EX 10.10
Employment Agreement
This Agreement is entered into as of February 17, 1999, by and between
Xxxxxxx X. Xxxxx (the "Employee") and Micromuse Inc., a Delaware corporation
(the "Company").
1. Duties and Scope of Employment.
(a) Position. For the term of his employment under this Agreement
("Employment"), the Company agrees to employ the Employee in the position of
Chairman of the Board of Directors and Chief Executive Officer. The Employee
shall report to the Company's Board of Directors (the "Board"). The Company
shall use its best efforts to cause the Employee to be elected as a member of
the Board when his Employment commences and whenever his term as a member of the
Board expires during the term of his Employment. In the event that his
Employment terminates for any reason, the Employee agrees to resign as a member
of the Board and as a member of the board of directors of any affiliate of the
Company, unless he and the Company agree otherwise.
(b) Obligations to the Company. During the term of his Employment, the
Employee shall devote his full business efforts and time to the Company. During
the term of his Employment, without the prior written approval of the Board, the
Employee shall not render services in any capacity to any other person or entity
and shall not act as a sole proprietor or partner of any other person or entity
or as a shareholder owning more than one percent of the stock of any other
corporation. The Employee will be entitled to expend a reasonable amount of time
performing civic and volunteer activities, subject to approval of the Board,
which shall not be unreasonably withheld. The Employee shall comply with the
Company's policies and rules, as they may be in effect from time to time during
the term of his Employment.
(c) No Conflicting Obligations. The Employee represents and warrants
to the Company that he is under no obligations or commitments, whether
contractual or otherwise, that are inconsistent with his obligations under this
Agreement. The Employee represents and warrants that he will not use or
disclose, in connection with his employment by the Company, any trade secrets or
other proprietary information or intellectual property in which the Employee or
any other person has any right, title or interest and that his employment by the
Company as contemplated by this Agreement will not infringe or violate the
rights of any other person. The Employee represents and warrants to the Company
that he has returned all property and confidential information belonging to any
prior employer.
(d) Commencement Date. The Employee shall commence his employment
relationship with the Company on the above date and will commence full-time
Employment as Chairman and Chief Executive Officer as soon as reasonably
practicable thereafter, currently targeted for on or about February 22, 1999,
but in no event later than March 1, 1999. The date that the Employee reports for
full-time employment will be the date of
employment for purposes of computing compensation as an executive and vesting of
stock options.
2. Cash and Incentive Compensation.
(a) Salary. The Company shall pay the Employee as compensation for his
services a base salary at a gross annual rate of not less than $350,000, which
amount will not be subject to unilateral reduction by the Company. Such salary
shall be payable in accordance with the Company's standard payroll procedures.
The annual compensation specified in this Subsection (a), together with any
increases in such compensation that the Company may grant from time to time, is
referred to in this Agreement as "Base Compensation."
(b) Incentive Bonuses. The Employee shall be eligible to be considered
for an annual incentive bonus with a target amount equal to his Base
Compensation. Such bonus (if any) shall be awarded based on objective or
subjective criteria reasonably established in advance by agreement between the
Employee and the Compensation Committee of the Board. The reasonable
determinations of the Board with respect to such bonus shall be final and
binding, subject to Section 10(g).
(c) Relocation. The Company shall reimburse the reasonable and
substantiated expenses, not to exceed $120,000, that the Employee incurs in
relocating from the Chicago area to the San Francisco or New York area,
including moving expenses and interim travel, housing and living expenses. The
Employee initially shall work primarily in the Company's San Francisco office.
The Employee shall relocate himself and his family to the San Francisco or New
York area, as he selects, not later than August 31, 1999.
(d) Stock Options. The Company shall grant the Employee non-statutory
stock options covering 800,000 shares of the Company's Common Stock. Such
options shall be granted on the date that the Employee commences full-time
employment with the Company under this Agreement. The exercise price of such
options shall be equal to the fair market value of such stock on the date of
grant. The term of such options shall be 10 years, subject to earlier expiration
in the event of the termination of the Employee's Employment. Such options shall
become exercisable as follows, subject to the Employee's continuing Employment:
(i) Options covering 320,000 shares shall become
exercisable after 18 months of continuous Employment. This option
award is intended to compensate the Employee for the value of equity
awards and other benefits which he forfeits by terminating his
previous employment.
(ii) Options covering 320,000 shares shall become
exercisable in equal monthly installments over the Employee's
first 48 months of continuous Employment.
(iii) Options covering 80,000 shares shall become
exercisable in equal monthly installments over the 24-month
period of continuous Employment commencing on October 1, 2000, if
the Company had not less than $100 million of revenue for the
fiscal year ending September 30, 2000. If the Board reasonably
determines that the Company had less than $100 million of
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revenue for the fiscal year ending September 30, 2000, then such
options covering 80,000 shares shall become exercisable after 48
months of continuous Employment.
(iv) Options covering 80,000 shares shall become exercisable
in equal monthly installments over the 24-month period of continuous
Employment commencing on October 1, 2000, if the Company had not
less than $90 million of revenue for the fiscal year ending
September 30, 2000. If the Board reasonably determines that the
Company had less than $90 million of revenue for the fiscal year
ending September 30, 2000, then such options covering 80,000
shares shall become exercisable after 48 months of continuous
Employment.
The grant of such options shall be subject to the other terms and conditions set
forth in the Notices of Grant of Stock Option and Stock Option Agreements
attached as Exhibits 1.1 through 1.4.
3. Vacation and Employee Benefits. During the term of his Employment,
the Employee shall be eligible for paid vacations in accordance with the
Company's standard policy applicable to its executive officers, as it may be
amended from time to time. During the term of his Employment, the Employee shall
be eligible to participate in any employee benefit plans maintained by the
Company for its executive officers, subject in each case to the generally
applicable terms and conditions of the plan in question and to the
determinations of any person or committee administering such plan. To the extent
that the Employee's eligibility for benefit coverage by his former employer
lapses in advance of his eligibility for benefit coverage under the Company's
current plans, the Company will pay directly for COBRA coverage or will
reimburse him for amounts expended to secure continuation of benefit coverage
under COBRA, grossed up for any taxes resulting from such reimbursement.
4. Business Expenses. During the term of his Employment, the Employee
shall be authorized to incur necessary and reasonable travel, entertainment and
other business expenses in connection with his duties hereunder. The Company
shall reimburse the Employee for such expenses upon presentation of an itemized
account and appropriate supporting documentation, all in accordance with the
Company's generally applicable policies.
5. Term of Employment.
(a) Basic Rule. The Company agrees to continue the Employee's
Employment, and the Employee agrees to remain in Employment with the Company,
from the commencement date set forth in Section 1(d) until the date when the
Employee's Employment terminates pursuant to Subsection (b) or (c) below. The
Employee's Employment with the Company shall be "at will." Any contrary
representations that may have been made to the Employee shall be superseded by
this Agreement. This Agreement, including Sections 6 and 7 below, shall
constitute the full and complete agreement between the Employee and the Company
on the "at will" nature of the Employee's Employment, which may only be changed
in an express written agreement signed by the Employee and a duly authorized
officer of the Company.
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(b) Termination. The Company may terminate the Employee's
Employment at any time and for any reason (or no reason), and with or without
Cause, by giving the Employee notice in writing. The Employee may terminate his
Employment at any time and for any reason (or no reason), and with or without
Good Reason, by giving the Company notice in writing. The Employee's Employment
shall terminate automatically in the event of his death.
(c) Permanent Disability. The Company may terminate the Employee's
active Employment due to Permanent Disability by giving the Employee notice in
writing. For all purposes under this Agreement, "Permanent Disability" shall
mean that the Employee, at the time notice is given, has failed to perform his
duties under this Agreement for not less than 120 days during any period of 12
consecutive months as the result of his incapacity due to physical or mental
injury, disability or illness.
(d) Rights upon Termination. Except as expressly provided in
Section 6 or 7, upon the termination of the Employee's Employment pursuant to
this Section 5, the Employee shall only be entitled to the compensation,
benefits and reimbursements described in Sections 2, 3 and 4 for the period
through the effective date of the termination. The payments under this Agreement
shall fully discharge all responsibilities of the Company to the Employee.
(e) Termination of Agreement. This Agreement shall terminate when
all obligations of the parties hereunder have been satisfied. The termination of
this Agreement shall not limit or otherwise affect any of the Employee's
obligations under Section 8.
6. Termination Benefits.
(a) General Release. Any other provision of this Agreement
notwithstanding, Subsections (b) and (c) below and Section 7(a) shall not apply
unless the Employee (i) has executed a general release (in a form reasonably
prescribed by the Company) of all known and unknown claims that he may then have
against the Company or persons affiliated with the Company and (ii) has agreed
not to prosecute any legal action or other proceeding based upon any of such
claims.
(b) Severance Pay. If, during the term of this Agreement, the
Company terminates the Employee's Employment for any reason other than Cause or
Permanent Disability or the Employee resigns his Employment for Good Reason,
then, for a period of 12 months following the termination of his Employment (the
"Continuation Period"), the Company shall provide the Employee with benefits
equivalent to those provided to other executive officers (not including vacation
or leave accrual) under insurance policies and employee benefits plans as
provided pursuant to Section 3 and shall pay the Employee his Base Compensation.
Such Base Compensation shall be paid at the rate in effect at the time of the
termination of Employment and in accordance with the Company's standard payroll
procedures. In addition, the Company shall pay a pro rata bonus under Section
2(b) (if any) for the year in which the termination occurs. With regard to
payments provided under this Subsection (b) or other post termination
compensation or benefits, the Employee shall be under no duty to mitigate his
damages and the Company shall be entitled to no offset rights in the event the
Employee secures other employment.
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(c) Option Acceleration. If Subsection (b) above applies, then the
percentage of all options described in Section 2(d) that is exercisable shall be
determined by adding six months to the actual length of the Employee's
Employment. In addition, if Subsection (b) above applies and if the termination
occurs during the Employee's first 18 months of Employment, then the 320,000
options described in Section 2(d)(i) shall become exercisable in full on the
date of the termination.
(d) Definition of "Cause." For all purposes under this Agreement,
"Cause" shall mean:
(i) Any material breach by the Employee of this Agreement,
the Proprietary Information and Inventions Agreement between the
Employee and the Company, or any other agreement between the
Employee and the Company;
(ii) Conviction of, or a plea of "guilty" or "no contest"
to, a felony under the laws of the United States or any state
thereof;
(iii) Threats or acts of violence or sexual harassment
directed at any present, former or prospective employee,
independent contractor, vendor, customer or business partner of
the Company, including, without limitation, any material breach
of the Company's policies and rules, as they may be in effect
from time to time during the term of his Employment;
(iv) The sale, possession or use of illegal weapons or
drugs on the premises of the Company or a customer of the Company;
(v) Deliberate misappropriation of the assets of the
Company or other deliberate acts of dishonesty at the expense of
the Company; or
(vi) Willful misconduct or gross negligence in the
performance of duties assigned to the Employee under this
Agreement that results in material injury to the Company.
Provided, however, that despite the foregoing, such definitions shall not apply
to actions that are isolated and insubstantial or inadvertent and insubstantial
and that did not occur in bad faith, unless notice thereof is given to the
Employee by the Company and the Employee fails to promptly remedy such actions;
(e) Definition of "Good Reason." For all purposes under this
Agreement, "Good Reason" shall mean:
(i) The assignment to the Employee of any duties
inconsistent in any respect with the Employee's position
(including status, offices, titles and reporting requirements),
authority, duties or responsibilities as contemplated by this
Agreement, or any other action by the Company that results in a
diminution in such position, authority, duties or
responsibilities, other than an isolated and insubstantial or
inadvertent and insubstantial action that was not
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taken in bad faith, unless notice thereof is given to the Company
by the Employee and the Company fails to promptly remedy such
actions;
(ii) Any failure by the Company to comply with
any of the provisions of this Agreement (including, but not
limited to, failure to provide compensation or benefits required
by this Agreement), other than an isolated and insubstantial or
inadvertent and insubstantial failure that did not occur in bad
faith, unless notice thereof is given to the Company by the
Employee and the Company fails to promptly remedy such failures;
(iii) The Company's requiring the Employee to be
based at any location other than the San Francisco or New York
metropolitan area (whichever the Employee selected under Section
2(c));or
(iv) The Company's failure to use its best efforts
to cause the Employee to be elected as a member of the Board when
his Employment commences and whenever his term as a member of the
Board expires during the term of his Employment.
7. Change in Control.
(a) Option Acceleration. If, during the term of this Agreement
and within 18 months after the Company is subject to a Change in Control, the
Company terminates the Employee's Employment for any reason other than Cause or
Permanent Disability or the Employee resigns his Employment for Good Reason,
then (i) Section 6(c) shall not apply and (ii) a percentage of all remaining
unexercisable options described in Section 2(d) shall become exercisable on the
date of the termination. If the termination occurs during the Employee's first
12 months of Employment, such percentage shall be 50%. If the termination occurs
after the Employee's first 12 months of Employment, such percentage shall be
100%.
(b) Definition of "Change in Control." For all purposes under
this Agreement, a "Change in Control" shall be deemed to have occurred if:
(i) Any "person" (as defined in Section 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), excluding for this purpose the Company or any
subsidiary of the Company, or any employee benefit plan of the
Company or any subsidiary of the Company, or any person or entity
organized, appointed or established by the Company for or pursuant
to the terms of such plan that acquires beneficial ownership of
voting securities of the Company, is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act) directly
or indirectly of securities of the Company representing 30% or more
of the combined voting power of the Company's then outstanding
securities; provided, however, that:
(A) No Change in Control shall be deemed to have
occurred as the result of an acquisition of securities of
the Company by the Company that, by reducing the number of
voting securities outstanding, increases the direct or
indirect beneficial
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ownership interest of any person to 30% or more of the
combined voting power of the Company's then outstanding
securities, but any subsequent increase in the direct or
indirect beneficial ownership interest of such a person in
the Company shall be deemed a Change in Control;
(B) If the Board determines in good faith that a
person who has become the beneficial owner directly or
indirectly of securities of the Company representing 30% or
more of the combined voting power of the Company's then
outstanding securities has inadvertently reached that level
of ownership interest, and if such person divests as promptly
as practicable a sufficient amount of securities of the Company
so that the person no longer has a direct or indirect
beneficial ownership interest in 30% or more of the combined
voting power of the Company's then outstanding securities,
then no Change in Control shall be deemed to have occurred;
and
(C) No Change in Control shall be deemed to have
occurred as the result of an acquisition of securities of
the Company that was approved by the Board, if the Employee
(in his capacity as a member of the Board) voted in favor of
the approval of such acquisition, but if any acquisition so
approved by the Employee results in a person beneficially
owning directly or indirectly securities of the Company
representing 30% or more of the combined voting power of the
Company's then outstanding securities, then any subsequent
increase in the direct or indirect beneficial ownership
interest of that person in the Company shall be deemed a
Change in Control if the Employee (in his capacity as a
member of the Board) did not vote in favor of approving the
transaction causing such subsequent increase or in favor of
approving an agreement permitting such subsequent increase;
(ii) During any period of two consecutive years (not
including any period prior to the execution of this Agreement), individuals
who at the beginning of such two-year period constituted the Board and any
new director or directors (except for any director designated by a person
who has entered into an agreement with the Company to effect a transaction
described in Paragraph (i) above or Paragraph (iii) below) whose election
by the Board or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds of the directors then still in
office who either were directors at the beginning of such two-year period
or whose election or nomination for election was previously so approved,
cease for any reason to constitute at least a majority of the Board; or
(iii) The consummation of one of the following
transactions (a "Business Combination"):
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(A) A plan of complete liquidation of the
Company;
(B) An agreement for the sale or disposition of the
Company or all or substantially all of the Company's assets;
(C) A plan of merger or consolidation of the Company
with any other corporation; or
(D) A similar transaction or series of transactions
involving the Company;
in each case unless after such Business Combination the
stockholders of the Company immediately prior to the Business
Combination continue to own at least 55% of the voting securities
of the new (or continued) entity immediately after such Business
Combination in substantially the same proportion as their
ownership of the Company immediately prior to such Business
Combination.
8. Employee's Restrictive Covenants.
(a) Non-Competition. During the period commencing on the date of
this Agreement and continuing until the second anniversary of the date when the
Employee's Employment terminates for any reason, the Employee shall not,
directly or indirectly (other than on behalf of the Company or with the
Company's prior written consent), engage in a Competitive Business Activity in
any of the locations in which the Company maintains an office or calls on or
solicits orders from customers of the Company. The term "Competitive Business
Activity" shall mean:
(i) Engaging in, or managing or directing persons
engaged in, the development, licensing, leasing, sale or distribution
of Network Management Software or Service Level Management Software
or any other business, defined by the Company with similar
specificity, which the Company or any of the Company's affiliates
can demonstrate that it is, at the time of such termination,
actively engaged in ("Competing Business"), whether independently
or as an employee, agent, consultant, advisor, independent
contractor, proprietor, partner, officer, director or otherwise;
(ii) Acquiring or having an ownership interest in
any entity that derives more than 15% of its gross revenues from any
Competing Business, except for ownership of 1% or less of any
entity whose securities are freely tradable on an established
market; or
(iii) Participating in the financing, operation,
management or control of any firm, partnership, corporation, entity
or business described in Paragraph (ii) above.
(b) Non-Solicitation. During the period commencing on the date
of is Agreement and continuing until the second anniversary of the date when the
Employee's
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Employment terminates for any reason, the Employee shall not directly or
indirectly, personally or through others, solicit or attempt to solicit (on the
Employee's own behalf or on behalf of any other person or entity) either (i) the
employment of any employee of the Company or any of the Company's affiliates or
(ii) the business of any customer of the Company or any of the Company's
affiliates with whom the Employee had contact during his Employment.
(c) Non-Disclosure. The Employee has entered into a Proprietary
Information and Inventions Agreement with the Company, which is incorporated
herein by reference, a copy of which is attached as Exhibit 2.
(d) Injunctive Relief. The Employee acknowledges and agrees that
his failure to perform any of his covenants in this Section 8 would cause
irreparable injury to the Company and cause damages to the Company that would be
difficult or impossible to ascertain or quantify. Accordingly, without limiting
any other remedies that may be available with respect to any breach of this
Agreement, the Employee consents to the entry of an injunction to restrain any
breach of this Section 8.
(e) Survival. The covenants in this Section 8 shall survive any
cancellation, termination, rescission or expiration of this Agreement and the
termination of the Employee's Employment with the Company for any reason.
9. Successors.
(a) Company's Successors. This Agreement shall be binding upon
any successor (whether direct or indirect and whether by purchase, lease,
merger, consolidation, liquidation or otherwise) to all or substantially all of
the Company's business and/or assets. For all purposes under this Agreement, the
term "Company" shall include any successor to the Company's business and/or
assets that becomes bound by this Agreement.
(b) Employee's Successors. This Agreement and all rights of the
Employee hereunder shall inure to the benefit of, and be enforceable by, the
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
10. Miscellaneous Provisions.
(a) Notice. Notices and all other communications contemplated by
this Agreement shall be in writing and shall be deemed to have been duly given
when (i) personally delivered, (ii) delivered to the U.S. Postal Service for
delivery by registered or certified mail or (iii) delivered to a comparable
private service offering guaranteed deliveries in the ordinary course of its
business. Notice under clauses (ii) and (iii) shall be valid only if delivery
charges have been prepaid and a return receipt will be furnished. In the case of
the Employee, notice under clauses (ii) and (iii) shall be addressed to him at
the home address that he most recently communicated to the Company in writing.
In the case of the Company, notice under clauses (ii) and (iii) shall be
addressed to its corporate headquarters and directed to the attention of its
Secretary.
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(b) Modifications and Waivers. No provision of this Agreement
shall be modified, waived or discharged unless the modification, waiver or
discharge is agreed to in writing and signed by the Employee and by an
authorized officer of the Company (other than the Employee). No waiver by either
party of any breach of, or of compliance with, any condition or provision of
this Agreement by the other party shall be considered a waiver of any other
condition or provision or of the same condition or provision at another time.
(c) Whole Agreement. No other agreements, representations or
understandings (whether oral or written and whether express or implied) that are
not expressly set forth in this Agreement have been made or entered into by
either party with respect to the subject matter hereof. This Agreement and the
attached Exhibits 1.1 through 1.4 and Exhibit 2 contain the entire understanding
of the parties with respect to the subject matter hereof.
(d) Withholding Taxes. All payments made under this Agreement
shall be subject to reduction to reflect taxes or other charges required to be
withheld by law.
(e) Choice of Law. The validity, interpretation, construction
and performance of this Agreement shall be governed by the laws of the State of
New York (except their provisions governing the choice of law).
(f) Severability. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full force
and effect.
(g) Arbitration. Subject to Section 8(d), any controversy or
claim arising out of or relating to this Agreement or the breach thereof, or the
Employee's Employment or the termination thereof, shall be settled in the
metropolitan area in which the Employee's principal office is or was most
recently located, by arbitration in accordance with the National Rules for the
Resolution of Employment Disputes of the American Arbitration Association. The
decision of the arbitrator shall be final and binding on the parties, and
judgment on the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. The parties hereby agree that the arbitrator shall
be empowered to enter an equitable decree mandating specific enforcement of the
terms of this Agreement. The Company shall initially pay all fees and expenses
of the arbitrator. However, the Company or the Employee, as the case may be,
shall bear all fees and expenses of the arbitrator and all of the reasonable
legal fees and out-of-pocket expenses of the other party if the arbitrator
determines that the claim or position of the Company or the Employee, as the
case may be, was without reasonable foundation. The Employee hereby consents to
personal jurisdiction of the state and federal courts located in the state where
the Employee's principal office is or most recently was located for any action
or proceeding arising from or relating to this Agreement or relating to any
arbitration in which the parties are participants.
(h) Legal Fees. The Company shall reimburse the Employee for
reasonable legal fees not in excess of $15,000 incurred by him in connection
with the review of this Agreement prior to its execution.
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(i) No Assignment. This Agreement and all rights and obligations
of the Employee hereunder are personal to the Employee and may not be
transferred or assigned by the Employee at any time. The Company may assign its
rights under this Agreement to any entity that assumes the Company's obligations
hereunder in connection with any sale or transfer of all or substantially all of
the Company's assets to such entity.
(j) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(k) Indemnity and Director and Officer Insurance. The Company
and the Employee shall execute an indemnity agreement that is in substance
identical to agreements entered or to be entered into with other executive
officers and members of the Board. Under such agreement the Company shall
indemnify the Employee to the extent permissible under Delaware law with respect
to actions taken in the scope and course of performing his duties under this
Agreement. In addition, the Company shall use all reasonable efforts to secure
and maintain Director and Officer indemnity insurance in an amount and for
premiums deemed reasonable by the Board.
IN WITNESS WHEREOF, each of the parties has executed this
Agreement, in the case of the Company by its duly authorized officer, as of the
day and year first above written.
Xxxxxxx X. Xxxxx
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Micromuse Inc.
By:
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President & Chief Financial Officer
Exhibit List
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EXHIBIT 1.1 NOTICE OF GRANT OF STOCK OPTION (480,000 shares)
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EXHIBIT 1.2 STOCK OPTION AGREEMENT & PROSPECTUS (480,000 shares)
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EXHIBIT 1.3 NOTICE OF GRANT OF STOCK OPTION (320,000 shares)
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EXHIBIT 1.4 STOCK OPTION AGREEMENT (320,000 shares)
-----------------------------------
EXHIBIT 2 PROPRIETARY INFORMATION, INVENTIONS, AND NON-SOLICITATION AGREEMENT
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11
EXHIBIT 1.1
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NOTICE OF GRANT OF STOCK OPTION
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(480,000 shares under 1997 Stock Option/Stock Issuance Plan)
12
EXHIBIT 1.2
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STOCK OPTION AGREEMENT
----------------------
(480,000 shares under 1997 Stock Option/Stock Issuance Plan)
13
EXHIBIT 1.3
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NOTICE OF GRANT OF STOCK OPTION
-------------------------------
(320,000 shares)
14
EXHIBIT 1.4
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STOCK OPTION AGREEMENT
----------------------
(320,000 shares)
15
EXHIBIT 2
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PROPRIETARY INFORMATION, INVENTIONS, AND NON-SOLICITATION AGREEMENT
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