Exhibit 10.14


 


SEPRACOR INC.


 


Executive
Retention Agreement


 


THIS EXECUTIVE RETENTION AGREEMENT by and between Sepracor Inc., a
Delaware corporation (the “Company”), and (the “Executive”) is made as of February 1,
2002 (the “Effective Date”).


 


WHEREAS, the Company recognizes that, as is the case with many
publicly-held corporations, the possibility of a change in control of the
Company exists and that such possibility, and the uncertainty and questions
which it may raise among key personnel, may result in the departure or
distraction of key personnel to the detriment of the Company and its
stockholders, and


 


WHEREAS, the Board of Directors of the Company (the “Board”) has
determined that appropriate steps should be taken to reinforce and encourage
the continued employment and dedication of the Company’s key personnel without
distraction from the possibility of a change in control of the Company and
related events and circumstances.


 


NOW, THEREFORE, as an inducement for and in consideration of the
Executive remaining in its employ, the Company agrees that the Executive shall
receive the severance benefits set forth in this Agreement (including a certain
“gross up” payment originally authorized by the Board on February 25, 1999
and set forth in Section 4.3 of this Agreement) in the event the Executive’s
employment with the Company is terminated under the circumstances described
below subsequent to a Change in Control (as defined in Section 1.1).


 


1.   Key Definitions.    As
used herein, the following terms shall have the following respective meanings:


 


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):


 


(a)   the
acquisition by an individual, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”)) (a “Person”) of beneficial ownership of any capital stock of the Company
if, after such acquisition, such Person beneficially owns (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) 30% or more of either (x) the
then-outstanding shares of common stock of the Company (the “Outstanding
Company Common Stock”) or (y) the combined voting power of the
then-outstanding securities of the Company entitled to vote generally in the
election of directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of
this subsection (a), the following acquisitions shall not constitute a Change
in Control: (i) any acquisition directly from the Company (excluding an
acquisition pursuant to the exercise, conversion or exchange of any security
exercisable for, convertible into or exchangeable for common stock or voting
securities of the Company, unless the Person exercising, converting or
exchanging such security acquired such security directly from the Company or an
underwriter or agent of the Company), (ii) any acquisition by the Company,
(iii) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by the
Company, or (iv) any acquisition by any corporation pursuant to a
transaction which complies with clauses (i) and (ii) of subsection (c) of
this Section 1.1; or


 


(b)   such
time as the Continuing Directors (as defined below) do not constitute a
majority of the Board (or, if applicable, the Board of Directors of a successor
corporation to the Company), where the term “Continuing Director” means at any
date a member of the Board (i) who was a member of the Board on the date
of the execution of this Agreement or (ii) who was nominated or elected
subsequent to such date by at least a majority of the


 

















 


directors who were
Continuing Directors at the time of such nomination or election or whose
election to the Board was recommended or endorsed by at least a majority of the
directors who were Continuing Directors at the time of such nomination or
election; provided, however, that there shall be excluded from
this clause (ii) any individual whose initial assumption of office
occurred as a result of an actual or threatened election contest with respect
to the election or removal of directors or other actual or threatened
solicitation of proxies or consents, by or on behalf of a person other than the
Board; or


 


(c)   the
consummation of a merger, consolidation, reorganization, recapitalization or
statutory share exchange involving the Company or a sale or other disposition
of all or substantially all of the assets of the Company in one or a series of
transactions (a “Business Combination”), unless, immediately following such
Business Combination, each of the following two conditions is satisfied: (i) the
beneficial owners of all or substantially all of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 50% of
the then-outstanding shares of common stock and the combined voting power of
the then-outstanding securities entitled to vote generally in the election of
directors, respectively, of the resulting or acquiring corporation in such
Business Combination (which shall include, without limitation, a corporation
which as a result of such transaction owns the Company or substantially all of
the Company’s assets either directly or through one or more subsidiaries) (such
resulting or acquiring corporation is referred to herein as the “Acquiring
Corporation”) in substantially the same proportions as their ownership,
immediately prior to such Business Combination, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, respectively; and (ii) no
Person (excluding the Acquiring Corporation or any employee benefit plan (or
related trust) maintained or sponsored by the Company or by the Acquiring
Corporation) beneficially owns, directly or indirectly, 30% or more of the then
outstanding shares of common stock of the Acquiring Corporation, or of the
combined voting power of the then-outstanding securities of such corporation
entitled to vote generally in the election of directors (except to the extent
that such ownership existed prior to the Business Combination); or


 


(d)   approval
by the stockholders of the Company of a complete liquidation or dissolution of
the Company.


 


1.2   “Change in Control Date” means the first date during the Term
(as defined in Section 2) on which a Change in Control occurs. Anything in
this Agreement to the contrary notwithstanding, if (a) a Change in Control
occurs, (b) the Executive’s employment with the Company is terminated
prior to the date on which the Change in Control occurs, and (c) either (i) such
termination of employment (x) was at the request of a third party who has
taken steps reasonably calculated to effect a Change in Control or (y) otherwise
arose in connection with or in anticipation of a Change in Control, or (ii) such
termination of employment occurs following the execution of a definitive
agreement for such Change in Control, then for all purposes of this Agreement
the “Change in Control Date” shall mean the date immediately prior to the date
of such termination of employment.


 


1.3   “Cause” means:


 


(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


 


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Company which specifically
identifies the manner in which the Board of Directors believes the Executive
has not substantially performed the Executive’s duties; or


 


(b)   the
Executive’s willful engagement in illegal conduct or gross misconduct which is
materially and demonstrably injurious to the Company.


 


For purposes of this Section 1.3, 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.


 


1.4   “Good Reason” means the occurrence, without the Executive’s
written consent, of any of the events or circumstances set forth in clauses (a) through
(f) below. Notwithstanding the occurrence of any such event or
circumstance, such occurrence shall not be deemed to constitute Good Reason if,
prior to the Date of Termination specified in the Notice of Termination (each
as defined in Section 3.2(a)) given by the Executive in respect thereof, such
event or circumstance has been fully corrected and the Executive has been
reasonably compensated for any losses or damages resulting therefrom (provided
that such right of correction by the Company shall only apply to the first
Notice of Termination for Good Reason given by the Executive).


 


(a)   the
assignment to the Executive of duties inconsistent in any material respect with
the Executive’s position (including status, offices, titles or reporting
requirements), authority or responsibilities in effect immediately prior to the
earliest to occur of (i) the Change in Control Date, (ii) the date of
the execution by the Company of the initial written agreement or instrument
providing for the Change in Control or (iii) the date of the adoption by
the Board of Directors of a resolution providing for the Change in Control
(with the earliest to occur of such dates referred to herein as the “Measurement
Date”), or any other action or omission by the Company which results in a
material diminution in such position, authority or responsibilities;


 


(b)   a
reduction in the Executive’s annual base salary or bonus eligibility as in
effect on the Measurement Date or as the same was or may be increased
thereafter from time to time;


 


(c)   the
failure by the Company to (i) continue in effect any material compensation
or benefit plan or program (including without limitation any life insurance,
medical, health and accident or disability plan and any vacation or automobile
program or policy) (a “Benefit Plan”) in which the Executive participates or
which is applicable to the Executive immediately prior to the Measurement Date,
unless an equitable arrangement (embodied in an ongoing substitute or
alternative plan) has been made with respect to such plan or program, (ii) continue
the Executive’s participation therein (or in such substitute or alternative
plan) on a basis not materially less favorable, in terms of the amount of
benefits provided, than the basis existing immediately prior to the Measurement
Date or (iii) award cash bonuses to the Executive in amounts and in a
manner substantially consistent with past practice in light of the Company’s
financial performance;


 


(d)   a
change by the Company in the location at which the Executive performs his
principal duties for the Company to a new location that increases the Executive’s
daily commute by more than 40 miles (as measured immediately prior to the
Measurement Date); or a requirement by the Company that the Executive travel on
Company business to a substantially greater extent than required immediately
prior to the Measurement Date;


 


(e)   the
failure of the Company to obtain the agreement from any successor to the
Company to assume and agree to perform this Agreement, as required by Section 6.1;
or


 


(f)   any
failure of the Company to pay or provide to the Executive any portion of the
Executive’s compensation or benefits due under any Benefit Plan within seven
days of the


 


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date such compensation or
benefits are due, or any material breach by the Company of this Agreement or
any employment agreement with the Executive.


 


The Executive’s right to terminate his employment for Good Reason shall
not be affected by his incapacity due to physical or mental illness.


 


1.5   “Disability” means the Executive’s absence from the full-time
performance of the Executive’s duties with the Company for 180 consecutive
calendar days as a result of incapacity due to mental or physical illness which
is determined to be total and permanent by a physician selected by the Company
or its insurers and acceptable to the Executive or the Executive’s legal
representative.


 


2.   Term of Agreement.    This
Agreement, and all rights and obligations of the parties hereunder, shall take
effect upon the Effective Date and shall expire upon the first to occur of (a) the
expiration of the Term (as defined below) if a Change in Control has not
occurred during the Term, (b) the termination of the Executive’s
employment with the Company prior to the Change in Control Date, (c) the
date 24 months after the Change in Control Date, if the Executive is still
employed by the Company as of such later date (unless the Company has provided
notice of termination of Executive’s employment within such 24 month
period in which case the Agreement shall expire on the termination of the
Executive’s employment with the Company), or (d) the fulfillment by the
Company of all of its obligations under Sections 4 and 5.2 and 5.3 if the
Executive’s employment with the Company terminates within 24 months (or
after 24 months if the Company provides notice to the Executive of
termination of his employment within such 24 month period) following the
Change in Control Date. “Term” shall mean the period commencing as of the
Effective Date and continuing in effect through March 31, 2007; provided, however, that commencing on April 1, 2007 and each April 1 thereafter,
the Term shall be automatically extended for one additional year unless, not
later than 90 days prior to the scheduled expiration of the Term (or any
extension thereof), the Company shall have given the Executive written notice
that the Term will not be extended.


 


3.   Employment Status; Termination Following Change in
Control.


 


3.1   Not an Employment Contract.    The
Executive acknowledges that this Agreement does not constitute a contract of
employment or impose on the Company any obligation to retain the Executive as
an employee and that this Agreement does not prevent the Executive from
terminating employment at any time. If the Executive’s employment with the
Company terminates for any reason and subsequently a Change in Control shall
occur, the Executive shall not be entitled to any benefits hereunder except as
otherwise provided pursuant to Section 1.2.


 


3.2   Termination
of Employment.


 


(a)   If
the Change in Control Date occurs during the Term, any termination of the
Executive’s employment by the Company or by the Executive within 24 months
following the Change in Control Date (other than due to the death of the
Executive) shall be communicated by a written notice to the other party hereto
(the “Notice of Termination”), given in accordance with Section 7. Any
Notice of Termination shall: (i) indicate the specific termination
provision (if any) of this Agreement relied upon by the party giving such
notice, (ii) to the extent applicable, set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of the
Executive’s employment under the provision so indicated and (iii) specify
the Date of Termination (as defined below). The effective date of an employment
termination (the “Date of Termination”) shall be the close of business on the
date specified in the Notice of Termination (which date may not be less than
15 days or more than 45 days after the date of delivery of such
Notice of Termination), in the case of a termination other than one due to the
Executive’s death, or the date of the Executive’s death, as the case may be. In
the event the Company fails to satisfy the requirements of Section 3.2(a) regarding
a Notice of Termination, the purported termination of the Executive’s
employment pursuant to such Notice of Termination shall not be effective for
purposes of this Agreement.


 


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(b)   The
failure by the Executive or the Company to set forth in the Notice of
Termination any fact or circumstance which contributes to a showing of Good
Reason or Cause shall not waive any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or the Company, respectively,
from asserting any such fact or circumstance in enforcing the Executive’s or
the Company’s rights hereunder.


 


(c)   Any
Notice of Termination for Cause given by the Company must be given within
90 days of the occurrence of the event(s) or circumstance(s) which
constitute(s) Cause. Prior to any Notice of Termination for Cause being
given (and prior to any termination for Cause being effective), the Executive
shall be entitled to a hearing before the Board of Directors of the Company at
which he may, at his election, be represented by counsel and at which he shall
have a reasonable opportunity to be heard. Such hearing shall be held on not
less than 15 days prior written notice to the Executive stating the Board
of Directors’ intention to terminate the Executive for Cause and stating in
detail the particular event(s) or circumstance(s) which the Board of
Directors believes constitutes Cause for termination.


 


(d)   Any
Notice of Termination for Good Reason given by the Executive must be given
within 90 days of the occurrence of the event(s) or circumstance(s) which
constitute(s) Good Reason.


 


4.   Benefits to Executive.


 


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; 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.


 


4.2   Compensation    If the Change in Control
Date occurs during the Term and the Executive’s employment with the Company
terminates within 24 months following the Change in Control Date, the
Executive shall be entitled to the following benefits:


 


(a)    Termination Without Cause or for
Good Reason.    If the Executive’s employment
with the Company is terminated by the Company (other than for Cause, Disability
or Death) or by the Executive for Good Reason within 24 months following
the Change in Control Date, then the Executive shall be entitled to the
following benefits:


 


(i)    the
Company shall pay to the Executive in a lump sum in cash within 30 days
after the Date of Termination the aggregate of the following amounts:


 


(1)   the
sum of (A) the Executive’s base salary through the Date of Termination, (B) the
product of (x) the annual bonus paid or payable (including any bonus or
portion thereof which has been earned but deferred) for the most recently
completed fiscal year and (y) a fraction, the numerator of which is the
number of days in the


 


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current fiscal year through
the Date of Termination, and the denominator of which is 365 and (C) the
amount of any compensation previously deferred by the Executive (together with
any accrued interest or earnings thereon) and any accrued vacation pay, in each
case to the extent not previously paid (the sum of the amounts described in
clauses (A), (B), and (C) shall be hereinafter referred to as the “Accrued
Obligations”); and


 


(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.


 


(ii)   for
24 months after the Date of Termination, or such longer period as may be
provided by the terms of the appropriate plan, program, practice or policy, the
Company shall continue to provide benefits to the Executive and the Executive’s
family at least equal to those which would have been provided to them if the
Executive’s employment had not been terminated, in accordance with the applicable
Benefit Plans in effect on the Measurement Date or, if more favorable to the
Executive and his family, in effect generally at any time thereafter with
respect to other peer executives of the Company and its affiliated companies; provided, however, that if the Executive
becomes reemployed with another employer and is eligible to receive a
particular type of benefits (e.g., health insurance benefits) from such
employer on terms at least as favorable to the Executive and his family as
those being provided by the Company, then the Company shall no longer be
required to provide those particular benefits to the Executive and his family;
and


 


(iii)  to
the extent not previously paid or provided, the Company shall timely pay or
provide to the Executive any other amounts or benefits required to be paid or
provided or which the Executive is eligible to receive following the Executive’s
termination of employment under any plan, program, policy, practice, contract
or agreement of the Company and its affiliated companies (such other amounts
and benefits shall be hereinafter referred to as the “Other Benefits”).


 


(b)    Resignation without Good Reason;
Termination for Death or Disability.    If the
Executive voluntarily terminates his employment with the Company within 24 months
following the Change in Control Date, excluding a termination for Good Reason,
or if the Executive’s employment with the Company is terminated by reason of
the Executive’s death or Disability within 24 months following the Change
in Control Date, then the Company shall (i) pay the Executive (or his
estate, if applicable), in a lump sum in cash within 30 days after the
Date of Termination, the Accrued Obligations and (ii) timely pay or
provide to the Executive the Other Benefits.


 


(c)    Termination for Cause.    If
the Company terminates the Executive’s employment with the Company for Cause
within 24 months following the Change in Control Date, then the Company
shall (i) pay the Executive, in a lump sum in cash within 30 days
after the Date of Termination, the sum of (A) the Executive’s annual base
salary through the Date of Termination and (B) the amount of any
compensation previously deferred by the Executive, in each case to the extent
not previously paid, and (ii) timely pay or provide to the Executive the
Other Benefits.


 


4.3   Taxes.


 


(a)   In
the event that the Company undergoes a “Change in Ownership or Control” (as
defined below), the Company shall, within 30 days after each date on which
the Executive becomes entitled to receive (whether or not then due) a
Contingent Compensation Payment


 


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(as defined below) relating
to such Change in Ownership or Control, determine and notify the Executive
(with reasonable detail regarding the basis for its determinations) (i) which
of the payments or benefits due to the Executive (under this Agreement or
otherwise) following such Change in Ownership or Control constitute Contingent
Compensation Payments, (ii) the amount, if any, of the excise tax (the “Excise
Tax”) payable pursuant to Section 4999 of the Internal Revenue Code of
1986, as amended (the “Code”), by the Executive with respect to such Contingent
Compensation Payment and (iii) the amount of the Gross-Up Payment (as
defined below) due to the Executive with respect to such Contingent
Compensation Payment. Within 30 days after delivery of such notice to the
Executive, the Executive shall deliver a response to the Company (the “Executive
Response”) stating either (A) that he agrees with the Company’s determination
pursuant to the preceding sentence or (B) that he disagrees with such
determination, in which case he shall indicate which payment and/or benefits
should be characterized as a Contingent Compensation Payment, the amount of the
Excise Tax with respect to such Contingent Compensation Payment and the amount
of the Gross-Up Payment due to the Executive with respect to such Contingent
Compensation Payment. The amount and characterization of any item in the
Executive Response shall be final; provided, however, that in the event that
the Executive fails to deliver an Executive Response on or before the required
date, the Company’s initial determination shall be final. Within 90 days
after the due date of each Contingent Compensation Payment to the Executive,
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.


 


(b)   For
purposes of this Section 4.3, the following terms shall have the following
respective meanings:


 


(i)    “Change
in Ownership or Control” shall mean a change in the ownership or effective
control of the Company or in the ownership of a substantial portion of the
assets of the Company determined in accordance with Section 280G(b)(2) of
the Code.


 


(ii)   “Contingent
Compensation Payment” shall mean any payment (or benefit) in the nature of
compensation that is made or made available (under this Agreement or otherwise)
to a “disqualified individual” (as defined in Section 280G(c) of the
Code) and that is contingent (within the meaning of Section 280G(b)(2)(A)(i) of
the Code) on a Change in Ownership or Control of the Company.


 


(iii)  “Gross-Up
Payment” shall mean an amount equal to the sum of (i) the amount of the
Excise Tax payable with respect to a Contingent Compensation Payment and (ii) the
amount necessary to pay all additional taxes imposed on (or economically borne
by) the Executive (including the Excise Taxes, state and federal income taxes
and all applicable employment taxes) attributable to the receipt of such
Gross-Up Payment. For purposes of the preceding sentence, all taxes
attributable to the receipt of the Gross-Up Payment shall be computed assuming
the application of the maximum tax rates provided by law.


 


4.4   Mitigation    The Executive shall not be
required to mitigate the amount of any payment or benefits provided for in this
Section 4 by seeking other employment or otherwise. Further, except as
provided in Section 4.2(a)(ii), the amount of any payment or benefits
provided for in this Section 4 shall not be reduced by any compensation
earned by the Executive as a result of employment by another employer, by
retirement benefits, by offset against any amount claimed to be owed by the
Executive to the Company or otherwise.


 


4.5   Outplacement Services    In the event
the Executive is terminated by the Company (other than for Cause, Disability or
Death), or the Executive terminates employment for Good Reason, within
24 months following the Change in Control Date, the Company shall provide
outplacement


 


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services through one or more
outside firms of the Executive’s choosing up to an aggregate amount equal to
15 percent of the Executive’s annual base salary, with such services to
extend until the earlier of (i) 12 months following the termination
of Executive’s employment or (ii) the date the Executive secures full time
employment.


 


5.   Disputes.


 


5.1   Settlement of Disputes; Arbitration    All
claims by the Executive for benefits under this Agreement shall be directed to
and determined by the Board of Directors of the Company and shall be in
writing. Any denial by the Board of Directors of a claim for benefits under
this Agreement shall be delivered to the Executive in writing and shall set
forth the specific reasons for the denial and the specific provisions of this
Agreement relied upon. The Board of Directors shall afford a reasonable
opportunity to the Executive for a review of the decision denying a claim. Any
further dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in Boston, Massachusetts,
in accordance with the rules of the American Arbitration Association then
in effect. Judgment may be entered on the arbitrator’s award in any court
having jurisdiction.


 


5.2   Expenses    The Company agrees to pay as
incurred, to the full extent permitted by law, all legal, accounting and other
fees and expenses which the Executive may reasonably incur as a result of any
claim or contest by the Company or others, or any bona fide claim or contest by
the Executive, regarding the validity or enforceability of, or liability under,
any provision of this Agreement or any guarantee of performance thereof
(including as a result of any contest by the Executive regarding the amount of
any payment or benefits pursuant to this Agreement), plus in each case interest
on any delayed payment at the applicable Federal rate provided for in Section 7872(f)(2)(A) of
the Code, provided that the Executive shall reimburse any fees and expenses to
the extent any such claim or contest is not resolved in favor of the Executive,
provided further that notwithstanding the forgoing, the Executive shall not be
required to reimburse any fees and expenses if such claim or contest relates to
termination by the Executive for Good Reason.


 


5.3   Compensation
During a Dispute.    If the Change in Control
Date occurs during the Term and the Executive’s employment with the Company
terminates within 24 months following the Change in Control Date, and the
right of the Executive to receive benefits under Section 4 (or the amount
or nature of the benefits to which he is entitled to receive) are the subject
of a dispute between the Company and the Executive, the Company shall continue (a) to
pay to the Executive his base salary in effect as of the Measurement Date and (b) to
provide benefits to the Executive and the Executive’s family at least equal to
those which would have been provided to them, if the Executive’s employment had
not been terminated, in accordance with the applicable Benefit Plans in effect
on the Measurement Date, until such dispute is resolved either by mutual
written agreement of the parties or by an arbitrator’s award pursuant to Section 5.1.
Following the resolution of such dispute, the sum of the payments made to the
Executive under clause (a) of this Section 5.3 shall be deducted
from any cash payment which the Executive is entitled to receive pursuant to Section 4;
and if such sum exceeds the amount of the cash payment which the Executive is
entitled to receive pursuant to Section 4, the excess of such sum over the
amount of such payment 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 such dispute.


 


6.   Successors.


 


6.1   Successor to Company    The Company
shall require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business or
assets of the Company expressly to assume and agree to perform this Agreement
to the same extent that the Company would be required to perform it if no such
succession had taken place.


 


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Failure of the Company to
obtain an assumption of this Agreement at or prior to the effectiveness of any
succession shall be a breach of this Agreement and shall constitute Good Reason
if the Executive elects to terminate employment, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination. As used in this Agreement, “Company”
shall mean the Company as defined above and any successor to its business or
assets as aforesaid which assumes and agrees to perform this Agreement, by operation
of law or otherwise.


 


6.2   Successor to Executive    This Agreement
shall inure to the benefit of and be enforceable by the Executive’s personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive should die while any
amount would still be payable to the Executive or his family hereunder if the
Executive had continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to the
executors, personal representatives or administrators of the Executive’s
estate.


 


7.   Notice.    All
notices, instructions and other communications given hereunder or in connection
herewith shall be in writing. Any such notice, instruction or communication
shall be sent either (i) by registered or certified mail, return receipt
requested, postage prepaid, or (ii) prepaid via a reputable nationwide
overnight courier service, in each case addressed to the Company, at 111 Locke
Drive, Marlborough, MA 01752, and to the Executive at the Executive’s address
indicated on the signature page of this Agreement (or to such other
address as either the Company or the Executive may have furnished to the other
in writing in accordance herewith). Any such notice, instruction or
communication shall be deemed to have been delivered five business days after
it is sent by registered or certified mail, return receipt requested, postage
prepaid, or one business day after it is sent via a reputable nationwide overnight
courier service. Either party may give any notice, instruction or other
communication hereunder using any other means, but no such notice, instruction
or other communication shall be deemed to have been duly delivered unless and
until it actually is received by the party for whom it is intended.


 


8.   Miscellaneous.


 


8.1   Employment
by Subsidiary    For purposes of this Agreement,
the Executive’s employment with the Company shall not be deemed to have
terminated solely as a result of the Executive continuing to be employed by a
wholly-owned subsidiary of the Company.


 


8.2   Severability    The invalidity or
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement, which shall
remain in full force and effect.


 


8.3   Injunctive Relief    The Company and the
Executive agree that any breach of this Agreement by the Company is likely to
cause the Executive substantial and irrevocable damage and therefore, in the
event of any such breach, in addition to such other remedies which may be
available, the Executive shall have the right to specific performance and
injunctive relief.


 


8.4   Governing Law    The validity,
interpretation, construction and performance of this Agreement shall be governed
by the internal laws of the Commonwealth of Massachusetts, without regard to
conflicts of law principles.


 


8.5   Waivers    No waiver by the Executive at
any time of any breach of, or compliance with, any provision of this Agreement
to be performed by the Company shall be deemed a waiver of that or any other
provision at any subsequent time.


 


8.6   Counterparts    This Agreement may be
executed in counterparts, each of which shall be deemed to be an original but
both of which together shall constitute one and the same instrument.


 


9

















 


8.7   Tax Withholding    Any payments provided
for hereunder shall be paid net of any applicable tax withholding required
under federal, state or local law.


 


8.8   Entire Agreement    This Agreement sets
forth the entire agreement of the parties hereto in respect of the subject
matter contained herein and supersedes all prior agreements, promises,
covenants, arrangements, communications, representations or warranties, whether
oral or written, by any officer, employee or representative of any party hereto
in respect of the subject matter contained herein; and any prior agreement of
the parties hereto in respect of the subject matter contained herein is hereby
terminated and cancelled, including without limitation the letter Agreement
dated                               by
and between the Company and the Executive. Notwithstanding the foregoing, (a) in
the event that this Agreement is terminated as a result of (i) the
expiration of the Term prior to the occurrence of a Change in Control or (ii) the
termination of the Executive’s employment by the Company prior to the Change in
Control Date, the Letter Agreement
dated                               by
and between the Company and the Executive shall not be superseded and shall
continue in full force and effect in accordance with its terms and (b) for
the avoidance of doubt, except as specifically described herein in Section 4.1,
the stock options and restricted stock awards held by Executive shall continue
to be governed by the applicable stock option or stock incentive plan under
which they were granted or issued (or any successor plan thereto) and any
related stock option or restricted stock agreement, as the same may be amended
or modified.


 


8.9   Amendments    This Agreement may be
amended or modified only by a written instrument executed by both the Company
and the Executive.


 


8.10 Executive’s Acknowledgements    The
Executive acknowledges that he: (a) has read this Agreement; (b) has
been represented in the preparation, negotiation, and execution of this
Agreement by legal counsel of the Executive’s own choice or has voluntarily
declined to seek such counsel; (c) understands the terms and consequences
of this Agreement; and (d) understands that the law firm of Hale and Dorr
LLP is acting as counsel to the Company in connection with the transactions
contemplated by this Agreement, and is not acting as counsel for the Executive.


 


[Remainder of Page Intentionally Left
Blank]


 


10

















 


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


 


	
   

  	
  SEPRACOR INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [Executive]

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
				



 


11














 


SEPRACOR INC.


 


December 23, 2008


 


[Name]


[Address]


 


Dear [Name]:


 


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 [                 ] 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:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [Name]

  	
   

  	
   

  	
   

  



 














 


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 


 

















 


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.


 

















 


(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”.