Exhibit 10.9
ADEPT TECHNOLOGY, INC.
[FORM OF EXECUTIVE]
CHANGE IN CONTROL SEVERANCE AGREEMENT
This CHANGE IN CONTROL SEVERANCE AGREEMENT (this “Agreement”) is made and entered into as of the day of January, 2014 (the “Effective Date”), by and between Adept Technology, Inc., a Delaware corporation (the “Company”), and[name of executive officer or CTO] (“Executive”).
WHEREAS, Executive has made or is expected to make a major contribution to the profitability, growth and financial strength of the Company and the Company considers the continued availability of Executive’s services to be in the best interest of the Company and desires to assure the continued services of Executive on behalf of the Company without the distraction occasioned by the possibility of a change in control of the Company; and
WHEREAS, Executive is willing to remain in the employ of the Company upon the understanding that in the event of certain terminations of employment following a Change in Control of the Company, the Company will provide Executive with equity, income security and health benefits as set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows:
1.Term of Agreement. This Agreement shall commence as of the Effective Date and shall continue until the third anniversary of the Effective Date (the “Term”);provided, however, that on the date of expiration of the Term, and on each anniversary of the date of expiration of the Term thereafter, the Term shall automatically be extended for one (1) year unless either the Executive or the Company shall give written notice to the other at least ninety (90) days prior thereto that the Term shall not be so extended;provided, further, however, that following the occurrence of a Change in Control, the Term shall not expire prior to the expiration of twelve (12) months after such occurrence.
2.Definitions. Whenever the following terms are used in this Agreement, they shall have the meaning specified below unless the context clearly indicates to the contrary:
2.1 “Base Salary” shall mean Executive’s annual rate of base salary in effect on the date of Executive’s termination of employment, excluding all bonuses, overtime, allowances, commissions, deferred compensation payments and any other extraordinary remuneration.
2.2 “Board” shall mean the Board of Directors of the Company.
2.3 “Bonus” shall mean an amount equal to the Executive’s estimated bonus (using the target bonus as a guide) for the full fiscal year in which the termination occurs as adjusted to reflect the extent to which Executive has or has not met the performance criteria for any completed fiscal quarters in such year (and any interim period where determinable) as determined by the Committee, subject to adjustment by the Committee as it determines appropriate in its sole discretion.
2.4 “Cause” shall mean, except as otherwise defined in an employment agreement or other written agreement between Executive and the Company dated on or after the Effective Date (which
definition would control in the event of any conflict with the definition in this Section 2.4) each of the following as determined by the Board, (i) willful and repeated failure to perform duties or contravention in any material respect of specific written lawful directions related to a material duty or responsibility which is directed to be undertaken by the Board or the person to whom Executive reports (other than due to physical or mental illness); (ii) conviction of guilty or nolo contendere plea to, a misdemeanor which is materially and demonstrably injurious to the Company or any felony; (iii) commission of an act, or a failure to act, that constitutes fraud, gross negligence or willful misconduct (including without limitation, embezzlement, misappropriation or breach of fiduciary duty resulting or intending to result in personal gain at the expense of the Company); and (iv) violation of any applicable laws, rules or regulations or failure to comply with the ongoing confidentiality, non-solicitation and non-competition obligations to the Company, corporate code of business conduct or other material policies of the Company in connection with or during performance of the Executive’s duties to the Company that could, in the Committee’s opinion, cause material injury to the Company, which violation, if curable, is not cured within thirty (30) days after notice thereof to Executive.
2.5 “Change in Control” shall mean, unless the Board provides otherwise, the occurrence of any of the following events:
(a) The acquisition by any individual, entity or group (within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of either (i) the then outstanding Shares (the “Outstanding Company Common Stock”) or (ii) 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 for purposes of this subsection (i), the following acquisitions will not constitute a Change in Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company or (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company;
(b) In any 12-month period, the individuals who, as of the beginning of the 12-month period, 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 Effective Date whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board will 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;
(c) Consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company or any of its subsidiaries (in each case, not related to an insolvency proceeding, bankruptcy or liquidation of the Company); or
(d) The sale or other disposition of all or substantially all of the assets of the Company to any Person, other than a transfer to any corporation or other Person of which a majority of its voting power or its voting equity securities or equity interest is owned, directly or indirectly, by the Company.
2.6 “Change in Control Plan” shall mean the Adept Technology, Inc. Change in Control Plan for Equity Awards, as the same may be amended from time to time.
2.7 “Good Reason” shall mean any of the following actions taken by the Company (including any successor) during the Trigger Period without Executive’s express prior written approval,
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provided that in each case Executive gives written notice to the Company of Executive’s election to terminate his or her employment for such reason within thirty (30) days after the time Executive becomes aware of the existence of facts or circumstances constituting Good Reason and the Company fails to cure such facts or circumstances within sixty (60) days after receiving such notice: (a) a material diminution in Executive’s position, authority, duties, or responsibilities; (b) a material reduction in Executive’s base salary, annual bonus, or incentive opportunity; (c) failure by the Company to require any successor to assume this Agreement; (d) a relocation of Executive’s principal office more than thirty (30) miles from Executive’s principal office as of the Effective Date; (e) material reduction in the budget over which Executive retains authority (if any), and (f) a material breach by the Company of its obligations to Executive under any employment agreement or similar agreement with Executive, including the failure by the Company to comply with provisions of this Agreement.
2.8 “Pro-Rata Bonus” shall mean the pro-rata portion of Executive’s annual bonus for the fiscal year of termination based on performance (as determined by the Committee) through the date of termination, as may adjusted by determination of the Committee in its sole discretion.
2.9 “Trigger Period” shall mean the period beginning ninety (90) days prior to a Change in Control and ending twelve (12) months following the consummation of a Change in Control.
3.Payment of Severance Benefits Upon Termination Following a Change in Control. In the event that Executive’s employment with the Company is terminated by the Company without Cause or Executive terminates his or her employment with the Company for Good Reason (each a “Qualified Termination”) during the Trigger Period, Executive shall be entitled to the following severance benefits, subject to the execution by Executive of a separation agreement including an effective release of claims and covenant not to compete with the business of the Company for a period of not less than one year following the date of the Qualified Termination in favor of the Company in such form as the Company shall reasonably determine (the “Separation Agreement”) and Executive’s continuing compliance with such Separation Agreement (the “Severance Payments”):
(a) payments equal, in the aggregate, to [two (2) [for CEO], one and a half (1.5) [for CFO, with no multiplier for others] times] the sum of (i) Executive’s Base Salary and (ii) Executive’s Bonus, with half of the aggregate payable in a lump sum following the Qualified Termination (and after the Change in Control) and half payable in equal installments over twelve (12) months on the Company’s regularly scheduled payroll dates;
(b) payments equal in the aggregate, to Executive’s Pro-Rata Bonus to the extent not previously paid, with half of the aggregate payable in a lump sum following the Qualified Termination (and after the Change in Control) and half payable in equal installments over twelve (12) months on the Company’s regularly scheduled payroll dates; and
(c) reimbursement of premium costs in excess of active employee rates to continue COBRA or such other medical coverage for one (1) year following termination; provided, however, that such coverage shall not provide for benefits greater than what Executive was receiving prior to termination of employment;
Provided that, unless otherwise determined by the Board or the Committee, the aggregate of all Severance Payments payable under this Agreement and severance payments under all other Change in Control Severance Agreements between the Company and an employee prior to the Change in Control shall not exceed an amount equal to 1.5% (“Cap”)of the net cash and non-cash consideration payable to all holders of the Company’s outstanding securities in connection with a Change in Control, as determined in good faith by the Committee, and the obligations to make any payment pursuant to this Section 3 shall in no event exceed the Executive’s pro rata portion of the amount of the Cap as determined by the Committee based upon the aggregate severance payments payable under such agreements in the absence of a Cap assuming all obligations accrued and become due in full (which as of the date of this Agreement is [CEO .70, CFO .40, CBDO and CTO .20]%).
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The payments under this Section 3 are in lieu of (and not in addition to) any severance payments (including, without limitation, in lieu of any annual bonus payments or pro-rata bonus payments) Executive may have been entitled to receive under any other offer letter, agreement, plan or policy, and any payments under any such agreement, plan or policy shall offset dollar-for-dollar the amounts payable hereunder. The benefits to be provided under Section 3(c) shall be reduced to the extent of the receipt of substantially equivalent health insurance coverage by Executive from any successor employer. For the avoidance of doubt, the payments under this Section 3 are only in lieu of any severance payments payable in connection with a Change in Control. Any other severance payments that Executive may be entitled to or receives in connection with a termination prior to a Change in Control shall reduce the amount of the Severance Payments (including, without limitation, in lieu of any annual bonus payments or pro-rata bonus payment) payable hereunder.
If Executive’s Qualified Termination occurs during the Trigger Period but prior to a Change in Control, the Severance Payments shall commence on the Company’s first regularly scheduled payroll date following the date of the Change in Control. If Executive’s Qualified Termination occurs during the Trigger Period after a Change in Control payment of any severance benefit pursuant to this Section 3 shall commence on the Company’s first regularly scheduled payroll date after the 60th day following the date of Executive’s termination of employment from the Company and shall include a lump sum payment equal to any amounts that would have been paid to Employee prior to such date had all payments been made in accordance with Company’s general payroll practices immediately following termination.
The Company may withhold from any amounts payable under this Agreement and the Change in Control Plan such federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation and all payments under this Agreement shall be made net of amounts required to be paid or withheld for purposes of any federal, state and local taxes.
4.Treatment of Equity. Unless explicitly stated otherwise in an award agreement dated on or after the Effective Date, upon a Change in Control, Executive’s outstanding equity awards shall be subject to the Change in Control Plan;provided, however, that Executive’s termination of employment for Good Reason shall also be considered an “Involuntary Termination” for purposes of the Change in Control Plan. For the avoidance of doubt, [For Cain only:except for the restricted stock units granted on January 14, 2014, which shall be governed by the equity award therefor,] any equity award granted to Executive prior to or after the Effective Date and outstanding on the date of a Change in Control (the “Current Awards”) shall be subject to the terms of the Change in Control Plan. Notwithstanding the terms of agreements governing Current Awards, upon a Qualified Termination prior to a Change in Control, the unvested portion of Executive’s Current Awards shall remain outstanding and unvested for the earlier of (i) ninety (90) days following such Qualified Termination but unexercisable prior to a Change in Control; and (ii) the expiration date set forth in the Current Award’s award agreement. If a Change in Control has not occurred before the ninety-first (91) day following the Qualified Termination, the unvested portion of the Current Awards shall be forfeited and cancelled and Executive shall have no right to additional compensation.
5.No Employment Contract. This Agreement, including the recitals hereto, shall not be deemed to create a contract of employment between the Company and Executive and shall create no right in Executive to continue in the Company’s employment for any specific period of time, or to create any other rights in Executive or obligations on the part of the Company or its affiliates, except as expressly set forth herein. Except as expressly set forth herein, this Agreement shall not restrict the right of the Company to terminate Executive’s employment at any time for any reason or no reason, or restrict the right of Executive to terminate his or her employment.
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6.Limitations on Benefits
6.1Excise Taxes. In the event that any benefits payable to Executive pursuant to this Agreement (“Payments”) (i) constitute “parachute payments” within the meaning of Section 280G of the Internal Revenue Code, as amended (the “Code”), and (ii) but for this Section 6.1 would be subject to the excise tax imposed by Section 4999 of the Code, or any comparable successor provisions (the “Excise Tax”), then Executive’s Payments hereunder shall be either (i) provided to Executive in full, or (ii) provided to Executive as to such lesser extent which would result in no portion of such benefits being subject to the Excise Tax, whichever of the foregoing amounts, when taking into account applicable federal, state, local and foreign income and employment taxes, the Excise Tax, and any other applicable taxes, results in the receipt by Executive, on an after-tax basis, of the greatest amount of benefits, notwithstanding that all or some portion of such benefits may be taxable under the Excise Tax, as determined by the Company with the input of accounting advisors and confirmed by the Committee. In the event that the payments and/or benefits are to be reduced pursuant to this Section 6.1, such payments and benefits shall be reduced such that the reduction of compensation to be provided to Executive as a result of this Section 6.1 is minimized. In applying this principle, the reduction shall be made in a manner consistent with the requirements of Section 409A (as defined below) and where two economically equivalent amounts are subject to reduction but payable at different times, such amounts shall be reduced on a pro rata basis but not below zero. For purposes of making the calculations required by this Section 6.1, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of the Code, and other applicable legal authority. The Company and the applicable Executive shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section 6.1.
6.2Section 409A.
(a) Notwithstanding anything herein to the contrary, this Agreement intended to comply with the requirements of Section 409A of the Internal Revenue Code and the regulations and guidance promulgated thereunder (“Section 409A”) or an exemption from Section 409A. The Company shall undertake to administer, interpret, and construe this Agreement in a manner that does not result in the imposition on Executive of any additional tax, penalty, or interest under Section 409A;provided, however, in no event shall the Company be liable to Executive for or with respect to any taxes, penalties or interest which may be imposed upon Executive pursuant to Section 409A. Each payment under this Agreement shall be treated as a separate payment for purposes of Section 409A.
(b) A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Section 409A and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment” or like terms shall mean “separation from service.”
(c) Notwithstanding anything herein to the contrary, in the event that Executive is a “specified employee” within the meaning of that term under Section 409A(a)(2)(B) of the Internal Revenue Code, then with regard to any payment or the provision of any benefit (whether under this Agreement or otherwise) that is considered deferred compensation under Section 409A payable on account of a “separation from service,” and that is not exempt from Section 409A as involuntary separation pay or a short-term deferral (or otherwise), to the extent necessary to avoid the imposition of
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excise taxes under Section 409A, such payment or benefit shall be made or provided at the date which is the earlier of (A) the expiration of the six (6)-month period measured from the date of such “separation from service” of Executive or (B) the date of Executive’s death (the “Delay Period”). Upon the expiration of the Delay Period, all payments and benefits delayed pursuant to this Section 6.2 (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid or reimbursed to Executive in a lump sum without interest, and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.
7.Waiver of Jury Trial.TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED, THE PARTIES HERETO HEREBY WAIVE AND COVENANT THAT THEY WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT TO ANY CLAIM, CAUSE OF ACTION OR SUIT (IN CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF. EXECUTIVE ACKNOWLEDGES THAT HE HAS BEEN INFORMED BY THE COMPANY THAT THIS SECTION 7 CONSTITUTES A MATERIAL INDUCEMENT UPON WHICH THE COMPANY IS RELYING AND WILL RELY IN ENTERING INTO THIS AGREEMENT. ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 7 WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.
8.Dispute Resolution.
Any dispute by Executive with respect to the interpretation or performance of this Agreement shall be resolved solely by arbitration. Notice of demand for arbitration will be made in writing to the Board within thirty (30) days after the applicable decision by the Board. The arbitrator will be selected by mutual agreement of the Board and Executive. If the Board and Executive are unable to agree on an arbitrator, the arbitrator will be selected by the American Arbitration Association. The arbitrator, no matter how selected, must be neutral within the meaning of the Commercial Rules of Dispute Resolution of the American Arbitration Association. The arbitrator will administer and conduct the arbitration pursuant to the Commercial Rules of Dispute Resolution of the American Arbitration Association. Each side will bear its own fees and expenses, including its own attorney’s fees, and each side will bear one half of the arbitrator’s fees and expenses; provided, however, that the arbitrator will have the discretion to award the prevailing party its fees and expenses. The arbitrator will have no authority to award exemplary, punitive, special, indirect, consequential, or other extracontractual damages. The decision of the arbitrator on the issue(s) presented for arbitration will be final and conclusive and any court of competent jurisdiction may enforce it.
9.Miscellaneous.
9.1Entire Agreement. This Agreement constitutes the entire understanding and sole and entire agreement between the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements, negotiations and discussions between the parties hereto and/or their respective counsel and representatives with respect to the subject matter covered hereby.
9.2Amendments. This Agreement may be changed, amended or modified only by a written instrument executed by Executive and an authorized representative of the Company other than Executive, subject to the Company’s ability to amend the Change in Control Plan. Notwithstanding
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anything herein to the contrary, the Board or the Committee may amend this Agreement (which amendment shall be effective upon its adoption or at such other time designated by the Board or the Committee, as applicable) at any time as may be necessary to comply with any law or regulation, including, but not limited to, to avoid the imposition of any additional taxes or penalties under Section 409A.
9.3Assignment and Binding Effect. Neither this Agreement nor the rights or obligations hereunder shall be assignable by Executive or the Company except that this Agreement shall be assignable to, binding upon and inure to the benefit of any successor of the Company, and any successor shall be deemed substituted for the Company upon the terms and subject to the conditions hereof.
9.4No Waiver. No waiver of any term, provision or condition of this Agreement, whether by conduct or otherwise, in any one or more instances shall be deemed or be construed as a further or continuing waiver of any such term, provision or condition or as a waiver of any other term, provision or condition of this Agreement.
9.5Executive Acknowledgment. Executive acknowledges that Executive has consulted with or has had the opportunity to consult with independent counsel of Executive’s choice concerning this Agreement, and that Executive has read and understands this Agreement and is fully aware of its legal effect.
9.6Governing Law. This Agreement has been negotiated and executed in, and shall be governed by and construed in accordance with the laws of, the State of Delaware.
9.7Severability; Headings. If any portion of this Agreement is held invalid or inoperative, the other portions of this Agreement shall be deemed valid and operative and, so far as is reasonable and possible, effect shall be given to the intent manifested by the portion held invalid or inoperative. The Section headings herein are for reference purposes only and are not intended in any way to describe, interpret, define or limit the extent or intent of the Agreement or of any part hereof.
9.8Notices. Any notice required or permitted by this Agreement shall be in writing, delivered by hand, or sent by registered or certified mail, return receipt requested, or by recognized courier service (regularly providing proof of delivery), addressed to the Chief Executive Officer of the Company at the Company’s then principal office, or to Executive at the address set forth under Executive’s signature below, as the case may be, or to such other address or addresses as any party hereto may from time to time specify in writing. Notices shall be deemed given when received.
9.9Counterparts. This Agreement may be executed simultaneously in two (2) or more counterparts and delivered by facsimile or other means of electronic communication, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument.
[Signature page follows]
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IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto as of the date first above written.
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[Signature page to Change in Control Severance Agreement]
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