Exhibit 10.1

 

Form of Amendment to Employment Agreement

 

This Amendment to Employment Agreement (this "Amendment") dated as of July 31,
2013 ("Effective Date"), by and between PharmAthene, Inc., a Delaware
corporation ("Company") and Eric Richman ("Executive"). Executive and Company
are sometimes each referred to in this Amendment as a "Party" and collectively
as the "Parties."

 

Background

 

WHEREAS, the Parties are parties to that certain Employment Agreement dated as
of December 23, 2010 (the "Employment Agreement");

 

WHEREAS, on May 9, 2012 the Board of Directors of the Company ("Board") adopted
a severance plan to provide certain benefits to our Chief Executive Officer and
certain other executive officers of the Company that applies in the event of a
change of control of the Company (the "Severance Plan");

 

WHEREAS, the Company has entered into an Agreement and Plan of Merger (as such
agreement may be amended from time to time, the "Merger Agreement") among the
Company and Theraclone Sciences, Inc. as of the date hereof pursuant to which
Theraclone Sciences, Inc. will become a wholly-owned subsidiary of the Company
(the "Merger");

 

WHEREAS, the Board, pursuant to the authority reserved in the Severance Plan, is
terminating the Severance Plan effective upon the consummation of the Merger;
and

 

WHEREAS, the Parties desire to clarify and memorialize the severance benefits,
if any, to which the Executive would be entitled upon termination of his
employment following the consummation of the Merger or another transaction that
constitutes a change of control hereunder.

 

NOW, THEREFORE, in consideration of the mutual promises, covenants and
conditions set forth herein, the Parties, intending to be legally bound, hereby
agree as follows:

 

1.             The Parties agree that Section 9b of the Employment Agreement is
hereby amended effective upon consummation of the Merger substantially in
accordance with the terms of the Merger Agreement to add the following paragraph
to the end thereof:

 

If the Company terminates the Executive's Employment without Cause, Executive
timely executes and does not revoke the General Release described in this
Section 9b and the Merger is consummated substantially in accordance with the
terms of the Merger Agreement after the Executive's termination of employment,
Executive shall be entitled to the following additional severance benefits: (v)
a lump sum payment equal to the amount of the Executive’s base salary as in
effect immediately prior to such termination (but without giving effect to any
reduction in base salary that triggered a Good Reason termination) for a period
of 12 months, payable on the later of 60 days after his termination of
employment or 5 days of the date the Merger is consummated; (w) a lump sum
payment equal to the excess of (I) two times the Executive’s Target Bonus Amount
as in effect immediately prior to such termination, over (II) any amount already
paid pursuant to clause (iii) above, payable on the later of 60 days after his
termination of employment or 5 days of the date the Merger is consummated; (x)
each stock option that remains outstanding as of the date on which the Merger is
consummated shall remain exercisable for three years following the date of
Executive ceases to perform services for the Company in any capacity (i.e., as
an employee, a non-employee director or consultant), but not later than the
earlier of ten years after such option was granted or its original expiration
date; and (y) reimbursement of the portion of the Executive’s health insurance
premiums as described in clause (v) above for an additional 12 months beyond the
initial 12-month period described in clause (v).

 

 

 

   

2.            The Parties agree that Section 9c of the Employment Agreement is
hereby amended effective upon consummation of the Merger substantially in
accordance with the terms of the Merger Agreement to read as follows:

 

c.            Termination Without Cause or Termination for Good Reason Following
a Change in Control. Following a Change in Control (as defined below), if
requested by the Company’s successor or acquirer, as applicable, the Executive
shall negotiate a new employment agreement in form and substance acceptable to
the Executive in all respects in his sole discretion. In the event the Company
and the Executive fail to enter into such new employment agreement within ninety
(90) days of the Change in Control and during the Employment Period a
Termination Without Cause or a termination of the Executive’s employment for
Good Reason occurs on or within twelve months of the consummation of the Change
in Control, the Executive shall not have any further rights or claims against
the Company under this Agreement except the right to receive (i) the payments
and other rights provided for in Section 9a hereof and a lump sum cash payment
for Executive’s unused vacation at the rate of his base salary in effect
immediately prior to such termination (but without giving effect to any
reduction in base salary that triggered a Good Reason termination), (ii) a lump
sum payment equal to the amount of the Executive’s base salary as in effect
immediately prior to such termination (but without giving effect to any
reduction in base salary that triggered a Good Reason termination) for a period
of 24 (twenty-four) months, payable within 60 days of the date of termination
(subject to Section 24), (iii) a lump sum payment equal to two times the
Executive’s Target Bonus Amount as in effect immediately prior to such
termination and a payment for the prior fiscal year to the extent that bonuses
have not previously been paid on or before the date of termination (and in the
case of the bonus in respect of the prior fiscal year to the extent such bonus
has been earned), payable within 60 days of the date of termination (subject to
Section 24), (iv) all equity-based awards held by Executive will be deemed fully
vested as of the date of termination and each outstanding stock option shall
remain exercisable for three years following the date of Executive ceases to
perform services for the Company in any capacity (i.e., as an employee, a
non-employee director or consultant), but not later than the earlier of ten
years after such option was granted or its original expiration date, (v)
reimbursement of the portion of the Executive's health insurance premiums
(whether such premiums are paid for COBRA continuation coverage under the
Company’s group health plan in accordance with Section 4980B of the Code or for
any comparable replacement group or individual health insurance coverage
obtained by the Executive) that exceeds the amount that the Company charges its
active employees for the same level of group health coverage during the
twenty-four (24) month period following the Executive's termination, and (vi)
the Excise Tax Gross-Up described in Section 9g below. Notwithstanding the
foregoing, the severance benefits described in clause (ii), (iii), (iv) and (vi)
above and the health care premium reimbursement described in clause (v) above
shall be provided in consideration for, and expressly conditioned upon, the
Executive’s execution of a binding General Release (which shall be provided on
or about the date of termination) containing terms reasonably satisfactory to
the Company within 45 days of the Executive’s termination of employment. Subject
to Section 24, if the Executive timely executes such General Release and the
applicable revocation period with respect to such General Release lapses, the
Executive will receive the severance benefits described in clauses (ii) and
(iii) above and the reimbursement for health insurance premiums paid by the
Executive during the first 60 days after his termination of employment 60 days
after the Executive's termination of employment. The Excise Tax Gross-Up
described in Section 9g below will be paid in accordance with Section 9g. If the
Executive does not timely execute the General Release or if the Executive
revokes the General Release within the applicable revocation period prescribed
by law, the Executive shall not be entitled to receive any severance payments.

 

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For purposes of this Section 9c, Change of Control shall have the same meaning
as that term is defined in Section 3g, except that any such transaction will not
constitute a Change of Control for this Section 9c unless it also constitutes a
change in ownership of the Company within the meaning of Treasury Regulation
Section 1.409A-3(i)(5)(v), a change in effective control of the Company within
the meaning of Treasury Regulation Section 1.409A-3(i)(5)(vi)(A)(1), or a change
in ownership of a substantial portion of the Company's assets within the meaning
of Treasury Regulation Section 1.409A-3(i)(5)(vii).

 

3.             The Parties agree that Section 9f of the Employment Agreement is
hereby amended effective upon consummation of the Merger substantially in
accordance with the terms of the Merger Agreement to read as follows:

 

f.              Rabbi Trust. If the Executive's employment is terminated prior
to a Change of Control (as defined in Section 9c above) and the Executive
becomes entitled to receive severance payments under clause (b) above, and the
Executive’s General Release described in clause (b) above becomes binding and
enforceable, the Company shall establish an irrevocable grantor trust (a "rabbi
trust"), appoint a federally or state chartered bank or trust company as the
trustee for such rabbi trust and shall contribute 12 (twelve) months of salary
continuation payments to such rabbi trust. Immediately upon consummation of a
Change of Control (as defined in Section 9c above) during the Employment Period,
the Company shall establish a rabbi trust, appoint a federally or state
chartered bank or trust company as the trustee for such rabbi trust and shall
contribute the sum of (i) 24 (twenty-four) months of base salary as in effect
immediately prior to such Change of Control, and (ii) two times the Executive's
Target Bonus Amount as in effect immediately prior to such Change of Control.

 

The assets of such rabbi trust shall be used solely to make the severance
payments to the Executive as required under this Agreement (or to reimburse the
Company for severance payments it makes to the Executive); or to satisfy the
claims of the Company’s unsecured general creditors in the event of the
Company’s insolvency or bankruptcy. The rabbi trust may be terminated and any
remaining assets therein shall revert to the Company after the Executive has
received all of the severance payments to which he is entitled hereunder.
Notwithstanding the foregoing, the provisions of this Section 9f shall not apply
if the funding of the rabbi trust would subject the Executive to acceleration of
taxation and tax penalties under Section 409A(b) of the Code.

 

4.             The Parties agree that Section 9g of the Employment Agreement
(Directorship) is hereby removed and replaced with a new Section 9g effective
upon consummation of the Merger substantially in accordance with the terms of
the Merger Agreement to read as follows:

 

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g.             Excise Tax Gross-Up. Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment, award,
benefit or distribution (including any acceleration) by the Company or any
entity which effectuates a transaction described in Section 280G(b)(2)(A)(i) of
the Code to or for the benefit of the Executive (whether pursuant to the terms
of this Agreement or otherwise, but determined without regard to any additional
payments required under this Section 9g) (a "Payment") would be subject to the
excise tax imposed by Section 4999 of the Code or any interest or penalties are
incurred with respect to such excise tax by the Executive (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Executive shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes, including, without limitation, any
income taxes (and any interest and penalties imposed with respect thereto) and
Excise Taxes imposed upon the Gross-Up Payment, the Executive retains an amount
of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. For
purposes of this Section 9g, the Executive shall be deemed to pay federal, state
and local income taxes at the highest marginal rate of taxation for the calendar
year in which the Gross-Up Payment is to be made, taking into account the
maximum reduction in federal income taxes which could be obtained from the
deduction of state and local income taxes.

 

All determinations required to be made under this Section 9g, including whether
and when a Gross-Up Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such determination, shall be
made by a certified public accounting firm of national standing reasonably
acceptable to the Executive as may be designated by the Company (the "Accounting
Firm") which shall provide detailed supporting calculations both to the Company
and the Executive within 15 business days of the receipt of notice from the
Executive that there has been a Payment, or such earlier time as is requested by
the Company. All fees and expenses of the Accounting Firm shall be borne solely
by the Company. Any Gross-Up Payment, as determined pursuant to this Section 9g,
shall be paid by the Company to the Executive within five business days prior to
the later of (i) the due date for the payment of any Excise Tax, and (ii) the
receipt of the Accounting Firm’s determination. If the Accounting Firm
determines that no Excise Tax is payable by the Executive, it shall furnish the
Executive with a written opinion to such effect, and to the effect that failure
to report the Excise Tax, if any, on the Executive’s applicable federal income
tax return will not result in the imposition of a negligence or similar penalty.
Any determination by the Accounting Firm shall be binding upon the Company and
the Executive.

 

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As a result of the uncertainty in the application of Section 4999 of the Code at
the time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by the Company
should have been made ("Underpayment") or Gross-up Payments are made by the
Company which should not have been made ("Overpayments"), consistent with the
calculations required to be made hereunder. In the event the Executive is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Executive. In the event the amount of Gross-up Payment exceeds the amount
necessary to reimburse the Executive for his Excise Tax, the Accounting Firm
shall determine the amount of the Overpayment that has been made and any such
Overpayment shall be promptly paid by the Executive (to the extent he has
received a refund if the applicable Excise Tax has been paid to the Internal
Revenue Service) to or for the benefit of the Company. The Executive shall
cooperate with any reasonable requests by the Company in connection with any
contests or disputes with the Internal Revenue Service in connection with the
Excise Tax; provided that the Company reimburse any reasonable expenses incurred
by the Executive in connection with such cooperation.

 

5.                  The Parties agree that the heading of Section 24 of the
Employment Agreement is hereby amended to read "409A Compliance" and Section
24(b) is hereby deleted effective upon consummation of the Merger substantially
in accordance with the terms of the Merger Agreement.

 

6.                  The Parties agree that the grant agreement or other
instruments evidencing each of Executive’s outstanding equity awards shall be
deemed amended by this Amendment effective upon consummation of the Merger
substantially in accordance with the terms of the Merger Agreement to the extent
necessary to reflect the terms hereof.

 

[Remainder of page intentionally left blank. Signature page follows.]

 

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IN WITNESS WHEREOF, the Parties hereto have caused this Amendment to be duly
executed as of the date first written above; provided, however, that this
Amendment shall become effective only if the Merger described in the Background
above is consummated subtantially in accordance with the terms of the Merger
Agreement either while the Executive is employed by the Company or after the
Executive's employment has been terminated by the Company without Cause.

 

  PHARMATHENE, INC.             Name: Brian Markison   Title: Chairman,
Compensation Committee                     EXECUTIVE             Name: Eric
Richman

 

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