AEHR TEST SYSTEMS
CHANGE OF CONTROL SEVERANCE AGREEMENT
This Change of Control Severance Agreement (the "Agreement") is made and
entered into effective as of January 24, 2001 (the "Effective Date"), by and
between [Xxxx X. Xxxx, Xxxxx X. Xxxxxxxxxxx, Xxxx X. Xxxxxx, Xxxx X. Xxxxxxx,
Xxxx X. Xxxxxxx] (the "Employee") and Aehr Test Systems, a California
corporation (the "Company"). Certain capitalized terms used in this Agreement
are defined in Section 1 below.
R E C I T A L S
A. It is expected that the Company from time to time will consider
the possibility of a Change of Control. The Board of Directors of the as
Company (the "Board") recognizes that such consideration can be a distraction
to the Employee and can cause the Employee to consider alternative employment
opportunities.
B. The Board believes that it is in the best interests of the Company
and its shareholders to provide the Employee with an incentive to continue his
employment and to maximize the value of the Company upon a Change of Control
for the benefit of its shareholders.
C. In order to provide the Employee with enhanced financial security
and sufficient encouragement to remain with the Company notwithstanding the
possibility of a Change of Control, the Board believes that it is imperative
to provide the Employee with certain severance benefits upon the Employee's
termination of employment following a Change of Control.
AGREEMENT
In consideration of the mutual covenants herein contained and the
continued employment of Employee by the Company, the parties agree as follows:
1. Definition of Terms. The following terms referred to in this
Agreement shall have the following meanings:
dishonesty taken by the Employee in connection with his responsibilities as an
employee which is intended to result in substantial personal enrichment of the
Employee, (ii) Employee's conviction of a felony which the Board reasonably
believes has had or will have a material detrimental effect on the Company's
reputation or business, (iii) a willful act by the Employee which constitutes
misconduct and is injurious to the Company, and/or (iv) continued willful
violations by the Employee of the Employee's obligations to the Company after
there has been delivered to the Employee a written demand for performance from
the Company which describes the basis for the Company's belief that the
Employee has not substantially performed his duties.
(b) Change of Control. "Change of Control" shall mean the
occurrence of any of the following events:
(i) the approval by shareholders of the Company of a
merger or consolidation of the Company with any other corporation, other than
a 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;
(ii) the approval by the shareholders 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, 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 hereof, 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) Involuntary Termination. "Involuntary Termination" shall
mean (i) without the Employee's express written consent, a significant
reduction of the Employee's duties, position or responsibilities relative to
the Employee's duties, position or responsibilities in effect immediately
prior to such reduction, or the removal of the Employee from such position,
duties and responsibilities, unless the Employee is provided with comparable
duties, position and responsibilities; provided, however, that a reduction in
duties, position or responsibilities solely by virtue of the Company being
acquired and made part of a larger entity (as, for example, when the Chief
Financial Officer of the Company remains as such following a Change of Control
but is not made the Chief Financial Officer of the acquiring corporation)
shall not constitute an "Involuntary Termination;" (ii) without the Employee's
express written consent, a substantial reduction, without good business
reasons, of the facilities and perquisites (including office space and
location) available to the Employee immediately prior to such reduction;
(iii) a reduction by the Company of the Employee's base salary as in effect
immediately prior to such reduction; (iv) a material reduction by the Company
in the kind or level of employee benefits to which the Employee is entitled
immediately prior to such reduction with the result that the Employee's
overall benefits package is significantly reduced; (v) without the Employee's
express written consent, the relocation of the Employee to a facility or a
location more than fifty (50) miles from his current location; (vi) any
purported termination of the Employee by the Company which is not effected for
Cause or for which the grounds relied upon are not valid; or (vii) the failure
of the Company to obtain the assumption of this Agreement by any successors
contemplated in Section 6 below.
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(d) 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 terminate upon the date
that all obligations of the parties hereto under this Agreement have been
satisfied or, if earlier, on the date, prior to a Change of Control, 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. 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, or as may otherwise
be established under the Company's then existing employee benefit plans or
policies at the time of termination.
4. Severance Benefits.
(a) Termination Following A Change of Control. If the
Employee's employment with the Company terminates as a result of an
Involuntary Termination at any time within twelve (12) months after a Change
of Control, Employee shall be entitled to the following severance benefits:
(i) [Six (6), Six (6), Nine (9), Nine (9), Twelve (12)] of
Employee's base salary as in effect as of the date of such termination, less
applicable withholding, payable in a lump sum within thirty (30) days of the
Involuntary Termination;
(ii) all stock options granted by the Company to the
Employee prior to the Change of Control shall become fully vested and
exercisable as of the date of the termination to the extent such stock options
are outstanding and unexercisable at the time of such termination and all
stock subject to a right of repurchase by the Company (or its successor) that
was purchased prior to the Change of Control shall have such right of
repurchase lapse with respect to all of the shares;
(iii) the same level of health (i.e., medical, vision and
dental) coverage and benefits as in effect for the Employee on the day
immediately preceding the day of the Employee's termination of employment;
provided, however, that (i) the Employee constitutes a qualified beneficiary,
as defined in Section 4980B(g)(1) of the Internal Revenue Code of 1986, as
amended; and (ii) Employee elects continuation coverage pursuant to the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"),
within the time period prescribed pursuant to COBRA. The Company shall
continue to provide Employee with health coverage until the earlier of (i) the
date Employee is no longer eligible to receive continuation coverage pursuant
to COBRA, or (ii) [Six (6), Six (6), Nine (9), Nine (9), Twelve (12)] from the
termination date.
(b) Termination Apart from a Change of Control. If the
Employee's employment with the Company terminates other than as a result of an
Involuntary Termination within the twelve (12) months following a Change of
Control, then the Employee shall not be entitled to receive severance or other
benefits hereunder, but may be eligible for those benefits (if any) as may
then be
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established under the Company's then existing severance and benefits plans and
policies at the time of such termination.
(c) Accrued Wages and Vacation; Expenses. Without regard to the
reason for, or the timing of, Employee's termination of employment: (i) the
Company shall pay the Employee any unpaid base salary due for periods prior to
the Termination Date; (ii) the Company shall pay the Employee all of the
Employee's accrued and unused vacation through the Termination Date; and
(iii) following submission of proper expense reports by the Employee, the
Company shall reimburse the Employee for all expenses reasonably and
necessarily incurred by the Employee in connection with the business of the
Company prior to the Termination Date. These payments shall be made promptly
upon termination and within the period of time mandated by law.
5. Limitation on Payments. In the event that the severance and other
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 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,
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 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. Successors.
(a) Company's Successors. Any successor to the Company (whether
direct or indirect and whether by purchase, lease, merger, consolidation,
liquidation or otherwise) to all or substantially all of the Company's
business and/or assets shall assume the Company's obligations under this
Agreement and agree expressly to perform the Company's obligations under this
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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. For all
purposes under this Agreement, the term "Company" shall include any successor
to the Company's business and/or assets which executes and delivers the
assumption agreement described in this subsection (a) or which becomes bound
by the terms of this Agreement by operation of law.
(b) Employee's Successors. Without the written consent of the
Company, Employee shall not assign or transfer this Agreement or any right or
obligation under this Agreement to any other person or entity. Notwithstanding
the foregoing, the terms of this Agreement and all rights of Employee
hereunder shall inure to the benefit of, and be enforceable by, Employee's
personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees.
7. Notices.
(a) General. Notices and all other communications contemplated
by this Agreement shall be in writing and shall be deemed to have been duly
given when personally delivered or when mailed by U.S. registered or certified
mail, return receipt requested and postage prepaid. In the case of the
Employee, mailed notices shall be addressed to him at the home address which
he most recently communicated to the Company in writing. In the case of the
Company, mailed notices shall be addressed to its corporate headquarters, and
all notices shall be directed to the attention of its Secretary.
(b) Notice of Termination. Any termination by the Company for
Cause or by the Employee as a result of a voluntary resignation or an
Involuntary Termination 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
giving of such notice). The failure by the Employee to include in the notice
any fact or circumstance which contributes to a showing of Involuntary
Termination shall not waive any right of the Employee hereunder or preclude
the Employee from asserting such fact or circumstance in enforcing his rights
hereunder.
8. 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, shall be settled by
binding arbitration to be held in Santa Xxxxx 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.
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(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. 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.
(c) Employee understands that nothing in this Section modifies
Employee's at-will employment status. Either Employee or the Company can
terminate the employment relationship at any time, with or without Cause.
(d) EMPLOYEE HAS READ AND UNDERSTANDS THIS SECTION, WHICH
DISCUSSES ARBITRATION. 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 TO BINDING ARBITRATION, CONSTITUTES A WAIVER OF 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.
9. 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.
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(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.
(c) Integration. This Agreement and any outstanding stock
option agreements referenced herein represent the entire agreement and
understanding between the parties as to the subject matter herein and
supersede all prior or contemporaneous agreements, whether written or oral,
with respect to this Agreement and any stock option agreement.
(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) Employment Taxes. All payments made pursuant to this
Agreement shall be subject to withholding of applicable income and employment
taxes.
(g) 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.
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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
first above written.
COMPANY: AEHR TEST SYSTEMS
By: [/s/ XXXX X. XXXXXXX,
/s/ XXXX X. XXXXXXX,
/s/ XXXX X. XXXXXXX,
/s/ XXXX X. XXXXXXX,
/s/ XXXX X. XXXXXX]
-------------------------------------
Title: [CEO,
CEO,
CEO,
CEO,
VP, CFO, ASST. SECTY]
----------------------------------
EMPLOYEE: [/s/ XXXX X. XXXX,
/s/ XXXXX X. XXXXXXXXXXX,
/s/ XXXX X. XXXXXX,
/s/ XXXX X. XXXXXXX,
/s/ XXXX X. XXXXXXX]
------------------------------------------
Signature
Xxxx X. Xxxx
Xxxxx X. Xxxxxxxxxxx
Xxxx X. Xxxxxx
Xxxx X. Xxxxxxx
Xxxx X. Xxxxxxx
------------------------------------------
Printed Name
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JDBC:\NRPORTBL\PALIB1\JDB\1036911.1
