AEHR TEST SYSTEMS
CHANGE OF CONTROL SEVERANCE AGREEMENT
This Change of Control Severance Agreement (the "Agreement")
is made and entered into effective as of January 3, 2012 (the
"Effective Date"), by and between ▇▇▇▇ ▇▇▇▇▇▇▇▇ (the "Employee")
and Aehr Test Systems, a California corporation (the "Company").
Certain capitalized terms used in this Agreement are defined in
Section 1 below.
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 (as defined
herein). 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, 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) 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
(iii) the sale or disposition by the Company of
all or substantially all of the Company's assets.
(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; (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) without the Employee's express
written consent, a reduction by the Company of the Employee's base
salary or Target Bonus as in effect immediately prior to such
reduction; (iv) without the Employee's express written consent, 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 lacks basic and customary benefits; (v) without the
Employee's express written consent, the relocation of the 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. At-Will Employment. The Company and the Employee
acknowledge that the Employee's employment is and shall continue to
be at-will, as defined under applicable law. 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.
-2-
4. Benefits.
(a) 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 within twelve (12) months
after a Change of Control and the Employee signs and does not
revoke a release of claims with the Company (in a form reasonably
acceptable to the Company), Employee shall be entitled to the
following severance benefits:
(i) Eighteen (18) months of Employee's base
salary as in effect as of the date of such termination, less
applicable withholding, payable in a lump sum within thirty (30)
days of the Involuntary Termination;
(ii) Bonus for final period. Employee shall
receive a pro rated bonus for the performance period in which the
Termination occurs (in addition to the amount in section 4.a.i.)
The amount of the bonus shall be equal to the Target Bonus for the
period in which the Termination occured multiplied by a fraction in
which the numerator is the number of days from and including the
first day of the performance period until and including the date of
the Termination and the denominator is the number of days in teh
performance period, less applicable withholding, payable in a lump
sum within thirty (30) days of the Involuntary Termination;
(iii) 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; The Stock Options shall
remain exercisable until the earlier of (a) the 18th month
anniversary of the date of Termination or (b) the expiration of
each option in accordance with its original terms provided.
(iv) 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.
(b) Termination Apart from a Change of Control. If
the Employee's employment with the Company terminates as a result
of an Involuntary Termination other than as a result of an
Involuntary Termination within the twelve (12) months following a
Change of Control, then the Employee Employee shall be entitled to
the following severance benefits:
-3-
(i) Twelve (12) months of Employee's base
salary as in effect as of the date of such termination, less
applicable withholding, payable in a lump sum within thirty (30)
days of the Involuntary Termination;
(ii) Bonus for final period. Employee shall
receive a pro rated bonus for the performance period in which the
Termination occurs (in addition to the amount in section 4.b.i.)
The amount of the bonus shall be equal to the Target Bonus for the
period in which the Termination occured multiplied by a fraction in
which the numerator is the number of days from and including the
first day of the performance period until and including the date of
the Termination and the denominator is the number of days in teh
performance period, less applicable withholding, payable in a lump
sum within thirty (30) days of the Involuntary Termination;
(iii) any stock options granted by the Company to
the Employee prior to the Termination that would have vested within
12 months of the Termination date 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; The Stock Options shall remain exercisable
until the earlier of (a) the 12th month anniversary of the date of
Termination or (b) the expiration of each option in accordance with
its original terms provided.
(iv) 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
-4-
(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
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
-5-
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 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).
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 ▇▇▇▇▇ 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 understands that nothing in this Section
modifies Employee's at-will employment status. Either Employee or
the Company can terminate the employment relationship at any time,
with or without Cause.
(d) 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:
-6-
(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.
(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 the subject
matter of 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.
-7-
(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.
-8-
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/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------
Title: Executive Chairman
EMPLOYEE: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------
Signature
▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------
Printed Name
-9-