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EXHIBIT 10.26
COHESION TECHNOLOGIES, INC.
MANAGEMENT CONTINUITY AGREEMENT
This Management Continuity Agreement (the "Agreement") is dated as of
February 9, 1998 by and between Officer ("Employee"), Cohesion Technologies,
Inc., a Delaware corporation (the "Company" or "Cohesion") and Collagen
Corporation, a Delaware corporation ("Collagen").
RECITALS
A. It is expected that another company may from time to time consider
the possibility of acquiring the Company or Collagen or that a change in control
may otherwise occur, with or without the approval of the Company's Board of
Directors (the "Board of Directors" or the "Board") or Collagen's Board of
Directors (collectively, the "Collective Board"). The Collective Board
recognizes that such consideration can be a distraction to Employee and can
cause Employee to consider alternative employment opportunities. The Collective
Board has determined that it is in the best interests of the Company, Collagen
and their stockholders to assure that the Company will have the continued
dedication and objectivity of the Employee, notwithstanding the possibility or
occurrence of a change of control of the Company or Collagen.
B. The Collective Board believes it is in the best interests of the
Company, Collagen and their stockholders to retain Employee and provide
incentives to Employee to continue in the service of the Company.
C. The Collective Board further believes that it is imperative to
provide Employee with certain benefits upon a Change of Control (as defined
below) and, under certain circumstances, upon termination of Employee's
employment in connection with a Change of Control, which benefits are intended
to provide Employee with financial security and provide sufficient income and
encouragement to Employee to remain with the Company, notwithstanding the
possibility of a Change of Control.
D. To accomplish the foregoing objectives, the Collective Board has
directed the Company, upon execution of this Agreement by Employee, to agree to
the terms provided in this Agreement.
Now therefore, in consideration of the mutual promises, covenants and
agreements contained herein, and in consideration of the continuing employment
of Employee by the Company, the parties hereto agree as follows:
1. AT-WILL EMPLOYMENT. The Company and Employee acknowledge that
Employee's employment is and shall continue to be at-will, as defined under
applicable law, and that Employee's employment with the Company may be
terminated by either party at any time for any or no reason. If Employee's
employment terminates for any reason, Employee shall not be entitled to any
payments, benefits, damages, award or compensation other than as provided in
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this Agreement, or as may otherwise be available in accordance with the terms of
the Company's established employee plans and written policies at the time of
termination. The terms of this Agreement shall terminate upon the earlier of (i)
the date on which Employee ceases to be employed as an executive corporate
officer of the Company, other than as a result of an involuntary termination by
the Company without Cause (as defined below), (ii) the date that all obligations
of the parties hereunder have been satisfied, (iii) twenty-four (24) months
after a Change of Control, or (iv) the date on which Collagen distributes to its
stockholders on a pro rata basis all of the shares of the Company's Common Stock
owned by Collagen on such date. A termination of the terms of this Agreement
pursuant to the preceding sentence shall be effective for all purposes, except
that such termination shall not affect the payment or provision of compensation
or benefits on account of a termination of employment occurring prior to the
termination of the terms of this Agreement. The rights and duties created by
this Section 1 may not be modified in any way except by a written agreement
executed by an officer of the Company upon direction from the Board of
Directors.
2. BENEFITS UPON A CHANGE OF CONTROL; TERMINATION OF EMPLOYMENT.
(a) TREATMENT OF COLLAGEN STOCK OPTIONS UPON A CHANGE OF CONTROL.
In the event of a Change of Control and regardless of whether Employee's
employment with the Company is terminated in connection with the Change in
Control and unless otherwise limited by the provisions of Section 5, each stock
option to purchase Collagen's Common Stock granted to Employee over the course
of his or her employment with Collagen and held by Employee on the effective
date of a Change of Control shall become immediately vested on such date as to
that number of shares that would have vested in accordance with the terms of
such option (assuming that Employee had remained in Continuous Status as an
Employee, as defined in the relevant plan and option agreement, for 24 months
after the date of termination of employment) as of the date 24 months after the
effective date of the Change of Control and each such option shall be
exercisable in accordance with the provisions of the option agreement and plan
pursuant to which such option was granted.
(b) INVOLUNTARY TERMINATION FOLLOWING A CHANGE OF CONTROL. In the
event that Employee's employment is terminated as a result of an Involuntary
Termination (as defined below) other than for Cause at any time within 24 months
following the effective date of a Change of Control, then Employee will be
entitled to receive severance benefits as follows: (A) severance payments during
the period from the date of Employee's termination until the date 18 months
after the effective date of the termination (the "Severance Period") equal to
the base salary which Employee was receiving immediately prior to the Change of
Control, which payments shall be paid during the Severance Period in accordance
with the Company's standard payroll practices, (B) a lump sum payment as soon as
practicable after the date of termination of employment equal to Employee's
scheduled bonus for the Company's fiscal year in which the termination occurs
or, if no such bonus has been scheduled, equal to the bonus paid to Employee for
the Company's fiscal year prior to the Company's fiscal year in which the
termination occurs, (C) continuation of the health insurance benefits provided
to Employee immediately prior to the Change of Control at Company expense
pursuant to the terms of the Collective Omnibus Budget Reconciliation Act of
1985, as amended ("COBRA") through the earlier of the end of the
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Severance Period or the date upon which Employee is no longer eligible for such
COBRA benefits under applicable law, (D) in the event that the acceleration of
vesting provided for in Section 2(a) did not occur due to the provisions of
Section 5 on the effective date of the Change of Control, then, except to the
extent that the provisions of Section 5 would not permit acceleration of vesting
pursuant to this Section 2(b), each stock option to purchase Collagen's Common
Stock granted to Employee over the course of his or her employment with Collagen
and held by Employee on the date of termination of employment shall become
immediately vested on such date as to that number of shares that would have
vested in accordance with the terms of such option (assuming that Employee had
remained in Continuous Status as an Employee, as defined in the relevant plan
and option agreement, for 24 months after the date of termination of employment)
as of the date 24 months after the date of termination of employment and each
such option shall be exercisable in accordance with the provisions of the option
agreement and plan pursuant to which such option was granted, and (E) except to
the extent that the provisions of Section 5 would not permit acceleration of
vesting pursuant to this Section 2(b), each stock option to purchase Cohesion
Corporation Common Stock granted to Employee over the course of his or her
employment with Cohesion Corporation and held by Employee on the date of
termination of employment shall become immediately vested on such date (if not
already vested) as to that number of shares that would have vested in accordance
with the terms of such option (assuming that Employee had remained in Continuous
Status as an Employee, as defined in the relevant plan and option agreement, for
24 months after the date of the Change of Control) as of the date 24 months
after the date of the Change of Control and each such option shall be
exercisable in accordance with the provisions of the option agreement and plan
pursuant to which such was granted. In addition, Employee will receive
payment(s) for all salary, bonuses and unpaid vacation accrued as of the date of
Employee's termination of employment.
(c) TERMINATION FOR CAUSE. If Employee's employment is terminated
for Cause at any time, then Employee shall not be entitled to receive payment of
any severance benefits. Employee will receive payment(s) for all salary, bonuses
and unpaid vacation accrued as of the date of Employee's termination of
employment and Employee's benefits will be continued under the Company's then
existing benefit plans and policies in accordance with such plans and policies
in effect on the date of termination and in accordance with applicable law.
(d) VOLUNTARY RESIGNATION. If Employee voluntarily resigns from
the Company, then Employee shall not be entitled to receive payment of any
severance benefits. Employee will receive payment(s) for all salary, bonuses and
unpaid vacation accrued as of the date of Employee's termination of employment
and Employee's benefits will be continued under the Company's then existing
benefit plans and policies in accordance with such plans and policies in effect
on the date of termination and in accordance with applicable law.
3. DEFINITION OF TERMS. The following terms referred to in this Agreement
shall have the following meanings:
(a) CHANGE OF CONTROL. "Change of Control" shall mean the
occurrence of any of the following events:
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(i) OWNERSHIP OF THE COMPANY. Any "Person" (as such term
is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended) is or becomes the "Beneficial Owner" (as defined in Rule 13d-3 under
said Act), directly or indirectly, of securities of the Company representing 50%
or more of the total voting power represented by the Company's then outstanding
voting securities without the approval of the Board;
(ii) OWNERSHIP OF COLLAGEN. Any Person is or becomes the
Beneficial Owner, directly or indirectly, of securities of Collagen representing
50% or more of the total voting power represented by Collagen's then outstanding
voting securities without the approval of Collagen's Board of Directors.
(iii) MERGER/SALE OF ASSETS OF THE COMPANY. A merger or
consolidation of the Company whether or not approved by the Board, 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) at least 50% of the total voting power represented by the
voting securities of the Company or such surviving entity 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 of the
Company's assets; or
(iv) MERGER/SALE OF ASSETS OF COLLAGEN. A merger or
consolidation of Collagen, whether or not approved by Collagen's Board of
Directors, other than a merger or consolidation which would result in the voting
securities of Collagen outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least 50% of the total voting power
represented by the voting securities of Collagen or such surviving entity
outstanding immediately after such merger or consolidation, or the stockholders
of Collagen approve a plan of complete liquidation of Collagen or an agreement
for the sale or disposition by Collagen of all or substantially all of
Collagen's assets; or
(v) CHANGE IN THE COMPANY'S BOARD COMPOSITION. A change in
the composition of the Board, as a result of which fewer than a majority of the
directors are Incumbent Directors. "Incumbent Directors" shall mean directors
who either (A) are directors of the Company as of February 9, 1998 or (B) are
elected, or nominated for election, to the Board with the affirmative votes of
at least a majority of the Incumbent Directors at the time of such election or
nomination (but an Incumbent Director shall not include an individual whose
election or nomination is in connection with an actual or threatened proxy
contest relating to the election of directors to the Company).
(vi) CHANGE IN COLLAGEN'S BOARD COMPOSITION. A change in
the composition of Collagen's Board of Directors, as a result of which fewer
than a majority of the directors are Collagen Incumbent Directors. "Collagen
Incumbent Directors" shall mean directors who either (A) are directors of
Collagen as of February 9, 1998 or (B) are elected, or nominated for election,
to Collagen's Board of Directors with the affirmative votes of at least a
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majority of the Collagen Incumbent Directors at the time of such election or
nomination (but a Collagen Incumbent Director shall not include an individual
whose election or nomination is in connection with an actual or threatened proxy
contest relating to the election of directors to Collagen).
(b) CAUSE. "Cause" shall mean (i) gross negligence or willful
misconduct in the performance of Employee's duties to the Company where such
gross negligence or willful misconduct has resulted or is likely to result in
substantial and material damage to the Company or its subsidiaries (ii) repeated
unexplained or unjustified absence from the Company, (iii) a material and
willful violation of any federal or state law; (iv) commission of any act of
fraud with respect to the Company or (v) conviction of a felony or a crime
involving moral turpitude causing material harm to the standing and reputation
of the Company, in each case as determined in good faith by the Board.
(c) INVOLUNTARY TERMINATION. "Involuntary Termination" shall
include any termination by the Company other than for Cause and Employee's
voluntary termination, upon 30 days prior written notice to the Company,
following (i) any reduction of Employee's base compensation (other than in
connection with a general decrease in base salaries for most officers of the
successor corporation), or (ii) Employee's refusal to relocate to a facility or
location more than 30 miles from the Company's current location.
4. LIMITATION ON PAYMENTS. In the event that the severance and other
benefits provided for in this Agreement to the Employee (i) constitute
"parachute payments" within the meaning of Section 280G of the Internal Revenue
Code of 1986, as amended (the "Code") and (ii) but for this Section, would be
subject to the excise tax imposed by Section 4999 of the Code, then the
Employee's severance benefits under Sections 2(a) and 2(b) shall be payable
either:
(a) in full, or
(b) as to such lesser amount which would result in no portion of
such severance benefits being subject to excise tax under Section 4999 of the
Code, whichever of the foregoing amounts, taking into account the applicable
federal, state and local income taxes and the excise tax imposed by Section
4999, results in the receipt by the Employee on an after-tax basis, of the
greatest amount of severance benefits under Section 2(a) and 2(b),
notwithstanding that all or some portion of such severance benefits may be
taxable under Section 4999 of the Code. Unless the Company and the Employee
otherwise agree in writing, any determination required under this Section 4
shall be made in writing by independent public accountants agreed to by the
Company and the Employee (the "Accountants"), whose determination shall be
conclusive and binding upon the Employee and the Company for all purposes. For
purposes of making the calculations required by this Section 4, the Accountants
may make reasonable assumptions and approximations concerning applicable taxes
and may rely on reasonable, good faith interpretations concerning the
application of Section 280G and 4999 of the Code. The Company and the Employee
shall furnish to the Accountants such information and documents as the
Accountants may reasonably request in order to make a determination under this
Section.
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The Company shall bear all costs the Accountants may reasonably incur in
connection with any calculations contemplated by this Section 4.
5. CERTAIN BUSINESS COMBINATIONS. In the event it is determined by the
Board of Directors of the company undergoing the Change of Control, upon
consultation with such company's management and independent auditors, that the
enforcement of any agreement between Employee, the Company and Collagen,
including the provisions of Section 2(a) and 2(b) of this Agreement, which
allows for the acceleration of vesting of stock options granted for Collagen's
Common Stock upon the effective date of a Change of Control or thereafter, would
preclude accounting for any proposed business combination of the Company or
Collagen involving a Change of Control as a pooling of interests, and the
respective Board of Directors otherwise desires to approve such a proposed
business transaction which requires as a condition to the closing of such
transaction that it be accounted for as a pooling of interests, then any such
provision of this Agreement shall be null and void. For purposes of this Section
5, the respective Board of Directors' determination shall require the unanimous
approval of the non-employee Board members.
6. SPIN-OFF TRANSACTION. Collagen has recently announced its intention
to formally "spin-off" the Company whereby all shares of the Company's Common
Stock held by Collagen will be distributed to the Collagen stockholders. The
distribution of shares of the Company's Common Stock to the stockholders of
Collagen will not by itself result in any obligation of the Company to make any
payments to Employee pursuant to Section 2 of this Agreement.
7. CONFLICTS. Employee represents that his or her performance of all the
terms of this Agreement will not breach any other agreement to which Employee is
a party. Employee has not, and will not during the term of this Agreement, enter
into any oral or written agreement in conflict with any of the provisions of
this Agreement. Employee further represents that he or she is entering into or
has entered into an employment relationship with the Company of his or her own
free will and that he or she has not been solicited as an employee in any way by
the Company.
8. SUCCESSORS. Any successor to the Company (whether direct or indirect
and whether by purchase, lease, merger, consolidation, liquidation or otherwise)
to all or substantially all of the Company's business and/or assets shall assume
the obligations under this Agreement and agree expressly to perform the
obligations under this Agreement in the same manner and to the same extent as
the Company would be required to perform such obligations in the absence of a
succession. The terms of this Agreement and all of Employee's rights hereunder
and thereunder shall inure to the benefit of, and be enforceable by, Employee's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
9. NOTICE. Notices and all other communications contemplated by this
Agreement shall be in writing and shall be deemed to have been duly given when
personally delivered or when mailed by U.S. registered or certified mail, return
receipt requested and postage prepaid. Mailed notices to Employee shall be
addressed to Employee at the home address which Employee most recently
communicated to the Company in writing. In the case of the Company,
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mailed notices shall be addressed to its corporate headquarters, and all notices
shall be directed to the attention of its Secretary.
10. MISCELLANEOUS PROVISIONS.
(a) NO DUTY TO MITIGATE. Employee shall not be required to
mitigate the amount of any payment contemplated by this Agreement (whether by
seeking new employment or in any other manner), nor shall any such payment be
reduced by any earnings that Employee may receive from any other source.
(b) WAIVER. No provision of this Agreement shall be modified,
waived or discharged unless the modification, waiver or discharge is agreed to
in writing and signed by Employee and by an authorized officer of the Company
(other than Employee). 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.
(c) WHOLE AGREEMENT. No agreements, representations or
understandings (whether oral or written and whether express or implied) which
are not expressly set forth in this Agreement have been made or entered into by
either party with respect to the subject matter hereof. This Agreement
supersedes any agreement of the same title and concerning similar subject matter
dated prior to the date of this Agreement, and by execution of this Agreement
both parties agree that any such predecessor agreement shall be deemed null and
void.
(d) CHOICE OF LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
California without reference to conflict of laws provisions.
(e) SEVERABILITY. If any term or provision of this Agreement or
the application thereof to any circumstance shall, in any jurisdiction and to
any extent, be invalid or unenforceable, such term or provision shall be
ineffective as to such jurisdiction to the extent of such invalidity or
unenforceability without invalidating or rendering unenforceable the remaining
terms and provisions of this Agreement or the application of such terms and
provisions to circumstances other than those as to which it is held invalid or
unenforceable, and a suitable and equitable term or provision shall be
substituted therefor to carry out, insofar as may be valid and enforceable, the
intent and purpose of the invalid or unenforceable term or provision.
(f) ARBITRATION. Any dispute or controversy arising under or in
connection with this Agreement may be settled at the option of either party by
binding arbitration in the County of Santa Clara, California, in accordance with
the rules of the American Arbitration Association then in effect. Judgment may
be entered on the arbitrator's award in any court having jurisdiction. Punitive
damages shall not be awarded.
(g) LEGAL FEES AND EXPENSES. The parties shall each bear their
own expenses, legal fees and other fees incurred in connection with this
Agreement.
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(h) NO ASSIGNMENT OF BENEFITS. The rights of any person to
payments or benefits under this Agreement shall not be made subject to option or
assignment, either by voluntary or involuntary assignment or by operation of
law, including (without limitation) bankruptcy, garnishment, attachment or other
creditor's process, and any action in violation of this Section 11(h) shall be
void.
(i) EMPLOYMENT TAXES. All payments made pursuant to this
Agreement will be subject to withholding of applicable income and employment
taxes.
(j) ASSIGNMENT BY COMPANY. The Company may assign its rights
under this Agreement to an affiliate, and an affiliate may assign its rights
under this Agreement to another affiliate of the Company or to the Company. In
the case of any such assignment, the term "Company" when used in a section of
this Agreement shall mean the corporation that actually employs the Employee.
(k) 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.
[SIGNATURE PAGE FOLLOWS]
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The parties have executed this Agreement on the date first written above.
COHESION TECHNOLOGIES, INC.
By:
Title:
Address: 0000 Xxxxx Xxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
COLLAGEN CORPORATION
By:
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Title:
---------------------------------
Address: 0000 Xxxxx Xxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Officer
Signature:
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Address:
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