Via Hand Delivery [Name] Alexza Pharmaceuticals, Inc. 1020 East Meadow Circle Palo Alto, CA 94303 Re: Change of Control Agreement Dear [Name]:
Exhibit 10.3
, 2005
Via Hand Delivery
[Name]
Alexza Pharmaceuticals, Inc.
0000 Xxxx Xxxxxx Xxxxxx
Xxxx Xxxx, XX 00000
Alexza Pharmaceuticals, Inc.
0000 Xxxx Xxxxxx Xxxxxx
Xxxx Xxxx, XX 00000
Re: Change of Control Agreement
Dear [Name]:
In consideration of your continued employment, Alexza Pharmaceuticals, Inc. (the “Company”) is
pleased to offer you the following agreement regarding your severance benefits (the “Agreement”).
This Agreement amends and supersedes any and all prior agreements with respect to your severance
benefits and any such prior agreements are hereby expressly superseded and replaced in their
entirety by this Agreement and shall have no further force or effect; provided, however, that
nothing herein shall supersede any agreement providing for severance benefits, bonuses or other
compensation or benefits which are not related to a Corporate Transaction.
1. At-Will Employment. Nothing in this Agreement alters the at-will nature of your employment
relationship with the Company. Subject to the terms of this Agreement, either you or the Company
may terminate your employment relationship at any time, with or without Cause or advance notice.
In particular, nothing expressed or implied in this Agreement will create any right or duty on the
part of the Company to have you remain in the employment of the Company or any subsidiary prior to
or following any Corporate Transaction.
2. Termination. You and the Company each acknowledge that either party has the right to
terminate your employment with the Company at any time for any reason whatsoever, with or without
cause or advance notice pursuant to the following:
(a) Termination by Death or Disability. In the event you shall die during the period of your
employment hereunder or become permanently disabled, as evidenced by your inability to carry out
your job responsibilities for a continuous period of six months, your employment and the Company’s
obligation to make payments hereunder shall terminate on the date of your death, or the date upon
which, in the sole reasonable determination of the Board of Directors, you have failed to carry out
your job responsibilities for six months, except the Company shall pay you (or your estate) (i) any
salary earned but unpaid prior to such termination and all accrued but unused vacation, and (ii)
any business expenses incurred by you in connection with your performance of your duties, according
to the policies of the Company, that were incurred but not reimbursed as of the date of such
termination. Vesting of any of your stock options outstanding on the date of termination shall
cease on the date of termination. The
1.
Company’s ability to terminate you as a result of any disability shall be to the extent
permitted by state and/or federal law.
(b) Voluntary Resignation. In the event you voluntarily resign from your employment with the
Company (other than for Good Reason as defined below), the Company’s obligation to make payments
hereunder shall cease upon such resignation, except the Company shall pay you (i) any salary earned
but unpaid prior to the resignation and all accrued but unused vacation, and (ii) any business
expenses incurred by you in connection with your performance of your duties, according to the
policies of the Company, that were incurred but not reimbursed as of the date of resignation.
Vesting of any of your stock options outstanding on the date of resignation shall cease on the date
of resignation.
(c) Termination for Cause. In the event you are terminated by the Company for Cause (as
defined below), the Company’s obligation to make payments hereunder shall cease upon the date of
receipt by you of written notice and explanation of such termination (the “Date of Termination” for
purposes of this paragraph 2(c)), except the Company shall: pay you (i) any salary earned but
unpaid prior to the Date of Termination, all accrued but unused vacation and (ii) any business
expenses, incurred by you in connection with your performance of your
duties, according to the policies of the Company, that were incurred but not reimbursed as of the Date of Termination. Vesting of any stock
options outstanding on the Date of Termination shall cease on the Date of Termination.
(d) Termination by the Company Without Cause or Resignation for Good Reason in Connection with
a Corporate Transaction. Subject to the terms and conditions of this Agreement, the Company will
provide you with Severance Benefits if a Corporate Transaction occurs and as of, or within three
(3) months prior to or twelve (12) months after, the effective time of such Corporate Transaction
(i) the Company terminates your employment without Cause or (ii) you resign your employment for
Good Reason. You will not be entitled to receive any Severance Benefits if (i) the Company
terminates your employment for Cause, (ii) you resign from your employment with the Company other
than for Good Reason, (iii) your employment with the Company terminates as a result of your death
or disability or (iv) the Company terminates your employment without Cause or you resign your
employment for Good Reason other than in connection with a Corporate Transaction as described in
the preceding sentence. In addition, to the extent that any federal, state or local laws,
including, without limitation, so-called “plant closing” laws, require the Company to give advance
notice or make a payment of any kind to you because of your involuntary termination due to a
layoff, reduction in force, plant or facility closing, sale of business, change of control, or any
other similar event or reason, the Severance Benefits payable under this Agreement shall either be
reduced proportionately, such that the total amounts paid you do not exceed the amounts specified
herein, or eliminated. The Severance Benefits provided under this Agreement are intended to
satisfy any and all statutory obligations that may arise out of your involuntary termination of
employment for the foregoing reasons.
3. Description of Severance Benefits. For purposes of this Agreement, “Severance Benefits”
are defined as:
(a)
severance pay (the “Severance Pay”) equivalent to twelve (12) months of your Base Salary
(as defined below) plus an amount equal to the greater of (i) the
annual bonus paid to you for the last completed fiscal year and (ii)
the amount of your target bonus established for the fiscal year in
which the Notice Date falls.
2.
The date you are notified that your employment
with the Company is being terminated without Cause or the date you notify the Company that you are
terminating your employment for Good Reason, shall be referred to herein as the “Notice Date.” The
Severance Pay will be paid in a single lump sum cash payment within seven days after the effective
date of the release described below, and will be subject to standard payroll deductions and
withholdings, provided that, in the event the Company determines in good faith that such payments
would be subject to Section 409A(a)(1) of the Code if paid within the time contemplated by this
Agreement, then such payments will be delayed to the minimum extent necessary to avoid the
application of Section 409A(a)(1) to such payments;
(b) all stock options in the Company theretofore granted to you, and any restricted stock
owned by you subject to a right of repurchase by the Company, shall vest immediately upon the
Notice Date; provided that, the relevant stock option plan and such stock options shall not have
otherwise terminated in accordance with the terms thereof; and
(c) reimbursement of your out of pocket costs to continue your group health insurance benefits
(and dependent coverage, if applicable) under COBRA at substantially the same level of coverage in
effect immediately prior to the Notice Date for eighteen (18) months following the last day of the
month in which your Notice Date occurs, payable in a single lump sum; provided, that even if you do
not elect or are not eligible to receive COBRA, you shall receive the equivalent of such out of
pocket costs.
To receive any of the Severance Benefits, you must first sign, date and allow to become effective a
general release of claims in favor of the Company in the form attached hereto as Exhibit A
(the “Release”). Such Release shall not be signed or dated until the Notice Date, or three days
thereafter.
4. Parachute Payments.
(a) If any payment, distribution or benefit you would receive pursuant to a Corporate
Transaction from the Company or otherwise, but determined without regard to any additional payment
required under this section 4(a), (“Payment”) would (i) constitute a “parachute payment” within the
meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), and (ii) be
subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties payable
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 you shall be entitled to
receive from the Company an additional payment (the “Gross-Up Payment”) in an amount that shall
fund the payment by you of any Excise Tax on the Payment as well as all income and employment taxes
imposed on the Gross-Up Payment, any Excise Tax imposed on the Gross-Up Payment and any interest or
penalties imposed with respect to income and employment taxes imposed on the Gross-Up Payment.
(b) The accounting firm engaged by the Company for general audit purposes as of the day prior
to the effective date of the Corporate Transaction shall perform the foregoing calculations. If
the accounting firm so engaged by the Company is serving as accountant or auditor for the
individual, entity or group effecting the Corporate Transaction, the Company shall appoint a
nationally recognized accounting firm to make the determinations required hereunder.
3.
The Company shall bear all expenses with respect to the determinations by such accounting firm
required to be made hereunder.
(c) The accounting firm engaged to make the determinations hereunder shall provide its
calculations, together with detailed supporting documentation, to the Company and you within
fifteen calendar days after the date on which your right to a Payment is triggered (if requested at
that time by the Company or you) or such other time as requested by the Company or you. If the
accounting firm determines that no Excise Tax is payable with respect to a Payment, it shall
furnish the Company and you with an opinion reasonably acceptable to you that no Excise Tax will be
imposed with respect to such Payment. Any good faith determinations of the accounting firm made
hereunder shall be final, binding and conclusive upon the Company and you.
5. Description of Corporate
Transaction. For purposes of this Agreement, “Corporate
Transaction” is defined as: (i) a sale of substantially all of the assets of the Company; (ii) a
merger or consolidation in which the Company is not the surviving corporation (other than a merger
or consolidation in which stockholders of the Company immediately before the merger or consolidation have,
immediately after the merger or consolidation, greater stock voting
power in the surviving corporation); (iii) 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 stockholders of the Company immediately before the merger have, immediately after the merger, greater stock
voting power in surviving corporation); or (iv) any transaction or series of related transactions in which in excess of 50%
of the Company’s voting power is transferred, other than the sale by the Company of stock in
transactions the primary purpose of which is to raise capital for the Company’s operations and
activities.
6. Definition of Base Salary. For purposes of this Agreement, “Base Salary” means your base
salary as of the Notice Date, excluding the following: any type of bonus payments, commissions,
incentive payments or any other similar remuneration paid directly to you, or any other income
received in connection with stock options, contributions made by the Company under any employee
benefit plan, or similar items of compensation.
7. Definition of Cause. For purposes of this Agreement, “Cause” means (i) your arrest for
violation of a state or federal criminal law involving the commission of any felony against the
Company; (ii) your intentional, material violation of any material written contract or agreement
between you and the Company (which, if curable, is not cured within twenty (20) days after written
notice thereof by the Company to you); (iv) your unauthorized use or disclosure of the Company’s
confidential information or trade secrets; or (v) your continued gross misconduct (which, if
curable, is not cured within twenty (20) days after written notice thereof by the Company to you).
In the event you are terminated for Cause you will not be entitled to the Severance Benefits, pay
in lieu of notice, vesting of any shares under any option plan, vesting of any unrestricted shares,
or any other such compensation set forth herein, but you will be entitled to all compensation,
benefits and unreimbursed expenses accrued through the date of termination. You and the Company
acknowledge that this definition of “Cause” is not intended and does not apply to any aspect of the
relationship between the Company and any of its employees, including you, beyond determining your
eligibility for the Severance Benefits.
4.
8. Definition of Good Reason. For purposes of this Agreement, “Good Reason” shall mean one or
more of the following are undertaken by the Company without your express written consent: (i)
relocation of your place of work greater than twenty-five miles from your current work location;
(ii) a decrease in compensation or (iii) the Company unilaterally
makes significant detrimental changes to your job responsibilities, including without limitation
any action resulting in a diminution in your position, authority, duties or responsibilities as of
the date of this Agreement. You and the Company acknowledge that this definition of Good Reason is
not intended and does not apply to any aspect of the relationship between the Company and any of
its employees, including you, beyond determining your eligibility for the Severance Benefits.
9. Miscellaneous. This Agreement constitutes the complete, final and exclusive embodiment of
the entire agreement between you and the Company with regard to your Severance Benefits. It is
entered into without reliance on any promise or representation, written or oral, other than those
expressly contained herein, and it supersedes any prior or
contemporaneous understandings, discussions, correspondence,
agreements promises, warranties or
representations relating to Severance Benefits. This Agreement may not be modified or amended except in writing signed by you and
a duly authorized officer of the Company. This Agreement will be deemed to have been entered into
and will be construed and enforced in accordance with the laws of the State of California as
applied to contracts made and to be performed entirely within California. The parties agree that
any action brought by either party to interpret or enforce any provision of this Agreement shall be
brought in, and each party agrees to, and does hereby, submit to the jurisdiction and venue of, the
appropriate state or federal court for the district encompassing the Company’s principal place of
business.
10. Successors and Binding Agreement. This Agreement will be binding upon and inure to the
benefit of the Company and any successor to the Company, including without limitation any persons
acquiring directly or indirectly all or substantially all of the business or assets of the Company
whether or not through a Corporate Transaction (and such successor shall thereafter be deemed the
“Company” for the purposes of this Agreement). This Agreement will inure to the benefit of and be
enforceable by your personal or legal representatives, executors, administrators, successors,
heirs, distributees and legatees.
11. Amendments. No provision of the Agreement may be amended, modified or waived unless such
amendment, modification or waiver shall be agreed to in writing and signed by the Executive and a
duly authorized officer of the Company.
12. Severability. If any provision of the Agreement shall be determined to be invalid or
unenforceable by a court of competent jurisdiction, the remaining provisions of the Agreement shall
be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by
law.
13. Independent Counsel. You acknowledge that this Agreement has been prepared on behalf of
the Company by counsel to the Company and that this counsel does not represent, and is not acting
on your behalf. You have been provided with an opportunity to consult with your own counsel with
respect to this Agreement. You understand that the Company does not make any representation or
warranty as to the tax treatment of your stock options.
5.
14. Counterparts. This Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original but all of which together will constitute one and the same
agreement.
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6.
The Company appreciates your continuing contributions to Alexza Pharmaceuticals, Inc. Please sign
below to indicate your understanding and acceptance of this Agreement and return the signed
original to me at your earliest convenience.
| Very truly yours, | ||||||||
| Alexza Pharmaceuticals, Inc. | ||||||||
By: |
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Name: |
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Title: |
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| Understood and Agreed: | ||||||||
[Name]
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Date | |||||||
7.
Exhibit A
RELEASE
In exchange for the Severance Benefits provided under the foregoing Change of Control
Agreement with Alexza Pharmaceuticals, Inc. (the “Company”), dated , 2005, and except
as set forth in this release:
I agree to the terms in the foregoing Agreement.
In
consideration of the payment to me of the Severance Benefits set
forth in the Agreement, I hereby release, acquit and forever discharge the Company, its parents and subsidiaries, and
their respective officers, directors, agents, servants, employees, attorneys, shareholders,
successors, assigns and affiliates, of and from any and all claims, liabilities, demands, causes of
action, costs, expenses, attorneys fees, damages, indemnities and obligations of every kind and
nature, in law, equity, or otherwise, known and unknown, suspected and unsuspected, disclosed and
undisclosed, arising out of or in any way related to agreements, events, acts or conduct at any
time prior to and including the execution date of this release, including but not limited to: all
such claims and demands directly or indirectly arising out of or in any way connected with my
employment with the Company or the termination of that employment; claims or demands related to
salary, bonuses, commissions, stock, stock options, or any other ownership interests in the
Company, vacation pay, fringe benefits, expense reimbursements, severance pay, or any other form of
compensation; claims pursuant to any federal, state or local law, statute, or cause of action
including, but not limited to, the federal Civil Rights Act of 1964, as amended; the federal
Americans with Disabilities Act of 1990; the federal Age Discrimination in Employment Act of 1967,
as amended (“ADEA”); the California Fair Employment and Housing Act, as amended; tort law; contract
law; wrongful discharge; discrimination; harassment; fraud; defamation; emotional distress; and
breach of the implied covenant of good faith and fair dealing.
I acknowledge that I am knowingly and voluntarily waiving and releasing any rights I may have
under the ADEA, as amended. I also acknowledge that the consideration given for the waiver and
release in the preceding paragraph hereof is in addition to anything of value to which I was
already entitled. I further acknowledge that I have been advised by this writing, as required by
the ADEA, that: (a) my waiver and release do not apply to any rights or claims that may arise
after the execution date of this release; (b) I have been advised hereby that I have the right to
consult with an attorney prior to executing this release; (c) I have twenty-one (21) days to
consider this release (although I may choose to voluntarily execute this release earlier); (d) I
have seven (7) days following my execution of this release to revoke the release; and (e) this
release will not be effective until the date upon which the revocation period has expired, which
will be the eighth day after I execute this release.
I UNDERSTAND THAT THIS AGREEMENT INCLUDES A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS. In
giving this release, which includes claims which may be unknown to me at present, I acknowledge
that I have read and understand Section 1542 of the California Civil Code which reads as follows:
“A general release does not extend to claims which the creditor does not know or suspect to exist
in his favor at the time of executing the
release, which if known by him must have materially affected his settlement with the debtor.”
I hereby expressly waive and relinquish all rights and benefits under that section and any law of
any jurisdiction of similar effect with respect to my release of any unknown or unsuspected claims
I may have against the Company.
| [Name] | ||||||
| Date: | ||||||
| Alexza Pharmaceuticals, Inc. | ||||||
| By: | ||||||
| Name: | ||||||
| Title: | ||||||
