Document:

Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement
(the “Agreement”) is made and entered into, effective as of March 10, 2021 (the “Effective Date”)
by and between National Rural Utilities Cooperative Finance Corporation, a District of Columbia cooperative corporation (“CFC”),
and J. Andrew Don (the “Executive”).

 

WHEREAS,
CFC desires to retain the Executive as its Governor and Chief Executive Officer under this Agreement for the period provided for
in this Agreement, and the Executive is willing to serve in the employ of CFC on a full-time basis for such period, upon such terms
and conditions as are provided herein;

 

NOW,
THEREFORE, in consideration of the premises and mutual covenants herein contained and for other good and valuable consideration,
the parties hereby agree as follows:

 

1.            Employment.
Subject to and upon the terms and conditions herein provided, CFC hereby agrees to employ the Executive, and the Executive hereby
agrees to be employed by CFC for the Term of Employment, as defined in Section 3 hereof.

 

2.            Position
and Responsibilities. During the Term of Employment, the Executive shall be employed as the Governor and Chief Executive Officer
of CFC, and/or in such other senior executive capacity or capacities as may be mutually satisfactory to the Executive and CFC.
The Executive will be the senior executive officer of CFC, reporting only to the Board of Directors of CFC (the “Board”),
and all other officers of CFC shall report to the Executive or to other officers designated by the Executive. The Executive shall,
at the request of the Board, serve as an officer or director of any Affiliate of CFC.

 

During the Term of
Employment, the Executive agrees to devote substantially all of his business time and attention to carrying out his duties and
responsibilities under this Agreement and shall use his best efforts, skills, and abilities to further the interests of CFC. The
Executive shall be permitted, to the extent such activities do not substantially interfere with the performance of the Executive’s
responsibilities and duties hereunder, (i) to manage his personal, financial, and legal affairs and (ii) to serve on
civic, charitable, religious, or educational boards or committees. However, the Executive may not serve on the board of directors
of any other business entities without the prior express written consent of the Board and subject to such reasonable limitations
as may be imposed by the Board in granting such consent.

 

3.            Term
of Employment. The Executive’s employment under this Agreement shall commence as of May 3, 2021 and, unless earlier
terminated as provided in Section 6 below, shall terminate on May 31, 2024 (the “Initial Term of Employment”)
unless extended as provided in the following sentence. The Initial Term of Employment shall automatically be extended on June 1,
2024 and each subsequent June 1st thereafter for an additional year (unless earlier terminated as provided in Section 6
below) (each such extension, an “Extended Term of Employment”) unless, not later than six (6) months prior
to any such June 1st, either party to this Agreement shall have given written notice to the other party that he or it does
not wish to extend or further extend the Term of Employment. For purposes of this Agreement, “Term of Employment”
shall mean the Initial Term of Employment and, if applicable, each subsequent Extended Term of Employment.

 

     

     

    

 

4.            Compensation.
For all services rendered by the Executive during the Term of Employment, CFC shall pay the Executive as compensation (i) a
base salary, in periodic installments in accordance with CFC’s usual payroll practice for its senior executives, at an annual
rate of no less than $1,000,000 (the “Base Salary”), and (ii) if the applicable performance goals and/or
other criteria are achieved with respect thereto, an opportunity to receive (A) an annual incentive (the “Short-Term
Incentive”) pursuant to the terms set forth in the CFC Annual Incentive Plan and (B) a long-term incentive (the
 “Long-Term Incentive”) pursuant to the terms of the CFC Long Term Incentive Plan. During the Term of Employment,
the Executive’s Base Salary shall be reviewed for possible increase at least annually, and the term “Base Salary”
shall thereafter refer to the Base Salary as so increased.

 

5.            Executive
Benefits, Perquisites, and Expenses.

 

5.1          CFC
Plans. The Executive shall be entitled to participate in all CFC health, accident, life insurance, savings, retirement, disability,
and other benefit plans, programs, or practices from time to time in effect for senior executives of CFC at least to the same extent
as other senior executives of CFC.

 

5.2          Vacation.
During the Term of Employment, the Executive shall be entitled to accrue and utilize vacation in accordance with CFC’s standard
employment policies, as they may exist and be amended from time to time.

 

6.            Termination
of Employment; Payments Upon Termination of Employment.

 

6.1.          Termination
by CFC.

 

a.            CFC
shall have the right to terminate the Executive’s employment at any time during the Term of Employment with or without “Cause,”
as such term is defined in Section 6.4.a. If, during the Term of Employment, CFC terminates the employment of the Executive
under this Section 6 without Cause, the Term of Employment shall terminate immediately thereafter, and:

 

		i.	CFC shall pay the Executive such Base Salary provided herein as he may be entitled to receive for
services rendered prior to the date of such termination;

 

		ii.	CFC shall pay the Executive for any accrued but unused vacation to the extent payout is required
by applicable law or CFC policy and for any properly-documented unreimbursed expenses;

 

		iii.	CFC shall pay the Executive the benefits which the Executive is, or may become, entitled to receive
under the terms and conditions of any applicable CFC plans that may be in effect at such time; and

 

		iv.	CFC shall pay the Executive, in substantially
equal monthly installments over the twelve (12) month period following the termination of Executive’s employment, an amount
equal to two (2) times the sum of (1) his annual Base Salary at the rate in effect on the date of such termination, and
(2) the Executive’s Short-Term Incentive award earned, if any, for the year prior to the year in which such termination
occurs (collectively, the “Severance Benefits”), provided that provision of the Severance Benefits is
contingent upon the Executive, within sixty (60) days of the date of termination, executing and delivering to CFC, and allowing
to become irrevocable and effective, a general release of claims in a form acceptable to CFC (the “Release”).
Notwithstanding the foregoing and anything in this Agreement to the contrary, (i) no Severance Benefits shall be paid until
the Release has become irrevocable and effective and the first paid installment of Severance Benefits shall include any Severance
Benefits that would have been paid had there been no delay in such payments, and (ii) payment of the Severance Benefits will
be contingent upon Executive’s full and continued compliance with the provisions of Section 8 of this Agreement.

 

     

     

    

 

For the avoidance of doubt, Executive’s
termination of employment due to the expiration of the Term as a result of notice of non-renewal pursuant to Section 3
shall not be a termination by CFC without Cause for purposes of this Agreement.

 

b.            If,
during the Term of Employment, CFC terminates the employment of the Executive for Cause, the Term of Employment shall terminate
immediately thereafter, and CFC shall pay the Executive such compensation as is set forth in Sections 6.1.a.i, 6.1.a.ii,
and 6.1.a.iii (the “Accrued Payments and Benefits”) herein. Similarly, if the Term of Employment ends
due to non-renewal pursuant to Section 3, CFC shall pay the Executive the Accrued Payments and Benefits.

 

6.2.          Termination
by the Executive.

 

a.            The
Executive has the right to terminate his employment hereunder at any time during the Term of Employment, with or without “Good
Reason.”

 

b.            Notwithstanding
anything in this Section 6.2, to terminate Executive’s employment for “Good Reason” as defined in Section 6.4.b,
(x) the Executive must provide written notice to the Board within thirty (30) days after Executive learns of any such
matter constituting Good Reason, specifying the basis for the existence of Good Reason and the relevant facts and circumstances
in reasonable detail, (y) CFC shall have thirty (30) days after receipt of written notice from the Executive specifying the
matter constituting Good Reason to cure such matter, and such Good Reason shall not exist unless CFC fails to cure such matter
within such cure period, and (z) the Executive must actually terminate the Executive’s employment within thirty (30)
days following the expiration of such cure period.

 

c.            If
during the Term of Employment the Executive validly terminates Executive’s employment for Good Reason, the Term of Employment
shall terminate as of the effectiveness of such termination, and CFC shall, subject to the requirements related to the effectiveness
of the Release, pay the Executive such compensation as is set forth in Section 6.1.a.

 

     

     

    

 

d.            If
during the Term of Employment the Executive terminates his employment other than for Good Reason, the Term of Employment shall
terminate immediately thereafter, and CFC shall pay the Executive the Accrued Payments and Benefits.

 

6.3.          Death
or Disability. In the event of the termination of the Executive’s employment by reason of death or Disability, as defined
in Section 6.4.c during the Term of Employment (upon which death or termination due to Disability the Term of Employment
shall terminate immediately thereafter), the Executive or the Executive’s “Designated Beneficiary,” as defined
in Section 6.4.d, shall be entitled to receive:

 

a.            payment
of the Executive’s unpaid Base Salary through the date of death or termination due to Disability;

 

b.            payment
of a pro-rated Short-Term Incentive and Long-Term Incentive, if any, to be paid in accordance with the provisions of CFC’s
Annual Incentive Plan and Long-Term Incentive Plan;

 

c.            a
lump sum payment equal to one year’s Base Salary at the rate in effect on the date of death or termination due to Disability,
payable within thirty (30) days of Executive’s termination due to death or Disability;

 

d.            reimbursement
for any properly-documented, unreimbursed expenses; and

 

e.            such
survivor benefits and payments for the Executive’s family or with respect to the Executive that are provided, or may be provided,
under CFC’s plans described in Section 5.1, determined in accordance with the then-applicable provisions of such
plans, programs, or arrangements.

 

6.4          Definitions.

 

a.            Cause.
For purposes of this Agreement, Cause shall mean the Executive’s (i) material failure to observe and comply with any
of CFC’s material written policies, including without limitation its policies prohibiting harassment (sexual or otherwise)
and discrimination; (ii) continued failure to substantially perform the Executive’s material duties with CFC (other
than any failure due to Executive’s physical or mental illness, incapacity or disability) which is not cured within thirty
(30) calendar days after receipt by the Executive of written notice of such failure; (iii) willful failure to carry out, or
comply with, in any material respect any lawful and reasonable written directive of the Board; (iv) commission of any act
or omission that results in an indictment, charge, conviction, plea of no contest or imposition of unadjudicated probation for
any felony or any crime involving moral turpitude; or (v) material or willful breach of this Agreement.

 

b.            Good
Reason. For purposes of this Agreement, Good Reason shall mean, without the prior written consent of the Executive, (i) a
reduction in the rate of the Executive’s Base Salary other than a reduction that is of the same relative magnitude as a percentage
of Base Salary as applies to other executive officers of CFC, (ii) a material decrease in the Executive’s titles, duties,
or responsibilities hereunder, or (iii) the relocation of CFC’s principal office or the relocation of the Executive
to a location more than fifty (50) miles from the principal office of CFC on the date of this Agreement.

 

     

     

    

 

c.            Disability.
For purposes of this Agreement, Disability shall mean that the Executive has not performed his full-time duties with CFC for three
(3) consecutive months as a result of his incapacity due to physical or mental illness and after such three (3) consecutive
months, CFC has provided written notice to Executive of its intent to terminate Executive’s employment and Executive shall
not have returned to the full-time performance of his duties hereunder within thirty (30) days after receipt of such written notice.

 

d.            Designated
Beneficiary. For purposes of this Agreement, the Designated Beneficiary shall be any person designated by the Executive in
a written instrument signed by the Executive and delivered to CFC to be the beneficiary of payments to be made by CFC hereunder
upon the death of the Executive, if such person survives the Executive. Any Designated Beneficiary may be changed by the Executive
at any time and from time to time by a written instrument signed by the Executive and delivered to CFC. If no Designated Beneficiary
survives the Executive, the Designated Beneficiary shall be the estate of the Executive.

 

7.            No
Mitigation. CFC agrees that if the Executive’s employment is terminated during the Term of Employment, the Executive
is not required to seek other employment or to attempt in any way to reduce the amounts payable and the benefits to be provided
to the Executive by CFC under this Agreement. Further, the amount or nature of any such payment or benefit to be paid to or with
respect to the Executive shall not be reduced by any compensation earned by the Executive as a result of employment by another
employer, or by retirement benefits.

 

8.            Restrictive
Covenants.

 

8.1.         Acknowledgment.
The Executive understands and agrees that the Executive will occupy a position of trust and confidence with respect to CFC’s
business affairs, and the Executive will be privy to non-public information relating to CFC and its Affiliates (defined below)
and CFC’s members, associates and patrons and all information obtained from CFC’s members, associates and patrons,
including, without limitation, their business relationships; negotiations; past, present and prospective activities; methods of
doing business; business models; know-how; trade secrets; member, associate and supplier lists; the identity of potential members
and patrons; pricing models, services, policies and procedures; compensation structure; strategic plans; employment records; product
development technique; internal management structure; philosophies and strategies; budgets; marketing plans; financial and technical
information; discoveries; ideas; designs; drawings; specifications; techniques; programs; systems; processes; models; data; documentation;
formulae; products, services; computer software; supplier and service provider information; other information generally regarded
as confidential and proprietary; other information marked as confidential or proprietary or that would otherwise appear to a reasonable
person to be confidential or proprietary; information of third parties to which CFC or its Affiliates have confidentiality obligations
and use restrictions; and all forms of the foregoing information, as well as modifications, enhancements, and improvements to any
of the foregoing, including in digital, physical, tangible, and intangible form (hereinafter collectively referred to as the “Confidential
Information”). Notwithstanding the foregoing, it is agreed that Confidential Information does not include information
regarding the Executive’s own compensation and benefits or information that became generally available to the public other
than as a result of a direct or indirect disclosure by the Executive or a representative of the Executive in violation of this
Agreement. The Executive agrees that the following obligations are necessary to preserve the confidential and proprietary nature
of Confidential Information (including trade secrets), to protect the goodwill of CFC and its Affiliates, and to protect CFC and
its Affiliates against harmful competition, harmful solicitation of employees, and other actions by the Executive based on the
Executive’s special knowledge acquired during employment that would result in serious adverse consequences for CFC and its
Affiliates. “Affiliates” as used in this Agreement includes any person, corporation, partnership, general partner,
or other entity that directly, or indirectly through one or more intermediaries, controls or is controlled by or is under common
control with CFC.

 

     

     

    

 

8.2.         Confidentiality.
The Executive shall not, except as may be required to perform the Executive’s duties hereunder or as required by applicable
law, during the Executive’s employment with CFC and after it ends (regardless of the reason), without limitation in time
or until such information shall have become public other than by the Executive’s unauthorized disclosure, disclose to any
third party or use for the Executive’s benefit or the benefit of any third party, whether directly or indirectly, any Confidential
Information without CFC’s specific prior written authorization. The Executive shall also hold Confidential Information in
the strictest confidence and take all reasonable precautions to prevent any unauthorized use or disclosure. The Executive shall
not at any time copy, transmit, reproduce, summarize, or quote or make any commercial or any other use whatsoever of any Confidential
Information, except as may be necessary to perform the Executive’s duties as an employee of CFC. The Executive agrees that,
as between the Executive and CFC, Confidential Information is property of CFC.

 

8.3.         Notification
and Assistance Obligations; Subpoena. The Executive shall at all times: (i) promptly notify CFC of any unauthorized
use or disclosure of Confidential Information, or any other breach of this Agreement; and (ii) assist CFC in every reasonable
way to retrieve any Confidential Information that was used or disclosed by the Executive or any representative of the Executive
in a manner inconsistent with this Section 8, and to mitigate the harm caused by the unauthorized use or disclosure.
Further, if the Executive is served with any subpoena or other compulsory judicial or administrative process calling for production
of any Confidential Information, the Executive shall immediately notify CFC so that CFC may take such action as CFC deems necessary
to protect its interests.

 

8.4.         Return
of Property. The Executive acknowledges that all Confidential Information is specialized, unique in nature, and of great value
to CFC and its Affiliates, and that such Confidential Information gives CFC and its Affiliates a competitive advantage. The Executive
agrees to deliver or return to CFC, at CFC’s request at any time or upon termination of the Executive’s employment
for any reason, all Confidential Information and all CFC property, including any and all documents, disks/drives, laptops, tablets,
phones, passwords and credentials, records, lists, data, drawings, prints, notes and written or recorded information (and all copies
thereof) furnished by or on behalf of or for the benefit of CFC and its Affiliates or prepared by the Executive during the Executive’s
employment with CFC, whether in tangible or electronic form, in the possession or control of the Executive.

 

     

     

    

 

8.5.          Non-Competition.
During the period commencing on the Effective Date and ending twelve (12) months after the end of the Employment Period (regardless
of the reason the Employment Period has ended) (such period hereinafter, the “Restricted Period”), the Executive
shall not, anywhere in the United States, directly or indirectly have any equity interest in, manage, operate, control, work for,
provide services to, be employed by, advise, assist, or take similar action in connection with any person, firm, corporation, partnership,
business, or other entity (whether as director, officer, employee, agent, representative, partner, security holder, consultant,
advisor, or otherwise), that engages, in a manner and to an extent materially competitive to CFC, in any aspect of its business
(the “Business”), where the Executive’s action or involvement relates to the activities and services the
Executive provided during the Executive’s employment with CFC. Notwithstanding the foregoing, the Executive may own, as a
passive investor, securities of any publicly-traded entity, so long as the Executive’s direct holdings in any such entity
shall not in the aggregate constitute more than 5% of the voting power of such entity and the Executive is not a controlling person
of, or a member of a group that controls, such entity.

 

8.6.          Non-Solicitation
of Customers. During the Restricted Period, the Executive shall not, on behalf of the Executive or any other individual or
entity, (i) solicit or encourage any person or entity who was a member or patron of CFC or its Affiliates during the Executive’s
employment and with whom Executive had contact or about whom Executive gained Confidential Information to: (A) terminate,
reduce, or alter in a manner adverse to CFC or its Affiliates any existing business arrangements with CFC or its Affiliates, or
(B) transfer existing business from CFC or its Affiliates to any other person or entity; or (ii) solicit any person or
entity who was a member or patron of CFC or its Affiliates during the Executive’s employment and with whom Executive had
contact or about whom Executive gained Confidential Information for the purpose of providing such person or entity with financial
or other services competitive with or similar to the financial or other services provided by CFC or its Affiliates.

 

8.7.          Non-Solicitation
of Employees, Consultants, and Advisors. The Executive agrees that, during the Restricted Period, the Executive will not, directly
or indirectly, other than as an employee of and for the benefit of CFC or its Affiliates, solicit, entice, persuade, or induce
any individual who is employed by CFC or its Affiliates or engaged by CFC or its Affiliates as a consultant or advisor or similar
role (or who was so employed or engaged within six (6) months prior to the Executive’s action) to terminate or refrain
from continuing such employment or engagement, when such action is taken for the purpose of competing with CFC.

 

8.8.          Intellectual
Property. The Executive shall disclose promptly and in writing to CFC all inventions, creative works, and any other intellectual
property, whether or not patentable or copyrightable, conceived, or created solely or jointly by the Executive during the Executive’s
employment with CFC which relate to the business of CFC, and the Executive shall assign all of the Executive’s interest in
them to CFC. These obligations shall continue beyond the period of the Executive’s employment with respect to inventions
or creations conceived or made by the Executive alone or in conjunction with other employees or consultants of CFC or its Affiliates
during the Executive’s employment with CFC.

 

8.9.          Remedies.
In the event of a breach or threatened breach of this Section 8, the Executive acknowledges CFC, including its business
interests, will be irreparably harmed, the full extent of the damages to CFC will be impossible to ascertain, and monetary damages
alone are not an adequate remedy. Accordingly, the Executive agrees that in addition to any other remedy that may be available
to it, CFC shall be entitled to temporary, preliminary, and/or permanent injunctive relief or other equitable relief to remedy
any such breach or threatened breach, without bond and without proving actual damages or the inadequacy of money damages, in any
court of competent jurisdiction. The Executive agrees that the restrictions of this Agreement are reasonable and no broader than
necessary to protect the legitimate business interests of CFC and its Affiliates.

 

     

     

    

 

8.10.       Survival
of Provisions. For the avoidance of doubt, the Executive’s obligations contained in this Section 8 shall
survive the termination or expiration of the Employment Period and the Executive’s employment with CFC and, as applicable,
shall be fully enforceable thereafter in accordance with the terms of this Agreement.

 

8.11.       Reformation
and Severability. If it is determined by a court, arbitrator, or other adjudicator of competent jurisdiction that any restriction
in this Section 8 is excessive with respect to geographic area, duration, or scope or is otherwise unreasonable or
unenforceable, it is the intention of the parties that such restriction may be modified or amended by the court, arbitrator, or
adjudicator to render it enforceable to the maximum extent permitted by law. In the event that modification is not possible or
that the applicable law does not permit such reformation, then the Executive and CFC agree that, because each of the Executive’s
obligations in this Section 8 is a separate and independent covenant, any unenforceable obligation shall be severed
and all remaining obligations shall be enforced.

 

8.12.       Tolling
of Restricted Period. If the Executive violates the terms of any of the restrictions set forth in Sections 8.5, 8.6, or
8.7, the Restricted Period shall automatically be extended by the period the Executive was in violation.

 

8.13.        Post-Employment
Cooperation. Upon or after the termination of the Executive’s employment for any reason, the Executive agrees to (i) immediately
resign from any and all positions the Executive holds with CFC or its Affiliates, including any board seat(s), and any other positions
or other boards of directors on which Executive serves by virtue of being an Executive of CFC; (ii) cooperate with the transition
of the Executive’s responsibilities, and comply with reasonable post-employment requests from CFC, not to exceed twenty (20)
hours in the aggregate, including responding to reasonable requests for information and assisting in connection with pending, threatened,
or anticipated litigations, proceedings, or inquiries where CFC reasonably determines the Executive’s participation is necessary,
provided, however, that any such cooperation shall take into account the Executive’s other scheduling needs and, to the extent
Executive incurs reasonable expenses in connection with such cooperation, CFC shall promptly reimburse Executive for such expenses.
To the extent CFC requires transition assistance in excess of twenty (20) hours, Executive shall be paid an hourly rate commensurate
with Executive’s rate of pay as of Executive’s termination of employment.

 

8.14.       Rights
Not Subject to Limitation.

 

a.            Notwithstanding
anything in this Agreement, the Executive may (1) disclose Confidential Information that the Executive is specifically required
by court order, subpoena, or law to disclose, but agrees to disclose only that portion of Confidential Information that is legally
required to be disclosed; (2) report possible violations of law to a government agency or entity or self-regulatory organization
or cooperating with such agency or entity or organization; or (3) make whistleblower or other disclosures that are protected
under whistleblower provisions of federal or state law.

 

     

     

    

 

b.            The
Executive understands that the Executive will not be held criminally or civilly liable under any federal or state trade secret
law for the disclosure of a trade secret that (1) is made (x) in confidence to a federal, state, or local government
official, either directly or indirectly, or to an attorney; and (y) solely for the purpose of reporting or investigating a
suspected violation of law; or (2) is made in a complaint or other document filed in a lawsuit or other proceeding, if such
filing is made under seal. Additionally, an individual suing an employer for retaliation based on the reporting of a suspected
violation of law may disclose a trade secret to his or her attorney and use the trade secret information in the court proceeding,
so long as any document containing the trade secret is filed under seal and the individual does not disclose the trade secret except
pursuant to court order.

 

9.            Indemnification.
CFC agrees that if the Executive is made, or is threatened to be made, a party to any action or proceeding, whether civil or criminal,
by reason of the fact that he is or was a director or officer of CFC or any of its subsidiaries or, at the request of CFC, serves
or served any other corporation, partnership, joint venture, trust, or other enterprise in any capacity, CFC shall indemnify him
to the fullest extent permitted by the Charter and By-Laws of CFC or, if greater, by the applicable laws of the District of Columbia,
against all costs, expenses, liabilities, and losses reasonably incurred or suffered by the Executive in connection therewith.
CFC shall advance to the Executive all reasonable costs and expenses incurred by him in connection with any such proceeding upon
receipt of an itemized list of such costs and expenses.

 

10.          Remedies.

 

a.            Clawback
Policies. In addition to any other remedies provided in this Section 10, all amounts payable under this Agreement
are subject to any policy, whether in existence as of the Effective Date or later adopted, established by CFC that provides for
the clawback, recoupment or other recovery of amounts that were previously paid to Executive in accordance with and pursuant to
the terms and conditions of such policy. Without limiting the generality of the foregoing, in the event that CFC is required to
prepare restated financial results owing to the Executive’s intentional misconduct or grossly negligent conduct, the Board
(or a designated committee) shall have the authority, to the extent permitted by applicable law (including Virginia law), to require
reimbursement or forfeiture to CFC of the amount of bonus or incentive compensation Executive received during the three fiscal
years preceding the year the restatement is determined to be required, to the extent that such bonus or incentive compensation
exceeds what the Executive would have received based on an applicable restated performance measure or target.

 

b.            Further,
notwithstanding any other provisions of this Agreement, if within one year of the termination of Executive’s employment,
CFC becomes aware of facts that would have allowed CFC to terminate Executive’s employment for Cause, then, to the extent
permitted by law, CFC may elect to cancel any and all payments of benefits otherwise due to Executive, but not yet paid, under
this Agreement or otherwise; and Executive will refund to CFC any amounts previously paid by CFC to Executive in excess of Executive’s
Accrued Payments and Benefits.

 

     

     

    

 

11.          Amendment;
Waiver. This Agreement contains the entire agreement of the parties with respect to the matters set forth herein and may only
be amended by subsequent written agreement of the parties hereto. All prior agreements between the Executive and CFC, whether in
writing or not, relating to terms and conditions of employment, are hereby canceled and superseded. No waiver by CFC of any breach
by the Executive of any term, condition, or provision of this Agreement to be performed by the Executive shall be deemed a waiver
of a similar or dissimilar condition or provision at the same or prior or subsequent time.

 

12.          Binding
Effect. The Executive’s rights and obligations under this Agreement shall not be transferable by assignment or otherwise,
such rights shall not be subject to commutation, encumbrance, or the claims of the Executive’s creditors, and any attempt
to do any of the foregoing shall be null and void. The provisions of this Agreement shall be binding upon and inure to the benefit
of the Executive and his heirs, beneficiaries, and personal representatives and shall be binding upon and inure to the benefit
of CFC and its successors or assigns.

 

13.          Governing
Law; Severability. Except as otherwise set forth herein, this Agreement is governed by and is to be construed and enforced
in accordance with the laws of the Commonwealth of Virginia, without regard to principles of conflicts of law. If any provision
or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, in whole or in part, the remaining
provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted
by law.

 

14.          Withholding
of Taxes. CFC may withhold from any compensation payable under this Agreement all federal, state, city, or other taxes as shall
be required pursuant to any law, regulation, or ruling.

 

15.          Counterparts.
This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together
will constitute one and the same instrument. In the event that any signature is delivered via e-mail transmission, such signature
shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same
force and effect as if such digital signature page were an original signature.

 

16.          Headings;
Interpretation. The headings contained in this Agreement are for reference purposes only and shall not be deemed to be part
of the Agreement or to affect the meaning or interpretation of this Agreement. Each party acknowledges that it has had the opportunity
to be represented by counsel in connection with this Agreement. Any rule of law or any legal decision that would require interpretation
of any claimed ambiguities in this Agreement against the party that drafted it has no application and is expressly waived.

 

17.          Notices.
Any notice given to either party hereto shall be in writing and shall be deemed to have been given when delivered personally or
sent by certified or registered mail, postage prepaid, return receipt requested, duly and properly addressed to the party concerned
at the address indicated below or to such changed address as party may subsequently give notice of:

 

     

     

    

 

If to CFC:

 

National Rural Utilities

Cooperative Finance
Corporation

20701 Cooperative
Way

Dulles, VA 20166

Attn: President of
the Board of Directors

 

If to the Executive:

 

J. Andrew Don

8308 Summerwood Drive

McLeon, VA 22102-2212

 

18.          Enforcement
of Agreement. The respective rights and obligations of the parties hereunder shall survive any termination of this Agreement
or the Term of Employment for any reason to the extent necessary to obtain the intended provision of such rights and the intended
performance of such obligations.

 

19.          Arbitration.
CFC and the Executive agree that any dispute arising out of or relating to their relationship, this Agreement, or the Executive’s
employment, other than with respect to Section 8 hereof, shall be resolved exclusively by confidential and binding
arbitration in accordance with the rules of JAMS for resolution of employment disputes then in effect. The parties shall bear
their own attorneys’, experts and other fees and CFC shall bear the cost of the arbitrator. The arbitration proceedings,
any record of the same, and the award shall be considered Confidential Information under this Agreement. Judgment upon the arbitrator’s
award may be entered in any court of competent jurisdiction.

 

20.          Section 409A.

 

a.            Anything
in this Agreement to the contrary notwithstanding, if at the time of the Executive’s separation from service within the meaning
of Section 409A of the Internal Revenue Code (“Code”), CFC determines that the Executive is a “specified
employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code, then to the extent any payment or benefit
that the Executive becomes entitled to under this Agreement on account of the Executive’s separation from service would be
considered deferred compensation subject to the 20 percent additional tax imposed pursuant to Section 409A(a) of the
Code as a result of the application of Section 409A(a)(2)(B)(i) of the Code, such payment shall not be payable and such
benefit shall not be provided until the date that is the earlier of (A) six months and one day after the Executive’s
separation from service, or (B) the Executive’s death. If any such delayed cash payment is otherwise payable on an installment
basis, the first payment shall include a catch-up payment covering amounts that would otherwise have been paid during the six-month
period but for the application of this provision, and the balance of the installments shall be payable in accordance with their
original schedule.

 

b.            The
parties intend that this Agreement will be administered in accordance with Section 409A of the Code. To the extent that any
provision of this Agreement is ambiguous as to its compliance with Section 409A of the Code, the provision shall be read in
such a manner so that all payments hereunder comply with Section 409A of the Code. The parties agree that this Agreement may
be amended, as reasonably requested by either party, and as may be necessary to fully comply with Section 409A of the Code
and all related rules and regulations in order to preserve the payments and benefits provided hereunder without additional
cost to either party.

 

     

     

    

 

c.            For
purposes of any payments to be made to Executive upon separation from service or termination of employment, the determination of
whether and when a separation from service has occurred shall be made by CFC in accordance with the presumptions set forth in Treasury
Regulation Section 1.409A-1(h).

 

d.            All
reimbursements and in kind benefits provided under this Agreement shall be made or provided in accordance with the requirements
of Section 409A of the Code, including, where applicable, the requirement that (i) the amount of expenses eligible for
reimbursement, or in kind benefits provided, during a calendar year may not affect the expenses eligible for reimbursement, or
in kind benefits to be provided, in any other calendar year, (ii) 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 (iii) the right to reimbursement
or in kind benefits is not subject to liquidation or exchange for another benefit.

 

21.          No
Violation of Third Party Rights. The Executive hereby represents, warrants, and covenants to CFC that the Executive: (a) shall
not, during the Executive’s employment with CFC, infringe upon or violate any proprietary rights of any third party (including,
without limitation, any third party confidential relationships, patents, copyrights, trade secrets or other proprietary rights);
(b) is not a party to any agreements with third parties that prevent the Executive from fulfilling the terms of employment
and the obligations of this Agreement or which would be breached as a result of the Executive’s execution of this Agreement;
and (c) agrees to respect any and all valid obligations which the Executive may now have to prior employers or to others relating
to confidential information, inventions or discoveries which are the property of those prior employers or others, as the case may
he. If the Executive is in breach of any of the foregoing representations, warranties, and covenants, CFC may immediately terminate
this Agreement and treat the Executive as if the Executive were terminated for Cause.

 

     

     

    

 

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

 

	 	NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
	 	 
	 	 
	 	By:	/s/ Alan Wattles
	 	Name:	Alan Wattles
	 	Title:	Board President
	 	 
	 	 
	 	By:	/s/ J. Andrew Don
	 	 	J. Andrew Don

 

Signature Page to Employment Agreementspro-ex108_148.htm

Exhibit 10.8

 

EXECUTIVE EMPLOYMENT AGREEMENT

This Executive Employment Agreement (this “Agreement”) is made and entered into this 9th day of December, 2020 (the “Effective Date”) by and between Spero Therapeutics, Inc., a Delaware corporation (“Company”), and Satyavrat Shukla (“Executive”). 

WHEREAS, Executive and Company desire to set forth the terms and conditions for the employment of the Executive by the Company to assure the harmonious performance of the affairs of Company as well as to enter into a Proprietary Information and Inventions Assignment Agreement (the “Restrictive Covenant Agreement”).

NOW, THEREFORE, in consideration of the mutual promises, terms, provisions, and conditions contained herein, Company and Executive hereby agree as follows:  

1.Roles and Duties.  Subject to the terms and conditions of this Agreement, Company shall employ Executive as its Chief Financial Officer (“CFO”) reporting to Company’s Chief Executive Officer (“CEO”).  The Executive shall have such duties and responsibilities as are reasonably determined by the Board of Directors (“Board”) and are consistent with the duties customarily performed by a CFO of a similarly situated company in the United States.  Executive accepts such employment upon the terms and conditions set forth herein, and agrees to perform such duties and discharge such responsibilities to the best of Executive’s ability. During Executive’s employment, Executive shall devote all of Executive’s business time and energies to the business and affairs of Company. Notwithstanding the foregoing, nothing herein shall preclude Executive from (i) performing services for such other companies as Company may designate or permit; (ii) serving, with the prior written consent of the Board, which consent shall not be unreasonably withheld, as a member of the boards of directors or advisory boards (or their equivalents in the case of a non-corporate entity) of non-competing businesses or charitable, educational or civic organizations; (iii) engaging in charitable activities and community affairs; and (iv) managing Executive's personal investments and affairs; provided, however, that the activities set out in clauses (i), (ii), (iii) and (iv) shall be limited by Executive so as not to materially interfere, individually or in the aggregate, with the performance of Executive's duties and responsibilities hereunder.

2.Term of Employment.

(a)Term.  Subject to the terms hereof, Executive’s employment hereunder shall commence on January 4, 2021 (the “Start Date”) and continue until terminated hereunder by either party (such term of employment referred to herein as the “Term”). 

(b)Termination.  Notwithstanding anything else contained in this Agreement, Executive’s employment hereunder shall terminate upon the earliest to occur of the following:

(i)Death.  Immediately upon Executive’s death;

(ii)Termination by Company.

(A)If because of Executive’s Disability (as defined below in Section 2(c)), written notice by Company to Executive that Executive’s 

 

 

 

employment is being terminated as a result of Executive’s Disability, which termination shall be effective on the date of such notice or such later date as specified in writing by Company;

(B)If for Cause (as defined below in Section 2(d)), written notice by Company to Executive that Executive’s employment is being terminated for Cause, which termination shall be effective on the date of such notice or such later date as specified in writing by Company, provided that if prior to the effective date of such termination Executive has cured the circumstances giving rise to the Cause (if capable of being cured as provided in Section 2(d)), then such termination shall not be effective; or

(C)If by Company for reasons other than under Sections 2(b)(ii)(A) or (B), written notice by Company to Executive that Executive’s employment is being terminated, which termination shall be effective thirty (30) days after the date of such notice.

(iii)Termination by Executive.  

(A)If for Good Reason (as defined below in Section 2(e)), written notice by Executive to Company that Executive is terminating Executive’s employment for Good Reason and that sets forth the factual basis supporting the alleged Good Reason, which termination shall be effective thirty (30) days after the date of such notice; provided that if prior to the effective date of such termination Company has cured the circumstances giving rise to the Good Reason if capable of being cured as provided in Section 2(e), then such termination shall not be effective; or

(B)If without Good Reason, written notice by Executive to Company that Executive is terminating Executive’s employment, which termination shall be effective no fewer than sixty (60) days after the date of such notice unless waived, in whole or in part, by Company.

Notwithstanding anything in this Section 2(b), Company may at any point, under the conditions set forth in Section 2(b)(ii)(B), terminate Executive’s employment for Cause prior to the effective date of any other termination contemplated hereunder; provided that if prior to the effective date of such for-Cause termination Executive has cured the circumstances giving rise to the Cause (if capable of being cured as provided in Section 2(d)), then such termination shall not be effective.   

(c)Definition of “Disability”.  For purposes of this Agreement, “Disability” shall mean Executive’s incapacity or inability to perform Executive’s duties and responsibilities as contemplated herein by reason of a medically determinable mental or physical impairment for one hundred twenty (120) days or more within any one (1) year period (cumulative or consecutive), which impairment can reasonably be expected to result in death or can be expected to last for a continuous period of not less than six (6) months.  The determination that Executive is disabled hereunder, if disputed by the parties, shall be resolved by a physician reasonably satisfactory to 

 

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Executive and Company, at Company’s expense, and the determination of such physician shall be final and binding upon both Executive and Company.  Executive hereby consents to such examination and consultation by a physician.  Company shall keep all information it receives as a result of such inquiry and determination confidential and shall not use it for any purpose other than in connection with exercising its rights under this Agreement. 

(d)Definition of “Cause”.  As used herein, “Cause” shall mean: (i) Executive’s conviction of (A) a felony or (B) any misdemeanor involving moral turpitude, deceit, dishonesty or fraud; (ii) Executive’s willful failure or refusal to comply with lawful directions of the CEO, which failure or refusal continues for more than thirty (30) days after written notice is given to Executive by the CEO, which notice sets forth in reasonable detail the nature of such failure or refusal; (iii) willful and material breach by Executive of a written Company policy applicable to Executive or Executive’s covenants and/or obligations under this Agreement or the material breach of the Restrictive Covenant Agreement; and/or (iv) material misconduct by Executive that seriously discredits or damages Company or any of its affiliates.  Except in the case of (ii) above, it is not necessary that the Company’s finding of Cause occur prior to Executive’s termination of service.  If Company determines, subsequent to Executive’s termination of service, that prior to Executive’s termination Executive engaged in conduct which would constitute “Cause,” (other than pursuant to (ii) above) then Executive shall have no right to any benefit or compensation under this Agreement. 

(e)Definition of “Good Reason”. As used herein, “Good Reason” shall mean: (i) relocation of Executive’s principal business location to a location more than thirty (30) miles from Executive’s then-current business location; (ii) a material diminution in Executive’s duties, authority or responsibilities; (iii) a material reduction in Executive’s Base Salary; or (iv) willful and material breach by Company of its covenants and/or obligations under this Agreement; provided that, in each of the foregoing clauses (i) through (iv) (A) Executive provides Company with written notice that Executive intends to terminate Executive’s employment hereunder for one of the grounds set forth in this Section 2(e) within thirty (30) days of such ground occurring, (B) if such ground is capable of being cured, Company has failed to cure such ground within a period of thirty (30) days from the date of such written notice, and (C) Executive terminates by written notice Executive’s employment within sixty-five (65) days from the date that Executive provides the notice contemplated by clause (A) of this Section 2(e).  For purposes of clarification, the above-listed conditions shall apply separately to each occurrence of Good Reason, and failure to adhere to such conditions in the event of Good Reason shall not disqualify Executive from asserting Good Reason for any subsequent occurrence of Good Reason. In addition, Executive may terminate Executive’s employment for Good Reason within one (1) year following a Change of Control (as defined below) if, after the Change of Control, Executive is not an executive of the parent company, provided that Executive’s roles, responsibilities and scope of authority within the subsidiary are not comparable to Executive’s roles, responsibilities and scope of authority with Company prior to the Change of Control.  For purposes of this Agreement, “Good Reason” shall be interpreted in a manner, and limited to the extent necessary, so that it shall not cause adverse tax consequences for either party with respect to Section 409A (“Section 409A”) of the Internal Revenue Code of 1986, as amended (the “Code”) and any successor statute, regulation and guidance thereto. 

 

 

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3.Compensation.

(a)Base Salary.  Commencing on the Start Date, Company shall pay Executive a base salary (the “Base Salary”) at the annual rate of Four Hundred Twenty Five Thousand Dollars ($425,000.00). The Base Salary shall be payable in substantially equal periodic installments in accordance with Company’s payroll practices as in effect from time to time.  Company shall deduct from each such installment all amounts required to be deducted or withheld under applicable law or under any employee benefit plan in which Executive participates. The Board or an appropriate committee thereof shall, on an annual basis, review the Base Salary, which may be adjusted upward (but not downward) at Company’s discretion.

(b)Annual Performance Bonus.  Commencing with fiscal year 2021, Executive shall be eligible to receive an annual cash bonus (the “Annual Performance Bonus”), with the target amount of such Annual Performance Bonus equal to forty percent (40%) of Executive’s Base Salary in the year to which the Annual Performance Bonus relates; provided that the actual amount of the Annual Performance Bonus may be greater or less than such target amount.  The amount of the Annual Performance Bonus shall be determined by the Board or an appropriate committee thereof in its sole discretion, and shall be paid to Executive no later than March 15th of the calendar year immediately following the calendar year in which it was earned.  Except as provided in Section 4, Executive must be employed by Company on the last day of the applicable fiscal year to which the Annual Performance Bonus relates in order to be eligible for, and to be deemed as having earned, such Annual Performance Bonus. Company shall deduct from the Annual Performance Bonus all amounts required to be deducted or withheld under applicable law or under any employee benefit plan in which Executive participates. 

(c)Equity. As a material inducement to the Executive joining the Company, on the Start Date, the Company shall award Executive an inducement stock option to purchase 75,000 shares of the Company’s common stock, subject to approval by the Board or an authorized delegate thereof (the “Inducement Option Grant”). The Inducement Option Grant shall be subject to the terms and conditions of the Company’s 2019 Inducement Equity Incentive Plan, as amended, and the applicable option agreement between the Executive and the Company entered into pursuant thereto.  The Inducement Option Grant is intended as an inducement grant under Nasdaq Rule 5635(c)(4) and shall not qualify as an incentive stock option.  The exercise price of the stock options subject to the Inducement Option Grant shall be the closing price of the Company’s common stock on the Nasdaq Stock Market on the Start Date.  The Inducement Option Grant shall be evidenced in writing by, and subject to the terms of, a Company stock option agreement which shall specify vesting over four (4) years, 25% on the first anniversary of the Start Date with the balance to vest in equal monthly installments over the following 36 months, and exercise of vested options for up to ten (10) years except as otherwise provided in the stock option agreement. Commencing in fiscal year 2022, Executive shall be eligible to be considered for the grant of stock options and/or other equity-based awards commensurate with Executive’s position and responsibilities. The amount, terms and conditions of any stock option or other equity-based award shall be determined by the Board or an appropriate committee thereof in its discretion and set forth in the applicable equity plan and other documents governing the award.

(d)Paid Time Off.  In addition to standard paid holidays, Executive may take up to twenty (20) days of paid time off (“PTO”) per year, to be scheduled so as not to materially 

 

4

 

 

disrupt Company’s operations, pursuant to the terms and conditions of Company policy and practices as applied to Company senior executives.  

(e)Fringe Benefits. Executive shall be entitled to participate in all benefit/welfare plans and fringe benefits provided to Company senior executives.  Executive understands that, except when prohibited by applicable law, Company’s benefit plans and fringe benefits may be amended by Company from time to time in its sole discretion.  The terms of any such benefits shall be governed by the applicable plan documents and Company policies in effect from time to time.

(f)Reimbursement of Expenses.  Company shall reimburse Executive for all ordinary and reasonable out-of-pocket business expenses incurred by Executive in furtherance of Company’s business in accordance with Company’s policies with respect thereto as in effect from time to time.  Executive must submit any request for reimbursement no later than ninety (90) days following the date that such business expense is incurred. All reimbursements provided under this Agreement shall be made or provided in accordance with the requirements of Section 409A including, where applicable, the requirement that (i) any reimbursement is for expenses incurred during Executive’s lifetime (or during a shorter period of time specified in this Agreement); (ii) the amount of expenses eligible for reimbursement during a calendar year may not affect the expenses eligible for reimbursement in any other calendar year; (iii) the reimbursement of an eligible expense shall be made no later than the last day of the calendar year following the year in which the expense is incurred; and (iv) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.

(g)Indemnification. Executive shall be entitled to indemnification with respect to Executive’s services provided hereunder pursuant to Delaware law, the terms and conditions of Company’s certificate of incorporation and/or by-laws, and Company’s standard indemnification agreement for directors and officers as executed by Company and Executive. Executive shall be entitled to coverage under the Company’s Directors’ and Officers’ (“D&O”) insurance policies that it may hold now or in the future to the same extent and in the same manner (i.e., subject to the same terms and conditions) that the Company’s other executive officers are entitled to coverage under any of the Company’s D&O insurance policies that it may have.

(h)Sign-On Bonus. Company shall pay Executive a sign-on bonus (the “Sign-On Bonus”) in the amount of One Hundred Sixty Four Thousand Dollars ($164,000.00), on the first payroll date following the Start Date, provided that in the event that Executive resigns Executive’s employment with Company without Good Reason or the Company terminates Executive for Cause within one (1) year following the Start Date, Executive shall repay Company the amount of the Sign-On Bonus to Company within fifteen (15) days of Executive’s termination date.  Company shall deduct from the Sign-On Bonus all amounts required to be deducted or withheld under applicable law or under any employee benefit plan in which Executive participates. Executive hereby acknowledges and agrees that any required repayment of the Sign-On Bonus may be deducted from payments to be made by Company to Executive upon termination, including from the Accrued Obligations.

(i)Forfeiture/Clawback. All compensation shall be subject to any forfeiture or clawback policy established by Company generally for senior executives from time to time and any other such policy required by applicable law.

 

5

 

 

4.Payments Upon Termination.

(a)Definition of Accrued Obligations.  For purposes of this Agreement, “Accrued Obligations” means: (i) the portion of Executive’s Base Salary that has accrued prior to any termination of Executive’s employment with Company and has not yet been paid; (ii) any accrued but unused PTO pursuant to Company’s standard policy and practices; and (iii) the amount of any expenses properly incurred by Executive on behalf of Company prior to any such termination and not yet reimbursed.  Executive’s entitlement to any other compensation or benefit under any plan of Company shall be governed by and determined in accordance with the terms of such plans, except as otherwise specified in this Agreement.

(b)Termination by Company for Cause.  If Executive’s employment hereunder is terminated by Company for Cause, then Company shall pay the Accrued Obligations to Executive promptly following the effective date of such termination and shall have no further obligations with respect to any benefit or compensation under this Agreement to Executive hereunder.

(c)Termination by Executive Without Good Reason. If Executive’s employment hereunder is terminated by Executive without Good Reason, then Company shall pay the Accrued Obligations and any accrued and unpaid Annual Performance Bonus for the prior fiscal year to Executive promptly following the effective date of such termination, and shall have no further obligations with respect to any benefit or compensation under this Agreement to Executive hereunder.  

(d)Termination as a Result of Executive’s Disability or Death.  If Executive’s employment hereunder terminates as a result of Executive’s Disability or death, promptly after such termination Company shall pay to Executive: (i) the Accrued Obligations; (ii) any accrued and unpaid Annual Performance Bonus for the prior fiscal year; and (iii) the Pro Rated Bonus (as defined below), and shall have no further obligations with respect to any benefit or compensation under this Agreement to Executive hereunder.  As used in this Section 4, “Pro Rated Bonus” shall mean an amount in cash equal to the target of Annual Performance Bonus for which Executive would have been eligible with respect to the year in which termination of Executive’s employment occurs multiplied by a fraction, the numerator of which is the number of days during which Executive is employed by Company during the year of termination and the denominator of which is 365.

(e)Termination by Company Without Cause or by Executive For Good Reason.  In the event that Executive’s employment is terminated by action of Company other than for Cause, or Executive terminates Executive’s employment for Good Reason, then, in addition to the Accrued Obligations and any accrued and unpaid Annual Performance Bonus for the prior fiscal year, Executive shall receive the following, subject to the terms and conditions described in Section 4(g) (including Executive’s execution of the Release (as defined herein)):

(i)Severance Payments. Continuation of payments in an amount equal to Executive’s then-current Base Salary for a nine (9) month period, less all customary and required taxes and employment-related deductions, in accordance with Company’s normal payroll practices (provided such payments shall be made 

 

6

 

 

at least monthly), commencing on the first payroll date following the date on which the Release required by Section 4(g) becomes effective and non-revocable, but not after seventy (70) days following the effective date of termination from employment; provided, that if the 70th day falls in the calendar year following the year during which the termination or separation from service occurred, then the payments shall commence in such subsequent calendar year; provided further that if such payments commence in such subsequent year, the first such payment shall be a lump sum in an amount equal to the payments that would have come due since Employee’s separation from service.

(ii)Pro Rata Bonus.  Payment of the Pro Rated Bonus, paid to Executive no later than March 15 of the calendar year next preceding the year of termination of employment, after deduction of all amounts required to be deducted or withheld under applicable law.

(iii)Benefits Payments.  Upon completion of appropriate forms and subject to applicable terms and conditions under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), Company shall continue to provide Executive medical insurance coverage to the same extent that such insurance continues to be provided to similarly situated executives at the time of Executive’s termination with the cost of the regular premium for such benefits shared in the same relative proportion by Company and Executive as in effect on the last day of employment (the “COBRA Payment”), until the earlier to occur of: (i) twelve (12) months following Executive’s termination date, or (ii) the date Executive becomes eligible for medical benefits with another employer.  Notwithstanding the foregoing, if Executive’s COBRA Payment would cause the applicable group health plan to be discriminatory and, therefore, result in adverse tax consequences to Executive, Company shall, in lieu of the COBRA Payment, provide Executive with an equivalent monthly cash payment, minus deduction of all amounts required to be deducted or withheld under applicable law, for any period of time Executive is eligible to receive the COBRA Payment. Executive shall bear full responsibility for applying for COBRA continuation coverage and Company shall have no obligation to provide Executive such coverage if Executive fails to elect COBRA benefits in a timely fashion. 

Payment of the above described severance payments and benefits are expressly conditioned on Executive’s execution without revocation of the Release and return of Company property under Section 6. 

(f)Termination by Company Without Cause or by Executive For Good Reason Following a Change of Control.  In the event that a Change of Control (as defined below) occurs and within a period of one (1) year following the Change of Control, or ninety (90) days preceding the earlier to occur of a Change of Control or the execution of a definitive agreement the consummation of which would result in a Change of Control, Executive’s employment is terminated other than for Cause, or Executive terminates Executive’s employment for Good Reason, then, in addition to the Accrued Obligations and any accrued and unpaid Annual 

 

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Performance Bonus for the prior fiscal year, Executive shall receive the following, subject to the terms and conditions described in Section 4(g) (including Executive’s execution of the Release):

(i)Lump Sum Severance Payment.  Payment of a lump sum amount equal to twelve (12) months of Executive’s then-current Base Salary plus the Pro Rated Bonus, less all customary and required taxes and employment-related deductions, paid on the first payroll date following the date on which the Release required by Paragraph 4(g) becomes effective and non-revocable, but not after seventy (70) days following the effective date of termination from employment.  

(ii)Equity Acceleration.  (A) All of Executive’s unvested equity awards shall accelerate and vest immediately on the date of termination of Executive’s employment if such employment commenced at least twenty-four (24) months prior to a Change of Control, (B) 50% of Executive’s unvested equity awards shall vest immediately on the date of termination of Executive’s employment if such employment commenced fewer than twenty-four (24) months but at least twelve (12) months prior to a Change of Control, and (C) 25% of Executive’s unvested equity awards shall vest immediately on the date of termination of Executive’s employment if such employment commenced fewer than twelve (12) months prior to a Change of Control. 

(iii)Benefit Payments.  Upon completion of appropriate forms and subject to applicable terms and conditions under COBRA, Company shall continue to provide Executive medical insurance coverage to the same extent that such insurance continues to be provided to similarly situated executives at the time of Executive’s termination with the cost of the regular premium for such benefits shared in the same relative proportion by Company and Executive as in effect on the last day of employment, until the earlier to occur of: (i) twelve (12) months following Executive’s termination date, or (ii) the date Executive becomes eligible for medical benefits with another employer.  Notwithstanding the foregoing, if Executive’s COBRA Payment would cause the applicable group health plan to be discriminatory and, therefore, result in adverse tax consequences to Executive, Company shall, in lieu of the COBRA Payment, provide Executive with an equivalent monthly cash payment, minus deduction of all amounts required to be deducted or withheld under applicable law, for any period of time Executive is eligible to receive the COBRA Payment.  Executive shall bear full responsibility for applying for COBRA continuation coverage and Company shall have no obligation to provide Executive such coverage if Executive fails to elect COBRA benefits in a timely fashion. 

Payment of the above described severance payments and benefits are expressly conditioned on Executive’s execution without revocation of the Release and return of Company property under Section 6. In the event that Executive is eligible for the severance payments and benefits under this Section 4(f), Executive shall not be eligible for any of the severance payments and benefits as provided in Section 4(e).

 

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As used herein, a “Change of Control” shall mean the occurrence of any of the following events:  (i) Ownership. Any “Person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becomes the “Beneficial Owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of Company representing fifty percent (50%) or more of the total voting power represented by Company’s then outstanding voting securities (excluding for this purpose any such voting securities held by Company, or any affiliate, parent or subsidiary of Company, or by any employee benefit plan of Company) pursuant to a transaction or a series of related transactions; or (ii) Merger/Sale of Assets.  (A) A merger or consolidation of Company whether or not approved by the Board, other than a merger or consolidation which would result in the voting securities of Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or the parent of such corporation) at least fifty percent (50%) of the total voting power represented by the voting securities of Company or such surviving entity or parent of such corporation, as the case may be, outstanding immediately after such merger or consolidation; (B) or Company’s stockholders approve an agreement for the sale or disposition by Company of all or substantially all of Company’s assets; or (iii) Change in Board Composition. A change in the composition of the Board, as a result of which fewer than a majority of the directors are Incumbent Directors. “Incumbent Directors” shall mean directors who either (A) are directors of Company as of the date of this Agreement, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors, or by a committee of the Board made up of at least a majority of the Incumbent Directors, at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors).  

(g)Execution of Release of Claims.  Company shall not be obligated to pay Executive any of the severance payments or benefits described in this Section 4 unless and until Executive has executed (without revocation) a release of claims as described below (the “Release”).  The Release shall contain reasonable and customary provisions including a general release of claims against Company and its affiliated entities and each of their officers, directors and employees as well as mutual non-disparagement, non-competition, non-solicitation, confidentiality, cooperation and the like.  The Release must be provided to Executive not later than fifteen (15) days following the effective date of termination of Executive’s employment by Company and executed by Executive and returned to Company within sixty (60) days after such effective date.  If Executive fails or refuses to return the Release within such 60-day period, Executive’s severance payments and benefits to be paid hereunder shall be forfeited. 

(h)No Other Payments or Benefits Owing.  Except as expressly set forth herein, the payments and benefits set forth in this Section 4: (a)  shall be the sole amounts owing to Executive upon termination of Executive’s employment for the reasons set forth above, and Executive shall not be eligible for any other payments or other forms of compensation or benefits; (b) shall be the sole remedy, if any, available to Executive in the event that Executive brings any claim against Company relating to the termination of Executive’s employment under this Agreement; and (c) shall not be subject to set-off by Company or any obligation on the part of Executive to mitigate or to offset compensation earned by Executive in other pursuits after termination of employment, other than as specified herein with respect to medical benefits provided by another employer. 

 

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5.Prohibited Competition and Solicitation.  Executive expressly acknowledges that: (a) there are competitive and proprietary aspects of the business of Company; (b) during the course of Executive’s employment, Company shall furnish, disclose or make available to Executive confidential and proprietary information and may provide Executive with unique and specialized training; (c) such Confidential Information and training have been developed and shall be developed by Company through the expenditure of substantial time, effort and money, and could be used by Executive to compete with Company; and (d) in the course of Executive’s employment, Executive shall be introduced to customers and others with important relationships to Company, and any and all “goodwill” created through such introductions belongs exclusively to Company, including, but not limited to, any goodwill created as a result of direct or indirect contacts or relationships between Executive and any customers of Company.  In light of the foregoing acknowledgements, and as a condition of employment hereunder, Executive hereby approves the Restrictive Covenant Agreement entered into on the date hereof as a binding obligation of the Executive, enforceable in accordance with its terms.  

6.Property and Records. Upon the termination of Executive’s employment hereunder for any reason or for no reason, or if Company otherwise requests, Executive shall:  (a) return to Company all tangible business information and copies thereof (regardless how such Confidential Information or copies are maintained), and (b) deliver to Company any property of Company which may be in Executive’s possession, including, but not limited to, Blackberry-type devices, smart phones, laptops, cell phones (the foregoing, “electronic devices”), products, materials, memoranda, notes, records, reports or other documents or photocopies of the same.  Executive may retain copies of any exclusively personal data contained in or on Company-owned electronic devices returned to Company pursuant to the foregoing. The foregoing notwithstanding, Executive understands and agrees that Company property belongs exclusively to Company, it should be used for Company business, and Executive has no reasonable expectation of privacy on any Company property or with respect to any information stored thereon. 

7.Cooperation.  During and after Executive’s employment, Executive shall fully cooperate with Company to the extent reasonable in the defense or prosecution of any claims or actions now in existence or which may be brought in the future against or on behalf of Company (other than claims directly or indirectly against Executive) which relate to events or occurrences that transpired while Executive was employed by Company. Executive’s cooperation in connection with such claims or actions shall include, but not be limited to, being available to meet with counsel to prepare for discovery or trial and to act as a witness on behalf of Company at mutually convenient times. During and after Executive’s employment, Executive also shall fully cooperate with Company to the extent reasonable in connection with any investigation or review of any federal, state or local regulatory authority as any such investigation or review relates to events or occurrences that transpired while Executive was employed by Company.  Company shall reimburse Executive for any reasonable out-of-pocket expenses incurred in connection with the Executive’s performance of obligations pursuant to this section. In addition, Company shall compensate Executive on an hourly basis, based on a rate commensurate with Executive’s Base Salary in effect prior to termination, for time Executive spends in excess of 10 hours in any calendar quarter providing services to the Corporation after termination. 

 

 

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8.Code Sections 409A and 280G.   

(a)In the event that the payments or benefits set forth in Section 4 of this Agreement constitute “non-qualified deferred compensation” subject to Section 409A, then the following conditions apply to such payments or benefits:

(i)Any termination of Executive’s employment triggering payment of benefits under Section 4 must constitute a “separation from service” under Section 409A(a)(2)(A)(i) of the Code and Treas. Reg. §1.409A-1(h) before distribution of such benefits can commence.  To the extent that the termination of Executive’s employment does not constitute a separation of service under Section 409A(a)(2)(A)(i) of the Code and Treas. Reg. §1.409A-1(h) (as the result of further services that are reasonably anticipated to be provided by Executive to Company at the time Executive’s employment terminates), any such payments under Section 4 that constitute deferred compensation under Section 409A shall be delayed until after the date of a subsequent event constituting a separation of service under Section 409A(a)(2)(A)(i) of the Code and Treas. Reg. §1.409A-1(h).  For purposes of clarification, this Section 8(a) shall not cause any forfeiture of benefits on Executive’s part, but shall only act as a delay until such time as a “separation from service” occurs.  

(ii)Notwithstanding any other provision with respect to the timing of payments under Section 4 if, at the time of Executive’s termination, Executive is deemed to be a “specified employee” of Company (within the meaning of Section 409A(a)(2)(B)(i) of the Code), then limited only to the extent necessary to comply with the requirements of Section 409A, any payments to which Executive may become entitled under Section 4 which are subject to Section 409A (and not otherwise exempt from its application) shall be withheld until the first (1st) business day of the seventh (7th) month following the termination of Executive’s employment, at which time Executive shall be paid an aggregate amount equal to the accumulated, but unpaid, payments otherwise due to Executive under the terms of Section 4.

(b)It is intended that each installment of the payments and benefits provided under Section 4 of this Agreement shall be treated as a separate “payment” for purposes of Section 409A.  Neither Company nor 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. 

(c)Notwithstanding any other provision of this Agreement to the contrary, this  Agreement shall be interpreted and at all times administered in a manner that avoids the inclusion of compensation in income under Section 409A, or the payment of increased taxes, excise taxes or other penalties under Section 409A. The parties intend this Agreement to be in compliance with Section 409A.  Executive acknowledges and agrees that Company does not guarantee the tax treatment or tax consequences associated with any payment or benefit arising under this Agreement, including but not limited to consequences related to Section 409A. 

 

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(d)If any payment or benefit Executive would receive under this Agreement, when combined with any other payment or benefit Executive receives pursuant to a Change of Control (for purposes of this section, a “Payment”) would: (i) constitute a “parachute payment” within the meaning of Section 280G the Code; and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then such Payment shall be either: (A) the full amount of such Payment; or (B) such lesser amount (with cash payments being reduced before stock option compensation) as would result in no portion of the Payment being subject to the Excise Tax, whichever of the foregoing amounts, taking into account the applicable federal, state and local employments taxes, income taxes, and the Excise Tax, results in Executive’s receipt, on an after-tax basis, of the greater amount of the Payment notwithstanding that all or some portion of the Payment may be subject to the Excise Tax.  Notwithstanding the foregoing, if, prior to the closing of an initial public offering, any Payment can be exempt from the definition of “parachute payment” and the Excise Tax pursuant to the shareholder approval requirements described in Treas. Regs. § 1.280G-1, Q&A 6, the Company will, at the Executive’s election (and subject to the Executive signing an appropriate waiver) seek shareholder approval to exempt such Payment from the definition of “parachute payment” and the Excise Tax. 

9.General.

(a)Notices.  Except as otherwise specifically provided herein, any notice required or permitted by this Agreement shall be in writing and shall be delivered as follows with notice deemed given as indicated: (i) by personal delivery when delivered personally; (ii) by overnight courier upon written verification of receipt; (iii) by telecopy or facsimile transmission upon acknowledgment of receipt of electronic transmission; or (iv) by certified or registered mail, return receipt requested, upon verification of receipt.

	
 
	
•
	
Notices to Executive shall be sent to the last known address in Company’s records or such other address as Executive may specify in writing.  

	
 
	
•
	
Notices to Company shall be sent to:  

Spero Therapeutics, Inc.

675 Massachusetts Ave., 14th Floor

Cambridge, MA 02139

Attn: CEO

 

(b)Modifications and Amendments.  The terms and provisions of this Agreement may be modified or amended only by written agreement executed by the parties hereto.

(c)Waivers and Consents.  The terms and provisions of this Agreement may be waived, or consent for the departure therefrom granted, only by a written document executed by the party entitled to the benefits of such terms or provisions.  No such waiver or consent shall be deemed to be or shall constitute a waiver or consent with respect to any other terms or provisions of this Agreement, whether or not similar.  Each such waiver or consent shall be effective only in the specific instance and for the purpose for which it was given and shall not constitute a continuing waiver or consent.

 

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(d)Assignment.  Company may assign its rights and obligations hereunder to any person or entity that succeeds to all or substantially all of Company’s business or that aspect of Company’s business in which Executive is principally involved.  Executive may not assign Executive’s rights and obligations under this Agreement without the prior written consent of Company.

(e)Governing Law/Dispute Resolution.  This Agreement and the rights and obligations of the parties hereunder shall be construed in accordance with and governed by the law of the Commonwealth of Massachusetts without giving effect to the conflict of law principles thereof.  Any legal action or proceeding with respect to this Agreement shall be brought in the courts of the Commonwealth of Massachusetts or of the United States of America for the District of Massachusetts. By execution and delivery of this Agreement, each of the parties hereto accepts for itself and in respect of its property, generally and unconditionally, the non-exclusive jurisdiction of the aforesaid courts. 

(f)Jury Waiver. ANY, ACTION, DEMAND, CLAIM, OR COUNTERCLAIM ARISING UNDER OR RELATING TO THIS AGREEMENT SHALL BE RESOLVED BY A JUDGE ALONE, AND EACH OF COMPANY AND EXECUTIVE WAIVES ANY RIGHT TO A JURY TRIAL THEREOF.

(g)Headings and Captions.  The headings and captions of the various subdivisions of this Agreement are for convenience of reference only and shall in no way modify or affect the meaning or construction of any of the terms or provisions hereof.

(h)Entire Agreement. This Agreement, together with the other agreements specifically referenced herein, embodies the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersedes all prior oral or written agreements and understandings relating to the subject matter hereof. No statement, representation, warranty, covenant or agreement of any kind not expressly set forth in this Agreement shall affect, or be used to interpret, change or restrict, the express terms and provisions of this Agreement. 

(i)Counterparts. This Agreement may be executed in two or more counterparts, and by different parties hereto on separate counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  For all purposes a signature by fax shall be treated as an original. 

[Signature Page to Follow]

 

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

 

	
SATYAVRAT SHUKLA
	
 
	
SPERO THERAPEUTICS, INC.

	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 

	
/s/ Satyavrat Shukla
	
 
	
By:
	
/s/ Ankit Mahadevia

	
Signature
	
 
	
 
	
Name: Ankit Mahadevia

	
 
	
 
	
 
	
Title: CEO

 

 

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