SCIOS INC.
September 8, 1998
Xx. Xxxxxxx X. Xxxxxx
000 Xxxxxxx Xxxx
Xxxxxxxxxxxx, XX 00000
Dear Dick:
On behalf of the Board of Directors and the senior management
of Scios, Inc. ("Scios" or the "Company"), I am very pleased to extend to you
our offer to lead our Company as President and Chief Executive Officer. This
letter sets forth the terms of your employment by Scios, with your first day of
employment being September 9, 1998.
1. Position, Duties and Responsibilities
-------------------------------------
a. You shall be the President and Chief Executive Officer of the Company and
shall in such capacity report directly to the Company's Board of Directors (the
"Board"). Your duties and responsibilities will be determined from time to time
by the Board, and will be consistent with your position as President and Chief
Executive Officer.
b. You shall be appointed to the Board of Directors and serve on such Committees
of the Board as elected or appointed by the Board.
c. During the period of employment hereunder and except for illness or vacation
periods, you shall devote your full business time, ability and attention to the
business of the Company, and shall not engage in or perform duties for any other
person which interfere with the performance of your duties hereunder. It is
possible that you may wish to hold board of director positions on outside civic
organizations, and that reasonable time will be made available to fulfill your
duties in that regard as long as those activities do not interfere with the
performance of your duties hereunder. Any outside commercial board of directors
positions will be subject to written approval by the Board, which approval shall
not be unreasonably withheld.
d. You agree to sign the Company's standard proprietary information agreement
for employees.
2. Salary and Bonus Compensation
-----------------------------
a. Base Salary. As compensation for your services hereunder, including your
services as a member of the Board, you shall receive a base salary of $400,000
per annum, provided that in view of the limited amount of time you will be able
to devote to the Company's business this month, your base salary for September
1998 will be $3,000. This base salary may be increased annually by the Board,
consistent with your performance and the Company's policy regarding increases in
officer compensation established from time to time by the Board.
b. Bonus Compensation. You may, in addition, at the Board's discretion, be
awarded incentive compensation, in the form of a cash bonus for each fiscal year
during your employment based upon performance. If the targeted level of
performance is satisfied, and you are employed at year end, unless employment
has been terminated for Good Reason or Without Cause as defined below, the cash
bonus amount will be equal to fifty percent (50%) of your base salary for the
year in which you satisfied the bonus criteria; with a maximum bonus of one
hundred percent (100%) of base salary if your performance substantially exceeds
the targeted level. Performance for bonus purposes will be measured against a
set of criteria or milestones to be approved by the Board of Directors no later
than December 31 of the preceding year. For calendar year 1998, your bonus
EXHIBIT 10.38
is guaranteed at a minimum of $50,000. For calendar year 1999, your bonus is
guaranteed at a minimum of at least $200,000; for calendar year 2000, your
minimum bonus will be $100,000. There is no guaranteed minimum level of bonus
compensation thereafter.
3. Benefits
--------
Standard Benefits. To the extent eligible, you will be
entitled to participate in such other benefit programs as are generally made
available to other members of senior management.
4. Expense Reimbursement
---------------------
The Company shall reimburse you for certain expenses under the
standard executive benefits program of the Company. Additionally, the Company
will reimburse you in accordance with the Company's reimbursement policies in
effect from time to time for all reasonable and customary business expenses
incurred during your employment, provided that you furnish to the Company
reasonably adequate records and documentary evidence of such expense.
5. Long-Term Incentive Compensation
--------------------------------
As of September 9, 1998, you shall receive the following
grants in accordance with the terms of the Company's 1992 Equity Incentive Plan,
as amended in 1998.
a. Stock Option. You will receive an initial grant of Stock Options for 200,000
shares of the Company's common stock exercisable at fair market value on the
date of grant and having a term of ten years. You shall vest in the option
shares 25% on your first day of employment and in the balance of the option
shares in three successive equal annual installments on your anniversary date so
long as you remain in continuous service with the Company.
On May 3, 1999, you will receive a second grant of Stock
Options for 200,000 shares of the Company's common stock exercisable at the fair
market value on the date of grant and having a term of ten years. This option
grant will vest 25% on the date of grant and the balance of the option shares in
three annual installments on the next three anniversaries of that grant date so
long as you remain in continuous service with the Company.
b. Restricted Share Units. You shall be granted Restricted Share Units in the
amount of 100,000 shares. The Restricted Share Units shall vest 50% at your
one-year anniversary and 50% on your two-year anniversary so long as you remain
in continuous service with the Company.
c. Incentive Stock Options. You shall be granted the right to purchase 75,000
shares of the Company's common stock under an "incentive stock option" as
permitted by Section 422 of the Internal Revenue Code. The option's exercise
price will be the stock's fair market value on the grant date, and the option
will become vested and exercisable 20% on your first day of employment and the
balance of the option shares in four successive equal annual installments on the
anniversary date, so long as you remain in continuous service with the Company.
d. Annual Awards. You will be eligible to participate in the Company's annual
awards to executives of long-term incentive compensation, presently awarded
under the 1992 Equity Incentive Plan, in the form of stock options, based upon
performance as determined by the Board's Compensation Committee.
e. Cashless Exercise. Your stock options will entitle you to a cashless exercise
feature.
6. Term of Employment
------------------
Your employment with the Company is not for any specified
period of time. As a result, either you or the Company are free to terminate
your employment relationship at any time for any reason, with or without cause
by giving written notice of such termination.
7. Change of Control
-----------------
All of your options, restricted shares and share units will
become fully exercisable (vested) immediately upon an acquisition of the Company
by merger, sale of all or substantially all of the Company's assets, or purchase
of 50% or more of the Company's assets, or purchase of 50% or more of the
Company's stock, or any other reorganization resulting in a change of 50% or
more in the ownership of the Company's stock (any such action hereinafter to be
referred to as a "Change of Control") (whether or not such Change of Control was
caused or could have been prevented by acts of the Company), and whether or not
you shall have voted for such Change of Control as a director or shareholder or
consented thereto expressly or in writing.
8. Effect of Termination
---------------------
If Scios terminates your employment "Without Cause", then
Scios will continue your base salary (based on your base salary prevailing at
the time of termination) for 12 months from the date of the termination of your
employment (hereinafter referred to as the "Severance Period"). Additionally,
you will receive an annual bonus equal to your previous year's bonus or the
guaranteed bonus, if any, for the Severance Period or any part thereof,
whichever is less, at the time bonuses are normally paid to executives of the
Company. Further, you will be given two years of additional service vesting on
your unvested stock options and restricted stock, and will be allowed twelve
months from the date of the termination of your employment to exercise the
vested stock options. If you elect to continue your health insurance coverage
pursuant to COBRA, then Scios will reimburse you for such payments during the
Severance Period.
If you are terminated for "Cause" or you resign at any time
(other than for "Good Reason" as defined below), then you would only be paid all
salary and benefits through the date of termination of your employment.
The severance pay described herein will be in lieu of any
entitlement you may have to notice of termination, pay in lieu of notice of
termination, or any other severance payment from any other source or severance
program. All other employee benefits will end at the time of termination of your
employment according to terms of the applicable plans regardless of the reason
for the termination, provided, however, that Scios will pay to you the full
value of all unused, accrued vacation time in a lump sum on the date of
termination.
As used in this Section, a termination for "Cause" shall mean
a termination for any of the following reasons: (i) engaging in intentional
misconduct which would tend to discredit Scios or your position as President and
Chief Executive Officer; (ii) being convicted of a felony; (iii) committing an
act of fraud against Scios or the willful material misappropriation of property
belonging to Scios; (iv) materially breaching this agreement or any proprietary
information agreement between you and Scios or (v) willfully disregarding your
duties despite adequate warnings from the Board. Scios will provide written
notice of the reason for termination in the case of any termination for "Cause."
A termination for any other reason shall be a termination "Without Cause."
9. Termination for Good Reason. If you terminate your employment with the
Company for Good Reason (as hereinafter defined), you shall be entitled to the
benefits applicable to termination Without Cause as set forth in Paragraph 8.
For the purposes of this Agreement, "Good Reason" shall mean any of the
following: (i) relocation of the Company's executive offices more than forty
miles from the current location, without your concurrence; (ii) any material
breach by the Company of any provision of this Agreement; or (iii) a material
change in the principal line of business of the Company, without your
concurrence.
10. Arbitration
-----------
We each agree that any and all disputes between us which arise
out of your employment, the termination of your employment, or under the terms
of this agreement shall be resolved through final and binding arbitration. This
shall include, without limitation, disputes relating to this agreement, any
disputes regarding your employment by Scios or the termination thereof, claims
for breach of contract or breach of the covenant of good faith and fair dealing,
and any claims of discrimination or other claims under any federal, state or
local law or regulation now in existence or hereinafter enacted and as amended
from time to time concerning in any way the subject of your employment with
Scios or its termination. The only claims not covered by this section are the
following: (i) claims for benefits under the unemployment insurance or worker's
compensation laws and (ii) claims concerning the validity, infringement or
enforceability of any trade secret, patent right, copyright, trademark or any
other intellectual property held or sought by Scios, or which Scios could
otherwise seek; in each of these instances such disputes or claims shall not be
subject to arbitration, but rather, will be resolved pursuant to applicable law.
Binding arbitration will be conducted in the San Francisco Bay Area. The
arbitration will be conducted in accordance with the rules and regulations of
the American Arbitration Association. The prevailing party, as defined in
California statutory law, shall be awarded its attorneys' fees and costs and
arbitration related expenses from the non-prevailing party. You understand and
agree that arbitration shall be instead of any civil litigation that each side
waives its right to a jury trial, and that the arbitrator's decision shall be
final and binding to the fullest extent permitted by law and enforceable by any
court having jurisdiction thereof.
11. Miscellaneous. This Agreement and the rights and obligations of the parties
shall be governed by California law. Neither party may assign this Agreement. In
the event that either party believes that the other party has breached this
Agreement in any way, the party claiming such breach shall give written notice
and thirty day opportunity to cure such breach, in the event such breach is
curable. The Company is simultaneously executing for your benefit the attached
Indemnification Agreement.
If you have any questions about this offer, please contact me.
If you find this offer acceptable, please sign and date this letter below and
return it to me.
Sincerely,
SCIOS INC.
/s/ Xxxxx Du Xxxx
Xxxxx Du Xxxx
Chairman of Search Committee
Attachments (Proprietary Information and Invention Agreement and Indemnification
Agreement)
I agree to the terms and conditions of this offer.
Date: 9/8/98 /s/ Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxx
