Cabot Microelectronics Corporation AMENDED AND RESTATED CHANGE IN CONTROL SEVERANCE PROTECTION AGREEMENT
Exhibit 10.23
Cabot
Microelectronics Corporation
AMENDED AND RESTATED CHANGE
IN CONTROL
This
Amended and Restated Agreement, (the “Agreement”) is entered
into effective as of ____________, 2008 (the “Agreement Date”), by and between
Cabot Microelectronics
Corporation, a Delaware corporation (the “Company”) and [Executive] (the
“Executive”);
Witnesseth
That:
Whereas,
the Executive is employed by the Company, and the Company desires to provide
protection to the Executive in the event of a Change in Control of the
Company;
Whereas,
the Executive and the Company desire to amend and restate the Change in Control
Severance Protection Agreement between the Company and the Executive, dated as
of _______, ____ (the “Original Agreement”), in order to comply with Section
409A of the Internal Revenue Code of 1986, as amended (the “Code”) and to make
certain other clarifications to ensure that the intended benefits of the
Original Agreement are provided to the Executive;
Now,
Therefore, it is hereby agreed by and between the parties, for good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged, as
follows:
Article
I. Establishment
and Purpose
1.1 Purpose of the
Agreement. The purpose of this Agreement is to advance the
interests of the Company by providing the Executive with an assurance of
equitable treatment, in terms of compensation and economic security, in the
event of an acquisition or other Change in Control of the Company. An
assurance of equitable treatment will enable the Executive to maintain
productivity and focus during the period of significant uncertainty that is
inherent in an acquisition or other Change in Control. Further, the
Company believes that agreements of this kind will aid it in attracting and
retaining the highly qualified, high-performing professionals who are essential
to its success.
Article
II. Certain
Definitions
2.1 “Affiliate”
is any entity directly or indirectly controlled by, controlling or under common
control with the Company.
2.2 “Cause”
means either:
(a) the
Executive’s willful and continued failure to perform substantially the duties
reasonably assigned to the Executive; or
(b) the
Executive’s willful engaging in conduct that is demonstrably and materially
injurious to the Company, monetarily or otherwise.
The
Executive’s willful failure to perform substantially his or her duties shall
constitute “Cause” only if the Applicable Board (as defined in Section 5.2) has
delivered a written demand for substantial performance to the Executive that
specifically identifies the manner in which the Applicable Board believes the
Executive has failed to perform, and has otherwise followed the procedure
described in Section 5.2 below. The Executive’s failure to perform
substantially his or her assigned duties does not include either a failure that
results from the Executive’s death, Disability, physical or mental incapacity,
or an anticipated failure following the Executive’s notifying the Company that
he or she intends to resign for Good Reason or during the One-Year Window
Period. No act or failure to act of the Executive’s will be deemed
“willful” if the Executive acted (or failed to act) in good faith or in the
reasonable belief that his or her act or omission was in the best interests of
the Company.
2.3 “Change
in Control” means the first to occur of any of the events or conditions
described in subsections (a) through (e):
(a) Any
Person, together with all affiliates and associates (within the meaning of Rule
12b-2 promulgated under the Exchange Act), acquires Beneficial Ownership,
directly or indirectly, or securities of the Company representing at least
thirty percent (30%) of the combined voting power of the Company’s then
outstanding Voting Securities. Notwithstanding the foregoing, the
acquisition of Voting Securities in a Non-Control Acquisition will not
constitute a Change in Control.
(b) During
any period of twenty-four (24) consecutive months beginning on or after the
Agreement Date, individuals who, at the beginning of that 24-month period,
constitute the Board (the “Incumbent Directors”), cease for any reason to
constitute at least a majority of the Board. A new director of the
Company whose election or nomination for election as a director of the Company
was approved by a vote of at least two-thirds of the Incumbent Directors will be
deemed to be an Incumbent Director. Notwithstanding the foregoing,
(i) a new director designated by a person who has entered into an agreement with
the Company to effect a transaction described in Section 2.3(d) will not be
deemed to be an Incumbent Director and (ii) no individual will be
considered to be an Incumbent Director if he or she initially assumed office
through an actual or threatened “Election Contest” with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board (a “Proxy Contest”),
including by reason of any agreement intended to avoid or settle any Election
Contest or Proxy Contest.
1
(c) At any
duly conducted election of directors at a special or annual meeting of the
Company’s stockholders,
(i)
|
two
or more nominees who are both (A) nominees of and endorsed by the Company
and (B) not employees of the Company or any Affiliate at the time of the
election are not elected to serve as directors;
and
|
(ii)
|
any
person not a nominee of, and endorsed by, the Company is elected to serve
as a director of the Company.
|
(d) The
consummation of:
(i)
|
a
merger, consolidation or reorganization involving the Company, unless the
merger, consolidation or reorganization is a “Non-Control Transaction;”
or
|
(ii)
|
a
transaction pursuant to which all or substantially all of the assets of
the Company are sold or disposed of to any Person (other than a transfer
to a Change in Control Subsidiary).
|
(e) Approval
by the stockholders of the Company of a complete liquidation or dissolution of
the Company; or
(f) This
Section 2.3(f) contains the definitions of the capitalized terms used in
subsections (a) through (e) above.
(i)
|
“Voting
Securities” are securities of the Company generally entitled to vote in
the election of directors.
|
(ii)
|
“Person”
is used under this Agreement in the same way as under Section 13(d) and
14(d) of the Exchange Act.
|
(iii)
|
“Beneficial
Ownership” is used in the same way as under Rule 13d-3 promulgated under
the Exchange Act.
|
(iv)
|
A
“Non-Control Acquisition” is an acquisition (A) by an employee benefit
plan maintained by the Company or by a Change in Control Subsidiary; (B)
by the Company or by a Change in Control Subsidiary; or (C) directly from
the Company (1) by an underwriter in connection with an underwritten
public offering or private placement, (2) of non-voting convertible debt
or non-voting convertible preferred stock (until converted into Voting
Securities), or (3) by a Person who, in connection with the acquisition,
(a) enters into a standstill agreement with the Company that has a
duration of at least two years and pursuant to which the Person agrees to
vote the acquired securities on any matter either at the direction of the
Board or in the same proportion as the Company’s other stockholders vote
on the matter and (b) agrees to assume, honor and perform the Company’s
obligations under this Agreement. An acquisition pursuant to
sub-clause (C)(3) will be a Non-Control Acquisition only for so long as
the standstill agreement remains in
effect.
|
(v)
|
“Board”
means the Board of Directors of the
Company.
|
(vi)
|
A
“Change in Control Subsidiary” is a corporation or other Person, a
majority of whose voting power, voting equity securities or equity
interest is owned directly or indirectly by the
Company.
|
(vii)
|
A
“Non-Control Transaction” is a merger, consolidation or reorganization of
the Company where (A) the stockholders of the Company, immediately before
the merger, consolidation or reorganization, own directly or indirectly
immediately after the merger, consolidation or reorganization, at least
sixty percent (60%) of the combined voting power of the outstanding voting
securities of the corporation resulting from the merger, consolidation or
reorganization (the “Surviving Corporation”) in substantially the same
proportion as their ownership of the Voting Securities immediately before
the merger, consolidation or reorganization; (B) the individuals who were
Incumbent Directors immediately before the agreement providing for the
merger, consolidation or reorganization was executed constitute at least
two-thirds of the members of the board of directors of the Surviving
Corporation; and (C) no Person other than (1) the Company, (2) a Change in
Control Subsidiary, or (3) an employee benefit plan maintained by the
Company, the Surviving Corporation or a Change in Control Subsidiary,
acquires Beneficial Ownership of thirty percent (30%) or more of the
combined voting power of the Surviving Corporation’s then outstanding
voting securities.
|
Notwithstanding
the foregoing, a Change in Control will not be deemed to occur solely because a
Person acquires Beneficial Ownership of more than the permitted amount of the
then outstanding Voting Securities as a result of the acquisition of Voting
Securities by the Company which, by reducing the number of Voting Securities
then outstanding, increases the percentage of shares Beneficially Owned by the
Person. Notwithstanding the foregoing, if a Change in Control would
occur but for the operation of the preceding sentence as a result of the
acquisition of Voting Securities by the Company, and after that acquisition by
the Company, the Person described in the preceding sentence increases the
percentage of then outstanding Voting Securities he or she owns, a Change in
Control will occur.
2
2.4 “Change
in Control Period” means the period commencing on the Agreement Date and ending
on the earliest to occur of the date that is (a) the first anniversary of the
date as of which the Company or Committee notifies the Executive in writing that
the Agreement is being terminated or (b) other than with respect to an
Anticipatory Termination (as defined in Section 2.6), the date on which the
Company and its Affiliates cease to employ the Executive, if such cessation
occurs prior to a Change in Control.
2.5 “Disability”
is a physical or mental condition that would entitle the Executive to benefits
under the Company’s long-term disability plan, or if the Company maintains no
such plan, then under the federal Social Security law.
2.6 “Effective
Date” means the first date during the Change in Control Period on which a Change
in Control occurs. Notwithstanding anything in this Agreement to the
contrary, if a Change in Control occurs and if the Executive’s employment with
the Company is terminated during the one-year period prior to the date on which
the Change in Control occurs, and if it is reasonably demonstrated by the
Executive that such termination of employment (a) was at the request of a third
party that has taken steps reasonably calculated to effect a Change in Control
or (b) otherwise arose in connection with or anticipation of a Change in
Control, then “Effective Date” means the date immediately prior to the date of
such termination of employment (an “Anticipatory Termination”). In
the event of an Anticipatory Termination, the Severance Benefits will be paid or
provided as set forth in Section 4.2 and for purposes thereof the “Termination
Date” shall be the date of the Change in Control.
2.7 “Good
Reason” means the taking of actions by the Company that result in a material
negative change in the Executive’s employment relationship. For these
purposes, a “material negative change in the Executive’s employment
relationship” includes any of the events or conditions described
below:
(i)
|
There
is a change in the Executive’s status, title, position or responsibilities
(including reporting responsibilities and, if applicable, membership on
the Board) which represents a material adverse change from those in effect
as of immediately prior to the Change in
Control;
|
(ii)
|
The
Executive is assigned duties or responsibilities that are materially
inconsistent with the Executive’s status, title, position or
responsibilities as of immediately prior to the Change in
Control;
|
(iii)
|
A
material decrease in the Executive’s annual base salary from the rate in
effect as of the date of the Change in Control or as of any date following
the Change in Control, whichever is
greater;
|
(iv)
|
The
offices of the Company or Operating Unit at which the Executive is
principally employed are moved to a location that increases the
Executive’s one-way commute by more than thirty-five (35) miles from the
location of the offices occupied immediately prior to such relocation;
or
|
(v)
|
Any
other action or inaction that constitutes a material breach by the Company
of this Agreement.
|
2.8 “One-Year
Window Period” is the thirty (30)-day period commencing on the date of the first
anniversary of a Change in Control.
Article
III. Employment
Period
The Company hereby agrees to continue
the Executive in its employ, subject to the terms and conditions of this
Agreement, for the period commencing on the Effective Date and ending on the day
after the date that is thirteen months following the Effective Date (the
“Employment Period”). The Employment Period shall terminate upon the
Executive’s termination of employment for any reason. During the
Employment Period, the Executive’s annual base salary shall be at least equal to
the Executive’s annual base salary as in effect immediately prior to the
Effective Date and the Executive shall be eligible to participate in
compensation and benefit plans that are no less favorable than those in which
the Executive participated immediately prior to the Effective
Date and on terms and conditions no less favorable (including as to
the amount of benefits provided and as to the level of the Executive’s
participation) than those that applied immediately prior to the Effective Date
(or, if more favorable, those in which similarly situated executives of the
Company are eligible to participate during the Employment Period).
3
Article
IV. Severance
Benefits
4.1 Right to Severance
Benefit. The Executive will be entitled to receive from the
Company the Severance Benefit provided in Section 4.2 if a Change in Control
occurs and, within the Employment Period, the Executive’s employment with the
Company and all of its Affiliates is (a) involuntarily terminated by the Company
for any reason other than the Executive’s death or Disability or for Cause or
(b) by the Executive (i) for Good Reason within the Employment Period (or due to
an Anticipatory Termination) or (ii) during the One-Year Window
Period. Other than during the One-Year Window Period, if the
Executive voluntarily terminates employment at any time for any reason other
than Good Reason (or due to an Anticipatory Termination), the Executive will not
be entitled to the Severance Benefit.
4.2 Severance
Benefit. The “Severance Benefit” to which the Executive will
become entitled if the Executive meets the requirements of Section 4.1 is
composed of all of the amounts and benefits described in subsections (a) through
(f) below, paid or provided as described in those subsections.
(a) The
Company will pay the Executive all Accrued Compensation within ten (10) days
after the Termination Date (as defined below). The Executive’s
“Accrued Compensation is all amounts earned or otherwise payable to the
Executive as of the Termination Date, including base salary, reimbursement for
reasonable and necessary expenses incurred by the Executive on behalf of the
Company through the Termination Date, vacation pay and earned and unpaid bonuses
and incentive compensation with respect to periods prior to the Termination
Date; provided, that notwithstanding the
foregoing, if the Executive has made an irrevocable election under any deferred
compensation arrangement subject to Section 409A of the Code to defer any
portion of the annual base salary, bonuses or incentive compensation described
above then for all purposes of this Agreement, such deferral election, and the
terms of the applicable arrangement shall apply to the same portion of such
amounts, and such portions shall not be considered as part of the “Accrued
Compensation” but shall instead be considered as an “Other Amount” (as defined
below).
(b) The
Company will pay the Executive a Pro-rata Bonus within thirty (30) days after
the Termination Date, subject to the proviso in Section 4.2(a)
above. The Executive’s “Pro-rata Bonus” shall be the amount equal to
the Executive’s Bonus Amount (as defined below) multiplied by a fraction, the
numerator of which is the number of days that have elapsed through the
Termination Date in the Company’s then-current fiscal year and the denominator
of which is 365. For purposes of this Agreement, the Executive’s
“Bonus Amount” shall equal the greatest of:
(i)
|
the
Executive’s target bonus amount for the fiscal year in which the Change in
Control occurs under the Short-Term Incentive Plans (as defined below) in
which the Executive is eligible to participate as of immediately prior to
the Change in Control;
|
(ii)
|
the
Executive’s target bonus amount for the fiscal year in which the
Termination Date occurs under all Short-Term Incentive Plans in which the
Executive is eligible to participate as of immediately prior to the
Termination Date; and
|
(iii)
|
the
highest bonus amount paid or payable to the Executive under all Short-Term
Incentive Plans in respect of any of the three fiscal years preceding the
fiscal year in which the Change in Control occurs (or for such lesser
number of full fiscal years prior to the Change in Control for which the
Executive was eligible to earn such a
bonus).
|
For
purposes of determining the Bonus Amount, the bonus formulations set forth in
clauses (i) through (iii) above shall include any portion of a bonus that the
Executive elected to defer and any portion that is settled in equity awards and,
for any fiscal year consisting of less than 12 full months or during which the
Executive was employed for less than 12 full months and received a pro-rated
bonus, shall be annualized.
“Short-Term
Incentive Plans” are any bonus or incentive compensation plans, policies,
programs or other arrangements that make cash awards to the Executive on the
basis of award periods that are no longer than one year.
(c) The
Company will pay the Executive an amount equal to [for executive officers other than
the chief executive officer and principal accounting officer: two (2)]
[for the chief executive
officer: three (3)][for
the principal accounting officer: one (1) time] times the sum
of: (i) the Executive’s annual base salary, (ii) the Executive’s
Bonus Amount and (iii) an amount equal to the contributions made or credited by
the Company under all qualified and non-qualified retirement plans for the
benefit of the Executive for the most recently completed plan year of each such
plan. For purposes of this Agreement, the Executive’s “annual base
salary” includes any amounts the Executive may have elected to defer, and will
be calculated at the rate in effect immediately before the Change in Control or
on the Termination Date, whichever is greater. The Company will pay
the amount described in this Section 4.2(c) in one lump sum, without any
discount for accelerated payment, within ten (10) days after the Termination
Date.
(d) For the
[for executive officers other
than the chief executive officer and principal accounting officer:
twenty-four (24)-month][for the chief executive
officer: thirty-six (36)-month][for the principal accounting
officer: twelve (12)-month] period beginning on the Termination Date (the
“Benefits Continuation Period”), the Company will continue on behalf of the
Executive and his or her dependents and beneficiaries, at the Company’s expense
and without any required contribution by the Executive medical, health, dental
and prescription drug benefits (the “Health Care Benefits”).
The
Health Care Benefits (including deductibles, if any) provided under this Section
4.2(d) will be no less favorable to the Executive and the Executive’s
beneficiaries than the most favorable of those coverages and benefits provided
to the Executive and the Executive’s dependents during the ninety-day (90-day)
period immediately before the earlier of the Executive’s Termination Date and
the Change in Control, or as of any date following the Change in Control but
preceding the Executive’s Termination Date (such period, the “Benefits
Measurement Period”); provided, however, that the Healthcare
Benefits provided during the Benefits Continuation Period shall be provided in
such a manner that such benefits (and the costs and premiums thereof) are
excluded from the Executive’s income for federal income tax purposes, and, if
the Company reasonably determines that providing continued coverage under one or
more of its welfare benefit plans contemplated herein could be taxable to the
Executive, the Company shall provide such benefits at the level required hereby
through the purchase of individual insurance coverage. If the
Executive obtains Health Care Benefits under a subsequent employer’s benefit
plans during the Benefits Continuation Period, the Health Care Benefits provided
hereunder shall be secondary to those provided under such other plan during such
applicable period of eligibility. In addition, the Company shall make
a lump sum payment to the Executive, without any discount for accelerated
payment, within ten (10) days after the Termination Date in an amount equal to
the product of (i) the annual premium payments based on the conversion rates
applicable to the Executive as of the Termination Date in respect of the group
term life insurance policy and not any supplemental policies under which the
Executive was covered immediately prior to the Date of Termination and (ii)
[for executive officers other
than the chief executive officer and principal accounting officer: two
(2)] [for the chief executive
officer: three (3)][for
the principal accounting officer: one (1)]. To the extent
requested by the Executive within 30 days following the Date of Termination, the
Company shall take all action necessary, if any, to facilitate the Executive’s
exercise of all conversion privileges, if any, under such group term life
insurance policy.
4
(e) The
Company shall, at its sole expense as incurred, provide the Executive with
outplacement assistance services the scope and provider of which shall be
selected by the Executive in the Executive’s sole discretion, provided that the cost of
such outplacement shall not exceed 15% of the Executive’s annual base salary;
and provided, further,
that such outplacement benefits shall end not later than the last day of
the second calendar year that begins after the Termination Date.
(f) All
amounts earned by, or awarded to, the Executive under any incentive compensation
plan or benefit plan and not specifically described in Sections 4.2(a) through
(e) above (the “Other Amounts”) will immediately vest on the Executive’s
Termination Date, and the Executive will be entitled to be paid such Other
Amounts in accordance with the terms of the plans. In addition, all
stock options to acquire Company common stock, shares of restricted Company
common stock and any other equity-related awards granted to the Executive under
the Cabot Microelectronics Corporation 2000 Equity Incentive Plan or any
successor plan will immediately vest and become freely exercisable upon a Change
in Control, to the extent provided by the terms of that plan. This
Section 4.2(f) will not apply to any benefits allocated or accrued to the
Executive under any plan that is intended to be qualified under Section 401(a)
of the Code.
All
payments described in this Section 4.2 are described gross of any withholding,
and will be subject to any applicable requirement to withhold income, payroll or
other taxes, except with respect to, and to the extent provided as, a Gross-up
Payment as provided in Article VI below.
4.3 No Obligation to
Mitigate. The Executive will not be required to mitigate the
amount of the Severance Benefit or any portion of it by seeking other employment
or otherwise. Except as provided in Section 4.2(d), no portion of the
Severance Benefit will be offset or reduced by the amount of any compensation or
benefits provided to the Executive through subsequent employment.
Article
V. Termination
of Employment
5.1 Termination
Date. The “Termination Date” is the date on which the
Executive’s employment with the Company and all Affiliates terminates, pursuant
to the provisions of this Article V. The Company and the Executive
shall take all steps necessary (including with regard to any post-termination
services by the Executive) to ensure that any termination described in this
Article V constitutes a “separation from service” within the meaning of Section
409A of the Code, and notwithstanding anything
contained herein to the contrary, the date on which such separation from
service takes place shall be the “Termination Date.”
5.2 Termination by Company for
Cause. At any time following a Change in Control and during
the Employment Period, the Company must follow the procedure set forth in this
Section 5.2, in order to terminate the Executive for Cause. First,
the Board of Directors of the Company (or if the Company is not the ultimate
parent of the Company, the board of directors of the ultimate parent of the
Company (the “Applicable Board”)) shall hold a meeting to determine whether
Cause exists. The Company must give the Executive reasonable advance
written notice of the meeting and of the facts and circumstances that will be
presented to the Applicable Board as constituting Cause, including facts
evidencing that the Executive has been given at least a thirty (30) day
opportunity within which to cure any facts and circumstances constituting Cause,
unless the facts and circumstances alleged to constitute Cause do not allow for
cure. The Executive will have an opportunity, together with the
Executive’s counsel, to be heard by the Applicable Board before the
meeting. If the Applicable Board finds, by a resolution duly adopted
in good faith by affirmative vote of at least three-quarters of the entire
membership of the Applicable Board, that Cause exists and that the Executive
should be terminated for Cause, then the Applicable Board must set forth those
findings in a written resolution that also includes the specific facts and
circumstances found to constitute Cause (which cannot include any facts or
circumstances not included in the written notice of the Applicable Board meeting
given to the Executive). The Company must furnish the Executive with
a copy of the resolution, together with a written notice that the Executive is
being terminated for Cause. The notice must specify the effective
date of the termination. The effective date of the termination may
not be sooner than five (5) business days after the date the Company delivers
the resolution and notice to the Executive. In any action to contest
the existence of Cause, the Applicable Board’s findings will have no presumptive
weight. The Company may not later rely upon any facts or
circumstances as Cause for the Executive’s termination, other than the facts or
circumstances set forth in the notice of the Applicable Board meeting given to
the Executive and found by the Applicable Board at that meeting to constitute
Cause.
5.3 Termination by Company for
Disability. At any time following a Change in Control and
during the Employment Period, the Company must follow the procedure set forth in
this Section 5.3, in order to terminate the Executive for
Disability. If, as a result of Disability, the Executive has been
absent from the performance of his or her duties for the Company for the
elimination period provided in the Company’s long-term disability plan (or, if
the Company does not maintain a long-term disability plan, for six (6)
consecutive months) and the Executive is unable to return to his or her duties
on a full-time basis, even with reasonable accommodations on the Company’s part,
the Company may give the Executive written notice that it proposes to terminate
the Executive’s employment for Disability. The notice will state that
the Company will terminate the Executive for Disability effective on a specific
date, unless the Executive returns to the performance of his or her duties on a
full-time basis by that date. The effective date of the termination
may not be sooner than thirty (30) days after the date the Company delivers the
notice to the Executive. The Executive will be terminated for
Disability if and only if the Company has made all reasonable accommodations
required to permit the Executive to return to work and the Executive has not
returned on a full-time basis by the date specified in the
notice. Notwithstanding any other provision of this Section 5.3, if
the Executive elects a disability retirement under any qualified retirement plan
of the Company, or begins to receive benefits under the Company’s long-term
disability plan, he or she will be deemed to have been properly terminated for
Disability by the Company. The effective date of such a termination
will be the Executive’s retirement date under the retirement plan or the date as
of which long-term disability benefits begin under the Company’s long-term
disability plan, whichever is sooner.
5.4 Termination by Executive for Good
Reason. Following a Change in Control and during the
Employment Period, the Executive may terminate employment for Good
Reason. In order to invoke a termination for Good Reason, the
Executive shall provide written notice to the Company of the existence of one or
more of the conditions described in clauses (i) through (vi) of Section 2.7
within ninety (90) days following the initial existence of such condition or
conditions, and, to the extent such condition is curable, the Company shall have
thirty (30) days following receipt of such written notice (the “Cure Period”)
during which it may remedy the condition. In the event that the
Company fails to remedy the condition constituting Good Reason during the Cure
Period, the Executive must terminate employment, if at all, within ninety (90)
days following the Cure Period in order to terminate employment for Good
Reason. The Executive’s mental or physical incapacity following the
occurrence of an event described above in clauses (i) through (vi) of Section
2.7 shall not affect the Executive’s ability to terminate employment for Good
Reason.
5
5.5 Voluntary Termination by Executive
during the One-Year Window Period. Following a Change in Control and
during the Employment Period, the Executive may voluntarily terminate his or her
employment with the Company and its Affiliates for any or no reason during the
One-Year Window Period without giving prior notice to the Company, and will not
be required to give any notice in order to perfect his or her rights under this
Agreement on termination during the One-Year Window Period. The Executive will
be deemed to voluntarily terminate his or her employment with the Company and
all Affiliates during the One-Year Window Period only if the Executive actually
terminates employment with the Company and all Affiliates before the end of the
One-Year Window Period.
5.6 Other
Termination. Neither the Company nor the Executive must follow
any particular procedures to effect a termination for a reason other than Cause,
Disability or Good Reason, or for the Executive to terminate employment
voluntarily at a time other than during the One-Year Window Period.
Article
VI. Parachute
Payments
6.1 Excise Tax Gross-up
Payment. Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any amounts or
benefits the Executive would receive , whether paid or provided under this
Agreement or otherwise (such amounts and benefits that are in the nature of
compensation (within the meaning of Section 280G(b)(2) of the Code), the
“Payments”), would subject the Executive to an excise tax under Section 4999 of
the Code (the “Excise Tax”), the Company will pay the Executive, in addition to
the Severance Benefit and any other payments or benefits to which the Executive
is entitled, a “Gross-up Payment.” The Gross-up Payment will be in
the amount such that, after payment by the Executive of all taxes (and any
interest or penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up Payment, but excluding
any income taxes and penalties imposed pursuant to Section 409A of the Code, the
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments. The Company’s obligation to make a
Gross-Up Payment under this Section 6.1 shall not be conditioned upon the
Executive’s termination of employment and shall survive the Executive’s
termination of employment.
6.2 Determination of Gross-up
Payment. A nationally recognized certified public accounting
firm or professional services firm with experience making such determinations,
as may be designated by the Company prior to the Change in Control (the
“Accounting Firm”), will make an initial determination of whether the Company
must pay a Gross-up Payment, and if so, the amounts of any such Gross-up
Payment. The Accounting Firm will provide the Company and the
Executive with the determination and detailed supporting calculations and
documentation within 15 business days of the receipt of notice from the
Executive that there has been a Payment or such earlier time as is requested by
the Company. The Company will pay the fees and expenses of the
Accounting Firm. The Executive will have the right to accept the
determination, or to have the determination reviewed by a nationally recognized
accounting firm selected by the Executive, at the Executive’s
expense. The determination of the second accounting firm will be
binding, final and conclusive on the Company and the Executive. The
Company will pay the Gross-up Payment finally determined under this Section 6.2
within ten (10) days after it is finally determined or if earlier the date that
it is due to the Internal Revenue Service or any other applicable taxing
authority; provided
that, the Gross-Up Payment shall in all events be paid no later than the end of
the Executive’s taxable year next following the Executive’s taxable year in
which the Excise Tax (and any income or other related taxes or interest or
penalties thereon) on a Payment are remitted to the Internal Revenue Service or
any other applicable taxing authority. The Gross-Up Payment shall be
paid to the Executive; provided that the Company, in
its sole discretion, may withhold and pay over to the Internal Revenue Service
or any other applicable taxing authority, for the benefit of the Executive, all
or any portion of any Gross-Up Payment, and the Executive hereby consents to
such withholding.
Article
VII. Other
Rights and Benefits Not Affected
7.1 Other
Benefits. Except as otherwise specifically provided in this
Agreement, the provisions of this Agreement will not affect any other plan,
program or arrangement under which the Executive may accrue or earn benefits or
compensation. Notwithstanding the foregoing, if the Executive
receives a Separation Benefit pursuant to Section 4.2 of this Agreement, the
Executive shall not be entitled to any severance pay or benefits under any
severance plan, program or policy of the Company and its
Affiliates.
7.2 Employment
Status. This Agreement does not constitute a contract of
employment or impose on the Executive or the Company any obligation to retain
the Executive as an employee, to change the status of the Executive’s
employment, or to change the Company’s policies regarding termination of
employment.
Article
VIII. Successors
and Beneficiaries
8.1 Successors. The
Company will require any successor (whether direct or indirect, by purchase,
merger, consolidation, or otherwise) of all or substantially all of the business
or assets of the Company expressly to assume and agree to perform this Agreement
in the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place.
This
Agreement shall inure to the benefit of and be enforceable by the Executive’s
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees, and legatees. If the Executive should die
while any amount would still be payable to him hereunder had the Executive
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement, to the Executive’s devisee,
legatee, or other designee, or if there is no such designee, to the Executive’s
estate.
6
8.2 Beneficiaries. The
Executive’s beneficiary under the Cabot Microelectronics Corporation 401(k) Plan
(or any successor plan (and if there is no such successor plan the Executive’s
beneficiary as noted on the records of the Company)) will be the Executive’s
beneficiary under this Agreement, unless the Executive otherwise designates a
beneficiary in the form of a signed writing acceptable to the
Committee. The Executive may make or change such designation at any
time.
Article
IX. Legal
Fees and Arbitration
The
Company will indemnify and reimburse the Executive for all legal fees and
related expenses (including the costs of experts, evidence and counsel, but not
including the costs of an accounting firm selected by the Executive to perform a
Gross-up Payment determination as provided in Section 6.2) (the “Legal
Expenses”) reasonably incurred by the Executive:
(a) to
contest or dispute in good faith the Executive’s termination of employment with
the Company and its Affiliates; or
(b) to seek
to obtain or enforce any benefit or right provided by this Agreement or by any
other plan or arrangement maintained by the Company or its Affiliates and under
which the Executive is or may be entitled to receive benefits upon or following
the Executive’s termination of employment or a Change in Control.
In either case, the Executive will be
entitled to indemnification and reimbursement of the Legal Expenses only if the
termination of employment the Executive contests or disputes, or as to which the
Executive seeks benefits or rights, arose in connection with a Change in Control
or during the Employment Period. In order to comply with Section 409A
of the Code, (i) the Legal Expenses shall be
reimbursed with respect to claims, actions or proceedings incurred at any time
from the occurrence of a Change in Control through the Executive’s remaining
lifetime (or, if longer, through the
20th anniversary of the occurrence of such Change in
Control), (ii) in no event shall the payments by the Company under this
Article IX be made later than the end of the calendar year next following the
calendar year in which the Legal Expenses were incurred, provided that the Executive
shall have submitted an invoice for such Legal Expenses at least ten (10)
business days before the end of the calendar year next following the calendar
year in which such Legal Expenses were incurred; (iii) the amount of any Legal
Expenses that the Company is obligated to pay in any given calendar year shall
not affect the Legal Expenses that the Company is obligated to pay in any other
calendar year; and (iv) the Executive’s right to have the Company pay such Legal
Expenses may not be liquidated or exchanged for any other benefit.
Article
X. Amendment,
Modification, Termination and Substitution
10.1 Amendment, Modification, Termination
and Substitution. Subject to Sections 10.2 and 10.3, the Board
may at any time and from time to time alter, amend, modify, extend or terminate
this Agreement, or accept its surrender and execute a new agreement in
substitution of it, by resolution or consent adopted by two-thirds of the
Board. Notwithstanding the foregoing, no modification or substitution
of this Agreement will, without the prior written consent of the Executive,
alter or impair any rights or obligations under this Agreement. The
Executive must be given a copy of any instrument that purports to alter, amend,
modify, extend or terminate this Agreement.
10.2 Limitations on Amendment,
Modification, Termination and Substitution. No amendment,
termination, modification, extension or substitution of this Agreement will be
effective if it would adversely affect the rights of the Executive, if a Change
in Control occurs within one year after the date it is meant to be effective
(or, if earlier, if a Change in Control occurs after the Executive’s
Anticipatory Termination), and any such an amendment, termination, modification
or substitution will be automatically rescinded, unless the rescission of any
such amendment, termination, modification or substitution would result in
adverse tax consequences to the Executive. . In addition,
this Agreement may not be amended, modified, terminated, extended or substituted
at the request of a third party who has indicated an intent, or taken steps to
effect, a Change in Control, or otherwise in connection with or anticipation of
a Change in Control. From and after the occurrence of a Change in
Control, this Agreement may not be amended, modified, terminated, extended or
substituted in a manner that would in any way adversely affect the benefits or
rights provided to the Executive.
10.3 Section 409A of the
Code. The payments and benefits under this Agreement are
intended to be exempt from Code Section 409A pursuant to the exception for
short-term deferrals, reimbursements, and in-kind distributions. This
Agreement shall be construed, interpreted and administered in accordance with
such intent. Notwithstanding the foregoing, the Executive and the
Company acknowledge that it may be necessary to amend this Agreement, within the
time period permitted by the applicable Treasury Regulations, to make changes so
as to cause such payments and benefits not to be considered “deferred
compensation” for purposes of Section 409A of the Code, to cause the provisions
of this Agreement to comply with the requirements of Section 409A of the Code,
or a combination thereof, so as to avoid the imposition of taxes and
penalties on the Executive pursuant to Section 409A of the Code. The
Executive hereby agrees that, prior to a Change in Control, the Company may,
without any further consent from the Executive, make any and all such changes to
this Agreement as may be necessary or appropriate to avoid the imposition of
penalties on the Executive pursuant to Section 409A of the Code, while not
substantially reducing the aggregate value to the Executive of the payments and
benefits to, or otherwise adversely affecting the rights of, the Executive under
this Agreement. Each payment under this Agreement shall be treated as
a separate payment for purposes of Section 409A of the Code. In no
event may the Executive, directly or indirectly, designate the calendar year of
any payment to be made under this Agreement. All reimbursements and
in-kind benefits provided under this Agreement shall be made or provided in
accordance with the requirements of Section 409A of the Code and (i) shall be
paid or provided within the time period permitted under Section 409A of the
Code, (ii) the amount or benefit that the Company
is obligated to pay or provide in any given calendar year shall not affect the
amount or benefit that the Company is obligated to pay in any other calendar
year and (iii) the Executive’s right to have the Company pay or provide the
amount or benefit may not be liquidated or exchanged for any other
benefit.
7
Article
XI. Miscellaneous
11.1 Severability. If
any provision of this Agreement is held to be illegal or invalid for any reason,
the illegality or invalidity will not affect the remaining parts of the
Agreement, and the Agreement will be construed and enforced as if the illegal or
invalid provision had not been included.
11.2 Unfunded Status of
Agreement. This Agreement is intended to constitute an
“unfunded” arrangement for executive compensation. As to any payments
due but not yet made under this Agreement, the Executive’s rights are no greater
than those of a general creditor of the Company. The Company is not
required to fund or otherwise set aside assets to pay the amounts owed under
this Agreement. Notwithstanding the foregoing, immediately prior to a
Change in Control, the Company or its successor must and will establish a
“rabbi” trust with a nationally recognized financial institution as trustee and
fully fund the Severance Benefit, Gross-up Payment (if any), and any other
amounts that may become payable under this Agreement; provided, however, that the
trust shall not be funded if the funding thereof would result in taxable income
to the Executive by reason of Section 409A(b) of the Code; and provided, further, in no
event shall any trust assets at any time be located or transferred outside of
the United States, within the meaning of Section 409A(b) of the
Code. Any fees and expenses of the trustee of any such rabbi trust
shall be paid by the Company.
11.3 Governing Law. The
laws of the State of Illinois, other than its conflict of law principles, will
govern in all matters relating to this Agreement.
11.4 Nonassignability. Neither the
Executive nor his or her beneficiaries or legal representatives may assign or
transfer this Agreement or any right under it, except by will or by the laws of
descent and distribution. This Agreement will inure to the benefit of
and be enforceable by the Executive’s personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees, and
legatees.
11.5 Settlement of Claims. The
Company’s obligation to make the payments provided for in this Agreements will
not be affected by any circumstances, including, without limitation, any
set-off, counterclaim, defense, recoupment or other right which the Company may
have against the Executive or others.
11.6 Survivorship. Upon
the expiration or other termination of this Agreement or the Executive’s
employment, the respective rights and obligations of the parties hereto shall
survive to the extent necessary to carry out the intentions of the parties under
this Agreement.
11.7 Entire
Agreement. From and after the Agreement Date, this Agreement
shall supersede the Original Agreement. From and after the Effective
Date, this Agreement shall supersede any other employment, severance or change
of control agreement between the parties with respect to the
subject matter hereof.
8
In
Witness Whereof, the Company and the Executive have duly executed this
Agreement as of the date first written above.
Cabot
Microelectronics Corporation
By:______________________________________
Its:______________________________________
_________________________________________
(Executive’s
Signature)
Executive’s
Name and Address for notices:
_________________________________________
_________________________________________
_________________________________________
9