CHANGE OF CONTROL AGREEMENT
Exhibit
10.2
This
CHANGE OF CONTROL AGREEMENT (this “Agreement”) is made and entered into as of
October 24, 2008, by and between IR BioSciences Holdings, Inc., a Delaware
corporation (the “Company”) and Xxx Xxxxxx (the “Executive”).
RECITALS
WHEREAS,
Executive is the Vice-President and Chief Scientific Officer of the
Company;
WHEREAS,
Board recognizes the possibility of a future Change of Control (as hereinafter
defined), which may alter the nature and structure of Company, and recognizes
that the uncertainty regarding the consequences of such an event adversely
affects Company’s ability to retain Executive;
WHEREAS,
in order to induce Executive to retain employment with the Company, the Board
and Company desire to provide benefits to Executive in the event Executive’s
employment is terminated under certain circumstances involving a Change of
Control, and the Executive desires to be so induced; and
WHEREAS,
Company and Executive desire to set forth in writing the terms and conditions of
their agreement with respect to Company’s provision of benefits to Executive in
the event Executive’s employment is terminated under certain circumstances
involving a Change of Control.
AGREEMENT
NOW,
THEREFORE, in consideration of the mutual covenants and obligations herein
contained, it is mutually agreed between the parties hereto as
follows:
1. Term. This
Agreement shall commence on the Execution Date of this Agreement and shall
continue until the earlier of the following: (a) prior to a Change of
Control Date, the date of termination of Executive’s employment with Company; or
(b) subsequent to a Change of Control Date the earlier of (x) the date of
termination of Executive’s employment with the Company absent Involuntary
Termination or (y) the one-year anniversary of a Change of Control
Date.
2. At-Will
Status. Notwithstanding any provision of this Agreement,
Executive is employed at-will , so that Executive, on the one
hand, or Company, on the other hand, may terminate Executive’s
employment at any time, with or without notice, for any or no
reason.
3. Definitions. As
used in this Agreement, the following terms shall have the meanings set forth
herein:
“Affiliate”
means any entity that is part of a controlled group of corporations or is under
common control with Company, as applicable, within the meaning of Sections
1563(a), 404(b) or 414(c) of the Code.
“Board”
means the Board of Directors of Company.
“Cause”
shall mean (i) a material act of dishonesty in connection with the Executive’s
responsibilities as an Executive of Company; (ii) the Executive’s conviction of,
or plea of nolo
contendere to, a felony or a crime involving moral turpitude, (iii) the
Executive’s gross misconduct which has a material adverse effect on the Company,
or (iv) the Executive’s consistent and willful failure to perform his or her
employment duties where such failure is not cured within thirty (30) days after
written notice to Executive by Company.
“Change
of Control” shall mean a Company Change in Control.
“Change
of Control Date” means the date on which a Change of Control
occurs. If any such change in control occurs on account of a series
of transactions, the “Change of Control Date” is the date of the last of such
transactions.
“Code”
means the Internal Revenue Code of 1986, and any amendments
thereto.
“Company
Acquiring Person” means that a Person, considered alone or as part of a “group”
within the meaning of Section 13(d)(3) of the Exchange Act, as amended, other
than an Initial Member or any Affiliate, is or becomes directly or indirectly
the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of
securities representing more than fifty percent (50%) of the Company’s then
outstanding securities entitled to vote generally in the election of the
Board.
“Company
Change in Control” means (i) a Person is or becomes a Company Acquiring Person;
(ii) holders of the securities of Company entitled to vote thereon approve any
agreement with a Person, (or, if such approval is not required by applicable law
and is not solicited by Company, the closing of such an agreement) that involves
the transfer of all or substantially all of Company’s assets on a consolidated
basis; (iii) holders of the securities of Company entitled to vote thereon
approve a transaction (or, if such approval is not required by applicable law
and is not solicited by the Company, the closing of such a transaction) pursuant
to which Company will undergo a merger, consolidation, statutory share exchange
or similar event with a Person, regardless of whether Company is intended to be
the surviving or resulting entity after the merger, consolidation, statutory
share exchange or similar event, other than a transaction that results in the
voting securities of Company carrying the right to vote in elections of persons
to the Board outstanding immediately prior to the closing of the transaction
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than 50% (fifty percent) of
Company’s voting securities carrying the right to vote in elections of persons
to Company’s Board, or voting securities of such surviving entity carrying the
right to vote in elections of persons to the Board of Directors or similar
authority of such surviving entity, outstanding immediately after the closing of
such transaction; (iv) the Continuing Directors cease for any reason to
constitute at least half of the number of members of the Board; (v) holders of
the securities of Company entitled to vote thereon approve a plan of complete
liquidation of Company or an agreement for the liquidation by the Company of all
or substantially all of Company’s assets (or, if such approval is not required
by applicable law and is not solicited by Company, the commencement of actions
constituting such a plan or the closing of such an agreement); or (vi) the Board
adopts a resolution to the effect that, in its judgment, as a consequence of any
one or more transactions or events or series of transactions or events, a change
in control of Company has effectively occurred. Notwithstanding the
foregoing, no event resulting from an initial public offering of securities of
Company shall constitute a Company Change in Control. The Board shall
be entitled to exercise its discretion in exercising its judgment and in the
adoption of such resolution, whether or not any such transaction(s) or event(s)
might be deemed, individually or collectively, to satisfy any of the criteria
set forth in subparagraphs (i) through (v) above.
“Continuing
Director” means any member of the Board (i) who was a member of the Board on the
date hereof, or (ii) whose nomination for or election to the Board was
recommended or approved by a majority of the Continuing Directors.
“Control”
(and “Controlling” and “Controlled”) shall mean possession, directly or
indirectly, of the power to direct or cause the direction of management policies
of such Entity through the ownership of voting securities or by
contract.
“Constructive
Termination” means Executive’s voluntary termination, upon thirty
(30) days’ prior written notice to the Company, following: (A)
Executive being designated to a divisional as opposed to corporate role with the
Company or Operating Company; (B) a material reduction or change in job duties,
responsibilities and requirements, including, without limitation, any material
increase in travel responsibilities, inconsistent with Executive’s position with
Company and Executive’s duties, responsibilities and requirements; (C) any
reduction of Executive’s base compensation or inactive pay (bonus); or (D)
Executive’s refusal to relocate to a facility or location more than fifty (50)
miles from Company’s current headquarters.
“Entity”
means any corporation, firm, unincorporated organization, association,
partnership, limited partnership, limited liability company, limited liability
partnership, business trust, joint stock company, joint venture organization,
entity or business.
“Exchange
Act” means the Securities Exchange Act of 1934, as amended.
“Involuntary
Termination” shall mean, at any time within that period which is one-year from
the Change of Control Date (including such date), the termination of the
employment of Executive (i) by Company without Cause or (ii) due to Constructive
Termination.
“Person”
means any human being, firm, corporation, partnership, or other
entity. “Person” also includes any human being, firm, corporation,
partnership, or other entity as defined in sections 13(d)(3) and 14(d)(2) of the
Exchange Act. The term “Person” does not include Company or any of
its Affiliates, and the term Person does not include any employee-benefit plan
maintained by the Company or any of its Affiliates, or any person or entity
organized, appointed, or established by the Company, or any of its Affiliates
for or pursuant to the terms of any such employee-benefit plan, unless the Board
determines that such an employee-benefit plan or such person or entity is a
“Person”.
4. Effect of
Termination. If Executive’s employment is terminated with
Company at any time for any reason, Executive shall be entitled to (i)
reimbursement for final expenses that Executive reasonably and necessarily
incurred on behalf of the Company prior to Executive’s termination of employment
(provided that Executive submits expense reports and supporting documentation as
required by Company practice or policy), (ii) unpaid compensation and benefits
and (iii) unused vacation, accrued through the date of Executive’s termination
of employment.
5. Effect of Involuntary
Termination. Only in the event of an Involuntary Termination,
Executive shall be entitled to the following, subject to Section 7 hereof:
a. continuation
of Executive’s base salary in effect on the date of such Involuntary Termination
for a period of eighteen (18) months from the date of termination (the “Payment
Period”), payable in accordance with the Operating Company’s prevailing
compensation practice, as such practice may be modified from time to
time;
b. Notwithstanding
any provision of any annual or long-term incentive plan to the contrary, the
Company shall pay to the Executive a lump sum amount, in cash, equal to the sum
of (i) any unpaid incentive compensation which has been allocated or
awarded to the Executive for a completed fiscal year or other measuring period
preceding the date of Involuntary Termination under any such plan and which, as
of the date of Involuntary Termination, is contingent only upon the continued
employment of the Executive to a subsequent date, and (ii) a pro rata
portion to the date of Involuntary Termination of the aggregate value of all
contingent incentive compensation awards to the Executive for all then
uncompleted periods under any such plan, calculated as to each such award by
multiplying the award that the Executive would have earned on the last day of
the performance award period, assuming the achievement, at the target level (or,
if greater, based on actual results to date of Involuntary Termination), of the
individual and corporate performance goals established with respect to such
award, by the fraction obtained by dividing the number of full months and any
fractional portion of a month during such performance award period through the
date of Involuntary Termination by the total number of months contained in such
performance award period;
c. should
Executive elect continued medical insurance coverage under the Consolidated
Omnibus Budget Reconciliation Act of 1985 (“COBRA”) and the Company is eligible
under COBRA requirements, payment of Executive’s COBRA premiums during the
Payment Period, subject to and in accordance with the provisions of
COBRA. If Company is not eligible for COBRA insurance coverage, then
Company will reimburse the monthly expense associated with private medical
insurance coverage during the Payment Period;
d. one-hundred
percent (100%) of the unvested portion of each outstanding stock option granted
to Executive shall be accelerated so that they become immediately exercisable
upon the date of Involuntary Termination and may be exercised during the Payment
Period; provided
that, such stock options that remain unexercised upon expiration of the
Payment Period shall then terminate and cease to be outstanding;
and
e. notwithstanding
the terms and conditions of any written stock option agreement between Executive
and Company, as amended (“Stock Option Agreements”), Executive shall have during
the Payment Period the ability to exercise any stock options that are vested as
of Executive’s date of termination pursuant to the terms the applicable Stock
Option Agreement or Change of Control provisions herein, but in no event shall
any stock option be exercisable at any time after the expiration date of such
stock option, and upon the expiration of the Payment Period, such stock options
shall terminate and cease to be outstanding.
6. Taxes. (a) If any
of the payments or benefits received or to be received by the Executive whether
pursuant to the terms of this Agreement or any other plan, arrangement or
agreement) (all such payments and benefits, excluding the Gross-Up Payment,
being hereinafter referred to as the "Total Payments") will be subject to the
Excise Tax, the Company shall pay to the Executive an additional amount (the
"Gross-Up Payment") such that the net amount retained by the Executive, after
deduction of any Excise Tax on the Total Payments and any federal, state and
local income and employment taxes and Excise Tax upon the Gross-Up Payment, and
after taking into account the phase out of itemized deductions and personal
exemptions attributable to the Gross-Up Payment, shall be equal to the Total
Payments.
(b) For
purposes of determining whether any of the Total Payments will be subject to the
Excise Tax and the amount of such Excise Tax, (i) all of the Total Payments
shall be treated as "parachute payments" (within the meaning of
section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the
“Code”) unless, in the opinion of tax counsel ("Tax Counsel") reasonably
acceptable to the Executive and selected by the accounting firm which was,
immediately prior to the Change in Control, the Company's independent auditor
(the "Auditor"), such payments or benefits (in whole or in part) do not
constitute parachute payments, including by reason of section 280G(b)(4)(A)
of the Code, (ii) all "excess parachute payments" within the meaning of
section 280G(b)(l) of the Code shall be treated as subject to the Excise
Tax unless, in the opinion of Tax Counsel, such excess parachute payments (in
whole or in part) represent reasonable compensation for services actually
rendered (within the meaning of section 280G(b)(4)(B) of the Code) in
excess of the amount allocable to such reasonable compensation, or are otherwise
not subject to the Excise Tax, and (iii) the value of any noncash benefits
or any deferred payment or benefit shall be determined by the Auditor 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 Executive
shall be deemed to pay federal income tax 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 Executive's residence on the date
Involuntary of Termination, net of the maximum reduction in federal income taxes
which could be obtained from deduction of such state and local
taxes.
(c) In
the event that the Excise Tax is finally determined to be less than the amount
taken into account hereunder in calculating the Gross-Up Payment, the Executive
shall repay to the Company, within five (5) business days following the
time that the amount of such reduction in the Excise Tax is finally determined,
the portion of the Gross-Up Payment attributable to such reduction (plus that
portion of the Gross-Up Payment attributable to the Excise Tax and federal,
state and local income and employment taxes imposed on the Gross-Up Payment
being repaid by the Executive), to the extent that such repayment results in a
reduction in the Excise Tax and a dollar-for-dollar reduction in the Executive's
taxable income and wages for purposes of federal, state and local income and
employment taxes, plus interest on the amount of such repayment at the rate
provided in section 1274(b)(2)(B) of the Code. In the event that the Excise
Tax is determined to exceed the amount taken into account hereunder in
calculating the Gross-Up Payment (including by reason of any payment the
existence or amount of which cannot be determined at the time of the Gross-Up
Payment), the Company shall make an additional Gross-Up Payment in respect of
such excess (plus any interest, penalties or additions payable by the Executive
with respect to such excess) within five (5) business days following the
time that the amount of such excess is finally determined. The Executive and the
Company shall each reasonably cooperate with the other in connection with any
administrative or judicial proceedings concerning the existence or amount of
liability for Excise Tax with respect to the Total Payments.
(d) The
payments provided in subsections (a) and (b) of this Section 6 shall
be made not later than the fifth day following the date of Involuntary
Termination provided, however, that if the amounts of such payments cannot be
finally determined on or before such day, the Company shall pay to the Executive
on such day an estimate, as determined in good faith by the Executive or, in the
case of payments referenced above of the minimum amount of such payments to
which the Executive is clearly entitled and shall pay the remainder of such
payments (together with interest on the unpaid remainder (or on all such
payments to the extent the Company fails to make such payments when due) at the
rate provided in section 1274(b)(2)(B) of the Code) as soon as the amount
thereof can be determined but in no event later than the thirtieth (30th) day
after the date of Involuntary Termination. At the time that payments
are made under this Agreement, the Company shall provide the Executive with a
written statement setting forth the manner in which such payments were
calculated and the basis for such calculations including, without limitation,
any opinions or other advice the Company has received from Tax Counsel, the
Auditor or other advisors or consultants (and any such opinions or advice which
are in writing shall be attached to the statement).
(e) The
Company also shall pay to the Executive legal fees and expenses up to ten
thousand dollars ($10,000) incurred by the Executive in disputing in good faith
any issue hereunder relating to the termination of the Executive's employment,
in seeking in good faith to obtain or enforce any benefit or right provided by
this Agreement or in connection with any tax audit or proceeding to the extent
attributable to the application of section 4999 of the Code to any payment
or benefit provided hereunder. Such payments shall be made within five
(5) business days after delivery of the Executive's written requests for
payment accompanied with such evidence of fees and expenses incurred as the
Company reasonably may require.
7. Conditions of
Benefits. Executive shall receive the benefits set forth in Section 5 and
6 hereof only if Executive (i) executes a separation agreement, which includes a
general release, in a form and of a scope acceptable to Company in its
discretion; (ii) presents satisfactory evidence to Company that he has returned
all Company property, confidential information and documentation to Company;
(iii) complies with, and does not violate, any provision of any confidentiality
and/or non-solicitation agreements that Executive may have entered into
with Company (a “Confidentiality Agreement”); (iv) provides the
Operating Company and Company with a signed, written resignation of Executive’s
status as an employee, officer and/or director of Company, as applicable; and
(v) shall not be entitled to receive any compensation, benefits, or other
payments from Company, except as set forth in this Agreement, as a result of or
in connection with the termination of Executive’s employment at any time and for
any reason. In the event Company reasonably believes that Executive
has breached any provision of any Confidentiality Agreement, Company shall
immediately terminate all benefits and Executive shall no longer be entitled to
such benefits and payments under this Agreement and further shall be required to
reimburse all payments previously made by Company pursuant to this
Agreement. Such termination of benefits shall be in addition to any
and all legal and equitable remedies available to Company, including injunctive
relief.
8. Governing
Law/Interpretation. Executive and Company agree that this Agreement and
any claims arising out of or in connection with this Agreement shall be governed
by and construed in accordance with the laws of the State in which Executive
substantially performs his/her employment responsibilities or, if none, the
State of Arizona and shall in all respects be interpreted, enforced and governed
under the internal and domestic laws of such State, without giving effect to the
principles of conflicts of laws thereof.
9. Entire
Agreement. This Agreement embodies the entire agreement among
the parties with respect to benefits payable upon an Involuntary Termination and
there have been and are no agreements, representations or warranties, oral or
written among the parties regarding the subject matter of this Agreement other
than those set forth or provided for in this Agreement.
10. Assignment. Executive
acknowledges that the services to be rendered hereunder are unique and personal
in nature. Accordingly, Executive may not assign any rights or
delegate any duties or obligations under this Agreement. The rights
and obligations of Company under this Agreement shall automatically be assigned
to the successors and assigns of Company (including, but not limited to, any
successor in the event of a Change of Control, as well as any other entity that
Controls, is Controlled by, or is under common Control with, any such
successor), and shall inure to the benefit of, and be binding upon, such
successors and assigns, as well as Executive’s heirs and
representatives.
11. Notices. All
notices required hereunder shall be in writing and shall be delivered in person,
by facsimile or by certified or registered mail, return receipt requested, and
shall be effective upon sending if by facsimile, or upon receipt if by personal
delivery or certified or registered mail. All notices shall be
addressed as follows or to such other address as the parties may later provide
in writing:
if to
Company:
IR
BioSciences Holdings, Inc.
0000 X.
Xxx Xx Xxxxxxx, Xxxxx 000
Xxxxxxxxxx,
Xxxxxxx 00000
Attn:
Xxxx Xxxxxxxx, CFO
and, if to Executive: at the home
address specified on the signature page of this Agreement.
12. Severability/Reformation. If
any one or more of the provisions (or any part thereof) of this Agreement shall
be held invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions (or any part thereof) shall not
in any way be affected or impaired thereby, and this Agreement shall be
construed and reformed to the maximum extent permitted by law. The
language of all parts of this Agreement shall in all cases be construed as a
whole according to its fair meaning and not strictly for or against either of
the parties.
13. Modification and
Waiver. This Agreement and the rights, remedies and obligations contained
in any provision hereof, may be modified or waived only in accordance with this
Section 13. No waiver by either
party of any breach by the other or any provision hereof shall be deemed to be a
waiver of any later or other breach thereof or as a waiver of any other
provision of this Agreement. This Agreement and its terms may not be
waived, changed, discharged or terminated orally or by any course of dealing
between the parties, but only by a written instrument signed by the party
against whom any waiver, change, discharge or termination is sought.
14. Arbitration. Any
dispute, controversy or claim arising out of or in connection with this
Agreement shall be exclusively subject to arbitration before the American
Arbitration Association (“AAA”). Such arbitration shall take place in
the State as determined under Section 8 hereof,
before a single arbitrator in accordance with AAA’s then current National Rules
for the Resolution of Employment Disputes. Judgment upon any
arbitration award may be entered in any court of competent
jurisdiction. All parties shall cooperate in the process of
arbitration for the purpose of expediting discovery and completing the
arbitration proceedings. Nothing contained in this Section or
elsewhere in this Agreement shall in any way deprive the Company or Operating
Company of its right to obtain injunctive relief in a court of competent
jurisdiction for purposes of enforcing any confidentiality agreement entered
into between the Company or Operating Company and Executive.
15. Survival of Obligations and
Rights. The obligations and rights contained in Sections 4 through 8, inclusive, and 10 hereof shall survive the termination of Executive’s
employment due to an Involuntary Termination. Moreover, Section 14 hereof shall survive the termination of Executive’s
employment for any reason.
16. Counterparts. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed to be an original, but all of which together shall constitute one and the
same instrument.
17. Section
Headings. The descriptive section headings herein have been
inserted for convenience only and shall not be deemed to define, limit, or
otherwise affect the construction of any provision hereof.
[REMAINDER
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IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
and year first written above.
IR
BIOSCIENCES HOLDINGS, INC.
By:
__________________________
Name:
Title:
_________________________
EXECUTIVE
______________________________
Xxx
Xxxxxx
Address
for Notice to Executive:
0000 X.
XxXxxxxx Xxxxx
Xxxxxxxx
Xxxxxx, XX 00000-0000
