Exhibit
10.3
EMPLOYMENT
AGREEMENT
This
EMPLOYMENT AGREEMENT (the “ Agreement
” ) is entered into effective as of December 14, 2006
(the “ Effective Date ” ), by and
between TorreyPines
Therapeutics, Inc. (the
“ Parent ” ) Parent’s subsidiary,
TPTX, Inc. ( “TPTX” ) and Craig Johnson
(the “ Executive ” ). As used in
this Agreement, references to the
“Company” shall include the Parent and
TPTX, as appropriate. The Company and the Executive are
hereinafter collectively referred to as the “
Parties, ” and individually referred to as a
“ Party . ”
RECITALS
A.
The Company desires to retain the
Executive’s experience, skills, abilities, background and
knowledge and is willing to engage the Executive’s services
on the terms and conditions set forth in this Agreement.
B.
The Executive desires to be in the
employ of the Company and is willing to accept such employment on
the terms and conditions set forth in this Agreement.
C.
The Parties contemplate that
Executive will be an employee of both the Parent and TPTX, and all
amounts required to be paid to Executive pursuant to this Agreement
will be paid by TPTX.
AGREEMENT
In
consideration of the foregoing Recitals and the mutual promises and
covenants herein contained, and for other good and valuable
consideration, the Parties, intending to be legally bound, agree as
follows:
1.
EMPLOYMENT.
1.1
Title . The
Executive shall serve as the Parent’s Chief Financial Officer
and Vice President, Finance and shall serve in such other
capacities as the Company may from time to time prescribe.
The Executive shall report solely and directly to the
Company’s Chief Executive Officer.
1.2
Duties .
The Executive shall perform all services and actions necessary or
advisable to conduct the business of the Company and which are
normally associated with the position(s) the Executive holds in a
corporation of the size and nature of the Company.
1.3
Location . Except
as otherwise specifically permitted by the Parent’s Board of
Directors (the “Board” ), the Executive
shall perform the services required pursuant to this Agreement at
the Company’s offices located in San Diego, California;
provided, however, that the Company may require the Executive to
travel temporarily to other locations in connection with the
Company’s business.
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2.
LOYAL AND CONSCIENTIOUS
PERFORMANCE; NONCOMPETITION.
2.1
Loyalty . Except as
otherwise specifically permitted by the Board, during the
Executive’s employment with the Company, the Executive shall
devote the Executive’s full business energies, interest,
abilities and productive time to the proper and efficient
performance of the Executive’s duties under this Agreement;
provided, however, that Executive may devote a reasonable
amount of time and energies for personal investment and civic and
charitable duties.
3.
COMPENSATION OF THE
EXECUTIVE.
3.1
Base Salary .
Effective October 4, 2006, the Company shall pay the Executive a
base salary of Two Hundred Sixty Thousand Dollars ($260,000) per
year, payable in regular periodic payments in accordance with
Company policy. Such base salary shall be prorated for any
partial year of employment on the basis of a 365-day fiscal
year.
3.2
Annual Incentive Bonus. In addition to the
Executive’s base salary, the Executive will be eligible to
receive an annual performance bonus. The bonus amount
Executive may receive¸ if any, shall be based upon the
Executive’s and the Company’s performance as measured
against agreed-upon targets during the previous year as evaluated
by the Board in its sole and absolute discretion. The bonus
amount payable for performance that meets the targets shall be a
percentage of the Executive’s annual base salary (the
“Target Bonus Amount” ). For 2007,
the Executive’s Target Bonus Amount shall be thirty percent
(30%) of the Executive’s annual base salary. Annual
performance bonus pay will vary according to the Executive’s
and the Company’s performance against the targets and will be
capped at one hundred fifty percent (150%) of the Target Bonus
Amount. In the event the Company and the Executive do not
agree upon the performance targets, the Board shall establish the
applicable performance targets in its sole and absolute
discretion.
3.3
Changes to Compensation . The Executive’s compensation shall
be reviewed from time to time by the Board or the Compensation
Committee thereof as it deems appropriate and may be increased at
any time by the Board or the Compensation Committee thereof or may
be reduced only upon mutual written agreement between the Executive
and the Board or the Compensation Committee thereof.
3.4
Employment Taxes .
All of the Executive’s compensation (in any form) shall be
subject to all required withholding taxes, employment taxes and
other deductions required by law.
3.5
Benefits . The
Executive shall, in accordance with Company policy and the terms of
the applicable plan documents, be eligible to participate in
benefits under any benefit plan or arrangement which may be in
effect from time to time and made available to the Company’s
employees. In addition, the Executive shall be eligible for
paid vacation, in accordance with Company policy as in effect from
time to time.
3.6
Equity Compensation . The
Compensation Committee of the Board will periodically evaluate the
equity position of Executive and determine changes, if any, at its
annual meeting addressing executive compensation in
general.
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4.
TERMINATION.
4.1
Termination By the Company . The Executive’s employment with
the Company may be terminated under the following
conditions:
4.1.1
Termination for Death or Disability . The Executive’s employment with
the Company shall terminate effective upon the date of the
Executive’s death or Complete Disability (as defined
below).
4.1.2
Termination by the Company For Cause . The Company may terminate the
Executive’s employment under this Agreement for Cause (as
defined below). A notice of termination given pursuant to this
Section 4.1.2 shall effect termination as of the date specified,
or, in the event no such date is specified, on the date upon which
the notice is given.
4.1.3
Termination by the Company For Any Reason Other Than
Cause . The
Executive’s employment by the Company shall be “at
will.” The Company may terminate the Executive’s
employment under this Agreement at any time, for any or no reason
and with or without cause or advance notice. This is the full
and complete agreement between the Executive and the Company on
this term. Although the Executive’s duties, title,
compensation and benefits may change, the “at will”
nature of the Executive’s employment relationship with the
Company may only be modified in an express written agreement signed
by the Executive and the Board.
4.2
Termination by Mutual Agreement of the Parties
. The Executive’s
employment pursuant to this Agreement may be terminated at any time
upon the mutual written agreement of the Parties. Any such
termination of employment shall have the consequences specified in
such writing.
4.3
Termination by the Executive . The Executive’s employment by the
Company shall be “at will.” The Executive shall
have the right to resign or terminate the Executive’s
employment at any time, with or without cause, notice or Good
Reason.
4.4
Compensation Upon Termination .
4.4.1
Termination Payments .
Upon Executive’s termination or resignation
with Good Reason, the Company shall pay the Executive’s base
salary and any accrued and unused vacation benefits earned through
the date of such termination or resignation. Except as
expressly provided herein, the Company shall thereafter have no
further obligations to the Executive under this
Agreement.
4.4.2
Severance Payments. In addition to the payments provided in
Section 4.4.1, if the Executive’s employment is terminated by
the Company without Cause, or if, within three months before, or 12
months following, a Change in Control (as defined below), the
Executive resigns for Good Reason, then the Company shall provide
the following benefits:
4.4.2.1
The Company shall continue to pay
the Executive’s base salary until the end of the period
following the termination or resignation of the Executive equal to
nine (9) months (the “Compensation Severance Period
” ). Such severance payments shall
be
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subject to standard deductions and
withholdings and paid in accordance with the Company’s
regular payroll policies and practices. For purposes of
calculating the amount to be paid pursuant this Section 4.4.2.1,
the Company shall use the Executive’s base compensation in
effect on the date of such termination or resignation.
4.4.2.2
Each month during the Compensation
Severance Period, the Company shall pay the Executive an amount
equal to one-twelfth (1/12 th ) of the
greater of (i) the average of the three annual bonuses paid to the
Executive by the Company prior to the date of termination or
resignation, (ii) the last annual bonus paid to the Executive by
the Company prior to the date of termination or resignation, or
(iii) if the termination occurs within the first twelve 12 months
following the Effective Date of this Agreement, then the Target
Bonus Amount. Such payment shall be subject to standard
deductions and withholdings and paid in equal monthly installments
over the Compensation Severance Period in accordance with the
Company’s regular payroll policies and practices.
4.4.2.3
The vesting of each Company equity
award held by Executive shall accelerate on such date of
termination by the number of shares that would have vested had
Executive remained employed by the Company until the end of the
period following the termination or resignation of the Executive
equal to twelve (12) months (the “Benefit Severance
Period” ), and, during the Benefit Severance Period,
Executive shall have continued exercisability of each Company stock
option and stock appreciation right held by the Executive (if any).
Notwithstanding the foregoing, if a stock option or stock
appreciation right was held by the Executive on the Effective Date
and counsel for the Company has not advised the Company that such
continued stock option exercisability would not cause such stock
option to be treated as covered by Section 409A of the Code or
would not cause the Executive to become subject to the immediate
taxation prior to the date of exercise, additional tax and interest
under Section 409A of the Code, then any such stock option or stock
appreciation right then held by Executive shall remain exercisable
until the earlier of (1) the end of the Benefit Severance Period or
(2) the later of the 15 th day of the third month following the date
at which, or December 31 of the calendar year in which, the stock
option would otherwise have expired if the stock option had not
been extended pursuant to this Section 4.4.2.3 (based on the terms
of the stock option at the original grant date); provided,
however , that such stock options shall not be exercisable
after the expiration of its maximum term. Nothing in
this Section 4.4.2.3 prohibits the Company or a successor
organization (or its parent) from causing such awards to terminate
in connection with a merger, consolidation or other corporate
transaction pursuant to the terms of the applicable equity plan or
award agreements.
4.4.2.4
Assuming the Executive timely and
accurately elects to continue his health insurance benefits under
the Consolidated Omnibus Budget Reconciliation Act of 1985 (“
COBRA ”), the Company shall pay the COBRA
premiums for the Executive and his or her qualified beneficiaries
until the earliest of (i) the end of the Benefit Severance Period,
(ii) the expiration of the Executive’s continuation coverage
under COBRA and any applicable state COBRA-like statute that
provides mandated continuation coverage or (iii) the date the
Executive becomes eligible for health insurance benefits of a
subsequent employer.
4.4.2.5
In the event the Executive resigns
with Good Reason prior to a Change in Control, the payments
described in Sections 4.4.2.1, 4.4.2.2 and 4.4.2.4 will
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commence as soon as administratively
practicable following the Change in Control; otherwise the payments
will commence as soon administratively practicable following the
Executive’s termination or resignation.
4.4.3
Release .
Notwithstanding the foregoing, the Executive shall not receive any
of the severance payments or benefits set forth under Section
4.4.2, unless upon Executive’s termination of employment the
Executive furnishes the Company with an effective waiver and
release of claims (the “Release” ) in a
form acceptable to the Parties and substantially as attached hereto
as Exhibit A . If a majority of the Board determines in
good faith that the Executive has breached any provision of this
Agreement or the Release, the Company shall be excused from the
obligation to provide any severance payment under Section 4.4.2;
provided, however, that the Company shall not be entitled to
recovery of any severance payment already provided to the Executive
under Section 4.4.2.
4.4.4 No
Mitigation.
Amounts payable to the Executive under Section
4.4.2.1 and Section 4.4.2.2 shall not be reduced by any amount of
the Executive’s earnings from other employment during the
Benefit Severance Period, if applicable, and, during the Benefit
Severance Period, the Executive shall not have an affirmative duty
to seek other employment or otherwise mitigate the amount of any
payment contemplated by this Agreement.
4.5
Definitions . For
purposes of this Agreement, the following terms shall have the
following meanings:
4.5.1
Complete Disability . “Complete Disability”
shall mean the inability of the Executive to perform the
Executive’s duties under this Agreement because the Executive
has become permanently disabled within the meaning of any policy of
disability income insurance covering employees of the Company then
in force. In the event the Company has no policy of
disability income insurance covering employees of the Company in
force when the Executive becomes disabled, the term
“Complete Disability” shall mean the inability
of the Executive to perform the Executive’s duties under this
Agreement by reason of any incapacity, physical or mental, which
the Board, based upon medical advice or an opinion provided by a
licensed physician acceptable to the Board, determines to have
incapacitated the Executive from satisfactorily performing all of
the Executive’s usual services for the Company for a period
of at least one hundred twenty (120) days during any twelve (12)
month period (whether or not consecutive). Based upon such
medical advice or opinion, the determination of the Board shall be
final and binding and the date such determination is made shall be
the date of such Complete Disability for purposes of this
Agreement.
4.5.2
Cause. “Cause” for the Company to terminate Executive’s
employment hereunder shall mean the occurrence of one or more of
the following events if such event results in a demonstrably
harmful impact on the Company’s business or reputation, or
that of any of its subsidiaries, as reasonably determined by the
Board:
(i)
Executive’s conviction of, or
plea of guilty or no contest to, any felony or any crime involving
fraud, dishonesty or moral turpitude under the laws of the United
States or
