Document:

Exhibit 10.2

 

June 14,
2005

 

 

Martin J. Joyce

11 Spruce Street

Braintree, MA 02184

 

Dear Marty:

 

We are
pleased to offer you continued employment with BioSphere Medical, Inc.
(the “Company”) under the following terms and conditions.  As consideration for your execution of this
letter agreement, the Company will grant you a stock option to purchase 150,000
shares of the Company’s Common Stock, $.01 par value per share (“Common Stock”),
as described below in paragraph 3.  This
agreement will supercede the terms of any prior agreements purporting to set
forth the terms and conditions of your employment.

 

1.                                       Employment;
Location; Duties.

 

You will continue to be employed to serve on a
full-time basis as Vice President and Chief Financial Officer, and will continue
to be based at the Company’s headquarters. 
You will continue to be subject to the supervision of, and shall have
such authority as is delegated to you by, the Chief Executive Officer of the
Company.

 

By entering into this letter agreement with the Company,
you will be agreeing to undertake the duties and responsibilities inherent in
such position and such other duties and responsibilities as the Chief Executive
Officer shall from time to time reasonably assign to you.  You agree to devote your entire business
time, attention and energies to the business and interests of the Company
during your continued employment.  You
also agree to abide by the rules, regulations, instructions, personnel
practices and policies of the Company and any changes therein which may be
adopted from time to time by the Company.

 

2.                                       Compensation.

 

2.1                                 Base
Salary.  Your annualized base salary
will continue to be $196,838, less applicable taxes and withholdings, paid
semi-monthly in accordance with the Company’s payroll practices (“Base Salary”).  Such salary and pay schedule may be
adjusted from time to time, in accordance with normal business practice and in
the sole discretion of the Company’s Board of Directors.

 

2.2                                 Bonus.  You will be eligible to receive an annual
bonus in an amount equal to up to 30% of your then current Base Salary, to be
paid based upon the Company’s evaluation of your achievement of milestones and
objectives to be mutually agreed upon annually by you and the Compensation
Committee of the Board of Directors, provided that you remain an employee of
the Company at the time such bonuses are customarily paid.

 

 

2.3                                 Other
Benefits. You shall continue to be eligible to participate in all benefit
programs that the Company establishes and generally makes available to its
employees, if any, to the extent that your position, tenure, salary, age,
health and other qualifications make you eligible to participate, including but
not limited to the Company’s health insurance plan, 401(k) plan, and policies
governing paid time off.  In addition,
you shall continue to be entitled to three (3) weeks paid vacation per
year, subject to the Company’s policies and procedures, to be taken at such
times as may be approved by the Company’s Chief Executive Officer or his
designee.  The Company reserves the right
to amend and/or terminate any plan, benefit, or program at any time with or
without notice or publication.

 

2.4                                 Reimbursement
of Expenses.  The Company shall
reimburse you for all reasonable travel, entertainment and other expenses
incurred or paid by you in connection with, or related to, the performance of
your duties, responsibilities or services as an employee of the Company, in
accordance with policies and procedures, and subject to limitations, adopted by
the Company from time to time.

 

3.                                       Consideration.

 

If you enter into this letter agreement with the
Company, you will be granted, pursuant to the Company’s 1997 Stock Incentive
Plan (the “Plan”) (a) an option to purchase 100,000 shares of Common Stock
of the Company pursuant to the terms and conditions of the Plan and a stock
option agreement issued thereunder, such option to be exercisable at a price
per share equal to the closing price of the Company’s Common Stock on the
NASDAQ Stock Market on date of grant, such option to vest and become
exercisable, subject to your continued employment, at a rate of 20% of the
total shares underlying the option on the first anniversary of the date of
grant and as to an additional 20% at the end of each full year thereafter and (b) an
option, to purchase 50,000 shares of the Company’s Common Stock pursuant to the
terms and conditions of the Plan and a stock option agreement issued
thereunder, such option to be exercisable at a price per share equal to the
closing price of the Company’s Common Stock on the date of grant, such option
to vest and become exercisable, subject to your continued employment, at a rate
of 33.3333% of the total shares underlying the option on the first anniversary
of the date on which the Company books revenue from the commercial sale of its
products in excess of $25.0 million (as reflected on the Company’s financial
statements prepared in accordance with generally accepted accounting principles
in the United States) in any continuous 12-month period and as to an additional
33.3333% at the end of each full year thereafter; provided that such option
shall vest, in any event, on the end of the seventh year after the date of
grant.

 

4.                                       Termination
Upon or in Anticipation of a Change in Control.

 

4.1                                 In
the event your at-will employment is terminated by the Company without Cause
(as defined below) in anticipation of, or within twelve months after, a Change
in Control (as defined below), the Company shall continue to pay to you your
salary as in effect on the date of termination and the amount of the annual
bonus paid to you for the fiscal year immediately preceding the date of
termination (payable in annualized monthly installments) and shall, provided
you elect to receive group medical insurance pursuant to the federal “COBRA” 

 

 

law,  29 U.S.C. § 1161 et  seq.,
provide to you reimbursement for the share of the premium for group medical and
dental that is paid by the Company for active and similarly-situated employees
who receive the same type of coverage, until the date 12 months after the date
of termination, provided, however, that the Company’s obligation to make the
aforesaid payments or provide the aforesaid benefits shall immediately
terminate in the event that you violate the provisions of Section 5 or Section 6
of this letter agreement during such 12 month period.  The payment to you of the amounts payable
under this Section 4.1 shall be contingent upon your execution of a
release in a form reasonably acceptable to and prepared by the Company and (ii) shall
constitute your sole remedy in the event of a termination of your employment in
the circumstances set forth in this Section 4.1.

 

4.2                                 “Cause”
shall, for the purposes of Section 4.1, mean (a) a finding by the
Company of failure by you to perform your assigned duties for the Company,
dishonesty, gross negligence, misconduct, or any act or omission by you that
may have an adverse effect on the Company’s business or on your ability to
perform services for the Company; or (b) your conviction or the entry of a
pleading of guilty or nolo contendere to any crime involving moral turpitude or
any felony.

 

4.3                                 “Change
in Control” means an event or occurrence set forth in any one or more of
subsections (a) through (d) below (including an event or occurrence
that constitutes a Change in Control under one of such subsections but is
specifically exempted from another such subsection):

 

(a)                                  the
acquisition by an individual, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”)) (a “Person”) of beneficial ownership of any capital stock of the Company
if, after such acquisition, such Person beneficially owns (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) 50% or more of either (x)
the then-outstanding shares of common stock of the Company (the “Outstanding
Company Common Stock”) or (y) the combined voting power of the then-outstanding
securities of the Company entitled to vote generally in the election of
directors (the “Outstanding Company Voting Securities”); provided,
however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change in Control: (i) any acquisition
directly from the Company (excluding an acquisition pursuant to the exercise,
conversion or exchange of any security exercisable for, convertible into or
exchangeable for common stock or voting securities of the Company, unless the
Person exercising, converting or exchanging such security acquired such
security directly from the Company or an underwriter or agent of the Company), (ii) any
acquisition by the Company, (iii) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company, or (iv) any acquisition by any
corporation pursuant to a transaction which complies with clauses (i) and (ii) of
subsection (c) of this Section 4.3; or

 

(b)                                 such
time as the Continuing Directors (as defined below) do not constitute a
majority of the Board (or, if applicable, the Board of Directors of a successor
corporation to the Company), where the term “Continuing Director” means at any
date a member 

 

 

of the Board (i) who was a member of the Board on the date of the
execution of this letter agreement or (ii) who was nominated or elected
subsequent to such date by at least a majority of the directors who were
Continuing Directors at the time of such nomination or election or whose
election to the Board was recommended or endorsed by at least a majority of the
directors who were Continuing Directors at the time of such nomination or
election; provided, however, that there shall be excluded from
this clause (ii) any individual whose initial assumption of office
occurred as a result of an actual or threatened election contest with respect
to the election or removal of directors or other actual or threatened
solicitation of proxies or consents, by or on behalf of a person other than the
Board; or

 

(c)                                  the
consummation of a merger, consolidation, reorganization, recapitalization or
statutory share exchange involving the Company or a sale or other disposition
of all or substantially all of the assets of the Company in one or a series of
transactions (a “Business Combination”), unless, immediately following such
Business Combination, each of the following two conditions is satisfied: (i) all
or substantially all of the individuals and entities who were the beneficial
owners of the Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination beneficially own,
directly or indirectly, more than 50%
of the then-outstanding shares of common stock and the combined voting power of
the then-outstanding securities entitled to vote generally in the election of
directors, respectively, of the resulting or acquiring corporation in such
Business Combination (which shall include, without limitation, a corporation
which as a result of such transaction owns the Company or substantially all of
the Company’s assets either directly or through one or more subsidiaries) (such
resulting or acquiring corporation is referred to herein as the “Acquiring
Corporation”) in substantially the same proportions as their ownership,
immediately prior to such Business Combination, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, respectively; and (ii) no
Person (excluding any employee benefit plan (or related trust) maintained or
sponsored by the Company or by the Acquiring Corporation) beneficially owns,
directly or indirectly, 50% or
more of the then outstanding shares of common stock of the Acquiring
Corporation, or of the combined voting power of the then-outstanding securities
of such corporation entitled to vote generally in the election of directors
(except to the extent that such ownership existed prior to the Business
Combination); or

 

(d)                                 approval
by the stockholders of the Company of a complete liquidation or dissolution of
the Company.

 

5.                                       Non-Competition
and Non-Solicitation.

 

5.1                                 Restricted
Activities.  While you are employed
by the Company and for a period of one year after the termination or cessation
of such employment for any reason, you will not directly or indirectly:

 

(a)                                  Engage
in any business or enterprise (whether as owner, partner, officer, director,
employee, consultant, investor, lender or otherwise, except as the holder of
not more than 1% of the outstanding stock of a publicly-held company) that is
competitive with the Company’s business, including but not limited to any
business or enterprise that develops, 

 

 

manufactures, markets, licenses, sells or provides any product or
service that competes with any product or service developed, manufactured,
marketed, licensed, sold or provided, or planned to be developed, manufactured,
marketed, licensed, sold or provided, by the Company or any of its subsidiaries
while you were employed by the Company; or

 

(b)                                 Either
alone or in association with others (i) solicit, or permit any
organization directly or indirectly controlled by you to solicit, any employee
of the Company to leave the employ of the Company, or (ii) solicit for
employment, hire or engage as an independent contractor, or permit any
organization directly or indirectly controlled by you to solicit for
employment, hire or engage as an independent contractor, any person who was
employed by the Company at the time of the termination or cessation of your
employment with the Company; provided, that this clause (ii) shall
not apply to the solicitation, hiring or engagement of any individual whose employment
with the Company has been terminated for a period of six months or longer.

 

5.2                                 Extension.  If you violate the provisions of Section 5.1,
you shall continue to be bound by the restrictions set forth in Section 5.1
until a period of one year has expired without any violation of such
provisions.

 

5.3                                 Interpretation.  If any restriction set forth in Section 5.1
is found by any court of competent jurisdiction to be unenforceable because it
extends for too long a period of time or over too great a range of activities
or in too broad a geographic area, it shall be interpreted to extend only over
the maximum period of time, range of activities or geographic area as to which
it may be enforceable.

 

5.4                                 Equitable
Remedies.  The restrictions contained
in this Section 5 are necessary for the protection of the business and
goodwill of the Company and are considered by you to be reasonable for such
purpose.  You agree that any breach of
this Section 5 is likely to cause the Company substantial and irrevocable
damage which is difficult to measure. 
Therefore, in the event of any such breach or threatened breach, you
agree that the Company, in addition to such other remedies which may be
available, shall have the right to obtain an injunction from a court restraining
such a breach or threatened breach and the right to specific performance of the
provisions of this Section 5 and you hereby waive the adequacy of a remedy
at law as a defense to such relief.

 

6.                                       Proprietary
Information and Developments.

 

6.1                                 Proprietary
Information.

 

(a)                                  You
agree that all information, whether or not in writing, of a private, secret or
confidential nature concerning the Company’s business, business relationships
or financial affairs (collectively, “Proprietary Information”) is and shall be
the exclusive property of the Company. 
By way of illustration, but not limitation, Proprietary Information may
include inventions, products, processes, methods, techniques, formulas,
compositions, compounds, projects, developments, plans, research data, clinical
data, financial data, personnel data, computer programs, customer and supplier
lists, and contacts at or knowledge of customers or 

 

 

prospective customers of the Company. 
You will not disclose any Proprietary Information to any person or entity
other than employees of the Company or use the same for any purposes (other
than in the performance of your duties as an employee of the Company) without
written approval by an officer of the Company, either during or after your
employment with the Company, unless and until such Proprietary Information has
become public knowledge without fault by you or unless required by law.

 

(b)                                 You
agree that all files, letters, memoranda, reports, records, data, sketches,
drawings, laboratory notebooks, program listings, or other written,
photographic, or other tangible material containing Proprietary Information,
whether created by you or others, which shall come into your custody or
possession, shall be and are the exclusive property of the Company to be used by
you only in the performance of your duties for the Company.  All such materials or copies thereof and all
tangible property of the Company in your custody or possession shall be
delivered to the Company, upon the earlier of (i) a request by the Company
or (ii) termination of your employment. 
After such delivery, you shall not retain any such materials or copies
thereof or any such tangible property.

 

(c)                                  You
agree that your obligation not to disclose or to use information and materials
of the types set forth in paragraphs (a) and (b) above, and your
obligation to return materials and tangible property, set forth in
paragraph (b) above, also extends to such types of information,
materials and tangible property of customers of the Company or suppliers to the
Company or other third parties who may have disclosed or entrusted the same to
the Company or to you.

 

6.2                                 Developments.

 

(a)                                  You
will make full and prompt disclosure to the Company of all inventions,
improvements, discoveries, methods, developments, software, and works of
authorship, whether patentable or not, which are created, made, conceived or
reduced to practice by you or under your direction or jointly with others
during your employment by the Company, whether or not during normal working
hours or on the premises of the Company (all of which are collectively referred
to in this letter agreement as “Developments”).

 

(b)                                 You
agree to assign and do hereby assign to the Company (or any person or entity
designated by the Company) all your right, title and interest in and to all
Developments and all related patents, patent applications, copyrights and
copyright applications.  However, this
paragraph (b) shall not apply to Developments which do not relate to
the business or research and development conducted or planned to be conducted
by the Company at the time such Development is created, made, conceived or
reduced to practice and which are made and conceived by you not during normal
working hours, not on the Company’s premises and not using the Company’s tools,
devices, equipment or Proprietary Information. 
You understand that, to the extent this letter agreement shall be
construed in accordance with the laws of any state which precludes a
requirement in an employee agreement to assign certain classes of inventions
made by an employee, this paragraph (b) shall be interpreted not to
apply to any invention which a court rules and/or the Company agrees falls
within such classes.  You also hereby
waive all claims to moral rights in any Developments.

 

 

(c)                                  You
agree to cooperate fully with the Company, both during and after your
employment with the Company, with respect to the procurement, maintenance and
enforcement of copyrights, patents and other intellectual property rights (both
in the United States and foreign countries) relating to Developments.  You shall sign all papers, including, without
limitation, copyright applications, patent applications, declarations, oaths,
formal assignments, assignments of priority rights, and powers of attorney,
which the Company may deem necessary or desirable in order to protect its
rights and interests in any Development. 
You further agree that if the Company is unable, after reasonable
effort, to secure your signature on any such papers, any executive officer of
the Company shall be entitled to execute any such papers as your agent and
attorney-in-fact, and you hereby irrevocably designate and appoint each
executive officer of the Company as your agent and attorney-in-fact to execute
any such papers on your behalf, and to take any and all actions as the Company
may deem necessary or desirable in order to protect its rights and interests in
any Development, under the conditions described in this sentence.

 

6.3                                 United
States Government Obligations.  You
acknowledge that the Company from time to time may have agreements with other
parties or with the United States Government, or agencies thereof, which impose
obligations or restrictions on the Company regarding inventions made during the
course of work under such agreements or regarding the confidential nature of
such work.  You agree to be bound by all
such obligations and restrictions which are made known to you and to take all
appropriate action necessary to discharge the obligations of the Company under
such agreements.

 

6.4                                 Equitable
Remedies.  The restrictions contained
in this Section 6 are necessary for the protection of the business and
goodwill of the Company and are considered by you to be reasonable for such
purpose.  You agree that any breach of
this Section 6 is likely to cause the Company substantial and irrevocable
damage which is difficult to measure. 
Therefore, in the event of any such breach or threatened breach, you
agree that the Company, in addition to such other remedies which may be
available, shall have the right to obtain an injunction from a court
restraining such a breach or threatened breach and the right to specific
performance of the provisions of this Section 6 and you hereby waive the
adequacy of a remedy at law as a defense to such relief.

 

7.                                       Conflicts.

 

You represent that you are not bound by any employment
contract, restrictive covenant or other restriction preventing you from
entering into employment with or carrying out your responsibilities for the
Company, or which is in any way inconsistent with the terms of this letter.

 

8.                                       Successors
and Assigns.

 

This letter agreement shall be binding upon and inure
to the benefit of both parties and their respective successors and assigns,
including any corporation with which, or into which, 

 

 

the Company may be merged
or which may succeed to the Company’s assets or business, provided, however,
that your obligations are personal and shall not be assigned by you.  Notwithstanding the foregoing, if the Company
is merged with or into a third party which is engaged in multiple lines of
business, or if a third party engaged in multiple lines of business succeeds to
the Company’s assets or business, then for purposes of Section 4.1(a), the
term “Company” shall mean and refer to the business of the Company as it
existed immediately prior to such event and as it subsequently develops and not
to the third party’s other businesses.

 

9.                                       At-Will
Status.

 

This letter shall not be construed as an agreement,
either express or implied, to employ you for any stated term, and shall in no
way alter the Company’s policy of employment at will, under which both you and
the Company remain free to terminate the employment relationship, with or
without cause, at any time, with or without notice.  Similarly, nothing in this letter shall be
construed as an agreement, either express or implied, to pay you any
compensation or grant you any benefit beyond the end of your employment with
the Company except as described in Section 4.1.

 

10.                                 Entire
Agreement.

 

This letter agreement constitutes the entire agreement
between you and the Company regarding the terms and conditions of employment
with the Company.  This letter agreement
supercedes all prior agreements and understandings, whether written or oral,
relating to the subject matter of this letter agreement, including, but not
limited to, compensation and payments upon termination of employment.  As such, the Employment Agreement dated September 14,
2004 and Executive Retention Agreement dated September 14, 2004 previously
executed between you and the Company shall be null and void.

 

11.                                 Amendment.

 

This letter agreement may be amended or modified only
by a written instrument executed by both you and the Company.

 

12.                                 Waivers.

 

No delay or omission by the Company in exercising any
right under this letter agreement shall operate as a waiver of that or any
other right.  A waiver or consent given
by the Company on any one occasion shall be effective only in that instance and
shall not be construed as a bar or waiver of any right on any other occasion.

 

13.                                 Choice
of Law.

 

This letter agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Massachusetts
(without reference to the conflicts of laws 

 

 

provisions thereof).  Any action, suit or other legal proceeding
arising under or relating to any provision of this letter agreement shall be
commenced only in a court of the Commonwealth of Massachusetts (or, if
appropriate, a federal court located within Massachusetts), and you and the
Company each consent to the jurisdiction of such a court.  You and the Company each hereby irrevocably
waive any right to a trial by jury in any action, suit or other legal
proceeding arising under or relating to any provision of this letter agreement.

 

14.                                 Severability.

 

In the case that any provision of this letter
agreement shall be invalid, illegal or otherwise unenforceable, the validity,
legality and enforceability of the remaining provisions shall in no way be
affected or impaired thereby.

 

If
this letter correctly sets forth the terms of your continued employment with
the Company, please sign the enclosed duplicate of this letter in the space
provided below and return it to me.

 

	
   

  	
  Sincerely,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Richard J. Faleschini

  	
   

  
	
   

  	
  Name:
  Richard J. Faleschini

  
	
   

  	
  Title: President
  and Chief Executive Officer

  

 

The foregoing correctly
sets forth the terms of Martin J. Joyce’s at-will employment by BioSphere Medical, Inc., including but
not limited to Sections 5 and 6 above.

 

 

	
  /s/ Martin J.
  Joyce

  	
   

  	
  /s/ Richard J.
  Faleschini

  	
   

  
	
  Martin J. Joyce

  	
  BioSphere
  Medical, Inc.

  
	
   

  	
  By:

  	
  Richard J.
  Faleschini

  
	
   

  	
   

  	
  President and
  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
  Date:

  	
  June 14,
  2005

  	
   

  	
  Date:

  	
  June 14,
  2005Exhibit 10.3

 

June 14,
2005

 

Peter C. Sutcliffe

317 Tamarac Lane

Abington, MA  02351

 

Dear Peter:

 

We are
pleased to offer you continued employment with BioSphere Medical, Inc.
(the “Company”) under the following terms and conditions.  As consideration for your execution of this
letter agreement, the Company will grant you a stock option to purchase 150,000
shares of the Company’s Common Stock, $.01 par value per share (“Common Stock”),
as described below in paragraph 3.  This
agreement will supercede the terms of any prior agreements purporting to set
forth the terms and conditions of your employment.

 

1.                                       Employment;
Location; Duties.                           

 

You will continue to be employed to serve on a
full-time basis as Vice President, Operations, and will continue to be based at
the Company’s headquarters.  You will
continue to be subject to the supervision of, and shall have such authority as
is delegated to you by, the Chief Executive Officer of the Company.

 

By entering into this letter agreement with the
Company, you will be agreeing to undertake the duties and responsibilities
inherent in such position and such other duties and responsibilities as the
Chief Executive Officer shall from time to time reasonably assign to you.  You agree to devote your entire business
time, attention and energies to the business and interests of the Company
during your continued employment.  You
also agree to abide by the rules, regulations, instructions, personnel
practices and policies of the Company and any changes therein which may be adopted
from time to time by the Company.

 

2.                                       Compensation.

 

2.1                                 Base
Salary.  Your annualized base salary
will continue to be $189,960, less applicable taxes and withholdings, paid
semi-monthly in accordance with the Company’s payroll practices (“Base Salary”).  Such salary and pay schedule may be
adjusted from time to time, in accordance with normal business practice and in
the sole discretion of the Company’s Board of Directors.

 

2.2                                 Bonus.  You will be eligible to receive an annual
bonus in an amount equal to up to 30% of your then current Base Salary, to be
paid based upon the Company’s evaluation of your achievement of milestones and
objectives to be mutually agreed upon annually by you and the Compensation
Committee of the Board of Directors, provided that you remain an employee of
the Company at the time such bonuses are customarily paid.

 

 

2.3                                 Other
Benefits. You shall continue to be eligible to participate in all benefit
programs that the Company establishes and generally makes available to its
employees, if any, to the extent that your position, tenure, salary, age,
health and other qualifications make you eligible to participate, including but
not limited to the Company’s health insurance plan, 401(k) plan, and policies
governing paid time off.  In addition,
you shall continue to be entitled to three (3) weeks paid vacation per
year, subject to the Company’s policies and procedures, to be taken at such
times as may be approved by the Company’s Chief Executive Officer or his
designee.  The Company reserves the right
to amend and/or terminate any plan, benefit, or program at any time with or
without notice or publication.

 

2.4                                 Reimbursement
of Expenses.  The Company shall
reimburse you for all reasonable travel, entertainment and other expenses
incurred or paid by you in connection with, or related to, the performance of
your duties, responsibilities or services as an employee of the Company, in
accordance with policies and procedures, and subject to limitations, adopted by
the Company from time to time.

 

3.                                       Consideration.

 

If you enter into this letter agreement with the
Company, you will be granted, pursuant to the Company’s 1997 Stock Incentive
Plan (the “Plan”) (a) an option to purchase 100,000 shares of Common Stock
of the Company pursuant to the terms and conditions of the Plan and a stock
option agreement issued thereunder, such option to be exercisable at a price
per share equal to the closing price of the Company’s Common Stock on the
NASDAQ Stock Market on date of grant, such option to vest and become
exercisable, subject to your continued employment, at a rate of 20% of the
total shares underlying the option on the first anniversary of the date of
grant and as to an additional 20% at the end of each full year thereafter and (b) an
option, to purchase 50,000 shares of the Company’s Common Stock pursuant to the
terms and conditions of the Plan and a stock option agreement issued
thereunder, such option to be exercisable at a price per share equal to the
closing price of the Company’s Common Stock on the date of grant, such option
to vest and become exercisable, subject to your continued employment, at a rate
of 33.3333% of the total shares underlying the option on the first anniversary
of the date on which the Company books revenue from the commercial sale of its
products in excess of $25.0 million (as reflected on the Company’s financial
statements prepared in accordance with generally accepted accounting principles
in the United States) in any continuous 12-month period and as to an additional
33.3333% at the end of each full year thereafter; provided that such option
shall vest, in any event, on the end of the seventh year after the date of
grant.

 

4.                                       Termination
Upon or in Anticipation of a Change in Control.

 

4.1                                 In
the event your at-will employment is terminated by the Company without Cause
(as defined below) in anticipation of, or within twelve months after, a Change
in Control (as defined below), the Company shall continue to pay to you your
salary as in effect on the date of termination and the amount of the annual
bonus paid to you for the fiscal year immediately preceding the date of
termination (payable in annualized monthly installments) and shall, provided
you elect to receive group medical insurance pursuant to the federal “COBRA” 

 

 

law,  29 U.S.C. § 1161 et  seq.,
provide to you reimbursement for the share of the premium for group medical and
dental that is paid by the Company for active and similarly-situated employees
who receive the same type of coverage, until the date 12 months after the date
of termination, provided, however, that the Company’s obligation to make the
aforesaid payments or provide the aforesaid benefits shall immediately
terminate in the event that you violate the provisions of Section 5 or Section 6
of this letter agreement during such 12 month period.  The payment to you of the amounts payable
under this Section 4.1 shall be contingent upon your execution of a
release in a form reasonably acceptable to and prepared by the Company and (ii) shall
constitute your sole remedy in the event of a termination of your employment in
the circumstances set forth in this Section 4.1.

 

4.2                                 “Cause”
shall, for the purposes of Section 4.1, mean (a) a finding by the
Company of failure by you to perform your assigned duties for the Company,
dishonesty, gross negligence, misconduct, or any act or omission by you that
may have an adverse effect on the Company’s business or on your ability to
perform services for the Company; or (b) your conviction or the entry of a
pleading of guilty or nolo contendere to any crime involving moral turpitude or
any felony.

 

4.3                                 “Change
in Control” means an event or occurrence set forth in any one or more of
subsections (a) through (d) below (including an event or occurrence
that constitutes a Change in Control under one of such subsections but is
specifically exempted from another such subsection):

 

(a)                                  the
acquisition by an individual, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”)) (a “Person”) of beneficial ownership of any capital stock of the Company
if, after such acquisition, such Person beneficially owns (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) 50% or more of either
(x) the then-outstanding shares of common stock of the Company (the “Outstanding
Company Common Stock”) or (y) the combined voting power of the then-outstanding
securities of the Company entitled to vote generally in the election of
directors (the “Outstanding Company Voting Securities”); provided,
however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change in Control: (i) any acquisition
directly from the Company (excluding an acquisition pursuant to the exercise,
conversion or exchange of any security exercisable for, convertible into or
exchangeable for common stock or voting securities of the Company, unless the
Person exercising, converting or exchanging such security acquired such
security directly from the Company or an underwriter or agent of the Company), (ii) any
acquisition by the Company, (iii) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company, or (iv) any acquisition by any
corporation pursuant to a transaction which complies with clauses (i) and (ii) of
subsection (c) of this Section 4.3; or

 

(b)                                 such
time as the Continuing Directors (as defined below) do not constitute a
majority of the Board (or, if applicable, the Board of Directors of a successor
corporation to the Company), where the term “Continuing Director” means at any
date a member 

 

 

of the Board (i) who was a member of the Board on the date of the
execution of this letter agreement or (ii) who was nominated or elected
subsequent to such date by at least a majority of the directors who were
Continuing Directors at the time of such nomination or election or whose
election to the Board was recommended or endorsed by at least a majority of the
directors who were Continuing Directors at the time of such nomination or
election; provided, however, that there shall be excluded from
this clause (ii) any individual whose initial assumption of office
occurred as a result of an actual or threatened election contest with respect
to the election or removal of directors or other actual or threatened
solicitation of proxies or consents, by or on behalf of a person other than the
Board; or

 

(c)                                  the
consummation of a merger, consolidation, reorganization, recapitalization or statutory
share exchange involving the Company or a sale or other disposition of all or
substantially all of the assets of the Company in one or a series of
transactions (a “Business Combination”), unless, immediately following such
Business Combination, each of the following two conditions is satisfied: (i) all
or substantially all of the individuals and entities who were the beneficial
owners of the Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination beneficially own,
directly or indirectly, more than 50%
of the then-outstanding shares of common stock and the combined voting power of
the then-outstanding securities entitled to vote generally in the election of
directors, respectively, of the resulting or acquiring corporation in such
Business Combination (which shall include, without limitation, a corporation
which as a result of such transaction owns the Company or substantially all of
the Company’s assets either directly or through one or more subsidiaries) (such
resulting or acquiring corporation is referred to herein as the “Acquiring
Corporation”) in substantially the same proportions as their ownership,
immediately prior to such Business Combination, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, respectively; and (ii) no
Person (excluding any employee benefit plan (or related trust) maintained or
sponsored by the Company or by the Acquiring Corporation) beneficially owns,
directly or indirectly, 50% or
more of the then outstanding shares of common stock of the Acquiring
Corporation, or of the combined voting power of the then-outstanding securities
of such corporation entitled to vote generally in the election of directors
(except to the extent that such ownership existed prior to the Business
Combination); or

 

(d)                                 approval
by the stockholders of the Company of a complete liquidation or dissolution of
the Company.

 

5.                                       Non-Competition
and Non-Solicitation.

 

5.1                                 Restricted
Activities.  While you are employed
by the Company and for a period of one year after the termination or cessation
of such employment for any reason, you will not directly or indirectly:

 

(a)                                  Engage
in any business or enterprise (whether as owner, partner, officer, director,
employee, consultant, investor, lender or otherwise, except as the holder of
not more than 1% of the outstanding stock of a publicly-held company) that is
competitive with the Company’s business, including but not limited to any
business or enterprise that develops, 

 

 

manufactures, markets, licenses, sells or provides any product or
service that competes with any product or service developed, manufactured,
marketed, licensed, sold or provided, or planned to be developed, manufactured,
marketed, licensed, sold or provided, by the Company or any of its subsidiaries
while you were employed by the Company; or

 

(b)                                 Either
alone or in association with others (i) solicit, or permit any
organization directly or indirectly controlled by you to solicit, any employee
of the Company to leave the employ of the Company, or (ii) solicit for
employment, hire or engage as an independent contractor, or permit any
organization directly or indirectly controlled by you to solicit for
employment, hire or engage as an independent contractor, any person who was
employed by the Company at the time of the termination or cessation of your
employment with the Company; provided, that this clause (ii) shall
not apply to the solicitation, hiring or engagement of any individual whose
employment with the Company has been terminated for a period of six months or
longer.

 

5.2                                 Extension.  If you violate the provisions of Section 5.1,
you shall continue to be bound by the restrictions set forth in Section 5.1
until a period of one year has expired without any violation of such
provisions.

 

5.3                                 Interpretation.  If any restriction set forth in Section 5.1
is found by any court of competent jurisdiction to be unenforceable because it
extends for too long a period of time or over too great a range of activities
or in too broad a geographic area, it shall be interpreted to extend only over
the maximum period of time, range of activities or geographic area as to which
it may be enforceable.

 

5.4                                 Equitable
Remedies.  The restrictions contained
in this Section 5 are necessary for the protection of the business and
goodwill of the Company and are considered by you to be reasonable for such
purpose.  You agree that any breach of
this Section 5 is likely to cause the Company substantial and irrevocable
damage which is difficult to measure. 
Therefore, in the event of any such breach or threatened breach, you
agree that the Company, in addition to such other remedies which may be
available, shall have the right to obtain an injunction from a court
restraining such a breach or threatened breach and the right to specific
performance of the provisions of this Section 5 and you hereby waive the
adequacy of a remedy at law as a defense to such relief.

 

6.                                       Proprietary
Information and Developments.

 

6.1                                 Proprietary
Information.

 

(a)                                  You
agree that all information, whether or not in writing, of a private, secret or
confidential nature concerning the Company’s business, business relationships
or financial affairs (collectively, “Proprietary Information”) is and shall be
the exclusive property of the Company. 
By way of illustration, but not limitation, Proprietary Information may
include inventions, products, processes, methods, techniques, formulas,
compositions, compounds, projects, developments, plans, research data, clinical
data, financial data, personnel data, computer programs, customer and supplier
lists, and contacts at or knowledge of customers or 

 

 

prospective customers of the Company. 
You will not disclose any Proprietary Information to any person or
entity other than employees of the Company or use the same for any purposes
(other than in the performance of your duties as an employee of the Company)
without written approval by an officer of the Company, either during or after
your employment with the Company, unless and until such Proprietary Information
has become public knowledge without fault by you or unless required by law.

 

(b)                                 You
agree that all files, letters, memoranda, reports, records, data, sketches,
drawings, laboratory notebooks, program listings, or other written,
photographic, or other tangible material containing Proprietary Information,
whether created by you or others, which shall come into your custody or
possession, shall be and are the exclusive property of the Company to be used
by you only in the performance of your duties for the Company.  All such materials or copies thereof and all
tangible property of the Company in your custody or possession shall be
delivered to the Company, upon the earlier of (i) a request by the Company
or (ii) termination of your employment. 
After such delivery, you shall not retain any such materials or copies
thereof or any such tangible property.

 

(c)                                  You
agree that your obligation not to disclose or to use information and materials
of the types set forth in paragraphs (a) and (b) above, and your
obligation to return materials and tangible property, set forth in
paragraph (b) above, also extends to such types of information,
materials and tangible property of customers of the Company or suppliers to the
Company or other third parties who may have disclosed or entrusted the same to
the Company or to you.

 

6.2                                 Developments.

 

(a)                                  You
will make full and prompt disclosure to the Company of all inventions,
improvements, discoveries, methods, developments, software, and works of
authorship, whether patentable or not, which are created, made, conceived or
reduced to practice by you or under your direction or jointly with others
during your employment by the Company, whether or not during normal working
hours or on the premises of the Company (all of which are collectively referred
to in this letter agreement as “Developments”).

 

(b)                                 You
agree to assign and do hereby assign to the Company (or any person or entity
designated by the Company) all your right, title and interest in and to all
Developments and all related patents, patent applications, copyrights and
copyright applications.  However, this
paragraph (b) shall not apply to Developments which do not relate to
the business or research and development conducted or planned to be conducted
by the Company at the time such Development is created, made, conceived or
reduced to practice and which are made and conceived by you not during normal
working hours, not on the Company’s premises and not using the Company’s tools,
devices, equipment or Proprietary Information. 
You understand that, to the extent this letter agreement shall be
construed in accordance with the laws of any state which precludes a
requirement in an employee agreement to assign certain classes of inventions
made by an employee, this paragraph (b) shall be interpreted not to
apply to any invention which a court rules and/or the Company agrees falls
within such classes.  You also hereby
waive all claims to moral rights in any Developments.

 

 

(c)                                  You
agree to cooperate fully with the Company, both during and after your
employment with the Company, with respect to the procurement, maintenance and
enforcement of copyrights, patents and other intellectual property rights (both
in the United States and foreign countries) relating to Developments.  You shall sign all papers, including, without
limitation, copyright applications, patent applications, declarations, oaths,
formal assignments, assignments of priority rights, and powers of attorney,
which the Company may deem necessary or desirable in order to protect its
rights and interests in any Development. 
You further agree that if the Company is unable, after reasonable
effort, to secure your signature on any such papers, any executive officer of
the Company shall be entitled to execute any such papers as your agent and
attorney-in-fact, and you hereby irrevocably designate and appoint each
executive officer of the Company as your agent and attorney-in-fact to execute
any such papers on your behalf, and to take any and all actions as the Company
may deem necessary or desirable in order to protect its rights and interests in
any Development, under the conditions described in this sentence.

 

6.3                                 United
States Government Obligations.  You
acknowledge that the Company from time to time may have agreements with other
parties or with the United States Government, or agencies thereof, which impose
obligations or restrictions on the Company regarding inventions made during the
course of work under such agreements or regarding the confidential nature of
such work.  You agree to be bound by all
such obligations and restrictions which are made known to you and to take all
appropriate action necessary to discharge the obligations of the Company under
such agreements.

 

6.4                                 Equitable
Remedies.  The restrictions contained
in this Section 6 are necessary for the protection of the business and
goodwill of the Company and are considered by you to be reasonable for such
purpose.  You agree that any breach of
this Section 6 is likely to cause the Company substantial and irrevocable
damage which is difficult to measure. 
Therefore, in the event of any such breach or threatened breach, you
agree that the Company, in addition to such other remedies which may be
available, shall have the right to obtain an injunction from a court
restraining such a breach or threatened breach and the right to specific
performance of the provisions of this Section 6 and you hereby waive the
adequacy of a remedy at law as a defense to such relief.

 

7.                                       Conflicts.

 

You represent that you are not bound by any employment
contract, restrictive covenant or other restriction preventing you from
entering into employment with or carrying out your responsibilities for the
Company, or which is in any way inconsistent with the terms of this letter.

 

8.                                       Successors
and Assigns.  

 

This letter agreement shall be binding upon and inure
to the benefit of both parties and their respective successors and assigns,
including any corporation with which, or into which, the Company may be merged
or which may succeed to the Company’s assets or business, provided, however,
that your obligations are personal and shall not be assigned by you.  

 

 

Notwithstanding the
foregoing, if the Company is merged with or into a third party which is engaged
in multiple lines of business, or if a third party engaged in multiple lines of
business succeeds to the Company’s assets or business, then for purposes of Section 4.1(a),
the term “Company” shall mean and refer to the business of the Company as it
existed immediately prior to such event and as it subsequently develops and not
to the third party’s other businesses.

 

9.                                       At-Will
Status.

 

This letter shall not be construed as an agreement,
either express or implied, to employ you for any stated term, and shall in no
way alter the Company’s policy of employment at will, under which both you and
the Company remain free to terminate the employment relationship, with or
without cause, at any time, with or without notice.  Similarly, nothing in this letter shall be construed
as an agreement, either express or implied, to pay you any compensation or
grant you any benefit beyond the end of your employment with the Company except
as described in Section 4.1.

 

10.                                 Entire
Agreement.

 

This letter agreement constitutes the entire agreement
between you and the Company regarding the terms and conditions of employment
with the Company.  This letter agreement
supercedes all prior agreements and understandings, whether written or oral,
relating to the subject matter of this letter agreement, including, but not
limited to, compensation and payments upon termination of employment.  As such, the Employment Agreement dated March 25,
2004 and Executive Retention Agreement dated March 25, 2004 previously
executed between you and the Company shall be null and void.

 

11.                                 Amendment.

 

This letter agreement may be amended or modified only
by a written instrument executed by both you and the Company.

 

12.                                 Waivers.

 

No delay or omission by the Company in exercising any
right under this letter agreement shall operate as a waiver of that or any
other right.  A waiver or consent given
by the Company on any one occasion shall be effective only in that instance and
shall not be construed as a bar or waiver of any right on any other occasion.

 

13.                                 Choice
of Law.

 

This letter agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Massachusetts
(without reference to the conflicts of laws provisions thereof).  Any action, suit or other legal proceeding
arising under or relating to any provision of this letter agreement shall be
commenced only in a court of the Commonwealth of Massachusetts (or, if
appropriate, a federal court located within Massachusetts), and you and the
Company each consent to the jurisdiction of such a court.  You and the Company each hereby 

 

 

irrevocably waive any
right to a trial by jury in any action, suit or other legal proceeding arising
under or relating to any provision of this letter agreement.

 

14.                                 Severability.

 

In the case that any provision of this letter
agreement shall be invalid, illegal or otherwise unenforceable, the validity,
legality and enforceability of the remaining provisions shall in no way be
affected or impaired thereby.

 

If
this letter correctly sets forth the terms of your continued employment with
the Company, please sign the enclosed duplicate of this letter in the space
provided below and return it to me.

 

	
   

  	
  Sincerely,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Richard J. Faleschini

  	
   

  
	
   

  	
  Name:
  Richard J. Faleschini

  
	
   

  	
  Title: President
  and Chief Executive Officer

  

 

 

The foregoing correctly
sets forth the terms of Peter C. Sutcliffe’s at-will employment by BioSphere Medical, Inc., including but
not limited to Sections 5 and 6 above.

 

 

	
  /s/ Peter C.
  Sutcliffe

  	
   

  	
  /s/ Richard J.
  Faleschini

  	
   

  
	
  Peter C. Sutcliffe

  	
  BioSphere
  Medical, Inc.

  
	
   

  	
  By:

  	
  Richard J.
  Faleschini

  
	
   

  	
   

  	
  President and
  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
  Date:

  	
  June 16,
  2005

  	
   

  	
  Date:

  	
  June 14,
  2005

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