Document:

srne-ex105_471.htm

 

Exhibit 10.5

SORRENTO THERAPEUTICS, INC.

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

This Amended and Restated Employment Agreement (this “Agreement”), dated as of May 9, 2017 (the “Effective Date”), is made by and between Sorrento Therapeutics, Inc., a Delaware corporation (together with any successor thereto, the “Company”), and Henry Ji, Ph.D. (the “Executive”) (collectively referred to herein as the “Parties”).

WHEREAS, Executive and the Company mutually desire to set forth the terms and conditions upon which the Company will compensate Executive for his services as an employee following the Effective Date.

NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and agreements set forth below, the Parties hereto agree as follows:

	
1.
	
Employment.

(a)General.  From and after the Effective Date, the Company shall employ Executive and Executive shall be employed by the Company, for the period and in the position set forth in this Section 1, subject to the other terms and conditions herein provided.

(b)Employment Term.  The initial term of employment under this Agreement (the “Initial Term”) shall commence on the Effective Date and continue for three (3) years.  On the expiration of the Initial Term, and each year thereafter, this Agreement shall renew automatically for an additional twelve (12) months (any such twelve (12) month extension, once in effect, along with the Initial Term, the “Term”) unless either Party provides written notice of non-renewal to the other Party at least three (3) months in advance of the then scheduled expiration of the Term.

(c)Position and Duties.  During the Term, Executive shall serve as President and Chief Executive Officer of the Company with such customary responsibilities, duties and authority normally associated with such position and as may from time to time be assigned to Executive by the Board of Directors of the Company (the “Board”), consistent with such position.  In the performance of such duties, Executive shall report to the Board.  Executive shall devote substantially all of Executive’s working time and efforts to the business and affairs of the Company (which shall include service to its affiliates, if applicable) and shall not engage in outside business activities (including serving on outside boards or committees) without the consent of the Board (such consent to not be unreasonably withheld), provided that Executive shall be permitted to (i) manage Executive’s personal, financial and legal affairs, (ii) participate in trade associations, (iii) serve on the board of directors of not- for-profit or tax-exempt charitable organizations, and (iv) engage in religious, charitable or other community or non-profit activities, subject to compliance with this Agreement and provided that such activities do not materially interfere with Executive’s performance of Executive’s duties and responsibilities hereunder.  Executive hereby consents to serve as an officer and/or director of the Company or any subsidiary or affiliate thereof without any additional salary or compensation, if so requested 

	
 
	
 
	
 

 

 

by the Board.  So long as Executive is serving as the President and Chief Executive Officer of the Company, he will be nominated to, and if elected by the stockholders of the Company, be a member of, the Board.  Executive agrees to observe and comply with the written rules and policies of the Company as adopted by the Company from time to time, in each case as amended from time to time, and as delivered or made available to Executive (each, a “Policy”).

	
2.
	
Compensation and Related Matters.

(a)Annual Base Salary.  During the Term, Executive shall receive a base salary at a rate of $600,000 per annum (such annual base salary, as it may be adjusted from time to time, the “Annual Base Salary”).  The Annual Base Salary shall be paid in accordance with the customary payroll practices of the Company.  Such Annual Base Salary shall be reviewed (and may be adjusted) from time to time by the Board or an authorized committee of the Board.

(b)Bonus.  During the Term, Executive will be eligible to participate in an annual incentive program established by the Board or an authorized committee of the Board.  Executive’s target annual incentive compensation under such incentive program shall be 55% of his Annual Base Salary at target performance (the “Annual Bonus”).  The Annual Bonus payable under the annual incentive program shall be based on the achievement of individual and Company performance goals to be determined in good faith by the Board or an authorized committee of the Board in consultation with Executive.  The Board or an authorized committee of the Board shall review Executive’s performance on no less than an annual basis.  Adjustments to Annual Base Salary, Annual Bonus and other compensation, if any, shall be made by the Board or an authorized committee of the Board in its discretion; provided, however, that in no event shall the Annual Base Salary or target Annual Bonus be adjusted downward.  The payment of each Annual Bonus shall be subject to Executive’s continued employment with the Company through the date of payment, and shall be paid between January 1st and March 15th of the calendar year following the calendar year to which it relates.  Executive also shall be eligible for annual equity incentive compensation awards, as determined by the Compensation Committee of the Board.

(c)Benefits.  During the Term, Executive shall be eligible to participate in the medical, dental, 401(k), profit sharing or pension plans, life insurance plans, disability income plans and other employee benefit plans, programs and arrangements as in effect from time to time for senior executives of the Company generally, consistent with the terms thereof and as such plans, programs and arrangements as may be amended from time to time.

(d)Vacation.  During the Term, Executive shall be entitled to paid personal leave in accordance with the Company’s Policies, but Executive shall be entitled to a minimum of three (3) weeks of paid time-off per year.  Any vacation shall be taken at the reasonable and mutual convenience of the Company and Executive.

(e)Expenses.  During the Term, the Company shall reimburse Executive for all reasonable travel and other business expenses incurred by Executive in the performance of Executive’s duties to, or professional activities on behalf of, the Company in accordance with the Company’s expense reimbursement Policy.

	
 
	
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(f)Key Person Insurance.  At any time during the Term, the Company shall have the right to insure the life of Executive for the Company’s sole benefit.  The Company shall have the right to determine the amount of insurance and the type of policy.  Executive shall reasonably cooperate with the Company in obtaining such insurance by submitting to physical examinations, by supplying all information reasonably required by any insurance carrier, and by executing all necessary documents reasonably required by any insurance carrier, provided that any information provided to an insurance company or broker shall not be provided to the Company without the prior written authorization of Executive.  Executive shall incur no financial obligation by executing any required document, and shall have no interest in any such policy. Upon termination of employment for any reason, at the option of Executive, such insurance policy shall be assigned to Executive by the Company, and thereafter the Company shall have no obligation to pay any premiums or other amounts relating to such insurance policy due and payable after the termination of Executive’s employment.

	
3.
	
Termination.

The Company and Executive acknowledge that Executive’s employment during the Term will be at-will, as defined under applicable law, and that Executive’s employment with the Company during the Term may be terminated by the Company or Executive, as applicable, without any breach of this Agreement under the following circumstances:

(a)Circumstances.

(i)Death.  Executive’s employment hereunder shall terminate upon Executive’s death.

(ii)Disability.  If Executive has incurred a Disability (as defined below), the Company may terminate Executive’s employment.  “Disability” shall mean, at any time the Company or any of its affiliates sponsors a long-term disability plan for the Company’s employees, “disability” as defined in such long-term disability plan for the purpose of determining a participant’s eligibility for benefits; provided, however, if the long-term disability plan contains multiple definitions of disability, “Disability” shall refer to that definition of disability which, if Executive qualified for such disability benefits, would provide coverage for the longest period of time.  The determination of whether Executive has a Disability shall be made by the person or persons required to make disability determinations under the long-term disability plan.  At any time the Company does not sponsor a long-term disability plan for its employees, Disability shall mean Executive’s inability to perform, with reasonable accommodation, the essential functions of Executive’s position hereunder for a total of ninety (90) days during any one-year period as a result of incapacity due to mental or physical illness.  Any refusal by Executive to submit to a medical examination for the purpose of determining Disability shall be deemed to constitute conclusive evidence of Executive’s Disability.  Should a dispute occur between Executive and the Company concerning whether or not a Disability exists, a doctor selected by Executive and a doctor selected by the Company shall be entitled to examine Executive.  If the opinion of Executive’s doctor and the Company’s doctor conflict, Executive’s doctor and the Company’s doctor shall agree upon a third doctor, whose opinion shall be binding.

	
 
	
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(iii)Termination by the Company.  The Company may terminate Executive’s employment with or without “Cause” (as defined below).

(iv)Resignation by Executive.  Executive may terminate his employment with the Company by resignation with or without “Good Reason” (as defined below).

(b)Notice of Termination.  Any termination of Executive’s employment by the Company or by Executive under this Section 3 (other than termination pursuant to paragraph (a)(i)) shall be communicated by a written notice to the other Party hereto (i) indicating the specific termination provision in this Agreement relied upon, and (ii) specifying a Date of Termination (as defined below) which, if submitted by Executive, shall be at least thirty (30) days following the date of such notice (a “Notice of Termination”); provided, however, that in the event that Executive delivers a Notice of Termination to the Company, the Company may, in its sole discretion, change the Date of Termination to any date that occurs following the date of Company’s receipt of such Notice of Termination and is prior to the date specified in such Notice of Termination.  A Notice of Termination submitted by the Company may provide for a Date of Termination on the date Executive receives the Notice of Termination, or any date thereafter elected by the Company in its sole discretion.  For purposes of this Agreement, “Date of Termination” shall mean (i) if Executive’s employment is terminated by Executive’s death, the date of Executive’s death; or (ii) if Executive’s employment is terminated pursuant to Section 3(a)(ii) – (iv) either the date indicated in the Notice of Termination or the date specified by the Company pursuant to this Section 3(b), whichever is earlier.

(c)Company Obligations upon Termination.  Upon termination of Executive’s employment pursuant to any of the circumstances listed in Section 3(a), Executive (or Executive’s estate) shall be entitled to receive the sum of:  (i) the portion of Executive’s Annual Base Salary earned through the Date of Termination but not yet paid to Executive; (ii) any expenses owed to Executive pursuant to Section 2(e); and (iii) any amount accrued and arising from Executive’s participation in, or vested benefits accrued under any employee benefit plans, programs or arrangements, including, without limitation, any 401(k), profit sharing or pension plan (collectively, the “Company Arrangements”), which amounts shall be payable in accordance with the terms and conditions of such employee benefit plans, programs or arrangements.

	
 
	
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(d)Severance on Termination Without Cause or Resignation for Good Reason.

(i)Standard Severance.  If, during the Term, Executive’s employment is terminated by the Company without Cause (and for purposes hereof the non-renewal of the Term by the Company shall be deemed termination by the Company of Executive’s employment without Cause) or by Executive due to resignation for Good Reason, then, subject to Executive signing on or before the forty-fifth (45th) day following Executive’s Separation from Service (as defined below), and not revoking, a release of claims in substantially the form attached hereto as Exhibit A (the “Release”), and Executive’s continued compliance with Section 4, Executive shall receive, in addition to the compensation set forth in Section 3(c), the following:

(A)an amount equal to Executive’s then current Annual Base Salary, payable in a lump sum on the First Payment Date (as defined below);

(B)an amount equal to Executive’s pro-rata target Annual Bonus for the fiscal year in which the termination occurs, such pro-rata amount calculated by multiplying the Executive’s target Annual Bonus for the fiscal year in which the termination occurs by a fraction (the “Termination Fraction”) where the numerator is the number of days that have elapsed in the fiscal year through and including the date of termination and the denominator is 365, payable in a lump sum on the First Payment Date; provided, however, that the aggregate amount of such pro-rated target Annual Bonus shall in no event be less than the Annual Bonus paid by the Company to Executive with respect to the immediately prior fiscal year multiplied by the Termination Fraction;

(C)for the twelve (12) month period following Executive’s Separation from Service (or, if earlier, the date on which the applicable continuation period under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) expires), the Company shall arrange to provide Executive and his eligible dependents who were covered under the Company’s health insurance plans as of the date of Executive’s Separation from Service with health (including medical and dental) insurance benefits substantially similar to those provided to such dependents immediately prior to the date of such Separation from Service.  If the Company is not reasonably able to continue health insurance benefits coverage under the Company’s insurance plans, the Company shall provide substantially equivalent coverage under other third party insurance sources.  If any of the Company’s health benefits are self-funded as of the date of Executive’s Separation from Service, or if the Company cannot provide the foregoing benefits in a manner that exempt from Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) or that is otherwise compliant with applicable law (including, without limitation, Section 2716 of the Public Health Service Act), instead of providing continued health insurance benefits as set forth above, the Company shall instead pay to Executive an amount equal to twelve (12) multiplied by the monthly premium Executive would be required to pay for continuation coverage pursuant to the COBRA for his eligible dependents who were covered under the Company’s health plans as of the date of Executive’s 

	
 
	
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Separation from Service (calculated by reference to the premium as of the date of Separation from Service), which amount shall be paid on the First Payment Date; and 

(D)acceleration of the vesting of Executive’s outstanding awards of equity compensation (including, without limitation, stock options, stock appreciation rights, restricted stock awards, and restricted stock units) otherwise scheduled to vest during the Restriction Period (as defined below), with all performance-based vesting criteria, if any, applicable to such awards that otherwise would vest on or prior to the expiration of the Restriction Period deemed satisfied at target.

(ii)Change of Control Severance.  Notwithstanding the foregoing clause (i) to the contrary, in the event of the termination of the Executive’s employment by the Company without Cause or by Executive due to a resignation for Good Reason, in either case during the period beginning three (3) months immediately prior to a “Change of Control” (as defined below) and ending twelve (12) months immediately following a Change of Control (as defined below) then, subject to Executive signing on or before the forty-fifth (45th) day following Executive’s Separation from Service and not revoking a Release, and Executive’s continued compliance with Section 4, Executive shall receive, in addition to the compensation set forth in Section 3(c) and in lieu of compensation set forth in Section 3(d)(i), the following:

(A)an amount equal to twice Executive’s then current Annual Base Salary, payable in a lump sum on the First Payment Date;

(B)an amount equal to twice Executive’s target Annual Bonus for the fiscal year in which the termination occurs, payable in a lump sum on the First Payment Date; provided, however, that the aggregate amount of such payment shall in no event be less than twice the Annual Bonus paid by the Company to Executive with respect to the immediately prior fiscal year;

(C)for the twenty-four (24) month period following Executive’s Separation from Service (or, if earlier, the date on which the applicable continuation period under COBRA, the Company shall arrange to provide Executive and his eligible dependents who were covered under the Company’s health insurance plans as of the date of Executive’s Separation from Service with health (including medical and dental) insurance benefits substantially similar to those provided to such dependents immediately prior to the date of such Separation from Service.  If the Company is not reasonably able to continue health insurance benefits coverage under the Company’s insurance plans, the Company shall provide substantially equivalent coverage under other third party insurance sources.  If any of the Company’s health benefits are self-funded as of the date of Executive’s Separation from Service, or if the Company cannot provide the foregoing benefits in a manner that exempt from Section 409A of the Code or that is otherwise compliant with applicable law (including, without limitation, Section 2716 of the Public Health Service Act), instead of providing 

	
 
	
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continued health insurance benefits as set forth above, the Company shall instead pay to Executive an amount equal to twenty-four (24) multiplied by the monthly premium Executive would be required to pay for continuation coverage pursuant to the COBRA for his eligible dependents who were covered under the Company’s health plans as of the date of Executive’s Separation from Service (calculated by reference to the premium as of the date of Separation from Service), which amount shall be paid on the First Payment Date; and

(D)full vesting of Executive’s outstanding awards of equity compensation (including, without limitation, stock options, stock appreciation rights, restricted stock awards, and restricted stock units), with all performance-based vesting criteria, if any, deemed satisfied at target.

(iii)Definition of Cause.  For purposes of this Agreement, the Company shall have “Cause” to terminate Executive’s employment hereunder upon:  (A) Executive’s dishonesty that is intended to materially injure the business of the Company or its affiliates; (B) Executive’s conviction of a felony; or (C) Executive’s wanton or willful dereliction of duties that is not cured within thirty (30) days after Executive is provided written notice of such dereliction of duties by the Company.

(iv)Definition of Good Reason.  For the sole purpose of determining Executive’s right to severance payments as described above, the Executive’s resignation will be for “Good Reason” if the Executive resigns within ninety (90) days after any of the following events, unless Executive consents to the applicable event:  (A) a decrease in Executive’s Annual Base Salary or annual target bonus opportunity, (B) a material decrease in the Executive’s duties, authority or areas of responsibility as are commensurate with such Executive’s title or position (other than in connection with a corporate transaction where the Executive continues to hold the position referenced in Section 1(c) above with respect to the Company’s business, substantially as such business exists prior to the date of consummation of such corporate transaction, but does not hold such position with respect to the successor corporation),  (C) a change in Executive’s title or reporting directly to the Board, or (D) the relocation of the Executive’s primary office to a location more than thirty-five (35) miles from the Company’s then current headquarters.  Notwithstanding the foregoing, no Good Reason will have occurred unless and until Executive has:  (1) provided the Company, within sixty (60) days of Executive’s knowledge of the occurrence of the facts and circumstances underlying the Good Reason event, written-notice stating with specificity the applicable facts and circumstances underlying such finding of Good Reason; and (2) provided the Company with an opportunity to cure the same within thirty (30) days after the receipt of such notice.

(v)Definition of Change of Control.  For purposes of this Agreement, “Change of Control” shall mean a Corporate Transaction, as such term is defined in the Company’s 2009 Equity Incentive Plan, as in effect on the Effective Date.

(vi)No Mitigation.  Executive shall not be required to mitigate the amount of any payment provided for in this Section 3(d) by seeking other employment or otherwise, 

	
 
	
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nor shall the amount of any payment or benefit provided for in this Section 3(d) be reduced by any compensation earned by Executive as the result of employment by another employer or self-employment or by retirement benefits.

(e)No Other Compensation.  Except as otherwise expressly required by law (e.g., COBRA) or as specifically provided in this Section 3, all of Executive’s rights to salary, severance, benefits, bonuses and other compensatory amounts hereunder (if any) shall cease upon the termination of Executive’s employment hereunder.  In the event that Executive’s employment is terminated by the Company for any reason other than being terminated without Cause or if Executive resigns without Good Reason, Executive’s sole and exclusive remedy shall be to receive the payments and benefits described in Section 3(c).  Executive shall not be required to mitigate the amount of any payment provided for in this Section 3 by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Section 3 be reduced by any compensation earned by Executive as the result of employment by another employer or self-employment or by retirement benefits; provided, however, that loans, advances or other amounts owed by Executive to the Company may be offset by the Company against amounts payable to Executive under this Section 3.

(f)Deemed Resignation.  Upon termination of Executive’s employment for any reason, Executive shall be deemed to have resigned from all offices and directorships, if any, then held with the Company or any of its affiliates.

(g)Best Pay Provision

(i)If any payment or benefit Executive would receive under this Agreement, when combined with any other payment or benefit Executive receives pursuant to the termination of Executive’s employment with the Company and its affiliates (“Payment”), would (A) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (B) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then such Payment shall be either (1) the full amount of such Payment or (2) such lesser amount (with cash payments being reduced  first, in reverse order of receipt, then reduction of equity award vesting acceleration, with performance-based vesting acceleration reduced before time-based vesting, proportional to each performance-based vesting award, and time-based vesting acceleration reduced in reverse order of scheduled vesting, then all other Payments pro-rata) as would result in no portion of the Payment being subject to the Excise Tax, whichever of the foregoing amounts, taking into account the applicable federal, state and local employment taxes, income taxes, and the Excise Tax, results in Executive’s receipt, on an after-tax basis, of the greater amount of the Payment notwithstanding that all or some portion of the Payment may be subject to the Excise Tax.

(ii)All determinations required to be made under this Section 3(g), including whether and to what extent the Payments shall be reduced and the assumptions to be utilized in arriving at such determination, shall be made by the nationally recognized certified public accounting firm used by the Company immediately prior to the effective date of the Change of Control or, if such firm declines to serve, such other nationally recognized certified public accounting firm as may be designated by the Company (the 

	
 
	
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“Accounting Firm”).   The Accounting Firm shall provide detailed supporting calculations both to Executive and the Company at such time as is requested by the Company.  All fees and expenses of the Accounting Firm shall be borne solely by the Company.  Any determination by the Accounting Firm shall be binding upon Executive and the Company.  For purposes of making the calculations required by this Section 3(g), the Accounting Firm may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good-faith interpretations concerning the application of Sections 280G and 4999 of the Code.

	
4.
	
Restrictive Covenants.

(a)General.  Executive acknowledges that the Company has provided and, during the Term, the Company from time to time will continue to provide Executive with, access to its proprietary information.  Ancillary to the rights provided to Executive as set forth in this Agreement and the Company’s provision of Confidential Information, and Executive’s agreements regarding the use of same, in order to protect the value of any Confidential Information, the Company and Executive agree to the following provisions (A) against unfair competition, (B) respecting Executive’s use of proprietary information and the protection of such information, and (C) the ownership of inventions developed by Executive in the course of Executive’s engagement or employment by or relationship with the Company, which Executive acknowledges represent a fair balance of the Company’s rights to protect its business and Executive’s right to pursue employment.

(b)Noncompetition; Nonsolicitation.

(i)Noncompetition.  Executive shall not, at any time during the Term, directly or indirectly engage in, have any equity interest in, manage, provide services to or operate any person, firm, corporation, partnership or business (whether as director, officer, employee, agent, representative, partner, security holder, consultant or otherwise) that engages in any business which competes in any material respect with any portion of the Business (as defined below) of the Company anywhere in the world.  Nothing herein shall prohibit Executive from being a passive owner of not more than two percent (2%) of the outstanding equity interest in any entity that is publicly traded, so long as Executive has no active participation in the business of such entity.  

(ii)Nonsolicitation.  Executive shall not, at any time during the Restriction Period, directly or indirectly, recruit or otherwise solicit or induce any business relation of the Company to (A) terminate or reduce its arrangement or business with the Company, or (B) to otherwise change its relationship with the Company.  Executive shall not, at any time during the Restriction Period, directly or indirectly, either for Executive or for any other person or entity, (x) intentionally solicit any employee or independent contractor of the Company to terminate his or her employment or arrangement with the Company, or (y) employ any such individual during his or her employment or engagement with the Company and for a period of twelve (12) months after such individual terminates his or her employment or engagement with the Company.  Notwithstanding the foregoing, this Section 4(b)(ii) shall not prohibit Executive from, directly or indirectly, either for Executive or for any other person or entity, (i) engaging 

	
 
	
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in general solicitation efforts not specifically targeting employees of the Company or participating in job fair events or (ii) hiring any employee or independent contractor of the Company who responds to any such general employment solicitation effort.

(iii)Blue Penciling.  In the event the terms of this Section 4(b) shall be determined by any court of competent jurisdiction to be unenforceable by reason of its extending for too great a period of time or over too great a geographical area or by reason of its being too extensive in any other respect, it will be interpreted to extend only over the maximum period of time for which it may be enforceable, over the maximum geographical area as to which it may be enforceable, or to the maximum extent in all other respects as to which it may be enforceable, all as determined by such court in such action.

(c)Proprietary Information and Inventions Agreement.  Executive and the Company have executed the Company’s standard Proprietary Information and Inventions Agreement, which agreement is attached hereto as Exhibit B and incorporated herein by reference (the “Proprietary Information and Inventions Agreement”).  Executive agrees to perform each and every obligation of his therein contained.

(d)Return of Property.  Upon termination of Executive’s employment with the Company for any reason, Executive will promptly deliver to the Company all correspondence, drawings, manuals, letters, notes, notebooks, reports, programs, plans, proposals, financial documents, or any other documents or property concerning the Company’s customers, business plans, marketing strategies, products, property or processes.

(e)Non-Disparagement.  Each Party (which, in the case of the Company, shall mean its officers and the members of the Board) agrees, during the Term and following the Date of Termination, to refrain from Disparaging (as defined below) the other Party and its affiliates, including, in the case of the Company, any of its services, technologies or practices, or any of its directors, officers, agents, representatives or stockholders, either orally or in writing.  Nothing in this paragraph shall preclude any Party from making truthful statements that are reasonably necessary to comply with applicable law, regulation or legal process, or to defend or enforce a Party’s rights under this Agreement.  For purposes of this Agreement, “Disparaging” means remarks, comments or statements, whether written or oral, that are intended to impugn the character, integrity, reputation or abilities of the person or entity being disparaged.

(f)Definitions.  As used in this Section 4, (i) the term “Company” shall include the Company and its direct and indirect parents and subsidiaries; (ii) the term “Business” shall mean the business of the Company, as such business may be expanded or altered by the Company during the Term; and (iii) the term “Restriction Period” shall mean the period beginning on the Effective Date and ending on the date that is twelve (12) months following the Date of Termination.

(g)Rights and Remedies Upon Breach.  It is recognized and acknowledged by Executive that a breach of the covenants contained in this Section 4 may cause irreparable damage to Company and its goodwill, the exact amount of which will be difficult or impossible to ascertain, and that the remedies at law for any such breach will be inadequate.  Accordingly, 

	
 
	
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Executive agrees that in the event of a breach of any of the covenants contained in this Section 4, in addition to any other remedy which may be available at law or in equity, the Company will be entitled to specific performance and injunctive relief.  In addition, in the event Executive breaches any of the provisions of this Section 4, as finally determined by a court of competent jurisdiction, and such breach is not cured within thirty (30) days after receipt by Executive of written notice thereof from the Company, the Company shall be entitled to immediately cease all payments under Section 3(d) above.

(h)Acknowledgment by Executive.  Executive has carefully read and considered the provisions of this Section 4, and, having done so, agrees that the restrictions set forth in this Section 4, including, but not limited to, the Restriction Period, are fair and reasonable and are reasonably required for the protection of the interests of the Company and its parent or subsidiary corporations, officers, directors, shareholders, and other employees.

	
5.
	
Indemnification.

Executive shall be entitled to indemnification as a director, officer and employee of the Company and its affiliates as provided in Article IX of the Bylaws of the Company, without regard to any future changes in Executive’s assignment or position.  In addition, to the extent the Company obtains insurance providing coverage or indemnification for other directors, officers or employees, or enters into any agreements with any other directors, officers or employees which provide such director, officer or employee with rights to indemnification, Executive shall be included as a named insured in such policy and/or granted the same rights to indemnification as are provided in such other agreements.  

	
6.
	
Assignment and Successors.

The Company may assign its rights and obligations under this Agreement to any affiliate or to any successor to all or substantially all of the business or the assets of the Company (by merger or otherwise), and may collaterally assign or encumber this Agreement and its rights hereunder as security for indebtedness of the Company and its affiliates.  The Company shall require any successor (whether direct or indirect, by purchase, merger or otherwise) to all or substantially all of the business or assets of the Company expressly to assume and to agree in writing to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place; provided, however, that no such assumption shall relieve the Company of its obligations hereunder. This Agreement shall be binding upon and inure to the benefit of the Company, Executive and their respective successors, assigns, personnel and legal representatives, executors, administrators, heirs, distributees, devisees, and legatees, as applicable.  None of Executive’s rights or obligations may be assigned or transferred by Executive, other than Executive’s rights to payments hereunder, which may be transferred only by will or operation of law.  Notwithstanding the foregoing, Executive shall be entitled, to the extent permitted under applicable law and applicable Company Arrangements, to select and change a beneficiary or beneficiaries to receive compensation hereunder following Executive’s death by giving written notice thereof to the Company.

	
 
	
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Miscellaneous Provisions.

(a)Governing Law; Venue.  This Agreement shall be governed, construed, interpreted and enforced in accordance with its express terms, and otherwise in accordance with the substantive laws of the State of California without reference to the principles of conflicts of law of the State of California or any other jurisdiction, and where applicable, the laws of the United States.  Any suit brought hereon shall be brought in the state or federal courts sitting in San Diego, California, the Parties hereby waiving any claim or defense that such forum is not convenient or proper.  Each Party hereby agrees that any such court shall have in personam jurisdiction over him or it and consents to service of process in any manner authorized by California law.

(b)Validity.  The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

(c)Notices.  Any notice, request, claim, demand, document and other communication hereunder to any Party shall be effective upon receipt (or refusal of receipt) and shall be in writing and delivered personally or sent by facsimile or certified or registered mail, postage prepaid, as follows:

(i)If to the Company:

 

		
	
Sorrento Therapeutics, Inc.

	
9380 Judicial Drive

	
San Diego, CA 92121

	
Attention:
	
Chairman of the Board of Directors

	
Facsimile:
	
(858) 210-3759

 

(ii)If to Executive, at the last address that the Company has in its personnel records for Executive, with a copy to:

 

		
	
Sills Cummis & Gross P.C.

	
One Riverfront Plaza

	
Newark, NJ  07102

	
Attention:
	
Ira A. Rosenberg, Esq.

	
Facsimile:
	
(973) 643-6500; or

 

(iii)At any other address as any Party shall have specified by notice in writing to the other Party.

(d)Counterparts.  This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement.  Signatures delivered by facsimile shall be deemed effective for all purposes.

(e)Entire Agreement.  The terms of this Agreement, together with the Proprietary Information and Inventions Agreement, are intended by the Parties to be the final expression of 

	
 
	
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their agreement with respect to the subject matter hereof and supersede all prior understandings and agreements, whether written or oral, including, without limitation, any offer letter, employment or consulting agreement between the Company and Executive.  For the avoidance of doubt, this Agreement supersedes and replaces that certain Employment Agreement dated September 21, 2012 between the Parties, as amended.  The Company shall be entitled to enforce any and all such agreements against Executive to ensure that the Company receives the benefit of all such agreements.  The Parties further intend that this Agreement shall constitute the complete and exclusive statement of their terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative, or other legal proceeding to vary the terms of this Agreement.

(f)Amendments; Waivers.  This Agreement may not be modified, amended, or terminated except by an instrument in writing, signed by Executive and a duly authorized officer of Company.  By an instrument in writing similarly executed, Executive or a duly authorized officer of the Company may waive compliance by the other Party with any specifically identified provision of this Agreement that such other Party was or is obligated to comply with or perform; provided, however, that such waiver shall not operate as a waiver of, or estoppel with respect to, any other or subsequent failure.  No failure to exercise and no delay in exercising any right, remedy, or power hereunder preclude any other or further exercise of any other right, remedy, or power provided herein or by law or in equity.

(g)No Inconsistent Actions.  The Parties hereto shall not voluntarily undertake or fail to undertake any action or course of action inconsistent with the provisions or essential intent of this Agreement.  Furthermore, it is the intent of the Parties hereto to act in a fair and reasonable manner with respect to the interpretation and application of the provisions of this Agreement.

(h)Construction.  This Agreement shall be deemed drafted equally by both the Parties.  Its language shall be construed as a whole and according to its fair meaning.  Any presumption or principle that the language is to be construed against any Party shall not apply.  The headings in this Agreement are only for convenience and are not intended to affect construction or interpretation.  Any references to paragraphs, subparagraphs, sections or subsections are to those parts of this Agreement, unless the context clearly indicates to the contrary.  Also, unless the context clearly indicates to the contrary, (i) the plural includes the singular and the singular includes the plural; (ii) “and” and “or” are each used both conjunctively and disjunctively; (iii) “any,” “all,” “each,” or “every” means “any and all,” and “each and every”; (iv) “includes” and “including” are each “without limitation”; (v) “herein,” “hereof,” “hereunder” and other similar compounds of the word “here” refer to the entire Agreement and not to any particular paragraph, subparagraph, section or subsection; and (vi) all pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural as the identity of the entities or persons referred to may require.

(i)Arbitration.  Both Executive and the Company agree to submit any and all disputes, controversies, or claims based upon, relating to, or arising from your employment by the Company (other than workers’ compensation claims) or the terms, interpretation, performance, breach, or arbitrability of this Agreement to final and binding arbitration before a single neutral arbitrator in San Diego County, California.  Subject to the terms of this paragraph, the arbitration proceedings shall be initiated in accordance with, and governed by, the applicable 

	
 
	
13
	
 

 

 

rules (the “Rules”) for the resolution of employment disputes of the American Arbitration Association (“AAA”) (such rules previously referred to as the National Rules for the Resolution of Employment Disputes).  The Executive acknowledges that a copy of the current Rules have been provided to him.  The arbitrator shall be appointed by agreement of the Parties hereto or, if no agreement can be reached, by the AAA pursuant to its Rules.  Notwithstanding the Rules, the Parties may take discovery in accordance with Sections 1283.05(a)-(d) of the California Code of Civil Procedure (but not subject to the restrictions of Section 1283.05(e)), and prior to the arbitration hearing the Parties may file, and the arbitrator shall rule on, pre-trial motions such as demurrers and motions for summary judgment (applying the procedural standard embodied in Rule 56 of the Federal Rules of Civil Procedure).  The time for filing such motions shall be determined by the arbitrator.  The arbitrator will rule on all pre-trial motions at least ten (10) business days prior to the scheduled hearing date.  Arbitration may be compelled, the arbitration award shall be enforced, and judgment thereon shall be entered, pursuant to the California Arbitration Act (Code of Civil Procedure §§ 1280 et seq.).  Each Party shall bear his or its own attorneys’ fees and costs (including expert witness fees) incurred in connection with the arbitration; provided, however, Executive and the Company agree that, to the extent permitted by law, the arbitrator may, in his or her discretion, award reasonable attorneys’ fees to the prevailing party.  The Company shall bear all other costs and expenses of arbitration, including AAA’s administrative fees and the arbitrator’s fees and costs.  If either Party is required to compel arbitration of a dispute governed by this paragraph, the Party prevailing in that proceeding shall be entitled to recover from the other Party reasonable costs and attorneys’ fees incurred to compel arbitration.  This Section 7(i) is intended to be the exclusive method for resolving any and all claims by Executive or the Company against each other for payment of damages under this Agreement or relating to Executive’s employment or service; provided, however, that neither this Agreement nor the submission to arbitration shall limit Executive’s or the Company’s right to seek provisional relief, including without limitation injunctive relief, in any court of competent jurisdiction.  Both Executive and the Company expressly waive their respective rights to a jury trial.

(j)Enforcement.  If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws effective during the term of this Agreement, such provision shall be fully severable; this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a portion of this Agreement; and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement.  Furthermore, in lieu of such illegal, invalid or unenforceable provision there shall be added automatically as part of this Agreement a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable.

(k)Withholding.  The Company shall be entitled to withhold from any amounts payable under this Agreement any federal, state, local or foreign withholding or other taxes or charges which the Company is required to withhold.  The Company shall be entitled to rely on an opinion of counsel if any questions as to the amount or requirement of withholding shall arise.

(l)Survival.  The covenants, agreements, representations and warranties contained in or made in Sections 3, 4 and 7 shall survive any termination of this Agreement, subject to any time limits set forth therein.

	
 
	
14
	
 

 

 

(m)Section 409A.

(i)General.  The intent of the Parties is that the payments and benefits under this Agreement comply with or be exempt from Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations and guidance promulgated thereunder (collectively, “Section 409A”) and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith.

(ii)Separation from Service.  Notwithstanding anything in this Agreement to the contrary, any compensation or benefits payable under this Agreement that is considered nonqualified deferred compensation under Section 409A and is designated under this Agreement as payable upon Executive’s termination of employment shall be payable only upon Executive’s “separation from service” with the Company within the meaning of Section 409A (a “Separation from Service”) and, except as provided below, any such compensation or benefits described in Section 4(b) shall not be paid until the fifty-fifth (55th) day following Executive’s Separation from Service (the “First Payment Date”).

(iii)Specified Employee.  Notwithstanding anything in this Agreement to the contrary, if Executive is deemed by the Company at the time of Executive’s Separation from Service to be a “specified employee” for purposes of Section 409A, to the extent delayed commencement of any portion of the benefits to which Executive is entitled under this Agreement is required in order to avoid a prohibited distribution under Section 409A, such portion of Executive’s benefits shall not be provided to Executive prior to the earlier of (i) the expiration of the six-month period measured from the date of Executive’s Separation from Service with the Company or (ii) the date of Executive’s death.  Upon the first business day following the expiration of the applicable Section 409A period, all payments deferred pursuant to the preceding sentence shall be paid in a lump sum to Executive (or Executive’s estate or beneficiaries), and any remaining payments due to Executive under this Agreement shall be paid as otherwise provided herein.

(iv)Expense Reimbursements.  To the extent that any reimbursements under this Agreement are subject to Section 409A, any such reimbursements payable to Executive shall be paid to Executive no later than December 31 of the calendar year following the calendar year in which the expense was incurred; provided, that Executive submits Executive’s reimbursement request promptly following the date the expense is incurred, the amount of expenses reimbursed in one calendar year shall not affect the amount eligible for reimbursement in any subsequent calendar year, other than medical expenses referred to in Section 105(b) of the Code, and Executive’s right to reimbursement under this Agreement will not be subject to liquidation or exchange for another benefit.

(v)Installments.  Executive’s right to receive any installment payments under this Agreement, including without limitation any continuation salary payments that are payable on Company payroll dates, shall be treated as a right to receive a series of separate payments and, accordingly, each such installment payment shall at all times be 

	
 
	
15
	
 

 

 

considered a separate and distinct payment as permitted under Section 409A.  Except as otherwise permitted under Section 409A, no payment hereunder shall be accelerated or deferred unless such acceleration or deferral would not result in additional tax or interest pursuant to Section 409A.

(n)Attorneys’ Fees.  The Company shall reimburse Executive for Executive’s attorneys' fees and tax consultant/advisor fees, up to $10,000 in the aggregate, incurred in connection with the review and negotiation of this Agreement and the documents and agreements related hereto.

	
8.
	
Executive Acknowledgement.

Executive acknowledges that Executive has read and understands this Agreement, is fully aware of its legal effect, has not acted in reliance upon any representations or promises made by the Company other than those contained in writing herein, and has entered into this Agreement freely based on Executive’s own judgment.

[Signature Page Follows]

 

 

	
 
	
16
	
 

 

 

IN WITNESS WHEREOF, the Parties have executed this Agreement on the date and year first above written.

 

		
	
COMPANY

	
By:
	
/s/ William Marth

	
Name:
	
William Marth

	
Title:
	
Chairperson of the Board of Directors

	
 
	
 

 

		
	
EXECUTIVE

	
By:
	
/s/ Henry Ji, Ph.D.

	
Name:
	
Henry Ji, Ph.D.

 

 

	
 
	
 
	
 

 

 

Exhibit  A – Release Agreement

GENERAL RELEASE OF ALL CLAIMS

This General Release of all Claims (this “Agreement”) is entered into by Henry Ji, Ph.D. (the “Employee”) and Sorrento Therapeutics, Inc., a Delaware corporation (together with any successor thereto, the “Company”), effective as of _____________________, but subject to the Employee’s right to revoke as set forth in Section 3(c).  In consideration of the promises set forth herein, the Employee and the Company agree as follows:

1.Return of Property.  All files, access keys and codes, desk keys, ID badges, computers, records, manuals, electronic devices, computer programs, papers, electronically stored information or documents, telephones and credit cards, and any other property of the Company or any affiliate thereof previously in the Employee’s possession or control has been returned to the Company.

2.Severance.  The Company shall pay/provide to the Employee the amounts/benefits set forth in Section 3(d)[(i)(ii)]1 of that certain Amended and Restated Employment Agreement between the Company and the Employee dated as of May 9, 2017 (as may be amended or restated from time to time) (the “Employment Agreement”)) in accordance with, and subject to, the provisions of the Employment Agreement.

3.General Release and Waiver of Claims.

(a)Release.  Having consulted with counsel, the Employee, on behalf of him/herself  and each of his/her respective heirs, executors, administrators, representatives, agents, insurers, successors and assigns (collectively, and including the Employee, the “Releasors”) hereby irrevocably and unconditionally releases and forever discharges the Company, its subsidiaries and affiliates (including without limitation Francisco Partners) and each of their respective officers, employees, directors, members, shareholders, parents, subsidiaries and agents (“Releasees”) from any and all claims, actions, causes of action, rights, judgments, obligations, damages, demands, accountings or liabilities of whatever kind or character (collectively, “Claims”), including, without limitation, any Claims under any federal, state, local or foreign law, that the Releasors may have, or in the future may possess, whether known or unknown, arising out of (i) the Employee’s employment relationship with and service as an employee, officer or director of the Company or any parents, subsidiaries or other affiliated companies and the termination of such relationship or service, and (ii) any event, condition, circumstance or obligation that occurred, existed or arose on or prior to the date hereof; provided, however, that the Employee does not release, discharge or waive any rights to (i) payments and benefits provided under this Agreement, (ii) benefit claims under any employee benefit plans in which Employee is a participant by virtue of his/her employment with the Company arising after the execution of this Agreement by Employee, and (iii) any indemnification rights the Employee may have in accordance with applicable law or under any director and officer liability insurance maintained by the Company with respect to liabilities arising as a result of the Employee’s service as an officer, if applicable, and employee of the 

	
	 

	
1 
	
 Appropriate section to be referenced

	
 
	
1
	
 

 

 

Company.  This Paragraph 3(a) does not apply to any Claims that the Releasors may have as of the date the Employee signs this Agreement arising under the Federal Age Discrimination in Employment Act of 1967, as amended, and the applicable rules and regulations promulgated thereunder (“ADEA”) or any other claims that may not be released as a matter of law.  Claims arising under ADEA are addressed in Paragraph 3(c) of this Agreement.

(b)Unknown Claims.  The Employee acknowledges that he/she may hereafter discover Claims or facts in addition to or different from those which the Employee now knows or believes to exist with respect to the subject matter of this release and which, if known or suspected at the time of executing this release, may have materially affected this release or the Employee’s decision to enter into it.  Nevertheless, the Employee, on behalf of him/herself and the other Releasors, hereby waives any right or Claim that might arise as a result of such different or additional Claims or facts.  In addition, the Employee, on behalf of him/herself and the other Releasors, hereby waives any and all rights and benefits conferred upon him/her and the other Releasors by the provisions of Section 1542 of the Civil Code of the State of California, which provides as follows:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.

(c)Specific Release of ADEA Claims.  In further consideration of the payments and benefits provided to the Employee under this Agreement, the Employee, on behalf of him/herself and the other Releasors, hereby unconditionally releases and forever discharges the Releasees from any and all Claims arising under ADEA that the Releasors may have as of the date the Employee signs this Agreement.  By signing this Agreement, the Employee hereby acknowledges and confirms the following: (i) the Employee was advised by the Company in connection with his/her termination to consult with an attorney of his/her choice prior to signing this Agreement and to have such attorney explain to the Employee the terms of this Agreement, including, without limitation, the terms relating to the Employee’s release of claims arising under ADEA, and the Employee has in fact consulted with an attorney; (ii) the Employee was given a period of not fewer than 45 days to consider the terms of this Agreement and to consult with an attorney of his/her choosing with respect thereto; (iii) the Employee knowingly and voluntarily accepts the terms of this Agreement; and (iv) the Employee is providing this release and discharge only in exchange for consideration in addition to anything of value to which the Employee is already entitled.  The Employee also understands that he/she has seven days following the date on which he/she signs this Agreement within which to revoke the release contained in this paragraph, by providing the Company with a written notice of his/her revocation of the release and waiver contained in this paragraph.

(d)No Assignment.  The Employee represents and warrants that he/she has not assigned any of the Claims being released under this Agreement.  The Company may assign this Agreement, in whole or in part, to any affiliated company, including subsidiaries of the Company, or any successor in interest to the Company.

	
 
	
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4.Proceedings.

(a)General Agreement Relating to Proceedings.  The Employee has not filed, and except as provided in Paragraphs 4(b) and 4(c), the Employee agrees not to initiate or cause to be initiated on his/her behalf, any complaint, charge, claim or proceeding against the Releasees before any local, state or federal agency, court or other body relating to his/her employment or the termination of his/her employment, other than with respect to the obligations of the Company to the Employee under this Agreement or any indemnification rights the Employee may have as listed in Paragraph 3(a) (each, individually, a “Proceeding”), and agrees not to participate voluntarily in any Proceeding.  The Employee waives any right he/she may have to benefit in any manner from any relief (whether monetary or otherwise) arising out of any Proceeding.

(b)Proceedings Under ADEA.  Paragraph 4(a) shall not preclude the Employee from filing any complaint, charge, claim or proceeding challenging the validity of the Employee’s waiver of Claims arising under ADEA (which is set forth in Paragraph 3(c) of this Agreement).  However, both the Employee and the Company confirm their belief that the Employee’s waiver of claims under ADEA is valid and enforceable, and that their intention is that all claims under ADEA will be waived.

(c)Certain Administrative Proceedings.  In addition, Paragraph 4(a) shall not preclude the Employee from filing a charge with, or participating in any administrative investigation or proceeding by, the Equal Employment Opportunity Commission, National Labor Relations Board, or another fair employment practices agency.  The Employee is, however, waiving his/her right to recover money in connection with any such charge or investigation.  The Employee is also waiving his/her right to recover money in connection with a charge filed by any other entity or individual, or by any federal, state or local agency.

5.Severability Clause.  In the event that any provision or part of this Agreement is found to be invalid or unenforceable, only that particular provision or part so found, and not the entire Agreement, shall be inoperative.

6.Nonadmission.  Nothing contained in this Agreement shall be deemed or construed as an admission of wrongdoing or liability on the part of the Company.

7.Governing Law and Forum.  This Agreement and all matters or issues arising out of or relating to your employment with the Company shall be governed by the laws of the State of California applicable to contracts entered into and performed entirely therein.  Any action to enforce this Agreement shall be brought solely in the state or federal courts located in San Diego County, California

8.Arbitration.  Any dispute or controversy arising under or in connection with this Agreement or otherwise in connection with the Executive’s employment by the Corporation that cannot be mutually resolved by the parties to this Agreement and their respective advisors and representatives shall be settled exclusively by arbitration in accordance with the provisions of Section 7(i) of the Employment Agreement.

	
 
	
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9.Notices.  Notices under this Agreement must be given as is specified in Section 7(c) of the Employment Agreement.

THE EMPLOYEE ACKNOWLEDGES THAT HE/SHE HAS READ THIS AGREEMENT AND THAT HE/SHE FULLY KNOWS, UNDERSTANDS AND APPRECIATES ITS CONTENTS, AND THAT HE/SHE HEREBY EXECUTES THE SAME AND MAKES THIS AGREEMENT AND THE RELEASE AND AGREEMENTS PROVIDED FOR HEREIN VOLUNTARILY AND OF HIS/HER OWN FREE WILL.

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4
	
 

 

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the dates set forth below.

 

	
“COMPANY”

 

	
 
	
 

	
By:
	
 

	
Name:
	
 

	
Dated:
	
 

 

	
“EMPLOYEE”

	
 

 

	
 

	
Dated:bsqr-ex101_367.htm

Exhibit 10.1

August 31, 2016

Dave Wagstaff

123 112th Ave. NE, #131

Bellevue, WA 98004

Dear Dave:

Bsquare is pleased to confirm and memorialize the revised terms of your employment as the company's Chief Technical Officer. This letter agreement supersedes all previous employment letter agreements between you and the company.

You will continue reporting to Jerry Chase, Chief Executive Officer. Your start date for this new new role was May 23, 2016. Your job classification is Executive; as an exempt employee you will not be entitled to overtime. You are now a Section 16 officer, subject to certain Bsquare stock trading restrictions and SEC reporting requirements (see attached memorandum for details). Your duties and responsibilities will be as designated by Bsquare.

Your offer includes the following compensation & benefits package:

	
 
	
•
	
Base pay of $9,230.76 biweekly, which when annualized is equivalent to $240,000.00 per year; paid biweekly consistent with the company's payroll practices;

	
 
	
•
	
Monthly cell phone stipend of $150.00. The stipend is a taxable benefit and will be dispursed in the first payroll of the month via payroll;

	
 
	
•
	
You will be eligible to participate in the company's Annual Bonus Plan ("ABP"). Your 2016 annual bonus potential will be 50% of your base salary at 100% achievement. The company's executive bonus plan is structured such that no bonuses are paid until the company achieves certain financial targets and you achieve individual objectives that you and your manager will agree upon. Bonuses are paid annually, in the first quarter following the close of the company's fiscal year, and are payable at the sole discretion of the Compensation Committee of the company's Board of Directors (the "Board"). You must be employed by the company at the end of the calendar year to be eligible to receive any bonus payout for that calendar year, except as otherwise specifically set out below;

	
 
	
•
	
You will continue to be eligible to participate in any benefit plans and programs in effect from time to time (such as paid time off, group medical and life insurance, and disability benefits) that are made available to Bsquare employees generally, subject to the eligibility requirements and other terms of those plans and programs.

Except as provided in the next paragraph, if your employment is terminated by the company when neither “cause" nor "long term disability" exists, and provided that you release the company and its agents from any and all employment-related claims in a signed, written release satisfactory in form and substance to the company, (i) you will be entitled to receive severance equal to 6 months of your then-current annual base salary; (ii) your stock options and restricted stock units will continue to vest for 4 months from the termination date, (iii) you shall be eligible for continued COBRA coverage at the company's expense for a period of 6 months following your termination date, and (iv) any ABP bonus to which you would have otherwise been entitled as determined at the sole discretion of the Compensation Committee of the Board shall be payable on a pro rata basis as of your termination date. The foregoing severance payments shall be paid out on regular payroll days post termination, subject to legally required and any individually agreed upon payroll deductions. During the period subsequent to 

110 110th Ave. NE., suite 300, Bellevue, Washington 98004 Toll Free: 888.820.4500 Main: +1 425.519.5900 Fax: +1 425.519.5999

Bsquare Confidential

 

your termination date in which you are being paid such severance amounts, you would not be considered an employee and would therefore receive no paid time off accrual, nor would you be entitled to benefits under the company's health and welfare plans or retirement savings plan as an active employee, except as otherwise provided herein.

Immediately prior to consummation of a "change of control," all of your unvested stock options and restricted stock units shall become fully vested and immediately exercisable. In addition, if your employment is terminated by the company or any successor thereto within 9 months following a change of control when neither "cause" nor "long term disability" exists or if you terminate your employment for "good reason," and provided that you release the company and any successor thereto and its respective agents from any and all employment-related claims in a signed, written release satisfactory in form and substance to the company or any successor thereto, you will be entitled to receive a one-time lump sum severance payment equal to (i) 9 months of your thencurrent annual base salary plus (ii) 75% of your target ABP bonus as may be modified from time to time by the Compensation Committee of the Board (provided the applicable percentage shall be 75% for 2016), and (iii) you shall be eligible for continued COBRA coverage at the company's expense for a period of 9 months following your termination date. The foregoing severance payments shall be in lieu of the severance payments described in the preceding paragraph, and after expiration of the 9-month period following a change of control, you shall continue to be entitled to receive the severance payments described in the preceding paragraph on the terms and conditions set forth therein.

For purposes of this letter agreement, "cause," "good reason" and "change of control" are defined on Attachment A hereto, and "long term disability" is defined in the company-sponsored long term disability group insurance plan.

No severance shall be payable hereunder unless the release described herein has been signed and become effective within sixty (60) days from the date of termination (the "Release Deadline"). Upon the release becoming effective, any severance payable hereunder will be payable commencing on or as soon as administratively practicable after the Release Deadline. In the event the termination occurs at a time during the calendar year when the release could become effective in the calendar year following the calendar year in which your termination occurs, then any payments hereunder that would be considered deferred compensation under Section 409A of the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations promulgated thereunder ("Section 409A") will be paid commencing on the first payroll date to occur during the calendar year following the calendar year in which such termination occurs, or, if later, the Release Deadline.

Notwithstanding any other provision of this letter agreement, if at the time of the termination of your employment, you are a "specified employee," determined in accordance with Section 409A, any payments and benefits provided hereunder that constitute "nonqualified deferred compensation" subject to Section 409A that are provided on account of separation from service shall not be paid until the first payroll date to occur following the six-month anniversary of your termination date (the "Specified Employee Payment Date"). The aggregate amount of any payments that would otherwise have been made during such six-month period shall be paid in a lump sum on the Specified Employee Payment Date without interest, and thereafter, any remaining payments shall be paid without delay in accordance with their original schedule.

The foregoing provisions are intended to comply with the requirements of Section 409A so that none of the benefits to be provided hereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities herein will be interpreted to so comply. You and the company agree to work together in good faith to consider amendments to this letter agreement and to take such reasonable actions which are necessary, appropriate or desirable to avoid imposition of any additional tax or income recognition prior to actual payment to you under Section 409A.

Furthermore, notwithstanding any other provision of this letter agreement or any other plan, arrangement or agreement to the contrary, if any of the payments or benefits provided or to be provided by the company or any 

	
Bsquare Confidential
	
2

 

 

successor to you or for your benefit pursuant to the terms of this Letter Agreement or otherwise ("Covered Payments") constitute parachute payments ("Parachute Payments") within the meaning of Section 280G of the Code and will be subject to the excise tax imposed under Section 4999 of the Code (or any successor provision thereto) or any interest or penalties with respect to such excise tax (collectively, the "Excise Tax"), then the company shall pay to you, no later than the time the Excise Tax is required to be paid by you or withheld by the company, an additional amount (the "Gross-up Payment") equal to the sum of the Excise Tax payable by you, plus the amount necessary to put you in the same after-tax position (taking into account any and all applicable federal, state, local and foreign income, employment and excise taxes (including the Excise Tax and any income and employment taxes imposed on the Gross-up Payment)) that you would have been in if you had not incurred any tax liability under Section 4999 of the Code. Any determination required under this paragraph, including whether any payments or benefits are Parachute Payments, shall be made by the company in its sole discretion. You shall provide the company with such information and documents as the company may reasonably request in order to make a determination under this paragraph. The company's determinations shall be final and binding on the company and you.

YOUR EMPLOYMENT IS AT-WILL AND ACCORDINGLY, YOU OR THE COMPANY MAY TERMINATE THIS EMPLOYMENT RELATIONSHIP AT ANY TIME WITH OR WITHOUT NOTICE OR CAUSE.

Please indicate your acceptance by signing and returning a copy of this letter agreement.

Thank you for your continued efforts to support the success of our team and Bsquare!

Sincerely,

I understand and agree to the terms of this letter agreement.

Signature: 

Name: David Wagstaff

Date: 

	
Bsquare Confidential
	
3

 

 

ATTACHMENT A

This attachment sets out definitions for certain of the terms used in this letter agreement:

	
 
	
•
	
"cause" means and is limited to dishonesty, fraud, commission of a felony or of a crime involving moral turpitude, destruction or theft of company property, physical attack to a fellow employee, intoxication at work, use of controlled substances or alcohol to an extent that materially impairs your performance of your duties, willful malfeasance or gross negligence in the performance of your duties, violation of law in the course of employment that has a material adverse impact on the company or its employees, your failure or refusal to perform your duties, your failure or refusal to follow reasonable instructions or directions, misconduct materially injurious to the company, neglect of duty, poor job performance, or any material breach of your duties or obligations to the company that results in material harm to the company.

	
 
	
•
	
"neglect of duty" means and is limited to the following circumstances: (i) you have, in one or more material respects, failed or refused to perform your job duties in a reasonable and appropriate manner (including failure to follow reasonable directives), (ii) the Board, or a duly appointed representative of the Board, has counseled you in writing about the neglect of duty and given you a reasonable opportunity to improve, and (iii) your neglect of duty either has continued at a material level after a reasonable opportunity to improve or has reoccurred at a material level within one year after you were last counseled.

	
 
	
•
	
"poor job performance" means and is limited to the following circumstances: (i) you have, in one or more material respects, failed to perform your job duties in a reasonable and appropriate manner, (ii) the Board, or a duly appointed representative of the Board, has counseled you in writing about the performance problems and given you a reasonable opportunity to improve, and (iii) your performance problems either have continued at a material level after a reasonable opportunity to improve or the same or similar performance problems have reoccurred at a material level within one year after you were last counseled.

	
 
	
•
	
"good reason" means the occurrence of any of the following, in each case without your written consent:

	
 
	
(i)
	
a material reduction in you base salary other than a general reduction in base salary that affects all similarly situated executives in substantially the same proportions;

	
 
	
(ii)
	
a material reduction in your AEBP bonus target; or

	
 
	
(iii)
	
a material, adverse change in your title, authority, duties or responsibilities (other than as required by applicable law).

	
Bsquare Confidential
	
4

 

 

You cannot terminate your employment for good reason unless you have provided written notice to the company of the existence of the circumstances providing grounds for termination for good reason within thirty (30) days of the initial existence of such grounds and the company has had at least thirty (30) days from the date on which such notice is provided to cure such circumstances. If you do not terminate your employment for good reason within ninety (90) days after the first occurrence of the applicable grounds, then you will be deemed to have waived your right to terminate for good reason with respect to such grounds.

	
 
	
•
	
"change of control" means:

	
 
	
(i)
	
the acquisition of the company by another entity by means of merger, consolidation or other transaction or series of related transactions resulting in the exchange of the outstanding sharesof the company for securities of, or consideration issued, or caused to be issued by, the acquiring entity or any of its affiliates, provided, that after such event the shareholders of the company immediately prior to the event own less than a majority of the outstanding voting equity securities of the surviving entity immediately following the event; or

	
 
	
(ii)
	
any sale, lease, exchange or other transfer not in the ordinary course of business (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the company.

	
 
	
•
	
the "company" and "Bsquare" mean BSQUARE Corporation.

	
Bsquare Confidential
	
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