Exhibit 10.1

 

SEPARATION AGREEMENT AND GENERAL RELEASE

 

This Agreement and General Release (this “Agreement”) is made by and between
Lpath, Inc., a Delaware corporation (“Company”), and Scott R. Pancoast
(“Mr. Pancoast”), and inures to the benefit of each of Company’s current, former
and future parents, subsidiaries, related entities, employee benefit plans and
each of their respective fiduciaries, predecessors, successors, officers,
directors, stockholders, agents, attorneys, employees and assigns.

 

RECITALS

 

A.                                    Mr. Pancoast is presently employed by
Company as its President and Chief Executive Officer.

 

B.                                    Mr. Pancoast presently serves as a member
of the Board of Directors of Company (the “Board”).

 

C.                                    Mr. Pancoast and Company are parties to
that certain Employment Agreement, dated January 1, 2006, as may have been
amended from time to time (the “Employment Agreement”) and Proprietary
Information and Inventions Agreement (the “PIIA”).

 

D.                                    Mr. Pancoast has agreed to voluntarily
resign as an employee of Company and from the Board, effective as of 12:00 Noon,
California time, on November 3, 2014 (the “Separation Date”).

 

E.                                     Company wishes to reach an amicable
separation with Mr. Pancoast and the parties desire to settle all claims and
issues that have, or could have been raised by Mr. Pancoast, in relation to
Mr. Pancoast’s employment with Company and arising out of or in any way related
to the acts, transactions or occurrences between Mr. Pancoast and Company to
date, including, but not limited to, Mr. Pancoast’s employment with Company or
the termination of that employment, on the terms set forth below.

 

AGREEMENT

 

THEREFORE, in consideration of the promises and mutual agreements hereinafter
set forth, it is agreed by and between the undersigned as follows:

 

1.                                      Resignation; Termination of Employment
Agreement; Press Release.

 

1.1                               Mr. Pancoast hereby voluntarily resigns (a) as
an employee of Company, (b) as the Chief Executive Officer and President of
Company, (c) as an officer in any other position in the Company or any Company
subsidiary, (d) as a member of the Board (and as a member of any committee
thereof) and (e) as a member of the board of directors of any Company subsidiary
(and as a member of any committee thereof), in each case, effective as of 12:00
Noon, California time, on the Separation Date.

 

1.2                               Mr. Pancoast and Company hereby agree that the
Employment Agreement shall terminate and be of no further force or effect,
effective as of 12:00 Noon, California time, on the Separation Date.

 

1.3                               Contingent upon this Agreement becoming
effective as provided in Section 14, Company agrees to prepare and issue a
Current Report on Form 8-K regarding Mr. Pancoast’s resignation from the Board
and as an employee of Company that is mutually acceptable to Company and
Mr. Pancoast; provided, that Mr. Pancoast acknowledges that the Current Report
must be filed within four (4) business days of the Separation Date.

 

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2.                                      Acknowledgement of Compensation Paid.

 

2.1                               Mr. Pancoast hereby acknowledges and agrees
that Company has paid him all of his salary and wages and all of his accrued and
unused vacation time through the Separation Date, subject to federal and state
withholding and other applicable taxes, and has been reimbursed by Company for
all reimbursable business expenses incurred by him through the Separation Date.

 

2.2                               Mr. Pancoast hereby acknowledges and agrees
that he is not entitled to any bonus or other compensation payments from Company
for his services through the Separation Date.

 

3.                                      Severance; Severance Period; Transition
Services.

 

3.1                               Contingent upon this Agreement becoming
effective as provided in Section 14, Company agrees to pay to Mr. Pancoast the
amount of $303,750, payable as follows:  (i)  $37,500 per month (subject to any
applicable withholding obligations) commencing on the one month anniversary of
the Separation Date (i.e., December 3, 2014) and continuing on each of the next
seven monthly anniversaries of the Separation Date thereafter (i.e., January 2,
2015, February 3, 2015, March 3, 2015, April 3, 2015, May 4, 2015, June 3, 2015
and July 2, 2015) and (ii) $3,750 (subject to any applicable withholding
obligations) on August 2, 2015 (the period commencing on the Separation Date and
ending on August 2, 2015 being referred to herein as the “Severance Period”).

 

3.2                               Contingent upon this Agreement becoming
effective as provided in Section 14, Company agrees that if Mr. Pancoast timely
elects to continue his participation in Company’s group health insurance plans
pursuant to the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), then
Company shall pay the COBRA premium(s) on Mr. Pancoast’s, and his eligible
dependent’s, behalf until November 3, 2016 (the “COBRA Period”).  If
Mr. Pancoast desires to continue his participation beyond the end of the COBRA
Period, and is eligible to continue his participation pursuant to COBRA, he
understands and agrees that he shall be fully responsible for making the
necessary premium payments in order to continue such coverage.  Nothing herein
shall be deemed to permit Mr. Pancoast to continue participating in any life
insurance, long-term disability benefits, accidental death and dismemberment or
other plans maintained by Company after the Separation Date.  Nothing herein
shall limit the right of Company to change the provider and/or the terms of its
group health insurance plans at any time hereafter.

 

3.3                               For and in consideration of the promises and
agreements set forth herein, Mr. Pancoast shall make himself available to the
Company and the Board during normal business hours during the Severance Period
to provide transition services to Company.

 

4.                                      Securities.

 

4.1                               Amendment of Stock Options and RSUs.
Contingent upon this Agreement becoming effective as provided in Section 14,
Company agrees to amend the terms of the Stock Options and Restricted Stock
Units (“RSUs”) held by Mr. Pancoast to provide that:

 

(a)                                 the vesting periods of any outstanding
unvested Stock Options shall be accelerated by eighteen (18) months from the
Separation Date (i.e., through May 3, 2016);

 

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(b)                                 the vesting periods of any outstanding
unvested RSUs shall be accelerated by three hundred seventy (370) days from the
Separation Date (i.e., through November 8, 2015); and

 

(c)                                  Mr. Pancoast will have until March 10, 2016
to exercise all or a portion of the Stock Options that are vested as of the
Separation Date, including the accelerated vesting provided in
Section 4.1(a) above.

 

4.2                               Mr. Pancoast acknowledges and agrees that
extending the period in which he may exercise his vested Stock Options will have
the effect of automatically converting any of the Stock Options that are
currently Incentive Stock Option (“ISO”) to Non-Qualified Stock Options
(“NSO”).  Mr. Pancoast further acknowledges that ISOs and NSOs are treated
differently under the tax laws (e.g., upon exercise of an NSO, the exercising
party must pay tax on the spread between the then fair market value of Company
Class A Common Stock and the exercise price paid for the stock), and that he is
responsible for seeking his own legal and tax advice on such matters.

 

5.                                      General Release.

 

5.1                               Mr. Pancoast unconditionally, irrevocably and
absolutely releases and discharges Company, and any parent and subsidiary
corporations, divisions, investors and affiliated corporations, partnerships or
other affiliated entities of Company, past and present, as well as Company’s
employees, officers, directors, agents, successors and assigns (collectively,
“Company Released Parties”), from all claims related in any way to the
transactions or occurrences between them to date, to the fullest extent
permitted by law, including, but not limited to, Mr. Pancoast’s employment with
Company, the termination of Mr. Pancoast’s employment, and all other losses,
liabilities, claims, charges, demands and causes of action, known or unknown,
suspected or unsuspected, arising directly or indirectly out of or in any way
connected with Mr. Pancoast’s employment with Company.  This release is intended
to have the broadest possible application and includes, but is not limited to,
any tort, contract, common law, constitutional or other statutory claims arising
under local state or federal law, including, but not limited to alleged
violations of the California Labor Code, the California Fair Employment and
Housing Act, Title VII of the Civil Rights Act of 1964, the Americans with
Disabilities Act, and all claims for attorneys’ fees, costs and expenses.

 

5.2                               Mr. Pancoast expressly waives his right to
recovery of any type, including damages or reinstatement, in any administrative
or court action, whether state or federal, and whether brought by Mr. Pancoast
or on his behalf, related in any way to the matters released herein.

 

5.3                               The parties acknowledge that this general
release is not intended to bar any claims that, by statute, may not be waived,
such as Mr. Pancoast’s right to file a charge with the National Labor Relations
Board or Equal Employment Opportunity Commission and other similar government
agencies, claims for statutory indemnity, workers’ compensation benefits or
unemployment insurance benefits, as applicable, and any challenge to the
validity of Mr. Pancoast’s release of claims under the Age Discrimination in
Employment Act of 1967, as amended, as set forth in this Agreement.

 

5.4                               Mr. Pancoast acknowledges that he may discover
facts or law different from, or in addition to, the facts or law that he knows
or believes to be true with respect to the claims released in this Agreement and
agrees, nonetheless, that this Agreement and the release contained in it shall
be and remain effective in all respects notwithstanding such different or
additional facts or the discovery of them.

 

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5.5                               Mr. Pancoast declares and represents that he
intends this Agreement to be complete and not subject to any claim of mistake,
and that the release herein expresses a full and complete release and he intends
the release herein to be final and complete.  Mr. Pancoast executes this release
with the full knowledge that this release covers all possible claims against the
Company Released Parties, to the fullest extent permitted by law.

 

5.6                               California Civil Code Section 1542 Waiver. 
Mr. Pancoast expressly acknowledges and agrees that all rights under
Section 1542 of the California Civil Code are expressly waived.  That section
provides:

 

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

 

5.7                               Representation Concerning Filing of Legal
Actions.  Mr. Pancoast represents that, as of the date of this Agreement, he has
not filed any lawsuits, charges, complaints, petitions, claims or other
accusatory pleadings against Company or any of the other Company Released
Parties in any court or with any governmental agency related to the matters
released in this Agreement.

 

6.                                      Nondisparagement.

 

6.1                               Mr. Pancoast agrees that he will not make any
voluntary statements, written or oral, or cause or encourage others to make any
such statements that defame, disparage or in any way criticize the personal
and/or business reputations, practices or conduct of Company or any of the other
Company Released Parties.

 

6.2                               Company agrees that it will not make any
voluntary statements, written or oral, or cause or encourage others to make any
such statements that defame, disparage or in any way criticize the personal
and/or business reputation, practices or conduct of Mr. Pancoast.

 

7.                                      Standstill. Until the date that is
twelve (12) months following the Separation Date, neither Mr. Pancoast nor any
of his Affiliates (as hereinafter defined), directly or indirectly, shall:

 

7.1                               solicit proxies or written consents of holders
of Company capital stock or become a “participant” (as such term is defined in
Instruction 3 to Item 4 of Schedule 14A promulgated under the Securities
Exchange Act of 1934, as amended and the rules and regulations promulgated
thereunder (the “Exchange Act”)) in or assist any other person in any
“solicitation” of any proxy, consent or other authority (as such terms are
defined under the Exchange Act) with respect to any shares of Company capital
stock (other than such encouragement, advice or influence as is consistent with
the Board’s recommendation in connection with such matter); or (ii) encourage
any other person to solicit or withhold any proxy, consent or other authority
with respect to any shares of Company capital stock or otherwise advise,
encourage or influence any other person with respect to voting any shares of
Company capital stock (other than such encouragement, advice or influence as is
consistent with the Board’s recommendation in connection with such matter);

 

7.2                               form or join in a partnership, limited
partnership, syndicate or other group, including a “group” as defined under
Section 13(d) of the Exchange Act, with respect to Company capital stock or
otherwise support or participate in any effort by any third party with respect
to the matters set forth in Section 7.1 above;

 

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7.3                               present at any meeting of Company stockholders
or through action by written consent any proposal for consideration for action
by Company stockholders or seek the removal of any member of the Board or
propose any nominee for election to the Board or seek representation on the
Board;

 

7.4                               grant any proxy, consent or other authority to
vote with respect to any matters (other than to the named proxies included in
the Company’s proxy card for any meeting of Company stockholders) or deposit any
shares of Company capital stock in a voting trust or subject them to a voting
agreement or other arrangement of similar effect with respect to any meeting of
Company stockholders or action by written consent (excluding customary brokerage
accounts, margin accounts, prime brokerage accounts and the like);

 

7.5                               without the prior approval of the Board,
separately or in conjunction with any other person or entity in which it is or
proposes to be either a principal, partner or financing source, publicly propose
or participate in, effect or seek to effect, any extraordinary corporate
transaction, tender offer or exchange offer, merger, acquisition,
reorganization, restructuring, recapitalization, change in the Company’s
dividend policy, change in the Company’s certificate of incorporation or bylaws,
business combination involving Company or a material amount of the assets or
businesses of Company or any action which would result in a class of securities
of Company being delisted from a national securities exchange or to ceasing to
be authorized to be quoted in an inter-dealer quotation system of a registered
national securities association or becoming eligible for termination of
registration pursuant to Section 12(g)(4) of the Exchange Act or encourage any
other person in any such activity;

 

7.6                               purchase or cause to be purchased or otherwise
acquire or agree to acquire beneficial ownership of any shares of Company
capital stock (other than in connection with a stock split, dividend or similar
transaction or the exercise of Stock Options in accordance herewith);

 

7.7                               disclose any intention, plan or arrangement
inconsistent with the foregoing;

 

7.8                               instigate, encourage, join, act in concert
with or assist any third party to do any of the foregoing;

 

7.9                               take any action that would reasonably be
expected to require Company to make a public announcement regarding the
possibility of any of the events described in this Section 7; or

 

7.10                        request that Company or the Board or any of their
respective representatives amend or waive any provision of this Section 7
(including this sentence).

 

For purposes of this Agreement, the term “Affiliate” shall have the meaning set
forth in Rule 12b-2 promulgated under the Exchange Act.

 

8.                                      Confidentiality and Return of Company
Property.  Mr. Pancoast understands and agrees that all of Company’s property
must be returned to Company.  By signing this Agreement, Mr. Pancoast represents
and warrants that Mr. Pancoast has returned to Company all Company property,
data and information belonging to Company (including, without limitation, all of
his access keys and electronic passes to Company’s premises, Company laptops and
computers, any Company issued

 

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mobile device and all Company documents, files and records in his possession). 
Mr. Pancoast will not use or disclose to others any confidential or proprietary
information of Company or any of the Company Released Parties.  In addition,
Mr. Pancoast agrees to keep the terms of this Agreement confidential between
Mr. Pancoast and Company, except that Mr. Pancoast may tell Mr. Pancoast’s
immediate family and attorney or accountant, if any, as needed, but in no event
should Mr. Pancoast discuss this Agreement or its terms with any current or
prospective employee of Company.  However, nothing in this Agreement shall
prohibit Mr. Pancoast from making truthful statements in any legal proceedings,
government investigation or as otherwise required by law.

 

9.                                      Continuing Obligations.

 

9.1                               Mr. Pancoast further agrees to comply with his
continuing obligations set forth in the PIIA, including but not limited to,
promises not to disclose and to protect all confidential and proprietary
information of Company.

 

9.2                               The Company further agrees to comply with its
continuing obligations set forth in the Indemnification Agreement dated July 17,
2014 between the Company and Mr. Pancoast, including but not limited to, the
obligations set forth therein with respect to the provision and maintenance of
directors’ and officers’ liability insurance in accordance therewith.

 

10.                               Ownership of Claims.  Mr. Pancoast represents
and warrants that he is the sole and lawful owner of all rights, title and
interest in and to all released matters, claims and demands as herein contained
and that there has been no assignment or other transfer of any interest of any
claim or demand which he may have against Company.

 

11.                               Representation by Counsel.  Mr. Pancoast
acknowledges and agrees that he has had the right and sufficient opportunity to
be represented by counsel of his own choosing.  Mr. Pancoast further
acknowledges and agrees that DLA Piper LLP (US) (“DLA Piper”) is legal counsel
for Company solely, and that he is not relying on Company or DLA Piper for legal
advice regarding this Agreement.  The parties further acknowledge that they have
entered into this Agreement voluntarily, without coercion, and based upon their
own judgment and not in reliance upon any representations or promises made by
the other party or parties, other than those contained within this Agreement. 
The parties further agree that if any of the facts or matters upon which they
now rely in making this Agreement hereafter prove to be otherwise, this
Agreement will nonetheless remain in full force and effect.

 

12.                               Drafting.  The parties agree that this
Agreement shall be construed without regard to the drafter of the same and shall
be construed as though each party to this Agreement participated equally in the
preparation and drafting of this Agreement.

 

13.                               Attorneys’ Fees.  Each party shall be
responsible for its own legal fees incurred in connection with the entering into
of this Agreement.

 

14.                               Effective Date/Acknowledgements.  Mr. Pancoast
has until 12:00 noon, California time, on November 3, 2014 to consider whether
or not to enter into this Agreement (“Consideration Period”) (although
Mr. Pancoast may elect not to use the full Consideration Period at his option). 
By signing this Agreement, Mr. Pancoast acknowledges that (a) he has read and
understands the terms of this Agreement; (b) he has obtained and considered such
legal counsel as he deems necessary; and (c) he enters this Agreement freely,
knowingly and voluntarily.  This Agreement shall become effective and
enforceable on the day Mr. Pancoast returns a signed copy of this Agreement to
the Company, provided it is signed during the Consideration Period (“Effective
Date”).  If the signed Agreement is not received by the Company on or before
12:00 noon, California time, on November 3, 2014, the Company will assume that
he is not interested in the accelerated vesting, and the offer will be
automatically withdrawn.

 

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15.                               Injunctive Relief; Consent to Jurisdiction. 
Mr. Pancoast acknowledges and agrees that damages will not be an adequate remedy
in the event of a breach of any of his obligations under this Agreement or the
PIIA.  Mr. Pancoast therefore agrees that Company shall be entitled (without
limitation of any other rights or remedies otherwise available to Company and
without the necessity of posting a bond) to obtain an injunction from any court
of competent jurisdiction prohibiting the continuance or recurrence of any
breach of this Agreement or the PIIA.  Mr. Pancoast hereby submits to the
jurisdiction and venue in the federal district court for the Southern District
of California and in the courts of the State of California in San Diego County,
California.  Mr. Pancoast further agrees that service upon him in any such
action or proceeding may be made by first class mail, certified or registered,
to Mr. Pancoast’s address as last appearing on the payroll records of Company.

 

16.                               Notice.  Any notices provided hereunder must
be in writing and such notices or any other written communication shall be
deemed effective: (i) upon personal delivery to the party to be notified;
(ii) when sent by confirmed facsimile if sent during normal business hours of
the recipient or, if not sent during normal business hours, then on the next
business day; (iii) three (3) days after having been sent by registered or
certified mail, return receipt requested, postage prepaid; or (iv) one day after
deposit with a nationally recognized overnight courier, specifying next day
delivery, with written verification of receipt.  If notice is to be provided to
Company, Mr. Pancoast shall use Company’s primary office location; and if notice
is to be provided to Mr. Pancoast, Company shall use Mr. Pancoast’s address as
listed in Company’s payroll records.

 

17.                               Severability.  In the event any provision of
this Agreement shall be found unenforceable, the unenforceable provision shall
be deemed deleted and the validity and enforceability of the remaining
provisions shall not be affected thereby.

 

18.                               Full Defense.  This Agreement may be pled as a
full and complete defense to, and may be used as a basis for an injunction
against, any action, suit or other proceeding that may be prosecuted, instituted
or attempted by Mr. Pancoast in breach hereof.

 

19.                               Applicable Law.  The validity, interpretation
and performance of this Agreement shall be construed and interpreted according
to the laws of the United States of America and the State of California.

 

20.                               No Admissions.  By entering into this
Agreement, neither the Company nor any of the Company Released Parties makes an
admission that they have engaged, or are now engaging, in any unlawful conduct. 
The parties understand and acknowledge that this Agreement is not an admission
of liability and shall not be used or construed as such in any legal or
administrative proceeding.

 

21.                               Preserved Rights of Mr. Pancoast.  This
Agreement does not waive or release any rights or claims that Mr. Pancoast may
have under the Age Discrimination in Employment Act of 1967, as amended, that
arise after the execution of this Agreement.  In addition, this Agreement does
not prohibit Mr. Pancoast from challenging the validity of this Agreement’s
waiver and release of claims under the Age Discrimination in Employment Act of
1967, as amended.

 

22.                               Entire Agreement; Modification.  This
Agreement, and the agreements and stock plans pertaining to the Stock Options
and RSU agreements held by Mr. Pancoast, and the surviving provisions of PIIA,
is intended to be the entire agreement between the parties and supersedes and
cancels any and all other and prior agreements, written or oral, between the
parties regarding this

 

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subject matter.  This Agreement may be amended only by a written instrument
executed by all parties hereto.  The parties agree that no waiver, amendment or
modification of any of the terms of this Agreement shall be effective unless in
writing and signed by all parties affected by the waiver, amendment or
modification.  No waiver of any term, condition or default of any term of this
Agreement shall be construed as a waiver of any other term, condition or
default.

 

23.                               Counterparts.  This Agreement may be signed in
counterparts and said counterparts shall be treated as though signed as one
document.

 

THE PARTIES TO THIS AGREEMENT HAVE READ THE FOREGOING AGREEMENT AND FULLY
UNDERSTAND EACH AND EVERY PROVISION CONTAINED HEREIN.  WHEREFORE, THE PARTIES
HAVE EXECUTED THIS AGREEMENT ON THE DATES SHOWN BELOW.

 

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

 

 

Dated: November 3, 2014

/s/ Scott R. Pancoast

 

Scott R. Pancoast

 

 

 

 

 

LPATH, INC.

 

 

 

 

 

Dated: November 3, 2014

By

/s/ Daniel H. Petree

 

 

Daniel H. Petree

 

 

Chairman of the Board

 

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