This Separation
Agreement (this “ Agreement ”) is entered
into between Meg M. McGilley (“ Employee
”), and Somaxon Pharmaceuticals, Inc. (the “
Company ”), as of May 14, 2009 (the
“ Effective Date ”).
WHEREAS, the
Company and Employee previously entered into that certain Amended
and Restated Employment Agreement dated as of December 1, 2007
(the “ Existing Agreement ”);
WHEREAS, the
Company and Employee wish to enter into this Agreement for the
purpose of terminating and superseding the Existing Agreement;
and
WHEREAS, the
Company and Employee wish to terminate their employment
relationship effective as of May 15, 2009 (the “
Termination Date ”) and to resolve amicably all
of their obligations to each other, including, without limitation,
under the Existing Agreement.
NOW, THEREFORE, in
consideration of the mutual promises herein contained, the parties
agree as follows:
1.
Existing Agreement . As of the Effective Date, the Existing
Agreement shall be superseded entirely by this Agreement, the
Existing Agreement shall be terminated and be of no further force
or effect and the Company’s obligations to Employee pursuant
to Section 7 of the Existing Agreement shall be abrogated in
all respects.
2.
Employment Status; Consulting Agreement . Effective as of
the Termination Date, Employee’s employment and other service
relationships with the Company, including as Vice President and
Chief Financial Officer of the Company (and any other positions he
or she may hold with the Company) shall terminate. As of the
Termination Date, Employee will be offered a consulting arrangement
with the Company on substantially the terms attached hereto as
Exhibit A .
(a)
Base Salary and Accrued Benefits . On the Termination Date,
the Company shall issue to Employee his or her final paycheck,
reflecting (i) his or her earned but unpaid base salary
through the Termination Date and (ii) all accrued, unused
vacation or PTO due Employee through the Termination Date. Except
as set forth in Sections 3(b), 3(c) and 4 below, Employee
acknowledges and agrees that with his or her final check, Employee
will have received all monies, bonuses, commissions, expense
reimbursements, paid time off or other compensation he or she
earned or was due during his or her employment by the Company,
including severance pay.
(b)
Partial Severance . As partial consideration for
Employee’s agreement to be bound by the terms of this
Agreement as of the Effective Date, the Company hereby agrees to
pay to Employee the sum of $42,500.00 on the Termination Date,
which amount, together with any amount to be paid pursuant to
Section 4(a) below, shall be the exclusive severance benefits to
which Employee is entitled.
(c)
Expense Reimbursements . The Company, within thirty
(30) days after the Termination Date, will reimburse Employee
for any and all reasonable and necessary business expenses incurred
by Employee in connection with the performance of his or her job
duties prior to the Termination Date, which expenses shall be
submitted to the Company with supporting receipts and/or
documentation no later than twenty-one (21) days after the
Termination Date.
(d)
Benefits . Employee’s entitlement to benefits from the
Company, and eligibility to participate in the Company’s
benefit plans, shall cease on the last day of the month of the
Termination Date, except to the extent Employee elects to and is
eligible to receive continued healthcare coverage pursuant to the
provisions of the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended (“ COBRA ”), for himself
or herself and any covered dependents, at his or her sole expense
in accordance with the provisions of COBRA.
(i) As
of the Termination Date, Employee has been granted the stock
options, restricted stock and restricted stock units listed on
Exhibit B attached hereto. Employee’s stock
awards shall continue to be governed in accordance with and subject
to the terms of the stock option agreements and the related plan
pursuant to which they were granted. Employee’s vested stock
options will remain exercisable for one hundred eighty
(180) days after the date on which Employee’s services
to the Company (whether as an employee or as a consultant)
terminate in accordance with the terms of the stock option
agreements and the related plan pursuant to which they were
granted.
(ii) Notwithstanding
any provision to the contrary in Employee’s options under the
Company’s 2005 Equity Incentive Award Plan (the “
Option Plan ”) or other plan (including,
without limitation, the expiration dates or vesting provisions
thereof) or any restricted stock agreement, (1) the unvested
portion, if any, of Employee’s outstanding options and
restricted stock units shall be deemed to have vested on the
Termination Date with respect to the number of shares that would
have vested had Employee remained employed by the Company for
twelve (12) months following such termination, and
(2) any restrictions with respect to any restricted shares of
the Company’s capital stock that Employee then holds shall
immediately lapse with respect to the number of restricted shares
that would have vested had Employee remained employed by the
Company for twelve (12) months following such termination;
provided , however , that this Section 3(e)(ii)
shall not apply to the shares of restricted stock granted to
Employee on October 8, 2007 or the stock options granted to
Employee on February 17, 2009. Employee’s vested and
unvested stock awards after giving effect to this
Section 3(e)(ii), are reflected on Exhibit B
.
(a) As
partial consideration for Employee’s agreement to be bound by
the terms of this Agreement as of the Effective Date, and subject
to Sections 4(b) and 4(c) below, the Company hereby agrees to pay
to Employee the sum of $246,412.50 on December 31, 2010,
provided that if any of the following events occurs prior to such
date, such amount will be payable to Employee upon the date of such
event (each, an “ Acceleration Event ”):
(i) a Qualified Financing, (ii) a Change in Control (as
such term is defined in the Option Plan) (other than a Change in
Control that results from the consummation of a financing or
strategic collaboration transaction, or a series of such
transactions, that results in working capital for the Company of
less than $10 million), or (iii) the Company files a petition
in bankruptcy, applies for or consents to the appointment of a
receiver or trustee, makes an assignment for the benefit of its
creditors or suffers or permits the entry of any order adjudicating
it to be bankrupt or insolvent and such order is not discharged
within sixty (60) days, or the Company’s Board of
Directors otherwise approves a liquidation or dissolution of the
Company. The foregoing amount, together with the amount paid
pursuant to Section 3(b) above, shall be the exclusive severance
benefits to which Employee is entitled. For purposes of this
Agreement, a “ Qualified Financing ”
means the consummation of a financing or strategic collaboration
transaction, or the last in a series of such transactions,
resulting in working capital for the Company of at least
$10 million in the aggregate.
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(b) Employee’s
right to receive the payment described in Section 4(a) above shall
be contingent on Employee providing to the Company (and failing to
revoke) a general release in the form attached hereto as
Exhibit C (the “ Release
”). Employee shall have twenty-one (21) days following
the earlier of December 31, 2010 or the date of an
Acceleration Event to execute such Release. It is understood that,
in the event that Employee is at least forty (40) years old on the
date of the termination of his or her employment with the Company,
Employee has a certain period to consider whether to execute such
Release, and Employee may revoke such Release within seven
(7) days after execution. In the event Employee does not
execute such Release within the applicable period, or if Employee
revokes such Release within the subsequent seven (7) day
period, Employee shall not be entitled to the aforesaid payments
and benefits. The date on which Employee’s Release becomes
effective and the applicable revocation period lapses shall be the
“ Release Effective Date .”
(c) The
payment described in Section 4(a) above shall be paid within five
(5) days following the Employee’s Release Effective
Date.
(d) Notwithstanding
the foregoing or anything to the contrary contained in this
Agreement, in the event that Employee is re-hired by the Company on
a full-time basis prior to the payment of the amount set forth in
Section 4(a) above, this Section 4 shall immediately terminate
and be of no further force and effect as of the date of
commencement of such full-time employment, and such amount shall no
longer be payable.
5.
Proprietary Information . Employee acknowledges
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