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Exhibit 10.16
SEVERANCE PROTECTION AGREEMENT BETWEEN SPAN-AMERICA MEDICAL
SYSTEMS, INC. AND MARIE SITTER
This Severance Protection Agreement (this "Agreement") is
made and entered into effective the 1st day of December, 2008, by
and between Marie Sitter, an individual (the "Executive"), and
Span-America Medical Systems, Inc., a South Carolina 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 her employment is terminated as a result of, or in
connection with, a Change in Control; and WHEREAS the
Executive is willing to continue his or her employment with the
Company under 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.
"Accrued Compensation" shall mean an amount which shall include all
amounts earned or accrued through the employment termination date
but not paid as of that date, including, without limitation, (i)
base salary, (ii) reimbursement for reasonable and necessary
expenses incurred by the Executive on behalf of the Company during
the period ending on the termination date, (iii) vacation pay, (iv)
bonuses and incentive compensation, and (v) all other amounts
to which the Executive is entitled under any compensation plan of
the Company at the times such payments are due. For
purposes of any termination pursuant to Section 3.1.2, Accrued
Compensation shall include the amount to which the Executive would
have been entitled under any bonus plan of the Company for the
fiscal year in which a Change in Control occurs, pro rated to
reflect the portion of the year during which Executive was employed
by the Company and based on an average of Executive's bonus
payments over the three year period immediately prior to the
termination.
"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 two-thirds (²/3) of the
Board that the Executive (i) intentionally and continually failed
substantially to perform 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) which failure continued for a period of at least thirty
(30) days after a written notice of demand for substantial
performance has been delivered to the Executive specifying the
manner in which the Executive has failed substantially to perform,
or (ii) intentionally engaged in illegal conduct or gross
misconduct which results in material economic harm to the Company;
provided, however, that (A) where the Executive has been terminated
for Cause because a felony prosecution has been brought against him
and no conviction or plea of guilty or plea of nolo contendere or
its equivalent results therefrom, then said termination shall 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 or 3.1.3
hereof, as appropriate, from and after the date on which the
prosecution of the Executive has been dismissed or a judgment of
acquittal has been entered, whichever shall first occur; and (B) no
termination of the Executive's employment shall be for Cause as set
forth in clause (ii) above until (x) there shall have been
delivered to the Executive a copy of a written notice setting forth
that the Executive was guilty of the conduct set forth in clause
(ii) and specifying the particulars thereof in detail, and (y) the
Executive shall have been provided an opportunity to be heard in
person by the Board (with the assistance of the Executive's counsel
if the Executive so desires). No act, nor failure to
act, on the Executive's part, shall be considered "intentional"
unless the Executive has acted or failed to act with a lack of good
faith and with a lack of reasonable belief that the Executive's
action or failure to act was in the best interests of the
Company. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board
or upon the instructions of any senior officer of the Company or
based upon the advice of counsel for the Company shall be
conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the
Company. Any termination of the Executive's employment
by the Company hereunder shall be deemed to be a termination other
than for Cause unless it meets all requirements of this definition.
"Change in Control" shall mean:
(i) The
acquisition by any Person (other than (A) any employee 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 35% or more of the combined voting power of the
Company's then outstanding voting securities.
(ii) 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 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;
(iii) The
stockholders of the Company approve a merger or consolidation of
the Company with any other corporation other than (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 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 merger or
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