CHANGE IN CONTROL AGREEMENT BETWEEN SYNERGETICS USA, INC. AND MICHAEL R FANNING
Exhibit 10.1
This Change in Control Agreement (this “Agreement”) is made and entered into effective
as of August 1, 2010, by and between Xxxxxxx X. Xxxxxxx, an individual (the “Executive”),
and Synergetics USA, Inc., a Delaware corporation (the “Company”).
W I T N E S S E T H
WHEREAS the Company’s Board of Directors (the “Board”) has determined that it is
essential and in the best interests of the Company and its shareholders to retain the services of
the Executive in the event of a threat or occurrence of a Change in Control of the Company;
WHEREAS, in order to induce the Executive to remain in the employ of the Company in the event
of a threat or the occurrence of a Change in Control, the Company desires to provide the Executive
with certain benefits in the event his or his employment is terminated as a result of, or in
connection with, a Change in Control; and
WHEREAS the Executive is willing to accept the inducement as a benefit of his employment with
the Company subject to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements
contained herein and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. Definitions. For purposes of this Agreement, the following terms shall have the meanings
specified below.
“Standard Compensation Due” shall mean a sum that includes all amounts, if any, earned
or accrued by Executive through the employment termination date as a result of and arising from his
employment by the Company, such amounts having been earned or accrued in accordance with standard
policies and practices of the Company, yet not paid as of the termination date, including, as
appropriate, (i) base salary, (ii) reimbursement for reasonable and necessary expenses incurred by
the Executive on behalf of the Company, (iii) vacation pay, (iv) bonuses and incentive
compensation, and (v) all other amounts to which the Executive is entitled under any compensation
or benefit plan of the Company. Under the bonus and incentive policy and practice that is current
as of the effective date hereof, which is subject to change in the sole discretion of the Company,
no bonus or incentive payment is due or payable until after being awarded by the Board, which award
is made in the sole discretion of the Board and only for eligible employees employed as of the last
day of the fiscal year. For purposes of any termination pursuant to Section 3.1.2, however,
Standard Compensation Due shall include a bonus and incentive compensation amount determined by the
Board under the Company’s policies and practices as of the fiscal year in which a Termination
Without Cause (as defined below) occurs, which bonus and incentive amount shall be pro rated to
reflect the portion of such fiscal year during which Executive was employed by the Company, such
that the award of bonus and incentive compensation shall not be conditioned upon Executive’s
employment by Company on the last day of the fiscal year.
“Cause” shall mean as follows: A termination of employment is for “Cause” if the
Executive has been convicted of a felony or a felony prosecution has been brought against the
Executive, or if the termination is evidenced by a resolution adopted in good faith by at least
two-thirds (2/3) of the Board (excluding Executive, if a Board member) finding that the
Executive (i) intentionally or by gross negligence failed substantially to perform any of his
reasonably assigned duties with the Company (other than a failure resulting from the Executive’s
incapacity due to physical or mental illness or because of a Change in Control), including a
failure to abide by his duty of loyalty or confidentiality or a breach of his duty with regard to
non-competition or non-solicitation, or (ii) intentionally or by gross negligence engaged in
illegal conduct or gross misconduct (including by omission) that results in or is expected by the
Board is likely to result in material economic harm or other detrimental effect to the Company,
directly or indirectly, including: (a) any embezzlement or misappropriation of Company property,
(b) any act of dishonesty performed within his employment, (c) the possession, distribution or use
of illegal substances, (d) any act or omission that endangers or is likely to endanger the health
or safety of another employee, or (e) any act or omission that has or could have a material
detrimental effect on the Company’s reputation or business; provided, however, that
(A) if a felony prosecution is dismissed by the prosecution or results in a judgment of acquittal,
then, a termination arising from such prosecution shall thereafter no longer be deemed to have been
for Cause and the Executive shall be entitled to all the benefits provided by Section 3.1.2 and
3.1.3 hereof, as appropriate; and (B) no termination shall be for Cause as set forth in clause (i)
or (ii) above unless (x) the failure of substantial performance or the illegal or gross misconduct
continues or is not remedied to the satisfaction of the Board during a period of seven (7) days
after delivery to the Executive of a written demand for substantial performance going forward and
the performance of any remedial action that shall satisfy the Board, if any, such demand specifying
the manner in which the Executive has failed substantially to perform or the illegal conduct or
gross misconduct undertaken, and (y) the Executive has been provided an opportunity to be heard by
the Board (with the assistance of the Executive’s counsel if the Executive so desires).
“Change in Control” shall mean:
(i) The acquisition by any Person (other than (A) any employee benefit plan established by the
Company; (B) the Company or any of its affiliates (as defined in Rule 12b-2 promulgated under the
Exchange Act); (C) an underwriter temporarily holding securities pursuant to an offering of such
securities; or (D) a corporation owned, directly or indirectly, by stockholders of the Company in
substantially the same proportions as their ownership of the Company), directly or indirectly, of
securities of the Company (not including in the securities beneficially owned by such Person any
securities acquired directly from the Company) representing an aggregate of fifty-one percent (51%)
or more of the combined voting power of the Company’s then outstanding voting securities; or
(ii) A change in the composition of the Board, wherein during any period of up to two
consecutive years, individuals who, at the beginning of such period, constitute the Board cease for
any reason to constitute at least a majority thereof, provided that any person who becomes a
director subsequent to the beginning of such period and whose nomination for election is approved
by at least two-thirds of the directors then still in office who either were directors at the
beginning of such period or whose election or nomination for election was previously so approved
(other than a director (A) whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the directors of the Company, as such terms
are used in Rule 14a-11 of Regulation 14A under the Exchange Act, or (B) who was designated by a
Person who has entered
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into an agreement with the Company to effect a transaction described in clause (i), (iii) or
(iv) hereof) shall be deemed a director as of the beginning of such period; or
(iii) The closing of a merger or consolidation of the Company with any other corporation,
except that the following shall not be considered to have effected a Change in Control: (A) a
merger or consolidation that would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity or any parent thereof), in combination
with the ownership of any trustee or other fiduciary holding securities under an employee benefit
plan of any Company, at least fifty-one percent (51%) 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 (B) a complete liquidation of the Company or the sale or
disposition of all or substantially all of the Company’s assets.
“Code” shall mean the Internal Revenue Code of 1986, as amended, or any successor
statute, rule or regulation of similar effect.
“Disability” or “Disabled” shall mean the Executive’s inability to
substantially perform Executive’s duties for the Company on a full-time basis, with or without
accommodation, for a period of six (6) months, as a result of physical or mental incapacity.
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
“Involuntary Termination” shall mean the termination of Executive’s employment by the
Executive, which is reasonably and objectively due to (i) a significant reduction of the
Executive’s responsibilities, position (including title, reporting relationships or working
conditions), authority, or duties (including the assignment to the Executive of any duties
inconsistent with Executive’s responsibilities, position, or duties just prior to such assignment);
or (ii) a significant change in the terms or status of this Agreement; or (iii) a reduction (other
than a reasonably insignificant reduction) in the Executive’s base salary or non-monetary benefits;
or (iv) a change of the Executive’s principal office location of more than fifty (50) miles; or (v)
a significant increase in the Executive’s out-of-town travel requirements (collectively “Status
Changes”), provided such termination occurs within six (6) months of the Status Change to which
it is due and within one (1) year of a Change in Control.
“Person” shall mean any individual, corporation, bank, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or other entity.
2. Term. This Agreement shall have a rolling term of one (1) year (the
“Term”) commencing on the date hereof. That is, the Term shall, after each day, extend for
an additional day, automatically and without any action on behalf of either party. Either party
may, by written notice to the other, cause this Agreement to cease to so extend automatically. The
Term of this Agreement shall be fixed for the one (1) year following the date such notice is duly
given, and shall expire thereafter. This Agreement shall terminate thirty (30) days after the
termination of Executive’s employment, although all obligations of Company which arise prior
thereto shall continue until fulfilled.
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3. Termination of Employment.
3.1. If, during the term of this Agreement, the Executive’s employment with the Company
is terminated within one year following a Change in Control under any of the following
circumstances, the Executive shall be entitled to the following compensation and benefits.
3.1.1. If the Executive’s employment with the Company shall be terminated (i)
by the Company for Cause or Disability, (ii) by reason of the Executive’s death, or
(iii) by the Executive, other than as an Involuntary Termination, the Company shall
pay to the Executive all Standard Compensation Due.
3.1.2. If the Company terminates Executive without Cause and otherwise for any
reason other than death or Disability, including, without limitation, any
Involuntary Termination, and provided Executive enters a separation agreement within
thirty (30) days thereof in a form reasonably satisfactory to Company, including a
release of claims and an acknowledgment of certain continuing obligations such as
non-disclosure of confidential information (“Termination Without Cause”), then
Executive shall be entitled to receive as severance an amount equal to the sum of
the following (“Ordinary Severance”); (i) all Standard Compensation Due; (ii) an
amount equal to one (1) times Executive’s annual base salary at the rate in effect
immediately prior to the Change in Control; and (iii) any amount payable as of the
date of such Termination Without Cause under the Company’s objectives-based
incentive plan. Such Ordinary Severance shall be paid in twelve (12) equal monthly
installments beginning in the month after such Termination Without Cause. To the
extent payment of the Executive’s Ordinary Severance under this Section 3.1.2. does
not constitute separation pay due to involuntary separation of service within the
meaning of Treasury Regulation Section 1.409A-1(a)(9)(iii), or any successor
regulation, and the Executive is, at the time of his termination of employment, a
specified employee of the Company within the meaning of Section 409A(a)(2)(B)(i) of
the Internal Revenue Code of 1986, as amended, the payments of such Ordinary
Severance, which do not constitute pay on account of involuntary separation of
service within the meaning of Treasury Regulation Section 1.409A-1(b)(9)(iii), shall
not be made under this Section 3.1.2. until the first day of the seventh full
consecutive month immediately following the month in which the Executive’s
termination of employment occurs. As of the first day of such seventh month, the
Executive shall be paid, in a single, lump sum payment, an amount equal to payments
which cannot be paid during the first six consecutive months immediately following
the Executive’s Termination Without Cause, increased by interest, compounded daily
at the prime rate published in the Wall Street Journal, on the amounts which cannot
be so paid from the dates such amounts would have been paid but for the immediately
preceding sentence to the date of payment on the first day of the seventh month.
Thereafter, the Executive shall be paid the monthly amount of Ordinary Severance for
each month during the balance of the term of the twelve month payment period
specified above.
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3.1.3. In the event of a termination pursuant to Section 3.1.2, (A) all rights
of Executive pursuant to awards of shares or options granted by the Company shall
immediately vest completely and shall be released from all conditions and
restrictions, except for restrictions on transfer pursuant to the Securities Act of
1933, as amended, and (B) the Executive shall be deemed to have retired from the
Company and shall be entitled, as of the termination date or at such later time as
he may elect, to commence receiving the total combined qualified and non-qualified
retirement benefit to which he is entitled in accord with any Company plan. Subject
to applicable legal limits to the contrary, including without limitation limits
applicable to incentive stock options under the Code, in the event of termination
pursuant to Section 3.1.2, Executive shall have up to one (1) year from the date of
such termination to exercise any outstanding stock options, except as such exercise
is limited by the applicable award agreement.
3.2. No Mitigation. The payments hereunder are not subject to reduction in the
event Executive receives other compensation for services rendered after termination, and
Executive is not required to mitigate any payment to be made hereunder.
3.3. All benefits received pursuant to this Agreement shall be subject to withholding
of applicable income and employment taxes.
3.4. The severance pay and benefits provided for in this Section 3.1.2 and 3.1.3 shall
be in lieu of any other severance or termination pay to which the Executive may be entitled
under any Company severance or termination plan, program, practice or arrangement, and shall
be the exclusive remedy in the event of such termination, in lieu of any other rights or
remedies to which the Executive may otherwise be entitled, whether at law or in equity.
3.5. Termination of Employment. For purposes of this Section 3, the Executive’s
employment with the Company is terminated only if he has incurred a separation from service
with the Company within the meaning of Code Section 409A(a)(2)(A)(ii) and Treasury and
Internal Revenue Service guidance published under such Code Section.
4. Excess Parachute Payments.
4.1. It is the intention of the parties hereto that the severance payments and other
compensation provided for herein are reasonable compensation for Executive’s services to the
Company and shall not constitute “excess parachute payments” within the meaning of Section
280G of the Code and any regulations thereunder. In the event that the Company’s
independent accountants acting as auditors for the Company on the date of a Change in
Control determine that the payments provided for herein constitute “excess parachute
payments,” then the compensation payable hereunder shall be reduced to the point that such
compensation shall not qualify as “excess parachute payments.”
4.2. To the extent that payments under Section 3 cause a “parachute payment,” as
defined in Section 280G(b)(2) of the Code, the Company shall indemnify Executive and hold
Executive harmless against all excise taxes, and penalties and interest owed under the Code,
provided Executive notifies Company immediately of such a determination by the IRS. To
effect this indemnification, the Company shall pay Executive an additional amount that is
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sufficient to pay any excise tax imposed by Section 4999 of the Code on the payments
and benefits to which Executive is entitled without the additional amount, plus any
penalties or interest imposed by the Internal Revenue Service in regard to such amounts,
plus another additional amount sufficient to pay all the excise taxes on the additional
amounts. The determination of any additional amount that must be paid under this section at
any time shall be made in good faith by the independent auditors then employed by the
Company.
5. Funding. This Agreement shall be unfunded. Any payment made under the Agreement
shall be made from the Company’s general assets.
6. Assignment. The parties acknowledge that this Agreement has been entered into due
to, among other things, the special skills of Executive, and agree that this Agreement may not be
assigned or transferred by Executive, in whole or in part, without the prior written consent of
Company.
7. Notices. All notices, requests, demands, and other communications required or
permitted hereunder shall be in writing and shall be deemed to have been duly given if delivered to
the address below, or seven days after mailing if mailed, first class, certified mail postage
prepaid:
To the Company:
|
Synergetics USA, Inc. | |
| 0000 Xxxxxxxxx Xxxxxx Xxxxx | ||
| X’Xxxxxx, Xxxxxxxx 00000 | ||
| Attn:Chairman of the Board | ||
To Executive:
|
Xxxxxxx Xxxxxxx | |
| 00000 Xxxxxxxx | ||
| Xxxx Xxxx, XX 00000 |
Any party may change the address to which notices, requests, demands, and other communications
shall be delivered or mailed by giving notice thereof to the other party in the same manner
provided herein.
8. Provisions Severable. If any provision or covenant, or any part thereof, of this
Agreement should be held by any court to be invalid, illegal or unenforceable, either in whole or
in part, such invalidity, illegality or unenforceability shall not affect the validity, legality or
enforceability of the remaining provisions or covenants, or any part thereof, of this Agreement,
all of which shall remain in full force and effect.
9. Entire Agreement. This Agreement forms the entire agreement between the parties
hereto with respect to the subject matter hereof, and supersedes all prior agreements, if any,
understandings and arrangement, oral or written, between the parties hereto with respect to the
subject matter hereof. In the event of any conflict between this Agreement and any other agreement
with respect to any termination of Executive’s employment with the Company, the provisions of this
Agreement shall control.
10. Not an Employment Agreement. This Agreement is not intended to be and shall not
be construed to be an employment agreement between the Company and Executive. It is not intended
to and shall not be construed to create, modify, or otherwise affect the current or future terms of
Executive’s employment by the Company.
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11. Amendments and Modifications. This Agreement may be amended or modified only by a
writing signed by the parties hereto.
12. Governing Law. The validity and effect of this agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Missouri.
13. Section 409A. This Agreement shall be construed and interpreted in accordance with Code
Section 409A and Treasury and Internal Revenue Service guidance published under such Code section.
IN WITNESS WHEREOF, the parties have executed this Agreement in O’Fallon, Missouri, as of the
date first written above.
| SYNERGETICS USA, INC. |
||||
| By: | /s/ Xxxxxx X. Xxxx | |||
| Name: | Xxxxxx X. Xxxx | |||
| Title: | Chairman of the Board of Directors | |||
| EXECUTIVE |
||||
| /s/ Xxxxxxx X. Xxxxxxx | ||||
| Name: | Xxxxxxx X. Xxxxxxx | |||
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