Exhibit 10.6

 

EMPLOYMENT AGREEMENT

 

Stefanie Cavanaugh

 

EMPLOYMENT AGREEMENT (the “Agreement”), by and between Apollo Endosurgery, Inc.
(the “Company”) and Stefanie Cavanaugh (“Executive”) and, together with the
Company, the “Parties”).

 

WHEREAS, the Company desires to employ Executive pursuant to the terms,
provisions and conditions set forth in this Agreement;

 

WHEREAS, Executive desires to be employed on the terms hereinafter set forth in
this Agreement;

 

WHEREAS, Executive shall commence employment and this Agreement shall be
effective on or about March 2, 2015 (the “Effective Date).

 

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

 

1.                                      At-Will Employment.  Executive shall be
employed by the Company on an at-will basis, meaning either the Company or
Executive may terminate Executive’s employment at any time, with or without
Cause or advanced notice.  Any contrary representations that may have been made
to Executive shall be superseded by this Agreement.  This Agreement shall
constitute the full and complete agreement between Executive and the Company on
the “at will” nature of Executive’s Employment, which may only be changed in an
express written agreement signed by Executive and a duly authorized officer of
the Company.  Executive’s rights to any compensation following a termination of
employment shall be only as set forth in Section 9 below.

 

2.                                      Position and Duties.  Executive shall
serve as the Company’s Chief Financial Officer.  Executive shall perform duties
customary to such position, and as reasonably assigned to her, from time to
time, by the Company’s Chief Executive Officer (CEO), to whom Executive shall
report.  Executive will perform her services in Austin, Texas.  Executive shall
devote Executive’s full business time and attention to the performance of
Executive’s duties hereunder and shall comply with all legal, ethical and
professional standards and adhere to Apollo’s quality systems.  Executive shall
not engage in any other business, profession or occupation for compensation or
otherwise which would conflict or interfere with the rendition of such services,
either directly or indirectly; provided, that nothing herein shall preclude
Executive from (i) with the prior written consent of the CEO, serving on the
board of directors of other for-profit companies that do not compete with the
Company, (ii) serving on civic or charitable boards or committees, and
(iii) managing personal investments, so long as all such activities described in
(i) through (iii) herein do not materially interfere with the performance of
Executive’s duties and responsibilities under this Agreement.

 

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3.                                      Compensation, Policies and Benefits.

 

(a)                                 Base Salary.  Executive’s initial base
salary for services rendered under this Agreement shall be earned at an
annualized rate of $235,000 (or $9,791.67 on a semi-monthly basis) (the “Base
Salary”), less standard payroll deductions and withholdings.  Executive shall be
paid in accordance with Company practice and policy. Executive’s Base Salary
shall be reviewed and adjusted from time to time by the Board or a duly
authorized committee.

 

(b)                                 Annual Bonus.  Subject to the achievement,
as determined by the Board or a duly authorized committee thereof, of
performance milestones agreed upon by Executive and the Company and based on
such other criteria determined by the Board or a duly authorized committee
thereof in its sole discretion and also based on Executive’s continued
performance of services to the Company through the bonus payment date, Executive
shall be eligible to earn an annual bonus in a target amount of thirty-five
percent (35%) of Executive’s then-current Base Salary (“Annual Bonus”).  It will
be in the Board’s discretion to determine the actual amount of Executive’s
earned bonus for any year. For calendar year 2015, Executive’s bonus eligibility
shall be prorated based on the percentage of the year she is employed.  If
Executive leaves the employ of the Company prior to payment of any Annual Bonus,
except as set forth in Sections 9(a) and (d)(ii)(1), Executive will not be
eligible for an Annual Bonus, pro-rated or otherwise. The Annual Bonus earned
for any given year will be paid to Executive on the date on which annual bonuses
are paid to all other senior executives of the Company, but in no event later
than March 31 of the year following the year in which Executive’s right to the
Annual Bonus is no longer subject to a substantial risk of forfeiture, so as to
comply with Treasury Regulation Section 1.409A-1(b)(4).

 

(c)                                  Stock Option Grants.

 

(i)                                    Time-Based Vesting Option.  Subject to
approval of the Board or a duly authorized committee thereof, Executive will be
issued an option (the “Time-Based Vesting Option”) to purchase 650,000 shares of
the Company’s common stock pursuant and subject to the Company’s 2006 Stock
Option Plan (“Plan”) and the Company’s standard form of Stock Option Agreement
between Executive and the Company. Subject to the approval of the Board or a
designated committee thereof, the Option will vest and become exercisable
according to the following schedule: 25% of the shares will vest as of one year
from Executive’s initial date of employment, and the remaining 75% of the shares
will vest thereafter in equal monthly installments over thirty-six (36) months,
based on continued employment. The Time-Based Vesting Option will be an
incentive stock option to the extent permissible under Section 422 of the
Internal Revenue Code and will have an exercise price per share based upon the
fair market value of the Company’s common stock on the date of grant.

 

(ii)                                Acceleration.  In the event of a Change in
Control (as defined in the Plan), fifty percent (50%) of the then unvested
shares subject to the Options (and any other options subsequently granted to
Executive) shall become vested and exercisable as of the date immediately prior
to the effective date of the Change in Control.

 

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4.                                      Company Policies and Benefits.  The
employment relationship between the parties shall also be subject to the
Company’s personnel policies and procedures as they may be interpreted, adopted,
revised or deleted from time to time in the Company’s sole discretion. 
Executive shall be eligible to participate in the employee benefit plans of the
Company on a basis no less favorable than such benefits are provided by the
Company from time to time to the Company’s other senior executives.  All matters
of eligibility for coverage or benefits under any benefit plan shall be
determined in accordance with the provisions of such plan or program.  The
Company reserves the right to change, alter, or terminate any benefit plan in
its sole discretion. Notwithstanding the foregoing, in the event that the terms
of this Agreement differ from or are in conflict with the Company’s general
employment policies or practices, this Agreement shall control.

 

5.                                      Vacation, Sick Leave and Holidays. 
Executive shall be eligible to accrue paid vacation and sick days during each
year in accordance with the Company’s vacation and sick leave policies and the
restrictions on carry-over, payout and use contained therein.  Executive shall
also be entitled to all paid holidays given by the Company to its senior
executives, administered in accordance with the Company’s holiday policies.

 

6.                                      Expense Reimbursement.  Executive shall
be eligible to receive prompt reimbursement for all travel and business expenses
reasonably incurred and accounted for by Executive (in accordance with the
policies and procedures established from time to time by the Company) in
performing services hereunder. For the avoidance of doubt, to the extent that
any reimbursements (including any taxable benefits reimbursements) are subject
to the provisions of Section 409A of the Code: (a) to be eligible to obtain
reimbursement for such expenses Executive must submit expense reports within 45
days after the expense is incurred, (b) any such reimbursements will be paid no
later than December 31 of the year following the year in which the expense was
incurred, (c) the amount of expenses reimbursed in one year will not affect the
amount eligible for reimbursement in any subsequent year, and (d) the right to
reimbursement under this Agreement will not be subject to liquidation or
exchange for another benefit.

 

7.                                      Indemnification; D&O Coverage.  The
Company, and its successors and/or assigns, will indemnify and defend Executive
to the fullest extent permitted by the By-Laws and Certificate of Incorporation
of the Company with respect to any claims that may be brought against Executive
arising out of any action taken or not taken in Executive’s capacity as an
officer or director or employee of any member of the Company.  In addition,
Executive shall be covered as an insured in respect of Executive’s activities as
an officer of the Company by the Company’s Directors and Officers liability
policy or other comparable policies obtained by the Company’s successors, to the
fullest extent permitted by such policies.  The Company’s indemnification
obligations hereunder shall remain in effect following Executive’s termination
of employment with the Company.

 

8.                                      Termination of Employment.  The parties
acknowledge that as set forth in Section 1 of this Agreement, Executive’s
employment relationship with the Company is at-will.  Either Executive or the
Company may terminate the employment relationship at any time, with or without
Cause.  The provisions in this Section govern the amount of compensation, if
any, to be provided to Executive upon termination of employment and do not alter
this at-will status.

 

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(a)                                 Death.    Upon any employment termination as
a result of Executive’s death, Executive’s estate shall be entitled to receive
his Base Salary through the date of termination, together with any compensation
and benefits payable to Executive based on his participation in any compensation
or benefit plan, program or arrangement through the date of termination
(together, the “Accrued Amounts”).  Executive’s estate shall also be entitled to
receive the Annual Bonus, if any, earned in connection with completion of the
fiscal year prior to Executive’s Death that would have been payable to Executive
under Section 3(b) had Executive remained an employee of the Company through the
Annual Bonus payment date for that fiscal year. The Accrued Amounts shall be
timely paid following the date of termination in accordance with applicable
laws.  All other benefits, if any, due to Executive’s estate following
Executive’s termination due to death shall be determined in accordance with the
plans, policies and practices of the Company; provided, that Executive’s estate
shall not be entitled to any payments or benefits under any severance plan,
policy or program of the Company.  Executive’s estate shall not accrue any
additional compensation (including any Base Salary or Annual Bonus) or other
benefits under this Agreement following termination of employment due to
Executive’s death.

 

(b)                                 Disability.  The Company may terminate
Executive’s employment for Disability.  “Disability” shall mean Executive’s
inability, due to physical or mental incapacity, to perform  the essential
functions of her position for a period of ninety (90) consecutive days or one
hundred twenty (120) days during any consecutive six (6) month period, or based
on the written certification by two licensed physicians of the likely
continuation of such condition for such period.  This definition shall be
interpreted and applied consistent with the Americans with Disabilities Act, the
Family and Medical Leave Act, and other applicable law.  In conjunction with
determining Disability for purposes of this Agreement, Executive hereby
(i) consents to any such examinations which are relevant to a determination of
whether Executive is mentally and/or physically disabled, and (ii) agrees to
furnish such medical information as may be reasonably requested.  Upon any such
termination, Executive shall be entitled to receive payment of the Accrued
Amounts.  All other benefits, if any, due to Executive following Executive’s
termination by the Company for Disability shall be determined in accordance with
the plans, policies and practices of the Company; provided, that Executive shall
not be entitled to any payments or benefits under any severance plan, policy or
program of the Company.  Executive shall not accrue any additional compensation
(including any Base Salary or Annual Bonus) or other benefits under this
Agreement following such termination of employment.

 

(c)                                  Termination for Cause; Termination by
Executive without Good Reason.  At any time, (i) the Company may terminate
Executive’s employment for Cause (as defined below) by Notice of Termination (as
defined in Section 8(e)) or (ii) Executive may elect to terminate Executive’s
employment other than for Good Reason (as defined below); provided, that
Executive shall be required to give, at least thirty (30) days in advance, a
Notice of Termination.  “Cause” for Executive’s termination will exist at any
time after the happening of one or more of the following events, in each
determined in good faith by the Board in its sole discretion: (i) Executive’s
gross negligence or willful misconduct in performance of his duties hereunder
where such gross negligence or willful misconduct has resulted in or is likely
to result in substantial and material damage to the Company or any of its
subsidiaries; (ii) Executive’s repeated and unjustified absence from the
Company; (iii) Executive’s material and willful violation of any federal or
state law; (iv)  the commission of any act of fraud by Executive with respect to
the Company; (v) Executive’s conviction of a felony or a crime involving moral

 

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turpitude causing material harm to the standing and reputation of the Company;
or (vi) Executive’s incurable material breach of any element of the Company’s
Invention, Confidential Information and Non-Competition Agreement, including
without limitation, Executive’s theft or other misappropriation of the Company’s
proprietary information.   Upon the termination of Executive’s employment
pursuant to this Section 8(c), Executive shall be entitled to receive payment of
the Accrued Amounts.  All other benefits, if any, due to Executive following
Executive’s termination of employment pursuant to this Section 8(c) shall be
determined in accordance with the plans, policies and practices of the Company;
provided, that Executive shall not be entitled to any payments or benefits under
any severance plan, policy or program of the Company.  Executive shall not
accrue any additional compensation (including any Base Salary or Annual Bonus)
or other benefits under this Agreement following such termination of employment.

 

(d)                                 Termination for Good Reason or Without
Cause.

 

(i)                                    Executive may terminate Executive’s
employment for Good Reason (as defined below), provided the Company has not
previously notified her of its intent to terminate his employment for Cause and
the Company may terminate Executive’s employment without Cause (that is, other
than by death, Disability or for Cause, in accordance with Section 8(a), 8(b) or
8(c), respectively).  “Good Reason” shall mean the occurrence, without
Executive’s prior written consent, of either of the following events:  (a) a
material reduction in the nature or scope of Executive’s responsibilities,
duties and/or authority; provided, that a change in job position (including a
change in title) shall not be deemed a “material reduction” in and of itself
unless Executive’s responsibilities, duties and/or or authority are materially
reduced; or (b) a material reduction in Executive’s then-current Base Salary,
which the Company and Executive agree is at least 10% of Executive’s
then-current Base Salary; provided, that a reduction in Base Salary shall not be
“Good Reason” to the extent that the salary reduction is made as part of a
broader salary reduction program of the Company affecting a majority of
similarly situated employees; provided, that any such event described in (a) or
(b) above shall not constitute Good Reason unless Executive delivers to the
Company a Notice of Termination for Good Reason within ninety (90) days after
the initial existence of the circumstances giving rise to Good Reason, within
thirty (30) days following the receipt of such Notice of Termination for Good
Reason the Company has failed to reasonably cure the circumstances giving rise
to Good Reason, and Executive terminates his employment within thirty (30) days
following the end of the cure period, or (c) a material change in the location
at which Executive must perform her services; provided that in no event will the
relocation of Executive to a facility or location of fifty (50) miles or less
from Executive’s then current office location be deemed material for purposes of
this Agreement and (d) a material breach of this Agreement by Company.

 

(ii)                                Upon the termination of Executive’s
employment hereunder pursuant to this Section 8(d), and provided such
termination constitutes a “separation from service” (as defined under Treasury
Regulation Section 1.409A-1(h), without regard to any alternative definitions
thereunder, a “Separation from Service”), Executive shall receive the Accrued
Amounts, and, subject to Executive’s (a) returning all Company property;
(b) complying with his post-termination obligations under this Agreement and the
Non-Competition Agreement; (c) execution, delivery and non-revocation of an
agreement that includes an effective release of all claims against the Company
(the “Release”) within the sixty (60) day period

 

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following the date of Executive’s Separation from Service, and (d) complying
with the Release including without limitation any non-disparagement and
confidentiality provisions contained therein, Executive shall receive the
following severance benefits (the “Severance Benefits”):

 

(1)                                 an amount equal to 6 months of Executive’s
then-current Base Salary, ignoring any decrease in Base Salary that forms the
basis for Good Reason, paid in equal installments on the Company’s normal
payroll schedule over the 6 month period immediately following the date of
Separation from Service, except as set forth below (the “Salary Continuation”),
plus an amount equal to the Annual Bonus, if any, earned in connection with
completion of the fiscal year prior to Executive’s Separation from Service that
would have been payable to Executive under Section 3(b) had Executive remained
an employee of the Company through the Annual Bonus payment date for that fiscal
year;

 

(2)                                 if such Separation from Service occurs  in
connection with or within twelve (12) months after a Change in Control, one
hundred percent (100%) of the shares subject to the Options (and any other
options subsequently granted to Executive) shall become vested and exercisable
as of the date of Executive’s Separation from Service.

 

(iii)                            All of the Severance Benefits are subject to
deductions for applicable tax withholdings.  No Severance Benefits will be paid
prior to the day that is sixty (60) days following the date of Separation from
Service. On the sixtieth (60th) day following the date of Separation from
Service, the Company shall pay in a lump sum the aggregate amount of the Salary
Continuation that the Company would have paid Executive through such date had
the payments commenced on the Separation from Service through such sixtieth
(60th) day, with the balance paid thereafter on the applicable schedules
described above.

 

(iv)                             All other benefits, if any, due Executive
following a termination pursuant to this Section 8(d) shall be determined in
accordance with the plans, policies and practices of the Company; provided, that
Executive shall not be entitled to any payments or benefits under any severance
plan, policy or program of the Company.  Payments under this Agreement are
intended to fulfill any statutory obligation to provide notice or pay in lieu of
notice.  Executive shall not accrue any additional compensation (including any
Base Salary or Annual Bonus) or other benefits under this Agreement following
such termination of employment.

 

(e)                                  Notice of Termination.  Any termination of
Executive’s employment by the Company or by Executive shall be communicated by
written Notice of Termination to the other Party in accordance with the Notice
requirements set forth in Section 11(e) of this Agreement.  For purposes of this
Agreement, “Notice of Termination” shall mean a notice that shall indicate the
specific termination provision in this Agreement relied upon and shall, to the
extent applicable, set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Executive’s employment under the
provision so indicated.

 

(f)                                   Taxes.  Notwithstanding any other
provision of this Agreement to the contrary, if payments made or benefits
provided pursuant to this Section 9 or otherwise from the Company or any person
or entity are considered “parachute payments” under Section 280G of the Code,
then such parachute payments shall be limited to the greatest amount that may be
paid

 

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to Executive under Section 280G of the Code without causing any loss of
deduction to the Company under such section, but only if, by reason of such
reduction, the net after tax benefit to Executive shall exceed the net after tax
benefit if such reduction were not made.  “Net after tax benefit” for purposes
of this Agreement shall mean the sum of (i) the total amounts payable to
Executive under Section 8, plus (ii) all other payments and benefits which
Executive receives or then is entitled to receive from the Company or otherwise 
that would constitute a “parachute payment” within the meaning of Section 280G
of the Code, less (iii) the amount of federal and state income taxes payable
with respect to the foregoing calculated at the maximum marginal income tax rate
for each year in which the foregoing shall be paid to Executive (based upon the
rate in effect for such year as set forth in the Code at the time of termination
of Executive’s employment), less (iv) the amount of excise taxes imposed with
respect to the payments and benefits described in (i) and (ii) above by
Section 4999 of the Code.  The determination as to whether and to what extent
payments are required to be reduced in accordance with this Section 8(f) shall
be made at the Company’s expense by a nationally recognized certified public
accounting firm as may be designated by the Company prior to a change in control
(the “Accounting Firm”) and the Company and Executive shall take all actions
reasonably available to them in accordance with the law to minimize the amount
of excise taxes imposed with respect to Section 4999 of the Code.  In the event
of any mistaken underpayment or overpayment under this Agreement, as determined
by the Accounting Firm, the amount of such underpayment or overpayment shall
forthwith be paid to Executive or refunded to the Company, as the case may be,
with interest at one hundred twenty (120%) of the applicable Federal rate
provided for in Section 7872(f)(2) of the Code.  Any reduction in payments
required by this Section 8(f) shall occur in the following order:  (1) any cash
severance, (2) any other cash amount payable to Executive, (3) any benefit
valued as a “parachute payment,” (4) the acceleration of vesting of any equity
awards that are options, and (5) the acceleration of vesting of any other equity
awards.  Within any such category of payments and benefits, a reduction shall
occur first with respect to amounts that are not “deferred compensation” within
the meaning of Section 409A and then with respect to amounts that are.  In the
event that acceleration of compensation from equity awards is to be reduced,
such acceleration of vesting shall be canceled, subject to the immediately
preceding sentence, in the reverse order of the date of grant.

 

9.                                      Invention, Confidential Information and
Non-Competition Obligations; Non-Disparagement.

 

(a)                                 Invention, Confidential Information and
Non-Competition Agreement. The parties hereto have entered into an Invention,
Confidential Information and Non-Competition Agreement (the “Non-Competition
Agreement”), which may be amended by the parties from time to time without
regard to this Agreement.  The Proprietary Information Agreement contains
provisions that are intended by the parties to survive and do survive
termination or expiration of this Agreement.

 

(b)                                 Non-Disparagement. Executive agrees not to
disparage the Company, any member thereof, and any of their officers, attorneys,
directors, managers, partners, employees, agents and affiliates, in any manner
likely to be harmful to them or their business, business reputation or personal
reputation; provided that Executive will respond accurately and fully to any
question, inquiry or request for information when required by legal process. 
Company agrees not to disparage the Executive in any manner likely to be harmful
to her or her

 

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business reputation or personal reputation; provided that Company will respond
accurately and fully to any question, inquiry or request for information when
required by legal process.

 

10.                               Miscellaneous.

 

(a)                                 Executive’s Representations.  Executive
hereby represents and warrants to the Company that (i) Executive has read this
Agreement in its entirety, fully understands the terms of this Agreement, has
had the opportunity to consult with counsel prior to executing this Agreement,
and is signing the Agreement voluntarily and with full knowledge of its
significance, (ii) the execution, delivery and performance of this Agreement by
Executive does not and shall not conflict with, breach, violate or cause a
default under any contract, agreement, instrument, order, judgment or decree to
which Executive is a party or by which she is bound, (iii) Executive is not a
party to or bound by an employment agreement, non-compete agreement or
confidentiality agreement with any other person or entity which would interfere
in any material respect with the performance of his duties hereunder, and
(iv) Executive shall not use any confidential information or trade secrets of
any person or party other than the Company in connection with the performance of
his duties hereunder.

 

(b)                                 Waiver.  No provision of this Agreement may
be modified, waived or discharged unless such waiver, modification or discharge
is agreed to in a writing signed by Executive and an officer of the Company
(other than Executive) duly authorized by the Board to execute such amendment,
waiver or discharge.  No waiver by either Party of any breach of the other Party
of, or compliance with, any condition or provision of this Agreement shall be
deemed a waiver of similar or dissimilar provisions or conditions at the same or
at any prior or subsequent time.

 

(c)                                  Successors and Assigns.

 

(i)                                    This Agreement is personal to Executive
and without the prior written consent of the Company shall not be assignable by
Executive otherwise than by will or the laws of descent and distribution.  This
Agreement shall inure to the benefit of and be enforceable by Executive’s legal
representatives.

 

(ii)                                This Agreement shall inure to the benefit of
and be binding upon the Company and its successors and, other than as set forth
in Section 10(c)(iii), shall not be assignable by the Company without the prior
written consent of Executive (which shall not be unreasonably withheld).

 

(iii)                            The Agreement shall be assignable by the
Company to any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of the Company; provided that, the Company shall require such successor
to expressly assume and agree 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.  As used in this Agreement, “Company” shall mean the
Company as hereinbefore defined and any successor to its business and/or assets
as aforesaid which assumes and agrees to perform this Agreement by operation of
law or otherwise.

 

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(d)                                 Notice.  For the purpose of this Agreement,
notices and all other communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given if delivered personally, if
delivered by overnight courier service, or if mailed by registered mail, return
receipt requested, postage prepaid, addressed to the respective addresses or
sent via facsimile or email to the respective facsimile numbers and email
addresses, as the case may be, as set forth below, or to such other address as
either party may have furnished to the other in writing in accordance herewith,
except that notice of change of address shall be effective only upon receipt;
provided, however, that (i) notices sent by personal delivery, email or
overnight courier shall be deemed given when delivered, (ii) notices sent by
facsimile transmission shall be deemed given upon the sender’s receipt of
confirmation of complete transmission, and (iii) notices sent by registered mail
shall be deemed given two days after the date of deposit in the mail.

 

If to Executive, to such address (including Company email address) as shall most
currently appear on the records of the Company.

 

If to the Company, to its primary business location

Attention:  Board of Directors

 

(e)                                  Governing Law; Consent to Jurisdiction. 
THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF TEXAS, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICTING
PROVISION OR RULE (WHETHER OF THE STATE OF TEXAS OR ANY OTHER JURISDICTION) THAT
WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF TEXAS TO BE
APPLIED.  IN FURTHERANCE OF THE FOREGOING, THE INTERNAL LAW OF THE STATE OF
TEXAS WILL CONTROL THE INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT, EVEN
IF UNDER SUCH JURISDICTION’S CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE
SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY APPLY.  ANY ACTION
TO ENFORCE THIS AGREEMENT MUST BE BROUGHT IN, AND THE PARTIES HEREBY CONSENT TO
THE JURISDICTION OF, A COURT SITUATED IN STATE OF TEXAS.  EACH PARTY HEREBY
WAIVES THE RIGHTS TO CLAIM THAT ANY SUCH COURT IS AN INCONVENIENT FORUM FOR THE
RESOLUTION OF ANY SUCH ACTION.

 

(f)                                   Resolution of Disputes.  The parties
recognize that litigation in federal or state courts or before federal or state
administrative agencies of disputes arising out of  Executive’s employment with
the Company or out of this Agreement, or Executive’s termination of employment
or termination of this Agreement, may not be in the best interests of either the
Executive or the Company, and may result in unnecessary costs, delays,
complexities, and uncertainty.  The parties agree that any dispute between the
parties arising out of or relating to the negotiation, execution, performance or
termination of this Agreement or Executive’s employment, including, but not
limited to, any claim arising out of this Agreement, claims under Title VII of
the Civil Rights Act of 1964, as amended, the Civil Rights Act of 1991, the Age
Discrimination in Employment Act of 1967, the Americans with Disabilities Act of
1990, Section 1981 of the Civil Rights Act of 1966, as amended, the Family
Medical Leave Act, the Employee Retirement Income Security Act, and any similar
federal, state or local law, statute,

 

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regulation, or any common law doctrine, whether that dispute arises during or
after employment, shall be settled by binding arbitration in accordance with the
National Rules for the Resolution of Employment Disputes of the American
Arbitration Association; provided however, that this dispute resolution
provision shall not apply to any separate agreements between the parties that do
not themselves specify arbitration as an exclusive remedy. The location for the
arbitration shall be the Austin, Texas metropolitan area.  Any award made by
such panel shall be final, binding and conclusive on the parties for all
purposes, and judgment upon the award rendered by the arbitrators may be entered
in any court having jurisdiction thereof. The arbitrators’ fees and expenses and
all administrative fees and expenses associated with the filing of the
arbitration shall be borne by the Company; provided however, that at Executive’s
option, Executive may voluntarily pay up to one-half the costs and fees. The
parties acknowledge and agree that their obligations to arbitrate under this
Section survive the termination of this Agreement and continue after the
termination of the employment relationship between Executive and the Company.
The parties each further agree that the arbitration provisions of this Agreement
shall provide each party with its exclusive remedy, and each party expressly
waives any right it might have to seek redress in any other forum, except as
otherwise expressly provided in this Agreement.  By election arbitration as the
means for final settlement of all claims, the parties hereby waive their
respective rights to, and agree not to, sue each other in any action in a
Federal, State or local court with respect to such claims, but may seek to
enforce in court an arbitration award rendered pursuant to this Agreement.  The
parties specifically agree to waive their respective rights to a trial by jury,
and further agree that no demand, request or motion will be made for trial by
jury.

 

(g)                                 Set Off.  The Company’s obligation to pay
Executive the amounts and to make the arrangements provided hereunder shall be
subject to set-off, counterclaim or recoupment of any amounts owed by Executive
to the Company or any of its affiliates except to the extent any such set-off,
counterclaim or recoupment would violate, or result in the imposition of tax
under Section 409A of the Code, in which case such right shall be null and void.

 

(h)                                 Compliance with Code Section 409A.  It is
intended that all of the payments payable under this Agreement satisfy, to the
greatest extent possible, the exemptions from the application of Section 409A of
the Code provided under Treasury Regulation Sections 1.409A-1(b)(4),
1.409A-1(b)(5) and 1.409A-1(b)(9), and this Agreement will be construed to the
greatest extent possible as consistent with those provisions.  For purposes of
Section 409A of the Code (including, without limitation, for purposes of
Treasury Regulation Section 1.409A-2(b)(2)(iii)), Executive’s right to receive
any installment payments under this Agreement (whether Severance Benefits,
expense reimbursements or otherwise) shall be treated as a right to receive a
series of separate payments and, accordingly, each installment payment under
this Agreement shall at all times be considered a separate and distinct
payment.  Notwithstanding any provision to the contrary in this Agreement, if
Executive is deemed by the Company at the time of his Separation from Service to
be a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code,
and if any of the payments, including the Severance Benefits, upon Separation
From Service set forth herein and/or under any other agreement with the Company
are deemed to be “deferred compensation” (including as a result of the terms of
Offer Letter), then to the extent delayed commencement of any portion of such
payments is required to avoid a prohibited distribution under
Section 409A(a)(2)(B)(i) of the Code and the related adverse taxation under
Section 409A of the Code, such payments shall not be provided to

 

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Executive prior to the earliest of (i) the expiration of the six (6)-month
period measured from the date of Executive’s Separation From Service with the
Company, (ii) the date of Executive’s death or (iii) such earlier date as
permitted under Section 409A of the Code without the imposition of adverse
taxation.  Upon the first business day following the expiration of such
applicable Code Section 409A(a)(2)(B)(i) period, all payments deferred pursuant
to this paragraph shall be paid in a lump sum to Executive, and any remaining
payments due shall be paid as otherwise provided in this Agreement or in the
applicable agreement.  No interest shall be due on any amounts so deferred.

 

(i)                                    Severability of Invalid or Unenforceable
Provisions.  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.

 

(j)                                    Advice of Counsel and Construction.  Each
Party acknowledges that such Party had the opportunity to be represented by
counsel in the negotiation and execution of this Agreement.  Accordingly, the
rule of construction of contract language against the drafting party is hereby
waived by each Party.

 

(k)                                 Entire Agreement.  This Agreement sets forth
the entire agreement of the Parties in respect of the subject matter contained
herein and supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written in
respect of the subject matter contained herein.

 

(l)                                    Withholding Taxes.  The Company shall be
entitled to withhold from any payment due to Executive hereunder any amounts
required to be withheld by applicable tax laws or regulations.

 

(m)                             Section Headings.  The headings of the Sections
hereof are provided for convenience only and are not to serve as a basis for
interpretation or construction, and shall not constitute a part, of this
Agreement.

 

(n)                                 Cooperation.  During the period of
Executive’s employment and at any time thereafter, Executive agrees to cooperate
(i) with the Company in the defense of any legal matter involving any matter
that arose during Executive’s employment with the Company, and (ii) with all
government authorities on matters pertaining to any investigation, litigation or
administrative proceeding pertaining to the Company.  Following termination of
Executive’s employment for any reason, Executive shall fully cooperate with the
Company in all matters relating to the winding up of Executive’s pending work
and the orderly transfer of any such pending work to such other employees as may
be designated by the Company. The Company will reimburse Executive for any
reasonable travel and out of pocket expenses incurred by Executive in providing
such cooperation.  The Company shall further reimburse Executive for any
reasonable legal fees and costs incurred in complying with this provision.

 

(o)                                 Survival.  Sections 6, 7, 8, 9 and 10 shall
survive and continue in full force in accordance with their terms
notwithstanding any termination of Executive’s employment with the Company.

 

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(p)                                 Counterparts.  This Agreement may be
executed in one or more counterparts, each of which shall be deemed to be an
original but all of which together will constitute one and the same instrument.

 

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

 

 

APOLLO ENDOSURGERY, INC.

 

 

 

 

 

By:

/s/ Todd Newton

 

 

Todd Newton

 

 

Chief Executive Officer

 

 

 

 

 

EXECUTIVE

 

 

 

 

 

/s/ Stefanie Cavanaugh

 

Stefanie Cavanaugh

 

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