Exhibit 10.1
Employment
Agreement
By And
Between
Cypress Bioscience,
Inc.
And
Michael J.
Walsh
EMPLOYMENT AGREEMENT
This Employment Agreement (the
“Agreement” ) is made and entered into
effective as of February 23, 2008 (the “Effective
Date” ), by and between Cypress Bioscience, Inc. ,
a Delaware corporation (the “Company” ),
and Michael J.
Walsh (the “Executive” ). 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
assurance of the association and services of the Executive in order
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.
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 Term. The Company hereby
employs the Executive, and the Executive hereby accepts employment
by the Company, upon the terms and conditions set forth in this
Agreement, until the termination of the Executive’s
employment in accordance with Section 5 or Section 6
below, as applicable (the “Term” ). The
Executive shall be employed at will, meaning that either the
Company or the Executive may terminate this agreement and
Executive’s employment at anytime, for any reason or no
reason, with or without cause, without liability to the other save
for wages earned through the effective date of termination and
severance compensation and benefits provided in Sections 5 or
6, as applicable.
1.2 Title. The Executive
shall have the title of Executive Vice President and Chief
Commercial Officer ( “CCO” ) of the
Company and shall serve in such other capacity or capacities as the
Board of Directors of the Company (the
“Board” ) may from time to time prescribe
with Executive’s consent.
1.3 Duties. The Executive
shall do and perform all services, acts or things necessary or
advisable to manage and conduct the business of the Company and
which are normally associated with the position of CCO, consistent
with the bylaws of the Company and as required by the Board.
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1.4 Policies and Practices.
The employment relationship between the Parties shall be governed
by the policies and practices established from time to time by the
Company and the Board.
1.5 Location. Unless the
Parties otherwise agree in writing, during the term of this
Agreement, the Executive shall perform the services Executive is
required to perform pursuant to this Agreement at the
Company’s offices, located in San Diego, or, with the consent
of the Company and Executive, at any other place at which the
Company maintains an office; provided, however, that the Company
may from time to time require the Executive to travel temporarily
to other locations in connection with the Company’s
business.
2. Loyal And
Conscientious Performance; Noncompetition.
2.1 Loyalty. During the
Executive’s employment by the Company, the Executive shall
devote Executive’s full business energies, interest,
abilities and productive time to the proper and efficient
performance of Executive’s duties under this Agreement.
Notwithstanding the foregoing, Executive may engage in personal,
investment, civic, and charitable activities to the extent they do
not unreasonably interfere with Executive’s performance of
his duties under this Agreement or violate paragraphs 2.2 or 2.3 of
this Agreement.
2.2 Covenant not to Compete.
Except with the prior written consent of the Board, the Executive
will not, during the Term of this Agreement, engage in competition
with the Company and/or any of its Affiliates, either directly or
indirectly, in any manner or capacity, as adviser, principal,
agent, affiliate, promoter, partner, officer, director, employee,
stockholder, owner, co-owner, consultant, or member of any
association or otherwise, in any phase of the business of
developing, manufacturing and marketing of products or services
which are in the same field of use or which otherwise compete with
the products or services or proposed products or services of the
Company and/or any of its Affiliates. For purposes of this
Agreement, “Affiliate” means, with
respect to any specific entity, any other entity that, directly or
indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with such specified
entity. Ownership by the Executive, as a passive investment, of
less than two percent (2%) of the outstanding shares of a capital
stock of any corporation with one or more classes of its capital
stock listed on a national or foreign securities exchange or
publicly traded on the Nasdaq Stock Market or in the
over-the-counter market shall not constitute a breach of this
paragraph.
2.3 Agreement not to Participate
in Company’s Competitors. During the Term, the Executive
agrees not to acquire, assume or participate in, directly or
indirectly, any position, investment or interest known by Executive
to be adverse or antagonistic to the Company, its business or
prospects, financial or otherwise or in any company, person or
entity that is, directly or indirectly, in competition with the
business of the Company or any of its Affiliates. Ownership by the
Executive, as a passive investment, of less than two percent (2%)
of the outstanding shares of capital stock of any corporation with
one or more classes of its capital stock listed on a national or
foreign securities exchange or publicly traded on the Nasdaq Stock
Market or in the over-the-counter market shall not constitute a
breach of this paragraph.
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3. Compensation Of
The Executive.
3.1 Base Salary. The Company
shall pay the Executive a base salary of three hundred thousand
dollars ($300,000) per year, less payroll deductions and all
required withholdings payable in regular periodic payments in
accordance with Company policy (the “Base
Salary” ). Such Base Salary shall be prorated for any
partial year of employment on the basis of a 365-day fiscal year.
Executive’s Base Salary shall not be reduced below three
hundred thousand dollars ($300,000) per year other than as the
result of a company-wide compensation reduction or in connection
with similar decreases for the management team of the Company,
provided the reduction of Executive’s Base Salary is of
similar proportion.
3.2 Annual Discretionary
Bonus. In addition to the Executive’s Base Salary, the
Executive will be eligible to receive a discretionary annual bonus
of up to thirty-five percent (35%) of Executive’s
then-current base salary amount. The bonus amount the Executive
will actually receive, if any, shall be determined in the sole and
absolute discretion of the Board by evaluating the
Executive’s and the Company’s performance against
milestones and targets established by the Board in its sole and
absolute discretion. Any bonus amount may be paid in either cash or
stock, or in any combination thereof, in the Board’s sole and
absolute discretion. The good faith determinations of the Board (or
its Compensation Committee) with respect to the amount or payment
of any bonus shall be final and binding. Any annual discretionary
bonus that is earned shall be paid no later than the fifteenth day
of the third month following the end of the Company’s fiscal
year for which such bonus was earned, and thus will be payable
pursuant to the “short-term deferral” rule set forth in
Section 1.409A-1(b)(4) of the Treasury Regulations.
3.3 Changes to Compensation.
The Executive’s compensation may be changed from time to time
by mutual agreement of the Executive and the Company.
3.4 Employment Taxes. All of
the Executive’s compensation shall be subject to customary
withholding taxes and any other employment taxes as are commonly
required to be collected or withheld by the Company.
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 executive benefit plan or arrangement that may be in
effect from time to time and is made generally available to the
Company’s executive or key management employees, including
but not limited to paid vacation and medical insurance, provided
that, the Executive shall receive four (4) weeks paid vacation
per year. This Section 3.5 does not give the Executive the
right to participate in or receive any individualized benefits that
may be offered to specific executives such as, for example,
severance packages. Any action by the Company (including the
elimination of health care or dental benefit plans or any life
insurance or disability benefits without providing substitutes
thereof or the reduction of the Executive’s benefits
thereunder) that would materially and substantially diminish the
aggregate value of Executive’s benefits under such
arrangements, as a whole as they exist as such time, other than as
the result of a company-wide benefits reduction or change or in
connection with similar decreases or changes for similarly situated
employees of the Company, shall constitute a material breach of
this Agreement.
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4. Stock
Options.
4.1 Initial Option Grant. On
the Closing Date of the Merger, the Executive shall be granted an
option to purchase four hundred thousand (400,000) shares of the
Company’s common stock, at an exercise price equal to the
closing price of such stock on the business day immediately
preceding the effective date of the grant (the “Initial
Option” ). The Initial Option shall be subject to
vesting, according to the schedule specified below.
4.2 Service-based Vesting.
Seventy-five percent (75%), i.e., three hundred thousand (300,000)
of the shares subject to the Initial Option (such portion of the
Initial Option referred to hereafter as the “Service-based
Vesting Option”) shall vest according to the following
schedule, subject to the Executive’s provision of continuous
service to the Company through the applicable vesting date(s):
(i) twenty-five percent (25%) of the shares subject to the
Service-based Vesting Option shall vest on the first anniversary of
the Executive’s date of hire, and, (ii) thereafter, the
remaining seventy-five percent (75%) of the Service-based Vesting
option shares shall vest in equal monthly installments on the final
calendar day of each month over the next three
(3) years.
4.3 Performance-based
Vesting. Twenty-five percent (25%), i.e., one hundred thousand
(100,000) shares subject to the Initial Option shall vest on the
date upon which the Company shall have realized ten million dollars
($10,000,000) in cumulative cash revenues derived from any of the
products acquired by the Company in connection with the Agreement
and Plan of Merger between the Company and Propel, subject to the
Executive’s provision of continuous service to the Company
through such vesting date.
5. Termination Not
in Connection With a Change of Control.
5.1 Termination. If the
Executive’s employment is terminated (either by the Company,
by the Executive, or due to the Executive’s death or Complete
Disability), then the Company shall pay to Executive or
Executive’s heirs the Executive’s Base Salary, any
bonus awarded under Section 3.2 not previously paid, and any
accrued and unused vacation benefits, each as earned through the
date of termination at the rate then in effect, less standard
deductions and withholdings, and the Company shall thereafter have
no further obligations to the Executive and/or the
Executive’s heirs under this Agreement, except as expressly
provided in this Section 5 or Section 6 below.
5.2 Benefits Upon Termination
Without Cause or for Good Reason Prior to a Change of Control.
Other than a termination due to Executive’s death or Complete
Disability, in the event the Executive’s employment with the
Company is terminated by the Company without Cause (as defined
below) or the Executive terminates his employment for Good Reason
(as defined below), in each case prior to a Change of Control (as
defined below), subject to Executive’s delivery to the
Company of an effective Release and Waiver in the form attached
hereto as Exhibit A within the applicable time period
set forth therein, but in no event later than forty-five
(45) days following termination of Executive’s
employment, and permitting such Release and Waiver to become fully
effective in accordance with its terms, (the date Executive’s
Release becomes fully effective, the “Release Effective
Date” ), the Company shall provide the Executive with
the following benefits hereunder:
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(a) Severance pay in the form of a lump sum payment equal to
six months of the Executive’s base salary then in effect. For
such purposes, the Executive’s base salary shall be
calculated based on the rate in effect prior to any material
reduction in base salary that would give the Executive the right to
resign for Good Reason, as defined below. Such severance payment
shall be subject to standard deductions and withholdings and paid
in accordance with the Company’s regular payroll policies and
practices in the first payroll period following the Release
Effective Date; and
(b) Assuming the Executive timely and accurately elects to
continue health insurance benefits under the Consolidated Omnibus
Budget Reconciliation Act of 1985 (“ COBRA
”), the Company shall provide the Executive with such
continued health insurance benefits for Executive and his eligible
dependents without cost to the Executive until the earliest of
(i) twelve (12) months following the termination of the
Executive’s employment, (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 substantially equivalent health insurance benefits of
a subsequent employer. The Executive agrees to immediately notify
the Company of such eligibility. Such health insurance coverage may
be provided at the Company’s option either by payment
directly to the Company’s health insurance carrier, or
through the Company’s own employee health insurance plan if
the Company is self-insured.
5.3 Benefits Under Severance
Benefit Plan. Executive will be added as an officer eligible
for benefits pursuant to Appendix A of the Company’s
Severance Benefit Plan dated May 21, 2004 (the
“Plan” ). In the event that Executive is
entitled to benefits under Section 5 or 6 of this Agreement
and is also eligible for benefits under the Plan, as to each
category of benefits to which Executive is entitled under this
Agreement or the Plan, Executive shall receive the benefit which is
greater, but shall not receive benefits under this Agreement and
the Plan as to the same category of benefits.
5.4 Definitions. For purposes
of this Agreement, the following terms shall have the following
meanings:
5.4.1 Good Reason.
“Good Reason” for the Executive to
terminate the Executive’s employment hereunder shall mean the
occurrence of any of the following events without the
Executive’s consent; provided however, that any resignation
by the Executive due to any of the following conditions shall only
be deemed for Good Reason if: (i) the Executive gives the
Company written notice of the intent to terminate for Good Reason
within ninety (90) days following the first occurrence of the
condition(s) that the Executive believes constitutes Good Reason,
which notice shall describe such condition(s); (ii) the
Company fails to remedy, if remediable, such condition(s) within
thirty (30) days following receipt of the written notice (the
“Cure Period”) of such condition(s) from the Executive;
and (iii) Executive actually resigns his employment within the
first fifteen (15) days after expiration of the Cure
Period.
(a) a material reduction in the Executive’s duties or
responsibilities as they are formally developed and confirmed in
writing following the Effective Date of this Agreement and
following the full integration of Propel into the Company (or if
following a Change of Control, as they existed immediately prior to
the Change of Con
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