CHANGE OF CONTROL AGREEMENT
This Change of Control Agreement (the "Agreement") is made and entered
into effective as of < < Date > >, by and between < < Employee > > (the
"Employee") and Metra Biosystems, Inc., a California 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 Employee, an executive corporate
officer of the Company, and can cause the Employee to consider alternative
employment opportunities. The Board has determined that it is in the best
interests of the Company and its shareholders to assure that the Company will
have the continued dedication and objectivity of the Employee,
notwithstanding the possibility, threat or occurrence of a Change of Control
(as defined below) of the Company.
B. The Board believes that it is in the best interests of the Company
and its shareholders to provide the Employee with an incentive to continue
his or her employment with the Company.
C. The Board believes that it is imperative to provide the Employee
with certain benefits upon a Change of Control and, under certain
circumstances, upon termination of the Employee's employment in connection
with a Change of Control, which benefits are intended to provide the Employee
with financial security and provide sufficient income and encouragement to
the Employee to remain with the Company notwithstanding the possibility of a
Change of Control.
D. To accomplish the foregoing objectives, the Board of Directors has
directed the Company, upon execution of this Agreement by the Employee, to
agree to the terms provided in this Agreement.
E. Certain capitalized terms used in the Agreement are defined in
Section 4 below.
In consideration of the mutual covenants herein contained, and in
consideration of the continuing employment of Employee by the Company, the
parties agree as follows:
1. AT-WILL EMPLOYMENT. The Company and the Employee acknowledge
that the Employee's employment is and shall continue to be at-will, as
defined under applicable law. If the Employee's employment terminates for
any reason, including (without limitation) any termination prior to a Change
of Control, the Employee shall not be entitled
-1-
to any payments or benefits, other than as provided by this Agreement, or as
may otherwise be available in accordance with the terms of Employee's offer
letter from the Company dated < < Date > > (the "Offer Letter") and 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 corporate officer of
the Company, other than as a result of an involuntary termination by the
Company without Cause (ii) the date that all obligations of the parties
hereunder have been satisfied, or (iii) two (2) years after a Change of
Control. 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.
2. RESTRICTED STOCK AND STOCK OPTIONS. Subject to Sections 5 and 6
below, in the event of a Change of Control and regardless of whether the
Employee's employment with the Company is terminated in connection with the
Change of Control, each share of Common Stock held by Employee that is
subject to the terms of a Restricted Stock Purchase Agreement ("Restricted
Stock") and each stock option granted for the Company's securities
(collectively referred to as the "Shares") held by the Employee shall become
vested on the effective date of the transaction as to fifty percent (50%) of
the Shares that have not otherwise vested as of such date. Thereafter, so
long as Employee remains employed by the Company (or a successor
Corporation), the remaining 50% of the Shares that have not otherwise vested
as of the Change of Control shall vest as follows: (i) 25% of the Shares
twelve (12) months after the Change of Control and (ii) 25% of the Shares
eighteen (18) months after the Change of Control. Each stock option shall be
exercisable to the extent so vested in accordance with the provisions of the
Option Agreement and 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 Stock Purchase Agreement
pursuant to which such stock was purchased by Employee.
3. CHANGE OF CONTROL.
(a) TERMINATION FOLLOWING A CHANGE OF CONTROL. Subject to
Section 5 below, if the Employee's employment with the Company is terminated
at any time within two (2) years after a Change of Control, then the Employee
shall be entitled to receive severance benefits as follows:
(i) VOLUNTARY RESIGNATION. If the Employee voluntarily
resigns from the Company (other than as an Involuntary Termination (as
defined below) or if the Company terminates the Employee's employment for
Cause (as defined below)), then the Employee shall not be entitled to receive
severance payments. The Employee's benefits will be terminated under the
Company's then existing benefit plans and policies in accordance with such
plans and policies in effect on the date of termination or as otherwise
determined by the Board of Directors of the Company.
-2-
(ii) INVOLUNTARY TERMINATION. If the Employee's
employment is terminated as a result of an Involuntary Termination other than
for Cause, the Employee shall be entitled to receive the following benefits:
(i) severance payments during the period from the date of the Employee's
termination until the date 12 months after the effective date of the
termination (the "Severance Period") equal to the salary which the Employee
was receiving at the time of such termination, which payments shall be paid
during the Severance Period in accordance with the Company's standard payroll
practices; (ii) a pro-rated amount of the Employee's "target bonus" for the
fiscal year in which the termination occurs (or for the prior fiscal year if
a target bonus has not yet been determined for the fiscal year in which the
termination occurs), with such payment being made on the termination date;
(iii) continuation of benefits through the end of the Severance Period
substantially identical to those to which the Employee was entitled
immediately prior to the termination, or to those being offered to officers
of the Company, or a successor corporation, if the Company's benefit programs
are changed during the Severance Period, unless Employee becomes eligible for
comparable coverage through another employer, at which time the benefits
coverage provided herein shall terminate; and (iv) full and immediate vesting
of each unvested stock option granted for the Company's securities and each
share of restricted stock held by the Employee on the date of termination so
that each such option shall be exercisable in full on the termination date in
accordance with the provisions of the Option Agreement and Plan pursuant to
which such option was granted and each share of restricted stock shall be
freely transferable by Employee. For purposes of this Agreement, the term
"target bonus" shall mean the Employee's base salary in effect on the
termination date multiplied by that percentage of such base salary that is
prescribed by the Company under its Executive Bonus Program as the percentage
of such base salary payable to the Employee as a bonus if the Company pays
bonuses at one-hundred percent (100%) of its operating plan.
(iii) INVOLUNTARY TERMINATION FOR CAUSE. If the
Employee's employment is terminated for Cause, then the Employee shall not be
entitled to receive severance payments. The Employee's benefits will be
terminated under the Company's then existing benefit plans and policies in
accordance with such plans and policies in effect on the date of termination.
(b) TERMINATION APART FROM A CHANGE OF CONTROL. In the event
the Employee's employment terminates for any reason, either prior to the
occurrence of a Change of Control or after the two year period following the
effective date of a Change of Control, then the Employee shall not be
entitled to receive any severance payments under this Agreement. The
Employee's benefits will be terminated under the terms of the Offer Letter
and the Company's then existing benefit plans and policies in accordance with
such plans and policies in effect on the date of termination or as otherwise
determined by the Board of Directors of the Company.
4. DEFINITION OF TERMS. The following terms referred to in this
Agreement shall have the following meanings:
-3-
(a) CHANGE OF CONTROL. "Change of Control" shall mean the
occurrence of any of the following events:
(i) MERGER AND CHANGE IN BOARD COMPOSITION. A merger or
consolidation of the Company whether or not approved by the Board of
Directors of the Company, 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 fifty
percent (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 combined with a change in the composition of the
Board of Directors of the Company, 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 March 3, 1997 or
(B) are elected, or nominated for election, to the Board of Directors of the
Company with the affirmative votes of at least a majority of the Incumbent
Directors at the time of such election or nomination (but 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).
(ii) LIQUIDATION; SALE OF ASSETS. 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 was approved by
the shareholders of the Company.
(b) CAUSE. "Cause" shall mean (i) gross negligence or willful
misconduct in the performance of the 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 of Directors of the Company.
(c) INVOLUNTARY TERMINATION. "Involuntary Termination" shall
include any termination by the Company other than for Cause and the
Employee's voluntary termination, upon 30 days prior written notice to the
Company, following (i) a material reduction or change in job duties,
responsibilities and requirements inconsistent with the Employee's position
with the Company and the Employee's prior duties, responsibilities and
requirements; (ii) any reduction of the Employee's base compensation (other
than in connection with a general decrease in base salaries for most officers
of the Company and any successor corporation); or (iii) the Employee's
refusal to relocate to a facility or location more than 50 miles from the
Company's current location.
-4-
5. 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 and 3(a)(ii) 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 Sections 2 and 3(a)(ii),
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 5
shall be made in writing by the Company's independent public accountants (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 5, 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. The Company
shall bear all costs the Accountants may reasonably incur in connection with
any calculations contemplated by this Section 5.
6. CERTAIN BUSINESS COMBINATIONS. In the event it is determined by
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 2 hereof, which allows for the
acceleration of vesting of Shares upon the effective date of a Change of
Control would preclude accounting for any proposed business combination of
the Company involving a Change of Control 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 6, the
Board's determination shall require the unanimous approval of the
non-employee Board members.
7. 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
-5-
obligations in the absence of a succession. The terms of this Agreement and
all of the Employee's rights hereunder shall inure to the benefit of, and be
enforceable by, the Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
8. 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 the Employee shall be addressed to the Employee at the home address which
the Employee 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.
9. MISCELLANEOUS PROVISIONS.
(a) NO DUTY TO MITIGATE. The 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, except as otherwise
provided in this Agreement, shall any such payment be reduced by any earnings
that the 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 the Employee and by an authorized officer of the
Company (other than the 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,
-6-
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.
(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 subsection (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;
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 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.
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.
METRA BIOSYSTEMS, INC. < < EMPLOYEE > >
By:______________________________ _______________________________
Title:___________________________
-7-
