Exhibit 10.6
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 993,279 shares of the Company's
Class A Common Stock, par value $.01 per share (the "Class A Common") and
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110,364 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 up to 671,875
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shares of the Company's Class B Common Stock, par value $.01 per share (the
"Class B Common") and (iii) pursuant to the Company's 1997 Stock Purchase and
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Option Plan, a copy of which is attached hereto as Exhibit A (the "Plan"), the
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Company will grant to Executive options (collectively, the "Management Options,"
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and each, a "Management Option") to acquire an aggregate of 671,875 shares of
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Class B Common, which options will be divided into five tranches (collectively,
the "Tranches"); the first tranche ("Tranche 1") will consist of Management
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Options to acquire 134,375 shares of Class B Common at an exercise price of
$8.93 per share; the second tranche ("Tranche 2") will consist of Management
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Options to acquire 134,375 shares of Class A Common at an exercise price of
$10.68 per share; the third tranche ("Tranche 3") will consist of Management
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Options to acquire 134,375 shares of Class B Common at an exercise price of
$12.43 per share; the fourth tranche ("Tranche 4") will consist of Management
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Options to acquire 134,375 shares of Class B Common at an exercise price of
$14.18 per share; and the fifth tranche ("Tranche 5") will consist of Management
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Options to acquire 134,375 shares of Class B Common at an exercise price of
$15.89 per share. Capitalized terms used herein and not otherwise defined are
defined in Section 13 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, 993,279 shares of Class A Common at a price of $0.235
per share and 110,364 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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$2,339,717.51. The Company will deliver to Executive certificates representing
the Rollover Stock, and, upon receipt of such certificates, Executive will
deliver to the Company $2,339,717.51 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 to Executive by Toray Industries, Inc.
("Toray") on the date hereof pursuant to the Agreement, dated as of January 25,
1996, among Toray, Executive and other key employees listed therein in
connection with the Company's recapitalization. In consideration of such loan,
Executive shall issue to the Company a promissory note in the form of Exhibit B
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attached hereto (the "Rollover Stock Note"). Executive's obligations under the
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Rollover Stock Note 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 attached hereto.
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(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, 671,875 shares of Class B Common (the "Time
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Vesting Stock"), at a price of $0.235 per share for an aggregate purchase price
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of $157,890.63. The Company will deliver to Executive certificates representing
the Time Vesting Stock, and, upon receipt of such certificates, Executive will
deliver to the Company $6,718.75 by delivery of a check or wire transfer of
funds and a promissory note in the form of Exhibit D attached hereto in the
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aggregate principal amount of $151,171.88 (the "Time Vesting Stock Note").
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Executive's obligations under the Time Vesting Stock Note will be 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 attached hereto.
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(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 August 16, November 16, February 16, and May 16
(beginning on August 16, 1997 and ending on May 16, 2002) (each, a "Vesting
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Date"), 33,593.75 shares of the Time Vesting Stock will become vested if
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Executive is, and has been, continuously employed by the Company or its
Subsidiaries from the date of this Agreement through such date; provided that if
an Early Termination occurs then the Time Vesting Stock will continue to vest
through the date that is thirty months following the date of the Early
Termination (such additional period being the "Extended Vesting Period") as if
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Executive had been continuously employed by the Company or its Subsidiaries
during such period; and provided, further, 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 Vesting Stock" and the shares of the Time Vesting
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Stock which have not vested will be hereafter referred to as "Unvested Time
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Vesting Stock."
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(f) No Vesting After Time Vesting Termination Date or Competition
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Date. Notwithstanding any provision of subsection 1(e) to the contrary, none of
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the Time Vesting Stock will become Vested Time Vesting Stock on or after the
first to occur of (i) the Time Vesting Termination Date and (ii) the Competition
Date. All shares of the Time Vesting Stock which have become Vested Time Vesting
Stock prior to the Time Vesting Termination Date or the Competition
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Date, as the case may be, will remain Vested Time Vesting Stock after the Time
Vesting Termination Date or the Competition Date, respectively.
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
671,875 shares of Class B Common ("Management Option Shares"). Tranche 1 will
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consist of Management Options to purchase 134,375 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 134,375 Management Option Shares
at an exercise price of $10.68 per share (the "Tranche 2 Exercise Price");
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Tranche 3 will consist of Management Options to purchase 134,375 Management
Option Shares at an exercise price of $12.43 per share (the "Tranche 3 Exercise
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Price"); Tranche 4 will consist of Management Options to purchase 134,375
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Management Option Shares at an exercise price of $14.18 per share (the "Tranche
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4 Exercise Price"); and Tranche 5 will consist of Management Options to purchase
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134,375 Management Option Shares at an exercise price of $15.89 per share (the
"Tranche 5 Exercise Price"). The Tranche 1 Exercise Price, the Tranche 2
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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
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Option Prices" and individually as a "Management Option Price". With respect to
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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. Notwithstanding
anything herein to the contrary, if an Early Termination occurs then a portion
of each Tranche of Management Options equal to the product of (i) the number of
Management Options Shares in each such Tranche multiplied by (ii) a fraction
(which will in no event be greater than one), the numerator of which will equal
the sum of (A) the number of completed 3-Month Periods elapsed between May 16,
1997 and the date of the Early Termination plus (B) if and only if the
applicable Management Target as of the Termination Date has been exceeded, 10,
and the denominator of which will equal 20 (collectively, the "Extended
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Options"), will not expire until the Expiration Date. Notwithstanding anything
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herein to the contrary, any Management Options which have not expired prior to
the Competition Date will expire 30 days after the Competition 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
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a portion of the Management Options which have not expired pursuant to
subsection 2(b) above by 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 Amount") and (y) a promissory note in the form of Exhibit G attached
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hereto (an "Option Note") in the aggregate principal amount equal to the
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aggregate 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 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
(i) if an Early Termination occurs, a percentage of the amount of Management
Option Shares issued or issuable upon exercise of each Tranche equal to the
result of (A) the number of completed 3-Month Periods elapsed between May 16,
1997 and the date of the Early Termination, divided by (B) 20, will become
vested on the date of the Early Termination; (ii) if an Early Termination occurs
and as of the Termination Date the applicable Management Target has been
achieved, an additional 50% of all Management Option Shares issued or issuable
upon exercise of each Tranche (or, if less, any amounts remaining unvested after
the operation of subclause (i)) shall vest on a straight-line basis on each
Vesting Date occurring after the Termination Date until (and including) May 16,
2002 (such Shares, the "Management Target Option Shares") and (iii) provided,
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further, 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
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Management Option Shares" and the Management Option Shares which have not vested
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will be hereafter referred to as "Unvested Management Option Shares."
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(f) No Vesting After Termination Date or Competition Date.
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Notwithstanding any provision of subsection 2(e) to the contrary, none of the
Unvested Management Option Shares will become Vested Management Option Shares
after the first to occur of (i) the Termination Date (except for the Management
Target Option Shares, as provided above) and (ii) the Competition Date. All
Management Option Shares which have become Vested Management Option Shares prior
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to the Termination Date or the Competition Date, as the case may be, will remain
Vested Management Option Shares after the Termination Date or the Competition
Date, respectively.
(g) Section 83(b) Election. If any Management Options are exercised
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prior to May 16, 2002, then within 30 days after the date of exercise, 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.
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(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
(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 or the Competition
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Date occurs, the Executive 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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(i) In the event that Executive is terminated by the Company
with Cause or Executive resigns (other than for Good Reason), (A) the
outstanding Unvested Management Option Shares will be subject to the
Repurchase Option at a price per share equal to the Original Cost thereof,
(B) the Unvested Time Vesting Stock will be subject to the Repurchase
Option at a price per share equal to the lesser of the Fair Market Value
thereof as of the Termination Date and the Original Cost thereof, (C) 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, (D) 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 (E) 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 shall be subject to the Repurchase Option.
(ii) In the event Executive is terminated by the Company
without Cause or Executive resigns for Good Reason (and in either case an
Early Termination has not occurred), (A) the outstanding Unvested
Management Option Shares will be subject to the Repurchase Option at a
price per share equal to the Original Cost thereof, (B) the Unvested Time
Vesting Stock will be subject to the Repurchase Option at a price per share
equal to the Original Cost thereof, (C) the outstanding Vested Management
Option Shares will be subject to the Repurchase Option at a price per share
equal to the greater of the Fair Market
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Value thereof as of the Termination Date and the Original Cost thereof, (D)
the Vested Time Vesting Stock will be subject to the Repurchase Option at a
price per share equal to the greater of the Fair Market Value thereof as of
the Termination Date and the Original Cost thereof and (E) the Rollover
Stock will not be subject to the Repurchase Option; 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 shall be subject to the Repurchase Option.
(iii) In the event of an Early Termination, (A) the outstanding
Unvested Management Option Shares (other than the Management Target Option
Shares) will be subject to the Repurchase Option at a price per share equal
to the Original Cost thereof, (B) the portion of the Time Vesting Stock
that has not become vested and that will not become vested prior to the
expiration of the Extending Vesting Period will be subject to the
Repurchase Option at a price per share equal to the Original Cost thereof
and (C) the Vested Management Option Shares will not be subject to the
Repurchase Option, (D) the Vested Time Vesting Stock (including the Time
Vesting Stock that will become vested during the Extended Vesting Period)
will not be subject to the Repurchase Option and (E) the Rollover Stock
will not be subject to the Repurchase Option.
(iv) Notwithstanding anything in clauses (a)(i)-(iii) to the
contrary, in the event the Competition Date occurs, (A) the outstanding
Unvested Management Option Shares will be subject to the Repurchase Option
at a price per share equal to the Original Cost thereof, (B) the Unvested
Time Vesting Stock will be subject to the Repurchase Option at a price per
share equal to the lesser of the Fair Market Value thereof as of the
Termination Date and the Original Cost thereof, (C) 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, (D) 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 (E) 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 Competition Date,
none of the Vested Management Option Shares, the Vested Time Vesting Shares
or the Rollover Stock shall be subject to the Repurchase Option.
(b) 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 subject to the Repurchase Option (the
"Applicable Stock") within 90 days after the Applicable Repurchase Date. The
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Repurchase Notice will set forth the number of shares of each Class of
Applicable Stock to be acquired from such holder(s), the aggregate consideration
to be paid for such holder's shares of each such Class of Applicable Stock and
the time and place for the closing of the transaction. If any shares of any
Class of Applicable 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 Applicable Stock, pro rata according to the number of shares of
such Class of Applicable Stock held by such holder(s) at the time of delivery of
such Repurchase Notice (determined as nearly as practicable to the nearest
share).
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(c) ▇▇▇▇ Group's Rights.
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(i) If for any reason the Company does not elect to purchase
all of the shares of Applicable Stock pursuant to the Repurchase Option prior to
the 90th day following the Applicable Repurchase 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 Applicable Stock the Company has
not elected to purchase (the "Available Shares"); provided that the ▇▇▇▇ Group
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will not be entitled to exercise the Repurchase Option with respect to any
Unvested Management Option Shares or 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 Notice") to the ▇▇▇▇ Group setting forth the number
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of each Class of Available 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 Applicable
Stock as to the number of shares of each Class of such Applicable 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 Applicable 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 Applicable 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.
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(d) 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 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 price by
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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(d) 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 Applicable 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 Applicable Stock, including, but not limited to, the representation that such
seller has good and marketable title to such shares of Applicable Stock to be
transferred free and clear of all liens, claims and other encumbrances.
(e) Termination of Repurchase Option. The provisions of this
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Section 4 will terminate upon the first to occur of (i) a Sale of the Company
and (ii) the later of (A) the fifth anniversary of the date of this Agreement
and (B) a Public Offering.
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
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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"), then the number of vested shares of
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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 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
--------------------
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
---------------
(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
------------------------------------
Section 5 will terminate upon the first to occur of (i) a Sale of the Company
and (ii) the later of (A) the fifth anniversary of the date of this Agreement
and (B) a Public Offering.
6. Participation Rights.
--------------------
(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
------------------
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
-10-
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.
For example (by way of illustration only), if the Transfer 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.
-----------------------------------
(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."
-11-
(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.
8. Definition of Executive Stock. For all purposes of this
-----------------------------
Agreement, 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.
-12-
(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) 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
-13-
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 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 in connection with Executive's termination by the Company with Cause or upon
Executive's resignation (other than for Good Reason), in further consideration
of the repurchase of Executive Stock in connection therewith, for a period of
thirty months after the Termination Date (the "Noncompete Period"), he will not
-----------------
Compete.
(b) Sections 7(b)-(g) of the Employment Agreement are hereby
incorporated by reference in their entirety.
12. Lookback.
--------
(a) If (i) the Termination Date occurs as a result of Executive's
termination by the Company without Cause or Executive's resignation for Good
Reason and (ii) within one year after the Termination Date either (x) a Transfer
of Common Stock by an Investor occurs (other than a Transfer among the
Investors, their partners or affiliates or to an employee of the Company or its
Subsidiaries) or (y) a Sale of the Company occurs, then Executive will be
entitled to receive from the Company the benefit of such Transfer or Sale of the
Company that Executive would have been entitled to receive had the Termination
Date not occurred. Thus, (1) if either a Transfer or a Sale of the Company
occurs within one year after the Termination Date and the Company or the
Investors have repurchased any Executive Stock pursuant to the Repurchase Option
(such repurchased shares of Executive Stock being "Repurchased Stock"), then the
-----------------
Company will pay to Executive the excess, if any, of (A) the amount of net
proceeds Executive would have been entitled to receive for the shares of
Repurchased Stock that Executive would have been permitted to sell in connection
with the Transfer or Sale of the Company had the Termination Date not occurred
and had Executive still
-14-
owned such shares over (B) the amount actually received by Executive for such
shares from the Company and/or the Investors pursuant to the Repurchase Option
and (2) without duplication of the payments made to Executive pursuant to clause
(1) above and only with respect to Management Options that expired on the
Termination Date, if a Sale of the Company occurs within one year of the
Termination Date, then the Company will pay to Executive the excess, if any, of
(X) the amount of net proceeds Executive would have received with respect to
Management Option Shares that Executive would have held if (I) the Termination
Date had not occurred, (II) Executive's Management Options that had not become
exercisable prior to and expired on the Termination Date had become exercisable
in connection with such Sale of the Company, and (III) Executive had exercised
the in-the-money Management Options in connection with such Sale of the Company
over (Y) the aggregate Management Option Price Executive would have been
required to pay to the Company in connection with to the exercise of such
Management Options, in each case by certified or cashier's check or wire
transfer of funds upon consummation of such transaction. The Company will
provide the Executive notice of the Transfer of Common Stock or the Sale of the
Company within fifteen days after the Transfer of Common Stock or Sale of the
Company, as the case may be.
(b) Subject to the following sentence, in the event Executive
becomes entitled to receive any amounts from the Company pursuant to Section
12(a) above and the Company has not paid all of such amounts (the amount not
paid being the "Unpaid Amount") to Executive within 90 days after the date of
-------------
the Transfer of Common Stock by an Investor or the Sale of the Company (as the
case may be), Executive may require (by delivery of written notice of such
election to the Investors (the "Lookback Notice")) each Investor to pay to
---------------
Executive the product of (i) the Unpaid Amount and (ii) a fraction, the
numerator of which shall equal the total number of shares of Common Stock held
by such Investor immediately preceding the Transfer of Common Stock or Sale of
the Company (as the case may be) and the denominator of which shall equal the
total number of shares of Common Stock outstanding on a fully diluted basis
(including all Common Stock issuable upon exercise or conversion of all options,
warrants or convertible securities outstanding at such time) immediately
preceding the Transfer of Common Stock or Sale of the Company (as the case may
be). Notwithstanding the foregoing, no Investor shall be required to pay to
Executive any amounts under this Section 12(b) unless Executive has in writing
unconditionally released the Company from all amounts and obligations owing by
the Company to Executive pursuant to this Section 12.
(c) The provisions of this Section 12 will terminate upon the
Competition Date.
DEFINITIONS
13. Definitions. The following terms are defined as follows:
-----------
"3-Month Period" means a period of three months (i) beginning on May
--------------
16 and ending on the next following August 16, (ii) beginning on August 16, and
ending on the next following November 16, (iii) beginning on November 16 and
ending on the next following February 16, or (iv) beginning on February 16 and
ending on the next following May 16.
-15-
"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.
"Applicable Repurchase Date" means, in the case of the Executive
--------------------------
ceasing to be employed by the Company for any reason, the Termination Date, and
in the case of the Competition Date occurring, the date the Company has obtained
actual knowledge that the Competition Date has occurred.
"▇▇▇▇ 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.
-----
"Cause" has the meaning given to such term in the Employment
-----
Agreement.
"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.
-------
"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, providing consultive service, 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.
"Competition Date" will occur if at any time within thirty months
----------------
after the Termination Date, Executive begins Competing with the Company or
breaches any of the provisions of Section 7 of the Employment Agreement or
Section 11 of this Agreement; provided that the Company will notify Executive of
any such breach and, if such breach is capable of being cured, provide Executive
with 10 days to cure such breach.
-16-
"Disability" has the meaning given to such term in the Employment
----------
Agreement.
"Early Termination" means termination of Executive's employment with
-----------------
the Company and its Subsidiaries (i) by the Company without Cause or by
Executive for Good Reason and, in either case if the Termination Date occurs
after the end of the Company's 1998 fiscal year, the applicable Performance
Hurdle has been achieved, (ii) by the Company without Cause or by Executive for
Good Reason and, in either case, the Investors have achieved Substantial
Liquidity or (iii) as a result of Executive's death or Disability.
"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 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
-17-
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.
"Good Reason" has the meaning given to such term in the Employment
-----------
Agreement.
"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, the ▇▇▇▇▇▇ Group and
---------
Antares International Partners, Inc.; and "Investor" means any of the Investors
--------
individually.
"Management Target" will be achieved as of any date of determination
-----------------
if the Company's cumulative actual EBITDA for the period from April 1, 1997
through the end of the Company's then most recently completed fiscal year
(determined by reference to the Company's annual audited financial statements)
exceeds the applicable cumulative EBITDA target set forth below:
Fiscal Year Ending: EBITDA Target:
------------------ --------------
March 31, 1998 $16.5 million
March 31, 1999 $42.2 million
March 31, 2000 $81.0 million
March 31, 2001 $127.3 million
March 31, 2002 $177.7 million
"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.
-18-
"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.
"Performance Hurdle" will be achieved if (i) at any time after the end
------------------
of the Company's fiscal year ending March 31, 1998 but prior to the end of the
second quarter of the Company's fiscal year ending March 31, 1999, the Company's
actual cumulative EBITDA for the immediately preceding twelve completed fiscal
months was at least $6 million, (ii) at any time after the end of the second
quarter of the Company's fiscal year ending March 31, 1999 but prior to the end
of the Company's fiscal year ending March 31, 1999, the Company's actual
cumulative EBITDA for the immediately preceding twelve completed fiscal months
was greater than $9 million, (iii) at any time after the end of the Company's
fiscal year ending March 31, 1999 but prior to the end of the Company's fiscal
year ending March 31, 2000, the Company's actual cumulative EBITDA for the
immediately preceding twenty-four completed fiscal months was greater than $24
million, or (iv) at any time after the end of the Company's fiscal year ending
March 31, 2000, the Company's actual cumulative EBITDA for the immediately
preceding twenty-four completed fiscal months was greater than $28 million. For
purposes of determining whether the Performance Hurdle has been achieved, the
Company's actual cumulative EBITDA will be determined by reference to the
Company's annual audited financial statements (for all completed fiscal years
within the measurement period) and monthly or other interim financial statements
provided to the Company's lenders (for interim periods).
"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.
"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 1993 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
-19-
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.
"Substantial Liquidity" means the sale by the Investors of at least
---------------------
50% in the aggregate of the shares of Class A Common and Class L Common held by
them on the date hereof (after giving effect to any stock splits, stock
dividends, recapitalizations and similar transactions) in a Public Offering or
thereafter.
"▇▇▇▇▇▇ Group" means collectively, ▇▇▇▇▇▇ Hill Ventures, a California
------------
limited partnership, ▇▇▇▇▇▇ ▇▇▇▇ Associates, L.P., ▇▇▇▇▇ Fargo Bank, Trustee SHV
M/P/T FBO ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ Fargo Bank, Trustee SHV M/P/T FBO ▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇., ▇▇▇▇▇ Fargo Bank, Trustee SHV M/P/T FBO ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.,
▇▇▇▇▇ Fargo Bank, Trustee SHV M/P/T FBO ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ Fargo Bank, Trustee
SHV M/P/T FBO ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇.
"Termination Date" means the date that Executive ceases to be employed
----------------
by the Company or any of its Subsidiaries for any reason.
"Time Vesting Termination Date" means the Termination Date; provided
-----------------------------
that if an Early Termination occurs, the "Time Vesting Termination Date" means
-----------------------------
the last day of the Extended Vesting Period.
MISCELLANEOUS
14. 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:
To the Company:
Therma-Wave, Inc.
▇/▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇
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With a copy to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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.
15. 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.
16. 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 agreements between the
Company and/or the Company's existing stockholders and Executive are hereby
cancelled and terminated.
17. 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.
18. 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.
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19. 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.
20. 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.
21. 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.
(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.
22. 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
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any transferee to whom such shares of Executive Stock have been transferred in
violation of this Agreement.
23. 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.
24. 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.
25. Therma-Wave, Inc. 1997 Stock Purchase and Option Plan. The
-----------------------------------------------------
issuance of the Time Vesting Stock and the grant of Management Stock Options
hereunder is pursuant to and subject to all of the terms and conditions of the
Plan.
26. Adjustment of Performance Hurdles and Management Targets. If the
--------------------------------------------------------
Company acquires all or substantially all of the assets or capital stock of
another business or if the Company sells a substantial portion of its assets,
the Company, the ▇▇▇▇ Group and the Executive will negotiate in good faith to
make any appropriate adjustments to the Performance Hurdles and Management
Targets based on the EBITDA of the acquired business or if the EBITDA associated
with the sold assets (as the case may be). In addition, for purposes of
determining whether the Performance Hurdles and the Management Targets have been
achieved, EBITDA shall be determined without giving effect to any (i)
extraordinary items of loss or gain, (ii) fees payable by the Company to ▇▇▇▇
Capital, Inc. or its Affiliates under the Advisory Agreement, dated May 16, 1997
or otherwise, (iii) non-cash charges incurred in connection with the
transactions contemplated by the Recapitalization Agreement or (iv) any expenses
incurred by the Company in connection with the modification of the lease of the
Company's Fremont facility in connection with the transaction contemplated by
the Recapitalization Agreement including, without limitation, any expenses
incurred by the Company as a result of any increased level of letter of credit
support required by such modification or any allowance payments, for rent or
otherwise, payable to Sobrato or his designees.
* * * * *
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IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first above written.
THERMA-WAVE, INC.
-----------------------------------
By:
Its:
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▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
[Signature Page to ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Executive Stock Agreement]