Document:

Exhibit 10.2

 

EMPLOYMENT AGREEMENT

 

This EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of the 10th day of August, 2015 (the “Effective Date”), by and between BIOPHARMX CORPORATION, a Delaware corporation (the “Company”), and Greg Kitchener (the “Executive”), (collectively the “Parties”).

 

WITNESSETH:

 

WHEREAS, Executive has represented that he has the experience, background and expertise necessary to enable him to be the Company’s Executive Vice President and Chief Financial Officer; and

 

WHEREAS, based on such representation, and the Company’s reasonable due diligence, the Company wishes to employ Executive as its Executive Vice President and Chief Financial Officer and Executive wishes to be so employed, in each case, upon the terms hereinafter set forth.

 

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements herein contained, and other good and valuable consideration, the Parties agree as follows:

 

1.              DEFINITIONS.  As used herein, the following terms shall have the following meanings:

 

1.1                   “Board” means the Board of Directors of the Company.

 

1.2                                                       “Cause” means (i) a determination by the Board made in good faith that Executive’s performance is unsatisfactory after there has been delivered to Executive a written demand for performance which describes the deficiencies in Executive’s performance and the manner in which Executive’s performance must be improved, and which provides thirty (30) business days from the date of notice to remedy such performance deficiencies; (ii) Executive’s conviction of or plea of nolo contendere to a felony or a crime involving moral turpitude, (iii) Executive engaging in an act of negligence or willful misconduct in the performance of his employment obligations and duties, (iv) Executive’s commission of an act of fraud or dishonesty against, material misconduct or misappropriation of property belonging to the Company; (v) Executive engaging in any other misconduct that has had or may reasonably be expected to have an adverse effect on the reputation or business of the Company or any of its subsidiaries; or (vi) Executive’s breach of the Company’s Invention Assignment and Confidentiality Agreement or any other provision of this Agreement or other misuse of the Company’s trade secrets or proprietary information.

 

1.3                         “Change in Control” means (i) a sale, conveyance, exchange or transfer (excluding any venture-backed or similar investments in the Company) in which any person or entity, other than persons or entities who as of immediately prior to such sale, conveyance, exchange or transfer own securities in the Company, either directly or indirectly, becomes the beneficial owner, directly or indirectly, of securities of the Company representing more than fifty 

 

 

(50%) percent of the total voting power of all its then outstanding voting securities; (ii) a merger or consolidation of the Company in which its voting securities immediately prior to the merger or consolidation do not represent, or are not converted into securities that represent, a majority of the voting power of all voting securities of the surviving entity immediately after the merger or consolidation; or (iii) a sale of substantially all of the assets of the Company or a liquidation or dissolution of the Company, provided that, with respect to any of the foregoing subsections (i), (ii), or (iii), a transaction that does not constitute a “change in control event” under Sections 1.409A-3(i)(5)(v) or 1.409A-3(i)(5)(vii) of the Treasury Regulations under Section 409A of Code will not constitute a Change in Control for purposes of this Agreement.

 

1.4                   “Code” means the Internal Revenue Code of 1986, as amended.

 

1.5                   “Common Stock” means the Company’s common stock, par value $.001 per share.

 

1.6                                                       “Good Reason” means a material decrease in Executive’s then current annual Base Salary (which for purposes of this Agreement, material means a reduction by more than 10%, as compared to immediately prior to such decrease and other than in connection with a general decrease in the salary of all employees with a title of vice president or above), provided that such decrease was taken without the Executive’s written consent and, provided further, that (a) the Company receives, within thirty (30) days following such decrease, written notice from the Executive specifying the specific basis for Executive’s belief that Executive is entitled to terminate employment for Good Reason, (b) the Company fails to cure the event constituting Good Reason within thirty (30) days after receipt of such written notice thereof, and (c) the Executive terminates employment within ten days (10) days following the earlier of expiration of such cure period or receipt from the Company that such deficiencies will not be cured.

 

1.7                   “Separation from Service” means a termination of employment with the Company as defined under Section 409A of the Code and as determined by the Company in its sole discretion.

 

2.              EMPLOYMENT.

 

2.1       Agreement to Employ. Effective as of the Effective Date, the Company hereby agrees to employ Executive, and Executive hereby agrees to serve, subject to the provisions of this Agreement, as an officer and executive of the Company.

 

2.2       Duties and Schedule. Executive shall serve as the Company’s Executive Vice President and Chief Financial Officer and shall have such responsibilities as designated by the Chief Executive Officer of the Company that are not inconsistent with applicable laws, regulations and rules.  Executive shall report directly to the Chief Executive Officer of the Company.

 

2.3       At-Will Employment.  Executive and the Company understand and acknowledge that Executive’s employment with the Company constitutes “at-will” employment, and the employment relationship may be terminated at any time, with or without cause and with or without notice.

 

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3.              INVENTIONS AND PROPRIETARY INFORMATION.   Executive hereby agrees to execute the Company’s Employee Invention Assignment and Confidentiality Agreement (the “Invention Assignment and Confidentiality Agreement”) attached hereto as Exhibit A.

 

4.              COMPENSATION.

 

4.1                                                       Salary and Bonus.  While employed by the Company pursuant to this Agreement, Executive’s annual base salary shall be Two Hundred Twenty-Five Thousand United States Dollars (US $225,000) (the “Base Salary”), payable in accordance with the Company’s normal payroll practices.  At such time as the Company adopts an employee bonus plan, as determined in its sole discretion and subject to Board approval, Executive will be eligible to receive an annual bonus in such amount and upon such terms as shall be determined by the Board.  The Company shall periodically review (at least annually) Executive’s compensation and benefits, provided that any changes thereto shall be determined by the Company in its sole and absolute discretion.

 

4.2                                                       Employee Benefits.  Executive shall be eligible to participate in all employee benefit plans and arrangements as are made available by the Company to its other senior executives, subject to the terms and conditions thereof.

 

4.3                                                       Vacation. Executive will be entitled to paid vacation and holidays pursuant to the terms of the Company’s vacation policy as may exist from time to time and in accordance with applicable U.S. law.

 

4.4                                                       Business Expenses. Executive shall be reimbursed by the Company for all ordinary and necessary expenses incurred by Executive in the performance of his duties hereunder on behalf of the Company subject to the approval by the Board and pursuant to Company policy as may be in effect from time to time.

 

5.              STOCK OPTIONS.  On or following commencement of Executive’s employment and subject to approval of the Board, the Company will grant Executive an option under the Company’s 2014 Equity Incentive Plan (the “Plan”) to purchase Two Hundred Thirty-Five Thousand (235,000) shares of the Company’s Common Stock (the “Option”). The Option will have an exercise price that is no less than the fair market value of the Company’s Common Stock on the date of grant and will vest over Four (4) years, with 25% of the total number of shares subject to the Option vesting on the One (1) year anniversary of the date of grant and, the remainder vesting in equal installments on the last day of each of the Thirty-Six (36) full calendar months thereafter (the “Vesting Schedule”).  Vesting will depend on Executive’s Continued Service as an Employee (as such terms are defined in the Plan) with the Company and will be subject to the terms and conditions of the Plan and the written Stock Option Agreement governing the Option.  Shares subject to the Option shall not vest during any period in which Executive is taking a leave of absence from the Company, except as may be required by applicable law.  At such time as Executive returns to regular and continuous service with the Company following the leave of absence, the Vesting Schedule applicable to the share subject to the Option shall recommence, with the total Four (4) year period of the Vesting Schedule, and One (1) year cliff (if applicable), extended by a number of days equal to the total number of days of Executive’s leave of absence. Similarly, if Executive’s schedule reduces to a less than full-

 

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time service arrangement, the shares subject to the Option may, as determined by the Board, vest on a proportionately and commensurately slower schedule, but no later than the expiration of the Option.  No fractional shares may be issued.  Notwithstanding the foregoing, in the event of certain Separations from Service from the Company, the vesting of the Option will be accelerated as set forth herein.

 

6.              TERMINATION OF EMPLOYMENT.

 

6.1                                                       Termination Other Than Separation from Service without Cause or by Executive for Good Reason, in each case within Twelve (12) months following a Change in Control.  In the event of any termination of Executive’s employment by the Company other than a Separation from Service without Cause or by Executive for Good Reason, in each case within Twelve (12) months following a Change in Control as set forth in Section 6.2 below, the Executive will be paid only (i) any earned but unpaid Base Salary, and (ii) other unpaid vested amounts or benefits under the compensation, incentive and benefit plans of the Company in which Executive participates, and (iii) reimbursement for all reasonable and necessary expenses incurred by Executive in connection with his performance of services on behalf of the Company in accordance with applicable Company policies and guidelines, in each case as of the effective date of such termination ((i), (ii) and (iii) collectively, the “Accrued Compensation”).  Executive will be allowed to exercise his vested stock options to purchase Company common stock, if any, during the time period set forth in, and in accordance with, the Plan and governing stock option agreement(s).

 

6.2                                                       Separation from Service Following Change in Control. In the event of the Executive’s Separation from Service without Cause or by Executive for Good Reason, in each case within Twelve (12) months following a Change in Control, and provided that Executive delivers to the Company a signed settlement agreement and general release of claims in favor of the Company in the form attached hereto as Exhibit B (the “Release”), and satisfies all conditions to make the Release effective, within sixty (60) days following Executive’s Separation from Service, then, in addition to the Accrued Compensation, Executive shall be entitled to the benefits as set forth below, which shall be paid on or commencing no later than the first business day following the 60th day following Separation from Service and in compliance with the timeframe required under Section 409A as set forth in Section 7 of this Agreement:

 

6.2.1         Lump sum payment equal to the sum of (a) Twelve (12) months of Executive’s then current Base Salary.

 

6.2.2         Provided Executive timely elects to continue health coverage under COBRA, reimbursement for any monthly COBRA premium payments made by Executive in the Eighteen (18) months following Executive’s Separation from Service, provided that, if the Company determines that it cannot provide reimbursement for such continued health coverage without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act) or incurring additional administrative expenses due to application of applicable law, the Company shall in lieu thereof provide to Executive a taxable payment in an amount equal to Eighteen (18) months of such continued health benefits, which continued payment shall be made following such determination and regardless of whether Executive elects COBRA continuation coverage.

 

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6.2.3         Acceleration as to One Hundred Percent (100%) of the unvested shares subject to the Option and all other Company equity awards then held by the Executive, provided, however, that in no event shall the vesting of restricted stock units, performance-based restricted stock units or long-term incentives be so accelerated if such acceleration would, as determined by the Company in good faith, cause adverse tax consequences under Section 409A of the Code.

 

6.2.4         No Other Obligations.  Notwithstanding anything in this Agreement to the contrary, and except with respect to payment of the Accrued Compensation, the Company shall have no obligation to make any payment or offer any benefits to Executive under this Section 6.2 in the event of a termination (a) for any reason occurring prior to a Change in Control, (b) for Cause, death, disability, retirement or voluntary resignation other than for Good Reason occurring within Twelve (12) months after a Change in Control or (c) for any reason occurring after Twelve (12) months following a Change in Control.

 

6.3                               Return of Company Property.  Upon any termination of Executive’s employment with the Company, Executive will return to the Company all documents, customer lists, customer information, product samples, presentation materials, drawing specifications, equipment and other materials relating to the business of any of the Companies, which Executive hereby acknowledges are the sole and exclusive property of the Companies or any one of them.  Nothing in this Agreement shall prohibit Executive from retaining, at all times any document relating to his personal entitlements and obligations, his Rolodex, his personal correspondence files; and any additional personal property.

 

6.4                               Parachute Payments.  In the event that the severance and other benefits provided for in this Agreement or otherwise payable to the Executive (i) constitute “parachute payments” within the meaning of Section 280G of the Code and (ii) but for this Section, would be subject to the excise tax imposed by Section 4999 of the Code, then, Executive’s severance and other benefits under this Agreement shall be payable either (i) in full, or (ii) as to such lesser amount which would result in no portion of such severance and other benefits being subject to the excise tax under Section 4999 of the Code, whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the excise tax imposed by Section 4999 (as applicable), results in the receipt by Executive on an after-tax basis, of the greatest amount of severance benefits under this Agreement.

 

Any reduction shall be made in the following manner:  first a prorata reduction of (i) any cash payments subject to Section 409A of the Code as deferred compensation and (ii) any cash payments not subject to Section 409A of the Code, and second a prorata cancellation of (i) any equity-based compensation subject to Section 409A of the Code as deferred compensation and (ii) any equity-based compensation not subject to Section 409A of the Code.  Reduction in either cash payments or equity compensation benefits shall be made prorata between and among benefits which are subject to Section 409A of the Code and benefits which are exempt from Section 409A of the Code in each case beginning with the benefits that would othewise be made last in time.

 

Unless the Company and Executive otherwise agree in writing, any determination required under this Section shall be made in writing by the Company’s independent public accountants (the

 

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“Accountants”), whose determination shall be conclusive and binding upon Executive and the Company for all purposes.  For purposes of making the calculations required by this Section 6.4, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code.  The Company and Executive shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section.  The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section.

 

7.              MISCELLANEOUS.

 

7.1                               Section 409A.  To the extent (i) any payments to which Executive becomes entitled under this Agreement, or any agreement or plan referenced herein, in connection with Executive’s termination of employment with the Company constitute deferred compensation subject to Section 409A of the Code and (ii) Executive is deemed at the time of such termination of employment to be a “specified” employee under Section 409A of the Code, then such payment or payment shall not be made or commence until the earlier of (i) the expiration of the six (6)-month period measured from the date of Executive’s “separation from service” (as such term is at the time defined in regulations under Section 409A of the Code) with the Company; or (ii) the date of Executive’s death following such separation from service; provided, however, that such deferral shall only be effected to the extent required to avoid adverse tax treatment to Executive, including (without limitation) the additional twenty percent (20%) tax for which Executive would otherwise be liable under Section 409A(a)(1)(B) of the Code in the absence of such deferral. The first payment thereof will include a catch-up payment covering the amount that would have otherwise been paid during the period between Executive’s termination of employment and the first payment date but for the application of this provision, and the balance of the installments (if any) will be payable in accordance with their original schedule.

 

For purposes of this Agreement or any agreement or plan referenced herein, and notwithstanding any other provision herein, with respect to any payment that is subject to (and not exempt from) Section 409A of the Code, no payment shall be made upon disability or terminal illness unless and until such condition qualifies as a “Disability” within the meaning of Section 409A of the Code and Section 1.409A-3(i)(4) of the regulations thereunder.

 

Except as otherwise expressly provided herein, to the extent any expense reimbursement or the provision of any in-kind benefit under this Agreement (or otherwise referenced herein) is determined to be subject to (and not exempt from) Section 409A of the Code, the amount of any such expenses eligible for reimbursement, or the provision of any in-kind benefit, in one calendar year shall not affect the expenses eligible for reimbursement or in kind benefits to be provided in any other calendar year, in no event shall any expenses be reimbursed after the last day of the calendar year following the calendar year in which Executive incurred such expenses, and in no event shall any right to reimbursement or the provision of any in-kind benefit be subject to liquidation or exchange for another benefit.

 

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To the extent that any provision of this Agreement is ambiguous as to its exemption or compliance with Section 409A, the provision will be read in such a manner so that all payments hereunder are exempt from Section 409A to the maximum permissible extent, and for any payments where such construction is not tenable, that those payments comply with Section 409A to the maximum permissible extent. To the extent any payment under this Agreement may be classified as a “short-term deferral” within the meaning of Section 409A, such payment shall be deemed a short-term deferral, even if it may also qualify for an exemption from Section 409A under another provision of Section 409A.

 

Payments pursuant to this Agreement (or referenced in this Agreement) are intended to constitute separate payments for purposes of Section 1.409A-2(b)(2) of the regulations under Section 409A.

 

7.2                                                       Arbitration.  Executive and the Company agree to submit to mandatory binding arbitration, in San Mateo County, California, any and all claims arising out of or related to this agreement and Executive’s employment with the Company and the termination thereof, except that each party may, at its or his option, seek injunctive relief in court related to the improper use, disclosure or misappropriation of a party’s proprietary, confidential or trade secret information.  EXECUTIVE AND THE COMPANY HEREBY WAIVE ANY RIGHTS TO TRIAL BY JURY IN REGARD TO SUCH CLAIMS.  This agreement to arbitrate does not restrict Executive’s right to file administrative claims Executive may bring before any government agency where, as a matter of law, the parties may not restrict the Executive’s ability to file such claims (including, but not limited to, the National Labor Relations Board, the Equal Employment Opportunity Commission and the Department of Labor).  However, Executive and the Company agree that, to the fullest extent permitted by law, arbitration shall be the exclusive remedy for the subject matter of such administrative claims.  The arbitration shall be conducted through JAMS before a single neutral arbitrator, in accordance with the JAMS employment arbitration rules then in effect.

 

7.3                                                       Executive’s Representation.  Executive hereby represents and warrants to the Company that (i) the execution, delivery and performance of this Agreement by Executive do not and shall not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which Executive is a party or by which he is bound, and (ii) upon the execution and delivery of this Agreement by the Company, this Agreement (and the exhibit(s) hereto) shall be the valid and binding obligation of Executive, enforceable in accordance with its terms.  Executive hereby acknowledges and represents that he has consulted with independent legal counsel regarding his rights and obligations under this Agreement and that he fully understands the terms and conditions contained herein.

 

7.4       Indemnification.     The Company shall indemnify Executive with respect to activities in connection with his employment hereunder to the fullest extent provided in the Company’s bylaws.

 

7.5                   Applicable Law.          Except as may be otherwise provided herein, this Agreement shall be governed by and construed in accordance with the laws of the State of California, applied without reference to principles of conflict of laws.

 

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7.6                   Amendments.           This Agreement may not be amended or modified otherwise than by a written agreement executed by and between Executive and the Chairman of the Board.

 

7.7                   Notices.  All notices and other communications hereunder shall be in writing and shall be given by hand-delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

 

If to the Executive:

 

Greg Kitchener

 

If to the Company:

 

BioPharmX Corporation
  1098 Hamilton Court

Menlo Park, California 94025

Fax: (650) 900-4130

 

With a copy to (which shall not constitute notice):

 

Fenwick & West LLP
 801 California Street
 Mountain View, CA  94041
 Attn: Robert Freedman
  Fax: (208) 331-7723

 

Or to such other address as either party shall have furnished to the other in writing in accordance herewith.  Notices and communications shall be effective when actually received by the addressee.

 

7.8                   Withholding. The Company may withhold from any amounts payable under the Agreement, such federal, state and local income, unemployment, social security and similar employment related taxes and similar employment related withholdings as shall be required to be withheld pursuant to any applicable law or regulation.

 

7.9                   Successors.

 

7.9.1                     Executive. This Agreement is personal to Executive and, without the prior express written consent of the Company, shall not be assignable by Executive, except that Executive’s rights to receive any compensation or benefits under this Agreement may be transferred or disposed of pursuant to testamentary disposition, intestate succession or a qualified domestic relations order or in connection with a disability.  This Agreement shall inure to the benefit of and be enforceable by Executive’s estate, heirs, beneficiaries, and/or legal representatives.

 

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7.9.2                     The Company. This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.

 

7.10            Inventions and Patents. The Company shall be entitled to the sole benefit and exclusive ownership of any inventions or improvements in products, processes, or other things that may be made or discovered by Executive within the technological fields of interests while he is in the service of the Company, and all patents for the same. During the Term, Executive shall do all acts necessary or required by the Company to give effect to this section and, following the Term, Executive shall do all acts reasonably necessary or required by the Company to give effect to this section.  In all cases, the Company shall pay all costs and fees associated with such acts by Executive.

 

7.11            Severability.                 The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, and any such provision which is not valid or enforceable in whole shall be enforced to the maximum extent permitted by law.

 

7.12            Captions.                                The captions of this Agreement are not part of the provisions and shall have no force or effect.

 

7.13            Entire Agreement.                 This Agreement (and the exhibit(s) hereto) contains the entire agreement among the parties concerning the subject matter hereof and supersedes all prior agreements, understandings, discussions, negotiations and undertakings, whether written or oral, between the parties with respect thereto.

 

7.14            Survivorship.                                           The respective rights and obligations of the parties hereunder shall survive any termination of this Agreement or the Executive’s employment hereunder to the extent necessary to the intended preservation of such rights and obligations.

 

7.15            Waiver. Either Party’s failure to enforce any provision or provisions of this Agreement shall not in any way be construed as a waiver of any such provision or provisions, or prevent that party thereafter from enforcing each and every other provision of this Agreement.

 

7.16            Joint Efforts/Counterparts.    Preparation of this Agreement shall be deemed to be the joint effort of the parties hereto and shall not be construed more severely against any party.  This Agreement may be signed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.

 

7.17            Representation by Counsel.    Each Party hereby represents that it has had the opportunity to be represented by legal counsel of its choice in connection with the negotiation and execution of this Agreement.

 

[Signature page follows]

 

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

 

 

	
EXECUTIVE:
    	
 
    	
BIOPHARMX CORPORATION
    
	
 
    	
 
    	
a Delaware corporation
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
/s/ Greg Kitchener
    	
 
    	
By:
    	
/s/ Jim Pekarsky
    
	
 
    	
 
    	
 
    	
 
    
	
Greg Kitchener
    	
 
    	
Name: Jim Pekarsky
    
	
 
    	
 
    	
Title: CEO
    

 

10Exhibit 10.3

 

BIOPHARMX, INC.

NOTICE OF INDUCEMENT OPTION GRANT

 

BioPharmX, Inc. (the “Company”) has granted you, Greg Kitchener, (“Participant”) an Option to purchase Shares of Common Stock of the Company (“Shares”), subject to the terms and conditions of this Notice of Inducement Option Grant (the “Notice”) and the Inducement Option Award Agreement (the Notice and the Inducement Option Agreement, collectively, the “Agreement”).

 

	
Participant:
    	
Greg Kitchener
    
	
 
    	
 
    
	
Address:
    	
 
    
	
 
    	
 
    
	
Date of Grant:
    	
August 10,   2015
    
	
 
    	
 
    
	
Vesting Commencement Date:
    	
August 10,   2015
    
	
 
    	
 
    
	
Exercise Price per Share:
    	
$1.67
    
	
 
    	
 
    
	
Total Number of Shares:
    	
235,000
    
	
 
    	
 
    
	
Type of Option:
    	
Non-Qualified   Stock Option
    
	
 
    	
 
    
	
Expiration Date:
    	
10 Years from   Date of Grant, August 10, 2025
    
	
 
    	
 
    
	
Post-Termination   Exercise Period:
    	
 
    
	
 
    	
 
    
	
 
    	
Voluntary Termination =   3 Months
    
	
 
    	
Termination = 3 Months
    
	
 
    	
Disability = 12 Months
    
	
 
    	
Death = 12 Months
    
	
 
    	
 
    
	
Vesting   Schedule:
    	
Subject to the   limitations set forth in the Agreement (inclusive of the Notice), the Shares   subject to the Option will vest and may be exercised, in whole or in part, in   accordance with the following schedule:
    
	
 
    	
 
    
	
 
    	
25% of the Shares   subject to the Option will vest and become exercisable on the first   anniversary of the Vesting Commencement Date with an additional 1/36th of the   remaining Shares subject to the Option vesting on the last day of each full   calendar month thereafter, so long as Participant has not been Terminated   prior to such date. In addition, subject to the terms of that certain   Employment Agreement dated August 10, 2015 by and between the Company   and Participant, as may be amended from time to time (the “Employment Agreement”) in the   event of Participant’s Termination without Cause (as defined in the   Employment Agreement) or by the Participant for Good Reason (as defined in   the Employment Agreement), in each case within twelve (12) months following   the consummation of a Change in Control (as defined in the Employment   Agreement), and provided that the Participant delivers to the Company a   signed Release (as defined in the Employment Agreement), and satisfies all   conditions to make the Release effective, 100% of the then unvested Shares   subject to the Option shall immediately vest as of the Termination Date and   be exercisable. Fractional vesting will be rounded in accordance with the   Company’s standard practices in its equity administration platform.
    
			

 

Participant acknowledges that the vesting pursuant to this Notice is earned only by continuing service as a Company employee, director or consultant.  Participant also understands that this Notice is subject to the terms and conditions of the Agreement, which is incorporated herein by reference.   By signing below or electronically accepting the Agreement, Participant confirms that he has read and agreed to the terms and conditions of this Agreement (inclusive of the Notice). Participant has had an opportunity to obtain the advice of counsel prior to executing the 

 

 

Notice and fully understands all provisions of this Agreement.  Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions relating to the Agreement.  Participant further agrees to notify the Company upon any change in the residence address indicated on the Notice.

 

	
PARTICIPANT:
    	
 
    	
BIOPHARMX, INC.
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Signature:
    	
/s/ Greg Kitchener
    	
 
    	
By:
    	
/s/ Jim Pekarsky
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Print Name:
    	
Greg Kitchener
    	
 
    	
Its:
    	
CEO
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Date:
    	
August 10, 2015
    	
 
    	
Date:
    	
August 10, 2015
    

 

 

BIOPHARMX, INC.

INDUCEMENT STOCK OPTION PLAN AND AGREEMENT

 

Participant has been granted an option to purchase Shares (the “Option”), subject to the terms and conditions of the Notice and this Agreement.

 

1.                                      Vesting Rights.  Subject to the applicable provisions of this Agreement, this Option may be exercised, in whole or in part, in accordance with the schedule set forth in the Notice.  In the event Participant’s Termination (for any reason whatsoever, whether or not later found to be invalid or in breach of employment laws in the jurisdiction where Participant is employed or the terms of Participant’s employment agreement, if any), Participant’s right to vest in the Shares subject to the Option will terminate effective as of the date that Participant is no longer actively providing services and will not be extended by any notice period (e.g., active services would not include any contractual notice period or any period of “garden leave” or similar period mandated under employment laws in the jurisdiction where Participant is employed or the terms of Participant’s employment agreement, if any); the Committee shall have the exclusive discretion to determine when Participant is no longer actively providing services for purposes of his Option grant (including whether Participant may still be considered to be providing services while on an approved leave of absence).

 

2.                                      Termination Period.

 

(a)                                 General Rule.  Except as provided below, this Option may be exercised for three months after Participant’s Termination with the Company or any Parent or Subsidiary.  In no event shall this Option be exercised later than the Expiration Date set forth in the Notice.

 

(b)                                 Death; Disability.  Unless provided otherwise in the Notice, upon Participant’s Termination by reason of his Disability or death, or if a Participant dies within three months of the Termination Date, this Option may be exercised for twelve months, provided that in no event shall this Option be exercised later than the Expiration Date set forth in the Notice.

 

(c)                                  Measurement Date.  In the event of Participant’s Termination (whether or not in breach of local labor laws), Participant’s right to exercise the Option after Termination, if any, will be measured by the date of termination of Participant’s active services and will not be extended by any notice period mandated under employment laws in the jurisdiction where Participant is employed or terms of Participant’s employment agreement, if any).

 

3.                                      Grant of Option.

 

(a)                                 Basic Terms. The Participant named in the Notice has been granted an Option for the number of Shares set forth in the Notice at the exercise price per Share set forth in the Notice (the “Exercise Price”).

 

(b)                                 Adjustment of Shares. If the number of outstanding Shares is changed by a stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or similar change in the capital structure of the Company, without consideration, then the Exercise Price of and number of Shares subject to this Agreement shall be proportionately adjusted, subject to any required action by the Board or the stockholders of the Company and in compliance with applicable securities laws; provided that fractions of a Share will not be issued.

 

(c)                                  Modification, Extension or Renewal. The Committee may modify, extend or renew the Option and authorize the grant of new options in substitution therefor, provided that any such action may not, without the written consent of a Participant, impair any of such Participant’s rights under this Agreement. Subject to the terms of Section 6(f), by written notice to Participant, the Committee may reduce the Exercise Price of the Option without the Participant’s consent; provided, however, that the Exercise Price may not be reduced below the Fair Market Value on the date the action is taken to reduce the Exercise Price.

 

4.                                      Exercise of Option.

 

(a)                                 Right to Exercise.  This Option is exercisable during its term in accordance with the Vesting Schedule set forth in the Notice and the applicable provisions of this Agreement.  In the event of Participant’s death, 

 

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Disability, Termination for Cause or other Termination, the exercisability of the Option is governed by the applicable provisions of this Agreement (inclusive of the Notice).

 

(b)                                 Method of Exercise.  This Option is exercisable by delivery of an exercise notice (the “Exercise Notice”), which shall state the election to exercise the Option, the number of Shares in respect of which the Option is being exercised (the “Exercised Shares”).  The Exercise Notice shall be delivered in person, by mail, via electronic mail or facsimile or by other authorized method to the Secretary of the Company or other person designated by the Company.  The Exercise Notice shall be accompanied by payment of the aggregate Exercise Price as to all Exercised Shares.  This Option shall be deemed to be exercised upon receipt by the Company of such fully executed Exercise Notice accompanied by such aggregate Exercise Price.

 

(c)                                  Securities Law. No Shares shall be issued pursuant to the exercise of this Option unless such issuance and exercise complies with all relevant provisions of securities law and the requirements of any stock exchange or quotation service upon which the Shares are then listed.  Assuming such compliance, for tax purposes the Exercised Shares shall be considered transferred to the Participant on the date the Option is exercised with respect to such Exercised Shares.

 

(d)                                 Limitations on Exercise. The Committee may specify a minimum number of Shares that may be purchased on any exercise of the Option, provided that such minimum number will not prevent the Participant from exercising the Option for the full number of Shares for which it is then exercisable.

 

5.                                      Method of Payment.  Unless provided otherwise by the Company, in its sole discretion, or in the Appendix, payment of the aggregate Exercise Price shall be by any of the following, or a combination thereof, at the election of the Participant:

 

(a)                                 cash;

 

(b)                                 check;

 

(c)                                  by consideration received by the Company pursuant to a broker-assisted or other cashless exercise program implemented by the Company; or

 

(d)                                 other method authorized by the Company.

 

6.                                      Restrictions.

 

(a)                                 Non-Transferability. This Option may not be transferred in any manner other than by will or by the laws of descent or distribution or court order and may be exercised during the lifetime of Participant only by the Participant unless otherwise permitted by the Committee on a case-by-case basis.  The terms of this Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of the Participant.

 

(b)                                 Voting and Dividends. No Participant will have any of the rights of a stockholder with respect to any Shares until the Shares are issued to the Participant. After Shares are issued to the Participant, the Participant will be a stockholder and have all the rights of a stockholder with respect to such Shares, including the right to vote and receive all dividends or other distributions made or paid with respect to such Shares.

 

(c)                                  Certificates. All certificates for Shares will be subject to such stock transfer orders, legends and other restrictions as the Committee may deem necessary or advisable, including restrictions under any applicable federal, state or foreign securities law, or any rules, regulations and other requirements of the SEC or any stock exchange or automated quotation system upon which the Shares may be listed or quoted.

 

(d)                                 Escrow; Pledge of Shares. To enforce any restrictions on a Participant’s Shares, the Committee may require the Participant to deposit all certificates representing Shares, together with stock powers or other instruments of transfer approved by the Committee, appropriately endorsed in blank, with the Company or an agent designated by the Company to hold in escrow until such restrictions have lapsed or terminated, and the Committee may cause a legend or legends referencing such restrictions to be placed on the certificates. If Participant is permitted to execute a promissory note as partial or full consideration for the purchase of Shares under this Agreement, he will be required to pledge and deposit with the Company all or part of the Shares so purchased as collateral to secure the payment of the Participant’s obligation to the Company under the promissory note; provided, 

 

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however, that the Committee may require or accept other or additional forms of collateral to secure the payment of such obligation and, in any event, the Company will have full recourse against the Participant under the promissory note notwithstanding any pledge of the Participant’s Shares or other collateral. In connection with any pledge of the Shares, the Participant will be required to execute and deliver a written pledge agreement in such form as the Committee will from time to time approve. The Shares purchased with the promissory note may be released from the pledge on a pro rata basis as the promissory note is paid.

 

(e)                                  Insider Trading Policy. Participant shall comply with any policy adopted by the Company from time to time covering transactions in the Company’s securities by employees, officers and/or directors of the Company.

 

(f)                                   Repricing; Exchange and Buyout of Awards. Without prior stockholder approval, the Committee may (a) reprice the Option (and where such repricing is a reduction in the Exercise Price of outstanding Options, the consent of Participant is not required provided written notice is provided to him), and (b) with the consent of the Participants (unless not required pursuant to Section 3(c) of this Agreement), pay cash or issue new awards in exchange for the surrender and cancellation of the Option, or any portion thereof.

 

7.                                      Term of Option.  This Option shall in any event expire on the expiration date set forth in the Notice, which date is 10 years after the Date of Grant.

 

8.                                      Tax Obligations.  Participant acknowledges that, regardless of any action taken by the Company or, if different, Participant’s employer (the “Employer”), the ultimate liability for all income tax, social insurance, payroll tax, fringe benefits tax, payment on account or other tax related items related to Participant’s Option and legally applicable to Participant (“Tax-Related Items”), is and remains Participant’s responsibility and may exceed the amount actually withheld by the Company or the Employer.  Participant further acknowledges that the Company and/or the Employer (i) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Option, including, but not limited to, the grant, vesting or exercise of the Option, the subsequent sale of Shares acquired pursuant to such exercise and the receipt of any dividends; and (ii) do not commit to and are under no obligation to structure the terms of the grant or any aspect of the Option to reduce or eliminate Participant’s liability for Tax-Related Items or achieve any particular tax result.  Further, if Participant is subject to Tax-Related Items in more than one jurisdiction between the Date of Grant and the date of any relevant taxable or tax withholding event, as applicable, Participant acknowledges that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.

 

Prior to the relevant taxable or tax withholding event, as applicable, Participant agrees to make adequate arrangements satisfactory to the Company and/or the Employer to satisfy all Tax-Related Items. In this regard, Participant authorizes the Company and/or the Employer, or their respective agents, at their discretion, to satisfy the obligations with regard to all Tax-Related Items by one or a combination of the following:

 

(a)                                 withholding from Participant’s wages or other cash compensation paid to Participant by the Company and/or the Employer;

 

(b)                                 withholding from proceeds of the sale of Shares acquired at exercise of the Option either through a voluntary sale or through a mandatory sale arranged by the Company (on Participant’s behalf pursuant to this authorization) without further consent;

 

(c)                                  withholding in Shares to be issued to Participant upon the exercise of the Option; or

 

(d)                                 any other arrangement approved by the Company.

 

Depending on the withholding method, the Company may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding amounts or other applicable withholding rates, including maximum applicable rates, in which case Participant will receive a refund of any over-withheld amount in cash and will have no entitlement to the Common Stock equivalent.

 

Finally, Participant agrees to pay to the Company or the Employer any amount of Tax-Related Items that the Company or the Employer may be required to withhold or account for as a result of this Agreement that cannot be satisfied by the means previously described.  The Company may refuse to issue or deliver the Shares or the 

 

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proceeds of the sale of Shares if Participant fails to comply with his obligations in connection with the Tax-Related Items.

 

9.                                      Acknowledgement of Nature of the Grant.  The Company and Participant agree that the Option is granted under and governed by this Agreement.  Participant acknowledges receipt of a copy of the Option prospectus, represents that Participant has carefully read and is familiar with the Option and hereby accepts the Option subject to all of the terms and conditions set forth in this Agreement.  Participant further acknowledges, understands and agrees that:

 

(a)                                 the grant of the Option is voluntary and does not create any contractual or other right to receive future grants of Options, or benefits in lieu of Options;

 

(b)                                 the Option grant shall not create a right to employment or be interpreted as forming an employment or service contract with the Company, the Employer or any Parent, Subsidiary or affiliate of the Company, and shall not interfere with the ability of the Company, the Employer or any Parent, Subsidiary or affiliate of the Company, as applicable, to terminate Participant’s employment or service relationship (if any);

 

(c)                                  Participant is voluntarily accepting this Option;

 

(d)                                 the Option and any Shares acquired hereunder are not intended to replace any pension rights or compensation;

 

(e)                                  the Option and any Shares acquired hereunder and the income and value of same, are not part of normal or expected compensation for purposes of calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments;

 

(f)                                   the future value of the Shares underlying the Option is unknown, indeterminable, and cannot be predicted with certainty;

 

(g)                                  if the underlying Shares do not increase in value, the Option will have no value;

 

(h)                                 if Participant exercises the Option and acquires Shares, the value of such Shares of may increase or decrease in value, even below the Exercise Price;

 

(i)                                     no claim or entitlement to compensation or damages shall arise from forfeiture of the Option resulting from Participant’s Termination (for any reason whatsoever, whether or not later found to be invalid or in breach of employment laws in the jurisdiction where Participant is employed or the terms of Participant’s employment agreement, if any), and in consideration of the grant of the Option to which Participant is otherwise not entitled, Participant irrevocably agrees never to institute any claim against the Company, its Parent, or any of its Subsidiaries or affiliates or the Employer, waives his ability, if any, to bring any such claim, and releases the Company, its Parent, Subsidiaries and affiliates and the Employer from any such claim; if, notwithstanding the foregoing, any such claim is allowed by a court of competent jurisdiction, then, Participant shall be deemed irrevocably to have agreed not to pursue such claim and agree to execute any and all documents necessary to request dismissal or withdrawal of such claim; and

 

(j)                                    unless otherwise provided by the Company in its discretion, the Option and the benefits evidenced by this Agreement do not create any entitlement to have the Option or any such benefits transferred to, or assumed by, another company nor to be exchanged, cashed out or substituted for, in connection with any Corporate Transaction affecting the Shares;

 

10.                               No Advice Regarding Grant.  The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding this Option or Participant’s acquisition or sale of the underlying Shares.  Participant is hereby advised to consult with his own personal tax, legal and financial advisors regarding this Option before taking any action.

 

11.                               Data Privacy.  Participant hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of Participant’s personal data as described in this Agreement and any other Option grant materials by and among, as applicable, the Employer, the Company and its Parent, Subsidiaries and 

 

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affiliates for the exclusive purpose of implementing, administering and managing this Agreement and Participant’s Option.

 

Participant understands that the Company and the Employer may hold certain personal information about Participant, including, but not limited to, Participant’s name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any Shares or directorships held in the Company, details of all Options or any other entitlement to Shares awarded, canceled, exercised, vested, unvested or outstanding in Participant’s favor (“Data”), for the exclusive purpose of implementing, administering and managing this Agreement.

 

Participant understands that Data will be transferred to a designated broker or such other stock administrator as may be selected by the Company in the future, which is assisting the Company with the implementation, administration and management of the Option and this Agreement.  Participant understands that the recipients of the Data may be located in the United States or elsewhere, and that the recipient’s country (e.g., the United States) may have different data privacy laws and protections than Participant’s country.  Participant understands that if he or she resides outside the United States, he or she may request a list with the names and addresses of any potential recipients of the Data by contacting his local human resources representative.  Participant authorizes the Company, its designed broker and any other possible recipients which may assist the Company (presently or in the future) with implementing, administering and managing the Option to receive, possess, use, retain and transfer the Data, in electronic or other form, for the sole purposes of implementing, administering and managing Participant’s Option and this Agreement.  Participant understands that Data will be held only as long as is necessary to implement, administer and manage Participant’s Option and this Agreement.  Participant understands that if he or she resides outside the United States, he or she may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing his local human resources representative.  Further, Participant understands that he or she is providing the consents herein on a purely voluntary basis.  If Participant does not consent, or if Participant later seeks to revoke his consent, his employment status or service and career with the Employer will not be adversely affected; the only adverse consequence of refusing or withdrawing Participant’s consent is that the Company would not be able to grant or maintain the Option.  Therefore, Participant understands that refusing or withdrawing his consent may affect Participant’s Option.  For more information on the consequences of Participant’s refusal to consent or withdrawal of consent, Participant understands that he or she may contact his local human resources representative.

 

12.                               Entire Agreement; Enforcement of Rights.  This Agreement (inclusive of the Notice) constitutes the entire agreement and understanding of the parties relating to the subject matter herein and supersede all prior discussions between the parties. Any prior agreements, commitments or negotiations concerning the purchase of the Shares hereunder are superseded.  The Committee may at any time amend this Agreement in any respect, provided, however, that the Committee will not, without the approval of the Participant, amend this Agreement in any manner that impairs the rights of Participant.  Other than modifications or amendments to this Agreement covered by the foregoing sentence, no modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing and signed by the parties to this Agreement. Participant acknowledges that a waiver by the Company of breach of any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement or of any subsequent breach by Participant.

 

13.                               Compliance with Laws and Regulations.  Notwithstanding any other provision hereunder, unless there is an available exemption from any registration, qualification or other legal requirement applicable to the Shares, the Company shall not be required to deliver any Shares issuable upon exercise of the Option prior to the completion of any registration or qualification of the Shares under any local, state, federal or foreign securities or exchange control law or under rulings or regulations of the U.S. SEC or of any other governmental regulatory body, or prior to obtaining any approval or other clearance from any local, state, federal or foreign governmental agency, which registration, qualification or approval the Company shall, in its absolute discretion, deem necessary or advisable.  Participant understands that the Company is under no obligation to register or qualify the Shares with the SEC or any state or foreign securities commission or to seek approval or clearance from any governmental authority for the issuance or sale of the Shares.  Further, Participant agrees that the Company shall have unilateral authority to amend the Agreement without Participant’s consent to the extent necessary to comply with securities or other laws applicable to issuance of Shares.

 

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14.                               Governing Law and Venue; Severability.  If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of this Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of this Agreement shall be enforceable in accordance with its terms.  This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law.  For purposes of any action, lawsuit or other proceedings brought to enforce this Agreement, relating to it, or arising from it, the parties hereby submit to and consent to the sole and exclusive jurisdiction of the courts of San Mateo County, California, or the federal courts for the United States for the Northern District of California, and no other courts, where this grant is made and/or to be performed.

 

15.                               Electronic Delivery and Acceptance.  The Company may, in its sole discretion, decide to deliver by electronic means any documents, including prospectuses required by the Securities and Exchange Commission, U.S. financial reports of the Company, other documents that the Company is required to deliver to its security holders (including, without limitation, annual reports and proxy statements) and other communications or information, related to this Agreement.  Participant hereby consents to receive such documents by electronic delivery and agrees to the administration of this Agreement on-line or on an electronic system established and maintained by the Company or a third party designated by the Company.  Participant acknowledges that Participant may receive from the Company a paper copy of any documents delivered electronically at no cost if Participant contacts the Company.  Participant further acknowledges that Participant will be provided with a paper copy of any documents delivered electronically if electronic delivery fails.  Participant understands that Participant must provide on request to the Company or any designated third party a paper copy of any documents delivered electronically if electronic delivery fails.  Participant understands that Participant’s consent may be revoked or changed, including any change in the electronic mail address to which documents are delivered (if Participant has provided an electronic mail address) at any time by notifying the Company of such revised or revoked consent.  Finally, Participant understands that Participant has consented to electronic delivery under this Section 13 even though Participant is not required to consent to electronic delivery.

 

16.                               Imposition of Other Requirements.  The Company reserves the right to impose other requirements on the Option and on any Shares acquired upon exercise of the Option, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.

 

17.                               Administration.       Subject to the general purposes, terms and conditions of this Agreement, and to the direction of the Board, the Committee will have full power to implement and carry out this Agreement, and will have the authority to (a) construe and interpret this Agreement, (b) prescribe, amend and rescind rules and regulations relating to this Agreement, (c) determine the Fair Market Value in good faith, if necessary, (d) determine whether this Option will be granted singly, in combination with, in tandem with, in replacement of, or as alternatives to, other awards or incentive or compensation plans of the Company or any Parent or Subsidiary of the Company, (e) grant waivers of conditions hereunder, (f) correct any defect, supply any omission or reconcile any inconsistency hereunder, (g) determine whether the Option is vested, (h) determine the terms and conditions of any, and to institute any Exchange Program, and (i) make all other determinations necessary or advisable for the administration of this Agreement. Any determination made by the Committee with respect to this Option or Agreement shall be made in its sole discretion on the Date of Grant or, unless in contravention of any express term of this Agreement, at any later time, and such determination shall be final and binding on the Company and all persons having an interest in the Option. Any dispute regarding the interpretation of this Agreement shall be submitted by the Participant or Company to the Committee for review. The resolution of such a dispute by the Committee shall be final and binding on the Company and the Participant.

 

18.                               Corporate Transactions.  In the event of a Corporate Transaction, the Option may be assumed or replaced by the successor corporation, which assumption or replacement shall be binding on Participant. In the alternative, the successor corporation may substitute an equivalent award or provide substantially similar consideration to Participant as was provided to stockholders (after taking into account the existing provisions of the Option). The successor corporation may also issue, in place of outstanding Shares of the Company held by the Participant, substantially similar shares or other property subject to repurchase restrictions no less favorable to the Participant. In the event such successor or acquiring corporation (if any) refuses to assume, convert, replace or substitute the Option, as provided above, pursuant to a Corporate Transaction, then notwithstanding any other provision in this Agreement to the contrary, such Option will expire on such transaction at such time and on such conditions as the 

 

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Board will determine; the Board (or, the Committee, if so designated by the Board) may, in its sole discretion, accelerate the vesting of the Shares subject to the Option in connection with a Corporate Transaction. In addition, in the event such successor or acquiring corporation (if any) refuses to assume, convert, replace or substitute this Option, as provided above, pursuant to a Corporate Transaction, the Committee will notify the Participant in writing or electronically that such Option will be exercisable for a period of time determined by the Committee in its sole discretion, and such Option will terminate upon the expiration of such period.

 

19.                               Definitions. In addition to the terms defined elsewhere in the Agreement (inclusive of the Notice), the following definitions shall apply:

 

(a)         “Board” means the Board of Directors of the Company.

 

(b)         “Common Stock” means the common stock of the Company.

 

(c)          “Committee” means the Compensation Committee of the Board or those persons to whom administration of this Agreement, or part of this Agreement, has been delegated as permitted by law.

 

(d)         “Code” means the United States Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder.

 

(e)          “Corporate Transaction” means the occurrence of any of the following events: (a) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) or “group” (two or more persons acting as a partnership, limited partnership, syndicate or other group for the purpose of acquiring, holding, or disposing of the applicable securities referred to herein) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the total voting power represented by the Company’s then-outstanding voting securities; (b) the consummation of the sale or other disposition by the Company of all or substantially all of the Company’s assets; (c) the consummation of a merger, reorganization, consolidation or similar transaction or series of related transactions of the Company with any other corporation, other than a merger, reorganization, consolidation or similar transaction (or series of related transactions) which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least a majority of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger, reorganization, consolidation or similar transaction (or series of related transactions), or (d) any other transaction which qualifies as a “corporate transaction” under Section 424(a) of the Code wherein the stockholders of the Company give up all of their equity interest in the Company (except for the acquisition, sale or transfer of all or substantially all of the outstanding shares of the Company).

 

(f)           “Disability” means total and permanent disability as defined in Section 22(e)(3) of the Code.

 

(g)          “Exchange Program” means a program pursuant to which outstanding awards are surrendered, cancelled or exchanged for cash, the same type of awards or a different award (or combination thereof).

 

(h)         “Fair Market Value” means, as of any date, the value of a share of the Company’s Common Stock determined as follows: (i) if such Common Stock is publicly traded and is then listed on a national securities exchange, its closing price on the date of determination on the principal national securities exchange on which the Common Stock is listed or admitted to trading as reported in The Wall Street Journal or such other source as the Board or the Committee deems reliable; (ii) if such Common Stock is publicly traded but is neither listed nor admitted to trading on a national securities exchange, the average of the closing bid and asked prices on the date of determination as reported in The Wall Street Journal or such other source as the Board or the Committee deems reliable; or (iii) if none of the foregoing is applicable, by the Board or the Committee in good faith.

 

(i)             “Parent” means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if each of such corporations other than the Company owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

 

(j)            “SEC” means the United States Securities and Exchange Commission.

 

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(k)         “Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

 

(l)             “Termination” or “Terminated” means that the Participant has for any reason ceased to provide services as an employee, officer, director, consultant, independent contractor or advisor to the Company or a Parent or Subsidiary of the Company. Participant will not be deemed to have ceased to provide services in the case of (i) sick leave, (ii) military leave, or (iii) any other leave of absence approved by the Committee; provided, that such leave is for a period of not more than 90 days, unless reemployment upon the expiration of such leave is guaranteed by contract or statute or unless provided otherwise pursuant to formal policy adopted from time to time by the Company and issued and promulgated to employees in writing. In the case of any employee on an approved leave of absence, the Committee may make such provisions respecting suspension of vesting of the Shares subject to the Option while on leave from the employ of the Company or a Parent or Subsidiary of the Company as it may deem appropriate, except that in no event may an Option be exercised after the expiration of the term set forth in the Notice. The Committee will have sole discretion to determine whether a Participant has ceased to provide services and the effective date on which the Participant ceased to provide services (the “Termination Date”).

 

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