Document:

EX-10.1 

 

HC Innovations, Inc. 

  Employment Agreement for Scott Walker

     This EMPLOYMENT AGREEMENT is made and entered into as of October 6th , 2008 and shall be effective on October 8, 2004 (herein referred to as the “Effective Date”), by and between
HC Innovations, Inc. (“Company”), a corporation having its principal offices in Shelton, Connecticut and Scott Walker (“Executive”). 

     WHEREAS, the Company and the Executive intend that the Executive shall serve the Company as Chief Financial Officer 

     WHEREAS, the Executive possesses considerable experience and an intimate knowledge of the business, and, as such, the Executive has demonstrated unique qualifications to act in an
executive capacity for the Company;

     WHEREAS, the Company is desirous of employing the Executive in the above stated capacity, and the Executive is desirous of such employment; and

     WHEREAS, the Company and Executive desire to enter into an agreement embodying the terms of such employment. 

     NOW THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements of the parties set forth in this Agreement, and of other good and valuable consideration the
receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows: 

Article 1. Term of Employment

     The Company hereby agrees to employ the Executive and the Executive agrees to serve the Company, in accordance with the terms and conditions set forth herein, for an initial period of
three (3) years commencing as of the Effective Date of this Agreement; subject, however, to earlier termination as expressly provided herein. 

     The initial three-(3-)year period of employment automatically shall be extended for one (1)
additional year at the end of the initial three-(3-)year term and then again after each successive year thereafter. However, either party may terminate this Agreement at the end of the initial three-(3-)year period, or at the end of any successive
one-(1-)year term thereafter, by giving the other party written notice of intent not to renew delivered at least sixty (60) days prior to the end of such initial period or successive term. 

     In the event such notice of intent not to renew is properly delivered, this Agreement automatically shall expire at the end of the initial period or successive term then in progress.

Article 2. Definitions

     2.1     “Agreement” means this Employment Agreement for Scott Walker.

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2.2     	
“Annual Bonus Award” means the annual bonus to be paid to the Executive in accordance with the Company’s annual bonus program as described in
Section 5.2 (Compensation/Annual Bonus) herein.
  
	 
	 	
2.3     	
“Award Period” means the performance period applicable to Long-Term Incentive Awards granted under the Company’s long-term incentive
plan.
  
	 
	 	
2.4     	
“Base Salary” means the salary of record paid to the Executive as annual salary, pursuant to Section 5.1 (Compensation/Base Salary), excluding amounts received under incentive or other bonus plans, whether or not deferred.
  
	 
	 	
2.5     	
“Beneficial Owner” or “Beneficial Ownership” shall
have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended from time to time, or any successor act thereto.
  
	 
	 	
2.5     	
“Beneficiary” means the individuals or entities designated or deemed designated by the Executive pursuant to Section 14.6 (Miscellaneous/Beneficiaries) herein.
  
	 
	 	
2.6     	
“Board” or “Board of Directors” means the Board of
Directors of the Company.
  
	 
	 	
2.7     	
“Cause” means any of the following with respect to the Executive, in each case as determined by the Board acting in its sole discretion:
  
	 
	 	 	
(a)     	
Willful failure to substantially perform the Executive’s duties (for reasons other than physical or mental illness) after reasonable notice to the Executive of that failure;
  
	 
	 	 	
(b)     	
Indictment for, or entering into a plea of nolo contendere to, a felony; or
  
	 
	 	 	
(c)     	
Misconduct that materially injures the Company or any subsidiary or affiliate of the Company; or
  
	 
	 	 	
(d)     	
Breach of any written covenant or agreement with the Company or any subsidiary or affiliate of the Company.
  
	 
	 	
2.8     	
“Change in Control” means any of the following events:
  
	 
	 	 	
(a)     	
The acquisition by any Person of Beneficial Ownership of fifty percent (50%) or more of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in
the election of Directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this Section 2.8 (Definitions/Change in Control), the following acquisitions shall not constitute a Change in Control: (i) any acquisition by a Person who on the Effective Date is the Beneficial Owner of twenty-five percent (25%) or more of the Outstanding Company Voting
Securities, (ii) any acquisition directly from the Company, including without limitation, a public offering of securities, (iii) any acquisition by the Company, (iv) any acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any of its subsidiaries, or (v) any acquisition by any corporation pursuant to a transaction which complies with subparagraphs (i), (ii), and (iii) of
  
	 

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  	Section 2.8(c); provided, however,
    the acquisition by any Person of Beneficial Ownership of fifty percent (50%)
    or more of the combined voting power shall not constitute a Change in Control
    if David M. Chess, M.D. and/or entities he controls maintain a Beneficial
    Ownership of more than twenty-five percent (25%) of the then-outstanding
    voting securities of the Company entitled to vote generally in the election
    of Directors;
	 
	     	 	
(b)     	
Individuals who constitute the
    Board as of the Effective Date hereof (the “Incumbent Board”) cease
    for any reason to constitute at least a majority of the Board, provided that
    any individual  becoming a Director subsequent to the Effective Date whose
    election, or nomination for election by the Company’s shareholders,
    was approved by a vote of at least
    a majority of the Directors then comprising the Incumbent Board shall be
    considered as though such individual were a member of the Incumbent Board,
    but excluding, for this purpose, any such individual whose initial assumption
    of office is in connection with an actual or threatened election contest
    relating to the election or removal of the Directors of the Company or other
    actual or threatened solicitation of proxies of consents by or on behalf
    of a Person other than the Board;
  
	 
	 	 	
(c)     	
Consummation of a reorganization,
    merger, or consolidation to which the Company is a party or a sale or other
    disposition of all or substantially all of the assets of the Company (a “Business
    Combination”), in each case unless, following such Business Combination:
    (i) all or substantially all of the individuals and entities who were the
    Beneficial Owners of Outstanding Company Voting Securities immediately prior
    to such Business Combination beneficially own, directly or indirectly, more
    than fifty percent (50%) of the combined voting power of the outstanding
    voting securities entitled to vote generally in the election of directors
    of the corporation resulting from the Business Combination (including, without
    limitation, a corporation which as a result of such transaction owns the
    Company or all or substantially all of the Company’s assets either directly
    or through one or more subsidiaries) (the “Successor Entity”) in
    substantially the same proportions as their ownership immediately prior to
    such Business Combination of the Outstanding Company Voting Securities; and
    (ii) no Person (excluding any Successor Entity or any employee benefit plan,
    or related trust, of the Company or such Successor Entity) beneficially owns,
    directly or indirectly, twenty percent (20%) or more of the combined voting
    power of the then outstanding voting securities of the Successor Entity,
    except to the extent that such ownership existed prior to the Business Combination;
    and (iii) at least a majority of the members of the board of directors of
    the Successor Entity were members of the Incumbent Board (including individuals
    deemed to be members of the Incumbent Board by reason of the proviso to paragraph
    (b) of this Section 2.8 (Definitions/Change
    in Control)) at the time of the
    execution of the initial agreement or of the action of the Board providing
    for such Business Combination; or
  
	 
	 	 	
(d)     	
Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.
  
	 
	 	
2.9     	
“Company” means HC Innovations, Inc., a Delaware corporation, or any successor company thereto as provided in Section 9.1 (Assignment/Assignment by Company) herein.
  
	 

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2.10     	
“Competitor” means at the time of the Executive’s termination any existing or proposed business in which the Company is engaged and in which
the Executive is involved, including, without limitation, the business of providing care management support services of the type provided or proposed to be provided by the Company in conjunction with other health care providers or through direct
patient care including, such as patient specific clinical and administrative monitoring, behavioral modification, preventive health measures, and care integration across each patient’s spectrum of health care providers; provided, however, that
the term “Competitor” shall not include any healthcare insurance organization that provides such care management support services as an ancillary activity only and not as its primary or a principal business objective, but only if the
Executive is not directly involved in the day-to-day management of the entity or division providing such services.
  
	 
	 	
2.11     	
“Director” means any individual who is a member of the Board of Directors of the Company.
  
	 
	 	
2.12     	
“Disability” or “Disabled” means for all purposes of
this Agreement, the meaning ascribed to such term in the Company’s long-term disability plan or in any successor to such plan. If the Company does not have a long-term disability plan, then the term shall have the meaning ascribed to such term
in Code Section 409A(a)(2)(C).
  
	 
	 	
2.13     	
“Effective Date” means the date first above written.
  
	 
	 	
2.14     	
“Effective Date of Termination” means the date on which a termination of the Executive’s employment occurs.
  
	 
	 	
2.15     	
“Executive” means Scott Walker.
  
	 
	 	
2.16     	
“Good Reason” means, following a Change in Control, without the Executive’s express written consent, the occurrence of any one (1) or more of
the following:
  
	 
	 	 	
(a)     	
A material reduction of the Executive’s authorities, duties, or responsibilities as an executive and/or officer of the Company; provided, however, that any reduction in the foregoing resulting
merely from the acquisition of the Company and its existence as a subsidiary or division of another entity shall not be sufficient to constitute Good Reason provided that the Executive retains the title and responsibilities of the CFO of the
identifiable successor entity or division to the Company;
  
	 
	 	 	
(b)     	
The Company’s requiring the Executive to be based at a location in excess of fifty (50) miles from the location of the Executive’s principal job location; except for required travel on the
Company’s business to an extent substantially consistent with the Executive’s business travel obligations
  
	 
	 	 	
(c)     	
A reduction by the Company of the Executive’s Base Salary in effect on the Effective Date hereof, or as the same shall be increased from time to time;
  
	 
	 	 	
(d)     	
Following a Change in Control, the failure of the Company to obtain a satisfactory agreement from any successor to the Company to assume and agree to perform the Company’s obligations under this
Agreement; and
  
	 

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(e)    A material
    breach of this Agreement by the Company.

  
	 
	 	 	
Unless the Executive becomes Disabled, the Executive’s right to terminate employment for Good Reason shall not be affected by the Executive’s incapacity due to physical or mental illness.
Executive must provide Company with notice specifying the event constituting Good Reason within ninety (90) days of the occurrence of such event, and the Company shall have thirty (30) days after receipt of such notice in which to remedy such event.
Unless the Company waives its ability to remedy the event, Good Reason will not exist for purposes of this Agreement until the end of the thirty (30) day period for remedy.

  
	 
	 	
2.17     	
“Notice of Termination” means a written notice which shall indicate the specific termination provision in this Agreement relied upon, and shall set
forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provisions so indicated.
  
	 
	 	
2.19     	
“Person” shall have the meaning ascribed to such term in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended from time to time, and
used in Sections 13(d) and 14(d) thereof, including a “group” as defined in Section 13(d) thereof.
  
	 
	 	
2.20     	
“Retirement” shall be reached when the Executive’s employment with the Company terminates and at the time of such termination the sum of the
Executive’s age plus years of service as an employee of the Company equals or exceeds 75 years, and the Executive has at least attained the age of 55.
  
	 
	 	
2.21     	
“Severance Agreement” shall have the meaning of an agreement, if any, entered into between the Company and the Executive within thirty (30) days of
the Executives actual departure from the Company.
  
	 
	 	
2.22     	
“Severance Pay” shall have the meaning of money, benefits, and other considerations provided to the Executive in consideration of non-compete,
non-solicitation and other mutual agreeable terms.
  
	 

Article 3. Position and Responsibilities

     During the term of this Agreement, the Executive agrees to serve as Chief Financial Officer 

     In Executives capacity as Chief Financial
Officer;, the Executive shall report directly to the Company’s Chief Executive Officer, and shall perform duties and
responsibilities of a Chief Financial Officer;, and other duties and responsibilities as Executive may be assigned by the CEO during the term of this Agreement.

Article 4. Standard of Care

     During the term of this Agreement, the Executive agrees to devote Executives full time, attention, and
energies to the Company’s business and shall not be engaged in any other business activity, whether or not such business activity is pursued for gain, profit, or other pecuniary advantage unless such business activity is approved in writing by
the CEO. The Executive covenants, warrants, and represents that Executive shall:

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(a)     	
Devote Executive’s full and best efforts to the fulfillment of Executive’s employment obligations; and
  
	 
	 	
(b)     	
Exercise the highest degree of loyalty and the highest standards of conduct in the performance of Executive’s duties.
  

Article 5. Compensation

     As remuneration for all services to be rendered by the Executive during the term of this Agreement, and as consideration for complying with the covenants herein, the Company shall pay and
provide to the Executive the following. 

     5.1     Base Salary. The Company shall pay the Executive a Base Salary at an initial annual rate of $225,000. Base Salary shall be paid to the
Executive in equal installments throughout the year, consistent with the normal payroll practices of the Company. The Base Salary shall be reviewed at least annually following the Effective Date of this Agreement. 

     5.2     Annual Bonus. Executive shall be eligible to receive in addition to his Base Salary an annual incentive compensation award (“Annual
Bonus Award”) for services rendered during such fiscal year. The amount of the Annual Bonus Award, if any, with respect to any fiscal year shall be based upon performance targets, with earnings being a key performance target, and award levels
determined by the CEO in its sole discretion, in accordance with the Company’s annual incentive compensation plan or other incentive arrangements in effect from time to time. The award levels with respect to Executive shall be established in
such a manner as to provide the Executive with the opportunity to earn an award of twenty-five percent (25%) of Executives average base salary for such fiscal year. The earned Annual Bonus Award, if any, shall be paid as soon as practicable after it
has been determined, but in no event later than the fifteenth (15th) day of the third month following the end of the fiscal year to which it relates unless other
arrangements have been agreed upon.

     5.3     Stock Options. Simultaneously upon the execution of this Agreement, the Company shall grant the Employee an option to purchase one million
(1,000,000) shares of Common Stock of the Company at an exercise price per share equal to the fair market value per share on the date the option is granted, and with terms and conditions substantially as set forth in the form of option agreement
attached hereto as Exhibit A. 

     5.4     Long-Term Incentives.  Executive shall be eligible to
participate, in addition to Executive’s Base Salary and Annual Bonus Award, in the Company’s 2008 Incentive Compensation Plan (“Stock Plan”) in accordance with its terms in effect from time to time. All grants made under the
Stock Plan will be at the sole discretion of the Company, including the discretion to make no grant in any given year.  

     5.5     Employee Benefits.  During the term of this Agreement,
and as otherwise provided within the provisions of each of the respective plans, the Company shall provide to the Executive all benefits to which other similarly situated executives and employees of the Company are entitled to receive, subject to
the eligibility requirements and other provisions of such arrangements as applicable to executives of the Company generally.  

     The Executive shall be entitled to twenty (20) days paid vacation annually, in accordance with the vacation policy of the Company. 

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     The Executive shall likewise participate in any additional benefit as may be established during the term of this Agreement, by standard written policy of the Company.

     5.6     Retirement Benefits. Executive shall be entitled to participate in, to the extent Executive is otherwise eligible under the terms thereof,
the Company’s retirement plans and programs, if any, and receive the retirement benefits generally provided by the Company to senior executives upon Retirement.

Article 6. Expenses

     Upon presentation of appropriate documentation, the Company shall pay, or reimburse the Executive for all ordinary and necessary expenses, in a reasonable amount, which the Executive
incurs in performing his duties under this Agreement including, but not limited to, travel, entertainment, professional dues and subscriptions, and all dues, fees, and expenses associated with membership in various professional, business, and civic
associations and societies in which the Executive’s participation is in the best interest of the Company, as determined by the Board in its sole discretion. Executive must submit appropriate documentation within ninety (90) days of incurring
the expense. Thereafter, the Company shall reimburse the expense within sixty (60) days, but in no event later than December 31st of the year following the year
in which the expense was incurred. [The Executive will be eligible for reimbursement for reasonable cost of travel and accommodations in Shelton, Connecticut.] 

Article 7. Employment Terminations

     7.1     Termination Due to Death. In the event the
Executive’s employment is terminated while this Agreement is in force by reason of death, the Company’s obligations under this Agreement shall immediately expire. 

     Notwithstanding the foregoing, the Company shall be obligated to pay to the Executive the following:

	             	
(a)     	
Base Salary through the Effective Date of Termination;
  
	 
	 	
(b)     	
A prorated Annual Bonus Award, if payable, based on target performance of the Company, as determined by the Board, through the Executive’s Effective Date of Termination. The prorated amount shall
be determined as a function of the length of time within the fiscal year that has elapsed prior to the Executive’s Effective Date of Termination;
  
	 
	 	
(c)     	
Accrued but unused vacation pay through the Effective Date of Termination; and
  
	 

	             	
(d)     	
All other rights and benefits the Executive is vested in, pursuant to other plans and programs of the Company.
  

     All unvested and outstanding stock options and restricted shares shall become immediately vested. Notwithstanding the foregoing, all restrictions regarding the exercise and sale of vested
options and restricted shares shall remain in-force. 

     All payments due to the Executive upon termination of employment shall be paid in accordance with the terms of such applicable plans or programs. The Company and the Executive thereafter
shall have no further obligations under this Agreement. 

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     7.2     Termination Due to Disability. The Company may terminate the Executive’s employment on 30 days’ notice in the event of the
Executive’s “Disability” which, for this purpose, shall mean the Executive’s inability to perform the material duties of the Executive’s employment hereunder by reason of a physical or mental disability or infirmity that is
expected to result in death or last indefinitely.  

     Disability shall be determined by the Board of the Company upon receipt of and in reliance on competent medical advice from one (1) or more individuals, selected by the Board, who are
qualified to give such professional medical advice. 

     It is expressly understood that the Disability of the Executive for a period of one hundred eighty (180) calendar days or less in the aggregate during any period of twelve (12) consecutive
months, in the absence of any reasonable expectation that Executive’s Disability will exist for more than such a period of time, shall not constitute a failure
by Executive to perform Executive’s duties hereunder and shall not be deemed a breach or default of this Agreement. 

     A termination for Disability shall become effective upon the end of the thirty (30) day notice period. Upon the Effective Date of Termination, the Company’s obligations under this
Agreement shall immediately expire. 

Notwithstanding the foregoing, the Company shall be obligated to pay to the Executive the following:

	             	
(a)     	
Base Salary through the Effective Date of Termination;
  
	 
	 	
(b)     	
A prorated Annual Bonus Award, if payable, based on target performance of the Company, as determined by the Board, through the Executive’s Effective Date of Termination. The prorated amount shall
be determined as a function of the length of time within the fiscal year that has elapsed prior to the Executive’s Effective Date of Termination;
  
	 
	 	
(c)     	
Accrued but unused vacation pay through the Effective Date of Termination; and
  
	 
	 	
(d)     	
All other rights and benefits the Executive is vested in, pursuant to other plans and programs of the Company.
  

     All unvested and outstanding stock options and restricted shares shall become immediately vested. Notwithstanding the foregoing, all restrictions regarding the exercise and sale of vested
options and restricted shares shall remain in-force. 

     7.3     Left
Purposefully Blank 

     7.4     Termination by the Company without Cause. At any time during the term of this Agreement, the Board may terminate the Executive’s
employment for reasons other than death, Disability, or for Cause, by providing to the Executive a Notice of Termination, at least thirty (30) calendar days prior to the Effective Date of Termination. Such Notice of Termination shall be irrevocable
absent express, mutual consent of the parties.  

     Upon the Effective Date of Termination, following the expiration of the thirty (30) day notice period, the Company shall pay and provide to the Executive: 

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(a)     	
In consideration of the Executive
    signing a Severance Agreement stipulating a twelve (12) month non-compete
    and non-solicitation period and other mutually agreeable terms, the Executive
    shall receive continuing payment of Executive’s Base Salary for one
    year following the termination of Executive’s employment, subject to
    the Executive’s continuing compliance with the restrictive covenants
    contained herein and, if applicable, in said Severance Agreement;
  
	 
	             	
(b)     	
In consideration of the Executive
    signing a Severance Agreement stipulating a twelve (12) month non-compete
    and non-solicitation period and other mutually agreeable terms, the Executive
    shall receive a lump sum payment equal to the Company’s contributions
    toward maintaining Executive’s enrollment in Company’s continuing
    employee benefits plans (excluding benefits under the executive death benefit
    plan, if any) substantially similar to those that the Executive was receiving
    or entitled to receive immediately prior to the Termination Date for a period
    of twelve (12) months. Additionally, the Executive shall be entitled to any
    benefits to which the Executive is entitled under COBRA;
  
	 
	 	
(c)     	
An amount equal to the Executive’s accrued and unpaid Base Salary and accrued but unused vacation pay through the Effective Date of Termination;
  
	 
	 	
(d)     	
A prorated Annual Bonus Award, if payable, based on target performance of the Company, as determined by the Board consistent with other similarly situated executives, through the Executive’s
Effective Date of Termination. The prorated amount shall be determined as a function of the length of time within the fiscal year that has elapsed prior to the Executive’s Effective Date of Termination; and
  
	 
	 	
(e)     	
All other benefits to which the Executive has a vested right at the time, according to the provisions of the governing plan or program.
  

     All unvested and outstanding stock options and restricted shares shall become immediately vested if employee is terminated without cause. Notwithstanding the foregoing, all restrictions
regarding the exercise and sale of vested options and restricted shares shall remain in-force. 

     Payment of the benefits described in Sections 7.4(a), (b), and (c) (Employment Terminations/Termination by the Company without Cause or by
Executive for Good Reason) shall be paid to the Executive in a single lump sum as soon as practicable following the Effective Date of Termination, but in no event later than the fifteenth
(15th) day of the third month following the completion of the fiscal year in which the Effective Date of Termination occurs. Notwithstanding the foregoing, if the
Executive is a “specified employee” (within the meaning of Code Section 409A), such payment will be made on the date that is six (6) months after the date of the Executive’s separation from service with the Company (except that during
such six-(6-)month period the Executive may receive total payments from the Company that do not exceed the amount specified in Treas. Reg. Section 1.409A -1(b)(9)), or, if earlier, on the Executive’s death. 

     With the exception of the covenants contained in Articles 11 (Confidentiality, Non-solicitation, Non-competition, and
Non-disparagement), 12 (Proprietary Developments), 13 (Executive’s
Representations and Further Agreements), and 14 (Indemnification) herein (which shall survive such termination), the Company
and the Executive thereafter shall have no further obligations under this Agreement.

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     7.5    Termination for Cause. Nothing in this Agreement shall be construed to prevent the Board from terminating the Executive’s employment
under this Agreement for Cause.

     Executive shall not be deemed to be terminated for Cause unless and until there shall have been delivered to the Executive a Notice of Termination that finds Executive is guilty of the
conduct described in subsections (a), (b), (c), or (d) of the definition set forth in Section 2.7 (Definitions/”Cause”) above and specifying the particulars
thereof in detail. 

     Subject to the terms of the Company’s nonqualified deferred compensation plan and any deferral elections there under, in the event this Agreement is terminated by the Company for
Cause, the Company shall pay the Executive Executive’s Base Salary and accrued vacation pay through the Effective Date of Termination in a single lump sum as
soon as practicable following the Effective Date of Termination, but in no event later than the fifteenth (15th) day of the third month following the completion
of the fiscal year in which the Effective Date of Termination occurs, and the Executive shall immediately thereafter forfeit all rights and benefits (other than vested benefits) he would otherwise have been entitled to receive under this Agreement.
The Company and the Executive thereafter shall have no further obligations under this Agreement with the exception of the covenants contained in Articles 11 (Confidentiality, Non-solicitation,
Non-competition, and Non-disparagement), 12 (Proprietary Developments), 13 (Executive’s Representations and Further Agreements), and 14 (Indemnification) herein (which shall
survive such termination). 

     7.6     Termination Following a Change in Control. In the event the Executive’s employment is terminated by the Company without Cause or by
the Executive for Good Reason within twelve (12) months following a Change in Control, the Company shall pay and provide to the Executive: 

	 	
(a)     	
In consideration of the Executive
    signing a Severance Agreement stipulating a twelve (12) month non-compete
    and non-solicitation period and other mutually agreeable terms, the Executive
    shall receive an amount equal to one (1) times the Executive’s annual
    Base Salary;
  
	 
	 	
(b)     	
In consideration of the Executive
    signing a Severance Agreement stipulating a twelve (12) month non-compete
    and non-solicitation period and other mutually agreeable terms, the Executive
    shall receive a lump sum payment equal to the Company’s contributions
    toward maintaining Executive’s enrollment in Company’s continuing
    employee benefits plans (excluding benefits under the executive death benefit
    plan, if any) substantially similar to those that the Executive was receiving
    or entitled to receive immediately prior to the Termination Date for a period
    of twelve (12) months. Additionally, the Executive shall be entitled to any
    benefits to which the Executive is entitled under COBRA;
  
	 
	             	
(c)     	
An amount equal to the Executive’s accrued and unpaid Base Salary and accrued but unused vacation pay through the Effective Date of Termination;
  
	 
	 	
(d)     	
A prorated Annual Bonus Award, if payable, based on target performance of the Company, as determined by the Board consistent with other similarly situated executives, through the Executive’s
Effective Date of Termination. The prorated amount shall be determined as a function of the length of time within the fiscal year that has elapsed prior to the Executive’s Effective Date of Termination; and
  
	 

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	             	(e)      	All other benefits to which the Executive
        has a vested right at the time, according to the provisions of the governing
    plan or program.

     All unvested and outstanding stock options and restricted shares shall become immediately vested if employee is terminated pursuant to Section 7.6 herein. Notwithstanding the foregoing,
all restrictions regarding the exercise and sale of vested options and restricted shares shall remain in-force. 

     Payment of the amounts and benefits described in this Section 7.6 (Employment Terminations/Termination Following a Change in
Control) shall be paid to the Executive in a single lump sum as soon as practicable following the Effective Date of Termination, but in no event beyond thirty (30) days from such date. Notwithstanding the
foregoing, if the Executive is a “specified employee” (within the meaning of Code Section 409A), such payment will be made on the date that is six (6) months after the date of the Executive’s separation from service with the Company
(except that during such six-(6-)month period the Executive may receive total payments from the Company that do not exceed the amount specified in Treas. Reg. Section 1.409A -1(b)(9)), or, if earlier, on the Executive’s death. 

     With the exception of the covenants contained in Articles 11 (Confidentiality, Non-solicitation, Non-competition, and
Non-disparagement), 12 (Proprietary Developments), 13 (Executive’s
Representations and Further Agreements), and 14 (Indemnification) herein (which shall survive such termination), the Company
and the Executive thereafter shall have no further obligations under this Agreement.

Article 8. Left Purposefully Blank

Article 9. Assignment 

     9.1     Assignment by Company. This Agreement may and shall be
assigned or transferred to, and shall be binding upon and shall inure to the benefit of any successor company. Any such successor company shall be deemed substituted for all purposes of the “Company” under the terms of this Agreement.
Notwithstanding such assignment, the Company shall remain, with such successor company, jointly and severally liable for all its obligations hereunder. 

     Failure of the Company to obtain the agreement of any successor company to be bound by the terms of this Agreement prior to the effectiveness of any such succession shall be a breach of
this Agreement, and shall immediately entitle the Executive to benefits from the Company in the same amount and on the same terms as the Executive would be entitled to receive in the event of a termination of employment without Cause as provided in
Section 7.4 (Employment Terminations/Termination by the Company without Cause or by Executive for Good Reason). Except as herein provided, this Agreement may not
otherwise be assigned by the Company. 

     9.2     Assignment by Executive. This Agreement shall inure to
the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees. If the Executive dies while any amount would still be payable to him
hereunder had he continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement, to the Executive’s Beneficiary. If the Executive has not named a Beneficiary, then such
amounts shall be paid to the Executive’s estate. 

- 11 -

Article 10. Notices; Arbitration

     10.1    Notices. Any notices, requests, demands, or other
communications provided by this Agreement shall be sufficient if in writing and if sent by registered or certified mail to the Executive at the last address he has filed in writing with the Company or, in the case of the Company, at its principal
offices, 10 Progress Drive, Suite 200, Shelton, Connecticut 06484. 

     10.2    Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled by arbitration. The
arbitration shall be conducted before a panel of three (3) arbitrators sitting in a location selected by the Executive within fifteen (15) miles from the location of Executive’s job with the Company and in accordance with the rules of the
American Arbitration Association then in effect. The decision of the arbitrators shall be binding on both the Company and Executive. Judgment may be entered on the award of the arbitrators in any court having jurisdiction. All expenses of such
arbitration, including the fees and expenses reasonably incurred by Executive, shall be borne by the Company. 

Article 11. Confidentiality, Non-Solicitation, Non-Competition, and Non-Disparagement 

     11.1    Disclosure of Information. The Executive recognizes
that he has access to and knowledge of confidential and proprietary information of the Company that is essential to the performance of Executive’s duties under
this Agreement. The information which the Company regards as confidential and proprietary and/or as trade secrets includes all information, including a formula, pattern, compilation, program, device, method, technique, or process that derives
independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means, by other individuals who can obtain economic value from its disclosure or use. 

     The Executive will not, during or after the term of Executive’s employment by the Company, in whole
or in part, disclose such information to any person, firm, corporation, association, or other entity for any reason or purpose whatsoever, nor shall he make use of any such information for Executive’s own purposes, so long as such information has not otherwise been disclosed to the public or is not otherwise in the public domain except as required by law or pursuant to
administrative or legal process. 

     11.2    Covenants Regarding Other Employees and Customers. During the term of this Agreement, and for a period of eighteen months following the
Executive’s termination of employment for any reason, the Executive agrees not to actively solicit any employee of the Company to terminate his or her employment with the Company, take any action that would interfere with the relationship the
Company has with its customers, or interfere in a similar manner with the business of the Company. 

     11.3    Non-compete Following a Termination of Employment. From the Effective Date of this Agreement until twelve (12) months following the Executive’s Effective Date of Termination for any reason, the Executive will not: (a) directly or indirectly own any equity or proprietary interest in
(except for ownership of shares in a publicly traded company not exceeding three percent (3%) of any class of outstanding securities), or be an employee, agent, director, advisor, or consultant to or for any Competitor of the Company, whether on
Executive’s own behalf or on behalf of any person; or (b) undertake any action to induce or cause any customer or client to discontinue any part of its business
with the Company.

     11.4    Non-Disparagement. During the term of this Agreement and thereafter, neither party shall make any statements, written or oral, to any
third party which disparage, criticize, discredit or otherwise operate to the detriment of Executive or the Company, its present or former officers, directors and employees and their respective business reputation and/or goodwill, except as required
by law or regulation. 

- 12 -

     11.5   Rights
and Remedies Upon Breach of the Agreement.

	     	
(a)     	
If the Executive breaches any of the provisions of this Agreement while he is employed by the Company or during the time period set forth in Sections 11.1 (Confidentiality, Non-solicitation, Non-competition, and Non-disparagement/Disclosure of Information), 11.2 (Confidentiality, Non-solicitation,
Non-competition, and Non-disparagement/Covenants Regarding Other Employees and Customers), 11.3 (Confidentiality, Non-solicitation, Non-competition, and
Non-disparagement/Non-compete Following a Termination of Employment), or 11.4 (Confidentiality, Non-solicitation, Non-competition, and Non-disparagement/Non-
Disparagement) he shall forfeit any and all rights he may have to payments due to him under the long-term incentive compensation plan. In addition, he shall be required to remit any cash severance paid to
him (other than accrued vacation time) within the twelve (12) month period preceding the date of the breach of this Agreement;
  
	 
	 	
(b)     	
Furthermore, if the Executive breaches or threatens to commit a breach of any of the provisions of this Agreement, the Company shall have the right and remedy to have the obligations pursuant to such
sections specifically enforced by any court having equity jurisdiction, it being acknowledged and agreed that any such breach or threatened breach will cause irreparable injury to the Company and that money damages alone will not provide an adequate
remedy to the Company. Such rights and remedies shall be in addition to, and not in lieu of, monetary damages or any other rights and remedies available to the Company under law.
  

     11.6   Code of Conduct. Nothing in this Article 11 (Confidentiality, Non-solicitation, Non-competition,
and Non-disparagement) is intended to limit, modify or reduce Executive’s obligations under the Company’s Code of Conduct. Executive’s obligations under this Article 11 (Confidentiality, Non-solicitation, Non-competition, and Non-disparagement) are in addition to, and not in lieu of, Executive’s obligations under the Code of Conduct. To the extent
there is any inconsistency between this Article 11 (Confidentiality, Non-solicitation, Non-competition, and Non-disparagement) and the Code of Conduct which would
permit the Executive to take any action or engage in any activity pursuant to this Article 11 (Confidentiality, Non-solicitation, Non-competition, and Non-disparagement) which Executive would be barred from taking or engaging in under the Code of Conduct, the Code of Conduct shall control. 

Article 12. Proprietary Developments.

     12.1   Proprietary Developments. Any and all inventions, products, discoveries, improvements, processes, methods, computer software programs,
models, techniques, or formulae (collectively, hereinafter referred to as “Developments”), made, conceived, developed, or created by Executive (alone or in conjunction with others, during regular work hours or otherwise) during
Executive’s employment, which may be directly or indirectly useful in, or relate to, the business conducted or to be conducted by the Company will be promptly disclosed by Executive to the Company and shall be the Company’s exclusive
property. The term “Developments” shall not be deemed to include inventions, products, discoveries, improvements, processes, methods, computer software programs, models, techniques, or formulae which were in the possession of Executive
prior to the term of this Agreement. Executive hereby transfers and assigns to the Company all proprietary rights which Executive may have or acquire in any Developments and Executive waives any other special right which the Executive may have or
accrue therein. Executive will execute any documents and to take any actions that may be required, in the reasonable determination of the Company’s counsel, to effect and confirm such assignment, transfer and waiver, to direct the issuance of
patents, trademarks, or copyrights to the 

- 13 -

Company with respect to such Developments as are to be the Company’s exclusive property or to vest in the Company title to such Developments; provided, however, that the expense of securing any patent, trademark
or copyright shall be borne by the Company. The parties agree that Developments shall constitute confidential information for purposes of Section 11.1 (Confidentiality, Non-solicitation, Non-competition, and
Non-disparagement/Disclosure of Information). 

     12.2   Work
Made for Hire. Any work performed by
Executive during Executive’s employment with the Company shall be considered
a “Work
Made for Hire” as defined in the U.S. Copyright laws, and shall be owned
by and for the express benefit of the Company. In the event it should be established
that such work does not qualify as a Work Made for Hire, Executive agrees to
and does  hereby assign to the Company all of Executive’s right, title,
and interest in such work product including, but not limited to, all copyrights
and other proprietary rights. 

     12.3   Cooperation. Both
during the term of this Agreement and thereafter, Executive shall fully cooperate
with the Company in the protection and  enforcement of any intellectual property
rights that relate to services performed by Executive for the Company, whether
under the terms of this Agreement or prior to the execution of this Agreement.
This shall include without limitation executing,  acknowledging, and delivering
to Company all documents or papers that may be necessary to enable the Company
to publish or protect such intellectual property rights. The Company shall bear
all costs in connection with Executive’s compliance
with the terms of this section. 

Article 13. Executive’s Representations and Further Agreements. 

     13.1   Executive’s
Representations. Executive represents,
warrant, and covenants to Company that: 

	             	
(a)     	
Neither the execution and delivery of this Agreement by Executive nor the performance of any of Executive’s duties hereunder in accordance with the Agreement will violate, conflict with, or result
in the breach of any order, judgment, employment contract, agreement not to compete, or other agreement or arrangement to which Executive is a party or is subject;
  
	 
	 	
(b)     	
On or prior to the date hereof, Executive has furnished to the Company true and complete copies of all judgments, orders, written employment contracts, agreements not to compete or other agreements or
arrangements that have current application to Employee;
  
	 
	 	
(c)     	
Executive is knowledgeable and sophisticated as to business matters, including the subject matter of this Agreement, and that prior to assenting to the terms of this Agreement, or giving the
representations and warranties herein, he has been given a reasonable time to review it and has consulted with counsel of Executive’s choice; and
  
	 
	 	
(d)     	
Executive will not knowingly breach or violate any provision of any law or regulations or any agreement to which Executive may be bound.
  
	 
	 	
(e)     	
Executive has not provided, nor been requested by the Company to provide, to the Company, any confidential or non public document or information of a former
  
	 

- 14 - 

 

	                    	employer that constitutes or contains
        any protected trade secret, and will not use any protected trade secrets
    in connection with the Executive’s employment. 

     13.2   Cooperation. During and subsequent to expiration of the term of this Agreement, the Executive will cooperate with the Company, and furnish
any and all complete and truthful information, testimony or affidavits in connection with any matter that arose during the Executive’s employment, that in any way relates to the business or operations of the Company or any of its parent or
subsidiary corporations or affiliates, or of which the Executive may have any knowledge or involvement; and will consult with and provide information to the Company and its representatives concerning such matters. Subsequent to the term of this
Agreement, the parties will make their best efforts to have such cooperation performed at reasonable times and places and in a manner as not to unreasonably interfere with any other employment in which Executive may then be engaged. Nothing in this
Agreement shall be construed or interpreted as requiring the Executive to provide any testimony, sworn statement, or declaration that is not complete and truthful. If the Company requires the Executive to travel outside the metropolitan area in the
United States where the Executive then resides to provide any testimony or otherwise provide any such assistance, then the Company will reimburse the Executive for any reasonable, ordinary, and necessary travel and lodging expenses incurred by
Executive to do so provided the Executive submits all documentation required under the Company’s standard travel expense reimbursement policies and as otherwise may be required to satisfy any requirements under applicable tax laws for the
Company to deduct those expenses. Nothing in this Agreement shall be construed or interpreted as requiring the Executive to provide any testimony or affidavit that is not complete and truthful.

     13.3   Forfeiture of Compensation. If the Company is required to prepare an accounting restatement due to the material noncompliance of the
Company, as a result of misconduct, with any financial reporting requirement under the securities laws, if the Executive knowingly or grossly negligently engaged in the misconduct, or knowingly or grossly negligently failed to prevent the
misconduct, or if the Executive is one of the individuals subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, the Executive shall reimburse the Company the amount of any paid compensation earned or accrued during the
twelve-(12-)month period following the first public issuance or filing with the United States Securities and Exchange Commission (whichever just occurred) of the financial document embodying such financial reporting requirement. 

Article 14. Miscellaneous

     14.1   Entire Agreement. This Agreement supersedes any prior
agreements or understandings, oral or written, between the parties hereto or between the Executive and the Company, with respect to the subject matter hereof, and constitutes the entire agreement of the parties with respect thereto. 

     14.2   Modification. This Agreement shall not be varied,
altered, modified, canceled, changed, or in any way amended except by mutual agreement of the parties in a written instrument executed by the parties hereto or their legal representatives. 

     14.3   Severability. In the event that any provision or
portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect. 

- 15 -

     14.4   Counterparts and Facsimile Signatures. This Agreement
may be executed in one (1) or more counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement. This Agreement may be executed by facsimile signatures. 

     14.5   Tax Withholding. The Company may withhold from any
amounts payable under this Agreement all federal, state, city, or other taxes as may be required pursuant to any law or governmental regulation or ruling. 

     14.6   Beneficiaries. Any payments or benefits hereunder due
to the Executive at the time of Executive’s death shall nonetheless be paid or provided and the Executive may designate one or more individuals or entities as
the primary and/or contingent Beneficiaries of any amounts to be received under this Agreement. Such designation must be in the form of a signed writing acceptable to the Board. The Executive may make or change such designation at any time.

     14.7   Payment Obligation Absolute. All amounts payable by the Company hereunder shall be paid without notice or demand. The restrictive
covenants contained in Articles 11 (Confidentiality, Non-solicitation, Non-competition, and Non-disparagement), 12 (Proprietary Developments), and 13 (Executive’s Representations and Further Agreements) are
independent of any other contractual obligations in this Agreement or otherwise owed by the Company to the Executive. Except as provided in this paragraph, the existence of any claim or cause of action by Executive against the Company, whether based
on this Agreement or otherwise, shall not create a defense to the enforcement by the Company of any restrictive covenant contained herein. 

     The Executive shall not be obligated to seek other employment in mitigation of the amounts payable or arrangements made under any provision of this Agreement, and the obtaining of any such
other employment shall in no event effect any reduction of the Company’s obligations to make the payments and arrangements required to be made under this Agreement.

     14.8   Contractual Rights to Benefits. Subject to approval by the Company’s Board of Directors, this Agreement establishes and vests in the
Executive a contractual right to the benefits to which he is entitled hereunder. However, nothing herein contained shall require or be deemed to require, or prohibit or be deemed to prohibit, the Company to segregate, earmark, or otherwise set aside
any funds or other assets, in trust or otherwise, to provide for any payments to be made or required hereunder. 

     14.9   Specific Performance. The Executive acknowledges that
the obligations undertaken by him pursuant to this Agreement are unique and that the Company will likely have no adequate remedy at law if the Executive shall fail to perform any of Executive’s obligations hereunder. The Executive therefore confirms that the Company’s right to specific performance of the terms of this Agreement is essential to protect the
rights and interests of the Company. Accordingly, in addition to any other remedies that the Company may have at law or in equity, the Company shall have the right to have all obligations, covenants, agreements, and other provisions of this
Agreement specifically performed by the Executive and the Company shall have the right to obtain preliminary injunctive relief to secure specific performance and to prevent a breach or contemplated breach of this Agreement by the Executive.

     14.10  Compliance with Code Section 409A.

     (a)       In General. This Agreement is intended to be administered in a manner consistent with the
requirements, where applicable, of Code Section 409A. Where reasonably possible and practicable, the Agreement shall be administered in a manner to avoid the imposition on Executive of immediate tax 

- 16 -

recognition and additional taxes pursuant to such Section 409A. Notwithstanding the foregoing, neither the Company nor the Committee shall have any liability to the Executive or Executive’s estate in the event such Section 409A applies to any compensation under this Agreement in a manner that results in adverse tax consequences for the Executive or any of
Executive’s beneficiaries or transferees.

     (b)       Elective Deferrals. Any elective deferrals of compensation payable under this Agreement shall only be
permitted pursuant to the Company’s nonqualified deferred compensation plan, if any.

     (c)       Applicable Requirements. To the extent any compensation granted under this Agreement is deemed
“deferred compensation” and hence subject to Code Section 409A, the following rules shall apply to such compensation: 

              (i)       Mandatory Deferrals. If the Company decides that the payment of compensation under this Agreement
shall be deferred within the meaning of Code Section 409A, then, except as provided pursuant to Treas. Reg. 1.409A -1(b)(4)(ii), at the time of the grant to which such compensation payment relates, the Company shall specify the date(s) at which such
compensation will be paid. 

              (ii)     Subsequent
Deferral Elections. To the extent the
Company or Committee decides to permit  compensation subject to Code Section
409A to be re-deferred pursuant to Treas. Reg. 1.409A -2(b), then the following
conditions must be met: (1) such election will not take effect until at least
twelve (12) months after the date on which it is made;  (2) in the case of an
election not related to a payment on account of disability, death, or an unforeseeable
emergency, the payment with respect to which such election is made must be deferred
for a period of not less than five (5) years from the  date such payment would
otherwise have been paid; and, (3) any election related to a payment at a specified
time or pursuant to a fixed schedule (within the meaning of Treas. Reg. 1.409A
-3(a)(4)) must be made not less than twelve (12) months before  the date the
payment is scheduled to be paid. 

              (iii)   Timing of Payments. Payment(s) of compensation that is subject to Code Section 409A shall only be
made upon an event or at a time set forth in Treas. Reg. 1.409A -3, i.e., the Executive’s separation from service, the Executive’s becoming disabled, the
Executive’s death, at a time or a fixed schedule specified in the applicable plan or an award agreement, a change in the ownership or effective control of the corporation, or in the ownership of a substantial portion of the assets of the
corporation, or the occurrence of an unforeseeable emergency. 

              (iv)    Certain
Delayed Payments. Notwithstanding the
foregoing, to the extent an amount was intended to be  paid such that it would
have qualified as a short-term deferral under Code Section 409A and the applicable
regulations, then such payment may be delayed if the requirements of Treas. Reg.
1.409A -1(b)(4)(ii) are met. 

              (v)     Acceleration
of Payment. Except in accordance with
Treas. Reg. 1.409A -3(j)(4), any payment made  under this Agreement to which
Code Section 409A applies may not be accelerated, , i.e., payments
may only be made upon the Executive’s separation from service,
the Executive becoming disabled, the Executive’s death, at a time or pursuant
to a fixed schedule specified in this Agreement, a change of ownership or effective
control, or in the ownership of a substantial portion of the assets, or upon
an  unforeseeable emergency (all as detailed in Treas. Reg. 1.409A -3(a)).

     (d)        Change
in Control. Notwithstanding any provision
of this Agreement to the contrary, to the extent any  compensation or award shall
be deemed to be vested or restrictions lapse, expire or terminate upon the occurrence
of a Change in Control and such Change in Control does not constitute a “change
in 

- 17 -

the ownership or effective control” or a “change in the ownership or a substantial portion of the assets” of the Corporation within the meaning of Code Section 409A(a)(2)(A)(v), then even though such
compensation or award may be deemed to be vested or restrictions lapse, expire or terminate upon the occurrence of the Change in Control or any other provision of this Agreement, payment will be made, to the extent necessary to comply with the
provisions of Code Section 409A, to the Executive on the earliest of: (i) the Executive’s “separation from service” with the Corporation (determined in accordance with Code Section 409A); provided, however, that if the Executive is a
“specified employee” (within the meaning of Code Section 409A), the payment date shall be the date that is six (6) months after the date of the Executive’s separation from service with the Company (except that during such
six-(6-)month period the Executive may receive total payments from the Company that do not exceed the amount specified in Treas. Reg. Section 1.409A -1(b)(9)), (ii) the date payment otherwise would have been made in the absence of any provisions in
this Agreement to the contrary (provided such date is permissible under Code Section 409A), or (iii) the Executive’s death. 

     (e)       Determining “Controlled
Group”. In order to determine
for purposes of Code Section 409A  whether the Executive is employed by a member
of the Company’s controlled group of corporations under Code Section 414(b)
(or by a member of a group of trades or businesses under common control with
the Company under Code Section 414(c)) and,  therefore, whether any shares of
common stock that are or have been purchased by or awarded under this Agreement
to the Executive are shares of “service recipient” stock within the
meaning of Code Section 409A: 

              (i)      In applying Code Section 1563(a)(1), (2) and (3) for purposes of determining the Company’s controlled group under Code Section 414(b), the language “at least 50
percent” is to be used instead of “at least 80 percent” each place it appears in Code Section 1563(a)(1), (2) and (3);

              (ii)     In
applying Treasury Regulation Section 1.414(c) -2 for purposes of determining
trades or businesses under common control with the Corporation for purposes of
Code Section 414(c),  the language “at least 50 percent” is to be used
instead of “at least 80 percent” each place it appears in Treasury
Regulation Section 1.414(c) -2; and 

                (iii)     Notwithstanding
the above, to the extent that the Company finds that legitimate business criteria
exist within the meaning of Treas. Reg. 1.409A -1(b)(5)(E)(1), then the language
“at least 50 percent” in clause (i) and (ii) above shall instead be “at
least 20 percent.” 

Article 15. Governing Law

     To the extent not preempted by federal law, the provisions of this Agreement shall be construed and enforced in accordance with the laws of the state of Connecticut, excluding any
conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of the Agreement to the substantive law of another jurisdiction.

Article 16. Indemnification

     The Company hereby covenants and agrees to indemnify and hold harmless the Executive against and in respect to any and all actions, suits, proceedings, claims, demands, judgments, costs,
expenses, losses, and damages resulting from the Executive’s performance of Executive’s duties and obligations under the terms of this Agreement; provided
however, the Executive acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company or its shareholders, 

- 18 -

and with respect to a criminal action or proceeding, the Executive had no reasonable cause to believe Executive’s conduct was
unlawful.  

	
HC Innovations, Inc.  	   	
Executive:  
	
/s/ David Chess  	   	
/s/ Scott Walker  
	
Dr, David Chess, CEO  	   	
Scott Walker  

 

 

 

 

 

 

 

 

 

 

 

 

- 19 -

EXHIBIT A

STOCK OPTION AGREEMENT made as of October 6th , 2008, between Health Care Innovations,
Inc., a Delaware corporation (the “Company”), and Scott Walker (the “Optionee”). 

WHEREAS, the Optionee is an employee of the Company or a subsidiary thereof; 

WHEREAS, the Company desires to provide to the Optionee an additional incentive to promote the success of the Company; 

NOW, THERFORE, in consideration of the foregoing, the Company hereby grants to the Optionee the right and option to purchase Common Shares (the “Grant”) of the
Company under and pursuant to the terms and conditions of the 2008 Incentive Compensation Plan (the “Plan”) and upon and subject to the following terms and conditions: 

	     	
1.     	
GRANT OF OPTION. The Company hereby grants to the Optionee the right and option (the “Option”) to purchase one million (1,000,000) Common Shares of
the Company (the “Option Shares”). Subject to the provisions hereof and of the Plan, the Option will vest with respect to 100,000 shares on the date hereof (subject to the shareholder approval limitation on exercise set forth in paragraph
4 below), and, with respect to the remaining 900,000 shares, in five equal annual increments beginning October 6, 2009, subject to your continuous employment with the Company on each applicable vesting date. Unless sooner terminated, the Option will
expire on the tenth anniversary of the date hereof (the “Expiration Date”).
  
	 
	 	
2.     	
NATURE OF OPTION. Such Options to purchase the Option Shares are intended to meet the requirements of Section 422 of the Internal Revenue Code of 1986, as
amended, relating to “incentive stock options”.
  
	 
	 	
3.     	
Exercise Price. The exercise price of each of the Option Shares shall be sixty three and a half Cents ($0.635) (the “Option Price”). The
Company shall pay all original issue or transfer taxes on the exercise of the Option.
  
	 
	 	
4.     	
EXERCISE OF OPTIONS. The Option (to the extent otherwise vested and exercisable) may be exercised by delivering to the Secretary of the Company a written
notice specifying the number of shares with respect to which the Option is being exercised, together with payment of the exercise price and applicable withholding taxes (unless other arrangements for such payment, satisfactory to the Company, shall
have been made). As soon as practicable after the acceptance of such notice of exercise and the payment (or satisfactory arrangement for payment) of the of the Option Price and applicable withholding taxes, the Company shall tender to the Optionee
certificates issued in the Optionee’s name evidencing the number of Option Shares covered thereby. Notwithstanding the foregoing, this Option will not be exercisable unless the Plan is approved by the Company’s stockholders within 12
months after the date it was adopted by the Company’s Board of Directors, and the Option will expire at the end of said 12-month period if the Plan is not so approved.
  
	 
	 	
5.     	
TRANSFERABILITY. The Option shall not be transferable other than by will or the laws of descent and distribution and, during the Optionee’s lifetime,
shall not be exercisable by any person other than the Optionee.
  
	 

- 20 - 

	     	
6.     	
TERMINATION OF EMPLOYMENT OF OPTIONEE. If the Optionee’s employment terminates, then, except as otherwise specified in the Plan, the non-vested portion
of the Option will terminate at the time of such termination of employment and the vested portion of the Option (if any) will be exercisable for 90 days following the date of such termination of employment (1 year in the event of termination due to
death or Disability (as defined in the Plan); provided, however, that, if the Optionee’s employment is terminated by the Company or a Subsidiary without Cause (as defined in the Plan), the entire Option, whether or not then vested, will
terminate at the time of such termination of employment.
  
	 
	 	
7.     	
INCORPORATION BY REFERENCE. The terms and conditions of the Plan are hereby incorporated by reference and made a part hereof. The terms of the Plan will
govern in the event of any inconsistency between the terms of the Plan and the terms of this Agreement.
  
	 
	 	
8.     	
NOTICES. Any notice or other communication given hereunder shall be deemed sufficient if in writing and hand delivered or sent by registered or certified
mail, return receipt requested, addressed to the Company, 10 Progress Drive, Shelton, CT, 06484, Attention: Secretary and to the Optionee at the address indicated below. Notices shall be deemed to have been given on the date of hand delivery or
mailing, except notices of change of address, which shall be deemed to have been given when received.
  
	 
	 	
9.     	
BINDING EFFECT. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective legal representatives, successors
and assigns.
  
	 
	 	
10.     	
ENTIRE AGREEMENT. This Agreement, together with the Plan, contains the entire understanding of the parties hereto with respect to the subject matter hereof
and may be modified only by an instrument executed by the party sought to be charged.
  

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

	
Health Care Initiatives, Inc.  	   	
Optionee  
	
David Chess, MD, CEO  	   	Name of Optionee 

	 	 	 
	   	   	
Signature of Optionee  
	 	 
	   	   	
Address of Optionee  

 

- 21 -c55318_ex10-1.htm

EX-10.1

 

SEPARATION
  AGREEMENT AND GENERAL RELEASE OF CLAIMS (this “Agreement”), dated as of October 20, 2008, by and between ELITE PHARMACEUTICALS, INC., with offices at 165 Ludlow Avenue, Northvale, New Jersey 07647 (the “Company”), and STUART APFEL, an individual residing at 218 Walker Place, West Hempstead, NY 11552. 

BACKGROUND

          WHEREAS, Employee is presently employed by the Company; and

          WHEREAS,
Employee’s employment with the Company has been terminated as of the Separation
Date (as defined below), and, in connection therewith, the Company has agreed
to provide  certain benefits to Employee in consideration of Employee’s
execution and performance of this Agreement; 

           NOW, THEREFORE, in consideration of the mutual covenants and conditions contained in this Agreement and other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound hereby, the parties agree as follows: 

TERMS

           1.      Termination of Employment. Employee
acknowledges that his employment with the Company shall terminate as of, and that his work-through date with the Company is the close of business on October 20, 2008 (the “Separation Date”). Employee acknowledges that all expenses to which he may be entitled to reimbursement have been reimbursed. 

       (a)     Employment
Agreement. Employee acknowledges
and hereby waives his entitlement to certain notice and payment provisions upon
termination under his Employment Agreement dated January 3, 2008, by and between
Employee and the Company (the “Employment Agreement”).
In particular, Employee hereby waives his right to notice under Section 3.2.4
and all obligations of the Company to the Employee  set forth in Sections 3.3,
3.2.4, 3.3.2 of the Employment Agreement, including without limitation the Severance
Amount (as such term is defined in the Employment Agreement). Employee further
acknowledges that there are no payment amounts outstanding  to Employee under
the Employment Agreement. 

          2.     Severance Benefits. The Company shall pay to Employee a severance payment of Four Thousand Two Hundred Nineteen Dollars (US$4,219) less any payroll or withholding taxes (the “Severance Payment”) Upon payment of the Severance Payment, the Company shall have no further obligation to Employee, including, without limitation, on
account of his service as an employee of the Company.

          3.     Covenants, Representations and Warranties of the Parties. The Company and Employee each represents and warrants to the other (as to itself) that (i) the party has full authority and capacity to enter into and perform the party’s obligations under
this Agreement

	 	Page 1 of  9 	
Initials  /s/ SA  	

(having obtained all requisite corporate, company and/or governmental approvals), (ii) this Agreement has been fully authorized, executed and delivered by the party and that the party has
full legal right, power and authority to enter into and perform this Agreement, which constitutes a valid and binding agreement between the parties, enforceable against the party in accordance with its terms, (iii) there are no agreements between
the party and any third party that conflict with this Agreement; and (iv) no consent or approval of any third party, court or governmental agency is required in connection with the party’s execution and performance of this Agreement.

          4.     General Release of Claims and Covenants Not to Sue. Employee for himself and his respective administrators, executors, agents, beneficiaries and assigns, does hereby waive, release and forever discharge the Company (as hereinafter defined for the
purposes of this Section 4) of and from any and all Claims (as defined below). Employee agrees not to file a lawsuit to assert any such Claim. This release covers all Claims arising from the beginning of time up to and including the date of this
Agreement, but does not cover Claims relating to the validity or enforcement of this Agreement. In addition, Employee irrevocably and unconditionally releases, forever discharges, and agrees to indemnify and hold harmless the Company from all Claims
Employee believes or, at a later date may believe, he has against the Company for any actions arising out of Employee’s employment with or separation from the Company from the beginning of time up to and including the date of this Agreement,
whether known or unknown as of the date of this Agreement.

     (a)     Definition
of “Claims”. (i) For purposes of this
Agreement, “Claims” includes
without limitation all  actions or demands of any kind that Employee now has,
or may have or claim to have in the future arising out of occurrences on or before
the date of this Agreement. More specifically, Claims include rights, causes
of action, damages, penalties,  losses, attorneys’ fees, costs, expenses,
obligations, agreements, judgments and all other liabilities of any kind or description
whatsoever, either in law or in equity, whether known or unknown, suspected or
unsuspected. 

                   (ii)
     The nature of Claims covered by this release and
covenant not to sue includes, without limitation, all actions or demands in any
way based on Employee’s
employment with Company,  the terms and conditions of such employment, or the
termination of such employment. More specifically, all of the following are included
in the types of Claims that will be barred by this release and covenant not to
sue: (i) contract claims (whether  express or implied), (ii) tort claims (such
as for defamation or emotional distress), (iii) claims under federal, state and
municipal laws, regulations, ordinances or court decisions of any kind, (iii)
claims of discrimination, harassment or  retaliation, whether based on race,
color, religion, gender, sex, age, sexual orientation, handicap or disability,
national origin, or any other legally protected class, (iv) claims under the
Age Discrimination in Employment Act of 1967 as amended  by the Older Workers
Benefit Protection Act, Title VII of the Civil Rights Act of 1964 as amended
by the Civil Rights Act of 1991, the Equal Pay Act of 1962, the Americans with
Disabilities Act of 1990, the Workers Adjustment and Retraining  Notification
Act, the New York State Human Rights Law (Article 15 of the New York State Employee
Law), the New York City Human Rights Law (Title I, Chapter B of the Administrative
Code of the City of New York), or any other federal, state or local  statute
or ordinance, (v) claims under Employee Retirement Income

	 	Page 2 of  9	Initials
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Security Act, the Fair Labor Standards Act, state wage payment laws and state wage and hour laws; and (vi) claims for wrongful discharge. 

     (b)      Definition
of “Company”. For purposes of this Section
4, “Company” includes,
without limitation, Elite  Pharmaceuticals, Inc., and its past, present and future
parents, Affiliates (as defined below), subsidiaries, divisions, predecessors,
successors, assigns, employee benefit plans and trusts and each of their respective
past, present and future  directors, officers, partners, shareholders, members,
managers, agents, employees, attorneys, representatives, consultants, associates,
fiduciaries, plan sponsors, administrators and trustees. 

     (c)      Definition
of “Affiliate”. For
purposes of this Agreement, “Affiliate” (and
its derivations) shall mean, with respect to any  person, any other person who
controls, is controlled by or is under common control with such person. For purposes
of the definition of Affiliate, “control” means
the power to direct the management and policies of such person or firm, directly
or indirectly, whether through the ownership of voting securities, by contract
or  otherwise.

     (d)      Employee’s Acknowledgment of Scope of Release. Employee declares and agrees that any Claims he may have incurred or sustained may not be fully known to him and may be more numerous and more serious than he now believes or expects. Further,
in entering into this Agreement, Employee relies wholly upon his own judgment of the future development, progress and result of said Claims, both known and unknown, and acknowledges that he has not been influenced to any extent whatsoever in the
making of this Agreement by any representations or statements regarding said Claims made by individuals or entities who are within the definition of Company above. Employee further acknowledges that he accepts the terms herein in full settlement and
satisfaction of all such Claims. 

          5.      Restrictive Covenants of Employee.

     (a)      Employment Agreement. Employee acknowledges that he has certain obligations under his Employment Agreement dated as of January 3, 2008.  In particular, Employee acknowledges his obligations under Sections 4 and 5: “Protection of Confidential
Information and Trade Secrets; Non-Competition; No Solicitation” and “Continued Cooperation; Return of Documents and Property; Injunctive Relief; Non-Exclusivity and Survival” of the Employment Agreement. Employee agrees that he will
continue to be bound by and shall abide by such provisions. 

     (b)      Confidentiality. 

     (i)      Employee acknowledges and agrees that, during his employment with the Company, he had access to Proprietary Information (as defined below) and that the
Proprietary Information is the exclusive property of the Company or the party that disclosed or delivered such information to the Company. Employee agrees not to use the Proprietary Information, directly or indirectly, and agrees that he will
promptly notify the Company of any unauthorized disclosure of Proprietary Information. Specifically, Employee agrees that all Proprietary Information or inventions developed as a direct result of his efforts on behalf of the Company 

	 	Page 3 of  9	Initials
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during his employment with the Company remain the exclusive property of the Company, and that Employee has no ownership interest therein. For purposes of this Agreement,
“Proprietary Information” means all of the following information and material, whether or not
reduced to writing and whether or not patentable, that Employee, during his employment with the Company, had access to or developed, in whole or in part, as a direct or indirect result of either his efforts on behalf of the Company or through the
use of any of the Company’s facilities or resources: (i) computer software, including without limitation all source and object code, flow charts, algorithms, coding sheets, routines, sub-routines, compilers, assemblers, design concepts and
related documentation and manuals; (ii) production processes, collection and receivable management processes, procedures and techniques, marketing techniques, licensing or sales policies, financial information, employee names and job descriptions,
customer and prospective customer names and requirements, data and other information or materials relating to the manner in which the customer, prospective customer or the Company do business; (iii) patents, patent applications, trademarks,
trademark applications and any other intellectual property rights and discoveries, concepts and ideas (including but not limited to the nature and results of research and development activities), processes, formulae, techniques,
“know-how”, designs, drawings and specifications, information relating to products, proposed products, agreements with or proprietary information of third parties,
and clinical data and analysis, clinical trials, applications and communications with the United States Food and Drug Administration; (iv) any other information or materials relating
to the business or activities of the Company which is not generally known to others engaged in similar business or activities; (v) all inventions and ideas which are derived from or relate to Employee’s access to, or knowledge of, any of the
information or materials describe herein; (vi) any of the information or material described herein which is the property of any other person or firm which has revealed or delivered such information or material to the Company pursuant to a
contractual relationship with the Company or otherwise in the course of the Company’s business. Proprietary Information shall not include any information or material of the type described herein to the extent that such information or material
is or becomes publicly known through no act on Employee’s part in violation of this confidentiality provision. 

     (ii)      Employee further agrees that he shall maintain the terms of this Agreement and the negotiations leading up to it in the STRICTEST CONFIDENCE. Employee
shall not disclose or discuss any of the terms of this Agreement or the negotiations leading up to it with anyone other than: Employee’s immediate family members, accountant, the Internal Revenue Service, legal representative, or pursuant to
subpoena issued as part of a legal proceeding; provided that, before disclosing the terms of this Agreement or the negotiations leading up to it to any of the foregoing, Employee shall advise the recipient regarding the existence of this
confidentiality provision and obtain the agreement of the recipient to maintain the information in accordance with this provision. 

     (c)      Return of Corporate Property and Associated Expenses. Employee represents that he has returned to the Company all corporate property and copies thereof in his possession or under his custody or control, including without limitation, corporate credit
cards, identification badge, calling cards, cellular or mobile telephone, and computer equipment and software. Employee’s access to such property and facilities shall cease effective as of the Separation Date. In addition, Employee represents
and warrants to the Company that he has returned to the Company, and has not retained copies of, all customer records, whether in print or electronic form, and Employee specifically represents and warrants to the Company that he has

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deleted all such information from any personal computer or other electronic storage media in his possession.  Employee’s access to such property and facilities, records, and information
shall cease effective as of the Separation Date. 

     (d)      Non-Disparagement. Employee agrees that he shall not, directly or indirectly, defame, disparage, make negative comments about, whether or not true, the name or reputation of the Company or any of its Affiliates, including but not limited to, any
officer, director, employee or shareholder of the Company or any of its Affiliates, or act in any other manner that is intended to or does damage the good will, business or personal reputations of the Company or any of its Affiliates, including but
not limited to, any officer, director, employee or shareholder of the Company or any of its Affiliates. The provisions of this Section 5(d) shall survive any termination of this Agreement and the termination of the Employee’s employment with
the Company.

          6.      Acknowledgements of Employee.

     (a)      Except as provided for in Section 2, the Company shall have no further obligation to Employee, including, without limitation, on account of his service as
an employee of the Company.

     (b)      Employee acknowledges that any payments or benefits provided to Employee under the terms of this Agreement do not constitute an admission by the Company
that it has violated any law or legal obligation with respect to any aspect of Employee’s employment or separation therefrom. 

     (c)      Employee agrees and acknowledges that Employee’s right to receive and keep the Severance Payment is conditioned upon Employee continuing to observe,
and not be in breach of, the provisions of any of the terms or conditions provided for in this Agreement. Upon any breach hereof, all severance compensation and other benefits due Employee pursuant to Section 2 of this Agreement shall immediately
cease, or if already paid, shall be recoverable in full by the Company.  

     (d)      Employee has not instituted, assisted, or otherwise participated in connection with, any complaint, claim, charge, lawsuit, or administrative agency
proceeding, or action at law or otherwise against the Company. To the extent permitted by law, Employee waives his right to institute in the future any complaint, claim, charge, lawsuit, or administrative proceeding, or action at law or otherwise
against the Company, and agree not to accept any relief or recovery from any such action or proceeding filed on his behalf, other than any complaint, claim, charge, lawsuit, or administrative proceeding, or action at law in connection with, or
resulting from, the Company’s breach of any term of this Agreement. 

     (e)      Employee hereby represents that from the Separation Date onward (i) Employee has not made and will not make any representations, warranties, or commitments
binding the Company and (ii) Employee has not executed and will not execute any agreement on behalf of the Company, nor did Employee or shall Employee hold himself out to have such authority.

	 	Page 5 of  9 	Initials
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     (f)      Upon reasonable advance written notice, during mutually agreeable time periods, and provided the foregoing shall not interfere with Employee’s then
current employment, Employee agrees to make himself available to the Company in any pending or future governmental or regulatory investigation, civil or administrative proceeding, or arbitration, subject to any privileges that Employee may have and
to his other personal and business commitments. The Company will reimburse Employee for any loss of salary and all reasonable costs and expenses incurred by Employee in connection with any such proceeding or arbitration.

     (g)      Employee hereby represents that Employee has not assigned to any person or entity any claim, including, without limitation, Claims that arose or could have
arisen against the Company, or its past, present and future parents, Affiliates, subsidiaries, divisions, predecessors, successors, assigns, employee benefit plans and trusts and each of their respective past, present and future directors, officers,
partners, shareholders, members, managers, agents, employees, attorneys, representatives, consultants, associates, fiduciaries, plan sponsors, administrators and trustees. 

     (h)      Employee acknowledges that he has been advised to consult, and has consulted, with legal counsel of his choosing, at his own expense, regarding the meaning
and binding effect of this Agreement and each and every term hereof prior to executing it. 

     (i)      Employee, intending to be legally bound hereby, certifies and warrants that he has read carefully this Agreement and has executed it voluntarily and with
full knowledge and understanding of its significance, meaning and binding effect. Employee further declares that he is competent to understand the content and effect of this Agreement. 

     (j)      Employee acknowledges that he was given a period of 21 days within which to consider this Agreement and to the extent he executes this Agreement before the
expiration of the 21-day period, he does so knowingly and voluntarily and only after consulting his attorney.  Employee shall have the right to cancel and revoke this Agreement during a period of 7 days following executing this Agreement, and this
Agreement shall not become effective, and no payments or benefits shall be made or provided pursuant to this Agreement, until the day after the expiration of such 7-day period. The 7-day period of revocation shall commence upon Employee executing
this Agreement. In order to revoke this Agreement, the Executive shall deliver to the Company, prior to the expiration of such 7-day period, a written notice of revocation. Upon such revocation, this Agreement shall be null and void and of no
further force or effect. 

          7.      Headings. The
headings contained in this Agreement are not part of this Agreement and are included solely for ease of reference. 

          8.      Integration and Modification. Employee declares and represents that no promise or agreement has been made to him other than those expressed herein and the grant of options to purchase up to 400,000 shares of common stock of the Company at an exercise price of
$1.75

	 	Page 6 of  9 	Initials
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per share as set forth in the Incentive Stock Option Letter Agreements dated January 3, 2008, the “Option
Agreements”), which is each attached hereto as Exhibit A. Except as stated herein, this Agreement and the Option Agreements, constitute the entire agreement of the parties
and supersedes all prior understandings, whether oral or written, between them. Any modification of this Agreement must be made in writing and signed by all parties. 

          9.      Severability. If
any provision of this Agreement is or shall be declared invalid or unenforceable by a court of competent jurisdiction, the remaining provisions shall not be affected thereby and shall remain in full force and effect. 

          10.     Notices.
All  notices and other communications set forth in this Agreement are to be deemed
delivered the day they are sent if sent by same day or overnight commercial service
to the applicable party at the following address (or such other address for a
party as  may be specified by like notice): 

	           	
If to Employee:	
	 	 	
	 	
         Dr. Stuart C. Apfel	
	 	
         218
 Walker Place	
	 	
         West Hempstead, NY 11552	
	 	 	
	 	
If to the Company:	
	 	 	
	 	         Elite Pharmaceuticals, Inc.	
	 	
         165 Ludlow Avenue	
	 	
         Northvale, NJ 07647	
	 	
         Attention: Chief Executive Officer or Chief Financial Officer	
	 	
         Facsimile: (201) 750-2755	
	 	 	
	 	
With a copy to:	
	 	 	
	 	
         Reitler Brown & Rosenblatt LLC	
	 	
         800 Third Avenue, 21st floor	
	 	
         New York, NY 10022	
	 	
         Attention: Lauren K. Kluger, Esq.	
	 	
         Facsimile: (212) 371-5500	

          11.     Governing Law; Consent to Jurisdiction. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York (without giving effect to its choice or conflict of laws provisions). Each of the parties hereby irrevocably and
unconditionally submits to the jurisdiction of the courts of the State of New York and of the federal courts sitting in the State of New York in all actions or proceedings arising out of or relating to this Agreement. Each of the parties agrees that
all actions or proceedings arising out of or relating to this Agreement must be litigated exclusively in any such state or federal court that sits in the City of New York, Borough of Manhattan, and accordingly, each party irrevocably waives
any

	 	Page 7 of  9 	Initials
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objection which it may now or hereafter have to the laying of the venue of any such litigation in any such court.  

          12.     Counterparts.
This Agreement may be executed in any number of counterparts, each of which shall constitute an original, but all of which together shall constitute one and the same instrument. 

          13.     Equitable Remedies. Employee acknowledges and agrees that it would be impossible or inadequate to measure and calculate the Company’s damages from any breach of the covenants set forth in Sections 3, 4, 5 and 6 of this Agreement. Accordingly,
Employee agrees that if he breaches any of such covenants, the Company will have available, in addition to any other right or remedy available, the right to obtain an injunction from a court of competent jurisdiction restraining such breach or
threatened breach and to specific performance of any such provision of this Agreement. Employee further agrees that no bond or other security shall be required in obtaining such equitable relief and hereby consents to the issuance of such injunction
and to the ordering of specific performance. 

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

 

 

 

	 	Page 8 of  9 	Initials
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          IN WITNESS WHEREOF, and with the intention of being legally bound hereby, the parties have executed this Separation Agreement and General Release of Claims as
of the date first written above. 

	 	/s/
    Stuart Apfel	 
	 	
      DR. STUART C. APFEL	
	 	 	 	
	 	 	 	
	 	 	 	
	 	
      ELITE PHARMACEUTICALS, INC.	
	 	 	 	
	 	 	 	
	 	By:  	/s/
    Chris Dick	 
	 	 	 Name: Chris Dick	
	 	 	
Title: Executive Vice President of	
	 	 	
         Corporate
Development	

 

 

 

	 	Page 9 of  9 	Initials
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