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Exhibit 10.17
CALIFORNIA MICROWAVE, INC.
SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT is entered into as of May 18, 1998 (the "Effective
Date"), between CALIFORNIA MICROWAVE, INC., a Delaware corporation ("CMI") and
Xxxxx Xxxxx (the "Employee").
RECITAL
The Employee serves as CMI's Executive Vice President and Chief Financial
Officer. CMI and the Employee desire to set forth the terms of the Employee's
severance compensation if the Employee's employment is ended as a result of a
Change in Control. If a Change in Control occurs, the Employee and other key
employees may be more vulnerable to dismissal or other negative consequences
without regard to the quality of their past or prospective service. The Board of
Directors (the "Board") believes that it is in the best interest of CMI and its
stockholders to ensure fair treatment to CMI's key employees and to reduce the
adverse effects upon their performance that may be caused by an acquisition or
change in control.
The parties agree as follows:
1. Definitions. For purposes of this Agreement, the following terms will
have the meanings set forth below.
1.1 A "Change in Control" will occur if (a) any person, as that term
is used in Section 13(d) and 14(d)(2) of the Securities and Exchange
Act of 1934 (the 'Exchange Act.), other than CMI, is or becomes the
beneficial owner, as defined in Rule 13(d)(3) under the Exchange Act,
directly or indirectly (including by holding securities which are
exercisable for or convertible into shares of capital stock of CMI),
of 30 percent or more of the combined voting power of the outstanding
shares of capital stock of CMI entitled to vote generally in the
election of directors (calculated as provided in Rule 13(d) under the
Exchange Act in the case of rights to acquire capital stock), whether
by means of a tender offer or exchange offer or open-market purchases
or a combination thereof; (b) a Transaction is consummated; (c)
Continuing Directors cease to constitute at least a majority of the
Board: or (d)
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a majority of the CMI's Outside Directors determine that a Change in
Control has occurred.
1.2 "Continuing Directors" shall mean the directors of CMI in office on
January 1, 1998 and any successor to any such director whose
nomination or selection was approved by a majority of the Continuing
Directors in office at the time of the director's nomination or
selection and who is not an "affiliate" or "associate" (as defined in
Regulation 12B under the Securities Exchange Act of 1934, as amended)
of any person who is the beneficial owner, directly or indirectly, of
securities representing ten percent (10%) or more of the combined
voting power of CMI's outstanding securities then entitled ordinarily
to vote for the election of directors.
1.3 "Disability" means that the Employee has met the qualifications for
CMI's long-term disability benefit.
1.4 "Good Reason" includes any of the following:
(a) the assignment to the Employee of duties inconsistent with, or a
substantial alteration in the nature or status of, the Employee's
responsibilities immediately before a Change in Control;
(b) a reduction in the Employee's salary or other benefits as in
effect on the date of a Change in Control;
(c) the Employee's relocation to a work site requiring an
increase in one-way commute from Employee's residence of
more than thirty-five (35) miles; or
(d) a breach by CMI of this Agreement if the breach has not been
cured within 30 days after written notice by the Employee to
CMI setting forth with specificity the nature of the breach.
1.5 "Outside Director" is a member of CMI's Board of Directors who is not,
and who during the past six months was not, an employee or officer of
CMI.
1.6 "Termination for Cause" is termination of the Employee's employment as
a result of (a) the Employee's willful misconduct or
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the Employee's dishonesty towards, fraud upon, crime against or
deliberate or attempted injury or bad faith action with respect to
CMI; or (b) the Employee's conviction for a felony (whether in
connection with CMI's affairs or otherwise).
1.7 "Termination Upon a Change in Control" is (a) termination by the
Employee of his employment for Good Reason within one year after the
occurrence of a Change in Control; or (b) declination by the Employee
of an offer of employment from the buyer or the newly created entity
for Good Reason at the time of a Change in Control if the Employee
would not have been permitted to remain in his/her existing position
following such declination; or (c) termination by CMI, the buyer or
the newly created entity of the Employee's employment within one year
after the occurrence of a Change in Control other than a Termination
for Cause or a termination resulting from the Employee's death or
Disability. The one-year period provided for herein shall be six
months in the event a Change in Control arises out of a Transaction
defined in Section 1.8 (c) hereof.
1.8 "Transaction" is (a) a consolidation or merger of CMI if the
shareholders of CMI immediately before the merger or consolidation do
not immediately after the merger or consolidation own equity
securities of the surviving or acquiring corporation or a parent party
possessing 50% or more of the voting power of the surviving or
acquiring corporation or parent party; (b) a sale, lease, exchange or
other transfer (in one transaction or a series of related
transactions) of 50 % or more of the assets of CMI; or (c) the sale or
other disposition of business units within any 12-month period that
contributed for that 12-month period more than 45% of CMI's revenues.
The Transaction requirements defined in parts (b) and (c) above shall
specifically exclude the sales of the Satellite Transmission Systems
and Microwave Networks divisions and their associated assets, and the
designated percentage thresholds (50% and 45%, respectively) shall be
calculated without including these two divisions' assets or revenues
in the base.
2. Term. If no Change in Control has occurred, this Agreement will expire on
December 17, 2000. If a Change in Control occurs prior to December 17,
2000, this Agreement will continue in effect, and will not terminate, until
either the Employee has received the severance compensation provided for
below or has ceased to be eligible for such compensation by reason of there
not having been a Termination Upon a Change in Control.
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3. Termination Upon a Change in Control. If a Termination Upon a Change in
Control occurs, the Employee will immediately be paid all accrued salary,
bonus compensation to the extent earned, vested deferred compensation
(other than pension plan or profit sharing plan benefits, which will be
paid in accordance with the applicable plan), any benefits then due under
any plans of CMI in which the Employee is a participant, accrued vacation
pay and any appropriate business expenses incurred by the Employee in
connection with his duties, all to the date of termination ("Accrued
Compensation"). The Employee will also be entitled to the greater of i) the
severance compensation described in Section 4 or ii) any severance benefit
to which the Employee is entitled based on her offer letter of December 12,
1997.
4. Severance Compensation. If a Termination Upon a Change in Control occurs,
CMI shall pay monthly severance compensation to the Employee for a period
ending 24 months after termination in an aggregate amount determined by
adding (a) the Employee's monthly base salary at the time of termination,
(b) a proportionate amount of the Employee's targeted bonus, determined by
multiplying the Employee's targeted bonus by the number of complete months
from the start of the then current fiscal year to the Employee's
termination date and dividing the product by 144, and (c) an amount equal
to the monthly `Perk Pot' benefit to which the Employee is entitled as an
officer of the company at the time of termination, and (d) the amount of
$2400.00 in lieu of other employee benefits (including health benefits) the
Employee was receiving from CMI. If the Employee becomes employed prior to
the expiration of the aforesaid 24 month period, the payments provided for
in this Section 4 shall cease as of the date of such employment; Employee
agrees to promptly notify CMI of any such employment and to reimburse CMI
for any payments made by CMI hereunder that cover any period during which
the Employee was employed. The severance compensation described herein will
be provided only in lieu of any severance benefit to which the Employee is
entitled in Employee's offer letter of December 12, 1997.
5. Acceleration of Options. If a Termination Upon a Change in Control occurs,
all stock options and restricted stock held by the Employee immediately
before the termination will become fully vested and the stock options will
be exercisable for the periods specified with respect to termination of
employment in the plans covering the options.
6. Other Benefits. Neither this Agreement nor the severance compensation that
it provides for will reduce any amounts otherwise payable, or in any way
diminish the Employee's rights as an employee of CMI, whether existing now
or hereafter, under any benefit, incentive, retirement, stock option, stock
bonus or stock purchase plan or under any employment agreement or other
plan or arrangement, provided, however, that the rights granted to the
Employee and the obligations assumed by CMI under this Agreement will be in
lieu of, and not in addition to, any severance or other termination
payments to which the Employee may be entitled under any employment
agreement or other plan or arrangement that the Employee may now or
hereafter have with CMI.
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7. Employment Status. This Agreement does not constitute a contract of
employment. It does not impose on CMI any obligation to retain the Employee
as an employee, to change the status of the Employee's employment or to
change CMI's policies regarding termination of employment.
8. Miscellaneous.
a. Severability. If a court or other body of competent jurisdiction
determines that any provision of this Agreement is invalid or
unenforceable, that provision will be adjusted rather than voided, if
possible, so that it is enforceable to the maximum extent possible,
and all other provisions of the Agreement will be deemed valid and
enforceable to the fullest extent possible.
b. Withholding. Compensation and benefits to the Employee under this
Agreement will be reduced by all federal, state, local and other
withholdings or similar taxes as required by applicable law.
c. Arbitration. The parties will submit all controversies, claims and
matters of difference in any way related to this Agreement, its
performance or breach, to arbitration in San Francisco, California,
according to the rules and practices of the American Arbitration
Association from time to time in effect. Any awards in such
arbitration shall be final and binding on all parties. The arbitrators
shall allocate the costs of the arbitration in such manner as they
deem equitable. The arbitrators may require the reimbursement of all
or a portion of the reasonable legal fees incurred by the prevailing
party in the arbitration proceeding and any legal proceedings which
are taken to enforce the arbitral award.
d. Entire Agreement: Modifications. This Agreement sets forth the entire
Agreement between the parties and supersedes any and all prior
agreements or understandings, written or oral, between the parties
pertaining to the subject matter of this Agreement with the express
limitation that the provisions of the offer letter sent to employee on
December 12, 1997 remain in force and effect except as specified in
Paragraphs 3 and 4 above. It may be amended, modified, superseded or
canceled, or its terms waived, only by a written instrument executed
by each party or, in the case of a waiver, by the party waiving
compliance. Failure of a party at any time to require performance of
any provision of this Agreement will not affect the right at a later
time to enforce the same. No waiver of a breach of this Agreement,
whether by conduct or otherwise, in any one or more instances will be
construed as a further or continuing waiver of the breach or of any
other term of this Agreement. This Agreement shall inure to the
benefit of and be binding upon
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the successors and assigns of the parties hereto.
e. Confidential Information. The Employee agrees not to disclose, either
while in the Company's employ or at any time thereafter, to any person
not employed by CMI any confidential information obtained while in the
employ of CMI (including, without limitation, any of CMI's inventions,
processes, methods of distribution, customers or trade secrets). This
shall not preclude the Employee from the use or disclosure of
information known generally to the public or from making disclosures
required by law or court order.
f. Applicable Law. This Agreement will be construed under and governed by
the laws of the State of California without regard or reference to the
rules of conflicts of law that would require the application of the
laws of any other jurisdiction.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
CALIFORNIA MICROWAVE, INC.
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Xxxxxxxxx X. Xxxxxxxx Xxxxx Xxxxx
Chairman and Chief Executive Officer Executive Vice President and Chief
Financial Officer
