FORM 10-Q

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-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CRYhIHDnmQxx9ny3PfrvLte3JbHRcD71nN4UGNHVS6GiHbdur2s8FvjqtnmP3/3t xmY6MgM3a4e62allmkL4jA== 0001021408-02-013896.txt : 20021113 0001021408-02-013896.hdr.sgml : 20021113 20021113144445 ACCESSION NUMBER: 0001021408-02-013896 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20020930 FILED AS OF DATE: 20021113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEOSE TECHNOLOGIES INC CENTRAL INDEX KEY: 0000877902 STANDARD INDUSTRIAL CLASSIFICATION: MEDICINAL CHEMICALS & BOTANICAL PRODUCTS [2833] IRS NUMBER: 133549286 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-27718 FILM NUMBER: 02819589 BUSINESS ADDRESS: STREET 1: 102 WITMER RD CITY: HORSHAM STATE: PA ZIP: 19044 BUSINESS PHONE: 2154415890 MAIL ADDRESS: STREET 1: 102 WITMER ROAD CITY: HORSHAM STATE: PA ZIP: 19044 FORMER COMPANY: FORMER CONFORMED NAME: NEOSE PHARMACEUTICALS INC DATE OF NAME CHANGE: 19950817 10-Q 1 d10q.htm FORM 10-Q FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2002.

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 0-27718

NEOSE TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

13-3549286
(I.R.S. Employer
Identification No.)

102 Witmer Road
Horsham, Pennsylvania
(Address of principal executive offices)

19044
(Zip Code)

(215) 315-9000
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 14,324,279 shares of common stock, $.01 par value, were outstanding as of October 31, 2002.

NEOSE TECHNOLOGIES, INC.
(a development-stage company)

INDEX

			Page

PART I.	FINANCIAL INFORMATION:

	Item 1.	Financial Statements (unaudited)

		Consolidated Balance Sheets at December 31, 2001 and September 30, 2002	3

		Consolidated Statements of Operations for the three and nine months ended September 30, 2001 and 2002, and for the period from inception through September 30, 2002	4

		Consolidated Statements of Cash Flows for the nine months ended September 30, 2001 and 2002, and for the period from inception through September 30, 2002	5

		Notes to Consolidated Financial Statements	6

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	8

	Item 3.	Quantitative and Qualitative Disclosure About Market Risk	16

	Item 4.	Controls and Procedures	16



PART II.	OTHER INFORMATION:

	Item 6.	Exhibits and Reports on Form 8-K	18



SIGNATURES	19

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

NEOSE TECHNOLOGIES, INC.
(a development-stage company)

CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands, except share amounts)

	December 31, 2001			September 30, 2002


Assets

Current assets:
Cash and cash equivalents	$	76,245		$	5,186
Marketable securities		—			37,863
Restricted funds		902			676
Accounts receivable		1,388			2,385
Prepaid expenses and other current assets		247			767

Total current assets		78,782			46,877
Property and equipment, net		22,649			35,752
Acquired intellectual property, net		3,105			2,657
Other assets		1,250			1,381

Total assets	$	105,786		$	86,667


Liabilities and Stockholders’ Equity

Current liabilities:
Current portion of long-term debt	$	1,100		$	1,200
Accounts payable		719			1,220
Accrued compensation		855			1,695
Accrued expenses		2,828			1,587
Deferred revenue		1,222			14

Total current liabilities		6,724			5,716
Other liabilities		16			45
Long-term debt		5,100			3,900

Total liabilities		11,840			9,661

Stockholders’ equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized, none issued		—			—
Common stock, $.01 par value, 30,000,000 shares authorized; 14,088,823 and 14,330,279 shares issued; 14,082,823 and 14,324,279 shares outstanding		141			143
Additional paid-in capital		176,124			178,896
Treasury stock, 6,000 shares at cost		(175	)		(175	)
Deferred compensation		(503	)		(177	)
Deficit accumulated during the development-stage		(81,641	)		(101,681	)

Total stockholders’ equity		93,946			77,006

Total liabilities and stockholders’ equity	$	105,786		$	86,667

The accompanying notes are an integral part of these consolidated financial statements.

NEOSE TECHNOLOGIES, INC.
(a development-stage company)

CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share amounts)

	Three months ended September 30,						Nine months ended September 30,						Period from inception (January 17, 1989) to September 30,

	2001			2002			2001			2002			2002

Revenue from collaborative agreements	$	330		$	2,187		$	934		$	4,519		$	17,152

Operating expenses:
Research and development		4,010			5,285			11,111			13,965			92,339
Marketing, general and administrative		1,883			3,197			5,640			8,977			44,793
Severance charges		—			—			440			2,722			3,292

Total operating expenses		5,893			8,482			17,191			25,664			140,424

Operating loss		(5,563	)		(6,295	)		(16,257	)		(21,145	)		(123,272	)

Gain on sale of marketable security		—			—			—			—			6,120
Interest income		793			378			3,145			1,225			18,896
Interest expense		(54	)		(38	)		(221	)		(120	)		(3,425	)

Net loss	$	(4,824	)	$	(5,955	)	$	(13,333	)	$	(20,040	)	$	(101,681	)

Basic and diluted net loss per share	$	(0.34	)	$	(0.42	)	$	(0.95	)	$	(1.41	)

Basic and diluted weighted-average shares outstanding		14,041			14,310			14,021			14,238

The accompanying notes are an integral part of these consolidated financial statements.

`NEOSE TECHNOLOGIES, INC.
(a development-stage company)

CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)

	Nine months ended September 30, 2001 2002						Period from inception (January 17, 1989) to September 30, 2002

Cash flows from operating activities:
Net loss	$	(13,333	)	$	(20,040	)	$	(101,681	)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization		1,769			1,687			12,421
Non-cash compensation		493			1,139			4,717
Common stock issued for non-cash and other charges		—			—			35
Changes in operating assets and liabilities:
Accounts receivable		245			(998	)		(2,385	)
Prepaid expenses and other current and non-current assets		(249	)		(650	)		(898	)
Accounts payable		(49	)		501			1,220
Accrued compensation		33			840			1,695
Accrued expenses		(710	)		(1,257	)		(895	)
Deferred revenue		(125	)		(1,208	)		14
Other liabilities		—			45			45

Net cash used in operating activities		(11,926	)		(19,941	)		(85,712	)

Cash flows from investing activities:
Purchases of property and equipment		(4,937	)		(14,794	)		(43,351	)
Proceeds from sale-leaseback of equipment		—			—			1,382
Purchases of marketable securities		(103,465	)		(68,412	)		(392,739	)
Proceeds from sales of marketable securities		—			—			11,467
Proceeds from maturities of and other changes in marketable securities		85,397			31,000			343,860
Purchase of acquired technology		—			—			(4,550	)
Investment in equity securities		(310	)		—			(1,250	)

Net cash used in investing activities		(23,315	)		(52,206	)		(85,181	)

Cash flows from financing activities:
Proceeds from issuance of debt		—			—			11,955
Repayment of debt		(1,100	)		(1,100	)		(8,152	)
Restricted cash related to debt		267			227			(604	)
Proceeds from issuance of preferred stock, net		—			—			29,497
Proceeds from issuance of common stock, net		—			—			136,840
Proceeds from exercise of stock options and warrants		706			1,961			6,790
Acquisition of treasury stock		—			—			(175	)
Dividends paid		—			—			(72	)

Net cash provided by (used in) financing activities		(127	)		1,088			176,079

Net increase (decrease) in cash and cash equivalents		(35,368	)		(71,059	)		5,186
Cash and cash equivalents, beginning of period		66,989			76,245			—

Cash and cash equivalents, end of period	$	31,621		$	5,186		$	5,186

Supplemental disclosure of cash flow information:
Cash paid for interest	$	243		$	86		$	3,389

Non-cash investing activities:
Accrued property & equipment	$	—		$	—		$	2,438

Non-cash financing activities:
Issuance of common stock for dividends	$	—		$	—		$	90

Issuance of common stock to employees in lieu of cash compensation	$	—		$	—		$	44

The accompanying notes are an integral part of these consolidated financial statements.

NEOSE TECHNOLOGIES, INC.
(a development-stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

1. Basis of Presentation

We have used accounting principles generally accepted in the United States for interim financial information to prepare unaudited consolidated financial statements:

•

As of September 30, 2002;

•

For the three and nine months ended September 30, 2001 and 2002; and

•

For the period from inception (January 17, 1989) to September 30, 2002.

Our unaudited consolidated financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete consolidated financial statements. In our opinion, the unaudited information includes all the normal recurring adjustments that are necessary for a fair presentation of the financial position, results of operations, and cash flows for the periods presented. You should not base your estimate of our results of operations for 2002 solely on our results of operations for the three and nine months ended September 30, 2002. You should read these unaudited consolidated financial statements in combination with:

•

The other Notes in this section;

•

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing in the following section; and

•

The Consolidated Financial Statements, including the Notes to the Consolidated Financial Statements, included in our Annual Report on Form 10-K for the year ended December 31, 2001.

Certain prior year amounts have been reclassified to conform to our current year presentation.

2. Revenue Recognition

Revenue from collaborative agreements consists of up-front fees, research and development funding, and milestone payments. We recognize revenues from these agreements consistent with Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements,” issued by the Securities and Exchange Commission in December 1999. Non-refundable up-front fees are deferred and amortized to revenue over the expected performance period. Periodic payments for research and development activities are recognized over the period in which we perform those activities under the terms of each agreement. Revenue resulting from the achievement of substantive milestone events stipulated in the agreements is recognized when the milestone is achieved. We comply with SAB 101, although its application to non-refundable up-front fees does not accurately reflect our access to such funds.

During the three and nine months ended September 30, 2002, we recognized $2.1 million and $3.7 million, respectively, related to our collaboration with Wyeth Pharmaceuticals, which was terminated

in September 2002. Of the $2.1 million recognized in the third quarter, $0.9 million was non-cash, and represented the remaining amortization of a $1.0 million up-front fee, which we received from Wyeth in December 2001. As required under SAB 101, we deferred the up-front fee and began to amortize this amount as revenue over the expected performance period of the Wyeth agreement. Upon termination of the Wyeth agreement in the third quarter, the unamortized portion of the up-front fee was recognized as revenue.

3. Severance Charges

In May 2002, we incurred severance charges of approximately $0.3 million in connection with the termination of employees from various departments. As of September 30, 2002, all amounts had been paid.

In March 2002, we entered into a Separation and Consulting Agreement with Stephen A. Roth, Ph.D., who was the Chief Executive Officer of the Company. Under this agreement, we agreed to provide medical benefits to Dr. Roth and to pay him $39,622 per month for twelve months. On or before the first anniversary of the agreement, Dr. Roth may agree to extend his non-competition and non-solicitation commitments for two additional years by entering into a separate non-competition agreement. If he does so, the Company will continue his medical benefits for six additional months, extend the $39,622 monthly payments for 24 additional months and, for purposes of stock option vesting and exercisability, treat Dr. Roth as remaining in service to the Company until the third anniversary of his resignation as Chief Executive Officer of the Company (or until the end of his service as a director, if later). We have recognized $0.3 million in severance charges related to this agreement during the three months ended March 31, 2002, and the remaining payment of $0.2 million is being recognized over the one-year term of the agreement.

In January 2002, we entered into a Retirement Agreement with Edward J. McGuire, Ph.D., Vice President, Research and Development. Under this agreement, he will receive payments through 2006, including $87,500 in 2002, $125,000 in 2003, and $100,000 in each of 2004, 2005, and 2006. We will continue to provide Dr. McGuire health insurance benefits through December 31, 2003. We also agreed to extend the period of time during which Dr. McGuire may exercise his stock options subsequent to his retirement. In connection with this agreement, in March 2002, we recognized $2.1 million in severance charges, of which $1.6 million was a non-cash expense related to the stock options.

4. Net Loss Per Share

Basic and diluted net loss per share are presented in conformity with Statement of Financial Accounting Standards No. 128, “Earnings Per Share.” Basic loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding for the period. Diluted loss per share reflects the potential dilution from the exercise or conversion of securities into common stock. For the nine months ended September 30, 2001 and 2002, the effects of the exercise of outstanding stock options and warrants to purchase 2,695,967 and 3,673,319 shares, respectively, were antidilutive; accordingly, they were excluded from the calculation of diluted earnings per share.

5. Comprehensive Loss

Our comprehensive loss for the nine months ended September 30, 2001 and 2002 was approximately $13.3 million and $20.0 million, respectively. Comprehensive loss is comprised of net loss and other comprehensive income or loss. For the periods reported, there are no separate sources of other comprehensive income or loss.

6. Recent Accounting Pronouncements

Statement of Financial Accounting Standard No. 143, “Accounting for Asset Retirement Obligations” (SFAS 143), which was released in August 2001, addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and their associated asset retirement costs. SFAS 143 requires an enterprise to record the fair value of an asset retirement obligation as a liability in the period in which it incurs a legal obligation associated with the retirement of intangible long-lived assets that result from the acquisition, construction, development, or normal use of the asset. The enterprise is also required to record a corresponding increase to the carrying amount of the related long-lived asset (i.e. the associated asset retirement cost) and to depreciate that cost over the life of the asset. The liability is changed at the end of each period to reflect the passage of time (i.e. accretion expense) and changes in the estimated future cash flows underlying the initial fair value measurement. Because of the extensive use of estimates, most enterprises will record a gain or loss when they settle the obligation. We are required to adopt SFAS 143 for our fiscal year beginning January 1, 2003; we do not expect the adoption of SFAS 143 to have a material impact on our consolidated financial position or results of operations.

In June 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 146, “Accounting for Exit or Disposal Activities” (SFAS No. 146). SFAS No. 146 addresses significant issues regarding the recognition, measurement and reporting of costs associated with exit and disposal activities, including restructuring activities. SFAS No. 146 also addresses recognition of certain costs related to terminating a contract that is not a capital lease, costs to consolidate facilities or relocate employees and termination of benefits provided to employees that are involuntarily terminated under the terms of a one-time benefit arrangement that is not an ongoing benefit arrangement or an individual deferred compensation contract. SFAS No. 146 is effective for exit or disposal activities that are initiated after December 31, 2002. Adoption of SFAS 146 is not expected to have a material impact on our consolidated financial position or results of operations.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

CAUTIONARY STATEMENT PURSUANT TO SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION ACT OF 1995:

This report and the documents incorporated by reference herein contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. When used in this report and the documents incorporated herein by reference, the words “anticipate,” “believe,” “estimate,” “may,” “expect,” “intend,” and similar expressions are generally intended to identify forward-looking statements. These forward-looking statements include, among others, the statements in Management’s Discussion and Analysis of Financial Condition and Results of Operations about our:

•

expectations for increases in operating expenses;

•

expectations for increases in research and development, and marketing, general and administrative expenses in order to develop products, manufacture commercial quantities of products and commercialize our technology;

•

expectations for the development, manufacturing, and approval of new products, including our own proprietary products;

•

expectations for incurring additional capital expenditures to expand our manufacturing capabilities;

•

expectations for generating revenue or becoming profitable on a sustained basis;

•

ability to enter into additional collaboration agreements and the ability of our existing collaboration partners to commercialize products incorporating our technologies;

•

estimate of the sufficiency of our existing cash and cash equivalents and investments to finance our operating and capital requirements;

•

expected losses; and

•

expectations for future capital requirements.

Our actual results could differ materially from those results expressed in, or implied by, these forward-looking statements. Potential risks and uncertainties that could affect our actual results include the following:

•

our ability to develop and commercialize any products or technologies;

•

our ability to enter into and maintain collaborative arrangements;

•

our ability to attract and retain key personnel;

•

our ability to develop commercial-scale manufacturing processes;

•

our ability to obtain adequate sources of proteins and reagents;

•

our ability to expand and protect our intellectual property;

•

unanticipated cash requirements to support current operations or research and development; and

•

general economic conditions.

Other risks and uncertainties that could affect our actual results are discussed in greater detail in this report and in our other filings with the Securities and Exchange Commission. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, events, levels of activity, performance, or achievements. We do not assume responsibility for the accuracy and completeness of the forward-looking statements other than as required by applicable law.

We do not undertake any duty to update after the date of this report any of the forward-looking statements in this report to conform them to actual results.

You should read this section in combination with the Management’s Discussion and Analysis of Financial Condition and Results of Operations for the year ended December 31, 2001, included in our Annual Report on Form 10-K and in our 2001 Annual Report to Stockholders.

Overview

Neose develops proprietary technologies for using enzymes to manufacture complex carbohydrates. Neose is using its broad technology base to develop novel and improved products for itself and its partners, primarily focusing on protein therapeutics.

Neose markets its technology for improving protein drugs under the names GlycoAdvance™ and GlycoPEGylation™. We use GlycoAdvance™ to modify the complex carbohydrate structures on therapeutic glycoproteins. We are also developing our technology to create novel glycosylation patterns. Our GlycoPEGylation technology is used to link polyethylene glycol to the carbohydrate structures of glycoproteins. The application of these technologies to proteins potentially results in improved clinical activity and pharmacokinetic profile, enhanced drug development flexibility, stronger and additional patent claims, and yield improvements.

We are implementing a new strategic plan that increases our emphasis on the development of improved proteins. Although we are continuing to pursue opportunities to use our proprietary technologies to improve the clinical profile of others’ proteins, or to improve the manufacturing consistency or yield of others’ proteins, we are also focusing on the development of our own proprietary products.

As we move forward with this strategy, we are modifying our business development strategy for using our proprietary technologies in collaboration with others. Previously, we sought collaborations in which the commercial terms were negotiated prior to conducting the initial research and development phase. We are now seeking to work with collaborators first under a discrete research and development agreement. We believe that the value of our technologies to a specific project may be more easily quantified upon completion of the research and development phase, which will allow us to negotiate commercial terms more effectively.

Under this type of research and development agreement, we anticipate receiving a combination of upfront fees, funding of our research and development costs, and, if the research achieves predefined success criteria, milestone payments. In October 2002, we entered into two research and development agreements with Novo Nordisk, one focusing on the use of GlycoAdvance and the other on the use of GlycoPEGylation. We do not expect the revenues or expenses related to these agreements, or to other such research and development agreements, to have a material impact on our consolidated financial position or results of operations, at least until such time as we enter into a broader commercial agreement.

We are also continuing to explore the use of our technology to enable the development of carbohydrate-based therapeutics, and the development of novel carbohydrate food and nutritional ingredients.

Neose was initially incorporated in January 1989, and began operations in October 1990. We have incurred operating losses each year since inception. As of September 30, 2002, we had an accumulated deficit of approximately $101.7 million. We expect additional losses for some time as we expand research and development efforts, manufacturing scale-up activities, and marketing activities.

Critical Accounting Policies

Our significant accounting policies are described in Note 2 to the consolidated financial statements included in Item 8 of our Form 10-K. We believe our most critical accounting policies relate to recognition of revenue, impairment of long-lived assets, and income taxes.

Revenue Recognition

Revenue from collaborative agreements consists of up-front fees, research and development funding, and milestone payments. We recognize revenues from these agreements consistent with Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements”, issued by the Securities and Exchange Commission in December 1999. Non-refundable up-front fees are deferred and amortized to revenue over the expected performance period. Periodic payments for research and development activities are recognized over the period in which we perform those activities under the terms of each agreement. Revenue resulting from the achievement of substantive milestone events stipulated in the agreements is recognized when the milestone is achieved. We comply with SAB 101, although its application to non-refundable up-front fees does not accurately reflect our access to such funds.

Impairment of Long-Lived Assets

As required by Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (SFAS 144), we assess the recoverability of any long-lived assets for which an indicator of impairment exists. Specifically, we calculate, and recognize, any impairment losses by comparing the carrying value of these assets to our estimate of the undiscounted future operating cash flows. Although our current and historical operating and cash flows are indicators of impairment, we believe the future cash flows to be received from our long-lived assets will exceed the assets’ carrying value. Accordingly, we have not recognized any impairment losses through September 30, 2002.

Income Taxes

We have a history of losses and, as a result, have generated federal and state tax net operating loss (NOL) carryforwards of approximately $9.6 million and $6.3 million, respectively, as of December 31, 2001. Accounting principles generally accepted in the United States require us to record a valuation allowance against the deferred tax asset associated with this NOL carryforward if it is more likely than not that we will not be able to utilize the NOL carryforward to offset future taxes. Due to the size of the NOL carryforward in relation to our history of unprofitable operations, we have not recognized a net deferred tax asset.

Liquidity and Capital Resources

We have incurred operating losses each year since our inception. As of September 30, 2002, we had an accumulated deficit of approximately $101.7 million. We have financed our operations through private and public offerings of our securities, and revenues from our collaborative agreements. We had approximately $43.0 million in cash, cash equivalents, and marketable securities as of September 30, 2002, compared to approximately $76.2 million in cash and cash equivalents as of December 31, 2001. The decrease in 2002 was primarily attributable to the use of cash to fund our operating loss and capital expenditures.

During the nine months ended September 30, 2002, we invested approximately $14.8 million in property, equipment, and building improvements. We anticipate additional capital expenditures during 2002 of approximately $2.0 million, of which approximately $0.7 million is to complete validation of additional cGMP manufacturing capacity in our Horsham, Pennsylvania facility.

We have temporarily suspended plans to complete renovations of a nearby 40,000 square foot facility in Horsham, Pennsylvania, which we leased in February 2002. During the nine months ended September 30, 2002, we invested approximately $3.8 million in renovating the facility. By putting the renovations on hold, we will not incur in 2002 an additional $7.0 million that was originally intended to complete the renovations. If we ultimately decide to cancel the project, or significantly change its scope, the investment of $3.8 million will be charged to our Statements of Operations. If we resume the project and complete the planned renovations, we may incur additional costs of approximately $1.0 million to restart the project. If we complete the project, we plan to relocate our non-cGMP research laboratories and corporate office space from our current facility in Horsham, Pennsylvania into the new facility, leaving our current facility available for future expansion of our cGMP manufacturing capacity. We expect to finance the cost of this capital project by a combination of equipment leasing and cash and marketable securities from our consolidated balance sheet, or other sources, as they become available.

In December 2001, we entered into a research, development and license agreement with Wyeth Pharmaceuticals, a division of Wyeth, for the use of our GlycoAdvance technology to develop an improved production process for Wyeth’s biopharmaceutical compound, recombinant PSGL-Ig (P-selectin glycoprotein ligand). On May 9, 2002, Neose learned of Wyeth’s decision to discontinue the development of rPSGL-Ig for the treatment of myocardial infarction. Their decision was unrelated to the performance of our GlycoAdvance technology. Wyeth subsequently notified us of the termination of the agreement, effective September 2002. We expect to receive no further revenues from this collaboration and, therefore, expect our revenues in the fourth quarter of 2002 to decrease significantly compared to the third quarter of 2002.

For the three and nine months ended September 30, 2002, we recognized revenue of $2.1 million and $3.7 million, respectively, from Wyeth. Of the $2.1 million recognized in the third quarter, $0.9 million is non-cash, and represents the remaining amortization of the $1.0 million up-front fee, which we received from Wyeth in December 2001. As required under SAB 101, we recorded a deferral on our consolidated balance sheet upon receipt of the up-front fee from Wyeth, and recognized as revenue in the third quarter upon termination of the agreement the unamortized portion of the up-front fee.

In 2001, we announced a stock repurchase program authorizing the repurchase of up to one million shares of common stock in the open market at times and prices that we consider appropriate. During 2001, we purchased 6,000 shares of common stock in the open market for approximately $0.2 million. We have made no purchases during 2002.

In 1997, we issued, through the Montgomery County (Pennsylvania) Industrial Development Authority, $9.4 million of taxable and tax-exempt bonds, of which $5.1 million remained outstanding as of September 30, 2002. The bonds were issued to finance the purchase of our current headquarters building and the construction of a pilot-scale manufacturing facility within our building. The bonds are supported by an AA-rated letter of credit, and a reimbursement agreement between our bank and the letter of credit issuer. The interest rate on the bonds varies weekly, depending on market rates for AA-rated taxable and tax-exempt obligations, respectively. During the quarter ended September 30, 2002, the weighted-average, effective interest rate was 2.8% per year, including letter-of-credit and other fees. The terms of the bond issuance provide for monthly, interest-only payments and a single repayment of principal at the end of the twenty-year life of the bonds. However, under our agreement with our bank, we are making monthly payments to an escrow account to provide for an annual prepayment of principal. As of September 30, 2002, we had restricted funds relating to the bonds of approximately $0.7 million, which consisted of our monthly payments to an escrow account plus interest earned on the balance of the escrow account.

To provide credit support for this arrangement, we have given a first mortgage on the land, building, improvements, and certain machinery and equipment to our bank. We have also agreed to a covenant to maintain a minimum required cash and short-term investments balance of at least two times the current loan balance. As of September 30, 2002, we were required to maintain a cash and short-term investments balance of $10.2 million. If we fail to comply with this covenant, we are required to deposit with the lender cash collateral up to, but not more than, the loan’s unpaid balance.

We believe that our existing cash and marketable securities, expected revenue from collaborations and license arrangements, and interest income should be sufficient to meet our operating and capital requirements through at least 2003, although changes in our collaborative relationships or our business, whether or not initiated by us, and general economic conditions may cause us to deplete our cash and marketable securities sooner than the above estimate. The timing and amount of our future capital requirements and the adequacy of available funds will depend on many factors, including the progress of our proprietary product programs and if, or when, any products manufactured using our technology are commercialized.

Joint Venture with McNeil Nutritionals

We have a joint venture with McNeil Nutritionals to develop bulking agents for use in the food industry. We account for our investment in the joint venture under the equity method, under which we recognize our share of the income and losses of the joint venture. In 1999, we reduced the carrying value of our initial investment in the joint venture of approximately $0.4 million to zero to reflect our share of the joint venture’s losses. We recorded this amount as research and development expense in our consolidated statements of operations. We will record our share of post-1999 losses of the joint venture, however, only to the extent of our actual or committed investment in the joint venture.

The joint venture developed a process for making fructooligosaccharides and constructed a pilot facility in Athens, Georgia. In 2001, the joint venture closed the pilot facility and is exploring establishing a manufacturing arrangement with a third party to produce this or other bulking agents.

During the three and nine months ended September 30, 2002, Neose supplied to the joint venture research and development services and supplies, which cost approximately $31,000 and $236,000, respectively. These amounts have been reflected as a reduction of research and development expense in our consolidated statements of operations. As of September 30, 2002, the joint venture owed Neose approximately $31,000. We expect to provide significantly fewer research and development services during 2002 compared to prior years, thereby significantly reducing our expected reimbursement from the joint venture.

If the joint venture becomes profitable, we will recognize our share of the joint venture’s profits only after the amount of our capital contributions to the joint venture is equivalent to our share of the joint venture’s accumulated losses. As of September 30, 2002, the joint venture had an accumulated loss since inception of approximately $10.1 million. Until the joint venture is profitable, McNeil Nutritionals is required to fund, as a non-recourse, no-interest loan, all of the joint venture’s aggregate capital expenditures in excess of an agreed-upon amount, and all of the joint venture’s operating losses. The loan balance would be repayable by the joint venture to McNeil Nutritionals over a seven-year period commencing on the earlier of September 30, 2006 or the date on which Neose attains a 50% ownership interest in the joint venture after having had a lesser ownership interest. In the event of any dissolution of the joint venture, the loan balance would be payable to McNeil Nutritionals before any distribution of assets to us. As of September 30, 2002, the joint venture owed McNeil Nutritionals approximately $8.5 million.

If we and McNeil Nutritionals agree that the joint venture should build additional production facilities, and we wish to have a 50% ownership interest in the joint venture, we would be required to invest up to $8.9 million to fund half of such expenditures. However, we could elect to fund as little as $1.9 million of the cost of the facilities, so long as our aggregate investments in the joint venture are at least 15% of the joint venture’s aggregate capital expenditures. In this case, McNeil Nutritionals would fund the remainder of our half of the joint venture’s capital expenditures, and our ownership percentage would be proportionately reduced. We do not currently intend to commit the joint venture to make any further investments in facilities.

Recent Accounting Pronouncements

143 for our fiscal year beginning January 1, 2003; we do not expect the adoption of SFAS 143 to have a material impact on our consolidated financial position or results of operations.

Results of Operations

Revenues

Revenues from collaborative agreements for the three and nine months ended September 30, 2002 were $2.2 million and $4.5 million, respectively, compared to $0.3 million and $0.9 million for the corresponding periods in 2001. The increases are attributable to our agreement with Wyeth Pharmaceuticals, which has been terminated. For the three and nine months ended September 30, 2002, we recognized revenue of $2.1 million and $3.7 million, respectively, from Wyeth Pharmaceuticals. Of the $3.7 million recognized through September 30, 2002, $1.0 million is non-cash, and represents the amortization of the $1.0 million up-front fee, which we received from Wyeth and deferred on our Consolidated Balance Sheet, as required under SAB 101. Our other revenues during 2002, and our revenues for the first nine months of 2001, were primarily related to research funding under our agreement with Wyeth Nutritionals.

Operating Expenses

Research and development expenses for the three and nine months ended September 30, 2002 were $5.3 million and $14.0 million, respectively, compared to $4.0 million and $11.1 million for the corresponding periods in 2001. The increases during the 2002 periods were primarily attributable to increases in the number of employees as well as increased supplies and service expenses.

Marketing, general and administrative expenses for the three and nine months ended September 30, 2002 were $3.2 million and $9.0 million, respectively, compared to $1.9 million and $5.6 million for the corresponding periods in 2001. The 2002 periods contained higher payroll, legal, and consulting expenses than the comparable 2001 periods.

During the nine months ended September 30, 2002, we incurred severance charges of $2.7 million compared to $0.4 million for the nine months ended September 30, 2001. Of the $2.7 million incurred in 2002, $1.6 million is a non-cash charge related to stock option modifications for an agreement entered into with one of our officers in connection with his retirement.

Interest Income and Expense

Interest income for the three and nine months ended September 30, 2002 was $0.4 million and $1.2 million, respectively, compared to $0.8 million and $3.1 million for the corresponding periods in 2001. The decreases were due to lower average cash, cash equivalents, and marketable securities balances and lower interest rates during the 2002 periods.

Interest expense for the three and nine months ended September 30, 2002 was $38,000 and $120,000, respectively, compared to $54,000 and $221,000 for the corresponding periods in 2001. The decreases were due to lower interest rates and lower average loan balances during the 2002 periods.

Net Loss

Our net loss for the three and nine months ended September 30, 2002 was $6.0 million and $20.0 million, respectively, compared to $4.8 million and $13.3 million for the corresponding periods in 2001, for the reasons described above.

Item 3.

Quantitative and Qualitative Disclosure About Market Risk

Our holdings of financial instruments are comprised primarily of government agency securities. All such instruments are classified as securities held to maturity. We seek reasonable assuredness of the safety of principal and market liquidity by investing in rated fixed income securities, while at the same time seeking to achieve a favorable rate of return. Our market risk exposure consists principally of exposure to changes in interest rates. Our holdings are also exposed to the risks of changes in the credit quality of issuers. We typically invest in the shorter-end of the maturity spectrum. As of September 30, 2002, we held $37.9 million in FNMA Discount notes with original maturities ranging from 182 to 338 days. The balance of our investment portfolio was held in money market securities. The approximate principal amount and weighted-average interest rate per year of our investment portfolio as of September 30, 2002 was $42.0 million and 2.1%, respectively.

We have exposure to changing interest rates on our taxable and tax-exempt bonds, and we are currently not engaged in hedging activities. Interest on approximately $5.1 million of outstanding indebtedness is at an interest rate that varies weekly, depending on the market rates for AA-rated taxable and tax-exempt obligations. During the quarter ended September 30, 2002, the weighted-average, effective interest rate was approximately 2.8% per year.

Item 4.

Controls and Procedures

Within 90 days prior to the date of this report, we carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, our principal executive officer and principal financial officer concluded that these controls and procedures are effective. There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.

Disclosure controls and procedures are our controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Securities and Exchange Commission. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

PART II. OTHER INFORMATION

Item 6.

Exhibits and Reports on Form 8-K.

(a) List of Exhibits:

3.2 Second Amended and Restated By-Laws of Neose Technologies, Inc.

10.1 Form of Change of Control Agreement Between Neose Technologies, Inc. and Certain Executive Officers.

10.2 Change of Control Agreement Between Neose Technologies, Inc. and Debra J. Poul, dated October 7, 2002.

10.3 Employment Letter Agreement Between Neose Technologies, Inc. and Robert I. Kriebel, dated August 15, 2002.

10.4 Change of Control Agreement Between Neose Technologies, Inc. and Robert I. Kriebel, dated October 7, 2002.

10.5 Employment Agreement between Neose Technologies, Inc. and Joseph J. Villafranca, dated September 12, 2002.

99.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b) Reports on Form 8-K:

None.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	NEOSE TECHNOLOGIES, INC.
Date: November 13, 2002	By:	/s/ ROBERT I. KRIEBEL

		Robert I. Kriebel Senior Vice President and Chief Financial Officer (Principal Financial Officer and Duly Authorized Signatory)

CERTIFICATIONS

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, C. Boyd Clarke, certify that:

	1.		I have reviewed this quarterly report on Form 10-Q of Neose Technologies, Inc.

	2.		Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

	3.		Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

	4.		The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

	a)		designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

	b)		evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

	a)		all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

	b)		any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.


November 13, 2002			/s/ C. BOYD CLARKE

Date			C. Boyd Clarke President and Chief Executive Officer

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Robert I. Kriebel, certify that:

	1.		I have reviewed this quarterly report on Form 10-Q of Neose Technologies, Inc.

	2.		Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

	3.		Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

	a)		designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

	b)		evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

	c)		presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

	a)		all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

	b)		any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and


November 13, 2002			/s/ ROBERT I. KRIEBEL

Date			Robert I. Kriebel Senior Vice President and Chief Financial Officer

21 EX-3.2 3 dex32.htm BY-LAWS BY-LAWS

EXHIBIT 3.2

SECOND AMENDED AND RESTATED BY-LAWS
OF
NEOSE TECHNOLOGIES, INC.

ARTICLE I

OFFICES

Section 1. The registered office shall be in the city of Dover, County of Kent, State of Delaware.

Section 2. The corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the corporation may require.

ARTICLE II

MEETINGS OF STOCKHOLDERS

Section 1. All meetings of the stockholders for the election of directors shall be held at such place as may be fixed from time to time by the Board of Directors, or at such other place either within or without the State of Delaware as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting. Meetings of stockholders for any other purpose may be held at such time and place, within or without the State of Delaware, as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof.

Section 2. Annual meetings of stockholders shall be held at such date and time as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting, at which they shall elect by a plurality vote a Board of Directors, and transact such other business as may properly be brought before the meeting.

Section 3. Written notice of the annual meeting stating the place, date and hour of the meeting shall be given to each stockholder entitled to vote at such meeting not fewer than ten (10) nor more than sixty (60) days before the date of the meeting.

Section 4. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city

where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.

Section 5. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the certificate of incorporation, may be called by the president and shall be called by the president or secretary at the request in writing of a majority of the Board of Directors.

Section 6. Written notice of a special meeting stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called, shall be given not fewer than ten (10) nor more than sixty (60) days before the date of the meeting, to each stockholder entitled to vote at such meeting.

Section 7. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice.

Section 8. The holders of fifty percent (50%) of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally notified. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

Section 9. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of the statutes or of the certificate of incorporation, a different vote is required, in which case such express provision shall govern and control the decision of such question.

Section 10. Unless otherwise provided in the certificate of incorporation each stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of the capital stock having voting power held by such stockholder, but no proxy shall be voted on after three (3) years from its date, unless the proxy provides for a longer period.

Section 11. A. Annual Meetings of Stockholders

1. Nominations of persons for election to the Board of Directors and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders (a) pursuant to the corporation’s notice of meeting, (b) by or at the direction of the Board of Directors or (c) by any stockholder of the corporation who was a stockholder of record at the time of giving of notice provided for in this Section 11, who is entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 11.

2. For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (c) of paragraph (A)(1) of this Section 11, the stockholder must have given timely notice thereof in writing to the Secretary of the corporation and such other business must otherwise be a proper matter for stockholder action. To be timely, a stockholder’s notice shall be delivered to the Secretary at the principal executive offices of the corporation not later than the close of business on the one hundred twentieth (120th) day nor earlier than the close of business on the one hundred fiftieth (150th) day prior to the first anniversary of the date of the proxy statement delivered to stockholders in connection with the preceding year’s annual meeting; provided, however, that if either (i) the date of the annual meeting is more than thirty (30) days before or more than sixty (60) days after such an anniversary date or (ii) no proxy statement was delivered to stockholders in connection with the preceding year’s annual meeting, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the ninetieth (90th) day prior to such annual meeting and not later than the close of business on the later of the sixtieth (60th) day prior to such annual meeting or the close of business on the tenth (10th) day following the day on which public announcement of the date of such meeting is first made by the corporation. Such stockholder’s notice shall set forth (a) as to each person whom the stockholder proposes to nominate for election or reelection as a director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director it elected); (b) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (c) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such stockholder, as they appear on the corporation’s books, and of such beneficial owner and (ii) the class and number of shares of capital stock of the corporation that are owned beneficially and held of record by such stockholder and such beneficial owner.

3. Notwithstanding anything in the second sentence of paragraph (A)(2) of this Section 11 to the contrary, in the event that the number of directors to be

elected to the Board of Directors of the corporation is increased and there is no public announcement by the corporation naming all of the nominees for director or specifying the size of the increased Board of Directors at least seventy (70) days prior to the first anniversary of the preceding year’s annual meeting (or, if the annual meeting is held more than thirty (30) days before or sixty (60) days after such anniversary date, at least seventy (70) days prior to such annual meeting), a stockholder’s notice required by this Section 11 shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive office of the corporation not later than the close of business on the tenth (10th) day following the day on which such public announcement is first made by the corporation.

B. Special Meetings of Stockholders. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the corporation’s notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected pursuant to the corporation’s notice of meeting (a) by or at the direction of the Board of Directors or (b) provided that the Board of Directors has determined that directors shall be elected at such meeting, by any stockholder of the corporation who is a stockholder of record at the time of giving of notice of the special meeting, who shall be entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 11. If the corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board of Directors, any such stockholder may nominate a person or persons (as the case may be), for election to such position(s) as specified in the corporation’s notice of meeting, if the stockholder’s notice required by paragraph (A)(2) of this Section 11 shall be delivered to the Secretary at the principal executive offices of the corporation not earlier than the ninetieth (90th) day prior to such special meeting not later than the later of (x) the close of business of the sixtieth (60th) day prior to such special meeting or (y) the close of business of the tenth (10th) day following the day on which public announcement is first made of the date of such special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting.

C. General.

1. Only such persons who are nominated in accordance with the procedures set forth in this Section 11 shall be eligible to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 11. Except as otherwise provided by law, the certificate of incorporation or these by-laws, the chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this Section 11 and, if any proposed nomination or business is not incompliance herewith, to declare that such defective proposal or nomination shall be disregarded.

2. For purposes of this Section 11, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to Section 13, 14 and 15(d) of the Exchange Act.

3. Notwithstanding the foregoing provisions of this Section 11, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth herein. Nothing in this Section 11 shall be deemed to affect any rights (i) of stockholders to request inclusion of proposals in the corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act or (ii) of the holders of any series of Preferred Stock to elect directors under specified circumstances.

Notwithstanding any other provision of law, the certificate of incorporation or these by-laws, and notwithstanding the fact that a lesser percentage may be specified by law, the affirmative vote of the holders of at least seventy-five percent (75) of the votes which all the stockholders would be entitled to cast at any annual election of directors or class of directors shall be required to amend or repeal, or to adopt any provision inconsistent with, this Section 11.

ARTICLE III

DIRECTORS

Section 1. The number of directors which shall constitute the whole Board shall be determined by resolution of the Board of Directors or by the stockholders at the annual meeting of the stockholders, except as provided in Section 2 of this Article, and each director elected shall hold office until said director’s successor is elected and qualified. Directors need not be stockholders.

Section 2. Vacancies and new created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until the next annual election and until their successors are duly elected and shall qualify, unless sooner displaced. If there are no directors in office, then an election of directors may be held in the manner provided by statute. If, at the time of filling any vacancy or any newly created directorship, the directors then in office shall constitute less than a majority of the whole Board (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten percent of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office.

Section 3. The business of the corporation shall be managed by or under the direction of its Board of Directors which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the certificate of incorporation or by these by-laws directed or required to be exercised or done by the stockholders.

MEETINGS OF THE BOARD OF DIRECTORS

Section 4. The Board of Directors of the corporation may hold meetings, both regular and special, either within or without the State of Delaware.

Section 5. The first meeting of each newly elected Board of Directors shall be held at such time and place as shall be fixed by the vote of the stockholders at the annual meeting and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present. In the event of the failure of the stockholders to fix the time or place of such first meeting of the newly elected Board of Directors, or in the event such meeting is not held at the time and place so fixed by the stockholders, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the Board of Directors, or as shall be specified in a written waiver signed by all of the directors.

Section 6. Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by the Board.

Section 7. Special meetings of the Board may be called by the president on two (2) days’ notice to each director by mail or forty-eight (48) hours notice to each director either personally or by telegram; special meetings shall be called by the president or secretary in like manner and on like notice on the written request of two directors unless the Board consists of only one director, in which case special meetings shall be called by the president or secretary in like manner and on like notice on the written request of the sole director.

Section 8. At all meetings of the Board a majority of the directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute or by the certificate of incorporation. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.

Section 9. Unless otherwise restricted by the certificate of incorporation of these by-laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or

writings are filed with the minutes of proceedings of the Board or committee.

Section 10. Unless otherwise restricted by the certificate of incorporation or these by-laws, members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.

COMMITTEES OF DIRECTORS

Section 11. The Board of Directors may, by resolution passed by a majority of the whole board, designate one or more committees, each committee to consist of one or more of the directors of the corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee.

In the absence of disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not the member or members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member.

Any such committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the certificate of incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the corporation’s property and assets, recommending to the stockholders a dissolution of the corporation or a revocation of a dissolution, or amending the by-laws of the corporation; and, unless the resolution or the certificate of incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors.

Section 12. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required.

COMPENSATION OF DIRECTORS

Section 13. Unless otherwise restricted by the certificate of incorporation or these by-laws, the Board of Directors shall have the authority to fix the compensation of directors. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting

of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings.

REMOVAL OF DIRECTORS

Section 14. Unless otherwise restricted by the certificate of incorporation or by-laws, any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of shares entitled to vote at an election of directors.

ARTICLE IV

NOTICES

Section 1. Whenever, under the provisions of the statutes or of the certificate of incorporation or of these by-laws, notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or stockholder, at such director’s or stockholder’s address as it appears on the records of the corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given by telegram.

Section 2. Whenever any notice is required to be given under the provisions of the statutes or of the certificate of incorporation or of these by-laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto.

ARTICLE V

OFFICERS

Section 1. The officers of the corporation shall be chosen by the Board of Directors and shall be a chief executive officer, chief financial officer, president, treasurer and a secretary. The Board of Directors may elect from among its members a Chairman of the Board and a Vice Chairman of the Board. The Board of Directors may also choose one or more vice-presidents, assistant secretaries and assistant treasurers. Any number of offices may be held by the same person, unless the certificate of incorporation or these by-laws otherwise provide.

Section 2. The Board of Directors at its first meeting after each annual meeting of stockholders shall choose a president, a treasurer, and a secretary and may choose vice presidents.

Section 3. The Board of Directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board.

Section 4. The salaries of all officers and agents of the corporation shall be fixed by the Board of Directors.

Section 5. The officers of the corporation shall hold office until their successors are chosen and qualify. Any officer elected or appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the Board of Directors. Any vacancy occurring in any office of the corporation shall be filled by the Board of Directors.

THE CHAIRMAN OF THE BOARD

Section 6. The Chairman of the Board, if any, shall preside at all meetings of the Board of Directors and of the stockholders at which the Chairman shall be present. The Chairman shall have and may exercise such powers as are, from time to time, assigned to the Chairman by the Board and as may be provided by law.

Section 7. In the absence of the Chairman of the Board, the Vice Chairman of the Board, if any, shall preside at all meetings of the Board of Directors and of the stockholders at which the Vice Chairman shall be present. The Vice Chairman shall have and may exercise such powers as are, from time to time, assigned to the Vice Chairman by the Board and as may be provided by law.

THE PRESIDENT AND VICE-PRESIDENTS

Section 8. The president shall be the chief operating officer or chief executive officer of the corporation, and in the absence of the Chairman and Vice Chairman of the Board the President shall preside at all meetings of the stockholders and the Board of Directors; the President shall have general and active management of the business of the corporation and shall see that all orders and resolutions of the Board of Directors are carried into effect.

Section 9. The President shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the corporation.

Section 10. In the absence of the president or in the event of the president’s inability or refusal to act, the vice-president, if any, (or in the event there be more than one vice-president, the vice-presidents in the order designated by the directors, or in the

absence of any designation, then in the order of their election) shall perform the duties of the president, and when so acting, shall have all the powers of and be subject to all the restrictions upon the president. The vice-presidents shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe.

THE SECRETARY AND ASSISTANT SECRETARY

Section 11. The secretary shall attend all meetings of the Board of Directors and all meetings of the stockholders and record all the proceedings of the meetings of the corporation and of the Board of Directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. The secretary shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or president, under whose supervision the secretary shall be. The secretary shall have custody of the corporate seal of the corporation and the secretary, or an assistant secretary, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by the signature of the secretary or by the signature of such assistant secretary. The Board of Directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by said officer’s signature.

Section 12. The assistant secretary, or if there be more than one, the assistant secretaries in the order determined by the Board of Directors (or if there be no such determination, then in the order of their election) shall, in the absence of the secretary or in the event of the secretary’s inability or refusal to act, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe.

THE TREASURER AND ASSISTANT TREASURERS

Section 13. The treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the Board of Directors.

Section 14. The treasurer shall disburse the funds of the corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the president and the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all the treasurer’s transactions as treasurer and of the financial condition of the corporation.

Section 15. If required by the Board of Directors, the treasurer shall give the corporation a bond (which shall be renewed every six years) in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of the office of the treasurer and for the restoration to the

corporation, in case of the treasurer’s death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in the treasurer’s possession or under the treasurer’s control belonging to the corporation.

Section 16. the assistant treasurer, or if there shall be more than one, the assistant treasurers in the order determined by the Board of Directors (or if there be no such determination, then in the order of their election) shall, in the absence of the treasurer or in the event of the treasurer’s inability or refusal to act, perform the duties and exercise the powers of the treasurer and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe.

ARTICLE VI

CERTIFICATE OF STOCK

Section 1. Every holder of stock in the corporation shall be entitled to have a certificate, signed by, or in the name of the corporation by, the chairman or vice-chairman of the Board of Directors, or the president or a vice-president and the treasurer or an assistant treasurer, or the secretary or an assistant secretary of the corporation, certifying the number of shares owned by such holder in the corporation.

Certificates may be issued for partly paid shares and in such case upon the face or back of the certificate issued to represent any such partly paid shares, the total amount of the consideration to be paid therefor, and the amount paid thereon shall be specified.

If the corporation shall be authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualification, limitations or restrictions or such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the corporation shall issue to represent such class or series of stock, provided that, except as otherwise provided in section 202 of the General Corporation Law of Delaware, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the corporation shall issue to represent such class or series of stock, a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.

Section 2. Any of or all the signatures on the certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if the former officer, transfer agent or registrar were such officer, transfer agent or registrar at the date of issue.

LOST CERTIFICATES

Section 3. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or the legal representative of the owner of such lost, stolen or destroyed certificate or certificates, to advertise the same in such manner as it shall require and/or give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen or destroyed.

TRANSFER OF STOCK

Section 4. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books.

FIXING RECORD DATE

Section 5. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholder or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

REGISTERED STOCKHOLDERS

Section 6. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.

TRANSFER OF RIGHTS BY ACQUIRING PERSON

Section 7. Rights issued pursuant to the Rights Agreement, dated September 26, 1997, between the corporation and American Stock Transfer & Trust Company, as amended (the “Rights Agreement”) may be transferred by an Acquiring Person or an Associate or Affiliate of an Acquiring Person (as such terms are defined in the Rights Agreement) only in accordance with the terms of, and subject to the restrictions contained in, the Rights Agreement.

ARTICLE VII

GENERAL PROVISIONS

DIVIDENDS

Section 1. Dividends upon the capital stock of the corporation, subject to the provisions of the certificate of incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the certificate of incorporation.

Section 2. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purposes as the directors shall think conducive to the interest of the corporation, and the directors may modify or abolish any such reserve in the manner in which it was created.

CHECKS

Section 3. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate.

FISCAL YEAR

Section 4. The fiscal year of the corporation shall be fixed by resolution of the Board of Directors.

SEAL

Section 5. The Board of Directors may adopt a corporate seal having inscribed thereon the name of the corporation, the year of its organization and the words “Corporate Seal, Delaware.” The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.

INDEMNIFICATION

Section 6. The corporation shall, to the fullest extent permitted by Section 145 of the General corporation Law of Delaware, as amended from time to time, indemnify each person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or she is or was, or has agreed to become, a director or officer of the corporation, or is or was serving, or has agreed to serve, at the request of the corporation, as a director, officer or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise (including any employee benefit plan), or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person or on such person’s behalf in connection with such action, suit or proceeding and any appeal therefrom.

Indemnification may include payment by the corporation of expenses in defending an action or proceeding in advance of the final disposition of such action or proceeding upon receipt of an undertaking by the person indemnified to repay such payment if it is ultimately determined that such person is not entitled to indemnification under this Section, which undertaking may be accepted without reference to the financial ability of such person to make such repayment.

The corporation shall not indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person unless the initiation thereof was approved by the Board of Directors of the corporation. The indemnification rights provided in this Section (i) shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any law, agreement or vote of stockholders or disinterested directors or otherwise, and (ii) shall inure to the benefit of the heirs, executors and administrators of such persons. The corporation may, to the extent authorized from time to time by its Board of Directors, grant indemnification rights to other employees or agents of the corporation or other persons serving the corporation and such rights may be equivalent to, or greater or less than, those set forth in this Section.

TRANSACTIONS WITH INTERESTED PARTIES

Section 7. No contract or transaction between the corporation and one or more of the directors or officers, or between the corporation and any other corporation,

partnership, association, or other organization in which one or more of the directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because such director or officer is present at or participates in the meeting of the Board of Directors or a committee of the Board of Directors which authorizes the contract or transaction or solely because his, her or their votes are counted for such purpose, if:

(1) The material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative vote of a majority of the disinterested directors, even though the disinterested directors be less than a quorum;

(2) The material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or

(3) The contract or transaction is fair as to the corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee of the Board of Directors, or the stockholders.

Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction.

OPTION REPRICING

Section 8. In no event shall any stock option or stock appreciation right, either issued and outstanding or to be granted in the future, under any stock option plan or agreement, be repriced at any time while such stock option or stock appreciation right is outstanding (other than adjustments for stock splits, stock dividends, recapitalizations and like events as provided for in the documents governing the grant), without the affirmative vote of a majority of the shares of stock of the corporation present in person or by proxy and entitled to vote thereon. For the purposes of this Section 8, a repricing shall include any reduction of the exercise price, cancellation and re-granting of options at a lower exercise price (including entering into any “6 month and 1 day” cancellation and re-grant plan), replacement of underwater options with restricted stock in an exchange, buy-back or other plan, or replacement of any options with new options having a lower exercise price or accelerated vesting schedule in an exchange or buy-back.

ARTICLE VIII

AMENDMENTS

These by-laws may be altered, amended or repealed or new by-laws may be adopted by the stockholders or by the Board of Directors, when such power is conferred upon the Board of Directors by the certificate of incorporation at any regular meeting of the stockholders or of the Board of Directors or at any special meeting of the stockholders or of the Board of Directors if notice of such alteration, amendment, repeal or adoption of new by-laws be contained in the notice of such special meeting. If the power to adopt, amend or repeal by-laws is conferred upon the Board of Directors by the certificate or incorporation, it shall not divest or limit the power of the stockholders to adopt, amend or repeal by-laws.

16 EX-10.1 4 dex101.htm AGREEMENT AGREEMENT

EXHIBIT 10.1

Executive Officer	Title
David A. Zopf, M.D.	Executive Vice President
A. Brian Davis	Vice President, Finance
Marjorie Hurley	Vice President, Regulatory Affairs & Project Management
George J. Vergis	Vice President, Business & Commercial Development
W. Kevin Pelin	Vice President, Manufacturing Operations

CHANGE OF CONTROL AGREEMENT

THIS CHANGE OF CONTROL AGREEMENT (the “Agreement”), is made on this ___ day of ________, ____, by and between NEOSE TECHNOLOGIES, INC. (the “Company”) and _______________ (the “Employee”).

Background

The Employee serves as a senior executive of the Company; and the Company and the Employee desire to establish certain protections for the Employee in the event of his or her termination of employment.

Terms

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and promises contained herein, and intending to be bound hereby, the parties agree as follows:

1. Definitions. As used herein:

1.1. “Base Salary” means, as of any given date, the annual base rate of salary payable to the Employee by the Company, as then in effect; provided, however, that in the case of a resignation by the Employee for the Good Reason described in Section 1.8.4, “Base Salary” will mean the annual base rate of salary payable to the Employee by the Company, as in effect immediately prior to the reduction giving rise to the Good Reason.

1.2. “Board” means the Board of Directors of the Company.

use in food, cosmetic, therapeutic, consumer and industrial applications, (b) enzymatic synthesis or modification of the carbohydrate portion of proteins or lipids, or modification of proteins or lipids through the attachment of carbohydrates, (c) carbohydrate-based therapeutics, and (d) the development of protein therapeutics using sialylation, fucosylation, glycosylation, glycopegylation, or glycoconjugation.

1.4. “Cause” means fraud, embezzlement, or any other serious criminal conduct that adversely affects the Company committed intentionally by the Employee in connection with his or her employment or the performance of his or her duties as an officer or director of the Company or the Employee’s conviction of, or plea of guilty or nolo contendere to, any felony.

1.5. “Change in Control” means a change in ownership or control of the Company effected through:

1.5.1. the direct or indirect acquisition by any person or related group of persons (other than the Company or a person that directly or indirectly controls, is controlled by, or is under common control with, the Company) of beneficial ownership (within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of securities possessing more than 50% of the total combined voting power of the Company’s outstanding securities;

1.5.2. a change in the composition of the Board over a period of 36 months or less such that a majority of the Board members ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who either (a) have been board members continuously since the beginning of such period, or (b) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (a) who were still in office at the time such election or nomination was approved by the Board;

1.5.3. the consummation of any consolidation, share exchange or merger of the Company (a) in which the stockholders of the Company immediately prior to such transaction do not own at least a majority of the voting power of the entity which survives/results from that transaction, or (b) in which a shareholder of the Company who does not own a majority of the voting stock of the Company immediately prior to such transaction, owns a majority of the Company’s voting stock immediately after such transaction; or

1.5.4. the liquidation or dissolution of the Company or any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Company, including stock held in subsidiary corporations or interests held in subsidiary ventures.

1.6. “Code” means Internal Revenue Code of 1986, as amended.

1.7. “Disability” means the Employee’s inability, by reason of any physical or mental impairment, to substantially perform his or her regular duties as contemplated by this Agreement, as determined by the Board in its sole discretion (after affording the Employee the opportunity to present his or her case), which inability is reasonably contemplated to continue for at least one year from its commencement and at least 90 days from the date of such determination.

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1.8. “Good Reason” means, without the Employee’s prior written consent, any of the following:

1.8.1. an adverse change in the Employee’s title;

1.8.2. a reduction in the Employee’s authority, duties or responsibilities, or the assignment to the Employee of duties that are inconsistent, in a material respect, with Employee’s position;

1.8.3. the relocation of the Company’s headquarters more than 15 miles from Horsham, Pennsylvania, unless such move reduces the Employee’s commuting time;

1.8.4. a reduction in the Employee’s Base Salary or in the amount, expressed as a percentage of Base Salary, of the Employee’s Target Bonus;

1.8.5. the Company’s failure to pay or make available any material payment or benefit due under this Agreement or any other material breach by the Company of this Agreement.

However, the foregoing events or conditions will constitute Good Reason only if the Employee provides the Company with written objection to the event or condition within 60 days following the occurrence thereof, the Company does not reverse or otherwise cure the event or condition within 30 days of receiving that written objection and the Employee resigns his or her employment within 90 days following the expiration of that cure period.

1.9. “Intellectual Property” means (a) all inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto, and all patents and patent applications claiming such inventions, (b) all trademarks, service marks, trade dress, logos, trade names, fictitious names, brand names, brand marks and corporate names, together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith, and all applications, registrations, and renewals in connection therewith, (c) all copyrightable works, all copyrights, and all applications, registrations, and renewals in connection therewith, (d) all mask works and all applications, registrations, and renewals in connection therewith, (e) all trade secrets (including research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, methodologies, technical data, designs, drawings and specifications), (f) all computer software (including data, source and object codes and related documentation), (g) all other proprietary rights, (h) all copies and tangible embodiments thereof (in whatever form or medium), or similar intangible personal property which have been or are developed or created in whole or in part by the Employee (i) at any time and at any place while the Employee is employed by Company and which, in the case of any or all of the foregoing, are related to and used in connection with the business of the Company, or (ii) as a result of tasks assigned to the Employee by the Company.

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listings, program logic algorithms, subroutines, modules or other subparts of computer programs and related documentation, including program notation), computer processing systems and techniques, all computer inputs and outputs (regardless of the media on which stored or located), hardware and software configurations, designs, architecture and interfaces, (c) business research, studies, procedures and costs, (d) financial data, (e) distribution methods, (f) marketing data, methods, plans and efforts, (g) the identities of actual and prospective customers, contractors and suppliers, (h) the terms of contracts and agreements with customers, contractors and suppliers, (i) the needs and requirements of, and the Company’s course of dealing with, actual or prospective customers, contractors and suppliers, (j) personnel information, (k) customer and vendor credit information, and (l) any information received from third parties subject to obligations of non-disclosure or non-use. Failure by the Company to mark any of the Proprietary Information as confidential or proprietary shall not affect its status as Proprietary Information under the terms of this Agreement.

1.11. “Release” means a release substantially identical to the one attached hereto as Exhibit A.

1.12. “Restricted Period” means the period beginning on the date hereof and ending on the first anniversary of the termination of the Employee’s employment with the Company for any reason.

1.13. “Restrictive Covenants” means the covenants set forth in Sections 6.1, 6.2 and 6.3 of this Agreement.

1.14. “Target Bonus” means, with respect to any year, the target amount of the annual bonus that would be payable to the Employee with respect to that year, whether under an employment or incentive agreement, under any bonus plan or policy of the Company, or otherwise, assuming that all applicable performance goals are met and conditions to the payment of such bonus are satisfied.

2. Termination.

2.1. In General. The Company may terminate the Employee’s employment at any time. The Employee may terminate his or her employment at any time, provided that before the Employee may voluntarily terminate his or her employment with the Company, he or she must provide 30 days prior written notice (or such shorter notice as is acceptable to the Company) to the Company. Upon any termination of the Employee’s employment with the Company for any reason: (a) the Employee (unless otherwise requested by the Board) concurrently will resign any officer or director positions he or she holds with the Company, its subsidiaries or affiliates, and (b) the Company will pay to the Employee all accrued but unpaid compensation through the date of termination, and (c) except as explicitly provided in Sections 2, 3 or 4, or otherwise pursuant to COBRA, all compensation and benefits will cease and the Company will have no further liability or obligation to the Employee, including, but not limited to, any unpaid Target Bonus. The foregoing will not be construed to limit the Employee’s right to payment or reimbursement for claims incurred under any insurance contract funding an employee benefit plan, policy or arrangement of the Company in accordance with the terms of such insurance contract.

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2.2. Termination Without Cause. If the Employee’s employment by the Company ceases due to a termination by the Company without Cause or due to death or Disability, then, in addition to the payments and benefits provided for in Section 2.1 above and subject to Section 5 below, the Company will (a) make a lump sum cash payment to the Employee equal to six months of the Employee’s Base Salary, as in effect on such date, (b) continue to provide medical benefits to the Employee (and, if covered immediately prior to such termination, his or her spouse and dependents) for a period of six months commencing from the date of the Employee’s termination of employment at a monthly cost to the Employee equal to the Employee’s monthly contribution, if any, toward the cost of such coverage immediately prior to such termination, and (c) arrange for the provision to the Employee of reasonable executive outplacement services by a provider selected by the mutual agreement of the Company and the Employee, provided that if the Company’s obligation to make the payments provided for in clause (a) of this Section 2.2 arises due to the Employee’s death or Disability, the cash payments described in clause (a) will be offset by the amount of benefits paid to the Employee (or his or her representatives, heirs, estate or beneficiaries) pursuant to any life insurance or disability plans, policies or arrangements of the Company by virtue of his or her death or such Disability (including, for this purpose, only that portion of such life insurance or disability benefits funded by the Company or by premium payments made by the Company). The payments and benefits described in this section are in lieu of (and not in addition to) any other severance arrangement maintained by the Company.

3. Certain Terminations Following a Change in Control. If the Employee’s employment with the Company ceases within twelve months following a Change in Control as a result of a termination by the Company without Cause or a resignation by the Employee for Good Reason, then in lieu of the payments and benefits provided for in Section 2.2, (a) the Company will pay to the Employee on the date of termination a lump sum cash payment equal to the sum of (i) one year of the Employee’s Base Salary as in effect on such date, and (ii) the Employee’s Target Bonus for the calendar year in which the termination occurs, (b) the Company will continue to provide medical benefits to the Employee (and, if covered immediately prior to such term, his or her spouse and dependents) for a period of one year commencing from the date of the Employee’s termination of employment at a monthly cost to the Employee equal to the Employee’s monthly contribution, if any, toward the cost of such coverage immediately prior to such termination, (c) the Company will arrange for the provision to the Employee of reasonable executive outplacement services by a provider selected by the mutual agreement of the Company and the Employee, (d) the Company will pay to the Employee the additional amount, if any, payable pursuant to Section 4 below, and (e) all outstanding stock options then held by the Employee will then become fully vested and immediately exercisable and will remain exercisable for 12 months following Employee’s termination of employment, notwithstanding any inconsistent language in any equity incentive plan or agreement.

4. Parachute Payments.

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subject the Employee to the excise tax levied on certain “excess parachute payments” under Section 4999 of the Code (the “Parachute Excise Tax”).

4.2. Gross-Up. If all or any portion of the payments or other benefits provided under any section of this Agreement, either alone or together with any other payments and benefits which the Employee receives or is entitled to receive from the Company or its affiliates (whether paid or payable or distributed or distributable) pursuant to the terms of this Agreement or otherwise pursuant to or by reason of any other agreement, policy, plan, program or arrangement, including without limitation any stock option, stock appreciation right or similar right, or the lapse or termination of any restriction on or the vesting or exercisability of any of the foregoing (the “Payment”) would result in the imposition of a Parachute Excise Tax, the Employee will be entitled to an additional payment (the “Gross-up Payment”) in an amount such that the net amount of the Payment and the Gross-up Payment retained by the Employee after the calculation and deduction of all excise taxes (including any interest or penalties imposed with respect to such taxes) on the Payment and all federal, state and local income tax, employment tax and excise tax (including any interest or penalties imposed with respect to such taxes) on the Gross-up Payment provided for in this Section 4.2, and taking into account any lost or reduced tax deductions on account of the Gross-up Payment, shall be equal to the Payment.

4.3. Measurements and Adjustments. The determination of the amount of the payments and benefits paid and payable to the Employee, and whether and to what extent payments under Section 4.2 are required to be made, will be made at the Company’s expense by an independent auditor selected by mutual agreement of the Company and the Employee, which auditor shall provide the Employee and the Company with detailed supporting calculations with respect to its determination within 15 business days after the receipt of notice from the Employee or the Company that the Employee has received or will receive a payment that is potentially subject to the Parachute Excise Tax. For the purposes of determining whether any payments will be subject to the Parachute Excise Tax and the amount of such Parachute Excise Tax, such payments will be treated as “parachute payments” within the meaning of Section 280G of the Code, and all “parachute payments” in excess of the “base amount” (as defined under Section 280G(b)(3) of the Code) shall be treated as subject to the Parachute Excise tax, unless and except to the extent, that in the opinion of the accountants, such payments (in whole or in part) either do not constitute “parachute payments” or represent reasonable compensation for services actually rendered (within the meaning of Section 280G(b)(4) of the Code) in excess of the “base amount,” or such “parachute payments” are otherwise not subject to such Parachute Excise Tax. For purposes of determining the amount of the Gross-up Payment, if any, the Employee shall be deemed to pay federal income taxes at the highest applicable marginal rate of federal income taxation for the calendar year in which the gross-up payment is to be made and to pay any applicable state and local income taxes at the highest applicable marginal rate of taxation for the calendar year in which the gross-up payment is to be made, net of the maximum reduction in federal income taxes which could be obtained from the deduction of such state or local taxes if paid in such year (determined without regard to limitations on deductions based upon the amount of the Employee’s adjusted gross income); and to have otherwise allowable deductions for federal, state and local income tax purposes at least equal to those disallowed because of the inclusion of the gross-up payment in the Employee adjusted gross income. Any Gross-up Payment shall be paid by the Company at the time the Employee is entitled to receive the

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Payment. Any determination by the auditor shall be binding upon the Company and the Employee.

4.4. Underpayment or Overpayment. In the event of any underpayment or overpayment to the Employee (determined after the application of Section 4.2), the amount of such underpayment or overpayment will be, as promptly as practicable, paid by the Company to the Employee or refunded by the Employee to the Company, as the case may be, with interest at the applicable federal rate specified in Section 1274(d) of the Code.

5. Timing of Payments Following Termination. Notwithstanding any provision of this Agreement, the payments and benefits described in Sections 2, 3 and 4 are conditioned on the Employee’s execution and delivery to the Company of a Release in a manner consistent with the Older Workers Benefit Protection Act and any similar state law that is applicable. The amounts described in Sections 2.2(a) or 3(a) (as applicable) will be paid in a lump sum, as soon as the Release becomes irrevocable following the Employee’s execution and delivery of the Release.

6. Restrictive Covenants. As consideration for all of the payments to be made to the Employee pursuant to Sections 2, 3, and 4 of this Agreement, the Employee agrees to be bound by the Restrictive Covenants set forth in this Section 6. The Restrictive Covenants will apply without regard to whether any termination of the Employee’s employment is initiated by the Company or the Employee, and without regard to the reason for that termination.

6.1. Covenant Not To Compete. The Employee covenants that, during the Restricted Period, the Employee will not (except in his or her capacity as an employee or director of the Company or with the prior consent of the Company) do any of the following, directly or indirectly, anywhere in the world:

6.1.1. engage or participate in any business competitive with the Business;

6.1.2. become interested (as owner, stockholder, lender, partner, co-venturer, director, officer, employee, agent or consultant) in any person, firm, corporation, association or other entity engaged in any business competitive with the Business. Notwithstanding the foregoing, the Employee may hold up to 4.9% of the outstanding securities of any class of any publicly-traded securities of any company;

6.1.3. engage in any business, or solicit or call on any customer, supplier, licensor, licensee, contractor, agent, representative, advisor, strategic partner, distributor or other person with whom the Company shall have dealt or any prospective customer, supplier, licensor, licensee, contractor, agent, representative, advisor, strategic partner, distributor or other person that the Company shall have identified and solicited at any time during the Employee’s employment by the Company for a purpose competitive with the Business;

6.1.4. influence or attempt to influence any employee, consultant, customer, supplier, licensor, licensee, contractor, agent, representative, advisor, strategic partner, distributor or other person to terminate or adversely modify any written or oral agreement, arrangement or course of dealing with the Company; or

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6.1.5. solicit for employment or employ or retain (or arrange to have any other person or entity employ or retain) any person who has been employed or retained by the Company within the 12 months preceding the termination of the Employee’s employment with the Company for any reason.

6.2. Confidentiality. The Employee recognizes and acknowledges that the Proprietary Information is a valuable, special and unique asset of the business of the Company. As a result, both during the Employee’s employment by the Company and thereafter, the Employee will not, without the prior written consent of the Company, for any reason either directly or indirectly divulge to any third-party or use for his or her own benefit, or for any purpose other than the exclusive benefit of the Company, any Proprietary Information, provided that the Employee may during his or her employment by the Company disclose Proprietary Information to third parties as may be necessary or appropriate to the effective and efficient discharge of his or her duties as an employee hereunder (provided that the third party recipient has signed the Company’s then-approved confidentiality or similar agreement) or as such disclosures may be required by law. If the Employee or any of his or her representatives becomes legally compelled to disclose any of the Proprietary Information, the Employee will provide the Company with prompt written notice so that the Company may seek a protective order or other appropriate remedy. The non-disclosure and non-use obligations with respect to Proprietary Information set forth in this Section 6.2 shall not apply to any information that is in or becomes part of the public domain through no improper act on the part of the Employee.

6.3. Property of the Company.

6.3.1. Proprietary Information. All right, title and interest in and to Proprietary Information will be and remain the sole and exclusive property of the Company. The Employee will not remove from the Company’s offices or premises any documents, records, notebooks, files, correspondence, reports, memoranda or similar materials of or containing Proprietary Information, or other materials or property of any kind belonging to the Company unless necessary or appropriate in the performance of his or her duties to the Company. If the Employee removes such materials or property in the performance of his or her duties, the Employee will return such materials or property to their proper files or places of safekeeping as promptly as possible after the removal has served its specific purpose. The Employee will not make, retain, remove and/or distribute any copies of any such materials or property, or divulge to any third person the nature of and/or contents of such materials or property or any other oral or written information to which he or she may have access or become familiar in the course of his or her employment, except to the extent necessary in the performance of his or her duties. Upon termination of the Employee’s employment with the Company, he or she will leave with the Company or promptly return to the Company all originals and copies of such materials or property then in his or her possession.

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Employee hereby irrevocably assigns and transfers to the Company any and all right, title, or interest that the Employee may now or in the future have in the Intellectual Property under patent, copyright, trade secret, trademark or other law, in perpetuity or for the longest period otherwise permitted by law, without the necessity of further consideration. The Company will be entitled to obtain and hold in its own name all copyrights, patents, trade secrets, trademarks and other similar registrations with respect to such Intellectual Property. The Employee further agrees to execute any and all documents and provide any further cooperation or assistance reasonably required by the Company to perfect, maintain or otherwise protect its rights in the Intellectual Property. If the Company is unable after reasonable efforts to secure the Employee’s signature, cooperation or assistance in accordance with the preceding sentence, whether because of the Employee’s incapacity or any other reason whatsoever, the Employee hereby designates and appoints the Company or its designee as the Employee’s agent and attorney-in-fact, to act on his or her behalf, to execute and file documents and to do all other lawfully permitted acts necessary or desirable to perfect, maintain or otherwise protect the Company’s rights in the Intellectual Property. The Employee acknowledges and agrees that such appointment is coupled with an interest and is therefore irrevocable.

6.4. Acknowledgements. The Employee acknowledges that the Restrictive Covenants are reasonable and necessary to protect the legitimate interests of the Company and its affiliates and that the duration and geographic scope of the Restrictive Covenants are reasonable given the nature of this Agreement and the position the Employee holds within the Company. The Employee further acknowledges that the Restrictive Covenants are included herein in order to induce the Company to enter into this Agreement and that the Company would not have entered into this Agreement in the absence of the Restrictive Covenants.

6.5. Remedies and Enforcement Upon Breach.

6.5.1. Specific Enforcement. The Employee acknowledges that any breach by him or her, willfully or otherwise, of the Restrictive Covenants will cause continuing and irreparable injury to the Company for which monetary damages would not be an adequate remedy. The Employee shall not, in any action or proceeding to enforce any of the provisions of this Agreement, assert the claim or defense that such an adequate remedy at law exists. In the event of any such breach by the Employee, the Company shall have the right to enforce the Restrictive Covenants by seeking injunctive or other relief in any court, without any requirement that a bond or other security be posted, and this Agreement shall not in any way limit remedies of law or in equity otherwise available to the Company.

6.5.2. Judicial Modification. If any court determines that any of the Restrictive Covenants, or any part thereof, is unenforceable because of the duration or geographical scope of such provision, such court shall have the power to modify such provision and, in its modified form, such provision shall then be enforceable.

6.5.3. Accounting. If the Employee breaches any of the Restrictive Covenants, the Company will have the right and remedy to require the Employee to account for and pay over to the Company all compensation, profits, monies, accruals, increments or other benefits derived or received by the Employee as the result of such breach. This right and remedy

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will be in addition to, and not in lieu of, any other rights and remedies available to the Company under law or in equity.

6.5.4. Enforceability. If any court holds the Restrictive Covenants unenforceable by reason of their breadth or scope or otherwise, it is the intention of the parties hereto that such determination not bar or in any way affect the right of the Company to the relief provided above in the courts of any other jurisdiction within the geographic scope of such Restrictive Covenants.

6.5.5. Disclosure of Restrictive Covenants. The Employee agrees to disclose the existence and terms of the Restrictive Covenants to any employer that the Employee may work for during the Restricted Period.

6.5.6. Extension of Restricted Period. If the Employee breaches Section 6.1 in any respect, the restrictions contained in that section will be extended for a period equal to the period that the Employee was in breach.

7. Miscellaneous.

7.1. No Liability of Officers and Directors for Severance Upon Insolvency. Notwithstanding any other provision of the Agreement and intending to be bound by this provision, the Employee hereby (a) waives any right to claim payment of amounts owed to him or her, now or in the future, pursuant to this Agreement from directors or officers of the Company if the Company becomes insolvent, and (b) fully and forever releases and discharges the Company’s officers and directors from any and all claims, demands, liens, actions, suits, causes of action or judgments arising out of any present or future claim for such amounts.

7.2. Successors and Assigns. The Company may assign this Agreement to any successor to all or substantially all of its assets and business by means of liquidation, dissolution, merger, consolidation, transfer of assets, or otherwise. The rights of the Employee hereunder are personal to the Employee and may not be assigned by him.

7.3. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania without regard to the principles of conflicts of laws.

7.4. Enforcement. Any legal proceeding arising out of or relating to this Agreement will be instituted in the United States District Court for the Eastern District of Pennsylvania, or if that court does not have or will not accept jurisdiction, in any court of general jurisdiction in the Commonwealth of Pennsylvania, and the Employee and the Company hereby consent to the personal and exclusive jurisdiction of such courts and hereby waive any objections that they may have to personal jurisdiction, the laying of venue of any such proceeding and any claim or defense of inconvenient forum.

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occurred unless set forth in a writing executed by or on behalf of the waiving party. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived. If any provision of this Agreement shall be declared to be invalid or unenforceable, in whole or in part, such invalidity or unenforceability shall not affect the remaining provisions hereof which shall remain in full force and effect.

7.6. Notices. All notices and communications that are required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given when delivered personally or upon mailing by registered or certified mail, postage prepaid, return receipt requested, as follows:

If to the Company, to:

Neose Technologies, Inc.
102 Witmer Road
Horsham PA 19044
Attn: General Counsel
Fax: 215-315-9100

With a copy to:

Pepper Hamilton LLP
3000 Two Logan Square
18th & Arch Streets
Philadelphia, PA 19103
Attn: Barry M. Abelson, Esquire
Fax: 215-981-4750

If to Employee, to:

or to such other address as may be specified in a notice given by one party to the other party hereunder.

7.7. Entire Agreement; Amendments. This Agreement and the attached exhibit contain the entire agreement and understanding of the parties relating to the provision of severance benefits upon termination, and merges and supersedes all prior and contemporaneous discussions, agreements and understandings of every nature relating to that subject, including but not limited to the Retention Agreement by and between the Employee and the Company dated _________ and the Noncompetition and Confidentiality Agreement by and between the Employee and the Company dated __________. This Agreement may not be changed or modified, except by an Agreement in writing signed by each of the parties hereto.

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7.8. Withholding. The Company will withhold from any payments due to Employee hereunder, all taxes, FICA or other amounts required to be withheld pursuant to any applicable law.

7.9. Headings Descriptive. The headings of sections and paragraphs of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement.

7.10. Counterparts. This Agreement may be executed in multiple counterparts, each of which will be deemed to be an original, but all of which together will constitute but one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date and year first above written.

		NEOSE TECHNOLOGIES, INC.
		By:

			C. Boyd Clarke President and Chief Executive Officer




			Employee

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Exhibit A
Release and Non-Disparagement Agreement

THIS RELEASE AND NON-DISPARAGEMENT AGREEMENT (this “Release”) is made as of the ___ day of _______, _____ by and between ____________________ (the “Employee”) and NEOSE TECHNOLOGIES, INC. (the “Company”).

WHEREAS, the Employee’s employment as an executive of the Company has terminated; and

WHEREAS, pursuant to Section[s] [2] [3] [and 4] of the Change of Control Agreement by and between the Company and the Employee dated as of __________ ___, 2002 (the “Change of Control Agreement”), the Company has agreed to pay the Employee certain amounts and to provide him or her with certain rights and benefits, subject to the execution of this Release.

NOW THEREFORE, in consideration of these premises and the mutual promises contained herein, and intending to be legally bound hereby, the parties agree as follows:

SECTION 1. Consideration. The Employee acknowledges that: (a) the payments, rights and benefits set forth in Section[s] [2] [3] [and 4] of the Change of Control Agreement constitute full settlement of all of his or her rights under the Change of Control Agreement, (b) he or she has no entitlement under any other severance or similar arrangement maintained by the Company, and (c) except as otherwise provided specifically in this Release, the Company does not and will not have any other liability or obligation to the Employee. The Employee further acknowledges that, in the absence of his or her execution of this Release, the payments and benefits specified in Section[s] [2] [3] [and 4] of the Change of Control Agreement would not otherwise be due to the Employee.

SECTION 2. Release and Covenant Not to Sue. The Employee hereby fully and forever releases and discharges the Company and its parents, affiliates and subsidiaries, including all predecessors and successors, assigns, officers, directors, trustees, employees, agents and attorneys, past and present, from any and all claims, demands, liens, agreements, contracts, covenants, actions, suits, causes of action, obligations, controversies, debts, costs, expenses, damages, judgments, orders and liabilities, of whatever kind or nature, direct or indirect, in law, equity or otherwise, whether known or unknown, arising through the date of this Release, out of his or her employment by the Company or the termination thereof, including, but not limited to, any claims for relief or causes of action under the Age Discrimination in Employment Act, 29 U.S.C. § 621 et seq., or any other federal, state or local statute, ordinance or regulation regarding discrimination in employment and any claims, demands or actions based upon alleged wrongful or retaliatory discharge or breach of contract under any state or federal law, [except for any claims arising out of the Tuition Reimbursement Agreement dated May 24, 2001 between Employee and the Company]. The Employee expressly represents that he or she has not filed a lawsuit or initiated any other administrative proceeding against the Company (including for purposes of this Section 2, its parents, affiliates and subsidiaries), and that he or she has not assigned any claim against the Company (or its parents, affiliates and subsidiaries) to any other person or entity. The Employee further promises not to initiate a lawsuit or to bring any other claim against the Company (or its parents, affiliates and subsidiaries) arising out of or in any way related to his or her employment by the Company or the termination of that employment. The forgoing will not be deemed to release the Company from (a) claims solely to enforce this Release, (b) claims solely to enforce Section[s] [2] [3] [and 4] of the Change of Control Agreement, (c) claims for indemnification under the Company’s By-Laws, under any indemnification agreement between the Company and the

Employee or under any similar agreement or (d) claims solely to enforce the terms of any equity incentive award agreement between the Employee and the Company. This Release will not prevent the Employee from filing a charge with the Equal Employment Opportunity Commission (or similar state agency) or participating in any investigation conducted by the Equal Employment Opportunity Commission (or similar state agency); provided, however, that any claims by the Employee for personal relief in connection with such a charge or investigation (such as reinstatement or monetary damages) would be barred.

SECTION 3. Restrictive Covenants. The Employee acknowledges that the terms of Section 6 of the Change in Control Agreement will survive the termination of his or her employment. The Employee affirms that the restrictions contained in Section 6 of the Change in Control Agreement are reasonable and necessary to protect the legitimate interests of the Company, that he or she received adequate consideration in exchange for agreeing to those restrictions and that he or she will abide by those restrictions.

SECTION 4. Non-Disparagement. The Company (meaning, solely for this purpose, Company’s directors and executive officers and other individuals authorized to make official communications on Company’s behalf) will not disparage the Employee or the Employee’s performance or otherwise take any action which could reasonably be expected to adversely affect the Employee’s personal or professional reputation. Similarly, the Employee will not disparage Company or any of its directors, officers, agents or employees or otherwise take any action which could reasonably be expected to adversely affect the reputation of the Company or the personal or professional reputation of any of the Company’s directors, officers, agents or employees.

SECTION 5. Cooperation. The Employee further agrees that, subject to reimbursement of his or her reasonable expenses, he or she will cooperate fully with the Company and its counsel with respect to any matter (including litigation, investigations, or governmental proceedings) which relates to matters with which the Employee was involved during his or her employment with Company. The Employee shall render such cooperation in a timely manner on reasonable notice from the Company.

SECTION 6. Rescission Right. The Employee expressly acknowledges and recites that (a) he or she has read and understands this Release in its entirety, (b) he or she has entered into this Release knowingly and voluntarily, without any duress or coercion; (c) he or she has been advised orally and is hereby advised in writing to consult with an attorney with respect to this Release before signing it; (d) he or she was provided 21 calendar days after receipt of the Release to consider its terms before signing it (or such longer period as is required for this Release to be effective under the Age Discrimination in Employment Act or any similar state law); and (e) he or she is provided seven (7) calendar days from the date of signing to terminate and revoke this Release (or such longer period required by applicable state law), in which case this Release shall be unenforceable, null and void. The Employee may revoke this Release during those seven (7) days (or such longer period required by applicable state law) by providing written notice of revocation to the Company.

SECTION 7. Challenge. If the Employee violates or challenges the enforceability of any provisions of the Noncompetition Agreement or this Release, no further payments, rights or benefits under Section[s] [2] [3] [and 4] of the Change of Control Agreement will be due to the Employee.

SECTION 8. Miscellaneous.

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8.1. No Admission of Liability. This Release is not to be construed as an admission of any violation of any federal, state or local statute, ordinance or regulation or of any duty owed by the Company to the Employee. There have been no such violations, and the Company specifically denies any such violations.

8.2. No Reinstatement. The Employee agrees that he or she will not apply for reinstatement with the Company or seek in any way to be reinstated, re-employed or hired by the Company in the future.

8.3. Successors and Assigns. This Release shall inure to the benefit of and be binding upon the Company and the Employee and their respective successors, executors, administrators and heirs. The Employee may make any assignment of this Release or any interest herein, by operation of law or otherwise. The Company may assign this Release to any successor to all or substantially all of its assets and business by means of liquidation, dissolution, merger, consolidation, transfer of assets, or otherwise.

8.4. Severability. Whenever possible, each provision of this Release will be interpreted in such manner as to be effective and valid under applicable law. However, if any provision of this Release is held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability will not affect any other provision, and this Release will be reformed, construed and enforced as though the invalid, illegal or unenforceable provision had never been herein contained.

8.5. Entire Agreement; Amendments. Except as otherwise provided herein, this Release contains the entire agreement and understanding of the parties hereto relating to the subject matter hereof, and merges and supersedes all prior and contemporaneous discussions, agreements and understandings of every nature relating to the subject matter hereof. This Release may not be changed or modified, except by an Agreement in writing signed by each of the parties hereto.

8.6. Governing Law. This Release shall be governed by, and enforced in accordance with, the laws of the Commonwealth of Pennsylvania without regard to the application of the principles of conflicts of laws.

8.7. Counterparts and Facsimiles. This Release may be executed, including execution by facsimile signature, in one or more counterparts, each of which shall be deemed an original, and all of which together shall be deemed to be one and the same instrument.

IN WITNESS WHEREOF, the Company has caused this Release to be executed by its duly authorized officer, and the Employee has executed this Release, in each case as of the date first above written.

			EMPLOYEE

- 3 - EX-10.2 5 dex102.htm AGREEMENT AGREEMENT

EXHIBIT 10.2

CHANGE OF CONTROL AGREEMENT

THIS CHANGE OF CONTROL AGREEMENT (the “Agreement”), is made on this 7th day of October, 2002, by and between NEOSE TECHNOLOGIES, INC. (the “Company”) and Debra J. Poul (the “Employee”).

Background

Terms

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and promises contained herein, and intending to be bound hereby, the parties agree as follows:

1. Definitions. As used herein:

1.1. “Base Salary” means, as of any given date, the annual base rate of salary payable to the Employee by the Company, as then in effect; provided, however, that in the case of a resignation by the Employee for the Good Reason described in Section 1.7.4, “Base Salary” will mean the annual base rate of salary payable to the Employee by the Company, as in effect immediately prior to the reduction giving rise to the Good Reason.

1.2. “Board” means the Board of Directors of the Company.

1.3. “Cause” means fraud, embezzlement, or any other serious criminal conduct that adversely affects the Company committed intentionally by the Employee in connection with her employment or the performance of her duties as an officer or director of the Company or the Employee’s conviction of, or plea of guilty or nolo contendere to, any felony.

1.4. “Change in Control” means a change in ownership or control of the Company effected through:

1.4.1 the direct or indirect acquisition by any person or related group of persons (other than the Company or a person that directly or indirectly controls, is controlled by, or is under common control with, the Company) of beneficial ownership (within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of securities possessing more than 50% of the total combined voting power of the Company’s outstanding securities;

1.4.2. a change in the composition of the Board over a period of 36 months or less such that a majority of the Board members ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who either (a) have been board members continuously since the beginning of such period, or (b) have been elected or nominated for election as Board members during such period by at least a majority of the Board

members described in clause (a) who were still in office at the time such election or nomination was approved by the Board;

1.4.3. the consummation of any consolidation, share exchange or merger of the Company (a) in which the stockholders of the Company immediately prior to such transaction do not own at least a majority of the voting power of the entity which survives/results from that transaction, or (b) in which a shareholder of the Company who does not own a majority of the voting stock of the Company immediately prior to such transaction, owns a majority of the Company’s voting stock immediately after such transaction; or

1.4.4. the liquidation or dissolution of the Company or any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Company, including stock held in subsidiary corporations or interests held in subsidiary ventures.

1.5. “Code” means Internal Revenue Code of 1986, as amended.

1.6. “Disability” means the Employee’s inability, by reason of any physical or mental impairment, to substantially perform her regular duties as contemplated by this Agreement, as determined by the Board in its sole discretion (after affording the Employee the opportunity to present her case), which inability is reasonably contemplated to continue for at least one year from its commencement and at least 90 days from the date of such determination.

1.7. “Good Reason” means, without the Employee’s prior written consent, any of the following:

1.7.1. an adverse change in the Employee’s title;

1.7.2. a reduction in the Employee’s authority, duties or responsibilities, or the assignment to the Employee of duties that are inconsistent, in a material respect, with Employee’s position;

1.7.3. the relocation of the Company’s headquarters more than 15 miles from Horsham, Pennsylvania, unless such move reduces the Employee’s commuting time;

1.7.4. a reduction in the Employee’s Base Salary or in the amount, expressed as a percentage of Base Salary, of the Employee’s Target Bonus;

1.7.5. the Company’s failure to pay or make available any material payment or benefit due under this Agreement or any other material breach by the Company of this Agreement.

However, the foregoing events or conditions will constitute Good Reason only if the Employee provides the Company with written objection to the event or condition within 60 days following the occurrence thereof, the Company does not reverse or otherwise cure the event or condition within 30 days of receiving that written objection and the Employee resigns her employment within 90 days following the expiration of that cure period.

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1.8. “Intellectual Property” means (a) all inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto, and all patents and patent applications claiming such inventions, (b) all trademarks, service marks, trade dress, logos, trade names, fictitious names, brand names, brand marks and corporate names, together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith, and all applications, registrations, and renewals in connection therewith, (c) all copyrightable works, all copyrights, and all applications, registrations, and renewals in connection therewith, (d) all mask works and all applications, registrations, and renewals in connection therewith, (e) all trade secrets (including research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, methodologies, technical data, designs, drawings and specifications), (f) all computer software (including data, source and object codes and related documentation), (g) all other proprietary rights, (h) all copies and tangible embodiments thereof (in whatever form or medium), or similar intangible personal property which have been or are developed or created in whole or in part by the Employee (i) at any time and at any place while the Employee is employed by Company and which, in the case of any or all of the foregoing, are related to and used in connection with the business of the Company, or (ii) as a result of tasks assigned to the Employee by the Company.

1.9. “Proprietary Information” means any and all information of the Company or of any subsidiary or affiliate of the Company. Such Proprietary Information shall include, but shall not be limited to, the following items and information relating to the following items: (a) all intellectual property and proprietary rights of the Company (including without limitation Intellectual Property) (b) computer codes or instructions (including source and object code listings, program logic algorithms, subroutines, modules or other subparts of computer programs and related documentation, including program notation), computer processing systems and techniques, all computer inputs and outputs (regardless of the media on which stored or located), hardware and software configurations, designs, architecture and interfaces, (c) business research, studies, procedures and costs, (d) financial data, (e) distribution methods, (f) marketing data, methods, plans and efforts, (g) the identities of actual and prospective customers, contractors and suppliers, (h) the terms of contracts and agreements with customers, contractors and suppliers, (i) the needs and requirements of, and the Company’s course of dealing with, actual or prospective customers, contractors and suppliers, (j) personnel information, (k) customer and vendor credit information, and (l) any information received from third parties subject to obligations of non-disclosure or non-use. Failure by the Company to mark any of the Proprietary Information as confidential or proprietary shall not affect its status as Proprietary Information under the terms of this Agreement.

1.10. “Release” means a release substantially identical to the one attached hereto as Exhibit A.

1.11. “Restrictive Covenants” means the covenants set forth in Sections 6.1 and 6.2 of this Agreement.

1.12. “Target Bonus” means, with respect to any year, the target amount of the annual bonus that would be payable to the Employee with respect to that year, whether under an employment or incentive agreement, under any bonus plan or policy of the Company or

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otherwise, assuming that all applicable performance goals are met and conditions to the payment of such bonus are satisfied.

2. Termination.

2.1. In General. The Company may terminate the Employee’s employment at any time. The Employee may terminate her employment at any time; provided that before the Employee may voluntarily terminate her employment with the Company, she must provide 30 days prior written notice (or such shorter notice as is acceptable to the Company) to the Company. Upon any termination of the Employee’s employment with the Company for any reason: (a) the Employee (unless otherwise requested by the Board) concurrently will resign any officer or director positions she holds with the Company, its subsidiaries or affiliates, and (b) the Company will pay to the Employee all accrued but unpaid compensation through the date of termination, and (c) except as explicitly provided in Sections 2, 3 or 4, or otherwise pursuant to COBRA, all compensation and benefits will cease and the Company will have no further liability or obligation to the Employee, including, but not limited to, any unpaid Target Bonus. The foregoing will not be construed to limit the Employee’s right to payment or reimbursement for claims incurred under any insurance contract funding an employee benefit plan, policy or arrangement of the Company in accordance with the terms of such insurance contract.

2.2. Termination Without Cause. If the Employee’s employment by the Company ceases due to a termination by the Company without Cause or due to death or Disability, then, in addition to the payments and benefits provided for in Section 2.1 above and subject to Section 5 below, the Company will (a) make a lump sum cash payment to the Employee equal to six months of the Employee’s Base Salary, as in effect on such date, (b) continue to provide medical benefits to the Employee (and, if covered immediately prior to such termination, her spouse and dependents) for a period of six months commencing from the date of the Employee’s termination of employment at a monthly cost to the Employee equal to the Employee’s monthly contribution toward the cost of such coverage immediately prior to such termination, and (c) arrange for the provision to the Employee of reasonable executive outplacement services by a provider selected by the mutual agreement of the Company and the Employee; provided that if the Company’s obligation to make the payments provided for in clause (a) of this Section 2.2 arises due to the Employee’s death or Disability, the cash payments described in clause (a) will be offset by the amount of benefits paid to the Employee (or her representatives, heirs, estate or beneficiaries) pursuant to any life insurance or disability plans, policies or arrangements of the Company by virtue of her death or such Disability (including, for this purpose, only that portion of such life insurance or disability benefits funded by the Company or by premium payments made by the Company). The payments and benefits described in this section are in lieu of (and not in addition to) any other severance arrangement maintained by the Company.

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Bonus for the calendar year in which the termination occurs, (b) the Company will continue to provide medical benefits to the Employee (and, if covered immediately prior to such term, her spouse and dependents) for a period of one year commencing from the date of the Employee’s termination of employment at a monthly cost to the Employee equal to the Employee’s monthly contribution, if any, toward the cost of such coverage immediately prior to such termination, (c) the Company will arrange for the provision to the Employee of reasonable executive outplacement services by a provider selected by the mutual agreement of the Company and the Employee, (d) the Company will pay to the Employee the additional amount, if any, payable pursuant to Section 4 below, and (e) all outstanding stock options then held by the Employee will then become fully vested and immediately exercisable and will remain exercisable for 12 months following Employee’s termination of employment, notwithstanding any inconsistent language in any equity incentive plan or agreement.

4. Parachute Payments.

4.1. Generally. All amounts payable to the Employee under this Agreement will be made without regard to whether the deductibility of such payments (considered together with any other entitlements or payments otherwise paid or due to the Employee) would be limited or precluded by Section 280G of the Code and without regard to whether such payments would subject the Employee to the excise tax levied on certain “excess parachute payments” under Section 4999 of the Code (the “Parachute Excise Tax”).

4.3. Measurements and Adjustments. The determination of the amount of the payments and benefits paid and payable to the Employee and whether and to what extent payments under Section 4.2 are required to be made will be made at the Company’s expense by an independent auditor selected by mutual agreement of the Company and the Employee, which auditor shall provide the Employee and the Company with detailed supporting calculations with respect to its determination within 15 business days after the receipt of notice from the Employee or the Company that the Employee has received or will receive a payment that is potentially subject to the Parachute Excise Tax. For the purposes of determining whether any payments will be subject to the Parachute Excise Tax and the amount of such Parachute Excise Tax, such

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payments will be treated as “parachute payments” within the meaning of Section 280G of the Code, and all “parachute payments” in excess of the “base amount” (as defined under Section 280G(b)(3) of the Code) shall be treated as subject to the Parachute Excise tax, unless and except to the extent that in the opinion of the accountants such payments (in whole or in part) either do not constitute “parachute payments” or represent reasonable compensation for services actually rendered (within the meaning of Section 280G(b)(4) of the Code) in excess of the “base amount,” or such “parachute payments” are otherwise not subject to such Parachute Excise Tax. For purposes of determining the amount of the Gross-up Payment, if any, the Employee shall be deemed to pay federal income taxes at the highest applicable marginal rate of federal income taxation for the calendar year in which the gross-up payment is to be made and to pay any applicable state and local income taxes at the highest applicable marginal rate of taxation for the calendar year in which the gross-up payment is to be made, net of the maximum reduction in federal income taxes which could be obtained from the deduction of such state or local taxes if paid in such year (determined without regard to limitations on deductions based upon the amount of the Employee’s adjusted gross income); and to have otherwise allowable deductions for federal, state and local income tax purposes at least equal to those disallowed because of the inclusion of the gross-up payment in the Employee adjusted gross income. Any Gross-up Payment shall be paid by the Company at the time the Employee is entitled to receive the Payment. Any determination by the auditor shall be binding upon the Company and the Employee.

6.1. Confidentiality. The Employee recognizes and acknowledges that the Proprietary Information is a valuable, special and unique asset of the business of the Company. As a result, both during the Employee’s employment by the Company and thereafter, the Employee will not, without the prior written consent of the Company, for any reason either directly or indirectly divulge to any third-party or use for her own benefit, or for any purpose other than the exclusive benefit of the Company, any Proprietary Information, provided that the Employee may during her employment by the Company disclose Proprietary Information to third

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parties as may be necessary or appropriate to the effective and efficient discharge of her duties as an employee hereunder (provided that the third party recipient has signed the Company’s then-approved confidentiality or similar agreement) or as such disclosures may be required by law. If the Employee or any of her representatives becomes legally compelled to disclose any of the Proprietary Information, the Employee will provide the Company with prompt written notice so that the Company may seek a protective order or other appropriate remedy. The non-disclosure and non-use obligations with respect to Proprietary Information set forth in this Section 6.2 shall not apply to any information that is in or becomes part of the public domain through no improper act on the part of the Employee.

6.2. Property of the Company.

6.2.1. Proprietary Information. All right, title and interest in and to Proprietary Information will be and remain the sole and exclusive property of the Company. The Employee will not remove from the Company’s offices or premises any documents, records, notebooks, files, correspondence, reports, memoranda or similar materials of or containing Proprietary Information, or other materials or property of any kind belonging to the Company unless necessary or appropriate in the performance of her duties to the Company. If the Employee removes such materials or property in the performance of her duties, the Employee will return such materials or property to their proper files or places of safekeeping as promptly as possible after the removal has served its specific purpose. The Employee will not make, retain, remove and/or distribute any copies of any such materials or property, or divulge to any third person the nature of and/or contents of such materials or property or any other oral or written information to which he may have access or become familiar in the course of her employment, except to the extent necessary in the performance of her duties. Upon termination of the Employee’s employment with the Company, he will leave with the Company or promptly return to the Company all originals and copies of such materials or property then in her possession.

6.3. Acknowledgements. The Employee acknowledges that the Restrictive Covenants are reasonable and necessary to protect the legitimate interests of the Company and its affiliates and that the duration and geographic scope of the Restrictive Covenants are reasonable given the nature of this Agreement and the position the Employee holds within the Company. The Employee further acknowledges that the Restrictive Covenants are included herein in order to induce the Company to enter into this Agreement and that the Company would not have entered into this Agreement in the absence of the Restrictive Covenants.

6.4. Remedies and Enforcement Upon Breach.

6.4.1. Specific Enforcement. The Employee acknowledges that any breach by her, willfully or otherwise, of the Restrictive Covenants will cause continuing and irreparable injury to the Company for which monetary damages would not be an adequate remedy. The Employee shall not, in any action or proceeding to enforce any of the provisions of this Agreement, assert the claim or defense that such an adequate remedy at law exists. In the event of any such breach by the Employee, the Company shall have the right to enforce the Restrictive Covenants by seeking injunctive or other relief in any court, without any requirement that a bond or other security be posted, and this Agreement shall not in any way limit remedies of law or in equity otherwise available to the Company.

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6.4.2. Judicial Modification. If any court determines that any of the Restrictive Covenants, or any part thereof, is unenforceable because of the duration of such provision, such court shall have the power to modify such provision and, in its modified form, such provision shall then be enforceable.

6.4.3. Accounting. If the Employee breaches any of the Restrictive Covenants, the Company will have the right and remedy to require the Employee to account for and pay over to the Company all compensation, profits, monies, accruals, increments or other benefits derived or received by the Employee as the result of such breach. This right and remedy will be in addition to, and not in lieu of, any other rights and remedies available to the Company under law or in equity.

7. Miscellaneous.

7.1. No Liability of Officers and Directors for Severance Upon Insolvency. Notwithstanding any other provision of the Agreement and intending to be bound by this provision, the Employee hereby (a) waives any right to claim payment of amounts owed to her, now or in the future, pursuant to this Agreement from directors or officers of the Company if the Company becomes insolvent, and (b) fully and forever releases and discharges the Company’s officers and directors from any and all claims, demands, liens, actions, suits, causes of action or judgments arising out of any present or future claim for such amounts.

7.3. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania without regard to the principles of conflicts of laws.

7.5. Waivers; Separability. The waiver by either party hereto of any right hereunder or any failure to perform or breach by the other party hereto shall not be deemed a waiver of any other right hereunder or any other failure or breach by the other party hereto, whether of the same or a similar nature or otherwise. No waiver shall be deemed to have occurred unless set forth in a writing executed by or on behalf of the waiving party. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived. If any provision of this Agreement shall be declared to be invalid or unenforceable, in whole or in part, such

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invalidity or unenforceability shall not affect the remaining provisions hereof which shall remain in full force and effect.

If to the Company, to:

Neose Technologies, Inc.
102 Witmer Road
Horsham PA 19044
Attn: General Counsel
Fax: 215-315-9100

With a copy to:

Pepper Hamilton LLP
3000 Two Logan Square
18th & Arch Streets
Philadelphia, PA 19103
Attn: Barry M. Abelson, Esquire
Fax: 215-981-4750

If to Employee, to:

Debra J. Poul
1320 Beaumont Drive
Gladwyne, PA 19035-1302
Fax: 610-896-3808

or to such other address as may be specified in a notice given by one party to the other party hereunder.

7.7. Entire Agreement; Amendments. This Agreement and the attached exhibit contain the entire agreement and understanding of the parties relating to the provision of severance benefits upon termination, and merges and supersedes all prior and contemporaneous discussions, agreements and understandings of every nature relating to that subject, including but not limited to the Retention Agreement by and between the Employee and the Company, dated January 21, 2002 and the Noncompetition and Confidentiality Agreement by and between the Employee and the Company dated December 8, 1999. This Agreement may not be changed or modified, except by an Agreement in writing signed by each of the parties hereto.

7.8. Withholding. The Company will withhold from any payments due to Employee hereunder, all taxes, FICA or other amounts required to be withheld pursuant to any applicable law.

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7.10. Counterparts. This Agreement may be executed in multiple counterparts, each of which will be deemed to be an original, but all of which together will constitute but one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date and year first above written.

		NEOSE TECHNOLOGIES, INC.
		By:	/s/ C. BOYD CLARKE

			C. Boyd Clarke President & Chief Executive Officer


			/s/ DEBRA J. POUL

			Debra J. Poul

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Exhibit A
Release and Non-Disparagement Agreement

WHEREAS, the Employee’s employment as an executive of the Company has terminated; and

WHEREAS, pursuant to Section[s] [2] [3] [and 4] of the Change of Control Agreement by and between the Company and the Employee dated as of __________ ___, 2002 (the “Change of Control Agreement”), the Company has agreed to pay the Employee certain amounts and to provide her with certain rights and benefits, subject to the execution of this Release.

NOW THEREFORE, in consideration of these premises and the mutual promises contained herein, and intending to be legally bound hereby, the parties agree as follows:

SECTION 1. Consideration. The Employee acknowledges that: (a) the payments, rights and benefits set forth in Section[s] [2] [3] [and 4] of the Change of Control Agreement constitute full settlement of all of her rights under the Change of Control Agreement, (b) she has no entitlement under any other severance or similar arrangement maintained by the Company, and (c) except as otherwise provided specifically in this Release, the Company does not and will not have any other liability or obligation to the Employee. The Employee further acknowledges that, in the absence of her execution of this Release, the payments and benefits specified in Section[s] [2] [3] [and 4] of the Change of Control Agreement would not otherwise be due to the Employee.

SECTION 2. Release and Covenant Not to Sue. The Employee hereby fully and forever releases and discharges the Company and its parents, affiliates and subsidiaries, including all predecessors and successors, assigns, officers, directors, trustees, employees, agents and attorneys, past and present, from any and all claims, demands, liens, agreements, contracts, covenants, actions, suits, causes of action, obligations, controversies, debts, costs, expenses, damages, judgments, orders and liabilities, of whatever kind or nature, direct or indirect, in law, equity or otherwise, whether known or unknown, arising through the date of this Release, out of her employment by the Company or the termination thereof, including, but not limited to, any claims for relief or causes of action under the Age Discrimination in Employment Act, 29 U.S.C. § 621 et seq., or any other federal, state or local statute, ordinance or regulation regarding discrimination in employment and any claims, demands or actions based upon alleged wrongful or retaliatory discharge or breach of contract under any state or federal law. The Employee expressly represents that she has not filed a lawsuit or initiated any other administrative proceeding against the Company (including for purposes of this Section 2, its parents, affiliates and subsidiaries), and that she has not assigned any claim against the Company (or its parents, affiliates and subsidiaries) to any other person or entity. The Employee further promises not to initiate a lawsuit or to bring any other claim against the Company (or its parents, affiliates and subsidiaries) arising out of or in any way related to her employment by the Company or the termination of that employment. The forgoing will not be deemed to release the Company from (a) claims solely to enforce this Release, (b) claims solely to enforce Section[s] [2] [3] [and 4] of the Change of Control Agreement, (c) claims for indemnification under the Company’s By-Laws, under any indemnification agreement between the Company and the Employee or under any similar agreement or (d) claims solely to enforce the terms of any equity incentive award agreement between

the Employee and the Company. This Release will not prevent the Employee from filing a charge with the Equal Employment Opportunity Commission (or similar state agency) or participating in any investigation conducted by the Equal Employment Opportunity Commission (or similar state agency); provided, however, that any claims by the Employee for personal relief in connection with such a charge or investigation (such as reinstatement or monetary damages) would be barred.

SECTION 3. Restrictive Covenants. The Employee acknowledges that the terms of Section 6 of the Change in Control Agreement will survive the termination of her employment. The Employee affirms that the restrictions contained in Section 6 of the Change in Control Agreement are reasonable and necessary to protect the legitimate interests of the Company, that she received adequate consideration in exchange for agreeing to those restrictions and that she will abide by those restrictions.

SECTION 5. Cooperation. The Employee further agrees that, subject to reimbursement of her reasonable expenses, she will cooperate fully with the Company and its counsel with respect to any matter (including litigation, investigations, or governmental proceedings) which relates to matters with which the Employee was involved during her employment with Company. The Employee shall render such cooperation in a timely manner on reasonable notice from the Company.

SECTION 6. Rescission Right. The Employee expressly acknowledges and recites that (a) she has read and understands this Release in its entirety, (b) she has entered into this Release knowingly and voluntarily, without any duress or coercion; (c) she has been advised orally and is hereby advised in writing to consult with an attorney with respect to this Release before signing it; (d) she was provided 21 calendar days after receipt of the Release to consider its terms before signing it (or such longer period as is required for this Release to be effective under the Age Discrimination in Employment Act or any similar state law); and (e) she is provided seven (7) calendar days from the date of signing to terminate and revoke this Release (or such longer period required by applicable state law), in which case this Release shall be unenforceable, null and void. The Employee may revoke this Release during those seven (7) days (or such longer period required by applicable state law) by providing written notice of revocation to the Company.

SECTION 8. Miscellaneous.

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8.2. No Reinstatement. The Employee agrees that she will not apply for reinstatement with the Company or seek in any way to be reinstated, re-employed or hired by the Company in the future.

IN WITNESS WHEREOF, the Company has caused this Release to be executed by its duly authorized officer, and the Employee has executed this Release, in each case as of the date first above written.

		NEOSE TECHNOLOGIES, INC.
		By:
		Name & Title:

			EMPLOYEE

- 3 - EX-10.3 6 dex103.htm AGREEMENT AGREEMENT

EXHIBIT 10.3

August 15, 2002

Robert I. Kriebel
767 West Prospect Avenue
North Wales, PA 19454

Dear Bob:

On behalf of Neose Technologies, Inc., I am pleased to offer you the position of Senior Vice President and Chief Financial Officer, reporting directly to me, effective August 15, 2002. In this capacity, you will be responsible for all components of finance, investor relations, and information technology.

The components of your compensation package will be as follows:

1. Base Compensation. Your annual salary will be $250,000, earned and paid semi-monthly.

2. Variable Cash Compensation. For the remainder of 2002, you will develop objectives, working with Brian Davis. Nevertheless, for 2002, you will be guaranteed a bonus of 25% of base compensation actually received for the period from August 15, 2002 through December 31, 2002. For succeeding years, you will be entitled to a bonus as approved by the Compensation Committee, based on your and the Company’s fulfillment of objectives. Your target bonus will be 50% of base compensation.

3. Sign-on Bonus. In consideration of your choosing to come to Neose over other opportunities, you will receive a one-time signing bonus of $50,000. In the event you voluntarily terminate your employment during the first 12 months, or you are terminated for “Cause,” you will be obligated to repay this amount to Neose.

4. Equity-Based Compensation. I will recommend to the Board of Directors that you receive an initial grant of an option to purchase 165,000 shares of Neose stock, at a share price equal to the closing price of Neose’s stock on the date of hire. This stock option will vest equally over four years, and, to the extent permitted under Section 422(d) of the Internal Revenue Code, will be an incentive stock option. All Neose stock options are subject to the terms of the Company’s 1995 Stock Option/Stock Issuance Plan, as amended. In addition, most Neose employees receive additional annual stock option grants based upon individual performance. Subject to the approval of the Board of Directors, you will be eligible for subsequent grants after you have been at Neose for at least 12 months.

Robert I. Kriebel
August 15, 2002
Page 2

5. Termination Not-for-Cause. In the event you are terminated other than for “Cause,” you will be entitled to receive a lump-sum payment equal to 6 months’ salary and continuation of medical benefits for the same period.

6. Termination After Change in Control. If, within 12 months after a “Change in Control,” you are terminated other than for “Cause,” or voluntarily terminate for “Good Reason,” you will receive a lump-sum payment equal to 12 months’ salary, your target bonus for the period since your last bonus, and continuation of medical benefits for 12 months. In addition, in such case, all of your unvested options will vest immediately. All such amounts payable to you under this paragraph will be made without regard to whether the deductibility of such payments (considered together with any other entitlements or payments otherwise paid or due to you) would be limited or precluded by Section 280G of the Internal Revenue Code and without regard to whether such payments would subject you to the excise tax levied on certain “excess parachute payments” under Section 4999 of the Code (the “Parachute Excise Tax”). If all or any portion of the payments or other benefits provided under any section of this letter, either alone or together with any other payments and benefits which you receive or are entitled to receive from the Company or its affiliates (whether paid or payable or distributed or distributable) pursuant to the terms of this letter or otherwise pursuant to or by reason of any other agreement, policy, plan, program or arrangement, including without limitation any stock option, stock appreciation right or similar right, or the lapse or termination of any restriction on or the vesting or exercisability of any of the foregoing (the “Payment”) would result in the imposition of a Parachute Excise Tax, you will be entitled to an additional payment (the “Gross-up Payment”) in an amount such that the net amount of the Payment and the Gross-up Payment retained by you after the calculation and deduction of all excise taxes (including any interest or penalties imposed with respect to such taxes) on the Payment and all federal, state and local income tax, employment tax and excise tax (including any interest or penalties imposed with respect to such taxes) on the Gross-up Payment, and taking into account any lost or reduced tax deductions on account of the Gross-up Payment, shall be equal to the Payment.

7. Board of Directors. If you have not been proposed for election to the Board of Directors by the nominating committee of the Board (currently the Corporate Governance Committee) by February 15, 2004, you will have the right, within 60 days thereafter, to voluntarily terminate your employment with the Company, in which case you will be entitled to receive a lump-sum payment equal to 6 months’ salary and continuation of medical benefits for the same period.

For purposes of this letter:

“Cause” shall mean (i) fraud, embezzlement, or any other illegal act committed intentionally by you in connection with the commencement of your employment or the

Robert I. Kriebel
August 15, 2002
Page 3

performance of your duties as an officer; or (ii) your conviction of, or plea of guilty or nolo contendere to, any felony.

“Good Reason” means, without your prior written consent, any of the following: (i) a diminution in your title; (ii) a reduction in the your authority, duties or responsibilities, or the assignment to you of duties that are inconsistent, in a material respect, with your position; (iii) the relocation of the Company’s headquarters more than 15 miles from Horsham, Pennsylvania, unless such move reduces your commuting time; (iv) a reduction in your base salary or target bonus percentage; or (v) the Company’s failure to pay or make available any material payment or benefit due under this Agreement or any other material breach by the Company of this Agreement. However, the foregoing events or conditions will constitute Good Reason only if you provide the Company with written objection to the event or condition within 60 days following the occurrence thereof, the Company does not reverse or otherwise cure the event or condition within 30 days after receiving that written objection, and you resign your employment within 90 days following the expiration of that cure period.

“Change in Control” means a change in ownership or control of the Company effected through any of the following transactions: (i) the direct or indirect acquisition by any person or related group of persons (other than the Company or a person that directly or indirectly controls, is controlled by, or is under common control with, the Company) of beneficial ownership (within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of securities possessing more than 50% of the total combined voting power of the Company’s outstanding securities; (ii) a change in the composition of the Board over a period of 36 months or less such that a majority of the Board members ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who either (a) have been board members continuously since the beginning of such period, or (b) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (a) who were still in office at the time such election or nomination was approved by the Board; (iii) the consummation of any consolidation, share exchange or merger of the Company (a) in which the stockholders of the Company immediately prior to such transaction do not own at least a majority of the voting power of the entity which survives/results from that transaction, or (b) in which a shareholder of the Company who does not own a majority of the voting stock of the Company immediately prior to such transaction, owns a majority of the Company’s voting stock immediately after such transaction; or (iv) the liquidation or dissolution of the Company or any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Company, including stock held in subsidiary corporations or interests held in subsidiary ventures.

8. Other Benefits. Neose offers employees and their eligible dependents a variety of benefits such as medical and dental coverage, flexible spending accounts, a 401(k) Plan, an

Robert I. Kriebel
August 15, 2002
Page 4

Employee Stock Purchase Plan, and Long Term Disability. Detailed information concerning all benefits and policies are contained in the Neose Technologies, Inc. Employee Handbook, which will be given to you when you commence employment. The Employee Handbook is not a contract between you and the Company, but rather sets forth current policies of the Company, subject to change any time.

The nature of Neose’s business requires that you sign a confidentiality agreement. Two copies of this agreement are enclosed. If you have questions regarding this agreement, please let me know.

Please acknowledge your acceptance of the offer by signing all copies of this offer and the enclosed confidentiality agreement and return one copy of each.

Sincerely,
/s/ C. BOYD CLARKE

C. Boyd Clarke President and Chief Executive Officer

The undersigned accepts the foregoing offer as of August 15, 2002:
/s/ ROBERT I. KRIEBEL

Robert I. Kriebel

EX-10.4 7 dex104.htm AGREEMENT AGREEMENT

EXHIBIT 10.4

CHANGE OF CONTROL AGREEMENT

THIS CHANGE OF CONTROL AGREEMENT (the “Agreement”), is made on this 7th day of October, 2002, by and between NEOSE TECHNOLOGIES, INC. (the “Company”) and Robert I. Kriebel (the “Employee”).

Background

Terms

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and promises contained herein, and intending to be bound hereby, the parties agree as follows:

1. Definitions. As used herein:

1.2. “Board” means the Board of Directors of the Company.

1.3. “Business” means research, development, manufacture, supply, marketing, licensing, use and sale of biologic, pharmaceutical and therapeutic materials and products and related process technology directed to (a) the enzymatic synthesis of complex carbohydrates for use in food, cosmetic, therapeutic, consumer and industrial applications, (b) enzymatic synthesis or modification of the carbohydrate portion of proteins or lipids, or modification of proteins or lipids through the attachment of carbohydrates, (c) carbohydrate-based therapeutics, and (d) the development of protein therapeutics using sialylation, fucosylation, glycosylation, glycopegylation, or glycoconjugation.

1.5. “Change in Control” means a change in ownership or control of the Company effected through:

1.5.1. the direct or indirect acquisition by any person or related group of persons (other than the Company or a person that directly or indirectly controls, is controlled by,

or is under common control with, the Company) of beneficial ownership (within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of securities possessing more than 50% of the total combined voting power of the Company’s outstanding securities;

1.6. “Code” means Internal Revenue Code of 1986, as amended.

1.8. “Good Reason” means, without the Employee’s prior written consent, any of the following:

1.8.1. an adverse change in the Employee’s title;

1.8.2. a reduction in the Employee’s authority, duties or responsibilities, or the assignment to the Employee of duties that are inconsistent, in a material respect, with Employee’s position;

1.8.3. the relocation of the Company’s headquarters more than 15 miles from Horsham, Pennsylvania, unless such move reduces the Employee’s commuting time;

1.8.4. a reduction in the Employee’s Base Salary or in the amount, expressed as a percentage of Base Salary, of the Employee’s Target Bonus;

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1.8.5. the Company’s failure to pay or make available any material payment or benefit due under this Agreement or any other material breach by the Company of this Agreement.

1.10. “Proprietary Information” means any and all information of the Company or of any subsidiary or affiliate of the Company. Such Proprietary Information shall include, but shall not be limited to, the following items and information relating to the following items: (a) all intellectual property and proprietary rights of the Company (including without limitation Intellectual Property), (b) computer codes or instructions (including source and object code listings, program logic algorithms, subroutines, modules or other subparts of computer programs and related documentation, including program notation), computer processing systems and techniques, all computer inputs and outputs (regardless of the media on which stored or located), hardware and software configurations, designs, architecture and interfaces, (c) business research, studies, procedures and costs, (d) financial data, (e) distribution methods, (f) marketing data, methods, plans and efforts, (g) the identities of actual and prospective customers, contractors and suppliers, (h) the terms of contracts and agreements with customers, contractors and suppliers, (i) the needs and requirements of, and the Company’s course of dealing with, actual or prospective customers, contractors and suppliers, (j) personnel information, (k) customer and vendor credit information, and (l) any information received from third parties subject to obligations of non-disclosure or non-use. Failure by the Company to mark any of the Proprietary Information as confidential or proprietary shall not affect its status as Proprietary Information under the terms of this Agreement.

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1.11. “Release” means a release substantially identical to the one attached hereto as Exhibit A.

1.12. “Restricted Period” means the period beginning on the date hereof and ending on the first anniversary of the termination of the Employee’s employment with the Company for any reason.

1.13. “Restrictive Covenants” means the covenants set forth in Sections 6.1, 6.2 and 6.3 of this Agreement.

2. Termination.

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payments described in clause (a) will be offset by the amount of benefits paid to the Employee (or his or her representatives, heirs, estate or beneficiaries) pursuant to any life insurance or disability plans, policies or arrangements of the Company by virtue of his or her death or such Disability (including, for this purpose, only that portion of such life insurance or disability benefits funded by the Company or by premium payments made by the Company). The payments and benefits described in this section are in lieu of (and not in addition to) any other severance arrangement maintained by the Company.

2.3. Nomination to Board. Notwithstanding any other provision of this Agreement, if the Employee has not been proposed for election to the Board by the nominating committee of the Board by February 15, 2004, the Employee will be entitled to resign his employment with the Company for a period of 60 days from such date. Such a resignation will be treated as a “termination without Cause” solely for purposes of Section 2.2 and, subject to the execution of a Release in accordance with Section 5, will entitle the Employee to the benefits described in Section 2.2.

4. Parachute Payments.

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(whether paid or payable or distributed or distributable) pursuant to the terms of this Agreement or otherwise pursuant to or by reason of any other agreement, policy, plan, program or arrangement, including without limitation any stock option, stock appreciation right or similar right, or the lapse or termination of any restriction on or the vesting or exercisability of any of the foregoing (the “Payment”) would result in the imposition of a Parachute Excise Tax, the Employee will be entitled to an additional payment (the “Gross-up Payment”) in an amount such that the net amount of the Payment and the Gross-up Payment retained by the Employee after the calculation and deduction of all excise taxes (including any interest or penalties imposed with respect to such taxes) on the Payment and all federal, state and local income tax, employment tax and excise tax (including any interest or penalties imposed with respect to such taxes) on the Gross-up Payment provided for in this Section 4.2, and taking into account any lost or reduced tax deductions on account of the Gross-up Payment, shall be equal to the Payment.

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the Employee or refunded by the Employee to the Company, as the case may be, with interest at the applicable federal rate specified in Section 1274(d) of the Code.

6.1.1. engage or participate in any business competitive with the Business;

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6.3. Property of the Company.

6.3.2. Intellectual Property. The Employee agrees that all the Intellectual Property will be considered “works made for hire” as that term is defined in Section 101 of the Copyright Act (17 U.S.C. § 101) and that all right, title and interest in such Intellectual Property will be the sole and exclusive property of the Company. To the extent that any of the Intellectual Property may not by law be considered a work made for hire, or to the extent that, notwithstanding the foregoing, the Employee retains any interest in the Intellectual Property, the Employee hereby irrevocably assigns and transfers to the Company any and all right, title, or interest that the Employee may now or in the future have in the Intellectual Property under patent, copyright, trade secret, trademark or other law, in perpetuity or for the longest period otherwise permitted by law, without the necessity of further consideration. The Company will be entitled to obtain and hold in its own name all copyrights, patents, trade secrets, trademarks and

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other similar registrations with respect to such Intellectual Property. The Employee further agrees to execute any and all documents and provide any further cooperation or assistance reasonably required by the Company to perfect, maintain or otherwise protect its rights in the Intellectual Property. If the Company is unable after reasonable efforts to secure the Employee’s signature, cooperation or assistance in accordance with the preceding sentence, whether because of the Employee’s incapacity or any other reason whatsoever, the Employee hereby designates and appoints the Company or its designee as the Employee’s agent and attorney-in-fact, to act on his or her behalf, to execute and file documents and to do all other lawfully permitted acts necessary or desirable to perfect, maintain or otherwise protect the Company’s rights in the Intellectual Property. The Employee acknowledges and agrees that such appointment is coupled with an interest and is therefore irrevocable.

6.5. Remedies and Enforcement Upon Breach.

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provided above in the courts of any other jurisdiction within the geographic scope of such Restrictive Covenants.

7. Miscellaneous.

7.3. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania without regard to the principles of conflicts of laws.

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If to the Company, to:

Neose Technologies, Inc.
102 Witmer Road
Horsham PA 19044
Attn: General Counsel
Fax: 215-315-9100

With a copy to:

Pepper Hamilton LLP
3000 Two Logan Square
18th & Arch Streets
Philadelphia, PA 19103
Attn: Barry M. Abelson, Esquire
Fax: 215-981-4750

If to Employee, to:

Robert I. Kriebel
767 W. Prospect Avenue
North Wales, PA 19454

or to such other address as may be specified in a notice given by one party to the other party hereunder.

7.7. Entire Agreement; Amendments. This Agreement and the attached exhibit contain the entire agreement and understanding of the parties relating to the provision of severance benefits upon termination, and merges and supersedes all prior and contemporaneous discussions, agreements and understandings of every nature relating to that subject, including but not limited to Sections 5, 6 and 7 of the letter agreement by and between the Employee and the Company dated August 15, 2002. This Agreement may not be changed or modified, except by an Agreement in writing signed by each of the parties hereto.

7.8. Withholding. The Company will withhold from any payments due to Employee hereunder, all taxes, FICA or other amounts required to be withheld pursuant to any applicable law.

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7.10. Counterparts. This Agreement may be executed in multiple counterparts, each of which will be deemed to be an original, but all of which together will constitute but one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date and year first above written.

		NEOSE TECHNOLOGIES, INC.
		By:	/s/ C. BOYD CLARKE

			C. Boyd Clarke President & Chief Executive Officer


			/s/ ROBERT I. KRIEBEL

			Robert I. Kriebel

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Exhibit A

Release and Non-Disparagement Agreement

WHEREAS, the Employee’s employment as an executive of the Company has terminated; and

NOW THEREFORE, in consideration of these premises and the mutual promises contained herein, and intending to be legally bound hereby, the parties agree as follows:

SECTION 2. Release and Covenant Not to Sue. The Employee hereby fully and forever releases and discharges the Company and its parents, affiliates and subsidiaries, including all predecessors and successors, assigns, officers, directors, trustees, employees, agents and attorneys, past and present, from any and all claims, demands, liens, agreements, contracts, covenants, actions, suits, causes of action, obligations, controversies, debts, costs, expenses, damages, judgments, orders and liabilities, of whatever kind or nature, direct or indirect, in law, equity or otherwise, whether known or unknown, arising through the date of this Release, out of his or her employment by the Company or the termination thereof, including, but not limited to, any claims for relief or causes of action under the Age Discrimination in Employment Act, 29 U.S.C. § 621 et seq., or any other federal, state or local statute, ordinance or regulation regarding discrimination in employment and any claims, demands or actions based upon alleged wrongful or retaliatory discharge or breach of contract under any state or federal law. The Employee expressly represents that he or she has not filed a lawsuit or initiated any other administrative proceeding against the Company (including for purposes of this Section 2, its parents, affiliates and subsidiaries), and that he or she has not assigned any claim against the Company (or its parents, affiliates and subsidiaries) to any other person or entity. The Employee further promises not to initiate a lawsuit or to bring any other claim against the Company (or its parents, affiliates and subsidiaries) arising out of or in any way related to his or her employment by the Company or the termination of that employment. The forgoing will not be deemed to release the Company from (a) claims solely to enforce this Release, (b) claims solely to enforce Section[s] [2] [3] [and 4] of the Change of Control Agreement, (c) claims for indemnification under the Company’s By-Laws, under any indemnification agreement between the Company and the Employee or under any similar agreement or (d) claims solely to enforce the terms of any equity incentive award agreement

between the Employee and the Company. This Release will not prevent the Employee from filing a charge with the Equal Employment Opportunity Commission (or similar state agency) or participating in any investigation conducted by the Equal Employment Opportunity Commission (or similar state agency); provided, however, that any claims by the Employee for personal relief in connection with such a charge or investigation (such as reinstatement or monetary damages) would be barred.

SECTION 8. Miscellaneous.

8.1. No Admission of Liability. This Release is not to be construed as an admission of any violation of any federal, state or local statute, ordinance or regulation or of any duty owed by

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the Company to the Employee. There have been no such violations, and the Company specifically denies any such violations.

8.2. No Reinstatement. The Employee agrees that he or she will not apply for reinstatement with the Company or seek in any way to be reinstated, re-employed or hired by the Company in the future.

IN WITNESS WHEREOF, the Company has caused this Release to be executed by its duly authorized officer, and the Employee has executed this Release, in each case as of the date first above written.

		NEOSE TECHNOLOGIES, INC.
		By:
		Name & Title:

			EMPLOYEE

- 3 - EX-10.5 8 dex105.htm AGREEMENT AGREEMENT

EXHIBIT 10.5

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (the “Agreement”), is made as of this 12th day of September, 2002, by and between NEOSE TECHNOLOGIES, INC. (the “Company”) and Joseph J. Villafranca (the “Executive”), and, subject to the termination of the Executive’s employment with his current employer, will be effective as of October 1, 2002 (the “Commencement Date”).

Background

The Company believes that the Executive can contribute to the growth and success of the Company and desires to employ the Executive as the Senior Vice President, Pharmaceutical Development and Operations, on the terms and conditions set forth in this Agreement, and the Executive desires to be so employed by the Company.

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and promises contained herein, and intending to be bound hereby, the parties agree as follows:

Terms

1. Employment.

1.1. Term. The Company agrees to employ the Executive in accordance with the terms of this Agreement and the Executive agrees to accept such employment, effective on the Commencement Date and continuing until terminated pursuant to Section 3 hereof (the “Term”).

1.2. Position. During the Term, Executive will serve as the Senior Vice President, Pharmaceutical Development and Operations, of the Company, reporting directly to the President and Chief Executive Officer.

1.3. Duties. The Executive will perform such duties and functions as are customarily performed by the Senior Vice President, Pharmaceutical Development and Operations, of an enterprise the size and nature of the Company, including the duties and functions from time to time assigned to him by the Chief Executive Officer. Without limiting the generality of the foregoing, the Executive will be responsible for running development programs in support of the Company’s proprietary drug strategy.

1.4. Place of Performance. The Executive shall perform his services hereunder at the principal executive offices of the Company, which are currently located in Horsham, Pennsylvania. The Executive will be required to travel from time to time for business purposes.

1.5. Time Devoted to Employment. The Executive will devote his best efforts and substantially all of his business time and services to the performance of his duties under this Agreement. Notwithstanding the foregoing, the Executive may engage in charitable, community service and industry association activities, and, with the approval of the Board (which approval

will not be unreasonably withheld), may serve as a member of boards of directors of other companies or organizations, which in the judgment of the Board, will not present any conflict of interest with the Company, so long as those activities do not interfere with the performance of his duties under this Agreement.

2. Compensation, Benefits and Expense Reimbursements.

2.1. Base Salary. The Executive shall receive an initial annual salary of $280,000 (the “Base Salary”), paid semi-monthly or otherwise in accordance with the Company’s customary payroll practices, as in effect from time to time. Future salary reviews will be undertaken by the Compensation Committee of the Board of Directors annually, based upon the recommendations of senior management.

2.2. Bonus. The Executive will be eligible to receive an annual bonus (the “Annual Bonus”) for each completed calendar year during the Term. The target amount of the Annual Bonus is 50% of the Base Salary for the applicable calendar year. The specific goals and objectives that must be met to receive the target bonus will be established by mutual agreement of the Chief Executive Officer and the Executive within 90 days following the commencement of each calendar year during the Term, except that, for the balance of the 2002 calendar year, the Executive will receive a bonus equal to $24,500, payable no later than March 31, 2003. The Company will endeavor to pay the Annual Bonus, if any, by the end of the first quarter of the calendar year following the calendar year to which the Annual Bonus relates.

2.3. Payment in Lieu of Lost Benefits. Within 30 days after the Commencement Date, the Company will pay to the Executive $50,000 in recognition of Executive foregoing certain payments from his prior employer.

2.4. Equity Incentive. The Board has authorized the grant to the Executive of options to purchase 160,000 shares of the Company’s common stock (the “Initial Stock Option”) effective as of the Commencement Date with a per share exercise price equal to the fair market value of a share of common stock on the Commencement Date, contingent on the commencement of the Executive’s employment with the Company on that date. The Initial Stock Option is intended to be an incentive stock option, to the extent permitted under Section 422(d) of the Internal Revenue Code (the “Code”). The Initial Stock Option will be granted under the Company’s1995Stock Option/Stock Issuance Plan (the “Plan). The Initial Stock Option will become vested and first exercisable with respect to 25% of shares on the Commencement Date, and will become vested and exercisable with respect to an additional 25% of the shares subject thereto on the first, second, and third anniversaries of the Commencement Date, respectively, contingent on the continued employment of the Executive by the Company on the applicable vesting date, such that the entire option will be fully vested and exercisable on the third anniversary of the Commencement Date (if the Executive then remains employed by the Company). In addition, the Board has authorized the grant to the Executive of options to purchase 30,000 shares of the Company’s common stock (the “Contingent Stock Option”) effective as of the Commencement Date with a per share exercise price equal to the fair market value of a share of common stock on the Commencement Date, contingent on the commencement of the Executive’s employment with the Company on that date. The Contingent

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Stock Option will be a non-qualified stock option granted under the Plan, and will become vested and first exercisable on the earlier of (i) the first filing with the Food and Drug Administration of an Investigational New Drug application for the Company’s own proprietary drug candidate that allows the Company to commence clinical trials, and (ii) the fifth anniversary of the Commencement Date. The Executive will be eligible to receive additional grants in accordance with the Company’s executive incentive options program, at the discretion of the Board or a committee of the Board.

2.5. Expenses. The Executive will be entitled to reimbursement by the Company for all expenses reasonably incurred by him in connection with the performance of his duties, including, without limitation, travel and entertainment expenses reasonably related to the business of the Company, in accordance with the policies and procedures established from time to time by the Company.

2.6. Other Benefits. The Executive will be entitled to participate in any benefit plans, policies or arrangements sponsored or maintained by the Company from time to time for its senior executive officers (which benefits, as of this date, include the right to participate in the Company’s 401(k), employee stock purchase, medical, and dental plans, and coverage under the Company’s group life and disability insurance policies). Notwithstanding the foregoing, the Executive’s eligibility for and participation in any of the Company’s employee benefit plans, policies or arrangements will be subject to the terms and conditions of such plans, policies or arrangements. Moreover, subject to the terms and conditions of such plans, policies or arrangements, the Company may amend, modify or terminate such plans, policies or arrangements at any time for any reason.

2.7. Vacations. In addition to holidays observed by the Company, the Executive shall be entitled to 4 weeks paid vacation time during each year of employment consistent with Company policies, as in effect from time to time.

3. Termination.

3.1. In General. The Company may terminate the Executive’s employment at any time. The Executive may terminate his or her employment at any time, provided that before the Executive may voluntarily terminate his or her employment with the Company, he or she must provide 30 days prior written notice (or such shorter notice as is acceptable to the Company) to the Company. If the Executive resigns, other than for Good Reason, his employment with the Company prior to the first anniversary of the Commencement Date, the Executive will be required to pay to the Company the amount of $50,000, which amount may be offset from any amounts payable to the Executive hereunder. Upon any termination of the Executive’s employment with the Company for any reason: (a) the Executive (unless otherwise requested by the Board) concurrently will resign any officer or director positions he or she holds with the Company, its subsidiaries or affiliates, and (b) the Company will pay to the Executive all accrued but unpaid compensation through the date of termination, and (c) except as explicitly provided in Sections 3 or 5, or otherwise pursuant to COBRA, all compensation and benefits will cease and the Company will have no further liability or obligation to the Executive, including, but not limited to, any unpaid Annual Bonus. The foregoing will not be construed to limit the

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Executive’s right to payment or reimbursement for claims incurredunder any insurance contract funding an employee benefit plan, policy or arrangement of the Company in accordance with the terms of such insurance contract.

3.2. Termination Without Cause. If the Executive’s employment by the Company ceases due to a termination by the Company without Cause or due to death or Disability, then, in addition to the payments and benefits provided for in Section 3.1 above and subject to Section 3.3 below, the Company will (a) make a lump sum cash payment to the Executive equal to six months of the Executive’s Base Salary, as in effect on such date, (b) continue to provide medical benefits to the Executive (and, if covered immediately prior to such termination, his or her spouse and dependents) for a period of six months commencing from the date of the Executive’s termination of employment at a monthly cost to the Executive equal to the Executive’s monthly contribution toward the cost of such coverage immediately prior to such termination, and (c) arrange for the provision to the Executive of reasonable executive outplacement services by a provider selected by the mutual agreement of the Company and the Executive; provided that if the Company’s obligation to make the payments provided for in clause (a) of this Section 3.2 arises due to the Executive’s death or Disability, the cash payments described in clause (a) will be offset by the amount of benefits paid to the Executive (or his or her representative(s), heirs, estate or beneficiaries) pursuant to the life insurance or disability plans, policies or arrangements of the Company by virtue of his or her death or that Disability (including, for this purpose, only that portion of such life insurance or disability benefits funded by the Company or by premium payments made by the Company). The payments and benefits described in this section are in lieu of (and not in addition to) any other severance arrangement maintained by the Company.

3.3. Certain Terminations Following a Change in Control. If the Executive’s employment with the Company ceases within twelve months following a Change in Control as a result of (i) a termination by the Company without Cause, or (ii) a resignation by the Executive for Good Reason, then in lieu of the payments and benefits provided for in Section 3.2, (a) the Company will make a lump sum cash payment to the Executive equal to the sum of (i) one year of the Executive’s Base Salary as in effect on such date, and (ii) the Executive’s Annual Bonus for the calendar year in which the termination occurs, (b) the Company will continue to provide medical benefits to the Executive (and, if covered immediately prior to such term, his or her spouse and dependents) for a period of one year commencing from the date of the Executive’s termination of employment at a monthly cost to the Executive equal to the Executive’s monthly contribution toward the cost of such coverage immediately prior to such termination, (c) the Company will arrange for the provision to the Executive of reasonable executive outplacement services by a provider selected by the mutual agreement of the Company and the Executive, (d) the Company will pay to the Executive the additional amount, if any, payable pursuant to Section 5 below, and (e) all outstanding stock options then held by the Executive will then become fully vested and immediately exercisable and will remain exercisable for 12 months following Executive’s termination of employment, notwithstanding any inconsistent language in any equity incentive plan or agreement.

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4. Definitions. For purposes of this Agreement:

4.1. “Change in Control” means

4.1.1. a change in ownership or control of the Company effected through (i) the direct or indirect acquisition by any person or related group of persons (other than the Company or a person that directly or indirectly controls, is controlled by, or is under common control with, the Company) of beneficial ownership (within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of securities possessing more than 50% of the total combined voting power of the Company’s outstanding securities; (ii) a change in the composition of the Board over a period of 36 months or less such that a majority of the Board members ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who either (a) have been board members continuously since the beginning of such period, or (b) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (a) who were still in office at the time such election or nomination was approved by the Board; or (iii) the consummation of any consolidation, share exchange or merger of the Company (a) in which the stockholders of the Company immediately prior to such transaction do not own at least a majority of the voting power of the entity which survives/results from that transaction, or (b) in which a shareholder of the Company who does not own a majority of the voting stock of the Company immediately prior to such transaction, owns a majority of the Company’s voting stock immediately after such transaction; or

4.1.2. the liquidation or dissolution of the Company or any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Company, including stock held in subsidiary corporations or interests held in subsidiary ventures.

4.2. “Cause” means fraud, embezzlement, or any other serious criminal conduct that adversely affects the Company committed intentionally by the Executive in connection with the commencement of his or her employment or the performance of his or her duties as an officer or director of the Company, or the Executive’s conviction of, or plea of guilty or nolo contendere to, any felony.

4.3. “Good Reason” means, without the Executive’s prior written consent, any of the following:

4.3.1. an adverse change in the Executive’s title;

4.3.2. a reduction in the Executive’s authority, duties or responsibilities, or the assignment to the Executive of duties that are inconsistent, in a material respect, with Executive’s position;

4.3.3. the relocation of the Company’s headquarters more than 15 miles from Horsham, Pennsylvania, unless such move reduces the Executive’s commuting time;

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4.3.4. a reduction in the Executive’s Base Salary or in the amount, expressed as a percentage of Base Salary, of the Executive’s Target Bonus;

4.3.5. the Company’s failure to pay or make available any material payment or benefit due under this Agreement or any other material breach by the Company of this Agreement.

However, the foregoing events or conditions will constitute Good Reason only if the Executive provides the Company with written objection to the event or condition within 60 days following the occurrence thereof, the Company does not reverse or otherwise cure the event or condition within 30 days of receiving that written objection and the Executive resigns his or her employment within 90 days following the expiration of that cure period.

4.4. “Release” means a release substantially identical to the one attached hereto as Exhibit 4.4.

5. Parachute Payments.

5.1. Generally. All amounts payable to the Executive under this Agreement will be made without regard to whether the deductibility of such payments (considered together with any other entitlements or payments otherwise paid or due to the Executive) would be limited or precluded by Section 280G of the Code and without regard to whether such payments would subject the Executive to the excise tax levied on certain “excess parachute payments” under Section 4999 of the Code (the “Parachute Excise Tax”).

5.2. Gross-Up. If all or any portion of the payments or other benefits provided under any section of this Agreement, either alone or together with any other payments and benefits which the Executive receives or is entitled to receive from the Company or its affiliates (whether paid or payable or distributed or distributable) pursuant to the terms of this Agreement or otherwise pursuant to or by reason of any other agreement, policy, plan, program or arrangement, including without limitation any stock option, stock appreciation right or similar right, or the lapse or termination of any restriction on or the vesting or exercisability of any of the foregoing (the “Payment”) would result in the imposition of a Parachute Excise Tax, the Executive will be entitled to an additional payment (the “Gross-up Payment”) in an amount such that the net amount of the Payment and the Gross-up Payment retained by the Executive after the calculation and deduction of all excise taxes (including any interest or penalties imposed with respect to such taxes) on the Payment and all federal, state and local income tax, employment tax and excise tax (including any interest or penalties imposed with respect to such taxes) on the Gross-up Payment provided for in this Section 5.2, and taking into account any lost or reduced tax deductions on account of the Gross-up Payment, shall be equal to the Payment.

5.3. Measurements and Adjustments. The determination of the amount of the payments and benefits paid and payable to the Executive and whether and to what extent payments under Section 5.2 are required to be made will be made at the Company’s expense by an independent auditor selected by mutual agreement of the Company and the Executive, which auditor shall provide Executive and the Company with detailed supporting calculations with respect to its determination within 15 business days of the receipt of notice from the Executive or

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the Company that the Executive has received or will receive a payment that is potentially subject to the Parachute Excise Tax. For the purposes of determining whether any payments will be subject to the Parachute Excise Tax and the amount of such Parachute Excise Tax, such payments will be treated as “parachute payments” within the meaning of Section 280G of the Code, and all “parachute payments” in excess of the “base amount” (as defined under Section 280G(b)(3) of the Code) shall be treated as subject to the Parachute Excise tax, unless and except to the extent that in the opinion of the accountants such payments (in whole or in part) either do not constitute “parachute payments” or represent reasonable compensation for services actually rendered (within the meaning of Section 280G(b)(4) of the Code) in excess of the “base amount,” or such “parachute payments” are otherwise not subject to such Parachute Excise Tax. For purposes of determining the amount of the Gross-up Payment, if any, the Executive shall be deemed to pay federal income taxes at the highest applicable marginal rate of federal income taxation for the calendar year in which the gross-up payment is to be made and to pay any applicable state and local income taxes at the highest applicable marginal rate of taxation for the calendar year in which the gross-up payment is to be made, net of the maximum reduction in federal income taxes which could be obtained from the deduction of such state or local taxes if paid in such year (determined without regard to limitations on deductions based upon the amount of the Executive’s adjusted gross income); and to have otherwise allowable deductions for federal, state and local income tax purposes at least equal to those disallowed because of the inclusion of the gross-up payment in the Executive adjusted gross income. Any Gross-up Payment shall be paid by the Company at the time the Executive is entitled to receive the Payment. Any determination by the auditor shall be binding upon the Company and the Executive.

5.4. Underpayment or Overpayment. In the event of any underpayment or overpayment to the Executive (determined after the application of Section 5.2), the amount of such underpayment or overpayment will be, as promptly as practicable, paid by the Company to the Executive or refunded by the Executive to the Company, as the case may be, with interest at the applicable federal rate specified in Section 1274(d) of the Code.

6. Timing of Payments Following Termination. Notwithstanding any provision of this Agreement, the payments and benefits described in Sections 3 and 5 are conditioned on the Executive’s execution and delivery to the Company of a Release in a manner consistent with the Older Workers Benefit Protection Act and any similar state law that is applicable. The amounts described in Sections 3.2(a) and 3.3(a) will be paid in a lump sum, as soon as the Release becomes irrevocable following the Executive’s execution and delivery of the Release (provided that the Release has not been revoked by the Executive).

7. Restrictive Covenants. As consideration for all of the payments to be made to the Executive pursuant to Sections 2, 3, and 5 of this Agreement, as well as for any equity incentive awards that the Executive may receive from the Company, the Executive agrees to be bound by the provisions of this Section 7 (the “Restrictive Covenants”). These Restrictive Covenants will apply without regard to whether any termination of the Executive’s employment is initiated by the Company or the Executive, and without regard to the reason for that termination.

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7.1. Covenant Not To Compete. The Executive covenants that, during the period beginning on the Commencement Date and ending on the first anniversary of the termination of the Executive’s employment with the Company for any reason (the “Restricted Period”), he will not (except in his capacity as an employee or director of the Company) do any of the following, directly or indirectly, anywhere in the world:

7.1.1. engage or participate in any business competitive with the Business (as defined below);

7.1.2. become interested in (as owner, stockholder, lender, partner, co-venturer, director, officer, employee, agent or consultant) any person, firm, corporation, association or other entity engaged in any business competitive with the Business. Notwithstanding the foregoing, the Executive may hold up to 4.9% of the outstanding securities of any class of any publicly-traded securities of any company;

7.1.3. engage in any business, or solicit or call on any customer, supplier, licensor, licensee, contractor, agent, representative, advisor, strategic partner, distributor or other person with whom the Company shall have dealt or any prospective customer, supplier, licensor, licensee, contractor, agent, representative, advisor, strategic partner, distributor or other person that the Company shall have identified and solicited at any time during the Executive’s employment by the Company for a purpose competitive with the Business;

7.1.4. influence or attempt to influence any employee, consultant, customer, supplier, licensor, licensee, contractor, agent, representative, advisor, strategic partner, distributor or other person to terminate or modify any written or oral agreement, arrangement or course of dealing with the Company; or

7.1.5. solicit for employment or employ or retain (or arrange to have any other person or entity employ or retain) any person who has been employed or retained by the Company within the 12 months preceding the termination of the Executive’s employment with the Company for any reason.

7.2. Confidentiality. The Executive recognizes and acknowledges that the Proprietary Information (as defined below) is a valuable, special and unique asset of the business of the Company. As a result, both during the Term and thereafter, the Executive will not, without the prior written consent of the Company, for any reason either directly or indirectly divulge to any third-party or use for his own benefit, or for any purpose other than the exclusive benefit of the Company, any Proprietary Information; provided, however, that the Executive may during the Term disclose Proprietary Information to third parties as may be necessary or appropriate to the effective and efficient discharge of his duties as an employee hereunder (provided that the third party recipient has signed the Company’s then-approved confidentiality or similar agreement) or as such disclosures may be required by law. If the Executive or any of his representatives becomes legally compelled to disclose any of the Proprietary Information, the Executive will provide the Company with prompt written notice so that the Company may seek a protective order or other appropriate remedy. The non-disclosure and non-use obligations with respect to Proprietary Information set forth in this Section 7.2 shall not apply to any information

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that is in or becomes part of the public domain through no improper act on the part of the Executive.

7.3. Property of the Company.

7.3.1. Proprietary Information. All right, title and interest in and to Proprietary Information will be and remain the sole and exclusive property of the Company. The Executive will not remove from the Company’s offices or premises any documents, records, notebooks, files, correspondence, reports, memoranda or similar materials of or containing Proprietary Information, or other materials or property of any kind belonging to the Company unless necessary or appropriate in the performance of his duties to the Company. If the Executive removes such materials or property in the performance of his duties, the Executive will return such materials or property to their proper files or places of safekeeping as promptly as possible after the removal has served its specific purpose. The Executive will not make, retain, remove and/or distribute any copies of any such materials or property, or divulge to any third person the nature of and/or contents of such materials or property or any other oral or written information to which he may have access or become familiar in the course of his employment, except to the extent necessary in the performance of his duties. Upon termination of the Executive’s employment with the Company, he will leave with the Company or promptly return to the Company all originals and copies of such materials or property then in his possession.

7.3.2. Intellectual Property. The Executive agrees that all the Intellectual Property (as defined below) will be considered “works made for hire” as that term is defined in Section 101 of the Copyright Act (17 U.S.C. § 101) and that all right, title and interest in such Intellectual Property will be the sole and exclusive property of the Company. To the extent that any of the Intellectual Property may not by law be considered a work made for hire, or to the extent that, notwithstanding the foregoing, the Executive retains any interest in the Intellectual Property, the Executive hereby irrevocably assigns and transfers to the Company any and all right, title, or interest that the Executive may now or in the future have in the Intellectual Property under patent, copyright, trade secret, trademark or other law, in perpetuity or for the longest period otherwise permitted by law, without the necessity of further consideration. The Company will be entitled to obtain and hold in its own name all copyrights, patents, trade secrets, trademarks and other similar registrations with respect to such Intellectual Property. The Executive further agrees to execute any and all documents and provide any further cooperation or assistance reasonably required by the Company to perfect, maintain or otherwise protect its rights in the Intellectual Property. If the Company is unable after reasonable efforts to secure the Executive’s signature, cooperation or assistance in accordance with the preceding sentence, whether because of the Executive’s incapacity or any other reason whatsoever, the Executive hereby designates and appoints the Company or its designee as the Executive’s agent and attorney-in-fact, to act on his behalf, to execute and file documents and to do all other lawfully permitted acts necessary or desirable to perfect, maintain or otherwise protect the Company’s rights in the Intellectual Property. The Executive acknowledges and agrees that such appointment is coupled with an interest and is therefore irrevocable.

7.4. Definitions. For purposes of this Agreement, the following terms have the meanings defined below:

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7.4.1. “Business” means research, development, manufacture, supply, marketing, licensing, use and sale of biologic, pharmaceutical and therapeutic materials and products and related process technology directed to (a) the enzymatic synthesis of complex carbohydrates for use in food, cosmetic, therapeutic, consumer and industrial applications, (b) enzymatic synthesis or modification of the carbohydrate portion of proteins or lipids, or modification of proteins or lipids through the attachment of carbohydrates, (c) carbohydrate-based therapeutics, and (d) the development of protein therapeutics using siallylation, fucosylation, glycosylation, glycopegylation, or glycoconjugation.

7.4.2. “Intellectual Property” means (a) all inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto, and all patents and patent applications claiming such inventions, (b) all trademarks, service marks, trade dress, logos, trade names, fictitious names, brand names, brand marks and corporate names, together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith, and all applications, registrations, and renewals in connection therewith, (c) all copyrightable works, all copyrights, and all applications, registrations, and renewals in connection therewith, (d) all mask works and all applications, registrations, and renewals in connection therewith, (e) all trade secrets (including research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, methodologies, technical data, designs, drawings and specifications), (f) all computer software (including data, source and object codes and related documentation), (g) all other proprietary rights, (h) all copies and tangible embodiments thereof (in whatever form or medium), or similar intangible personal property which have been or are developed or created in whole or in part by the Executive (i) at any time and at any place while the Executive is employed by Company and which, in the case of any or all of the foregoing, are related to and used in connection with the business of the Company, or (ii) as a result of tasks assigned to the Executive by the Company.

7.4.3. “Proprietary Information” means any and all information of the Company or of any subsidiary or affiliate of the Company. Such Proprietary Information shall include, but shall not be limited to, the following items and information relating to the following items: (a) all intellectual property and proprietary rights of the Company (including without limitation Intellectual Property) (b) computer codes or instructions (including source and object code listings, program logic algorithms, subroutines, modules or other subparts of computer programs and related documentation, including program notation), computer processing systems and techniques, all computer inputs and outputs (regardless of the media on which stored or located), hardware and software configurations, designs, architecture and interfaces, (c) business research, studies, procedures and costs, (d) financial data, (e) distribution methods, (f) marketing data, methods, plans and efforts, (g) the identities of actual and prospective customers, contractors and suppliers, (h) the terms of contracts and agreements with customers, contractors and suppliers, (i) the needs and requirements of, and the Company’s course of dealing with, actual or prospective customers, contractors and suppliers, (j) personnel information, (k) customer and vendor credit information, and (l) any information received from third parties subject to obligations of non-disclosure or non-use. Failure by the Company to mark any of the Proprietary Information as confidential or proprietary shall not affect its status as Proprietary Information under the terms of this Agreement.

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7.5. Acknowledgements. The Executive acknowledges that the Restrictive Covenants are reasonable and necessary to protect the legitimate interests of the Company and its affiliates and that the duration and geographic scope of the Restrictive Covenants are reasonable given the nature of this Agreement and the position the Executive will hold within the Company. The Executive further acknowledges that the Restrictive Covenants are included herein in order to induce the Company to employ the Executive pursuant to this Agreement and that the Company would not have entered into this Agreement or otherwise employed the Executive in the absence of the Restrictive Covenants.

7.6. Remedies and Enforcement Upon Breach.

7.6.1. Specific Enforcement. The Executive acknowledges that any breach by him, willfully or otherwise, of the Restrictive Covenants will cause continuing and irreparable injury to the Company for which monetary damages would not be an adequate remedy. The Executive shall not, in any action or proceeding to enforce any of the provisions of this Agreement, assert the claim or defense that such an adequate remedy at law exists. In the event of any such breach by the Executive, the Company shall have the right to enforce the Restrictive Covenants by seeking injunctive or other relief in any court, without any requirement that a bond or other security be posted, and this Agreement shall not in any way limit remedies of law or in equity otherwise available to the Company.

7.6.2. Judicial Modification. If any court determines that any of the Restrictive Covenants, or any part thereof, is unenforceable because of the duration or geographical scope of such provision, such court shall have the power to modify such provision and, in its modified form, such provision shall then be enforceable.

7.6.3. Accounting. If the Executive breaches any of the Restrictive Covenants, the Company will have the right and remedy to require the Executive to account for and pay over to the Company all compensation, profits, monies, accruals, increments or other benefits derived or received by the Executive as the result of such breach. This right and remedy will be in addition to, and not in lieu of, any other rights and remedies available to the Company under law or in equity.

7.6.4. Enforceability. If any court holds the Restrictive Covenants unenforceable by reason of their breadth or scope or otherwise, it is the intention of the parties hereto that such determination not bar or in any way affect the right of the Company to the relief provided above in the courts of any other jurisdiction within the geographic scope of such Restrictive Covenants.

7.6.5. Disclosure of Restrictive Covenants. The Executive agrees to disclose the existence and terms of the Restrictive Covenants to any employer that the Executive may work for during the Restricted Period.

7.6.6. Extension of Restricted Period. If the Executive breaches Section 7.1 in any respect, the restrictions contained in that section will be extended for a period equal to the period that the Executive was in breach.

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8. Miscellaneous.

8.1. No Liability of Officers and Directors for Severance Upon Insolvency. Notwithstanding any other provision of the Agreement and intending to be bound by this provision, the Executive hereby (a) waives any right to claim payment of amounts owed to him, now or in the future, pursuant to this Agreement from directors or officers of the Company if the Company becomes insolvent, and (b) fully and forever releases and discharges the Company’s officers and directors from any and all claims, demands, liens, actions, suits, causes of action or judgments arising out of any present or future claim for such amounts.

8.2. Legal Fees. The Company shall pay the reasonable attorneys’ fees and related expenses and disbursements incurred by the Executive in connection with the negotiation and preparation of this Agreement (including the term sheet relating thereto) up to a maximum of $4,500.

8.3. Other Agreements. The Executive represents and warrants to the Company that there are no restrictions, agreements or understandings whatsoever to which he is a party that would prevent or make unlawful his execution of this Agreement, that would be inconsistent or in conflict with this Agreement or Executive’s obligations hereunder, or that would otherwise prevent, limit or impair the performance by Executive of his duties under this Agreement.

8.4. Successors and Assigns. The Company may assign this Agreement to any successor to all or substantially all of its assets and business by means of liquidation, dissolution, merger, consolidation, transfer of assets, or otherwise. The duties of the Executive hereunder are personal to the Executive and may not be assigned by him.

8.5. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania without regard to the principles of conflicts of laws.

8.6. Enforcement. Any legal proceeding arising out of or relating to this Agreement will be instituted in the United States District Court for the Eastern District of Pennsylvania, or if that court does not have or will not accept jurisdiction, in any court of general jurisdiction in the Commonwealth of Pennsylvania, and the Executive and the Company hereby consent to the personal and exclusive jurisdiction of such court(s) and hereby waive any objection(s) that they may have to personal jurisdiction, the laying of venue of any such proceeding and any claim or defense of inconvenient forum.

8.7. Waivers; Separability. The waiver by either party hereto of any right hereunder or any failure to perform or breach by the other party hereto shall not be deemed a waiver of any other right hereunder or any other failure or breach by the other party hereto, whether of the same or a similar nature or otherwise. No waiver shall be deemed to have occurred unless set forth in a writing executed by or on behalf of the waiving party. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically

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waived. If any provision of this Agreement shall be declared to be invalid or unenforceable, in whole or in part, such invalidity or unenforceability shall not affect the remaining provisions hereof which shall remain in full force and effect.

8.8. Notices. All notices and communications that are required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given when delivered personally or upon mailing by registered or certified mail, postage prepaid, return receipt requested, as follows:

If to the Company, to:

Neose Technologies, Inc.
102 Witmer Road
Horsham PA 19044
Attn: General Counsel
Fax: 215-315-9100

With a copy to:

Pepper Hamilton LLP
3000 Two Logan Square
18th & Arch Streets
Philadelphia, PA 19103
Attn: Barry M. Abelson, Esquire
Fax: 215-981-4750

If to Executive, to:

Joseph J. Villafranca
1679 Lookaway Court
New Hope, PA 18938
Fax: 215-794-4563

With a copy to:

Dechert
Princeton Pike Corporate Center
P.O. Box 5218
Princeton, NJ 08543-5218
Fax: 609-620-3259

or to such other address as may be specified in a notice given by one party to the other party hereunder.

8.9. Entire Agreement; Amendments. This Agreement and the attached exhibits contain the entire agreement and understanding of the parties hereto relating to the subject matter hereof, and merges and supersedes all prior and contemporaneous discussions,

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agreements and understandings of every nature relating to the subject matter. This Agreement may not be changed or modified, except by an Agreement in writing signed by each of the parties hereto.

8.10. Withholding. The Company will withhold from any payments due to Executive hereunder, all taxes, FICA or other amounts required to be withheld pursuant to any applicable law.

8.11. Headings Descriptive. The headings of sections and paragraphs of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement.

8.12. Counterparts. This Agreement may be executed in multiple counterparts, each of which will be deemed to be an original, but all of which together will constitute but one and the same instrument.

[This space left blank intentionally; signature page follows.]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date and year first above written.

		NEOSE TECHNOLOGIES, INC.
		By:	/s/ C. BOYD CLARKE

			C. Boyd Clarke President and Chief Executive Officer

			JOSEPH J. VILLAFRANCA
			/s/ JOSEPH J. VILLAFRANCA

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Exhibit 4.4

Release and Non-Disparagement Agreement

WHEREAS, the Employee’s employment as an executive of the Company has terminated; and

WHEREAS, pursuant to Sections 3 and 5 of the Employment Agreement by and between the Company and the Employee dated as of September___, 2002 (the “Employment Agreement”), the Company has agreed to pay the Employee certain amounts and to provide him or her with certain rights and benefits, subject to the execution of this Release.

NOW THEREFORE, in consideration of these premises and the mutual promises contained herein, and intending to be legally bound hereby, the parties agree as follows:

SECTION 1. Consideration. The Employee acknowledges that: (a) the payments, rights and benefits set forth in Sections 3 and 5 of the Employment Agreement constitute full settlement of all of his or her rights under the Employment Agreement, (b) he or she has no entitlement under any other severance or similar arrangement maintained by the Company, and (c) except as otherwise provided specifically in this Release, the Company does not and will not have any other liability or obligation to the Employee. The Employee further acknowledges that, in the absence of his or her execution of this Release, the payments and benefits specified in Sections 3 and 5 of the Employment Agreement would not otherwise be due to the Employee.

SECTION 2. Release and Covenant Not to Sue. The Employee hereby fully and forever releases and discharges the Company and its parents, affiliates and subsidiaries, including all predecessors and successors, assigns, officers, directors, trustees, employees, agents and attorneys, past and present, from any and all claims, demands, liens, agreements, contracts, covenants, actions, suits, causes of action, obligations, controversies, debts, costs, expenses, damages, judgments, orders and liabilities, of whatever kind or nature, direct or indirect, in law, equity or otherwise, whether known or unknown, arising through the date of this Release, out of his or her employment by the Company or the termination thereof, including, but not limited to, any claims for relief or causes of action under the Age Discrimination in Employment Act, 29 U.S.C. § 621 et seq., or any other federal, state or local statute, ordinance or regulation regarding discrimination in employment and any claims, demands or actions based upon alleged wrongful or retaliatory discharge or breach of contract under any state or federal law. The Employee expressly represents that he or she has not filed a lawsuit or initiated any other administrative proceeding against the Company (including for purposes of this Section 2, its parents, affiliates and subsidiaries), and that he or she has not assigned any claim against the Company (or its parents, affiliates and subsidiaries) to any other person or entity. The Employee further promises not to initiate a lawsuit or to bring any other claim against the Company (or its parents, affiliates and subsidiaries) arising out of or in any way related to his or her employment by the Company or the termination of that employment. The forgoing will not be deemed to release the Company from (a) claims solely to enforce this Release, (b) claims solely to enforce Sections 3 and 5 of the Employment Agreement, (c) claims for indemnification under the Company’s By-Laws, under any indemnification agreement between the Company and the Employee or under any similar

agreement or (d) claims solely to enforce the terms of any equity incentive award agreement between the Employee and the Company. This Release will not prevent the Employee from filing a charge with the Equal Employment Opportunity Commission (or similar state agency) or participating in any investigation conducted by the Equal Employment Opportunity Commission (or similar state agency); provided, however, that any claims by the Employee for personal relief in connection with such a charge or investigation (such as reinstatement or monetary damages) would be barred.

SECTION 3. Restrictive Covenants. The Employee acknowledges that the terms of the Noncompetition and Confidentiality Agreement by and between the Employee and the Company dated _______________ (the “Noncompetition Agreement”) will survive the termination of his or her employment. The Employee affirms that the restrictions contained in the Noncompetition Agreement are reasonable and necessary to protect the legitimate interests of the Company, that he or she received adequate consideration in exchange for agreeing to those restrictions and that he or she will abide by those restrictions.

SECTION 6. Rescission Right. The Employee expressly acknowledges and recites that (a) he or she has read and understands this Release in its entirety, (b) he or she has entered into this Release knowingly and voluntarily, without any duress or coercion; (c) he or she has been advised orally and is hereby advised in writing to consult with an attorney with respect to this Release before signing it; (d) he or she was provided 21 calendar days after receipt of the Release to consider its terms before signing it (or such longer period as is required for this Release to be effective under the Age Discrimination in Employment Act or any similar state law); and (e) he or she is provided seven (7) calendar days from the date of signing to terminate and revoke this Release (or such longer period required by applicable state law), in which case this Release shall be unenforceable, null and void. The Employee may revoke this Release during those 7 days (or such longer period required by applicable state law) by providing written notice of revocation to the Company.

SECTION 7. Challenge. If the Employee (i) violates or challenges the enforceability of any provisions of this Release, or (ii) violates any provision contained in Section 7 of the Employment Agreement, no further payments, rights or benefits under Sections 3 and 5 of the Employment Agreement will be due to the Employee.

SECTION 8. Miscellaneous.

8.2. No Reinstatement. The Employee agrees that he or she will not apply for reinstatement with the Company or seek in any way to be reinstated, re-employed or hired by the Company in the future.

[This space left blank intentionally; signature page follows.]

IN WITNESS WHEREOF, the Company has caused this Release to be executed by its duly authorized officer, and the Employee has executed this Release, in each case as of the date first above written.

		NEOSE TECHNOLOGIES, INC.
		By:
		Name & Title:

			EMPLOYEE

EX-99.1 9 dex991.htm CERTIFICATE CERTIFICATE

Exhibit 99.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Neose Technologies, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, C. Boyd Clarke, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


/s/ C. BOYD CLARKE

C. Boyd Clarke President and Chief Executive Officer

November 13, 2002

EX-99.2 10 dex992.htm CERTIFICATE CERTIFICATE

Exhibit 99.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Neose Technologies, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert I. Kriebel, Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


/s/ ROBERT I. KRIEBEL

Robert I. Kriebel Principal Financial Officer

November 13, 2002

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NEOSE TECHNOLOGIES, INC.

Name & Title: