Employment Agreement W/ Dennis Cocco

EMPLOYMENT AGREEMENT


Employment Agreement, dated as of July 6, 1998 ("Effective Date") between DENNIS COCCO of 4 Little Pond, Laguna Niguel, CA 92677 ("the Employee") and C.P. CLARE CORPORATION, a Massachusetts corporation with its principal office at 78 Cherry Hill Drive, Beverly, MA 01915-1048 (the "Company"). Unless the context otherwise requires, the term "Company" shall include all subsidiary corporations of the Company.


WHEREAS, on the Effective Date, the Company acquired all of the outstanding stock of Micronix Integrated Systems, Inc. ("Micronix") pursuant to a merger with a subsidiary of the Company pursuant to an Agreement and Plan of Merger dated as of July 6, 1998 between the Company, a wholly owned subsidiary of the Company, Micronix, the Employee and the other principal shareholders of Micronix (the "Transaction") and the Employee was previously the President and principal shareholder of Micronix; and


WHEREAS, as a condition to the Transaction, the parties hereto have agreed to enter into this Employment Agreement.


NOW THEREFORE, in consideration of the terms and mutual covenants herein contained, the Employee and the Company agree as follows:


1. TERM OF EMPLOYMENT.


(a) EMPLOYMENT. The Company hereby employs the Employee, and the Employee hereby accepts employment by the Company, for a period of five years commencing on the Effective Date and ending on the fifth anniversary of the Effective Date (the "Initial Term"), subject to extension in accordance with the provisions of subparagraph (b), below, unless terminated earlier in accordance with the terms hereof (the "Employment Period").


(b) EXTENSION OF TIME. Unless either party shall have given notice of its intention to terminate this Agreement 120 days prior to the end of the Initial Term or any successive one year term or unless this Agreement is terminated pursuant to Paragraph 8, the term of the employment of the Employee under this Agreement shall be automatically renewed for successive one year terms.


2. CAPACITY. The Employee shall serve as President of Clare Micronix Integrated Systems, Inc., a wholly owned subsidiary of the Company or, in the event Clare Micronix Integrated Systems, Inc. is later combined with the Company, as President of Clare Micronix, a division of CP Clare Corporation (in either case, the "Division"), shall report to the Chief Operating Officer of the Company and shall perform such duties and functions with respect to such position as are assigned from time to time by the Board of Directors or by the Chief Operating Officer or Chief Executive Officer of the Company. In all events, Employee shall have and perform such duties and functions as are appropriate for a division president. The Employee shall also be a member of the CP Clare Executive Management Team, as it may be composed and operated from time to time. During the Employment Period and unless otherwise agreed to by the parties, the Division will maintain a material business presence in Orange County, California (which will be the principal place for Employee's performance of services) and the Employee shall not be required to relocate his personal residence in order to perform his duties under this Agreement. To the extent that Clare Micronix Integrated Systems, Inc. remains a wholly owned subsidiary of the Company, the Employee shall be a director of the subsidiary.


2


3. FULL-TIME EMPLOYMENT. The Employee shall devote his entire business and professional time, attention and energies to the performance of his duties to the Company and of any of its subsidiaries by which he may be employed and shall not, directly or indirectly, actively engage in or concern himself with any other activities or commitments which interfere with the performance of his duties hereunder or which, even if non-interfering, may be inimical or contrary to the best interests of the Company. Notwithstanding the foregoing, the Employee may at all times during the Employment Period (i) subject in each case to the approval of the Chief Executive Officer of the Company, serve as an officer, director, trustee, or committee member of any religious, professional, civic, charitable or educational organization, or as a director of any corporation whose business is not competitive with that of the Company; provided, however, that Chief Executive Officer shall have been deemed to approve the activities set forth in Schedule 3 hereof; and (ii) engage in, and devote time and effort to, any and all personal investments or business ventures unrelated to the business or affairs of the Company, in each case so long as such activities do not materially interfere with his obligations set forth in this Paragraph 3 and provided that such activities are permitted under Paragraph 13 of this Agreement.


4. COMPENSATION AND BENEFITS. For all services rendered by the Employee to the Company, the Company shall pay to the Employee during the Employment Period the following compensation:


(a) BASE SALARY. The Employee shall be entitled to an annual base salary of Two Hundred Thousand Dollars ($200,000) from the date of this Agreement until the expiration of the Employment Period. The base salary may be increased (but may not be reduced) by approval of the Board of Directors of the Company for any fiscal year of the Company during the Employment Period. To that end, the Employee shall receive a performance review at least once in each fiscal year of the Company, in connection with which he shall be eligible for such merit increases and other salary adjustments as the Board of Directors of the Company shall approve.


(b) ANNUAL BONUS. In addition to his regular salary, the Employee shall be eligible (subject to the provisions of Paragraph 8(e) hereof) to receive an annual bonus each year of up to 50% of his base salary on terms consistent with those applicable, from time to time, to the other members of the CP Clare Executive Management Team including increases to such bonus amount based on performance multiples that may be in effect from time to time. For the first fiscal year of employment by the Employee, the bonus, if granted, shall be prorated for the period from the Effective Date through the end of the fiscal year.


(c) STOCK OPTION GRANT. In addition to his regular salary, the Employee shall be eligible (subject to the provisions of Paragraph 8(e) hereof) to receive grants of options to purchase Common Stock in the Company consistent with the grants to other members of the CP Clare Executive Management Team.


(d) PERFORMANCE STOCK OPTION BONUS. In addition to his regular salary, the Employee shall be eligible (subject to the provisions of Paragraph 8(e) hereof) to receive annual grants of options to purchase Common Stock in the Company in amounts set forth on Exhibit A to this Agreement ("Performance Options"). Grants of Performance Options, if any, shall be determined following the end of each fiscal year of the Company based on the performance of the Division in the manner described on Exhibit A. Performance Options shall be granted pursuant to the Company's 1995 Stock Option and Incentive Plan, and/or other option plan providing for the issuance of stock options as may from time to time be in effect. Performance Options will be issued at the fair market value


2 3


on the date of grant. Any portion of the Performance Options which are unvested on the date of termination of Employee's employment with the Company shall lapse upon the date of termination, if such termination was the result of one of the following: (i) Company's termination of Employee for Good Cause (as defined in Paragraph 8(b)) or (ii) Employee's resignation of employment, for any reason. Notwithstanding anything to the contrary in this Agreement, after the date of termination of employment, the Employee shall retain Performance Options granted under this Paragraph 4(d) and vesting shall continue pursuant to the terms and conditions of the option agreement governing such options, except as provided in the immediately preceding sentence. Performance Options will have provisions regarding vesting and duration and registration provisions and will be in the form substantially similar to Initial Options and any changes will not be materially adverse to the Employee.


(e) PAYMENT OF SALARY AND BONUS. The Employee's base salary under subparagraph (a) of this Paragraph 4 shall be payable in substantially equal installments in accordance with the Company's existing payroll practices for its executives. Any bonus payable under subparagraph (b) of this Paragraph 4 shall be paid to the Employee within 60 days following the end of the fiscal year with respect to which such bonus relates. Any stock option grants payable under subparagraph (c) of this Paragraph 4 shall be made in a manner consistent with the manner and time any options are issued to the CP Clare Executive Management Team. Any Performance Option grants under subparagraph (d) of this Paragraph 4 shall be made within 90 days following the end of each applicable fiscal year to which each option relates.


(f) WITHHOLDING TAXES. The Employee agrees that the Company shall withhold from any and all payments required to be made to the Employee pursuant to this Agreement all federal, state, local and/or other taxes which the Company determines are required to be withheld in accordance with applicable statutes and/or regulations from time to time in effect.


(g) ACCELERATION OF OPTIONS. The vesting of the right to exercise all options granted to the Employee under Paragraphs 4 and 5 of this Agreement shall be accelerated in the event that there shall be a Change of Control of the Company (as hereafter defined).


5. INITIAL GRANT OF STOCK OPTIONS.


On the Effective Date, the Employee will be granted options to purchase 240,000 shares of Common Stock in the Company vesting cumulatively in five equal amounts on each anniversary of the Effective Date. Such options shall be (i) Incentive Stock Options, as such term is defined pursuant to Internal Revenue Code Section 422, as it may be amended from time to time, and issued under the Company's 1995 Stock Option and Incentive Plan to the extent that such options qualify on the date of grant as Incentive Stock Options and (ii) non-qualified stock options, to the extent that balance of such option do not qualify as Incentive Stock Options with substantially the same terms and conditions as options issued under the Plan referenced in clause (i) (collectively, the "Initial Options"). The forms of Option Agreements to be issued to Employee pursuant to this Section 5 are attached hereto as Exhibit B-1 and B-2. All Initial Options shall have been approved in advance by the Board of Directors of the Company and will be issued at fair market value on the Effective Date. The shares of stock underlying the Initial Options not already registered for resale will be registered for resale on Form S-8 within 30 days after the Effective Date. Any portion of the Initial Options which are unvested on the date of termination of Employee's employment with the Company shall lapse upon the date of termination, if such termination was the result of one of the following: (i) Company's termination of Employee for Good Cause (as defined in Paragraph 8(b)) or


3 4


(ii) Employee's resignation of employment, for any reason. Notwithstanding anything to the contrary in this Agreement, the Employee shall retain the Initial Options after the date of termination of employment and vesting shall continue pursuant to the terms and conditions of the option agreement governing such options over the initial five year period, except as provided in the immediately preceding sentence.


6. FRINGE BENEFITS; VACATIONS.


(a) EMPLOYEE BENEFIT PLAN. The Employee shall be eligible to participate during the Employment Period in such of the employee benefit and health plans and other fringe benefit programs as the Company shall establish or maintain for its executive management employees from time to time (commensurate with the Employee's position and compensation). The employee shall be considered an officer of the Company for purposes of the Company's bylaw provisions regarding indemnity.


(b) LIFE AND DISABILITY INSURANCE. The Company shall provide to the Employee at the expense of the Company and keep in force during the Employment Period policies of term or other life insurance comparable in scope and amount to the policies currently owned by the Company for the benefit of the Employee and set forth in Schedule 6(b)(1). Additionally, the Employee shall be entitled to participate in the Company's group disability insurance program during the Employment Period; provided, however, such disability program shall be comparable in scope and amount to the policies currently owned by the Company for the benefit of the Employee as set forth in Schedule 6(b)(2). Nothing in this Paragraph 6(b) shall be deemed to prohibit the Company from modifying or changing the policies pursuant to which the benefits described in this Paragraph 6(b) are received; provided, however, that the modification or change does not result in a material detriment to the Employee. Upon termination of the Employee's employment with the Company, unless the termination was due to Good Cause or Performance Cause, or unless the Employee resigns, the Employee may purchase from the Company any life or disability policies owned by the Company solely for the benefit of the Employee. The purchase price shall be mutually agreed between the Company and the Employee.


(c) CAR/LEASE ALLOWANCE. The Company shall maintain the leases and pay the lease payments under the automobile leases referenced on Exhibit C, until the expiration date or earlier termination (by purchase or otherwise) of each lease indicated on Exhibit C. Thereafter, the Company's only obligation with respect to automobiles will be to pay to the Employee a car allowance equal to the amount of $650 per month or such greater amount as the Company is then providing to its executive management team during the Employment Period. As of the Effective Date, the Employee shall carry (or reimburse the Company for) insurance and provide for gas and all maintenance costs, at Employee's sole expense, on the vehicles leased pursuant to Exhibit C. All insurance policies referenced in this Paragraph 6(c) shall name the Employee and the Company as named insureds. The Employee may, at any time, at his sole expense, have assigned to him and exercise any purchase options under the automobile leases referenced on Exhibit C.


(d) VACATIONS. The Employee shall be entitled to vacation time in each year consistent with the Company's vacation policy for its senior executives as in effect from time to time. For purposes of determining time of service, years of service with Micronix shall be included. For the first year of employment only and in addition to vacation allocated to Employee under this Section, Employee shall have the right to carry over up to five (5) days of accrued vacation in Micronix. Employee agrees that, in consideration of the terms of this Agreement, any additional accrued vacation from


4 5


the period prior to the Effective Date shall be eliminated as of the date of this Agreement. A copy of the Company's current vacation policy has been provided to the Employee. The Employee shall also be entitled to all paid holidays and personal days given by the Company to its executives.


7. REIMBURSEMENT. The Company shall promptly reimburse the Employe ...