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EXHIBIT 10.61
CHANGE OF CONTROL AGREEMENT
This Change of Control Agreement (the "Agreement") is made and entered
into effective as of January 20, 1997, by and between [Employee] (the
"Employee") and Target Therapeutics, Inc., 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 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 Hostile Takeover or 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 Hostile Takeover 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
Hostile Takeover or 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. On May 8, 1996, the Board, for the reasons set forth above,
authorized the Company to enter into Change of Control Agreements
("Agreements") with each of its executive corporate officers pursuant to the
specific terms set forth in the term sheet attached as Exhibit C to the minutes
for such meeting (the "Term Sheet"). The Company subsequently entered into
Agreements with each officer with terms consistent with the Term Sheet.
Thereafter, the Company amended the Agreements in December, 1996, in certain
respects. The Company now desires to amend and restate the Agreements so they
are consistent in all material respects with the specific terms set forth in
the Term Sheet.
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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 to any payments or benefits, other
than as provided by this Agreement, or as may otherwise be available in
accordance with 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 an
executive corporate officer of the Company, (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. Stock Options.
(a) Change of Control. 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 stock option granted for the Company's securities held
by the Employee shall become vested on the effective date of the transaction as
to one-half of the Shares that have not otherwise vested as of such date, and
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.
(b) Hostile Takeover. Subject to Sections 5 and
6 below, in the event of a Hostile Takeover and regardless of whether the
Employee's employment with the Company is terminated in connection with such
takeover, each stock option granted for the Company's securities held by the
Employee shall become immediately vested on the effective date of the Hostile
Takeover, and shall be exercisable in full in accordance with the provisions of
the Option Agreement and Plan pursuant to which such option was granted.
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
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plans and policies in effect on the date of termination or as otherwise
determined by the Board of Directors of the Company.
(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) monthly 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 monthly salary which the
Employee was receiving immediately prior to the Change of Control; (ii) monthly
severance payments during the Severance Period equal to 1/12th of the
Employee's "target bonus" (as defined below) for the fiscal year in which the
termination occurs for each month in which severance payments are made to the
Employee pursuant to subsection (i) above; (iii) the pro-rated amount of the
Employee's "target bonus" for the fiscal year in which the termination occurs,
calculated based on the number of months during such fiscal year in which the
Employee was employed by the Company (or a successor corporation) with such
payment being made on the termination date; (iv) continuation of benefits
through the end of the Severance Period substantially identical to those to
which the Employee was entitled immediately prior to the Change of Control; (v)
full and immediate vesting of each unvested stock option granted for the
Company's securities 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 (vi) outplacement services with a total
value not to exceed $15,000. The severance payments described in subsections
(i) and (ii) above shall be paid during the Severance Period in accordance with
the Company's standard payroll practices. For purposes of this Agreement, the
term "target bonus" shall mean that percentage of the Employee's base salary
that is prescribed by the Company under its Management Bonus Program as the
percentage of such base salary payable to the Company 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 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.
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4. Definition of Terms. The following terms referred to
in this Agreement shall have the following meanings:
(a) 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 fifteen percent (15%) 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; or
(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) 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, 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 September 3, 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).
(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) Hostile Takeover. "Hostile Takeover" shall
mean a transaction or series of transactions that results in any person
becoming the Beneficial Owner, directly or indirectly, of securities of the
Company representing fifty percent (50%) 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.
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(d) 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 30 miles from the Company's
current location.
5. Limitation on Payments. In the event that the
severance and other benefits provided for in this Agreement to the Employee
constitute "parachute payments" within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code") and, but for this
Section 5, would be subject to the excise tax imposed by Section 4999 of the
Code, the Company shall reduce the aggregate amount of such payments and
benefits such that the present value thereof (as determined under the Code and
the applicable regulations) is equal to 2.99 times the Employee's "base amount"
as defined in Section 280G(b)(3) of the Code.
6. Certain Business Combinations. In the event it is
determined by the Board, upon receipt of a written opinion of 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 stock options granted for the Company's securities
upon the effective date of a Change of Control or a Hostile Takeover, would
preclude accounting for any proposed business combination of the Company
involving a Change of Control or a Hostile Takeover 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
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.
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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, 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
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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) 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.
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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.
TARGET THERAPEUTICS, INC. EMPLOYEE
By:______________________________ ________________________________
Title:___________________________
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EXECUTIVE OFFICERS WHO ARE PARTIES
TO FORM CHANGE OF CONTROL AGREEMENT
DATED JANUARY 20, 1997
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