EMPLOYMENT AGREEMENT
This
Employment Agreement is entered into as of June 2, 2006 (the “Effective Date”)
by and between SciClone Pharmaceuticals, Inc. (the “Company”) and Xx. Xxxxxxxxx
Xxxxxx (“Employee”).
WHEREAS,
the Company desires to employ Employee as the Company’s President and Chief
Executive Officer, and Employee agrees to accept employment on the terms set
forth below;
NOW,
THEREFORE, in consideration of the promises, terms and conditions set forth
in
this Agreement, the parties agree as follows:
1.
Position
and Duties.
Employee will be employed by the Company as its President and Chief Executive
Officer (“CEO”), reporting to the Company’s Board of Directors (the “Board”).
Employee agrees to undertake the duties and responsibilities inherent in this
position and accepts employment with the Company on the terms and conditions
set
forth in this Agreement and the Exhibits hereto. Employee’s duties will include,
but not be limited to, those duties normally performed by a CEO, as well as
any
other reasonable duties that may be assigned to him from time to time by the
Board.
In
addition, Employee will be nominated to the Board effective upon the Effective
Date, for a term ending at the next annual meeting. The Board will nominate
Employee thereafter for reelection to the Board, at every time at which
directors are nominated to the stockholders for election, as long as Employee
serves as CEO unless Employee declines such nomination in writing to the Board.
As with all members of the Board, Employee’s continuation as a director requires
election as a director by the stockholders when directors are to be elected
by
the stockholders.
2.
Term
of Employment.
Employee’s employment with the Company will begin as of June 2, 2006 (the
“Effective Date”), subject to effectiveness of this Agreement and the applicable
documents referenced in this Section 2 hereof and Sections 7 and 8 hereof.
Employment is on an at-will basis, and may be terminated by Employee or the
Company at any time, with or without cause, subject to the provisions of
Paragraphs 4 and 5 below as well as the terms set forth in the Change in Control
Agreement, which is attached hereto as Exhibit
A
and
incorporated herein by reference (the “Change in Control Agreement”).
3.
Compensation.
Employee will be compensated by the Company for his services as
follows:
(a) Salary:
Employee’s annual base salary will be $400,000.00. Employee’s salary and other
compensation will initially be reviewed by the Company’s Board on the first
anniversary of the Effective Date and may be subject to adjustment at that
time;
provided, however, that such salary will not be reduced below the annual salary
then being paid to Employee unless a reduction is part of a salary reduction
applicable to all members of the Company’s executive team. Thereafter,
Employee’s compensation will be reviewed on an annual basis. Any adjustment to
Employee’s salary and/or other compensation will be in the sole discretion of
the Board and its Committees.
(b) Annual
Bonus:
Employee will be eligible to receive an annual bonus (the “Target Bonus”) with
an initial target amount equal to forty percent (40%) of Employee’s annual base
salary, subject to his meeting the performance goals and targets for the
relevant calendar year during his service hereunder as are mutually set and
agreed upon in writing by Employee and the Board (as evidenced by its Chairman
or the Chairman of the Compensation Committee of the Board executing and
delivering such writing) not later than February 28 of the then-current calendar
year, provided that if Employee and the Board have not agreed upon such
performance goals and targets in writing by such date, or by such later date
as
Employee and the Board may agree in writing, then Employee’s performance goals
and targets for such current year will be set by the Board in good faith not
later than March 31 of such then-current calendar year, and will be promptly
communicated to Employee in writing when so set. Such goals and targets will
be
reviewed annually and maybe changed as appropriate. The Target Bonus for
Employee’s first year of employment, (calendar year 2006) will be $160,000.00
initially on an annualized basis but will be prorated from the Effective Date
to
the end of calendar year 2006.
(c) Stock
Options.
(i) Effective
upon the Effective Date, Employee will be granted a stock option (the “First
Option”) under the Company’s 2005 Equity Incentive Plan (the “Plan”)
to
purchase 400,000 shares of the Company’s common stock under the Company’s stock
option plan at an exercise price per share equal to the closing price on the
Nasdaq National Market of a share of the Company’s common stock on June 1, 2006.
To the maximum extent possible a portion of this option will be an incentive
stock option with the balance of such option being a nonstatutory stock option.
The First Option will have a term of 10 years and will vest in annual
installments on each of the first four anniversaries of the Effective Date,
provided Employee is an employee of or acting as a consultant to the Company
at
the relevant vesting date.
(ii) Effective
upon the Effective Date, Employee also will be granted a nonstatutory stock
option (the “Second Option”) under the Plan to purchase 600,000 shares of the
Company’s common stock under the Company’s stock option plan at an exercise
price per share equal to the closing price on the Nasdaq National Market of
a
share of the Company’s common stock on June 1, 2006. Provided Employee remains
employed by the Company, the Second Option will have a term of 10 years and
will
vest as to a number of the shares subject to the Second Option as detailed
below
upon the achievement of a “Trading Price Goal.” A Trading Price Goal will be
achieved if and when, following the Effective Date, the Company’s common stock
has first traded publicly for a period of at least 30 consecutive calendar
days
at or greater than a target closing price per share, as reported on the Nasdaq
National Market, of (a) $4.50 on or before the third anniversary of the
Effective Date for 100,000 shares, (b) $6.00 on or before the fourth anniversary
of the Effective Date for 100,000 shares, (c) $8.00 on or before the fifth
anniversary of the Effective Date for 100,000 shares, (d) $10.00 on or before
the sixth anniversary of the Effective Date for 100,000 shares, (e) $12.00
on or
before the seventh anniversary of the Effective Date for 100,000 shares, and
(f)
$14.00 on or before the eighth anniversary of the Effective Date for 100,000
shares. Each of the foregoing closing price targets will be appropriately
adjusted for any stock dividend, stock split or similar change in the Company’s
capital structure occurring after the Effective Date. If a Trading Price Goal
is
not achieved on or before the respective anniversary date, the corresponding
portion of the Second Option will not vest and will terminate upon the
applicable anniversary date.
Except
as
otherwise specified in this paragraph or in Paragraph 5 of this Agreement,
or in
the Change in Control Agreement, Employee’s options as described herein will be
governed by and subject to the terms and conditions of the Company’s standard
form of nonstatutory stock option agreement under the Plan (which Employee
will
be required to sign in connection with the issuance of the First Option and
the
Second Option as described in (i) and (ii) above), provided however, that for
any nonqualified stock options described in clause (c)(i) and (ii) above, the
period during which Employee may exercise such options after termination will
be
one year, which extended exercise period will be reflected in the stock option
documentation for the First Option and Second Option.
(d)
Other Long Term Incentive Plan Benefits(“LTIP”)
(i)
At the beginning of calendar year 2009, the Compensation Committee of the Board
will consider an award to Employee of a special cash bonus (the “LTIP Bonus”) of
up to $300,000, the exact amount of which will be based on Employee’s overall
achievement of the performance targets over the years 2006-2008 which have
been
previously agreed upon in writing by Employee and the Board, (as evidenced
by
its Chairman or the Chairman of the Compensation Committee of the Board
executing and delivering such writing). Provision of the LTIP Bonus and the
amount of such will be in the sole discretion of the Board. To the extent
earned, the LTIP Bonus will be paid to Employee no later than 30 days after
the
Board approves the payment of the LTIP Bonus.
(ii)
In the normal course of business, it is anticipated that the LTIP will be
reviewed each year and if warranted by the Company’s as well as Employee’s
performance and the outlook for the Company, the Board, in its sole discretion,
will consider additional stock based and/or cash performance based awards in
future years.
(e) Benefits:
Employee will participate in and receive benefits under the Company’s various
group benefit plans (including a health plan and a life insurance policy) on
the
same basis as other members of the Company’s executive team, as well as under
the Company’s business expense reimbursement and other policies. Employee will
accrue four (4) weeks of vacation on an annual basis in accordance with the
Company’s paid time off policy (prorated for 2006). Company will permit Employee
to elect health care coverage under another plan, provided the Compensation
Committee of the Board of Directors approves the expenses associated with such
benefit.
4.
Voluntary
Termination.
(a) In
the
event that Employee voluntarily resigns from his employment with the Company,
Employee will be entitled to no compensation or benefits from the Company other
than those earned under Paragraph 3 hereof through the date of such termination.
If Employee voluntarily terminates employment with the Company for any reason,
he will provide the Company with at least forty five (45) days’ prior written
notice of the date of his resignation. The Company may, in its sole discretion,
elect to waive all or any part of such notice period and accept Employee’s
resignation at an earlier date. The execution and delivery by Employee of this
Agreement will constitute also his immediate resignation from all his positions
with the Company as well as from the Board on the date of Employee’s voluntary
resignation from the Company, unless otherwise agreed in writing by the Company
and Employee.
(b) For
purposes of this paragraph, voluntary termination or voluntary resignation
also
include employment termination as a result of Employee’s death or Disability (as
such is defined in the Change in Control Agreement).
5.
Other
Termination.
The
employment relationship may be terminated under the circumstances set forth
below as well as those described in the Change in Control Agreement. For
purposes of this Agreement, the term “Cause” will have the meaning given to it
in the Change in Control Agreement.
(a) Termination
for Cause:
If
Employee’s employment is terminated by the Company for Cause as defined in the
Change in Control Agreement, Employee will be entitled to no compensation or
benefits from the Company other than those earned under Paragraph 3 through
the
date of Employee’s termination for Cause. The execution and delivery by Employee
of this Agreement will constitute also his immediate resignation from all his
positions with the Company as well as from the Board, on the date of Employee’s
termination for Cause.
(b) Termination
Without Cause:
If
Employee’s employment is terminated by the Company without Cause (and not as a
result of Employee’s death or Disability) and such termination is not governed
by the conditions specified in the Change in Control Agreement, and if Employee
signs a general release of known and unknown claims in a form satisfactory
to
the Company (which may be in the form of Schedule A to the Change in Control
Agreement) and Employee resigns from all of Employee’s positions with the
Company as well as from the Board, Employee will receive the following
benefits:
(i)
Continued payment of Employee’s final base salary rate, less applicable
withholding, for the twelve (12) month period following the date of such
termination without Cause; provided, however, that if required in order to
avoid
the imposition of additional tax on Employee or the Company pursuant to Section
409A of the Internal Revenue Code, such payments will not commence until the
first normal payroll date of the Company occurring at least six months after
the
date of such termination without Cause. Such payments will be made in accordance
with the Company’s normal payroll procedures
(ii)
If Employee was covered under the Company’s group health plan as of the date of
termination without Cause and he timely elects to continue his group health
benefits pursuant to federal law (COBRA), the Company will pay the COBRA
premiums until the earlier of (A) the one year anniversary of Employee’s
termination without Cause, or (B) the date on which Employee commences new
employment. If the Company was paying for health coverage of Employee under
another plan, the Company will continue to make payments (not to exceed the
amount paid in the prior calendar year) for such coverage for the period
specified in the prior sentence.
Employee
will be entitled to no other benefits except as described in this paragraph
(b)(i) and (ii).
The
execution and delivery by Employee of this Agreement will constitute also his
immediate resignation from all his positions with the Company as well as from
the Board, on the date of Employee’s termination without Cause, unless otherwise
agreed in writing by the Company and Employee.
6.
Limitation
of Payments
and Benefits.
To the
extent that any of the payments and benefits provided for in this Agreement
or
otherwise payable to Employee constitute “parachute payments” within the meaning
of Section 280G of the Internal Revenue Code of 1986, as amended, such payments
and benefits will be treated in accordance with the provisions in the Change
in
Control Agreement regarding Parachute Payments.
7.
Confidential
and Proprietary Information.
As a
condition of employment, Employee will be required to sign and be subject to
the
terms and conditions of the Company’s standard form of employee confidentiality
and assignment of inventions agreement.
8.
Indemnification.
The
Company will provide Employee with its standard form of indemnification
agreement for officers and directors as attached hereto as Exhibit
B.
9.
Dispute
Resolution.
In the
event of any dispute or claim relating to or arising out of the employment
relationship with the Company, this Agreement, or the termination of employment
with the Company for any reason (including, but not limited to, any claims
of
breach of contract, wrongful termination or age, sex, race, national origin,
disability or other discrimination or harassment), all such disputes will be
fully, finally and exclusively resolved by binding arbitration conducted by
the
American Arbitration Association (“AAA”) under the AAA’s National Rules for the
Resolution of Employment Disputes then in effect, which are available online
at
the AAA’s website at xxx.xxx.xxx
or by
requesting a copy from the Human Resources Department. Employee and the Company
hereby waive their respective rights to have any such disputes or claims tried
before a judge or jury.
10.
Severability.
If any
provision of this Agreement is deemed invalid, illegal or unenforceable, such
provision will be modified so as to make it valid, legal and enforceable, and
the validity, legality and enforceability of the remaining provisions of this
Agreement will not in any way be affected.
11.
Assignment.
In view
of the personal nature of the services to be performed under this Agreement,
Employee cannot assign or transfer any of his obligations under this
Agreement.
12.
No
Duty to Mitigate.
Employee will not be required to mitigate the amount of any payment contemplated
by this Agreement (whether by seeking New Employment or in any other manner),
nor will any such payment be reduced by any earnings that Employee may receive
from any other source.
13.
Employee’s
Successors.
All
rights of Employee hereunder will inure to the benefit of, and be enforceable
by, the Employee’s personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
14
Entire
Agreement.
This
Agreement and the agreements referred to herein constitute the entire agreement
between Employee and the Company regarding the terms and conditions of
employment, and they supersede all prior negotiations, representations or
agreements between Employee and the Company regarding employment, whether
written or oral. This Agreement may be executed in counterparts, each of which
will be an original and both of which together will constitute one and the
same
instrument.
15
Modification.
This
Agreement may only be modified or amended by a supplemental written agreement
signed by Employee and an authorized representative of the Company.
16
Governing
Law.
This
Agreement will be governed by and construed according to the laws of the State
of California.
[The
remainder of this page is intentionally blank]
Please
sign and date this letter on the spaces provided below to acknowledge Employee’s
acceptance of the terms of this Agreement.
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Sincerely,
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SciClone
Pharmaceuticals, Inc.
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By:
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/s/ Xxxx Xxxxxxx | |
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Xxxx
Xxxxxxx
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Chairman
of the Board
|
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Agreed
to and Accepted:
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Date:
|
April
23, 2006
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/s/ Xx. Xxxxxxxxx Xxxxxx | |
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Xx.
Xxxxxxxxx Xxxxxx
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