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EXHIBIT 4.2
NOTICE OF RESTRICTED STOCK GRANT
BY
TELCO SYSTEMS, INC.
Stockholder: Itai Aaronson
Social Security No.: ###-##-####
The Company's Board of Directors has authorized you to be granted shares of
restricted common stock, as follows:
TOTAL NUMBER OF SHARES: 5,000
DATE OF GRANT: 2/15/96
VESTING SCHEDULE: The shares of restricted stock are subject to a vesting
schedule which begins on the Date of Grant. Twenty-five percent (25%) of the
total number of shares granted vest each year, on each of the first four
anniversaries of the Date of Grant. Once shares have vested, you are entitled to
full ownership of, and the right to sell or hold, such shares. In the event that
your full-time employment by the Company terminates for any reason prior to the
fourth anniversary of the Date of Grant, any unvested shares will be forfeited
to the Company for no consideration.
By your signature below, you accept this grant and you and the Company agree
that these restricted shares are granted under and governed by the provisions of
the Grant Agreement, which is attached hereto as Appendix A and made a part of
this document. PLEASE READ THAT AGREEMENT CAREFULLY.
The parties have executed this agreement, or caused this agreement to be
executed, as of the Date of Grant.
TELCO SYSTEMS, INC.
/s/ John A. Ruggiero /s/ Itai Aaronson
By: _________________________ _________________________
John A. Ruggiero Itai Aaronson
Chief Executive Officer Stockholder
and Secretary
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Appendix A
GRANT AGREEMENT
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This agreement is dated as of February 15, 1996 and is between the
person (the "Stockholder") whose name is set forth on the Notice of Restricted
Stock Grant (the "Notice") to which this agreement is attached and Telco
Systems, Inc., a Delaware corporation (the "Company").
1. ACKNOWLEDGEMENT OF GRANT. The Stockholder and the Company hereby
acknowledge the grant to the Stockholder by the Company as of the date of this
agreement of the number of shares of the Company's common stock, $.01 par value
("Common Stock"), set forth in the Notice, for consideration consisting of past
services rendered to the Company by the Stockholder. The shares of Common Stock
so granted are hereinafter sometimes referred to as the "Shares," which term
shall also include any shares of capital stock of the Company issued to the
Stockholder by virtue of his or her ownership of the Shares, by stock dividend,
stock split, recapitalization or otherwise. Shares that are subject to
forfeiture, as described in section 3 hereof, are hereinafter referred to as
"Unvested Shares," and Shares that are no longer so subject to forfeiture are
hereinafter referred to as "Vested Shares."
2. RESTRICTIONS ON TRANSFER. The following restrictions on transfer of
the Shares shall apply. No Shares, or any interest therein, may be sold, pledged
or otherwise disposed of, by operation of law or otherwise, at any time or under
any circumstances unless (i) the Shares proposed to be transferred are Vested
Shares, and EITHER (ii) such Shares have been registered under the Securities
Act of 1933, as amended (the "Act"), and qualified under applicable state
securities laws, OR (iii) the proposed transfer is exempt from such registration
and qualification, as determined by the Company. The Company hereby represents
that it has filed under the Act, and caused to become effective, a registration
statement on Form S-8 covering the Shares. The Company shall use reasonable
efforts to maintain such registration in effect so long as the Stockholder
holds, or has a right to hold, any of the Shares.
3. Employment and Forfeiture of Unvested Shares.
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(a) The parties hereby acknowledge that the Stockholder is
presently employed on a full-time basis by the Company. In the event that the
Stockholder's full-time employment by the Company, or by a subsidiary of the
Company, terminates for any reason whatsoever (including without limitation
voluntary termination, termination by the Company with or without cause, death
or disability) prior to February 15, 2000, then there shall be forfeited by the
Stockholder, and transferred to the Company for
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no cash or other consideration, a number of Shares determined as follows:
Employment Shares
Termination Date to be Forfeited
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Prior to February 15, 1997 100% of the total
February 15, 1997-February 14, 1998 75% of the total
February 15, 1998-February 14, 1999 50% of the total
February 15, 1999-February 14, 2000 25% of the total
February 15, 2000 and thereafter None
(b) If the Stockholder shall have been continuously employed
full-time by the Company or a subsidiary of the Company from the date hereof
through February 15, 2000, then ownership of all of the Shares held by the
Stockholder as of such date shall be vested outright in the Stockholder, free
and clear of the forfeiture rights set forth in this section 3. The Shares
shall, however, remain subject to any restrictions contained or referred to in
section 2 hereof, to the extent then applicable.
4. PROCEDURES. No certificate representing Shares shall initially be
issued to the Stockholder. The shares shall be held in "Book Entry" form by the
Transfer Agent for the Common Stock until each vesting date. On or as soon as
practicable after each vesting date, the Company shall take the following
action:
(a) The Company shall notify the Stockholder of the amount of
the state and federal taxes required to be held by the Company with respect to
the vesting of the Shares that became Vested Shares on such date, which notice
shall specify that the Stockholder may deliver to the Company a check in the
amount of such withholding taxes.
(b) In the event that the Stockholder does not pay such
withholding taxes to the Company within the period specified in the notice, the
Company shall cause a sufficient number of such Vested Shares to be sold on the
NASDAQ market so that the net proceeds of such sale shall equal the amount of
such taxes. The Stockholder may also request that the Company sell additional
Vested Shares, at the time of the aforesaid sale, for the Stockholder's own
account.
(c) The Company shall retain withholding taxes, whether
provided by the Stockholder or though the sale of Vested shares, in accordance
with applicable withholding regulations.
(d) The Company shall deliver to the Stockholder (i) the net
proceeds of the sale of any Vested Shares sold by the Company for the account of
the Stockholder, as described in section 4(b), and (ii) a certificate
representing the balance (if any) of the Vested Shares. Such certificate shall
contain appropriate restrictive legends if the registration statement on Form
S-8 referred to in section 2 hereof is not then effective.
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The Stockholder hereby irrevocably constitutes and appoints the Company
as his or her attorney-in-fact and agent to execute and deliver all documents
and take such other action as may be necessary in order to take the action
described in the section 4, including the sale of Vested Shares as described
above.
5. Miscellaneous
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(a) AMENDMENTS. Neither this agreement nor any provision
hereof may be changed or modified except by an agreement in writing executed by
the Stockholder and on behalf of the Company.
(b) BINDING EFFECT OF THE AGREEMENT. This agreement shall
inure to the benefit of, and be binding upon, the Company, the Stockholder and
their respective estates, heirs, executors, transferees, successors, assigns and
legal representatives.
(c) RIGHTS AS A STOCKHOLDER. The Stockholder shall have all
rights and privileges of a holder of Common Stock, including full voting power,
with respect to any and all Shares (whether vested or unvested).
(d) PROVISIONS SEPARABLE. In the event that any of the terms
of this agreement shall be or become or is declared to be illegal or
unenforceable by any court or other authority of competent jurisdiction, such
terms shall be null and void and shall be deemed deleted from this agreement,
and all the remaining terms of this agreement shall remain in full force and
effect.
(e) DEFINITION OF COMMON STOCK. The term "Common Stock" as
used in this agreement shall mean the Company's presently authorized Common
Stock, $.01 par value, and any class of capital stock of the Company that may,
through stock dividend, stock split, recapitalization, merger, reorganization or
otherwise replace such class of stock.
(f) NO EMPLOYMENT AGREEMENT. This agreement shall not be
construed as an agreement by the Company to employ the Stockholder, nor is the
Company obligated to continue employing the Stockholder by reason of this
agreement or the grant of the Shares to the Stockholder.
(g) APPLICABLE LAW. This agreement shall be construed
and enforced in accordance with the laws of the State of Delaware.
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SCHEDULE 4.2
Exhibit 4.2 omits certain additional Restricted Stock Grant Agreements,
each dated February 15, 1996 and substantially identical to Exhibit 4.2. The
grantee and number of shares of Common Stock covered by each such agreement are
as follows:
Number of Shares of
Grantee Restricted Stock
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Al Bannis 5,000
Jeffrey Black 10,000
Karen Brim 5,000
Richard Cameron 5,000
John Caughron 5,000
Jaswant Dhaliwal 5,000
Daniel Fretz 5,000
Stanley Gardner 5,000
Zuren Hsi 5,000
Bryan Knysh 3,000
Stephen Mills 5,000
Larry Orr 3,000
Joseph Schick 3,000
Edward Schloeman 5,000
Lawrence Walker 3,000
George Weigt 5,000
Jeffrey Weiss 10,000