EXHIBIT 10.37
EMPLOYMENT AND TRANSITION AGREEMENT
This EMPLOYMENT AND TRANSITION AGREEMENT (the "Agreement"), is made and
entered into on and effective as of November 3, 2003, (the "Effective Date") by
MATTHEW NEVILLE, residing at 425 Easton Avenue, Geneva, Illinois, hereinafter
referred to as "you," and Cabot Microelectronics Corporation, hereinafter
referred to as "CMC" on behalf of themselves, their heirs, successors and
assigns.
WHEREAS, you agree that you are entering into this Agreement
voluntarily and have been advised to consult an attorney prior to signing it;
WHEREAS, you agree that the cash and other consideration provided
pursuant to this Agreement is adequate consideration for the mutual terms,
covenants and conditions of it, therefore, the parties do hereby agree as
follows:
1. PURPOSE OF AGREEMENT. The parties have entered into this
agreement to secure for CMC, the services of Matthew Neville in connection with
the transition of CMC to new executive leadership and to obtain the benefit of
his executive advice in light of his many years of service to CMC, to recognize
his contributions to CMC as an employee, officer, director and as Chairman, and
to clarify the rights and obligations of the parties following his decision to
leave his position as Chairman, President, Chief Executive Officer and Director
of CMC.
2. CONSIDERATION; TERM OF EMPLOYMENT. Upon the execution of this
Agreement, CMC will:
a. Continue your employment for the two-year period beginning on
the Effective Date and ending on the second anniversary of the
Effective Date, November 3, 2005 (the "Extended Employment
Term"). Your employment with CMC will be terminated on
November 3, 2005, or earlier as otherwise may be specifically
provided in this Agreement ("Termination Date").
b. During the Extended Employment Term, CMC will pay you an
annual base salary equal to $400,000 in accordance with CMC's
normal payroll practices, subject to normal withholding for
state and federal taxes, FICA and other payroll deductions.
c. CMC will pay you a bonus of $300,000, for the fiscal year
ended September 30, 2003, on or before December 12, 2003,
subject to normal withholding for state and federal taxes,
FICA and other payroll deductions.
d. Any and all non-qualified stock options ("NQSOs") granted to
you pursuant to the Amended and Restated 2000 Equity Incentive
Plan (the "EIP") and applicable Grant Agreements for such
NQSOs previously vested or that become vested pursuant to
their terms during the Extended Employment Term are and will
remain exercisable only pursuant to the respective Grant
Agreements and EIP. Schedule A hereto lists the NQSOs that
have been granted, which shall continue to vest and be
exercisable throughout the Extended Employment Term in
accordance with the Grant Agreements for such NQSOs and the
terms of the EIP.
You will not be eligible for any new or additional awards of
stock options pursuant to the EIP or any other CMC stock
option plan or program presently existing or adopted hereafter
or for any new or additional deferral of income under any
deferred compensation plan or program presently existing or
adopted hereafter, including but not limited to the Short Term
Bonus program. Other than as may be provided in any Grant
Agreement for previously granted NQSOs or in the EIP, there
will be no effect on any stock option heretofore awarded,
whether or not such stock option has vested, nor shall there
be any effect on any deferral of income that has already taken
place. Following the Effective Date, you may exercise and sell
your vested NQSOs in accordance with the terms of the EIP and
applicable Grant Agreements, and the requirements of the
securities laws of the United States, including laws relating
to the purchase or sale of securities while in possession of
material nonpublic information about CMC.
e. During the Extended Employment Term, you will be eligible to
continue to participate in the health and welfare benefit
programs that may be made generally available to employees of
CMC in effect from time to time in accordance with the normal
policies and practices of CMC, including CMC's group health,
life and disability insurance programs. At the end of the
Extended Employment Term, CMC will offer you the right to
continue coverage under the CMC Group Welfare Benefit Plan in
which you participated on the last day of the Extended
Employment Term (so-called "COBRA coverage"). If you elect to
continue your participation in the Group Welfare Benefit Plan
under COBRA by signing and returning the COBRA election form
to CMC at the end of the Extended Employment Term, for the
eighteen month period following the end of the Extended
Employment Term, CMC will pay the premium cost of your
coverage and that of your eligible dependents under the Group
Welfare Benefit Plan. CMC reserves the right to amend, modify,
terminate or discontinue the health and welfare benefit
programs provided to its employees, or the costs associated
therewith, at any time. No such change shall adversely affect
your benefits unless it is applicable to all other employees
and executives of CMC.
f. During the Extended Employment Term, you will remain eligible
to continue to participate in CMC's qualified and
non-qualified retirement plans in accordance with the terms
and provisions of such plans, including without limitation the
Supplemental Executive Retirement Plan. At the end of the
Extended Employment Period, you will be entitled to the
distribution or payment of benefits under CMC's qualified and
non-qualified retirement plans, in accordance with the terms
of those plans.
g. Shares of CMC stock held by you under the Deposit Share
Agreement dated December 27, 2002, will be held in accordance
with that agreement and the Deposit Share Program.
h. During the Extended Employment Term, CMC will permit you to
attend in-house training and educational programs and shall
reimburse any professional society dues up to a limit of $250
per year.
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i. During the Extended Employment Term, CMC will continue to
reimburse you for the annual membership fee for the American
Airlines Admirals Club.
j. During the Extended Employment Term, you may terminate your
employment at any time without liability to CMC. Upon such
termination, however, you will not be entitled to further
payments or benefits hereunder. Your obligations and Release
of Claims under this Agreement shall remain in full force and
effect, except for your obligation to provide services under
Section 3, despite any termination.
The consideration under this Agreement shall constitute full and final
settlement and satisfaction of any and all claims, demands, or causes of action,
whether known or unknown, whether for damages or otherwise. No other
consideration shall be provided to you for any reason and you agree you will not
receive or be eligible for any other consideration in any form. To the extent it
is determined that federal or state taxes are due on any part of these proceeds,
such taxes and any related penalty or interest charges shall be solely your
responsibility. As of the Termination Date you will execute a Second General
Release, Settlement, and Covenant Not to Sue in favor of CMC, and CMC will
execute a General Release, Settlement, and Covenant Not to Sue in your favor,
both of which will be without prejudice to any then existing dispute.
3. SERVICES DURING THE EXTENDED EMPLOYMENT TERM. You are
submitting , on the Effective Date, your resignation as President and Chief
Executive Officer, Director and Chairman of the Board of Directors of CMC, but
you shall remain an employee of CMC in an executive advisory role. You agree
that during the Extended Employment Term:
a. You will from time to time provide executive advisory services
for CMC as reasonably requested by the Chief Executive Officer
and directly to the Chief Executive Officer, at times
reasonably agreeable to you, in order to assist in completion
of the transition allowing the new Chief Executive Officer to
assume responsibility for the business and affairs of CMC,
through November 30, 2003, during which time you will make
yourself available on up to a full-time basis to provide
advice and counsel (but not performance of regular duties or
execution of policy except as you and the Chief Executive
Officer may agree) and thereafter to be available for
telephone consultation as matters arise, up to ten hours a
month and on-site consultation at CMC headquarters for no more
than one day a month (or for such additional time as you and
the Chief Executive Officer may agree).
b. You will cooperate fully with CMC in any investigation,
negotiation, litigation or other action arising out of any
transaction or business decision in which you were involved or
of which you have knowledge during your employment by CMC.
c. You will give a certified written statement, in the form of a
Management Representation Letter, as to your knowledge of
CMC's financial statements and financial condition as of the
Effective Date to the Audit Committee of CMC's Board of
Directors and to CMC's external auditors, to the extent the
same is within your knowledge.
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d. You will provide services hereunder from a location or
locations agreeable to you.
e. You agree to continue to comply with CMC's Code of Business
Conduct, applying in good faith the same standards as applied
to other CMC employees.
f. CMC will pay your reasonable legal fees in negotiating this
Agreement.
4. TERMINATION.
a. If you die during the Extended Employment Term, all payments
hereunder shall be paid to your estate or designees.
b. Notwithstanding the foregoing or any provisions of this
Agreement to the contrary, if CMC terminates your employment
during the Extended Employment Term for Cause (as defined
below), CMC shall cease all payments and benefits not
theretofore due and payable provided for under Section 2 of
this Agreement and no stock options not already vested shall
vest. For purposes of this Agreement, "Cause" shall be the:
(i) conviction of or entering a guilty plea with respect to a
felony, whether or not connected with CMC or other criminal
conduct causing material harm to CMC; (ii) commission of any
act of fraud (knowing material misrepresentation of fact or
actionable material omission of fact) causing material harm to
CMC; (iii) theft, embezzlement or misappropriation of any
property of CMC having material financial value; (iv) material
knowing failure to observe or comply with CMC's Code of
Business Conduct; or (v) material knowing violation of the
Proprietary Rights Agreement/Cabot Microelectronics
Corporation Employee Confidentiality, Intellectual Property
and Non-Competition Agreement for Employees signed by you.
5. RELEASE BY YOU In consideration of this Agreement and the
consideration provided hereunder, you, for yourself and, to the extent you have
legal authority to do so, on behalf of your heirs, executor, administrator,
successors and assigns claiming by or through you, (hereinafter in this
paragraph referred to as the "Releasers"), hereby release, acquit, and forever
discharge CMC and/or its subsidiaries, and the respective officers, employees,
directors and benefits plans of CMC and its subsidiaries (hereafter in this
Agreement collectively referred to as the "Releasees"), of and from any and all
actions, causes of action, claims, demands, rights, damages, costs, expenses,
and liabilities of any nature whatsoever, whether now or heretofore known or
unknown, accrued or unaccrued, or alleged or not alleged as of the Effective
Date, including but not limited to those which are based upon, exist on account
of, or in any way arise out of:
a. Any and all acts, omissions or activities of the above-named
Releasees occurring on or prior to the Effective Date of this
Agreement, including those in any way connected, directly or
indirectly, with your employment, and the claims defined in
subparagraph (b), below;
b. Any and all claims alleged or to be alleged, including but not
limited to claims under the Age Discrimination in Employment
Act, 29 U.S.C. Section 621, et seq., Title
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VII of the Civil Rights Act of 1964, 42 U.S.C. Section 2000e,
et seq., the Illinois Human Rights Act, 735 ILCS 5/1-101, et
seq., and any other claims arising under laws pertaining to
breach of contract, wrongful discharge or any other federal,
state or local laws relating in any way to employment, and
claims of any of the parties against any Releasees based upon
any cause of action they now have or may have in the future
arising from any facts or circumstances existing on or prior
to the Effective Date of this Agreement, including but not
limited to all claims for costs or attorney's fees.
This Release shall not apply to claims, demands, actions or causes of action
arising out of the performance or non-performance by any person of any term,
covenant or condition of this Agreement or subsequent to the Effective Date of
this Agreement or any agreement or plan under which you retain rights by virtue
of the provisions of this Agreement subsequent to this Agreement. CMC, the chief
financial officer, general counsel, and board of directors of CMC each agree and
affirm that, as of the Effective Date, they know of no claims against you
resulting from your employment and service with CMC.
You affirm and acknowledge that: 1) you have been advised by CMC to consult with
an attorney about the terms of this Agreement before signing it; 2) you have
been given a reasonable period of time to consider this Agreement and to decide
whether to sign it; 3) you have read and understand this Agreement; and 4) you
voluntarily enter into and execute it of your own free will with full knowledge
of its terms and conditions.
6. ENFORCEMENT OF AGREEMENT. In any action brought to enforce or
rescind this Agreement, the courts of the State of Illinois and the District
Court for the Northern District of Illinois, Eastern Division, shall have
jurisdiction and venue with respect to each party hereto. This Agreement may be
pleaded as the basis for a claim for relief or as a full and complete defense,
as may be appropriate, and where appropriate, may be used as the basis of an
action for specific performance or otherwise seeking an injunction. You agree
and affirm that you have not and will never institute, maintain or participate
in, or in any way aid in the institution or prosecution of, any claim, action or
proceeding of any kind against CMC or the other Releasees, including but not
limited to, claims related to your employment with CMC or the termination of
that employment barred by the foregoing release provisions.
7. RIGHT TO REVOKE. You have at least twenty-one (21) calendar
days measured from the day this Agreement is presented to you (until NOVEMBER
24, 2003), to consider this Agreement, however, you may execute this Agreement
before that time, and you certify, by such execution, that you knowingly and
voluntarily waived the right to the full 21 days with no pressure by CMC to do
so. If you do not execute this Agreement by NOVEMBER 24, 2003, the end of the 21
day period, and return it to CMC on or before NOVEMBER 24, 2003, you will not be
eligible for the consideration specified in this Agreement. Also, you may revoke
this Agreement within seven (7) days of its Effective Date, by sending written
notice to H. Carol Bernstein, Vice President, Secretary and General Counsel, at
CMC . If you revoke this Agreement, you will not receive the consideration
specified herein. Your resignation from your positions as Chairman, President
and Chief Executive Officer of CMC and as a Director of CMC is and will be
unaffected by any revocation of, or failure to execute, this Agreement by you.
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8. ATTORNEYS' FEES. In any action brought by any party under or
related to this Agreement, you will be entitled to the recovery of a reasonable
attorneys' fee and reasonably incurred costs of litigation incurred by you, if
you are a prevailing party with respect to claims or defenses based on the
Agreement.
9. CONSTRUCTION OF AGREEMENT AND RELATED DOCUMENTS. This
Agreement and the documents required hereby shall be construed in accordance
with the laws of the State of Illinois. This provision is not intended to alter
the governing law provisions applicable to any other plan or agreement, except
where required to fulfill the intent of this Agreement.
10. NO ADMISSION OF LIABILITY. This Agreement is not to be
construed as an admission of liability on the part of any party hereto or to any
other party. The parties expressly deny liability for any claims asserted or
which could have been asserted against them, and enter into this Agreement for
the sole purpose of avoiding litigation with respect to any disputed claims that
are or could be asserted.
11. INTEGRATION. This Agreement signed by the parties hereto,
constitutes the final written expression of the parties and is a complete and
exclusive statement of those terms and conditions. Each of the parties
acknowledges that no representations or promises not expressly contained in this
Agreement and the documents required hereby have been made by any party or by
the agents or representatives of any party.
12. NO DISPARAGEMENT. You agree not to make disparaging,
malicious, or otherwise negative comments about CMC and/or its personnel,
officers, directors, products, services, vendors and vendor personnel, customers
and customer personnel, other related third parties, practices or policies. CMC
agrees not to make disparaging, malicious or otherwise negative comments about
you to any third party and agrees that it shall inform its executive officers of
such obligation. The provisions of this Section 12 shall not apply to testimony
as a witness, compliance with other legal obligations, assertion of or defense
against any claim of breach of this Agreement, and shall not require CMC or you
to make false statements or disclosures.
13. CONFIDENTIAL/PROPRIETARY INFORMATION. You agree to maintain
all proprietary/confidential information and personal and intellectual property
of CMC and to not disclose to any third party or use CMC's
proprietary/confidential information. You affirm and agree that your obligations
pursuant to the Cabot Microelectronics Corporation Employee Confidentiality,
Intellectual Property and Non-Competition Agreement for Employees in Arizona,
Colorado, Illinois, Massachusetts, and Texas you signed on October 26, 2000 and
any predecessor agreements ("Confidentiality Agreement"), including but not
limited to those to protect all CMC proprietary/confidential information from
disclosure and use, and to uphold your non-compete/non-solicit obligations in
section 3 of the Confidentiality Agreement, and the Confidentiality Agreement
itself remain in full force and effect independent from your obligations under
this Agreement, but that to the extent necessary the consideration stated in
Section 2 of this Agreement also constitutes additional consideration for your
obligations under the Confidentiality Agreement, which are restated, affirmed by
you, and incorporated into this Agreement by reference. The provisions of the
Confidentiality Agreement are hereby amended as follows: no notice of
termination of employment shall be required.
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14. RESIGNATION AS OFFICER AND DIRECTOR. You agree that you have
resigned your position as the Chairman of the Board of Directors, President and
Chief Executive Officer of CMC, and your positions with Cabot Microelectronics
Global Corporation, effective as of November 2, 2003, by written notice to CMC,
in the form attached hereto. You further agree that you have resigned your
position as a Director of CMC, effective as of November 2, 2003, by written
notice to CMC, in the form attached hereto.
15. INSURANCE AND INDEMNIFICATION. Any director's and officer's
liability insurance carried by CMC and your indemnification letter agreement
dated December 1, 2000 will apply to you as a past officer pursuant to the terms
of any such insurance and such indemnification letter agreement and in a manner
similar to that provided for any other past officer or director of CMC. CMC
agrees that a prompt determination shall be made with respect to the question of
whether indemnification of you is proper in the circumstances pursuant to
Section 145 of the Delaware General Corporation Law (the "DGCL") and upon
receipt of an undertaking from you as specified in Section 145(e) of the DGCL,
CMC shall pay in advance the expenses incurred by you in defending any matter
referred to therein not otherwise covered by insurance.
16. AMENDMENT OF CHANGE IN CONTROL AGREEMENT. On the Effective
Date, CMC will give you notice of termination of the Change in Control Severance
Protection Agreement executed by you and CMC on November 10, 2000, as amended
(the "Change in Control Agreement"), pursuant to clause (i) of Section 1.1 of
the Change in Control Agreement, which will have the effect of causing the
Change in Control Agreement to terminate on November 3, 2004. This Agreement
shall not be construed as your voluntary termination of employment other than
during the One-Year Window Period or without Good Reason under clause (iii) of
Section 1.1 of the Change in Control Agreement. The payments provided in the
Change of Control Agreement will be made available to you in the alternative or
in lieu of and not in addition to the payments provided Section 2.b of this
Agreement. If you are terminated pursuant to a Change in Control as defined in
the Change in Control Agreement, then the terms of such agreement shall apply
and you shall not receive the remaining payments provided for in section 2.b of
this Agreement.
17. SECURITIES LAW MATTERS. CMC agrees that it shall not seek to
or exercise control over or limit your purchases or sales of stock in CMC,
including without limitation transactions relating to your stock options, except
as mandated by and to the extent mandated by the federal securities laws.
Further:
CMC acknowledges that on the Effective Date you are no longer an
"affiliate" within the meaning of Rule 144(a)(1) adopted pursuant to
the Securities Act of 1933, as amended.
CMC agrees that you may provide Rule 144 letter of counsel by and
through counsel of your own choice, including outside counsel of your
choosing.
CMC agrees that no practice or policy now or hereafter adopted shall
permit it to limit or regulate your purchases or sales of or other
transactions in stock of CMC, including without limitation transactions
relating to your stock options, except as mandated by and to the extent
mandated by the federal securities laws, and/or the EIP or applicable
Grant Agreements.
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No new policy or change in policy governing employees adopted hereafter
governing purchases or sales of or other transactions in stock of CMC
shall be applied to you, including without limitation transactions
relating to your stock options, except as mandated by and to the extent
mandated by the federal securities laws.
CMC acknowledges that to its knowledge and to the knowledge of its
general counsel, upon the announcement of your resignation, this
agreement, and the appointment of a new Chief Executive Officer, you
will no longer be a Section 16(b) insider, except as mandated by
federal securities laws.
CMC agrees that it will exercise good faith efforts to avoid providing
you with material non-public information during its consultations with
you from this day forward, and that in the event doing so is needed to
secure your advice as provided above, it will give you written notice
of the specific material non-public information being provided at the
time it is provided and of the expected date it will no longer be
material non-public information. CMC will notify you immediately when
the information, or any part of it, is no longer material non-public
information. CMC agrees that after such consultation, it will exercise
good faith efforts to avoid providing you with new material, non-public
information for at least one week following such notice.
CMC will, upon the expiration of the Rule 144 period, remove any
restrictive legends from your CMC stock or other securities, except
with respect to shares held under your Deposit Share Agreement.
18. COUNTERPART ORIGINALS. This Agreement may be executed in
multiple counterpart originals and shall have the same force and effect as if
all signatures appeared on the same original.
19. FURTHER DOCUMENTATION. To the extent applicable, the parties
shall execute such other and further documents as may be reasonably necessary to
carry out the terms and conditions of this Agreement.
20. SEVERABILITY. It is the intent of the parties that each and
every provision in this Agreement be enforced. To the extent any provision is
held unenforceable, such unenforceability shall not render the remaining terms
hereof unenforceable.
IN WITNESS WHEREOF, the parties hereto have executed counterpart
originals of this Agreement as of the date entered above.
CABOT MICROELECTRONICS CORPORATION
By: __________________________________
By: ________________________________ __________________________
MATTHEW NEVILLE __________________________
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THIS AGREEMENT INCLUDES A RELEASE OF ALL CLAIMS, WHETHER KNOWN OR UNKNOWN,
INCLUDING ANY UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT. YOU ARE ADVISED TO
CONSULT AN ATTORNEY PRIOR TO SIGNING IT.
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SCHEDULE A
OPTIONS
SEE INDIVIDUAL GRANT AGREEMENTS AND EIP FOR TERMS OF EACH GRANT
NUMBER OF
GRANT DATE SHARES
---------- ------
April 4, 2000 75,000
May 1, 2001 100,000
May 1, 2002 100,000
Dec. 11, 2002 100,000
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SCHEDULE B
[CMC Letterhead]
November 2, 2003
Board of Directors
Cabot Microelectronics Corporation
Ladies and Gentlemen:
I hereby resign from the office of Chairman of the Board, President and
Chief Executive Officer and as a Director of Cabot Microelectronics Corporation
(the "Company") and from all offices that I hold with subsidiaries of the
Company, effective immediately.
Very truly yours,
Matthew Neville
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