Exhibit 10.8
CHANGE OF CONTROL AND
SEVERANCE BENEFITS AGREEMENT
This C HANGE OF C ONTROL AND S EVERANCE B ENEFITS A GREEMENT (the “Agreement” ) is
entered into this 30 day of April, 2009 (the “Effective
Date” ), between T RANSCEPT P HARMACEUTICALS , I NC . (the
“Company” ) and S
HARON S AKAI , P H .D. (
“Executive” ). This Agreement is intended
to provide Executive with the compensation and benefits described
herein upon the occurrence of specific events.
W HEREAS , Executive is currently employed by the Company;
and
W HEREAS , the Company believes it is imperative to
provide Executive with certain severance benefits in the event that
Executive’s employment is terminated without Cause (as
defined herein) in circumstances unrelated to a Change of Control
(as defined herein); and
W HEREAS , the
Company believes it is imperative to provide Executive with certain
change of control severance benefits, including certain equity
acceleration, in the event that Executive’s employment is
terminated without Cause (as defined herein) or Executive resigns
for Good Reason (as defined herein) in connection with a Change of
Control (as defined herein).
N OW ,
T HEREFORE
, in consideration of the foregoing,
the mutual covenants contained herein, and other good and valuable
consideration, the parties hereto hereby agree as
follows:
1. T ERM OF A GREEMENT . The
term of this Agreement shall commence on the Effective Date and
shall continue through the fifth anniversary of the Effective Date
(the “Expiration Date” ), and if not
amended or renewed by the Compensation Committee of the
Company’s Board of Directors (the “Compensation
Committee” ) prior to the Expiration Date, this
Agreement shall terminate automatically on such Expiration Date.
Notwithstanding the foregoing, the Company agrees that after the
fourth anniversary of the Effective Date, the Compensation
Committee shall undertake to review this Agreement and the
severance benefits and change of control severance benefits
provided herein in good faith, with the assistance of the
Company’s outside advisors and compensation consultants, in
order to determine, based upon the then current market conditions
or any other factors deemed relevant by the Compensation Committee,
the appropriateness of continuing this Agreement after the
Expiration Date, or whether it would be more appropriate for the
Company to amend or terminate this Agreement as of the Expiration
Date.
2. T ERMINATION OF E MPLOYMENT AND S EVERANCE B ENEFITS .
(a) At-Will
Employment. Executive’s employment is at-will, which
means that the Company may terminate Executive’s employment
at any time, with or without advance notice, and with or without
Cause (as defined herein). Similarly, Executive may resign
Executive’s employment at any time, with or without advance
notice, and with or without reason. Executive shall not receive any
compensation of any kind, including, without limitation, severance
benefits or change of control severance benefits, following
Executive’s last day of employment with the Company (the
“Termination Date” ), except as expressly
provided for by this Agreement, applicable law, and/or any plan
documents governing the compensatory equity awards that have been
or may be granted to Executive from time to time in the sole
discretion of the Company.
(b) Termination Without Cause
Unrelated to a Change of Control. If: (i) Executive’s
employment is terminated without Cause (and other than as a result
of Executive’s death or disability) at any time (except for
the time period commencing on the date of the consummation of a
Change of Control and ending twelve (12) months after a Change
of Control), (ii) such termination constitutes a
“separation from service” (within the meaning of
Treasury Regulation Section 1.409A-1(h)), (iii)
Executive signs and allows to become effective a general
release of all known and unknown claims in the form provided by the
Company, which form shall be substantially in the form attached
hereto as Exhibit A ) (the “ Release
”) within sixty (60) days after the Termination Date,
and (iv) Executive fully complies with
Executive’s continuing fiduciary, statutory and material
contractual obligations to the Company (with a 30-day opportunity
to cure after notice of any such non-compliance if Executive has
not, unless such non-compliance is not capable of being cured);
then the Company shall provide Executive with the following
severance benefits (the “Severance
Benefits” ):
(i) The Company shall make a single lump sum
severance payment to Executive in an amount equal to
Executive’s Base Annual Salary in effect as of the
Termination Date , less required tax withholdings and
deductions (the “ Severance Payment ”).
The Severance Payment will be paid within sixty (60) days
after the Termination Date, but in no event later than
March 15 of the year following the year of
termination.
(ii) Provided that Executive elects continued
coverage under the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended (together with any state or local laws of
similar effect, “COBRA” ) within the time
period provided for under COBRA, the Company will pay the premiums
necessary to continue Executive’s group health (including
dental and vision) insurance coverage in effect as of the
Termination Date of Executive’s employment (including
coverage for Executive’s eligible dependents) for a maximum
period of twelve (12) months following the Termination Date;
provided, however, that no premium payments will be made by the
Company pursuant to this paragraph following the effective date of
Executive’s coverage by a health (including dental and
vision) insurance plan of a subsequent employer or such other date
on which Executive (and Executive’s dependents, as
applicable) cease to be eligible for COBRA coverage. Executive
agrees that Executive shall notify the Company in writing as soon
as practical, but no later than 15 days after Executive receives
coverage under a health insurance plan of a subsequent
employer.
(c) Termination Without Cause or
Resignation for Good Reason Within Twelve Months After a Change of
Control. If: (i)
Executive’s employment is terminated without Cause (and
other than as a result of Executive’s death or disability),
or if Executive resigns for Good Reason, during the time period
commencing on the date of the consummation of a Change of Control
and ending twelve (12) months after a Change of Control,
(ii) such termination constitutes a “separation
from service” (within the meaning of Treasury Regulation
Section 1.409A-1(h)), (iii) Executive signs and
allows to become effective the Release within sixty (60) days
after the Termination Date, and (iv) Executive fully
complies with Executive’s continuing fiduciary, statutory and
material contractual obligations to the Company (with a 30-day
opportunity to cure after notice of any such non-compliance if
Executive has not, unless such non-compliance is not reasonably
capable of being cured); then the Company shall provide Executive
with the following change of control severance benefits (the
“Change of Control Benefits”
):
(i) The Company shall make a single lump sum
severance payment to Executive in an amount equal to
Executive’s Base Annual Salary in effect as of the
Termination Date , less required tax withholdings and
deductions (the “ Change of Control Payment
”). The Change of Control Payment will be paid within sixty
(60) days after the Termination Date, but in no event later
than March 15 of the year following the year of
termination.
(ii) Provided that Executive elects continued
coverage under COBRA within the time period provided for under
COBRA, the Company will pay the premiums necessary to continue
Executive’s group health (including dental and vision)
insurance coverage in effect as of the Termination Date of
Executive’s employment (including coverage for
Executive’s eligible dependents) for a maximum period of
twelve (12) months following the Termination Date;
provided, however, that no premium payments will be made by the
Company pursuant to this paragraph following the effective date of
Executive’s coverage by a health (including dental and
vision) insurance plan of a subsequent employer or such other date
on which Executive (and Executive’s dependents, as
applicable) cease to be eligible for COBRA coverage. Executive
agrees that Executive shall notify the Company in writing as soon
as practical, but no later than 15 days after Executive receives
coverage under a health insurance plan of a subsequent
employer.
(iii) After taking into account any additional
acceleration of vesting Executive may be entitled to receive under
any other plan or agreement, the Company shall cause all
outstanding equity awards then held by Executive (including,
without limitation, stock options, stock appreciation rights,
restricted stock or similar awards) to become fully vested
and, if applicable, exercisable with respect to all the shares
subject thereto effective immediately prior to the Termination
Date. In all other respects, such equity awards shall continue to
be governed by the terms of the applicable award agreements and
equity incentive plan documents and any applicable agreements
between the Company and Executive.
3. D EFINITIONS .
(a) Definition of Base Annual
Salary. For purposes of
this Agreement, “ Base Annual Salary ”
shall mean Executive’s annualized base salary in effect
immediately prior to the Termination Date. Base Annual Salary does
not include variable forms of compensation such as but not limited
to bonuses, incentive compensation, commissions, benefits, equity,
expenses, or expense allowances.
(b) Definition of
Cause. For the purposes
of this Agreement, “ Cause ” shall mean
any one or more of the following:
(i) Executive is convicted of (or pleads guilty or
no contest to) any felony or any crime involving moral
turpitude;
(ii) Executive participates in any material fraud,
material act of dishonesty, or other act of intentional and
material misconduct against the Company;
(iii) Executive intentionally damages or willfully
misappropriates any property of the Company that in any case has a
material adverse effect on the Company;
(iv) Executive materially breaches any fiduciary,
statutory, or contractual duty Executive owes to the Company
(including, but not limited to, any breach of the Company’s
Confidentiality Agreement);
(v) Executive regularly and materially fails to
diligently and successfully perform Executive’s assigned
duties;
(vi) Executive fails to cooperate with the Company in
any investigation or proceeding by any governmental or similar
authority or as otherwise authorized by the Board of Directors or a
committee thereof; or
(vii) Executive is found liable in an SEC action
and/or is disqualified by the SEC from serving in an executive
role.
The determination that a termination
is for Cause shall be made by the Company in its sole discretion;
provided, however, that in the event that any of the
foregoing events occurs, the Company shall provide written notice
to Executive making reference to this Section describing the nature
of such event and Executive shall thereafter have thirty
(30) days to cure such event if such event is capable of being
cured.
(c) Definition of Good
Reason. For purposes of
this Agreement, “Good Reason” means that Executive
resigns Executive’s employment with the Company (or any
successor thereto) if and only if:
(i) One of the following actions has been taken
without Executive’s express written consent:
(1) There is a material reduction in
Executive’s Base Annual Salary from the Base Annual Salary in
effect immediately preceding the Change of Control;
(2) There is a material change in Executive’s
position or responsibilities (including the person or persons to
whom Executive has reporting responsibilities) that represents an
adverse change from Executive’s position or responsibilities
from those in effect at any time within ninety (90) days
preceding the date of the Change of Control or at any time
thereafter; provided, however, that a Change of Control which
results in the subsequent conversion of the Company to a division
or unit of the acquiring corporation will not by itself result in a
material reduction in Executive’s level of
responsibility;
(3) Executive is required to relocate
Executive’s principal place of employment to a facility or
location that would increase Executive’s one way commute
distance by more than thirty-five (35) miles;
(4) The Company (or any successor thereto)
materially breaches its obligations under this Agreement or any
other then-effective employment agreement with Executive;
or
(5) Any acquirer, successor or assignee of the
Company fails to assume and perform, in any material respect, the
obligations of the Company hereunder; and
(ii) Executive provides written notice to the
Company’s Board within the thirty (30) day period
immediately following such action; and
(iii) Such action is not remedied by the Company
within thirty (30) days following the Company’s receipt
of such written notice; and
(iv) Executive’s resignation is effective not
later than sixty (60) days after the expiration of such thirty
(30) day cure period.
The termination of Executive’s
employment as a result of Executive’s death or disability
will not be deemed to be a Good Reason.
(d) Definition of Change of
Control. For purposes of
this Agreement, “Change of Control” shall
mean:
(i) A transaction or series of transactions (other
than an offering of Stock to the general public through a
registration statement filed with the Securities and Exchange
Commission) whereby any “person” or related
“group” of “persons” (as such terms are
used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act
of 1934 (the “ Exchange Act ”)) (other
than the Company,
