EXHIBIT 10.21
EXECUTIVE
SEVERANCE BENEFITS AGREEMENT
This EXECUTIVE SEVERANCE BENEFITS AGREEMENT (the "AGREEMENT") is
entered into as of the ___ day of ________, 1999 (the "Effective Date"),
between XXXXX X. XXXXXX ("EXECUTIVE") and CYPROS PHARMACEUTICAL CORPORATION
(the "COMPANY"). This Agreement is intended to provide Executive with the
compensation and benefits described herein upon the occurrence of specific
events. Certain capitalized terms used in this Agreement are defined in
Article 4.
The Company and Executive hereby agree as follows:
ARTICLE 1
SCOPE OF AND CONSIDERATION FOR THIS AGREEMENT
1.1 Executive is currently employed by the Company.
1.2 The Company and Executive wish to set forth the compensation and
benefits which Executive shall be entitled to receive in the event Executive's
employment with the Company is terminated under the circumstances described
herein following a Change in Control.
1.3 The duties and obligations of the Company to Executive under this
Agreement shall be in consideration for Executive's past services to the
Company, Executive's continued employment with the Company, and Executive's
execution of a release in accordance with Section 3.1.
1.4 This Agreement shall supersede any other agreement relating to cash
severance benefits, health benefits and stock option vesting in the event of
Executive's severance from employment with the Company following a Change in
Control.
ARTICLE 2
SEVERANCE BENEFITS
2.1 SEVERANCE BENEFITS. A Covered Termination (as defined in Article 4)
entitles Executive to receive the following benefits set forth in Sections 2.2,
2.3, 2.4, and 2.5. The parties acknowledge and agree that the payment of such
benefits are conditioned upon and subject to the closing of the Change in
Control transaction.
2.2 SEVERANCE PAYMENT. Executive shall receive a severance payment equal
to twelve (12) months of his Base Salary. The severance payment shall be paid in
a lump sum upon the Payment Date and shall be subject to all required tax
withholding.
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2.3 BONUS.
(a) The Company shall pay to Executive a cash bonus upon the later of
the date of the Covered Termination or the closing of the Change in Control
transaction, equal to the amount payable according to the terms of Executive's
Bonus Agreement dated January 18, 1999, a copy of which is attached hereto as
Exhibit A. Such amount shall be subject to all required tax withholding.
(b) Notwithstanding anything herein to the contrary, Executive shall
be entitled to receive compensation under a retention bonus agreement with the
Company in connection with any Change in Control transaction.
2.4 HEALTH AND DISABILITY BENEFITS. Provided that Executive elects
continued coverage under federal COBRA law, the Company shall pay the premiums
of Executive's group health insurance coverage, including coverage for
Executive's eligible dependents, for a maximum period of twelve (12) months
following a Covered Termination; PROVIDED, HOWEVER, that (i) the Company shall
pay premiums for Executive's eligible dependents only for coverage for which
those eligible dependents were enrolled immediately prior to the Covered
Termination and (ii) the Company's obligation to pay such premiums shall cease
immediately upon Executive's eligibility for group health insurance provided by
a new employer of Executive. No premium payments will be made following the
effective date of Executive's coverage by a health insurance plan of a
subsequent employer. For the balance of the period that Executive is entitled to
coverage under federal COBRA law, if any, Executive shall be entitled to
maintain such coverage at Executive's own expense. The Company will use its best
efforts to continue Executive's participation in the Company's long term and
short term disability policies, as well as Executive's individual long term
disability policy. The Company will pay for the premiums of such coverage for
the same period of time that the Company pays for Executive's group health
insurance premiums under COBRA.
2.5 OPTION VESTING AND EXERCISABILITY. If Executive's employment with the
Company terminates due to a Covered Termination, then all outstanding options of
Executive to purchase the Company's common stock (or the stock of a successor to
the Company by reason of assumption or substitution of options) shall
immediately vest and become exercisable. All such options shall be exercisable
until the date two (2) years after the date of Executive's termination of
employment. During the period when Executive's stock options are exercisable,
the Company agrees to provide reasonable consultation concerning SEC regulations
governing his options and Executive's status as a former officer. Such advice
shall be obtained by Executive from the Chief Financial Officer of the Company,
who shall obtain any necessary legal advice for this purpose at the Company's
expense.
2.6 MITIGATION. Except as otherwise specifically provided herein,
Executive shall not be required to mitigate damages or the amount of any payment
provided under this Agreement by seeking other employment or otherwise, nor
shall the amount of any payment provided for under this Agreement be reduced by
any compensation earned by Executive as a result of employment by another
employer or by any retirement benefits received by Executive after the date of
the Covered Termination.
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ARTICLE 3
LIMITATIONS AND CONDITIONS ON BENEFITS
3.1 RELEASE PRIOR TO PAYMENT OF BENEFITS. Upon the occurrence of a
Covered Termination, and prior to the payment of any benefits under this
Agreement on account of such Covered Termination, Executive shall execute a
release (the "Release") in the form attached hereto and incorporated herein as
Exhibit B. Such Release shall specifically relate to all of Executive's rights
and claims in existence at the time of such execution and shall confirm
Executive's obligations under the Company's standard form of proprietary
information and inventions agreement. It is understood that, as specified in the
applicable Release, Executive has a certain number of calendar days to consider
whether to execute such Release, and Executive may revoke such Release within
seven (7) calendar days after execution. In the event Executive does not execute
such Release within the applicable period, or if Executive revokes such Release
within the subsequent seven (7) day period, no benefits shall be payable under
this Agreement, and this Agreement shall be null and void.
3.2 TERMINATION OF BENEFITS. Benefits under this Agreement shall
terminate immediately if the Executive, at any time, violates any proprietary
information or confidentiality obligation to the Company.
3.3 NON-DUPLICATION OF BENEFITS. Executive is not eligible to receive
benefits under this Agreement more than one time.
ARTICLE 4
DEFINITIONS
For purposes of the Agreement, the following terms are defined as
follows:
4.1 "BASE SALARY" means Executive's annual base salary as in effect
during the last regularly scheduled payroll period immediately preceding the
Covered Termination.
4.2 "BOARD" means the Board of Directors of the Company.
4.3 "CAUSE" means that, in the reasonable determination of the Company
or, in the case of the Chief Executive Officer, the Board, Executive:
(a) has committed an act that materially injures the business of the
Company;
(b) has refused or failed to follow lawful and reasonable directions of
the Board or the appropriate individual to whom Executive reports;
(c) has willfully or habitually neglected Executive's duties for the
Company; or
(d) has been convicted of a felony involving moral turpitude that is
likely to inflict or has inflicted material injury on the business of the
Company.
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Notwithstanding the foregoing, Cause shall not exist based on conduct
described in clause (b) or clause (c) unless the conduct described in such
clause has not been cured within fifteen (15) days following Executive's receipt
of written notice from the Company or the Board, as the case may be, specifying
the particulars of the conduct constituting Cause.
4.4 "INVOLUNTARY TERMINATION WITHOUT CAUSE" means Executive's dismissal
or discharge other than for Cause. The termination of Executive's employment as
a result of Executive's death or disability will not be deemed to be an
Involuntary Termination Without Cause.
4.5 "CHANGE IN CONTROL" means
(a) a sale of substantially all of the assets of the Company;
(b) a merger or consolidation in which the Company is not the
surviving corporation (other than a merger or consolidation in which
shareholders immediately before the merger or consolidation have, immediately
after the merger or consolidation, equal or greater stock voting power);
(c) a reverse merger in which the Company is the surviving corporation
but the shares of the Company's common stock outstanding immediately preceding
the merger are converted by virtue of the merger into other property, whether in
the form of securities, cash or otherwise (other than a reverse merger in which
shareholders immediately before the merger have, immediately after the merger,
greater stock voting power); or
(d) any transaction or series of related transactions in which in
excess of 40% of the Company's voting power is transferred.
4.6 "COMPANY" means Cypros Pharmaceutical Corporation or, following a
Change in Control, the surviving entity resulting from such transaction.
4.7 "COVERED TERMINATION" means an Involuntary Termination Without Cause
or a resignation by Executive, for any reason, occurring within six (6) months
before or thirteen (13) months after the effective date of a Change in Control
of the Company; provided that if Executive resigns, he shall provide at least
three (3) weeks' notice prior to termination.
4.8 "PAYMENT DATE" means (a) in the event of an Involuntary Termination
Without Cause, the date of such termination and (b) in the event of a
resignation by Executive (i) if the resignation occurs prior to the closing of
the Change in Control transaction, then the Payment Date shall be the date of
the closing of the Change in Control transaction and (ii) if the resignation
occurs on or after the date of the closing of the Change in Control transaction,
then the Payment Date shall be the effective date of the resignation.
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ARTICLE 5
GENERAL PROVISIONS
5.1 EMPLOYMENT STATUS; EMPLOYMENT AGREEMENT SUPERCEDED. This Agreement
does not constitute a contract of employment or impose upon Executive any
obligation to remain as an employee, or impose on the Company any obligation (i)
to retain Executive as an employee, (ii) to change the status of Executive as an
at-will employee, or (iii) to change the Company's policies regarding
termination of employment. In the event of any conflict between the provisions
of this Agreement and the provisions of any other previously existing
employment, severance or other similar agreement, then the provisions of this
Agreement shall govern.
5.2 NOTICES. Any notices provided hereunder must be in writing, and such
notices or any other written communication shall be deemed effective upon the
earlier of personal delivery (including personal delivery by facsimile) or the
third day after mailing by first class mail, to the Company at its primary
office location and to Executive at Executive's address as listed in the
Company's payroll records. Any payments made by the Company to Executive under
the terms of this Agreement shall be delivered to Executive either in person or
at the address as listed in the Company's payroll records.
5.3 SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provisions had never been contained herein.
5.4 WAIVER. If either party should waive any breach of any provisions of
this Agreement, he or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
5.5 ARBITRATION. Unless otherwise prohibited by law or specified below,
all disputes, claims and causes of action, in law or equity, arising from or
relating to this Agreement or its enforcement, performance, breach, or
interpretation shall be resolved solely and exclusively by final and binding
arbitration held in San Diego County, California through American Arbitration
Association ("AAA") under the then existing AAA arbitration rules. However,
nothing in this section is intended to prevent either party from obtaining
injunctive relief in court to prevent irreparable harm pending the conclusion of
any such arbitration. Each party in any such arbitration shall be responsible
for its own attorneys' fees, costs and necessary disbursement; PROVIDED,
however, that in the event one party refuses to arbitrate and the other party
seeks to compel arbitration by court order, if such other party prevails, it
shall be entitled to recover reasonable attorneys' fees, costs and necessary
disbursements. Pursuant to California Civil Code Section 1717, each party
warrants that it was represented by counsel in the negotiation and execution of
this Agreement, including the attorneys' fees provision herein.
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5.6 COMPLETE AGREEMENT. This Agreement, including Exhibits A and B,
constitutes the entire agreement between Executive and the Company and is the
complete, final, and exclusive embodiment of their agreement with regard to this
subject matter, wholly superseding all written and oral agreements with respect
to cash severance benefits and health benefits to Executive in the event of
employment termination other than any outstanding loans by the Company to
Executive. It is entered into without reliance on any promise or representation
other than those expressly contained herein.
5.7 AMENDMENT OR TERMINATION OF AGREEMENT. This Agreement may be changed
or terminated only upon the mutual written consent of the Company and Executive.
The written consent of the Company to a change or termination of this Agreement
must be signed by an executive officer of the Company after such change or
termination has been approved by the Board.
5.8 COUNTERPARTS. This Agreement may be executed in separate
counterparts, any one of which need not contain signatures of more than one
party, but all of which taken together will constitute one and the same
Agreement.
5.9 HEADINGS. The headings of the Articles and Sections hereof are
inserted for convenience only and shall not be deemed to constitute a part
hereof nor to affect the meaning thereof.
5.10 SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and inure
to the benefit of and be enforceable by Executive, and the Company, and any
surviving entity resulting from a Change in Control and upon any other person
who is a successor by merger, acquisition, consolidation or otherwise to the
business formerly carried on by the Company, and their respective successors,
assigns, heirs, executors and administrators, without regard to whether or not
such person actively assumes any rights or duties hereunder; PROVIDED, HOWEVER,
that Executive may not assign any duties hereunder and may not assign any rights
hereunder without the written consent of the Company, which consent shall not be
withheld unreasonably.
5.11 CHOICE OF LAW. All questions concerning the construction, validity
and interpretation of this Agreement will be governed by the law of the State of
California, without regard to such state's conflict of laws rules.
5.12 NON-PUBLICATION. The parties mutually agree not to disclose publicly
the terms of this Agreement except to the extent that disclosure is mandated by
applicable law or to respective advisors (E.G., attorneys, accountants).
5.13 CONSTRUCTION OF AGREEMENT. In the event of a conflict between the
text of the Agreement and any summary, description or other information
regarding the Agreement, the text of the Agreement shall control.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the
Effective Date written above.
CYPROS PHARMACEUTICAL CORPORATION XXXXX X. XXXXXX
By:
--------------------------------- ----------------------------------
Name:
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Title:
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Exhibit A: Bonus Agreement
Exhibit B: Release
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