Exhibit 10.4
July 15, 2011
Dr. James Crapo, MD
4650 S. Forest Street
Englewood, CO 80113
Subject: Employment Terms
Dear James:
On behalf of the Board of Directors of Omni Bio Pharmaceutical, Inc. (the
“Board”), I would like to clarify and further explain certain terms of your
employment as outlined in your original offer letter dated February 23, 2011.
This letter outlines the terms of your employment relationship with Omni, and
supersedes and replaces the February 23rd letter in its entirety.
This letter confirms the Board’s approval of your compensation as CEO of Omni
Bio Pharmaceutical, Inc. (“Omni” or “Company”).
Below is a summary of certain other terms of your employment with Omni.

     
Start date:
  March 1, 2011
 
   
Position:
  Chief Executive Officer, reporting to the Board
 
   
Cash Compensation:
  $10,000 per month salary, plus $2,000 allowance per month for health insurance
and other fringe benefits.
 
   
Confidentiality Agreement:
  In connection with the execution of this letter, as a condition of your
employment with Omni, you will sign the Confidentiality and Inventions
Assignment Agreement attached hereto as Exhibit A (the “Confidentiality
Agreement”).
 
   
At-Will Employment:
  Your employment with the Company is not for a specific period of time. Rather,
your employment with the Company is “at will,” meaning that it could be
terminated at any time, for any or no reason, at the option of either you or the
Company. Notwithstanding the foregoing, the Company agrees that it shall not
terminate you in bad faith in order to avoid payment of any Incentive Bonus (as
defined below. You also should understand that the compensation and benefits
described in this letter are subject to change during your employment at the
discretion of the Company.
 
   
Company Policies:
  You are expected to follow all applicable policies and procedures adopted by
the Company from time to time, including without limitation policies relating to
business ethics, conflict of interest, non-discrimination, confidentiality and
protection of trade secrets.

 

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Restricted Stock Units:
  300,000 restricted stock units (“RSUs”), vesting over three years as follows:
100,000 as of March 1, 2012, 100,000 as of March 1, 2013 and 100,000 as of
March 1, 2014. Automatic vesting of all unvested RSUs upon “change of control.”
Details regarding this restricted stock unit grant will be provided to you in a
separate RSU agreement.
 
   
Restrictions:
  The Board recognizes that you will also be the chief executive officer of
BioMimetix Pharmaceutical, Inc. (“BioMimetix”) and acknowledges that certain
corporate opportunity and conflict of interest situations may arise out of such
role. Therefore, you agree that you will not assist or participate in raising
additional capital for BioMimetix until the earlier of: (1) the Company raising
a total of $7 million; (2) 12 months from the date of the Company’s initial
investment in BioMimetix; (3) the Company executing an agreement with a
strategic partner resulting in payments made to the Company; or (4) permission
of the Board.
 
   
Incentive Bonus:
  You will be eligible to receive an incentive bonus (the “Incentive Bonus”) in
connection with the occurrence of a Liquidity Event (as defined below), so long
as either (i) you have been continuously employed by the Company from your Start
Date through the effective date of the Liquidity Event, or (ii) the Liquidity
Event occurs with one or more parties introduced by you to the Company for
purposes of a Liquidity Event prior to 12 months from the effective date of
termination of your services other than for Cause (as defined below) (the “Tail
Period”). For the avoidance of doubt, if (1) your employment with the Company
terminates other than for Cause prior to the occurrence of a Liquidity Event or
(2) the Liquidity Event occurs after the expiration of the Tail Period, you will
not be entitled to receive payment of any Incentive Bonus.

Bonus Calculation and Payment. The Incentive Bonus amount payable to you in
connection with the occurrence of a Liquidity Event will be equal to the Net
Proceeds (defined below) multiplied by the Applicable Percentage (defined
below). Subject to the paragraph below dealing with escrows and hold-backs, any
Incentive Bonus payable hereunder will be paid to you in a single lump sum
payment as soon as administratively practicable after the occurrence of the
Liquidity Event giving rise to such payment, but in no event later than the 15th
day of the third calendar month after the close of the calendar year in which
the Liquidity Event occurred. Payment of any Incentive Bonus hereunder will be
made from the general assets of the Company.
Definitions. The following definitions will apply for purposes of this
Agreement.

 

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(a)   “Applicable Percentage” means the percentage specified in the table below
corresponding to the amount of Net Proceeds received in connection with a
Liquidity Event:

          Applicable     Percentage   Net Proceeds        
 
  1.0 %  
Less than or equal to $100 million
       
 
  1.5 %  
Greater than $100 million, less than or equal to $200 million
       
 
  2.0 %  
Greater than $200 million, less than or equal to $300 million
       
 
  3.0 %  
Greater than $300 million

(b) “Cause” means, except to the extent specified otherwise by the Board, a
finding by the Board that the you (i) have breached the terms of your employment
or service agreement with the Company, (ii) has engaged in disloyalty to the
Company, including, without limitation, fraud, embezzlement, theft, commission
of a felony or proven dishonesty in the course of your employment or service,
(iii) have disclosed trade secrets or confidential information of the Company to
persons not entitled to receive such information or (iv) have engaged in such
other behavior detrimental to the interests of the Company as the Board
determines.
(c) “Liquidity Event” means the consummation of:

  (1)   the sale (including in one or a series of related transactions) of all
or substantially all of the Company’s consolidated assets to a person or a group
of persons acting in concert (other than a person or group affiliated with the
Company);     (2)   the sale or transfer (including in one or a series of
related transactions) to a person or a group of persons acting in concert (other
than a person or group affiliated with the Company) of Company equity securities
representing more than 50% of the combined voting power of the Company’s then
outstanding equity securities entitled to vote generally in the election of
directors;     (3)   the merger or consolidation of the Company with or into
another entity, unless immediately following such transaction, all or
substantially all of the persons who were the beneficial owners of the Company’s
outstanding voting securities immediately before the transaction beneficially
own, directly or indirectly, more than 50% of the combined voting power of the
then outstanding voting securities (or comparable equity interests) of the
surviving or resulting entity (or its parent entity); or     (4)   the sale
(including in one or a series of related transactions) of the Company’s
intellectual property related to the use of the FDA approved drug Alpha-1
Antitrypsin to a person or a group of persons acting in concert (other than a
person or group affiliated with the Company). Net Proceeds will be aggregated
over any series of applicable transactions, and any difference due to an
increase in the Applicable Percentage as a result of such aggregation will be
paid in connection with the most recent transaction.

 

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By way of illustration for (4), if the Company sells applicable intellectual
property in a transaction with Net Proceeds of $50 million, assuming you are
eligible to receive an Incentive Bonus for the transaction, the Applicable
Percentage would be 1% and you would receive an Incentive Bonus of $0.5 million.
If the Company subsequently sells other applicable intellectual property in a
second transaction with Net Proceeds of $75 million, then, assuming you are
eligible to receive an Incentive Bonus for this transaction, the Applicable
Percentage would be 1.5% (instead of 1%) on the aggregate Net Proceeds of
$125 million, and the aggregate Incentive Bonus would be $1.875 million.
Therefore, in connection with the second transaction, you would receive an
Incentive Bonus of $1.375 million.

(d)   “Net Proceeds” means the fair market value, as of the date of the
Liquidity Event and as determined in good faith by the Board, of the aggregate
consideration (whether cash, notes, stock or other securities) actually received
by the Company or its stockholders as a result of the Liquidity Event, less all
transaction fees and expenses incurred by the Company in connection with such
Liquidity Event, including legal, accounting and investment banking fees.

Escrow or Hold-Back. Notwithstanding the foregoing, if any portion of the
proceeds from a Liquidity Event are deposited into an escrow account (whether
established by the Company or any purchaser or acquirer) or are subject to a
hold-back by the purchaser or acquirer for distribution upon the occurrence or
satisfaction of any event, that portion of the proceeds shall be included in
calculating Net Proceeds, but a comparable portion of the incentive bonus amount
shall be withheld and released to you only as and when that portion of the
Liquidity Event proceeds are released from any escrow or hold-back arrangement.
Term of Bonus Arrangement. This Incentive Bonus arrangement will remain in
effect until the earlier of (i) until your employment by the Company is
terminated for Cause or (ii) until the expiration of the Tail Period, if any.
The Company may modify this Incentive Bonus arrangement if any such modification
is, in the discretion of the Company, necessary or desirable to ensure the
compliance of this arrangement with the requirements of the Internal Revenue
Code, including Section 409A thereof, or any other applicable law or regulation.
Successors. All obligations of the Company under this Incentive Bonus
arrangement will be binding upon any successor to the Company, whether the
existence of such successor is the result of merger, consolidation, purchase of
all or substantially all of the business or assets of the Company, or otherwise.
Please acknowledge and accept the terms of your employment as outlined above by
countersigning below.
The Board is extremely excited about having you join our team.
Sincerely,
Vicki Barone
Chairperson
On Behalf of the Board of Directors of Omni Bio Pharmaceutical, Inc.
Agreed to:

     
 
James Crapo
   

 

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Exhibit A
Confidentiality and Inventions Assignment Agreement
[See attached]