Exhibit 10.14
COLEY PHARMACEUTICAL GROUP,
INC.
Change of Control
Agreement
This Change of Control Agreement,
effective as of
is entered into by and between Coley Pharmaceutical Group, Inc., a
Delaware corporation (the “ Company ”), with its
principal offices located at 20 William Street, Suite 115,
Wellesley, Massachusetts 02481, and
(the “ Executive ”).
The Executive is employed by the
Company and the Company and the Executive desire to arrange for
certain provisions applicable in the event of termination of the
Executive’s employment in the circumstances provided herein.
The Executive is a skilled and dedicated employee who has important
management responsibilities and talents which benefit the Company.
The Company believes that its best interests will be served if the
Executive is encouraged to remain with the Company. The Company has
determined that the Executive’s ability to perform the
Executive’s responsibilities and utilize the
Executive’s talents for the benefit of the Company, and the
Company’s ability to retain the Executive as an employee,
will be significantly enhanced if the Executive is provided with
fair and reasonable protection from the risks of a change in
ownership or control of Company. Accordingly, the Company and the
Executive agree as follows:
1. Change of Control Payments;
Benefits .
1.1 Termination Events
Resulting in Change of Control Payments .
(a) Following a “Change of
Control” (as hereinafter defined) of the Company, in the
event of the termination of the Executive’s employment by the
Company, or its successor, without cause, within twenty-four (24)
months after such Change of Control, then the Company shall make
Change of Control payments to the Executive in the amount set forth
in, and payable in accordance with, Section 1.2 (a).
(b) In the event of the termination
of the Executive’s employment by the Executive for
“Good Reason” (as defined below) within twenty-four
(24) months after a “Change of Control” (as defined
below), then the Company shall make Change of Control payments to
the Executive in the amount set forth in, and payable in accordance
with, Section 1.2 (a).
(i) For purposes of this Agreement,
a “ Change of Control ” shall mean the
occurrence of any one of the following:
A. the acquisition by any
“person” (as such term is defined in Section 3(a)(9) of
the Securities Exchange Act of 1934), other than the Company or its
affiliates, from any party of an amount of the capital stock of the
Company, so that such person holds or controls 50% or more of the
Company’s capital stock; or
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B. a merger or similar combination
between the Company and another entity after which 50% or more of
the voting stock of the surviving corporation is held by persons
other than the Company or its affiliates; or
C. a merger or similar combination
(other than with the Company) in which the Company is not the
surviving corporation; or
D. an acquisition, merger or similar
combination or a divestiture of a substantial portion of the
Company’s business after which the Executive’s role is
not substantially the same as such role prior to the
transaction;
E. the sale of all or substantially
all of the Company’s assets or business; or
(ii) For purposes of this Agreement,
“ Good Reason ” shall mean the following
involuntary circumstances:
A. assignment to the Executive of
any duties inconsistent in any material respect with the
Executive’s position (including titles and reporting
requirements), authority, duties or responsibilities as
contemplated by the job description of the Executive’s
position, or any other action by the Company or its successor,
which results in a diminution in such position, authority, duties
or responsibilities, other than an isolated, insubstantial and
inadvertent action not taken in bad faith and which is remedied by
the Company promptly after receipt of written notice thereof given
by the Executive;
B. a reduction in the
Executive’s annual base salary (or an adverse change in the
form or timing of the payment thereof), other than an isolated,
insubstantial and inadvertent action not taken in bad faith and
which is remedied by the Company promptly after receipt of written
notice thereof given by the Executive; or the elimination of or
reduction of any benefit under any bonus, incentive or other
employee benefit plan in effect on the day immediately preceding
the Change in Control, without an economically equivalent
replacement, if Executive was a participant or member of such plan
on the day immediately preceding the Change in Control;
C. the Company’s or its
successor’s requiring the Executive (i) to be based at any
office or location more than 25 miles away from the office or
location where Executive was performing services immediately prior
to the Change in Control, or (ii) to relocate his personal
residence, or (iii) the Company’s requiring the Executive to
travel on Company business to a substantially greater extent than
required immediately prior to the Change in Control.
For purposes of this Section 1.1
(b)(ii), any good faith determination of “Good Reason”
made by the Executive shall be conclusive.
(c) No Change of Control payments
shall be payable in the event that the Executive’s employment
is terminated (i) by the Executive, except in accordance with
Section 1.1(b) above, or (ii) by the Company in the event of (x)
the Executive’s
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breach of any material duty or
obligation to the Company, or (y) intentional or grossly negligent
conduct that is materially injurious to the Company (as reasonably
determined by the Company’s Board of Directors), or (z) the
willful failure of the Executive to follow the reasonable
directions of the Company’s executive officers or Board of
Directors.
(d) Anything in this Agreement to
the contrary notwithstanding, if a Change of Control occurs and if
the Executive’s employment is terminated prior to the date on
which the Change of Control occurs, and if it is reasonably
demonstrated by the Executive that such termination of employment
(i) was at the request of a third party who has taken steps
reasonably calculated to effect a Change of Control or (ii)
otherwise arose in connection with or anticipation of a Change of
Control, then for all purposes of this Agreement change of Control
payments shall be payable.
1.2 Amount and Payment of
Change of Control Payments .
(a) The aggregate Change of Control
payment referred to in Sections 1.1(a) and 1.1(b) above shall be
equal to the sum of (1) one-twelfth (1/12 th ) of the Executive’s annual
base salary at the time of such termination multiplied by twelve
(12) months, plus (2) an amount equal to one-twelfth (1/12
th
) of the
Executive’s maximum annual incentive bonus multiplied by
twelve (12) months, if any, that would next be payable to him or
her and would otherwise be due to the Executive if such termination
had not occurred, such sum to be payable in one lump sum not later
than thirty (30) days after date of termination of the
Executive’s employment by the Company (the “
Termination Date ”).
(b) The Executive shall not be
required to mitigate the amount of any payment provided for in this
Section 1.2 by seeking other employment or otherwise. The amount of
any payment or benefit provided for in this Section 1.2 shall not
be reduced as the result of employment by the Executive with
another employer after the Termination Date, or
otherwise.
(c) Until the anniversary of the
Termination Date, the Executive shall be entitled to participate in
the Company’s medical, dental, and life insurance plans, at
the highest level provided to the Executive during the period
beginning immediately prior to the Change in Control and ending on
the Termination Date, and at no greater cost than the cost the
Executive was paying immediately prior to Change in Control;
provided , however , that if the Executive becomes
employed by a new employer, the Executive’s coverage under
the applicable Coley plans shall continue, but the
Executive’s coverage thereunder shall be secondary to (i.e.,
reduced by) any benefits provided under like plans of such new
employer.
(d) Payment of Accrued But
Unpaid Amounts . Within ten (10) business days after the
Termination Date, Coley shall pay Executive:
(i) earned but unpaid compensation,
including, without limitation, any unpaid portion of the
Executive’s Bonus accrued with respect to the full calendar
year ended prior to the Termination Date; and
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(ii) all compensation previously
deferred by the Executive on a non-qualified basis but not yet
paid.
(e) Retiree-Medical
Benefits . If the Executive is, or would become fifty-five
(55) or older, or the Executive’s age and service equal
fifty-five (55) and Executive has at least two (2) years of service
with the Company within two (2) years of Change in Control, the
Executive is eligible for retiree medical benefits (as such are
determined immediately prior to Change in Control). The Executive
is eligible to commence receiving such retiree medical benefits
based on the terms and conditions of the applicable plans in effect
immediately prior to the Change in Control.
1.3 Option Vesting .
If the Executive’s employment with the Company is terminated
pursuant to Sections 1.1(a) or 1.1(b), 100% of any options to
purchase shares of Common Stock of the Company then held by the
Executive, which options are then subject to vesting, shall,
notwithstanding any contrary provision in the option agreement or
stock option plan pursuant to which such options had been granted,
be accelerated and become fully vested and exercisable on the date
immediately preceding the effective Termination Date. All other
terms of the Executive’s options shall remain in full force
and effect.
1.4 Lapsing Purchase
Right . If the Executive’s employment with the
Company is terminated pursuant to Sections 1.1(a) or 1.1(b) and, on
the date immediately preceding the effective date of such
termination, the Executive then holds (i) any shares of Common
Stock of the Company received upon exercise of stock options
granted to the Executive, which shares are subject to a
“Lapsing Purchase Right,” and/or (ii) any outstanding
options to purchase shares of Common Stock of the Company, which,
upon exercise thereof, would result in the issuance to the
Executive of shares of Common Stock subject to a “Lapsing
Purchase Right,” then, notwithstanding any contrary provision
in the relevant option agreement or stock option plan pursuant to
which such options had been granted, such Lapsing Purchase Right
shall expire in its entirety with respect to shares of Common Stock
then outstanding and with respect to shares of Common Stock
issuable upon exercise of outstanding stock options, on the date
immediately preceding the Termination Date and all of such shares
of Common Stock shall become transferable free of restriction (upon
issuance, in the case of the exercise of outstanding stock
options), subject to the applicable provisions of federal and state
securities laws. All other terms of the Executive’s options
shall remain in full force and effect.
1.5 Restricted Stock .
If the Executive’s employment with the Company is terminated
pursuant to Sections 1.1(a) or 1.1(b) and, on the date immediately
preceding the Date of Termination, the Executive then holds shares
of Common Stock of the Company that are subject to restrictions on
transfer (“Restricted Stock”), which shares were issued
to the Executive in a transaction other than pursuant to the
exercise of a stock option, then, notwithstanding any contrary
provision in the relevant stock purchase agreement or other
instrument pursuant to which the Executive acquired such shares of
Restricted Stock, such restrictions shall expire in their entirety
on the date immediately preceding the Termination Date and all of
such shares of Common Stock shall become transferable free of
restriction, subject to the applicable provisions of federal and
state securities laws. All other terms of any existing stock
purchase or similar document shall remain in full force and
effect.
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2. Gross-Up .
2.1 Gross-Up Payment .
In the event it shall be determined that any payment, benefit or
distribution (or combination thereof) by the Company, or one or
more trusts established by the Company for the benefit of its
employees, to or for the benefit of the Executive (whether paid or
payable or distributed or distributable pursuant to the terms of
this Agreement, or otherwise), including any Change of Control
Payment paid in accordance with Sections 1.1(a) or 1.1(b) (a
“ Payment ”) would be subject to the excise tax
imposed by Section 4999 of the Code or any interest or penalties
are incurred by the Executive with respect to such excise tax (such
excise tax, together with any such interest and penalties,
hereinafter collectively referred to as the “Excise
Tax”), the Executive shall be entitled to receive an
additional payment (a “ Gross-Up Payment ”) in
an amount such that after payment by Executive of all taxes
(including any interest or penalties imposed with respect to such
taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and the Excise
Tax imposed upon the Gross-Up Payment, the Executive retains an
amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payment(s).
2.2 Determination of Gross-Up
Payments – Accounting Firm . Subject to the
provisions of Section 2.3 hereof, all determinations required to be
made under this Section 2, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determination, shall
be made by a nationally recognized certified public accounting firm
as may be designated by the Executive (the “ Accounting
Firm ”) which shall provide detailed supporting
calculations both to the Company and the Executive within fifteen
(15) business days of the receipt of written notice from the
Executive that there has been a Payment, or such earlier time as is
requested by the Company. In the event that the Accounting Firm is
serving as accountant or auditor for an individual, entity or group
effecting the change in ownership or effective control (within the
meaning of Section 280G of the Code), the Executive shall appoint
another nationally recognized accounting firm to make the
determinations required hereunder (which accounting firm shall then
be referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by the
Company. Any Gross-Up Payment, as determined pursuant to this
Section 2, shall be paid by the Company to the Executive within
five (5) business days after the receipt of the Accounting
Firm’s determination. If the Accounting Firm determines that
no Excise Tax is payable by the Executive, it shall so indicate to
the Executive in writing. Any determination by the Accounting Firm
shall be binding upon the Company and the Executive. As a result of
the uncertainty in the application of Section 4999 of the Code at
the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not
have been made by Company should have been made (each an “
Underpayment ”), consistent with the calculations
required to be made hereunder. In the event that the Company
exhausts its remedies pursuant to Section 2.3 hereof and the
Executive thereafter is required to make a payment of any Excise
Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such
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Underpayment shall be promptly paid
by the Company to or for the benefit of the Executive.
2.3 Claim Effecting
Gross-Up . The Executive shall notify the Company in
writing of any written claim by the Internal Revenue Service that,
if successful, would require the payment by the Company of the
Gross-Up Payment. Such notification shall be given as soon as
practicable, but no later than ten (10) business days after the
Executive is informed in writing of such claim and shall apprise
the Company of the nature of such claim and the date on which such
claim is requested to be paid (but the Executive’s failure to
comply with this notice obligation shall not eliminate his or her
rights under this Section 2 except to the extent the
Company’s defense against the imposition of the Excise Tax is
actually prejudiced by any such failure). The Executive shall not
pay such claim prior to the expiration of the thirty (30) day
period following the date on which he or she gives such notice to
the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the Company
notifies the Executive in writing prior to the expiration of such
period that it desires to contest such claim, the Executive
shall:
(a) Give the Company any information
reasonably requested by the Company relating to such
claim;
(b) take such action in connection
with contesting such claim as the Company shall reasonably request
in writing, from time to time, including, without limitation,
accepting legal representation with respect to such claim by an
attorney reasonably selected by the Company;
(c) cooperate with the Company in
good faith in order to effectively contest such claim;
and
(d) permit the Company to
participate in any proceedings relating to such claim;
provided , however , that the Company shall bear
and pay directly all costs and expenses (including additional
interest and penalties) incurred in connection with such contest
and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a result of
such representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 2.3 hereof,
the Company shall control all proceedings taken in connection with
such contest and, at its sole option, may pursue or forego any and
all administrative appeals, proceedings, hearings and conferences
with the taxing authority in respect of such claim and may, at its
sole option, either direct the Executive to pay the tax claimed and
sue for a refund, or contest the claim in any permissible manner,
and the Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided , however , that if
the Company directs the Executive to pay such claim and sue for a
refund, the Company shall advance the amount of such payment to the
Executive, on an interest-free basis, and shall indemnify and hold
the Executive harmless, on an after-tax basis,
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from any Excise Tax or income tax (including
interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to
such advance; and provided , further , that if the
Executive is required to extend the statute of limitations to
enable the Company to contest such claim, the Executive may limit
this extension solely to such contested amount. The Company’s
control of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the case may
be, any other issue raised by the Internal Revenue Service or any
other taxing authority.
If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 2.3, Executive
receives any refund with respect to such claim, Executive shall
(subject to Company’s complying with the requirements of
Section 2(c)) promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 2.3, a
determination is made that the Executive shall not be entitled to
any refund with respect to such claim and the Company does not
notify the Executive in writing of its intent to contest such
denial of refund prior to the expiration of thirty (30) days after
such determination, then such advance shall be forgiven.
3. Confidentiality and Noncompetition
.
3.1 Confidentiality and
Noncompetion Agreements . The Executive confirms that as of
the date hereof he or she has executed, or agrees that he or she
will execute, the Company’s standard Confidentiality and
Noncompetition Agreement pursuant to which the Executive has (i)
agreed to refrain from disclosing the Company’s confidential
information, and (ii) covenanted not to compete with the Company as
described in such standard Confidentiality and Noncompetition
Agreement.
3.2 Noncompetition Payments -
Enforcement of Noncompetition Covenant .
(a) Subject to the provisions of
Section 2.2, following the termination of the Executive’s
employment with the Company, the Company may enforce its rights
with respect to the Executive’s noncompetition covenant set
forth in the Company’s standard Confidentiality and
Noncompetition Agreement only if:
(i) in the event that the employment
of the Executive by the Company is terminated and the Executive is
entitled to Change of Control payments under the terms of Section
1.1 or any other agreement or understanding between the parties,
the Company makes a Change of Control payment to the Executive
hereunder and continues to provide benefits to the Executive for a
total of six (6) months after the Termination Date as set forth
herein; or
(ii) in the event that the
employment of the Executive by the Company is terminated and the
Executive is not entitled to Change of Control payments under the
terms of Section 1.1 or any other agreement o
