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XXXX THERAPEUTICS, INC.
SEVERANCE AND CHANGE OF CONTROL AGREEMENT
THIS SEVERANCE AND CHANGE OF CONTROL AGREEMENT dated as of 1/16 , 1998
(this "Agreement") is made and entered into by and between Xxxx Therapeutics,
Inc., a California corporation (the "Company'), and Xxxxxx X.
Xxxxx (the "Executive").
WHEREAS, Executive is employed by the Company; and
WHEREAS, the Company desires to retain the services of Executive in the
event of a Change of Control or Ownership Change (as hereinafter defined) of the
Company.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
1. Severance Pay Benefit. If Executive's employment with the Company is
either terminated by the Company or he incurs a Change in Duties at any time
within the period of twenty-four (24) months following a Change of Control or
Ownership Change (as hereinafter defined), and provided that Executive's
termination of employment is not for cause (as hereinafter defined) and
Executive has not been offered employment in a comparable position with the
Company within sixty (60) calendar days of his employment termination date, then
in such case:
(a) Executive will be entitled to receive severance pay in an amount
equal to two hundred percent (200%) of his aggregate compensation (consisting
of base salary and incentive bonus, if any) for the calendar year immediately
preceding the year during which such termination of employment by the Company or
Change in Duties occurred.
(b) For purposes of determining the amount of Executive's severance pay
benefit hereunder, Executive's aggregate compensation shall include any amounts
withheld therefrom pursuant to the Company's Section 401(k) and/or 125 plans.
Any severance pay benefits to which Executive may become entitled to under this
Agreement shall be in lieu of severance pay, if any, that would otherwise become
payable to Executive pursuant to any standard severance pay policy which the
Company may adopt.
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(c) A "Change in Duties", for purposes of this Agreement, means: (i) an
involuntary reduction in the nature or scope of Executive's authority, areas of
responsibility or the duties that Executive performs; (ii) any reduction in
Executive's annual regular salary; (iii) a reduction in Executive's total
compensation (i.e., annual regular salary and annual incentive compensation) to
less than ninety percent (90%) of the amount provided to Executive for the last
full calendar year immediately preceding the occurrence of a Change of Control
or Ownership Change; (iv) a change of more than fifty (50) miles in Executive's
principal place of employment (not including business travel or temporary
assignments); (v) a material change in the percentage of working time Executive
is required to spend in the Company's Southern California office; or (vi) a
determination by the Company that Executive is unable to exercise his authority
or perform his duties as a result of a Change of Control or Ownership Change. If
any of the events set forth above shall occur, Executive shall give prompt
written notice to the Company and shall have sixty (60) days from the date of
such notice or ninety (90) days from the event, whichever is earlier, to
exercise his rights to terminate for a Change in Duties or such right shall be
deemed waived as to such event but not as to any future event.
(d) A comparable position, for purposes of this Agreement, is one that
has job responsibilities and skill requirements that are substantially identical
to Executive's previous position and requires limited training to perform
competently, that is in the same geographic fifty (50) mile radius, and that is
at the same salary grade level and the same aggregate compensation range. In
general, for purposes of determining whether Executive has been offered a
comparable position with the Company, "Company" means Xxxx Therapeutics, Inc.,
any of its affiliated companies or any successor to the Company's business
and/or assets which become bound by this Agreement either (i) by virtue of its
agreement to assume this Agreement and perform it in the same manner and to the
same extent as the Company would be required to perform it in the absence of a
succession or (ii) by operation of law.
(e) Executive shall also be entitled to severance pay in the event of
his termination by mutual agreement. Termination by mutual agreement means any
termination jointly initiated by the Company and Executive or initiated by the
Company with the agreement of the Executive under circumstances that the
Company, in its sole discretion, believes do not justify a termination for
cause.
(f) Cause for termination of Employment shall include: theft of Company
property having a value in excess of $100; dishonest or fraudulent conduct in
his dealings with the Company or on behalf of the Company if such conduct might
have a Material Adverse Effect (as defined below) on the Company; willful
destruction of Company property having a value in excess of $100; performing any
illegal act
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related in any manner to his employment by and/or duties to the Company if such
conduct might have a Material Adverse Effect on the Company; conviction of any
felony or any act involving moral turpitude; unauthorized disclosure of any
Confidential Information; or the Employee's physical or mental incapacity to
perform the essential functions of his job with reasonable accommodation.
Cause for termination of Employment shall also include:
performing any act adverse to the interests of the Company if such conduct might
have a Material Adverse Effect on the Company; gross insubordination; willful
neglect of duty; the Employee's failure to follow the instructions of the Board;
any breach by the Employee of any of the Company's rules, policies or procedures
if such conduct might have a Material Adverse Effect on the Company; or any
material breach or threatened breach by the Employee of any term, provision, or
covenant of this Agreement.
For purposes hereof, Material Adverse Effect shall mean the
incurrence by the Company of any liability, the development of any contingent
liability or the diminution in value of any of the Company's assets, in an
amount which is determined in good faith by the Board of Directors to involve a
loss to the Company of $10,000 or more.
(g) For purposes of this Agreement, an *Ownership Change" shall be
deemed to have occurred in the event that any of the following occurs with
respect to the Company:
i) the direct or indirect sale or exchange by the shareholders
of the Company of at least twenty percent 20%) of the
outstanding shares of common stock of the Company;
ii) issuance by the Company of shares of its common stock which
results in any person owning 20% or more of the issued and
outstanding shares of the Company's common stock;
iii)a merger or consolidation of the Company in which the
Company is not the surviving corporation, except for a
transaction in which the principal purpose is to change the
state of the Company's incorporation or a transaction in which
the Company's shareholders immediately prior to such merger or
consolidation will hold (by virtue of securities received in
exchange for their shares of common stock of the Company)
securities of the surviving entity representing more than eighty
percent (80%) of the total voting power of such entity
immediately after such transaction;
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iv) the sale, exchange, or transfer of all or substantially all
of the assets of the Company (other than a sale, exchange, or
transfer to one (1) or more subsidiary corporations);
v) a liquidation or dissolution of the Company; or
vi) any other event, including without limitation the
acquisition by any person of less than 20% of the outstanding
shares of the Company, which the Board of Directors, in its sole
discretion, deems an ownership change.
(h) For purposes of this Agreement, a "Change of Control" shall mean a
change in the composition of the Company's Board of Directors as a result of
which at least one-third (1/3) of the members of the Board is replaced during
any twelve (12)-month period by directors whose appointment or election was not
endorsed by a majority of the members of the Board prior to the date of the
appointment or election.
2. Severance Agreement and Release. In order to be eligible for benefits
under this Agreement, Executive must execute a Severance Agreement and Release
which shall release the Company and its affiliates, directors and employees from
any and all legal actions, or other claims of any kind, including those arising
from his employment relationship with or his separation from the Company and/or
any of its affiliated companies.
3. Payment of Benefits. Once Executive's Severance Agreement and Release
becomes effective and enforceable, Executive shall receive his severance pay in
one lump sum cash payment, less applicable withholding taxes.
4. Death. If Executive dies before receiving any severance pay benefit
hereunder to which he became entitled prior to his death, such benefit shall be
distributed in one lump sum payment to Executive's spouse, or if no spouse, to
Executive's estate.
5. Offset. The Company reserves the right to offset Executive's
severance pay benefit by any advance, loan or other monies Executive owes the
Company.
6. Coordination With Plant Closing laws. Any amounts determined to be
payable by the Company to Executive or his dependents under the Worker
Adjustment and Retraining Notification Act of 1988 or under any other law
regarding termination of employment as a result of the elimination of job
positions
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shall offset and reduce any amounts otherwise payable under this Agreement to
Executive or to any third party for the benefit of Executive or his dependents.
7. Section 28OG Parachute Payment. In the event that the provision to
Executive of the severance pay benefit described in this Agreement will be
deemed, whether considered singularly or together with other compensation or
benefits to which Executive is otherwise entitled from the Company, to
constitute an "excess parachute payment" under Section 280G of the Internal
Revenue Code of 1986, as amended, the Company may reduce or eliminate such
payment to the extent necessary to avoid all taxes and penalties under that
Section, and Executive shall not be entitled to receive any additional or
different compensation or benefits as a result of such reduction or elimination.
In the sole discretion of the Company, the foregoing action shall be effected
without regard to whether all or a portion of such excess parachute payment
potentially constitutes reasonable compensation.
8. Employment Status. This Agreement does not constitute a contract of
employment or impose on Executive any obligation to remain as a employee, or
impose on the Company any obligation (i) to retain Executive as an employee,
(ii) to change the status of Executive as an at-will employee, or (iii) to
change the Company's policies regarding termination of employment.
9. Notices. Any notices provided hereunder must be in writing and such
notices or any other written communication shall be deemed effective upon the
earlier of personal delivery (including personal delivery by telex or facsimile)
or the third day after mailing by first class mail, to the Company at its
primary office location and to Executive at his address as listed in the
Company's payroll records. Any payments made by the Company to Executive under
the terms of this Agreement shall be delivered to Executive either in person or
at his address as listed in the Company's payroll records.
10. Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provisions had never been contained herein.
11. Waiver. If either party should waive any breach of any provisions of
this Agreement, such party shall not thereby be deemed to have waived any
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preceding or succeeding breach of the same or any other provision of this
Agreement.
12. Complete Agreement. This Agreement, including any other written
agreements expressly referred to in this Agreement, constitutes the entire
agreement between Executive and the Company and it is the complete, final, and
exclusive embodiment of their agreement with regard to this subject matter. It
is entered into without reliance on any promise or representation other than
those expressly contained herein.
13. Amendment or Termination of Agreement. This Agreement may be changed
or terminated only upon the mutual written consent of the Company and
Executive. The written consent of the Company to a change or termination of
this Agreement must be signed by an executive officer of the Company after such
change or termination has been approved by the Company's Board of Directors.
14. Counterparts. This Agreement may be executed in separate
counterparts, any one of which need not contain signatures of more than one
party, but all of which taken together will constitute one and the same
Agreement.
15. Headings. The headings of the Articles and Sections hereof are
inserted for convenience only and shall not be deemed to constitute a part
hereof nor to affect the meaning thereof.
16. Successors and Assigns. This Agreement is intended to bind and inure
to the benefit of and be enforceable by Executive and the Company, and their
respective successors, assigns, heirs, executors and administrators, except
that Executive may not assign any of his duties hereunder and he may not assign
any of his rights hereunder without the written consent of the Company, which
consent shall not be withheld unreasonably.
17. Arbitration. Any and all disputes or controversies, arising from or
regarding the interpretation, performance, enforcement or termination of this
Agreement shall be resolved by final and binding arbitration in accordance with
the Employment Dispute Rules of the American Arbitration Association ("AAA"),
and judgment upon the award rendered by the arbitrator may be entered in any
court having jurisdiction thereof. Executive and the Company shall each pay the
fees of his or its own attorneys, the expenses of his or its witnesses and all
other expenses connected with presenting his or its arbitration. All other
costs of the arbitration, including without limitation, the costs of any record
or transcript of the arbitration proceedings, administrative fees, the fee of
the arbitrator and all other fees and costs shall be borne equally by the
Company and Executive. Such
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arbitration will take place in Los Angeles County, California and shall be heard
by a single neutral arbitrator (to be appointed in accordance with the
procedures of the AAA).
18. Choice of Law. Except as to the arbitration provisions of this
Agreement which shall be construed under the Federal Arbitration Act, all
questions concerning the construction, validity and interpretation of this
Agreement will be governed by the laws of the State of California applicable to
contracts executed and to be performed solely in the State of California.
19. Opportunity for Independent Counsel and Advisors. Executive
acknowledges that he has had an opportunity to retain independent counsel and
tax advisors to review this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year written above.
EXECUTIVE XXXX THERAPEUTICS, INC.
/s/ XXXXXX X. XXXXX By: /s/ XXXXXXX X. XXXXX
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Xxxxxx X. Xxxxx 1-26-98 Chairman
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