Exhibit No. 10.1
 
REPLACEMENT EMPLOYMENT AGREEMENT
 
THIS REPLACEMENT EMPLOYMENT AGREEMENT (the “Agreement”) is entered into on May
15, 2014 (the “Effective Date”), by and between Lion Biotechnologies, Inc., a
Nevada corporation  (the “Company”), and Michael Handelman (“Executive”) (either
party individually, a “Party”; collectively, the “Parties”).
 
WHEREAS, effective May 1, 2011 the Parties entered into that certain Executive
Employment Agreement (the “Prior Agreement”).
 
WHEREAS, the Parties desire to terminate the Prior Agreement, to replace the
Prior Agreement with this Agreement, and to address certain matters related to
Executive’s compensation with the Company;
 
WHEREAS, both the Company and the Executive have read and understood the terms
and provisions set forth in this Agreement, and Executive acknowledges Executive
has been afforded a reasonable opportunity to review this Agreement with
Executive’s legal counsel to the extent desired;
 
NOW, THEREFORE, in consideration of the foregoing and the mutual provisions
contained herein, and for other good and valuable consideration, the Parties
hereto agree as follows:
 
1. Termination of Prior Agreement.  As of the Effective Date, the Prior
Agreement is hereby cancelled, and all past, present and future rights and
obligations of the Parties under the Prior Agreement are hereby terminated.
 
2. Employment.  As of the Effective Date, Executive shall continue to be
employed by the Company as its Chief Financial Officer.  Executive shall report
to the Company’s Chief Executive Officer and to the Board of Directors of the
Company (the "Board").  Executive shall be an executive officer of the Company,
and shall have all authorities, duties and responsibilities customarily
exercised by an individual serving as the chief financial officer of an entity
of the size and nature of the Company.  Executive shall perform his duties at
the Company’s corporate headquarters in the Woodland Hills, California.
 
3. Duties.
 
3.1 Best Efforts/Full-Time.
 
3.1(a) Executive understands and agrees that Executive will faithfully devote
Executive’s best efforts and substantially all of his time during normal
business hours to advance the interests of the Company.  Executive will abide by
all policies and decisions made by the Company, as well as all applicable
federal, state and local laws, regulations or ordinances.  Executive will act in
the best interest of the Company at all times. Executive further understands and
agrees that Executive has a fiduciary duty of loyalty to the Company and that
Executive will take no action which in any way harms the business, business
interests, or reputation of the Company.
 
 
 
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3.1(b) Executive agrees that Executive will not directly engage in competition
with the Company at any time during the existence of the employment relationship
between the Company and Executive.
 
3.1(c) Executive agrees that, during the term of this Agreement, Executive shall
work exclusively for the Company.  Consequently, Executive agrees to not accept
employment, of any kind, from any person or entity other than the Company, and
to not perform duties or render services to any person or entity other than the
Company.
 
3.1(d) Executive understands and agrees that any information, funds, or property
received or developed by Executive during Executive’s employment with the
Company that is related to the Company’s business is or shall become the sole
property of the Company. Accordingly, Executive understands and agrees that
Executive shall immediately turn over all of the foregoing information, funds,
or property that comes into Executive’s possession during Executive’s employment
with the Company, upon the Company’s request.
 
4. At-Will Employment.  Executive’s employment with the Company will be
“at-will” and will not be for any specific period of time.  As a result,
Executive is free to resign at any time, for any or no reason, as Executive
deems appropriate.  The Company will have a similar right and may terminate
Executive’s employment at any time, with or without cause.  Executive’s and the
Company’s respective rights and obligations at the time of termination are
outlined below in Section 6 of this Agreement.
 
5. Compensation.
 
5.1 Base Salary.  As compensation for the proper and satisfactory performance of
all duties to be performed by Executive hereunder, the Company shall pay to
Executive a Base Salary of $180,000 per year, less required deductions for state
and federal withholding tax, social security and all other employment taxes and
authorized payroll deductions, payable on a prorated basis as it is earned, in
accordance with the normal payroll practices of the Company.
 
5.2 Stock Options/Restricted Stock.  As of the date of this Agreement, pursuant
to grants made by the Board under the Company’s 2011 Equity Incentive Plan,
Executive shall receive (i) stock options to purchase an aggregate of 75,000
shares of the Company’s common stock, and (ii) 75,000 shares of restricted
common stock.  To the extent legally permitted, the stock options shall be
incentive stock options.  The stock options will have an exercise price of $8.55
per share (which price is the fair market value of the common stock on the date
the foregoing options were granted and approved by the Board).  Provided that
Executive is still employed with the Company on the following dates, the
foregoing stock options will vest as follows: Options for the purchase of 25,000
shares shall vest on the one year anniversary of the Effective Date; and after
the one-year anniversary date the remaining shares shall thereafter vest
quarterly over the next two years.  Provided that Executive is still employed
with the Company on the following dates, the foregoing 75,000 shares of
restricted stock will vest in three installments as follows: (i) 25,000 shares
shall vest on the first anniversary of the Effective Date; provided, however,
that this vesting date will accelerate and change to August 15, 2014 if the
Company has timely filed the quarterly reports of Form 10-Q for the fiscal
quarters ended March 31, 2014 and June 30, 2014; and (ii) 25,000 shares shall
vest on the second anniversary of the Effective Date, and (iii) 25,000 shares
shall vest on the third anniversary of the Effective Date.  Upon the termination
of your employment with the Company, except as otherwise provided in this
Agreement, the unvested options and the unvested shares of restricted stock will
be forfeited and returned to the Company.  In addition to the foregoing grant of
options, Executive shall also be entitled to receive stock option grants under
the Company’s stock option plan commencing one year after the Effective Date in
such amounts and upon such terms as shall be determined by the Board of
Directors, in its sole discretion.
 
 
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5.3 Incentive Compensation. Commencing in 2014, Executive will be eligible to
participate in the Company’s annual incentive compensation program (“Incentive
Plan”) applicable to Executive’s position, as approved by the Board (the year in
which the program is implemented, the “Plan Year”).  The target potential amount
payable to Executive under the Incentive Plan, if earned, shall be 25% of
Executive’s Base Salary earned during the applicable calendar
year.  Compensation under the Incentive Plan (“Incentive Compensation”) will be
conditioned on the satisfaction of individual and Company objectives, as
established in writing by the Company, and the condition that Executive is
employed by Company on the Incentive Compensation payment date, which shall be
on or before March 15th of the year following the Plan Year.  The payment of any
Incentive Compensation pursuant to this Section 5.3 shall be made in accordance
with the normal payroll practices of the Company, less required deductions for
state and federal withholding tax, social security and all other employment
taxes and authorized payroll deductions, and provided Executive satisfies the
conditions for earning the Incentive Compensation.
 
5.4 Performance Review.  The Company will periodically review Executive’s
performance on no less than an annual basis and will make adjustments to salary
or other compensation, as they deem appropriate in their sole and absolute
discretion.
 
5.5 Customary Fringe Benefits.  Executive understands and agrees that certain
employee benefits may be provided to the Executive by the Company incident to
the Executive's employment.  Executive will be eligible for all customary and
usual fringe benefits generally available to employees of the Company subject to
the terms and conditions of the Company’s benefit plan documents.  Executive
understands and agrees that any employee benefits provided to the Executive by
the Company incident to the Executive's employment are provided solely at the
discretion of the Company and may be modified, suspended or revoked at any time,
without notice or the consent of the Executive, unless otherwise provided by
law.  Moreover, to the extent that these benefits are provided pursuant to
policies or plan documents adopted by the Company, Executive acknowledges and
agrees that these benefits shall be governed by the applicable employment
policies or plan documents.  The benefits to be provided to Executive shall
include group health and dental insurance and participation in a 401-K plan once
such plans have been established and implemented.
 
5.6 Personal Time Off (“PTO”).  Executive will be eligible to receive 10 PTO
days per year.  PTO is an accrued benefit and will be paid out at termination in
accordance with the Company’s standard PTO policies.
 
 
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5.7 Business Expenses.  Executive will be reimbursed for all reasonable,
out-of-pocket business expenses incurred in the performance of Executive’s
duties on behalf of the Company, including travel-related expenses.  To obtain
reimbursement, expenses must be submitted promptly with appropriate supporting
documentation in accordance with the Company’s policies.
 
6. Confidentiality and Proprietary Agreement.  Executive agrees to abide by the
Company’s Employee Proprietary Information and Inventions Agreement (the
“Non-Disclosure Agreement”), which Executive has signed and is incorporated
herein by reference.
 
7. Termination of Executive’s Employment.
 
7.1 Termination for Cause by the Company. The Company may terminate Executive’s
employment immediately at any time and without notice for “Cause.”  For purposes
of this Agreement, “Cause” shall mean (i) a failure by Executive to perform any
of his material obligations under this Agreement or to execute and perform in a
timely and cooperative manner any directions of the Board; (ii) the death of
Executive or his disability resulting in his inability to perform his reasonable
duties assigned hereunder for a period of 180 days; (iii) Executive’s theft,
dishonesty, or falsification of any Company documents or records; (iv)
Executive’s improper use or disclosure of the Company’s confidential or
proprietary information; or (v) Executive’s conviction (including any plea of
guilty or nolo contendere) of any criminal act which impairs Executive’s ability
to perform his or her duties hereunder or which in the Board’s judgment may
materially damage the business or reputation of the Company; provided, however,
that prior to termination for cause arising under clause (i), Executive shall
have a period of ten days after written notice from the Company to cure the
event or grounds constituting such cause. Any notice of termination provided by
Company to Executive under this Section 7.1 shall identify the events or conduct
constituting the grounds for termination with sufficient specificity so as to
enable Executive to take steps to cure the same if such default is a failure by
Executive to perform any of his material obligations under this Agreement.  In
the event Executive’s employment is terminated in accordance with this
subsection 7.1, Executive shall be entitled to receive only the Base Salary and
any earned Incentive Compensation (as defined in Section 5.3 above) then in
effect, prorated to the date of termination. All other obligations of the
Company to Executive pursuant to this Agreement will be automatically terminated
and completely extinguished.
 
7.2 Termination Without Cause By The Company/Separation Package.  The Company
may terminate Executive’s employment under this Agreement without Cause (as
defined in Section 7.1 above) at any time on thirty (30) days’ advance written
notice to Executive.  In the event of such termination, Executive will receive
Executive’s Base Salary through the date of termination and a prorated portion
of any Incentive Compensation that was earned under Section 5.3 through the date
of termination.  Upon such termination without cause, any then unvested stock
options granted to Executive by the Company and any unvested shares of
restricted stock that vest with the passage of time will become fully vested and
Executive shall have twelve months from the date of termination within which to
exercise his vested options.  In addition, Executive will be eligible to receive
a “Severance Payment” equivalent to six months of Executive’s then Base Salary,
payable in full within thirty (30) days after termination, provided that
Executive first satisfies the Severance Conditions.  For purposes of this
Agreement, the “Severance Conditions” are defined as (1) Executive’s execution
and non-revocation of a full general release, in a form acceptable to the
Company, releasing all claims, known or unknown, that Executive may have against
the Company arising out of or in any way related to Executive’s employment or
termination of employment with the Company, and such release has become
effective in accordance with its terms prior to the 30th day following the
termination date; and (2) Executive’s reaffirmation of Executive’s commitment to
comply, and actual compliance, with all surviving provisions of this
Agreement.  Following payment of the Severance Payment, Base Salary and any
Incentive Compensation through the date of termination, all other obligations of
the Company to Executive pursuant to this Agreement will be automatically
terminated and completely extinguished.
 
 
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7.3 Termination Upon a Change of Control.  For purposes of this Agreement,
“Change of Control” shall mean: (1) a merger or consolidation or the sale or
exchange by the stockholders of the Company of all or substantially all of the
capital stock of the Company, where the stockholders of the Company immediately
before such transaction do not obtain or retain, directly or indirectly, at
least a majority of the beneficial interest in the voting stock or other voting
equity of the surviving or acquiring corporation or other surviving or acquiring
entity, in substantially the same proportion as before such transaction; (2) any
transaction or series of related transactions to which the Company is a party in
which in excess of fifty percent (50%) of the Company’s voting power is
transferred; or (3) the sale or exchange of all or substantially all of the
Company’s assets (other than a sale or transfer to a subsidiary of the Company
as defined in section 424(f) of the Internal Revenue Code of 1986, as amended
(the “Code”)), where the stockholders of the Company immediately before such
sale or exchange do not obtain or retain, directly or indirectly, at least a
majority of the beneficial interest in the voting stock or other voting equity
of the corporation or other entity acquiring the Company’s assets, in
substantially the same proportion as before such transaction; provided, however,
that a Change of Control shall not be deemed to have occurred pursuant to any
transaction or series of transactions relating to a public or private financing
or re-financing, the principal purpose of which is to raise money for the
Company’s working capital or capital expenditures and which does not result in a
change in a majority of the members of the Board.  If, within six (6) months
immediately preceding a Change of Control or within twelve (12) months
immediately following a Change of Control, the Executive’s employment is
terminated by the Company for any reason other than Cause, then the Executive
shall be entitled to receive the Severance Payment and stock option and
restricted stock vesting and exercisability set forth in Section 7.2, provided
that Executive first satisfies the Severance Conditions.  Following payment of
the Severance Payment, Base Salary and any Incentive Compensation through the
date of termination, all other obligations of the Company to Executive pursuant
to this Agreement will be automatically terminated and completely extinguished.
 
7.4 Resignation.  Executive shall have the right to terminate this Agreement at
any time, for any reason, by providing the Company with thirty (30) days written
notice, provided, however, that subsequent to Executive’s resignation, Executive
shall be required to comply with all surviving provisions of this
Agreement.  Executive shall not be entitled to any Severance Pay.  Executive
will only be entitled to receive Executive’s Base Salary earned up to the date
of termination.  Notwithstanding the foregoing, Executive has the right upon
thirty (30) days written notice to the Company to terminate Executive’s
employment for “Good Reason” due to occurrence of any of the following:  (i) the
Company’s requirement that Executive’s principal place of work relocate more
than thirty (30) miles from its headquarters location initially designated by
Executive without the written consent of Executive to such relocation, (ii) a
material adverse change in Executive’s duties and responsibilities; (iii) any
failure by the Company to pay, or any material reduction by Company of, the base
salary or any failure by Company to pay any Incentive Compensation to which
Executive is entitled pursuant to Section 5; (iv) the Company creates a work
environment designed to constructively terminate Executive or to unlawfully
harass or retaliate against Executive; or (v) a Change of Control occurs in
which the Company is not the surviving entity and the surviving entity fails to
offer Executive an executive position at a compensation level at least equal to
Executive’s then compensation level under this Agreement.  In the event that
Executive terminates his employment for Good Reason, then Executive shall be
entitled to receive the Base Salary, any earned Incentive Compensation,
Severance Payment and stock option and restricted stock vesting and
exercisability as if Executive were terminated by the Company without Cause
under Section 7.2, subject to Executive’s compliance with all of the Severance
Conditions.
 
7.5 Application of Section 409A.
 
7.5(a)  Notwithstanding anything set forth in this Agreement to the contrary, no
amount payable pursuant to this Agreement which constitutes a “deferral of
compensation” within the meaning of the Treasury Regulations issued pursuant to
Section 409A of the Code (the “Section 409A Regulations”) shall be paid unless
and until Executive has incurred a “separation from service” within the meaning
of the Section 409A Regulations.
 
7.5(b) Company intends that income provided to Executive pursuant to this
Agreement will not be subject to taxation under Section 409A of the Code.  The
provisions of this Agreement shall be interpreted and construed in favor of
satisfying any applicable requirements of Section 409A of the Code.  However,
Company does not guarantee any particular tax effect for income provided to
Executive pursuant to this Agreement.  In any event, except for Company’s
responsibility to withhold applicable income and employment taxes from
compensation paid or provided to Executive, Company shall not be responsible for
the payment of any applicable taxes on compensation paid or provided to
Executive pursuant to this Agreement.
 
 
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7.5(c) Furthermore, to the extent that Executive is a “specified employee”
within the meaning of the Section 409A Regulations as of the date of Executive’s
separation from service, no amount that constitutes a deferral of compensation
which is payable on account of Executive’s separation from service shall be paid
to Executive before the date (the “Delayed Payment Date”) which is first day of
the seventh month after the date of Executive’s separation from service or, if
earlier, the date of Executive’s death following such separation from
service.  All such amounts that would, but for this Section, become payable
prior to the Delayed Payment Date will be accumulated and paid on the Delayed
Payment Date.
 
7.5(d) Notwithstanding anything herein to the contrary, the reimbursement of
expenses or in-kind benefits provided pursuant to this Agreement shall be
subject to the following conditions: (i) the expenses eligible for reimbursement
or in-kind benefits in one taxable year shall not affect the expenses eligible
for reimbursement or in-kind benefits in any other taxable year; (ii) the
reimbursement of eligible expenses or in-kind benefits shall be made promptly,
subject to Company’s applicable policies, but in no event later than the end of
the year after the year in which such expense was incurred; and (iii) the right
to reimbursement or in-kind benefits shall not be subject to liquidation or
exchange for another benefit.
 
7.5(e) For purposes of Section 409A of the Code, the right to a series of
installment payments under this Agreement shall be treated as a right to a
series of separate payments.
 
8. General Provisions.
 
8.1 Successors and Assigns.  The rights and obligations of the Company under
this Agreement shall inure to the benefit of and shall be binding upon the
successors and assigns of the Company.  Executive shall not be entitled to
assign any of Executive’s rights or obligations under this Agreement.
 
8.2 Waiver.  Either party's failure to enforce any provision of this Agreement
shall not in any way be construed as a waiver of any such provision, or prevent
that party thereafter from enforcing each and every other provision of this
Agreement.
 
8.3 Attorney’s Fees.  In the event of any dispute or claim relating to or
arising out of Executive’s employment relationship with Company, this Agreement,
or the termination of Executive’s employment with Company for any reason, the
prevailing party in any such dispute or claim shall be entitled to recover its
reasonable attorney’s fees and costs.
 
 
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8.4 Severability.  In the event any provision of this Agreement is found to be
unenforceable by an arbitrator or court of competent jurisdiction, such
provision shall be deemed modified to the extent necessary to allow
enforceability of the provision as so limited, it being intended that the
parties shall receive the benefit contemplated herein to the fullest extent
permitted by law.  If a deemed modification is not satisfactory in the judgment
of such arbitrator or court, the unenforceable provision shall be deemed
deleted, and the validity and enforceability of the remaining provisions shall
not be affected thereby.
 
8.5 Interpretation; Construction.  The headings set forth in this Agreement are
for convenience only and shall not be used in interpreting this Agreement.
Executive has participated in the negotiation of the terms of this
Agreement.  Furthermore, Executive acknowledges that Executive has had an
opportunity to review and revise the Agreement and have it reviewed by legal
counsel, if desired, and, therefore, the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting party shall
not be employed in the interpretation of this Agreement.
 
8.6 Governing Law.  This Agreement will be governed by and construed in
accordance with the laws of the United States and the internal laws of the State
of California.
 
8.7 Notices.  Any notice required or permitted by this Agreement shall be in
writing and shall be delivered as follows with notice deemed given as
indicated:  (a) by personal delivery when delivered personally; (b) by overnight
courier upon written verification of receipt; (c) by telecopy, facsimile
transmission, or electronic transmission such as e-mail, upon acknowledgment of
receipt of electronic transmission; or (d) by certified or registered mail,
return receipt requested, upon verification of receipt.  Notice shall be sent to
the addresses set forth below, or such other address as either party may specify
in writing.
 
8.8 Entire Agreement.  This Agreement constitutes the entire agreement between
the Parties relating to this subject matter and supersedes all prior or
simultaneous representations, discussions, negotiations, and agreements, whether
written or oral.  This Agreement may be amended or modified only with the
written consent of Executive and the Company.  No oral waiver, amendment or
modification will be effective under any circumstances whatsoever.
 
 
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THE PARTIES TO THIS AGREEMENT HAVE READ THE FOREGOING AGREEMENT AND FULLY
UNDERSTAND EACH AND EVERY PROVISION CONTAINED HEREIN. WHEREFORE, THE PARTIES
HAVE EXECUTED THIS AGREEMENT AS OF THE DATE SET FORTH ABOVE.
 

 
EXECUTIVE:
         
Michael Handelman
           /s/ Michael Handelman                Address:   3210 Rickey Court    
  Thousand Oaks, CA 91362          

 

 
COMPANY:
         
Lion Biotechnologies, Inc.
         
 
By:
/s/ Manish Singh       
Name:      Manish Singh
     
Title:        Chief Executive Officer
         

 
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