This Employment
Agreement (the “Agreement”) is entered into by
and between Scott C. Stromatt, M.D. (the
“Executive”) and Trubion Pharmaceuticals, Inc., a
Delaware corporation (the “Company”) as of
March 10, 2009 (the “Effective
Date”).
1.
Duties and Scope of Employment . For the term of this
Agreement (“Employment”), the Company agrees to employ
the Executive in the position of Senior Vice President and Chief
Medical Officer . The Executive shall report directly to the
Company’s Chief Executive Officer. The Executive shall have
such duties, authority and responsibilities that are commensurate
with his being a senior executive officer of the Company. During
his Employment, the Executive shall devote substantially his full
business efforts and time to the Company and, so long as such
activities do not interfere with the performance of his
responsibilities to the Company under this Agreement, the Executive
may engage in civic and charitable activities and serve on the
boards of directors (or managers or trustees) of civic or
charitable organizations and, subject to the consent of the Board,
may serve on the board of directors of corporations or other
businesses. The Executive’s primary work place shall be at
the Company’s corporate headquarters in Seattle,
Washington.
2.
Cash and Incentive ompensation.
(a)
Salary . The Company shall pay the Executive as compensation
for his services a base salary at a gross annual rate of not less
than $315,000.00. Such salary shall be payable in accordance with
the Company’s standard payroll procedures. The annual
compensation specified in this Section 2(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.”
(b)
Incentive Bonuses . The Executive shall be eligible to
receive an annual fiscal year incentive bonus that the Board or
Compensation Committee of the Board (the “Committee”)
shall determine and award in its discretion. Such incentive bonus
shall be awarded based upon the achievement of specific milestones
that will be determined by the Board and/or the Committee and
confirmed to the Executive no later than ninety (90) days
after the start of each fiscal year. Payment for each year’s
bonus actually earned shall be made to the Executive no later than
the fifteenth day of the third month after the later of the end of
the calendar year or the Company’s taxable year in which the
bonus payment is no longer subject to a substantial risk of
forfeiture for purposes of Section 409A of the Internal
Revenue Code, as amended
(“Section 409A”).
(c)
Equity Terms . During the Executive’s Employment, at
the discretion of the Committee, the Executive shall be entitled to
participate in the Company’s equity compensation plans, as in
effect from time to time, and the Executive shall be eligible to
receive grants of Company equity (“Compensatory
Equity”), as determined by Committee, in its discretion from
time to time.
(d)
Employee Benefits. During the Executive’s Employment,
the Executive will be entitled to participate in the employee
benefit plans of general applicability to other employees of the
Company, as in effect from time to time, including, without
limitation, the Company’s group medical, dental, vision,
disability, life insurance, director and officer liability
insurance and flexible-spending account plans. The Company reserves
the right to cancel or change the benefit plans and programs it
offers to its employees at any time.
(e)
Service Definition . For purposes of Section 3(b) of this
Agreement, “Service” shall mean service by the
Executive as an employee, director and/or consultant of the Company
(or any subsidiary or parent or affiliated entity of the
Company).
3.
Vacation and Indemnification.
(a)
Vacation . The Executive will be eligible for paid vacation
in accordance with the Company’s vacation policy. Under the
Company’s current vacation policy, the Executive is eligible
for three (3) weeks per year of paid vacation and would become
eligible for four (4) weeks per year of paid vacation
commencing on the third anniversary of the Executive’s
employment with the Company.
(b)
Indemnification . The Company shall indemnify the Executive
to the maximum extent permitted by applicable law and the
Company’s bylaws with respect to the Executive’s
Service. During the Executive’s Employment, the Company shall
maintain directors’ and officers’ liability insurance
for the Executive’s benefit on terms and conditions no less
favorable than the terms and conditions generally applicable to the
Company’s other senior executives. The Company’s
obligations under this Section 3(b) shall survive termination of
the Executive’s Service and also termination or expiration of
this Agreement.
4.
Business Expenses. During his Employment, the Executive
shall be authorized to incur necessary and reasonable travel,
entertainment and other business expenses in connection with his
duties hereunder. The Company shall promptly reimburse the
Executive for such expenses upon presentation of appropriate
supporting documentation, all in accordance with the
Company’s generally applicable policies.
(a)
Employment-at-Will . The Company and the Executive hereby
acknowledge that the Executive’s Employment is at-will. The
Company may terminate the Executive’s Employment with or
without Cause, by giving the Executive thirty (30) days’
advance notice in writing. The Executive may terminate his
Employment by giving the Company thirty (30) days’
advance notice in writing. The Executive’s Employment shall
terminate automatically in the event of his death.
(b)
Rights Upon Termination . Upon the termination of the
Executive’s Employment for any reason (including death or
Disability (as defined below)), the Executive shall be entitled to
the compensation, benefits and reimbursements described in this
Agreement through the effective date of the termination (the
“Termination Date”), and the Company shall make the
following payments to the Executive (or his beneficiary) on
his
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Termination
Date: (i) all unpaid salary and unpaid vacation accrued
through the Termination Date, (ii) any accrued, unpaid bonuses
for any fiscal year of the Company ended prior to the Termination
Date and (iii) any unreimbursed business expenses. The
Executive may also be eligible for other post-Employment payments
and benefits as provided in this Agreement or pursuant to other
agreements or plans with the Company. Upon the Termination Date,
the Executive shall have no further rights to receive compensation
or benefits from the Company except as set forth in Section 6
and pursuant to the terms of any benefit plans (including without
limitation any equity compensation plans) of the Company in which
the Executive is a participant.
(a)
Severance Pay . If there is an Involuntary Termination (as
defined below) of the Executive’s Employment, then subject to
the Executive’s execution, delivery and non-revocation of a
Release (defined below) within the time period described below,
following the Executive’s “separation from
service” within the meaning of Section 409A, the Company
shall pay the Executive a single lump sum of cash in an amount
equal to the sum of twelve (12) months of the
Executive’s then annual Base Compensation (not giving effect
to any reduction in Base Compensation made in connection with such
Involuntary Termination or giving rise to Good Reason). The cash
lump sum amount payable under this Section 6(a) shall be made to
the Executive on the first payroll date in the month following the
month containing the Release Deadline. The Executive shall also
receive the benefits provided in Sections 6(b) and 6(c), and all
such payments and benefits shall not be subject to mitigation or
offset (except as specified in Section 6(b)). In order to be
entitled to receive the severance described in this Section 6(a)
(including the benefits provided in Sections 6(b), 6(c) and, if
applicable, 6(d)), the Executive must execute, deliver and not
revoke the Release within forty-five (45) calendar days
following the Executive’s separation from service (the date
that is forty-five (45) calendar days following the
Executive’s separation from service is the “Release
Deadline”). The Company shall furnish the Release to the
Executive on the date of his Involuntary Termination. The
“Release” shall be a general release of all litigation
and other claims by the Executive and on Executive’s behalf
in a form satisfactory to the Company. Notwithstanding the
foregoing, if the Executive’s Involuntary Termination occurs
in 2008, an amount of the severance pay otherwise payable under
this Section 6(a) in a lump sum equal to the amount that would have
been payable under the Prior Agreement (had it been in effect on
the date of such Involuntary Termination) shall instead be paid in
twelve (12) equal monthly installments commencing on the first
payroll date in the month following the month containing the
Release Deadline.
(b)
Health Insurance . If the Executive is entitled to receive
the severance payment in Section 6(a), and if the Executive
elects to continue his (and his dependents’) health insurance
coverage under the Consolidated Omnibus Budget Reconciliation Act
of 1985 (“COBRA”), then the Company shall pay up to
twelve (12) months of the Executive’s monthly premium
under COBRA, provided that the Company’s obligation to pay
the monthly premium shall cease at such time as the Executive
commences receiving substantially equivalent health insurance
coverage in connection with new employment and that the Company may
require that the Executive substantiate his COBRA
coverage.
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(c)
Equity Vesting . If the Executive is entitled to receive the
payments in Section 6(a), then the time-based vesting
restrictions shall immediately lapse on an additional number of
shares of Company common stock under all of the Executive’s
outstanding Compensatory Equity that is equal to the number of
shares that would have time-vested if the Executive had continued
in employment for twelve (12) additional months following the
Termination Date. In addition, the Executive shall have three
(3) months following the Termination Date to exercise any of
his outstanding Compensatory Equity (subject to the original term
duration of each equity grant).
(d)
Effect of Change in Control . If there is an Involuntary
Termination of the Executive’s Employment (i) within the
period beginning three (3) months before and ending twelve
(12) months after a Change in Control (as defined below) or
(ii) more than three (3) months prior to a Change in
Control but in connection with a Change in Control (each, a
“Qualifying Change in Control Termination”), then the
vesting restrictions shall immediately lapse on all of the
Executive’s Compensatory Equity provided that the Executive
executes, delivers, and does not revoke the Release as described in
Section 6(a). In addition, in the event of a Qualifying Change
in Control Termination, the Executive will be entitled to all
benefits described in Sections 6(a) and 6(b) of this Agreement
subject to the same terms and conditions and payment dates
described above, except that (x) the cash payment amount under
Section 6(a) shall be an amount equal to the sum of fifteen
(15) months of the Executive’s then annual Base
Compensation (not giving effect to any reduction in Base
Compensation made in connection with such Involuntary Termination
or giving rise to Good Reason) and (y) the Company’s
payment of monthly COBRA premiums under Section 6(b) shall be for
up to fifteen (15) months. For purposes of the preceding
sentence, an Involuntary Termination shall be deemed to be in
connection with a Change in Control if such termination (i) is
required by the merger agreement, purchase agreement or other
instrument relating to such Change in Control or (ii) is made at
the express request of the other party (or parties) to the
transaction constituting such Change in Control.
(e)
Parachute Payments . In the event that the payments and
benefits provided for in this Agreement and the payments and/or
benefits provided to, or for the benefit of, the Executive under
any other Company plan or agreement (such payments or benefits are
hereinafter collectively referred to as the “Benefits”)
(i) constitute “parachute payments” within the
meaning of Section 280G of the Internal Revenue Code and
(ii) but for this Section 6(e), would be subject to the
excise tax imposed by Section 4999 of the Internal Revenue
Code (the “Excise Tax”), then the Benefits shall either
be:
(i)
delivered in full, or
(ii)
delivered as to such lesser extent which would result in no portion
of such Benefits being subject to the Excise Tax (such reduced
amount is hereinafter referred to as the “Limited
Amount”),
whichever of
the foregoing amounts, taking into account the applicable federal,
state and local income taxes and the Excise Tax, results in the
receipt by the Executive on an after-tax basis, of the greatest
amount of Benefits, notwithstanding that all or some portion of
such Benefits may be
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subject to the
Excise Tax. If applicable, in order to effectuate the Limited
Amount, the Company shall first reduce those Benefits which are
payable in cash
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