COMPENSATION AGREEMENT
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THIS COMPENSATION AGREEMENT (this "Agreement"), made and entered into
as of _____________, 1996, is by and between ILC Technology, Inc., a California
corporation with its principal offices in Sunnyvale, California (the "Company"),
and _______________, an individual residing in _______________, California
("Employee").
R E C I T A L S:
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A. Employee serves as an officer or employee of the Company; and
B. The Company desires to retain the services of Employee, whose experience,
knowledge and abilities with respect to the business and affairs of the Company
and its subsidiaries are extremely valuable to the Company; and
C. The Board of Directors of the Company (the "Board") and the Compensation
Committee (the "Committee") of the Board recognize that the continuing
possibility of an acquisition proposal, including unsolicited tender offer or
other takeover bid, for the Company may be unsettling to Employee and other
senior executives of the Company, and that uncertainty as to the Employee's
future position with the Company and future compensation could affect Employee's
objectivity in assessing and advising the Board with respect to the proposal and
could detract from Employee's continuing performance and willingness to remain
with the Company; and
D. The Board and the Committee believe it is in the best interests of the
Company and its shareholders to adopt a compensation arrangement that, should
the Company receives any acquisition proposals from third parties, will enable
Employee, without being influenced by the uncertainties of Employees' own
situation, to continue the faithful performance of Employee's duties to the
Company, to assess and advise the Board objectively whether such proposals would
be in the best interests of the Company and its shareholders and to take such
other action regarding such proposals as the Board might determine to be
appropriate.
E. The Board and the Committee also wish to demonstrate to Employee and other
senior employees of the Company that the Company is concerned with the welfare
of its employees and intends to see that loyal employees are treated fairly in
respect of their past service on behalf of the Company and their continuing
value to the Company.
F. In view of the foregoing and in further consideration of Employee's continued
employment with the Company, the Board and the Committee have determined that it
is in the best interests of the Company and its shareholders for the Company to
agree to pay Employee the compensation set forth below in the event Employee
should leave the employ of the Company under certain circumstances, as set forth
below;
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428044.2
NOW, THEREFORE, in consideration of the mutual agreements and promises of
the parties, the parties hereby agree as follows:
1. Term. This Agreement shall terminate upon the earliest of (a) three years
from the date hereof if a Change in Control of the Company (as defined herein)
has not occurred within such three year period, (b) the termination of
Employee's employment with the Company (i) prior to a Change in Control of the
Company or (ii) after a Change in Control of the Company, if such termination is
based upon Employee's death, Employee's Disability (as defined herein), Cause
(as defined herein) or Employee's Retirement (as defined herein) or is the
result of Employee's voluntary resignation for Good Reason (as defined herein)
or (c) two years after the date of a Change in Control of the Company.
2. Change in Control. No compensation shall be payable under this Agreement
unless and until (a) there shall have been a Change in Control of the Company
while the Employee is still an employee of the Company, and (b) Employee's
employment shall thereafter have terminated (i) involuntarily for reasons other
than death, Disability, Retirement or Cause, or (ii) voluntarily for Good
Reason. For purposes of this Agreement, a "Change in Control of the Company"
shall mean any of the following:
(a) A consolidation or merger of the Company in which the Company is not
the continuing or surviving company, other than a transaction (1) the
sole purpose of which is to change the state of incorporation of the
Company, (2) in which the proportionate beneficial ownership (as
determined immediately prior to such consolidation or merger) of the
combined voting power of the outstanding shares of the Company and
combined voting power of the outstanding shares (or other voting
interests) of the surviving company remains substantially unchanged or
(3) in which the Company is effectively the continuing or surviving
corporation but changes its name to that of the other company (or to
another name);
(b) A consolidation merger or other acquisition of the Company in which
the Company becomes a subsidiary of another person and resulting in
less than 51% of the outstanding voting shares (or other voting
interests) of such other person being held, immediately after such
merger or consolidation, by the holders of voting shares of the
Company immediately prior to such consolidation, merger or
acquisition;
(c) Any "person" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"))
becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of 50% or more of the combined
voting power of the Company's then outstanding shares, unless, within
30 days after notice to the Company of such event, the Board (as
constituted immediately prior to such event) adopts a resolution that
for purposes of this Agreement no Change in Control of the Company
shall be deemed to have occurred (which resolution may be revoked by
the Board at any time, in which case a Change in Control of the
Company will be deemed to have occurred as of the date such revocation
becomes effective);
(d) During any period of two consecutive years, members who at the
beginning of such period constitute the Board cease for any reason to
constitute a majority thereof, unless the election, or nomination for
election by the Company's shareholders, of each director is approved
by the vote of at least two-thirds of the directors then still in
office who were directors at the beginning of such period; or
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(e) An acquisition of all or substantially all of the assets of the
Company or the acquisition of the Company pursuant to a tender or
exchange offer resulting in less than 51% of the outstanding voting
shares of the surviving corporation being held, immediately after such
acquisition or offer, by the holders of the voting shares of the
Company outstanding immediately prior to such acquisition or offer.
3. Termination After Change in Control. If, within two years after a Change
in Control of the Company, Employee's employment with the Company is terminated
(i) by the Company for reasons other than Employee's death, Employee's
Disability or Cause, or (ii) by Employee upon Retirement or for Good Reason,
then Employee will be entitled to the benefits provided in Section 4 hereof.
(a) "Disability," as used in this Agreement, means a physical or mental
illness or injury which, as determined an independent physician,
continuously prevents Employee from performing Employee's duties with
the Company for a period of six months prior to termination.
(b) "Cause," as used in this Agreement, means (i) gross negligence, (ii)
material dishonesty, (iii) violation of any reasonable rule or
regulation of the Board that results in significant damage to the
Company, and with respect to which Employee fails to correct within a
reasonable time, (iv) Employee's continued failure to perform
Employee's duties with the Company (other than such failure resulting
from incapacity due to physical or mental illness), after Employee
shall have been given written demand for such performance setting
forth the specific respects in which Employee is deemed not to have
satisfactorily performed such duties, (v) Employee's willfully
engaging in gross misconduct that is materially and demonstrably
injurious to the Company, (vi) Employee's committing a felony or an
act of fraud against the Company or its affiliates, or (vii)
Employee's breaching materially the terms of Employee's employee
confidentiality and proprietary information agreement with the
Company. No act, or failure to act, by Employee shall be considered
"willful" if done, or omitted to be done, by Employee in Employee's
good faith and reasonable belief that such act or omission was in the
best interest of the Company or required by applicable law. Cause
shall be determined only by the affirmative vote of a majority of the
authorized number of the Board of Directors at a meeting for which
notice has been given that it is proposed to consider the issue or at
a meeting occurring not less than seven days after a meeting at which
one or more directors indicates an intention to present a motion to
such effect. Notice of such meeting shall be provided promptly to
Employee, and Employee, together with Employee's counsel, shall be
given an opportunity to be heard before the Board. No termination of
Employee for Cause shall be effective until the Board shall have
delivered to Employee a Notice of Termination.
(c) "Notice of Termination," as used in this Agreement, means a written
notice that shall indicate those specific termination provisions in
this Agreement relied upon, shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of
Employee's employment under the provisions so indicated and shall
state that, in the good faith opinion of the Board, the Company has
Cause (as defined above) to terminate Employee. For
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purposes of this Agreement, no purported termination by the Company
shall be effective without Employee's being furnished a Notice of
Termination.
(d) "Date of Termination," as used in this Agreement, means the effective
date of Employee's termination of employment.
(e) "Retirement," as used in this Agreement, means the voluntary
termination of Employee's employment with the Company in accordance
with the Company's retirement policy as of the date of this Agreement,
including (at Employee's election, set forth in writing) early
retirement, generally applicable to its salaried employees or in
accordance with any retirement arrangement established with Employee's
written consent with respect to Employee. (f) "Good Reason," as used
in this Agreement, means the occurrence of one of the following events
within two years after a Change in Control of the Company and without
Employee's express written consent:
(i) The assignment by the Company to Employee of any duties that
materially diminish the position held by Employee or the duties
assigned to Employee immediately prior to the Change in Control
of the Company, or a significant reduction in Employee's
responsibilities, titles or positions as in effect immediately
prior to a Change in Control or the Company;
(ii) A reduction by the Company in Employee's base salary as in effect
immediately prior to the Change in Control of the Company;
provided that any reduction in base salary that occurs in
connection with an across-the-board reduction in the level of
base salaries payable to the Company's executive officers or
senior management (or the executive officers or senior management
of a successor to the Company) as part of a general cost-cutting
program shall not constitute Good Reason unless it reduces
Employee's annual compensation by more than 10%;
(iii)Failure to include Employee in the executive incentive and
benefit programs in which other executives of the Company at the
same level participate; or a material reduction in the benefits
made available to Employee by the Company under any employee
benefit plan or any life, health, accident, disability or similar
plan, or any material reduction in vacation benefits, as compared
to such benefits made available to Employee immediately prior to
the Change in Control of the Company, unless the benefits made
available to Employee after such Change in Control of the Company
are no less favorable to Employee than the benefits then made
available by the Company to the other employees of the Company
whose positions and seniority with the Company are similar to the
position and seniority of Employee.
(iv) The requirement by the Company that Employee be based anywhere
other than within a 50-mile radius of Employee's location
immediately prior to the Change in Control of the Company, except
for required travel on the Company's business to an extent
substantially consistent with Employee's duties;
(v) The failure of any successor of the Company to assume the
Company's obligations under this Agreement, as provided in
Section 5.
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Any occurrence described in (i), (ii), (iii) or (iv) of this Section 3(f) that
is caused by the termination of Employee's employment by Employer voluntarily or
by the Company for cause or as a result of Employee's death or disability shall
not constitute Good Reason.
4. Certain Benefits upon Termination of Employment.
(a) If Employee's employment with the Company terminates pursuant to the
provisions of Section 3(a), then Employee shall be entitled to the
benefits set forth below:
(i) The Company shall pay to Employee the amount of Employee's full
base salary (which, for the purposes of this Agreement, shall not
include any bonuses or other forms of compensation) through the
Date of Termination at the rate in effect at the time Notice of
Termination is given plus credit for any vacation earned but not
taken and the amount, if any, of any bonus or incentive
compensation for a past fiscal year that has been awarded but not
yet paid to Employee;
(ii) The Company shall pay to Employee in a lump sum, in cash, on the
fifth business day following the Date of Termination (the
"Termination Payment") an amount equal to % of the amount of
Employee's annual full base salary at Employee's salary rate at
the time Notice of Termination is given;
(iii)Employee's participation in, and terminating distributions and
vested rights under, any applicable retirement plan, profit
sharing plan and stock incentive plan of the Company shall be
governed by the terms of those respective plans;
(iv) Any benefits of indemnification provided by the Bylaws of the
Company or under any agreement with Employee shall be continued
for the benefit of Employee for such period of time after
termination as may be necessary until any action for which
indemnification would otherwise be available is barred by the
applicable statute of limitation, and, to the extent required
under the Bylaws or any such agreement, any directors' and
officers' liability insurance that may be maintained by the
Company and outstanding on the date of termination shall be
continued for the benefit of Employee for such reasonable period
of time as may be determined by the Board to afford protection to
Employee; and
(v) The Company shall pay all reasonable legal fees and expenses that
Employee may incur as a result of the Company's contesting the
validity, enforceability or Employee's interpretation of, or
determinations under, this Agreement, provided such dispute is
finally determined substantially in Employee's favor.
(b) Notwithstanding any provision in this Agreement to the contrary, in
the event that any payment or benefit received or to be received by
Employee in connection with a Change in Control of the Company or the
termination of Employee's employment, whether payable pursuant to the
terms of this Agreement or any other plan, arrangement or agreement
with the Company (collectively, the "Total Payments"), would
constitute a "parachute payment" as defined in Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code"), the Total
Payments shall be reduced to the largest amount that would result in
no portion of such benefits being subject to the excise tax imposed by
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Section 4999 of the Code. The determination of any reduction in the
benefits available under this Section pursuant to the foregoing shall
be made by the Company in good faith and any such reduction shall
reduce first the cash payable under Section 4 of this Agreement. For
purposes of this limitation: (i) no portion of the Total Payments, the
receipt or enjoyment of which Employee shall have effectively waived
in writing prior to the date of payment of the Termination Payment,
shall be taken into account; (ii) no portion of the Total Payments
shall be taken into account which, in the opinion of tax counsel
selected by the Company and reasonably acceptable to Employee, does
not constitute a "parachute payment" within the meaning of Section
280G(b)(2) of the Code; (iii) the Termination Payment shall be reduced
only to the extent necessary so that the Total Payments (excluding
payments referred to in clause (i) or (ii)) in their entirety
constitute reasonable compensation for services actually rendered
within the meaning of Section 280G(b)(4) of the Code, in the opinion
of the tax counsel referred to in clause (ii); and (iv) the value of
any non-cash benefit or any deferred payment or benefit included in
the Total Payments shall be determined by the Company's independent
auditors in accordance with the principles of Sections 280(G)(d)(3)
and (4) of the Code and the regulations thereunder.
(c) Employee's benefits hereunder shall be considered payment in
consideration of Employee's past service and continued service from
the date hereof, and Employee's entitlement thereto shall not be (i)
governed by any duty of Employee to mitigate damages by seeking
further employment or (ii) offset by any compensation that Employee
may received from future employment.
(d) In the event that Employee's employment with the Company is terminated
in a manner so that the benefits under this Section 4 become payable
to Employee, the arrangements provided for by this Section 4, by any
stock option or other agreement between the Company and Employee in
effect at the time and by any other applicable plan of the Company
shall constitute the entire obligation of the Company to Employee and
performance thereof shall constitute full settlement of any claim that
Employee might otherwise assert against the Company on account of such
termination.
5. Successor to the Company.
(a) The Company shall require any successor or assignee (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company,
absolutely and unconditionally to assume (including an assumption by
operation of law) all the Company's obligations under this Agreement
in the same manner and to the same extent that the Company would be
required to perform if no such succession or assignment had taken
place. Upon such assumption, such successor or assignee shall be bound
by the provisions of this Agreement as if it were the Company and,
thereupon, the term "Company", as used herein, shall be deemed to
include such successor or assignee. Any failure of such successor or
assignee to assume such obligations prior to the effectiveness of any
such succession or assignment shall be deemed a material breach of
this Agreement by the Company and shall entitle Employee to terminate
Employee's employment voluntarily for Good Reason, as provided in
Section 3(f).
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(b) If during the term of this Agreement Employee is employed by a
subsidiary of the Company (including any company a majority of the
voting securities of which is then owned, directly or indirectly, by
the Company), the term "Company" as used in Sections 3 and 4 will
include such employer and the Company shall pay or cause such employer
to pay any amounts owed to Employee pursuant to Section 4.
(c) The rights of Employee under this Agreement are personal to Employee
and may not be assigned by Employee. However, such rights shall inure
to the benefit of, and this Agreement shall be enforceable by,
Employee's personal and legal representatives, executors,
administrators, successors, heirs, distributees, devisees and
legatees. If Employee should die while any amounts are still payable
hereunder, all such amounts, unless otherwise provided herein, shall
be paid in accordance with the terms of this Agreement to Employee's
devisee, legatee, or other designee, or, if there is no such designee,
to Employee's estate.
6. Approval by Company. This Agreement has been approved by the Board in
accordance with the authority granted and restrictions imposed by action of
the Board. It shall be executed by the President or other duly qualified
officer. Upon request, the Company shall furnish Employee with a certified
copy of the portion of the minutes of the meeting of the Board approving
this Agreement and authorizing such execution.
7. Modification. Any alteration or modification of any of the provisions of
this Agreement or cancellation or replacement of this Agreement shall not
be valid unless made in writing and signed by the parties hereto.
8. No Employment Rights. This Agreement does not extend to Employee any right
to continued employment with the Company or any subsidiary of the Company,
nor does it limit the Company's right to terminate Employee's employment at
any time. This Agreement does not create a trust of any kind or any
fiduciary relationship.
9. No Assignment of Rights. Employee's rights under this Agreement shall be
nontransferable except by will or the laws of descent and distribution.
10. Unfunded Agreement. This Agreement is not intended to meet the
qualification requirements of Section 401 of the Code. Neither the Company
nor the Board shall be required to segregate any assets with respect to
amounts payable under this Agreement. Neither the Company nor the Board
shall be deemed to be a trustee of any amounts to be paid under this
Agreement. All benefits under this Agreement shall be payable solely from
the general assets of the Company or any appropriate subsidiary, and no
obligation created by this Agreement shall be deemed to be secured by any
pledge or any encumbrance on any property of the Company.
11. Severability. Any provision in this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective only to the extent of such prohibition or unenforceability,
without invalidating or affecting the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction.
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12. Construction. This Agreement shall be governed by the laws of the State of
California applicable to contracts made and to be performed in California.
13. Confidentiality. Employee shall retain in confidence any and all
confidential information known to Employee concerning the Company, its
business any subsidiary of the Company or the business of any such
subsidiary, so long as such information is not otherwise publicly
disclosed. This Section 13 shall not supersede any other nondisclosure or
confidentiality agreement between Employee and the Company or any such
subsidiary.
14. Sole Agreement. This Agreement represents the entire agreement between
Employee and the Company and (except for Section 13) supersedes any and all
prior concurrent (a) agreements, amendments, memoranda and understandings
between the Company and Employee with respect to the subject matter hereof
and (b) any representations by or on behalf of the Company or Employee with
respect to the subject matter hereof.
15. Waiver. Waiver by either party of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent
breach.
16. Counterparts. This Agreement may be executed in a number of identical
counterparts, each of which shall be construed as an original for all
purposes, but all of which taken together shall constitute one and the same
agreement.
17. Notices. Any notice required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been duly given when
delivered, deposited with a commercial courier, fees prepaid, or mailed by
first class United States mail, postage prepaid, as follows:
If to the Company: ILC Technology, Inc.
000 Xxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
If to Employee:
Either party may change its address for receipt of notices by written notice to
the other party, which shall be effective upon receipt.
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IN WITNESS WHEREOF, the parties hereto have executed this Compensation
Agreement the day and year first above written.
EMPLOYEE ILC TECHNOLOGY, INC.
By:
[Employee Signature]
Title:
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