5
July 8, 1999
Xx. Xxxxxxx X. Xxxxx
Chairman and Chief Executive Officer
The Liposome Employer, Inc.
Xxx Xxxxxxxx Xxx
Xxxxxxxxx, XX 00000-0000
Dear Xxxxx:
This letter agreement (the "Letter Agreement") will serve to
amend and modify the agreement (the "Agreement"), dated as of
June 1, 1995, by and between you and The Liposome Employer, Inc.,
a Delaware corporation (the "Employer"), by the addition of the
following terms and conditions thereto:
1. The Agreement is hereby amended by the addition of a new
Section 20 to read as follows:
"20. Excise Tax Gross-Up.
"(a) Equalization Payment. In the event that
the Employee becomes subject to the tax (the "Excise
Tax") imposed by Section 4999 of the Internal Revenue
Code of 1986, as amended (the "Code") (or any similar tax
that may hereafter be imposed), with regard to any
amounts received in connection with Employee's
termination of employment with the Employer or any other
payments and benefits provided by the Employer that
constitute "excess parachute payments" within the meaning
of Section 280G(b)(1) of the Code (including, but not
limited to, any and all excess parachute payments
associated with outstanding long-term incentive grants
(including, but not limited to, early vesting of stock
options or restricted stock)) (the "Total Payments"), the
Employer shall pay to the Employee in cash an additional
amount (the "Gross-Up Payment") such that the net amount
retained by the Employee after deduction of any Excise
Tax or compensation on the Total Payments and any
federal, state, and local income tax and Excise Tax upon
the Gross-Up Payment, shall be equal to the Total
Payments. Such payment shall be made by the Employer to
the Employee as soon as practicable following the event
triggering the Excise Tax, but in no event beyond 30 days
from such date.
"(b) Tax Computation. For purposes of
determining whether any of the Total Payments will be
subject to the Excise Tax and the amounts of such Excise
Tax:
"(i) Any other payments or benefits
received or to be received by the Employee in connection
with a Change in Control of the Employer or the
Employee's termination of employment (whether pursuant to
the terms of this Agreement or any other plan,
arrangement, or agreement with the Employer, or with any
Person whose actions result in a Change in Control of the
Employer or any Person affiliated with the Employer or
such Persons) shall be treated as "parachute payments"
within the meaning of Section 280G(b)(2) of the Code, and
all "excess parachute payments" within the meaning of
Section 280G(b)(1) of the Code shall be treated as
subject to the excise tax, unless in the opinion of tax
counsel selected by the Employer's independent auditors
and acceptable to the Employee, such other payments or
benefits (in whole or in part) do not constitute
parachute payments, or unless such excess parachute
payments (in whole or in part) represent reasonable
compensation for services actually rendered within the
meaning of Section 280G(b)(4) of the Code in excess of
the base amount within the meaning of Section 280G(b)(3)
of the Code, or are otherwise not subject to the Excise
Tax;
"(ii) The amount of the Total Payments
which shall be treated as subject to the Excise Tax shall
be equal to the lesser of: (1) the total amount of the
Total Payments; or (2) the amount of excess parachute
payments within the meaning of Section 280G(b)(1) (after
applying clause (i) above); and
"(iii) The value of any noncash benefits
or any deferred payment or benefit shall be determined by
the Employer's independent auditors in accordance with
the principles of Sections 280G(d)(3) and (4) of the
Code.
"For purposes of determining the amount of the Gross-Up
Payment, the Employee shall be deemed to pay Federal
income taxes at the highest marginal rate of Federal
income taxation in the calendar year in which the Gross-
Up Payment is to be made, and state and local income
taxes at the highest marginal rate of taxation in the
state and locality of the Employee's residence on the
Effective Date of Termination, net of the maximum
reduction in Federal income taxes which could be obtained
from deduction of such state and local taxes.
"(c) Subsequent Recalculation. In the event the
Internal Revenue
Service adjusts the computation of the Employer under
Section 20(b) hereof, so that the Employee did not
receive the greatest net benefit, the Employer shall
reimburse the Employee for the full amount necessary to
make the Employee whole, plus an appropriate market rate
of interest, as determined by the Employer's independent
auditors."
2. Section 9(a) of the Agreement is hereby amended by the
addition of subsection (v) to read as follows:
"(v) Termination After Age 65. For purposes of any stock
options, restricted stock or other equity grants and for
purposes of any benefit plans in which the Employee
participates, any termination of the Employee's
employment (other than by death or, to the extent that
the Employee would receive greater benefits than upon a
retirement under a specific plan or grant, a disability
under such plan or grant) after the Employee has attained
age 65, whether by the Employer or the Employee and
notwithstanding the reason for such termination, shall
constitute a retirement, within the meaning of such
equity and benefit plans and grants."
3. The Agreement is hereby amended by the deletion of
subsection 9(a)(iv) and the substitution therefor of the language
annexed hereto as Exhibit A.
The Agreement, as amended herein, shall remain in full force
and effect.
Very truly yours,
THE LIPOSOME EMPLOYER, INC.
By: _________________________
Title: ________________________
Agreed:
_____________________
Xxxxxxx X. Xxxxx
L:\LEGALDPT\LEGAL\AGREEMEN\CAB Letter Agreement.doc
EXHIBIT A
(iv) "Change in Control" of the Employer shall be deemed to
have occurred as of the first day that any one or more of the
following conditions shall have been satisfied:
(i)When a "person," as defined in Sections 3(a)(9) and
13(d)(3) of the Exchange Act, becomes the beneficial
owner, directly or indirectly, of securities of the
Employer representing (I) more than thirty-five percent
(35%) of the combined voting power of the Employer's then
outstanding securities, unless such person is subject to
contractual restrictions that would preclude him or her
from voting such shares in a manner to influence or
control the management of the Employer's business,
provided that in the event such contractual restrictions
are removed, a Change of Control will be deemed to have
occurred on the effective date of such removal or on such
later date as the Executive receives actual notice of such
removal, or (II) one hundred percent (100%) of the
combined voting power of the Employer's then outstanding
securities regardless of any contractual restrictions.
For purposes of this provision, "person" shall not include
the Employer, any subsidiary of the Employer, any employee
benefit plan or employee stock plan of the Employer, or
any person holding the Employer's Common Stock by, for or
pursuant to the terms of such a plan; and "voting power"
shall mean the power under ordinary circumstances (and not
merely upon the happening of a contingency) to vote in the
election of directors. For the purpose of subsections
9(a)(iv)(A)(I) and 9(a)(iv)(A)(II) of this Agreement, the
right to vote shares in a transaction for which
stockholder approval is required under Sections 251
through 258 (mergers), 271 (sale of assets), or 275
(dissolution) of the Delaware General Corporation Law, as
the same may be amended from time to time, will not, in
themselves, be deemed, to constitute the right to vote
such shares "in a manner to influence or control the
management of the Employer's business". Whether other
voting rights may be granted to a beneficial owner without
enabling it to influence or control the management of the
Employer's business will depend on the totality of rights
granted in each case.
(B)When, as a result of a vote of stockholders for which
proxies are solicited by or on behalf of any person other
than the Employer in accordance with the SEC rules issued
under Section 14 of the Exchange Act, or which is exempt
from the SEC proxy rules by reason of Rule 14a-2 under the
Exchange Act, or as a result of an action by written
consent of stockholders without a meeting, the "incumbent
directors" cease to constitute at least a majority of the
authorized number of members of the Board. For purposes
of this provision, "incumbent directors" shall mean the
persons who were members of the Board on January 22, 1998,
and the persons who were elected or nominated as their
successors or pursuant to increases in the size of the
Board by a vote of at least an absolute majority (and not
just the majority of a quorum) of the Board members who
were then Board members (or successors or additional
members so elected or nominated).
(C)When the stockholders of the Employer approve a merger,
consolidation, or reorganization, whether or not the
Employer is the surviving entity in such transaction, (I)
other than a merger, consolidation, or reorganization that
would result in the voting securities of the Employer
outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity)
at least sixty-five percent (65%) of the combined voting
power of the voting securities of the Employer (or such
surviving entity) outstanding immediately after the
merger, consolidation, or reorganization; and (II) other
than a merger, consolidation or reorganization that would
result in the voting securities of the Employer
outstanding immediately prior thereto continuing to
represent less than sixty-five percent (65%) but more than
one percent (1%) of the combined voting power of the
voting securities of the Employer (or such surviving
entity) outstanding immediately after the merger,
consolidation or reorganization if the holder or holders
of the shares in the surviving entity that do not
represent the securities of the Employer outstanding prior
to the merger, consolidation or reorganization is or are
subject to contractual restrictions that would preclude
such holder or holders from voting such shares in a manner
to influence or control the management of the Employer's
(or such surviving entity's) business, provided that in
the event such contractual restrictions are removed, a
Change of Control will be deemed to have occurred on the
effective date of such removal or on such later date as
the Executive receives actual notice of such removal.
(D)When the stockholders of the Employer approve (I) the sale
or other disposition of all or substantially all of the
assets the Employer or (II) a complete liquidation or
dissolution of the Employer.
(E)When the Board adopts a resolution to the effect that any
person has acquired effective control of the business and
affairs of the Employer.
However, in no event shall a Change in Control be deemed to
have occurred, with respect to the Executive, if the
Executive is part of a purchasing group which consummates the
Change-in-Control transaction. The Executive shall be deemed
"part of a purchasing group" for purposes of the preceding
sentence if the Executive is an equity participant in the
purchasing Employer or group (except for: (x) passive
ownership of less than three percent (3%) of the stock of the
purchasing Employer; or (y) ownership of equity participation
in the purchasing Employer or group which is otherwise not
significant, as determined prior to the Change in Control by
an absolute majority of the non-employee Directors who were
Directors prior to the transaction, and who continue as
Directors following the transaction).
