Document:

Exhibit 10.18

 

VERASTEM, INC.

 

RESTRICTED STOCK PURCHASE AGREEMENT

 

THIS RESTRICTED STOCK PURCHASE AGREEMENT (the “Agreement”)  is made as of August 11, 2010, by and between Verastem, Inc., a Delaware corporation (the “Company”), and Rich Aldrich (“Purchaser”).

 

WHEREAS, the Company desires to issue, and Purchaser desires to acquire, stock of the Company as herein described, on the terms and conditions hereinafter set forth;

 

NOW, THEREFORE, IT IS AGREED between the parties as follows:

 

1.             PURCHASE AND SALE OF STOCK. Purchaser hereby agrees to purchase from the Company, and the Company hereby agrees to sell to Purchaser, an aggregate of 1,900,000 shares of the Common Stock of the Company (the “Stock”)  at $0.0001 per share (the “Purchase Price”), for an aggregate purchase price of $190.00, payable in cash. The closing hereunder, including payment for and delivery of the Stock, shall occur at the offices of the Company immediately following the execution of this Agreement, or at such other time and place as the parties may mutually agree.

 

2.             REPURCHASE OPTION

 

(a)           In the event Purchaser’s relationship with the Company (or a parent or subsidiary of the Company) terminates for any reason (including death or disability), or for no reason, such that after such termination Purchaser is no longer providing services to the Company (or a parent or subsidiary of the Company) as an employee, director, consultant or advisor (a “Service Provider”), then the Company shall have an irrevocable option (the “Repurchase Option”), for a period of ninety (90) days after said termination to repurchase from Purchaser or Purchaser’s personal representative, as the case may be, at a price per share equal to the Purchase Price, up to but not exceeding the number of shares of Stock that have not vested in accordance with the provisions of Section 2(b) below as of such termination date. The term of the Repurchase Option shall be extended to such longer period (1) as may be agreed to by the Company and the Purchaser, or (2) as needed to ensure the stock issued by the Company does not lose its status as “qualified small business stock” under Section 1202 of the Code (as defined below). Purchaser hereby acknowledges that the Company has no obligation, either now or in the future, to repurchase any of the shares of Common Stock, whether vested or unvested, at any time.

 

(b)           One Million Four Hundred and Twenty-Five Thousand (1,425,000) shares of the Stock (the “Option Shares”)  shall initially be unvested and subject to the Repurchase Option. One-sixteenth (1/16th) of the Option Shares shall vest and be released from the Repurchase Option on a quarterly basis measured from the Vesting Commencement Date (as set forth on the signature page of this Agreement), until all the Stock is released from the Repurchase Option (provided in each case that Purchaser remains a Service Provider as of the date of such release).

 

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(c)           In the event of a Change in Control, the Repurchase Option shall lapse and all shares of Stock subject to Repurchase Option shall immediately become fully vested. For purposes hereof, “Change in Control” shall mean (A) a sale or other disposition of all or substantially all (as determined by the Board of Directors in its sole discretion) of the assets of the Company; or (B) a merger, consolidation or similar transaction in which the Company is not the surviving corporation (other than a transaction in which stockholders immediately before the transaction have, immediately after the transaction, at least a majority of the voting power of the surviving corporation); or (C) the consummation of a merger, consolidation or similar transaction in which the Company is the surviving corporation but the shares of the Company’s Common Stock outstanding immediately preceding the transaction are converted by virtue of the transaction into other property, whether in the form of securities, cash or otherwise (other than a transaction in which stockholders immediately before the transaction have, immediately after the transaction, at least a majority of the voting power of the surviving corporation); or (D) any transaction or series of related transactions in which in excess of fifty percent (50%) of the Company’s voting power is transferred, other than the sale by the Company of stock in transactions the primary purpose of which is to raise capital for the Company’s operations and activities.

 

3.             EXERCISE OF REPURCHASE OPTION. The Repurchase Option shall be exercised by written notice signed by an officer of the Company or by any assignee or assignees of the Company and delivered or mailed as provided in Section 16(a). Such notice shall identify the number of shares of Stock to be purchased and shall notify Purchaser of the time, place and date for settlement of such purchase, which shall be scheduled by the Company within the term of the Repurchase Option set forth in Section 2 above. The Company shall be entitled to pay for any shares of Stock purchased pursuant to its Repurchase Option at the Company’s option in cash or by offset against any indebtedness owing to the Company by Purchaser, or by a combination of both. Upon delivery of such notice and payment of the purchase price in any of the ways described above, the Company shall become the legal and beneficial owner of the Stock being repurchased and all rights and interest therein or related thereto, and the Company shall have the right to transfer to its own name the Stock being repurchased by the Company, without further action by Purchaser.

 

4.             ADJUSTMENTS TO STOCK. If, from time to time, during the term of the Repurchase Option there is any change affecting the Company’s outstanding Common Stock as a class that is effected without the receipt of consideration by the Company (through merger, consolidation, reorganization, reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, change in corporation structure or other transaction not involving the receipt of consideration by the Company), then any and all new, substituted or additional securities or other property to which Purchaser is entitled by reason of Purchaser’s ownership of Stock shall be immediately subject to the Repurchase Option and be included in the word “Stock” for all purposes of the Repurchase Option with the same force and effect as the shares of the Stock presently subject to the Repurchase Option, but only to the extent the Stock is, at the time, covered by such Repurchase Option. While the total Purchase Price shall remain the same after each such event, the Purchase Price per share of Stock upon exercise of the Repurchase Option shall be appropriately adjusted.

 

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5.             CORPORATE TRANSACTION. In the event of (a) an Acquisition (as defined below); or (b) an Asset Transfer (as defined below) ((a) and (b) being collectively referred to herein as a “Corporate Transaction”), then the Repurchase Option shall be assigned by the Company to any successor of the Company (or the successor’s parent) in connection with such Corporate Transaction. To the extent that the Repurchase Option remains in effect following such a Corporate Transaction, it shall apply to the new capital stock or other property received in exchange for the Stock in consummation of the Corporate Transaction, but only to the extent the Stock is at the time covered by such right. Appropriate adjustments shall be made to the Purchase Price per share payable upon exercise of the Repurchase Option to reflect the effect of the Corporate Transaction upon the Company’s capital structure; provided, however, that the aggregate Purchase Price shall remain the same.

 

For the purposes of this Section 5: (i) “Acquisition”  shall mean (A) any consolidation or merger of the Company with or into any other corporation or other entity or person, or any other corporate reorganization; or (B) any transaction or series of related transactions to which the Company is a party in which in excess of fifty percent (50%) of the Company’s voting power is transferred; and (ii) “Asset Transfer”  shall mean a sale, lease, exclusive license or other disposition of all or substantially all of the assets of the Company.

 

6.             TERMINATION OF REPURCHASE OPTION. Sections 2, 3, 4 and 5 of this Agreement shall terminate upon the exercise in full or expiration of the Repurchase Option, whichever occurs first.

 

7.             ESCROW OF UNVESTED STOCK. As security for Purchaser’s faithful performance of the terms of this Agreement and to insure the availability for delivery of Purchaser’s Stock upon exercise of the Repurchase Option herein provided for, Purchaser agrees, at the closing hereunder, to deliver to and deposit with the Secretary of the Company or the Secretary’s designee (“Escrow Agent”), as Escrow Agent in this transaction, three (3) stock assignments duly endorsed (with date and number of shares blank) in the form attached hereto as Exhibit A, together with a certificate or certificates evidencing all of the Stock subject to the Repurchase Option; said documents are to be held by the Escrow Agent and delivered by said Escrow Agent pursuant to the Joint Escrow Instructions of the Company and Purchaser set forth in Exhibit B attached hereto and incorporated by this reference, which instructions shall also be delivered to the Escrow Agent at the closing hereunder. Purchaser hereby acknowledges that the Secretary of the Company, or the Secretary’s designee, is so appointed as the escrow holder with the foregoing authorities as a material inducement to make this Agreement and that said appointment is coupled with an interest and is accordingly irrevocable. Purchaser agrees that Escrow Agent shall not be liable to any party hereof (or to any other party). Escrow Agent may rely upon any letter, notice or other document executed by any signature purported to be genuine and may resign at any time. Purchaser agrees that if the Secretary of the Company, or the Secretary’s designee, resigns as Escrow Agent for any or no reason, the Board of Directors of the Company shall have the power to appoint a successor to serve as Escrow Agent pursuant to the terms of this Agreement. Purchaser agrees that if the Secretary of the Company resigns as Secretary, the successor Secretary shall serve as Escrow Agent pursuant to the terms of this Agreement.

 

8.             RIGHTS OF PURCHASER. Subject to the provisions of Sections 7, 9, 12 and 14 herein, Purchaser shall exercise all rights and privileges of a shareholder of the Company with respect to

 

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the Stock deposited in escrow. Purchaser shall be deemed to be the holder for purposes of receiving any dividends that may be paid with respect to such shares of Stock and for the purpose of exercising any voting rights relating to such shares of Stock, even if some or all of such shares of Stock have not yet vested and been released from the Repurchase Option.

 

9.             LIMITATIONS ON TRANSFER.

 

(a)           In addition to any other limitation on transfer created by applicable securities laws, Purchaser shall not assign, hypothecate, donate, encumber, dispose of or otherwise transfer or dispose of any interest in the Stock while the Stock is unvested and is subject to the Repurchase Option.

 

(b)           After any Stock has become vested and has been released from the Repurchase Option, Purchaser shall not assign, hypothecate, donate, encumber, dispose of or otherwise transfer any interest in the Stock except in compliance with the following restrictions and applicable securities laws:

 

(i)            Before assigning, hypothecating, donating, encumbering, disposing of or otherwise transferring any interest in the Stock, the Purchaser shall give written notice of such intention to the Company which notice shall include the name of the proposed transferee, the proposed purchase price per share or other interest, the terms of payment of such purchase price and all other matters relating to such transfer and shall be accompanied by a copy of the binding written agreement of the proposed transferee to purchase the shares of or other interest in the Stock of the Purchaser. Such notice shall constitute a binding offer by the Purchaser to sell to the Company such number of the shares of Stock or other interest in the Stock then held by the Purchaser as are proposed to be sold in the notice at the monetary price per share designated in such notice, payable on the terms offered to the Purchaser by the proposed transferee (provided, however, that the Company shall not be required to meet any non-monetary terms of the proposed transfer, including, without limitation, delivery of other securities in exchange for the Shares proposed to be sold). The Company shall give written notice to the Purchaser as to whether such offer has been accepted in whole by the Company within 60 days after its receipt of written notice from the Purchaser. The Company may only accept such offer in whole and may not accept such offer in part. Such acceptance notice shall specify a place, a time, and date for the closing on such purchase (for purposes of this Section 9, the “Closing” and the date on which the Closing occurs, the “Closing Date”)  which shall not be less than ten nor more than 60 days after the giving of the acceptance notice, provided, however, if any of the Shares to be sold pursuant to this Section 9 have been held by the Purchaser for less than six months, then the Closing Date may be extended by the Company until no more than ten days after such Shares have been held by the Purchaser for six months if required under applicable accounting rules in effect at the time. At the Closing, the Purchaser shall accept payment as set forth herein and shall deliver to the Company in exchange therefor the Shares being repurchased, duly endorsed for transfer, to the extent that they are not then in the possession of the Company.

 

(ii)           If the Company shall fail to accept any such offer, the Purchaser shall be free to sell all, but not less than all, of the shares or other interests set forth in his notice to the designated transferee at the price and terms designated in the Purchaser’s notice, provided, that (i) such sale is consummated within six months after the giving of notice by the Purchaser to the

 

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Company as aforesaid, and (ii) the transferee first agrees in writing to be bound by the provisions of this Section so that he or she (and all subsequent transferees) shall thereafter only be permitted to sell or transfer the Shares in accordance with the terms hereof. After the expiration of such six months, the provisions of this Section shall again apply with respect to any proposed voluntary transfer of the Shares.

 

(iii)         The Company may assign in whole or in part any of its rights provided in this Section 9 to purchase shares of Stock or any interests therein of the Purchaser to such other stockholders of the Company as the Company determines, in which event the rights granted to the Company in this Section 9 shall apply, mutatis mutandis, to all such stockholders to whom such rights have been assigned.

 

(c)           The provisions of this Section 9 may be waived by the Company. Any such waiver may be unconditional or based upon such conditions as the Company may impose.

 

(d)           Notwithstanding the restrictions on transfer contained in this Section 9 such restrictions shall not apply to (a) transfers by the Purchaser to his or her spouse or children or to a trust for the benefit of his or her spouse or children, (b) transfers by the Purchaser to his or her guardian or conservator, and (c) transfers by the Purchaser, in the event of his or her death, to his or her executor(s) or administrator(s) or to trustee(s) under his or her will (collectively, “Permitted Transferees”); provided, however, that in any such event the shares of Stock or interests therein so transferred in the hands of each such Permitted Transferee shall remain subject to this Agreement, and each such Permitted Transferee shall so acknowledge in writing as a condition precedent to the effectiveness of such transfer.

 

10.          RESTRICTIVE LEGENDS. All certificates representing the Stock shall have endorsed thereon legends in substantially the following forms (in addition to any other legend which may be required by other agreements between the parties hereto):

 

(a)           “THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A WRITTEN AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED HOLDER, OR SUCH HOLDER’S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY. ANY TRANSFER OR ATTEMPTED TRANSFER OF ANY SHARES SUBJECT TO SUCH AGREEMENT IS VOID WITHOUT THE PRIOR EXPRESS WRITTEN CONSENT OF THE COMPANY.”

 

(b)           “THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.”

 

(c)           Any legend required by appropriate blue sky officials.

 

11.          INVESTMENT REPRESENTATIONS. In connection with the purchase of the Stock, Purchaser represents to the Company the following:

 

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(a)           Purchaser is aware of the Company’s business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Stock. Purchaser is purchasing the Stock for investment for Purchaser’s own account only and not with a view to, or for resale in connection with, any “distribution” thereof within the meaning of the Securities Act of 1933, as amended (the “Act”).

 

(b)           Purchaser understands that the Stock has not been registered under the Act by reason of a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Purchaser’s investment intent as expressed herein.

 

(c)           Purchaser further acknowledges and understands that the Stock must be held indefinitely unless the Stock is subsequently registered under the Act or an exemption from such registration is available. Purchaser further acknowledges and understands that the Company is under no obligation to register the Stock. Purchaser understands that the certificate evidencing the Stock will be imprinted with a legend which prohibits the transfer of the Stock unless the Stock is registered or such registration is not required in the opinion of counsel for the Company.

 

(d)           Purchaser is familiar with the provisions of Rule 144, under the Act, as in effect from time to time, which, in substance, permit limited public resale of “restricted securities” acquired, directly or indirectly, from the issuer thereof (or from an affiliate of such issuer), in a non-public offering subject to the satisfaction of certain conditions. The Stock may be resold by Purchaser in certain limited circumstances subject to the provisions of Rule 144, which may require, among other things, (i) the availability of certain public information about the Company and (ii) the resale occurring following the required holding period under Rule 144 after the Purchaser has purchased, and made full payment for (within the meaning of Rule 144), the securities to be sold.

 

(e)           Purchaser further understands that at the time Purchaser wishes to sell the Stock there may be no public market upon which to make such a sale, and that, even if such a public market then exists, the Company may not be satisfying the current public information requirements of Rule 144, and that, in such event, Purchaser may be precluded from selling the Stock under Rule 144 even if the minimum holding period requirement had been satisfied.

 

(f)            Purchaser represents that Purchaser is an “accredited investor” as that term is defined in Rule 501 of Regulation D promulgated by the Securities and Exchange Commission under the Securities Act of 1933, as amended.

 

12.          MARKET STAND-OFF AGREEMENT. Purchaser shall not sell, dispose of, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, any Common Stock or other securities of the Company held by Purchaser (other than those included in the registration), including the Stock (the “Restricted Securities”), during the 180-day period following the effective date of the Company’s first firm commitment underwritten public offering of its Common Stock (or such longer period, not to exceed 34 days after the expiration of the 180-day period, as the underwriters or the Company shall request in order to facilitate compliance with NASD Rule 2711 or NYSE Member Rule 472 or any successor or similar rule or regulation) (the “Lock Up

 

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Period”), provided, however, that nothing contained in this Section 12 shall prevent the exercise of the Repurchase Option during the Lock Up Period. Purchaser agrees to execute and deliver such other agreements as may be reasonably requested by the Company and/or the managing underwriters which are consistent with the foregoing or which are necessary to give further effect thereto. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to Purchaser’s Restricted Securities until the end of such period. The underwriters of the Company’s stock are intended third party beneficiaries of this Section 12 and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto.

 

13.          SECTION 83(B) ELECTION. Purchaser understands that Section 83(a) of the Internal Revenue Code of 1986, as amended (the “Code”), taxes as ordinary income the difference between the amount paid for the Stock and the fair market value of the Stock as of the date any restrictions on the Stock lapse. In this context, “restriction” includes the right of the Company to buy back the Stock pursuant to the Repurchase Option set forth in Section 2 above. Purchaser understands that Purchaser may elect to be taxed at the time the Stock is purchased, rather than when and as the Repurchase Option expires, by filing an election under Section 83(b) (an “83(b) Election”) of the Code with the Internal Revenue Service within thirty (30) days from the date of purchase. Even if the fair market value of the Stock at the time of the execution of this Agreement equals the amount paid for the Stock, the 83(b) Election must be made to avoid income under Section 83(a) in the future. Purchaser understands that failure to file such an 83(b) Election in a timely manner may result in adverse tax consequences for Purchaser. Purchaser further understands that an additional copy of such 83(b) Election is required to be filed with his or her federal income tax return for the calendar year in which the date of this Agreement falls. Purchaser further acknowledges and understands that it is Purchaser’s sole obligation and responsibility to timely file such 83(b) Election, and neither the Company nor the Company’s legal or financial advisors shall have any obligation or responsibility with respect to such filing. Purchaser acknowledges that the foregoing is only a summary of the effect of United States federal income taxation with respect to purchase of the Stock hereunder, and does not purport to be complete. Purchaser further acknowledges that the Company has directed Purchaser to seek independent advice regarding the applicable provisions of the Code, the income tax laws of any municipality, state or foreign country in which Purchaser may reside, and the tax consequences of Purchaser’s death. Purchaser assumes all responsibility for filing an 83(b) Election and paying all taxes resulting from such election or the lapse of the restrictions on the Stock.

 

14.          REFUSAL TO TRANSFER. The Company shall not be required (a) to transfer on its books any shares of Stock of the Company which shall have been transferred in violation of any of the provisions set forth in this Agreement or (b) to treat as owner of such shares or to accord the right to vote as such owner or to pay dividends to any transferee to whom such shares shall have been so transferred.

 

15.          NO EMPLOYMENT RIGHTS. This Agreement is not an employment or other service contract and nothing in this Agreement shall affect in any manner whatsoever the right or power of the Company (or a parent or subsidiary of the Company) to terminate Purchaser’s employment or other service relationship for any reason at any time, with or without cause and with or without notice.

 

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16.          MISCELLANEOUS.

 

(a)           Notices. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (i) upon personal delivery to the party to be notified, (ii) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient, and if not during normal business hours of the recipient, then on the next business day, (iii) five (5) calendar days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (iv) one (1) business day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the other party hereto at such party’s address hereinafter set forth on the signature page hereof, or at such other address as such party may designate by ten (10) days advance written notice to the other party hereto.

 

(b)           Successors and Assigns. This Agreement shall inure to the benefit of the successors and assigns of the Company and, subject to the restrictions on transfer herein set forth, be binding upon Purchaser, Purchaser’s successors, and assigns. The Repurchase Option of the Company hereunder shall be assignable by the Company at any time or from time to time, in whole or in part.

 

(c)           Attorneys’ Fees; Specific Performance. Purchaser shall reimburse the Company for all costs incurred by the Company in enforcing the performance of, or protecting its rights under, any part of this Agreement, including reasonable costs of investigation and attorneys’ fees. It is the intention of the parties that the Company, upon exercise of the Repurchase Option and payment therefor, pursuant to the terms of this Agreement, shall be entitled to receive the Stock, in specie, in order to have such Stock available for future issuance without dilution of the holdings of other shareholders. Furthermore, it is expressly agreed between the parties that money damages are inadequate to compensate the Company for the Stock and that the Company shall, upon proper exercise of the Repurchase Option, be entitled to specific enforcement of its rights to purchase and receive said Stock.

 

(d)           Governing Law; Venue. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts. The parties agree that any action brought by either party to interpret or enforce any provision of this Agreement shall be brought in, and each party agrees to, and does hereby, submit to the jurisdiction and venue of, the appropriate state or federal court for the district encompassing the Company’s principal place of business.

 

(e)           Further Execution. The parties agree to take all such further action (s) as may reasonably be necessary to carry out and consummate this Agreement as soon as practicable, and to take whatever steps may be necessary to obtain any governmental approval in connection with or otherwise qualify the issuance of the securities that are the subject of this Agreement.

 

(f)            Independent Counsel. Purchaser acknowledges that this Agreement has been prepared on behalf of the Company by Cooley LLP, counsel to the Company and that Cooley LLP does not represent, and is not acting on behalf of, Purchaser. Purchaser has been provided with an opportunity to consult with Purchaser’s own counsel with respect to this Agreement.

 

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(g)           Entire Agreement; Amendment. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes and merges all prior agreements or understandings, whether written or oral. This Agreement may not be amended, modified or revoked, in whole or in part, except by an agreement in writing signed by each of the parties hereto.

 

(h)           Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of the Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of the Agreement shall be enforceable in accordance with its terms.

 

(i)            Release. As a condition of receiving the benefits under Section 2(c) of this Agreement to which Purchaser would not otherwise be entitled, Purchaser shall execute the Company’s standard form of a release of claims (the “Release”)  and permit such Release to become effective in accordance with its terms. Unless the Release is executed by Purchaser and delivered to the Company within the period of time set forth in the Release, and such Release becomes effective, Purchaser shall not receive any of the accelerated vesting benefits provided for under this Agreement.

 

(j)            Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.

 

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

 

	
 
    	
VERASTEM, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Paul Brannelly
    
	
 
    	
 
    	
 
    
	
 
    	
Title:
    	
Secretary and Treasurer
    
	
 
    	
 
    	
 
    
	
 
    	
Address:
    	
800 Boylston Street, Suite 1555
    
	
 
    	
Boston, MA 02199
    

 

PURCHASER ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO SECTION 2 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS AN EMPLOYEE, DIRECTOR, CONSULTANT OR ADVISOR AT THE WILL OF THE COMPANY. PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS AGREEMENT SHALL CONFER UPON PURCHASER ANY RIGHT WITH RESPECT TO CONTINUATION OF SUCH EMPLOYMENT, DIRECTORSHIP, CONSULTING OR ADVISORY RELATIONSHIP WITH THE COMPANY, NOR SHALL IT INTERFERE IN ANY WAY WITH PURCHASER’S RIGHT OR THE COMPANY’S RIGHT TO TERMINATE PURCHASER’S EMPLOYMENT, DIRECTORSHIP, CONSULTING OR ADVISORY RELATIONSHIP AT ANY TIME, WITH OR WITHOUT CAUSE.

 

PURCHASER ACKNOWLEDGES AND AGREES THAT PURCHASER MUST HOLD THE COMMON STOCK PURCHASED HEREUNDER INDEFINITELY, AND THAT THE COMPANY HAS NO OBLIGATION TO REPURCHASE SUCH SHARES. PURCHASER FURTHER ACKNOWLEDGES THAT ANY RISK RELATED TO THE FLUCTUATION IN THE VALUE OF THE STOCK FROM AND AFTER THE DATE HEREOF, INCLUDING ANY LOSSES TO PURCHASER AS A RESULT OF THE COMPANY’S EXERCISE OF ITS REPURCHASE OPTION PURSUANT TO SECTION 2, SHALL BE BORNE BY PURCHASER.

 

PURCHASER ACKNOWLEDGES THAT PURCHASER HAS READ ALL TAX RELATED SECTIONS AND FURTHER ACKNOWLEDGES PURCHASER HAS HAD AN OPPORTUNITY TO CONSULT PURCHASER’S OWN TAX, LEGAL AND FINANCIAL ADVISORS REGARDING THE PURCHASE OF COMMON STOCK UNDER THIS AGREEMENT.

 

PURCHASER ACKNOWLEDGES AND AGREES THAT IN MAKING THE DECISION TO PURCHASE THE COMMON STOCK HEREUNDER PURCHASER HAS NOT RELIED ON ANY STATEMENT, WHETHER WRITTEN OR ORAL, REGARDING THE SUBJECT MATTER HEREOF, EXCEPT AS EXPRESSLY PROVIDED HEREIN AND IN THE ATTACHMENTS AND EXHIBITS HERETO.

 

	
 
    	
PURCHASER:
    
	
 
    	
 
    
	
 
    	
/s/ Rich Aldrich
    
	
 
    	
Rich Aldrich
    
	
 
    	
 
    
	
 
    	
Address:
    	
26 Beech Rd.
    
	
 
    	
 
    	
Brookline, MA 02446
    
	
 
    	
 
    
	
VESTING COMMENCEMENT DATE:    August 10, 2010
    

 

10Exhibit 10.19

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (the “Agreement”) dated March 28, 2012 is by and between Verastem, Inc. (the “Company”), a Delaware corporation with its principal place of business at 215 First Street, Suite 440, Cambridge, MA 02142, and Paul Brannelly (the “Employee”) of 40 Glenellen Road, Boston, MA 02132.

 

WHEREAS, the Employee is possessed of certain experience and expertise that qualify him to provide management direction and leadership for the Company.

 

WHEREAS, the Company wishes to employ the Employee to serve as its Vice President, Finance.

 

NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company offers and the Employee accepts employment upon the following terms and conditions:

 

1.                                       Position and Duties.  Upon the terms and subject to the conditions set forth in this Agreement, the Company hereby offers and the Employee hereby accepts employment with the Company to serve as its Vice President, Finance.  The Employee agrees to perform the duties of the Employee’s position and such other duties as reasonably may be assigned to the Employee from time to time.  The Employee also agrees that while employed by the Company, the Employee will devote one hundred percent (100%) of the Employee’s business time and the Employee’s reasonable commercial efforts, business judgment, skill and knowledge exclusively to the advancement of the business and interests of the Company and to the discharge of the Employee’s duties and responsibilities for it.

 

2.                                       Compensation and Benefits.  During the Employee’s employment, as compensation for all services performed by the Employee for the Company and subject to his performance of his duties and responsibilities for the Company, pursuant to this Agreement or otherwise, the Company will provide the Employee the following pay and benefits:

 

(a)                                  Base Salary; Annual Bonus.  Effective January 1, 2012, the Company will pay the Employee a base salary at the rate of Two Hundred and Fifty Eight Thousand Dollars ($258,000) per year.  Such amounts shall be payable in accordance with the regular payroll practices of the Company, as in effect from time to time, and subject to increase from time to time by the Board in its discretion.  The Employee shall have the opportunity to earn an annual target bonus measured against performance criteria to be determined by the Board (or a committee thereof) of 30% of the Employee’s then current annual base salary.  Any bonus amount payable by the Company, if any, shall be paid no later than March 15 of the year following the year in which such bonus is earned.

 

(b)                                 Stock Options; RSUs.  Upon commencement of employment the Employee was granted a stock option to purchase Two Hundred Ten Thousand (210,000) shares of the Company’s Common Stock (representing 60,000 shares after giving effect to a 1-for-3.5 reverse stock split of the Company’s Common Stock effected on January 10, 2012 (the “Reverse Stock Split”)) at a price per share of $0.08 (representing a price per share of $0.28 after giving 

 

 

effect to the Reverse Stock Split).  The stock option will vest over four years at the rate of 25% on the one year anniversary of the Employee’s date of hire subject to his continuing employment with the Company, and no shares shall vest before such date, except as provided below.  The remaining shares shall vest quarterly over the next three years in equal quarterly amounts subject to the Employee’s continuing employment with the Company, except as provided below.  Upon the closing of the initial public offering of the Company’s Common Stock on February 1, 2012 (the “2012 IPO”), the Company granted to the Employee a restricted stock unit award (the “IPO RSU”) representing the right to receive 28,571 shares of Company Common Stock (after giving effect to the Reverse Stock Split and subject to appropriate adjustment to reflect any stock dividend, stock split, combination or other similar recapitalization with respect to the Company’s Common Stock) upon satisfaction of applicable vesting conditions, as set forth in the Restricted Stock Unit Agreement between the Company and the Employee.

 

(c)                                  Participation  in Employee Benefit Flans.  The Employee will be entitled to participate in all Employee Benefit Plans from time to time in effect for employees of the Company generally, except to the extent such plans are duplicative of benefits otherwise provided the Employee under this Agreement (e.g., severance pay) or under any other agreement.  The Employee’s participation will be subject to the terms of the applicable plan documents and generally applicable Company policies.  The Company may alter, modify, add to or delete its Employee Benefit Plans at any time as it, in its sole judgment, determines to be appropriate, without recourse by the Employee.  For purposes of this Agreement, “Employee Benefit Plan” shall have the meaning ascribed to such term in Section 3(3) of ERISA, as amended from time to time.

 

(d)                                 Vacation.  The Employee will accrue three weeks paid vacation per year (or such greater amount as is generally made available to the Company’s employees) in accordance with the Company’s policies from time to time in effect and receive paid holidays in accordance with the Company holiday schedule.  Vacation may be taken at such times and intervals as the Employee shall determine, subject to the business needs of the Company, and otherwise shall be subject to the policies of the Company, as in effect from time to time.

 

(e)                                  Business Expenses.  The Company will pay or reimburse the Employee for all reasonable business expenses incurred or paid by the Employee in the performance of his duties and responsibilities for the Company, subject to any maximum annual limit and other restrictions on such expenses set by the Company and to such reasonable substantiation and documentation as it may specify from time to time.  Any such reimbursement that would constitute nonqualified deferred compensation subject to Section 409A shall be subject to the following additional rules: (i) no reimbursement of any such expense shall affect the Employee’s right to reimbursement of any other such expense in any other taxable year; (ii) reimbursement of the expense shall be made, if at all, not later than the end of the calendar year following the calendar year in which the expense was incurred; and (iii) the right to reimbursement shall not be subject to liquidation or exchange for any other benefit.

 

3.                                       Confidential Information, Non-Competition and Proprietary Information.  The Employee has executed or will execute the Company’s standard Employee Non-Solicitation, Non-Competition, Confidential Information and Inventions Assignment Agreement.  It is understood and agreed that breach by the Employee of the Employee Non-Solicitation, Non-

 

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Competition, Confidential Information and Inventions Assignment Agreement shall constitute a material breach of this Agreement.

 

4.                                       Termination of Employment.  The Employee’s employment under this Agreement shall continue until terminated pursuant to this Section 4.

 

(a)                                  The Company may terminate the Employee’s employment for “Cause” upon written notice to the Employee setting forth in reasonable detail the nature of the Cause.  The following, as determined by the Board in good faith and using its reasonable judgment, shall constitute Cause for termination:  (i) the Employee’s willful failure to perform, or gross negligence in the performance of, the Employee’s material duties and responsibilities to the Company and its Affiliates which is not remedied within thirty (30) days of written notice thereof; (ii) material breach by the Employee of any material provision of this Agreement or any other agreement with the Company or any of its Affiliates which is not remedied within thirty (30) days of written notice thereof; (iii) fraud, embezzlement or other dishonesty with respect to the Company and any of its Affiliates, taken as a whole, which, in the case of such other dishonesty, causes or could reasonably be expected to cause material harm to the Company and any of its Affiliates, taken as a whole; or (iv) the Employee’s conviction of a felony.

 

(b)                                 The Company may terminate the Employee’s employment at any time other than for Cause upon one month’s written notice to the Employee.

 

(c)                                  The Employee may terminate his employment hereunder for Good Reason by providing notice to the Company of the condition giving rise to the Good Reason no later than thirty (30) days following the occurrence of the condition, by giving the Company thirty (30) days to remedy the condition and by terminating employment for Good Reason within thirty (30) days thereafter if the Company fails to remedy the condition.  For purposes of this Agreement, “Good Reason” shall mean, without the Employee’s consent, the occurrence of anyone or more of the following events: (i) material diminution in the nature or scope of the Employee’s responsibilities, duties or authority, provided that in the absence of a Change of Control any diminution in the nature or scope of the Employee’s responsibilities, duties or authority that is reasonably related to a diminution of the business of the Company or any of its Affiliates shall constitute “Good Reason”; (ii) a material reduction in the Employee’s base salary other than one temporary reduction of not more than 120 days and not in excess of 20% of the Employee’s base salary in connection with and in proportion to a general reduction of the base salaries of the Company’s employees; (iii) failure of the Company to provide the Employee the salary or benefits in accordance with Section 2 hereof after thirty (30) days’ notice during which the Company does not cure such failure; or (iv) relocation of the Employee’s office more than forty (40) miles from the location of the Company’s principal offices as of the date of Employee’s hire.

 

(d)                                 The Employee may terminate his employment with the Company other than for Good Reason at any time upon one month’s notice to the Company.

 

(e)                                  This Agreement shall automatically terminate in the event of the Employee’s death during employment.  The Company may terminate the Employee’s employment, upon notice to the Employee, in the event the Employee becomes disabled during 

 

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employment and, as a result, is unable to continue to perform substantially all of his material duties and responsibilities under this Agreement for one-hundred and fifty (150) days during any period of three hundred and sixty-five (365) consecutive calendar days.  If any question shall arise as to whether the Employee is disabled to the extent that the Employee is unable to perform substantially all of his material duties and responsibilities for the Company and its Affiliates, the Employee shall, at the Company’s request and expense, submit to a medical examination by a physician selected by the Company to whom the Employee or the Employee’s guardian, if any, has no reasonable objection to determine whether the Employee is so disabled and such determination shall for the purposes of this Agreement be conclusive of the issue.  If such a question arises and the Employee fails to submit to the requested medical examination, the Company’s determination of the issue shall be binding on the Employee.

 

5.                                       Severance Payments and Other Matters Related to Termination.

 

(a)                                  Termination pursuant to Section 4(b) or 4(c).

 

i.                                          Except as provided in Section 5(c) below, in the event of termination of the Employee’s employment either by the Company other than for Cause pursuant to Section 4(a) of this Agreement or by the Employee for Good Reason pursuant to Section 4(c) of this Agreement, (I) all unvested options, restricted stock and restricted stock units (including the IPO RSUs) in each case that were granted prior to the 2012 IPO, and which by their terms, vest only based on the passage of time (disregarding any acceleration of the vesting of such options, restricted stock or restricted stock units based on individual or Company performance) shall vest as of the date of termination (notwithstanding anything to the contrary in Section 2(b) of this Agreement) with respect to an additional six (6) months of vesting; and (II) the Company shall pay the Employee’s then-current annual base salary for a period of six (6) months in accordance with the Company’s payroll practice then in effect, beginning on the Payment Commencement Date.

 

ii.                                       If the Employee is participating in the Company’s group health plan and/or dental plan at the time the Employee’s employment terminates, and the Employee exercises his right to continue participation in those plans under the federal law known as COBRA, or any successor law, the Company will pay or, at its option, reimburse the Employee, for the full premium cost of that participation for six (6) months following the date on which the Employee’s employment with the Company terminates, or, if earlier, until the date the Employee becomes eligible to enroll in the health (or, if applicable, dental) plan of a new employer, payable in accordance with regular payroll practices for benefits beginning on the Payment Commencement Date.  The Company will also pay the Employee on the date of termination any base salary earned but not paid through the, date of termination and pay for any vacation time accrued but not used to that date.  In addition, the Company will pay the Employee any bonus which has been awarded to the Employee, but not yet paid on the date of termination of his employment, payable in a lump sum on the payment Commencement Date.

 

iii.                                    Any obligation of the Company to provide the Employee severance payments or other benefits under this Section 5(a) is conditioned on the Employee’s signing an effective and reasonable release of claims in the form provided by the Company (the “Employee Release”) within 60 days following the termination of the Employee’s employment, 

 

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which release shall not apply to (i) rights to receive insurance payments under any policy maintained by the Company and (ii) rights to receive retirement benefits that are accrued and fully vested at the time of the Employee’s termination and rights under such plans protected by ERISA.  The severance payments shall be paid or commence on the first payroll period following the date the Employee Release becomes effective, but shall be retroactive to the date of termination (the “Payment Commencement Date”).  Notwithstanding the foregoing, if the 60th day following the date of termination occurs in the calendar year following the calendar year of the termination, then the Payment Commencement Date shall be no earlier than January 1 of such subsequent calendar year.  The Employee agrees to provide the Company prompt notice of the Employee’s eligibility to participate in the health plan and, if applicable, dental plan of any employer.  The Employee further agrees to repay any overpayment of health benefit premiums made by the Company hereunder.

 

(b)                                 Termination other than pursuant to Section 4(b) or 4(c).  In the event of any termination of the Employee’s employment, other than a termination by the Company pursuant to Section 4(b) of this Agreement or a termination by the Employee for Good Reason pursuant to Section 4(c) of this Agreement, the Company will pay the Employee any base salary earned but not paid through the date of termination and pay for any vacation time accrued but not used to that date.  In addition, the Company will pay the Employee any bonus which has been awarded to the Employee, but not yet paid on the date of termination of the Employee’s employment.  The Company shall have no other obligation to the Employee under this Agreement.

 

(c)                                  Upon a Change of Control.

 

i.                                          If, within ninety (90) days prior to the Change of Control or within eighteen (18) months following a Change of Control (as defined in Section 6 hereof), the Company or any successor thereto terminates the Employee’s employment other than for Cause, or the Employee terminates his employment for Good Reason, then, in lieu of any payments to the Employee or on the Employee’s behalf under Section 5(a) hereof, (i) all unvested options, restricted stock and restricted stock units which, by their terms, vest only based on the passage of time (disregarding any acceleration of the vesting of such options, restricted stock or restricted stock units based on individual or Company performance) shall vest as of the date of termination (notwithstanding anything to the contrary in Section 2(b) of this Agreement) with respect to 100% of the unvested portion of such awards; and (ii) the Company shall pay, within thirty (30) days of such termination, a lump sum payment equal to the Employee’s then-current annual base salary for a period of six (6) months; provided, however, that if such termination occurs prior to a Change of Control, such severance payments shall be made at the time and in the manner set forth in Section 5(a)(i) during the period beginning on the date of termination through the date of the Change of Control with any severance remaining to be paid under this Section 5(c)(i) payable in a lump sum on the closing date of the Change of Control; and,

 

ii.                                       If the Employee is participating in the Company’s group health plan and/or dental plan at the time the Employee’s employment terminates (whether such termination is as described in (i) above), and the Employee exercises his right to continue participation in those plans under the federal law known as COBRA, or any successor law, the Company will pay or, at its option, reimburse the Employee, for the full premium cost of that 

 

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participation for six (6) months following the date on which the Employee’s employment with the Company terminates or, if earlier, until the date the Employee becomes eligible to enroll in the health (or, if applicable, dental) plan of a new employer, with such amount payable on a pro-rata basis in accordance with the Company’s regular payroll practices for benefits.  The Company will also pay the Employee on the date of termination any base salary earned but not paid through the, date of termination and pay for any vacation time accrued but not used to that date.  In addition, the Company will pay the Employee any bonus which has been awarded to the Employee, but not yet paid on the date of termination of his employment, payable within 30 days of the date of termination.

 

(d)                                 Except for any right the Employee may have under applicable law to continue participation in the Company’s group health and dental plans under COBRA, or any successor law, benefits shall terminate in accordance with the terms of the applicable benefit plans based on the date of termination of the Employee’s employment, without regard to any continuation of base salary or other payment to the Employee following termination.

 

(e)                                  Provisions of this Agreement shall survive any termination if so provided in this Agreement or if necessary or desirable to accomplish the purposes of other surviving provisions, including without limitation the Employee’s obligations under Section 3 of this Agreement and under the Employee Non-Solicitation, Non-Competition, Confidential Information and Inventions Assignment Agreement.  The obligation of the Company to make payments to the Employee or on the Employee’s behalf under Section 5 of this Agreement is expressly conditioned upon the Employee’s continued full performance of the Employee’s obligations under Section 3 hereof, under the Employee Non-Solicitation, Non-Competition, Confidential Information and Inventions Assignment Agreement to be executed herewith, and under any subsequent agreement between the Employee and the Company or any of its Affiliates relating to confidentiality, non-competition, proprietary information or the like.

 

6.                                       Definitions.  For purposes of this agreement; the following definitions apply:

 

“Affiliates” means all persons and entities directly or indirectly controlling, controlled by or under common control with the Company, where control may be by management authority, equity interest or otherwise.

 

“Change of Control” shall mean (i) the acquisition of beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) directly or indirectly by any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), of securities of the Company representing a majority or more of the combined voting power of the Company’s then outstanding securities, other than an acquisition of securities for investment purposes pursuant to a bona fide financing of the Company; (ii) a merger or consolidation of the Company with any other corporation in which the holders of the voting securities of the Company prior to the merger or consolidation do not own more than 50% of the total voting securities of the surviving corporation; or (iii) the sale or disposition by the Company of all or substantially all of the Company’s assets other than a sale or disposition of assets to an Affiliate of the Company or a holder of securities of the Company; notwithstanding the foregoing, no transaction or series of transactions shall constitute a Change of Control unless such transaction or series of transactions constitutes a “change in control event” within the meaning of Treasury Regulation Section 1.409A-3(i)(5)(i).

 

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“Person” means an individual, a corporation, an association, a partnership, an estate, a trust and any other entity or organization, other than the Company or any of its Affiliates.

 

7.                                       Conflicting Agreements.  The Employee hereby represents and warrants that his signing of this Agreement and the performance of his obligations under it will not breach or be in conflict with any other agreement to which the Employee is a party or is bound and that the Employee is not now subject to any covenants against competition or similar covenants or any court order that could affect the performance of the Employee’s obligations under this Agreement.  The Employee agrees that he will not disclose to or use on behalf of the Company any proprietary information of a third party without that party’s consent.

 

8.                                       Withholding; Other Tax Matters.  Anything to the contrary notwithstanding, (a) all payments required to be made by the Company hereunder to Employee shall be subject to the withholding of such amounts, if any, relating to tax and other payroll deductions as the Company may reasonably determine it should withhold pursuant to any applicable law or regulation, and (b) all severance payments and benefits payable pursuant to Sections 5(a) and 5(c) hereof shall be subject to the terms and conditions set forth on Exhibit A attached hereto.

 

9.                                       Assignment.  Neither the Employee nor the Company may make any assignment of this Agreement or any interest in it, by operation of law or otherwise, without the prior written consent of the other; provided, however, that the Company may assign its rights and obligations under this Agreement without the Employee’s consent to one of its Affiliates or to any Person with whom the Company shall hereafter affect a reorganization, consolidate with, or merge into or to whom it transfers all or substantially all of its properties or assets.  This Agreement shall inure to the benefit of and be binding upon the Employee and the Company, and each of our respective successors, executors, administrators, heirs and permitted assigns.

 

10.                                 Severability.  If any portion or provision of this Agreement shall to any extent be declared illegal or unenforceable by a court of competent jurisdiction, then the remainder of this Agreement, or the application of such portion or provision in circumstances other than those as to which it is so declared illegal or unenforceable, shall not be affected thereby, and each portion and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.

 

11.                                 Miscellaneous.  This Agreement, together with the Employee Non-Solicitation, Non-Competition, Confidential Information and Inventions Assignment Agreement, sets forth the entire agreement between the Employee and the Company and replaces all prior communications, agreements and understandings, written or oral, with respect to the terms and conditions of the Employee’s employment.  This Agreement may not be modified or amended, and no breach shall be deemed to be waived, unless agreed to in writing by the Employee and an expressly authorized representative of the Board.  The headings and captions in this Agreement are for convenience only and in no way define or describe the scope or content of any provision of this Agreement.  This Agreement may be executed in two or more counterparts, each of which shall be an original and all of which together shall constitute one and the same instrument.  This is a Massachusetts contract and shall be governed and construed in accordance with the laws of the Commonwealth of Massachusetts, without regard to the conflict-of-laws principles thereof.

 

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12.                                 Notices.  Any notices provided for in this Agreement shall be in writing and shall be effective when delivered in person, consigned to a reputable national courier service for overnight delivery or deposited in the United States mail, postage prepaid, and addressed to the Employee at the Employee’s last known address on the books of the Company or, in the case of the Company, to it by notice to the Chairman of the Board of Directors, c/o Verastem, Inc. at its principal place of business, or to such other addressees) as either party may specify by notice to the other actually received.

 

[Remainder of page intentionally left blank.]

 

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IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument by the Company, by its duly authorized representative, and by the Employee, as of the date first stated above.

 

	
THE   EXECUTIVE
    	
 
    	
THE   COMPANY
    
	
 
    	
 
    	
 
    
	
/s/   Paul Brannelly
    	
 
    	
/s/   Robert Forrester
    
	
Paul   Brannelly
    	
 
    	
Robert   Forrester
    
	
 
    	
 
    	
Chief   Operating Officer
    

 

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Exhibit A

 

Payments Subject to Section 409A

 

1.                                       Subject to this Exhibit A, any severance payments that may be due under the Agreement shall begin only upon the date of the Employee’s “separation from service” (determined as set forth below) which occurs on or after the termination of Employee’s employment.  The following rules shall apply with respect to distribution of the severance payments, if any, to be provided to Employee under the Agreement, as applicable:

 

(a)                                   It is intended that each installment of the severance payments under the Agreement provided under shall be treated as a separate “payment” for purposes of Section 409A.  Neither the Company nor Employee shall have the right to accelerate or defer the delivery of any such payments except to the extent specifically permitted or required by Section 409A.

 

(b)                                  If, as of the date of Employee’s “separation from service” from the Company, Employee is not a “specified employee” (within the meaning of Section 409A), then each installment of the severance payments shall be made on the dates and terms set forth in the Agreement.

 

(c)                                   If, as of the date of Employee’s “separation from service” from the Company, Employee is a “specified employee” (within the meaning of Section 409A), then:

 

(i)                                        Each installment of the severance payments due under the Agreement that, in accordance with the dates and terms set forth herein, will in all circumstances, regardless of when Employee’s 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 shall be paid on the dates and terms set forth in the Agreement; and

 

(ii)                                     Each installment of the severance payments due under the Agreement that is not described in this Exhibit A, Section 1(c)(i) and that would, absent this subsection, be paid within the six-month period following Employee’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, Employee’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 Employee’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 payments 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 

 

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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 Employee’s second taxable year following the taxable year in which the separation from service occurs.

 

2.                                       The determination of whether and when Employee’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 Exhibit A, Section 2, “Company” shall include all persons with whom the Company would be considered a single employer under Section 414(b) and 414(c) of the Code.

 

3.                                       The Company makes no representation or warranty and shall have no liability to Employee or to any other person if any of the provisions of the Agreement (including this Exhibit) are determined to constitute deferred compensation subject to Section 409A but that do not satisfy an exemption from, or the conditions of, that section.

 

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