Amended and Restated Change of Control Agreement
EXHIBIT
10.2
Amended
and Restated Change of Control Agreement
Matritech,
Inc., a Delaware corporation with a principal place of business at 000 Xxxxxx
Xxxxxx, Xxxxxx, XX 00000 (the “Company”) and Xxxxxxxx Xxxxxxx, an individual
residing at 00 Xxxxxxx Xxxx, Xxxxxxxxx, XX 00000 (the “Executive”) hereby enter
into this Amended and Restated Change of Control Agreement (“Agreement”),
effective December 28, 2007. This Agreement replaces and supersedes
the original Change of Control Agreement between the parties dated March 16,
2006.
1. Purpose. The
Company considers it essential to the best interests of its stockholders to
xxxxxx the continuous and dedicated employment of its executive officers and
other key management personnel. The Compensation Committee of Board
of Directors of the Company recognizes, however, that competition for key
management personnel is keen and that, as a small publicly held corporation,
the
Company may face special challenges in ensuring the continued commitment of
its
management. To assist in ensuring that executive officers and other
key management personnel do not become distracted or consider leaving the employ
of the Company due to concerns about their employment security in the event
of a
possible Change in Control (as defined in Section 2 hereof), the Committee
has
determined that appropriate steps should be taken to reinforce and encourage
the
continued attention and dedication of selected members of the Company’s
management, including the Executive. Nothing in this Agreement shall
be construed as creating an express or implied contract of employment and,
except as otherwise agreed in writing between the Executive and the Company,
the
Executive shall not have any right to be retained in the employ of the
Company.
2. Definitions.
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(a)
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“Change
of Control Transaction” shall mean any transaction involving the
occurrence of (x) a change in the ownership of the Company (as defined
in
section 1.409A-3(i)(5)(v) of the final regulations under Internal
Revenue
Code section 409A or any similar provisions of any successor regulations),
or (y) a change in effective control of the Company (as defined in
section
1.409A-3(i)(5)(vi) of the final regulations under Internal Revenue
Code
section 409A or any similar provisions of any successor regulations)
or
(z) a change in the ownership of a substantial portion of the assets
of
the Company (as defined in section 1.409A-3(i)(5)(vii) of the final
regulations under Internal Revenue Code section 409A or any similar
provisions of any successor
regulations).
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(b)
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“Good
Reason” shall mean (i) any material diminution in (A) the Executive’s base
compensation, (B) the Executive’s authority, duties or responsibilities,
(C) the authority, duties or responsibilities of the supervisor to
whom
the Executive reports or (D) the budget over which the Executive
has
authority, (ii) a material change in geographic location of performance
of
the Executive’s duties, (iii) if the Executive is a part-time employee of
the Company, a material change in the number of days of service per
week
required of the Executive or (iv) any other action or
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inaction
which constitutes a material breach of the agreement under which
the Executive performs services for the Company (any one of the foregoing
being
a “Good Reason Condition”), and (x) the Executive has provided notice to the
Company of the Good Reason Condition within ninety (90) days of the initial
existence of the Good Reason Condition and (y) the Company has failed to
remedy the Good Reason Condition within thirty (30) days after receipt of
such
notice.
3. Entitlement
to Change of Control Severance Benefits. In the event the
Executive’s employment with the Company is terminated by the Company without
cause within three (3) months prior to or within twelve (12) months after a
Change of Control Transaction (as defined herein) or in the event the Executive
terminates his/her employment for Good Reason (as defined herein) within twelve
(12) months after a Change of Control Transaction, the Executive shall receive
compensation as set forth in Section 4 of this Agreement, provided,
however, that the Executive’s entitlement, if any, to Change of Control
Severance Benefits shall automatically cease in the event the Executive violates
any covenant or agreement contained in Section 6 hereof or in the Non-Disclosure
and Inventions Agreement previously executed by the Executive (or any substitute
or successor agreement of similar import which the Executive may hereafter
enter
into with the Company).
4. Change
of Control Severance Benefits. The compensation to be provided to
the Executive by the Company if the Executive becomes entitled to Change of
Control Severance Benefits under this Agreement shall include: (a) base salary
at the rate in effect as of the date of termination or, if the Executive has
terminated his/her employment for Good Reason due to a material diminution
in
his or her base salary, the annual rate of base salary in effect immediately
prior to such diminution, (b) annual bonus, in cash, at the target percentage
of
base salary in effect as of the date of termination or, if the Executive has
terminated his/her employment for Good Reason due to a material diminution
in
his or her base salary, the target percentage of base salary in effect
immediately prior to such diminution and (c) health insurance, life insurance
and disability insurance received by the Executive as of the date of termination
(collectively, the “Change of Control Severance Benefits”).
5.
Payment
of the Change of Control Severance Benefits. The Change of
Control Severance Benefits described in clauses (a), (b) and (c) of Section
4
above shall be provided to the Executive for a period of twelve (12) months
following termination of employment; provided that such number of months of
base
salary and target annual bonus shall determine the amount of payments to be
made
under clauses (a) and (b) of Section 4, but the timing of payments shall be
governed by this Section 5. Payments to be made by the Company to the
Executive pursuant to clauses (a) and (b) of Section 4 hereof shall initially
be
made on whatever the then customary payment schedule is for compensation of
executive employees of the Company (i.e. monthly, bi-weekly, or the
like). However, all payments due under clauses (a) and (b) of Section
4 of this Agreement but not yet made on or before March 12 of the calendar
year
of termination (if termination occurs prior to or on March 12 of the year)
shall
be accelerated and paid on March 12 of such year. If termination
occurs after March 12 of a calendar year, all payments due under clauses (a)
and
(b) of Section 4 of this Agreement shall be paid as promptly as feasible
following the date of termination, such payment to be made in a single lump
sum. Notwithstanding
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anything
to the contrary in this Agreement, to the extent the Executive is a “specified
employee” within the meaning of Internal Revenue Code Section 409A and the final
regulations thereunder, payment of “non-qualified deferred compensation” on
account of separation from service shall not be made before the date that is
six
months after the date of separation from service (or upon the earlier death
of
the Executive).
The
payments to be made pursuant to clauses (a) and (b) of Section 4 and the
benefits to be provided pursuant to clause (c) of Section 4 shall not be
considered employee compensation or be subject to tax withholding by the
Company. Rather they shall be made in exchange for the Executive’s
covenant not to compete, as set forth in Section 6(a) hereof. If, at
any time, the payments made pursuant to clauses (a) and (b) of Section 4 and
benefits provided pursuant to clause (c) of Section 4 are determined by any
state or federal taxing authority to be employee compensation, then the Company
agrees to pay its share of FICA and Medicare tax on such payments, plus any
interest or penalty that may be due as a result of the taxing authority’s
determination and that relates to the Company’s unpaid tax.
In
the
event the Executive secures a new employment position during the period of
the
Company’s continuing payment of compensation to him/her, the Executive shall
promptly notify the Company of the commencement of the new employment position
and shall inform the Company of the extent to which benefits to be provided
by
the Company under clause (c) above are duplicative of benefits then available
to
the Executive through his/her new employment position. To the extent
that the benefits to be provided by the Company hereunder are duplicative,
the
Company shall be entitled to cease provision of such
benefits. Nothing contained herein shall, however, be construed as
reducing the obligation of the Company to continue to make the payment due
under
clauses (a) and (b) of Section 4.
The
Company agrees that, if the Executive’s employment by the Company is terminated
and the Executive becomes entitled to receive any Change of Control Severance
Benefits hereunder, the Executive is not required to seek other employment
or to
attempt in any way to reduce any amounts payable to the Executive by the Company
pursuant to Sections 5 or 7 hereof. Further, except for the possible
abatement of fringe benefits described in clause (c) of Section 4 in the
circumstances set forth in the preceding paragraph, and the possible reduction
of payments as a result of the application of the provisions of Section 8
hereof, the amount of any payment provided for in this Agreement shall not
be
reduced by any compensation earned by the Executive as the result of employment
by another employer, by self-employment or consulting, by retirement benefits,
by disability benefits, by offset against any amount claimed to be owed by
the
Executive to the Company, or otherwise.
6. Non-competition;
Non-solicitation.
(a) Non-compete. The
Executive acknowledges that he/she has gained or will gain extensive and
valuable experience and knowledge in the business conducted by the Company
and
has had or will have extensive contacts with the customers, suppliers,
investors, employees and/or consultants of the Company. The Executive
recognizes that it is critical to the ongoing success of the Company that it
preserve its goodwill and protect its proprietary rights and its other important
business interests.
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Accordingly,
the Executive agrees that he/she will not, while employed by the Company and,
in
the event the Executive becomes entitled to receive Change of Control Severance
Benefits hereunder, for the duration of time covered by the payments under
clauses (a) and (b) of Section 4 of this Agreement (without regard to the
acceleration of payment provisions of Section 5), directly or indirectly, engage
in (whether as an officer, employee, consultant, director, proprietor, agent,
partner or otherwise) or have an ownership interest in, or participate in the
financing, operation, management or control of, any person, firm, corporation
or
business engaged in competition with the Company or any of its subsidiaries
or
affiliates in the business of development, manufacture, marketing, distribution
and licensing of cancer diagnostic technologies, products and
services. It is agreed that ownership of no more than 4.9% of the
outstanding voting stock of a corporation shall not constitute a violation
of
this provision. In recognition of the fact that the Company’s
business is global, the territory to which the restrictions contained in this
Section 6(a) shall apply shall be worldwide.
The
Company may, in its sole discretion, waive the foregoing restrictions or their
application in any particular circumstance and may condition any such waiver
upon receipt of assurances satisfactory to the Company, from the Executive
and/or others, that the Executive’s proposed activity will not adversely affect
the Company’s goodwill, proprietary rights or other important business
interests.
(b) Non-solicitation. The
Executive agrees that he/she will not, while employed by the Company and, in
the
event the Executive becomes entitled to receive Change of Control Severance
Benefits hereunder, for the duration of time covered by the payments under
clauses (a) and (b) of Section 4 of this Agreement (without regard to the
acceleration of payment provisions of Section 5), recruit or otherwise solicit,
entice and induce (i) any persons or companies who are or have recently been
customers, suppliers or business patronage of the Company or any of its
subsidiaries or affiliates if such solicitation is for the purpose of, or
results in, competition with the Company or any of its subsidiaries or
affiliates, or (ii) any employees of the Company or any of its subsidiaries
or
affiliates to terminate their employment with, or otherwise cease their
relationships with the Company or any of its subsidiaries or affiliates, in
order to engage in any activity for any business, firm, corporation or any
other
entity that conducts research with respect to, develops, produces or
manufactures any products or technologies or provides services similar to those
developed, produced, manufactured or provided by the Company.
7. Other
Change of Control Payments. In the event of a Change of Control
Transaction, the Executive shall receive, in a lump sum payment paid within
thirty (30) days of the Change of Control Transaction, (i) a pro-rated incentive
bonus based on the portion of the then current fiscal year completed at the
time
of the Change of Control Transaction compared to the Executive’s target annual
bonus for such year and (ii) all deferred compensation, if any, then maintained
in the Executive’s account, including without limitation all restricted stock
issued pursuant to the Amended and Restated Management Bonus Plan, whether
or
not otherwise vested, and all other restricted stock which by the terms of
the
individual restricted stock award agreement is to be vested upon an Acquisition
(as defined in such individual agreements). All
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payments
to be made by the Company under this Section 7 shall be net of any tax or other
amounts required to be withheld by the Company under applicable
law.
8. Application
of Section 280G of the Internal Revenue Code. If the payments and
benefits provided for in this Agreement, together with any other payments or
benefits which the Executive has the right to receive from the Company (or
any
of its subsidiaries or affiliates), would constitute an “excess parachute
payment” (as defined in Section 280G of the Internal Revenue Code) or would
otherwise be non-deductible by the Company as a result of application of any
similar statutory or regulatory provision, the Executive shall receive either
(a) all compensation and benefits provided for him or her under this Agreement
or (b) the maximum of compensation and benefits that will avoid an excess
parachute payment under Section 280G, whichever would provide the greater
after-tax benefit to the Executive. In the event that clause
(b) of this Section 8 provides the greater after-tax benefit, the Executive
shall be entitled to select the items to be abated, provided that if the
Executive fails to make such selection within forty-five (45) days after the
Company has given notice of the need for such abatement, the Company may
determine the method of such abatement in its sole discretion. If the
Executive is to receive benefits under clause (b) of this Section 8 and through
error or otherwise the Executive receives payments, together with other payments
the Executive has the right to receive from the Company (or its affiliates
or
subsidiaries) in excess of 2.99 times the Executive’s base amount, the Executive
agrees to immediately refund the overpayment to the Company, together with
interest thereon at the applicable Federal rate determined under Section 1274(d)
of the Code, compounded annually, or at such other rate as may be required
in
order that no such payments shall be nondeductible to the Company by reason
of
the operation of Section 280G or any similar statutory or regulatory
provision.
9. Notices. Any
notice, request, demand, and other communication provided for or permitted
by
this Agreement shall be sufficient if in writing and delivered in person or
sent
by registered or certified mail, postage prepaid, or by overnight delivery
service, to the Executive at the last address the Executive has filed in writing
with the Company, or to the Company at its main office, attention of the Board
of Directors.
10. Amendments. This
Agreement may be amended or modified only by a written instrument signed by
the
Executive and by a duly authorized representative of the Company.
11. Assignment;
Entire Agreement. Except for an assignment by the Company in
connection with a Change of Control Transaction in which the successor, if
other
than the Company, shall assume and agree to perform this Agreement in writing,
neither the Company nor the Executive may make any assignment of this Agreement
or any interest herein, by operation of law or otherwise, without the prior
written consent of the other party, and without such consent any attempted
transfer shall be null and void and of no effect. This Agreement
shall inure to the benefit of and be binding upon the Company and the Executive,
their respective successors, executors, administrators, heirs and permitted
assigns. In the event of the Executive’s death after he/she becomes
entitled to the Change of Control Severance Benefits or other Change of Control
Payments but prior to the completion by the Company of all payments due him
or
her under this Agreement, the Company shall continue such payments to the
Executive’s beneficiary designated in writing to the Company prior to his or her
death (or to his
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or
her
estate, if the Executive fails to make such designation). This
Agreement supersedes all prior Agreements, whether written or oral with respect
to the subject matter hereof. Notwithstanding the foregoing, the
Non-Disclosure and Inventions Agreement executed by the Executive (or any
substitute or successor agreement of similar import which the Executive may
hereafter enter into with the Company) and individual restricted stock award
agreements executed prior to or after this Agreement between the Executive
and
the Company shall remain in full force and effect in accordance with its
terms.
12. Obligations
of Successors. In addition to any obligations imposed by law upon
any successor to the Company, the Company will use commercially reasonable
efforts to require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
or assets of the Company to expressly assume and agree to perform this Agreement
in the same manner and to the same extent that the Company would be required
to
perform if no such succession had taken place.
13. Dispute
Resolution. In the event of any dispute between the Company and
the Executive as to any claim arising out of or relating to this Agreement
or
the breach thereof, the parties shall endeavor in good faith to settle the
dispute through mediation using a professional mediator mutually selected by
them. If the dispute has not been resolved within 90 days, either
party shall be free to pursue legal remedies, at law or in equity.
14. Severability. If
any term or provision of this Agreement is declared by a court of competent
jurisdiction to be invalid or unenforceable for any reason, this Agreement
shall
remain in full force and effect, and either (a) the invalid or unenforceable
provision shall be modified to the minimum extent necessary to make it valid
and
enforceable, or (b) if such a modification is not possible, this Agreement
shall
be interpreted as if such invalid or unenforceable provisions were not a part
hereof.
15. Governing
Law and Venue. This Agreement shall be construed and enforced in accordance
with the substantive law of the Commonwealth of Massachusetts, without giving
effect to its conflicts of law principles. The parties agree that any
litigation pertaining to this Agreement shall be maintained exclusively in
the
courts of general jurisdiction located in Massachusetts, and each party agrees
to submit to the jurisdiction and venue of any such
court. Notwithstanding the foregoing, the Company shall be entitled
to file litigation against the Executive in any jurisdiction where the Company
deems it necessary or advisable to do so in order to enforce the provisions
of
Section 6 hereof.
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IN
WITNESS WHEREOF, the parties have executed this Agreement effective as of
December 28, 2007.
Matritech,
Inc.
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By:
/s/ Xxxxx Xxxxxxx
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/s/
Xxxxxxxx Xxxxxxx
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Name:
Xxxxx Xxxxxxx
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Xxxxxxxx
Xxxxxxx
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Title:
President
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