PERCEPTRON,
INC.
SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT, dated as of September 26,
2005, is between Perceptron, Inc. (the “Company”) and
Mark S. Hoefing, who is currently employed by the Company in the
position of Vice President — Sales and Marketing (the
“Executive”).
1. Operation of Agreement . This Agreement sets
forth the severance compensation that the Company shall pay the
Executive if the Executive’s employment with the Company
terminates under one of the applicable provisions set forth herein.
As used in this Agreement, employment with the Company shall be
deemed to include employment with a subsidiary of the
Company.
2. Defined Terms . For purposes of this
Agreement, the following terms shall have the meanings set forth
below:
(a)
“ Cause ” shall mean the
Executive’s
(i)
personal dishonesty in connection with the performance of services
for the Company,
(ii)
willful misconduct in connection with the performance of services
for the Company,
(iii)
conviction for violation of any law involving (A) imprisonment
that interferes with performance of duties or (B) moral
turpitude.
(iv)
repeated and intentional failure to perform stated duties, after
written notice is delivered identifying the failure, and it is not
cured within 10 days following receipt of such notice,
or
(v)
breach of a fiduciary duty to the Company.
(b)
“ Change in Control ” shall be deemed to have
occurred upon the occurrence of any of the following
events:
(i)
A merger involving the Company in which the Company is not the
surviving corporation (other than a merger with a wholly-owned
subsidiary of the Company formed for the purpose of changing the
Company’s corporate domicile);
(ii)
A share exchange in which the shareholders of the Company exchange
their stock in the Company for stock of another corporation (other
than a share exchange in which all or substantially all of the
holders of the voting stock of the Company, immediately prior to
the transaction, exchange, on a pro rata basis, their voting stock
of the Company, for more than 50% of the voting stock of such other
corporation);
(iii)
A sale of all or substantially all of the assets of the Company;
or
(iv)
Any person or group of persons (as defined in Section 13(d) of the
Securities Exchange Act of 1934, as amended) (other than any
employee benefit plan or employee benefit trust benefiting the
employees of the Company) becoming a beneficial owner, directly or
indirectly, of securities of the Company representing more than 50%
of either the then outstanding Common Stock of the Company, or the
combined voting power of the Company’s then outstanding
voting securities.
(c)
“ Disability ” shall mean the Executive’s
inability to substantially perform the Executive’s duties for
such period as would qualify the Executive for benefits under the
long-term disability insurance policy provided by the Company or,
if no such policy is provided, the Executive’s total and
permanent disability which prevents the Executive from performing
for a continuous period exceeding six months the duties assigned to
the Executive. The determination of Disability shall be made by a
medical board-certified physician mutually acceptable to the
Company and the Executive (or the Executive’s legal
representative, if one has been appointed), and if the parties
cannot mutually agree to the selection of a physician, then each
party shall select such a physician and the two physicians so
selected shall select a third physician who shall make this
determination.
3. Termination of Employment . The Executive
shall be entitled to the Regular Severance Benefits (as defined in
Section 3(b) below) set forth in this Section 3 if the
Executive has incurred a Termination of Employment. The severance
benefit provided under this Section 3 is in lieu of cash
severance payments offered under the Company’s documented
severance policy, if any.
(a) For
purposes of Section 3 of the Agreement, “Termination of
Employment” shall be defined as the Executive’s
involuntary termination by the Company for any reason other than
death, Disability or Cause.
(b) Upon
satisfaction of the requirements set forth in this Section 3,
upon the Executive’s execution of a release (in the form
attached hereto as Exhibit A), the Executive shall be entitled
to (the “Regular Severance Benefits”):
(i)
A cash severance benefit equal to one-half the Executive’s
current annual base salary, as in effect at the time of the
Termination of Employment;
(ii)
A prorated portion of any bonus that the Executive would have
earned for the year of termination had the Executive been employed
by the Company at the end of the applicable bonus
period;
(iii)
Any payments of commissions required to be made to the Executive
upon termination of employment under the terms of any commission
plan that the Executive participated in at the date of termination
of employment;
(iv)
Subject to Section 6, continuation of Company-provided health
(including vision and dental, if provided by the Company at the
date of termination) and welfare benefits (including executive life
insurance coverage, if provided by the Company to the Executive at
the date of termination) for six months, on the terms (or
comparable terms) provided by the Company to its employees from
time to time during
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this period. Health
benefits shall be provided through continued coverage under the
Company’s group health plan, if allowed under the terms of
such plan, or by the reimbursement of COBRA continuation coverage
premiums paid by the Executive, as determined by the Company;
provided, however, if the health plan is self-insured by the
Company, then the determination shall be made by the Executive. Any
continuation of group health plan coverage under this paragraph
shall run concurrently with the period of required COBRA
continuation coverage under the Code. If COBRA continuation
coverage is not available, the Company shall reimburse the
Executive for premiums for comparable coverage, provided, however,
that the reimbursement shall not exceed the greater of (i) two
times the annual premium paid by the Company for such coverage at
the date of termination or (ii) two times the then current
amount of the COBRA premium under the Company’s group health
plan for coverage comparable to that elected by the Executive.
Welfare benefits (other than health benefits) shall be continued
only to the extent permitted under the terms of such
plans;
(v)
Continuation of the Executive’s then current car benefit for
six months in accordance with the Company car policy in effect at
the time of termination.
(c) The
Executive’s cash severance benefit under Section 3(b)(i)
shall be payable in the same manner as the Executive’s base
salary, the pro rata share of any bonus under Section 3(b)(ii)
shall be payable at the time set forth in the bonus program and
commissions payable under Section 3(b)(iii) shall be payable at the
time set forth in the commission plan, or, in each case, such
earlier time as is required to avoid such payments being subject to
Section 409A of the Internal Revenue Code of 1986, as amended
(the “Code”).
4. Termination of Employment Following a Change in
Control . Subject to Section 11(a) hereunder, the Executive
shall be entitled to the Change in Control Severance Benefits (as
defined in Section 4(c) below) set forth in this Section 4, in
lieu of the severance benefits the Executive is entitled to under
Section 3 of this Agreement, if there has been a Change in
Control and the Executive has incurred a Termination of Employment.
The severance benefit provided under this Section 4 is in lieu
of cash severance payments offered under the Company’s
documented severance policy, if any.
(a) For
purposes of Section 4 of the Agreement, “Termination of
Employment” shall be defined as:
(i)
The Executive’s involuntary termination by the Company for
any reason other than death, Disability or Cause; or
(ii)
The Executive’s termination for “Good Reason,”
defined as the occurrence of any of the following events without
the Executive’s written consent, if the Executive terminates
employment within one (1) year following the occurrence of
such event:
(A)
Any reassignment of the Executive to substantial duties materially
inconsistent with the Executive’s position, duties,
responsibilities and status with the Company immediately prior to
the Change in Control or a
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substantial diminution in
the Executive’s position, duties, responsibilities or status
with the Company from his position, duties, responsibilities or
status with the Company immediately prior to the Change in Control;
provided that the fact that the Company is no longer a publicly
traded company or the Executive no longer has duties and
responsibilities associated exclusively with a publicly traded
company, such as Securities and Exchange Commission or stock
exchange reporting responsibilities or investor or analyst
relations responsibilities, shall not be deemed to be a
reassignment of the Executive to substantial duties materially
inconsistent with the Executive’s position, duties,
responsibilities and status with the Company immediately prior to
the Change in Control or a substantial diminution in the
Executive’s position, duties, responsibilities or status with
the Company from his position, duties, responsibilities or status
with the Company immediately prior to the Change in
Control;
(B)
Any reduction in the Executive’s base salary or targeted
incentive bonus or commissions in effect immediately prior to the
Change in Control, or failure by the Company to continue any bonus,
stock or other incentive plans in effect immediately prior to the
Change in Control (without the implementation of comparable
successor plans that provide comparable award
opportunities/benefits), or any removal of the Executive from
participation in such aforementioned plans;
(C)
The discontinuance or reduction in benefits to the Executive under
any qualified or nonqualified retirement or welfare plan maintained
by the Company immediately prior to the Change in Control (without
the implementation of comparable successor plans that provide
comparable benefits), or the discontinuance of any fringe benefits
or other perquisites that the Executive received immediately prior
to the Change in Control (without the implementation of comparable
successor plans that provide comparable benefits);
(D)
Required relocation of the Executive’s principal place of
employment more than 50 miles from the Executive’s place of
employment prior to the Change in Control; or
(E)
The Company’s breach of any provision in this Agreement,
provided that the Company has not cured such breach within
10 days following written notice by the Executive to the
Company of such breach.
(b) The Executive
who believes the Executive is entitled to a Termination of
Employment for Good Reason, as defined in Section 4 above, may
apply in writing to the Company for confirmation of such
entitlement prior to the Executive’s actual separation from
employment, by following the claims procedure set forth in
Section 15 hereof. The submission of such a request by the
Executive shall not constitute “Cause” for the Company
to terminate the Executive as defined under Section 2(a) hereof. If
the Executive’s request for a Good Reason Termination of
Employment is denied under both the request and appeal procedures
set forth in paragraphs (b) and (c) of Section 15
hereof, then the parties shall use their best efforts to resolve
the claim within 90 days after the claim is submitted to
arbitration pursuant to Section 15(d).
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(c) Upon
satisfaction of the requirements set forth in Sections 4 or
11(a) hereof and with respect to any one or more Changes in Control
that may occur during the term of this Agreement, upon the
Executive’s execution of a release (in the form attached
hereto as Exhibit A ), the Executive shall be entitled
to (the “Change in Control Severance
Benefits”):
(i)
A cash severance benefit equal to one times the Executive’s
current annual base salary, as in effect at the time of the Change
in Control;
(ii)
A prorated portion of the Executive’s target bonus for the
year of termination, if any, based on the number of days worked in
the year of termination;
(iii)
An amount equal to the positive difference, if any, between a
prorated portion of the Executive’s target commissions for
the year of termination, as established by the Company, under the
terms of any commission plan that the Executive participated in at
the date of termination of employment, based on the number of days
worked in the year of termination, less any commissions otherwise
paid or payable under such plan for such year;
(iv)
Subject to Section 6, continuation of Company-provided health
(including vision and dental, if provided by the Company
immediately prior to the Change in Control) and welfare benefits
(including executive life insurance coverage, if provided by the
Company to the Executive immediately prior to the Change in
Control) for one year, on the terms (or comparable terms) provided
by the Company to the Executive immediately prior to the Change in
Control. Health benefits shall be provided through continued
coverage under the Company’s group health plan, if allowed
under the terms of such plan, or by the reimbursement of COBRA
continuation coverage premiums paid by the Executive, as determined
by the Company; provided, however, if the health plan is
self-insured by the Company, then the determination shall be made
by the Executive. Any continuation of group health plan coverage
under this paragraph shall run concurrently with the period of
required COBRA continuation coverage under the Code. If COBRA
continuation coverage is not available, the Company shall reimburse
the Executive for premiums for comparable coverage, provided,
however, that the reimbursement shall not exceed the greater of
(i) two times the annual premium paid by the Company for such
coverage at the date of termination or (ii) two times the
amount of the COBRA premium under the Company’s group health
plan for coverage comparable to that elected by the Executive,
(A) at the time of the Change of Control or (B) at the time of
the required payment, whichever is greater. Welfare benefits (other
than health benefits) shall be continued only to the extent
permitted under the terms of such plans;
(v)
Continuation of the Executive’s then current car benefit for
one year in accordance with the Company car policy in effect at the
time of termination.
(vi)
Continued coverage, during the six (6) years following the
Executive’s termination for his actions or omissions as an
officer and, if applicable, director of the Company prior to the
date of termination of his employment, under any directors and
officers liability insurance policy maintained by the Company (or,
if the Company does not maintain such a policy, by its affiliates)
for its former directors and
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officers or, at the
Company’s election, for the current directors and officers.
If the Company or its affiliates does not otherwise maintain such a
policy, then the Company shall be required to provide the Executive
with such a policy, to the extent available. The policy dollar
coverage limits of any such policy shall be not less than the
policy limit under any Company policy in place within the one
(1) year prior to the Executive’s termination of
employment (the “Existing Policy”) or, if less, the
policy dollar coverage limit that can be purchased by the Company
for all of its current and former directors and officers at an
annual premium equal to two times the Company’s annual
premium for the Existing Policy.
(d) Subject
to Section 11(a) hereof, the Executive’s cash severance
benefit under Section 4(c)(i), (ii) and (iii) shall be
paid in a lump sum cash payment within ten (10) days following
the Executive’s Termination of Employment, as defined in
Section 4. Any payment made later than 10 days following the
Executive’s Termination of Employment (or applicable due date
under Section 11(a) hereof) for whatever reason, shall include
interest at the prime rate plus two percent, which shall begin
accruing on the 10th day following the Executive’s
Termination of Employment (or applicable due date under Section
11(a) hereof). For purposes of this Section 4, “prime
rate” shall be determined by reference to the prime rate
established by Comerica Bank (or its successor), in effect from
time to time commencing on the 10th day following the
Executive’s Termination of Employment (or applicable due date
under Section 11(a) hereof).
(e) Section 4
of this Agreement shall terminate upon the first of the following
events to occur:
(i)
Three years from the date hereof if a Change in Control has not
occurred within such three-year period;
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