Exhibit 10.2

CHANGE OF CONTROL AGREEMENT

This Change of Control Agreement (the “Agreement”) is made and entered into as
of May 31, 2018, by and between Aradigm Corporation (the “Company”), and
Dr. Juergen Froehlich (the “Executive”).

WHEREAS, the Company’s Board of Directors (the “Board”) has determined that it
would be in the best interests of the Company and its stockholders to provide
for certain severance benefits in the event the Executive’s employment is
terminated in connection with a Change of Control (as defined below) in order to
align further the interests of the Executive with those of the stockholders of
the Company;

NOW, THEREFORE, in consideration of the Executive’s continued employment with
the Company, the Company and the Executive hereby agree as follows:

 

1. DEFINITIONS. The following terms in this Agreement shall have the meanings
set forth below:

1.1    “Change of Control” shall mean any one or more of the following events:

(a)    The consummation of a merger, consolidation or similar transaction
involving (directly or indirectly) the Company and, immediately after the
consummation of such merger, consolidation or similar transaction, the
shareholders of the Company immediately prior thereto do not own, directly or
indirectly, either (i) outstanding voting securities representing more than
sixty percent (60%) of the combined outstanding voting power of the surviving
entity in such merger, consolidation or similar transaction or (ii) more than
sixty percent (60%) of the combined outstanding voting power of the parent of
the surviving entity in such merger, consolidation or similar transaction, in
each case in substantially the same proportions as their ownership of the
outstanding voting securities of the Company immediately prior to such
transaction.

(b)    The consummation of a sale, lease, exclusive license or other disposition
of 90% or more of the consolidated assets of the Company and its subsidiaries
within a single 12 month period, other than a sale, lease, license or other
disposition of all or substantially all of the consolidated assets of the
Company and its subsidiaries to an entity, more than sixty percent (60%) of the
combined voting power of the voting securities of which are owned by the
shareholders of the Company in substantially the same proportions as their
ownership of the outstanding voting securities of the Company prior to such
sale, lease, license or other disposition. The Board shall have the sole
discretion to determine whether the event described in this Section 1.1(b) has
occurred.

(c)    Individuals who, on the date this Agreement is approved by the Board, are
members of the Board (the “Incumbent Board”) cease for any reason to constitute
at least a majority of the members of the Board; provided, however, that if the
appointment or election (or nomination for election) of any new Board member was
approved or recommended by a majority vote of the members of the Incumbent Board
then still in office, such new member shall, for purposes of this Agreement, be
considered a member of the Incumbent Board.

 

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The term Change of Control shall not include a sale of assets, merger or other
transaction effected exclusively for the purpose of changing the domicile of the
Company.                

1.2    “Cause” shall mean any one or more of the following: (i) the Executive’s
commission of any felony or any crime involving fraud, dishonesty or moral
turpitude under the laws of the United States or any state thereof; (ii) the
Executive’s attempted commission of, or participation in, a fraud or act of
dishonesty against the Company; (iii) the Executive’s intentional, material
violation of any material contract or agreement between the Executive and the
Company or any statutory duty owed to the Company; (iv) the Executive’s
unauthorized use or disclosure of the Company’s confidential information or
trade secrets; or (v) the Executive’s gross misconduct. The determination that a
termination is for Cause shall be made by the Company in its sole discretion.

1.3    “Constructive Termination” shall mean the resignation of the Executive
due to the occurrence of any of the following without the Executive’s consent:

(a)    a material reduction in the Executive’s duties, title, reporting
relationships, or responsibilities relative to the Executive’s duties, title,
reporting relationships, or responsibilities in effect immediately prior to the
effective date of the Change of Control; provided, however, that a change in the
Executive’s title or reporting relationships shall not in and of themselves (or
collectively) constitute a Constructive Termination;

(b)    a material reduction by the Company in the Executive’s annual base salary
or benefits, including a reduction in Severance Benefits under the Executive
Severance Plans, as in effect on the effective date of the Change of Control or
as increased thereafter; provided, however, that Constructive Termination shall
not be deemed to have occurred in the event of a reduction in the Executive’s
annual base salary or benefits that is pursuant to a salary reduction program or
change in Company benefit programs that affects substantially all of the
executive officers or employees of the Company and that does not adversely
affect the Executive to a greater extent than other similarly situated
employees; or

(c)    a relocation of the Executive’s primary business office to a location
more than fifty (50) miles from the location at which the Executive performed
the Executive’s duties as of the effective date of the Change of Control, except
for required travel by the Executive with respect to the Company’s business to
an extent substantially consistent with the Executive’s business travel
obligations prior to the effective date of the Change of Control.

1.4    “Covered Termination” shall mean either that an Executive’s employment
(a) is terminated without Cause, or (b) terminates as a result of a Constructive
Termination, in each case, resulting in a “separation from service” with the
Company within the meaning of Treasury Regulation Section 1.409A-1(h) (without
regard to any permissible alternative definition of “termination of employment”
thereunder).

 

2. CHANGE OF CONTROL SEVERANCE BENEFITS.

2.1    Severance Benefits. If within eighteen (18) months after the effective
date of a Change of Control, the Executive: (a) is either terminated by the
Company without Cause or suffers a Constructive Termination; and (b) provides
the Company with a signed general release

 

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of all claims in a form acceptable to the Company and allows this release to
become effective, then the Executive shall be eligible for the following
severance benefits:

(a)    Severance Payment. The Executive shall receive a single lump sum payment
equal to 12 months of the base salary he received as of the date of the Change
of Control, or the termination of her employment (whichever is greater). This
Severance Payment shall be subject to required deductions and tax withholdings
and shall be paid within ten (10) business days of the effective date of the
Release.

(b)    Bonus Payment. The Executive shall receive a single lump sum payment
equal to 35% of the base salary he received as of the date of the Change of
Control, or the date of the Covered Termination (whichever is greater). This
Bonus Payment shall be subject to required deductions and tax withholdings and
shall be paid within ten (10) business days of the effective date of the
Release.

(c)    Health Insurance Payments. If, following the termination of Executive’s
employment, the Executive timely elects continued group health insurance
coverage under the federal COBRA law or similar state laws, if applicable, the
Company will pay the Executive’s COBRA premium costs to continue such coverage
at the level in effect as of the Executive’s termination date for a period of 12
months after the Executive’s termination date or until the Executive becomes
eligible for group health insurance coverage through a new employer (whichever
comes first). The Executive must promptly notify the Company in writing if the
Executive becomes eligible for group health insurance coverage through a new
employer during the Severance Period.

(d)    Career Transition Assistance (Outplacement Services). The Company will
reimburse the Executive up to $10,000 for expenses actually incurred by the
Executive within six (6) months of her termination date for reasonable and
customary outplacement services for career transition assistance expenses. Such
payments shall qualify for exemption provided by Treasury Regulation Sections
1.409A-1 (b)(9)(v)(A) and (C).

(e)    Accelerated Vesting. The Company will accelerate the vesting of any stock
options or restricted stock awards that remain unvested as of the date of the
termination of the Executive’s employment such that all such unvested options or
awards shall be deemed vested as of the date of such termination. Except as
modified herein, all such options and awards shall continue to be governed by
the applicable agreements and stock option plans.

2.2    Ineligibility For Severance Benefits. The Executive will not be eligible
for any benefits under this Agreement if the Company (or its successor)
terminates the Executive’s employment for Cause or if the Executive resigns for
any reason other than a Constructive Termination. Further, the Executive will
not be eligible for severance benefits under this Agreement in the event that
the Executive’s employment ends for any reason more than eighteen (18) months
after the effective date of a Change of Control. If the Release does not become
effective by the Release Deadline, Executive will not have any rights to any
benefits under this Agreement.

2.3    Other Severance Benefits. Nothing in this Agreement shall affect the
right of the Executive to receive any severance benefits pursuant to any other
Company severance plan

 

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including, without limitation, the Aradigm Corporation Executive Officer
Severance Benefit Plan; provided, however, that if the Executive actually
receives benefits under this Agreement, he shall not be entitled to receive any
other severance benefits of any kind (except for the accelerated vesting set
forth in Section 2.1(e) above) pursuant to any other severance benefit plan of
the Company (including, without limitation, the Aradigm Corporation Executive
Officer Severance Benefit Plan). The Executive acknowledges and agrees that any
prior agreement between the Executive and the Company providing for or relating
to severance benefits in connection with a Change of Control (as defined herein
or therein), except for those contained in the Executive’s stock option
agreements with the Company, are hereby expressly superseded and replaced in
their entirety by this Agreement and shall have no further force or effect.

2.4    Deferred Compensation.

(a)    All payments provided under this Agreement are intended to constitute
separate payment for purposes of Treasury Regulation Section 1.409A-2(b)(2).

(b)    If Executive is a “specified employee” of the Company of any affiliate
thereof (or any successor entity thereto) within the meaning of
Section 409A9a)(2)(B)(i) of the Internal Revenue Code of 1986, as amended (the
“Code”) on the date of a Covered Termination, then any cash severance payments
pursuant to Sections 2.1(a) and 2.1(b) (the “Severance Payments”) shall be
delayed until the earlier of: (i) the date that is six (6) months after the date
of the Covered Termination, or (ii) the date of the Executive’s death (such date
the “Delayed Payment Date”), and the Company (or the successor entity therto, as
applicable) shall pay to the Executive a lump sum amount equal to the sum of the
Severance Payments that otherwise would have been paid to the Executive on or
before the Delayed Payment Date, without any adjustment on account of such
delay. Except to the extent that payments may be delayed until the Delayed
Payment Date, on the first regularly scheduled payroll period following the date
the Release becomes effective by its terms, the Company will pay the Executive
the Severance Payments.

(c)    Any amounts paid pursuant to Section 2.1(c) are not intended to be
delayed pursuant to Section 409A(a)(2)(B)(i) of the Code and are intended to be
delayed pursuant to the exception provided by Treasury Regulation
Section 1.409A-1(b)(9)(v)(B). Amounts paid pursuant to Section 2.1(d) are
intended to qualify for the exception provided under Treasury Regulation
Sections 1.409A-1(b)(9)(v)(A) and (C).

 

3. PARACHUTE PAYMENTS.

3.1    Reduction of Severance Benefits. Notwithstanding the above, if any
payment or benefit that the Executive would receive under this Plan, when
combined with any other payment or benefit he receives that is contingent upon a
Change in Control (“Payment”) would (i) constitute a “parachute payment” within
the meaning of Section 280G of the Code, and (ii) but for this sentence, be
subject to the excise tax imposed by Section 4999 of the Code (“Excise Tax”),
then such Payment shall be either (x) the full amount of such Payment or
(y) such lesser amount as would result in no portion of the Payment being
subject to the Excise Tax (the “Reduced Amount”), whichever of the foregoing
amounts, taking into account the applicable federal, state and local employment
taxes, income taxes and the Excise Tax, results in the Executive’s receipt, on
an after-tax basis, of the greater amount notwithstanding that all or some
portion of the Payment may be subject to the Excise Tax. If a reduction in
payments or benefits

 

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constituting “parachute payments” is necessary so that the Payment equals the
Reduced Amount, reduction shall occur in a manner necessary to provide the
Executive with the greatest economic benefit. If more than one manner of
reduction of payments or benefits necessary to arrive at the Reduced Amount
yields the greatest economic benefit, the payments and benefits shall be reduced
pro rata. The Executive shall be solely responsible for the payment of all
personal tax liability that is incurred as a result of the payments and benefits
received under this Plan, and the Executive will not be reimbursed by the
Company for any such payments.

3.2    Determination of Excise Tax Liability. The Company shall attempt to cause
its accountants to make all of the determinations required to be made under
Section 3.1, or, in the event the Company’s accountants will not perform such
service, the Company may select another professional services firm to perform
the calculations. The Company shall request that the accountants or firm provide
detailed supporting calculations both to the Company and the Executive prior to
the Change in Control if administratively feasible or subsequent to the Change
in Control if events occur that result in parachute payments to the Executive at
that time. For purposes of making the calculations required by Section 3.1, the
accountants or firm may make reasonable assumptions and approximations
concerning applicable taxes and may rely on reasonable, good faith
determinations concerning the application of the Code. The Company and the
Executive shall furnish to the accountants or firm such information and
documents as the accountants or firm may reasonably request in order to make a
determination under this Section 3.1. The Company shall bear all costs the
accountants or firm may reasonably incur in connection with any calculations
contemplated by Section 3.1. Any such determination by the Company’s accountants
or other firm shall be binding upon the Company and the Executive, and the
Company shall have no liability to the Executive for the determinations of its
accountants or other firm.

 

4. GENERAL PROVISIONS.

4.1    At Will Employment. Nothing in this Agreement alters the Executive’s
at-will employment status. Either the Executive or the Company may terminate the
Executive’s employment relationship at any time, with or without cause or
advance notice. In particular, nothing expressed or implied in this Agreement
will create any right or duty on the part of the Company or the Executive to
have the Executive remain in the employment of the Company or any subsidiary
prior to or following any Change of Control.

4.2    Successors and Binding Agreement. This Agreement will be binding upon and
inure to the benefit of the Company and any successor to the Company, including
without limitation any persons acquiring directly or indirectly all or
substantially all of the business or assets of the Company whether or not
through a Change of Control (and such successor shall thereafter be deemed the
“Company” for the purposes of this Agreement). This Agreement will inure to the
benefit of and be enforceable by the Executive’s personal or legal
representatives, executors, administrators, successors, heirs, distributees and
legatees.

4.3    Amendments. No provision of the Agreement may be amended, modified or
waived unless such amendment, modification or waiver shall be agreed to in
writing and signed by the Executive and a duly authorized officer of the
Company.

 

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4.4    Severability. If any provision of the Agreement shall be determined to be
invalid or unenforceable by a court of competent jurisdiction, the remaining
provisions of the Agreement shall be unaffected thereby and shall remain in full
force and effect to the fullest extent permitted by law.

4.5    Notices. Any notice or other communication required or permitted under
the Agreement shall be in writing and shall be deemed to have been duly given
when delivered by hand, electronic transmission (with a copy following by hand
or by overnight courier), by registered or certified mail, postage prepaid,
return receipt requested or by overnight courier addressed to the other party.
All notices shall be addressed as follows, or to such other address or addresses
as may be substituted by notice in writing:

 

To the Company:

Aradigm Corporation

3929 Point Eden Way

Hayward, CA 94545

  

To the Executive:

Dr. Juergen Froehlich

19 Prescott Street

Newton, MA 02460

4.6    Governing Law. The Agreement shall be construed, interpreted and governed
in accordance with the laws of the State of California, without reference to
rules relating to conflicts of law.

4.7    Independent Counsel. The Executive acknowledges that this Agreement has
been prepared on behalf of the Company by counsel to the Company and that this
counsel does not represent, and is not acting on behalf of, the Executive. The
Executive has been provided with an opportunity to consult with the Executive’s
own counsel with respect to this Agreement.

4.8    Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same agreement.

IN WITNESS WHEREOF, the parties have executed this Change of Control Agreement
as of the date first written above.

 

ARADIGM CORPORATION By:  

/s/ John M. Siebert

Name:  

John M. Siebert

Title:  

Interim Principal Executive Officer

EXECUTIVE Signature:  

/s/ Juergen Froehlich

Print Name:  

Juergen Froehlich

 

 

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