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Exhibit 10.5
EXECUTIVE AGREEMENT
This EXECUTIVE AGREEMENT (the "Agreement") is entered into this 7th day of
September, 2000 (the "Effective Date") between Xxxxxx Xxxxxx ("Executive") and
GELTEX PHARMACEUTICALS, INC. (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 6.
The Company and the Executive hereby agree as follows:
ARTICLE 1
SCOPE AND CONSIDERATION FOR THIS AGREEMENT
1.1 EXECUTIVE'S STATUS. Executive is currently employed by the Company.
1.2 PURPOSE OF THIS AGREEMENT. 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
circumstances described herein.
1.3 CONSIDERATION. 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 4.1.
1.4 OTHER AGREEMENTS. This Agreement shall supersede any other agreement
relating to cash severance benefits and health benefits in the event of
Executive's termination of employment with the Company.
ARTICLE 2
SEVERANCE BENEFITS PRIOR TO A CHANGE OF CONTROL
2.1 SEVERANCE BENEFITS. If Executive's employment terminates prior to
the effective date of a Change of Control due to an Involuntary Termination
without Cause, Executive shall be entitled to receive the following benefits set
forth in Sections 2.2, 2.3 and 2.4.
2.2 SALARY CONTINUATION. Executive shall continue to receive his Base
Salary for six (6) months following the effective date of the Involuntary
Termination without Cause. Salary continuation payments shall be paid to
Executive in regular installments on the normal payroll dates of the Company or
over a shorter period, as determined by the Company. Amounts paid to Executive
under this Section 2.2 shall be subject to all
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required tax withholding.
2.3 BONUS. The Company shall pay Executive an amount equal to that
percentage of Executive's target bonus established for the year in which
Executive's termination occurs. The percentage of target bonus shall be equal to
the percentage of the year that Executive is employed by the Company, and shall
be calculated as if the target applicable to such bonus had been attained. The
bonus benefit shall be paid to Executive in regular installments on the normal
payroll dates of the Company over a six (6) month period, or over a shorter
period, as determined by the Company. Amounts paid to Executive under this
Section 2.3 shall be subject to all required tax withholding.
2.4 HEALTH 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 six (6) months following the effective date
of the Involuntary Termination without Cause; provided, however, that the
Company shall pay such premiums for Executive's eligible dependents only for
coverage for which those eligible dependents were enrolled immediately prior to
the effective date of the Involuntary Termination without Cause. For the balance
of the period that Executive is entitled to coverage under federal COBRA law,
Executive shall be entitled to maintain such coverage at Executive's own
expense. The Company shall be relieved of its obligation under this Section 2.4
as of the effective date of Executive's coverage by a health insurance plan of a
subsequent employer.
ARTICLE 3
BENEFITS UPON A CHANGE OF CONTROL
3.1 SEVERANCE BENEFITS. If Executive's employment terminates within
thirteen (13) months following the effective date of a Change of Control due to
a Change of Control Covered Termination, Executive shall be entitled to receive
the following benefits set forth in Sections 3.1.1, 3.1.2 and 3.1.3.
3.1.1 SALARY CONTINUATION. Executive shall continue to receive his
Base Salary for twelve (12) months following the effective date of the Change of
Control Covered Termination. Salary continuation payments shall be paid to
Executive in regular installments on the normal payroll dates of the Company or
over a shorter period, as determined by the Company. Amounts paid to Executive
under this Section 3.1.1 shall be subject to all required tax withholding.
3.1.2 BONUS. The Company shall pay to Executive an amount equal to
one hundred fifty percent (150%) of the annual bonus paid to Executive in the
year immediately preceding the effective date of the Change of Control. Such
amount shall be subject to all required tax withholding and shall be paid in a
lump sum within thirty (30) days following the effective date of the Change of
Control Covered Termination.
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3.1.3 HEALTH 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 the
effective date of the Change of Control Covered Termination; provided, however,
that the Company shall pay such premiums for Executive's eligible dependents
only for coverage for which those eligible dependents were enrolled immediately
prior to the effective date of the Change of Control Covered Termination. For
the balance of the period that Executive is entitled to coverage under federal
COBRA law, Executive shall be entitled to maintain such coverage at Executive's
own expense. The Company shall be relieved of its obligation under this Section
3.1.3 as of the effective date of Executive's coverage by a health insurance
plan of a subsequent employer.
3.2 OPTION ACCELERATION. All options to purchase the Company's common
stock granted to Executive prior to the closing date of a Change of Control
shall become immediately fully vested and exercisable as of the effective date
of the Change of Control.
ARTICLE 4
LIMITATIONS AND CONDITIONS ON BENEFITS
4.1 RELEASE PRIOR TO PAYMENT OF BENEFITS. Prior to the payment of any
benefits under Article 2 or Section 3.1 of this Agreement, Executive shall
execute a release (the "Release") in the form attached hereto and incorporated
herein as Exhibit A or Exhibit B, as applicable. Such Release shall specifically
relate to all of Executive's rights and claims in existence at the time of
execution and shall confirm Executive's obligations under the Company's standard
form of Employee Inventions, Non-Disclosure and Non-Competition 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, no
options will vest under this Agreement, and this Agreement shall be null and
void.
4.2 TERMINATION OF BENEFITS. Benefits under this Agreement shall
terminate immediately if the Executive, at any time, violates any of the terms
of the Employee Inventions, Non-Disclosure and Non-Competition Agreement.
4.3 NON-DUPLICATION OF BENEFITS. Executive is not eligible to receive
benefits under this Agreement more than one time.
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ARTICLE 5
PARACHUTE PAYMENTS
If any payment or benefit Executive would receive under this Agreement,
when combined with any other payment or benefit Executive receives pursuant to
the termination of Executive's employment with the Company ("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) but for this
sentence, be subject to the excise tax imposed by Section 4999 of the Code (the
"Excise Tax"), then such Payment shall be either (x) the full amount of such
Payment or (y) such less amount (with cash payments being reduced before stock
option compensation) as would result in no portion of the Payment being subject
to the Excise Tax, whichever of the foregoing amounts, taking into account the
applicable federal state and local employments taxes, income taxes, and the
Excise Tax results in Executive's receipt, on an after-tax basis, of the greater
amount of the Payment notwithstanding that all or some portion of the Payment
may be subject to the Excise Tax.
ARTICLE 6
DEFINITIONS
For purposes of this Agreement, the following terms are defined as
follows:
6.1 "BASE SALARY" means Executive's annual base salary as in effect
during the last regularly scheduled payroll period immediately preceding an
Involuntary Termination without Cause or a Change of Control Covered
Termination, as the case may be.
6.2 "BOARD" means the Board of Directors of the Company.
6.3 "CAUSE" means that, in the reasonable determination of the Board,
Executive
(i) has committed an act that materially injures the business of
the Company;
(ii) has refused or failed to follow lawful and reasonable
directions of the Board;
(iii) has willfully or habitually neglected Executive's duties for
the Company;
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(iv) 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.
Notwithstanding the foregoing, Cause shall not exist based on
conduct described in clause (ii) or clause (iii) unless the conduct described in
such clause has not been cured within thirty (30) days following Executive's
receipt of written notice form the Board specifying the particulars of the
conduct constituting Cause.
6.4 "CHANGE OF CONTROL" means any of the following events and shall be
deemed to have occurred at any of the following times:
(i) upon the acquisition (other than by the Company) by any person,
entity or "group," within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (excluding, for
this purpose, the Company or its affiliates, or any employee benefit plan of the
Company or its affiliates which acquires beneficial ownership of voting
securities of the Company), of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of fifty percent (50%) or more of
either the then-outstanding shares of common stock or the combined voting power
of the Company's then-outstanding voting securities entitled to vote generally
in the election of directors;
(ii) at the time the individuals who, as of September 1, 2000
constitute the Board (the "Incumbent Board") cease for any reason to constitute
at least a majority of the Board, provided that, any person becoming a director
subsequent to September 1, 2000 whose election, or nomination for election by
the Company's stockholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board (other than an election or
nomination if an individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of the
members of the Board of Directors of the Company, as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act) shall be, for
purposes of this Agreement, considered as though such person were a member of
the Incumbent Board; or
(iii) immediately prior to the consummation by the Company of a
reorganization, merger or consolidation, (in each case, with respect to which
persons who were the stockholders of the Company immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter, own more
than fifty percent (50%) of the combined voting power entitled to vote generally
in the election of directors of the reorganized, merged or consolidated
company's then-outstanding voting securities) or a liquidation or dissolution of
the Company or the sale of all or substantially all of the assets of the
Company.
6.5 "COMPANY" means GelTex Pharmaceuticals, Inc. or, following a Change
of Control, the surviving entity resulting from such transaction.
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6.6 "CONSTRUCTIVE TERMINATION" means that Executive voluntarily
terminates employment following a Change of Control after any of the following
are undertaken without Executive's express written consent:
(i)the assignment to Executive of any duties or responsibilities
which results in a significant diminution in Executive's function as in
effect immediately prior to the effective date of the Change of Control;
provided, however, that a mere change in Executive's title or reporting
relationship shall not constitute a Constructive Termination;
(ii) a reduction by the Company in Executive's annual base salary,
as in effect on the effective date of the Change of Control or as
increased thereafter;
(iii) any failure by the Company to continue in effect any benefit
plan or program, including fringe benefits, incentive plans and plans with
respect to the receipt of securities of the Company, in which Executive is
participating immediately prior to the effective date of the Change of
Control (hereinafter referred to as "Benefit Plans"); or the taking of any
action by the Company that would adversely affect Executive's
participation in or reduce Executive's benefits under the Benefit Plans;
provided, however, that a "Constructive Termination" shall not exist under
this paragraph following a Change of Control if the Company offers a range
of benefit plans and programs which, taken as a whole, are comparable to
the Benefit Plans;
(iv) a relocation of Executive's business office, or a relocation of
the Company's principal executive offices if Executive's principal
business office is at such offices, to a location more than twenty (20)
miles from the location at which Executive was performing duties
immediately prior to the effective date of the Change of Control, except
for required travel on the Company's business to an extent substantially
consistent with Executive's business travel obligations immediately prior
to the effective date of the Change of Control; or
(v) any failure by the Company to obtain the assumption of this
Agreement by any successor or assign of the Company.
6.7 "CHANGE OF CONTROL COVERED TERMINATION" means an Involuntary
Termination without Cause occurring within thirteen (13) months following the
effective date of a Change of Control or a Constructive Termination occurring
within thirteen (13) months following the effective date of a Change of Control.
6.8 "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.
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ARTICLE 7
GENERAL PROVISIONS
7.1 EMPLOYMENT STATUS. 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.
7.2 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 via facsimile) or the
third day after mailing by first class mail, to the Company at is 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.
7.3 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.
7.4 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.
7.5 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 Boston, Massachusetts. 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 disbursements; 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.
7.6 COMPLETE AGREEMENT. This Agreement, including Exhibit A and Exhibit
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
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benefits and health benefits to Executive in the event of employment termination
[other than with respect to any outstanding loans by the Company to Executive].
7.7 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 the Chairman of the Board after such change or termination has
been approved by the Board.
7.8 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.
7.9 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.
7.10 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 of 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.
7.11 CHOICE OF LAW. All questions concerning the construction, validity
and interpretation of this Agreement will be governed by the law of the
Commonwealth of Massachusetts, without regard to such state's conflict of laws
rules.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
Effective Date written above.
GELTEX PHARMACEUTICALS, INC.
By: /s/ Xxxx Xxxxxxxxx
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Xxxx Xxxxxxxxx
President and CEO
/s/ Xxxxxx Xxxxxx
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Xxxxxx Xxxxxx
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