Exhibit 10.21

 

AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

 

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Agreement”), made this
6th day of November 2008 (the “Effective Date”), is entered into by Sepracor
Inc., a Delaware corporation with its principal place of business at 84
Waterford Drive, Marlborough, Massachusetts 01752-7231 (the “Company”), and
Richard Ranieri, residing at 7910 Entrada De Luz , San Diego, CA 92127 (the
“Executive”).

 

The Company desires to employ the Executive and the Executive desires to be
employed by the Company, and in connection therewith the Company and the
Executive entered into an Employment Agreement, dated August 18, 2008 (the
“Original Agreement”).  The Company and the Executive wish to amend and restate
the Original Agreement as provided for herein.  In consideration of the mutual
covenants and promises contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
the parties hereto, the parties agree that the Original Agreement is amended and
restated in its entirety as follows:

 

1.             TERM OF EMPLOYMENT.  THE COMPANY HEREBY AGREES TO EMPLOY THE
EXECUTIVE AND THE EXECUTIVE HEREBY AGREES TO BE EMPLOYED BY THE COMPANY, UPON
THE TERMS SET FORTH IN THIS AGREEMENT, FOR THE PERIOD COMMENCING ON AUGUST 19,
2008 (THE “COMMENCEMENT DATE”) AND ENDING ON THE FIFTH ANNIVERSARY OF THE
COMMENCEMENT DATE (THE “TERM”).  NOTWITHSTANDING THE FOREGOING, THE TERM SHALL
BE EXTENDED AUTOMATICALLY WITHOUT FURTHER ACTION BY EITHER PARTY BY ONE
(1) ADDITIONAL YEAR (ADDED TO THE END OF THE TERM) ON EACH SUCCEEDING
ANNIVERSARY OF THE COMMENCEMENT DATE, UNLESS EITHER PARTY SHALL HAVE SERVED
WRITTEN NOTICE UPON THE OTHER PARTY AT LEAST SIXTY (60) DAYS PRECEDING THE DATE
UPON WHICH SUCH TERM WOULD END (SUCH PERIOD, AS IT MAY

 

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BE EXTENDED, THE “EMPLOYMENT PERIOD”), UNLESS SOONER TERMINATED IN ACCORDANCE
WITH THE PROVISIONS OF SECTION 4.

 

2.             TITLE AND CAPACITY.  THE EXECUTIVE SHALL SERVE AS EXECUTIVE
VICE-PRESIDENT, HUMAN RESOURCES AND ADMINISTRATION OF THE COMPANY.  EXECUTIVE
SHALL REPORT DIRECTLY TO THE CHIEF EXECUTIVE OFFICER OF THE COMPANY AND SHALL,
EXCEPT AS PERMITTED HEREBY, DEVOTE ALL OF HIS BUSINESS TIME AND SERVICES TO THE
BUSINESS AND AFFAIRS OF THE COMPANY.  EXECUTIVE SHALL ALSO PERFORM SUCH OTHER
DUTIES CONSISTENT WITH HIS POSITION AS EXECUTIVE VICE-PRESIDENT, HUMAN RESOURCES
AND ADMINISTRATION AS MAY BE REASONABLY ASSIGNED BY THE CHIEF EXECUTIVE OFFICER
AND THE BOARD OF DIRECTORS OF THE COMPANY (THE “BOARD”) FROM TIME TO TIME.  THE
EXECUTIVE AGREES TO ABIDE BY THE RULES, REGULATIONS, INSTRUCTIONS, PERSONNEL
PRACTICES AND POLICIES OF THE COMPANY AND ANY CHANGES THEREIN THAT MAY BE
ADOPTED FROM TIME TO TIME BY THE COMPANY.

 

Notwithstanding anything herein to the contrary, Executive shall be entitled to
engage in (a) service on the board of directors of two companies, businesses or
trade organizations with prior Board approval, (b) service on the board of
directors for a not-for-profit or charitable organization with prior Board
approval, (c) other charitable activities and community affairs, and
(d) managing his personal investments and affairs, in each case to the extent
such activities do not materially interfere with the performance of his duties
and responsibilities to the Company.

 

3.             COMPENSATION AND BENEFITS.

 

3.1        SALARY.  DURING THE TERM OF THIS AGREEMENT, THE COMPANY AGREES TO
CONTINUE TO PAY THE EXECUTIVE A BASE SALARY AT THE ANNUALIZED RATE OF $405,000
(“BASE SALARY”) COMMENCING ON THE COMMENCEMENT DATE.  THE BASE SALARY SHALL BE
SUBJECT TO ANNUAL REVIEW BY THE BOARD BUT SHALL NOT BE REDUCED BELOW $ 405,000
PER ANNUM.  SUCH SALARY SHALL BE PAYABLE

 

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TO EXECUTIVE IN BI-WEEKLY INSTALLMENTS AND IN ACCORDANCE WITH THE COMPANY’S
NORMAL PAYROLL PROCEDURES.

 

3.2        BONUS.  THE EXECUTIVE SHALL BE ELIGIBLE FOR A PERFORMANCE-BASED
ANNUAL BONUS FOR EACH FISCAL YEAR OF THE TERM (THE “ANNUAL BONUS”). THE ANNUAL
BONUS SHALL BE BASED UPON ANNUAL QUANTITATIVE AND QUALITATIVE PERFORMANCE
TARGETS AS ESTABLISHED BY THE BOARD IN ITS SOLE DISCRETION IN ACCORDANCE WITH
THE COMPANY’S BONUS PLAN; PROVIDED, THAT THE EXECUTIVE’S ANNUAL BONUS LEVEL
TARGET SHALL BE SET AT FIFTY PERCENT (50%) OR MORE OF BASE SALARY.  FOR 2008,
EXECUTIVE SHALL BE ENTITLED TO A GUARANTEED ANNUAL BONUS IN AN AMOUNT EQUAL TO
FIFTY PERCENT (50%) OF HIS BASE SALARY.  THE ANNUAL BONUS IS NOT EARNED UNTIL
THE CLOSE OF BUSINESS ON THE LAST BUSINESS DAY OF THE COMPANY’S FISCAL YEAR. 
ANY ANNUAL BONUS PAYABLE HEREUNDER SHALL BE PAYABLE, IF AT ALL, AFTER THE DATE
OF THE DELIVERY OF THE AUDITED FINANCIAL STATEMENTS FOR THE APPLICABLE FISCAL
YEAR. IN ADDITION, EXECUTIVE SHALL RECEIVE A ONE-TIME “ SIGN ON” BONUS OF
$150,000 LESS APPLICABLE TAXES AND WITHHOLDINGS TO BE PAID WITHIN THIRTY (30)
DAYS OF THE COMMENCEMENT DATE, PROVIDED, HOWEVER, IF THE EXECUTIVE’S EMPLOYMENT
IS TERMINATED WITHIN TWELVE (12) MONTHS OF THE COMMENCEMENT DATE, FOR CAUSE BY
THE COMPANY PURSUANT TO SECTION 4.2, OR AT THE ELECTION OF THE EXECUTIVE
PURSUANT TO SECTION 4.5, THE EXECUTIVE WILL BE REQUIRED TO REPAY THE PORTION OF
THE SIGN ON BONUS RETAINED BY EXECUTIVE AFTER PAYMENT OF ALL TAXES.

 

3.3           STOCK AND OPTION GRANT.  AT THE FIRST MEETING OF THE COMPENSATION
COMMITTEE OF THE BOARD OF DIRECTORS FOLLOWING THE EXECUTIVE’S FIRST DAY OF
EMPLOYMENT, THE COMPANY SHALL GRANT TO THE EXECUTIVE, UNDER THE COMPANY’S 2000
STOCK INCENTIVE PLAN (THE “STOCK PLAN”), 40,000 SHARES OF RESTRICTED STOCK ( THE
“INITIAL STOCK GRANT”) AND AN OPTION TO PURCHASE 55,000 SHARES OF COMPANY STOCK
(THE “INITIAL OPTION GRANT”).  THE TERMS AND CONDITIONS

 

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OF THE INITIAL STOCK GRANT AND THE INITIAL OPTION GRANT (OTHER THAN THE EXERCISE
PRICE PER SHARE, WHICH SHALL BE EQUAL TO THE CLOSING PRICE OF THE COMPANY’S
STOCK ON THE GRANT DATE) SHALL BE SET FORTH IN THE AWARD AGREEMENTS ATTACHED
HERETO AS SCHEDULES A AND B.  THE INITIAL STOCK GRANT SHALL VEST IN THREE EQUAL
INSTALLMENTS ON EACH OF THE FIRST THREE ANNIVERSARIES OF THE COMMENCEMENT DATE. 
THE INITIAL OPTION GRANT SHALL VEST IN FIVE EQUAL INSTALLMENTS ON EACH OF THE
FIRST FIVE ANNIVERSARIES OF THE COMMENCEMENT DATE. THE BOARD, IN ITS SOLE
DISCRETION, MAY GRANT FURTHER INCENTIVE COMPENSATION AWARDS TO THE EXECUTIVE
FROM TIME TO TIME.  THE COMPANY REPRESENTS AND WARRANTS TO EXECUTIVE THAT THE
COMPANY HAS FULL POWER AND AUTHORITY, SUBJECT TO COMPENSATION COMMITTEE
APPROVAL, AND SHARES AVAILABLE UNDER THE STOCK PLAN, TO MAKE THE INITIAL GRANT.

 

3.4           BENEFITS.  THE EXECUTIVE SHALL BE ENTITLED TO PARTICIPATE IN ALL
BONUS AND BENEFIT PROGRAMS THAT THE COMPANY ESTABLISHES AND MAKES AVAILABLE TO
ITS EMPLOYEES, TO THE EXTENT THAT THE EXECUTIVE IS ELIGIBLE UNDER (AND SUBJECT
TO THE PROVISIONS OF) THE PLAN DOCUMENTS GOVERNING THOSE PROGRAMS.  THE
EXECUTIVE SHALL BE ENTITLED TO NO LESS THAN FOUR WEEKS PAID VACATION PER YEAR,
SUBJECT TO THE OTHER TERMS OF THE COMPANY’S STANDARD VACATION POLICY, ATTACHED
HERETO AS SCHEDULE C.

 

3.5           REIMBURSEMENT OF EXPENSES.  THE COMPANY SHALL REIMBURSE THE
EXECUTIVE FOR ALL REASONABLE TRAVEL (WHICH SHALL BE DEEMED TO INCLUDE FIRST
CLASS AIRFARE), ENTERTAINMENT AND OTHER EXPENSES INCURRED OR PAID BY THE
EXECUTIVE UNTIL DECEMBER 31, 2008 AND THROUGHOUT HIS EMPLOYMENT WITH THE COMPANY
IN CONNECTION WITH, OR RELATED TO, THE PERFORMANCE OF HIS DUTIES,
RESPONSIBILITIES OR SERVICES UNDER THIS AGREEMENT OR IN CONNECTION WITH
EXECUTIVE’S COMMUTING TO AND FROM HIS PERSONAL RESIDENCE IN SAN DIEGO,
CALIFORNIA AND THE COMPANY’S OFFICES, UPON PRESENTATION BY THE EXECUTIVE OF
DOCUMENTATION, EXPENSE STATEMENTS, VOUCHERS AND/OR SUCH OTHER

 

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SUPPORTING INFORMATION AS THE COMPANY MAY REQUEST.  ALL REIMBURSEMENT PAYMENTS
MADE PURSUANT TO THIS SECTION 3.5 SHALL BE MADE ON A FULLY TAX GROSSED-UP BASIS.

 

3.6           HOUSING EXPENSES.  THE COMPANY UNDERSTANDS THAT THE EXECUTIVE
INTENDS TO MAINTAIN HIS PRIMARY RESIDENCE OUTSIDE THE MASSACHUSETTS AREA UNTIL
DECEMBER 31, 2008 AND THEN INTENDS TO RELOCATE TO THE MASSACHUSETTS AREA. UNTIL
DECEMBER 31, 2008, THE COMPANY AGREES TO PROVIDE THE EXECUTIVE WITH A HOUSING
ALLOWANCE OF $3,750 PER MONTH, WHICH PAYMENTS SHALL BE INCREASED ON A FULLY TAX
GROSSED-UP BASIS.  THE COMPANY ALSO WILL REIMBURSE THE EXECUTIVE AND HIS SPOUSE
FOR REASONABLE TRAVEL, MEALS AND LODGING EXPENSES INCURRED BY THEM FOR UP TO TWO
TRIPS FOR THE PURPOSE OF SECURING SUCH HOUSE OR APARTMENT WITHIN A SUITABLE
DISTANCE TO THE COMPANY’S HEADQUARTERS.  EXECUTIVE SHALL BE ENTITLED TO
RELOCATION BENEFITS AFFORDED BY THE COMPANY TO OTHER COMPANY EXECUTIVES IF AND
WHEN EXECUTIVE DECIDES TO PERMANENTLY RELOCATE HIS PRIMARY RESIDENCE TO THE
MASSACHUSETTS AREA.

 

3.7           EXECUTIVE’S LEGAL FEES.  THE COMPANY AGREES TO PAY THE EXECUTIVE’S
REASONABLE LEGAL COSTS AND EXPENSES IN CONNECTION WITH NEGOTIATING AND DRAFTING
THIS AGREEMENT UP TO A MAXIMUM OF $15,000.

 

3.8           AUTOMOBILE.  THE COMPANY AGREES TO PROVIDE THE EXECUTIVE WITH AN
AUTOMOBILE ALLOWANCE OR A LEASED AUTOMOBILE WITH A RETAIL VALUE OF UP TO
$60,000, WHICH PAYMENTS SHALL BE MADE ON A FULLY TAX GROSSED-UP BASIS.  IN
ADDITION, THE COMPANY AGREES TO PAY ALL INSURANCE, MAINTENANCE, FUEL AND OTHER
CUSTOMARY COSTS ASSOCIATED WITH OPERATING THE AUTOMOBILE.

 

3.9           WITHHOLDING.  ALL SALARY, BONUS AND OTHER COMPENSATION PAYABLE TO
THE EXECUTIVE SHALL BE SUBJECT TO APPLICABLE WITHHOLDING TAXES.

 

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4.             EMPLOYMENT TERMINATION.  THE EMPLOYMENT OF THE EXECUTIVE UNDER
THIS AGREEMENT SHALL TERMINATE UPON THE OCCURRENCE OF ANY OF THE FOLLOWING:

 

4.1        ON THE EXPIRATION DATE OF THE EMPLOYMENT PERIOD.

 

4.2        AT THE ELECTION OF THE COMPANY, FOR CAUSE (AS DEFINED BELOW),
IMMEDIATELY UPON WRITTEN NOTICE BY THE COMPANY TO THE EXECUTIVE, WHICH NOTICE
SHALL IDENTIFY THE CAUSE UPON WHICH TERMINATION IS BASED.  FOR THE PURPOSES OF
THIS SECTION 4.2, CAUSE FOR TERMINATION SHALL MEAN:  (A) THE EXECUTIVE’S WILLFUL
AND CONTINUED FAILURE TO SUBSTANTIALLY PERFORM HIS REASONABLE ASSIGNED DUTIES
(OTHER THAN ANY SUCH FAILURE RESULTING FROM INCAPACITY DUE TO PHYSICAL OR MENTAL
ILLNESS OR ANY FAILURE AFTER THE EXECUTIVE GIVES NOTICE OF TERMINATION FOR GOOD
REASON AND GOOD REASON EXISTS), WHICH FAILURE IS NOT CURED WITHIN 30 DAYS AFTER
A WRITTEN DEMAND FOR SUBSTANTIAL PERFORMANCE IS RECEIVED BY THE EXECUTIVE FROM
THE BOARD OF DIRECTORS OF THE COMPANY WHICH SPECIFICALLY IDENTIFIES THE MANNER
IN WHICH THE BOARD OF DIRECTORS BELIEVES THE EXECUTIVE HAS NOT SUBSTANTIALLY
PERFORMED THE EXECUTIVE’S DUTIES; (B) THE EXECUTIVE’S WILLFUL ENGAGEMENT IN
ILLEGAL CONDUCT OR GROSS MISCONDUCT WHICH IS MATERIALLY AND DEMONSTRABLY
INJURIOUS TO THE COMPANY; OR (C) A MATERIAL BREACH OF SECTION 6 OR 7 OF  THIS
AGREEMENT BY THE EXECUTIVE.  FOR PURPOSES OF THIS SECTION 4.2, NO ACT OR FAILURE
TO ACT BY THE EXECUTIVE SHALL BE CONSIDERED “WILLFUL” UNLESS IT IS DONE, OR
OMITTED TO BE DONE, IN BAD FAITH AND WITHOUT REASONABLE BELIEF THAT THE
EXECUTIVE’S ACTION OR OMISSION WAS IN THE BEST INTERESTS OF THE COMPANY.

 

4.3        UPON THE DEATH OR DISABILITY OF THE EXECUTIVE.  AS USED IN THIS
AGREEMENT, THE TERM “DISABILITY” SHALL MEAN THE EXECUTIVE’S ABSENCE FROM THE
FULL-TIME PERFORMANCE OF THE EXECUTIVE’S DUTIES WITH THE COMPANY FOR ONE HUNDRED
EIGHTY (180) CONSECUTIVE CALENDAR DAYS AS A RESULT OF INCAPACITY DUE TO MENTAL
OR PHYSICAL ILLNESS WHICH IS DETERMINED TO BE TOTAL AND

 

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PERMANENT BY A PHYSICIAN SELECTED BY THE COMPANY OR ITS INSURERS AND ACCEPTABLE
TO THE EXECUTIVE OR THE EXECUTIVE’S LEGAL REPRESENTATIVE.

 

4.4        AT THE ELECTION OF THE EXECUTIVE FOR GOOD REASON AS DEFINED HEREIN. 
THE EXECUTIVE MAY TERMINATE HIS EMPLOYMENT FOR GOOD REASON AT ANY TIME,
FOLLOWING 30-DAYS PRIOR WRITTEN NOTICE OF SUCH TERMINATION TO THE COMPANY. SUCH
NOTICE SHALL PROVIDE FACTUAL DETAILS OF THE BASIS BEHIND SUCH TERMINATION AND
THE COMPANY SHALL HAVE A THIRTY (30) DAY PERIOD THEREAFTER TO CURE SUCH MATTER. 
AS USED HEREIN, THE TERM “GOOD REASON” SHALL MEAN:  (A) A MATERIAL BREACH BY THE
COMPANY OF THE TERMS OF THIS AGREEMENT, INCLUDING THE FAILURE TO PAY BASE SALARY
OR ANY ANNUAL BONUS WHEN DUE; OR (B) ANY MATERIAL ADVERSE CHANGE BY THE COMPANY
IN EXECUTIVE’S TITLES, AUTHORITIES, DUTIES, RESPONSIBILITIES OR LINES OF
REPORTING INCONSISTENT WITH THE TERMS HEREOF OR THE ASSIGNMENT TO EXECUTIVE BY
THE COMPANY OF TITLES, AUTHORITIES, DUTIES, RESPONSIBILITIES OR LINES OF
REPORTING INCONSISTENT WITH THE TERMS HEREOF, OR (C) A RELOCATION OF THE OFFICES
OF THE COMPANY WHERE THE EXECUTIVE IS WORKING TO AN AREA MORE THAN FORTY (40)
MILES FROM THE LOCATION OF SUCH OFFICES AS OF THE DATE HEREOF.

 

4.5        AT THE ELECTION OF THE EXECUTIVE WITHOUT GOOD REASON, UPON NOT LESS
THAN SIXTY (60) CALENDAR DAYS PRIOR WRITTEN NOTICE OF TERMINATION BY THE
EXECUTIVE TO THE COMPANY; PROVIDED, HOWEVER, THAT THE COMPANY MAY, IN ITS SOLE
DISCRETION, DETERMINE THAT THE TERMINATION OF THE EXECUTIVE SHALL BECOME
EFFECTIVE IMMEDIATELY AND IN WHICH CASE THE TERMINATION SHALL STILL BE
CONSIDERED AT THE ELECTION OF THE EXECUTIVE WITHOUT GOOD REASON.

 

4.6        AT THE ELECTION OF THE COMPANY, WITHOUT CAUSE, UPON NOT LESS THAN
SIXTY (60) DAYS WRITTEN NOTICE TO EXECUTIVE.

 

4.7        AT THE ELECTION OF THE COMPANY OR THE EXECUTIVE IN CONNECTION WITH A
CHANGE IN CONTROL, AS SET FORTH IN THE EXECUTIVE RETENTION AGREEMENT BETWEEN THE
COMPANY

 

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AND THE EXECUTIVE (THE “ERA”), DATED AS OF THE DATE HEREOF.  “CHANGE IN CONTROL”
SHALL HAVE THE MEANING SET FORTH IN THE ERA.

 

5.             EFFECT OF TERMINATION.

 

5.1        NON-RENEWAL, TERMINATION WITHOUT GOOD REASON BY THE EXECUTIVE OR
TERMINATION FOR CAUSE BY THE COMPANY.  IN THE EVENT THE EXECUTIVE’S EMPLOYMENT
IS TERMINATED BY NON-RENEWAL PURSUANT TO SECTION 4.1, FOR CAUSE BY THE COMPANY
PURSUANT TO SECTION 4.2, OR AT THE ELECTION OF THE EXECUTIVE PURSUANT TO
SECTION 4.5, THE COMPANY SHALL PAY TO THE EXECUTIVE THE COMPENSATION AND
BENEFITS OTHERWISE PAYABLE TO HIM UNDER SECTION 3 THROUGH THE LAST CALENDAR DAY
OF HIS ACTUAL EMPLOYMENT BY THE COMPANY..

 

5.2        TERMINATION FOR DEATH OR DISABILITY.  IN THE EVENT THE EXECUTIVE’S
EMPLOYMENT IS TERMINATED BY DEATH OR BECAUSE OF DISABILITY PURSUANT TO
SECTION 4.3, THE COMPANY SHALL PAY TO THE ESTATE OF THE EXECUTIVE OR TO THE
EXECUTIVE, AS THE CASE MAY BE, (A) WITHIN THIRTY (30) DAYS OF THE DATE OF THE
EXECUTIVE’S DEATH OR DETERMINATION OF DISABILITY, THE COMPENSATION WHICH WOULD
OTHERWISE BE PAYABLE TO THE EXECUTIVE UP TO THE END OF THE MONTH IN WHICH THE
TERMINATION OF HIS EMPLOYMENT BECAUSE OF DEATH OR DISABILITY OCCURS; AND (B) AN
ANNUAL BONUS, PAYABLE WHEN BONUSES ARE PAID FOR THAT YEAR, IN AN AMOUNT EQUAL TO
THE TOTAL BONUS HE WOULD BE PAID FOR SUCH YEAR, IF ANY, MULTIPLIED BY A
FRACTION, THE NUMERATOR OF WHICH IS THE NUMBER OF DAYS IN THE YEAR THAT HAVE
ELAPSED SINCE JANUARY 1 AND THE DENOMINATOR OF WHICH IS 365 (A “PRO RATA
BONUS”).  IN ADDITION, THE COMPANY SHALL PERMIT EXECUTIVE OR EXECUTIVE’S ESTATE
OR REPRESENTATIVE TO EXERCISE THE VESTED STOCK OPTION PORTION OF THE INITIAL
GRANT FOR A PERIOD OF NO LESS THAN ONE YEAR AFTER ANY SUCH TERMINATION OF
EMPLOYMENT.

 

5.3        TERMINATION BY THE EXECUTIVE WITH GOOD REASON OR BY THE COMPANY
WITHOUT “CAUSE”.  IN THE EVENT THE EXECUTIVE’S EMPLOYMENT IS TERMINATED BY THE
EXECUTIVE WITH

 

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GOOD REASON PURSUANT TO SECTION 4.4 OR BY THE COMPANY WITHOUT CAUSE PURSUANT TO
SECTION 4.6, THE COMPANY SHALL PAY TO THE EXECUTIVE THE COMPENSATION AND
BENEFITS OTHERWISE PAYABLE TO HIM UNDER SECTION 3 THROUGH THE LAST CALENDAR DAY
OF HIS ACTUAL EMPLOYMENT BY THE COMPANY.  IN ADDITION, PROVIDED THE EXECUTIVE
EXECUTES AND DOES NOT REVOKE A SEPARATION AGREEMENT AND RELEASE OF CLAIMS FOR
THE BENEFIT OF THE COMPANY SUBSTANTIALLY IN THE FORM SET FORTH ON SCHEDULE D
HERETO, THE COMPANY SHALL  (A) CONTINUE TO PAY THE EXECUTIVE THE BASE SALARY FOR
TWENTY FOUR (24) MONTHS IN ACCORDANCE WITH THE COMPANY’S REGULAR PAYROLL
PRACTICES; (B) PAY THE EXECUTIVE A PRO RATA BONUS; (C) PAY THE EXECUTIVE, IN
BI-WEEKLY INSTALLMENTS, OVER A TWENTY FOUR (24) MONTH PERIOD, AN AMOUNT EQUAL IN
THE AGGREGATE TO 1.5 TIMES THE AVERAGE ANNUAL BONUS EARNED FOR THE TWO YEARS
PRIOR TO THE DATE OF HIS TERMINATION (IN THE EVENT THE EXECUTIVE HAS NOT BEEN
EMPLOYED FOR A SUFFICIENT PERIOD TO EARN TWO SUCH BONUSES, SUCH CALCULATION
SHALL BE MADE ASSUMING EXECUTIVE EARNED A BONUS FOR ANY SUCH YEAR AT A TARGET
LEVEL OF PERFORMANCE (TAKING INTO ACCOUNT ANY MINIMUM BONUS AMOUNT)).; AND
(D) PROVIDE TO THE EXECUTIVE FOR 24 MONTHS FOLLOWING THE DATE OF HIS
TERMINATION, PAYMENT OF COBRA PREMIUMS FOR MEDICAL, DENTAL, AND VISION BENEFITS
PURSUANT TO PLANS MAINTAINED BY THE COMPANY UNDER WHICH EXECUTIVE AND/OR
EXECUTIVE’S FAMILY IS ELIGIBLE TO RECEIVE BENEFITS; PROVIDED, HOWEVER, THAT,
NOTWITHSTANDING THE FOREGOING, THE BENEFITS DESCRIBED IN THIS SUBSECTION MAY BE
DISCONTINUED PRIOR TO THE END OF THE PERIOD, BUT ONLY TO THE EXTENT, THAT
EXECUTIVE RECEIVES SUBSTANTIALLY SIMILAR BENEFITS FROM A SUBSEQUENT EMPLOYER;
AND (E) PERMIT EXECUTIVE TO EXERCISE THE STOCK OPTION PORTION OF THE INITIAL
GRANT FOR A PERIOD OF NO LESS THAN SIX MONTHS AFTER THE DATE OF TERMINATION.

 

5.4        TERMINATION FOLLOWING A CHANGE IN CONTROL.  IN THE EVENT THE
EXECUTIVE’S EMPLOYMENT IS TERMINATED PURSUANT TO SECTION 4.7 BY THE COMPANY OR
BY THE EXECUTIVE WITHIN

 

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24 MONTHS FOLLOWING THE CHANGE IN CONTROL DATE AS DEFINED IN THE ERA, THE
EXECUTIVE WILL BE ENTITLED TO THE BENEFITS SET FORTH IN THE ERA IN ACCORDANCE
WITH THE TERMS OF THE ERA.

 

5.5        PARTICIPATION IN EXECUTIVE RETIREMENT HEALTH BENEFIT PROGRAM. 
FOLLOWING THE DATE OF THE EXECUTIVE’S TERMINATION, FOR ANY REASON WHATSOEVER,
AND, IF APPLICABLE, THE TWENTY-FOUR (24) MONTH PERIOD REFERRED TO IN
SECTION 5.3(D) OR THE PERIOD REFERRED TO IN SECTION 4.2(A)(II) OF THE ERA, IN
THE EVENT THE EXECUTIVE ELECTS TO PARTICIPATE IN THE COMPANY’S EXECUTIVE RETIREE
HEALTH BENEFIT PROGRAM SET FORTH ON EXHIBIT A HERETO (THE “PROGRAM”), HE WILL
REIMBURSE THE COMPANY WITH RESPECT TO HIS PARTICIPATION IN THE PROGRAM AT THE
LESSER OF (A) THE ACTUAL COST TO THE COMPANY OF THE EMPLOYEE’S PARTICIPATION AND
(B) THE RATE APPLICABLE TO FORMER EMPLOYEES OF THE COMPANY TO ELECT COBRA HEALTH
COVERAGE.

 

5.6        PAYMENTS SUBJECT TO SECTION 409A.

 

(A)           SUBJECT TO THIS SECTION 5.6, PAYMENTS OR BENEFITS UNDER SECTION 5 
SHALL BEGIN ONLY UPON THE DATE OF A “SEPARATION FROM SERVICE” OF THE EXECUTIVE
(DETERMINED AS SET FORTH BELOW) WHICH OCCURS ON OR AFTER THE TERMINATION OF THE
EXECUTIVE’S EMPLOYMENT.  THE FOLLOWING RULES SHALL APPLY WITH RESPECT TO
DISTRIBUTION OF THE PAYMENTS AND BENEFITS, IF ANY, TO BE PROVIDED TO THE
EXECUTIVE UNDER SECTION 5, AS APPLICABLE:

 

(I)            IT IS INTENDED THAT EACH INSTALLMENT OF THE PAYMENTS AND BENEFITS
PROVIDED UNDER SECTION 5  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 THE 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.

 

(II)           IF, AS OF THE DATE OF THE “SEPARATION FROM SERVICE” OF THE
EXECUTIVE FROM THE COMPANY, THE EXECUTIVE IS NOT A “SPECIFIED EMPLOYEE” (WITHIN
THE MEANING

 

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OF SECTION 409A), THEN EACH INSTALLMENT OF THE PAYMENTS AND BENEFITS SHALL BE
MADE ON THE DATES AND TERMS SET FORTH IN SECTION 5.

 

(III)          IF, AS OF THE DATE OF THE “SEPARATION FROM SERVICE” OF THE
EXECUTIVE FROM THE COMPANY, THE EXECUTIVE IS A “SPECIFIED EMPLOYEE” (WITHIN THE
MEANING OF SECTION 409A), THEN:

 

(1)           EACH INSTALLMENT OF THE PAYMENTS AND BENEFITS DUE UNDER SECTION 5
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 15TH DAY OF THE THIRD MONTH FOLLOWING THE END
OF THE EXECUTIVE’S TAX YEAR IN WHICH THE SEPARATION FROM SERVICE OCCURS AND THE
15TH DAY OF THE THIRD MONTH FOLLOWING THE END OF THE COMPANY’S TAX YEAR IN WHICH
THE SEPARATION FROM SERVICE OCCURS; AND

 

(2)           EACH INSTALLMENT OF THE PAYMENTS AND BENEFITS DUE UNDER SECTION 5
THAT IS NOT DESCRIBED IN SECTION 5.6 (A)(III)(1) AND THAT WOULD, ABSENT THIS
SUBSECTION, BE PAID WITHIN THE SIX-MONTH PERIOD FOLLOWING THE “SEPARATION FROM
SERVICE” OF THE EXECUTIVE 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,
THE 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 THE EXECUTIVE’S SEPARATION
FROM SERVICE AND ANY SUBSEQUENT INSTALLMENTS, IF ANY, BEING PAID IN ACCORDANCE
WITH THE DATES AND

 

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TERMS SET FORTH HEREIN; PROVIDED, HOWEVER, THAT THE PRECEDING PROVISIONS OF THIS
SENTENCE SHALL NOT APPLY TO ANY INSTALLMENT OF PAYMENTS AND BENEFITS IF AND TO
THE MAXIMUM EXTENT THAT 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 THE
EXECUTIVE’S SECOND TAXABLE YEAR FOLLOWING HIS TAXABLE YEAR IN WHICH THE
SEPARATION FROM SERVICE OCCURS.

 

(B)           THE DETERMINATION OF WHETHER AND WHEN A SEPARATION FROM SERVICE OF
THE EXECUTIVE FROM THE COMPANY HAS OCCURRED SHALL BE MADE AND 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 5.6 (B), “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.

 

(C)           ALL REIMBURSEMENTS AND IN-KIND BENEFITS PROVIDED UNDER THE
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.

 

6.             NON-COMPETITION AND NON-SOLICITATION.

 

(A)           WHILE THE EXECUTIVE IS EMPLOYED BY THE COMPANY, AND FOR A PERIOD
OF TWELVE (12) MONTHS FOLLOWING THE EXECUTIVE’S TERMINATION OR CESSATION OF SUCH
EMPLOYMENT FOR ANY REASON, THE EXECUTIVE WILL NOT DIRECTLY OR INDIRECTLY:

 

(I)            ENGAGE IN ANY BUSINESS OR ENTERPRISE (WHETHER AS AN OWNER,
PARTNER, OFFICER, EMPLOYEE, DIRECTOR, INVESTOR, LENDER, CONSULTANT, INDEPENDENT
CONTRACTOR OR OTHERWISE, EXCEPT AS THE HOLDER OF NOT MORE THAN 5% OF THE
COMBINED VOTING POWER OF THE

 

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OUTSTANDING STOCK OF A PUBLICLY HELD COMPANY) THAT (A) IS COMPETITIVE WITH THE
COMPANY’S BUSINESS, AND (B) DEVELOPS, DESIGNS, PRODUCES, MARKETS, SELLS OR
RENDERS ANY PRODUCT OR SERVICE COMPETITIVE WITH ANY PRODUCT DEVELOPED, PRODUCED,
MARKETED, SOLD OR RENDERED BY THE COMPANY WHILE THE EXECUTIVE WAS EMPLOYED BY
THE COMPANY;

 

(II)           EITHER ALONE OR IN ASSOCIATION WITH OTHERS, RECRUIT OR SOLICIT,
ANY PERSON WHO WAS EMPLOYED BY THE COMPANY AT ANY TIME DURING THE PERIOD OF THE
EXECUTIVE’S EMPLOYMENT WITH THE COMPANY, EXCEPT FOR AN INDIVIDUAL WHOSE
EMPLOYMENT WITH THE COMPANY HAS BEEN TERMINATED FOR A PERIOD OF SIX MONTHS OR
LONGER; AND

 

(III)          EITHER ALONE OR IN ASSOCIATION WITH OTHERS, SOLICIT, DIVERT OR
TAKE AWAY, OR ATTEMPT TO DIVERT OR TO TAKE AWAY, THE BUSINESS OR PATRONAGE OF
ANY OF THE CLIENTS, CUSTOMERS OR ACCOUNTS, OR PROSPECTIVE CLIENTS, CUSTOMERS OR
ACCOUNTS, OF THE COMPANY WHICH WERE CONTACTED, SOLICITED OR SERVED BY THE
EXECUTIVE WHILE HE WAS EMPLOYED BY THE COMPANY.

 

(B)           IF ANY RESTRICTION SET FORTH IN THIS SECTION 6 IS FOUND BY ANY
COURT OF COMPETENT JURISDICTION TO BE UNENFORCEABLE BECAUSE IT EXTENDS FOR TOO
LONG A PERIOD OF TIME OR OVER TOO GREAT A RANGE OF ACTIVITIES OR IN TOO BROAD A
GEOGRAPHIC AREA, IT SHALL BE INTERPRETED TO EXTEND ONLY OVER THE MAXIMUM PERIOD
OF TIME, RANGE OF ACTIVITIES OR GEOGRAPHIC AREA AS TO WHICH IT MAY BE
ENFORCEABLE.

 

(C)           THE EXECUTIVE ACKNOWLEDGES THAT THE RESTRICTIONS CONTAINED IN THIS
AGREEMENT ARE NECESSARY FOR THE PROTECTION OF THE BUSINESS AND GOODWILL OF THE
COMPANY AND ARE CONSIDERED BY THE EXECUTIVE TO BE REASONABLE FOR SUCH PURPOSE. 
THE EXECUTIVE AGREES THAT ANY BREACH OF THIS AGREEMENT WILL CAUSE THE COMPANY
SUBSTANTIAL AND IRREVOCABLE DAMAGE AND THEREFORE, IN THE EVENT OF ANY SUCH
BREACH, IN ADDITION TO SUCH OTHER REMEDIES WHICH MAY BE

 

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AVAILABLE, THE COMPANY SHALL HAVE THE RIGHT TO SEEK SPECIFIC PERFORMANCE AND
INJUNCTIVE RELIEF WITHOUT POSTING A BOND.

 

(D)           THE GEOGRAPHIC SCOPE OF THIS SECTION SHALL EXTEND TO ANYWHERE THE
COMPANY OR ANY OF ITS SUBSIDIARIES IS DOING BUSINESS, OR HAS PLANS, DURING THE
TERM, TO DO BUSINESS.

 

(E)           THE EXECUTIVE AGREES TO PROVIDE A COPY OF THIS AGREEMENT TO ALL
PERSONS AND ENTITIES WITH WHOM THE EXECUTIVE SEEKS TO BE HIRED OR DO BUSINESS
BEFORE ACCEPTING EMPLOYMENT OR ENGAGEMENT WITH ANY OF THEM.

 

(F)            IF THE EXECUTIVE VIOLATES THE PROVISIONS OF THIS SECTION, THE
EXECUTIVE SHALL CONTINUE TO BE HELD BY THE RESTRICTIONS SET FORTH IN THIS
SECTION, UNTIL A PERIOD EQUAL TO THE PERIOD OF RESTRICTION HAS EXPIRED WITHOUT
ANY VIOLATION.

 

7.             PROPRIETARY INFORMATION AND DEVELOPMENTS.

 

7.1        PROPRIETARY INFORMATION.

 

(A)           THE EXECUTIVE AGREES THAT ALL INFORMATION, WHETHER OR NOT IN
WRITING, OF A PRIVATE, SECRET OR CONFIDENTIAL NATURE CONCERNING THE COMPANY’S
BUSINESS, BUSINESS RELATIONSHIPS OR FINANCIAL AFFAIRS (COLLECTIVELY,
“PROPRIETARY INFORMATION”) IS AND SHALL BE THE EXCLUSIVE PROPERTY OF THE
COMPANY.  BY WAY OF ILLUSTRATION, BUT NOT LIMITATION, PROPRIETARY INFORMATION
MAY INCLUDE DISCOVERIES, INVENTIONS, PRODUCTS, PRODUCT IMPROVEMENTS, PRODUCT
ENHANCEMENTS, PROCESSES, METHODS, TECHNIQUES, FORMULAS, COMPOSITIONS, COMPOUNDS,
NEGOTIATION STRATEGIES AND POSITIONS, PROJECTS, DEVELOPMENTS, PLANS (INCLUDING
BUSINESS AND MARKETING PLANS), RESEARCH DATA, CLINICAL DATA, FINANCIAL DATA
(INCLUDING SALES, COSTS, PROFITS AND PRICING METHODS), PERSONNEL DATA, COMPUTER
PROGRAMS (INCLUDING SOFTWARE USED PURSUANT TO A LICENSE AGREEMENT), CUSTOMER AND
SUPPLIER LISTS, AND CONTACTS AT OR KNOWLEDGE OF CUSTOMERS OR PROSPECTIVE
CUSTOMERS

 

14

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OF THE COMPANY.  EXCEPT AS REQUIRED BY APPLICABLE LAW, THE EXECUTIVE WILL NOT
DISCLOSE ANY PROPRIETARY INFORMATION TO ANY PERSON OR ENTITY OTHER THAN
EMPLOYEES OF THE COMPANY OR USE THE SAME FOR ANY PURPOSES (OTHER THAN IN THE
PERFORMANCE OF HIS DUTIES AS AN EMPLOYEE OF THE COMPANY) WITHOUT PRIOR WRITTEN
APPROVAL FROM THE CHIEF EXECUTIVE OFFICER, EITHER DURING OR AFTER HIS EMPLOYMENT
WITH THE COMPANY, UNLESS AND UNTIL SUCH PROPRIETARY INFORMATION HAS BECOME
PUBLIC KNOWLEDGE WITHOUT FAULT BY THE EXECUTIVE.

 

(B)           THE EXECUTIVE AGREES THAT ALL FILES, DOCUMENTS, LETTERS,
MEMORANDA, REPORTS, RECORDS, DATA, SKETCHES, DRAWINGS, METHODS, LABORATORY
NOTEBOOKS, PROGRAM LISTINGS, COMPUTER EQUIPMENT OR DEVICES, COMPUTER PROGRAMS OR
OTHER WRITTEN, PHOTOGRAPHIC, OR OTHER TANGIBLE MATERIAL CONTAINING PROPRIETARY
INFORMATION, WHETHER CREATED BY THE EXECUTIVE OR OTHERS, WHICH SHALL COME INTO
HIS CUSTODY OR POSSESSION, SHALL BE AND ARE THE EXCLUSIVE PROPERTY OF THE
COMPANY AND ARE TO BE USED BY THE EXECUTIVE ONLY IN THE PERFORMANCE OF HIS
DUTIES FOR THE COMPANY.  ALL SUCH MATERIALS OR COPIES THEREOF AND ALL TANGIBLE
PROPERTY OF THE COMPANY IN THE CUSTODY OR POSSESSION OF THE EXECUTIVE SHALL BE
DELIVERED TO THE COMPANY UPON THE EARLIER OF (I) A REQUEST BY THE COMPANY OR
(II) TERMINATION OF HIS EMPLOYMENT.  AFTER SUCH DELIVERY, THE EXECUTIVE SHALL
NOT RETAIN ANY SUCH MATERIALS OR COPIES THEREOF OR ANY SUCH TANGIBLE PROPERTY.

 

(C)           THE EXECUTIVE AGREES THAT HIS OBLIGATION NOT TO DISCLOSE OR TO USE
INFORMATION AND MATERIALS OF THE TYPES SET FORTH IN SUBSECTIONS (A) AND
(B) ABOVE, AND HIS OBLIGATION TO RETURN MATERIALS AND TANGIBLE PROPERTY SET
FORTH IN SUBSECTION (B) ABOVE, ALSO EXTENDS TO SUCH TYPES OF INFORMATION,
MATERIALS AND TANGIBLE PROPERTY OF CUSTOMERS OF THE COMPANY OR SUPPLIERS TO THE
COMPANY OR OTHER THIRD PARTIES WHO MAY HAVE DISCLOSED OR ENTRUSTED THE SAME TO
THE COMPANY OR TO THE EXECUTIVE.

 

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7.2        DEVELOPMENTS.

 

(A)           THE EXECUTIVE WILL MAKE FULL AND PROMPT DISCLOSURE TO THE COMPANY
OF ALL INVENTIONS, CREATIONS, IMPROVEMENTS, DISCOVERIES, TRADE SECRETS, SECRET
PROCESSES, TECHNOLOGY, KNOW-HOW, COPYRIGHTABLE MATERIALS, METHODS, DEVELOPMENTS,
SOFTWARE, AND WORKS OF AUTHORSHIP OR OTHER CREATIVE WORKS, WHETHER PATENTABLE OR
NOT, WHICH ARE CREATED, MADE, CONCEIVED OR REDUCED TO PRACTICE BY HIM OR UNDER
HIS DIRECTION OR JOINTLY WITH OTHERS DURING HIS EMPLOYMENT BY THE COMPANY,
WHETHER OR NOT DURING NORMAL WORKING HOURS OR ON THE PREMISES OF THE COMPANY
(ALL OF WHICH ARE COLLECTIVELY REFERRED TO IN THIS AGREEMENT AS “DEVELOPMENTS”).

 

(B)           THE EXECUTIVE AGREES TO ASSIGN AND DOES HEREBY ASSIGN TO THE
COMPANY (OR ANY PERSON OR ENTITY DESIGNATED BY THE COMPANY) ALL HIS RIGHT, TITLE
AND INTEREST IN AND TO ALL DEVELOPMENTS AND ALL RELATED PATENTS, PATENT
APPLICATIONS, COPYRIGHTS AND COPYRIGHT APPLICATIONS.  HOWEVER, THIS SUBSECTION
(B) SHALL NOT APPLY TO DEVELOPMENTS THAT DO NOT RELATE TO ANY BUSINESS OR
RESEARCH AND DEVELOPMENT CONDUCTED OR PLANNED TO BE CONDUCTED BY THE COMPANY AT
THE TIME SUCH DEVELOPMENT IS CREATED, MADE, CONCEIVED OR REDUCED TO PRACTICE AND
THAT ARE MADE AND CONCEIVED BY THE EXECUTIVE NOT DURING NORMAL WORKING HOURS,
NOT ON THE COMPANY’S PREMISES AND NOT USING THE COMPANY’S TOOLS, DEVICES,
EQUIPMENT OR PROPRIETARY INFORMATION.  THE EXECUTIVE UNDERSTANDS THAT, TO THE
EXTENT THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF ANY
STATE THAT PRECLUDES A REQUIREMENT IN AN EMPLOYEE AGREEMENT TO ASSIGN CERTAIN
CLASSES OF INVENTIONS MADE BY AN EMPLOYEE, THIS SUBSECTION (B) SHALL BE
INTERPRETED NOT TO APPLY TO ANY INVENTION THAT A COURT RULES AND/OR THE COMPANY
AGREES FALLS WITHIN SUCH CLASSES.  THE EXECUTIVE ALSO HEREBY WAIVES ALL CLAIMS
TO MORAL RIGHTS IN ANY DEVELOPMENTS.

 

(C)           THE EXECUTIVE AGREES TO COOPERATE FULLY WITH THE COMPANY AND TO
TAKE SUCH FURTHER ACTIONS AS MAY BE NECESSARY OR DESIRABLE, BOTH DURING AND
AFTER HIS EMPLOYMENT

 

16

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WITH THE COMPANY, WITH RESPECT TO THE PROCUREMENT, MAINTENANCE AND ENFORCEMENT
OF COPYRIGHTS, PATENTS AND OTHER INTELLECTUAL PROPERTY RIGHTS (BOTH IN THE
UNITED STATES AND FOREIGN COUNTRIES) RELATING TO DEVELOPMENTS.  THE EXECUTIVE
SHALL SIGN ALL PAPERS, INCLUDING, WITHOUT LIMITATION, COPYRIGHT APPLICATIONS,
PATENT APPLICATIONS, DECLARATIONS, OATHS, FORMAL ASSIGNMENTS, ASSIGNMENTS OF
PRIORITY RIGHTS AND POWERS OF ATTORNEY, THAT THE COMPANY MAY DEEM NECESSARY OR
DESIRABLE IN ORDER TO PROTECT ITS RIGHTS AND INTERESTS IN ANY DEVELOPMENT.  THE
EXECUTIVE FURTHER AGREES THAT IF THE COMPANY IS UNABLE, AFTER REASONABLE EFFORT,
TO SECURE THE SIGNATURE OF THE EXECUTIVE ON ANY SUCH PAPERS, THE CHIEF EXECUTIVE
OFFICER OF THE COMPANY SHALL BE ENTITLED TO EXECUTE ANY SUCH PAPERS AS THE AGENT
AND THE ATTORNEY-IN-FACT OF THE EXECUTIVE, AND THE EXECUTIVE HEREBY IRREVOCABLY
DESIGNATES AND APPOINTS THE CHIEF EXECUTIVE OFFICER OF THE COMPANY AS HIS AGENT
AND ATTORNEY-IN-FACT TO EXECUTE ANY SUCH PAPERS ON HIS BEHALF AND TO TAKE ANY
AND ALL ACTIONS AS THE COMPANY MAY DEEM NECESSARY OR DESIRABLE IN ORDER TO
PROTECT ITS RIGHTS AND INTERESTS IN ANY DEVELOPMENT UNDER THE CONDITIONS
DESCRIBED IN THIS SENTENCE.

 

7.3        UNITED STATES GOVERNMENT OBLIGATIONS.  THE EXECUTIVE ACKNOWLEDGES
THAT THE COMPANY FROM TIME TO TIME MAY HAVE AGREEMENTS WITH OTHER PARTIES OR
WITH THE UNITED STATES GOVERNMENT, OR AGENCIES THEREOF, WHICH IMPOSE OBLIGATIONS
OR RESTRICTIONS ON THE COMPANY REGARDING INVENTIONS MADE DURING THE COURSE OF
WORK UNDER SUCH AGREEMENTS OR REGARDING THE CONFIDENTIAL NATURE OF SUCH WORK. 
THE EXECUTIVE AGREES TO BE BOUND BY ALL SUCH OBLIGATIONS AND RESTRICTIONS THAT
ARE MADE KNOWN TO THE EXECUTIVE AND TO TAKE ALL ACTION NECESSARY TO DISCHARGE
THE OBLIGATIONS OF THE COMPANY UNDER SUCH AGREEMENTS.

 

7.4        OTHER AGREEMENTS.  THE EXECUTIVE HEREBY REPRESENTS THAT HE IS NOT
BOUND BY THE TERMS OF ANY AGREEMENT WITH ANY PREVIOUS EMPLOYER OR OTHER PARTY TO
REFRAIN FROM COMPETING, DIRECTLY OR INDIRECTLY, WITH THE BUSINESS OF SUCH
PREVIOUS EMPLOYER OR ANY OTHER

 

17

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PARTY.  THE EXECUTIVE FURTHER REPRESENTS THAT HIS PERFORMANCE OF ALL THE TERMS
OF THIS AGREEMENT AND THE PERFORMANCE OF HIS DUTIES AS AN EMPLOYEE OF THE
COMPANY DOES NOT AND WILL NOT BREACH ANY AGREEMENT TO KEEP IN CONFIDENCE
PROPRIETARY INFORMATION, KNOWLEDGE OR DATA ACQUIRED BY HIM IN CONFIDENCE OR IN
TRUST PRIOR TO HIS EMPLOYMENT WITH THE COMPANY AND THAT THE EXECUTIVE WILL NOT
DISCLOSE TO THE COMPANY OR INDUCE THE COMPANY TO USE ANY CONFIDENTIAL OR
PROPRIETARY INFORMATION, KNOWLEDGE OR MATERIAL BELONGING TO ANY PREVIOUS
EMPLOYER OR OTHERS.  THE EXECUTIVE FURTHER REPRESENTS THAT HIS PERFORMANCE OF
ALL THE TERMS OF THIS AGREEMENT AND THE PERFORMANCE OF HIS DUTIES AS AN EMPLOYEE
OF THE COMPANY DOES NOT AND WILL NOT BREACH ANY AGREEMENT TO REFRAIN FROM
SOLICITING EMPLOYEES, CUSTOMERS OR SUPPLIERS OF ANY FORMER EMPLOYER OR OTHERS.

 

8.             INDEMNIFICATION.  THE COMPANY SHALL INDEMNIFY THE EXECUTIVE IN
ACCORDANCE WITH APPLICABLE LAWS, ITS CERTIFICATE OF INCORPORATION AND BY-LAWS
AND ANY OTHER POLICY OR PLAN OF ANY KIND THAT PROVIDES FOR INDEMNIFICATION OF
THE EXECUTIVE AND IS, OR MAY BECOME, APPLICABLE OR AVAILABLE TO THE EXECUTIVE.

 

9.             SURVIVAL.  THE PROVISIONS OF SECTIONS 6, 7 AND 8 SHALL SURVIVE
THE TERMINATION OF THIS AGREEMENT FOR ANY REASON.

 

10.           NOTICES.  ANY NOTICES DELIVERED UNDER THIS AGREEMENT SHALL BE
DEEMED DULY DELIVERED THREE (3) BUSINESS DAYS AFTER IT IS SENT BY REGISTERED OR
CERTIFIED MAIL, RETURN RECEIPT REQUESTED, POSTAGE PREPAID, OR ONE (1) BUSINESS
DAY AFTER IT IS SENT FOR NEXT-BUSINESS DAY DELIVERY VIA A REPUTABLE NATIONWIDE
OVERNIGHT COURIER SERVICE, IN EACH CASE TO THE ADDRESS OF THE RECIPIENT SET
FORTH IN THE INTRODUCTORY PARAGRAPH HERETO.  EITHER PARTY MAY CHANGE THE ADDRESS
TO WHICH NOTICES ARE TO BE DELIVERED BY GIVING NOTICE OF SUCH CHANGE TO THE
OTHER PARTY IN THE MANNER SET FORTH IN THIS SECTION 10.

 

18

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11.           COMPLIANCE WITH CODE SECTION 409A.  THIS AGREEMENT IS INTENDED TO
COMPLY WITH THE PROVISIONS OF SECTION 409A AND THE AGREEMENT SHALL, TO THE
EXTENT PRACTICABLE, BE CONSTRUED IN ACCORDANCE THEREWITH.  THE COMPANY MAKES NO
REPRESENTATION OR WARRANTY AND SHALL HAVE NO LIABILITY TO THE EXECUTIVE OR ANY
OTHER PERSON IF ANY PROVISIONS OF THIS AGREEMENT ARE DETERMINED TO CONSTITUTE
DEFERRED COMPENSATION SUBJECT TO SECTION 409A AND DO NOT SATISFY AN EXEMPTION
FROM, OR THE CONDITIONS OF, SECTION 409A.

 

12.           PRONOUNS.  WHENEVER THE CONTEXT MAY REQUIRE, ANY PRONOUNS USED IN
THIS AGREEMENT SHALL INCLUDE THE CORRESPONDING MASCULINE, FEMININE OR NEUTER
FORMS, AND THE SINGULAR FORMS OF NOUNS AND PRONOUNS SHALL INCLUDE THE PLURAL,
AND VICE VERSA.

 

13.           ENTIRE AGREEMENT.  THIS AGREEMENT, TOGETHER WITH THE ERA,
CONSTITUTES THE ENTIRE AGREEMENT BETWEEN THE PARTIES AND SUPERSEDES ALL PRIOR
AGREEMENTS AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT
MATTER OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, THE ORIGINAL AGREEMENT.

 

14.           AMENDMENT.  THIS AGREEMENT MAY BE AMENDED OR MODIFIED ONLY BY A
WRITTEN INSTRUMENT EXECUTED BY BOTH THE COMPANY AND THE EXECUTIVE.

 

15.           GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (WITHOUT
REFERENCE TO THE CONFLICT OF LAWS PROVISIONS THEREOF).  ANY ACTION, SUIT OR
OTHER LEGAL PROCEEDING ARISING UNDER OR RELATING TO ANY PROVISION OF THIS
AGREEMENT SHALL BE COMMENCED ONLY IN A COURT OF THE COMMONWEALTH OF
MASSACHUSETTS (OR, IF APPROPRIATE, A FEDERAL COURT LOCATED WITHIN THE
COMMONWEALTH OF MASSACHUSETTS), AND THE COMPANY AND THE EXECUTIVE EACH CONSENTS
TO THE JURISDICTION OF SUCH A COURT.  THE COMPANY AND THE EXECUTIVE EACH HEREBY
IRREVOCABLY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION, SUIT OR OTHER
LEGAL PROCEEDING ARISING UNDER OR RELATING TO ANY

 

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PROVISION OF THIS AGREEMENT OR ANY OTHER DEALING BETWEEN THEM RELATING TO THE
SUBJECT MATTER OF THIS TRANSACTION AND THE RELATIONSHIP THAT IS BEING
ESTABLISHED.

 

16.           SUCCESSORS AND ASSIGNS.  THIS AGREEMENT SHALL BE BINDING UPON AND
INURE TO THE BENEFIT OF BOTH PARTIES AND THEIR RESPECTIVE SUCCESSORS AND
ASSIGNS, INCLUDING ANY CORPORATION WITH WHICH OR INTO WHICH THE COMPANY MAY BE
MERGED OR WHICH MAY SUCCEED TO ITS ASSETS OR BUSINESS; PROVIDED, HOWEVER, THAT
THE OBLIGATIONS OF THE EXECUTIVE ARE PERSONAL AND SHALL NOT BE ASSIGNED BY HIM.

 

17.           ACKNOWLEDGMENT.  THE EXECUTIVE STATES AND REPRESENTS THAT HE HAS
HAD AN OPPORTUNITY TO FULLY DISCUSS AND REVIEW THE TERMS OF THIS AGREEMENT WITH
AN ATTORNEY.  THE EXECUTIVE FURTHER STATES AND REPRESENTS THAT HE HAS CAREFULLY
READ THIS AGREEMENT, UNDERSTANDS THE CONTENTS HEREIN, FREELY AND VOLUNTARILY
ASSENTS TO ALL OF THE TERMS AND CONDITIONS HEREOF, AND SIGNS HIS NAME OF HIS OWN
FREE ACT.

 

18.           MISCELLANEOUS.

 

18.1      NO DELAY OR OMISSION BY THE COMPANY OR THE EXECUTIVE IN EXERCISING ANY
RIGHT UNDER THIS AGREEMENT SHALL OPERATE AS A WAIVER OF THAT OR ANY OTHER
RIGHT.  A WAIVER OR CONSENT GIVEN BY THE COMPANY OR THE EXECUTIVE ON ANY ONE
OCCASION SHALL BE EFFECTIVE ONLY IN THAT INSTANCE AND SHALL NOT BE CONSTRUED AS
A BAR TO OR WAIVER OF ANY RIGHT ON ANY OTHER OCCASION.

 

18.2      THE CAPTIONS OF THE SECTIONS OF THIS AGREEMENT ARE FOR CONVENIENCE OF
REFERENCE ONLY AND IN NO WAY DEFINE, LIMIT OR AFFECT THE SCOPE OR SUBSTANCE OF
ANY SECTION OF THIS AGREEMENT.

 

18.3      IN CASE ANY PROVISION OF THIS AGREEMENT SHALL BE INVALID, ILLEGAL OR
OTHERWISE UNENFORCEABLE, THE VALIDITY, LEGALITY AND ENFORCEABILITY OF THE
REMAINING PROVISIONS SHALL IN NO WAY BE AFFECTED OR IMPAIRED THEREBY.

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year set forth above.

 

 

Sepracor Inc.

 

 

 

 

 

By:

/s/ Adrian Adams

 

Title:

President and Chief Executive Officer

 

 

 

 

 

/s/ Richard Ranieri

 

Richard Ranieri

 

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Exhibit A

 

Program Terms

 

The Executive shall be entitled to continued access to health benefits under, at
the Executive’s election, the Company’s Blue Cross Blue Shield PPO Policy or
BlueChoice Policy (the “Policies”), following the Executive’s retirement from
the Company, for so long as (A) the Company continues to offer such Policy and
(B) the Policy allows for such continued access; and, to the extent the Company
no longer maintains at least one of the Policies, or access is no longer allowed
under either of the Policies, the Company shall allow the Executive continued
access to health benefits under a successor policy, or otherwise, for so long as
it offers health benefits to its employees.

 

1

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SCHEDULE A

 

FORM OF RESTRICTED STOCK AGREEMENT

 

SEE ATTACHED AGREEMENT

 

--------------------------------------------------------------------------------

 

SEPRACOR INC.

 

Restricted Stock Agreement

 

Name of Recipient:

 

 

 

 

 

 

 

Number of shares of restricted common
stock awarded:

 

 

 

 

 

 

 

Grant Date:

 

 

 

Sepracor Inc. (the “Company”) has selected you to receive the restricted stock
award described above, which is subject to the provisions of the Company’s 2000
Stock Incentive Plan (the “Plan”) and the terms and conditions contained in this
Restricted Stock Agreement.  Please confirm your acceptance of this restricted
stock award and of the terms and conditions of this Agreement by signing a copy
of this Agreement where indicated below.

 

SEPRACOR INC.

 

 

 

By:

 

 

 

[insert name and title]

Accepted and Agreed:

 

 

 

 

 

 

[insert name of recipient]

 

 

--------------------------------------------------------------------------------

 

SEPRACOR INC.

 

Restricted Stock Agreement

 

The terms and conditions of the award of shares of restricted common stock of
the Company (the “Restricted Shares”) made to the Recipient, as set forth on the
cover page of this Agreement, are as follows:

 

ISSUANCE OF RESTRICTED SHARES.

 

18.4         THE RESTRICTED SHARES ARE ISSUED TO THE RECIPIENT, EFFECTIVE AS OF
THE GRANT DATE (AS SET FORTH ON THE COVER PAGE OF THIS AGREEMENT), IN
CONSIDERATION OF EMPLOYMENT SERVICES RENDERED AND TO BE RENDERED BY THE
RECIPIENT TO THE COMPANY.

 

18.5         THE RESTRICTED SHARES WILL INITIALLY BE ISSUED BY THE COMPANY IN
BOOK ENTRY FORM ONLY, IN THE NAME OF THE RECIPIENT.  FOLLOWING THE VESTING OF
ANY RESTRICTED SHARES PURSUANT TO SECTION 2 BELOW, THE COMPANY SHALL, IF
REQUESTED BY THE RECIPIENT, ISSUE AND DELIVER TO THE RECIPIENT A CERTIFICATE
REPRESENTING THE VESTED RESTRICTED SHARES.   THE RECIPIENT AGREES THAT THE
RESTRICTED SHARES SHALL BE SUBJECT TO THE FORFEITURE PROVISIONS SET FORTH IN
SECTION 3 OF THIS AGREEMENT AND THE RESTRICTIONS ON TRANSFER SET FORTH IN
SECTION 4 OF THIS AGREEMENT.

 

19.           VESTING.

 

VESTING SCHEDULE.  UNLESS OTHERWISE PROVIDED IN THIS AGREEMENT OR THE PLAN, THE
RESTRICTED SHARES SHALL VEST IN ACCORDANCE WITH THE FOLLOWING VESTING SCHEDULE: 
ONE-THIRD OF THE TOTAL NUMBER OF RESTRICTED SHARES SHALL VEST ON THE FIRST
ANNIVERSARY OF YOUR COMMENCEMENT DATE (AS DEFINED IN THE EMPLOYMENT AGREEMENT
ENTERED INTO BETWEEN YOU AND THE COMPANY DATED AS OF [           ,2008] AND
ONE-THIRD OF THE TOTAL NUMBER OF RESTRICTED SHARES SHALL VEST ON EACH SUCCESSIVE
ANNIVERSARY THEREAFTER, THROUGH AND INCLUDING THE 3RD ANNIVERSARY OF THE
COMMENCEMENT DATE.   ANY FRACTIONAL NUMBER OF RESTRICTED SHARES RESULTING FROM
THE APPLICATION OF THE FOREGOING PERCENTAGES SHALL BE ROUNDED DOWN TO THE
NEAREST WHOLE NUMBER OF RESTRICTED SHARES.

 

ACCELERATION OF VESTING.  NOTWITHSTANDING THE FOREGOING VESTING SCHEDULE, AS
PROVIDED IN THE PLAN, ALL UNVESTED RESTRICTED SHARES SHALL VEST EFFECTIVE
IMMEDIATELY PRIOR TO A CHANGE IN CONTROL EVENT (AS DEFINED IN THE PLAN).

 

20.           FORFEITURE OF UNVESTED RESTRICTED SHARES UPON EMPLOYMENT
TERMINATION.

 

In the event that the Recipient ceases to be employed by, a director of, or a
consultant or advisor to, the Company for any reason or no reason, with or
without cause all of the Restricted Shares that are unvested as of the time of
such employment termination shall be forfeited immediately and automatically to
the Company, without the payment of any consideration to the Recipient,
effective as of such termination of employment.  The Recipient shall have no
further rights with respect to any Restricted Shares that are so forfeited.  If
the Recipient is employed by a subsidiary of the Company, any references in this
Agreement to employment with the Company shall instead be deemed to refer to
employment with such subsidiary.

 

3

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21.           RESTRICTIONS ON TRANSFER.

 

The Recipient shall not sell, assign, transfer, pledge, hypothecate or otherwise
dispose of, by operation of law or otherwise (collectively “transfer”) any
Restricted Shares, or any interest therein, until such Restricted Shares have
vested, except that the Recipient may transfer such Restricted Shares as part of
the sale of all or substantially all of the shares of capital stock of the
Company (including pursuant to a merger or consolidation).  The Company shall
not be required (i) to transfer on its books any of the Restricted Shares which
have been transferred in violation of any of the provisions of this Agreement or
(ii) to treat as owner of such Restricted Shares or to pay dividends to any
transferee to whom such Restricted Shares have been transferred in violation of
any of the provisions of this Agreement.

 

22.           RESTRICTIVE LEGENDS.

 

The book entry account reflecting the issuance of the Restricted Shares in the
name of the Recipient shall bear a legend or other notation upon substantially
the following terms:

 

“These shares of stock are subject to forfeiture provisions and restrictions on
transfer set forth in a certain Restricted Stock Agreement between the
corporation and the registered owner of these shares (or his or her predecessor
in interest), and such Agreement is available for inspection without charge at
the office of the Secretary of the corporation.”

 

23.           RIGHTS AS A SHAREHOLDER.

 

Except as otherwise provided in this Agreement, for so long as the Recipient is
the registered owner of the Restricted Shares, the Recipient shall have all
rights as a shareholder with respect to the Restricted Shares, whether vested or
unvested, including, without limitation, any rights to receive dividends and
distributions with respect to the Restricted Shares and to vote the Restricted
Shares and act in respect of the Restricted Shares at any meeting of
shareholders.

 

24.           PROVISIONS OF THE PLAN.

 

This Agreement is subject to the provisions of the Plan, a copy of which is
furnished to the Recipient with this Agreement.  As provided in the Plan, upon
the occurrence of a Reorganization Event (as defined in the Plan), the rights of
the Company hereunder (including the right to receive forfeited Restricted
Shares) shall inure to the benefit of the Company’s successor and, unless the
Board determines otherwise, shall apply to the cash, securities or other
property which the Restricted Shares were converted into or exchanged for
pursuant to such Reorganization Event in the same manner and to the same extent
as they applied to the Restricted Shares under this Agreement.

 

25.           TAX MATTERS.

 

25.1         ACKNOWLEDGMENTS; SECTION 83(B) ELECTION.  THE RECIPIENT
ACKNOWLEDGES THAT HE OR SHE IS RESPONSIBLE FOR OBTAINING THE ADVICE OF THE
RECIPIENT’S OWN TAX ADVISORS WITH RESPECT TO THE ACQUISITION OF THE RESTRICTED
SHARES AND THE RECIPIENT IS RELYING SOLELY ON SUCH ADVISORS AND NOT ON ANY
STATEMENTS OR REPRESENTATIONS OF THE COMPANY OR ANY OF ITS AGENTS WITH RESPECT
TO THE TAX CONSEQUENCES RELATING TO THE RESTRICTED SHARES.  THE RECIPIENT
UNDERSTANDS THAT THE RECIPIENT (AND NOT THE COMPANY) SHALL BE RESPONSIBLE FOR
THE RECIPIENT’S TAX LIABILITY THAT MAY ARISE IN CONNECTION WITH THE ACQUISITION,
VESTING AND/OR DISPOSITION OF THE RESTRICTED SHARES.  THE RECIPIENT ACKNOWLEDGES
THAT HE OR SHE HAS BEEN INFORMED OF THE AVAILABILITY OF MAKING AN ELECTION UNDER
SECTION 83(B) OF THE INTERNAL REVENUE CODE, AS AMENDED, WITH RESPECT TO THE

 

4

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ISSUANCE OF THE RESTRICTED SHARES AND THAT THE RECIPIENT HAS DECIDED NOT TO FILE
A SECTION 83(B) ELECTION.

 

25.2         WITHHOLDING. THE RECIPIENT ACKNOWLEDGES AND AGREES THAT THE COMPANY
HAS THE RIGHT TO DEDUCT FROM PAYMENTS OF ANY KIND OTHERWISE DUE TO THE RECIPIENT
ANY FEDERAL, STATE, LOCAL OR OTHER TAXES OF ANY KIND REQUIRED BY LAW TO BE
WITHHELD WITH RESPECT TO THE VESTING OF THE RESTRICTED SHARES.  ON EACH DATE ON
WHICH RESTRICTED SHARES VEST, THE COMPANY SHALL DELIVER WRITTEN NOTICE TO THE
RECIPIENT OF THE AMOUNT OF WITHHOLDING TAXES DUE WITH RESPECT TO THE VESTING OF
THE RESTRICTED SHARES THAT VEST ON SUCH DATE; PROVIDED, HOWEVER, THAT THE TOTAL
TAX WITHHOLDING CANNOT EXCEED THE COMPANY’S MINIMUM STATUTORY WITHHOLDING
OBLIGATIONS (BASED ON MINIMUM STATUTORY WITHHOLDING RATES FOR FEDERAL AND STATE
TAX PURPOSES, INCLUDING PAYROLL TAXES, THAT ARE APPLICABLE TO SUCH SUPPLEMENTAL
TAXABLE INCOME).  THE RECIPIENT SHALL SATISFY SUCH TAX WITHHOLDING OBLIGATIONS
BY MAKING A CASH PAYMENT TO THE COMPANY ON THE DATE OF VESTING OF THE RESTRICTED
SHARES, IN THE AMOUNT OF THE COMPANY’S WITHHOLDING OBLIGATION IN CONNECTION WITH
THE VESTING OF SUCH RESTRICTED SHARES.

 

26.           MISCELLANEOUS.

 

26.1         NO RIGHT TO CONTINUED EMPLOYMENT.  THE RECIPIENT ACKNOWLEDGES AND
AGREES THAT, NOTWITHSTANDING THE FACT THAT THE VESTING OF THE RESTRICTED SHARES
IS CONTINGENT UPON HIS OR HER CONTINUED EMPLOYMENT BY THE COMPANY, THIS
AGREEMENT DOES NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED
EMPLOYMENT OR CONFER UPON THE RECIPIENT ANY RIGHTS WITH RESPECT TO CONTINUED
EMPLOYMENT BY THE COMPANY.

 

26.2         GOVERNING LAW.  THIS AGREEMENT SHALL BE CONSTRUED, INTERPRETED AND
ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE WITHOUT
REGARD TO ANY APPLICABLE CONFLICTS OF LAWS PROVISIONS.

 

5

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SCHEDULE B
FORM OF STOCK OPTION AGREEMENT

 

SEE ATTACHED AGREEMENT

 

6

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SEPRACOR INC.

 

Nonstatutory Stock Option Agreement

Granted Under 2000 Stock Incentive Plan

 

1.             Grant of Option.

 

This agreement evidences the grant by Sepracor Inc., a Delaware corporation (the
“Company”), on the Grant Date indicated on the preceding Certificate of Stock
Option Grant (the “Certificate”) to an employee, consultant, or director of the
Company (the “Participant”), of an option to purchase, in whole or in part, on
the terms provided herein and in the Company’s 2000 Stock Incentive Plan (the
“Plan”), the number of shares (the “Shares”) of common stock, $.10 par value per
share, of the Company (“Common Stock”), indicated on the Certificate at the
price  per Share indicated on the Certificate. Unless earlier terminated, this
option shall expire on the Grant Expiration Date indicated on the Certificate
(“Grant Expiration Date”).

 

It is intended that the option evidenced by this agreement shall not be an
incentive stock option as defined in Section 422 of the Internal Revenue Code of
1986, as amended, and any regulations promulgated thereunder (the “Code”). 
Except as otherwise indicated by the context, the term “Participant”, as used in
this option, shall be deemed to include any person who acquires the right to
exercise this option validly under its terms.

 

2.             Vesting Schedule.

 

This option will become exercisable (“vest”) pursuant to the Vesting Schedule
indicated on the Certificate (“Vesting Schedule”).

 

The right of exercise shall be cumulative so that to the extent the option is
not exercised in any period to the maximum extent permissible it shall continue
to be exercisable, in whole or in part, with respect to all shares for which it
is vested until the earlier of the Grant Expiration Date or the termination of
this option under Section 3 hereof or the Plan.

 

3.             Exercise of Option.

 

(a)           Form of Exercise. Each election to exercise this option shall be
in writing, signed by the Participant, and received by the Company at its
principal office, accompanied by this agreement, and payment in full in the
manner provided in the Plan. The Participant may purchase less than the number
of shares covered hereby, provided that no partial exercise of this option may
be for any fractional share.

 

(b)           Continuous Relationship with the Company Required.  Except as
otherwise provided in this Section 3, this option may not be exercised unless
the Participant, at the time he or she exercises this option, is, and has been
at all times since the Grant Date, an [employee or officer of], or consultant or
advisor to, the Company or any parent or subsidiary of the Company as defined in
Section 424(e) or (f) of the Code (an “Eligible Participant”).

 

(c)           Termination of Relationship with the Company. If the Participant
ceases to be an Eligible Participant for any reason, then, except as provided in
paragraphs (d) and (e) below, the right to exercise this option shall terminate
six months after such cessation (but in no event after the Grant Expiration
Date), provided that this option shall be exercisable only to the extent that

 

7

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the Participant was entitled to exercise this option on the date of such
cessation.  Notwithstanding the foregoing, if, following the time the
Participant has ceased to be an Eligible Participant, but prior to the Grant
Expiration Date, the Participant materially breaches Section 6 or 7 of the
Employment Agreement between the Participant and the Company dated [          ],
2008 (the “Employment Agreement”), the right to exercise this option shall
terminate immediately upon written notice to the Participant from the Company
describing such violation.

 

(d)           Exercise Period Upon Death or Disability.  If the Participant dies
or becomes disabled (within the meaning of Section 22(e)(3) of the Code) prior
to the Grant Expiration Date while he or she is an Eligible Participant and the
Company has not terminated such relationship for “cause” as specified in
paragraph (e) below, this option shall be exercisable, within the period of one
year following the date of death or disability of the Participant, by the
Participant (or in the case of death by an authorized transferee), provided that
this option shall be exercisable only to the extent that this option was
exercisable by the Participant on the date of his or her death or disability,
and further provided that this option shall not be exercisable after the Grant
Expiration Date.

 

(e)           Discharge for Cause.  If the Participant, prior to the Grant
Expiration Date, is discharged by the Company for “cause” (as defined below),
the right to exercise this option shall terminate immediately upon the effective
date of such discharge.  “Cause” shall have the meaning set forth in the
Employment Agreement.

 

4.             Withholding.

 

No Shares will be issued pursuant to the exercise of this option unless and
until the Participant pays to the Company, or makes provision satisfactory to
the Company for payment of, any federal, state or local withholding taxes
required by law to be withheld in respect of this option.

 

5.             Nontransferability of Option.

 

This option may not be sold, assigned, transferred, pledged or otherwise
encumbered by the Participant, either voluntarily or by operation of law, except
by will or the laws of descent and distribution, and, during the lifetime of the
Participant, this option shall be exercisable only by the Participant.

 

6.             Provisions of the Plan.

 

This option is subject to the provisions of the Plan, a copy of which is
furnished to the Participant with this option.

 

IN WITNESS WHEREOF, the Company has caused this option to be executed under its
corporate seal by its duly authorized officer.  This option shall take effect as
a sealed instrument.

 

SEPRACOR INC.

 

PARTICIPANT’S ACCEPTANCE

 

8

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The Participant hereby accepts the foregoing option and agrees to the terms and
conditions thereof.  The Participant hereby acknowledges receipt of a copy of
the Company’s 2000 Stock Incentive Plan.

 

9

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SCHEDULE C
VACATION POLICY

 

SEE ATTACHED POLICY

 

10

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SEPRACOR COMPANIES

 

HUMAN RESOURCE POLICY

 

Division:

All

 

Effective Date:

January 1, 2005

 

Index No.:

3-60

 

Page No:

1 of 2

 

 

 

 

 

 

 

Title:

Accrued Vacation Policy
Director Level and Above

 

Supersedes:

All

 

Approved By:

Signature on File

 

 

 

1.             Introduction

 

1.1                                      The purpose of the Accrued Vacation
Policy is to provide paid time off for employees to cover vacations and personal
time.

 

2.             Accrual rate for employees at Director level and above

 

2.1                                 Employees accrue vacation hours monthly that
may be used for paid time off to cover vacations and personal time. Regular
full-time employees, Director level or above, will accrue vacation time at a
rate of ten (10) hours per month during the first year of employment, for a
total of fifteen (15) days per year, equal to one hundred twenty (120) hours. 
Additional time begins to accrue in the month of the employee’s anniversary
date, up to a maximum of twenty-three (23) days per year, equal to one hundred
eighty-four (184) hours. Please see schedule below for details on total hours
accrued monthly:

 

Years of
Service

 

Director
and Above
Total Days

 

Monthly
Accrual
(Hours)

0-1

 

15

 

10.00

1-2

 

16

 

10.67

2-3

 

17

 

11.33

3-4

 

18

 

12.00

4-5

 

19

 

12.67

5-10

 

20

 

13.33

10-13

 

20

 

13.33

13-15

 

20

 

13.33

15-17

 

20

 

13.33

17-19

 

21

 

14.00

19-20

 

22

 

14.67

20+

 

23

 

15.33

 

3.             Administration

 

3.1           Accrual of vacation time is pro-rated for employees who are
regularly scheduled to work less than forty (40) hours but work at least twenty
(20) hours per week.  For example, an employee with a weekly schedule of twenty
(20) hours will accrue five (5) hours per month, and a thirty (30) hour employee
will accrue seven and a half (7.5) hours of vacation time per month.

 

11

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Accrued Vacation Policy: Director Level and Above

 

3.                                                                                     
Administration (Continued)

 

3.2                                              The current month’s accrual is
accrued on the 15th of every month.  An employee must be employed on the 15th in
order to receive that monthly accrual.  For example, if an employee is hired on
or before the 15th, they will receive that month’s accrual, and if they are
hired after the 15th, they will not.  Also, if an employee terminates employment
before the 15th they will not be paid for that month’s accrual, but if they
terminate after the 15th they will.

 

3.3                                              Employees may carry over a
maximum of forty (40) accrued vacation hours into the next calendar year.  The
carryover vacation hours must be used by July 31st of the new calendar year. 
Any carried over vacation hours not used by this date will be forfeited.*

 

3.3.1                        *In accordance with state law, California residents
will not have a limit on carryover time into the next calendar year.  Once an
employee accrues twenty-three (23) days of vacation, equal to one hundred
eighty-four (184) hours, the employee will cease to accrue any additional
vacation time until the vacation balance falls below that level.  Please refer
to Sepracor Human Resources for more information.

 

3.4                                              It is your responsibility to
request and schedule the use of accrued vacation time with your manager. 
Approval of vacation time will depend on the business needs of the
organization.  It is your responsibility to accurately track your use of accrued
vacation time through the iTime Tracking system.

 

3.5                                              At the minimum, vacation time
for full time employees should be taken in four (4) hour increments, with the
norm being eight (8) hour increments. For those with schedules of 20-39 hours,
increments of time used would be pro-rated according to hours worked.  For
example, if you were regularly scheduled to work six (6) hours, then you would
be paid a six (6) hour vacation day.

 

3.6                                             Your manager may approve the
borrowing of vacation time, up to a maximum of forty (40) hours for regular
full-time employees and pro-rated accordingly for regular part-time employees. 
Employees with a negative vacation balance may not borrow additional vacation
time until the existing vacation time balance has been satisfied and then upon
approval from your manager.  Under no circumstances may an employee borrow
vacation time from a future calendar year.

 

3.7                                             If it has been verified by
Payroll and the manager that an employee has a balance of accrued and unused
vacation time left at the end of employment, the balance will be converted to
cash and included in his/her final paycheck.  In the event an employee ends
his/her employment before having enough accrued time to cover any borrowed
vacation time, the employee’s final paycheck will reflect a deduction equal to
the cash value of the borrowed vacation time.

 

12

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SCHEDULE D
FORM OF SEPARATION AGREEMENT AND RELEASE OF CLAIMS

 

SEE ATTACHED AGREEMENT

 

13

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SCHEDULE D

 

FORM OF SEPARATION AGREEMENT AND RELEASE OF CLAIMS

 

In connection with your separation from Sepracor Inc. (the “Company”) on
[     ], and in order to receive the benefits as set forth in the Employment
Agreement (the “Agreement”) between you and the Company dated
[                ], 2008, this agreement must become binding between you and the
Company.  By signing and returning this agreement, you will be entering into a
binding agreement with the Company and will be agreeing to the terms and
conditions set forth in the numbered paragraphs below, including the release of
claims set forth in paragraph 1.  Therefore, you are advised to consult with an
attorney before signing this agreement and you have been given more than
twenty-one (21) days to do so.  If you sign this agreement, you may change your
mind and revoke your agreement during the seven (7) day period after you have
signed it.  If you do not so revoke, this agreement will become a binding
agreement between you and the Company upon the expiration of the seven (7) day
revocation period.

 

The following numbered paragraphs set forth the terms and conditions which will
apply if you timely sign and return this agreement and do not revoke it within
the seven (7) day revocation period:

 

1.               Mutual Release – In consideration of the payment of the
severance benefits, which you acknowledge you would not otherwise be entitled to
receive, you hereby fully, forever, irrevocably and unconditionally release,
remise and discharge the Company, its officers, directors, stockholders,
corporate affiliates, subsidiaries, parent companies, successors and assigns,
agents and employees (each in their individual and corporate capacities)
(hereinafter, the “Released Parties”) from any and all claims, charges,
complaints, demands, actions, causes of action, suits, rights, debts, sums of
money, costs, accounts, reckonings, covenants, contracts, agreements, promises,
doings, omissions, damages, executions, obligations, liabilities, and expenses
(including attorneys’ fees and costs), of every kind and nature which you ever
had or now have against the Released Parties, including, but not limited to,
those claims arising out of your employment with and/or separation from the
Company, including, but not limited to, all claims under Title VII of the Civil
Rights Act of 1964, 42 U.S.C. § 2000e et seq., the Age Discrimination in
Employment Act, 29 U.S.C. § 621 et seq., the Americans With Disabilities Act of
1990, 42 U.S.C. § 12101 et seq., the Family and Medical Leave Act, 29 U.S.C. §
2601 et seq., the Worker Adjustment and Retraining Notification Act (“WARN”), 29
U.S.C. § 2101 et seq., Section 806 of the Corporate and Criminal Fraud
Accountability Act of 2002, 18 U.S.C. § 1514(A), the Rehabilitation Act of 1973,
29 U.S.C. § 701 et seq., Executive Order 11246, Executive Order 11141, the Fair
Credit Reporting Act, 15 U.S.C. § 1681 et seq., the Employee Retirement Income
Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et seq., the Massachusetts Fair
Employment Practices Act., M.G.L. c. 151B, § 1 et seq., the Massachusetts Civil
Rights Act, M.G.L. c. 12, §§ 11H and 11I, the Massachusetts Equal Rights Act,
M.G.L. c. 93, § 102 and M.G.L. c. 214, § 1C, the Massachusetts Labor and
Industries Act, M.G.L. c. 149, § 1 et seq., the Massachusetts Privacy Act,
M.G.L. c. 214, § 1B, and the Massachusetts Maternity Leave Act, M.G.L. c. 149, §
105D, all as amended; all common law claims including, but not limited to,
actions in tort, defamation and breach of contract; all claims to any non-vested
ownership interest in the Company, contractual or otherwise, including, but not
limited to, claims to stock or stock options; and any claim or damage arising
out of your employment with or separation from

 

14

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the Company (including a claim for retaliation) under any common law theory or
any federal, state or local statute or ordinance not expressly referenced
above.  Notwithstanding the foregoing, the release set forth in this Section 1
shall not apply to (a) your rights under the Agreement, (b) any vested equity
interest in the Company, including vested stock options or (c) the rights you
have to be indemnified and defended  by the Company pursuant to the terms of the
Company’s Restated Certificate of Incorporation, as amended, or other organizing
documents, and the rights that you have under, or with respect to, the Company’s
Directors and Officers liability insurance policies with respect to conduct or
events occurring during, or relating to, your employment by, or while serving as
an officer or director of, the Company,  Without limiting the generality of the
foregoing,  the Company shall continue to cover you under its Directors and
Officers liability insurance policies following the Separation Date in
substantially the same amount and on substantially the same terms as the Company
covers its other former officers and directors.

 

The Company hereby fully, forever, irrevocably and unconditionally releases,
remises and discharges you from any and all claims, charges, complaints,
demands, actions, causes of action, suits, rights, debts, sums of money, costs,
accounts, reckonings, covenants, contracts, agreements, promises, doings,
omissions, damages, executions, obligations, liabilities and expenses (including
attorney’s fees and costs), of every kind and nature that the Company ever had
or now has against you as of the date of this agreement.

 

2.               On-Going Obligations – You acknowledge and reaffirm your
obligation to keep confidential and not to disclose any and all Proprietary
Information (as defined in the Agreement) concerning the Company which you
acquired during the course of your employment with the Company, including, but
not limited to, any non-public information concerning the Company’s business
affairs, business prospects and financial condition. You further acknowledge and
reaffirm your obligations under the Agreement for the benefit of the Company.

 

3.               Return of Company Property – You confirm that you have returned
to the Company all keys, files, records (and copies thereof), equipment
(including, but not limited to, computer hardware, software and printers,
wireless handheld devices, cellular phones, pagers, etc.), Company
identification, Company vehicles and any other Company owned property in your
possession or control and have left intact all electronic Company documents,
including but not limited to, those that  you developed or helped develop during
your employment.  You further confirm that you have cancelled all accounts for
your benefit, if any, in the Company’s name, including but not limited to,
credit cards, telephone charge cards, cellular phone and/or pager accounts and
computer accounts.

 

4.               Business Expenses and Compensation – You acknowledge that you
have been reimbursed by the Company for all business expenses incurred in
conjunction with your employment with the Company and that no other
reimbursements are owed to you.  You further acknowledge that you have received
payment in full for all services rendered in conjunction with your employment by
the Company and that no other compensation is owed to you except as provided in
the Agreement.

 

5.               Non-Disparagement – You understand and agree that, as a
condition for payment to you of the consideration herein described and described
in the Agreement, you shall not make any false, disparaging or derogatory
statements to any media outlet, industry group, financial institution or current
or former employee, consultant, client or customer of the Company

 

15

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regarding the Company or any of its directors, officers, employees, agents or
representatives or about the Company’s business affairs and financial condition;
provided, however, that nothing herein shall prevent you from making truthful
disclosures to any governmental entity or in any litigation or arbitration.  The
Company agrees not to make any false, disparaging or derogatory statements about
you to any media outlet, industry group, financial institution, or current or
former employee, consultant, client, or customer; provided, however, that
nothing herein shall prevent the Company from making truthful disclosures to any
governmental entity or in any litigation or arbitration.  In the event that any
inquiries are directed to the Company’s Human Resources Office regarding you
from prospective employers, the Company will explain its neutral reference
policy, confirm only the fact of your former employment with the Company,
starting and ending dates and your job title in the last position held.

 

6.               Amendment - This agreement shall be binding upon the parties
and may not be modified in any manner, except by an instrument in writing of
concurrent or subsequent date signed by duly authorized representatives of the
parties hereto.  This agreement is binding upon and shall inure to the benefit
of the parties and their respective agents, assigns, heirs, executors,
successors and administrators.

 

7.               Waiver of Rights - No delay or omission by the Company or you
in exercising any right under this agreement shall operate as a waiver of that
or any other right.  A waiver or consent given by the Company or you on any one
occasion shall be effective only in that instance and shall not be construed as
a bar or waiver of any right on any other occasion.

 

8.               Validity - Should any provision of this agreement be declared
or be determined by any court of competent jurisdiction to be illegal or
invalid, the validity of the remaining parts, terms or provisions shall not be
affected thereby and said illegal or invalid part, term or provision shall be
deemed not to be a part of this agreement.

 

9.               Tax Provision - In connection with the severance benefits
provided to you pursuant to this agreement and the Agreement, the Company shall
withhold and remit to the tax authorities the amounts required under applicable
law, and you shall be responsible for all applicable taxes with respect to such
severance benefits under applicable law.  You acknowledge that you are not
relying upon advice or representation of the Company with respect to the tax
treatment of any of the severance benefits.

 

10.         Nature of Agreement - You understand and agree that this agreement,
together with the Agreement, is a severance agreement and does not constitute an
admission of liability or wrongdoing on the part of the Company.

 

11.         Acknowledgments - You acknowledge that you have been given at least
twenty-one (21) days to consider this agreement and that the Company advised you
to consult with an attorney of your own choosing prior to signing this
agreement.  You understand that you may revoke this agreement for a period of
seven (7) days after you sign this agreement, and the agreement shall not be
effective or enforceable until the expiration of this seven (7) day revocation
period.  You understand and agree that by entering into this agreement you are
waiving any and all rights or claims you might have under The Age Discrimination
in Employment Act, as amended by The Older Workers Benefit Protection Act, and
that you have received consideration for that waiver.

 

16

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12.         Voluntary Assent - You affirm that, other than as contained in the
Agreement, no other promises or agreements of any kind have been made to or with
you by any person or entity whatsoever to cause you to sign this agreement, and
that you fully understand the meaning and intent of this agreement.  You state
and represent that you have had an opportunity to fully discuss and review the
terms of this agreement with an attorney.  You further state and represent that
you have carefully read this agreement, understand the contents herein, freely
and voluntarily assent to all of the terms and conditions hereof, and sign your
name of your own free act.

 

13.         Applicable Law - This agreement shall be interpreted and construed
by the laws of the Commonwealth of Massachusetts, without regard to conflict of
laws provisions.  You hereby irrevocably submit to and acknowledge and recognize
the jurisdiction of the courts of the Commonwealth of Massachusetts, or if
appropriate, a federal court located in Massachusetts (which courts, for
purposes of this agreement, are the only courts of competent jurisdiction), over
any suit, action or other proceeding arising out of, under or in connection with
this agreement or the subject matter hereof.

 

14.         Entire Agreement - This agreement, together with the Agreement,
contains and constitutes the entire understanding and agreement between the
parties hereto with respect to your severance benefits and the settlement of
claims against the Company and cancels all previous oral and written
negotiations, agreements, commitments and writings in connection therewith.
Nothing in this paragraph, however, shall modify, cancel or supersede your
obligations set forth in paragraph 2 herein.

 

17

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Sepracor Inc.

 

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

I hereby agree to the terms and conditions set forth above.  I have been given
at least twenty-one (21) days to consider this agreement and I have chosen to
execute this on the date below.  I intend that this agreement become a binding
agreement between me and the Company if I do not revoke my acceptance in seven
(7) days by notifying                                                in writing.

 

 

 

 

Date

 

Name

 

 

 

18

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SEPRACOR INC.

 

December 23, 2008

 

Richard Ranieri

7910 Entrada De Luz

San Diego, CA  92127

 

Dear Richard:

 

In order to ensure compliance with Section 409A of the Internal Revenue Code of
1986, as amended, Sepracor Inc., a Delaware corporation (the “Company”), and you
hereby agree to amend the Executive Retention Agreement dated as of August 18,
2008 by and between the Company and you (the “Retention Agreement”), as set
forth on Exhibit A hereto, and to further amend the Amended and Restated
Employment Agreement dated as of November 6, 2008 by and between the Company and
you (the “Employment Agreement”), as set forth on Exhibit B hereto.

 

Except as modified by this letter, all other terms and conditions of the
Retention Agreement and Employment 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,

 

 

 

 

 

SEPRACOR INC.

 

 

 

 

 

By:

/s/ Adrian Adams

 

 

  Name:  Adrian Adams

 

 

  Title:  President and Chief Executive Officer

Acknowledged and agreed:

 

 

 

 

 

 

 

 

/s/ Richard Ranieri

 

 

Richard Ranieri

 

 

 

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Exhibit A

 

Retention Agreement

 

1.     Section 1.1. of the Retention Agreement be and hereby is amended by
deleting the first paragraph in its entirety and inserting the following in lieu
thereof:

 

“1.1         “Change in Control” means an event or occurrence set forth in any
one or more of subsections (a) through (d) below (including an event or
occurrence that constitutes a Change in Control under one of such subsections
but is specifically exempted from another such subsection), provided that such
event constitutes a “change in control event” within the meaning of Section 409A
(as defined below):”

 

2.     Section 4.1 of the Retention Agreement be and hereby is deleted in its
entirety and the following is inserted in lieu thereof:

 

“4.1         “Stock Acceleration.  If the Change in Control Date occurs during
the Term, then, effective upon the Change in Control Date, (a) each outstanding
option to purchase shares of Common Stock of the Company held by the Executive
shall vest and become immediately exercisable in full and shares of Common Stock
of the Company received upon exercise of any options will no longer be subject
to a right of repurchase by the Company, (b) each outstanding restricted stock
award shall be deemed to be fully vested and will no longer be subject to a
right of repurchase by the Company and (c) if the Executive’s employment is
thereafter terminated for any reason (other than by the Company for Cause), then
each such option (or any option into which such option is converted, exchanged
or substituted in connection with the Change in Control) shall continue to be
exercisable by the Executive (to the extent such option was exercisable on the
Date of Termination) for a period of six months following the Date of
Termination, notwithstanding any provision in any applicable option agreement to
the contrary but not later than the expiration date of the option; provided
however that if stock options held generally by employees of the Company under
the stock option or stock incentive plan under which Executive’s stock option
was granted terminate or expire if not exercised upon, immediately prior to or
otherwise in connection with the Change in Control, such stock option held by
Executive shall likewise terminate or expire.”

 

3.     Section 4.2(a)(i)(2) of the Retention Agreement be and hereby is deleted
in its entirety and the following is inserted in lieu thereof:

 

“(2)         the amount equal to (A) two multiplied by (B) the sum of (x) the
Executive’s highest annual base salary during the five-year period prior to the
Change in Control Date and (y) the Executive’s highest annual bonus during the
five-year period prior to the Change in Control Date, provided, however, that if
the Executive is terminated prior to the Closing of the Change in Control and
the Executive is entitled to these payments solely pursuant to the second
sentence of Section 1.2 hereof, then the amount payable pursuant to this
subsection shall be paid over the 24-month period commencing 30 days following
the date of termination in accordance with the Company’s regular payroll
practices.”

 

4.     Section 4.3(a) of the Retention Agreement be and hereby is amended by
deleting the last sentence in its entirety and inserting the following in lieu
thereof:

 

“Within 90 days after the due date of each Contingent Compensation Payment to
the Executive but no later than the end of the year following the year in which
the Executive paid

 

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the Excise Tax, the Company shall pay to the Executive, in cash, the Gross-Up
Payment with respect to such Contingent Compensation Payment, in the amount
determined pursuant to this Section 4.3.”

 

5.     Section 4.6 of the Retention Agreement be and hereby is deleted in its
entirety and the following is inserted in lieu thereof:

 

“4.6         Payments Subject to Section 409A.  Any severance payments or
benefits under Section 4 of the 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 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 Section 4 of the Agreement:

 

(a)           It is intended that each installment of the severance payments and
benefits provided under the Agreement shall be treated as a separate “payment”
for purposes of Section 409A of the Internal Revenue Code and the guidance
issued thereunder (“Section 409A”).  Neither the Company nor the 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 the 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
the 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 defined under
Section 409A) 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; and

 

(ii)           Each installment of the severance payments and benefits due under
the Agreement that is not described in paragraph (c)(i) above and that would,
absent this subparagraph, 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 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.

 

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(d)           The determination of whether and when Executive’s separation from
service from the Company has occurred shall be made and 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 paragraph (d), “Company” shall
include all persons with whom the Company would be considered a single employer
as determined under Treasury Regulation Section 1.409A-1(h)(3).

 

(e)           All reimbursements and in-kind benefits provided under the
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
(A) any reimbursement is for expenses incurred during Executive’s lifetime (or
during a shorter period of time specified in this Agreement), (B) the amount of
expenses eligible for reimbursement during a calendar year may not affect the
expenses eligible for reimbursement in any other calendar year, (C) 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
(D) the right to reimbursement is not subject to set off or liquidation or
exchange for any other benefit.”

 

6.     Section 5.3 of the Retention Agreement by and hereby is amended by adding
the following at the end of the paragraph:

 

“Notwithstanding the foregoing, if the continued payment of base salary and/or
continued provision of benefits to Executive pending resolution of any dispute
would cause the Executive to become subject to penalties, interest or other
adverse tax consequences under Section 409A, then (i) the Executive shall be
entitled to the payments and benefits at the time and in the manner set forth in
Section 4 hereof and (ii) following the resolution of the dispute if the
payments made and/or benefits provided to the Executive under clause (i) exceed
the amount that the Executive is entitled to receive pursuant to Section 4, the
excess of such amount shall be repaid (with interest at the applicable Federal
rate provided for in Section 7872(f)(2)(A) of the Code) by the Executive to the
Company within 60 days of the resolution of the dispute.”

 

7.     Section 7 of the Retention Agreement be and hereby is amended by deleting
“111 Locke Drive” and replacing it with “84 Waterford Drive”.

 

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Exhibit B

 

Employment Agreement

 

1.     Any Annual Bonus or Pro Rata Bonus payable to you under the Employment
Agreement will be paid to you no later than March 15th of the calendar year
following the year in which you earned such bonus.

 

2.     Section 5.2 of the Employment Agreement be and hereby is amended by
deleting the last sentence in its entirety and inserting the following in lieu
thereof:

 

“In addition, the Company shall permit Executive or Executive’s estate or
representative to exercise the vested stock option portion of the Initial Grant
for a period of no less than one year after any such termination of employment
but not later than the expiration date of such option.”

 

3.     Section 5.3 of the Employment Agreement be and hereby is amended by
deleting the second sentence in its entirety and inserting the following in lieu
thereof:

 

“In addition, provided the Executive executes a Separation Agreement and Release
of Claims for the benefit of the Company substantially in the form set forth on
Schedule D hereto (the “Release”) and any applicable revocation period with
respect to the Release has expired on or before the 60th day following the date
of Executive’s termination of employment (the “Payment Commencement Date”), the
Company shall (a) continue to pay the Executive the Base Salary for twenty four
(24) months in accordance with the Company’s regular payroll practices,
commencing on the Payment Commencement Date (provided, however, that if the
Release has been signed, and any applicable revocation period has expired, on or
before the 30th day following the date of the Executive’s termination of
employment, then the payments may commence on such 30th day, unless the Payment
Commencement Date occurs in the calendar year following the year in which the
Executive’s employment is terminated, in which case the payments shall commence
no earlier than January 1 of such subsequent year); (b) pay the Executive a Pro
Rata Bonus; (c) pay the Executive, in bi-weekly installments, over a twenty
four-month period, commencing on the Payment Commencement Date (provided,
however, that if the Release has been signed, and any applicable revocation
period has expired, on or before the 30th day following the date of the
Executive’s termination of employment, then the payments may commence on such
30th day, unless the Payment Commencement Date occurs in the calendar year
following the year in which the Executive’s employment is terminated, in which
case the payments shall commence no earlier than January 1 of such subsequent
year), an amount equal in the aggregate to 1.5 times the average Annual Bonus
earned for the two years prior to the date of his termination (in the event
Executive has not been employed for a sufficient period to earn two such
bonuses, such calculation shall be made assuming Executive earned a bonus for
any such year at a target level of performance (taking into account any minimum
bonus amount)); (d) provide to the Executive for 24 months following the date of
his termination payment of COBRA premiums for medical, dental, and vision
benefits pursuant to plans maintained by the Company under which Executive
and/or Executive’s family is eligible to receive benefits; provided, however,
that, notwithstanding the foregoing, the benefits described in this subsection
may be discontinued prior to the end of the period, but only to the extent, that
Executive receives substantially similar benefits from a subsequent employer;
and (e) permit Executive to exercise the stock option portion of the Initial
Grant for a period of no less than six months after the date of termination but
not later than the expiration date of such option.”

 

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