Document:

Exhibit 10.3

 

Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.

 

SUBCONTACTOR AGREEMENT

 

This Subcontractor Agreement (“Agreement”), between Angion Biomedica Corporation, a Delaware corporation, having an address at 51 Charles Lindbergh Blvd., Uniondale, New York 11553, (hereinafter referred to as “Angion”) and The Regents of the University of Michigan, a public educational institution and Constitutional corporation of the State of Michigan having an address at 3003 S. State Street, Ann Arbor, Michigan 48109-1274 (hereinafter referred to as “UM”). Angion and UM are hereinafter referred to collectively as the “Parties” or individually the “Party”.

 

RECITALS

 

A.            The Department of Defense (“Government”) has awarded to ANGION a contract (“Funding Agreement”) for its project entitled “An Integrated Omics Approach for Treatment of Steroid-Resistant Nephrotic Syndrome in Primary Focal Segmental Glomerulosclerosis” (“Project” or DoD Project) under Prime Contract No. W81XWH1910448 (Exhibit B) (“Prime Award”).

 

B.            ANGION wishes to retain UM as its subcontractor to perform that portion of the research which is specifically allocated to UM under the Project (“UM PROJECT”).

 

1.             Statement of Work:

 

UM agrees to use reasonable efforts to perform that portion of the UM PROJECT in accordance with the Project and Exhibit A Statement of Work. Notwithstanding anything to the contrary, the UM PROJECT is subject to all the terms and conditions of the Prime Award which state they apply to subrecipients, and in the event of a conflict between the terms of this Agreement and the terms of the Prime Award, the Prime Award will govern. ANGION hereby certifies that it has received proper authorization from the USAMRMC’s Office of Research Protections for research involving the use of human subjects as outlined in the UM PROJECT.

 

2.             Principal Investigator:

 

The UM PROJECT will be supervised by Matthias Kretzler, M.D. in his role as an employee of UM (“UM Principal Investigator”). If, for any reason, he/she is unable to continue to serve as UM Principal Investigator, a successor will be designated by UM, subject to ANGION’s approval. The ANGION Principal Investigator for this collaboration shall be Prakash Narayan, Ph.D. If, for any reason, he/she is unable to continue to serve as the ANGION Principal Investigator, a successor will be designated by ANGION, subject to the Government’s approval, and UM will be so notified. UM will only use employees of UM to perform the UM PROJECT hereunder.

 

 

3.             Period of Performance/Term:

 

This Agreement shall be in effect from September 30, 2019 through September 29, 2022, during which time UM shall perform the UM PROJECT. This Agreement will be subject to renewal only by mutual agreement of the Parties.

 

4.             Payment:

 

This is a Firm-Fixed Price Type Agreement and ANGION shall fund UM for all direct and indirect costs incurred during the Subaward period of performance set forth in Section 3, in connection with the UM PROJECT at the amount of five hundred and nineteen thousand, five hundred and fifty-nine dollars ($519,559.00). Payment shall be made to UM within [****] ([****]) days of receipt of UM’s invoices. UM’s invoices will be presented on a [****] basis to ANGION covering work already performed, within [****] days of such work performed under the UM PROJECT to allow ANGION reasonable time to fulfill its reporting requirements. Late invoice submissions may not be paid by ANGION. ANGION shall send payments via regular mail to:

 

[****]

 

ANGION reserves the right to withhold payment if a submitted invoice is lacking information reasonably required by ANGION. Notice of any dispute regarding the charges in an invoice must be provided to UM in accordance with Article 12 and include a description of the item(s) in dispute and a reasonably detailed explanation of the reason for the dispute.

 

For the avoidance of doubt, if ANGION is more than [****] ([****]) days delinquent in undisputed payments due under this Agreement, then it is in material breach of this Agreement. If ANGION is in material breach of this Agreement, then, upon [****] ([****]) days’ written notice to ANGION, UM may stop all work under this Agreement until the undisputed amounts have been paid. The parties agree and acknowledge that any such work stoppage by UM pursuant to this paragraph shall not constitute a breach of UM’s obligations to perform pursuant to the terms of this Agreement.

 

All payments made hereunder shall be considered provisional and subject to adjustment within the total estimated cost in the event such adjustment is necessary as a result of an adverse audit finding against UM.

 

5.             Applicability of this Agreement; Debarment:

 

(a)           This Agreement shall be applicable only to matters relating to the DoD Project referred to in the Recitals above.

 

(b)           UM represents and certifies by signing this Subcontractor Agreement that neither it nor any person or entity performing work under the Project on UM’s behalf are presently debarred, suspended, proposed for debarment, declared ineligible, or voluntarily excluded from participation in this transaction by any federal department or agency.

 

[****] = [CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

 

(c)           The provisions of this Agreement shall apply to any and all consultants, subcontractors, independent contractors, or other individuals employed by ANGION or UM in the scope of their agency or employment to that party for the purpose of the DOD Project referenced above.

 

6.             Project Intellectual Property:

 

(a)           Project Intellectual Property means the legal rights relating to inventions, patent applications, patents, copyrights required to be provided by UM to ANGION under this Agreement, trademarks, mask works, and computer software, first invented under the terms of this Agreement.

 

(b)           The rights of the Parties to Project Intellectual Property made by their employees in the performance of this Agreement shall be as set forth in the patent rights clause of 37 CFR 401.14. The Government may obtain title to any Project Intellectual Property not elected by a Party as set forth in the patent rights clause. Unless otherwise agreed in writing, Project Intellectual Property shall be owned by the Party(ies) whose employee(s) invent(s) Project Intellectual Property. Jointly invented Project Intellectual Property shall be jointly owned by the Parties unless otherwise agreed in writing. In addition to the Government’s rights under the patent rights clause of 37 CFR 401.14, the Parties agree that the Government shall have an irrevocable, royalty free, non-exclusive license for any Governmental purpose in any Project Intellectual Property.

 

(c)           The Parties agree to disclose to each other, in writing, Project Intellectual Property which may be patentable or otherwise protectable under the United States patent laws in Title 35, United States Code. The Parties acknowledge that they will disclose Project Intellectual Property to each other promptly, but no later than within [****] ([****]) months after their respective inventor(s) first disclose the invention in writing to the person(s) responsible for patent matters of the disclosing Party. All written disclosures of such inventions shall contain sufficient detail of the invention, identification of any statutory bars, and shall be marked confidential, in accordance with 35 U.S.C. Section 205. Disclosures to Government by ANGION shall be within the time provided in paragraph (c)(1) of the patent rights clause of 37 CFR 401.14.

 

(d)           Each Party hereto may use Project Intellectual Property of the other nonexclusively and without compensation in connection with internal research or development activities under the Funding Agreement, including inclusion in DOD project reports to Government by ANGION, to meet ANGION’s obligations under its Prime Award, and with Projects to the Government for continued funding of this DOD project through additional phases.

 

(e)           Subject to the rights of the Government, ANGION will have an option to license from and commercialize the Project Intellectual Property solely owned by UM, in accordance with the following terms:

 

(1)           In accordance with Article 6(c), UM will notify ANGION of any invention conceived and reduced to practice, in whole or part, by one or more of its employees during the term of and under the terms of this Agreement. Within [****] ([****]) days after such notice is given, ANGION, if interested in a license of Project Intellectual Property relating to such invention, shall direct UM in writing to file and prosecute a U.S. and any appropriate foreign

 

[****] = [CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

 

application(s) for protection of Project Intellectual Property and ANGION shall pay all associated documented costs and fees.

 

(2)           Upon UM’s receipt of the direction referred to in (e) (1) above, i) ANGION shall have a first right to negotiate an exclusive or non-exclusive commercial license for Project Intellectual Property within a period of [****] ([****]) months after the date of such written direction by ANGION and ii) UM shall prepare, file and prosecute such U.S. and any appropriate foreign applications(s) in UM’s name as UM deems appropriate, using UM employees or a firm or attorney that is chosen by UM. During said [****] ([****]) month period, ANGION shall be given the opportunity to review and comment on such application(s), and UM shall keep ANGION advised as to all important developments with respect to such application(s) and shall supply ANGION copies of all prosecution documents filed with or received from the Patent and Trademark Office.

 

(3)           The first right to negotiate referred to in subparagraph (e) (2) above shall not impair UM rights to use and publish as set forth in this Agreement. During said [****] ([****]) month period, UM shall negotiate with ANGION in good faith for a license which may include, but not limited to the following:

 

(i)            Commercially reasonable royalties and fees, which may include minimum royalties, which license may also include a further, non-exclusive license to any UM Intellectual Property necessary for ANGION to make, use and sell a product incorporating Project Intellectual Property, said further license to take into consideration the relative contributions of the Parties as well as any third party licenses required to make, use and sell said product;

 

(ii)           Due diligence clauses, including milestones, requiring reasonable commercial efforts by ANGION; and

 

(iii)          Clauses reflecting UM’s and ANGION’s reasonable policies regarding warranties, indemnities and other matters.

 

(4)           If ANGION does not direct UM to file for protection of Project Intellectual Property in a particular country, or decides to discontinue, or fails to pay any associated costs when due of the Project Intellectual Property in that country, UM may pursue whatever course it deems necessary or desirable to protect its Project Intellectual Property. UM shall have no further obligations to ANGION, and ANGION shall have no further rights, with regard to that country. In the event that ANGION acquires an exclusive license or right under this Agreement, ANGION hereby grants to UM the right to continue to use Project Intellectual Property made, in whole or part, by their employees in the performance of this Agreement, for its own internal research and educational purposes.

 

(5)           Title to and the right to determine the disposition of any copyrights or copyrightable material that is required to be provided by UM to ANGION under this Agreement and first produced under the terms of this Agreement solely by employees of UM (“Copyrightable Materials”) shall remain with UM. UM shall grant to ANGION an irrevocable, royalty-free, non- transferable, non-exclusive right and license to use, reproduce, display, distribute, and perform all such Copyrightable Materials other than computer software and its documentation. UM shall grant

 

[****] = [CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

 

to ANGION an irrevocable, royalty-free, non-transferable, non-exclusive right and license to use, reproduce, display, and perform computer software and its documentation specified to be developed and delivered under the UM PROJECT for ANGION’s internal purposes. ANGION is entitled to elect to negotiate a non-exclusive (or exclusive if deemed appropriate by UM) royalty-bearing license to use, reproduce, display, distribute, and perform such computer software and its documentation for commercial purposes (in a designated field of use, where appropriate). Computer software for which a patent application is filed shall be subject to Paragraph (e) (1) to (4) above.

 

(6)           In the event that UM elects to establish property rights other than patents to any tangible research property (TRP), UM and ANGION will determine the disposition of rights to such property by separate agreement. UM will at a minimum reserve the right to use and distribute TRP for non-commercial research purposes.

 

(7)           All licenses elected by ANGION pursuant to this clause become effective as of the date the Parties sign a subsequent license agreement, which shall not be unreasonably delayed or withheld by UM. Such subsequent license agreement shall be based on reasonable terms and shall not require ANGION to agree to license restrictions not set forth herein.

 

7.             Follow-on Research or Development:

 

All follow-on work for the Project continued by the award of a valid contractual document, including any licenses, contracts, subcontracts, sublicenses or arrangements of any type, shall contain appropriate provisions to implement the Project Intellectual Property rights provisions of this Agreement and ensure that the Parties and the Government obtain and retain such rights granted herein in future research funded by the same parties, provided, however, an uninterrupted continuity of effort exists.

 

8.             Confidentiality/Publication:

 

(a)           UM recognizes that it may properly receive confidential or proprietary data of ANGION for the conduct of the UM PROJECT, which will be marked as “confidential” at the time of disclosure or, if disclosed in oral or non-tangible format is identified as confidential when first disclosed and reduced to a writing provided to UM confirming its confidential status within [****] ([****]) business days of disclosure (“Confidential Information”). Notwithstanding the foregoing, any information, which by its nature or due to or circumstances of its disclosure, a reasonable person familiar with the UM PROJECT would understand it to be confidential or proprietary, shall be considered Confidential Information regardless of whether a Party has marked the Confidential Information as “Confidential” or “Proprietary” or has otherwise provided a notice confirming the confidentiality of the information. Accordingly, UM’s use of any such Confidential Information which may be supplied by ANGION in the course of this UM PROJECT shall be subject to the following:

 

(1)           UM agrees to hold such data in confidence to the same level of effort employed to safeguard its own confidential or proprietary records during and for a period of [****] ([****]) years from the date of disclosure;

 

[****] = [CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

 

(2)           UM agrees to use such data solely for the conduct of the UM PROJECT

 

(3)           UM agrees not to publish or otherwise reveal such data to others outside UM without the written permission of ANGION, unless the data has already been published or disclosed publicly by third parties.

 

(b)           Subject to the terms of paragraph (a) above, either Party may publish its results from this DOD Project. However, the publishing Party shall provide the other Party a [****]-day ([****]) period in which to review proposed publications, identify confidential or proprietary and patentable information, and to submit comments. The publishing Party shall not publish or otherwise disclose confidential or proprietary information identified by the other Party and the publishing Party will give full consideration to all comments before publication. Furthermore, upon request of the reviewing Party, publication will be deferred for up to [****] ([****]) additional days for preparation and filing of a patent application which the reviewing Party has the right to file or to have filed at its request by the publishing Party.

 

(c)           The obligation to protect Confidential Information shall not apply to any information that: (1) is already in the rightful possession of (other than from ANGION), or is independently developed without use of or reference to the Confidential Information by UM; (2) becomes publicly available other than through breach of this Section 8; or (3) is received by UM from a third party with authorization to make the disclosure on a non-confidential basis. In the event that UM is required by court order, governmental authority or operation of law to disclose Confidential Information, UM shall promptly inform ANGION in writing so that ANGION may seek a protective order or other appropriate remedy. UM shall reasonably cooperate to facilitate ANGION’s efforts to obtain any such order or other remedy. In the event that no such protective order or other remedy is obtained, then UM may furnish only that portion of the Confidential Information which UM is legally required to disclose and shall exercise reasonable efforts to continue to treat such portion of Confidential Information as confidential pursuant to this Agreement.

 

9.             Liability:

 

NO PARTY MAKES ANY WARRANTIES, EXPRESSED OR IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING, WITHOUT LIMITATION, THE CONDITION OF THE RESEARCH OR ANY INVENTION(S) OR PRODUCT(S), WHETHER TANGIBLE OR INTANGIBLE, CONCEIVED, DISCOVERED, OR DEVELOPED UNDER THIS AGREEMENT; OR THE OWNERSHIP, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE OF THE RESEARCH OR ANY SUCH INVENTION OR PRODUCT. NO PARTY SHALL BE LIABLE FOR ANY INDIRECT OR CONSEQUENTIAL DAMAGES SUFFERED BY THE OTHER PARTY RESULTING FROM THE CONDUCT OF THE PROJECT, THE USE OF THE RESEARCH OR ANY SUCH INVENTION OR PRODUCT.

 

Each party shall be responsible for its negligent acts or omissions and the negligent acts or omissions of its employees, officers, or directors, to the extent allowed by law.

 

[****] = [CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

 

10.          Termination:

 

This Agreement may be terminated by UM by giving written notice to ANGION at least ninety (90) days in advance of the specified date of termination. This Agreement may be terminated by ANGION by giving written notice to UM (i) at least thirty (30) days in advance of the specified date of termination or (ii) upon termination or cancellation of the Prime Award for any reason. By such termination, neither Party may nullify the rights and obligations of the Parties accrued prior to the effective date of termination of this Agreement. Upon termination, UM will be reimbursed for all costs properly incurred prior to effective date of termination, and, if this Agreement was terminated by ANGION without cause, any noncancellable commitments properly incurred in the performance of the UM PROJECT and not yet paid for, such reimbursement together with other payments not to exceed the total estimated project cost specified in Article 4 nor the allowable amounts under applicable laws and regulations relating to cost principles under federal government contracts.

 

11.          Use of Names:

 

Neither Party will use the name of the other in any advertising or other form of publicity without the written permission of the other; in the case of UM, that of the Director of Technology Transfer. Each Party retains the right to disclose the existence of this Agreement, the identity of the parties, and the general nature and scope of the Project.

 

12.          Notices:

 

Any notices required to be given or which shall be given under this Agreement shall be in writing delivered by first class mail (air mail if not domestic) or express delivery addressed to the Parties as follows:

 

If to UM:

 

[****] 
 Attention: [****]

 

ANGION:

 

[****] 
 Attention: [****]
 Phone: [****]

 

In the event notices, statements and payments required under this Agreement are sent by certified or registered mail or express delivery by one Party to the other Party at its above address, they shall be deemed to have been given or made as of [****] ([****]) business days following the date so mailed, otherwise as of the date received.

 

13.          Governing Law:

 

Intentionally omitted.

 

[****] = [CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

 

14.          Entire Agreement:

 

Unless otherwise specified, this Agreement embodies the entire understanding between UM and the ANGION for this Project, and any prior or contemporaneous representations, either oral or written are hereby superseded. No amendments or changes to this Agreement, including without limitation, changes in the statement of work, total estimated cost, and period of performance, shall be effective unless made in writing and signed by authorized representatives of the Parties.

 

	
AGREED TO AND ACCEPTED -
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
ANGION BIOMEDICA CORP.
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
By:
    	
/s/ Itzhak Goldberg
    	
 
    	
Date: 
    	
11/6/2019
    
	
Print Name:
    	
Itzhak Goldberg
    	
 
    	
 
    	
 
    
	
Title: 
    	
Executive Chairman
    	
 
    	
 
    

 

THE REGENTS OF THE UNIVERSITY OF MICHIGAN

 

	
By: 
    	
/s/ Peter J. Gerard
    	
 
    	
Date: 
    	
11/15/2019
    
	
Print Name: 
    	
Peter J. Gerard
    	
 
    	
 
    	
 
    
	
Title: 
    	
Associate Director Grants and ContractsExhibit 10.5(a)

 

ANGION BIOMEDICA CORP.

 

SECOND AMENDED AND RESTATED 2015 EQUITY INCENTIVE PLAN

 

Adopted June 27, 2019 and Amended and Restated February 5, 2020

 

1.                                      DEFINITIONS.

 

Unless otherwise specified or unless the context otherwise requires, the following terms, as used in this Angion Biomedica Corp. Amended and Restated 2015 Equity Incentive Plan, have the following meanings:

 

Administrator means the Board of Directors, unless it has delegated power to act on its behalf to the Committee, in which case the Administrator means the Committee.

 

Affiliate means a corporation which, for purposes of Section 424 of the Code, is a parent or subsidiary of the Company, direct or indirect.

 

Agreement means an agreement between the Company and a Participant pertaining to a Stock Right delivered pursuant to the Plan in such form as the Administrator shall approve.

 

Board of Directors means the Board of Directors of the Company.

 

Cause means, with respect to a Participant (a) dishonesty with respect to the Company or any Affiliate, (b) insubordination, substantial malfeasance or non-feasance of duty, (c) unauthorized disclosure of confidential information, (d) breach by a Participant of any provision of any employment, consulting, advisory, nondisclosure, non-competition or similar agreement between the Participant and the Company or any Affiliate, and (e) conduct substantially prejudicial to the business of the Company or any Affiliate; provided, however, that any provision in an agreement between a Participant and the Company or an Affiliate, which contains a conflicting definition of Cause for termination and which is in effect at the time of such termination, shall supersede this definition with respect to that Participant.  The determination of the Administrator as to the existence of Cause will be conclusive on the Participant and the Company and the term “Company” will be interpreted to include any Affiliate, as appropriate.

 

Change of Control means the occurrence of any of the following events:(i) Any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) becomes the beneficial owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that, for purposes of this paragraph, the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its Affiliates or (iv) any acquisition by any

 

 

corporation pursuant to a transaction that complies with (iii)(A), (iii)(B) and (iii)(C) of this definition;

 

(ii) Individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board;

 

(iii) Consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company or any of its affiliates, a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or stock of another entity by the Company or any of its subsidiaries (each, a “Business Combination”), in each case unless, following such Business Combination, (A) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation that, as a result of such transaction, owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, and (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 50% or more of, respectively, the then-outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination; or

 

(iv) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.

 

“Change of Control” shall be interpreted, if applicable, in a manner, and limited to the extent necessary, so that it will not cause adverse tax consequences under Section 409A.

 

Code means the United States Internal Revenue Code of 1986, as amended including any successor statute, regulation and guidance thereto.

 

Committee means the committee of the Board of Directors to which the Board of Directors has delegated power to act under or pursuant to the provisions of the Plan the composition of which shall at all times satisfy the provisions of Section 162(m) of the Code to the extent Section 162(m) of the Code is applicable.

 

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Common Stock means shares of the Company’s common stock, $0.01 par value per share.

 

Company means Angion Biomedica Corp. a Delaware corporation.

 

Consultant means any natural person who is an advisor or consultant that provides bona fide services to the Company or its Affiliates, provided that such services are not in connection with the offer or sale of securities in a capital raising transaction, and do not directly or indirectly promote or maintain a market for the Company’s or its Affiliates’ securities.

 

Disability or Disabled means permanent and total disability as defined in Section 22(e)(3) of the Code.

 

Disaffiliation means an Affiliate’s ceasing to be an Affiliate for any reason (including, without limitation, as a result of a public offering, or a spinoff or sale by the Company, of the stock of the Subsidiary or Affiliate) or a sale of a division of the Company and its Affiliates.

 

Employee means any employee of the Company or of an Affiliate (including, without limitation, an employee who is also serving as an officer or director of the Company or of an Affiliate), designated by the Administrator to be eligible to be granted one or more Stock Rights under the Plan.

 

Exchange Act means the Securities Exchange Act of 1934, as amended.

 

Fair Market Value of a Share of Common Stock means:

 

(1)           If the Common Stock is listed on a national securities exchange or traded in the over-the-counter market and sales prices are regularly reported for the Common Stock, the closing or, if not applicable, the last price of the Common Stock on the composite tape or other comparable reporting system for the trading day on the applicable date and if such applicable date is not a trading day, the last market trading day prior to such date;

 

(2)           If the Common Stock is not traded on a national securities exchange but is traded on the over-the-counter market, if sales prices are not regularly reported for the Common Stock for the trading day referred to in clause (1), and if bid and asked prices for the Common Stock are regularly reported, the mean between the bid and the asked price for the Common Stock at the close of trading in the over-the-counter market for the trading day on which Common Stock was traded on the applicable date and if such applicable date is not a trading day, the last market trading day prior to such date; and

 

(3)           If the Common Stock is neither listed on a national securities exchange nor traded in the over-the-counter market, such value as the Administrator, in good faith, shall determine in compliance with applicable laws.

 

ISO means an option intended to qualify as an incentive stock option under Section 422 of the Code.

 

Non-Qualified Option means an option which is not intended to qualify as an ISO.

 

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Option means an ISO or Non-Qualified Option granted under the Plan.

 

Participant means an Employee, director or Consultant of the Company or an Affiliate to whom one or more Stock Rights are granted under the Plan. As used herein, “Participant” shall include “Participant’s Survivors” where the context requires.

 

Plan means this Angion Biomedica Corp. Second Amended and Restated 2015 Equity Incentive Plan.

 

RSU or Restricted Stock Unit means the grant of a contingent entitlement to receive shares of Common Stock based on the attainment of performance or time based vesting criteria, which for purposes of the Plan shall be a type of Stock-Based Award.

 

Securities Act means the Securities Act of 1933, as amended.

 

Shares means shares of the Common Stock as to which Stock Rights have been or may be granted under the Plan or any shares of capital stock into which the Shares are changed or for which they are exchanged within the provisions of Paragraph 3 of the Plan.  The Shares issued under the Plan may be authorized and unissued shares or shares held by the Company in its treasury, or both.

 

Stock Appreciation Right means the right to receive an amount equal to the excess of the Fair Market Value of a share of Common Stock (as determined on the date of exercise) over the purchase price of a share of Common Stock on the date a stock appreciation right is granted.

 

Stock-Based Award means a grant by the Company under the Plan of an equity award or an equity based award which is not an Option or a Stock Grant.

 

Stock Grant means a grant by the Company of Shares under the Plan.

 

Stock Right means a right to Shares or the value of Shares of the Company granted pursuant to the Plan — an ISO, a Non-Qualified Option, a Stock Grant or a Stock-Based Award.

 

Survivor means a deceased Participant’s legal representatives and/or any person or persons who acquired the Participant’s rights to a Stock Right by will or by the laws of descent and distribution.

 

2.                                      PURPOSES OF THE PLAN.

 

The Plan is intended to encourage ownership of Shares by Employees and directors of and certain Consultants to the Company and its Affiliates in order to attract and retain such people, to induce them to work for the benefit of the Company or of an Affiliate and to provide additional incentive for them to promote the success of the Company or of an Affiliate.  The Plan provides for the granting of ISOs, Non-Qualified Options, Stock Grants and Stock-Based Awards.

 

4

 

3.                                      SHARES SUBJECT TO THE PLAN.

 

(a)           The number of Shares which may be issued from time to time pursuant to this Plan shall be 1,867,412, or the equivalent of such number of Shares after the Administrator, in its sole discretion, has interpreted the effect of any stock split, stock dividend, combination, recapitalization or similar transaction in accordance with Paragraph 25 of the Plan. For the avoidance of doubt, the number of Shares previously issued under the Angion Biomedica Corp. 2015 Equity Incentive Plan prior to its amendment and restatement hereunder shall count against the limitation set forth in the first sentence of this Subparagraph (a), subject to the provisions of Subparagraph (c) below.

 

(b)           Notwithstanding Subparagraph (a) above, on the first day of each fiscal year of the Company during the period beginning in fiscal year 2020, and ending on the second day of fiscal year 2025, the number of Shares that may be issued from time to time pursuant to the Plan, shall be increased by an amount equal to the lesser of (i) 5% of the number of outstanding shares of Common Stock on such date; and (ii) an amount determined by the Board.  However, in no event shall the number of Shares available for issuance under this Plan be increased as set forth in this Subparagraph (b) to the extent such increase, in addition to any other increases proposed by the Board in the number of shares of Common Stock available for issuance under all other employee or director stock plans, including, without limitation, employee stock purchase plans, would result in the total number of shares of Common Stock then available for issuance under all employee and director stock plans exceeding 20% of the outstanding shares on a fully diluted basis of the Company on the first day of the applicable fiscal year.

 

(c)           If an Option ceases to be “outstanding”, in whole or in part (other than by exercise), or if the Company shall reacquire (at not more than its original issuance price) any Shares issued pursuant to a Stock Grant or Stock-Based Award, or if any Stock Right expires or is forfeited, cancelled, or otherwise terminated or results in any Shares not being issued, the unissued or reacquired Shares which were subject to such Stock Right shall again be available for issuance from time to time pursuant to this Plan.  Notwithstanding the foregoing, if a Stock Right is exercised, in whole or in part, by tender of Shares or if the Company or an Affiliate’s tax withholding obligation is satisfied by withholding Shares, the number of Shares deemed to have been issued under the Plan for purposes of the limitation set forth in Paragraph 3(a) above shall be the number of Shares that were subject to the Stock Right or portion thereof, and not the net number of Shares actually issued.  However, in the case of ISOs, the foregoing provisions shall be subject to any limitations under the Code.  The maximum number of ISOs that may be granted under the Plan is the maximum number of shares authorized under the Plan.

 

4.                                      ADMINISTRATION OF THE PLAN.

 

The Administrator of the Plan will be the Board of Directors, except to the extent the Board of Directors delegates its authority to the Committee, in which case the Committee shall be the Administrator.  Subject to the provisions of the Plan, the Administrator is authorized to:

 

(a)           Interpret the provisions of the Plan and all Stock Rights and to make all rules and determinations which it deems necessary or advisable for the administration of the Plan;

 

(b)           Determine which Employees, directors and Consultants shall be granted Stock Rights;

 

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(c)           Determine the number of Shares for which a Stock Right or Stock Rights shall be granted, provided, however, that in no event shall Stock Rights with respect to more than the maximum number of Shares that may be issued under the Plan be granted to any Participant in any fiscal year;

 

(d)           Specify the terms and conditions upon which a Stock Right or Stock Rights may be granted;

 

(e)           Amend any term or condition of any outstanding Stock Right, including, without limitation, to reduce or increase the exercise price or purchase price, accelerate the vesting schedule or extend the expiration date, provided that; (ii) any such amendment shall not impair the rights of a Participant under any Stock Right previously granted without such Participant’s consent or in the event of death of the Participant the Participant’s Survivors; and (iii) any such amendment shall be made only after the Administrator determines whether such amendment would cause any adverse tax consequences to the Participant, including, but not limited to, the annual vesting limitation contained in Section 422(d) of the Code and described in Paragraph 6(b)(iv) below with respect to ISOs and pursuant to Section 409A of the Code;

 

Buy out for a payment in cash or Shares, a Stock Right previously granted and/or cancel any such Stock Right and grant in substitution therefor other Stock Rights, covering the same or a different number of Shares and having an exercise price or purchase price per share which may be lower or higher than the exercise price or purchase price of the cancelled Stock Right, based on such terms and conditions as the Administrator shall establish and the Participant shall accept; and

 

(f)            Adopt any sub-plans applicable to residents of any specified jurisdiction as it deems necessary or appropriate in order to comply with or take advantage of any tax or other laws applicable to the Company, any Affiliate or to Participants or to otherwise facilitate the administration of the Plan, which sub-plans may include additional restrictions or conditions applicable to Stock Rights or Shares issuable pursuant to a Stock Right;

 

provided, however, that all such interpretations, rules, determinations, terms and conditions shall be made and prescribed in the context of not causing any adverse tax consequences under Section 409A of the Code and preserving the tax status under Section 422 of the Code of those Options which are designated as ISOs.  Subject to the foregoing, the interpretation and construction by the Administrator of any provisions of the Plan or of any Stock Right granted under it shall be final, unless otherwise determined by the Board of Directors, if the Administrator is the Committee.  In addition, if the Administrator is the Committee, the Board of Directors may take any action under the Plan that would otherwise be the responsibility of the Committee.

 

To the extent permitted under applicable law, the Board of Directors or the Committee may allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any portion of its responsibilities and powers to any other person selected by it. The Board of Directors or the Committee may revoke any such allocation or delegation at any time.  Notwithstanding the foregoing, only the Board of Directors or the Committee shall be authorized to grant a Stock Right to any director of the Company or to any “officer” of the Company as defined by Rule 16a-1 under the Exchange Act.

 

5.                                      ELIGIBILITY FOR PARTICIPATION.

 

The Administrator will, in its sole discretion, name the Participants in the Plan; provided, however, that each Participant must be an Employee, director or Consultant of the Company or of an

 

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Affiliate at the time a Stock Right is granted.  Notwithstanding the foregoing, the Administrator may authorize the grant of a Stock Right to a person not then an Employee, director or Consultant of the Company or of an Affiliate; provided, however, that the actual grant of such Stock Right shall be conditioned upon such person becoming eligible to become a Participant at or prior to the time of the execution of the Agreement evidencing such Stock Right.  ISOs may be granted only to Employees who are deemed to be residents of the United States for tax purposes.  Non-Qualified Options, Stock Grants and Stock-Based Awards may be granted to any Employee, director or Consultant of the Company or an Affiliate.  The granting of any Stock Right to any individual shall neither entitle that individual to, nor disqualify him or her from, participation in any other grant of Stock Rights or any grant under any other benefit plan established by the Company or any Affiliate for Employees, directors or Consultants.

 

6.                                      TERMS AND CONDITIONS OF OPTIONS.

 

Each Option shall be set forth in writing in an Option Agreement, duly executed by the Company and, to the extent required by law or requested by the Company, by the Participant.  The Administrator may provide that Options be granted subject to such terms and conditions, consistent with the terms and conditions specifically required under this Plan, as the Administrator may deem appropriate including, without limitation, subsequent approval by the shareholders of the Company of this Plan or any amendments thereto.  The Option Agreements shall be subject to at least the following terms and conditions:

 

(a)           Non-Qualified Options:  Each Option intended to be a Non-Qualified Option shall be subject to the terms and conditions which the Administrator determines to be appropriate and in the best interest of the Company, subject to the following minimum standards for any such Non-Qualified Option:

 

(i)                                     Exercise Price: Each Option Agreement shall state the exercise price per share of the Shares covered by each Option, which exercise price shall be determined by the Administrator and shall be at least equal to the Fair Market Value per share of Common Stock on the date of grant of the Option.

 

(ii)                                  Number of Shares: Each Option Agreement shall state the number of Shares to which it pertains.

 

(iii)                               Vesting:  Each Option Agreement shall state the date or dates on which it first is exercisable and the date after which it may no longer be exercised, and may provide that the Option rights accrue or become exercisable in installments over a period of months or years, or upon the occurrence of certain performance conditions or the attainment of stated goals or events.

 

(iv)                              Additional Conditions:  Exercise of any Option may be conditioned upon the Participant’s execution of a Share purchase agreement in form satisfactory to the Administrator providing for certain protections for the Company and its other shareholders, including requirements that:

 

A.                                    The Participant’s or the Participant’s Survivors’ right to sell or transfer the Shares may be restricted; and

 

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B.                                    The Participant or the Participant’s Survivors may be required to execute letters of investment intent and must also acknowledge that the Shares will bear legends noting any applicable restrictions.

 

(v)                                 Term of Option:  Each Option shall terminate not more than ten years from the date of the grant or at such earlier time as the Option Agreement may provide.

 

(b)           ISOs:  Each Option intended to be an ISO shall be issued only to an Employee who is deemed to be a resident of the United States for tax purposes, and shall be subject to the following terms and conditions, with such additional restrictions or changes as the Administrator determines are appropriate but not in conflict with Section 422 of the Code and relevant regulations and rulings of the Internal Revenue Service:

 

(i)                                     Minimum standards:  The ISO shall meet the minimum standards required of Non-Qualified Options, as described in Paragraph 6(a) above, except clause (i) and (v) thereunder.

 

(ii)                                  Exercise Price:  Immediately before the ISO is granted, if the Participant owns, directly or by reason of the applicable attribution rules in Section 424(d) of the Code:

 

A.                                    10% or less of the total combined voting power of all classes of stock of the Company or an Affiliate, the exercise price per share of the Shares covered by each ISO shall not be less than 100% of the Fair Market Value per share of the Common Stock on the date of grant of the Option; or

 

B.                                    More than 10% of the total combined voting power of all classes of stock of the Company or an Affiliate, the exercise price per share of the Shares covered by each ISO shall not be less than 110% of the Fair Market Value per share of the Common Stock on the date of grant of the Option.

 

(iii)                               Term of Option:  For Participants who own:

 

A.                                    10% or less of the total combined voting power of all classes of stock of the Company or an Affiliate, each ISO shall terminate not more than ten years from the date of the grant or at such earlier time as the Option Agreement may provide; or

 

B.                                    More than 10% of the total combined voting power of all classes of stock of the Company or an Affiliate, each ISO shall terminate not more than five years from the date of the grant or at such earlier time as the Option Agreement may provide.

 

(iv)                              Limitation on Yearly Exercise:  The Option Agreements shall restrict the amount of ISOs which may become exercisable in any calendar year (under this or any other ISO plan of the Company or an Affiliate) so that the aggregate Fair Market Value (determined on the date each ISO is granted) of the stock with respect to which ISOs are exercisable for the first time by the Participant in any calendar year does not exceed $100,000.

 

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7.                                      TERMS AND CONDITIONS OF STOCK GRANTS.

 

Each Stock Grant to a Participant shall state the principal terms in an Agreement duly executed by the Company and, to the extent required by law or requested by the Company, by the Participant. The Agreement shall be in a form approved by the Administrator and shall contain terms and conditions which the Administrator determines to be appropriate and in the best interest of the Company, subject to the following minimum standards:

 

(a)           Each Agreement shall state the purchase price per share, if any, of the Shares covered by each Stock Grant, which purchase price shall be determined by the Administrator but shall not be less than the minimum consideration required by the Delaware General Corporation Law, if any, on the date of the grant of the Stock Grant;

 

(b)           Each Agreement shall state the number of Shares to which the Stock Grant pertains; and

 

(c)           Each Agreement shall include the terms of any right of the Company to restrict or reacquire the Shares subject to the Stock Grant, including the time and events upon which such rights shall accrue and the purchase price therefor, if any.

 

8.                                      TERMS AND CONDITIONS OF OTHER STOCK-BASED AWARDS.

 

The Administrator shall have the right to grant other Stock-Based Awards based upon the Common Stock having such terms and conditions as the Administrator may determine, including, without limitation, the grant of Shares based upon certain conditions, the grant of securities convertible into Shares and the grant of stock appreciation rights, phantom stock awards or stock units.  The principal terms of each Stock-Based Award shall be set forth in an Agreement, duly executed by the Company and, to the extent required by law or requested by the Company, by the Participant.  The Agreement shall be in a form approved by the Administrator and shall contain terms and conditions which the Administrator determines to be appropriate and in the best interest of the Company. Notwithstanding the foregoing, each Stock Appreciation Right shall (i) have an exercise price which shall not be less than the Fair Market Value per Share of Common Stock and (ii) terminate not more than ten years from the date of the grant or at such earlier time as the Agreement therefor may provide.

 

The Company intends that the Plan and any Stock-Based Awards granted hereunder be exempt from the application of Section 409A of the Code or meet the requirements of paragraphs (2), (3) and (4) of subsection (a) of Section 409A of the Code, to the extent applicable, and be operated in accordance with Section 409A so that any compensation deferred under any Stock-Based Award (and applicable investment earnings) shall not be included in income under Section 409A of the Code.  Any ambiguities in the Plan shall be construed to effect the intent as described in this Paragraph 8.

 

9.                                      EXERCISE OF OPTIONS AND ISSUE OF SHARES.

 

An Option (or any part or installment thereof) shall be exercised by giving written notice to the Company or its designee (in a form acceptable to the Administrator, which may include electronic notice), together with provision for payment of the aggregate exercise price in accordance with this Paragraph for the Shares as to which the Option is being exercised, and upon compliance with any other condition(s) set forth in the Option Agreement.  Such notice shall be signed by the person exercising the Option (which signature may be provided electronically in a form acceptable to the Administrator), shall state the number of Shares with respect to which the Option is being exercised and shall contain any representation required by the Plan or the Option Agreement.  Payment of the exercise price for the

 

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Shares as to which such Option is being exercised shall be made (a) in United States dollars in cash or by check, or (b) at the discretion of the Administrator, through delivery of shares of Common Stock held for at least six months (if required to avoid negative accounting treatment) having a Fair Market Value equal as of the date of the exercise to the aggregate cash exercise price for the number of Shares as to which the Option is being exercised, or (c) at the discretion of the Administrator, by having the Company retain from the Shares otherwise issuable upon exercise of the Option, a number of Shares having a Fair Market Value equal as of the date of exercise to the aggregate exercise price for the number of Shares as to which the Option is being exercised, or (d) at the discretion of the Administrator, in accordance with a cashless exercise program established with a securities brokerage firm, and approved by the Administrator, or (e) at the discretion of the Administrator, by any combination of (a), (b), (c) and (d) above or (f) at the discretion of the Administrator, by payment of such other lawful consideration as the Administrator may determine. Notwithstanding the foregoing, the Administrator shall accept only such payment on exercise of an ISO as is permitted by Section 422 of the Code.

 

The Company shall then reasonably promptly deliver the Shares as to which such Option was exercised to the Participant (or to the Participant’s Survivors, as the case may be).  In determining what constitutes “reasonably promptly,” it is expressly understood that the issuance and delivery of the Shares may be delayed by the Company in order to comply with any law or regulation (including, without limitation, state securities or “blue sky” laws) which requires the Company to take any action with respect to the Shares prior to their issuance.  The Shares shall, upon delivery, be fully paid, non-assessable Shares.

 

10.                               PAYMENT IN CONNECTION WITH THE ISSUANCE OF STOCK GRANTS AND STOCK-BASED AWARDS AND ISSUE OF SHARES.

 

Any Stock Grant or Stock-Based Award requiring payment of a purchase price for the Shares as to which such Stock Grant or Stock-Based Award is being granted shall be made (a) in United States dollars in cash or by check, or (b) at the discretion of the Administrator, through delivery of shares of Common Stock held for at least six months (if required to avoid negative accounting treatment) and having a Fair Market Value equal as of the date of payment to the purchase price of the Stock Grant or Stock-Based Award, or (c) at the discretion of the Administrator, by any combination of (a) and (b) above; or (d) at the discretion of the Administrator, by payment of such other lawful consideration as the Administrator may determine.

 

The Company shall when required by the applicable Agreement, reasonably promptly deliver the Shares as to which such Stock Grant or Stock-Based Award was made to the Participant (or to the Participant’s Survivors, as the case may be), subject to any escrow provision set forth in the applicable Agreement.  In determining what constitutes “reasonably promptly,” it is expressly understood that the issuance and delivery of the Shares may be delayed by the Company in order to comply with any law or regulation (including, without limitation, state securities or “blue sky” laws) which requires the Company to take any action with respect to the Shares prior to their issuance.

 

11.                               RIGHTS AS A SHAREHOLDER.

 

No Participant to whom a Stock Right has been granted shall have rights as a shareholder with respect to any Shares covered by such Stock Right except after due exercise of an Option or issuance of Shares as set forth in any Agreement, tender of the aggregate exercise or purchase price, if any, for the Shares being purchased and registration of the Shares in the Company’s share register in the name of the Participant.

 

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12.                               ASSIGNABILITY AND TRANSFERABILITY OF STOCK RIGHTS.

 

By its terms, a Stock Right granted to a Participant shall not be transferable by the Participant other than (i) by will or by the laws of descent and distribution, or (ii) as approved by the Administrator in its discretion and set forth in the applicable Agreement provided that no Stock Right may be transferred by a Participant for value.  Notwithstanding the foregoing, an ISO transferred except in compliance with clause (i) above shall no longer qualify as an ISO.  The designation of a beneficiary of a Stock Right by a Participant, with the prior approval of the Administrator and in such form as the Administrator shall prescribe, shall not be deemed a transfer prohibited by this Paragraph.  Except as provided above during the Participant’s lifetime a Stock Right shall only be exercisable by or issued to such Participant (or his or her legal representative) and shall not be assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process.  Any attempted transfer, assignment, pledge, hypothecation or other disposition of any Stock Right or of any rights granted thereunder contrary to the provisions of this Plan, or the levy of any attachment or similar process upon a Stock Right, shall be null and void.

 

13.                               EFFECT ON OPTIONS OF TERMINATION OF SERVICE OTHER THAN FOR CAUSE OR DEATH OR DISABILITY.

 

Except as otherwise provided in a Participant’s Option Agreement, in the event of a termination of service (whether as an Employee, director or Consultant) with the Company or an Affiliate before the Participant has exercised an Option, the following rules apply:

 

(a)           A Participant who ceases to be an Employee, director or Consultant of the Company or of an Affiliate (for any reason other than termination for Cause, Disability, or death for which events there are special rules in Paragraphs 14, 15 and 16, respectively), may exercise any Option granted to him or her to the extent that the Option is exercisable on the date of such termination of service, but only within such term as the Administrator has designated in a Participant’s Option Agreement.

 

(b)           Except as provided in Subparagraph (c) below, or Paragraph 15 or 16, in no event may an Option intended to be an ISO, be exercised later than three months after the Participant’s termination of employment.

 

(c)           The provisions of this Paragraph, and not the provisions of Paragraph 15 or 16, shall apply to a Participant who subsequently becomes Disabled or dies after the termination of employment, director status or consultancy; provided, however, in the case of a Participant’s Disability or death within three months after the termination of employment, director status or consultancy, the Participant or the Participant’s Survivors may exercise the Option within one year after the date of the Participant’s termination of service, but in no event after the date of expiration of the term of the Option.

 

(d)           Notwithstanding anything herein to the contrary, if subsequent to a Participant’s termination of employment, termination of director status or termination of consultancy, but prior to the exercise of an Option, the Administrator determines that, either prior or subsequent to the Participant’s termination, the Participant engaged in conduct which would constitute Cause, then such Participant shall forthwith cease to have any right to exercise any Option.

 

(e)           A Participant to whom an Option has been granted under the Plan who is absent from the Company or an Affiliate because of temporary disability (any disability other than a Disability as defined in Paragraph 1 hereof), or who is on leave of absence for any purpose, shall not, during the period of any such absence, be deemed, by virtue of such absence alone, to have terminated such

 

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Participant’s employment, director status or consultancy with the Company or with an Affiliate, except as the Administrator may otherwise expressly provide; provided, however, that, for ISOs, any leave of absence granted by the Administrator of greater than ninety days, unless pursuant to a contract or statute that guarantees the right to reemployment, shall cause such ISO to become a Non-Qualified Option on the 181st day following such leave of absence.

 

(f)            Except as required by law or as set forth in a Participant’s Option Agreement, Options granted under the Plan shall not be affected by any change of a Participant’s status within or among the Company and any Affiliates, so long as the Participant continues to be an Employee, director or Consultant of the Company or any Affiliate.

 

14.                               EFFECT ON OPTIONS OF TERMINATION OF SERVICE FOR CAUSE.

 

Except as otherwise provided in a Participant’s Option Agreement, the following rules apply if the Participant’s service (whether as an Employee, director or Consultant) with the Company or an Affiliate is terminated for Cause prior to the time that all his or her outstanding Options have been exercised:

 

(a)           All outstanding and unexercised Options as of the time the Participant is notified his or her service is terminated for Cause will immediately be forfeited.

 

(b)           Cause is not limited to events which have occurred prior to a Participant’s termination of service, nor is it necessary that the Administrator’s finding of Cause occur prior to termination.  If the Administrator determines, subsequent to a Participant’s termination of service but prior to the exercise of an Option, that either prior or subsequent to the Participant’s termination the Participant engaged in conduct which would constitute Cause, then the right to exercise any Option is forfeited.

 

15.                               EFFECT ON OPTIONS OF TERMINATION OF SERVICE FOR DISABILITY.

 

Except as otherwise provided in a Participant’s Option Agreement:

 

(a)           A Participant who ceases to be an Employee, director or Consultant of the Company or of an Affiliate by reason of Disability may exercise any Option granted to such Participant to the extent that the Option has become exercisable but has not been exercised on the date of the Participant’s termination of service due to Disability.  A Disabled Participant may exercise the Option only within the period ending one year after the date of the Participant’s termination of service due to Disability, notwithstanding that the Participant might have been able to exercise the Option as to some or all of the Shares on a later date if the Participant had not been terminated due to Disability and had continued to be an Employee, director or Consultant or, if earlier, within the originally prescribed term of the Option.

 

(b)           The Administrator shall make the determination both of whether Disability has occurred and the date of its occurrence (unless a procedure for such determination is set forth in another agreement between the Company and such Participant, in which case such procedure shall be used for such determination).  If requested, the Participant shall be examined by a physician selected or approved by the Administrator, the cost of which examination shall be paid for by the Company.

 

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16.                               EFFECT ON OPTIONS OF DEATH WHILE AN EMPLOYEE, DIRECTOR OR CONSULTANT.

 

Except as otherwise provided in a Participant’s Option Agreement, in the event of the death of a Participant while the Participant is an Employee, director or Consultant of the Company or of an Affiliate, such Option may be exercised by the Participant’s Survivors to the extent that the Option has become exercisable but has not been exercised on the date of death.

 

17.                               EFFECT OF TERMINATION OF SERVICE ON STOCK GRANTS AND STOCK-BASED AWARDS.

 

In the event of a termination of service (whether as an Employee, director or Consultant) with the Company or an Affiliate for any reason before the Participant has accepted a Stock Grant or a Stock-Based Award and paid the purchase price, if required, such grant shall terminate.

 

For purposes of this Paragraph 17 and Paragraph 18 below, a Participant to whom a Stock Grant or Stock-Based Award has been issued under the Plan who is absent from work with the Company or with an Affiliate because of temporary disability (any disability other than a Disability as defined in Paragraph 1 hereof), or who is on leave of absence for any purpose, shall not, during the period of any such absence, be deemed, by virtue of such absence alone, to have terminated such Participant’s employment, director status or consultancy with the Company or with an Affiliate, except as the Administrator may otherwise expressly provide.

 

In addition, for purposes of this Paragraph 17 and Paragraph 18 below, any change of employment or other service within or among the Company and any Affiliates shall not be treated as a termination of employment, director status or consultancy so long as the Participant continues to be an Employee, director or Consultant of the Company or any Affiliate.

 

18.                               EFFECT ON STOCK GRANTS AND STOCK-BASED AWARDS OF TERMINATION OF SERVICE OTHER THAN FOR CAUSE.

 

Except as otherwise provided in a Participant’s Agreement, in the event of a termination of service for any reason (whether as an Employee, director or Consultant), other than for Cause for which event there are special rules in Paragraph 19 below, before all forfeiture provisions or Company rights of repurchase shall have lapsed, then the Company shall have the right to cancel or repurchase that number of Shares subject to a Stock Grant or Stock-Based Award as to which the Company’s forfeiture or repurchase rights have not lapsed.

 

With respect to a termination for a Disability, the Administrator shall make the determination both as to whether Disability has occurred and the date of its occurrence (unless a procedure for such determination is set forth in another agreement between the Company and such Participant, in which case such procedure shall be used for such determination).  If requested, the Participant shall be examined by a physician selected or approved by the Administrator, the cost of which examination shall be paid for by the Company.

 

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19.                               EFFECT ON STOCK GRANTS OR STOCK BASED-AWARDS OF TERMINATION OF SERVICE FOR CAUSE.

 

Except as otherwise provided in a Participant’s Agreement, the following rules apply if the Participant’s service (whether as an Employee, director or Consultant) with the Company or an Affiliate is terminated for Cause:

 

(a)           All Shares subject to any Stock Grant or Stock Based-Award that remain subject to forfeiture provisions or as to which the Company shall have a repurchase right shall be immediately forfeited to the Company as of the time the Participant is notified his or her service is terminated for Cause.

 

(b)           Cause is not limited to events which have occurred prior to a Participant’s termination of service, nor is it necessary that the Administrator’s finding of Cause occur prior to termination.  If the Administrator determines, subsequent to a Participant’s termination of service, that either prior or subsequent to the Participant’s termination the Participant engaged in conduct which would constitute Cause, then all Shares subject to any Stock Grant or Stock Based-Award that remained subject to forfeiture provisions or as to which the Company had a repurchase right on the date of termination shall be immediately forfeited to the Company.

 

20.                               PURCHASE FOR INVESTMENT.

 

Unless the offering and sale of the Shares shall have been effectively registered under the Securities Act, the Company shall be under no obligation to issue Shares under the Plan unless and until the following conditions have been fulfilled:

 

(a)           The person who receives a Stock Right shall warrant to the Company, prior to the receipt of Shares, that such person is acquiring such Shares for his or her own account, for investment, and not with a view to, or for sale in connection with, the distribution of any such Shares, in which event the person acquiring such Shares shall be bound by the provisions of the following legend (or a legend in substantially similar form) which shall be endorsed upon the certificate evidencing the Shares issued pursuant to such exercise or such grant:

 

“The shares represented by this certificate have been taken for investment and they may not be sold or otherwise transferred by any person, including a pledgee, unless (1) either (a) a Registration Statement with respect to such shares shall be effective under the Securities Act of 1933, as amended, or (b) the Company shall have received an opinion of counsel satisfactory to it that an exemption from registration under such Act is then available, and (2) there shall have been compliance with all applicable state securities laws.”

 

(b)           At the discretion of the Administrator, the Company shall have received an opinion of its counsel that the Shares may be issued in compliance with the Securities Act without registration thereunder.

 

21.                               DISSOLUTION OR LIQUIDATION OF THE COMPANY.

 

Upon the dissolution or liquidation of the Company, all Options granted under this Plan which as of such date shall not have been exercised and all Stock Grants and Stock-Based Awards which have not been accepted, to the extent required under the applicable Agreement, will terminate and become null

 

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and void; provided, however, that if the rights of a Participant or a Participant’s Survivors have not otherwise terminated and expired, the Participant or the Participant’s Survivors will have the right immediately prior to such dissolution or liquidation to exercise or accept any Stock Right to the extent that the Stock Right is exercisable or subject to acceptance as of the date immediately prior to such dissolution or liquidation.  Upon the dissolution or liquidation of the Company, any outstanding Stock-Based Awards shall immediately terminate unless otherwise determined by the Administrator or specifically provided in the applicable Agreement.

 

22.                               ADJUSTMENTS.

 

In the event of a merger, consolidation, acquisition of property or shares, stock rights offering, liquidation, Disaffiliation (other than a spinoff), or similar event affecting the Company or any of its Affiliates (each, a “Corporate Transaction”), the Committee or the Board may in its discretion make such substitutions or adjustments as it deems appropriate and equitable to (A) the aggregate number and kind of Shares or other securities reserved for issuance and delivery under the Plan, (B) the various maximum limitations set forth in Sections 3 and 4, (C) the number and kind of Shares or other securities subject to outstanding Stock Rights; and (D) the exercise price of outstanding Options and Stock Appreciation Rights.

 

In the event of a stock dividend, stock split, reverse stock split, separation, spinoff, reorganization, extraordinary dividend of cash or other property, share combination, or recapitalization or similar event affecting the capital structure of the Company (each, a “Share Change”), the Committee or the Board shall make such substitutions or adjustments as it deems appropriate and equitable to (A) the aggregate number and kind of Shares or other securities reserved for issuance and delivery under the Plan, (B) the various maximum limitations set forth in Sections 3 and 4, (C) the number and kind of Shares or other securities subject to outstanding Stock Rights; and (D) the exercise price of outstanding Options and Stock Appreciation Rights.

 

In the case of Corporate Transactions, the adjustments contemplated by the first paragraph of this Section 22 may include, without limitation, (A) the cancellation of outstanding Stock Rights in exchange for payments of cash, property or a combination thereof having an aggregate value equal to the value of such Stock Rights, as determined by the Committee or the Board in its sole discretion (it being understood that in the case of a Corporate Transaction with respect to which holders of Common Stock receive consideration other than publicly traded equity securities of the ultimate surviving entity, any such determination by the Committee that the value of an Option or Stock Appreciation Right shall for this purpose be deemed to equal the excess, if any, of the value of the consideration being paid for each Share pursuant to such Corporate Transaction over the exercise price of such Option or Stock Appreciation Right shall conclusively be deemed valid); (B) the substitution of other property (including, without limitation, cash or other securities of the Company and securities of entities other than the Company) for the Shares subject to outstanding Stock Rights; and (C) in connection with any Disaffiliation, arranging for the assumption of Stock Rights, or replacement of Stock Rights with new Stock Rights based on other property or other securities (including, without limitation, other securities of the Company and securities of entities other than the Company), by the affected Affiliate, or division or by the entity that controls such Affiliate, or division following such Disaffiliation (as well as any corresponding adjustments to Stock Rights that remain based upon Company securities). The Committee may adjust the performance goals applicable to any Stock Rights to reflect any Share Change and any Corporate Transaction and any unusual or non-recurring events and other extraordinary items, impact of charges for restructurings, discontinued operations, and the cumulative effects of accounting or tax changes, each as defined by generally accepted accounting principles or as identified in the Company’s

 

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financial statements, notes to the financial statements, management’s discussion and analysis or the Company’s other filings with the Commission. Any adjustments made pursuant to this Section 22 to Stock Rights that are considered “deferred compensation” within the meaning of Section 409A of the Code shall be made in compliance with the requirements of Section 409A of the Code. Any adjustments made pursuant to this Section 22 to Stock Rights that are not considered “deferred compensation” subject to Section 409A of the Code shall be made in such a manner as to ensure that after such adjustment, the Stock Rights either (A) continue not to be subject to Section 409A of the Code or (B) comply with the requirements of Section 409A of the Code.

 

Any adjustment under this Section 22 need not be the same for all Participants.

 

23.                               ISSUANCES OF SECURITIES.

 

Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares subject to Stock Rights.  Except as expressly provided herein, no adjustments shall be made for dividends paid in cash or in property (including without limitation, securities) of the Company prior to any issuance of Shares pursuant to a Stock Right.

 

24.                               FRACTIONAL SHARES.

 

No fractional shares shall be issued under the Plan and the person exercising a Stock Right shall receive from the Company cash in lieu of such fractional shares equal to the Fair Market Value thereof.

 

25.                               CONVERSION OF ISOs INTO NON-QUALIFIED OPTIONS; TERMINATION OF ISOs.

 

The Administrator, at the written request of any Participant, may in its discretion take such actions as may be necessary to convert such Participant’s ISOs (or any portions thereof) that have not been exercised on the date of conversion into Non-Qualified Options at any time prior to the expiration of such ISOs, regardless of whether the Participant is an Employee of the Company or an Affiliate at the time of such conversion.  At the time of such conversion, the Administrator (with the consent of the Participant) may impose such conditions on the exercise of the resulting Non-Qualified Options as the Administrator in its discretion may determine, provided that such conditions shall not be inconsistent with this Plan.  Nothing in the Plan shall be deemed to give any Participant the right to have such Participant’s ISOs converted into Non-Qualified Options, and no such conversion shall occur until and unless the Administrator takes appropriate action.  The Administrator, with the consent of the Participant, may also terminate any portion of any ISO that has not been exercised at the time of such conversion.

 

26.                               WITHHOLDING.

 

In the event that any federal, state, or local income taxes, employment taxes, Federal Insurance Contributions Act (“F.I.C.A.”) withholdings or other amounts are required by applicable law or governmental regulation to be withheld from the Participant’s salary, wages or other remuneration in connection with the issuance of a Stock Right or Shares under the Plan or for any other reason required by law, the Company may withhold from the Participant’s compensation, if any, or may require that the Participant advance in cash to the Company, or to any Affiliate of the Company which employs or employed the Participant, the statutory minimum amount of such withholdings unless a different

 

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withholding arrangement, including the use of shares of the Company’s Common Stock or a promissory note, is authorized by the Administrator (and permitted by law).  For purposes hereof, the fair market value of the shares withheld for purposes of payroll withholding shall be determined in the manner set forth under the definition of Fair Market Value provided in Paragraph 1 above, as of the most recent practicable date prior to the date of exercise.  If the Fair Market Value of the shares withheld is less than the amount of payroll withholdings required, the Participant may be required to advance the difference in cash to the Company or the Affiliate employer.  The Administrator in its discretion may condition the exercise of an Option for less than the then Fair Market Value on the Participant’s payment of such additional withholding.

 

27.                               NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION.

 

Each Employee who receives an ISO must agree to notify the Company in writing immediately after the Employee makes a Disqualifying Disposition of any Shares acquired pursuant to the exercise of an ISO.  A Disqualifying Disposition is defined in Section 424(c) of the Code and includes any disposition (including any sale or gift) of such Shares before the later of (a) two years after the date the Employee was granted the ISO, or (b) one year after the date the Employee acquired Shares by exercising the ISO, except as otherwise provided in Section 424(c) of the Code.  If the Employee has died before such Shares are sold, these holding period requirements do not apply and no Disqualifying Disposition can occur thereafter.

 

28.                               TERMINATION OF THE PLAN.

 

The Plan will terminate on June 26, 2029, the date which is ten years from the earlier of the date of its adoption by the Board of Directors and the date of its approval by the shareholders of the Company.  The Plan may be terminated at an earlier date by vote of the shareholders or the Board of Directors of the Company; provided, however, that any such earlier termination shall not affect any Agreements executed prior to the effective date of such termination.  Termination of the Plan shall not affect any Stock Rights theretofore granted.

 

29.                               AMENDMENT OF THE PLAN AND AGREEMENTS.

 

The Plan may be amended by the shareholders of the Company.  The Plan may also be amended by the Administrator, including, without limitation, to the extent necessary to qualify any or all outstanding Stock Rights granted under the Plan or Stock Rights to be granted under the Plan for favorable federal income tax treatment as may be afforded incentive stock options under Section 422 of the Code (including deferral of taxation upon exercise), and to the extent necessary to qualify the Shares issuable under the Plan for listing on any national securities exchange or quotation in any national automated quotation system of securities dealers. Any amendment approved by the Administrator which the Administrator determines is of a scope that requires shareholder approval shall be subject to obtaining such shareholder approval.  Other than as set forth in Paragraph 22 of the Plan, the exercise price of an Option may not be reduced without stockholder approval.

 

Any modification or amendment of the Plan shall not, without the consent of a Participant, adversely affect his or her rights under a Stock Right previously granted to him or her.  With the consent of the Participant affected, the Administrator may amend outstanding Agreements in a manner which may be adverse to the Participant but which is not inconsistent with the Plan.  In the discretion of the Administrator, outstanding Agreements may be amended by the Administrator in a manner which is not adverse to the Participant.  Nothing in this Paragraph 29 shall limit the Administrator’s authority to take any action permitted pursuant to Paragraph 22.

 

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30.                               EMPLOYMENT OR OTHER RELATIONSHIP.

 

Nothing in this Plan or any Agreement shall be deemed to prevent the Company or an Affiliate from terminating the employment, consultancy or director status of a Participant, nor to prevent a Participant from terminating his or her own employment, consultancy or director status or to give any Participant a right to be retained in employment or other service by the Company or any Affiliate for any period of time.

 

31.                               GOVERNING LAW.

 

This Plan shall be construed and enforced in accordance with the law of the State of Delaware.

 

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