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Exhibit 99.5
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" .
Recitals
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.
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.
Employment.
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
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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.
Termination.
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
Definitions.
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,
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