EXHIBIT 99.1
EMPLOYMENT AGREEMENT
This AGREEMENT is made as of the 31st day of January, 2006, by and between
Novelos Therapeutics, Inc., a Delaware corporation, with its principal office in
Newton, Massachusetts (the "Company"), and Xxxxx Xxxxxx of Boston, Massachusetts
(the "Executive").
WITNESSETH
WHEREAS, the Company and the Executive desire to set forth the terms and
conditions on which, from and after the Effective Date, (i) the Company shall
employ the Executive, (ii) the Executive shall render services to the Company,
and (iii) the Company shall compensate the Executive for such services;
NOW THEREFORE, in consideration of the mutual covenants contained herein,
the Company and the Executive (individually a "Party" and together the
"Parties") agree as follows:
1. EMPLOYMENT
1.1. TERM OF EMPLOYMENT. This Agreement shall be effective on January 1,
2006 (the "Effective Date") and end at the close of business on the second
anniversary of the Effective Date (the "Initial Term"); provided, however, that
the Initial Term shall thereafter be automatically extended for additional
one-year periods (together with the Initial Term, the "Term") unless either the
Company or the Executive gives the other written notice at least 90 days prior
to the then-scheduled expiration of the Term that such Party is electing not to
so extend the Term. Notwithstanding the foregoing, the Term shall end on the
date on which the Executive's employment is terminated by either Party in
accordance with the provisions herein.
1.2. TITLE AND RESPONSIBILITIES. The Executive shall serve the Company as
President, Chief Executive Officer and a Director. In such positions, the
Executive shall have the duties, responsibilities and authorities as determined
and designated from time to time by the board of directors of the Company,
including, without limitation, management authority with respect to, and
responsibility for, the overall day-to-day business and affairs of the Company.
The Executive shall serve under the direction and supervision of, and report to,
the board of directors. Notwithstanding the above, the Executive shall not be
required to perform any duties and responsibilities which would result in
noncompliance with or violation of any applicable law or regulation.
2. COMPENSATION AND BENEFITS. The compensation and benefits payable to the
Executive under this Agreement shall be as follows:
2.1. SALARY. For all services rendered by the Executive to the Company, the
Executive shall be entitled to receive a base salary at the rate of $225,000 per
year beginning January 1, 2006. The Executive's base salary shall be reviewed
annually by the compensation committee of the board of directors, with the first
review no later than January 1, 2007, and shall be subject to increase from time
to time as approved by the compensation committee of the board of directors. In
addition, if the compensation committee of the board of directors increases the
Executive's
annual base salary, such increased annual base salary shall become a floor below
which such annual base salary shall not fall without the Executive's written
consent. The Executive's salary shall be payable in periodic installments in
accordance with the Company's usual practice for its senior executives.
2.2. BONUS. The compensation committee of the board of directors shall
determine, on an annual basis, the amount of any bonus to be paid to the
Executive.
2.3. REGULAR BENEFITS. The Executive shall also be entitled to participate
in any and all employee benefit plans, medical insurance plans, disability
income plans, retirement plans, bonus incentive plans, and other benefit plans
from time to time in effect for senior executives of the Company. Such
participation shall be subject to (i) the terms of the applicable plan
documents, (ii) generally applicable policies of the Company and (iii) the
discretion of the board of directors of the Company or any administrative or
other committee provided for in or contemplated by such plan.
2.4. BUSINESS EXPENSES. The Company shall reimburse the Executive for all
reasonable travel and other business expenses incurred by the Executive in the
performance of his duties and responsibilities, subject to such reasonable
requirements with respect to substantiation and documentation as may be
specified by the Company.
2.5. VACATION. The Executive shall be entitled to 4 weeks of paid vacation
per year, to be taken at such times and intervals as shall be determined by the
Executive consistent with his responsibilities.
3. SERVICE.
3.1. EXTENT OF SERVICE. The Executive shall, subject to the direction and
supervision of the board of directors, devote his full time, best efforts and
business judgment, skill and knowledge to the advancement of the Company's
interests and to the discharge of his duties and responsibilities hereunder;
provided, however, that nothing herein shall be construed as preventing the
Executive from:
(a) investing his assets in such form or manner as shall not require
any material services on his part in the operations or affairs of the
companies or the other entities in which such investments are made;
(b) serving on the board of directors of any company, provided that he
obtains the prior approval of a majority of the board of directors and
shall not be required to render any material services with respect to the
operations or affairs of any such company; or
(c) engaging in religious, charitable or other community or non-profit
activities which do not impair his ability to fulfill his duties and
responsibilities under this Agreement.
4. TERMINATION BY THE COMPANY FOR CAUSE.
4.1. TERMINATION BY COMPANY. The Executive's employment hereunder may be
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terminated by the Company, without further liability on the part of the Company,
effective immediately, by the board of directors for Cause (as such term is
defined in Section 4.2) by written notice to the Executive setting forth in
reasonable detail the nature of such Cause, provided that the board of directors
has complied with the provisions of Section 4.3.
4.2. CAUSE. Termination for "Cause" shall mean:
(a) gross neglect of duties for which employed (other than on account
of a medically determinable disability which renders the Executive
incapable of performing such services);
(b) committing fraud, misappropriation or embezzlement in the
performance of duties as an employee of the Company;
(c) conviction or guilty or nolo plea of a felony or misdemeanor
involving moral turpitude; or
(d) willfully engaging in conduct materially injurious to the Company
or violating a covenant contained in this Agreement.
4.3. TERMINATION PROCEDURE. In each case, in determining Cause the alleged
acts or omissions of the Executive shall be measured against standards
prevailing in the industry generally and the ultimate existence of Cause must be
confirmed by a majority of the board of directors (excluding the Executive) at a
meeting prior to any termination therefor. In the event of such a confirmation
by two-thirds or more of the board of directors, the Company shall notify the
Executive that the Company intends to terminate the Executive's employment for
Cause under this Section 4 (the "Confirmation Notice").
4.4. TERMINATION OF OBLIGATIONS. In the event of termination pursuant to
Section 4, all obligations of the Company under this Agreement, other than the
Company's obligations under the provisions of COBRA, shall terminate as of the
date specified in the Confirmation Notice, but vested rights of the parties
hereunder as of such date shall not be affected.
5. TERMINATION BY THE EXECUTIVE
5.1. TERMINATION BY THE EXECUTIVE FOR GOOD REASON. The Executive shall be
entitled to terminate his employment hereunder for Good Reason (as defined in
Section 5.3) effective immediately by giving written notice to the board of
directors. Upon any such termination, the Executive shall be entitled to receive
the benefits set forth in Section 6.
5.2. OTHER VOLUNTARY TERMINATION BY THE EXECUTIVE. The Executive may
effect, upon thirty (30) days prior written notice to the Company, which notice
may be waived by the Company, a Voluntary Termination of his employment
hereunder. A "Voluntary Termination" shall mean a termination of employment by
the Executive on his own initiative other than a termination for Good Reason. If
the Executive's employment is so terminated due to Voluntary Termination, the
Executive shall be entitled to his base salary up to the date of termination.
Provision of medical benefits shall be in accordance with the provisions of
COBRA.
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5.3. GOOD REASON. For purposes of this Agreement, the term "Good Reason"
shall mean any of the following:
(a) the failure of the board of directors of the Company to elect the
Executive to the offices of President and Chief Executive Officer, or to
continue the Executive in such offices;
(b) the failure by the stockholders of the Company to continue to
elect the Executive to the board of directors of the Company;
(c) the failure by the Company to pay compensation as provided for in
Sections 2.1, 2.2 or 2.3, which failure is not cured within five (5)
business days after notice by the Executive to the Company except for
across the board cuts applicable to all officers of the Company on an equal
percentage basis; provided that such reduction is approved by the board of
directors of the Company;
(d) relocation of Executive's principal place of employment to a
location beyond 50 miles of Newton, Massachusetts;
(e) there occurs any reduction of base salary or material reduction in
other benefits or any material change by the Company to the Executive's
function, duties, authority, or responsibilities in effect on the date
hereof or as set forth in this Agreement, which change would cause the
Executive's position with the Company to become one of lesser
responsibility, importance, or scope from the position and attributes
thereof in effect on the date hereof or as set forth in this Agreement (and
any such material change shall be deemed a continuing breach of this
Agreement); and
(f) a material breach by the Company of any of the other provisions of
this Agreement which failure or breach shall have continued for thirty (30)
days after written notice from the Executive to the Company specifying the
nature of such failure or breach.
5.4. TERMINATION BY THE COMPANY WITHOUT CAUSE. The Executive's employment
with the Company may be terminated without cause by a majority of the board of
directors of the Company on thirty (30) days prior written notice to the
Executive, provided, however, that the Company shall have the obligation upon
any such termination to make the payments to the Executive provided for under
Section 6 of this Agreement.
6. CERTAIN TERMINATION BENEFITS. In the event of termination pursuant to
Section 5.1 or 5.4, the Executive shall be entitled to each of the following
benefits:
6.1. EARNINGS TO DATE OF TERMINATION. An amount equal to the sum of (a)
base salary or other compensation earned through the date of termination, plus
(b) the Executive's pro rata share (based on the portion of the fiscal year
during which the Executive was employed) of the average of the annual bonus paid
during the two fiscal years preceding the termination of employment (the
"Pre-Termination Compensation").
6.2. PAYMENT OF REMAINING SALARY OBLIGATION. For a period of eleven (11)
months following the date of the Executive's termination, the Executive shall
continue to receive the
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installments of base salary set forth in Section 2.1, payable when and as if the
Executive had continued to be employed by the Company.
6.3. OPTION ACCELERATION AND EXERCISE. Fifty percent (50%) of the
Executive's unvested options shall vest, and all vested options held by the
Executive shall remain exercisable for a period ending on the first anniversary
of termination.
6.4. BENEFIT CONTINUATION. For the eleven (11) month period subsequent to
the date of termination, the Executive shall continue to receive the disability
and medical benefits described in Section 2.3 existing on the date of
termination at the level in effect on, and at the same out-of-pocket cost to the
Executive as of, the date of termination.
The Company's obligation to make payments pursuant to this Section 6 shall
(i) be conditioned upon the Executive's execution of a release in favor of the
Company and its affiliates in the form attached hereto as Exhibit B (which the
Company agrees to execute and deliver simultaneously).
7. DEATH, DISABILITY. The Executive's employment shall terminate immediately
upon the death or Disability of the Executive. "Disability" means Executive's
failure by reason of sickness, accident or physical or mental disability to
substantially perform the duties and responsibilities of his employment with the
Company for a period of ninety (90) consecutive days. In the event of
termination under this Section 7, the Executive or his estate shall receive the
Executive's Pre-Termination Compensation as defined in Section 6.1, and fifty
percent (50%) of the Executive's unvested options shall vest and all vested
options held by the Executive shall remain exercisable for a period ending of
the first anniversary of termination.
8. CHANGE OF CONTROL
8.1. DEFINITION. A "Change of Control" means (i) the sale of all or
substantially all of the assets or issued and outstanding capital stock of the
Company, (ii) merger or consolidation involving the Company in which
stockholders of the Company immediately before such merger or consolidation do
not own immediately after such merger or consolidation capital stock or other
equity interests of the surviving corporation or entity representing more than
fifty percent (50%) in voting power of capital stock or other equity interests
of such surviving corporation or entity outstanding immediately after such
merger or consolidation, or (iii) a change, without the approval of the board of
directors, in the composition of the board of directors such that directors who
were serving as of the date of this Agreement cease to constitute a majority of
the board of directors.
8.2. OPTION VESTING ACCELERATION UPON CHANGE OF CONTROL. If a Change of
Control occurs while the Executive is employed by the Company, then, whether or
not the Executive is terminated in connection with the Change of Control and
notwithstanding any contrary or inconsistent provision of any option granted to
the Executive by the Company, the unvested options held by the Executive
immediately before such Change of Control shall vest upon such Change of Control
and remain exercisable in accordance with the terms of this Agreement and such
options.
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8.3. SECTION 280G. In the event it shall be determined that any amount paid
to the Executive upon a Change of Control (a "Payment") would be subject to the
excise tax imposed by Section 4999 of the Internal Revenue Code (the "Excise
Tax"), then the Executive shall receive an additional payment (a "Gross-Up
Payment") in an amount such that, after payment by the Executive of all taxes,
including without limitation, any income, employment and excise taxes imposed
upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payment, subject to the
following: the Executive shall not pay any Excise Tax without the prior written
consent of the Company, which shall not be unreasonably withheld (provided that
the Company shall pay any penalty imposed on the Executive because of any delay
in paying any Excise Tax caused solely by the Company's failure to grant its
consent), and in the event that the Executive receives any notice of audit from
the Internal Revenue Service, shall promptly so inform the Company, and shall
thereafter cooperate with the Company in connection with any dispute or other
proceedings before the Internal Revenue Service, any other governmental
authority and/or any court proceedings concerning the assessment of any Excise
Tax or the applicability of Section 4999 to any Payment. The Company shall at
its election be entitled to control the conduct of such a dispute or other
proceeding insofar as it relates to the assessment of any Excise Tax or the
applicability of Section 4999 to any Payment, provided, that the Company shall
bear and pay directly all costs and expenses of such dispute and shall indemnify
and hold the Executive harmless for any Excise Tax imposed on a Payment
thereunder.
9. CONFIDENTIAL INFORMATION. The Executive shall not disclose to any other
Person (except as required by applicable law or in connection with the
performance of his duties and responsibilities hereunder), or use for his own
benefit or gain, any confidential information of either Company obtained by him
incident to his employment with the Company. The term "confidential information"
includes, without limitation, financial information, technical information,
designs, business plans, customers, vendors, prospects and opportunities (such
as lending relationships, financial product developments, or possible
acquisitions or dispositions of business or facilities) which have been
discussed or considered by the management of the Company but does not include
any information which has become part of the public domain by means other than
the Executive's nonobservance of his obligations hereunder. The provisions of
this Section 9 shall survive for a period of five years following the
termination of this Agreement.
10. NON-COMPETITION. In the event of termination, the Executive shall not, for
a period of one (1) year after termination, directly or indirectly, alone or as
a partner, officer, director, employee, consultant, agent, or independent
contractor of any company or business organization, (a) engage in any business
activity which is directly or indirectly in competition with the business of the
Company in the area of developing, manufacturing, licensing and distributing
oxidized glutathione based compounds for the treatment of cancer and hepatitis
("Competitive Activity") or (b) solicit or contact in connection with, or in
furtherance of, a Competitive Activity any of the Company's employees,
consultants, agents, suppliers, customers, or prospects that were such with
respect to the Company at any time during the one year immediately preceding the
date of termination or that become such with respect to the Company at any time
during the three (3) months immediately following the date of termination. The
provisions of this Section 10 shall survive the termination of this Agreement.
The Executive represents and warrants that the covenant imposed by this Section
10 would not cause him an undue hardship.
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11. NO MITIGATION; NO OFFSET. In the event of any termination of employment
under this Agreement, the Executive shall be under no obligation to seek other
employment or to mitigate damages, and there shall be no offset against any
amounts due to the Executive under this Agreement for any reason, including,
without limitation, on account of any remuneration attributable to any
subsequent employment that the Executive may obtain. Any amounts due under this
Agreement are in the nature of severance payments or liquidated damages, or
both, and are not in the nature of a penalty.
12. SPECIFIC PERFORMANCE. The Executive agrees that any breach of Sections 9 or
10 of this Agreement by the Executive could cause irreparable damage and that in
the event of such breach the Company shall have, in addition to any and all
remedies available at law or in equity, the right to an injunction, specific
performance or other equitable relief to prevent the violation of the
Executive's obligations hereunder.
13. MISCELLANEOUS.
13.1. CONFLICTING AGREEMENTS. The Executive hereby represents and warrants
that the execution of this Agreement and the performance of his obligations
hereunder shall not breach or be in conflict with any other agreement to which
he is a party or is bound, and that he is not now subject to any covenants
against competition or similar covenants which would affect the performance of
his obligations hereunder.
13.2. DEFINITION OF "PERSON". For purposes of this Agreement, the term
"Person" shall mean an individual, a corporation, an association, a partnership,
an estate, a trust and any other entity or organization.
13.3. WITHHOLDING. All payments made by the Company under this Agreement
shall be net of any tax or other amounts required to be withheld by the Company
under applicable law.
13.4. ARBITRATION.
(a) Except for claims of fraud or intentional misrepresentation which
shall be filed in a state or federal court in The Commonwealth of
Massachusetts, the Executive's ongoing relationship with the Company that
is not resolved by mutual agreement shall be resolved solely and
exclusively by binding arbitration to be conducted in Boston, Massachusetts
before a single arbitrator (the "Arbitrator") and shall be conducted in
accordance with the American Arbitration Association Rules and Procedures
unless specifically modified herein.
(b) The parties covenant and agree that the arbitration shall commence
within 90 days of the date on which a written demand for arbitration is
filed by any party hereto. In connection with the arbitration proceeding,
the Arbitrator shall have the power to order the production of documents by
each party and any third-party witnesses. In addition, each party may take
up to six depositions as of right, and the Arbitrator may in his or her
discretion allow additional depositions upon good cause shown by the moving
party. There shall be no interrogatories or requirements for or response to
requests for admission but the parties may require production of documents.
In connection with any arbitration, each party shall provide to the other,
no later than seven (7) business days before the date
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of the arbitration, the identity of all persons that may testify at the
arbitration and a copy of all documents that may be introduced at the
arbitration or considered or used by a party's witnesses or experts. The
Arbitrator's decision and award shall be made and delivered within six (6)
months of the selection of the Arbitrator. The Arbitrator's decision shall
set forth a reasoned basis for any award of damages or finding of
liability. The Arbitrator shall not have power to award damages in excess
of actual compensatory damages and shall not multiply actual damages or
award punitive damages or any other damages that are specifically excluded
under this Agreement, and each party hereby irrevocably waives any claim to
such damages in connection with any such arbitration.
(c) The parties covenant and agree that they will participate in the
arbitration in good faith and that they will (i) bear their own attorneys'
fees, costs and expenses in connection with the arbitration, and (ii) share
equally in the fees and expenses charged by the Arbitrator. Any party
unsuccessfully refusing to comply with an order of the Arbitrator shall be
liable for costs and expenses, including reasonable attorneys' fees,
incurred by the other party in enforcing the award. In the case of
temporary or preliminary injunctive relief any party may proceed in court
prior to, during or after arbitration for the purpose of avoiding immediate
and irreparable harm or to enforce its rights under any non-competition
covenants; provided, that the right to equitable relief by a court is not
intended to derogate from this arbitration procedure.
13.5. ASSIGNMENT; SUCCESSORS AND ASSIGNS, ETC. Neither the Company nor the
Executive may make any assignment of this Agreement or any interest herein, by
operation of law or otherwise, without the prior written consent of the other
party and without such consent any attempted transfer or assignment shall be
null and of no effect; provided, however, that the Company may assign its rights
under this Agreement without the consent of the Executive in the event either
Company shall hereafter effect a reorganization, consolidate with or merge into
any other Person, or transfer all or substantially all of its properties or
assets to any other Person. This Agreement shall inure to the benefit of and be
binding upon the Company and the Executive, and their respective successors,
executors, administrators, heirs and permitted assigns. In the event of the
Executive's death prior to the completion by the Company of all payments due his
under this Agreement, the Company shall continue such payments to the
Executive's beneficiary designated in writing to the Company prior to his death
(or to his estate, if he fails to make such designation).
13.6. ENFORCEABILITY. If any portion or provision of this Agreement shall
to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
13.7. WAIVER. No waiver of any provision hereof shall be effective unless
made in writing and signed by the waiving party. The failure of any party to
require the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
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13.8. NOTICES. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and delivered
in person or sent by registered or certified mail, postage prepaid, to the
Executive at the last address the Executive has filed in writing with the
Company or, in the case of the Company, at its main office, attention of the
board of directors.
13.9. AMENDMENT. This Agreement may be amended or modified only by a
written instrument signed by the Executive and by a duly authorized
representative of the Company.
13.10. COUNTERPARTS; FACSIMILE SIGNATURES. This Agreement may be executed
in two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument, and in pleading
or proving any provision of this Agreement it shall not be necessary to produce
more than one such counterpart. A signature sent by telecopy or facsimile
transmission shall be as valid and binding upon a Party as an original signature
of such Party.
13.11. GOVERNING LAW. This is a Massachusetts contract and shall be
construed under and be governed in all respects by the laws of The Commonwealth
of Massachusetts.
* * * * *
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IN WITNESS WHEREOF, this Agreement has been executed by the Company, by its
duly authorized officer, and by the Executive, as of the date first above
written.
NOVELOS THERAPEUTICS, INC.
By: /s/ Xxxxxxx Xxxxx
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Name: Xxxxxxx Xxxxx
Title: Chairman of the
Compensation Committee
EXECUTIVE:
/s/ Xxxxx Xxxxxx
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Xxxxx Xxxxxx
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EXHIBIT B
RELEASE
In consideration of the undertakings by Novelos Therapeutics, Inc. (the
"Company") set forth in the Employment Agreement with the undersigned (the
"Employee") dated January 31, 2006, to which this Release is attached as an
exhibit (the "Employment Agreement") and for other good and valuable
consideration, the receipt of which is hereby acknowledged, Employee, on behalf
of himself, his successors, heirs, administrators, executors, assigns, agents,
representatives, and all those in privity with him, releases and forever
discharges the Company, all of its present and former officers, directors,
employees, servants, agents, representatives, shareholders, successors, assigns,
and beneficiaries, (collectively, the "Company Releases"), of and from any and
all claims, charges, complaints, causes of action, demands, obligations,
liabilities, damages, attorneys fees, expenses, and costs of any kind which
Employee now has or ever had arising out of his employment by the Company
("Released Claims"), including but not limited to any causes of action or claims
arising under or based on the National Labor Relations Act, as amended; the
Civil Rights Act of 1886, 42 U.S.C. ss. 1981; Section 2 of the Civil Rights Act
of 1871, 42 U.S.C. ss. 1985(c); Title VII of the Civil Rights Act of 1964, 42
U.S.C. ss. 2000a et seq., as amended by the Equal Employment Opportunity Act of
1972, 42 U.S.C. ss. 2000e et seq. and the Civil Rights Act of 1991, 42 U.S.C.
ss. 1981a et seq.; the Equal Pay Act of 1963, 29 U.S.C. ss.206(d); the
Rehabilitation Act of 1973, as amended by the Americans With Disabilities Act
and the 1991 Civil Rights Act, 29 U.S.C. xx.xx. 706(8), 791, 793, 794, 794a; the
Americans with Disabilities Act of 1990, as amended by the Civil Rights Act of
1991, 42 U.S.C. ss. 12101 et seq.; the Age Discrimination in Employment Act
("ADEA") of 1967, 29 U.S.C. ss. 621 et seq.; Executive Order No. 11246, 3 C.F.R.
1964, reprinted as amended in 42 U.S.C. ss. 2000e; Massachusetts General Laws
chapter 151B; Massachusetts General Laws chapter 31; and any other state,
federal or municipal equal employment opportunity law, statute, public policy,
order, ordinance, or regulation, and any other federal or state law, statute,
order, public policy, or regulation affecting or relating to the claims or
rights of employees, and any and all Released Claims sounding in tort or
contract or otherwise, which Employee had, now has, or claimed to have, known or
unknown, against the Company Releasees; provided, however, the foregoing release
shall not relate to any obligations of the Company arising under (i) the
Employment Agreement relating to the payment of severance and other
post-termination payments, (ii) any equity award granted by the Company to the
Employee, (iii) the 401(k) plan or similar retirement benefit plan of the
Company and any agreements thereunder, or (iv) any statute, provision of the
Company's certificate of incorporation or by-laws or insurance or other
agreement providing indemnification rights to Employee in connection with his
services as an officer of the Company.
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Xxxxx Xxxxxx
Dated: , 20
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