Exhibit 10.1

 

SEPARATION AGREEMENT

 

This Separation Agreement (this “Agreement”) is made and entered into as
of December 21, 2015 (the “Separation Date”), by and between Edward J. Quilty
(the “Executive”) and Derma Sciences, Inc. (the “Company”). The Company and
Executive are sometimes collectively referred to herein as the Parties and
individually as a Party. As used in this Agreement, the term “affiliate” shall
mean any entity controlled by, controlling, or under common control with, the
Company.

 

WHEREAS, Executive and the Company have determined to provide for the separation
of Executive’s employment with the Company and its affiliates on the terms and
subject to the conditions set forth herein.

 

NOW, THEREFORE, in consideration of the foregoing recitals, the mutual promises
contained herein, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Parties hereto agree as follows:

 

1. Separation. As of the Separation Date, Executive’s employment and status as
an employee and officer with the Company and its affiliates (including, without
limitation, as Chairman of the Board, President and Chief Executive Officer of
the Company) will terminate and Executive will cease to be an employee of any
and all of the foregoing. In addition, as of the Separation Date, Executive
shall, and by execution of this Agreement he does, resign from any and all
directorships Executive may hold with any of the Company’s affiliates. Executive
shall continue his service as a member of the Board of Directors of the Company
(the “Board”), and shall be entitled to receive director compensation consistent
with the Company’s then-current policy for the compensation of directors;
provided that Executive agrees to promptly resign from the Board in the event
that he receives notice from the Chairman that Executive will not be nominated
for re-election to the Board pursuant to the Board’s By-Laws.

 

2. Accrued Benefits. The Company will pay and provide to Executive the following
payments and benefits:

 

(a) Salary and Vacation Pay. Within 10 calendar days after the Separation Date,
or such earlier date as required by law, the Company will issue to Executive his
final paycheck, reflecting (i) his unpaid base salary through December 31, 2015,
and (ii) his accrued but unused vacation pay through the Separation Date.

 

(b) Expense Reimbursements. Within 30 calendar days following the Separation
Date, the Company will reimburse Executive for any reasonable unreimbursed
business expenses actually and properly incurred by Executive in connection with
carrying out his duties with the Company through the Separation Date in
accordance with applicable Company business expense reimbursement policies,
which expenses will be submitted by Executive to the Company with supporting
receipts and/or documentation no later than 10 calendar days after the
Separation Date.

 

 

 

 

(c) Other Benefits. All Company-provided benefits shall cease to accrue on the
Separation Date, including, but not limited to, accrual of vacation, sick, and
other benefits. The Company will continue to provide the existing level of
health insurance benefits through December 31, 2015, at which time Executive
shall be eligible for COBRA coverage, as set forth below.

 

3. Severance Benefits. In consideration of, and subject to and conditioned upon
Executive’s execution and non-revocation of the release attached as Exhibit A to
this Agreement (the “Release”) and the effectiveness of such Release as provided
in Section 4 of this Agreement, and subject to Executive’s continuing compliance
with his obligations in Sections 1 and 6(b) hereof, the Company will pay or
provide to Executive the following payments and benefits, which Executive
acknowledges and agrees constitute adequate and valuable consideration, in and
of themselves, for the promises contained in this Agreement:

 

(a) Severance. The Company shall pay to Executive an amount equal to $1,030,000
(the “Severance Payment”), payable in equal installments in accordance with the
Company’s payroll practices over the two year period commencing on the first
payroll date in 2016.

 

(b) Annual Bonus. The Company shall pay to Executive $93,344 (36.25% of the
target bonus opportunity) under the Company’s annual bonus program for the 2015
fiscal year in a single lump sum by December 31, 2015.

 

(c) Equity Awards. The Company has granted Executive certain restricted share
units (“RSUs”) and stock options that are outstanding as of the Separation Date
pursuant to the terms and conditions of the Company’s equity compensation plan
and the equity award agreements between the Parties (the “Equity Awards”). The
following Equity Awards that remain outstanding immediately prior to the
Separation Date shall become vested and exercisable, effective as of the
Separation Date:

 

 

Equity Award

Equity Awards to Vest as of the Separation Date Time-Based RSUs (December 2012)
16,250 RSUs Time-Based Stock Option (February 2013) 6,000 option shares
Time-Based  Stock Option  (February 2014) 18,000 option shares Performance-Based
RSUs (February 2015) 5,438 RSUs (36.25% of award) Time-Based Stock Option
(February 2015) 15,000 option shares Performance-Based Stock Option (February
2015) 18,125 option shares (36.25% of award)

 

For the avoidance of doubt, the Parties acknowledge and agree that Executive
vested in an additional 16,250 RSUs under the Time-Based RSUs (December 2012) on
December 20, 2015 (i.e., the day before the Separation Date). Any remaining
unvested Equity Awards that have not vested prior to the Separation Date and
that do not vest in accordance with this Section 3(c) shall be forfeited
effective as of the Separation Date. The period to exercise any stock options
outstanding as of the Separation Date, including any such stock options that
become exercisable pursuant to this Section 3(c), shall be the earlier of: (i)
the expiration date set forth in the applicable equity award agreement; or (ii)
the 10th anniversary of the original date of grant.

 

2 

 

 

(d) Continued Health Care Benefits. If Executive timely elects continued health
coverage under COBRA, the Company will pay all related COBRA premiums, and any
other premiums required to maintain Executive’s health insurance coverage as in
effect immediately prior to the Separation Date, for the two-year period
commencing January 1, 2016 and ending December 31, 2018 (the “Premium Period”),
which period shall run concurrently with the COBRA continuation period. An
amount equal to the applicable premiums (or such other amounts as may be
required by law) will be included in Executive’s income for tax purposes to the
extent required by applicable law and the Company may withhold taxes from
Executive’s other compensation for this purpose.

 

(e) Consulting Agreement. The Company and Executive shall enter into a
Consulting Services Agreement in the form attached as Exhibit B (the “Consulting
Services Agreement”).

 

(f) Payment of Legal Fees. Within 10 calendar days after the Separation Date,
the Company shall reimburse Executive for up to $2,500 in legal fees and costs
Executive incurred related to his attorneys’ review of this Agreement.

 

4. Release of Claims. Executive agrees that, as a condition to Executive’s right
to receive the payments and benefits set forth in Section 3, within 21 calendar
days following the Separation Date, Executive shall execute and deliver the
Release to the Company. If Executive fails to execute and deliver the Release to
the Company, or if the Release is revoked by Executive or otherwise does not
become effective and irrevocable in accordance with its terms, then Executive
will not be entitled to any payment or benefit under Section 3 of this
Agreement.

 

5. Effect on Other Arrangements. Executive acknowledges that the payments and
arrangements contained in this Agreement will constitute full and complete
satisfaction of any and all amounts properly due and owing to Executive as a
result of his employment with the Company and its affiliates and the termination
thereof. Executive agrees that, as of the Separation Date, this Agreement
supersedes and replaces the severance terms under any plan, program, policy or
practice or contract or agreement of the Company and its affiliates, including
the terms of the Employment Agreement between the Parties dated March 7, 2012,
as amended December 20, 2012, March 27, 2013, and March 9, 2015 (the “Employment
Agreement”), and that Company and its affiliates have no further obligations to
Executive under any plan, program, policy or practice or contract or agreement,
with the exception of the Company’s equity compensation plan and the equity
award agreements.

 

6. Covenants

 

(a) Claw Back Policy. Executive acknowledges that he shall remain subject to the
provisions of the Company’s Claw Back Policy (the “Claw Back Policy”), as in
effect on the Separation Date, which shall survive and continue in full force
and effect notwithstanding the termination of Executive’s employment. The
Parties acknowledge that, on and after the Separation Date, the Company may not
amend or modify the Claw Back Policy in a manner that adversely affects
Executive, unless the Company determines in good faith that such amendment or
modification is required in order to comply with applicable laws or exchange
listing requirements.

 

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(b) Non-Disparagement. Executive agrees that he will not do or say anything that
could reasonably be expected to disparage or impact negatively the name or
reputation in the marketplace of the Company or any of its affiliates,
employees, officers, directors, stockholders, members, principals or assigns.
Nothing in this Section 6(b) shall preclude Executive from responding truthfully
to any legal process or truthfully testifying in a legal or regulatory
proceeding, provided that, to the extent permitted by law, Executive promptly
informs the Company of any such obligation prior to participating in any such
proceedings. The Company likewise agrees that it will not release any
information or make any statements, and its officers and directors shall not do
or say anything that could reasonably be expected to disparage or impact
negatively the name or reputation in the marketplace of Executive. Nothing
herein shall preclude the Company or any of its affiliates, employees, officers,
directors, stockholders, members, principals or assigns from responding
truthfully to any legal process or truthfully testifying in a legal or
regulatory proceeding, provided that to the extent permitted by law, the Company
will promptly inform Executive in advance if it has reason to believe such
response or testimony will directly relate to Executive, or preclude the Company
from complying with applicable disclosure requirements.

 

7. Indemnification and Insurance. The Company will continue in force its
directors and officers liability insurance coverages with respect to any claims
that may be asserted against Executive arising out of Executive’s employment
with the Company. Executive shall be eligible for indemnification on the same
basis as other former officers of the Company in accordance with its bylaws and
applicable law after the Separation Date.

 

8. Miscellaneous.

 

(a) Section 409A. The intent of the Parties is that payments and benefits under
this Agreement comply with Section 409A of the Code (“Section 409A”) or are
exempt therefrom and, accordingly, to the maximum extent permitted, this
Agreement will be interpreted and administered so as to be in compliance
therewith. If Executive notifies the Company (with specificity as to the reason
therefor) that Executive believes that any provision of this Agreement would
cause Executive to incur any additional tax or interest under Section 409A and
the Company concurs with such belief or the Company (without any obligation
whatsoever to do so) independently makes such determination, the Company will,
after consulting with Executive, reform such provision in a manner that is
economically neutral to the Company to attempt to comply with Section 409A
through good faith modifications to the minimum extent reasonably appropriate to
conform with Section 409A. The Parties hereby acknowledge and agree that (i) the
payments and benefits due to Executive under Section 3 above are payable or
provided on account of Executive’s “separation from service” within the meaning
of Section 409A; and (ii) each installment of Severance Payment payable to
Executive under Section 3(a) is intended to be treated as a separate payment for
purposes of Section 409A that is exempt from Section 409A, to the maximum extent
possible, under the “short-term deferral” exemption of Treasury Regulation
Section 1.409A-1(b)(4) and/or the “involuntary separation pay” exemption of
Treasury Regulation Section 1.409A-1(b)(9)(iii). Notwithstanding any provision
of this Agreement to the contrary, if Executive is determined by the Company to
be a “specified employee” within the meaning of Section 409A, then any payment
under this Agreement that is considered nonqualified deferred compensation
subject to Section 409A will be paid no earlier than (1) the date that is six
months after the date of Executive’s separation from service, or (2) the date of
Executive’s death. In no event may Executive, directly or indirectly, designate
the calendar year of any payment under this Agreement.

 

4 

 

 

(b) Withholding. The Company or its affiliates, as applicable, may withhold from
any amounts payable or benefits provided under this Agreement such federal,
state, local, foreign or other taxes as will be required to be withheld pursuant
to any applicable law or regulation. Notwithstanding the foregoing, Executive
will be solely responsible and liable for the satisfaction of all taxes,
interest and penalties that may be imposed on Executive in connection with this
Agreement (including any taxes, interest and penalties under Section 409A), and
neither the Company nor its affiliates will have any obligation to indemnify or
otherwise hold Executive harmless from any or all of such taxes, interest or
penalties. To the extent the Company or any affiliate is required to withhold
any federal, state, local, foreign or other taxes in connection with the payment
or exercise of an Equity Award, then the Company or an affiliate (as applicable)
shall satisfy the minimum required tax withholding obligation via a net share
withholding method authorized by the applicable equity plan.

 

(c) Severability. In construing this Agreement, if any portion of this Agreement
will be found to be invalid or unenforceable, the remaining terms and provisions
of this Agreement will be given effect to the maximum extent permitted without
considering the void, invalid or unenforceable provision.

 

(d) Successors. This Agreement is personal to Executive and without the prior
written consent of the Company will not be assignable by Executive other than by
will or the laws of descent and distribution. This Agreement will inure to the
benefit of and be enforceable by Executive’s surviving spouse, heirs and legal
representatives. This Agreement will inure to the benefit of and be binding upon
the Company and its affiliates, and their respective successors and assigns.

 

(e) Final and Entire Agreement; Amendment. This Agreement, together with the
Release and the Consulting Services Agreement, represents the final and entire
agreement between the Parties with respect to the subject matter hereof and
supersedes all prior agreements, negotiations and discussions between the
Parties hereto and/or their respective counsel with respect to the subject
matter hereof. Executive has not relied upon any representations, promises or
agreements of any kind except those set forth herein in signing this Agreement.
Any amendment to this Agreement must be in writing, signed by duly authorized
representatives of the Parties, and stating the intent of the Parties to amend
this Agreement.

 

(f) Governing Law; Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey, without
reference to conflict of laws principles.

 

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(g) Notices. All notices and other communications hereunder will be in writing
and will be given by hand delivery to the other Party or by registered or
certified mail, return receipt requested, postage prepaid, or by overnight
courier, addressed as follows:

 

If to Executive: at Executive’s most recent address on the records of the
Company;

 

If to the Company: Derma Sciences, Inc., 214 Carnegie Center, Suite 300,
Princeton, NJ 08540, Attention: Chairman of the Board;

 

or to such other address as either Party will have furnished to the other in
writing in accordance herewith. Notice and communications will be effective on
the date of delivery if delivered by hand, on the first business day following
the date of dispatch if delivered utilizing overnight courier, or three business
days after having been mailed, if sent by registered or certified mail.

 

(h) Counterparts. This Agreement may be executed in one or more counterparts
(including by means of facsimile or other electronic transmission), each of
which will be deemed an original, but all of which taken together will
constitute one original instrument.

 

IN WITNESS WHEREOF, the Parties hereto have each executed this Agreement as of
the date first above written.

 

 

Derma Sciences, Inc.

 

/s/ Stephen T. Wills                               

By: Stephen T. Wills

Its: Chairman of the Board

EXECUTIVE

 

 

/s/ Edward J. Quilty                                

Edward J. Quilty

6 

 

EXHIBIT A

GENERAL RELEASE

 

This General Release (this “Release”) is made and entered into as of this 21st
day of December, 2015, by and between Derma Sciences, Inc. (the “Company”) and
Edward J. Quilty (“Executive”).

 

1. Employment Status. Executive’s employment with the Company and its affiliates
terminated effective as of December 21, 2015 (the “Separation Date”).

 

2. Payments and Benefits. Upon the effectiveness of the terms set forth herein,
the Company shall provide Executive with the benefits set forth in Section 3 of
the Separation Agreement between Executive and the Company dated as of December
21, 2015 (the “Separation Agreement”), upon the terms, and subject to the
conditions, of the Separation Agreement. Executive agrees that Executive is not
entitled to receive any additional payments as wages, vacation or bonuses except
as otherwise provided under the Separation Agreement and the Consulting Services
Agreement attached as Exhibit B to the Separation Agreement (the “Consulting
Services Agreement”).

 

3. No Liability. This Release does not constitute an admission by the Company or
its affiliates or predecessors, or their respective officers, directors,
partners, agents, or employees, or by Executive, of any unlawful acts or of any
violation of federal, state or local laws.

 

4. Release. In consideration of the payments and benefits set forth in Section 2
of this Release, Executive for himself/herself, his or her heirs,
administrators, representatives, executors, successors and assigns
(collectively, “Releasors”) does hereby irrevocably and unconditionally release,
acquit and forever discharge the Company, its respective affiliates and their
respective predecessors, successors and assigns (the “Company Group”) and each
of its officers, directors, partners, agents, and former and current employees,
including without limitation all persons acting by, through, under or in concert
with any of them (collectively, “Releasees”), and each of them, from any and all
claims, demands, actions, causes of action, costs, expenses, attorney fees, and
all liability whatsoever, whether known or unknown, fixed or contingent, which
Executive has, had, or may ever have against the Releasees relating to or
arising out of Executive’s employment or separation from employment with the
Company Group, from the beginning of time and up to and including the date
Executive executes this Release. This Release includes, without limitation, (a)
law or equity claims; (b) contract (express or implied) or tort claims; (c)
claims for wrongful discharge, retaliatory discharge, whistle blowing, libel,
slander, defamation, unpaid compensation, wage and hour violations, intentional
infliction of emotional distress, fraud, public policy contract or tort, and
implied covenant of good faith and fair dealing, whether based in common law or
any federal, state or local statute; (d) claims under or associated with any of
the Company Group’s incentive or equity compensation plans or arrangements; (e)
claims arising under any federal, state, or local laws of any jurisdiction that
prohibit age, sex, race, national origin, color, disability, religion, veteran,
military status, sexual orientation, or any other form of discrimination,
harassment, or retaliation (including without limitation under the Age
Discrimination in Employment Act of 1967 as amended by the Older Workers Benefit
Protection Act (“ADEA”), Title VII of the Civil Rights Act of 1964 as amended by
the Civil Rights Act of 1991 (“Title VII”), the Equal Pay Act of 1963, and the
Americans with Disabilities Act of 1990 (“ADA”), the Rehabilitation Act, the
Family and Medical Leave Act, the Sarbanes-Oxley Act, the Employee Polygraph
Protection Act, the Uniformed Services Employment and Reemployment Rights Act of
1994 (“USERRA”), the Lilly Ledbetter Fair Pay Act or any other foreign, federal,
state or local law or judicial decision); (f) claims arising under the Employee
Retirement Income Security Act; and (g) any other statutory or common law claims
related to Executive’s employment with the Company Group or the separation of
Executive’s employment with the Company Group.

 

 

 

 

Without limiting the foregoing paragraph, Executive represents that Executive
understands that this Release specifically releases and waives any claims of age
discrimination, known or unknown, that Executive may have against the Company as
of the date Executive signs this Release. This Release specifically includes a
waiver of rights and claims under the Age Discrimination in Employment Act of
1967, as amended, and the Older Workers Benefit Protection Act. Executive
acknowledges that as of the date Executive signs this Release, Executive may
have certain rights or claims under the Age Discrimination in Employment Act, 29
U.S.C. §626 and Executive voluntarily relinquishes any such rights or claims by
signing this Release.

 

Notwithstanding the foregoing provisions of this Section 4, nothing herein will
release the Company Group from (i) any obligation under the Separation Agreement
or Consulting Agreement; and (ii) any rights or claims that relate to events or
circumstances that occur after the date that Executive executes this Release. In
addition, nothing in this Release is intended to interfere with Executive’s
right to file a charge with the Equal Employment Opportunity Commission or any
state or local human rights commission in connection with any claim Executive
believes he may have against the Releasees. However, by executing this Release,
Executive hereby waives the right to recover any remuneration, damages,
compensation or relief of any type whatsoever from the Company, its affiliates
and their respective predecessors and successors in any proceeding that
Executive may bring before the Equal Employment Opportunity Commission or any
similar state commission or in any proceeding brought by the Equal Employment
Opportunity Commission or any similar state commission on Executive’s behalf.

 

5. Return of Property. Executive warrants and represents that, as of the
Separation Date, Executive has surrendered to the Company all documents,
materials, and other property of the Company and/or its clients and has not
photocopied or reproduced such documents. Executive further warrants and
represents that, as of the Separation Date, Executive has returned to the
Company any and all Company computer equipment and software, and any and all
other equipment of the Company in Executive’s possession in good working order
and reasonable condition, including any keys.

 

Notwithstanding the foregoing, the Company agrees to provide Executive with
access to the Company’s offices in Princeton, New Jersey during regular business
hours from the Separation Date through January 31, 2016 to gather his personal
belongings and documents, including, but not limited to, the personal contents
of his office and any personal records.

 

  A-2 

 

 

The Company also agrees to provide Executive with access to his Company-issued
computer during regular business hours from the Separation Date through January
31, 2016 to access, download and copy personal files and other information
electronically stored on the computer and/or the Company’s computer servers,
including, but not limited to, personal emails and contact information.

 

The Company also agrees that the Executive may continue to use his
company-issued cell phone during the time period that the Company engages
Executive as a Consultant pursuant to the Consulting Services Agreement.

 

6. Representation of No Pending Action and Agreement Not to Sue. Executive
further agrees never to sue any Releasees or cause any Releasees to be sued
regarding any matter within the scope of the above release. If Executive
violates this Release by suing any Releasees or causing any Releasees to be
sued, Executive shall continue to be bound by the release obligations of this
Release and shall pay all costs and expenses of defending against the suit
incurred by the Releasees, including reasonable attorneys’ fees, unless (1)
paying such costs and expenses is prohibited by law, (2) the action is brought
by Executive to enforce the terms of this Agreement, or (3) Executive is
bringing an action relating to the validity of this Agreement.

 

7. Acknowledgment. Executive has read this Release, understands it, and
voluntarily accepts its terms, and Executive acknowledges that he has been
advised by the Company to seek the advice of legal counsel (at Executive’s cost)
before entering into this Release. Executive acknowledges that he was given a
period of at least 21 calendar days within which to consider and execute this
Release, and to the extent that he executes this Release before the expiration
of the 21-day period, he does so knowingly and voluntarily and only after
consulting his attorney. Executive acknowledges and agrees that the promises
made by the Company Group hereunder represent substantial value over and above
that to which Executive would otherwise be entitled.

 

8. Revocation. Executive has a period of 7 calendar days following the execution
of this Release during which Executive may revoke this Release by delivering
written notice to the Company pursuant to Section 8(g) of the Separation
Agreement by hand or overnight courier before 5:00 p.m. on the seventh day after
signing this Release. This Release will not become effective or enforceable
until such revocation period has expired. Executive understands that if he
revokes this Release, it will be null and void in its entirety, and he will not
be entitled to any payments or benefits provided in this Release, including
without limitation under Section 2 of this Release.

 

9. Counterparts. This Release may be executed by the parties hereto in
counterparts, which taken together shall be deemed one original.

 

[Signatures are on the following page]

 

  A-3 

 

 

Derma Sciences, Inc.

 

/s/ Stephen T. Wills                               

By: Stephen T. Wills

Its: Chairman of the Board

EXECUTIVE

 

 

/s/ Edward J. Quilty                               

Edward J. Quilty

 

  A-4 

 

EXHIBIT B

CONSULTING SERVICES AGREEMENT

 

This Consulting Services Agreement (this “Agreement”) is made and entered into
as of the 21st day of December, 2015 (the “Effective Date”), by and between
Edward J. Quilty (the “Consultant”) and Derma Sciences, Inc. (the “Company”).
The Company and Consultant are sometimes collectively referred to herein as the
Parties and individually as a Party. As used in this Agreement, the term
“affiliate” shall mean any entity controlled by, controlling, or under common
control with, the Company.

 

1. Engagement. The Company hereby engages Consultant, and Consultant agrees to
provide certain consulting services to the Company and its affiliates, in
accordance with the terms, and subject to the conditions, of this Agreement.

 

2. Consulting Period. During the period commencing on January 1, 2016 and ending
June 30, 2016, or such earlier date on which Consultant’s consulting
relationship with the Company is terminated as provided herein (the “Consulting
Period”), Consultant shall, at the Company’s request, provide consulting
services to the Company and its affiliates as set forth in Section 3 below (the
“Consulting Services”).

 

3. Services To Be Provided. Consultant shall from time to time provide
Consulting Services to the Company and its affiliates with regard to the
business and operations of the Company. Consultant shall provide the Consulting
Services at the request of, and report directly to, the Chairman of the Board of
the Company or any officer designated by the Chairman. In connection therewith,
Consultant shall make himself available (by telephone or otherwise) at
reasonable times during normal business hours and on reasonable notice to
provide the Consulting Services; provided, however, that the Consulting Services
rendered by Consultant during the Consulting Period shall not exceed 40 hours
per month. In addition, Consultant shall make himself available to travel within
the United States in connection with his services hereunder if reasonably
requested by the Company, with appropriate advance notice, and any travel
expenses associated therewith shall be reimbursed to the extent provided by
Section 6.

 

4. Non-Exclusive Relationship. The Consulting Services being provided by
Consultant are on a non-exclusive basis, and Consultant shall be entitled to
perform or engage in any activity not inconsistent with this Agreement.

 

5. Compensation. During the Consulting Period, the Company shall pay Consultant
a total of $60,000 for Consulting Services to be performed by Consultant (the
“Consulting Fee”) payable in 6 equal monthly installments. Consultant shall be
responsible for the payment of all taxes, interest and penalties owed on all
amounts paid to Consultant by the Company hereunder, and neither the Company nor
any of its affiliates shall have any obligation to indemnify or otherwise hold
Consultant harmless from any or all of such taxes, interest or penalties.

 

 

 

 

6. Reimbursable Costs. The Company shall reimburse Consultant in accordance with
general policies and practices of the Company for actual and reasonable expenses
incurred in performing the Consulting Services during the Consulting Period and
pre-approved by the Chairman of the Board, payable within 30 calendar days after
receipt of an invoice; provided that the invoice is submitted to the Company no
later than two months prior to the end of the calendar year immediately
following the year in which the expense was incurred. The amount of any
reimbursements that constitute compensation in one year shall not affect the
amount of reimbursements constituting compensation that are eligible for payment
or reimbursement in any other year, and Consultant’s right to such payments or
reimbursement of any such expenses shall not be subject to liquidation or
exchange for any other benefit.

 

7. Duties of the Company. The Company shall (a) grant Consultant access to
information reasonably required for Consultant to perform the Consulting
Services contemplated herein; and (b) pay to Consultant the amounts due to
Consultant within the time periods specified herein.

 

8. Duties of Consultant. Subject to Section 3 of this Agreement, Consultant
shall: (a) dedicate such time commitment to the Consulting Services as is
reasonably necessary to perform such Consulting Services; (b) comply with all
applicable federal, state, municipal and foreign laws and regulations required
to enable Consultant to render to the Company the Consulting Services called for
herein; and (c) upon termination of the Consulting Period, return to the Company
all Company property in Consultant’s possession, including without limitation,
keys, credit cards, telephone calling cards, computer hardware and software,
cellular and portable telephone equipment, manuals, books, notebooks, financial
statements, reports and other documents.

 

9. Retention of Authority. Throughout the Consulting Period, the Company shall
retain all authority and control over the business, policies, operations and
assets of the Company and its affiliates. Consultant shall not knowingly violate
any rules or policies of the Company applicable to Consultant or violate any
applicable law in connection with the performance of the Consulting Services.
The Company does not, by virtue of the Agreement, delegate to Consultant any of
the powers, duties or responsibilities vested in the Company or its affiliates
by law or under the organizational documents of the Company or its affiliates.

 

10. Independent Consultant Status. In performing the Consulting Services herein,
the Company and Consultant agree that Consultant shall at all times be acting
solely as an independent contractor and not as an employee of the Company. The
Parties acknowledge that Consultant was, prior to the Effective Date, an
employee of the Company, but that such employment relationship has terminated
immediately prior to the effectiveness of this Agreement. The Company and
Consultant agree that Consultant will not be an employee of the Company or its
affiliates during the Consulting Period in any matter under any circumstances or
for any purposes whatsoever, and that Consultant and not the Company shall have
the authority to direct and control Consultant’s performance of his activities
hereunder. The Company shall not pay, on the account of Consultant or any
principal, employee or contractor of Consultant, any unemployment tax or other
taxes, required under the law to be paid with respect to employees; nor shall
the Company withhold any federal, state, local or other taxes from the
Consulting Fee (other than as required by applicable law, as reasonably
determined by the Company, with respect to that portion, if any, that is
considered severance or other wages for tax purposes); nor shall the Company
provide Consultant, in his capacity as such, or any principal, employee or
contractor of Consultant with any benefits, including without limitation any
severance, pension, retirement, health or welfare, or any kind of insurance
benefits, including workers compensation insurance. Consultant and the Company
hereby agree and acknowledge that this Agreement does not impose any obligation
on the Company to offer employment to Consultant at any time. Nothing contained
in this Agreement shall be construed to create a partnership or joint venture
between the Company and Consultant, nor to authorize either Party to act as
general or special agent of the other Party in any respect.

 

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11. Termination. Either Party may terminate this Agreement and Consultant’s
services hereunder at any time and for any reason by providing at least 30
calendar days prior written notice to the other Party in accordance with Section
12(e) below. In the event of such termination, Consultant shall be entitled to
receive all earned but unpaid Consulting Fees through the date of termination,
including a pro rata portion of the Consulting Fee for the partial month in
which the termination date occurs, and except as set forth in the following
sentence, shall have no further rights to payment of any consulting fees or
other compensation hereunder. Notwithstanding the foregoing, in the event of a
termination of Consultant’s services by the Company without Cause (as defined
below) during the Consulting Period, Consultant shall be entitled to continue to
receive the monthly Consulting Fees in accordance with the payment schedule set
forth in Section 5 hereof. For purposes of this Section 11, Cause shall mean (a)
Consultant’s act of fraud or dishonesty resulting in material injury to business
or reputation of the Company or its affiliates; or (b) Consultant’s material
breach of any of his obligations under this Agreement, provided the Company
first transmits to Consultant a written document specifying the material breach
and permits Consultant 30 calendar days to cure such breach to the Company’s
reasonable satisfaction.

 

12. Miscellaneous.

 

(a) Entire Agreement, Amendment and Waiver. This Agreement represents the final
and entire agreement between the Parties with respect to the subject matter
hereof and supersedes all prior agreements, negotiations and discussions between
the Parties hereto and/or their respective counsel with respect to the subject
matter hereof. The provisions of this Agreement may be amended or waived only
with the prior written consent of the Company and Consultant, and no course of
conduct or failure or delay in enforcing the provisions of this Agreement shall
affect the validity, binding effect or enforceability of this Agreement.

 

(b) Successors. This Agreement is personal to Consultant and without the prior
written consent of the Company shall not be assignable by Consultant other than
by will or the laws of descent and distribution. This Agreement shall inure to
the benefit of and be enforceable by Consultant’s surviving spouse, heirs, and
legal representatives. This Agreement shall inure to the benefit of and be
binding upon the Company and its affiliates, and their respective successors and
assigns.

 

(c) Choice of Law, Severability. This Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey, without
reference to principles of conflict of laws that would result in the application
of any law other than that of the State of New Jersey. In construing this
Agreement, if any portion of this Agreement shall be found to be invalid or
unenforceable, the remaining terms and provisions of this Agreement shall be
given effect to the maximum extent permitted without considering the void,
invalid or unenforceable provision.

 

  B-3 

 

 

(d) Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be an original, but all of which taken together shall
constitute one instrument.

 

(e) Notices. All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other Party or by registered or
certified mail, return receipt requested, postage prepaid, or by overnight
courier, addressed as follows: (i) if to Consultant: at Consultant’s most recent
address on the records of the Company; and (ii) if to the Company: Derma
Sciences, Inc., 214 Carnegie Center, Suite 300, Princeton, NJ 08540, Attention:
Chairman of the Board; or to such other address as either Party shall have
furnished to the other in writing in accordance herewith. Notice and
communications will be effective on the date of delivery if delivered by hand,
on the first business day following the date of dispatch if delivered utilizing
overnight courier, or three business days after having been mailed, if sent by
registered or certified mail.

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
date first set forth above.

 

  Derma Sciences, Inc.     /s/ Stephen T. Wills   By: Stephen T. Wills   Title:
Chairman of the Board       CONSULTANT       /s/ Edward J. Quilty   Edward J.
Quilty

 

  B-4