EXHIBIT 10.3
CHANGE OF CONTROL AGREEMENT
This Change of Control Agreement (the "Agreement") is made and entered
into effective as of May 13, 1998, by and between Xxxxxx Xxxxxxx (the
"Director") and Chemdex Corporation, a Delaware corporation (the "Company").
RECITALS
A. It is expected that another company or other entity may from time
to time consider the possibility of acquiring the Company or that a change in
control may otherwise occur, with or without the approval of the Company's Board
of Directors (the "Board"). The Board recognizes that such consideration can be
a distraction to the Director and can cause the Director to consider alternative
service opportunities. The Board has determined that it is in the best interests
of the Company and its stockholders to assure that the Company will have the
continued dedication and objectivity of the Director, notwithstanding the
possibility, threat or occurrence of a Corporate Transaction (as defined below)
of the Company.
B. The Board believes that it is in the best interests of the Company
and its stockholders to provide the Director with an incentive to continue his
or her service with the Company.
C. The Board believes that it is imperative to provide the Director
with certain benefits upon termination of the Director's service in connection
with a Corporate Transaction, which benefits are intended to provide the
Director with financial security and provide sufficient encouragement to the
Director to remain with the Company notwithstanding the possibility of a
Corporate Transaction.
D. To accomplish the foregoing objectives, the Board of Directors has
directed the Company, upon execution of this Agreement by the Director, to agree
to the terms provided in this Agreement.
E. Certain capitalized terms used in the Agreement are defined in
Section 2 below.
In consideration of the mutual covenants herein contained, and in
consideration of the continuing service of Director by the Company, the parties
agree as follows:.
1. Stock Options and Restricted Stock. Subject to Sections 3 and 4
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below, in the event of a Corporate Transaction, each stock option granted for
the Company's securities held by Director and any shares of the Company's Common
Stock that are subject to a right of repurchase by the Company pursuant to the
terms of a Restricted Stock Purchase Agreement ("Restricted Stock") held by the
Director shall become fully vested on the closing date of the Corporate
Transaction as to one hundred percent (100%) of the total number of shares
issuable pursuant to such stock option grant or issued pursuant to such
Restricted Stock Purchase
Agreement. Each stock option shall otherwise vest in accordance with the
provisions of the Stock Option Agreement and the Company's 1998 Stock Option
Plan pursuant to which such option was granted and each Share of Restricted
Stock shall be freely transferable to the extent so vested in accordance with
the provisions of the Restricted Stock Purchase Agreement pursuant to which such
stock was purchased by Director.
2. Definition of Terms. The following terms referred to in this
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Agreement shall have the following meanings:
(a) Corporate Transaction. "Corporate Transaction" shall mean the
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occurrence of either of the following stockholder-approved events to which the
Company is a party:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting power of
the Company's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to such
transaction; or
(ii) the sale, transfer or other disposition of all or
substantially all of the Company's assets in complete liquidation or dissolution
of the Company.
(b) Cause. "Cause" shall mean:
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(i) conviction of a felony or a crime involving fraud or
moral turpitude; or
(ii) intentional or reckless conduct or gross negligence
materially harmful to the surviving entity after a Corporation Transaction,
including violation of a non-competition or confidentiality agreement.
Cause shall not include poor performance in the achievement of the Director's
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job objectives or the death or physical disability of the Director.
3. Limitation on Payments. In the event that the benefits provided
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for in this Agreement to the Director (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 Director's benefits under Section
1 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 Director
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on an after-tax basis, of the greatest amount of benefits under Section 1
notwithstanding that all or some portion of such severance benefits may be
taxable under Section 4999 of the Code. Unless the Company and the Director
otherwise agree in writing, any determination required under this Section 3
shall be made in writing by the Company's independent public accountants (the
"Accountants"), whose determination shall be conclusive and binding upon the
Director and the Company for all purposes. For purposes of making the
calculations required by this Section 3, 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 Director shall furnish to the
Accountants such information and documents as the Accountants may reasonably
request in order to make a determination under this Section. The Company shall
bear all costs the Accountants may reasonably incur in connection with any
calculations contemplated by this Section 3.
4. Certain Business Combinations. In the event it is determined by
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the Board, upon consultation with Company management and the Company's
independent auditors, that the enforcement of any Section of this Agreement,
including, but not limited to, Section 1 hereof, which allows for the
acceleration of vesting of stock options and Restricted Stock granted for the
Company's securities upon the effective date of a Corporate Transaction would
preclude accounting for any proposed business combination of the Company
involving a Corporate Transaction as a pooling of interests, and the Board
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 Section of this Agreement shall be null and
void. For purposes of this Section 4, the Board's determination shall require
the unanimous approval of the non-Director Board members.
5. Successors. Any successor to the Company (whether direct or
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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 the Director's rights
hereunder shall inure to the benefit of, and be enforceable by, the Director's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
6. Notice. Notices and all other communications contemplated by this
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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 the Director shall be
addressed to the Director at the home address which the Director most recently
communicated to the Company in writing. In the case of the Company, mailed
notices shall be addressed to its corporate headquarters, and all notices shall
be directed to the attention of its Secretary.
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7. Miscellaneous Provisions.
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(a) No Duty to Mitigate. The Director shall not be required to
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mitigate the amount of any benefit contemplated by this Agreement (whether by
seeking new service or in any other manner), nor, except as otherwise provided
in this Agreement, shall any such benefit be reduced by any earnings that the
Director may receive from any other source.
(b) Waiver. No provision of this Agreement shall be modified,
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waived or discharged unless the modification, waiver or discharge is agreed to
in writing and signed by the Director and by an authorized officer of the
Company (other than the Director). 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
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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
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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
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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
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connection with this Agreement may be settled at the option of either party by
binding arbitration in the County of San Mateo, 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
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expenses, legal fees and other fees incurred in connection with this Agreement.
(h) No Assignment of Benefits. The rights of any person to
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payments or benefits under this Agreement shall not be made subject to option or
assignment, either by
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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 subsection (h) shall be void.
(i) Service Taxes. Any payments made pursuant to this Agreement will
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be subject to withholding of applicable income and service taxes.
(j) Assignment by Company. The Company may assign its rights under
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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; provided,
however, that no assignment shall be made if the net worth of the assignee is
less than the net worth of the Company at the time of assignment. 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 Director.
(k) Counterparts. This Agreement may be executed in counterparts,
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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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IN WITNESS WHEREOF, each of the parties has executed this Agreement,
in the case of the Company by its duly authorized officer, as of the day and
year first above written.
CHEMDEX CORPORATION XXXXXX XXXXXXX
By: /s/ Xxxxx Vindsius /s/ Xxxxxx Xxxxxxx
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Title: Controller
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