|
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:
1.1 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.
1
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.
3.1 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.
2
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
3
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
4
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
| 
