**Exhibit 10.7**

 

**CHANGE OF CONTROL AGREEMENT**

 

This Change of ControlAgreement (this “Agreement”), dated as of July 1, 2004, is between PROCYTECORPORATION, a Washington corporation (the “Company”), and ROBIN L. CARMICHAEL(the “Executive”).

 

The Board of Directors ofthe Company (the “Board”) has determined that it is in the best interests ofthe Company and its stockholders to ensure that the Company will have thecontinued dedication of the Executive, notwithstanding the possibility, threator occurrence of a Change of Control (as defined in Section 1.1 below) ofthe Company.  The Board believes it isimperative to diminish the inevitable distraction of the Executive arising fromthe personal uncertainties and risks created by a pending or threatened Change ofControl, to encourage the Executive’s full attention and dedication to theCompany currently and in the event of any threatened or pending Change ofControl, and to provide the Executive with reasonable compensation and benefitarrangements upon a Change of Control.

 

In order to accomplish theseobjectives, the Board has caused the Company to enter into this Agreement.

 

**1.****                                     ****DEFINITIONS**

 

1.1                                 “Change of Control” shall have thedefinition set forth in Appendix A to this Agreement, which is herebyincorporated by reference.

 

1.2                                 “Change of Control Date” shall meanthe first date on which a Change of Control occurs.

 

1.3                                 “Employment Period” shall mean thetwo-year period commencing on the Change of Control Date and ending on thesecond anniversary of such date.

 

**2.****                                     ****TERM**

 

The term of this Agreement(“Term”) shall be for a period of two (2) years from the date of this Agreementas first entered above, at which time this Agreement shall terminate withoutfurther action by either the Company or the Executive; provided, however, thatif a Change of Control occurs during the Term, the Term shall automaticallyextend for the duration of the Employment Period.

 

**3.****                                     ****EMPLOYMENT**

 

**3.1****                              ****Employment Period**

 

During the EmploymentPeriod, the Company hereby agrees to continue the Executive in its employ or inthe employ of its affiliated companies, and the Executive hereby agrees toremain in the employ of the Company or its affiliated companies, in accordancewith the terms and provisions of this Agreement; provided, however, that eitherthe Company or the Executive may terminate the employment relationship subjectto the terms of this Agreement.

 

1

----

 

**3.2****                              ****Position and Duties**

 

During the EmploymentPeriod, the Executive’s position, authority, duties and responsibilities shallbe at least commensurate in all material respects with the most significant ofthose held, exercised and assigned at any time during the 90-day periodimmediately preceding the Change of Control Date.

 

**3.3****                              ****Location**

 

During the EmploymentPeriod, the Executive’s services shall be performed at the Company’sheadquarters on the Change of Control Date or any office which is subsequentlydesignated as the headquarters of the Company and is less than 30 miles fromsuch location.

 

**3.4****                              ****Employment at Will**

 

The Executive and theCompany acknowledge that, except as may otherwise be provided under any otherwritten agreement between the Executive and the Company, the employment of theExecutive by the Company or its affiliated companies is “at will” and may beterminated by either the Executive or the Company or its affiliated companiesat any time with or without cause. Moreover, if prior to the Change of Control Date, the Executive’s employmentwith the Company or its affiliated companies terminates for any reason, thenthe Executive shall have no further rights under this Agreement; provided,however, that Company may not avoid liability for any termination paymentswhich would have been required during the Employment Period pursuant toSection 8 below by terminating the Executive prior to the EmploymentPeriod where such termination is carried out in anticipation of a Change ofControl and the principal motivating purpose is to avoid liability for suchtermination payments.

 

**4.****                                     ****ATTENTION AND EFFORT**

 

During the EmploymentPeriod, and excluding any periods of vacation and sick leave to which theExecutive is entitled, the Executive will devote all of her productive time,ability, attention and effort to the business and affairs of the Company andthe discharge of the responsibilities assigned to her hereunder, and will useher reasonable best efforts to perform faithfully and efficiently suchresponsibilities.  It shall not be aviolation of this Agreement for the Executive to (a) serve on corporate, civicor charitable boards or committees, (b) deliver lectures, fulfill speakingengagements or teach at educational institutions, and (c) manage personalinvestments, so long as such activities do not significantly interfere with theperformance of the Executive’s responsibilities in accordance with thisAgreement.  It is expressly understoodand agreed that to the extent any such activities have been conducted by theExecutive prior to the Employment Period, the continued conduct of suchactivities (or the conduct of activities similar in nature and scope thereto)during the Employment Period shall not thereafter be deemed to interfere withthe performance of the Executive’s responsibilities to the Company.

 

**5.****                                     ****COMPENSATION**

 

As long as the Executiveremains employed by the Company during the Employment Period, the Companyagrees to pay or cause to be paid to the Executive, and the Executive agrees toaccept in exchange for the services rendered hereunder by her, the followingcompensation:

 

2

----

 

**5.1****                              ****Salary**

 

The Executive shall receivean annual base salary (the “Annual Base Salary”), at least equal to the annualsalary established by the Board or the Compensation Committee of the Board (the“Compensation Committee”) for the fiscal year in which the Change of ControlDate occurs.  The Annual Base Salaryshall be paid in substantially equal installments and at the same intervals asthe salaries of other executives of the Company are paid.  The Board or the Compensation Committeeshall review the Annual Base Salary at least annually and shall determine ingood faith and consistent with any generally applicable Company policy anyincreases for future years.

 

**5.2****                              ****Bonus**

 

In addition to Annual BaseSalary, the Executive shall be awarded, for each fiscal year ending during theEmployment Period, an annual bonus (the “Annual Bonus”) in cash at least equalto the average annualized (for any fiscal year consisting of less than 12 fullmonths) bonus paid or payable, including by reason of any deferral, to theExecutive by the Company and its affiliated companies in respect of the threefiscal years immediately preceding the fiscal year in which the Change ofControl Date occurs.  Each such AnnualBonus shall be paid no later than 90 days after the end of the fiscal year forwhich the Annual Bonus is awarded, unless the Executive shall elect to deferthe receipt of such Annual Bonus.

 

**6.****                                     ****BENEFITS**

 

**6.1****                              ****Incentive, Retirement andWelfare Benefit Plans; Vacation**

 

During the EmploymentPeriod, the Executive shall be entitled to participate, subject to and inaccordance with applicable eligibility requirements, in such fringe benefitprograms as shall be generally made available to other executives of theCompany and its affiliated companies from time to time during the EmploymentPeriod by action of the Board (or any person or committee appointed by theBoard to determine fringe benefit programs and other emoluments), including,without limitation, paid vacations; any stock purchase, savings or retirementplan, practice, policy or program; and all welfare benefit plans, practices,policies or programs (including, without limitation, medical, prescription,dental, disability, salary continuance, employee life, group life, accidentaldeath and travel accident insurance plans or programs).

 

**6.2****                              ****Expenses**

 

During the EmploymentPeriod, the Executive shall be entitled to receive prompt reimbursement for allreasonable employment expenses incurred by her in accordance with the policies,practices and procedures of the Company and its affiliated companies in effectfor the executives of the Company and its affiliated companies during theEmployment Period.

 

**7.****                                     ****TERMINATION**

 

During the EmploymentPeriod, employment of the Executive may be terminated as follows but, in anycase, the nondisclosure provisions set forth in Section 10 hereof shallsurvive the termination of this Agreement and the termination of theExecutive’s employment with the Company:

 

3

----

 

**7.1****                              ****By the Company or theExecutive**

 

At any time during theEmployment Period, the Company may terminate the employment of the Executivewith or without Cause (as defined below), and the Executive may terminate heremployment for Good Reason (as defined below) or for any reason, upon givingNotice of Termination (as defined below).

 

**7.2****                              ****Automatic Termination**

 

This Agreement and theExecutive’s employment during the Employment Period shall terminateautomatically upon the death or Total Disability of the Executive.  The term “Total Disability” as used hereinshall mean the Executive’s inability (with such accommodation as may berequired by law and which places no undue burden on the Company), as determinedby a physician selected by the Company and acceptable to the Executive, toperform the duties set forth in Section 3.2 hereof for a period or periodsaggregating 120 calendar days in any 12-month period as a result of physical ormental illness, loss of legal capacity or any other cause beyond theExecutive’s control, unless the Executive is granted a leave of absence by theBoard.  The Executive and the Companyhereby acknowledge that the duties specified in Section 3.2 hereof areessential to Executive’s position and that Executive’s ability to perform thoseduties is the essence of this Agreement.

 

**7.3****                              ****Notice of Termination**

 

Any termination by theCompany or by the Executive during the Employment Period shall be communicatedby Notice of Termination to the other party given in accordance withSection 12 hereof.  The term“Notice of Termination” shall mean a written notice which (a) indicates thespecific termination provision in this Agreement relied upon and (b) to theextent applicable, sets forth in reasonable detail the facts and circumstancesclaimed to provide a basis for termination of the Executive’s employment underthe provision so indicated.  The failureby the Executive or the Company to set forth in the Notice of Termination anyfact or circumstance which contributes to a showing of Good Reason or Causeshall not waive any right of the Executive or the Company hereunder or precludethe Executive or the Company from asserting such fact or circumstance inenforcing the Executive’s or the Company’s rights hereunder.

 

**7.4****                              ****Date of Termination**

 

During the EmploymentPeriod, “Date of Termination” means (a) if the Executive’s employment isterminated by reason of death, at the end of the calendar month in which theExecutive’s death occurs, (b) if the Executive’s employment is terminated byreason of Total Disability, immediately upon a determination by the Company ofthe Executive’s Total Disability, and (c) in all other cases, five days afterthe date of personal delivery or mailing of the Notice of Termination.  The Executive’s employment and performanceof services will continue during such five-day period; provided, however,that the Company may, upon notice to the Executive and without reducing theExecutive’s compensation during such period, excuse the Executive from any orall of her duties during such period.

 

**8.****                                     ****TERMINATION PAYMENTS**

 

In the event of terminationof the Executive’s employment during the Employment Period, all compensationand benefits shall terminate except as specifically provided in thisSection 8.

 

4

----

 

**8.1****                              ****Termination by the CompanyOther Than for Cause or by the Executive for Good Reason**

 

If during the EmploymentPeriod the Company terminates the Executive’s employment other than for Causeor the Executive terminates her employment for Good Reason, the Executive shallbe entitled to:

 

(a)                                  receive payment of the following accruedobligations (the “Accrued Obligations”):

 

(i)                                     the Executive’s Annual Base Salary throughthe Date of Termination to the extent not theretofore paid;

 

(ii)                                  the product of (x) the Annual Bonus payablewith respect to the fiscal year in which the Date of Termination occurs and (y)a fraction, the numerator of which is the number of days in the current fiscalyear through the Date of Termination, and the denominator of which is 365; and

 

(iii)any compensation previously deferred by the Executive (together with accruedinterest or earnings thereon, if any) and any accrued vacation pay which wouldbe payable under the Company’s standard policy, in each case to the extent nottheretofore paid;

 

(b)                                 for one year after the Date of Termination,the Company shall pay the Executive’s premiums for health insurance benefitcontinuation for Executive and her family members, if applicable, which theCompany provides to the Executive under the provisions of the federalComprehensive Omnibus Budget Reconciliation Act of 1986, as amended (“COBRA”)to the extent that the Company would have paid such premiums had the Executiveremained employed by the Company (such continued payment is hereinafterreferred to as “COBRA Continuation”); and

 

(c)                                  an amount as severance pay equal to one  (1) times the Annual Base Salary for thefiscal year in which the Date of Termination occurs.

 

**8.2****                              ****Termination for Cause orOther Than for Good Reason**

 

If during the EmploymentPeriod the Executive’s employment shall be terminated by the Company for Causeor by the Executive for other than Good Reason, this Agreement shall terminatewithout further obligation on the part of the Company to the Executive, otherthan the Company’s obligation to pay the Executive (a) her Annual Base Salarythrough the Date of Termination, (b) the amount of any compensation previously deferred by the Executive, and(c) any accrued vacation pay which would be payable under the Company’sstandard policy, in each case to the extent theretofore unpaid.

 

**8.3****                              ****Expiration of Term**

 

In the case of a terminationof the Executive’s employment as a result of the expiration of the Term of thisAgreement, this Agreement shall terminate without further obligation on thepart of the Company to the Executive, other than the Company’s obligation topay the Executive the Accrued Obligations.

 

5

----

 

**8.4****                              ****Termination Because of Deathor Total Disability**

 

If during the EmploymentPeriod the Executive’s employment is terminated by reason of the Executive’sdeath or Total Disability, this Agreement shall terminate automatically withoutfurther obligation on the part of the Company to the Executive or her legalrepresentatives under this Agreement, other than the Company’s obligation topay the Executive the Accrued Obligations (which shall be paid to theExecutive’s estate or beneficiary, as applicable in the case of the Executive’sdeath), and to provide COBRA Continuation.

 

**8.5****                              ****Payment Schedule**

 

All payments of AccruedObligations, or any portion thereof payable pursuant to this Section 8,shall be made to the Executive within ten working days of the Date ofTermination.  Any payments payable tothe Executive pursuant to Section 8.1(c) shall be made to the Executive,at the Company’s option, either (a) in a lump sum within ten working days ofthe Date of Termination; or (b) in two equal payments, the first of which ismade within ten working days of the Date of Termination and the second of whichis made within six months of the Date of Termination.

 

**8.6****                              ****Cause**

 

For purposes of thisAgreement, “Cause” means cause given by the Executive to the Company and shallinclude, without limitation, the occurrence of one or more of the followingevents:

 

(a)                                  A clear refusal to carry out any materiallawful duties of the Executive or any directions of the Board or seniormanagement of the Company, all reasonably consistent with those dutiesdescribed in Section 3.2 hereof ;

 

(b)                                 Persistent failure to carry out any lawfulduties of the Executive described in Section 3.2 hereof or any directionsof the Board or senior management reasonably consistent with those dutiesherein set forth to be performed by the Executive, provided Executive has beengiven reasonable notice and opportunity to correct any such failure;

 

(c)                                  Violation by the Executive of a state orfederal criminal law involving the commission of a crime against the Company orany other criminal act involving moral turpitude;

 

(d)                                 Current abuse by the Executive of alcohol orcontrolled substances; deception, fraud, misrepresentation or dishonesty by theExecutive; or any incident materially compromising the Executive’s reputationor ability to represent the Company with investors, customers or the public; or

 

(e)                                  Any other material violation of any provisionof this Agreement by the Executive, subject to the notice and opportunity tocure requirements of Section 11.

 

**8.7****                              ****Good Reason**

 

For purposes of thisAgreement, “Good Reason” means

 

(a)                                  The assignment to the Executive of any dutiesmaterially inconsistent with the Executive’s position, authority, duties orresponsibilities as contemplated by Section 3.2 hereof or any other actionby the Company which results in a material diminution in such position,authority, duties or responsibilities, excluding for this purpose an isolatedand inadvertent action not taken in bad faith and which is remedied by theCompany promptly after receipt of notice thereof given by the Executive;

 

6

----

 

(b)                                 Any failure by the Company to comply with anyof the provisions of Section 5 or Section 6 hereof, other than anisolated and inadvertent failure not taken in bad faith and which is remediedby the Company promptly after receipt of notice thereof given by the Executive;

 

(c)                                  The Company’s requiring the Executive to bebased at any office or location other than that described in Section 3.3hereof;

 

(d)                                 Any failure by the Company to comply with andsatisfy Section 13 hereof, provided that the Company’s successor hasreceived at least ten days’ prior written notice from the Company or theExecutive of the requirements of Section 13 hereof; or

 

(e)                                  Any other material violation of any provisionof this Agreement by the Company, subject to the notice and opportunity to curerequirements of Section 11.

 

**8.8****                              ****Excess Parachute Limitation**

 

If either the Company or theExecutive receives confirmation from the Company’s independent tax counsel orits certified public accounting firm, or such other accounting firm retained asindependent certified public accountants for the Company (the “Tax Advisor”),that any payment by the Company to the Executive under this Agreement orotherwise would be considered to be an “excess parachute payment” within themeaning of Section 280G of the Internal Revenue Code of 1986, as amended,or any successor statute then in effect (the “Code”), then the aggregatepayments by the Company pursuant to this Agreement shall be reduced to thehighest amount that may be paid to the Executive by the Company under thisAgreement without having any portion of any amount payable to the Executive bythe Company or a related entity under this Agreement or otherwise treated as suchan “excess parachute payment”, and, if permitted by applicable law and withoutadverse tax consequence, such reduction shall be made to the last payment duehereunder.  Any payments made by theCompany to the Executive under this Agreement which are later confirmed by theTax Advisor to be “excess parachute payments” shall promptly be repaid by theExecutive to the Company.

 

**9.****                                     ****REPRESENTATIONS, WARRANTIESAND OTHER CONDITIONS**

 

In order to induce theCompany to enter into this Agreement, the Executive represents and warrants tothe Company as follows:

 

**9.1****                              ****Health**

 

The Executive is in goodhealth and knows of no physical or mental disability which, with anyaccommodation which may be required by law and which places no undue burden onthe Company, would prevent her from fulfilling her obligations hereunder.  The Executive agrees, if the Companyrequests, to submit to reasonable periodic medical examinations by a physicianor physicians designated by, paid for and arranged by the Company.  The Executive agrees that the examination’smedical report shall be provided to the Company.

 

**9.2****                              ****No Violation of OtherAgreements**

 

The Executive representsthat neither the execution nor the performance of this Agreement by theExecutive will violate or conflict in any way with any other agreement by whichthe Executive may be bound.

 

7

----

 

**10.****                              ****NONDISCLOSURE; RETURN OFMATERIALS**

 

**10.1****                       ****Nondisclosure**

 

Except as required by heremployment with the Company, the Executive will not, at any time during theterm of employment by the Company, or at any time thereafter, directly,indirectly or otherwise, use, communicate, disclose, disseminate, lecture uponor publish articles relating to any confidential, proprietary or trade secretinformation without the prior written consent of the Company.  The Executive understands that the Companywill be relying on this covenant in continuing the Executive’s employment,paying her compensation, granting her any promotions or raises, or entrustingher with any information which helps the Company compete with others.

 

**10.2****                       ****Return of Materials**

 

All documents, records,notebooks, notes, memoranda, drawings or other documents made or compiled bythe Executive at any time while employed by the Company, or in her possession,including any and all copies thereof, shall be the property of the Company andshall be held by the Executive in trust and solely for the benefit of theCompany, and shall be delivered to the Company by the Executive upontermination of employment or at any other time upon request by the Company.

 

**11.****                              ****NOTICE AND CURE OF BREACH**

 

Whenever a breach of thisAgreement by either party is relied upon as justification for any action takenby the other party pursuant to any provision of this Agreement, other thanclause (a), (b), (c) or (d) of Section 8.6 hereof, before such action istaken, the party asserting the breach of this Agreement shall give the otherparty at least ten days’ prior written notice of the existence and the natureof such breach before taking further action hereunder and shall give the partypurportedly in breach of this Agreement the opportunity to correct such breachduring the ten-day period.

 

**12.****                              ****FORM OF NOTICE**

 

Every notice required by theterms of this Agreement shall be given in writing by serving the same upon theparty to whom it was addressed personally or by registered or certified mail,return receipt requested, at the address set forth below or at such otheraddress as may hereafter be designated by notice given in compliance with theterms hereof:

 
| If to the Executive: |   | Robin L. Carmichael                  |
|----------------------|--------|--------------------------------------|
|                 |   |                                 |
|                 |   |                                 |
|                 |   |                                 |
| If to the Company:   |   | ProCyte Corporation                  |
|                 |   | 8511 154th Avenue N.E.,  Bldg. A     |
|                 |   | Redmond, Washington  98052-3557 |
|                 |   | Attn:  President                |
|                 |   |                                 |
| With a copy to:      |   | Perkins Coie LLP                     |
|                 |   | Attn:  James R. Lisbakken, Esq. |
|                 |   | 1201 Third Avenue, 40th  Floor       |
|                 |   | Seattle, Washington  98101-3099      |

 

8

----

 

or such other address asshall be provided in accordance with the terms hereof.  Except as set forth in Section 7.4hereof, if notice is mailed, such notice shall be effective upon mailing.

 

**13.****                              ****ASSIGNMENT**

 

This Agreement is personalto the Executive and shall not be assignable by the Executive.

 

The Company shall assign toand require any successor (whether direct or indirect, by purchase, merger,consolidation or otherwise) to all or substantially all the business and/orassets of the Company to assume expressly and agree to perform this Agreementin the same manner and to the same extent that the Company would be required toperform it if no such succession had taken place.  As used in this Agreement, “Company” shall mean ProCyteCorporation and any affiliated company or successor to its business and/orassets as aforesaid which assumes and agrees to perform this Agreement bycontract, operation of law, or otherwise; and as long as such affiliatedcompany or successor assumes and agrees to perform this Agreement, thetermination of Executive’s employment by one such entity and the immediatehiring and continuation of the Executive’s employment by the Company or otheraffiliated company or successor shall not be deemed to constitute a terminationor trigger any obligation under this Agreement.  All the terms and provisions of this Agreement shall be bindingupon and inure to the benefit of and be enforceable by the parties hereto andtheir respective successors and permitted assigns.

 

**14.****                              ****WAIVERS**

 

No delay or failure by anyparty hereto in exercising, protecting or enforcing any of its rights, titles,interests or remedies hereunder, and no course of dealing or performance withrespect thereto, shall constitute a waiver thereof.  The express waiver by a party hereto of any right, title,interest or remedy in a particular instance or circumstance shall notconstitute a waiver thereof in any other instance or circumstance.  All rights and remedies shall be cumulativeand not exclusive of any other rights or remedies.

 

**15.****                              ****AMENDMENTS IN WRITING**

 

No amendment, modification,waiver, termination or discharge of any provision of this Agreement, norconsent to any departure therefrom by either party hereto, shall in any eventbe effective unless the same shall be in writing, specifically identifying thisAgreement and the provision intended to be amended, modified, waived,terminated or discharged and signed by the Company and the Executive, and eachsuch amendment, modification, waiver, termination or discharge shall beeffective only in the specific instance and for the specific purpose for whichgiven.  No provision of this Agreementshall be varied, contradicted or explained by any oral agreement, course ofdealing or performance or any other matter not set forth in an agreement inwriting and signed by the Company and the Executive.

 

**16.****                              ****APPLICABLE LAW**

 

This Agreement shall in allrespects, including all matters of construction, validity and performance, begoverned by, and construed and enforced in accordance with, the laws of theState of Washington, without regard to any rules governing conflicts of laws.

 

**17.****                              ****ARBITRATION; ATTORNEYS’ FEES**

 

Except in connection withenforcing Section 10 of this Agreement, for which legal and equitableremedies may be sought in a court of law, any dispute arising under thisAgreement shall be subject to arbitration. The arbitration proceeding shall be conducted in accordance with theCommercial

 

9

----

 

Arbitration Rules of theAmerican Arbitration Association then in effect, conducted by one arbitratoreither mutually agreed upon or selected in accordance with the AAA Rules.  The arbitration shall be conducted in KingCounty, Washington under the jurisdiction of the Seattle office of the AmericanArbitration Association.  The arbitratorshall have authority only to interpret and apply the provisions of thisAgreement, and shall have no authority to add to, subtract from, or otherwisemodify the terms of this Agreement.  Anydemand for arbitration must be made within sixty (60) days of the event(s)giving rise to the claim that this Agreement has been breached.  The arbitrator’s decision shall be final andbinding, and each party agrees to be bound to by arbitrator’s award subjectonly to an appeal therefrom in accordance with the laws of the State ofWashington.  Either party may obtain judgmentupon the arbitrator’s award in the Superior Court of King, County, Washington.

 

If it becomes necessary topursue or defend any legal proceeding, whether in arbitration or court, inorder to resolve a dispute arising under this Agreement, the prevailing partyin any such proceeding shall be entitled to recover its reasonable costs andattorneys’ fees.

 

**18.****                              ****SEVERABILITY**

 

If any provision of thisAgreement shall be held invalid, illegal or unenforceable in any jurisdiction,for any reason, including, without limitation, the duration of such provision,its geographical scope or the extent of the activities prohibited or requiredby it, then, to the full extent permitted by law, (a) all other provisionshereof shall remain in full force and effect in such jurisdiction and shall beliberally construed in order to carry out the intent of the parties hereto asnearly as may be possible, (b) such invalidity, illegality or unenforceabilityshall not affect the validity, legality or enforceability of any other provisionhereof, and (c) any court or arbitrator having jurisdiction thereover shallhave the power to reform such provision to the extent necessary for suchprovision to be enforceable under applicable law.

 

**19.****                              ****ENTIRE AGREEMENT**

 

This Agreement on and as ofthe date hereof constitutes the entire agreement between the Company and theExecutive with respect to the subject matter hereof and all prior orcontemporaneous oral or written communications, understandings or agreementsbetween the Company and the Executive with respect to such subject matter,including, but not limited to, that certain Change of Control Agreement betweenthe Company and the Executive dated as of April 24, 1998 and allamendments thereto, are hereby superseded and nullified in their entireties,except that the Proprietary Information and Invention Agreement between theExecutive and the Company shall continue in full force and effect to the extentnot superseded by Section 10 hereof.

 

**20.****                              ****WITHHOLDING**

 

The Company may withholdfrom any amounts payable under this Agreement such federal, state or localtaxes as shall be required to be withheld pursuant to any applicable law orregulation.

 

**21.****                              ****COUNTERPARTS**

 

This Agreement may beexecuted in counterparts, each of which counterpart shall be deemed anoriginal, but all of which together shall constitute one and the sameinstrument.

 

10

----

 

IN WITNESS WHEREOF, theparties have executed and entered into this Agreement effective on the datefirst set forth above.

 
|   | **EXECUTIVE**            |
|--------|--------------------------|
|   |                     |
|   |                     |
|   | /s/ Robin L. Carmichael  |   |
|   | Robin L. Carmichael      |
|   |                     |
|   | **PROCYTE  CORPORATION** |
|   |                     |
|   |                     |
|   | By                       | /s/ John  F. Clifford |   |
|   | Its                      | Chairman and CEO |   |

 

11

----

 

**APPENDIX A TO**

 

**CHANGE OF CONTROL AGREEMENT**

 

For purposes of thisAgreement, a “Change of Control” shall mean:

 

(a)                                  A “Board Change” which, for purposes of thisAgreement, shall have occurred if a majority (excluding vacant seats) of theseats on the Company’s Board are occupied by individuals who were neither (i)nominated by a majority of the Incumbent Directors nor (ii) appointed bydirectors so nominated.  An “IncumbentDirector” is a member of the Board who has been either (i) nominated by amajority of the directors of the Company then in office or (ii) appointed bydirectors so nominated, but excluding, for this purpose, any such individualwhose initial assumption of office occurs as a result of either an actual orthreatened election contest (as such terms are used in Rule 14a-11 of Regulation14A promulgated under the Securities Exchange Act of 1934, as amended (the“Exchange Act”)) or other actual or threatened solicitation of proxies orconsents by or on behalf of a Person (as hereinafter defined) other than theBoard; or

 

(b)                                 The acquisition by any individual, entity orgroup (within the meaning of Section 13(d)(3) or 14(d)(2) of the ExchangeAct) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3promulgated under the Exchange Act) of (i) 20% or more of either (A) the thenoutstanding shares of Common Stock of the Company (the “Outstanding CompanyCommon Stock”) or (B) the combined voting power of the then outstanding votingsecurities of the Company entitled to vote generally in the election ofdirectors (the “Outstanding Company Voting Securities”), in the case of either(A) or (B) of this clause (i), which acquisition is not approved in advance bya majority of the Incumbent Directors, or (ii) 33% or more of either (A) theOutstanding Company Common Stock or (B) the Outstanding Company VotingSecurities, in the case of either (A) or (B) of this clause (ii), whichacquisition is approved in advance by a majority of the Incumbent Directors; provided,however, that the following acquisitions shall not constitute a Changeof Control:  (x) any acquisition by theCompany, (y) any acquisition by any employee benefit plan (or related trust)sponsored or maintained by the Company or any corporation controlled by theCompany or (z) any acquisition by any corporation pursuant to a reorganization,merger or consolidation, if, following such reorganization, merger orconsolidation, the conditions described in clauses (i), (ii) and (iii) ofsubsection (c) of this Appendix A are satisfied; or

 

(c)                                  Approval by the stockholders of the Companyof a reorganization, merger or consolidation, in each case, unless, immediatelyfollowing such reorganization, merger or consolidation, (i) more than 60% of,respectively, the then outstanding shares of common stock of the corporationresulting from such reorganization, merger or consolidation and the combinedvoting power of the then outstanding voting securities of such corporationentitled to vote generally in the election of directors is then beneficiallyowned, directly or indirectly, by all or substantially all the individuals andentities who were the beneficial owners, respectively, of the OutstandingCompany Common Stock and the Outstanding Company Voting Securities immediatelyprior to such reorganization, merger or consolidation in substantially the sameproportion as their ownership immediately prior to such reorganization, mergeror consolidation of the Outstanding Company Common Stock and the OutstandingCompany Voting Securities, as the case may be, (ii) no Person (excluding the Company,any employee benefit plan (or related trust) of the Company or such corporationresulting from such reorganization, merger or consolidation and any Personbeneficially owning, immediately prior to such

 

12

----

 

reorganization, merger orconsolidation, directly or indirectly, 33% or more of the Outstanding CompanyCommon Stock or the Outstanding Voting Securities, as the case may be)beneficially owns, directly or indirectly, 33% or more of, respectively, thethen outstanding shares of common stock of the corporation resulting from suchreorganization, merger or consolidation or the combined voting power of thethen outstanding voting securities of such corporation entitled to votegenerally in the election of directors, and (iii) at least a majority of themembers of the board of directors of the corporation resulting from suchreorganization, merger or consolidation were the Incumbent Directors at thetime of the execution of the initial agreement providing for suchreorganization, merger or consolidation; or

 

(d)                                 Approval by the stockholders of the Companyof (i) a complete liquidation or dissolution of the Company or (ii) the sale orother disposition of all or substantially all the assets of the Company, otherthan to a corporation with respect to which immediately following such sale orother disposition, (A) more than 60% of, respectively, the then outstandingshares of common stock of such corporation and the combined voting power of thethen outstanding voting securities of such corporation entitled to votegenerally in the election of directors is then beneficially owned, directly orindirectly, by all or substantially all the individuals and entities who werethe beneficial owners, respectively, of the Outstanding Company Common Stockand the Outstanding Company Voting Securities immediately prior to such sale orother disposition in substantially the same proportion as their ownership,immediately prior to such sale or other disposition, of the Outstanding CompanyCommon Stock and the Outstanding Company Voting Securities, as the case may be,(B) no Person (excluding the Company, any employee benefit plan (or relatedtrust) of the Company or such corporation and any Person beneficially owning,immediately prior to such sale or other disposition, directly or indirectly,33% or more of the Outstanding Company Common Stock or the Outstanding CompanyVoting Securities, as the case may be) beneficially owns, directly orindirectly, 33% or more of, respectively, the then outstanding shares of commonstock of such corporation and the combined voting power of the then outstandingvoting securities of such corporation entitled to vote generally in theelection of directors and (C) at least a majority of the members of the boardof directors of such corporation were approved by a majority of the IncumbentDirectors at the time of the execution of the initial agreement or action ofthe Board providing for such sale or other disposition of assets of theCompany.

 

13

----