Executive Severance Benefit Plan

EXHIBIT 10.14


AEROGEN, INC.
EXECUTIVE SEVERANCE BENEFIT PLAN


SECTION 1. INTRODUCTION


The AeroGen, Inc. Executive Severance Benefit Plan (the "Plan") is designed to provide separation pay and benefits to certain eligible executive employees of the Company whose employment is terminated under the conditions specified herein. This document constitutes the written instrument under which the Plan is maintained and supersedes any prior plan or practice of the Company that provides severance benefits to eligible employees. The Plan was initially approved by the Board of Directors of the Company effective September 29, 2000.


SECTION 2. DEFINITIONS


For purposes of this Plan, the following terms shall have the meanings set forth below:


(a) "BASE SALARY" means base salary paid to you (including all amounts elected to be deferred that would otherwise have been paid, under any cash or deferred arrangement established by the Company), bonuses, and commissions but excluding the cost of employee benefits paid for by the Company, education or tuition reimbursements, imputed income arising under any Company group insurance or benefit program, traveling expenses, business and moving expense reimbursements, income received in connection with stock options, contributions made by the Company under any employee benefit plan, and similar items of compensation.


(b) "BOARD" means the Board of Directors of the Company.


(c) "CAUSE" means any of the following: (i) your theft, dishonesty, or falsification of any Company documents or records; (ii) your improper use or disclosure of the Company's confidential or proprietary information, which use or disclosure is not cured within ten (10) days following notification to you by the Company or the Board; (iii) your refusal to perform any reasonable assigned duties after written notice from the Company of, and a reasonable opportunity to cure, such refusal; (iv) any material breach by you of any agreement between you and the Company, which breach is not cured pursuant to the terms of such agreement; or (v) your conviction (including any plea of guilty or NOLO CONTENDERE) of any felony or any crime involving moral turpitude or dishonesty which impairs your ability to perform your duties with the Company. The Board shall have the right to reasonably determine whether you have engaged in conduct constituting "Cause" for purposes of this Plan.


(d) "CHANGE IN CONTROL" means a (i) a dissolution or liquidation of the Company; (ii) a sale, lease or other disposition of all or substantially all of the assets of the Company so long as the Company's stockholders immediately prior to such transaction will, immediately after such transaction, fail to possess direct or indirect beneficial ownership of more than fifty percent (50%) of the voting power of the acquiring entity (for purposes of this clause 2(d)(ii),


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any person who acquired securities of the Company prior to the occurrence of such asset transaction in contemplation of such transaction and who after such transaction possesses direct or indirect ownership of at least ten percent (10%) of the securities of the acquiring entity immediately following such transaction shall not be included in the group of stockholders of the Company immediately prior to such transaction); (iii) either a merger or consolidation in which the Company is not the surviving corporation and the stockholders of the Company immediately prior to the merger or consolidation fail to possess direct or indirect beneficial ownership of more than fifty percent (50%) of the voting power of the securities of the surviving corporation (or if the surviving corporation is a controlled affiliate of another entity, then the required beneficial ownership shall be determined with respect to the securities of that entity which controls the surviving corporation and is not itself a controlled affiliate of any other entity) immediately following such transaction, or a reverse merger in which the Company is the surviving corporation and the stockholders of the Company immediately prior to the reverse merger fail to possess direct or indirect beneficial ownership of more than fifty percent (50%) of the securities of the Company (or if the Company is a controlled affiliate of another entity, then the required beneficial ownership shall be determined with respect to the securities of that entity which controls the Company and is not itself a controlled affiliate of any other entity) immediately following the reverse merger (for purposes of this clause 2(d)(iii), any person who acquired securities of the Company prior to the occurrence of a merger, reverse merger, or consolidation in contemplation of such transaction and who after such transaction possesses direct or indirect beneficial ownership of at least ten percent (10%) of the securities of the Company or the surviving corporation (or if the Company or the surviving corporation is a controlled affiliate, then of the appropriate entity as determined above) immediately following such transaction shall not be included in the group of stockholders of the Company immediately prior to such transaction); (iv) an acquisition by any person, entity or group within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any comparable successor provisions (excluding any employee benefit plan, or related trust, sponsored or maintained by the Company or a subsidiary or other controlled affiliate of the Company) of the beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act, or comparable successor rule) of securities of the Company representing at least fifty percent (50%) of the combined voting power entitled to vote in the election of directors; or (v) the individuals who, as of the date of this Agreement, are members of the Board (the "Incumbent Board"), cease for any reason to constitute at least fifty percent (50%) of the Board. If the election, or nomination for election by the Company's stockholders, of any new director was approved by a vote of at least fifty percent (50%) of the Incumbent Board, such new director shall be considered as a member of the Incumbent Board.


(e) "COMPANY" means AeroGen, Inc., or following a Change in Control, the surviving entity resulting from such transaction.


(f) "INVOLUNTARY TERMINATION WITHOUT CAUSE" means your dismissal or discharge by the Company (or, if applicable, by any successor entity) for any reason or no reason other than for Cause. The termination of your employment will not be deemed to be an "Involuntary Termination Without Cause" if your termination occurs as a result of your death or disability.


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(g) "VOLUNTARY TERMINATION FOR GOOD REASON" means that you voluntarily terminate your employment with the Company after any of the following are undertaken by the Company:


(i) the assignment to you of any duties or responsibilities which result in a material diminution or adverse change of your position, responsibilities, authority or circumstances of employment;


(ii) a reduction by the Company in your Base Salary;


(iii) any failure by the Company to continue in effect any benefit plan or arrangement, including incentive plans or plans to receive securities of the Company, in which you are participating (hereinafter referred to as "Benefit Plans"), or the taking of any action by the Company which would adversely affect your participation in or reduce your benefits under any Benefit Plans or deprive you of any fringe benefit then enjoyed by you; provided, however, a Voluntary Termination for Good Reason shall not exist under this subsection 2(g)(iii) if the Company offers a range of benefit plans and programs which, taken as a whole, are comparable to the Benefit Plans provided to you as of the date of this Plan, as determined in good faith by the Company;


(iv) a relocation of your or the Company's principal business offices to a location more than thirty-five (35) miles from the location at which you have performed duties, except for required travel by you on the Company's business to an extent substantially consistent with your business travel obligations as of the date of this Plan;


(v) any material breach by the Company of any provision of this Plan which is not cured by the Company within twenty (20) days of delivery of written notice from Executive of such breach; or


(vi) any failure by the Company to obtain the assumption of this Plan by any successor or assign of the Company.


SECTION 3. ELIGIBILITY AND PARTICIPATION


Employees of the Company listed on a separate schedule ("Eligible Employees") shall receive benefits under the Plan. The Board may determine that you are eligible for any portion of or all of the benefits set forth in Section 4 or Section 5 of the Plan for reasons other than those specified herein and such decision by the Board shall in no way obligate the Company to provide such benefits to any other Eligible Employee, even if similarly situated. The Board may add employees to the schedule of Eligible Employees from time to time in its sole discretion or on the recommendation of the Chief Executive Officer.


SECTION 4. BENEFITS FOLLOWING A CHANGE IN CONTROL


In the event of your Involuntary Termination without Cause or your Voluntary Termination for Good Reason during the period commencing one (1) month prior to and ending thirteen (13) months following a Change in Control, you are entitled to the following benefits, subject to Section 5 hereof:


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(a) SALARY CONTINUATION. The Company shall, subject to Section 5 hereof, continue your Base Salary for twelve (12) months. Any salary continuation payments shall be paid to you in monthly installments beginning on the termination of your employment. Any such amount that you receive shall be subject to all required tax withholding.


(b) CONTINUATION OF HEALTH BENEFITS. Provided that you elect continued coverage under federal COBRA law as applicable, the Company shall pay, on your behalf, the portion of premiums of your group health insurance, including coverage for your eligible dependents, that the Company paid prior to your termination of employment; PROVIDED, HOWEVER, that the Company will pay such premiums for your eligible dependents only for coverage for which those dependents were enrolled immediately prior to your termination of employment. You will continue to be required to pay that portion of the premium of your health coverage, including coverage for your eligible dependents, that you were required to pay as an active employee immediately prior to your termination of employment. The number of months of such premium payments shall equal the number of months of your salary continuation payments, but in no event shall such premium payments be made for a period exceeding twelve (12) months or be made following the effective date of your coverage by a health plan of a subsequent employer. For the balance of the period that you are entitled to coverage under federal COBRA law, you shall be entitled to maintain coverage for yourself and your eligible dependents at your own expense.


(c) VESTING OF STOCK OPTIONS. The Company, immediately prior to your termination of employment, shall accelerate one hundred percent (100%) of the vesting of all of your unvested stock options to purchase stock of the Company or any successor thereto, such options to vest in 12 equal monthly installments beginning on the date of the termination of your employment. In addition, if applicable, the Company's (or any successor corporation's) right to repurchase unvested stock purchased by you pursuant to an early exercise stock purchase agreement shall lapse in 12 equal monthly installments beginning on the date of the termination of your employment. Notwithstanding the provisions in your stock option agreements, you shall have fifteen (15) months from your date of termination to exercise your stock options.


(d) INDEMNIFICATION. For a period no less than six (6) years following the date or your termination of employment, you shall be indemnified by the Company (or any successor entity) for any act, or omission, taken while you were employed by the Company (or any successor entity), and the Company shall maintain insurance coverage which is either at least equivalent to such indemnification coverage provided for you prior to such termination, or if such equivalent coverage is not available at a commercially reasonable price, then at least equivalent to the indemnification coverage provided to the then current executive officers of the Company (or in the event of the occurrence of a Change in Control of the Company, the executive officers of the controlling entity of which the Company is then a part).


(e) ADDITIONAL BENEFITS. In addition to the benefits provided in the foregoing Sections 5(a), 5(b), 5(c) and 5(d), the Board may, in its sole discretion, provide additional benefits to Eligible Employees chosen by the Company, in its sole discretion, and the provision of any such additional benefits to an Eligible Employee shall in no way obligate the Company to provide such additional benefits to any other Eligible Employee, even if similarly situated.


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(f) PARACHUTE PAYMENTS. If any payment or benefit (or any portion thereof) you would receive pursuant to a Change in Control from the Company or otherwise ("Payment") would (i) constitute "parachute payments" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended, (the "Code"), or any comparable successor provision, and (ii) but for this section would be subject to the excise tax imposed by Section 4999 of the Code, or any comparable successor provision (the "Excise Tax"), then Executive's benefits hereunder shall be either


(i) provided to you in full, or


(ii) provided to you as to such lesser extent
which would result in no portion of such
benefits being subject to the Excise Tax,


whichever of the foregoing amounts, when taking into account applicable federal, state, local and foreign income and employment taxes, the Excise Tax, and any other applicable taxes, results in the receipt by you, on an after-tax basis, of the greatest amount of benefits, notwithstanding that all or some portion of such benefits may be taxable under the Excise Tax. Unless you and the Company otherwise agree in writing, any determination required under this section shall be made in writing in good faith by a qualified third party (the "Professional Service Firm") selected by the Company prior to the Change in Control (and if none is selected by the Company prior to the Change in Control, then that Professional Service Firm selected by the Company at a later time). In the event of a reduction of benefits hereunder, benefits payable in cash shall be reduced first. For purposes of making the calculations required by this section, the Professional Service Firm may make reasonable assumptions and appro ...