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Exhibit 10.3

 

AMENDED AND RESTATED
EXECUTIVE SEVERANCE AGREEMENT

 

This Amended and Restated Executive Severance Agreement (“Agreement”) is entered into, effective as of November 28, 2011, by and between Craig A. Sheldon (“Executive”) and Cantel Medical Corp. (“Company”).

 

Background

 

A.             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.  The Company believes that, to attract and retain experienced and valuable key executive employees, it is important and prudent to provide such executives with fair compensation should their employment be terminated under certain circumstances, including but not limited to change in control situations.

 

B.             The Company wishes to encourage the Executive to devote his full time and attention to the performance of his management responsibilities and to assist the Board and other management employees in evaluating business options and pursuing the best interests of the Company’s shareholders without being influenced by the uncertainty of his own employment situation.

 

C.             In furtherance of the foregoing, the Company and the Executive previously entered into an Executive Severance Agreement to set forth the compensation and benefits arrangements payable in connection with a termination of employment of the Executive.   The Board has determined that it continues to be in the best interests of the Company and its stockholders that this Agreement and the Executive Severance Agreements of other executives of the Company be maintained in order to ensure that the Company will have the continued dedication of the executives throughout their tenure.   The Company has been administering the Executive Severance Agreements in a manner consistent with the Company’s other plans and now wishes to formally amend and restate the Agreement as more fully set forth herein to ensure consistent treatment of the Company’s executives under the Company’s various benefit plans and arrangements.

 

In consideration of the premises, the Executive’s employment by the Company on an at-will basis, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Executive and the Company agree as follows:

 

Agreement

 

1.              Defined Terms.  Throughout this Agreement, when the first letter of a word (or the first letter of each word in a phrase) is capitalized, the word or phrase shall have the meaning specified in Appendix A (beginning on page 15).

 

2.              Term.  This initial Term of this Agreement commenced as of January 1, 2010, and shall continue through July 31, 2011; provided, however, that beginning on August 1, 2010, and on the first day of each following August, the Term of this Agreement shall automatically be extended by one year, unless either the Company or the Executive shall have provided notice to

 



 

the other at least six (6) months before such date that the Term shall not be extended. Notwithstanding the preceding provisions of this Section, (i) if a Change in Control occurs during the Term of this Agreement, such Term (other than with respect to the provisions of Section 4) shall not end before the second anniversary of the Change in Control; provided, however, this sentence shall apply only to the first Change of Control while this Agreement is in effect; and (ii) termination of this Agreement shall not affect the obligations of the Company hereunder on account of the Executive’s Termination of Employment during the Term.

 

3.              Termination of Employment; Resignation of Officer and Director Positions.   The Executive is an at-will employee.  The Company may Terminate the Executive’s Employment at any time, for any reason whatsoever or for no reason, subject to its payment obligations under this Section and, if applicable, Section 4 or 5.  The Executive may voluntarily Terminate his Employment at any time by providing at least twenty (20) days’ prior notice to the Company.  Regardless of whether the Executive’s Termination of Employment is voluntary or involuntary, the Executive shall resign from any and all of his director positions and offices with the Company and each Related Employer, effective as of his Termination Date.  Upon Termination of Employment, the Executive shall be entitled to the following, in addition to any benefits payable under Section 4 or 5:

 

(a)            Any earned but unpaid base salary through his Termination Date, plus any accrued and unused paid time off (PTO) due to the Executive under the Company’s PTO program through his Termination Date, which amounts shall be paid to the Executive not later than the payment date for the payroll period next following his Termination Date.

 

(b)            Provided that the Executive applies for reimbursement in accordance with the Company’s established reimbursement procedures (within the period required by such procedures but under no circumstances later than ninety (90) days after his Termination Date), the Company shall pay the Executive any reimbursements to which he is entitled under such procedures not later than the payment date for the payroll period next following the date on which the Executive applies for reimbursement.

 

(c)            Any benefits (other than severance) payable to the Executive under any of the Company’s cash or equity incentive compensation plans, employee benefit plans or programs, the Company’s 2006 Equity Incentive Plan and any successor thereto (the “Equity Plan”) and the agreements issued thereunder (collectively, “Benefit Plans”), to the extent not provided for herein, shall be payable in accordance with the provisions of those plans or programs. This Agreement and all such Benefit Plans that cover the Executive shall be construed in a consistent manner.  In the event of conflict between the terms and conditions of this Agreement and any of the Benefit Plans as they relate to the Executive and any particular payment or award, the order of precedence shall be as follows: (i) this Agreement; (ii) any Benefit Plan that constitutes an employment agreement; (iii) any Benefit Plan that constitutes an annual or long term incentive plan; (iv) the Equity Plan; and (v) any agreement issued under the Equity Plan; provided, however, that no effect shall be given to any provision of this Agreement over any provision of the Equity Plan if and to the extent such provision could not have been approved by the Board as an amendment to the Equity Plan pursuant to Section 14(a) of the Company’s 2006 Equity Incentive Plan (or any corresponding provision of any successor Equity

 

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Plan) without stockholder approval or the consent of the Executive, unless and until such approval or consent has been obtained.

 

4.              Non-Change of Control Severance and Other Benefits .

 

(a)            Subject to (i) the Executive’s timely filing of a duly executed Release in accordance with Section 19, (ii) such Release becoming effective and irrevocable in accordance with its terms not later than sixty (60) days after the Executive’s Termination of Employment (the last day of such 60-day period being referred to as the “Release Effectiveness Date”), (iii) the provisions of this Section 4, and (iv) the limitations provided in Section 10, the Company shall provide the Executive with the payments and benefits set forth in this Section, if at any time during the Term other than during a Change in Control Coverage Period either (i) the Company Terminates the Executive’s Employment (other than a termination for Cause, Unacceptable Performance, Disability, or death pursuant to Section 7), or (ii) the Executive voluntarily Terminates his Employment for Adequate Reason pursuant to Section 9.  Notwithstanding the preceding provisions of this Subsection, the Executive shall not be entitled to benefits pursuant to this Section 4, if he is entitled to benefits pursuant to Section 5.

 

(b)            As soon as administratively feasible (and not more than ten (10) days) after the Company’s receipt of the duly executed Release and the Release becoming effective and irrevocable, the Company shall pay to the Executive a single lump sum payment equal to the product of (i) the Executive’s Monthly Base Salary Rate as of his Termination Date multiplied by (ii) 18.  For purposes of determining the Executive’s Monthly Base Salary Rate pursuant to the preceding sentence, any reduction to the Executive’s salary during the six-month period preceding his Termination of Employment (other than in connection with an “across-the-board” reduction in salary of all senior executives of the Company with the approval of the Company’s CEO) shall be disregarded.  Notwithstanding the foregoing, if the Release Effectiveness Date falls in the calendar year next succeeding the calendar year of the Termination Date, the lump sum payment will be made no earlier than the first business day of such next succeeding calendar year.

 

(c)            If the Termination Date of the Executive occurs subsequent to the last day of a Fiscal Year for which the Executive has not been paid his Bonus, then the Executive shall be entitled to his full Bonus for such Fiscal Year to the extent otherwise earned under the terms of the Bonus Plan for such Fiscal Year (as if the Executive’s employment had not been Terminated prior to the next Bonus payment date). Such amount shall be paid to the Executive not later than seventy five (75) days following the close of such Fiscal Year.  Amounts payable under this Subparagraph (c) will be deemed payments attributable to the Executive’s employment prior to or on the Termination Date and not as severance.

 

(d)            The Company shall pay to the Executive a pro-rated Bonus for the Fiscal Year in which the Termination Date occurs, determined by multiplying (i) the amount of the Executive’s full Bonus for such Fiscal Year that would have been earned under the terms of the Bonus Plan for such Fiscal Year (as in effect immediately prior to the Termination Date) if the Executive’s employment had continued through the next Bonus payment date, by (ii) a fraction, (A) the numerator of which is the number of full or partial months since the end of the prior Fiscal Year in which the Executive was employed by the Company, and (B) the denominator of

 

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which is 12.  Such amount shall be paid to the Executive not later than seventy five (75) days following the close of such Fiscal Year.  To the extent that a Bonus is payable to the Executive under Subparagraph (c) or (d) of this Section 4 for any Fiscal Year, the Executive shall not also be entitled to any Bonus payment for such Fiscal Year under the terms of the applicable Bonus Plan.  Notwithstanding the foregoing, if no Bonus Plan has been finalized (i.e., approved by the Compensation Committee and disseminated to the Executive) for the Fiscal Year in which such Termination Date occurs either prior to the commencement of such Fiscal Year or within three months following the commencement of such Fiscal Year, then the Bonus for such Fiscal Year payable under this Subparagraph (d) will be determined in accordance with the first sentence of Section 5(b)(2) (as if the pro rata Bonus payment under that Section was required). Amounts payable under this Subparagraph (d) will be deemed payments attributable to the Executive’s employment prior to or on the Termination Date and not as severance.

 

(e)            If the Executive is eligible for and properly elects Continuation Coverage for himself and/or one or more qualified beneficiaries (as defined in ERISA Section 607(3)) under the Company’s medical plan, the Company shall pay the premiums for such coverage (or reimburse the Executive for such premiums) for the eighteen (18) month period following the Executive’s Termination of Employment (or such shorter period during which such person is eligible for Continuation Coverage).  Such payments or reimbursements shall constitute taxable income of the Executive to the extent required by law.

 

(f)             The Company shall pay the cost of outplacement services incurred by the Executive during the twelve (12) month period following his Termination of Employment and provided by a firm of the Executive’s choice, up to a total of Twenty Thousand Dollars ($20,000).  Payment for outplacement expenses shall be made by the Company promptly following the Company’s receipt of appropriate invoices documenting such expenses.

 

(g)            Notwithstanding the preceding provisions or any other provisions herein to the contrary, if the Executive’s Employment is Terminated during a Change in Control Coverage Period, either by the Executive for Good Reason or by the Company for any reason other than for Cause or death, then the Executive shall be entitled to the payments and benefits that would have been provided to him pursuant to Section 5 if the Company had Terminated his Employment without Cause during a Change in Control Coverage Period (reduced by any payments or benefits provided to him pursuant to this Section 4).  In such a case, the Executive shall not be required to execute an additional Release, and any Release requirement specified in Section 5 shall be deemed satisfied on the Change in Control Date.

 

(h)            Notwithstanding the preceding provisions of this Section, if the Executive is a “specified employee” within the meaning of Code Section 409A(a)(2)(B)(i), the Company shall promptly deliver written notice to the Executive advising him of the application of such Code Section. Solely to the extent necessary to avoid adverse personal tax consequences to the Executive under Code Section 409A, payments otherwise required to be made to the Executive pursuant to this Section 4 shall be delayed to the earlier of (i) six months and one day after the Executive’s Termination Date, or (ii) the Executive’s death.  For purposes of this Subparagraph, the Executive’s Date of Termination shall be interpreted in a manner that is consistent with the term “separation from service” as defined in Code Section 409A and the Treasury Regulations

 

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thereunder. Interest shall accrue on unpaid amounts delayed under this subparagraph at the prime rate from time to time in effect at JP Morgan Chase Bank or any successor bank commencing from the date that such amounts would otherwise have been due under the applicable provision.

 

5.              Change of Control Severance and Other Benefits.

 

(a)            Subject to (i) the Executive’s timely filing of a duly executed Release in accordance with Section 19, (ii) such Release becoming effective and irrevocable in accordance with its terms not later than the Release Effectiveness Date (i.e., the sixtieth day after the Executive’s Termination of Employment), (iii) the provisions of this Section 5, and (iv) the limitations provided in Section 10, the Company shall provide the Executive with the payments and benefits set forth in this Section, if during a Change in Control Coverage Period, (A) the Company Terminates the Executive’s Employment (other than a termination for Cause or death pursuant to Section 7), or (B) the Executive voluntarily Terminates his Employment for Good Reason pursuant to Section 9.  Amounts payable pursuant to this Section shall be subject to the limitations and reimbursement expressly provided in this Agreement.

 

(b)            As soon as administratively feasible (and not more than five (5) business days) after the Company’s receipt of the duly executed Release and the Release becoming effective and irrevocable in accordance with its terms, the Company shall pay to the Executive a single lump sum payment in an amount equal to the sum of the following:

 

(1)            the product of (i) two (2) times (ii) the sum of (A) the Executive’s Annual Base Salary, at the greater of the rate in effect on the Change in Control Date or the Termination Date (disregarding any reduction in the rate of the Executive’s salary during the six-month period immediately preceding his Termination of Employment), plus (B) the greater of (I) 45% of the amount determined under clause (A) of this Subparagraph or (II) the average of the annual Bonuses paid to the Executive for the two Fiscal Years preceding the year in which the Executive’s Employment is Terminated.  Amounts payable under this Subparagraph (b)(1) will be deemed severance; and

 

(2)            a pro-rata Bonus amount, determined by multiplying (i) the greater of (A) 45% of the amount determined under clause (A) of the preceding Subparagraph (b)(1) or (B) the average of the annual Bonuses paid to the Executive for the two years Fiscal Years preceding the Fiscal Year in which the Executive’s Employment is Terminated, by (ii) a fraction, (A) the numerato


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