Document:

Exhibit 10.6

 

GABLES RESIDENTIAL TRUST

 

Form of Senior Executive Severance Agreement

 

AGREEMENT
made as of this 19th day of April, 2005 by and among Gables Residential Trust,
a Maryland business trust with its principal place of business in Atlanta,
Georgia (the “Company”), and                     
(the “Executive”), an individual presently employed as the                     
of the Company.

 

1.                                       Purpose.  The Company considers it essential to the
best interests of its stockholders to foster the continuous employment of key
management personnel.  The Board of
Trustees of the Company (the “Board”) recognizes, however, that, as is the case
with many publicly held corporations, the possibility of a Change in Control
(as defined in Section 2 hereof) exists and that such possibility, and the
uncertainty and questions which it may raise among management, may result in
the departure or distraction of management personnel to the detriment of the
Company and its shareholders.  Therefore,
the Board has determined that appropriate steps should be taken to reinforce
and encourage the continued attention and dedication of members of the Company’s
management, including the Executive, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from
the possibility of a Change in Control. 
Nothing in this Agreement shall be construed as creating an express or
implied contract of employment and, except as otherwise agreed in writing
between the Executive and the Company, the Executive shall not have any right
to be retained in the employ of the Company.

 

2.                                       Change
in Control.  For purposes of this
Agreement, a “Change in Control” shall mean the occurrence of any one of the
following events:

 

(a)                                  any
“person,” as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the “Act”) (other than the
Company, any of its Subsidiaries (as defined below), or any trustee, fiduciary
or other person or entity holding securities under any employee benefit plan or
trust of the Company or any of its Subsidiaries), together with all “affiliates”
and “associates” (as such terms are defined in Rule 12b-2 under the Act)
of such person, shall become the “beneficial owner” (as such term is defined in
Rule 13d-3 under the Act), directly or indirectly, of securities of the
Company representing 40% or more of either (i) the combined voting power
of the Company’s then outstanding securities having the right to vote in an
election of the Board (“Voting Securities”) or (ii) the then outstanding
common shares of beneficial interest, par value $.01 per share, of the Company
(“Shares”) (in either such case other than as a result of an acquisition of
securities directly from the Company); or

 

(b)                                 individuals
who, as of the date hereof, constitute the Board (the “Incumbent Members”)
cease for any reason to constitute at least a majority of the Board, provided,
however, that any individual becoming a trustee of the Company subsequent to
the date hereof (excluding, for this purpose, (A) any such individual
whose initial assumption of office is in connection with an actual or
threatened election contest relating 

 

 

to the
election of members of the Board or other actual or threatened solicitation of
proxies or consents by or on behalf of a person other than the Board, including
by reason of agreement intended to avoid or settle any such actual or
threatened contest or solicitation, and (B) any individual whose initial
assumption of office is in connection with a merger or consolidation, involving
an unrelated entity), whose election or nomination for election by the Company’s
shareholders was approved by a vote of at least a majority of the persons then
comprising Incumbent Members shall for purposes of this Agreement be considered
an Incumbent Member; or

 

(c)                                  the
consummation of a consolidation or merger of the Company where the shareholders
of the Company, immediately prior to the consolidation or merger, would not,
immediately after the consolidation or merger, “beneficially own” (as such term
is defined in Rule 13d-3 under the Act), directly or indirectly, shares
representing in the aggregate 50% or more of the voting shares of the
corporation issuing cash or securities in the consolidation or merger (or of
its ultimate parent corporation, if any) (the “Resulting Corporation”); or

 

(d)                                 the
shareholders of the Company shall approve (A) any sale, lease, exchange or
other transfer to an unrelated party (in one transaction or a series of
transactions contemplated or arranged by any party as a single plan) of all or
substantially all of the assets of the Company or (B) any plan or proposal
for the liquidation or dissolution of the Company.

 

Notwithstanding
the foregoing, a “Change in Control” shall not be deemed to have occurred for
purposes of the foregoing clause (a) solely as the result of an
acquisition of securities by the Company which, by reducing the number of
Shares or other Voting Securities outstanding, increases (x) the proportionate
number of Shares beneficially owned by any person to 40% or more of the Shares
then outstanding or (y) the proportionate voting power represented by the
Voting Securities beneficially owned by any person to 40% or more of the
combined voting power of all then outstanding Voting Securities; provided,
however, that if such person referred to in clause (x) or (y) of this
sentence shall thereafter become the beneficial owner of any additional Shares
or Voting Securities (other than pursuant to a stock split, stock dividend, or
similar transaction or as a result of an acquisition of securities directly
from the Company) and immediately thereafter beneficially owns 40% or more of
the combined voting power of all the outstanding Voting Securities or 40% or
more of the Shares then outstanding, then a “Change in Control” shall be deemed
to have occurred for purposes of the foregoing clause (a).

 

Notwithstanding
the foregoing, a “Change in Control” shall not be deemed to have occurred for
purposes of the foregoing clause (c) if after the consummation of a
consolidation or merger of the Company where the shareholders of the Company,
immediately prior to the consolidation or merger, would, immediately after the
consolidation or merger, “beneficially own” (as such term is defined in Rule 13d-3
under the Act), directly or indirectly, shares representing in the aggregate
less than 50% or more of the voting shares of the Resulting Corporation, the
Incumbent Members constitute at least 50% of the board of directors or board of
trustees of the Resulting Corporation and the Chairman and Chief Executive
Officer of the Company prior to the consolidation or merger remains the Chief
Executive Officer of the Resulting Company immediately after the consolidation
or merger.

 

2

 

As used
in this definition of “Change in Control,” the term “Subsidiary” means Gables
Realty Limited Partnership, Gables Residential Services, Inc., Gables
Central Construction, Inc., and Gables East Construction, Inc., and
any corporation or other entity (other than the Company) in any unbroken chain
of corporations or other entities, beginning with the Company if each of the
corporations or entities (other than the last corporation or entity in the
unbroken chain) owns stock or other interests possessing 50% or more of the
economic interest or the total combined voting power of all classes of stock or
other interests in one of the other corporations or entities in the chain.

 

3.                                       Terminating
Event.  A “Terminating Event” shall
mean any of the events provided in this Section 3 occurring within 24
months following a Change in Control:

 

(a)                                  termination
by the Company of the employment of the Executive with the Company and its
Subsidiaries for any reason other than for Cause or the death of the
Executive.  “Cause” shall mean, and shall
be limited to, the occurrence of any one or more of the following events:

 

(i)                                     a
willful act of dishonesty by the Executive in connection with the performance
of his material duties involving the Company or any of its Subsidiaries; or

 

(ii)                                  conviction
of the Executive of a crime involving moral turpitude or conviction of a felony
and such conviction has a material adverse affect on the interests of the
Company; or

 

(iii)                               the deliberate or
willful failure by the Executive (other than by reason of the Executive’s
physical or mental illness, incapacity or disability) to substantially perform
the Executive’s duties with the Company and the continuation of such failure
for a period of 30 days after delivery by the Company to the Executive of
written notice specifying the scope and nature of such failure and its
intention to terminate the Executive for Cause.

 

A Terminating Event shall not be deemed to have
occurred pursuant to this Section 3(a) solely as a result of the
Executive being an employee of any direct or indirect successor to the business
or assets of the Company, rather than continuing as an employee of the Company
following a Change in Control.  For
purposes of clauses (i) and (iii) of this Section 3(a),
no act, or failure to act, on the Executive’s part shall be deemed “willful”
unless done, or omitted to be done, by the Executive without reasonable belief
that the Executive’s act, or failure to act, was in the best interest of the
Company; or

 

(b)                                 termination
by the Executive of the Executive’s employment with the Company and its
Subsidiaries for Good Reason.  “Good
Reason” shall mean the occurrence of any of the following events:

 

(i)                                     a
substantial adverse change in the nature or scope of the Executive’s
responsibilities, authorities, powers, functions, or duties from the 

 

3

 

responsibilities,
authorities, powers, functions, or duties exercised by the Executive
immediately prior to the Change in Control; or

 

(ii)                                  a
reduction in the Executive’s annual base salary as in effect on the date hereof
or as the same may be increased from time to time except for across-the-board
salary reductions similarly affecting all or substantially all management
employees; or

 

(iii)                               the relocation of the
Company’s offices at which the Executive is principally employed immediately
prior to the date of a Change in Control to a location more than 30 miles from
such offices, or the requirement by the Company for the Executive to be based
anywhere other than the Company’s offices at such location, except for required
travel on the Company’s business to an extent substantially consistent with the
Executive’s business travel obligations immediately prior to the Change in
Control; or

 

(iv)                              the
failure by the Company to pay to the Executive any portion of his compensation
or to pay to the Executive any portion of an installment of deferred
compensation under any deferred compensation program of the Company within 15
days of the date such compensation is due without prior written consent of the
Executive; or

 

(v)                                 the
failure by the Company to obtain an effective agreement from any successor to
assume and agree to perform this Agreement.

 

4.                                       Special
Termination Payments.  In the event a
Terminating Event occurs within 24 months after a Change in Control, subject to
the signing by Executive of a release of employment-related claims reasonably
acceptable to the Company (or its successor),

 

(a)                                  the
Company shall pay to the Executive an amount equal to two (2) times the
sum of Executive’s (i) most recent annual base salary (or Executive’s
annual base salary immediately prior to the Change in Control, if higher), (ii) the
(A) average of cash bonuses earned as a percentage of Executive’s maximum cash
bonus potential for the three most recently completed fiscal years, exclusive
of investment performance bonuses earned, if any, multiplied by (B) the
Executive’s maximum cash bonus potential (exclusive of investment performance
bonus potential) expressed as a percentage of annual base salary and multiplied
by (C) the Executive’s most recent annual base salary (or the Executive’s
annual base salary immediately prior to the Change in Control, if higher) and (iii) the
value of 50% of the maximum restricted equity award (determined using the fair
market value of the shares immediately prior to the Change in Control, without
regard to any restrictions thereon) for the fiscal year of the Company in which
the Change in Control occurs.

 

Said
amount shall be paid in one lump sum payment no later than 31 days following
the date of termination; and

 

4

 

(b)                                 the
Company shall pay to the Executive all reasonable legal and mediation fees and
expenses incurred by the Executive in obtaining or enforcing any right or
benefit provided by this Agreement, except in cases involving frivolous or bad
faith litigation initiated by the Executive; and

 

(c)                                  Gross
Up Payment.

 

(i)  In the event it shall be determined that any
compensation, payment or distribution by the Company to or for the benefit of
the Executive, whether paid or payable or distributed or distributable pursuant
to the terms of this Agreement or otherwise (the “Severance Payments”), would
be subject to the excise tax imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the “Code”), or any interest or penalties are
incurred by the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the “Excise Tax”), then the Executive shall be entitled to
receive an additional payment (a “Gross-Up Payment”) such that the net amount
retained by the Executive, after deduction of any Excise Tax on the Severance
Payments, any Federal, state, and local income tax, employment tax and Excise
Tax upon the payment provided by this subsection, and any interest and/or
penalties assessed with respect to such Excise Tax, shall be equal to the
Severance Payments.  Notwithstanding the
foregoing provisions of this Subparagraph 4(c)(i), if it shall be determined
that the Executive is entitled to a Gross Up Payment, but the amount that
equals 95% of the Severance Payments that would be treated as “parachute
payments” under Section 280G of the Code does not exceed the Threshold
Amount, then no Gross Up Payment shall be made to the Executive, but rather, (A) if
the Severance Payments, reduced by the sum of (1) the Excise Tax and (2) the
total of the Federal, state, and local income and employment taxes payable by
Executive on the amount of the Severance Payments which are in excess of the
Threshold Amount, are greater than or equal to the Threshold Amount, the
Executive shall be entitled to 100% of the benefits payable under this
Agreement; or (B) if the Threshold Amount is less than (x) the Severance
Payments, but greater than (y) the Severance Payments reduced by the sum of (1) the
Excise Tax and (2) the total of the Federal, state, and local income and
employment taxes on the amount of the Severance Payments which are in excess of
the Threshold Amount, then the benefits payable under this Agreement shall be
reduced (but not below zero) to the extent necessary so that the maximum
Severance Payments shall not exceed the Threshold Amount.  To the extent that there is more than one
method of reducing the payments to bring them within the Threshold Amount, the
Executive shall determine which method shall be followed; provided that if the
Executive fails to make such determination within 15 days after the Company has
sent the Executive written notice of the need for such reduction, the Company
may determine the amount of such reduction in its sole discretion.  For the purposes of this Subparagraph, “Threshold
Amount”

 

5

 

shall
mean three times the Executive’s “base amount” within the meaning of Section 280G(b)(3) of
the Code and the regulations promulgated thereunder less one dollar ($1.00).

 

(ii) Subject to the provisions of Subparagraph (iii) below,
all determinations required to be made under this clause (ii), including
whether a Gross-Up Payment is required and the amount of such Gross-Up Payment,
shall be made by a nationally recognized accounting firm selected by the
Company (the “Accounting Firm”), which shall provide detailed supporting
calculations both to the Company and the Executive within 15 business days of
the Date of Termination, if applicable, or at such earlier time as is
reasonably requested by the Company or the Executive.  For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to pay Federal income taxes at
the highest marginal rate of Federal income taxation applicable to individuals
for the calendar year in which the Gross-Up Payment is to be made, and state
and local income taxes at the highest marginal rates of individual taxation in
the state and locality of Executive’s residence on the date of the Terminating
Event, net of the maximum reduction in Federal income taxes which could be
obtained from deduction of such state and local taxes.  The initial Gross-Up Payment, if any, as
determined pursuant to this clause (ii), shall be paid to the Executive within
five days of the receipt of the Accounting Firm’s determination.  Any determination by the Accounting Firm
shall be binding upon the Company and the Executive.  As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should have been made (an
“Underpayment”).  In the event that the
Company exhausts its remedies pursuant to Subparagraph (iii) below and the
Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has
occurred, consistent with the calculations required to be made hereunder, and
any such Underpayment, and any interest and penalties imposed on the
Underpayment and required to be paid by the Executive in connection with the
proceedings described in Subparagraph (iii) below, shall be promptly paid
by the Company to or for the benefit of the Executive.

 

(iii) The Executive shall notify the Company in
writing of any claim by the Internal Revenue Service that, if successful, would
require the payment by the Company of the Gross-up Payment.  Such notification shall be given as soon as
practicable but no later than 10 business days after the Executive knows of
such claim and shall apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid.  The Executive shall not pay such claim prior
to the expiration of the 30-day period following the date on which he gives
such notice to the 

 

6

 

Company
(or such shorter period ending on the date that any payment of taxes with
respect to such claim is due).  If the
Company notifies the Executive in writing prior to the expiration of such
period that it desires to contest such claim, provided that the Company has set
aside adequate reserves to cover the Underpayment and any interest and
penalties thereon that may accrue, the Executive shall: (A) give the
Company any information reasonably requested by the Company relating to such
claim, (B) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim
by an attorney selected by the Company, (C) cooperate with the Company in
good faith in order to effectively contest such claim, and (D) permit the
Company to participate in any proceedings relating to such claim; provided,
however, that the Company shall bear and pay directly all costs and expenses
(including additional interest and penalties) incurred in connection with such
contest and shall indemnify and hold the Executive harmless, on an after-tax
basis, for any Excise Tax or income tax, including interest and penalties with
respect thereto, imposed as a result of such representation and payment of
costs and expenses.  Without limitation
on the foregoing provisions of this Subparagraph (iii), the Company shall
control all proceedings taken in connection with such contest and, at its sole
option, may pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim and
may, at its sole option, either direct the Executive to pay the tax claimed and
sue for a refund or contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however, that if
the Company directs the Executive to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the Executive on an
interest-free basis (to the extent not prohibited by applicable law) and shall indemnify
and hold the Executive harmless, on an after-tax basis, from any Excise Tax or
income tax, including interest or penalties with respect thereto, imposed with
respect to such advance or with respect to any imputed income with respect to
such advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the Executive
with respect to which such contested amount is claimed to be due is limited
solely to such contested amount.  Furthermore,
the Company’s control of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and the Executive shall be
entitled to settle or contest, as the case may be, any other issues raised by
the Internal Revenue Service or any other taxing authority.

 

7

 

(iv)  If, after the receipt by the Executive of
an amount advanced by the Company pursuant to Subparagraph (iii) above,
the Executive becomes entitled to receive any refund with respect to such
claim, the Executive shall (subject to the Company’s complying with the
requirements of Subparagraph (iii) above) promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon
after taxes applicable thereto).  If,
after the receipt by the Executive of an amount advanced by the Company
pursuant to Subparagraph (iii) above, a determination is made that the
Executive shall not be entitled to any refund with respect to such claim and
the Company does not notify the Executive in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.

 

Notwithstanding
the foregoing, the special termination benefits required by Section 4(a) hereof
shall be reduced by any amount paid or payable to the Executive by the Company
pursuant to any employment or similar agreement between the Company and the
Executive (or any employment or similar agreement to which the Executive
becomes a party after the date hereof), on account of the termination of employment
of the Executive.

 

5.                                       Term.  This Agreement shall take effect on the date
first set forth above and shall terminate upon the earliest of (a) the
termination by the Company of the employment of the Executive for Cause; (b) the
resignation or voluntary termination of the Executive for any reason prior to a
Change in Control; (c) the resignation of the Executive after a Change in
Control for any reason other than the occurrence of any of the events
enumerated in Section 3(b)(i)-(v) of this Agreement; or (d) 24
months plus one day following a Change in Control.

 

6.                                       Withholding.  All payments made by the Company under this
Agreement shall be net of any tax or other amounts required to be withheld by
the Company under applicable law.

 

7.                                       No
Mitigation; Disputes; Etc.

 

(a)                                  No
Mitigation.  The Company agrees that,
if the Executive’s employment by the Company is terminated during the term of
this Agreement, the Executive is not required to seek other employment or to
attempt in any way to reduce any amounts payable to the Executive by the
Company pursuant to Section 4 hereof. 
Further, the amount of any payment provided for in this Agreement shall
not be reduced by any compensation earned by the Executive as the result of
employment by another employer, by retirement benefits, or otherwise.

 

(b)                                 Mediation
of Disputes.  The parties shall
endeavor in good faith to settle within 90 days any controversy or claim
arising out of or relating to this Agreement or the breach thereof through
mediation with JAMS, Endispute or similar organizations.  If the controversy or claim is not resolved
within 90 days, the parties shall be free to pursue other legal remedies in law
or equity.

 

8

 

8.                                       Assignment;
Prior Agreements.  Neither the Company
nor the Executive may make any assignment of this Agreement or any interest
herein, by operation of law or otherwise, without the prior written consent of
the other party, and without such consent any attempted transfer shall be null
and void and of no effect.  This
Agreement shall inure to the benefit of and be binding upon the Company and the
Executive, their respective successors, executors, administrators, heirs and
permitted assigns.  In the event of the
Executive’s death after a Terminating Event but prior to the completion by the
Company of all payments due him under Section 4 of this Agreement, the
Company shall continue such payments to the Executive’s beneficiary designated
in writing to the Company prior to his death (or to his estate, if the
Executive fails to make such designation).

 

9.                                       Enforceability.  If any portion or provision of this Agreement
shall to any extent be declared illegal or unenforceable by a court of
competent jurisdiction, then the remainder of this Agreement, or the application
of such portion or provision in circumstances other than those as to which it
is so declared illegal or unenforceable, shall not be affected thereby, and
each portion and provision of this Agreement shall be valid and enforceable to
the fullest extent permitted by law.

 

10.                                 Waiver.  No waiver of any provision hereof shall be
effective unless made in writing and signed by the waiving party.  The failure of any party to require the
performance of any term or obligation of this Agreement, or the waiver by any
party of any breach of this Agreement, shall not prevent any subsequent
enforcement of such term or obligation or be deemed a waiver of any subsequent
breach.

 

11.                                 Notices.  Any notices, requests, demands, and other
communications provided for by this Agreement shall be sufficient if in writing
and delivered in person or sent by registered or certified mail, postage
prepaid, to the Executive at the last address the Executive has filed in
writing with the Company, or to the Company at its main office, attention of
the Board of Trustees.

 

12.                                 Effect
on Other Plans.  Nothing in this
Agreement shall be construed to limit the rights of the Executive under the
Company’s benefit plans, programs or policies.

 

13.                                 Amendment.  This Agreement may be amended or modified
only by a written instrument signed by the Executive and by a duly authorized
representative of the Company.

 

14.                                 Governing
Law.  This is a Maryland contract and
shall be construed under and be governed in all respects by the laws of the
State of Maryland.

 

15.                                 Obligations
of Successors.  In addition to any
obligations imposed by law upon any successor to the Company, the Company will
use their best efforts to require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of
the business or assets of the Company to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform if no such succession had taken place.

 

9

 

IN
WITNESS WHEREOF, this Agreement has been executed as a sealed instrument by the
Company by its duly authorized officer and by the Executive, as of the date
first above written.

 

	
   

  	
  GABLES RESIDENTIAL
  TRUST

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  

 

10Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

THIS
EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) dated as of March 25,
2005, is by and between Isolagen, Inc., a Delaware corporation (together
with its subsidiaries, the “Company” or “Isolagen”), and Martin E. Schmieg, an
individual residing in Philadelphia, Pennsylvania (the “Executive”).

 

W I T N E S S E T H:

 

WHEREAS,
the Executive desires to serve the Company as its Senior Vice President and
Chief Financial Officer; and

 

WHEREAS,
the Company desires to employ Executive as its Senior Vice President and Chief
Financial Officer;

 

NOW
THEREFORE in consideration of the mutual benefits to be derived from this
Agreement, the Company and the Executive hereby agree as follows:

 

1.                                       Term
of Employment; Office and Duties.

 

(a)                                  Commencing
on April 18, 2005 (the “Employment Date”), and for an initial term ending April 17,
2008 the Company shall employ the Executive as a senior executive of the
Company with the title of Senior Vice President and Chief Financial Officer,
with the duties and responsibilities prescribed for such offices in the Bylaws
of the Company and such additional duties and responsibilities consistent with
such positions as may from time to time be assigned to the Executive by the
Board of Directors.  Specifically
included in the Executive’s responsibilities shall be the identification,
recruitment and retention of the members of the finance and accounting team of
the Company, with the advice and consent of the Board of Directors.  Executive agrees to perform such duties and
discharge such responsibilities in accordance with the terms of this
Agreement.  This Agreement shall be
renewed for an additional one (1) year term, by the mutual written
agreement of the Executive and the Company at least thirty (30) days prior to
its expiration.

 

(b)                                 The
Executive shall devote substantially all of his working time to the business
and affairs of the Company other than during vacations of four weeks per year
and periods of illness or incapacity; provided, however, that
nothing in this Agreement shall preclude the Executive from devoting time
required:  (i) for serving as a
director or officer of any organization or entity not in a competing business
with the Company, and any other businesses in which the Company becomes involved;
(ii) delivering lectures or fulfilling speaking engagements;  or (iii) engaging in charitable and
community activities provided that such activities do not interfere with
the performance of his duties hereunder.

 

2.                                       Compensation
and Benefits.

 

For all services rendered by the Executive in any
capacity during the period of Executive’s employment by the Company, including
without limitation, services as an executive officer or member of any committee
of the Board of Directors or any subsidiary, affiliate or division thereof,
from and after the Effective Date, the Executive shall be compensated as
follows:

 

(a)                                  Base
Salary.  The Company shall pay the
Executive a fixed salary (“Base Salary”) at a rate of Two Hundred Seventy-five
Thousand Dollars ($275,000) per year. 
The Board of Directors may periodically review the Executive’s Base
Salary and may determine to increase (but not decrease) the Executive’s salary,
in accordance with such policies as the Company may hereafter adopt from time
to time, if it deems appropriate.  Base
Salary will be payable in accordance with the customary payroll practices of
the Company.

 

(b)                                 Executive
will also be entitled to receive an annual bonus (“the “Annual Bonus”), payable
each year subsequent to the issuance of final audited financial statements, but
in no case later than 120 days after the end of the Company’s most recently
completed fiscal year. The final determination on the amount of the Annual
Bonus will be made by the Compensation Committee of the Board of Directors,
based primarily on mutually

 

 

agreed upon criteria,
established with respect to the ensuing fiscal year, within thirty (30) days of
the end of each fiscal year.  The
Compensation Committee may also consider other more subjective factors in
making its determination.

 

(c)                                  Fringe
Benefits, Option Grants and Miscellaneous Employment Matters.

 

(i)                                     The
Executive shall be entitled to participate in such disability, health and life
insurance and other fringe benefit plans or programs, including a Section 401(k)
retirement plan, of the Company established from time to time by the Board of
Directors, if any, to the extent that his position, tenure, salary, age, health
and other qualifications make him eligible to participate, subject to the rules and
regulations applicable thereto.  In
addition, the Executive shall be entitled to the following benefits:

 

(ii)                                  Contemporaneous
with the execution of this Agreement, the Executive will be granted a
non-qualified stock option (the “Employment Option”) to purchase 300,000 shares
of the Company’s Common Stock, par value $.001 per share (the “Common Stock”)
with an exercise price per share equal to the closing price of Isolagen on the
date of the grant. The term of the Employment Option will be for a period of
five (5) years from the date of grant and governed by the terms of an
Option Agreement between the Executive and the Company.  The shares eligible for purchase under the
Employment Option grant vest ratably, annually, over the three years following
the Employment Date.

 

(d)                                 Withholding
and Employment Tax.  Payment of all
compensation hereunder shall be subject to customary withholding tax and other
employment taxes as may be required with respect to compensation paid by an
employer/corporation to an employee.

 

(e)                                  Disability.  The Company shall, to the extent such
benefits can be obtained at a reasonable cost, provide the Executive with
disability insurance benefits.

 

(f)                                    Death.  The Company shall, to the extent such
benefits can be obtained at a reasonable cost, provide the Executive with life
insurance benefits in the amount of at least One Million Dollars ($1,000,000).

 

(g)                                 Vacation.  Executive shall receive four (4) weeks
of vacation annually, administered in accordance with the Company’s existing
vacation policy.

 

3.                                       Business
Expenses.

 

The Company shall pay or reimburse all reasonable
travel and entertainment expenses incurred by the Executive in connection with
the performance of his duties under this Agreement, including travel between
Executive’s current domicile in the Philadelphia, Pennsylvania metropolitan
area, travel to the Company’s various offices (other than his primary assigned
office in Exton, PA) and facilities in the United states and abroad,
reimbursement for attending out-of-town meetings of the Board of Directors, and
such other travel as may be required or appropriate to fulfill the
responsibilities of his office, all in accordance with such policies and
procedures as the Company may from time to time establish for senior officers
and as required to preserve any deductions for federal income taxation purposes
to which the Company may be entitled and subject to the Company’s normal
requirements with respect to reporting and documentation of such expenses.

 

4.                                       Termination
of Employment.

 

Notwithstanding any other provision of this Agreement,
Executive’s employment with the Company may be terminated upon written notice
to the other party as follows:

 

(a)                                  By
the Company, in the event of the Executive’s death or Disability (as
hereinafter defined) or for Cause (as hereinafter defined). For purposes of
this Agreement, “Cause” shall mean either: (i) the indictment of, or the
bringing of formal charges against, Executive by a governmental authority of
competent jurisdiction for charges involving criminal fraud or embezzlement; (ii) the
conviction of Executive of a crime involving an act or acts of dishonesty,
fraud or moral turpitude by the Executive, which act or acts constitute a
felony; (iii) Executive having willfully caused the Company, without the
approval of the Board of Directors, to fail

 

2

 

to abide by either a valid contract to which the
Company is a party or the Company’s Bylaws or; (iv) Executive having
committed acts or omissions constituting gross negligence or willful misconduct
with respect to the Company; (v) Executive having committed acts or
omissions constituting a material breach of Executive’s duty of loyalty or
fiduciary duty to the Company or any material act of dishonesty or fraud with
respect to the Company which are not cured in a reasonable time, which time
shall be 30 days from receipt of written notice from the Company of such
material breach; or (vi) Executive having committed acts or omissions
constituting a material breach of this Agreement, including any failure of the
Executive to follow a directive from the Board of Directors and/or its Audit
Committee, which are not cured in a reasonable time, which time shall be 30
days from receipt of written notice from the Company of such material breach (vii) Executive
having failed to meet agreed upon minimum performance criteria.  A determination that Cause exists as defined
in clauses (iv), (v), (vi) or (vii) (as to this Agreement) of the
preceding sentence shall be made in good faith and by at least a majority of
the members of the Board of Directors. 
For purposes of this Agreement, “Disability” shall mean the inability of
Executive, in the reasonable judgment of a physician appointed by the Board of
Directors, to perform his duties of employment for the Company or any of its
subsidiaries because of any physical or mental disability or incapacity, where
such disability shall exist for an aggregate period of more than 120 days in
any 365-day period or for any period of 90 consecutive days.  The Company shall by written notice to the
Executive specify the event relied upon for termination pursuant to this Section 4(a),
and Executive’s employment hereunder shall be deemed terminated as of the date
of such notice.  In the event of any
termination under this Subsection 4(a), the Company shall pay all amounts
then due to the Executive under Section 2(a) of this Agreement for
any portion of the payroll period worked but for which payment had not yet been
made up to the date of termination, and, if such termination was for Cause, the
Company shall have no further obligations to Executive under this Agreement,
and any and all options granted hereunder shall terminate according to their
terms.  In the event of a termination due
to Executive’s Disability or death, the Company shall comply with its
obligations under Sections 2(e) and 2(f).

 

(b)                                 By
the Company, in the absence of Cause, for any reason and in its sole and
absolute discretion, provided that in such event the Company shall, as
liquidated damages or severance pay, or both, continue to pay to Executive the
Base Salary (at a monthly rate equal to the rate in effect immediately prior to
such termination) for the lesser of the remaining term as defined above or six
months from the date of termination (the “Termination Payments”), when, as and
if such payments would have been made in the absence of Executive’s
termination.

 

5.                                       Non-Competition.

 

During the period of Executive’s employment hereunder
and during the period, if any, during which payments are required to be made to
the Executive by the Company pursuant to Sections 4(a) or 4(b), the
Executive shall not, within any state or foreign jurisdiction in which the
Company or any subsidiary of the Company is then providing services or products
or marketing its services or products (or engaged in active discussions to
provide such services), or within a one hundred (100) mile radius of any such
state, directly or indirectly own any interest in, manage, control, participate
in, consult with, render services for, or in any manner engage in any business
engaged in any business engaged in by the Company (unless the Board of
Directors shall have authorized such activity and the Company shall have
consented thereto in writing). 
Investments of less than five percent of the outstanding securities of
any class of a corporation subject to the reporting requirements of Section 13
or Section 15(d) of the Securities Exchange Act of 1934, as amended,
shall not be prohibited by this Section 5. Executive’s obligations under
this Section 5 arising after the termination of Executive shall be
suspended during any period in which the Company fails to pay to him
Termination Payments required to be paid to him pursuant to this
Agreement.  The provisions of this Section 5
are subject to the provisions of Section 14 of this Agreement.

 

6.                                       Inventions
and Confidential Information.

 

The parties hereto recognize that a major need of the
Company is to preserve its specialized knowledge, trade secrets, and
confidential information.  The strength
and good will of the Company is derived from the specialized knowledge, trade
secrets, and confidential information generated from experience with the
activities undertaken by the Company and its subsidiaries.  The disclosure of this information and
knowledge to competitors would be beneficial to them and detrimental to the
Company, as would the disclosure of information about the marketing practices,
pricing practices, costs, profit margins, design specifications, analytical
techniques, and similar items of the Company and its subsidiaries.  The Executive acknowledges that the
proprietary information,

 

3

 

observations and data obtained by him while employed
by the Company concerning the business or affairs of the Company are the
property of the Company.  By reason of
his being a senior executive of the Company, the Executive has or will have
access to, and has obtained or will obtain, specialized knowledge, trade
secrets and confidential information about the Company’s operations and the
operations of its subsidiaries, which operations extend throughout the United
States.  [For purposes of this Section 6,
“Company” shall mean the Company and each of its controlled subsidiaries.]  Therefore, subject to the provisions of Section 14
hereof, the Executive hereby agrees as follows, recognizing that the Company is
relying on these agreements in entering into this Agreement:

 

(i)                                     During
the period of Executive’s employment with the Company and for ten (10) years
thereafter, the Executive will not use, disclose to others, or publish or
otherwise make available to any other party any inventions or any confidential
business information about the affairs of the Company, including but not
limited to confidential information concerning the Company’s products, methods,
engineering designs and standards, analytical techniques, technical
information, customer information, employee information, and other confidential
information acquired by him in the course of his past or future services for
the Company.  Executive agrees to hold as
the Company’s property all books, papers, letters, formulas, memoranda, notes,
plans, records, reports, computer tapes, printouts, software and other
documents, and all copies thereof and therefrom, in any way relating to the
Company’s business and affairs, whether made by him or otherwise coming into
his possession, and on termination of his employment, or on demand of the
Company, at any time, to deliver the same to the Company within twenty four
(24) hours of such termination or demand.

 

(ii)                                  During
the period of Executive’s employment with the Company and for eighteen (18)
months thereafter, (a) the Executive will not directly or indirectly
through another entity induce or otherwise attempt to influence any employee of
the Company to leave the Company’s employ and (b) the Executive will not
directly or indirectly hire or cause to be hired or induce a third party to
hire, any such employee (unless the Board of Directors shall have authorized such
employment and the Company shall have consented thereto in writing) or in any
way interfere with the relationship between the Company and any employee
thereof and (c) induce or attempt to induce any customer, supplier,
licensee, licensor or other business relation of the Company to cease doing
business with the Company or in any way interfere with the relationship between
any such customer, supplier, licensee or business relation of the Company.

 

7.                                       Indemnification.

 

The
Company will indemnify (and advance the costs of defense of) the Executive (and
his legal representatives) to the fullest extent required by the laws of the
state in which the Company is incorporated, as in effect at the time of the
subject act or omission, or by the Certificate of Incorporation and Bylaws of
the Company, as in effect at such time or on the date of this Agreement,
whichever affords greater protection to the Executive, and the Executive shall
be entitled to the protection of any insurance policies the Company may elect to
maintain generally for the benefit of its executive officers, against all
judgments, damages, liabilities, costs, charges and expenses whatsoever
incurred or sustained by him or his legal representative in connection with any
action, suit or proceeding to which he (or his legal representatives or other
successors) may be made a party by reason of his being or having been an
officer of the Company or any of its subsidiaries except that the Company shall
have no obligation to indemnify Executive for liabilities resulting from
conduct of the Executive with respect to which a court of competent
jurisdiction has made a final determination that Executive committed gross
negligence or willful misconduct.

 

8.                                       Litigation
Expenses.

 

In the
event of any litigation or other proceeding between the Company and the
Executive with respect to the subject matter of this Agreement and the
enforcement of the rights hereunder and such litigation or proceeding results
in final judgment or order in favor of the Executive, which judgment or order
is substantially inconsistent with the positions asserted by the Company in
such litigation or proceeding, the losing party shall reimburse the prevailing
party for all of his/its reasonable costs and expenses relating to such
litigation or other proceeding, including, without limitation, his/its
reasonable attorneys’ fees and expenses.

 

4

 

9.                                       Consolidation;
Merger; Sale of Assets; Change of Control.

 

Nothing in this Agreement shall preclude the Company
from combining, consolidating or merging with or into, transferring all or
substantially all of its assets to, or entering into a partnership or joint
venture with, another corporation or other entity, or effecting any other kind
of corporate combination provided that the corporation resulting from or
surviving such combination, consolidation or merger, or to which such assets
are transferred, or such partnership or joint venture assumes this Agreement
and all obligations and undertakings of the Company hereunder. Upon such a
consolidation, merger, transfer of assets or formation of such partnership or
joint venture, this Agreement shall inure to the benefit of, be assumed by, and
be binding upon such resulting or surviving transferee corporation or such
partnership or joint venture, and the term “Company,” as used in this
Agreement, shall mean such corporation, partnership or joint venture or other
entity, and this Agreement shall continue in full force and effect and shall
entitle the Executive and his heirs, beneficiaries and representatives to
exactly the same compensation, benefits, perquisites, payments and other rights
as would have been their entitlement had such combination, consolidation,
merger, transfer of assets or formation of such partnership or joint venture
not occurred.

 

10.                                 Survival
of Obligations.

 

Sections
4, 5, 6, 7, 8, 9, 11, 12 and 14 shall survive the termination for any reason of
this Agreement (whether such termination is by the Company, by the Executive,
upon the expiration of this Agreement or otherwise).

 

11.                                 Executive’s
Representations.

 

The Executive hereby represents and warrants to the
Company that (i) the execution, delivery and performance of this Agreement
by the Executive do not and shall not conflict with, breach, violate or cause a
default under any contract, agreement, instrument, order, judgment or decree to
which the Executive is a party or by which he is bound, (ii) the Executive
is not a party to or bound by any employment agreement, non-compete agreement
or confidentiality agreement with any other person or entity and (iii) upon
the execution and delivery of this Agreement by the Company, this Agreement
shall be the valid and binding obligation of the Executive, enforceable in
accordance with its terms.  The Executive
hereby acknowledges and represents that he has consulted with legal counsel
regarding his rights and obligations under this Agreement and that he fully
understands the terms and conditions contained herein.

 

12.                                 Company’s
Representations.

 

The Company hereby represents and warrants to the
Executive that (i) the execution, delivery and performance of this
Agreement by the Company do not and shall not conflict with, breach, violate or
cause a default under any contract, agreement, instrument, order, judgment or
decree to which the Company is a party or by which it is bound and (ii) upon
the execution and delivery of this Agreement by the Executive, this Agreement
shall be the valid and binding obligation of the Company, enforceable in
accordance with its terms.

 

13.                                 Enforcement.

 

Because the Executive’s services are unique and
because the Executive has access to confidential information concerning the
Company, the parties hereto agree that money damages would not be an adequate
remedy for any breach of this Agreement. 
Therefore, in the event of a breach or threatened breach of this
Agreement, the Company may, in addition to other rights and remedies existing
in its favor, apply to any court of competent jurisdiction for specific
performance and/or injunctive or other relief in order to enforce, or prevent
any violations of, the provisions hereof (without posting a bond or other
security).

 

14.                                 Severability.

 

In case any one or more of the provisions or part of a
provision contained in this Agreement shall for any reason be held to be
invalid, illegal or unenforceable in any respect in any jurisdiction, such
invalidity, illegality or unenforceability shall be deemed not to affect any
other jurisdiction or any other provision or part of a provision of this
Agreement, nor shall such invalidity, illegality or unenforceability affect the
validity, legality or enforceability

 

5

 

of this Agreement or any provision or provisions
hereof in any other jurisdiction; and this Agreement shall be reformed and
construed in such jurisdiction as if such provision or part of a provision held
to be invalid or illegal or unenforceable had never been contained herein and
such provision or part reformed so that it would be valid, legal and
enforceable in such jurisdiction to the maximum extent possible.  In furtherance and not in limitation of the
foregoing, the Company and the Executive each intend that the covenants
contained in Sections 5 and 6 shall be deemed to be a series of separate
covenants, one for each county of the Commonwealth of Pennsylvania and one for
each and every other state, territory or jurisdiction of the United States and
any foreign country set forth therein. 
If, in any judicial proceeding, a court shall refuse to enforce any of
such separate covenants, then such unenforceable covenants shall be deemed
eliminated from the provisions hereof for the purpose of such proceedings to
the extent necessary to permit the remaining separate covenants to be enforced
in such proceedings.  If, in any judicial
proceeding, a court shall refuse to enforce any one or more of such separate
covenants because the total time, scope or area thereof is deemed to be
excessive or unreasonable, then it is the intent of the parties hereto that
such covenants, which would otherwise be unenforceable due to such excessive or
unreasonable period of time, scope or area, be enforced for such lesser period
of time, scope or area as shall be deemed reasonable and not excessive by such
court.

 

15.                                 Entire
Agreement; Amendment.

 

Except
as otherwise set forth in this Agreement, this Agreement contains the entire
agreement between the Company and the Executive with respect to the subject
matter hereof and thereof.  This
Agreement may not be amended, waived, changed, modified or discharged except by
an instrument in writing executed by or on behalf of the party against whom
enforcement of any amendment, waiver, change, modification or discharge is
sought.  No course of conduct or dealing
shall be construed to modify, amend or otherwise affect any of the provisions
hereof.

 

16.                                 Notices.

 

All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if physically delivered, delivered by express mail or other
expedited service or upon receipt if mailed, postage prepaid, via registered
mail, return receipt requested, addressed as follows:

 

	
  (a)

  	
  To the Company:

  	
  (b)

  	
  To the
  Executive:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Isolagen, Inc.

  	
   

  	
  Martin E. Schmieg

  
	
   

  	
   

  	
   

  	
  640 W. Carpenter Lane

  
	
   

  	
   

  	
   

  	
  Philadelphia, PA 19119

  

 

Dilworth
Paxson, LLP

3200
Mellon Bank Center

1735
Market Street

Philadelphia,
PA 19103

Attn:  Susan Ciallella, Esq.

 

and/or to such other
persons and addresses as any party shall have specified in writing to the
other.

 

17.                                 Assignability.

 

This Agreement shall not be assignable by either party
and shall be binding upon, and shall inure to the benefit of, the heirs,
executors, administrators, legal representatives, successors and assigns of the
parties.  In the event that all or
substantially all of the business of the Company is sold or transferred, then
this Agreement shall be binding on the transferee of the business of the
Company whether or not this Agreement is expressly assigned to the transferee.

 

18.                                 Governing
Law.

 

This Agreement shall be governed by and construed
under the laws of the Commonwealth of Pennsylvania.

 

6

 

19.                                 Waiver
and Further Agreement.

 

Any
waiver of any breach of any terms or conditions of this Agreement shall not
operate as a waiver of any other breach of such terms or conditions or any
other term or condition, nor shall any failure to enforce any provision hereof
operate as a waiver of such provision or of any other provision hereof.  Each of the parties hereto agrees to execute
all such further instruments and documents and to take all such further action
as the other party may reasonably require in order to effectuate the terms and
purposes of this Agreement.

 

20.                                 Headings
of No Effect.

 

The
paragraph headings contained in this Agreement are for reference purposes only
and shall not in any way affect the meaning or interpretation of this
Agreement.

 

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

 

	
   

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  ISOLAGEN, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Frank DeLape,
  Chairman of the Board

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EXECUTIVE:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Martin E. Schmieg

  
					

 

7

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