SEPARATION OF EMPLOYMENT
AGREEMENT AND GENERAL RELEASE
THIS SEPARATION OF EMPLOYMENT AGREEMENT AND
GENERAL RELEASE (this “Agreement”) is made as of August
13, 2009 between Discovery Laboratories, Inc. (the
“Company”) and Robert J. Capetola, Ph.D.
(“Executive”) (hereinafter collectively referred to as
the “Parties”).
WHEREAS, the Company and Executive are parties
to an employment agreement dated May 4, 2006, as amended (the
“Employment Agreement”);
WHEREAS, Executive desires to resign all of his
positions with the Company and Executive and the Company wish to
mutually agree on matters relating to Executive’s
resignation, on the terms set forth in this Agreement;
and
NOW, THEREFORE, for good and valuable
consideration, the receipt of which is hereby acknowledged, and
intending to be legally bound hereby, Executive and the Company
agree as follows:
1. Resignation
from Employment and the Board of Directors . As of
5:00 p.m. on the date of this Agreement as set forth above (the
“Resignation Date”), Executive hereby resigns all
employment and related job duties and responsibilities with the
Company including, without limitation, his positions as President
and Chief Executive Officer and as a member of the Board of
Directors of the Company. This resignation is the
product of an agreement by the Parties hereto and is not a result
of any disagreement Executive had about the operations, policies or
practices of the Company or any of its subsidiaries or
affiliates. Terms not otherwise defined in this
Agreement shall have the meaning given to them in the Employment
Agreement.
2. Severance
Payments and Benefits to Executive .
(a) Separation
Payment . On the Effective Date (as defined in
Section 8(d) of this Agreement), Company shall pay to Executive a
lump sum cash payment in an amount equal to the sum of (i) all
unpaid compensation accrued through the Resignation Date, and any
unreimbursed employee business expenses (subject to submission of
appropriate documentation) ( provided , that any payment
under this Section 2(a) shall not exceed the amount that otherwise
would be calculated in accordance with Section 7(a)(i) of the
Employment Agreement), plus (ii) $250,000.
(b) Periodic
Severance Payments . During the period beginning as
of the Resignation Date and ending on May 3, 2010
(the “Severance Period”, unless terminated early under
Section 2(e) or 2(f) of this Agreement), Company shall pay to
Executive an amount equal to his Base Salary (calculated at a rate
of $490,000 per annum), payable in accordance with the
Company’s normal bi-weekly payroll practices and less any
required withholdings.
(c) Severance
Period Benefits . During the period beginning as of
the Resignation Date and ending on May 3, 2010 (the “Benefits
Period”, unless extended under Section 2(e) or 2(f) of this
Agreement), the Company shall provide Executive continuation of the
health (initially pursuant to the Consolidated Omnibus Budget
Reconciliation Act (“COBRA”)), life and other benefits
as set forth, and to the extent described, in Section 7(b)(iv) of
the Employment Agreement.
(d) Stock Options
and Restricted Stock . On the Effective Date, all
shares of stock and all options to acquire Company stock held by
Executive shall accelerate and become fully vested and all stock
options shall continue to be exercisable for the remainder of their
stated terms. In the event of a Change of Control, if
Executive shall elect not to exercise all or any portion of his
Company options, Executive shall be treated no less favorably than
the Company’s senior executives with respect to any
extension, monetization or other disposition of such
executives’ similar unexercised options in connection with
the Change of Control.
(e) Additional
Severance Payments and Benefits in the Event of a Corporate
Transaction . In the event that, prior to the
expiration of the Severance Period, the Company consummates a
Corporate Transaction, as that term is defined below,
then:
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the periodic
payments under Section 2(b) shall cease and, within 10 days from
the date of a Corporate Transaction (or, if the Corporate
Transaction consists of more than one transaction, the date of the
last of such transactions), the Company shall pay Executive a lump
sum cash payment in the amounts described in Section 7(b)(iii) of
the Employment Agreement, reduced by the aggregate of any severance
payments paid to Executive pursuant to Sections 2(a)(ii) and 2(b);
and
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the Benefits
Period under Section 2(c) shall be extended for a period ending 24
months after the Resignation Date.
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For the
purposes of this Agreement, the term “Corporate
Transaction” means (i) one or more corporate partnering or
strategic alliance transactions, Business Combinations or public or
private financings that (A) are completed during the Severance
Period and (B) result in cash proceeds (net of transaction costs)
to the Company of at least $20 million received during the
Severance Period or within 90 calendar days thereafter, or (ii) an
acquisition of the Company, by Business Combination or other
similar transaction, that occurs during the Severance Period and
the consideration paid to stockholders of the Company, in cash or
securities, is at least $20 million. Net proceeds shall
be calculated without taking into account any amounts received by
the Company as reimbursement for costs of development and research
activities to be performed in connection with any such
transaction.
(f) Additional
Severance Payments and Benefits in the Event of a Change of
Control . In the event that, prior to the expiration
of the Severance Period, the Company consummates a Corporate
Transaction that constitutes a Change of Control, as that term is
defined under the Employment Agreement, then:
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the periodic
payments under Section 2(b) shall cease and, in lieu of the
Severance Payments provided under Section 2(e) of this Agreement,
within 10 days from the date of a Change of Control, the Company
shall pay Executive a lump sum cash payment in an amount equal to
the product of 2.25 times the sum of (A) the Executive’s Base
Salary and (B) the Highest Annual Bonus, reduced by the aggregate
of any severance payments paid to Executive pursuant to Sections
2(a)(ii) and 2(b); and
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The Benefits
Period under Section 2(c) shall be extended for a period ending
27 months after the Resignation Date.
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(g) Other
Miscellaneous Severance Matters .
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Executive
acknowledges and agrees that, from and after the date of this
Agreement, Executive shall not be entitled to any benefits or
employment rights set forth in his Employment Agreement, during the
Severance Period or otherwise, other than the benefits set forth in
this Agreement.
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In the event of
a Corporate Transaction or a Change of Control in which the
Company’s vice-presidents shall decide or otherwise be
required to accept a reduction in any severance payments payable in
connection with such transaction pursuant to their respective
employment agreements then in effect, the lump sum cash payments to
be provided to Executive pursuant to Sections 2(e) or (f) of this
Agreement shall then likewise be reduced in an amount and manner so
as to constitute a substantially similar proportional adjustment as
that experienced by the Company’s vice-presidents; provided,
however, that (i) such adjustment shall be applied solely with
respect to payments that otherwise would be paid to Executive under
Sections 2(e) or (f) of this Agreement, (ii) the Company shall
promptly notify Executive that such adjustment will occur and
provide copies of the transaction documents at the time the
transaction is publicly disclosed, and (iii) under no circumstances
will Executive be required to return any money that has been
previously paid to him.
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(h) Survival of
Obligations . The obligations of the Company under
this Section 2 shall survive the death of Executive. Any
amounts remaining due at the time of or after Executive’s
death shall be paid on the dates set forth in this Agreement and
shall be payable to his surviving spouse or his estate or legal
representative. If the Company remains obligated to
provide any benefits after the time of Executive’s death,
such benefits shall be provided to surviving participants and/or
beneficiaries under the Company’s health and welfare and
other benefit plans, in accordance with any applicable provisions
of COBRA and the provisions of such plans.
(i)
Acknowledgements . All payments made to Executive
under this Agreement shall be subject to applicable federal, state
and local withholding taxes. Executive hereby
acknowledges that, under the Employment Agreement and under the
Company’s general policies and practices, Executive is not
otherwise entitled to receive the benefits described in this
Agreement unless Executive signs this
Agreement. Executive further acknowledges that, other
than the foregoing payments described in this Section 2, he
has received payment in full for all of the compensation, wages,
benefits and payments of any kind otherwise due him from the
Company, including compensation, bonuses, commissions, lost wages,
severance, expense reimbursements, payments to benefit plans,
accrued but unused vacation and personal or sick time as provided
in the Employment Agreement or otherwise. The Parties
acknowledge that the consideration described in
Section 2 represents good, valuable, and sufficient
consideration for the mutual promises and duties set forth in this
Agreement.
3. Complete
Release by Executive; Indemnity by Company .
(a) Release
. For and in consideration of the payments and promises
contemplated by Section 2 of this Agreement and for other good
and valuable consideration as more fully described herein, the
receipt and adequacy of which is hereby acknowledged, Executive
hereby waives, releases and gives up any claim or cause of action
that Executive, Executive’s heirs, executors, administrators,
successors and assigns may have against the Company, its
subsidiaries and affiliates and their employee benefit plans and
the trustees, fiduciaries and administrators of those plans, and
any of the foregoing present or past employees, officers,
shareholders, managers, directors, agents and contractors, and each
of their predecessors, successors and assigns (the “Released
Parties”), based on any event that has occurred before
Executive signs this Agreement, or arising from or based upon
Executive’s employment with the Company and/or separation
from employment and/or termination of the Employment Agreement,
including, but not limited to, any claims for salary, bonuses,
severance pay, vacation pay or any benefits under the Employee
Retirement Income Security Act of 1974, as amended; any claims of
harassment or discrimination based upon race, color, national
origin, ancestry, religion, marital status, sex, sexual
orientation, harassment, retaliation, citizenship status,
pregnancy, leave of absence (including, but not limited to, the
Family Medical Leave Act or any other federal, state or local leave
laws), medical condition or disability, under Title VII of the
Civil Rights Act of 1964, the Civil Rights Act of 1991, the
Americans With Disabilities Act, Section 1981 of the Civil Rights
Act of 1866, or any other federal, state or local law prohibiting
discrimination in employment; any claims of age discrimination
under the Age Discrimination in Employment Act, as amended by the
Older Workers Benefit Protection Act of 1990, or under any federal,
state or local law prohibiting age discrimination; the Worker
Adjustment and Retraining Notification Act; whistleblower claims;
claims of breach of implied or express contract, breach of promise,
misrepresentation, negligence, fraud, estoppel, defamation,
infliction of emotional distress, violation of public policy,
wrongful or constructive discharge or any other employment-related
tort; any claim for costs, fees or other expenses, including
attorneys’ fees; and all claims under any other federal,
state or local law relating to employment, including the
Sarbanes-Oxley Act of 2002. This waiver includes a
waiver of claims that Executive may know about and claims that
Executive may not know about. However, the foregoing
waiver shall not apply to, and Executive does not hereby waive,
release or give up (i) any claim for workers’ compensation
benefits, (ii) any vested benefits (if any) under the terms of any
retirement savings, insurance, or other qualified plan(s)
maintained by the Company, (iii) any right to unemployment
benefits that Executive may have, (iv) any rights that Executive
may have to purchase health benefit continuation coverage under
COBRA, (v) any rights that Executive may have under this
Agreement, the Indemnification Agreement (as defined below), the
Agreements between the Company and Executive related to
Executive’s Options Agreements and Restricted Stock
Agreements, and (vi) any rights of Executive under the
Company’s Certificate of Incorporation, as amended from time
to time, and the Company’s Bylaws, as amended from time to
time, and any insurance policies maintained by the Company,
including directors and officers liability and product and general
liability policies.
(b) Claims
. Executive represents and warrants that Executive has
not filed, commenced or lodged against or relating to the Company,
or permitted to be filed, commenced or lodged against or relating
to the Company on Executive’s behalf, any complaints,
charges, claims, actions or other proceedings of any nature or
description in or before any court, administrative agency or other
forum. Executive hereby agrees that neither Executive,
nor any non-governmental person, organization or other entity
acting on Executive’s behalf, has in the past or will in the
future file any lawsuit or arbitration asserting any claim that is
waived under Section 3(a) of this Agreement. If
Executive breaks this promise and files a lawsuit or arbitration
making any claim waived in this Agr
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