EMPLOYMENT AGREEMENT

 

This EMPLOYMENT AGREEMENT (this “Agreement”), effective January 7, 2020 (the
“Effective Date”), is by and between PROVENTION BIO, INC., a Delaware
corporation (the “Company”) and Jason Hoitt (the “Executive”).

 

W I T N E S S E T H

 

WHEREAS, the Company desires to employ the Executive as its Chief Commercial
Officer, and the Executive desires to accept such employment, on the terms and
conditions set forth in this Agreement; and

 

WHEREAS, the Company and the Executive have mutually agreed that, as of the
Effective Date, this Agreement shall govern the terms of employment between the
Executive and the Company;

 

NOW, THEREFORE, in consideration of the promises and the mutual covenants and
agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound hereby, agree as follows:

 

ARTICLE 1
EMPLOYMENT; TERM OF AGREEMENT

 

Section 1.1. Employment and Acceptance. During the Term (as defined in Section
1.2), the Company shall employ the Executive, and the Executive shall accept
such employment and serve the Company, in each case, subject to the terms and
conditions of this Agreement.

 

Section 1.2. Term. The employment relationship hereunder shall be for the period
commencing on the Effective Date until terminated by either party as provided in
ARTICLE 4 (the “Term”). In the event that the Executive’s employment with the
Company terminates, the Company’s obligation to continue to pay, after the
Termination Date, Base Salary, Annual Bonus, and other unaccrued benefits shall
terminate, except as may be provided for in ARTICLE 4.

 

ARTICLE 2
TITLE, DUTIES AND OBLIGATIONS; LOCATION

 

Section 2.1. Title. The Company shall employ the Executive to render full-time
services to the Company on the terms and conditions hereinafter set forth. The
Executive shall serve in the capacity of Chief Commercial Officer.

 

Section 2.2. Duties. The Executive shall report to the Company’s Chief Executive
Officer (CEO). The Executive agrees to perform to the best of his ability,
experience and talent those acts and duties, consistent with his/her position as
Chief Commercial Officer from time to time as the CEO may lawfully direct.
During the Term, the Executive also shall serve in such other positions or
capacities as may, from time to time, be reasonably requested by the Company or
any of its Affiliates.

 

   

 

 

Section 2.3. Compliance with Policies, etc. During the Term, the Executive shall
be bound by, and comply fully with, all of the Company’s written policies and
procedures for employees and officers in place from time to time, including, but
not limited to, all terms and conditions set forth in the Company’s employee
handbook, compliance manual, codes of conduct and any other memoranda and
communications applicable to the Executive pertaining to the policies,
procedures, rules and regulations, as currently in effect and as may be amended
from time to time and provided to the Executive in writing. These policies and
procedures include, among other things and without limitation, the Executive’s
obligations to comply with the Company’s rules regarding confidential and
proprietary information and trade secrets.

 

Section 2.4. Time Commitment. During the Term, the Executive shall use his/her
best efforts to promote the interests of the Company (including its subsidiaries
and other Affiliates) and shall devote all of his business time, ability and
attention to the performance of his duties for the Company and shall not,
directly or indirectly, render any services to any other person or organization,
whether for compensation or otherwise, except with the CEO’s prior written
consent, except that, without such written consent, the Executive may (i)
participate in charitable, civic, educational, professional, community or
industry affairs; and (ii) manage the Executive’s passive personal investments.
As used in this Agreement, “Affiliate” of any individual or entity means any
other individual or entity that directly or individual controls, is controlled
by, or is under common control with, the individual or entity. Notwithstanding
the above, the Company is aware that Executive is engaged in those Activities
listed in Exhibit A (if any) and consents to his continued participation in such
activities and other non-commercial activities that do not interfere with
Executive’s duties hereunder.

 

Section 2.5. Location. The Executive’s principal place of business for the
performance of his duties under this Agreement shall be remotely, or such other
place as permitted by the CEO. Notwithstanding the foregoing, the Executive
shall be required to travel as necessary to perform his duties hereunder.

 

 -2- 

 

 

ARTICLE 3
COMPENSATION AND BENEFITS; EXPENSES

 

Section 3.1. Compensation and Benefits. For all services rendered by the
Executive in any capacity during the Term (including, without limitation,
serving as an officer, director or member of any committee of the Company or any
of its subsidiaries or other Affiliates), the Executive shall be compensated as
follows (subject, in each case, to the provisions of ARTICLE 4 below):

 

(a) Base Salary. During the Term, the Company shall pay the Executive a base
salary (the “Base Salary”) at the annualized rate of $425,000, which shall be
subject to customary withholdings and authorized deductions and be payable in
equal installments in accordance with the Company’s customary payroll practices
in place from time to time. The Executive’s Base salary shall be subject to
periodic adjustments as the CEO shall in his discretion deem appropriate, but
will not be reduced more than ten percent (10%) in connection with an across the
board reduction of the salaries of all executives.

 

(b) Annual Bonus. For each calendar year ending during the Term, the Executive
shall be eligible to receive an annual bonus (the “Annual Bonus”) with a target
amount equal to forty percent (40%) of the Base Salary earned by the Executive
for such calendar year (the “Target Annual Bonus”). The actual amount of each
Annual Bonus will be based upon the level of achievement of the Company’s
corporate objectives and the Executive’s individual objectives, in each case, as
established by the CEO and the Executive for the calendar year with respect to
which such Annual Bonus relates. The determination of the level of achievement
of the corporate objectives and the Executive’s individual performance
objectives for a year shall be made by the CEO, in his reasonable discretion.
Each Annual Bonus for a calendar year, to the extent earned, will be paid in a
lump sum in the following calendar year, within the first 75 days of such
following year. Unless otherwise set forth herein the Annual Bonus shall not be
deemed earned until the date that it is paid. Accordingly, except as otherwise
provided herein, in order for the Executive to receive an Annual Bonus, the
Executive must be actively employed in good standing by the Company at the time
of such payment for such Annual Bonus to be due and payable.

 

(c) Equity Compensation. The Executive shall be eligible to receive equity
compensation in the form of a stock option grant for 400,000 shares, the details
of which shall be provided under separate cover pursuant to a stock grant
agreement.

 

(d) Benefit Plans. The Executive shall be entitled to participate in all
employee benefit plans and programs (excluding severance plans, if any)
generally made available by the Company to senior executives of the Company, to
the extent permissible under the general terms and provisions of such plans or
programs and in accordance with the provisions thereof. The Company may amend,
modify or rescind any employee benefit plan or program and/or change employee
contribution amounts to benefit costs in its discretion.

 

(e) Paid Vacation. The Executive shall be eligible to accrue paid vacation days
in accordance with the Company’s vacation policies in effect from time to time
for its executive team.

 

Section 3.2. Expense Reimbursement. The Company shall reimburse the Executive
during the Term, in accordance with the Company’s expense reimbursement policies
in place from time to time, for all reasonable out-of-pocket business and travel
expenses incurred by the Executive in the performance of his duties hereunder.
In order to receive such reimbursement, the Executive shall furnish to the
Company documentary evidence of each such expense in the form required to comply
with the Company’s policies in place from time to time.

 

 -3- 

 

 

ARTICLE 4
TERMINATION OF EMPLOYMENT

 

Section 4.1. Termination Without Cause or Resignation for Good Reason.

 

(a) The Company may terminate the Executive’s employment hereunder at any time
without Cause (other than by reason of death or Disability) upon fourteen days
prior written notice to the Executive. Executive may terminate his employment
hereunder for Good Reason upon written notice to the Company in accordance with
the provisions set forth in Section 4.1(c).

 

(b) As used in this Agreement, “Cause” means: (i) a material act, or act of
fraud, committed by the Executive that is intended to result in the Executive’s
personal enrichment to the detriment or at the expense of the Company or any of
its Affiliates; (ii) the Executive is convicted of a felony; (iii) gross
negligence or willful misconduct by the Executive, or failure by the Executive
to perform the duties or obligations reasonably assigned to the Executive by the
CEO or his designee from time to time, which is not cured upon at least thirty
(30) days prior written notice (unless such negligence, misconduct or failure is
not susceptible to cure, as determined in the reasonable discretion of the CEO);
or (iv) the Executive violates this Agreement or the Covenants Agreement (as
defined in Section 5.1 below).

 

(c) As used in this Agreement, “Good Reason” means the occurrence of any of the
following: (1) a material breach by the Company of the terms of this Agreement;
(2) a material reduction in the Executive’s Base Salary (other than pursuant to
a reduction uniformly applicable to all senior executives of the Company; (3) a
material diminution or change in the Executive’s title, authority, duties or
responsibilities; or (4) a change in the geographic location at which the
Executive performs services for the Company of more than fifty (50) miles;
provided, however, that the Executive must notify the Company within ninety (90)
days of the occurrence of any of the foregoing conditions that he considers it
to be a “Good Reason” condition and provide the Company with at least thirty
(30) days in which to cure the condition. If the Executive fails to provide this
notice and cure period prior to his resignation, or resigns more than six (6)
months after the initial existence of the condition, his resignation will not be
deemed to be for “Good Reason.”

 

(d) If the Executive’s employment is terminated pursuant to Section 4.1(a),
other than upon a Change of Control (as defined in Section 5.19) the Executive
shall, in full discharge of all of the Company’s obligations to the Executive,
be entitled to receive, and the Company’s sole obligation to the Executive under
this Agreement or otherwise shall be to pay or provide to the Executive, the
following:

 

(i) the Accrued Obligations (as defined in Section 4.2(b));

 

(ii) subject to Section 4.4 and Section 4.5: (A) payments equal to nine (9)
months of Executive’s Base Salary at the rate in effect immediately prior to the
Termination Date (provided that if such salary has been reduced, the
pre-reduction Base Salary); and (B) nine (9) months of COBRA premiums, in each
case less applicable withholdings and authorized deductions (the “Pre-CIC
Severance Payments”), to be paid (subject to Section 5.16) in equal installments
in accordance with the Company’s regular payroll practices, commencing on the
next regular payroll date that occurs on or after the sixtieth (60th) day
following the Termination Date; provided, however, that payments under
subsection (B) of this section will cease in the event that Executive secures
substantially gainful employment from a new employer prior to the expiration of
the time such payments are to be paid, and Executive agrees to immediately
inform the Company in writing if he becomes employed by a new employer. In
addition Executive shall (X) receive accelerated vesting of any equity awards
that would have become vested during the nine (9) month period following the
Termination Date and (Y) be paid by the Company the pro rata portion of his
Annual Bonus calculated as though all individual and Company objectives had been
fully achieved for the fiscal year in which Executive was terminated, which
shall be paid on the date the subject annual bonus would have been paid had
Executive’s employment continued and any Annual Bonus that would have been paid
to Executive for any prior fiscal year if Executive had been employed on the
date of payment.

 

 -4- 

 

 

(e) If the Executive’s employment is terminated pursuant to Section 4.1(a)
within twelve (12) months following a Change in Control (as defined below in
Section 5.19) (the “Post-Change in Control Period”), the Executive shall, in
full discharge of all of the Company’s obligations to the Executive (and in lieu
of any payments and benefits set forth in Section 4.1(d)), be entitled to
receive, and the Company’s sole obligation to the Executive under this Agreement
or otherwise shall be to pay or provide to the Executive, the following:

 

(i) the Accrued Obligations; and

 

(ii) subject to Section 4.4, Section 4.5, Section 4.6 and Section 4.7, (A)
payments equal to twelve (12) months of Executive’s Base Salary at the rate in
effect immediately prior to the Termination Date (provided that if such salary
has been reduced, the pre-reduction Base Salary) and (B) twelve (12) months of
COBRA premiums, in each case less applicable withholdings and authorized
deductions (the “Post-CIC Severance Payments”), to be paid (subject to Section
5.16) in twelve equal installments in accordance with the Company’s regular
payroll schedule, commencing on the next regular payroll date that occurs on or
after the sixtieth (60th) day following the Termination Date; provided, however,
that payments under subsection (B) of this section will cease in the event that
Executive secures substantially gainful employment from a new employer prior to
the expiration of the time such payments are to be paid, and Executive agrees to
immediately inform the Company in writing if he becomes employed by a new
employer. In addition Executive shall (X) receive accelerated vesting of any
equity awards that would have become vested following the Termination Date and
(Y) be paid by the Company in a lump sum on the closing of the Change of
Control, the pro rata portion of his Annual Bonus for the year in which the
Change of Control occurs calculated as though all Company and individual
objectives had been fully achieved upon the Change of Control and any Annual
Bonus that would have been paid to Executive for any prior fiscal year if
Executive had been employed on the date of payment.

 

 -5- 

 

 

Section 4.2. Termination for Cause; Voluntary Termination; Expiration of Term.

 

(a) The Company may terminate the Executive’s employment hereunder at any time
for Cause upon written notice to the Executive. The Executive may voluntarily
terminate his employment hereunder at any time without Good Reason upon sixty
(60) days prior written notice to the Company; provided, however, the Company
reserves the right, upon written notice to the Executive, to accept the
Executive’s notice of resignation and to accelerate such notice and make the
Executive’s resignation effective immediately, or on such other date prior to
Executive’s intended last day of work as the Company deems appropriate; provided
the Company pays Executive for the full notice period. It is understood and
agreed that the Company’s election to accelerate Executive’s notice of
resignation shall not be deemed a termination by the Company without Cause for
purposes of Section 4.1 of this Agreement or otherwise or constitute Good Reason
(as defined in Section 4.1) for purposes of Section 4.1 of this Agreement or
otherwise. The Executive’s employment shall automatically terminate upon the
expiration of the Term in accordance with Section 1.2.

 

(b) If the Executive’s employment is terminated pursuant to Section 4.2(a), the
Executive shall, in full discharge of all of the Company’s obligations to the
Executive, be entitled to receive, and the Company’s sole obligation under this
Agreement or otherwise shall be to pay or provide to the Executive, the
following (collectively, the “Accrued Obligations”):

 

(i) the Executive’s earned, but unpaid, Base Salary through the final date of
the Executive’s employment by the Company (the “Termination Date”), payable in
accordance with the Company’s standard payroll practices;

 

(ii) the Executive’s accrued, but unused, vacation (in accordance with the
Company’s policies);

 

(iii) expenses reimbursable under Section 3.2 above incurred on or prior to the
Termination Date but not yet reimbursed; and

 

(iv) any amounts or benefits that are vested amounts or vested benefits or that
the Executive is otherwise entitled to receive under any Company plan, program,
policy or practice (with the exception of those, if any, relating to severance)
on the Termination Date, in accordance with such plan, program, policy, or
practice.

 

Section 4.3. Termination Resulting from Death or Disability.

 

(a) As the result of any Disability suffered by the Executive, the Company may,
upon five (5) days prior notice to the Executive, terminate the Executive’s
employment under this Agreement. The Executive’s employment shall automatically
terminate upon his death.

 

(b) “Disability” means a determination by the Company in accordance with
applicable law that as a result of a physical or mental injury or illness, the
Executive is unable to perform the essential functions of his job with or
without reasonable accommodation for a period of (i) ninety 90) consecutive
days; or (ii) one hundred twenty (120) days during any twelve (12) month period.

 

 -6- 

 

 

(c) If the Executive’s employment is terminated pursuant to Section 4.3(a), the
Executive or the Executive’s estate, as the case may be, shall be entitled to
receive, and the Company’s sole obligation under this Agreement or otherwise
shall be to pay or provide to the Executive or the Executive’s estate, as the
case may be, the Accrued Obligations.

 

Section 4.4. Release Agreement. In order to receive the Pre-CIC Severance
Payments, the Post-CIC Severance Payments, the Executive must timely execute,
deliver (and not revoke) a separation agreement and general release (the
“Release Agreement”) in a form reasonably satisfactory to the Company. If the
Executive is eligible for Severance Payments pursuant to Section 4.1, the
Company will deliver the Release Agreement to the Executive within seven (7)
calendar days following the Termination Date. The Severance Payments are subject
to the Executive’s execution and delivery of such Release Agreement within 21
days [or 45 days in the case of a group layoff] of the Executive’s receipt of
the Release Agreement and the Executive’s non-revocation of such Release
Agreement in accordance with applicable law.

 

Section 4.5. Post-Termination Breach. Notwithstanding anything to the contrary
contained in this Agreement, the Company’s obligations to provide the Severance
Payments will immediately cease if the Executive breaches any of the provisions
of the Covenants Agreement, the Release Agreement or any other agreement the
Executive has with the Company.

 

Section 4.6. Covenants Regarding Other Employees. During the term of this
Agreement, and for a period of twelve (12) months following the Executive’s
termination of employment for any reason, the Executive agrees not to directly
or indirectly solicit any employee of the Company to terminate his or his
employment with the Company or to interfere in any manner with the business of
the Company.

 

Section 4.7. Noncompete Following a Termination of Employment. From the
Effective Date of this Agreement until twelve (12) months following the
Termination Date for any reason pursuant to Section 4.2 the Executive will not:
(a) directly or indirectly own any equity or proprietary interest in (except for
ownership of shares in a publicly traded company not exceeding three percent
(3%) of any class of outstanding securities), or be an employee, agent,
director, advisor, or consultant to or for any Competitor of the Company,
whether on his own behalf or on behalf of any person; or (b) undertake any
action to induce or cause any customer or client to discontinue or diminish any
part of its business with the Company.

 

“Competitor” shall mean any entity that is engaged, directly or indirectly, in
the business of developing and/or commercializing an enteroviral vaccine to
prevent the onset of type one diabetes and/or products that prevent or delay
type one diabetes and/or treat celiac disease. In the event Company in- licenses
or acquires other assets while the Executive is still employed by the Company,
the definition of Competitor will be expanded to include the specific mechanisms
of action against which the in-licensed or acquired assets are at that time
known to be targeted.

 

 -7- 

 

 

ARTICLE 5
GENERAL PROVISIONS

 

Section 5.1. Company Non-Disclosure and Invention Assignment Agreement.
Concurrent with the execution of this Agreement, Executive shall enter into an
Employee Non- Disclosure and Invention Assignment Agreement (“Covenants
Agreement”), the terms of which are incorporated herein by reference. The
Covenants Agreement shall survive the termination of this Agreement and the
Executive’s employment by the Company for the applicable period(s) set forth
therein.

 

Section 5.2. Expenses. Each of the Company and the Executive shall bear its/his
own costs, fees and expenses in connection with the negotiation, preparation and
execution of this Agreement.

  

Section 5.3. Entire Agreement. This Agreement, the Stock Option Grant Agreement,
and the Covenants Agreement contain the entire agreement of the parties hereto
with respect to the terms and conditions of the Executive’s employment during
the Term and activities following termination of this Agreement and the
Executive’s employment with the Company and supersede any and all prior
agreements and understandings, whether written or oral, between the parties
hereto with respect to the subject matter of this Agreement or the Covenants
Agreement. Each party hereto acknowledges that no representations, inducements,
promises or agreements, whether oral or in writing, have been made by any party,
or on behalf of any party, which are not embodied herein or in the Covenants
Agreement. The Executive acknowledges and agrees that the Company has fully
satisfied, and has no further, obligations to the Executive arising under, or
relating to, any other employment or consulting arrangement or understanding
(including, without limitation, any claims for compensation or benefits of any
kind) or otherwise. No agreement, promise or statement not contained in this
Agreement or the Covenants Agreement shall be valid and binding, unless agreed
to in writing and signed by the parties sought to be bound thereby.

 

Section 5.4. No Other Contracts. The Executive represents and warrants to the
Company that neither the execution and delivery of this Agreement by the
Executive nor the performance by the Executive of the Executive’s obligations
hereunder, shall constitute a default under or a breach of the terms of any
other agreement, contract or other arrangement, whether written or oral, to
which the Executive is a party or by which the Executive is bound, nor shall the
execution and delivery of this Agreement by the Executive nor the performance by
the Executive of his duties and obligations hereunder give rise to any claim or
charge against either the Executive, the Company or any Affiliate, based upon
any other contract or other arrangement, whether written or oral, to which the
Executive is a party or by which the Executive is bound. The Executive further
represents and warrants to the Company that he is not a party to or subject to
any restrictive covenants, legal restrictions or other agreement, contract or
arrangement, whether written or oral, in favor of any entity or person which
would in any way preclude, inhibit, impair or limit the Executive’s ability to
perform his obligations under this Agreement or the Covenants Agreement,
including, but not limited to, non-competition agreements, non-solicitation
agreements or confidentiality agreements. The Executive shall defend, indemnify
and hold the Company harmless from and against all claims, actions, losses,
liabilities, damages, costs and expenses (including reasonable attorney’s fees
and amounts paid in settlement in good faith) arising from or relating to any
breach of the representations and warranties made by the Executive in this
Section 5.4.

 

 -8- 

 

 

Section 5.5. Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally or sent by
nationally recognized overnight courier service (with next business day delivery
requested). Any such notice or communication shall be deemed given and
effective, in the case of personal delivery, upon receipt by the other party,
and in the case of a courier service, upon the next business day, after dispatch
of the notice or communication. Any such notice or communication shall be
addressed as follows:

 

If to the Company, to:

 

*****

 

With a copy to:

 

*****

 

If to the Executive, to:

 

*****

 

Any person named above may designate another or an additional notification
address and contact person by giving notice in accordance with this Section to
the other persons named above.

 

Section 5.6. Governing Law; Jurisdiction. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New Jersey, without
regard to principles of conflicts of law. Any and all actions arising out of
this Agreement or Employee’s employment by Company or termination therefrom
shall be brought and heard in the state and federal courts of the State of New
Jersey and the parties hereto hereby irrevocably submit to the exclusive
jurisdiction of any such courts. THE COMPANY AND THE EXECUTIVE HEREBY WAIVE
THEIR RESPECTIVE RIGHT TO TRIAL BY JURY IN ANY ACTION CONCERNING THIS AGREEMENT
OR ANY AND ALL MATTERS ARISING DIRECTLY OR INDIRECTLY HEREFROM AND REPRESENT
THAT THEY HAVE CONSULTED WITH COUNSEL OF THEIR CHOICE OR HAVE CHOSEN VOLUNTARILY
NOT TO DO SO SPECIFICALLY WITH RESPECT TO THIS WAIVER.

 

Section 5.7. Waiver. Either party hereto may waive compliance by the other party
with any provision of this Agreement. The failure of a party to insist on strict
adherence to any term of this Agreement on any occasion shall not be considered
a waiver or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement. No waiver of any
provision shall be construed as a waiver of any other provision. Any waiver must
be in writing.

 

Section 5.8. Severability. If any one or more of the terms, provisions,
covenants and restrictions of this Agreement shall be determined by a court of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions of this Agreement shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated and the parties will attempt to agree upon a valid and enforceable
provision which shall be a reasonable substitute for such invalid and
unenforceable provision in light of the tenor of this Agreement, and, upon so
agreeing, shall incorporate such substitute provision in this Agreement. In
addition, if any one or more of the provisions contained in this Agreement shall
for any reason be determined by a court of competent jurisdiction to be
excessively broad as to duration, geographical scope, activity or subject, it
shall be construed, by limiting or reducing it, so as to be enforceable to the
extent compatible with then applicable law.

 

 -9- 

 

 

Section 5.9. Counterparts. This Agreement may be executed in any number of
counterparts and each such duplicate counterpart shall constitute an original,
any one of which may be introduced in evidence or used for any other purpose
without the production of its duplicate counterpart. Moreover, notwithstanding
that any of the parties did not execute the same counterpart, each counterpart
shall be deemed for all purposes to be an original, and all such counterparts
shall constitute one and the same instrument, binding on all of the parties
hereto.

 

Section 5.10. Advice of Counsel. This Agreement was prepared by Lowenstein
Sandler LLP in its capacity as legal counsel to the Company. Both parties hereto
acknowledge that they have had the opportunity to seek and obtain the advice of
counsel before entering into this Agreement and have done so to the extent
desired, and have fully read the Agreement and understand the meaning and import
of all the terms hereof.

  

Section 5.11. Assignment. This Agreement shall inure to the benefit of the
Company and its successors and assigns (including, without limitation, the
purchaser of all or substantially all of its assets) and shall be binding upon
the Company and its successors and assigns. This Agreement is personal to the
Executive, and the Executive shall not assign or delegate his rights or duties
under this Agreement, and any such assignment or delegation shall be null and
void.

 

Section 5.12. Agreement to Take Actions. Each party to this Agreement shall
execute and deliver such documents, certificates, agreements and other
instruments, and shall take all other actions, as may be reasonably necessary or
desirable in order to perform his or its obligations under this Agreement.

 

Section 5.13. No Attachment. Except as required by law, no right to receive
payments under this Agreement shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation or
to execution, attachment, levy or similar process or assignment by operation of
law, and any attempt, voluntary or involuntary, to effect any such action shall
be null, void and of no effect; provided, however, that nothing in this Section
5.13 or Section 5.11 shall preclude the assumption of such rights by executors,
administrators or other legal representatives of the Executive or the
Executive’s estate and their assigning any rights hereunder to the person or
persons entitled thereto.

 

Section 5.14. Source of Payment. Except as otherwise provided under the terms of
any applicable employee benefit plan, all payments provided for under this
Agreement shall be paid in cash from the general funds of Company. The Company
shall not be required to establish a special or separate fund or other
segregation of assets to assure such payments, and, if the Company shall make
any investments to aid it in meeting its obligations hereunder, the Executive
shall have no right, title or interest whatever in or to any such investments
except as may otherwise be expressly provided in a separate written instrument
relating to such investments. Nothing contained in this Agreement, and no action
taken pursuant to its provisions, shall create or be construed to create a trust
of any kind, or a fiduciary relationship, between the Company and the Executive
or any other person. To the extent that any person acquires a right to receive
payments from the Company hereunder, such right, without prejudice to rights
which employees may have, shall be no greater than the right of an unsecured
creditor of the Company. The Executive shall not look to the owners of the
Company for the satisfaction of any obligations of the Company under this
Agreement.

 

 -10- 

 

 

Section 5.15. Tax Withholding. The Company or other payor is authorized to
withhold from any benefit provided or payment due hereunder, the amount of
withholding taxes due any federal, state or local authority in respect of such
benefit or payment and to take such other action as may be necessary in the
opinion of the Company to satisfy all obligations for the payment of such
withholding taxes. The Executive will be solely responsible for all taxes
assessed against him under applicable law with respect to the compensation and
benefits described in this Agreement, other than typical employer-paid taxes
such as FICA, and the Company makes no representations as to the tax treatment
of such compensation and benefits.

 

Section 5.16. 409A Compliance. All payments under this Agreement are intended to
comply with or be exempt from the requirements of Section 409A of the Code and
regulations promulgated thereunder (“Section 409A”). As used in this Agreement,
the “Code” means the Internal Revenue Code of 1986, as amended. To the extent
permitted under applicable regulations and/or other guidance of general
applicability issued pursuant to Section 409A, the Company reserves the right to
modify this Agreement to conform with any or all relevant provisions regarding
compensation and/or benefits so that such compensation and benefits are exempt
from the provisions of 409A and/or otherwise comply with such provisions so as
to avoid the tax consequences set forth in Section 409A and to assure that no
payment or benefit shall be subject to an “additional tax” under Section 409A.
To the extent that any provision in this Agreement is ambiguous as to its
compliance with Section 409A, or to the extent any provision in this Agreement
must be modified to comply with Section 409A, such provision shall be read in
such a manner so that no payment due to the Executive shall be subject to an
“additional tax” within the meaning of Section 409A(a)(1)(B) of the Code. If
necessary to comply with the restriction in Section 409A(a)(2)(B) of the Code
concerning payments to “specified employees,” any payment on account of the
Executive’s separation from service that would otherwise be due hereunder within
six (6) months after such separation shall be delayed until the first business
day of the seventh month following the Termination Date and the first such
payment shall include the cumulative amount of any payments (without interest)
that would have been paid prior to such date if not for such restriction. Each
payment in a series of payments hereunder shall be deemed to be a separate
payment for purposes of Section 409A. In no event may the Executive, directly or
indirectly, designate the calendar year of payment. All reimbursements provided
under this Agreement shall be made or provided in accordance with the
requirements of Section 409A, including, where applicable, the requirement that
(i) any reimbursement is for expenses incurred during the Executive’s lifetime
(or during a shorter period of time specified in this Agreement), (ii) the
amount of expenses eligible for reimbursement during a calendar year may not
affect the expenses eligible for reimbursement in any other calendar year, (iii)
the reimbursement of an eligible expense will be made on or before the last day
of the calendar year following the year in which the expense is incurred, and
(iv) the right to reimbursement is not subject to liquidation or exchange for
another benefit. Notwithstanding anything contained herein to the contrary, the
Executive shall not be considered to have terminated employment with the Company
for purposes of Section 4.1 unless the Executive would be considered to have
incurred a “termination of employment” from the Company within the meaning of
Treasury Regulation §1.409A-1(h)(1)(ii). In no event whatsoever shall the
Company be liable for any additional tax, interest or penalty that may be
imposed on the Executive by Section 409A or damages for failing to comply with
Section 409A.

 

 -11- 

 

 

Section 5.17. 280G Modified Cutback.

 

(a) If any payment, benefit or distribution of any type to or for the benefit of
the Executive, whether paid or payable, provided or to be provided, or
distributed or distributable pursuant to the terms of this Agreement or
otherwise (collectively, the “Parachute Payments”) would subject the Executive
to the excise tax imposed under Section 4999 of the Code (the “Excise Tax”), the
Parachute Payments shall be reduced so that the maximum amount of the Parachute
Payments (after reduction) shall be one dollar ($1.00) less than the amount
which would cause the Parachute Payments to be subject to the Excise Tax;
provided that the Parachute Payments shall only be reduced to the extent the
after-tax value of amounts received by the Executive after application of the
above reduction would exceed the after-tax value of the amounts received without
application of such reduction. For this purpose, the after-tax value of an
amount shall be determined taking into account all federal, state, and local
income, employment and excise taxes applicable to such amount. Unless the
Executive shall have given prior written notice to the Company to effectuate a
reduction in the Parachute Payments if such a reduction is required, which
notice shall be consistent with the requirements of Section 409A to avoid the
imputation of any tax, penalty or interest thereunder, then the Company shall
reduce or eliminate the Parachute Payments by first reducing or eliminating any
cash payments (with the payments to be made furthest in the future being reduced
first), then by reducing or eliminating accelerated vesting of stock options or
similar awards, and then by reducing or eliminating any other remaining
Parachute Payments; provided, that no such reduction or elimination shall apply
to any non-qualified deferred compensation amounts (within the meaning of
Section 409A) to the extent such reduction or elimination would accelerate or
defer the timing of such payment in manner that does not comply with Section
409A.

 

(b) An initial determination as to whether (x) any of the Parachute Payments
received by the Executive in connection with the occurrence of a change in the
ownership or control of the Company or in the ownership of a substantial portion
of the assets of the Company shall be subject to the Excise Tax, and (y) the
amount of any reduction, if any, that may be required pursuant to the previous
paragraph, shall be made by an independent accounting firm selected by the
Company (the “Accounting Firm”) prior to the consummation of such change in the
ownership or effective control of the Company or in the ownership of a
substantial portion of the assets of the Company. The Executive shall be
furnished with notice of all determinations made as to the Excise Tax payable
with respect to the Executive’s Parachute Payments, together with the related
calculations of the Accounting Firm, promptly after such determinations and
calculations have been received by the Company.

 

(c) For purposes of this Section 5.17, (i) no portion of the Parachute Payments
the receipt or enjoyment of which the Executive shall have effectively waived in
writing prior to the date of payment of the Parachute Payments shall be taken
into account; (ii) no portion of the Parachute Payments shall be taken into
account which in the opinion of the Accounting Firm does not constitute a
“parachute payment” within the meaning of Section 280G(b)(2) of the Code; (iii)
the Parachute Payments shall be reduced only to the extent necessary so that the
Parachute Payments (other than those referred to in the immediately preceding
clause (i) or (ii)) in their entirety constitute reasonable compensation for
services actually rendered within the meaning of Section 280G(b)(4) of the Code
or are otherwise not subject to disallowance as deductions, in the opinion of
the auditor or tax counsel referred to in such clause (ii); and (iv) the value
of any non-cash benefit or any deferred payment or benefit included in the
Parachute Payments shall be determined by the Company’s independent auditors
based on Sections 280G and 4999 of the Code and the regulations for applying
those sections of the Code, or on substantial authority within the meaning of
Section 6662 of the Code.

 

 -12- 

 

 

Section 5.18. Recoupment of Erroneously Awarded Compensation. Any
incentive-based or other compensation paid to the Executive under this Agreement
or any other agreement or arrangement with the Company which is subject to
recovery under any law, government regulation, stock exchange listing
requirement or any clawback policy adopted by the Company from time to time will
be subject to the deductions and clawback as may be required by such law,
government regulation, stock exchange listing requirement or clawback policy. In
addition, if the executive is or becomes an executive officer subject to the
incentive compensation repayment requirements of the Dodd-Frank Wall Street
Reform and Consumer Protection Act (the “Dodd-Frank Act”), then if required by
the Dodd-Frank Act or any of its regulations he/she will enter into an amendment
to this Agreement or a separate written agreement with the Company to comply
with the Dodd-Frank Act and any of its regulations.

 

Section 5.19. Certain Definitions. As used in this Agreement, “Change in
Control” means (x) a change in ownership of the Company under clause (i) below
or (y) a change in the ownership of a substantial portion of the assets of the
Company under clause (ii) below:

 

(i) Change in the Ownership of the Company. A change in the ownership of the
Company shall occur on the date that any one person, or more than one person
acting as a group (as defined in clause (iii) below), acquires ownership of
capital stock of the Company that, together with capital stock held by such
person or group, constitutes more than 50 percent of the total fair market value
or total voting power of the capital stock of the Company. However, if any one
person or more than one person acting as a group, is considered to own more than
50 percent of the total fair market value or total voting power of the capital
stock of the Company, the acquisition of additional capital stock by the same
person or persons shall not be considered to be a change in the ownership of the
Company. An increase in the percentage of capital stock owned by any one person,
or persons acting as a group, as a result of a transaction in which the Company
acquires capital stock in the Company in exchange for property will be treated
as an acquisition of stock for purposes of this paragraph.

 

(ii) Change in the Ownership of a Substantial Portion of the Company’s Assets. A
change in the ownership of a substantial portion of the Company’s assets shall
occur on the date that any one person, or more than one person acting as a group
(as defined in clause (iii) below), acquires (or has acquired during the
12-month period ending on the date of the most recent acquisition by such person
or persons) assets from the Company that have a total gross fair market value
equal to or more than 80 percent of the total gross fair market value of all of
the assets of the Company immediately prior to such acquisition or acquisitions.
For this purpose, gross fair market value means the value of the assets of the
Company, or the value of the assets being disposed of, determined without regard
to any liabilities associated with such assets. There is no Change in Control
under this clause (ii) when there is a transfer to an entity that is controlled
by the shareholders of the Company immediately after the transfer, as provided
below in this clause (ii). A transfer of assets by the Company is not treated as
a change in the ownership of such assets if the assets are transferred to (a) a
shareholder of the Company (immediately before the asset transfer) in exchange
for or with respect to its capital stock, (b) an entity, 50 percent or more of
the total value or voting power of which is owned, directly or indirectly, by
the Company, (c) a person, or more than one person acting as a group, that owns,
directly or indirectly, 50 percent or more of the total value or voting power of
all the outstanding capital stock of the Company, or (d) an entity, at least 50
percent of the total value or voting power of which is owned, directly or
indirectly, by a person described in clause (ii)(c) of this paragraph. For
purposes of this clause (ii), a person’s status is determined immediately after
the transfer of the assets.

 

(iii) Persons Acting as a Group. For purposes of clauses (i) and (ii) above,
persons will not be considered to be acting as a group solely because they
purchase or own capital stock or purchase assets of the Company at the same
time. However, persons will be considered to be acting as a group if they are
owners of a corporation that enters into a merger, consolidation, purchase or
acquisition of assets or capital stock, or similar business transaction with the
Company. If a person, including an entity, owns stock in both corporations that
enter into a merger, consolidation, purchase or acquisition of assets or capital
stock, or similar transaction, such shareholder is considered to be acting as a
group with other shareholders in a corporation only with respect to the
ownership in that corporation before the transaction giving rise to the change
and not with respect to the ownership interest in the other corporation. For
purposes of this paragraph, the term “corporation” shall have the meaning
assigned such term under Treasury Regulation section 1.280G-1, Q&A-45.

 

(iv) Each of clauses (i) through (iii) above shall be construed and interpreted
consistent with the requirements of Section 409A and any Treasury Regulations or
other guidance issued thereunder.

 

[Signature Page Follows]

 

 -13- 

 

 

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

 

  COMPANY       PROVENTION BIO, INC.                               By:     Name:
    Title:           EXECUTIVE           Jason Hoitt

 

 -14-