Exhibit 10.65
SEVERANCE AGREEMENT
THIS AGREEMENT is entered into as of January 2, 2003, by and between Xxxxxxxxx
X. Xxxxxxx (the "Employee") and Essential Therapeutics, Inc., a Delaware
corporation (the "Company").
1. Term of Agreement.
This Agreement shall remain in effect from the date hereof until the
earlier of:
a) The date when the Employee's employment with the Company terminates
for any reason not described in Section 6; or
b) The date when the Company has met all of its obligations under this
Agreement following a Termination event as defined in Section 6 below.
2. Definition of Change in Control.
For all purposes under this Agreement, "Change in Control" shall mean (i) a
merger, reorganization or other transaction or series of related
transactions (other than financings) following which the shareholders of
the Company do not own a majority of the capital stock of the surviving
corporation or (ii) the sale of all or substantially all of the assets of
the Company.
3. Definition of Good Reason.
For all purposes under this Agreement, "Good Reason" shall mean that the
Employee:
a) Has been demoted or has incurred a material reduction in his
authority or responsibility as an employee of the Company, including
(without limitation) a reduction or elimination of his authority to
approve expenditures or to hire, promote, demote or terminate
subordinates;
b) Has incurred a reduction in his total compensation (including
benefits) as an employee of the Company, other than pursuant to a
Company-wide reduction of total compensation (including benefits) for
employees of the Company generally; or
c) Has been notified that his principal place of work as an employee of
the Company will be relocated by a distance of 50 miles or more.
4. Definition of Cause.
For all purposes under this Agreement, "Cause" shall mean:
a) A willful act by the Employee which constitutes misconduct or fraud
and which is injurious to the Company; provided, however, that no act,
or failure to act, by the Employee shall be considered "willful"
unless committed
without good faith and without a reasonable belief that the act or
omission was in the Company's best interest; or
b) Conviction of, or a plea of "guilty" or "no contest" to, a felony.
The Board of Directors of the Company shall have sole discretion with
respect to whether any act or failure to act constitutes "Cause" for
purposes of this Agreement.
5. Definition of Continuation Period.
For all purposes under this Agreement, "Continuation Period" shall mean the
period commencing on the date when the termination of the Employee's
employment under Section 6 is effective and ending on the earlier of:
a) The date twelve (12) months after the date when the employment
termination was effective; or
b) The date of the Employee's death.
6. Entitlement to Severance Pay and Benefits.
The employee shall be entitled to receive the severance pay described in
Section 7 (the "Severance Pay") and the benefits described in Section 8
from the Company if, and only if, one of the following events occurs (each
a "Termination Event"):
a) Within the first 12-month period after the occurrence of a Change in
Control, the Employee voluntarily resigns his employment for Good
Reason; or
b) Within the first 12-month period after the occurrence of a Change in
Control, the Company terminates the Employee's employment for any
reason other than Cause.
7. Amount of Severance Pay.
During the Continuation Period, the Company shall pay the Employee
Severance Pay at an annual rate equal to the Employee's base compensation
at the annual rate in effect on the date when the termination of his
employment with the Company is effective. Such amount shall be paid
pro-rata at periodic intervals in accordance with the Company's standard
procedures.
8. Other Benefits
a) Stock options and Restricted Stock. All unvested stock options and
shares of restricted stock granted to Employee by the Company shall
vest immediately upon the occurrence of a Termination Event. The
post-termination exercise grace period under the Employee's stock
options shall commence at the end of the Continuation Period. The
Employee represents that he has consulted or will consult a tax
advisor regarding the impact of this Subsection a) on the tax
treatment of incentive stock options and shares of restricted stock.
b) Group Insurance. At the commencement of the Continuation Period, the
Employee (and, where applicable, his dependents) shall be entitled to
convert his key employee long-term disability policy and group life
insurance policy into individual policies pursuant to the terms of
such policies. Should the Employee elect to convert either or both of
such policies, the Company will pay the premiums for such policy or
policies during the Continuation Period. At the commencement of the
Continuation Period, the Employee shall be eligible to continue his
group health continuation coverage under the Consolidated Omnibus
Budget Reconciliation Act of 1986, and the Company will pay the
premiums for such coverage during the Continuation Period. The
foregoing notwithstanding, in the event that the Employee becomes
eligible for comparable group insurance coverage in connection with
new employment, the premium payments by the Company under this
Subsection b) shall terminate immediately.
c) Outplacement Services. Upon the occurrence of a Termination Event, the
Employee shall be entitled to reasonable outplacement services at the
Company's expense. Such services shall be provided by a firm selected
by the Employee from a list compiled by the Company and shall be
limited to a period of six consecutive months.
9. Limitation on Payments.
a) Basic Rule. Any other provision of this Agreement notwithstanding, the
Company shall not be required to make any payment or property transfer
to, or for the benefit of, the Employee (under this Agreement or
otherwise) that would be nondeductible by the company by reason of
Section 20G of the Internal Revenue Code of 1986, as amended (the
"Code"), or that would subject the Employee to the excise tax
described in Section 4999 of the Code. All calculations required by
this Section 9 shall be performed by the independent auditors retained
by the Company most recently prior to the Change in Control (the
"Auditors"), based on information supplied by the Company and the
Employee, and shall be binding on the Company and the Employee. All
fees and expenses of the Auditors shall be paid by the Company.
b) Reductions. If the amount of the aggregate payments or property
transfers to the Employee must be reduced under this Section 9, then
the Employee shall direct in which order the payments or transfers are
to be reduced, but no change in the timing of any payment or transfer
shall be made without the Company's consent. As a result of
uncertainty in the application of sections 280G and 4999 of the Code
at the time of an initial determination by the Auditors hereunder, it
is possible that a payment will have been made by the Company that
should not have been made (an "Overpayment"), or that an additional
payment that will not have been made by the Company could have been
made (an "Underpayment"). IN the event that the Auditors, based upon
the assertion of a deficiency by the Internal Revenue Service against
the Company or the Employee that the Auditors believe has a high
probability of success, determine that an Overpayment has been made,
such Overpayment shall be treated for all purposes as a loan to the
Employee that he shall repay to the Company, together with interest at
the applicable federal rate specified in section 7872(f)(2) of the
Code; provided, however, that no amount shall be payable by the
Employee to the company if and to the extent that such payment would
not reduce the amount that is nondeductible under section 280G of the
Code or is subject to an excise tax under section 4999 of the Code. In
the event that the Auditors determine that an Underpayment has
occurred, such Underpayment shall promptly be paid or transferred by
the Company to, or for the benefit of, the Employee, together with
interest at the applicable federal rate specified in section
7872(f)(2) of the Code.
10. Non-solicitation.
After the occurrence of a Termination Event, the Employee agrees that
for a period of two years from the date of the Termination Event (the
"Non-Solicitation Term") he will not directly or indirectly solicit
for employment any employee of the Company who was employed by the
Company at the time of the Occurrence of Termination Event and remains
in the employment of the Company during the Non-Solicitation Term.
11. Successors.
a) Company's Successors. The Company shall require any successor
(whether direct or indirect and whether by purchase lease, merger,
consolidation, liquidation or otherwise) to all or substantially all
of the Company's business and/or assets, by an agreement in substance
and form satisfactory to the Employee, to assume this Agreement and to
agree expressly to perform this Agreement in the same manner and to
the same extent as the Company would be required to perform it in the
absence of a succession. For all purposes under this Agreement, the
Term "Company" shall include any successor to the Company's business
and/or assets which executes and delivers the assumption agreement
described in this Subsection (a) or which becomes bound by this
Agreement by operation of law.
b) Employee's Successors. This Agreement and all rights of the
Employee hereunder shall inure to the benefit of, and be enforceable
by, the Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributes, devisees and legatees.
12. Miscellaneous Provisions.
a) Notice. Notices and all other communications contemplated by this
Agreement shall be in writing and shall be deemed to have been duly
given
when personally delivered or when mailed by U.S. registered or
certified mail, return receipt requested and postage prepaid. In the
case of the Employee, mailed notices shall be addressed to him at the
home address, which he most recently communicated to the Company in
writing. In the case of the company, mailed notices shall be addressed
to its corporate headquarters, and all notices shall be directed to
the attention of its Secretary.
b) Waiver. No provision of this Agreement shall be modified, waived or
discharge unless the modification, waiver or discharge is agreed to in
writing and signed by the Employee and by an authorized officer of the
Company (other than the Employee). No waiver by either party of any
breach of, or of compliance with, any condition or provision of this
Agreement by the other party shall be considered a waiver of any other
condition or provision or of the same condition or provision at
another time.
c) Whole Agreement. No agreements, representations or understandings
(whether oral or written and whether express or implied) which are not
expressly set forth in this Agreement have been made or entered into
by either party with respect to the subject matter hereof.
d) No Setoff; Withholding Taxes. There shall be no right of setoff or
counterclaim, with respect to any claim, debt or obligation, against
payments to the Employee under this Agreement. All payments made under
this Agreement shall be subject to reduction to reflect taxes required
to be withheld by law.
e) Choice of Law. The validity or unenforceability of any provision or
provisions of the Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in
full force and effect.
f) Severability. The invalidity or unenforceability of any other
provision hereof, which shall remain in full force and effect.
g) Potential Pooling Transactions. In the event the Board determines that
the acceleration of options pursuant to Sections 8(a) above would
preclude accounting for a proposed business transaction involving a
Change in Control as a "Pooling of Interests" but the Board otherwise
desires to approve and account for such transaction as a "Pooling of
Interests," the acceleration of options described in Sections 8(a)
above shall be null and void, and the Company shall enter into a
consulting agreement with the employee covering services and
compensation to be determined by the parties at that time. Such
agreement shall be for a period of three years and shall not be
subject to earlier termination unless by mutual consent of the
parties.
h) Arbitration. Except as otherwise provided in Section 9, any dispute or
controversy arising under or in connection with this Agreement shall
be
settled exclusively by arbitration in San Jose, California, in
accordance with the rules of the American Arbitration Association then
in effect. Judgment may be entered on the arbitrator's award in any
court having jurisdiction. Punitive damages shall not be awarded.
i) No Assignment of Benefits. The rights of any person to payments or
benefits under this Agreement shall not be made subject to option or
assignment, either by voluntary or involuntary assignment or by
operation of law, including (without limitation) bankruptcy,
garnishment, attachment or other creditor's process, and any action in
violation of this subsection (i) shall be void.
j) Employment Taxes. All payments made pursuant to this Agreement will be
subject to withholding of applicable income and employment taxes.
Counterparts. This Agreement may be executed in counterparts, each of which
shall be deemed an original but all of which together will constitute one and
the same instrument.
Essential Therapeutics, Inc.
___________________________
By:
Title:
Xxxxxxxxx X. Xxxxxxx
___________________________
