Exhibit 10.3

AGREEMENT

 

This AGREEMENT (the “Agreement”), dated as of July 14, 2015, is made and entered
into by and between Receptos, Inc., a Delaware corporation (the “Company”), and
William H. Rastetter, Ph.D. (the “Rastetter”).

 

WHEREAS, the Company, Celgene Corporation, a Delaware corporation (“Parent”),
and Strix Corporation, a Delaware corporation and direct wholly owned subsidiary
of Parent (the “Acquisition Sub”), have entered into an Agreement and Plan of
Merger (the “Merger Agreement”) pursuant to which Acquisition Sub will commence
a tender offer to acquire all of the outstanding shares of common stock of the
Company, and will then merge with and into the Company, with the Company as the
surviving corporation of such merger (the “Merger”); and

 

WHEREAS, in connection with the Merger, the Company and Rastetter desire to
enter into this Agreement with respect to the effect of the Merger on the
Payments (as defined below) received by Rastetter.

 

NOW, THEREFORE, in consideration of the mutual agreements set forth herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereby agree as follows:  

 

1.

Certain Payments by the Company.

(a)         Gross-Up Payment.  If it shall be determined that any Payment (as
defined below), excluding any Gross-Up Payment (as provided for herein) (the
“Net Payment”) would be subject to the Excise Tax (as defined below), then
Rastetter shall receive an additional payment (the “Gross-Up Payment”).  The
amount of the Gross-Up Payment shall be equal to the amount necessary so that
the Gross Payment (the Net Payment plus the Gross-Up Payment), less the total
of: (i) the Excise Tax on the Gross Payment; (ii) any taxes, including, but not
limited to Federal and state income taxes (but other than the Excise Tax) on the
Gross-Up Payment; and (iii) any interest, penalties, or both imposed on the
taxes under clause (i) and (ii), equals the Net Payment.  It is the intent of
the foregoing, and this Agreement will be interpreted accordingly, that to the
extent any Excise Tax is imposed on Rastetter with respect to any Payment,
Rastetter is to be paid an additional payment so that the additional payment
amount not only reimburses Rastetter or pays on behalf of Rastetter said Excise
Tax (and any interest and penalties thereon), but also any additional Excise
Tax, other taxes, and interest and penalties on such taxes as a result of the
additional payment.

(b)         Determinations.  Subject to the provisions of Section 1(c) below,
all determinations required to be made under this Section 1, including whether
and when a Gross-Up Payment is required, the amount of such Gross-Up Payment,
and the assumptions to be utilized in arriving at such determination, shall be
made by Ernst & Young LLP (the “Accounting Firm”).  The Accounting Firm shall
provide detailed supporting calculations both to the Company and Rastetter
within 15 business days of the receipt of notice from Rastetter that there has
been a Payment or such earlier time as is requested by the Company.  All fees
and expenses of the Accounting Firm shall be borne solely by the
Company.  Subject to the final sentence of this Section 1(b) and Section 3
hereof, any determination by the Accounting Firm shall be binding upon the
Company and Rastetter.  As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments that will not
have been made by the Company should have been made (the “Underpayment”),
consistent with the calculations required to be made hereunder.  In the event
the Company exhausts its remedies pursuant to Section 1(c) below and Rastetter
thereafter is required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of
Rastetter.  Notwithstanding the foregoing and subject to Section 2 hereof,
Rastetter shall be entitled to hire another accounting firm and outside legal
counsel to review any determinations made under this Section 1 by the Accounting
Firm.  All fees and expenses of such accounting firm shall be paid by the
Company.

 

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(c)         Claims by the IRS.  Rastetter shall notify the Company in writing of
any claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment.  Such notification shall be
given as soon as practicable, but no later than 10 business days after Rastetter
is informed in writing of such claim.  Rastetter shall apprise the Company of
the nature of such claim and the date on which such claim is requested to be
paid.  Rastetter shall not pay such claim prior to the expiration of the 30-day
period following the date on which Rastetter gives such notice to the Company
(or such shorter period ending on the date that any payment of taxes with
respect to such claim is due).  If the Company notifies Rastetter in writing
prior to the expiration of such period that the Company desires to contest such
claim, Rastetter shall:

(i)          give the Company any information reasonably requested by the
Company relating to such claim;

(ii)         take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company;

(iii)        cooperate with the Company in good faith in order to effectively
contest such claim; and

(iv)        permit the Company to participate in any proceedings relating to
such claim;

provided, however, that the Company shall bear and pay directly all costs and
expenses (including any attorney’s fees and additional interest and penalties)
incurred in connection with such contest, and shall indemnify and hold Rastetter
harmless, on an after-tax basis, for any Excise Tax or income tax (including
interest and penalties) imposed as a result of such representation and payment
of costs and expenses.  Without limitation on the foregoing provisions of this
Section 1(c), the Company shall control all proceedings taken in connection with
such contest, and, at its sole discretion, may pursue or forgo any and all
administrative appeals, proceedings, hearings, and conferences with the
applicable taxing authority in respect of such claim and may, at its sole
discretion, either pay the tax claimed to the appropriate taxing authority on
behalf of Rastetter and direct Rastetter to sue for a refund or to contest the
claim in any permissible manner, and Rastetter agrees to prosecute such contest
to a determination before any administrative tribunal, in a court of initial
jurisdiction, and in one or more appellate courts, as the Company shall
determine; provided, however, that, if the Company pays such claim and directs
Rastetter to sue for a refund, the Company shall indemnify and hold Rastetter
harmless, on an after-tax basis, from any Excise Tax or income tax (including
interest or penalties) imposed with respect to such payment or with respect to
any imputed income in connection with such payment; and provided, further, that
any extension of the statute of limitations relating to payment of taxes for the
taxable year of Rastetter with respect to which such contested amount is claimed
to be due is limited solely to such contested amount.  Furthermore, the
Company’s control of the contest shall be limited to issues with respect to
which the Gross-Up Payment would be payable hereunder, and Rastetter shall be
entitled to settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.

(d)         Refunds.  If, after the receipt by Rastetter of a Gross-Up Payment
or payment by the Company of an amount on Rastetter’s behalf pursuant to Section
1(c) above, Rastetter becomes entitled to receive any refund with respect to the
Excise Tax to which such Gross-Up Payment relates or with respect to such claim,
Rastetter shall (subject to the Company’s complying with the requirements of
Section 1(c) above, if applicable) promptly pay to the Company the amount of
such refund (together with any interest paid or credited thereon after taxes
applicable thereto).  If, after payment by the Company of an amount on
Rastetter’s behalf pursuant to Section 1(c) above, a determination is made that
Rastetter shall not be entitled to any refund with respect to such claim and the
Company does not notify Rastetter in writing of its intent to contest such
denial of refund prior to the expiration of 30 days after such determination,
then the amount of such payment shall offset, to the extent thereof, the amount
of Gross-Up Payment required to be paid.

(e)         Payment of the Gross-Up Payment.  Any Gross-Up Payment, as
determined pursuant to this Section 1, shall be paid by the Company within five
days of the receipt of the Accounting Firm’s determination; provided that the
Gross-Up Payment shall in all events be paid no later than the end of
Rastetter’s taxable year next following Rastetter’s taxable year in which the
Excise Tax (and any income or

 

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other related taxes or interest or penalties thereon) on a Payment are remitted
to the Internal Revenue Service or any other applicable taxing authority or, in
the case of amounts relating to a claim described in Section 1(c) above that
does not result in the remittance of any federal, state, local, and foreign
income, excise, social security, and other taxes, the calendar year in which the
claim is finally settled or otherwise resolved.

(f)         Certain Definitions.  The following terms shall have the following
meanings for purposes of this Agreement:

(i)        “Excise Tax” shall mean the excise tax imposed by Section 4999 of the
Code, together with any interest or penalties imposed with respect to such
excise tax.

(ii)       A “Payment” shall mean any payment or distribution in the nature of
compensation (within the meaning of Section 280G(b)(2) of the Code) to or for
the benefit of Rastetter, whether paid or payable pursuant to this Agreement or
otherwise.

 

2.

Legal fees.  The Company shall pay all legal fees and expenses incurred by
Rastetter in connection with the subject matter hereof, up to a maximum of
$20,000.

 

3.

Dispute Resolution.

 

(a)         Any disputes arising under or in connection with this Agreement
between the Company and Rastetter shall be resolved by third party mediation of
the dispute with a mediator selected from a panel of mediators of
JAMS/Endispute. If such dispute is not resolved within five days, then any
disputes shall be resolved by binding arbitration.  Any mediation or arbitration
shall be held in or near the city in which the Company maintains its corporate
headquarters at the time of the dispute, and shall be governed in accordance
with the applicable rules and procedures of JAMS/Endispute.  Each party shall
bear his or its own costs of the mediation or arbitration; provided, however,
that the Company shall bear the costs for mediation, including the mediator’s
fees.  Judgment upon the award rendered by the arbitrator(s) may be entered in
any court having jurisdiction thereof.  

 

(b)         WAIVER OF TRIAL BY JURY OR COURT.  RASTETTER AND COMPANY UNDERSTAND
THAT BY AGREEING TO ARBITRATE ANY ARBITRATION CLAIM, THEY WILL NOT HAVE THE
RIGHT TO HAVE ANY ARBITRATION CLAIM DECIDED BY A JURY OR A COURT, BUT SHALL
INSTEAD HAVE ANY ARBITRATION CLAIM DECIDED THROUGH ARBITRATION.

 

(c)         WAIVER OF OTHER RIGHTS.  RASTETTER AND THE COMPANY WAIVE ANY
CONSTITUTIONAL OR OTHER RIGHT TO BRING CLAIMS COVERED BY THIS AGREEMENT OTHER
THAN IN THEIR INDIVIDUAL CAPACITIES.  EXCEPT AS MAY BE PROHIBITED BY LAW, THIS
WAIVER INCLUDES THE ABILITY TO ASSERT CLAIMS AS A PLAINTIFF OR CLASS MEMBER IN
ANY PURPORTED CLASS OR REPRESENTATIVE PROCEEDING.

 

4.

In the event the Merger Agreement is terminated prior to consummation of the
Merger, this Agreement shall automatically and without further action terminate.

 

5.

This Agreement shall be administered, interpreted and enforced under the
internal laws of the State of California without regard to the principles of
conflicts of laws thereof.

 

6.

If any provision of this Agreement is determined to be invalid or unenforceable,
it shall be adjusted rather than voided, to achieve the intent of the parties to
the extent possible, and the remainder of the Agreement shall be enforced to the
maximum extent possible.

 

7.

This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original and all of which together shall constitute one
and the same instrument.  The parties hereto agree to accept a signed facsimile
copy of this Agreement as a fully binding original.

 

(Signature page follows)

 

 

 

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IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
parties hereto.

 

 

 

 

RECEPTOS, INC.,

 

 

 

a Delaware corporation

 

 

 

 

 

By

 

/s/ Faheem Hasnain

 

 

 

Faheem Hasnain

 

 

 

President and Chief Executive Officer

 

 

 

 

 

 

 

RASTETTER

 

By

 

/s/ William H. Rastetter, Ph.D.

 

 

 

William H. Rastetter, Ph.D.

 

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