Exhibit 10.51
DURECT CORPORATION
EXECUTIVE CHANGE OF CONTROL
POLICY
This Executive Change of Control
Policy (the “ Policy ”) is effective as of
April 7, 2004, as amended on September 25,
2008.
POLICY
GOALS
A. It is expected that the Company
from time to time will consider the possibility of an acquisition
by another company or other change of control transaction. The
Board of Directors of the Company (the “ Board
”) recognizes that such consideration can be a distraction to
officers of the Company and can cause these individuals to consider
alternative employment opportunities. The Board has determined that
it is in the best interests of the Company and its stockholders to
assure that the Company will have the continued dedication and
objectivity of its officers, notwithstanding the possibility,
threat or occurrence of a Change of Control (as defined below) of
the Company.
B. Accordingly, the Board believes
that it is in the best interests of the Company and its
stockholders to provide officers with an incentive to continue
their employment and to motivate such individuals to maximize the
value of the Company upon a Change of Control for the benefit of
its stockholders by providing them with certain benefits upon a
Change of Control that provide them with enhanced financial
security and incentive notwithstanding the possibility or
occurrence of a Change of Control.
POLICY
1. ELIGIBILITY.
This Policy shall be applicable to
each individual who is an employee of the Company holding a
position of Vice President (or equivalent position) or higher as of
the effective date of a Change of Control or who held such a
position with the Company within 90 days of such date but whose
employment terminated under the conditions specified in
Section 3 below (each, an “ Officer ”);
provided, however, that the terms of this Policy will not
apply to any Officer who is party to one or more agreements with
the Company providing for specified benefits to the Officer upon or
in connection with a Change of Control unless such Officer
expressly consents (by executing the acknowledgment provided below)
to becoming a participant eligible to receive benefits under this
Policy and thereby expressly waiving and forfeiting any rights or
claims he or she has or may have under any such prior agreement(s).
Once acknowledged below, the terms of this Policy shall constitute
the entire agreement between the Officer and the Company as to the
subject matter covered by the Policy and such terms may thereafter
be amended only by a written agreement signed by the Officer and,
following approval by the Company’s Board or a Committee
thereof, a duly authorized officer of the Company.
2. AT-WILL EMPLOYMENT
. Unless otherwise agreed to
expressly by the Company and an Officer through a separate written
agreement which remains in effect after the Officer becomes
eligible to receive benefits under this Policy, each
Officer’s employment is and shall continue to be on an
at-will basis, meaning that either the Officer or the Company (or
its successor) can terminate their employment relationship with
each other at any time for any or no reason. Nothing in this Policy
shall give an Officer any benefits whatsoever in the event the
Officer’s employment terminates in a manner that is not in
connection with a Change of Control.
3. SEPARATION BENEFITS UPON
INVOLUNTARY TERMINATION FOLLOWING CHANGE OF CONTROL
. If, in connection with and within
90 days prior to a Change of Control, or within twenty-four
(24) months following the effective date of a Change of
Control, the Officer’s employment with the Company (or its
successor) is terminated by the Company or the successor without
Cause or the Officer experiences a Constructive Termination (in
each case as defined below), then subject to Sections 3(c), 4 and 5
below the Officer will be entitled to the following
benefits:
(a) Vesting
Acceleration. The
remaining unvested portion of any such stock options or shares of
stock held by the Officer as of the effective date of the
employment termination shall automatically be accelerated so as to
become completely vested and exercisable (and any such right of
repurchase or forfeiture provision shall lapse in full) as of the
effective date of such termination; and
(b) Cash Benefits.
The Officer will be entitled to
payment of an amount equal in aggregate to his or her then-current
annual base salary, payable in equal installments (on the
Company’s normal payroll schedule and subject to applicable
withholdings) over the 12 months following the date of employment
termination; provided however that this Section 3(b)
shall be subject to Section 5(c) below; and provided
further that the Company’s obligations to make any
payments under this Section 3(b) is subject to
Section 3(c) below.
(c) Conditions to Payment of
Benefits. Notwithstanding
anything else to the contrary contained herein, no Officer shall be
entitled to payment of any benefits provided under this
Section 3 or otherwise under this Policy unless and until
(1) the Company (or its successor) shall have received from
the Officer an effective release releasing the Company (or its
successor) from any and all claims Officer may have against such
entities related to or arising in connection with his or her
employment, the terms of such employment and termination thereof,
and (2) the Officer is in compliance and continues to be in
compliance with the covenants contained in Section 4 below
(the “ Covenants ”), which Covenants shall be
acknowledged and agreed to by the Officer upon his or her executing
this Policy in the
acknowledgment signature block
below. Each Officer further acknowledges and agrees that any breach
by him or her of the Covenants at any time during the period
specified in Section 4 below will cause irreparable damage to
the Company and that in the event of such breach the Company shall
have, in addition to any and all remedies of law, the right to an
injunction, specific performance or other equitable relief to
prevent the violation of his or her obligations hereunder, without
showing or proving actual damages or exhausting any Company remedy
in the form of money damages and without having to post a bond or
any other security. In addition, in the event of any breach of the
Covenants by the Officer, the Company will be entitled without
further liability to cease any and all payments yet to be made to
the Officer under Section 3(b) above.
4. COVENANTS.
During his or her employment with
the Company, the Officer agrees to devote his or her full time and
best efforts to the business of the Company, and the Officer
further agrees that during his or her employment with the Company
and for any period thereafter for which he or she is receiving or
has received payment of cash severance under Section 3(b)
above (but in any event not exceeding two years), he or she will
not, directly or indirectly, act as a partner, joint venturer,
consultant, officer, director, employee, agent, independent
contractor or stockholder of any company or business organization
(including any unit or division of any company or organization)
whose business is the development and marketing of products and
services that are directly competitive with the products and
services being developed and marketed by the Company immediately
prior to the Change of Control; provided, however , that the
record or beneficial ownership by the Officer of 5% or less of the
outstanding publicly traded capital stock of any such company shall
not be deemed, in and of itself, to be in violation of the
Covenants set forth in this Section 4.
5. TAXES.
(a) General Withholding Tax
Obligations. The Officer
shall be responsible for any income, excise or other taxes imposed
on the Officer under applicable law with respect to the benefits
provided hereunder, including without limitation delivering to the
Company (or its successor) any amounts necessary to timely satisfy
any applicable withholding tax obligations. The Officer’s
receipt of any benefit hereunder is conditioned on his or her
satisfaction of any applicable withholding or similar obligations
that apply to such benefit, and any cash payment owed hereunder
will be reduced to satisfy any such withholding or similar
obligations that may apply.
(b) Limitation on
Payments. In the event
that the benefits provided for under this Policy
(x) constitute “parachute payments” within the
meaning of Section 280G of the Internal Revenue Code of 1986,
as amended (the “ Code ”), and (y) but for
this Section 4(b) would be subject to the excise tax imposed
by Section 4999 of the Code (or any corresponding provisions
of state income tax law), then such benefits shall be either
(1) delivered i
