EXHIBIT 10.33
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement") by and between INCYTE GENOMICS,
INC., a Delaware corporation (the "Company"), and Xxxxxx X. Xxxxx (the
"Executive"), dated as of the 26th day of November, 2001.
The Board of Directors of the Company (the "Board"), has determined that it
is in the best interests of the Company and its stockholders to assure that the
Company will have the continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change in Control (as defined below) of
the Company. The Board believes it is imperative to diminish the inevitable
distraction of the Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change in Control and to encourage the
Executive's full attention and dedication to the Company currently and in the
event of any threatened or pending Change in Control, and to provide the
Executive with compensation and benefits arrangements upon a Change in Control
and an event of Change in Control Good Reason which ensure that the compensation
and benefits expectations of the Executive will be satisfied and which are
competitive with those of other comparable corporations. In addition, as an
inducement to the agreement by Executive to be employed by the Company prior to
a Change in Control on an "at will" basis, the Company desires to provide
Executive with certain benefits upon termination of Executive's employment under
certain circumstances as set forth herein.
Therefore, in order to accomplish these objectives, the Board has caused
the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
SECTION 1. DEFINITIONS
(a) "Annual Base Salary" shall mean the highest rate of annual base salary
paid or payable, including any base salary which has been earned but deferred,
to the Executive by the Company and its affiliated companies in respect of the
12-month period immediately preceding the month in which the Change in Control
or, in the case of termination other than on account of a Change in Control, the
Date of Termination occurs.
(b) "Business Unit" shall mean a Subsidiary or a business division of the
Company or Subsidiary in which the Executive is primarily employed.
(c) "Cause" shall mean:
(i) The willful and continued failure of the Executive to perform
substantially the Executive's duties with the Company or one of its
affiliates (other than any such failure resulting from incapacity due to
physical or mental illness or impairment), after a written demand for
substantial performance is delivered to the Executive by the Board or the
Chief Executive Officer of the Company which specifically identifies the
manner in which the Board or Chief Executive Officer believes that the
Executive has not substantially performed the Executive's duties; or
- 1 -
(ii) The willful engaging by the Executive in illegal conduct, gross
misconduct or dishonesty which is materially and demonstrably injurious to
the Company; or
(iii) Unauthorized and prejudicial disclosure or misuse of the
Company's secret, confidential or proprietary information, knowledge or
data relating to the Company or its affiliates.
Notwithstanding the foregoing, "Cause" shall not include any act, or
failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive
Officer or based upon the advice of counsel for the Company. The cessation
of employment of the Executive shall not be deemed to be for Cause unless
and until there shall have been delivered to the Executive a copy of a
resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a meeting of the
Board called and held for such purpose (after reasonable notice is provided
to the Executive and the Executive is given an opportunity, together with
counsel, to be heard before the Board), finding that, in the good faith
opinion of the Board, the Executive is guilty of the conduct described in
subparagraph (i), (ii) or (iii) above, and specifying the particulars
thereof in detail.
(d) "Change in Control" shall mean the occurrence of any of the following
events:
(i) A change in the composition of the Board, as a result of which
fewer than one-half of the incumbent directors are directors who either:
(A) Had been directors of the Company 24 months prior to such
change; or
(B) Were elected, or nominated for election, to the Board with
the affirmative votes of at least a majority of the directors who had
been directors of the Company 24 months prior to such change and who
were still in office at the time of the election or nomination;
(ii) Any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) by the acquisition or aggregation of securities is or
becomes the beneficial owner, directly or indirectly, of securities of the
Company representing 50% or more of the combined voting power of the
Company's then outstanding securities ordinarily (and apart from rights
accruing under special circumstances) having the right to vote at elections
of directors (the "Base Capital Stock"); except that any change in the
relative beneficial ownership of the Company's securities by any person
resulting solely from a reduction in the aggregate number of outstanding
shares of Base Capital Stock, and any decrease thereafter in such person's
ownership of securities, shall be disregarded until such person increases
in any manner, directly or indirectly, such person's beneficial ownership
of any securities of the Company;
(iii) The stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company;
(iv) There is consummated an agreement for the sale or disposition by
the Company of all or substantially all of the Company's assets, other than
a sale or
- 2 -
disposition by the Company to a Subsidiary or to an entity, the voting
securities of which are owned by stockholders of the Company in
substantially the same proportions as their ownership of the Company
immediately prior to such sale; or
(v) The sale, transfer or other disposition of a substantial portion
of the stock or assets of the Company or a Business Unit or a similar
transaction as the Board, in each case, in its sole discretion, may
determine to be a Change in Control.
The term "Change in Control" shall not include a transaction, the sole
purpose of which is to change the state of the Company's incorporation or the
initial public offering of the stock of a Business Unit.
(e) "Change in Control Employment Period" shall mean the 24-month period
following the occurrence of a Change in Control.
(f) "Change in Control Good Reason" shall mean:
(i) The assignment to Executive of any duties inconsistent with
Executive's position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities as in effect
immediately prior to a Change in Control or any other action by the Company
that results in a diminishment in such position, authority, duties or
responsibilities; or
(ii) (A) Except as required by law, the failure by the Company to
continue to provide to Executive benefits substantially equivalent or more
beneficial (including in terms of the amount of benefits provided and the
level of participation of Executive relative to other participants), in the
aggregate, to those enjoyed by Executive under the Company's employee
benefit plans (including, without limitation, any pension, deferred
compensation, split-dollar life insurance, supplemental retirement,
retirement or savings plan(s) or program(s)) and Welfare Benefits in which
Executive was eligible to participate immediately prior to the Change in
Control; or (B) the taking of any action by the Company that would,
directly or indirectly, materially reduce or deprive Executive of any other
benefit, perquisite or privilege enjoyed by Executive immediately prior to
the Change in Control, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and that is remedied by the
Company promptly after receipt of notice thereof given by the Executive; or
(iii) The Company's requiring the Executive to be based at any office
or location more than 35 miles from the office or location where the
Executive is based immediately prior to the Change in Control; or
(iv) Any reduction in the Executive's Base Salary or Target Bonus
opportunity; or
(v) A material breach by the Company of Sections 2 or 3 of the letter
agreement between the Company and the Executive dated November 16, 2001
(the "Offer Letter") or this Agreement.
- 3 -
(g) "Disability" shall mean the absence of the Executive from the
Executive's duties with the Company on a full-time basis for 180 consecutive
business days as a result of incapacity due to mental or physical illness or
impairment which is determined to be total and permanent by a physician selected
by the Company or its insurers and acceptable to the Executive or the
Executive's legal representative.
(h) "Employment Agreements" shall mean this Agreement and all other
employment agreements with executive officers of the Company similar to this
Agreement that are in effect as of the first Change in Control to occur after
April 1, 2001.
(i) "Employment Period" means the period the Executive is employed by the
Company prior to the Change in Control Employment Period and the period the
Executive is employed by the Company after the end of a Change in Control
Employment Period.
(j) "Good Reason" shall mean:
(i) The assignment to Executive of any duties substantially and
materially inconsistent with Executive's position (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities as in effect prior to the Date of Termination or any other
action by the Company that results in a substantial and material
diminishment in such position, authority, duties or responsibilities; or
(ii) The Company's requiring the Executive to be based at any office
or location other than the Company's East Coast or West Coast headquarters;
the West Coast headquarters are currently located in Palo Alto, California;
or
(iii) Any reduction in the Executive's Base Salary, Target Bonus
opportunity or Welfare Benefits, unless such reductions are made
proportionally for all executives of the Company at the same time; or
(iv) A material breach by the Company of this Agreement or of Sections
2 or 3 of the Offer Letter; or
(v) If Xxxx Xxxxxxxx ceases to be the Chief Executive Officer of the
Company more than 30 months after the Executive commences his employment
with the Company and the Executive terminates his employment for any reason
between the ninetieth (90th) and one hundred twentieth (120th) day
following Xxxx Xxxxxxxx'x termination.
(k) "Limitation Amount" shall mean the sum of Payments that constitute
nondeductible "excess parachute payments" under section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"), assuming such Payments constitute
the only payments made on account of a Change in Control, that result in a
deemed Federal income tax cost to the Company, calculated as set forth in the
succeeding sentences, of $15,000,000. The Limitation Amount is based on the
estimated Federal income tax cost to the Company resulting from the
nondeductibility of such excess parachute payments, which tax cost shall not
exceed $15,000,000. The initial Limitation Amount is $42,857,143.07, based on
the Federal corporate income tax rate of 35% for tax years ending in 2001. The
Limitation Amount shall be adjusted if, and when, the Federal corporate income
tax rate changes to such amount as shall equal the quotient obtained by dividing
$15,000,000 by such changed Federal corporate income tax rate;
- 4 -
provided, however, that the Limitation Amount shall not be so adjusted after the
first Change in Control to occur after April 1, 2001. For purposes of computing
the Limitation Amount hereunder, the parachute payments attributable to the
vesting of 20% of the Units shall be excluded.
(l) "Payment" shall mean any payment or transfer by the Company under this
Agreement to or for the benefit of the Executive (including for this purpose
those made pursuant to Section 3(a)(iii)) or, as the case may be, any such
payment or transfer made to another executive officer of the Company pursuant to
another Employment Agreement. "Payment" shall not include any amount that would
be payable to the Executive or another executive officer of the Company that
would be payable in the event of a Change in Control regardless of the existence
of this Agreement or the relevant Employment Agreement, as the case may be. By
way of example, an amount in respect of an option that by its terms, and not
pursuant to the terms of this Agreement, accelerates upon a Change in Control
shall not be deemed to be a Payment.
(m) "Subsidiary" shall mean any other entity, whether incorporated or
unincorporated, in which the Company or any one or more of its Subsidiaries
directly owns or controls (i) 50% or more of the securities or other ownership
interests, including profits, equity or beneficial interests, or (ii) securities
or other interests having by their terms ordinary voting power to elect more
than 50% of the board of directors or others performing similar function with
respect to such other entity that is not a corporation.
(n) "Target Bonus" shall mean the Executive's target bonus under the
Company's annual bonus program, or any comparable bonus under any predecessor or
successor plan for the year prior to the year in which the Change in Control or,
in the case of a termination other than on account of a Change in Control, the
Date of Termination occurs.
(o) "Units" shall mean the restricted stock units which entitle Executive
to receive shares of common stock of the Company, as described in the Offer
Letter.
(p) "Welfare Benefits" shall mean welfare benefit plans, practices,
policies and programs provided by the Company and its affiliated companies
(including, without limitation, medical, prescription, dental, disability,
employee life, and group life plans and programs) (i) in effect for the
Executive at any time during the 120-day period immediately preceding (A) the
Change in Control or (B) the Date of Termination (as defined below) or (ii)
which are provided at any time after the Change in Control to peer executives of
the Company and its affiliated companies, whichever of (i)(A), (i)(B) or (ii)
provides the most favorable benefit to the Executive, as determined separately
for each such benefit.
SECTION 2. TERMINATION OF EMPLOYMENT.
(a) Death or Disability. The Executive's employment shall terminate
-------------------
automatically upon the Executive's death during the Employment Period or Change
in Control Employment Period. If the Company determines in good faith that the
Disability of the Executive has occurred during the Employment Period or Change
in Control Employment Period, it may give to the Executive written notice in
accordance with Section 9(b) of this Agreement of its intention to terminate the
Executive's employment. In such event, the Executive's employment with the
Company shall terminate effective on the 30th day after receipt of such notice
by the Executive (the "Disability
- 5 -
Effective Date"), provided that, within the 30 days after such receipt, the
Executive shall not have returned to full-time performance of the Executive's
duties.
(b) Cause. The Company may terminate the Executive's employment for Cause
-----
during the Employment Period or Change in Control Employment Period.
(c) Good Reason. The Executive's employment may be terminated by the
-----------
Executive for Good Reason during the Employment Period.
(d) Change in Control Good Reason. The Executive's employment may be
-----------------------------
terminated by the Executive for Change in Control Good Reason during the Change
in Control Employment Period. For purposes of this Section 2(d), any good faith
determination of "Change in Control Good Reason" made by the Executive shall be
conclusive. The termination of the Executive's employment with the Company prior
to, but in anticipation of or in connection with, a Change in Control shall be
deemed to be a termination by the Executive for Change in Control Good Reason
during the Change in Control Employment Period if the Board so determines in its
good faith judgment.
(e) Notice of Termination. Any termination by the Company for Cause, or by
---------------------
the Executive for Good Reason during the Employment Period or for Change in
Control Good Reason during the Change in Control Employment Period, shall be
communicated by Notice of Termination to the other party hereto given in
accordance with Section 9(b) of this Agreement. For purposes of this Agreement,
a "Notice of Termination" means a written notice which (i) indicates the
specific termination provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provision so indicated and (iii) if the Date of Termination (as defined below)
is other than the date of receipt of such notice, specifies the termination date
(which date shall be not more than 30 days after the giving of such notice). The
failure by the Executive or the Company to set forth in the Notice of
Termination any fact or circumstance which contributes to a showing of Good
Reason, Change in Control Good Reason or Cause shall not waive any right of the
Executive or the Company, respectively, hereunder or preclude the Executive or
the Company, respectively, from asserting such fact or circumstance in enforcing
the Executive's or the Company's rights hereunder.
(f) Date of Termination. "Date of Termination" means (i) if the
-------------------
Executive's employment is terminated by the Company for Cause, by the Executive
for Good Reason during the Employment Period, or by the Executive for Change in
Control Good Reason during the Change in Control Employment Period, the date of
receipt of the Notice of Termination or any later date specified therein, as the
case may be, (ii) if the Executive's employment is terminated by the Company
other than for Cause or Disability or by the Executive other than for Good
Reason or Change in Control Good Reason, the Date of Termination shall be the
date on which the Company or the Executive, as the case may be, notifies the
other of such termination, and (iii) if the Executive's employment is terminated
by reason of death or Disability, the Date of Termination shall be the date of
death of the Executive or the Disability Effective Date, as the case may be.
- 6 -
SECTION 3. OBLIGATIONS OF THE COMPANY UPON TERMINATION
(a) Termination During the Change in Control Employment Period Other Than
---------------------------------------------------------------------
for Cause, Death or Disability or for Change in Control Good Reason. If, during
-------------------------------------------------------------------
the Change in Control Employment Period, the Company shall terminate the
Executive's employment other than for Cause or the Executive shall terminate
employment for Change in Control Good Reason (and the Executive's employment is
not terminated by reason of death or Disability):
(i) The Company shall pay to the Executive the aggregate of the
following amounts:
(A) the sum of (1) the Executive's Annual Base Salary through the
Date of Termination to the extent not theretofore paid, (2) the
product of (x) the Target Bonus and (y) a fraction, the numerator of
which is the number of days in the current fiscal year through the
Date of Termination, and the denominator of which is 365 and (3) any
compensation previously deferred by the Executive (together with any
accrued interest or earnings thereon) and any accrued vacation pay, in
each case to the extent not theretofore paid (the sum of the amounts
described in clauses (1), (2), and (3) shall be hereinafter referred
to as the "Accrued Obligations"); and
(B) the amount equal to the product of (1) two and (2) the sum of
(x) the Executive's Annual Base Salary and (y) the Target Bonus or, if
greater, the bonus pursuant to the Company's management bonus plan in
the most recently completed fiscal year.
The payments described in this Section 3(a)(i) shall be paid to the
Executive in a lump sum in cash within 30 days after the Date of
Termination unless the Executive elected to receive such payments in equal
installments in accordance with the Company's usual payroll practices over
the 24-month period following the Date of Termination. Such election may be
made at any time prior to the Change in Control and may be amended or
revoked at the sole discretion of the Executive prior to the date of the
Change in Control.
(ii) For 24 months after the Executive's Date of Termination or such
longer period as may be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall continue Welfare Benefits to
the Executive and/or the Executive's family; provided, however, that if the
Executive becomes reemployed with another employer and is eligible to
receive medical or other welfare benefits under another employer provided
plan, the medical and other welfare benefits described herein shall be
secondary to those provided under such other plan during such applicable
period of eligibility. For purposes of determining eligibility (but not the
time of commencement of benefits) of the Executive for retiree benefits
pursuant to such plans, practices, programs and policies, the Executive
shall be considered to have remained employed until 24 months after the
Executive's Date of Termination and to have retired on the last day of such
period;
(iii) All options acquired under the 1991 Stock Plan of Incyte
Genomics, Inc. or any other stock-based incentive plan of the Company which
have not vested in
- 7 -
accordance with the terms and conditions of the grant, award or purchase,
shall become 100% vested and all options shall continue to be exercisable
for 12 months following the Date of Termination and all Units shall become
100% vested and the shares of common stock of the Company shall be
delivered to the Executive within 30 days after the Date of Termination;
(iv) The Company shall, at its sole expense as incurred, provide the
Executive with outplacement services for a period of 12 months following
the Date of Termination, the scope and provider of which shall be selected
by the Executive in his sole discretion (the "Outplacement Benefits"); and
(v) To the extent not theretofore paid or provided, the Company shall
timely pay or provide to the Executive any other amounts or benefits
required to be paid or provided or which the Executive is eligible to
receive under any plan, program, policy or practice or contract or
agreement of the Company and its affiliated companies (such other amounts
and benefits shall be hereinafter referred to as the "Other Benefits").
(b) Termination During the Employment Period Other Than for Cause, Death
--------------------------------------------------------------------
or Disability or for Good Reason. If, during the Employment Period, the Company
--------------------------------
shall terminate the Executive's employment other than for Cause or the Executive
shall terminate employment for Good Reason or if, during the Change in Control
Employment Period, the Executive shall terminate employment for Good Reason
under subparagraph (v) thereof (and the Executive's employment is not terminated
by reason of death or Disability):
(i) The Company shall pay to the Executive the aggregate of the
following amounts:
(A) The Accrued Obligations; and
(B) the amount equal to the product of (1) one and (2) the sum of
(x) the Executive's Annual Base Salary and (y) the Target Bonus or, if
greater, the bonus pursuant to the Company's management bonus plan in
the most recently completed fiscal year.
The payments described in this Section 3(b)(i) shall be paid to the
Executive in a lump sum in cash within 30 days after the Date of
Termination unless the Executive elected to receive such payments in equal
installments in accordance with the Company's usual payroll practices over
the 12-month period following the Date of Termination. Such election may be
made at any time prior to 180 days before the Date of Termination and may
be amended or revoked at the sole discretion of the Executive prior to 180
days before the Date of Termination.
(ii) For 12 months after the Executive's Date of Termination, if the
Executive properly elects to continue the Company's group health plan
coverage as is the Executive's right under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA"), the Company shall pay the
portion of the COBRA premiums for Executive and/or the Executive's family
equal to the percentage share of medical premiums the Company paid for the
Executive and/or the Executive's family prior to the Date of Termination;
provided, however, that if the Executive becomes reemployed with
- 8 -
another employer and is eligible to receive medical or other welfare
benefits under an other employer provided plan, the medical and other
welfare benefits described herein shall be secondary to those provided
under such other plan during such applicable period of eligibility. For
purposes of determining eligibility (but not the time of commencement of
benefits) of the Executive for retiree benefits pursuant to such plans,
practices, programs and policies, the Executive shall be considered to have
remained employed until 12 months after the Executive's Date of Termination
and to have retired on the last day of such period;
(iii) An additional portion of options acquired under the 1991 Stock
Plan of Incyte Genomics, Inc. or any other stock-based incentive plan of
the Company which have not vested in accordance with the terms and
conditions of the grant, award or purchase, shall become vested equal to
the amount of vesting that would have occurred if the Executive had
continued working for the Company for an additional 12 months after the
Date of Termination and all options shall continue to be exercisable for 90
days following the Date of Termination and an additional portion of the
Units which have not vested in accordance with the terms and conditions of
such grant shall become vested equal to the amount of vesting that would
have occurred if the Executive had continued working for the Company for an
additional 12 months after the Date of Termination (provided that in no
event will less than 20% of the Units vest) and the shares of common stock
of the Company shall be delivered to the Executive within 30 days after the
Date of Termination; and
(iv) The Company shall provide to the Executive the Outplacement
Benefits and the Other Benefits.
(c) Termination for Cause. If the Executive's employment shall be
---------------------
terminated for Cause during the Employment Period or the Change in Control
Employment Period, this Agreement shall terminate without further obligations to
the Executive other than the obligation to pay to the Executive (x) the
Executive's Annual Base Salary through the Date of Termination, (y) the amount
of any compensation previously deferred by the Executive, including vested
Units, and (z) Other Benefits, in each case to the extent theretofore unpaid. In
such case, all amounts due and owing to the Executive pursuant to this Section
3(c) shall be paid to the Executive in a lump sum in cash or, in the case of
Units, in shares of common stock of the Company, within 30 days of the Date of
Termination.
(d) Voluntary Termination. If the Executive voluntarily terminates
---------------------
employment during the Employment Period, other than for Good Reason, or during
the Change in Control Employment Period, other than for Change in Control Good
Reason, this Agreement shall terminate without further obligations to the
Executive other than for Accrued Obligations and the timely payment or provision
of Other Benefits; provided that if such termination occurs during the
Employment Period, the Executive shall not receive a prorated Target Bonus. In
such case, all amounts due and owing to the Executive pursuant to this Section
3(d) shall be paid to the Executive in a lump sum in cash or, in the case of
Units, in shares of common stock of the Company, within 30 days of the Date of
Termination.
(e) Death or Disability. If the Executive's employment is terminated
-------------------
during the Employment Period or the Change in Control Employment Period due to
the death or Disability
- 9 -
of the Executive, this Agreement shall terminate without further obligations to
the Executive other than for (i) Accrued Obligations and the timely payment or
provision of Other Benefits and (ii) the Units shall become 100% vested and an
additional portion of options acquired under the 1991 Stock Plan of Incyte
Genomics, Inc. or any other stock-based incentive plan of the Company which have
not vested in accordance with the terms and conditions of the grant, award or
purchase, shall become vested equal to the amount of vesting that would have
occurred if the Executive had continued working for the Company for an
additional 12 months after the Date of Termination and all options shall
continue to be exercisable for 12 months following the Date of Termination. In
such case, all amounts due and owing to the Executive or the Executive's estate,
as the case may be, pursuant to this Section 3(e) shall be paid to the Executive
or the Executive's estate in a lump sum in cash or, in the case of Units, in
shares of common stock of the Company, within 30 days of the receipt by the
Company of written notice of the Executive's death from the executor of the
Executive's estate or the Disability Effective Date.
SECTION 4. SECTION 280G
(a) Basic Rule. Notwithstanding anything in this Agreement to the
----------
contrary, in the event that the independent auditors most recently selected by
the Board (the "Auditors") determine that any Payments would constitute "excess
parachute payments" within the meaning of section 280G of the Code that in the
aggregate exceed the Limitation Amount, then the Payments made pursuant to this
Agreement shall be reduced (but not below zero) to the Reduced Amount. For
purposes of this Section 4, the "Reduced Amount" shall be the amount, expressed
as a present value, that maximizes the aggregate present value of the Payments
to the Executive without causing the sum of the Payments made hereunder and
under all Employment Agreements to exceed the Limitation Amount. The Payments
for the Executive under this Agreement and for each executive officer under the
other Employment Agreements, as so reduced, shall be determined on a pro rata
basis based on the total Payments payable pursuant to the Employment Agreements,
calculated as of the date of the first Change in Control to occur after April 1,
2001. Notwithstanding anything contained in this Agreement to the contrary, to
the extent that any payment or distribution of any type to or for the benefit of
the Executive by the Company (the "Total Payment") is or will be subject to the
excise tax imposed under Section 4999 of the Code (the "Excise Tax"), then the
Total Payments shall be reduced (but not below zero) if and to the extent that a
reduction in the Total Payments would result in the Executive retaining a larger
amount, on an after-tax basis (taking into account federal, state and local
income taxes and the Excise Tax) than if the Executive received the entire
amount of such Total Payments. The determination of which Payments are to be
reduced shall be made in a manner consistent with the provisions of Section
4(b).
(b) Reduction of Payments. If the Auditors determine that any Payments made
---------------------
pursuant to this Agreement would exceed the Limitation Amount because of section
280G of the Code, which calculation shall occur at the time of the Change in
Control, then the Company shall promptly give the Executive notice to that
effect and a copy of the detailed calculation thereof and of the Reduced Amount,
and the Executive may then elect, in the Executive's sole discretion, which and
how much of such Payments shall be eliminated or reduced (as long as after such
election the aggregate present value of such Payments, as so eliminated or
reduced, equals the Reduced Amount) and shall advise the Company in writing of
the Executive's election within 10 days of receipt of notice. If no such
election is made by the Executive within such 10-day period, then the Company
may decide which and how much of such Payments shall be
- 10 -
eliminated or reduced (as long as after such decision the aggregate present
value of such Payments, as so eliminated or reduced, equals the Reduced Amount)
and shall notify the Executive promptly of such decision. For purposes of this
Section 4, present value shall be determined in accordance with section
280G(d)(4) of the Code. All determinations made by the Auditors under this
Section 4 shall be binding upon the Company and the Executive and shall be made
within 60 days of the date when a Payment becomes payable or transferable. As
promptly as practicable following such determination and the elections
hereunder, the Company shall pay or transfer to or for the benefit of the
Executive such amounts as are then due to the Executive under this Agreement and
shall promptly pay or transfer to or for the benefit of the Executive in the
future such amounts as become due to the Executive under this Agreement.
(c) Overpayments and Underpayments. As a result of uncertainty in the
------------------------------
application of section 280G of the Code at the time of an initial determination
by the Auditors hereunder, it is possible that Payments will have been made by
the Company pursuant to this Agreement that should not have been made (an
"Overpayment") or that additional Payments that will not have been made by the
Company pursuant to this Agreement could have been made (an "Underpayment"),
consistent in each case with the calculation of the Reduced Amount hereunder. In
the event that the Auditors, based upon the assertion of a deficiency by the
Internal Revenue Service against the Company or the Executive that the Auditors
believe has a high probability of success, determine that an Overpayment has
been made, such Overpayment shall be treated for all purposes as a loan to the
Executive which he or she shall repay to the Company, together with interest at
the applicable federal rate provided in section 7872(f)(2) of the Code;
provided, however, that no amount shall be payable by the Executive to the
Company if and to the extent that such payment would not reduce the Company's
Federal income tax liability under section 280G of the Code. In the event that
the Auditors determine that an Underpayment has occurred, such Underpayment
shall promptly be paid or transferred by the Company to or for the benefit of
the Executive, together with interest at the applicable federal rate provided in
section 7872(f)(2) of the Code.
(d) Waiver of Limitation. At any time, and in its sole discretion, the
--------------------
Company's Compensation Committee of the Board may elect to waive, in whole or in
part, the reduction of a Payment to be made pursuant to this Agreement,
notwithstanding the determination that such Payment will be nondeductible by the
Company for federal income tax purposes because of section 280G of the Code, or
that it exceeds the Limitation Amount.
(e) Related Corporations. For purposes of this Section 4, the term
--------------------
"Company" shall include affiliated corporations to the extent determined by the
Auditors in accordance with section 280G(d)(5) of the Code.
SECTION 5. NON-EXCLUSIVITY OF RIGHTS.
Nothing in this Agreement shall prevent or limit the Executive's continuing
or future participation in any plan, program, policy or practice provided by the
Company or any of its affiliated companies and for which the Executive may
qualify, nor, subject to Section 9(f), shall anything herein limit or otherwise
affect such rights as the Executive may have under any contract or agreement
with the Company or any of its affiliated companies. Amounts which are vested
benefits or which the Executive is otherwise entitled to receive under any plan,
policy, practice or program of or any contract or agreement with the Company or
any of its affiliated
- 11 -
companies at or subsequent to the Date of Termination shall be payable in
accordance with such plan, policy, practice or program or contract or agreement
except as explicitly modified by this Agreement.
SECTION 6. FULL SETTLEMENT.
The Company's obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive or others (other than
pursuant to Section 7(d) of this Agreement). In no event shall the Executive be
obligated to seek other employment or take any other action by way of mitigation
of the amounts payable to the Executive under any of the provisions of this
Agreement and such amounts shall not be reduced whether or not the Executive
obtains other employment. The Company agrees to pay as incurred, to the full
extent permitted by law, all legal fees and expenses which the Executive may
reasonably incur as a result of any contest (regardless of the outcome thereof)
by the Company, the Executive or others of the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee of performance
thereof (including as a result of any contest by the Executive about the amount
of any payment pursuant to this Agreement), plus in each case interest on any
delayed payment at the applicable Federal rate provided for in section
7872(f)(2)(A) of the Code. Notwithstanding the foregoing, the Company will not
pay any legal fees or expenses which the Executive may incur as a direct result
of any contest or dispute regarding Sections 7(a), 7(b) or 7(d) of this
Agreement; provided, however, that (i) this sentence shall not apply if (A)
after a Change in Control the Executive's employment with the Company is
terminated by the Company without Cause, by the Executive for Change in Control
Good Reason or by the Executive for Good Reason under subparagraph (v) thereof
and (B) the Executive has not, in the good faith determination of the Board,
blatantly and willfully breached Sections 7(a), 7(b) or 7(c) of this Agreement
and (ii) if this sentence applies and there is a contest or dispute regarding
Sections 7(a), 7(b) or 7(d) of this Agreement and the Executive is found to have
not violated Section 7 of this Agreement, then the Company will reimburse all
such legal fees and expenses reasonably incurred as a result of such contest or
dispute.
SECTION 7. COVENANTS.
(a) The Executive represents and warrants to the Company that the
performance of the Executive's duties will not violate any agreements with or
trade secrets of any other person or entity or previous employers, including
without limitation agreements containing provisions against solicitation or
competition. The Executive has provided the Company with copies of the Employee
Agreement, dated June 4, 1996, between The DuPont Pharmaceutical Company and
the Executive and any other agreements (specifically including any agreements
with The DuPont Pharmaceutical Company or Xxxxxxx-Xxxxx Squibb Company) that
could restrict the Executive's activities in the course of the Executive's
employment with the Company. The Executive represents and warrants to the
Company that the Executive has not and will not sign the Xxxxxxx-Xxxxx Squibb
Company General Release and Non-Solicitation Agreement or any other agreement
that could restrict his activities in the course of his employment with the
Company. The Company's offer of employment is based on the accuracy of the
Executive's representation and warranty and a violation of this Section 7(a)
shall be grounds for termination with Cause.
- 12 -
(b) During the Executive's employment with the Company and for two (2)
years after the termination of the Executive's employment for any reason, the
Executive agrees that, without the prior express written consent of the Company,
the Executive shall not, anywhere in the world, for his own benefit or for, with
or through any other person, firm, partnership, corporation or other entity or
individual (other than the Company or its affiliates) as or in the capacity of
an owner, shareholder, employee, consultant, director, officer, trustee,
partner, agent, independent contractor and/or in any other representative
capacity or otherwise:
(i) personally (or personally direct another to) solicit or hire (A)
any employee of the Company or its affiliates at the time of such
solicitation or hiring or (B) any former employee of the Company or its
affiliates who had such relationship within six (6) months prior to the
date of such solicitation or hiring, including but not limited to
attempting to induce any such employee of the Company or its affiliates to
leave the employ of the Company;
(ii) personally (or personally direct another to) make or publish any
statement (orally or in writing) to a current or prospective client of the
Company or its affiliates or any other entity with whom the Company has a
collaboration, strategic partnership, joint venture or other similar
relationship (collectively, a "Customer Entity") that would libel, slander,
disparage, denigrate, ridicule or criticize the Company or any of its
affiliates; and
(iii) personally (or personally direct another to) solicit any
Customer Entity to purchase a gene sequence or genomic database product.
For purposes of this Section 7(b), the term "solicit" means any
communication of any kind whatsoever, regardless of by whom initiated, inviting,
encouraging or requesting any person or entity to take or refrain from taking
any action.
(c) The Executive shall hold in a fiduciary capacity for the benefit of
the Company all secret or confidential information, knowledge or data relating
to the Company or any of its affiliated companies, and their respective
businesses, which shall have been obtained by the Executive during the
Executive's employment by the Company or any of its affiliated companies and
which shall not be or become public knowledge (other than by acts by the
Executive or representatives of the Executive in violation of this Agreement).
After termination of the Executive's employment with the Company, the Executive
shall not, without the prior written consent of the Company or as may otherwise
be required by law or legal process, communicate or divulge any such
information, knowledge or data to anyone other than the Company and those
designated by it. In no event shall an asserted violation of the provisions of
this Section 7 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement. The Executive also
agrees to comply with the terms set forth in the Confidential Information and
Invention Assignment Agreement.
(d) If at any time prior to the date that is 365 days after the
Executive's Date of Termination, the Executive breaches any provision of
Sections 7(a), 7(b) or 7(c) of this Agreement in more than a minor, deminimus or
trivial manner, then (i) the Executive shall forfeit all of his unexercised
Company stock options or stock appreciation rights, unvested Company restricted
stock and unvested Company restricted stock units and (ii) the gain or income
realized within the twenty-four (24) months prior to such breach from (A) the
exercise of
- 13 -
any Company stock options or stock appreciation rights, (B) the vesting of any
Company restricted stock or other Company equity based awards, (C) the vesting
of Company restricted stock units (excluding the vesting of 20% of the Units),
or (D) the forgiveness of any loan to the Executive from the Company, by the
Executive from such event shall be paid by the Executive to the Company upon
notice from the Company (for purposes of this Section 7(d), the exercise of
incentive stock options and the vesting of restricted stock units shall be
treated as a realization event). Such gain shall be determined on a gross basis,
without reduction for any taxes incurred, as of the date of such event, and
without regard to any subsequent change in the Fair Market Value (as defined
below) of a share of Company common stock. The Company shall have the right to
offset such gain against any amounts otherwise owed to the Executive by the
Company (whether as wages, vacation pay, or pursuant to any benefit plan or
other compensatory arrangement). For purposes of this Section 7(d), the "Fair
Market Value" of a share of Company common stock on any date shall be (i) the
closing sale price per share of Company common stock during normal trading hours
on the national securities exchange on which the Company common stock is
principally traded for such date or the last preceding date on which there was a
sale of such Company common stock on such exchange or (ii) if the shares of
Company common stock are then traded on the NASDAQ Stock Market or any other
over-the-counter market, the average of the closing bid and asked prices for the
shares of Company common stock during normal trading hours in such
over-the-counter market for such date or the last preceding date on which there
was a sale of such Company common stock in such market, or (iii) if the shares
of Company common stock are not then listed on a national securities exchange or
traded in an over-the-counter market, such value as the Compensation Committee
shall determine in good faith. Notwithstanding the foregoing, this Section 7(d)
shall not apply in the event that after a Change in Control the Executive's
employment with the Company is terminated either (i) by the Company without
Cause, (ii) by the Executive for Change in Control Good Reason or (iii) by the
Executive for Good Reason under subparagraph (v) thereof.
(e) Any termination of the Executive's employment or of this Agreement
shall have no effect on the continuing operation of this Section 7.
(f) The Executive acknowledges and agrees that the Company will have no
adequate remedy at law, and could be irreparably harmed, if the Executive
breaches or threaten to breach any of the provisions of this Section 7. The
Executive agrees that the Company shall be entitled to equitable and/or
injunctive relief to prevent any breach or threatened breach of this Section 7,
and to specific performance of each of the terms hereof in addition to any other
legal or equitable remedies that the Company may have. The Executive further
agrees that he shall not, in any equity proceeding relating to the enforcement
of the terms of this Section 7, raise the defense that the Company has an
adequate remedy at law.
(g) The terms and provisions of this Section 7 are intended to be separate
and divisible provisions and if, for any reason, any one or more of them is held
to be invalid or unenforceable, neither the validity nor the enforceability of
any other provision of this Agreement shall thereby be affected. The parties
hereto acknowledge that the potential restrictions on the Executive's future
employment imposed by this Section 7 are reasonable in both duration and
geographic scope and in all other respects. If for any reason any court of
competent jurisdiction shall find any provisions of this Section 7 unreasonable
in duration or geographic scope or otherwise, the Executive and the Company
agree that the restrictions and prohibitions contained herein shall be effective
to the fullest extent allowed under applicable law in such jurisdiction.
- 14 -
(h) The parties acknowledge that the Offer Letter and this Agreement would
not have been entered into and the benefits described herein and therein would
not have been promised in the absence of the Executive's promises under this
Section 7.
SECTION 8. SUCCESSORS.
(a) This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive's legal
representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.
(c) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company or the relevant Business Unit to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company or such Business Unit would be required to perform it if
no such succession had taken place. As used in this Agreement, "Company" shall
mean the Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
SECTION 9. MISCELLANEOUS.
(a) This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware without reference to principles of conflict of
laws. The captions of this Agreement are not part of the provisions hereof and
shall have no force or effect. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive:
at the Executive's current address as shown on the records of the
Company.
If to the Company:
Incyte Genomics, Inc.
0000 Xxxxxx Xxxxx
Xxxx Xxxx, XX 00000
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
- 15 -
(c) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
(d) The Company may withhold from any amounts payable under this Agreement
such Federal, state, local or foreign taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Section 2(c) or Change in Control Good Reason pursuant to Section
2(d) of this Agreement, shall not be deemed to be a waiver of such provision or
right or any other provision or right of this Agreement.
(f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company is "at will"
and, prior to the Change in Control, the Executive's employment and/or this
Agreement may be terminated by either the Executive or the Company at any time,
in which case the Executive shall have no further rights under this Agreement
except as expressly set forth in Section 3 hereof. From and after the closing of
a Change in Control transaction, this Agreement shall supersede any other
agreement between the parties with respect to the subject matter hereof
(provided that it shall not supersede the Company's obligations in the Offer
Letter or the Executive's obligations under the Confidential Information and
Invention Assignment Agreement).
- 16 -
IN WITNESS WHEREOF, the Executive and the Company, through its duly
authorized Officer, have executed this Agreement as of the day and year first
above written.
EXECUTIVE
/s/ Xxxxxx X. Xxxxx
-------------------------------------------
COMPANY
By /s/ Xxx X. Xxxxxxxxx
-------------------------------------------
Its Chief Executive Officer
- 17 -
