Exhibit 10.1
CHANGE OF CONTROL SEVERANCE
PLAN
As amended and restated
effective December 10, 2008
Introduction
The Board of Directors of
Coherent, Inc., a Delaware corporation
(“Company”), has evaluated the economic and social
impact of an acquisition or other change of control on its key
employees. The Board recognizes that the potential of such an
acquisition or change of control can be a distraction to its key
employees and can cause them to consider alternative employment
opportunities. The Board has determined that it is in the
best interests of the Company and its stockholders to assure that
the Company will have the continued dedication and objectivity of
its key employees. The Board believes that the adoption of
this amended and restated Plan will enhance the ability of the
Company’s key employees’ to assist the Board in
objectively evaluating potential acquisitions or other changes of
control.
Furthermore, the Board believes a
change of control severance plan of this kind will aid the Company
in attracting and retaining the highly qualified, high performing
individuals who are essential to its success. The
plan’s assurance of fair treatment will ensure that key
employees will be able to maintain productivity, objectivity and
focus during the period of significant uncertainty that is inherent
in an acquisition or other change of control.
Accordingly, the following plan has
been developed and is hereby adopted.
ARTICLE I
ESTABLISHMENT OF PLAN
1.1
Establishment of Plan . As of the Effective Date, the
Company hereby establishes an amended and restated severance plan
to be known as the “Change of Control Severance Plan”
(the “Plan”), as set forth in this document. The
purposes of the Plan are as set forth in the
Introduction.
1.2
Applicability of Plan . The benefits provided by this
Plan shall be available to certain key Employees of the Company
who, at or after the Effective Date, meet the eligibility
requirements of Article III.
1.3
Contractual Right to Benefits . This Plan establishes
and vests in each Participant a contractual right to the benefits
to which he or she is entitled hereunder, enforceable by the
Participant against his or her Employer or the Company, or
both.
ARTICLE II
DEFINITIONS AND CONSTRUCTION
2.1
Definitions
. Whenever
used in the Plan, the following terms shall have the meanings set
forth below and, when the meaning is intended, the initial letter
of the term is capitalized.
(a)
“ Acquiror ” means the Person, successor, or
assignee, if any, that consummates a Business Combination with the
Company or that acquires fifty percent (50%) or more of the
combined voting power of the outstanding shares of capital stock of
the Company entitled to vote generally in the election of
directors.
(b)
“ Base Pay ” means all base straight time gross
earnings, exclusive of incentive compensation, incentive payments,
bonuses, commissions or other compensation, for the calendar year
coinciding with or immediately preceding the year in which the
Severance Payment becomes payable.
(c)
“ Beneficial Owner ” shall have the meaning
ascribed to such term in Rule l3d-3 of the General
Rules and Regulations under the Securities Exchange Act of
1934, as amended (the “Exchange Act”).
(d)
“ Bonus Pay ” means, with respect to a
Participant, the total target payments to the Participant under the
Company’s cash bonus, commission and incentive programs at
100% of plan for the Company fiscal year in which the Change of
Control occurs, or, if greater, for the Company fiscal year in
which the Participant’s employment terminates, and Company
contributions allocated to the Participant’s account under
the Company’s 401(k) plan (other than contributions
attributable to the Participant’s salary deferral election),
for the calendar year coinciding with or immediately preceding the
year in which the Severance Payment becomes payable.
(e)
“ Change of Control ” means a (i) change in
ownership of the Company, (ii) change in effective control of
the Company, or (iii) change in the ownership of a substantial
portion of the Company’s assets (with an asset value change
in ownership exceeding more than 50% of the total gross fair market
value replacing the 40% default rule), all as defined under Code
Section 409A and the final Treasury Regulations
thereunder.
(f)
“ Code ” means the Internal Revenue Code of
1986, as amended.
(g)
“ Company ” means Coherent, Inc., a
Delaware corporation, and any successor as provided in
Article VII hereof.
(h)
“ Effective Date ” means December 10,
2008.
(i)
“ Employee ” means a common law employee of an
Employer (other than an employee who is a party to an individual
agreement with the Company which provides severance or
severance-type benefits), whose customary employment as of a Change
of Control is 20 hours or more per week. For purposes of this
Plan, an Employee shall be considered to continue to be
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employed in the case of sick
leave, military leave, or any other leave of absence approved by
the Company.
(j)
“ Employer ” means the Company or a subsidiary
of the Company which has adopted the Plan pursuant to
Article VI hereof.
(k)
“ ERISA ” means the Employee Retirement Income
Security Act of 1974, as amended.
(l)
“ Just Cause ” means the termination of
employment of an Employee shall have taken place as a result of
(i) an act or acts of dishonesty undertaken by such Employee
and intended to result in substantial gain or personal enrichment
of the Employee at the expense of his or her Employer,
(ii) persistent failure or inability to perform the duties and
obligations of such Employee’s employment which are
demonstrably willful and deliberate on the Employee’s part
and which are not remedied in a reasonable period of time after
receipt of written notice from the Company, or
(iii) Employee’s conviction of, or plea of nolo
contendere to, a felony.
(m)
“ Participant ” means an Employee who meets the
eligibility requirements of Section III.
(n)
“ Person ” shall have the meaning ascribed to
such term in Section 3(a)(9) of the Exchange Act and as used
in Sections 13(d) and 14(d) thereof, including a
“group” as defined in Section 13(d) of the
Exchange Act but excluding the Company and any subsidiary and any
employee benefit plan sponsored or maintained by the Company or any
subsidiary (including any trustee of such plan acting as
Trustee).
(o)
“ Plan ” means the Coherent, Inc. Change of
Control Severance Plan, as amended and restated as of the Effective
Date.
(p)
“ Review Committee ” means a committee
established by the Board of Directors of the Company, the primary
functions of which shall be to determine whether Participants have
incurred a significant reduction in duties and responsibilities,
and to establish, where necessary, the date of a
Participant’s termination of employment for purposes of the
Plan. The Review Committee shall be composed solely of
members of the Company’s Board of Directors serving as such
immediately prior to a Change of Control. The Review
Committee shall establish such procedures as it deems appropriate
to facilitate a fair and objective review process to determine
whether a Participant has incurred a significant reduction in his
or her duties and responsibilities.
(q)
“ Severance Payment ” means the payment of
severance compensation as provided in Article IV
hereof.
2.2
Applicable Law . To the extent not preempted by the
laws of the United States, the laws of the State of California
shall be the controlling law in all matters relating to the
Plan.
2.3
Severability . If a provision of this Plan shall be
held illegal or invalid, the illegality or invalidity shall not
affect the remaining parts of the Plan and the Plan shall be
construed and enforced as if the illegal or invalid provision had
not been included.
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ARTICLE III
ELIGIBILITY
3.1
Participation
in Plan . As of the Effective
Date, only Employees who are Non-Officer Vice-Presidents, Officer
Vice-Presidents or the Chief Executive Officer shall be
Participants in the Plan. Following the Effective Date, new
Officers of the Company shall automatically become Participants in
the Plan; provided, however, that new Non-Officer Vice-Presidents
shall only become Participants in the Plan if the Board, in its
sole discretion, affirmatively determines that they are eligible
Participants. A Participant shall cease to be a Participant
in the Plan when he or she ceases to be an Employee of an Employer,
unless such Participant is then entitled to payment of a Severance
Payment as provided in the Plan. A Participant entitled to
payment of a Severance Payment shall remain a Participant in the
Plan until the full amount of the Severance Payment has been paid
to the Participant.
ARTICLE IV
SEVERANCE BENEFITS
4.1
Right to
Severance Payment . A Participant shall
be entitled to receive from the Company a Severance Payment in the
amount provided in Section 4.3 if there has been a Change of
Control of the Company and if, within two (2) years of the
Change of Control, the Participant’s employment by an
Employer shall terminate for any reason specified in
Section 4.2, whether the termination is voluntary or
involuntary. A Participant shall not be entitled to a
Severance Payment if termination occurs for reasons not specified
in Section 4.2, including (but not limited to) death,
voluntary retirement at or after age 65, total and permanent
disability, or for Just Cause.
4.2
Good Reasons
for Termination . Following a Change of
Control, and subject to a Participant’s entering into and not
revoking a Release of Claims in favor of the Company or any
successor company in substantially the form attached hereto as
Exhibit A (the “Release”), a Participant shall be
entitled to a Severance Payment and to the benefits described in
Section 4.5 if his or her employment by an Employer is
terminated, voluntarily or involuntarily, following any one or more
of the following events:
(a)
The Employer reduces the Participant’s Base Pay as in effect
immediately prior to the Change of Control.
(b)
Without the Participant’s express written consent, the
Employer requires the Participant to change the location of his or
her job or office, so that he or she will be based at a location
more than twenty-five (25) miles from the location of his job or
office immediately prior to the Change of Control.
(c)
The Employer decreases its cost of Employer-provided benefits,
under plans, arrangements, policies and procedures, taken as a
whole, compared to the Employer-provided cost of
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such benefits immediately
prior to the Change of Control, or the Employer increases the cost
of such benefits to the Participant compared to the Participant
cost immediately prior to the Change of Control; provided, however,
that if such decrease or increase results from the Employer’s
good faith exercise of business judgment or in response to changes
in federal or state law, such decrease or increase shall not be a
Good Reason for termination.
(d)
The Participant incurs a significant reduction in duties and
responsibilities as determined by the Review Committee.
(e)
A successor company fails or refuses to assume the Company’s
obligations under this Plan, as required by
Article VII.
(f)
The Company or any successor company breaches any of the provisions
of this Plan.
(g)
The Employer terminates the employment of a Participant other than
for Just Cause.
Provided, however, that such events shall not
constitute grounds for a Good Reason termination unless the
Participant has provided notice to the Company of the existence of
the one or more of the above conditions within 90 days of its
initial existence and the Company has been provided at least 30
days to remedy the condition.
4.3
Amount of
Severance Payment . Each Participant
entitled to a Severance Payment under this Plan shall receive from
the Company a cash payment as follows:
(a)
Chief Executive Officer . The Severance Payment for
the Company’s Chief Executive Officer shall equal the product
of 2.99 times the sum of the Chief Executive Officer’s Base
Pay and Bonus Pay.
(b)
Officer Vice-Presidents . The Severance Payment for
the Company’s Officer Vice-Presidents shall equal the product
of two times the sum of the Officer Vice-President’s Base Pay
and Bonus Pay.
(c)
Non-Officer Vice-Presidents . The Severance Payment
for the Company’s Non-Officer Vice-Presidents shall equal the
product of one times the sum of the Non-Officer
Vice-President’s Base Pay and Bonus Pay.
(d)
Non-U.S. Participants . In the case of a Participant
who performs all or substantially all of his or her employment
services outside of the United States, the Company may, in its
discretion, reduce the Severance Payment otherwise calculated under
Section 4.3(a), (b) or (c) by the amount of severance-type
benefits to which such Participant is then entitled under the laws
of the country or countries in which such services are
performed.
4.4
Time of
Severance Payment . Subject to
section 4.5(e) hereof, the Severance Payment to which a
Participant is entitled shall be paid by the Company to the
Participant, in cash and in full, not later than the later of
(i) ten calendar days after the termination date or,
(ii) two business days
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following the date of
effectiveness of the Release (the “Payment
Date”). If such a Participant should die before all
amounts payable to him or her have been paid, such unpaid amounts
shall be paid to the Participant’s designated beneficiary, if
living, otherwise to the personal representative of the
Participant’s estate.
4.5
Other
Severance Provisions . In the event a
Severance Payment obligation is triggered under this Plan for a
Participant, such Participant shall also receive the following
benefits:
(a)
Equity Compensation Acceleration . One hundred percent
of Participant’s outstanding unvested equity compensation
awards shall automatically accelerate their vesting so as to become
fully vested and, with respect to stock options and stock
appreciation rights, exercisable.
(b)
Health Insurance . In addition, for a period set forth
below, the Company shall be obligated to continue to make available
to the Participant and to pay directly or reimburse premiums for
Participant and his or her covered dependents within thirty (30)
days of the premium due date for all group health, dental, vision
and life insurance plans existing on the date of the
Participant’s termination at the same level and with the same
employee premium cost as provided to such Participant immediately
prior to the Participant’s termination (the
“Company-Paid Coverage”); provided, however that such
payments or reimbursements shall be delayed six months and one day
from the date of termination (and then paid in full in arrears) to
the extent required to avoid the imposition of additional tax under
Internal Revenue Code Section 409A (“Code
Section 409A”). If a Participant’s coverage
under such plans coverage included the Participant’s
dependents immediately prior to the Participant’s
termination, such dependents shall also be covered at Company
expense. Company-Paid Coverage shall continue for three years
for the Company’s Chief Executive Officer, for two years for
the Company’s Officer Vice-Presidents and for one year for
the Company’s non-Officer Vice Presidents. For purposes
of the continuation health coverage required under
Section 4980B of the Code (“COBRA”), the date of
the “qualifying event” giving rise to a
Participant’s COBRA election period (and that of his
“qualifying beneficiaries”) shall be the last date on
which the Participant receives Company-Paid Coverage under this
Plan.
(c)
Outplacement Assistance . On termination, the
Participant shall be entitled to reasonable, pre-approved
Company-paid outplacement assistance, including job counseling and
referral services.
(d)
Golden Parachute Excise Taxes .
(i)
Chief Executive Officer — Reduction if Parachute Payments
Are Less than 3.59 x Base Amount . In the event that the
benefits provided for in this Plan or otherwise payable to the
Company’s Chief Executive Officer (a) constitute
“parachute payments” within the meaning of Code
Section 280G, (b) would be subject to the excise tax
imposed by Section 4999 of the Code (the “Excise
Tax”), and (c) the aggregate value of such parachute
payments, as determined in accordance with Section 280G of the
Code and the Treasury Regulations thereunder is less than the
product obtained by multiplying 3.59 by Chief Executive
Officer’s “base amount” within the meaning of
Code Section 280G(b)(3), then the benefits under this Plan
shall be reduced to the extent necessary (but only to that extent)
so that no portion of such benefits will be subject to the Excise
Tax.
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(ii)
Chief Executive Officer — Full Excise Tax Gross-Up if
Parachute Payments Equal to or Greater than 3.59 x Base Amount
. In the event that the benefits provided for in this Plan or
otherwise payable to the Company’s Chief Executive Officer
(a) constitute “parachute payments” within the
meaning of Code Section 280G, (b) would be subject to the
Excise Tax, and (c) the aggregate value of such parachute
payments, as determined in accordance with Section 280G of the
Code and the Treasury Regulations thereunder is equal to or greater
than the product obtained by multiplying 3.59 by the Chief
Executive Officer’s “base amount” within the
meaning of Code Section 280G(b)(3), then the Chief Executive
Officer shall receive (i) a payment from the Company
sufficient to pay such Excise Tax, plus (ii) an additional
payment from the Company sufficient to pay the Excise Tax and
federal and state income and employment taxes arising from the
payments made by the Company to its Chief Executive Officer
pursuant to this sentence. The Executive shall receive such
payments no later
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