Employment Agreement - Egenera Inc. and Robert M. Dutkowsky
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of
February 2, 2004 by and between EGENERA, INC., a Delaware corporation (the
"Company"), and ROBERT M. DUTKOWSKY ("you").
The Company wishes to employ you, and you desire to be employed by the
Company, on and subject to the terms and conditions set forth in this Agreement.
NOW, THEREFORE, the Company and you agree as follows:
1. EMPLOYMENT; POSITION; AND RESPONSIBILITIES.
1.1 The Company hereby employs you, and you hereby accept to commence
employment with the Company, effective as of February 2, 2004 (the "Effective
Date") and subject to the terms and conditions set forth in this Agreement.
1.2 You shall serve as Chairman of the Company's Board of Directors (the
"Board"), President and Chief Executive Officer of the Company. You shall devote
substantially your full business time and best efforts to the performance of
your duties hereunder and the business and affairs of the Company. You shall
perform the duties customarily associated with the offices of Chairman of the
Board of Directors, President and Chief Executive Officer and such other duties
as may be assigned to you from time to time by or on authority of the Board.
1.3 You shall duly, punctually and faithfully perform and observe in all
material respects any and all rules and regulations that the Company may now or
shall hereafter establish governing the conduct of its business.
1.4 You shall report directly to the Board. You shall be based in the
Company's chief executive office as from time to time established. At the date
hereof, the Company's chief executive office is located at 165 Forest Street,
Marlborough, Massachusetts. You acknowledge and agree that, in order to
discharge your duties as President and Chief Executive Officer and to represent
the Company in its business operations, you may be required to travel
frequently, both within and without Massachusetts.
2. TERM AND TERMINATION.
2.1 The initial term of this Agreement shall be for the period set forth
on EXHIBIT A annexed hereto commencing with the Effective Date. Thereafter, the
term of this Agreement shall be automatically extended for successive periods of
one (1) year unless you or the Company shall give the other written notice of
non-renewal at least thirty (30) days prior to the end of the term then in
effect. Notwithstanding the foregoing, your employment with the Company may be
terminated prior to the expiration of the initial term, or any successive term,
in accordance with Section 2.2.
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2.2 Your employment with the Company may be terminated prior to the
expiration of the initial term or any successive term (as described in Section
2.1 hereof) as follows:
(a) The Company may terminate your employment with the Company at
any time (i) with Cause (as defined below) upon written notice to you; or (ii)
without Cause or on account of your Disability (as defined below), by providing
you with at least thirty (30) days written notice. Any notice of termination
with Cause shall describe the basis for such termination with Cause and shall
specifically reference the subparagraph(s) in Section 2.3(a) that were relied
upon in issuing the notice. For purposes of this Agreement, "Disability" shall
mean that you have been or shall be prevented by illness, accident, disability
or any other physical or mental condition (to be determined by means of a
written opinion of a competent medical doctor chosen by mutual agreement of the
Company and you or your personal representative), from substantially performing
your duties and responsibilities hereunder for one or more periods totaling one
hundred eighty (180) days in any continuous twelve (12) month period. During the
initial 180-day period of Disability and any notice period provided for in this
Section, you shall continue to have all of your rights under this Agreement
(including but not limited to your compensation and benefits); thereafter, in
the case of your termination for Disability, your right to receive income
continuation shall be determined in accordance with the terms and conditions of
the Company's short-term and long-term disability plans then in effect.
(b) You may terminate your employment with the Company (i) at any
time with Good Reason (as defined below) by written notice to the Company; or
(ii) at any time without Good Reason upon not less than thirty (30) days prior
written notice to the Company. All of your rights hereunder (including but not
limited to your compensation and benefits) shall continue during such notice
period.
(c) Your employment with the Company shall terminate immediately
upon your death.
(d) For purposes of this Agreement, a "Qualifying Termination"
shall mean either that the Company (or its successor or assignee) has terminated
your employment without Cause or that you have terminated your employment for
Good Reason.
2.3 For purposes of this Agreement:
(a) The term "Cause" means any of the following: (i) willful
misconduct by you in the performance of your duties hereunder or under the
Invention, Confidentiality and Noncompete Agreement, dated as of the date of
this Agreement, between the Company and you (a conformed copy of which is
attached hereto as EXHIBIT B (the "NDA")) and which in either case causes
material harm to the Company as determined by the Board in the exercise of its
business judgment and your failure to explain and correct such conduct within
fifteen (15) days (or such longer period as the Board determines in its good
faith judgment is reasonably necessary) after your receipt of written notice
from the Board of such conduct; (ii) refusal by you to perform or discharge
material duties or responsibilities assigned by the Board (provided the same are
not illegal or unethical or materially inconsistent with the position of
Chairman of the Board of Directors or President and Chief Executive Officer of a
corporation similar in size,
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scope and business to the Company) and the failure to correct such refusal and
perform such duties or responsibilities within fifteen (15) days (or such longer
period as the Board determines in its good faith judgment is reasonably
necessary to perform such duties or responsibilities) after your receipt of
written notice from the Board of such refusal; (iii) your conviction of any
felony; (iv) your prolonged absence from work (which shall mean at least ten
(10) consecutive business days), not excused by (A) a bona fide medical
disability or illness as determined by a qualified physician mutually acceptable
to you and the Company, (B) your exercise of your rights under the Family
Medical Leave Act or any other similar federal or state law, (C) vacation days,
or (D) other good reason as determined by or your leave of absence as approved
by the Board in its reasonable discretion, and your failure to end such
prolonged absence within a reasonable period of time (but in any event not less
than seven (7) days after your receipt of written notice from the Board of such
absence); (v) intentional falseness of any material warranty or representation
by you herein or in the NDA; (vi) a material breach by you of your duties
hereunder or under the NDA that is not cured by you within fifteen (15) days
after your receipt of written notice from the Board of such breach; (vii) any
material misrepresentation or breach of warranty by you herein or in the NDA and
the failure to correct such misrepresentation or breach of warranty within
fifteen (15) days (or such longer period as the Board determines in its good
faith judgment is reasonably necessary to correct such misrepresentation or
breach of warranty) after your receipt of written notice from the Board of such
misrepresentation or breach of warranty; and (viii) your committing any act of
embezzlement, fraud or theft relating to the Company and the failure to explain
and remedy such conduct within fifteen (15) days (or such longer period as the
Board determines in its good faith judgment is reasonably necessary) after your
receipt of written notice from the Board of such conduct. The Company
acknowledges and agrees that for purposes of this Agreement and the Stock Option
Agreements (as defined below), it is the understanding and intent of the parties
that your service to the Company as an employee shall be deemed to be continuous
and to constitute "Continuous Service" within the meaning of the Stock Option
Agreements so long as your employment under this Agreement has not been
terminated by the Company (with or without Cause) or by you (with or without
Good Reason) or by your death.
(b) The term "Good Reason" means that any one or more of the
following occur (whether or not in connection with a Change of Control) without
your express prior written consent: (i) any change by the Company of your duties
or responsibilities that results in a material diminution, in your position,
function or authority as in effect on the Effective Date (for purposes of this
Agreement, a "material diminution" shall be deemed to have occurred if at any
time you are not the Company's Chairman of the Board, President and Chief
Executive Officer (or if after the Effective Date, the Company becomes a
subsidiary or division of any other business entity and you are not the
Chairman, President and Chief Executive Officer of the ultimate parent business
entity of the Company); (ii) a reduction by the Company in either your Base
Salary or your Target Bonus percentage; (iii) a material breach by the Company
of its obligations under this Agreement and the failure to cure such breach
within ten (10) business days after written notice from you of such breach; or
(iv) a requirement by the Company that you relocate to an office of the Company
or other workplace that is located outside of a fifty (50) mile radius of
Marlborough, Massachusetts.
2.4 In the event that your employment with the Company terminates for any
reason, the Company shall be obligated to pay you for the following items that
were accrued but unpaid as of
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the date of your termination: (i) your Base Salary, (ii) a cash payment for all
accrued vacation using your then Base Salary rate of pay; (iii) reimbursement
for any unpaid business expenses incurred by you in connection with your
services hereunder in accordance with the Company's then current policy and
guidelines for the reimbursement of its employees' business expenses, (iv) any
earned but unpaid bonuses and (v) such other benefits and payments to which you
may be entitled by law or pursuant to the benefit plans of the Company then in
effect.
Additionally, in the event (i) a Qualifying Termination occurs and (ii)
you execute, deliver to the Company and do not revoke a general release (in a
form acceptable to the Company) releasing and waiving any and all claims that
you have or may have against the Company, its affiliates, and each of the
Company's and its affiliates' respective directors, officers, employees and
agents arising out of or connected with your employment with the Company (other
than the obligations of the Company set forth herein which specifically survive
the termination of your employment), the Company will provide you with Severance
Benefits as defined in Section 5 of EXHIBIT A hereto and a limited release (in a
form reasonably acceptable to you) releasing and waiving any and all claims that
the Company or any of its subsidiaries has or may have against you arising out
of or connected with your employment with the Company other than (A) any claim
not known by the Company that, if known, would have constituted grounds for
termination of your employment by the Company for Cause and (B) your future
obligations set forth herein or the NDA or the executed Stock Option Agreements
(as defined in Section 4 of EXHIBIT A hereto) which are intended to survive the
termination of your employment. Notwithstanding the foregoing, your release of
claims does not release your rights to: (i) indemnification, (ii) coverage under
the Company's directors and officers liability insurance coverage, (iii)
exercise your stock options, (iv) enforcement of the Company's future
obligations under this Agreement or your stock option agreements or (v) pursue
any claim not known by you that, if known, would have permitted you to file a
claim or action on the basis that the Company violated an applicable law or
regulation.
2.5 Notwithstanding anything herein to the contrary, no expiration or
termination of this Agreement or your employment with the Company shall relieve
any party from liability for any breach of this Agreement occurring prior to
such expiration or termination.
3. OTHER ACTIVITIES DURING EMPLOYMENT.
3.1 Except for any outside directorships currently held by you as listed
on EXHIBIT C (including Network Associates, Inc. and SEPATON, Inc.) and except
with the prior written consent of the Board, you will not during the term of
this Agreement undertake or engage in any other employment, occupation or
enterprise or entity other than one in which you are an inactive investor. The
Board will not unreasonably withhold or delay its consent to your request to
serve on any other board of directors or managers of any other enterprise or
entity.
3.2 You hereby agree that, except as disclosed on EXHIBIT C hereto, during
your employment hereunder, you will not, directly or indirectly, engage (a)
individually, (b) as an officer, (c) as a director or manager, (d) as an
employee, (e) as a consultant, (f) as an advisor, (g) as an agent (whether a
salesperson or otherwise), (h) as a broker, or (i) as a partner, co-venturer,
stockholder or other proprietor owning directly or indirectly more than two
percent (2%) interest,
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in any firm, proprietorship, corporation, partnership, trust, association,
limited liability company or other organization or entity which is engaged in
the research, development, production, manufacture or marketing of equipment or
processes in direct competition with the Company or any other line of business
engaged in or under development by the Company (such firm, proprietorship,
corporation, partnership, trust, association, limited liability company or other
organization being hereinafter referred to as a "Prohibited Enterprise"). Except
as may be shown on EXHIBIT C, you hereby represent that you are not engaged in
any of the foregoing capacities (a) through (i) in any Prohibited Enterprise.
For purposes of this Agreement, Prohibited Enterprises shall include only those
persons and entities identified or described in Section 5.1 of the NDA.
4. CERTAIN REPRESENTATIONS AND COVENANTS BY YOU.
4.1 You represent and warrant as follows: You are a United States Citizen.
Your employment by the Company will not conflict with any prior or current
employment, consulting, noncompetition, nondisclosure or other agreement or
relationship, whether oral or written. You do not possess confidential
information arising out of any such employment, consulting, noncompetition,
nondisclosure or other agreement or relationship which, in your best judgment,
would be utilized in connection with your employment by the Company in the
absence of Section 4.2.
4.2 If, in spite of the last sentence of Section 4.1, you should find that
confidential information belonging to any other person or entity might be usable
in connection with the Company's business, you will not intentionally disclose
to the Company or use on behalf of the Company any such confidential
information; but during your employment by the Company you will use in the
performance of your duties all information which is generally known and used by
persons with training and experience comparable to your own and all information
which is common knowledge in the industry or otherwise legally in the public
domain.
5. INVENTION, CONFIDENTIALITY AND NONCOMPETE AGREEMENT. You agree that, on or
before February 2, 2004 you will execute, deliver and be bound by the provisions
of the NDA.
6. RETURN OF COMPANY PROPERTY. Upon the termination of your employment, you
shall return to the Company all keys, correspondence, contracts, reports,
manuals, forms, data, and all documents in any form, and all copies thereof,
relating to the Company's business and all other property of the Company that is
in your possession, custody or control.
7. REMEDIES. Your obligations under the NDA and the provisions of Exhibit A and
Sections 2.4, 2.5 and 4 through 16 of this Agreement shall survive any
expiration or termination of this Agreement or your employment for any reason
with the Company. You acknowledge that a remedy at law for any breach or
threatened breach by you of the provisions of the NDA would be inadequate and
you therefore agree that the Company shall be entitled to such injunctive or
other equitable relief in case of any such breach or threatened breach.
8. ASSIGNMENT. This Agreement and the rights and obligations of the parties
hereto shall bind and inure to the benefit of any successor or successors of the
Company by reorganization, merger
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or consolidation and any assignee of all or substantially all of its business
and properties, but, except as to any such successor or permitted assignee of
the Company, neither this Agreement nor any rights or benefits hereunder may be
assigned by the Company or by you except by operation of law. The Company's
obligations and those of any successors or permitted assignee of the Company
under this Agreement, including but not limited to the severance provisions and
other compensation and benefits due to you pursuant to Exhibit A hereto, will be
a condition of and are to remain those of any successor or permitted assignee of
the Company and such successor or permitted assignee will expressly assume this
Agreement and its obligations in writing.
9. INTERPRETATION. It is the express intent of the parties that, (i) in case any
one or more of the provisions contained in this Agreement shall for any reason
be held to be excessively broad as to duration, geographical scope, activity or
subject, such provision shall be construed by limiting and reducing it as
determined by a court of competent jurisdiction, so as to be enforceable to the
extent compatible with applicable law; and (ii) in case any one or more of the
provisions contained in this Agreement cannot be so limited and reduced and for
any reason is held to be invalid, illegal or unenforceable, such invalidity,
illegality or unenforceability shall not affect the other provisions of this
Agreement, and this Agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein.
10. NOTICES. Any notice that the Company is required to or may desire to give
you shall be given by personal delivery, recognized overnight courier service,
email, telecopy or registered or certified mail, return receipt requested,
addressed to you at your address of record with the Company, or at such other
place as you may from time to time designate in writing. Any notice that you are
required or may desire to give to the Company hereunder shall be given by
personal delivery, recognized overnight courier service, email, telecopy or by
registered or certified mail, return receipt requested, addressed to the Company
at its principal office, or at such other office as the Company may from time to
time designate in writing. The date of actual delivery of any notice under this
Section 10 shall be deemed to be the date of delivery thereof.
11. WAIVERS. If either party should waive any breach of any provision of this
Agreement, such party shall not thereby be deemed to have waived any preceding
or succeeding breach of the same or any other provision of this Agreement.
12. COMPLETE AGREEMENT; AMENDMENTS. This Agreement, including the Exhibits
hereto, sets forth the entire agreement of the parties with respect to the
subject matter hereof, and supersedes any previous oral or written
communications, representations, understandings, or agreements with the Company
or any officer or representative thereof. Any amendment to this Agreement or
waiver by either party of any right hereunder shall be effective only if
evidenced by a written instrument executed by the parties hereto, upon
authorization of the Board.
13. HEADINGS. The headings of the Sections hereof are inserted for convenience
only and shall not be deemed to constitute a part hereof nor to affect the
meaning of this Agreement.
14. COUNTERPARTS. This Agreement may be signed in two counterparts, each of
which shall be deemed an original and both of which shall together constitute
one agreement.
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15. CHOICE OF LAW; ARBITRATION. You acknowledge that a substantial portion of
the Company's business is based in and directed from the Commonwealth of
Massachusetts, where the Company is headquartered and administers all employee
compensation and benefits. You also acknowledge that during the course of your
employment with the Company you have had and will continue to have substantial
contacts with Massachusetts. This Agreement shall be deemed to have been made in
the Commonwealth of Massachusetts, shall take effect as an instrument under seal
within Massachusetts, and the validity, interpretation and performance of this
Agreement shall be governed by, and construed in accordance with, the internal
law of Massachusetts, without giving effect to conflict of law principles. Both
parties further acknowledge that the last act necessary to render this Agreement
enforceable is its execution by the Company in Massachusetts, and that the
Agreement thereafter shall be maintained in Massachusetts. Except for the right
of any party to apply to a court of competent jurisdiction for a temporary
restraining order, preliminary injunction or other equitable relief to preserve
the status quo or prevent irreparable harm, any claim of breach or violation of
this Agreement, either during the existence of the employment relationship or
afterward, by either party hereto shall be settled by binding arbitration in
Boston, Massachusetts. Such arbitration shall be conducted in accordance with
the then current Commercial Arbitration Rules of the American Arbitration
Association ("AAA") and shall be before a single neutral arbitrator licensed to
practice law in the state of Massachusetts and with at least five (5) years
substantive legal experience with executive employment contracts and dispute
resolution (provided such an individual is then available to be assigned to and
work on the matter). Such arbitration shall be conducted by an arbitrator chosen
by mutual agreement of the parties or, failing such agreement, an arbitrator
appointed by the AAA. There shall be discovery prior to the arbitration hearing
as follows: (a) exchange of witness lists and copies of documentary evidence and
documents related to or arising out of the issues to be arbitrated, (b)
depositions of all party witnesses, and (c) such other depositions as may be
allowed by the arbitrator upon a showing of reasonable need or good cause. The
arbitrator shall apply the same substantive law, the same limitation periods and
the same remedies, that would apply if the claims were brought in a court. The
arbitrator shall have no power or authority to add to or detract from this
Agreement. The arbitrator shall have no authority to award punitive or
consequential damages. The arbitrator shall prepare a written decision
containing the essential findings and conclusions on which the award is based.
The resulting arbitration award may be enforced in any court of competent
jurisdiction. Either party may bring an action in court to compel arbitration
under this Agreement, to enforce an arbitration award or to obtain temporary
injunctive relief pending a judgment based on the arbitration award. Such
decisions and awards rendered by the arbitrator shall be final and conclusive
and may be entered in any court having jurisdiction thereof as a basis of
judgment and of the issuance of execution for its collection. The arbitrator
shall be required to follow applicable law.
16. ADVICE OF SEPARATE COUNSEL. You acknowledge that you have been advised to
review this Agreement with your own legal counsel and other advisors of your
choosing and that prior to entering into this Agreement, you have had the
opportunity to review this Agreement with your attorney and other advisors and
have not asked (or relied upon) the Company or its counsel to represent you or
your counsel in this matter. The Company shall pay for all reasonable legal fees
and expenses incurred by you in the negotiation and execution of this Agreement
and other applicable agreements and Company documents (but not any amendment of
or waiver under this
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Agreement). The Company shall directly pay your legal counsel within thirty (30)
days of the Company's receipt of any applicable invoice(s) for such reasonable
legal fees and expenses.
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IN WITNESS WHEREOF, the Company and you have executed this Agreement as
of the day and year first set forth above.
EGENERA, INC.
By: /s/ Vern J. Brownell
-------------------------------------
Name:
Title:
/s/ Robert M. Dutkowsky
_________________________________________
ROBERT M. DUTKOWSKY
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EXHIBIT A
EMPLOYMENT TERM, COMPENSATION AND BENEFITS
OF ROBERT M. DUTKOWSKY
1. TERM. The initial term of your employment under this Agreement to
which this EXHIBIT A is attached and made a part shall be for a period of three
(3) years from the Effective Date. If the Company consummates an initial public
offering of its Common Stock, $.001 par value per share, then within one hundred
eighty (180) days after the consummation of such offering the Company will
review this Agreement with you to consider, in its discretion, whether any
modifications to it are then advisable or appropriate; provided that any such
modifications shall be subject to the execution and delivery of a written
amendment to this Agreement signed by both the Company and you.
2. COMPENSATION.
(a) Your base salary ("Base Salary") shall be at the annual rate
of Three Hundred Fifty Thousand Dollars ($350,000), payable in accordance with
the Company's payroll policies as from time to time in effect (provided that
pro-rata portions of your Base Salary shall be paid to you no less frequently
than once each month). Your Base Salary will be reviewed annually by the Board
and may be increased by the Board in its discretion. You will also receive a
signing bonus of One Hundred Thousand Dollars ($100,000) on the Effective Date.
(b) For every fiscal year, you will be eligible for an annual
bonus of five-sevenths (5/7) of your Base Salary as of the end of the fiscal
year (the "Target Bonus"). Subject to this Section 2 of EXHIBIT A, the actual
amount, if any, of the Target Bonus to be paid to you ("Actual Bonus") shall be
based upon attainment of goals and objectives to be established no later than
the 45th day of each such fiscal year by the Board in consultation with you (and
which may be modified by the Board during such fiscal year from time to time in
consultation with you). Any Actual Bonus to be paid to you shall be paid not
later than the earlier of (i) three (3) business days after issuance of the
Company's auditors' signed annual audit report with respect the fiscal year to
which the Actual Bonus relates and (ii) ninety (90) days after the end of the
fiscal year to which the Actual Bonus relates.
(c) If you are entitled to Severance Benefits under Section 5 of
this EXHIBIT A below, then in addition to such Section 5 benefits, on your
termination of employment you shall also receive a cash payment that is equal to
a pro-rated portion of your Target Bonus for the fiscal year of termination
(with the amount based on the number of days worked in the fiscal year of
termination) if you shall have attained the goals and objectives for such Target
Bonus established through the date of termination of your employment.
Notwithstanding the foregoing, for fiscal year 2004, if there is a Qualifying
Termination on or before December 31, 2004, you shall be entitled to a cash
payment on your termination of employment that is equal to the greater of (i)
such pro-rated portion of your Target Bonus for fiscal year 2004 whether or not
any goals or objectives for such Target Bonus were attained or (ii) $150,000.
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(d) For fiscal year 2004, your Actual Bonus shall be at least One
Hundred Fifty Thousand Dollars ($150,000), whether or not any goals or
objectives for such Target Bonus were attained, if you remain in the employment
of the Company from the Effective Date until immediately after the end of
calendar year 2004.
3. VACATION, INSURANCE AND BENEFITS; EXPENSES.
(a) You will be entitled to all legal holidays recognized by the
Company and twenty (20) days paid vacation per annum, which shall accrue at a
rate of 1.67 days per month commencing with the Effective Date. Any unused
vacation may be used or carried over in accordance with Company policy as from
time to time in effect.
(b) You will be eligible for participation in any health, dental,
and other insurance plans that may be established and maintained by the Company
from time to time for its senior executives, all as determined by the Board in
its sole discretion. You also will be entitled to participate in any employee
benefit programs that the Board may establish for Company employees generally,
including but not limited to health insurance and stock purchase or option or
compensation plans. At the Effective Date, the benefits to which you will be
entitled include: BlueCross/BlueShield health insurance with the option of HMO
or PPO, premium 80% employer-paid; Delta Dental Insurance allowing for care from
any dentist or specialist, including orthodontia for children and adults,
premium 80% employer-paid; 401(k) plan with the choice of 26 funds from
Fidelity; GE Financial Life Insurance with 2 times your Base Annual Earnings,
100% employer-paid with the option for you to purchase an additional amount
(subject to certain limitations) at competitive group rates; Short and Long Term
Disability Insurance from GE Financial; Business Travel Accident Insurance, 100%
employer-paid; Flexible Spending Plan; and an Employee Assistance Program
through The Wellness Corporation. Your benefits under the second sentence of
this paragraph (b) may change at any time, at the discretion of the Company,
provided all employees are subject to the change.
(c) The Company will reimburse you for all usual and ordinary
business expenses incurred by you in the scope of your employment hereunder in
accordance with the Company's expense reimbursement policy as from time to time
in effect.
4. COMPENSATORY EQUITY.
(a) You will be entitled to receive stock options, with a ten (10)
year term, to purchase up to an aggregate of Seven Million Two Hundred Fourteen
Thousand Nine Hundred Two (7,214,902) shares of Common Stock, $.001 par value
per share, of the Company. The exercise price under such stock options shall be
$2.1622 per share (which is the fair market value of a common share of the
Company as of the Effective Date as determined by the Board). Your right to
receive such stock options shall be subject to your execution and delivery of
Stock Option Agreements substantially in the forms attached hereto as EXHIBIT D
(the "Stock Option Agreements"). Such stock options will be incentive stock
options (as defined under Section 422 of the Internal Revenue Code of 1986, as
amended) to the maximum extent permitted by law and as provided in the incentive
stock agreement provided in EXHIBIT D. You acknowledge receipt by the Company of
a complete copy of its Amended and Restated 2000 Stock Option/Stock
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Issuance Plan, as amended (the "Plan") and the stock options shall be granted to
you pursuant to the Plan (and such granted options shall receive any and all
benefits provided under the Plan other than any accelerated vesting provisions).
Such stock options shall commence vesting as of the Effective Date and shall
continue to vest during any continuous period in which you have continuously
been in service to the Company (or a parent holding company or subsidiary of the
Company) as an employee, director and/or consultant. The Company acknowledges
and agrees that for purposes of this Agreement and the Stock Option Agreements,
it is the understanding and intent of the parties that your service to the
Company as an employee shall be deemed to be continuous and to constitute
"Continuous Service" within the meaning of the Stock Option Agreements so long
as your employment under this Agreement has not been terminated by the Company
(with or without Cause) or by you (with or without Good Reason) or by your
death. Such stock options will become vested as set forth in the Stock Option
Agreements (including but not limited to the Vesting Schedule attached to each
Stock Option Agreement). If you cease to provide such services (unless such
cessation of services is due to the termination of your employment by the
Company with Cause or by you without Good Reason), then (subject to the 10 year
option term expiration date) you will be permitted to exercise such vested stock
options until nine (9) months after your cessation of such services. If you
cease to provide such services because your employment with the Company is
terminated with Cause or by you without Good Reason, your right to exercise such
stock options, whether vested or unvested, shall terminate immediately upon the
termination of your employment. In the event of your death or Disability, you
(or your representative) shall also be permitted to exercise your stock options
for the longer period of time provided in Section 3(d) of your option agreements
shown in EXHIBIT D. Anything in this Agreement or the Stock Option Agreements to
the contrary notwithstanding, you shall not be entitled to exercise any stock
options at anytime after you shall have been given written notice by the Company
pursuant to clause (ii), (iv) or (vi)(B) of Section 2.3(a) of this Agreement
until you shall have cured or otherwise remedied the matter that is the subject
of such notice to the reasonable satisfaction of the Board. To the extent of any
conflict between the express terms of this Agreement and the express terms of
the Plan and executed Stock Option Agreements, the terms of this Agreement shall
prevail.
(b) During the period that the Company is not subject to the
periodic reporting requirements under the Securities Exchange Act of 1934, as
amended (the "1934 Act") applicable to issuers of securities, any stock options,
restricted stock, stock appreciation rights or other equity incentive
instruments awarded to you, including the stock options described in this
Section 4, (collectively, "Compensatory Equity") shall be granted to you in
reliance on Rule 701 of the Securities Act of 1933, as amended, or another
available exemption from the registration requirements under the Securities Act
of 1933, as amended. During the period that the Company is subject to the
periodic reporting requirements of the 1934 Act applicable to issuers of
securities, then the Company shall promptly file a registration statement(s) (on
Form S-8 or its successor or other applicable registration statement) with the
Securities and Exchange Commission and maintain the effectiveness of such
registration statement(s) covering any Compensatory Equity previously awarded to
you or awarded to you in the future. Without limiting the immediately preceding
sentence, the Company shall include in its initial filing on Form S-8 or its
successor or other applicable registration statement a re-offer prospectus
covering any and all of shares of Common Stock of the Company acquired by you by
exercise of the stock
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options to be granted pursuant to the Stock Option Agreements (and any other
Compensatory Equity granted to you to the extent that such Compensatory Equity
may be included in such a re-offer prospectus) prior to the time the Company
becomes subject to the periodic reporting requirements of the 1934 Act
applicable to issuers of securities and maintain the effectiveness of such
registration statement.
(c) You will be considered by the Board for additional
Compensatory Equity grants in the future.
5. SEVERANCE BENEFITS. As and to the extent expressly provided for in
the second paragraph of Section 2.4 of this Agreement, you will be entitled to
"Severance Benefits." The term "Severance Benefits" means:
(a) Payment to you of an amount equal to, as the case may be, (i)
your then current annual Base Salary (which will be paid to you in accordance
with the Company's usual payroll practices over the period of twelve (12) months
following the date on which your employment terminates) if at the time of the
termination of your employment the Company is not subject to the periodic
reporting requirements under the 1934 Act applicable to issuers of securities or
(ii) the sum of your then current annual Base Salary and Target Bonus for the
fiscal year in which your employment terminates (which will be paid to you in
accordance with the Company's usual payroll practices over the period of twelve
(12) months following the date on which your employment terminates) if at the
time of the termination of your employment the Company is subject to the
periodic reporting requirements under the 1934 Act applicable to issuers of
securities; and
(b) The Company's paid continuation, for a period of twelve (12)
months following the date on which your employment terminates, of the health
insurance and dental insurance provided to you and your then eligible dependents
as of that date; and
(c) In the event of a Qualifying Termination, outstanding unvested
Compensatory Equity shall vest, effective immediately prior to the termination
of your employment, on an accelerated basis as if your employment had
terminated:
(i) on the first anniversary of the Effective Date if the Qualifying
Termination occurs within six (6) months after the Effective Date
(such that the stock options to be granted to you under Section 4 of
Exhibit A shall be 25% vested), or
(ii) six (6) months later than it actually terminated if at the time
of the termination of your employment the Company is not subject to
the periodic reporting requirements under the 1934 Act applicable to
issuers of securities, or
(iii) twelve (12) months later than it actually terminated if at the
time of the termination of your employment the Company is subject to
the periodic reporting requirements under the 1934 Act applicable to
issuers of securities
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Notwithstanding the foregoing, in the event of a Qualifying Termination
occurring in connection with or after a Change of Control (as defined below),
the accelerated vesting provisions set forth in this Section 5(c) shall apply
only as described in Section 6(b) of this EXHIBIT A below such that, if unvested
Compensatory Equity vests on an accelerated basis pursuant to Section 6(b) of
this EXHIBIT A below, then no unvested Compensatory Equity shall vest under this
Section 5(c) because it would be duplicative.
To the extent that the Company's benefit plans do not allow for inclusion of
non-employee beneficiaries, the Company shall pay to you in cash the amount of
money that the Company would have otherwise spent on providing you with such
benefits.
6. CHANGE OF CONTROL.
(a) Upon any Change of Control (as defined below), fifty percent
(50%) of your then outstanding unvested Compensatory Equity shall immediately
become vested. The vesting schedule for your remaining unvested Compensatory
Equity (determined after giving effect to any accelerated vesting of such equity
pursuant to Section 6(b) of this EXHIBIT A below) shall also upon a Change of
Control be automatically proportionately adjusted so that such remaining
unvested Compensatory Equity shall thereafter vest over the remaining term of
the vesting schedule therefor (applied on a Compensatory Equity grant by grant
basis). For example, if immediately prior to a Change of Control there were 100
option shares of Compensatory Equity outstanding and, after giving effect to the
accelerated vesting provisions of this Section 6(a) and Section 6(b) below upon
a Change of Control, 75 of such option shares become vested on an accelerated
basis, then the 25 remaining unvested option shares would thereafter vest at 25%
of the rate of vesting theretofore in effect under the vesting schedule(s)
applicable to such option shares.
(b) Upon any Change of Control, if you are not offered a position
with the ultimate parent business entity that survives or results from such
Change of Control that is as or more favorable to you than the position you hold
immediately prior to such Change of Control or if there is a Qualifying
Termination in connection with or after any Change of Control, then your then
outstanding unvested Compensatory Equity (determined after giving effect to any
accelerated vesting of such equity pursuant to Section 6(a) of this EXHIBIT A
above) shall immediately become vested as to the greater of (applied on a
Compensatory Equity grant by grant basis) of (i) fifty percent (50%) of such
unvested Compensatory Equity or (ii) the amount of accelerated vesting
calculated under Section 5(c) of this EXHIBIT A above (assuming, for purposes of
such calculation, that a Qualifying Termination has occurred). For purposes of
this Agreement, a Qualifying Termination will be deemed to be in connection with
a Change of Control if you were an employee on the date the Board authorizes by
resolution at a meeting duly called and held or by a written consent to action
the discussions or negotiations that culminated in the Change of Control and
such Qualifying Termination occurred on or after such date.
(c) "Change of Control" means the first occurrence of any one of
the following: (a) the issuance of capital stock or other securities of the
Company in one or a series of related transactions, as a result of which the
holders of capital stock of the Company immediately prior to such one or series
of related transactions hold immediately following such
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one or series of related transactions less than a majority by voting power of
the capital stock of the Company; (b) if immediately prior to such Change of
Control the Company is not subject to the periodic reporting requirements under
the 1934 Act applicable to issuers of securities, a direct or indirect
acquisition of securities of the Company representing more than fifty percent
(50%) percent of the combined voting power of the Company's then outstanding
securities in one or a series of related transactions by any person (as defined
in Section 13(d) or 14(d) of the Securities Exchange of 1934, as amended) other
than by virtue of a merger, consolidation or similar transaction or by way of a
distribution of securities by the Company to its securityholders in
substantially the same proportions as their ownership of securities of the
Company immediately prior to such distribution(s), (c) if immediately prior to
such Change of Control the Company is subject to the periodic reporting
requirements under the 1934 Act applicable to issuers of securities, a direct or
indirect acquisition of securities of the Company, in one or a series of related
transactions, representing more than thirty-three and one-third percent (33 and
1/3%) percent of the combined voting power of the Company's then outstanding
securities by any person (as defined in Section 13(d) or 14(d) of the Securities
Exchange of 1934, as amended) other than by virtue of a merger, consolidation or
similar transaction or by way of a distribution of securities by the Company to
its securityholders in substantially the same proportions as their ownership of
securities of the Company immediately prior to such distribution(s), (d) the
merger or consolidation of the Company with or into any person, firm or entity,
other than a merger or consolidation of the Company in which the holders of
capital stock of the Company immediately prior to such merger or consolidation
hold immediately following such merger or consolidation at least a majority by
voting power of the capital stock or other equity interests of the surviving or
resulting or acquiring corporation or its parent in substantially the same
proportions as their ownership immediately prior to such merger or
consolidation; (e) the lease, sale, transfer or otherwise disposition of all or
substantially all of the Company's assets or business whether now owned or
hereafter acquired, other than any such lease, sale, transfer or otherwise
disposition to a subsidiary of the Company or to any person, firm or entity in
which the holders of capital stock of the Company immediately prior to such
lease, sale, transfer or otherwise disposition hold immediately following such
lease, sale, transfer or otherwise disposition at least a majority by voting
power of the capital stock or other equity interests of the acquiring person,
firm or entity in substantially the same proportions as their ownership
immediately prior to such transaction(s); (f) if, after one year after the
Company becomes subject to the periodic reporting requirements under the 1934
Act applicable to issuers of securities, individuals who constituted the Board
(the "Incumbent Board") immediately prior to the Company's becoming subject to
such reporting requirements cease for any reason to constitute at least a
majority of such Board; provided however that any individual becoming a director
after execution of this Agreement whose election (or nomination for election)
was approved by (or by a committee appointed by) a vote of at least a majority
of the individuals then comprising the Incumbent Board shall be considered to
have been a member of the Incumbent Board, (g) a voluntary or involuntary
complete liquidation or dissolution of the Company.
(d) In the event that it is determined that any payment or
distribution of any type to or for the benefit of you made by the Company, by
any of its affiliates, by any person who acquires ownership or effective control
or ownership of a substantial portion of the Company's assets (within the
meaning of section 280G of the Internal Revenue Code of 1986, as amended,
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and the regulations thereunder (the "Code")) or by any affiliate of such person,
whether paid or payable or distributed or distributable pursuant to the terms of
this Agreement or otherwise (the "Total Payments"), would be subject to the
excise tax imposed by section 4999 of the Code or any interest or penalties
(other than any interest or penalties arising from your failure to timely file a
return with respect thereto or to pay such excise tax in an amount not less than
the amount calculated by the Company) with respect to such excise tax
(collectively the "Excise Tax"), then you shall be entitled to receive an
additional payment (an "Excise Tax Restoration Payment") in an amount equal to
the sum of any Excise Tax on the Total Payments plus all income taxes under the
Code and Massachusetts income taxes imposed on the Excise Tax Restoration
Payment plus any Excise Tax imposed on the Excise Tax Restoration Payment. Such
Excise Tax Restoration Payment will be based on the Company's calculation of the
Excise Tax Amount and shall be paid to you upon completion of such calculations
(which shall be performed in connection with any Change of Control or with any
payments/benefits provided to you that are reasonably likely to be included in
an Excise Tax determination) but in no event later than twenty (20) days before
the filing due date(s) (without extensions) of any federal income tax return(s)
with which any such Excise Tax is payable. If the Excise Tax as so calculated is
increased by an assessment of the Internal Revenue Service (the "Assessment"),
the Company shall pay to you, in no event later than ten (10) days before such
Assessment is required to be paid, on a tax-effected basis, an additional cash
amount to fully pay any related interest and penalties and the appropriate
additional Excise Tax Restoration Payment to you such that you will be no worse
off financially on an after-tax basis as a result of such Assessment, provided
that you have given the Company the opportunity, at its expense, to contest the
Assessment on your behalf until a final judicial determination (or until such
earlier disposition as the Company may agree to on your behalf). All
calculations performed under this Section 6(d) shall apply the highest
applicable federal and state marginal tax rates.
7. LATE PAYMENTS. If any payments or benefits to be provided to you
under this Agreement are not fully paid to you within thirty (30) days after
their original due date, then such late amounts shall accrue interest at an
annualized rate of 10% per year. This section shall survive both termination of
your employment and expiration/termination of this Agreement.
8. INDEMNIFICATION. You will be indemnified by the Company against any
threatened, pending or completed action, suit or claim against you by reason of
the fact that you are or have been a director, officer, employee or agent of the
Company or are or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, to the maximum extent permitted by the Company's
bylaws, certificate of incorporation, Delaware or Massachusetts contract law or
applicable law. You will also be covered under the Company's directors' and
officers' liability insurance policies. This section shall survive both
termination of your employment and expiration/termination of this Agreement.
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