Retention Letter
Retention
Letter
Dear Dr. Xxxxxx
Xxxxx:
You are a
highly valuable employee of Discovery Laboratories, Inc. (the “Company”).
The Company wishes to retain you, Dr. Xxxxxx Xxxxx (the “Executive”) as an
employee, and is therefore willing to make certain commitments in order to
induce you to remain an employee of the Company. This letter will confirm
the agreement between the Executive and the Company (“Agreement”) in that
regard. The Agreement is as follows:
1. Severance. (a) In the
event that the Executive’s employment is terminated (i) by the Company for any
reason other than for Cause or (ii) by the Executive for Good Reason (including
in the event any such for Cause or Good Reason termination occurs within
twenty-four (24) months after a Change of Control), then the Company shall make
a one-time, lump-sum payment to the Executive equal to twelve (12) months of the
then current base salary, plus a prorated Bonus award on or before the tenth day
following termination conditioned upon the receipt by the Company of the
Executive’s signed release in accordance with Section 6 herein.
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(b)
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Notwithstanding
any other provision with respect to the timing of payments under this
Section 1, in order to comply with the requirements of Section 409A of the
Internal Revenue Code of 1986 (“Section 409A”), any payment or portion
thereof, to which the Executive is entitled under this Section 1 which is
not exempt from the application of Section 409A’s “six month delay”
provision (in the Company’s sole discretion), shall be withheld until the
first business day of the seventh month following the Executive’s
termination. At such time, you shall be paid the remaining balance
otherwise owed to the Executive under this Section 1 in a lump
sum.
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2. Definitions. For the
purposes of this Agreement, the following definitions apply:
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(a)
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“Cause”
means the Executive: (i) commits an act of dishonesty, fraud or
misrepresentation in connection with his or her employment which is
materially and demonstrably injurious to the Company; (ii) is convicted
of, or pleads nolo
contendere to, a felony; (iii) breaches any material obligation
under the Proprietary Information and Inventions Agreement or the
Company’s Code of Business Conduct and Ethics; (iv) engages in substantial
or continuing inattention to or neglect of the duties (including fiduciary
duties) and responsibilities reasonably assigned by or due to the Company;
provided such inattention or neglect remains uncured for a period of 10
days after written notice describing the same is given to the Executive;
or (v) engages in substantial or continuing acts to the detriment of the
Company or inconsistent with the Company’s policies or
practices.
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(b)
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“Good
Reason” means: (i) the failure of the Company to employ the Executive in
his or her current or a substantially similar position, without regard to
title, such that the Executive’s duties and responsibilities are
materially diminished without consent (ii) a reduction in Executive’s
then-current base salary without the Executive’s consent (unless such
reduction is in connection with a proportional reduction in compensation
to all or substantially all of the Company’s Executives); or (iii) a
relocation of the primary place of employment more than 30 miles from the
current site of employment without the Executive’s consent; provided
however, if any of these conditions occur, the Executive is required to
provide written notice of any such condition to the Company’s Chief
Executive Officer and General Counsel within 60 days of the initial
occurrence of the condition, and the Company will then have 20 days to
remedy the condition, prior to the existence of such condition being
deemed to be “Good Reason.”
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(c)
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a
“Change of Control” occurs: (i) when any person or entity other than the
Company or one of its subsidiaries becomes the owner of more than fifty
percent (50%) of the Company’s common stock or (ii) upon the effective
date of an agreement of acquisition, merger, or consolidation that has
been approved by the Company’s stockholders and that contemplates that all
or substantially all of the business and/or assets of the Company shall be
owned or otherwise controlled by another person or entity upon the
effective date of such agreement.
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(d)
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“Bonus”
shall mean an amount equal to the greater of either (i) the current year
target annual bonus amount or (ii) the previous year’s actual bonus; in
either case, multiplied by the fraction obtained by dividing the number of
days in the year through the date of termination by
365.
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3.
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Withholding. All
payments made by the Company under this Agreement shall be reduced by any
tax or other amounts required to be withheld by the Company under
applicable law.
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4.
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Medical and Dental
Benefits. In the event that the Executive’s employment is
terminated (i) by the Company for any reason other than for Cause or (ii)
by the Executive for Good Reason (including in the event any such for
Cause or Good Reason termination occurs within twenty-four (24) months
after a Change of Control), then the Company will maintain the Executive’s
medical and dental insurance coverage, providing substantially similar
benefits to those which the Executive and his dependents were receiving
immediately prior to the termination of employment, for a period of up to
twelve (12) months after the month in which employment
terminates. Provided, however, that Executive shall elect such
coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985
(COBRA) to the extent that COBRA benefits are available and that in any
event the Executive shall pay the employee portion for such coverage
(whether through COBRA or otherwise) by making a payment to the Company
during the first five (5) days of any month in which the continuation of
such coverage is elected and, provided further, that the Company’s
obligation to continue benefits shall be reduced to the extent that
substantially similar coverages (determined on a benefit-by-benefit basis)
are provided by a subsequent employer. The “qualifying event”
which triggers the Executive’s right to continue health insurance post
employment under COBRA shall be deemed to have occurred on the termination
date.
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5.
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No Contract of
Employment. This Agreement is not a contract of employment
for a specific term, and employment is “At Will” and may be terminated by
the Company at any time, subject to the terms of this
letter.
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6.
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Employee Release.
Any obligation of the Company to provide the Executive with severance
payments or other benefits under this Agreement is expressly conditioned
upon the Executive reviewing and signing (and not revoking during any
applicable revocation period) a general release of claims in a form
reasonably satisfactory to the Company within the time period specified in
such release. The Company shall provide the Executive with the
general release promptly after the date on which the Executive gives or
receives, as the case may be, notice of termination of
employment.
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2
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7.
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Assignment. The
Executive shall not make any assignment of this Agreement or any interest
in it, by operation of law or otherwise, without the prior written consent
of the Company. The Company may assign its rights and obligations
under this Agreement without consent. This Agreement shall inure to the
benefit of and be binding upon the Executive and the Company, and each of
our respective successors, executors, administrators, heirs and permitted
assigns, including any organization involved in a Change of
Control.
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8.
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Severability. 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 hereof shall be valid and enforceable to the fullest extent
permitted by law.
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9.
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Miscellaneous.
This Agreement will commence on the date hereof and will expire on
December 31, 2011, unless the Company experiences a Change of Control
prior to the expiration of the term of this Agreement, in which case this
Agreement will expire on the later of: (a) December 31, 2011, or (b) two
(2) years from the date of the closing of such Change of Control.
This Agreement sets forth the entire agreement between the Executive and
the Company in connection with the subject matter hereof, and replaces all
prior and contemporaneous communications, agreements and understandings,
written or oral, with respect to the subject matter hereof, other than any
obligations set forth in your employee confidentiality agreement with the
Company, which obligations shall remain in full force and effect. In
consideration of the benefits provided to the Executive hereunder, it is
agreed that, in the event of the Executive’s termination from the Company,
such benefits shall be in complete satisfaction of any and all obligations
that the Company may have to you. This Agreement may not be modified
or amended, and no breach shall be deemed to be waived, unless agreed to
in writing by the Executive and an expressly authorized representative of
the Company. This Agreement may be executed in two counterparts,
each of which shall be an original and all of which together shall
constitute one and the same instrument. This Agreement shall be
governed by the laws of the Commonwealth of Pennsylvania, without regard
to its conflicts of laws principles, and all disputes hereunder shall be
adjudicated in the courts of the Commonwealth of Pennsylvania, to whose
personal jurisdiction the Executive hereby consents
to.
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3
If the
foregoing is acceptable to you, please sign both copies of this letter in the
space provided, at which time this letter will take effect as a binding
agreement between the Executive and the Company. Please keep one original
for your records and return one original to me.
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Discovery
Laboratories, Inc.
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By:
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/s/
Xxxxxxx X.
Xxxx 5/4/2010
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Xxxxxxx
X.
Xxxx Date
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Accepted
and Agreed:
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By:
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/s/
Xxxxxx
Xxxxx 5/4/2010
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Dr.
Xxxxxx
Xxxxx Date
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