EXHIBIT 10-2: EXECUTIVE SEVERANCE AGREEMENT
Published on April 19, 2007
EXHIBIT
10.2
EMCORE
CORPORATION
EXECUTIVE
SEVERANCE POLICY
1. Purpose
of the Policy
The
Emcore Corporation Executive Severance Policy (the “Policy”) is effective May 1,
2007 and incorporates and amends the terms of the Executive Severance Policy
adopted by the Compensation Committee of the Board of Directors of Emcore
Corporation (the “Committee”) on November 29, 2004. The Policy is intended to
provide certain executives of the Company who are in a position to contribute
materially to the success of the Company with Severance Benefits if they are
separated from employment with the Company as set forth herein.
2. Definitions
As
used
in this Policy, the following terms shall have the respective meanings set
forth
below:
a. "Base
Salary" means the higher of (i) the Participant's highest annual rate of base
salary during the twelve-month period immediately prior to the Executive’s Date
of Termination or (ii) the average of the Participant's annual base salary
earned during the past three (3) completed fiscal years of the Company
immediately preceding the Participant's Date of Termination (annualized in
the
event the Participant was not employed by the Company (or its affiliates) for
the whole of any such fiscal year).
b.
"Board
of Directors" means, the board of directors of the Company.
c.
"Cause" means termination of employment resulting from a good faith
determination by the Board of Directors that:
(i)
the
Participant has willfully failed or repeatedly refused in a material respect
to
follow policies or reasonable directives established by the Board of Directors
with the result that such refusal has caused material damage to the Company
or
willfully failed or repeatedly refused to perform the material duties or
obligations of his or her office (other than any such failure resulting from
the
person's inability due to physical or mental illness), which the Participant
has
failed to correct within a reasonable period following with notice to such
Participant; or
(ii)
there has been an act by the Participant involving wrongful misconduct which
has
a demonstrably adverse impact or material damage to the Company, or which
constitutes theft, fraud or a misappropriation of the assets of the Company;
or
(iii)
the
Participant has engaged in an unauthorized disclosure of confidential
information, directly or indirectly, to persons outside the Company that
materially adversely affects the Company; or
(iv)
the
Participant while employed by the Company has performed services for another
company or person which competes with the Company without the prior written
approval of the Board of Directors.
d.
"Code"
means the Internal Revenue Code of 1986, as amended.
e.
"Committee" has the meaning set forth in Section 1.
f.
"Company" means EMCORE Corporation or any successor thereto.
g. "Date
of
Termination" means (i) the effective date on which the Participant's employment
by the Company terminates as specified in a prior written notice by the Company
or the Participant, as the case may be, to the other, or (ii) if the
Participant's employment by the Company terminates by reason of death, the
date
of death of the Participant.
h.
"Disability" means that at the time the Participant's employment is terminated,
he or she has been unable to perform the duties of his/her position for a period
of six consecutive months as a result of the Participant's inability due to
physical or mental illness.
i. “Disposition”
means the sale, transfer, spin-off or other disposition to another party or
a
resulting new entity (the “Purchaser”) of the stock or assets of any subsidiary,
business unit or division of the Company. For example, the sale of the Company’s
electronic materials division in Somerset, New Jersey constitutes a
Disposition.
j.
"Good
Reason" means, without the consent of the Participant:
(i)
a
material reduction in base salary, incentive compensation potential or benefits
(other than reductions applicable to employees generally); or
(ii)
a
material diminution in job responsibilities; or
(iii)
a
requirement that the Participant relocate, except for office relocations that
would not increase the Participant's one-way commute by more than 50 miles;
or
(iv)
following a Disposition, a change in the Participant’s job requirements, such as
a request from the Chief Executive Officer or the Board of Directors that the
Participant travel more frequently, such that the Participant reasonably
believes that he cannot meet the new requirements.
k. "Participant"
means each of the senior executives of the Company who are selected by the
Committee for coverage by this Policy and who have been employed by the Company
for a minimum of twelve months. As of the adoption date of the Policy,
Participants shall include the:
i. |
Chief
Executive Officer
|
ii. |
Chief
Financial Officer
|
iii. |
Chief
Operating Officer
|
iv. |
Chief
Technical Officer
|
v. |
Chief
Legal Officer
|
vi. |
Vice
President and General Manager
|
vii. |
Vice
President, Finance
|
viii. |
Vice
President, Human Resources
|
ix. |
Vice
President & Deputy Counsel
|
l.
"Qualifying Separation" means a termination of employment from the Company
(and
its affiliates) but specifically excludes, without limitation, termination
of
employment due to Cause, death, Disability, or termination by the Participant
(other than a termination for Good Reason); provided, however, that such
termination of employment also constitutes a "Separation from Service" within
the meaning of Section 409A of the Code.
m. "Separation
Agreement" means an effective agreement prepared by the Company, executed by
the
Participant and returned to the Company within the time period requested by
the
Company. It shall contain (a) typical provisions concerning termination of
employment, (b) a statement that Severance Benefits under this Policy are
conditioned upon the Company's receipt of such agreement, and (c) a release
(in
a form to be determined by the Company) by the Participant of the Company from
any liability or obligation (excluding any indemnification to which the
Participant may be entitled pursuant to the Company’s Amended and Restated
Certificate of Incorporation, By-Laws and any coverage under directors and
officers, professional, fiduciary or errors or omissions policies that benefit
the Participant) to the Participant. To be effective, the Separation Agreement
shall not have been revoked by the Participant within the time permitted under
applicable state and federal laws.
n.
"Severance Benefits" mean the benefits set forth in Sections 5, 6, 7, 8, 9
and
10 of this Policy.
o.
"Severance Pay" means the salary continuation payments under Section 5 of this
Policy.
p. “409A
Participant” means a Participant who satisfies the “specified employee”
definition described under Code Section 409A and who is either:
(i)
eligible for Severance Pay due to the Participant’s termination for Good Reason;
(ii)
eligible to receive Severance Pay that exceeds two times the lesser of (1)
the
Participant’s compensation for the calendar year preceding the calendar year of
the Participant’s Date of Termination or (2) the maximum amount of compensation
that may be taken into account under a qualified plan pursuant to Code Section
401(a)(17); or
(iii)
eligible to receive Severance Pay payments that extend past the December 31st
of
the second calendar year following the calendar year of the Participant’s Date
of Termination.
3. Participation
in the Policy
All
Participants who have experienced a Qualifying Separation from the Company
shall
be eligible to receive Severance Benefits under this Policy provided the
requirements of Section 4 are met.
4. Condition
to Receipt of Benefits
A
Participant must execute an effective Separation Agreement to receive Severance
Benefits. Severance Benefits shall cease upon the Participant violating any
provision of his or her Separation Agreement, or any post-termination
obligations under his or her employment agreement (if any).
5. Severance
Pay
Severance
payments shall be made as follows:
Participants
at the level of Executive Vice President or higher hired or promoted prior
to
May 1, 2007:
Continuation of Base Salary for a period equal to (a) one year, plus
(b)
two weeks, plus (c) two additional weeks for each year the Participant was
employed by the Company (the “Severance Period”).
Participants
at the level of Executive Vice President or higher hired or promoted on or
after
May 1, 2007:
Continuation of Base Salary for a period equal to (a) one year, plus
(b)
one week, plus (c) one additional week for each year the Participant was
employed by the Company (the “Severance Period”).
Participants
at the level of Vice President or lower hired or promoted prior to May 1,
2007:
Continuation of Base Salary for a period equal to (a) five months, plus
(b)
two weeks, plus (c) two additional weeks for each year the Participant was
employed by the Company (the “Severance Period”).
Participants
at the level of Vice President or lower hired or promoted on or after May 1,
2007:
Continuation of Base Salary for a period equal to (a) five months, plus
(b)
one week, plus (c) one additional week for each year the Participant was
employed by the Company (the “Severance Period”).
Notwithstanding
the foregoing:
(i)
during the applicable revocation period of a Participant’s Separation Agreement,
the severance payments that would otherwise have been paid during such time
shall be paid as soon as administratively feasible following the lapsing of
such
revocation period; and
(ii)
to
the extent a Participant is a 409A Participant, the severance payments that
would otherwise have been paid within the first six months of the Participant’s
Date of Termination shall be paid in a lump sum as soon as administratively
feasible following the six month anniversary of the Participant’s Date of
Termination.
Subject
to the foregoing, the Company shall pay to the Participant severance on regular
paydays of the Company to the extent administratively feasible. The Severance
Pay will be made less applicable withholdings and deductions.
6. Health
Insurance
In
accordance with the Company’s health plans, the Participant will be eligible to
exercise his or her rights to COBRA health insurance coverage for the
Participant, and, where applicable, Participant’s spouse and eligible
dependents, at Participant’s expense (subject to the foregoing), upon
termination of the Participant’s employment. To the extent the Participant
elects COBRA continuation coverage, the Company shall continue to pay the
portion of the COBRA premiums for the entire Severance Period up to a maximum
of
18 months that the Company would have otherwise paid assuming the Participant
was an active employee during such time. Participant acknowledges that the
Company will deduct from his or her Severance Pay (to the extent being paid)
an
amount equal to the Participant’s portion of the COBRA premiums during the
Severance Period. In the event that the Participant is a 409A Participant,
the
Company shall pay the Participant’s portion of the COBRA premiums during the six
month deferral period specified in 5 (ii). Nothing herein shall be construed
as
extending or delaying the start date of the COBRA coverage period for the
Participant.
All
voluntary payroll deductions, including but not limited to 401(k), ESPP and
term
life, will cease effective the Date of Termination.
7. Stock
Options
The
rights regarding the Participant's stock options shall be governed by the
Participant's stock option agreement and the stock option plan that governs
the
option.
8. Annual
Bonus or Pay-for-Performance Payment
If
the
Participant's employment is terminated after the end of a fiscal year but before
annual bonus or pay-for-performance payments are distributed and a Disposition
directly affecting the Participant has occurred, the Participant shall be
entitled to the annual bonus or pay-for-performance payment attributable to
the
immediately preceding fiscal year, assuming for this purpose that all personal
performance targets or goals were met. The Company shall make this payment
at
the same time it pays all of its other employees in accordance with the
Company's normal practices but no later than March 15th of the applicable
year.
9. Outplacment
Services
The
Company shall provide to each terminated Participant standard outplacement
services at the expense of the Company from an established outplacement firm
selected by the Company; provided, however, that the cost of the benefits shall
be commensurate with the level of the Participant and, absent special
circumstances, shall generally not exceed in total an amount equal to $30,000
per executive officer Participant and $25,000 per non-executive officer
Participant. In order to receive outplacement services, the Participant must
begin utilizing the services within 30 days of his or her Date of Termination.
The fees shall be paid directly to the outplacement firm and no part of this
amount shall be paid to the Participant. All services must be provided by the
end of the Severance Period.
10. Perquisites.
The
Participant's right to use a Company automobile and any automobile allowance
or
other perquisite that the Participant was receiving in accordance with the
arrangement in effect at the time of termination of the Participant's employment
will continue until the end of the Severance Period.
11. Funding.
The
Policy shall at all times be entirely unfunded and no provision shall at any
time be made with respect to segregating assets of the Company for payment
of
any Severance Pay or Severance Benefits hereunder. Severance Pay and Severance
Benefits are not a vested right. No Participant or other person shall have
any
interest in any particular assets of the Company by reason of the right to
receive Severance Pay and Severance Benefits under the Policy and any such
Participant or any other person shall have only the rights of a general
unsecured creditor of the Company with respect to any rights under the
Policy.
12.
Non-Exclusivity
of Rights.
The
terms
of this Policy shall not prevent or limit the right of a Participant to receive,
prior to a Qualifying Separation, any base salary, retirement or welfare
benefit, perquisite, bonus or other payment provided by the Company to the
Participant, except for such rights as the Participant may have specifically
waived in writing. Amounts that are vested benefits or which the Participant
is
otherwise entitled to receive under any other benefit, policy or program
provided by the Company shall be payable in accordance with the terms of such
policy or program.
13.
Amendment;
Termination; Interpretation; 409A Compliance.
This
Policy, including the designation of those who qualify as Participants, may
be
amended or terminated by the Committee at any time. No such termination or
amendment shall affect the rights of any Participant whose employment has been
terminated as a result of a Qualifying Separation, or who is then receiving
Severance Benefits at the time of such amendment or termination. If a
Participant dies after signing the Separation Agreement and prior to receiving
all of the Severance Pay to which he or she is entitled pursuant to the Policy,
payment shall be made to the beneficiary designated by the Participant to the
Company or, in the event of no designation of beneficiary or the death of the
beneficiary, then to the estate of the deceased Participant. The Committee
reserves the right in its sole discretion to interpret the Policy, prescribe,
amend and rescind rules and regulations relating to it, determine the terms
and
provisions of the severance payments and make all other determinations he deems
necessary or advisable for the administration of the Policy, subject to the
appeals procedure in Section 18. The determination of the Committee on all
matters regarding the Policy shall be conclusive and binding on all
parties.
To
the
extent any provision of the Policy, or action by the Committee would subject
any
Participant to liability for interest or additional taxes under Code Section
409A(a)(1)(B), it will be deemed null and void, to the extent permitted by
law
and deemed advisable by the Committee. It is intended that the Policy and
payments hereunder will comply with Code Section 409A to the extent applicable,
and the Policy shall be interpreted and construed on a basis consistent with
such intent. The Policy may be amended in any respect deemed necessary
(including retroactively) by the Committee in order to preserve compliance
with
Code Section 409A. The preceding shall not be construed as a guarantee of any
particular tax effect for Policy benefits or payments.
Nothing
herein shall restrict the Committee’s ability to exercise its discretionary
authority as provided in the Policy.
14. Non-Assignability.
Severance
Benefits pursuant to the Policy shall not be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or
charge prior to actual receipt thereof by a Participant; and any attempt to
so
anticipate, alienate, sell, transfer, assign, pledge, encumber or charge prior
to such receipt shall be void; and the Company shall not be liable in any manner
for, or subject to, the debts, contracts, liabilities, engagements or torts
of
any person entitled to any Severance Benefits under this Policy.
15.
No
Employment Rights.
This
Policy does not constitute a contract of employment for a particular term or
length between any Participant and the Company, nor does it in any way alter
any
Participant's status as an employee-at-will who may be terminated with or
without cause for any reason or no reason at all except a reason prohibited
by
law. The Company is an "employment at will" employer. Participants have the
right to resign their positions "at will" and the Company has the right to
terminate an employee "at will" with or without notice or Cause. No
Participant’s "at will" status may be modified except in a written contract
signed by an authorized officer of the Company.
16..
Governing
Law.
The
terms
of the Policy, to the extent not preempted by federal law, shall be governed
by
and construed and enforced in accordance with the laws of the State of New
Jersey (without regard to its conflict of laws principles) including all matters
of construction, validity and performance.
17. ERISA
Plan
This
policy is intended to be and shall be administered and maintained as a welfare
benefit plan under Section 3(1) of the Employee Retirement Income Security
Act
of 1974 ("ERISA"), providing certain benefits to participants on certain
severances from employment covering
only a select group of management or highly compensated employees, with the
effect that, although it shall be subject to Sections 502 and 514 of ERISA,
it
shall not be subject to Parts 1-4 of Subtitle B of Title I of ERISA.
This
policy is not intended to be a pension plan under Section 3(2)(A) of ERISA
and
shall be maintained and administered so as not to be such a plan.
18.
Claims
Procedure.
Generally,
benefits will be paid under this Policy (also, referred to herein as the "Plan")
without the necessity of filing a claim. If a Participant believes that he
or
she has been denied benefits under the Plan, the Participant (or his or her
authorized representative) may file a written claim with the Committee to the
following address: 2015 W. Chestnut St., Alhambra, California 91803.
If
a
claim for Plan benefits is denied in whole or in part, the Participant will
receive a written notice of the denial. This notice must be provided to the
Participant within a reasonable period of time, but not later than 90 days
after
receipt of the claim by the Committee, unless the Committee determines that
special circumstances require an extension of time for processing the
Participant's claim. If the Committee determines that an extension is necessary,
notice of the extension will be furnished to the Participant prior to the
termination of the initial 90-day period. In no event will such extension exceed
a period of 90 days from the end of the initial 90-day period. The extension
notice will indicate the special circumstances requiring an extension of time
and when the Participant can expect the benefit determination.
The
Committee's notice of denial of a Participant's claim will contain the following
information: (a) the specific reason or reasons for the adverse determination;
(b) references to specific Plan provisions on which the determination is based;
(c) a description of any additional material or information necessary for the
Participant to perfect the claim and an explanation of why such material or
information is necessary; and (d) appropriate information as to the steps to
be
taken if the Participant wants to submit a claim for appeal.
If
a
claim is denied in whole or in part by the Committee, the Participant (or his
or
her representative) may appeal the adverse determination by filing a written
request for a review of the claim with the Committee. The request for review
must be made within 60 days of the date the Participant receives the denial
(or,
if no written denial is received, within 60 days of the date when the denial
was
due). The Participant should send the written request for review to the
Committee. A Participant may submit written comments, documents, records, and
other information relating to his or her claim for benefits. A Participant
will
be provided, upon request and free of charge, reasonable access to, and copies
of, all documents, records, and other information relevant to his or her claim
for benefits. The review will take into account all comments, documents,
records, and other information submitted by the Participant relating to his
or
her claim, without regard to whether such information was submitted or
considered in the initial benefit determination. The Committee will provide
the
Participant with a written notice of its decision on review within 60 days
after
the Committee’s receipt of the Participant's written claim for review, unless
the Committee determines that special circumstances require an extension of
time
for processing the claim. If the Committee determines that an extension of
time
is required, written notice of the extension will be furnished to the
Participant prior to the end of the initial 60-day period. The extension notice
will indicate the special circumstances requiring an extension of the time
and
the date by which the Committee expects to render its determination on review.
The extension will not exceed a period of 60 days from the end of the initial
60-day period.
In
the
case of an adverse benefit determination on review, the notice will set forth:
(a) the specific reason or reasons for the adverse determination; and (b)
references to the specific Plan provisions on which the determination is based.
By participating in the Plan, Participants agree that (a) the Plan will not
pay
any benefit for a claim filed more than one year from the date a Participant
terminates employment, and (b) no legal or equitable action may be filed against
the Plan or any Plan fiduciary more than 90 days after exhaustion of the
Participant's rights under the above claims procedure. A Participant must
exhaust all levels of the appeal procedure before the Participant can bring
an
action at law or equity. The power and authority of the Committee shall be
discretionary with respect to all matters arising before each of them under
this
claims procedure.
Unless
otherwise required by ERISA, and notwithstanding anything to the contrary
herein, any unresolved dispute remaining after exhaustion of the claims
procedures herein shall be resolved exclusively by final and binding arbitration
in New York, New York under the commercial arbitration rules of the American
Arbitration Association with each party to bear its own attorneys’ fees, but the
Company bearing the fees of the arbitrator. By participating in the Plan, the
Participant acknowledges that the Participant waives the right to litigate
such
unresolved disputes in a judicial forum before a judge or jury.
19.
Miscellaneous.
(a) Taxes
and
Withholding. As a condition to any payment or distribution pursuant to the
Policy, the Company may require a Participant to pay such sum to the Company
as
may be necessary to discharge its obligations with respect to any taxes,
assessments or other governmental charges imposed on property or income received
by the Participant thereunder. The Company may deduct or withhold such sum
from
any payment or distribution to the Participant.
(b) Right
to
Offset. Notwithstanding any provisions of the Policy to the contrary, the
Company may offset any amounts to be paid to a Participant (or, in the event
of
the Participant’s death, to his beneficiary or estate) under the Policy against
any amounts that such Participant may owe to the Company.
(c)
Severability.
If any provision of the Policy is determined to be invalid, illegal or
unenforceable, such provision shall be construed or deemed amended to conform
to
applicable laws, or, if it cannot be so construed or deemed amended without,
in
the determination of the Committee, materially altering the intent of the
Policy, such provision shall be stricken, and the remainder of the Policy shall
remain in full force and effect.
(d) Treatment
for other compensation purposes. Payments and other benefits received by a
Participant pursuant to the Policy shall not be deemed part of a Participant's
regular, recurring compensation for purposes of any termination, indemnity
or
severance pay laws and shall not be included in, nor have any effect on, the
determination of benefits under any other employee benefit plan, contract or
similar arrangement provided by the Company, unless expressly so provided by
such other plan, contract or arrangement.
(e) Furnishing
Information. A Participant will cooperate with the Committee by furnishing
any
and all information requested by the Committee and take such other actions
as
may be requested in order to facilitate the administration of the Policy and
the
payments of benefits hereunder, including but not limited to taking such
physical examinations as the Committee may deem necessary.
(f) Headings;
Gender and Number. Section headings are used in this Policy for convenience
of
reference only and shall not affect the meaning of any provision of this
Agreement. Except where otherwise indicated by the context, any masculine term
used herein will also include the feminine; the plural will include the singular
and the singular will include the plural.