Document:

mcrb-ex103_260.htm

Exhibit 10.3

EMPLOYMENT AGREEMENT

This Employment Agreement (this “Agreement”), dated as of December 11, 2015, is made by and between Seres Therapeutics, Inc., a Delaware corporation (together with any successor thereto, the “Company”), and Wael Hashad (“Executive”) (collectively referred to as the “Parties” or individually referred to as a “Party”).

RECITALS

	
A.
	
It is the desire of the Company to assure itself of the services of Executive by entering into this Agreement.

	
B.
	
Executive and the Company mutually desire that Executive be employed by the Company on the terms herein provided, commencing on January 4, 2016 or another date mutually agreed by the Parties (the date Executive actually commences such employment, the “Effective Date”).

	
C.
	
This Agreement will become effective upon the Effective Date.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and agreements set forth below, the Parties hereto agree as follows:

1.Employment.

(a)General.  Effective on the Effective Date, the Company shall employ Executive and Executive shall remain in the employ of the Company, for the period and in the positions set forth in this Section 1, and subject to the other terms and conditions herein provided. 

(b)At-Will Employment.  The Company and Executive acknowledge that Executive’s employment is and shall continue to be at-will, as defined under applicable law, and that Executive’s employment with the Company may be terminated by either Party at any time for any or no reason (subject to the notice requirements of Section 3(b)).  This “at-will” nature of Executive’s employment shall remain unchanged during Executive’s tenure as an employee and may not be changed, except in an express writing signed by Executive and a duly authorized officer of the Company.  If Executive’s employment terminates for any reason, Executive shall not be entitled to any payments, benefits, damages, award or compensation other than as provided in this Agreement or otherwise agreed to in writing by the Company or as provided by applicable law.  The term of this Agreement (the “Term”) shall commence on the Effective Date and end on the date this Agreement is terminated under Section 3.

(c)Positions and Duties.  Executive shall serve as Executive Vice President and Chief Commercial Officer of the Company with such responsibilities, duties and authority normally associated with such positions and as may from time to time be assigned to Executive by the Chief Executive Officer of the Company.  Executive shall devote substantially all of Executive’s working time and efforts to the business and affairs of the Company (which shall include service 

 

 

 

to its affiliates, if applicable) and shall not engage in outside business activities (including serving on outside boards or committees) without the consent of the Board (as defined below), provided that Executive shall be permitted to (i) manage Executive’s personal, financial and legal affairs, (ii) participate in trade associations, and (iii) serve on the board of directors of not-for-profit or tax-exempt charitable organizations, in each case, subject to compliance with this Agreement and provided that such activities do not materially interfere with Executive’s performance of Executive’s duties and responsibilities hereunder.  Executive agrees to observe and comply with the rules and policies of the Company as adopted by the Company from time to time, in each case as amended from time to time, as set forth in writing, and as delivered or made available to Executive (each, a “Policy”). 

2.Compensation and Related Matters.

(a)Annual Base Salary.  During the Term, Executive shall receive a base salary at a rate of $340,000 per annum, which shall be paid in accordance with the customary payroll practices of the Company and shall be pro-rated for partial years of employment.  Such annual base salary shall be reviewed (and may be adjusted) from time to time by the Board of Directors of the Company or an authorized committee of the Board (in either case, the “Board”) (such annual base salary, as it may be adjusted from time to time, the “Annual Base Salary”).

(b)Bonus.  During the Term, Executive will be eligible to participate in an annual incentive program established by the Board.  Executive’s annual incentive compensation under such incentive program (the “Annual Bonus”) shall be targeted at 40% of Executive’s Annual Base Salary.  The Annual Bonus payable under the incentive program shall be based on the achievement of performance goals to be determined by the Board.  The payment of any Annual Bonus pursuant to the incentive program shall be subject to Executive’s continued employment with the Company through the date of payment, except as otherwise provided in Section 4(b).

(c)Benefits.  During the Term, Executive shall be eligible to participate in employee benefit plans, programs and arrangements of the Company (including medical, dental and 401(k) plans), consistent with the terms thereof and as such plans, programs and arrangements may be amended from time to time.  In no event shall Executive be eligible to participate in any severance plan or program of the Company, except as set forth in Section 4 of this Agreement.

(d)Vacation.  During the Term, Executive shall be entitled to paid personal leave in accordance with the Company’s Policies, which currently provide for 20 days of vacation per full calendar year of employment.  Any vacation shall be taken at the reasonable and mutual convenience of the Company and Executive. 

(e)Business Expenses.  During the Term, the Company shall reimburse Executive for all reasonable travel and other business expenses incurred by Executive in the performance of Executive’s duties to the Company in accordance with the Company’s expense reimbursement Policy.

(f)Key Person Insurance.  At any time during the Term, the Company shall have the right to insure the life of Executive for the Company’s sole benefit.  The Company shall have the right to determine the amount of insurance and the type of policy.  Executive shall reasonably 

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cooperate with the Company in obtaining such insurance by submitting to physical examinations, by supplying all information reasonably required by any insurance carrier, and by executing all necessary documents reasonably required by any insurance carrier, provided that any information provided to an insurance company or broker shall not be provided to the Company without the prior written authorization of Executive.  Executive shall incur no financial obligation by executing any required document, and shall have no interest in any such policy. 

(g)Equity.  Subject to approval by the Board, the Company will grant Executive an option (the “Option”) under the Company’s 2015 Incentive Award Plan (the “Plan”) to purchase 100,000 shares of the Company’s common stock (subject to adjustment for corporate events as set forth in the Plan) at an exercise price per share equal to the per share fair market value of the Company’s common stock on the date of grant, as determined in accordance with the Plan.  The Option will vest as to 25% of the shares subject to the Option on the first anniversary of the Effective Date and as to an additional 6.25% of such shares upon Executive’s completing each three months of continuous service to the Company thereafter.  In all respects, the Option will be governed by and subject to the terms of the Plan and a separate stock option agreement to be entered into between Executive and the Company.

(h)Relocation Assistance.  The Company will reimburse Executive for, or directly pay on Executive’s behalf, up to $50,000 of reasonable moving expenses Executive incurs prior to December 1, 2016 in relocating Executive’s primary residence to the Cambridge, Massachusetts area, which will include the costs of providing Executive with relocation coordination services from the Company’s third-party provider in accordance with Company Policies to help Executive manage the logistics of Executive’s relocation (collectively, the “Relocation Assistance”).  The Company will also provide Executive with an additional payment (a “Gross-Up Payment”) in an amount such that, after payment by Executive of all income and employment taxes imposed on the Gross-Up Payment, Executive retains from the Gross-Up Payment an amount equal to all of the income and employment taxes imposed on the Relocation Assistance Executive receives.  All payments to Executive or for Executive’s benefit under this Section shall be subject to Section 9(l), except that notwithstanding anything in such Section to the contrary, Executive will promptly, and in no event later than December 15, 2016, submit all requests for Relocation Assistance payments, together with any supporting documentation that the Company reasonably requests, and the Company will make all Relocation Assistance payments in 2016, regardless of when the corresponding expenses were incurred.  In the event Executive voluntarily terminates Executive’s employment with the Company other than for Good Reason or the Company terminates Executive’s employment for Cause, in either case, prior to the second anniversary of the Effective Date, Executive will repay the Company the Relocation Assistance and Gross-Up Payment Executive has received as follows:

(i)If the termination of employment occurs on or prior to the first anniversary of the Effective Date, Executive will repay 100% of the Relocation Assistance and Gross-Up Payment Executive has received;

(ii)If the termination of employment occurs after the first anniversary of the Effective Date and or on prior to the 15-month anniversary of the Effective Date, Executive 

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will repay 75% of the Relocation Assistance and Gross-Up Payment Executive has received; 

(iii)If the termination of employment occurs after the 15-month anniversary of the Effective Date and on or prior to the 18-month anniversary of the Effective Date, Executive will repay 50% of the Relocation Assistance and Gross-Up Payment Executive has received; and

(iv)If the termination of employment occurs after the 18-month anniversary of the Effective Date and prior to the second anniversary of the Effective Date, Executive will repay 25% of the Relocation Assistance and Gross-Up Payment Executive has received.

If Executive is required to repay any Relocation Assistance or Gross-Up Payment hereunder, the Company will be entitled in its discretion to deduct from any other compensation or amounts payable by the Company or its affiliates to Executive all or any portion of the Relocation Assistance and the Gross-Up Payment that Executive is required to repay.

3.Termination.

Executive’s employment hereunder may be terminated by the Company or Executive, as applicable, without any breach of this Agreement under the following circumstances:

(a)Circumstances.

(i)Death.  Executive’s employment hereunder shall terminate upon Executive’s death.

(ii)Disability.  If Executive has incurred a Disability, as defined below, the Company may terminate Executive’s employment.

(iii)Termination for Cause.  The Company may terminate Executive’s employment for Cause, as defined below.

(iv)Termination without Cause.  The Company may terminate Executive’s employment without Cause.

(v)Resignation from the Company for Good Reason.  Executive may resign Executive’s employment with the Company for Good Reason, as defined below.

(vi)Resignation from the Company Without Good Reason.  Executive may resign Executive’s employment with the Company for any reason other than Good Reason or for no reason.

(b)Notice of Termination.  Any termination of Executive’s employment by the Company or by Executive under this Section 3 (other than termination pursuant to paragraph (a)(i)) shall be communicated by a written notice to the other Party hereto (i) indicating the specific termination provision in this Agreement relied upon, (ii) setting forth in reasonable detail the facts 

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and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated, if applicable, and (iii) specifying a Date of Termination which, if submitted by Executive, shall be at least forty-five (45) days following the date of such notice (a “Notice of Termination”); provided, however, that in the event that Executive delivers a Notice of Termination to the Company, the Company may, in its sole discretion, change the Date of Termination to any date that occurs following the date of Company’s receipt of such Notice of Termination and is prior to the date specified in such Notice of Termination.  A Notice of Termination submitted by the Company may provide for a Date of Termination on the date Executive receives the Notice of Termination, or any date thereafter elected by the Company in its sole discretion.  The failure by the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause shall not waive any right of the Company hereunder or preclude the Company from asserting such fact or circumstance in enforcing the Company’s rights hereunder.   

(c)Company Obligations upon Termination.  Upon termination of Executive’s employment pursuant to any of the circumstances listed in this Section 3, Executive (or Executive’s estate) shall be entitled to receive the sum of:  (i) the portion of Executive’s Annual Base Salary earned through the Date of Termination, but not yet paid to Executive; (ii) any expenses owed to Executive pursuant to Section 2(e) or Section 2(h) (subject to Executive’s repayment obligations under such Section); and (iii) any amount accrued and arising from Executive’s participation in, or benefits accrued under any employee benefit plans, programs or arrangements, which amounts shall be payable in accordance with the terms and conditions of such employee benefit plans, programs or arrangements (collectively, the “Company Arrangements”).  Except as otherwise expressly required by law (e.g., COBRA) or as specifically provided herein, all of Executive’s rights to salary, severance, benefits, bonuses and other compensatory amounts hereunder (if any) shall cease upon the termination of Executive’s employment hereunder.  In the event that Executive’s employment is terminated by the Company for any reason, Executive’s sole and exclusive remedy shall be to receive the payments and benefits described in this Section 3(c) or Section 4, as applicable.

(d)Deemed Resignation.  Upon termination of Executive’s employment for any reason, Executive shall be deemed to have resigned from all offices and directorships, if any, then held with the Company or any of its subsidiaries.

4.Severance Payments.

(a)Termination for Cause, or Termination Upon Death, Disability or Resignation from the Company Without Good Reason.  If Executive’s employment shall terminate as a result of Executive’s death pursuant to Section 3(a)(i) or Disability pursuant to Section 3(a)(ii), pursuant to Section 3(a)(iii) for Cause, or pursuant to Section 3(a)(vi) for Executive’s resignation from the Company without Good Reason, then Executive shall not be entitled to any severance payments or benefits, except as provided in Section 3(c).

(b)Termination without Cause, or Resignation from the Company for Good Reason.  If Executive’s employment terminates without Cause pursuant to Section 3(a)(iv), or pursuant to Section 3(a)(v) due to Executive’s resignation for Good Reason, then, subject to Executive signing 

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on or before the 21st day following Executive’s Separation from Service (as defined below), and not revoking, a release of claims substantially in the form attached as Exhibit A to this Agreement (the “Release”), and Executive’s continued compliance with Section 5, Executive shall receive, in addition to payments and benefits set forth in Section 3(c), the following: 

(i)an amount in cash equal to the Annual Base Salary, payable in the form of salary continuation in regular installments over the 12-month period following the date of Executive’s Separation from Service (the “Severance Period”) in accordance with the Company’s normal payroll practices;

(ii)to the extent unpaid as of the Date of Termination, an amount of cash equal to any Annual Bonus earned by Executive for the Company’s fiscal year prior to the fiscal year in which the Date of Termination occurs, as determined by the Board in its discretion based upon actual performance achieved, which Annual Bonus, if any, shall be paid to Executive in the fiscal year in which the Date of Termination occurs when bonuses for such prior fiscal year are paid in the ordinary course to actively employed senior executives of the Company; and

(iii)if Executive elects to receive continued medical, dental or vision coverage under one or more of the Company’s group healthcare plans pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), the Company shall directly pay, or reimburse Executive for, the COBRA premiums for Executive and Executive’s covered dependents under such plans during the period commencing on Executive’s Separation from Service and ending upon the earliest of (X) the last day of the Severance Period, (Y) the date that Executive and/or Executive’s covered dependents become no longer eligible for COBRA or (Z) the date Executive becomes eligible to receive healthcare coverage from a subsequent employer (and Executive agrees to promptly notify the Company of such eligibility).  Notwithstanding the foregoing, if the Company determines in its sole discretion that it cannot provide the foregoing benefit without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act) or incurring an excise tax, the Company shall in lieu thereof provide to Executive a taxable monthly payment in an amount equal to the monthly COBRA premium that Executive would be required to pay to continue Executive’s and Executive’s covered dependents’ group health coverage in effect on the Date of Termination (which amount shall be based on the premium for the first month of COBRA coverage), less the amount Executive would have had to pay to receive group health coverage for Executive and his or her covered dependents based on the cost sharing levels in effect on the Date of Termination, which payments shall be made regardless of whether Executive elects COBRA continuation coverage and shall commence in the month following the month in which the Date of Termination occurs and shall end on the earlier of (X) the last day of the Severance Period, (Y) the date that Executive and/or Executive’s covered dependents become no longer eligible for COBRA or (Z) the date Executive becomes eligible to receive healthcare coverage from a subsequent employer (and Executive agrees to promptly notify the Company of such eligibility).

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(c)Change in Control.  Notwithstanding anything to the contrary in Section 4(b), in the event Executive’s employment terminates without Cause pursuant to Section 3(a)(iv), or pursuant to Section 3(a)(v) due to Executive’s resignation for Good Reason, in either case, within 60 days prior to or 12 months following the date of a Change in Control, subject to Executive signing on or before the 21st day following Executive’s Separation from Service, and not revoking, the Release, all unvested equity or equity-based awards held by Executive under any Company equity compensation plans that vest solely based on the passage of time shall immediately become 100% vested (for the avoidance of doubt, with any such awards that vest in whole or in part based on the attainment of performance-vesting conditions being governed by the terms of the applicable award agreement). 

(d)Survival.  Notwithstanding anything to the contrary in this Agreement, the provisions of Sections 5 through 9 will survive the termination of Executive’s employment and the termination of the Term.

5.Restrictive Covenants.  As a condition to the effectiveness of this Agreement, Executive will execute and deliver to the Company prior to the Effective Date the Employee Non-Competition, Non-Solicitation, Confidentiality and Assignment Agreement attached as Exhibit B (the “Proprietary Information Agreement”).  Executive agrees to abide by the terms of the Proprietary Information Agreement, which are hereby incorporated by reference into this Agreement.  Executive acknowledges that the provisions of the Proprietary Information Agreement will survive the termination of Executive’s employment and the termination of the Term for the periods set forth in the Proprietary Information Agreement.

6.Assignment and Successors.

The Company may assign its rights and obligations under this Agreement to any of its affiliates or to any successor to all or substantially all of the business or the assets of the Company (by merger or otherwise), and may assign or encumber this Agreement and its rights hereunder as security for indebtedness of the Company and its affiliates.  This Agreement shall be binding upon and inure to the benefit of the Company, Executive and their respective successors, assigns, personnel and legal representatives, executors, administrators, heirs, distributees, devisees, and legatees, as applicable.  None of Executive’s rights or obligations may be assigned or transferred by Executive, other than Executive’s rights to payments hereunder, which may be transferred only by will or operation of law.  Notwithstanding the foregoing, Executive shall be entitled, to the extent permitted under applicable law and applicable Company Arrangements, to select and change a beneficiary or beneficiaries to receive compensation hereunder following Executive’s death by giving written notice thereof to the Company.  

7.Certain Definitions.

(a)Cause.  The Company shall have “Cause” to terminate Executive’s employment hereunder upon:

(i)Executive’s failure to (A) substantially perform Executive’s duties with the Company (other than any such failure resulting from Executive’s Disability) or (B) comply with, in any material respect, any of the Company’s Policies; 

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(ii)the Board’s determination that Executive failed in any material respect to carry out or comply with any lawful and reasonable directive of the Board; 

(iii)Executive’s breach of a material provision of this Agreement;

(iv)Executive’s conviction, plea of no contest, plea of nolo contendere, or imposition of unadjudicated probation for any felony or crime involving moral turpitude; 

(v)Executive’s unlawful use (including being under the influence) or possession of illegal drugs on the Company’s (or any of its affiliate’s) premises or while performing Executive’s duties and responsibilities under this Agreement; or

(vi)Executive’s commission of an act of fraud, embezzlement, misappropriation, willful misconduct, or breach of fiduciary duty against the Company or any of its affiliates. 

(b)Change in Control.  “Change in Control” shall have the meaning set forth in the version of the Seres Therapeutics, Inc. 2015 Incentive Award Plan in effect on the Effective Date.

(c)Code.  “Code” shall mean the Internal Revenue Code of 1986, as amended, and the regulations and guidance promulgated thereunder.

(d)Date of Termination.  “Date of Termination” shall mean (i) if Executive’s employment is terminated by Executive’s death, the date of Executive’s death; or (ii) if Executive’s employment is terminated pursuant to Section 3(a)(ii) – (vi) either the date indicated in the Notice of Termination or the date specified by the Company pursuant to Section 3(b), whichever is earlier.

(e)Disability.  “Disability” shall mean, at any time the Company or any of its affiliates sponsors a long-term disability plan for the Company’s employees, “disability” as defined in such long-term disability plan for the purpose of determining a participant’s eligibility for benefits, provided, however, if the long-term disability plan contains multiple definitions of disability, “Disability” shall refer to that definition of disability which, if Executive qualified for such disability benefits, would provide coverage for the longest period of time. The determination of whether Executive has a Disability shall be made by the person or persons required to make disability determinations under the long-term disability plan.  At any time the Company does not sponsor a long-term disability plan for its employees, “Disability” shall mean Executive’s inability to perform, with or without reasonable accommodation, the essential functions of Executive’s positions hereunder for a total of three months during any six-month period as a result of incapacity due to mental or physical illness as determined by a physician selected by the Company or its insurers and acceptable to Executive or Executive’s legal representative, with such agreement as to acceptability not to be unreasonably withheld or delayed.  Any refusal by Executive to submit to a medical examination for the purpose of determining Disability shall be deemed to constitute conclusive evidence of Executive’s Disability. 

(f)Good Reason.  For the sole purpose of determining Executive’s right to severance payments and benefits as described above, Executive’s resignation will be for “Good Reason” if Executive resigns within ninety days after any of the following events, unless Executive consents 

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to the applicable event:  (i) a decrease in Executive’s Annual Base Salary, other than a reduction in Annual Base Salary of less than 10% that is implemented in connection with a contemporaneous reduction in annual base salaries affecting other senior executives of the Company, (ii) a material decrease in Executive’s authority or areas of responsibility as are commensurate with Executive’s title or positions, or (iii) the relocation of Executive’s primary office to a location more than 50 miles from the Boston metropolitan area.  Notwithstanding the foregoing, no Good Reason will have occurred unless and until Executive has:  (a) provided the Company, within 60 days of Executive’s knowledge of the occurrence of the facts and circumstances underlying the Good Reason event, written-notice stating with specificity the applicable facts and circumstances underlying such finding of Good Reason; and (b) provided the Company with an opportunity to cure the same within 30 days after the receipt of such notice. 

8.Parachute Payments.

(a)Notwithstanding any other provisions of this Agreement, in the event that any payment or benefit by the Company or otherwise to or for the benefit of Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (all such payments and benefits, including the payments and benefits under Section 4(b) and Section 4(c) hereof, being hereinafter referred to as the “Total Payments”), would be subject (in whole or in part) to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then the Total Payments shall be reduced (in the order provided in Section 8(b)) to the minimum extent necessary to avoid the imposition of the Excise Tax on the Total Payments, but only if (i) the net amount of such Total Payments, as so reduced (and after subtracting the net amount of federal, state and local income and employment taxes on such reduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such reduced Total Payments), is greater than or equal to (ii) the net amount of such Total Payments without such reduction (but after subtracting the net amount of federal, state and local income and employment taxes on such Total Payments and the amount of the Excise Tax to which Executive would be subject in respect of such unreduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such unreduced Total Payments).

(b)The Total Payments shall be reduced in the following order:  (i) reduction on a pro-rata basis of any cash severance payments that are exempt from Section 409A of the Code (“Section 409A”), (ii) reduction on a pro-rata basis any non-cash severance payments or benefits that are exempt from Section 409A, (iii) reduction on a pro-rata basis of any other payments or benefits that are exempt from Section 409A, and (iv) reduction of any payments or benefits otherwise payable to Executive on a pro-rata basis or such other manner that complies with Section 409A; provided, in case of clauses (ii), (iii) and (iv), that reduction of any payments attributable to the acceleration of vesting of Company equity awards shall be first applied to Company equity awards that would otherwise vest last in time.

(c)All determinations regarding the application of this Section 8 shall be made by an accounting firm or consulting group with experience in performing calculations regarding the applicability of Section 280G of the Code and the Excise Tax selected by the Company (the “Independent Advisors”).  For purposes of determinations, no portion of the Total Payments shall be taken into account which, in the opinion of the Independent Advisors, (i) does not constitute a 

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“parachute payment” within the meaning of Section 280G(b)(2) of the Code (including by reason of Section 280G(b)(4)(A) of the Code) or (ii) constitutes reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the “base amount” (as defined in Section 280G(b)(3) of the Code) allocable to such reasonable compensation.  The costs of obtaining such determination and all related fees and expenses (including related fees and expenses incurred in any later audit) shall be borne by the Company. 

(d)In the event it is later determined that a greater reduction in the Total Payments should have been made to implement the objective and intent of this Section 8, the excess amount shall be returned immediately by Executive to the Company.

9.Miscellaneous Provisions.

(a)Governing Law.  This Agreement shall be governed, construed, interpreted and enforced in accordance with its express terms, and otherwise in accordance with the substantive laws of the Commonwealth of Massachusetts without reference to the principles of conflicts of law of the Commonwealth of Massachusetts or any other jurisdiction, and where applicable, the laws of the United States.

(b)Validity.  The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.  

(c)Notices.  Any notice, request, claim, demand, document and other communication hereunder to any Party shall be effective upon receipt (or refusal of receipt) and shall be in writing and delivered personally or sent by facsimile or certified or registered mail, postage prepaid, as follows:

(i)If to the Company, the Chief Financial Officer at its headquarters,

(ii)If to Executive, at the last address that the Company has in its personnel records for Executive, or

(iii)at any other address as any Party shall have specified by notice in writing to the other Party.

(d)Counterparts.  This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement.  Signatures delivered by facsimile shall be deemed effective for all purposes.

(e)Entire Agreement.  The terms of this Agreement, and the Proprietary Information Agreement incorporated herein by reference as set forth in Section 5, are intended by the Parties to be the final expression of their agreement with respect to the subject matter hereof and supersede all prior understandings and agreements, whether written or oral.  The Parties further intend that this Agreement shall constitute the complete and exclusive statement of their terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative, or other legal proceeding to vary the terms of this Agreement.

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(f)Amendments; Waivers.  This Agreement may not be modified, amended, or terminated except by an instrument in writing, signed by Executive and a duly authorized officer of Company.  By an instrument in writing similarly executed, Executive or a duly authorized officer of the Company may waive compliance by the other Party with any specifically identified provision of this Agreement that such other Party was or is obligated to comply with or perform; provided, however, that such waiver shall not operate as a waiver of, or estoppel with respect to, any other or subsequent failure.  No failure to exercise and no delay in exercising any right, remedy, or power hereunder preclude any other or further exercise of any other right, remedy, or power provided herein or by law or in equity.   

(g)No Inconsistent Actions.  The Parties hereto shall not voluntarily undertake or fail to undertake any action or course of action inconsistent with the provisions or essential intent of this Agreement.  Furthermore, it is the intent of the Parties hereto to act in a fair and reasonable manner with respect to the interpretation and application of the provisions of this Agreement.

(h)Construction.  This Agreement shall be deemed drafted equally by both the Parties. Its language shall be construed as a whole and according to its fair meaning.  Any presumption or principle that the language is to be construed against any Party shall not apply.  The headings in this Agreement are only for convenience and are not intended to affect construction or interpretation.  Any references to paragraphs, subparagraphs, sections or subsections are to those parts of this Agreement, unless the context clearly indicates to the contrary.  Also, unless the context clearly indicates to the contrary, (i) the plural includes the singular and the singular includes the plural; (ii) “and” and “or” are each used both conjunctively and disjunctively; (iii) “any,” “all,” “each,” or “every” means “any and all,” and “each and every”; (iv) “includes” and “including” are each “without limitation”; (v) “herein,” “hereof,” “hereunder” and other similar compounds of the word “here” refer to the entire Agreement and not to any particular paragraph, subparagraph, section or subsection; and (vi) all pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural as the identity of the entities or persons referred to may require.

(i)Arbitration.  Any controversy, claim or dispute arising out of or relating to this Agreement, shall be settled solely and exclusively by a binding arbitration process administered by JAMS/Endispute in Boston, Massachusetts.  Such arbitration shall be conducted in accordance with the then-existing JAMS/Endispute Rules of Practice and Procedure, with the following exceptions if in conflict:  (i) one arbitrator who is a retired judge shall be chosen by JAMS/Endispute; (ii) each Party to the arbitration will pay one-half of the expenses and fees of the arbitrator, together with other expenses of the arbitration incurred or approved by the arbitrator; and (iii) arbitration may proceed in the absence of any Party if written notice (pursuant to the JAMS/Endispute rules and regulations) of the proceedings has been given to such Party.  Each Party shall bear its own attorney’s fees and expenses; provided that the arbitrator may assess the prevailing Party’s fees and costs against the non-prevailing Party as part of the arbitrator’s award.  The Parties agree to abide by all decisions and awards rendered in such proceedings.  Such decisions and awards rendered by the arbitrator shall be final and conclusive.  All such controversies, claims or disputes shall be settled in this manner in lieu of any action at law or equity; provided, however, that nothing in this subsection shall be construed as precluding the bringing of an action for injunctive relief or specific performance as provided in this Agreement.  

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This dispute resolution process and any arbitration hereunder shall be confidential and neither any Party nor the neutral arbitrator shall disclose the existence, contents or results of such process without the prior written consent of all Parties, except where necessary or compelled in a Court to enforce this arbitration provision or an Award from such arbitration or otherwise in a legal proceeding.  If JAMS/Endispute no longer exists or is otherwise unavailable, the Parties agree that the American Arbitration Association (“AAA”) shall administer the arbitration in accordance with its then-existing rules as modified by this subsection.  In such event, all references herein to JAMS/Endispute shall mean AAA.  Notwithstanding the foregoing, Executive and the Company each have the right to resolve any issue or dispute over intellectual property rights by Court action instead of arbitration. 

(j)Enforcement.  If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws effective during the Term, such provision shall be fully severable; this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a portion of this Agreement; and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement.  Furthermore, in lieu of such illegal, invalid or unenforceable provision there shall be added automatically as part of this Agreement a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable.

(k)Withholding.  The Company shall be entitled to withhold from any amounts payable under this Agreement any federal, state, local or foreign withholding or other taxes or charges which the Company is required to withhold. The Company shall be entitled to rely on an opinion of counsel if any questions as to the amount or requirement of withholding shall arise.

(l)Section 409A.

(i)General.  The intent of the Parties is that the payments and benefits under this Agreement comply with or be exempt from Section 409A and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith.  

(ii)Separation from Service.  Notwithstanding anything in this Agreement to the contrary, any compensation or benefits payable under this Agreement that is considered nonqualified deferred compensation under Section 409A and is designated under this Agreement as payable upon Executive’s termination of employment shall be payable only upon Executive’s “separation from service” with the Company within the meaning of Section 409A (a “Separation from Service”) and, except as provided below, any such compensation or benefits described in Section 4 shall not be paid, or, in the case of installments, shall not commence payment, until the thirtieth (30th) day following Executive’s Separation from Service (the “First Payment Date”).  Any installment payments that would have been made to Executive during the thirty (30) day period immediately following Executive’s Separation from Service but for the preceding sentence shall be paid to Executive on the First Payment Date and the remaining payments shall be made as provided in this Agreement.

12

 

 

(iii)Specified Employee.  Notwithstanding anything in this Agreement to the contrary, if Executive is deemed by the Company at the time of Executive’s Separation from Service to be a “specified employee” for purposes of Section 409A, to the extent delayed commencement of any portion of the benefits to which Executive is entitled under this Agreement is required in order to avoid a prohibited distribution under Section 409A, such portion of Executive’s benefits shall not be provided to Executive prior to the earlier of (i) the expiration of the six-month period measured from the date of Executive’s Separation from Service with the Company or (ii) the date of Executive’s death.  Upon the first business day following the expiration of the applicable Section 409A period, all payments deferred pursuant to the preceding sentence shall be paid in a lump sum to Executive (or Executive’s estate or beneficiaries), and any remaining payments due to Executive under this Agreement shall be paid as otherwise provided herein.   

(iv)Expense Reimbursements.  To the extent that any reimbursements under this Agreement are subject to Section 409A, any such reimbursements payable to Executive shall be paid to Executive no later than December 31 of the year following the year in which the expense was incurred; provided, that Executive submits Executive’s reimbursement request promptly following the date the expense is incurred, the amount of expenses reimbursed in one year shall not affect the amount eligible for reimbursement in any subsequent year, other than medical expenses referred to in Section 105(b) of the Code, and Executive’s right to reimbursement under this Agreement will not be subject to liquidation or exchange for another benefit.

(v)Installments.  Executive’s right to receive any installment payments under this Agreement, including without limitation any continuation salary payments that are payable on Company payroll dates, shall be treated as a right to receive a series of separate payments and, accordingly, each such installment payment shall at all times be considered a separate and distinct payment as permitted under Section 409A.  Except as otherwise permitted under Section 409A, no payment hereunder shall be accelerated or deferred unless such acceleration or deferral would not result in additional tax or interest pursuant to Section 409A.

10.Executive Acknowledgement.

Executive acknowledges that Executive has read and understands this Agreement, is fully aware of its legal effect, has not acted in reliance upon any representations or promises made by the Company other than those contained in writing herein, and has entered into this Agreement freely based on Executive’s own judgment.

 

[Signature Page Follows]

 

13

 

 

IN WITNESS WHEREOF, the Parties have executed this Agreement on the date and year first above written. 

SERES THERAPEUTICS, INC.

 

By: /s/ Roger J. Pomerantz________

Name:  Roger J. Pomerantz, M.D.

Title:  President and Chief Executive Officer

 

 

 

/s/ Wael Hashad __________

Wael Hashad

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[Signature Page to Employment Agreement]

 

 

EXHIBIT A

Separation Agreement and Release

This Separation Agreement and Release (“Agreement”) is made by and between Wael Hashad (“Executive”) and Seres Therapeutics, Inc. (the “Company”) (collectively referred to as the “Parties” or individually referred to as a “Party”).  Capitalized terms used but not defined in this Agreement shall have the meanings set forth in the Employment Agreement (as defined below).

WHEREAS, the Parties have previously entered into that certain Employment Agreement, dated as of December 11, 2015 (the “Employment Agreement”); and 

WHEREAS, in connection with Executive’s termination of employment with the Company or a subsidiary or affiliate of the Company effective ________, 20__, the Parties wish to resolve any and all disputes, claims, complaints, grievances, charges, actions, petitions, and demands that Executive may have against the Company and any of the Releasees as defined below, including, but not limited to, any and all claims arising out of or in any way related to Executive’s employment with or separation from the Company or its subsidiaries or affiliates but, for the avoidance of doubt, nothing herein will be deemed to release any rights or remedies in connection with Executive’s ownership of vested equity securities of the Company or Executive’s right to indemnification by the Company or any of its affiliates pursuant to contract or applicable law (collectively, the “Retained Claims”).

NOW, THEREFORE, in consideration of the severance payments and benefits described in Section 4 of the Employment Agreement, which, pursuant to the Employment Agreement, are conditioned on Executive’s execution and non-revocation of this Agreement, and in consideration of the mutual promises made herein, the Company and Executive hereby agree as follows:

1.Severance Payments; Salary and Benefits.  The Company agrees to provide Executive with the severance payments and benefits described in Section 4(b) and/or Section 4(c) of the Employment Agreement, payable at the times set forth in, and subject to the terms and conditions of, the Employment Agreement. In addition, to the extent not already paid, and subject to the terms and conditions of the Employment Agreement, the Company shall pay or provide to Executive all other payments or benefits described in Section 3(c) of the Employment Agreement, subject to and in accordance with the terms thereof.

2.Release of Claims.  Executive agrees that, other than with respect to the Retained Claims, the foregoing consideration represents settlement in full of all outstanding obligations owed to Executive by the Company, any of its direct or indirect subsidiaries and affiliates, and any of their current and former officers, directors, equity holders, managers, employees, agents, investors, attorneys, shareholders, administrators, affiliates, benefit plans, plan administrators, insurers, trustees, divisions, and subsidiaries and predecessor and successor corporations and assigns (collectively, the “Releasees”).  Executive, on Executive’s own behalf and on behalf of any of Executive’s affiliated companies or entities and any of their respective heirs, family members, executors, agents, and assigns, other than with respect to the Retained Claims, hereby and forever releases the Releasees from, and agrees not to sue concerning, or in any manner to institute, prosecute, or pursue, any claim, complaint, charge, duty, obligation, or cause of action relating to any matters of any kind, whether presently known or unknown, suspected or 

 

 

unsuspected, that Executive may possess against any of the Releasees arising from any omissions, acts, facts, or damages that have occurred up until and including the Effective Date of this Agreement (as defined in Section 7 below), including, without limitation: 

(a)any and all claims relating to or arising from Executive’s employment or service relationship with the Company or any of its direct or indirect subsidiaries or affiliates and the termination of that relationship;

(b)any and all claims relating to, or arising from, Executive’s right to purchase, or actual purchase of any shares of stock or other equity interests of the Company or any of its affiliates, including, without limitation, any claims for fraud, misrepresentation, breach of fiduciary duty, breach of duty under applicable state corporate law, and securities fraud under any state or federal law;

(c)any and all claims for wrongful discharge of employment; termination in violation of public policy; discrimination; harassment; retaliation; breach of contract, both express and implied; breach of covenant of good faith and fair dealing, both express and implied; promissory estoppel; negligent or intentional infliction of emotional distress; fraud; negligent or intentional misrepresentation; negligent or intentional interference with contract or prospective economic advantage; unfair business practices; defamation; libel; slander; negligence; personal injury; assault; battery; invasion of privacy; false imprisonment; conversion; and disability benefits;

(d)any and all claims for violation of any federal, state, or municipal statute, including, but not limited to, Title VII of the Civil Rights Act of 1964; the Civil Rights Act of 1991; the Rehabilitation Act of 1973; the Americans with Disabilities Act of 1990; the Equal Pay Act; the Fair Credit Reporting Act; the Age Discrimination in Employment Act of 1967; the Older Workers Benefit Protection Act; the Employee Retirement Income Security Act of 1974; the Worker Adjustment and Retraining Notification Act; the Family and Medical Leave Act; and the Sarbanes-Oxley Act of 2002;

(e)any and all claims for violation of the federal or any state constitution;

(f) any and all claims arising out of any other laws and regulations relating to employment or employment discrimination;

(g)any claim for any loss, cost, damage, or expense arising out of any dispute over the non-withholding or other tax treatment of any of the proceeds received by Executive as a result of this Agreement; and

(h)any and all claims for attorneys’ fees and costs.

Executive agrees that the release set forth in this section shall be and remain in effect in all respects as a complete general release as to the matters released.  This release does not release claims that cannot be released as a matter of law, including, but not limited to, Executive’s right to report possible violations of federal law or regulation to any governmental agency or entity in accordance with the provisions of and rules promulgated under Section 21F of the Securities Exchange Act of 

2

 

 

1934 or Section 806 of the Sarbanes-Oxley Act of 2002, or any other whistleblower protection provisions of state or federal law or regulation, Executive’s right to file a charge with or participate in a charge by the Equal Employment Opportunity Commission, or any other local, state, or federal administrative body or government agency that is authorized to enforce or administer laws related to employment, against the Company (with the understanding that Executive’s release of claims herein bars Executive from recovering such monetary relief from the Company or any Releasee), claims for unemployment compensation or any state disability insurance benefits pursuant to the terms of applicable state law, claims to continued participation in certain of the Company’s group benefit plans pursuant to the terms and conditions of COBRA, claims to any benefit entitlements vested as the date of separation of Executive’s employment, pursuant to written terms of any employee benefit plan of the Company or its affiliates and Executive’s right under applicable law and any Retained Claims.  This release further does not release claims for breach of Section 3(c), Section 4(b) or Section 4(c) of the Employment Agreement.

3.Acknowledgment of Waiver of Claims under ADEA.  Executive understands and acknowledges that Executive is waiving and releasing any rights Executive may have under the Age Discrimination in Employment Act of 1967 (“ADEA”), and that this waiver and release is knowing and voluntary.  Executive understands and agrees that this waiver and release does not apply to any rights or claims that may arise under the ADEA after the Effective Date of this Agreement.  Executive understands and acknowledges that the consideration given for this waiver and release is in addition to anything of value to which Executive was already entitled.  Executive further understands and acknowledges that Executive has been advised by this writing that:  (a) Executive should consult with an attorney prior to executing this Agreement; (b) Executive has 21 days within which to consider this Agreement; (c) Executive has 7 days following Executive’s execution of this Agreement to revoke this Agreement pursuant to written notice to the General Counsel of the Company; (d) this Agreement shall not be effective until after the revocation period has expired; and (e) nothing in this Agreement prevents or precludes Executive from challenging or seeking a determination in good faith of the validity of this waiver under the ADEA, nor does it impose any condition precedent, penalties, or costs for doing so, unless specifically authorized by federal law.  In the event Executive signs this Agreement and returns it to the Company in less than the 21 day period identified above, Executive hereby acknowledges that Executive has freely and voluntarily chosen to waive the time period allotted for considering this Agreement.

4.Severability.  In the event that any provision or any portion of any provision hereof or any surviving agreement made a part hereof becomes or is declared by a court of competent jurisdiction or arbitrator to be illegal, unenforceable, or void, this Agreement shall continue in full force and effect without said provision or portion of provision.

5.No Oral Modification.  This Agreement may only be amended in a writing signed by Executive and a duly authorized officer of the Company.

6.Governing Law; Dispute Resolution.  This Agreement shall be subject to the provisions of Sections 9(a), 9(c) and 9(i) of the Employment Agreement.

7.Effective Date.  If Executive has attained or is over the age of 40 as of the date of Executive’s termination of employment, then each Party has seven days after that Party signs this 

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Agreement to revoke it and this Agreement will become effective on the eighth day after Executive signed this Agreement, so long as it has been signed by the Parties and has not been revoked by either Party before that date (the “Effective Date”).  If Executive has not attained the age of 40 as of the date of Executive’s termination of employment, then the “Effective Date” shall be the date on which Executive signs this Agreement. 

8.Voluntary Execution of Agreement.  Executive understands and agrees that Executive executed this Agreement voluntarily, without any duress or undue influence on the part or behalf of the Company or any third party, with the full intent of releasing all of Executive’s claims against the Company and any of the other Releasees.  Executive acknowledges that:  (a) Executive has read this Agreement; (b) Executive has not relied upon any representations or statements made by the Company that are not specifically set forth in this Agreement; (c) Executive has been represented in the preparation, negotiation, and execution of this Agreement by legal counsel of Executive’s own choice or has elected not to retain legal counsel; (d) Executive understands the terms and consequences of this Agreement and of the releases it contains; and (e) Executive is fully aware of the legal and binding effect of this Agreement.

IN WITNESS WHEREOF, the Parties have executed this Agreement on the respective dates set forth below.  

		
	
 
	
 

	
Dated: ______
	

Wael Hashad

	
 
	
 

	
 
	
SERES THERAPEUTICS, INC.

	
Dated:
	
By:
Name:
Title:

 

 

4

 

 

EXHIBIT B

Employee Non-Competition, Non-Solicitation, Confidentiality and Assignment Agreement

In consideration and as a condition of my employment or continued employment by Seres Therapeutics, Inc. (the “Company”), I hereby agree as follows:

 

1.Proprietary Information.  I agree that all information, whether or not in writing, whether or not disclosed before or after I was first employed by the Company, concerning the Company’s business, technology, business relationships or financial affairs that the Company has not released to the general public (collectively, “Proprietary Information”), and all tangible embodiments thereof, are and will be the exclusive property of the Company.  By way of illustration, Proprietary Information may include information or material that has not been made generally available to the public, such as:  (a) corporate information, including plans, strategies, methods, policies, resolutions, notes, email correspondence, negotiations or litigation; (b) marketing information, including strategies, methods, customer identities or other information about customers, prospect identities or other information about prospects, or market analyses or projections; (c) financial information, including cost and performance data, debt arrangements, equity structure, investors and holdings, purchasing and sales data and price lists; and (d) operational and technological information, including plans, specifications, manuals, forms, templates, software, designs, methods, procedures, formulas, discoveries, inventions, improvements, biological or chemical materials, concepts and ideas; and (e) personnel information, including personnel lists, reporting or organizational structure, resumes, personnel data, compensation structure, performance evaluations and termination arrangements or 

documents.  Proprietary Information includes, without limitation, (1) information received in confidence by the Company from its customers or suppliers or other third parties, and (2) all biological or chemical materials and other tangible embodiments of the Proprietary Information. Nothing in this Agreement shall prohibit me from reporting possible violations of federal law or regulation to any governmental agency or entity in accordance with the provisions of and rules promulgated under Section 21F of the Securities Exchange Act of 1934 or Section 805 of the Sarbanes-Oxley Act of 2002, or any other whistleblower protection provisions of state or federal law or regulation.

2.Recognition of Company’s Rights.  I will not, at any time, without the Company’s prior written permission, either during or after my employment, disclose or transfer any Proprietary Information to anyone outside of the Company, or use or permit to be used any Proprietary Information for any purpose other than the performance of my duties as an employee of the Company.  I will cooperate with the Company and use my best efforts to prevent the unauthorized disclosure of all Proprietary Information.  I will deliver to the Company all copies and other tangible embodiments of Proprietary Information in my possession or control upon the earlier of a request by the Company or termination of my employment.

3.Rights of Others.  I understand that the Company is now and may hereafter be subject to non-disclosure or confidentiality 

 

 

 

agreements with third persons which require the Company to protect or refrain from use of proprietary information.  I agree to be bound by the terms of such agreements in the event I have access to such proprietary information. 

4.Commitment to Company; Avoidance of Conflict of Interest.  While an employee of the Company, I will devote my full-time efforts to the Company’s business and I will not engage in any other business activity that conflicts with my duties to the Company.  I will advise the president of the Company or his or her nominee at such time as any activity of either the Company or another business presents me with a conflict of interest or the appearance of a conflict of interest as an employee of the Company.  I will take whatever action is requested of me by the Company to resolve any conflict or appearance of conflict which it finds to exist.

5.Developments.  I hereby assign and transfer and, to the extent any such assignment cannot be made at present, will assign and transfer, to the Company and its successors and assigns, all my right, title and interest in and to all Developments (as defined below) that: (a) are created, developed, made, conceived or reduced to practice by me (alone or jointly with others) or under my direction (collectively, “conceived”) during the period of my employment and six (6) months thereafter and that relate to the business of the Company or to products, methods or services being researched, developed, manufactured or sold by the Company; or (b) result from tasks assigned to me by the Company; or (c) result from the use of premises, Proprietary Information or personal property (whether tangible or intangible) owned, licensed or leased by the Company (collectively, “Company-Related Developments”), and all patent rights, trademarks, copyrights and other intellectual 

property rights in all countries and territories worldwide claiming, covering or otherwise arising from or pertaining to Company-Related Developments (collectively, “Intellectual Property Rights”).  I further agree that “Company-Related Developments” include, without limitation, all Developments that (i) were conceived by me before my employment, (ii) relate to the business of the Company or to products, methods or services being researched, developed, manufactured or sold by the Company, and (iii) were not subject to an obligation to assign to another entity when conceived.  I will make full and prompt disclosure to the Company of all Company-Related Developments, as well as all other Developments conceived by me during the period of my employment and six (6) months thereafter.  I acknowledge that all work performed by me as an employee of the Company is on a “work for hire” basis.  I hereby waive all claims to any moral rights or other special rights which I may have or accrue in any Company-Related Developments.  “Developments” mean inventions, discoveries, designs, developments, methods, modifications, improvements, processes, biological or chemical materials, algorithms, databases, computer programs, formulae, techniques, trade secrets, graphics or images, audio or visual works, and other works of authorship.

To preclude any possible uncertainty, I have set forth on Appendix A attached hereto a complete list of Developments conceived by me before my employment that are not Company-Related Developments (“Prior Inventions”).  I have also listed on Appendix A all patent rights of which I am an inventor, other than those contained within Intellectual Property Rights (“Other Patent Rights”).  If no such disclosure is attached, I represent that there are no Prior Inventions or Other Patent 

 

 

 

Rights.  If, in the course of my employment with the Company, I incorporate a Prior Invention into a Company product, process or research or development program or other work done for the Company, I hereby grant to the Company a nonexclusive, royalty-free, fully paid-up, irrevocable, perpetual, worldwide license (with the full right to sublicense through multiple tiers) to make, have made, modify, use, offer for sale, import and sell such Prior Invention.  Notwithstanding the foregoing, I will not incorporate, or permit to be incorporated, Prior Inventions in any Company-Related Development without the Company’s prior written consent.

I understand that to the extent this Agreement is required to be construed in accordance with the laws of any state which precludes a requirement in an employee agreement to assign certain classes of inventions made by an employee, this Section will be interpreted not to apply to any invention which a court rules and/or the Company agrees falls within such classes.

6.Documents and Other Materials.  I will keep and maintain adequate and current records of all Proprietary Information and Company-Related Developments conceived by me, which records will be available to and remain the sole property of the Company at all times.  All files, letters, notes, memoranda, reports, records, data, sketches, drawings, notebooks, layouts, charts, quotations and proposals, specification sheets, program listings, blueprints, models, prototypes, materials or other written, photographic or other tangible material containing or embodying Proprietary Information, whether created by me or others, which come into my custody or possession, are the exclusive property of the Company to be used by me only in the performance of my duties for the Company.  

In the event of the termination of my employment for any reason, I will deliver to the Company all of the foregoing, and all other materials of any nature pertaining to the Proprietary Information of the Company and to my work, and will not take or keep in my possession any of the foregoing or any copies.  Any property situated on the Company’s premises and owned by the Company, including laboratory space, computers, disks and other storage media, filing cabinets or other work areas, is subject to inspection by the Company at any time with or without notice.

7.Enforcement of Intellectual Property Rights.  I will cooperate fully with the Company, both during and after my employment with the Company, with respect to the procurement, maintenance and enforcement of Intellectual Property Rights, as well as all other patent rights, trademarks, copyrights and other intellectual property rights in all countries and territories worldwide owned by or licensed to the Company.  I will sign, both during and after the term of this Agreement, all papers, including copyright applications, patent applications, declarations, oaths, assignments of priority rights, and powers of attorney, which the Company may deem necessary or desirable in order to protect its rights and interests in any Company-Related Development or Intellectual Property Rights.  If the Company is unable, after reasonable effort, to secure my signature on any such papers, I hereby irrevocably designate and appoint each officer of the Company as my agent and attorney-in-fact to execute any such papers on my behalf, and to take any and all actions as the Company may deem necessary or desirable in order to protect its rights and interests in the same.

8.Non-Competition and Non-Solicitation.  In order to protect the 

2

 

 

Company’s Proprietary Information and good will, during my employment and for a period of twelve (12) months following the termination of my employment for any reason (the “Restricted Period”), I will not directly or indirectly, whether as owner, partner, shareholder, director, consultant, agent, employee, co-venturer or otherwise: 

(a)Engage, participate or invest in any business that develops, manufactures or markets microbiome therapeutics, or products or services that the Company has under development or that are the subject of active planning at any time during my employment (collectively, the “Competitive Products”); provided that this will not prohibit any possible investment in publicly traded stock of a company representing less than one percent of the stock of such company;

(b)Directly or indirectly, in any manner, other than for the benefit of the Company, (i) call upon, solicit, divert or take away any of the customers, business or prospective customers of the Company or any of its suppliers, and/or (ii) solicit, entice or attempt to persuade any other employee or consultant of the Company to leave the services of the Company for any reason.  

(c)I acknowledge and agree that if I violate any of the provisions of this Section, in addition to any other remedies to which the Company may be entitled in law or equity, the running of the Restricted Period will be extended by the time during which I engage in such violation(s).

(d)I acknowledge and agree that the provisions of this agreement shall apply during and following my employment by the Company, and shall not be affected by any 

change in my job duties, whether material or immaterial.

9.Government Contracts.  I acknowledge that the Company may have from time to time agreements with other persons or with the United States Government or its agencies which impose obligations or restrictions on the Company regarding inventions made during the course of work under such agreements or regarding the confidential nature of such work.  I agree to comply with any such obligations or restrictions upon the direction of the Company.  In addition to the rights assigned under Section 5, I also assign to the Company (or any of its nominees) all rights which I have or acquired in any Developments, full title to which is required to be in the United States under any contract between the Company and the United States or any of its agencies.

10.Prior Agreements.  I hereby represent that, except as I have fully disclosed previously in writing to the Company, I am not bound by the terms of any agreement with any previous employer or other party to refrain from using or disclosing any trade secret or confidential or proprietary information in the course of my employment with the Company or to refrain from competing, directly or indirectly, with the business of such previous employer or any other party.  I further represent that my performance of all the terms of this Agreement as an employee of the Company does not and will not breach any agreement to keep in confidence proprietary information, knowledge or data acquired by me in confidence or in trust prior to my employment with the Company. I will not disclose to the Company or induce the Company to use any confidential or proprietary information or material 

3

 

 

belonging to any previous employer or others.  

11.Remedies Upon Breach.  I understand that the restrictions contained in this Agreement are necessary for the protection of the business and goodwill of the Company and I consider them to be reasonable for such purpose.  Any breach of this Agreement is likely to cause the Company substantial and irrevocable damage and therefore, in the event of such breach, the Company, in addition to such other remedies which may be available, will be entitled to specific performance and other injunctive relief.

12.Use of Voice, Image and Likeness.  I give the Company permission to use my voice, image or likeness, with or without using my name, for the purposes of advertising and promoting the Company, or for other purposes deemed appropriate by the Company in its reasonable discretion, except to the extent expressly prohibited by law.

13.Publications and Public Statements.  I will obtain the Company’s written approval before publishing or submitting for publication any material that relates to my work at the Company and/or incorporates any Proprietary Information.  To ensure that the Company delivers a consistent message about its products, services and operations to the public, and further in recognition that even positive statements may have a detrimental effect on the Company in certain securities transactions and other contexts, any statement about the Company which I create, publish or post during my period of employment and for six (6) months thereafter, on any media accessible by the public, including but not limited to electronic bulletin boards and Internet-based chat rooms, must first be reviewed and approved by an officer of the Company before it is released in the public domain.

14.No Employment Obligation.  I understand that this Agreement does not create an obligation on the Company or any other person to continue my employment.  I acknowledge that, unless otherwise agreed in a formal written employment agreement signed on behalf of the Company by an authorized officer, my employment with the Company is at will and therefore may be terminated by the Company or me at any time and for any reason.

15.Survival and Assignment by the Company.  I understand that my obligations under this Agreement will continue in accordance with its express terms regardless of any changes in my title, position, duties, salary, compensation or benefits or other terms and conditions of employment. I further understand that my obligations under this Agreement will continue following the termination of my employment regardless of the manner of such termination and will be binding upon my heirs, executors and administrators.  The Company will have the right to assign this Agreement to its affiliates, successors and assigns.  I expressly consent to be bound by the provisions of this Agreement for the benefit of the Company or any parent, subsidiary or affiliate to whose employ I may be transferred without the necessity that this Agreement be resigned at the time of such transfer.

16.Disclosure to Future Employers.  I will provide a copy of this Agreement to any prospective employer, partner or co-venturer prior to entering into an employment, partnership or other business relationship with such person or entity.

17.Exit Interview.  If and when I depart from the Company, I may be required to attend an exit interview and sign an “Employee Exit Acknowledgement” to reaffirm my acceptance and 

4

 

 

acknowledgement of the obligations set forth in this Agreement.  During the Restricted Period following termination of my employment, I will notify the Company of any change in my address and of each subsequent employment or business activity, including the name and address of my employer or other post-Company employment plans and the nature of my activities. 

18.Severability.  In case any provisions (or portions thereof) contained in this Agreement will, for any reason, be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability will not affect the other provisions of this Agreement, and this Agreement will be construed as if such invalid, illegal or unenforceable provision had never been contained herein.  If, moreover, any one or more of the provisions contained in this Agreement will for any reason be held to be excessively broad as to duration, geographical scope, activity or subject, it will be construed by limiting and reducing it, so as to be enforceable to the extent compatible with the applicable law as it will then appear.

19.Entire Agreement.  This Agreement constitutes the entire and only agreement between the Company and me respecting the 

subject matter hereof, and supersedes all prior agreements and understandings, oral or written, between us concerning such subject matter.  No modification, amendment, waiver or termination of this Agreement or of any provision hereof will be binding unless made in writing and signed by an authorized officer of the Company.  Failure of the Company to insist upon strict compliance with any of the terms, covenants or conditions hereof will not be deemed a waiver of such terms, covenants or conditions.  In the event of any inconsistency between this Agreement and any other contract between the Company and me, the provisions of this Agreement will prevail.

20.Interpretation.  This Agreement will be deemed to be made and entered into in the Commonwealth of Massachusetts, and will in all respects be interpreted, enforced and governed under the laws of the Commonwealth of Massachusetts.  I hereby agree to consent to personal jurisdiction of the state and federal courts situated within Suffolk County, Massachusetts for purposes of enforcing this Agreement, and waive any objection that I might have to personal jurisdiction or venue in those courts.  As used in this Agreement, “including” means “including but not limited to”.

 

 

BY SIGNING BELOW, I CERTIFY THAT I HAVE READ THIS AGREEMENT CAREFULLY AND AM SATISFIED THAT I UNDERSTAND IT COMPLETELY.

IN WITNESS WHEREOF, the undersigned has executed this agreement as a sealed instrument as of the date set forth below.

Signed:  __________________________________________________________

    (Employee’s full name)

Type or print name:Wael Hashad

Last four digits of SSN:_____________________Date:__________________

 

 

 

 

 

 

Appendix A

To:Seres Therapeutics, Inc.

From:Wael Hashad

Date:____________________

SUBJECT: Prior Inventions

The following is a complete list of all inventions or improvements relevant to the subject matter of my employment by the Company that have been made or conceived or first reduced to practice by me alone or jointly with others prior to my engagement by the Company:

�No inventions or improvements

�See below:

_______________________________________________________________

_______________________________________________________________

_______________________________________________________________

_______________________________________________________________

_______________________________________________________________

_______________________________________________________________

_______________________________________________________________

�Additional sheets attached

 

The following is a list of all patents, patent applications and other patent rights that I invented:

�None

�See below:

_______________________________________________________________

_______________________________________________________________

_______________________________________________________________

_______________________________________________________________

_______________________________________________________________

_______________________________________________________________

_______________________________________________________________fdnh-ex102_185.htm

 

Exhibit 10.2

LOAN MODIFICATION AGREEMENT AND WAIVER

THIS LOAN MODIFICATION AGREEMENT AND WAIVER (“Amendment”) is dated effective as of May 11, 2016 by and among FOUNDATION HEALTHCARE, INC., an Oklahoma corporation (“Borrower”), the lenders from time to time party to the Credit Agreement (collectively, “Lenders” and individually, a “Lender”), and TEXAS CAPITAL BANK, NATIONAL ASSOCIATION, a national banking association, as Administrative Agent and L/C Issuer (the “Administrative Agent”).

RECITALS

A. Administrative Agent, Lenders and Borrower are parties to that certain Credit Agreement, dated as of December 31, 2015 (the “Credit Agreement”).

B. Borrower has requested that Administrative Agent and the Lenders, among other things:

(i) waive certain Events of Default as more specifically provided herein;

(ii) increase the Revolving Credit Commitments from $12,500,000 to $15,500,000 temporarily, from the date hereof until July 31, 2016; and

(iii) consent to the following:

(a) the acquisition by Foundation Surgical Hospital Holdings, LLC, a Guarantor, of 51% of the outstanding Equity Interests of Ninety Nine Healthcare Management, LLC, 

(b) the sale of 100% of the Equity Interests held by Foundation Surgery Holdings, LLC, a Guarantor, in Summit Medical Center, LLC, a Non-Controlled Hospital Entity,

(c) the sale of 49% of the Equity Interest of Foundation Surgery Affiliates, LLC, a Guarantor,

(d) the issuance of warrants for the purchase of Equity Interests in the Houston Hospital to certain physicians, and

(e)  the issuance of Equity Interests of the Borrower to employees in lieu of cash bonuses.

C. Administrative Agent and the Lenders are willing to permit such modifications subject to the terms and conditions set forth herein.

 

 

 

AGREEMENT

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

ARTICLE I

Recitals and Definitions

Section 1.01.  Recitals.  The foregoing recitals are hereby incorporated into and made a part of this Amendment for all purposes.

Section 1.02.  Definitions.  Capitalized terms used in this Amendment, to the extent not otherwise defined herein, shall have the same meaning as in the Credit Agreement.  Definitions contained in the Credit Agreement, as amended hereby, and in the other Loan Documents which identify agreements, instruments or documents shall be deemed to include all amendments and supplements to such agreements, instruments and documents and, without any obligation on the part of Lender to enter into any future amendments, modifications or supplements, all future amendments, modifications, and supplements thereto entered into from time to time.

ARTICLE II

Waiver of Event of Default; Etc.

Section 2.01.  Event of Default.  Pursuant to Section 7.1 of the Credit Agreement, Borrower was required to deliver to Administrative Agent (a) within 45 days after the last day of the calendar month ended December 31, 2015, (i) an unaudited financial report of the Borrower Entities, (ii) a Borrowing Base Report, and (iii) a listing of accounts receivable and accounts payable; (b) within 45 days of the quarter ended December 31, 2015, (i) an unaudited financial report of the Houston Hospital and (ii) a Compliance Certificate; and (c) within 30 days of the beginning of 2016, an operating budget.  Borrower failed to timely make such deliveries (collectively, the “Current Defaults”) which, under Section 10.1(b), constitutes one or more Events of Default.

Section 2.02.  Waiver of Current Defaults.  Subject to satisfaction of the other conditions set forth in this Amendment, each of the Administrative Agent and Lenders hereby waives the Current Defaults.  This waiver is limited to the Current Defaults and shall not be deemed to be a waiver of any other provision of the Loan Documents.  Neither the execution by Administrative Agent and the Lenders of this Amendment, nor any other act or omission by the Administrative Agent and the Lenders in connection herewith, shall be deemed a waiver by the Administrative Agent and the Lenders of any other Default or Event of Default which may exist or which may occur in the future under the Credit Agreement or any other Loan Document (collectively “Other Violations”).  Similarly, nothing contained in this Amendment shall, directly or indirectly, in any way whatsoever, either (a) impair, prejudice or otherwise adversely affect the rights of the Administrative Agent and Lenders at any time to exercise any right, privilege, or remedy in connection with the Loan Documents with respect to any Other Violations, or (b) constitute any course of dealing or other basis for altering any obligation of Borrower or any Obligated Party or any right, privilege, or remedy of Lender under the Loan Documents.  Nothing in this Amendment shall be construed to be a consent or waiver by the Administrative Agent or any Lender to any Other Violations.

Loan Modification Agreement and Waiver – Page 2

 

ARTICLE III

Consents

Section 3.01.  Acquisition of Equity Interests in Ninety Nine Healthcare Management, LLC.  Borrower has informed the Administrative Agent and the Lenders that Foundation Surgical Hospital Holdings, LLC, a Guarantor, desires to acquire 51% of the outstanding Equity Interests of Ninety Nine Healthcare Management, LLC, a Texas limited liability company (“Ninety Nine Healthcare”), a physician practice management company, for $440,000 in cash, utilizing an advance under the Revolving Credit Facility, and 900,000 shares of common stock of the Borrower pursuant to the terms of the Membership Interest Purchase Agreement dated March 1, 2016 and amendment thereto dated May 11, 2016 attached hereto as Exhibit A (the “Ninety Nine Healthcare Transaction”).  The Administrative Agent and Lenders hereby consent to the Ninety Nine Healthcare Transaction as described herein.  On the date of closing of the Ninety Nine Healthcare Transaction, (a) Borrower shall deliver to Administrative Agent a true, correct and complete copy of the acquisition documents, and (b) Borrower shall cause Ninety Nine Healthcare to execute (i) an Intercompany Note payable to the Borrower in the principal amount of $440,000, which will be assigned, and the original thereof will be delivered, to Administrative Agent; and (ii) a security agreement in favor of Borrower granting a lien on substantially all of the assets of Ninety Nine Healthcare.  In addition, within ninety (90) days of the closing date of the Ninety Nine Healthcare Transaction, Borrower shall cause (A) Ninety Nine Healthcare to execute a control agreement in form and substance reasonably satisfactory to the Administrative Agent among Ninety Nine Healthcare, the Borrower and the Administrative Agent, (B) Ninety Nine Healthcare to use Texas Capital Bank as its principal depository bank, including for the maintenance of business, cash management, operating and administrative deposit accounts, and, to the extent accounts are maintained with a financial institution other than Texas Capital Bank, enter into control agreements in form and substance satisfactory to Administrative Agent, and (C) Ninety Nine Healthcare to have no subsidiaries or own any Equity Interests in any Person other than Ninety Nine Human Resources, LLC.  Notwithstanding anything to the contrary contained in the Loan Documents, none of the Borrower Entities shall make any advance, distribution or loan to, or other investment in, Ninety Nine Healthcare unless the amount thereof is subject to repayment pursuant to the terms of an Intercompany Note assigned to Administrative Agent.

Section 3.02.  Sale of Equity Interest in Summit Medical Center.  Borrower has informed the Administrative Agent and the Lenders that Foundation Surgery Holdings, LLC, a Guarantor, (a) desires to sell 100% of its Equity Interests of Summit Medical Center, LLC, a Non-Controlled Hospital Entity for an amount in excess of $1,200,000 and (b) upon consummation of the sale, 100% of the proceeds will be delivered to the Administrative Agent for application, first, to outstanding amounts under the Revolving Credit Loans and, second, to prepay the Term Loans (the “Summit Transaction”).  The Administrative Agent and Lenders hereby consent to the Summit Transaction as described herein; provided, however, that such consent shall not be effective until such time as the Administrative Agent receives, reviews and approves, in its reasonably discretion, the terms of and documents evidencing the Summit Transaction and provides written notice to the Borrower thereof.  Immediately upon consummation of the Summit Transaction (and approval thereof by the Administrative Agent as set forth herein), (i) Summit Medical Center, LLC shall no longer be a Non-Controlled Hospital Entity under the Credit Agreement and (ii) Borrower shall deliver to Administrative Agent (x) a true, correct and complete copy of the transaction documents and (y) 100% of the proceeds.

Section 3.03.  Sale of Equity Interest in Foundation Surgery Affiliates, LLC.  Borrower has informed the Administrative Agent and the Lenders that TSH Acquisition, LLC, a Guarantor, (a) desires to sell 49% of its Equity Interests of Foundation Surgery Affiliates, LLC, a Guarantor, for an amount in excess of $2,500,000 and (b) upon consummation of the sale, 100% of the proceeds will be delivered to the Administrative Agent for application, first, to outstanding amounts under the Revolving Credit Loans and, second, to prepay the Term Loans (the “Ambulatory Surgery Division Transaction”).  The 

Loan Modification Agreement and Waiver – Page 3

 

Administrative Agent and Lenders hereby consent to the Ambulatory Surgery Division Transaction as described herein; provided, however, that such consent shall not be effective until such time as the Administrative Agent receives, reviews and approves, in its reasonably discretion, the terms of and documents evidencing the Ambulatory Surgery Division Transaction and provides written notice to the Borrower thereof..  Immediately upon consummation of the Ambulatory Surgery Division Transaction, Borrower shall deliver to Administrative Agent (a) a true, correct and complete copy of the transaction documents and (b) 100% of the proceeds.

Section 3.04.  Issuance of Warrants in the Houston Hospital to Physicians.  Borrower has informed the Administrative Agent and the Lenders that Borrower desires to issue to physicians at the Houston Hospital (the “Houston Hospital Warrant Transaction”) up to 98 Interests at $50,000 per interest.  Each “Interest” will consist of one Class A Unit in Houston Hospital and 10,000 shares of the common stock of Foundation Healthcare, Inc.  The issuance of the warrants will terminate on June 30, 2016, and the warrants will expire on June 30, 2019.  The Administrative Agent and Lenders hereby consent to the Houston Hospital Warrant Transaction as described herein.

Section 3.05.  Issuance of Stock in Borrower.  Borrower has informed the Administrative Agent and the Lenders that the Borrower desires to issue common stock to its employees in lieu of cash bonuses from time to time in accordance with its long term incentive plan and otherwise in the ordinary course of business (the “Stock Bonus Transactions”).  The Administrative Agent and Lenders hereby consent to the Stock Bonus Transactions as described herein.

Section 3.06.  El Paso Sale Transaction.  Borrower has informed the Administrative Agent and the Lenders that Foundation Surgical Hospital Holdings, LLC, a Guarantor, (a) desires to sell its real property for a purchase price of not less than $1,400,000 and (b) upon consummation of the sale, 100% of the proceeds will be delivered to the Administrative Agent for application, first, to outstanding amounts under the Revolving Credit Loans and, second, to prepay the Term Loans (the “El Paso Transaction”).  The Administrative Agent and Lenders hereby consent to the El Paso Transaction as described herein; provided, however, that such consent shall not be effective until such time as the Administrative Agent receives, reviews and approves, in its reasonably discretion, the terms of and documents evidencing the El Paso Transaction and provides written notice to the Borrower thereof.  Immediately upon consummation of the El Paso Transaction, Borrower shall deliver to Administrative Agent (a) a true, correct and complete copy of the transaction documents and (b) 100% of the proceeds.

ARTICLE IV

Amendments to Credit Agreement

Section 4.01.  Definition of Change of Control.  Section 1.1 of the Credit Agreement is amended by amending and restating clause (f) of the definition of Change of Control to read as follows:

(f) Borrower ceases to own, directly or indirectly, at least 51% of any Controlled Hospital Entity or Ninety Nine Healthcare;

Section 4.02.  Definition of Houston Hospital.  Section 1.1 of the Credit Agreement is amended by amending and restating the definition of Houston Hospital to read as follows:

“Houston Hospital” means University General Hospital, LLC, a Texas limited liability company (f/k/a University General Hospital, LP, a Texas limited partnership).

Loan Modification Agreement and Waiver – Page 4

 

Section 4.03.  Definition of Intercompany Note.  Section 1.1 of the Credit Agreement is amended by amending and restating the definition of Intercompany Note to read as follows:

“Intercompany Note” means a promissory note in substantially the form of Exhibit K evidencing advances made by Borrower to a Controlled Hospital Entity and/or Ninety Nine Healthcare from the proceeds of the Loans.

Section 4.04.  Definition of Intercompany Note Documents.  Section 1.1 of the Credit Agreement is amended by amending and restating the definition of Intercompany Note Documents to read as follows:

“Intercompany Note Documents” means each Intercompany Note, Controlled Hospital Entity Control Agreement, Controlled Hospital Entity Security Agreement, Ninety Nine Healthcare Control Agreement, Ninety Nine Healthcare Security Agreement and each other document, instrument or agreement executed or delivered in connection with the foregoing.

Section 4.05.  Definition of Material Adverse Event.  Section 1.1 of the Credit Agreement is amended by amending and restating the definition of Material Adverse Event to read as follows:

“Material Adverse Event” means any act, event, condition, or circumstance which could materially and adversely affect (a) the operations, business, properties, liabilities (actual or contingent), condition (financial or otherwise) or prospects of any of the Borrower Entities, Ninety Nine Healthcare or Non-Controlled Hospital Entities, taken as a whole; (b) the ability of any Obligated Party to perform its obligations under any Loan Document to which it is a party; (c) the ability of any Controlled Hospital Entity or Ninety Nine Healthcare to perform its obligations under the Intercompany Note Documents; or (d) the legality, validity, binding effect or enforceability against any Obligated Party of any Loan Document to which it is a party.

Section 4.06.  Definitions of Ninety Nine Healthcare, Ninety Nine Healthcare Control Agreement, and Ninety Nine Healthcare Security Agreement.  Section 1.1 of the Credit Agreement is amended by adding the following definitions in their proper alphabetical order to read as follows:

“Ninety Nine Healthcare” means Ninety Nine Healthcare Management, LLC, a Texas limited liability company.

“Ninety Nine Healthcare Control Agreement” means a deposit account control agreement in substantially the form of Exhibit I among Ninety Nine Healthcare, as borrower, Borrower, as lender, and Agent, as depository bank.

“Ninety Nine Healthcare Security Agreement” means a security agreement in substantially the form of Exhibit J, pursuant to which Ninety Nine Healthcare grants to Borrower a security interest in substantially all of its assets.

Section 4.07.  Letter of Credit Fees Payable in Arrears.  Section 2.4(b) of the Credit Agreement is amended by amending and restating the third and fourth sentence to read as follows:

Letter of Credit Fees for each commercial and standby Letter of Credit shall computed on a quarterly basis and be payable in arrears on the first Business Day of each April, July, October and January thereafter so long as such Letter of Credit remains outstanding.  

Loan Modification Agreement and Waiver – Page 5

 

Section 4.08.  Uncommitted Increase in Revolving Credit Commitment of $3,000,000.

(a) Maturity Date – Section 1.1 of the Credit Agreement is hereby amended by amending and restating the definition of Maturity Date to read as follows:

“Maturity Date” means (a) with respect to the Revolving Credit Facility, December 30, 2018, or such earlier date on which the Revolving Credit Commitment of each Revolving Credit Lender terminates as provided in this Agreement; provided that any and all amounts outstanding under the May 2016 Temporary Advance shall be due and payable on July 31, 2016, and (b) with respect to the Term Loan Facility, December 30, 2020; provided, however, that, in each case, if such date is not a Business Day, the Maturity Date shall be the next succeeding Business Day.

(b) Minimum Amount of Uncommitted Increase – Section 2.10(a) of the Credit Agreement is hereby amended by amending and restating the proviso to read as follows:

provided that any such request for an increase shall be in a minimum amount of $1,500,000.

(c) Increase and Advance – Section 2.10 of the Credit Agreement is hereby amended by adding clause (g) to read as follows:

(g) May 2016 Temporary Advance.  Subject to the terms and conditions of this Agreement, each Lender listed on Annex I attached to that certain Loan Modification and Waiver dated May 11, 2016 severally agrees to make one or more revolving credit loans to Borrower from time to time from May 11, 2016 until July 31, 2016 in an aggregate principal amount for such Lender at any time outstanding up to but not exceeding the amount listed on Annex 1 (the “May 2016 Temporary Advance”).  Each May 2016 Temporary Advance shall be deemed to be a Revolving Credit Borrowing, shall be evidenced by a separate Revolving Credit Note, and the Revolving Credit Commitment of each Revolving Credit Lender shall, until the May 2016 Temporary Advance is paid in full, be deemed amended to take into account such advances.  Borrower agrees that any and all May 2016 Temporary Advances, as determined by the Administrative Agent, shall be paid in full on or before July 31, 2016.  Each of the Lenders acknowledges and agrees that, so long as any amount remains outstanding under this clause (g), payments on the Obligations to be applied to the Revolving Credit Loans shall be applied first to the advances hereunder.

Section 4.09.  Landlord Waivers and Control Agreements.  Section 7.17(b) and (c) of the Credit Agreement are amended and restated to read as follows:

(b) Borrower shall use reasonable efforts to obtain landlord waivers not later than June 30, 2016 in form and substance reasonably satisfactory to the Administrative Agent executed by the landlords of all locations leased by the Controlled Hospital Entities and the Borrower.

(c) Not later than June 30, 2016, Borrower shall have executed, and caused each of the Controlled Hospital Entities to execute, Controlled Hospital Entity Control Agreements in form and substance reasonably satisfactory to Administrative Agent.

Loan Modification Agreement and Waiver – Page 6

 

ARTICLE V

Conditions

Section 5.01.  Conditions Precedent.  The effectiveness of this Amendment is subject to the satisfaction of the following conditions precedent, in form and substance satisfactory to Lender, unless specifically waived in writing by Administrative Agent:

(a) Administrative Agent shall have received this Amendment originally executed and delivered by Borrower and the Lenders; 

(b) Administrative Agent shall have received an Authority Certificate executed by an officer of Borrower; 

(c) Administrative Agent shall have received an acknowledgment and consent from the Guarantors in the form attached hereto as Annex II;

(d) Administrative Agent shall have received from Borrower additional Revolving Credit Notes taking into account the amount of the May 2016 Temporary Advance;

(e) Administrative Agent shall have received Intercompany Note Documents with respect to Ninety Nine Healthcare, including an originally executed Intercompany Note assigned to the Administrative Agent and a UCC-1 Financing Statement listing Ninety Nine Healthcare as the debtor and Borrower as the secured party to be filed with the Texas Secretary of State and assigned to Administrative Agent;

(f) Administrative Agent shall have received a revised Schedule 3.10 to that certain Security Agreement dated December 31, 2015 between Guarantors and Administrative Agent reflecting the addition of the Equity Interests of Ninety Nine Healthcare, which schedule will be attached by the Administrative Agent and each of the other parties to their respective copies of the Security Agreement to replace any prior Schedule 3.10 attached thereto;

(g) Administrative Agent shall have received such UCC lien searches as Administrative Agent may require;

(h) The representations and warranties contained herein, in the Credit Agreement, as amended hereby, and in each other Loan Document, as amended of even date herewith, shall be true and correct as of the date hereof, as if made on the date hereof;

(i) Except for the Current Defaults, no Default or Event of Default shall have occurred and be continuing;

(j) All corporate proceedings taken in connection with the transactions contemplated by this Amendment and all documents, instruments and other legal matters incident thereto, shall be satisfactory to Lender; 

(k) Administrative Agent shall have received from Borrower payment of all expenses incurred by Lender to date, including reasonable attorneys’ fees and costs; and

Loan Modification Agreement and Waiver – Page 7

 

(l) Lender shall have received such other documents, instruments or certificates as Lender and its counsel may reasonably require, including such documents as Lender in its sole discretion deems necessary or appropriate to effectuate the terms and conditions of this Amendment and the Loan Documents.

ARTICLE VI

Ratifications, Representations and Warranties

Section 6.01.  Ratifications.  The terms and provisions set forth in this Amendment shall modify and supersede all inconsistent terms and provisions set forth in the Credit Agreement and the other Loan Documents and, except as expressly modified and superseded by this Amendment, the terms and provisions of the Credit Agreement and the other Loan Documents are ratified and confirmed and shall continue in full force and effect.  The Credit Agreement, as amended, and the other Loan Documents, as amended, shall continue to be legal, valid, binding and enforceable in accordance with their respective terms.

Section 6.02.  Representations and Warranties.  Borrower hereby represents and warrants to the Administrative Agent and the Lenders as follows:

(a) the execution, delivery and performance of this Amendment and any and all other Loan Documents executed and/or delivered in connection herewith have been authorized by all requisite action on the part of Borrower and do not and will not conflict with or violate any provision of any applicable law, the organizational documents of, or any agreement, document, judgment, license, order or permit applicable to or binding upon any of the Borrower; and no consent, approval, authorization or order of and no notice to or filing with, any court or governmental authority or third person is required in connection with the execution, delivery or performance of this Amendment or to consummate the transactions contemplated hereby;

(b) the representations and warranties contained in the Credit Agreement, as amended, and in each of the other Loan Documents, as amended, are true and correct on and as of the date hereof as though made on and as of the date hereof, except to the extent such representations and warranties relate to an earlier date;

(c) Except for the Current Defaults, Borrower is in full compliance with all covenants and agreements contained in the Credit Agreement, as amended, and in each of the other Loan Documents, as amended; and

(d) Borrower acknowledges and agrees that each of the Administrative Agent and Lenders is in full compliance with all covenants and agreements contained in the Credit Agreement, as amended, and in each of the other Loan Documents, as amended.

Section 6.03.  Renewal and Extension of Security Interests and Liens.  Borrower hereby acknowledges, ratifies, reaffirms and renews the liens and security interests created by and granted in the Loan Documents in all of the assets of Borrower and Guarantors now or hereafter owned (collectively, together with any and all substitutes, replacements and proceeds thereof, the “Collateral”).  Borrower agrees that this Amendment shall in no manner affect or impair the liens and security interests securing the Obligations, and that such liens and security interests shall not in any manner be waived, the purposes of this Amendment being to modify the Credit Agreement as herein provided, and to carry forward all liens and security interest securing same, which are acknowledged by Borrower to be valid and subsisting, perfected in favor of Lender and prior in right and interest over any other liens or security 

Loan Modification Agreement and Waiver – Page 8

 

interests existing on the Collateral.  Borrower covenants and agrees that no security interests or liens exist on the Collateral, except in favor of Lender and as otherwise expressly permitted in the Credit Agreement.

Section 6.04.  Modification.  Borrower acknowledges and agrees that (a) this Amendment shall not constitute a novation or otherwise extinguish the Obligations evidenced by the Credit Agreement, as amended, or the other Loan Documents, as amended; (b) the Obligations shall be paid in accordance with the terms and conditions of the Credit Agreement, as amended, and the other Loan Documents, as amended; and (c) neither Borrower nor any Guarantor has any right of offset, defense, or counterclaim to the payment and performance of the Notes or any of the other Obligations under the Credit Agreement, as amended, or any other Loan Document, as amended.  Neither the Administrative Agent nor the Lenders have made any commitment, either express or implied, to extend the maturity date of the Notes, or to provide Borrower with any financing, beyond the maturity date of the Notes, it being expressly acknowledged and agreed to by Borrower that the Obligations shall be due and payable in full as set forth in the Loan Documents.

ARTICLE VII

Miscellaneous

Section 7.01.  Survival of Representations and Warranties.  All representations and warranties made in this Amendment, the Credit Agreement or any other document or documents relating thereto, including, without limitation, any Loan Document furnished in connection with this Amendment, shall survive the execution and delivery of this Amendment and the other Loan Documents, and no investigation by the Administrative Agent or any Lender or any closing shall affect the representations and warranties or the right of the Administrative Agent and Lenders to rely upon them.

Section 7.02.  Reference to Credit Agreement and the Other Loan Documents.  Each of the Loan Documents, including the Credit Agreement and any and all other agreements, documents or instruments now or hereafter executed and delivered pursuant to the terms hereof or pursuant to the terms of the Credit Agreement and the other Loan Documents, as amended hereby, are hereby amended so that any reference in such Loan Documents to the Credit Agreement or any other Loan Document shall mean a reference to the Credit Agreement and the other Loan Documents as amended hereby or of even date herewith, and as may be further amended from time to time.

Section 7.03.  Expenses of Lender.  As provided in the Credit Agreement, Borrower agrees to pay on demand all reasonable costs and expenses incurred by the Administrative Agent in connection with the preparation, negotiation and execution of this Amendment and the other Loan Documents executed pursuant hereto and any and all amendments, modifications, and supplements hereto, including, without limitation, the reasonable costs and fees of Administrative Agent’s legal counsel, and all reasonable costs and expenses incurred by Administrative Agent in connection with the enforcement or preservation of any rights under the Credit Agreement, as amended hereby, or any other Loan Document.

Section 7.04.  RELEASE.  BORROWER HEREBY ACKNOWLEDGES THAT IT HAS NO DEFENSE, COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR NATURE WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF ITS LIABILITY TO PAY AND PERFORM THE OBLIGATIONS UNDER THE LOAN DOCUMENTS OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES OF ANY KIND OR NATURE FROM THE ADMINISTRATIVE AGENT AND LENDERS.  BORROWER HEREBY VOLUNTARILY AND KNOWINGLY RELEASES AND FOREVER DISCHARGES THE ADMINISTRATIVE AGENT, LENDERS, AND THEIR RESPECTIVE PREDECESSORS, AGENTS, EMPLOYEES, ATTORNEYS, SUCCESSORS AND ASSIGNS (COLLECTIVELY, THE “RELEASED PARTIES”), FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, 

Loan Modification Agreement and Waiver – Page 9

 

DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN, ANTICIPATED OR UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT LAW OR IN EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS AMENDMENT IS EXECUTED, WHICH THE BORROWER MAY NOW OR HEREAFTER HAVE AGAINST THE RELEASED PARTIES (OR ANY OF THEM), IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING FROM ANY OF THE OBLIGATIONS, INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE CREDIT AGREEMENT, AS AMENDED, OR OTHER LOAN DOCUMENTS, AS AMENDED, AND NEGOTIATION FOR AND EXECUTION OF THIS AMENDMENT (COLLECTIVELY, THE “RELEASED CLAIMS”).  WITHOUT LIMITING ANY PROVISION OF THIS AMENDMENT OR ANY OTHER LOAN DOCUMENT, IT IS THE EXPRESS INTENTION OF THE PARTIES HERETO THAT THE RELEASED CLAIMS INCLUDE ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER (INCLUDING ATTORNEYS’ FEES) ARISING OUT OF OR RESULTING FROM THE SOLE CONTRIBUTORY OR ORDINARY NEGLIGENCE OF THE RELEASED PARTIES (OR ANY OF THEM).

Section 7.05.  Severability.  Any provision of this Amendment held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Amendment and the effect thereof shall be confined to the provision so held to be invalid or unenforceable in such jurisdiction.

Section 7.06.  APPLICABLE LAW.  THIS AMENDMENT AND, EXCEPT AS OTHERWISE SET FORTH THERIN, THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE; PROVIDED THAT THE LENDER SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.

Section 7.07.  Successors and Assigns.  This Amendment is binding upon and shall inure to the benefit of the Administrative Agent, the Lenders, the Borrower, and their respective successors and assigns, except Borrower may not assign or transfer any of its rights or obligations hereunder without the prior written consent of the Administrative Agent.

Section 7.08.  Counterparts; Facsimiles.  This Amendment may be executed in one or more counterparts, each of which when so executed shall be deemed to be an original, but all of which when taken together shall constitute one and the same instrument.  Delivery of an executed counterpart of this Amendment by facsimile or portable document format (pdf) shall be equally as effective as delivery of an executed original counterpart and shall constitute a covenant to deliver an executed original counterpart, but the failure to do so shall not affect the validity, enforceability and binding effect of this Amendment.  

Section 7.09.  Further Assurances.  Borrower shall execute and deliver, or cause to be executed and delivered, to the Administrative Agent such documents and agreements, and shall take or cause to be taken such actions as the Administrative Agent may, from time to time, reasonably request to carry out the terms of this Amendment and the other Loan Documents.

Loan Modification Agreement and Waiver – Page 10

 

Section 7.10.  Headings.  The headings, captions, and arrangements used in this Amendment are for convenience only and shall not affect the interpretation of this Amendment.

Section 7.11.  ENTIRE AGREEMENT.  THIS AMENDMENT, THE CREDIT AGREEMENT, THE NOTES, AND THE OTHER LOAN DOCUMENTS, EACH AS AMENDED, REPRESENT THE ENTIRE AGREEMENT AMONG THE PARTIES RELATED TO THE SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

Section 7.12.  Amendment as a Loan Document.  This Amendment constitutes a Loan Document and any failure of the Borrower to comply with the terms and conditions of this Amendment shall result in an Event of Default under the Credit Agreement and the other Loan Documents.

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Loan Modification Agreement and Waiver – Page 11

 

IN WITNESS WHEREOF, the parties have executed this Amendment to be effective as of the date first written above.

 

	
ADMINISTRATIVE AGENT:

	
 

	
TEXAS CAPITAL BANK, NATIONAL ASSOCIATION

 

	
By:
	
 
	
/s/ DEBORAH T. PURVIN

	
 
	
 
	
Deborah T. Purvin, Senior Vice President

 

 

Loan Modification Agreement and Waiver – Signature Page

 

 

	
BORROWER:

	
 

	
FOUNDATION HEALTHCARE, INC.

 

	
By:
	
 
	
/s/ STANTON M. NELSON

	
 
	
 
	
Stanton M. Nelson, CEO

 

 

Loan Modification Agreement and Waiver – Signature Page

 

 

	
LENDER:

	
 

	
TEXAS CAPITAL BANK, NATIONAL ASSOCIATION

 

	
By:
	
 
	
/s/ DEBORAH T. PURVIN

	
 
	
 
	
Deborah T. Purvin, Senior Vice President

 

 

Loan Modification Agreement and Waiver – Signature Page

 

 

	
LENDER:

	
 

	
LEGACYTEXAS BANK

 

	
By:
	
 
	
/s/ SPENCER STOCKWELL

	
 
	
 
	
Spencer Sockwell, Corporate Heathcare Banking -- Manager

 

 

 

Loan Modification Agreement and Waiver – Signature Page

 

 

	
LENDER:

	
 

	
INTRUST BANK, NATIONAL ASSOCIATION

 

	
By:
	
 
	
/s/ ROGER G. EASTWOOD

	
 
	
 
	
Roger G. Eastwood, Division Director, Complex Credits

 

 

Guarantor Consent and Acknowledgment – Signature Page

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