Document:

exv10w1

 

Exhibit 10.1

June 30, 2005

Barry G. Caldwell

4500 Lakeside Drive

Colleyville, Texas 76034

Dear Barry:

On behalf of the Board of Directors of IRIDEX Corporation, we are pleased to present our offer to
you to become the new President and Chief Executive Officer of IRIDEX Corporation, and a member of
the IRIDEX Board of Directors.

We have all enjoyed getting to know you, and look forward very much to welcoming you and Trena to
IRIDEX. All of us have been impressed with your personal stature and character, your skills, and
your achievements. We are convinced that you are very well qualified to help lead IRIDEX to
continued growth and success. We also believe becoming President and CEO of IRIDEX is an
outstanding and timely opportunity for you to capitalize upon your talents and track record to
date, and for you to continue to attain your personal, career, and financial goals.

Position and Duties:

Your title will be President and Chief Executive Officer. As CEO you will be responsible for all
strategic, operational, and financial aspects of running the Company, as well as all duties
customary to such position and such duties as may be assigned to you by the Board, and you will be
held accountable for delivering the growth in shareholder value and other results expected by the
Board and its owners.

Careful thought has been given to compensation arrangements that would be appropriate to your
professional stature and to IRIDEX precedents and policies. Accordingly, we offer you the
following:

Compensation:

Salary: $11,538.47 per bi-weekly pay period (annualized to $300,000 per year).

Stock Options:

In addition to your salary, the Board of Directors has approved the following grant of stock
options, conditional upon your acceptance of this offer:

	 	•	 	Number: 300,000 Shares of IRIDEX Common Stock, approximately 4.1 % of the 7,317,000
weighted shares outstanding as reported in our Q1 financial statements.
	 
	 	•	 	Vesting: These options will vest over a period of 48 months and may be exercised by you
in the following manner:

	 	 	 	® 12/48 (75,000) shares at one year, after your date of hire.
	 
	 	 	 	® 1/48 (6,250) shares per month thereafter.

	 	•	 	Option Price: Fair market value on the trading day prior to your starting employment
at IRIDEX. (i.e. If you start on July 5, 2005, the last trading day would be July 1, 2005)
	 
	 	•	 	Incentive Stock options (ISO) and Non-qualified (NQ) stock options: Based on current
regulations only the first $100,000 of aggregate market value of the stock options
(exercise price x # of shares) may be Incentive Stock options for any calendar year.
Therefore IRIDEX will grant you Incentive stock options up to this allowed maximum with
the balance of your option grant being Non-qualified stock options. For example, if the
fair market value of the shares were about $6.20/share then about 65,000 shares would be
ISOs and 235,000 would be NQ options.

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Incentive Compensation:

You will participate in IRIDEX’ profit and executive bonus programs as currently constituted, and
as they may be changed or amended in the future.

Other Benefits:

Insurance is available for health, dental, and prescriptions currently at a cost of 15% of the
monthly premium. The company provides for life, short-term and long-term disability insurance, and
business travel insurance. You may participate in the 401-k Plan beginning on the following entry
dates: January 1, April 1, July 1 and October 1. Compensation for sick time is accrued in
accordance with the IRIDEX Sick Time policy. Three weeks of paid time off for vacation is earned
during your first year of employment and is accrued on a monthly basis from your date of hire.
After five years of employment, your vacation accrual will increase as per the IRIDEX vacation
policy. IRIDEX also compensates their eligible employees for ten holidays per year. You may
participate in the Employee Stock Purchase Plan at the next enrollment date, August 15, 2005.

Relocation:

In anticipation of you establishing full-time residence near Mountain View, California, IRIDEX will
reimburse the ordinary and necessary living, housing and moving expenses as itemized below. In
most cases such reimbursed expenses will be grossed up by 44% to cover state and federal taxes.
However, those reimbursed expenses which you are entitled to take as itemized deductions in your
1040, i.e. moving expenses will not be grossed up.

	 	•	 	For up to 12 months prior to your move to California:

	 	o	 	Temporary Housing
	 
	 	o	 	Two roundtrip flights per month from the Bay Area to Fort Worth or
vice versa for either you or Trena.

	 	•	 	Customary Selling costs associated with home sale in Texas not paid by the buyer:
(including commissions, legal fees, transfer taxes, mortgage prepayment penalties,
brokerage fees, title insurance, and other standard non-recurring fees.)
	 
	 	•	 	Customary Closing costs associated with purchase of home in California not paid by the
seller: (including commissions, legal fees, transfer taxes, brokerage fees, title
insurance, and non-recurring fees. In addition IRIDEX will reimburse you up to a maximum
of a one point lending fee on your mortgage loan.)
	 
	 	•	 	Moving Expenses:

	 	o	 	Packing, unpacking, insuring, and transporting of household and
personal goods (including 2 cars)
	 
	 	o	 	Storage (up to a maximum of three months)

If, for any reason, you voluntarily terminate your employment within twelve (12) months from your
hire date, these paid expenses will be reimbursed to IRIDEX on a prorated basis.

Please note that this offer of employment is made “at will” in which either you or the Company may
terminate employment at any time with or without cause, with or without notice, and for any reason
or no reason. Any contrary representations or agreements, which may have been made to you are
superseded by this offer.

This offer is contingent upon your completing, signing and returning the enclosed Change of Control
and Severance Agreement; Employment Application; Employment, Confidential Information, Invention
Assignment, and Arbitration Agreement; and providing verification of eligibility to work in the
United States in accordance with the provisions of the Immigration Reform and Control Act of 1986
before starting work.

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You agree that, during the term of your employment with the Company, you will not engage in any
other employment, occupation, consulting or other business activity directly related to the
business in which the Company is now involved or becomes involved during the term of your
employment, nor will you engage in any other activities that conflict with your obligations to the
Company. Before undertaking any proposed professional activities outside your duties at IRIDEX,
you shall first obtain Board approval. Similarly, you agree not to bring any third party
confidential information to the Company, including that of any former employer, and that in
performing your duties for the Company you will not in any way utilize any such information.

To indicate your acceptance of the Company’s offer, please sign and date this letter in the space
provided below, sign the enclosed Change of Control and Severance Agreement; Employment
Application; the Employment, Confidential Information, Invention Assignment, and Arbitration
Agreement; and return them to me. Duplicate originals are enclosed for your records. This letter,
along with the Change of Control and Severance Agreement; Employment Application and the
Employment, Confidential Information, Invention Assignment, and Arbitration Agreement, set forth
the terms of your employment with the Company and supersede any prior representations or
agreements, whether written or oral. This letter may be executed in any number of counterparts,
each of which shall be an original, but all of which together shall constitute one instrument.
This letter may not be modified, amended or superseded except by a written agreement, signed by the
Company and by you and approved by the Compensation Committee of the Board of Directors.

Barry, we look forward to your prompt acceptance of our offer, and to your joining IRIDEX full-time
as of July 5, 2005. We would appreciate your early response to this offer, and in any event by
close of business on July 1, 2005, after which time this offer shall expire. We have very high
expectations that your capabilities, experience, and winning attitude will make you an outstanding
contributor on the IRIDEX team.

	 	 	 
	 

	 	Sincerely,
	 
	 	 
	 

	 	/s/ Donald L. Hammond
	 
	 	 
	 

	 	Donald L. Hammond
	 

	 	Chairman of the Board
	 
	 	 
	 

	 	/s/ Theodore A. Boutacoff
	 
	 	 
	 

	 	Theodore A. Boutacoff
	 

	 	President & CEO
	 
	 	 
	AGREED AND ACCEPTED:
	 	 
	 
	 	 
	/s/ Barry G. Caldwell
 

           Barry G. Caldwell

	 	 
	 
	 	 
	July 5, 2005
 

          Date

	 	 

Enclosures:

	•	 	Second signature copy of this letter
	 
	•	 	Employment Application
	 
	•	 	Change of Control and Severance Agreement
	 
	•	 	Employment, Confidential Information, Invention Assignment and Arbitration Agreement

Page 3exv10w2

 

Exhibit 10.2

IRIDEX CORPORATION

CHANGE OF CONTROL AND SEVERANCE AGREEMENT

     This Change of Control and Severance Agreement (the “Agreement”), effective as of July 5, 2005
(the “Effective Date”), is made and entered into by and between Barry G. Caldwell (the “Employee”)
and IRIDEX Corporation, a Delaware corporation (the “Company”). Certain capitalized terms used in
this Agreement are defined in Section 1 below.

RECITALS

     Whereas, the Company has offered the Employee employment as the Company’s Chief
Executive Officer and the Employee has accepted such offer and has agreed to serve as the Company’s
Chief Executive Officer pursuant to the terms set forth in that certain offer letter (the “Offer
Letter”) from the Company to Employee dated July 5, 2005 and acknowledged and agreed to by Employee
on July 5, 2005.

     Whereas, as a condition to the Employee’s appointment as the Company’s Chief
Executive Officer, the Company and the Employee entered into that certain Employment, Confidential
Information, Invention Assignment, and Arbitration Agreement (the “Confidential Information and
Invention Assignment Agreement”) dated July 5, 2005.

     Whereas, it is expected that from time to time the Company will consider the
possibility of a change of control of the Company and the Board of Directors of the Company (the
“Board”) recognizes that such considerations can be a distraction to the Employee and can cause the
Employee to consider alternative employment opportunities.

     Whereas, the Board believes that it is in the best interests of the Company and its
stockholders to provide Employee with certain severance benefits upon Employee’s termination of
employment without cause or upon a constructive termination, both (i) following a change of control
of the Company and (ii) outside of the change of control context, in order to induce Employee to
join the Company and to provide Employee with enhanced financial security and incentive to remain
with the Company.

     Now, Therefore, in consideration of the mutual promises and covenants
hereinafter set forth, the Company and Employee agree as follows:

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AGREEMENT

     1. Definition of Terms. The following terms referred to in this Agreement shall have
the following meanings:

          (a) Cause. “Cause” shall mean (i) any act of personal dishonesty taken by the
Employee, which is intended to result in substantial personal enrichment of the Employee, (ii) the
Employee’s conviction of or plea of nolo contendere to a felony or a material violation of federal
or state law by Employee that the Board reasonably believes has had or will have a detrimental
effect on the Company’s reputation or business, (iii) an intentional and reckless act by the
Employee that constitutes misconduct or is injurious to the Company, or (iv) continued failure by
the Employee to perform Employee’s duties and obligations to the Company at any time after there
has been delivered to the Employee a written demand for performance from the Board, which describes
the basis for the Company’s belief that the Employee has not previously performed his duties or met
his obligations as an employee.

          (b) Change of Control. “Change of Control” shall mean the occurrence of any of the
following events:

               (i) the approval by the stockholders of the Company of a merger or consolidation of the
Company with any other corporation or entity; provided, however, that any merger or
consolidation which would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation shall not be deemed a Change of Control;

               (ii) the approval by the stockholders of the Company of a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or substantially all of
the Company’s assets;

               (iii) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended) becoming the “beneficial owner” (as defined in Rule 13d-3 under
said Act), directly or indirectly, of securities of the Company representing 50% or more of the
total voting power represented by the Company’s then outstanding voting securities; or

               (iv) a change in the composition of the Board occurring within a 12-month period, as a result
of which fewer than a majority of the directors are Incumbent Directors. “Incumbent Directors”
shall mean directors who either (A) are directors of the Company as of the date immediately prior
to the Change of Control, or (B) are elected, or nominated for election, to the Board with the
affirmative votes of at least a majority of those directors whose election or nomination was not in
connection with any transactions described in subsections (i), (ii), or (iii) or in connection with
an actual or threatened proxy contest relating to the election of directors of the Company.

          (c) Good Reason. “Good Reason” shall mean:

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               (i) without the Employee’s express written consent, a significant reduction of the Employee’s
duties, responsibilities or position with the Company or surviving entity following the Change of
Control relative to the Employee’s duties, responsibilities or position with the Company in effect
immediately prior to such reduction; provided, further, that in the event of a
Change of Control, if the Employee is not named the Chief Executive Officer of the parent company
of the Successor or, if there is no such parent company, Chief Executive Officer of the Successor
or does not continue as Chief Executive Officer of the Company in the event of a Change of Control
as specified in Section 1(b)(ii), (iii) or (iv), then the Employee will be deemed to have
terminated his employment with the Company for Good Reason; or

               (ii) without the Employee’s express written consent, a material reduction, of the facilities
and perquisites available to the Employee immediately prior to the Change of Control;
provided, however, that Employee will be deemed not to have terminated his
employment with the Company for Good Reason in the event that similar such reductions occur
concurrently with and apply to the Company’s senior management, including the Company’s Vice
Presidents; or

               (iii) without the Employee’s express written consent, a reduction of the Employee’s base
annual salary by fifteen percent (15%) or more as compared to the baseline equal to the Employee’s
base annual salary in effect immediately prior to the Change of Control; provided,
however, that Employee will be deemed not to have terminated his employment with the
Company for Good Reason in the event similar such reductions occur concurrently and apply to the
Company’s senior management, including the Company’s Vice Presidents; or

               (iv) without the Employee’s express written consent, a material reduction by the Company in
the kind or level of employee benefits to which the Employee is entitled immediately prior to the
Change of Control with the result that the Employee’s overall benefits package is significantly
reduced; provided, however, that Employee will be deemed not to have terminated his
employment with the Company for Good Reason in the event similar such reductions occur concurrently
and apply to the Company’s senior management, including the Company’s Vice Presidents; or

               (v) without the Employee’s express written consent, the relocation of the Employee to a
facility or a location more than twenty-five (25) miles from the Company’s Mountain View
headquarters, or the Employee’s current location as of immediately prior to such relocation if the
Employee’s principal office is not then located at the Company’s Mountain View headquarters;
provided, however, that Employee will be deemed not to have terminated his
employment with the Company for Good Reason in the event similar such relocation occurs
concurrently with and applies to the Company’s senior management, including the Company’s Vice
Presidents; or

               (vi) any purported involuntary termination of the Employee by the Company which is not
effected for Cause.

          (d) Public Disclosure. “Public Disclosure” shall mean any “public disclosure” that
would satisfy the requirements of Rule 101(e) of Regulation FD under the Securities Exchange Act of
1934, as amended.

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          (e) Successor. “Successor” shall mean any corporation or other entity that acquires
all or substantially all of the assets or business of the Company, whether directly or indirectly
and whether by purchase, lease, merger, reverse triangular merger, consolidation, liquidation or
otherwise. For all purposes under this Agreement, the term “Company” shall include any Successor
to the Company’s business and/or assets that executes and delivers the assumption agreement
described in Section 7(a) or which becomes bound by the terms of this Agreement by operation of law
to all or substantially all of the Company’s business and/or assets.

          (f) Termination Date. “Termination Date” shall mean the effective date of any notice
of termination delivered by one party to the other hereunder.

     2. Term of Agreement. This Agreement shall be renewable upon the three year
anniversary of the Effective Date; provided, however, that in the event that this
entire Agreement is not renewed at such time, the provisions of Section 4(a)(ii), Section
4(a)(iii), and Section 4(b) shall terminate and the remaining provisions of this Agreement shall
continue in full force and effect and shall terminate upon the date that all remaining obligations
of the parties hereto under this Agreement have been satisfied or, if earlier, on such date, which
is prior to a Change of Control, that the Employee is no longer employed by the Company.

     3. At-Will Employment. The Company and the Employee acknowledge that the Employee’s
employment is and shall continue to be at-will, as defined under applicable law and that nothing in
this Agreement shall affect in any manner whatsoever the right or power of the Employee or the
Company, or any Successor, to terminate Employee’s employment, for any reason. This Agreement does
not constitute an express or implied promise of continued employment for any reason. If the
Employee’s employment terminates for any reason, the Employee shall not be entitled to any
payments, benefits, damages, awards or compensation other than as provided by this Agreement, under
law, or as may otherwise be established under the Company’s then existing employee benefit plans or
policies at the time of termination.

     4. Benefits.

          (a) Termination within the Change of Control Context. If the Employee’s employment
with the Company is: (x) terminated either (1) as a result of an actual termination by the Company
or its Successor other than for Cause or (2) Employee terminates his employment for Good Reason,
and (y) (1) or (2) occur at any time either: (i) between the Public Disclosure of any event that
would result in a Change of Control and either the occurrence of such event or the abandonment or
cessation of such event; or (ii) between the occurrence of a Change of Control and the nine (9)
month anniversary of such Change of Control, then, subject to Employee’s executing a separation
agreement and release of claims in a form satisfactory to the Company (the “Separation Agreement”),
Employee shall be entitled to receive the following benefits from the Company:

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               (i) Vesting Acceleration. Fifty percent (50%) of the unvested shares subject to all
of Employee’s options to purchase shares of Company common stock (the “Options”) outstanding on the
date of such termination, whether granted on, before or after the date of this Agreement, and fifty
percent (50%) of any of Employee’s shares of Company common stock subject to a Company repurchase
right upon Employee’s termination of employment for any reason (the “Restricted Stock”) whether
acquired by Employee on, before or after the date of this Agreement, will immediately vest upon
such termination. To the extent not expressly amended hereby, the terms and provisions otherwise
applicable to such Options and Restricted Stock shall remain in full force and effect.

               (ii) Cash Severance Payment. Employee will be paid continuing payments of severance
pay in an aggregate amount equal to the amount of base salary Employee would have been paid at
Employee’s base salary rate, as then in effect, had Employee continued his employment with the
Company through (a) the twelve (12) month anniversary of such termination, if such termination
occurs prior to the one year anniversary of the date hereof or (b) the eighteen (18) month
anniversary of such termination, if such termination occurs subsequent to the one year anniversary
of the date hereof, as the case may be (with the relevant time period provided for in either (a) or
(b), as the case may be, being referred to hereinafter as the “Change of Control Severance Payment
Period”), and such aggregate amount will be paid ratably on a periodic basis through March 15 of
the calendar year following the year of employment termination in accordance with the Company’s
normal payroll policies; provided, however, that if during the Change of Control
Severance Payment Period Employee breaches the provisions of the Separation Agreement, all payments
pursuant to this subsection will immediately cease.

               (iii) Continued Employee Benefits. Employee will receive Company-paid coverage during
the Change of Control Severance Payment Period for Employee and Employee’s eligible dependents
under the Company’s Benefit Plans; provided, however, that if during the Change of
Control Severance Payment Period Employee breaches the provisions of the Separation Agreement, all
Company-paid coverage pursuant to this subsection will immediately cease. 

               (iv) Other Benefits. Employee will (a) receive his earned but unpaid base salary
through the date of termination of employment, (b) receive all accrued vacation, expense
reimbursements and any other benefits due to Employee through the date of termination of employment
in accordance with established Company plans, policies and arrangements, and (c) be entitled to any
other compensation or benefits from the Company to the extent provided under the applicable stock
option agreement(s) or as may be required by law (for example, “COBRA” coverage under Section 4980B
of the Code).

               (v) Consulting Agreement. In the event that Employee’s employment with the Company is
terminated such that Employee is eligible to receive the benefits set forth in Sections 4(a)(i),
4(a)(ii) and 4(a)(iii) above, the Company will have the option of retaining Employee as a
consultant to the Company to provide consulting services to the Company during the Change of
Control Severance Payment Period or such shorter period as the parties may mutually agree, subject
to the Company and Employee mutually agreeing on the terms of any such consulting relationship.
Nothing in this Section 4(a)(v) shall require Employee to perform consulting services or in any way
affect Employee’s rights under this Agreement.

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          (b) Termination outside the Change of Control Context. If the Employee’s employment
with the Company is: (x) terminated either (1) as a result of an actual termination by the Company
or its Successor other than for Cause or (2) Employee terminates his employment for Good Reason,
and (y) (1) or (2) occur at any time that does not fall within the time period described in clauses
(i) and (ii) of Section 4(a) above, then, subject to Employee’s executing a Separation Agreement,
Employee shall be entitled to receive the following benefits:

               (i) Cash Severance Payment. Employee will be paid continuing payments of severance
pay in an aggregate amount equal to the amount of base salary Employee would have been paid at
Employee’s base salary rate, as then in effect, had Employee continued his employment with the
Company through (a) the six (6) month anniversary of such termination, if such termination occurs
prior to the one year anniversary of the date hereof or (b) the twelve (12) month anniversary of
such termination, if such termination occurs subsequent to the one year anniversary of the date
hereof, as the case may be (with the relevant time period provided for in either (a) or (b), as the
case may be, being referred to hereinafter as the “Non-Change of Control Severance Payment
Period”), and such aggregate amount will be paid ratably on a periodic basis through March 15 of
the calendar year following the year of employment termination in accordance with the Company’s
normal payroll policies; provided, however, that if during the Non-Change of
Control Severance Payment Period Employee breaches the provisions of the Separation Agreement, all
payments pursuant to this subsection will immediately cease.

               (ii) Continued Employee Benefits. Employee will receive Company-paid coverage during
the Non-Change of Control Severance Payment Period for Employee and Employee’s eligible dependents
under the Company’s Benefit Plans; provided, however, that if during the Non-Change
of Control Severance Payment Period Employee breaches the provisions of the Separation Agreement,
all Company-paid coverage pursuant to this subsection will immediately cease.

               (iii) Other Benefits. Employee will (a) receive his earned but unpaid base salary
through the date of termination of employment, (b) receive all accrued vacation, expense
reimbursements and any other benefits due to Employee through the date of termination of employment
in accordance with established Company plans, policies and arrangements, and (c) be entitled to any
other compensation or benefits from the Company to the extent provided under the applicable stock
option agreement(s) or as may be required by law (for example, “COBRA” coverage under Section 4980B
of the Code).

               (iv) Consulting Agreement. In the event that Employee’s employment with the Company
is terminated such that Employee is eligible to receive the benefits set forth in Sections 4(b)(i)
and 4(b)(ii) above, the Company will have the option of retaining Employee as a consultant to the
Company to provide consulting services to the Company during the Non-Change of Control Severance
Payment Period or such shorter period as the parties may mutually agree, subject to the Company and
Employee mutually agreeing on the terms of any such consulting relationship. Nothing in this
Section 4(b)(iv) shall require Employee to perform consulting services or in any way affect
Employee’s rights under this Agreement.

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          (c) Other Terminations. If at any time Employee voluntarily terminates Employee’s
employment with the Company or any parent or subsidiary of the Company (other than for Good Reason)
or if the Company (or any parent or subsidiary of the Company employing Employee) terminates
Employee’s employment with the Company (or any parent or subsidiary of the Company) for Cause, then
Employee will (i) receive his earned but unpaid base salary through the date of termination of
employment, (ii) receive all accrued vacation, expense reimbursements and any other benefits due to
Employee through the date of termination of employment in accordance with established Company
plans, policies and arrangements, and (iii) not be entitled to any other compensation or benefits
(including, without limitation, accelerated vesting of Options or Restricted Stock) from the
Company except to the extent provided under the applicable stock option agreement(s) or as may be
required by law (for example, “COBRA” coverage under Section 4980B of the Code).

          (d) Termination due to Death or Disability. If Employee’s employment with the Company
(or any parent or subsidiary of the Company) is terminated due to Employee’s death or Employee’s
becoming Disabled, then Employee or Employee’s estate (as the case may be) will (i) receive the
earned but unpaid base salary through the date of termination of employment, (ii) receive all
accrued vacation, expense reimbursements and any other benefits due to Employee through the date of
termination of employment in accordance with Company-provided or paid plans, policies and
arrangements, and (iii) not be entitled to any other compensation or benefits from the Company
except to the extent required by law (for example, “COBRA” coverage under Section 4980B of the
Code).

          (e) Exclusive Remedy. In the event of a termination of Employee’s employment with the
Company (or any parent or subsidiary of the Company), the provisions of this Section 4 are intended
to be and are exclusive and in lieu of any other rights or remedies to which Employee or the
Company may otherwise be entitled (including any contrary provisions in any written formal
employment agreement, including, but not limited to, the Offer Letter, between the Company and
Employee (any such agreements, an “Employment Agreement”)), other than as provided under law, or as
may otherwise be established under the Company’s then existing employee benefit plans or policies
at the time of termination.

     5. Limitation on Payments. In the event that the benefits provided for in this
Agreement or otherwise payable to the Employee (i) constitute “parachute payments” within the
meaning of Section 280G of the Code, and (ii) would be subject to the excise tax imposed by Section
4999 of the Code (the “Excise Tax”), then the Employee’s benefits under this Agreement shall be
either:

          (a) delivered in full; or

          (b) delivered as to such lesser extent which would result in no portion of such benefits being
subject to the Excise Tax,

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whichever of the foregoing amounts, taking into account the applicable federal, state and local
income taxes and the Excise Tax, results in the receipt by the Employee on an after-tax basis, of
the greatest amount of benefits, notwithstanding that all or some portion of such benefits may be
taxable under Section 4999 of the Code. Unless the Company and the Employee otherwise agree in
writing, any determination required under this Section shall be made in writing by the Company’s
independent public accountants (the “Accountants”), whose determination shall be conclusive and
binding upon the Employee and the Company for all purposes. For purposes of making the
calculations required by this Section, the Accountants may make reasonable assumptions and
approximations concerning applicable taxes and may rely on reasonable, good faith interpretations
concerning the application of Section 280G and 4999 of the Code. The Company and the Employee
shall furnish to the Accountants such information and documents as the Accountants may reasonably
request in order to make a determination under this Section. The Company shall bear all costs the
Accountants may reasonably incur in connection with any calculations contemplated by this Section.

     6. Non-Solicitation. During the Change of Control Severance Payment Period or the
Non-Change of Control Severance Period, as applicable, the Employee, directly or indirectly,
whether as employee, owner, sole proprietor, partner, director, member, consultant, agent, founder,
co-venturer or otherwise, will not: (i) solicit, induce or influence any person to leave employment
with the Company; or (ii) directly or indirectly solicit business from any of the Company’s
customers and users on behalf of any business that directly competes with the principal business of
the Company.

     7. Successors.

          (a) Company’s Successors. The rights and obligations of the Company under this
Agreement will be binding upon and inure to the benefit of its successors, assigns, heirs,
executors, administrators and transferees. A Successor to the Company shall assume the Company’s
obligations under this Agreement and agree expressly in writing to perform the Company’s
obligations under this Agreement in the same manner and to the same extent as the Company would be
required to perform such obligations in the absence of a succession.

          (b) Employee’s Successors. The rights and obligations of the Employee under this
Agreement will be binding upon and inure to the benefit of the successors, assigns, heirs,
executors and administrators of the Employee. Notwithstanding the foregoing, the Employee may not
assign, pledge or otherwise transfer his rights or obligations under this Agreement without the
prior written consent of the Company.

     8. Notices.

          (a) General. All notices and other communications required or permitted hereunder
shall be in writing and shall be sent by first-class United States certified mail, return receipt
requested, postage prepaid, or delivered in person, or delivered by overnight commercial messenger
service, or by facsimile (with written confirmation of receipt). All notices shall be deemed
delivered for purposes of this Agreement (i) when received, if delivered in person, (ii) when sent,
if by facsimile (with confirmation of receipt), (iii) five (5) days after deposit in the U.S.
mails, certified mail, return receipt requested, postage prepaid, (iv) one (1) business day after
being sent via overnight commercial messenger service.

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          (b) Notices. All notices to the Company shall be addressed to:

IRIDEX Corporation

Attn: Chairman of the Board of Directors

1212 Terra Bella Avenue

Mountain View, California 94043

Phone: (650) 940-4700

Fax: (650) 940-4710

     In the case of the Employee, notices shall be addressed to him at the home address which he
most recently communicated to the Company in writing.

          (c) Notice of Termination. Any termination by the Company for Cause or by the
Employee as a result of a voluntary resignation or a termination of Employee’s employment with the
Company by Employee for Good Reason shall be communicated by a notice of termination to the other
party hereto given in accordance with this Section. Such notice shall indicate the specific
termination provision in this Agreement relied upon, shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination under the provision so indicated, and
shall specify the Termination Date (which shall be not more than 30 days after the deemed delivery
of such notice). The failure by the Company to include in the notice any fact or circumstance
which contributes to a showing of Cause shall not preclude the Company from asserting such fact or
circumstance. The failure by the Employee to include in the notice any fact or circumstance which
contributes to a showing of Good Reason shall not waive any right of the Employee hereunder or
preclude the Employee from asserting such fact or circumstance in enforcing his rights hereunder.

     9. Arbitration.

          (a) Any dispute or controversy arising out of, relating to, or in connection with this
Agreement, or the interpretation, validity, construction, performance, breach, or termination
thereof, or any agreements between Employee and the Company relating to stock or stock options, or
any other aspect of the employment relationship, shall be settled by binding arbitration to be held
in Santa Clara County, California, in accordance with the National Rules for the Resolution of
Employment Disputes then in effect of the American Arbitration Association (the “Rules”). The
arbitrator may grant injunctions or other relief in such dispute or controversy. The decision of
the arbitrator shall be final, conclusive and binding on the parties to the arbitration. Judgment
may be entered on the arbitrator’s decision in any court having jurisdiction and the prevailing
party shall be entitled to injunctive relief in any court of competent jurisdiction to enforce the
arbitration award. Each party in any arbitration shall be responsible for his, her or its own
legal fees and costs, with the costs of the arbitrator borne by the Company.

          (b) The arbitrator(s) shall apply California law to the merits of any dispute or claim,
without reference to conflicts of law rules. The arbitration proceedings shall be governed by
federal arbitration law and by the Rules, without reference to state arbitration law. The Employee
hereby consents to the personal jurisdiction of the state and federal courts located in California
for any action or proceeding arising from or relating to this Agreement or relating to any
arbitration in which the parties are participants.

-9-

 

          (c) The Employee understands that nothing in this Section modifies the Employee’s at-will
employment status. Either the Employee or the Company can terminate the employment relationship at
any time and for any reason.

          (d) THE EMPLOYEE HAS READ AND UNDERSTANDS THIS SECTION, WHICH DISCUSSES ARBITRATION. THE
EMPLOYEE UNDERSTANDS THAT SUBMITTING ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH
THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION
THEREOF, OR ANY DISPUTE RELATED TO STOCK OPTIONS OR STOCK, TO BINDING ARBITRATION, CONSTITUTES A
WAIVER OF THE EMPLOYEE’S RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES
RELATING TO ALL ASPECTS OF THE EMPLOYER/EMPLOYEE RELATIONSHIP, INCLUDING BUT NOT LIMITED TO, THE
FOLLOWING CLAIMS:

               (i) ANY AND ALL CLAIMS FOR WRONGFUL DISCHARGE OF EMPLOYMENT; BREACH OF CONTRACT, BOTH EXPRESS
AND IMPLIED; BREACH OF THE COVENANT OF GOOD FAITH AND FAIR DEALING, BOTH EXPRESS AND IMPLIED;
NEGLIGENT OR INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS; NEGLIGENT OR INTENTIONAL
MISREPRESENTATION; NEGLIGENT OR INTENTIONAL INTERFERENCE WITH CONTRACT OR PROSPECTIVE ECONOMIC
ADVANTAGE; AND DEFAMATION.

               (ii) ANY AND ALL CLAIMS FOR VIOLATION OF ANY FEDERAL STATE OR MUNICIPAL STATUTE, INCLUDING,
BUT NOT LIMITED TO, TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, THE CIVIL RIGHTS ACT OF 1991, THE
AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, THE AMERICANS WITH DISABILITIES ACT OF 1990, THE FAIR
LABOR STANDARDS ACT, THE CALIFORNIA FAIR EMPLOYMENT AND HOUSING ACT, AND LABOR CODE SECTION 201, et
seq;

               (iii) ANY AND ALL CLAIMS ARISING OUT OF ANY OTHER LAWS AND REGULATIONS RELATING TO EMPLOYMENT
OR EMPLOYMENT DISCRIMINATION.

     10. Miscellaneous Provisions.

          (a) No Duty to Mitigate. The Employee shall not be required to mitigate the amount of
any payment contemplated by this Agreement, nor shall any such payment be reduced by any earnings
that the Employee may receive from any other source.

          (b) Waiver. No provision of this Agreement may be modified, waived or discharged
unless the modification, waiver or discharge is agreed to in writing and signed by the Employee and
by an authorized officer of the Company (other than the Employee). No waiver by either party of
any breach of, or of compliance with, any condition or provision of this Agreement by the other
party shall be considered a waiver of any other condition or provision or of the same condition or
provision at another time.

-10-

 

          (c) Integration. This Agreement, the Offer Letter and the Confidential Information
and Invention Assignment Agreement constitute the entire agreement of the parties hereto with
respect to the subject matter hereof. No future agreements between the Company and Employee may
supersede this Agreement, unless they are in writing and specifically mention this Section 10(c).

          (d) Choice of Law. The validity, interpretation, construction and performance of this
Agreement shall be governed by the internal substantive laws, but not the conflicts of law rules,
of the State of California.

          (e) Severability. The invalidity or unenforceability of any provision or provisions
of this Agreement shall not affect the validity or enforceability of any other provision hereof,
which shall remain in full force and effect.

          (f) No Representations. Employee represents that he has had the opportunity to
consult with an attorney of his choice, and has carefully read and understands the scope and effect
of the provisions of this Agreement. Employee further represents that he has not relied upon any
representations or statements made by the Company or anyone else regarding his employment with the
Company which are not specifically set forth in this Agreement.

          (g) Employment Taxes. All payments made pursuant to this Agreement shall be subject
to withholding of applicable income and employment taxes.

          (h) Counterparts. This Agreement may be executed in counterparts, each of which shall
be deemed an original, but all of which together will constitute one and the same instrument.

[Remainder of page intentionally left blank. Signature page follows.]

-11-

 

     IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the
Company by its duly authorized officer, as of the day and year set forth below.

	 	 	 	 	 
	COMPANY	 	IRIDEX CORPORATION
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Larry Tannenbaum
	 

	 	 	 	 
	 

	 	Title:
	 	Chief Financial Officer
	 

	 	 	 	 
	 
	 	 	 	 
	EMPLOYEE	 	BARRY G. CALDWELL
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Barry G. Caldwell
	 

	 	 	 	 
	 

	 	Title:
	 	Chief Executive Officer

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