AEHR TEST SYSTEMS
AMEMDED AND RESTATED CHANGE OF CONTROL SEVERANCE AGREEMENT
This Amended and Restated Change of Control Severance Agreement (the
"Agreement") is made and entered into by and between Xxxx X. Xxxxxxx
("Employee") and Aehr Test Systems, a California corporation (the
"Company"), effective as of March 5, 2013 (the "Effective Date"). The
Agreement replaces in its entirety the Amended and Restated Change of
Control Severance Agreement previously entered into between Employee and
the Company, which was dated January 3, 2012.
R E C I T A L S
A. It is expected that the Company from time to time will
consider the possibility of a Change of Control. The Board of Directors
of the Company (the "Board") recognizes that such consideration can be a
distraction to the Employee and can cause the Employee to consider
alternative employment opportunities.
B. The Board believes that it is in the best interests of the
Company and its shareholders to provide the Employee with an incentive
to continue his employment and to maximize the value of the Company upon
a Change of Control for the benefit of its shareholders.
C. In order to provide the Employee with enhanced financial
security and sufficient encouragement to remain with the Company
notwithstanding the possibility of a Change of Control, the Board
believes that it is imperative to provide the Employee with certain
severance benefits upon the Employee's termination of employment
following a Change of Control.
AGREEMENT
In consideration of the mutual covenants herein contained and the
continued employment of Employee by the Company, the parties agree as
follows:
1. Definition of Terms. The following terms referred to in
this Agreement shall have the following meanings:
(a) Cause. "Cause" shall mean (i) any act of personal
dishonesty taken by the Employee in connection with his responsibilities
as an employee which is intended to result in substantial personal
enrichment of the Employee, (ii) Employee's conviction of a felony
which the Board reasonably believes has had or will have a material
detrimental effect on the Company's reputation or business, (iii) a
willful act by the Employee which constitutes misconduct and is
injurious to the Company, and/or (iv) continued willful violations by
the Employee of the Employee's obligations to the Company after there
has been delivered to the Employee a written demand for performance from
the Company which describes the basis for the Company's belief that the
Employee has not substantially performed his duties.
(b) Change of Control. "Change of Control" shall mean
the occurrence of any of the following events:
(i) the approval by shareholders of the Company of a
merger or consolidation of the Company with any other corporation, other
than a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more than
fifty percent (50%) of the total voting power represented by the voting
securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation;
(ii) the approval by the shareholders of the Company
of a plan of complete liquidation of the Company or an agreement for the
sale or disposition by the Company of all or substantially all of the
Company's assets;
(iii) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended) becoming the "beneficial owner" (as defined in Rule 13d-3 under
said Act), directly or indirectly, of securities of the Company
representing fifty percent (50%) or more of the total voting power
represented by the Company's then outstanding voting securities; or
(iv) a change in the composition of the Board, as a
result of which fewer than a majority of the directors are Incumbent
Directors. "Incumbent Directors" shall mean directors who either (A)
are directors of the Company as of the date hereof, or (B) are elected,
or nominated for election, to the Board with the affirmative votes of at
least a majority of those directors whose election or nomination was not
in connection with any transactions described in subsections (i), (ii),
or (iii) or in connection with an actual or threatened proxy contest
relating to the election of directors of the Company.
(c) Involuntary Termination. "Involuntary Termination"
shall mean (i) without the Employee's express written consent, a
significant reduction of the Employee's duties, position or
responsibilities relative to the Employee's duties, position or
responsibilities in effect immediately prior to such reduction, or the
removal of the Employee from such position, duties and responsibilities,
unless the Employee is provided with comparable duties, position and
responsibilities; provided, however, that a reduction in duties,
position or responsibilities solely by virtue of the Company being
acquired and made part of a larger entity (as, for example, when the
Chief Financial Officer of the Company remains as such following a
Change of Control but is not made the Chief Financial Officer of the
acquiring corporation) shall not constitute an "Involuntary
Termination;" (ii) without the Employee's express written consent, a
substantial reduction, without good business reasons, of the facilities
and perquisites (including office space and location) available to the
Employee immediately prior to such reduction; (iii) a reduction by the
Company of the Employee's base salary as in effect immediately prior to
such reduction; (iv) a material reduction by the Company in the kind or
level of employee benefits to which the Employee is entitled immediately
prior to such reduction with the result that the Employee's overall
benefits package is significantly reduced; (v) without the Employee's
express written consent, the relocation of the
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Employee to a facility or a location more than fifty (50) miles from his
current location; (vi) any purported termination of the Employee by the
Company which is not effected for Cause or for which the grounds relied
upon are not valid; or (vii) the failure of the Company to obtain the
assumption of this Agreement by any successors contemplated in Section 6
below.
(d) Termination Date. "Termination Date" shall mean the
effective date of any notice of termination delivered by one party to
the other hereunder.
2. Term of Agreement. This Agreement shall terminate upon the
date that all obligations of the parties hereto under this Agreement
have been satisfied or, if earlier, on the date, prior to a Change of
Control, Employee is no longer employed by the Company.
3. Term Employment. The Company and the Employee acknowledge
that the Employee's employment is for a minimum term of three (3) years,
with Employee's employment continuing on an at-will basis thereafter.
If the Employee's employment terminates for any reason, the Employee
shall not be entitled to any payments, benefits, damages, awards or
compensation other than as provided by this Agreement, or as may
otherwise be established under the Company's then existing employee
benefit plans or policies at the time of termination.
4. Severance Benefits.
(a) Involuntary Termination Apart from a Change of
Control. If the Employee's employment with the Company terminates as a
result of an Involuntary Termination during Employee's three (3) year
term of employment, other than as a result of an Involuntary Termination
within twelve (12) months following a Change of Control, then Employee
shall be entitled to the following severance benefits:
(i) the balance of Employee's base salary for
Employee's three (3) year term of employment, payable in a lump sum
within thirty (30) days of Employee's Involuntary Termination; and
(ii) any stock options granted by the Company to
Employee prior to Employee's Involuntary Termination shall become fully
vested and exercisable as of the date of termination to the extent such
stock options are outstanding and unexercisable at the time of
Employee's termination and all stock subject to a right of repurchase by
the Company (or its successor) that was purchased prior to the
termination shall have such right of repurchase lapse with respect to
all of the shares.
(iii) Employee may elect to forgoe the severance
benefits set forth in Section 4(a)(i) above in favor of receiving the
severance or other benefits (if any) as may then be established under
the Company's then existing severance and benefits plans and policies at
the time of Employee's termination.
(b) Involuntary Termination Following A Change of
Control. If the Employee's employment with the Company terminates as a
result of an Involuntary Termination at any time
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within twelve (12) months after a Change of Control, then Employee shall
be entitled to the following severance benefits:
(i) the greater of (a) Employee's remaining term of
employment base salary or (b) eighteen (18) months of base salary,
payable in a lump sum within thirty (30) days of Employee's Involuntary
Termination;
(ii) all stock options granted by the Company to the
Employee prior to the Change of Control shall become fully vested and
exercisable as of the date of the termination to the extent such stock
options are outstanding and unexercisable at the time of such
termination and all stock subject to a right of repurchase by the
Company (or its successor) that was purchased prior to the Change of
Control shall have such right of repurchase lapse with respect to all of
the shares; and
(iii) the same level of health (i.e., medical, vision
and dental) coverage and benefits as in effect for the Employee on the
day immediately preceding the day of the Employee's termination of
employment; provided, however, that (i) the Employee constitutes a
qualified beneficiary, as defined in Section 4980B(g)(1) of the Internal
Revenue Code of 1986, as amended; and (ii) Employee elects continuation
coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended ("COBRA"), within the time period prescribed
pursuant to COBRA. The Company shall continue to provide Employee with
health coverage until the earlier of (i) the date Employee is no longer
eligible to receive continuation coverage pursuant to COBRA, or (ii)
twelve (12) months from the termination date.
(c) Accrued Wages and Vacation; Expenses. Without regard
to the reason for, or the timing of, Employee's termination of
employment: (i) the Company shall pay the Employee any unpaid base
salary due for periods prior to the Termination Date; (ii) the Company
shall pay the Employee all of the Employee's accrued and unused vacation
through the Termination Date; and (iii) following submission of proper
expense reports by the Employee, the Company shall reimburse the
Employee for all expenses reasonably and necessarily incurred by the
Employee in connection with the business of the Company prior to the
Termination Date. These payments shall be made promptly upon
termination and within the period of time mandated by law.
5. Limitation on Payments. In the event that the severance and
other benefits provided for in this Agreement or otherwise payable to
the Employee (i) constitute "parachute payments" within the meaning of
Section 280G of the Code, and (ii) would be subject to the excise tax
imposed by Section 4999 of the Code (the "Excise Tax"), then Employee's
benefits under this Agreement shall be either
(a) delivered in full, or
(b) delivered as to such lesser extent which would result
in no portion of such benefits being subject to the Excise Tax,
whichever of the foregoing amounts, taking into account the
applicable federal, state and local income taxes and the Excise Tax,
results in the receipt by Employee on an after-tax basis, of
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the greatest amount of benefits, notwithstanding that all or some
portion of such benefits may be taxable under Section 4999 of the Code.
Unless the Company and the Employee otherwise agree in writing,
any determination required under this Section shall be made in writing
by the Company's independent public accountants (the "Accountants"),
whose determination shall be conclusive and binding upon the Employee
and the Company for all purposes. For purposes of making the
calculations required by this Section, the Accountants may make
reasonable assumptions and approximations concerning applicable taxes
and may rely on reasonable, good faith interpretations concerning the
application of Section 280G and 4999 of the Code. The Company and the
Employee shall furnish to the Accountants such information and documents
as the Accountants may reasonably request in order to make a
determination under this Section. The Company shall bear all costs the
Accountants may reasonably incur in connection with any calculations
contemplated by this Section.
6. Successors.
(a) Company's Successors. Any successor to the Company
(whether direct or indirect and whether by purchase, lease, merger,
consolidation, liquidation or otherwise) to all or substantially all of
the Company's business and/or assets shall assume the Company's
obligations under this Agreement and agree expressly to perform the
Company's obligations under this Agreement in the same manner and to the
same extent as the Company would be required to perform such obligations
in the absence of a succession. For all purposes under this Agreement,
the term "Company" shall include any successor to the Company's business
and/or assets which executes and delivers the assumption agreement
described in this subsection (a) or which becomes bound by the terms of
this Agreement by operation of law.
(b) Employee's Successors. Without the written consent
of the Company, Employee shall not assign or transfer this Agreement or
any right or obligation under this Agreement to any other person or
entity. Notwithstanding the foregoing, the terms of this Agreement and
all rights of Employee hereunder shall inure to the benefit of, and be
enforceable by, Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
7. Notices.
(a) General. Notices and all other communications
contemplated by this Agreement shall be in writing and shall be deemed
to have been duly given when personally delivered or when mailed by U.S.
registered or certified mail, return receipt requested and postage
prepaid. In the case of the Employee, mailed notices shall be addressed
to him at the home address which he most recently communicated to the
Company in writing. In the case of the Company, mailed notices shall be
addressed to its corporate headquarters, and all notices shall be
directed to the attention of its Secretary.
(b) Notice of Termination. Any termination by the
Company for Cause or by the Employee as a result of a voluntary
resignation or an Involuntary Termination shall be
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communicated by a notice of termination to the other party hereto given
in accordance with this Section. Such notice shall indicate the
specific termination provision in this Agreement relied upon, shall set
forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination under the provision so indicated, and
shall specify the Termination Date (which shall be not more than 30 days
after the giving of such notice). The failure by the Employee to
include in the notice any fact or circumstance which contributes to a
showing of Involuntary Termination shall not waive any right of the
Employee hereunder or preclude the Employee from asserting such fact or
circumstance in enforcing his rights hereunder.
8. Arbitration.
(a) Any dispute or controversy arising out of, relating
to, or in connection with this Agreement, or the interpretation,
validity, construction, performance, breach, or termination thereof,
shall be settled by binding arbitration to be held in Santa Xxxxx
County, California, in accordance with the National Rules for the
Resolution of Employment Disputes then in effect of the American
Arbitration Association (the "Rules"). The arbitrator may grant
injunctions or other relief in such dispute or controversy. The
decision of the arbitrator shall be final, conclusive and binding on the
parties to the arbitration. Judgment may be entered on the arbitrator's
decision in any court having jurisdiction.
(b) The arbitrator(s) shall apply California law to the
merits of any dispute or claim, without reference to conflicts of law
rules. The arbitration proceedings shall be governed by federal
arbitration law and by the Rules, without reference to state arbitration
law. Employee hereby consents to the personal jurisdiction of the state
and federal courts located in California for any action or proceeding
arising from or relating to this Agreement or relating to any
arbitration in which the parties are participants.
(c) EMPLOYEE HAS READ AND UNDERSTANDS THIS SECTION, WHICH
DISCUSSES ARBITRATION. EMPLOYEE UNDERSTANDS THAT SUBMITTING ANY CLAIMS
ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT, OR
THE INTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH OR
TERMINATION THEREOF TO BINDING ARBITRATION, CONSTITUTES A WAIVER OF
EMPLOYEE'S RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL
DISPUTES RELATING TO ALL ASPECTS OF THE EMPLOYER/EMPLOYEE RELATIONSHIP,
INCLUDING BUT NOT LIMITED TO, THE FOLLOWING CLAIMS:
(i) ANY AND ALL CLAIMS FOR WRONGFUL DISCHARGE OF
EMPLOYMENT; BREACH OF CONTRACT, BOTH EXPRESS AND IMPLIED; BREACH OF THE
COVENANT OF GOOD FAITH AND FAIR DEALING, BOTH EXPRESS AND IMPLIED;
NEGLIGENT OR INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS; NEGLIGENT OR
INTENTIONAL MISREPRESENTATION; NEGLIGENT OR INTENTIONAL INTERFERENCE
WITH CONTRACT OR PROSPECTIVE ECONOMIC ADVANTAGE; AND DEFAMATION.
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(ii) ANY AND ALL CLAIMS FOR VIOLATION OF ANY FEDERAL,
STATE OR MUNICIPAL STATUTE, INCLUDING, BUT NOT LIMITED TO, TITLE VII OF
THE CIVIL RIGHTS ACT OF 1964, THE CIVIL RIGHTS ACT OF 1991, THE AGE
DISCRIMINATION IN EMPLOYMENT ACT OF 1967, THE AMERICANS WITH
DISABILITIES ACT OF 1990, THE FAIR LABOR STANDARDS ACT, THE CALIFORNIA
FAIR EMPLOYMENT AND HOUSING ACT, AND LABOR CODE SECTION 201, et seq;
(iii) ANY AND ALL CLAIMS ARISING OUT OF ANY OTHER LAWS
AND REGULATIONS RELATING TO EMPLOYMENT OR EMPLOYMENT DISCRIMINATION.
9. Miscellaneous Provisions.
(a) No Duty to Mitigate. The Employee shall not be
required to mitigate the amount of any payment contemplated by this
Agreement, nor shall any such payment be reduced by any earnings that
the Employee may receive from any other source.
(b) Waiver. No provision of this Agreement may be
modified, waived or discharged unless the modification, waiver or
discharge is agreed to in writing and signed by the Employee and by an
authorized officer of the Company (other than the Employee). No waiver
by either party of any breach of, or of compliance with, any condition
or provision of this Agreement by the other party shall be considered a
waiver of any other condition or provision or of the same condition or
provision at another time.
(c) Integration. This Agreement and any outstanding
stock option agreements referenced herein represent the entire agreement
and understanding between the parties as to the subject matter herein
and supersede all prior or contemporaneous agreements, whether written
or oral, with respect to this Agreement and any stock option agreement.
(d) Choice of Law. The validity, interpretation,
construction and performance of this Agreement shall be governed by the
internal substantive laws, but not the conflicts of law rules, of the
State of California.
(e) Severability. The invalidity or unenforceability of
any provision or provisions of this Agreement shall not affect the
validity or enforceability of any other provision hereof, which shall
remain in full force and effect.
(f) Employment Taxes. All payments made pursuant to this
Agreement shall be subject to withholding of applicable income and
employment taxes.
(g) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of
which together will constitute one and the same instrument.
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IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of the Company by its duly authorized officer, as of the day
and year first above written.
COMPANY: AEHR TEST SYSTEMS
By: /S/ XXXX XXXXXXXX
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Name: Xxxx Xxxxxxxx
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Title:President and Chief Executive Officer
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EMPLOYEE: /S/ XXXX X. XXXXXXX
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Signature
XXXX X. XXXXXXX
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Printed Name
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