Exhibit 10.9
THERMA-WAVE, INC.
EXECUTIVE STOCK AGREEMENT
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THIS EXECUTIVE STOCK AGREEMENT (this "Agreement") is made and entered
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into as of May 16, 1997 by and between Therma-Wave, Inc., a Delaware corporation
(the "Company"), and ▇▇▇ ▇. ▇▇▇▇▇ ("Executive").
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The Company and Executive desire to enter into this Agreement pursuant
to which (i) the Company will issue to Executive 23,427 shares of the Company's
Class A Common Stock, par value $.01 per share (the "Class A Common") and 2,603
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shares of the Company's Class L Common Stock, par value $.01 per share (the
"Class L Common"), (ii) the Company will issue to Executive 127,656 shares of
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the Company's Class B Common Stock, par value $.01 per share (the "Class B
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Common") and (iii) pursuant to the Company's 1997 Stock Purchase and Option
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Plan, a copy of which is attached hereto as Exhibit A (the "Plan"), the Company
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will grant to Executive options (collectively, the "Management Options," and
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each, a "Management Option") to acquire an aggregate of 127,656 shares of Class
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A Common, which options will be divided into five tranches (collectively, the
"Tranches"); the first tranche ("Tranche 1") will consist of Management Options
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to acquire 25,531.2 shares of Class A Common at an exercise price of $8.93 per
share; the second tranche ("Tranche 2") will consist of Management Options to
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acquire 25,531.2 shares of Class A Common at an exercise price of $ 10.68 per
share; the third tranche ("Tranche 3") will consist of Management Options to
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acquire 25,531.2 shares of Class A Common at an exercise price of $12.43 per
share; the fourth tranche ("Tranche 4") will consist of Management Options to
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acquire 25,531.2 shares of Class A Common at an exercise price of $14.18 per
share; and the fifth tranche ("Tranche 5") will consist of Management Options to
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acquire 25,531.2 shares of Class A Common at an exercise price of $ 15.89 per
share. Capitalized terms used herein and not otherwise defined are defined in
Section 12 hereof.
The parties hereto agree as follows:
STOCK AND OPTION PROVISIONS
1. Purchase and Sale of Stock.
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(a) Upon execution of this Agreement, Executive will purchase, and
the Company will sell, 23,427 shares of Class A Common at a price of $0.235 per
share and 2,603 shares of Class L Common at a price of $19.085 per share
(collectively, the "Rollover Stock"), for an aggregate purchase price of
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$55,183.60. The Company will deliver to Executive certificates representing the
Rollover Stock, and, upon receipt of such certificates, Executive will deliver
to the Company $55,183.60 by delivery of a certified check or wire transfer of
funds.
(b) On or prior to April 15, 1998, at the Executive's request the
Company shall loan to Executive an amount equal to all federal, state and local
taxes required to be paid by Executive as a result of payments on the date
hereof to Executive by Toray Industries, Inc. pursuant
to the Agreement, dated as of January 25, 1996, among Toray Industries, Inc.,
Executive and other key employees listed therein in connection with the
Company's recapitalization in exchange for the issuance by Executive to the
Company of a promissory note in the form of Exhibit B attached hereto (the
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"Rollover Stock Note"). Executive's obligations under the Rollover Stock Note
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will be secured by a pledge of all of the Rollover Stock, and in connection
therewith Executive will enter into a pledge agreement in the form of Exhibit C
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attached hereto.
(c) Immediately after the closing of the transactions contemplated
by the Recapitalization Agreement, dated as of December 18, 1996, among the
Company, Sellers and Purchaser (each as defined therein), Executive will
purchase, and the Company will sell, 127,656 shares of Class B Common (the
"Time Vesting Stock"), at a price of $0.235 per share for an aggregate purchase
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price of $29,999.16. The Company will deliver to Executive certificates
representing the Time Vesting Stock, and, upon receipt of such certificates,
Executive will deliver to the Company $1,276.56 by delivery of a check or wire
transfer of funds and a promissory note in the form of Exhibit D attached
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hereto in the aggregate principal amount of $28,722.60 (the "Time Vesting Stock
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Note"). Executive's obligations under the Time Vesting Stock Note will be
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secured by a pledge of all of the Time Vesting Stock, and in connection
therewith Executive will enter into a pledge agreement in the form of Exhibit E
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attached hereto.
(d) Section 83(b) Election. Within 30 days after the date hereof,
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the Executive will make an effective election with the Internal Revenue Service
under Section 83(b) of the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder, in the form of Exhibit F attached hereto.
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(e) Vesting of Time Vesting Stock. Subject to the provisions of
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subsection 1(f), on each date set forth below the Time Vesting Stock will have
become vested with respect to the cumulative percentage of Time Vesting Stock
set forth opposite such date if Executive is, and has been, continuously
employed by the Company or its Subsidiaries from the date of this Agreement
through such date:
Cumulative
Percentage of Time
Date Vesting Stock Vested
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May 16, 1998 20%
May 16, 1999 40%
May 16, 2000 60%
May 16, 2001 80%
May 16, 2002 100%
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; provided that upon the occurrence of a Sale of the Company, all of the Time
Vesting Stock will immediately vest. The shares of the Time Vesting Stock which
have vested as set forth above will be hereafter referred to as "Vested Time
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Vesting Stock" and the shares of the Time Vesting Stock which have not vested
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will be hereafter referred to as "Unvested Time Vesting Stock."
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(f) No Vesting After Termination Date. Notwithstanding any
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provision of subsection 1(e) to the contrary, none of the Time Vesting Stock
will become Vested Time Vesting Stock on or after the Termination Date. All
shares of the Time Vesting Stock which have become Vested Time Vesting Stock
prior to the Termination Date will remain Vested Time Vesting Stock after the
Termination Date.
2. Management Options and Management Option Shares.
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(a) Management Options Grant. The Company hereby grants to
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Executive, pursuant to the Plan, Management Options to purchase an aggregate of
127,656 shares of Class A Common ("Management Option Shares"). Tranche 1 will
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consist of Management Options to purchase 25,531.2 Management Option Shares at
an exercise price of $8.93 per share (the "Tranche 1 Exercise Price"); Tranche 2
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will consist of Management Options to purchase 25,531.2 Management Option
Shares at an exercise price of $10.68 per share (the "Tranche 2 Exercise
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Price"); Tranche 3 will consist of Management Options to purchase 25,531.2
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Management Option Shares at an exercise price of $12.43 per share (the "Tranche
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3 Exercise Price"); Tranche 4 will consist of Management Options to purchase
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25,531.2 Management Option Shares at an exercise price of $14.18 per share (the
"Tranche 4 Exercise Price"); and Tranche 5 will consist of Management Options to
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purchase 25,531.2 Management Option Shares at an exercise price of $15.89 per
share (the "Tranche 5 Exercise Price"). The Tranche 1 Exercise Price, the
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Tranche 2 Exercise Price, the Tranche 3 Exercise Price, the Tranche 4 Exercise
Price, and the Tranche 5 Exercise Price are collectively referred to herein as
"Management Option Prices" and individually as a "Management Option Price".
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With respect to each Tranche, the Management Option Price and the number of
Management Option Shares will be equitably adjusted for any stock split, stock
dividend, reclassification or recapitalization of the Company which occurs
subsequent to the date of this Agreement. The Management Options will be
immediately exercisable and, subject to earlier expiration as provided in
subsection 2(b) below, will expire on the Expiration Date. Each Tranche may be
exercised separately; provided that each Tranche may only be exercised in whole
and not in part. The Management Options are not intended to be "incentive stock
options" within the meaning of Section 422A of the Code.
(b) Expiration Upon Termination of Employment. Any Management
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Options which have not been exercised prior to the Termination Date will expire
on the earlier of (i) 90 days after the Termination Date and (ii) the Expiration
Date and may not be exercised thereafter under any circumstance.
(c) Procedure for Exercise. At any time after the earlier of (i)
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six months after the date hereof and (ii) the effective date of a registration
statement with respect to the Company's debt securities under the 1933 Act and
prior to the Expiration Date, Executive may exercise all or a portion of the
Management Options which have not expired pursuant to subsection 2(b) above by
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delivering written notice of exercise to the Company, together with (i) a
written acknowledgment that Executive has read and has been afforded an
opportunity to ask questions of members of the Company's management regarding
all financial and other information provided to Executive regarding the Company
and (ii) (x) a certified check or wire transfer of funds in an amount equal to
the par value of the Management Option Shares being purchased (the "Cash
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Amount") and (y) a promissory note in the form of Exhibit G attached hereto (an
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"Option Note") in the aggregate principal amount equal to the aggregate
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Management Option Prices (calculated with respect to each Tranche based on the
number of Management Option Shares of such Tranche to be acquired by Executive
and the Management Option Price for such Tranche) for the Tranche(s) being
exercised less the Cash Amount. Executive's obligations under the Option Note
will be secured by a pledge of all of the Management Option Shares, and in
connection therewith Executive will enter into a pledge agreement in the form of
Exhibit H attached hereto. As a condition to any exercise of the Management
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Options, Executive will permit the Company to deliver to him all financial and
other information regarding the Company and its Subsidiaries which it believes
necessary to enable Executive to make an informed investment decision.
(d) Non-Transferability of Management Options. The Management
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Options are personal to Executive and are not transferable by Executive except
pursuant to the laws of descent or distribution. Only Executive or his legal
guardian or representative may exercise the Management Options.
(e) Vesting of Management Option Shares. The Management Option
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Shares will become vested (regardless of whether the corresponding Management
Options have been exercised) on the fifth anniversary of the date hereof if
Executive is, and has been, continuously employed by the Company or its
Subsidiaries from the date of this Agreement through such date; provided that
all of the outstanding Management Option Shares will become vested upon the
occurrence of a Sale of the Company. The Management Option Shares which have
vested as set forth above will be hereafter referred to as "Vested Management
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Option Shares" and the Management Option Shares which have not vested will be
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hereafter referred to as "Unvested Management Option Shares."
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(f) No Vesting After Termination Date. Notwithstanding any provision
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of subsection 2(e) to the contrary, none of the Unvested Management Option
Shares will become Vested Management Option Shares after the Termination Date.
All Management Option Shares which have become Vested Management Option Shares
prior to the Termination Date will remain Vested Management Option Shares after
the Termination Date.
(g) Section 83(b) Election. Within 30 days after the exercise of
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any Management Options, the Executive will make an effective election with the
Internal Revenue Service under Section 83(b) of the Internal Revenue Code of
1986, as amended, and the regulations promulgated thereunder, in the form of
Exhibit I attached hereto.
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3. Representations and Warranties; Acknowledgments.
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(a) Representations and Warranties by Executive. In connection with
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the purchase and sale of Executive Stock hereunder, Executive represents and
warrants to the Company that:
(i) The shares of Executive Stock to be acquired by Executive
pursuant to this Agreement will be acquired for Executive's own account and
not with a view to, or intention of, distribution thereof in violation of
the 1933 Act or any applicable state securities laws, and the shares of
Executive Stock will not be disposed of in contravention of the 1933 Act or
any applicable state securities laws.
(ii) Executive is an executive officer of the Company or its
Subsidiaries, is sophisticated in financial matters and is able to evaluate
the risks and benefits of the investment in Executive Stock.
(iii) Executive is able to bear the economic risk of his
investment in Executive Stock for an indefinite period of time because
Executive Stock has not been registered under the 1933 Act and, therefore,
cannot be sold unless subsequently registered under the 1933 Act or an
exemption from such registration is available.
(iv) Executive has had an opportunity to ask questions and
receive answers concerning the terms and conditions of the offering of
Executive Stock and has had full access to such other information
concerning the Company and its Subsidiaries as he has requested. Executive
has reviewed, or has had an opportunity to review, a copy of the
Recapitalization Agreement and the persons listed on the signature pages
thereto, and Executive is familiar with the transactions contemplated
thereby. Executive also has reviewed, or has had an opportunity to review,
the Company's Certificate of Incorporation and the Company's Bylaws and any
credit agreements, notes and related documents to which the Company is a
party.
(v) This Agreement constitutes the legal, valid and binding
obligation of Executive, enforceable in accordance with its terms, and the
execution, delivery and performance of this Agreement by Executive does not
and will not conflict with, violate or cause a breach of any agreement,
contract or instrument to which Executive is a party or any judgment, order
or decree to which Executive is subject.
(b) Acknowledgment by Executive. As an inducement to the Company to
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sell the Executive Stock to Executive, and as a condition thereto,
Executive acknowledges and agrees that:
(i) the Company will have no duty or obligation to disclose to
Executive, and Executive will have no right to be advised of, any material
information regarding the Company or its Subsidiaries at any time prior
to, upon or in connection with the repurchase of Executive Stock as
provided hereunder; and
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(ii) subject to any employment agreement between Executive and
the Company or applicable law, neither the issuance of Executive Stock to
Executive nor any provision contained herein will entitle Executive to
remain in the employment of the Company or its Subsidiaries or affect the
right of the Company to terminate Executive's employment at any time for
any reason.
4. Repurchase Option.
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(a) Repurchase Option. If the Termination Date occurs, the Executive
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Stock, whether held by Executive or one or more transferees, will be subject to
repurchase by the Company and the ▇▇▇▇ Group (each of the aforementioned, solely
at their option) pursuant to the terms and conditions set forth in, and to the
extent described in, this Section 4 (the "Repurchase Option").
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(b) Repurchase Price. In the event the Termination Date occurs, (i)
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the outstanding Unvested Management Option Shares will be subject to the
Repurchase Option at a price per share equal to the Original Cost thereof, (ii)
the Unvested Time Vesting Stock will be subject to the Repurchase Option at a
price per share equal to the Original Cost thereof, (iii) the outstanding Vested
Management Option Shares will be subject to the Repurchase Option at a price per
share equal to the Fair Market Value thereof as of the Termination Date, (iv)
the Vested Time Vesting Stock will be subject to the Repurchase Option at a
price per share equal to the Fair Market Value thereof as of the Termination
Date and (v) the Rollover Stock will be subject to the Repurchase Option at a
price per share equal to the Fair Market Value thereof as of the Termination
Date; provided that, if the Company has consummated a Public Offering prior to
the Termination Date, none of the Rollover Stock, the Vested Management Option
Shares or the Vested Time Vesting Shares will be subject to the Repurchase
Option.
(c) Repurchase Procedures. The Repurchase Option is exercisable by
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the Company delivering written notice (the "Repurchase Notice") to the holder or
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holders of each Class of Executive Stock within 180 days after the Termination
Date. The Repurchase Notice will set forth the number of shares of each Class
of Executive Stock to be acquired from such holder(s), the aggregate
consideration to be paid for such holder's shares of each such Class of
Executive Stock and the time and place for the closing of the transaction. If
any shares of any Class of Executive Stock are held by any transferees of
Executive, the Company will purchase the shares of such Class elected to be
purchased from such holder(s) of Executive Stock, pro rata according to the
number of shares of such Class of Executive Stock held by such holder(s) at the
time of delivery of such Repurchase Notice (determined as nearly as practicable
to the nearest share).
(d) ▇▇▇▇ Group's Rights.
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(i) If for any reason the Company does not elect to purchase all
of the shares of Executive Stock pursuant to the Repurchase Option prior to the
180th day following the Termination Date, the ▇▇▇▇ Group will be entitled to
exercise the Repurchase Option, in the manner set forth in this Section 4, for
those shares of each Class of Executive Stock the Company has not elected to
purchase (the "Available Shares"); provided that the ▇▇▇▇ Group will not be
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entitled to exercise the Repurchase Option with respect to any Unvested
Management Option Shares or
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Unvested Time Vesting Stock unless the Company is legally or contractually
prohibited from repurchasing such stock. As soon as practicable, but in any
event within thirty (30) days after the Company determines that there will be
any Available Shares, the Company will deliver written notice (the "Option
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Notice") to the ▇▇▇▇ Group setting forth the number of each Class of Available
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Shares and the price for each Available Share.
(ii) Each member of the ▇▇▇▇ Group initially will be permitted
to purchase its pro rata share (based upon the number of shares of Common Stock
then held by such member of the ▇▇▇▇ Group) of each Class of the Available
Shares. Each member of the ▇▇▇▇ Group may elect to purchase any number of any
Class of the Available Shares (subject to the preceding sentence) by delivering
written notice to the Company within 30 days after receipt of the Option Notice
from the Company (such 30-day period being referred to herein as the "Election
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Period").
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(iii) As soon as practicable but in any event within five (5)
days after the expiration of the Election Period, the Company will, if
necessary, notify the members of the ▇▇▇▇ Group electing to purchase Available
Shares of any Class of Available Shares which the members of the ▇▇▇▇ Group have
elected not to purchase and each of the electing members of the ▇▇▇▇ Group will
be entitled to purchase the remaining Available Shares on the same terms as
described above (the "Second Option Notice"); provided that if in the aggregate
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such members of the ▇▇▇▇ Group elect to purchase more than the remaining
Available Shares of any Class, such remaining Available Shares purchased by each
such member of the ▇▇▇▇ Group of such Class will be reduced on a pro rata basis
based upon the number of shares of Common Stock then held by such member of the
▇▇▇▇ Group. Each member of the ▇▇▇▇ Group may elect to purchase any of the
remaining Available Shares available to such member of the ▇▇▇▇ Group by
delivering written notice to the Company within 10 days after the delivery of
the Second Option Notice (with such 10-day period referred to herein as the
"Second Election Period").
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(iv) As soon as practicable but in any event within five (5) days
after the expiration of the Election Period or the Second Election Period (if
any) the Company will, if necessary, notify the holder(s) of Executive Stock as
to the number of shares of each Class of such Executive Stock being purchased
from the holder(s) by the members of the ▇▇▇▇ Group (the "Supplemental
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Repurchase Notice"). At the time the Company delivers a Supplemental Repurchase
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Notice to the holder(s) of such Executive Stock, the Company will also deliver
to each electing member of the ▇▇▇▇ Group written notice setting forth the
number of shares of each Class of Executive Stock the Company and each member of
the ▇▇▇▇ Group will acquire, the aggregate purchase price to be paid and the
time and place of the closing of the transaction.
(e) Closing. The closing of the transactions contemplated by this
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Section 4 will take place on the date designated by the Company in the
Repurchase Notice or the Supplemental Repurchase Notice, as the case may be,
which date will not be more than 90 days after the delivery of such notice. The
members of the ▇▇▇▇ Group will pay for any shares of Applicable Stock to be
purchased by such members of the ▇▇▇▇ Group pursuant to the Repurchase Option by
delivery of a check payable to the holder of such shares of Applicable Stock.
The Company will pay for any shares of Applicable Stock to be purchased by the
Company pursuant to the Repurchase Option (if any) first, to the extent of any
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amounts owed to the Company under the Rollover Stock Note, the
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Time Vesting Stock Note and/or the Option Note, as the case may be, used to
purchase the shares of Applicable Stock being repurchased, by offsetting such
amounts and second, the Company shall pay the remaining portion of the purchase
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price by delivery of (i) a check payable to the holder of such shares of
Applicable Stock or (ii) a note or notes payable in three equal annual
installments beginning on the first anniversary of the closing of such purchase
and bearing interest at a rate per annum equal to 7%, or (iii) a combination of
(i) and (ii) in the aggregate amount of such remaining portion. Any notes issued
by the Company pursuant to this subsection 4(e) will be subject to any
restrictive covenants to which the Company is subject at the time of such
purchase. Notwithstanding anything to the contrary contained in this Agreement,
all repurchases of shares of Executive Stock by the Company will be subject to
applicable restrictions contained in the Delaware General Corporation Law and in
the Company's and its Subsidiaries' debt and equity financing agreements. If any
such restrictions prohibit the repurchase of shares of Executive Stock hereunder
which the Company is otherwise entitled to make, the Company may make such
repurchases as soon as it is permitted to do so under such restrictions;
provided, however, that in such circumstances any such repurchases for Fair
Market Value shall be for the greater of (i) the Fair Market Value on the date
such restrictions lapse and (ii) the Fair Market Value on the Termination Date.
The Company and/or the members of the ▇▇▇▇ Group, as the case may be, will
receive customary representations and warranties from each seller regarding the
sale of the shares of Executive Stock, including, but not limited to, the
representation that such seller has good and marketable title to such shares of
Executive Stock to be transferred free and clear of all liens, claims and other
encumbrances.
(f) Termination of Repurchase Option. The provisions of this
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Section 4 will terminate upon a Sale of the Company.
5. Restrictions on Transfer of Executive Stock.
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(a) Transfer of Executive Stock. Executive will not sell, pledge,
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transfer or otherwise dispose of (a "Transfer") any interest in any shares of
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Executive Stock, except pursuant to the provisions of Sections 4, 5(b), 6, 7 and
8 hereof.
(b) Certain Permitted Transfers. The restrictions contained in this
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Section 5 will not apply with respect to Transfers of shares of Executive Stock
(i) pursuant to applicable laws of descent and distribution, (ii) among
Executive's Family Group, or (iii) at such times as the Investors sell shares of
Common Stock in a Public Offering, but in the case of this clause (iii) only to
the extent of the lesser of (x) the number of vested shares of Executive Stock
held by Executive and (y) the number of shares of Executive Stock held by
Executive multiplied by a fraction, the numerator of which is the number of
shares of Common Stock sold by the Investors in such Public Offering and the
denominator of which is the total number of shares of Common Stock held by the
Investors immediately prior to the initial Public Offering; provided that if any
Other Executives are permitted but do not elect to Transfer any vested shares of
Other Executive Stock pursuant to the applicable Other Executive Stock Agreement
(the aggregate amount of such shares not Transferred being "Excess Shares"),
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then the number of vested shares of Executive Stock permitted to be Transferred
pursuant to clause (y) above will be increased by the result of the number of
Excess Shares multiplied by a fraction, the numerator of which is the number of
vested shares of Executive Stock held by Executive and the denominator of which
is the aggregate number of vested shares of
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Executive Stock and Other Executive Stock held by Executive and all Other
Executives electing to transfer additional vested shares of Other Executive
Stock pursuant to similar provisions of the applicable Other Executive Stock
Agreement; and provided, further, that the restrictions contained in this
Section 5 will continue to be applicable to the shares of Executive Stock after
any Transfer of the type referred to in clause (i) or (ii) and the transferees
of such shares of Executive Stock will agree in writing to be bound by the
provisions of this Agreement. Any transferee of Executive Stock pursuant to a
transfer in accordance with the provisions of this Section 5(b) is herein
referred to as a "Permitted Transferee." Upon the transfer of Executive Stock
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pursuant to this Section 5(b), Executive will deliver a written notice (a
"Transfer Notice") to the Company. In the case of a Transfer pursuant to clause
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(i) or (ii) hereof, the Transfer Notice will disclose in reasonable detail the
identity of the Permitted Transferee(s).
(c) Termination of Transfer Restrictions. The provisions of this
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Section 5 will terminate upon the earlier of (i) a Sale of the Company and (ii)
the eighth anniversary of the date hereof.
6. Participation Rights.
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(a) At least 30 days prior to any Transfer of Common Stock by an
Investor (other than a Transfer among the Investors, their partners or
affiliates or to an employee of the Company or its Subsidiaries), the
transferring Investor will deliver a Transfer Notice to the Company, Executive
and all other holders of such class of Common Stock that have been granted
participation rights similar to the participation rights granted herein
(Executive and such other holders of Common Stock with participation rights
collectively referred to as the "Other Stockholders"), specifying in reasonable
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detail the identity of the prospective transferee(s) and the terms and
conditions of the Transfer. Notwithstanding the restrictions contained in this
Section 6, the Other Stockholders may elect to participate in the contemplated
Transfer by delivering written notice to the transferring Investor within 10
days after delivery of the Transfer Notice. If any Other Stockholders elect to
participate in such Transfer, each of the transferring Investor and such Other
Stockholders will be entitled to sell in the contemplated Transfer, at the same
price and on the same terms, a number of shares of such class of Common Stock
equal to the product of (i) the quotient determined by dividing the number of
shares of such class of Common Stock owned by such person by the aggregate
number of shares of such class of Common Stock owned by the transferring
Investor and the Other Stockholders participating in such sale and (ii) the
number of shares of such class of Common Stock to be sold in the contemplated
Transfer. Notwithstanding the foregoing, in the event that the transferring
Investor intends to Transfer shares of more than one class of Common Stock, the
Other Stockholders participating in such Transfer will be required to sell in
the contemplated Transfer a pro rata portion of shares of all such classes of
Common Stock, which portion will be determined in the manner set forth
immediately above.
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For example (by way of illustration only), if the Transfer
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Notice contemplated a sale of 100 shares of Class L Common
by the transferring Investor, and if the transferring
Investor at such time owns 30% of the Class L Common and
if one Other Stockholder elects to participate and owns
20% of the Class L Common, the transferring Investor would
be entitled to sell 60 shares (30% / 50% x 100 shares) and
the Other Stockholder would be entitled to sell 40 shares
(20% / 50% x 100 shares).
(b) The transferring Investor will use reasonable efforts to obtain
the agreement of the prospective transferee(s) to the participation of the Other
Stockholders who have elected to participate in any contemplated Transfer, and
the transferring Investor will not Transfer any of its shares of Common Stock to
the prospective transferee unless (A) the prospective transferee agrees to allow
the participation of the Other Stockholders or (B) simultaneously with such
Transfer, the transferring Investor purchases the number of shares of such class
of Common Stock from the Other Stockholders who have elected to participate
which Other Stockholders would have been entitled to sell pursuant to this
Section 6.
(c) The provisions of this Section 6 will terminate upon the first
to occur of (i) a Sale of the Company and (ii) a Public Offering.
7. Additional Restrictions on Transfer.
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(a) The certificates representing shares of Executive Stock will
bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR TRANSFERRED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION
THEREUNDER. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS
ON TRANSFER, CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER
AGREEMENTS SET FORTH IN AN EXECUTIVE STOCK AGREEMENT
BETWEEN THE ISSUER (THE "COMPANY") AND AN EMPLOYEE OF THE
COMPANY DATED AS OF MAY 16, 1997, A COPY OF WHICH MAY BE
OBTAINED BY THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL
PLACE OF BUSINESS WITHOUT CHARGE."
(b) No holder of Executive Stock may Transfer any Executive Stock
(except pursuant to an effective registration statement under the 1933 Act)
without first delivering to the Company an opinion of counsel reasonably
acceptable in form and substance to the Company (which counsel will be
reasonably acceptable to the Company) that registration under the 1933 Act is
not required in connection with such Transfer.
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8. Definition of Executive Stock. For all purposes of this Agreement,
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Executive Stock will continue to be Executive Stock in the hands of any holder
other than Executive (except for the Company, the Investors, purchasers pursuant
to an offering registered under the 1933 Act or purchasers pursuant to a Rule
144 transaction (other than a Rule 144(k) transaction occurring prior to the
time the Company is a Public Company) and subsequent transferees), and each such
other holder of Executive Stock will succeed to all rights and obligations
attributable to Executive as a holder of Executive Stock hereunder. Executive
Stock will also include shares of the Company's capital stock issued with
respect to shares of Executive Stock by way of a stock split, stock dividend or
other recapitalization.
9. Sale of the Company
-------------------
(a) If the holders of a majority of the shares of Common Stock held
by the ▇▇▇▇ Group approve a sale of all or substantially all of the Company's
assets determined on a consolidated basis or a sale of all (or, for accounting,
tax or other reasons, substantially all) of the Company's outstanding capital
stock (whether by merger, recapitalization, consolidation, reorganization,
combination or otherwise) to an Independent Third Party or group of Independent
Third Parties (each such sale, an "Approved Sale"), each holder of Executive
-------------
Stock will vote for, consent to and raise no objections against such Approved
Sale. If the Approved Sale is structured as (i) a merger or consolidation, each
holder of Executive Stock will waive any dissenters' rights, appraisal rights or
similar rights in connection with such merger or consolidation or (ii) sale of
stock, each holder of Executive Stock will agree to sell all of his shares of
Executive Stock and rights to acquire shares of Executive Stock on the terms and
conditions approved by the Board and the holders of a majority of the Common
Stock then outstanding. Each holder of Executive Stock will take all necessary
or desirable actions in connection with the consummation of the Approved Sale as
requested by the Company.
(b) The obligations of the holders of Common Stock with respect to
an Approved Sale of the Company are subject to the satisfaction of the following
conditions: (i) upon the consummation of such Approved Sale, each holder of
Common Stock will receive the same form of consideration and the same portion of
the aggregate consideration that such holders of Common Stock would have
received if such aggregate consideration had been distributed by the Company in
complete liquidation pursuant to the rights and preferences set forth in the
Company's Certificate of Incorporation as in effect immediately prior to such
Approved Sale; (ii) if any holders of a class of Common Stock are given an
option as to the form and amount of consideration to be received, each holder of
such class of Common Stock will be given the same option; and (iii) each holder
of then currently exercisable rights to acquire shares of a class of Common
Stock will be given an opportunity to exercise such rights prior to the
consummation of such Approved Sale and participate in such Approved Sale as
holders of such class of Common Stock.
(c) If the Company or the holders of the Company's securities enter
into any negotiation or transaction for which Rule 506 (or any similar rule then
in effect) promulgated by the Securities Exchange Commission may be available
with respect to such negotiation or transaction (including a merger,
consolidation or other reorganization), the holders of Executive Stock will, at
the request of the Company, appoint a purchaser representative (as such term is
defined in Rule 501)
-11-
reasonably acceptable to the Company. If any holder of Executive Stock appoints
a purchaser representative designated by the Company, the Company will pay the
fees of such purchaser representative, but if any holder of Executive Stock
declines to appoint the purchaser representative designated by the Company, such
holder will appoint another purchaser representative, and such holder will be
responsible for the fees of the purchaser representative so appointed.
(d) Executive and the other holders of Executive Stock (if any) will
bear their pro-rata share (based upon the number of shares sold) of the costs of
any sale of Executive Stock pursuant to an Approved Sale to the extent such
costs are incurred for the benefit of all holders of Common Stock and are not
otherwise paid by the Company or the acquiring party. Costs incurred by
Executive and the other holders of Executive Stock on their own behalf will not
be considered costs of the transaction hereunder.
(e) The provisions of this Section 9 will terminate upon the
consummation of a Public Offering.
10. Preemptive Rights.
-----------------
(a) Except as set forth in subsection (b) below, the Company will
not issue, sell or otherwise transfer for consideration to any Investor (an
"Issuance") at any time prior to a Public Offering, any capital stock or debt
--------
security unless, at least 30 days and not more than 60 days prior to such
Issuance, the Company notifies Executive in writing of the Issuance (including
the price, the purchasers thereof and the other terms thereof) and grants to
Executive, the right (the "Right") to subscribe for and purchase a portion of
-----
such additional shares or other securities so issued at the same price and on
the same terms as issued in the Issuance equal to the quotient determined by
dividing (1) the number of fully diluted shares of Executive Stock held by
Executive (other than options to acquire stock from other stockholders of the
Company) by (2) the total number of shares of Common Stock outstanding on a
fully diluted basis. Notwithstanding the foregoing, if all Persons entitled to
purchase or receive such stock or securities are required to also purchase other
securities of the Company, if Executive exercises the Right pursuant to this
Section 10 then Executive will also be required to purchase the same strip of
securities (on the same terms and conditions) that such other Persons are
required to purchase. The Right may be exercised by Executive at any time by
written notice to the Company received by the Company within 15 days after
receipt by Executive of the notice from the Company referred to above. The
closing of the purchase and sale pursuant to the exercise of the Right will
occur at least 10 days after the Company receives notice of the exercise of the
Right and concurrently with the closing of the Issuance. In the event that the
consideration received by the Company in connection with an Issuance is property
other than cash, Executive may, at his election, pay the purchase price for such
additional shares or other securities in such property or solely in cash. In
the event that Executive elects to pay cash, the amount thereof will be
determined based on the fair value of the consideration received or receivable
by the Company in connection with the Issuance.
(b) Notwithstanding the foregoing, the Right will not apply to (i)
issuances of Common Stock (or securities convertible into or exchangeable for,
or options to purchase, Common Stock), pro rata to all holders of Common Stock,
as a dividend on, subdivision of or other
-12-
distribution in respect of, the Common Stock in accordance with the Company's
Certificate of Incorporation or (ii) issuances of Common Stock upon conversion
of any shares of the Company=s Series A Preferred Stock, or (iii) the issuance
of Common Stock (or securities convertible into or exchangeable for, or options
to purchase, Common Stock) in connection with the provision by the Investors or
their Affiliates of debt financing to the Company or its Subsidiaries.
(c) The provisions of this Section 10 will terminate upon the
consummation of a Public Offering.
11. Non-Compete; Non-Solicitation.
-----------------------------
(a) Executive acknowledges that in the course of his employment with
the Company he has become familiar and will become familiar with the Company's
trade secrets and with other confidential information concerning the Company and
its Subsidiaries and that his services have been and will be of special, unique
and extraordinary value to the Company and its Subsidiaries. Therefore,
Executive agrees that upon exercise of the Repurchase Option pursuant to Section
4 hereof, in further consideration of the repurchase of Executive Stock in
connection therewith, for a period of two years after the Termination Date (the
"Noncompete Period"), he will not Compete.
-----------------
(b) Sections 6(b)-(g) of the Employment Agreement are hereby
incorporated by reference in their entirety.
DEFINITIONS
12. Definitions. The following terms are defined as follows:
------------
"1933 Act" means the Securities Act of 1933, as amended from time to
--------
time.
"Affiliate" means, with respect to any Person, any other Person who is
---------
controlling, controlled by, or under common control with such Person and, in the
case of a Person which is a partnership, any partner of such Person.
"▇▇▇▇ Group" means collectively ▇▇▇▇ Capital Fund V, L.P., ▇▇▇▇
----------
Capital Fund V-B, L.P., BCIP Associates, BCIP Trust Associates, L.P. and
▇▇▇▇▇▇▇▇ Street Partners.
"Board" means the Company's Board of Directors.
-----
"Class" means each of the Vested Time Vesting Stock, the Unvested Time
-----
Vesting Stock, the Vested Management Option Shares, the Unvested Management
Option Shares, and the Rollover Stock.
"Closing" means the closing of the Recapitalization.
-------
-13-
"Common Stock" means, collectively, Class A Common, Class B Common and
------------
Class L Common.
"Competes" or "Competing" means, without the prior written consent of
-------- ---------
the Company directly or indirectly, providing consultive service with or without
pay, owning, managing, operating, joining, controlling, participating in, or
being connected as a stockholder, partner or otherwise with any business,
individual, partner, firm corporation or other entity that (i) is in competition
with the Company or any Subsidiary or affiliate of the Company to the extent its
products are similar or materially related to those of the Company or any
Subsidiary or affiliate of the Company (including products under development by
the Company or any Subsidiary of affiliate of the Company) or (ii) otherwise
engages in any business in which the Company or any Subsidiary or affiliate of
the Company is engaged or proposes to engage, in either case as of the
Termination Date; provided that "Compete" and "Competing" will not mean being a
------- ---------
passive owner of not more than 2% of the outstanding stock of any class of a
corporation which is publicly traded, so long as Executive has no active
participation in the business of such corporation.
"Employment Agreement" means the Employment Agreement, dated as of the
--------------------
date hereof, between Executive and the Company, as amended and modified from
time to time.
"Executive Stock" means all shares of Common Stock purchased pursuant
---------------
hereto and all shares of Common Stock otherwise owned or acquired by Executive,
including the Management Option Shares and the Rollover Stock but excluding the
Option Shares (as defined in the Option Agreement).
"Expiration Date" means, with respect to any Management Option, the
---------------
date which is 30 days after the tenth anniversary of the date of this Agreement.
"Fair Market Value" of each share of Common Stock means,
-----------------
(i) the average of the closing prices of the sales of the Common
Stock on all securities exchanges on which Common Stock may at the time be
listed, or, if there have been no sales on any such exchange on any day, the
average of the highest bid and lowest asked prices on all such exchanges at the
end of such day, or, if on any day Common Stock is not so listed, the average of
the representative bid and asked prices quoted in the NASDAQ System as of 3:00
P.M., Chicago time, or, if on any day Common Stock is not quoted in the NASDAQ
System, the average of the highest bid and lowest asked prices on such day in
the domestic over-the-counter market as reported by the National Quotation
Bureau Incorporated, or any similar successor organization, in each such case
averaged over a period of 21 days consisting of the day as of which the Fair
Market Value is being determined and the 20 consecutive business days prior to
such day; or
(ii) if at any time Common Stock is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market, the fair
value of such security determined jointly in good faith by the Board and
Executive; provided that if, within 60 days, the Board and Executive cannot so
agree, then such value will be determined by an independent appraiser reasonably
acceptable to the Board and Executive, which appraiser will submit to the
-14-
Board and Executive a written report setting forth such determination. If the
Board and Executive are unable to so agree on an appraiser within 15 days after
the end of such 60-day period, each of the Board and Executive will promptly
select an independent appraiser and the two appraisers so selected by the Board
and Executive will promptly select a third independent appraiser to determine
the Fair Market Value based upon information provided by the Company and
Executive. The appraiser appointed hereunder will allocate its costs and
expenses incurred in determining Fair Market Value based upon the relative
differences between each the Board's and Executive's respective determinations
of Fair Market Value and such appraiser's determination of Fair Market Value.
"Family Group" means Executive's spouse and descendants (whether
------------
natural or adopted) and any trust solely for the benefit of Executive and/or
Executive's spouse and/or descendants.
"Independent Third Party" means any Person who, immediately prior to
-----------------------
the contemplated transaction, does not own in excess of 5% of the Common Stock
on a fully diluted basis, who is not controlling, controlled by or under common
control with any such 5% owner of the Common Stock and who is not the spouse or
descendant (by birth or adoption) of any such 5% owner of the Common Stock;
provided that in no event will ▇▇▇▇ Capital, Inc. or any of its Affiliates be an
Independent Third Party.
"Investors" means collectively the ▇▇▇▇ Group Members, the ▇▇▇▇▇▇
---------
Group and Antares International Partners, Inc.; and "Investor" means any of the
--------
Investors individually.
"Option Agreement" means the Option Agreement, dated as of the date
----------------
hereof, between Executive and certain investors named therein.
"Original Cost" means, in the case of each share of Time Vesting
-------------
Stock, $0.235, and in the case of each Management Option Share, the applicable
Management Option Price (in each case as proportionally adjusted for all stock
splits, stock dividends and other recapitalizations affecting such shares
subsequent to the date hereof).
"Other Executives" means the individuals who have executed or will
----------------
execute Other Executive Stock Agreements with the Company.
"Other Executive Stock" means the "Executive Stock" as defined in all
---------------------
Other Executive Stock Agreements.
"Other Executive Stock Agreements" means the Executive Stock
--------------------------------
Agreements (other than this Agreement) by and between the Company and certain
other executives of the Company, as amended and modified from time to time.
"Person" means an individual, a partnership, a joint venture, a
------
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.
-15-
"Plan" has the meaning set forth in the preamble.
----
"Public Company" means a company any of whose securities are
--------------
registered pursuant to Section 12(b) or 12(g) of the Securities Exchange Act.
"Public Offering" means an initial public offering and sale of the
---------------
Common Stock pursuant to an effective registration statement under the 1933 Act.
"Public Sale" means any sale of Common Stock to the public pursuant to
-----------
an offering registered under the Securities Act or to the public through a
broker, dealer or market maker pursuant to the provisions of Rule 144 (other
than Rule 144(k) prior to the time the Company is a Public Company) adopted
under the 1933 Act.
"Recapitalization Agreement" means the Recapitalization Agreement,
--------------------------
dated as of the date hereof, among the Company, the ▇▇▇▇ Group and the Sellers
named therein.
"Sale of the Company" means any transaction involving the Company and
-------------------
an Independent Third Party or affiliated group of Independent Third Parties
pursuant to which such party or parties acquire (i) a majority of the
outstanding shares of capital stock of the Company entitled to vote generally in
the election of the Board (whether by merger, consolidation or sale or Transfer
of the Company's capital stock) or (ii) all or substantially all of the
Company's assets determined on a consolidated basis.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
-----------------------
as amended from time to time.
"Subsidiary" means any corporation of which shares of stock having a
----------
majority of the general voting power in electing the board of directors are, at
the time as of which any determination is being made, owned by the Company
either directly or through its Subsidiaries.
"▇▇▇▇▇▇ Group" means collectively ▇▇▇▇▇▇ ▇▇▇▇ Ventures and certain
------------
other investors affiliated therewith.
"Termination Date" means the date that Executive ceases to be employed
----------------
by the Company or any of its Subsidiaries for any reason.
MISCELLANEOUS
13. Notices. Any notice provided for in this Agreement must be in
-------
writing and must be personally delivered, received by certified mail, return
receipt requested, or sent by guaranteed overnight delivery service, to the
Investors at the addresses indicated in the Company's records and to the other
recipients at the address indicated below:
-16-
To the Company:
Therma-Wave, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: President
With a copy to:
▇▇▇▇ Capital, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇
and
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
To Executive:
▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
or such other address or to the attention of such other person as the recipient
party will have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or mailed.
14. 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 the effectiveness or validity of any provision in any
other jurisdiction, and this Agreement will be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein .
15. Complete Agreement. This Agreement embodies the complete agreement
------------------
and understanding among the parties and supersedes and preempts any prior
understandings, agreements or representations by or among the parties, written
or oral, which may have related to the subject matter hereof in any way. Without
limiting the foregoing, all existing stock option
-17-
agreements between the Company and/or the Company's existing stockholders and
Executive are hereby cancelled and terminated.
16. Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which will be deemed to be an original and all of which
taken together will constitute one and the same agreement.
17. Successors and Assigns; Transfer. This Agreement is intended to
--------------------------------
bind and inure to the benefit of and be enforceable by Executive, the Company,
the Investors, and their respective successors and assigns, provided that
Executive may not assign any of his rights or obligations, except as expressly
provided by the terms of this Agreement. Prior to Transferring any shares of
Executive Stock (other than in a Public Sale or any Approved Sale) to any person
or entity, Executive will cause the prospective transferee to execute and
deliver to the Company and the Other Stockholders an agreement containing the
rights and restrictions set forth herein with respect to such shares of
Executive Stock.
18. Governing Law. The corporate law of the State of Delaware will
-------------
govern all questions concerning the relative rights of the Company and its
stockholders. All other issues concerning the enforceability, validity and
binding effect of this Agreement will be governed by and construed in accordance
with the laws of the State of California, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of California or
any other jurisdiction) that would cause the application of the law of any
jurisdiction other than the State of California.
19. Remedies. The parties hereto acknowledge and agree that money
--------
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that any party hereto will have the right to injunctive relief, in
addition to all of its other rights and remedies at law or in equity, to enforce
the provisions of this Agreement.
20. Arbitration.
-----------
(a) Arbitration. In the event of disputes between the parties with
-----------
respect to the terms and conditions of this Agreement, such disputes will be
resolved by and through an arbitration proceeding to be conducted under the
auspices of the American Arbitration Association (or any like organization
successor thereto) at Los Angeles, California. Such arbitration proceeding will
be conducted in as expedited a manner as is then permitted by the commercial
arbitration rules (formal or informal) of the American Arbitration Association,
and the arbitrator or arbitrators in any such arbitration will be persons who
are expert in the subject matter of the dispute. Both the foregoing agreement
of the parties to arbitrate any and all such claims, and the results,
determination, finding, judgment and/or award rendered through such arbitration,
will be final and binding on the parties hereto and may be specifically enforced
by legal proceedings. The parties agree and acknowledge that money damages may
not be an adequate remedy for any breach of the provisions of this Agreement and
that any party may, in his or its sole discretion, ask for specific performance
and/or injunctive relief in order to enforce or prevent any violations of the
provisions of this Agreement.
-18-
(b) Procedure. Such arbitration may be initiated by written notice
---------
from either party to the other which will be a compulsory and binding proceeding
on each party. The arbitration will be conducted before a panel of arbitrators
selected in accordance with the rules of the American Arbitration Association.
The costs of said arbitrators and the arbitration will be borne equally by the
parties to the arbitration; provided that the Company will reimburse Executive
for all reasonable travel costs incurred by Executive in connection with such
arbitration. Each party will bear separately the cost of their respective
attorneys, witnesses and experts in connection with such arbitration. Time is
of the essence of this arbitration procedure, and the arbitrators will be
instructed and required to render their decision within ten (10) days following
completion of the arbitration.
21. Effect of Transfers in Violation of Agreement. The Company will not
---------------------------------------------
be required (a) to transfer on its books any shares of Executive Stock which
have been sold or transferred in violation of any of the provisions set forth in
this Agreement or (b) to treat as owner of such shares of Executive Stock, to
accord the right to vote as such owner or to pay dividends to any transferee to
whom such shares of Executive Stock have been transferred in violation of this
Agreement.
22. Amendments and Waivers. Any provision of this Agreement may be
----------------------
amended or waived only with the prior written consent of the Company and the
members of the ▇▇▇▇ Group who hold 80% of the Common Stock held by the ▇▇▇▇
Group as of the Closing, and Executive; provided, however, that in the event
that such amendment or waiver would materially and adversely affect an Investor
or a group of Investors in a manner different than any other Investor, then such
amendment or waiver will require the consent of such Investor or a majority of
the Common Shares held by such group of Investors adversely affected.
23. Third Party Beneficiaries. The parties hereto acknowledge and agree
-------------------------
that the Investors are third party beneficiaries of this Agreement. This
Agreement will inure to the benefit of and be enforceable by the Investors and
their respective successors and assigns.
24. Therma-Wave, Inc. 1997 Stock Purchase and Option Plan. The grant of
-----------------------------------------------------
Management Stock Options hereunder is pursuant to and subject to all of the
terms and conditions of the Plan.
* * * * *
-19-
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first above written.
THERMA-WAVE, INC.
___________________________________
By:
Its:
____________________________________
▇▇▇ ▇. ▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇ Executive Stock Agreement