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EXHIBIT 10.65
TERMINATION AGREEMENT
THIS TERMINATION AGREEMENT, dated as of December 10, 1998 is made and
entered into by and between Texas Biotechnology Corporation, a Delaware
corporation with its principal office at 0000 Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx
(the "Company"), and Xxxx XxXxxxx, M.D. ("Executive").
RECITALS
A. Company desires to enter into an agreement with Executive whereby
severance benefits will be paid to Executive on a change in control of the
Company and consequent actual or constructive termination of Executive's
employment.
B. This Agreement sets forth the severance benefits which the Company
agrees that it will pay to the Executive if Executive's employment with the
Company terminates under one of the circumstances described herein following a
Change in Control of the Company.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
convenants contained herein, the parties hereto agree as follows:
1. Term of Agreement. This Agreement shall be effective immediately on
the date hereof and shall continue in effect through December 31, 1999;
provided, however, that commencing on January 1, 2000 and each January 1
thereafter, the term of this Agreement shall automatically be extended for one
additional year unless not later than September 30 of the preceding year, the
Company shall have given notice that it does not wish to extend this Agreement;
provided, further, that notwithstanding any such notice by the Company not to
extend this Agreement shall automatically be extended for 24 months beyond the
term provided herein if a Change in Control, as defined in Section 3 of this
Agreement has occurred during the term of this Agreement.
2. Effect on Employment Rights. This Agreement is not part of any
employment agreement that the Company and Executive may have entered. Nothing in
this Agreement shall confer upon Executive any right to continue in the employ
of the Company or interfere with or restrict in any way the rights of the
Company, which are hereby expressly reserved, to terminate for any reason, with
or without cause.
Executive agrees that, subject to the terms and conditions of this
Agreement, in the event of a potential change in control of the Company (as
defined below), Executive will remain in the employ of the Company during the
pendency of any such potential change in control and for a period of one year
after the occurrence of an actual Change in Control. For this purpose, a
"potential change in control of the Company" shall be deemed to have occurred if
(a) the Company enters into an agreement, the consummation of which would result
in the occurrence of a Change in Control, (b) any person (including the Company)
publicly announces an intention to take or consider taking action which if
consummated would constitute a Change in Control or (c) the Board of Directors
of the Company (the "Board") adopts a resolution to the effect that a potential
change in control of the Company has occurred.
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3. Change in Control. For purposes of this Agreement, a "Change in
Control" of the Company shall be deemed to have occurred if any of the events
set forth in any one of the following paragraphs shall occur:
(a) any "person" (as defined in section 3(a) (9) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and as such term is
modified in sections 13(d) and 14(d) of the Exchange Act), excluding the
Company or any of its subsidiaries, a trustee or any fiduciary holding
securities under an employee benefit plan of the Company of any of its
subsidiaries, an underwriter temporarily holding securities pursuant to
an offering of such securities or a corporation owned, directly or
indirectly, by stockholders of the Company in substantially the same
proportions as their ownership of the Company, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 30% or
more of the combined voting power of the Company's then outstanding
securities; or
(b) during any period of not more than two consecutive years,
individuals who at the beginning of such period constitute the Board and
any new director (other than a director designated by a Person who has
entered into an agreement with the Company to effect a transaction
described in clause (a), (c) or (d) of this paragraph) whose election by
the Board or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds (2/3) of the directors then
still in office who either were directors at the beginning of the period
or whose election or nomination for election was previously so approved,
cease for any reason to constitute a majority thereof; or
(c) the shareholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than (i) 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), in combination with the ownership of
any trustee or other fiduciary holder of securities under an employee
benefit plan of the Company, at least 50% of the combined voting power of
the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or (ii) a merger or
consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no person acquires more than 50% of the
combined voting power of the Company's then outstanding securities; or
(d) 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.
Notwithstanding the foregoing, no Change in Control shall be deemed to
have occurred if there is consummated any transaction or series of
integrated transactions immediately following which, in the judgment of
the Compensation Committee of the Board, the holders of the Company's
Common Stock immediately prior to such transaction or series of
transactions continue to have the same proportionate ownership in an
entity which owns all or substantially all of the assets of the Company
immediately prior to such transaction or series of transactions.
4. Termination of Employment Following a Change in Control. Executive
shall be entitled to the benefits provided in Section 5 hereof upon the
subsequent termination of
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Executive's employment by the Company within two years after a Change in Control
which occurs during the term of this Agreement, provided such termination is (a)
by the Company other than for cause, as defined below, or (b) by Executive for
Good Reason, as defined below. Executive shall not be entitled to the benefits
of Section 5, any other provision hereof to the contrary notwithstanding, if
Executive's employment terminates: (i) pursuant to Executive retiring at age 65,
(ii) by reason of Executive's total and permanent disability, or (iii) by reason
or Executive's death. As used herein, "total and permanent disability" means a
condition which prevents Executive from performing to a significant degree the
essential duties of his or her position and is expected to be of long-term
duration or result in death. A determination of total and permanent disability
must be based on competent medical evidence.
(a) Cause.
(i) Definition. Termination by the Company of Executive's
employment for Cause shall mean termination upon Executive's willful
engaging in misconduct which is demonstrably and materially injurious to
the Company and its subsidiaries taken as a whole. No act, or failure to
act, on Executive's part shall be considered "willful" unless done, or
omitted to be done, by Executive not in good faith and without reasonable
belief that Executive's action or omission was in the best interest of
the Company or its subsidiaries. Notwithstanding the foregoing, Executive
shall not be deemed to have been terminated for Cause unless and until
there shall have been delivered to Executive a copy of a resolution duly
adopted by the affirmative vote of not less than three quarters of the
entire membership of the Board at a meeting of the Board called and held
for the purpose of making a determination of whether Cause for
termination exists (after reasonable notice to Executive and an
opportunity for Executive to be heard before the Board), finding that in
the good faith opinion of the Board Executive was guilty of misconduct as
set forth above in this subsection 4(a)(i) and specifying the particulars
thereof in detail.
(ii) Remedy by Executive. If the Company gives Executive a Notice
of Termination which states that the basis for terminating Executive's
employment is Cause, Executive shall have ten days after receipt of such
Notice to remedy the facts and circumstances which provided Cause. The
Board (or any duly authorized Committee thereof) shall make a good faith
reasonable determination immediately after such ten-day period whether
such facts and circumstances have been remedied and shall communicate
such determination in writing to Executive. If the Board determines that
an adequate remedy has not occurred, then the initial Notice of
Termination shall remain in effect.
(b) Good Reason. After a Change in Control, Executive may
terminate employment with the Company at any time during the term of this
Agreement if Executive has made a good faith reasonable determination
that Good Reason exists for this termination.
(i) Definition. for purposes of this Agreement, "Good
Reason" shall mean any of the following actions, if taken without
the express written consent of Executive:
A. any material change by the Company in Executive's
functions, duties, or responsibilities which change would cause
Executive's position with the Company to become of less dignity,
responsibility, importance, or scope from the position and
attributes that applied to Executive immediately prior to the
Change in Control;
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B. any significant reduction in Executive's base salary,
other than a reduction effected as part of an across-the-board
reduction affecting all executive employees of the Company;
C. any material failure by the Company to comply with any of
the provisions of this Agreement (or of any employment agreement
between the parties);
D. the Company's requiring Executive to be based at any
office or location more than 45 miles from the home at which the
Executive resides on the date immediately preceding the Change in
Control, except for travel reasonably required in the performance
of Executive's responsibilities and commensurate with the amount
of travel required of Executive prior to the Change in Control; or
E. any failure by the Company to obtain the express
assumption of this Agreement by any successor or assign of the
Company.
Executive's right to terminate employment for Good Reason
pursuant to this subsection 4(b)(I) shall not be affected by
Executive's incapacity due to physical or mental illness.
(ii) Remedy by Company. If Executive gives the Company a
Notice of Termination which states that the basis for Executive's
termination of employment is Good Reason, the Company shall have
ten days after receipt of such Notice to remedy the facts and
circumstances which provided Good Reason. Executive shall make a
good faith reasonable determination immediately after such ten-day
period whether such facts and circumstances have been remedied and
shall communicate such determination in writing to the Company. If
Executive determines that adequate remedy has not occurred, then
the initial Notice of Termination shall remain in effect.
(iii) Determination by Executive Presumed Correct. Any
determination by Executive pursuant to this Section 4(b) that Good
Reason exists for Executive's termination of employment and that
adequate remedy has not occurred shall be presumed correct and
shall govern unless the party contesting the determination shows
by a clear preponderance of the evidence that it was not a good
faith reasonable determination.
(iv) Severance Payment Made Notwithstanding Dispute.
Notwithstanding any dispute concerning whether Good Reason exists
for termination of employment or whether adequate remedy has
occurred, the Company shall immediately pay to Executive, as
specified in Section 5, any amounts otherwise due under this
Agreement. Executive may be required to repay such amounts to the
Company if any such dispute is finally determined adversely to
Executive.
(c) Notice of Termination. Any termination of Executive's
employment by the Company or by Executive hereunder shall be communicated
by a Notice of Termination to the other party hereto. For purposes of
this Agreement, a "Notice of Termination" shall mean a written notice
which shall indicate the specific termination provisions in this
Agreement relied upon and which sets forth (i) in reasonable detail the
facts and
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circumstances claimed to provide a basis for termination of Executive's
employment under the provision so indicated and (ii) the date of
Executive's termination of employment, which shall be no earlier than 10
days after such Notice is received by the other party. Any purported
termination of the Executive's employment by the Company which is not
effected pursuant to a Notice of Termination satisfying the requirements
of this Agreement shall not be effective. In the case of a termination
for Cause, the Notice of Termination shall also satisfy the requirements
set forth in Section 4(a)(i).
5. Severance Payment Upon Termination of Employment. If Executive's
employment with the Company is terminated during the term of this Agreement and
after a Change in Control (a) by the Company other than for Cause, or (b) by
Executive for Good Reason, then Executive shall be entitled to the following:
(a) Lump-Sum Severance Payment. In lieu of any further salary
payments to the Executive for periods subsequent to the Date of
Termination, the Company shall pay to the Executive a lump sum severance
payment, in cash, equal to one and one half (1.5) (or, if less, the
number of years, including fractions, from the Date of Termination until
the Executive would have reached age sixty-five (65)) times the sum of
(a) the Executive's Annual Base Salary in effect on date of termination
and (b) the Executive's most recent Annual Bonus. If the most recent
Annual Bonus was a stock option or a stock grant, the value of the bonus
will be deemed to be the number of option shares times the closing price
of the Company's Common Stock for the 20 trading days prior to
Termination.
(b) Continued Benefits. For a eighteen (18) month period (or, if
less, the number of months from the Date of Termination until the
Executive would have reached age sixty-five (65)) after the Date of
Termination, the Company shall provide the Executive with life insurance,
health, disability and other welfare benefits ("Welfare Benefits")
substantially similar in all respects to those which the Executive is
receiving immediately prior to the Notice of Termination (without giving
effect to any reduction in such benefits subsequent to the Potential
Change in Control preceding the Change in Control or the Change in
Control which reduction constitutes or may constitute Good Reason).
Benefits otherwise receivable by an Executive pursuant to this Section
shall be reduced to the extent substantially similar benefits are
actually received by or made available to the Executive by any other
employer during the same time period for which such benefits would be
provided pursuant to this Section at a cost to the Executive that is
commensurate with the cost incurred by the Executive immediately prior to
the Executive's Date of Termination (without giving effect to any
increase in costs paid by the Executive after the Potential Change in
Control preceding the Change in Control or the Change in Control which
constitutes or may constitute Good Reason); provided, however, that if
the Executive becomes employed by a new employer which maintains a
medical plan that either (i) does not cover the Executive or a family
member or dependent with respect to a preexisting condition which was
covered under the applicable Company medical plan, or (ii) does not cover
the Executive or a family member or dependent for a designated waiting
period, the Executive's coverage under the applicable Company medical
plan shall continue (but shall be limited in the event of noncoverage due
to a preexisting condition, to such preexisting condition) until the
earlier of the end of the applicable period of noncoverage under the new
employer's plan or the third anniversary of the Executive's Date of
Termination. The Executive agrees to report to the Company any coverage
and benefits actually received by the Executive or made available to the
Executive from such other employer(s). The Executive shall be entitled to
elect to change his level of coverage and/or his choice of
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coverage options (such as Executive only or family medical coverage) with
respect to the Welfare Benefits to be provided by the Company to the
Executive to the same extent that actively employed senior executives of
the Company are permitted to make such changes; provided, however, that
in the event of any such changes the Executive shall pay the amount of
any cost increase that would actually be paid by an actively employed
executive of the Company by reason of making the same change in his level
of coverage or coverage options.
(c) Gross-Up Payment. In the event that the Executive becomes
entitled to the Severance Benefits or any other benefits or payments
under this Agreement (other than pursuant to this Section) by reason of
the accelerated vesting of stock options thereunder (together, the "Total
Benefits"), and in the event that any of the Total Benefits will be
subject to the Excise Tax, the Company shall pay to the Executive an
additional amount (the "Gross-Up Payment") such that the net amount
retained by the Executive, after deduction of any Excise Tax on the Total
Benefits and any federal, state and local income tax, Excise Tax and FICA
and Medicare withholding taxes upon the payment provided for by this
Section, shall be equal to the Total Benefits.
For purposes of determining whether any of the Total Benefits will
be subject to the Excise Tax and the amount of such Excise Tax, (i) any
other payments or benefits received or to be received by the Executive in
connection with a Change in Control or the Executive's termination of
employment (whether pursuant to the terms of this Agreement or any other
agreement, plan or arrangement with the Company, any Person whose actions
result in a Change in Control or any Person affiliated with the Company
or such Person) shall be treated as "parachute payments" within the
meaning of Section 280G(b) (2) of the Code, and all "excess parachute
payments" within the meaning of Section 280G(b) (1) shall be treated as
subject to the Excise Tax, unless in the opinion of tax counsel ("Tax
Counsel") selected by the Company's independent auditors and acceptable
to the Executive, such other payments or benefits (in whole or in part)
do not constitute parachute payments, or such excess parachute payments
(in whole or in part) represent reasonable compensation for services
actually rendered within the meaning of Section 280G(b) (4) of the Code
in excess of the Base Amount, or are otherwise not subject to the Excise
Tax, (ii) the amount of the Total Benefits which shall be treated as
subject to the Excise Tax shall be equal to the lesser of (A) the total
amount of the Total Benefits reduced by the amount of such Total Benefits
that in the opinion of Tax Counsel are not parachute payments, or (B) the
amount of excess parachute payments within the meaning of Section 280G(b)
(1) (after applying clause (i), above), and (iii) the value of any
non-cash benefits or any deferred payment or benefit shall be determined
by the Company's independent auditors in accordance with the principles
of sections 280G(d) (3) and (4) of the Code. For purposes of determining
the amount of the Gross-Up Payment, the Executive shall be deemed to pay
federal income taxes at the highest marginal rate of federal income
taxation in the calendar year in which the Gross-Up Payment is to be made
and state and local income taxes at the highest marginal rate of taxation
in the state and locality of the Executive's residence on the Date of
Termination, net of the reduction in federal income taxes which could be
obtained from deduction of such state and local taxes (calculated by
assuming that any reduction under Section 68 of the Code in the amount of
itemized deductions allowable to the Executive applies first to reduce
the amount of such state and local income taxes that would otherwise be
deductible by the Executive).
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In the event that the Excise Tax is subsequently determined to be
less than the amount taken into account hereunder at the time of
termination of the Executive's employment, the Executive shall repay to
the Company, at the time that the amount of such reduction in Excise Tax
is finally determined, the portion of the Gross-Up Payment attributable
to such reduction (plus that portion of the Gross-Up Payment attributable
to the Excise Tax, federal, state and local income taxes and FICA and
Medicare withholding taxes imposed on the portion of the Gross-Up Payment
being repaid by the Executive to the extent that such repayment results
in a reduction in Excise Tax, FICA and Medicare withholding taxes and/or
federal, state or local income taxes) plus interest on the amount of such
repayment at the rate provided in Section 1274(b) (2) (B) of the Code. In
the event that the Excise Tax is determined to exceed the amount taken
into account hereunder at the time of the termination of the Executive's
employment (including by reason of any payment the existence or amount of
which cannot be determined at the time of the Gross-Up Payment), the
Company shall make an additional Gross-Up Payment, determined as
previously described, to the Executive in respect of such excess (plus
any interest, penalties or additions payable by the Executive with
respect to such excess) at the time that the amount of such excess is
finally determined.
(D) Timing of Payments. The payments provided for in Sections 5(a)
and 5(c) shall be made not later than the fifth (5th) day following the
Date of Termination; provided, however, that if the amounts of such
payments cannot be finally determined on or before such day, the Company
shall pay to the Executive on such day an estimate, as determined in good
faith by the Company, of the minimum amount of such payments and shall
pay the remainder of such payments (together with interest at the rate
provided in Section 1274(b) (2) (B) of the Code from the fifth (5th) day
following the Date of Termination to the payment of such remainder) as
soon as the amount thereof can be determined but in no event later than
the thirtieth (30th) day after the Date of Termination. In the event that
the amount of the estimated payments exceeds the amount subsequently
determined to have been due, such excess shall constitute a loan by the
Company to the Executive, payable on the fifth (5th) business day after
demand by the Company (together with interest at the rate provided in
Section 1274(b) (2) (B) of the Code from the fifth (5th) day following
the Date of Termination to the repayment of such excess).
6(D) Reimbursement of Legal Costs. The Company shall pay to the
Executive all legal fees and expenses incurred by the Executive as a
result of a termination which entitles the Executive to any payments
under this Agreement including all such fees and expenses, if any,
incurred in contesting or disputing any Notice of Intent to Terminate
under Section 4.(a) hereof or in seeking to obtain or enforce any right
or benefit provided by this Agreement or in connection with any tax audit
or proceeding to the extent attributable to the application of Section
4999 of the Code to any payment or benefit provide hereunder. Such
payments shall be made within five (5) business days after delivery of
the Executive's respective written requests for payment accompanied by
such evidence of fees and expenses incurred as the Company reasonably may
require.
7. Damages. Executive shall not be required to mitigate damages
with respect to the amount of any payment provided under this Agreement by
seeking other employment or otherwise, nor shall the amount of any payment
provided under this Agreement be reduced by retirement benefits, deferred
compensation or any compensation earned by Executive as a result of employment
by another employer.
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8. Successor to Company. The Company shall require any successor
or assign (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company, by agreement in form and substance satisfactory to Executive,
expressly, absolutely and unconditionally to assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession or assignment had taken place. As
used in this Agreement, "Company" shall mean the Company as hereinbefore defined
and any successor or assign to its business and/or assets as aforesaid which
executes and delivers the agreement provided for in this section or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law.
9. Heirs of Executive. This Agreement shall inure to the benefit
of and be enforceable by Executive's personal and legal representatives,
executors, administrators, successors, heirs, distributes, devisees and
legatees. If Executive should die while any amounts are still payable to
Executive hereunder, all such amounts, unless otherwise provided herein, shall
be paid in accordance with the terms of this Agreement to Executive's devisee,
legatee, or other designee or, if there be so such designee, to Executive's
estate.
10. Arbitration. Any dispute, controversy or claim arising under
or in connection with this Agreement, or the breach hereof, shall be settled
exclusively by arbitration in accordance with the Rules of the American
Arbitration Association then in effect. Judgment upon the award rendered by the
arbitrator(s) may be entered in any court of competent jurisdiction. Any
arbitration held pursuant to this section in connection with Executive's
termination of employment shall take place in Houston, Texas at the earliest
possible date. If any proceeding is necessary to enforce or interpret the terms
of this Agreement, or to recover damages for breach thereof, the prevailing
party shall be entitled to reasonable attorneys fees and necessary costs and
disbursements, not to exceed in the aggregate one percent (1%) of the net worth
of the other party, in addition to any other relief to which he or it may be
entitled.
11. 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 delivered by messenger or in person, or when
mailed by United States registered mail, return receipt requested, postage
prepaid, as follows:
If to the Company: Texas Biotechnology Corporation
0000 Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: President
If to the Executive: Xxxx XxXxxxx, M.D.
c/o Texas Biotechnology Corporation
0000 Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
or 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.
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12. General Provisions.
(a) Executive's rights and obligations under this Agreement shall
not be transferable by assignment or otherwise, nor shall Executive's rights be
subject to encumbrance or subject to the claims of the Company's creditors.
Nothing in this Agreement shall prevent the consolidation of the Company with,
or its merger into, any other corporation, or the sale by the Company of all or
substantially all of its properties or assets; and this Agreement shall inure to
the benefit of, be binding upon and be enforceable by, any successor surviving
or resulting corporation, or other entity to which such assets shall be
transferred. This Agreement shall not be terminated by the voluntary or
involuntary dissolution of the Company.
(b) This Agreement and any Employment Agreement with Executive
plus terms of any stock option plans or grants constitutes the entire agreement
between the parties hereto in respect to the rights and obligations of the
parties following a Change in Control. This Agreement supersedes and replaces
all prior oral and written agreements, understandings, commitments, and
practices between the parties (whether or not fully performed by Executive prior
to the date hereof), which shall be of no further force or effect.
(c) The provisions of this Agreement shall be regarded as
divisible, and if any of said provisions or any part thereof are declared
invalid or unenforceable by a court of competent jurisdiction, the validity and
enforceability of the remainder of such provisions or parts thereof and the
applicability thereof shall not be affected thereby.
(d) This Agreement may not be amended or modified except by a
written instrument executed by the Company and Executive.
(e) This Agreement and the rights and obligations hereunder shall
be governed by and construed in accordance with the laws of the State of Texas.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
TEXAS BIOTECHNOLOGY CORPORATION
A Delaware Corporation
By /s/ XXXXX X. XXXXXXXXXX
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Attest: Xxxxx X. XxXxxxxxxx
President and CEO
By /s/ XXXXXXX X. XXXXXXX
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By the authority of the Compensation
Committee of the Board of Directors
of Texas Biotechnology Corporation
on March 23, 1999.
/s/ XXXX XXXXXXX
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Executive
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