PROCEPT BioRobotics (PRCT) - 2025 Q2 - Quarterly Results

Employment Agreement Overview This section details the employment agreement between PROCEPT BioRobotics Corporation and Larry L. Wood, outlining the parties involved and the effective dates of his new CEO role Parties and Effective Date This employment agreement is between PROCEPT BioRobotics Corporation and Larry L. Wood, who will serve as the new Chief Executive Officer. The agreement was executed on July 23, 2025, with an employment start date of September 2, 2025 - The agreement is between PROCEPT BioRobotics Corporation and Larry L. Wood ("Executive")[2] Key Dates | Date Type | Date | | :--- | :--- | | Execution Date | July 23, 2025 | | Employment Effective Date | September 2, 2025 | 1. Employment Terms This section outlines the executive's position, primary work location, and the exclusivity requirements of his employment with the company Position and Duties Effective September 2, 2025, Larry L. Wood will serve as the sole Chief Executive Officer of PROCEPT BioRobotics, reporting directly to the Board of Directors. He will also continue to serve as a member of the Board, and the company will support his nomination for election - Executive will serve as the sole Chief Executive Officer, reporting directly to the Board of Directors[5] - Executive will continue to serve as a member of the Board and the Company will use commercially reasonable efforts to nominate him for election to the Board[5] Principal Office The executive's primary workplace will be the company's principal corporate offices located in San Jose, California - The primary workplace is designated as the company's corporate offices in San Jose, California[6] Exclusivity The executive is required to devote his full working time and effort to the company. However, he is permitted to engage in passive investments, charitable activities, and serve on one other non-competing board of directors, provided these activities do not interfere with his duties and receive prior written approval from the Board - Executive must devote full working time to the Company, with exceptions for passive investments and charitable activities[7] - Serving on another organization's board of directors is permissible if the organization is not a competitor and prior written approval from the Board is obtained[7] 3. Compensation and Related Matters This section details the executive's annual base salary, eligibility for annual and sign-on bonuses, and participation in company benefits and expense reimbursement Annual Base Salary The executive will receive an annual base salary of $925,000, subject to annual review by the Board of Directors or its Compensation Committee Annual Base Salary | Component | Amount | | :--- | :--- | | Annual Base Salary | $925,000 | Annual Bonus The executive is eligible for a discretionary annual bonus with a target of 100% of his Annual Base Salary, based on performance objectives. The bonus for the 2025 calendar year will be pro-rated - Eligible for a discretionary annual bonus targeted at 100% of the Annual Base Salary[10] - The bonus for calendar year 2025 will be pro-rated to reflect a partial year of employment[11] Sign-On Bonus A one-time sign-on bonus of $1,700,000 will be paid within 30 days of the effective date. A pro-rated, after-tax portion of this bonus must be repaid if the executive resigns without Good Reason or is terminated for Cause within the first 12 months Sign-On Bonus Details | Component | Amount | Repayment Condition | | :--- | :--- | :--- | | Sign-On Bonus | $1,700,000 | Pro-rated repayment if terminated for Cause or resigns without Good Reason within 12 months | Benefits and Expenses The executive is entitled to participate in the company's standard employee and executive benefit plans, will be covered by D&O liability insurance, and will be reimbursed for all reasonable business expenses - Entitled to participate in employee and executive benefit plans offered by the Company[13] - Executive will be indemnified and covered under a Company-maintained directors and officers (D&O) liability insurance policy[13] - Reasonable, documented business and travel expenses will be reimbursed by the Company[14] 4. Equity Awards This section describes the initial equity grants, including buy-out RSUs, new-hire PSUs, and options, along with future eligibility for additional awards New Hire Equity Grants The executive will receive three initial equity awards: a Buy-Out RSU award valued at $7.5 million to compensate for forfeited equity, a New-Hire PSU award valued at $3.0 million, and a New-Hire Option Award valued at $7.5 million. The RSUs and Options vest over four years, with a one-year cliff Summary of New Hire Equity Awards | Award Type | Value | Vesting Schedule | | :--- | :--- | :--- | | Buy-Out RSUs | $7,500,000 | 25% on 1st anniversary, then quarterly over the next 3 years | | New-Hire PSUs | $3,000,000 | Based on pre-established performance formula | | New-Hire Options | $7,500,000 | 25% on 1st anniversary, then monthly over the next 3 years | - The Buy-Out RSU award is granted in consideration of unvested equity awards forfeited by the Executive from his previous employer[16] Future Eligibility The executive will be eligible for additional equity award grants for fiscal year 2026 and beyond, at the discretion of the Board or its Compensation Committee - Executive is eligible for future equity grants for fiscal year 2026 and subsequent years[19] 5. Termination of Employment This section establishes the at-will nature of the executive's employment and the general conditions under which the employment relationship can be terminated At-Will Employment The executive's employment is "at-will," meaning either the company or the executive can terminate the employment relationship at any time, for any reason, with or without cause, subject to the severance provisions outlined in the agreement - Employment is on an at-will basis and can be terminated by either party at any time for any reason[20] - Upon termination, the executive is only entitled to payments and benefits as provided in this agreement[20] 6. Consequences of Termination This section specifies the financial and equity benefits due to the executive upon various termination scenarios, including definitions for "Cause" and "Good Reason" Accrued Obligations Upon Any Termination Regardless of the reason for termination, the executive is entitled to receive all earned but unpaid base salary, vested benefits, reimbursed expenses, and any earned but unpaid annual bonus - Upon any termination, the Executive is entitled to: earned Annual Base Salary, owed expenses, accrued paid time-off, and any earned but unpaid Annual Bonus[23] Severance Payments for Covered Termination In the event of a "Covered Termination" (termination by the company without Cause or resignation by the executive for Good Reason), the executive is entitled to significant severance benefits. These benefits are enhanced if the termination occurs during a "Change in Control Period" (3 months prior to and 12 months after a Change in Control) Severance Benefits Comparison | Benefit | Covered Termination (Outside CIC Period) | Covered Termination (During CIC Period) | | :--- | :--- | :--- | | Cash Severance | 1.5x Annual Base Salary | 3.0x (Annual Base Salary + Target Annual Bonus) | | COBRA Subsidy | 18 months | 36 months | | Equity Vesting | Full vesting of Buy-Out RSU Award only | Full vesting of all service-based equity awards; performance awards vest per their terms (at least at target) | - All severance payments are contingent upon the executive signing and not revoking a waiver and release of claims agreement[24][28] Key Definitions for Termination The agreement provides specific definitions for key terms that govern termination and severance eligibility, including "Cause," "Good Reason," "Change in Control Period," and "Covered Termination" - Cause: Defined to include material dishonesty, felony conviction, willful harm to the company, material breach of agreement, or repeated refusal to perform duties[31] - Good Reason: Defined to include a material reduction in title, duties, base salary (>5%), or target bonus; a relocation of the primary workplace outside California; or a material breach of the agreement by the Company[36] - Change in Control Period: The period commencing 3 months prior to a Change in Control and ending 12 months after[32] - Covered Termination: Termination by the Company without Cause or by the Executive for Good Reason. Excludes termination due to death or Disability[33] 8. Miscellaneous Provisions This section covers general legal terms, including the governing law, dispute resolution mechanisms, and whistleblower protections within the agreement Governing Law and Dispute Resolution%20Governing%20Law%20and%20Dispute%20Resolution) The agreement is governed by the laws of the State of California. Any disputes arising from the agreement must be resolved exclusively through final and binding arbitration in Santa Clara County, California, through JAMS - The agreement shall be governed and construed in accordance with the laws of the State of California[39] - Disputes are to be resolved exclusively by final and binding arbitration held in Santa Clara County, California, through JAMS[46] Whistleblower Protections The agreement explicitly states that nothing within it or the associated Confidentiality Agreement prohibits the executive from reporting possible violations of federal law or regulation to any governmental agency or entity, in accordance with whistleblower protection provisions - The agreement does not prohibit the Executive from reporting possible violations of federal law or regulation to any U.S. governmental agency, as protected under Sarbanes-Oxley and other whistleblower provisions[50] 9. Golden Parachute Excise Tax (Section 280G) This section addresses the treatment of payments that may be subject to the Section 280G excise tax, ensuring the executive receives the maximum after-tax benefit Best Pay Provision The agreement includes a "best pay" provision regarding the Section 280G golden parachute excise tax. If any payments would trigger the tax, the total payment will either be reduced to avoid the tax or paid in full (subject to the tax), whichever results in a greater after-tax amount for the executive - If payments constitute a "parachute payment" subject to the excise tax under Section 4999 of the Code, the payment will be the greater of: (A) the largest amount that does not trigger the tax, or (B) the full payment amount, based on which provides the greater after-tax benefit to the Executive[51] 10. Section 409A Compliance This section ensures that all compensation and benefits provided under the agreement comply with or are exempt from Section 409A of the Internal Revenue Code Compliance with Deferred Compensation Rules This section contains standard provisions to ensure that all payments and benefits under the agreement comply with, or are exempt from, Section 409A of the Internal Revenue Code, which governs nonqualified deferred compensation. This includes rules for payment timing upon separation from service, potential six-month delays for "specified employees," and procedures for the execution of a release of claims - The agreement is intended to comply with or be exempt from Section 409A of the tax code regarding deferred compensation[54] - If the Executive is a "specified employee," payments subject to Section 409A may be delayed for six months following separation from service to avoid tax penalties[56]