Vanda Pharmaceuticals Inc. Employment Agreement
Exhibit 10.36
This Employment Agreement (this “Agreement”) was entered into as of May 22, 2009, by and
between Xxxx Xxxxxx (the “Executive”) and Vanda Pharmaceuticals Inc., a Delaware
corporation (the “Company”).
1. Duties and Scope of Employment.
(a) Position. For the term of his employment under this Agreement (“Employment”), the Company
agrees to employ the Executive in the position of Acting Chief Medical Officer. The Executive
shall be subject to the supervision of, and shall have such authority as is delegated to him by,
the Company’s Chief Executive Officer. The Executive hereby accepts such employment and agrees to
undertake the duties and responsibilities normally inherent in such position and such other duties
and responsibilities as the Company’s Board of Directors (the “Board”) shall from time to time
reasonably assign to him.
(b) Obligations to the Company. During the term of his Employment, the Executive shall devote
his full business efforts and time to the Company. During the term of his Employment, without the
prior written approval of the Board, the Executive shall not render services in any capacity to any
other person or entity and shall not act as a sole proprietor or partner of any other person or
entity or as a shareholder owning more than five percent of the stock of any other corporation.
The Executive shall comply with the Company’s policies and rules, as they may be in effect from
time to time during the term of his Employment.
(c) No Conflicting Obligations. The Executive represents and warrants to the Company that he
is under no obligations or commitments, whether contractual or otherwise, that are inconsistent
with his obligations under this Agreement. The Executive represents and warrants that he will not
use or disclose, in connection with his Employment, any trade secrets or other proprietary
information or intellectual property in which the Executive or any other person has any right,
title or interest and that his Employment as contemplated by this Agreement will not infringe or
violate the rights of any other person or entity. The Executive represents and warrants to the
Company that he has returned all property and confidential information belonging to any prior
employers.
2. Cash and Incentive Compensation.
(a) Salary. The Company shall pay the Executive as compensation for his services a base
salary at a gross annual rate of not less than $270,000. Such salary shall be payable in
accordance with the Company’s standard payroll procedures. (The annual compensation specified in
this Subsection (a), together with any increases in such compensation that the Company may grant
from time to time, is referred to in this Agreement as “Base Compensation.”)
(b) Incentive Bonuses. The Executive shall be eligible for an annual incentive bonus with a
target amount equal to 25% of his Base Compensation (the “Annual Target Bonus”). Such bonus (if
any) shall be awarded based on objective or subjective criteria established in advance by the Board. Any bonus for the fiscal year in which Executive’s employment begins
shall be prorated, based on the number of days Executive is employed by the Company during that
fiscal year. Any incentive bonus for a fiscal year shall in no event be paid later than 21/2 months
after the close of such fiscal year. Such bonus shall be paid only if Executive is employed by the
Company at the time of payment. The determinations of the Board with respect to such bonus shall
be final and binding.
(c) Stock Options. On the date of this Agreement, the Company shall grant the Executive a
nonstatutory stock option to purchase 95,000 shares of the Company’s Common Stock (the “Option”).
The per-share exercise price of the Option shall be equal to the fair market value of one share of
the Company’s Common Stock on the date of grant. The term of the Option shall be 10 years, subject
to earlier expiration in the event of the termination of the Executive’s service with the Company.
The grant of the Option shall be subject to the terms and conditions set forth in the Vanda
Pharmaceuticals Inc. 2006 Equity Incentive Plan and in the Company’s standard form of Stock Option
Agreement. The Option shall become exercisable in equal monthly installments over the four years
of continuous service commencing on the date of this Agreement. The Option shall become
exercisable in full if (i) the Company is subject to a Change in Control before the Executive’s
service with the Company terminates and (ii) the Executive is subject to an Involuntary Termination
within 24 months after such Change in Control.1 In addition, Section 6(d) shall apply
to the Option.
3. Vacation and Employee Benefits. During the term of his Employment, the Executive shall be
eligible for 20 paid vacation days each year in accordance with the Company’s standard policy for
similarly situated employees, as it may be amended from time to time. During the term of his
Employment, the Executive shall be eligible to participate in any employee benefit plans maintained
by the Company for similarly situated employees, subject in each case to the generally applicable
terms and conditions of the plan in question and to the determinations of any person or committee
administering such plan.
4. Business Expenses. During the term of his Employment, the Executive shall be authorized to
incur necessary and reasonable travel, entertainment and other business expenses in connection with
his duties hereunder. The Company shall reimburse the Executive for such expenses upon
presentation of an itemized account and appropriate supporting documentation, all in accordance
with the Company’s generally applicable policies. Any reimbursement shall (a) be paid promptly but
not later than the last day of the calendar year following the year in which the expense was
incurred, (b) not be affected by any other expenses that are eligible for reimbursement in any
calendar year and (c) not be subject to liquidation or exchange for another benefit.
| 1 | Certain capitalized terms are defined in Section 9. |
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5. Term of Employment.
(a) Basic Rule. The Company agrees to continue the Executive’s Employment, and the Executive
agrees to remain in Employment with the Company, from the date of this Agreement until the date
when the Executive’s Employment terminates pursuant to Subsection (b) below. The Executive’s
Employment with the Company shall be “at will,” meaning that either the Executive or the Company may terminate the Executive’s Employment at any time,
with or without Cause. Any contrary representations which may have been made to the Executive
shall be superseded by this Agreement. This Agreement shall constitute the full and complete
agreement between the Executive and the Company on the “at will” nature of the Executive’s
Employment, which may only be changed in an express written agreement signed by the Executive and a
duly authorized officer of the Company (other than the Executive).
(b) Termination. The Company may terminate the Executive’s Employment at any time and for any
reason (or no reason), and with or without Cause, by giving the Executive notice in writing. The
Executive may terminate his Employment by giving the Company 14 days’ advance notice in writing.
The Executive’s Employment shall terminate automatically in the event of his death.
(c) Rights Upon Termination. Except as expressly provided in Section 6, upon the termination
of the Executive’s Employment pursuant to this Section 5, the Executive shall only be entitled to
the compensation, benefits and reimbursements described in Sections 2, 3 and 4 for the period
preceding the effective date of the termination. The payments under this Agreement shall fully
discharge all responsibilities of the Company to the Executive.
(d) Termination of Agreement. This Agreement shall terminate when all obligations of the
parties hereunder have been satisfied. The termination of this Agreement shall not limit or
otherwise affect any of the Executive’s obligations under Section 7.
6. Termination Benefits.
(a) General Release. Any other provision of this Agreement notwithstanding, Subsections (b),
(c) and (d) below shall not apply unless the Executive has executed a general release of all known
and unknown claims that he may then have against the Company or persons affiliated with the
Company, (ii) has agreed not to prosecute any legal action or other proceeding based upon any of
such claims and (iii) has returned all property of the Company in the Executive’s possession. The
release shall be in a form prescribed by the Company, without alterations. The Executive shall
execute and return the release on or before the date specified by the Company in the prescribed
form (the “Release Deadline”). The Release Deadline shall in no event be later than 60 days after
the Executive’s Separation. If the Executive fails to return the release on or before the Release
Deadline, or if the Executive revokes the release, then the Executive shall not be entitled to the
benefits described in this Section 6.
(b) Severance Pay. If, during the term of this Agreement, a Separation occurs because the
Company terminates the Executive’s Employment for any reason other than Cause or Permanent
Disability, or because the Executive terminates his Employment
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within six months after a condition constituting Good Reason arises, then the Company shall pay the Executive both of the following:
(i) Base Compensation. His Base Compensation for a period of 12 months
following the Separation (the “Continuation Period”). Such Base Compensation shall
be paid at the rate in effect at the time of the Separation and in accordance with
the Company’s standard payroll procedures. The salary continuation payments shall
commence within 30 days after the Release Deadline and, once they commence, shall be retroactive to the date of the Executive’s
Separation.
(ii) Target Bonus. An amount equal to his Annual Target Bonus at the rate in
effect at the time of the Separation. Such amount shall be payable in a lump sum
within 30 days after the Release Deadline.
(c) Health Insurance. If Subsection (b) above applies, and if the Executive elects to
continue his health insurance coverage under the Consolidated Omnibus Budget Reconciliation Act
(“COBRA”) following the Separation, then the Company shall pay the Executive’s monthly premium
under COBRA until the earliest of (i) the close of the Continuation Period, (ii) the expiration of
the Executive’s continuation coverage under COBRA and (iii) the date when the Executive is offered
substantially equivalent health insurance coverage in connection with new employment or
self-employment.
(d) Options. If, during the term of this Agreement, a Separation occurs because the Company
terminates the Employee’s Employment for any reason other than Cause or Permanent Disability, then
(i) the vested portion of the shares of the Company’s Common Stock subject to all options held by
the Employee at the time of his Separation shall be determined by adding three months to the actual
period of service that he has completed with the Company and (ii) such options shall be exercisable
for six months after the Employee’s Separation.
7. Non-Solicitation, Non-Disclosure and Non-Competition. The Executive has entered into a
Proprietary Information and Inventions Agreement with the Company, which agreement is incorporated
herein by reference.
8. Successors.
(a) Company’s Successors. This Agreement shall be binding upon 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. For all purposes under this
Agreement, the term “Company” shall include any successor to the Company’s business and/or assets
which becomes bound by this Agreement.
(b) Executive’s Successors. This Agreement and all rights of the Executive hereunder shall
inure to the benefit of, and be enforceable by, the Executive’s personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and legatees.
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9. Definitions. For all purposes under this Agreement:
“Cause” shall mean:
(a) An unauthorized use or disclosure by the Executive of the Company’s confidential
information or trade secrets, which use or disclosure causes material harm to the Company;
(b) A material breach by the Executive of any agreement between the Executive and the Company;
(c) A material failure by the Executive to comply with the Company’s written policies or
rules;
(d) The Executive’s conviction of, or plea of “guilty” or “no contest” to, a felony under the
laws of the United States or any State thereof;
(e) The Executive’s gross negligence or willful misconduct;
(f) A continuing failure by the Executive to perform assigned duties after receiving written
notification of such failure from the Board; or
(g) A failure by the Executive to cooperate in good faith with a governmental or internal
investigation of the Company or its directors, officers or employees, if the Company has requested
the Executive’s cooperation.
“Change in Control” shall mean:
(a) The consummation of a merger or consolidation of the Company with or into another entity
or any other corporate reorganization, if persons who were not stockholders of the Company
immediately prior to such merger, consolidation or other reorganization own immediately after such
merger, consolidation or other reorganization 50% or more of the voting power of the outstanding
securities of each of (i) the continuing or surviving entity and (ii) any direct or indirect parent
corporation of such continuing or surviving entity;
(b) The sale, transfer or other disposition of all or substantially all of the Company’s
assets;
(c) A change in the composition of the Board, as a result of which fewer than 50% of the
incumbent directors are directors who either:
(i) Had been directors of the Company on the date 24 months prior to the date
of such change in the composition of the Board (the “Original Directors”); or
(ii) Were appointed to the Board, or nominated for election to the Board, with
the affirmative votes of at least a majority of the aggregate of (A) the Original
Directors who were in office at the time of their
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appointment or nomination and (B)the directors whose appointment or nomination was previously approved in a manner
consistent with this Paragraph (ii); or
(d) Any transaction as a result of which any person is the “beneficial owner” (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934, as amended), directly or indirectly, of
securities of the Company representing at least 50% of the total voting power represented by the
Company’s then outstanding voting securities. For purposes of this Subsection (d), the term
“person” shall have the same meaning as when used in Sections 13(d) and 14(d) of such Exchange Act
but shall exclude (i) a trustee or other fiduciary holding securities under an employee benefit
plan of the Company or of a parent or subsidiary of the Company and (ii) a corporation owned
directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of the Common Stock of the Company.
A transaction shall not constitute a Change in Control if its sole purpose is to change the
State of the Company’s incorporation or to create a holding company that will be owned in
substantially the same proportions by the persons who held the Company’s securities immediately
before such transaction.
“Good Reason” shall mean (i) a change in the Executive’s position with the Company that
materially reduces his level of authority or responsibility, (ii) a material reduction in his base
salary or (iii) receipt of notice that his principal workplace will be relocated by more than 30
miles. A condition shall not be considered “Good Reason” unless the Executive gives the Company
written notice of such condition within 90 days after such condition comes into existence and the
Company fails to remedy such condition within 30 days after receiving the Executive’s written
notice.
“Involuntary Termination” shall mean a Separation resulting from either (i) the Executive’s
involuntary discharge by the Company for reasons other than Cause or (ii) the Executive’s voluntary
resignation for Good Reason.
“Permanent Disability” shall mean the Executive’s inability to perform the essential functions
of the Executive’s position, with or without reasonable accommodation, for a period of at least 120
consecutive days because of a physical or mental impairment.
“Separation” shall mean a “separation from service,” as defined in the regulations under
Section 409A of the Code.
10. 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
overnight courier, U.S. registered or certified mail, return receipt requested and postage prepaid.
In the case of the Executive, mailed notices shall be addressed to him at the home address that 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.
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(b) Modifications and Waivers. No provision of this Agreement shall be modified, waived or
discharged unless the modification, waiver or discharge is agreed to in writing and signed by the
Executive and by an authorized officer of the Company (other than the Executive). 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 other 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. This
Agreement and the Proprietary Information and Inventions Agreement contain the entire understanding of the parties with respect to the subject matter hereof. The letter
agreement dated September 17, 2007, between the Employee and the Company is hereby superseded.
(d) Tax Matters. All payments made under this Agreement shall be subject to reduction to
reflect taxes or other charges required to be withheld by law. For purposes of Section 409A of the
Code, each periodic salary continuation payment under Section 6(b)(i) is hereby designated as a
separate payment. If the Company determines that the Executive is a “specified employee” within
the meaning of Section 409A(a)(2)(B)(i) of the Code and the regulations thereunder at the time of
his Separation, then:
(i) Any salary continuation payments under Section 6(b)(i), to the extent not
exempt from Section 409A of the Code, shall commence during the seventh month after
the Executive’s Separation and the installments that otherwise would have been paid
during the first six months following the Executive’s Separation shall be paid in a
lump sum when such salary continuation payments commence; and
(ii) Any lump sum payment under Section 6(b)(ii), to the extent not exempt from
Section 409A of the Code, shall be made during the seventh month after the
Executive’s Separation.
The Company shall not have a duty to design its compensation policies in a manner that minimizes
the Executive’s tax liabilities, and the Executive shall not make any claim against the Company or
the Board related to tax liabilities arising from the Executive’s compensation.
(e) Choice of Law. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Maryland (except their provisions governing
the choice of law).
(f) Severability. The invalidity or unenforceability of any provision or provisions of this
Agreement shall not affect the validity or enforceability of any other provision hereof, which
shall remain in full force and effect.
(g) Arbitration. Any controversy or claim arising out of or relating to this Agreement or the
breach thereof, or the Executive’s Employment or the termination thereof,
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shall be settled in the State of Maryland, by arbitration in accordance with the National Rules for the Resolution of
Employment Disputes of the American Arbitration Association. The decision of the arbitrator shall
be final and binding on the parties, and judgment on the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof. The parties hereby agree that the arbitrator
shall be empowered to enter an equitable decree mandating specific enforcement of the terms of this
Agreement. The Company and the Executive shall share equally all fees and expenses of the
arbitrator. The Executive hereby consents to personal jurisdiction of the state and federal courts
located in the State of Maryland for any action or proceeding arising from or relating to this
Agreement or relating to any arbitration in which the parties are participants. This arbitration
provision does not apply to (i) workers’ compensation or unemployment insurance claims or (ii)
claims concerning the validity, infringement or enforceability of any trade secret, patent right,
copyright or any other trade secret or intellectual property held or sought by either the Executive
or the Company (whether or not arising under the Proprietary Information and Inventions Agreement
between the Executive and the Company).
(h) No Assignment. This Agreement and all rights and obligations of the Executive hereunder
are personal to the Executive and may not be transferred or assigned by the Executive at any time.
The Company may assign its rights under this Agreement to any entity that assumes the Company’s
obligations hereunder in connection with any sale or transfer of all or a substantial portion of
the Company’s assets to such entity.
(i) Counterparts. This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and the same
instrument.
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IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the
Company by its duly authorized officer, as of the date first written above.
| /s/ Xxxx Xxxxxx | ||||
| Xxxx Xxxxxx | ||||
| Vanda Pharmaceuticals Inc. |
||||
| By | /s/ Xxxxxx X. Xxxxxxxxxxxxxx | |||
| Title: President and Chief Executive Officer | ||||
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