Document:

exv10w20

 

Exhibit 10.20

VANDA PHARMACEUTICALS INC.

EMPLOYMENT AGREEMENT

     This Employment Agreement (this “Agreement”) is entered into as of October
25, 2007, by and between Al Gianchetti (the “Employee”) and Vanda
Pharmaceuticals Inc., a Delaware corporation (the “Company”).

     1.     Duties and Scope of Employment.

             (a)  Position. For the term of his employment under this Agreement
(“Employment”), the Company agrees to employ the Employee in the position of
Chief Commercial Officer. The Employee shall be subject to the supervision of,
and shall have such authority as is delegated to him by, the Chief Executive
Officer of the Company, consistent with his position as Chief Commercial
Officer. The Employee hereby accepts such employment and agrees to undertake
the duties and responsibilities normally inherent in such position and such
other duties and responsibilities as the Chief Executive Officer shall from
time to time reasonably assign to him consistent with his position as Chief
Commercial Officer.

             (b)  Obligations to the Company. During the term of his Employment, the
Employee shall devote his full business efforts and time to the Company.
During the term of his Employment, without the prior written approval of the
Board of Directors of the Company (the “Board”), the Employee shall not render
services in any capacity to any other person or entity and shall not act as a
sole proprietor or partner of any other person or entity or as a shareholder
owning more than five percent of the stock of any other corporation. The
Employee shall comply with the Company’s policies and rules, as they may be in
effect from time to time during the term of his Employment.

             (c)  No Conflicting Obligations. The Employee represents and warrants to
the Company that he is under no obligations or commitments, whether contractual
or otherwise, that are inconsistent with his obligations under this Agreement.
The Employee represents and warrants that he will not use or disclose, in
connection with his employment by the Company, any trade secrets or other
proprietary information or intellectual property in which the Employee or any
other person has any right, title or interest and that his employment by the
Company as contemplated by this Agreement will not infringe or violate the
rights of any other person or entity. The Employee represents and warrants to
the Company that he has returned all property and confidential information
belonging to any prior employers.

     2.     Cash and Incentive Compensation.

             (a)  Salary and Signing Bonus. The Company shall pay the Employee as
compensation for his services a base salary at a gross annual rate of not less
than $295,000. Such salary shall be payable in accordance with the Company’s
standard payroll procedures. (The annual compensation specified in this
Subsection (a), together with any increases in such compensation that the
Company may grant from time to time, is referred to in this Agreement as “Base
Compensation.”). The Employee will also receive a $100,000 signing bonus that
will be become due and payable upon hire. The payment of such signing bonus
will be subject to standard federal and state taxes and will be payable in
accordance with the Company’s standard payroll procedures. The Employee will
also receive a $35,000 bonus that will become due and payable once the Employee
has completed one year of continuous service to the Company. This bonus will be
subject to standard federal and state taxes and will be payable in accordance
with the Company’s standard payroll procedures.

 

 

             (b)  Incentive Bonuses. The Employee shall be eligible to be considered
for an annual incentive bonus with a target amount equal to 25% of his Base
Compensation (the “Annual Target Bonus”). Such annual incentive bonus (if any)
shall be awarded based on objective or subjective criteria established in
advance by the Board or its Compensation Committee. The determinations of the
Board or its Compensation Committee with respect to such bonus shall be final
and binding. For the avoidance of doubt, (i) to be eligible for an annual
incentive bonus for any given fiscal year of the Company, the Employee must
have been employed continuously by the Company throughout such fiscal year, and
(ii) provided the Employee has been employed continuously by the Company from
the date of this Agreement through December 31, 2007, then, notwithstanding
clause (i), the Employee’s annual incentive bonus with respect to the Company’s
2007 fiscal year will not be prorated, but will instead be based on the full
amount of Base Compensation the Employee would have been entitled to receive
had the Employee commenced his employment with the Company on January 1, 2007.

             (c)  Stock Option. Subject to the approval of the Board or its
Compensation Committee, the Company shall grant the Employee a nonstatutory stock
option under the Company’s 2006 Equity Incentive Plan, covering 90,000 shares
of the Company’s Common Stock. Such option shall be granted as soon as
reasonably practicable after the date of this Agreement. The per-share
exercise price of such option shall be equal to the fair market value of one
share of the Company’s Common Stock on the date of grant. The term of such
option shall be 10 years, subject to earlier expiration in the event of the
termination of the Employee’s Employment. The Employee shall vest in 25% of
the option shares after the first 12 months of continuous service and shall
vest in the remaining option shares in equal monthly installments over the next
three years of continuous service. The vested and exercisable portion of the
option shall be determined by adding 24 months to the Employee’s actual period
of service if, after a Change in Control, (i) the Employee’s Employment is
terminated by the Company for reasons other than Cause or (ii) the Employee’s
Employment is terminated by the Employee for Good Reason. The grant of such
option shall be subject to the other terms and conditions set forth in the
Company’s 2006 Equity Incentive Plan, and the Company’s standard form of stock
option agreement under such Plan.

             (d)  Restricted Stock Grant. Subject to the approval of the Board or its
Compensation Committee, the Company shall also award the Employee as
compensation 3,000 shares of the Company’s Common Stock under the Company’s
2006 Equity Incentive Plan, which shall be “Restricted Shares” as defined in
such Plan. The Employee shall vest in 25% of such Restricted Shares on each of
the first, second, third and fourth anniversaries of this agreement. The vested
portion of the Restricted Shares shall be determined by adding 24 months to the
Employee’s actual period of service if, after a Change in Control, (i) the
Employee’s Employment is terminated by the Company for reasons other than Cause
or (ii) the Employee’s Employment is terminated by the Employee for Good
Reason. The Restricted Shares shall be subject to the terms of the Company’s
2006 Equity Incentive Plan and such other terms as shall be determined by the
Board or its Compensation Committee, and shall be evidenced by a restricted
stock agreement to be executed by the Employee and the Company as soon as
reasonably practicable following approval thereof.

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               For purposes of the foregoing paragraphs (c) and (d):

             “Change in Control” shall mean (i) the consummation of a merger or
consolidation of the Company with or into another entity, if persons who were
not stockholders of the Company immediately prior to such merger or
consolidation own immediately after such merger or consolidation 50% or more of
the voting power of the outstanding securities of each of (A) the continuing or
surviving entity and (B) any direct or indirect parent corporation of such
continuing or surviving entity; or (ii) the sale, transfer or other disposition
of all or substantially all of the Company’s assets. A transaction shall not
constitute a Change in Control if its sole purpose is to change the state of
the Company’s incorporation or to create a holding company that will be owned
in substantially the same proportions by the persons who held the Company’s
securities immediately before such transaction.

             “Cause” shall mean (i) an unauthorized use or disclosure of the Company’s
confidential information or trade secrets, which use or disclosure causes
material harm to the Company; (ii) a material breach of any agreement between
Employee and the Company; (iii) a material failure to comply with the Company’s
written policies or rules; (iv) conviction of, or plea of “guilty” or “no
contest” to, a felony under the laws of the United States or any state thereof;
(v) gross negligence or willful misconduct which causes material harm to the
Company; or (vi) a continued failure to perform assigned duties after receiving
written notification of such failure from the Board; or (vii) a failure by the
Employee to cooperate in good faith with a governmental or internal
investigation of the Company or its directors, officers or employees, if the
Company has requested the Employee’s cooperation.

             “Good Reason” shall mean any of the following events, if such event occurs
without the Employee’s consent: (i) the Employee’s receipt of notice that his
principal workplace will be relocated more than 30 miles; (ii) a reduction in
the Employee’s base salary by more than 10%, unless pursuant to a Company-wide
reduction affecting all employees proportionately; or (iii) a change in
Employee’s position with the Company that materially reduces his level of
authority or responsibility.

     3.     Vacation and Employee Benefits. During the term of his Employment, the
Employee shall be eligible for 20 paid vacation days each year in accordance
with the Company’s standard policy for similarly situated employees, as it may
be amended from time to time. During the term of his Employment (and beginning
on the first day of such Employment), the Employee shall be eligible to
participate in any employee benefit plans maintained by the Company for
similarly situated employees, subject in each case to the generally applicable
terms and conditions of the plan in question, the completion of any required
enrollment forms and the determinations of any person or committee
administering such plan.

     4.     Business Expenses. During the term of his Employment, the Employee
shall be authorized to incur necessary and reasonable travel, entertainment and
other business expenses in connection with his duties hereunder. The Company
shall reimburse the Employee for such expenses upon presentation of an itemized
account and appropriate supporting documentation, all in accordance with the
Company’s generally applicable policies.

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     5.     Term of Employment.

             (a)  Basic Rule. The Company agrees to continue the Employee’s Employment,
and the Employee agrees to remain in Employment with the Company, from the date
of this Agreement until the date when the Employee’s Employment terminates
pursuant to Subsection (b) or (c) below. The Employee’s Employment with the
Company shall be “at will,” meaning that either the Employee or the Company may
terminate the Employee’s Employment at any time, with or without cause. Any
contrary representations which may have been made to the Employee shall be
superseded by this Agreement. This Agreement shall constitute the full and
complete agreement between the Employee and the Company on the “at will” nature
of the Employee’s Employment, which may only be changed in an express written
agreement signed by the Employee and a duly authorized officer of the Company.

             (b)  Termination. The Company may terminate the Employee’s Employment at
any time and for any reason (or no reason), and with or without cause, by
giving the Employee notice in writing. The Employee may terminate his
Employment by giving the Company 14 days’ advance notice in writing. The
Employee’s Employment shall terminate automatically in the event of his death.

             (c)  Permanent Disability. The Company may terminate the Employee’s
Employment due to Permanent Disability by giving the Employee 30 days’ advance
notice in writing. For all purposes under this Agreement, “Permanent
Disability” shall mean that the Employee, at the time notice is given, has
failed to perform his duties under this Agreement for a period of not less than
90 consecutive days as the result of his incapacity due to physical or mental
injury, disability or illness. In the event that the Employee satisfactorily
resumes the performance of substantially all of his duties hereunder before the
termination of his Employment under this Subsection (c) becomes effective, the
notice of termination shall automatically be deemed to have been revoked.

             (d)  Rights Upon Termination. Except as expressly provided in Section 6,
upon the termination of the Employee’s Employment pursuant to this Section 5,
the Employee shall only be entitled to the compensation, benefits and
reimbursements described in Sections 2, 3 and 4 for the period preceding the
effective date of the termination. The payments under this Agreement shall
fully discharge all responsibilities of the Company to the Employee.

             (e)  Termination of Agreement. This Agreement shall terminate when all
obligations of the parties hereunder have been satisfied. The termination of
this Agreement shall not limit or otherwise affect any of the Employee’s
obligations under Section 7.

     6.     Termination Benefits.

             (a)  General Release. Any other provision of this Agreement
notwithstanding, Subsections (b) and (d) below shall not apply unless the
Employee (i) has executed a general release (in a form prescribed by the
Company) of all known and unknown claims that he may then have against the
Company or persons affiliated with the Company and (ii) has agreed not to
prosecute any legal action or other proceeding based upon any of such claims.
The release shall be in a form prescribed by the Company, without alterations.
The Company shall deliver the form to the Employee within 30 days after his
Employment termination date. The Employee shall execute the release within the
period set forth in the form.

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             (b)  Severance Pay. If, during the term of this Agreement, the Company
terminates the Employee’s Employment for any reason other than Cause or
Permanent Disability, then the Company shall pay the Employee:

                    (i)  Base Compensation. His Base Compensation for a period of 12 months
following the termination of his Employment (the “Continuation Period”). Such
Base Compensation shall be paid at the rate in effect at the time of the
termination of Employment and in accordance with the Company’s standard payroll
procedures.

                    (ii)  Bonus Compensation. A bonus (the “Severance Bonus”) in an amount
determined as follows:

                          (A)  If the Employee’s Employment is terminated prior to the first
anniversary of the date of this Agreement, the Severance Bonus shall be equal
to a pro-rata portion of the anticipated first-year Annual Target Bonus as
determined by the Board in good faith.

                          (B)  If the Employee’s Employment is terminated on or following the first
anniversary of the date of this Agreement and prior to the third anniversary of
the date of this Agreement, the Severance Bonus shall be equal to the greater
of (I) the most recent Annual Target Bonus and (II) the average of Annual
Target Bonuses awarded for the prior years.

                          (C)  If the Employee’s Employment is terminated on or following the third
anniversary of the date of this Agreement, the Severance Bonus shall be equal
to the greater of (I) the most recent Annual Target Bonus) and (II) the average
of Annual Target Bonuses awarded for the prior three years.

Such Severance Bonus shall be payable in accordance with the Company’s standard
payroll procedures.

             (c)  Section 409A. If the Company determines that the Employee is a
“specified employee” under Section 409A(a)(2)(B)(i) of the Internal Revenue
Code of 1986, as amended (the “Code”), and the regulations thereunder when his
Employment terminates, then (i) the salary continuation payments under
Subsection (b)(i), to the extent not exempt from Section 409A of the Code,
shall commence on the earliest practicable date that occurs more than six
months after the Employment termination date, (ii) the installments that
otherwise would have been paid under Subsection (b)(i) during the first six
months following the Employment termination date shall be paid in a lump sum on
the earliest practicable date in the seventh month after the Employment
termination date and (iii) the Severance Bonus, to the extent not exempt from
Section 409A of the Code, shall be paid on the earliest practicable date in the
seventh month after the Employment termination date.

             (d)  Health Insurance. If Subsection (b) above applies, and if the
Employee elects to continue his health insurance coverage under the
Consolidated Omnibus Budget Reconciliation Act (“COBRA”) following the
termination of his Employment, then the Company shall pay the Employee’s
monthly premium under COBRA until the earliest of (i) the close of the
Continuation Period, (ii) the expiration of the Employee’s continuation
coverage under COBRA and (iii) the date when the Employee is offered
substantially equivalent health insurance coverage in connection with new
employment or self-employment.

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     7.     Non-Solicitation, Non-Disclosure and Non-Competition. The Employee has
entered into a Proprietary Information and Inventions Agreement with the
Company, which agreement is incorporated herein by reference.

     8.     Successors.

             (a)  Company’s Successors. This Agreement shall be binding upon any
successor (whether direct or indirect and whether by purchase, lease, merger,
consolidation, liquidation or otherwise) to all or substantially all of the
Company’s business and/or assets. For all purposes under this Agreement, the
term “Company” shall include any successor to the Company’s business and/or
assets which becomes bound by this Agreement.

             (b)  Employee’s Successors. This Agreement and all rights of the Employee
hereunder shall inure to the benefit of, and be enforceable by, the Employee’s
personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees.

     9.     Miscellaneous Provisions.

             (a)  Notice. Notices and all other communications contemplated by this
Agreement shall be in writing and shall be deemed to have been duly given when
personally delivered or when mailed by overnight courier, U.S. registered or
certified mail, return receipt requested and postage prepaid. In the case of
the Employee, mailed notices shall be addressed to him at the home address
which he most recently communicated to the Company in writing. In the case of
the Company, mailed notices shall be addressed to its corporate headquarters,
and all notices shall be directed to the attention of its Secretary.

             (b)  Modifications and Waivers. No provision of this Agreement shall be
modified, waived or discharged unless the modification, waiver or discharge is
agreed to in writing and signed by the Employee and by an authorized officer of
the Company (other than the Employee). No waiver by either party of any breach
of, or of compliance with, any condition or provision of this Agreement by the
other party shall be considered a waiver of any other condition or provision or
of the same condition or provision at another time.

             (c)  Whole Agreement. No other agreements, representations or
understandings (whether oral or written and whether express or implied) which
are not expressly set forth in this Agreement have been made or entered into by
either party with respect to the subject matter hereof. This Agreement and the
Proprietary Information and Inventions Agreement contain the entire
understanding of the parties with respect to the subject matter hereof.

             (d)  Withholding Taxes. All payments made under this Agreement shall be
subject to reduction to reflect taxes or other charges required to be withheld
by law.

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             (e)  Choice of Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Maryland (except their provisions governing the choice of law).

             (f)  Severability. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision hereof, which shall remain in full force and effect.

             (g)  Arbitration. Any controversy or claim arising out of or relating to
this Agreement or the breach thereof, or the Employee’s Employment or the
termination thereof, shall be settled in the State of Maryland, by arbitration
in accordance with the National Rules for the Resolution of Employment Disputes
of the American Arbitration Association. The decision of the arbitrator shall
be final and binding on the parties, and judgment on the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof. The
parties hereby agree that the arbitrator shall be empowered to enter an
equitable decree mandating specific enforcement of the terms of this Agreement.
The Company and the Employee shall share equally all fees and expenses of the
arbitrator. The Employee hereby consents to personal jurisdiction of the state
and federal courts located in the State of Maryland for any action or
proceeding arising from or relating to this Agreement or relating to any
arbitration in which the parties are participants.

             (h)  No Assignment. This Agreement and all rights and obligations of the
Employee hereunder are personal to the Employee and may not be transferred or
assigned by the Employee at any time. The Company may assign its rights under
this Agreement to any entity that assumes the Company’s obligations hereunder
in connection with any sale or transfer of all or a substantial portion of the
Company’s assets to such entity.

             (i)  Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

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     IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of the Company by its duly authorized officer, as of the date first
written above.

	 	 	 
	 	 	/s/ Al Gianchetti             
                  
               

Al Gianchetti
	 
	 	 	
VANDA PHARMACEUTICALS INC.
	 
	 	 	
By: /s/ Mihael H. Polymeropoulos          
       

Title:    CEO

8exv10w21

 

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 “Determination”), together with
detailed supporting calculations regarding the amount of any Gross-Up Payment
and any other relevant matter, to the Executive and the Company within five
days after the Executive or the Company made a request (if the Executive
reasonably believes that any of the Total Payments may be subject to the Excise
Tax). If the Accounting Firm determines that no Excise Tax is payable by the
Executive, it shall furnish the Executive with a written statement that it has
concluded that no Excise Tax is payable (including the reasons therefor) and
that the Executive has substantial authority not to report any Excise Tax on
his federal income tax return. If a Gross-Up Payment is determined to be
payable, it shall be paid to the Executive within five days after the
Determination has been delivered to him or the Company. Any determination by
the Accounting Firm shall be binding upon the Company and the Executive, absent
manifest error.

 

 

     3.     Over- and Underpayments.    As a result of 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 not made by
the Company should have been made (“Underpayment”) or that Gross-Up Payments
will have been made by the Company that should not have been made
(“Overpayment”). In either event, the Accounting Firm shall determine the
amount of the Underpayment or Overpayment that has occurred. In the case of an
Underpayment, the Company shall promptly pay the amount of such Underpayment to
the Executive or for his benefit. In the case of an Overpayment, the Executive
shall, at the direction and expense of the Company, take such steps as are
reasonably necessary (including the filing of returns and claims for refund),
follow reasonable instructions from, and procedures established by, the
Company, and otherwise reasonably cooperate with the Company to correct such
Overpayment, provided, however, that (i) the Executive shall in no event be
obligated to return to the Company an amount greater than the net after-tax
portion of the Overpayment that the Executive has retained or has recovered as
a refund from the applicable taxing authorities and (ii) this provision shall
be interpreted in a manner consistent with the intent of paragraph 1 above,
which is to make the Executive whole, on an after-tax basis, from the
application of the Excise Tax, it being understood that the correction of an
Overpayment may result in the Executive’s repaying to the Company an amount
that is less than the Overpayment.

     4.     Limitation on Parachute Payments.    Any other provision of this
Agreement notwithstanding, if the Excise Tax could be avoided by reducing the
Total Payments by $25,000 or less, then the Total Payments shall be reduced to
the extent necessary to avoid the Excise Tax and no Gross-Up Payment shall be
made. If the Accounting Firm determines that the Total Payments are to be
reduced under the preceding sentence, then the Company shall promptly give the
Executive notice to that effect and a copy of the detailed calculation thereof.
The Executive may then elect, in his sole discretion, which and how much of
the Total Payments are to be eliminated or reduced (as long as after such
election no Excise Tax shall be payable), and the Executive shall advise the
Company in writing of his election within 10 days of receipt of notice. If the
Executive make no such election within such 10-day period, then the Company may
elect which and how much of the Total Payments are to be eliminated or reduced
(as long as after such election no Excise Tax shall be payable), and it shall
notify the Executive promptly of such election.

[The rest of this page has been intentionally left blank.]

 

 

     IN WITNESS WHEREOF, the Company and the Executive have duly executed this
Agreement as of the date first written above.

	 	 	 
	 	 	
VANDA PHARMACEUTICALS INC.
	 
	 	 	
By: /s/ Mihael H. Polymeropoulos         
	 	 	
Title: CEO
	 
	 	 	
By: /s/ Al Gianchetti            
          
         
	 	 	
Title: SVP, Chief Commercial Officer

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