This Separation
Agreement (the “ Agreement ”) is made as of the
25th day of July, 2008, between EPIX Pharmaceuticals, Inc. (the
“Company”) and Michael G. Kauffman, M.D., Ph.D.
(“Dr. Kauffman”).
In consideration
of the mutual covenants and agreements herein contained and other
good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties agree as
follows:
1.
Resignation . Effective July 25, 2008 (the
“Resignation Date”), Dr. Kauffman resigns from his
positions as the Company’s Chief Executive Officer, member of
the Company’s Board of Directors, and any other positions he
holds with the Company. If so requested by the Company,
Dr. Kauffman shall sign any document reasonably requested by
the Company to confirm any such resignations.
2. Final
Payments and Benefits Information . Regardless of whether
Dr. Kauffman enters into this Agreement, the following terms
and conditions shall apply:
(a)
On August 1, 2008, the Company shall pay Dr. Kauffman for
all salary earned but not yet paid through the Resignation Date.
Dr. Kauffman acknowledges that, consistent with Company
policy, he has no accrued but unused vacation days.
(b)
The Company shall provide Dr. Kauffman with the right to
continue group medical and dental insurance coverage after the
Resignation Date, under 29 U.S.C. § 1161 et seq. (commonly
known as “COBRA”). Unless Dr. Kauffman enters into
and does not revoke this Agreement and the Release, the premiums
for COBRA continuation shall be payable by Dr. Kauffman. If
Dr. Kauffman enters into and does not revoke this Agreement
and the Release, then his COBRA continuation rights shall be as
further described in paragraph 3.(b) of this Agreement. The terms
for that opportunity will be set forth in a separate written
notice.
(c)
Consistent with the terms of the stock option agreements between
Dr. Kauffman and the Company, all outstanding options that
Dr. Kauffman holds as of the Resignation Date shall cease
vesting as of the Resignation Date. In accordance with the
applicable stock option plans, Dr. Kauffman (whether for his
own benefit or for the benefit of Christine LeGoff, pursuant to the
terms of a divorce decree) must exercise any vested options within
a limited amount of time from the Resignation Date, and all
unvested options shall expire as of the Resignation
Date.
(d)
Except as otherwise provided herein, Dr. Kauffman’s
eligibility to participate in any other employee benefit plans and
programs of the Company ceases on or after the Resignation Date in
accordance with applicable benefit plan or program
terms.
3.
Employment Agreement — Termination Benefits . In
consideration for Dr. Kauffman’s execution and delivery
(without revocation during any applicable revocation period) of a
release of claims in the form of Exhibit A hereto (the
“Release”) within 10 business days after the
Resignation Date, the Company agrees to provide Dr. Kauffman
with the following termination benefits (the “Termination
Benefits”). Those Termination Benefits consist of:
(a)
A lump sum equal to 12 months Salary (at the rate in effect on
the Resignation Date pursuant to Section 4(a) of the Employment
Agreement). Such amount is equal to four hundred and five thousand,
three hundred and sixty-six dollars ($405, 366). Such amount shall
be paid in one lump sum no later than August 25,
2008;
(b)
Continuation of group health plan benefits to the extent authorized
by and consistent with COBRA, with the cost of the regular premium
for such benefits shared in the same relative proportion by the
Company and Dr. Kauffman as in effect on the Resignation Date,
until 12 months after the Resignation Date. Notwithstanding
the foregoing, nothing in this Section 3 shall be construed to
affect Dr. Kauffman’s right to receive COBRA
continuation entirely at Dr. Kauffman’s own cost to the
extent that Dr. Kauffman may continue to be entitled to COBRA
continuation after Dr. Kauffman’s right to cost sharing
under this Section 3(b) ceases; and
(c)
A payment of $101,341.50, which represents the portion of
Dr. Kauffman’s bonus as had been accrued by the Company
in accordance with generally accepted accounting principles as of
the end of the fiscal quarter immediately preceding the Resignation
Date. Such amount shall be paid in one lump sum no later than
August 25, 2008.
4.
Continuing Obligations. Dr. Kauffman’s
post-separation obligations under the Employment Agreement,
including, without limitation, the confidentiality, return of
property, noncompetition and nonsolicitation, and cooperation
provisions set forth in Section 7 thereof, shall remain in
full force and effect following the Resignation Date. Pursuant to
Section 6(d)(iv) of the Employment Agreement, if
Dr. Kauffman violates any provision of Section 7 of his
Employment Agreement, Dr. Kauffman shall forfeit all rights to
the Termination Benefits described in Section 3 of this
Agreement.
5.
Section 409A . The Company has determined that
Dr. Kauffman is a “specified employee” within the
meaning of Section 409A(a)(2)(B)(i) of the Internal Revenue
Code (the “Code”). Notwithstanding such status, based
solely on the advice of counsel to Dr. Kauffman, the Company
agrees to treat the payment of the $460,000 lump sum amount
described in Section 3(a) as separation pay that meets the
conditions of Section 1.409A-1(b)(9)(iii) of the Treasury
Regulations and therefore as exempt from the requirements of
Section 409A of the Code, and to report such payment to
Dr. Kauffman and to the Internal Revenue Service
(“IRS”) and to withhold taxes on such payment
consistently with it being exempt from Section 409A; provided
that if prior to the deadline for the Company to issue his 2008
Form W-2 to Dr. Kauffman the IRS issues formal guidance that
subjects such payment to Section 409A, the Company shall have
the right (after good-faith consultation with counsel to
Dr. Kauffman) to report the payment in such manner as the
Company determines is required by such guidance and other rules
applicable to it pursuant to Section 409A of the Code and
regulations thereunder.
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6.
Taxation of Payments and Benefits . The Company shall
undertake to make deductions, withholdings and tax reports with
respect to payments and benefits under this Agreement to the extent
that it reasonably and in good faith believes that it is required
to make such deductions, withholdings and tax reports. Payments
under this
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