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Exhibit 10.31
CONNECTIVE THERAPEUTICS, INC.
1994 STOCK PLAN
1995 DIRECTORS' STOCK OPTION PLAN
DIRECTORS AND OFFICERS
CHANGE IN CONTROL AGREEMENT
This Agreement, effective March 28, 1996, between Connective Therapeutics, Inc.,
a Delaware corporation (the "Company") and the undersigned director or executive
officer optionee of the Company (the "Optionee"), pursuant to the Resolution of
the Company's Board of Directors of March 28, 1996 shall amend any and all prior
stock option and restricted stock purchase agreements between the parties with
respect to Optionee's stock options and/or restricted shares of Common Stock
subject to a right of repurchase in favor of the Company (the "Options") under
the Company's 1994 Stock Plan and/or the Company's 1995 Directors' Stock Option
Plan [the "Plan(s)," hereby incorporated by reference].
1. Definitions.
(a) Transaction. "Transaction" shall mean a merger of the Company and
another entity, acquisition of the Company by another entity, consolidation of
the Company or sale of the Company's assets, or any Change in Control.
(b) Change of Control. "Change of Control" shall mean the occurrence of
any of the following events:
(i) Ownership. 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
twenty percent (20%) or more of the total voting power represented by
the Company's then outstanding voting securities without the approval
of the Board of Directors of the Company.
(ii) Merger/Sale of Assets. 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) greater than
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, or the shareholders 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.
(iii) Change in Board Composition. 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 28, 1996 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).
(c) Cause. "Cause" shall mean (i) gross negligence or willful
misconduct 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
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Change in Control Agreement
the standing and reputation of the Company, in each case as determined in good
faith by the Board of Directors of the Company.
(d) Involuntary Termination. "Involuntary Termination" shall include
any termination as a director or executive officer by the Company other than for
Cause and the Optionee's voluntary termination, upon one (1) month prior written
notice to the Company, following (i) a material reduction in job
responsibilities inconsistent with the Optionee's position with the Company and
the Optionee's prior responsibilities, (ii) a reduction of more than 20% of the
Optionee's base compensation (other than in connection with a general decrease
in base salaries for most officers of the Company), or (iii) the Optionee's
refusal to relocate to a facility or location more than 50 miles from the
Company's current location.
2. Accelerated Vesting.
(a) Subject to Section 3 below, in the event of a Transaction that
results in a Change in Control, regardless of whether Optionee's
employment/directorship with the Company is terminated in connection with the
Change in Control, each of Optionee's Options shall become immediately fully
vested (and fully exercisable in accordance with the terms of the Plans) and the
Company's right of repurchase with respect to such Options shall expire on the
effective date of the Transaction.
(b) Subject to Section 3 below, in the event of Involuntary Termination
within one (1) year of a Transaction that does not result in a Change in
Control, which Involuntary Termination is a result of such Transaction, each of
Optionee's Options shall become immediately fully vested (and fully exercisable
in accordance with the terms of the Plans) and the Company's right of repurchase
with respect to such Options shall expire on the effective date of such
Involuntary Termination.
3. Limitation on Benefits.
If any payments or benefits received by Optionee pursuant to this
Agreement would result in the imposition of an excise tax pursuant to Section
4999 of the Internal Revenue Code of 1986 (the "Code") or any corresponding
provisions of state income tax law, the Optionee shall receive whichever of
clause (a) or clause (b) below results in the larger dollar amount of payments
or benefits (calculating such dollar amount in accordance with the principles of
Section 280G of the Code) after taking into account such excise taxes:
(a) that portion of the payments or benefits to be received by the
Optionee under this Agreement which, when aggregated with any other
payments or benefits treated as contingent on a change in the ownership
or effective control of the Company or the ownership of a substantial
portion of the assets of the Company under Section 280G(b)(2) of the
Code, does not exceed 2.99 times the Optionee's "Base Amount" as
defined in Section 280G of the Code, or
(b) 100% of the payments or benefits to which the Optionee is entitled
under this Agreement, in which event the Optionee shall be responsible
for the payment of all such excise taxes imposed with respect to such
payments or benefits.
If clause (a) produces the larger payment or benefit, then each payment or
benefit to which the Optionee would otherwise be entitled under this Agreement
shall be proportionately reduced to the extent necessary to comply with the
limitation of Section 280G of the Code.
4. 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 the Optionee's rights hereunder shall
inure to the benefit of, and be enforceable by, the Optionee's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees.
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Change in Control Agreement
5. Miscellaneous Provisions.
(a) No Duty to Mitigate. The Optionee shall not be required to mitigate
the amount of any benefits 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 benefits be reduced by any earnings that the
Optionee 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 Optionee and by an authorized officer of the Company (other
than the Optionee). 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) At-Will Employment. The Company and the Optionee acknowledge that
all employment by the Company is and shall continue to be at-will, as defined
under applicable law.
(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 provision of this Agreement is or becomes or
is deemed to be invalid, illegal, or unenforceable in any jurisdiction: such
provision will be deemed amended to conform to applicable laws of such
jurisdiction so as to be valid and enforceable, or, if it cannot be so amended
without materially altering the intention of the parties, it will be stricken;
the validity, legality and enforceability of such provision will not in any way
be affected or impaired thereby in any other jurisdiction; and the remainder of
this Agreement will remain in full force and effect.
(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 commercial contract 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 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 benefits pursuant to this Agreement will be
subject to withholding of any 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.
(k) 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 Optionee shall be
addressed to the Optionee at the home address which the Optionee 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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(l) 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, the Plan(s) and Optionee's
stock option and/or restricted stock purchase agreement(s) with the Company
constitute the entire agreement of the parties and supersede in their entirety
all prior undertakings and agreements of the Company and Optionee with respect
to the subject matter hereof.
(m) 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.
OPTIONEE CONNECTIVE THERAPEUTICS, INC.
By:
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Signature Xxxxxx X. Xxxxxxx
President & CEO
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Printed Name
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Social Security No.
