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Exhibit 10.65
FORM OF
CHANGE IN CONTROL SEVERANCE AGREEMENT
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Note: In August 1997, the Company's Board of Directors authorized the
Company to enter into Severance Agreements related to a Change in Control of the
Company with all Company employees at the Vice President level and higher.
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CHANGE IN CONTROL SEVERANCE AGREEMENT
This SEVERANCE AGREEMENT (the "Agreement") is dated and effective as
of ____________, 1998, between Guilford Pharmaceuticals Inc., (the "Employer"),
and _____________________ (the "Employee"), a resident of the State of
____________.
WHEREAS, the Employee serves as __________ of the Employer, and in
that role has been important in developing and expanding the business and
operations of the Employer and possesses valuable knowledge and skills with
respect to such business; and
WHEREAS, the Board of Directors of the Company (the "Board")
believes that it is in the best interests of the Company to encourage the
Employee's continued employment with and dedication to the Employer, including
in the face of potentially distracting circumstances arising from the
possibility of a change in control of the Company; and
WHEREAS, the Board has adopted a policy which authorizes the
Employer to enter into this Agreement with the Employee; and
WHEREAS, the parties desire to enter into this Agreement setting
forth the terms and conditions for the payment of compensation to the Employee
in the event of a termination of the Employee's employment during the term of
this Agreement;
NOW, THEREFORE, in consideration of the foregoing, the mutual
covenants and agreements of the parties contained herein and other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
hereto agree as follows:
1. TERM.
The term of this Agreement shall be for a period commencing as of
the date set forth above and will remain in effect until the earlier of the date
on which (a) all obligations of the parties hereto shall have been satisfied,
(b) the agreement is terminated by the mutual written agreement of the parties,
(c) or the agreement is terminated pursuant to terms contained elsewhere herein.
2. TERMINATION OF EMPLOYMENT OTHER THAN FOLLOWING A CHANGE IN CONTROL EVENT.
If, prior to a Change in Control Event, the Employee's employment is
terminated by the Employer with or without Cause during the term of this
Agreement or the Employee voluntarily terminates his employment with or without
Good Reason, this Agreement shall, subject to the provisions contained in
Section 17 below, terminate.
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3. TERMINATION OF EMPLOYMENT FOLLOWING A CHANGE IN CONTROL EVENT.
Subject to the terms of this Agreement, including without limitation
Section 17 below, the Employee shall be entitled to receive severance payments
from the Employer for services previously rendered to the Employer and its
affiliates if a Change in Control Event occurs during the term of this Agreement
and the Employee's employment is terminated by the Employee for Good Reason or
by the Employer other than for Cause during the period commencing upon such
Change in Control Event (as defined in SECTION 9) and ending two years after a
Change in Control (as defined in SECTION 9)(the "Change in Control Period").
3.1. GOOD REASON; OTHER THAN FOR CAUSE.
If a Change in Control Event occurs during the term of this
Agreement and the Employer terminates the Employee's employment other than for
Cause or the Employee terminates employment for Good Reason during the Change in
Control Period:
(i) the Employer shall pay to the Employee the following
amounts:
A. the sum of (1) the Employee's Annual Base Salary (as
defined in SECTION 6) through the Date of Termination to the extent
not theretofore paid and (2) any compensation previously deferred by
the Employee (together with any accrued interest or earnings
thereon) and any accrued vacation pay, in each case, to the extent
not theretofore paid, in a lump sum in cash no later than 10 days
following the date of termination; and
B. the amount equal to two (2) times the Employee's
Annual Base Salary, which amount shall be payable in full in a lump
sum in cash no later than 10 days following the date of
termination.(1)
(ii) for two (2) years after the Date of Termination, or such
longer period as may be provided by the terms of the appropriate plan,
program, practice or policy, the Employer shall continue benefits to the
Employee and/or the Employee's family at least equal to those which would
have been provided to them in accordance with the welfare benefit plans,
practices, policies and programs provided by the Employer and its
affiliated companies (including, without limitation, medical,
prescription, dental, disability, employee life, group life, accidental
death and travel accident insurance plans and programs) to the
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(1) In the case of the Company's Chief Executive Officer, the amount
is three times (3x) base salary.
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extent applicable generally to other executive-level employees of the
Employer and its affiliated companies, as if the Employee's employment had
not been terminated; provided, however, that if the Employee becomes
reemployed with another employer and is eligible to receive medical or
other welfare benefits under another employer provided plan, the medical
and other welfare benefits described herein shall be secondary to those
provided under such other plan during such applicable period of
eligibility.
3.2. CAUSE; OTHER THAN FOR GOOD REASON.
If the Employee's employment is terminated for Cause during the
Change in Control Period, this Agreement shall terminate without further
obligations to the Employee hereunder. Furthermore, if the Employee voluntarily
terminates employment during the Change in Control Period, excluding a
termination for Good Reason, this Agreement shall terminate without further
obligations to the Employee hereunder.
4. (PROVISION INTENTIONALLY OMITTED)
5. CERTAIN ADDITIONAL PAYMENTS BY EMPLOYER.
5.1. GENERAL
Notwithstanding anything in this Agreement to the contrary and
except as set forth in this SECTION 5, in the event it shall be determined that
any payment or distribution by the Employer to or for the benefit of the
Employee (whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise, but determined without regard to any
additional payments required under this SECTION 5) (a "Payment") would be
subject to the excise tax imposed by Section 4999 of the Code or any interest or
penalties are incurred by the Employee with respect to such excise tax (such
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the Employee shall be
entitled to receive an additional payment (a "Gross-Up Payment") in an amount
such that after payment by the Employee of all taxes, including, without
limitation, any income taxes (and any interest and penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Employee
retains an amount of the Gross-Up Payment equal to the Excise Tax (including any
interest or penalties imposed with respect to such taxes) imposed upon the
Payments.
5.2. PROCEDURES
Subject to the provisions of SECTION 5.3, all determinations
required to be made under this SECTION 5, including whether and when a Gross-Up
Payment is
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required and the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by KPMG Peat Marwick
or such other certified public accounting firm as may be designated by the
Employee and reasonably acceptable to the Employer (the "Accounting Firm") which
shall provide detailed supporting calculations both to the Employer and the
Employee within 15 business days of the receipt of notice from the Employee that
there has been a Payment, or such earlier time as is requested by the Employer.
In the event that the Accounting Firm is serving as accountant or auditor for
the individual, entity or group effecting the Change in Control, the Employee
may appoint another nationally recognized accounting firm and reasonably
acceptable to the Employer to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm hereunder). All
fees and expenses of the Accounting Firm shall be borne solely by the Employer.
Any Gross-Up Payment, as determined pursuant to this SECTION 5, shall be paid by
the Employer to the Employee within five business days of the receipt of the
Accounting Firm's determination. Any determination by the Accounting Firm shall
be binding upon the Employer and the Employee. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Employer should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Employer exhausts its remedies pursuant to
SECTION 5.3 and the Employee thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Employer to or for the benefit of the Employee.
5.3. NOTIFICATION OF CLAIMS
The Employee shall notify the Employer in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Employer of the Gross-Up Payment. The Employee shall not pay such claim
prior to the expiration of the 30-day period following the date on which it
gives such notice to the Employer (or such shorter period ending on the date
that any payment of taxes with respect to such claim is due). If the Employer
notifies the Employee in writing prior to the expiration of such period that it
desires to contest such claim, the Employee shall:
(i) give the Employer any information reasonably
requested by the Employer relating to such claim,
(ii) take such action in connection with contesting such claim
as the Employer shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect
to such claim by attorneys reasonably selected by the Employer,
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(iii) cooperate with the Employer in good faith in order
effectively to contest such claim, and
(iv) permit the Employer to participate in any proceedings
relating to such claim;
provided, however, that the Employer shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Employee harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this SECTION 5.3, the Employer shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Employee to pay the tax claimed and xxx for a refund or contest the claim in
any permissible manner, and the Employee agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Employer shall
determine; provided, however, that if the Employer directs the Employee to pay
such claim and xxx for a refund, the Employer shall advance the amount of such
payment to the Employee, on an interest-free basis and shall indemnify and hold
the Employee harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Employee with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Employer's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Employee shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
5.4. REFUNDS
If, after the receipt by the Employee of an amount advanced by the
Employer pursuant to SECTION 5.3, the Employee becomes entitled to receive any
refund with respect to such claim, the Employee shall (subject to the Employer's
complying with the requirements of SECTION 5.3) promptly pay to the Employer the
amount of such refund (together with any interest actually paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Employee
of an amount advanced by the Employer pursuant to SECTION 5.3, a determination
is made that the Employee shall not be entitled to any refund with respect to
such claim and the Employer does not notify the Employee in writing of its
intent to contest such denial
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of refund prior to the expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be repaid and the amount
of such advance shall offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid.
6. DEFINITION OF "ANNUAL BASE SALARY".
Annual base salary ("Annual Base Salary") means the greater of (a)
the annual base salary payable to the Employee by the Employer and its
affiliates as of the Date of Termination of employment (the "Current Annual Base
Salary") or (b) the amount equal to twelve times the highest monthly base salary
paid or payable, including any base salary which has been earned but deferred,
to the Employee by the Employer and its affiliated companies in respect of the
twelve-month period immediately preceding the month in which the Date of
Termination occurs.
7. DEFINITION OF "CAUSE".
"Cause" means (i) conviction of a crime involving fraud or theft
against the Company or a crime involving moral turpitude; or (ii) a finding by
the Board that an employee has (x) compromised trade secrets or other
proprietary information of the Company, (y) willfully failed or refused to
perform material assigned duties, or (z) engaged in gross or willful misconduct
that causes substantial and material harm to the business and operations of the
Company.
8. DEFINITION OF "GOOD REASON".
"Good Reason" means (i) any proposed reduction in an employee's base
salary; (ii) any reduction of an employee's responsibilities or areas of
supervision within the Company, or (iii) relocation of an employee's office
outside the metropolitan area in which the office of the employee was located
immediately prior to the change in control.
9. DEFINITION OF "CHANGE IN CONTROL" AND "CHANGE IN CONTROL EVENT".
A "Change in Control" shall be deemed to have occurred if:
(a) any "person" (including, without limitation, any individual,
sole proprietorship, partnership, trust, corporation, association, joint
venture, pool, syndicate, or other entity, whether or not incorporated), or any
two or more persons acting as a syndicate or group or otherwise acting in
concert with regard to the ownership of securities of the Company and thereby
deemed collectively to be a "person") as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")),
becomes, after the date hereof, the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or
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indirectly, of securities of the Company representing thirty percent (30%) or
more of the combined voting power of the Company's then outstanding securities,
unless, in transaction in which a "person" becomes, after the date hereof, the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing less than fifty percent
(50%) of the combined voting power of the Company's then outstanding securities,
prior to the acquisition by such person of securities of the Company which
causes such person to have such beneficial ownership, the full Board shall by at
least a two-thirds vote have specifically approved such acquisition and
determined that such acquisition shall not constitute a Change in Control for
purposes of this Agreement despite such beneficial ownership; or
(b) during any two (2) year period, individuals who at the beginning
of such period constitute the Board, together with any new directors elected or
appointed during the period whose election or appointment resulted from a
vacancy on the Board caused by retirement, death , or disability of a director
and whose election or appointment was approved by a vote of at least two-thirds
(2/3rds) of the directors then still in office who were directors at the
beginning of the period, cease for any reason to constitute a majority thereof.
A "Change in Control Event" shall mean the earlier of (i) a Change
in Control or (ii) the execution and delivery by the Company of an agreement
providing for a Change in Control.
10. EXPENSES.
The Employer shall pay any and all reasonable legal fees and
expenses incurred by the Employee in seeking to obtain or enforce, by bringing
an action against the Employer, any right or benefit provided in this Agreement
if the Employee is successful in whole or in part in such action.
11. WITHHOLDING.
Notwithstanding anything in this Agreement to the contrary, all
payments required to be made by the Employer hereunder to the Employee or his
estate or beneficiaries shall be subject to the withholding of such amounts
relating to taxes as the Employer reasonably may determine it should withhold
pursuant to any applicable law or regulation. In lieu of withholding such
amounts, in whole or in part, the Employer may, in its sole discretion, accept
other provisions for the payment of taxes and any withholdings as required by
law, provided that the Employer is satisfied that all requirements of law
affecting its responsibilities to withhold compensation have been satisfied.
12. NO DUTY TO MITIGATE.
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The Employee's payments received hereunder shall be considered
severance pay in consideration of past service, and pay in consideration of
continued service from the date hereof and entitlement thereto shall not be
governed by any duty to mitigate damages by seeking further employment or
otherwise.
13. AMENDMENTS OR ADDITIONS; ACTION BY THE BOARD OF DIRECTORS.
No amendments or additions to this Agreement shall be binding unless
in writing and signed by both parties hereto. The prior approval by the Board
shall be required in order for the Employer to authorize any amendments or
additions to this Agreement, unless this requirement is specifically waived in
writing by the Employee in any document effecting any such amendment.
14. GOVERNING LAW; JURISDICTION.
This Agreement shall be governed by the laws of United States to the
extent applicable and otherwise by the laws of the State of Maryland, excluding
any choice of law rules. In the event that an unresolved dispute arises over the
enforcement, interpretation, construction or breach of this Agreement, the
parties agree that it shall be litigated in the U.S. District Court for the
District of Maryland or in the circuit courts of Baltimore City, Maryland, and
the parties hereby irrevocably submit to the exclusive jurisdiction of such
courts for all purposes with respect to any legal action or proceeding in
connection with this Agreement.
15. ASSIGNMENT.
The rights and obligations of the Employer under this Agreement
shall be binding upon its successors and assigns and may be assigned by the
Employer to the successors in interest of the Employer. The rights and
obligations of the Employee under this Agreement shall be binding upon his
heirs, legatees, personal representatives, executors or administrators. This
Agreement may not be assigned by the Employee, but any amount owed to the
Employee upon his death shall inure to the benefit of his heirs, legatees,
personal representatives, executors, or administrators.
16. NOTICE.
For purposes of this Agreement, notices and all other communications
provided for in this Agreement shall be in writing and shall be deemed to have
been duly given when hand delivered, sent by overnight courier, or mailed by
first-class, registered or certified mail, return receipt requested, postage
prepaid, or transmitted by telegram, telecopy, or telex (against receipt of
answerback confirming delivery), addressed as follows:
If to the Employer:
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Guilford Pharmaceuticals Inc.
0000 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Corporate Secretary
Fax: 410/000-0000
If to the Employee:
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt. In the case of notices sent by telegram,
telecopy, or telex, which notice shall be deemed duly given if made pursuant to
the provisions of this Section 16 above, the notifying party shall also send a
confirmation copy of any such notice to the other party by first class-mail.
17. OTHER AGREEMENTS.
This Agreement may not constitute the entire agreement between the
parties hereto providing for severance payments in connection with a termination
of employment following a Change in Control Event; provided, however, that if
the Employee is entitled to severance payments pursuant to this Agreement and
pursuant to any other oral or written agreements, commitments or understandings
calling for severance payments in connection with a termination of employment
following a Change in Control Event, the severance payments paid to the Employee
by the Employer in connection with such termination of employment shall be
limited to the greater of (i) severance payments provided pursuant to this
Agreement and any share option agreements and restricted share agreements
between the Company and the Employee or (ii) severance payments provided by the
Employer pursuant to such other oral or written agreements, commitments or
understandings. If the Employee is entitled to severance payments pursuant to
this Agreement and any share option agreements and restricted share agreements
between the Company and the Employee, on the one hand, and pursuant to any other
oral or written agreements, commitments or understandings calling for severance
payments in connection with a termination of employment following a Change in
Control Event, on the other hand, the Employee shall determine, in the
Employee's sole discretion, by notice given in writing to the Employer, which
payments are greater. For the avoidance of doubt, the parties agree the terms of
this Agreement shall in no way be deemed to diminish or other modify any
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terms set forth in any other oral or written agreements, commitments or
understandings related to the payment of severance amounts to the Employee in
connection with a termination of employment that are not conditioned on a Change
in Control Event, including without limitation the employment offer letter
between the Company and the Employee, effective _______________ 199___.
18. SEVERABILITY.
If any part of any provision of this Agreement shall be invalid or
unenforceable under applicable law, such part shall be ineffective to the extent
of such invalidity or unenforceability only, without in any way affecting the
remaining parts of such provision or the remaining provisions of this Agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement, or have caused this Agreement to be executed and delivered, to be
effective as of ___________________, 1998.
GUILFORD PHARMACEUTICALS INC.
By:
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Name:
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Title:
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EMPLOYEE
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Name:
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