CHANGE OF CONTROL AGREEMENT
THIS
CHANGE OF CONTROL AGREEMENT (“Agreement”) is effective as of the 19th day of
June 2006 (the “Effective Date”), by and between SYNTHEMED, INC. (the
“Company”), and Xxx Xxxxx, PhD (the “Executive”).
WHEREAS,
the Executive is currently employed by the Company;
WHEREAS,
the Board of Directors of the Company (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 services and dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control
(as
defined herein); and
WHEREAS,
in order to accomplish the foregoing objective, the Board has authorized and
directed the Company to enter into this Agreement.
NOW,
THEREFORE, in consideration of the premises, the mutual covenants and agreements
contained in this Agreement, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Executive hereby agree as follows:
1. Term.
The
term of this Agreement (“Term”) shall commence on the Effective Date and shall
continue until the earlier of: (a) ninety (90) days after the Executive’s
termination of employment with the Company if no Change of Control shall have
then been commenced, publicly announced or occurred; or (b) one (1) year after
a
Change of Control shall have occurred.
2. Accelerated
Vesting of Options; Option Exercisability; Health Insurance Benefits; Severance
Payments.
If:
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(a)
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a
Change of Control shall have occurred and the Executive’s employment with
the Company is terminated by the Executive for Good Reason (i) at
any time
at least three months thereafter and during the Term if on account
of an
event described in Section 3(a)(i) below or (ii) at any time during
the
Term if on account of an event described in Section 3(a)(ii) or 3(a)(iii)
below; or
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(b)
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during
the period from ninety (90) days prior to the commencement or public
announcement of a Change of Control until one (1) year after a Change
of
Control shall have occurred, the Executive’s employment with the Company
is terminated by the Company other than for
Cause;
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then
(i)
all unvested options granted to the Executive by the Company or any successor
entity prior to, simultaneously with or in connection with the Change of Control
shall vest immediately prior to such resignation or termination of employment
described in subsection 2(a) or (b) above, (ii)
all
outstanding options shall remain exercisable until their respective expiration
dates in effect immediately prior to such termination (unless a later date
is
provided in the option award agreement or governing plan), (iii) the Executive
shall be entitled to continue, for a period of one year following termination,
his participation in any group health plan sponsored by the Company in which
the
Executive was participating on the date of such termination, at a cost to such
executive equal to the amount charged by the Company to its then-current
employees (it
being
understood that the Company's obligation under this clause (iii) with respect
to
the foregoing benefits shall be compromised to the extent that the Executive
obtains any such benefits pursuant to a subsequent employer's benefit plans,
in
which case the Company may reduce the coverage of any benefits it is required
to
provide the Executive hereunder as long as the aggregate coverages and benefits
of the combined benefits plans is no less favorable to the Executive than the
coverages and benefits required to be provided hereunder; it being further
understood that this clause (iii) shall not be interpreted so as to limit any
benefits to which the Executive, his dependents or beneficiaries may be
otherwise entitled under any of the Company's employee benefit plans, programs
or practices following the Executive's termination of employment, including
without limitation, retiree medical and life insurance benefits) and (iv) the
Company shall pay to the Executive, in twelve equal monthly payments, commencing
thirty (30) days after any such resignation or termination, an amount equal
to
the sum of:
(i) one
hundred and fifty percent (150%) of the Executive’s highest annual base salary
in effect during the one (1) year period immediately preceding such resignation
or termination, plus
(ii) the
greater of the annual bonus the Executive received with respect to the
immediately preceding fiscal year of the Company and the current annual target
bonus in effect at the time of such resignation or termination.
Any
amounts due the Executive under clauses (iv)(1) and (iv)(2) above shall be
(A)
in addition to any accrued but unpaid base salary and/or bonus and any
unreimbursed business and/or medical expenses and/or other accrued but unpaid
benefits under the Company’s employee benefit programs as of the date of such
resignation or termination of employment and (B) reduced by any amounts paid
to
the Executive as severance (calculated on the basis of base salary and/or bonus)
in lieu of compensation for periods subsequent to the date of such resignation
or termination pursuant to any employment agreement in existence between the
Company and the Executive on the date of such resignation or
termination.
3. Good
Reason.
(a) As
used
in this Agreement, the term “Good Reason” means:
(i) a
material change in the nature of the Executive’s authority, duties,
responsibilities or status (including offices, titles, reporting requirements
and supervisory functions), from those in effect immediately prior to the Change
of Control; or
(ii) the
required relocation of the Executive’s place of employment to a location in
excess of twenty (20) miles from (A) the current principal executive offices
of
the Company (or such other location serving as Executive’s place of employment
prior to such relocation as agreed to in writing by the Company and Executive)
and (B) Executive’s current or then residence (whichever is closer to the new
place of employment), except for (a) required relocation for up to three months
limited to the work week, provided the cost of meals and accommodations during
the work week, as well as commuting costs to enable the Executive to spend
weekends and holidays at home, are borne by the Company and (b) required travel
on Company business to an extent substantially equivalent to the Executive’s
business travel obligations immediately prior to the Change of Control; or
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(iii) any
reduction by the Company of the Executive’s base salary, or reduction in the
cash portion of the Executive’s target bonus, from the levels in effect
immediately prior to the Change of Control, except for across-the-board
reductions affecting all senior executives of the Company, provided, however,
that such across-the-board reductions are not made as a result of, or in
contemplation of, a Change in Control and further provided that any such
reductions applicable to Executive shall not exceed 15% of the levels in effect
for the Executive immediately prior to the Change in Control.
(b) If,
at
any time during the Term of this Agreement, whether before or after the
occurrence of a Change of Control, the Executive receives a written description
from the Company of the nature of the Executive’s authorities, duties,
responsibilities, status, salary, bonus and other employee benefits, or job
location, and the Executive thereafter accepts in writing such new authority,
duties, responsibilities, status, salary, bonus and other employee benefits,
or
job location (“New Position”) with the Company without determining that the New
Position causes a Good Reason as set forth in Section 2(a) hereof, then for
the
remainder of the Term, the New Position shall be the authorities, duties,
responsibilities, status, salary, bonus and other employee benefits, or job
location to be used by the Executive in determining whether Good Reason has
occurred thereafter pursuant to Section 2(a) hereof.
4. Change
of Control.
As used
herein, the term “Change of Control” shall mean the occurrence with respect to
the Company of any of the following events:
(a) An
acquisition of any voting securities of the Company (the “Voting Securities”) by
any “Person” (as the term Person is used for purposes of Section 13(d) or 14(d)
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”))
immediately after which such Person has “Beneficial Ownership” (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of fifty percent
(50%)
or more of the combined voting power of the then outstanding Voting
Securities;
(b) The
individuals who, as of the date hereof, are members of the Board (the “Incumbent
Board”), cease for any reason to constitute at least a majority of the Board;
provided, however, that if the election or nomination for election by the
Company’s stockholders of any new director was approved by a vote of at least a
majority of the Incumbent Board, such new director shall, for purposes of this
Agreement, be considered as a member of the Incumbent Board; provided, further,
however, that no individual shall be considered a member of the Incumbent Board
if (i) such individual initially assumed office as a result of either an actual
or threatened “Election Contest” (as described in Rule 14a-11 promulgated under
the Exchange Act) or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board (a “Proxy Contest”),
including by reason of any agreement intended to avoid or settle any Election
Contest or Proxy Contest, or (ii) such individual was designated by a Person
who
has entered into an agreement with the Company to effect a transaction described
in clause (i) or (iii) of subsection (c) below; or
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(c) A
merger,
consolidation or reorganization involving the Company, unless,
(i) the
stockholders of the Company immediately before such merger, consolidation or
reorganization, own, directly or indirectly, immediately following such merger,
consolidation or reorganization, at least a majority of the combined voting
power of the outstanding Voting Securities of the corporation (the “Surviving
Corporation”) in substantially the same proportion as their ownership of the
Voting Securities immediately before such merger, consolidation or
reorganization;
(ii) the
individuals who were members of the Incumbent Board immediately prior to the
execution of the agreement providing for such merger, consolidation or
reorganization constitute at least a majority of the members of the board of
directors of the Surviving Corporation; and
(iii) no
Person
(other than any Person who, immediately prior to such merger, consolidation
or
reorganization, had Beneficial Ownership of a majority or more of the then
outstanding Voting Securities) has Beneficial Ownership of a majority or more
of
the combined voting power of the Surviving Corporation’s then outstanding Voting
Securities.
(d) A
complete liquidation or dissolution of the Company; or
(e) A
sale or
other disposition of all or substantially all of the assets of the Company
to
any Person.
Notwithstanding
the foregoing, a Change of Control shall not be deemed to occur solely because
any Person (the “Subject Person”) acquired Beneficial Ownership of more than the
permitted amount of the outstanding Voting Securities as a result of the
acquisition of Voting Securities by the Company which, by reducing the number
of
Voting Securities outstanding, increased the proportional number of shares
Beneficially Owned by the Subject Person; provided that if a Change of Control
would occur (but for the operation of this sentence) as a result of the
acquisition of Voting Securities by the Company, and after such share
acquisition by the Company, the Subject Person becomes the Beneficial Owner
of
any additional Voting Securities Beneficially Owned by the Subject Person,
then
a Change of Control shall be deemed to have occurred.
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5. Cause.
The
term “Cause” shall mean (1) the failure of the Executive substantially to
perform the duties of his employment (as in effect immediately prior to a Change
in Control or pursuant to a New Position later agreed to by Executive in
accordance with Section 3(b) hereof)(other than any such failure resulting
from
incapacity due to physical or mental illness) after a demand for substantial
performance is delivered to the Executive by the Company which specifically
identifies the manner in which the Company believes the Executive has not
substantially performed the duties of his employment, provided
that prior to delivering any such notice the Com-pany shall first have attempted
in good faith to resolve the matter(s) at issue with the Executive including,
if
the Executive so requests, through a meeting with the Board of
Directors;
(2) the
Executive’s engaging in any act that constitutes neglect or willful misconduct
and that is injurious to the Company or any of its affiliates including without
limitation engaging in conduct in violation of the Company’s Code of Business
Conduct or Xxxxxxx Xxxxxxx Policy, as the same may be in effect from time to
time, and making a written certification that the Executive knows or should
know
is erroneous and that contributes to a material error in the Company’s filings
with any governmental agency; (3) the Executive’s conviction of, or entering a
plea of guilty, nolo contendere (or similar plea) to a crime that constitutes
a
felony or any crime of moral turpitude; (4) the Executive’s directly or
indirectly selling, passing on or otherwise using or disclosing without
permission any confidential information of the Company; or (5) the Executive’s
direct or indirect participation in business activities in competition with
the
Company.
6. Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of New Jersey, without reference to the choice of law principles
thereof.
7. Assignability.
This
Agreement is personal to the Executive and without the prior written consent
of
the Company shall not be assignable by the Executive other than by will or
the
laws of descent and distribution. This Agreement shall inure to the benefit
of
and be enforceable by the Executive’s legal representatives and heirs. This
Agreement shall inure to the benefit of and be binding upon the Company and
its
successors and assigns. The Company shall require any corporation, entity,
individual or other person who is the successor (whether direct or indirect,
by
purchase, merger, consolidation, reorganization, or otherwise) to all or
substantially all of the business and/or assets of the Company, to expressly
assume and agree to perform, by a written agreement in form and substance
reasonably satisfactory to the Executive, all of the obligations of the Company
under this Agreement, prior to or contemporaneously with a Change of Control.
As
used in this Agreement, the term “Company” shall mean the Company as defined
above and any successor to its business and/or assets as described herein which
assumes and agrees to perform this Agreement by operation of law, written
agreement, or otherwise.
8. Waiver.
This
Agreement may not be changed or terminated without the prior written agreement
of both the Company and the Executive. The waiver of any breach of any term
or
condition of this Agreement shall not be deemed to constitute the waiver of
any
breach of the same or any other term or condition of this
Agreement.
9. Severability.
In the
event any provision of this Agreement is found to be unenforceable or invalid,
such provision shall be severable from this Agreement and shall not affect
the
enforceability or validity of any other provision of this Agreement. If any
provision of this Agreement is capable to two constructions, one of which would
render the provision void and the other that would render the provision valid,
then the provision shall have the construction that renders it
valid.
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10. Additional
Agreement.
This
Agreement is in addition to (and, except as specifically set forth herein,
does
not supercede or modify any of the provisions of) the Company’s employment
agreement with the Executive and stock option plans and related award
agreements, which shall remain in full force and effect. For the avoidance
of
doubt, certain stock options granted to the Executive may automatically vest
under certain circumstances pursuant to the Company’s stock option plans or
related award agreements even though no Change of Control has been commenced,
publicly announced or occurred as contemplated hereby. This Agreement supersedes
the provisions of Section 5(d) of the Company’s employment agreement with the
Executive to the extent and only to the extent that such section addresses
compensation to the Executive upon termination by Executive of his employment
thereunder for Good Reason (as defined therein) following a Change in Control
(as defined therein).
11. Conditions
to Payments.
To be
eligible to receive (and continue to receive) and retain the payments and
benefits described in Section 2, the Executive must comply with the terms of
any
non-compete agreement or other restrictive covenants in favor of the Company
and
applicable to the Executive a the time of termination or resignation of
Executive’s employment, and must execute and deliver to the Company an
agreement, in form and substance satisfactory to the Company, effectively
releasing and giving up all claims the Executive may have against the Company
and its subsidiaries, shareholders, successors and affiliates (and each of
their
respective employees, officers, plans and agents) arising out of or based upon
any facts or conduct occurring prior to that date, and reaffirming and agreeing
to comply with the terms of this Agreement and any other agreement signed by
the
Executive in favor of the Company or any of its subsidiaries or affiliates.
The
agreement will be prepared by the Company and provided to the Executive at
the
time the Executive’s employment is terminated or as soon as administratively
practicable thereafter. The Company will have no obligations to make the
payments and/or provide the benefits specified in Section 2, unless and until
the Executive signs and delivers the agreement described in this Section 11
and
all conditions to the effectiveness of the release and waiver (including but
not
limited to the expiration of any applicable time period to consider signing
the
agreement or to revoke acceptance without any action being taken to revoke
acceptance or otherwise invalidate the agreement) have been
satisfied.
12. Section
409A.
Notwithstanding anything to the contrary in this Agreement, if the Company
determines (a) that on the date the Executive’s employment with the Company
terminates or at such other time that the Company determines to be relevant,
the
Executive is a “specified employee” (as such term is defined under Section 409A
of the Internal Revenue Code) of
the
Company and (b) that any payments to be provided to the Executive pursuant
to this Agreement are or may become subject to the additional tax under Section
409A(a)(1)(B)
of the Code or any other taxes or penalties imposed under Section 409A
of
the Code (“Section 409A
Taxes”)
if provided at the time otherwise required under this Agreement, then such
payments shall be delayed until the date (the “ Deferred Payment Date”) that is
six months after the date of the Executive’s “separation from service” (as such
term is defined under Section 409A
of the
Code) with the Company, or such shorter period that, as determined by the
Company, is sufficient to avoid the imposition of Section 409A
Taxes;
it being understood that any payments so delayed shall become payable in the
aggregate on the Deferred Payment Date. It
is the
intent of the parties that the provisions of this Agreement comply with
Section 409A of the Code and related regulations and Department of the
Treasury pronouncements. Accordingly, notwithstanding any provision in this
Agreement to the contrary, this Agreement will be interpreted, applied and
to
the minimum extent necessary, unilaterally amended by the Company in its sole
discretion, without the consent of Executive, as the Company deems appropriate
for the Agreement to satisfy the requirements of Section 409A and to avoid
the imposition of Section 409A Taxes. Notwithstanding the foregoing, the Company
shall not be liable for any taxes, penalties, interest or other costs that
may
arise under Section 409A or otherwise.
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IN
WITNESS WHEREOF, the parties have executed this Agreement as of the Effective
Date.
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SYNTHEMED,
INC:
By:
/s/ Xxxxxx X.
Xxxxxx
Name/Title: Xxxxxx
X. Xxxxxx
President
& CEO
EXECUTIVE:
/s/Xxx Xxxxx Xxx Xxxxx, PhD |
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