Executive Stock Agreement

Exhibit 10.10


THERMA-WAVE, INC.


EXECUTIVE STOCK AGREEMENT
-------------------------


THIS EXECUTIVE STOCK AGREEMENT (this "Agreement") is made and entered
--------- into as of May 16, 1997 by and between Therma-Wave, Inc., a Delaware corporation


(the "Company"), and Anthony W. Lin ("Executive").
------- ---------


The Company and Executive desire to enter into this Agreement pursuant to which (i) the Company will issue to Executive 40,588 shares of the Company's Class A Common Stock, par value $.01 per share (the "Class A Common") and 4,510
-------------- shares of the Company's Class L Common Stock, par value $.01 per share (the "Class L Common"), (ii) the Company will issue to Executive 127,656 shares of -------------- the Company's Class B Common Stock, par value $.01 per share (the "Class B
------- Common") and (iii) pursuant to the Company's 1997 Stock Purchase and Option - ------ Plan, a copy of which is attached hereto as Exhibit A (the "Plan"), the Company
--------- ---- will grant to Executive options (collectively, the "Management Options," and
------------------ each, a "Management Option") to acquire an aggregate of 127,656 shares of Class
----------------- A Common, which options will be divided into five tranches (collectively, the "Tranches"); the first tranche ("Tranche 1") will consist of Management Options -------- --------- to acquire 25,531.2 shares of Class A Common at an exercise price of $8.93 per share; the second tranche ("Tranche 2") will consist of Management Options to
--------- acquire 25,531.2 shares of Class A Common at an exercise price of $ 10.68 per share; the third tranche ("Tranche 3") will consist of Management Options to
--------- acquire 25,531.2 shares of Class A Common at an exercise price of $12.43 per share; the fourth tranche ("Tranche 4") will consist of Management Options to
--------- acquire 25,531.2 shares of Class A Common at an exercise price of $14.18 per share; and the fifth tranche ("Tranche 5") will consist of Management Options to
--------- acquire 25,531.2 shares of Class A Common at an exercise price of $ 15.89 per share. Capitalized terms used herein and not otherwise defined are defined in Section 12 hereof.


The parties hereto agree as follows:


STOCK AND OPTION PROVISIONS


1. Purchase and Sale of Stock.
--------------------------


(a) Upon execution of this Agreement, Executive will purchase, and the Company will sell, 40,588 shares of Class A Common at a price of $0.235 per share and 4,510 shares of Class L Common at a price of $19.085 per share (collectively, the "Rollover Stock"), for an aggregate purchase price of
-------------- $95,611.53. The Company will deliver to Executive certificates representing the Rollover Stock, and, upon receipt of such certificates, Executive will deliver to the Company $95,611.53 by delivery of a certified check or wire transfer of funds.


(b) On or prior to April 15, 1998, at the Executive's request the Company shall loan to Executive an amount equal to all federal, state and local taxes required to be paid by Executive as a result of payments on the date hereof to Executive by Toray Industries, Inc. pursuant


to the Agreement, dated as of January 25, 1996, among Toray Industries, Inc., Executive and other key employees listed therein in connection with the Company's recapitalization in exchange for the issuance by Executive to the Company of a promissory note in the form of Exhibit B attached hereto (the
--------- "Rollover Stock Note"). Executive's obligations under the Rollover Stock Note ------------------- will be secured by a pledge of all of the Rollover Stock, and in connection therewith Executive will enter into a pledge agreement in the form of Exhibit C
--------- attached hereto.


(c) Immediately after the closing of the transactions contemplated by the Recapitalization Agreement, dated as of December 18, 1996, among the Company, Sellers and Purchaser (each as defined therein), Executive will purchase, and the Company will sell, 127,656 shares of Class B Common (the "Time Vesting Stock"), at a price of $0.235 per share for an aggregate purchase ------------------ price of $29,999.16. The Company will deliver to Executive certificates representing the Time Vesting Stock, and, upon receipt of such certificates, Executive will deliver to the Company $1,276.56 by delivery of a check or wire transfer of funds and a promissory note in the form of Exhibit D attached
--------- hereto in the aggregate principal amount of $28,722.60 (the "Time Vesting Stock
------------------ Note"). Executive's obligations under the Time Vesting Stock Note will be - ---- secured by a pledge of all of the Time Vesting Stock, and in connection therewith Executive will enter into a pledge agreement in the form of Exhibit E
--------- attached hereto.


(d) Section 83(b) Election. Within 30 days after the date hereof,
---------------------- the Executive will make an effective election with the Internal Revenue Service under Section 83(b) of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder, in the form of Exhibit F attached hereto.
---------


(e) Vesting of Time Vesting Stock. Subject to the provisions of
----------------------------- subsection 1(f), on each date set forth below the Time Vesting Stock will have become vested with respect to the cumulative percentage of Time Vesting Stock set forth opposite such date if Executive is, and has been, continuously employed by the Company or its Subsidiaries from the date of this Agreement through such date:


Cumulative
Percentage of Time
Date Vesting Stock Vested
---- --------------------


May 16, 1998 20%

May 16, 1999 40%

May 16, 2000 60%

May 16, 2001 80%

May 16, 2002 100%


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provided that upon the occurrence of a Sale of the Company, all of the Time Vesting Stock will immediately vest. The shares of the Time Vesting Stock which have vested as set forth above will be hereafter referred to as "Vested Time
----------- Vesting Stock" and the shares of the Time Vesting Stock which have not vested - ------------- will be hereafter referred to as "Unvested Time Vesting Stock."
---------------------------


(f) No Vesting After Termination Date. Notwithstanding any
--------------------------------- provision of subsection 1(e) to the contrary, none of the Time Vesting Stock will become Vested Time Vesting Stock on or after the Termination Date. All shares of the Time Vesting Stock which have become Vested Time Vesting Stock prior to the Termination Date will remain Vested Time Vesting Stock after the Termination Date.


2. Management Options and Management Option Shares.
-----------------------------------------------


(a) Management Options Grant. The Company hereby grants to
------------------------ Executive, pursuant to the Plan, Management Options to purchase an aggregate of 127,656 shares of Class A Common ("Management Option Shares"). Tranche 1 will
------------------------ consist of Management Options to purchase 25,531.2 Management Option Shares at an exercise price of $8.93 per share (the "Tranche 1 Exercise Price"); Tranche 2
------------------------ will consist of Management Options to purchase 25,531.2 Management Option Shares at an exercise price of $10.68 per share (the "Tranche 2 Exercise
------------------ Price"); Tranche 3 will consist of Management Options to purchase 25,531.2 - ----- Management Option Shares at an exercise price of $12.43 per share (the "Tranche
------- 3 Exercise Price"); Tranche 4 will consist of Management Options to purchase - ---------------- 25,531.2 Management Option Shares at an exercise price of $14.18 per share (the "Tranche 4 Exercise Price"); and Tranche 5 will consist of Management Options to ------------------------ purchase 25,531.2 Management Option Shares at an exercise price of $15.89 per share (the "Tranche 5 Exercise Price"). The Tranche 1 Exercise Price, the
------------------------ Tranche 2 Exercise Price, the Tranche 3 Exercise Price, the Tranche 4 Exercise Price, and the Tranche 5 Exercise Price are collectively referred to herein as "Management Option Prices" and individually as a "Management Option Price". ------------------------- ----------------------- With respect to each Tranche, the Management Option Price and the number of Management Option Shares will be equitably adjusted for any stock split, stock dividend, reclassification or recapitalization of the Company which occurs subsequent to the date of this Agreement. The Management Options will be immediately exercisable and, subject to earlier expiration as provided in subsection 2(b) below, will expire on the Expiration Date. Each Tranche may be exercised separately; provided that each Tranche may only be exercised in whole and not in part. The Management Options are not intended to be "incentive stock options" within the meaning of Section 422A of the Code.


(b) Expiration Upon Termination of Employment. Any Management
----------------------------------------- Options which have not been exercised prior to the Termination Date will expire on the earlier of (i) 90 days after the Termination Date and (ii) the Expiration Date and may not be exercised thereafter under any circumstance.


(c) Procedure for Exercise. At any time after the earlier of (i)
---------------------- six months after the date hereof and (ii) the effective date of a registration statement with respect to the Company's debt securities under the 1933 Act and prior to the Expiration Date, Executive may exercise all or a portion of the Management Options which have not expired pursuant to subsection 2(b) above by


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delivering written notice of exercise to the Company, together with (i) a written acknowledgment that Executive has read and has been afforded an opportunity to ask questions of members of the Company's management regarding all financial and other information provided to Executive regarding the Company and (ii) (x) a certified check or wire transfer of funds in an amount equal to the par value of the Management Option Shares being purchased (the "Cash
---- Amount") and (y) a promissory note in the form of Exhibit G attached hereto (an - ------ --------- "Option Note") in the aggregate principal amount equal to the aggregate ----------- Management Option Prices (calculated with respect to each Tranche based on the number of Management Option Shares of such Tranche to be acquired by Executive and the Management Option Price for such Tranche) for the Tranche(s) being exercised less the Cash Amount. Executive's obligations under the Option Note will be secured by a pledge of all of the Management Option Shares, and in connection therewith Executive will enter into a pledge agreement in the form of Exhibit H attached hereto. As a condition to any exercise of the Management Options, Executive will permit the Company to deliver to him all financial and other information regarding the Company and its Subsidiaries which it believes necessary to enable Executive to make an informed investment decision.


(d) Non-Transferability of Management Options. The Management
----------------------------------------- Options are personal to Executive and are not transferable by Executive except pursuant to the laws of descent or distribution. Only Executive or his legal guardian or representative may exercise the Management Options.


(e) Vesting of Management Option Shares. The Management Option
----------------------------------- Shares will become vested (regardless of whether the corresponding Management Options have been exercised) on the fifth anniversary of the date hereof if Executive is, and has been, continuously employed by the Company or its Subsidiaries from the date of this Agreement through such date; provided that all of the outstanding Management Option Shares will become vested upon the occurrence of a Sale of the Company. The Management Option Shares which have vested as set forth above will be hereafter referred to as "Vested Management
----------------- Option Shares" and the Management Option Shares which have not vested will be - ------------- hereafter referred to as "Unvested Management Option Shares."
---------------------------------


(f) No Vesting After Termination Date. Notwithstanding any
--------------------------------- provision of subsection 2(e) to the contrary, none of the Unvested Management Option Shares will become Vested Management Option Shares after the Termination Date. All Management Option Shares which have become Vested Management Option Shares prior to the Termination Date will remain Vested Management Option Shares after the Termination Date.


(g) Section 83(b) Election. Within 30 days after the exercise of
---------------------- any Management Options, the Executive will make an effective election with the Internal Revenue Service under Section 83(b) of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder, in the form of Exhibit I attached hereto. - ---------


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3. Representations and Warranties; Acknowledgments.
-----------------------------------------------


(a) Representations and Warranties by Executive. In connection with
------------------------------------------- the purchase and sale of Executive Stock hereunder, Executive represents and warrants to the Company that:


(i) The shares of Executive Stock to be acquired by Executive
pursuant to this Agreement will be acquired for Executive's own account and
not with a view to, or intention of, distribution thereof in violation of
the 1933 Act or any applicable state securities laws, and the shares of
Executive Stock will not be disposed of in contravention of the 1933 Act or
any applicable state securities laws.


(ii) Executive is an executive officer of the Company or its
Subsidiaries, is sophisticated in financial matters and is able to evaluate
the risks and benefits of the investment in Executive Stock.


(iii) Executive is able to bear the economic risk of his
investment in Executive Stock for an indefinite period of time because
Executive Stock has not been registered under the 1933 Act and, therefore,
cannot be sold unless subsequently registered under the 1933 Act or an
exemption from such registration is available.


(iv) Executive has had an opportunity to ask questions and
receive answers concerning the terms and conditions of the offering of
Executive Stock and has had full access to such other information
concerning the Company and its Subsidiaries as he has requested. Executive
has reviewed, or has had an opportunity to review, a copy of the
Recapitalization Agreement and the persons listed on the signature pages
thereto, and Executive is familiar with the transactions contemplated
thereby. Executive also has reviewed, or has had an opportunity to review,
the Company's Certificate of Incorporation and the Company's Bylaws and any
credit agreements, notes and related documents to which the Company is a
party.


(v) This Agreement constitutes the legal, valid and binding
obligation of Executive, enforceable in accordance with its terms, and the
execution, delivery and performance of this Agreement by Executive does not
and will not conflict with, violate or cause a breach of any agreement,
contract or instrument to which Executive is a party or any judgment, order
or decree to which Executive is subject.


(b) Acknowledgment by Executive. As an inducement to the Company to
---------------------------
sell the Executive Stock to Executive, and as a condition thereto,
Executive acknowledges and agrees that:


(i) the Company will have no duty or obligation to disclose to
Executive, and Executive will have no right to be advised of, any material
information regarding the Company or its Subsidiaries at any time prior
to, upon or in connection with the repurchase of Executive Stock as
provided hereunder; and


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(ii) subject to any employment agreement between Executive and
the Company or applicable law, neither the issuance of Executive Stock to
Executive nor any provision contained herein will entitle Executive to
remain in the employment of the Company or its Subsidiaries or affect the
right of the Company to terminate Executive's employment at any time for
any reason.


4. Repurchase Option.
-----------------


(a) Repurchase Option. If the Termination Date occurs, the Executive
----------------- Stock, whether held by Executive or one or more transferees, will be subject to repurchase by the Company and the Bain Group (each of the aforementioned, solely at their option) pursuant to the terms and conditions set forth in, and to the extent described in, this Section 4 (the "Repurchase Option").
-----------------


(b) Repurchase Price. In the event the Termination Date occurs, (i)
---------------- the outstanding Unvested Management Option Shares will be subject to the Repurchase Option at a price per share equal to the Original Cost thereof, (ii) the Unvested Time Vesting Stock will be subject to the Repurchase Option at a price per share equal to the Original Cost thereof, (iii) the outstanding Vested Management Option Shares will be subject to the Repurchase Option at a price per share equal to the Fair Market Value thereof as of the Termination Date, (iv) the Vested Time Vesting Stock will be subject to the Repurchase Option at a price per share equal to the Fair Market Value thereof as of the Termination Date and (v) the Rollover Stock will be subject to the Repurchase Option at a price per share equal to the Fair Market Value thereof as of the Termination Date; provided that, if the Company has consummated a Public Offering prior to the Termination Date, none of the Rollover Stock, the Vested Management Option Shares or the Vested Time Vesting Shares will be subject to the Repurchase Option.


(c) Repurchase Procedures. The Repurchase Option is exercisable by
--------------------- the Company delivering written notice (the "Repurchase Notice") to the holder or
----------------- holders of each Class of Executive Stock within 180 days after the Termination Date. The Repurchase Notice will set forth the number of shares of each Class of Executive Stock to be acquired from such holder(s), the aggregate consideration to be paid for such holder's shares of each such Class of Executive Stock and the time and place for the closing of the transaction. If any shares of any Class of Executive Stock are held by any transferees of Executive, the Company will purchase the shares of such Class elected to be purchased from such holder(s) of Executive Stock, pro rata according to the number of shares of such Class of Executive Stock held by such holder(s) at the time of delivery of such Repurchase Notice (determined as nearly as practicable to the nearest share).


(d) Bain Group's Rights.
-------------------


(i) If for any re ...