-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, V+OvqC6+6Eq4KBKqmg3CgTsWiLjAljOzTrhXQAT4UylEgMQbe8GWgCMfgtasijQn wZTEE1SXrB4a7xZtYe6Ouw== 0000914317-06-001656.txt : 20060525 0000914317-06-001656.hdr.sgml : 20060525 20060525134219 ACCESSION NUMBER: 0000914317-06-001656 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20060519 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers ITEM INFORMATION: Other Events ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20060525 DATE AS OF CHANGE: 20060525 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TERABEAM, INC. CENTRAL INDEX KEY: 0000712511 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 042751645 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-29053 FILM NUMBER: 06866591 BUSINESS ADDRESS: STREET 1: 881 NORTH KING STREET STREET 2: SUITE 100 CITY: NORTHAMPTON STATE: MA ZIP: 01060 BUSINESS PHONE: 4135841425 MAIL ADDRESS: STREET 1: 881 NORTH KING STREET STREET 2: SUITE 100 CITY: NORTHAMPTON STATE: MA ZIP: 01060 FORMER COMPANY: FORMER CONFORMED NAME: YDI WIRELESS, INC. DATE OF NAME CHANGE: 20051103 FORMER COMPANY: FORMER CONFORMED NAME: TERABEAM, INC DATE OF NAME CHANGE: 20051102 FORMER COMPANY: FORMER CONFORMED NAME: YDI WIRELESS INC DATE OF NAME CHANGE: 20030714 8-K 1 form8k-77159_trbm.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (date of earliest event reported): May 19, 2006 ------------------------------ TERABEAM, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 000-29053 04-2751645 - -------------------------------------------------------------------------------- (State or other jurisdiction of (Commission (IRS employer incorporation) file number) identification no.) 2115 O'Nel Drive, San Jose, CA 95131 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (408) 731-2700 ---------------------------- Not Applicable - ------------------------------------------------------------------------------- (Former name or former address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): [_] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [_] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [_] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [_] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 1.01. Entry into a Material Definitive Agreement. ------------------------------------------ Employment and Stock Option Agreements with Pankaj S. Manglik - ------------------------------------------------------------- Terabeam, Inc. entered into an employment agreement, dated as of May 19, 2006, with Pankaj S. Manglik for Mr. Manglik to be Terabeam's President and Chief Operating Officer reporting to Robert E. Fitzgerald, Terabeam's Chief Executive Officer. Mr. Manglik will also serve as President and Chief Operating Officer of Terabeam's subsidiary Proxim Wireless Corporation. The key terms of the employment agreement with Mr. Manglik are the following: o Mr. Manglik's employment is "at will" and subject to termination at any time by either Terabeam or Mr. Manglik subject to the other terms of the agreement; o Mr. Manglik's base salary is $330,000 per year; o Mr. Manglik is eligible for an annual bonus pursuant to an incentive plan to be established by Terabeam's board of directors with a target annual bonus opportunity of at least 50% of Mr. Manglik's base salary; o Mr. Manglik would be entitled to severance benefits if Terabeam terminates his employment without cause (as defined in the employment agreement) or if Mr. Manglik terminates his employment for good reason (as defined in the employment agreement). The severance benefits consist of (a) continued payment of base salary for six months (if the termination occurs during the first year of Mr. Manglik's employment) or twelve months (if the termination occurs after the one year anniversary of Mr. Manglik's employment) (the "Severance Period"), (b) a pro rated portion of his annual bonus (if the payment criteria are met), (c) acceleration of any of Mr. Manglik's stock options that would have otherwise vested during the Severance Period with those options remaining exercisable for the entire Severance Period, and (d) continued coverage during the Severance Period under Terabeam's medical insurance plans at the same cost to Mr. Manglik as prior to termination; o Mr. Manglik's severance benefits described above would be modified as described below if Terabeam terminates his employment without cause (as defined in the employment agreement) or if Mr. Manglik terminates his employment for good reason (as defined in the employment agreement) within twelve months following or three months prior to a change of control of Terabeam subject to possible reduction for excise tax reasons: (a) Mr. Manglik's base salary amount described above would be paid in a lump sum shortly after termination, (b) Mr. Manglik's annual bonus amount would be paid in a lump sum shortly after termination without regard to meeting the payment criteria, (c) all of Mr. Manglik's unvested options would accelerate, and (d) Mr. Manglik would not receive the continued insurance coverage described above; o Mr. Manglik agreed to keep Terabeam's information confidential; and o During his employment and for one year thereafter, Mr. Manglik agreed not to compete with Terabeam and to not solicit Terabeam's employees subject to the provisions of applicable law. Also on May 19, 2006, Terabeam granted Mr. Manglik options to purchase 600,000 shares of Terabeam's common stock in three separate option agreements. The three agreements have the same terms except for number of shares and exercise price. One option agreement is for 300,000 shares of stock with an exercise price of $2.53 per share, which was the fair market value of Terabeam's common stock on the date of grant. One option agreement is for 100,000 shares of stock with an exercise price of $3.79 per share, which was approximately one and a half times the fair market value of Terabeam's common stock on the date of grant. One option agreement is for 200,000 shares of stock with an exercise price of $5.06 per share, which was approximately twice the fair market value of Terabeam's common stock on the date of grant. The stock options vest over three years with 8 1/3% of the grant vesting on July 1, 2006 and thereafter as to 8 1/3% of the grant vesting on the first day of each January, April, July, and October until the option has vested in full. The option agreements provide that, upon a change of control, 50% of all unvested stock options will automatically vest. The option agreements also defer to Mr. Manglik's employment agreement as to vesting in certain situations. The foregoing description of the employment agreement and stock option agreements with Mr. Manglik does not purport to be complete and is qualified in its entirety by the terms and conditions of that employment agreement, a copy of which is filed as Exhibit 10.1 to this Form 8-K, and of the stock option agreements, a form of which is filed as Exhibit 10.2 to this Form 8-K, and each of which is incorporated by reference. Approval of Amendments to 2004 Stock Plan - ----------------------------------------- At the annual meeting of stockholders of Terabeam, Inc. held on May 23, 2006, the stockholders of the company approved two amendments to the company's 2004 Stock Plan increasing the shares issuable thereunder by 1,000,000 (the "Share Increase Amendment") and adding a provision capping at 500,000 the number of shares of the company's common stock with respect to which stock rights under the plan may be granted to any participant in any calendar year (the "Annual Cap Amendment"). On February 2, 2006, Terabeam's board of directors approved the Share Increase Amendment to the 2004 Stock Plan and, on April 10, 2006, Terabeam's board of directors approved the Annual Cap Amendment to the 2004 Stock Plan, in each case subject to stockholder approval at the May 23, 2006 annual meeting. The 2004 Stock Plan provides for the granting of stock options, stock awards, stock appreciation rights, and other equity-based awards to Terabeam's employees, directors, and consultants. The maximum number of shares of Terabeam's common stock that may be granted or issued under the 2004 Stock Plan is now 3,150,000 shares. Now that the amendments to the 2004 Stock Plan have been approved by Terabeam's stockholders, equity grants may be made and shares issued under the plan for the full number of shares without further stockholder approval. The following summary outlines the principal features of the 2004 Stock Plan as amended (the "Plan"). Purpose. The purpose of the Plan is to provide directors, officers, employees, and consultants of Terabeam and its affiliates with additional incentives to contribute to Terabeam's future growth and success by increasing their capital stock ownership in Terabeam. The Plan provides a flexible framework that will permit Terabeam's board of directors to develop and implement a variety of stock-based programs based on changing needs of Terabeam, its competitive market, and regulatory climate. Terabeam's board of directors believes it is in the best interest of Terabeam's stockholders for officers, employees, and members of the board of directors of Terabeam to own stock in Terabeam and that such ownership will enhance Terabeam's ability to attract highly qualified personnel, strengthen its retention capabilities, enhance the long-term performance of Terabeam and its subsidiaries, and vest in participants a proprietary interest in the success of Terabeam and its subsidiaries. Eligibility. All directors, officers, employees, and consultants of Terabeam and its affiliates are eligible to participate in the Plan. Administration. Terabeam's board of directors and the Compensation Committee of Terabeam's board of directors (collectively referred to as the "Plan Committee") administer the Plan. The Plan Committee has broad powers to administer the Plan, including the authority to determine the persons to whom equity grants are made, the type of the grant, the size of the grant, any vesting provisions, the exercise or purchase price, the duration of the equity grant, any restrictions on the equity grant, and the other terms and conditions of any grant. Term of Plan. The Plan will remain in effect until August 4, 2014 unless terminated earlier by the board of directors. No equity grant may be made after the Plan has been terminated. Maximum Number of Shares Issuable. The maximum number of shares of Terabeam's common stock that may be issued or issuable under the Plan may not now exceed 3,150,000 shares. All shares will be newly issued by Terabeam or from Terabeam's treasury stock upon the exercise of an equity grant under the Plan. The number of shares which may be issued under the Plan is subject to adjustment upon the occurrence of certain corporate events including the issuance of dividends in the form of stock, stock splits, recapitalizations, mergers, consolidations, 3 combinations or exchanges of shares, separations, reorganizations, and liquidations. Shares of Terabeam's common stock subject to equity grants under the Plan which have expired, terminated, or been canceled or forfeited will be available for issuance or use in connection with future equity grants. Annual Cap on Individual Awards. In no event may any Plan participant be granted stock rights under the Plan with respect to more than 500,000 shares of our common stock (which number may be adjusted in accordance with the Plan) in any calendar year. The number of shares of our common stock relating to a stock right granted to a participant in a calendar year that is subsequently forfeited, cancelled, or otherwise terminated will continue to count toward the foregoing limitation in such calendar year. In addition, if the exercise price of a stock right is subsequently reduced, the transaction will be deemed a cancellation of the original stock right and the grant of a new one so that both transactions will count toward the maximum shares issuable in the calendar year of each respective transaction. Award Types. Individual awards under the Plan may take the form of one or more of incentive stock options, non-qualified stock options, stock appreciation rights (SARs), and stock purchases or awards (either restricted or unrestricted). Although Terabeam believes that performance-based long-term incentives are a necessary component of its compensation program, Terabeam has designed the Plan to allow for flexibility to issue the types of equity-based compensation it believes are most appropriate in the circumstances. Incentive Stock Options. Only employees of Terabeam or its affiliates may receive incentive stock options. Incentive stock options entitle the holder to purchase a certain number of shares of Terabeam's common stock at an exercise price specified at the time the option is granted. The exercise price per share of common stock which may be purchased under an incentive stock option may not be less than 100% of the fair market value of a share of Terabeam's common stock on the date the option is granted. If the equity grant recipient owns more than 10% of Terabeam's stock, then the exercise price must be at least 110% of that fair market value. The aggregate fair market value of all shares of Terabeam's common stock subject to incentive stock options for an employee which become exercisable by that employee for the first time during any year may not exceed $100,000. Any incentive stock options granted to an employee owning more than 10% of Terabeam's common stock must expire not more than 5 years from the date of grant, and all other incentive stock options must expire not more than 10 years from the date of grant. Non-Qualified Stock Options. Non-qualified stock options, which are stock options that are not incentive stock options, entitle the holder to purchase a certain number of shares of Terabeam's common stock at an exercise price specified at the time the option is granted. Under the terms of the Plan, the Plan Committee is authorized to set the exercise price of any non-qualified stock options at its discretion. However, given recent developments in federal tax law, the Plan Committee currently expects that the exercise price of any non-qualified stock options will not be less than 100% of the fair market value of a share of Terabeam's common stock on the date the option is granted. Historically, Terabeam has not issued any stock options with an exercise price less than 100% of the fair market value of a share of its common stock on the date the option is granted. SARs. SARs may either be issued together with stock options or apart from stock options. SARs are rights that, when exercised, entitle the holder to the appreciation in value of the number of shares of Terabeam's common stock specified in the grant from either the exercise price of a share under the option (if the SAR is granted with an option) or the date granted (if the SAR is granted apart from any options) to the date exercised. Under the terms of the Plan, the Plan Committee is authorized to provide for payment of a SAR upon exercise in either cash or stock. Stock Awards and Purchases. Under the Plan, the Plan Committee can issue restricted stock and unrestricted stock awards and bonuses. Restricted stock consists of stock issued under the Plan that is subject to certain restrictions established by the Plan Committee. Unrestricted stock is stock issued under the Plan without transfer, vesting, sale, or other similar restrictions. The Plan Committee can also grant rights to purchase shares of Terabeam's common stock under the Plan at prices and on such other terms as it determines in its sole discretion. Exercise of Equity Grant. If applicable, the vested portion of an equity grant may be exercised by giving written notice to Terabeam at its designated office address identifying the equity grant being exercised, specifying the portion of the equity grant being exercised, and providing payment in one of the following forms: (a) United States cash or cash equivalent or (b) at the discretion of the Plan Committee, (i) shares of Terabeam's common stock 4 previously issued to the equity grant holder having a fair market value on the date of exercise equal to the exercise price of the equity grant, (ii) delivery of the equity grant holder's promissory note, (iii) a "cashless" exercise in which Terabeam withholds from those shares that would otherwise be obtained on the exercise of such equity grant the number of shares having a fair market value on the date of exercise equal to the aggregate exercise price, (iv) a "cashless" exercise in which the equity grant holder uses a broker to sell the shares on its behalf, to use the proceeds to pay the exercise price and taxes, and then to distribute the excess to the equity grant holder in either cash or stock, or (v) any combination of the above payment options. Fair Market Valuation Calculation. The fair market value of a share of Terabeam's common stock will be the closing price on the applicable date on the securities market where Terabeam's common stock is traded, or if there were no sales on the date of grant, on the next preceding date within a reasonable period on which there were sales. In the event that there were no sales in such a market within a reasonable period or if Terabeam's common stock is not publicly traded on the applicable date, the fair market value will be as determined in good faith by the Plan Committee in its sole discretion. Nontransferability of Equity Grants. Equity grants are not assignable or transferable by the recipient, either voluntarily or by operation of law, except by will or by the laws of descent and distribution or as permitted by the Plan Committee in a specific situation. During the lifetime of the recipient, no equity grant will be exercisable by or payable to anyone other than the recipient or his legal representative or permitted assignee. Amendments. The Plan may be terminated or amended by Terabeam's board of directors in any manner allowed by law, but no amendment will be effective without approval of Terabeam's stockholders if stockholder approval if required by applicable federal or state law or regulation or by the rules of any stock exchange or automated quotation system on which Terabeam's common stock may then be listed or quoted. Neither Terabeam's board of directors nor the stockholders may adversely alter or impair the rights of an equity grant holder without that holder's consent. Adjustments. Notwithstanding any other provision of the Plan, the Plan Committee may at any time make or provide for such adjustments to the Plan, to the number and class of shares available under the Plan or to any outstanding equity grants, as it deems appropriate to prevent dilution or enlargement of rights, including adjustments in the event of distributions to holders of Terabeam's common stock of other than a normal cash dividend, and changes in Terabeam's outstanding common stock by reason of stock dividends, split-ups, recapitalizations, mergers, consolidations, combinations or exchanges of shares, separations, reorganizations, liquidations and the like. In the event of any general offer to holders of Terabeam's common stock relating to the acquisition of their shares, the Plan Committee may make such adjustment as it deems equitable in respect of outstanding equity grants including, in the Plan Committee's discretion, revision of outstanding equity grants so that they may be exercisable for the consideration payable in the acquisition transaction. Any such determination by the Plan Committee will be conclusive. Withholding. It will be a condition of Terabeam's obligation to issue common stock upon exercise of an equity grant that the person exercising the equity grant pay, or make provision satisfactory to Terabeam for the payment of, any taxes which Terabeam is obligated to collect with respect to the issuance of its common stock upon such exercise. Compliance with Laws. Terabeam's obligation to sell and deliver shares of its common stock under the Plan is subject to the approval of any governmental authority required in connection with the authorization, issuance, or sale of such shares and the availability of federal and appropriate state securities law registrations, qualifications, and/or exemptions. * * * * * * * * * The foregoing description of the amendments to the 2004 Stock Plan does not purport to be complete and is qualified in its entirety by the terms and conditions of Amendment No. 2 to the 2004 Stock Plan, a copy of which is filed as Exhibit 10.3 to this Form 8-K, and which is incorporated by reference. 5 Item 5.02 Departure of Directors or Principal Officers; Election of Directors; ------------------------------------------------------------------- Appointment of Principal Officers. --------------------------------- As described in Item 1.01 above, effective May 19, 2006, Pankaj S. Manglik, 41, became Terabeam's President and Chief Operating Officer. The terms of his employment agreement are described above under Item 1.01. There is no family relationship between Mr. Manglik and any of Terabeam's directors or other executive officers. Prior to joining Terabeam, Mr. Manglik was an independent consultant advising the boards of directors of venture capital-funded startup companies. In January 2002, he co-founded Aruba Networks, a wireless infrastructure company, and was Chief Executive Officer of that company until December 2003 when he transitioned to Vice President until May 2004 helping to transition responsibility to a new management team. Mr. Manglik was Director of Product Management for Nortel Networks from October 2000 until January 2002 when he left to co-found Aruba. Mr. Manglik started with Nortel after Nortel acquired Alteon Websystems, for which Mr. Manglik was Director of Product Management since September 1999. Item 8.01 Other Events. ------------ At the annual meeting of stockholders of Terabeam, Inc. held on May 23, 2006, each of the following individuals was elected as a director of the company: Daniel A. Saginario Robert E. Fitzgerald John W. Gerdelman Robert A. Wiedemer Item 9.01 Financial Statements and Exhibits. --------------------------------- (c) Exhibits See Exhibit Index. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. TERABEAM, INC. Dated: May 25, 2006 By: /s/ David L. Renauld -------------------------- David L. Renauld Vice President EXHIBIT INDEX Number Title ------ ----- 10.1 Employment Agreement between the Registrant and Pankaj S. Manglik dated May 19, 2006. 10.2 Form of Incentive Stock Option Agreement between the Registrant and Pankaj S. Manglik dated as of May 19, 2006. 10.3 Amendment No. 2 to 2004 Stock Plan of the Registrant. 6 EX-10.1 2 ex10-1.txt Exhibit 10.1 EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT (the "Agreement") effective as of May 19, 2006, by and between Terabeam, Inc., a Delaware corporation (the "Company") and Pankaj Manglik (the "Executive"). WHEREAS, the Company considers it essential to its best interests and the best interests of its stockholders for the Company to employ Executive and Executive is willing to accept employment on the terms hereinafter set forth in this Agreement; NOW, THEREFORE, in consideration of the premises and mutual covenants herein and for other good and valuable consideration, the parties agree as follows: 1. Term of Employment; Executive Representation. -------------------------------------------- a. Employment Term. Executive's term of employment under this Agreement shall commence on the date hereof and, subject to the terms hereof, Executive and the Company agree and acknowledge that Executive's employment with the Company constitutes "at-will" employment and that this Agreement may be terminated at any time by the Company or Executive, subject to the terms of Section 7 of this Agreement. b. Executive Representation. Executive hereby represents to the Company that the execution and delivery of this Agreement by Executive and the Company and the performance by Executive of the Executive's duties hereunder shall not constitute a breach of, or otherwise contravene, the terms of any statute, law, regulation, or of any employment agreement or other agreement or policy to which Executive is a party or otherwise bound. 2. Position. -------- a. While employed hereunder, Executive shall serve as the President and Chief Operating Officer of the Company and in the same position with the Company's subsidiary Proxim Wireless Corporation. In such position, Executive shall have such duties and authority as shall be determined from time to time by Chief Executive Officer ("CEO"). b. While employed hereunder, Executive will devote Executive's full business time and best efforts to the performance of Executive's duties hereunder and will not engage in any other business, profession or occupation for compensation or otherwise which would conflict with the rendering of such services either directly or indirectly, without the prior written consent of the CEO. 3. Base Salary. While employed hereunder, the Company shall pay Executive ----------- a base salary (the "Base Salary") at the annual rate of $330,000, payable in regular installments in accordance with the Company's usual payment practices. Executive shall be entitled to such increases in Executive's Base Salary, if any, as may be determined from time to time in the sole discretion of the board of directors of the Company (the "Board"), as applicable. 4. Annual Bonus. With respect to each calendar year while employed ------------ hereunder, Executive shall be eligible to earn an annual bonus award (an "Annual Bonus") pursuant to an annual incentive plan to be established by the Board no later than the beginning of the annual period to which the bonus applies, after consultation and input from Executive; provided, however, that Executive's -------- ------- target Annual Bonus opportunity shall not be less than 50% of Executive's Base Salary (the "Target Bonus"). 5. Employee Benefits. The Company shall provide Executive during the term ----------------- of his employment hereunder with coverage under all employee pension and welfare benefit programs, plans and practices in accordance with the terms thereof, which the Company generally makes available to its senior executives (other than the CEO). Executive shall be entitled to five weeks of paid vacation and such number of days of sick leave as established under the Company's policies as in effect from time to time, which shall be taken at such times as are consistent with Executive's responsibilities hereunder. In addition, Executive shall be entitled to the perquisites and other fringe benefits currently made available to senior executives of the Company (other than the CEO), commensurate with Executive's position with the Company. 6. Business Expenses. Executive is authorized to incur reasonable expenses ----------------- in carrying out his duties and responsibilities under this Agreement, including, without limitation, expenses for travel and similar items related to such duties and responsibilities. The Company will reimburse Executive for all such expenses upon presentation by Executive from time to time of appropriately itemized accounts of such expenditures, provided such expenditures are consistent with the Company's policy. 7. Termination. The Executive's employment hereunder may be terminated by ----------- either party at any time and for any reason or no reason; provided that Executive will be required to give the Company at least 30 days advance written notice of any resignation of Executive's employment (unless the Company waives its right to receive such 30-day notice). Notwithstanding any other provision of this Agreement, the provisions of this Section 7 shall exclusively govern Executive's rights upon termination of employment with the Company and its affiliates. a. By the Company For Cause; By the Executive Without Good Reason. -------------------------------------------------------------- (i) The Executive's employment hereunder may be terminated by the Company for Cause (as defined below) at any time or by Executive without Good Reason. (ii) For purposes of this Agreement, "Cause" shall mean (i) Executive's continued failure to properly perform Executive's duties hereunder (other than as a result of total or partial incapacity due to physical or mental illness) as reasonably determined 2 by the CEO following notice by the Company to the Executive of such failure and a reasonable opportunity for Executive to cure, (ii) dishonesty in the performance of Executive's duties hereunder, (iii) an act or acts on Executive's part constituting (x) a felony under the laws of the United States or any state thereof or (y) a misdemeanor involving moral turpitude, (iv) Executive's willful malfeasance or willful misconduct in connection with Executive's duties hereunder or any act or omission which is materially injurious to the financial condition or business reputation of the Company or any of its subsidiaries or affiliates, or (v) Executive's breach of the provisions of Section 8 of this Agreement. (iii) If Executive's employment is terminated by the Company for Cause or by Executive without Good Reason, Executive shall be entitled to receive, reduced by any amounts owed to the Company by Executive, the amounts described in the following clauses (A) through (C) set forth below: (A) the Base Salary through the date of termination; (B) reimbursement for any unreimbursed business expenses properly incurred by Executive in accordance with Company policy prior to the date of Executive's termination; and (C) such employee benefits under the employee benefit plans of the Company, including accrued paid vacation, which have accrued for services already performed as of the date of termination of Executive's employment (the amounts described in clauses (A) through (C) hereof being referred to as the "Accrued Rights"). (iv) Following such termination of Executive's employment by the Company for Cause or by Executive without Good Reason, except as set forth in this Section 7(a), Executive shall have no further rights to any compensation or any other benefits under this Agreement. b. Disability or Death. ------------------- (i) The Executive's employment hereunder shall terminate upon Executive's death or if Executive becomes physically or mentally incapacitated and is therefore unable to perform Executive's duties for a period in excess of one hundred twenty (120) consecutive days or for more than one hundred eighty (180) days in any consecutive twelve (12) month period (such incapacity is hereinafter referred to as "Disability"). Any question as to the existence of the physical or mental incapacitation of Executive as to which Executive or his representative and the Company cannot agree shall be determined in writing by a qualified independent physician mutually acceptable to Executive and the Company. If Executive and the Company cannot agree as to a qualified independent physician, each shall appoint such a physician and those two physicians shall select a third who shall make such determination in writing. The determination of Disability made in writing to the Company and Executive shall be final and conclusive for all purposes of the Agreement, and all costs incurred by Executive 3 and/or the Company that are related to such determination shall be paid by the party incurring such costs. (ii) Upon termination of Executive's employment hereunder for either Disability or death, Executive or Executive's estate (as the case may be) shall be entitled to receive: (A) the Accrued Rights; and (B) a pro rata portion of any Annual Bonus that the Executive would have been entitled to receive pursuant to Section 4 hereof in such year based upon the percentage of the calendar year that shall have elapsed through the date of Executive's termination of employment, payable when such Annual Bonus would have otherwise been payable had the Executive's employment not terminated. (iii) Following Executive's termination of employment due to death or Disability, except as set forth in this Section 7(b), Executive shall have no further rights to any compensation or any other benefits under this Agreement. c. By the Company Without Cause or Resignation by Executive for Good ----------------------------------------------------------------- Reason. - ------ (i) The Executive's employment hereunder may be terminated by the Company without Cause or by Executive's resignation for Good Reason. (ii) For purposes of this Agreement, "Good Reason" shall mean: (v) a failure to nominate Executive to the Board as part of the Board's slate of nominees for consideration at any meeting of stockholders of the Company at which directors will be elected commencing in 2007; or (w) the reduction by the Company of Executive's Base Salary (other than as a result of a general salary reduction affecting all Company employees); or (x) any material and adverse reduction in Executive's duties and responsibilities made without Executive's written consent; or (y) relocation of Executive's principal workplace more than fifty (50) miles from Executive's principal workplace as of the date hereof made without Executive's written consent; or (z) a material breach by the Company of the provisions of this Agreement which remains uncured for thirty days after notice from Executive. In addition, "Good Reason" shall also be deemed to have occurred in the event the Company 4 fails to obtain from any successor to the Company an agreement to assume and perform this Agreement, as contemplated by Section 10(e) hereof. Notwithstanding the foregoing, none of the events described in clauses (x), (y) or (z) of this Section 7(c)(ii) shall constitute Good Reason unless Executive shall have ------ notified the Company in writing describing the events which constitute Good Reason and then only if the Company shall have failed to cure such event within thirty (30) days after the Company's receipt of such written notice. (iii) If Executive's employment is terminated by the Company without Cause (other than by reason of death or Disability) or if Executive resigns for Good Reason, then upon the execution of an effective general release of claims (but not rights which Executive may have as a shareholder or as a participant in any deferred compensation arrangements established by the Company) in a form satisfactory to the Company, Executive shall be entitled to receive: (A) the Accrued Rights; and (B) subject to Executive's continued compliance with the applicable provisions of Section 8, (x) continued payment of the Base Salary after the date of termination (I) for the first year of Executive's employment with the Company, six (6) months or (II) after the one year anniversary of Executive's employment with the Company, twelve (12) months (such number of months being the "Severance Period"), and (y) payment of the Target Bonus (prorated by multiplying the Target Bonus by a fraction, the numerator of which shall be the number of months in the Severance Period and the denominator of which shall be 12) in respect of the year in which such date of termination occurs, payable at such time as the Annual Bonus would otherwise be payable. Such Target Bonus will only be paid if the criteria for payment of a Target Bonus under the annual incentive plan in effect as of the date of termination are met; provided, that the aggregate amount described in this clause (B) shall -------- be reduced by the present value of any other cash severance or termination benefits payable to Executive under any other plans, programs or arrangements of the Company or its affiliates; and (C) acceleration of that portion, if any, of any outstanding option to purchase shares of common stock of the Company granted to Executive pursuant to the Company's stock plans (the "Option") that is otherwise unexercisable as of the date of termination, which would have otherwise become exercisable at any time(s) during the Severance Period, with all Options continuing to be exercisable by Executive during the full term of the Severance Period (but in any event for no shorter period than provided for under the terms of the Option); and (D) subject to Executive's continued compliance with the applicable provisions of Section 8, continued coverage during the Severance Period under the Company's medical insurance plans in accordance with the terms thereof at the same cost to Executive as was provided to Executive immediately prior to the date of termination. Executive shall not be required to mitigate the amount of any payments or benefits provided for pursuant to this Section 7(c)(iii) by seeking other employment. 5 (iv) Notwithstanding anything set forth in this Section 7(c) to the contrary, in the event that, upon or within twelve (12) months following or three (3) months prior to the occurrence of a Change of Control, either (x) Executive's employment is terminated by the Company without Cause (other than by reason of Executive's death or Disability) or (y) Executive resigns for Good Reason, the payments and benefits set forth in Section 7(c)(iii) above shall be modified as follows: (A) in lieu of the continued payment of Base Salary and payment of the Target otherwise payable pursuant to Section 7(c)(iii)(B), Executive shall be paid, in a lump sum no later than ten (10) business days following the termination of Executive's employment, an amount equal to the sum of the Base Salary and the Target Bonus (without consideration of whether the criteria to pay such Target Bonus have been met); provided, however, that such payments shall still be offset by any other cash severance or termination benefits payable in accordance with any other such plans, programs or arrangements; (B) in lieu of the acceleration of exercisability of the Option provided for in Section 7(c)(iii)(C), one hundred percent (100%) of any portion of the Option that is otherwise unexercisable as of the date of termination shall become immediately exercisable, and all Options shall continue to be exercisable by Executive during the full term of the Severance Period; and (C) Executive's right to the Base Salary and the Target Bonus described in Section 7(c)(iv)(A) (collectively, the "Advanced Payments") and to any income to be realized (but not necessarily recognized for tax purposes) on account of the Option acceleration described in Section 7(c)(iv)(B) (the "Option Spread"), or to retain the Advanced Payments or Option Spread, as the case may be, is expressly contingent upon Executive's compliance with each and every provision set forth in Section 8. In the event that Executive engages in conduct that contravenes the terms of Section 8, the Option described in Section 7(c)(iv)(B) shall immediately terminate (and shall no longer be exercisable) and Executive shall not be entitled to any of the benefits described in Section 7(c)(iv). In the event that Executive engages in conduct that contravenes the terms of Section 8 subsequent to the date that he has been paid the Advanced Payments, or subsequent to the date that he has realized Option Spread, (I) the Option described in Section 7(c)(iv)(B) shall immediately terminate (and shall no longer be exercisable), and (II) Executive shall promptly return a portion of the Advanced Payments and a portion of the Option Spread, as the case may be. The amount of Advanced Payments and Option Spread to be returned to the Company shall be determined by multiplying the Advanced Payments and the Option Spread by the "Return Fraction" (defined in the following sentence). The "Return Fraction" shall be a fraction having a numerator equal to a number of consecutive calendar months beginning in the month in which Executive first engaged in conduct in contravention of the terms of Section 8 and including each and every month thereafter during which the offending behavior continues through the end of the one (1) year period following the date Executive ceases to be employed by the Company and a denominator equal to twelve (12). The required return of funds described in this Section 7(c)(iv)(C) shall not constitute the 6 Company's exclusive remedy if Executive engages in conduct that contravenes the terms of Section 8. (D) Executive shall not be required to mitigate the amount of any payments or benefits provided for pursuant to this Section 7(c)(iv) by seeking other employment. (v) For purposes of Section 7(c)(iv), a "Change of Control" shall mean the occurrence of any of the following events: (A) any Person (other than any Person holding securities representing 10% or more of the combined voting power of the Company's outstanding securities on the date hereof, the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, or any company owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company), becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company's then-outstanding securities; (B) during any period of twenty-four consecutive months (not including any period prior to the date hereof), individuals who at the beginning of such period constitute the Board, and any new director (other than (I) a director nominated by a Person who has entered into an agreement with the Company to effect a transaction described in Sections 7(c)(v)(A), (C), or (D) hereof or (II) a director nominated by any Person (including the Company) who publicly announces an intention to take or to consider taking actions (including, but not limited to, an actual or threatened proxy contest) which if consummated would constitute a Change in Control) whose election by the board of directors of the Company or nomination by the board of directors of the Company for election by the Company's shareholders was approved by a vote of at least two-thirds (2/3rd) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof; (C) the consummation of any transaction or series of transactions under which the Company is merged or consolidated with any other company, other than a merger or consolidation which would result in the shareholders of the Company immediately prior thereto continuing to own (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) more than 50% of the combined voting power of the voting securities of the Company or such surviving entity (or its parent) outstanding immediately after such merger or consolidation; or (D) the complete liquidation of the Company or the sale or disposition by the Company of all or substantially all of the Company's assets, other than a liquidation of the Company into a wholly-owned subsidiary. For purposes of this Section 7(c)(v), the terms "Person" and "Beneficial Owner" shall each have 7 the same meaning as such terms are defined in Section 13(d) and Rule 13d-3, respectively, of the Securities Exchange Act of 1934, as amended, or any successor thereto, and the term Affiliate" shall mean any entity directly or indirectly controlling, controlled by, or under common control with, the Company or any other entity designated by the board of directors of the Company in which the Company has an interest. (vi) If all or any portion of the payments or benefits provided under Section 7(c)(iv), either alone or together with other payments and benefits which Executive receives or is then entitled to receive from the Company, would constitute a payment described in Section 280G(b)(2) (or its successors) of the Internal Revenue Code, as amended from time to time (the "Code"), such payments and benefits provided to Executive thereunder shall be reduced to the extent necessary so that no portion thereof shall be subject to the excise tax imposed by Section 4999 of the Code; but only if, by reason of such reduction, the net after-tax benefit to Executive with respect to such payments and benefits shall exceed such net after-tax benefit if no such reduction were made. For purposes of Section 7(c)(iv), "net after-tax benefit" shall mean the sum of (I) the total amounts payable to Executive hereunder, plus (II) all other payments and benefits which the Executive receives or is entitled to receive from the Company as a result of any such termination of employment set forth in Section 7(c)(iv) that would constitute a payment described in Section 280G(b)(2) of the Code, less (III) the amount of federal income taxes payable with respect to the foregoing calculated at the maximum marginal income tax rate for each year in which the foregoing shall be paid to Executive (based upon the rate in effect for such year as set forth in the Code at the time of termination of Executive's employment), less (IV) the amount of excise taxes imposed with respect to the payments and benefits described in (I) and (II) above by Section 4999 of the Code. The foregoing calculations shall be made, at the Company's expense, by a nationally recognized accounting firm selected by the Company. The determination of such firm shall be conclusive and binding on all parties. (vii) Following Executive's termination of employment by the Company without Cause (other than by reason of Executive's death or Disability) or by Executive's resignation for Good Reason, except as set forth in this Section 7(c), Executive shall have no further rights to any compensation or any other benefits under this Agreement. d. Notice of Termination. Any purported termination of employment by --------------------- the Company or by Executive (other than due to Executive's death) shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 10(g) hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of employment under the provision so indicated. 8. Nondisclosure of Confidential Information; Non-Competition. ---------------------------------------------------------- (a) At any time during or after Executive's employment with the Company, Executive shall not, without the prior written consent of the Company, use, divulge, disclose or make accessible to any other person, firm, partnership, corporation or other entity any 8 Confidential Information (as hereinafter defined) pertaining to the business of the Company or any of its subsidiaries, except (i) while employed by the Company, in the business of and for the benefit of the Company, or (ii) when required to do so by a court of competent jurisdiction, by any governmental agency having supervisory authority over the business of the Company, or by any administrative body or legislative body (including a committee thereof) with jurisdiction to order Executive to divulge, disclose or make accessible such information. For purposes of this Section 8(a), "Confidential Information" shall mean information (whether or not in written form) which relates to the Company or any of its affiliates, or any of its businesses or products (including, without limitation, its financial data, strategic business plans, and other proprietary information) or to this Agreement, and which is not known to the public generally (excluding public knowledge which occurs as a result of Executive's breach of this covenant or the wrongful acts of others who were under confidentiality obligations as to the item or items involved), except in the conduct of the business of the Company, as in existence as of the date of Executive's termination of employment. (b) As President and Chief Operating Officer, Executive will acquire knowledge of Confidential Information and trade secrets. Executive acknowledges that the Confidential Information and trade secrets which the Company has provided and will provide to him could play a significant role were he to directly or indirectly be engaged in any business in Competition (as hereinafter defined) with the Company or its subsidiaries. During the period of his employment hereunder and for one year thereafter, Executive agrees that, without the prior written consent of the Company, (A) he will not, directly or indirectly, either as principal, manager, agent, consultant, officer, stockholder, partner, investor, lender or employee or in any other capacity, carry on, be engaged in or have any financial interest in (other than an ownership position of less than 5 percent in any company whose shares are publicly traded) any business which is in Competition (as hereinafter defined) with the business of the Company or its subsidiaries as the business was conducted at any time during Executive's employment and (B) he shall not, on his own behalf or on behalf of any person, firm or company, directly or indirectly, solicit or offer employment to any person who has been employed by the Company or its subsidiaries at any time during the 12 months immediately preceding such solicitation. (c) For purposes of this Section 8, a business shall be deemed to be in "Competition" with the Company or its subsidiaries if it is engaged in or has taken concrete steps toward engaging in the business of research and development, designing, manufacturing, marketing, distributing, or servicing or selling microwave or millimeter wave systems, radios, products and equipment (or components of any of the foregoing), whether in existence or in development, relating to microwave or millimeter wave communications (including unlicensed spread spectrum radio, licensed radio, wireless ethernet bridge, and fixed, portable, and mobile wireless (e.g., Wi-Fi, WiMax, wireless local loop, mesh, point-to-point, point-to-multipoint)), as carried on by the Company or its affiliates at any time during Executive's employment, in all cities, counties, states and countries in which the business of the Company or its affiliates is then being conducted or its products are being offered, sold, used, serviced, or maintained. (d) The results and proceeds of Executive's services hereunder, including, without limitation, any works of authorship resulting from Executive's services during 9 Executive's employment with the Company and/or any of the Company's affiliates and any works in progress, will be works-made-for hire and the Company will be deemed the sole owner throughout the universe of any and all rights of whatsoever nature therein, whether or not now or hereafter known, existing, contemplated, recognized or developed, with the right to use the same in perpetuity in any manner the Company determines in its sole discretion without any further payment to Executive whatsoever. If, for any reason, any of such results and proceeds will not legally be a work-for-hire and/or there are any rights which do not accrue to the Company under the preceding sentence, then Executive hereby irrevocably assigns and agrees to assign any and all of Executive's right, title and interest thereto, including, without limitation, any and all copyrights, patents, trade secrets, trademarks and/or other rights of whatsoever nature therein, whether or not now or hereafter known, existing, contemplated, recognized or developed, to the Company, and the Company will have the right to use the same in perpetuity throughout the universe in any manner the Company determines without any further payment to Executive whatsoever. Executive will, from time to time as may be requested by the Company, (i) during the term of Executive's employment without further consideration, and (ii) thereafter at Executive's then current hourly rate, do any and all things which the Company may deem useful or desirable to establish or document the Company's exclusive ownership of any and all rights in any such results and proceeds, including, without limitation, the execution of appropriate copyright and/or patent applications or assignments. To the extent Executive has any rights in the results and proceeds of Executive's services that cannot be assigned in the manner described above, Executive unconditionally and irrevocably waives the enforcement of such rights. This subsection is subject to and will not be deemed to limit, restrict, or constitute any waiver by the Company of any rights of ownership to which the Company may be entitled by operation of law by virtue of the Company being Executive's employer. This Section does not apply to an invention that qualifies as a nonassignable invention under Section 2870 of the California Labor Code, which applies to any invention for which no equipment, supplies, facilities or Confidential Information of the Company or its subsidiaries was used, which does not (i) relate to the business of the Company; (ii) relate to the Company's actual or demonstrable anticipated research or development or (iii) result from any work performed by Executive for the Company. This confirms that Executive has been notified of his rights under Section 2870 of the California Labor Code. 9. Specific Performance. Executive and the Company agree that the -------------------- covenants in Section 8 are reasonable covenants under the circumstances. Executive agrees that any breach of the covenants contained in Section 8 would irreparably injure the Company. Accordingly, Executive agrees the Company's remedies at law for a breach or threatened breach of any of the provisions of Section 8 would be inadequate and, in recognition of this fact, Executive agrees that, in the event of such a breach or threatened breach, the Company may, without posting any bond, in addition to pursuing any other remedies it may have in law or in equity, cease making any payments otherwise required by this Agreement and obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedy which may then be available against Executive from any court having jurisdiction over the matter, restraining any threatened or further violation of this Agreement by Executive. 10 10. Miscellaneous. ------------- a. Governing Law. To the maximum extent permitted by applicable law, ------------- this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to conflicts of laws principles thereof. b. Entire Agreement/Amendments. This Agreement contains the entire --------------------------- understanding of the parties with respect to the employment of Executive by the Company. There are no restrictions, agreements, promises, warranties, covenants or undertakings between the parties with respect to the subject matter herein other than those expressly set forth herein. This Agreement may not be altered, modified, or amended except by written instrument signed by the parties hereto. This Agreement supersedes all prior agreements and understandings (including verbal agreements) between Executive and the Company and/or its affiliates regarding the terms and conditions of Executive's employment with the Company and/or its affiliates. c. No Waiver. The failure of a party to insist upon strict adherence to --------- any term of this Agreement on any occasion shall not be considered a waiver of such party's rights or deprive such party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. d. Severability. Whenever possible, each provision of this Agreement ------------ will be interpreted in a manner to be effective and valid. If any of the covenants set forth in Section 8 of this Agreement are held to be unreasonable, arbitrary, or against public policy, such covenants will be considered divisible with respect to scope, time, and geographic area and, in such lesser scope, time, and geographic area, will be effective, binding, and enforceable against Executive to the maximum extent permitted by applicable law. Any provision of this Agreement which is determined to be prohibited, unenforceable, or not authorized in any jurisdiction by a competent court of that jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition, unenforceability, or non-authorization without invalidating the remaining provisions hereof or affecting the validity, enforceability, or legality of such provision in any other jurisdiction. e. Assignment. This Agreement shall not be assignable by Executive. ---------- This Agreement may be assigned by the Company to a company that is a successor in interest to substantially all of the business operations of the Company. Such assignment shall become effective when the Company notifies the Executive of such assignment or at such later date as may be specified in such notice. Upon such assignment, the rights and obligations of the Company hereunder shall become solely the rights and obligations of such successor company, provided -------- that any assignee expressly assumes the obligations, rights and privileges of this Agreement. f. Successors; Binding Agreement. This Agreement shall inure to the ----------------------------- benefit of and be binding upon personal or legal representatives, executors, administrators, successors, heirs, distributes, devises and legatees. 11 g. Notice. For the purpose of this Agreement, notices and all other ------ communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. If to the Company: Terabeam, Inc. 2115 O'Nel Drive San Jose, CA 95131 Attention: Chief Executive Officer with a copy to: Terabeam, Inc. 881 North King Street, Suite 100 Northampton, MA 01060 Attention: David L. Renauld If to Executive: To the most recent address of Executive set forth in the personnel records of the Company. h. Withholding Taxes. The Company may withhold from any amounts payable ----------------- under this Agreement such Federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation. i. Counterparts. This Agreement may be signed in counterparts, each of ------------ which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. A facsimile or copy of a signature is valid as an original. [Signatures on next page] 12 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. TERABEAM, INC. By: /s/ Robert E. Fitzgerald ------------------------ Name: Robert E. Fitzgerald Title: Chief Executive Officer EXECUTIVE: /s/ Pankaj Manglik ------------------ Pankaj Manglik 13 EX-10.2 3 ex10-2.txt Exhibit 10.2 INCENTIVE STOCK OPTION AGREEMENT -------------------------------- THIS INCENTIVE STOCK OPTION AGREEMENT is made as of May 19, 2006 between TERABEAM, INC., a corporation organized under the laws of the State of Delaware (hereinafter called the "Corporation"), and Pankaj Manglik (hereinafter referred to as the "Employee"). WHEREAS, the Employee is in the employ of the Corporation or one of its affiliates and the Corporation considers it desirable and in its best interests to encourage the Employee as an eligible employee under its 2004 Stock Plan (the "Plan") to remain in such employ and to motivate the Employee to exert the Employee's best efforts on behalf of the Corporation and its affiliates; NOW, THEREFORE, it is agreed as follows: 1. Grant of Option. The Corporation hereby grants to the Employee as of --------------- the date of this Agreement ("Date of Grant") the right, privilege and option to ------------- purchase not more than ____________________________ shares (the "Grant Number") ------------ of the Common Stock of the Corporation, par value $.01 per share, as constituted on the date of this Agreement pursuant to the terms, provisions and conditions of the Plan which is incorporated herein and made a part hereof by reference as if fully set forth herein at length and subject to the terms, provisions and conditions set forth below. 2. Option Price. The option price per share of Common Stock as constituted ------------ on the date of this Agreement, as determined in accordance with the Plan, shall be $__________ per share. 3. Time of Exercise; Acceleration. This option will vest as to eight and ------------------------------ one-third percent (8.33%) of the Grant Number on July 1, 2006 and then as to eight and one-third percent (8.33%) of the Grant Number on the first day of each January, April, July, and October thereafter until the option has vested in full (the day on which any options are scheduled to vest under this Agreement is referred to in this Agreement as a "Vesting Date"); provided, however, that upon ------------ the event of (i) the completion of a merger or consolidation of the Corporation with any other entity (other than a merger or consolidation which would result in the shareholders of the Corporation immediately prior thereto continuing to own (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) more than 50% of the combined voting power of the voting securities of the Corporation or such surviving entity (or its parent) outstanding immediately after such merger or consolidation), (ii) the sale of substantially all of the Corporation's assets to another entity, or (iii) the sale of more than 50% of the outstanding capital stock of the Corporation to an unrelated person or group of persons acting collectively in one or a series of transactions, fifty percent (50%) of the unvested options that would have vested on each Vesting Date (rounded down to the nearest whole number if necessary) will be immediately vested. Notwithstanding the foregoing sentence, (a) the number of options that will vest on each Vesting Date, if other than a whole number, will be rounded down to the nearest whole number and (b) any fractional options resulting from the preceding clause will vest on the twelfth Vesting Date. Only vested stock options may be exercised. This option may be exercised in whole or in part as to shares which have vested for not in excess of the difference between (i) the total number of shares then vested and (ii) the total number of shares as to which the option has been previously exercised. No partial exercise of this option within any year may be for less than 100 shares (or the remaining shares purchasable under this option if less than 100 shares). 4. Method of Exercise. This option shall be exercisable from time to time ------------------ as provided above by written notice in the form of Exhibit "A", signed by the person entitled to exercise the option, setting forth in terms of shares of Stock as constituted on the date of this Agreement, the number of shares as to which this option is being exercised. Such notice shall be delivered to the Corporation at its principal place of business or as otherwise directed by the Corporation and be accompanied by the purchase price. Alternatively, the person entitled to exercise the option may exercise the option and pay the purchase price by any other method that may be authorized by the Corporation from time to time. The Corporation shall make prompt delivery of the shares of Stock as to which the option is exercised against payment of the purchase price; provided, however, that if any law or regulation requires the Corporation to take any action with respect to the Stock before the issuance thereof, then the date of delivery of the Stock shall be extended for the period necessary to take such action. 5. Further Limitations on Exercise. ------------------------------- A. Termination of Employment. ------------------------- (i) If Employee's employment with or service to the Corporation terminates other than by reason of death or Disability, (a) no further vesting of this option will occur subsequent to the date of termination, and (b) this option will terminate on the date three months after the date of termination or on the option's specified expiration date, if earlier. Nothing in this Agreement will be deemed to give the Employee the right to continued employment with the Corporation. (ii) If Employee's employment or other service to the Corporation is terminated due to the Employee's death or Disability, this option may be exercised, up to that portion of the option which the Employee could have exercised on the date of death or Disability, by the Employee, or in the case of death, the Employee's estate, personal representative or any beneficiary who has acquired the option by will or by the laws of descent and distribution, at any time prior to the earlier of the specified expiration date of this option or one year after the Employee's death or Disability. B. Condition to Exercise. As a condition of the Corporation's --------------------- obligation to issue Stock upon exercise of this option, the Employee or other person entitled to exercise this option must, at the time of exercise, be subject to and bound by an agreement not to compete in favor of the Corporation, either in an employment agreement or in a separate document reasonably acceptable to the Corporation. 2 C. Payment. The option price shall be paid as follows: (i) by check, ------- and/or (ii) to the extent the Stock is publicly traded, by delivery to the Corporation by the Employee of Stock already owned by such Employee, properly endorsed and having a fair market value equal to the purchase price (if permitted by the Corporation) and/or (iii) in any other manner permitted by the Corporation from time to time. For purposes of this Section 5(C), the market value of such stock to be delivered to the Corporation in payment of the option price shall be determined in accordance with the Plan. D. Non-Transferability. This option is not transferable by the ------------------- Employee, except by will or by laws of descent and distribution, and is exercisable during the Employee's lifetime only by the Employee. E. Adjustment. If a dividend is declared upon the Stock payable in ---------- Stock, then the shares of Stock then subject to this option (and the number of shares reserved for issuance) shall be increased proportionately without any change in the aggregate purchase price. If the outstanding Stock is changed into or exchanged for a different number or class of shares of stock of the Corporation or of another corporation, whether through reorganization, recapitalization, stock split-up, combination of shares, merger or consolidation, then (i) there shall be substituted for each such share of Stock then subject to this option (and for each share reserved for issuance) the number and class of shares of Stock into which each outstanding share of Stock is so changed or exchanged, all without any change in the aggregate purchase price for the shares then subject to this option and (ii) the vesting schedule set forth in Section 3 above shall also be adjusted proportionately to reflect the impact of such reorganization, recapitalization, stock split-up, combination of shares, merger or consolidation. F. Withholding Taxes. Whenever under this Agreement Stock is to be ----------------- issued, the Corporation shall have the right to require the recipient to remit to the Corporation an amount sufficient to satisfy federal, state and local withholding tax requirements prior to delivery of any certificate or certificates representing the Stock. 6. Stock Ownership. An optionee shall be entitled to the privilege of --------------- stock ownership only as to such shares of Stock as are issued upon exercise of this option. 7. Requirements of Law. The granting of this option and issuance of shares ------------------- of Stock upon the exercise of this option, and the Corporation's obligations relating thereto, shall be subject to compliance with all of the applicable requirements of law with respect to the granting of this option and issuance and sale of such shares (including, without limitation, having an effective registration statement relating to such shares in force with the Securities and Exchange Commission). The Corporation shall not be required to take any action pursuant to this Agreement that would violate any applicable federal, state, local, or foreign law or require the Corporation to qualify to do business in, obtain any certifications or approvals from, or make any filings with any state, local, or foreign jurisdiction. 8. Expiration Date. This option and all rights granted in this Agreement --------------- shall, in all events, expire five (5) years from the Date of Grant. 3 9. Legend. The Employee hereby agrees that the stock certificates ------ delivered upon exercise of this option may bear a legend or legends in the form designated by the Corporation to ensure compliance with legal or contractual restrictions. 10. Definitions. Unless otherwise defined in this Agreement, the terms ----------- used in this Agreement shall have the same meanings as in the Plan. The term "Stock" shall mean shares of Common Stock of the Corporation as constituted on the date of this Agreement and such other stock as shall be substituted therefor or issued thereon as provided in Section 5(E) above or as shall be substituted for or issued upon or in exchange for Stock issued pursuant to the options. 11. Disposition of Stock. The Employee acknowledges that the "incentive -------------------- stock option" rules set forth in Section 422 of the Internal Revenue Code of 1986, as amended, will not be applicable to any Stock issued to the Employee pursuant to this Agreement if such Stock is disposed of either within two (2) years of the Date of Grant or within one (1) year of the issuance of such Stock to the Employee. The Employee shall give the Corporation prompt notice of a Disqualifying Disposition. 12. Notices. All notices under this Agreement shall be sufficient if in ------- writing and delivered in hand or mailed, registered or certified mail, postage prepaid, and addressed to the Corporation at TERABEAM, INC., 2115 O'Nel Drive, San Jose, CA 95131, Attn: Chief Financial Officer or to the Employee at the most recent address of the Employee set forth in the personnel records of the Corporation. Either party may change the address to which notices shall be delivered by like notice given at least ten (10) days before the effective date of such change of address. 13. Binding Effect. This Agreement shall be binding upon and inure to the -------------- benefit of the Corporation, its successors and assigns, and the Employee, his legal representatives, heirs, legatees and assigns. 14. Governing Law. This Agreement shall be governed by and construed in ------------- accordance with the internal laws of the State of Delaware, U.S.A. 15. Possible Changed Terms due to Employment Agreement. The Employee is -------------------------------------------------- party to an employment agreement with the Corporation. That employment agreement may provide for different vesting provisions or post-termination exercise provisions than this Agreement. Any applicable provisions in the employment agreement shall take priority over the terms of this Agreement. 4 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date and year first above written. TERABEAM, INC. Employee By: ------------------------------ ------------------------------ Name: Pankaj Manglik Title: 5 EXHIBIT A --------- --------------------------- (date) TERABEAM, INC. 2115 O'Nel Drive San Jose, CA 95131 Ladies and Gentlemen: I wish to exercise my option to purchase ____________ shares of common stock, par value $.01 per share (the "Securities") at a price of $__________ per ---------- share pursuant to the Incentive Stock Option Agreement dated as of May 19, 2006 (the "Agreement") under the Corporation's 2004 Stock Plan. --------- Check one of the following boxes: [_] I enclose herewith my check for $_____________________ (the exercise amount). [_] I am paying the exercise price by the following means which has been approved by the Corporation: ---------------------------------------------------- - ----------------------------------------------------------------------------. I understand that at the time of exercise of this option, I must be subject to and bound by an agreement not to compete in favor of the Corporation, either in an employment agreement or in a separate document reasonably acceptable to the Corporation. I further agree that I will not make any sales or other transfers or dispositions of the securities covered by this letter during the time period following the closing of any public offering by the Corporation of its securities requested by the underwriter or, in the absence of such request, ninety (90) days.
Very truly yours, - -------------------------------- -------------------------------------- Employee Social Security Number Employee Signature (on line above) Employee Name (printed):____________________ Address to which certificates are to be sent Employee's Home Address: (complete ONLY if different than home address): - -------------------------------------- ----------------------------------------------- - -------------------------------------- ----------------------------------------------- - -------------------------------------- -----------------------------------------------
6 EX-10.3 4 ex10-3.txt Exhibit 10.3 AMENDMENT NO. 2 TO TERABEAM, INC. 2004 STOCK PLAN --------------- This Amendment No. 2 to the Terabeam, Inc. 2004 Stock Plan, as amended to date (as amended, the "Original Plan") is effective as of May 23, 2006. The first sentence of Section 4 of the Original Plan is hereby replaced in its entirety to read as follows: The aggregate number of shares of Common Stock which may be issued under this Plan is Three Million One Hundred Fifty Thousand (3,150,000), subject to adjustment as provided in Section 11. The Section 4 of the Original Plan is hereby re-designated Section 4(a) and the following language is hereby added to the Original Plan as new Section 4(b): In no event may any Grantee or other Plan participant be granted Stock Rights (including Stock Appreciation Rights) with respect to more than 500,000 shares of Common Stock (which number may be adjusted by the Committee as contemplated in Section 11) in any calendar year. The number of shares of Common Stock relating to a Stock Right granted to a Grantee in a calendar year that is subsequently forfeited, cancelled, or otherwise terminated shall continue to count toward the foregoing limitation in such calendar year. In addition, if the exercise price of a Stock Right is subsequently reduced, the transaction shall be deemed a cancellation of the original Stock Right and the grant of a new one so that both transactions shall count toward the maximum shares issuable in the calendar year of each respective transaction. The substantive effects of this amendment are (a) to increase the number of shares which may be issued under the Original Plan by One Million (1,000,000) from Two Million One Hundred Fifty Thousand (2,150,000) to Three Million One Hundred Fifty Thousand (3,150,000) and (b) to add language to the Original Plan to conform to Internal Revenue Code requirements for deductibility. All other provisions of the Original Plan remain unchanged. -----END PRIVACY-ENHANCED MESSAGE-----