EXHIBIT 10.8
SEPARATION
AGREEMENT
This Separation Agreement (the
“Agreement”) is being entered into and effective on the
later of February 12, 2009 or the date (the “Effective
Date”) the Company (defined below) completes the initial
closing of a financing transaction with 10X Fund, L.P., a Delaware
limited partnership, and is between Pro-Pharmaceuticals, Inc. (the
“Company”) and David Platt, Ph.D. (the
“Employee” or “You”). For purposes of this
Agreement, Company includes parent, subsidiary and affiliated
entities, and the stockholders, trustees, directors, officers,
agents and employees of the Company or such entities. Employee
includes heirs, spouse, legal representative and assigns of the
Employee.
This Agreement will serve as notice
and confirm the termination of your employment with the Company and
the terms of the separation package offered to You. This Agreement
shall supersede Your January 2, 2004 Employment Agreement
(“Employment Agreement”), except as set forth herein.
The purpose of this Agreement is to establish an amicable
arrangement for ending our employment relationship, to provide you
with separation benefits to assist you in transitioning to new
employment, and to release the Company from any claims that you may
have against it in exchange for the separation benefits. With that
understanding, Employee and the Company agree as
follows:
We have mutually agreed that for
purposes of this Agreement the Termination Date shall be the
Effective Date. Employee confirms that he is resigning from all
positions and offices that he held with the Company (and all of its
subsidiaries) as of the Effective Date, and is resigning as
Chairman of the Board of Directors and as a member of the Board.
The Company acknowledges that Employee voluntarily resigned from
the Company and that his termination is Without Cause as set forth
in paragraph 7(e) of Your Employment Agreement.
|
2.
|
Payments/Benefits
upon Termination
|
On your Termination Date, you will
be entitled to the following regardless of whether you sign this
Agreement:
|
|
a.
|
All
salary and wages earned through your Termination Date.
|
|
|
b.
|
A
payment for unused, earned vacation time accrued through your
Termination Date; and, if applicable, unused, earned personal need
time.
|
|
|
c.
|
All
unpaid reasonable and appropriate out-of-pocket expenses incurred
by You prior to the Termination Date. Any such claim for expenses
must be submitted to the Company within fourteen (14) days of
the Effective Date.
|
|
|
d.
|
The
opportunity to elect to convert your life insurance policy coverage
(which will terminate on the Effective Date) to an individual
policy, at your cost and expense.
|
Following your Termination Date, you will not be
entitled to participate in any Company-provided benefit programs or
practices, including, but not limited to, the following:
|
|
ii.
|
If
applicable, personal need time accrual;
|
|
|
iii.
|
Any
equity and/or stock plan or program. In addition, please be advised
that all vesting in any such plan shall cease as of the Termination
Date. Please see the Company’s stock plan and your stock
agreement(s) for applicable terms and conditions; and
|
|
|
iv.
|
Ability
to make any 401(k) contributions and entitlement to any Company
matches.
|
All amounts set forth in this
Section 2 are subject to any applicable federal, state and
local deductions, withholdings, payroll and other taxes. Your
existing equity grants shall continue to be governed under the
Plans and granting agreements in effect as of the respective
granting dates.
In consideration of your execution
of this Agreement, including specifically the release provisions in
Sections 4 and 5, the Company agrees to the following:
|
|
a.
|
Salary
continuation: The Company will continue to pay your current salary
at the monthly rate of $21,666.66 for twenty four (24) months
following your Termination Date. In total, the Company will pay
$520,000 in additional salary from the Termination Date. One-third
(1/3) of the salary paid under this section shall be in
consideration of the release of any claims under the Age
Discrimination in Employment Act of 1967 (ADEA), and in the event
you opt to revoke your consent to this Agreement per
Section 5(e), you will forfeit one-third of the salary to
which you are entitled under this Agreement; the remaining
provisions of this Agreement, including the release of non-age
related claims in Section 4, below, will remain
intact.
|
|
|
b.
|
Salary deferral: You agree that
the Company may defer payment of a portion of the salary amounts
above. In no event shall You receive payments of less than $10,000
per month, and in no event shall You receive payments of less than
the salary payments being made to the Company’s Chief
Executive Officer. All deferred amounts will continue to accrue and
will be payable either upon the Company receiving a minimum of $4
million of funding from the Effective Date, or twenty four months
from the Effective Date, whichever occurs first. In the event the
Company fails to pay the monthly amount due to you pursuant to this
Section 3(b) (whether by application of the first or second
sentence of this Section) which payment failure remains uncured for
more than forty-five (45) calendar days after the applicable
monthly payment date, all amounts due to You under this
Section 3(b) (i.e., (i) the greater of $240,000 or 24
times the
|
2
|
|
Company’s Chief Executive
Officer’s monthly salary, (ii) less the amounts
previously paid to You pursuant to Section 3(a) or 3(b) of
this Agreement) shall be immediately due and payable, and the
balance of the deferred salary shall be due and payable as of the
date stated in the third sentence of this
Section 3(b).
|
|
|
c.
|
Health
Benefits: Following (and subject to the occurrence of) the
Effective Date, the Company shall at its expense not to exceed
$2,000 per month continue to provide health and dental insurance
group benefits that are comparable to those provided to you and
your family as of the Termination Date until the first to occur of
(i) the twenty-four (24) month anniversary of the
Termination Date or (ii) the date you and your family become
eligible to receive health and dental insurance benefits under the
plans of your subsequent employer. This period will be reduced to
sixteen (16) months in the event you opt to revoke the
Agreement under Section 5(e). You agree to immediately notify
the Company upon the commencement of your employment with a
subsequent employer whereby you are eligible to receive
medical/dental benefits and to provide the Company with a complete
copy of the health and dental benefit coverages offered to you by
your new employer.
|
|
|
d.
|
During
the time that you receive Health Benefits from the Company, you may
be required to make a monthly contribution consistent with the
terms provided under these plans, and consistent with the terms
provided to other employees. Please note that your contribution
amount is subject to change based on plan costs contracted by the
Company and the Company’s shared cost arrangement with
employees.
|
|
|
e.
|
Except
as set forth above, all other benefits, including but not limited
to disability and life insurance, shall cease as of the Termination
Date. All stock options or restricted stock grants shall continue
to be governed exclusively under the terms of the Plans and
granting agreements under which such grants were originally made to
you.
|
|
|
f.
|
Deferred Milestone Payments and
Benefits: The Company acknowledges that under the terms of Your
Employment Agreement, You are entitled to a minimum severance
payment of $1 million. You agree that payment of such amount
(referred to for purposes of this Agreement as the “Milestone
Amount”) shall be deferred until the occurrence of any of the
milestone events described in the next sentence (each a
“Milestone Event”). The Milestone Amount shall be due
and payable upon the first to occur of the Milestone Events,
provided that in the case of either Milestone Event referred in
clause (i) or (iii) of this sentence, payment of the
Milestone Amount may be deferred in the sole discretion of the
Company up to and until the six (6) month anniversary thereof:
(i) approval by the Food and Drug Administration of a new drug
application (“NDA”) for any drug candidate or drug
delivery candidate of the Company based on its DAVANAT
® technology (whether or not such
technology is patented); (ii) consummation of a transaction
with a pharmaceutical company expected to result in at least $10
million of equity investment or $50 million of royalty revenue to
the Company; or (iii) the renewed listing of the
Company’s securities on a national securities exchange and
the achievement of a market capitalization of $100 million. In the
event of the Company filing a voluntary or involuntary petition for
bankruptcy at any time, whether or not a Milestone Event has
occurred, such event shall trigger the
|
3
|
|
obligation of the Company to pay
the Milestone Amount with the result that You may assert a claim
for the Milestone Amount against the bankruptcy estate of the
Company. If a Milestone Event occurs and at such time the Company
has failed to pay the Milestone Amount by the due date because the
Company has insufficient cash to pay the Milestone Amount, or
payment thereof would render the Company insolvent, the Company may
advise You in writing as to such facts, which notice shall be
accompanied by a written confirmation of the Company’s Audit
Committee of the Board of Directors, then, in that event, the
Company may issue you a promissory note in the original principal
amount of the Milestone Amount secured by the assets of the
Company. The terms and conditions of such promissory note and
security interest shall be substantially identical, and pari passu
in right of payment, to the obligations of the Company which arise
upon a default of its redemption obligation under the
“Pro-Pharmaceuticals Inc. Certificate of Designations,
Preferences, Rights and Limitations of Series B-1 Convertible
Preferred Stock and Series B-2 Convertible Preferred Stock”
(the “Designation Certificate”). In the event you are
issued the promissory note and are the secured creditor party to
the security agreement with the Company described above in this
Section 3(f), You agree and covenant that You shall not
commence any legal action of any nature or otherwise challenge the
security interest in the Company’s assets granted to the
holder(s) of the Company’s securities which are designated in
the Designation Certificate and which security interest is
evidenced by the security agreement exhibited thereto.
|
Upon a Milestone Event that is
consummation of a transaction with a pharmaceutical company
expected to result in at least $10 million of equity investment or
$50 million of royalty revenue to the Company, the Company shall
grant fully vested cashless-exercise stock options exercisable to
purchase least 300,000 shares of the common stock of the Company
(“Common Stock”) for ten (10) years at an exercise
price not less than the fair market value of the Common Stock
determined as of the date of the grant (“Cashless Stock
Options”).
Upon a Milestone
Event that is approval by the FDA of the first NDA for any drug or
drug delivery candidate of the Company based on its DAVANAT
® technology (whether or not such
technology is patented), the Company shall grant you with fully
vested Cashless Stock Options to purchase at least 500,000 shares
of the Common Stock.
You also agree and acknowledge that
the Company is entitled to your consulting services for purposes of
achieving one or more of the Milestone Events pursuant to the
Consulting Agreement of approximate even date by and between the
Company and Medi-Pharmaceuticals, Inc., a Nevada corporation
(“Medi-Pharmaceuticals”).
|
|
g.
|
Automobile:
The Company will continue to make the current lease payments on
your automobile for twenty-four (24) months from the Effective
Date.
|
|
|
h.
|
Section 409A: You and the
Company agree that the payment schedule for any payments described
in this Section 3 may be adjusted as necessary to avoid the
application of the provisions of Section 409A of the Internal
Revenue Code of
|
4
|
|
1986, as amended, (“Section
409A”), provided that no such adjustment shall result in
either a decrease of any benefit or payment contemplated herein,
nor an increase in the cost of providing such payment or benefit.
For example, if at the time of your separation from service, you
are a “specified employee,” as hereinafter defined, any
and all amounts payable under this Section 3 in connection
with such separation from service that constitute deferred
compensation subject to Section 409A, as determined by the
Company in its sole discretion, and that would (but for this
sentence) be payable within six months following such separation
from service, shall instead be paid on the date that follows the
date of such separation from service by six (6) months. For
purposes of the preceding sentence, “separation from
service” shall be determined in a manner consistent with
subsection (a)(2)(A)(i) of Section 409A and the term
“specifie
|
|
