EXECUTIVE SEVERANCE CHANGE IN CONTROL AGREEMENT
Exhibit 10.4
EXECUTIVE SEVERANCE
&
CHANGE IN CONTROL AGREEMENT
THIS EXECUTIVE SEVERANCE AND CHANGE IN CONTROL AGREEMENT (the “Agreement”) is made by and between Xxxxxx Pharmaceuticals, Inc. (the “Company”), and Xxxxxxx X. Step (“Executive”) as of December 2, 2014.
In consideration of the mutual promises, covenants and obligations contained herein, the Company and Executive agree as follows:
2. Definitions. For purposes of this Agreement, the following terms have the following meanings:
(a) “Accrued Obligations” means (i) Executive’s earned but unpaid Base Salary through the Termination Date; (ii) payment of any annual, long-term, or other incentive award which relates to a completed fiscal year or performance period, as applicable, and is payable (but not yet paid) on or before the Termination Date; (iii) a lump-sum payment in respect of accrued but unused vacation days at Executive’s per-business-day Base Salary rate in effect as of the Termination Date; and (iv) any unpaid expense or other reimbursements due pursuant to Company expense reimbursement policy.
(b) “Affiliate(s)” means, with respect to any specified Person (as such term is used in Section 13(d) of the Securities Exchange Act of 1934, as amended), any other Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person.
(c) “Annual Bonus” means Executive’s target annual bonus for the year in which the Change in Control occurs.
(d) “Base Salary” means Executive’s base rate of pay as of a specified date.
(e) “Cause” means a finding by the Company that Executive has (i) been convicted of a felony or crime involving moral turpitude; (ii) disclosed trade secrets or confidential information of the Company (or any Parent or Subsidiary) to persons not entitled to receive such information; (iii) engaged in conduct in connection with Executive’s employment or service to the Company (or any Parent or Subsidiary), that has, or could reasonably be expected to result in, material injury to the business or reputation of the Company (or any Parent or Subsidiary), including, without limitation, act(s) of fraud, embezzlement, misappropriation and
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breach of fiduciary duty; (iv) violated the operating and ethics policies of the Company (or any Parent or Subsidiary) in any material way, including, but not limited to those relating to sexual harassment and the disclosure or misuse of confidential information; (v) engaged in willful and continued negligence in the performance of the duties assigned to Executive by the Company, after Executive has received notice of and failed to cure such negligence; or (vi) breached any material provision of any agreement between Executive and the Company (or any Parent or Subsidiary), including, without limitation, any confidentiality agreement.
(f) “Change in Control” means the occurrence of any of the following events:
(i) | Any “person” (as such term is used in sections 13(d) and 14(d) of the Exchange Act) becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than 50% of the voting power of the then outstanding securities of the Company; provided that a Change of Control shall not be deemed to occur as a result of a change of ownership resulting from the death of a shareholder, and a Change of Control shall not be deemed to occur as a result of a transaction in which the Company becomes a subsidiary of another corporation and in which the shareholders of the Company, immediately prior to the transaction, will beneficially own, immediately after the transaction, shares entitling such shareholders to more than 50% of all votes to which all shareholders of the parent corporation would be entitled in the election of directors (without consideration of the rights of any class of stock to elect directors by a separate class vote) |
(ii) | A change in the effective control of the Company which occurs on the date that a majority of members of the Board is replaced during any twelve (12) month period by Directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election; or |
(iii) | The consummation of (A) a merger or consolidation of the Company with another corporation where the shareholders of the Company, immediately prior to the merger or consolidation, will not beneficially own, immediately after the merger or consolidation, shares entitling such shareholders to more than 50% of all votes to which all shareholders of the surviving corporation would be entitled in the election of directors (without consideration of the rights of any class of stock to elect directors by a separate class vote); (B) a sale or other disposition of all or substantially all of the assets of the Company; or (C) a liquidation or dissolution of the Company. |
(g) “Disability” means total and permanent disability as defined in Section 22(e)(3) of the Code or in the Company’s long-term disability plan. A termination of Executive’s
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employment due to a Disability shall be effective only if the party terminating Executive’s employment first gives at least 15 days’ written notice of such termination to the other party.
(h) “Good Reason” means, without Executive’s express written consent, the occurrence of any one or more of the following: (i) a substantial and material diminution in Executive’s duties or responsibilities; (ii) a material reduction in Executive’s Base Salary; or (iii) the relocation of Executive’s principal place of employment to a location more than 50 miles from Executive’s principal work location to a location that is more than 50 miles from the prior location. Notwithstanding the foregoing, a relocation of Executive’s principal place of employment to a location closer to Executive’s principal residence in San Diego, California shall not constitute “Good Reason.” A termination of employment by Executive for Good Reason shall be effectuated by giving the Company written notice (“Notice of Termination for Good Reason”), not later than 90 days following the occurrence of the circumstance that constitutes Good Reason, setting forth in reasonable detail the specific conduct of the Company that constitutes Good Reason and the specific provision(s) of this Agreement on which Executive relied. The Company shall be entitled, during the 30-day period following receipt of a Notice of Termination for Good Reason, to cure the circumstances that gave rise to Good Reason, provided that the Company shall be entitled to waive its right to cure or reduce the cure period by delivery of written notice to that effect to Executive (such 30-day or shorter period, the “Cure Period”). If, during the Cure Period, such circumstance is remedied, Executive will not be permitted to terminate employment for Good Reason as a result of such circumstance. If, at the end of the Cure Period, the circumstance that constitutes Good Reason has not been remedied, Executive shall terminate employment for Good Reason on the date of expiration of the Cure Period.
(i) “Termination Date” means the date on which Executive’s employment hereunder terminates.
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Company to Executive and Executive’s spouse and dependents (in each case, as provided in any applicable plan) at least equal to the levels of benefits provided to other similarly situated active employees of the Company and its subsidiaries until the earlier of (i) the twelve (12) month anniversary of the Termination Date or (ii) the date that Executive becomes covered under a subsequent employer’s medical and dental plans; and (d) acceleration of vesting of all equity and equity-based awards.
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(b) Notwithstanding any provision of this Agreement to the contrary, if Executive is a “specified employee” within the meaning of Section 409A, any payments or arrangements due upon a termination of Executive’s employment under any arrangement that constitutes a “nonqualified deferral of compensation” within the meaning of Section 409A and which do not otherwise qualify under the exemptions under Treas. Regs. Section 1.409A-1 (including without limitation, the short-term deferral exemption or the permitted payments under Treas. Regs. Section 1.409A-1(b)(9)(iii)(A)), shall be delayed and paid or provided, without interest, on the earlier of (i) the date which is six months after Executive’s “separation from service” (as such term is defined in Section 409A and the regulations and other published guidance thereunder) for any reason other than death, and (ii) the date of Executive’s death.
(c) After any Termination Date, Executive shall have no duties or responsibilities that are inconsistent with having a “separation from service” within the meaning of Section 409A and, notwithstanding anything in the Agreement to the contrary, distributions upon termination of employment of nonqualified deferred compensation may only be made upon a “separation from service” as determined under Section 409A and such date shall be the Termination Date for purposes of this Agreement. Each payment under this Agreement or otherwise shall be treated as a separate payment for purposes of Section 409A. In no event may Executive, directly or indirectly, designate the calendar year of any payment to be made under this Agreement which constitutes a “nonqualified deferral of compensation” within the meaning of Section 409A and to the extent an amount is payable within a time period, the time during which such amount is paid shall be in the discretion of the Company.
(b) This Agreement and all rights of Executive hereunder shall inure to the benefit of, and be enforceable by, Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If Executive should die while any amounts would still be payable to him or her hereunder if he or she had continued to live, 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, should there be no such designee, to Executive’s estate.
(c) The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company (a “Successor”) to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would have been required to perform it if no
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such succession had taken place. As used in this Agreement, (i) the term “Company” shall mean the Company as hereinbefore defined and any Successor and any permitted assignee to which this Agreement is assigned and (ii) the term “Board” shall mean the Board as hereinbefore defined and the board of directors or equivalent governing body of any Successor and any permitted assignee to which this Agreement is assigned.
12. Dispute Resolution. The parties agree that any dispute arising out of or relating to this Agreement or the formation, breach, termination or validity thereof, will be settled by binding arbitration by a panel of three arbitrators in accordance with the commercial arbitration rules of the American Arbitration Association. The arbitration proceedings will be located in Los Angeles County, California. The arbitrators are not empowered to award damages in excess of compensatory damages and each party irrevocably waives any damages in excess of compensatory damages. Judgment upon any arbitration award may be entered into any court having jurisdiction thereof and the parties consent to the jurisdiction of any court of competent jurisdiction located in the State of California.
13. GOVERNING LAW. THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN THE STATE OF CALIFORNIA, AND THE VALIDITY, INTERPRETATION, CONSTRUCTION AND PERFORMANCE OF THIS AGREEMENT IN ALL RESPECT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO ITS PRINCIPLES OF CONFLICTS OF LAW.
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rights and obligations arising from Executive’s employment hereunder, to the extent necessary to preserve the intended benefits of such provisions.
XXXXXX PHARMACEUTICALS, INC. | ||
By: | /s/ Xxxxxx X. Xxxxxx | |
Name: | Xxxxxx Xxxxxx | |
Title: | President | |
Executive | ||
By: | /s/ Xxxxxxx X. Step | |
Name: | Xxxxxxx X. Step | |
Title: | Chief Executive Officer |
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