Exhibit
10.1


 


SONUS PHARMACEUTICALS, INC.


1522 217th PL S.E., Suite 100


Bothell, Washington 98021


 


 


January 11, 2008


 


Mr. Michael A. Martino


c/o SONUS Pharmaceuticals, Inc.


1522 217th PL S.E., Suite 100


Bothell, Washington 98021


 


Re: Severance/Change In Control Agreement


 


Dear
Mike:


 


In consideration of your continued employment with SONUS
Pharmaceuticals, Inc., a Delaware corporation (the “Company”), you and the
Company entered into a Change in Control Agreement dated October 10TH,  2003 (the “Prior Agreement’”). For good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, you and the Company desire to amend and restate the Prior
Agreement as set forth herein. This new Severance/Change in Control Agreement
(the “Agreement”) amends and restates the Prior Agreement and sets forth the
compensation and benefits you will be entitled to receive in the event your
employment terminates under any of the circumstances outlined in Section 1
below. This Agreement takes effect on the date set forth above.


 


1.             TERMINATION OF EMPLOYMENT.


 


1.1.          You will be entitled to the compensation and
benefits outlined in Section 2 of this Agreement in the event that:


 


(A)          Your
employment ends due to either (1) a termination for Good Reason, or
(2) a termination for reasons other than Cause, Disability, or your death,
regardless of whether any termination under (1) and (2) above occurs
before, after, or in connection with any Change in Control; and


 


(B)           You
execute a release of all claims, known and unknown, against the Company; and


 


(C)           You
otherwise fulfill your obligations under this Agreement.


 


1.2           For purposes of this Agreement, the term
“Change in Control” shall mean (i) a sale of fifty percent (50%) or more
of the outstanding shares of common stock of the Company; (ii) a sale of
all or substantially all of the assets of the Company, or (iii) a merger,
consolidation or reorganization whereby the stockholders of the Company
immediately prior to the consummation of such merger, consolidation or
reorganization own less than fifty percent (50%) of the outstanding shares of
common stock immediately following the consummation of the merger,
consolidation or reorganization.


 


1.3.          For purposes of this Agreement, the term
“Good Reason” shall mean any of the following, if done without your consent:


 

















 


1.3.1.        A
substantial diminution in your duties and responsibilities to a level
substantially beneath that of your duties and responsibilities as President and
Chief Executive Officer of the Company other than actions that are not taken in
bad faith and are remedied by the Company within thirty days after written
notice by you;


 


1.3.2.        A
reduction by the Company in your annual base salary in effect as of the
effective date of the Change in Control unless such reduction is attributable
to an across the board salary reduction for all of management personnel of the
Company and then only if the percentage of your reduction is (i) not
greater than 10%, and (ii) no greater than that of the other management
personnel;


 


1.3.3.        The
Company requires the relocation of your base of employment outside the Seattle,
Washington metropolitan area;


 


1.3.4.        A
material breach by the Company of any of the terms and provisions of this
Agreement, which is not cured within 30 days of written notice by you of such
breach; or


 


1.3.5.        the
failure of the Company to obtain a satisfactory agreement from any successor in
a Change of Control to assume and agree to perform this Agreement, as
contemplated in Section 6 hereof.


 


1.4           For purposes of this Agreement, the term
“Cause” shall mean any of the following: (i) your willful and continued
failure or refusal to perform your duties with the Company; (b) your
willfully engaging in gross misconduct injurious to the Company; (c) your
being convicted or pleading guilty or nolo
contendere to any misdemeanor involving moral turpitude or to any
felony; (d) your having materially breached any provision of this
Agreement, or any agreement concerning confidentiality or ownership of
inventions with the Company and failed to cure such breach to the reasonable
satisfaction of the Company within 30 days after receiving written notice of
breach if such cure is possible.


 


1.5.          For purposes of this Agreement, the term
“Disability’ shall mean your inability to perform the essential functions of
your position due to any physical or mental illness even with reasonable
accommodation to the extent required by law, for any period of six months in
the aggregate during any twelve months, provided the Company has given you a
written demand to return to your full time duties.


 


1.6           Any termination of employment by you or by
the Company pursuant to this Agreement shall be communicated by written Notice
of Termination indicating the termination provision in this Agreement relied
upon, if any. For purposes of this Agreement, the “Date of Termination” shall
mean the date specified in the Notice of Termination which shall not be earlier
than ten (10) business days after the date on the Notice of Termination is
given and the expiration of the period given to cure a breach as provided in
Section 1.4(d) of this Agreement.


 


2.             COMPENSATION UPON TERMINATION.


 


2.1.          Immediately upon your termination, the
Company shall pay you (A) your base salary unpaid through the Date of
Termination at the rate in effect as of the time of Notice of Termination, and
(B) an amount equal to the value as of the Date of Termination of the
deferred portion of any bonus which has been declared but is unpaid under any
incentive compensation plan or program of the Company then in effect.


 


In addition, if your employment is terminated pursuant to
Section 1 of this Agreement and upon your execution of a release of all
claims, known and unknown, against the Company, then you shall also receive the
compensation and benefits set forth below.


 


2

















 


2.1.1.       The Company shall pay to you as severance,
paid out either as salary continuation or in a lump sum, whichever you prefer,
within ten days following the date of execution of the above-referenced
release, an amount equal to the product of your highest annual base salary in
effect any time during the twelve (12) month period prior to the Date of
Termination, multiplied by 2.99.


 


2.1.2        (2)           You
will also be offered group health insurance continuation coverage available
under “COBRA.” If you timely elect continuation coverage under COBRA, the
Company will pay the required insurance premiums for you and for any of your
dependents who are insured on your Date of Termination and remain eligible for
continuation coverage under COBRA for up to the first twelve (12) months of
your COBRA coverage continuation period.


 


2.1.3.       The Company shall maintain in full force and
effect, for the continued benefit of you for one year after the Date of
Termination, or, if sooner, until you are employed in a full time capacity by
another employer, all non-cash health and welfare plans and programs (excluding
401(k) or any employee bonus plans and programs or retirement plans or
programs) in which you participated immediately prior to the Date of
Termination provided that your continued participation is permissible under the
general terms and provisions of such plans and programs.


 


In the event that your participation in any such plan or program is
barred, the Company shall arrange to provide you with benefits substantially
similar to those which you are entitled to receive under such plans and
programs at no cost to you. At the end of the period of coverage, you shall
have the option to have assigned to you at no cost and with no apportionment of
prepaid premiums, any assignable insurance policy owned by the Company and
relating specifically to you.


 


2.2.          The
respective obligations of, and benefits afforded to, the Company and you as
provided in this Agreement shall survive a Change of Control.


 


2.3.          No
compensation or benefits shall be due under this Agreement in the event your
employment is terminated by you or the Company in circumstances other than
those described in Section 1, including but not limited to a termination
by you for any reason other than Good Reason; a termination by the Company for
Cause, Disability, or death; or any termination that does not occur as a result
of a layoff prior to a Change in Control; any termination by you for any reason
other than Good Reason or by the Company for Cause within twelve months
following a Change in Control.


 


2.4.          To
the extent that any or all of the payments and benefits provided for in this
Agreement constitute “parachute payments” within the meaning of
Section 280G of the Internal Revenue Code (the “Code”) and, but for this
Section 2.4 would be subject to the excise tax imposed by
Section 4999 of the Code, the aggregate amount of such payments and
benefits shall be reduced such that the present value thereof (as determined
under the Code and applicable regulations) is equal to 2.99 times the
Executive’s “base amount” (as defined in the Code). The determination of any
reduction of any payment or benefits under Section 2 pursuant to the
foregoing provision shall be made by a nationally recognized public accounting
firm chosen by the Company in good faith, and such determination shall be
conclusive and binding on the Company and you.


 


3.             OTHER BENEFITS.


 


In the event you are entitled to any compensation or benefits under
this Agreement, you shall not be entitled to any other severance compensation
or benefits under any other policy or agreement with the Company.


 


3

















 


4.              PROPRIETARY INFORMATION AND UNFAIR
COMPETITION.


 


4.1            You
acknowledge that in the course of your employment with the Company, you will be
entrusted with access to extensive confidential information of the Company
concerning its products and service, methods of manufacture, research and
development, know-how, patents, copyrights, trademarks, and other proprietary
data, as well as the identity, needs, and preferences of its customers and
prospects, all of which the Company considers its legally protected trade
secrets and intellectual property. You further acknowledge the highly
competitive nature of the business of the Company, and the fact that
unauthorized disclosure or use of such trade secrets and intellectual property
would be inevitable if you were to compete with the Company or solicit
competing business from its prospects and customers. You therefore agree as
follows:


 


4.2            Commencing
on the Date of Termination, and ending one year thereafter, (the “Non-Compete
Period”), you will not provide goods or services to, or become an employee,
owner (except for passive investments of not more than 3% of the outstanding
shares of, or any other equity interest in, any company or entity listed or
traded on a national securities exchange or in an over-the-counter securities
market), officer, agent, consultant, advisor or director of any firm or person
in any geographic area which competes with the “Business’’. For purposes of
this Agreement, the term “Business” shall mean the specific business conducted by the Company on the Date
of Termination. As of the date of this Agreement, the “Business” of the Company
consists of the  research, design, development, manufacture, sale
or distribution of Vitamin E emulsion-based drug delivery products.


 


4.3            During
the Non-Compete Period, you will not directly or indirectly induce any employee
of the Company or any of its affiliates to engage in any activity in which you
are prohibited from engaging by paragraph 5.1 above, or to terminate such
employee’s employment with the Company, or any of its affiliates, and will not
directly or indirectly employ or offer employment to any person who was
employed by the Company or any of its affiliates unless such person shall cease
to be employed by the Company or any of its affiliates for a period of at least
12 months; provided, however, that this provision shall not apply to any person
who is no longer an employee of the Company or any of its affiliates as of a
result of actions taken by the Company or its affiliates.


 


4.4            During
the Non-Compete Period, you will refrain from making any statement which has
the effect of demeaning the name or the business reputation of the Company or
its subsidiaries or affiliates, or any officer or employee thereof, or which
materially adversely effects the best interests (economic or otherwise) of the
Company, its subsidiaries or affiliates.


 


4.5.           It
is expressly understood and agreed that although you and the Company consider
the restrictions contained in this Section 5 to be reasonable, if a final
judicial determination is made by a court of jurisdiction that the time or
territory or any other restriction contained in this Agreement is an
unenforceable restriction against you, provisions of this Agreement shall not
be rendered void, but shall be deemed amended to apply to such maximum time and
territory and to such maximum extent as such court may judicially determine or
indicate to be enforceable. Alternatively, if any court of competent
jurisdiction finds that any restriction contained in this Agreement is
unenforceable, and such restriction cannot be amended so as to make it
enforceable, such finding shall not effect the enforceability of any of the
other restriction contained herein.


 


4

















 


5.             MISCELLANEOUS.


 


Any payment required under this Agreement shall be subject to all
requirements of the law with regard to withholding, filing, making of reports
and the like, and the Company shall use its commercially reasonable best
efforts to satisfy promptly all such requirements. No provisions of this
Agreement may be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in a writing signed by both parties. The
validity, interpretation, construction and performance of this Agreement shall
be governed by the law of the State of Delaware.


 


6.             SUCCESSORS AND ASSIGNMENT.


 


This agreement and all of your rights thereunder shall inure to the
benefit of and be enforceable by your personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. Except as expressly provided in this Agreement, this Agreement is
personal to you and may not be assigned to you. If you should die while any
amounts would still be payable to you hereunder if you had continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to your devisee, legatee, or other designee
or, if there be no such designee, to your estate. This Agreement shall be
binding upon any successor to the Company (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company.


 


7.             TERM OF AGREEMENT.


 


This Agreement shall commence as of the date of this Agreement and
shall terminate on the earliest of (i) the termination of your employment
by the Company for Cause, Disability or death; (ii) your termination of
employment other than for Good Reason or (iii) your reaching age 65.


 


8.             NO GUARANTEE OF CONTINUED EMPLOYMENT.


 


This Agreement is intended solely to provide you with certain
compensation and benefits in the event your employment terminates in the
circumstances described in Section 1.1. Nothing in this Agreement
constitutes or implies any specific term of employment. You acknowledge and
agree that your employment with the Company can be terminated by you or the
Company at any time with or without cause or prior warning. Nothing in this
Agreement limits or supersedes any other agreements between you and the Company
concerning confidentiality or ownership of intellectual property.


 


5

















 


9.             MEDIATION


 


In the event that the Company terminates you for Cause and you dispute
its right to do so or you claim that your are entitled to terminate your
employment for Good Reason and the Company disputes your right to do so, a
mediator acceptable to you and the Company will be appointed within ten
(10) days to assist in reaching a mutually satisfactory resolution but
will have no authority to issue a binding decision. Such mediation must be
concluded within 60 days of the date of termination or claim to termination.
Should such mediation fail to reach an acceptable conclusion and you are
successful in any litigation or settlement that issues from such dispute, you
shall be entitled to receive from the Company all of the expenses incurred by
you in connection with any such dispute including reasonable attorney’s fees.


 


If this Agreement is acceptable to you, kindly sign and return to the
Company the enclosed copy of this letter.


 


	
   

  	
  Sincerely,

  
	
   

  	
   

  
	
   

  	
  SONUS
  Pharmaceuticals, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert E. Ivy

  	
   

  
	
   

  	
   

  	
  Robert E. Ivy, Chairman of
  the Board

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Dated:

  	
  11 Jan 2008

  	
   

  
						



 


 


	
  AGREED AND ACCEPTED:

  	
   

  
	
   

  	
   

  
	
  /s/ Michael A. Martino

  	
   

  	
   

  
	
  Michael A. Martino

  	
   

  
	
   

  	
   

  
	
  Dated:  January 11,
  2008

  	
   

  
			



 


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