Exhibit 10.2
EXECUTIVE CHANGE IN CONTROL SEVERANCE
AGREEMENT
This Executive
Change in Control Severance Agreement (this “
Agreement ”), is made as of June 30, 2005, by
and between Advanced Energy Industries, Inc., a Delaware
corporation (the “ Company ”), and
Hans-Georg Betz (the “ Executive ”), and
shall become effective as of the day the Executive commences his
employment with the Company (the “ Effective
Date ”) as its President and Chief Executive
Officer.
Recitals
A. It is
anticipated that the Executive shall commence service as President
and Chief Executive Officer of the Company in the Office of the
President on August 1, 2005.
B. 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.
C. The
Executive confirms that the terms of this Agreement reduce the
risks of his departure and distraction of his attention from his
duties to the Company and, accordingly, desires to enter into this
Agreement.
Agreement
In
consideration of the foregoing and the mutual covenants contained
herein, the Company and the Executive agree as follows:
1. Definitions . Capitalized terms used herein
shall have the meanings given to them in Annex A attached
hereto, except where the context requires otherwise.
2. Term of Agreement .
(a) This
Agreement shall be effective as of the Effective Date and shall
continue in effect until the second anniversary of the Effective
Date, provided , however , that the term of this
Agreement automatically shall be extended for one additional year
effective as of each anniversary of the Effective Date beginning
with the second anniversary, unless either the Company or the
Executive provides written notice to the other that the term of
this Agreement shall terminate on the upcoming anniversary of the
Effective Date, provided such notice is received by the
receiving party not less than ninety (90) days prior to the
intended date of termination and provided further that the
Company shall not be entitled to deliver to the Executive such
notice in the event of a Change in Control or a Pending Change in
Control. Notwithstanding the foregoing, this Agreement shall
terminate immediately upon (a) the Executive’s Voluntary
Resignation, (b) the termination of the Executive’s
employment for Cause, or (c) the termination of the CIC
Period.
(b) “
Voluntary Resignation ” means the termination
of the Executive’s employment upon his voluntary resignation,
which includes retirement.
(c) “
CIC Period ” means the 30-day period commencing
on the date that is six months following the effective date of a
Change in Control and ending on the date that is thirty
(30) days thereafter.
3. At Will Employment; Reasons for Termination
.
(a) The
Executive’s employment shall continue to be at-will, as
defined under applicable law. If the Executive’s employment
terminates for any reason or no reason, the Executive shall not be
entitled to any compensation, benefits, damages, awards or other
payments in respect of such termination, except as provided in this
Agreement or pursuant to the terms of any Applicable Benefit Plan.
“ Applicable Benefit Plan ” means any
written employee benefit plan in effect and in which the Executive
participates as of the time of the termination of his
employment.
(b) The
Executive’s employment shall be terminated upon the first to
occur of the following:
(i) the
Executive’s Voluntary Resignation;
(ii) termination
by the Company for Cause;
(iii) the
Executive’s death or Long-Term Disability;
(iv) termination
by the Company without Cause;
(v) termination
by the Executive for Good Reason following a Change in Control;
and
(vi) termination
by the Executive during the CIC Period.
(c) The
Executive’s termination shall be deemed to be an “
Involuntary Termination ,” if such termination
is effected (i) by the Company without Cause following a
Change in Control or during a Pending Change in Control,
(ii) by the Executive for Good Reason following a Change in
Control, or (iii) by the Executive during the CIC
Period.
(d) “
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;
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(ii) the
Executive’s continued substantial and repeated neglect of his
duties, after written notice thereof from the Board, and such
neglect has not been cured within 30 days after the Executive
receives notice thereof from the Board;
(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; or
(iv) the
Executive’s engaging in conduct constituting a breach of his
written obligations to the Company in respect of confidentiality
and/or the use or ownership of proprietary information.
(e) “
Good Reason ” means any of the
following:
(i) a
material reduction in the Executive’s duties, level of
responsibility or authority, other than (A) reductions solely
attributable to the Company ceasing to be a publicly held company
or becoming a subsidiary or division of another company, or
(B) isolated incidents that are promptly remedied by the
Company; or
(ii) a
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
(iii) a
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; or
(iv) a
material reduction in the Benefits, taken as a whole, without the
Executive’s express written consent; or
(v) the
relocation of the Executive’s principal place of business to
a location more than thirty-five (35) miles from the
Executive’s principal place of business immediately prior to
the Change in Control, without the Executive’s express
written consent; or
(vi) the
Company’s (or its successor’s) material breach of this
Agreement.
4. Severance Benefits .
(a)
Compensation and Benefits Required by Law or Applicable Benefit
Plan . Notwithstanding anything to the contrary herein, the
Executive or his estate shall be entitled to any and all
compensation, benefits, awards and other payments required by any
Applicable Benefit Plan, the COBRA Act or other applicable law,
after taking into account the agreements set forth
herein.
(b)
No Payments Without Release . The Executive shall not be
entitled to any of the compensation, benefits or other payments
provided herein in respect of the termination of his employment,
unless and until he has provided to the Company a full release
of
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claims, substantially in the form
of Appendix I attached hereto, which release shall be
dated not earlier than the date of the termination of his
employment and shall release the Company of any claims that the
Executive may have in respect of his employment with the Company or
the termination thereof.
(c)
Voluntary Resignation or Termination for Cause .
(i) In
the event of the Executive’s Voluntary Resignation or
termination of his employment by the Company for Cause, the
Executive shall not be entitled to any compensation, benefits,
awards or other payments in connection with such termination of his
employment, except as provided in paragraph (a) of this
Section 4.
(ii) The
Executive shall not be deemed to have been terminated for Cause
under this Agreement, unless the following procedures have been
observed: To terminate the Executive for Cause, the Board must
deliver to the Executive notice of such termination in writing,
which notice must specify the facts purportedly constituting Cause
in reasonable detail. The Executive will have the right, within 10
calendar days of receipt of such notice, to submit a written
request for review by the Board. If such request is timely made,
within a reasonable time thereafter, the Board (with all directors
attending in person or by telephone) shall give the Executive the
opportunity to be heard (personally or by counsel). Following such
hearing, unless a majority of the directors then in office confirm
that the Executive’s termination was for Cause, the
Executive’s termination shall be deemed to have been made by
the Company without Cause for purposes of this
Agreement.
(d)
Death or Long-Term Disability . In the event of the
Executive’s death or Long-Term Disability, the Executive (or
his estate or personal representative) shall be entitled to receive
(i) the proceeds of any life insurance policy carried by the
Company with respect to the Executive, (ii) payments pursuant
to any long-term disability insurance policy carried by the Company
with respect to the Executive, and (iii) within sixty
(60) days following the Executive’s death or Long-Term
Disability, a lump-sum payment equal to six months’ salary,
reduced by any proceeds or payments remitted or to be remitted
pursuant to clause (i) or (ii) above.
(e)
Termination by the Company without Cause and without a Change in
Control . In the event of the Executive’s termination
without Cause, provided that a Change in Control has not
occurred and there is no Pending Change in Control, the Executive
shall be entitled to receive:
(i) within
fifteen (15) calendar days after the Date of Termination, the
Executive’s Accrued Compensation and Pro-Rata Bonus through
the date of termination; and
(ii) within
fifteen (15) calendar days after the Date of Termination, the
amount in cash equal to product of (A) 1.5 and (B) the
sum of the Executive’s annual Base Salary and the
Executive’s Target Bonus in effect as of the Date of
Termination; and
(iii) for
eighteen (18) months after the Date of Termination, or such
longer period as may be provided by the terms of any Applicable
Benefit Plan, continuation
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of the benefits for the Executive
and/or the Executive’s family that are being provided to the
Executive and/or the Executive’s family immediately prior to
the Date of Termination, including the welfare benefit plans,
practices, policies and programs provided by the Company
(including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and travel
accident insurance plans and programs) (collectively, the “
Benefits ”), as if the Executive’s
employment had not been terminated; provided, however , that
if the Executive commences employment with another employer during
such eighteen (18) month period and is eligible to receive
medical or other welfare benefits under the new employer’s
plan(s), the Benefits shall terminate as of the date the Executive
becomes eligible to receive such benefits; and
(iv) an
amount equal to the contributions to the Company’s retirement
plans on behalf of the Executive that would have been made for the
benefit of the Executive if the Executive’s employment had
continued for eighteen (18) months after the Date of
Termination, assuming for this purpose that all benefits under any
such retirement plans were fully vested and that the
Executive’s compensation during such eighteen
(18) months were the same as it had been immediately prior to
the Date of Termination; and
(v) reimbursement,
up to $15,000, for outplacement services reasonably selected by the
Executive.
(f)
Involuntary Termination . In the event Executive’s
employment is terminated under circumstances constituting an
Involuntary Termination, the Executive shall be entitled to
receive:
(i) within
15 calendar days after the Date of Termination, the
Executive’s Accrued Compensation and Pro-Rata Bonus through
the Date of Termination; and
(ii) within
fifteen (15) calendar days after the Date of Termination, the
amount in cash equal to the product of (A) 2.625 and
(B) the sum of the Executive’s annual Base Salary and
the Executive’s Target Bonus in effect as of the Date of
Termination; and
(iii) for
twenty-seven (27) months after the Date of Termination, or
such longer period as may be provided by the terms of any
Applicable Benefit Plan, continuation of the Benefits, as if the
Executive’s employment had not been terminated; provided,
however , that if the Executive commences employment with
another employer during such twenty-seven (27) month period
and is eligible to receive medical or other welfare benefits under
the new employer’s plan(s), the Benefits shall terminate as
of the date the Executive becomes eligible to receive such
benefits;
(iv) an
amount equal to the contributions to the Company’s retirement
plans on behalf of the Executive that would have been made for the
benefit of the Executive if the Executive’s employment had
continued for twenty-seven (27) months after the Date of
Termination, assuming for this purpose that all benefits under any
such retirement plans were fully vested and that the
Executive’s compensation during such twenty-seven
(27) months were the same as it had been immediately prior to
the Date of Termination; and
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(v) reimbursement,
up to $15,000, for outplacement services reasonably selected by the
Executive; provided that the Executive may not terminate his
employment for Good Reason, unless he has delivered prior written
notice of his belief that Good Reason exists and the Company has
not fully remedied the situation (such that Good Reason no longer
exists) within ten (10) business days after receipt of such
notice.
5. Effect on Option,
Restricted Stock and Restricted Unit Agreements
.
(a) In
the event Options held by the Executive are assumed by the
surviving entity in connection with a Change in Control, if an
Involuntary Termination of Executive’s employment occurs
following the Change of Control before the end of the CIC Period,
vesting of any and all assumed Options held by the Executive shall
be accelerated so that all unexpired Options then held by the
Executive shall be fully vested and exercisable immediately upon
the Involuntary Termination.
(b) In
the event Restricted Stock and RSUs held by the Executive are
assumed by the surviving entity in connection with a Change in
Control, if an Involuntary Termination of Executive’s
employment occurs following the Change of Control before the end of
the CIC Period, vesting of any and all assumed Restricted Stock and
RSUs held by the Executive shall be accelerated so that all
Restricted Stock and RSUs then held by the Executive shall be fully
vested and exercisable immediately upon the Involuntary
Termination.
(c) The
termination of the Executive’s employment by the Company
without Cause during a Pending Change in Control shall have no
effect on the vesting of the Options, Restricted Stock or RSUs then
held by the Executive, and no shares of Common Stock shall be
delivered to the Executive in connection with the RSUs held by the
Executive at the time of the termination of his employment unless
the Change in Control is effected within three (3) months
following the Date of Termination. If the Change in Control is
effected, then the Options, Restricted Stock and RSUs held by the
Executive as of the Date of Termination shall be treated as if the
Executive’s employment had not been terminated and the
Executive shall have rights as set forth under Section 5(a) above.
If the Change in Control is not effected within three
(3) months following the Date of Termination, then the
Options, Restricted Stock and RSUs held by the Executive as of the
Date of Termination shall be treated as if the Executive’s
employment had been terminated as of such three-month anniversary
of the Date of Termination.
(d) In
the event the Executive’s employment is terminated by the
Company under any circumstances other than those described in
paragraphs (a) through (c) of this Section 5, the
effect of such termination of employment on the Options, Restricted
Stock and/or RSUs then held by the Executive shall be as set forth
in the agreements representing such Options, Restricted Stock
and/or RSUs.
6. Certain Additional
Payments by the Company .
(a) Anything
in this Agreement to the contrary notwithstanding and except as set
forth below, in the event it shall be determined that any Payment
would be subject to the Excise Tax, then the Executive shall be
entitled to receive an additional payment (the “
Gross-Up Payment ”) in an amount such that,
after payment by the Executive of all taxes (and any interest or
penalties imposed with respect to such taxes), including, without
limitation, any
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income taxes (and any interest
and penalties imposed with respect thereto) and Excise Tax imposed
upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the
Payments.
(b) Subject
to the provisions of Section 6(c) , all determinations
required to be made under this Section 6 , including
whether and when a Gross-Up Payment is required, the amount of such
Gross-Up Pay
