EXHIBIT 10.23
EMPLOYMENT AGREEMENT
OF XXXXXXX X. XXXXXXXXX
This Employment Agreement (the "Agreement") is made and entered
into as of August 4, 1999, by and between Cypros Pharmaceutical Corporation,
a California corporation (the "Company"), and Xxxxxxx X. Xxxxxxxxx
("Executive").
RECITALS
A. Executive has heretofore been employed as President and
Chief Executive Officer of RiboGene, Inc., a Delaware corporation
("RiboGene"), and has served as the Chairman of the Board of Directors of
RiboGene.
B. The Company, Cypros Acquisition Corporation and RiboGene
have entered into the Agreement and Plan of Reorganization dated as of August
4, 1999 (the "Merger Agreement"), which provides that Cypros Acquisition
Corporation will merge with and into RiboGene, on the terms and subject to
certain conditions (the "Merger").
C. RiboGene and Executive are parties to the Letter
Agreement, dated May 11, 1993, pursuant to which Executive has been employed
by RiboGene (the "Prior Employment Agreement").
D. RiboGene and Executive are also parties to the Change of
Control Agreement dated as of July 20, 1995, pursuant to which Executive is
entitled to certain benefits upon termination of employment (the "Prior
Change of Control Agreement").
E. RiboGene and Executive are also parties to the Stock
Option Agreements listed on Exhibit A hereto (the "Prior Stock Option
Agreements") and the Restricted Stock Agreement dated as of December 21,
1998, as amended as of July 30, 1999 (the "Prior Restricted Stock Agreement").
F. The Company desires to retain the services of the
Executive, and Executive desires to be employed by the Company, effective as
of the Merger, on the terms and subject to the conditions set forth in this
Agreement.
G. This Agreement will supercede the Prior Employment
Agreement and the Prior Change of Control Agreement, and such Agreements
shall terminate effective on the Merger.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, and with reference to the above recitals, the
parties hereby agree as follows:
ARTICLE 1.
EFFECTIVE DATE;
TERM OF EMPLOYMENT AND
PRIOR AGREEMENTS
1.1 MERGER EFFECTIVE TIME. This Agreement shall become effective as
of the "Effective Time" (as defined in the Merger Agreement), and the date
during which the "Effective Time" occurs shall be referred to herein as the
"Effective Date." In the event that the Merger does not occur, this Agreement
shall not become effective and shall be null and void.
1.2 TERM OF EMPLOYMENT. Subject to extension in accordance with
Section 1.3, the term of this Agreement shall commence on the Effective Date
and shall continue until December 31, 2001 (the "Initial Term"), unless
terminated earlier in accordance with Article 6 of this Agreement. On the
last day of the Term (as defined below), Executive shall immediately resign
from all positions with the Company.
1.3 EXTENSION OF TERM. The term of this Agreement shall be
automatically extended by one year on December 31, 2001 (and each anniversary
thereof), unless either party elects not to so extend the term of the
Agreement. A party shall elect not to extend the term of this Agreement by
notifying the other party, in writing, of such election not less than six
months prior to the last day of the term of the Agreement then in effect. Any
extension shall become effective immediately following six months prior to
the last day of the term of the Agreement then in effect. For purposes of
this Agreement, the "Term" shall mean the period commencing on the Effective
Date and ending on the last day of the Initial Term (or the term of this
Agreement, as extended in accordance with this Section 1.3).
1.4 TERMINATION OF PRIOR AGREEMENTS.
(a) Effective as of the "Effective Time" (as defined in the
Merger Agreement), the Prior Employment Agreement and Executive's employment
by RiboGene thereunder shall terminate. Except as otherwise provided in this
Agreement, such termination shall not affect Executive's rights to
compensation, benefits and expense reimbursements under the Prior Employment
Agreement relating to the period prior to the Effective Time. As provided in
Sections 3.4 and 3.5, the Prior Stock Options and the Prior Restricted Stock
shall not become fully vested upon the Merger pursuant to Section 3(c) of the
Prior Employment Agreement, and Executive shall not receive salary
continuation benefits under Section 6 of the Prior Employment Agreement.
Effective as of the "Effective Time" (as defined in the Merger Agreement),
Executive shall hereby waive any and all rights under the Prior Employment
Agreement relating to the period on or after the "Effective Time" (including,
without limitation, any right to full vesting of the Prior Stock Options or
the Prior Restricted Stock as a result of the Merger and any right to salary
continuation benefits under Section 6 of the Prior Employment Agreement).
(b) Effective as of the Effective Time, the Prior Change in
Control Agreement shall terminate, and Executive shall waive any and all
rights under such Agreement.
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ARTICLE 2.
EMPLOYMENT, DUTIES AND DIRECTORSHIP
2.1 EMPLOYMENT. During the Term, the Company shall employ
Executive, and Executive shall accept employment with the Company, upon the
terms and subject to the conditions set forth in this Agreement.
2.2 POSITION. During the Term, Executive shall serve as President
and Chief Executive Officer of the Company, and shall hold such other
position or positions as the parties mutually agree in writing. Executive
shall report directly to the Board of Directors of the Company (the "Board").
As President and Chief Executive Officer, Executive shall have overall
responsibility for directing the Company toward the achievement of its
business objectives as developed by the Board. Upon the termination of
Executive's employment hereunder in accordance with Section 6, Executive
shall immediately resign as President and Chief Executive Officer of the
Company (and from all other positions with the Company).
2.3 DUTIES. During the Term, Executive shall devote his full
business time, attention and energies to the business of the Company and use
his best efforts to promote the interest of the Company. Executive shall
perform such duties, services and responsibilities incident to the
Executive's positions which are reasonably consistent with such positions and
shall act in accordance with the policies and directives of the Company as
determined from time to time.
2.4 PRINCIPAL LOCATION. The principal location at which Executive's
services are to be performed shall be at the Company's principal offices.
2.5 DIRECTORSHIP; TERMINATION OF DIRECTORSHIP.
(a) During the Term, Executive shall serve as Chairman of
the board, subject to election and reelection by the Company's shareholders
in accordance with the Company's Articles of Incorporation and Bylaws.
Executive shall devote such time to the business of the Company as is
necessary for the fulfillment of Executive's duties as Chairman of the Board.
During the Term, Executive shall not be paid a fee for serving as Chairman of
the Board or as a Director. The Company shall reimburse Executive for
reasonable expenses incurred in connection with his service as Chairman of
the Board and a member of the Board.
(b) During the Term, the Company shall nominate Executive as
a member of the Board, shall recommend that Executive be appointed, elected
or reelected as a member of the Board, and shall include Executive on the
management slate of Board member candidates recommended for election to the
Company's shareholders for each annual meeting of the Company's shareholders
held during the Term and at which Board members are elected.
(c) On the last day of the Term (or upon the termination of
Executive's employment hereunder in accordance with Article 6), Executive
shall immediately resign as Chairman of the Board and as a member of the
Board.
2.6 OTHER ACTIVITIES. Subject to Article 9, Executive may engage in
other activities and invest his personal assets in other businesses or
ventures to the extent that such other
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activities, businesses or ventures to not materially interfere with the
performance of his duties under this Agreement.
ARTICLE 3.
SALARY, BONUS AND STOCK OPTIONS
3.1 BASE SALARY. During the Term, the Company shall pay Executive a
base salary ("Base Salary") at an annual rate of not less than $341,250 prior
to January 1, 2000, and at an annual rate of not less than $375,000
thereafter, subject to increase as provided in this Section 3.1. Such annual
rate shall be reviewed by the Board at least annually and may be increased
(but not reduced) by the Board in such amounts as the Board deems appropriate
in its sole discretion.
3.2 ANNUAL BONUS. The Company shall provide Executive with the
opportunity to receive an annual bonus ("Bonus") for each fiscal year of the
Company, ending during the Term. The annual bonus opportunity (the "Bonus
Opportunity") shall be 50% of the Executive's annual rate of base salary, and
the Board shall determine the terms and conditions under which Executive
shall receive all or a portion of the Bonus Opportunity for each fiscal year
of the Company after consultation with Executive. To the extent that
Executive is entitled to receive all or a portion of the Bonus Opportunity
with respect to a fiscal year of the Company, such payment shall be made
within 60 days following the end of such fiscal year.
3.3 NEW OPTIONS.
(a) NEW FOUR YEAR OPTION. Effective as of the Effective
Date, the Company shall grant to Executive an option (the "New Four Year
Option") representing the right to purchase 403,549 shares of Common Stock,
no par value, of the Company ("Company Common Stock"). The New Four Year
Option shall be exercisable at an exercise price equal to the closing price
of the Company Common Stock on the Effective Date. The New Four Year Option
shall vest and become exercisable over a period of four (4) years commencing
on the date of grant, on a cumulative basis, at the rate of one quarter (1/4)
of the number of shares of Company Common Stock subject to the New Four Year
Option on the first anniversary of the date of grant and one forty-eighth
(1/48) of the number of shares of Company Common Stock subject to such New
Four Year Option on the last day of each calendar month following such date.
(b) NEW PERFORMANCE OPTION. Effective as of the Effective
Date, the Company shall also grant to Executive an option (the "New
Performance Option") representing the right to purchase 665,000 shares of
Company Common Stock. The New Performance Option shall be exercisable at an
exercise price equal to the closing price of the Company Common Stock on the
Effective Date. The New Performance Option shall become fully vested and
exercisable on the eighth anniversary of the date of grant, and shall vest
and become exercisable prior to such date upon the achievement of objective
performance targets to be determined in accordance with this Section 3.3(b).
As soon as reasonably practicable following the Effective Date, Executive
shall propose to the Board objective performance targets, the achievement of
which shall result in the vesting of the New Performance Option. The Board
and Executive shall each negotiate in good faith and use their reasonable
best efforts to mutually agree to the terms and conditions of the objective
performance targets to be achieved, and the portions of the New Performance
Option to be vested upon the achievement of such objective performance
targets.
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The Board and Executive shall enter into such agreement not later than
December 31, 1999 (or, if later, forty-five (45) days following the Effective
Date), and such agreement shall provide that the objective performance
targets are to be achieved during the period ending two (2) years from the
date of such agreement.
(c) Subject to Article 7, the New Four Year Option and the
New Performance Option (collectively, the "New Options") shall contain such
other terms and conditions as the Company and Executive shall mutually
determine. The Company shall reserve for issuance the shares of Company
Common Stock subject to the New Options and shall prepare and file with the
Securities and Exchange Commission a registration statement on Form S-8 (or
other appropriate form) registering the number of Company Common Stock
subject to the New Options. The Company shall take such actions as are
necessary to maintain the effectiveness of such registration statement during
the term of the New Options.
3.4 ASSUMPTION OF PRIOR STOCK OPTIONS.
(a) Executive holds certain options (the "Prior Stock
Options") to purchase shares of Common Stock, $0.01 par value, of RiboGene
("RiboGene Common Stock"), granted to Executive under the RiboGene, Inc. 1993
Stock Plan and the RiboGene, Inc. 1997 Equity Incentive Plan (the "RiboGene
Plans"). The Prior Stock Options were granted pursuant to the Prior Stock
Option Agreements listed in Exhibit A. The Company shall assume the Prior
Stock Options in accordance with the Merger Agreement and, upon such
assumption, the Prior Stock Options shall be converted into options to
purchase shares of Company Common Stock, subject to the vesting and
exercisability provisions and other terms and conditions specified by the
applicable RiboGene Plan, the applicable Prior Stock Option Agreement and
this Agreement.
(b) Executive shall hereby waive any right under the Prior
Employment Agreement, the RiboGene Plans and the applicable Prior Stock
Option Agreements to the full vesting of the Prior Stock Options as a result
of the Merger.
(c) The Company shall reserve for issuance the shares of
Company Common Stock subject to the Prior Stock Options and shall prepare and
file with the Securities and Exchange Commission a registration statement on
Form S-8 (or other appropriate form) registering the number of shares of
Company Common Stock subject to the Prior Stock Options. The Company shall
take such actions as are necessary to maintain the effectiveness of such
registration statement during the term of the Prior Stock Options.
3.5 SUBSTITUTION OF RESTRICTED STOCK.
(a) Executive holds shares of RiboGene Common Stock (the
"Prior Restricted Stock") subject to certain restrictions, awarded to
Executive under the RiboGene, Inc. 1997 Equity Incentive Plan. The Prior
Restricted Stock was granted pursuant to the Prior Restricted Stock
Agreement. The Company shall issue shares of Company Common Stock to
Executive in substitution for the Prior Restricted Stock in accordance with
the Merger Agreement and, upon such issuance, the Prior Restricted Stock
shall be surrendered for cancellation. Such shares of Company Common Stock
shall be subject to the restrictions, vesting and reacquisition provisions
and the other terms and conditions specified by the RiboGene, Inc. 1997
Equity Incentive Plan, the Prior Restricted Stock Agreement and this
Agreement.
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(b) Executive shall hereby waive any right under the Prior
Employment Agreement, the RiboGene, Inc. 1997 Equity Incentive Plan and the
Prior Restricted Stock Agreement to the full vesting of the Prior Restricted
Stock as a result of the Merger.
3.6 WITHHOLDING. The Company shall deduct or withhold from the
compensation and benefits payable to Executive hereunder any and all sums
required for federal income and employment taxes and all state or local
income taxes now applicable or that may be enacted and become applicable
during the Term.
ARTICLE 4.
EMPLOYEE BENEFITS
4.1 EMPLOYEE BENEFITS. During the Term, the Company shall provide
Executive with the following benefits.
(a) BENEFIT PLANS. Executive shall be entitled to all ordinary
and customary perquisites afforded to executive employees of the Company, at
the Company's sole expense (except to the extent employee contributions may
be required under the Company's benefit plans as they may now or hereafter
exist), which shall in no event be less than the benefits afforded to
Executive on the date hereof and the other executive employees of the Company
as of the date hereof or from time to time, but in any event shall include
any qualified or non-qualified pension, profit sharing and savings plans, any
death benefit and disability benefit plans, life insurance coverages, any
medical, dental, health and welfare plans or insurance coverages and any
stock purchase programs that are approved by the Board on terms and
conditions at least as favorable as provided to Executive on the date hereof
and other senior executives of the Company as of the date hereof or from time
to time.
(b) MEDICAL EXPENSE REIMBURSEMENT. During the Term, the
Company shall provide health insurance benefits coverage under the Company's
health insurance plan for the benefit of the Executive and shall reimburse
the Executive for any medical expenses which are not covered pursuant to that
health insurance plan (but in no event shall the Company reimburse more than
$50,000 in medical expenses each calendar year). The Company shall pay
additional compensation to Executive in an amount necessary to reimburse
Executive, on an after-tax basis, for the additional income and employment
taxes incurred by Executive as a result of the uninsured health expenses
reimbursed by the Company.
(c) TERM LIFE INSURANCE. The Company shall pay the premiums
for a $1,000,000 term life insurance policy, the beneficiary or beneficiaries
of which shall be named by Executive. Such premiums shall be considered
compensation for federal income tax purposes and will be subject to income
tax withholding.
(d) DISABILITY INSURANCE. The Company shall pay or reimburse
Executive for premiums for long-term disability insurance that will provide
disability benefits in an amount not less than 80% of Executive's Base
Salary. Such insurance benefits shall be under such terms and conditions as
are mutually determined by the Company and Executive. Premium payments made
by the Company will be reported as compensation for federal income tax
purposes and will be subject to income tax withholding. The Company shall pay
additional compensation to
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Executive in an amount necessary to reimburse Executive, on an after-tax
basis, for the additional income and employment taxes incurred by Executive as a
result of the premium payments reimbursed by the Company.
4.2 VACATION. During the Term, Executive shall be entitled to four
weeks of paid vacation for each year of his employment hereunder, which, to
the extent unused in any given year, may be carried over in accordance with
the policies of the Company then in effect.
4.3 RELOCATION EXPENSES. The Company shall reimburse reasonable,
out-of-pocket expenses incurred by Executive in connection with any
relocation of Executive's principal place of employment, including legal
expenses, expenses incurred in connection with the sale of Executive's home
(such as brokerage fees and closing costs), expenses incurred by Executive in
purchasing a home (such as loan fees), travel expenses from San Francisco,
California to the principal offices of the Company for Executive and
Executive's wife (a maximum of three trips each, coach class) and moving
expenses. The Company shall pay additional compensation to Executive in an
amount necessary to reimburse Executive, on an after-tax basis, for the
additional income and employment taxes incurred by Executive as a result of
the reimbursement of such expenses.
4.4 TEMPORARY LIVING EXPENSES. For a six month period during the
Term, the Company shall pay the Executive up to $2,000 per month for
Executive's reasonable, out-of-pocket, temporary living expenses incurred by
Executive in connection with any relocation of Executive's principal place of
employment. The Company shall pay additional compensation to Executive in an
amount necessary to reimburse Executive, on an after-tax basis, for the
additional income and employment taxes incurred by Executive as a result of
the reimbursement of such expenses.
4.5 MORTGAGE ASSISTANCE LOAN. During the Term, in the event that
Executive is unable to sell his home in the San Francisco, California area
promptly following any relocation of Executive's principal place of
employment, the Company shall make available a bridge loan in an amount not
to exceed $900,000 to provide a down payment on a new home for Executive.
Such loan shall be due and payable on the earlier of six months following the
date of the loan, and 30 days following the sale of Executive's home in the
San Francisco, California area. The loan shall bear interest at the lowest
rate allowed by applicable law without imputing taxable income to Executive,
and such interest shall be due and payable on the maturity of the loan. The
loan shall have such other terms and conditions as the Company and Executive
mutually determine.
ARTICLE 5.
BUSINESS EXPENSES
5.1 BUSINESS EXPENSES. The Company shall pay or reimburse the
Executive for all reasonable and authorized business expenses incurred by the
Executive during the Term.
5.2 BUSINESS TRAVEL. The Company shall reimburse Executive for
expenses incurred for business-related travel. Notwithstanding the above, the
Company shall not pay or reimburse
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Executive for the costs of any business-related travel to the extent such
costs exceed the cost of business class.
5.3 DOCUMENTATION. As a condition to reimbursement under this
Article 5, Executive shall furnish to the Company adequate records and other
documentary evidence required by federal and state statutes and regulations
for the substantiation of each expenditure. Executive acknowledges and agrees
that failure to furnish the required documentation may result in the Company
denying all or part of the expense for which reimbursement is sought.
ARTICLE 6.
TERMINATION OF EMPLOYMENT
6.1 TERMINATION OF EMPLOYMENT. Notwithstanding the provisions of
Article 1, either the Company or Executive may terminate Executive's
employment hereunder during the Term upon, and only upon, the following terms
and conditions:
(a) INVOLUNTARY TERMINATION BY THE COMPANY FOR CAUSE. The
Company may terminate Executive's employment hereunder for "Cause" upon
fifteen (15) days' written notice to Executive. In such event, the Company
shall pay to Executive: (i) his Base Salary through the date of Executive's
termination of employment, and (ii) expenses incurred by Executive prior to
such termination of employment reimbursable under Article 5.
(b) TERMINATION UPON DISABILITY. The Company may terminate
Executive's employment hereunder in the event of Executive's "Disability"
upon sixty (60) days' written notice to Executive. In such event, the Company
shall pay to Executive: (i) his Base Salary until Executive begins to receive
benefits under the long term disability insurance provided under Section
4.1(b), but in no event following twelve (12) months after the date of
Executive's termination of employment, and (ii) expenses incurred by
Executive prior to such termination of employment reimbursable under Article
5. Such Base Salary shall be paid at the annual rate of his Base Salary in
effect on the date of Executive's termination of employment and shall be
payable not less frequently than semi-monthly in accordance with the
Company's executive compensation practices. For purposes of this subparagraph
(b), Executive's "Disability" shall mean a good faith determination by the
Board (acting without participation by Executive), based on competent and
independent medical evidence, that Executive, as a result of a mental or
physical disease or condition expected to continue indefinitely, is incapable
of performing a substantial portion of the services contemplated in this
Agreement.
(c) TERMINATION UPON DEATH. Executive's employment hereunder
shall terminate upon Executive's death. In such event, the Company shall pay
to Executive's estate: (i) his Base Salary until the earlier of twelve (12)
months after the date of Executive's death and the Expiration Date, and (ii)
expenses incurred by Executive reimbursable under Article 5.
(d) INVOLUNTARY TERMINATION OTHER THAN FOR CAUSE. The
Company may terminate Executive's employment hereunder other than for "Cause"
upon ninety (90) days' written notice to Executive. In such event, the
Company shall pay to Executive: (i) his Base Salary until eighteen (18)
months after the date of Executive's termination of employment, and (ii)
expenses incurred by Executive prior to such termination of employment
reimbursable under
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Article 5. Such Base Salary shall be paid at the annual rate of Executive's
Base Salary in effect on the date of Executive's termination and shall be
payable not less frequently than semi-monthly in accordance with the
Company's executive compensation practices. In addition, the Company shall
pay to Executive a prorated bonus in an amount equal to Executive's Bonus
Opportunity for the fiscal year of the Company in which such termination of
employment occurs, multiplied by a fraction, the numerator of which is the
number of days during such fiscal year ending prior to such termination of
employment, and the denominator of which is 365. Such prorated bonus shall be
paid not later than 10 days following such termination of employment. In
addition, each of the Prior Stock Options (as assumed and converted as
provided in Section 3.4) held by Executive shall become immediately vested on
the date of Executive's termination of employment and shall be exercisable in
full in accordance with the provisions of the plan and option agreement
pursuant to which such option was granted, and the Prior Restricted Stock (as
substituted as provided in Section 3.5) held by Executive shall become fully
vested, nonforfeitable and no longer subject to reacquisition or repurchase
by the Company or other restrictions on the date of Executive's termination
of employment. Finally, the New Options shall become vested and exercisable
during the eighteen (18) month period following Executive's termination of
employment with respect to the portions thereof that would have otherwise
become vested and exercisable in accordance with the terms thereof had
Executive continued in employment with the Company during such period.
(e) VOLUNTARY TERMINATION FOR GOOD REASON. Executive may
terminate Executive's employment hereunder for "Good Reason" upon sixty (60)
days' written notice to the Company. In such event, the Company shall pay to
Executive: (i) his Base Salary until eighteen (18) months following such
termination of employment, and (ii) expenses incurred by Executive prior to
such termination of employment reimbursable under Article 5. Such Base Salary
shall be paid at the annual rate of Executive's base salary in effect on the
date of Executive's termination and shall be payable not less frequently than
semi-monthly in accordance with the Company's executive compensation
practices. In addition, the Company shall pay to Executive a prorated bonus
in an amount equal to Executive's Bonus Opportunity for the fiscal year of
the Company in which such termination of employment occurs, multiplied by a
fraction, the numerator of which is the number of days during such fiscal
year ending prior to such termination of employment, and the denominator of
which is 365. Such prorated bonus shall be paid not later than 10 days
following such termination of employment. In addition, each of the Prior
Stock Options (as assumed and converted as provided in Section 3.4) held by
Executive shall become immediately vested on the date of Executive's
termination of employment and shall be exercisable in full in accordance with
the provisions of the plan and option agreement pursuant to which such option
was granted, and the Prior Restricted Stock (as substituted as provided in
Section 3.5) held by Executive shall become fully vested, nonforfeitable and
no longer subject to reacquisition or repurchase by the Company or other
restrictions on the date of Executive's termination of employment. Finally,
the New Options shall become vested and exercisable during the eighteen (18)
month period following Executive's termination of employment with respect to
the portions thereof that would have otherwise become vested and exercisable
in accordance with the terms thereof had Executive continued in employment
with the Company during such period.
(f) VOLUNTARY TERMINATION OTHER THAN FOR GOOD REASON.
Executive may terminate Executive's employment hereunder other than for "Good
Reason" upon sixty (60) days' written notice to the Company. In such event,
the Company shall pay to Executive: (i) his
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Base Salary through the date of Executive's termination of employment, and
(ii) expenses incurred by Executive prior to such termination of employment
reimbursable under Article 5. The Company shall have no further obligation to
pay Executive any Base Salary, Bonus or other compensation or benefits under
this Agreement.
6.2 TERMINATION OF OBLIGATIONS. In the event of the termination of
Executive's employment hereunder pursuant to this Article 6, the Company
shall have no obligation to pay Executive any Base Salary, Bonus or other
compensation or benefits, except as provided in this Article 6 or for
benefits due to Executive (and his dependents) under the terms of the
Company's employee benefit plans.
ARTICLE 7.
CHANGE IN CONTROL
7.1 TERMINATION FOLLOWING A CHANGE OF CONTROL.
(a) Subject to Section 7.3 below, if Executive's employment
with the Company is terminated by the Company (other than for "Cause" or
"Disability" or upon Executive's death) at any time within sixty (60) days
before, or within twelve (12) months after, a Change of Control, or is
terminated by Executive within six (6) months after a Change of Control,
Executive shall be entitled to receive a severance benefit, in a lump sum
payment, in an amount equal to eighteen (18) months of Base Salary at the
annual rate in effect immediately prior to the Change of Control (or, if
greater, the annual rate in effect on the date of termination). In addition,
the Company shall pay to Executive a prorated bonus in an amount equal to
Executive's Bonus Opportunity for the fiscal year of the Company in which
such termination of employment occurs, multiplied by a fraction, the
numerator of which is the number of days during such fiscal year ending prior
to such termination of employment, and the denominator of which is 365. Such
payments shall be paid not later than 10 days following such termination of
employment.
(b) In the event Executive is entitled to a severance
benefit pursuant to Section 7.1(a), then in addition to such severance
benefit, Executive shall receive 100% Company-paid health insurance coverage
as provided to such Executive (and his dependents, if applicable) immediately
prior to Executive's termination of employment (the "Company-Paid Coverage").
Company-Paid Coverage shall continue for eighteen (18) months following
termination of employment or until Executive becomes covered under another
employer's group health insurance plan, whichever occurs first. In addition,
for 18 months following the termination of the Company-Paid Coverage, the
Company shall provide Executive (and his dependents, if applicable) with the
health insurance coverage provided immediately prior to Executive's
termination of employment, at Executive's election and expense.
(c) In the event Executive is entitled to severance benefits
pursuant to Section 7.1(a), each of the Prior Stock Options (as assumed and
converted as provided in Section 3.4), the New Options and each other stock
option exercisable for shares of Company Common Stock held by Executive shall
become immediately vested on the date of Executive's termination of
employment and shall be exercisable in full in accordance with the provisions
of the plan and option agreement pursuant to which such option was granted.
Executive shall have the right to
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request an extension of the exercise period of each such stock option for a
period of one (1) year following the later of the end of the severance period
or the expiration of a lock-up agreement imposed on the Company's optionees
at the time of Executive's termination of employment. In addition, the Prior
Restricted Stock (as substituted as provided in Section 3.5) and each other
share of the Company's Common Stock held by Executive that is subject to a
forfeiture, reacquisition or repurchase option held by the Company shall
become fully vested, nonforfeitable and no longer subject to reacquisition or
repurchase by the Company or other restrictions on the date of Executive's
termination of employment.
(d) In the event Executive is entitled to severance benefits
pursuant to Section 7.1(a), any and all outstanding loans shall be forgiven
in their entirety. Any and all security for such loans shall also be rendered
free and clear on any claims, liens, or encumbrances. This provision shall
apply to all loans with Executive in existence as of the effective date of
this agreement and any future loans unless forgiveness of such future loans
under the conditions contained herein are expressly prohibited by the terms
and conditions of such future loans.
(e) Any payments and benefits under this Section 7.1 shall
be in lieu of any payments and benefits under Article 6. In the event
Executive is entitled to payments and benefits under this Article 7.1, the
Company shall have no further obligation to pay Executive any Base Salary,
Bonus or other compensation or benefits under this Agreement, except for
benefits due to Executive (or his dependents) under the terms of the
Company's employee benefit plans.
7.2 DEFINITION OF TERMS. The following terms referred to in
Articles 6 and 7 shall have the following meanings:
(a) CHANGE OF CONTROL. "Change of Control" shall mean the
occurrence of any of the following events (other than the Merger) that occur
following the Effective Date:
(i) OWNERSHIP. Any "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under said Act), directly or indirectly, of securities of the Company
representing fifty percent (50%) or more of the total voting power
represented by the Company's then outstanding voting securities; or
(ii) MERGER OR SALE OF ASSETS. A merger or consolidation
of the Company whether or not approved by the Board, other than a merger
or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least fifty percent (50%) of the
total voting power represented by the voting securities of the Company
or such surviving entity outstanding immediately after such merger or
consolidation, or the shareholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's
assets; or
(iii) CHANGE IN BOARD COMPOSITION. A change in the
composition of the Board, as a result of which fewer than a majority of
the directors are Incumbent
11
Directors. "Incumbent Directors" shall mean directors who either (A) are
directors of the Company as of the Effective Date, or (B) are elected,
or nominated for election, to the Board with the affirmative votes of at
least a majority of the Incumbent Directors at the time of such election
or nomination (but shall not include an individual whose election or
nomination is in connection with an actual or threatened proxy contest
relating to the election of directors to the Company).
(b) CAUSE. "Cause" shall mean: (i) a material and willful
breach of any material term of this Agreement by Executive, (ii) willful
conduct by Executive that is materially injurious to the Company (or any
affiliate or successor thereto, whether financially or otherwise), or (iii)
Executive's conviction of a felony or a misdemeanor involving moral turpitude.
(c) GOOD REASON. "Good Reason" shall mean: (i) a material
diminution in Executive's position, power or duties relative to Executive's
position, power and duties in effect at any time during the Term, (ii) a
material breach of the Agreement by the Company; (iii) the relocation of the
Company's principal offices to a location to a location more than 50 miles
from the location of the Company's principal offices; or (iv) the failure of
Executive to be nominated as a Director, or the failure of Executive to be
elected as a Board member or as Chairman (other than as a result of
Executive's failure to stand for election), or the removal of Executive as
Chairman or as a Board member. During the period of notice set forth above,
the Company shall be afforded reasonable opportunity to establish, to the
reasonable satisfaction of Executive, that the "Good Reason" circumstances
referred to in Executive's notice were not present on the date of such
notice, or are no longer present, in which case Executive's employment and
service as Chairman hereunder shall not terminate under this subparagraph (c).
(d) DISABILITY. "Disability" shall mean that Executive has
been unable to perform his duties under this Agreement as the result of his
or her incapacity due to physical or mental illness, and such inability, at
least 26 weeks after its commencement, is determined to be total and
permanent by a physician selected by the Company or its insurer and
acceptable to Executive or Executive's legal representatives (such agreement
as to acceptability not to be unreasonably withheld).
7.3 LIMITATION OF PAYMENTS. To the extent that any of the payments
or benefits provided for in this Agreement or otherwise payable to Executive
constitute "parachute payments" within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code"), and, but for this
Section 7.3, would be subject to the excise tax imposed by Section 4999 of
the Code, the Company shall reduce the aggregate amount of such payments and
benefits such that the present value thereof (as determined under the Code
and the applicable regulations) is equal to 2.99 times Executive's "base
amount" as defined in Section 280G(b)(3) of the Code if, and only if, as a
result of such reduction, Executive would realize a greater amount from such
payments and benefits, after the payment of income, excise and other taxes
with respect to such payments and benefits.
12
ARTICLE 8.
NO MITIGATION OR OFFSET; INSURANCE
8.1 NO MITIGATION OR OFFSET. The Executive shall not be required to
seek other employment or to reduce any severance benefit payable to him under
Article 6 or 7 hereof, and no severance benefit shall be reduced on account of
any compensation received by the Executive from other employment. The Company's
obligation to pay severance benefits under this Agreement shall not be reduced
by any amount owed by the Executive to the Company.
8.2 INDEMNIFICATION; INSURANCE.
(a) If the Executive is a party or is threatened to be made a
party to any threatened, pending or completed claim, action, suit or proceeding,
or appeal therefrom, whether civil, criminal, administrative, investigative or
otherwise, because he is or was an officer of the Company, or at the express
request of the Company is or was serving, for purposes reasonably understood by
him to be for the Company, as a director, officer, partner, employee, agent or
trustee (or in any other capacity of an association, corporation, general or
limited partnership, joint venture, trust or other entity), the Company shall
indemnify the Executive against any reasonable expenses (including attorneys'
fees and disbursements), and any judgments, fines and amounts paid in settlement
incurred by him in connection with such claim, action, suit, proceeding or
appeal therefrom to the extent such expenses, judgments, fines and amounts paid
in settlement were not advanced by the Company on his behalf pursuant to Section
8.2(b) below, to the fullest extent permitted under California law. The Company
shall provide the Executive with directors and officers liability insurance
coverage at least as favorable to the Executive as what the Company maintains as
of the date hereof or such greater coverage as the Company may maintain from
time to time.
(b) Upon the written request of the Executive specifying the
amount of a request advance and the intended use thereof, the Company shall
indemnify the Executive for his expenses (including attorneys' fees and
disbursements), judgments, fines and amounts paid in settlement incurred by him
in connection with such claim, action, suit, proceeding or appeal whether civil,
criminal, administrative, investigative or otherwise, in advance of the final
disposition of any such claim, action, suit, proceeding or appeal therefrom to
the fullest extent permitted under California law.
ARTICLE 9.
RESTRICTIVE COVENANTS
9.1 CONFIDENTIAL INFORMATION. In the course of his employment
hereunder, Executive may have access to confidential records, data, formulae,
customer lists, trade secrets, specifications, inventions and processes owned by
the Company. During the Term and thereafter, Executive shall not, directly or
indirectly, disclose such information to any person or use any such information,
except as required in the performance of Executive's duties hereunder. All
records, files, keys, drawings, documents, models, equipment and the like
relating to the Company's business, which Executive shall prepare, copy or use,
or with which Executive comes into contact, shall be and remain the Company's
sole property, shall not be removed from
13
the Company's premises (except as necessary for the performance of the
Executive's duties) and shall be returned to the Company upon the expiration or
termination of the Term of Employment.
9.2 NON-COMPETITION AND NON-DISCLOSURE COVENANTS.
(a) COVENANT NOT TO COMPETE. Executive shall not, at any time
during the Term and the period during which payments are made by the Company to
Executive following the end of the Term in accordance with Article 6 or 7 (the
"Non-Compete Period");
(i) Either directly or indirectly, or solely or jointly
with other persons or entities, own, manage, operate, join, control,
consult with, render services for or participate in the ownership,
management, operation or control of, or be connected as an officer,
director, employee, partner, principal, agent, consultant or other
representative with, or permit his name to be used in connection with,
any profit or non-profit business, organization or entity (other than the
Company and its affiliates) which operates or engages in or owns an
interest in a "Competing Business;"
(ii) Lend any credit or money for the purposes of
establishing or operating any Competing Business, or otherwise give aid
or advice to any person, firm, association, corporation or entity
engaging in any Competing Business; or
(iii) Solicit, contact, divert or take away or attempt to
solicit, divert or take away any of the customers, potential customers,
business or patrons of the Company and its affiliates (or any of their
respective successors and assigns), directly or indirectly, by or for
himself, or as the agent of any other person or entity, or through others
as an agent or on behalf of a competitor of the Company.
Notwithstanding the foregoing, Executive may own publicly traded
securities issued by a Competing Business, provided that Executive shall not own
more than one percent (1%) of the value of any class of such securities
outstanding at such time.
A "Competing Business" as used in the Agreement shall refer to any
person or entity engaged in any of the businesses in which the Company or any of
its affiliates (or any of their respective successors and assigns) are engaged.
The restrictions contained in clauses (i) through (iii) above shall apply only
to Executive's actions within the cities, counties, states of the United States
and other countries where the Company and its affiliates do business during the
Non-Compete Period. The Company and Executive acknowledge and agree that the
duration, scope and geographic area for which this covenant is to be effective
are reasonable.
(b) SOLICITATION OF EMPLOYEES. Executive shall not, at any time
during the Non-Compete Period, directly or indirectly, by or for himself, or as
the agent of any other person or entity, or through others as an agent, in any
way solicit or induce, or attempt to solicit or induce, any employee, officer,
representative, consultant, or other agent of the Company or its affiliates,
whether such person is presently employed with the Company or an affiliate or
may hereinafter be so employed, to leave the Company's employ or the employ of a
the Company affiliate or otherwise interfere with the employment relationship
between any such person and the Company and its affiliates.
14
(c) DISCLOSURE OF PROPRIETARY INFORMATION.
(i) In the course of Executive's employment with the
Company, Executive may have access to confidential records, data,
formulae, customer lists, trade secrets, specifications, inventions and
processes owned by the Company and its affiliates. During Executive's
employment with the Company and thereafter, Executive shall maintain in
strict confidence and shall not, directly or indirectly, use,
disseminate, disclose or publish, or use for his benefit or the benefit
of any person, firm, corporation or other entity, any confidential or
proprietary information or trade secrets of or relating to the Company
and its affiliates (or which the Company and its affiliates have a right
to use), including, without limitation, information with respect to the
Company's and its affiliates' operations, processes, products,
inventions, business practices, finances, principals, vendors, suppliers,
customers, potential customers, marketing methods, costs, prices,
contractual relationships, regulatory status, compensation paid to
employees or other terms of employment, and Executive shall not deliver
to any person, firm, corporation or other entity any document, record,
notebook, computer program or similar repository of or containing any
such confidential or proprietary information or trade secrets, except as
required in the faithful performance of Executive's duties during
employment with the Company; provided, however, that the foregoing
restriction shall not apply to (i) disclosure or use of Executive's
general business knowledge or any such information which becomes
generally available to the public in any manner or form through no fault
of Executive, (ii) disclosure or use of any such information with the
Company's prior written consent, or (iii) disclosure of any such
information required by a court or a governmental agency or competent
jurisdiction. In the event that Executive is so required or compelled to
make such disclosure, Executive shall cooperate with the Company to
preserve in full the confidentiality of all proprietary information whose
disclosure is not required or compelled.
(ii) All such information and trade secrets and all
records, files, keys, drawings, documents, models, equipment and the like
relating to the Company's and its affiliates' business, with which
Executive comes into contact, shall be and remain the sole property of
the Company and its affiliates, shall not be removed from the Company's
or its affiliate's premises (except as reasonably appropriate for the
performance of Executive's duties or with the Company's prior written
consent) and shall be returned to the Company and its affiliates upon
Executive's retirement or other termination of employment with the
Company.
(iii) The Company and Executive hereby stipulate and agree
that as between them the foregoing matters are important, material and
confidential proprietary information and trade secrets and affect the
successful conduct of the business of the Company and its affiliates (and
any successor or assignee of the Company and its affiliates). In the
event that, during Executive's employment with the Company or thereafter,
Executive becomes employed by any employer other than the Company,
Executive shall notify such employer of the terms of this paragraph not
later than the date on which Executive commences employment with such
employer.
(d) Normal Business Communications. Notwithstanding the
foregoing, Executive may engage in discussions and meetings with representatives
of a Competing Business
15
in the normal course of the business of the Company during Executive's
employment with the Company.
9.3 ENFORCEMENT OF NON-COMPETITION AND NON-DISCLOSURE COVENANTS.
(a) The Company and Executive intend that the provisions of
Article 9 shall be fully enforceable as set forth herein. To the extent that any
court of competent jurisdiction finds that any such provision is enforceable by
reason of its duration or scope, the Company and Executive agree that it shall
be enforced insofar as it may be enforced within the limits of the law of that
jurisdiction, but that the Agreement as a whole shall be unaffected elsewhere.
(b) The Company and Executive recognize and acknowledge that
the Company, by the Agreement, has sought to prohibit competition and disclosure
of confidential information by Executive during Executive's employment with the
Company and thereafter, and that Executive's performance of services or
disclosure of confidential information in contravention of the Agreement or
other breach of the provisions of Article 9 would consequently cause immediate
and irreparable harm to the business and goodwill of the Company and its
affiliates, the exact amount of which will be difficult or impossible to
ascertain, and that damages, if any, and other remedies at law would be
inadequate. Accordingly, should Executive perform, or attempt or threaten to
perform, services or disclose confidential information in contravention of the
Agreement or otherwise breach the provisions of paragraph 8, the Company shall,
in addition to any and all other remedies available to it under the Agreement,
have the right to seek and obtain an injunction or other equitable relief,
restraining and preventing Executive from performing such services or disclosing
such information or breaching the provisions of Article 9.
(c) If Executive breaches any provision of Article 9, the
rights of Executive (or Executive's estate) to a benefit under the Agreement,
and the rights of a Surviving Spouse or any other person to a benefit under the
Agreement, shall be forfeited, unless the Committee determines that such
activity is not detrimental to the best interests of the Company and its
affiliates. Such forfeiture shall be in addition to any other remedy of the
Company under the Agreement or at law and in equity with respect to such breach.
However, if Executive ceases such activity and notifies the Committee of this
action, Executive's (or Executive's estate's) right to receive a benefit, and
any right of a Surviving Spouse or any other person to a benefit, may be
restored within 60 days of said notification, unless the Committee in its sole
discretion determines that the prior activity has caused serious injury to the
Company and its affiliates, which determination will be final and conclusive.
ARTICLE 10.
GENERAL PROVISIONS
10.1 ENTIRE AGREEMENT AND MODIFICATION. This Agreement and attached
schedules (which are incorporated herein and shall be treated as part of
thereof) are intended to be the final, complete and exclusive agreement between
the parties relating to the employment of the Executive by the Company with
respect to the Term and all prior or contemporaneous understandings,
representations and statements, oral or written, are merged herein.
Notwithstanding anything to the contrary, the terms and conditions of any stock
option
16
agreement or restricted stock award agreement executed by the Executive prior to
the date hereof shall remain in effect. No modification, waiver, amendment,
discharge or change of this Agreement shall be valid unless the same is in
writing and signed by the party against which the enforcement thereof is or may
be sought.
10.2 NO WAIVER. No waiver, by conduct or otherwise, by any party of any
term, provision, or condition of this Agreement, shall be deemed or construed as
a further or continuing waiver of any such term, provision, or condition nor as
a waiver of a similar or dissimilar condition or provision at the same time or
at any prior or subsequent time.
10.3 REMEDIES NOT EXCLUSIVE. No remedy conferred by any of the specific
provisions of this Agreement is intended to be exclusive of any other remedy,
except as expressly provided in this Agreement or any Schedule thereto, and each
and every remedy shall be cumulative and shall be in addition to every other
remedy given hereunder or now or hereafter existing in law or in equity or by
statute or otherwise. No failure by any party to exercise, and no delay in
exercising, any rights shall be construed or deemed to be a waiver thereof, nor
shall any single or partial exercise by any party preclude any other or future
exercise thereof or the exercise of any other right.
10.4 NOTICES. Except as otherwise provided in this Agreement, any
notice, approval, consent, waiver or other communication required or permitted
to be given or to be served upon any person in connection with this Agreement
shall be in writing. Such notice shall be personally served, sent by telegram,
tested telex, fax or cable, or sent prepaid by either registered or certified
mail with return receipt requested or Federal Express and shall be deemed given
(i) if personally served or by Federal Express, when delivered to the person to
whom such notice is addressed, (ii) if given by telegram, telex, fax or cable,
when sent or (iii) if given by mail, two business days following deposit in the
United States mail. Any notice given by telegram, telex, fax or cable shall be
confirmed in writing by overnight mail or Federal Express within 48 hours after
being sent. Such notices shall be addressed to the party to whom such notice is
to be given at the party's address set forth below or as such party shall
otherwise direct.
If to the Company: Cypros Pharmaceutical Corporation
0000 Xxxxx Xxxxxx Xxxx
Xxxxxxxx, XX 00000
Attn: Corporate Secretary
If to the Executive: c/o RiboGene, Inc.
00000 Xxxxxxxx Xxxx
Xxxxxxx, XX 00000
10.5 ASSIGNMENT. This Agreement, and the Executive's rights and
obligations hereunder, may not be assigned by the Executive; any purported
assignment by the Executive in violation hereof shall be null and void. In the
event of any sale, transfer or other disposition of all or substantially all of
the Company's assets or business, whether by merger, consolidation or otherwise,
the Company may assign this Agreement and its rights hereunder; provided that
such assignment shall not limit the Company's liability under this Agreement to
the Executive.
17
10.6 GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of California, without giving effect to
the principles of conflict of laws thereof.
10.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which shall
constitute one instrument.
10.8 SEVERABILITY. The provisions of this Agreement are agreed to be
severable, and if any provision, or application thereof, is held invalid or
unenforceable, then such holding shall not effect any other provision or
application.
10.9 ARBITRATION. Any controversy or claim arising out of, or related
to, this Agreement, or the breach thereof, shall be settled by binding
arbitration in the city or county in which the Company's principal offices are
located, in accordance with the rules then in effect of the American Arbitration
Association, and the arbitrator's decision shall be binding and final, and
judgment upon the award rendered may be entered in any court having jurisdiction
thereof. Each party hereto shall pay its or his own expenses incident to the
negotiation, preparation and resolution of any controversy or claim arising out
of, or related to, this Agreement, or the breach thereof, PROVIDED, HOWEVER, the
Company shall pay and be solely responsible for any attorneys' fees and expenses
and court or arbitration costs incurred by the Executive as a result of a claim
that the Company has breached or otherwise failed to perform this Agreement or
any provision hereof to be performed by the Company if the Executive prevails in
the contest in whole or in part.
10.10 INJUNCTIVE RELIEF. The Executive agrees that it would be difficult
to compensate Company fully for damages for any violation of the provisions of
this Agreement, including without limitation, the provisions of Article 9.
Accordingly, the Executive specifically agrees that the Company and its
successors and assigns shall be entitled to temporary and permanent injunctive
relief to enforce the provisions of this Agreement. This provision with respect
to injunctive relief shall not, however, diminish the right of the Company to
claim and recover damages in addition to injunctive relief.
18
10.11 ATTORNEYS' FEES. If any legal action or other proceeding is
brought for the enforcement of the Agreement, or because of an alleged dispute,
breach or default in connection with any of the provisions of the Agreement, the
successful or prevailing party shall be entitled to recover attorneys' fees and
other expenses and costs incurred in that action or proceeding, in addition to
any other relief that may be granted.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
"COMPANY"
CYPROS PHARMACEUTICAL CORPORATION,
a California corporation
By: /s/ Xxxxx X. Xxxxxx
---------------------------------
Title: Senior Vice President and
C.F.O.
-------------------------
Date: August 4, 1999
"EXECUTIVE"
By: XXXXXXX X. XXXXXXXXX
/s/ Xxxxxxx X. Xxxxxxxxx
---------------------------------
Signature
Date: August 4, 1999
19
EXHIBIT A
EMPLOYMENT AGREEMENT
OF XXXXXXX X. XXXXXXXXX
1. Notice of Stock Option Grant under the RiboGene, Inc. 1993 Stock Plan,
dated as of July 14, 1993.
2. Notice of Stock Option Grant under the RiboGene, Inc. 1993 Stock Plan,
dated as of December 11, 1993.
3. Notice of Stock Option Grant under the RiboGene, Inc. 1993 Stock Plan,
dated as of May 11, 1994.
4. Notice of Stock Option Grant under the RiboGene, Inc. 1993 Stock Plan,
dated as of January 18, 1995.
5. Notice of Stock Option Grant under the RiboGene, Inc. 1993 Stock Plan,
dated as of November 17, 1995.
6. Notice of Stock Option Grant under the RiboGene, Inc. 1993 Stock Plan,
dated as of July 24, 1997.
7. Notice of Stock Option Grant under the RiboGene, Inc. 1997 Equity
Incentive Plan, dated as of June 4, 1998.
8. Notice of Stock Option Grant under the RiboGene, Inc. 1997 Equity
Incentive Plan, dated as of December 21, 1998, as amended as of July 30,
1999.
