EXHIBIT 10.29
April 21, 2003
Richard Okumoto
102 Strathmore Place
Los Gatos, CA 95032
Dear Rich:
Photon Dynamics, Inc. (the "Company") is pleased to offer you employment in the
position of Chief Financial Officer ("CFO") of the Company on the following
terms:
1. POSITION, DUTIES AND RESPONSIBILITIES. We would like you to begin
employment with the Company on or around May 12, 2003 (the "Employment Date").
You will serve in a full-time capacity as Chief Financial Officer of the
Company, reporting to the Company's Chief Executive Officer (the "CEO"). As CFO,
you have overall responsibility for management of the Company's finances, and
shall continue to perform duties customarily associated with this position and
such other duties as are assigned from time to time by the Company. You shall
devote your full time and attention during normal business hours to the business
affairs of the Company, except for reasonable vacations and periods of illness
or incapacity. By signing this letter agreement, you represent and warrant to
the Company that you are under no contractual commitments inconsistent with your
obligations to the Company.
2. COMPENSATION AND EMPLOYEE BENEFITS.
2.1 BASE SALARY. Your base salary is $4,327.00 per week
($225,000 annually), less payroll deductions and required withholdings, paid
according to the Company's regular payroll schedule and procedures. Your salary
will be subject to adjustment as determined by the Company.
2.2 INCENTIVE BONUS. You will be eligible to receive an
annual incentive bonus of up to $112,500 for each Company fiscal year during
which you are employed (the "Bonus Year"), based on the achievement of
performance goals and financial targets. You and the CEO will establish such
goals and targets by mutual agreement, within 60 days after the Employment Date
and the end of each Bonus Year. For the first Bonus Year, which will end on
September 30, 2003, you will be eligible to receive a pro rata share of the
annual bonus amount, up to a total of $47,250, provided that you are employed at
the end of the first Bonus Year. Any bonus payment shall be subject to payroll
deductions and required withholdings.
2.3 STOCK OPTION GRANTS. Subject to approval of the
Board, the Company shall grant you options to purchase an aggregate of 90,000
shares of the Company's common stock (the "Common Stock") pursuant to the
Company's Amended and Restated 1995 Stock Option Plan. The exercise price
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April 21, 2003
Page 2
of the Stock Options shall be equal to the fair market value of the stock as of
the date of grant as determined by the Board. The options will vest over a
50-month period as follows: twelve percent (12%) of the options will vest and
become exercisable six (6) months after your employment date; thereafter, the
remaining options will vest 2% per month over an additional forty-four (44)
months, so that the Stock Options will be fully vested and exercisable after you
complete four (4) years and two (2) months of employment with the Company. The
Stock Options will otherwise be governed by the terms and conditions of the
applicable stock option plans, stock option agreements and grant notices.
2.4 EMPLOYEE BENEFITS. You are entitled to receive all
benefits, including accrual of Paid Time Off, and health and disability
benefits, for which you are eligible under the terms and conditions of the
standard Company benefit plans, which may be in effect from time to time and
provided by the Company to its senior executive level employees generally. After
termination of your employment with the Company, to the extent provided by the
federal COBRA law or, if applicable, state insurance laws, and by the Company's
then-current group health insurance policies, you will be eligible to continue
your group health insurance benefits at your own expense.
2.5 RELOCATION. The Company will reimburse you for actual
expenses reasonably incurred in connection with your relocation to California,
subject to the Company's general policies and procedures governing such
reimbursements (the "Relocation Reimbursement"). If any portion of the
Relocation Reimbursement paid to you by the Company is taxable, you shall be
entitled to receive from the Company an additional payment (the "Gross-Up
Payment") in an amount that shall fund the payment by you of any income and
employment taxes imposed on the Relocation Reimbursement as well as all income
and employment taxes imposed on the Gross-Up Payment.
3. OTHER ACTIVITIES DURING EMPLOYMENT. During your employment with the
Company, you will not engage in any other gainful employment business or
activity without the prior written consent of the Company. While you are
employed by the Company, you also will not assist any person or organization in
competing with the Company, in preparing to compete with the Company or in
soliciting or hiring any employees of the Company. Nothing in this letter
agreement will prevent you from accepting speaking or presentation engagements
in exchange for honoraria, serving on boards of charitable organizations or
owning no more than one percent (1%) of the voting stock of a corporation.
4. COMPANY POLICIES; PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT.
As a Company employee, you are expected to abide by Company policies and
procedures, and acknowledge in writing that you have read the Company's Employee
Handbook. You must also sign and comply with the enclosed Proprietary
Information and Inventions Agreement as a condition of your continuing
employment.
5. AT-WILL EMPLOYMENT. Your employment with the Company is at-will.
Either you or the Company may terminate the employment relationship at any time,
with or without cause and with or without advance notice, provided that you may
be removed from any position that you hold as an employee of the Company only in
the manner provided by the Bylaws of the Company and applicable law.
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April 21, 2003
Page 3
6. CHANGE IN CONTROL.
6.1 DEFINITION. For purposes of this Agreement, "Change
in Control" means the occurrence in a single transaction or in a series of
related transactions of any one or more of the following events:
(a) any person (within the meaning of Section
13(d) or 14(d) of the Securities Exchange Act of 1934, as amended) becomes the
owner, directly or indirectly, of securities of the Company representing more
than fifty percent (50%) of the combined voting power of the Company's then
outstanding securities other than by virtue of a merger, consolidation or
similar transaction;
(b) there is consummated a merger, consolidation
or similar transaction involving (directly or indirectly) the Company and,
immediately after the consummation of such merger, consolidation or similar
transaction, the stockholders of the Company immediately prior thereto do not
own, directly or indirectly, outstanding voting securities representing more
than fifty percent (50%) of the combined outstanding voting power of the
surviving entity in such merger, consolidation or similar transaction or more
than fifty percent (50%) of the combined outstanding voting power of the parent
of the surviving entity in such merger, consolidation or similar transaction; or
(c) there is consummated a sale, lease, license
or other disposition of all or substantially all of the consolidated assets of
the Company and its subsidiaries, other than a sale, lease, license or other
disposition of all or substantially all of the consolidated assets of the
Company and its subsidiaries to an entity, more than fifty percent (50%) of the
combined voting power of the voting securities of which are owned by
stockholders of the Company in substantially the same proportions as their
ownership of the Company immediately prior to such sale, lease, license or other
disposition.
6.2 TERMINATION AFTER A CHANGE IN CONTROL. In the event
that within twelve (12) months following a Change in Control, the Company
terminates your employment without Cause (as defined below) or you resign for
Good Reason (as defined below) (a Change in Control Termination), all stock
options held by you shall have their vesting accelerated such that all options
are fully vested and exercisable as of the date of the Change in Control
Termination (the "Acceleration"). As a precondition of receiving the
Acceleration, you must first sign and allow to become effective a general
release of claims in favor of the Company in a form acceptable to the Company.
6.3 DEFINITION OF "CAUSE." For purposes of this
Agreement, "Cause" shall mean the occurrence of one or more of the following:
(a) your indictment or conviction of any felony or crime involving moral
turpitude or dishonesty; (b) your participation in any fraud against the Company
or its successor; (c) breach of your duties to the Company or its successor,
including, without limitation, persistent unsatisfactory performance of job
duties; (d) intentional damage to any property of the Company or its successor;
(e) willful conduct that is demonstrably injurious to the Company or its
successor, monetarily or otherwise; (f) breach of any agreement with the Company
or its successor, including your Proprietary Information and Inventions
Agreement; or (g) conduct by you that in the good faith and reasonable
determination of the Company demonstrates gross unfitness to serve. Physical or
mental disability or death shall not constitute Cause hereunder.
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6.4 DEFINITION OF "GOOD REASON." For purposes of this
Agreement, your voluntary termination of employment with the Company will be
considered a termination for "Good Reason" if you resign your employment because
one of the following events occurs without your consent: (a) a reduction of your
then-existing annual base salary by more than ten percent (10%), unless the
then-existing base salaries of other executive officers of the Company are
accordingly reduced; (b) a material reduction in the package of benefits and
incentives, taken as a whole, provided to you (not including raising of employee
contributions to the extent of any cost increases imposed by third parties),
except to the extent that such benefits and incentives of other executive
officers of the Company are similarly reduced; (c) assignment to you of any
duties or any limitation of your responsibilities substantially inconsistent
with your position, duties, responsibilities and status with the Company
immediately prior to the date of the Change in Control; or (d) relocation of the
principal place of your employment to a location that is more than fifty (50)
miles from your principal place of employment immediately prior to the date of
the Change in Control.
6.5 LIMITATION ON PAYMENTS. If any payment or benefit you
would receive pursuant to a Change in Control from the Company or otherwise
("Payment") would (i) constitute a "parachute payment" within the meaning of
Section 280G of the Code, and (ii) but for this sentence, be subject to the
excise tax imposed by Section 4999 of the Code (the "Excise Tax"), then such
Payment shall be equal to the Reduced Amount. The "Reduced Amount" shall be
either (x) the largest portion of the Payment that would result in no portion of
the Payment being subject to the Excise Tax or (y) the largest portion, up to
and including the total, of the Payment, whichever amount, after taking into
account all applicable federal, state and local employment taxes, income taxes,
and the Excise Tax (all computed at the highest applicable marginal rate),
results in your receipt, on an after-tax basis, of the greater amount of the
Payment notwithstanding that all or some portion of the Payment may be subject
to the Excise Tax. If a reduction in payments or benefits constituting
"parachute payments" is necessary so that the Payment equals the Reduced Amount,
reduction shall occur in the following order unless you elect in writing a
different order (provided, however, that such election shall be subject to Board
approval if made on or after the effective date of the event that triggers the
Payment): reduction of cash payments; cancellation of Acceleration; reduction of
employee benefits. In the event that Acceleration is to be reduced, it shall be
cancelled in the reverse order of the date of grant of your Options (i.e.,
earliest granted Option cancelled last) unless you elect in writing a different
order for cancellation.
The accounting firm engaged by the Company for general audit purposes as of the
day prior to the effective date of the Change in Control shall perform the
foregoing calculations. If the accounting firm so engaged by the Company is
serving as accountant or auditor for the individual, entity or group effecting
the Change in Control, the Company shall appoint a nationally recognized
accounting firm to make the determinations required hereunder. The Company shall
bear all expenses with respect to the determinations by such accounting firm
required to be made hereunder.
The accounting firm engaged to make the determinations hereunder shall provide
its calculations, together with detailed supporting documentation, to you and
the Company within fifteen (15) calendar days after the date on which your right
to a Payment is triggered (if requested at that time by you or the Company) or
such other time as requested by you or the Company. If the accounting firm
determines that no Excise Tax is payable with respect to a Payment, either
before or after the application of the Reduced Amount, it shall furnish you and
the Company with an opinion reasonably acceptable to you that
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no Excise Tax will be imposed with respect to such Payment. Any good faith
determinations of the accounting firm made hereunder shall be final, binding and
conclusive upon you and the Company.
7. GENERAL PROVISIONS.
7.1 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 any other jurisdiction, but such invalid,
illegal or unenforceable provision will be reformed, construed and enforced in
such jurisdiction so as to render it valid, legal, and enforceable consistent
with the intent of the parties insofar as possible.
7.2 ENTIRE AGREEMENT. This Agreement, together with the
Proprietary Information and Inventions Agreement, constitutes the entire and
exclusive agreement between you and the Company, and it supersedes any prior
agreement, promise, representation, or statement, written or otherwise, between
you and the Company with regard to this subject matter. It is entered into
without reliance on any promise, representation, statement or agreement other
than those expressly contained or incorporated herein, and it cannot be modified
or amended except in a writing signed by you and a duly authorized officer of
the Company.
7.3 SUCCESSORS AND ASSIGNS. This Agreement is intended to
bind and inure to the benefit of and be enforceable by you, the Company and your
and its respective successors, assigns, heirs, executors and administrators,
except that you may not assign any of your duties hereunder and you may not
assign any of your rights hereunder without the written consent of the Company,
which shall not be withheld unreasonably.
7.4 GOVERNING LAW. All questions concerning the
construction, validity and interpretation of this Agreement will be governed by
the law of the State of California as applied to contracts made and to be
performed entirely within California.
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To indicate your acceptance of the Company's offer of continued employment,
please sign and date this Agreement and the enclosed Proprietary Information and
Inventions Agreement and return the signed documents to me.
Sincerely,
PHOTON DYNAMICS, INC.
BY: /s/ E. Floyd Kvamme
_____________________________
E. Floyd Kvamme
Chairman of the Board
BY: /s/ Elwood Spedden
_____________________________
Elwood Spedden
President & CEO
ACCEPTED AND AGREED:
/s/ Richard Okumoto April 21, 2003
___________________________________ _______________________
RICHARD OKUMOTO DATE
Enclosure - Proprietary Information and Inventions Agreement