BIO-IMAGING TECHNOLOGIES, INC. Executive Retention Agreement

EX-10.1 2 dex101.htm FORM OF AMENDED EXECUTIVE RETENTION AGREEMENT Form of Amended Executive Retention Agreement

Exhibit 10.1

BIO-IMAGING TECHNOLOGIES, INC.

Executive Retention Agreement

THIS EXECUTIVE RETENTION AGREEMENT by and between Bio-Imaging Technologies, Inc., a Delaware corporation (the “Company”), and (the “Executive”) is made as of March 1, 2006, to be effective upon the earlier of (i) the termination of the prior Executive Retention Agreement with the Executive or (ii) March 1, 2006 (the “Effective Date”).

WHEREAS, the Company recognizes that, as is the case with many publicly-held corporations, the possibility of a change in control of the Company exists and that such possibility, and the uncertainty and questions which it may raise among key personnel, may result in the departure or distraction of key personnel to the detriment of the Company and its stockholders, and

WHEREAS, the Board of Directors of the Company (the “Board”) has determined that appropriate steps should be taken to reinforce and encourage the continued employment and dedication of the Company’s key personnel without distraction from the possibility of a change in control of the Company and related events and circumstances.

NOW, THEREFORE, as an inducement for and in consideration of the Executive remaining in its employ, the Company agrees that the Executive shall receive the severance benefits set forth in this Agreement in the event the Executive’s employment with the Company is terminated under the circumstances described below in connection with a Change in Control (as defined in Section 1.1).

1. Key Definitions.

As used herein, the following terms shall have the following respective meanings:

1.1 “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) more than 50% of either (x) the total fair market value of the then-outstanding shares of the Company’s stock (the “Outstanding Company 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 of securities 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 1.1; or

(b) a change in the composition of the Board over a period of twelve (12) months or less such that the Continuing Directors (as defined below) fail to 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 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 related transactions over a 12-month period (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 Company’s outstanding common stock (the “Company Outstanding 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.

1.2 “Change in Control Date” means the first date during the Term (as defined in Section 2) on which a Change in Control occurs. Anything in this Agreement to the contrary notwithstanding, if (a) a Change in Control occurs, (b) the Executive’s employment with the Company is terminated more than 60 days prior to the date on which the Change in Control occurs, and (c) it is reasonably demonstrated by the Executive that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change in Control or (ii) otherwise arose in connection with or in anticipation of a Change in Control, then for all purposes of this Agreement the “Change in Control Date” shall mean the date immediately prior to the date of such termination of employment.

1.3 “Cause” means:

(a) the Executive’s willful and continued failure to substantially perform his reasonable assigned duties as an officer of the Company (other than any such failure resulting from incapacity due to physical or mental illness or any failure after the Executive gives notice of termination for Good Reason), which failure is not cured within 30 days after a written demand for substantial performance is received by the Executive from the Board of Directors of the Company which specifically identifies the manner in which the Board of Directors believes the Executive has not substantially performed the Executive’s duties; or

(b) the conviction of the Executive of, or the entry of a pleading of guilty or nolo contendere by the Executive to, any crime involving moral turpitude or any felony; or

(c) the Executive’s commission of dishonesty or gross negligence which is materially and demonstrably injurious to the Company; or

(d) the Executive’s willful engagement in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company; or

(e) any material breach by the Executive of this Agreement or any employment agreement and related agreements with the Company, including, but not limited to, any non-competition or non-solicitation provision, which breach is not cured within 30 days after a written notice of such breach is received by the Executive from the Board of Directors of the Company, which specifically identifies such breach.

For purposes of this Section 1.3, no act or failure to act by the Executive shall be considered “willful” unless it is done, or omitted to be done, in bad faith or without reasonable belief that the Executive’s action or omission was in the best interests of the Company.

Notwithstanding the foregoing, if the Executive has an effective employment agreement with the Company that contains a definition of “Cause” for purposes of termination of the Executive’s employment with the Company, the definition of “Cause” contained in such effective employment agreement shall be used in this Agreement.

1.4 “Good Reason” means the occurrence, without the Executive’s written consent, of any of the events or circumstances set forth in clauses (a) through (g) below. Notwithstanding the occurrence of any such event or circumstance, such occurrence shall not be deemed to constitute Good Reason if, prior to the Date of Termination specified in the Notice of Termination (each as defined in Section 3.2(a)) given by the Executive in respect thereof, such event or circumstance has been fully corrected and the Executive has been reasonably compensated for any losses or damages resulting therefrom (provided that such right of correction by the Company shall only apply to the first Notice of Termination for Good Reason given by the Executive):

(a) the assignment to the Executive of duties materially inconsistent with the Executive’s authority or responsibilities taken as a whole in effect immediately prior to the earliest to occur of (i) the Change in Control Date, (ii) the date of the execution by the Company of the initial written agreement or instrument providing for the Change in Control or (iii) the date of the adoption by the Board of Directors of a resolution providing for the Change in Control (with the earliest to occur of such dates referred to herein as the “Measurement Date”), or any other action or omission by the Company which results in a material diminution in such position, authority or responsibilities; or

(b) a reduction in the Executive’s annual base salary as in effect on the Measurement Date; or

(c) the failure by the Company to (i) continue in effect any material compensation or benefit plan or program (including without limitation any life insurance, medical, health and accident or disability plan and any vacation or automobile program or policy) (a “Benefit Plan”) in which the Executive participates or which is applicable to the Executive immediately prior to the Measurement Date, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan, a lump sum payment or increase in compensation) has been made with respect to such plan or program, (ii) continue the Executive’s participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of the Executive’s participation relative to other participants, than the basis existing immediately prior to the Measurement Date or (iii) award cash bonuses to the Executive in amounts and in a manner substantially consistent with past practice in light of the Company’s financial performance; or

(d) a change by the Company in the location at which the Executive performs his principal duties for the Company to a new location that is outside a radius of 50 miles from the Executive’s principal residence and outside a radius of 25 miles from the location at which the Executive performed his principal duties for the Company immediately prior to the Measurement Date; or

(e) the failure of the Company to obtain the agreement from any successor to the Company to assume and agree to perform this Agreement, as required by Section 6.1; or

(f) a purported termination of the Executive’s employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Section 3.2(a); or

(g) any material breach by the Company of this Agreement or any employment agreement with the Executive, which breach is not cured within 30 days after a written notice of such breach is received by the Company from the Executive, which specifically identifies such breach.

The Executive’s right to terminate his employment for Good Reason shall not be affected by his incapacity due to physical or mental illness.

1.5 “Disability” means the Executive’s absence from the full-time performance of the Executive’s duties with the Company for 180 consecutive calendar days as a result of incapacity due to mental or physical illness which is determined to be total and permanent by a physician selected by the Company or its insurers and reasonably acceptable to the Executive or the Executive’s legal representative, which consent shall not be unreasonably withheld.

2. Term of Agreement. This Agreement, and all rights and obligations of the parties hereunder, shall take effect upon the Effective Date and shall expire upon the first to occur of (a) the termination of the Executive’s employment with the Company more than 60 days prior to the Change in Control Date, (b) the date 24 months after the Change in Control Date, if the Executive is still employed by the Company as of such later date, or (c) the fulfillment by the Company of all of its obligations under Sections 4 and 5.2 and 5.3 if the Executive’s employment with the Company terminates within the period from 60 days prior to the Change in Control Date to 24 months following the Change in Control Date.

3. Employment Status; Termination Following Change in Control.

3.1 Not an Employment Contract. The Executive acknowledges that this Agreement does not constitute a contract of employment or impose on the Company any obligation to retain the Executive as an employee and that this Agreement does not prevent the Executive from terminating employment at any time.

3.2 Termination of Employment.

(a) If the Change in Control Date occurs during the Term, any termination of the Executive’s employment by the Company or by the Executive within 24 months following the Change in Control Date (other than due to the death of the Executive) shall be communicated by a written notice to the other party hereto (the “Notice of Termination”), given in accordance with Section 7. Any Notice of Termination shall: (i) indicate the specific termination provision (if any) of this Agreement relied upon by the party giving such notice, (ii) to the extent applicable, set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated and (iii) specify the Date of Termination (as defined below). The effective date of an employment termination (the “Date of Termination”) shall be the close of business on the date specified in the Notice of Termination (which date may not be less than 15 days or more than 120 days after the date of delivery of such Notice of Termination), in the case of a termination other than one due to the Executive’s death, or the date of the Executive’s death, as the case may be. In the event the Company fails to satisfy the requirements of Section 3.2(a) regarding a Notice of Termination, the purported termination of the Executive’s employment pursuant to such Notice of Termination shall not be effective for purposes of this Agreement.

(b) If a Change in Control Date occurs during the 60 days after the termination of the Executive’s employment by the Company, the Company shall give the Executive notice of such Change in Control.

(c) The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting any such fact or circumstance in enforcing the Executive’s or the Company’s rights hereunder.

(d) Any Notice of Termination for Cause given by the Company must be given within 90 days of the discovery by the Board of the occurrence of the event(s) or circumstance(s) that constitute(s) Cause. Prior to any Notice of Termination for Cause being given (and prior to any termination for Cause being effective), the Executive shall be entitled to a hearing before the Board of Directors of the Company at which he may, at his election, be represented by counsel and at which he shall have a reasonable opportunity to be heard. Such hearing shall be held on not less than 15 days prior written notice to the Executive stating the Board of Directors’ intention to terminate the Executive for Cause and stating in detail the particular event(s) or circumstance(s) which the Board of Directors believes constitutes Cause for termination.

(e) Any Notice of Termination for Good Reason given by the Executive must be given within 90 days of the discovery by the Executive of the occurrence of the event(s) or circumstance(s) that constitute(s) Good Reason.

4. Benefits to Executive.

4.1 Stock Acceleration. If the Executive’s employment is terminated by the Company other than for Cause, or the Executive terminates his employment for Good Reason, during the Pre-Closing Period or at any time thereafter during the remainder (if any) of the Term, then, effective upon such termination of employment, (a) each outstanding option to purchase shares of Common Stock of the Company held at that time by the Executive shall become immediately exercisable in full and shares of Common Stock of the Company received upon exercise of any options will no longer be subject to a right of repurchase by the Company, and (b) each outstanding restricted stock award shall be deemed to be fully vested and will no longer be subject to a right of repurchase by the Company. Each option shall remain so exercisable until the expiration date of the option term or (if earlier) the termination of that option in accordance with the provisions of the applicable stock option agreement. For purposes of this Section 4.1, the Pre-Closing Period means the period commencing with the Company’s execution of the definitive agreement for a Change in Control transaction and ending upon the earlier of (i) the closing of the Change in Control contemplated by such definitive agreement or (ii) the termination of such definitive agreement without the consummation of the contemplated Change in Control.

4.2 Compensation. If the Change in Control Date occurs during the Term and the Executive’s employment with the Company terminates within the period from 60 days prior to the Change in Control Date to 24 months following the Change in Control Date, the Executive shall be entitled to the following benefits:

(a) Termination Without Cause or for Good Reason. If the Executive’s employment with the Company is terminated by the Company (other than for Cause, Disability or death) or by the Executive for Good Reason within the period from 60 days prior to the Change in Control Date to 24 months following the Change in Control Date, then, subject to Section 4.2(a)(v) below, the Executive shall be entitled to the following benefits:

(i) The Company shall pay to the Executive in cash the aggregate of the following amounts:

(1) The Company shall make a lump sum cash payment to the Executive equal to (A) the Executive’s base salary through the Date of Termination, (B) the product of (x) the greater of (i) Executive’s largest annual bonus for the most recently completed three (3) fiscal years and (ii) the Executive’s target annual bonus at time of termination and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365 and (C) any accrued vacation pay, in each case to the extent not previously paid (the sum of the amounts described in clauses (A) and (C) shall be hereinafter referred to as the “Accrued Obligations” and the dollar amount described in clause (B) shall be hereinafter referred to as the “Pro-Rata Bonus”). Payment of the Accrued Obligations shall be made on the Date of Termination, and the payment of the Pro-Rata Bonus shall be made on the 30th day following the later of the Date of Termination or the Change in Control Date (the “Applicable Date”) or as soon as administratively practicable following such scheduled payment date, but in no event later than the close of the calendar year in which the Applicable Date occurs or (if later) the 15th day of the third calendar month following that date.

(2) Any compensation deferred on behalf of the Executive on the Date of Termination or the Change in Control Date under any deferred compensation plan subject to Section 409A of the Internal Revenue Code, as amended (the “Code”), shall be paid at the time or times specified for payment pursuant to the provisions of such plan.

(3) The Company shall, in a series of 24 successive equal monthly installments pursuant to the Company’s normal payment practices, pay in cash to the Executive an amount equal to (A) 2.0 multiplied by (B) the sum of (x) the greater of (i) the Executive’s annual base salary for the most recently completed fiscal year or (ii) the Executive’s current annual base salary at the time of termination and (y) the greater of (i) Executive’s largest annual bonus for the most recently completed three (3) fiscal years and (ii) the Executive’s target annual bonus at time of termination. The first such installment shall be paid on the 30th day following the Applicable Date or as soon as administratively practicable following such scheduled payment date, but in no event later than the close of the calendar year in which the Applicable Date occurs or (if later) the 15th day of the third calendar month following that date.

(ii) For a period not to exceed 24 months measured from the Applicable Date, the Company shall, if the Executive elects under Code Section 4980B to continue health care coverage under the Company’s group health plan for himself, his spouse and his eligible dependents following the Applicable Date, provide such continued health care coverage at the Company’s expense; provided, however, that such coverage at the Company’s expense shall immediately terminate on the date the Executive is first covered under another employer’s heath benefit program which provides substantially the same level of benefits without exclusion for pre-existing medical conditions. Such health care coverage shall be at the same level and provide the same type of benefits as would have been provided to them if the Executive’s employment had not been terminated and they had continued to be covered under the applicable Benefit Plans in effect on the Measurement Date or, if more favorable to the Executive and his family, in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. Such continued health care coverage shall be provided pursuant to the provisions of this subparagraph (ii) even if such coverage extends beyond the period of statutorily-required coverage under Code Section 4980B, but subject to earlier termination in accordance with the above proviso relating to coverage under another employer’s plan. In the event the Company’s provision of such continued health care coverage results in the recognition of taxable income (whether for federal, state or local income tax purposes) by the Executive or his spouse or other eligible dependent, then the Executive and his spouse and dependents shall each be responsible for the payment of the income and employment tax liability resulting from such coverage, and the Company will not provide any tax gross-up payments to the Executive (or any other person) with respect to such income and employment tax liability. To the extent the health coverage under this subparagraph (ii) is to be provided by an insured plan or insurance policy, the applicable insurance premiums shall be paid by the Company within 10 days after each due date, with such premium payment to be made in all events not later than the close of the calendar year in which those premiums become due and payable. To the extent such health coverage is to be provided through a self-funded reimbursement program maintained by the Company, the Executive shall, within 30 days after his receipt of each invoice for a reimbursable health or medical care expense under this Section 4.2, submit a copy of such invoice to the Company for reimbursement, and the Company shall pay such reimbursement on the 30th day following receipt of the submitted invoice or as soon after that scheduled payment date as administratively practicable, but in no event later than the close of the calendar year in which such invoice is received by the Company or (if later) the 15th day of the third the calendar month following the date of such receipt.

(iii) To the extent not previously paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive following the Executive’s termination of employment under any plan, program, policy, practice, contract or agreement of the Company and its affiliated companies (such other amounts and benefits shall be hereinafter referred to as the “Other Benefits”). Each of the Other Benefits shall be paid or provided as they become due and payable in one or more installments under the applicable plan or arrangement, but in no later than 10 business days after each such scheduled payment or due date.

(iv) For purposes of determining eligibility (but not the time of commencement of benefits) of the Executive for retiree benefits to which the Executive is entitled, the Executive shall be considered to have remained employed by the Company until 18 months after the Date of Termination.

(v) Notwithstanding the foregoing, if the Executive breaches any ongoing obligation with the Company (by way of example and not by way of limitation, any breach of a non-competition or non-solicitation provision with the Company), and such breach is not cured within 30 days of written notice of such breach received by the Executive from the Company, then the Company shall no longer be required to provide any of the benefits set forth in this Section 4.2(a).

(b) Resignation without Good Reason; Termination for Death or Disability. If the Executive voluntarily terminates his employment with the Company within the period from 60 days prior to the Change in Control Date to 24 months following the Change in Control Date, excluding a termination for Good Reason, or if the Executive’s employment with the Company is terminated by reason of the Executive’s death or Disability within the period from 60 days prior to the Change in Control Date to 24 months following the Change in Control Date, then the Company shall (i) pay the Executive (or his estate, if applicable), in a lump sum in cash on the Date of Termination, the Accrued Obligations, (ii) pay the Executive (or his estate, if applicable) the Pro-Rated Bonus in a lump sum in cash on the 30th day following the Applicable Date or as soon as administratively practicable following such scheduled payment date, but in no event later than the close of the calendar year in which the Applicable Date occurs or (if later) the 15th day of the third calendar month following that date, and (iii) pay or provide to the Executive the Other Benefits in accordance with same payment and due date provisions in effect under subparagraph (iii) of Section 4.2(a). In addition, any vested compensation deferred on behalf of the Executive under any deferred compensation plan subject to Code Section 409A shall be paid at the time or times specified for payment pursuant to the provisions of such plan.

(c) Termination for Cause. If the Company terminates the Executive’s employment with the Company for Cause within the period from 60 days prior to the Change in Control Date to 24 months following the Change in Control Date, then the Company shall (i) pay the Executive, in a lump sum in cash on the Date of Termination, the Accrued Obligations and (ii) timely pay or provide to the Executive the Other Benefits in accordance with same payment and due date provisions in effect under subparagraph (iii) of Section 4.2(a). In addition, any vested compensation deferred on behalf of the Executive under any deferred compensation plan subject to Code Section 409A shall be paid at the time or times specified for payment pursuant to the provisions of such plan.

4.3 Deferred Payment Date. Notwithstanding any provision to the contrary in this Agreement, no payments or benefits to which the Executive may become entitled under Section 4 of this Agreement shall be made or provided to him prior to the earlier of (i) the expiration of the six (6)-month period measured from the date of his “separation from service” with the Company (as determined in accordance with the provisions of Code Section 409A and the proposed or final Treasury Regulations thereunder) or (ii) the date of his death, if the Executive is deemed at the time of such separation from service to be a “key employee” within the meaning of that term under Code Section 416(i) and such delayed commencement is

otherwise required in order to avoid a prohibited distribution under Code Section 409A(a)(2). Upon the expiration of the applicable Code Section 409A(a)(2) deferral period, all payments and benefits deferred pursuant to this Section 4.3 (whether they would have otherwise been payable in a single sum or in installments in the absence of such deferral) shall be paid or reimbursed to the Executive in a lump sum, and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.

4.4 Taxes.

(a) Notwithstanding any other provision of this Agreement, except as set forth in Section 4.4(b), in the event that the Company undergoes a “Change in Ownership or Control” (as defined below), the Company shall not be obligated to provide to the Executive a portion of any “Contingent Compensation Payments” (as defined below) that the Executive would otherwise be entitled to receive to the extent necessary to eliminate any “excess parachute payments” (as defined in Section 280G(b)(1) of the Internal Revenue Code of 1986, as amended (the “Code”)) for the Executive. For purposes of this Section 4.4, the Contingent Compensation Payments so eliminated shall be referred to as the “Eliminated Payments” and the aggregate amount (determined in accordance with Proposed Treasury Regulation Section 1.280G-1, Q/A-30 or any successor provision) of the Contingent Compensation Payments so eliminated shall be referred to as the “Eliminated Amount.”

(b) Notwithstanding the provisions of Section 4.4(a), no such reduction in Contingent Compensation Payments shall be made if (i) the Eliminated Amount (computed without regard to this sentence) exceeds (ii) 110% of the aggregate present value (determined in accordance with Proposed Treasury Regulation Section 1.280G-1, Q/A-31 and Q/A-32 or any successor provisions) of the amount of any additional taxes that would be incurred by the Executive if the Eliminated Payments (determined without regard to this sentence) were paid to him (including, state and federal income taxes on the Eliminated Payments, the excise tax imposed by Section 4999 of the Code payable with respect to all of the Contingent Compensation Payments in excess of the Executive’s “base amount” (as defined in Section 280G(b)(3) of the Code), and any withholding taxes). The override of such reduction in Contingent Compensation Payments pursuant to this Section 4.4(b) shall be referred to as a “Section 4.4(b) Override.” For purpose of this paragraph, if any federal or state income taxes would be attributable to the receipt of any Eliminated Payment, the amount of such taxes shall be computed by multiplying the amount of the Eliminated Payment by the maximum combined federal and state income tax rate provided by law.

(i) “Change in Ownership or Control” shall mean a change in the ownership or effective control of the Company or in the ownership of a substantial portion of the assets of the Company determined in accordance with Section 280G(b)(2) of the Code.

(ii) “Contingent Compensation Payment” shall mean any payment (or benefit) in the nature of compensation that is made or made available (under this

Agreement or otherwise) to a “disqualified individual” (as defined in Section 280G(c) of the Code) and that is contingent (within the meaning of Section 280G(b)(2)(A)(i) of the Code) on a Change in Ownership or Control of the Company.

(d) Any payments or other benefits otherwise due to the Executive following a Change in Ownership or Control that could reasonably be characterized (as determined by the Company) as Contingent Compensation Payments (the “Potential Payments”) shall not be made until the dates provided for in this Section 4.4(d). Within 30 days after each date on which the Executive first becomes entitled to receive (whether or not then due) a Contingent Compensation Payment relating to such Change in Ownership or Control, the Company shall determine and notify the Executive (with reasonable detail regarding the basis for its determinations) (i) which Potential Payments constitute Contingent Compensation Payments, (ii) the Eliminated Amount and (iii) whether the Section 4.4(b) Override is applicable. Within 30 days after delivery of such notice to the Executive, the Executive shall deliver a response to the Company (the “Executive Response”) stating either (A) that he agrees with the Company’s determination pursuant to the preceding sentence, in which case he shall indicate, if applicable, which Contingent Compensation Payments, or portions thereof (the aggregate amount of which, determined in accordance with Proposed Treasury Regulation Section 1.280G-1, Q/A-30 or any successor provision, shall be equal to the Eliminated Amount), shall be treated as Eliminated Payments or (B) that he disagrees with such determination, in which case he shall set forth (i) which Potential Payments should be characterized as Contingent Compensation Payments, (ii) the Eliminated Amount, (iii) whether the Section 4.4(b) Override is applicable, and (iv) which (if any) Contingent Compensation Payments, or portions thereof (the aggregate amount of which, determined in accordance with Proposed Treasury Regulation Section 1.280G-1, Q/A-30 or any successor provision, shall be equal to the Eliminated Amount, if any), shall be treated as Eliminated Payments. In the event that the Executive fails to deliver an Executive Response on or before the required date, the Company’s initial determination shall be final and the Contingent Compensation Payments that shall be treated as Eliminated Payments shall be determined by the Company in its absolute discretion, and the remaining Potential Payments to which the Executive is entitled shall be paid in accordance with the same payment date provisions in effect for payments which become due under the following sentence, except that the scheduled payment shall be the third business day following the expiration of the 30-day notice period for the Executive’s Response. If the Executive states in the Executive Response that he agrees with the Company’s determination, the Company shall make each of the Potential Payments to the Executive on the third business day following delivery to the Company of the Executive Response or as soon as administratively practicable following such scheduled payment date, but in no event later than the close of the calendar year in which the scheduled payment occurs or (if later) the 15th day of the 3rd calendar month following such scheduled payment date; provided, however, that any Potential Payments which are not due to be made until after such date shall be made on the date on which they are due. If the Executive states in the Executive Response that he disagrees with the Company’s determination, then, for a period of 60 days following delivery of the Executive Response, the Executive and the Company shall use good faith efforts to resolve such dispute. If such dispute is not resolved within such 60-day period, such dispute shall be settled exclusively by arbitration in Philadelphia, Pennsylvania, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator’s award in any court having jurisdiction. The Company shall pay to the Executive each of those Potential Payments as to which there is no dispute between the Company and the

Executive regarding whether they should be made, with such payment to be made on the third business day following delivery to the Company of the Executive Response or as soon after that scheduled payment date as administratively practicable, but in no event later than the close of the calendar year in which such scheduled payment date occurs or (if later) the 15th day of the 3rd calendar month following such scheduled payment date; provided, however, that any Potential Payments which are not due to be made until after such date shall be made on the date on which they are due. The balance of the Potential Payments shall be made on the third business day following the resolution of such dispute or as soon as administratively practicable following such scheduled payment date, but in no event later than the close of the calendar year in which the dispute is resolved or (if later) the 15th day of the 3rd calendar month following the date of such resolution. Subject to the limitations contained in Sections 4.4(a) and (b) hereof, the amount of any payments to be made to the Executive following the resolution of such dispute shall be increased by amount of the accrued interest thereon computed at the prime rate announced from time to time by Citibank, N.A., compounded monthly from the date that such payments originally were due.

(e) The provisions of this Section 4.4 are intended to apply to any and all payments or benefits available to the Executive under this Agreement or any other agreement or plan of the Company under which the Executive receives Contingent Compensation Payments.

4.5 Mitigation. The Executive shall not be required to mitigate the amount of any payment or benefits provided for in this Section 4 by seeking other employment or otherwise.

5. Disputes.

5.1 Settlement of Disputes; Arbitration. All claims by the Executive for benefits under this Agreement shall be directed to and determined by the Board of Directors of the Company and shall be in writing. Any denial by the Board of Directors of a claim for benefits under this Agreement shall be delivered to the Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon. The Board of Directors shall afford a reasonable opportunity to the Executive for a review of the decision denying a claim. Any further dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Philadelphia, Pennsylvania, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator’s award in any court having jurisdiction.

5.2 Expenses. The Company agrees to pay as incurred, to the full extent permitted by law, all legal, accounting and other fees and expenses which the Executive may reasonably incur as a result of any claim or contest (so long as a court of competent jurisdiction renders a final order, decree or judgment in favor of the Executive, and after the time for appeal has expired and no appeal has been perfected for such final order, decree or judgment) by the Company, the Executive or others regarding the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive regarding the amount of any payment or benefits pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the Code.

5.3 Compensation During a Dispute. If the Change in Control Date occurs during the Term and the Executive’s employment with the Company terminates within the period from 60 days prior to the Change in Control Date to 24 months following the Change in Control Date, and the right of the Executive to receive benefits under Section 4 (or the amount or nature of the benefits to which he is entitled to receive) are the subject of a dispute between the Company and the Executive, the Company shall continue (a) to pay to the Executive his base salary in effect as of the Measurement Date and (b) to provide benefits to the Executive and the Executive’s family at least equal to those which would have been provided to them, if the Executive’s employment had not been terminated, in accordance with the applicable Benefit Plans in effect on the Measurement Date, until such dispute is resolved either by mutual written agreement of the parties or by an arbitrator’s award pursuant to Section 5.1. Following the resolution of such dispute, the sum of the payments made to the Executive under clause (a) of this Section 5.3 shall be deducted from any cash payment which the Executive is entitled to receive pursuant to Section 4; and if such sum exceeds the amount of the cash payment which the Executive is entitled to receive pursuant to Section 4, the excess of such sum over the amount of such payment shall be repaid (without interest) by the Executive to the Company within three (3) business days following the resolution of such dispute.

6. Successors.

6.1 Successor to Company. The Company shall 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 expressly to assume and agree to perform this Agreement to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain an assumption of this Agreement at or prior to the effectiveness of any succession shall be a breach of this Agreement and shall constitute Good Reason if the Executive elects to terminate employment, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, “Company” shall mean the Company as defined above and any successor to its business or assets as aforesaid which assumes and agrees to perform this Agreement, by operation of law or otherwise.

6.2 Successor to Executive. This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amount would still be payable to the Executive or his family hereunder if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of the Executive’s estate.

7. Notice. All notices, instructions and other communications given hereunder or in connection herewith shall be in writing. Any such notice, instruction or communication shall be sent either (i) by registered or certified mail, return receipt requested, postage prepaid, or (ii) prepaid via a reputable nationwide overnight courier service, in each case addressed to the

Company, at 826 Newtown-Yardley Road, Newtown, Pennsylvania 18940, and to the Executive at the Executive’s address indicated on the signature page of this Agreement (or to such other address as either the Company or the Executive may have furnished to the other in writing in accordance herewith). Any such notice, instruction or communication shall be deemed to have been delivered five business days after it is sent by registered or certified mail, return receipt requested, postage prepaid, or one business day after it is sent via a reputable nationwide overnight courier service. Either party may give any notice, instruction or other communication hereunder using any other means, but no such notice, instruction or other communication shall be deemed to have been duly delivered unless and until it actually is received by the party for whom it is intended.

8. Miscellaneous.

8.1 Employment by Subsidiary. For purposes of this Agreement, the Executive’s employment with the Company shall not be deemed to have terminated solely as a result of the Executive continuing to be employed by a wholly-owned subsidiary of the Company.

8.2 Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

8.3 Injunctive Relief. The Company and the Executive agree that any breach of this Agreement by the Company is likely to cause the Executive substantial and irrevocable damage and therefore, in the event of any such breach, in addition to such other remedies which may be available, the Executive shall have the right to specific performance and injunctive relief.

8.4 Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the internal laws of the Commonwealth of Pennsylvania, without regard to conflicts of law principles.

8.5 Waivers. No waiver by the Executive at any time of any breach of, or compliance with, any provision of this Agreement to be performed by the Company shall be deemed a waiver of that or any other provision at any subsequent time.

8.6 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original but both of which together shall constitute one and the same instrument.

8.7 Tax Withholding. Any payments provided for hereunder shall be subject to the Company’s collection of the any applicable tax withholding required under federal, state or local law, and the Executive shall only be entitled to the amount of each payment remaining the applicable withholding taxes have been collected.

8.8 Entire Agreement. This Agreement sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein and supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party hereto in respect of the subject matter contained herein; and any prior agreement of the parties hereto in respect of the subject matter contained herein is hereby terminated and cancelled.

8.9 Amendments. This Agreement may be amended or modified only by a written instrument executed by both the Company and the Executive.

8.10 Executive’s Acknowledgements. The Executive acknowledges that he: (a) has read this Agreement; (b) has been represented in the preparation, negotiation, and execution of this Agreement by legal counsel of the Executive’s own choice or has voluntarily declined to seek such counsel; (c) understands the terms and consequences of this Agreement; and (d) understands that the law firm of Morgan, Lewis & Bockius LLP is acting as counsel to the Company in connection with the transactions contemplated by this Agreement, and is not acting as counsel for the Executive.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first set forth above.


BIO-IMAGING TECHNOLOGIES, INC.

By:

Name:

Title:


Name:

Address: