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EXHIBIT 10.3
COHU, INC.
CHANGE IN CONTROL AGREEMENT
This Change in Control Agreement (the "Agreement")
is made and entered into by and between
("Executive") and Cohu, Inc.
(the "Company"), effective as of
, 2008 (the "Effective
Date").
RECITALS
1. It is expected that the Company from time
to time will consider the possibility of an acquisition by another
company or other change in control. The Board of Directors of the
Company (the "Board") recognizes that such consideration can be a
distraction to Executive and can cause Executive 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 Executive, notwithstanding the possibility, threat
or occurrence of a Change in Control (as defined herein) of the
Company.
2. The Board believes that it is in the best
interests of the Company and its stockholders to provide Executive
with an incentive to continue his or her employment and to motivate
Executive to maximize the value of the Company upon a Change in
Control for the benefit of its stockholders.
3. The Board believes that it is imperative to
provide Executive with certain severance benefits upon
Executive’s termination of employment following a Change in
Control. These benefits will provide Executive with enhanced
financial security and incentive and encouragement to remain with
the Company notwithstanding the possibility of a Change in
Control.
4. Certain capitalized terms used in the
Agreement are defined in Section 6 below.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual
covenants contained herein, the parties hereto agree as
follows:
1. Term of Agreement . This Agreement
will terminate upon the date that all of the obligations of the
parties hereto with respect to this Agreement have been
satisfied.
2. At-Will Employment . The Company
and Executive acknowledge that Executive’s employment is and
will continue to be at-will, as defined under applicable law. If
Executive’s employment terminates for any reason, including
(without limitation) any termination prior to a Change in Control,
Executive will not be entitled to any payments, benefits, damages,
awards or compensation other than as provided by this
Agreement.
3.
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Severance Benefits .
(a) Involuntary Termination Following a
Change in Control . If within twenty-four (24) months following
a Change in Control (i) Executive terminates his or her
employment with the Company (or any parent, subsidiary or successor
of the Company) for Good Reason (as defined herein) or
(ii) the Company (or any parent, subsidiary or successor of
the Company) terminates Executive’s employment without Cause
(as defined herein), and Executive signs and does not revoke the
release of claims required by Section 4, Executive will
receive the following severance benefits from the Company:
(i) Severance Payment . Executive will
receive a lump sum cash payment (less applicable withholding taxes)
in an amount equal to the sum of (A) an amount equal to
twenty-four (24) months (the "Severance Period") of the
Executive’s base salary rate (as in effect immediately prior
to (1) the Change in Control, or (2) Executive’s
termination, whichever is greater) and (B) an amount equal to two
times the Executive’s target annual incentive established for
the year prior to the year of Executive’s termination of
employment.
(ii) Bonus Payment . Executive will
also receive a lump sum cash severance payment (less applicable
withholding taxes) in an amount equal to the current year’s
target annual incentive pro-rated to the date of termination, with
such pro-rated amount to be calculated by multiplying the current
year’s target incentive level by a fraction with a numerator
equal to the number of days between the start of the current fiscal
year and the date of termination and a denominator equal to 365.
The actual annual incentive for the year of termination shall be
forfeited and Executive shall not be entitled to any payment
thereof, other than the severance payment described in this
Section 3(a)(ii).
(iii) Equity Awards . One hundred
percent (100%) of Executive’s then outstanding and unvested
awards relating to the Company’s common stock (whether stock
options, stock appreciation rights, shares of restricted stock,
restricted stock units, or otherwise (collectively, the "Equity
Awards")) as of the date of Executive’s termination of
employment will become vested and will otherwise remain subject to
the terms and conditions of the applicable Equity Award agreement.
In addition, the post-termination exercise period for any
outstanding stock option and/or stock appreciation right shall be
extended so as to terminate on the first to occur of
(1) twelve (12) months from the date of Executive’s
termination, or (2) the stock option and/or stock appreciation
rights original term expiration (e.g., the awards original ten
(10) year expiration date). Notwithstanding the foregoing, if
(A) in a Change of Control the acquirer refuses to assume
Executive’s Equity Awards and/or refuses to substitute such
Equity Awards with equivalent awards reflecting acquirer’s
stock, or (B) in a Change of Control where the acquirer is not
a publicly traded corporation as defined in Section 162(m)(2)
of the Code (regardless of whether or not such acquirer is willing
to assume the Equity Awards), then one hundred percent (100%) of
Executive’s Equity Awards outstanding as of the Change of
Control will become vested immediately prior to the effective date
of the Change of Control.
(iv) Benefits . The Company agrees to
reimburse Executive for the same level of health coverage and
benefits as in effect for Executive on the day immediately
preceding the date of termination; provided, however, that
(1) Executive constitutes a qualified beneficiary, as defined
in Section 4980(B)(g)(1) of the Internal Revenue Code of 1986,
as amended (the "Code"); and (2) Executive 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 will continue to
reimburse Executive for continuation coverage through the Severance
Period. Executive will thereafter be responsible for the payment of
COBRA premiums (including, without limitation, all administrative
expenses) for the remaining COBRA period. Such reimbursements shall
be made within thirty (30) days of the premium payment.
(b) Timing of Severance Payments .
Unless otherwise required pursuant to Section 10 of this
Agreement, the Company will pay the severance payments to which
Executive is entitled pursuant to Section 3(a) in a lump sum as
soon as practicable following the date of termination.
(c) Voluntary Resignation; Termination For
Cause . If Executive’s employment with the Company
terminates (i) voluntarily by Executive (other than for Good
Reason) or (ii) for Cause by the Company, then Executive will
not be entitled to receive severance or other benefits except for
those (if any) as may then be established under the Company’s
then existing severance and benefits plans and practices or
pursuant to other written agreements with the Company, including,
without limitation, any Equity Award agreement.
(d) Disability; Death . If the Company
terminates Executive’s employment as a result of
Executive’s Disability, or Executive’s employment
terminates due to his or her death, then Executive will not be
entitled to receive severance or other benefits except for those
(if any) as may then be established under the Company’s then
existing written severance and benefits plans and practices or
pursuant to other written agreements with the Company, including,
without limitation, any Equity Award agreement.
(e) Termination Apart from Change in
Control . In the event Executive’s employment is
terminated for any reason, either prior to the occurrence of a
Change in Control or after the twenty-four (24) month period
following a Change in Control, then Executive will be entitled to
receive severance and any other benefits only as may then be
established under the Company’s existing written severance
and benefits plans and practices or pursuant to other written
agreements with the Company, including, without limitation, any
Equity Award agreement.
(f) Exclusive Remedy . In the event of
a termination of Executive’s employment within twenty-four
(24) months following a Change in Control, the provisions of
this Section 3 are intended to be and are exclusive and in
lieu of any other rights or remedies to which Executive or the
Company may otherwise be entitled, whether at law, tort or
contract, in equity, or under this Agreement. Executive will be
entitled to no benefits, compensation or other payments or rights
upon termination of employment following a Change in Control other
than those benefits expressly set forth in this Section 3,
except as may be provided in any Equity Award agreement.
4.
2
Conditions to Receipt of Severance .
(a) Release of Claims Agreement . The
receipt of any severance or other benefits pursuant to
Section 3 will be subject to Executive signing and not
revoking a release of claims agreement in a form reasonably
acceptable to the Company, and such release becoming effective
within forty-five (45) days of Executive’s termination.
No severance or other benefits will be paid or provided until the
release of claims agreement becomes effective, and any severance
amounts or benefits otherwise payable between the date of
Executive’s termination and the date such release becomes
effective shall be paid on the effective date of such release.
(b) Non-solicitation . The receipt of
any severance or other benefits pursuant to Section 3 will be
subject to Executive agreeing that during the Severance Period,
Executive will not solicit any employee of the Company for
employment other than at the Company.
(c) Non-disparagement . The receipt of
any severance or other benefits pursuant to Section 3 will be
subject to Executive agreeing that during the Severance Period,
Executive will not knowingly and materially disparage, criticize,
or otherwise make any derogatory statements regarding the Company.
During the Severance Period, the Company will not knowingly and
materially disparage, criticize, or otherwise make any derogatory
statements regarding Executive. Notwithstanding the foregoing,
nothing contained in this Agreement will be deemed to restrict
Executive, the Company or any of the Company’s current or
former officers and/or directors from (1) providing information to
any governmental or regulatory agency (or in any way limit the
content of any such information) to the extent they are requested
or required to provide such information pursuant to applicable law
or regulation or (2) enforcing his or its rights pursuant to
this Agreement.
(d) Other Requirements .
Executive’s receipt of any payments or benefits under Section
3 will be subject to Executive continuing to comply with the terms
of any form of confidential information agreement and the
provisions of this Section 4.
(e) No Duty to Mitigate . Executive
will not be required to mitigate the amount of any payment
contemplated by this Agreement, nor will any earnings that
Executive may receive from any other source reduce any such
payment.
5. Limitation on Payments . In the
event that the severance and other benefits provided for in this
Agreement or otherwise payable to Executive (i) constitute
"parachute payments" within the meaning of Section 280G of the
Code and (ii) but for this Section 5, would be subject to
the excise tax imposed by Section 4999 of the Code, then
Executive’s severance benefits under Section 4 will be
either:
(a) delivered in full, or
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(b)
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delivered as to such lesser extent which would result in no
portion of such severance benefits being subject to excise tax
under Section 4999 of the Code,
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whichever of the foregoing amounts, taking into
account the applicable federal, state and local income taxes and
the excise tax imposed by Section 4999, results in the receipt
by Executive on an after-tax basis, of the greatest amount of
severance benefits, notwithstanding that all or some portion of
such severance benefits may be taxable under Section 4999 of
the Code. Unless the Company and Executive otherwise agree in
writing, any determination required under this Section 5 will
be made in writing by the Company’s independent public
accountan
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