Document:

Exhibit 4.1

 

REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights Agreement (this “Agreement”), dated as of October 25, 2006, is made by and among PHARMOS CORPORATION, a Nevada corporation (the “Company”), and Srinivas Akkaraju, Jeff Calcagno, Anthony B. Evnin, Robert F. Johnston and Charles W. Newhall III (the “Representatives”), as representatives of (i) the stockholders (“Former Stockholders”) of Vela Pharmaceuticals Inc., a Delaware corporation (“Vela”), that become stockholders of the Company in accordance with the Merger Agreement (as hereinafter defined) and (ii) the participants (“Participants”) in Vela’s 2005 Acquisition Bonus Plan that become stockholders of  the Company in connection with the Merger; such Former
Stockholders and Participants are hereinafter collectively referred to as the “Stockholders”.

 

NOW THEREFORE, in consideration of the mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

 

1.          Definitions.  All capitalized terms used herein without definition shall have the meanings ascribed to such terms in the Agreement and Plan of Merger, dated March 14, 2006, as amended (as amended, the “Merger Agreement”), by and among the Company, Vela Acquisition Corporation., a Delaware corporation, Vela Acquisition No. 2 Corporation, a Delaware corporation, and Vela.  For the purposes of this Agreement, the following terms shall have the respective meanings set forth below or elsewhere in this Agreement as referred to below:

 

 “Business Day” shall mean any day that is not a Saturday, a Sunday or a legal holiday in the State of New York.

 

 “Commission” shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act.

 

 “Registrable Securities” shall mean, collectively, the Closing Shares issued to the Stockholders pursuant to the Merger Agreement and, if hereafter issued under the Merger Agreement, the Milestone Shares; provided, however, that with respect to any such shares of Parent Stock, such shares of Parent Stock shall cease to be Registrable Securities when (a) such shares of Parent Stock have been disposed of by the Stockholders thereof in a public distribution of securities effected pursuant to this Agreement, (b) such shares of Parent Stock become eligible for resale pursuant to Rule 144(k) promulgated under the Securities Act (as hereinafter defined) or other provision of substantially similar effect, or (c) such shares of Parent Stock have
ceased to be outstanding.

 

 “Required Stockholders” shall mean, at the relevant time of reference thereto, those Stockholders holding, in the aggregate, fifty percent (50%) of the Registrable Securities then outstanding and then held by all Stockholders.

 

 “Securities Act” shall mean the Securities Act of 1933, as amended and in effect from time to time.

 

 

                2.          Registration and Sale.

 

	
             
 	
            (a)
 	
            Mandatory Registration.
 

 

(i)          Subject to the limitations set forth in this Section 2(a)(i) and in Sections 2(a)(ii) and (iii) and Section 7 below, the Company shall file, within twenty days (the “Filing Date”) of the Effective Date, a registration statement on Form S-3 (or comparable or successor form) under the Securities Act, which shall be a “shelf registration” made pursuant to Rule 415 adopted pursuant to the Securities Act, and shall use its best efforts to cause all of the Registrable Securities to be registered for resale to the public thereunder.  The foregoing notwithstanding, in the event the Commission notifies the Company that under the Securities Act it may only include the Closing Shares in the initial registration statement to be filed
on the Filing Date, and not the Milestone Shares, the Company shall file, within seven days of the respective issuance dates of the Milestone Shares, a registration statement on Form S-3 (or comparable or successor form) and shall use its best efforts to cause all such Milestone Shares to be registered for resale to the public thereunder.  If a separate registration statement for the Milestone Shares is required and the Company is not then eligible to use Form S-3, it will file the registration statement on Form S-1 or other available form and shall be required to make such filing no later than thirty (30) days after the issuance thereof.  

 

(ii)         Notwithstanding anything to the contrary set forth in Section 2(a)(i) above, the Company shall not be obligated to prepare or file any registration statement pursuant to Section 2(a)(i) hereof, or to prepare or file any amendment or supplement thereto, and the Stockholders agree that they shall not sell any Registrable Securities, at any time when the Company, in the good faith and reasonable judgment of its Board of Directors, and upon the advice of counsel, reasonably believes that the filing thereof at that time, or the offering or sale of Registrable Securities pursuant thereto, (a) would materially adversely affect a pending or proposed public offering of capital stock of the Company, or an acquisition, merger, recapitalization, consolidation, reorganization or other transaction, or any
negotiations, discussions or pending proposals with respect thereto, or (b) would require the disclosure of information that would have a material adverse effect on the Company, is likely to materially adversely affect the Company or any pending transaction or negotiations of the Company, or would constitute a violation of the Securities Act or any state or other applicable securities laws; provided, however, that the filing of a registration statement, or any supplement or amendment thereto, by the Company may be deferred pursuant to this Section 2(a)(ii), and the restrictions on the sale of Registrable Securities by the Stockholders shall be effective, only for the minimum period of time necessary under the circumstances, but not to exceed sixty (60) days and in any event no more than two deferrals shall be allowed in any twelve (12) month period.  In the case of any such delay, the
Company shall deliver to the Stockholders or the Representatives a written certificate of the Company’s Chief Executive Officer certifying that such delay is necessary in the good faith and reasonable judgment of the Company's Board of Directors.

 

(iii)        The Company shall be entitled to include in any registration statement filed or to be filed by the Company pursuant to Section 2(a)(i) above shares of the capital stock of the Company to be sold by the Company for its own account or for the account of any other stockholders of the Company except as and to the extent that, in the opinion of the managing underwriter (if such method of disposition shall be an underwritten public offering), such inclusion would adversely affect the marketing of the Registrable Securities to be sold.

 

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                                 (b)          Piggyback Registration.

 

(i)          If at any time or from time to time when any registration statement referred to in Section 2(a) is not effective, the Company shall determine to register any of its securities, for its own account or the account of any of its stockholders, other than a registration relating solely to employee share option plans or pursuant to an acquisition transaction on Form S-4, the Company will:

 

(A)          provide to the Stockholders written notice thereof as soon as practicable prior to filing the registration statement; and

(B)         include in such registration and in any underwriting involved therein, all of the Registrable Securities specified in a written request by the Stockholders made within fifteen (15) days after receipt of such written notice from the Company.

 

(ii)         If the Registration is for a registered public offering involving an underwriting, the Company shall so advise the Stockholders as a part of the written notice given pursuant to this Section.  In such event, the rights of the Stockholders hereunder shall include participation in such underwriting and the inclusion of the Registrable Securities in the underwriting to the extent provided herein.  To the extent that a Stockholder proposes to distribute its securities through such underwriting, such Stockholder shall (together with the Company and any other securityholders of the Company distributing their securities through such underwriting) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Company.  Notwithstanding
any other provision of this Section, if the managing underwriter of such underwriting determines that marketing factors require a limitation of the number of shares to be offered in connection with such underwriting, the managing underwriter may limit the number of Registrable Securities to be included in the registration statement and underwriting (provided, however, that (a) the Registrable Securities shall not be excluded from such underwritten offering prior to any securities held by officers and directors of the Company or their affiliates, (b) the Registrable Securities shall be entitled to at least the same priority in an underwritten offering as any of the Company’s existing securityholders, and (c) the Company shall not enter into any agreement that would provide any securityholder with priority in connection with an underwritten offering greater than the priority granted to the
Stockholders hereunder).  The Company shall so advise any of its other securityholders who are distributing their securities through such underwriting pursuant to their respective piggyback registration rights, and the number of shares of Registrable Securities and other securities that may be included in the registration and underwriting shall be allocated among the Stockholders and all other securityholders of the Company in proportion, as nearly as practicable, to the respective amounts of Registrable Securities held by the Stockholders and such other securityholders at the time of the filing of the registration statement.  If any Stockholder disapproves of the terms of any such underwriting, it may elect to withdraw therefrom by written notice to the Company.  Any Registrable Securities so excluded or withdrawn from such underwriting shall be withdrawn from such registration statement.

(i)          The Company shall not be required to give notice to the Stockholders in accordance with this Section 2(b) or include the Registrable Securities in any registration referred to in this Section 2(b) if the registration referred to in Section 2(a) hereof is effective.

 

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(c)          Eligibility for Form S-3.  The Company represents and warrants that it currently meets all of the requirements for the use of Form S-3 for the registration of the sale by the Stockholders and any transferee who purchases the Registrable Securities, and the Company shall file all reports required to be filed by the Company with the Commission in a timely manner, and shall take such other actions as may be necessary to maintain such eligibility for the use of Form S-3.

 

3.          Further Obligations of the Company.  Whenever the Company is required to register Registrable Securities under this Agreement, it agrees that it shall also use its best efforts to do the following as expeditiously as commercially reasonable:

 

 (a)         prepare and file with the Commission a registration statement on Form S-3 (or other applicable form, as determined by the Company) with respect to such Registrable Securities and use commercially reasonable efforts to cause such registration statement to become and remain effective for a period of time required for the disposition of such Registrable Securities by the Stockholders thereof; provided, however, that such period shall not be longer than (i) the third anniversary of the Closing Date of the Merger in the case of the Closing Shares or (ii) the third anniversary of the respective issuance dates of the Milestone Shares, or, if less, the date on which the Registrable Securities may be sold
under Rule 144(k) or any successor provision promulgated under the Securities Act having substantially similar effect, unless the Company otherwise agrees in its sole discretion;

 

 (b)        prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for the applicable time period set forth in Section 3(a) and comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by such registration statement in accordance with the sellers' intended method of disposition set forth in such registration statement;

 

 (c)         furnish to each Stockholder offering Registrable Securities under such registration statement such number of copies of the registration statement and the prospectus included therein (including each preliminary prospectus) as such Stockholder may reasonably request;

 

 (d)         register or qualify the Registrable Securities covered by such registration statement under the securities or blue sky laws of such jurisdictions within the United States as each Stockholder shall reasonably request unless an available exemption to such registration or qualification requirements is then available; provided that the Company shall not be obligated to register or qualify such Registrable Securities in any jurisdiction in which such registration or qualification would require the Company to qualify as a foreign corporation or file any general consent to service of process where it is not then so qualified or otherwise required to be qualified or has not theretofore so consented;

 

 (e)         timely file with the Commission such information as the Commission may prescribe under Sections 13 or 15(d) of the Securities Exchange Act of 1934, as amended, and otherwise use commercially reasonable efforts to ensure that the public information requirements of Rule 144 under the Securities Act are satisfied with respect to the Company; and

 

 (f)         notify the Representatives promptly in writing (A) of any comments by the Commission with respect to such registration statement or prospectus, or any request by the Commission for the amending or supplementing thereof or for additional information with respect 

 

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thereto, (B) of the issuance by the Commission of any stop order suspending the effectiveness of a registration statement registering the Registrable Securities or their resale which is known to the Company or the initiation of any proceedings for that purpose which are known to the Company and (C) of the receipt by the Company of any notification with respect to the suspension of the qualification of such Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purposes;

 

(g)          As promptly as practicable after becoming aware of such event, notify each Stockholder of the occurrence of any event of which the Company has knowledge, as a result of which the prospectus included in the registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein in order to make the statements therein, in light of the circumstances under which they were made, not misleading, and to use its best efforts to promptly prepare a supplement or amendment to the registration statement or other appropriate filing with the Commission to correct such untrue statement of omission, and to deliver a number of copies of such supplement or amendment to each Stockholder as such Stockholder may reasonably request; and

(h)         If the offering is underwritten, at the request of a Stockholder, to furnish on the date that Registrable Securities are delivered to the underwriters for sale pursuant to such registration: (i) an opinion dated such date of counsel representing the Company for the purposes of such registration, addressed to the underwriters and to any Stockholder selling Registrable Securities in connection with such underwriting, stating that such registration statement has become effective under the Securities Act and that (A) to the best knowledge of such counsel, no stop order suspending the effectiveness thereof has been issued and no proceedings for that purpose have been instituted or are pending or contemplated under the Securities Act and (B) the registration statement, the related prospectus and each
amendment or supplement thereof comply as to form in all material respects with the requirements of the Securities Act (except that such counsel need not express any opinion as to financial statements or other financial data contained therein) and (ii) a letter dated such date from the Company’s independent public accountants addressed to the underwriters and to such Stockholders, stating that they are independent public accountants within the meaning of the Securities Act and that, in the opinion of such accountants, the financial statements of the Company included in the registration statement or the prospectus, or any amendment or supplement thereof, comply as to form in all material respects with the applicable accounting requirements of the Securities Act, and such letter shall additionally cover such other financial matters (including information as to the period ending no more than five (5) Business Days prior to the date of such letter) with respect to such registration
as such underwriters may reasonably request.

 

4.           Obligations of the Stockholders.   In connection with the registration of the Registrable Securities, the Stockholders shall have the following obligations:

 

(a)          It shall be a condition precedent to the obligations of the Company to complete the registration pursuant to this Agreement of the Registrable Securities of each Stockholder that such Stockholder shall furnish to the Company in writing such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of the Registrable Securities held by it, as shall be reasonably required to effect the registration of such Registrable Securities, and such Stockholder shall execute such documents in connection with such registration as the Company may reasonably request.  At least five (5) days prior to the first anticipated filing date of the registration statement, the Company shall notify such Stockholder of the information the Company requires from such
Stockholder (the “Requested Information”) if such Stockholder elects to have any of its Registrable Securities included in the registration statement.  

 

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If, at least two (2) business days prior to the filing date, the Company has not received the Requested Information from a Stockholder, then the Company may file the registration statement without including the Registrable Securities of such Stockholder.

 

(b)         The Stockholder, by such Stockholder’s acceptance of the Registrable Securities, agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of any registration statement hereunder, unless such Stockholder has notified the Company in writing of such Stockholder’s election to exclude all of such Stockholder’s Registrable Securities from such registration statement.

 

(c)          Each Stockholder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Sections 2(a)(ii),  3(f) or 3(g) above, such Stockholder will immediately discontinue disposition of its Registrable Securities pursuant to the registration statement covering such Registrable Securities until such copies of the supplemented or amended prospectus contemplated by Sections 2(a)(ii),  3(f) or 3(g) shall be furnished to such Stockholder.

 

(d)         If the offering is underwritten, at the request of the managing underwriters, each Stockholder or his permitted assignee holding more than one percent (1%) of the Company’s voting securities shall agree not to sell or otherwise transfer or dispose of any Registrable Securities of the Company held by such Stockholder (other than those included in the registration) for a period specified by the underwriters not to exceed ninety (90) days following the effective date of the registration statement, provided that all officers and directors of the Company and holders of at least one percent (1%) of the Company’s voting securities enter into similar agreements.  The obligations described in this Section 4(d) shall not apply to a registration relating solely to employee share option plans or
an acquisition transaction registered on Form S-4.

 

(e)          Each Stockholder shall take all other reasonable actions necessary to expedite and facilitate the disposition by the Stockholder of the Registrable Securities pursuant to the registration statement.

 

  5.            Expenses.         All expenses incurred by the Company in complying with its obligations under this Agreement shall be paid by the Company, except that the Company shall not be liable for any fees, discounts or commissions to any underwriter or any fees or disbursements of counsel for any Stockholder, in either case in respect of the Registrable Securities sold by any Stockholders.

 

	
             
 	
              6.
 	
              Indemnification and Contribution.
 

 

 (a)         Indemnification by the Company.  If any Registrable Securities are registered for resale under the Securities Act pursuant to this Agreement, the Company shall indemnify and hold harmless each Stockholder of such Registrable Securities and such Stockholder's directors, officers, employees and agents, against any losses, claims, damages, liabilities or expenses, joint or several, to which such Stockholder or any such director, officer, employee or agent may become subject under the Securities Act or any other statute or at common law, insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof) arise out of or are based upon (i) any untrue statement of any material fact contained, on the effective date thereof, in any registration
statement under which such Registrable Securities were registered under the Securities Act or any final prospectus contained therein (in each case as amended or supplemented, including without limitation, any update pursuant to Rule 424(b) under the Securities Act), provided that such final prospectus was used to effect a sale by such 

 

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Stockholder. (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading or, with respect to any prospectus, necessary to make the statements therein in light of the circumstances under which they were made not misleading, or (iii) any violation by the Company of the Securities Act or state securities or blue sky laws applicable to the Company and relating to any action or inaction required of the Company in connection with such registration or qualification under such state securities or blue sky laws; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability or expense arises out of or is based upon any untrue statement or alleged untrue
statement or any omission or alleged omission made in such registration statement, final prospectus, or amendment or supplement in reliance upon and in conformity with written information furnished to the Company by such Stockholder specifically for use in such registration statement, prospectus, or amendment or supplement.  Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Stockholder or such director, officer, employee or agent.

 

 (b)         Stockholders’ Indemnification.  In connection with any registration statement in which a Stockholder is participating, each such Stockholder will furnish to the Company such information as shall reasonably be requested by the Company for use in any such registration statement or prospectus and shall severally, and not jointly, indemnify, to the extent permitted by law, the Company, its directors, officers, employees and agents against any losses, claims, damages, liabilities and expenses (under the Securities Act, at common law or otherwise), insofar as such losses, claims, damages, liabilities or expenses arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained on the effective date thereof in any
registration statement filed by the Company under the Securities Act, or any final prospectus included therein (in each case as amended or supplemented, including without limitation, any update pursuant to Rule 424(b) under the Securities Act), but only to the extent that such untrue statement of a material fact is contained in, or such material fact is omitted from, written information furnished by such Stockholder, specifically for use in such registration statement or prospectus; provided, however, that the obligations of such Stockholders hereunder shall be limited to an amount equal to the proceeds to each Stockholder of Registrable Securities sold in connection with such registration.

 

 (c)         Indemnification Procedures.  Promptly after receipt by an indemnified party hereunder of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party hereunder, notify the indemnifying party in writing thereof (an “Indemnification Notice”), but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party unless the indemnifying party is materially and adversely affected thereby.  In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate in and, to the extent it shall wish, to assume and undertake the defense thereof and, after notice from the indemnifying party to such indemnified party of its election so to assume and undertake the defense thereof, the indemnifying party shall not be liable to such indemnified party under this Section 6(c) for any legal expenses subsequently incurred by such indemnified party in connection with the defense thereof.  Notwithstanding the foregoing, the indemnified party shall have the right to employ its own counsel at its expense unless (i) the employment of such counsel shall have been authorized in writing by the indemnifying party or (ii) the attorneys for the indemnifying party shall have concluded that there are defenses available to the indemnified party that are different from or additional to those available to the indemnifying party and such counsel reasonably concludes that it is therefore unable to represent the interests of both the indemnified and
indemnifying party (in which case the 

 

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indemnifying party may employ separate counsel).  In no event shall the indemnifying party be liable for fees and expenses of more than one counsel separate from its own counsel.

 

 (d)         In order to provide for just and equitable contribution to joint liability under the Securities Act in any case in which either (i) any holder of Registrable Securities exercising rights under this Agreement, or any controlling person of any such holder, makes a claim for indemnification pursuant to this Section 6 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section 6 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any such selling holder or any such controlling person in
circumstances for which indemnification is provided under this Section 6; then, and in each such case, the Company and such holder will contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (after contribution from others) in such proportion so that such holder is responsible for the portion represented by the percentage that the public offering price of its Registrable Securities offered by the registration statement bears to the public offering price of all securities offered by such registration statement, and the Company is responsible for the remaining portion; provided, however, that, in any such case, (A) no such holder will be required to contribute any amount in excess of the net proceeds received by such holder from the sale of such Registrable Securities offered by it pursuant to such registration statement; and (B) no person or entity guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act)
will be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation.  

 

	
             
 	
            7.
 	
            Restrictions on Dispositions of Parent Stock.
 

 

(a)             For a period of six months commencing on the Effective Date (the “Initial Lock-up”) no Stockholder may (i) offer, issue, sell, contract to sell, transfer, pledge, assign, hypothecate or otherwise encumber or dispose of (or enter into any transaction which is designed to, or might reasonably be expected to, result in the disposition (whether by actual disposition as effective economic disposition due to cash settlement or otherwise) by any Stockholder or any affiliate of any Stockholder or any person in privity with any Stockholder or any affiliate of any Stockholder), directly or indirectly, any shares of Parent Stock issued pursuant to the Merger Agreement or any options, warrants or other securities convertible into or exercisable or exchangeable for such
Parent Stock issued pursuant to the Merger Agreement or (ii) engage in any transaction, whether or not with respect to any shares of Parent Stock issued pursuant to the Merger Agreement or any interest therein, the intent or effect of which is to reduce the risk of owning such shares (including, by way of example and not limitation, engaging in put, call, short-sale, straddle or similar market transactions). 

 

(b)             Subject to applicable securities laws, commencing at the expiration of the Initial Lock-up, each Stockholder may sell, transfer or otherwise dispose of up to one-half of such Stockholder’s Parent Stock issued pursuant to the Merger Agreement without violating the provisions of Section 7(a) hereof.

 

(c)             Subject to applicable securities laws, commencing six months after the expiration of the Initial Lock-up, each Stockholder may sell, transfer or otherwise dispose of all or any of such Stockholder’s Parent Stock issued pursuant to the Merger Agreement without violating the provisions of Section 7(a) hereof.

 

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(d)              In addition to applicable securities law requirements, all shares of Parent Stock issued pursuant to the Merger Agreement subject to the provisions of this Section shall, until the expiration of the stated time periods, bear a legend substantially as follows:

“THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED, SOLD, PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE WITH THE CONDITIONS SPECIFIED IN THAT CERTAIN REGISTRATION RIGHTS AGREEMENT, DATED OCTOBER 25, 2006, BY AND AMONG THE HOLDER OF THIS CERTIFICATE, PHARMOS CORPORATION AND CERTAIN OTHER STOCKHOLDERS OF PHARMOS CORPORATION, A COPY OF WHICH MAY BE INSPECTED BY THE HOLDER OF THE CERTIFICATE AT THE PRINCIPAL OFFICES OF PHARMOS CORPORATION OR FURNISHED BY PHARMOS CORPORATION TO THE HOLDER OF THIS CERTIFICATE UPON WRITTEN REQUEST AND WITHOUT CHARGE.”

 

	
             
 	
            8.
 	
            Miscellaneous.
 

 

 (a)         Notices.            All notices and other communications pursuant to this Agreement shall be in writing, either hand delivered or sent by certified or registered mail with charges prepaid or by commercial courier guaranteeing next business day delivery, or sent by telecopier, and shall be addressed:

 

 (i)        in the case of the Company, to the Company at its principal office set forth in the Merger Agreement; and

 

 (ii)       in the case of a Representative or Stockholder, to the Representatives at the addresses provided below:

 

Srinivas Akkaraju

c/o Panorama Capital

2440 Sand Hill Road, Suite 302 

Menlo Park, CA 94025

	
             
 	
            Fax:
 	
            (415) 591-1205
 

	
             
 	
            Phone:
 	
            (650) 234-1420
 

 

Anthony B. Evnin

c/o Venrock Associates

30 Rockefeller Plaza, Room 5508

New York, NY  10112

	
             
 	
            Fax:
 	
            (212) 649-5788
 

	
             
 	
            Phone:
 	
            (212) 649-5791
 

 

 

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Charles W. Newhall III

c/o New Enterprise Associates

1119 St. Paul Street

Baltimore, MD  21202

	
             
 	
            Fax:
 	
            (410) 752-7721
 

	
             
 	
            Phone:
 	
            (410) 244-0115
 

 

Robert F. Johnston

48 Elm Ridge Road

Pennington, NJ  08534

	
             
 	
            Fax:
 	
            (609) 737-0314
 

	
             
 	
            Phone:
 	
            (609) 737-2935
 

 

Jeff Calcagno

c/o BA Venture Partners

950 Tower Lane, Suite 700

Foster City, CA 94404

	
             
 	
            Fax:
 	
            (650) 378-6040
 

	
             
 	
            Phone:
 	
            (650) 378-6064
 

 

with a copy (which shall not constitute notice) to:

 

John E. Stoddard III 

Drinker Biddle & Reath LLP

105 College Road East, Suite 300

Princeton, New Jersey 08542

	
             
 	
            Fax:  
 	
            (609) 799-7000
 

Phone: (609) 716-6504

 

Any notice or other communication pursuant to this Agreement shall be deemed to have been duly given or made and to have become effective (i) when delivered in hand to the party to which it was directed, (ii) if sent by telecopier and properly addressed in accordance with the foregoing provisions of this Section 8(a), when received by the addressee, (iii) if sent by commercial courier guaranteeing next business day delivery, on the business day following the date of delivery to such courier, or (iv) if sent by first-class mail, postage prepaid, and properly addressed in accordance with the foregoing provisions of this Section 8(a), (A) when received by the addressee, or (B) on the third business day following the day of dispatch thereof, whichever of (A) or (B) shall be the earlier.

 

 (b)         Assignment.  This Agreement shall inure to the benefit of and be binding upon each Stockholder and its, his or her heirs and successors.  The Stockholders’ rights and obligations and each Stockholder's rights and obligations under this Agreement may only be assigned or delegated if each Stockholder’s Registrable Securities are assigned to the same party to which the rights hereunder are assigned or delegated, and such assignment of Registrable Securities is not in violation of the Securities Act or any state securities laws as set forth in the written opinion of counsel to such Stockholder, reasonably satisfactory to the Company.  The Company’s rights and obligations under this Agreement shall not be assigned or delegated.

 

 (c)         Amendment and Waiver.  This Agreement may not be amended except by an instrument in writing signed by the Company and by the Required Stockholders.  Any Stockholder may waive any of its, his or her rights under this Agreement (including, without limitation, such Stockholder's right to cause any other Person to comply with such other Person's obligations under 

 

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this Agreement) only by an instrument in writing signed by such Stockholder; provided, however, that any rights under this Agreement which inure to the benefit of any and all Stockholders (including, without limitation, the right of any and all Stockholders to cause any other Person to comply with such other Person’s obligations under this Agreement) may be waived on behalf of any and all Stockholders by an instrument in writing signed by the Required Stockholders.  Any waiver, pursuant to this Subsection 9(c), of a breach of this Agreement shall not operate or be construed as a waiver of any subsequent breach.  

 

 (d)        Governing Law; Headings.  This agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to conflict of law provisions of such state.  The headings in this Agreement are for convenience only and shall not affect the construction hereof.

 

 (e)         Severability.  In the event that any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

 

 (f)         Entire Agreement.  This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein.  This Agreement supersedes all prior agreements and understandings between the parties with respect to the subject matter contained herein and therein.

 

 (g)        Gender and Number.  Whenever the context may require, any pronouns used herein shall include the corresponding masculine, feminine or neuter forms, and the plural form of names, defined terms, nouns and pronouns shall include the singular and vice-versa.

 

 (h)         Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart.

 

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REGISTRATION RIGHTS AGREEMENT

SIGNATURE PAGE – PHARMOS

 

 

 

IN WITNESS WHEREOF, the Company and the Representatives have executed this Agreement as of the date first above written.

 

 

 

PHARMOS CORPORATION

 

 

 

By:_______________________________

	
             
 	
            Name:
 

	
             
 	
            Title:
 

 

 

12

 

REGISTRATION RIGHTS AGREEMENT

SIGNATURE PAGE – REPRESENTATIVES

 

 

 

IN WITNESS WHEREOF, the Company and the Representatives have executed this Agreement as of the date first above written.

 

 

 

 

_______________________________

	
             
 	
            Srinivas Akkaraju
 

 

 

_______________________________

	
             
 	
            Jeff Calcagno
 

 

 

_______________________________

	
             
 	
            Anthony B. Evnin
 

 

 

_______________________________

	
             
 	
            Robert F. Johnston
 

 

 

_______________________________

	
             
 	
            Charles W. Newhall III
 

 

 

 

 

13EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT

            EMPLOYMENT AGREEMENT (the "Agreement"), dated as of the __27____ day of ___October___________, 2006 (the "Commencement Date"), between Cambridge Display Technology, Inc., a Delaware corporation (the "Company"), and David Fyfe ("Executive"). 

W I T N E S S E T H:

            WHEREAS, the Company and Executive are parties to an Employment Agreement, dated as of August 12, 2002, which was amended by instrument dated as of August 31, 2004; and

            WHEREAS, the Company desires to continue the services of Executive and to amend and restate the Agreement to embody the terms of such continued employment and to comply with Section 409A of the Internal Revenue Code of 1986, as amended (the "Code");

            WHEREAS, the Company and Executive agree that Executive will continue to have a prominent role in the management of the business, and the development of the goodwill, of the Company and its subsidiaries and will establish and develop relations and contacts with the principal customers and suppliers of the Company and its subsidiaries in the United States of America and the rest of the world and maintain and develop relations with investors in the Company in both Europe and the USA;

            WHEREAS, (i) in the course of his employment with the Company, Executive will obtain confidential and proprietary information and trade secrets concerning the business and operations of the Company and its subsidiaries in the United States and the rest of the world that could be used to compete unfairly with the Company and its subsidiaries; (ii) the covenants and restrictions contained in Section 7 are intended to protect the legitimate interests of the Company and its subsidiaries in their respective goodwill, trade secrets and other confidential and proprietary information; and (iii) Executive desires to be bound by such covenants and restrictions; and

            WHEREAS, Executive desires to accept such employment and enter into such amended and restated Agreement;  

            NOW, THEREFORE, in consideration of the mutual covenants herein contained and for other good and value consideration, the Company and Executive hereby agree as follows:

            1. Employment.

            Agreement to Employ.  Upon the terms and subject to the conditions of this Agreement, the Company hereby employs Executive and Executive hereby accepts such employment by the Company.

            (b) Term of Employment.  The Company shall employ Executive pursuant to the terms of the Agreement for the period commencing on the Commencement Date and ending on December 31, 2008, unless Executive's employment with the Company terminates earlier pursuant to Section 6 below.  The period during which Executive is employed pursuant to the Agreement shall be referred to as the "Employment Period."  

            2. Positions and Duties.  During the Employment Period, Executive shall serve as Chief Executive Officer and as a Director of the Company and in such other position or positions with the Company or any of its subsidiaries consistent with the foregoing as the Board of Directors of the Company (the "Board") may from time to time specify.  During the Employment Period, Executive shall have the duties, responsibilities and obligations customarily assigned to individuals serving in the position or positions in which Executive serves hereunder and such other duties, responsibilities and obligations consistent with such positions as the Board may from time to time specify.  Executive shall devote all of his full business time to the services required of him hereunder, except for vacation time and reasonable periods of absence due to sickness, personal injury or other disability, and shall use his best efforts, judgment, skill and energy to perform the duties of his employment in a manner consistent with his position and to improve and advance the business and interests of the Company and its subsidiaries.  The principal location of Executive's employment shall be at the Company's office in Jacksonville, Florida, although Executive understands and agrees that he may be required to travel from time to time for business reasons.  Executive represents that his employment hereunder and compliance by him with the terms and conditions of this Agreement will not conflict with or result in the breach of any other agreement to which he is a party or by which he may be bound.

            3. Compensation.

            (a) Base Salary.  During the Employment Period, the Company shall pay Executive a base salary of $480,690 per year, payable in accordance with the Company's practices in effect from time to time, but not less often than monthly.  The Board shall review Executive's base salary annually and may, in its discretion, increase such base salary if and to the extent it deems appropriate.  Executive's annual base salary payable under this Agreement, as it may be increased from time to time, is referred to herein as "Base Salary."

            (b) Incentive Compensation.  During the Employment Period, Executive shall be eligible to participate in the Company's annual incentive compensation plan for its senior executive officers (the "Annual Plan"), in accordance with the terms thereof as in effect from time to time.  Notwithstanding the foregoing, commencing as of January 1, 2006, the maximum bonus payable to Executive under the Annual Plan will be 65% of the Base Salary as adjusted from time to time.    

            (c) Payments to Executive.  The Base Salary and the bonus payable to Executive pursuant to the Annual Plan will be paid by the Company by direct deposit into the banking account designated by Executive from time to time.

            (d) 401(k) Plan Contributions.  Each year during the Employment Period, the Company shall contribute five percent (5%) of Executive's Base Salary to the Company's 401(k) Plan as a nonelective contribution; provided, however, that if in any plan year such contribution may not be made, in whole or in part, because of the legal limitations on contributions to or under the terms of the Company's 401(k) Plan, the difference between five percent (5%) of Executive's Base Salary and the amount contributed by the Company to the Company's 401(k) Plan as a nonelective contribution, less all applicable withholdings, shall be paid to Executive via payroll, promptly after the end of the plan year.

            (e) Special Pension Provision.  On the earlier of December 31, 2008 or the date of termination of Executive's employment with the Company for reasons described in Section 6 (a)(i), (ii), (iv) or (v) hereto, the Company shall pay to Executive a pension sum of $100,000 per annum for each of five (5) years, such pension to be paid in monthly installments.  However, if the pension shall become payable because of the Executive's death prior to Separation from Service, such pension shall be paid promptly in one lump sum to his surviving spouse, if any, or his estate if there is no surviving spouse.  If the pension shall become payable for any other reason, subject to Section 6(f), it shall be paid in monthly installments commencing as of the first day of the month following the Executive's Separation from Service.  In the event of the Executive's death following Separation from Service, the six month delay, if any, in benefit commencement shall be waived and the balance of any pension payments shall be paid promptly in one lump sum to his surviving spouse, if any, or his estate if there is no surviving spouse.  Promptly following a Change in Control (as defined in Section 6(d)), the Company shall promptly pay to the Executive, in a single lump sum, the amount that remains due to him pursuant to this Section 3(e) as of such date.  For the avoidance of doubt, the Executive shall not be entitled to any pension payments under this Section 3(e) if his employment is terminated by the Company for Cause or by Executive without Good Reason on or prior to December 31, 2008.

            (f) Overseas Services.  The Overseas Benefits Agreement dated as of August 12, 2002 between the Company and Executive terminated effective as of December 31, 2005.  Nevertheless, the Company shall continue to make tax equalization payments with respect to the period ending December 31, 2005 and provide professional advice in relation to Executive's tax filings in accordance with the Overseas Benefits Agreement and on the same terms subsequently for any tax year in which he is liable for taxes in jurisdictions outside of the United States in relation to his earnings from the Company.  The Company shall pay to or on behalf of the Executive any remaining taxes and tax equalization payments due for the period to December 31, 2005 no later than the end of the second calendar year beginning after the calendar year in which Executive's U.S. Federal income tax return is required to be filed (including extensions) for the year to which such tax equalization payment relates.   Save as otherwise expressly provided in this Agreement, the Company shall not be liable to bear the cost of tax liabilities incurred by the Executive on income or gains in respect of periods from and after January 1, 2006.  To the extent that the cost of professional advice is regarded as a taxable benefit, the Company will for the period of this Agreement gross-up or reimburse all applicable taxes with the result that Executive receives such advice on a tax free basis.  In the event that Executive's accumulated United States foreign tax credits are not sufficient to offset any additional tax liability he incurs due to any of his responsibilities to the Company and its affiliates outside of the United States which are taxed by non-United States jurisdictions, the Company shall, no later than ninety (90) days after separation from service at the termination of the Employment Period, make a payment to Executive of non-U.S. taxes on his United States general limitation income which he has paid or reasonably expects to pay with respect to income earned during the Employment Period and which, in reliance on professional advice, he does not expect to credit against his United States taxes in the five-year period after the Employment Period.  Within thirty (30) days after the Commencement Date, the Company shall provide Executive with a statement of amounts paid to or on behalf of Executive in respect of the period beginning January 1, 2006 and ending on the Commencement Date.  In the event that the Company pays Executive a bonus for 2006 under the Annual Plan, such bonus shall be reduced by any such amounts in respect of income or gains accrued from January 1, 2006 which have been borne by the Company on behalf of the Executive otherwise than by deduction out of his gross remuneration.  If no bonus shall be paid in respect of 2006, any such amounts which have paid or borne by the Company shall not be repayable by Executive.  The Company shall withhold all applicable income taxes from all payments described in this Section 3(f) in accordance with applicable law.

            4. Indemnification.  Executive and the Company shall enter into the Company's Indemnification Agreement for executives of the Company.

            5. Benefits and Expenses.

            (a) Benefit Plans.  During the Employment Period, employee and senior executive benefits (other than severance benefits), including life, medical, dental, vision and disability insurance will be provided to Executive in accordance with the programs, if any, of the Company available to its senior executives, as in effect from time to time.  Executive will also be entitled to participate in the Company's 401(k) plan in accordance with the terms thereof.

            (b) Other Benefits.  During the Employment Period, Executive shall be entitled to five weeks of paid vacation annually and shall also be entitled to such other benefits and perquisites as may be provided by Company from time to time to its other senior executive officers, in accordance with the policies and practices of the Company as in effect from time to time.  

            (c) Business Expenses.  During the Employment Period, the Company shall pay or reimburse Executive for all reasonable expenses incurred or paid by Executive in the performance of Executive's duties hereunder, upon presentation of expense statements or vouchers and such other information as the Company may require, in accordance with the generally applicable policies and procedures of the Company as in effect from time to time.

            6. Termination of Employment.

            (a) Early Termination of the Employment Period.  Notwithstanding Section 1(b) of the Agreement, the Employment Period shall end upon the earliest to occur of a termination of Executive's employment (i) on account of Executive's death, (ii) due to Disability, (iii) by the Company for Cause (iv) effective as of the date specified by the Company in a written notice delivered to Executive by the Company of his termination without Cause, (v) by Executive for Good Reason, or (vi) effective as of the delivery by Executive of written notice to the Company of his resignation without Good Reason, provided that with respect to a termination pursuant to clause (iv), (v) or (vi), the terminating party must give at least twelve months' notice to the other party in order for such termination to be effective.  The Company reserves the right to require Executive not to report to work during the twelve month notice period.

            (b) Benefits Payable Upon Termination.  In the event of the early termination or following the end of the Employment Period pursuant to Section 6(a), Executive (or, in the event of his death, his surviving spouse, if any, or his estate if there is no surviving spouse) shall be paid the type or types of compensation determined to be payable in accordance with the following table at the times established pursuant to Section 6(c):

 

 

	 	

Earned Salary
	

Vested Benefits
	

Compensation Under the Annual Plan
	

Severance Payment
	

Payment for Benefit Continuation
	

Special Pension

	Termination due to death

	

Payable
	

Payable
	

Payable
	

Not Payable
	

Not Payable
	

Payable

	Termination due to Disability

	

Payable
	

Payable
	

Payable
	

Not Payable
	

Not Payable
	

Payable

	Termination for Cause

	

Payable
	

Payable
	

Not Payable
	

Not Payable
	

Not Payable
	

Not Payable

	Termination Without Cause

	

Payable
	

Payable
	

Payable
	

Payable
	

Payable
	

Payable

	Resignation for Good Reason

	

Payable
	

Payable
	

Payable
	

Payable
	

Payable
	

Payable

	Resignation by Executive without Good Reason

	

Payable
	

Payable
	

Not Payable
	

Not Payable
	

Not Payable
	

Not Payable

	Expiration of Employment Period Without Prior Termination of Employment with the Company

	

Payable
	

Payable
	

Payable
	

Not Payable
	

Not Payable
	

Payable

 

 

            (c) Timing of Payments.  Any payments due to Executive pursuant to Section 6(b) shall be paid as follows:

      (i) Earned Salary.  Earned Salary and all accrued but unused paid time off shall be paid within 14 days after the effective date of termination.  Vested Benefits shall be payable in accordance with the terms of the plan, policy, practice, program, contract or agreement under which such benefits have accrued.  

      (ii) Severance Payment.  If Executive's employment terminates prior to December 31, 2008 pursuant to Section 6(a)(iv) or (v), the Company shall pay Executive Severance Payments in accordance with this Section 6(c)(ii); provided that Executive first executes an irrevocable general release on a form provided by the Company.  Subject to Section 6(f), each Severance Payment shall be made as of the last day of each month during the Severance Period (as defined below).  Severance Payments shall cease as of the last day of the Employment Period, provided, however, that Severance Payments shall cease immediately if Executive breaches any of the provisions of Section 7, and if Executive has not yet received any Severance Payment at the time of such breach, he shall only be entitled to one Severance Payment.  In the event of Executive's death before the entire amount of the Severance Payments have been paid to him, the balance of the Severance Payments shall be promptly paid as a lump sum to his surviving spouse, if any, or his estate if there is no surviving spouse.  

      (iii) Annual Plan.  Any accrued compensation under the Annual Plan due under Section 6(b) of this Agreement shall be paid in a single lump sum within 30 days following the delivery to the Company of the Company's audited financial statements for the fiscal year (wherein Executive provided services under this Agreement).  With respect to such compensation under the Annual Plan, should Executive be entitled to compensation at the time of termination as set forth in Section 6(b) above, Executive shall receive a pro-rata share based upon the time worked during the year in which his employment terminated, subject to the terms of the Annual Plan.  

      (iv) Benefit Continuation.  To the extent permitted by law and the terms of the Company's benefit plans, Benefit Continuation will be provided to Executive during the Severance Period, provided that the Executive executes an irrevocable general release on a form provided by the Company.  Notwithstanding the foregoing, if Executive obtains alternative benefit coverage from a new employer (whether as an employee, consultant or otherwise) of the type or types provided to Executive under the Benefit Continuation, such type or types of Benefit Continuation hereunder shall cease immediately upon the date such alternative coverage is obtained or, in the case of any medical benefits, the date that any applicable waiting periods or pre-existing condition exclusions under such alternative coverage expire.  Notwithstanding the foregoing, Benefit Continuation shall cease immediately if Executive breaches any of the provisions of Section 7.  

            (d) Definitions.  For purposes of Sections 3, 6, 7 and 8, the following terms shall have the meanings ascribed to them below:

            Benefit Continuation:  coverage during the Severance Period under any medical, dental, vision, life insurance or disability plan described in Section 5(a) hereof in which Executive participates on the last day of the Employment Period and which permits continued participation by former employees, at the level at which Executive participated in such plans on the last day of the Employment Period; provided, however, that Executive continues to make the same amount of contributions to the cost of coverage as may be required from time to time of senior executives of the Company.  

            Cause:  a termination of Executive's employment by the Company or any subsidiary of the Company that employs Executive (or by the Company on behalf of any such subsidiary) due to Executive's (i) refusal or neglect to perform substantially his employment-related duties, (ii) theft, fraud, embezzlement, falsification of Company or client documents, misappropriation of funds or other assets of the Company, dishonesty, incompetence, willful misconduct, breach of fiduciary duty or duty of loyalty, or material breach or material non-observance of any of the terms or conditions of this Agreement, (iii) conviction of or entering a plea of guilty or nolo contendere to a crime constituting a felony or his willful violation of any law, rule or regulation (other than a traffic violation or similar offense or violation outside of the course of employment which in no way adversely affects the Company or its reputation or the ability of Executive to perform his employment-related duties or to represent the Company), (iv) breach of Section 7 hereof or of any other written covenant or agreement with the Company or any of its subsidiaries not to disclose any information pertaining to the Company or any such subsidiary or not to compete or interfere with the Company or such subsidiary, or (v) refusal or failure to implement any lawful instruction issued by the Board or the Company.

            Change in Control:  the acquisition by any person or a group of persons of ownership of stock of the Company, that, together with stock held by such person or group, constitutes more than fifty percent (50%) of the total fair market value or total voting power of the stock of the Company.  However, if any one person, or more than one person acting as a group, is considered to own more than 50% of the total fair market value or total voting power of the stock of the Company, the acquisition of additional stock by the same person or persons is not considered to cause a Change in Control.  

            Disability:  the termination of the employment of Executive by the Company or any of its subsidiaries that employs Executive (or by the Company on behalf of any such subsidiary) shall be deemed to be by reason of a "Disability" if, as a result of Executive's incapacity due to reasonably documented physical or mental illness, Executive shall have been unable for a period of six months, consecutive or non-consecutive, within any 12-month period, to perform his duties with the Company or any subsidiary that employs Executive on a full-time basis.

            Earned Salary:  any Base Salary earned, but unpaid, for services rendered to the Company or any of its subsidiaries on or prior to the date on which the Employment Period ends pursuant to Section 6(a).

            Good Reason:  a termination of Executive's employment with the Company or any of its subsidiaries that employs Executive shall be for "Good Reason" if Executive voluntarily terminates his employment with the Company or any such subsidiary as a result of any of the following:

      (i) without Executive's prior written consent, a significant reduction by the Company or any such subsidiary of his current Base Salary (after receipt by the Company of written notice and a 20-day cure period), other than any such reduction which is part of a general salary reduction or other concessionary arrangement affecting all employees or affecting the group of employees of which Executive is a member;

      (ii) the taking of any action by the Company or any such subsidiary that would substantially diminish the aggregate value of the benefits provided to Executive under the Company's or such subsidiary's accident, disability, life insurance and any other employee benefit plans in which he was participating on the date of his execution of this Agreement (after receipt by the Company of written notice and a 20-day cure period), other than any such reduction which is (A) required by law, (B) implemented in connection with a general concessionary arrangement affecting all employees or affecting the group of employees of which Executive is a member or (C) generally applicable to all beneficiaries of such plans; or

      (iii) a change in Executive's management status that meaningfully and detrimentally changes his responsibilities, span of control or authority to operate as the chief executive officer of the Company at the direction of the Board.

.

            Separation from Service:  shall mean Executive's "separation from service," as defined in Section 409A9(a)(2)(A)(i) of the Code and applicable regulations thereunder, from the Company. 

            Severance Payment:  an amount per month equal to one-twelfth of the Base Salary payable to Executive, at the annual rate in effect immediately prior to the last day of the Employment Period.

            Severance Period:  the period commencing on the date of Executive's Separation from Service pursuant to Section 6(a)(iv) or (v) and ending on the date of the expiration of the Employment Period.

            Vested Benefits:  amounts which are vested or which Executive is otherwise entitled to receive under the terms of or in accordance with any plan, policy, practice or program of, or any contract or agreement with, the Company, at or subsequent to the date of his employment termination without regard to the performance by Executive of further services or the resolution of a contingency, including, without limitation, rights to continuation coverage under any group health plan.

            (e) Full Discharge of Company Obligations.  The payment of the amounts payable to Executive pursuant to this Section 6 following termination of his employment (including, without limitation, amounts payable with respect to Vested Benefits and in connection with any Benefit Continuation) shall be in full and complete satisfaction of Executive's rights under this Agreement and any other claims he may have in respect of his employment or termination of employment with the Company or any of its subsidiaries.  Such amounts shall constitute liquidated damages with respect to any and all such rights and claims and, upon Executive's receipt of such amounts, the Company and its subsidiaries, and their respective officers and directors, shall be released and discharged from any and all liability to Executive in connection with this Agreement or otherwise in connection with Executive's employment or termination of employment with the Company and its subsidiaries.

            (f) Section 409A Tax.  Notwithstanding anything herein to the contrary, if the Executive is a "Specified Employee," as defined in Code Section 409A(a)(2)(B)(i) and the regulations and rulings issued thereunder, to the extent any payment or provision of benefits under this Agreement is required to be made upon the Executive's  Separation From Service and is subject to Section 409A of the Code, no such payment shall be made for six (6) months following the Executive's Separation From Service (or, if earlier, until the death of Executive).  In the case of any payment delayed in accordance with this Section 6(f), all payments to which Executive would otherwise be entitled during the six months following his Separation from Service shall be accumulated and paid, without interest, on the first day of the seventh month following his Separation from Service (or promptly following the date of his death, if earlier).  In the case of any Benefits Continuation delayed in accordance with this Section 6(f), Executive shall pay to the Company the value of all such Benefits Continuation for the six month period following his Separation from Service, and the Company shall reimburse such amounts, without interest, on the first day of the seventh month following the date of Executive's Separation from Service (or promptly following the date of Executive's death, if earlier). .  

            7. Noncompetition; Confidentiality; Ownership; Non-Solicitation.

      In order to protect the Company's trade secrets, valuable confidential business information relationships with prospective or existing customers or clients, and in consideration of Executive's continued employment, Executive agrees to the following covenants:

            (a) Noncompetition.  During the Employment Period and (i) in the case of a termination of Executive's employment due to Executive's resignation other than for Good Reason or a termination by the Company for Cause, during the one year period following such termination of Executive's employment or (ii) in the case of a termination of Executive's employment due to a resignation by Executive for Good Reason or a termination by the Company without Cause, during the applicable Severance Period under clause (i) or (ii) hereof (the "Restriction Period"), Executive shall not become associated with any entity, whether as a principal, partner, employee, consultant or shareholder (other than as a holder of not in excess of 1% of the outstanding voting shares of any publicly traded company), that is actively engaged in any geographic area in which the Company or any of its subsidiaries does business during the Employment Period or during the 12 months preceding Executive's termination of employment, in any business which is in competition with the business of the Company or any of its subsidiaries conducted during the Employment Period or any business proposed to be conducted by the Company or any of its subsidiaries in the Company's business plan as in effect as of the date of termination of Executive's employment.

            (b) Confidentiality.  Without the prior written consent of the Board, except to the extent required by law, rule, regulation or court order, Executive shall not disclose any trade secrets, customer lists, drawings, designs, information regarding product development, marketing plans, sales plans, manufacturing plans, management organization information (including data and other information relating to members of the Board or management), operating policies or manuals, business plans, financial records, packaging design or other financial, commercial, business or technical information relating to the Company or any of its subsidiaries or information designated as confidential or proprietary that the Company or any of its subsidiaries may receive belonging to suppliers, customers or others who do business with the Company or any of its subsidiaries (collectively, "Confidential Information") to any third person unless such Confidential Information has been previously disclosed to the public by the Company or is in the public domain (other than by reason of Executive's breach of this Section 7(b)).

            (c) Company Property; Ownership of Developments.  Promptly following Executive's termination of employment, Executive shall return to the Company all property of the Company or any of its subsidiaries, and all copies thereof (in whatever media) in Executive's possession or under his control.  Executive hereby agrees that the Company shall own all right, title and interest in and to all ideas, programs, systems, processes, discoveries, inventions and information whether or not patentable or copyrightable, which Executive, either alone or jointly with others, conceives, makes, develops, acquires or reduces to practice, in whole or in part, during the Employment Period which are unique to the Company's business or are used by the Company, or arise out of or in connection with the duties performed by Executive hereunder (collectively "Developments").  Subject to the foregoing, Executive will promptly and fully disclose to the Company, or any persons designated by it, any and all Developments conceived, made, developed, learned or reduced to practice by Executive, either alone or jointly with others during the Employment Period.  Executive hereby assigns all right, title and interest in and to any and all of these Developments to the Company.  Executive shall further assist the Company, at the Company's expense, to further evidence, record and perfect such assignments, and to perfect, obtain, maintain, enforce, and defend any rights specified to be so owned or assigned.  Executive hereby irrevocably designates and appoints the Company and its agents as attorneys-in-fact to act for and in Executive's behalf to execute and file any document and to do all other lawfully permitted acts to further the purposes of the foregoing with the same legal force and effect as if executed by Executive.  In addition, and not in contravention of any of the foregoing, Executive acknowledges that all original works of authorship which are made by him (solely or jointly with others) within the scope of employment and which are protectable by copyright are "works made for hire," as that term is defined in the United States Copyright Act (17 U.S.C.A. õ 101).

            (d) Non-Solicitation of Employees.  Except during the Employment Period in connection with the performance of his duties hereunder, during the Employment Period and for one year thereafter, Executive shall not, either directly or indirectly, personally or on behalf of or in conjunction with any person or firm, solicit, induce, facilitate, recruit, encourage or cause any employee, consultant, contractor, agent or representative of the Company, to leave their employment or engagement with the Company for any reason.

            (e) Non-Solicitation of Clients.  Except during the Employment Period in connection with the performance of his duties hereunder, during the Employment Period and for one year thereafter, Executive shall not solicit or otherwise attempt to establish for himself or any other person, firm or entity any business relationship with any person, firm or corporation which is, or during the 12-month period preceding the date Executive's employment terminates was, a customer, client or distributor of the Company or any of its subsidiaries.

            (f) Injunctive Relief with Respect to Covenants.  Executive acknowledges and agrees that the covenants and obligations of Executive with respect to non-competition, non-solicitation, confidentiality and Company property relate to special, unique and extraordinary matters and that a violation or threatened violation of any of the terms of such covenants or obligations will cause the Company irreparable injury for which adequate remedies are not available at law.  Therefore, Executive agrees that the Company shall be entitled to an injunction, restraining order or such other equitable relief (without the requirement to post bond) restraining Executive from committing any violation of the covenants or obligations contained in this Section 7.  These injunctive remedies are cumulative and are in addition to any other rights and remedies the Company may have at law or in equity.

            8. Miscellaneous.

            (a) Amendments.  This Agreement may not be amended, modified or supplemented except by a written instrument signed by each of the parties hereto.

            (b) Succession and Assignment.  The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, legal representatives, successors and assigns, provided that Executive may not assign this Agreement nor his rights, interests, or obligations hereunder.

            (c) Survival.  Sections 4 (Indemnification), 6 (Termination of Employment), 7 (Non-competition; Confidentiality; Ownership; Non-Solicitation) and 8 (Miscellaneous) shall survive the termination of this Agreement, whether such termination shall be by expiration of the Employment Period, an early termination pursuant to Section 6 hereof or otherwise.

            (d) Governing Law.  This Agreement and the rights and obligations of the parties hereunder shall be governed by, construed and interpreted in accordance with, the laws of the State of Delaware, without giving effect to the choice of law principles thereof.

            (e) Invalidity of Provision; Reformation.  The invalidity or unenforceability of any provision of this Agreement in any jurisdiction shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of this Agreement, including that provision, in any other jurisdiction.  It is expressly understood and agreed that although Executive and the Company consider the restrictions contained in Section 7 to be reasonable, if a final determination is made by an arbitrator to whom the parties have assigned the matter or a court of competent jurisdiction that any restriction contained in this Agreement is an unenforceable restriction against Executive, the provisions of this Agreement shall not be rendered void but shall be reformed to apply as to such maximum time and to such maximum extent as such arbitrator or court may determine or indicate to be enforceable.  Alternatively, if such arbitrator or court finds that any restriction contained in this Agreement is unenforceable, and such restriction cannot be reformed so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein.

            (f) Waiver.  Waiver by any party hereto of any breach or default by the other party of any of the terms of this Agreement shall not operate as a waiver of any other breach or default, whether similar to or different from the breach or default waived.  No waiver of any provision of this Agreement shall be implied from any course of dealing between the parties hereto or from any failure by either party hereto to assert its or his rights hereunder on any occasion or series of occasions.

            (g) Notices.  All notices, requests, demands and other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given if (i) delivered personally, (ii) mailed, certified or registered mail with postage prepaid, (iii) sent by next-day or overnight mail or delivery or (iv) sent by fax, as follows, and shall be effective upon actual receipt by the party to whom such notice shall be directed, and shall be addressed as follows (or to such other address as the party entitled to notice shall hereafter designate in accordance with the terms hereof):

If to the Company:

c/o Cambridge Display Technology Limited

Greenwich House

Madingley Rise

Madingley Road

Cambridge CB3 0HJ

ENGLAND

Fax:  (011) 44-1223-723556

Attention:  Human Resources

with a copy to:

Bingham McCutchen LLP

399 Park Avenue 

New York, NY  10022

Fax:  (212) 702-3614

Attention:  Jonathan A. Kenter,

If to Executive:

___________________

___________________

___________________

Fax:  

or to such other address as Executive may from time to time have notified the Company, with a copy to:

___________________

___________________

___________________

Fax:

Attention:  

            All such notices, requests, demands and other communications shall be deemed to have been received (A) if by personal delivery on the day after such delivery, (B) if by certified or registered mail, on the fifth business day after the mailing thereof, (C) if by next-day or overnight mail or delivery, on the day delivered or (D) if by fax, on the next day following the day on which such fax was sent.

            (h) Headings.  The headings to Sections in this Agreement are for the convenience of the parties only and shall not control or affect the meaning or construction of any provision hereof.

            (i) Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

            (j) Entire Agreement.  This Agreement, constitutes the entire agreement and understanding of the parties hereto with respect to the matters referred to herein.  This Agreement and the agreements referred to in the preceding sentence supercede all prior agreements and undertakings among the parties with respect to such matters.  There are no representations, warranties, promises, inducements, covenants or undertakings relating to Executive's employment other than those expressly set forth or referred to herein.  Executive acknowledges that he is entering into this Agreement of his own free will and accord, and with no duress, that he has been represented and fully advised by competent counsel in entering into this Agreement, that he has read this Agreement and that he understands it and its legal consequences.

            (k) Withholding.  Any payments provided for herein shall be reduced by any amounts required to be withheld by the Company from time to time under applicable Federal, state or local income or employment tax laws or similar statutes or other provisions of law then in effect.

            

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer and Executive has hereunto set his hand as of the day and year first above written.

            

 CAMBRIDGE DISPLAY TECHNOLOGY, INC.

By:/s/ Stephen Chandler

Name:  Stephen Chandler

Title: Company Secretary

EXECUTIVE

 /s/ David Fyfe

David Fyfe

2

 

 

 

NYDOCS/1259682.10/3203544-3203544002 

 

 

 

 

 

NYDOCS/1259682.10/3203544-3203544002

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