1
October 19, 1999
Xxxxxx X. Xxxx
00000 Xxxxxx Xxxx DeCristal
X.X. Xxx 0000
Xxxxxx Xxxxx Xx, XX 00000
CHANGE OF CONTROL AGREEMENT
Dear D.J.:
The Board of Directors believes that it is in the best interests of
Cerprobe Corporation, a Delaware corporation ("Cerprobe"), and its shareholders
to take appropriate steps to allay any concerns you may have about your future
employment opportunities with Cerprobe and its subsidiaries (Cerprobe and its
subsidiaries are collectively referred to as the "Company"). As a result, the
Board has decided to offer to you the benefits described below.
Please bear in mind that these benefits are being offered only to a few,
selected employees and we accordingly ask that you refrain from discussing this
program with others. Also, please note that the benefits described below will
only be effective if you sign the extra copy of this Change of Control Agreement
(the "Agreement") which is enclosed and return it to me on or before October 22,
1999.
1. TERM OF AGREEMENT.
This Agreement is effective immediately and will continue in effect as
long as you are actively employed by Cerprobe, unless you and Cerprobe agree in
writing to its termination.
2. SEVERANCE PAYMENT.
If your employment with the Company is terminated without "Cause" (as
defined in Section 7) at any time within two years following a "Change of
Control" (as defined in Section 5), you will receive the "Severance Payment"
described below. You will also receive the Severance Payment if you terminate
your employment for "Good Reason" (as defined in Section 6) at any time within
two years following a Change of Control. For the purposes of this Agreement, if
a termination occurs after the public announcement of an event which would
constitute a Change of Control but before completion of the Change of Control,
the termination shall be considered a termination occurring after a Change of
Control has occurred.
The Severance Payment equals the sum of (i) two times the higher of (x)
your base salary on the date of your termination of employment, or (y) your base
salary on the date preceding the
2
Change in Control, (ii) two times the average of the higher of (x) your
incentive compensation for the two years prior to your termination of
employment, or (y) your incentive compensation on the date preceding the Change
in Control, and (iii) the amount of any lump-sum severance benefit paid to you
under your Employment Agreement.
The Severance Payment will be paid in one lump sum as soon as
administratively feasible following your termination of employment, but in no
event more than 90 days following your termination of employment.
You are not entitled to receive the Severance Payment if your employment
is terminated for Cause, if you terminate your employment without Good Reason,
or if your employment is terminated by reason of your "Disability" (as defined
in Section 9(d)) or your death. In addition, you are not entitled to receive the
Severance Payment if your employment is terminated by you or the Company for any
or no reason before a Change of Control occurs or more than two years after a
Change of Control has occurred.
In order to receive the Severance Payment, you must execute any release
reasonably requested by the Company of claims that you may have pursuant to this
Agreement (but not any other claims).
The Severance Payment will be paid to you without regard to whether you
look for or obtain alternative employment following your termination of
employment with the Company.
3. BENEFITS CONTINUATION.
If you are entitled to severance under Section 2, you will continue to
receive life, disability, accident and group health insurance benefits
substantially similar to those which you were receiving immediately prior to
your termination of employment for a period of 24 months following your
termination of employment. Such benefits shall be provided on substantially the
same terms and conditions as they were provided prior to the Change of Control.
The Company does not intend to provide duplicative benefits. As a result,
benefits otherwise receivable pursuant to this Section shall be reduced or
eliminated if and to the extent that you receive such benefits pursuant to your
Employment Agreement.
Benefits otherwise receivable pursuant to this Section also shall be
reduced or eliminated if and to the extent that you receive comparable benefits
from any other source (for example, another employer); provided, however, you
shall have no obligation to seek, solicit or accept employment from another
employer in order to receive such benefits.
4. INCENTIVE COMPENSATION.
If you are employed by the Company on the day on which a Change of Control
occurs, the incentive compensation to which you will be entitled (pursuant to
any performance-based incentive compensation program established by the Company)
for the calendar year in which the Change of Control occurs will equal at least
the "Minimum Incentive Compensation Amount." The "Minimum Incentive Compensation
Amount" will equal the incentive compensation to
2
3
which you would have been entitled if the year were to end on the day on which
the Change of Control occurs, based upon performance up to that date. In
measuring financial performance, financial results through the date of the
Change of Control will be annualized.
5. CHANGE OF CONTROL DEFINED.
For purposes of this Agreement, the term Change of Control shall mean and
include the following transactions or situations:
(a) A sale, transfer, or other disposition by Cerprobe through a
single transaction or a series of transactions of securities of Cerprobe
representing 30% or more of the combined voting power of Cerprobe's then
outstanding securities to any "Unrelated Person" or "Unrelated Persons" acting
in concert with one another. For purposes of this Section, the term "Person"
shall mean and include any individual, partnership, joint venture, association,
trust, corporation, or other entity (including a "group" as referred to in
Section 13(d)(3) of the Securities Exchange Act of 1934 (the "Act")). For
purposes of this Section, the term "Unrelated Person" shall mean and include any
Person other than the Company, or an employee benefit Plan of the Company.
(b) A sale, transfer, or other disposition through a single
transaction or a series of transactions of all or substantially all of the
assets of Cerprobe to an Unrelated Person or Unrelated Persons acting in concert
with one another,
(c) A change in the ownership of Cerprobe through a single
transaction or a series of transactions such that any Unrelated Person or
Unrelated Persons acting in concert with one another become the "Beneficial
Owner," directly or indirectly, of securities of Cerprobe representing at least
30% of the combined voting power of Cerprobe's then outstanding securities. For
purposes of this Section, the term "Beneficial Owner" shall have the same
meaning as given to that term in Rule 13d-3 promulgated under the Act, provided
that any pledgee of voting securities shall not be deemed to be the Beneficial
Owner thereof prior to its acquisition of voting rights with respect to such
securities.
(d) Any consolidation or merger of Cerprobe with or into an
Unrelated Person, unless immediately after the consolidation or merger the
holders of the common stock of Cerprobe immediately prior to the consolidation
or merger are the Beneficial Owners of securities of the surviving corporation
representing at least 50% of the combined voting power of the surviving
corporation's then outstanding securities.
(e) During any period of two (2) years, individuals who, at the
beginning of such period, constituted the Board of Directors of Cerprobe cease,
for any reason, to constitute at least a majority thereof, unless the election
or nomination for election of each new director was approved by the vote of at
least two-thirds (2/3) of the directors then still in office who were directors
at the beginning of such period.
(f) A change in control of Cerprobe of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Act,
3
4
or any successor regulation of similar import, regardless of whether Cerprobe is
subject to such reporting requirement.
Notwithstanding any provision herein to the contrary, the filing of a
proceeding for the reorganization of Cerprobe under Chapter 11 of the Federal
Bankruptcy Code or any successor or other statute of similar import shall not be
deemed to be a Change of Control for purpose of this Agreement.
6. GOOD REASON DEFINED.
For purposes of this Agreement, the term "Good Reason" shall be given the
meaning ascribed to such term in your Employment Agreement, as it may be amended
from time to time.
7. CAUSE DEFINED.
For purposes of this Agreement, the term "Cause" shall be given the
meaning ascribed to such term in your Employment Agreement, as it may be amended
from time to time.
8. CEILING ON BENEFITS.
The Internal Revenue Code (the "Code") places significant tax burdens on
you and the Company if the total payments made to you due to a Change of Control
exceed prescribed limits. For example, if your limit is $749,999 (because your
"Base Period Income" (as defined below) is $250,000) and the "Total Payments"
(as defined below) exceed the limit by even $1.00, you are subject to an excise
tax under Section 4999 of the Code of 20% of all amounts paid to you in excess
of $250,000. If your limit is $749,999, you will not be subject to an excise tax
if you receive exactly $749,999. If you receive $750,000, you will be subject to
an excise tax of $100,000 (20% of $500,000).
In order to avoid this excise tax and the related adverse tax consequences
for the Company, by signing this Agreement, you agree that the present value of
your Total Payments will not exceed an amount equal to 2.99 times your Base
Period Income. This is the maximum amount which you may receive without becoming
subject to the excise tax imposed by Section 4999 of the Code or which the
Company may pay without loss of deduction under Section 280G of the Code.
"Base Period Income" is an amount equal to your "annualized includible
compensation" for the "base period" as defined in Sections 280G(d)(1) and (2) of
the Code and the regulations adopted thereunder. Generally, your "annualized
includible compensation" is the average of your annual taxable income from the
Company for the "base period," which is the five calendar years prior to the
year in which the Change of Control occurs. These concepts are complicated and
technical and all of the rules set forth in the applicable regulations apply for
purposes of this Agreement.
4
5
Your "Total Payments" include the sum of the Severance Payment and any
other "payments in the nature of compensation" (as defined in Section 280G of
the Code and the regulations adopted thereunder).
If Cerprobe believes that these rules will result in a reduction of the
payments to which you are entitled under this Agreement, it will so notify you
within 60 days following delivery of the "Notice of Termination" described in
Section 9. You and Cerprobe will then, at Cerprobe's expense, retain legal
counsel, certified public accountants, and/or a firm of recognized executive
compensation consultants to provide an opinion or opinions concerning whether
your Total Payments exceed the limit discussed above.
Cerprobe will select the legal counsel, certified public accountants and
executive compensation consultants. If you do not accept one or more of the
parties selected by Cerprobe you may provide Cerprobe with the names of legal
counsel, certified public accountants and/or executive compensation consultants
acceptable to you. If Cerprobe does not accept the party or parties selected by
you, the legal counsel, certified public accountants and/or executive
compensation consultants selected by you and Cerprobe, respectively, will select
the legal counsel, certified public accountants and/or executive compensation
consultants to provide the opinions required.
At a minimum, the opinions required by this Section must set forth (a) the
amount of your Base Period Income, (b) the present value of the Total Payments
and (c) the amount and present value of any excess parachute payments.
If the opinions state that there would be an excess parachute payment,
your payments under this Agreement will be reduced to the extent necessary to
eliminate the excess.
You will be allowed to choose which payment should be reduced or
eliminated, but the payment you choose to reduce or eliminate must be a payment
determined by such legal counsel, certified public accountants, and/or executive
compensation consultants to be includible in Total Payments. You will make your
decision in writing and deliver it to Cerprobe within 30 days of your receipt of
such opinions. If you fail to so notify Cerprobe, it will decide which payments
to reduce or eliminate.
If the legal counsel, certified public accountants, and/or executive
compensation consultants selected to provide the opinions referred to above so
requests in connection with the opinion required by this Section, a firm of
recognized executive compensation consultants, selected by you and Cerprobe
pursuant to the procedures set forth above, shall provide an opinion, upon which
such legal counsel, certified public accountants, and/or executive compensation
consultants may rely, as to the reasonableness of any item of compensation as
reasonable compensation for services rendered before or after the Change of
Control.
If Cerprobe believes that your Total Payments will exceed the limitations
of this Section, it will nonetheless make payments to you, at the times stated
above, in the maximum amount that it believes may be paid without exceeding such
limitations. The balance, if any, will then be paid after the opinions called
for above have been received.
5
6
If the amount paid to you by Cerprobe is ultimately determined, pursuant
to the opinion referred to above or by the Internal Revenue Service, to have
exceeded the limitation of this Section, the excess will be treated as a loan to
you by Cerprobe and shall be repayable on the 90th day following demand by
Cerprobe, together with interest at the "applicable federal rate" provided in
Section 1274(d) of the Code.
In the event that the provisions of Sections 280G and 4999 of the Code are
repealed without succession, this Section shall be of no further force or
effect.
9. TERMINATION NOTICE AND PROCEDURE.
Any termination by the Company or you of your employment shall be
communicated by written Notice of Termination to you if such Notice of
Termination is delivered by the Company and to the Company if such Notice of
Termination is delivered by you, all in accordance with the following
procedures:
(a) The Notice of Termination shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances alleged to provide a basis for
termination.
(b) Any Notice of Termination by the Company shall be in writing
signed by the Chairman of the Board of Cerprobe specifying in detail the basis
for such termination.
(c) If the Company shall furnish a Notice of Termination for Cause
and you in good faith notify the Company that a dispute exists concerning such
termination within the 15-day period following your receipt of such notice, you
may elect to continue your employment during such dispute. If it is thereafter
determined that (i) Cause did exist, your "Termination Date" shall be the
earlier of (A) the date on which the dispute is finally determined, either by
mutual written agreement of the parties or pursuant to the alternative dispute
resolution provisions of Section 16, or (B) the date of your death; or (ii)
Cause did not exist, your employment shall continue as if the Company had not
delivered its Notice of Termination and there shall be no Termination Date
arising out of such notice.
(d) If the Company shall furnish a Notice of Termination by reason
of Disability and you in good faith notify the Company that a dispute exists
concerning such termination within the 15-day period following your receipt of
such notice, you may elect to continue your employment during such dispute. The
dispute relating to the existence of a Disability shall be resolved by the
opinion of the licensed physician selected by Cerprobe, provided, however, that
if you do not accept the opinion of the licensed physician selected by Cerprobe,
the dispute shall be resolved by the opinion of a licensed physician who shall
be selected by you; provided further, however, that if Cerprobe does not accept
the opinion of the licensed physician selected by you, the dispute shall be
finally resolved by the opinion of a licensed physician selected by the licensed
physicians selected by Cerprobe and you, respectively. If it is thereafter
determined that (i) a Disability did exist, your Termination Date shall be the
earlier of (A) the date on which the dispute is resolved, or (B) the date of
your death, or (ii) a Disability did not exist, your employment shall continue
as if the Company had not delivered its Notice of Termination and
6
7
there shall be no Termination Date arising out of such notice. For purposes of
this Agreement, "Disability" shall be given the meaning ascribed to such term in
your Employment Agreement at the time the Disability determination is being
made.
(e) If you in good faith furnish a Notice of Termination for Good
Reason and the Company notifies you that a dispute exists concerning the
termination within the 15-day period following the Company's receipt of such
notice, you may elect to continue your employment during such dispute. If it is
thereafter determined that (i) Good Reason did exist, your Termination Date
shall be the earlier of (A) the date on which the dispute is finally determined,
either by mutual written agreement of the parties or pursuant to the alternative
dispute resolution provisions of Section 16, (B) the date of your death, or (C)
one day prior to the second anniversary of a Change of Control, and your
payments hereunder shall reflect events occurring after you delivered Notice of
Termination; or (ii) Good Reason did not exist, your employment shall continue
after such determination as if you had not delivered the Notice of Termination
asserting Good Reason.
(f) If you do not elect to continue employment pending resolution of
a dispute regarding a Notice of Termination, and it is finally determined that
the reason for termination set forth in such Notice of Termination did not
exist, if such notice was delivered by you, you shall be deemed to have
voluntarily terminated your employment other than for Good Reason and if
delivered by the Company, the Company will be deemed to have terminated you
other than by reason of Disability or Cause.
(g) For purposes of this Agreement, a transfer from Cerprobe to one
of its subsidiaries or a transfer from a subsidiary to Cerprobe or another
subsidiary shall not be treated as a termination of employment.
10. SUCCESSORS.
Cerprobe will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of Cerprobe or any of its subsidiaries to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that Cerprobe or any subsidiary would be required to perform it if no
such succession had taken place. Failure of Cerprobe to obtain such assumption
and agreement prior to the effectiveness of any such succession shall be a
breach of this Agreement and shall entitle you to compensation in the same
amount and on the same terms to which you would be entitled hereunder if you
terminate your employment for Good Reason following a Change of Control, except
that for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Termination Date. As used in
this agreement "Company" shall mean Company, as hereinbefore defined and any
successor to its business and/or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law or otherwise.
7
8
11. BINDING AGREEMENT.
This Agreement shall inure to the benefit of and be enforceable by you and
your personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If you should die while any amount
would still be payable to you hereunder had you continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee or other designee or, if there
is no such designee, to your estate.
12. NOTICE.
For purposes of this Agreement, notices and all other communications
provided for in this Agreement shall be in writing and shall be deemed to have
been duly given when delivered or mailed by United States certified or
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notices to Cerprobe shall be directed to the attention of the Chairman
of the Board of Cerprobe with a copy to the Secretary of Cerprobe, 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.
13. MISCELLANEOUS.
No provision of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing and signed
by you and the Chairman of the Board of Cerprobe. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreement or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not expressly set forth in this
Agreement. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Delaware without regard
to its conflicts of law principles. All references to sections of the Act or the
Code shall be deemed also to refer to any successor provisions to such sections.
Any payments provided for hereunder shall be paid net of any applicable
withholding required under federal, state or local law. The obligations of
Cerprobe that arise prior to the expiration of this Agreement shall survive the
expiration of the term of this Agreement.
14. VALIDITY.
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.
15. COUNTERPARTS.
This Agreement may be executed in several counterparts, each of which
shall he deemed to be an original but all of which together will constitute one
and the same instrument.
8
9
16. ALTERNATIVE DISPUTE RESOLUTION.
All claims, disputes and other matters in question between the parties
arising under this Agreement shall, unless otherwise provided herein (such as in
Sections 8 and 9(d)), be resolved in accordance with the arbitration or
alternative dispute resolution provisions included in your Employment Agreement.
17. EXPENSES AND INTEREST.
If a good faith dispute shall arise with respect to the enforcement of
your rights under this Agreement or if any arbitration or legal proceeding shall
be brought in good faith to enforce or interpret any provision contained herein,
or to recover damages for breach hereof, and you are the prevailing party, you
shall recover from the Company any reasonable attorneys' fees and necessary
costs and disbursements incurred as a result of such dispute or legal
proceeding, and prejudgment interest on any money judgment obtained by you
calculated at the rate of interest announced by Bank of America, Arizona from
time to time as its prime rate from the date that payments to you should have
been made under this Agreement. It is expressly provided that the Company shall
in no event recover from you any attorneys' fees, costs, disbursements or
interest as a result of any dispute or legal proceeding involving the Company
and you.
18. PAYMENT OBLIGATIONS ABSOLUTE.
Cerprobe's obligation to pay you the compensation and to make the
arrangements in accordance with the provisions herein shall be absolute and
unconditional and shall not be affected by any circumstances; provided, however,
that Cerprobe may apply amounts payable under this Agreement to any debts owed
to the Company by you on your Termination Date. All amounts payable by Cerprobe
in accordance with this Agreement shall be paid without notice or demand. If
Cerprobe has paid you more than the amount to which you are entitled under this
Agreement, Cerprobe shall have the right to recover all or any part of such
overpayment from you or from whomsoever has received such amount.
19. EFFECT ON EMPLOYMENT AGREEMENT.
This Agreement supplements, and does not replace, your Employment
Agreement, as it may be amended or replaced from time to time (the "Employment
Agreement"). You will be entitled to receive all amounts due to you pursuant to
your Employment Agreement; but some payments under your Employment Agreement may
reduce your Severance Payments as provided in Section 2 and benefits due
pursuant to your Employment Agreement may reduce the benefits due pursuant to
Section 3. In addition, payments under your Employment Agreement may, in some
limited circumstances, be considered as part of your Total Payment and result in
a reduction in payments as provided in Section 8. If there is any conflict
between the provisions of this Agreement and your Employment Agreement, the
provisions of this Agreement shall control.
20. ENTIRE AGREEMENT.
This Agreement and your Employment Agreement set forth the entire
agreement between you and the Company concerning the subject matter discussed in
this Agreement and supersede
9
10
all prior agreements, promises, covenants, arrangements, communications,
representations, or warranties, whether written or oral, by any officer,
employee or representative of the Company. Any prior agreements or
understandings with respect to the subject matter set forth in this Agreement
are hereby terminated and canceled.
21. DEFERRAL OF PAYMENTS.
To the extent that any payment under this Agreement, when combined with
all other payments received during the year that are subject to the limitations
on deductibility under Section 162(m) of the Code, exceeds the limitations on
deductibility under Section 162(m) of the Code, such payment shall, in the
discretion of Cerprobe, be deferred to the next succeeding calendar year. Such
deferred amounts shall be paid no later than the 60th day after the end of such
next succeeding calendar year, provided that such payment, when combined with
any other payments subject to the Section 162(m) limitations received during the
year, does not exceed the limitations on deductibility under Section 162(m) of
the Code.
22. PARTIES.
This Agreement is an agreement between you and Cerprobe. In certain cases,
though, obligations imposed upon Cerprobe may be satisfied by a subsidiary of
Cerprobe. Any payment made or action taken by a subsidiary of Cerprobe shall be
considered to be a payment made or action taken by Cerprobe for purposes of
determining whether Cerprobe has satisfied its obligations under this Agreement.
If you would like to participate in this special benefits program, please
sign and return the extra copy of this letter which is enclosed.
Sincerely,
CERPROBE CORPORATION
By. /s/ X. Xxxx Close
__________________________________
Name: X. Xxxx Close
Its: Chief Executive Officer
By: /s/ Xxxx X. Xxxxxxx
__________________________________
Name: Xxxx X. Xxxxxxx
Its: Chairman of the Board of
Directors
Enclosure
ACCEPTANCE
I hereby accept the offer to participate in this special benefits program
and I agree to be bound by all of the provisions noted above.
Dated: __________ __, 1999
/s/ Xxxxxx X. Xxxx
____________________________
Xxxxxx X. Xxxx
10
11
Xxxxxx X. Xxxx
11
