Exhibit 10.63
SEVERANCE AGREEMENT
THIS AGREEMENT is entered into as of July 15, 2002, by and between Timothy P.
Noyes (the "Employee") and Essential Therapeutics, Inc., a Delaware corporation
(the "Company").
1. Term of Agreement.
This Agreement shall remain in effect from the date hereof until the
earlier of:
a) The date when the Employee's employment with the Company terminates for
any reason not described in Section 5; or
b) The date when the Company has met all of its obligations under this
Agreement following a Termination event as defined in Section 5 below.
2. Definition of Good Reason.
For all purposes under this Agreement, "Good Reason" shall mean that the
Employee:
a) Has been demoted or has incurred a material reduction in his authority
or responsibility as an employee of the Company, including (without
limitation) a reduction or elimination of his authority to approve
expenditures or to hire, promote, demote or terminate subordinates;
b) Has incurred a reduction in his total compensation (including benefits)
as an employee of the Company, other than pursuant to a Company-wide
reduction of total compensation (including benefits) for employees of
the Company generally; or
c) Has been notified that his principal place of work as an employee of
the Company will be relocated by a distance of 50 miles or more.
3. Definition of Cause.
For all purposes under this Agreement, "Cause" shall mean:
a) A willful act by the Employee which constitutes misconduct or fraud and
which is injurious to the Company; provided, however, that no act, or
failure to act, by the Employee shall be considered "willful" unless
committed without good faith and without a reasonable belief that the
act or omission was in the Company's best interest; or
b) Conviction of, or a plea of "guilty" or "no contest" to, a felony.
The Board of Directors of the Company shall have sole discretion with
respect to whether any act or failure to act constitutes "Cause" for
purposes of this Agreement.
4. Definition of Continuation Period.
For all purposes under this Agreement, "Continuation Period" shall mean the
period commencing on the date when the termination of the Employee's
employment under Section 5 is effective and ending on the earlier of:
a) The date twelve (12) months after the date when the employment
termination was effective; or
b) The date of the Employee's death.
5. Entitlement to Severance Pay and Benefits.
The employee shall be entitled to receive the severance pay described in
Section 6 (the "Severance Pay") and the benefits described in Section 7
from the Company if, and only if, one of the following events occurs (each
a "Termination Event"):
a) The Employee voluntarily resigns his employment for Good Reason; or
b) The Company terminates the Employee's employment for any reason other
than Cause.
6. Severance Pay.
The Company shall pay the Employee Severance Pay in an amount equal to the
Employee's base compensation at the annual rate in effect on the date when
the termination of his employment with the Company is effective and any
amount of earned bonus as determined by the Compensation Committee of the
Board of Directors of the Company. Severance Pay may be received as a
single, one-time payment or as periodic payments at specified intervals
throughout the Continuation Period, at the election of the Employee.
7. Other Benefits
a) Stock options and Restricted Stock. All unvested stock options and
shares of restricted stock granted to Employee by the Company shall
vest immediately upon the occurrence of a Termination Event. The
post-termination exercise grace period under the Employee's stock
options shall commence at the end of the Continuation Period. The
Employee represents that he has consulted or will consult a tax advisor
regarding the impact of this Subsection a) on the tax treatment of
incentive stock options and shares of restricted stock.
b) Group Insurance. At the commencement of the Continuation Period, the
Employee (and, where applicable, his dependents) shall be entitled to
convert his key employee long-term disability policy and group life
insurance policy into individual policies pursuant to the terms of such
policies. Should the Employee elect to convert either or both of such
policies, the Company will pay the premiums for such policy or policies
during the Continuation Period.
c) At the commencement of the Continuation Period, the Employee shall be
eligible to continue his group health continuation coverage under the
Consolidated Omnibus Budget Reconciliation Act of 1986, and the Company
will pay the premiums for such coverage during the Continuation Period.
The foregoing notwithstanding, in the event that the Employee becomes
eligible for comparable group insurance coverage in connection with new
employment, the premium payments by the Company under this Subsection
b) shall terminate immediately.
d) Outplacement Services. Upon the occurrence of a Termination Event, the
Employee shall be entitled to reasonable outplacement services at the
Company's expense. Such services shall be provided by a firm selected
by the Employee from a list compiled by the Company and shall be
limited to a period of six consecutive months.
8. Limitation on Payments.
a) Basic Rule. Any other provision of this Agreement notwithstanding, the
Company shall not be required to make any payment or property transfer
to, or for the benefit of, the Employee (under this Agreement or
otherwise) that would be nondeductible by the company by reason of
Section 20G of the Internal Revenue Code of 1986, as amended (the
"Code"), or that would subject the Employee to the excise tax described
in Section 4999 of the Code. All calculations required by this Section
9 shall be performed by the independent auditors retained by the
Company most recently prior to the Change in Control (the "Auditors"),
based on information supplied by the Company and the Employee, and
shall be binding on the Company and the Employee. All fees and expenses
of the Auditors shall be paid by the Company.
b) Reductions. If the amount of the aggregate payments or property
transfers to the Employee must be reduced under this Section 8, then
the Employee shall direct in which order the payments or transfers are
to be reduced, but no change in the timing of any payment or transfer
shall be made without the Company's consent. As a result of uncertainty
in the application of sections
280G and 4999 of the Code at the time of an initial determination by
the Auditors hereunder, it is possible that a payment will have been
made by the Company that should not have been made (an "Overpayment"),
or that an additional payment that will not have been made by the
Company could have been made (an "Underpayment"). IN the event that the
Auditors, based upon the assertion of a deficiency by the Internal
Revenue Service against the Company or the Employee that the Auditors
believe has a high probability of success, determine that an
Overpayment has been made, such Overpayment shall be treated for all
purposes as a loan to the Employee that he shall repay to the Company,
together with interest at the applicable federal rate specified in
section 7872(f)(2) of the Code; provided, however, that no amount shall
be payable by the Employee to the company if and to the extent that
such payment would not reduce the amount that is nondeductible under
section 280G of the Code or is subject to an excise tax under section
4999 of the Code. In the event that the Auditors determine that an
Underpayment has occurred, such Underpayment shall promptly be paid or
transferred by the Company to, or for the benefit of, the Employee,
together with interest at the applicable federal rate specified in
section 7872(f)(2) of the Code.
9. Non-solicitation.
After the occurrence of a Termination Event, the Employee agrees that
for a period of two years from the date of the Termination Event (the
"Non-Solicitation Term") he will not directly or indirectly solicit for
employment any employee of the Company who was employed by the Company
at the time of the Occurrence of Termination Event and remains in the
employment of the Company during the Non-Solicitation Term.
10. Successors.
a) Company's Successors. The Company shall require 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, by an agreement in substance and
form satisfactory to the Employee, to assume this Agreement and to
agree expressly to perform this Agreement in the same manner and to the
same extent as the Company would be required to perform it in the
absence of a succession. For all purposes under this Agreement, the
Term "Company" shall include any successor to the Company's business
and/or assets which executes and delivers the assumption agreement
described in this Subsection (a) or which becomes bound by this
Agreement by operation of law.
b) Employee's Successors. This Agreement and all rights of the Employee
hereunder shall inure to the benefit of, and be enforceable by, the
Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributes, devisees and legatees.
11. 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 U.S. registered or
certified mail, return receipt requested and postage prepaid. In the
case of the Employee, mailed notices shall be addressed to him at the
home address, which 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) Waiver. No provision of this Agreement shall be modified, waived or
discharge unless the modification, waiver or discharge is agreed to in
writing and signed by the Employee and by an authorized officer of the
Company (other than the Employee). 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 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.
d) No Setoff; Withholding Taxes. There shall be no right of setoff or
counterclaim, with respect to any claim, debt or obligation, against
payments to the Employee under this Agreement. All payments made under
this Agreement shall be subject to reduction to reflect taxes required
to be withheld by law.
e) Choice of Law. The validity or unenforceability of any provision or
provisions of the Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in
full force and effect.
f) Severability. The invalidity or unenforceability of any other provision
hereof, which shall remain in full force and effect.
g) Potential Pooling Transactions. In the event the Board determines that
the acceleration of options pursuant to Sections 7(a) above would
preclude accounting for a proposed business transaction involving a
Change in Control
as a "Pooling of Interests" but the Board otherwise desires to approve
and account for such transaction as a "Pooling of Interests," the
acceleration of options described in Sections 7(a) above shall be null
and void, and the Company shall enter into a consulting agreement with
the employee covering services and compensation to be determined by
the parties at that time. Such agreement shall be for a period of
three years and shall not be subject to earlier termination unless by
mutual consent of the parties.
h) Arbitration. Except as otherwise provided in Section 8, any dispute or
controversy arising under or in connection with this Agreement shall be
settled exclusively by arbitration in Waltham, MA, in accordance with
the rules of the American Arbitration Association then in effect.
Judgment may be entered on the arbitrator's award in any court having
jurisdiction. Punitive damages shall not be awarded.
i) No Assignment of Benefits. The rights of any person to payments or
benefits under this Agreement shall not be made subject to option or
assignment, either by voluntary or involuntary assignment or by
operation of law, including (without limitation) bankruptcy,
garnishment, attachment or other creditor's process, and any action in
violation of this subsection (i) shall be void.
j) Employment Taxes. All payments made pursuant to this Agreement will be
subject to withholding of applicable income and employment taxes.
Counterparts. This Agreement may be executed in counterparts, each of which
shall be deemed an original but all of which together will constitute one and
the same instrument.
Essential Therapeutics, Inc.
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By:
Title:
Timothy P. Noyes
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