OpNext, Inc. Nonqualified Stock Option Agreement
Exhibit 10.4
OpNext, Inc.
THIS
AGREEMENT (the “Agreement”), is made effective as of the ___ day of , 20___,
(hereinafter called the “Date of Grant”), between OpNext, Inc., a Delaware corporation (hereinafter
called the “Company”), and (hereinafter called the “Participant”):
R E C I T A L S:
WHEREAS, the Company has adopted the OpNext, Inc. 2001 Long-Term Stock Incentive Plan (the
“Plan”), which Plan is incorporated herein by reference and made a part of this Agreement.
Capitalized terms not otherwise defined herein shall have the same meanings as in the Plan; and
WHEREAS, the Committee has determined that it would be in the best interests of the Company
and its stockholders to grant the option provided for herein (the “Option”) to the Participant
pursuant to the Plan and the terms set forth herein.
NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties
agree as follows:
1. Grant of the Option. The Company hereby grants to the Participant the right and
option (the “Option”) to purchase, on the terms and conditions hereinafter set forth, all or any
part of an aggregate of Shares, subject to adjustment as set forth in the Plan. The
purchase price of the Shares subject to the Option shall be $ per Share (the “Exercise
Price”). The Option is intended to be a non-qualified stock option, and is not intended to be
treated as an option that complies with Section 422 of the Internal Revenue Code of 1986, as
amended.
2. Vesting.
(a) Subject to the Participant’s continued employment with the Company, the Option shall vest
and become exercisable with respect to one-fourth of the Shares initially covered by the Option on
each of the first four anniversaries of the date of Participants commencement of employment with
the Company.
At any time, the portion of the Option that has become vested and exercisable as described
above (or pursuant to Section 2 (c) below) is hereinafter referred to as the “Vested Portion”.
(b) If the Participant’s employment with the Company is terminated for any reason, the Option
shall, to the extent not then vested, be canceled by the Company without consideration and the
Vested Portion of the Option shall remain exercisable for the period set forth in Section 3(a).
(c) Notwithstanding any other provisions of this Agreement to the contrary, in the event that
the Participant’s employment is terminated by the Company and its Subsidiaries without Cause during
the six-month period immediately following a Change of Control (as defined below), the Option
shall, to the extent not then vested and not previously canceled, immediately become fully vested
and exercisable. For purposes of this Agreement, “Change of Control” shall mean the occurrence of
any of the following: (i) the sale, lease, transfer, conveyance or other disposition, in one or a
series of related transactions, of all or substantially all of the assets of the Company to any
“person” or “group” (as such terms are used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act
(as defined in the Plan)) other than the Permitted Holders (as defined below), (ii) any person or
group, other than the Permitted Holders, is or becomes the “beneficial owner” (as defined in Rules
13d-3 and 13d-5 under the Exchange Act, except that a person shall be deemed to have “beneficial
ownership” of all shares that any such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or indirectly, of more than
60% of the total voting power of the voting stock of the Company, including by way of merger,
consolidation or otherwise, (iii) the consummation of any transaction or series of transactions
pursuant to which the Company is merged or consolidated with any other company, other than a
transaction which would result in the shareholders of the Company (and their Affiliates (as defined
in the Plan)) immediately prior thereto continuing to own (either by remaining outstanding or by
being converted into voting securities of the surviving entity) more than 50% of the combined
voting power of the voting securities of the Company or such surviving entity outstanding
immediately after such transaction or (iv) during any period of two consecutive years, individuals
who at the beginning of such period constituted the Board (as defined in the Plan) (together with
any new directors whose election by such Board or whose nomination for election by the shareholders
of the Company was approved by a vote of a majority of the directors of the Company, then still in
office, who were either directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to constitute a majority of the
Board, then in office. “Permitted Holders” shall mean, as of the date of determination, any and
all of (i) Hitachi, Ltd. and any of its Affiliates, (ii) Clarity Partners, L.P. and any of its
Affiliates (iii) Marubeni Corporation and any of its Affiliates and (iv) any person of which
Clarity Partners, L.P., Hitachi Ltd., Marubeni Corporation and any of their respective affiliates
beneficially own, in the aggregate, more than 40% of the total voting power of the voting
securities.
3. Exercise of Option.
(a) Period of Exercise. Subject to the provisions of the Plan and this Agreement, the
Participant may exercise all or any part of the Vested Portion of the Option at any time prior to
the earliest to occur of:
(i) the tenth anniversary of the Date of Grant;
(ii) one year following the date of the Participant’s termination of employment due to
death or “Disability”;
(iii) three months following the date of the Participant’s termination of employment by
the Company without “Cause”; and
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(iv) the date of the Participant’s termination of employment by the Company for “Cause”
or by the Participant for any reason.
For purposes of this agreement:
“Cause” shall mean “Cause” as defined in any employment agreement then in effect
between the Participant and the Company or if not defined therein or, if there shall be no
such agreement, (i) Participant’s engagement in misconduct which is materially injurious to
the Company or any of its Affiliates, (ii) Participant’s continued failure to substantially
perform his duties to the Company or any of its Subsidiaries, (iii) Participant’s repeated
dishonesty in the performance of his duties to the Company or any of its Subsidiaries, (iv)
Participant’s commission of an act or acts constituting any (x) fraud against, or
misappropriation or embezzlement from the Company or any of its Affiliates, (y) crime
involving moral turpitude, or (z) offense that could result in a jail sentence of at least
30 days or (v) Participant’s material breach of any confidentiality, non-solicitation,
non-competition or inventions covenant entered into between the Participant and the Company
or any of its Subsidiaries. The determination of the existence of Cause shall be made by
the Committee in good faith, which determination shall be conclusive for purposes of this
Agreement; and
“Disability” shall mean “disability” as defined in any employment agreement then in
effect between the Participant and the Company or if not defined therein or if there shall
be no such agreement, as defined in the Company’s long-term disability plan as in effect
from time to time, or if there shall be no plan or if not defined therein, the Participant’s
becoming physically or mentally incapacitated and consequent inability for a period of six
(6) months in any twelve (12) consecutive month period to perform his duties to the Company.
(b) Method of Exercise.
(i) Subject to Section 3(a), the Vested Portion of the Option may be exercised by
delivering to the Company at its principal office written notice of intent to so exercise;
provided that, the Option may be exercised with respect to whole Shares only. Such notice
shall specify the number of Shares for which the Option is being exercised and shall be
accompanied by payment in full of the Exercise Price. The payment of the Exercise Price may
be made in cash, or its equivalent, or (x) by exchanging Shares owned by the Participant
(which are not the subject of any pledge or other security interest and which have been
owned by the Participant for at least 6 months) or (y) at any time that the Shares are
publicly traded on a nationally recognized stock exchange, through delivery of irrevocable
instructions to a broker (as selected or approved by the Committee) to sell the Shares
otherwise deliverable upon the exercise of the Option and to deliver promptly to the Company
an amount equal to the aggregate exercise price, or by a combination of the foregoing,
provided that the combined value of all cash and cash equivalents and the Fair Market Value
of any such Shares so tendered to the Company as of the date of such tender is at least
equal to such aggregate exercise price.
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(ii) Notwithstanding any other provision of the Plan or this Agreement to the contrary,
the Option shall be exercised in accordance with any registration or qualification of the
Option or the Shares under applicable state and federal securities or other laws, or under
any ruling or regulation of any governmental body or national securities exchange that the
Committee shall in its sole discretion determine to be necessary or advisable.
(iii) Upon the Company’s determination that the Option has been validly exercised as to
any of the Shares, the Company shall issue certificates in the Participant’s name for such
Shares. However, the Company shall not be liable to the Participant for damages relating to
any delays in issuing the certificates to him, any loss of the certificates, or any mistakes
or errors in the issuance of the certificates or in the certificates themselves.
(iv) In the event of the Participant’s death, the Vested Portion of the Option shall
remain exercisable by the Participant’s executor or administrator, or the person or persons
to whom the Participant’s rights under this Agreement shall pass by will or by the laws of
descent and distribution as the case may be, to the extent set forth in Section 3(a). Any
heir or legatee of the Participant shall take rights herein granted subject to the terms and
conditions hereof.
(c) No Right to Exercise. Notwithstanding the foregoing with respect to any
termination of employment, the Vested Portion of the Option may not be exercised pursuant to this
Section 3 if the Company in its sole discretion determines that the Participant has, at any time
during the term of employment or following termination of employment, violated the terms of any
agreement with the Company or a Subsidiary regarding competition with the business of the Company
or any Subsidiary, interference with contractual or business relationships of the Company or any
Subsidiary, solicitation of employees, officers, partners, agents, or consultants of the Company or
a Subsidiary or other similar covenant. In the event that a Participant violates the terms of any
such agreement, the Company may cause such Participant to forfeit all of his or her outstanding
Options and disgorge any gain realized upon the exercise of any Option within the six-month period
preceding the violation.
4. No Right to Continued Employment. Neither the Plan nor this Agreement shall be
construed as giving the Participant the right to be retained in the employ of, or in any consulting
relationship to, the Company or any Affiliate. Further, the Company or an Affiliate may at any
time dismiss the Participant or discontinue any consulting relationship, free from any liability or
any claim under the Plan or this Agreement, except as otherwise expressly provided herein.
5. Legend on Certificates. The certificates representing the Shares purchased by
exercise of the Option shall be subject to such stop transfer orders and other restrictions as the
Committee may deem advisable under the Plan or the rules, regulations, and other requirements of
the Securities and Exchange Commission, any stock exchange upon which such Shares are listed, and
any applicable Federal or state laws, and the Committee may cause a legend or legends to be put on
any such certificates to make appropriate reference to such restrictions.
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6. Transferability. The Option may not be transferred or assigned by the Participant
otherwise than by will or by the laws of descent and distribution, and any such purported transfer
or assignment shall be void and unenforceable against the Company or any Affiliate; provided that
the designation of a beneficiary shall not constitute a transfer or assignment. No such permitted
transfer of the Option to heirs or legatees of the Participant shall be effective to bind the
Company unless the Committee shall have been furnished with written notice thereof and a copy of
such evidence as the Committee may deem necessary to establish the validity of the transfer and the
acceptance by the transferee or transferees of the terms and conditions hereof.
7. Right of Repurchase.
(a) The Repurchase Right. Upon the termination of a Participant’s service as a
director, officer, consultant or employee of the Company and its Subsidiaries for any reason, all
Shares issued (before or after termination of service) pursuant to exercise of the Option (the
“Option Shares”), whether held by the Participant or one or more of his transferees, will, prior to
an initial public offering by the Company of the Shares, be subject to repurchase by the Company at
its election pursuant to the terms and conditions set forth in this Section 7 (the “Repurchase
Right”).
(b) Repurchase Price. The “Repurchase Price” for all Option Shares shall be the Fair
Market Value for such Option Shares.
(c) Exercise of Repurchase Option. The Company may elect to purchase all or any
portion of the Option Shares by delivering written notice (the “Repurchase Notice”) to the holder
or holders of such Option Shares within the notice period commencing on the later of the date that
is 6 months and 1 day after the Participant’s purchase of such Option Shares or such Participant’s
termination of employment or service. The Repurchase Notice shall set forth the number of Option
Shares to be acquired from each such holder, the aggregate consideration to be paid for such Option
Shares, and the time and place for the closing of the repurchase (which shall occur not less than 5
and not more than 30 days after the giving of the Repurchase Notice).
(d) Assignment of the Company’s Repurchase Right. The Company will not have the right
to assign all or any portion of its Repurchase Right without the consent of Clarity Partners, L.P.
(so long as Clarity Partners, L.P. or one of its affiliates has the right to appoint at least one
director to the Board) and Hitachi, Ltd.
(e) Closing of the Repurchase. At the closing of the repurchase, the holders of
Option Shares shall deliver all certificates evidencing the Option Shares to be repurchased
(accompanied by duly executed stock powers) to the Company (and/or any assignees of the Company’s
Repurchase Right), and the Company (and/or any assignees) shall pay for the Option Shares to be
purchased pursuant to the Repurchase Right by delivery of a check or wire transfer of immediately
available funds in the aggregate amount of the Repurchase Price for such Option Shares; provided
that the Company may pay the Repurchase Price for such Option Shares by offsetting amounts
outstanding under any indebtedness or obligations owed by the Participant to the Company. The
holders of Option Shares to be repurchased shall, at the Company’s request,
provide customary representations and warranties with respect to such holder’s good title to
the Option Shares, free and clear of any liens or encumbrances.
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(f) Restrictions. Notwithstanding anything to the contrary contained in this
Agreement, all repurchases of Option Shares by the Company shall be subject to applicable
restrictions contained in the Delaware corporation laws and in the Company’s and its Subsidiaries’
debt and equity financing agreements. If any such restrictions prohibit the repurchase of Option
Shares hereunder which the Company is otherwise entitled or required to make, the time periods
provided in this Section 7 shall be suspended, and the Company may make such repurchases as soon as
it is permitted to do so under such restrictions.
8. Withholding.
(a) The Participant may be required to pay to the Company or any Affiliate and the Company or
any Affiliate shall have the right and is hereby authorized to withhold from any payment due or
transfer made under the Option or under the Plan or from any compensation or other amount owing to
a Participant the amount (in cash, Shares, other securities, other Awards or other property) of any
applicable withholding taxes in respect of the Option, its exercise, or any payment or transfer
under the Option or under the Plan and to take such action as may be necessary in the option of the
Company to satisfy all obligations for the payment of such taxes.
(b) Without limiting the generality of clause (a) above, the Participant may satisfy, in whole
or in part, the foregoing withholding liability by delivery of Shares owned by the Participant
(which are not subject to any pledge or other security interest and which have been owned by the
Participant for at least 6 months) with a Fair Market Value equal to such withholding liability or
by having the Company withhold from the number of Shares otherwise issuable pursuant to the
exercise of the option a number of Shares with a Fair Market Value equal to such withholding
liability.
9. Securities Laws. Upon the acquisition of any Shares pursuant to the exercise of
the Option, the Participant will make or enter into such written representations, warranties and
agreements as the Committee may reasonably request in order to comply with applicable securities
laws or with this Agreement.
10. Notices. Any notice necessary under this Agreement shall be addressed to the
Company in care of its Secretary at the principal executive office of the Company and to the
Participant at the address appearing in the personnel records of the Company for the Participant or
to either party at such other address as either party hereto may hereafter designate in writing to
the other. Any such notice shall be deemed effective upon receipt thereof by the addressee.
11. Choice of Law. THE INTERPRETATION, PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT
SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAW.
12. Option Subject to Plan. By entering into this Agreement the Participant agrees
and acknowledges that the Participant has received and read a copy of the Plan. The
Option is subject to the Plan. The terms and provisions of the Plan as it may be amended from
time to time are hereby incorporated herein by reference. In the event of a conflict between any
term or provision contained herein and a term or provision of the Plan, the applicable terms and
provisions of the Plan will govern and prevail.
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13. Signature in Counterparts. This Agreement may be signed in counterparts, each of
which shall be an original, with the same effect as if the signatures thereto and hereto were upon
the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
| OPNEXT, INC. | ||||
| Title: | ||||
| PARTICIPANT |
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