Vanda Pharmaceuticals Inc. Employment Agreement
Exhibit 10.38
This Employment Agreement (this “Agreement”) was entered into as of December 13, 2010,
by and between Xxxxx Xxxxx (the “Executive”) and Vanda Pharmaceuticals Inc., a Delaware
corporation (the “Company”).
1. Duties and Scope of Employment.
(a) Position. For the term of his employment under this Agreement
(“Employment”), the Company agrees to employ the Executive in the position of Senior Vice
President, Chief Financial Officer, Treasurer and Secretary. The Executive shall be subject to
the supervision of, and shall have such authority as is delegated to him by, the Company’s Chief
Executive Officer. The Executive hereby accepts such employment and agrees to undertake the
duties and responsibilities normally inherent in such position and such other duties and
responsibilities as the Company’s Board of Directors (the “Board”) shall from time to time
reasonably assign to him.
(b) Obligations to the Company. During the term of his Employment, the Executive
shall devote his full business efforts and time to the Company.
During the term of his Employment, without the prior written approval of the Board, the
Executive shall not render services in any capacity to any other person or entity and shall
not act as a sole proprietor or partner of any other person or entity or as a shareholder owning more
than five percent of the stock of any other corporation. The Executive shall comply with the
Company’s policies and rules, as they may be in effect from time to time during the term of
his Employment.
(c) No Conflicting Obligations. The Executive represents and
warrants to the Company that he is under no obligations or commitments, whether contractual or
otherwise, that are inconsistent with his obligations under this Agreement. The Executive
represents and warrants that he will not use or disclose, in connection with his Employment, any
trade secrets or other proprietary information or intellectual property in which the Executive or
any other person has any right, title or interest and that his Employment as contemplated by this
Agreement will not infringe or violate the rights of any other person or entity. The Executive
represents and warrants to the Company that he has returned all property and confidential
information belonging to any prior employers.
2. Cash and Incentive Compensation.
(a) Salary. The Company shall pay the Executive as compensation for his services a base
salary at a gross annual rate of not less than $285,000. Such salary shall be payable in
accordance with the Company’s standard payroll procedures. (The annual compensation specified in
this Subsection (a), together with any increases in such compensation that the Company may grant
from time to time, is referred to in this Agreement as “Base Compensation.”)
(b) Incentive Bonuses. The Executive shall be eligible for an annual
incentive bonus with a target amount equal to 40% of his Base Compensation (the “Annual
Target Bonus”). Such bonus (if any) shall be awarded based on objective or subjective
criteria established in advance by the Board. Any bonus for the fiscal year in which Executive’s
employment begins shall be prorated, based on the number of days Executive is employed by the
Company during that fiscal year. Any incentive bonus for a fiscal year shall in no event be
paid later than
21/2 months after the close of such fiscal year. Except as provided in
Section 6, such
bonus shall be paid only if Executive is employed by the Company at the time of payment. The
determinations of the Board with respect to such bonus shall be final and binding.
(c)
Stock Options. On the date of this Agreement, the Company shall
grant the Executive a nonstatutory stock option to purchase 150,000 shares of the Company’s
Common Stock (the “Option”). The per-share exercise price of the Option shall be equal to the
fair market value of one share of the Company’s Common Stock on the date of grant. The maximum
term of the Option shall be 10 years, subject to earlier expiration in the event of the
termination of the Executive’s service with the Company. The grant of the Option shall be subject to the
terms and conditions set forth in the Vanda Pharmaceuticals Inc. 2006 Equity Incentive Plan and in
the Company’s standard form of Stock Option Agreement. The Option will become exercisable with
respect to 25% of the shares on the first anniversary of the date of this Agreement and with
respect to the remaining 75% of the shares in equal monthly installments over the next 3 years
of continuous service thereafter. The Option shall become exercisable in full if (i) the Company
is subject to a Change in Control before the Executive’s service with the Company terminates and
(ii) the Executive is subject to an Involuntary Termination within 24 months after such Change
in Control. In addition,
Section 6(d) shall apply to the Option.
Section 6(d) shall apply to the Option.
(d) Restricted Stock Units. On the date of this Agreement, the
Company shall grant the Executive restricted stock units covering 50,000 shares of the
Company’s Common Stock (the “RSU Award”). The grant of the RSU Award shall be subject to the terms and
conditions set form in the Vanda Pharmaceuticals Inc. 2006 Equity Incentive Plan and in the
Company’s standard form of Restricted Stock Unit Award Agreement. The RSU Award will vest
with respect to 25% of the shares on January 1, 2012, an additional 25% of the shares on
January 1, 2013, an additional 25% of the shares on January 1, 2014, and the final 25% of the shares
on January 1, 2015, provided that Executive’s remains in continuous service with the Company on
each applicable vesting date. The RSU Award shall vest in full if (i) the Company is subject
to a Change in Control before the Executive’s service with the Company terminates and (ii)the
Executive is subject to an Involuntary Termination within 24 months after such Change in
Control.
3. Vacation and Employee Benefits. During the term of his Employment, the Executive shall be
eligible for 20 paid vacation days each year in accordance with the Company’s standard policy for
similarly situated employees, as it may be amended from time to time. During the term of his
Employment, the Executive shall be eligible to participate in any employee benefit plans
maintained by the Company for similarly situated employees, subject in each case to the generally
applicable terms and conditions of the plan in question and to the determinations of any person or
committee administering such plan.
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4. Business Expenses. During the term of his Employment, the Executive
shall be authorized to incur necessary and reasonable travel, entertainment and other business
expenses in connection with his duties hereunder. The Company shall reimburse the Executive
for such expenses upon presentation of an itemized account and appropriate supporting
documentation, all in accordance with the Company’s generally applicable policies. Any
reimbursement shall (a) be paid promptly but not later than the last day of the calendar year
following the year in which the expense was incurred, (b) not be affected by any other
expenses
that are eligible for reimbursement in any calendar year and (c) not be subject to liquidation
or exchange for another benefit.
5. Term of Employment.
(a) Basic Rule. The Company agrees to continue the Executive’s
Employment, and the Executive agrees to remain in Employment with the Company, from the
date of this Agreement until the date when the Executive’s Employment terminates pursuant to
Subsection (b) below. The Executive’s Employment with the Company shall be “at will,”
meaning that either the Executive or the Company may terminate the Executive’s Employment at
any time, with or without Cause. Any contrary representations which may have been made to the
Executive shall be superseded by this Agreement. This Agreement shall constitute the full and
complete agreement between the Executive and the Company on the “at will” nature of the
Executive’s Employment, which may only be changed in an express written agreement signed by
the Executive and a duly authorized officer of the Company (other than the Executive).
(b) Termination. The Company may terminate the Executive’s
Employment at any time and for any reason (or no reason), and with or without Cause, by giving
the Executive notice in writing. The Executive may terminate his Employment by giving the
Company 14 days’ advance notice in writing. The Executive’s Employment shall terminate
automatically in the event of his death.
(c) Rights Upon Termination. Except as expressly provided in
Section 6, upon the termination of the Executive’s Employment pursuant to this Section 5, the
Executive shall only be entitled to the compensation, benefits and reimbursements described in
Sections 2, 3 and 4 for the period preceding the effective date of the termination. The
payments
under this Agreement shall fully discharge all responsibilities of the Company to the
Executive.
(d) Termination of Agreement. This Agreement shall terminate
when all obligations of the parties hereunder have been satisfied. The termination of this
Agreement shall not limit or otherwise affect any of the Executive’s obligations under Section 7.
6. Termination Benefits.
(a) General Release. Any other provision of this Agreement notwithstanding, Subsections (b),
(c) and (d) below shall not apply unless a general release of all known and unknown claims that
the Executive may then have against the Company or persons affiliated with the Company becomes
effective by the Release Deadline (as defined below), (ii) has agreed not to prosecute any legal
action or other proceeding based upon any of such
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claims and (iii) has returned all property of the Company in the Executive’s possession. The
release shall be in a form prescribed by the Company, without alterations, and must become
effective on or before the 60th day following the Executive’s Separation (the “Release Deadline”).
(b) Severance Pay. If, during the term of this Agreement, a
Separation occurs because the Company terminates the Executive’s Employment for any reason
other than Cause or Permanent Disability, or because the Executive terminates his Employment
within six months after a condition constituting Good Reason arises, then the Company shall
pay the Executive both of the following:
(i) Base Compensation. His Base Compensation for a period of 12 months
following the Separation (the “Continuation Period”). Such Base Compensation shall
be paid at the rate in effect at the time of the Separation and in accordance with
the Company’s standard payroll procedures. The salary continuation payments shall
commence on the Company’s next regularly scheduled payroll that occurs following the
Release Deadline, and the first payment will include amounts that would have been
paid between the Separation date and the first payment date but for the obligation
to deliver an effective release of claims.
(ii) Target Bonus. An amount equal to his Annual Target Bonus at the rate in
effect at the time of the Separation. Such amount shall be payable in a lump sum on
the Company’s next regularly scheduled payroll that occurs following the Release
Deadline.
(c) Health Insurance. If Subsection (b) above applies, and if the
Executive elects to continue his health insurance coverage under the Consolidated Omnibus
Budget Reconciliation Act (“COBRA”) following the Separation, then the Company shall pay
the Executive’s monthly premium under COBRA until the earliest of (i) the close of the
Continuation Period, (ii) the expiration of the Executive’s continuation coverage under COBRA
and (iii) the date when the Executive is offered substantially equivalent health insurance
coverage in connection with new employment or self-employment.
(d) Options. If, during the term of this Agreement, a Separation
occurs because the Company terminates the Executive’s Employment for any reason other than
Cause or Permanent Disability, then (i) the vested portion of the shares of the Company’s
Common Stock subject to all options held by the Executive at the time of his Separation shall
be determined by adding three months to the actual period of service that he has completed with
the Company and (ii) such options shall be exercisable for six months after the Executive’s
Separation.
7. Non-Solicitation, Non-Disclosure and Non-Competition. The
Executive has entered into a Proprietary Information and Inventions Agreement with the Company,
which agreement is incorporated herein by reference.
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8. Successors.
(a) Company’s Successors. This Agreement shall be binding upon
any successor (whether direct or indirect and whether by purchase, lease, merger,
consolidation, liquidation or otherwise) to all or substantially all of the Company’s business and/or assets.
For all purposes under this Agreement, the term “Company” shall include any successor to the
Company’s business and/or assets which becomes bound by this Agreement.
(b) Executive’s Successors. This Agreement and all rights of the
Executive hereunder shall inure to the benefit of, and be enforceable by, the Executive’s
personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees
and legatees.
9. Definitions. For all purposes under this Agreement:
“Cause” shall mean:
(a) An unauthorized use or disclosure by the Executive of the
Company’s confidential information or trade secrets, which use or disclosure causes material
harm to the Company;
(b) A material breach by the Executive of any agreement between the
Executive and the Company;
(c) A material failure by the Executive to comply with the Company’s
written policies or rules;
(d) The Executive’s conviction of, or plea of “guilty” or “no contest”
to, a felony under the laws of the United States or any State thereof;
(e) The Executive’s gross negligence or willful misconduct;
(f) A continuing failure by the Executive to perform assigned duties
after receiving written notification of such failure from the Board; or
(g) A failure by the Executive to cooperate in good faith with a
governmental or internal investigation of the Company or its directors, officers or employees,
if the Company has requested the Executive’s cooperation.
“Change in Control” shall mean:
(a) The consummation of a merger or consolidation of the Company with or into another entity
or any other corporate reorganization, if persons who were not stockholders of the Company
immediately prior to such merger, consolidation or other reorganization own immediately after such
merger, consolidation or other reorganization 50% or more of the voting power of the outstanding
securities of each of (i) the continuing or surviving entity and (ii) any direct or indirect
parent corporation of such continuing or surviving entity;
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(b) The sale, transfer or other disposition of all or substantially all of
the Company’s assets;
(c) A change in the composition of the Board, as a result of which
fewer than 50% of the incumbent directors are directors who either:
(i) Had been directors of the Company on the date 24 months prior to the date
of such change in the composition of the Board (the “Original Directors”); or
(ii) Were appointed to the Board, or nominated for election to the Board, with
the affirmative votes of at least a majority of the aggregate of (A) the Original
Directors who were in office at the time of their appointment or nomination and (B)
the directors whose appointment or nomination was previously approved in a manner
consistent with this Paragraph (ii); or
(d) Any transaction as a result of which any person is the “beneficial
owner” (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)), directly or indirectly, of securities of the Company representing at least
50% of the total voting power represented by the Company’s then outstanding voting securities. For
purposes of this Subsection (d), the term “person” shall have the same meaning as when used in
Sections 13(d) and 14(d) of the Exchange Act but shall exclude (i) a trustee or other
fiduciary holding securities under an employee benefit plan of the Company or of a parent or subsidiary
of the Company and (ii) a corporation owned directly or indirectly by the stockholders of the
Company in substantially the same proportions as their ownership of the Common Stock of the
Company.
A transaction shall not constitute a Change in Control if its sole purpose is to change the
State of the Company’s incorporation or to create a holding company that will be owned in
substantially the same proportions by the persons who held the Company’s securities immediately
before such transaction.
“Code” shall mean the Internal Revenue Code of 1986, as amended.
“Good Reason” shall mean (i) a change in the Executive’s position with the Company that
materially reduces his level of authority or responsibility, (ii) a material reduction in his Base
Compensation or (iii) receipt of notice that his principal workplace will be relocated by more
than 30 miles. A condition shall not be considered “Good Reason” unless the Executive gives the
Company written notice of such condition within 90 days after the initial existence of such
condition and the Company fails to remedy such condition within 30 days after receiving the
Executive’s written notice.
“Involuntary Termination” shall mean a Separation resulting from either (i) the Executive’s
involuntary discharge by the Company for reasons other than Cause or (ii) the Executive’s
voluntary resignation for Good Reason.
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“Permanent Disability” shall mean the Executive’s inability to perform the essential
functions of the Executive’s position, with or without reasonable accommodation, for a period of
at least 120 consecutive days because of a physical or mental impairment.
“Separation” shall mean a “separation from service,” as defined in the regulations under
Section 409A of the Code,
10. Miscellaneous Provisions.
(a) Notice. Notices and all other communications contemplated by
this Agreement shall be in writing and shall be deemed to have been duly given when personally
delivered or when mailed by overnight courier, U.S. registered or certified mail, return
receipt requested and postage prepaid. In the case of the Executive, mailed notices shall be addressed
to him at the home address that he most recently communicated to the Company in writing. In the
case of the Company, mailed notices shall be addressed to its corporate headquarters, and all
notices shall be directed to the attention of its Secretary.
(b) Modifications and Waivers. No provision of this Agreement
shall be modified, waived or discharged unless the modification, waiver or discharge is agreed
to in writing and signed by the Executive and by an authorized officer of the Company (other than
the Executive). No waiver by either party of any breach of, or of compliance with, any
condition or provision of this Agreement by the other party shall be considered a waiver of any other
condition or provision or of the same condition or provision at another time.
(c) Whole Agreement. No other agreements, representations or
understandings (whether oral or written and whether express or implied) which are not
expressly
set forth in this Agreement have been made or entered into by either party with respect to the
subject matter hereof. This Agreement and the Proprietary Information and Inventions
Agreement contain the entire understanding of the parties with respect to the subject matter
hereof.
(d) Tax Matters. All payments made under this Agreement shall be
subject to reduction to reflect taxes or other charges required to be withheld by law. For
purposes of Section 409A of the Code, each periodic salary continuation payment under
Section 6(b)(i) is hereby designated as a separate payment. If the Company determines that
the Executive is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code
and the regulations thereunder at the time of his Separation, then:
(i) Any salary continuation payments under Section 6(b)(i), to the extent not
exempt from Section 409A of the Code, shall commence with the Company’s first
regularly scheduled payroll that occurs during the seventh month after the
Executive’s Separation and, once such payments commence, any amounts accrued from
the Separation date shall be paid in a lump sum on the first payment date; and
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(ii) Any lump-sum payment under Section 6(b)(ii), to the extent not exempt
from Section 409A of the Code, shall be made with the Company’s first regularly
scheduled payroll that occurs during the seventh month after the Executive’s
Separation.
The Company shall not have a duty to design its compensation policies in a manner that minimizes
the Executive’s tax liabilities, and the Executive shall not make any claim against the Company or
the Board related to tax liabilities arising from the Executive’s compensation.
(e) Choice of Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of Maryland (except
its provisions governing the choice of law).
(f) Severability. The invalidity or unenforceability of any provision
or provisions of this Agreement shall not affect the validity or enforceability of any other
provision hereof, which shall remain in full force and effect.
(g) No Assignment. This Agreement and all rights and obligations of
the Executive hereunder are personal to the Executive and may not be transferred or assigned
by the Executive at any time. The Company may assign its rights under this Agreement to any
entity that assumes the Company’s obligations hereunder in connection with any sale or
transfer of all or a substantial portion of the Company’s assets to such entity.
(h) Counterparts. This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and the same
instrument.
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IN
WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the
Company by its duly authorized officer, as of the date first written above.
| /s/ Xxxxx Xxxxx | ||||
| Xxxxx Xxxxx | ||||
| Vanda Pharmaceuticals Inc. |
||||
| By | ||||
| Title: | ||||
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