Severance Agreement Between Thomas Klopack And Aclara Biosciences, Inc.

EXHIBIT 10.40


March 18, 2003

Mr. Thomas Klopack 864 Chelsea Lane

Encinitas, CA 92024


Re: Severance Agreement


Dear Tom:

ACLARA BioSciences, Inc. (the " Company" ) considers it essential to the best interests of its shareholders to foster the continuous employment of the Company' s key management personnel. In order to induce you to remain in its employ, the Company hereby agrees that after this letter agreement (this " Agreement" ) has been fully executed, you shall receive the severance benefits set forth in this Agreement in the event of a Hostile Takeover (as defined below) or that your employment with the Company is terminated under the circumstances described below.


1. Term of Agreement . This Agreement shall commence on the date hereof and shall continue in effect so long as you continue to be employed by the Company.

2. Definitions .

(a) For purposes of this Agreement, " Board" shall mean the Board of Directors of the Company.


(b) For purposes of this Agreement, " Cause" shall mean (i) gross negligence or willful misconduct in the performance of duties to the Company where such gross negligence or willful misconduct has resulted or is likely to result in substantial and material damage to the Company or its subsidiaries; (ii) repeated unexplained or unjustified absence from the Company; (iii) a material and willful violation of any federal or state law which results or is likely to result in substantial and material harm to the company or its standing and reputation; (iv) commission of any act of fraud with respect to the Company; or (v) conviction of a felony or a crime involving moral turpitude causing material harm to the standing and reputation of the Company, in each case as determined in good faith by the Board.

(c) For purposes of this Agreement, a " Change in Control" shall mean (i) an acquisition of any voting securities of the Company (the " Voting Securities" ) by any " person" (as the term " person" is used for purposes of Section 13(d) or Section 14(d) of the Securities Exchange Act of 1934, as amended (the " 1934 Act" )) immediately after which such person has " beneficial ownership" (within the meaning of Rule 13d-3 promulgated under the 1934 Act) (" Beneficial Ownership" ) of 15% or more of the combined voting power of the Company' s then outstanding Voting Securities without the approval of the Board; (ii) a merger or consolidation


that results in more than 50% of the combined voting power of the Company' s then outstanding Voting Securities of the Company or its successor changing ownership (whether or not approved by the Board); (iii) the sale of all or substantially all of the Company' s assets; (iv) approval by the shareholders of the Company of a plan of dissolution or complete liquidation of the Company; or (v) the individuals constituting the Board as of the date of this Agreement (the " Incumbent Board" ) cease for any reason to constitute at least bd of the members of the Board; provided , however , that if the election, or nomination for election by the Company' s stockholders, of any new director was approved by a vote of the Incumbent Board, such new director shall be considered a member of the Incumbent Board.

(d) For purposes of this Agreement, " Date of Termination" shall mean (i) if your employment is terminated due to your death or Disability, the date of your death or Disability; or (ii) if your employment is terminated for any reason other than death or Disability, the date specified in the Notice of Termination.


(e) For purposes of this Agreement, " Disability" shall mean that you have been unable to perform your duties to the Company as described in your offer letter of even date herewith, as the same may be amended from time to time, as a result of your mental or physical incapacity and such inability, at least twenty-six (26) weeks after its commencement, is determined to be total and permanent by a physician selected by the Company and acceptable to you or your legal representative (such agreement as to acceptability not to be unreasonably withheld). Termination resulting from Disability may only be effected after at least thirty (30) days' written notice by the Company of its intention to termination your employment as a result of your Disability. In the event that you resume the performance of substantially all of your duties before the termination of your employment becomes effective, the notice of intent to terminate automatically shall be deemed to have been revoked.


(f) For purposes of this Agreement, " Good Reason" shall mean the occurrence of any one or more of the following events without your prior written consent, unless the Company fully corrects the circumstances constituting Good Reason (provided such circumstances are capable of correction) prior to the Date of Termination:

(i) any material reduction of your duties or level of responsibility or material in the level of management to which you report ( provided , however , that any such changes occurring as a result of the hiring of a Chief Operating Officer by the Company shall not be deemed to constitute Good Reason for purposes of this Agreement). For purposes of clarification only and without limiting the foregoing, a material reduction in your level of responsibility shall be deemed to have occurred if you are not Chief Executive Officer of the combined or acquiring entity following a Change in Control;


(ii) any reduction of your base compensation; or

(iii) the relocation of the Company' s offices at which you are principally employed to a location more than 35 miles from such offices.


Your continued employment shall not constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason hereunder.


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(g) For purposes of this Agreement, a " Hostile Takeover" means a transaction or series of transactions that results in any person acquiring Beneficial Ownership of more than 50% of the combined voting power of the Company' s then outstanding Voting Securities without the approval of the Board.

(h) For purposes of this Agreement, " Notice of Termination" shall mean a notice that shall indicate the specific termination provision in this Agreement (if any) relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision so indicated. Any purported termination of your employment by the Company or by you (other than termination due to your death, which shall terminate your employment automatically) shall be communicated by a written Notice of Termination to the other party hereto in accordance with Section 7.


(i) For purposes of this Agreement, a " Payment Termination" shall mean (i) the termination of your employment by the Company without Cause or (ii) your voluntary termination of employment for Good Reason or (iii) your death or Disability.


3. Accelerated Vesting Upon A Hostile Takeover . Upon a Hostile Takeover during the term of this Agreement, you shall immediately become 100% vested with respect to any options to purchase the Company' s capital stock that you then hold and/or any restrictions with respect to restricted shares of the Company' s capital stock that you then hold shall immediately lapse.

4. Compensation Upon Termination Not in Connection with Change in Control .


(a) Except as provided for in paragraph 4(d), if your employment with the Company is terminated other than in a Payment Termination, the Company shall pay you your full earned but unpaid base salary, when due, through the Date of Termination plus all other amounts to which you are entitled under any compensation plan or practice of the Company at the time such payments are due, and the Company shall have no further obligations to you under this Agreement.


(b) Except as provided for in paragraph 5(c), if you incur a Payment Termination more than three (3) months prior to or more than twelve (12) months following a Change in Control, then, in lieu of any severance benefits to which you may otherwise be entitled under any severance plan or program of the Company, you shall be entitled to the benefits provided below:

(i) the Company shall, at the time specified in Section 4(c), pay to you your full earned but unpaid base salary, when due, through the Date of Termination plus all other amounts to which you are entitled under any compensation plan ...