Amendment to Employment Agreement
Amendment
to Employment Agreement
This
Amendment to Employment Agreement (this “Amendment”) dated as of May
18, 2010 (“Effective Date”), by and between PharmAthene, Inc., a Delaware
corporation (“Company”)
and Xxxx Xxxxxxx (“Executive”). Executive
and Company are sometimes each referred to in this Amendment as a “Party” and collectively as the
“Parties.”
Background
WHEREAS,
the Parties are parties to that certain Employment Agreement dated as of April
18, 2008, pursuant to which Executive was appointed as Senior Vice President,
Business Development & Strategic Planning of the Company (the “Employment
Agreement”);
WHEREAS,
on March 25, 2010, Executive was appointed President and Chief Operating Officer
of the Company, on May 2, 2010 Executive was appointed as interim Chief
Executive Officer of the Company and on May 17, 2010, he was appointed to serve
as a member of the Board of Directors of the Company (the “Board”), and the
Company and Executive wish to amend the Employment Agreement in the manner set
forth in this Amendment; and
NOW, THEREFORE, in
consideration of the mutual promises, covenants and conditions set forth herein,
the Parties, intending to be legally bound, hereby agree as
follows:
1. It
is understood and agreed that, in accordance with clause (b) of Section 2 of the
Employment Agreement, Executive has been appointed to the position of President
& interim Chief Executive Officer. Accordingly, it is expressly
understood that in this capacity Executive will report to the Board, until
otherwise specified by the Board. Section 2 of the Employment
Agreement is hereby amended accordingly.
2. The
Parties agree that on the Effective Date Executive was granted a stock option to
purchase 100,000 shares of the Company’s common stock (the “Stock Option”) pursuant to the
Company’s 2007 Long-Term Incentive Plan, as amended (“2007 Plan”), and subject
to the terms and conditions of the 2007 Plan and of a stock option agreement
dated as of the Effective Date by the Company and the Executive. The
Stock Option shall have a term of 10 years and, subject to possible acceleration
of vesting as otherwise provided for herein, the Stock Option shall vest in full
on May 2, 2011. The per share exercise price of the Stock Option
shall be the fair market value of a share of the common stock of the Company on
the date of grant as determined by the Company in accordance with the terms of
the 2007 Plan. In the event during the Employment Period (i) the
Executive is not appointed as the Chief Executive Officer of the Company, (ii) a
Change in Control (as defined below) occurs, or (iii) the Executive’s employment
is terminated due to a Termination Without Cause, for Good Reason, or due to
death or Disability, the Stock Option held by the Executive and not then vested
shall become immediately and fully vested. In the event the Executive
is not appointed as the Chief Executive Officer of the Company and someone other
than the Executive is appointed as Chief Executive Officer of the Company (the
“Successor CEO”), all
equity-based awards issued by the Company (including the Stock Option) held by
the Executive and not then vested that would otherwise vest during the 12-month
period following the appointment of the Successor CEO shall become immediately
and fully vested. In the event of a Change in Control during the
Employment Period and a Termination Without Cause or a termination of the
Executive’s employment for Good Reason occurs on or within 3 months of the consummation of
the Change in Control, all equity-based awards issued by the Company held by the
Executive and not then vested shall become immediately and fully
vested.
3. As
used herein and in the Employment Agreement, “Change in Control” means: (i) an
acquisition subsequent to the date hereof by any person, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the “Exchange
Act”)), of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 30% or more of either (A) the then
outstanding shares of common stock of the Company (“Common Stock”) or (B) the
combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors; excluding, however, the
following: (1) any acquisition directly from the Company, other than an
acquisition by virtue of the exercise of a conversion privilege unless the
security being so converted was itself acquired directly from the Company, (2)
any acquisition by the Company and (3) any acquisition by an employee benefit
plan (or related trust) sponsored or maintained by the Company; (ii) the
approval by the stockholders of the Company of a merger, consolidation,
reorganization or similar corporate transaction, whether or not the Company is
the surviving corporation in such transaction, in which outstanding shares of
Common Stock are converted into (A) shares of stock of another company, other
than a conversion into shares of voting common stock of the successor
corporation (or a holding company thereof) representing 80% of the voting power
of all capital stock thereof outstanding immediately after the merger or
consolidation or (B) other securities (of either the Company or another company)
or cash or other property; (iii) the approval by stockholders of the Company of
the issuance of shares of Common Stock in connection with a merger,
consolidation, reorganization or similar corporate transaction in an amount in
excess of 40% of the number of shares of Common Stock outstanding immediately
prior to the consummation of such transaction; (iv) the approval by the
stockholders of the Company of (A) the sale or other disposition of all or
substantially all of the assets of the Company or (B) a complete liquidation or
dissolution of the Company; or (v) the adoption by the Board of Directors of the
Company of a resolution to the effect that any person has acquired effective
control of the business and affairs of the Company.
4. The
Parties agree that, effective immediately upon the hiring of the Successor CEO
and/or upon the Executive’s termination of employment with the Company for any
reason, Executive shall resign as a director of the Company’s Board of
Directors.
5. The
Parties agree that Section 3 of the Employment Agreement is hereby amended as
follows:
(i) the
phrase “$275,126.00” contained in Clause (a) of Section 3 shall be amended to
read “$350,000.00” effective as of May 2, 2010;
(ii) Clause
(b) of Section 3 is amended and superseded in its entirety as follows, without
any further action of any Party:
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“b. Bonus. The
Executive shall be eligible to receive an annual cash bonus of up to an
additional 60% of the Executive’s base salary based upon, in the case of the
fiscal year ending December 31, 2010, the achievement of certain pre-determined
corporate objectives (the achievement of such objectives being determined by the
Compensation Committee), and, for future years, at such percentages and with
such corporate objectives determined by the Compensation Committee in
consultation with the Executive. In addition, the Executive shall be
eligible for an additional cash bonus of 60% of the Executive’s base salary if,
and at such time as, the Executive is not named as the Chief Executive Officer
of the Company during the Employment Period, irrespective of whether the
Executive continues his employment with the Company or if the Executive’s
employment with the Company is terminated.”
;
and
(iii) the
phrase “the costs associated with the use of an automobile in an amount not to
exceed $1,000 per month” contained in Clause (f) of Section 3 shall be amended
to read “the costs associated with the use of an automobile in an amount not to
exceed $1,000 per month through December 31, 2010.”
6. The
Parties agree that Section 8 of the Employment Agreement is amended and
superseded in its entirety as follows:
“8. Termination by Executive for
Good Reason. Any termination of the employment of the
Executive by the Executive for Good Reason which shall be deemed to be
equivalent to a Termination Without Cause. For purposes of this Agreement “Good
Reason” means (i) any material breach by the Company of any of its obligations
under this Agreement; (ii) any material reduction in the Executive’s duties,
authority or responsibilities without the Executive’s consent; (iii) any
assignment to the Executive of duties or responsibilities materially
inconsistent with the Executive’s position and duties contained in this
Agreement without the Executive’s consent; (iv) a relocation of the Company’s
principal executive offices or the Company determination to require the
Executive to be based anywhere other than within 25 miles of the location at
which the Executive on the date hereof performs the Executive’s duties; (v) the
taking of any action by the Company which would deprive the Executive of any
material benefit plan (including, without limitation, any medical, dental,
disability or life insurance); (vi) the failure of the Company to appoint the
Executive as its Chief Executive Officer prior to the time this Agreement
provides for notice of non-extension in respect of the Employment Period
commencing April 18, 2011; (vii) the appointment of a Successor CEO; or (viii)
the failure by the Company to obtain the specific assumption of this Agreement
by any successor or assignee of the Company or any person acquiring
substantially all of the Company’s assets; provided, however, that the Executive
may not terminate the Employment Period for Good Reason unless the Executive
first provides the Company with written notice specifying the Good Reason and
providing the Company with 20 days in which to remedy the stated
reason. Notwithstanding the foregoing, an event described in clause
(vii) above will not constitute Good Reason unless the Executive terminates his
employment within 60 days after the appointment of a Successor
CEO.”
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7. The
Parties agree that Clause (b) of Section 9 of the Employment Agreement is
amended and superseded in its entirety as follows:
“b. Termination Without Cause;
Termination for Good Reason. Upon the termination of the Executive’s
employment as a result of a Termination Without Cause or for Good Reason, the
Executive shall not have any further rights or claims against the Company under
this Agreement except the right to receive (i) the payments and other rights
provided for in Section 9(a) hereof, (ii) severance payments in the form of a
continuation of the Executive’s base salary as in effect immediately prior to
such termination for a period of 12 (twelve) months following the effective date
of such termination, (iii) the accelerated vesting of equity-based awards
specifically as set forth in Section 2 of the Amendment to the Employment
Agreement dated as of May 18, 2010 by and between the Executive and the Company,
and (iv) to the extent that the Executive has elected and is continuing to
receive COBRA continuation coverage under the Company’s group health plan in
accordance with Section 4980B of the Internal Revenue of 1986, as amended (the
“Code”), the Company shall reduce the COBRA premiums that the Executive is
required to pay during the first 12 (twelve) months following his termination of
employment to that the Company charges to its active employees for the same
level of group health coverage.
Notwithstanding the foregoing, the
severance benefits described in clause (ii) and (iii) above and the COBRA
premium subsidy described in clause (iv) above shall be provided in
consideration for, and expressly conditioned upon, the Executive’s execution of
a binding General Release (which shall be provided on or about the date of
termination) containing terms reasonably satisfactory to the Company within 45
days of the Executive’s termination of employment. Subject to Section
24, if the Executive timely executes such General Release and the applicable
revocation period with respect to such General Release lapses, the Executive
will receive the first two months of severance payments 60 days after his
termination of employment and the remaining payments in accordance with the
Company’s payroll practices. If the Executive does not timely execute
the General Release or if the Executive revokes the General Release within the
applicable revocation period prescribed by law, the Executive shall not be
entitled to receive any severance payments and the Executive will be required to
pay 102% of the applicable premium (as defined in Code Section 4980B) for any
COBRA continuation coverage elected by the Executive.”
8. The
Parties agree that Section 9 of the Employment Agreement is amended to add the
following new Clause (e) to the end thereof:
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“e. Rabbi
Trust. If the Executive becomes entitled to receive severance
payments under Clause (b) above, the Executive’s General Release described in
Clause (b) above becomes binding and enforceable, the Company shall establish an
irrevocable grantor trust (a “rabbi trust”), appoint a federally or state
chartered bank or trust company as the trustee for such rabbi trust and shall
contribute 12 months of salary continuation payments to such rabbi
trust. The assets of such rabbi trust shall be used solely to make
the severance payments to the Executive as required under this Agreement (or to
reimburse the Company for severance payments it makes to the Executive); or to
satisfy the claims of the Company’s unsecured general creditors in the event of
the Company’s insolvency or bankruptcy. The rabbi trust may be
terminated and any remaining assets therein shall revert to the Company after
the Executive has received all of the severance payments to which he is entitled
hereunder. Notwithstanding the foregoing, the provisions of this
Section 9(e) shall not apply if the funding of the rabbi trust would subject the
Executive to acceleration of taxation and tax penalties under Section 409A(b) of
the Code.”
9. The
Parties agree that the Employment Agreement is amended so that the following
sentence is added at the end of Section 12 of the Employment
Agreement:
“The
Company shall not, and shall use commercially reasonable efforts to cause its
directors and executive officers not to, disparage the Executive to any person
or entity. Notwithstanding the foregoing, the Company may confer with
its advisors and make truthful statements required by law. In
addition, it is understood and agreed that factual statements made by either
Party in the ordinary course of business, as well as factual statements made in
legal actions, legal proceedings, or government investigative proceedings that
are protected by a qualified privilege or immunity are not intended to be
construed as disparagement.”
10. For
clarity, and for purposes of the Employment Agreement, the appointment of a
Successor CEO shall constitute a material reduction in the Executive’s duties,
authorities or responsibilities (i.e., a “Good Reason” resignation); provided,
however, that the Executive shall only have 60 days following the appointment of
the Successor CEO to tender a resignation for such Good Reason. After
such time, the executive’s duties, authorities and responsibilities shall be
deemed to be those established by the Board and the CEO at such
time.
11. The
Parties agree that Section 24 of the Employment Agreement is amended and
superseded in its entirety as follows:
“24. 409A
Compliance. If Executive is a “specified employee” (as
determined in accordance with Treasury Regulation Section 1.409A-1(i) or any
written Company policy implementing such regulation) at the time of his
termination of employment, then his severance payments that are otherwise
payable during the first six month period following the Executive’s termination
of employment (to the extent that such severance payments constitute
nonqualified deferred compensation within the meaning of Section 409A of the
Code and the regulations promulgated thereunder) shall be deferred until the
date that is six months after the Executive’s termination of employment (or, if
earlier, upon his death). Each salary continuation payment that is
due under this Agreement shall be treated as a separate payment for purposes of
Section 409A Code. This Agreement shall be interpreted to comply, or
otherwise be exempt from, with the requirements of Code Section
409A. Accordingly, references to termination of employment hereunder
shall be interpreted to mean “separation from service” as defined in regulations
under Section 409A of the Code. All expenses under this Agreement
that are reimbursable in accordance with Company policy shall be made as soon as
practicable after Executive’s submission of such expenses in accordance with the
Company’s policy, but in no event later than the last day of the taxable year
following the taxable year in which the expense was incurred.”
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12. Initially
capitalized terms used in this Amendment shall have the meaning given to such
terms in the Employment Agreement (unless otherwise defined herein). Other than
as specifically amended pursuant to this Amendment, all other provisions of the
Employment Agreement shall remain in full force and effect. Upon
execution and delivery of this Agreement by the Parties, the Company will
reimburse Executive for his reasonable legal fees and expenses incurred in
connection with the negotiation and execution of this Amendment in an amount up
to $10,000. All reasonable legal fees paid or incurred by Executive
in any litigation or dispute to enforce Executive’s rights under the Employment
Agreement, as amended hereby, shall be paid or reimbursed by the Company if
Executive is the prevailing party in such litigation or
dispute.
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IN
WITNESS WHEREOF, the Parties hereto have caused this Amendment to be duly
executed as of the date first written above.
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By:
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/s/ Xxxx XxXxxxxx
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Name:
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Xxxx XxXxxxxx
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Title:
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Chairman, Compensation
Committee
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EXECUTIVE
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By:
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/s/
Xxxx Xxxxxxx
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Name:
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Xxxx
Xxxxxxx
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