UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8−K

CURRENT REPORT
Pursuant to Section 13 OR 15 (d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): September 10, 2012
 
INSMED INCORPORATED
(Exact name of registrant as specified in its charter)

Virginia
 
0-30739
 
54-1972729
(State or other jurisdiction of incorporation)
 
(Commission File Number)
 
(I.R.S. Employer Identification No.)

9 Deer Park Drive, Suite C,
   
Monmouth Junction, New Jersey
 
08852
(Address of principal executive offices)
 
(Zip Code)

Registrant’s telephone number, including area code: (732) 997-4600
 
Not Applicable
(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8−K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o
Soliciting material pursuant to Rule 14a−12 under the Exchange Act (17 CFR 240.14a−12)
 
o
Pre−commencement communications pursuant to Rule 14d−2(b) under the Exchange Act (17 CFR 240.14d−2(b))
 
o
Pre−commencement communications pursuant to Rule 13e−4(c) under the Exchange Act (17 CFR 240.13e−4(c))



 
 

 
 
Item 5.02 – Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
 
Appointment of New Chief Executive Officer
 
On September 10, 2012, Timothy Whitten, the President and Chief Executive Officer of Insmed Incorporated (the “Company”), resigned from employment with the Company and as a member of the Company’s Board of Directors (the “Board”) and William Lewis was appointed as the Company’s new President and Chief Executive Officer, all effective September 10, 2012.  In addition, the Board appointed Mr. Lewis to fill the vacant Board seat created by Mr. Whitten’s resignation, effective September 10, 2012.
 
Mr. Lewis, 43, has been engaged by the Company as an advisor since June 2012.  Mr. Lewis was a co-founder of Aegerion Pharmaceuticals, Inc., a publicly-traded biopharmaceutical company that focuses on the development and commercialization of novel, life-altering therapeutics to treat debilitating and often fatal rare diseases, and served as its President and Chief Financial Officer from March 2005 to June 2011.  Prior to that, Mr. Lewis served in a variety of investment banking positions with Wells Fargo Securities (2002 to 2004), Robertson Stephens (2000 to 2002) and J.P. Morgan & Co. (1995 to 2000).
 
Employment Agreement of New Chief Executive Officer
 
The Company entered into an employment agreement (the “Employment Agreement”) with Mr. Lewis on September 10, 2012.  Under the terms of the Employment Agreement, Mr. Lewis will receive an annual base salary of $425,000, which may be increased from time to time in the discretion of the Board.  The Employment Agreement also provides that Mr. Lewis will be eligible to participate in the Company’s annual bonus program for executives and will have a target annual bonus opportunity equal to 50% of his base salary.
 
In connection with the commencement of his employment, the Company granted to Mr. Lewis a stock option (the “Initial Option”) to purchase 708,314 shares of the Company’s common stock at $3.40 per share.  This option will vest over four years, based on Mr. Lewis’ continued service to the Company.  In addition, if the Company conducts an equity financing transaction before May 1, 2013, the Company agreed in the Employment Agreement to grant another stock option to Mr. Lewis (the “Top-Up Option”) to purchase such number of shares of the Company’s common stock that, when combined with the shares underlying the Initial Option, equals 2.6% of the number of fully diluted shares of common stock of the Company determined as of the grant date of the Top-Up Option.  If granted, the Top-Up Option would have an exercise price equal to the fair market value of the Company’s common stock on its grant date and would vest over four years, based on Mr. Lewis’ continued service to the Company.
 
The Employment Agreement also provides that Mr. Lewis will be entitled to certain severance benefits if his employment ceases under specified circumstances. If Mr. Lewis is terminated without cause or resigns for good reason, he will receive (i) a pro rata cash bonus for the year of severance (based on the actual performance of the Company in that year), (ii) cash severance equal to his annual salary and target cash bonus for the fiscal year of severance (payable over twelve months), (iii) subsidized COBRA coverage for 18 months, and (iv) vesting of any time-vested equity awards granted at least one year prior to the termination date. However, if the severance event occurs within two years following a change in control: (x) the cash severance will be doubled and will be paid in a lump sum (instead of installments), and (y) any time-vested equity awards granted to Mr. Lewis within the preceding year will also become vested. Payment of any severance benefits is subject to the requirement that Mr. Lewis execute a release of claims against the Company and its affiliates.
 
 
 

 
 
Finally, the Employment Agreement also contains customary non-competition, non-solicitation, confidentiality, intellectual property and indemnification provisions.
 
Letter Agreement with Timothy Whitten
 
In connection with the cessation of his employment, the Company entered into a letter agreement with Mr. Whitten on September 10, 2012 (the “Whitten Letter”) pursuant to which (i) Mr. Whitten will receive $726,042, payable in a lump sum within 30 days, (ii) Mr. Whitten will receive $159,375, payable in three monthly installments commencing six months and one day after his resignation date, (iii) otherwise unvested equity awards held by Mr. Whitten became vested, (iv) all stock options held by Mr. Whitten will remain outstanding for one year, and (v) Mr. Whitten and his eligible dependents will receive subsidized COBRA coverage for 18 months. The Whitten Letter also includes a customary release by Mr. Whitten of claims against the Company and its affiliates and a mutual commitment by the parties not to disparage each other.
 
Chairman of the Board
 
In connection with the leadership changes described above, the Company also announced that Donald J. Hayden, Jr. would transition from service as the Company’s Executive Chairman back to service as the non-executive Chairman of the Board, effective September 10, 2012.  As a result of this change in his position, Mr. Hayden ceased to be an officer and employee of the Company and he and the Company agreed to terminate his employment agreement.  No severance or termination benefits will be paid to him as a result of the termination of his employment agreement.  Mr. Hayden will not participate in the Company’s 2012 annual cash bonus program, although the Board will consider awarding him a discretionary bonus in respect of his service as the Executive Chairman of the Company.  Prospectively, Mr. Hayden will be compensated for his service as Chairman of the Board in accordance with the Company’s non-employee director compensation policies and practices, as in effect from time to time.  The Company and Mr. Hayden entered into a letter agreement confirming these matters on September 10, 2012 (the “Hayden Letter”).
 
The foregoing descriptions of the Employment Agreement, the Whitten Letter and the Hayden Letter are qualified in their entireties by reference to the full text of such agreements, copies of which are attached as Exhibit 10.1, 10.2 and 10.3, respectively, to this Current Report on Form 8-K and incorporated herein by reference.  The Company issued a press release regarding these leadership changes dated September 10, 2012, which press release is attached hereto as Exhibit 99.1 and incorporated herein by reference.
 
 
 

 
 
Item 9.01 – Financial Statements and Exhibits.
 
(d) Exhibits
 
Exhibit No.
Description
   
10.1
Employment Agreement between Insmed Incorporated and William H. Lewis, dated September 10, 2012.
   
10.2
Severance Agreement between Insmed Incorporated and Timothy Whitten, dated September 10, 2012.
   
10.3
Letter Agreement between Insmed Incorporated and Donald Hayden, Jr., dated September 10, 2012.
   
99.1
Press Release, dated September 11, 2012.
 
 
 

 
 
SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
Date: September 11, 2012
 
 
INSMED INCORPORATED
     
 
By: 
/s/ Andrea Holtzman Drucker, Esq.
 
Name:
  Andrea Holtzman Drucker
 
Title:
  Senior Vice President, General Counsel and Corporate Secretary
 
 
 

 
 
Exhibit Index

Exhibit No.
 
Description of Exhibit
     
 
Employment Agreement between Insmed Incorporated and William H. Lewis, dated September 10, 2012.
     
 
Severance Agreement between Insmed Incorporated and Timothy Whitten, dated September 10, 2012.
     
 
Letter Agreement between Insmed Incorporated and Donald Hayden, Jr., dated September 10, 2012.
     
 
Press Release, dated September 11, 2012.
 
 


EXHIBIT 10.1
 
EMPLOYMENT AGREEMENT
 
This Employment Agreement (“Agreement”) is made and entered into on this 10th day of September, 2012 by and between Insmed Incorporated, a Virginia corporation (the “Company”), and William H. Lewis (hereinafter, the “Executive”).
 
WITNESSETH:
 
WHEREAS, the Company desires to employ the Executive and the Executive desires to be employed by the Company on the terms herein described.
 
NOW, THEREFORE, in consideration of the premises and mutual covenants set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are mutually acknowledged, the Company and the Executive hereby agree as follows:
 
1.              Definitions . When used in this Agreement, the following terms shall have the following meanings:
 
(a)           “ Accrued Obligations ” means:
 
(i)           all accrued but unpaid Base Salary through the end of the Term of Employment;
 
(ii)          any unpaid or unreimbursed expenses incurred in accordance with Company policy, including amounts due under Section 5(a) hereof, to the extent incurred during the Term of Employment;
 
(iii)         any accrued but unpaid benefits provided under the Company’s employee benefit plans, subject to and in accordance with the terms of those plans;
 
(iv)        any unpaid Bonus in respect to any completed fiscal year that has ended on or prior to the end of the Term of Employment;
 
(v)          rights to indemnification by virtue of the Executive’s position as an officer or director of the Company or its subsidiaries and the benefits under any directors’ and officers’ liability insurance policy maintained by the Company, in accordance with its terms thereof; and
 
(vi)        any accrued but unused vacation pay.
 
(b)           “ Base Salary” means the salary provided for in Section 4(a) hereof or any increased salary granted to Executive pursuant to Section 4(a) hereof.
 
(c)           “ Beneficial Ownership ” shall have the meaning ascribed to such term in Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended.
 
(d)           “ Board ” means the Board of Directors of the Company.
 
 
 

 
 
(e)           “ Bonus ” means any bonus payable to the Executive pursuant to Section 4(b) hereof.
 
(f)            “ Cause ” means:
 
(i)           a conviction of the Executive, or a plea of nolo contendere, to a felony involving moral turpitude; or
 
(ii)          willful misconduct or gross negligence by the Executive resulting, in either case, in material economic harm to the Company or any of Related Entities; or
 
(iii)         a willful failure by the Executive to carry out the reasonable and lawful directions of the Board and failure by the Executive to remedy the failure within thirty (30) days after receipt of written notice of same, by the Board; or
 
(iv)         fraud, embezzlement, theft or dishonesty of a material nature by the Executive against the Company or any Related Entity, or a willful material violation by the Executive of a policy or procedure of the Company or any Related Entity, resulting, in any case, in material economic harm to the Company or any Related Entity; or
 
(v)          a willful material breach by the Executive of this Agreement and failure by the Executive to remedy the material breach within 30 days after receipt of written notice of same, by the Board.
 
(g)           “ Change in Control ” means:
 
(i)           The acquisition by any Person of Beneficial Ownership of at least 40% of either (A) the value of the then outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”) (the foregoing Beneficial Ownership hereinafter being referred to as a “Controlling Interest”); provided, however, that for purposes of this definition, the following acquisitions shall not constitute or result in a Change of Control: (v) any acquisition directly from the Company; (w) any acquisition by the Company; (x) any acquisition by any person that as of the Commencement Date owns Beneficial Ownership of a Controlling Interest; (y) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any subsidiary of the Company; or (z) any acquisition by any corporation pursuant to a transaction which complies with clauses (A), (B) and (C) of subsection (iii) below; or
 
(ii)          During any period of two consecutive years (not including any period prior to the Commencement Date) individuals who constitute the Board on the Commencement Date (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Commencement Date whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or
 
 
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(iii)         Consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company or any of its subsidiaries, a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or stock of another entity by the Company or any of its subsidiaries (each a “Business Combination”), in each case, unless, following such Business Combination, (A) all or substantially all of the Persons who were the Beneficial Owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) (such resulting or acquiring corporation is referred to herein as the “ Acquiring Corporation ”) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding the Acquiring Corporation or any employee benefit plan (or related trust) of the Company or such Acquiring Corporation) beneficially owns, directly or indirectly, more than 40% of the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the Board of Directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or
 
(iv)        approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.
 
Notwithstanding the foregoing, no event or transaction will constitute a Change in Control hereunder unless it also constitutes a “change in control event” under Section 409A of the Code.
 
(h)           “ COBRA ” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended from time to time.
 
(i)            “ Code ” means the Internal Revenue Code of 1986, as amended.
 
(j)            “ Commencement Date ” means September 10, 2012.
 
(k)           “ Competitive Activity ” means (i) the discovery, design, development, distribution, marketing or sale of inhalation therapies for lung diseases and/or disorders, or (ii) any other activity in competition with the material activities of the Company or any of its Related Entities, in either case in any of the States within the United States, or countries within the world, in which the Company or any of its Related Entities conducts business.  For this purpose, the activities of the Company and its Related Entities, and where the Company and its Relates Entities do business, will be determined as of the earlier of the date of the application of this definition or the Termination Date.
 
 
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(l)            “ Confidential Information ” means all trade secrets and information disclosed to the Executive or known by the Executive as a consequence of or through the unique position of his employment with the Company or any Related Entity (including information conceived, originated, discovered or developed by the Executive and information acquired by the Company or any Related Entity from others) prior to or after the date hereof, and not generally or publicly known (other than as a result of unauthorized disclosure by the Executive), about the Company or any Related Entity or its business. Confidential Information includes, but is not limited to, inventions, ideas, designs, computer programs, circuits, schematics, formulas, algorithms, trade secrets, works of authorship, mask works, developmental or experimental work, processes, techniques, improvements, methods of manufacturing, know-how, data, financial information and forecasts, product plans, marketing plans and strategies, price lists, customer lists and contractual obligations and terms thereof, data, documentation and other information, in whatever form disclosed, relating to the Company or any Related Entity, including, but not limited to, financial statements, financial projections, business plans, listings and contractual obligations and terms thereof, components of intellectual property, unique designs, methods of manufacturing or other technology of the Company or any Related Entity.
 
(m)          “ Disability ” means the Executive’s inability, or failure, to perform the essential functions of his position, with or without reasonable accommodation, for any period of six months or more in any 12 month period, by reason of any medically determinable physical or mental impairment.
 
(n)           “Equity Awards ” means any stock options, restricted stock, restricted stock units, stock appreciation rights, phantom stock or other equity based awards granted by the Company to the Executive.
 
(o)           “ Equity Financing ” shall mean the sale by the Company of shares of its capital stock, or of other securities convertible into its capital stock, in a capital raising transaction (specifically excluding the issuance of securities upon exercise or conversion of securities outstanding on the date hereof, securities issued to service providers pursuant to an equity compensation arrangements, securities issued pursuant to corporate collaborations, mergers, debt financing, equipment leasing or any other transaction where the primary purpose is not capital raising).
 
(p)           “ Excise Tax ” means any excise tax imposed by Section 4999 of the Code, together with any interest and penalties imposed with respect thereto, or any interest or penalties are incurred by the Executive with respect to any such excise tax.
 
(q)          “ Good Reason ” means the occurrence of any of the following: (i) a material diminution in the Executive’s base compensation; (ii) a material diminution in the Executive’s authority, duties, or responsibilities; (iii) a material diminution in the authority, duties, or responsibilities of the supervisor to whom the Executive is required to report, including a requirement that the Executive report to a corporate officer or executive instead of reporting directly to the Board; (iv) the Company’s or Related Entity’s requiring the Executive to be based at any office or location outside of 50 miles from the location of employment or service as of the effective date of this Agreement, except for travel reasonably required in the performance of the Executive’s responsibilities; or (v) any other action or inaction that constitutes a material breach by the Company of this Agreement. For purposes of this Agreement, Good Reason shall not be deemed to exist unless the Executive’s termination of employment for Good Reason occurs within six months following the initial existence of one of the conditions specified in clauses (i) through (v) above, the Executive provides the Company with written notice of the existence of such condition within 90 days after the initial existence of the condition, and the Company fails to remedy the condition within 30 days after its receipt of such notice.
 
 
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(r)            “ Group ” shall have the meaning ascribed to such term in Section 13(d) of the Securities Exchange Act of 1934.
 
(s)           “ Person ” shall have the meaning ascribed to such term in Section 3(a)(9) of the Securities Exchange Act of 1934 and used in Sections 13(d) and 14(d) thereof.
 
(t)            “Pro-Rata Bonus” means the Bonus that (but for the cessation of the Executive’s employment) would otherwise have been payable to the Executive for the fiscal year in which the Termination Date occurs (based on actual performance outcomes for that year), multiplied by the following faction: (i) the number of days that the Executive was employed by the Company during that fiscal year, divided by (ii) 365.  For this purpose, the Bonus that would otherwise have been payable to the Executive shall be determined in good faith and in the same manner applicable to active named executive officers of the Company.
 
(u)           “ Related Entity ” means any Person controlling, controlled by or under common control with the Company or any of its subsidiaries.  For this purpose, the terms controlling,” “controlled by” and “under common control with” mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, as trustee or executor, by contract or otherwise, including (without limitation) the ownership, directly or indirectly, of securities having the power to elect a majority of the board of directors or similar body governing the affairs of such Person.
 
(v)           “ Restricted Period ” shall be the Term of Employment and the one year period immediately following termination of the Term of Employment.
 
(w)          “ Severance Amount ” shall mean an amount equal to the sum of (A) the Executive’s annual Base Salary, as in effect immediately prior to the Termination Date, and (B) the Executive’s Target Bonus for the fiscal year in which Termination Date occurs.
 
(x)           “ Severance Term ” means the twelve month period following the date on which the Term of Employment ends.
 
(y)           “ Target Bonus ” has the meaning described in Section 4(b).
 
 
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(z)           “ Term of Employment ” means the period during which the Executive shall be employed by the Company pursuant to the terms of this Agreement, which period shall begin on the Commencement Date and continue until terminated in accordance with Section 6 hereof.
 
(aa)         “ Termination Date ” means the date on which the Term of Employment ends.
 
2.              Employment . The Company hereby agrees to employ the Executive and the Executive hereby agrees to serve the Company during the Term of Employment on the terms and conditions set forth herein.
 
3.              Duties of Executive . During the Term of Employment, the Executive shall be employed and serve as the President and Chief Executive Officer of the Company, and shall have such duties typically associated with such titles, including, without limitation supervising operations and management of the Company and its subsidiaries.  The Executive shall faithfully and diligently perform all services as may be assigned to him by the Board, and shall exercise such power and authority as may from time to time be delegated to him by the Board. The Executive shall devote his full business time, attention and efforts to the performance of his duties under this Agreement, render such services to the best of his ability, and use his reasonable best efforts to promote the interests of the Company.  The Executive shall not engage in any other business or occupation during the Term of Employment, including, without limitation, any activity that (i) conflicts with the interests of the Company or its subsidiaries, (ii) interferes with the proper and efficient performance of his duties for the Company, or (iii) interferes with the exercise of his judgment in the Company’s best interests.  Notwithstanding the foregoing or any other provision of this Agreement, it shall not be a breach or violation of this Agreement for the Executive to (w) serve on up to two outside corporate or scientific advisory boards with prior notice to the Company, (x) serve on civic or charitable boards or committees, (y) deliver lectures, fulfill speaking engagements or teach at educational institutions, or (z) manage personal investments, so long as such activities do not constitute a Competitive Activity or significantly interfere with or significantly detract from the performance of the Executive’s responsibilities to the Company in accordance with this Agreement.
 
4.              Compensation .
 
(a)            Base Salary . The Executive shall receive a Base Salary at the annual rate of $425,000 during the Term of Employment, with such Base Salary payable in installments consistent with the Company’s normal payroll schedule, subject to applicable withholding and other taxes.  The Base Salary shall be reviewed, at least annually, for merit increases and may, by action and in the discretion of the Board, be increased at any time or from time to time, but may not be decreased from the then current Base Salary.
 
(b)           Bonuses . During the Term of Employment, the Executive shall participate in the Company’s annual incentive compensation plan, program and/or arrangements applicable to senior-level executives, as established and modified from time to time by the Compensation Committee of the Board in its sole discretion. During the Term of Employment, the Executive shall have a target bonus opportunity under such plan or program equal to 50% of his current Base Salary (or, for 2012, 50% of the actual base salary earned by him during that year)(the “Target Bonus”), based on satisfaction of performance criteria to be established by the Compensation Committee of the Board within the first three months of each fiscal year that begins during the Term of Employment (or, for 2012, within 30 days of the Commencement Date). Payment of annual incentive compensation awards shall be made in the same manner and at the same time that other senior-level executives receive their annual incentive compensation awards and, except as otherwise provided herein, will be subject to the Executive’s continued employment through the applicable payment date.
 
 
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5.            Expense Reimbursement and Other Benefits .
 
(a)            Reimbursement of Expenses . Upon the submission of proper substantiation by the Executive, and subject to such rules and guidelines as the Company may from time to time adopt with respect to the reimbursement of expenses of executive personnel, the Company shall reimburse the Executive for all reasonable expenses actually paid or incurred by the Executive during the Term of Employment in the course of and pursuant to the business of the Company.  The Executive shall account to the Company in writing for all expenses for which reimbursement is sought and shall supply to the Company copies of all relevant invoices, receipts or other evidence reasonably requested by the Company.  In addition, the Company shall reimburse the Executive for (or directly pay) reasonable attorneys’ fees incurred by the Executive in the negotiation and drafting of this Agreement, up to a maximum of $10,000.
 
(b)            Compensation/Benefit Programs . During the Term of Employment, the Executive shall be entitled to participate in all medical, dental, hospitalization, accidental death and dismemberment, disability, travel and life insurance plans, and any and all other plans as are presently and hereinafter offered by the Company to its executive personnel, including savings, pension, profit-sharing and deferred compensation plans, subject to the general eligibility and participation provisions set forth in such plans.
 
(c)            Working Facilities . During the Term of Employment, the Company shall furnish the Executive with an office, secretarial help and such other facilities and services suitable to his position and adequate for the performance of his duties hereunder.  The Executive’s principal place of employment (subject to reasonable travel) shall be Monmouth Junction, NJ.
 
(d)            Stock Options .
 
(i)           Effective upon commencement of the Executive’s employment hereunder, the Company will grant to the Executive a stock option, substantially in the form attached hereto as Exhibit A , with respect to 708,314 shares of the Company’s common stock (the “Initial Option”).
 
(ii)          In addition, if the Company conducts an Equity Financing on or prior to April 30, 2013 and the Executive remains in employment with the Company through the completion of that Equity Financing, the Company will then grant to the Executive an additional stock option, substantially in the form attached hereto as Exhibit A (the “Top-Up Option”).  The number of shares of common stock of the Company subject to the Top-Up Option, when added to the number of shares subject to the Initial Option, will represent 2.6% of the fully diluted common stock of the Company as of the date of grant of the Top-Up Option (the “Top-Up Grant Date”).  For avoidance of doubt, the Top-Up Option will have an exercise price equal to the fair market value of the Company’s common stock on the Top-Up Grant Date.
 
 
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(iii)        During the Term of Employment, the Executive shall be eligible to be granted additional Equity Awards.  The number and type of such additional Equity Awards, and the terms and conditions thereof, shall be determined by the Compensation Committee of the Board, in its discretion.
 
(e)            Vacation . The Executive shall be entitled to five weeks of paid vacation each calendar year during the Term of Employment, to be taken at such times as the Executive and the Company shall mutually determine and provided that no vacation time shall significantly interfere with the duties required to be rendered by the Executive hereunder.  Up to two weeks of unused vacation time may be carried forward into any succeeding calendar year; provided, however, in no event shall the amount of vacation time available to the Executive annually under this Agreement, inclusive of any carryover time, exceed six weeks in the aggregate.
 
6.              Termination .
 
(a)            General . The Term of Employment shall terminate upon the earliest to occur of (i) the Executive’s death, (ii) a termination by the Company by reason of the Executive’s Disability, (iii) a termination by the Company with or without Cause, or (iv) a termination by Executive with or without Good Reason.  Upon any termination of Executive’s employment for any reason, except as may otherwise be requested by the Company in writing and agreed upon in writing by Executive, the Executive shall resign from any and all directorships, committee memberships or any other positions Executive holds with the Company or any of its Related Entities.
 
(b)            Termination By Company for Cause. The Company shall at all times have the right, upon written notice to the Executive, to terminate the Term of Employment, for Cause.  In no event shall a termination of the Executive’s employment for Cause occur unless the Company gives written notice to the Executive in accordance with this Agreement stating with reasonable specificity the events or actions that constitute Cause and providing the Executive with an opportunity to cure (if curable) within a reasonable period of time.  Cause shall in no event be deemed to exist except upon a decision made by the Board, at a meeting, duly called and noticed, to which the Executive (and the Executive’s counsel) shall be invited upon proper notice and shall be permitted to present evidence.  For purposes of this Section 6(b), any good faith determination by the Board of Cause shall be binding and conclusive on all interested parties.  In the event that the Term of Employment is terminated by the Company for Cause, Executive shall be entitled only to the Accrued Obligations, payable as and when those amounts would have been payable had the Term of Employment not ended.
 
(c)            Disability . The Company shall have the option, in accordance with applicable law, to terminate the Term of Employment upon written notice to the Executive, at any time during which the Executive is suffering from a Disability.  In the event that the Term of Employment is terminated due to the Executive’s Disability, the Executive shall be entitled to (i) the Accrued Obligations, payable as and when those amounts would have been paid had the Term of Employment not ended, (ii) the Pro-Rata Bonus, payable within 2 ½ months following the end of the fiscal year in which the Termination Date occurs, and (iii) any insurance benefits to which he and his beneficiaries are entitled as a result of his Disability.
 
 
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(d)            Death . In the event that the Term of Employment is terminated due to the Executive’s death, the Executive’s estate shall be entitled to (i) the Accrued Obligations, payable as and when those amounts would have been paid had the Term of Employment not ended, (ii) the Pro-Rata Bonus, payable within 2 ½ months following the end of the fiscal year in which the Termination Date occurs, and (iii) any insurance benefits to which he and his beneficiaries are entitled as a result of his death.
 
(e)            Termination Without Cause or Resignation With Good Reason . The Company may terminate the Term of Employment without Cause, and the Executive may terminate the Term of Employment for Good Reason, at any time upon written notice.  If the Term of Employment is terminated by the Company without Cause (other than due to the Executive’s death or Disability) or by the Executive for Good Reason, in either case prior to the date of a Change in Control or more than one year after a Change in Control, the Executive shall be entitled to the following:
 
(i)           The Accrued Obligations, payable as and when those amounts would have been paid had the Term of Employment not ended;
 
(ii)          The Pro-Rata Bonus, payable within 2 ½ months following the end of the fiscal year in which the Termination Date occurs;
 
(iii)         The Severance Amount, payable in equal installments consistent with the Company’s normal payroll schedule over the 12 month period beginning with the first regularly scheduled payroll date that occurs more than 30 days following the Termination Date;
 
(iv)         Provided that the Executive timely elects continued coverage under COBRA, the Company will reimburse the Executive for the monthly COBRA cost of continued health and dental coverage of the Executive and his qualified beneficiaries paid by the Executive under the health and dental plans of the Company, less the amount that the Executive would be required to contribute for health and dental coverage if the Executive were an active employee of the Company, for 18 months (or, if less, for the duration that such COBRA coverage is available to Executive); and
 
(v)          Vesting, immediately prior to such termination, of any time-vested Equity Awards that have not previously vested and were granted to the Executive at least one year prior to the Termination Date.
 
(f)            Termination by Executive Without Good Reason . The Executive may terminate his employment without Good Reason by providing the Company 30 days’ written notice of such termination.  In the event of a termination of employment by the Executive under this Section 6(f), the Executive shall be entitled only to the Accrued Obligations payable as and when those amounts would have been payable had the Term of Employment not ended.  In the event of termination of the Executive’s employment under this Section 6(f), the Company may, in its sole and absolute discretion, by written notice, accelerate such date of termination and still have it treated as a termination without Good Reason.
 
 
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(g)            Change in Control of the Company . If the Executive’s employment is terminated by the Company (or any entity to which the obligations and benefits under this Agreement have been assigned, pursuant to Section 10) without Cause or by the Executive for Good Reason during the one year period immediately following the Change in Control, then the Executive shall be entitled to the same payments, rights and benefits described in Section 6(e), subject to the following enhancements:
 
(i)           The Severance Amount will be doubled and will be paid in a lump-sum on the first regularly scheduled payroll date that occurs more than 30 days following the Termination Date (rather than in installments over 12 months); and
 
(ii)           All time-vested Equity Awards will vest in full (not merely those granted more than one year prior to the Termination Date).
 
(h)            Release .  All rights, payments and benefits due to the Executive under this Article 6 (other than the Accrued Obligations) shall be conditioned on the Executive’s execution of a general release of claims against the Company and its affiliates substantially in the form attached hereto as Exhibit B (the “Release”) and on that Release becoming irrevocable within 30 days following the Termination Date.
 
(i)             Section 280G Certain Reductions of Payments by the Company .
 
(i)          Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (a “Payment”), would be nondeductible by the Company for Federal income tax purposes because of Section 280G of the Code, then the aggregate present value of amounts payable or distributable to or for the benefit of the Executive pursuant to this Agreement (such payments or distributions pursuant to this Agreement are hereinafter referred to as “Agreement Payments”) shall be reduced to the Reduced Amount.  The “Reduced Amount” shall be an amount expressed in present value that avoids any Payment being nondeductible by the Company because of Section 280G of the Code.  To the extent necessary to avoid imposition of the Excise Tax, the amounts payable or benefits to be provided to the Executive shall be reduced such that the reduction of compensation to be provided to the Executive is minimized.  In applying this principle, the reduction shall be made in a manner consistent with the requirements of Section 409A of the Code, and where two economically equivalent amounts are subject to reduction but payable at different times, such amounts shall be reduced on a pro rata basis (but not below zero).  Anything to the contrary notwithstanding, if the Reduced Amount is zero and it is determined further that any Payment which is not an Agreement Payment would nevertheless be nondeductible by the Company for Federal income tax purposes because of Section 280G of the Code, then the aggregate present value of Payments which are not Agreement Payments shall also be reduced (but not below zero) to an amount expressed in present value which maximizes the aggregate present value of Payments without causing any Payment to be nondeductible by the Company because of Section 280G of the Code.  If a reduction of any Payment is required pursuant to this Section 6(i), such reduction shall occur to the amounts in the order that results in the greatest economic present value of all payments and benefits actually made or provided to the Executive.  For purposes of this Section 6(i), present value shall be determined in accordance with Section 280G(d)(4) of the Code.
 
 
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(ii)          All determinations required to be made under this Section 6(i) shall be made by a tax or compensation consulting firm of national reputation selected by the Company (the “Consulting Firm”), which shall provide detailed supporting calculations both to the Company and the Executive within 20 business days of the date of termination or such earlier time as is requested by the Company and an opinion to the Executive that he has substantial authority not to report any excise tax on his Federal income tax return with respect to any Payments.  Any such determination by the Consulting Firm shall be binding upon the Company and the Executive.  Within five business days thereafter, the Company shall pay to or distribute to or for the benefit of the Executive such amounts as are then due to the Executive under this Agreement.  All fees and expenses of the Consulting Firm incurred in connection with the determinations contemplated by this Section 6(i) shall be borne by the Company.
 
(iii)         As a result of the uncertainty in the application of Section 280G of the Code at the time of the initial determination by the Consulting Firm hereunder, it is possible that Payments will have been made by the Company which should not have been made (“Overpayment”) or that additional Payments which will not have been made by the Company could have been made (“Underpayment”), in each case, consistent with the calculations required to be made hereunder. In the event that the Consulting Firm, based upon the assertion of a deficiency by the Internal Revenue Service against the Executive which the Consulting Firm believes has a high probability of success, determines that an Overpayment has been made, any such Overpayment paid or distributed by the Company to or for the benefit of the Executive shall be promptly repaid to the Company by the Executive.  In the event that the Consulting Firm, based upon controlling precedent or other substantial authority, determines that an Underpayment has occurred, any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code.
 
(j)            Cooperation . Following the Term of Employment, the Executive shall give his assistance and cooperation willingly, upon reasonable advance notice with due consideration for his other business or personal commitments, in any matter relating to his position with the Company, or his expertise or experience as the Company may reasonably request, including his attendance and truthful testimony where deemed appropriate by the Company, with respect to any investigation or the Company’s defense or prosecution of any existing or future claims or litigations or other proceedings relating to matters in which he was involved or potentially had knowledge by virtue of his employment with the Company. In no event shall his cooperation materially interfere with his services for a subsequent employer or other similar service recipient. To the extent permitted by law, the Company agrees that (i) it shall promptly reimburse the Executive for his reasonable and documented expenses in connection with his rendering assistance and/or cooperation under this Section 6(j) upon his presentation of documentation for such expenses and (ii) the Executive shall be reasonably compensated for any continued material services as required under this Section 6(j).
 
 
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(k)            Return of Company Property . Following the Termination Date, the Executive or his personal representative shall return all Company property in his possession, including but not limited to all computer equipment (hardware and software), telephones, facsimile machines, palm pilots and other communication devices, credit cards, office keys, security access cards, badges, identification cards and all copies (including drafts) of any documentation or information (however stored) relating to the business of the Company, its customers and clients or its prospective customers and clients (provided that the Executive may retain a copy the addresses contained in his rolodex, palm pilot, PDA or similar device).
 
(l)             Compliance with Section 409A .
 
(i)             General .  It is the intention of both the Company and the Executive that the benefits and rights to which the Executive could be entitled pursuant to this Agreement comply with Section 409A of the Code and the Treasury Regulations and other guidance promulgated or issued thereunder (“Section 409A”), to the extent that the requirements of Section 409A are applicable thereto, and the provisions of this Agreement shall be construed in a manner consistent with that intention.
 
(ii)            Distributions on Account of Separation from Service . If and to the extent required to comply with Section 409A, no payment or benefit required to be paid under this Agreement on account of termination of the Executive’s employment shall be made unless and until the Executive incurs a “separation from service” within the meaning of Section 409A.
 
(iii)            Six Month Delay for Specified Employees .  If the Executive is a “specified employee” (within the meaning of Section 409A(a)(2)(B)(i) of the Code), then no payment or benefit that is payable on account of the Executive’s “separation from service”, as that term is defined for purposes of Section 409A, shall be made before the date that is six months after the Executive’s “separation from service” (or, if earlier, the date of the Executive’s death) if and to the extent that such payment or benefit constitutes deferred compensation (or may be nonqualified deferred compensation) under Section 409A and such deferral is required to comply with the requirements of Section 409A.  Any payment or benefit delayed by reason of the prior sentence shall be paid out or provided in a single lump sum at the end of such required delay period in order to catch up to the original payment schedule.
 
(iv)           Treatment of Each Installment as a Separate Payment . For purposes of applying the provisions of Section 409A to this Agreement, each separately identified amount to which the Executive is entitled under this Agreement shall be treated as a separate payment.  In addition, any series of installment payments under this Agreement shall be treated as a right to a series of separate payments.
 
(v)           Taxable Reimbursements and In-Kind Benefits .
 
(A)           Any reimbursements by the Company to the Executive of any eligible expenses under this Agreement that are not excludable from the Executive’s income for Federal income tax purposes (the “Taxable Reimbursements”) shall be made by no later than the last day of the taxable year of the Executive following the year in which the expense was incurred.
 
 
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(B)           The amount of any Taxable Reimbursements, and the value of any in-kind benefits to be provided to the Executive, during any taxable year of the Executive shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year of the Executive.
 
(C)           The right to Taxable Reimbursement, or in-kind benefits, shall not be subject to liquidation or exchange for another benefit.
 
(vi)         No Guaranty of 409A Compliance . Notwithstanding the foregoing, the Company does not make any representation to the Executive that the payments or benefits provided under this Agreement are exempt from, or satisfy, the requirements of Section 409A, and the Company shall have no liability or other obligation to indemnify or hold harmless the Executive or any beneficiary of the Executive for any tax, additional tax, interest or penalties that the Executive or any beneficiary of the Executive may incur in the event that any provision of this Agreement, or any amendment or modification thereof, or any other action taken with respect thereto, is deemed to violate any of the requirements of Section 409A.
 
7.              Restrictive Covenants .
 
(a)            Non-competition . At all times during the Restricted Period, the Executive shall not, directly or indirectly (whether as a principal, agent, partner, employee, officer, investor, owner, consultant, board member, security holder, creditor or otherwise), engage in any Competitive Activity, or have any direct or indirect interest in any sole proprietorship, corporation, company, partnership, association, venture or business or any other person or entity that directly or indirectly (whether as a principal, agent, partner, employee, officer, investor, owner, consultant, board member, security holder, creditor, or otherwise) engages in a Competitive Activity; provided that the foregoing shall not apply to the Executive’s ownership of securities of the Company or the acquisition by the Executive, solely as an investment, of securities of any issuer that is registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934, and that are listed or admitted for trading on any United States national securities exchange or that are quoted on the Nasdaq Stock Market, or any similar system or automated dissemination of quotations of securities prices in common use, so long as the Executive does not control, acquire a controlling interest in or become a member of a group which exercises direct or indirect control of, more than five percent of any class of capital stock of such corporation.
 
(b)            Nonsolicitation of Employees and Certain Other Third Parties . At all times during the Restricted Period, the Executive shall not, directly or indirectly, for himself or for any other person, firm, corporation, partnership, association or other entity (i) employ or attempt to employ or enter into any contractual arrangement with any employee, consultant or individual contractor performing services for the Company, or any Related Entity, unless such employee, consultant or independent contractor, has not been employed or engaged by the Company for a period in excess of six months, and/or (ii) call on, solicit, or engage in business with, any of the actual or targeted prospective customers or clients of the Company or any Related Entity on behalf of any person or entity in connection with any Competitive Activity, nor shall the Executive make known the names and addresses of such actual or targeted prospective customers or clients, or any information relating in any manner to the trade or business relationships of the Company or any Related Entities with such customers or clients, other than in connection with the performance of the Executive’s duties under this Agreement, and/or (iii) persuade or encourage or attempt to persuade or encourage any persons or entities with whom the Company or any Related Entity does business or has some business relationship to cease doing business or to terminate its business relationship with the Company or any Related Entity or to engage in any Competitive Activity on its own or with any competitor of the Company or any Related Entity.
 
 
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(c)            Confidential Information. The Executive shall not at any time divulge, communicate, use to the detriment of the Company or any Related Entity or for the benefit of any other person or persons, or misuse in any way, any Confidential Information pertaining to the business of the Company. Any Confidential Information or data now or hereafter acquired by the Executive with respect to the business of the Company or any Related Entity (which shall include, but not be limited to, information concerning the Company’s or any Related Entity’s financial condition, prospects, technology, customers, suppliers, sources of leads and methods of doing business) shall be deemed a valuable, special and unique asset of the Company and its Related Entities that is received by the Executive in confidence and as a fiduciary, and the Executive shall remain a fiduciary to the Company and its Related Entities with respect to all of such information. Notwithstanding the foregoing, nothing herein shall be deemed to restrict the Executive from disclosing Confidential Information as required to perform his duties under this Agreement or to the extent required by law. If any person or authority makes a demand on the Executive purporting to legally compel him to divulge any Confidential Information, the Executive immediately shall give notice of the demand to the Company so that the Company may first assess whether to challenge the demand prior to the Executive’s divulging of such Confidential Information. The Executive shall not divulge such Confidential Information until the Company either has concluded not to challenge the demand, or has exhausted its challenge, including appeals, if any. Upon request by the Company, the Executive shall deliver promptly to the Company upon termination of his services for the Company, or at any time thereafter as the Company may request, all memoranda, notes, records, reports, manuals, drawings, designs, computer files in any media and other documents (and all copies thereof) containing such Confidential Information.
 
(d)            Ownership of Developments . All processes, concepts, techniques, inventions and works of authorship, including new contributions, improvements, formats, packages, programs, systems, machines, compositions of matter manufactured, developments, applications and discoveries, and all copyrights, patents, trade secrets, or other intellectual prope1ty rights associated therewith conceived, invented, made, developed or created by the Executive during the Term of Employment either during the course of performing work for the Company or its Related Entities, or their clients, or which are related in any manner to the business (commercial or experimental) of the Company or its Related Entities or their clients (collectively, the “Work Product”) shall belong exclusively to the Company and its Related Entities and shall, to the extent possible, be considered a work made by the Executive for hire for the Company and its Related Entities within the meaning of Title 17 of the United States Code. To the extent the Work Product may not be considered work made by the Executive for hire for the Company and its Related Entities, the Executive agrees to assign, and automatically assign at the time of creation of the Work Product, without any requirement of further consideration, any right, title, or interest the Executive may have in such Work Product. Upon the request of the Company, the Executive shall take such further actions, including execution and delivery of instruments of conveyance, as may be appropriate to give full and proper effect to such assignment. The Executive shall further: (i) promptly disclose the Work Product to the Company; (ii) assign to the Company or its assignee, without additional compensation, all patent or other rights to such Work Product for the United States and foreign countries; (iii) sign all papers necessary to carry out the foregoing; and (iv) give testimony in support of his inventions, all at the sole cost and expense of the Company.
 
 
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(e)            Books and Records . All books, records, and accounts relating in any manner to the customers or clients of the Company or its Related Entities, whether prepared by the Executive or otherwise coming into the Executive’s possession, shall be the exclusive property of the Company and its Related Entities and shall be returned immediately to the Company on termination of the Executive’s employment hereunder or on the Company’s request at any time.
 
(f)             Acknowledgment by Executive . The Executive acknowledges and confirms that the restrictive covenants contained in this Section 7 (including without limitation the length of the term of the provisions of this Section 7) are reasonably necessary to protect the legitimate business interests of the Company and its Related Entities, and are not overbroad, overlong, or unfair and are not the result of overreaching, duress or coercion of any kind. The Executive further acknowledges and confirms that the compensation payable to the Executive under this Agreement is in consideration for the duties and obligations of the Executive hereunder, including the restrictive covenants contained in this Section 7, and that such compensation is sufficient, fair and reasonable. The Executive further acknowledges and confirms that his full, uninhibited and faithful observance of each of the covenants contained in this Section 7 will not cause him any undue hardship, financial or otherwise, and that enforcement of each of the covenants contained herein will not impair his ability to obtain employment commensurate with his abilities and on terms fully acceptable to him or otherwise to obtain income required for the comfortable support of him and his family and the satisfaction of the needs of his creditors. The Executive acknowledges and confirms that his special knowledge of the business of the Company and its Related Entities is such as would cause the Company and its Related Entities serious injury or loss if he were to use such ability and knowledge to the benefit of a competitor or were to compete with the Company or its Related Entities in violation of the terms of this Section 7. The Executive further acknowledges that the restrictions contained in this Section 7 are intended to be, and shall be, for the benefit of and shall be enforceable by, the Company’s successors and assigns. The Executive expressly agrees that upon any breach or violation of the provisions of this Section 7, the Company shall be entitled to seek in addition to any other rights or remedies it may have, to (i) temporary and/or permanent injunctive relief in any court of competent jurisdiction as described in Section 7(i) hereof, and (ii) such damages as are provided at law or in equity. The existence of any claim or cause of action against the Company or its Related Entities, whether predicated upon this Agreement or otherwise, shall not constitute a defense to the enforcement of the restrictions contained in this Section 7.
 
 
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(g)            Reformation by Court . In the event that a court of competent jurisdiction shall determine that any provision of this Article 7 is invalid or more restrictive than permitted under the governing law of such jurisdiction, then only as to enforcement of this Article 7 within the jurisdiction of such court, such provision shall be interpreted or reformed and enforced as if it provided for the maximum restriction permitted under such governing law.
 
(h)            Extension of Time . If the Executive shall be in violation of any provision of this Section 7, then each time limitation set forth in this Section 7 shall be extended for a period of time equal to the period of time during which such violation or violations occur.  If the Company or any Related Entity seeks injunctive relief from such violation in any court, then the covenants set forth in this Section 7 shall be extended for a period of time equal to the pendency of such proceeding including all appeals by the Executive.
 
(i)             Injunction . It is recognized and hereby acknowledged by the parties hereto that a breach by the Executive of any of the covenants contained in Section 7 of this Agreement may cause irreparable harm and damage to the Company, and its Related Entities, the monetary amount of which may be virtually impossible to ascertain.  As a result, the Executive recognizes and hereby acknowledges that the Company and its Related Entities shall be entitled to seek an injunction from any court of competent jurisdiction enjoining and restraining any violation of any or all of the covenants contained in Section 7 of this Agreement by the Executive or any of his affiliates, associates, partners or agents, either directly or indirectly, and that such right to injunction shall be cumulative and in addition to whatever other remedies the Company may possess.
 
8.              Representations and Warranties of Executive . The Executive represents and warrants to the Company that:
 
(a)           The Executive’s employment will not conflict with or result in his breach of any agreement to which he is a party or otherwise may be bound;
 
(b)           The Executive has not violated, and in connection with his employment with the Company will not violate, any non-solicitation, non-competition or other similar covenant or agreement of a prior employer by which he is or may be bound; and
 
(c)           In connection with Executive’s employment with the Company, he will not use any confidential or proprietary information that he may have obtained in connection with employment with any prior employer; and
 
(d)           The Executive has not (i) been convicted of any felony; or (ii) committed any criminal act with respect to Executive’s current or any prior employment; and
 
(e)           The Executive is not dependent on alcohol or the illegal use of drugs. The Executive recognizes that Company shall have the right to conduct random drug testing of its employees and that Executive may be called upon in such a manner.
 
9.              Taxes .  All payments or transfers of property made by the Company to the Executive or his estate or beneficiaries shall be subject to the withholding of such amounts relating to taxes as the Company may reasonably determine it should withhold pursuant to any applicable law or regulation.
 
 
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10.            Assignment . The Company shall have the right to assign this Agreement and its rights and obligations hereunder in whole, but not in part, to any corporation or other entity with or into which the Company may hereafter merge or consolidate or to which the Company may transfer all or substantially all of its assets, if in any such case said corporation or other entity shall by operation of law or expressly in writing assume all obligations of the Company hereunder as fully as if it had been originally made a party hereto, but may not otherwise assign this Agreement or its rights and obligations hereunder.  The Executive may not assign or transfer this Agreement or any rights or obligations hereunder.
 
11.            Governing Law . This Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of New Jersey, without regard to principles of conflict of laws.
 
12.            Jurisdiction and Venue . The patties acknowledge that a substantial portion of the negotiations, anticipated performance and execution of this Agreement occurred or shall occur in Monmouth, New Jersey, and that, therefore, without limiting the jurisdiction or venue of any other federal or state courts, each of the parties irrevocably and unconditionally (i) agrees that any suit, action or legal proceeding arising out of or relating to this Agreement which is expressly permitted by the terms of this Agreement to be brought in a court of law, may be brought in the courts of record of the State of New Jersey in Monmouth County or the court of the United States, District of New Jersey; (ii) consents to the jurisdiction of each such court in any such suit, action or proceeding; (iii) waives any objection which it or he may have to the laying of venue of any such suit, action or proceeding in any of such courts; and (iv) agrees that service of any court papers may be effected on such party by mail, as provided in this Agreement, or in such other manner as may be provided under applicable laws or court rules in such courts.
 
13.            Entire Agreement . This Agreement, together with the exhibit attached hereto, constitutes the entire agreement between the patties hereto with respect to the subject matter hereof and, upon its effectiveness, shall supersede all prior agreements, understandings and arrangements, both oral and written, between the Executive and the Company (or any of its Related Entities) with respect to such subject matter.  This Agreement may not be modified in any way unless by a written instrument signed by both the Company and the Executive.
 
14.            Notices . All notices required or permitted to be given hereunder shall be in writing and shall be personally delivered by courier, sent by registered or certified mail, return receipt requested or sent by confirmed facsimile transmission addressed as set forth herein. Notices personally delivered, sent by facsimile or sent by overnight courier shall be deemed given on the date of delivery and notices mailed in accordance with the foregoing shall be deemed given upon receipt by the addressee, as evidenced by the return receipt thereof.  Notice shall be sent (i) if to the Company, addressed to 9 Deer Park Drive, Suite C, Monmouth Junction, NJ 08852-1919, Attention: General Counsel, and (ii) if to the Executive, to his address as reflected on the payroll records of the Company, or to such other address as either party shall request by notice to the other in accordance with this provision.
 
 
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15.            Benefits; Binding Effect. This Agreement shall be for the benefit of and binding upon the parties hereto and their respective heirs, personal representatives, legal representatives, successors and, where permitted and applicable, assigns, including, without limitation, any successor to the Company, whether by merger, consolidation, sale of stock, sale of assets or otherwise.
 
16.            Right to Consult with Counsel; No Drafting Party . The Executive acknowledges having read and considered all of the provisions of this Agreement carefully, and having had the opportunity to consult with counsel of his own choosing, and, given this, the Executive agrees that the obligations created hereby are not unreasonable.  The Executive acknowledges that he has had an opportunity to negotiate any and all of these provisions and no rule of construction shall be used that would interpret any provision in favor of or against a patty on the basis of who drafted the Agreement.
 
17.            Severability . The invalidity of any one or more of the words, phrases, sentences, clauses, provisions, sections or articles contained in this Agreement shall not affect the enforceability of the remaining portions of this Agreement or any part thereof, all of which are inserted conditionally on their being valid in law, and, in the event that any one or more of the words, phrases, sentences, clauses, provisions, sections or articles contained in this Agreement shall be declared invalid, this Agreement shall be construed as if such invalid word or words, phrase or phrases, sentence or sentences, clause or clauses, provisions or provisions, section or sections or article or articles had not been inserted.  If such invalidity is caused by length of time or size of area, or both, the otherwise invalid provision will be considered to be reduced to a period or area which would cure such invalidity.
 
18.            Waivers .  The waiver by either party hereto of a breach or violation of any term or provision of this Agreement shall not operate nor be construed as a waiver of any subsequent breach or violation.
 
19.            Damages; Attorneys’ Fees .  Nothing contained herein shall be construed to prevent the Company or the Executive from seeking and recovering from the other damages sustained by either or both of them as a result of its or his breach of any term or provision of this Agreement.  Each party shall bear its own costs and attorneys’ fees.
 
20.            Waiver of Jury Trial . The Executive hereby knowingly, voluntarily and intentionally waives any right that the Executive may have to a trial by jury in respect of any litigation based hereon, or arising out of, under or in connection with this Agreement and any agreement, document or instrument contemplated to be executed in connection herewith, or any course of conduct, course of dealing statements (whether verbal or written) or actions of any party hereto.
 
21.            No Set-off or Mitigation . The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set­ off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others.  In the event of any termination of the Executive’s employment under this Agreement, he shall be under no obligation to seek other employment or otherwise in any way to mitigate the amount of any payment provided for hereunder.
 
 
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22.            Section Headings . The article, section and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
23.            No Third Party Beneficiary .  The Related Entities are intended third party beneficiaries of this Agreement.  Otherwise, nothing expressed or implied in this Agreement is intended, or shall be construed, to confer upon or give any person other than the Company, the parties hereto and their respective heirs, personal representatives, legal representatives, successors and permitted assigns, any rights or remedies under or by reason of this Agreement.
 
24.            Counterparts . This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument and agreement.
 
25.            Indemnification .
 
(a)           Subject to limitations imposed by law, the Company shall indemnify and hold harmless the Executive to the fullest extent permitted by law from and against any and all claims, damages, expenses (including attorneys’ fees), judgments, penalties, fines, settlements, and all other liabilities incurred or paid by him in connection with the investigation, defense, prosecution, settlement or appeal of any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative and to which the Executive was or is a party or is threatened to be made a party by reason of the fact that the Executive is or was an officer, employee or agent of the Company, or by reason of anything done or not done by the Executive in any such capacity or capacities, provided that the Executive acted in good faith, in a manner that was not grossly negligent or constituted willful misconduct and in a manner he reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The Company also shall pay any and all expenses (including attorney’s fees) incurred by the Executive as a result of the Executive being called as a witness in his capacity as a current or former officer or director of the Company.
 
(b)           The Company shall pay any expenses (including attorneys’ fees), judgments, penalties, fines, settlements, and other liabilities incurred by the Executive in investigating, defending, settling or appealing any action, suit or proceeding described in this Section 25 in advance of the final disposition of such action, suit or proceeding.  The Company shall promptly pay the amount of such expenses to the Executive, but in no event later than ten days following the Executive’s delivery to the Company of a written request for an advance pursuant to this Section 25, together with a reasonable accounting of such expenses.
 
(c)           The Executive hereby undertakes and agrees to repay to the Company any advances made pursuant to this Section 25 if and to the extent that it shall ultimately be found that the Executive is not entitled to be indemnified by the Company for such amounts.
 
 
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(d)           The Company shall make the advances contemplated by this Section 25 regardless of the Executive’s financial ability to make repayment, and regardless whether indemnification of the Executive by the Company will ultimately be required.  Any advances and undetakings to repay pursuant to this Section 25 shall be unsecured and interest-free.
 
(e)            The provisions of this Section 25 shall survive the Term of Employment.
 
IN WITNESS WHEREOF, the undersigned have executed this Agreement on the date first above written.
 
 
COMPANY:
   
 
Insmed Incorporated, a Virginia corporation
 
By:
   
 
Name:
Donald J. Hayden, Jr.
 
Title:
Executive Chairman
   
  EXECUTIVE:
   
     

 
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Exhibit A

INSMED INCORPORATED
 
NON-QUALIFIED STOCK OPTION AGREEMENT
 
THIS AGREEMENT is entered into on September 10, 2012 between INSMED INCORPORATED, a Virginia corporation (the "Company"), and WILLIAM H. LEWIS ("Participant"), pursuant and subject to the provisions of the Insmed Incorporated 2000 Stock Incentive Plan, as amended (the "Plan"), a copy of which has been made available to the Participant.  All terms used herein that are defined in the Plan have the same meaning given them in the Plan.

If and to the extent that this Agreement conflicts or is inconsistent with the terms, conditions and provisions of any employment, consulting or similar services agreement between the Participant and the Company as may be in effect (the “Service Agreement”), the Service Agreement shall control, and this Award Agreement shall be deemed to be modified accordingly so long as such modification is not expressly prohibited by the Plan.

1.              Grant of Option .  Pursuant to the Plan, the Company, on September 10, 2012 (the "Date of Grant"), granted to Participant, subject to the terms and conditions of the Plan and subject further to the terms and conditions herein set forth, the right and Option to purchase from the Company all or any part of an aggregate of 708,314 shares of Common Stock at the Option price of $3.40 per share, being not less than the Fair Market Value of such shares on the Date of Grant.  This Option is intended to be a nonqualified stock option and not an "incentive stock option" within the meaning of Section 422 of the Code.  This Option is exercisable as hereinafter provided.

2.             Terms and Conditions .  This Option is subject to the following terms and conditions:

(a)   Expiration Date .  This Option shall expire ten years from the Date of Grant (the "Expiration Date").

(b)   Exercise of Option .  Except as provided in paragraphs 3, 4 and 5, this Option shall be exercisable with respect to twenty-five percent (25%) of the shares of Common Stock subject to this Option on the first anniversary of the Date of Grant (the “First Anniversary Date”) and with respect to an additional twelve and a half percent (12.5%) of the shares of Common Stock subject to this Option on the sixth month anniversary of the First Anniversary Date and each sixth month anniversary date thereafter through the fourth anniversary of the Date of Grant.  If the foregoing schedule would produce fractional shares, the number of shares for which the Option becomes exercisable shall be rounded down to the nearest whole share.  Once this Option has become exercisable in accordance with the preceding sentence, it shall continue to be exercisable until the termination of Participant's rights hereunder pursuant to paragraph 3, 4 or 5 or until the Option has expired pursuant to subparagraph 2(a).  A partial exercise of this Option shall not affect Participant's right to exercise this Option with respect to the remaining shares, subject to the conditions of the Plan and this Agreement.
 
 
 

 
 
(c)   Method of Exercising Option and Payment for Shares .  This Option shall be exercised by written notice delivered to the attention of the Company's Principal Financial Officer at the Company's principal office in New Jersey (see Attachment I – “Notice of Option Exercise”).  The exercise date shall be (i) in the case of notice by mail, the date of postmark, or (ii) if delivered in person, the date of delivery.  Such notice shall be accompanied by payment of the Option price in full, in cash or cash equivalent acceptable to the Committee, or by the surrender of shares of Common Stock with an aggregate Fair Market Value (determined as of the day preceding the exercise date) which, together with any cash or cash equivalent paid, is not less than the Option price for the number of shares for which this Option is being exercised.

(d)   Nontransferability .  This Option may not be transferred except by will or by the laws of descent and distribution.  During Participant's lifetime, this Option may be exercised only by Participant.

3.             Exercise in the Event of Death .  In the event Participant dies before the expiration of this Option pursuant to subparagraph 2(a), this Option shall be exercisable with respect to all or part of the shares of Common Stock that Participant was entitled to purchase under subparagraph 2(b) on the date of Participant’s death.  In that event, this Option may be exercised, to the extent exercisable under subparagraph 2(b), by Participant's estate or by the person or persons to whom his rights under this Option shall pass by will or the laws of descent and distribution.  Participant's estate or such persons may exercise this Option within one (1) year of Participant's death or during the remainder of the period preceding the Expiration Date, whichever is shorter.

4.             Exercise in the Event of Permanent and Total Disability .  In the event Participant becomes permanently and totally disabled within the meaning of Section 22(e)(3) of the Code ("Permanently and Totally Disabled") before the expiration of this Option pursuant to subparagraph 2(a), this Option shall be exercisable with respect to all or part of the shares of Common Stock that Participant was entitled to purchase under subparagraph 2(b) on the date he ceases to be employed by the Company and its Affiliates as a result of his becoming Permanently and Totally Disabled.  In that event, Participant may exercise this Option, to the extent exercisable under subparagraph 2(b), within one (1) year of the date he ceases to be employed by the Company and its Affiliates as a result of his becoming Permanently and Totally Disabled or during the remainder of the period preceding the Expiration Date, whichever is shorter.

5.              Exercise After Termination of Employment .   Except as provided in paragraphs 3 and 4 hereof, if the Participant ceases to be employed by the Company and its Affiliates prior to the Expiration Date, this Option shall be exercisable for all or part of the number of shares that the Participant was entitled to purchase under subparagraph 2(b), as well as set forth under any Service Agreement, on the date of Participant’s termination of employment.  In that event, Participant may exercise this Option, to the extent exercisable under subparagraph 2(b) and/or under Service Agreement, during the remainder of the period preceding the Expiration Date or until the date that is three (3) months after the date he ceases to be employed by the Company and its Affiliates, whichever is shorter.
 
 
-2-

 
 
6.              Notice .  Any notice or other communication given pursuant to this Agreement shall be in writing and shall be personally delivered or mailed by United States registered or certified mail, postage prepaid, return receipt requested, to the Company at its principal place of business or to the Participant at the address on the payroll records of the Company or, in either case, at such other address as one party may subsequently furnish to the other party in writing.  Any such notice shall be deemed to have been given (a) on the date of postmark, in the case of notice by mail, or (b) on the date of delivery, if delivered in person.

7.              Fractional Shares .  Fractional shares shall not be issuable hereunder, and when any provision hereof may entitle Participant to a fractional share such fraction shall be disregarded.

8.             No Right to Continued Employment .  This Option does not confer upon Participant any right to continue in the employ of the Company or an Affiliate, nor shall it interfere in any way with the right of the Company or an Affiliate to terminate such employment at any time.

9.              Change in Capital Structure .  The terms of this Option shall be adjusted as the Committee determines is equitably required in the event the Company effects one or more stock dividends, stock split-ups, subdivisions or consolidations of shares or other similar changes in capitalization.

10.            Governing Law .  This Agreement shall be governed by the laws of the Commonwealth of Virginia.

11.            Conflicts .  In the event of any conflict between the provisions of the Plan as in effect on the date hereof and the provisions of this Agreement, the provisions of the Plan shall govern.  All references herein to the Plan shall mean the Plan as in effect on the date hereof.

12.            Participant Bound by Plan .  Participant hereby acknowledges receipt of a copy of the Plan and agrees to be bound by all the terms and provisions thereof.

13.            Binding Effect .  Subject to the limitations stated above and in the Plan, this Agreement shall be binding upon and inure to the benefit of the legatees, distributees, and personal representatives of Participant and the successors of the Company.
 
 
-3-

 
 
IN WITNESS WHEREOF, the Company has caused this Agreement to be signed by a duly authorized officer, and Participant has affixed his signature hereto.

 
INSMED INCORPORATED
   
 
By:
   
 
Name:
Donald J. Hayden, Jr.  
 
Title:
Executive Chairman  
   
 
WILLIAM H. LEWIS
   
     
 
 
-4-

 
 
Attachment I

[name]
Chief Financial Officer
Insmed Incorporated
9 Deer Park Drive, Suite C
Monmouth Junction, NJ 08852-1919
 
Notice Of Option Exercise

Dear _______:

This letter is notice of my decision to exercise the option that was granted to me on __________________.   The exercise will be effective on _________________.   I am exercising the option for ________________ shares of Common Stock.  Enclosed is my check for $__________, which is the aggregate option price for the number of shares for which I am exercising the option.
 
Please issue the certificate according to the following instructions:

Name/entity stock certificate issued to:
   
 
(If entity is a trust, please include date trust was established)
         
Address to send stock certificate:
       
         
         
         
   
Sincerely,
   
         
         
 
Accepted by:
   
 
Date:
   
 
Note :  The date of exercise cannot be earlier than the date of delivery of this notice or the postmark, if the notice is mailed.
 
 
 

 
 
Exhibit B

General Release of Claims

1.           William H. Lewis ("Executive"), for himself and his family, heirs, executors, administrators, legal representatives and their respective successors and assigns, in exchange for the consideration received pursuant to Sections 6(e) [and 6(g)] of the Employment Agreement (the “Severance Benefits”) to which this release is attached as Exhibit B (the "Employment Agreement"), does hereby release and forever discharge Insmed Incorporated (the "Company"), its subsidiaries, affiliated companies, successors and assigns, and its current or former directors, officers, employees, shareholders or agents in such capacities (collectively with the Company, the "Released Parties") from any and all actions, causes of action, suits, controversies, claims and demands whatsoever, for or by reason of any matter, cause or thing whatsoever, whether known or unknown including, but not limited to, all claims under any applicable laws arising under or in connection with Executive's employment or termination thereof, whether for tort, breach of express or implied employment contract, wrongful discharge, intentional infliction of emotional distress, or defamation or injuries incurred on the job or incurred as a result of loss of employment.  Without limiting the generality of the release provided above, Executive expressly waives any and all claims under Age Discrimination in Employment Act (" ADEA' ') that he may have as of the date hereof.  Executive further understands that, by signing this General Release of Claims, he is in fact waiving, releasing and forever giving up any claim under the ADEA as well as all other laws within the scope of this paragraph 1 that may have existed on or prior to the date hereof.  Notwithstanding anything in this paragraph 1 to the contrary, this General Release of Claims shall not apply to (i) any rights to receive any payments or benefits to which the Executive is entitled under COBRA, (ii) any rights or claims that may arise as a result of events occurring after the date this General Release of Claims is executed, (iii) any indemnification and advancement rights Executive may have as a former employee, officer or director of the Company or its subsidiaries or affiliated companies (including any rights under Section 25 of the Employment Agreement), (iv) any claims for benefits under any directors' and officers' liability policy maintained by the Company or its subsidiaries or affiliated companies in accordance with the terms of such policy, (v) rights to vested benefits under the Company’s 401(k) plan, and (vi) any rights as a holder of equity securities of the Company.
 
2.           Executive represents that he has not filed against the Released Parties any complaints, charges, or lawsuits arising out of his employment, or any other matter arising on or prior to the date of this General Release of Claims, and covenants and agrees that he will never individually or with any person file, or commence the filing of any lawsuits, complaints or proceedings with any governmental agency, or against the Released Parties with respect to any of the matters released by Executive pursuant to paragraph 1 hereof; provided, that nothing herein shall prevent you from filing a charge or complaint with the Equal Employment Opportunity Commission (“EEOC”) or similar federal or state agency or your ability to participate in any investigation or proceeding conducted by such agency.  Executive does agree, however, that he is waiving his right to recover any money in connection with such an investigation or charge filed by him or by any other individual, or a charge filed by the Equal Employment Opportunity Commission or any other federal, state or local agency.
 
 
B-1

 
 
3.           Executive acknowledges that, in the absence of his execution of this General Release of Claims, the Severance Benefits would not otherwise be due to him.
 
4.           Executive acknowledges and agrees that he received adequate consideration in exchange for agreeing to the covenants contained in Section 7 of the Employment Agreement, that such covenants remain reasonable and necessary to protect the legitimate business interests of the Company and its affiliates and that he will continue to comply with those covenants.
 
5.           Executive hereby acknowledges that the Company has informed him that he has up to 21 days to sign this General Release of Claims and he may knowingly and voluntarily waive that 21 day period by signing this General Release of Claims earlier.  Executive also understands that he shall have seven days following the date on which he signs this General Release of Claims within which to revoke it by providing a written notice of his revocation to the Company in the manner described in Section 14 of the Employment Agreement.
 
6.           Executive acknowledges and agrees that this General Release of Claims will be governed by and construed and enforced in accordance with the internal laws of the State of New Jersey applicable to contracts made and to be performed entirely within such State.
 
7.           Executive acknowledges that he has read this General Release of Claims, that he has been advised that he should consult with an attorney before he executes this general release of claims, and that he understands all of its terms and executes it voluntarily and with full knowledge of its significance and the consequences thereof.
 
8.           This General Release of Claims shall become irrevocable on the eighth day following Executive's execution of this General Release of Claims, unless previously revoked in accordance with paragraph 5, above.
 
Intending to be legally bound hereby, Executive has executed this General Release of Claims on ___________, 20__.
 
     
 
 
B-2


EXHIBIT 10.2
 
September 10, 2012
 
Tim Whitten
 
Dear Tim:
 
This letter agreement (“Agreement”) confirms our mutual agreement regarding the terms and conditions of your separation from employment with Insmed, Inc. (“Insmed” or the “Company”).  You and the Company agree as follows:
 
1.
Cessation of Service .  You hereby resign from employment with the Company, from service as an officer of the Company, from service as a member of the Board of Directors of the Company (the “Board”) and from service with the Company and its affiliates in any other capacity, all effective as of the date of your execution of this Agreement (the “Last Day of Employment”).  Promptly following such date, you will receive payment for (i) base salary earned in the payroll period that includes your Last Day of Employment, and (ii) vacation days that were accrued and unused as of your Last Day of Employment.
 
2.
Severance Benefits .  Provided that Paragraph 3 of this Agreement is not revoked during the seven day period following your execution of this Agreement, the Company will provide you with the rights, payment and benefits described in the attached Exhibit A (the “Severance Benefits”).  If you die before any of the Severance Benefits are paid, the Company will pay those benefits to your estate, heirs or beneficiaries.  If Paragraph 3 of this Agreement is revoked, no severance benefits will be owed to you under this Paragraph 2 or under your Employment Agreement with the Company dated January 31, 2011 (the “Employment Agreement”), but the remainder of this Agreement will remain in full force and effect.
 
3.
Release .
 
 
a)
In consideration of the Severance Benefits, you hereby waive, release and forever discharge the Company and each of its past and current parents, subsidiaries, affiliates and each of its and their respective past and current directors, officers, trustees, employees, representatives, agents, employee benefit plans and such plans’ administrators, fiduciaries, trustees, record-keepers and service providers, and each of its and their respective successors and assigns, each and all of them in their personal and representative capacities (collectively the “Company Releasees”) from any and all claims legally capable of being waived, grievances, injuries, controversies, agreements, covenants, promises, debts, accounts, actions, causes of action, suits, arbitrations, sums of money, attorneys’ fees, costs, damages, or any right to any monetary recovery or any other personal relief, whether known or unknown, in law or in equity, by contract, tort, law of trust or pursuant to federal, state or local statute, regulation, ordinance or common law, which you now have, ever have had, or may hereafter have, based upon or arising from any fact or set of facts, whether known or unknown to you, from the beginning of time until the date of execution of this Agreement, arising out of or relating in any way to your employment relationship with the Company or the Company Releasees or other associations with the Company or the Company Releasees or any termination thereof. Without limiting the generality of the foregoing, this waiver, release, and discharge includes any claim or right based upon or arising under any federal, state or local fair employment practices or equal opportunity laws, including, but not limited to, the New Jersey Law Against Discrimination (N.J. Stat. Ann. §10:5-1 et seq.), the New Jersey Conscientious Employee Protection Act (N.J. Stat. Ann. §34:19-3 et seq.), the Age Discrimination in Employment Act (29 U.S.C. Section 621, et seq.) (“ADEA”), the Older Workers’ Benefits Protection Act, the Rehabilitation Act of 1973, the Worker Adjustment and Retraining Notification Act, 42 U.S.C. Section 1981, Title VII of the Civil Rights Act of 1964, the Equal Pay Act, the Employee Retirement Income Security Act (“ERISA”) (including, but not limited to, claims for breach of fiduciary duty under ERISA), the Americans With Disabilities Act, and the Family and Medical Leave Act of 1993, including all amendments thereto.
 
 

 
 
 
b)
Notwithstanding the generality of the foregoing, nothing herein constitutes a release or waiver by you of, or prevents you from making or asserting:  (i) any claim or right you may have under COBRA; (ii) any claim or right you may have for unemployment insurance or workers’ compensation benefits; (iii) any claim to vested benefits under the written terms of a qualified employee pension benefit plan; (iv) any claim or right that may arise after the execution of this Agreement; or (v) any claim or right you may have under this Agreement.  In addition, nothing herein shall prevent you from filing a charge or complaint with the Equal Employment Opportunity Commission (“EEOC”) or similar federal or state agency or your ability to participate in any investigation or proceeding conducted by such agency; provided, however, that pursuant to Paragraph 3(a), you are waiving any right to recover monetary damages or any other form of personal relief in connection with any such charge, complaint, investigation or proceeding.
 
4.
Violations of Any Law or of the Company’s Code of Conduct .  You hereby represent and warrant that during your employment with the Company, you did not violate any federal, state or local law, statute or regulation while acting within the scope of your employment with the Company, nor did you violate the Company’s Code of Conduct.  You acknowledge and understand that if the Company should discover any such violation after your execution of this Agreement, it will be considered a material breach of this Agreement.
 
5.
No Additional Entitlements.   You agree that you have received all entitlements due from the Company relating to your employment with the Company, other than the payments, rights and benefits specifically enumerated in this Agreement.
 
6.
Employment Agreement .  You and the Company acknowledge and agree that Sections 6(l), 6(m), 7 through 13, and 15 through 26 of your Employment Agreement survive the cessation of your employment with the Company.  You further acknowledge and agree that the other sections of your Employment Agreement do not survive the cessation of your employment and that you have no further rights in respect thereof.
 
 
 

 
 
7.
Protection of Confidential Information .
 
 
a)
You acknowledge and agree that you received adequate consideration in exchange for agreeing to the covenants contained in Section 7 of your Employment Agreement, that such covenants remain reasonable and necessary to protect the Company’s legitimate business interests and that you will continue to comply with those covenants.
 
 
b)
In addition, you hereby acknowledge your existing obligation to maintain the confidentiality of the Company’s information as contained in the Company’s Code of Conduct.  You affirm that you agreed to be bound by the Company’s Code of Conduct (which is hereby incorporated by this reference) when you signed that Code of Conduct in  January 2012;
 
 
c)
Without limiting the generality of the foregoing obligations set forth in Paragraph 7(a) and (b), you agree that, except as expressly permitted in Paragraph 9 of this Agreement or if otherwise required by law, you will not at any time, directly or indirectly, disclose any trade secret, confidential or proprietary information you have learned by reason of your association with the Company (the “Confidential Information”) or use any such Confidential Information to the detriment of the Company, its parents, affiliates or subsidiaries, or to the benefit of any business or enterprise that competes with the Company, its parents, affiliates or subsidiaries.  Confidential Information is deemed to include, but is not limited to, information pertaining to Company strategic plans, advertising and marketing plans, sales plans, formulae, processes, methods, machines, ideas, concepts, new product developments, proposed launches, discontinuance of existing products, product and consumer testing data, sales and market research, technology research and development, budgets, profit and loss data, raw material costs, identity of suppliers, customer lists, customer information, employee information, improvements, inventions, and associations with other organizations that the Company has not previously made public.  Confidential Information does not include information that can be shown by written evidence to be in the public domain at the time of disclosure by you or that is publicized or otherwise becomes part of the public domain through no fault of your own.
 
8.
Non-Disparagement .
 
 
a)
You agree that you shall not at any time make any written or verbal comments or statements of a defamatory or disparaging nature regarding the Company and/or the Company Releasees or their personnel or products and you shall not take any action that would cause the Company and/or the Company Releasees or their personnel or products any embarrassment or humiliation or otherwise cause or contribute to their being held in disrepute.
 
 
b)
The Company agrees that it will use its best efforts to ensure that none of its representatives makes any written or verbal comments or statements of a defamatory or disparaging nature regarding you or takes any action that would cause you any embarrassment or humiliation or otherwise cause or contribute to your being held in disrepute while they are employed by the Company and acting in their capacity as Company representatives.
 
 
 

 
 
9.
Permitted Conduct .  Nothing in this Agreement shall prohibit or restrict you, the Company, or our respective attorneys from: (i) making any disclosure of relevant and necessary information or documents in any action, investigation, or proceeding relating to this Agreement, including all exhibits, or as required by law or legal process; or (ii) participating, cooperating, or testifying in any action, investigation, or proceeding with, or providing information to, any governmental agency or legislative body, including, but not limited to, the Company’s Legal Department, the Securities & Exchange Commission, and/or pursuant to the Dodd-Frank Act or Sarbanes-Oxley Act; provided that , to the extent permitted by law, upon receipt of any subpoena, court order or other legal process compelling the disclosure of any such information or documents, the disclosing party gives prompt written notice to the other party so as to permit such other party to protect such party’s interests in confidentiality to the fullest extent possible.
 
10.
Non-Admission .  It is understood and agreed that neither the execution of this Agreement, nor the terms of the Agreement, constitute an admission of liability to you by the Company or the Company Releasees, and such liability is expressly denied.  It is further understood and agreed that no person shall use the Agreement, or the consideration paid pursuant thereto, as evidence of an admission of liability, inasmuch as such liability is expressly denied.
 
11.
Acknowledgments .  You hereby acknowledge that:
 
 
a)
The Company hereby advises you to consult with an attorney before signing this Agreement;
 
 
b)
You have obtained independent legal advice from an attorney of your own choice with respect to this Agreement and all exhibits or you have knowingly and voluntarily chosen not to do so;
 
 
c)
You freely, voluntarily and knowingly entered into this Agreement after due consideration;
 
 
d)
You have been provided with at least 21 days to review and consider this Agreement;
 
 
e)
You have a right to revoke Paragraph 3 of this Agreement by notifying the undersigned Company representative in writing, via hand delivery, facsimile or electronic mail, within seven days of your execution of this Agreement;
 
 
f)
In exchange for your waivers, releases and commitments set forth herein, including your waiver and release of all claims arising under the Age Discrimination in Employment Act, the payments, benefits and other considerations that you are receiving pursuant to this Agreement exceed any payment, benefit or other thing of value to which you would otherwise be entitled, and are just and sufficient consideration for the waivers, releases and commitments set forth herein; and
 
 
g)
No promise or inducement has been offered to you, except as expressly set forth herein, and you are not relying upon any such promise or inducement in entering into this Agreement.
 
 
 

 
 
12.
Miscellaneous.
 
 
a)
Entire Agreement .  This Agreement sets forth the entire agreement between you and the Company and replaces any other oral or written agreement between you and the Company relating to the subject matter of this Agreement.
 
 
b)
Governing Law .  This Agreement, shall be construed, performed, enforced and in all respects governed in accordance with the laws of the State of New Jersey, without giving effect to the principles of conflicts of law thereof.  Additionally, all disputes arising from or related to this Agreement and/or exhibits shall be brought in a state or federal court situated in the State of New Jersey, Mercer County and the parties hereby expressly consent to the jurisdiction of such courts for all purposes related to resolving such disputes.
 
 
c)
Severability .  Should any provision of this Agreement, including any exhibit, be held to be void or unenforceable, the remaining provisions shall remain in full force and effect, to be read and construed as if the void or unenforceable provisions were originally deleted.
 
 
d)
Taxation .  All payments to you from the Company are subject to withholding for applicable taxes.  Both you and the Company intend for payments and benefits under this Agreement to be exempt from, or compliant with, the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”).  You acknowledge and agree, however, that the Company does not guarantee the tax treatment or tax consequences associated with any payment or benefit, including, without limitation, tax consequences related to Section 409A.
 
 
e)
Amendments .  This Agreement may not be modified or amended, except upon the express written consent of both you and the Company.
 
 
f)
Waiver .  A waiver by either party hereto of a breach of any term or provision of the Agreement, including all exhibits, shall not be construed as a waiver of any subsequent breach.
 
 
g)
Counterparts .  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same agreement.
 
 
 

 

If the above accurately states our agreement, including the separation, waiver and release, kindly sign below and return this original Agreement to me.
 
 
Sincerely,
   
 
INSMED, INC.
   
 
By:
   
  Donald J. Hayden, Jr.
 
Executive Chairman
   
  Date:    
   
 
UNDERSTOOD, AGREED TO AND ACCEPTED WITH THE INTENTION TO BE LEGALLY BOUND:
   
     
 
Tim Whitten
   
  Date:    
 
 
 

 
 
EXHIBIT A

SEVERANCE BENEFITS

(1)
SEVERANCE PAY
You will receive severance pay as follows:

          $35,417, payable in a lump sum within 30 days following your Last Day of Employment.

          $212,500, payable in a lump sum within 30 days following your Last Day of Employment.

          $478,125, payable in a lump sum within 30 days following your Last Day of Employment.

          $159,375, payable in three monthly installments (of $53,125 each) commencing six months and one day following your Last Day of Employment

(2) 
EQUITY AWARDS
Equity Awards that have not previously vested and that were granted to you will vest in full, effective upon your Last Day of Employment. You will have one year from the Last Day of Employment to exercise all of your vested Stock Options.

(3) 
GROUP HEALTH CONTINUATION
COBRA continuation of your   medical, dental and vision insurance will be subsidized for you and your covered dependents for 18 months following your Last Day of Employment.  The subsidy will be such that the monthly cost of COBRA continuation will be the same as the monthly cost for such coverage applicable to active employees.  As a condition of continuation of such benefits, you must elect COBRA continuation of this coverage.

(4 )
OUTPLACEMENT SERVICES
The Company will pay or reimburse you for the cost of outplacement services provided by a reputable company on or before September 1, 2013, up to a maximum of $15,000.  As a condition of this benefit, you must submit proper documentation of such expenses within 90 days after you incur them.  The Company will pay or reimburse such expenses within 30 days following the receipt of proper documentation.
 
 
A-1


EXHIBIT 10.3
 
LOGO
 
Insmed Incorporated
Princeton Corporate Plaza
9 Deer Park Drive, Suite C
Monmouth Junction, NJ 08852-1919
732-997-4600
www.insmed.com
 
September 10, 2012
 
Via Hand Delivery
 
Mr. Donald Hayden, Jr.
 
Dear Don:
 
This letter confirms our mutual agreement regarding the effects of the change in your position with Insmed Incorporated (the “Company”) from Executive Chairman to Chairman of the Board of Directors (the “Board”).  In connection with that change and effective as of the date hereof, you hereby agree and acknowledge as follows:
 
1)           You hereby cease to be an officer and an employee of the Company;
 
2)           That certain Employment Agreement between you and the Company dated May 14, 2012 (the “Employment Agreement”) is hereby terminated.  The change in your position, the cessation of your employment and the termination of the Employment Agreement are by mutual consent and, accordingly, no severance benefits are due to you.  The Company’s only remaining obligations to you under the Employment Agreement or in respect of your service as an employee are those expressly described below;
 
3)           Promptly following the date hereof, the Company will pay you any Accrued Obligations (as that term is defined in the Employment Agreement);
 
4)           You will not participate in the Company’s 2012 annual cash bonus program, although the Board will consider the award to you of a discretionary bonus in respect to your service as the Executive Chairman of the Company;
 
 
 

 
 
5)           Your rights under Section 26 (Indemnification) in respect of your service as an employee and an officer of the Company will survive the termination of the Employment Agreement; and
 
6)           Following the date hereof, you will be compensated for your service as a member (and as Chairman) of the Board in accordance with the Company’s policies and practices for the compensation of non-employee directors, as in effect from time to time.
 
To confirm the foregoing, please execute this letter in the space below and return the original to me.
 
 
Sincerely,
   
 
Andrea Holtzman Drucker
 
Senior Vice President, General Counsel and Corporate Secretary
   
Agreed and Acknowledged on this
 
____ day of September, 2012:
 
   
 
 
 
Donald Hayden, Jr.
 
 
 
2


EXHIBIT 99.1
 
LOGO
Investor Relations Contact:
Brian Ritchie – FTI Consulting
212-850-5683
brian.ritchie@fticonsulting.com

Media Contact:
Irma Gomez-Dib – FTI Consulting
212-850-5761
irma.gomez-dib@fticonsulting.com
   
Press Release
 
 
Insmed Appoints Will Lewis as President and Chief Executive Officer

Monmouth Junction, N . J . – September 11, 2012 – Insmed Incorporated (NASDAQ: INSM), a biopharmaceutical company focused on developing novel inhalation therapeutics for patients suffering from serious orphan lung diseases, today announced the appointment of Will Lewis as President and Chief Executive Officer, effective immediately. Mr. Lewis has also been appointed to the Company’s Board of Directors. He succeeds Tim Whitten, who has resigned as President and Chief Executive Officer and as a member of the Company’s Board of Directors. In addition, Donald J. Hayden, Jr., who was appointed Executive Chairman in May 2012, will return to his role as Chairman, effective immediately.

Mr. Lewis has more than 20 years of executive experience and a track record of success in the pharmaceutical and finance industries both in the U.S. and internationally. He is the former Co-Founder, President and Chief Financial Officer of Aegerion Pharmaceuticals, Inc. (NASDAQ: AEGR).  During his tenure at Aegerion, Mr. Lewis played a pivotal role in re-orienting the company’s strategy to focus on orphan disease indications enabling Aegerion to go public in one of the best performing IPOs of 2010. Prior to Aegerion, Mr. Lewis spent more than 10 years working in the U.S. and Europe in investment banking for JP Morgan, Robertson Stephens and Wells Fargo. During his time in banking, he was involved in a broad range of domestic and international capital raising and advisory work valued at more than $20 billion. Mr. Lewis began his career as an Operations Officer with the Central Intelligence Agency. He earned a J.D. and M.B.A. from Case Western Reserve University and a B.A. with Honors from Oberlin College.

“Will has a record of success in the strategic, operational and financial leadership of rapidly growing organizations and has demonstrated the ability to significantly increase shareholder value in the biotech industry,” said Mr. Hayden. “Will has worked closely with the Insmed Board and management team as an advisor to the Company during the past several months, and I am confident he will successfully lead Insmed in its efforts to fully realize the potential our lead compound, ARIKACE, holds for patients suffering from serious orphan diseases of the lung.

“On behalf of the Board and the Company, I would also like to thank Tim Whitten for his unwavering leadership and considerable contributions as CEO over the past six years. We wish Tim the very best going forward.”
 
“Insmed is approaching an important inflection point as it transitions from late-stage development of ARIKACE through to registration and commercialization,” said Mr. Lewis. “Our late-stage clinical trials, including our pivotal phase 3 trial in CF patients, are enrolling patients quickly, and we believe this speaks to the need for and interest in ARIKACE. We believe this novel therapy has the potential to improve the lives of patients who battle CF-related Pseudomonas lung infections and non-TB mycobacteria lung infections, both high-growth orphan disease populations. Our focus in the near term will be to prepare the Company for commercialization of ARIKACE in Europe and the U.S. as quickly as possible for the benefit of both patients and Insmed shareholders.”
 
 
 

 
 
About Insmed

Insmed Incorporated is a biopharmaceutical company dedicated to improving the lives of patients battling serious orphan lung diseases through the development and commercialization of novel, targeted inhalation therapies in orphan patient populations with critical unmet needs in high-growth markets. Insmed’s lead candidate, ARIKACE ® , is engineered to deliver a proven and potent anti-infective directly to the site of serious lung infections to improve the efficacy, safety and convenience of treatment for at least two identified patient populations: cystic fibrosis (CF) patients with Pseudomonas lung infections and patients with nontuberculous mycobacteria lung infections (NTM). Following strong phase 2 results in CF patients, Insmed’s CLEAR-108 phase 3 registrational study of ARIKACE in Europe and Canada is well underway, as is the U.S. Phase 2 trial in NTM (TARGET-NTM). The Company expects to report clinical results from both the CLEAR-108 and TARGET-NTM studies in 2013 and currently is preparing for regulatory filings and commercialization.   For more information, please visit http://www.insmed.com .
 
Forward-Looking Statements
 
Statements made in this press release, which are not historical in nature, constitute forward-looking statements for purposes of the safe harbour provided by the Private Securities Litigation Reform Act of 1995. This release contains forward-looking statements which are made pursuant to provisions of Section 21E of the Securities Exchange Act of 1934. Investors are cautioned that such statements in this release, including statements relating to the development and potential commercialization of the Company’s current and future pipeline and the Company’s future under its new President and Chief Financial Officer and the Company’s financial and operational performance constitute forward-looking statements which involve risks and uncertainties that could cause actual results to differ materially from those anticipated by the forward-looking statements.  The risks and uncertainties include, without limitation, we may experience unexpected regulatory actions, delays or requests, our future clinical trials may not be successful, we may be unsuccessful in developing our product candidates or receiving necessary regulatory approvals, we may experience delays in our product development or clinical trials, our product candidates may not prove to be commercially successful, our expenses may be higher than anticipated, we may not be able to access capital on reasonable terms and in a  timely manner, and other risks and challenges detailed in our filings with the U.S. Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2011 and our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2012 and June 30, 2012.  Investors are cautioned not to place undue reliance on any forward-looking statements which speak only as of the date of this release.  We undertake no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances that occur after the date of this release or to reflect the occurrence of unanticipated events.
 
 
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