Exhibit 10.1
CHANGE IN CONTROL SEVERANCE
AGREEMENT
THIS AGREEMENT, dated
September 30, 2009, is made by and between Mercury Computer
Systems, Inc., a Massachusetts corporation with its principal
offices at 201 Riverneck Road, Chelmsford, Massachusetts 01824 (the
“Company”), and Mark Aslett (the
“Executive”) residing in Winchester, Massachusetts
01890.
WHEREAS, the Company considers the
establishment and maintenance of a sound and vital management to be
essential to protecting and enhancing the best interests of the
Company and its shareholders; and
WHEREAS, the Executive has made and
is expected to make, due to the Executive’s intimate
knowledge of the business and affairs of the Company, its policies,
methods, personnel, and problems, a significant contribution to the
profitability, growth, and financial strength of the Company;
and
WHEREAS, the Company, as a
publicly-held corporation, recognizes that the possibility of a
Change in Control may exist, and that such possibility and the
uncertainty and questions which it may raise among management may
result in the departure or distraction of the Executive in the
performance of the Executive’s duties, to the detriment of
the Company and its shareholders; and
WHEREAS, it is in the best interests
of the Company and its shareholders to reinforce and encourage the
continued attention and dedication of management personnel,
including the Executive, to their assigned duties without
distraction and to ensure the continued availability to the Company
of the Executive in the event of a Change in Control;
NOW, THEREFORE, in consideration of
the foregoing and other respective covenants and agreements of the
parties herein contained, the parties hereto agree as
follows:
1. Defined Terms . The
definitions of capitalized terms used in this Agreement are
provided in Section 18.
2. Term of Agreement . The
term of this Agreement (the “Term”) shall commence on
the date hereof and shall continue in effect through June 30,
2012; provided , however , that commencing on
July 1, 2012 and each July 1 thereafter, the Term shall
automatically be extended for one additional year unless, not later
than September 30 of the preceding year, the Company or the
Executive shall have given notice not to extend the Term; and
further provided , however , that if a Change
in Control shall have occurred during the Term, the Term shall
expire on the last day of the twenty-fourth (24
th ) month following the month in which such
Change in Control occurred.
3. Company’s Covenants
Summarized . In order to induce the Executive to remain in the
employ of the Company and in consideration of the Executive’s
covenants in Section 4, the Company, under the conditions
described herein, shall pay the Executive the Severance Payments
and the other payments and benefits described herein. Except as
provided in Section 9.1, no Severance Payments shall be
payable under this Agreement unless there shall have been a
Terminating Event following a Change in Control (or during a
Potential Change in Control Period) and during the Term. This
Agreement shall not be construed as creating an express
or
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implied contract of employment and, except as
otherwise agreed in writing between the Executive and the Company,
the Executive shall not have any right to be retained in the employ
of the Company.
4. The Executive’s
Covenants . Subject to the terms and conditions of this
Agreement, in the event of a Potential Change in Control, the
Executive shall remain in the employ of the Company until the
earliest of (i) the date of a Change in Control, (ii) the
date of termination by the Executive of the Executive’s
employment for Good Reason or by reason of death, Disability or
Retirement, or (iii) the termination by the Company of the
Executive’s employment for any reason.
5. Termination Following a Change
in Control for Disability; Other Reasons .
5.1 If the Executive fails to
perform the Executive’s full-time duties with the Company
following a Change in Control as a result of incapacity due to
physical or mental illness, during any period when the Executive so
fails to perform the Company shall pay the Base Salary to the
Executive, together with all compensation and benefits payable to
the Executive under the terms of any compensation or benefit plan,
program or arrangement (other than the Company’s short- or
long-term disability plan, as applicable, but including any bonus
or incentive plan) maintained by the Company during such period,
until the Executive resumes the full time performance of such
duties or the Executive’s employment is terminated by the
Company for Disability.
5.2 If the Executive’s
employment shall be terminated for any reason following a Change in
Control, the Company shall pay the Base Salary to the Executive
through the Date of Termination, together with all compensation and
benefits payable to the Executive through the Date of Termination
under the terms of the Company’s compensation and benefit
plans, programs or arrangements as in effect immediately prior to
the Date of Termination or, if more favorable to the Executive, as
in effect immediately prior to the first occurrence of an event or
circumstance constituting Good Reason.
5.3 Except as expressly provided
herein, if the Executive’s employment shall be terminated for
any reason following a Change in Control, the Company shall pay to
the Executive the Executive’s normal post-termination
compensation and benefits as such payments become due. Such
post-termination compensation and benefits shall be determined
under, and paid in accordance with, the Company’s retirement,
insurance and other compensation or benefit plans, programs and
arrangements as in effect immediately prior to the Date of
Termination or, if more favorable to the Executive, as in effect
immediately prior to the occurrence of the first event or
circumstance constituting Good Reason.
6. Severance Payments and
Benefits; Vesting of Stock Awards .
6.1 Severance . Subject to
the Executive’s execution of and the effectiveness of a
General Release in a form identical to or substantially the same as
the release attached as Exhibit A hereto (the
“Release”) within twenty-eight (28) days of the
Date of Termination, if a Terminating Event occurs within
twenty-four (24) months following a Change in Control (or
during a Potential Change in Control Period) and during the Term,
then the Company shall pay the Executive the amounts, and provide
the Executive the benefits, described in this Section 6.1
(“Severance Payments”), in addition to any payments and
benefits to which the Executive is entitled under Section 5.
Except as described above or in Section 9.1, the Executive
shall not be entitled to benefits pursuant to this Section 6.1
unless a Change in Control shall have occurred during the
Term.
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(A) The Company shall pay to the
Executive a lump sum severance payment, in cash, equal to two
(2) times the sum of (i) the Base Salary, and
(ii) the Target Bonus Amount in respect of the fiscal year in
which the Date of Termination occurs (without giving effect to any
event or circumstance constituting Good Reason), assuming for this
purpose attainment of 100% of any applicable target. Such amount
shall be paid in one lump sum payment no later than thirty
(30) days following the Date of Termination; provided,
however, that if the Terminating Event is during a Potential Change
in Control Period, or after the Change in Control but the Change in
Control does not constitute a change in the ownership or effective
control of the Company, or in the ownership of a substantial
portion of the assets of the Company, within the meaning of
Section 409A of the Code, and the Executive otherwise has a
contractual right to severance that is considered deferred
compensation within the meaning of Section 409A of the Code,
such amount shall be paid in the same form (e.g., lump sum, salary
continuation, etc.) as set forth in such contract beginning with
the first payroll date that occurs thirty (30) days after the
Date of Termination.
(B) For the twenty-four
(24) month period immediately following the Date of
Termination, the Company shall arrange to provide the Executive and
his dependents health and dental insurance benefits on the same
terms and conditions as though the Executive had remained an active
employee. The cost of providing the benefits set forth in this
Section 6.1(B) shall be in addition to (and shall not reduce)
the Severance Payments. Benefits otherwise receivable by the
Executive pursuant to this Section 6.1(B) shall be reduced to
the extent the Executive becomes eligible to receive comparable
benefits from a new employer or pursuant to a government-sponsored
health insurance or health care program.
(C) The Company shall pay the cost
of providing the Executive with outplacement services up to a
maximum of $45,000, provided that (i) the Executive begins to
utilize such services within six months following the Date of
Termination and completes the utilization of such services no later
than the last day of the calendar year following the calendar year
that contains the Date of Termination, and (ii) such services
are provided by an outplacement provider approved by the Company
(which approval shall not be unreasonably withheld, delayed or
conditioned). Such payment shall be made by the Company directly to
the service provider promptly following the provision of such
services and the presentation to the Company of documentation of
the provision of such services.
6.2 Vesting of Stock Awards .
Subject to the Executive’s execution of the Release and the
effectiveness of the Release within twenty-eight (28) days of
the Date of Termination, if a Terminating Event occurs within
twenty-four (24) months following a Change in Control and
during the Term, anything contained in any applicable option
agreement or stock-based award agreement to the contrary
notwithstanding, vesting of all stock options and other stock-based
awards granted to the Executive by the Company and outstanding
immediately prior to such Terminating Event shall immediately
accelerate and all such awards shall become exercisable or
non-forfeitable as of the effective date of such Terminating Event.
For the avoidance of doubt, the Executive shall not be entitled
hereunder to the accelerated vesting of any stock options or other
stock-based awards upon a Terminating Event during a Potential
Change in Control Period.
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6.3 Best Net Benefit
Limitation .
(A) Anything contained in this
Agreement to the contrary notwithstanding, if any of the payments
or benefits received or to be received by the Executive (whether
pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company, any Person whose actions
result in a Change in Control or any Person affiliated with the
Company or such Person) (all such payments and benefits being
hereinafter referred to as the “Total Payments”) will
be subject to the Excise Tax, the following provisions shall
apply:
(i) If the Total Payments, reduced
by the sum of (a) the Excise Tax and (b) the total of the
Federal, state, and local income and employment taxes payable by
the Executive on the amount of the Total Payments which are in
excess of the Threshold Amount, are greater than or equal to the
Threshold Amount, the Executive shall be entitled to the full
benefits payable under this Agreement.
(ii) If the Threshold Amount is less
than (a) the Total Payments, but greater than (b) the
Total Payments reduced by the sum of (1) the Excise Tax and
(2) the total of the Federal, state and local income and
employment taxes on the amount of the Total Payments which are in
excess of the Threshold Amount, then the benefits payable under
this Agreement shall be reduced (but not below zero) to the extent
necessary so that the maximum Total Payments shall not exceed the
Threshold Amount. In such event, the Total Payments shall be
reduced in the following order: (1) cash payments not subject
to Section 409A of the Code; (2) cash payments subject to
Section 409A of the Code; (3) equity-based payments; and
(4) non-cash form of benefits. To the extent any payment is to
be made over time (e.g., in installments), then the payments shall
be reduced in reverse chronological order.
(B) The determination as to which of
the alternative provisions of subsection (A) above shall apply
to the Executive shall be made by a nationally recognized
accounting firm selected by the Company (the “Accounting
Firm”), which shall provide detailed supporting calculations
both to the Company and the Executive within fifteen
(15) business days of the Date of Termination, if applicable,
or at such earlier time as is reasonably requested by the Company
or the Executive. For purposes of determining which of the
alternative provisions of subsection (A) above shall apply,
the Executive shall be deemed to pay Federal income taxes at the
highest marginal rate of Federal income taxation applicable to
individuals for the calendar year in which the determination is to
be made, and state and local income taxes at the highest marginal
rates of individual taxation in the state and locality of the
Executive’s residence on the Date of Termination, net of the
maximum reduction in Federal income taxes which could be obtained
from deduction of such state and local taxes. Any determination by
the Accounting Firm shall be binding upon the Company and the
Executive.
6.4 Section 409A . The
payments provided in subsection (A) of Section 6.1 shall
be made not later than the fifth day following the Date of
Termination. Notwithstanding anything in this Agreement to the
contrary, to the extent that any payment or benefit described in
this Agreement constitutes “non-qualified deferred
compensation” under Section 409A of the Code, and to the
extent that such payment or benefit is payable upon the
Executive’s termination
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of employment, then such payments or benefits
shall only be payable upon the Executive’s “Separation
from Service.” The term “Separation from Service”
shall mean the Executive’s “separation from
service” from the Company, an affiliate of the Company or a
successor entity within the meaning set forth in Section 409A
of the Code, determined in accordance with the presumptions set
forth in Treasury Regulation Section 1.409A-1(h). If the
Executive is considered a “specified employee,” within
the meaning of Section 409A of the Code on his Date of
Termination and severance payable hereunder is considered deferred
compensation subject to Section 409A of the Code, no severance
payments will be paid during the six-month period following the
Executive’s Separation from Service. Any severance amount
that would have been paid during such six-month period but for the
provisions of the preceding sentence shall be paid in a lump sum
within the first five (5) days of the seventh month following
the Executive’s Separation from Service. If any such delayed
cash payment is otherwise payable on an installment basis, the
first payment shall include a catch-up payment covering amounts
that would otherwise have been paid during the six-month period but
for the application of this provision, and the balance of the
installments shall be payable in accordance with their original
schedule.
6.5 Source of Payment .
Nothing herein shall be construed as establishing a trust or as
requiring the Company to set aside funds to meet its obligations
hereunder. Notwithstanding the foregoing, if the Board in its sole
discretion so determines the Company may establish a so-called
“rabbi trust” or similar arrangement to assist it in
meeting any such obligations that it may have.
7. Termination Procedures and
Compensation During Dispute .
7.1 Notice of Termination .
After a Change in Control, any purported termination of the
Executive’s employment (other than by reason of death) shall
be communicated by written Notice of Termination from one party
hereto to the other party hereto in accordance with
Section 10. For purposes of this Agreement, a “Notice of
Termination” shall mean a notice which shall indicate the
specific termination provision in this Agreement relied upon and
shall set forth in reasonable detail any facts and circumstances
claimed to provide a basis for termination of the Executive’s
employment under the provision so indicated. Further, a Notice of
Termination for Cause is required to include a copy of a resolution
duly adopted by the affirmative vote of not less than two-thirds
( 2
/ 3 ) of
the entire membership of the Board at a meeting of the Board which
was called and held for the purpose of considering such termination
(after reasonable notice to the Executive and an opportunity for
the Executive, together with the Executive’s counsel, to be
heard before the Board) finding that, in the good faith opinion of
the Board, the Executive was guilty of conduct set forth in clause
(i), (ii) or (iii) of the definition of Cause herein, and
specifying the particulars thereof in detail.
7.2 Date of Termination .
“Date of Termination,” with respect to any purported
termination of the Executive’s employment after a Change in
Control, shall mean (i) if the Executive’s employment is
terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that the Executive shall not have
returned to the full-time performance of the Executive’s
duties during such thirty (30) day period), and (ii) if
the Executive’s employment is terminated for any other
reason, the date specified in the Notice of Termination (which, in
the case of a termination by the Company, shall not be less than
fifteen (15) days (except in the case of a termination for
Cause) and, in the case of a termination by the Executive, shall
not be less than fifteen (15) days, respectively, from the
date such Notice of
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Termination is given). Notwithstanding the
foregoing, if the Executive gives a Notice of Termination to the
Company, the Company may unilaterally accelerate the Date of
Termination and such acceleration shall not result in a
“Termination by the Company” for purposes of this
Agreement.
7.3 Dispute Concerning
Termination . If within ten (10) days after any Notice of
Termination is given, or, if later, prior to the Date of
Termination (as determined without regard to this
Section 7.3), the party receiving such Notice of Termination
notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be extended until the
earlier of (i) the date on which the Term ends or
(ii) the date on which the dispute is finally resolved, either
by mutual written agreement of the parties or by a final judgment,
order or decree of an arbitrator or a court of competent
jurisdiction (which is not appealable or with respect to which the
time for appeal therefrom has expired and no appeal has been
perfected); provided , however , that the Date of
Termination shall be extended by a notice of dispute given by the
Executive only if such notice is given in good faith and the
Executive pursues the resolution of such dispute with reasonable
diligence.
7.4 Compensation During
Dispute . If the Date of Termination is extended in accordance
with Section 7.3, the Company shall continue to pay the
Executive the full compensation in effect when the notice giving
rise to the dispute was given (including, but not limited to, the
Base Salary) and continue the Executive as a participant in all
compensation, benefit and insurance plans in which the Executive
was participating when the notice giving rise to the dispute was
given, until the Date of Termination, as determined in accordance
with Section 7.3. Amounts paid under this Section 7.4 are
in addition to all other amounts due under this Agreement (other
than those due under Section 5.2) and shall not be offset
against or reduce any other amounts due under this
Agreement.
7.5 Legal Fees and Expenses .
The Company shall indemnify and hold harmless the Executive from
and against, and shall pay to the Executive, all reasonable legal
fees and expenses incurred by the Executive in disputing in good
faith any issue hereunder relating to the termination of the
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.
8. No Mitigation . If the
Executive’s employment with the Company terminates following
a Change in Control, the Executive is not required to seek other
employment or to attempt in any way to reduce any amounts payable
to the Executive by the Company pursuant to Section 6 or
Section 7.4. Except as set forth in Section 6.1(B), the
amount of any payment or benefit provided for in this Agreement
shall not be reduced by any compensation earned by the Executive as
the result of employment by another employer, by retirement
benefits, by offset against any amount claimed to be owed by the
Executive to the Company, or otherwise.
9. Successors; Binding
Agreement .
9.1 In addition to any obligations
imposed by law upon any successor to the Company, the Company shall
req
