Document:

Exh 10.23 Patterson CIC

AMENDED AND RESTATED CHANGE OF CONTROL AND SEVERANCE BENEFITS AGREEMENT
This AMENDED AND RESTATED CHANGE OF CONTROL AND SEVERANCE BENEFITS AGREEMENT (the “Agreement”) is entered into this eleventh day of November 2013 (the “Effective Date”), between TRANSCEPT PHARMACEUTICALS, INC. (the “Company”) and Leone Patterson (“Executive”).  This Agreement amends and restates in its entirety that certain Change of Control and Severance Benefits Agreement by and between the Executive and the Company dated as of July 15, 2013, as amended (the “Prior Agreement”).  This Agreement is intended to provide Executive with the compensation and benefits described herein upon the occurrence of specific events.
WHEREAS, Executive is currently employed by the Company pursuant to the terms of Executive’s offer letter with the Company, dated May 22, 2012 (the “Offer Letter”); and
WHEREAS, the Company believes it is imperative to provide Executive with certain severance benefits in the event that Executive’s employment is terminated by the Company without Cause (as defined herein) in circumstances unrelated to a Change of Control (as defined herein); 
WHEREAS, the Company believes it is imperative to provide Executive with certain change of control severance benefits, including certain equity acceleration, in the event that Executive’s employment is terminated by the Company without Cause (as defined herein) or by Executive with Good Reason (as defined herein) in connection with a Change of Control (as defined herein); and
WHEREAS, the Company believes it is in the best interests of the Company to amend and restate the Prior Agreement in its entirety, such that the Prior Agreement shall be of no further force or effect as of the Effective Date. 
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants contained herein, and other good and valuable consideration, the parties hereto hereby agree as follows:
1.TERM OF AGREEMENT.  The term of this Agreement shall commence on the Effective Date and shall continue through May 22, 2017 (the “Expiration Date”), and if not amended or renewed by the Compensation Committee of the Company’s Board of Directors (the “Compensation Committee”) prior to the Expiration Date, this Agreement shall terminate automatically on such Expiration Date.  Notwithstanding the foregoing, the Company agrees that during the one-year period before the Expiration Date, the Compensation Committee shall undertake to review this Agreement and the severance benefits and change of control severance benefits provided herein in good faith, with the assistance of the Company’s outside advisors and compensation consultants, in order to determine, based upon the then current market conditions or any other factors deemed relevant by the Compensation Committee, the appropriateness of continuing this Agreement after the Expiration Date, or whether it would be more appropriate for the Company to amend or terminate this Agreement as of the Expiration Date.  
2.    TERMINATION OF EMPLOYMENT AND SEVERANCE BENEFITS.
(a)    At-Will Employment.  Executive’s employment is at-will, which means that the Company may terminate Executive’s employment at any time, with or without advance notice, and 

 

with or without Cause (as defined herein).  Similarly, Executive may resign Executive’s employment at any time, with or without advance notice, and with or without reason.  Executive shall not receive any compensation of any kind, including, without limitation, severance benefits or change of control severance benefits, following Executive’s last day of employment with the Company (the “Termination Date”), except as expressly provided for by this Agreement, applicable law, and/or any plan documents governing the compensatory equity awards that have been or may be granted to Executive from time to time in the sole discretion of the Company.  
(b)    Termination Without Cause Unrelated to a Change of Control.  If:  (i) Executive’s employment is terminated without Cause (and other than as a result of Executive’s death or disability) at any time (except for the time period commencing on the date of the consummation of a Change of Control and ending twelve (12) months after a Change of Control), (ii) Executive signs and allows to become effective a general release of all known and unknown claims in the form provided by the Company, which form shall be substantially in the form attached hereto as Exhibit A) (the “Release”) within sixty (60) days after the Termination Date, and (iii) Executive fully complies with Executive’s continuing fiduciary, statutory and material contractual obligations to the Company (with a 30-day opportunity to cure after notice of any such non-compliance if Executive has not, unless such non-compliance is not capable of being cured); then the Company shall provide Executive with the following severance benefits (the “Severance Benefits”):
(i)    The Company shall make a single lump sum severance payment to Executive in an amount equal to twelve (12) months of Executive’s Base Annual Salary, less required tax withholdings and deductions (the “Severance Payment”).  The Severance Payment will be paid within sixty (60) days after the Termination Date, but in no event later than March 15 of the year following the year of the Termination Date.  
(ii)    Provided that Executive elects continued coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (together with any state or local laws of similar effect, “COBRA”) within the time period provided for under COBRA, the Company will pay directly or, at its election, reimburse Executive the amount of the premiums necessary to continue Executive’s group health (including dental and vision) insurance coverage in effect as of the Termination Date (including coverage for Executive’s eligible dependents) for a maximum period of twelve (12) months following the Termination Date; provided, however, that no premium payments will be made by the Company pursuant to this paragraph following the effective date of Executive’s coverage by a health (including dental and vision) insurance plan of a subsequent employer or such other date on which Executive (and Executive’s dependents, as applicable) cease to be eligible for COBRA coverage.  Executive agrees that Executive shall notify the Company in writing as soon as practical, but no later than 15 days after Executive receives coverage under a health insurance plan of a subsequent employer.
(c)    Termination Without Cause or Resignation for Good Reason Within Twelve Months After a Change of Control.  If:  (i) Executive’s employment is terminated without Cause (and other than as a result of Executive’s death or disability), or if Executive resigns for Good Reason, during the time period commencing on the date of the consummation of a Change of Control and ending twelve (12) months after a Change of Control, (ii) Executive signs and allows to become effective the Release within sixty (60) days after the Termination Date, and (iii) Executive fully complies with Executive’s continuing fiduciary, statutory and material contractual obligations to the Company (with a 30-day opportunity to cure after notice of any such non-compliance if he or 

 

she has not, unless such non-compliance is not reasonably capable of being cured); then the Company shall provide Executive with the following change of control severance benefits (the “Change of Control Benefits”): 
(i)    The Company shall make a single lump sum severance payment to Executive in an amount equal to eighteen (18) months of Executive’s Base Annual Salary, less required tax withholdings and deductions (the “Change of Control Payment”).  The Change of Control Payment will be paid within sixty (60) days after the Termination Date, but in no event later than March 15 of the year following the year of the Termination Date.
(ii)    Provided that Executive elects continued coverage under COBRA  within the time period provided for under COBRA, the Company will pay directly or, at its election, reimburse Executive the amount of the premiums necessary to continue Executive’s group health (including dental and vision) insurance coverage in effect as of the termination date of Executive’s employment (including coverage for Executive’s eligible dependents) for a maximum period of eighteen (18) months following the Termination Date; provided, however, that no premium payments will be made by the Company pursuant to this paragraph following the effective date of Executive’s coverage by a health (including dental and vision) insurance plan of a subsequent employer or such other date on which Executive (and Executive’s dependents, as applicable) cease to be eligible for COBRA coverage.  Executive agrees that Executive shall notify the Company in writing as soon as practical, but no later than 15 days after Executive receives coverage under a health insurance plan of a subsequent employer.
(iii)    After taking into account any additional acceleration of vesting Executive may be entitled to receive under any other plan or agreement, the Company shall cause all outstanding equity awards then held by Executive (including, without limitation, stock options, stock appreciation rights, restricted stock or similar awards) to become fully vested and, if applicable, exercisable with respect to all the shares subject thereto effective immediately prior to the Termination Date.  After giving effect to any acceleration of vesting of Executive’s outstanding equity awards, all outstanding options to purchase Company common stock then held by Executive that are (x) vested and exercisable as of the Termination Date and (y) designated by the Board or the Board’s compensation committee on the date of grant of such option or anytime thereafter as being eligible for extended exercisability (such option, an “Extension Eligible Option”) shall remain exercisable until the earlier of (A) the third (3rd) anniversary of Executive’s Termination Date or (B) the original expiration date of the applicable Extension Eligible Option.  If Executive has not exercised the Extension Eligible Options in accordance with the procedures set forth in Executive’s option agreements by such date, such Extension Eligible Options shall terminate and be of no further effect.  In all other respects, Executive’s equity awards shall continue to be governed by the terms of the applicable award agreements and equity incentive plan documents and any applicable agreements between the Company and Executive.
(d)    Deemed Resignation; No Requirement to Mitigate; Survival.  Upon termination of Executive’s employment for any reason, Executive shall be deemed to have resigned from all offices and directorships, if any, then held with the Company or any of its affiliates, and, at the Company’s request, Executive shall execute such documents as are necessary or desirable to effectuate such resignations.  Executive shall not be required to mitigate the amount of any payment provided for under this Agreement by seeking other employment or in any other manner.  Notwithstanding 

 

anything to the contrary in this Agreement, the termination of Executive’s employment shall not impair the rights or obligations of any party. 
3.    DEFINITIONS.  
(a)    Definition of Base Annual Salary.  For purposes of this Agreement, “Base Annual Salary” shall mean Executive’s annualized base salary in effect immediately prior to the Termination Date.  Base Annual Salary does not include variable forms of compensation such as but not limited to bonuses, incentive compensation, commissions, benefits, equity, expenses, or expense allowances.  
(b)    Definition of Cause.  For the purposes of this Agreement, “Cause” shall mean any one or more of the following:  
(i)    Executive is convicted of (or pleads guilty or no contest to) any felony or any crime involving moral turpitude; 
(ii)    Executive participates in any material fraud, material act of dishonesty, or other act of intentional and material misconduct against the Company; 
(iii)    Executive intentionally damages or willfully misappropriates any property of the Company that in any case has a material adverse effect on the Company; 
(iv)    Executive materially breaches any fiduciary, statutory, or contractual duty Executive owes to the Company (including, but not limited to, any breach of the Company’s Confidentiality Agreement); 
(v)    Executive regularly and materially fails to diligently and successfully perform Executive’s assigned duties; 
(vi)    Executive fails to cooperate with the Company in any investigation or proceeding by any governmental or similar authority or as otherwise authorized by the Board of Directors or a committee thereof; or 
(vii)    Executive is found liable in an SEC action and/or is disqualified by the SEC from serving in an executive role.  
The determination that a termination is for Cause shall be made by the Company in its sole discretion; provided, however, that in the event that any of the foregoing events occurs, the Company shall provide written notice to Executive making reference to this Section describing the nature of such event and Executive shall thereafter have thirty (30) days to cure such event if such event is capable of being cured.
(c)    Definition of Good Reason.  For purposes of this Agreement, “Good Reason” means that Executive resigns Executive’s employment with the Company (or any successor thereto) if and only if:
(i)    One of the following actions has been taken without Executive’s express written consent:

 

(1)    There is a material reduction in Executive’s Base Annual Salary from the Base Annual Salary in effect immediately preceding the Change of Control;
(2)    There is a material change in Executive’s position or responsibilities (including the person or persons to whom Executive has reporting responsibilities) that represents an adverse change from Executive’s position or responsibilities from those in effect at any time within ninety (90) days preceding the date of the Change of Control or at any time thereafter; provided, however, that a Change of Control which results in the subsequent conversion of the Company to a division or unit of the acquiring corporation will not by itself result in a material reduction in Executive’s level of responsibility;
(3)    Executive is required to relocate Executive’s principal place of employment to a facility or location that would increase Executive’s one way commute distance by more than thirty-five (35) miles; provided, however, that Executive’s anticipated move to the San Francisco Bay Area as specified in the Offer Letter shall not be deemed a triggering relocation under this provision;
(4)    The Company (or any successor thereto) materially breaches its obligations under this Agreement or any other then-effective employment agreement with Executive; or
(5)    Any acquirer, successor or assignee of the Company fails to assume and perform, in any material respect, the obligations of the Company hereunder; and
(ii)    Executive provides written notice to the Company’s Board within the thirty (30) day period immediately following such action; and
(iii)    Such action is not remedied by the Company within thirty (30) days following the Company’s receipt of such written notice; and 
(iv)    Executive’s resignation is effective not later than sixty (60) days after the expiration of such thirty (30) day cure period.
The termination of Executive’s employment as a result of Executive’s death or disability will not be deemed to be a Good Reason.
(d)    Definition of Change of Control.  For purposes of this Agreement,  “Change of Control” shall mean:
(i)    A transaction or series of transactions (other than an offering of Stock to the general public through a registration statement filed with the Securities and Exchange Commission) whereby any “person” or related “group” of “persons” (as such terms are used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934 (the “Exchange Act”)) (other than the Company, any of its subsidiaries, an employee benefit plan maintained by the Company or any of its subsidiaries or a “person” that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, the Company) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company possessing more than 50% of the total combined voting power of the Company’s securities outstanding immediately after such acquisition; or 

 

(ii)    During any period of two consecutive years, individuals who, at the beginning of such period, constitute the Board of Directors of the Company (the “Board”) together with any new director(s) (other than a director designated by a person who shall have entered into an agreement with the Company to effect a transaction described in Section 3(c)(i) or Section 3(c)(ii)) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the two-year period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or 
(iii)    The consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of the Company’s assets in any single transaction or series of related transactions or (z) the acquisition of assets or stock of another entity, in each case other than a transaction: 
(1)    Which results in the Company’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s assets or otherwise succeeds to the business of the Company (the Company or such person, the “Successor Entity”)) directly or indirectly, at least a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction, and 
(2)    After which no person or group beneficially owns voting securities representing 50% or more of the combined voting power of the Successor Entity; provided, however, that no person or group shall be treated for purposes of this Section 3(c)(iii)(2) as beneficially owning 50% or more of combined voting power of the Successor Entity solely as a result of the voting power held in the Company prior to the consummation of the transaction; or 
(iv)    The Company’s stockholders approve a liquidation or dissolution of the Company. 
The Company shall have full and final authority, which shall be exercised in its discretion, to determine conclusively whether a Change of Control of the Company has occurred pursuant to the above definition, and the date of the occurrence of such Change of Control and any incidental matters relating thereto.
4.    COMPLIANCE WITH SECTION 409A.  
(a)    It is intended that each installment of the payments and benefits provided for in this Agreement is a separate “payment” for purposes of Treasury Regulation Section 1.409A-2(b)(2)(i).  It is also intended that payments of the amounts set forth in this Agreement satisfy, to the greatest extent possible, the exemptions from the application of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) (Section 409A of the Code, together, with any state law of similar effect, “Section 409A”) provided under Treasury Regulation Sections 1.409A-1(b)(4), 1.409A-1(b)(5) and 1.409A-1(b)(9). 

 

(b)    Notwithstanding anything in this Agreement to the contrary, any compensation or benefits payable under this Agreement that constitutes “nonqualified deferred compensation” (“Deferred Compensation”) within the meaning of Section 409A, and which is designated under this Agreement as payable upon Executive’s termination of employment shall be payable only upon Executive’s “separation from service” with the Company within the meaning of Section 409A (a “separation from service”) and, except as provided under Section 4(c) of this Agreement, any such compensation or benefits shall not be paid or commence until the sixtieth (60th) day following Executive’s separation from service.  
(c)    Notwithstanding the foregoing, if the Company (or, if applicable, the successor entity thereto) determines that the Severance Payment, the Change of Control Payment and/or other benefits provided under this Agreement (the “Agreement Payments”) constitute “deferred compensation” under Section 409A and Executive is, on the Termination Date, a “specified employee” of the Company or any successor entity thereto, as such term is defined in Section 409A(a)(2)(B)(i) of the Code, then, solely to the extent necessary to avoid the incurrence of the adverse personal tax consequences under Section 409A, the timing of the Agreement Payments shall be delayed as follows:  on the earlier to occur of (i) the date that is six months and one day after Executive’s “separation from service” (as defined above) or (ii) the date of Executive’s death (such earlier date, the “Delayed Initial Payment Date”), the Company (or the successor entity thereto, as applicable) shall (A) pay to Executive a lump sum amount equal to the sum of the Agreement Payments that Executive would otherwise have received through the Delayed Initial Payment Date if the commencement of the payment of the Agreement Payments had not been so delayed pursuant to this Section 4(b) and (B) commence paying the balance of the Agreement Payments in accordance with the applicable payment schedules set forth in this Agreement.
5.    To the extent that any reimbursements under this Agreement are subject to Section 409A, any such reimbursements payable to Executive shall be paid to Executive no later than December 31 of the year following the year in which the expense was incurred; provided, that Executive submits his or her reimbursement request promptly following the date the expense is incurred, the amount of expenses reimbursed in one year shall not affect the amount eligible for reimbursement in any subsequent year, other than medical expenses referred to in Section 105(b) of the Code, and Executive’s right to reimbursement under this Agreement will not be subject to liquidation or exchange for another benefit. INTERNAL REVENUE CODE SECTION 280G.
(a)    If the payments and benefits (including but not limited to payments and benefits pursuant to this Agreement) that Executive would receive in connection with a change of control of the Company, whether from the Company or otherwise (a “Transaction Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then the Company shall cause to be determined, before any amounts of the Transaction Payment are paid to Executive, which of the following two alternative forms of payment would result in Executive’s receipt, on an after-tax basis, of the greater amount of the Transaction Payment notwithstanding that all or some portion of the Transaction Payment may be subject to the Excise Tax: (1) payment in full of the entire amount of the Transaction Payment (a “Full Payment”), or (2) payment of only a part of the Transaction Payment so that Executive receives the largest payment possible without the imposition of the Excise Tax (a “Reduced Payment”).  

 

(b)    For purposes of determining whether to make a Full Payment or a Reduced Payment, the Company shall cause to be taken into account all applicable federal, state and local income and employment taxes and the Excise Tax (all computed at the highest applicable marginal rate, net of the maximum reduction in federal income taxes which could be obtained from a deduction of such state and local taxes).  If a Reduced Payment is made, (i) Executive shall have no rights to any additional payments and/or benefits constituting the Transaction Payment, and (ii) reduction in payments and/or benefits shall occur in the following order: (1) reduction of cash payments; (2) cancellation of accelerated vesting of equity awards other than stock options; (3) cancellation of accelerated vesting of stock options; and (4) reduction of other benefits (if any) paid to Executive.  In the event that acceleration of compensation from Executive’s equity awards is to be reduced, such acceleration of vesting shall be canceled in the reverse order of the date of grant.  
(c)    The independent registered public accounting firm engaged by the Company for general audit purposes as of the day prior to the Termination Date shall make all determinations required to be made under this Section 5.  If the independent registered public accounting firm so engaged by the Company is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Company shall appoint a nationally recognized independent registered public accounting firm to make the determinations required hereunder.  The Company shall bear all expenses with respect to the determinations by such independent registered public accounting firm required to be made hereunder.  
(d)    The independent registered public accounting firm engaged to make the determinations hereunder shall provide its calculations, together with detailed supporting documentation, to the Company and Executive within fifteen (15) calendar days after the date on which Executive’s right to a Transaction Payment is triggered or such other time as reasonably requested by the Company or Executive.  If the independent registered public accounting firm determines that no Excise Tax is payable with respect to the Transaction Payment, either before or after the application of the Reduced Amount, it shall furnish the Company and Executive with detailed supporting calculations of its determinations that no Excise Tax will be imposed with respect to such Transaction Payment.  Any good faith determinations of the accounting firm made hereunder shall be final, binding and conclusive upon the Company and Executive.  
6.    DISPUTE RESOLUTION.  Any dispute, claim or controversy of whatever nature arising out of or relating to this Agreement, including, without limitation, any action or claim based on tort, contract or statute, or concerning the interpretation, performance, or execution of this Agreement (including any determination of Cause or Good Reason hereunder) shall be resolved by confidential, final and binding arbitration administered by Judicial Arbitration and Mediation Services, Inc. (“JAMS”), in San Francisco, California, before a single arbitrator, in accordance with JAMS’ then applicable arbitration rules.  Executive acknowledges that by agreeing to this arbitration procedure, Executive and the Company waive the right to resolve any such dispute, claim or demand through a trial by jury or judge or by administrative proceeding.  Executive will have the right to be represented by legal counsel at any arbitration proceeding.  The arbitrator shall:  (a) have the authority to compel adequate discovery for the resolution of the dispute and to award such relief as would otherwise be available under applicable law in a court proceeding; and (b) issue a written statement signed by the arbitrator regarding the disposition of each claim and the relief, if any, awarded as to each claim, the reasons for the award, and the arbitrator’s essential findings and conclusions on which the award is based.  Company shall bear all JAMS fees for the arbitration.  Nothing in this Agreement shall prevent any of the parties from obtaining injunctive relief in court 

 

if necessary to prevent irreparable harm pending the conclusion of any arbitration.  Any awards or orders in such arbitrations may be entered and enforced as judgments in any court of competent jurisdiction.
7.    GENERAL PROVISIONS.
(a)    This Agreement constitutes the complete, final and exclusive embodiment of the entire agreement between Company and Executive with regard to the payments and benefits described herein, and it supersedes and replaces any and all other agreements (whether written or unwritten) Executive may have with the Company concerning severance benefits or change of control benefits (including but not limited to the Prior Agreement, any letter agreements issued regarding the Prior Agreement, and the provisions of Executive’s Offer Letter concerning severance benefits or change of control benefits); provided, however, that nothing herein shall affect any plan document or agreements governing any compensatory equity awards that have been or may be granted to Executive, which shall remain in full force and effect.  This Agreement is entered into without reliance on any promise or representation, written or oral, other than those expressly contained herein, and it supersedes any other such promises or representations.  This Agreement may not be modified or amended except in a written agreement approved by the Compensation Committee and signed by Executive and a duly authorized officer of the Company.  
(b)    Whenever possible, each provision of this Agreement will be interpreted in such a manner as to be effective under applicable law.  The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.  Any invalid or unenforceable provision shall be modified so as to be rendered valid and enforceable in a manner consistent with the intent of the parties insofar as possible.
(c)    Executive’s or the Company’s failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right Executive or the Company may have hereunder shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.
(d)    This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.  Facsimile signatures shall be deemed as effective as originals.
(e)    This Agreement is intended to bind and inure to the benefit of and be enforceable by Executive, the Company and their respective successors, assigns, heirs, executives and administrators, except that Executive may not assign any of Executive’s duties hereunder and Executive may not assign any of Executive’s rights hereunder without the written consent of the Company.  This Agreement shall be interpreted and enforced in accordance with the laws of the State of California.
(f)    Any ambiguity in this Agreement shall not be construed against either party as the drafter. 
[Signature Page Follows]

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date written below.
/s/ Leone Patterson        
LEONE PATTERSON
		
	Date:
	11/21/13    

TRANSCEPT PHARMACEUTICALS, INC.
/s/ Glenn A. Oclassen    
Name: Glenn A. Oclassen 
Title: President and Chief Executive Officer
		
	Date:
	11/12/13    

 

EXHIBIT A
FORM OF RELEASE AGREEMENT 
As provided in the AMENDED AND RESTATED CHANGE OF CONTROL AND SEVERANCE BENEFITS AGREEMENT dated November 11, 2013 (the “Agreement”) between me and Transcept Pharmaceuticals, Inc. (the “Company”), I will be eligible for certain Severance Benefits or Change of Control Benefits if I enter into this Release Agreement (the “Release”).  I am not relying on any promise or representation by the Company that is not expressly stated in the Agreement.  Certain capitalized terms used in this Release are defined in the Agreement. 
I hereby acknowledge and reaffirm my obligations under my Confidentiality Agreement with the Company.
In consideration of the Severance Benefits or Change of Control Benefits, and other consideration, provided to me under the Agreement that I am not otherwise entitled to receive, and except as otherwise set forth in this Release, I hereby generally and completely release the Company and its current and former directors, officers, employees, stockholders, shareholders, partners, agents, attorneys, predecessors, successors, parent and subsidiary entities, insurers, affiliates, and assigns (collectively, the “Released Parties”) from any and all claims, liabilities and obligations, both known and unknown, that arise out of or are in any way related to events, acts, conduct, or omissions occurring prior to my signing this Release (collectively, the “Released Claims”).  The Released Claims include, but are not limited to:  (1) all claims arising out of or in any way related to my employment with the Company or its affiliates, or the termination of that employment; (2) all claims related to my compensation or benefits, including salary, bonuses, commissions, vacation pay, expense reimbursements, severance pay, fringe benefits, stock, stock options, or any other ownership interests in the Company or its affiliates; (3) all claims for breach of contract, wrongful termination, and breach of the implied covenant of good faith and fair dealing; (4) all tort claims, including claims for fraud, defamation, emotional distress, and discharge in violation of public policy; and (5) all federal, state, and local statutory claims, including claims for discrimination, harassment, retaliation, attorneys’ fees, or other claims arising under the federal Civil Rights Act of 1964 (as amended), the federal Americans with Disabilities Act of 1990, the federal Age Discrimination in Employment Act of 1967 (as amended) (“ADEA”), the federal Employee Retirement Income Security Act of 1974 (as amended), the California Fair Employment and Housing Act (as amended), and the California Labor Code.  
Notwithstanding the foregoing, the following are not included in the Released Claims (the “Excluded Claims”): (1) any rights or claims for indemnification I may have pursuant to any written indemnification agreement with the Company to which I am a party, the charter, bylaws, or operating agreements of the Company, or under applicable law;  or (2) any rights which are not waivable as a matter of law.  In addition, nothing in this Release prevents me from filing, cooperating with, or participating in any proceeding before the Equal Employment Opportunity Commission, the Department of Labor, the California Department of Fair Employment and Housing, or any other government agency, except that I hereby waive my right to any monetary benefits in connection with any such claim, charge or proceeding.  I hereby represent and warrant that, other than the Excluded Claims, I am not aware of any claims I have or might have against any of the Released Parties that are not included in the Released Claims.

 

I acknowledge that I am knowingly and voluntarily waiving and releasing any rights I may have under the ADEA.  I also acknowledge that the consideration given for the Released Claims is in addition to anything of value to which I was already entitled.  I further acknowledge that I have been advised by this writing, as required by the ADEA, that: (1) the Released Claims do not apply to any rights or claims that arise after the date I sign this Release; (2) I should consult with an attorney prior to signing this Release (although I may choose voluntarily not to do so); (3) I have twenty-one (21) days to consider this Release (although I may choose to voluntarily sign it sooner) [for those Executive terminated as part of a group termination, substitute the following language – I have forty-five (45) days to consider this Release (although I may choose to voluntarily sign it sooner)]; (4) I have seven (7) days following the date I sign this Release to revoke the Release by providing written notice to the Company; and (5) the Release will not be effective until the date upon which the revocation period has expired unexercised, which will be the eighth day after I sign this Release.  
[For those Executives terminated as part of a group termination, add the following language —I have received with this Release all of the information required by the ADEA, including without limitation a detailed list of the job titles and ages of all employees who were terminated in this group termination and the ages of all employees of the Company in the same job classification or organizational unit who were not terminated, along with information on the eligibility factors used to select employees for the group termination and any time limits applicable to this group termination program].
I acknowledge that I have read and understand Section 1542 of the California Civil Code which reads as follows: “A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.”  I hereby expressly waive and relinquish all rights and benefits under that section and any law of any jurisdiction of similar effect with respect to my release of any claims I may have against the Company.
I hereby represent that I have been paid all compensation owed and for all hours worked, I have received all the leave and leave benefits and protections for which I am eligible, and I have not suffered any on-the-job injury for which I have not already filed a workers’ compensation claim.
I acknowledge that to become effective, I must: (1) sign and return this Release to the Company within twenty-one (21) days [for those Executives terminated as part of a group termination, substitute the following – forty-five (45) days] after I am requested to sign it by the Company or its successor (as applicable); and (2) I must not revoke it thereafter.
LEONE PATTERSON
        
Date:ex10-1.htm

Exhibit 10.1

 

THE SECURITIES OFFERED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY SECTION 3(b) OF THE SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE "1933 ACT)

 

 

  US $30,000.00

NORTH BAY RESOURCES, INC

5% CONVERTIBLE REDEEMABLE NOTE

DUE MARCH 13, 2015

FOR VALUE RECEIVED, North Bay Resources, Inc (the “Company”) promises to pay to the order of UNION CAPITAL, LLC and its authorized successors and permitted assigns ("Holder"), the aggregate principal face amount of Thirty Three Thousand dollars exactly (U.S. $33,000.00) on March 13, 2015 ("Maturity Date") and to pay interest on the principal amount outstanding hereunder at the rate of 5% per annum commencing on March 13, 2014.   The interest will be paid to the Holder in whose name this Note is registered on the records of the Company regarding registration and transfers of this Note.  This Note contains an original issue discount of $3,000.00 such that the purchase price of this Note is $30,000.00. The principal of, and interest on, this Note are payable at 338 Crown Street, Brooklyn, NY 11225, initially, and if changed, last appearing on the records of the Company as designated in writing by the Holder hereof from time to time.  The Company will pay each interest payment and the outstanding principal due upon this Note before or on the Maturity Date, less any amounts required by law to be deducted or withheld, to the Holder of this Note by check or wire transfer addressed to such Holder at the last address appearing on the records of the Company.  The forwarding of such check or wire transfer shall constitute a payment of outstanding principal hereunder and shall satisfy and discharge the liability for principal on this Note to the extent of the sum represented by such check or wire transfer.  Interest shall be payable in Common Stock (as defined below) pursuant to paragraph 4(b) herein.

This Note is subject to the following additional provisions:

1.           This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the Holder surrendering the same.  No service charge will be made for such registration or transfer or exchange, except that Holder shall pay any tax or other governmental charges payable in connection therewith.

 

  

  

  

2.           The Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.

3.           This Note may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended ("Act") and applicable state securities laws.  Any attempted transfer to a non-qualifying party shall be treated by the Company as void.  Prior to due presentment for transfer of this Note, the Company and any agent of the Company may treat the person in whose name this Note is duly registered on the Company's records as the owner hereof for all other purposes, whether or not this Note be overdue, and neither the Company nor any such agent shall be affected or bound by notice to the contrary.  Any Holder of this Note electing to exercise the right of conversion set forth in Section 4(a) hereof, in addition to the requirements set forth in Section 4(a), and any prospective transferee of this Note, also is required to give the Company written confirmation that this Note is being converted ("Notice of Conversion") in the form annexed hereto as Exhibit A. The date of receipt (including receipt by telecopy) of such Notice of Conversion shall be the Conversion Date.

4.           (a)           The Holder of this Note is entitled, at its option, at any time after 180 days, and after full cash payment for the shares convertible hereunder, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock (the "Common Stock") without restrictive legend of any nature, at a price ("Conversion Price") for each share of Common Stock equal to 70% of the average of the two lowest daily VWAP’s (volume weighted average prices) of the Common Stock as reported on the National Quotations Bureau OTCQB exchange which the Company’s shares are traded or any exchange upon which the Common Stock may be traded in the future ("Exchange"), for the twenty five prior trading days including the day upon which a Notice of Conversion is received by the Company (provided such Notice of Conversion is delivered by fax or other electronic method of communication to the Company after 4 P.M. Eastern Standard or Daylight Savings Time if the Holder wishes to included the same day closing price). If the shares have not been delivered within 3 business days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated by the Company delivering the shares of Common Stock to the Holder within 3 business days of receipt by the Company of the Notice of Conversion.  Once the Holder has received such shares of Common Stock, the Holder shall surrender this Note to the Company, executed by the Holder evidencing such Holder's intention to convert this Note or a specified portion hereof, and accompanied by proper assignment hereof in blank.  Accrued but unpaid interest shall be subject to conversion.  No fractional shares or scrip representing fractions of shares will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share. In the event the Company experiences a DTC “Chill” on its shares, the conversion price shall be decreased to 60% instead of 70% while that “Chill” is in effect. In the event the Company is unable to deliver shares via DWAC, the conversion price shall be decreased to 65% instead of 70%.

(b)         Interest on any unpaid principal balance of this Note shall be paid at the rate of 5% per annum.  Interest shall be paid by the Company in Common Stock ("Interest Shares").  The Holder may, at any time, send in a Notice of Conversion to the Company for Interest Shares based on the formula provided in Section 4(a) above.  The dollar amount converted into Interest Shares shall be all or a portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice.

 

  

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(c)         This Note may be redeemed within 90 days of issuance by paying the full principal amount of this Note plus any accrued interest. Such redemption must be closed and funded within 3 days of giving notice of redemption of the right to redeem shall be null and void.

(d)         Upon (i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series of related transactions, (ii) a reclassification, capital reorganization or other change or exchange of outstanding shares of the Common Stock, or (iii) any consolidation or merger of the Company with or into another person or entity in which the Company is not the surviving entity (other than a merger which is effected solely to change the jurisdiction of incorporation of the Company and results in a reclassification, conversion or exchange of outstanding shares of Common Stock solely into shares of Common Stock) (each of items (i), (ii) and (iii) being referred to as a "Sale Event"), then, in each case, the Company shall, upon request of the Holder, redeem this Note in cash for 150% of the principal amount, plus accrued but unpaid interest through the date of redemption, or at the election of the Holder, such Holder may convert the unpaid principal amount of this Note (together with the amount of accrued but unpaid interest) into shares of Common Stock immediately prior to such Sale Event at the Conversion Price.

(e)         In case of any Sale Event in connection with which this Note is not redeemed or converted, the Company shall cause effective provision to be made so that the Holder of this Note shall have the right thereafter, by converting this Note, to purchase or convert this Note into the kind and number of shares of stock or other securities or property (including cash) receivable upon such reclassification, capital reorganization or other change, consolidation or merger by a holder of the number of shares of Common Stock that could have been purchased upon exercise of the Note and at the same Conversion Price, as defined in this Note, immediately prior to such Sale Event. The foregoing provisions shall similarly apply to successive Sale Events. If the consideration received by the holders of Common Stock is other than cash, the value shall be as determined by the Board of Directors of the Company or successor person or entity acting in good faith.

5.           No provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.

6.           The Company hereby expressly waives demand and presentment for payment, notice of non-payment, protest, notice of protest, notice of dishonor, notice of acceleration or intent to accelerate, and diligence in taking any action to collect amounts called for hereunder and shall be directly and primarily liable for the payment of all sums owing and to be owing hereto.

7.           The Company agrees to pay all costs and expenses, including reasonable attorneys' fees and expenses, which may be incurred by the Holder in collecting any amount due under this Note.

 

  

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8.           If one or more of the following described "Events of Default" shall occur:

(a)         The Company shall default in the payment of principal or interest on this Note or any other note issued to the Holder by the Company; or

(b)         Any of the representations or warranties made by the Company herein or in any certificate or financial or other written statements heretofore or hereafter furnished by or on behalf of the Company in connection with the execution and delivery of this Note shall be false or misleading in any respect; or

(c)         The Company shall fail to perform or observe, in any respect, any covenant, term, provision, condition, agreement or obligation of the Company under this Note or any other note issued to the Holder; or

(d)           The Company shall (1) become insolvent; (2) admit in writing its inability to pay its debts generally as they mature; (3) make an assignment for the benefit of creditors or commence proceedings for its dissolution; (4) apply for or consent to the appointment of a trustee, liquidator or receiver for its or for a substantial part of its property or business; (5) file a petition for  bankruptcy relief, consent to the filing of such petition or have filed against it an involuntary petition for bankruptcy relief, all under federal or state laws as applicable; or

(e)         A trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without its consent and shall not be discharged within thirty (30) days after such appointment; or

(f)         Any governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody or control of the whole or any substantial portion of the properties or assets of the Company; or

(g)           One or more money judgments, writs or warrants of attachment, or similar process, in excess of fifty thousand dollars ($50,000) in the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid, unvacated, unbonded or unstayed for a period of fifteen (15) days or in any event later than five (5) days prior to the date of any proposed sale thereunder; or

(h)         defaulted on or breached any term of any other note of similar debt instrument into which the Company has entered and failed to cure such default within the appropriate grace period; or

(i)          The Company shall have its Common Stock delisted from an exchange (including the OTCBB exchange) or, if the Common Stock trades on an exchange, then trading in the Common Stock shall be suspended for more than 10 consecutive days;

(j)          If a majority of the members of the Board of Directors of the Company on the date hereof are no longer serving as members of the Board;

 

  

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(k)         The Company shall not deliver to the Holder the Common Stock pursuant to paragraph 4 herein without restrictive legend within 3 business days of its receipt of a Notice of Conversion; or

(l)          The Company shall not replenish the reserve set forth in Section 12, within 3 business days of the request of the Holder ; or

(m)        The Company shall cease to be “current” in its filings with the Securities and Exchange Commission.

Then, or at any time thereafter, unless cured, and in each and every such case, unless such Event of Default shall have been waived in writing by the Holder (which waiver shall not be deemed to be a waiver of any subsequent default) at the option of the Holder and in the Holder's sole discretion, the Holder may consider this Note immediately due and payable, without presentment, demand, protest or (further) notice of any kind (other than notice of acceleration), all of which are hereby expressly waived, anything herein or in any note or other instruments contained to the contrary notwithstanding, and the Holder may immediately, and without expiration of any period of grace, enforce any and all of the Holder's rights and remedies provided herein or any other rights or remedies afforded by law.  Upon an Event of Default, interest shall be accrue at a default interest rate of 24% per annum or, if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by law.  In the event of a breach of 8(k) the penalty shall be $250 per day the shares are not issued beginning on the 4th day after the conversion notice was delivered to the Company.  This penalty shall increase to $500 per day beginning on the 10th day.

If the Holder shall commence an action or proceeding to enforce any provisions of this Note, including without limitation engaging an attorney, then the Holder shall be reimbursed by the Company for its attorneys’ fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.

 

9.           In case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable, such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and the validity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired thereby.

10.         Neither this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the Company and the Holder.

11.         The Company represents that it is not a “shell” issuer and has never been a “shell” issuer or that if it previously has been a “shell” issuer that at least 12 months have passed since the Company has reported form 10 type information indicating it is no longer a “shell issuer.  Further, the Company will instruct its counsel to either (i) write a 144- 3(a)(9) opinion to allow for salability of the conversion shares or (ii) accept such opinion from Holder’s counsel.

 

  

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12.         The Company will issue irrevocable transfer agent instructions reserving 6,000,000 shares of Common Stock for conversion under this Note.  The reserve shall be replenished as needed to allow for conversions of this Note.  Upon full conversion of this Note, the reserve representing this Note shall be cancelled.

13.         The Company will give the Holder direct notice of any corporate actions including but not limited to name changes, stock splits, recapitalizations etc.  This notice shall be given to the Holder as soon as possible under law.

14.         This Note shall be governed by and construed in accordance with the laws of New York applicable to contracts made and wholly to be performed within the State of New York and shall be binding upon the successors and assigns of each party hereto.  The Holder and the Company hereby mutually waive trial by jury and consent to exclusive jurisdiction and venue in the courts of the State of New York.  This Agreement may be executed in counterparts, and the facsimile transmission of an executed counterpart to this Agreement shall be effective as an original.

 

 

  

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IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by an officer thereunto duly authorized.

Dated:    March 13, 2014

 

NORTH BAY RESOURCES, INC

By: /s/ Perry Leopold                                                        

 

Title: CEO                                                             

 

 

 

  

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EXHIBIT A

 

NOTICE OF CONVERSION

 (To be Executed by the Registered Holder in order to Convert the Note)

The undersigned hereby irrevocably elects to convert $___________ of the above Note into _________ Shares of Common Stock of North Bay Resources, Inc.  (“Shares”) according to the conditions set forth in such Note, as of the date written below.

If Shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer and other taxes and charges payable with respect thereto.

Date of Conversion:                                                                                                                                

Applicable Conversion Price:                                                                                                                     

Signature:                                                                                                                                                 

[Print Name of Holder and Title of Signer]

Address:                                                                                                                                                   

                                                                                                                                                                    

SSN or EIN:                                                                 

Shares are to be registered in the following name:                                                                              

Name:                                                                                                                                                        

Address:                                                                                                                                                   

Tel:                                                                

Fax:                                                                

SSN or EIN:                                                                

Shares are to be sent or delivered to the following account:

Account Name:                                                                                                                                        

Address:                                                                                                                                                   

  

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