SEPARATION AGREEMENT
Execution
Copy
THIS SEPARATION AGREEMENT
between Uluru Inc., a Nevada corporation (the "Company"), and Xxxxx
X. Xxxx (hereinafter referred to as "Xxxx"), dated as of
March 9, 2009 (the “Effective Date”);
WHEREAS, Xxxx is a member of
the Board of Directors of the Company (the “Board”), and
President and Chief Executive Officer of the Company;
WHEREAS, Xxxx intends to
resign and terminate his employment and all other positions of employment with
the Company and its subsidiaries, including the offices of President and Chief
Executive Officer;
WHEREAS, the Company intends
to accept Xxxx’x resignation and wishes to provide to Xxxx certain payments and
to provide Xxxx with certain other benefits upon such termination and Xxxx
agrees to give certain releases and provide certain services to the
Company;
NOW, THEREFORE, in
consideration of the mutual promises set forth herein and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
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1.
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Resignation and
Termination.
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1.1.
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Xxxx
hereby resigns from all employment positions he currently holds with the
Company and any subsidiary of the Company, including without limitation
the positions of President and Chief Executive Officer effective as of the
Effective Date. Xxxx shall remain as a member of the Board of
Directors, subject to the provisions of Section
3.5.
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1.2.
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The
Employment Agreement, dated as of January 1, 2006, by and between the
Company and Xxxx is hereby terminated in its entirety as of the Effective
Date and neither party thereto shall have any further rights or owe any
further payment, duty or obligation to the other thereunder;
notwithstanding the foregoing, (a) the non-competition obligation of Xxxx
set forth in Section 8 of the Employment Agreement and (b) the
non-solicitation obligation of Xxxx set forth in Section 9 of the
Employment Agreement shall each survive for a period of one year from the
date of this Agreement.
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2. Company
Covenants.
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2.1.
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Cash
Payments. Commencing as of the Effective Date, Xxxx
shall be entitled to the following cash
payments:
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(a)
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Commencing
as of March 2009, the Company shall pay Xx. Xxxx a cash payment of
$54,166.66 per month, payable semi-monthly, for a period of six months,
making an aggregate payment of $325,000 under this Section 2.1(a);
and
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(b)
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Thereafter
for a period of fifty-four (54) months, the Company shall pay to Xxxx a
payment of $12,500 per month, payable semi-monthly, making an aggregate
payment of $675,000 under this
Section 2.1(b).
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2.2.
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Vesting and Exercise
of Existing Options and Restricted Stock. On the
Effective Date, all outstanding Company stock options and shares of
restricted stock of the Company held by Xxxx shall immediately and fully
vest. All outstanding Company stock options held by Xxxx shall
remain exercisable by Xxxx until March 1, 2012, notwithstanding anything
to the contrary in documents related to such option grants, and shall
expire on such date. As of the Effective Date, Xx. Xxxx shall
forfeit 300,000 of the stock options currently held by
him.
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2.3.
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Consulting. At
the Company’s sole discretion, Xxxx and the Company hereby agree that,
beginning on the Effective Date through August 31, 2009, the
Company may request that Xxxx serve the Company in the capacity of a
consultant for the equivalent of up to two full days per
month. Xx. Xxxx shall not be paid for such
consulting.
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2.4.
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Benefits. For
a period of Twenty-Four (24) months following the Effective Date, the
Company shall, at its sole expense, continue to maintain and provide
coverage under Xxxx’x existing health coverage plan. Xxxx
agrees that he shall not be entitled to receive any compensation under the
Company’s paid time off (PTO) benefit program. While Xx. Xxxx
remains on the Board of Directors of the Company, the Company shall
maintain for Xx. Xxxx his current Company e-mail
address.
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2.5.
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Withholding. All
payments required to be made by the Company hereunder to Xxxx shall be
subject to the withholding of such amounts, if any, relating to tax and
other payroll deductions as the Company may reasonably determine it must
withhold pursuant to any applicable law or
regulation.
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2.6.
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No Duty to Mitigate
Damages. Xxxx'x payments and benefits under Sections
2.1, 2.2 and 2.4 of this Agreement shall be considered severance pay in
consideration of his past service and his agreement to comply with the
provisions of his Employment Agreement relating to noncompetition and as
an inducement to him to enter into and become bound by this Agreement, and
his entitlement thereto shall not be dependent upon whether or not Xxxx
provides further services of any type to or for the Company or any third
party.
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2.7
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Default. Notwithstanding
any provision in this Agreement to the contrary, but subject to Section
11.9, in the event that the Company defaults in its obligations to provide
the payments and benefits in Sections 2.1 or 2.4, then all amounts and
benefits that otherwise would have been due and payable under the
Employment Agreement dated as of January 1, 2006 by and between the
Company and Xxxx, including without limitation the payments and benefits
set forth in Section 6.2.1 (less any payments previously made under this
Agreement) shall become due and payable ten (10) days after written notice
of default from Xx. Xxxx if such default is not
cured.
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3. Xxxx
Covenants. Xxxx hereby covenants with the Company as
follows:
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3.1.
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Non-disclosure. Xxxx
recognizes and acknowledges that he has had and will have access to
certain highly sensitive, special, unique information of the Company that
is confidential or proprietary. Xxxx hereby covenants and
agrees not to use or disclose any Confidential Information (as hereinafter
defined) except for disclosures made solely (i) to authorized
representatives of the Company; or (ii) as required by any governmental,
statutory or judicial authority, provided that prior to any such
disclosure Xxxx shall provide the Company with notice of such requirement
as is practicable and shall cooperate with the Company in responding to
such requirement, including assisting the Company in procuring a
protective order or other modification of such required
disclosure.
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3.2.
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Confidential
Information. For purposes of this Agreement, "Confidential
Information"
means any data or information with respect to the business conducted by
the Company that is material to the Company and not generally known by the
public. To the extent consistent with the foregoing definition,
Confidential Information includes without limitation; (i) reports,
pricing, sales manuals and training manuals, selling and pricing
procedures, and financing methods of the Company, together with any
techniques utilized by the Company in designing, developing,
manufacturing, testing or marketing its products or in performing services
for clients, customers and accounts of the Company and (ii) the
business plans and financial statements, reports and projections of the
Company.
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3.3.
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Return of
Property. Xxxx covenants, agrees and acknowledges that
all Confidential Information is and shall remain the sole, exclusive and
valuable property of the Company and Xxxx has and shall acquire no right,
title or interests therein. Any and all printed, typed, written
or other material which Xxxx may have or obtain shall be and remain the
exclusive property of the Company, and any and all material (including any
copies) shall be promptly delivered by Xxxx to the Company. The
Company acknowledges that the personal property listed on Exhibit B is and shall
remain Xxxx’x personal property unaffected by this
Agreement.
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3.4.
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Stock
Lock-up1. If requested by investors in
a financing, Xx. Xxxx will agree in writing not to sell any shares of the
common stock of the Company owned or controlled by him, except as
follows:
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(1) no
sales for 90 days after the Effective Date
(2) 90%
lock-up for 180 days after the Effective Date
(3) 80%
lock-up for 270 days after the Effective Date
(4) 70%
lock-up for 360 days after the Effective Date
(5) 50%
lock-up for 450 days after the effective Date
(6) 25%
lock-up for 540 days after the Effective Date
In
addition, if requested by investors in a financing, Xx. Xxxx agrees not to sell
any shares for a period of 90 days after his resignation from the Board of
Directors. For the avoidance of doubt, the above schedule commences
on the Effective Date of this Separation Agreement, not at the closing of a
financing. In the event of a breach by the Company of Section 2.1(b),
2.2 or 2.4, the provisions of this lock-up arrangement shall
terminate.
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3.5.
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Board
Membership. At the request of the Board at any time in
2009 in connection with a Company financing, Xx. Xxxx shall resign as a
member of the Board of Directors and each of its
subsidiaries.
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4. Indemnification. The
Company shall indemnify Xxxx to the same extent provided to its other directors
and officers by its charter and by-laws against all costs, charges and expenses,
including, without limitation, attorneys’ fees, incurred or sustained by Xxxx in
connection with any action, suit or proceeding to which Xxxx may be made a party
by reason of being an officer, director or employee of the Company for acts
undertaken from the time of his employment by the Company through the date of
his resignation as a member of the Board (the “Indemnification Period”), and Xxxx
will be included as an insured individual under any liability insurance policy
that insures other officers or directors of the Company for acts taken during
the Indemnification Period.
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5.
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Public Statement,
Non-disparagement.
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5.1.
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With
respect to Xx. Xxxx’x separation from the Company, neither Xxxx nor the
Company shall make any public statement other than the Approved Public
Statement set forth on Exhibit A (the
“Approved Public Statement”) or statements that are consistent with the
Approved Public Statement.
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5.2.
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Xxxx
shall make no disparaging statements, whether public or private, with
regard to the Company, its current officers, employees or members of the
Board unless and to the extent specifically compelled by any governmental
agency or tribunal to make a
statement.
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5.3.
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The
Company and the members of the Board shall make no disparaging statements,
whether public or private, about Xxxx unless and to the extent
specifically compelled by any government agency or tribunal to make a
statement. In response to an inquiry, or as necessary or
appropriate to make clear Xxxx’x status with the Company or the
circumstances of his departure, the Company and the members of the Board
shall inform third parties that Xxxx is a shareholder of the Company
and/or that he is not an employee, officer, director (as applicable) or
other agent of the Company by saying that Xxxx remains a shareholder
and/or director of the Company and that Xxxx resigned voluntarily, or
other words of similar effect. Neither the Company nor the
members of the Board shall make any statement that implies or suggests
that the reason for Xxxx’x separation from the Company was anything other
than Xxxx’x voluntary action.
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6.
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Mutual Release and
Covenant Not to Xxx.
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6.1
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Release and Covenant
Not to Xxx from Xxxx.
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(a)
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Release. Xxxx
hereby releases each of the Company and its officers, employees,
directors, attorneys, agents, successors, and assigns, from each and every
right, claim, debt, demand, liability, cost, expense, and/or cause of
action, which he has or may have had against any of such released parties
as of the Effective Date, whether known or
unknown.
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(b)
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Covenant Not to
Xxx. Xxxx hereby covenants and agrees not to bring suit
against any of the Company or any of its officers, employees,
directors, attorneys, agents, successors, and assigns based upon any claim
herein released.
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(c)
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Rights
Retained. Notwithstanding anything in this Agreement to
the contrary, Xxxx expressly reserves his right to take action against the
Company to preserve his rights under this Agreement in the event of a
breach thereof by the Company, subject to Section 7
below.
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6.2
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Release and Covenant
Not to Xxx from the Company.
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(a)
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Release. The
Company hereby releases each of Xxxx and his attorneys, agents,
successors, and assigns from each and every right, claim, debt, demand,
liability, cost, expense, and/or cause of action arising out of Xxxx’x
service or status as an employee, officer, director, shareholder (in his
capacity as such) or representative of shareholders of the Company,
existing as of the Effective Date and whether known or
unknown.
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(b)
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Covenant Not to
Xxx. The Company hereby covenants and agrees not to
bring suit against each of Xxxx and his attorneys, agents, successors, and
assigns based upon any claim herein
released.
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(c)
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Rights
Retained. Notwithstanding anything in this Agreement to
the contrary, the Company expressly reserves its right to take action
against Xxxx to preserve its rights under this Agreement in the event of a
breach thereof by Xxxx, subject to Section 7
below.
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7.
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Arbitration. Any
controversy or claim arising out of or relating to this Agreement, or the
breach thereof, shall be settled exclusively by single-arbitrator
arbitration, in Dallas, Texas, in accordance with the Commercial
Arbitration Rules of the American Arbitration Association then in effect,
and judgment upon the award rendered by the arbitrator may be entered in
any court having jurisdiction
thereof.
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8.
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Collateral. Payments
owed to Xxxx by the Company pursuant to Section 2 hereof shall be
secured by, and the Company hereby grants to Xxxx a first priority
security interest in and to, the assets of the Company relating to
Zindaclin, including the patent rights, royalty payments, licensing
payments and milestone payments. Any failure to pay timely any
amount due under Section 2.1(b) shall result, automatically, in the
full acceleration of all such payments (i) which are not yet paid in full,
and (ii) which do not constitute deferred compensation within the meaning
of Section 409A (as defined in Section 11.9(i), below), if such amount due
is not paid within 10 days after written notice from Xxxx. With
respect to the Company, any commencement of a bankruptcy proceeding,
assignment for the benefit of creditors or the appointment of a receiver,
trustee, liquidator or other similar official shall also result,
automatically, in the full acceleration of all such payments (i) which are
not yet paid in full, and (ii) which do not constitute deferred
compensation within the meaning of Section
409A.
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9.
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Legal Fees and
Expenses. Each party hereto shall pay its own legal fees
and expenses of counsel reasonably incurred by such party in connection
with the negotiation, execution and delivery of this Agreement or in
seeking in good faith to obtain any right or benefit to which such party
believes it or he is entitled under this Agreement. In the
event of a default by the Company with respect to any payments owed to
Xxxx under this Agreement, the Company agrees to pay Xxxx any costs of
collection, including but not limited to any reasonable attorneys fees,
which shall be deemed additional payments that are secured pursuant to
Section 8 hereto.
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10.
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Notices. Any
notices required to be given under this Agreement shall be in writing and
shall be deemed given three (3) days after mailing in the continental
United States by registered or certified mail, or upon personal receipt
after delivery, telex, telecopy, or telegram, to the party entitled
thereto at the address stated below or to such changed address as the
addressee may have given by a similar
notice:
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To the
Company: Uluru
Inc.
0000 Xxxxxxx Xxxxx
Xxxxxxx,
XX 00000
Attn: Chief Executive
Officer
With a copy
to:
Xxxx X. Xxxxxxxxx III, Esq.
Xxxxxxx XxXxxxxxx LLP
Xxx Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
To
Xxxx:
Xxxxx Xxxx
00000
Xxxxxxxxx Xxxxx
Xxxxxxx,
XX 00000
11. General
Provisions.
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11.1.
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Binding
Agreement. This Agreement shall be binding upon and
inure to the benefit of Xxxx and be enforceable by his personal or legal
representatives or successors. If Xxxx dies while any amounts
would still be payable to him hereunder, his rights herein shall still be
exercisable by such representatives or successors. Such amounts
shall be paid to Xxxx'x estate in accordance with the terms of this
Agreement. This Agreement shall not otherwise be assignable by
Xxxx.
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11.2.
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Successors. This
Agreement shall inure to and be binding upon the Company's
successors. The Company shall require any successor to all or
substantially all of its business and/or assets by sale, merger (where the
Company is not the surviving corporation), consolidation, lease or
otherwise, by agreement in form and substance satisfactory to Xxxx, to
assume this Agreement expressly. This Agreement shall not
otherwise be assignable by the
Company.
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11.3.
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Amendment or
Modification; Waiver. This Agreement may not be amended
or modified unless agreed to in writing by Xxxx and the
Company. No waiver by either party of any breach of this
Agreement shall be deemed a waiver of any subsequent
breach.
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11.4.
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Severability. In
the event that any provision of this Agreement shall be determined to be
invalid or unenforceable, such provision shall be enforceable in any
jurisdiction in which valid and enforceable, and in any event the
remaining provisions shall remain in full force and effect to the fullest
extent permitted by law.
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11.5.
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Rights
Granted. This Agreement shall not give Xxxx any right to
compensation or benefits from the Company or any affiliate of the Company,
except for the rights specifically stated herein, including those certain
severance and other benefits that become payable on or after the Effective
Date.
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11.6.
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Governing
Law. The validity, interpretation, performance, and
enforcement of this Agreement shall be governed by and construed in
accordance with the internal laws of the State of Texas, without giving
effect to the principles of choice of law or conflicts of
law.
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11.7.
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Counterparts. This
Agreement may be executed in multiple counterparts, each of which shall be
deemed an original, but all of which taken together shall constitute one
and the same Agreement.
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11.8.
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Section
Headings. The descriptive section headings in this
Agreement have been inserted for convenience of reference only and are not
intended to be part of, or to affect the meaning or interpretation of,
this Agreement.
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11.9
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Section
409A.
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(a) Purpose. This section is intended
to help ensure that compensation paid or delivered to Xxxx pursuant to this
Agreement either is paid in compliance with, or is exempt from,
Section 409A of the Internal Revenue Code of 1986, as amended and the rules
and regulations promulgated thereunder (collectively, “Section 409A”).
However, the Company does not warrant to Xxxx that all compensation paid or
delivered to him for his services will be exempt from, or paid in compliance
with, Section 409A. Except as otherwise provided herein, Xxxx
understands and agrees that he bears the entire risk of any adverse federal,
state or local tax consequences and penalty taxes which may result from payment
of compensation for his services on a basis contrary to the provisions of
Section 409A or comparable provisions of any applicable state or local income
tax laws.
(b) Amounts Payable On Account
of Termination. For the purposes of determining when amounts otherwise
payable on account of Xxxx'x termination of employment under this Agreement will
be paid, which amounts become due because of his termination of employment,
“termination of employment” or words of similar import, as used in this
Agreement, shall be construed as the date that Xxxx first incurs a “separation
from service” for purposes of Section 409A on or following termination of
employment. Furthermore, if Xxxx is a “specified employee” of a
public company as determined pursuant to Section 409A as of his termination
of employment, any amounts payable on account of his termination of employment
which constitute deferred compensation within the meaning of Section 409A and
which are otherwise payable during the first six months following Xxxx'x
termination (or prior to his death after termination) shall be paid to Xxxx in a
cash lump-sum on the earlier of (1) the date of his death and (2) the first
business day of the seventh calendar month immediately following the month in
which his termination occurs.
(c) Reimbursements. Any
taxable reimbursement of business or other expenses as specified under this
Agreement shall be subject to the following conditions: (1) the expenses
eligible for reimbursement in one taxable year shall not affect the expenses
eligible for reimbursement in any other taxable year; (2) the reimbursement of
an eligible expense shall be made no later than the end of the year after the
year in which such expense was incurred; and (3) the right to reimbursement
shall not be subject to liquidation or exchange for another
benefit.
(d) Interpretative Rules.
In applying Section 409A to amounts paid pursuant to this Agreement, any right
to a series of installment payments under this Agreement shall be treated as a
right to a series of separate payments.
(e) Deferred Compensation
Taxes. Notwithstanding any other provisions of this Agreement,
in the event that any payment or benefit under this Agreement received or to be
received by Xxxx (the “Payment”) is
determined to be subject (in whole or part) to the penalties imposed by Section
409A (the “Additional
Taxes”), then Xxxx shall be entitled to receive an additional payment (a
“Gross-Up
Payment”) in an amount such
that
after payment by Xxxx of the Additional Taxes imposed upon the Payment, Xxxx
retains an amount equal to the Payment net of any otherwise applicable taxes and
withholdings (that is, applicable taxes and withholdings other than Additional
Taxes). Xxxx shall also be entitled to be reimbursed by the Company
for any costs and expenses relating to any disputes with the IRS relating to
Section 409A. All determinations required to be made under this
Section 11.9(e), including whether and when a Gross-Up Payment is required and
the amount of such Gross-Up Payment and the assumptions to be utilized in
arriving at such determination, shall be made by the Company’s accountants or
such other certified public accounting firm reasonably acceptable to the Company
as may be designated by Xxxx which shall provide detailed supporting
calculations both to the Company and Xxxx. Any Gross-Up Payment due
under this paragraph shall be paid to Xxxx within ten (10) business days after
notice from Xx. Xxxx that he has made any such payment to the IRS, provided that
in no event may such reimbursement be made to Xx. Xxxx later than December 31 of
the calendar year following the calendar year in which Xxxx remits the
Additional Taxes to the applicable authorities.
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12.
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Exclusive
Agreement. It is agreed and understood that this
Agreement represents the entire agreement between the Company and Xxxx
concerning the subject matter hereof and supersedes all prior agreements
and understandings concerning Xxxx'x rights upon the termination of his
employment.
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IN WITNESS WHEREOF, the
parties hereto have executed this Agreement under seal as of the day and year
first above written.
Uluru
Inc. Xxxxx
Xxxx
By: /s/ Xxxxxxx X.
Xxxxxx /s/ Xxxxx
Xxxx
Name: Xxxxxxx
X. Xxxxxx
Title:
Chairman
1 This lock-up applies to 5,125,000 shares controlled by Xx. Xxxx
which initially shall be subject to this lock-up. It is expected that
ninety days after Xx. Xxxx is no longer an officer or director that he would not
be an affiliate and his filing obligations with the SEC would relate to updating
his Form 13G while he remains a 5% stockholder of the
Company.
