EXHIBIT 10.5

 

IMPRIMIS PHARMACEUTICALS, INC.
AMENDED AND RESTATED 2007 INCENTIVE STOCK AND AWARDS PLAN

 

PERFORMANCE STOCK UNITS AGREEMENT

 

Effective as of April 25, 2016 (the “Grant Date”), Imprimis Pharmaceuticals,
Inc., a Delaware corporation (the “Company”), has awarded to Andrew R. Boll
(“Grantee”) a targeted number of 157,500 Performance Stock Units (the
“Performance Stock Units” or “Award”) to be calculated and determined as
discussed below. Each Performance Stock Unit will represent an unfunded and
unsecured promise of the Company to deliver shares of common stock, par value
$0.01 per share, of the Company (the “Shares”) to Grantee as set forth herein.
Each Performance Stock Unit will be subject to forfeiture until the date such
Performance Stock Unit vests pursuant to Section 1 of this Performance Stock
Units Agreement (this “Agreement”). The Performance Stock Units have been
granted pursuant to the Imprimis Pharmaceuticals, Inc. Amended and Restated 2007
Incentive Stock and Awards Plan (the “Plan”), and shall be subject to all
provisions of the Plan, which are incorporated herein by reference, and of this
Agreement and the Employment Agreement between the Grantee and the Company dated
April 25, 2016 as it may be amended from time to time (the “Employment
Agreement”). Capitalized terms used in this Agreement that are not specifically
defined or referenced to the Employment Agreement will have the meanings
ascribed to such terms in the Plan.

 

1. Vesting. The Performance Stock Units will vest upon the five (5) year
anniversary of the Effective Date of the Employment Agreement (the “5 Year
Anniversary”), provided that Grantee is in continuous service with the Company
or its Affiliates through such date. Notwithstanding the foregoing, the
Performance Stock Units will accelerate vesting sooner upon the earlier of (x)
upon the achievement of the performance vesting conditions specified in Section
1(a) below, in which case the Performance Stock Units shall accelerate to the
extent described in Section 1(a) below; (y) a Change in Control in which the
Performance Stock Units are not assumed, continued or substituted for by the
acquiring or surviving company or entity, in which case the Performance Stock
Units shall accelerate and vest in full or (z) upon certain types of Grantee’s
termination as described in Section 1(b) below. The date on which any portion of
the Performance Stock Units vest under the terms of this Section 1 is referred
to as the “Vesting Date” for such Performance Stock Units. Except as provided in
Section 1(b), any Performance Stock Units that are unvested as of Grantee’s
termination of continuous service with the Company and its Affiliates shall be
immediately forfeited and any Performance Stock Units that have not vested on or
before the 5 Year Anniversary shall immediately expire.

 

(a) Performance Vesting. The following five tranches (each, a “Tranche”) of
Performance Stock Units shall accelerate and vest upon the attainment of the
target share price (the “Target Share Price”) as specified below on or prior to
the 5 Year Anniversary (such five-year period, the “Performance Period”):

 

Tranche   No. of Shares   Target Share Price Tranche 1   30,000 Performance
Stock Units   $9.00 or greater Tranche 2   30,000 Performance Stock Units  
$10.00 or greater Tranche 3   30,000 Performance Stock Units   $12.00 or greater
Tranche 4   30,000 Performance Stock Units   $14.00 or greater Tranche 5  
37,500 Performance Stock Units   $15.00 or greater

 

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Each Tranche may only vest once. Except as otherwise specified below, for each
respective Tranche to accelerate and vest under this Section 1(a), all three of
the following conditions must be met:

 

(i) a Trigger Date may occur any time after the Grant Date and during the
Performance Period. A “Trigger Date” means any trading day on which the official
closing price per Share (the “Closing Price”) is at or above the Target Share
Price for the respective Tranche. Notwithstanding the foregoing, the Committee
will, in such manner as the Committee determines is appropriate in its
discretion, include the value of stock dividends distributed to the stockholders
of the Company in connection with spin-offs or similar transactions for purposes
of determining whether the Target Share Price has been achieved;

 

(ii) during the period that includes the Trigger Date and the immediately
following 19 trading days (each, a “Measurement Period”), the arithmetic mean of
the 20 Closing Prices during the Measurement Period must be at or above the
Target Share Price for such Tranche (the “20 Closing Price Condition”); and

 

(iii) the Grantee must be in continuous service with the Company and its
Affiliates through the Performance Period (the “Service Condition”).

 

To the extent all three of the above conditions are met, the applicable number
of Performance Stock Units shall accelerate and vest in full on the first
trading day immediately following the Measurement Period for the Trigger Date.
Notwithstanding the foregoing, in the event of a Change in Control, the
per-Share transaction consideration received by stockholders of the Company upon
the Change in Control (as determined in accordance with the terms and conditions
of the applicable definitive agreement that results in the Change in Control)
shall be used as the Closing Price for purposes of determining if a Trigger Date
has occurred and the 20 Closing Price Condition shall be inapplicable for
determining whether any Tranche shall vest as a result of the Change in Control.

 

(b) Involuntary Termination.

 

(i) If the Grantee’s continuous service is terminated as a result of an
Involuntary Termination (as defined in the Employment Agreement) at any time
after the Grant Date and on or prior to the thirty (30) day period prior to the
5 Year Anniversary, then, Grantee’s unvested Performance Stock Units shall
remain outstanding and eligible to accelerate vesting pursuant to their terms
for the Continuation Period (defined below) as if Grantee’s continuous service
had continued for such Continuation Period, provided that, in order to receive
any vesting during the Continuation Period, Grantee satisfies the conditions set
forth in Section 11.4 of the Employment Agreement, which include the execution
and delivery of an effective release of claims. The “Continuation Period” means
the period of time beginning on the date of Involuntary Termination and
continuing until the earlier of (i) twelve (12) months thereafter and (ii) one
day before the 5 Year Anniversary.

 

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(ii) If Grantee’s Involuntary Termination (as described in the Employment
Agreement) occurs within the one (1) month period prior to, or twelve (12)
months following, a Change in Control, and in any case before the 5 Year
Anniversary, then the Performance Stock Units shall accelerate and vest in full;
provided that, in order to receive any such vesting acceleration, Grantee
satisfies the conditions set forth in Section 11.4 of the Employment Agreement,
which include the execution and delivery of an effective release of claims.

 

2. Transferability. Prior to the time that Shares are delivered to Grantee, the
Performance Stock Units shall not be transferable other than by will or by the
laws of descent and distribution. During the lifetime of the Grantee, the
Performance Stock Units shall be exercisable only by the Grantee or, in the
event of his or her disability, by his or her guardian or legal representative,
except that, with the prior written consent of the Committee (or its authorized
designee), the Performance Stock Units may be transferred under the following
circumstances, to the extent permissible under applicable securities laws: (i)
to a trust for the benefit of the Grantee; (ii) to a member of the Grantee’s
immediate family (or a trust for his or her benefit) or (iii) pursuant to a
domestic relations order or official marital settlement agreement that contains
the information required by the Company to effectuate the transfer. Upon any of
the foregoing permitted transfers, the Grantee and the transferee must enter
into any transfer or other agreement as required by the Company. In no event may
this Award be transferred for consideration.

 

3. Forfeiture/Termination of Employment. Except as set forth in Section 1, if a
termination of employment of Grantee occurs prior to the vesting in full of the
Performance Stock Units, any unvested portion of such Performance Stock Units
shall be forfeited by Grantee. For the avoidance of doubt, any Performance Stock
Units not vested as of the 5 Year Anniversary shall be forfeited by Grantee,
unless otherwise agreed by the Company and the Grantee.

 

4. Triggering Conduct. As used in this Agreement, “Triggering Conduct” shall
mean Grantee’s material breach of any provision of Section 14.3 and 14.4 of the
Employment Agreement or Grantee’s breach of any provision of Grantee’s
Proprietary Agreement (as defined in the Employment Agreement).

 

5. Special Forfeiture/Repayment Rules. For so long as Grantee continues as an
employee with the Company or any of its affiliates and for one (1) year
following termination of employment regardless of the reason, Grantee agrees not
to engage in Triggering Conduct. If Grantee engages in Triggering Conduct during
the time period set forth in the preceding sentence, then Grantee shall, within
sixty (60) days following written notice from the Company (subject to the
opportunity to cure described below), pay to the Company an amount equal to (x)
the aggregate gross gain realized or obtained by Grantee resulting from the
settlement of all Performance Stock Units pursuant to Section 6 hereof (measured
as of the settlement date (i.e., the market value of the Performance Stock Units
on such settlement date)) that have already been settled and that had vested at
any time within three years prior to the Triggering Conduct (the “Look-Back
Period”), minus (y) $1.00. Before the Company seeks recovery from Grantee
pursuant to the foregoing sentence, Grantee shall be provided an opportunity to
be heard by the full Committee and an opportunity to cure the material breach,
if curable, within thirty (30) days from the written notice of such material
breach is received by Grantee. Grantee may be released from Grantee’s
obligations under this Section 5 if and only if the Committee (or its duly
appointed designee) authorizes, in writing and in its sole discretion, such
release. This Section 5 prohibits certain conduct while Grantee is associated
with the Company or any of its affiliates and thereafter and does provide for
the forfeiture or repayment of the benefits granted by this Agreement under
certain circumstances. No provisions of this Agreement shall diminish, negate or
otherwise impact any separate agreement to which Grantee may be a party,
including, without limitation, any certificate of compliance or similar
attestation/certification signed by Grantee; provided, however, that to the
extent that any provisions contained in any other agreement are inconsistent in
any manner with the restrictions and covenants of Grantee contained in this
Agreement, the provisions of this Agreement shall take precedence and such other
inconsistent provisions shall be null and void as to this Agreement. Grantee
acknowledges and agrees that the restrictions contained in this Agreement are
being made for the benefit of the Company in consideration of Grantee’s receipt
of the Performance Stock Units, in consideration of employment, in consideration
of exposing Grantee to the Company’s business operations and confidential
information, and for other good and valuable consideration, the adequacy of
which consideration is hereby expressly confirmed. Grantee further acknowledges
that the receipt of the Performance Stock Units and execution of this Agreement
are voluntary actions on the part of Grantee and that the Company is unwilling
to provide the Performance Stock Units to Grantee without including the
restrictions and covenants of Grantee contained in this Agreement. Further, the
parties agree and acknowledge that the provisions contained in Sections 4 and 5
are ancillary to, or part of, an otherwise enforceable agreement at the time the
agreement is made.

 

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6. Payment. Subject to the provisions of Sections 4 and 5 of this Agreement, and
unless Grantee makes an effective election to defer receipt of the Shares
represented by the Performance Stock Units, on the Vesting Date, Grantee shall
be entitled to receive from the Company (without any payment on behalf of
Grantee other than as described in Section 10) the Shares represented by such
Performance Stock Units; provided, however, that where the vesting of any
Performance Stock Unit occurs in connection with Grantee’s Involuntary
Termination or termination due to Disability, if the distribution in connection
with such acceleration is subject to Section 409A of the Code and Grantee is a
“specified employee” (determined in accordance with Section 409A of the Code),
Grantee shall be entitled to receive the corresponding Shares from the Company
on the date that is the first day of the seventh (7th) month after Grantee’s
“separation from service” with the Company (determined in accordance with
Section 409A of the Code). Elections to defer receipt of the Shares beyond the
date of settlement provided herein may be permitted in the discretion of the
Committee pursuant to procedures established by the Committee in compliance with
the requirements of Section 409A of the Code.

 

7. Dividend Equivalents. Grantee shall not be entitled to receive any cash
dividends on the Performance Stock Units. However, to the extent the Company
determines to pay a cash dividend to holders of the Shares, Grantee shall, with
respect to each Performance Stock Unit, be entitled to receive a cash payment
from the Company on each cash dividend payment date with respect to the Shares
with a record date between the Grant Date and the settlement of such Performance
Stock Unit pursuant to Section 6 hereof, such cash payment to be in an amount
equal to the dividend that would have been paid on the Shares represented by
such Performance Stock Unit. Cash payments on each cash dividend payment date
with respect to the Shares with a record date prior to a Vesting Date shall be
accrued until the Vesting Date and paid thereon (subject to the same vesting
requirements as the underlying Performance Stock Units). Elections to defer
receipt of the cash payments in lieu of cash dividends beyond the date of
settlement provided herein may be permitted in the discretion of the Committee
pursuant to procedures established by the Company in compliance with the
requirements of Section 409A of the Code.

 

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8. Right of Set-Off. By accepting these Performance Stock Units, Grantee
consents to a deduction from, and set-off against, any amounts owed to Grantee
that are not treated as “non-qualified deferred compensation” under Section 409A
of the Code by the Company or any of its affiliates from time to time
(including, but not limited to, amounts owed to Grantee as wages, severance
payments or other fringe benefits) to the extent of the amounts owed by Grantee
to the Company or any of its affiliates under this Agreement.

 

9. No Stockholder Rights. Grantee shall have no rights of a stockholder with
respect to the Performance Stock Units, including, without limitation, any right
to vote the Shares represented by the Performance Stock Units unless and until
such Shares are delivered to Grantee.

 

10. Withholding Tax.

 

(a) Generally. Grantee is liable and responsible for all withholding taxes owed
in connection with the Performance Stock Units (including taxes owed with
respect to any cash payments described in Section 7 hereof), regardless of any
action the Company takes with respect to any tax withholding obligations that
arise in connection with the Performance Stock Units. The Company does not make
any representation or undertaking regarding the tax treatment or the treatment
of any tax withholding in connection with the grant or vesting of the
Performance Stock Units or the subsequent sale of Shares issuable upon
settlement of the Performance Stock Units. The Company does not commit and is
under no obligation to structure the Performance Stock Units to reduce or
eliminate Grantee’s tax liability.

 

(b) Payment of Withholding Taxes. Prior to any event in connection with the
Performance Stock Units (e.g., vesting or settlement) that the Company
determines may result in any domestic or foreign tax withholding obligation,
whether national, federal, state or local, including any employment tax
obligation (the “Tax Withholding Obligation”), Grantee is required to arrange
for the satisfaction of the minimum amount of such Tax Withholding Obligation in
a manner acceptable to the Company.

 

(i) By Share Withholding. Unless Grantee elects to satisfy the Tax Withholding
Obligation pursuant to Sections 10(b)(ii) or 10(b)(iii), Grantee’s acceptance of
this Agreement constitutes Grantee’s instruction and authorization to the
Company to retain on Grantee’s behalf the number of Shares from those Shares
issuable to Grantee under the Award as the Company determines to be sufficient
to satisfy the Tax Withholding Obligation as owed when any such obligation
becomes due. The value of any Shares retained for such purposes shall be based
on the Fair Market Value, as the term is defined in the Plan, of the Shares on
the date of vesting of the Performance Stock Units. To the extent that the
Company retains any Shares to cover the Tax Withholding Obligation, it will do
so at the minimum statutory rate, but in no event shall such amount exceed the
minimum required by applicable law and regulations.

 

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(ii) By Sale of Shares. No later than five (5) business days prior to a Vesting
Date, Grantee may instruct and authorize the Company and any brokerage firm
determined acceptable to the Company for such purpose to sell on Grantee’s
behalf a whole number of Shares from those Shares issuable to Grantee as the
Company determines to be appropriate to generate cash proceeds sufficient to
satisfy the minimum applicable Tax Withholding Obligation. Such Shares will be
sold on the day such Tax Withholding Obligation arises (e.g., a vesting date) or
as soon thereafter as practicable. Grantee will be responsible for all broker’s
fees and other costs of sale, and Grantee agrees to indemnify and hold the
Company harmless from any losses, costs, damages, or expenses relating to any
such sale. To the extent the proceeds of such sale exceed Grantee’s minimum Tax
Withholding Obligation, the Company agrees to pay such excess in cash to
Grantee. Grantee acknowledges that the Company or its designee is under no
obligation to arrange for such sale at any particular price, and that the
proceeds of any such sale may not be sufficient to satisfy Grantee’s minimum Tax
Withholding Obligation. Accordingly, Grantee agrees to pay to the Company or any
Subsidiary as soon as practicable, including through additional payroll
withholding, any amount of the Tax Withholding Obligation that is not satisfied
by the sale of Shares described herein.

 

(iii) By Check, Wire Transfer or Other Means. No later than five (5) business
days prior to a Vesting Date, Grantee may elect to satisfy Grantee’s Tax
Withholding Obligation by delivering to the Company an amount that the Company
determines is sufficient to satisfy the Tax Withholding Obligation by (x) wire
transfer to such account as the Company may direct, (y) delivery of a certified
check payable to the Company, or (z) such other means as specified from time to
time by the Administrator.

 

(iv) Notwithstanding anything to the contrary set forth above, the Company shall
have the right to deduct from all cash payments paid pursuant to Section 7
hereof the amount of any taxes which the Company is required to withhold with
respect to such payments.

 

11. Governing Law/Venue for Dispute Resolution. This Agreement shall be governed
by the laws of the State of Delaware, without regard to principles of conflicts
of law, except to the extent superseded by the laws of the United States of
America. The parties agree and acknowledge that the laws of the State of
Delaware bear a substantial relationship to the parties and/or this Agreement
and that the Performance Stock Units and benefits granted herein would not be
granted without the governance of this Agreement by the laws of the State of
Delaware. In addition, all disputes relating to this Agreement shall be resolved
exclusively pursuant to the terms of Section 16 of the Employment Agreement.

 

12. Action by the Committee. The parties agree that the interpretation of this
Agreement shall rest exclusively and completely within the sole discretion of
the Committee. The parties agree to be bound by the decisions of the Committee
with regard to the interpretation of this Agreement and with regard to any and
all matters set forth in this Agreement. The Committee may delegate its
functions under this Agreement to an officer of the Company designated by the
Committee (hereinafter the “designee”). In fulfilling its responsibilities
hereunder, the Committee or its designee may rely upon documents, written
statements of the parties or such other material as the Committee or its
designee deems appropriate. The parties agree that, except as described in
Section 5, there is no right to be heard or to appear before the Committee or
its designee and that any decision of the Committee or its designee relating to
this Agreement shall be final and binding unless such decision is arbitrary and
capricious.

 

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13. Prompt Acceptance of Agreement. The Performance Stock Unit award evidenced
by this Agreement shall, at the discretion of the Committee, be forfeited if
this Agreement is not manually executed and returned to the Company, or
electronically executed by Grantee by indicating Grantee’s acceptance of this
Agreement in accordance with the Company’s applicable acceptance procedures,
within ninety (90) days after the Grant Date.

 

14. Electronic Delivery and Consent to Electronic Participation. The Company
may, in its sole discretion, decide to deliver any documents related to the
Performance Stock Unit grant under and participation in the Plan or future
Performance Stock Units that may be granted under the Plan by electronic means.
Grantee hereby consents to receive such documents by electronic delivery and to
participate in the Plan through an on-line or electronic system established and
maintained by the Company or another third party designated by the Company,
including the acceptance of this Performance Stock Unit award and the execution
of this Agreement through electronic signature.

 

15. Notices. All notices, requests, consents and other communications required
or provided under this Agreement to be delivered by Grantee to the Company will
be in writing and will be deemed sufficient if delivered by hand, facsimile,
nationally recognized overnight courier, or certified or registered mail, return
receipt requested, postage prepaid, and will be effective upon delivery to the
Company at the address set forth below:

 

Imprimis Pharmaceuticals, Inc.

12264 El Camino Real, Suite 350

San Diego, CA 92130

Attention: Chief Executive Officer

Facsimile: 858-345-1745

 

All notices, requests, consents and other communications required or provided
under this Agreement to be delivered by the Company to Grantee may be delivered
by e-mail or in writing and will be deemed sufficient if delivered by e-mail,
hand, facsimile, nationally recognized overnight courier, or certified or
registered mail, return receipt requested, postage prepaid, and will be
effective upon delivery to the Grantee at the address set forth on the Grantee’s
acceptance of this Agreement or such other address provided by the Grantee to
the Company pursuant to this Section 15.

 

* * * * *

 

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IN WITNESS WHEREOF, the Company and the Grantee have executed this Notice and
agree that the Award is to be governed by the terms and conditions of this
Notice, the Plan, the Agreement and the Employment Agreement. This Agreement may
not be amended or modified in any manner that would impair the rights of Grantee
without his prior written consent.

 

IMPRIMIS PHARMACEUTICALS, INC.   a Delaware corporation         By: /s/ Mark L.
Baum         Its: Chief Executive Officer         Date: April 25, 2016  

 

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ACCEPTANCE OF AGREEMENT

 

Grantee, Andrew R. Boll, hereby: (a) acknowledges receiving a copy of the Plan,
which has either been previously delivered or is provided with this Agreement,
and represents that he or she is familiar with and understands all provisions of
the Plan and this Agreement; and (b) voluntarily and knowingly accepts this
Agreement and the Performance Stock Units granted to him under this Agreement
subject to all provisions of the Plan and this Agreement, including, without
limitation, the provisions in the Agreement regarding “Triggering Conduct” and
“Special Forfeiture/Repayment Rules” set forth in Sections 4 and 5 of this
Agreement. Grantee further acknowledges receiving a copy of the Company’s most
recent annual report to stockholders and other communications routinely
distributed to the Company’s stockholders and a copy of the Prospectus
pertaining to the Plan.

 

/s/ Andrew R. Boll   Grantee’s Signature       April 25, 2016   Date          
Address           City, Sate & Zip           Email Address           Facsimile
Number  

 

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