement between Executive and the Company and it is the complete,
final, and exclusive embodiment of their agreement with regard to this subject
matter. It is entered into without reliance on any promise or representation
other than those expressly contained herein.
6.7 Amendment or Termination of Agreement. This Agreement may be changed or
terminated only upon the mutual written consent of the Company and Executive.
The written consent of the Company to a change or termination of this Agreement
must be signed by an executive officer of the Company after such change or
termination has been approved by the Compensation Committee of the Company's
Board of Directors.
6.8 Counterparts. This Agreement may be executed in separate counterparts,
any one of which need not contain signatures of more than one party, but all of
which taken together will constitute one and the same Agreement.
6.9 Headings. The headings of the Articles and Sections hereof are inserted
for convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning hereof.
6.10 Successors and Assigns. This Agreement is intended to bind and inure
to the benefit of and be enforceable by Executive and the Company, and their
respective successors, assigns, heirs, executors and administrators, except that
Executive may not assign any duties hereunder and may not assign any rights
hereunder without the written consent of the Company, which consent shall not be
withheld unreasonably.
6.11 Attorneys' Fees. If Executive brings any action to enforce his rights
hereunder, Executive shall be responsible for his own attorneys' fees and costs
incurred in connection with such action, regardless of the outcome of such
action.
6.12 Choice Of Law. All questions concerning the construction. validity and
interpretation of this Agreement will be governed by the law of the State of
California, without regard to such state's conflict of laws rules.
6.13 Non-Publication. The parties mutually agree not to disclose publicly
the terms of this Agreement except to the extent that disclosure is mandated by
applicable law, made pursuant to required or standard corporate reporting
guidelines, or made to the parties' respective personal advisors.
6.14 Construction Of Agreement. In the event of a conflict between the text
of the Agreement and any summary, description or other information regarding the
Agreement, the text of the Agreement shall control.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year written above.
CASTELLE XXXXX X. XXXXXXXX
By: /s/Xxxxxx X. Xxxx /s/ Xxxxx X. XxXxxxxx
----------------- ---------------------
Printed Name: Xxxxxx X. Xxxx
Title: Chairman of the Board
Exhibit A: Employee Agreement and Release
Exhibit B: Chart of Possible Outcomes
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EXHIBIT A
EMPLOYEE AGREEMENT AND RELEASE
I understand and agree completely to the terms set forth in the foregoing
Executive Severance and Transition Benefits Agreement ("Agreement").
I hereby confirm my obligations under the Company's proprietary
information agreement.
I acknowledge that I have read and understand Section 1542 of the
California Civil Code which reads as follows: "A general release does not
extend to claims which the creditor does not know or suspect to exist in
his favor at the time of executing the release, which if known by him
must have materially affected his settlement with the debtor." I hereby
expressly waive and relinquish all rights and benefits under that section
and any law of any jurisdiction of similar effect with respect to my
release of any claims I may have.
Except as otherwise set forth in the Agreement, I hereby release, acquit
and forever discharge the Company, its parents and subsidiaries, and
their officers, directors, agents, servants, employees, shareholders,
successors, assigns and affiliates, of and from any and all claims,
liabilities, demands, causes of action, costs, expenses, attorneys' fees,
damages, indemnities and obligations of every kind and nature, in law,
equity, or otherwise, known and unknown, suspected and unsuspected,
disclosed and undisclosed (other than any claim for indemnification I may
have as a result of any third party action against me based on my
employment with the Company), arising out of or in any way related to
agreements, events, acts or conduct at any time prior to and including
the date that I sign this Employee Agreement and Release ("Release"),
including but not limited to: all such claims and demands directly or
indirectly arising out of or in any way connected with my employment with
the Company or the termination of that employment, including but not
limited to, claims of intentional and negligent infliction of emotional
distress, any and all tort claims for personal injury, claims or demands
related to salary, bonuses, commissions, stock, stock options, or any
other ownership interests in the Company, vacation pay, fringe benefits,
expense reimbursements, severance pay, or any other form of compensation;
claims pursuant to any federal, state or local law or cause of action
including, but not limited to, the federal Civil Rights Act of 1964, as
amended; the federal Age Discrimination in Employment Act of 1967, as
amended ("ADEA"); the federal Americans with Disabilities Act of 1990;
the California Fair Employment and Housing Act, as amended; tort law;
contract law; wrongful discharge; discrimination; fraud; defamation;
emotional distress; and breach of the implied covenant of good faith and
fair dealing; provided, however, that nothing in this paragraph shall be
construed in any way to release the Company from its obligation to
indemnify me pursuant to the Company's indemnification obligation
pursuant to agreement or applicable law or to reduce or eliminate any
coverage I may have under the Company's director and officer liability
policy, if any.
I acknowledge that I am knowingly and voluntarily waiving and releasing
any rights I may have under ADEA. I also acknowledge that the
consideration given for the waiver and release in the preceding paragraph
hereof is in addition to anything of value to which I was already
entitled. I further acknowledge that I have been advised by this writing,
as required by the ADEA, that: (A) my waiver and release do not apply to
any rights or claims that may arise after the date I sign this Release;
(B) I have the right to consult with an attorney prior to
13
executing this Release; (C) I have forty-five (45) days to consider this
Release (although I may choose to voluntarily execute this Release
earlier); (D) I have seven (7) days following my execution of this
Release to revoke the Release; and (E) this Release shall not be
effective until the date upon which the revocation period has expired,
which shall be the eighth day after this Release is executed by me (the
"Effective Date").
XXXXX X. XXXXXXXX
/s/ Xxxxx X. XxXxxxxx
Date: April 22, 2002
14
EXHIBIT B
POSSIBLE CASH PAYMENTS UNDER
EXECUTIVE SEVERANCE AND TRANSITION BENEFITS AGREEMENT
---------------------------------------- -------------------------------------- --------------------------------------
Termination that Does Not Qualify as Termination that Qualifies as a
a Covered Termination Covered Termination
---------------------------------------- -------------------------------------- --------------------------------------
Prior to Change in Control Cash: -0- Cash: 12 months base pay
---------------------------------------- -------------------------------------- --------------------------------------
0 - 89 days after Change in Control Cash: -0- Cash: 12 months base pay
---------------------------------------- -------------------------------------- --------------------------------------
90 days after Change in Control Cash: 6 months base pay Cash: 12 months base pay
---------------------------------------- -------------------------------------- --------------------------------------
90+ days after Change in Control Cash: 6 months base pay Cash: 18 months base pay
---------------------------------------- -------------------------------------- --------------------------------------
15
Castelle Exhibit 10.16
CASTELLE
2002 EQUITY INCENTIVE PLAN
As Adopted December 20, 2002
1. PURPOSE. The purpose of this Plan is to provide incentives to attract,
retain and motivate eligible persons whose present and potential contributions
are important to the success of the Company, its Parent and Subsidiaries, by
offering them an opportunity to participate in the Company's future performance
through awards of Options and Restricted Stock. Capitalized terms not defined in
the text are defined in Section 23 ("Definitions).
2. SHARES SUBJECT TO THE PLAN.
2.1 Number of Shares Available. Subject to Sections 2.2
("Adjustment of Shares") and 17 ("Corporate Transactions"), the total
number of Shares reserved and available for grant and issuance
pursuant to this Plan will be 850,000 Shares plus Shares that are
subject to: (a) issuance upon exercise of an Option but cease to be
subject to such Option for any reason other than exercise of such
Option; (b) an Award granted hereunder but are forfeited or are
repurchased by the Company at the original issue price; and (c) an
Award that otherwise terminates without Shares being issued.
2.2 Adjustment of Shares. In the event that the number of
outstanding shares of the Company's Common Stock is changed by a stock
dividend, recapitalization, stock split, reverse stock split,
subdivision, combination, reclassification or similar change in the
capital structure of the Company without consideration, then (a) the
number of Shares reserved for issuance under this Plan, (b) the number
of Shares that may be granted pursuant to Sections 3 ("Eligibility"),
5.10 ("No Disqualification") and 8 ("Automatic Grants to Outside
Directors") below, (c) the Exercise Prices of and number of Shares
subject to outstanding Options, and (d) the number of Shares subject
to other outstanding Awards may, upon approval of the Board in its
discretion, be proportionately adjusted in compliance with applicable
securities laws; provided, however, that fractions of a Share will not
be issued but will either be replaced by a cash payment equal to the
Fair Market Value of such fraction of a Share or will be rounded up to
the nearest whole Share, as determined by the Committee.
3. ELIGIBILITY. ISOs (as defined in Section 5 ("Options") below) may be
granted only to employees (including officers and directors who are also
employees) of the Company or of a Parent or Subsidiary of the Company. All other
Awards may be granted to employees, officers, directors, consultants,
independent contractors and advisors of the Company or any Parent or Subsidiary
of the Company; provided such consultants, independent contractors and advisors
render bona fide services not in connection with the offer and sale of
securities in a capital-raising transaction. No person will be eligible to
receive more than 300,000 Shares in any calendar year under this Plan pursuant
to the grant of Awards hereunder. A person may be granted more than one Award
under this Plan.
4. ADMINISTRATION.
4.1 Committee Authority. This Plan will be administered by the
Committee or by the Board acting as the Committee. Except to the extent
which may otherwise be required by the terms of Section 8 ("Automatic
Grants to Outside Directors") hereof, and subject to the general purposes,
terms and conditions of this Plan, and to the direction of the Board, the
Committee will have full power to implement and carry out this Plan. The
Committee will have the authority to:
1
(a) construe and interpret this Plan, any Award Agreement and
any other agreement or document executed pursuant to this
Plan;
(b) prescribe, amend and rescind rules and regulations relating
to this Plan or any Award;
(c) select persons to receive Awards;
(d) determine the form and terms of Awards;
(e) determine the number of Shares or other consideration
subject to Awards;
(f) determine whether Awards will be granted singly, in
combination with, in tandem with, in replacement of, or as
alternatives to, other Awards under this Plan or any other
incentive or compensation plan of the Company or any Parent
or Subsidiary of the Company;
(g) grant waivers of Plan or Award conditions;
(h) determine the vesting, exercisability and payment of Awards;
(i) correct any defect, supply any omission or reconcile any
inconsistency in this Plan, any Award or any Award
Agreement;
(j) determine whether an Award has been earned;
(k) initiate an Awards Exchange Program; and
(l) make all other determinations necessary or advisable for the
administration of this Plan.
4.2 Committee Discretion. Except for automatic grants to Outside
Directors pursuant to Section 8 ("Automatic Grants to Outside Directors")
hereof, any determination made by the Committee with respect to any Award
will be made in its sole discretion at the time of grant of the Award or,
unless in contravention of any express term of this Plan or the Award, at
any later time, and such determination will be final and binding on the
Company and on all persons having an interest in any Award under this Plan.
The Committee may delegate to one or more officers of the Company the
authority to grant an Award under this Plan to Participants who are not
Insiders of the Company.
5. OPTIONS. The Committee may grant Options to eligible persons and will
determine whether such Options will be Incentive Stock Options within the
meaning of the Code ("ISOs") or Nonqualified Stock Options ("NQSOs"), the number
of Shares subject to the Option, the Exercise Price of the Option, the period
during which the Option may be exercised, and all other terms and conditions of
the Option, subject to the following:
5.1 Form of Option Grant. Each Option granted under this Plan will be
evidenced by an Award Agreement which will expressly identify the Option as
an ISO or an NQSO ("Stock Option Agreement"), and, except to the extent
which may otherwise be required by the terms of Section 8 ("Automatic
Grants to Outside Directors") hereof, will be in such form and contain such
provisions
2
(which need not be the same for each Participant) as the
Committee may from time to time approve, and which will comply with and be
subject to the terms and conditions of this Plan.
5.2 Date of Grant. The date of grant of an Option will be the date on
which the Committee makes the determination to grant such Option, unless
otherwise specified by the Committee. The Stock Option Agreement and a copy
of this Plan will be delivered to the Participant within a reasonable time
after the granting of the Option.
5.3 Exercise Period. Options may be exercisable within the times or
upon the events determined by the Committee as set forth in the Stock
Option Agreement governing such Option; provided, however, that no Option
will be exercisable after the expiration of ten (10) years from the date
the Option is granted; and provided further that no ISO granted to a person
who directly or by attribution owns more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or of
any Parent or Subsidiary of the Company ("Ten Percent Shareholder") will be
exercisable after the expiration of five (5) years from the date the ISO is
granted. The Committee also may provide for Options to become exercisable
at one time or from time to time, periodically or otherwise, in such number
of Shares or percentage of Shares as the Committee determines.
5.4 Exercise Price. The Exercise Price of an Option will be determined
by the Committee when the Option is granted and may not be less than
eighty-five percent (85%) of the Fair Market Value of the Shares on the
date of grant; provided that: (i) the Exercise Price of an ISO will be not
less than 100% of the Fair Market Value of the Shares on the date of grant;
and (ii) the Exercise Price of any ISO granted to a Ten Percent Shareholder
will not be less than 110% of the Fair Market Value of the Shares on the
date of grant. Payment for the Shares purchased may be made in accordance
with Section7 ("Payment for Share Purchases").
5.5 Method of Exercise. Options may be exercised only by delivery to
the Company of a written stock option exercise agreement (the "Exercise
Agreement") in a form approved by the Committee (which need not be the same
for each Participant), stating the number of Shares being purchased, the
restrictions imposed on the Shares purchased under such Exercise Agreement,
if any, and such representations and agreements regarding the Participant's
investment intent and access to information and other matters, if any, as
may be required by or desirable to the Company to comply with applicable
securities laws, together with payment in full of the Exercise Price for
the number of Shares being purchased.
5.6 Termination. Notwithstanding the exercise periods set forth in the
Stock Option Agreement, the exercise of an Option will always be subject to
the following:
(a) If the Participant is Terminated for any reason except the
Participant's death or Disability, then the Participant may
exercise such Participant's Options only to the extent that
such Options would have been exercisable by the Participant
on the Termination Date no later than three (3) months after
the Termination Date (or such shorter or longer time period
not exceeding five (5) years as may be determined by the
Committee, with any exercise beyond three (3) months after
the Termination Date deemed to be an NQSO), but in any event
no later than the expiration date of the Options.
(b) If the Participant is Terminated because of Participant's
death or Disability (or the Participant dies within three
(3) months after a Termination other than for Cause or
because of the Participant's Disability), then the
Participant's Options
3
may be exercised only to the extent
that such Options would have been exercisable by the
Participant on the Termination Date and must be exercised by
the Participant (or the Participant's legal representative
or authorized assignee) no later than twelve (12) months
after the Termination Date (or such shorter or longer time
period not exceeding five (5) years as may be determined by
the Committee, with any exercise beyond (a) three (3) months
after the Termination Date when the Termination is for any
reason other than the Participant's death or Disability, or
(b) twelve (12) months after the Termination Date when the
Termination is for the Participant's death or Disability,
deemed to be an NQSO), but in any event no later than the
expiration date of the Options.
(c) If the Participant is terminated for Cause, then
Participant's Options shall expire on such Participant's
Termination Date, or at such later time and on such
conditions as are determined by the Committee.
5.7 Limitations on Exercise. The Committee may specify a reasonable
minimum number of Shares that may be purchased on any exercise of an
Option, provided that such minimum number will not prevent any Participant
from exercising the Option for the full number of Shares for which it is
then exercisable.
5.8 Limitations on ISOs. The aggregate Fair Market Value (determined
as of the date of grant) of Shares with respect to which ISOs are
exercisable for the first time by a Participant during any calendar year
(under this Plan or under any other incentive stock option plan of the
Company or any Parent or Subsidiary of the Company) will not exceed
$100,000. If the Fair Market Value of Shares on the date of grant with
respect to which ISOs are exercisable for the first time by a Participant
during any calendar year exceeds $100,000, then the Options for the first
$100,000 worth of Shares to become exercisable in such calendar year will
be ISOs and the Options for the amount in excess of $100,000 that become
exercisable in such calendar year will be NQSOs. In the event that the Code
or the regulations promulgated thereunder are amended after the Effective
Date to provide for a different limit on the Fair Market Value of Shares
permitted to be subject to ISOs, such different limit will be automatically
incorporated herein and will apply to any Options granted after the
effective date of such amendment.
5.9 Modification, Extension or Renewal. The Committee may modify,
extend or renew outstanding Options and authorize the grant of new Options
in substitution therefor, provided that any such action may not, without
the written consent of a Participant, impair any of such Participant's
rights under any Option previously granted. Any outstanding ISO that is
modified, extended, renewed or otherwise altered will be treated in
accordance with Section 424(h) of the Code. The Committee may reduce the
Exercise Price of outstanding Options without the consent of Participants
affected by a written notice to them; provided, however, that the Exercise
Price may not be reduced below the minimum Exercise Price that would be
permitted under Section 5.4 ("Exercise Price") for Options granted on the
date the action is taken to reduce the Exercise Price.
5.10 No Disqualification. Notwithstanding any other provision in this
Plan, no term of this Plan relating to ISOs will be interpreted, amended or
altered, nor will any discretion or authority granted under this Plan be
exercised, so as to disqualify this Plan under Section 422 of the Code or,
without the consent of the Participant affected, to disqualify any ISO
under Section 422 of the Code. In no event shall the total number of Shares
issued (counting each reissuance of a Share that was previously issued and
then forfeited or repurchased by the Company as a separate issuance) under
the Plan upon
4
exercise of ISOs exceed 10,000,000 Shares (adjusted in
proportion to any adjustments under Section 2.2 ("Adjustment of Shares")
hereof) over the term of the Plan.
6. RESTRICTED STOCK. A Restricted Stock Award is an offer by the Company to
sell to an eligible person Shares that are subject to restrictions. The
Committee will determine to whom an offer will be made, the number of Shares the
person may purchase, the price to be paid (the "Purchase Price"), the
restrictions to which the Shares will be subject, and all other terms and
conditions of the Restricted Stock Award, subject to the following:
6.1 Form of Restricted Stock Award. All purchases under a Restricted
Stock Award made pursuant to this Plan will be evidenced by an Award
Agreement ("Restricted Stock Purchase Agreement") that will be in such form
and contain such provisions (which need not be the same for each
Participant) as the Committee may from time to time approve, and will
comply with and be subject to the terms and conditions of this Plan. The
offer of Restricted Stock Awards will be accepted by the Participant's
execution and delivery of the Restricted Stock Purchase Agreement and full
payment for the Shares to the Company within thirty (30) days from the date
the Restricted Stock Purchase Agreement is delivered to the person. If such
person does not execute and deliver the Restricted Stock Purchase Agreement
along with full payment for the Shares to the Company within thirty (30)
days, then the offer will terminate, unless otherwise determined by the
Committee.
6.2 Purchase Price. The Purchase Price will be determined by the
Committee on the date the Restricted Stock Award is granted or at the time
the purchase is consummated, except in the case of a sale to a Ten Percent
Shareholder, in which case the Purchase Price will be one hundred percent
(100%) of the Fair Market Value on the date the Restricted Stock Award is
granted or at the time the purchase is consummated. Payment of the Purchase
Price may be made in accordance with Section 7 ("Payment for Share
Purchases").
6.3 Terms of Restricted Stock Awards. Restricted Stock Awards shall be
subject to such restrictions as the Committee may impose. These
restrictions may be based upon completion of a specified number of years of
service with the Company or upon completion of the performance goals as set
out in advance in the Participant's individual Restricted Stock Purchase
Agreement. Restricted Stock Awards may vary from Participant to Participant
and between groups of Participants. Prior to the grant of a Restricted
Stock Award, the Committee shall: (a) determine the nature, length and
starting date of any Performance Period for the Restricted Stock Award; (b)
select from among the Performance Factors to be used to measure performance
goals, if any; and (c) determine the number of Shares that may be awarded
to the Participant. Prior to the payment of any Restricted Stock Award, the
Committee shall determine the extent to which such Restricted Stock Award
has been earned. Performance Periods may overlap and Participants may
participate simultaneously with respect to Restricted Stock Awards that are
subject to different Performance Periods and having different performance
goals and other criteria.
6.4 Termination During Performance Period. If a Participant is
terminated during a Performance Period for any reason, then such
Participant will be entitled to payment (whether in Shares, cash or
otherwise) with respect to the Restricted Stock Award only to the extent
earned as of the date of Termination in accordance with the Restricted
Stock Purchase Agreement, unless the Committee determines otherwise.
5
7. PAYMENT FOR SHARE PURCHASES.
7.1 Payment. Payment for Shares purchased pursuant to this Plan may be
made in cash (by check) or, where expressly approved for the Participant by
the Committee and where permitted by law:
(a) by cancellation of indebtedness of the Company to the
Participant;
(b) by surrender of shares that either: (1) have been owned by
the Participant for more than six (6) months and have been
paid for within the meaning of SEC Rule 144 (and, if such
shares were purchased from the Company by use of a
promissory note, such note has been fully paid with respect
to such shares); or (2) were obtained by the Participant in
the public market;
(c) by waiver of compensation due or accrued to the Participant
for services rendered to the Company or a Parent or
Subsidiary of the Company;
(d) with respect only to purchases upon exercise of an Option,
and provided that a public market for the Company's Common
Stock exists:
(1) through a "same day sale" commitment from the
Participant and a broker-dealer that is a member of the
National Association of Securities Dealers (an "NASD
Dealer") whereby the Participant irrevocably elects to
exercise the Option and to sell a portion of the Shares
so purchased to pay for the Exercise Price, and whereby
the NASD Dealer irrevocably commits upon receipt of
such Shares to forward the Exercise Price directly to
the Company; or
(2) through a "margin" commitment from the Participant and
an NASD Dealer whereby the Participant irrevocably
elects to exercise the Option and to pledge the Shares
so purchased to the NASD Dealer in a margin account as
security for a loan from the NASD Dealer in the amount
of the Exercise Price, and whereby the NASD Dealer
irrevocably commits upon receipt of such Shares to
forward the Exercise Price directly to the Company; or
(e) by any combination of the foregoing.
7.2 Loan Guarantees. The Committee may, subject to its express
approval and where permitted by law, help the Participant pay for Shares
purchased under this Plan by authorizing a guarantee by the Company of a
third-party loan to the Participant.
8. AUTOMATIC GRANTS TO OUTSIDE DIRECTORS.
8.1 Types of Options and Shares. Options granted under this Plan and
subject to this Section 8 shall be NQSOs.
6
8.2 Eligibility. Options subject to this Section 8 shall be granted
only to Outside Directors.
8.3 Initial Grant. Each Outside Director who first becomes a member of
the Board on or after the Effective Date will automatically be granted an
option for that fixed number of Shares which the Committee has established
for initial grants to Outside Directors as of the date of each grant (an
"Initial Grant") on the date such Outside Director first becomes a member
of the Board, unless such Outside Director received a grant of options
before the Effective Date.
8.4 Succeeding Grant. On April 1 of each year (or the next business
day should such date be a legal holiday), each Outside Director will
automatically be granted an option for that fixed number of Shares which
the Committee has established for succeeding grants to Outside Directors as
of the date of each grant (a "Succeeding Grant"), provided, that the
Outside Director is a member of the Board on such date and has served
continuously as a member of the Board for a period of at least twelve (12)
months since the last option grant (whether an Initial Grant or a
Succeeding Grant) to such Outside Director. If less than twelve (12) months
has passed, then the number of shares subject to the Succeeding Grant will
be pro-rated based on the number of days passed since the last option grant
to such Outside Director, divided by 365 days.
8.5 Vesting. The date an Outside Director receives an Initial Grant or
a Succeeding Grant is referred to in this Plan as the "Start Date" for such
option.
(a) Initial Grant. Each Initial Grant will vest and be
exercisable as to 8.33333% of the Shares at the end of each
full succeeding month after the Start Date, so long as the
Outside Director continuously remains a director or a
consultant of the Company.
(b) Succeeding Grant. Each Succeeding Grant will vest and be
exercisable as to 8.33333% of the Shares at the end of each
full succeeding month after the Start Date, so long as the
Outside Director continuously remains a director or a
consultant of the Company.
8.6 Exercise Price. The exercise price of an option pursuant to an
Initial Grant or a Succeeding Grant shall be the Fair Market Value of the
Shares at the time that such option is granted.
8.7 Termination. Except as provided below in this Section, the options
granted under this Section 8 shall terminate and may not be exercised if
the Outside Director ceases to be a member of the Board or a consultant of
the Company. The date on which the Outside Director ceases to be a member
of the Board or ceases to remain a consultant of the Company shall be
referred to as the "Termination Date."
(a) Termination Generally. If Outside Director ceases to be a
member of the Board or a consultant of the Company for any
reason except death, Disability or Cause, the options
granted under this Section 8, to the extent (and only to the
extent) that it would have been exercisable by such Outside
Director on the Termination Date, may be exercised by the
Outside Director within three (3) months after the
Termination Date, but in no event later than the expiration
date.
7
(b) Death or Disability. If the Outside Director ceases to be a
member of the Board or a consultant of the Company because
of the death or Disability of the Outside Director, the
options granted under this Section 8, to the extent (and
only to the extent) that it would have been exercisable by
the Outside Director on the Termination Date, may be
exercised by the Outside Director within twelve (12) months
after the Termination Date, but in no event later than the
expiration date.
(c) Cause. If the Outside Director is terminated for Cause, then
the options granted under this Section 8 shall expire on
such Outside Director's Termination Date, or at such later
time and on such conditions as are determined by the
Committee.
9. WITHHOLDING TAXES.
9.1 Withholding Generally. Whenever Shares are to be issued in
satisfaction of Awards granted under this Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy
federal, state and local withholding tax requirements prior to the delivery
of any certificate or certificates for such Shares. Whenever, under this
Plan, payments in satisfaction of Awards are to be made in cash, such
payment will be net of an amount sufficient to satisfy federal, state, and
local withholding tax requirements.
9.2 Stock Withholding. When, under applicable tax laws, a Participant
incurs tax liability in connection with the exercise or vesting of any
Award that is subject to tax withholding and the Participant is obligated
to pay the Company the amount required to be withheld, the Committee may in
its sole discretion allow the Participant to satisfy the minimum
withholding tax obligation by electing to have the Company withhold from
the Shares to be issued that number of Shares having a Fair Market Value
equal to the minimum amount required to be withheld, determined on the date
that the amount of tax to be withheld is to be determined. All elections by
a Participant to have Shares withheld for this purpose will be made in
accordance with the requirements established by the Committee and be in
writing in a form acceptable to the Committee.
10. TRANSFERABILITY.
Awards granted under this Plan, and any interest therein, will
not be transferable or assignable by Participant, other than by will or by the
laws of descent and distribution, and may not be made subject to execution,
attachment or similar process. During the lifetime of the Participant an Award
will be exercisable only by the Participant or Participant's legal
representative and any elections with respect to an Award may be made only by
the Participant or Participant's legal representative.
11. PRIVILEGES OF STOCK OWNERSHIP; RESTRICTIONS ON SHARES.
11.1 Voting and Dividends. No Participant will have any of the rights
of a shareholder with respect to any Shares until the Shares are issued to
the Participant. After Shares are issued to the Participant, the
Participant will be a shareholder and have all the rights of a shareholder
with respect to such Shares, including the right to vote and receive all
dividends or other distributions made or paid with respect to such Shares;
provided, that if such Shares are restricted stock, then any new,
additional or different securities the Participant may become entitled to
receive with respect to such Shares by virtue of a stock dividend, stock
split or any other change in the corporate or capital structure of the
Company will be subject to the same restrictions as the restricted stock;
provided, further, that the Participant will have no right to retain such
stock dividends or stock distributions with respect to Shares
8
that are
repurchased at the Participant's Purchase Price or Exercise Price pursuant
to Section 11.2 ("Restrictions on Shares").
11.2 Restrictions on Shares. At the discretion of the Committee, the
Company may reserve to itself and/or its assignee(s) in the Award Agreement
a right to repurchase a portion of or all Unvested Shares held by a
Participant following such Participant's Termination at any time within
ninety (90) days after the later of the Participant's Termination Date and
the date the Participant purchases Shares under this Plan, for cash and/or
cancellation of purchase money indebtedness, at the Participant's Exercise
Price or Purchase Price, as the case may be.
12. CERTIFICATES. All certificates for Shares or other securities delivered
under this Plan will be subject to such stock transfer orders, legends and other
restrictions as the Committee may deem necessary or advisable, including
restrictions under any applicable federal, state or foreign securities law, or
any rules, regulations and other requirements of the SEC or any stock exchange
or automated quotation system upon which the Shares may be listed or quoted.
13. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a
Participant's Shares, the Committee may require the Participant to deposit all
certificates representing Shares, together with stock powers or other
instruments of transfer approved by the Committee, appropriately endorsed in
blank, with the Company or an agent designated by the Company to hold in escrow
until such restrictions have lapsed or terminated, and the Committee may cause a
legend or legends referencing such restrictions to be placed on the
certificates. Any Participant who is permitted to execute a promissory note as
partial or full consideration for the purchase of Shares under this Plan will be
required to pledge and deposit with the Company all or part of the Shares so
purchased as collateral to secure the payment of the Participant's obligation to
the Company under the promissory note; provided, however, that the Committee may
require or accept other or additional forms of collateral to secure the payment
of such obligation and, in any event, the Company will have full recourse
against the Participant under the promissory note notwithstanding any pledge of
the Participant's Shares or other collateral. In connection with any pledge of
the Shares, the Participant will be required to execute and deliver a written
pledge agreement in such form as the Committee will from time to time approve.
The Shares purchased with the promissory note may be released from the pledge on
a pro rata basis as the promissory note is paid.
14. EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any time or from
time to time, authorize the Company, with the consent of the respective
Participants, to issue new Awards in exchange for the surrender and cancellation
of any or all outstanding Awards, including but not limited to an exchange
pursuant to an Award Exchange Program and including but not limited to an
exchange for a new option at a lower exercise price, whether or not such
exchange is simultaneous. The Committee may at any time buy from a Participant
an Award previously granted with payment in cash, Shares (including restricted
stock) or other consideration, based on such terms and conditions as the
Committee and the Participant may agree.
15. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. This Plan is intended
to comply with the California Corporations Code. Any provision of this Plan
which is inconsistent with the California Corporations Code shall, without
further act or amendment by the Company or the Board, be reformed to comply with
the requirements of the California Corporations Code. An Award will not be
effective unless such Award is in compliance with all applicable federal and
state securities laws, rules and regulations of any governmental body, and the
requirements of any stock exchange or automated quotation system upon which the
Shares may then be listed or quoted, as they are in effect on the date of grant
of the Award and also on the date of exercise or other issuance. Notwithstanding
any other provision in this Plan, the Company will have no obligation to issue
9
or deliver certificates for Shares under this Plan prior to: (a) obtaining any
approvals from governmental agencies that the Company determines are necessary
or advisable; and/or (b) compliance with any exemption, completion of any
registration or other qualification of such Shares under any state or federal
law or ruling of any governmental body that the Company determines to be
necessary or advisable. The Company will be under no obligation to register the
Shares with the SEC or to effect compliance with the exemption, registration,
qualification or listing requirements of any state securities laws, stock
exchange or automated quotation system, and the Company will have no liability
for any inability or failure to do so.
16. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award granted
under this Plan will confer or be deemed to confer on any Participant any right
to continue in the employ of, or to continue any other relationship with, the
Company or any Parent or Subsidiary of the Company or limit in any way the right
of the Company or any Parent or Subsidiary of the Company to terminate
Participant's employment or other relationship at any time, with or without
Cause.
17. CORPORATE TRANSACTIONS.
17.1 Assumption or Replacement of Awards by Successor. In the event of
(a) a dissolution or liquidation of the Company, (b) a merger or
consolidation in which the Company is not the surviving corporation (other
than a merger or consolidation with a wholly-owned subsidiary, a
reincorporation of the Company in a different jurisdiction, or other
transaction in which there is no substantial change in the shareholders of
the Company or their relative stock holdings and the Awards granted under
this Plan are assumed, converted or replaced by the successor corporation,
which assumption will be binding on all Participants), (c) a merger in
which the Company is the surviving corporation but after which the
shareholders of the Company immediately prior to such merger (other than
any shareholder that merges, or which owns or controls another corporation
that merges, with the Company in such merger) cease to own their shares or
other equity interest in the Company, (d) the sale of substantially all of
the assets of the Company, or (e) the acquisition, sale, or transfer of
more than 50% of the outstanding shares of the Company by tender offer or
similar transaction (each, a "Corporate Transaction"), any or all
outstanding Awards may be assumed, converted or replaced by the successor
corporation (if any), which assumption, conversion or replacement will be
binding on all Participants. In the alternative, the successor corporation
may substitute equivalent Awards or provide substantially similar
consideration to Participants as was provided to shareholders (after taking
into account the existing provisions of the Awards). The successor
corporation may also issue, in place of outstanding Shares of the Company
held by the Participants, substantially similar shares or other property
subject to repurchase restrictions no less favorable to the Participant. In
the event such successor corporation (if any) refuses to assume or
substitute Awards, as provided above, pursuant to a transaction described
in this Subsection 17.1, such Awards will expire on such transaction at
such time and on such conditions as the Committee will determine.
Notwithstanding anything in this Plan to the contrary, the Committee may,
in its sole discretion, provide that the vesting of any or all Awards
granted pursuant to this Plan will accelerate upon a transaction described
in this Section 17. If the Committee exercises such discretion with respect
to Options, such Options will become exercisable in full prior to the
consummation of such event at such time and on such conditions as the
Committee determines, and if such Options are not exercised prior to the
consummation of the corporate transaction, they shall terminate at such
time as determined by the Committee.
17.2 Other Treatment of Awards. Subject to any greater rights granted
to Participants under the foregoing provisions of this Section 17, in the
event of the occurrence of any Corporate Transaction described in Section
17.1, any outstanding Awards will be treated as provided in the applicable
agreement or plan of merger, consolidation, dissolution, liquidation, or
sale of assets.
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17.3 Assumption of Awards by the Company. The Company, from time to
time, also may substitute or assume outstanding awards granted by another
company, whether in connection with an acquisition of such other company or
otherwise, by either; (a) granting an Award under this Plan in substitution
of such other company's award; or (b) assuming such award as if it had been
granted under this Plan if the terms of such assumed award could be applied
to an Award granted under this Plan. Such substitution or assumption will
be permissible if the holder of the substituted or assumed award would have
been eligible to be granted an Award under this Plan if the other company
had applied the rules of this Plan to such grant. In the event the Company
assumes an award granted by another company, the terms and conditions of
such award will remain unchanged (except that the exercise price and the
number and nature of Shares issuable upon exercise of any such option will
be adjusted appropriately pursuant to Section 424(a) of the Code). In the
event the Company elects to grant a new Option rather than assuming an
existing option, such new Option may be granted with a similarly adjusted
Exercise Price.
18. ADOPTION AND SHAREHOLDER APPROVAL. This Plan will become effective on
the date on which the registration statement filed by the Company with the SEC
under the Securities Act registering the initial public offering of the
Company's Common Stock is declared effective by the SEC (the "Effective Date").
This Plan shall be approved by the shareholders of the Company (excluding Shares
issued pursuant to this Plan), consistent with applicable laws, within twelve
(12) months before or after the date this Plan is adopted by the Board. Upon the
Effective Date, the Committee may grant Awards pursuant to this Plan; provided,
however, that: (a) no Option may be exercised prior to initial shareholder
approval of this Plan; (b) no Option granted pursuant to an increase in the
number of Shares subject to this Plan approved by the Board will be exercised
prior to the time such increase has been approved by the shareholders of the
Company; (c) in the event that initial shareholder approval is not obtained
within the time period provided herein, all Awards granted hereunder shall be
cancelled, any Shares issued pursuant to any Awards shall be cancelled, and any
purchase of Shares issued hereunder shall be rescinded; and (d) in the event
that shareholder approval of such increase shall not be obtained within the time
period provided herein, all Awards granted pursuant to such increase shall be
cancelled, any Shares issued pursuant to any Awards granted pursuant to such
increase will be cancelled, and any purchase of Shares pursuant to such increase
shall be rescinded.
19. TERM OF PLAN/GOVERNING LAW. Unless earlier Terminated as provided
herein, this Plan will terminate ten (10) years from the date this Plan is
adopted by the Board or, if earlier, the date of shareholder approval. This Plan
and all agreements thereunder shall be governed by and construed in accordance
with the laws of the State of California.
20. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time terminate
or amend this Plan in any respect, including, without limitation, amendment of
any form of Award Agreement or instrument to be executed pursuant to this Plan;
provided, however, that the Board will not, without the approval of the
shareholders of the Company, amend this Plan in any manner that requires such
shareholder approval pursuant to the California Corporations Code, the Code or
the regulations promulgated thereunder as such provisions apply to this Plan.
21. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan by the
Board, the submission of this Plan to the shareholders of the Company for
approval, nor any provision of this Plan will be construed as creating any
limitations on the power of the Board to adopt such additional compensation
arrangements as it may deem desirable, including, without limitation, the
granting of stock options otherwise than under this Plan, and such arrangements
may be either generally applicable or applicable only in specific cases.
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22. XXXXXXX XXXXXXX POLICY. Each Participant and Outside Director who
receives an Award shall comply with any policy adopted by the Company from time
to time covering transactions in the Company's securities by employees, officers
and/or directors of the Company.
23. DEFINITIONS. As used in this Plan, the following terms will have the
following meanings:
"Award" means any award under this Plan, including any Option or
Restricted Stock Award.
"Award Agreement" means, with respect to each Award, the signed
written agreement between the Company and the Participant
setting forth the terms and conditions of the Award.
"Awards Exchange Program" is a program whereby outstanding (a)
Options are exchanged for new Options with a lower exercise
price and (b) Restricted Stock Awards are exchanged for new
Restricted Stock Awards with a lower purchase price.
"Board" means the Board of Directors of the Company.
"Cause" means (a) the commission of an act of theft,
embezzlement, fraud, dishonesty, (b) a breach of fiduciary
duty to the Company or a Parent or Subsidiary of the
Company, or (c) a failure to materially perform the
customary duties of employee's employment.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the Compensation Committee of the Board.
"Company" means Corporation, Inc. or any successor corporation.
"Disability" means a disability, whether temporary or permanent,
partial or total, as determined by the Committee.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exercise Price" means the price at which a holder of an Option
may purchase the Shares issuable upon exercise of the
Option.
"FairMarket Value" means, as of any date, the value of a share
of the Company's Common Stock determined as follows:
(a) if such Common Stock is then quoted on the Nasdaq
National Market, its closing price on the Nasdaq
National Market on the date of determination as
reported in The Wall Street Journal;
(b) if such Common Stock is publicly traded and is then
listed on a national securities exchange, its closing
price on the date of determination on the principal
national securities exchange on which the Common Stock
is listed or admitted to trading as reported in The
Wall Street Journal;
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(c) if such Common Stock is publicly traded but is not
quoted on the Nasdaq National Market nor listed or
admitted to trading on a national securities exchange,
the average of the closing bid and asked prices on the
date of determination as reported in The Wall Street
Journal (or, if not so reported, as otherwise reported
by any newspaper or other source as the Board may
determine);
(d) in the case of an Award made on the Effective Date, the
price per share at which shares of the Company's Common
Stock are initially offered for sale to the public by
the Company's underwriters in the initial public
offering of the Company's Common Stock pursuant to a
registration statement filed with the SEC under the
Securities Act; or
(e) if none of the foregoing is applicable, by the
Committee in good faith.
"Insider" means an officer or director of the Company or any
other person whose transactions in the Company's Common
Stock are subject to Section 16 of the Exchange Act.
"Option" means an award of an option to purchase Shares pursuant
to Section 5 ("Options").
"Outside Director" means a member of the Board who is (a) not an
employee of the Company or any Parent or Subsidiary of the
Company and (b) not a representative of any venture capital
funds or corporate investors who own 10% or more of
Company's Common Stock.
"Parent" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if
each of such corporations other than the Company owns stock
possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in
such chain.
"Participant" means a person who receives an Award under this
Plan.
"Performance Factors" means the factors selected by the Committee
from among the following measures to determine whether the
performance goals established by the Committee and
applicable to Awards have been satisfied:
(a) Net revenue and/or net revenue growth;
(b) Earnings before income taxes and amortization and/or
earnings before income taxes and amortization growth;
(c) Operating income and/or operating income growth;
(d) Net income and/or net income growth;
(e) Earnings per share and/or earnings per share growth;
(f) Total shareholder return and/or total shareholder
return growth;
(g) Return on equity;
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(h) Operating cash flow return on income;
(i) Adjusted operating cash flow return on income;
(j) Economic value added; and
(k) Individual confidential business objectives.
"Performance Period" means the period of service determined by
the Committee, not to exceed five years, during which years
of service or performance is to be measured for Restricted
Stock Awards.
"Plan" means this Corporation, Inc. 2002 Equity Incentive Plan,
as amended from time to time.
"Restricted Stock Award" means an award of Shares pursuant to
Section 6 ("Restricted Stock").
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means shares of the Company's Common Stock reserved for
issuance under this Plan, as adjusted pursuant to Sections 2
("Shares Subject to the Plan") and 17 ("Corporate
Transactions"), and any successor security.
"Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if
each of the corporations other than the last corporation in
the unbroken chain owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one
of the other corporations in such chain.
"Termination" or "Terminated" means, for purposes of this Plan
with respect to a Participant, that the Participant has for
any reason ceased to provide services as an employee,
officer, director, consultant, independent contractor or
advisor to the Company or a Parent or Subsidiary of the
Company. An employee will not be deemed to have ceased to
provide services in the case of (i) sick leave, (ii)
military leave, or (iii) any other leave of absence approved
by the Committee; provided, that such leave is for a period
of not more than 90 days, unless reemployment upon the
expiration of such leave is guaranteed by contract or
statute or unless provided otherwise pursuant to formal
policy adopted from time to time by the Company and issued
and promulgated to employees in writing. In the case of any
employee on an approved leave of absence, the Committee may
make such provisions respecting suspension of vesting of the
Award while on leave from the employ of the Company or a
Parent or Subsidiary of the Company as it may deem
appropriate, except that in no event may an Option be
exercised after the expiration of the term set forth in the
Stock Option Agreement. The Committee will have sole
discretion to determine whether a Participant has ceased to
provide services and the effective date on which the
Participant ceased to provide services (the "Termination
Date").
"Unvested Shares" means "Unvested Shares" as defined in the Award
Agreement.
"Vested Shares" means "Vested Shares" as defined in the Award
Agreement.
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EXHIBIT A
EXECUTIVE SEVERANCE AND TRANSITION BENEFITS AGREEMENT
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EXHIBIT B
EMPLOYEE PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
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