Exhibit 10.21
TAX INDEMNITY
AGREEMENT
This
Tax Indemnity Agreement (this “ Agreement ”) is
made as of this 7 day of November, 2007 by and between Vanda
Pharmaceuticals Inc. (the “ Company ”) and Al
Gianchetti (the “ Executive ”).
WHEREAS , the Compensation Committee of the Company’s
Board of Directors has determined that the Company should enter
into tax indemnity agreements with certain of its executives to
reimburse certain excise taxes, interest and penalties they may be
obligated to pay in connection with a change of control of the
Company, so that the Company may preserve the financial incentives
the Company created by granting stock options to those executives,
and so that the Company may also continue to provide motivation for
those executives to stay with the Company and act in its best
interests.
NOW, THEREFORE, in consideration of the foregoing, and for
other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged and agreed to, the parties hereto
agree as follows:
1. Gross-Up Payment. If it is
determined that any payment or distribution of any type to the
Executive or for his benefit by the Company, any of its affiliates,
any person who acquires ownership or effective control of the
Company or ownership of a substantial portion of the
Company’s assets (within the meaning of section 280G of the
Internal Revenue Code of 1986, as amended (the “ Code
”), and the regulations thereunder) or any affiliate of such
person, whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise (the “
Total Payments ”), would be subject to the excise tax
imposed by section 4999 of the Code or any interest or penalties
with respect to such excise tax (such excise tax and any such
interest or penalties are collectively referred to as the “
Excise Tax ”), then the Executive shall be entitled to
receive an additional payment (a “ Gross-Up Payment
”) in an amount calculated to ensure that after the Executive
pays all taxes (and any interest or penalties imposed with respect
to such taxes), including any Excise Tax, imposed upon the Gross-Up
Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Total Payments.
2. Determination by Accountant
. All determinations and calculations required to be made under
this Agreement shall be made by an independent accounting firm
selected by the Executive from among the largest five accounting
firms in the United States (the “ Accounting Firm
”). The Accounting Firm shall provide its determination (the
“ Determi
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