Exhibit 10.5

 

EMPLOYMENT AGREEMENT

 

 

THIS EMPLOYMENT AGREEMENT (the "Agreement"), dated as of January 30,

 

2015, is hereby entered into in the State of Maryland by and between SUCAMPO
PHARMACEUTICALS, INC., a Delaware limited liability company (the "Company"), and
Andrew Smith ("Executive").

 

 

WHEREAS, Executive was hired as the Chief Financial Officer of the Company as of
January 30, 2015;

 

WHEREAS, Executive possesses certain skills, experience or expertise which will
be of use to the Company;

 

WHEREAS, the parties acknowledge that Executive's abilities and services are
unique and will significantly enhance the business prospects of the Company; and

 

WHEREAS, in light of the foregoing, the Company desires to employ Executive as
the Chief Financial Officer as of January 30, 2015 and Executive desires to
obtain such employment.

 

NOW, THEREFORE, in consideration of the promises and the mutual covenants and
agreements herein contained, the Company and Executive hereby agree as follows:

 

1.Employment and Duties

 

1.1The Company offers and Executive hereby accepts employment with the Company
for the Term (as hereinafter defined) as its Chief Financial Officer, and in
connection therewith, to perform such duties as Executive shall reasonably be
assigned by

 
 

 

Executive's supervisor and/or by the Company's Board of Directors and to enter
into this Agreement.

 

1.2Executive hereby warrants and represents that Executive has no contractual
commitments or other obligations to third parties inconsistent with Executive's
acceptance of this employment and performance of the obligations set forth in
this Agreement.

 

1.3Executive shall perform such duties and carry out Executive's
responsibilities hereunder faithfully and to the best of Executive's ability,
and shall devote Executive's full business time and best efforts to the business
and affairs of the Company during normal business hours (exclusive of periods of
vacation, sickness, disability, or other leaves to which Executive is entitled).

 

1.4Executive will perform all of Executive's responsibilities in compliance with
all applicable laws and will ensure that the operations that Executive manages
are in compliance with all applicable laws.

 

2.Employment Term

 

2.1Term

 

The term of Executive's employment hereunder (the "Term") shall commence on
January 30, 2015 and shall end on January 30, 2016, unless sooner terminated as
hereinafter provided; provided, however, that the Term shall be automatically
renewed and extended for an additional period of one (1) year on each date on
which it would otherwise expire unless either party gives a Notice of
Termination (as defined below) to the other party at least sixty (60) days prior
to such expiration date.

 

 2 

 

2.2Survival on Merger or Acquisition

 

In the event the Company is acquired during the Term, or is the non-surviving
party in a merger, or sells all or substantially all of its assets, this
Agreement shall not automatically be terminated, and the Company agrees to use
its best efforts to ensure that the transferee or surviving company shall assume
and be bound by the provisions of this Agreement.

 

3.Compensation and Benefits

 

3.1Compensation

 

(a)Base Salary. The Company shall pay Executive a salary at an annual rate that
is not less than three hundred fifty thousand and 00/100 dollars ($350,000), to
be paid in bi- weekly installments, in arrears (the "Base Salary"). The Base
Salary will be reviewed by the Compensation Committee of the Board of Directors
("Compensation Committee") at least annually, and the Committee's recommendation
shall be reviewed and approved by the Board of Directors. The Base Salary may,
in the sole discretion of the Board of Directors, be increased, but not
decreased (unless either mutually agreed by Executive and the Company, or
established as part of across-the- board salary reductions that apply equally to
all similarly situated officers as a percentage reduction in their salaries).

 

 3 

 

(b)Stock Compensation.

 

(i)Awards. On the Effective Date, the Company shall grant Executive, on

 

the terms and conditions set forth in the Incentive Stock Option Agreement
attached hereto as Exhibit A and generally described herein, the right and
option to purchase, in whole or in part, 50,000 shares of the Company’s common
stock at the option exercise price as defined in the Incentive Stock Option
agreement in effect on the grant date, which will be the Effective Date of this
Agreement and which will vest ratably over a four (4) year period. Additionally,
at least annually for the Term of this Agreement, Executive shall be eligible
for consideration to receive restricted stock grants, incentive stock options or
other awards in accordance with the Amended and Restated 2006 Stock Incentive
Plan. Recommendations concerning the decision to make an award pursuant to that
Plan and the amount of any award are entirely discretionary and shall be made
initially by the Compensation Committee, subject to review and approval by the
Board of Directors.

 

(ii)Effect of Termination of Employment. As more fully set forth in the

 

Executive’s Incentive Stock Option Agreement and generally described herein, in
the event that, during the Term, (1) the Company terminates Executive’s
employment by not renewing this Agreement or without cause, any unvested stock
options that have duration vesting condition as defined in the Incentive Stock
Option Agreement (such terms shall govern in the event of any conflict with this
Agreement) shall immediately vest to the extent such unvested stock options
would have vested in the twelve (12) months from the Date of Termination; or (2)
if the Company is acquired or is the non-surviving party in a merger, or the
Company sells all of its assets, and in advance of the closing of such

 4 

 

 

transaction or within twelve (12) months thereafter the Executive is terminated
without Cause, or terminates his or her employment for Good Reason or because
this Agreement is not assumed by the successor corporation (or affiliate
thereto), any unvested stock options that have a duration vesting condition as
defined in the Incentive Stock Option Agreement (such terms shall govern in the
event of any conflict with this Agreement), shall immediately vest and any
unvested stock options under the Plan with a performance condition shall
immediately vest and may be exercised only to the extent the performance targets
have been achieved or would be achieved by such acquisition, merger or sale in
accordance with the terms of the Plan and the Executive’s Incentive Stock Option
Agreement, which in the event of a conflict with this Agreement controls.

 

(c)Bonuses. Executive shall be eligible to receive an annual cash bonus award
targeted at 40% of annual base earnings in recognition of Executive's
contributions to the success of the Company pursuant to the Company's management
incentive bonus program as it may be amended or modified from time to time.
Recommendations concerning the decision to make an award and the amount of any
award are entirely discretionary and shall be made initially by the Compensation
Committee, subject to review and approval by the Board of Directors.

 

(d)Taxes. Executive acknowledges and agrees that Executive shall be solely
responsible for the satisfaction of any applicable taxes that may arise pursuant
to this Agreement (including taxes arising under Code Section 409A (regarding
deferred compensation) or 4999 (regarding golden parachute excise taxes), and
that neither the Company nor any of its employees, officers, directors, or
agents shall have any obligation whatsoever to pay such taxes or to otherwise
indemnify or hold Executive harmless

 

 5 

 

 

from any or all of such taxes. For purposes of Section 409A, the right to a
series of installment payments under this Agreement shall be treated as a right
to a series of separate payments. All compensation due to Executive shall be
paid subject to withholding by the Company to ensure compliance with all
applicable laws and regulations.

 

3.2Participation in Benefit Plans

 

Executive shall be entitled to participate in all employee benefit plans or
programs of the Company offered to other employees to the extent that
Executive's position, tenure, salary, and other qualifications make Executive
eligible to participate in accordance with the terms of such plans. The Company
does not guarantee the continuance of any particular employee benefit plan or
program during the Term, and Executive's participation in any such plan or
program shall be subject to all terms, provisions, rules and regulations
applicable thereto.

 

3.3Expenses

 

The Company will pay or reimburse Executive for all reasonable and necessary
out-of- pocket expenses incurred by Executive in the performance of Executive's
duties under this Agreement. Executive shall provide to the Company detailed and
accurate records of such expenses for which payment or reimbursement is sought,
and Company payments shall be in accordance with the regular policies and
procedures maintained by the Company from time to time, and all reimbursements
due under this Agreement shall be separately requested and paid not later than
one year after Executive incurs the underlying expense.

 

 6 

 

3.4Professional Organizations

 

During the Term, Executive shall be reimbursed by the Company for the annual
dues payable for membership in professional societies associated with subject
matter related to the Company's interests. New memberships for which
reimbursement will be sought shall be approved by the Company in advance.

 

3.5Parking

 

During the Term and where Executive uses an automobile to commute to work, the
Company shall either provide parking for Executive's automobile at the Company's
expense or reimburse Executive for such expense.

 

4.Termination of Employment

 

4.1Definitions

 

As used in Article 4 of this Agreement, the following terms shall have the
meaning set forth for each below:

 

(a)"Benefit Period" shall mean (i) the twelve (12) month period commencing on
the Date of Termination which occurs in connection with a termination of
employment described in the Section 4.4(a) or (ii) the eighteen (18) month
period commencing on the Date of Termination which occurs in connection with a
termination of employment described in the first sentence of Section 4.4.(b), or
a period ending when Executive becomes eligible for group medical benefits
coverage from another source, whichever is shorter.

 

 7 

 

(b)"Cause" shall mean any of the following:

 

i.the gross neglect or willful failure or refusal of Executive to perform
Executive's duties hereunder (other than as a result of Executive's death or
Disability);

 

ii.perpetration of an intentional and knowing fraud against or affecting the
Company or any customer, supplier, client, agent or employee thereof;

 

iii.any willful or intentional act that could reasonably be expected to injure
the reputation, financial condition, business or business relationships of the
Company or Executive's reputation or business relationships;

 

iv.conviction (including conviction on a nolo contendere plea) of a felony or
any crime involving fraud, dishonesty or moral turpitude;

 

v.the material breach by Executive of this Agreement (including, without
limitation, the Employment Covenants set forth in Article 5 of this Agreement);
or

 

vi.the failure or continued refusal to carry out the directives of Executive's
supervisor or the Board of Directors that are consistent with Executive's duties
and responsibilities under this Agreement which is not cured within thirty (30)
days after receipt of written notice from the Company specifying the nature of
such failure or refusal; provided, however, that Cause shall not exist if such
refusal arises from Executive's

 

reasonable, good faith belief that such failure or refusal is required by law.

 

(c)"Date of Termination" shall mean the date specified in the Notice of
Termination (as hereinafter defined) (except in the case of Executive's death,
in which case the Date

 

 8 

 

 

of Termination shall be the date of death); provided, however, that if
Executive's employment is terminated by the Company other than for Cause, the
date specified in the Notice of Termination shall be at least thirty (30) days
from the date the Notice of Termination is given to Executive.

 

(d)"Notice of Termination" shall mean a written notice from the Company to
Executive that indicates Section 2 or the specific provision of Section 4 of
this Agreement relied upon as the reason for such termination or nonrenewal, the
Date of Termination, and, in the case of termination or non-renewal by the
Company for Cause, in reasonable detail, the facts and circumstances claimed to
provide a basis for termination or nonrenewal.

 

(e)"Good Reason" shall mean:

 

i.Company effects a material diminution of Executive's position, authority or
duties;

 

ii.any requirement that Executive, without his/her consent, move his/her regular
office to a location more than fifty (50) miles from Company's executive
offices;

 

iii.the material failure by Company, or its successor, if any, to pay
compensation or provide benefits or perquisites to Executive as and when
required by the terms of this Agreement; or

 

iv.any material breach by Company of this Agreement.

 

The Executive shall have Good Reason to terminate Executive's employment if (i)
within twenty-one (21) days following Executive's actual knowledge of the event
which

 9 

 

 

Executive determines constitutes Good Reason, Executive notifies the Company in
writing that Executive has determined a Good Reason exists and specifies the
event creating Good Reason, and (ii) following receipt of such notice, the
Company fails to remedy such event within thirty (30) days, and Executive
resigns within sixty (60) days thereafter.

 

(f)"Change in Control" shall mean:

 

i.the acquisition by any person of beneficial ownership of fifty percent (50%)
or more of the outstanding shares of the Company's voting securities; or

 

ii.the Company is the non-surviving party in a merger; or

 

iii.the Company sells all or substantially all of its assets; provided, however,
that no "Change in Control" shall be deemed to have occurred merely as the
result of a refinancing by the Company or as a result of the Company's
insolvency or the appointment of a conservator; or

 

iv.the Board of the Company, in its sole and absolute discretion, determines
that there has been a sufficient change in the share ownership or ownership of
the voting power of the Company's voting securities to constitute a change of
effective ownership or control of the Company.

 

4.2Termination upon Death or Disability

 

This Agreement and Executive's employment hereunder, shall terminate
automatically and without the necessity of any action on the part of the Company
upon the death of

 10 

 

 

Executive. In addition, except as prohibited by applicable law, the Company may
terminate Executive’s employment on account of Disability, as defined in this
subparagraph. "Disability" shall mean a physical or mental illness, injury, or
condition that prevents Executive from performing some or all of the essential
functions of Executive’s job for a period of at least ninety (90) consecutive
calendar days, or one hundred and twenty (120) calendar days whether consecutive
or not, during any one (1) year period, as certified by an independent physician
competent to assess the condition at issue, and which cannot be reasonably
accommodated without undue hardship on the Company.

 

4.3Company’s and Executive’s Right to Termination.

 

This Agreement and Executive's employment hereunder may be terminated at any
time by the Company for Cause or, if without Cause, upon thirty (30) days prior
written notice to Executive. In the event the Company should give Executive
notice of termination without Cause, the Company may, at its option, elect to
provide Executive with thirty (30) days' salary in lieu of Executive's continued
active employment during the notice period. This Agreement and Executive's
employment hereunder may be terminated by Executive at any time for Good Reason
and, if without Good Reason, upon thirty (30) days prior written notice to the
Company.

 

4.4Compensation Upon Termination

 

Severance.

 

(a)In the event (1) the Company terminates Executive’s employment without Cause;
or

 

(2) this Agreement terminates pursuant to Section 4.2 due to the death or
disability of

 11 

 

 

Executive, or (3) the Company elects not to renew this Agreement under
circumstances where Executive is willing and able to execute a new agreement
providing terms and conditions substantially similar to those in this Agreement,
or (4) the Executive terminates this Agreement for Good Reason, Executive (or
his estate) shall be entitled to receive: (i) Executive's Base Salary through
the Date of Termination, (ii) reimbursement for the duration of the Benefit
Period of (1) any COBRA continuation premium payments made by Executive and
(iii) a lump sum severance payment equal to twelve (12) months of Executive’s
then current annual Base Salary to be made not later than sixty (60) days
following Executive’s Date of Termination; provided, however that each of the
benefits under clauses (ii) and (iii) hereof are absolutely contingent on
Executive's execution of the Release (as provided in Section 4.4(c) below)
without any revocation having occurred. Notwithstanding the foregoing, the
Company shall, to the extent necessary and only to the extent necessary, modify
the timing of delivery of severance benefits to Executive if the Company
reasonably determines that the timing would subject the severance benefits to
any additional tax or interest assessed under Section 409A of the Internal
Revenue Code. In such event, the payments will be made as soon as practicable
without causing the severance benefits to trigger such additional tax or
interest under Section 409A of the Internal Revenue Code. If any amounts that
become due under Section 4.4 constitute “nonqualified deferred compensation”
within the meaning of Section 409A, payment of such amounts shall not commence
until Executive incurs a “separation from service” within the meaning of
Treasury Regulation Section 1.409A-1(h). If, at the time of Executive’s
separation from service, Executive is a

 12 

 

 

“specified employee” (under Internal Revenue Code Section 409A), any benefit as
to which Section 409A penalties could be assessed that becomes payable to
Executive on account of Executive’s “separation from service” (including any
amounts payable pursuant to the preceding sentence) shall be paid, without
interest thereon, on the date six months and one day after such separation from
service. In no event shall Executive be entitled to the continuation of any
compensation, bonuses or benefits provided hereunder, or any other payments
following the Date of Termination, other than Base Salary earned through such
Date of Termination and any other benefits payable under Section 4.4(a).

 

(b)Change in Control. In the event that Executive in advance of the closing or
within twelve (12) months following the occurrence of a “Change in Control” of
the Company (1) is terminated other than for Cause, or (2) terminates for Good
Reason, or (3) terminates because this Agreement is not assumed by the successor
corporation (or affiliate thereto) as the result of a Change in Control,
Executive (or his estate) shall be entitled to receive: (i) Executive's Base
Salary through the Date of Termination, (ii) reimbursement for the duration of
the Benefit Period of (1) any COBRA continuation premium payments made by
Executive and (iii) a lump sum severance payment equal to eighteen (18) months
of Executive’s then current annual Base Salary to be made not later than sixty
(60) days following Executive’s Date of Termination; provided, however that each
of the benefits under clauses (ii) and (iii) hereof are absolutely contingent on
Executive's execution of the Release (as provided in Section 4.4(c) below)
without any revocation having occurred. Notwithstanding the foregoing, the
Company shall, to the extent necessary and only to the extent

 13 

 

 

necessary, modify the timing of delivery of severance benefits to Executive if
the Company reasonably determines that the timing would subject the severance
benefits to any additional tax or interest assessed under Section 409A of the
Internal Revenue Code. In the event that Executive shall become entitled to a
Change in Control Severance Payment as provided herein, the Company shall cause
its independent auditors promptly to review, at the Company's sole expense, the
applicability to those payments of Sections 280G and 4999 of the Internal
Revenue Code of 1986, as amended (the "Code"). If the auditors determine that
any payment of the Change in Control Severance Payment would be subject to the
excise tax imposed by Section 4999 of the Code or any interest or penalties with
respect to such excise tax, then such payment owed to Executive shall be reduced
by an amount calculated to provide to Executive the maximum Change in Control
Severance Payment which will not trigger application of Sections 280G and 4999
of the Code, with any such reduction being made last with respect to benefits
that are not exempt from Code §409A.

 

(c)Release. Anything to the contrary contained herein notwithstanding, as a
condition to Executive receiving severance benefits to be paid pursuant to this
Section 4.4, Executive shall execute and deliver to the Company a general
release in the form attached hereto as Exhibit A not later than forty-five (45)
days after Executive’s Date of Termination. The Company shall have no obligation
to provide any severance benefits to Executive until it has received the general
release from Executive within the time specified in the preceding sentence, and
any revocation or rescission period applicable to the Release shall have expired
without revocation or rescission.

 

 14 

 

 

5.Employment Covenants

 

5.1Definitions

 

As used in this Article 5 of the Agreement, the following terms shall have the
meaning set forth for each below:

 

(a)"Affiliate" shall mean a person or entity that directly or indirectly through
one or more intermediaries, controls or is controlled by, or under common
control with another person or entity, including current and former directors
and officers of such an entity.

 

(b)"Confidential Information" shall mean all confidential and proprietary
information of the Company, its Predecessors and Affiliates, whether in written,
oral, electronic or other form, including but not limited to trade secrets;
technical, scientific or business information; processes; works of authorship;
Inventions; discoveries; developments; systems; chemical compounds; computer
programs; code; algorithms; formulae; methods; ideas; test data; know how;
functional and technical specifications; designs; drawings; passwords; analyses;
business plans; information regarding actual or demonstrably anticipated
business, research or development; marketing, sales and pricing strategies; and
information regarding the Company's current and prospective consultants,
customers, licensors, licensees, investors and personnel, including their names,
addresses, duties and other personal characteristics. Confidential Information
does not include information that (i) is in the public domain, other than as a
result of an act of misappropriation or breach of an obligation of
confidentiality by any person;

(ii) Executive can verify by written records kept in the ordinary course of
business

 

 15 

 

was in Executive's lawful possession prior to its disclosure to Executive; (iii)
is received by Executive from a third party without a breach of an obligation of
confidentiality owed by the third party to the Company and without the
requirement that Executive keep such information confidential; or (iv) Executive
is required to disclose by applicable law, regulation or order of a governmental
agency or a court of competent jurisdiction. If Executive is required to make
disclosure pursuant to clause (iv) of the preceding sentence as a result of the
issuance of a court order or other government process, Executive shall (a)
promptly, but in no event more than 72 hours after learning of such court order
or other government process, notify, pursuant to Section 6.1 below, the Company;
(b) at the Company's expense, take all reasonable necessary steps requested by
the Company to defend against the enforcement of such court order or other
government process, and permit the Company to intervene and participate with
counsel of its choice in any proceeding relating to the enforcement thereof; and
(c) if such compelled disclosure is required, Executive shall disclose only that
portion of the Confidential Information that is necessary to meet the minimum
legal requirement imposed on Executive.

 

(c)"Executive Work Product" shall mean all Confidential Information and
Inventions conceived of, created, developed or prepared by Executive (whether
individually or jointly with others) before or during Executive's employment
with the Company, during or outside of working hours, which relate in any manner
to the actual or demonstrably anticipated business, research or development of
the Company, or result from or are suggested by any task assigned to Executive
or any work performed by Executive for or on behalf of the Company or any of its
Affiliates.

 

 16 

 

(d)"Invent ion" shall mean any apparatus, biological processes, cell line,
chemical compound, creation, data, development, design, discovery, formula,
idea, improvement, innovation, know-how, laboratory notebook, manuscript,
process or technique, whether or not patentable or protectable by copyright, or
other intellectual property in any form.

 

(e)"Predecessor" shall mean an entity, the major portion of the business and
assets of which was acquired by another entity in a single transaction or in a
series of related transactions.

 

(f)"Trade Secrets," as used in this Agreement, will be given its broadest
possible interpretation under the law applicable to this Agreement.

 

5.2Nondisclosure and Nonuse

 

Executive acknowledges that prior to and during Executive's employment with the
Company, Executive had and will have occasion to create, produce, obtain, gain
access to or otherwise acquire, whether individually or jointly with others,
Confidential Information. Accordingly, during the term of Executive's employment
with the Company and at all times thereafter, Executive shall keep secret and
shall not, except for the Company's benefit, disclose or otherwise make
available to any person or entity or use, reproduce or commercialize, any
Confidential Information, unless specifically authorized in advance by the
Company in writing.

 

5.3Other Confidentiality Obligations

 

Executive acknowledges that the Company may, from time to time, have agreements
with other persons or entities or with the U.S. Government or governments of
other countries, or agencies thereof, which impose confidentiality obligations
or other restrictions on the Company.

 17 

 

 

Executive hereby agrees to be bound by all such obligations and restrictions and
shall take all actions necessary to discharge the obligations of the Company
thereunder, including, without limitation, signing any confidentiality or other
agreements required by such third parties.

 

5.4Return of Confidential Information

 

At any time during Executive's employment with the Company, upon the Company's
request, and in the event of Executive's termination of employment with the
Company for any reason whatsoever, Executive shall immediately surrender and
deliver to the Company all records, materials, notes, equipment, drawings,
documents and data of any nature or medium, and all copies thereof, relating to
any Confidential Information (collectively the "the Company Materials") which is
in Executive's possession or under Executive's control. Executive shall not
remove any of the Company Materials from the Company's business premises or
deliver any of the Company Materials to any person or entity outside of the
Company, except as required in connection with Executive's duties of employment.
In the event of the termination of Executive's employment for any reason
whatsoever, Executive shall promptly sign and deliver to the Company a
Termination Certificate in the form of Exhibit B attached hereto.

 

5.5Confidential Information of Others

 

Executive represents that Executive's performance of all the terms of this
Agreement and Executive's employment with the Company do not and will not breach
any agreement to keep in confidence proprietary information, knowledge or data
with regard to which Executive has obligations of confidentiality or nonuse, and
Executive shall not disclose to the Company or cause the Company to use any such
confidential proprietary information, knowledge or data belonging to any
previous employer of Executive or other person. Executive represents that

 18 

 

 

Executive has not brought and will not bring to the Company or use at the
Company any confidential materials or documents of any former employer or other
person that are not generally available to the public, unless express written
authorization for their possession and use has been obtained from such former
employer or other person. Executive agrees not to enter into any agreement,
whether written or oral, that conflicts with these obligations.

 

5.6Other Obligations

 

The terms of this Section 5 are in addition to, and not in lieu of, any
statutory or other contractual or legal obligation to which Executive may be
subject relating to the protection of Confidential Information.

 

5.7Assignment of Confidential Information and Inventions; Works Made for Hire

 

Executive hereby assigns to the Company all right, title and interest in all
intellectual property, including any patent applications, trade secrets, know
how, copyrights, software, or trademarks associated with the Executive Work
Product and Confidential Information. Executive hereby acknowledges and agrees
that all Executive Work Product subject to copyright protection constitutes
"work made for hire" under United States copyright laws (17 U.S.C. §101) and is
owned exclusively by the Company. To the extent that title to any Executive Work
Product subject to copyright protection does not constitute a "work for hire,"
and to the extent title to any other Executive Work Product does not, by
operation of law or otherwise, vest in the Company, all right, title, and
interest therein, including, without limitation, all copyrights, patents and
trade secrets, and all copyrightable or patentable subject matter, are hereby
irrevocably assigned to the Company. Executive shall promptly disclose to the
Company in writing all Executive Work Product. Executive shall, without any
additional compensation,

 19 

 

 

execute and deliver all documents or instruments and give the Company all
assistance it requires to transfer all right, title, and interest in any
Executive Work Product to the Company; to vest in the Company good, valid and
marketable title to such Executive Work Product; to perfect, by registration or
otherwise, trademark, copyright and patent protection of the Company with
respect to such Executive Work Product; and otherwise to protect the Company's
trade secret and proprietary interest in such Executive Work Product. Executive
hereby irrevocably designates and appoints the Company and its duly authorized
officers and agents as Executive's agents and attorneys-in-fact to act for and
on Executive's behalf, and to execute and file any documents and to do all other
lawfully permitted acts to further the purposes of this Section 5.7 with the
same legal force and effect as if executed by Executive.

 

5.8Representations

 

Executive represents that, to the best of his or her knowledge, none of the
Inventions will violate or infringe upon any right, patent, copyright, trademark
or right of privacy, or constitute libel or slander against or violate any other
rights of any person, firm or corporation, and that Executive will not knowingly
create any Invention which causes any such violation.

 

5.9Invent ions, Intellectual Property and Equipment Not Transferred

 

Executive has set forth on Exhibit C attached hereto a complete list and brief
description of all Inventions, intellectual property and equipment located at
the Company which is owned directly or indirectly by Executive and which shall
not be transferred to the Company pursuant to this Agreement. Except as so
listed, Executive agrees that he or she will not assert any rights under any
intellectual property as having been made or acquired by Executive prior to
being

 20 

 

 

employed by the Company. The Company may, at its discretion, require detailed
disclosures and materials demonstrating ownership of the intellectual property
so listed.

 

5.10Exclusivity of Employment

 

During the Term, and without prior approval of the Board of Directors, Executive
shall not directly or indirectly engage in any activity competitive with or
adverse to the Company's business or welfare or render a material level of
services of a business, professional or commercial nature to any other person or
firm, whether for compensation or otherwise.

 

5.11Covenant Not to Compete

 

Executive acknowledges that his services to the Company involve a unique level
of trust, of skills, and of access to Confidential Information and other
business and strategic insights about the Company, and accordingly Executive
agrees to be bound and abide by the following covenant not to compete:

 

(a)Term and Scope. During Executive's employment with the Company and for a
period of twelve (12) months after the Term, Executive will not render to any
Conflicting Organization (as hereinafter defined), services, directly or
indirectly, anywhere in the world in connection with any Conflicting Product (as
hereunder defined), except that Executive may accept employment with a
Conflicting Organization whose business is diversified (and which has separate
and distinct divisions) if Executive first certifies to the Company in writing
that such prospective employer is a separate and distinct division of the
Conflicting Organization and that Executive will not render services directly or
indirectly in respect of any Conflicting Product. Such twelve (12) month

 

 21 

 

time period shall be tolled during any period that Executive is engaged in
activity in violation of this covenant.

 

(b)Judicial Construction. Executive and the Company agree that, if the period of
time or the scope of this Covenant Not to Compete shall be adjudged unreasonably
overbroad in any court proceeding, then the period of time and/or scope shall be
modified accordingly, so that this covenant may be enforced with respect to such
services or geographic areas and during such period of time as is judged by the
court to be reasonable.

 

(c) Definitions. For purposes of this Agreement, the following terms shall have
the following meanings:

 

"Conflicting Product" means any product, method or process, system or service of
any person or organization other than the Company that is the same as, similar
to or interchangeable with any product, method or process, system or service
material to the Company’s business that was provided or under development by the
Company or any of its Affiliates at the time Executive's employment with the
Company terminates, or about which Executive acquired any Confidential
Information or developed any Executive Work Product.

 

"Conflicting Organization" means any person or organization which is engaged in
research on or development, production, marketing, licensing, selling or
servicing of any Conflicting Product.

 

 22 

 

5.12Non-Solicitation

 

For a period of twelve (12) months after termination of employment with the
Company for any reason, Executive shall not directly or indirectly solicit or
hire, or assist any other person in soliciting or hiring, any person employed by
the Company (as of the date of Executive's termination) or any person who, as of
the date of Executive's termination, was in the process of being recruited by
the Company, or induce any such employee to terminate his or her employment with
the Company.

 

5.13Judicial Enforcement

 

In the event of a breach or violation of any provision of this Article 5 by
Executive, the parties agree that, in addition to any other remedies it may
have, the Company shall be entitled to equitable relief for specific
performance, and Executive hereby agrees and acknowledges that the Company has
no adequate remedy at law for the breach of the employment covenants contained
herein.

 

6.Miscellaneous

 

 

6.1Notices

 

 

All notices or other communications which are required or permitted hereunder
shall be deemed to be sufficient if contained in a written instrument given by
personal delivery, air courier or registered or certified mail, postage prepaid,
return receipt requested, addressed to such party at the address set forth below
or such other address as may thereafter be designated in a written notice from
such party to the other party:

 

 23 

 

To Company: Sucampo Pharmaceuticals, Inc.   4520 East West Highway, Third Floor 
  Bethesda, Maryland 20814   Attention: Executive Vice President, Human
Resources        Copy to: Corporate Secretary     To Executive: Andrew Smith  
4520 East West Highway, 3rd Floor    Bethesda, MD 20814

 

All such notices, advances and communications shall be deemed to have been
delivered and received (i) in the case of personal delivery, on the date of such
delivery, (ii) in the case of air courier, on the business day after the date
when sent and (iii) in the case of mailing, on the third business day following
such mailing.

 

6.2Headings

 

The headings of the articles and sections of this Agreement are inserted for
convenience only and shall not be deemed a part of or affect the construction or
interpretation of any provision hereof.

 

6.3Modifications; Waiver

 

No modification of any provision of this Agreement or waiver of any right or
remedy herein provided shall be effective for any purpose unless specifically
set forth in a writing signed by the party to be bound thereby. No waiver of any
right or remedy in respect of any occurrence or event on one occasion shall be
deemed a waiver of such right or remedy in respect of such occurrence or event
on any other occasion.

 24 

 

 

6.4Entire Agreement

 

This Agreement contains the entire agreement of the parties with respect to the
subject matter hereof and supersedes all other agreements, oral or written,
heretofore made with respect thereto including, without limitation, the offer
letter between Executive and the Company dated January 30, 2015.

 

6.5Severability

 

Any provision of this Agreement that may be prohibited by, or unlawful or
unenforceable under, any applicable law of any jurisdiction shall, as to such
jurisdiction, be ineffective without affecting any other provision hereof. To
the full extent, however, that the provisions of such applicable law may be
waived, they are hereby waived, to the end that this Agreement be deemed to be a
valid and binding agreement enforceable in accordance with its terms.

 

6.6Controlling Law

 

This Agreement has been entered into by the parties in the State of Maryland and
shall be continued and enforced in accordance with the laws of Maryland.

 

6.7Arbitration

 

Any controversy, claim, or breach arising out of or relating to executive’s
employment or termination of employment, this Agreement or the breach thereof
shall be settled by arbitration in the State of Maryland in accordance with the
rules of the American Arbitration Association for commercial disputes and the
judgment upon the award rendered shall be entered by consent in any court having
jurisdiction thereof; provided, however, that this provision shall not preclude

 25 

 

 

the Company from seeking injunctive or similar relief from the courts to enforce
its rights under the Employment Covenants set forth in Article 5 of this
Agreement. All other disputes or any nature related to executive’s employment or
this agreement will be resolved by arbitration. It is understood and agreed
that, in the event the Company gives notice to Executive of termination for
Cause and it should be finally determined in a subsequent arbitration that
Executive's termination was not for Cause as defined in this Agreement, then the
remedy awarded to Executive shall be limited to such compensation and benefits
as Executive would have received in the event of Executive's termination other
than for Cause at the same time as the original termination.

 

6.8Assignments

 

Subject to obtaining Executive's prior approval, which shall not be unreasonably
withheld or delayed, the Company shall have the right to assign this Agreement
and to delegate all rights, duties and obligations hereunder to any entity that
controls the Company, that the Company controls or that may be the result of the
merger, consolidation, acquisition or reorganization of the Company and another
entity. Executive agrees that this Agreement is personal to Executive and
Executive's rights and interest hereunder may not be assigned, nor may
Executive's obligations and duties hereunder be delegated (except as to
delegation in the normal course of operation of the Company), and any attempted
assignment or delegation in violation of this provision shall be void.

 

6.9Read and Understood

 

Executive has read this Agreement carefully and understands each of its terms
and conditions. Executive has sought independent legal counsel of Executive's
choice to the extent

 26 

 

 

Executive deemed such advice necessary in connection with the review and
execution of this Agreement.

 

6.10. Counterparts

 

This Agreement may be executed in two (2) or more counterparts, each of which
shall be deemed an original and both of which, taken together shall constitute
one and the same instrument. Signatures to this Agreement transmitted by
facsimile transmission, by electronic mail in “portable document format”
(“.pdf”) form, or by any other electronic means intended to preserve the
original graphic and pictorial appearance of a document, will have the same
effect as physical delivery of the paper document bearing the original
signature.

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first indicated above.

 

  SUCAMPO PHARMACEUTICALS, INC.                     By: /s/ Peter Greenleaf    
  Peter Greenleaf       Chief Executive Officer                                
                      /s/ Andrew Smith             EXECUTIVE  

 

 

 27 

 

Exhibit A

 

 

Sucampo Pharmaceuticals, Inc. Stock Option Incentive Award

 

Stock Option Agreement Terms and Conditions

 

 

This Incentive Stock Option Agreement, along with the Sucampo Pharmaceuticals,
Inc. Stock Option Incentive Award Summary delivered herewith (the "Award
Summary"), once signed by the individual named on the Award Summary (the
"Participant"), shall constitute an Agreement made as of the Grant Date (as
indicated on the Award Summary), by and between Sucampo Pharmaceuticals, Inc., a
Delaware corporation having its principal office at 4520 East-West Highway,
Third Floor, Bethesda, MD 20814 (“Sucampo” and with its direct and indirect
subsidiaries, the "Company"), and Matthias Alder (“Participant”).

 

WITNESSETH:

 

WHEREAS, the Board of Directors and shareholders of Sucampo have approved the
Sucampo Pharmaceuticals, Inc. 2006 Stock Incentive Plan, as amended and restated
(the “Plan”); and

WHEREAS, pursuant to the authority granted to it in the Plan, the Compensation
Committee of the Board of Directors of Sucampo (the "Committee"), directly
authorized the award evidenced by this Agreement; and

WHEREAS, awards granted under the Plan are subject to the terms and conditions
in the Plan;

NOW, THEREFORE, it is mutually agreed as follows:

 

A.  Terms and Conditions Applicable to Stock Options. All the terms and
conditions set forth in this Agreement, in the Plan that apply to stock option
awards and in the Award Summary shall govern the stock options granted to the
Participant under this Agreement.

 

1.                  Grant of Options. In consideration of the Participant
remaining in the continuous service of the Company and agreeing to be bound by
the covenants of Section B, Sucampo hereby grants to Participant, on the terms
and conditions set forth herein, the right and option to purchase, in whole or
in part, the number of shares (the “Shares”) of Class A common stock, $0.01 par
value per share, of the Company (“Common Stock”) indicated on the Award Summary
under the heading “Total Award”, at the Grant/Exercise Price per share indicated
on the Award Summary (the “Option Exercise Price”), which was the Fair Market
Value (as defined below) of the Common Stock on the Grant Date, rounded up to
the nearest one-fourth. The right to purchase each such share is referred to
herein as an “Option.” If designated in the Award Summary as an Incentive Stock
Option, those Options are intended to qualify as Incentive Stock Options under
Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”);

 

 
 

however, if any Options that are intended to be Incentive Stock Options fail to
qualify as Incentive Stock Options, such Options shall be treated as
Nonstatutory Stock Options.

 

2.                  Vesting Schedule. Those Options as set forth in the Award
Summary shall vest on the applicable vesting dates (such date, a "Vesting Date")
and will become exercisable from the applicable Vesting Date through the
expiration date set forth in the Award Summary (the "Expiration Date"). Options
may vest only while the Participant is in continuous service with the Company.
Once vested and exercisable, and until terminated, all or any portion of the
Options may be exercised from time to time and at any time under procedures that
the Committee or its delegate shall establish from time to time, including,
without limitation, procedures regarding the frequency of exercise and the
minimum number of Options which may be exercised at any time.

 

The right of exercise shall be cumulative so that to the extent any Options are
not exercised in any period to the maximum extent permissible such Options shall
continue to be exercisable, in whole or in part, with respect to all Shares for
which such Options are vested until the earlier of the Expiration Date or the
termination of such Options under Paragraph 4 hereof or the Plan.

 

3.Exercise of Options.

 

(a)                Form of Exercise. Subject to terms and conditions set forth
herein, each election to exercise Options shall be in writing, signed by the
Participant, and received by the Company at its principal office, accompanied by
this Agreement, and payment in full in the manner provided in the Plan. The
Participant may purchase less than the number of Shares covered by vested
Options that have not previously been exercised, provided that no partial
exercise of Options may be for any fractional Share. The aggregate Option
Exercise Price for the Shares being purchased, together with any amount which
the Company may be required to withhold upon such exercise in respect of
applicable foreign, federal (including FICA), state and local taxes, must be
paid in full at the time of issuance of the Shares being purchased as a result
of the exercise of any Options.

 

(b)               Continuous Relationship with the Company Required. Except as
otherwise provided in Paragraph 4, Options may not be exercised unless the
Participant, at the time he or she exercises Options, is, and has been at all
times since the Grant Date, an employee, officer or director of, or consultant
or advisor to, the Company as defined in Section 424(e) or (f) of the Code.

 

4.Effect of Termination of Employment, Death, Retirement and Total Disability.

 

(a)                Termination of Relationship with the Company. If the
Participant ceases to have a continuous relationship with the Company for any
reason, then, except as provided in paragraphs (b),(c) and (d) below, the right
to exercise Options shall terminate three months after such cessation (but in no
event after the Expiration Date); provided, that Options shall be exercisable
only to the extent that the Participant was entitled to exercise Options on the
date of such cessation. Notwithstanding the foregoing, if the Participant, prior
to the Expiration Date, violates the non-competition or confidentiality

 

 - 2 - 

 

provisions of any employment contract, confidentiality and nondisclosure
agreement or other agreement between the Participant and the Company, the right
to exercise Options shall terminate immediately upon written notice to the
Participant from the Company describing such violation.

 

(b)               Effect of Termination of Employment Agreement Without Cause.
If the Participant's employment with the Company (or if applicable, a successor
corporation) is terminated by the Company or such successor for any reasons
other than Cause then, as of the date of the Participant's termination, (i)
those outstanding Options granted hereunder which would vest during the twelve
(12) months after the date of the Participant’s termination shall vest and
become exercisable and shall remain outstanding until the Expiration Date and
shall be paid immediately in accordance with their terms or, if later, as of the
earliest permissible date under Code Section 409A. For purposes of this Section
C.3, "Cause" and "Good Reason" are defined in the Participant’s employment
agreement, if applicable, or Cause is defined hereinafter, and a termination for
Cause or Good Reason is subject to the terms and conditions set forth in the
Plan.

 

(c)                Exercise Period Upon Death or Disability. If the Participant
dies or becomes disabled (within the meaning of Section 22(e)(3) of the Code)
prior to the Expiration Date while he or she is in a continuous relationship
with the Company and the Participant had not been terminated from such
relationship for “Cause” as defined below, Options shall be exercisable, within
the period of one year following the date of death or disability of the
Participant, by the Participant (or in the case of death by an authorized
transferee), provided, that Options shall be exercisable only to the extent that
Options were exercisable by the Participant on the date of his or her death or
disability, and further provided that Options shall not be exercisable after the
Expiration Date.

 

(d)               Removal. If, prior to the Expiration Date, the Participant is
removed pursuant to Section 2.6 of the Restated Bylaws of the Company, the right
to exercise Options shall terminate immediately upon the effective date of such
removal.

 

(d) Transfers to a Related Entity. In the event the Participant transfers to a
Related Entity (as defined below) as a result of actions by Sucampo, any
reference to "Company" in this Agreement shall be deemed to refer to such
Related Entity in addition to the Company.

 

5.                  Buy-Out of Option Gains. Except as provided hereinafter, at
any time after any Option becomes exercisable, the Committee shall have the
right, in its sole discretion and without the consent of the Participant, to
cancel such Option and to cause Sucampo to pay to the Participant the excess of
the Fair Market Value of the shares of Common Stock covered by such Option over
the Option Exercise Price of such Option as of the date the Committee provides
written notice (the "Buy Out Notice") of its intention to exercise such right.
Payments of such buy out amounts pursuant to this provision shall be effected by
Sucampo as promptly as possible after the date of the Buy Out Notice and shall
be made in shares of Common Stock. The number of shares shall be the greatest
number of whole shares determined by dividing the amount of the payment to be
made by the Fair Market Value of a share of Common Stock at the date of the Buy
Out Notice. Payments

 - 3 - 

 

 

of any such buy out amounts shall be made net of all applicable foreign, federal
(including FICA), state and local withholding taxes, if any, calculated at the
assumed maximum tax withholding rate.

 

6.                  No Rights as Stockholder. The Participant shall have no
rights as a holder of the Common Stock with respect to the Options granted
hereunder unless and until such Options are exercised and the Shares have been
registered in the Participant's name as owner.

 

7.                  Nontransferability of Options. Options may not be sold,
assigned, transferred, pledged or otherwise encumbered by the Participant,
either voluntarily or by operation of law, except by will or the laws of descent
and distribution, and, during the lifetime of the Participant, Options shall be
exercisable only by the Participant.

 

B.  Prohibited Conduct. In consideration of the Company the grant by the Company
of the Options, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Participant and the Company,
intending to be legally bound, and recognizing that the Company has made and
will continue to make available to Participant Confidential Information, as more
fully described in Section B.2. below, that Participant acknowledges constitutes
proprietary information of the Company, hereby agree as follows.

 

1.                      Non-Competition and Non-Solicitation. At all times
during his or her continuous relationship with the Company and for a period of
twelve months after the termination of the Participant's continuous relationship
with the Company for any reason whatsoever (including a termination due to the
Participant's Retirement or Total Disability), Participant shall and will not,
without the prior written consent of Sucampo's chief human resources officer or
chief legal officer, either directly or indirectly, for himself/herself or on
behalf of or in conjunction with any other person, partnership, corporation or
other entity, engage in any activities prohibited in the following Section B.1
(a) and (b):

 

(a)   The Participant shall not, in any country in which the Company operates,
accept any employment, assignment, position or responsibility, or provide
services in any capacity or acquire any ownership interest which involves the
Participant's Participation in a Conflicting Organization that engages in
research on, or development, production, marketing, licensing, selling or
servicing of, a Conflicting Product; or

 

(b)   The Participant shall not in any way, directly or indirectly (including
through someone else acting on the Participant's recommendation, suggestion,
identification or advice), solicit or hire, or assist any other person in
soliciting or hiring, any Company employee to leave the Company's employment or
to accept any position with any other entity or any person who had been an
employee of the Company at any time in the past twelve (12) months from the date
of determination.

 

2.                  Non-Disclosure. In order to assist the Participant with his
or her duties, during the time Participant has a continuous relationship with
the Company, the Company shall continue to provide the Participant with access
to confidential and proprietary and operational information and other
confidential information which is either information not known by actual or
potential competitors, customers and third parties of the Company or is

 - 4 - 

 

 

proprietary information of the Company ("Confidential Information"). Such
Confidential Information shall mean all confidential and proprietary information
of the Company, its predecessors and Affiliates, whether in written, oral,
electronic or other form, including but not limited to trade secrets; technical,
applications filed with any governmental agency such as NDAs and ANDAs filed
with the Food and Drug Administration, scientific or business information;
processes; works of authorship; Inventions; discoveries; developments; systems;
chemical compounds; computer programs; code; algorithms; formulae; methods;
ideas; test data; know how; functional and technical specifications; designs;
drawings; passwords; analyses; business plans; information regarding actual or
demonstrably anticipated business, research or development; marketing, sales and
pricing strategies; and information regarding the Company's current and
prospective consultants, customers, licensors, licensees, investors and
personnel, including their names, addresses, duties and other personal
characteristics. Confidential Information does not include information that (i)
is in the public domain, other than as a result of an act of misappropriation or
breach of an obligation of confidentiality by any person; (ii) Participant can
verify by written records kept in the ordinary course of business was in
Participant 's lawful possession prior to its disclosure to Participant; (iii)
is received by Participant from a third party without a breach of an obligation
of confidentiality owed by the third party to the Company and without the
requirement that Participant keep such information confidential; or (iv)
Participant is required to disclose by applicable law, regulation or order of a
governmental agency or a court of competent jurisdiction. If Participant is
required to make disclosure pursuant to clause (iv) of the preceding sentence as
a result of the issuance of a court order or other government process,
Participant shall (a)   promptly, but in no event more than 72 hours after
learning of such court order or other government process, notify the Company;
(b) at the Company's expense, take all reasonable necessary steps requested by
the Company to defend against the enforcement of such court order or other
government process, and permit the Company to intervene and participate with
counsel of its choice in any proceeding relating to the enforcement thereof; and
(c) if such compelled disclosure is required, Participant shall disclose only
that portion of the Confidential Information that is necessary to meet the
minimum legal requirement imposed on Participant. The Participant agrees that
such Confidential Information remains confidential even if committed to the
Participant's memory. The Participant agrees, during the term of his or her
employment and at all times thereafter, not to use, divulge, or furnish or make
accessible to any third party, company, corporation or other organization
(including but not limited to, customers, competitors, or governmental
agencies), without the Company's prior written consent, any Confidential
Information of the Company, except as necessary in his or her position with the
Company.

 

3.                  Return of Confidential Information and Company Property. The
Participant agrees that whenever the Participant's continuous relationship with
the Company ends for any reason, (a) all records, materials, notes, equipment,
drawings, documents and data of any nature or medium, and all copies thereof,
relating to any Confidential Information (collectively the "the Company
Materials") which is in Participant 's possession or under Participant 's
control, and (b) all Company computer and computer-related equipment and
software, and all Company property, files, records, documents, drawings,
specifications, lists, equipment, keys, passes, and similar items relating to
the business of the Company,

 - 5 - 

 

 

whether prepared by or provided to the Participant or otherwise, coming into the
Participant's possession or control during the course of his employment shall
remain the exclusive property of the Company, shall in each case under clauses
(a) and (b) be delivered by the Participant to the Company immediately, with no
request being required. Participant shall not remove any of the Company
Materials from the Company's business premises or deliver any of the Company
Materials to any person or entity outside of the Company, except as required in
connection with Participant’s duties.

 

4.                      Misconduct. The Participant shall not engage in any of
the following acts that are considered to be contrary to the Company's best
interests during the term of his or her employment with the Company: (a)
violating the Company's Code of Conduct, Insider Trading Policy or any other
written policies of the Company, (b) unlawfully trading in the securities of
Sucampo or of any other company based on information gained as a result of his
or her employment with the Company, or (c) engaging in any activity which
constitutes gross misconduct.

 

5.                      Reasonableness of Provisions. The Participant agrees
that: (a) the terms and provisions of this Agreement are reasonable and
constitute an otherwise enforceable agreement to which the terms and provisions
of this Paragraph B are ancillary or a part of; (b)   the consideration provided
by the Company under this Agreement is not illusory but are in fact material and
considerable; (c) the restrictions contained in this Section B are necessary and
reasonable for the protection of the legitimate business interests and goodwill
of the Company; and (d) the consideration given by the Company under this
Agreement, including, without limitation, the provision by the Company of
Confidential Information to the Participant, all give rise to the Company's
reasonable interest in requiring the Participant to comply with the covenants
set forth in this Section B.

 

6.                      Repayment and Forfeiture. The Participant specifically
recognizes and affirms that each of the covenants contained in Sections B.1
through B.4 of this Agreement is a material and important term of this Agreement
which has induced the Company to provide for the award of the Options granted
hereunder, the disclosure of Confidential Information referenced herein, and the
other promises made by the Company herein. The Participant further agrees that
in the event that (i) the Company determines that the Participant has breached
any term of Sections B.1 through B.4 or (ii) all or any part of Section B is
held or found invalid or unenforceable for any reason whatsoever by a court of
competent jurisdiction in an action between the Participant and the Company, in
addition to any other remedies at law or in equity the Company may have
available to it, the Company may in its sole discretion:

 

(a)   Cancel any unexercised Options granted hereunder; and/or

 

(b)   Require the Participant to pay to the Company all gains realized from the
exercise of any Options granted hereunder.

 

7.                      Equitable Relief. In the event the Company determines
that the Participant has breached or attempted or threatened to breach any term
of Section B, in addition to any other remedies at law or in equity the Company
may have available to it, it is agreed that the Company shall be entitled, upon
application to any court of proper jurisdiction, to a temporary restraining
order or preliminary injunction (without the necessity of (a) proving
irreparable harm, (b) establishing that monetary damages are inadequate or (c)
posting any

 - 6 - 

 

 

bond with respect thereto) against the Participant prohibiting such breach or
attempted or threatened breach by proving only the existence of such breach or
attempted or threatened breach.

 

8.                      Extension of Restrictive Period. The Participant agrees
that the period during which the covenants contained in this Section B shall be
effective shall be computed by excluding from such computation any time during
which the Participant is in violation of any provision of Section B.

 

9.                      Acknowledgments. The Company and the Participant agree
that it was their intent to enter into a valid and enforceable agreement. The
Participant and the Company thereby acknowledge the reasonableness of the
restrictions set forth in Section B, including the reasonableness of the
geographic area, duration as to time and scope of activity restrained. The
Participant further acknowledges that his or her skills are such that he or she
can be gainfully employed in noncompetitive employment and that the agreement
not to compete will not prevent him or her from earning a living. The
Participant agrees that if any covenant contained in Section B is found by a
court of competent jurisdiction to contain limitations as to time, geographical
area, or scope of activity that are not reasonable and impose a greater
restraint than is necessary to protect the goodwill or other business interest
of the Company, then the court shall reform the covenant to the extent necessary
to cause the limitations contained in the covenant as to time, geographical
area, and scope of activity to be restrained to be reasonable and to impose a
restraint that is not greater than necessary to protect the goodwill and other
business interests of the Company and to enforce the covenants as reformed.

 

10.                  Provisions Independent. The covenants on the part of the
Participant in this Section B shall be construed as an agreement independent of
any other agreement, including any employee benefit agreement, and independent
of any other provision of this Agreement, and the existence of any claim or
cause of action of the Participant against the Company, whether predicated upon
this Agreement or otherwise, shall not constitute a defense to the enforcement
by the Company of such covenants.

 

11.                  Notification of Subsequent Employer. The Participant agrees
that the Company may notify any person or entity employing the Participant or
evidencing an intention of employing the Participant of the existence and
provisions of this Agreement.

 

C.Additional Terms and Conditions.

 

1.                Adjustment for Change in Common Stock. In the event of any
change in the outstanding shares of Sucampo Common Stock by reason of any stock
split, stock dividend, recapitalization, reorganization, merger, consolidation,
combination or exchange of shares, spin-off or other similar corporate change,
the number and type of shares which the Participant may purchase pursuant to the
Options and the Option Exercise Price at which the Participant may purchase such
shares shall be adjusted, to such extent (if any), determined to be appropriate
and equitable by the Committee.

 

2.                Effect of Reorganization Event. In the event of a
Reorganization Event (as defined in the Plan), the following provisions shall
apply:

 

(a)   If the successor corporation (or affiliate thereto) (1) assumes the
outstanding Options granted hereunder or (2) replaces the outstanding Options
with equity

 - 7 - 

 

 

awards that preserve the existing value of such Options at the time of the
Reorganization Event and provide for subsequent payout in accordance with a
vesting schedule and performance targets, as applicable, that are the same or
more favorable to the Participant than the vesting schedule and performance
targets applicable to such Options, then the outstanding Options or such
substitute thereof shall remain outstanding and be governed by their respective
terms and the provisions of the Plan, subject to Section C.2 (c) below.

 

(b)   If the outstanding Options granted hereunder are not assumed or replaced
in accordance with Section C.2 (a) above, then upon the Reorganization Event,
(1)   the outstanding Options granted hereunder shall immediately vest and
become exercisable only to the extent the performance targets have been achieved
or would be achieved by the Reorganization Event and shall remain outstanding in
accordance with their terms, and shall be paid, , immediately in accordance with
their terms or, if later, as of the earliest permissible date under Code Section
409A and (2), notwithstanding Section C.2 (b)(1) but after taking into account
the accelerated vesting set forth therein, the Board or Committee may, in its
sole discretion, provide for cancellation of the outstanding Options at the time
of the Reorganization Event in which case a payment of cash, property or a
combination thereof shall be made to the Participant that is determined by the
Board in its sole discretion, but is at least equal to the excess, if any, of
the value of such consideration over the Option Exercise Price for such Options
less applicable taxes.

 

(c)   If the outstanding Options granted hereunder are assumed or replaced in
accordance with Section C.2 (a) and the Participant's employment with the
Company (or if applicable, a successor corporation) is terminated by the Company
or such successor for any reasons other than Cause or by the Participant for
Good Reason, if applicable, in each case, within the two-year period commencing
on the Reorganization Event, then, as of the date of the Participant's
termination, (1) the outstanding Options granted hereunder shall immediately
vest and become exercisable only to the extent the performance targets have been
achieved or would be achieved by the Reorganization Event and shall remain
outstanding until the Expiration Date and shall be paid, , immediately in
accordance with their terms or, if later, as of the earliest permissible date
under Code Section 409A. For purposes of this Section C.2, "Cause" and "Good
Reason" are defined in the Participant’s employment agreement, if applicable, or
Cause is defined hereinafter, and a termination for Cause or Good Reason is
subject to the terms and conditions set forth in the Plan.

 

3.Nontransferability. Unless the Committee specifically determines otherwise:

 (a) the Options are personal to the Participant and, with respect to Options,
during the Participant's lifetime, such Options may be exercised only by the
Participant, and (b) the Options shall not be transferable or assignable, other
than in the case of the Participant's death by will, the laws of descent and
distribution.

 

4.                 Definitions. As used in this Agreement, the following terms
shall have the meanings set forth below:

 - 8 - 

 

 

(a)   “Affiliate” shall mean a person or entity that directly or indirectly
through one or more intermediaries, controls or is controlled by, or under
common control with another person or entity, including current and former
directors and officers of such an entity.

 

(b)   “Conflicting Product” means any product, method or process, system or
service of any person or organization other than the Company that is the same
as, similar to or interchangeable with any product, method or process, system or
service that was provided or under development by the Company or any of its
Affiliates at the time Participant’s employment with the Company terminates, or
about which Participant acquired any Confidential Information or developed any
Participant Work Product.

 

(c)   “Conflicting Organization” means any person or organization which is
engaged in research on or development, production, marketing, licensing, selling
or servicing of any Conflicting Product.

 

(d)  “Fair Market Value” of a share of Common Stock on any date shall mean the
Closing Price of a share of Common Stock. For purposes of this definition,
Closing Price shall mean for any particular date the closing price of a share of
Common Stock as reported for the last trade on the Nasdaq Global Market or if
the stock is not then traded on the Nasdaq Global Market then as reported on
such national securities exchange on which the stock is then listed and if not
then listed on a national securities exchange as reported in the OTC Bulletin
Board provided that for a day to be considered a trading day at least 50,000
shares of Common Stock must trade on such day or if there is no listing on OTC
Bulletin Board then no such determination can be made until the Common Stock is
so listed and traded. If the particular date falls on a date in which the Common
Stock is not traded, the Closing Price shall be determined on the prior date in
which the Common Stock was traded.

 

(e)   “Participant Work Product” shall mean all Confidential Information and
inventions conceived of, created, developed or prepared by Participant (whether
individually or jointly with others) before or during Participant 's employment
with the Company, during or outside of working hours, which relate in any manner
to the actual or demonstrably anticipated business, research or development of
the Company or its products, methods, processes, systems or services, or result
from or are suggested by any task assigned to Participant or any work performed
by Participant for or on behalf of the Company or any of its Affiliates.

 

(f) “Participation” shall be construed broadly to include, without limitation:

 

(i)   serving as a director, officer, employee, consultant or advisor with
respect to such a business entity; (ii) providing input, advice, guidance or
suggestions to such a business entity; or (iii) providing a recommendation or
testimonial on behalf of such a business entity or one or more products it
produces.

 

(g)   “Related Entity” shall mean any entity as to which the Company directly or
indirectly owns 20% or more of the entity's voting securities, general
partnership interests, or other voting or management rights at the relevant
time.

 

 - 9 - 

 

(h)   “Retirement” shall mean (i) early, normal or late retirement under the
U.S. pension plan of the Company in which the Participant participates (if any),
(ii)   retirement as explicitly set out in an individual agreement between the
Company and the Participant for this purpose in effect on the Grant Date,
(iii)   termination of employment after attaining at least age 55 with at least
10 years of service with the Company (or, if earlier, after attaining at least
age 65 and completing at least five years of service with the Company), or (iv)
retirement as otherwise determined by the Committee.

 

(i) “Total Disability” shall mean being considered disabled under the Company's
Long Term Disability Plan (as amended and restated from time to time), with such
status having resulted in benefit payments from such plan or another Sucampo
disability plan and 12 months having elapsed since the Participant was so
considered to be disabled from the cause of the current disability. The
effective date of a Participant's Total Disability shall be the first day that
all of the foregoing requirements are met.

 

5.                Notices. Any notice to be given to Sucampo in connection with
the terms of this Agreement shall be addressed to Sucampo at 4520 East-West
Highway, Third Floor, Bethesda, MD 20814, Attention: Corporate Secretary or such
other address as Sucampo may hereafter designate to the Participant. Any notice
to be given to Participant in connection with the terms of this Agreement shall
be addressed to the Participant at the address set forth below the Participant’s
signature, or such other address as the Participant may hereafter designate to
Sucampo. Any such notice shall be deemed to have been duly given when personally
delivered, addressed as aforesaid, or when enclosed in a properly sealed
envelope or wrapper, addressed as aforesaid, and deposited, certified mail
postage prepaid, with the United States postal service.

 

6.Binding Effect.

 

(a)   This Agreement shall be binding upon and inure to the benefit of any
assignee or successor in interest to Sucampo, whether by merger, consolidation
or the sale of all or substantially all of Sucampo's assets. Unless the Options
are cancelled, terminated or paid out as provided under Section B.2., Sucampo
will require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of Sucampo expressly to assume and agree to perform this Agreement in the
same manner and to the same extent that Sucampo would be required to perform it
if no such succession had taken place.

 

(b)   This Agreement shall be binding upon and inure to the benefit of the
Participant or his or her legal representative and any person to whom the
Options may be transferred by will or the applicable laws of descent and
distribution as permitted under the terms of this Agreement.

 

7.                      No Contract of Employment; Agreement's Survival. This
Agreement is not a contract of employment. This Agreement does not impose on the
Company any obligation to retain the Participant in its employ and shall not
interfere with the ability of the Company to terminate the Participant's
employment relationship at any time and for any reason. This Agreement shall
survive the termination of the Participant's employment for

 - 10 - 

 

 

any reason.

 

8.                      Registration, Listing and Qualification of Shares. The
Committee may require that the Participant make such representations and
agreements and furnish such information as the Committee deems appropriate to
assure compliance with or exemption from the requirements of any securities
exchange, any foreign, federal, state or local law, any governmental regulatory
body, or any other applicable legal requirement, and shares of Common Stock
shall not be issued unless and until the Participant makes such representations
and agreements and furnished such information as the Committee deems appropriate
and the Committee otherwise believes Sucampo has complied with all legal
requirements applicable to such issuance.

 

9.                      Amendment; Waiver. As directed by the Board or the
Committee, the terms and conditions of this Agreement may be amended in writing
by the chief human resources officer or chief legal officer of Sucampo (or
either of their delegates), provided, however, that (i) no such amendment shall
be adverse to the Participant without the Participant's written consent (except
to the extent the Committee reasonably determines that such amendment is
necessary or appropriate to comply with applicable law, including the provisions
of Code Section 409A and the regulations thereunder pertaining to the deferral
of compensation, or the rules and regulations of any stock exchange on which
Sucampo Common Stock is listed or quoted); and (ii) the amendment must be
permitted under the Plan. The Company's failure to insist upon strict compliance
with any provision of this Agreement or failure to exercise, or any delay in
exercising, any right, power or remedy under this Agreement shall not be deemed
to be a waiver of such provision or any such right, power or remedy which the
Board, the Committee or the Company has under this Agreement.

 

10.                  Severability or Reform by Court. In the event that any
provision of this Agreement is deemed by a court to be broader than permitted by
applicable law, then such provision shall be reformed (or otherwise revised or
narrowed) so that it is enforceable to the fullest extent permitted by
applicable law. If any provision of this Agreement shall be declared by a court
to be invalid or unenforceable to any extent, the validity or enforceability of
the remaining provisions of this Agreement shall not be affected.

 

11.                  Plan Controls. The Options and the terms and conditions set
forth herein are subject in all respects to the terms and conditions of the Plan
and any guidelines, policies or regulations which govern administration of the
Plan, which shall be controlling. The Committee reserves its rights to amend or
terminate the Plan at any time without the consent of the Participant; provided,
however, that Options outstanding under the Plan at the time of such action
shall not, without the Participant's written consent, be adversely affected
thereby (except to the extent the Committee reasonably determines that such
amendment is necessary or appropriate to comply with applicable law, including
the provisions of Code Section 409A and the regulations thereunder pertaining to
the deferral of compensation, or the rules and regulations of any stock exchange
on which the Common Stock is listed or quoted). All interpretations or
determinations of the Board or the Committee or its delegate shall be final,
binding and conclusive upon the Participant (and his or her legal
representatives and any recipient of a transfer of the Options permitted by this
Agreement) on any question arising hereunder or under the Plan or other
guidelines, policies or regulations which govern administration of the Plan.

 

 - 11 - 

 

12.                  Participant Acknowledgements. By entering into this
Agreement, the Participant acknowledges and agrees that:

 

(a)   the Option grant will be exclusively governed by the terms of the Plan,
including the right reserved by the Company to amend or cancel the Plan at any
time without the Company incurring liability to the Participant (except in
circumstances set forth above for Options already granted under the Plan);

 

(b)   stock options and restricted stock units are not a constituent part of the
Participant's salary and that the Participant is not entitled, under the terms
and conditions of his/her employment, or by accepting or being awarded the
Options pursuant to this Agreement, to require options, restricted stock units
or other awards to be granted to him/her in the future under the Plan or any
other plan;

 

(c)   upon exercise of the Options the Participant will arrange for payment to
the Company an estimated amount to cover employee payroll taxes resulting from
the exercise and/or, to the extent necessary, any balance may be withheld from
the Participant's wages;

(d)  benefits received under the Plan will be excluded from the calculation of
termination indemnities or other severance payments;

 

(e)   in the event of termination of the Participant's employment, a severance
or notice period to which the Participant may be entitled under local law and
which follows the date of termination specified in a notice of termination or
other document evidencing the termination of the Participant's employment will
not be treated as active employment for purposes of this Agreement and, as a
result, vesting of unvested Options will not be extended by any such period;

 

(f)  the Participant will seek all necessary approval under, make all required
notifications under and comply with all laws, rules and regulations applicable
to the ownership of stock options and stock and the exercise of stock options,
including, without limitation, currency and exchange laws, rules and
regulations; and

 

(g)   this Agreement will be interpreted and applied so that the Options, in all
cases, to the extent possible, will not be subject to Code Section 409A.
Notwithstanding any other provisions of this Agreement, this Agreement will be
modified to the extent the Committee reasonably determines that is necessary or
appropriate for such Options to comply with Code Section 409A.

 

13.                  Right of Set-Off. The Participant agrees, in the event that
the Company in its reasonable judgment determines that the Participant owes the
Company or any Related Entity any amount due to any loan, note, obligation or
indebtedness, including but not limited to amounts owed to the Company pursuant
to the Company's tax equalization program or the Company's policies with respect
to travel and business expenses, and if the Participant has not satisfied such
obligation(s), then the Company may instruct the plan administrator to withhold
and/or sell shares of the Common Stock acquired by the Participant upon exercise
of his or her Options (to the extent such Options are not subject to Code
Section 409A), or the Company may deduct funds equal to the amount of such
obligation from other funds due to the Participant from the Company to the
maximum

 - 12 - 

 

 

extent permitted by Code Section 409A.

 

14.                  Electronic Delivery and Acceptance. The Participant hereby
consents and agrees to electronic delivery of any Plan documents, proxy
materials, annual reports and other related documents. The Participant hereby
consents to any and all procedures that the Company has established or may
establish for an electronic signature system for delivery and acceptance of Plan
documents (including documents relating to any programs adopted under the Plan),
and agrees that his or her electronic signature is the same as, and shall have
the same force and effect as, his or her manual signature. Participant consents
and agrees that any such procedures and delivery may be effected by a third
party engaged by the Company to provide administrative services related to the
Plan, including any program adopted under the Plan.

 

15.                  Data Privacy. Participant hereby acknowledges and consents
to the collection, use, processing and transfer of personal data as described in
this paragraph. Participant is not obliged to consent to such collection, use,
processing and transfer of personal data. However, failure to provide the
consent may affect Participant's ability to participate in the Plan. The Company
and Participant’s employer hold certain personal information about Participant,
that may include his/her name, home address and telephone number, date of birth,
social security number or other employee identification number, salary grade,
hire data, salary, nationality, job title, any shares of stock held in Sucampo,
or details of all options, restricted stock units or any other entitlement to
shares of stock awarded, canceled, purchased, vested, or unvested, for the
purpose of managing and administering the Plan (“Data”). The Company and/or its
subsidiaries will transfer Data amongst themselves as necessary for the purpose
of implementation, administration and management of Participant’s participation
in the Plan, and the Company and/or any of its subsidiaries may each further
transfer Data to any third parties assisting the Company in the implementation,
administration and management of the Plan. These recipients may be located
throughout the world, including the United States. Participant’s authorizes them
to receive, possess, use, retain and transfer the Data, in electronic or other
form, for the purposes of implementing, administering and managing Participant’s
participation in the Plan, including any requisite transfer of such Data as may
be required for the administration of the Plan and/or the subsequent holding of
shares of stock on Participant’s behalf to a broker or other third party with
whom Participant may elect to deposit any shares of stock acquired pursuant to
the Plan. Participant may, at any time, review Data, require any necessary
amendments to it or withdraw the consents herein in writing by contacting the
Company; however, withdrawing consent may affect Participant’s ability to
participate in the Plan.

 

16.                  Stock Ownership Guidelines. The Participant agrees as a
condition of this grant that, in the event that the Participant is subject to
the Company's Stock Ownership Guidelines, the Participant shall not sell any
shares obtained upon exercise of the Options unless such sale complies with the
Stock Ownership Guidelines as in effect from time to time.

 

17.                  Governing Law. This Agreement and the relationship of the
parties hereto shall be governed, construed and enforced in accordance with the
laws of the State of Delaware, without giving effect to conflict of law rules or
principles.

 

 - 13 - 

 

18.                  Choice of Venue. Any action or proceeding seeking to
enforce any provision of or based on any right arising out of this Agreement may
be brought against the Participant or the Company only in the courts of the
State of Delaware or, if it has or can acquire jurisdiction, in the United
States District Court for the District of Delaware, and the Participant and the
Company consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue laid therein.

 

19.                  Entire Agreement. This Agreement contains all the
understanding and agreements between the Participant and the Company regarding
the subject matter hereof.

 

 

 

 

 

 

 

(This space intentionally left blank.)

 

 

 

 

 

 - 14 - 

 

 

Sucampo Durational Stock Option Incentive Award Summary

 

Participant Name: Andrew Smith

Grant Date: 1/30/2015

Exercise Price: $_.

TOTAL AWARD:

Stock Options: 50,000

TOTAL AWARD DETAILS

 

DURATIONAL STOCK OPTIONS GRANT

 

Number of Stock Options Granted: 50,000

Option Exercise (Grant) Price: $_.

Expiration Date: 1/30/25

 

Vesting Schedule*:

12,500 options vest on 1/30/16

12,500 options vest on 1/30/17

12,500 options vest on 1/30/18

12,500 options vest on 1/30/19

 

 

*     Vesting and exercisability are subject to the terms and conditions set
forth above.

 

 

 

 

 

 

 - 15 - 

 

 

AWARD ACCEPTANCE

 

This Sucampo Durational Stock Option Incentive Award (“Award”) is not considered
valid unless you accept it on or before February 6, 2015. At the bottom of this
Award Summary, you can indicate that you either “Accept” or “Reject” the Award
by marking an “x” in the box next to “Accept” below and accepting your Award or
by marking an “x” in the box next to “Reject” below or by failing to make any
such indication by the indicated date, in either of such cases you will be
deemed to have rejected this award. By marking this award with an “x” you
acknowledge having received and read this Award Summary, the Terms and
Conditions document and the Plan under which this Award was granted and you
agree to comply with, and be bound by, the terms and conditions of the Plan,
this Award Summary and the Terms and Conditions document. If you “Reject” this
Award, the Award will be null and void and will NOT become yours. Likewise, if
you do not either “Accept” or “Reject” this Award on or before February 6, 2015,
the Award will be null and void and will NOT become yours.

 

 

ACCEPT    ☒ REJECT   ☐

 

 

 

 

 

 

 - 16 - 

 

IN WITNESS WHEREOF, the Company has caused Options to be executed by its duly
authorized officer.

 

  Sucampo Pharmaceuticals, Inc.                   Dated: January 30, 2015      
  By:         Name:               Title:  

 

 

 

 

PARTICIPANT’S ACCEPTANCE

 

The undersigned hereby accepts the foregoing Options and agrees to the terms and
conditions thereof. The undersigned hereby acknowledges receipt of a copy of the
Company’s Amended and Restated 2006 Stock Incentive Plan, as amended and
restated.

 

  PARTICIPANT:                   Address:    

 

 - 17 - 

 

 

EXHIBIT B

 

 

SEPARATION AGREEMENT AND RELEASES

 

This Separation Agreement and Releases (“Separation Agreement”) is made and
entered into as of the day of , 201_, by and between [NAME] (hereinafter
“Executive”) and Sucampo Pharmaceuticals, Inc. (“SPI”), a corporation organized
under the laws of the State of Delaware, and its affiliates (hereinafter
collectively referred to as the “Company”).

 

WHEREAS, Executive and SPI are parties to an Employment Agreement dated as of

 

, 201_ (hereinafter, the “Employment Agreement”);

 

 

WHEREAS, Executive and Company intend to settle any and all claims that
Executive may have against Company as a result of any act, occurrence, decision,
event or omission occurring at any time prior to the signing of this Separation
Agreement, including, but not limited to, any matter or fact arising out of
Executive’s employment with SPI, compensation during the employment, the
termination of Executive’s employment, or the events giving rise to the
Employment Agreement or this Separation Agreement;

 

WHEREAS, the parties have had extensive negotiations concerning the terms and
conditions of the Executive’s separation arrangement from the Company, and they
have agreed upon such terms and conditions as set forth in this Separation
Agreement;

 

NOW, THEREFORE, in consideration of the severance payments and benefits,
obligations and covenants all contained herein, the parties agree as follows:

 
 

 

1.Termination of Employment. Executive’s last day of active employment with

 

the Company is       , 201_ and after that date, Executive will have no role or
relationship with or obligation to the Company except as set forth in this
Separation Agreement.

 

2..Separation Agreement Executive understands that any payments or benefits paid
or granted to him pursuant to this Separation Agreement represent consideration
for signing this Separation Agreement and are not salary, wages or benefits to
which Executive was already entitled. Executive understands that, in light of
the circumstances surrounding his employment with the Company, the Company chose
to terminate the Employment Agreement, but in consideration for Executive’s
execution of this Separation Agreement, the Company has agreed to provide the
Executive with payment and benefits in excess of the payments and benefits
described in the Employment Agreement for such termination. Executive
understands that he will not receive any payments or benefits from the Company
unless (a) he executes this Separation Agreement and does not revoke it within
the time period permitted herein, and (b) he complies with all obligations in
this Separation Agreement and does not breach it. Pursuant to the terms of this
Separation Agreement, Executive will receive the following benefits:

 

a.payment of Executive’s base salary through ________, 201_;

 

b.a lump sum severance payment of $________, less all taxes and withholdings, to
be made by no later than ten (10) business days following the execution of
Exhibits A and B in accordance with Section 9 of this Separation Agreement
without any revocation having occurred;

 

 2 

 

c.in the event Executive elects COBRA, the COBRA continuation premium payments
will be made by the Company during the _______ ( ) month period following the
termination date; and

 

d.payment for any accrued and unused PTO through _________, 201_.

 

3.Release of Claims by Executive. Executive and the Company intend to settle

 

any and all claims that Executive may have against the Company as a result of
the hiring of Executive, Executive’s employment, Executive’s compensation while
employed, and the termination of Executive’s employment. Executive agrees that
in exchange for SPI’s promises in the Agreement and in exchange for the
separation pay and benefits to be paid to Executive as described in the
Agreement, Executive, on behalf of Executive and Executive’s heirs, successors
and assigns, hereby releases and forever discharges the Company, its
predecessors, successors, and assigns, and their respective boards of directors,
board committees, officers, directors, shareholders, agents, employees, and
insurers (the “Released Parties”), from all liability for damages and from all
claims that Executive may have against the Released Parties arising from or
relating to the hiring of Executive, Executive’s compensation while employed,
Executive’s employment, the termination of Executive’s employment, and any other
actions, decisions, alleged omissions, or events occurring on or prior to the
signing of this Separation Agreement.

 

A.                Executive understands and agrees that Executive’s release of
claims in this Separation Agreement includes, but is not limited to, any claims
Executive may have under Title VII of the Federal Civil Rights Act of 1964, as
amended; the Americans with Disabilities Act, the Equal Pay Act, the Fair Labor
Standards Act, the Employee Retirement and Income Security Act, the Age
Discrimination in Employment Act, the Family and Medical Leave Act, the

 3 

 

 

Maryland Fair Employment Practices Statute (formerly referred to as Article 49
B) - MD. Code Ann., State Gov't § 20-601 et seq.; Maryland Lily Ledbetter Civil
Rights Restoration Act - MD. Code Ann., State Gov't § 20-607 (b); Maryland Equal
Pay Law- MD. Code Ann., Lab. & Emp. § 3-301 et seq.; Maryland Wage Payment and
Collection Law - MD. Code Ann., Lab. & Emp. § 3- 501 et seq.; Maryland Wage Hour
Law - MD. Code Ann., Lab. & Emp. § 3-401 et seq.; Maryland Worker's Compensation
Act - MD. Code Ann., Lab. & Emp. § 9-101 et seq.; Maryland Occupational Safety
and Health Law - MD. Code Ann., Lab. & Emp. § 5-101 et seq. or any other
federal, state, or local statute, ordinance, or law.

 

B.                 Executive also understands that Executive is giving up all
other claims, whether grounded in contract or tort theories, including, but not
limited to, wrongful discharge, breach of contract, tortious interference with
contractual relations, promissory estoppel, detrimental reliance, breach of the
implied covenant of good faith and fair dealing, breach of express or implied
promise, breach of manuals or other policies, breach of fiduciary duty, assault,
battery, fraud, invasion of privacy, intentional or negligent misrepresentation,
defamation, including libel, slander, discharge defamation and self-publication
defamation, discharge in violation of public policy, whistleblower, intentional
or negligent infliction of emotional distress, or any other theory, whether
legal or equitable.

 

C.                 Executive will not institute any lawsuit against the Released
Parties arising from or relating to the hiring of Executive, Executive’s
employment, Executive’s compensation while employed, the termination of
Executive’s employment, or any other actions, decisions, alleged omissions, or
events occurring prior to the signing of this Separation Agreement.

 4 

 

 

D.                To the extent required by law, nothing contained in this
Separation Agreement will be interpreted to prevent Executive from filing a
charge with a governmental agency or participating in or cooperating with an
investigation conducted by a governmental agency. However, Executive agrees that
Executive is waiving the right to any monetary damages or other individual legal
or equitable relief awarded as a result of any such proceeding related to any
claim against the Released Parties arising from or relating to the hiring of
Executive, Executive’s employment, Executive’s compensation while employed, the
termination of Executive’s employment, or any other actions, decisions, alleged
omissions, or events occurring on or prior to the signing of this Separation
Agreement.

 

E.                 Notwithstanding any of the foregoing, this Separation
Agreement shall not apply with respect to any rights or claims which Executive
may have under this Separation Agreement itself or to any rights or benefits
Executive may have related to vested accrued benefits under the terms of the
Company’s benefit plans or to the Executive’s right to be indemnified by the
Company pursuant to the terms of its bylaws and the law of the State of
Delaware.

 

F.                  Executive expressly acknowledges that he has been given the
opportunity to take twenty-one (21) days to review this Separation Agreement
before signing it, and that he has been advised to consult with an attorney
before signing it. Executive acknowledges that he understands that he may revoke
this Separation Agreement, insofar as it extends to potential claims under the
Age Discrimination in Employment Act, by informing the Company of Executive’s
intent to revoke this release within seven (7) days following the execution of
this Separation Agreement, and that this Separation Agreement is not effective
or enforceable until that seven-day revocation period has expired. Executive
understands that any such revocation

 5 

 

 

must be stated in writing and delivered by hand or by certified mail-return
receipt requested to ____________, Human Resources Department, Sucampo
Pharmaceuticals, Inc., 4520 East West Highway, Third Floor, Bethesda, Maryland
20814. If Executive exercises this right to revoke or rescind, the Company shall
have no obligation to provide severance pay or benefits to Executive as provided
by the Agreement.

 

G.                Executive acknowledges that the Company’s obligation to
provide any severance pay or benefits pursuant to the Agreement shall not become
effective or enforceable until this Separation Agreement has been executed and
the revocation period identified above has expired without notice of revocation
having been made.

 

H.                Executive agrees that he will forfeit all amounts payable by
the Company under this Separation Agreement if he challenges the validity of
this Separation Agreement. Executive also agrees that if he violates this
Separation Agreement by suing the Company or the other Released Parties, in the
event that the Company is the prevailing party, Executive will pay all costs and
expenses of defending against the suit incurred by the Released Parties,
including reasonable attorneys’ fees, and return all payments received by
Executive on or after the termination of his employment.

 

I.                   Executive hereby acknowledges and states that Executive has
read this Separation Agreement, this Separation Agreement is written in language
which is understandable to Executive, that Executive fully appreciates the
meaning of the terms of this Separation Agreement, and that Executive enters
into this Separation Agreement freely and voluntarily.

 

4.Release of Claims by Company. The Company, its boards of directors, board
committees, officers, directors, shareholders, agents, and employees agree and
forever discharge

 

 6 

 

 

and release Executive, his heirs, assign, executors and administrators from any
and all claims, actions, causes of action, grievances, arbitrations, suits,
proceedings, debts, controversies, agreements, attorney fees, judgments,
demands, and damages whatsoever, in law or equity, arising from or relating to
any actions, decisions, alleged omissions, or events occurring on or prior to
the signing of this Separation Agreement, except any action or proceeding which
the Company may be required or requested to take against Executive as a result
of any regulatory agency action. This includes, but is not limited to, any
claims arising from or relating to Executive’s employment with, and recruitment
to, the Company, and Executive’s termination of employment. Nothing in this
Separation Agreement releases or waives Company’s right to enforce any breach or
violation of this Separation Agreement.

 

5.Confidentiality.  Executive agrees that this Separation Agreement and the

 

Employment Agreement are confidential and agrees not to disclose any information
regarding the terms of this Separation Agreement or the Employment Agreement,
except to his immediate family and any tax, legal or other counsel he has
consulted regarding the meaning or effect hereof or as required by law, and he
will instruct each of the foregoing not to disclose the same to anyone. The
Company agrees to disclose any such information only to any tax, legal or other
counsel of the Company as required by law. Further, Executive shall not
affirmatively make any public or private statements about his employment or
separation from the Company except to his immediate family and any tax, legal or
other counsel he has retained, unless authorized in writing by the Company;
except however, that in response to any inquires from any media or third party,
Executive only can state that “Executive and the Company have agreed to part
ways on an amicable basis upon the conclusion of the Employment Agreement.”
Company shall provide dates of employment and positions held by Executive in
response to any inquiry made by a third

 7 

 

 

party for any purpose regarding Executive’s employment by the Company, and shall
not be required to provide any other reference for Executive, whether oral or
written.

 

6.Executive Cooperation. As long as there is no conflict between Executive’s
legal interests and those of the Company, Executive agrees that he shall, to the
extent reasonably requested in writing, cooperate with and serve in any capacity
requested by the Company in any investigation and/or threatened or pending
litigation (now or in the future) in which the Company is a party, and regarding
which Executive, by virtue of his employment with the Company, has knowledge or
information relevant to said investigation or litigation including, but not
limited to (i) meeting with representatives of the Company to prepare for
testimony and to provide truthful information regarding his knowledge, (ii)
acting as the Company’s representative, and (iii) providing, in any jurisdiction
in which the Company requests, truthful information or testimony relevant to the
investigation or litigation. Company agrees to reimburse Executive’s reasonable
expenses incurred for his cooperation under this Paragraph 6.

 

Executive also agrees to cooperate with the Company and its counsel in
connection with any matters relating to the Company in which Executive has been
compelled, by subpoena or other compulsory, to testify or produce documents.
Executive shall provide notice to the Company within 48 hours of receiving such
notice and agrees to (i) meet with the Company’s representatives and attorneys
(ii) provide the attorneys with any documents requested, and (iii) prepare for
any appearance with the Company’s attorneys.

 

Executive, at his own expense, may retain his own counsel, in lieu of or in
addition to, the Company’s counsel. Executive’s appointment of his own counsel
shall in no way interfere with his obligation to cooperate with the Company as
described herein.

 

 8 

 

7.Mutual Non-Disparagement. Executive and the Company agree that, at all times
following the signing of this Separation Agreement, they shall not engage in any
disparagement or vilification of the other, and shall refrain from making any
false, negative, critical or otherwise disparaging statements, implied or
expressed, concerning the other, including, but not limited to, the management
style, methods of doing business, the quality of products and services, role in
the community, treatment of employees or the circumstances and events regarding
Executive’s employment separation. Executive acknowledges that the only persons
whose statements may be attributed to the Company for purposes of this
Separation Agreement not to make disparaging statements shall be each member of
the Board of Directors of the SPI and each of SPI's senior executive officers.
The parties further agree to do nothing that would damage the other’s business
reputation or good will. Nothing in this Separation Agreement prevents the
Company responding to subpoenas, government inquiries or other obligations they
may have under the law or from reporting criminal activities to appropriate
authorities.

 

8.Employment Agreement Provisions Incorporated Into Separation Agreement
Executive and the Company will be bound by and comply with all provisions of
Article 5 of the Employment Agreement, for the durations expressly stated in
Article 5, all of which are incorporated by reference into this Separation
Agreement. Aside from Article 5 of the Employment Agreement, which is
incorporated herein, this Separation Agreement contains the entire agreement of
the parties with respect to the subject matter hereof and supersedes all other
agreements, oral or written, heretofore made with respect thereto including,
without limitation, the Employment Agreement. In addition, no provision of this
Separation Agreement may be

 

 9 

 

amended, modified, changed, altered, or supplemented except by a writing that is
signed by Executive and by the Company.

 

9.Post-Employment General Release and Termination Certificate. As consideration
for the payments and benefits Executive receives under this Separation
Agreement, Executive agrees to execute the Termination Certificate attached as
Exhibit A between _____ and _____, 201_ and the General Release as Exhibit B to
this Separation Agreement on ______, 201_. If Executive fails to execute and
return such documents to the Company by _______, 201_, or revokes the General
Release after executing it, Executive forfeits his right to all payments and
benefits in the Separation Agreement.

 

10.Indemnification Rights. In the event Executive is named as a defendant in a
lawsuit because of his role as an officer, manager, or employee of the Company,
Executive shall be entitled to the same indemnification rights and directors and
officers liability coverage he had while employed by the Company. In any such
lawsuit, the Company shall have the option of designating counsel for Executive
and Executive agrees that his counsel shall enter into a joint defense agreement
with the attorneys for the Company and any of its officers, directors,
shareholders, employees, or other agents or representatives with respect to
their common defense.

 

11..Severability .Any provisions of this Separation Agreement that may be

 

prohibited by, or unlawful or unenforceable under, any applicable law of any
jurisdiction shall, as to such jurisdiction, be ineffective without affecting
any other provision hereof. To the full extent, however, that the provisions of
such applicable law may be waived, they are hereby

 10 

 

 

waived, to the end that this Separation Agreement be deemed to be a valid and
binding agreement enforceable in accordance with its terms.

 

12.Controlling Law This Separation Agreement has been entered into by the

 

parties in the State of Maryland and shall be continued and enforced in
accordance with the laws of Maryland.

 

13.Arbitration. Any controversy, claim, or breach arising out of or relating to
this Separation Agreement or the breach thereof shall be settled by arbitration
in the State of Maryland in accordance with the rules of the American
Arbitration Association for commercial disputes and the judgment upon the award
rendered shall be entered by consent in any court having jurisdiction thereof;
provided, however, that this provision shall not preclude the Company from
seeking injunctive or similar relief from the courts to enforce its rights under
the Employment Covenants set forth in Article 5 of the Employment Agreement as
incorporated into this Separation Agreement.

 

14.Assignments. Subject to obtaining Executive’s prior approval, which shall not
be unreasonably withheld or delayed, the Company shall have the right to assign
this Separation Agreement and to delegate all rights, duties and obligations
hereunder to any entity that controls the Company, that the Company controls or
that may be the result of the merger, consolidation, acquisition or
reorganization of the Company and another entity. Executive agrees that this
Separation Agreement is personal to Executive and Executive’s rights and
interest hereunder may not be assigned, nor may Executive’s obligations and
duties hereunder be delegated (except as to delegation in the normal course of
operation of the Company), and any attempted assignment or delegation in
violation of this provision shall be void.

 

 11 

 

 

EXECUTIVE ACKNOWLEDGES THAT HE HAS READ THIS ENTIRE SEPARATION AGREEMENT
CAREFULLY, AS THIS SEPARATION AGREEMENT INCLUDES A RELEASE OF ALL KNOWN AND
UNKNOWN CLAIMS (AS ALLOWED BY LAW) WHICH HE MAY HAVE AGAINST THE COMPANY
INCLUDING CLAIMS PURSUANT TO THE AGE DISCRIMINATION IN EMPLOYMENT ACT.

 

 

 

 

 

 

(Signature page appears on the following page.)

 

 

 

 

IN WITNESS WHEREOF, Executive after due consideration and consultation, has
authorized, executed, and delivered this Separation Agreement all as of the date
first above written.

 

  NAME                                                       Sucampo
Pharmaceuticals, Inc.             By:         NAME               TITLE  

 

 

 

 12 

 

 

EXHIBIT A

 

 

TERMINATION CERTIFICATE

 

 

I hereby certify that I do not have in my possession or under my control, nor
have I failed to return, any “Company Materials” as defined in that certain
Employment Agreement entered into before Sucampo Pharmaceuticals, Inc., a
Delaware corporation, and me, dated as of __________, 201_.

 

 

I further certify that I have complied with and will continue to comply with all
the terms of the Separation Agreement.

 

 

 

                          Date  

 

 

 

 

 

 

 
 

EXHIBIT B

 

 

GENERAL RELEASE

 

 

This General Release is made and entered into as of the day of , 201_ (the
“Separation Date”), by and between [NAME] (hereinafter “Executive”) and Sucampo
Pharmaceuticals, Inc. (“SPI”), a corporation organized under the laws of the
State of Delaware, and its affiliates (hereinafter collectively referred to as
the “Company”).

 

WHEREAS, Executive and SPI are parties to Separation and Release Agreement dated
as of , 201_ (hereinafter, the “Separation Agreement”);

 

WHEREAS, Executive and Company intend to settle any and all claims that
Executive may have against Company as a result of any act, occurrence, decision,
event or omission occurring at any time after the signing of the Separation
Agreement, including, but not limited to, any matter or fact arising out of
Executive’s employment with SPI, the termination of Executive’s employment, or
the events giving rise to the Separation Agreement or this General Release;

 

WHEREAS, under the terms of the Separation Agreement, Executive promised to
enter into this General Release as a condition precedent to the separation
payments and benefits to be provided under the Separation Agreement;

 

NOW, THEREFORE, in consideration of the payments and benefits, obligations and
covenants contained in the Separation Agreement herein, the parties agree as
follows:

 

 
 

1.Release of Claims. Executive and the Company intend to settle any and all

 

claims that Executive may have against the Company as a result of the hiring of
Executive, Executive’s employment, Executive’s compensation while employed, and
the termination of Executive’s employment. Executive agrees that in exchange for
SPI’s promises in the Separation Agreement and in exchange for the separation
pay and benefits to be paid to Executive as described in the Separation
Agreement, Executive, on behalf of Executive and Executive’s heirs, successors
and assigns, hereby releases and forever discharges the Company, its
predecessors, successors, and assigns, and their respective boards of directors,
board committees, officers, directors, shareholders, agents, employees, and
insurers (the “Released Parties”), from all liability for damages and from all
claims that Executive may have against the Released Parties arising from or
relating to the hiring of Executive, Executive’s compensation while employed,
Executive’s employment, the termination of Executive’s employment pursuant to
any other actions, decisions, alleged omissions, or events occurring on or prior
to the signing of this General Release.

 

A.                Executive understands and agrees that Executive’s release of
claims in this General Release includes, but is not limited to, any claims
Executive may have under Title VII of the Federal Civil Rights Act of 1964, as
amended; the Americans with Disabilities Act, the Equal Pay Act, the Fair Labor
Standards Act, the Employee Retirement and Income Security Act, the Age
Discrimination in Employment Act, the Family and Medical Leave Act, the Maryland
Fair Employment Practices Statute (formerly referred to as Article 49 B) - MD.
Code Ann., State Gov't § 20-601 et seq.; Maryland Lily Ledbetter Civil Rights
Restoration Act - MD. Code Ann., State Gov't § 20-607 (b); Maryland Equal Pay
Law- MD. Code Ann., Lab. & Emp. § 3-301 et seq.; Maryland Wage Payment and
Collection Law - MD. Code Ann., Lab. & Emp. § 3-501 et

 2 

 

 

seq.; Maryland Wage Hour Law - MD. Code Ann., Lab. & Emp. § 3-401 et seq.;
Maryland Worker's Compensation Act - MD. Code Ann., Lab. & Emp. § 9-101 et seq.;
Maryland Occupational Safety and Health Law - MD. Code Ann., Lab. & Emp. § 5-101
et seq., or any other federal, state, or local statute, ordinance, or law.

 

B.                 Executive also understands that Executive is giving up all
other claims, whether grounded in contract or tort theories, including, but not
limited to, wrongful discharge, breach of contract, tortious interference with
contractual relations, promissory estoppel, detrimental reliance, breach of the
implied covenant of good faith and fair dealing, breach of express or implied
promise, breach of manuals or other policies, breach of fiduciary duty, assault,
battery, fraud, invasion of privacy, intentional or negligent misrepresentation,
defamation, including libel, slander, discharge defamation and self-publication
defamation, discharge in violation of public policy, whistleblower, intentional
or negligent infliction of emotional distress, or any other theory, whether
legal or equitable.

 

C.                 Executive will not institute any lawsuit against the Released
Parties arising from or relating to the hiring of Executive, Executive’s
employment, Executive’s compensation while employed, the termination of
Executive’s employment, or any other actions, decisions, alleged omissions, or
events occurring prior to the signing of this General Release.

 

D.                To the extent required by law, nothing contained in this
General Release will be interpreted to prevent Executive from filing a charge
with a governmental agency or participating in or cooperating with an
investigation conducted by a governmental agency. However, Executive agrees that
Executive is waiving the right to any monetary damages or other individual legal
or equitable relief awarded as a result of any such proceeding related to any

 3 

 

 

claim against the Released Parties arising from or relating to the hiring of
Executive, Executive’s employment, Executive’s compensation while employed, the
termination of Executive’s employment, or any other actions, decisions, alleged
omissions, or events occurring on or prior to the signing of this General
Release.

 

E.                 Notwithstanding any of the foregoing, this General Release
shall not apply with respect to any rights or claims which Executive may have
under the terms of the Separation Agreement itself or to any rights or benefits
Executive may have related to vested accrued benefits under the terms of the
Company’s benefit plans or to the Executive’s right to be indemnified by the
Company pursuant to the terms of its bylaws and the law of the State of
Delaware.

 

F.                  Executive expressly acknowledges that he has been given the
opportunity to take twenty-one (21) days to review this General Release before
signing it, and that he has been advised to consult with an attorney before
signing it. Executive acknowledges that he understands that he may revoke this
General Release, insofar as it extends to potential claims under the Age
Discrimination in Employment Act, by informing the Company of Executive’s intent
to revoke this release within seven (7) days following the execution of this
General Release, and that this General Release is not effective or enforceable
until that seven-day revocation period has expired. Executive understands that
any such revocation must be stated in writing and delivered by hand or by
certified mail-return receipt requested to , Human Resources Department, Sucampo
Pharmaceuticals, Inc., 4520 East West Highway, Third Floor, Bethesda, Maryland
20814. If Executive exercises this right to revoke or rescind, the Company shall
have no obligation to provide severance pay or benefits to Executive as provided
by the Agreement.

 4 

 

 

G.                Executive acknowledges that the Company’s obligation to
provide any severance pay or benefits pursuant to the Agreement shall not become
effective or enforceable until the revocation period identified above has
expired without notice of revocation having been made.

 

H.                Executive agrees that he will forfeit all amounts payable by
the Company under the Separation Agreement if he challenges the validity of this
General Release. Executive also agrees that if he violates this General Release
by suing the Company or the other Released Parties, in the event that the
Company is the prevailing party, Executive will pay all costs and expenses of
defending against the suit incurred by the Released Parties, including
reasonable attorneys’ fees, and return all payments received by Executive on or
after the termination of his employment.

 

2.                  This General Release shall be binding upon, and inure to the
benefit of, Executive and the Company and their respective successors and
permitted assigns.

 

3.                  Executive hereby acknowledges and states that Executive has
read this General Release, this General Release is written in language which is
understandable to Executive, that Executive fully appreciates the meaning of the
terms of this General Release, and that Executive enters into this General
Release freely and voluntarily.

 

EXECUTIVE ACKNOWLEDGES THAT HE HAS READ THIS ENTIRE GENERAL RELEASE CAREFULLY,
AS THIS GENERAL RELEASE INCLUDES A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS (AS
ALLOWED BY LAW) WHICH HE MAY HAVE AGAINST THE COMPANY INCLUDING CLAIMS PURSUANT
TO THE AGE DISCRIMINATION IN EMPLOYMENT ACT.

 

 

 

(Signature page appears on the following page.)

 5 

 

 

IN WITNESS WHEREOF, Executive after due consideration and consultation, has
authorized, executed, and delivered this General Release all as of the date
first above written.

 

 

        NAME  

 

 

 

 

 

 

 

 

 6 

 

EXHIBIT C

 

 

INVENTIONS, INTELLECTUAL PROPERTY AND EQUIPMENT CERTIFICATE

 

I hereby certify that I have set forth below a complete list and brief
description of all Inventions, intellectual property and equipment located at
the Company which is owned directly or indirectly by me and which shall not be
transferred to the Company pursuant to the terms of that certain Employment
Agreement (the Agreement") entered into between Sucampo Pharmaceuticals, Inc., a
Delaware corporation, and me, dated January 30, 2015.

 

I further certify that I have complied with and will continue to comply with all
the terms of the Agreement.

 

 

List of Items:

 

 

 

 

 

 

 

 

 

  /s/ Andrew Smith     SIGNATURE           Andrew Smith      Print Name        
  April 20, 2015     Date