Document:

Exhibit

SUBLEASE

THIS SUBLEASE (this “Sublease”) is dated for reference purposes November 7, 2018, and is entered into by and between ACACIA RESEARCH CORPORATION, a Delaware corporation (“Sublandlord”), and EVOLUS, INC., a Delaware corporation (“Subtenant”).
Recitals
A.Sublandlord has leased that certain premises located in the building at 520 Newport Center, Newport Beach, California (the “Building”), consisting of Suite 1200 (the “Premises”), with a total of approximately 17,758 rentable square feet, pursuant to that certain Lease dated January 28, 2002, which lease was amended by a First Amendment to Lease dated August 13, 2004, a Second Amendment to Lease dated February 9, 2005, a Third Amendment to Lease dated March 14, 2006, a Fourth Amendment to Lease dated November 9, 2006, a Fifth Amendment to Lease dated September 10, 2007, a Sixth Amendment to Lease dated January 13, 2011, a Seventh Amendment to Lease dated September 17, 2012, an Eighth Amendment to Lease dated February 28, 2013, and a Ninth Amendment to Lease dated June 26, 2014 (collectively, the “Master Lease”), by and between Sublandlord, as Tenant, and THE IRVINE COMPANY LLC, a Delaware limited liability company, as Landlord (herein referred to as “Master Landlord”).  Sublandlord and Subtenant acknowledge and agree that a true and correct copy of the Master Lease has been provided to Subtenant and where referenced in this Sublease, the applicable provisions of the Master Lease are hereby incorporated by reference into this Sublease. 
B.    Sublandlord wishes to sublease to Subtenant, and Subtenant wishes to sublease from Sublandlord, the entirety of the Premises (the “Subleased Premises”), subject to the terms and conditions of this Sublease.  
Agreement
NOW THEREFORE, in consideration of the mutual promises and covenants contained in this Sublease, and for other valuable consideration which they hereby acknowledge, the parties agree as follows:
1.    Defined Terms.  Terms used in this Sublease which are not specifically defined herein shall have the meanings set forth in the Master Lease.
2.    Sublease of Premises.  Subtenant agrees to sublease the Subleased Premises from Sublandlord and Sublandlord agrees to sublease the Subleased Premises to Subtenant.  This Sublease and Subtenant’s rights to the Subleased Premises shall be subject to the terms and provisions of the Master Lease.  Sublandlord warrants to Subtenant that (a) the Master Lease has not been amended or modified, and (b) Sublandlord has not received any notice of Default under the Master Lease which has not been cured.  So long as Subtenant is not in Default of this Sublease, Subtenant may quietly enjoy the Subleased Premises for the term of this Sublease.
3.    Term.  
(a)    This Sublease is contingent upon Master Landlord consenting to this Sublease in accordance with the terms of the Master Lease.  This Sublease shall commence on the “Commencement 

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Date”, which shall be the later to occur of (i) the date upon which Master Landlord consents to this Sublease in writing pursuant to that certain Consent to Subletting (the “Consent to Subletting”) to be entered into by Master Landlord, Sublandlord and Subtenant (the “Consent Date”), or (ii) Sunday, December 2, 2018 (the “Target Date”), or (iii) the date on which Sublandlord delivers possession of the Subleased Premises to Subtenant.  The term of this Sublease (the “Term”) shall be from the Commencement Date until Monday, January 20, 2020 (the “Expiration Date”).  
(b)    Notwithstanding the forgoing, in the event Master Landlord has not provided the form of Consent to Subletting to Sublandlord and Subtenant on or before Monday, December 17, 2018 (the “Outside Date”), each of Sublandlord and Subtenant shall have the right to terminate this Sublease by delivering written notice of such termination to the other party, on or after Tuesday, December 18, 2018; provided, however, in the event the Consent to Subletting is ultimately provided by Master Landlord after the Outside Date but before either Sublandlord or Subtenant have delivered a termination notice to the other, such right to terminate shall automatically expire and no longer be available to either of Sublandlord or Subtenant, and this Sublease shall continue as contemplated herein.  
(c)    If Sublandlord, for any reason whatsoever, cannot deliver possession of the Subleased Premises to Tenant on or before the Target Date, this Sublease shall not be void or voidable nor shall Sublandlord be liable to Subtenant for any resulting loss or damage.  However, Subtenant shall not be liable for the payment of any rent until the Commencement Date occurs as provided in Section 3(a) above.  
(d)    Sublandlord and Subtenant acknowledge and agree that the Expiration Date is intentionally scheduled to be earlier than the date upon which the Master Lease expires, so as to allow Sublandlord time to remove telecommunication cabling and prepare the Subleased Premises for surrender to Master Landlord after Subtenant has vacated, but prior to expiration of the Master Lease.  Notwithstanding the foregoing, so long as Subtenant is not in default hereunder, in the event that Subtenant and Master Landlord enter into a new direct lease for the Subleased Premises that will commence immediately following the expiration of the Master Lease, and Master Landlord affirmatively releases Sublandlord in writing from any obligation to remove the telecommunication cabling and any other improvements from the Subleased Premises, Sublandlord and Subtenant shall enter into an amendment to this Sublease to change the Expiration Date to be commensurate with the expiration of the Master Lease.  
(e)    Notwithstanding the foregoing, this Sublease shall automatically terminate (without liability of Sublandlord to Subtenant therefor) if and when the term of the Master Lease terminates for any reason.  Any hold over beyond the termination of this Sublease shall only be permitted (i) with the prior written consent of Sublandlord, which consent may be withheld in Sublandlord’s sole discretion, and (ii) in accordance with the provisions of Section 15.1 of the Master Lease, which shall apply to any such hold over.
(f)    In the event the Consent Date occurs prior to the Target Date, Sublandlord shall provide Subtenant with a license for non-exclusive, shared access to the Subleased Premises on Saturday, December 1, 2018 (the “Early Access Day”), subject to the following terms and conditions:
(i)    Subtenant and Subteant’s contractors, subcontractors and employees shall work in harmony and not interfere with Sublandlord and Sublandlord’s agents shared use of the Subleased Premises during the Early Access Day, and Subtenant hereby acknowledges that Sublandlord 

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will likely be in the process of removing Sublandlord’s personal property from the Subleased Premises on the Early Access Day; 
(ii)    In the event Subtenant’s entry causes disharmony or interfere with the work being performed by Sublandlord, Sublandlord may notify Subtenant that the Commencement Date is being extended for the one (1) additional day to allow Sublandlord time to complete its moving activities due to any delay caused by Subtenant’s entry on the Early Access Date.
(iii)    Sublandlord shall permit Subtenant and its agents to enter the Subleased Premises on the Early Access Day, subject to compliance by Subtenant with the terms and conditions of this Sublease and the Master Lease, including, but not limited to, all requirements imposed by Master Landlord on third party contractors, including without limitation the maintenance by Subtenant and its contractors and subcontractors of workers’ compensation and public liability and property damage insurance in accordance with the Master Lease, with certificates of such insurance being furnished to Sublandlord and Master Landlord prior to proceeding with any such entry on the Early Access Date;
(iv)    The entry shall be deemed to be under all of the provisions of this Sublease except as to the covenant to pay rent; and
(v)     Sublandlord shall not be liable in any way for any injury, loss or damage which may occur to any such work being performed by Subtenant, the same being solely at Subtenant's risk.     
4.     Insurance Certificates.  Subtenant shall maintain and deliver to Sublandlord certificate(s) of insurance evidencing the insurance required pursuant to Section 10.1 and Exhibit D of the Master Lease.
5.    Rent.
(a)    Commencing on the Commencement Date, Subtenant shall pay monthly base full service gross rent (“Monthly Base Rent”) to Sublandlord during the term of this Sublease, without offset, deduction or abatement, which Monthly Base Rent shall be in the amount of Sixty-Five Thousand and No/100 Dollars ($65,000.00).  Monthly Base Rent for any partial month at the beginning or the end of the term of this Sublease shall be prorated on the basis of a 30-day month. 
(b)    In addition to Monthly Base Rent, Subtenant is responsible for the payment of the following:  (i) the Parking Charges (as defined in Section 14, below), (ii) the actual expenses incurred by Sublandlord for any additional services requested by Subtenant that are to be provided by Master Landlord (i.e., if Subtenant requests the use of after-hours HVAC, such after-hours HVAC charges and assessments which are charged by Master Landlord to Sublandlord shall be payable to Sublandlord by Subtenant); (iii) any charges permitted by and pursuant to the Sublease or the Master Lease as a result of actions or omissions of the Subtenant; and (iv) any actual and direct expenses Sublandlord incurs by reason of Subtenant’s non-performance of its obligations under this Sublease (collectively, “Additional Rent”).  All such amounts shall be payable in full by Subtenant as directed by Sublandlord within ten (10) days after submission of a written invoice therefor by Sublandlord to Subtenant, and such obligations shall survive the expiration or earlier termination of this Sublease. 

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(c)    Notwithstanding Subtenant’s obligation to pay Additional Rent, Sublandlord and Subtenant hereby acknowledge and agree that Subtenant shall not be responsible for separate payment of Operating Expenses under the Master Lease.
(d)    Monthly Base Rent, Additional Rent and all other costs and expenses payable hereunder by Subtenant shall be referred to collectively as “rent.”  All Monthly Base Rent payments shall be paid to Sublandlord on a monthly basis and are due and payable in advance on the first day of each month.  All other rent (including Additional Rent) shall be paid to Sublandlord within ten (10) days after Sublandlord’s written demand therefor.  Sublandlord may impose a late charge of five percent (5%) of the amount due or $100, whichever is greater, for any rent payment not received on the date due.  In addition, all amounts not paid by Subtenant when due shall bear interest at the rate of ten percent (10%) per annum until paid.  As a cumulative and non-exclusive remedy, Sublandlord may also treat failure to pay on the first day of a month the Monthly Base Rent payment for such month as a Default by Subtenant, and shall be entitled to any and all remedies for such Default.
6.    First Month’s Rent and Security Deposit.  Upon execution of this Sublease, Subtenant shall deliver to Sublandlord (a) one (1) full month of Monthly Base Rent for the first month of the term of this Sublease, and (b) a security deposit in the amount of One Hundred Thirty Thousand and No/100 Dollars ($130,000.00) (the “Security Deposit”).  The Security Deposit shall be held by Sublandlord as security for the performance by the Subtenant of its obligations under this Sublease.  The Security Deposit shall be retained by the Sublandlord for the entire Term of this Sublease.  Upon any breach of Subtenant’s obligations under this Sublease, Sublandlord may apply all or a portion of the Security Deposit as full or partial satisfaction of same.  If any portion of the Security Deposit is so applied, Subtenant shall deposit with Sublandlord an amount sufficient to restore the Security Deposit to its original amount.  So long as Subtenant has satisfied all of its obligations under this Sublease, the Security Deposit shall be returned to the Subtenant within thirty (30) days of the expiration of the Sublease, the return of all keys, fobs and parking transponders to Sublandlord, and the Subleased Premises is vacated in “broom clean” condition, with any such restoration of improvements made by Subtenant completed to the satisfaction of Master Landlord, if so required by Master Landlord in connection with the approval of such improvements to be made by Subtenant.
7.    Condition of the Subleased Premises.  On the Commencement Date, Sublandlord shall deliver the Subleased Premises in substantially the same condition the Subleased Premises are in on the date hereof.  Subtenant represents and warrants that Subtenant has inspected the Subleased Premises, and has independently determined that the Subleased Premises are suitable for its intended uses.  SUBTENANT ACCEPTS THE SUBLEASED PREMISES “AS IS, WHERE IS,” WITHOUT REPRESENTATION OR WARRANTY BY SUBLANDLORD, EXPRESS OR IMPLIED.  Sublandlord shall not be required to make any improvements or repairs to the Subleased Premises, or to provide any tenant improvement or other allowance to Subtenant.  Subtenant shall have no obligation to make any capital repairs or replacements in the Subleased Premises except to the extent necessary to repair or replace any aspect of the Subleased Premises damaged beyond reasonable wear and tear as a result of any act or omission of Subtenant or its employees, agents, contractors, visitors, licensees or invitees.
8.    Use of the Subleased Premises; Signage.  Subtenant shall use the Subleased Premises only for general office purposes and in compliance with Section 5.1 of the Master Lease.  Subject to approval of Master Landlord, which may or may not be provided pursuant to the Master Lease, and solely at the cost and expense of Subtenant, Subtenant shall have the right to (a) have the name of 

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Subtenant included in the electronic directory of the Building located in the lobby of the Building in place of Sublandlord’s listing in such directory, and (b) affix Subtenant’s name on the signage maintained adjacent to the entry door of the Premises and/or in the elevator bay on the floor of the Premises, in accordance with the Master Lease.  In addition to the indemnities set forth in the Master Lease, Subtenant shall indemnify, defend and hold Sublandlord and Master Landlord harmless from and against any and all claims, losses, damages and expenses, including clean-up costs and reasonable attorneys’ fees and expenses, incurred by or asserted against Sublandlord or Master Landlord and arising from or relating to (a) any breach or Default by Subtenant under this Sublease, (b) any act or omission of Subtenant or its employees, agents, contractors, visitors, licensees or invitees, or (c) the introduction or use by Subtenant of hazardous or toxic materials, as such materials may be identified in any federal, state or local law or regulation (“Hazardous Substances”) on or about the Subleased Premises, except to the extent such claims, losses, damages and expenses arise from the negligence or willful misconduct of Sublandlord or Master Landlord, or their respective agents, servants or employees.  Subtenant hereby assumes all risk of damage to the property of Subtenant in, upon or about the Subleased Premises arising from any cause, and Subtenant hereby waives all claims in respect thereof against Sublandlord and Master Landlord, except for any claims resulting from the negligence or willful misconduct of Sublandlord or Master Landlord, as the case may be.  Notwithstanding the foregoing, in no event shall Sublandlord or Master Landlord be liable under any circumstance for a loss of, or injury to Subtenant’s business, including, without limitation, lost profits.  Subtenant shall not use any Hazardous Substances in, on or about the Subleased Premises in a manner that would constitute a breach or violation of any applicable laws or regulations, or the terms and provisions of the Master Lease.  Subtenant shall obtain and maintain, at Subtenant’s sole cost, all permits, licenses and approvals required under any applicable laws or regulations for the use, storage or disposal of any Hazardous Substances which are used on or about the Subleased Premises.  Following Subtenant’s vacation of the Subleased Premises, and prior to the expiration of the term of this Sublease, Subtenant and Sublandlord will conduct an inspection of the Subleased Premises.  Subtenant acknowledges that Subtenant shall not have access to nor use of any portion of the roof of the Building. 
9.    Alterations.  In addition to, and without limitation of the restrictions and limitations on alterations, additions or improvements as set forth in the Master Lease, Subtenant shall not make any improvements, alterations, additions, changes or modifications to the Subleased Premises (collectively, “Alterations”) without the prior written consent of Sublandlord and Master Landlord; provided, however, subject to the terms and conditions of this Section 9, Sublandlord will not unreasonably withhold its consent if Master Landlord grants consent pursuant to the terms and conditions of the Master Lease.  In the event Master Landlord approves any Alterations requested by Subtenant, but deems the same to be Alterations that will be Required Removables (as defined below), Sublandlord will not unreasonably withhold its consent to same so long as Subtenant delivers to Sublandlord a supplemental security deposit in an amount reasonably satisfactory to Sublandlord to cover the estimated cost for Subtenant to remove such Required Removables and restore the Subleased Premises to the condition required by Master Landlord upon the expiration of the Master Lease (the “Supplemental Security Deposit”), which Supplemental Security Deposit shall be returned to Subtenant upon Subtenant’s removal of such Required Removables and restoration of the Subleased Premises to its previous condition on or prior to the Expiration Date to the satisfaction of Master Landlord.  To the extent any such removal or restoration is not performed by Subtenant on or prior to the Expiration Date, Sublandlord shall have the right to perform such removal and restoration and apply all or a portion of the Supplemental Security Deposit to Sublandlord’s actual cost and expense incurred in performing such removal and restoration on behalf of Subtenant, and Sublandlord shall return to Subtenant any unapplied portion of the 

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Supplemental Security Deposit within thirty (30) days after to the Expiration Date, subject to Subtenant also satisfying any hold over liability for failing to timely perform the restoration prior to the Expiration Date.  Should Master Landlord consent to Subtenant performing any Alterations work that would necessitate any ancillary Building modification or other expenditure by Master Landlord, then Subtenant shall promptly fund the cost thereof to Master Landlord upon request by Master Landlord.  Subtenant shall be responsible for obtaining all required permits for the Alterations and shall perform the work in compliance with all applicable laws, regulations and ordinances with contractors reasonably acceptable to Master Landlord and Sublandlord, and Master Landlord shall be entitled to any supervision fee provided for under the Master Lease.  Any request for consent from Sublandlord and Master Landlord shall be made in writing and shall contain architectural plans describing the work in detail reasonably satisfactory to Sublandlord and Master Landlord.  Sublandlord and/or Master Landlord may elect to cause their own architects to review Subtenant’s architectural plans, and the reasonable cost of that review shall be reimbursed by Subtenant.  Should the Alterations proposed by Subtenant and consented to by Sublandlord and Master Landlord change the floor plan of the Subleased Premises, then Subtenant shall, at its expense, furnish Sublandlord and Master Landlord with as-built drawings and CAD disks compatible with Master Landlord’s systems.  Alterations shall be constructed in a good and workmanlike manner using materials of a quality reasonably approved by Sublandlord and Master Landlord.  Unless Sublandlord and Master Landlord otherwise agree in writing, all Alterations affixed to the Subleased Premises, but excluding moveable trade fixtures and furniture, shall become the property of Master Landlord and shall be surrendered with the Subleased Premises at the end of the Term, except that Master Landlord may require Subtenant to remove by the Expiration Date, or sooner termination date of this Sublease, all or any Alterations installed either by Subtenant or by Sublandlord or Master Landlord at Subtenant’s request (collectively, the “Required Removables”), and to restore the Subleased Premises to the condition that existed as of the Commencement Date of this Sublease.  At the time Subtenant requests approval for any proposed Alterations, Sublandlord shall submit such request to Master Landlord or reasonably cooperate with the submittal of such request by Subtenant directly to Master Landlord and shall advise Subtenant in writing as to which portions of the subject Alterations are Required Removables as required by Master Landlord.  In connection with its removal of Required Removables, in addition to delivering the supplemental security to Sublandlord as contemplated above, Subtenant shall repair any damage to the Subleased Premises arising from that removal and shall restore the affected area to its pre-existing condition, reasonable wear and tear excepted.  
10.    Maintenance.  Except for those obligations of Master Landlord under the Master Lease, Subtenant shall maintain the Subleased Premises and all property contained therein in good and clean order and condition and in every respect as required by the Master Lease.  At the expiration or earlier termination of the term of this Sublease, Subtenant shall surrender the Subleased Premises to Sublandlord in good condition and repair, ordinary wear and tear excepted, and in the condition required for the surrender of same under the provisions of the Master Lease.  In addition, and without limitation of the foregoing, Subtenant shall (a) if Master Landlord so requires, remove any Required Removables made by Subtenant to the Subleased Premises and repair any damage caused by such removal, and (b) if Sublandlord shall so request, leave any Alterations made by Subtenant to the Subleased Premises, except for any trade fixtures or personal property installed or placed by Subtenant in the Subleased Premises.  Subtenant shall have no obligation to remove any improvements that are located in the Subleased Premises as of the date of this Sublease.
11.    Utilities; Other Costs.  Sublandlord and Subtenant acknowledge and agree that the Monthly Base Rent includes Subtenant’s use or consumption of water, electricity, heat and air 

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conditioning and other utilities supplied to the Subleased Premises.  Sublandlord shall have no liability or responsibility for, and there shall be no abatement of rent with respect to any interruption of any utility, telephone or other services to the Premises.  Additionally, while Subtenant shall have no liability or responsibility for payment or reimbursement of Sublandlord’s monthly share of Operating Expenses as Tenant under the Master Lease, Subtenant shall be responsible for payment of Additional Rent to Sublandlord to the extent Sublandlord incurs additional expense under the Master Lease pursuant to Subtenant’s request for after-hour services and/or electric current in excess of that which is furnished to the Premises as part of Tenant’s Share of Operating Expenses under the Master Lease.  Sublandlord and Subtenant will each use commercially reasonable efforts to coordinate with Master Landlord for the delivery of utilities to be supplied to the Subleased Premises.
12.    Assignment/Subletting.
(a)    Subtenant shall not transfer, assign, encumber or sublet (collectively, “Transfer”) all or any portion of the Subleased Premises or its interest under this Sublease, directly or indirectly, by operation of law or otherwise, or permit the Subleased Premises to be occupied by anyone other than Subtenant, without the prior written consent of both Sublandlord and Master Landlord, which consent may be given or withheld in their respective sole discretion. 
(b)    For purposes of this Sublease, the term “Transfer” shall also include any transfer of shares by sale, assignment, bequest, inheritance, operation of law or other disposition (including such a transfer to or by a receiver or trustee in federal or state bankruptcy, insolvency or other proceeding) resulting in a change in the control of Subtenant or any of its parent companies.
13.    Casualty or Taking.  In the event of any casualty or the exercise or threatened exercise of the power of eminent domain, any rights to damages or compensation relating to any improvements installed by Sublandlord, or which Sublandlord may require remain in the Subleased Premises on termination of this Sublease, shall belong to Sublandlord in all cases, and Subtenant may elect to terminate the Sublease.  Any condemnation award for any improvements paid for by Subtenant, to the extent Subtenant has the right to remove same from the Subleased Premises on the termination of the term of this Sublease, may be claimed by Subtenant, subject to any rights of Master Landlord under the Master Lease.  Subtenant shall have no obligation to restore any portion of the Premises in the event of any damage, destruction or eminent domain with respect to any portion of the Premises, except in the event any such damage or destruction is a result of any act or omission of Subtenant or its employees, agents, contractors, visitors, licensees or invitees.
14.    Parking.  On the terms and subject to the conditions set forth in the Master Lease, Subtenant may sublease from Sublandlord for the term of this Sublease, up to twenty-three (23) unreserved parking stalls (each, an “Unreserved Stall”, and referred to in the Master Lease as a “Parking Pass”), and up to twenty-one (21) reserved parking stalls (each, a “Reserved Stall” and collectively with each Unreserved Stall referred to in this Sublease as a “Parking Stall”), at the rate of $75.00 per Parking Pass per month, and $140.00 per Reserved Stall per month, in addition to the Additional Transponder Costs (as defined below), if any.  For the purpose of this Sublease, the “Additional Transponder Costs” shall mean the cost charged by Master Landlord to Sublandlord to issue to Sublandlord, for the use of Subtenant, any additional parking transponders, at the rate charged by Master Landlord for such parking transponders.  Subtenant will only be obligated to pay the Additional Transponder Costs in the event Subtenant requests the use of more than thirty-seven (37) Parking Stalls, which amount corresponds to 

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the number of parking transponders currently in Sublandlord’s possession.  For clarity, a parking transponder is needed for each Parking Stall, and while Sublandlord has the right to twenty-three (23) Unreserved Stalls and twenty-one (21) Reserved Stalls, as of the date of this Sublease, Sublandlord is only in possession of thirty-seven (37) parking transponders, since Sublandlord is not currently utilizing all of the Parking Stalls allocated under the Master Lease.  To Sublandlord’s knowledge, Master Landlord currently charges $35.00 for each new parking transponder issued to a tenant in the Building, but the Additional Transponder Costs will be the amount then charged by Master Landlord at the time such transponders are requested by Subtenant.  The location of the Parking Stalls is subject to Master Landlord and the terms of the Master Lease.  On or before November 15, 2018, Subtenant shall notify Sublandlord in writing as to how many Parking Passes and Reserved Stalls desired by Subtenant for the month during which the Commencement Date occurs, up to the amounts listed above (such requested amount to be referred to collectively as the “Subleased Parking”).  The aggregate monthly charges for the Subleased Parking is referred to herein as the “Parking Charges”; provided, however, the Additional Transponder Costs will be a one-time charge per transponder, not a recurring monthly cost.  The monthly Parking Charges for the Subleased Parking shall be paid by Subtenant to Sublandlord on the first of the month, in addition to the Monthly Base Rent.  To the extent the Commencement Date does not occur on the first of the month, the Parking Charges for the partial initial month of the Term shall be prorated for the number of days in such month, and such prorated Parking Charges shall be paid within five (5) days following the Commencement Date.  The monthly Parking Charges are subject to increase in the event parking costs are increased under the Master Lease.  To the extent Subtenant desires more parking than the Parking Stalls allocated to Sublandlord pursuant to the Sublease, Sublandlord and Subtenant will each use commercially reasonable efforts to coordinate with Master Landlord for the procurement of additional Parking Spaces for Subtenant’s use, subject to availability and the current terms and conditions imposed by Master Landlord on such additional parking.  To Sublandlord’s knowledge, Master Landlord currently charges $95.00 for each Unreserved Stall.  
15.    Use of FF&E.  Sublandlord hereby agrees to leave in the Subleased Premises, for the benefit and use by Subtenant during the Term at no additional cost to Subtenant, those certain items of furniture, fixtures and equipment expressly listed on Exhibit A attached hereto and incorporated herein (“FF&E”).  Subtenant hereby agrees to maintain such FF&E in good condition and repair, and not remove such FF&E from the Subleased Premises.  Notwithstanding the foregoing, so long as Subtenant is not in default under this Sublease upon the Expiration Date, Subtenant agrees to purchase the FF&E from Sublandlord for One and No/100 Dollar ($1.00) and remove the same from the Subleased Premises on or prior to the Expiration Date.
16.    Default.  Article 14 of the Master Lease is incorporated herein, except that, for the purpose of such incorporation, the term “Lease” shall be deemed to refer to this Sublease, the term “Landlord” shall refer to Sublandlord, and the term “Tenant” shall refer to Subtenant.
17.    Compliance with Terms of Master Lease.  This Sublease is subject to the terms and conditions of the Master Lease and the matters to which the Master Lease are subject and subordinate pursuant to the terms thereof.  Except as provided in this Sublease or with respect to provisions of this Sublease which are expressly inconsistent with or which modify the Master Lease, Subtenant and Sublandlord shall comply with and perform all terms, covenants and conditions of the Master Lease as if Subtenant were the “Tenant” thereunder, and as if Sublandlord were the “Landlord” thereunder, including, but not limited to, all indemnity obligations, waivers, covenants and agreements in favor of the Master Landlord contained in the Master Lease, as same may be accruing from and after the 

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Commencement Date, but Subtenant shall be required to perform such terms, covenants and conditions only to the extent such terms, covenants and conditions relate to the Subleased Premises and to the Sublease Term and to the extent not inconsistent with the terms of this Sublease, and the same shall be incorporated in, and applicable to this Sublease by this reference, and shall inure to the benefit of the Master Landlord as if Sublandlord were “Landlord” under the Master Lease.  Sublandlord shall not be required to perform the obligations of the Master Landlord under the Master Lease, and shall have no liability to Subtenant arising from or related to Master Landlord’s failure to perform any of their respective obligations under the Master Lease.  Notwithstanding anything in this Section 17 to the contrary, Sublandlord shall not be deemed or construed to have undertaken any obligation or liability of the “Landlord” under the Master Lease.  Neither Subtenant nor Sublandlord shall take any action, nor consent to or permit any action to be taken by any of such party’s employees, agents, contractors, licensees or invitees, that would cause a Default under any provision of the Master Lease.  In the event of any conflict between this Sublease and the Master Lease, as between Sublandlord and Subtenant, the terms of this Sublease shall control.
18.    Time of Essence.  Time is of the essence of this Sublease and each of its provisions.
19.    Partial Invalidity.  If any term, provision or condition contained in this Sublease shall, to any extent, be invalid or unenforceable, the remainder of this Sublease, or the application of such term, provision or condition to persons or circumstances other than those with respect to which it is invalid or unenforceable, shall not be affected thereby, and each and every other term, provision and condition of this Sublease shall be valid and enforceable to the fullest extent possible permitted by law.
20.    Governing Law.  This Sublease shall be construed and enforced in accordance with the laws of the State of California.
21.    Brokers.  Both parties warrant and represent to each other that no broker has acted as a broker in this transaction except for Allison Schneider Kelly of CBRE as Sublandlord’s broker, and Michael Lewis of Hughes Marino as Subtenant’s broker, each of which shall be compensated pursuant to a separate agreement.  Accordingly, both parties further warrant and represent to each other, except for the brokers identified in the preceding sentence, no brokers are entitled to any commission, finder’s fee, compensation, or remuneration of any type, kind, or nature.  Each party agrees to indemnify and hold harmless the other party from any and all liability, responsibility, claims, damages, costs, and attorney’s fees of any kind or nature incurred or sustained by the indemnified party as the result of the claim by any broker, or any other party or entity for a commission or finder’s fee resulting from the activities or actions of the indemnifying party.
22.    Attorneys’ Fees.  Should either Sublandlord or Subtenant bring any action in connection with this Sublease, the prevailing party shall be entitled to recover from the other party such costs and reasonable attorneys’ fees as may have been incurred, including any and all costs incurred in enforcing, perfecting and executing any judgment.   Sublandlord or Subtenant shall each bear their own attorneys’ fees and costs with regard to the negotiation and finalization of this Sublease.
23.    Notices.  Any notice required or given under this Sublease shall be in writing to each party at the address as set forth below, by hand delivery, electronic mail, overnight courier, or by certified mail, postage prepaid, return receipt requested, effective upon delivery to the address specified below.  The addresses of each party shall be changed by notice given the other party in accordance with the provisions of this Section 23.

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To Sublandlord:    Prior to Commencement Date:

Acacia Research Corporation
520 Newport Center Drive, Suite 1200
Newport Beach, CA  92660
Attn:  Darren Miller 
Telephone:  (949) 480-8347
E-mail:  dmiller@acaciares.com 

After to Commencement Date:

Acacia Research Corporation
__________________________
__________________________
Attn:  Darren Miller 
Telephone:  (949) 480-8347
E-mail:  dmiller@acaciares.com 

With a copy at all times to:         
 
            Stuart Kane LLP
620 Newport Center, Suite 200
Newport Beach, California  92660
Attn:  Josh C. Grushkin
Telephone:  949-791-5151
E-mail:  jgrushkin@stuartkane.com 

		
	To Subtenant:
	Prior to Commencement Date: 
 
Evolus, Inc. 

17901 Von Karman Ave., Suite 1500
Irvine, California 92614
Attn:  Legal 
Telephone:  ________________
E-mail:  ___________________ 

After Commencement Date: 

520 Newport Center Drive, Suite 1200
Newport Beach, CA  92660
Attn:  _____________________ 
Telephone:  ________________
E-mail:  ___________________ 

 Page 10

4510092v4 / 101022.0001

With a copy at all times to:         
            
__________________________ 
__________________________
__________________________
Attn:  _____________________ 
Telephone:  ________________
E-mail:  ___________________ 

24.    No Agency.    Neither party shall hold itself out as an agent or affiliate of the other Party and neither Party shall purport to bind the other to any contract or commitment. 
[SIGNATURES APPEAR ON FOLLOWING PAGE]

 Page 11

4510092v4 / 101022.0001

IN WITNESS WHEREOF, the parties have executed this Sublease as of the date first set forth above.

	
		
	SUBLANDLORD:

ACACIA RESEARCH CORPORATION,  
a Delaware corporation 

By:  /s/ Marc W. Booth                           
Name:  Marc W. Booth                           
Title:    Chief IP Officer                          

	 

	

SUBTENANT:

EVOLUS, INC.,  
a Delaware corporation 

By:  /s/ David Moatazedi                                
Name:  David Moatazedi                                
Title:    President & CEO                                

	 

EXHIBIT A

FF&E to Remain in the Subleased Premises

[Attached]

 Page 12

4510092v4 / 101022.0001Exhibit 10.1

 

THIRD AMENDED AND RESTATED EMPLOYMENT AGREEMENT

 

This AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”) is dated as of March 19, 2019 (the “Effective Date”) by and between HANGER, INC., a Delaware corporation (the “Company”), and VINIT K. ASAR (the “Executive”). The Company and Executive agree as follows:

 

WHEREAS, the Executive and Hanger Prosthetics & Orthotics, Inc. (“Hanger Prosthetics”), were party to a Second Amended and Restated Employment Agreement, dated as of August 27, 2012 (“Existing Agreement”);

 

WHEREAS, Hanger Prosthetics, the Company and the Executive entered into an Assignment of Employment Agreement, dated as of March 1, 2017, under which Hanger Prosthetics assigned to the Company all of its right, title and interest in and to the Existing Agreement and the Company accepted, and the Executive consented to, such assignment;

 

WHEREAS, the parties hereto desire to amend the Existing Agreement as set forth in this Agreement, with such amendments to be effective as of the Effective Date; and

 

WHEREAS, capitalized terms that are not defined when first used shall have the meanings given in Section 12.

 

NOW, THEREFORE, in consideration of the promises and mutual agreements set forth below, including the enhanced benefits being provided to the Executive hereunder in connection with the amendment and restatement of this Agreement, both parties agree as follows:

 

1.                                      Employment; Term.

 

The Company agrees to continue to employ the Executive and the Executive agrees to continue in such employment by the Company upon the terms and conditions set forth in this Agreement, for the period beginning on the Effective Date and ending upon termination pursuant to Section 4 or Section 5 (the “Employment Period”). The Executive represents and warrants that the Executive is not subject to any restrictive covenants (including, without limitation, covenants not to compete and covenants not to solicit) that would prevent the Executive from entering into this Agreement or providing services on the Company’s behalf. The Executive agrees not to use or disclose in the course of the Executive’s employment with the Company any confidential information or trade secrets of any other Person.

 

2.                                      Services.

 

During the Employment Period, the Executive agrees (i) to devote the Executive’s best efforts and full business time and attention to the business affairs of the Company and its affiliates and to the performance of the Executive’s duties and responsibilities hereunder (except for periods of approved absence, including Vacation); (ii) to serve the Company as its Chief Executive Officer, which role shall include, among other things, responsibility for the overall performance of the Company and all of its subsidiaries, and to render such services as the Company’s Board of Directors (the “Board of Directors”) may from time to time direct;

 

 

provided, however, that the Executive recognizes and agrees that, subject to Section 4.5(b), the Company may change the Executive’s job description as set forth in this Section 2 as a result of a good faith restructuring of the Company’s or its affiliates’ operations; (iii) that the Executive will not, except with the prior written consent of the Company, become engaged in or render services for any business other than the business of the Company or its affiliates; and (iv) that the Executive will follow the written policies and procedures of the Company and its affiliates, as set forth by the Company and its affiliates from time to time, as well as all applicable federal and state healthcare laws, rules and regulations.

 

3.                                      Salary, Bonus, Equity Compensation, Other Benefits.

 

In consideration for the valuable services to be rendered by the Executive and for the Executive’s agreement not to disclose or use Confidential Information of the Company as described in Section 6 and not to compete against the Company as described in Section 7, the Company hereby agrees as follows:

 

3.1                               Salary.  The Company will pay the Executive a minimum base salary at the rate of Seven Hundred Forty-Two Thousand, Eight Hundred Forty-Eight Dollars and Sixty-Six Cents ($742,848.66) per annum, payable in accordance with the standard payroll practices of the Company (the “Base Salary”).  The Executive shall be entitled to such increases in Base Salary during the Employment Period as shall be determined and approved by the Compensation Committee of the Board of Directors in its sole discretion, taking account of the performance of the Company and the Executive, and other factors generally considered relevant to the salaries of executives holding similar positions with enterprises comparable to the Company.  Upon any such increase, the term Base Salary shall mean such increased amount.

 

3.2                               Bonuses.

 

(a)                                 In addition to the Base Salary, the Executive shall participate in the Company’s current bonus plan for senior corporate officers (the “Bonus Plan”), as approved by the Compensation Committee of the Board of Directors in each calendar year during the term of this Agreement.  The Executive’s target bonus is one hundred twenty percent (120%) of the Base Salary earned during the calendar year (the “Target Bonus”) and is contingent on the Executive meeting certain performance criteria and the Company achieving certain financial criteria, and up to two hundred forty percent (240%) of the Base Salary earned during the calendar year (the “Maximum Bonus”) if the Executive exceeds certain performance criteria and the Company exceeds certain financial criteria all as determined in the reasonable discretion of the Board of Directors and its Compensation Committee.  The Executive shall be entitled to such increases in the “Target Bonus” and the “Maximum Bonus” during the term hereof as shall be determined and approved by the Compensation Committee of the Board of Directors in its sole discretion, taking account of the performance of the Company and the Executive, and other factors generally considered relevant to the salaries of executives holding similar positions with enterprises comparable to the Company.  Notwithstanding the foregoing, in the event that the Executive or the Company fail to attain their minimum respective criteria in any given year, the Board of Directors and its Compensation Committee may, in their reasonable discretion, decline to award any bonus to the Executive.

 

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(b)                                 The bonus described in this Section 3.2 shall be payable between January 1 and March 15 (inclusive) of the calendar year following the calendar year for which the bonus is determined in accordance with the Company’s normal practices.  In the event that the Executive is employed for less than the full calendar year in the year in which the Executive’s Termination Date occurs (“Termination Year”), the bonus payable to the Executive shall be subject to Sections 4 and 5 of this Agreement and calculated based on the Executive meeting certain performance criteria and the Company achieving certain year-end financial criteria, all as determined by the Compensation Committee of the Board of Directors, in its sole discretion.  Such bonus shall be pro-rated for the portion of the Termination Year during which the Executive was employed by the Company.  With respect to the bonus for the Termination Year, any bonus payable pursuant to this Section 3.2 shall be payable to the Executive between January 1 and March 15 (inclusive) of the calendar year following the calendar year for which the bonus is determined in accordance with the Company’s normal practices.

 

(c)                                  For any year beginning during the twenty-four (24) month period following a Change in Control (the “Change in Control Period”), as well as for any year in which a Change in Control occurs if such Change in Control occurs prior to the grant of annual bonus opportunities for such year, to assure that Executive will have an opportunity to earn annual incentive compensation, the Executive shall be included in a bonus plan of the Company which shall satisfy the standards described above and in this Section 3(c) (such plan, the “Post-Change-in-Control Bonus Plan”).  Bonuses under the Post-Change-in-Control Bonus Plan shall be payable with respect to achieving such financial or other goals reasonably related to the business of the Company as the Company shall establish (the “Goals”), all of which Goals shall be reasonably attainable, by the end of the year of grant, with approximately the same degree of probability as the most attainable goals under the Company’s bonus plan or plans as in effect at any time during the 180-day period immediately prior to the Change in Control and in view of the Company’s existing and projected financial and business circumstances applicable at the time.  The amount of the bonus (the “Bonus Amount”) that Executive is eligible to earn under the Post-Change-in-Control Bonus Plan shall be no less than one hundred percent (100%) of the Target Bonus for which the Executive was eligible in the year prior to the Change in Control for achievement of the target Goals, and no less than one hundred percent (100%) of the Maximum Bonus for which the Executive was eligible in the year prior to the Change in Control for achievement exceeding the target Goals, and in the event the target level of Goals are not achieved, the Post-Change-in-Control Bonus Plan shall provide for a payment of a Bonus Amount equal to a portion of the Targeted Bonus reasonably related to that portion of the Goals which were achieved. Notwithstanding the foregoing, if, during a Change in Control Period, employees of the Company or the successor or acquirer in the Change in Control who are similarly situated to the Executive are eligible for greater bonus amounts than those provided by the foregoing sentence, then the Executive shall be eligible for a Bonus Amount no less than that offered to such similarly situated employees.  In the event that the Executive is employed for less than the full year for which a Post-Change-in-Control Bonus Plan is in effect, the bonus payable to the Executive shall be determined as described in Section 3.2(b) except that no discretion may be applied to reduce the amount of the bonus otherwise payable to the Executive and any subjective performance objectives applicable to the bonus shall be deemed satisfied.

 

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3.3                               Equity-Based Compensation.

 

(a)                                 In addition to the compensation described in Section 3.1 and Section 3.2 of this Agreement, the Executive may have the opportunity to receive equity-based awards relating to Shares in a manner consistent with any equity incentive plan adopted by the Company. The determination as to the number of shares subject to any such equity-based awards, and the other terms and conditions of such awards, shall be subject to the sole discretion of the Board of Directors or a committee thereof.

 

(b)                                 The equity-based awards contemplated by this Section 3.3 shall be evidenced by, in addition to the equity incentive plan under which they are granted, one or more award agreements (each, an “Award Agreement”) between the Executive and the Company, which Award Agreement(s) shall provide for a vesting schedule of not more than four (4) years, in equal parts, of the award granted thereunder.  Notwithstanding any provisions now or hereafter existing under any equity incentive plan of the Company, all equity-based awards granted to the Executive shall vest in full immediately upon the Termination Date except for termination of employment pursuant to Section 4.3 or Section 4.5(a) hereof, and, to the extent the equity-based awards held by the Executive on the Termination Date include stock options, stock appreciation rights or similar awards with an exercise or base price, the Executive (or the Executive’s estate or legal representative, if applicable) shall thereafter have twelve (12) months from such Termination Date to exercise such awards, if applicable. For the avoidance of doubt, for purposes of measuring the full vesting prescribed in the preceding sentence with respect to any equity-based awards subject to performance goals, such performance goals will be deemed satisfied at one hundred percent (100%) of the stated target level for the award.

 

(c)                                  Notwithstanding the foregoing, during any Change in Control Period, the Executive will be entitled to receive annual grants of long-term incentive awards (the “Post-Change-in-Control LTI Grants”) that shall satisfy the standards set forth above and that are no less favorable to the Executive than the equity incentive awards granted to the Executive in the year immediately preceding the Change in Control, including with respect to the grant date fair value of such awards, the applicable performance criteria, the manner in which the amount of incentive compensation earned is determined, the length of vesting periods or the other terms of such incentive compensation awards.  In addition, the Post-Change-in-Control LTI Grants shall either (i) relate to, and be settled in, a class of equity that is listed and traded on a national securities exchange, or (ii) have a grant date fair value no lower than the equity incentive awards most recently granted to the Executive prior to the Change in Control and be settled in cash at the end of the applicable vesting or performance period.  Notwithstanding the foregoing, if, during a Change in Control Period, employees of the Company or the successor or acquirer in the Change in Control who are similarly situated to the Executive receive annual grants of long-term incentive awards with a value greater than those to which the Executive would be entitled pursuant to the foregoing, then the Executive’s Post-Change-in-Control LTI Grants shall have a value no less than the long-term incentive awards granted to such similarly situated employees.  In addition, for purposes hereof, any grants made prior to a Change in Control that are designated as special or non-recurring awards shall not be considered in determining the Post-Change-in-Control LTI Grants.

 

(d)                                 Except to the extent any equity incentive plan of the Company or any other agreement between the Company and the Executive provides a more favorable result to

 

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the Executive, in the event of a Change in Control all equity-based awards granted to the Executive prior to the Effective Date shall immediately fully vest as of the date of such Change in Control and shall be valued at the closing price of the Shares on the day prior to the day of the Change in Control.  For purposes of measuring the full vesting prescribed in the preceding sentence with respect to any equity-based awards subject to performance goals, such performance goals will be deemed satisfied at one hundred percent (100%) of the stated target level for the award or, if higher, the level that would be achieved if the performance goals (as measured at the time of the Change in Control) were to continue to be achieved at the same rate through the end of the performance period.  Any equity-based awards granted to the Executive on or after the Effective Date that are outstanding immediately prior to a Change in Control shall be subject to the change in control provisions of the applicable equity incentive plan under which they were granted and of the applicable award agreement, except as otherwise provided herein.  In addition, except to the extent any equity incentive plan of the Company or any other agreement between the Company and the Executive provides a more favorable result to the Executive, if, after a Change in Control, the Executive’s equity incentive awards do not relate to a class of equity that is listed and traded on a national securities exchange, then:

 

(i)                                     The Executive shall have the right, exercisable by written notice to the Company at any time after the Change in Control, to receive, in exchange for the surrender of each of the Executive’s then-vested stock options, stock appreciation rights or similar equity-based awards the value of which is based on the appreciation of the value of a Share rather than the full value of a Share, regardless of when granted, an amount of cash equal to the excess of the Fair Market Value of the Shares subject to such award over the exercise or grant price of such Shares subject to the award; and

 

(ii)                                  The Executive shall have the right, exercisable by written notice to the Company at any time after the Change in Control, to receive, in exchange for the surrender of each of the Executive’s then-vested restricted Shares and each of the Executive’s then-vested restricted stock unit, performance share and performance share unit awards, regardless of when granted, an amount of cash equal to the Fair Market Value of the number of Shares subject to such awards.

 

3.4                               Benefits.

 

(a)                                 The Executive shall be entitled to an automobile allowance in the amount of One Thousand, Two Hundred Fifty Dollars ($1,250.00) per month and the provision of, or reimbursement for, parking of such automobile at the Company’s headquarters, five (5) weeks of Vacation per year, and sick leave, medical and other benefits, including, without limitation, participation in the Company’s Supplemental Executive Retirement Program (“SERP”) and appropriate directors and officers liability insurance (to the extent commercially reasonable for the Company to obtain such insurance), all of which are consistent with those received by other similarly-situated members of the Board of Directors (if the Executive is a member of the Board of Directors) and/or senior executives of the Company and its subsidiaries as determined in the sole discretion of the Compensation Committee of the Board of Directors. The Executive’s level of benefit in the SERP shall be sixty-five percent (65%) of the Executive’s average base salary, as defined in the SERP. The Executive shall receive life insurance in an amount equal to two (2) times the Executive’s Base Salary (in addition to the life insurance equal

 

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to whatever the Company provides to its employees as part of the Executive’s base benefit program), with the premiums for such policy to be paid by the Company, and the Executive shall also receive the option to participate in the Company’s supplemental life and accidental death and dismemberment policies, with the premiums for such policies to be paid by the Executive, all in accordance with the terms and conditions of such policies as generally applied by the Company.

 

(b)                                 In addition to the foregoing, during any Change in Control Period, the Executive shall be included: (i) to the extent eligible thereunder (which eligibility shall not be conditioned on the Executive’s salary grade or on any other requirement which excludes persons of comparable status to the Executive unless such exclusion was in effect for such plan or an equivalent plan at least one hundred eighty (180) days prior to the Change in Control), in any and all plans providing benefits for the Company’s salaried employees in general (including but not limited to group life insurance, hospitalization, medical, dental, and long-term disability plans) and (ii) in plans provided to executives of the Company of comparable status and position to the Executive (including but not limited to deferred compensation, split-dollar life insurance, supplemental retirement and similar or comparable plans); provided, that, in no event shall the aggregate level of benefits under the plans described in clause (i) and the plans described in clause (ii), respectively, in which the Executive is included be less than the aggregate level of benefits under plans of the Company of the type referred to in such clauses, respectively, in which Executive was participating immediately prior to the Change in Control; and provided further, that, the Executive’s level of benefit in the SERP (or equivalent benefit) during any Change in Control Period shall not be less than the Executive’s level of benefit in the SERP during the year prior to the Change in Control or the year in which the Change in Control occurred, whichever is greater.

 

3.5                               Determination of Cap or Payment.

 

(a)                                 Notwithstanding any other provision of this Agreement, if any portion of any payment under this Agreement, or under any other agreement or arrangement with the Executive or plan of the Company or one of its subsidiaries or affiliates (in the aggregate, “Total Payments”), would constitute an “excess parachute payment” and would, but for this Section 3.5, result in the imposition on the Executive of an excise tax under Code Section 4999 (the “Excise Tax”), then the Total Payments to be made to the Executive shall either be (i) delivered in full, or (ii) reduced to two hundred ninety-nine and ninety-nine one-hundredths percent (299.99%) of the Executive’s “base amount” for purposes of Code Section 280G so that no portion of such Total Payments would be subject to the Excise Tax, whichever of the foregoing results in the receipt by the Executive of the greatest benefit on an after-tax basis (taking into account the applicable federal, state and local income taxes and the Excise Tax).

 

(b)                                 Within forty (40) days following a termination or notice by one party to the other of its belief that there is a payment or benefit due the Executive that will result in an excess parachute payment, the Company shall obtain, at its expense, the opinion (which need not be unqualified) of nationally recognized tax counsel (“Tax Counsel”) selected by the Compensation Committee of the Board of Directors, which sets forth (i) the “base amount” within the meaning of Code Section 280G; (ii) the aggregate present value of the payments in the nature of compensation to the Executive as prescribed in Code Section 280G(b)(2)(A)(ii); (iii) the amount and present value of any “excess parachute payment” within the meaning of Code

 

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Section 280G(b)(1); and (iv) the net after-tax proceeds to the Executive, taking into account the tax  imposed under Code Section 4999 if (x) the Total Payments were delivered in full or (y) the Total Payments were reduced in accordance with Section 3.5(a).  Such opinion shall be addressed to the Company and the Executive and shall be binding upon the Company and the Executive.  If such opinion determines that clause (a)(ii) above applies, then the payments or benefits under this agreement or any other payment or benefit determined by Tax Counsel to be includable in the Total Payments shall be reduced or eliminated so that under the bases of calculations set forth in such opinion there will be no excess parachute payment.  In such event, payments or benefits included in the Total Payments shall be reduced or eliminated by applying  the following principles, in order:  (1) the payment or benefit with the higher ratio of the parachute payment value to present economic value (determined using reasonable actuarial assumptions) shall be reduced or eliminated before a payment or benefit with a lower ratio; (2) the payment or benefit with the later payment date shall be reduced or eliminated before a payment or benefit with an earlier payment date; and (3) cash payments shall be reduced prior to non-cash benefits; provided that if the foregoing order of reduction or elimination would violate Code Section 409A, then the reduction shall be made pro rata among the payments or benefits to be received by the Executive (on the basis of the relative present value of the parachute payments).

 

(c)                                  For purposes of this Agreement, (i) the value of any noncash benefits or any deferred payment or benefit shall be determined in accordance with the principles of Code Sections 280G(d)(3) and (4), and (ii) the Executive shall be deemed to pay federal income tax and employment taxes at the highest stated rate of federal income and employment taxation, and state and local income taxes at the highest stated rate of taxation in the state or locality of the Executive’s domicile (determined in both cases in the calendar year in which the termination or notice described in Section 3.5(b) is given, whichever is earlier), net of the maximum reduction in federal income taxes that may be obtained from the deduction of such state and local taxes.

 

(d)                                 If such Tax Counsel so requests in connection with the opinion required by this Section 3.5, the Company shall obtain, at its expense, and the Tax Counsel may rely on, the advice of a firm of recognized executive compensation consultants as to (1) the reasonableness of any item of compensation to be received by the Executive solely with respect to its status under Code Section 280G, or (2) the fair market value of any non-cash benefit.  Such firm shall be selected by the Compensation Committee of the Board of Directors.

 

(e)                                  This Section 3.5 shall be amended to comply with any amendment or successor provision to Code Sections 280G or 4999.  If such provisions are repealed without successor, then this Section 3.5 shall be cancelled without further effect.

 

4.                                      Termination of Employment.

 

4.1                               Death. The Executive’s employment shall be terminated by the Executive’s death.  In the event of the death of the Executive, the Company shall pay to the estate or other legal representative of the Executive the Base Salary (at the annual rate in effect) and Vacation as accrued through the Termination Date and the bonus provided for in Section 3.2 for the Termination Year (as well as any then earned but unpaid bonus for the year preceding the

 

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Termination Year, if applicable).  Except as otherwise provided in this Agreement, the rights and benefits of the estate or other legal representative of the Executive under the benefit plans and programs of the Company shall be determined in accordance with the provisions of such plans and programs.

 

4.2                               Disability.  If the Executive shall incur a Disability, the employment of the Executive shall be terminated.  In the event of such termination, the Company shall pay to the Executive the Base Salary (at the annual rate then in effect) and Vacation accrued through the Termination Date and the bonus provided for in Section 3.2 for the Termination Year (as well as any then earned but unpaid bonus for the year preceding the Termination Year, if applicable).  Except as otherwise provided under this Agreement, the rights and benefits of the Executive or the Executive’s transferee under the benefit plans and programs of the Company shall be determined in accordance with the provisions of such plans and programs.

 

4.3                               Due Cause.  The employment of the Executive hereunder may be terminated by the Company at any time for Due Cause.  In the event of such termination, the Company shall pay to the Executive the Base Salary (at the annual rate then in effect) and Vacation accrued through the Termination Date and not theretofore paid to the Executive.  Except as otherwise provided under this Agreement, the rights and benefits of the Executive or the Executive’s transferee under the benefit plans and programs of the Company shall be determined in accordance with the provisions of such plans and programs.

 

4.4                               Termination by the Company Without Cause.

 

(a)                                 The Company may terminate the Executive’s employment at any time, for whatever reason it deems appropriate or without reason; provided, however, that in the event that such termination is not pursuant to Section 4.1 (Death); Section 4.2 (Disability); Section 4.3 (Due Cause); Section 4.5 (Voluntary Termination); or Section 4.6 (Retirement), the Company shall pay to the Executive the Base Salary (at the annual rate then in effect) and Vacation accrued through the Termination Date and the bonus provided for in Section 3.2 for the Termination Year (as well as any then earned but unpaid bonus for the year preceding the Termination Year, if applicable).

 

(b)                                 In addition to the payments described in Section 4.4(a), the Company shall pay to the Executive, on the date that is six (6) months and one day after the Termination Date, a lump sum in an amount equal to twenty-four (24) months (thirty (30) months, if the Termination Date is during a Change in Control Period) of the monthly Base Salary and an additional bonus payment equal to two (2) times (two and one-half (2.5) times, if the Termination Date is during a Change in Control Period) the Target Bonus for the Termination Year (collectively, the “Severance Payment”). In addition, the Company shall for twenty-four (24) months (thirty (30) months if the Termination Date is during a Change in Control Period) following the Termination Date, (i) reimburse the Executive for the Executive’s reasonable costs of medical and dental coverage as provided under COBRA (which shall be extended by six (6) months if the Termination Date is not during a Change in Control Period and by twelve (12) months if the Termination Date is during a Change in Control Period), (ii) reimburse the Executive for the Executive’s reasonable costs incurred in maintaining the Executive’s life and disability coverage, and (iii) reimburse the Executive for similar, applicable

 

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benefits granted to the Executive in Section 3.4, each at levels substantially equivalent to those provided by the Company to the Executive immediately prior to the termination of employment (including such other benefits as shall be provided to senior corporate officers of the Company in lieu of such benefits from time to time during the twenty-four (24) or thirty (30) month payment period, as applicable), on the same basis, including the Company’s payment of premiums and contributions, as such benefits are provided to other senior corporate officers of the Company or were provided to the Executive prior to the termination. Reimbursements of expenses which provide for nonqualified deferred compensation under Code Section 409A, if any, shall not be paid before six (6) months and one day after the Executive’s Termination Date.  The amount of expenses eligible for reimbursement, or in-kind benefits provided, during a taxable year of the Executive may not affect the expenses eligible for reimbursement, or in-kind benefits to be provided in any other taxable year.  Reimbursements shall be paid on or before the last day of the Executive’s taxable year following the taxable year in which the expense was incurred.  The right to reimbursement hereunder is not subject to liquidation or exchange for another benefit.

 

In addition, for a period of twenty-four (24) months immediately following the Executive’s Termination Date, the Executive will be provided with outplacement services commensurate with those provided to other senior corporate officers of the Company through a vendor selected by the Company. Except as otherwise provided under this Agreement, the rights and benefits of the Executive or the Executive’s transferee under the benefit plans and programs of the Company shall be determined in accordance with the provisions of such plans and programs.

 

(c)                                  Notwithstanding Section 4.4(b), in the event that (i) the Executive is not a Specified Employee, then the Company shall pay to the Executive the Severance Payment within forty-five (45) days from the Termination Date and the six (6) month delay for reimbursements shall cease to apply, or (ii) the Executive is a Specified Employee and the death of the Executive occurs within six (6) months following the Termination Date, the Company shall pay to the Executive’s estate any unpaid portion of the amounts due to be paid to the Executive pursuant to Section 4.4(b) within forty-five (45) days following the Executive’s death.  If the Executive’s estate or legal representative fails to notify the Company of the death of the Executive such that the Company is unable to make timely payment hereunder, then the Company shall not be treated as in breach of this Agreement and shall not be liable to the estate or legal representative for any losses, damages, or other claims resulting from such late payment.

 

(d)                                 Notwithstanding anything in this Agreement to the contrary, the Executive shall not be entitled to any payments under Section 4.4(b) unless the Executive has first duly and timely executed (and not revoked) a form of mutual agreement and general release acceptable to the Company releasing both the Company and the Executive from certain claims the other party may have in connection with the Executive’s employment with the Company and the termination thereof, to the extent permitted by law.

 

4.5                               Voluntary Termination.

 

(a)                                 The Executive may terminate the Executive’s employment with the Company at any time and the Company shall pay to the Executive the Base Salary (at the annual rate then in effect) and Vacation accrued through the Termination Date and the bonus provided

 

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for in Section 3.2 for the Termination Year (as well as any then earned but unpaid bonus for the year preceding the Termination Year, if applicable).  In the event the Executive terminates the Executive’s employment under this Section 4.5, written notice of at least thirty (30) days shall be provided to the Company in accordance with the provisions of Section 9. Except as otherwise provided under this Agreement, the rights and benefits of the Executive or the Executive’s transferee under the benefit plans and programs of the Company shall be determined in accordance with the provisions of such plans and programs.

 

(b)                                 In the event that, other than during a Change in Control Period, the Company or the Board of Directors materially and negatively alters the scope of the Executive’s position, duties and/or title as described in Section 2 without the consent of the Executive, or the Executive experiences a material reduction of the Base Salary, Bonus Plan targets (as distinguished from the payments received thereunder) or other benefits as described in Section 3 of this Agreement (not including a material reduction that is comparable to a material reduction for all or substantially all of the Company’s executive officers), the Executive may terminate the Executive’s employment with the Company upon (i) thirty (30) days’ prior written notice to the Company describing in detail the material alteration or material reduction described above and (ii) the Company’s failure to cure such material alteration or material reduction within such thirty (30) day period.  If the Company does not permit the Executive to continue actively working during such notice period, the Executive shall be deemed to be on a bona fide leave of absence until the last day of such notice period.  In the event of a termination of the Executive’s employment under this Section 4.5(b), the Company shall pay to the Executive the Base Salary (at the annual rate then in effect) and vacation accrued through the Termination Date and the bonus provided for in Section 3.2 for the Termination Year (as well as any then earned but unpaid bonus for the year preceding the Termination Year, if applicable).  In addition, the Company shall pay to the Executive on the date that is six (6) months and one day after the Termination Date the Severance Payment (calculated, for the avoidance of doubt, using twenty-four (24) months of Base Salary and two (2) times the Target Bonus for the Termination Year). In addition, the Company shall, for twenty-four (24) months following the Termination Date, (i) reimburse the Executive for the Executive’s reasonable costs of medical and dental coverage as provided under COBRA (which shall be extended by six (6) months), (ii) reimburse the Executive for the Executive’s reasonable costs incurred in maintaining the Executive’s life and disability coverage, and (iii) reimburse the Executive for similar, applicable benefits granted to the Executive in Section 3.4, each at levels substantially equivalent to those provided by the Company to the Executive immediately prior to the termination of the Executive’s employment (including such other benefits as shall be provided to senior corporate officers of the Company in lieu of such benefits from time to time during the twenty-four (24) month payment period), on the same basis, including the Company’s payment of premiums and contributions, as such benefits are provided to other senior corporate officers of the Company or were provided to the Executive prior to the termination. Reimbursements of expenses which provide for nonqualified deferred compensation under Code Section 409A, if any, shall not be paid before six (6) months and one day after the Executive’s Termination Date.  The amount of expenses eligible for reimbursement, or in-kind benefits provided, during a taxable year of the Executive may not affect the expenses eligible for reimbursement, or in-kind benefits to be provided in any other taxable year.  Reimbursements shall be paid on or before the last day of the Executive’s taxable year following the taxable year in which the expense was incurred.  The right to reimbursement hereunder is not subject to liquidation or exchange for another benefit.

 

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In addition, for a period of twenty-four (24) months immediately following the Executive’s Termination Date, the Executive will be provided with outplacement services commensurate with those provided to other senior corporate officers of the Company through a vendor selected by the Company. Except as otherwise provided under this Agreement, the rights and benefits of the Executive or the Executive’s transferee under the benefit plans and programs of the Company shall be determined in accordance with the provisions of such plans and programs.

 

(c)                                  Notwithstanding Section 4.5(b), in the event that (i) the Executive is not a Specified Employee, then the Company shall pay to the Executive the Severance Payment within forty-five (45) days from the Termination Date and the six (6) month delay for reimbursement shall cease to apply, or (ii) the Executive is a Specified Employee and the death of the Executive occurs within six (6) months following the Termination Date, the Company shall pay to the Executive’s estate any unpaid portion of the amounts due to be paid to the Executive pursuant to Section 4.5(b) within forty-five (45) days following the Executive’s death.  If the Executive’s estate or legal representative fails to notify the Company of the death of the Executive such that the Company is unable to make timely payment hereunder, then the Company shall not be treated as in breach of this Agreement and shall not be liable to the estate or legal representative for any losses, damages, or other claims resulting from such late payment.

 

(d)                                 Notwithstanding anything contained in this Agreement to the contrary, the Executive shall not be entitled to any payments under this Section 4.5 unless the Executive has first duly and timely executed (and not revoked) a form of mutual agreement and general release acceptable to the Company releasing both the Company and the Executive from certain claims the other party may have in connection with the Executive’s employment with the Company and the termination thereof, to the extent permitted by law.

 

4.6                               Retirement. In the event of the Executive’s Retirement, the Company shall pay to the Executive the Base Salary (at the annual rate then in effect) and Vacation accrued through the date of Retirement and the bonus provided for in Section 3.2 for the Termination Year (as well as any then earned but unpaid bonus for the year preceding the Termination Year, if applicable).  Except as otherwise provided under this Agreement, the rights and benefits of the Executive or the Executive’s transferee under the benefit plans and programs of the Company shall be determined in accordance with the provisions of such plans and programs.

 

5.                                      Good Reason Termination Following Change in Control.

 

If during a Change in Control Period there occurs:

 

(a)                                 any purported termination of the Executive by the Company not in accordance with Section 4.1 (Death), Section 4.2 (Disability) or Section 4.3 (Due Cause);

 

(b)                                 a material diminution of the Executive’s responsibilities, as compared to the Executive’s responsibilities immediately prior to the Change in Control or at any time thereafter;

 

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(c)                                  the Company’s notification of the Executive of its intent, at least sixty (60) days in advance, to change the location of the Executive’s principal place of employment with the Company to a location that is at least fifty (50) miles away from the location of the Executive’s principal place of employment prior to such change, unless such new location is no farther from the Executive’s then-current residence than the immediately prior location;

 

(d)                                 the Company’s failure to satisfy the sixty (60) day advance notice of relocation requirement set forth in Section 5(c) above (it being understood that the Executive shall not, in such event, be required to relocate to terminate the Executive’s employment pursuant to this Section 5);

 

(e)                                  any breach by the Company of Section 3.2(c), Section 3.3(c), Section 3.3(d) or Section 3.4(b); or

 

(f)                                   any other material breach of this Agreement by the Company;

 

then, at the option of the Executive, exercisable by the Executive within ninety (90) days after the Executive’s actual knowledge of the occurrence of any of the foregoing events, the Executive may resign employment with the Company (or, if involuntarily terminated, give notice of the Executive’s intention to collect benefits under this Agreement) by delivering a notice in writing (the “Notice of Termination”) to the Company; provided, however, that, in the case of a resignation based on a material breach of this Agreement pursuant to Section 5(f), the Company shall have thirty (30) days from its receipt of the Notice of Termination to cure the breach, if curable, and, if the Company fails to cure the breach within such thirty (30) day period, then the Executive’s resignation shall become effective upon the expiration of such thirty (30) day period.  Upon the Executive’s resignation or notice following an involuntary termination pursuant to the preceding sentence, the Executive shall be entitled to receive the Base Salary and Vacation accrued to the Termination Date and the bonus provided for in Section 3.2 for the Termination Year (as well as any then earned but unpaid bonus for the year preceding the Termination Year, if applicable).  In addition, the Company shall pay to the Executive on the date that is six (6) months and one day after the Termination Date the Severance Payment (calculated, for the avoidance of doubt, using thirty (30) months of Base Salary and two and one-half (2.5) times the Target Bonus for the Termination Year).  In addition, the Company shall, for thirty (30) months following the Termination Date, (i) reimburse the Executive for the Executive’s reasonable costs of medical and dental coverage as provided under COBRA (which shall be extended by twelve (12) months), (ii) reimburse the Executive for the Executive’s reasonable costs incurred in maintaining the Executive’s life and disability coverage, and (iii) reimburse the Executive for similar, applicable benefits granted to the Executive in Section 3.4, each at levels substantially equivalent to those provided by the Company to the Executive immediately prior to the termination of the Executive’s employment (including such other benefits as shall be provided to senior corporate officers of the Company in lieu of such benefits from time to time during the thirty (30) month period), on the same basis, including the Company’s payment of premiums and contributions, as such benefits are provided to other senior corporate officers of the Company or were provided to the Executive prior to the termination. Reimbursements of expenses which provide for nonqualified deferred compensation under Code Section 409A, if any, shall not be paid before six (6) months and one day after the Executive’s Termination Date.  The amount of 

 

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expenses eligible for reimbursement, or in-kind benefits provided, during a taxable year of the Executive may not affect the expenses eligible for reimbursement, or in-kind benefits to be provided in any other taxable year.  Reimbursements shall be paid on or before the last day of the Executive’s taxable year following the taxable year in which the expense was incurred.  The right to reimbursement hereunder is not subject to liquidation or exchange for another benefit.

 

In addition, for a period of twenty-four (24) months immediately following the Executive’s Termination Date, the Executive will be provided with outplacement services commensurate with those provided to other senior corporate officers of the Company through a vendor selected by the Company.  Except as otherwise provided under this Agreement, the rights and benefits of the Executive or the Executive’s transferee under the benefit plans and programs of the Company shall be determined in accordance with the provisions of such plans and programs.

 

(g)                                  Notwithstanding the prior provisions of this Section 5, in the event that (i) the Executive is not a Specified Employee, then the Company shall pay to the Executive the Severance Payment within forty-five (45) days from the Termination Date and the six (6) month delay for reimbursements shall cease to apply, or (ii) the Executive is a Specified Employee and the death of the Executive occurs within six (6) months following the Termination Date, the Company shall pay to the Executive’s estate any unpaid portion of the amounts due to be paid to the Executive pursuant to this Section 5 within forty-five (45) days following the Executive’s death.  If the Executive’s estate or legal representative fails to notify the Company of the death of the Executive such that the Company is unable to make timely payment hereunder, then the Company shall not be treated as in breach of this Agreement and shall not be liable to the estate or legal representative for any losses, damages, or other claims resulting from such late payment.

 

(h)                                 Notwithstanding anything contained in this Agreement to the contrary, the Executive shall not be entitled to any payments under this Section 5 unless the Executive has first duly and timely executed (and not revoked) the form of mutual agreement and general release acceptable to the Company releasing both the Company and the Executive from certain claims the other party may have in connection with the Executive’s employment with the Company and the termination thereof, to the extent permitted by law.

 

6.                                      Confidential Information; Return of Property.

 

6.1                               Unless the Executive secures the Company’s written consent, the Executive will not, during the Employment Period and for an unlimited period of time thereafter, disclose, use, disseminate, lecture upon, or publish Confidential Information, whether or not such Confidential Information was developed by the Executive.

 

6.2                               “Confidential Information” means information disclosed to the Executive or known by the Executive as a result of the Executive’s employment with the Company, not generally known in the industry, about the Company’s and/or its affiliates’ services, products, or customers, including, but not limited to, clinical programs, procedures and protocols, research, operating manuals, business methods, financial strategic planning, client retention, customer and supplier lists, data processing, insurance plans, risk management, 

 

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marketing, contracting, selling and employees, as well as all protected health information, as defined by the Health Insurance Portability and Accountability Act of 1996, as amended (“PHI”).

 

6.3                               The Executive agrees to preserve for the Company’s exclusive use and deliver to the Company at the termination of the Executive’s employment, or at any other time the Company may request, all equipment and property (including, without limitation, tools, computers, mobile communication devices and furniture) and all memoranda, data, notes, plans, records, reports and other documents, whether in electronic, written or other form (and copies thereof), relating to the business of the Company, including, without limitation, PHI, that the Executive may then possess or have under the Executive’s control.

 

6.4                               Limits on Confidentiality Requirements.

 

(a)                                 Nothing in this Agreement is intended to discourage or restrict the Executive from communicating with, or making a report with, any governmental authority regarding a good faith belief of any violations of law or regulations based on information that the Executive acquired through lawful means in the course of the Executive’s employment, including such disclosures protected or required by any whistleblower law or regulation of the Securities and Exchange Commission, the Department of Labor, or any other appropriate governmental authority.

 

(b)                                 Nothing in this Agreement is intended to discourage or restrict the Executive from reporting any theft of Trade Secrets pursuant to the Defend Trade Secrets Act of 2016 (the “DTSA”) or other applicable state or federal law.  The DTSA prohibits retaliation against an employee because of whistleblower activity in connection with the disclosure of Trade Secrets, so long as any such disclosure is made either (i) in confidence to an attorney or a federal, state, or local government official and solely to report or investigate a suspected violation of the law, or (ii) under seal in a complaint or other document filed in a lawsuit or other proceeding.

 

(c)                                  If the Executive believes that any employee or any third party has misappropriated or improperly used or disclosed Trade Secrets or Confidential Information, the Executive should report such activity through the Company’s Open Door Policy (as provided in the Employee Handbook and/or any other then applicable policies and procedures of the Company) or Compliance Hotline.  This Agreement is in addition to and not in lieu of any obligations to protect the Company’s Trade Secrets and Confidential Information pursuant to the Employee Handbook and/or any other then applicable policies and procedures of the Company and Code of Business Conduct and Ethics for Directors and Employees. Nothing in this Agreement shall limit, curtail or diminish the Company’s statutory rights under the DTSA, any applicable state law regarding trade secrets or common law.

 

7.                                      Non-Compete.

 

7.1                               The Executive recognizes and acknowledges that by virtue of signing this Agreement and accepting employment hereunder, Executive will receive training materials, Trade Secrets and other Confidential Information and will acquire additional valuable training and knowledge, enhance the Executive’s professional skills and experience, and learn additional proprietary Trade Secrets and Confidential Information of the Company and its affiliates.  In 

 

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consideration of the foregoing and this contract of employment, the Executive agrees that the Executive will not, during the Executive’s term of employment and for a period of twenty-four (24) months after the Termination Date, directly or indirectly (i) engage, whether as principal, agent, investor, representative, stockholder (other than as the holder of not more than five percent (5%) of the stock or equity of any corporation the capital stock of which is publicly traded), employee, consultant, volunteer or otherwise, with or without pay, in any activity or business venture anywhere within the contiguous United States that is competitive with the Business, (ii) solicit or entice or endeavor to solicit or entice away from the Company and/or its affiliates any director, officer, employee, agent or consultant of the Company and/or its affiliates with whom the Executive had contact during the Executive’s employment with the Company, either on the Executive’s own account or for any Person, firm, corporation or other organization, regardless of whether the Person solicited would commit any breach of such Person’s contract of employment by reason of leaving the Company’s or any of its affiliates’ service; (iii) solicit or entice or endeavor to solicit or entice away any of the referral sources, clients or customers of the Company and/or any of its affiliates with whom the Executive had contact during the Executive’s employment with the Company for the purpose of competing in the Business, either on the Executive’s own account or for any other Person, firm, corporation or organization; (iv) employ or otherwise utilize (whether as a consultant, advisor or otherwise) any Person who was a director, officer, or employee of the Company and/or its affiliates at any time during the two (2) years preceding the Termination Date and with whom the Executive had contact during the Executive’s employment with the Company, unless such Person’s employment was terminated by the Company and/or its affiliates; or (v) employ or otherwise utilize (whether as a consultant, advisor or otherwise) any Person with whom the Executive had contact during the Executive’s employment with the Company and who is or may be likely to be in possession of any Confidential Information.  The Executive agrees that the restraints imposed under this Section 7 are reasonable and not unduly harsh or oppressive.  The parties hereto agree that if, in any proceeding, the Court or other authority shall refuse to enforce covenants set forth in this Section 7, because such covenants cover too extensive a geographic area or too long a period of time, any such covenant shall be deemed appropriately amended and modified in keeping with the intention of the parties to the maximum extent permitted by law.

 

7.2                               Since a material purpose of this Agreement is to protect the Company’s investment in the Executive and to secure the benefits of the Executive’s background and general experience in the industry, the parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of Section 6 or this Section 7 and that any such breach will cause the Company irreparable harm.  Therefore, in the event of a breach by the Executive of any of the provisions of Section 6 or this Section 7, the Company or its successors or assigns may, in addition to other rights and remedies existing in its favor, apply to any court of law or equity of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce or prevent any violations of the provisions of this Agreement.

 

7.3                               The Executive specifically authorizes and permits the Company to provide any Person with which the Executive serves (or may serve) as an employee, director, owner, stockholder, consultant, partner (limited or general) or otherwise with a copy of this Agreement or a general description of some or all of the terms of this Agreement.

 

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8.                                      Miscellaneous.

 

8.1                               Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law.  The parties agree that (i) the provisions of this Agreement shall be severable in the event that any of the provisions hereof are for any reason whatsoever invalid, void or otherwise unenforceable, (ii) such invalid, void or otherwise unenforceable provisions shall be automatically replaced by other provisions which are as similar as possible in terms to such invalid, void or otherwise unenforceable provisions but are valid and enforceable and (iii) the remaining provisions shall remain enforceable to the fullest extent permitted by law.

 

8.2                               This Agreement embodies the complete agreement and understanding among the parties and supersedes and preempts any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way.

 

8.3                               This Agreement is intended to bind and inure to the benefit of and be enforceable by the Executive and the Company, and their respective successors and assigns.

 

8.4                               Assignment.

 

8.4.1                     By the Company. The Company shall require any successors (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.  As used in this Agreement, the “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law and this Agreement shall be binding upon and inure to the benefit of, the Company, as so defined.  The Company and the Executive agree that the Company may not assign this Agreement without the express, written consent of the Executive.

 

8.4.2                     By the Executive. The Executive may not assign this Agreement or any part thereof without the prior written consent of a majority of the Board of Directors; provided, however, that nothing herein shall preclude one or more beneficiaries of the Executive from receiving any amount that may be payable following the occurrence of the Executive’s legal incompetency or death and shall not preclude the legal representative of the Executive’s estate from receiving such amount or from assigning any right hereunder to the person or persons entitled thereto under the Executive’s will or, in the case of intestacy, to the person or persons entitled thereto under the laws of intestacy applicable to the Executive’s estate.  The term “beneficiaries,” as used in this Agreement, shall mean a beneficiary or beneficiaries so designated to receive any such amount or, if no beneficiary has been so designated, the legal representative of the Executive (in the event of the Executive’s incompetency) or the Executive’s estate.

 

8.5                               All questions concerning the construction, validity and interpretation of the Agreement will be governed by the internal law, and not the law of conflicts, of the State of 

 

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Texas.  All disputes under this Agreement shall be submitted to and governed by binding arbitration with an arbitrator from the American Arbitration Association; except only that the Company may seek relief in a court of competent jurisdiction in the event of a claimed violation of Section 6 or Section 7 of this Agreement. The Executive hereby agrees that any action or proceeding regarding or relating to this Agreement that is properly submitted to a court of competent jurisdiction as described in the preceding sentence shall be subject to the exclusive jurisdiction of the courts of the State of Texas, County of Travis, or, if it has or can acquire jurisdiction, in the United States District Court for the Western District of Texas, and each of the parties hereto consents to the jurisdiction of such courts (and of the appropriate appellate courts) in any such action or proceeding and waives any objection to venue laid therein.  Process in any action or proceeding referred to in the preceding sentence may be served on any party hereto anywhere in the world.

 

8.6                               Any provision of this Agreement may be amended or waived only with the prior written consent of the Company and the Executive.  Notwithstanding anything in this Agreement to the contrary, the Company shall unilaterally have the right to amend this Agreement to comply with Section 409A of the Code.

 

8.7                               This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.  The parties further agree that facsimile signatures or signatures scanned into .pdf (or similar) format and sent by e-mail shall be deemed original signatures.

 

9.                                      Notices.

 

Any notice to be given hereunder shall be in writing and delivered personally or sent by certified mail, postage prepaid, return receipt requested, addressed to the party concerned at the address indicated below or at such other address as such party may subsequently be designated by like notice:

 

	
If to the Company:
    
	
 
    
	
Hanger, Inc.
    
	
Suite 300
    
	
10910 Domain Drive
    
	
Austin, Texas 78758
    
	
Attention: Senior Vice   President & Chief Human Resources Officer
    
	
 
    
	
If to the Executive:
    
	
 
    
	
Vinit K. Asar
    
	
 
    	
 
    

 

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10.                               Withholding.

 

Anything to the contrary notwithstanding, all payments required to be made by the Company hereunder to the Executive or the Executive’s beneficiaries, including the Executive’s estate, shall be subject to withholding of such amounts relating to taxes as the Company may reasonably determine it should withhold pursuant to any applicable law or regulation.  In lieu of withholding such amounts, in whole or in part, the Company may, in its sole discretion, accept other provisions for payment of taxes as permitted by law, provided it is satisfied in its sole discretion that all requirements of law affecting its responsibilities to withhold such taxes have been satisfied.

 

11.                               Survivorship.

 

The respective rights and obligations of the parties hereunder shall survive any termination of this Agreement to the extent necessary to the intended preservation of such rights and obligations.

 

12.                               Definitions.

 

12.1                        “Business” shall mean any competitive business of any of the following: (a) fabricating, manufacturing, distributing, wholesaling or retailing of orthotics or prosthetics, or the operation of clinics to fit patients for orthotics or prosthetics; (b) orthotic and prosthetic network management, care and administration; (c) the business of providing rehabilitative products (cold therapy, continuous passive motion, or similar products) and services directly to patients; (d) integrated clinical physical therapy programs for sub-acute and long-term care rehabilitation providers (including, without limitation, skilled nursing facilities, home health agencies, outpatient clinics and other rehabilitation providers), combining medical technology with evidence-based clinical protocols; and/or (e) or any other related businesses in which the Company and/or its affiliates is engaged during and at the termination of the Employment Period.  For avoidance of doubt, volunteer work and/or teaching at an educational institution shall not be deemed activities within the Business.

 

12.2                        “Change in Control” shall mean the occurrence of any of the following:

 

(a)                                 a person, as defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (other than the Executive or a group including the Executive), either (i) acquires twenty percent (20%) or more of the combined voting power of the outstanding securities of the Company having the right to vote in elections of directors and such acquisition shall not have been approved within sixty (60) days following such acquisition by a majority of the Continuing Directors (as hereinafter defined) then in office, or (ii) acquires fifty percent (50%) or more of the combined voting power of the outstanding securities of the Company having a right to vote in elections of directors; or

 

(b)                                 Continuing Directors shall for any reason cease to constitute a majority of the Board of Directors; or

 

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(c)                                  the Company disposes of all or substantially all of the business of the Company to a party or parties other than a subsidiary or other affiliate of the Company pursuant to a partial or complete liquidation of the Company, sale of assets (including stock of a subsidiary of the Company) or otherwise; or

 

(d)                                 the Board of Directors approves the Company’s consolidation or merger with or into any other Person (other than a wholly-owned subsidiary of the Company), or any other Person’s consolidation or merger with or into the Company, which results in all or part of the outstanding shares of Stock being changed in any way or converted into or exchanged for stock or other securities or cash or any other property.

 

12.3                        “Continuing Director” shall mean a member of the Board of Directors who either was a member of the Board of Directors on the date hereof or who subsequently became a Director of the Company and whose election, or nomination for election, was approved by a vote of at least two-thirds (2/3) of the Continuing Directors then in office.

 

12.4                        “Disability” means that the Executive is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months.

 

12.5                        “Due Cause” means any of: (i) the repeated failure or refusal of the Executive to follow the lawful directives of the Board of Directors (except due to sickness, injury or disabilities), (ii) gross inattention to duty or any other willful, reckless or grossly negligent act (or omission to act) by the Executive, which, in the good faith judgment of the Board of Directors, materially injures the Company, including the repeated failure to follow the written policies and procedures of the Company, (iii) a material breach of this Agreement by the Executive after written notice and a reasonable opportunity to cure, if curable (provided that such opportunity to cure will not apply if the opportunity to cure described in the following sentence following a Change in Control applies), or (iv) the commission by the Executive of a felony or other crime involving moral turpitude or an act of financial dishonesty against the Company or any of its affiliates.  Following a Change in Control, any determination of Due Cause shall be made only by the Board of Directors or by the board of directors of the successor or acquirer in the Change in Control, which may terminate the Executive for Due Cause only after providing Executive (a) written notice that indicates in reasonable detail the facts and circumstances alleged to provide a basis for such termination, (b) a thirty (30) day opportunity to cure such facts or circumstances, if curable, (c) the opportunity to appear before such board (with the accompaniment of counsel) and provide rebuttal to such proposed termination, and (d) written notice following such appearance confirming such termination and certifying that the decision to terminate the Executive for Due Cause was approved in good faith by at least sixty-six percent (66%) of the members of such board; provided that the requirements of this sentence shall apply only if the termination for Due Cause occurs, or is initiated by delivery of a written notice pursuant to clause (a), during the Change in Control Period.

 

12.6                        “Fair Market Value” shall mean, per Share on a particular date, the last sales price on such date on the national securities exchange on which the Shares are then traded, as reported in The Wall Street Journal, or if no sales of Shares occur on the date in 

 

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question, on the last preceding date on which there was a sale on such exchange. If the Shares are not listed on a national securities exchange, but are traded in an over-the-counter market, the last sales price (or, if there is no last sales price reported, the average of the closing bid and asked prices) for the Shares on the particular date, or on the last preceding date on which there was a sale of Shares on that market, will be used. If the Shares are neither listed on a national securities exchange nor traded in an over-the-counter market, the price determined by the Board of Directors in its discretion shall be used.  Notwithstanding anything to the contrary herein, following a Change in Control, if the Shares are neither listed on a national securities exchange nor traded in an over-the-counter market, the price determined by an independent appraisal, performed by an independent appraisal firm selected by the mutual agreement of the Company and the Executive, will be used to determine Fair Market Value.

 

12.7                        “Person” shall mean and include an individual, a partnership, a joint venture, a corporation, a limited liability company, a trust, an unincorporated organization and a governmental entity or any department or agency thereof.

 

12.8                        “Retirement” shall mean the Executive’s voluntary termination of employment at or after age sixty-five (65), provided the Executive has given the Company written notice of the Executive’s intent to retire no less than one (1) year prior to the scheduled Termination Date and the Executive has, as of the scheduled Termination Date, been continuously employed with the Company, including any of its direct or indirect subsidiaries, for a period of no less than five (5) years.

 

12.9                        The Executive will be a “Specified Employee” if the Executive is a key employee (as defined in Code Section 416(i) but without regard to Code Section 416(i)(5)) of the Company or an affiliate of the Company (within the meaning of Code Section 414(b) or (c)) any of the stock of which is publicly traded on an established securities market or otherwise, as determined at the time of the Executive’s “separation from service”.  The Executive is a key employee under Code Section 416(i) if the Executive meets the requirements of Code Section 416(i)(1)(A)(i), (ii) or (iii), applied in accordance with the regulations under Code Section 416, but disregarding Code Section 416(i)(5), at any time during the twelve (12) month period ending on an identification date.  For purposes of determining whether the Executive is a key employee, compensation shall mean wages within the meaning of Code Section 3401(a) but determined without regard to any rules that limit the amount of remuneration included in wages based on the nature or location of the employment or services performed.  If the Executive is a key employee as of an identification date, the Executive is treated as a key employee for the twelve (12) month period beginning on the first day of the fourth month following the identification date.  The identification date for this Agreement shall be December 31 of each year, such that if the Executive satisfies the foregoing requirements for key employee status as of December 31 of a year, the Executive shall be treated as a key employee for the twelve (12) month period starting April 1 of the following calendar year.

 

If, in a transaction constituting a “change in control” of the Company, as determined by Code Section 409A, the Company is merged with or acquired by another entity, and immediately following such change in control of the Company the stock of either the Company or the acquirer or successor in such transaction is publicly traded on an established securities market or otherwise, then for the period between the date of such transaction and the 

 

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next specified employee effective date of the acquirer or survivor, the acquirer or survivor shall combine the lists of the specified employees of each entity participating in the transaction and re-order the list to identify the top 50 key employees (as well as one percent (1%) and five percent (5%) owners that are considered key employees) in accordance with Treasury Regulation §1.409A-1(i)(6)(i).

 

12.10                 “Share” shall mean a share of the common stock of the Company or, following a Change in Control, a share of the common stock of the Company or any other security used to determine the value of the equity-based compensation of the Executive.

 

12.11                 “Termination Date” shall mean (i) if the Executive’s employment is terminated by the Company for any reason whatsoever, other than death or Disability, the Executive’s last day of work; (ii) if the Executive’s employment is terminated by reason of death or Disability, the date of death of the Executive or the effective date of the Disability, as the case may be; and (iii) if the Executive’s employment is terminated by the Executive, the expiration date of the applicable notice period that is required pursuant to this Agreement.  Notwithstanding the foregoing, no Termination Date shall be earlier than the date as of which the Executive has incurred a “separation from service” within the meaning of Internal Revenue Code (“Code”) Section 409A, as determined by applying the default rules thereof.

 

12.12                 “Trade Secret” shall mean information, including a formula, pattern, compilation, program, device, method, technique, process, financial data, or list of actual or potential customers or suppliers that: (a) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and (b) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

 

12.13                 “Vacation” shall mean the Executive’s entitlement to paid vacation pursuant to the Company’s vacation policy and Section 3.4(a).

 

[The next page is the signature page.]

 

21

 

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

 

	
 
    	
HANGER, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
  /s/ Thomas E. Hartman
    
	
 
    	
 
    	
  Thomas E. Hartman
    
	
 
    	
 
    	
  Senior Vice President, General Counsel   and Secretary
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
/s/ Vinit K. Asar
    
	
 
    	
 
    	
VINIT K. ASAR

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