Document:

Exhibit

10.40

 

ZORAN

CORPORATION

EXECUTIVE

RETENTION AND SEVERANCE PLAN

Adopted November 8, 2002

 

1.                                      ESTABLISHMENT

AND PURPOSE

 

1.1                                 Establishment.  The Zoran Corporation Executive Retention

and Severance Plan (the “Plan”) is hereby established by

the Compensation Committee of the Board of Directors of Zoran Corporation,

effective November 8, 2002 (the “Effective Date”).

 

1.2                                 Purpose.  The Company draws upon the knowledge,

experience and advice of its Officers and Key Employees in order to manage its

business for the benefit of the Company’s stockholders.  Due to the widespread awareness of the

possibility of mergers, acquisitions and other strategic alliances in the

Company’s industry, the topic of compensation and other employee benefits in

the event of a Change in Control is an issue in competitive recruitment and

retention efforts.  The Committee

recognizes that the possibility or pending occurrence of a Change in Control

could lead to uncertainty regarding the consequences of such an event and could

adversely affect the Company’s ability to attract, retain and motivate its

Officers and Key Employees.  The

Committee has therefore determined that it is in the best interests of the

Company and its stockholders to provide for the continued dedication of its Officers

and Key Employees notwithstanding the possibility or occurrence of a Change in

Control by establishing this Plan to provide designated Officers and Key

Employees with enhanced financial security in the event of a Change in Control.  The purpose of this Plan is to provide its

Participants with specified compensation and benefits in the event of

termination of employment under circumstances specified herein upon or

following a Change in Control.

 

2.             Definitions and Construction

 

2.1                                 Definitions.  Whenever used in this Plan, the following

terms shall have the meanings set forth below:

 

(a)                                  “Annual Bonus”

means an amount equal to the greatest of (1) the aggregate of all bonuses

earned by the Participant (whether or not actually paid) under the terms of the

programs, plans or agreements providing for such bonuses for the fiscal year of

the Company immediately preceding the fiscal year of the Change in Control,

(2) the aggregate of all bonuses earned by the Participant (whether or not

actually paid) under the terms of the programs, plans or agreements providing

for such bonuses for the fiscal year of the Company immediately preceding the

fiscal year of the Participant’s Termination Upon a Change in Control, or

(3) the aggregate of all annual bonuses that would be earned by the

Participant at the targeted annual rate (assuming attainment of 100% of all

applicable performance goals) under the terms of the programs, plans or

agreements providing for such bonuses in which the Participant was

participating for the fiscal year of the Participant’s Termination Upon a

Change in Control.

 

(b)                                 “Base Salary

Rate” means a Participant’s monthly base salary

determined at the greater of (1) the Participant’s monthly base salary rate in

effect immediately prior to the Participant’s Termination Upon a Change in

Control or (2) the Participant’s monthly base salary rate in effect immediately

prior to the applicable Change in Control. 

For this purpose, base salary does not include any bonuses, commissions,

fringe benefits, car allowances, other irregular payments or any other

compensation except base salary.

 

(c)                                  “Benefit

Period” means (1) with respect to a Participant who

is the Chief Executive Officer, a period of thirty-six (36) months,

(2) with respect to a Participant who is an Executive Officer (other than

the Chief Executive Officer), a period of eighteen (18) months, and

(3) with respect to a Participant who is a Key Employee (other than an

Executive Officer), a period of nine (9) months.

 

(d)                                 “Board”

means the Board of Directors of the Company.

 

 

(e)                                  “Cause”

means the occurrence of any of the following, as determined in good faith by a

vote of not less than two-thirds of the entire membership of the Board at a

meeting of the Board called and held for such purpose (after reasonable notice

to the Participant and an opportunity for the Participant, together with the

Participant’s counsel, to be heard before the Board):

 

(1)                                  the

Participant’s commission of any act of fraud, embezzlement or dishonesty;

 

(2)                                  the

Participant’s unauthorized use or disclosure of confidential information or

trade secrets of any member of the Company Group; or

 

(3)                                  the

Participant’s intentional misconduct adversely affecting the business or

affairs of any member of the Company Group.

 

(f)                                    “Change in Control”

means, except as otherwise provided in the Participation Agreement applicable

to a given Participant, the occurrence of any of the following:

 

(1)                                  any

“person” (as such term is used in Sections 13(d) and 14(d) of the

Securities Exchange Act of 1934, as amended (the “Exchange Act”)), other than a

trustee or other fiduciary holding securities of the Company under an employee

benefit plan of the Company, becomes the “beneficial owner” (as defined in

Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of

securities of the Company representing more than fifty percent (50%) of

(i) the outstanding shares of common stock of the Company or (ii) the

total combined voting power of the Company’s then–outstanding securities

entitled to vote generally in the election of directors;

 

(2)                                  the

Company is party to a merger or consolidation which results in the holders of

the voting securities of the Company outstanding immediately prior thereto

failing to retain immediately after such merger or consolidation direct or

indirect beneficial ownership of more than fifty percent (50%) of the total

combined voting power of the securities entitled to vote generally in the

election of directors of the Company or the surviving entity outstanding

immediately after such merger or consolidation;

 

(3)                                  the

sale or disposition of all or substantially all of the Company’s assets or

consummation of any transaction having similar effect (other than a sale or

disposition to one or more subsidiaries of the Company); or

 

(4)                                  a

change in the composition of the Board within any consecutive two-year period

as a result of which fewer than a majority of the directors are Incumbent

Directors.

 

(g)                                 “Change in

Control Period” means a period commencing upon the date

of the consummation of a Change in Control and ending on the date occurring

eighteen (18) months thereafter.

 

(h)                                 “Chief

Executive Officer” means the individual who, immediately

prior to the consummation of a Change in Control, serves as the Company’s Chief

Executive Officer as appointed by the Board.

 

(i)                                     “Code”

means the Internal Revenue Code of 1986, as amended, or any successor

thereto and any applicable regulations promulgated thereunder.

 

(j)                                     “Committee”

means the Compensation Committee of the Board.

 

(k)                                  “Company”

means Zoran Corporation, a Delaware corporation, and, following a Change in

Control, a Successor that agrees to assume all of the terms and provisions of

this Plan or a Successor which otherwise becomes bound by operation of law to

this Plan.

 

(l)                                     “Company Group”

means the group consisting of the Company and each present or future parent and

subsidiary corporation or other business entity thereof.

 

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(m)                               “Disability”

means a Participant’s permanent and total disability within the meaning of

Section 22(e)(3) of the Code.

 

(n)                                 “Executive Officer”

means an individual who, immediately prior to the consummation of a Change in

Control, serves as an executive officer of the Company appointed by the Board.

 

(o)                                 “Good Reason”

means the occurrence of any of the following conditions upon or following a

Change in Control, without the Participant’s informed written consent, which

condition(s) remain(s) in effect ten (10) days after written notice to the

Company from the Participant of such condition(s):

 

(1)                                  assignment

of the Participant to a position that is not a Substantive Functional

Equivalent of the position which the Participant occupied immediately prior to

the Change in Control;

 

(2)                                  a

decrease in the Participant’s Base Salary Rate or a decrease in the

Participant’s target bonus amount (subject to applicable performance

requirements with respect to the actual amount of bonus compensation earned by

the Participant);

 

(3)                                  any

failure by the Company to (i) continue to provide the Participant with the

opportunity to participate, on terms no less favorable than those in effect for

the benefit of any employee group which customarily includes a person holding

the employment position or a comparable position with the Company Group then

held by the Participant, in any benefit or compensation plans and programs,

including, but not limited to, the Company Group’s life, disability, health,

dental, medical, savings, profit sharing, stock purchase and retirement plans,

if any, in which the Participant was participating immediately prior to the

date of the Change in Control, or their equivalent, or (ii) provide the

Participant with all other fringe benefits (or their equivalent) from time to

time in effect for the benefit of any employee group which customarily includes

a person holding the employment position or a comparable position with the

Company Group then held by the Participant;

 

(4)                                  the

relocation of the Participant’s work place for the Company Group to a location

that increases the regular commute distance between the Participant’s residence

and work place by more than thirty (30) miles (one-way), or the imposition of

travel requirements substantially more demanding of the Participant than such

travel requirements existing immediately prior to the Change in Control; or

 

(5)                                  any

material breach of this Plan by the Company with respect to the Participant.

 

The existence of Good

Reason shall not be affected by the Participant’s temporary incapacity due to

physical or mental illness not constituting a Disability.  The Participant’s continued employment shall

not constitute consent to, or a waiver of rights with respect to, any condition

constituting Good Reason hereunder.  For

the purposes of any determination regarding the existence of Good Reason

hereunder, any claim by the Participant that Good Reason exists shall be

presumed to be correct unless the Company establishes to the Board that Good

Reason does not exist, and the Board, acting in good faith, affirms such

determination by a vote of not less than two-thirds of its entire membership.

 

(p)                                 “Incumbent

Director” means a director who either (1) is a

member of the Board as of the Effective Date, or (2) is elected, or

nominated for election, to the Board with the affirmative votes of at least a

majority of the Incumbent Directors at the time of such election or nomination,

but (3) was not elected or nominated in connection with an actual or

threatened proxy contest relating to the election of directors of the Company.

 

(q)                                 “Key Employee”

means an individual, other than an Executive Officer, who, immediately prior to

the consummation of a Change in Control, is employed by the Company Group and

has been designated by the Board or the Committee as eligible to participate in

the Plan.

 

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(r)                                    “Option”

means any option to purchase shares of the capital stock of the Company or of

any other member of the Company Group granted to a Participant by the Company

or any other Company Group member, whether granted before or after a Change in

Control.

 

(s)                                  “Participant”

means each Executive Officer and each Key Employee designated by the Committee

to participate in the Plan, provided such individual has executed a

Participation Agreement.

 

(t)                                    “Participation

Agreement” means an Agreement to Participate in the Zoran

Corporation Executive Retention and Severance Plan in the form attached hereto

as Exhibit A or in such other form as the Committee may approve

from time to time; provided, however, that, after a Participation Agreement has

been entered into between a Participant and the Company, it may be modified

only by a supplemental written agreement executed by both the Participant and

the Company.  The terms of such forms of

Participation Agreement need not be identical with respect to each

Participant.  For example, a

Participation Agreement may limit the duration of a Participant’s participation

in the Plan or may modify the definition of “Change in Control” with respect to

a Participant.

 

(u)                                 “Release”

means a general release of all known and unknown claims against the Company and

its affiliates and their stockholders, directors, officers, employees, agents,

successors and assigns substantially in the appropriate form attached hereto as

Exhibit B, with any modifications thereto determined by legal

counsel to the Company to be necessary or advisable to comply with applicable

law or to accomplish the intent of Section 8 hereof.

 

(v)                                 “Restricted

Stock” means any shares of the capital stock of the Company

or of any other member of the Company Group granted to a Participant by the

Company or any other Company Group member or acquired upon the exercise of an

Option, whether such shares are granted or acquired before or after a Change in

Control, including any shares issued in exchange for any such shares by a

Successor or any other member of the Company Group.

 

(w)                               “Substantive

Functional Equivalent” means an employment position

occupied by a Participant after a Change in Control that:

 

(1)                                  is

in a substantive area of competence (such as, accounting, executive management,

finance, human resources, marketing, sales and service, or operations, etc.)

that is consistent with the Participant’s experience and not materially

different from the position occupied by the Participant immediately prior to

the Change in Control;

 

(2)                                  allows

the Participant to serve in a role and perform duties that are functionally

equivalent to those performed immediately prior to the Change in Control (such

as business unit executive with profit and loss responsibility, product line

manager, marketing strategist, geographic sales manager, executive officer,

etc.); and

 

(3)                                  does

not otherwise constitute a material, adverse change in the Participant’s

responsibilities or duties, as measured against the Participant’s

responsibilities or duties prior to the Change in Control, causing it to be of

materially lesser rank or responsibility within the Company or an equivalent

business unit of its parent.

 

(x)                                   “Successor”

means any successor in interest to substantially all of the business and/or

assets of the Company.

 

(y)                                 “Termination

Upon a Change in Control” means the occurrence of any of

the following events:

 

(1)                                  termination

by the Company Group of the Participant’s employment for any reason other than

Cause during the Change in Control Period; or

 

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(2)                                  the

Participant’s resignation for Good Reason during the Change in Control Period

from all capacities in which the Participant is then rendering service to the

Company Group;

 

provided, however, that

Termination Upon a Change in Control shall not include any termination of the

Participant’s employment which is (i) for Cause, (ii) a result of the

Participant’s death or Disability, or (iii) a result of the Participant’s

voluntary termination of employment other than for Good Reason.

 

2.2                                 Construction.  Captions and titles contained herein are for

convenience only and shall not affect the meaning or interpretation of any

provision of the Plan.  Except when

otherwise indicated by the context, the singular shall include the plural and

the plural shall include the singular. 

Use of the term “or” is not intended to be exclusive, unless the context

clearly requires otherwise.

 

3.             Eligibility

 

The Board or Committee

shall designate those Executive Officers and Key Employees who shall be

eligible to become Participants in the Plan.

 

4.             Treatment of Options Upon a Change in Control

 

Notwithstanding any

provision to the contrary contained in any agreement evidencing an Option

granted to a Participant, in the event of a Change in Control in which the

surviving, continuing, successor, or purchasing corporation or other business

entity or parent thereof, as the case may be (the “Acquiring Corporation”), does not

assume the Company’s rights and obligations under the then-outstanding Options

held by the Participant or substitute for such Options substantially equivalent

options for the Acquiring Corporation’s stock, then the vesting and

exercisability of each such Option shall be accelerated in full effective

immediately prior to but conditioned upon the consummation of the Change in

Control.

 

5.             Severance Benefits

 

In the event of a

Participant’s Termination Upon a Change in Control and provided that the

Participant has executed and not revoked a Release at the time of such

Termination Upon a Change in Control, the Participant shall be entitled to

receive, in addition to all compensation and benefits earned by the Participant

through the date of the Participant’s termination of employment, the following

severance payments and benefits:

 

5.1                                 Salary and

Bonus.  Subject to Section 6,

within thirty (30) days following the later of the Participant’s termination of

employment or the last day following the Participant’s execution of the Release

on which the Participant may, by its terms, revoke such Release, the Company

shall pay to the Participant in a lump sum cash payment an amount equal to the

sum of (a) the Participant’s Base Salary Rate multiplied by the number of months

in the Benefit Period applicable to the Participant and (b) the Participant’s

Annual Bonus multiplied by a ratio, the numerator of which is the number of

months in the Benefit Period applicable to the Participant and the denominator

of which is twelve (12).

 

5.2                                 Health and

Life Insurance Benefits.  For

the period commencing immediately following the Participant’s termination of

employment and continuing for the duration of the Benefit Period applicable to

the Participant, the Company shall arrange to provide the Participant and his

or her dependents with health (including medical and dental) and life insurance

benefits substantially similar to those provided to the Participant and his or

her dependents immediately prior to the date of such termination of employment

(without giving effect to any reduction in such benefits constituting Good

Reason).  Such benefits shall be

provided to the Participant at the same premium cost to the Participant and at

the same coverage level as in effect as of the Participant’s termination of

employment (without giving effect to any reduction in such benefits

constituting Good Reason); provided, however, that the Participant shall be

subject to any change in the premium cost and/or level of coverage applicable

generally to all employees holding the position or comparable position with the

Company which the Participant held immediately prior to the Change in

Control.  The Company may satisfy its

obligation to provide a continuation of health insurance benefits by paying

that portion of the Participant’s premiums required under the Consolidated

Omnibus Budget Reconciliation Act (“COBRA”) that exceed the amount

of premiums that the

 

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Participant would have

been required to pay for continuing coverage had he or she continued in

employment.  If the Company is not

reasonably able to continue such coverage under the Company’s benefit plans,

the Company shall provide substantially equivalent coverage under other sources

or will reimburse the Participant for premiums (in excess of the Participant’s

premium cost described above) incurred by the Participant to obtain his or her

own such coverage.  If the Participant

becomes eligible to receive such coverage under another employer’s benefit

plans during the applicable Benefit Period, the Participant shall report such

eligibility to the Company, and the Company’s obligations under this

Section 5.2 shall be secondary to the coverage provided by such other

employer’s plans.  For the balance of

any period in excess of the applicable Benefit Period during which the

Participant is entitled to continuation coverage under COBRA, the Participant

shall be entitled to maintain coverage for himself or herself and the

Participant’s eligible dependents at the Participant’s own expense.

 

5.3                                 Acceleration

of Vesting of Options, Cash Incentive Program and Restricted Stock; Extension

of Option Exercise Period. 

Notwithstanding any provision to the contrary contained in any agreement

evidencing an Option or shares of Restricted Stock granted to a Participant,

the vesting and exercisability of each of the Participant’s outstanding Options

and the vesting of the Participant’s Cash Incentive Program and shares of

Restricted Stock shall be accelerated in full effective as of the date of the

Participant’s termination of employment so that each Option and share of

Restricted Stock held by the Participant shall be immediately exercisable and

fully vested.  Furthermore, the Option,

to the extent unexercised on the date on which the Participant’s employment

terminated, may be exercised by the Participant (or the Participant’s guardian

or legal representative) at any time prior to the later of the date specified

in the agreement evidencing such Option or the expiration of one (1) year after

the date on which the Participant’s employment terminated, but in any event no

later than the date of expiration of the Option’s term as set forth in the

agreement evidencing such Option.

 

5.4                                 Indemnification;

Insurance.

 

(a)                                  In

addition to any rights a Participant may have under any indemnification

agreement previously entered into between the Company and such Participant (a “Prior

Indemnity Agreement”), from and after the date of the

Participant’s termination of employment, the Company shall indemnify and hold

harmless the Participant against any costs or expenses (including attorneys’

fees), judgments, fines, losses, claims, damages or liabilities incurred in

connection with any claim, action, suit, proceeding or investigation, whether

civil, criminal, administrative or investigative, by reason of the fact that

the Participant is or was a director, officer, employee or agent of the Company

Group, or is or was serving at the request of the Company Group as a director,

officer, employee or agent of another corporation, partnership, joint venture,

trust or other enterprise, whether asserted or claimed prior to, at or after

the date of the Participant’s termination of employment, to the fullest extent

permitted under applicable law, and the Company shall also advance fees and

expenses (including attorneys’ fees) as incurred by the Participant to the

fullest extent permitted under applicable law. 

In the event of a conflict between the provisions of a Prior Indemnity

Agreement and the provisions of this Plan, the Participant may elect which

provisions shall govern.

 

(b)                                 For

a period of six (6) years from and after the date of termination of employment

of a Participant who was an officer and/or director of the Company at any time

prior to such termination of employment, the Company shall maintain a policy of

directors’ and officers’ liability insurance for the benefit of such

Participant which provides him or her with coverage no less favorable than that

provided for the Company’s continuing officers and directors.

 

6.             Federal Excise Tax Under Section 4999 of the Code

 

6.1                                 Excess

Parachute Payment.  In the

event that any payment or benefit received or to be received by the Participant

pursuant to this Plan or otherwise (collectively, the “Payments”)

would subject the Participant to any excise tax pursuant to Section 4999 of the

Code (the “Excise

Tax”) due to the characterization of such Payments as an

excess parachute payment under Section 280G of the Code, then, notwithstanding

the other provisions of this Plan, the amount of such Payments will not exceed

the amount which produces the greatest after-tax benefit to the Participant.

 

6.2                                 Determination

by Accountants.  Upon the occurrence of any event (the

“Event”) that would give rise to

any Payments pursuant to this Plan, the Company shall promptly request a

determination in

 

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writing to be made within

thirty (30) days of the date of the Event by independent public accountants

(the “Accountants”) selected by the

Company and reasonably acceptable to the Participant of the amount and type of

such Payments which would produce the greatest after-tax benefit to the

Participant.  For the purposes of such

determination, the Accountants may rely on reasonable, good faith

interpretations concerning the application of Sections 280G and 4999 of the

Code.  The Company and the Participant

shall furnish to the Accountants such information and documents as the

Accountants may reasonably request in order to make their required

determination.  The Company shall bear

all fees and expenses the Accountants may reasonably charge in connection with

their services contemplated by this Section. 

In the event that the report of the Accountants is not received within

thirty (30) days following the Participant’s Termination Upon Change in

Control, the Company shall pay to the Participant the cash severance benefits

required by Section 5.1 above (subject to any reduction necessary to produce

the greatest after-tax benefit to the Participant) within ten (10) days of the

date of the Accountants’ report of their determination.

 

7.             Conflict in Benefits; Noncumulation of Benefits

 

7.1                                 Effect of

Plan.  The terms of this

Plan, when accepted by a Participant pursuant to an executed Participation

Agreement, shall supersede all prior arrangements, whether written or oral, and

understandings regarding the subject matter of this Plan and shall be the

exclusive agreement for the determination of any payments and benefits due to

the Participant upon the events described in Sections 4, 5 and 6.

 

7.2                                 Noncumulation

of Benefits.  Except as

expressly provided in a written agreement between a Participant and the Company

entered into after the date of such Participant’s Participation Agreement and

which expressly disclaims this Section 7.2 and is approved by the Board or the

Committee, the total amount of payments and benefits that may be received by

the Participant as a result of the events described in Sections 4, 5 and 6

pursuant to (a) the Plan, (b) any agreement between the Participant and the

Company or (c) any other plan, practice or statutory obligation of the Company,

shall not exceed the amount of payments and benefits provided by this Plan upon

such events (plus any payments and benefits provided pursuant to an agreement

evidencing an Option, Cash Incentive Program or award of Restricted Stock, as

described in Section 4, or a Prior Indemnity Agreement, as described in Section

5.3(a)), and the aggregate amounts payable under this Plan shall be reduced to

the extent of any excess (but not below zero).

 

8.             Exclusive Remedy

 

The payments and benefits

provided by Section 5 and Section 6 (plus any payments and benefits

provided pursuant to an agreement evidencing an Option, Cash Incentive Program

or award of Restricted Stock, as described in Section 4, or a Prior Indemnity

Agreement, as described in Section 5.3(a)), if applicable, shall constitute the

Participant’s sole and exclusive remedy for any alleged injury or other damages

arising out of the cessation of the employment relationship between the

Participant and the Company in the event of the Participant’s Termination Upon

a Change in Control.  The Participant

shall be entitled to no other compensation, benefits, or other payments from

the Company as a result of any Termination Upon a Change in Control with

respect to which the payments and benefits described in Section 5 and

Section 6 (plus any payments and benefits provided pursuant to an

agreement evidencing an Option, Cash Incentive Program or award of Restricted

Stock, as described in Section 4, or a Prior Indemnity Agreement, as described

in Section 5.3(a)), if applicable, have been provided to the Participant,

except as expressly set forth in this Plan or, subject to the provisions of

Sections 7.2, in a duly executed employment agreement between Company and

the Participant.

 

9.             Proprietary and Confidential Information

 

The Participant agrees to

continue to abide by the terms and conditions of the confidentiality and/or

proprietary rights agreement between the Participant and the Company.

 

10.           Nonsolicitation

 

If the Company performs

its obligations to deliver the payments and benefits set forth in

Section 5 and Section 6 (plus any payments and benefits provided

pursuant to an agreement evidencing an Option, Cash

 

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Incentive Program or award of Restricted Stock, as described in Section

4, or a Prior Indemnity Agreement, as described in Section 5.3(a)), then for a

period equal to the Benefit Period applicable to a Participant following the

Participant’s Termination Upon a Change in Control, the Participant shall not,

directly or indirectly, recruit, solicit or invite the solicitation of any

employees of the Company to terminate their employment relationship with the

Company.

 

11.           No Contract of Employment

 

Neither the establishment

of the Plan, nor any amendment thereto, nor the payment of any benefits shall

be construed as giving any person the right to be retained by the Company, a

Successor or any other member of the Company Group.  Except as otherwise established in an employment agreement

between the Company and a Participant, the employment relationship between the

Participant and the Company is an “at-will” relationship.  Accordingly, either the Participant or the

Company may terminate the relationship at any time, with or without cause, and

with or without notice except as otherwise provided by Section 14.  In addition, nothing in this Plan shall in any

manner obligate any Successor or other member of the Company Group to offer

employment to any Participant or to continue the employment of any Participant

which it does hire for any specific duration of time.

 

12.           Arbitration

 

12.1                           Disputes

Subject to Arbitration.  Any

claim, dispute or controversy arising out of this Plan, the interpretation,

validity or enforceability of this Plan or the alleged breach thereof shall be

submitted by the parties to binding arbitration by the American Arbitration

Association; provided, however, that (a) the arbitrator shall have no authority

to make any ruling or judgment that would confer any rights with respect to

trade secrets, confidential and proprietary information or other intellectual

property; and (b) this arbitration provision shall not preclude the parties

from seeking legal and equitable relief from any court having jurisdiction with

respect to any disputes or claims relating to or arising out of the misuse or

misappropriation of intellectual property. 

Judgment may be entered on the award of the arbitrator in any court

having jurisdiction.

 

12.2                           Site of

Arbitration.  The site of the

arbitration proceeding shall be in Santa Clara, California or any other site

mutually agreed to by the Company and the Participant.

 

12.3                           Costs and

Expenses Borne by Company. 

All costs and expenses of arbitration, including but not limited to

reasonable attorneys’ fees and other costs reasonably incurred by the

Participant in connection with an arbitration in accordance with this Section

12, shall be paid by the Company.  Notwithstanding

the foregoing, if the Participant initiates the arbitration, and the arbitrator

finds that the Participant’s claims were totally without merit or frivolous,

then the Participant shall be responsible for the Participant’s own attorneys’

fees and costs.

 

13.           Successors and Assigns

 

13.1                           Successors

of the Company.  The Company

shall require any successor or assign (whether direct or indirect, by purchase,

merger, consolidation or otherwise) to all or substantially all of the business

and/or assets of the Company, expressly, absolutely and unconditionally to

assume and agree to perform this Plan in the same manner and to the same extent

that the Company would be required to perform it if no such succession or

assignment had taken place.  Failure of

the Company to obtain such agreement shall be a material breach of this Plan

and shall entitle the Participant to resign for Good Reason and to receive the

benefits provided under this Plan in the event of Termination Upon a Change in

Control.

 

13.2                           Acknowledgment

by Company.  If, after a

Change in Control, the Company fails to reasonably confirm that it has

performed the obligation described in Section 13.1 within thirty (30) days

after written notice from the Participant, such failure shall be a material

breach of this Plan and shall entitle the Participant to resign for Good Reason

and to receive the benefits provided under this Plan in the event of

Termination Upon a Change in Control.

 

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13.3                           Heirs and

Representatives of Participant. 

This Plan shall inure to the benefit of and be enforceable by the

Participant’s personal or legal representatives, executors, administrators,

successors, heirs, distributees, devises, legatees or other beneficiaries.  If the Participant should die while any

amount would still be payable to the Participant hereunder (other than amounts

which, by their terms, terminate upon the death of the Participant) if the

Participant had continued to live, then all such amounts, unless otherwise

provided herein, shall be paid in accordance with the terms of this Plan to the

executors, personal representatives or administrators of the Participant’s

estate.

 

14.           Notices

 

14.1                           General.  For purposes of this Plan, notices and all

other communications provided for herein shall be in writing and shall be

deemed to have been duly given when personally delivered or when mailed by

United States certified mail, return receipt requested, or by overnight

courier, postage prepaid, as follows:

 

(a)                                  if

to the Company:

 

Zoran Corporation

3112 Scott Boulevard

Santa Clara, California

95054

Attention: President

 

(b)                                 if

to the Participant, at the home address which the Participant most recently

communicated to the Company in writing.

 

Either party may provide

the other with notices of change of address, which shall be effective upon

receipt.

 

14.2                           Notice of

Termination.  Any termination

by the Company of the Participant’s employment during the Change in Control

Period or any resignation by the Participant during the Change in Control

Period shall be communicated by a notice of termination or resignation to the

other party hereto given in accordance with Section 14.1.  Such notice shall indicate the specific

termination provision in this Plan 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.

 

15.           Termination and Amendment of Plan

 

This Plan and/or any

Participation Agreement executed by a Participant may not be terminated with

respect to such Participant without the written consent of the

Participant.  This Plan and/or any

Participation Agreement executed by a Participant may be modified, amended or

superseded with respect to such Participant only by a supplemental written

agreement between the Participant and the Company.

 

16.           Miscellaneous Provisions

 

16.1                           Unfunded

Obligation.  Any amounts

payable to Participants pursuant to the Plan are unfunded obligations.  The Company shall not be required to

segregate any monies from its general funds, or to create any trusts, or

establish any special accounts with respect to such obligations.  The Company shall retain at all times

beneficial ownership of any investments, including trust investments, which the

Company may make to fulfill its payment obligations hereunder.  Any investments or the creation or

maintenance of any trust or any Participant account shall not create or

constitute a trust or fiduciary relationship between the Board or the Company

and a Participant, or otherwise create any vested or beneficial interest in any

Participant or the Participant’s creditors in any assets of the Company.

 

16.2                           No Duty to

Mitigate; Obligations of Company. 

A Participant shall not be required to mitigate the amount of any

payment or benefit contemplated by this Plan by seeking employment with a new

employer or otherwise, nor shall any such payment or benefit (except for

benefits to the extent described in Section 5.2) be reduced by any compensation

or benefits that the Participant may receive from employment by another

 

9

 

employer.  Except as otherwise provided by this Plan,

the obligations of the Company to make payments to the Participant and to make

the arrangements provided for herein are absolute and unconditional and may not

be reduced by any circumstances, including without limitation any set-off,

counterclaim, recoupment, defense or other right which the Company may have

against the Participant or any third party at any time.

 

16.3                           No

Representations.  By

executing a Participation Agreement, the Participant acknowledges that in

becoming a Participant in the Plan, the Participant is not relying and has not

relied on any promise, representation or statement made by or on behalf of the

Company which is not set forth in this Plan.

 

16.4                           Waiver.  No waiver by the Participant or the Company

of any breach of, or of any lack of compliance with, any condition or provision

of this Plan 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.

 

16.5                           Choice of

Law.  The validity,

interpretation, construction and performance of this Plan shall be governed by

the substantive laws of the State of California, without regard to its conflict

of law provisions.

 

16.6                           Validity.  The invalidity or unenforceability of any

provision of this Plan shall not affect the validity or enforceability of any

other provision of this Plan, which shall remain in full force and effect.

 

16.7                           Benefits Not

Assignable.  Except as

otherwise provided herein or by law, no right or interest of any Participant

under the Plan shall be assignable or transferable, in whole or in part, either

directly or by operation of law or otherwise, including, without limitation, by

execution, levy, garnishment, attachment, pledge or in any other manner, and no

attempted transfer or assignment thereof shall be effective.  No right or interest of any Participant under

the Plan shall be liable for, or subject to, any obligation or liability of

such Participant.

 

16.8                           Tax

Withholding.  All payments

made pursuant to this Plan will be subject to withholding of applicable income

and employment taxes.

 

16.9                           Consultation

with Legal and Financial Advisors. 

By executing a Participation Agreement, the Participant acknowledges

that this Plan confers significant legal rights, and may also involve the

waiver of rights under other agreements; that the Company has encouraged the Participant

to consult with the Participant’s personal legal and financial advisors; and

that the Participant has had adequate time to consult with the Participant’s

advisors before executing the Participation Agreement.

 

17.           Agreement

 

By executing a

Participation Agreement, the Participant acknowledges that the Participant has

received a copy of this Plan and has read, understands and is familiar with the

terms and provisions of this Plan.  This

Plan shall constitute an agreement between the Company and the Participant

executing a Participation Agreement.

 

IN WITNESS WHEREOF, the undersigned Secretary of the

Company certifies that the foregoing Plan was duly adopted by the Committee on

November 8, 2002.

 

	

   

  	

   

  

 

10

 

EXHIBIT A

 

 

FORM OF

 

AGREEMENT TO

PARTICIPATE IN THE

 

ZORAN CORPORATION

 

EXECUTIVE

RETENTION AND SEVERANCE PLAN

 

11

 

AGREEMENT TO

PARTICIPATE IN THE

ZORAN

CORPORATION

EXECUTIVE

RETENTION AND SEVERANCE PLAN

Adopted

November 8, 2002

 

In consideration of the benefits provided by the Zoran

Corporation Executive Retention and Severance Plan (the “Plan”), the undersigned employee

of Zoran Corporation (the “Company”) and the Company agree

that, as of the date written below, the undersigned shall become a Participant

in the Plan and shall be fully bound by and subject to all of its

provisions.  All references to a

“Participant” in the Plan shall be deemed to refer to the undersigned.

 

The undersigned employee acknowledges that the Plan

confers significant legal rights and may also constitute a waiver of rights

under other agreements with the Company; that the Company has encouraged the

undersigned to consult with the undersigned’s personal legal and financial

advisors; and that the undersigned has had adequate time to consult with the

undersigned’s advisors before executing this agreement.

 

The undersigned employee acknowledges that he or she

has received a copy of the Plan and has read, understands and is familiar with

the terms and provisions of the Plan. 

The undersigned employee further acknowledges that (1) by accepting the

arbitration provision set forth in Section 12 of the Plan, the undersigned is

waiving any right to a jury trial in the event of any dispute covered by such

provision and (2) except as otherwise established in an employment agreement

between the Company and the undersigned, the employment relationship between

the undersigned and the Company is an “at-will” relationship.

 

	

   

  	

  Executed on

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  PARTICIPANT

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Signature

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Name Printed

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Address

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  ZORAN CORPORATION

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  By:

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Title:

  	

   

  
								

 

12

 

EXHIBIT B

 

 

FORMS OF

 

GENERAL RELEASE OF

CLAIMS

 

13

 

GENERAL

RELEASE OF CLAIMS

[Age

40 and over]

 

This Agreement is by and between [Employee Name] (“Employee”) and [Zoran Corporation or successor that agrees to assume

the Executive Retention and Severance Plan following a Change in Control]

(the “Company”).  This Agreement will

become effective on the eighth (8th) day after it is signed by Employee (the

“Effective Date”), provided that the Company has signed this Agreement and

Employee has not revoked this Agreement (by written notice to [Company Contact Name] at the Company) prior

to that date.

 

RECITALS

 

A.                                   Employee

was employed by the Company as of

                      ,              .

 

B.                                     Employee

and the Company entered into an Agreement to Participate in the Zoran

Corporation Executive Retention and Severance Plan (such agreement and plan

being referred to herein as the “Plan”) effective as

of                      ,              

wherein Employee is entitled to receive certain benefits in the event of a

Termination Upon a Change in Control (as defined by the Plan), provided

Employee signs and does not revoke a Release (as defined by the Plan).

 

C.                                     A

Change in Control (as defined by the Plan) has occurred as a result of [briefly describe change in control]

 

D.                                    Employee’s

employment is being terminated as a result of a Termination Upon a Change in

Control.  Employee’s last day of work

and termination are effective as

of                      ,              .  Employee desires to receive the payments and

benefits provided by the Plan by executing this Release.

 

NOW, THEREFORE, the

parties agree as follows:

 

1.                                       Commencing

on the Effective Date, the Company shall provide Employee with the applicable

payments and benefits set forth in the Plan in accordance with the terms of the

Plan.  Employee acknowledges that the

payments and benefits made pursuant to this paragraph are made in full

satisfaction of the Company’s obligations under the Plan.  Employee further acknowledges that Employee

has been paid all wages and accrued, unused vacation that Employee earned

during his or her employment with the Company.

 

2.                                       Employee

and Employee’s successors release the Company, its respective subsidiaries,

stockholders, investors, directors, officers, employees, agents, attorneys,

insurers, legal successors and assigns of and from any and all claims, actions

and causes of action, whether now known or unknown, which Employee now has, or

at any other time had, or shall or may have against those released parties

based upon or arising out of any matter, cause, fact, thing, act or omission

whatsoever directly related to Employee’s employment by the Company or the

termination of such employment and occurring or existing at any time up to and

including the Effective Date, including, but not limited to, any claims of

breach of written contract, wrongful termination, retaliation, fraud,

defamation, infliction of emotional distress, or national origin, race, age,

sex, sexual orientation, disability or other discrimination or harassment under

the Civil Rights Act of 1964, the Age Discrimination In Employment Act of 1967,

the Americans with Disabilities Act, the Fair Employment and Housing Act or any

other applicable law.  Notwithstanding

the foregoing, this release shall not apply to any right of the Employee

pursuant to Section 5.4 of the Plan or pursuant to a Prior Indemnity

Agreement (as such term is defined by the Plan).

 

3.                                       Employee

acknowledges that he or she has read Section 1542 of the Civil Code of the

State of California, which states in full:

 

A general release does

not extend to claims which the creditor does not know or suspect to exist in

his favor at the time of executing the release, which if known by him must have

materially affected his settlement with the debtor.

 

Employee waives any

rights that Employee has or may have under Section 1542 and comparable or

similar provisions of the laws of other states in the United States to the full

extent that he or she may lawfully waive such

 

14

 

rights pertaining to this general release of claims, and affirms that

Employee is releasing all known and unknown claims that he or she has or may

have against the parties listed above.

 

4.                                       Employee

and the Company acknowledge and agree that they shall continue to be bound by

and comply with the terms and obligations under the following agreements: (i)

any proprietary rights or confidentiality agreements between the Company and

Employee, (ii) the Plan, (iii) any Prior Indemnity Agreement (as such term is

defined by the Plan) to which Employee is a party, and (iv) any stock option,

stock grant, stock purchase or Cash Incentive Program (as described in Section

4 of the Plan) agreements between the Company and Employee.

 

5.                                       This

Agreement shall be binding upon, and shall inure to the benefit of, the parties

and their respective successors, assigns, heirs and personal representatives.

 

6.                                       The

parties agree that any and all disputes that both (i) arise out of the Plan,

the interpretation, validity or enforceability of the Plan or the alleged

breach thereof and (ii) relate to the enforceability of this Agreement or the

interpretation of the terms of this Agreement shall be subject to binding

arbitration pursuant to Section 12 of the Plan.

 

7.                                       The

parties agree that any and all disputes that (i) do not arise out of the Plan,

the interpretation, validity or enforceability of the Plan or the alleged

breach thereof and (ii) relate to the enforceability of this Agreement, the

interpretation of the terms of this Agreement or any of the matters herein

released or herein described shall be subject to binding arbitration, to the

extent permitted by law, in Santa Clara, California or any other cite mutually

agreed to by the Company and Employee, before the American Arbitration

Association, as provided in this paragraph. 

The parties agree to and hereby waive their rights to jury trial as to

such matters to the extent permitted by law; provided however, that (a) the

arbitrator shall have no authority to make any ruling or judgment that would

confer any rights with respect to trade secrets, confidential and proprietary

information or other intellectual property; and (b) this arbitration provision

shall not preclude the parties from seeking legal and equitable relief from any

court having jurisdiction with respect to any disputes or claims relating to or

arising out of the misuse or misappropriation of intellectual property.  The Company shall bear the costs of the

arbitrator, forum and filing fees and each party shall bear its own respective

attorney fees and all other costs, unless otherwise provided by law and awarded

by the arbitrator.

 

8.                                       This

Agreement constitutes the entire agreement between the parties with respect to

the subject matter hereof and supersedes all prior negotiations and agreements,

whether written or oral, with the exception of any agreements described in

paragraph 4 of this Agreement. 

This Agreement may not be modified or amended except by a document signed

by an authorized officer of the Company and Employee.  If any provision of this Agreement is deemed invalid, illegal or

unenforceable, such provision shall be modified so as to make it valid, legal

and enforceable, and the validity, legality and enforceability of the remaining

provisions of this Agreement shall not in any way be affected.

 

EMPLOYEE UNDERSTANDS THAT

EMPLOYEE SHOULD CONSULT WITH AN ATTORNEY PRIOR TO SIGNING THIS AGREEMENT AND

THAT EMPLOYEE IS GIVING UP ANY LEGAL CLAIMS EMPLOYEE HAS AGAINST THE PARTIES

RELEASED ABOVE BY SIGNING THIS AGREEMENT. 

EMPLOYEE FURTHER UNDERSTANDS THAT EMPLOYEE MAY HAVE UP TO 45 DAYS TO

CONSIDER THIS AGREEMENT, THAT EMPLOYEE MAY REVOKE IT AT ANY TIME DURING THE 7

DAYS AFTER EMPLOYEE SIGNS IT, AND THAT IT SHALL NOT BECOME EFFECTIVE UNTIL THAT

7-DAY PERIOD HAS PASSED.  EMPLOYEE

ACKNOWLEDGES THAT EMPLOYEE IS SIGNING THIS AGREEMENT KNOWINGLY, WILLINGLY AND

VOLUNTARILY IN EXCHANGE FOR THE COMPENSATION AND BENEFITS DESCRIBED IN

PARAGRAPH 1.

 

	

  Dated:

  	

   

  	

   

  	

   

  
	

   

  	

  [Employee Name]

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  [Company]

  
	

   

  	

   

  
	

   

  	

   

  
	

  Dated:

  	

   

  	

   

  	

  By:

  	

   

  
						

 

15

 

GENERAL

RELEASE OF CLAIMS

[Under

age 40]

 

This Agreement is by and between [Employee Name] (“Employee”) and [Zoran Corporation or successor that agrees to assume

the Executive Retention and Severance Plan following a Change in Control]

(the “Company”).  This Agreement is

effective on the day it is signed by Employee (the “Effective Date”).

 

RECITALS

 

A.                                   Employee

was employed by the Company as of

                      ,              .

 

B.                                     Employee

and the Company entered into an Agreement to Participate in the Zoran

Corporation Executive Retention and Severance Plan (such agreement and plan

being referred to herein as the “Plan”) effective as of

                      ,              wherein

Employee is entitled to receive certain benefits in the event of a Termination

Upon a Change in Control (as defined by the Plan), provided Employee signs a

Release (as defined by the Plan).

 

C.                                     A

Change in Control (as defined by the Plan) has occurred as a result of [briefly describe change in control]

 

D.                                    Employee’s

employment is being terminated as a result of a Termination Upon a Change in

Control.  Employee’s last day of work

and termination are effective as of

                      ,              

(the “Termination Date”).  Employee

desires to receive the payments and benefits provided by the Plan by executing

this Release.

 

NOW, THEREFORE, the

parties agree as follows:

 

1.                                       Commencing

on the Effective Date, the Company shall provide Employee with the applicable

payments and benefits set forth in the Plan in accordance with the terms of the

Plan.  Employee acknowledges that the

payments and benefits made pursuant to this paragraph are made in full

satisfaction of the Company’s obligations under the Plan.  Employee further acknowledges that Employee

has been paid all wages and accrued, unused vacation that Employee earned

during his or her employment with the Company.

 

2.                                       Employee

and Employee’s successors release the Company, its respective subsidiaries,

stockholders, investors, directors, officers, employees, agents, attorneys,

insurers, legal successors and assigns of and from any and all claims, actions

and causes of action, whether now known or unknown, which Employee now has, or

at any other time had, or shall or may have against those released parties

based upon or arising out of any matter, cause, fact, thing, act or omission

whatsoever directly related to Employee’s employment by the Company or the

termination of such employment and occurring or existing at any time up to and

including the Termination Date, including, but not limited to, any claims of

breach of written contract, wrongful termination, retaliation, fraud,

defamation, infliction of emotional distress, or national origin, race, age,

sex, sexual orientation, disability or other discrimination or harassment under

the Civil Rights Act of 1964, the Age Discrimination In Employment Act of 1967,

the Americans with Disabilities Act, the Fair Employment and Housing Act or any

other applicable law.  Notwithstanding the

foregoing, this release shall not apply to any right of the Employee pursuant

to Sections 5.4 of the Plan or pursuant to a Prior Indemnity Agreement (as

such terms are defined by the Plan).

 

3.                                       Employee

acknowledges that he or she has read Section 1542 of the Civil Code of the

State of California, which states in full:

 

A general release does

not extend to claims which the creditor does not know or suspect to exist in

his favor at the time of executing the release, which if known by him must have

materially affected his settlement with the debtor.

 

Employee waives any

rights that Employee has or may have under Section 1542 and comparable or

similar provisions of the laws of other states in the United States to the full

extent that he or she may lawfully waive such rights pertaining to this general

release of claims, and affirms that Employee is releasing all known and unknown

claims that he or she has or may have against the parties listed above.

 

16

 

4.                                       Employee

and the Company acknowledge and agree that they shall continue to be bound by

and comply with the terms and his obligations under the following agreements:

(i) any proprietary rights or confidentiality agreements between the Company

and Employee, (ii) the Plan, (iii) any Prior Indemnity Agreement (as such term

is defined by the Plan) to which Employee is a party, and (iv) any stock

option, stock grant, stock purchase or Cash Incentive Program (as described in

Section 4 of the Plan) agreements between the Company and Employee.

 

5.                                       This

Agreement shall be binding upon, and shall inure to the benefit of, the parties

and their respective successors, assigns, heirs and personal representatives.

 

6.                                       The

parties agree that any and all disputes that both (i) arise out of the Plan,

the interpretation, validity or enforceability of the Plan or the alleged

breach thereof and (ii) relate to the enforceability of this Agreement or the

interpretation of the terms of this Agreement shall be subject to binding arbitration

pursuant to Section 12 of the Plan.

 

7.                                       The

parties agree that any and all disputes that (i) do not arise out of the Plan,

the interpretation, validity or enforceability of the Plan or the alleged

breach thereof and (ii) relate to the enforceability of this Agreement, the

interpretation of the terms of this Agreement or any of the matters herein

released or herein described shall be subject to binding arbitration, to the

extent permitted by law, in Santa Clara, California or any other cite mutually

agreed to by the Company and Employee, before the American Arbitration

Association, as provided in this paragraph. 

The parties agree to and hereby waive their rights to jury trial as to

such matters to the extent permitted by law; provided however, that (a) the

arbitrator shall have no authority to make any ruling or judgment that would

confer any rights with respect to trade secrets, confidential and proprietary

information or other intellectual property; and (b) this arbitration provision

shall not preclude the parties from seeking legal and equitable relief from any

court having jurisdiction with respect to any disputes or claims relating to or

arising out of the misuse or misappropriation of intellectual property.  The Company shall bear the costs of the

arbitrator, forum and filing fees and each party shall bear its own respective

attorney fees and all other costs, unless otherwise provided by law and awarded

by the arbitrator.

 

8.                                       This

Agreement constitutes the entire agreement between the parties with respect to

the subject matter hereof and supersedes all prior negotiations and agreements,

whether written or oral, with the exception of any agreements described in

paragraph 4 of this Agreement. 

This Agreement may not be modified or amended except by a document

signed by an authorized officer of the Company and Employee.  If any provision of this Agreement is deemed

invalid, illegal or unenforceable, such provision shall be modified so as to

make it valid, legal and enforceable, and the validity, legality and

enforceability of the remaining provisions of this Agreement shall not in any

way be affected.

 

EMPLOYEE UNDERSTANDS THAT

EMPLOYEE SHOULD CONSULT WITH AN ATTORNEY PRIOR TO SIGNING THIS AGREEMENT AND

THAT EMPLOYEE IS GIVING UP ANY LEGAL CLAIMS EMPLOYEE HAS AGAINST THE PARTIES

RELEASED ABOVE BY SIGNING THIS AGREEMENT. 

EMPLOYEE ACKNOWLEDGES THAT EMPLOEE IS SIGNING THIS AGREEMENT KNOWINGLY,

WILLINGLY AND VOLUNTARILY IN EXCHANGE FOR THE COMPENSATION AND BENEFITS DESCRIBED

IN PARAGRAPH 1.

 

 

	

  Dated:

  	

   

  	

   

  	

   

  
	

   

  	

  [Employee Name]

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  [Company]

  
	

   

  	

   

  
	

   

  	

   

  
	

  Dated:

  	

   

  	

   

  	

  By:

  	

   

  
						

 

17Exhibit 10.16

 

[HENRY COMPANY(R) LOGO]

 

	
   

  	
  December 9, 2002

  

 

Jeffrey A. Wahba

Chief Financial Officer

Henry Company

2911 Slauson Avenue

Huntington Park, California 90255

 

Re:       Revised
Incentive Compensation 

 

Dear Jeff:

 

This letter is to set forth certain agreements relating to the
Incentive Compensation Agreement (the “Incentive Agreement”) dated as of
December 22, 1988 and amended and restated as of August 1,1994, between the
Henry Company (“Company”) and you. In consideration of the foregoing, the Company
and you hereby agree as follows:

 

1.             The Deferred
Benefit Amount set forth in the Incentive Agreement is hereby fixed at $288,350
and is fully vested. The Company agrees to pay this amount in full to you
within 60 days of the date of this Agreement. Upon payment of the Deferred
Benefit Amount, the Incentive Agreement will terminate automatically, without
any further action on your or our part, and thereafter shall have no force and
effect.

 

2.             The Company will
pay you minimum annual cumulative bonus payments of $50,000 for the years
ending December 31, 2002 through December 31, 2008 (seven years’ cumulative
minimum total of $350,000). All bonuses received for 2002 through 2008 will be
counted against the minimums and applied first against the 2002 minimum, then
2003, and so forth.

 

If you leave the Company’s employment before December 31, 2008, the
amount of minimum cumulative bonus due you will be $50,000 times the number of
full years employed after December 31, 2001, plus $4,166 times the number of
full months in a partial year employed after December 31, 2001, less all
bonuses (including minimum bonuses) previously paid related to periods after
December 31, 2001.

 

3.             The Company has
indicated its intent relating to a long-term incentive compensation arrangement,
a copy of which is attached hereto. 
Event of sale payments pursuant to such arrangement or otherwise will
not be considered bonuses that would be applied against the minimum bonus set
forth above.

 

4.             Upon payment of the
existing Deferred Benefit Amount of $288,350 the guarantee by Mr. Warner Henry
pursuant to the agreement dated August 9, 2001, 2001 will be extinguished and
will have no force and effect.

 

 

Upon your signature set forth below, this letter will be a binding
agreement between us.

 

	
   

  	
  Henry Company

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Warner W. Henry

  	
   

  
	
   

  	
   

  	
  Warner W. Henry

  
	
   

  	
   

  	
  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ William H. Baribault

  	
   

  
	
   

  	
   

  	
  William H. Baribault

  
	
   

  	
   

  	
  Chief Operating Officer

  

 

 

Accepted and Agreed this 9th

day of December, 2002:

 

	
  /s/ Jeffrey A. Wahba

  	
   

  
	
  Jeffrey A. Wahba

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