EXHIBIT 10.33
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into as of [_______], 2006, by and
between Communications & Power Industries, Inc., a Delaware corporation
(hereinafter called the "Corporation"), and Xxxx X. Xxxxxxx (hereinafter called
the "Executive").
WITNESSETH THAT:
WHEREAS, the Corporation desires to continue to employ the Executive as
its Chief Financial Officer, and the Executive desires to continue in such
employment;
NOW, THEREFORE, the Corporation and the Executive, each intending to be
legally bound, hereby mutually covenant and agree as follows (certain defined
terms are set forth in Section 8(d) hereof):
1. Employment and Term.
(a) Employment. The Corporation shall employ the Executive as the
Chief Financial Officer of the Corporation, and the Executive shall so serve,
for the term set forth in Section 1(b).
(b) Term. The term of the Executive's employment under this
Agreement shall commence on the date hereof and end on the third anniversary of
the date hereof, subject to the extension of such term as hereinafter provided
and subject to earlier termination as provided in Section 8. The term of this
Agreement shall be extended automatically for one (1) additional year as of the
third anniversary hereof, and each anniversary date thereafter unless, no later
than six (6) months prior to any such renewal date, either the Corporation or
the Executive gives written notice to the other, in accordance with Section 14,
that the term of this Agreement shall not be so extended; provided, however, no
automatic extension of the term shall occur with respect to an anniversary date
if Executive has attained the age of 65.
2. Duties. During the period of employment as provided in Section 1(b)
hereof, the Executive shall serve as Chief Financial Officer of the Corporation
and Chief Financial Officer of the Parent and have all powers and duties
consistent with such positions, subject to the reasonable direction of the Chief
Executive Officer. The Executive shall devote substantially his entire time
during reasonable business hours (reasonable sick leave and vacations excepted)
and reasonable best efforts to fulfill faithfully, responsibly and to the best
of his ability his duties hereunder.
3. Salary.
(a) Base Salary. For services performed by the Executive for the
Corporation pursuant to this Agreement during the period of employment as
provided in Section 1(b) hereof, the Corporation shall pay the Executive a base
salary at the rate of Two Hundred Thirty Thousand U.S. dollars ($230,000 U.S.)
per year, payable in
substantially equal installments in accordance with the Corporation's regular
payroll practices. The Executive's base salary (with any increases under Section
3(b), below) shall not be subject to reduction; provided, however, in connection
with an across-the-board salary reduction that applies to substantially all of
the management executives of Parent and its subsidiaries, Executive's base
salary may be reduced by a percentage amount equal to the average amount of the
percentage decrease affecting such other management executives, but in no event
more than 10%. Any compensation which may be paid to the Executive under any
additional compensation or incentive plan of the Corporation or Parent or which
may be otherwise authorized from time to time by the Board (or an appropriate
committee thereof) shall be in addition to the base salary to which the
Executive shall be entitled under this Agreement.
(b) Salary Increases. During the period of employment as provided
in Section 1(b) hereof, the base salary of the Executive shall be reviewed no
less frequently than annually by the Board to determine whether or not the same
should be increased in light of the duties and responsibilities of the Executive
and the performance thereof, and if it is determined that an increase is
merited, such increase shall be promptly put into effect and the base salary of
the Executive as so increased shall constitute the base salary of the Executive
for purposes of Section 3(a).
4. Annual Bonuses. For each fiscal year during the term of employment,
the Executive shall be eligible to receive a bonus payable in cash and/or in
Parent's common stock. The amount of the bonus shall be based on the achievement
of certain operating and/or financial goals, in accordance with the terms of a
bonus plan adopted and administered by the Board for senior executives of the
Parent and its subsidiaries, which plan may be amended from time to time by the
Board in its discretion. Executive's target annual bonus for fiscal year 2006
will be equal to 0.60 times his current annual salary.
5. Equity Incentive Compensation. During the term of employment
hereunder the Executive shall be eligible to participate, in an appropriate
manner relative to other senior executives of the Parent and its subsidiaries,
in any equity-based incentive compensation plan or program approved by the Board
from time to time, including (but not by way of limitation) any plan providing
for the granting of (a) options to purchase stock of the Parent, (b) restricted
stock of the Parent or (c) similar equity-based units or interests.
6. Other Benefits. In addition to the compensation described in
Sections 3, 4 and 5, above, the Executive shall also be entitled to the
following:
(a) Participation in Benefit Plans. The Executive shall be
entitled to participate in all of the various retirement, welfare, disability,
fringe benefit, executive perquisite and expense reimbursement plans, and any
other programs and arrangements of the Corporation and Parent to the extent the
Executive is eligible for participation under the terms of such plans, programs
and arrangements, with the participation levels to be determined by Executive's
salary, position and tenure, and such other factors as apply in such plans and
programs. Except as otherwise specifically provided in this Agreement, the
Executive shall also be entitled to all benefits provided to him under the
practices of the Corporation as in effect immediately prior to the effective
date of this Agreement.
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(b) Vacation and Holidays. The Executive shall be entitled to the
number of weeks of vacation during each year of this Agreement per the formula
determined by the existing policies of the Corporation, or such greater period
as the Board may approve, and to the paid holidays given by the Corporation to
its employees generally, without reduction in salary or other benefits.
7. Covenants of the Executive. In order to induce the Corporation to
enter into this Agreement, the Executive hereby agrees as follows:
(a) Confidentiality. Except for and on behalf of the Corporation
with the consent of or as directed by the Board, the Executive shall keep
confidential and shall not divulge to any other person or entity, during the
term of employment or thereafter, any of the business secrets or other
confidential information regarding the Parent and its subsidiaries which has not
otherwise become public knowledge; provided, however, that nothing in this
Agreement shall preclude the Executive from disclosing information (i) to an
appropriate extent to parties retained to perform services for the Parent or its
subsidiaries or (ii) under any other circumstances to the extent such disclosure
is, in the reasonable judgment of the Executive, appropriate or necessary to
further the best interests of the Corporation or its subsidiaries or (iii) as
may be required by law, legal process or subpoena.
(b) Records. All papers, books and records of every kind and
description relating to the business and affairs of the Parent and its
subsidiaries, whether or not prepared by the Executive, other than personal
notes prepared by or at the direction of the Executive, shall be the sole and
exclusive property of the Corporation, and the Executive shall surrender them to
the Corporation at any time upon request by the Board.
(c) Non-Competition. The Executive hereby agrees with the
Corporation that during the term of his employment hereunder, and in certain
instances, as provided below, for a period following termination of his
employment hereunder, he shall not, directly or indirectly, engage in, or be
employed by, or act as a consultant to, or be a director, officer, owner or
partner of, or acquire a substantial interest in, any business activity or
entity which competes significantly with the Parent or any of its subsidiaries,
provided, however, that as to the period after termination of the Executive's
employment hereunder, the restrictive covenants set forth in this Section 7(c)
shall apply only in the case of terminations without Cause or resignations for
Good Reason and then only for a period beginning on the Date of Termination and
ending, as applicable, eighteen (18) months or twenty-four (24) months later
(which period will be based the applicable multiplier pursuant to subsection
(ii) of Section 9(b) of this Agreement);
(d) Non-Solicitation. During the time period after termination (if
any) during which the Executive is subject to the noncompetition covenants of
Section 7(c) of this Agreement, he shall not induce or attempt to induce any
customer, supplier, licensee or other individual, corporation or other business
organization having a business relation with the Parent or its subsidiaries to
cease doing business with the Parent or its subsidiaries or in any way interfere
with the relationship between any such customer, supplier, licensee or other
person and the Parent or its subsidiaries. In addition, during the
eighteen-month period following termination of employment for any reason (or, if
longer, the period during which the Executive is subject to the non-competition
covenants of Section 7(c) of this
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Agreement), Executive shall not solicit any employee of the Parent or any of its
subsidiaries to leave the employment thereof or in any way interfere with the
relationship of such employee with the Parent or its subsidiaries.
(e) Enforcement. The Executive recognizes that the provisions of
this Section 7 are vitally important to the continuing welfare of the
Corporation and its subsidiaries and that money damages would constitute an
inadequate remedy for any violation thereof. Accordingly, in the event of any
such violation by the Executive, the Corporation and its subsidiaries, in
addition to any other remedies they may have, shall have the right to institute
and maintain a proceeding to compel specific performance thereof or to seek an
injunction restraining any action by the Executive in violation of this Section
7.
8. Termination. Unless earlier terminated in accordance with the
following provisions of this Section 8, the Corporation shall continue to employ
the Executive and the Executive shall remain employed by the Corporation during
the entire term of this Agreement as set forth in Section 1(b). Section 9 hereof
sets forth certain obligations of the Corporation in the event that the
Executive's employment is terminated.
(a) Death or Disability. Except to the extent otherwise provided
in Section 9 with respect to certain post-Date of Termination payment
obligations of the Corporation, this Agreement shall terminate immediately as of
the Date of Termination in the event of the Executive's death or in the event
that the Executive becomes disabled. The Executive will be deemed to be disabled
upon the earlier of (i) the end of a twelve (12) consecutive month period during
which, by reason of any medically determinable physical or mental impairment,
the Executive has been unable to engage in any substantial gainful activity or
(ii) the date that a reputable physician selected by the Board, and as to whom
the Executive has no reasonable objection, determines in writing that the
Executive will, by reason of any medical determinable physical or mental
impairment, be unable to engage in any substantial gainful employment for a
period of at least twelve (12) consecutive months. If any question arises as to
whether the Executive is disabled, upon reasonable request therefor by the
Board, the Executive shall submit to reasonable medical examination for the
purpose of determining the existence, nature and extent of any such disability.
In accordance with Section 14, the Board shall promptly give the Executive
written notice of any such determination of the Executive's disability and of
any decision of the Board to terminate the Executive's employment by reason
thereof. In the event of disability, until the Date of Termination, the base
salary payable to the Executive under Section 3 hereof shall be reduced
dollar-for-dollar by the amount of disability benefits, if any, paid to the
Executive in accordance with any disability policy or program of the Corporation
or its affiliates.
(b) Discharge for Cause. In accordance with the procedures
hereinafter set forth, the Board may discharge the Executive from his employment
hereunder for Cause. Except to the extent otherwise provided in Section 9 with
respect to certain post-Date of Termination obligations of the Corporation, this
Agreement shall terminate immediately as of the Date of Termination in the event
the Executive is discharged for Cause. Any discharge of the Executive for Cause
shall be communicated by a Notice of Termination to the Executive given in
accordance with Section 14 of this Agreement. For purposes of this Agreement, a
"Notice of Termination" means a written notice which (i) indicates the specific
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termination provision in this Agreement relied upon, (ii) sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated and
(iii) if the Date of Termination is to be other than the date of receipt of such
notice, specifies the Date of Termination (which date shall in all events be
within thirty (30) days after the giving of such notice). In the case of a
discharge of the Executive for Cause, the Notice of Termination shall include a
copy of a resolution duly adopted by the Board at a meeting called and held for
such purpose (after reasonable notice to the Executive and reasonable
opportunity for the Executive to be heard before the Board prior to such vote),
finding that, in the reasonable and good faith opinion of the Board, the
Executive was guilty of conduct constituting Cause. No purported termination of
the Executive's employment for Cause shall be effective without a Notice of
Termination.
(c) Termination for Other Reasons. The Corporation may discharge
the Executive without Cause by giving written notice to the Executive in
accordance with Section 14 at least thirty (30) days prior to the Date of
Termination. The Executive may resign from his employment by giving written
notice to the Corporation in accordance with Section 14 at least thirty (30)
days prior to the Date of Termination. Except to the extent otherwise provided
in Section 9 with respect to certain post-Date of Termination obligations of the
Corporation, this Agreement shall terminate immediately as of the Date of
Termination in the event the Executive is discharged without Cause or resigns.
(d) Definitions. For purposes of this Agreement, the following
capitalized terms shall have the meanings set forth below:
(i) "Accrued Obligations" shall mean, as of the Date of
Termination, the sum of (A) the Executive's base salary hereunder through the
Date of Termination to the extent not theretofore paid, (B) the amount of any
incentive compensation, deferred compensation and other cash compensation
accrued by the Executive as of the Date of Termination to the extent not
theretofore paid, (C) any vacation pay, expense reimbursements and other cash
entitlements accrued by the Executive as of the Date of Termination to the
extent not theretofore paid, and (D) with respect to any bonus plans for the
fiscal year of termination, if Executive has been employed for at least six (6)
months during such fiscal year and has not been terminated for Cause or resigned
without Good Reason, a partial bonus for the fiscal year of termination equal to
the bonus payable for the full fiscal year in accordance with the applicable
plan, program or policy, multiplied by a fraction equal to the fraction of the
fiscal year preceding Executive's termination.
(ii) "Base Salary" shall mean the annual base salary paid
to Executive immediately prior to the termination of employment, provided that
such amount shall in no event be less than the annual base salary payable to
Executive during the one (1) year period immediately prior to the termination.
(iii) "Board" means the board of directors of Parent.
(iv) "Cause" shall mean (i) acts or omissions by the
Executive which constitute intentional material misconduct or a knowing
violation of a material policy of the Parent or any of its subsidiaries, (ii)
the Executive personally receiving a benefit in
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money, property or services from the Parent or any of its subsidiaries or from
another person dealing with the Parent or any of its subsidiaries, in material
violation of applicable law or policy of Parent or any of its subsidiaries,
(iii) an act of fraud, conversion, misappropriation, or embezzlement by the
Executive or his conviction of, or entering a guilty plea or plea of no contest
with respect to, a felony, or the equivalent thereof (other than DUI), or (iv)
any deliberate and material misuse or deliberate and material improper
disclosure of confidential or proprietary information of Parent or any of its
subsidiaries. Notwithstanding the foregoing, no act or omission by the Executive
shall constitute Cause hereunder unless the Corporation has given detailed
written notice thereof to the Executive, and the Executive has failed to remedy
such act or omission within a reasonable time after receiving such notice.
(v) A "Change of Control" shall be deemed to have occurred
if:
(A) Any individual or group constituting a "person",
as such term is used in Sections l3(d) and l4(d)(2) of the Securities Exchange
Act of 1934, as amended ("Exchange Act") (other than (A) the Parent or any of
its subsidiaries, (B) any trustee or other fiduciary holding securities under an
Executive benefit plan of the Parent or of any of its subsidiaries or (C) any
Cypress Fund(s)), is or becomes the beneficial owner, directly or indirectly, of
securities of the Parent representing fifty percent (50%) or more of the
combined voting power of the Parent's outstanding securities then entitled
ordinarily (and apart from rights accruing under special circumstances) to vote
for the election of directors; or
(B) Continuing Directors cease to constitute at
least a majority of the Board; or
(C) there occurs a reorganization, merger,
consolidation or other corporate transaction involving the Parent (a
"Transaction"), in each case with respect to which the stockholders of the
Parent immediately prior to such Transaction do not, immediately after the
Transaction, own more than 50% of the combined voting power of the Parent or
other corporation resulting from such Transaction; or
(D) all or substantially all of the assets of the
Corporation or Parent are sold, liquidated or distributed.
(vi) "Continuing Directors" shall mean (A) the directors of
the Parent in office on the date hereof and (B) any successor to any such
director who (x) was nominated or selected by a majority of the Continuing
Directors in office at the time of the director's nomination or selection, and
(y) who is not an "affiliate" or "associate" (as defined in rule 12b-2 under the
Exchange Act) of any Ten Percent Owner.
(vii) "Cypress Fund" shall mean any investment fund which is
an "affiliate" of Cypress Associates II LLC.
(viii) "Date of Termination" shall mean (A) in the event of a
discharge of the Executive by the Board for Cause, the date the Executive
receives a Notice of Termination, or any later date specified in such Notice of
Termination, as the case may be, (B) in the event of a discharge of the
Executive without Cause or a resignation by the Executive, the date specified in
the written notice to the Executive (in the case of discharge)
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or the Corporation (in the case of resignation), which date shall be no less
than thirty (30) days from the date of such written notice, (C) in the event of
the Executive's death, the date of the Executive's death, and (D) in the event
of termination of the Executive's employment by reason of disability pursuant to
Section 8(a), the date the Executive receives written notice of such termination
(or, if earlier, twelve (12) months from the date the Executive's disability
began).
(ix) "Good Reason" shall mean any of the following (A) the
assignment to the Executive of any duties inconsistent in any respect with the
Executive's positions with the Corporation and Parent as set forth in this
Agreement (including status, offices, titles and reporting requirements),
authority, duties or responsibilities as contemplated by Section 2, or any
action by the Corporation or Parent which results in diminution in such
positions, authority, duties or responsibilities, excluding for this purpose any
action not taken in bad faith and which is remedied by the Corporation or Parent
promptly after receipt of written notice thereof given by the Executive in
accordance with Section 14; or (B) any failure by the Corporation to comply with
any of the provisions of this Agreement, other than any failure not occurring in
bad faith and which is remedied by the Corporation promptly after receipt of
written notice thereof given by the Executive in accordance with Section 14; or
(C) the relocation of the offices where Executive is required to report to a
location that is 50 miles or more distant from the Corporation's existing
location in Palo Alto, California; or (D) the failure to appoint Executive as
Chief Financial Officer of the combined or acquiring entity in connection with a
Change of Control, reporting to its Chief Executive Officer; or (E) the
Corporation giving notice to the Executive in accordance with Section 1(b) that
the term of this Agreement shall not be extended upon the expiration of the
then-current term.
(x) "Parent" shall mean CPI International, Inc.
(xi) "Potential Change of Control" shall mean the earliest
to occur of (a) the execution of an agreement or letter of intent, the
consummation of the transactions described in which would result in a Change of
Control, (b) the approval by the Board of a transaction or series of
transactions, the consummation of which would result in a Change of Control, or
(c) the public announcement of a tender offer for the Parent's voting stock, the
completion of which would result in a Change of Control; provided, that no such
event shall be a "Potential Change of Control" unless (i) in the case of any
agreement or letter of intent described in clause (a), the transaction described
therein is subsequently consummated by the Parent and the other party or parties
to such agreement or letter of intent and thereupon constitutes a "Change of
Control", (ii) in the case of any Board-approved transaction described in clause
(b), the transaction so approved is subsequently consummated and thereupon
constitutes a "Change of Control" or (iii) in the case of any tender offer
described in clause (c), such tender offer is subsequently completed and such
completion thereupon constitutes a "Change of Control."
(xii) "Ten Percent Owner" shall mean any person who is the
beneficial owner, directly or indirectly, of securities representing ten percent
(10%) or more of the combined voting power of Parent's outstanding securities
then entitled ordinarily to vote for the election of directors; provided,
however, shares held as of the date hereof by any
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Cypress Fund shall not be counted for purposes of determining whether any such
fund is a "Ten Percent Owner."
9. Obligations of the Corporation Upon Termination. The following
provisions describe the obligations of the Corporation to the Executive under
this Agreement upon termination of his employment. However, except as explicitly
provided in this Agreement, nothing in this Agreement shall limit or otherwise
adversely affect any rights which the Executive may have under applicable law,
under any other agreement with the Parent or any of its subsidiaries, or under
any compensation or benefit plan, program, policy or practice of the Parent or
any of its subsidiaries.
(a) Death, Disability, Discharge for Cause, or Resignation Without
Good Reason. In the event this Agreement terminates pursuant to Section 8(a) by
reason of the death or disability of the Executive, or pursuant to Section 8(b)
by reason of the discharge of the Executive by the Corporation for Cause, or
pursuant to Section 8(c) by reason of the resignation of the Executive other
than for Good Reason, the Corporation shall pay to the Executive, or his heirs
or estate, in the event of the Executive's death, all Accrued Obligations in a
lump sum in cash within fifteen (15) days after the Date of Termination;
provided, however, that any portion of the Accrued Obligations which consists of
bonus, deferred compensation, or incentive compensation, shall be determined and
paid in accordance with the terms of the relevant plan as applicable to the
Executive, subject to the partial bonus provisions of clause (D) of the
definition of "Accrued Obligations."
(b) Discharge Without Cause or Resignation with Good Reason. In
the event that this Agreement terminates pursuant to Section 8(c) by reason of
the discharge of the Executive by the Corporation other than for Cause or
disability or by reason of the resignation of the Executive for Good Reason:
(i) The Corporation shall pay all Accrued Obligations to
the Executive in a lump sum in cash within fifteen (15) days after the Date of
Termination; provided, however, that any portion of the Accrued Obligations
which consists of bonus, deferred compensation, or incentive compensation shall
be determined and paid in accordance with the terms of the relevant plan as
applicable to the Executive, subject to the partial bonus provisions of clause
(D) of the definition of "Accrued Obligations;"
(ii) The Corporation shall pay to the Executive, in
accordance with the schedule set forth in the next sentence, an amount equal to
1.5 times the sum of (A) the Executive's Base Salary and (B) the average value
of the management incentive plan and other performance bonuses (excluding the
discretionary bonus announced by the Board in December, 2005) earned by the
Executive with respect to the preceding three (3) full fiscal years; provided,
however, notwithstanding the foregoing, if the discharge or resignation occurs
within two (2) years following the date of a Change of Control or a Potential
Change of Control, then the applicable multiple shall be 2.0, and the amount in
clause (B) shall be based upon the highest management incentive plan and other
performance bonus earned by Executive (excluding the discretionary bonus
announced by the Board in December, 2005) with respect to any fiscal year during
the preceding three full fiscal years (rather than the average amount). The
total amount set forth in the preceding sentence shall be paid to the Executive
in three equal installments, with the first payment
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occurring one month after the Date of Termination, the second payment occurring
six (6) months after the Date of Termination, and the third payment occurring
one year after the Date of Termination; provided, however, if any payment
pursuant to the preceding sentence would result in the imposition of any tax
upon the Executive pursuant to Section 409A of the Code (as defined below) and
the regulations promulgated thereunder, such payment shall be deferred to the
earliest date upon which such amounts may be paid without the imposition of such
tax; provided, further, in no event shall the length of any such deferral exceed
twelve (12) months from the date of the scheduled payment without the written
consent of the Executive.
(iii) For a period of eighteen (18) months after the Date of
Termination, the Corporation shall continue to provide benefits to the Executive
and/or the Executive's family at least equal to those which would have been
provided to them in accordance with the plans, programs and arrangements
referred to in Section 6(a) of this Agreement; provided, however,
notwithstanding the foregoing, if the discharge or resignation occurs within two
(2) years following the date of a Change of Control or a Potential Change of
Control, then the applicable time period shall be twenty-four (24) months;
provided, however, any benefits (such as ongoing contributions and participation
in a 401(k) plan) which may not be provided pursuant to applicable law or
regulations shall not be provided during the foregoing period; provided,
further, Executive agrees to elect COBRA coverage to the extent available under
the Corporation's health insurance plans (and the Corporation shall reimburse
the cost of any premiums for such coverage on an after-tax basis).
(iv) All long-term incentive compensation awards to the
Executive, including (but not by way of limitation) all equity-based incentive
compensation awards (such as (A) options to purchase stock of Parent, (B)
restricted stock of Parent, or (C) similar equity-based units or interests)
shall, if not otherwise vested, vest in full upon such termination of this
Agreement.
As a condition to receiving the benefits and payments in this Section
9(b), the Executive shall be required to execute a release of any claims and
potential claims against he Corporation and its affiliates and directors that
the Executive might have related to his employment. In addition, in connection
with any such release, Executive and the Corporation shall enter into reasonable
mutual non-disparagement covenants.
10. Certain Additional Payments by the Corporation. The Corporation
agrees that:
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment or distribution by the
Corporation or Parent to or for the benefit of the Executive (whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise, but determined without regard to any additional payments required
under this Section 10) (a "Payment") would be subject to the excise tax imposed
by Section 4999 of the Internal Revenue Code of 1986, as amended, (the "Code")
or if any interest or penalties are incurred by the Executive with respect to
such excise tax (such excise tax, together with any such interest and penalties,
being hereinafter collectively referred to as the "Excise Tax"), then the
Executive shall be entitled to receive
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an additional payment (a "Gross-Up Payment") in an amount such that, after
payment by the Executive of all taxes (including 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, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payment; provided,
however, if a 10% or smaller reduction in the amounts payable to Executive
pursuant to Section 9(b)(ii) above would result in no amounts owing by Executive
in respect of such Excise Tax, then the payments in Section 9(b)(ii) above shall
be reduced (but in no event by more than 10%), by an amount sufficient to
eliminate the Excise Tax.
(b) Subject to the provisions of Section 10(c), below, all
determinations required to be made under this Section 10, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by Ernst & Young (the "Accounting Firm"), which shall provide detailed
supporting calculations both to the Corporation and the Executive within fifteen
(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 Corporation. In the
event that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change of Control in question, the
Executive shall appoint another nationally recognized accounting firm to make
the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Corporation. Any Gross-Up Payment,
as determined pursuant to this Section 10, shall be paid by the Corporation to
the Executive within five (5) days of the receipt of the Accounting Firm's
determination. If the Accounting Firm determines that no Excise Tax is payable
by the Executive, it shall furnish the Executive with a written opinion that
failure to report the Excise Tax on the Executive's applicable federal income
tax return would not result in the imposition of a negligence or similar
penalty. Any good faith determination by the Accounting Firm shall be binding
upon the Corporation and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Gross-Up Payments which
will not have been made by the Corporation should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Corporation exhausts its remedies pursuant to
Section 10(c), below, and the Executive thereafter is required to make a payment
of any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly paid
by the Corporation to or for the benefit of the Executive.
(c) The Executive shall notify the Corporation in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Corporation of a Gross-Up Payment. Such notification shall be
given as soon as practicable but no later than fifteen (15) business days after
the Executive is informed in writing of such claim and shall apprise the
Corporation of the nature of such claim and the date on which such claim is
requested to be paid. The Executive shall not pay such claim prior to the
expiration of the thirty (30)-day period following the date on which Executive
gives such notice to the Corporation (or such shorter period ending on the date
that any payment of
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taxes with respect to such claim is due). If the Corporation notifies the
Executive in writing prior to the expiration of such period that it desires to
contest such claim, the Executive shall:
(i) Give the Corporation any information reasonably
requested by the Corporation relating to such claim,
(ii) Take such action in connection with contesting such
claim as the Corporation shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the Corporation,
(iii) Cooperate with the Corporation in good faith in order
effectively to contest such claim, and
(iv) Permit the Corporation to participate in any
proceedings relating to such claim;
provided, however, that the Corporation shall bear and pay directly all costs
and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limiting the foregoing
provisions of this Section 10(c), the Corporation shall control all proceedings
taken in connection with such contest and, at its sole option, may pursue or
forego any and all administrative appeals, proceedings, hearings and conferences
with the taxing authority in respect of such claim and may, at its sole option,
either direct the Executive to pay the tax claimed and xxx for a refund or
contest the claim in any permissible manner; and the Executive agrees to
prosecute such contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate courts, as the
Corporation shall determine; provided, however, that if the Corporation directs
the Executive to pay such claim and xxx for a refund, the Corporation shall (to
the extent permitted by law) advance the amount of such payment to the Executive
on an interest-free basis and shall indemnify and hold the Executive harmless,
on an after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further provided
that any extension of the statute of limitations relating to payment of taxes
for the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Corporation's control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced
by the Corporation pursuant to Section 10(c), above, the Executive becomes
entitled to receive any refund with respect to such claim, the Executive shall
(subject to the Corporation's complying with the requirements of said Section
10(c)) promptly pay to the Corporation the
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amount of such refund (together with any interest paid or credited thereon,
after taxes applicable thereto). If, after the receipt by the Executive of an
amount advanced by the Corporation pursuant to said Section 10(c), a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Corporation does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of thirty (30) days after such determination, then such advance shall be
forgiven and shall not be required to be repaid; and the amount of such advance
shall offset, to the extent thereof, the amount of the Gross-Up Payment required
to be paid.
11. No Set-Off or Mitigation. The Corporation's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Corporation may have against
the Executive or others. In no event shall the Executive be obligated to seek
other employment or take any other action by way of mitigation of the amounts
payable to the Executive under any of the provisions of this Agreement and such
amounts shall not be reduced whether or not the Executive obtains other
employment; provided, however, if Executive is employed during any portion of
the period covered by Section 9(b)(iii) above and receives benefits in
connection with such employment, the Corporation shall not be required to
provide any benefits pursuant to Section 9(b)(iii) to the extent duplicative
benefits are provided by such new employer.
12. Payment of Certain Expenses. The prevailing party in any dispute
under this Agreement shall be entitled, to the extent permitted by law, to
reimbursement from the other party for all of the prevailing party's costs
(including but not limited to the arbitrator's compensation), expenses, and
attorneys' fees.
13. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the heirs and representatives of the Executive and the successors
and assigns of the Corporation. The Corporation shall require any successor
(whether direct or indirect, by purchase, merger, reorganization, consolidation,
acquisition of property or stock, liquidation, or otherwise) to all or a
substantial portion of its assets, by agreement in form and substance reasonably
satisfactory to the Executive, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent that the Corporation would
be required to perform this Agreement if no such succession had taken place.
Regardless of whether such an agreement is executed, this Agreement shall be
binding upon any successor of the Corporation in accordance with the operation
of law, and such successor shall be deemed the "Corporation" for purposes of
this Agreement.
14. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand, reputable overnight courier or mailed within the continental
United States by first class certified mail, return receipt requested, postage
prepaid, addressed as follows:
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(a) If to the Corporation, to:
Communications & Power Industries, Inc.
000 Xxxxxx Xxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Attn: Chief Executive Officer
(b) If to the Executive, to:
Xxxx X. Xxxxxxx
c/o Communications & Power Industries, Inc.
000 Xxxxxx Xxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Such addresses may be changed by written notice sent to the other party at the
last recorded address of that party.
15. Tax Withholding. The Corporation shall provide for the withholding
of any taxes required to be withheld by federal, state, provincial or local law
with respect to any payment in cash, shares of stock and/or other property made
by or on behalf of the Corporation to or for the benefit of the Executive under
this Agreement or otherwise. The Corporation may, at its option: (a) withhold
such taxes from any cash payments owing from the Corporation to the Executive,
(b) require the Executive to pay to the Corporation in cash such amount as may
be required to satisfy such withholding obligations and/or (c) make other
satisfactory arrangements with the Executive to satisfy such withholding
obligations.
16. Arbitration.
(a) General. Except as to (a) actions described in Section 7(e),
any controversy, dispute, or claim between the parties to this Agreement,
including any claim arising out of, in connection with, or in relation to the
formation, interpretation, performance or breach of this Agreement shall be
settled exclusively by arbitration, before a single arbitrator, in accordance
with this Section 16 and the then most applicable rules of the American
Arbitration Association. Judgment upon any award rendered by the arbitrator may
be entered by any state or federal court having jurisdiction thereof. Such
arbitration shall be administered by the American Arbitration Association.
Arbitration shall be the exclusive remedy for determining any such dispute,
regardless of its nature. Notwithstanding the foregoing, either party may in an
appropriate matter apply to a court for provisional relief, including a
temporary restraining order or a preliminary injunction, on the ground that the
award to which the applicant may be entitled in arbitration may be rendered
ineffectual without provisional relief. Unless mutually agreed by the parties
otherwise, any arbitration shall take place in the City of Palo Alto,
California.
(b) Selection of Arbitrator. In the event the parties are unable
to agree upon an arbitrator, the parties shall select a single arbitrator from a
list of nine arbitrators (which shall be retired judges or corporate or
litigation attorneys experienced in executive employment agreements) provided by
the office of the American Arbitration Association having jurisdiction over Palo
Alto, California. If the parties are unable to agree upon an arbitrator from the
list so drawn, then the parties shall each strike names alternately from the
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list, with the first to strike being determined by lot. After each party has
used four strikes, the remaining name on the list shall be the arbitrator. If
such person is unable to serve for any reason, the parties shall repeat this
process until an arbitrator is selected.
(c) Applicability of Arbitration; Remedial Authority. This
agreement to resolve any disputes by binding arbitration shall extend to claims
against any parent, subsidiary or affiliate of each party, and, when acting
within such capacity, any officer, director, shareholder, employee or agent of
each party, or of any of the above, and shall apply as well to claims arising
out of state and federal statutes and local ordinances as well as to claims
arising under the common law. In the event of a dispute subject to this
paragraph the parties shall be entitled to reasonable discovery subject to the
discretion of the arbitrator. The remedial authority of the arbitrator (which
shall include the right to grant injunctive or other equitable relief) shall be
the same as, but no greater than, would be the remedial power of a court having
jurisdiction over the parties and their dispute. The arbitrator shall, upon an
appropriate motion, dismiss any claim without an evidentiary hearing if the
party bringing the motion establishes that he or it would be entitled to summary
judgment if the matter had been pursued in court litigation. In the event of a
conflict between the applicable rules of the American Arbitration Association
and these procedures, the provisions of these procedures shall govern.
(d) Fees and Costs. Any filing or administrative fees shall be
borne initially by the party requesting arbitration. The Corporation shall be
responsible for the costs and fees of the arbitration, unless the Executive
wishes to contribute (up to 50%) of the costs and fees of the arbitration.
(e) Award Final and Binding. The arbitrator shall render an award
and written opinion, and the award shall be final and binding upon the parties.
If any of the provisions of this paragraph, or of this Agreement, are determined
to be unlawful or otherwise unenforceable, in whole or in part, such
determination shall not affect the validity of the remainder of this Agreement,
and this Agreement shall be reformed to the extent necessary to carry out its
provisions to the greatest extent possible and to insure that the resolution of
all conflicts between the parties, including those arising out of statutory
claims, shall be resolved by neutral, binding arbitration. If a court should
find that the arbitration provisions of this Agreement are not absolutely
binding, then the parties intend any arbitration decision and award to be fully
admissible in evidence in any subsequent action, given great weight by any
finder of fact, and treated as determinative to the maximum extent permitted by
law.
17. No Assignment. Except as otherwise expressly provided herein, this
Agreement is not assignable by any party and no payment to be made hereunder
shall be subject to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance or other charge.
18. Execution in Counterparts. This Agreement may be executed by the
parties hereto in two (2) or more counterparts, each of which shall be deemed to
be an original, but all such counterparts shall constitute one and the same
instrument, and all signatures need not appear on any one counterpart.
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19. Governing Law. This Agreement shall be construed and interpreted in
accordance with and governed by the laws of the State of California, other than
the conflict of laws provisions of such laws.
20. Severability. If any provision of this Agreement shall be adjudged
by any court of competent jurisdiction to be invalid or unenforceable for any
reason, such judgment shall not affect, impair or invalidate the remainder of
this Agreement. Furthermore, if the scope of any restriction or requirement
contained in this Agreement is too broad to permit enforcement of such
restriction or requirement to its full extent, then such restriction or
requirement shall be enforced to the maximum extent permitted by law, and the
Executive consents and agrees that any court of competent jurisdiction may so
modify such scope in any proceeding brought to enforce such restriction or
requirement.
21. Prior Understandings. This Agreement embodies the entire
understanding of the parties hereto and supersedes all other oral or written
agreements or understandings between them regarding the subject matter hereof.
No change, alteration or modification hereof may be made except in a writing,
signed by each of the parties hereto. The headings in this Agreement are for
convenience and reference only and shall not be construed as part of this
Agreement or to limit or otherwise affect the meaning hereof.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the day and year first above written.
CORPORATION
Communications & Power Industries, Inc.
By: __________________________________
Title: __________________________________
EXECUTIVE
_________________________________________
Xxxx X. Xxxxxxx
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