December 17, 2008
Exhibit 10.1
December 17, 2008
Dear Sudhir:
In order to ensure compliance with Section 409A of the Internal Revenue Code, Idera
Pharmaceuticals, Inc., a Delaware corporation (the “Company”), and you hereby agree to amend that
certain Employment Agreement dated as of October 19, 2005 by and between the Company and you (the
“Employment Agreement”) as follows:
1. Amendment of Section 5(b). Section 5(b) of the Employment Agreement shall be amended by
deleting the last sentence thereof and inserting in lieu therefor the following sentence:
“Any Bonus earned by Executive for service or performance rendered in any
fiscal year within the Employment Period shall be paid to Executive in
accordance with the applicable plan or program, if any, and the Company’s
policies governing such matters; provided, however, that such Bonus shall be
paid to Executive no later than March 15th of the calendar year
following the calendar year in which the Bonus is earned and approved by the
Board or Compensation Committee.”
2. Amendment of Section 6(a). Section 6(a) of the Employment Agreement shall be amended by
deleting the phrase “the Company’s receipt of notification of” where it appears in the first
sentence thereof.
3. Amendment of Sections 6(d) and 6(e). Each of Section 6(d) and Section 6(e) of the
Agreement shall be amended by deleting the third sentence of each such section in its entirety and
inserting in lieu therefor the following sentence:
“In addition, subject to Section 6(h)(i) below and Section 15 below, the Company shall
pay Executive in accordance with the Company’s payroll practices applicable to salaried
executives, Executive’s Base Salary as in effect immediately prior to such termination
for a period commencing on the termination date and ending on the earlier of (x) the
final day of the Employment Period in effect immediately prior to such termination and
(y) the second anniversary of the termination date.”
4. Amendment of Sections 6(h)(i) and (ii). Sections 6(h)(i) and (ii) of the Agreement
shall be amended by deleting them in their entirety and inserting in lieu therefor the following:
“(h) Change of Control.
(i) Continuation of Salary. If Executive’s employment with the
Company is terminated by Executive for Good Reason or by the Company other
than for death, Disability or Cause in connection with, or within one year
after the effective date of, a Change of Control that qualifies as a change
of control event under Section 409A of the Internal Revenue Code, as
amended, and the guidance issued thereunder (the “Code”), in lieu of the
severance payments provided for in the third sentence of Section 6(d) or the
third sentence of Section 6(e), as applicable, the Company shall pay
Executive a lump sum cash payment in an amount equal to Executive’s Base
Salary as in effect immediately prior to the termination date multiplied by
the lesser of (x) the aggregate number of years (or any portion thereof,
calculated on a daily basis) remaining in the Employment Period in effect
immediately prior to such termination and (y) two years. Such amounts shall
be paid to Executive within 10 days after the termination date.
Notwithstanding the foregoing, if the Change of Control does not qualify as
a change of control event under Section 409A of the Code, Executive shall be
entitled to the payments provided for in Section 6(d) or 6(e), as
applicable, on the schedule set forth in Section 6(d) or 6(e), respectively,
in lieu of the severance payments provided for in this Section 6(h)(i).
(ii) Parachute Payments. If all or any portion of the amounts
payable to Executive under this Agreement or otherwise are subject to the
excise tax imposed by Section 4999 of the Code or a similar state tax or
assessment, the Company shall pay to Executive an amount necessary to place
Executive in the same after-tax position as Executive would have been had no
such excise tax or assessment been imposed (the “Gross-Up Payment”). The
Gross-Up Payment shall be increased to the extent necessary to pay income
and excise taxes on such amounts. The determination of any amounts payable
under this Section 6(h)(ii) shall be made by an independent accounting firm
employed by the Company and such determination shall be final, binding and
conclusion on the Parties. The Gross-Up Payment shall be paid to Executive
no later than the end of the taxable year following the taxable year in
which Executive remits to
the Internal Revenue Service or other governmental
taxing authority the taxes related to the Gross-Up Payment.”
5. Addition of New Section 6(i)(D). Section 6(i) of the Employment Agreement shall be
amended by inserting a new subsection 6(i)(D), which shall read in its entirety as follows:
“(D) any coverage provided by the Company pursuant to this Section 6(i) that
continues beyond the COBRA coverage period shall be administered in
accordance with the Company’s payroll practices applicable to salaried
executives.”
6. Addition of New Section 15. The Employment Agreement shall be amended by inserting a
new Section 15, which shall read in its entirety as follows:
“15. Compliance with Section 409A. Subject to the provisions in
this Section 15, any severance payments or benefits under this Agreement
shall begin only upon the date of Executive’s “separation from service”
(determined as set forth below) which occurs on or after the date of
Executive’s termination of employment. The following rules shall apply with
respect to distribution of the payments and benefits, if any, to be provided
to Executive under this Agreement:
(a) It is intended that each installment of the severance payments and
benefits provided under this Agreement shall be treated as a separate
“payment” for purposes of Section 409A of the Code and the guidance issued
thereunder (“Section 409A”). Neither the Company nor Executive shall have
the right to accelerate or defer the delivery of any such payments or
benefits except to the extent specifically permitted or required by Section
409A.
(b) If, as of the date of Executive’s “separation from service” from the
Company, Executive is not a “specified employee” (within the meaning of
Section 409A), then each installment of the severance payments and benefits
shall be made on the dates and terms set forth in this Agreement.
(c) If, as of the date of Executive’s “separation from service” from the
Company, Executive is a “specified employee” (within the meaning of Section
409A), then:
(i) Each installment of the severance payments and benefits due under
this Agreement that, in accordance with the dates and terms set forth
herein, will in all circumstances, regardless of when the separation from
service occurs, be paid within the Short-Term Deferral Period (as
hereinafter defined) shall be treated as a short-term deferral within the
meaning of Treasury Regulation Section 1.409A-1(b)(4) to the maximum extent
permissible under Section 409A. For purposes of this Agreement, the “Short-Term Deferral Period”
means the period ending on the later of the fifteenth day of the third month
following the end of the Executive’s tax year in which the separation from
service occurs and the fifteenth day of the third month following the end of
the Company’s tax year in which the separation from service occurs; and
(ii) Each installment of the severance payments and benefits due under
this Agreement that is not described in Section 15(c)(i) above and that
would, absent this subsection, be paid within the six-month period following
Executive’s “separation from service” from the Company shall not be paid
until the date that is six months and one day after such separation from
service (or, if earlier, Executive’s death), with any such installments that
are required to be delayed being accumulated during the six-month period and
paid in a lump sum on the date that is six months and one day following
Executive’s separation from service and any subsequent installments, if any,
being paid in accordance with the dates and terms set forth herein;
provided, however, that the preceding provisions of this
sentence shall not apply to any installment of severance payments and
benefits if and to the maximum extent that such installment is deemed to be
paid under a separation pay plan that does not provide for a deferral of
compensation by reason of the application of Treasury
Regulation 1.409A-1(b)(9)(iii) (relating to separation pay upon an
involuntary separation from service). Any installments that qualify for the
exception under Treasury Regulation Section 1.409A-1(b)(9)(iii) must be paid
no later than the last day of Executive’s second taxable year following the
taxable year in which the separation from service occurs.
(d) The determination of whether and when Executive’s separation from
service from the Company has occurred shall be made in a manner consistent
with, and based on the presumptions set forth in, Treasury Regulation
Section 1.409A-1(h). Solely for purposes of this Section 15(d), “Company”
shall include all persons with whom the
Company would be considered a single
employer under Section 414(b) and 414(c) of the Code.
(e) All reimbursements and in-kind benefits provided under this Agreement
shall be made or provided in accordance with the requirements of Section
409A to the extent that such reimbursements or in-kind benefits are subject
to Section 409A, including, where applicable, the requirements that (i) any
reimbursement is for expenses incurred during Executive’s lifetime (or
during a shorter period of time specified in this Agreement), (ii) the
amount of expenses eligible for reimbursement during a calendar year may not
affect the expenses eligible for reimbursement in any other calendar year,
(iii) the reimbursement of an eligible expense will be made on or before the
last day of the calendar year following the year in which the expense is
incurred and (iv) the right to reimbursement is not subject to set off or
liquidation or exchange for any other benefit.
(f) Notwithstanding anything herein to the contrary, the Company shall have
no liability to Executive or to any other person if the payments and
benefits provided hereunder that are intended to be exempt from or compliant
with Section 409A are not so exempt or compliant.”
Except as modified by this letter, all other terms and conditions of the Agreement shall remain in
full force and effect. This letter may be executed in counterparts, each of which shall be deemed
to be an original, and all of which shall constitute one and the same document.
Very truly yours,
By:
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/s/ XXXXX X. XXXXXX, III
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| Chief Financial Officer | ||||
| Acknowledged and agreed: | ||||
| /s/ XXXXXX XXXXXXX | ||||
| Xxxxxx Xxxxxxx | ||||
