FORM OF EXECUTIVE CHANGE IN CONTROL & GENERAL SEVERANCE AGREEMENT
Exhibit 10.2
FORM OF
EXECUTIVE CHANGE IN CONTROL &
GENERAL SEVERANCE AGREEMENT
This Executive Change in Control & General Severance Agreement (this “Agreement”), is made as of the [ ] day of [month] [year] (the “Effective Date”), by and between Advanced Energy Industries, Inc., a Delaware corporation (the “Company”), and [ name ] (the “Executive”).
WITNESSETH
WHEREAS, The Executive is expected to serve as the [ title ] of the Company;
WHEREAS, The Board of Directors of the Company (the “Board”) acknowledges that consolidation within the industries in which the Company operates is likely to continue and the potential for a change in control of the Company, whether friendly or hostile, currently exists and from time to time in the future will exist, which potential can give rise to uncertainty among the senior executives of the Company. The Board considers it essential to the best interests of the Company to reduce the risk of the Executive’s departure and/or the inevitable distraction of the Executive’s attention from his duties to the Company, which are normally attendant to such uncertainties, and based on market data, offers certain benefits as outlined in this Agreement;
WHEREAS, The Board also acknowledges that should the Executive be involuntarily terminated without cause, even during a time where no potential change of control is occurring, that based on market data, certain standard severance benefits would be available to the Executive;
WHEREAS, The Executive confirms that the terms of this Agreement (a) reduce the risks of his/her departure and distraction of his/her attention from his/her duties to the Company and (b) provides retention value, and, accordingly, desires to enter into this Agreement; and
WHEREAS, This Agreement replaces any former executive change in control and general severance agreement previously entered into (if applicable) with the Executive.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants contained herein, the Company and the Executive agree as follows:
1 Applicable to U.S.-based employees.
2 Applicable to U.S.-based employees.
2
3 Applicable to U.S.-based employees.
4 Applicable to the Chief Executive Officer (“CEO”).
5 Applicable to named executive officers, other than the CEO.
3
6 Applicable to U.S.-based employees.
7 Applicable to the CEO.
8 Applicable to named executive officers, other than the CEO.
4
9 Applicable to U.S.-based employees.
10 Applicable to the CEO.
11 Applicable to named executive officers, other than the CEO.
12 Applicable to U.S.-based employees.
5
6
if to the Executive:
[ ]
if to the Company:
Advanced Energy Industries, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇, ▇▇▇ ▇▇▇
Denver, CO 80202
Attention: President and CEO
or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.
13 Applicable to U.S.-based employees.
14 Applicable to Singapore-based employees.
7
15 Applicable to Singapore-based employees.
8
9
10
11
[Signature Page Follows]
16 Applicable to U.S.-based employees.
12
IN WITNESS WHEREOF, the parties have executed this Executive Change in Control and General Severance Agreement as of the date set forth in the Preamble hereto.
Advanced Energy Industries, Inc. | |
| |
| |
By: | |
Name: | |
Title: | |
| |
| |
Executive | |
| |
| |
By: | |
Name: | [ ] |
ANNEX A
DEFINITIONS
(a)“Accrued Compensation” means an amount including all amounts earned or accrued through the Date of Termination but not paid as of the Date of Termination including (i) Base Salary, (ii) reimbursement for reasonable and necessary expenses incurred by the Executive on behalf of the Company during the period ending on the Date of Termination, (iii) vacation and sick leave pay (to the extent provided by Company policy or applicable law), and (iv) incentive compensation (if any) earned in respect of any period ended prior to the Date of Termination. It is expressly understood that incentive compensation shall have been “earned” as of the time that the conditions to such incentive compensation have been met, even if not calculated or payable at such time unless the incentive plan or this Agreement requires otherwise.
(b)“Affiliate” has the meaning ascribed to such term in Rule 12b-2 under the Exchange Act.
(c)“Agreement” means this Executive Change in Control and General Severance Agreement, as set forth in the Preamble hereto.
(d) “Applicable Benefit Plan” means any written employee benefit plan (which may include compensatory equity incentive plans) in effect and in which the Executive participates or under which the Executive retains rights to benefits as of the time of the termination of his/her employment.
(e)“Base Salary” means the Executive’s annual base salary at the rate in effect during the last regularly scheduled payroll period immediately preceding the occurrence of the termination of employment (disregarding any reduction in base salary that constitutes Good Reason) and does not include, for example, bonuses, overtime compensation, incentive pay, fringe benefits, sales commissions or expense allowances.
(f)“Board” means the Board of Directors of the Company, as set forth in the Recitals hereto.
(g)“Cause” means any of the following:
(i)the Executive’s (A) conviction of a felony; (B) commission of any other material act or omission involving dishonesty or fraud with respect to the Company or any of its affiliates or any of the customers, vendors or suppliers of the Company or its affiliates; (C) misappropriation of material funds or assets of the Company for personal use; or (D) engagement in unlawful harassment or unlawful discrimination with respect to any employee of the Company or any of its Subsidiaries;
(ii)the Executive’s continued substantial and repeated neglect of his/her duties, after written notice thereof from Senior Management (or the Compensation Committee, if Executive is a member of Senior Management or a named executive officer of the Company), and such neglect has not been cured within 30 days after the Executive receives notice thereof from Senior Management (or the Compensation Committee, as applicable);
(iii)the Executive’s gross negligence or willful misconduct in the performance of his duties hereunder that is materially and demonstrably injurious to the Company (either singly or on a consolidated basis); or
(iv)the Executive’s engaging in conduct constituting a breach of his written obligations to the Company or any Subsidiary in respect of confidentiality and/or the use or ownership of proprietary information.
(h)“Change in Control” shall be deemed to occur upon the consummation of any of the following transactions:
(i)The acquisition by any Person of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act of 50% or more of either (A) the then-outstanding Shares (the “Outstanding Company Common Stock”) or (B) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that the following acquisitions shall not constitute a Change in Control: (1) any acquisition directly from the Company, (2) any acquisition by the Company, (3) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliate or (4) any acquisition by any corporation pursuant to a transaction that complies with below subsections (h)(iii)(A) – (h)(iii)(C);
(ii)Any time at which individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board;
(iii)Consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company or any of its Subsidiaries, a sale or other disposition of the Company’s assets which occurs on the date that any Person acquires (or has acquired during the 12 month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than 50% of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions, or the acquisition of assets or stock of another entity by the Company or any of its Subsidiaries (each, a “Business Combination”), in each case unless, following such Business Combination, (A) at least 50% of the individuals and entities that were the beneficial owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding common equity and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity that, as a result of such transaction, owns the Company or all or
2
substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding any entity resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or an Affiliate or such entity resulting from such Business Combination) beneficially owns, directly or indirectly, 50% or more of, respectively, the then-outstanding common equity of the entity resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such entity, except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors of the entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or
(v)Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.
Notwithstanding the foregoing, for purposes of an Award (1) that provides for the payment of deferred compensation that is subject to Code Section 409A or (2) with respect to which the Company permits a deferral election, the definition of Change in Control herein shall be deemed amended to conform to the requirements of Code Section 409A to the extent necessary for the Award and deferral election to comply with Code Section 409A.
(i)“CIC Involuntary Termination” means the termination of the Executive’s employment with the Company at the time of or following a Change in Control before the end of the CIC Period:
(i)by the Company without Cause, or
(ii) by the Executive for Good Reason.
(j)“CIC Period” means the eighteen (18) month period at the time of or following a Change in Control.
(k)“Code” means the Internal Revenue Code of 1986, as amended.
(l)“Common Stock” means common stock, par value $0.001, of the Company.
(m)“Company” means Advanced Energy Industries, Inc., a Delaware corporation, as set forth in the Preamble hereto.
(n)“Date of Termination” means (i) if the Executive’s employment is terminated for Cause, the date of receipt by the Executive of written notice from Board or the Chief Executive Officer that the Executive has been terminated, or any later date specified therein, as the case may be, (ii) if the Executive’s employment is terminated by the Company other than for Cause, death or Long-Term Disability, the date specified in the Company’s written notice to the Executive of such termination, (iii) if the Executive’s employment is terminated by reason of the Executive’s death or Long-Term Disability, the date of such death or the effective date of such Long-Term Disability, and (iv) if the Executive’s employment is terminated by Executive’s resignation that
3
constitutes Good Reason under this Agreement, the date of the Company’s receipt of the Executive’s notice of termination or any later date specified therein, which date shall not exceed thirty (30) days from the date notice is given.
(o)“Effective Date” means the date set forth in the Preamble hereto.
(p)“Exchange Act” means the United States Securities Exchange Act of 1934, as amended. Any reference to a specific provision of the Exchange Act includes any successor provision and the regulations and rules promulgated under such provision.
(q)“Executive” means the individual identified in the Preamble hereto.
(r)“Good Reason” means any of the following:
(i)without the Executive’s express written consent a material reduction in the Executive’s duties, or level of responsibility or authority, including, without limitation, any requirement that the Executive report to any person(s) other than the [Board]17 [the Chief Executive Officer of the Company]18, or if, following a Change in Control, the Executive is not the [ title ] of a publicly traded company that is the ultimate parent entity of the acquirer; or
(ii)(x) a more than 10% reduction in the Executive’s Base Salary, without (A) the Executive’s express written consent or (B) an increase in the Executive’s benefits, perquisites and/or guaranteed bonus, which increase(s) have a value reasonably equivalent to the reduction in Base Salary; or
(y) a more than 10% reduction in the Executive’s Target Bonus, without (A) the Executive’s express written consent or (B) a corresponding increase in the Executive’s Base Salary;
provided that, in each case such reductions shall not constitute Good Reason if they are pursuant to a Company-wide reduction of base salaries and/or bonuses; or
(iv)relocation of the Executive’s [primary work location to a location more than thirty-five (35) miles from the Executive’s then-current primary work location]19 [principal place of business to a location outside of Singapore]20, without the Executive’s express written consent; or
(v)any failure by the Company (or any successor) to comply with any of the provisions of this Agreement other than certain isolated, insubstantial and inadvertent failures not occurring in bad faith which are remedied within 30 days.
Notwithstanding the foregoing, the Executive will not be considered to have terminated for Good Reason unless (A) the Executive provides written notice to the Company of the circumstance(s) constituting the Good Reason event within 90 days following the initial existence
17 Applicable to the CEO.
18 Applicable to named executive officers, other than the CEO.
19 Applicable to U.S.-based employees.
20 Applicable to Singapore-based employees.
4
of such event, (B) the Company fails to cure the Good Reason event within 30 days following its receipt of such notice, and (C) the Executive provides written notice to the Company of his/her Date of Termination.
(s)“Involuntary Termination” means the termination of Executive’s employment with the Company at any time:
(i)by the Company without Cause, or
(ii) by the Executive for Good Reason.
(t)“Long-Term Disability” is defined according to the Company’s insurance policy regarding long-term disability for its employees.
(u)“Option” means options to purchase Common Stock granted by the Company or any of its subsidiaries under a compensation plan adopted or approved by the Company.
(v)“Payment” means any payment or distribution in the nature of compensation (within the meaning of Section 280G(b)(2) of the Code) to or for the benefit of the Executive, whether paid or payable pursuant to this Agreement or otherwise.
(w)“Person” has the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, or any group of Persons acting in concert that would be considered “persons acting as a group” within the meaning of Treas. Reg. § 1.409A-3(i)(5).
(x)“Pro Rata Bonus” means an amount equal to 100% of the Target Bonus that the Executive would have been eligible to receive for the Company’s fiscal year in which the Executive’s employment terminates following a Change in Control, multiplied by a fraction, the numerator of which is the number of days in such fiscal year through the Termination Date and the denominator of which is 365. If the Target Bonus for the fiscal year in which the Executive’s employment is terminated has not yet been established as of the date of such termination, then “Target Bonus” shall refer to the Target Bonus as was in effect for the Executive for the fiscal year preceding the fiscal year in which the Executive’s employment terminates.
(y)“PSUs” means performance stock units or awards granted by the Company pursuant to which the Company has the right to issue Common Stock upon the satisfaction of vesting and other conditions, which PSUs are subject to an award agreement pursuant to a stock plan of the Company.
(z)“RSUs” means restricted stock units or awards granted by the Company pursuant to which the Company has the right to issue Common Stock upon the satisfaction of vesting and other conditions, which RSUs are subject to an award agreement pursuant to a stock plan of the Company.
(z)“Subsidiary” means any corporation, limited liability company or other limited liability entity in an unbroken chain of entities beginning with the Company if each of the entities (other than the last entities in the chain) owns the stock or equity interest possessing
5
more than fifty percent (50%) of the total combined voting power of all classes of stock or other equity interests in one of the other entities in the chain.
(aa) “Target Bonus” means the bonus which would have been paid to the Executive for full achievement of specific performance objectives pertaining to the business of the Company or any of its specific business units or divisions, or to individual performance criteria applicable to the Executive or his position (as the case may be), which objectives have been established by the Board of Directors (or the Compensation Committee thereof) or the Chief Executive Officer for the Executive relating to such plan or budget for the year in question. “Target Bonus” shall not mean the “maximum bonus” which the Executive might have been paid for overachievement of such plan.
(bb)“Value” of a Payment means the economic present value of a Payment as of the date of the change of control for purposes of Section 280G of the Code, as determined by the Accounting Firm using the discount rate required by Section 280G(d)(4) of the Code.
(cc)“Voluntary Resignation” means the termination of the Executive’s employment upon his voluntary resignation, which includes retirement, as set forth in Section 5 hereof. If the Executive terminates his employment for Good Reason, such termination shall not be treated as a Voluntary Resignation.
(dd)[“409A Affiliate” means each entity that is required to be included in the Company’s controlled group of corporations within the meaning of Section 414(b) of the Code, or that is under common control with the Company within the meaning of Section 414(c) of the Code; provided, however, that the phrase “at least 50 percent” shall be used in place of the phrase “at least 80 percent” each place it appears therein or in the regulations thereunder.]21
21 Applicable to U.S.-based employees.
6
APPENDIX I
Legal Release
This Legal Release (“Release”) is between Advanced Energy Industries, Inc. (the “Company”) and _______ (“Executive”) (each a “Party,” and together, the “Parties“).
Recitals
A.Executive and the Company are parties to an Executive Change in Control and General Severance Agreement to which this Release is appended as Appendix I (the “Agreement”).
B.Executive wishes to receive the compensation, benefits, awards and other payments described in the Agreement.
C.Executive and the Company wish to resolve, except as specifically set forth herein, all claims between them arising from or relating to any act or omission predating the Date of Termination of [ date ].
Agreement
The Parties agree as follows:
The Company shall pay or provide to Executive the payments and benefits, as, when and on the terms and conditions specified in the Agreement.
Legal Releases
A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release, and that, if known by him or her would have materially affected his or her settlement with the debtor or released party.]26
(b)In order to provide a full and complete release, Executive understands and agrees that this Release is intended to include all claims, if any, covered herein that Executive may have and not now know or suspect to exist in Executive’s favor against any Executive Releasee and that this Release extinguishes such claims. Thus, Executive expressly waives all rights under any statute or common law principle in any jurisdiction that provides, in effect, that a general release does not extend to claims which the releasing party does not know or suspect to exist in Executive’s favor at the time of executing the release, which if known by Executive must have materially affected Executive’s settlement with the party being released. Notwithstanding any other provision
22 Applicable to U.S.-based employees.
23 Applicable to Singapore-based employees.
24 Applicable to U.S.-based employees.
25 Applicable to Singapore-based employees.
26 Applicable to California-based employees.
2
of this Section, however, nothing in this Section is intended or shall be construed to limit or otherwise affect in any way Executive’s rights under this Release.
(c)Executive agrees and acknowledges that Executive: (i) understands the language used in this Release and the Release’s legal effect; [(ii) is specifically releasing all claims and rights under the Age Discrimination in Employment Act, as amended, 29 U.S.C. Section 621 et seq.;] 27 (iii) will receive compensation under this Release to which Executive would not have been entitled without signing this Release; (iv) has been advised by the Company to consult with an attorney before signing this Release; [and (v) will be given up to twenty one (21) calendar days to consider whether to sign this Release. For a period of seven (7) days after Executive signs this Release, Executive may, in Executive’s sole discretion, rescind or revoke this Release by delivering a written notice of rescission to the Company’s General Counsel. If Executive rescinds or revokes this Release within seven (7) calendar days after Executive signs the Release, or if Executive does not sign this Release within the twenty-one (21) day consideration period, this Release shall be void, all actions taken pursuant to this Release shall be reversed, and neither this Release nor the fact of or circumstances surrounding its execution shall be admissible for any purpose whatsoever in any proceeding between the Parties, except in connection with a claim or defense involving the validity or effective rescission of this Release. If Executive does not rescind or revoke this Release within seven (7) calendar days after the day Executive signs this Release, this Release shall become final and binding and shall be irrevocable]28.
Executive acknowledges that Executive has received all compensation to which Executive is entitled for Executive’s work up to Executive’s last day of employment with the Company, and that Executive is not entitled to any further pay or benefit of any kind, for services rendered or any other reason, other than the payments and benefits, to the extent not already paid, described in the Agreement. Benefits under the Agreement are conditioned on Executive’s compliance with any restrictive covenant agreements or assignment of inventions agreements between the parties.
Executive agrees that the only thing of value that Executive will receive by signing this Release is the payments and benefits described in the Agreement.
2. [Protected Rights. Nothing in this Agreement is intended to waive claims (a) for unemployment or workers’ compensation benefits, (b) for vested rights under ERISA-covered employee benefit plans as applicable on the date Employee signs this Agreement, (c) that may arise after Employee signs this Agreement, (d) for reimbursement of expenses under the Company’s expense reimbursement policies, or (e) which cannot be released by private agreement. In addition, nothing in this Agreement including but not limited to the acknowledgments, release of claims, proprietary information, return of property, confidentiality, cooperation, and non-disparagement provisions, (f) limits or affects Employee’s right to challenge the validity of this Agreement under the ADEA or the OWBPA, (g) prevents Employee from communicating with, filing a charge or complaint with; providing documents or information voluntarily or in response to a subpoena or other information request to; or from participating in an investigation or proceeding conducted by the Equal Employment Opportunity Commission, National Labor Relations Board, the Securities and Exchange Commission, law enforcement, or any other any
27 Applicable to U.S.-based employees.
28 Applicable to U.S.-based employees.
3
federal, state or local agency charged with the enforcement of any laws, or from responding to a subpoena or discovery request in court litigation or arbitration, [or] (h) limits Employee from exercising rights under Section 7 of the NLRA or similar state law to engage in protected, concerted activity with other employees, although by signing this Agreement Employee is waiving rights to individual relief (including backpay, frontpay, reinstatement or other legal or equitable relief) in any charge, complaint, or lawsuit or other proceeding brought by Employee or on Employee’s behalf by any third party, except for any right Employee may have to receive a payment or award from a government agency (and not the Company) for information provided to the government agency or otherwise where prohibited[, or (i) prevents Employee from discussing or disclosing information about unlawful acts in the workplace, such as harassment or discrimination or any other conduct that you have reason to believe is unlawful or waives Employee’s right to testify in an administrative, legislative, or judicial proceeding concerning alleged criminal conduct or alleged sexual harassment on the part of the Company, or on the part of the agents or employees of the Company, when Employee has been required or requested to attend such a proceeding pursuant to a court order, subpoena, or written request from an administrative agency or the legislature]29.]30
The Parties agree that their respective rights and obligations under the Agreement shall survive the execution of this Release.
This Agreement may be executed and delivered in one or more counterparts, which, together, shall constitute one and the same agreement and shall be fully effective and binding on the Parties. Execution of the Agreement by the parties via facsimile or electronic signatures shall be deemed the same as original signatures.
By signing below, you acknowledge that you have read this Agreement carefully in its entirety, that you know and understand its contents, and that you enter into this Agreement freely and as a voluntary act.
Note: Do not sign this legal release until after Executive’s final day of employment.
EXECUTIVE | ADVANCED ENERGY INDUSTRIES, INC. |
29 Applicable to California-based employees.
30 Applicable to U.S.-based employees.
31 Applicable to U.S.-based employees.
4
By: | | By: | |
| | | |
Date: | | Date: | |
5