This Separation
Agreement is made between David A. Broecker
(“Executive”) and Alkermes, Inc. (the
“Company,” together with Executive, the
“Parties”).
WHEREAS ,
Executive has served as an executive officer, including CEO, of the
Company since February 2001;
WHEREAS ,
the Parties entered into an employment agreement dated
December 12, 2007, and amended that agreement as of
October 7, 2008 (the agreement as amended is hereinafter
referred to as the “Employment Agreement”);
WHEREAS,
the Employment Agreement contains terms which expressly survive the
termination of Executive’s employment;
WHEREAS,
Executive holds restricted shares of the Company’s common
stock and options to purchase shares of the Company’s common
stock (which are both vested and unvested options) that are
governed by the Alkermes, Inc. 2008 Stock Option and Incentive
Plan, the Alkermes, Inc. 2002 Restricted Stock Award Plan (as
amended and approved on October 9, 2007), and the Alkermes,
Inc. 1999 Stock Option Plan (as amended and approved on
November 2, 2006) and associated stock option certificates and
restricted stock certificates (collectively “Equity
Documents”);
WHEREAS ,
the Company has agreed to provide Executive with certain
termination benefits (the “Termination Benefits”)
provided that, among other things, the Executive enters into a
separation agreement which includes a general release of claims in
favor of the Company and related persons and entities;
WHEREAS ,
the Company and the Executive have agreed that the Executive will
resign his employment with the Company;
NOW,
THEREFORE , for good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the Parties agree
as follows:
1.
Employment Separation . Executive’s employment
with the Company shall end on December 31, 2009 (“Separation
Date”). Executive confirms that, effective September 10,
2009, he has resigned his position as President and Chief Executive
Officer of the Company, his position as a Director of the Company,
and all other offices and positions that he holds with the Company
or any of its subsidiaries or affiliates. Between
September 10, 2009 and the Separation Date, Executive will
receive his regular bi-weekly salary payments. Executive confirms
that he will use all accrued, unused vacation pay to which he is
entitled as of September 10, 2009 by the Separation Date.
Executive will not accrue additional vacation entitlement after
September 10, 2009.
2.
Business Expense Reimbursement . The Company shall
reimburse Executive for any outstanding, reasonable business
expenses that Executive has incurred on the Company’s behalf
through the Separation Date, provided the Company
receives
appropriate
documentation pursuant to the Company’s business expense
reimbursement policy on or before the Separation Date.
3.
Termination Benefits . In exchange for, among other
things, his signing, delivering and not revoking a General Release
of Claims in the form of Exhibit A hereto (the
“Release”), the Company agrees to provide Executive
with the following Termination Benefits:
(a) The
Company shall pay Executive $1,151,250, which represents an amount
equal to one and one-half times the sum of the Executive’s
Base Salary and his Average Incentive Compensation (as such terms
are defined in the Employment Agreement, such amount referred to
herein as the “Severance Amount”). The Severance Amount
shall be paid out in substantially equal bi-weekly installments
over eighteen (18) months, in arrears beginning on the first
payroll date that occurs after thirty-five days from the Separation
Date. Solely for the purposes of Section 409A of the Internal
Revenue Code of 1986, as amended (the “Code”), each
bi-weekly payment is considered a separate payment. The death of
the Executive shall not relieve the Company of its obligations
hereunder.
(b) Subject
to Executive’s copayment of premium amounts at the active
employees’ rate, he shall continue to participate in the
Company’s group health, dental and vision program for
eighteen (18) months following the Separation Date;
provided, however , that the continuation of such benefits
under this subparagraph shall reduce and count against
Executive’s rights under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended
(“COBRA”).
(c) Anything
in this Agreement to the contrary notwithstanding, if any payment
or benefit that Executive becomes entitled to under this Agreement
is considered deferred compensation subject to interest, penalties
and additional tax imposed pursuant to Section 409A(a) of the
Code as a result of the application of
Section 409A(a)(2)(B)(i) of the Code, then no such payment
shall be payable or benefit shall be provided prior to the date
that is the earlier of (A) six months after Executive’s
separation from service, or (B) Executive’s death, and
the initial payment shall include a catch-up amount covering
amounts that would otherwise have been paid during the first
six-month period but for the applications of this Subparagraph
3(c). The Parties intend that this Agreement will be administered
in accordance with Section 409A of the Code. The Parties agree
that this Agreement may be amended, as reasonably requested by
either Party, and as may be necessary to fully comply with
Section 409A of the Code and all related rules and regulations
in order to preserve the payments and benefits provided hereunder
without additional cost to either Party.
(d)
Treatment of Executive’s Stock Options . The stock
options held by Executive immediately prior to September 10,
2009 are set forth on Exhibit B hereto (all of such
options, the “ Stock Options ”). Subject to the
approval of the Compensation Committee of the Board of Directors of
the Company, all Stock Options are hereby amended such that,
effective as of the Separation Date, they are exercisable until the
earlier of (1) the stated expiration date of such Stock
Option, and (2) June 30, 2011.
(i)
Subject to the approval of the Compensation Committee of the Board
of Directors of the Company, the following Stock Options are hereby
amended such that such options are fully vested as of the earlier
of Executive’s death or the Separation Date:
(A)
The remaining 28,125 shares of a Stock Option to purchase 112,500
shares of the Company’s Common Stock at an exercise price of
$18.60 per share, granted on December 9, 2005; and
(B)
The remaining 14,062 shares of a Stock Option to purchase 56,250
shares of the Company’s Common Stock at an exercise price of
$20.79 per share, granted on May 2, 2006.
(ii)
Subject to the approval of the Compensation Committee of the Board
of Directors of the Company, the following Stock Options are hereby
amended such that vesting is accelerated as of the earlier of
Executive’s death or the Separation Date as if
Executive’s employment with the Company terminated on
June 30, 2010 (notwithstanding anything to the contrary
contained in the Stock Option award certificates or in the equity
compensation plan pursuant to which such Stock Option was granted)
as a result of which the following vesting shall occur:
(A)
20,000 shares of a Stock Option to purchase 80,000 shares of the
Company’s Common Stock at an exercise price of $14.38 per
share, granted on December 12, 2006, the remaining 20,000
shares of such award shall remain unvested and terminate on the
Separation Date;
(B)
15,000 shares of a Stock Option to purchase 60,000 shares of the
Company’s Common Stock at an exercise price of $15.95 per
share, granted on June 1, 2007, the remaining 15,000 shares of
such award shall remain unvested and terminate on the Separation
Date;
(C)
7,500 shares of a Stock Option to purchase 30,000 shares of the
Company’s Common Stock at an exercise price of $14.13 per
share, granted on November 5, 2007, the remaining 15,000
shares of such award shall remain unvested and terminate on the
Separation Date;
(D)
27,500 shares of a Stock Option to purchase 110,000 shares of the
Company’s Common Stock at an exercise price of $12.29 per
share, granted on May 27, 2008, the remaining 55,000 shares of
such award shall remain unvested and terminate on the Separation
Date; and
(E)
43,750 shares of a Stock Option to purchase 175,000 shares of the
Company’s Common Stock at an exercise price of $8.55 per
share, granted on May 26, 2009, the remaining 131,250 shares
of such award shall remain unvested and terminate on the Separation
Date.
(iii)
Executive acknowledges that the Stock Options amended pursuant to
(i) and (ii) above shall not be eligible to be taxed as an
“incentive stock option” for purposes of
Section 422 of the Code.
(e)
Treatment of Executive’s Restricted Stock Awards . The
restricted stock awards granted to Executive prior to
September 10, 2009 are set forth in Exhibit C
hereto.
(i)
Subject to the approval of the Compensation Committee of the Board
of Directors of the Company and the continued employment of
Executive until the earlier of the Separation Date or his death,
the following Restricted Stock Awards are hereby amended such that
vesting is accelerated as of the earlier of Executive’s death
or the Separation Date as if Executive’s employment with the
Company terminated on June 30, 2010 (notwithstanding anything
to the contrary contained in the Restricted Stock Award
certificates or in the equity compensation plan pursuant to which
such Restricted Stock Award was granted) as a result of which the
following vesting shall occur:
(A)
3,750 shares of the Company’s Common Stock pursuant to a
Restricted Stock Award granted on June 1, 2007, the remaining
3,750 shares of such award shall remain unvested and terminate on
the Separation Date;
(B)
1,000 shares of the Company’s Common St
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