FARO TECHNOLOGIES, INC. EMPLOYMENT AGREEMENT
EXHIBIT
10.1
FARO
TECHNOLOGIES, INC.
ARTICLE
I
EFFECTIVE
DATE AND PURPOSE
This
Employment Agreement (the “Agreement”)
is
made and entered into effective as of October 20, 2006 by and between FARO
Technologies, Inc. (the “Company”)
and
XXX XXXXXXXX (hereinafter referred to as the “Executive”).
The
Company believes that an effective and stable management team is essential
to
promoting the best interests of the Company and its shareholders. Given the
Executive’s strong performance and diligent work efforts, the Company wishes to
assure Executive’s continued services in the event of a change of control. As a
change in control of the Company may adversely affect Executive’s employment
security the Company desires to provide an incentive for the Executive to remain
employed with the Company during the period leading up to any such change of
control, and to encourage the Executive to devote full and continued attention
to the business of the Company and use best efforts to consummate any such
change of control.
ARTICLE
II
DEFINITIONS
Section
2.1 Act
means
the Securities Exchange Act of 1934, as amended.
Section
2.2 Affiliate
and Associate
shall
have the respective meanings ascribed to such terms in Rule 12b-2 of the General
Rules and Regulations of the Act.
Section
2.3 Beneficial
Owner.
For
purposes of this Agreement, a Person shall be deemed to be the “Beneficial
Owner” of any securities:
(a) which
such Person or any of such Person’s Affiliates or Associates has the right to
acquire (whether such right is exercisable immediately or only after the passage
of time) pursuant to any agreement, arrangement or understanding, or upon the
exercise of conversion rights, exchange rights, rights, warrants or options,
or
otherwise; provided,
however,
that a
Person shall not be deemed the Beneficial Owner of, or to beneficially own,
securities tendered pursuant to a tender or exchange offer made by or on behalf
of such Person or any of such Person’s Affiliates or Associates until such
tendered securities are accepted for purchase;
(b) which
such Person or any of such Person’s Affiliates or Associates, directly or
indirectly, has the right to vote or dispose of or has “beneficial ownership” of
(as determined pursuant to Rule 13d-3 of the General Rules and Regulations
under
the Act), including pursuant to any agreement, arrangement or understanding;
provided,
however,
that a
Person shall not be deemed the Beneficial Owner of, or to beneficially own,
any
security under this Subsection (b) as a result of an agreement, arrangement
or
understanding to vote such security if the agreement, arrangement or
understanding: (i) arises solely from a revocable proxy or consent given to
such
Person in response to a public proxy or consent solicitation made pursuant
to,
and in accordance with, the applicable rules and regulations under the Act
and
(ii) is not also then reportable on a Schedule 13D under the Act (or any
comparable or successor report); or
(c) which
are
beneficially owned, directly or indirectly, by any other Person with which
such
Person or any of such Person’s Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting
(except pursuant to a revocable proxy as described in Subsection (b)(i) above)
or disposing of any voting securities of the Company.
Section
2.4 Board
(or Board of Directors)
means
the Board of Directors of the Company.
Section
2.5 Change
of Control
means
the occurrence of any of the following:
(a) any
Person (other than (i) an Affiliate of the Company, (ii) any employee benefit
plan of the Company or any Affiliate thereof, or (iii) any Person organized,
appointed or established pursuant to the terms of any such benefit plan) is
or
becomes the Beneficial Owner of securities of the Company representing at least
thirty percent (30%) of either (i) the combined voting power of the Company’s
then outstanding securities; or (ii) the outstanding shares of the then
outstanding shares of common stock of the Company; or
(b) a
change
in the composition of the Company’s Board of Directors such that the individuals
who, as of the effective date of this Agreement, constitute the Board (such
Board hereinafter referred to as the “Incumbent Board”) cease for any reason to
constitute at least a majority of the Board; provided however, for purposes
of
this definition, that any individual who becomes a member of the Board
subsequent to the effective date hereof, whose election or nomination for
election was approved by a vote of at least a majority of those individuals
who
are members of the Board and who were also members of the Incumbent Board (or
deemed to be such pursuant to this proviso) shall be considered as though such
individual were a member of the Incumbent Board; but provided further, that
any
such individual whose initial assumption of office occurs as a result of either
an actual or threatened election contest (as such terms are used in Rule 14a-11
of Regulation 14A promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person
other
than the Board shall not be so considered as a member of the Incumbent Board;
or
(c) the
approval by the shareholders of the Company of any one of the following
transactions:
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| (i) |
a
reorganization, merger or consolidation of the Company with any other
Person, other than one which results in the voting securities of
the
Company outstanding immediately prior to such merger or consolidation
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity or any parent
there) at least 50% of the combined voting power of the voting securities
of the Company or such surviving entity or any parent thereof outstanding
immediately after such merger or consolidation;
or
|
| (ii) |
an
agreement for the sale of disposition by the Company of all or
substantially all of the Company’s assets, other than a sale or
disposition by the Company of all or substantially all of the Company’s
assets to an entity, at least 75% of the combined voting power of
the
voting securities of which are owned by shareholders of the Company
in
substantially the same proportions as their ownership of the Company
immediately prior to such sale.
|
(d) Notwithstanding
the foregoing, no “Change in Control” shall be deemed to have occurred if there
is consummated any transaction or series of integrated transactions immediately
following which the record holders of the common stock of the Company
immediately prior to such transaction or series of transactions continue to
have
substantially the same proportionate ownership in an entity which owns all
or
substantially all of the assets of the Company immediately following such
transaction or series of transactions.
Section
2.6 Cause
shall be
determined by the Board of the Company means (a) an act of fraud or embezzlement
against the Company or acceptance of a bribe or kickback; (b) the conviction
or
a plea of nolo
contendere
by the
Executive of a felony or of a crime involving fraud, dishonesty, violence or
moral turpitude; (c) willful and continued refusal to substantially perform
assigned duties (other than any refusal resulting from incapacity due to
physical or mental illness or Disability); and (d) willful engagement in gross
misconduct materially and demonstrably injurious to the Company.
Section
2.7 Change
of Control Date
means
the first date on which a Change of Control has occurred.
Section
2.8 Code
means
the Internal Revenue Code of 1986, including any amendments or successor tax
codes. Any reference to a specific provision of the Code shall mean any
successor provision thereto.
Section
2.9 Disability
means a
disability that would entitle the Executive to payment of monthly disability
payments under any Company long-term disability plan.
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Section
2.10 Good
Reason
means
any of the following to which the Executive has not consented in writing: (a)
a
material breach by the Company of the Company’s obligations to the Executive
under this Agreement, which breach is not cured to the Executive’s reasonable
satisfaction within ten (10) days after written notification to the Company
describing in reasonable detail such breach and stating that such notice is
being delivered pursuant to this Agreement; (b) a reduction in the Executive’s
base salary to an amount below the base annual salary in effect as of the date
of this Agreement; (c) a material reduction in the Executive’s benefits,
including retirement, Company-paid insurance, sick leave, expense reimbursement
and vacation time, as provided by the Company (except consistent with a general
reduction of such benefits to executives of the Company as a whole); (d) an
ongoing material and substantial diminution in the duties of the Executive
not
consistent with that of an executive with his position and duties; or (e)
relocation of the Executive’s principal office to a location more than 25 miles
from the Company’s headquarters on the date of this Agreement.
Section
2.11 Person
means
any individual, firm, partnership, corporation or other entity, including any
successor (by merger or otherwise) of such entity, or a group of any of the
foregoing acting in concert.
ARTICLE
III
EVENTS
UPON CHANGE OF CONTROL
Section
3.1 Change
of Control Payment.
If the
Executive is actively employed by
the
Company or any of its Affiliates on the day immediately preceding the Change
of
Control Date, the Executive shall receive a Change of Control payment equal
to
2.99 times the greater of (A) Executive’s base annual salary as of the date of
this Agreement; and (B) Executive’s then-current base annual salary. The payment
described herein shall be paid to the Executive in a cash lump sum on, or as
soon as practicable after, the Change of Control Date.
Section
3.2 Accelerated
Vesting of Options.
Upon a
Change of Control, all unvested options with respect to the Company’s stock held
by the Executive shall vest and become immediately exercisable and shall be
exercisable for a period ending on the later of (A) the fifth anniversary of
the
Change of Control Date or (B) the last date that such option would otherwise
be
exercisable under the terms of the option agreement or the plan pursuant to
which such option was granted; provided, that in no event shall any option
be
exercisable after the expiration of the original term of the
option.
ARTICLE
IV
SEVERANCE
PAYMENTS
Section
4.1 Severance
Payments Upon Certain Terminations of Employment.
Upon
the termination of the Executive’s employment by the Executive for Good Reason
or by the Company without Cause, the Executive shall be entitled to the
following severance:
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(a) The
Company shall make payments to the Executive of continued salary for one year
at
a rate equal to the Executive’s base salary in effect at the time of such
termination, payable pursuant to normal payroll procedures of the
Company;
(b) The
Company shall pay to Executive, in a lump sum and as promptly as practicable
after such termination, Executive’s earned but unpaid compensation accrued
through the date of such termination;
(c) All
of
the Executive’s unvested options for shares of the Company’s stock and all of
the Executive’s unvested shares of restricted shares of the Company’s stock
shall automatically vest in full as of the date of such
termination;
(d) Until
the
earlier of (i) twelve (12) months following termination; or (ii) the Executive’s
securing coverage, through another employer, of benefits similar to those
provided by the Company, the Company shall provide the same coverage to the
Executive under the Company’s “employee welfare benefit plans” (as defined in
Section 3(1) of the Employee Retirement Income Security Act of 1974) as is
provided by the Company to comparable employees, or, in lieu of such coverage,
the Company may reimburse the Executive on a net after-tax basis, for the cost
of individual insurance coverage for the Executive and his dependents under
a
policy or policies that provide benefits not less favorable than the benefits
provided under such employee welfare benefit plans; and
(e) The
Company also shall pay to the Executive all reasonable attorney’s fees and
expenses incurred by the Executive in disputing in good faith any issue
hereunder relating to the termination of Executive’s employment, in seeking in
good faith to obtain or enforce any benefit or right provided by this Agreement
or in connection with any tax audit or proceeding to the extent attributable
to
the application of Section 4999 of the Code to any payment or benefit provided
hereunder. Such payments shall be made within five (5) business days after
delivery of the Executive’s written requests for payment accompanied with such
evidence of fees and expenses incurred as the Company reasonably may
require.
The
Executive shall not be required to mitigate the amount of any payment or benefit
contemplated by this Agreement (whether by seeking new employment or in any
other manner). No such payment shall be reduced by earnings that the Executive
may receive from any other source.
ARTICLE
V
NONQUALIFIED
DEFERRED COMPENSATION OMNIBUS PROVISION
Section
5.1 General.
It is
intended that any payment or benefit which is provided pursuant to or in
connection with this Agreement which is considered to be nonqualified deferred
compensation subject to Section 409A of the Code shall be paid and provided
in a
manner, and at such time and in such form, as complies with the applicable
requirements of Section 409A of the Code to avoid the unfavorable tax
consequences provided therein for noncompliance. In connection with effecting
such compliance with Section 409A of the Code, the following shall
apply:
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(a) Notwithstanding
any other provision of this Agreement, the Company is authorized to amend this
Agreement, to delay the payment of any monies and/or provision of any benefits
in such manner as may be determined by it to be necessary or appropriate to
comply, or to evidence or further evidence required compliance, with Section
409A of the Code (including any transition or grandfather rules
thereunder);
(b) If
the
Executive is a “key employee” of a publicly traded corporation within the
meaning of Section 416(i) and any payment or provision of any benefit hereunder
is subject to Section 409A in connection with a “separation from service” within
the meaning of the U.S. Treasury Regulations promulgated under Section 409A,
no
payment or benefit shall be made or provided until the earlier of (i) the
expiration of the six (6) month period measured from the date of the Executive’s
“separation from service”; or (ii) the date of the Executive’s death (the “409A
Payment Date”). In the event such payments are otherwise due to be made
installments or periodically during the period from “separation of service” to
the 409A Payment Date (the “Deferral Period”), the payments which would
otherwise have been made during the Deferral Period shall be accumulated and
paid in a lump sum upon the 409A Payment Date, and the balance of the payments
shall be made as otherwise scheduled. In the event benefits are required to
be
deferred, any such benefit may be provided during the Deferral Period at the
Executive’s expense, with the Executive having a right to reimbursement from the
Company once the Deferral Period ends, and the balance of the benefits shall
be
provided as otherwise scheduled.
ARTICLE
VI
SUCCESSORS
AND ASSIGNS
Section
6.1 Successors
and Assigns of Company.
If the
Company sells, assigns or transfers all or substantially all of its business
and
assets to any Person or if the Company merges into or consolidates or otherwise
combines (where the Company does not survive such combination) with any Person
(any such event, a "Sale of Business"), then the Company shall assign this
Agreement to such Person and cause such Person to expressly assume and agree
to
perform from and after the date of such assignment all of the terms, conditions
and provisions imposed by this Agreement upon the Company. In case of such
assignment by the Company and the assumption and agreement by such Person,
"Company" as used in this Agreement shall thereafter mean the Person that
assumes and agrees to perform this Agreement as provided for in this Section
or
that otherwise becomes bound by all the terms and provisions of this Agreement
by operation of law, and this Agreement shall inure to the benefit of, and
be
enforceable by, such Person. The Executive shall, in his or her discretion,
be
entitled to proceed against any or all of such Persons, any Person which
theretofore was such a successor to the Company and the Company (as so defined)
in any action to enforce any rights of the Executive. Except as provided in
this
Section, this Agreement shall not be assignable by the Company.
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Section
6.2 Successors
and Assigns of Executive.
The
Executive shall not have the right to assign, transfer, alienate, anticipate,
pledge or encumber any portion of a payment due hereunder, nor shall such
amounts be subject to seizure by legal process by any creditor of such
Executive. All rights of the Executive under this Agreement shall inure to
the
benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, heirs and beneficiaries. In the
event of the Executive's death, all amounts payable to the Executive under
the
Agreement if the Executive had lived, shall be paid to the Executive's estate,
heirs or representatives.
ARTICLE
VII
MISCELLANEOUS
Section
7.1 Notices.
Notices
given pursuant to this Agreement shall be in writing and shall be deemed given
when personally delivered or sent by telecopy transmission or three (3) days
after being sent by
United
States mail, postage prepaid to the parties at their respective address set
forth below:
To
the
Company:
FARO
Technologies, Inc.
Attention:
Chief Financial Officer
000
Xxxxxxxxxx Xxxx
Xxxx
Xxxx, XX
00000
To
the
Executive:
To
Executive’s address contained in the Company’s records.
Section
7.2 Severability.
The
provisions of this Agreement shall be regarded as divisible, and if any of
such
provisions or any part are declared invalid or unenforceable by a court of
competent jurisdiction, the validity and enforceability of the remainder of
such
provisions or parts and the applicability thereof shall not be affected
thereby.
Section
7.3 Withholding.
The
Company shall be entitled to withhold from amounts to be paid to the Executive
any federal, state or local withholding or other taxes or charges which it
is
from time to time required to withhold. The Company shall be entitled to rely
on
an opinion of nationally recognized tax counsel if any question as to the amount
or requirement of any such withholding shall arise.
Section
7.4 Entire
Agreement.
This
Agreement embodies the entire Agreement and understanding between the Company
and Executive relating to the subject matter hereof.
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Section
7.5 Governing
Law; Resolution of Disputes.
The
laws
of the State of Florida and the federal laws of the United States of America,
excluding the laws of those jurisdictions pertaining to resolution of conflicts
with laws of other jurisdictions, govern the validity, enforcement,
construction, and interpretation of this Agreement. In the event that there
is
any litigation under this Agreement, Executive and the Company (a) consent
to
the personal jurisdiction of the state and federal courts having jurisdiction
in
Orange County, Florida, (b) stipulate that the proper, convenient, and exclusive
venue for any legal proceeding arising out of this Agreement is Orange County,
Florida, for a state court proceeding, or the Middle District of Florida,
Orlando Division, for a federal court proceeding, and (c) waive any defense,
whether asserted by motion or pleading, that Orange County, Florida, or the
Middle District of Florida, Orlando Division, is an improper or inconvenient
venue.
Section
7.6 No
Waiver.
No
waiver of any provision of this Agreement shall be valid unless in writing
and
signed by the person against
whom it is sought to be enforced. The failure by either party to insist upon
strict performance of any provision will not be construed as a waiver or
relinquishment of the right to insist upon strict performance of the same
provision at any other time, or any other provision of this
Agreement.
Section
7.7 Counterparts.
This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed to be an original but all of which together will constitute one and
the
same instrument.
Section
7.8 Headings.
The
headings contained are for reference only and shall not affect the meaning
or
interpretation of any provision of this Agreement
Section
7.9 Further
Assurances.
Each
party hereto shall cooperate and shall take such further action and shall
execute and deliver such further documents as may be reasonably necessary in
order to carry out the provisions and purposes of this Agreement.
Section
7.10 No
Strict Construction.
The
parties have jointly participated in the negotiation and drafting of this
Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the parties
hereto, and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any of the provisions
of
this Agreement.
EXECUTIVE
ACKNOWLEDGES THAT HE HAS CAREFULLY READ THIS AGREEMENT, WAS AFFORDED SUFFICIENT
OPPORTUNITY TO CONSULT WITH LEGAL COUNSEL OF HIS CHOICE, AND TO ASK QUESTIONS
AND RECEIVE SATISFACTORY ANSWERS REGARDING THIS AGREEMENT, UNDERSTANDS HIS
RIGHTS AND OBLIGATIONS UNDER IT, AND SIGNED IT OF HIS OWN FREE WILL AND
VOLITION.
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IN
WITNESS WHEREOF, the Executive and Company have executed this Agreement as
of
the date first written above.
| COMPANY: | |
| FARO TECHNOLOGIES, INC. | |
| /s/ Xxxxx Xxxx | |
| Name: Xxxxx Xxxx | |
| Title: Co-Chief Executive Officer | |
| EXECUTIVE: | |
| /s/ Xxx Xxxxxxxx | |
|
Name:
Xxx Xxxxxxxx
|
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