EXHIBIT 10.16
LECTEC CORPORATION
CHANGE IN CONTROL
TERMINATION PAY PLAN
39
LECTEC CORPORATION
CHANGE IN CONTROL
TERMINATION PAY PLAN
TABLE OF CONTENTS
PAGE
SECTION 1. INTRODUCTION 1
SECTION 2. PARTICIPATION 1
SECTION 3. TERMINATION OF EMPLOYMENT 1
3.1. Notice of Termination
3.2. Participant's Termination Rights
SECTION 4. TERMINATION PAYMENT 2
4.1. Qualification
4.2. Amount
4.2.1. Class I Participants
4.2.2. Class II Participants
4.3. Time and Form of Cash Payment
4.4. ERISA Limitation
4.5. Legal Fees and Expenses
SECTION 5. 280G LIMITATION 4
SECTION 6. AMENDMENT OR TERMINATION OF THE PLAN 5
SECTION 7. MISCELLANEOUS PROVISIONS 5
7.1. Nonexclusivity of Rights
7.2. Successors
7.3. Notice
7.4. Governing Law
7.5. Validity
7.6. Employment
7.7. Termination Prior to a Change in Control.
SECTION 8. CLAIMS PROCEDURE 6
8.1. General
8.2. Making a Claim
8.3. Requesting Review of a Denied Claim
8.4. Exhaustion of Administrative Remedies
8.5. Decisions
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SECTION 9. DEFINITIONS 7
9.1. Cause
9.2. Change in Control
9.3. Code
9.4. Continuing Director
9.5. Date of Termination
9.6. Effective Date
9.7. Employer
9.8. Good Reason
9.9. Notice of Termination
9.10. Participant
9.11. Plan
9.12. Plan Year
9.13. Termination of Employment
SCHEDULE A A-1
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SECTION 1
INTRODUCTION
Effective May 27, 1998, LecTec Corporation, a Minnesota corporation (hereinafter
sometimes referred to as "Employer"), hereby creates a change in control
termination pay plan for the benefit of certain employees of the Employer in the
event of a Change in Control. Capitalized terms used herein shall have the
meaning provide in Section 9.
SECTION 2
PARTICIPATION
All Participants in the Plan shall be identified in Schedule A attached.
Participants shall be classified as Class I or Class II Participants. An
employee who has become a Participant shall be considered to continue as a
Participant in the Plan until the date of the Participant's death or, if
earlier, the date when the Participant is no longer employed by the Employer;
provided, however, that a Participant who has a Termination of Employment within
12 months following the date of a Change in Control will not cease to be a
Participant.
SECTION 3
TERMINATION OF EMPLOYMENT
3.1 NOTICE OF TERMINATION. Any purported termination of a Participant's
employment by the Employer or the Participant (including a Termination of
Employment) (other than by reason of the Participant's death) within twelve (12)
months following the month in which a Change in Control occurs, shall be
communicated by Notice of Termination to the other. No purported termination by
the Employer of a Participant's employment shall be effective if it is not
pursuant to a Notice of Termination. Failure by a Participant to provide Notice
of Termination shall not limit any rights of the Participant under the Plan
except to the extent the Employer can demonstrate that it suffered actual
damages by reason of such failure.
3.2 PARTICIPANT'S TERMINATION RIGHTS. A Participant's right to terminate
his or her employment pursuant to the terms of the Plan shall not be affected by
the Participant's incapacity due to physical or mental illness. A Participant's
continued employment shall not constitute consent to, or a waiver of rights with
respect to, any circumstance constituting Good Reason pursuant to the terms of
the Plan. Termination by a Participant of the Participant's employment for Good
Reason shall constitute termination for Good Reason for all purposes of the
Plan, notwithstanding that the Participant may also thereby be deemed to have
"retired" under any applicable retirement programs of the Employer.
SECTION 4
TERMINATION PAYMENT
4.1 QUALIFICATION. To qualify for a termination payment under the Plan, a
Participant must (a) be a Participant as of the date of the Change in Control,
and (b) have a Termination of Employment within 12 months following a Change in
Control.
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4.2 AMOUNT. Subject to the eligibility requirement set forth in Section
4.1, and the limitations set forth in Section 4.4 and Section 5, termination
payments for Class I and Class II Participants shall be determined as follows:
4.2.1 CLASS I PARTICIPANTS. Termination payments shall be made to
a Class I Participant in a single sum in an amount equal to the sum of (a)
twenty (20) times the Class I Participant's highest monthly base compensation
during the six (6) months immediately before the Date of Termination, and (b)
all annual incentive payments that the Class I Participant would have received
for the year in which the Date of Termination occurs, had required performance
targets been met, which shall be deemed to have occurred on the Date of
Termination, whether or not they have occurred or could possibly occur.
Additionally, the Class I Participant shall receive the following:
(a) until the end of the twentieth (20th) month following the month in which
occurs the Class I Participant's Date of Termination, the Employer will arrange
to provide the Class I Participant with welfare benefits (including life and
health insurance benefits) and other employee benefits of substantially similar
design and cost (to the Class I Participant) as the welfare benefits and other
employee benefits available to the Class I Participant immediately prior to the
Notice of Termination or immediately prior to the date of the Change in Control,
whichever is greater; but benefits otherwise receivable by the Class I
Participant pursuant to this clause (a) shall be discontinued if the Class I
Participant obtains full-time employment providing welfare benefits during such
period following such termination; and (b) group outplacement counseling
services for twenty (20) months from the Date of Termination up to $10,000 in
value. Notwithstanding the foregoing, the Employer shall not be required to
continue to provide disability benefits following a Class I Participant's Date
of Termination other than with respect to benefits to which the Class I
Participant became entitled prior to the Date of Termination and which are
required to be paid following such Date of Termination in accordance with the
terms of applicable disability plans or policies in effect prior to such Date of
Termination. The Class I Participant shall not be required to mitigate the
amount of any payment provided for under the Plan by seeking other employment or
otherwise, nor shall the amount of any payment provided for under the Plan be
reduced by any compensation earned by the Class I Participant as the result of
employment by another employer after the Date of Termination, or otherwise,
except as set forth in clause (a) of this paragraph.
4.2.2 CLASS II PARTICIPANTS. Termination payments shall be made
to a Class II Participant in a single sum in an amount equal to the sum of (a)
twelve (12) times the Class II Participant's highest monthly base compensation
during the six (6) months immediately before the Date of Termination, and (b)
all annual incentive payments that the Class II Participant would have received
for the year in which the Date of Termination occurs, had required performance
targets been met, which shall be deemed to have occurred on the Date of
Termination, whether or not they have occurred or could possibly occur.
Additionally, the Class II Participant shall receive the following:
(a) until the end of the twelfth (12th) month following the month in which
occurs the Class II Participant's Date of Termination, the Employer will arrange
to provide the Class II Participant with welfare benefits (including life and
health insurance benefits) and other employee benefits of substantially similar
design and cost (to the Class II Participant) as the welfare benefits and other
employee benefits available to the Class II Participant immediately prior to the
Notice of Termination or immediately prior to the date of the Change in Control,
whichever is greater; but benefits otherwise receivable by the Class II
Participant pursuant to this clause (a) shall be discontinued if the Class II
Participant obtains full-time employment providing welfare benefits during such
period following such termination; and (b) group outplacement counseling
services for twelve (12) months from the Date of Termination up to $5,000 in
value. Notwithstanding the foregoing, the Employer shall not be required to
continue to provide disability benefits following a Class II Participant's Date
of Termination other than with respect to benefits to which the Class II
Participant became entitled prior to the Date of Termination and which are
required to be paid following such Date of Termination in accordance with the
terms of applicable disability plans or policies in effect prior to such Date of
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Termination. The Class II Participant shall not be required to mitigate the
amount of any payment provided for under the Plan by seeking other employment or
otherwise, nor shall the amount of any payment provided for under the Plan be
reduced by any compensation earned by the Class II Participant as the result of
employment by another employer after the Date of Termination, or otherwise,
except as set forth in clause (a) of this paragraph.
4.3 TIME AND FORM OF CASH PAYMENT. If a Participant is eligible to
receive a cash termination payment under the Plan, payment will be made to the
Participant in a single lump sum cash payment within sixty (60) days after the
Date of Termination. If a Participant should die before the Participant actually
receives payment, payment will be made to the Participant's estate.
4.4 ERISA LIMITATION. No termination payment under the Plan shall in the
aggregate provide for payment in excess of twice a Participant's annual
compensation during the Plan Year immediately preceding the termination of the
Participant's employment. Annual compensation for determining the limitation in
the preceding sentence means the total of all compensation, including wages,
salary, incentive payments, and any other benefit of monetary value, whether
paid in the form of cash or otherwise, which was paid as consideration for a
Participant's service during the year, or which should have been so paid at the
Participant's usual rate and compensation if the Participant had worked a full
year. To the extent that a termination payment would exceed the foregoing
limitation, payment under the Plan shall be reduced.
4.5 LEGAL FEES AND EXPENSES. The Employer will pay any legal fees and
expenses incurred by a Participant (a) as a result of successful litigation
against the Employer or Employer for nonpayment of any benefit under the Plan or
(b) in connection with any dispute with any Federal, state or local governmental
agency with respect to benefits claimed under the Plan. If the Participant
utilizes arbitration to resolve any such dispute, the Employer will pay any
legal fees and expenses incurred by the Participant in connection therewith.
SECTION 5
280G LIMITATION
The amount of any cash payment to be received by a Participant pursuant to the
Plan shall be reduced (but not below zero) by the amount, if any, necessary to
prevent any part of any payment or benefit received or to be received by the
Participant in connection with a Change in Control of the Employer or the
termination of the Participant's employment (whether payable pursuant to the
terms of the Plan or any other plan, contract, agreement or arrangement with the
Employer, with any person whose actions result in a Change in Control of the
Employer or with any person constituting a member of an "affiliated group" (as
defined in section 280G(d)(5) of the Code)) (such foregoing payments or benefits
referred to collectively as the "Total Payments"), from being treated as an
"excess parachute payment" within the meaning of section 280G(b)(l) of the Code,
but only if and to the extent such reduction will also result in, after taking
into account all applicable state or federal taxes (computed at the highest
marginal rate) including any taxes payable pursuant to section 4999 of the Code,
a greater after-tax benefit to the Participant than the after-tax benefit to the
Participant of the Total Payments computed without regard to any such reduction.
For purposes of the foregoing, (a) no portion of the Total Payments shall be
taken into account which in the opinion of tax counsel selected by the Employer
and acceptable to the Participant does not constitute a "parachute payment"
within the meaning of section 280G(b)(2) of the Code; (b) any reduction in
payments pursuant to the Plan shall be computed by taking into account that
portion of Total Payments which constitute reasonable compensation within the
meaning of section 280G(b)(4) of the Code in the opinion of such tax counsel;
(c) the value of any non-cash benefit or of any deferred cash payment included
in the Total Payments shall be determined by the Employer in accordance with the
principles of section 280G(d)(4) of the Code; and (d) in the event of any
uncertainty as to whether a reduction in Total Payments to the Participant is
required pursuant to the Plan, the
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Employer shall initially make the payment to the Participant and the Participant
shall be required to refund to the Employer any amounts ultimately determined
not to have been payable under the terms of the Plan.
SECTION 6
AMENDMENT OR TERMINATION OF THE PLAN
The Plan may not be amended if any amendment would adversely affect the rights,
expectancies or benefits of any Participant under the Plan (as in effect
immediately prior to the amendment) unless such amendment is consented to in
writing by 75% of all Participants under the Plan (including the estate of any
deceased Participant if the estate would have a claim for benefits under the
Plan) on the effective date of such amendment. Similarly the Plan may not be
terminated unless such termination is consented to in writing by 75% of all such
Participants on the date of such termination. If any of these actions are taken,
affected Participants will be notified. Except to the extent benefits have
become payable but have not actually been paid, the Plan terminates
automatically on the second anniversary of the date of a Change in Control.
SECTION 7
MISCELLANEOUS PROVISIONS
7.1 NONEXCLUSIVITY OF RIGHTS. Nothing in the Plan shall prevent or limit
any Participant's continuing or future participation in any benefit, bonus,
incentive, retirement or other plan or program provided by the Employer and for
which the Participant may qualify, nor shall anything in the Plan limit or
reduce such rights as any Participant may have under any other agreement with,
or plan, program, policy or practice of, the Employer. Amounts which are vested
benefits or which a Participant is otherwise entitled to receive under any
agreement with, or plan, program, policy or practice of, the Employer shall be
payable in accordance with such agreement, plan, program, policy or practice,
except as explicitly modified by the Plan.
7.2 SUCCESSORS. The Employer will require any successor (whether direct
or indirect, by purchase, merger, consolidation, or otherwise) to all or
substantially all of the business and/or assets of the Employer or of any
division or subsidiary thereof employing any Participant to expressly assume and
agree to perform under the terms of the Plan in the same manner and to the same
extent that the Employer would be required to perform if no such succession had
taken place. Failure of the Employer to obtain such assumption and agreement
prior to the effectiveness of any such succession shall entitle each affected
Participant to compensation from the Employer in the same amount and on the same
terms as the Participant would be entitled under the Plan if the Participant
terminated employment for Good Reason following a Change in Control, except that
for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of Termination and Notice
of Termination shall be deemed to have been given on such date.
7.3 NOTICE. Notices and all other communications provided for under the
Plan shall be in writing and shall be deemed to have been duly given when
delivered or mailed by United States registered mail, postage prepaid, addressed
to the other party as follows:
If to the Employer, to:
LecTec Corporation
Attention: Corporate Secretary
10701 Red Circle Drive
Minnetonka, Minnesota 55343
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If to the Participant, to the address shown on the records of the Employer,
which the Employer shall keep up to date.
Either party may change its address for purposes of this Section 7.3 by giving
appropriate notice to the other party.
7.4 GOVERNING LAW. The validity, interpretation and construction of the
Plan shall be governed by the laws of the State of Minnesota, except to the
extent that federal law controls.
7.5 VALIDITY. The invalidity or unenforceability of any provision of the
Plan shall not affect the validity or enforceability of any other provision of
the Plan, which shall remain in full force and effect.
7.6 EMPLOYMENT. The Plan does not constitute a contract of employment or
impose on the Employer any obligation to retain any Participant as an employee,
to continue any Participant's current employment status or to change any
employment policies of the Employer.
7.7. TERMINATION PRIOR TO A CHANGE IN CONTROL. Any termination of the
Participant's employment by the Employer without Cause prior to a Change in
Control which occurs at the request or insistence of any person (other than the
Employer) in connection with a Change in Control shall be deemed to have
occurred after the Change in Control for purposes of the Plan.
SECTION 8
CLAIMS PROCEDURE
8.1 GENERAL. If a Participant believes that he or she may be entitled to
benefits, or the Participant is in disagreement with any determination that has
been made, the Participant may present a claim to the Employer.
8.2 MAKING A CLAIM. A Participant's claim must be written and must be
delivered to the Employer. Within 30 days after delivery of such claim, the
Participant shall receive either: (a) a decision; or (b) a notice describing
special circumstances requiring a specified amount of additional time (but no
more than 60 days from the date of delivery of such claim) to reach a decision.
If such claim is wholly or partially denied, the Participant shall receive a
written notice specifying: (a) the reasons for denial; (b) the Plan provisions
on which the denial is based; and (c) any additional information needed from the
Participant in connection with the claim and the reason such information is
needed. The Participant also shall receive a copy of Section 8.3 below
concerning the Participant's right to request a review.
8.3 REQUESTING REVIEW OF A DENIED CLAIM. A Participant may request that a
denied claim be reviewed. Such request for review must be written and must be
delivered to the Employer within 30 days after the Participant receives the
written notice that the Participant's claim was denied. Such request for review
may (but is not required to) include issues and comments the Participant wants
considered in the review. The Participant may examine pertinent Plan documents
by asking the Employer. Within 30 days after delivery by the Participant of the
Participant's request for review, the Participant shall receive either: (a) a
decision; or (b) a notice describing special circumstances requiring a specified
amount of additional time (but no more than 60 days from the date of delivery of
such request for review) to reach a decision. The decision shall be in writing
and shall specify the Plan provisions on which it is based.
8.4 EXHAUSTION OF ADMINISTRATIVE REMEDIES. No Participant (nor the estate
of any deceased Participant) may commence any legal action to recover Plan
benefits or to enforce or clarify rights under
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the Plan under Section 502 or Section 510 of ERISA, or under any other provision
of law, whether or not statutory, until the claims and review procedures set
forth herein have been exhausted in their entirety.
8.5 DECISIONS. All decisions on claims and on reviews of denied claims
will be made by the Employer. The Employer may, in its discretion, hold one or
more hearings. If a Participant does not receive a decision within the specified
time, the Participant should assume. that the claim was denied or re-denied on
the date the specified time expired. The Employer reserves the right to delegate
its authority to make decisions.
SECTION 9
DEFINITIONS
When the following terms are used in this document with initial capital letters,
they shall have the following meanings.
9.1 CAUSE -- shall mean (i) the willful and continued failure by a
Participant to resume substantial performance of the Participant's duties with
the Employer on a continuous basis within fourteen (14) days after receiving
from the Employer a demand for substantial performance that specifically
identifies the manner in which the Employer believes that the Participant has
not substantially performed the Participant's duties (other than any such
failure resulting from a Participant's disability or from termination by a
Participant for Good Reason), (ii) the willful engaging by a Participant in
conduct which is demonstrably and materially injurious to the Employer,
monetarily or otherwise, or (iii) a Participant's conviction of a felony which
impairs the Participant's ability substantially to perform the Participant's
duties with the Employer. For purposes of this definition, no act, or failure to
act, on a Participant's part shall be deemed "willful" unless done, or omitted
to be done, by the Participant with reasonable belief that the Participant's
action or omission was not in the best interest of the Employer. Failure by a
Participant to perform the Participant's duties with the Employer during any
period of disability shall not constitute Cause.
9.2 CHANGE IN CONTROL -- shall mean:
(a) a change in control of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), whether or not the
Employer is then subject to such reporting requirement; or
(b) the public announcement (which, for purposes of this
definition, shall include, without limitation, a report filed
pursuant to Section 13(d) of the Exchange Act) by the Employer
or any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) that such person has become the
"beneficial owner" (as defined in Rule 13d-3 promulgated under
the Exchange Act), directly or indirectly, of securities of
the Employer (i) representing 25% or more, but not more than
50%, of the combined voting power of the Employer's then
outstanding securities unless the transaction resulting in
such ownership has been approved in advance by the Continuing
Directors (as hereinafter defined) or (ii) representing more
than 50% of the combined voting power of the Employer's then
outstanding securities (regardless of any approval by the
Continuing Directors); provided, however, that notwithstanding
the foregoing, no Change in Control shall be deemed to have
occurred for purposes of the Plan by reason of the ownership
of 25% or more of the total voting capital stock of the
Employer then issued and outstanding by the Employer, any
subsidiary of the Employer or any employee benefit plan of the
Employer or of any subsidiary of the Employer or any entity
holding shares of the common stock organized,
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appointed or established for, or pursuant to the terms of, any
such plan (any such person or entity described in this clause
is referred to herein as a "Employer Entity"); or
(c) the announcement of a tender offer by any person or entity
(other than an Employer Entity) for 20% or more of the
Employer's voting capital stock then issued and outstanding,
which tender offer has not been approved by the Board, a
majority of the members of which are Continuing Directors, and
recommended to the shareholders of the Employer; or
(d) the Continuing Directors cease to constitute a majority of the
Employer's Board of Directors; or
(e) the shareholders of the Employer approve (i) any consolidation
or merger of the Employer in which the Employer is not the
continuing or surviving corporation or pursuant to which
shares of Employer stock would be converted into cash,
securities or other property, other than a merger of the
Employer in which shareholders immediately prior to the merger
have the same proportionate ownership of stock of the
surviving corporation immediately after the merger; (ii) any
sale, lease, exchange or other transfer (in one transaction or
a series of related transactions) of all or substantially all
of the assets of the Employer; or (iii) any plan of
liquidation or dissolution of the Employer.
9.3 CODE -- shall mean the Internal Revenue Code of 1986, as amended.
9.4 CONTINUING DIRECTOR -- shall mean any person who is a member of the
Board of Directors of the Employer, while such person is a member of the
Board of Directors, who is not an Acquiring Person (as hereinafter
defined) or an Affiliate or Associate (as hereinafter defined) of an
Acquiring Person, or a representative of an Acquiring Person or of any
such Affiliate or Associate, and who (i) was a member of the Board of
Directors as of the Effective Date or (ii) subsequently becomes a member
of the Board of Directors, if such person's initial nomination for
election or initial election to the Board of Directors is recommended or
approved by a majority of the Continuing Directors. For purposes of this
definition. "Acquiring Person" shall mean any "person" (as such term is
used in Sections 13(d) and 14(d) of the Exchange Act) who or which,
together with all Affiliates and Associates of such person, is the
"beneficial owner" (as defined in Rule 13d-3 promulgated under the
Exchange Act), directly or indirectly, of securities of the Employer
representing 20% or more of the combined voting power of the Employer's
then outstanding securities, but shall not include the Investors or any
Employer Entity; and "Affiliate" and "Associate shall have their
respective meanings ascribed to such terms in Rule 12b-2 promulgated
under the Exchange Act.
9.5 DATE OF TERMINATION -- shall mean the date specified in the Notice of
Termination (except in the case of a Participant's death, in which case
Date of Termination shall be the date of death); provided, however, that
if the Participant's employment is terminated by the Employer, the date
specified in the Notice of Termination shall be at least 30 days from
the date the Notice of Termination is given to the Participant and if
the Participant's employment is terminated by the Participant for Good
Reason, the date specified in the Notice of Termination shall not be
more than 60 days from the date the Notice of Termination is given to
the Employer.
9.6 EFFECTIVE DATE -- shall mean May 27, 1998.
9.7 EMPLOYER -- shall mean LecTec Corporation, a Minnesota corporation,
or any successor thereto pursuant to Section 7.2 hereof or by operation
of law.
9.8 GOOD REASON -- shall mean the occurrence, without a Participant's
express written consent, within 12 months following a Change in Control
of any one or more of the following:
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(a) a significant reduction by the Employer in the Participant's base
salary as in effect immediately prior to the Change in Control or
as the same shall be increased from time to time;
(b) the Employer's requiring the Participant to be based at a location
in excess of thirty (30) miles from the location of the
Participant's office immediately prior to the Change in Control:
(c) the failure by the Employer to (i) continue in effect any material
compensation or benefit plan, program, policy or practice in which
the Participant was participating at the time of the Change in
Control or (ii) provide the Participant with compensation and
benefits at least equal (in terms of benefit levels and/or reward
opportunities) to those provided for under each employee benefit
plan, program, policy and practice as in effect immediately prior
to the Change in Control (or as in effect following the Change in
Control, if greater);
(d) the failure of the Employer to obtain a satisfactory agreement from
any successor to the Employer to assume and agree to perform under
the Plan, as contemplated in Section 7.2 hereof;
(e) any purported termination by the Employer of the Participant's
employment that is not effected pursuant to a Notice of Termination
(as hereinafter defined); and
(f) the assignment by the Employer to the Participant of any duties
inconsistent in any respect with Participant's position (including
status, offices, titles, and reporting requirements), authorities,
duties, or other responsibilities as in effect immediately prior to
the Change in Control or any other action of the Employer which
results in a diminishment in such position, authority, duties, or
responsibilities, other than an insubstantial and inadvertent
action which is remedied by the Employer promptly after receipt of
notice thereof given by the Participant.
9.9 NOTICE OF TERMINATION -- shall mean a written notice which shall set
forth the Date of Termination and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the
Participant's employment.
9.10 PARTICIPANT -- shall mean the employees of the Employer identified on
Schedule A attached to this Plan document, as the same may be added to by the
Employer from time to time. Each Participant shall be assigned to Class I or
Class II as stated on Schedule A.
9.11 PLAN -- shall mean the termination pay plan of the Employer
established for the benefit of the Participants in the event of a Change in
Control. The Plan shall be referred to as the "LecTec Corporation Change in
Control Termination Pay Plan."
9.12 PLAN YEAR -- the twelve consecutive month period ending on any
December 31.
9.13 TERMINATION OF EMPLOYEMENT -- shall mean termination of a
Participant's employment (a) by the Employer for any reason other than Cause or
(b) by a Participant for Good Reason; but shall not include termination by
reason of a Participant's death.
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SCHEDULE A
TO LECTEC CORPORATION
CHANGE IN CONTROL
TERMINATION PAY PLAN
Participants Class
--------------------------------------------------------
Rodney A. Young I
Deborah Moore II
Jane Nichols II
Daniel McWhorter II
Vice President of Operations (future hire) II
Vice President of Sales (future hire) II
Verified as of the 27th day of May, 1998.
/s/Rodney A. Young
-----------------------------------------------
Chairperson of the Board of Directors of LecTec
Corporation
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