RETENTION AND
INCENTIVE AGREEMENT
This Retention and Incentive
Agreement (this “Agreement”) is made as of
January 28, 2009 (the “Effective Date”) by and
between Adventrx Pharmaceuticals, Inc., a Delaware corporation (the
“Company”), and Brian M. Culley, an individual resident
of the State of California (“Employee”). Certain
capitalized terms used in this Agreement are defined in
Section 12 below.
1. At-Will Employment .
Employee’s employment is and shall continue to be at-will, as
defined under applicable law. If Employee’s employment
terminates for any reason, Employee shall not be entitled to any
payments, benefits, damages, awards or compensation other than as
provided by this Agreement or required by applicable law, or as may
otherwise be established under the Company’s then existing
employee benefit plans or policies at the time of termination.
2. Severance Benefits .
If Employee’s employment with the Company terminates as a
result of an Involuntary Termination at any time, and Employee
delivers (and does not revoke) the Release (as defined in
Section 8 below), then Employee shall be entitled to an amount
payable by the Company to Employee equal to the Severance Payment,
less applicable withholdings, which amount shall be payable in a
lump-sum on the date determined pursuant to Section 8.
3. Issuance of Restricted
Stock Units . The Company shall execute a Notice of Grant of
Restricted Stock Units in substantially the form of Exhibit A
attached hereto pursuant to which Employee shall be granted an
award of Restricted Stock Units pursuant to the Company’s
2008 Omnibus Incentive Plan (the “Award”); provided,
however, that the Company has received a written waiver under that
certain Rights Agreement, dated July 25, 2005, as amended (the
“Rights Agreement”), that allows the Company to grant
the Award without complying with the participation rights (and any
related rights, including rights to notice) set forth in the Rights
Agreement.
4. Other Terminations .
If Employee’s employment with the Company is terminated,
other than as a result of an Involuntary Termination, then Employee
shall not be entitled to the benefits of Section 2 of this
Agreement.
5. Accrued Wages and
Vacation, Expenses . Without regard to the reason for, or the
timing of, Employee’s termination of employment: (i) the
Company shall pay Employee any unpaid base salary due for periods
prior to and including the Termination Date; (ii) the Company
shall pay Employee all of Employee’s accrued and unused
vacation through the Termination Date; and (iii) following
submission of proper expense reports by Employee, the Company shall
reimburse Employee for all expenses reasonably and necessarily
incurred by Employee in connection with the business of the Company
prior to the Termination Date. These payments shall be made
promptly upon termination and within the period of time mandated by
law (including but limited to Section 409A of the Internal
Revenue Code of 1986, as amended (the “Code”)).
6. Limitation on
Payments . In the event it shall be determined that any
compensation by or benefit from the Company to Employee or for
Employee’s benefit, whether pursuant to the terms of this
Agreement or otherwise (collectively, the “Payments”),
(i) constitute “parachute payments” within the
meaning of Section 280G of the Code, and (ii) would be
subject to the excise tax imposed by Section 4999 of the Code
(the “Excise Tax”), then Employee’s benefits
under this Agreement shall be either:
(a) delivered in full, or
(b) delivered as to such lesser
extent which would result in no portion of such benefits being
subject to the Excise Tax,
whichever of the foregoing amounts, taking into account the
applicable federal, state and local income taxes and the Excise
Tax, results in the receipt by Employee on an after-tax basis of
the greatest amount of benefits, notwithstanding that all or some
portion of such benefits may be taxable under Section 4999 of
the Code.
Unless the Company and Employee
otherwise agree in writing, any determination required under this
Section 6 shall be made in writing by the Company’s
independent public accountants (the “Accountants”),
whose determination shall be conclusive and binding upon Employee
and the Company for all purposes. For purposes of making the
calculations required by this Section 6, the Accountants may
make reasonable assumptions and approximations concerning
applicable taxes and may rely on reasonable, good faith
interpretations concerning the application of Sections 280G
and 4999 of the Code. The Company and Employee shall furnish to the
Accountants such information and documents as the Accountants may
reasonably request in order to make a determination under this
Section 6. The Company shall bear all costs the Accountants
may reasonably incur in connection with any calculations
contemplated by this Section 6.
In the event that Payments must be
reduced, then the Payments will be reduced in accordance with the
following order of priority: (a) first, Full Credit Payments
(as defined below) will be reduced in reverse chronological order
such that the payment owed on the latest date following the
occurrence of the event triggering the Excise Tax will be the first
Payment to be reduced until such Payment is reduced to zero, and
then the Payment owed on the next latest date following occurrence
of the event triggering the Excise Tax will be the second Payment
to be reduced until such payment is equal to zero, and so forth,
until all such Full Credit Payments have been reduced to zero, and
(b) second, Partial Credit Payments (as defined below) will be
reduced in a manner such as to obtain the best economic benefit for
the employee so that after giving effect to such reduction, the
employee retains the greatest economic value of such Partial Credit
Payments. “Full Credit Payment” means a payment,
distribution or benefit, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise,
that if reduced in value by one dollar reduces the amount of the
parachute payment by one dollar. “Partial Credit
Payment” means a payment, distribution or benefit, whether
paid or payable or distributed or distributable pursuant to the
terms of this letter or otherwise, that if reduced in value by one
dollar reduces the amount of the parachute payment by an amount
that is less than one dollar. For clarification purposes only, a
“Partial Credit Payment” would include a stock option
as to which vesting is accelerated upon an event that triggers the
Excise Tax, where the in the money value of the option exceeds the
value of the option acceleration that is added to the parachute
payment.
7. Company’s
Successors . Any successor to the Company (whether direct or
indirect and whether by purchase, license, lease, merger,
consolidation, liquidation or otherwise) to all or substantially
all of the Company’s business and/or assets shall not later
than the closing or consummation of such succession assume the
Company’s obligations under this Agreement and agree
expressly to perform the Company’s obligations under this
Agreement in the same manner and to the same extent as the Company
would be required to perform such obligations in the absence of a
succession. For all purposes under this Agreement, the term
“Company” shall include any successor to the
Company’s business and/or assets which executes and delivers
the assumption agreement described in this section or which becomes
bound by the terms of this Agreement by operation of law.
8. Execution of Release
Agreement upon Termination . As a condition of receiving the
benefits under Section 2 of this Agreement, Employee shall
execute and not revoke a general release of claims, which will also
confirm any post-termination obligations and/or restrictions
applicable to Employee (the “Release”), such that the
Release becomes effective no later than 60 days following the
Termination Date (the “Release Deadline”). The benefits
under Section 2 shall be paid on the date the Release is
effective; provided , however, that, in the event
Employee’s separation occurs at a time during the calendar
year where it would be possible for the Release to become effective
in the calendar year following the calendar year in which
Employee’s separation occurs, any severance that would be
considered deferred compensation (as defined in Section 409A
of the Code) will be paid on the first payroll date to occur
immediately following the Release Deadline.
9. Notices .
(a) General . Notices
and all other communications contemplated by this Agreement shall
be in writing and shall be deemed to have been duly given when
personally delivered or when mailed by U.S. registered or certified
mail, return receipt requested and postage prepaid. In the case of
Employee, mailed notices shall be addressed to him or her at the
home address that he or she most recently communicated to the
Company in writing. In the case of the Comp
