Exhibit 10.11
MICHAEL N. CHANG
EMPLOYMENT
AGREEMENT
This EMPLOYMENT AGREEMENT
(the “ Agreement ”) dated as of
June 17, 2005, is between OPTIMER PHARMACEUTICALS, INC.,
a Delaware corporation (“ Company ”), and
MICHAEL N. CHANG (“ Executive ”). Together,
Executive and Company are the “parties” and each is a
“party” hereto.
WHEREAS , the Company and the Executive previously
entered into an employment agreement dated March 1, 2001
(the “ Prior Agreement ”).
WHEREAS , THE Company wishes for Executive to continue
in his role as Chief Executive Officer and President of the
Company.
NOW , THEREFORE , in consideration of the
covenants and agreements hereinafter set forth, the parties hereto
agree as follows:
1.
EFFECTIVENESS OF
AGREEMENT
1.1
General. This Agreement shall become effective as
of the date hereof and shall replace, void, and supersede any
section of the Prior Agreement that conflicts with this
Agreement.
2.
EMPLOYMENT AND
DUTIES
2.1
General. The Company hereby employs the Executive,
and the Executive agrees to serve, as President and Chief Executive
Officer of the Company, upon the terms and conditions herein
contained. In such capacity, Executive shall report directly to the
Board of Directors of the Company (“ Board ”).
The Executive shall perform such other duties and services for the
Company as may be reasonably designated from time to time by the
Company and as are consistent with Executive’s title. The
Executive agrees to serve the Company faithfully and to the best of
his ability under the direction of the Company.
2.2
Exclusive Services.
Except as may otherwise be
approved in advance by the Board, and except during vacation
periods and reasonable periods of absence due to sickness, personal
injury or other disability, the Executive shall devote his full
working time throughout the Employment Term (as defined below)
to the services required of him hereunder. The Executive shall
render his services exclusively to the Company during the
Employment Term, and shall use his best efforts, judgment and
energy to improve and advance the business and interests of the
Company in a manner consistent with the duties of his position.
Executive may participate in charitable and philanthropic
activities so long as they don’t interfere with his duties
hereunder. However, the foregoing shall not prevent Executive from
providing services as a member of the Board of Directors of another
third party or parties nor consulting services to Pharmanex,
provided that the total of all such services to such
entities cumulatively shall not exceed four days per
month.
2.3
Term of Employment.
The Executive’s
employment under this Agreement (the “ Employment
Term ”) shall commence as of the effective date hereof
and shall terminate on the earlier of (a) the forth year
anniversary of the date hereof, or (b) the termination of the
Executive’s employment pursuant to this Agreement. Executive
may terminate his employment with the Company at any time and for
any reason upon thirty (30) days’ prior written notice
to the Company.
2.4
Reimbursement of
Expenses. The
Company shall reimburse the Executive for reasonable travel and
other business expenses incurred by him in the fulfillment of his
duties hereunder upon presentation by the Executive of an itemized
account of such expenditures, such reimbursement to be in
accordance with the Company’s policies and
procedures.
3.
SALARY
3.1
Base Salary.
From the date hereof, the
Executive shall receive a base salary (“ Base Salary
”) at a rate of $271,695.35 per annum, payable twice monthly
in arrears in equal installments in accordance with the
Company’s payroll practices.
3.2
Annual Review.
The Executive’s Base
Salary shall be reviewed for potential increase by Company, based
upon the Executive’s performance, not less often than
annually. Any positive adjustments in Base Salary effected as a
result of such review shall be made by Company in its sole
discretion.
4.
LONG-TERM INCENTIVE
COMPENSATION
The Company will provide the
Executive with the following long-term incentive compensation
arrangement.
4.1
Subject to the approval of the
Board, the Executive will be granted a stock option to purchase up
to 570,744 shares o the Company’s Common Stock at a
price per share equal to the fair market value per share of the
Common Stock on the date of grant (the “ Option
”). Subject to Section 4.2 below, 25% of the shares
subject to the Option shall vest 12 months after the date of
Executive’s vesting begins and the remaining shares shall
vest monthly over the following 36 months in equal monthly
amounts subject to Executive continuing eligibility.
4.2
Notwithstanding the foregoing, upon
(i) the occurrence of a change of control (the “
Change of Control Transaction ”) of the Company
(defined as the Company’s being merged with or into or
combined with a third party such that the security holders of the
Company prior to such transaction do not hold at least 50% of the
securities of the resulting entity after such transaction by virtue
of such transaction), and (ii) within twelve (12) months
thereafter Executive’s employment is terminated by the
Company (or its successor in interest), then all unvested
shares subject to the Option shall immediately vest and be
exercisable (and, in the case of shares already purchased with the
Company maintaining a right of repurchase, the Company shall cease
to have the right to repurchase any such unvested shares);
provided that the Executive is employed by the Company on
such transaction date.
5.
EMPLOYEE BENEFITS
The Executive shall, during his
employment under this Agreement, be included to the extent eligible
thereunder in all employee benefit plans, programs or arrangements
(including, without limitation, any plans, programs or arrangements
providing for retirement benefits, profit sharing, disability
benefits, health and life insurance, or vacation and paid holidays)
that shall be established or adopted by the Company for, or made
available to, the Company’s senior executives. In addition,
the Company shall furnish the Executive with the following benefits
during his employment under this Agreement:
(a)
In connection with the Prior
Agreement, Executive received a relocation and housing assistance
loan (the “ Loan ”) in the principal amount
of $300,000. 25% of the Loan shall be forgiven each year after the
date hereof, such that the Loan shall be fully forgiven on the four
year anniversary of the date hereof, subject to the Executive being
an employee of the Company on such anniversary dates.
Notwithstanding the foregoing, subject to the Executive being an
employee of the Company immediately prior to a Change of Control
Transaction, the Loan shall be forgiven immediately prior to the
close of a Change of Control Transaction.
(b)
Four (4) weeks vacation per
annum.
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6.
TERMINATION OF
EMPLOYMENT
6.1
Termination Without
Cause.
6.1.1
Severance.
Subject to the provisions of
Sections 6.1.3 and 6.1.4, if, prior to the expiration of
the Employment Term, the Executive’s employment is terminated
by the Company without Cause (as defined below), the Company
shall continue to pay the Executive the Base Salary (at the
rate in effect on the date of such termination) for twelve
(12) months (such period being referred to hereinafter as the
“ Severance Period ”), at such intervals as the
same would have been paid had the Executive remained in the active
service of the Company. The Executive shall have no further right
to receive any other compensation or benefits after such
termination or resignation of employment, except as determined in
accordance with the terms of the employee benefit plans or programs
of the Company or as provided in this Agreement.
6.1.2
Accelerated Vesting.
To the extent that any of the
shares would have vested at the end of the twelve months after
Executive is terminated under Section 4 of this Agreement but
for the termination of the Executive without Cause, all such shares
which would have vested within the twelve months had Executive
remained employed shall vest at the Company’s declared
termination date, and Executive shall have ninety (90) days
from the Company’s declared termination date to exercise the
Option. The Company shall notify Executive within ten days after
the necessary calculations under Section 4 have been completed
(which calculations shall be made no later than thirty
(30) days after the termination date in question) as to
whether any of the shares have vested. This provision shall survive
termination of the Agreement.
6.1.3
Conditions Applicable to the
Severance Period.
(a) If, during the Severance Period, the Executive breaches
any of his obligations under Section 8, the Company may, upon
written notice to the Executive, terminate the Severance Period and
cease to make any further payments or provide any benefits
described in Section 6.1.1. (b) If, during the Severance
Period, the Executive obtains other employment, then the Base
Salary payments due shall be reduced by an amount equivalent
(dollar for dollar) to what Executive receives from such other
employment. Executive shall promptly notify Company of such
employment and other payments.
6.1.4
Death During Severance
Period. In the
event of the Executive’s death during the Severance Period,
payments of Base Salary under Section 6.1.1 shall continue to
be made during the remainder of the Severance Period to the
beneficiary designated in writing for this purpose by the Executive
or, if no such beneficiary is specifically designated, to the
Executive’s estate.
6.1.5
Date of Termination.
The date of termination of
employment without Cause shall be the date specified in a written
notice of termination to the Executive as the last day of the
Executive’s employment.
6.1.6
Constructive
Termination. The
term “Constructive Termination” means:
(a)
the continued assignment to
Executive of any duties or the continued material reduction in
Executive’s duties, either of which is materially
inconsistent with Executive’s position with the Company, for
thirty (30) calendar days after Executive’s delivery of
written notice to the Company objecting to such assignment or
reduction; or
(b)
the relocation of the principal
place for the rendering of Executive’s services hereunder to
a location more than thirty (30) miles from the
Company’s business offices in the San Diego Area;
or
(c)
a material reduction in compensation
and benefits under this Agreement, which remains in effect for
thirty (30) calendar days after Executive delivers written
notice to the Company of such material reduction which reduction is
not applicable to all Company’s senior executive
employees.
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None of the foregoing will
constitute a Constructive Termination to the extent mutually agreed
upon in advance of the occurrence thereof by the Executive and the
Company. A Constructive Termination will be treated as a
termination of the Executive by the Company without Cause for all
purposes within this Agreement.
6.2
Termination for Cause:
Resignation.
6.2.1
General.
If, prior to the expiration of the
Employment Term, the Executive’s employment is terminated by
the Company for Cause, or the Executive resigns from his employment
hereunder, the Executive shall be entitled only to payment of his
Base Salary as then in effect through and including the date of
termination or resignation. The Executive shall have no further
right to receive any other compensation or benefits after such
termination or resignation of employment, except as determined in
accordance with the terms of the employee benefit plans or programs
of the Company or as provided in this Agreement.
6.2.2
Date of Termination.
The date of termination for
Cause shall be the date specified in a written notice of
termination to the Executive as the last day of the
Executive’s employment. The date of resignation shall be the
date specified in the written notice of resignation from the
Executive to the Company as the last day of the Executive’s
employment, which shall be no more than three months and no less
than thirty (30) days in advance, or if no date is specified
therein, receipt by the Company of written notice of resignation
from the Executive.
6.3
Cause. Termination for “ Cause
” shall mean termination of the Executive’s employment
because of:
(a)
any act or omission that constitutes
a material breach by the Executive of any of his obligations under
this Agreement or his failure to discharge the duties lawfully
assigned to him by the Board;
(b)
the willful and continued failure or
refusal of the Executive to substantially perform the duties
required of him in his position with the Company, which failure is
not cured within twenty (20) days following written notice of
such failure;
(c)
any willful violation by the
Executive of any material law or regulation applicable to the
business of the Company or any of its subsidiaries or affiliates,
or the Executive’s conviction of, or a plea of nolo
contendere to, a felony, or any act by the Executive of common
law fraud or its equivalent, or any Executive violation of a
Company policy applicable to all employees which is materially
detrimental to the Company, all as determined by a disinterested
majority of the Board of Directors; or
(d)
any other misconduct by the
Executive that is materially injurious to the financial condition
or business reputation of, or is otherwise materially injurious to,
the Company or any of its subsidiaries or affiliates.
7.
DEATH OR
DISABILITY
In the event of termination of
employment by reason of death or Disability (as hereinafter
defined), the Executive (or his estate, as applicable) shall
be entitled to Base Salary through the date of termination. Other
benefits shall be determined in accordance with the terms of the
benefit plans maintained by the Company, and the Company shall have
no further obligation hereunder. In addition, the Executive
(or his estate or the person or persons to whom the Options
may have been transferred by will or by the laws of descent and
distribution, as applicable) may, but only within twelve months
after Executive ceases to be an employee, exercise
Executive’s Options to the extent Executive was entitled to
exercise such Options on the date of his death or on the date he is
terminated by the Company by reason of Disability. To the extent
that the Executive was not otherwise entitled to
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exercise the Options on such date, or if he
(or his estate or the person or persons to whom the Options
may have been transferred by will or by the laws of descent and
distribution, as applicable) fails to exercise the Options within
the time specified in the preceding sentence, such Options will
terminate. For purposes of thi
