Exhibit 10.1

 

CHANGE OF CONTROL SEVERANCE AGREEMENT

December 1, 2011

 

XXXXXX XXXXXXX

XXXXXXXXXXXXX

XXXXXXXX XX XXXXX

 

Dear XXXXXX:

 

Mesa Laboratories, Inc. (the “Company”), considers it essential to the best
interests of its stockholders to attract top executives. In this connection, the
Board of Directors of the Company (the “Board”) recognizes that the possibility
of a change of 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 management personnel to the detriment of the Company and its
stockholders.

 

The Board has determined that appropriate steps should be taken to ensure the
continuity of management and to foster objectivity in the face of potentially
disturbing circumstances arising from the possibility of a change of control of
the Company, although no such change is now contemplated. In order to induce you
to remain in the employ of the Company and in consideration of your further
services to the Company, the Company agrees that effective as of the date of
this letter, you shall receive the severance benefits from the Company, set
forth in this letter agreement (“Agreement”) in the event you Separate from
Service with the Company subsequent to a Change of Control of the Company (as
defined in Section 2(d) hereof) under the circumstances described below.

 

1.               Term of Agreement. This Agreement shall commence on the date
hereof and shall continue in effect until the earlier of (i) your Separation
from Service other than within twenty four (24) months following a Change of
Control; (ii) such time as you no longer are a Corporate Executive Officer of
the Company other than within twenty four (24) months following a Change of
Control; (iii) the Company’s satisfaction of all of its obligations under this
Agreement; or (iv) the execution of a written agreement between the Company and
you terminating this Agreement.

 

2.               Definitions. As used in this Agreement:

 

(a)               “Beneficial Owner” has the meaning ascribed to such term in
Rule 13d-3 of the General Rules and Regulations under the Securities Exchange
Act of 1934, as amended (the “Exchange Act”).

 

(b)              “Cause” means (i) any act of personal dishonesty taken by you
in connection with your responsibilities as an employee and intended to result
in substantial personal enrichment to you; (ii) use, possession, sale, or
distribution of illegal substances; (iii) your acknowledgment or conviction of,
fraud or any crime in which the Board reasonably believes has or could have a
material detrimental effect on the Company’s reputation or business;
(iv) conduct endangering, or likely to endanger, the health or safety of another
employee, or (v) falsifying or misrepresenting information on Company records.

 

(c)               “Change of Control” of the Company means and includes each and
all of the following occurrences:

 

i.     The stockholders of the Company approve a merger or consolidation of the
Company with any other corporation, other than a merger or consolidation which
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 its parent
company) more than fifty percent (50%) of the total voting power represented by
the voting securities of the Company or such surviving entity, or its parent
company, outstanding immediately after such merger or consolidation, or the
stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or
substantially all the Company’s assets.

 

ii.    The acquisition by any Person as Beneficial Owner, directly or
indirectly, of securities of the Company representing fifty percent (50%) or
more of the total voting power represented by the Company’s then outstanding
voting securities.

 

iii.   Any other provision of this Section 2 notwithstanding, the term Change in
Control shall not include either of the following even ts undertaken at the
election of the Company:

 

1.               Any transaction, the sole purpose of which is to change the
state of the Company’s incorporation; or

 

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2.               A transaction, the result of which is to sell all or
substantially all of the assets of the Company to another corporation (the
“surviving corporation”); provided that the surviving corporation is owned
directly or indirectly by the stockholders of the Company immediately following
such transaction in substantially the same proportions as their ownership of the
Company’s Common Stock immediately preceding such transaction; and provided,
further, that the surviving corporation expressly assumes this Agreement.

 

(d)              “Code” means the Internal Revenue Code of 1986, as amended.

 

(e)               “Company” or “Mesa” means Mesa Laboratories, Inc., a Colorado
corporation, and any successor as provided in Section 8 hereof.

 

(f)                 “Current Monthly Salary” means the highest monthly base
salary rate that you were paid by the Company in the 12-month period prior to
the date of your Separation from Service (the “Look-Back Period”);

 

(g)              “Disability” means that, at the time you Separate from Service,
you have been unable to perform the duties of your position for a period of 180
consecutive days as the result of your incapacity due to physical or mental
illness.

 

(h)              “Good Reason” means the occurrence of one of the following
without your express written consent (i) a significant reduction of your duties,
position or responsibilities, or your removal from such position and
responsibilities, unless you are offered a comparable position (i.e., a position
of equal or greater organizational level, duties, authority, compensation, title
and status); (ii) a reduction by the Company in your base compensation (base
salary and target bonus) as in effect immediately prior to such reduction;
(iii) a material reduction by the Company in the kind or level of employee
benefits to which you are entitled immediately prior to such reduction with the
result that your overall benefits package is significantly reduced; (iv) you are
requested to relocate (except for office relocations that would not increase
your one way commute by more than 50 miles); or (v) the failure of the Company
to obtain the assumption of this Agreement pursuant to Section 8.

 

(i)                  “Person” has the meaning ascribed to such term in
Section 3(a)(9) of the Exchange Act and as used in Sections 13(d) and
14(d) thereof, including a group as defined in Section 13(d) of the Exchange Act
but excluding the Company and any subsidiary and any employee benefit plan
sponsored or maintained by the Company or any subsidiary (including any trustee
of such plan acting as Trustee).

 

(j)                  “Separation from Service” or “Separates from Service” means
a termination of employment with Mesa that the Company determines is a
Separation from Service in accordance with Section 409A of the Code.

 

(k)               “Severance Payment” means the payment of severance
compensation as provided in Section 3 of this Agreement.

 

3.               Compensation Upon Separation from Service Following a Change of
Control. If you Separate from Service on account of (i) an involuntary
termination without Cause or (ii) a voluntary termination for Good Reason,
within twenty four (24) months after a Change in Control, then subject to
(x) your signing and not revoking a separation agreement and release of claims
in a form reasonably satisfactory to the Company and (y) Sections 4 and 5 below:

 

(a)               You will be entitled to Severance Payments, as follows:

 

i.     Your then Current Monthly Salary will continue to be paid to you within
10 days after the end of every month for a period of 24 months after your date
of termination.  If required by taxing authorities, this continuation pay will
be net of any withheld taxes.

 

ii.    The same percentage of Company-paid health and group-term life insurance
benefits as were provided to you and your family under plans of the Company as
of the Change of Control for a total of twenty-four (24) months. Notwithstanding
the foregoing, the Company may, at its option, satisfy any requirement that the
Company provide coverage under any plan by instead providing coverage under a
separate plan or plans providing coverage that is no less favorable.

 

(b)              The Company agrees that, in addition to the payments and
benefits provided under Section 3(a), all outstanding unvested stock options,
restricted stock, performance shares and stock appreciation rights previously
granted to you under any Company equity or long-term incentive plan or program
(a “Company Incentive Plan”) (including any stock options, restricted stock,
performance shares and stock appreciation rights assumed by the Company in
connection with its acquisition of another entity) shall immediately be 100%
vested upon such Separation from Service. You shall be entitled to exercise any
stock options or stock appreciation rights until the expiration of three months
following your Separation from Service (or until such later date as may be
applicable under the terms of the award agreement governing the stock option or
stock appreciation right upon termination of employment), subject to the

 

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maximum full term of the stock option or stock appreciation right. In addition,
the Company agrees that all restricted stock units, performance-based restricted
stock units, and long-term incentive cash programs (“Long-Term Incentives”)
previously granted to you under any Company Incentive Plan shall immediately be
100% vested upon such Separation from Service; however, the issuance or payment
of such restricted stock units, performance-based restricted stock units or
Long-Term Incentives shall be governed by your applicable grant or award
agreement. Notwithstanding the immediately preceding sentence, in no event will
the 100% vesting apply to restricted stock units, performance-based restricted
stock units or Long-Term Incentives if the 100% vesting would cause adverse tax
consequences under Code Sec. 409A.

 

Notwithstanding anything contained in subsections (a) and (b) above, the Company
shall have no obligation to make any payment or offer any benefits to you under
this Section 3 if you Separate from Service prior to a Change in Control or if
you Separate from Service within twenty four (24) months after a Change in
Control for Cause, death, Disability, retirement or voluntary resignation other
than for Good Reason or if you Separate from Service for any reason after twenty
four (24) months following a Change in Control.

 

4.               Parachute Payments. In the event that any payment or benefit
received or to be received by you in connection with your Separation from
Service with the Company (collectively, the “Severance Parachute Payments”)
would (i) constitute a parachute payment within the meaning of Section 280G of
the Code or any similar or successor provision to 280G and (ii) but for this
Section 4, be subject to the excise tax imposed by Section 4999 of the Code or
any similar or successor provision to Section 4999 (the “Excise Tax”), then such
Severance Parachute Payments shall be reduced to the largest amount which would
result in no portion of the Severance Parachute Payments being subject to the
Excise Tax. In the event any reduction of benefits is required pursuant to this
Agreement, you shall be allowed to choose which benefits hereunder are reduced
(e.g., reduction first from the Severance Payment, then from the vesting
acceleration). Any determination as to whether a reduction is required under
this Agreement and as to the amount of such reduction shall be made in writing
by the independent public accountants appointed for this purpose by the Company
(the “Accountants”) prior to, or immediately following, the Change of Control,
whose determinations shall be conclusive and binding upon you and the Company
for all purposes. If the Internal Revenue Service (the “IRS”) determines that
the Severance Parachute Payments are subject to the Excise Tax, then the Company
or any related corporation, as their exclusive remedy, shall seek to enforce the
provisions of Section 5 hereof. Such enforcement of Section 5 below shall be the
only remedy, under any and all applicable state and federal laws or otherwise,
for your failure to reduce the Severance Parachute Payments so that no portion
thereof is subject to the Excise Tax. The Company or related corporation shall
reduce the Severance Parachute Payments in accordance with this Section 4 only
upon written notice by the Accountants indicating the amount of such reduction,
if any. The Company shall bear all costs the Accountants may reasonably incur in
connection with any calculations contemplated by this Agreement.

 

5.               Remedy. If, notwithstanding the reduction described in
Section 4 hereof, the IRS determines that you are liable for the Excise Tax as a
result of the receipt of a Severance Parachute Payment, then you shall, subject
to the provisions of this Agreement, be obligated to pay to the Company (the
“Repayment Obligation”) an amount of money equal to the Repayment Amount
(defined below). The “Repayment Amount” with respect to the Severance Parachute
Payments shall be the smallest such amount, if any, as shall be required to be
paid to the Company so that your net proceeds with respect to any Severance
Parachute Payments (after taking into account the payment of the Excise Tax
imposed on such Severance Parachute Payments) shall be maximized.
Notwithstanding the foregoing, the Repayment Amount with respect to the
Severance Parachute Payments shall be zero if a Repayment Amount of more than
zero would not eliminate the Excise Tax imposed on such Severance Parachute
Payment. If the Excise Tax is not eliminated through the performance of the
Repayment Obligation, you shall pay the Excise Tax. The Repayment Obligation
shall be performed within thirty (30) days of either (i) your entering into a
binding agreement with the IRS as to the amount of your Excise Tax liability or
(ii) a final determination by the IRS or a decision by a court of competent
jurisdiction requiring you to pay the Excise Tax with respect to the Severance
Parachute Payments from which no appeal is available or is timely taken.

 

6.               No Mitigation. You shall not be required to mitigate the amount
of any payment provided for in Section 3 hereof by seeking other employment or
otherwise, nor shall the amount of such payment be reduced by reason of
compensation or other income you receive for services rendered after your
Separation from Service from the Company.

 

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7.               Exclusive Remedy. In the event of your Separation from Service
on account of an involuntary termination without Cause or a voluntary
termination for Good Reason within twenty four (24) months following a Change of
Control, the provisions of Section 3 are intended to be and are exclusive and in
lieu of any other rights or remedies to which you or the Company may otherwise
be entitled (including any contrary provisions in any employment agreement you
may have with the Company), whether at law, tort or contract, in equity, or
under this Agreement.

 

8.               Company’s Successors. The Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company, to
expressly assume and agree to perform the obligations under this Agreement in
the same manner and to the same extent that the Company would be required to
perform if no such succession had taken place. As used in this Section 8,
Company includes any successor to its business or assets as aforesaid which
executes and delivers this Agreement or which otherwise becomes bound by all the
terms and provisions of this Agreement by operation of law.

 

9.               Notice. Notices and all other communications provided for in
this Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered or five (5) days after deposit with postal authorities
transmitted by United States registered or certified mail, return receipt
requested, postage prepaid, addressed to the respective addresses set forth on
the first or last page of this Agreement, or to such other address as either
party may have furnished to the other in writing in accordance herewith, except
that notices of change of address shall be effective only upon receipt.

 

10.         Amendment or Waiver. No provisions of this Agreement may be amended,
modified, waived or discharged unless you and the Company agree to such
amendment, modification, waiver or discharge in writing. No amendment,
modification, waiver or discharge of this Agreement shall result in the
accelerated payment of any Severance Payment provided for in Section 3. No
waiver by either party at any time of the breach of, or lack of compliance with,
any conditions or provisions of this Agreement shall be deemed a waiver of the
provisions or conditions hereof.

 

11.         Sole Agreement. This Agreement represents the entire agreement
between you and the Company with respect to the matters set forth herein and
supersedes and replaces any prior agreements in their entirety. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter of this Agreement will be made by either party which are not set
forth expressly herein. No future agreement between you and the Company may
supersede this Agreement, unless it is in writing and specifically makes
reference to this Section 11.

 

12.         Employee’s Successors. This Agreement shall inure to the benefit of
and be enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If you
should die while any amounts are still payable to you hereunder, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee, or other designee or, if there
be no such designees, to your estate.

 

13.         Funding. This Agreement shall be unfunded. Any payment made under
the Agreement shall be made from the Company’s general assets.

 

14.         Waiver. No waiver by either party of any breach of, or of compliance
with, any condition or provision of this Agreement by the other party shall be
considered a waiver of any other condition or provision or of the same condition
or provision at another time.

 

15.         Headings. All captions and section headings used in this Agreement
are for convenient reference only and do not form a part of this Agreement.

 

16.         Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.

 

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17.         Withholding. All payments made pursuant to this Agreement will be
subject to withholding of applicable income and employment taxes.

 

18.         Applicable Law. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Colorado (with the exception of its
conflict of laws provisions). This Agreement is intended to comply with
Section 409A of the Code and the regulations promulgated thereunder.

 

19.         Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together will constitute
one and the same instrument.

 

If the foregoing conforms to your understanding, please indicate your agreement
to the terms hereof by signing where indicated below and returning one copy of
this Agreement to the undersigned.

 

IN WITNESS WHEREOF, this Agreement is executed effective as of the date set
forth above.

 

 

 

 

ACCEPTED AND AGREED TO AS OF THE

 

Sincerely,

DATE FIRST SET FORTH ABOVE:

 

 

 

 

Mesa Laboratories, Inc.

 

 

 

 

 

 

XXXXXXXXX XXXXXXXXX

 

Steven W. Peterson

 

 

Vice President, Chief Financial Officer and Secretary

 

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