EXECUTIVE EMPLOYMENT
AGREEMENT
This Employment Agreement (the
“Agreement” ) is made and entered into
effective as of December 21, 2006 (the “Effective
Date” ), by and between Intrabiotics Pharmaceuticals,
Inc. , (the “Company” ), and
Zhi Hong (the
“Executive” ). The Company and the
Executive are hereinafter collectively referred to as the
“Parties” , and individually referred to
as a “Party” .
A. The Company
desires assurance of the association and services of the Executive
in order to retain the Executive’s experience, skills,
abilities, background and knowledge, and is willing to engage the
Executive’s services on the terms and conditions set forth in
this Agreement.
B. The Executive
desires to be in the employ of the Company, and is willing to
accept such employment on the terms and conditions set forth in
this Agreement.
In consideration of the foregoing Recitals and
the mutual promises and covenants herein contained, and for other
good and valuable consideration, the Parties, intending to be
legally bound, agree as follows:
1.1 Title .
The Executive shall initially have the title of the Executive Vice
President of Research and Chief Scientific Officer of the Company
and shall serve in such other capacity or capacities as the Company
may from time to time prescribe. The Executive shall report to the
Company’s Chief Executive Officer (
“CEO” ).
1.2 Duties.
The Executive shall do and perform all services, acts or things
necessary or advisable to manage and conduct the business of the
Company and which are normally associated with the position of
Executive Vice President of Research and Chief Scientific Officer,
consistent with the bylaws of the Company and as required by the
CEO.
1.3 Policies and
Practices. The employment relationship between the Parties
shall be governed by the policies and practices established by the
Company and the Board. The Executive acknowledges that he has read
the Company’s Employee Handbook and other governing policies,
which will govern the terms and conditions of his employment with
the Company, along with this Agreement. In the event that the terms
of this Agreement differ from or are in conflict with the
Company’s policies or practices or the Company’s
Employee Handbook, this Agreement shall control.
1.4 Location .
Unless the Parties otherwise agree in writing, during the term of
this Agreement, the Executive shall perform the services the
Executive is required to perform pursuant to this Agreement at the
Company’s offices, located in San Diego, California, or at
any other place at which the Company maintains an office; provided,
however, that the Company may from time to time require the
Executive to travel temporarily to other locations in connection
with the Company’s business.
2. Loyal and Conscientious Performance;
Noncompetition.
2.1 Loyalty .
During the Executive’s employment by the Company, the
Executive shall devote the Executive’s full business
energies, interest, abilities and productive time to the proper and
efficient performance of the Executive’s duties under this
Agreement.
2.2 Covenant not
to Compete . Except with the prior written consent of the
Company’s Board of Directors or the CEO, which shall not be
unreasonably withheld, the Executive will not, during his
employment by the Company, engage in competition with the Company
and/or any of its Affiliates, either directly or indirectly, in any
manner or capacity, as adviser, principal, agent, affiliate,
promoter, partner, officer, director, employee, stockholder, owner,
co-owner, consultant, or member of any association or otherwise, in
any phase of the business of developing, manufacturing and
marketing of products or services which are in the same field of
use or which otherwise compete with the products or services or
proposed products or services of the Company
1
and/or any of
its Affiliates. For purposes of this Agreement,
“Affiliate” means, with respect to any
specific entity, any other entity that, directly or indirectly,
through one or more intermediaries, controls, is controlled by or
is under common control with such specified entity.
2.3 Agreement not
to Participate in Company’s Competitors . During any
period during which the Executive is receiving any compensation or
consideration from the Company, the Executive agrees not to
acquire, assume or participate in, directly or indirectly, any
position, investment or interest known by the Executive to be
adverse or antagonistic to the Company, its business or prospects,
financial or otherwise or in any company, person or entity that is,
directly or indirectly, in competition with the business of the
Company or any of its Affiliates. Ownership by the Executive, as a
passive investment, of less than two percent (2%) of the
outstanding shares of capital stock of any corporation with one or
more classes of its capital stock listed on a national securities
exchange or publicly traded on the Nasdaq Stock Market or in the
over-the-counter market shall not constitute a breach of this
paragraph.
3. Compensation of the
Executive.
3.1 Base
Salary. The Company shall pay the Executive a base salary of
Two Hundred Eighty Thousand Dollars ($280,000) per year, less
payroll deductions and all required withholdings payable in regular
periodic payments in accordance with Company policy. Such base
salary shall be prorated for any partial year of employment on the
basis of a 365-day fiscal year.
3.2 Performance
Bonus. In addition to the Executive’s base salary, the
Executive shall be eligible for a performance bonus based upon the
Executive’s and the Company’s achievement of specified
objectives established by the CEO and/or Company’s Board of
Directors (the “Board”) during the first quarter of
each year, as evaluated by the CEO and/or Board in its or their
discretion. The target bonus for full achievement of all objectives
shall be forty percent (40%) of the Executive’s Base
Salary.
3.3 Signing
Bonus. Within thirty (30) days of the Executive’s
commencement of employment with the Company, the Executive shall be
paid a signing bonus of one hundred fifty thousand dollars
($150,000), less standard deductions and withholdings.
3.4 Stock
Options. Upon the commencement of the Executive’s
employment and subject to approval of the Board and the terms of
the Company’s 2004 Stock Equity Incentive Plan, (the
“Plan” ), the Executive will be granted a
stock option under the Plan to purchase two hundred eighty thousand
(280,000) shares of the Company’s Common Stock (the
“Option” ). To the maximum extent
possible, the Option shall be an Incentive Stock Option as such
term is defined in Section 422 of the Internal Revenue Code of
1986, as amended. The Option will be governed by and granted
pursuant to a separate Stock Option Agreement and the Plan. The
exercise price per share of the Option will be equal to the fair
market value of the Common Stock established on the date of grant,
subject to approval by the Board of Directors. The Option will vest
over four (4) years for so long as the Executive continues to
be employed by the Company, as follows: twenty-five percent (25%)
shall vest on the first anniversary of the date of the grant of the
Option, and 1/48 th shall vest on the final calendar day of each
month thereafter.
3.5 Changes to
Compensation. The Executive’s compensation will be
reviewed on a regular basis by the Company and may be changed from
time to time as deemed appropriate.
3.6 Employment
Taxes . All of the Executive’s compensation shall be
subject to customary withholding taxes and any other employment
taxes as are commonly required to be collected or withheld by the
Company.
4.1 Termination By
the Company . The Executive’s employment by the Company
shall be at will. The Executive’s employment with the Company
may be terminated by the Company at any time and for any reason or
no reason, with or without “Cause” (as
defined below), subject to the provisions of this
Section 4.
4.2 Termination by
Mutual Agreement of the Parties . The Executive’s
employment pursuant to this Agreement may be terminated at any time
upon a mutual agreement in writing of the Parties. Any such
termination of employment shall have the consequences specified in
such agreement.
2.
4.3 Termination by
the Executive. The Executive’s employment by the Company
shall be at will. The Executive shall have the right to resign or
terminate the Executive’s employment at any time and for any
reason, or no reason, with or without “Good
Reason” (as defined below), subject to the provisions
of this Section 4.
4.4 Compensation
Upon Termination.
4.4.1 With Cause or
Without Good Reason. If the Executive’s employment shall
be terminated by the Company for Cause, or if the Executive
terminates employment hereunder for other than Good Reason, the
Company shall pay the Executive’s base salary and accrued and
unused vacation benefits earned through the date of termination at
the rate in effect at the time of termination, less standard
deductions and withholdings, and the Company shall thereafter have
no further obligations to the Executive under this
Agreement.
4.4.2 Without Cause
or With Good Reason. If the Executive’s employment shall
be terminated by the Company without Cause, or by the Executive for
Good Reason, the Executive shall receive the payments specified in
Section 4.4.1, and, in addition, within ten (10) days of
the Executive’s delivery to the Company of a fully effective
Release and Waiver in the form attached hereto as Exhibit A,
shall receive the following: i) a lump sum payment equal to the sum
of the Executive’s annual base salary then in effect and the
Executive’s target performance bonus then in effect, less
required deductions and withholdings; and ii) provided that the
Executive timely elects continued coverage under the Consolidated
Comprehensive Omnibus Budget Reconciliation Act of 1985 (
“COBRA” ), the COBRA benefit specified in
Section 4(b) of the Company’s Senior Executive Severance
Benefit Plan as it may be amended from time to time.
4.4.3 Change in
Control. The provisions of Article Two,
Section IVB(i) and (ii) of the Plan providing for
acceleration of outstanding option rights in the event of a
“Change in Control” (as defined in the
Appendix, Section C, of the Plan) and an
“Involuntary Termination” thereafter (as
defined in the Plan) are hereby incorporated into this Agreement
and shall apply in full.
4.4.4 Parachute
Payment. If any payment or benefit Executive would receive
pursuant to a Change of Control or otherwise (
“Payment” ) would (i) constitute a
“parachute payment” within the meaning of
Section 280G of the Code, and (ii) but for this sentence,
be subject to the excise tax imposed by Section 4999 of the
Code (the “Excise Tax” ), then such
Payment shall be reduced to the Reduced Amount. The
“Reduced Amount” shall be either
(x) the largest portion of the Payment that would result in no
portion of the Payment being subject to the Excise Tax or
(y) the largest portion, up to and including the total, of the
Payment, whichever amount, after taking into account all applicable
federal, state and local employment taxes, income taxes, and the
Excise Tax (all computed at the highest applicable marginal rate),
results in the Executive’s receipt, on an after-tax basis, of
the greater amount of the Payment notwithstanding that all or some
portion of the Payment may be subject to the Excise Tax. If a
reduction in payments or benefits constituting “parachute
payments” is necessary so that the Payment equals the Reduced
Amount, reduction shall occur in the following order unless the
Executive elects in writing a different order (provided, however,
that such election shall be subject to Company approval if made on
or after the effective date of the event that triggers the
Payment): reduction of cash payments; cancellation of accelerated
vesting of stock awards; reduction of employee benefits. In the
event that acceleration of vesting of stock award compensation is
to be reduced, such acceleration of vesting shall be cancelled in
the reverse order of the date of grant of Executive’s stock
awards unless the Executive elects in writing a different order for
cancellation.
The accounting firm engaged by the Company for
general audit purposes as of the day prior to the effective date of
the Change of Control shall perform the foregoing calculations. If
the accounting firm so engaged by the Company is serving as
accountant or auditor for the individual, entity or group effecting
the Change of Control, then the Company shall appoint a nationally
recognized accounting firm to make the determinations required
hereunder. The Company shall bear all expenses with respect to the
determinations by such accounting firm required to be made
hereunder.
The accounting firm engaged to make the
determinations hereunder shall provide its calculations, together
with detailed supporting documentation, to the Executive and the
Company within fifteen (15) calendar days after the date on
which the Executive’s right to a Payment is triggered (if
requested at that time by the Executive or the Company) or such
other time as requested by the Executive or the Company. If the
accounting firm determines that no Excise Tax is payable with
respect to a Payment, either before or after the application of the
Reduced Amount, it shall furnish the Executive and the Company with
an opinion reasonably acceptable to the Executive that no Excise
Tax will be imposed with respect to such Payment. Any good faith
determinations of the accounting firm made hereunder shall be
final, binding and conclusive upon the Executive and the
Company.
3.
4.4.5 Application of
Internal Revenue Code Section 409A. If the Company
determines that any of the severance benefits provided by this
Agreement in Section 4 fail to satisfy the distribution
requirement of Section 409A(a)(2)(A) of the Internal Revenue
Code as a result of Section 409A(a)(2)(B)(i) of the Internal
Revenue Code, the payment of such benefit shall be accelerated to
the minimum extent necessary so that the benefit is not subject to
the provisions of Section 409A(a)(1) of the Internal Revenue Code.
(It is the intention of the preceding sentence to apply the
short-term deferral provisions of Section 409A of the Internal
Revenue Code, and the regulations and other guidance thereunder, to
the Severance Benefits payments, and the payment schedule as
revised after the application of the preceding sentence shall be
referred to as the “Revised Payment
Schedule.” ) However, if there is no Revised Payment
Schedule that would avoid the application of
Section 409A(a)(1) of the Internal Revenue Code, the payment
of such benefits shall not be paid pursuant to a Revised Payment
Schedule and instead shall be delayed to the minimum extent
necessary so that such benefits are not subject to the provisions
of Section 409A(a)(1) of the Internal Revenue Code. The Board
may attach conditions to or adjust the amounts paid pursuant to
Section 4.4.2 and/or 4.4.3 to preserve, as closely as
possible, the economic consequences that would have applied in the
absence of this Section 4.4.5; provided, however, that
no such condition or adjustment shall result in the payments being
subject to Section 409A(a)(1) of the Internal Revenue
Code.
4.5.1 Cause. For
purposes of this Agreement, “Cause” means that, in the
reasonable determination of the Company, the Executive
has:
i)
been indicted for or convicted of or
pleaded guilty or no contest to any felony or crime involving
dishonesty that is likely to inflict or has inflicted demonstrable
and material injury on the business of the Company;
ii)
participated in any fraud against the
Company;
iii)
willfully and materially breached a
Company policy;
iv)
intentionally damaged any property of
the Company thereby causing demonstrable and material injury to the
business of the Company;
v)
willfully and materially breached the
Executive’s Proprietary Information and Inventions Agreement
with the Company; or
vi)
engaged in conduct that, in the
reasonable determination of the Company, demonstrates gross
unfitness to serve.
Notwithstanding the foregoing, Cause shall not
exist based on conduct described in clause iii) or vi) above unless
the conduct described in such clause has not been cured within
fifteen (15) days following the Executive’s receipt of
written notice from the Company specifying the particulars of the
conduct constituting Cause.
4.5.2 Good
Reason. For purposes of this Agreement, “Good
Reason” means that the Executive voluntarily terminates
employment with the Company within thirty (30) days after any
of the following is undertaken without the Executive’s
express written consent:
i)
a reduction in the Executive’s
salary grade;
ii)
a change in the Executive’s
reporting structure such that the Executive is required to report
to someone other than the CEO;
iii)
a reduction by the Company in the
Executive’s Base Salary by five percent (5%) or more;
provided, however, that a reduction by the Company of the
Executive’s Base Salary by up to ten percent (10%) shall not
constitute Good Reason if it is made in connection with an
across-the-board reduction by the Company of all executives’
annual base salaries by a percentage at least equal to the
percentage by which the Executive’s Base Salary is
reduced;
iv)
a relocation of the Executive’s
business office to a location more than fifty (50) miles form
the location at which the Executive performs his or her duties,
except for required travel by the Executive on the Company’s
business to an extent substantially consistent with the
Executive’s business travel obligations; provided, however,
that no relocation of the
4.
Executive’s business office shall
constitute Good Reason if the Executive provides services to the
Company from a remote location (e.g., through telecommuting) at the
time of the relocation; or
v)
any failure by the Company to obtain
the assumption of this Plan by an successor or assign of the
Company.
5. Confidential And Proprietary
Information; Nonsolicitation .
5.1 As a condition of
employment the Executive agrees to execute and abide by the
Proprietary Information and Inventions Agreement attached hereto as
Exhibit B.
5.2 While employed by
the Company and for one (1) year thereafter, the Executive
agrees that in order to protect the Company’s Confidential
and Proprietary Information from unauthorized use, that the
Executive will not, either directly or through others, solicit or
attempt to solicit any employee, consultant or independent
contractor of the Company to terminate his or her relationship with
the Company in order to become an employee, consultant or
independent contractor to or for any other person or business
entity; or the business of any customer, supplier, service
provider, vendor or distributor of the Company which, at the time
of termination or one (1) year immediately prior thereto, was
doing business with the Company or listed on Company’s
customer, supplier, service provider, vendor or distributor
list.
6. Assignment and Binding
Effect.
This Agreement shall be binding upon and inure
to the benefit of the Executive and the Executive’s heirs,
executors, personal representatives
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