Document:

Exhibit 10.1

 

 

October 7, 2004

 

 

Anne-Marie Corner

586 West Mermaid Lane

Philadelphia, PA 19118

 

 

Dear Anne-Marie:

 

 

                By means of this
letter agreement (the “Agreement”),
we are pleased to confirm the terms of your employment, effective as of the
Effective Date (as defined below) and subject to the other terms and conditions
herein, with Cellegy Pharmaceuticals, Inc. (“Cellegy”
or the “Company”).

 

1.                                       Effective Date.

 

This Agreement is entered into in connection with that
certain Agreement and Plan of Share Exchange dated as of October 7, 2004 by and
between Biosyn, Inc. (“Biosyn”)
and Cellegy (the “Exchange Agreement”).  The terms of this Agreement shall become
effective (the “Effective Date”) only upon
the completion of the “Closing” and the “Effective Time,” as those terms are
defined in the Exchange Agreement.  If
the Closing of the transactions contemplated by the Exchange Agreement does not
occur, then this Agreement shall have no force or effect and shall terminate in
its entirety.

 

2.                                       Impact on Previous Agreements.

 

Upon and after the Effective Date and the payment
to you at the Closing of the amounts specified pursuant to the Exchange
Agreement, this
Agreement shall replace and supersede all prior employment agreements or
employment arrangements, whether written or oral, between you and Biosyn,
including, but not limited to, that certain agreement of employment between
Biosyn and you dated June 4, 1999 (as the same may be amended, the “Prior Employment Agreement”), that
certain Agreement to Defer Salary between Biosyn and you dated as of March 26,
2003, as amended, that certain Amended Agreement for Deferral of Compensation
between you and Biosyn dated as of February 17, 2004 and that certain Change of
Control Agreement between Biosyn and you dated as of February 18, 2004
(collectively, the “Prior Employment Arrangements”),
and upon the Effective Date, all Prior Employment Arrangements shall be
terminated in their entirety and shall be of no further force or effect.  Notwithstanding the foregoing, Subsection
7(d) of the Prior Employment Agreement that relates to the assignment by you to
Biosyn of inventions or other intellectual property rights, shall survive and
remain effective.

 

 

3.                                       Duties.

 

You will serve as Senior Vice President, Women’s
Preventive Health and as an Officer of Cellegy Pharmaceuticals, Inc. Your
responsibilities will include those described in Exhibit A hereto,
subject to the overall directives of the Chief Executive Officer and the Board
of Directors of Cellegy.  You will
initially report to the Chief Executive Officer.  You agree to devote your full time, effort
and attention to the affairs of Cellegy and shall not, during the term of this
Agreement, actively engage in any other business activity, whether or not for
profit.  The foregoing shall not be
construed as preventing you from (a) making investments in other businesses or
enterprises, (b) participating in the activities of professional trade
organizations related to the business of the Company, as approved by your
manager, (c) engaging in civic, charitable or fraternal activities, in each of
the above cases whose businesses are not competitive with the Company provided that your ownership
does not exceed 1% of each such business or enterprise and (d) serving on the boards of directors
of not more than one other entity (and up to one additional nonprofit
organization) that is reasonably satisfactory to the Company and whose business
is not competitive with the Company.  The
principal location of your employment will be at the Company’s principal
executive office located in Huntingdon Valley, Pennsylvania, although you
understand and agree that you may be required to travel from time to time for
business reasons.

 

4.                                       Annual Salary.

 

Subject to the immediately following sentence, during
your first year of employment, Cellegy agrees to pay you a monthly salary at an
annual rate of $250,000 per annum (the “Base Salary”),
payable in conformity with Cellegy’s normal payroll periods and subject to all
applicable withholdings and deductions. 
Your salary shall be reviewed by Cellegy’s Board of Directors or
Compensation Committee on an annual basis and may be increased in the
discretion of the Board or such Committee. 
Your first salary review will occur in approximately December 2005 with
respect to your Base Salary for the 2006 year.

 

5.             Bonus.

 

Promptly after the Effective
Date you will be paid a cash bonus of $25,000 in recognition of your
performance during the course of 2004.  Effective
January 1, 2005, you will be eligible to participate in Cellegy’s bonus
programs in a manner and percentage similar to similarly situated Cellegy
employees, with Company and individual performance targets for the relevant
calendar year to be established by Cellegy’s Board of Directors or the
Compensation Committee thereof (and amounts, if any, paid after completion of
the year to which such performance targets relate).  As part of this program, you will be eligible
to receive an annual cash bonus up to a target amount of 25% of Base Salary
based on Company and individual performance.

 

6.                                       Equity Incentive Programs.

 

You shall be eligible to participate in future equity
incentive programs established by the Company to provide restricted stock,
stock options and other equity-based incentives to officers and key employees
of the Company.

 

2

 

7.                                       Business Expenses.

 

You shall be entitled to
reimbursement of travel and entertainment expenses incurred in connection with
your services hereunder consistent with the policies of Cellegy, upon receipt
of reasonable supporting documentation.

 

8.                                       Benefits; Vacation/PTO.

 

                You shall be
entitled to participate in Cellegy’s benefit plans to the same extent as other
similarly situated Cellegy employees, including plans that provide vacation,
medical and dental insurance benefits described in Cellegy’s employee handbook,
which previously was provided to you.  In
general, you will be entitled to the number vacation/paid-time-off (“PTO”) days
that are specified in Cellegy’s standard vacation policies for similarly
situated employees.  Notwithstanding the
foregoing, you will be entitled to carry over to Cellegy the same number of
accrued but unused PTO days that you had with Biosyn immediately before the
Effective Date, and unused PTO days will carry-over at year-end into the
succeeding year.  However, no additional PTO days shall accrue
after the Effective Date until such time as you have used a number of your then
accrued PTO days such that the number of your then accrued PTO days is less
than the maximum number of PTO days that you would be entitled to under Cellegy’s
standard policy regarding PTO days, and at that time, the number of PTO days
that you shall be entitled to will be governed by Cellegy’s standard PTO
policies.  To the maximum extent
permitted under Cellegy’s plans, you will be given credit for the time during
which you were employed by Biosyn.  You
will also receive such other benefits as are generally made available from time
to time to other similarly situated employees of Cellegy.  By signing this Agreement, you agree and
acknowledge that in consideration of Cellegy’s assumption of your PTO days
accrued while you were employed with Biosyn, neither Cellegy nor Biosyn will
have any financial obligation to you with respect to such PTO days in
connection with any termination of your employment with Biosyn that may be
deemed to occur with respect to the transactions contemplated by the Exchange
Agreement and your employment by Cellegy (including without limitation any obligation
to make any cash payment to you with respect to such accrued unused PTO
days).

 

9.                                       401(k) Savings Plan.

 

You will be eligible to participate
in Cellegy’s 401(k) plan on the same terms and conditions as other Cellegy
employees.

 

10.                                 Termination.

 

(a)           Termination
of Employment.  Notwithstanding
anything contained in this Agreement, this Agreement and your employment
hereunder may be terminated at any time (a) voluntarily by you upon prior
written notice to Cellegy and (b) by Cellegy immediately upon notice to
you.  Cellegy may terminate your
employment:

 

(i)                                     for Cause;

 

3

 

(ii)                                  by reason of your
death;

 

(iii)                               by reason of your
disability, where such disability has continued for a period of ninety (90)
days, whether or not consecutive, in any 365 day period (“disability” shall
mean your inability to perform the services contemplated by this Agreement for
such period, as determined by a physician reasonably satisfactory to both you
and Cellegy; provided, that if you and Cellegy do not agree on a physician, you
and Cellegy shall each select one, and these two together will select a third
physician, whose determination as to disability shall be binding on all
parties); and

 

(iv)                              without Cause, for any
reason or no reason (with employment terminations by reason of death or
disability, or your termination of your employment by reason of your non-renewal
of the term of this Agreement, not constituting terminations
without Cause).

 

(b)           Cause.  For the purposes of this Agreement, “Cause”
shall be deemed to exist for:

 

(i)                                     your willful and
deliberate failure or a refusal (not resulting from your incapacity due to
physical or mental illness) to comply in any material respect with the legal or
ethical policies, standards or regulations of the Company (including without
limitation the Company’s insider trading policy), or willful and deliberate
failure to follow the lawful written directions of the Chief Executive Officer
or the Board of Directors, provided that written notice in reasonable detail as
to the alleged failure or refusal has been given to you by the Chief Executive
Officer or his authorized designate and, if the failure is capable of cure, you
have had a reasonable opportunity to cure such failure;

(ii)                                  your misconduct which
is materially detrimental to the Company, or willful and deliberate failure or
a refusal (not resulting from your incapacity due to physical or mental
illness) in any material respect faithfully or diligently, to perform your
legal and ethical duties, determined by the Company in accordance with any
written agreement between you and the Company or the customary duties of your
employment; provided that written notice, in reasonable detail as to the
alleged failure or refusal, has been given to you by the Chief Executive
Officer or his authorized designate and, if the failure is capable of cure, you
have had a reasonable opportunity to cure such failure;

(iii)                               your deliberate
concealment from the Board of any action by you in violation of any legal or
ethical policy, standard or regulation set by the Company;

 

4

 

(iv)                              any unethical or
fraudulent conduct that is demonstrably injurious and materially discredits the
Company or is materially detrimental to the reputation, character or standing
of the Company;

(v)                                 dishonest conduct or a
deliberate attempt by you to do injury to the Company;

(vi)                              your material breach of
any written employment agreement or invention assignment and confidentiality
agreement between you and the Company; or

(vii)                           commission of an
unlawful or criminal act (serious in nature) which the Board of Directors or
the Chief Executive Officer reasonably concludes would reflect adversely on the
Company, or your conviction of a felony or other crime involving embezzlement
or fraud involving the money or property of the Company.

 

11.                                 Effect of Termination.

 

(a)           General.  Upon termination of your employment, you (or
your heirs in the event of your death) will be paid (i) the Base Salary (as
defined above) through the date of termination, (ii) any portion of your bonus
then earned but not yet paid, and (iii) all other benefits payable in
accordance with the applicable plans and programs of Cellegy, and all rights
and benefits hereunder shall cease except as expressly provided herein.

 

(b)           Termination.  In the event that Cellegy terminates your
employment in a termination without Cause or notifies you of Cellegy’s
determination not to renew this Agreement upon the expiration of any term or in
the event that you terminate your employment for Good Reason (as defined
below), then:

 

(i)            you
will be entitled to receive your Base Salary for a period of twelve (12)
months, one-half of which shall be paid in a lump sum payment as of the date
of termination and the other half of which shall be paid in six equal
monthly installments on the first day of each of the six calendar months
immediately following the date of termination.

 

(ii)           any
stock options granted by Cellegy to you after the Effective Time (the “Post-Acquisition Options”) will
become vested and exercisable on a pro rata basis through the date of
termination (with vesting for the year in which termination occurred to be on a
monthly basis for the portion of the year in which the termination occurred)
and you shall have 90 days in which to exercise the options; provided, however,
that if your employment is terminated in a Termination upon Change of Control
as defined in Cellegy’s Retention and Severance Plan for Executives (the “Retention Plan”), then all
Post-Acquisition Options will become fully vested and exercisable as provided
in the Retention Plan.

 

(iii)          if you elect coverage under COBRA, you will receive, by
means of payment by Cellegy on behalf of yourself, your spouse and your dependents of the applicable
premiums, continued provision of the Company’s health-related and other
standard employee

 

5

 

insurance coverages as are in effect immediately
prior to such employment termination for a period of twelve (12) months
following such termination (with you remaining responsible for such deductibles
or percentage of payments under such insurance as you were responsible for
contributing immediately before the employment termination).  You will be responsible for all taxes
relating to any payments made pursuant to this Section 10, and the amounts of
any such payments will be reduced by any amounts required to be withheld or
deducted by the Company from the payments. 
The date of the “qualifying event” for you and your spouse and
dependents shall be the date of your employment termination.  Notwithstanding the preceding provisions, in
the event you become covered as a primary insured (that is, not as a
beneficiary under a spouse’s or partner’s plan) under another employer’s group
health plan that is comparable or superior to Cellegy’s health plan during the
period provided for herein, you shall promptly shall inform the Company and the
Company shall cease provision of continued group health insurance for you and
any family.

 

For purposes of this paragraph, “Good Reason” shall
mean: assignment to you of a title position, responsibilities or duties that
are materially less than the title position, responsibilities and duties that
you occupied immediately after the Effective Time (except that following a
Change of Control (as defined in the Company’s Retention and Severance Plan), a
reduction in title position, responsibilities or duties solely by virtue of the
Company being acquired and made part of a larger entity or operated as a
subsidiary shall not constitute Good Reason); (ii) a material breach by the
Company of any of the terms of this Agreement; or (iii) a material reduction in
your compensation or benefits (other than reductions in benefits under employee
benefit plans applicable to officers or employees of the Company generally);
provided, in each of the foregoing cases, that you have provided written notice
to the Company that an event constituting Good Reason has occurred and the
Company has a reasonable opportunity, not to exceed thirty (30) days, to cure
such event.

 

12.                                 Indemnification

 

Cellegy shall indemnify and defend
you and hold you harmless to the fullest extent permitted by Cellegy’s bylaws
and applicable law in connection with any claim, action, suit, investigation or
proceeding arising out of or relating to performance by you of services for, or
action by you as an officer or employee of (i) Biosyn prior to the Effective
Date or (ii) Cellegy, or any parent, subsidiary or affiliate of Cellegy after
the Effective Date.  Expenses incurred by
you in defending a claim, action, suit or investigation or criminal proceedings
shall be paid for by Cellegy in advance of the final disposition thereof in
accordance with Cellegy’s bylaws and upon the receipt by Cellegy of your
undertaking to repay said amount if it shall ultimately be determined that you
are not entitled to be indemnified hereunder. 
You acknowledge receipt of a copy of such bylaws.  Notwithstanding the foregoing, Cellegy shall
not be required:

 

(a)           (Unlawful Indemnification) to
indemnify you with respect to any acts or omissions or transactions from which
a court having jurisdiction in the matter shall determine that you may not be
relieved of liability under any applicable state or federal law.  In this respect, you acknowledge having been
advised that the Securities and Exchange Commission takes the position that
indemnification for liabilities arising under the federal securities laws is
against public policy and is, therefore, unenforceable and

 

6

 

that claims for indemnification
should be submitted to appropriate courts for adjudication;

 

(b)           (Claims Initiated by you) to
indemnify or to advance expenses to you with respect to proceedings or claims
initiated or brought voluntarily by you and not by way of defense, except as
may expressly be required under applicable law, but such indemnification or
advancement of expenses may be provided by the Company in specific cases if the
Board of Directors has approved the initiation or bringing of such suit; or

 

(c)           (No Duplication of Payments) to
indemnify you for expenses or liabilities of any type whatsoever (including,
without limitation, judgments, fines, ERISA, excise taxes or penalties, and
amounts paid in settlement) to the extent that you have otherwise actually
received payment (under any insurance policy, provision of the Company’s
certificate of incorporation, bylaws or otherwise) of the amounts otherwise
payable hereunder.

 

13.                                 Acknowledgement of No
Claims; Release of Claims.

 You acknowledge and agree that,
except as may be expressly disclosed in the Biosyn Disclosure Schedule relating
to the Exchange Agreement and provided that at the Closing of the
transactions contemplated by the Exchange Agreement you receive all salary,
bonus and benefits payments that are provided for in the Exchange Agreement, as of the date of this
Agreement, all accrued salary, bonus pay, cash profit-sharing, termination
benefits or other compensation to which you are entitled by virtue of your
employment with Biosyn has been satisfied or will be satisfied by Biosyn on or
before the Effective Date (other than accrued salary or reimbursements for
expenses incurred in the ordinary course of business for pay periods before the
Effective Date, all of which will be satisfied by Biosyn before the Effective
Date).  You acknowledge and agree that as
of the date of this Agreement and as of the Effective Date, you do not have and
will not have any claims arising from any omissions, acts or facts that have
occurred up until and including the date of this Agreement and the Effective
Date against Biosyn, the Company or any of their officers, shareholders,
employees, directors, or agents, including without limitation any claims  under any employment laws, including, but not
limited to, claims of unlawful discharge, breach of contract, breach of the
covenant of good faith and fair dealing, fraud, violation of public policy,
defamation, emotional distress, claims for additional compensation or benefits
arising out of you employment with Biosyn or your separation of employment from
Biosyn in connection with the transactions contemplated by the Exchange
Agreement, claims under Title VII of the 1964 Civil Rights Act, as amended, and
any other laws and/or regulations relating to employment or employment
discrimination.  Your right to receive
the severance and other benefits described in this Agreement (other than
benefits required by law to be paid to you upon employment termination) is
conditioned upon your execution and delivery to Cellegy of a release of claims
agreement upon employment termination in the form attached as Exhibit B
hereto or, if payment of severance and benefits as contemplated by this
Agreement are as provided in the Retention Plan, then on the form of release
provided in the Retention Plan

 

14.                                 Term.

 

7

 

The term of this Agreement shall be
for a period of two (2) years beginning on the Effective Date, unless
terminated earlier as provided in Section 9 hereof, and shall renew
automatically for successive one (1) year terms unless either you or Cellegy
notifies the other in writing of your or its determination not to renew this
Agreement at least sixty (60) days prior to the termination of the immediately
preceding term.

 

15.                                 Secrecy and
Non-Competition.

 

(a)           Non-Competing Employment.  You acknowledge
that the agreements and covenants contained in this Section are essential to
protect the value of the Company’s business and assets (including resulting
from the acquisition of the business of Biosyn) and, by your current employment
with the Company, you have obtained and will obtain such knowledge, contacts,
know-how, training and experience and there is a substantial probability that
such knowledge, know-how, contacts, training and experience could be used to
the substantial advantage of a competitor of the Company and to the Company’s
substantial detriment.  Therefore, you
agree that for the period commencing on the Effective Date and ending on the
first anniversary of the termination of employment hereunder (such period is
hereinafter referred to as the “Restricted Period”)
with respect to any geographical area in which the Company is engaged in
business or actively contemplating engaging in business in the immediate future during your term of employment with the Company, you
shall not participate or engage, directly or indirectly, for your benefit or on
behalf of or in conjunction with any person, partnership, corporation or other
entity, whether as an employee, consultant, advisor, agent, officer, director,
shareholder, partner, joint venturer, investor or otherwise, in the research,
development or commercialization of any technologies, intellectual property,
potential products or products relating to (i) anti-microbial spermicides or
intravaginal gels used for contraception or the
prevention or reduction in transmission of infectious or sexually transmitted
diseases, or (ii) any other business of the Company that you become
substantially engaged in during the period of time that you are an employee of,
or consultant to, the Company after the Effective Time (collectively, the “Restricted Field”),
which technologies or products are competitive with any technology, intellectual
property, potential products, or products or application thereof in the
Restricted Field designed, contemplated to be implemented in the immediate
future, under research or development, marketed, announced, leased or sold by
the Company or any of its subsidiaries (which term for purposes of this Section
includes the Company and/or Biosyn either before or after the Effective Date) during your term of employment with the Company
or any of its subsidiaries or at the time of the termination of your
employment; provided, however, that you may own any securities of any company
which is engaged in such business and is publicly owned and traded but in an
amount not to exceed at any one time one percent of any class of stock or
securities of such company.

 

(b)           Nondisclosure
of Confidential Information.  Except in connection with your employment
hereunder, you shall not disclose to any person or entity or use, either during
the term of your employment with the Company or any of its subsidiaries or at
any time thereafter, any information not in the public domain, is generally
known in the industry or has been independently developed and disclosed by
others, in any form, acquired by you while employed by the Company (or any
subsidiary) or any predecessor to the Company’s business or, if acquired
following the term of your employment with the Company, such information which,
to

 

8

 

your knowledge, has been acquired, directly or
indirectly, from any person or entity owing a duty of confidentiality to the
Company or any of its subsidiaries or affiliates, relating to the Company, its
subsidiaries or affiliates, including but not limited to information regarding
customers, vendors, suppliers, trade secrets, training programs, manuals or materials,
technical information, contracts, systems, or other data (including the
revenues, costs or profits associated with any of the Company’s products or
services), business plans, code books, invoices and other financial statements,
computer programs, software systems, databases, discs and printouts, plans
(business, technical or otherwise), customer and industry lists,
correspondence, internal reports, personnel files, sales and advertising
material, telephone numbers, names, addresses or any other compilation of
information, written or unwritten, which is or was used in the business of the
Company or any subsidiaries or affiliates thereof.  You agree and acknowledge that all of such
information, in any form, and copies and extracts thereof, are and shall remain
the sole and exclusive property of the Company, and upon termination of your
employment with the Company, you shall return to the Company the originals and
all copies of any such information (whether in hard copy, electronic form or
otherwise) provided to or acquired by you in connection with the performance of
your duties for the Company or any subsidiary, and shall return to the Company
all files, correspondence and/or other communications received, maintained
and/or originated by you during the course of your employment.

 

                (c)           No Interference.  During the
Restricted Period, you shall not, whether for your own account or for the
account of any other individual, partnership, firm, corporation or other
business organization (other than the Company), directly or indirectly solicit,
endeavor to entice away from the Company or its subsidiaries, or otherwise
directly interfere with the relationship of the Company or its subsidiaries
with any person who is employed by or otherwise engaged to perform services for
the Company or its subsidiaries (including, but not limited to, any independent
sales representatives or organizations) or who is, or was within the then most
recent twelve-month period, a customer or client of the Company or other entity
having a business relationship with the Company, its predecessors or any of its
subsidiaries.  The placement of any
general classified or “help wanted” advertisement and/or general solicitations
to the public at large shall not constitute a violation of this Section unless
your name is contained in such advertisements or solicitations.

 

                (d)           Inventions, etc.  By signing this Agreement you hereby sell,
transfer and assign to the Company or to any person or entity designated by the
Company your entire right, title and interest in and to all inventions, ideas,
disclosures and improvements, whether patented or unpatented, and copyrightable
material, made or conceived by you, solely or jointly, during your employment
by the Company (or any subsidiary) which relate to methods, apparatus, designs,
products, processes or devices, sold, leased, used or under consideration or
development by the Company (or any subsidiary), or which otherwise relate to or
pertain to the business, functions or operations of the Company (or any subsidiary)
or which were made or conceived during business hours or using the facilities
or other resources of the Company (or any subsidiary).  You shall communicate promptly and disclose
to the Company, in such form as the Company requests, all information, details
and data pertaining to the aforementioned inventions, ideas, disclosures and
improvements; and you shall execute and deliver to the Company such formal
transfers and assignments and such other papers and documents as may be
necessary or required to permit the Company or any person or entity designated
by the Company to file and prosecute the patent

 

9

 

applications and, as to copyrightable material, to
obtain copyright thereof.  Any invention
relating to the business of the Company (or any subsidiary) and disclosed by
you within one year following the termination of your employment with the
Company shall be deemed to fall within the provisions of this Section unless
proved to have been first conceived and made following such termination.  No later than the Effective Date, you agree
to execute Cellegy’s standard form of proprietary information and invention
assignment agreement.

 

(e)           Injunctive
Relief. 
Without intending to limit the remedies available to the Company, you
acknowledge that a breach of any of the covenants contained in Section hereof
may result in material irreparable injury to the Company or its subsidiaries or
affiliates for which there is no adequate remedy at law, that it may not be possible
to measure damages for such injuries precisely and that, in the event of such a
breach or threat thereof, the Company shall be entitled to obtain a temporary
restraining order and/or a preliminary or permanent injunction, without the
necessity of proving irreparable harm or injury as a result of such breach or
threatened breach of this Section, restraining you from engaging in activities
prohibited by this Section hereof or such other relief as may be required
specifically to enforce any of the covenants in Section.

 

16.           Arbitration.

 

In order to obtain the many
benefits of arbitration over court proceedings, including speed of resolution,
lower costs and fees and more flexible rules of evidence, all disputes between you and the Company arising out of or concerning
the interpretation of application of this Agreement or its subject matter shall
be resolved exclusively by binding arbitration in Philadelphia, Pennsylvania
pursuant to the National Rules for the Resolution of Employment Disputes of the
American Arbitration Association.  The
Company and you hereby waive their rights to have a jury trial for any such
disputes.  Arbitration must be demanded within 180 days of the time when the
demanding party knows or should have known of the events giving rise of the
claim.  The arbitration opinion and award
shall be in writing and shall be final, binding and enforceable by any court
under the Federal Arbitration Act.  Each
party shall pay their own fees and costs in connection with any such
arbitration and shall pay one-half of the fees of the arbitrator, but the
arbitrator shall have discretion to make a different award of fees and costs in
connection with rendering the arbitrator’s opinion and award.  The foregoing provisions are intended to
supersede any provisions in the Retention Plan, including Section 9 thereof,
concerning arbitration of disputes.

 

17.           General.

 

(a)          
Assignment.  You may not assign
this Agreement or any of its rights and privileges hereunder to any other
person, firm or corporation.  Cellegy may
assign this Agreement without your consent in connection with any sale of all
or substantially all of Cellegy’s business or assets, whether by merger,
consolidation, sale of assets, sale or stock, or other similar transaction
provided that the successor company agrees in writing to assume the Company’s
obligations under this Agreement in their entirety (and any change in employers
resulting from the fact that the successor or acquiring company, rather than
Cellegy, becomes the employer shall not by itself be deemed a termination of
employment hereunder).  This

 

10

 

Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, successors and
permitted assigns.

 

(b)           Entire
Agreement.  This Agreement (together
with any nondisclosure, noncompetition, proprietary information and/or
invention assignment agreement(s) with Biosyn or the Company that you have
executed or will execute and all other agreements and documents referred to
herein) constitutes the entire agreement between the parties with reference to
the subject matter hereof and, except as expressly set forth in Section 2
above, supersedes all prior negotiations, understandings, representations and
agreements, if any, relating to your employment by Biosyn or Cellegy. If and to
the extent any such other agreements or documents shall be inconsistent in any
respect with the provisions of this Agreement, the provisions of this Agreement
shall prevail.

 

(c)           Governing
Law; Consent to Jurisdiction.  The
provision of this Agreement shall be governed by and interpreted in accordance
with the laws of the Commonwealth of Pennsylvania, notwithstanding any
application of any doctrine of conflicts of laws.  Without limiting the effect of the other
provisions in this Agreement requiring arbitration of disputes arising
hereunder, each party irrevocably consents to the exclusive jurisdiction and
venue of the state and federal courts for the federal and state judicial
district in which such party is entitled to initiate an arbitration proceeding
in accordance with Section 16 above in connection with any action to enforce
the provisions of this Agreement, to recover damages or other relief for breach
or default of this Agreement, or otherwise arising under or by reason of this
Agreement, and agrees that service of process in any such action may be
effected by the means provided in this Agreement for delivery of notices.

 

(d)           Severability.  If any provision contained in this Agreement
is determined to be void, invalid or unenforceable in whole or in part for any
reason whatsoever, such determination shall not affect or impair the validity
of any other provision herein, nor the validity of this Agreement as a whole.  Each provision of this Agreement shall be
deemed to be separate and distinct. 
Without limiting the foregoing, you acknowledge and agree that the
covenants set forth in Section 15 above are reasonable and valid in
geographical and temporal scope and in all other respects.  If any of such covenants or such other
provisions are found to be invalid or unenforceable by a final determination of
a court of competent jurisdiction, (i) the remaining terms and provisions
hereof shall be unimpaired and (ii) the invalid or unenforceable term or
provision shall be deemed replaced by a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid
or unenforceable term or provision.

 

(e)           Counterparts.  This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original and all of
which together shall be deemed to be one and the same instrument.

 

(f)            Termination of Exchange Agreement.  If the Exchange Agreement is terminated in
accordance with its terms, then this Agreement and the obligations of the
parties hereunder shall immediately terminate.

 

11

 

(g)           Notices.  All notices and other communications required
or permitted under this Agreement will be in writing and hand delivered, sent
by telecopier, sent by certified first class mail, postage pre-paid, or sent by
nationally recognized express courier service. 
Such notices and other communications will be effective:  (a) upon receipt if hand delivered; or (b)
three (3) days after mailing if sent by mail; and (c) one (l) business day
after delivery to a national overnight courier service for next business day
delivery, to the following addresses, or such other addresses as any party may
notify the other parties in accordance with this Section:

 

	
  If to Cellegy or Employee:

  	
   

  	
  With a copy to:

  
	
   

  	
   

  	
   

  
	
  Cellegy Pharmaceuticals, Inc.

  	
   

  	
  Weintraub Genshlea Chediak Sproul

  
	
  349 Oyster Point Boulevard

  	
   

  	
  400 Capitol Mall, Eleventh Floor

  
	
  South San Francisco, CA 94080

  	
   

  	
  Sacramento, CA 95814

  
	
  Attention: Chief Financial Officer

  	
   

  	
  Attention: C. Kevin Kelso, Esq.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  If to Employee:

  	
   

  	
  With a copy to:

  
	
   

  	
   

  	
   

  
	
  Anne-Marie Corner

  	
   

  	
  Duane Morris LLP

  
	
  586 West Mermaid Lane

  	
   

  	
  One Liberty Place

  
	
  Philadelphia, PA 19118

  	
   

  	
  Philadelphia, PA 19103-7396

  
	
   

  	
   

  	
  Attention: Kathleen M. Shay, Esq.

  

or to such other address as either
party may have furnished to the other in writing in accordance herewith, except
that notices of change of address shall only be effective upon receipt.

 

 

[Remainder of
this page intentionally left blank]

 

12

 

                Please
confirm your acceptance of the foregoing by signing this Agreement where
indicated below.  Your signature below
indicates your acceptance of this Agreement and its terms and conditions, and
we both intend, acknowledge and agree that this is a binding contract
enforceable in accordance with these terms.

 

 

Yours very truly,

 

CELLEGY PHARMACEUTICALS, INC.

 

 

By:/s/ K. Michael Forrest_______________________

                K.
Michael Forrest,

Chief Executive Officer

 

 

 

I accept the terms of the agreement as outlined
above:

 

 

 

 

 

/s/ Ann-Marie Corner________________________                                  Date:  October    , 2004

Anne-Marie Corner

 

 

13

 

EXHIBIT A

 

 

EMPLOYMENT RESPONSIBILITIES

 

 

 

1.                                       Assume direct
responsibility for the strategic direction and management of the Company’s
microbicide business, as well as administrative management of all employees
located at the Huntingdon Valley, PA facility.

 

2.                                       Prepare, obtain
approval for and manage annual budgets for the microbicide business.  As requested, prepare longer-range forecasts
and projections.

 

3.                                       Participate proactively
in Cellegy’s overall strategic planning process, working cooperatively with the
CEO, Corporate Development, Regulatory Affairs, Clinical Research, R&D,
Finance, Human Resources and Marketing/Sales.

 

4.                                       As requested, attend
Cellegy’s Board of Directors meetings in order to provide updates and input
into the strategic direction and operations of the microbicide business.

 

5.                                       Assume direct
responsibility for coordination with granting agencies to effectively manage
relationships and ensure that adequate resources are available to support core
programs.

 

6.                                       As requested, attend
conferences, conventions, road shows and meetings with members of the
investment and medical community, as well as with other constituents in order
to obtain information and/or make presentations relevant to the microbicide
business.

 

7.                                        Implement a proactive
program designed to educate and keep the CEO and/or his designates current
regarding all aspects of the microbicide business, including a planned program
to meet with potential licensing partners, granting and potential granting
agencies, CROs and other key organizations to accomplish objectives agreed upon
from time to time.

 

8.                                       As directed, and in
coordination with the Vice President, Corporate Development, meet with
potential licensing partners an/or M&A targets to accomplish objectives
agreed upon from time to time with the CEO.

 

9.                                       Seek advice and
actively provide assistance to and cooperation with employees of Cellegy from
various disciplines, in particular Clinical, Regulatory, Research, Development,
and Finance in order to effectively manage the microbicides business.

 

14

 

EXHIBIT B

 

RELEASE
OF CLAIMS

THIS
RELEASE OF CLAIMS (“Release”) is entered into
between             (“Employee”) and Cellegy
Pharmaceuticals, Inc. (“Cellegy”).

1.             Payment of Separation Benefits.  I understand that my employment with Cellegy
has terminated.  Cellegy has agreed that
if I choose to sign this Release on or after my last day of employment, Cellegy
will provide me separation benefits (the “Separation Benefits”)
set forth in pursuant to the employment letter agreement between Cellegy and me
dated             , 2004
(the “Agreement”).  I understand that I am not entitled to these
Separation Benefits unless I sign this Release. 
Employee agrees to waive or terminate his or her rights to any cash severance
or option or restricted stock acceleration or continued vesting under any
agreement, other than as described in the Agreement (whether written or oral),
with Cellegy that provides that upon a change of control or termination of
employment Employee would be entitled to receive any cash severance or
acceleration or continued vesting.  This
Release and the Agreement contain the entire understanding of Cellegy and
Employee with respect to cash severance or option or restricted stock
acceleration or continued vesting and supersede any prior agreements with
respect to these matters.  I understand
that in addition to the Separation Benefits and regardless of whether I sign
this Release, Cellegy has paid me all of my accrued salary and vacation earned
through my date of termination and any remaining unpaid balance of my bonus
that I am entitled to receive and that has not been paid.

2.             Release.

(a)           Each of (i) Employee and Employee’s
respective heirs, executors, successors and assigns, and (ii) Cellegy and its
parents, subsidiaries, successor, agents, officers and directors, hereby fully
and forever release each other and their respective heirs, executors,
successors, agents, officers and directors, from and agree not to sue
concerning, any and all claims, actions, obligations, duties, causes of action,
whether now known or unknown, suspected or unsuspected, that either of them may
possess based upon or arising out of any matter, cause, fact, thing, act, or
omission whatsoever occurring or existing at any time prior to and including
the date of Employee’s termination of employment (collectively, the “Released Matters”), as follows:

(i)            any and all claims relating to or
arising from Employee’s employment relationship with Cellegy and the
termination of that relationship;

(ii)           any and all claims relating to, or
arising from, Employee’s right to purchase, or actual purchase of, shares of
stock of Cellegy, including, without limitation, any claims of fraud,
misrepresentation, breach of fiduciary duty, breach of duty under applicable
state corporate law, and securities fraud under any state or federal law;

(iii)          any and all claims for wrongful
discharge of employment; termination in violation of public policy;
discrimination; breach of contract, both express and

 

15

 

implied; breach of a covenant of
good faith and fair dealing, both express and implied or promissory estoppel;

(iv)          any and all claims for violation of
any federal, state or municipal statute, including, but not limited to, Title
VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Age
Discrimination in Employment Act of 1967, the Americans with Disabilities Act
of 1990, the Fair Labor Standards Act, the Employee Retirement Income Security
Act of 1974, the Worker Adjustment and Retraining Notification Act, Older
Workers Benefit Protection Act, and the California Fair Employment and Housing
Act, and Labor Code section 201, et. seq.;

(v)           any and all claims for violation of
the federal, or any state, constitution;

(vi)          any and all claims arising out of any
other laws and regulations relating to employment or employment discrimination;
and

(vii)         any and all claims for attorneys’ fees
and costs.

This Release does not extend to, and
does not result in, a waiver or release of any of the following:  (a) any claim by Employee for workers’
compensation or unemployment benefits; (b) Employee’s rights to indemnity
under any indemnity agreement signed by the parties, as well as under Labor
Code section 2802; and (c) all rights and benefits to which Employee is
entitled under the Agreement.

(b)           Employee and Cellegy acknowledge that
they have been advised by legal counsel and are familiar with Section 1542 of
the Civil Code of the State of California, which states:

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

Employee
expressly waives any right or benefit that he has or may have under Section
1542 of the California Civil Code or any similar provision of the statutory or
non-statutory law of any other jurisdiction, including Pennsylvania and
Delaware.

3.             Acknowledgment of Waiver of
Claims under ADEA.  Employee
acknowledges that Employee is waiving and releasing any rights Employee may
have under the Age Discrimination in Employment Act of 1967 (“ADEA”) and that this waiver and
release is knowing and voluntary. 
Employee and Cellegy agree that this waiver and release does not apply
to any rights or claims that may arise under ADEA after the Effective Date
(defined below) of this Release. 
Employee acknowledges that the consideration given for this Release is
in addition to anything of value to which Employee was already entitled.  Employee further acknowledges that Employee
has been advised by this writing that:

 

16

 

(a)           Employee should consult with an
attorney prior to executing this Release;

(b)           Employee has at least twenty-one (21)
days within which to consider this Release, although Employee may accept the
terms of this Release at any time within those 21 days;

(c)           Employee has at least seven (7) days
following the execution of this Release by the parties to revoke this Release;
and

(d)           This Release will not be effective
until the revocation period has expired (the “Effective
Date”).

4.             Indemnity and Employee Invention
Agreement.  Employee and Cellegy
agree that all rights and obligations of the parties under any indemnity
agreement between the parties and under any invention assignment and
confidentiality agreement will continue in effect.

5.             Voluntary Execution of Agreement.  This Release is executed voluntarily and
without any duress or undue influence on the part or behalf of the parties
hereto, with the full intent of releasing all claims.  The parties acknowledge that:

(a)           they have read this Release;

(b)           they have been represented in the
preparation, negotiation, and execution of this Release by legal counsel of
their own choice or that they have voluntarily declined to seek such counsel;

(c)           they understand the terms and
consequences of this Release and of the releases it contains;

(d)           they are fully aware of the legal and
binding effect of this Release.

EXECUTIVE HAS CONSULTED WITH AN
ATTORNEY BEFORE SIGNING THIS RELEASE AND UNDERSTANDS THAT, BY SIGNING THIS
RELEASE, EXECUTIVE IS GIVING UP ANY LEGAL CLAIMS EXECUTIVE HAS AGAINST CELLEGY
PHARMACEUTICALS, INC. EXCEPT AS SET FORTH HEREIN.  EXECUTIVE FURTHER ACKNOWLEDGES THAT EXECUTIVE
DOES SO KNOWINGLY, WILLINGLY, AND VOLUNTARILY IN EXCHANGE FOR THE BENEFITS
DESCRIBED IN THE AGREEMENT.

                6.             Return of Company Property.  Employee represents and warrants to Cellegy
that Employee has returned all real or intangible property or data of Cellegy
of any type whatsoever that has been in Employee’s possession or control.

                7.             Nondisparagement.  Employee agrees that Employee will not
disparage Cellegy or its products, services, agents, directors, officers,
shareholders, attorneys, employees, affiliates, successors or assigns, or any
persons acting by, through, or in concert with any of them, with any written or
oral statement.

 

17

 

                8.             Arbitration.  The mandatory binding arbitration provisions
set forth in the Agreement are hereby incorporated by referenced.

                9.             Confidentiality.  The contents, terms and conditions of this
Release shall be kept confidential by Employee and may not be disclosed by
Employee except to Employee’s accountant or attorneys or pursuant to court
order or subpoena.  Employee agrees that
if Employee is asked for information concerning this settlement, Employee will
state only that Employee and Cellegy have reached an amicable resolution of any
disputes concerning Employee’s separation from Cellegy.

                10.           Entire Agreement.  This Release sets forth the entire agreement
between Employee and Cellegy with respect to the subject matter hereof and
supersedes all prior negotiations and agreements, whether written or oral,
relating to such subject matter.

 

 

[Remainder of this page intentionally left blank]

 

18

 

IN
WITNESS WHEREOF, the parties have executed this Release as of the date set
forth below.

 

	
  EXECUTIVE

  	
  CELLEGY PHARMACEUTICALS, INC.

  	 

	
   

  	 

	
   

  	 

	
   

  	
   

  	
   

  	 

	
   

  	
  By:

  	
   

  	
   

  	 

	
   

  	
  Title:

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	 

	
  Signature

  	 

	
  Date:

  	
   

  	
   

  	
  Date:

  	
   

  	
   

  
									

 

 

19Exhibit 10.2

BIOSYN, INC.

1999 STOCK OPTION PLAN

(as amended effective October 7, 2004)

 

Purpose.
BIOSYN, INC. (the “Company”) hereby adopts The Biosyn Inc. 1999 Stock Option
Plan (the “Plan”). The Plan is intended to recognize the contributions made to
the Company by key employees, directors, consultants and advisors of the
Company or any Affiliate, to provide such persons with additional incentive to
devote themselves to the future success of the Company or an Affiliate, and to
improve the ability of the Company or an Affiliate to attract, retain, and
motivate individuals upon whom the Company’s sustained growth and financial
success depend, by providing such persons with an opportunity to acquire or
increase their proprietary interest in the Company through receipt of rights to
acquire Shares of the Company’s Common Stock, $.01 par value per Share (the
“Common Stock”).

 

2.             Definitions.
Unless the context clearly indicates otherwise, the following terms shall have
the following meanings:

 

a.             “Affiliate”
means a corporation which is a parent corporation or a subsidiary corporation
with respect to the Company within the meaning of Section 424(e) or (f) of the
Code.

 

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

 

c.             “Change
of Control” shall have the meaning as set forth in Section 9 of the Plan.

 

1

 

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

 

e.             “Committee”
shall have the meaning set forth in Section 3 of the Plan.

 

f.              “Company”
means Biosyn, Inc., a Pennsylvania corporation.

 

g.             “Disability”
shall have the meaning set forth in Section 22(e)(3) of the Code.

 

h.             “Fair
Market Value” shall have the meaning set forth in Subsection 8(b) of the Plan.

 

“ISO” means an Option granted under the Plan which is
intended to qualify as an “incentive stock option” within the meaning of
Section 422(b) of the Code.

 

“Non-qualified Stock Option” means an Option granted
under the Plan which is not intended to qualify, or otherwise does not qualify,
as an “incentive stock option” within the meaning of Section 422(b) of the
Code.

 

k.             “Option”
means either an ISO or a Non-qualified Stock Option granted under the Plan.

 

1.             “Optionee”
means a person to whom an Option has been granted under the Plan, which Option
has not been exercised and has not expired or terminated.

 

m.            “Option
Document” means the document described in Section 8 of the Plan which sets
forth the terms and conditions of each grant of Options.

 

n.             “Option Price” means the price at
which Shares may be purchased upon exercise of an Option, as calculated
pursuant to Subsection 8(b) of the Plan.

 

o.                    “Shares” means the shares of Common Stock of the Company
which are the subject of Options.

 

3.             Administration of the Plan. The Plan shall be administered
by the Board of 

 

2

 

Directors o the Company; however, the Board of Directors may designate
a committee composed of two or more of its members to operate and administer
the Plan in its stead. Any such committee designated by the Board of Directors,
and the Board of Directors itself in its administrative capacity with respect
to the Plan, is referred to as the “Committee.”

 

a.             Meetings. The Committee shall hold meetings at
such times and places as it may determine. Acts approved at a meeting by a
majority of the members of the Committee or acts approved in writing by the
unanimous consent of the members of the Committee shall be the valid acts of
the Committee.

 

b.             Grants. The Committee shall from time to time at
its discretion direct the Company to grant Options pursuant to the terms of the
Plan. The Committee shall have plenary authority to (i) determine the persons
to whom, the times at which, and the price at which Option shall be granted,
(ii) determine the type of Option to be granted and the number of Shares
subject thereto, and (iii) approve the form and terms and conditions of the
Option Documents; all subject, however, to the express provisions of the Plan.
In making such determination, the Committee may take into account the nature of
such Optionee’s services and responsibilities, the Optionee’s present and
potential contribution to the Company’s success and such other factors as it
may deem relevant. The interpretation and construction by the Committee of any
provisions of the Plan or of any Option granted under it shall be final,
binding and conclusive.

 

c.             Exculpation. No member of the Committee shall be
personally liable for monetary damages as such for any action taken or any
failure to take any action in connection with the administration of the Plan or
the granting of Options thereunder unless (i) the member of the Committee has
breached or failed to perform the duties of such member’s office under
Subchapter B of Chapter 17 of the Pennsylvania Business Corporation Law of
1988, as 

 

3

 

amended,
and (ii) the breach or failure to perform constitutes self-dealing, willful
misconduct or recklessness; provided, however, that the provisions of this
Subsection 3(c) shall not apply to the responsibility or liability of a member
of the Committee pursuant to any criminal statute or to the liability of a
member of the Committee for the payment of taxes pursuant to local, state or
federal law.

 

d.             Indemnification.
Service on the Committee shall constitute service as a member of the Board of
Directors of the Company. Each member of the Committee shall be entitled
without further act on his part to indemnity from the Company to the fullest
extent provided by applicable law and the Company’s Articles of Incorporation
and/or By-laws in connection with or arising out of any action, suit or
proceeding with respect to the administration of the Plan or the granting of
Options thereunder in which he or she may be involved by reason of his or her
being or having been a member of the Committee, whether or not he or she
continues to be such member of the Committee at the time of the action, suit or
proceeding.

 

4.               Grants
under the Plan.  Grants under the
Plan may be in the form of a Non-qualified Stock Option, an ISO or a
combination thereof, at the discretion of the Committee.

 

5.             Eligibility. 
All key employees, consultants and advisors of the Company or any
Affiliate, and members of the Board of Directors of the Company or any
Affiliate shall be eligible to receive Options hereunder. The Committee, in its
sole discretion, shall determine whether an individual qualified as a key
employee.

 

6.             Shares Subject to Plan.  The aggregate maximum number of Shares for
which Options may be granted pursuant to the Plan is One Million (1,000,000),
subject to adjustment as provided in Section 10 of the Plan. The Shares shall
be issued from authorized and unissued Common Stock or Common Stock held in or hereafter acquired for the treasury
of the Company. If an Option terminates or expires without having been fully
exercised for any 

 

4

 

reason, the Shares for which the Option was
not exercised may again be the subject of one or more Options granted pursuant
to the Plan.

 

7              Term of the Plan.  The Plan is effective as of May 21, 1999, the
date on which it was adopted by the Board of Directors, subject to its approval
prior to May 21, 2000 by a majority of the votes cast by stockholders entitled
to vote, or by a method and in a degree that would be treated as adequate under
applicable state law in the case of an action requiring shareholder approval.
No Option may be granted under the Plan after May 21, 2009. If the Plan is not
so approved on or before May 21, 2000, all Options granted under the Plan shall
be null and void.

 

8.             Option Documents and Terms.  Each Option granted under the Plan shall be a
Non-qualified Stock Option unless the Option shall be specifically designated
at the time of grant to be an ISO for Federal income tax purposes. If any
Option designated as an ISO is determined for any reason not to qualify as an
incentive stock option within the meaning of Section 422 of the Code, such
Option shall be treated as a Non-qualified Stock Option for all purposes under
the provisions of the Plan. Options granted pursuant to the Plan shall be
evidenced by the Option Documents in such form as the Committee shall
from time to time approve, which Option Documents shall comply with and be subject
to all of the terms and conditions contained in the Plan and such other terms
and conditions as the Committee shall from time to time require which are not
inconsistent with the terms of the Plan.

 

a.             Number of Option Shares.
Each Option Document shall state the number of Shares to which it pertains. An
Optionee may receive more than one Option, which may include Options which are
intended to be ISO’s and Options which are not intended to be ISO’s, but only
on the terms and subject to the conditions and restrictions of the Plan.

 

b.             Option Price. Each Option
Document shall state the Option Price 

 

5

 

which, for a Non-qualified
Stock Option, may be less than, equal to, or greater than the Fair Market Value
of the Shares on the date the Option is granted and, for an ISO, shall be at
least 100% of the Fair Market Value of the Shares on the date the Option is
granted as determined by the Committee in accordance with this Subsection 8(b);
provided, however, that if an ISO is granted to an Optionee who then owns,
directly or by attribution under Section 424(d) of the Code, shares possession
more than ten percent of the total combined voting power of all classes of
stock of the Company or an Affiliate, then the Option Price shall be at least
110% of the Fair Market Value of the Shares on the date the Option is granted.
If the Common Stock is traded in a public market, then the Fair Market Value
per share shall be, if the Common Stock is listed on a national securities
exchange or included in the Nasdaq National Market System, the last reported
sale price thereof on the relevant date, or, if the Common Stock is not so
listed or included, the mean between the last reported “bid” and “asked” prices
thereof on the relevant date, as reported on Nasdaq or, if not so reported, as
reported by the National Daily Quotation Bureau, Inc., or as reported in a
customary financial reporting service, as applicable and as the Committee
determines. If the Common Stock is not traded in a public market, then the Fair
Market Value per share shall be as determined in good faith by the Committee.

 

Exercise. No Option shall be deemed
to have been exercised prior to the receipt by the Company of written notice of
such exercise and of payment on the terms established by the Committee and in
the Option Document of the Option Price for the Shares to be purchased. Each
such notice shall specify the number of Shares to be purchased and shall
(unless the Shares are covered by a then current registration statement or a
Notification under Regulation A under the Securities Act of 1933, as amended
(the “Act”)), certain the Optionee’s acknowledgment in form and substance
satisfactory to the Company that (a) such Shares are being purchased for
investment and not for distribution or resale (other than a distribution or 

 

6

 

resale which, in the opinion
of counsel satisfactory to the Company, may be made without violating the
registration provisions of the Act), (b) the Optionee has been advised and
understands that (i) the Shares have not been registered under the Act and are
“restricted securities” within the meaning of Rule 144 under the Act and are
subject to restrictions on transfer and (ii) the Company is under no obligation
to register the Shares under the Act or to take any action which would make
available to the Optionee any exemption from such registration, (c) such Shares
may not be transferred without compliance with all applicable federal and state
securities law, and (d) an appropriate legend referring to the foregoing
restrictions on transfer and any other restrictions imposed under the Option
Documents may be endorsed on the certificates. Notwithstanding the foregoing,
if the Company determines that issuance of Shares should be delayed pending (A)
registration under federal or state securities laws, (B) the receipt of an
opinion of counsel satisfactory to the Company that an appropriate exemption
from such registration is available,
(C) the listing or inclusion of the Shares on any securities exchange or an
automated quotation system or (D) the consent or approval of any governmental
regulatory body whose consent or approval is necessary in connection with the
issuance of such Shares, the Company may defer exercise of any Option granted
hereunder until any of the events described in this sentence has occurred.

 

d.             Medium
of Payment. An Optionee shall pay for Shares (i) in cash, (ii) by certified
or cashier’s check payable to the order of the Company, or (iii), by such other
mode of payment as the Committee may approve, including payment through a
broker in accordance with procedures permitted by Regulation T of the Federal
Reserve Board. Furthermore, the Committee may provide in an Option Document that
payment may be made in whole or in part in shares of the Company’s Common Stock
held by the Optionee. If payment is made in whole or in part shares of the
Company’s Common Stock, then the Optionee shall 

 

7

 

deliver to the Company’s
Common Stock, then the Optionee shall deliver to the Company certificates
registered in the name of such Optionee representing the shares owned by such
Optionee, free of all liens, claims and encumbrances of every kind and having
an aggregate Fair Market Value on the date of delivery that is at least as
great as the Option Price of the Shares (or relevant portion thereof) with
respect to which such Option is to be exercised by the payment in shares of
Common Stock, endorsed in blank or accompanied by stock powers duly endorsed in
blank by the Optionee. In the event that certificates for shares of the
Company’s Common Stock delivered to the Company represent a number of shares in
excess of the number of shares required to make payment for the Option Price of
the Shares (or relevant portion thereof) with respect to which such Option is
to be exercised by payment in shares of Common Stock, the stock certificate issued to the Optionee shall
represent (i) the Shares in respect of which payment is made, (ii) such excess
number of shares. Notwithstanding the foregoing, the Committee may impose from
time to time such limitations and prohibitions on the use of shares of the
Common Stock to exercise an Option as it deems appropriate.

 

e.             Termination of Options.

 

(i)            No Option shall be exercisable after
the first to occur of the following:

 

Expiration
of the Option term specified in the Option Document, which shall not occur
after (1) ten years from the date of grant, or (2) five years from the date of
grant of an ISO if the Optionee on the date of grant owns, directly or by
attribution under Section 424(d) of the Code, shares possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or of an Affiliate;

 

Expiration
of three months from the date the Optionee’s employment or service with the
Company or its Affiliates terminates for any reason 

 

8

 

other than Disability or death or as otherwise specified
in Subsection 8(e)(i)(D) or 8(e)(i)(E) below;

 

Expiration of one year from the date such employment or
service with the Company or its Affiliates terminates due to the Optionee’s
Disability or death;

 

A finding by the Committee, after full consideration of the facts presented on behalf of both the Company and the Optionee,
that the Optionee has breached his employment or service contract with the
Company or an Affiliate, including,

 

without limitation,
fraud, embezzlement, theft, commission of a felony or proven dishonesty in the
course of his employment or service, or has disclosed trade secrets or
confidential information of the Company or an Affiliate. In such event, in
addition to immediate termination of the Option, the Optionee shall automatically
forfeit all Shares for which the Company has not yet delivered the share
certificates upon refund by the Company of the Option Price. Notwithstanding
anything herein to the contrary, the Company may withhold delivery of share
certificates pending the resolution of any inquiry that could lead to a finding
resulting in forfeiture.

 

The
date, if any, set by the Board of Directors as an accelerated expiration date
in the event of the liquidation or dissolution of the Company.

 

The occurrence of such other event as may, at the discretion of the Committee, be established as an early termination
date for an Option granted under the Plan.

 

(ii)           Notwithstanding
the foregoing, the Committee may extend the period during which all or any
portion of an Option may be exercised to a date no later than the option term
specified in the Option Document pursuant to Subsection 8(e)(i)(A), provided
that any change pursuant to this Subsection 8(e)(ii) which would cause an ISO
to become a non-

 

9

 

qualified
Stock Option may be made only with the consent of the Optionee.

 

f.              Transfers.
No Option granted under the Plan may be transferred, except by will or by the
laws of descent and distribution. During the lifetime of the person to whom an
Option is granted, such Option may be exercised only by him.

 

g.                   Limitation on ISO
Grants. In no event shall the aggregate fair market value of the shares of
Commons Stock (determined at the time the ISO is granted) with respect to which
incentive stock options under all incentive stock option plans of the Company
or its Affiliates are exercisable for the first time by the Optionee during any
calendar year exceed $100,000.

 

h.             Other
Provisions. Subject to the provisions of the Plan, the Option Documents
shall contain such other provisions including, without limitation, provisions
authorizing the Committee to accelerate the exercisability of all or any
portion of an Option granted pursuant to the Plan, additional restrictions upon
the exercise of the Option or additional limitations upon the term of the
Option, as the Committee shall deem advisable.

 

i.              Amendment.
Subject to the provisions of the Plan, the Committee shall have the right to
amend Option Documents issued to an Optionee, subject to the Optionee’s consent
if such amendment is not favorable to the Optionee, except that the consent of
the Optionee shall not be required for any amendment made pursuant to
Subsection 9 (e)(i) (E) or Section 9 of the Plan, as applicable.

 

9.               Change
of Control.  In the event of
a Change of Control, the Committee may take whatever action it deems necessary
or desirable with respect to the Options outstanding, including, without
limitation, (i) accelerating the expiration or termination date in the
respective Option documents to a date no earlier than thirty (30) days after
notice of such acceleration is given to the Optionees, and/or (ii) substituting
for any outstanding unexercised 

 

10

 

Options
new options which shall provide that, subject to such terms and conditions as
the Committee may deem appropriate, the Optionee shall be entitled upon the
exercise of such new options to receive such securities of the surviving or
resulting corporation (or the corporate parent of such corporation that owns at
least fifty percent (50 %) of the voting common stock of the surviving or
resulting corporation) as the board of directors of such corporation (or such
corporate parent, as applicable) shall determine to be equivalent, as nearly as
practicable, to the nearest whole number and class of Shares to which Optionee
would have been entitled under the terms of the agreement governing the
reorganization, merger, consolidation, acquisition of all of the interests or
liquidation as if, immediately prior to such event, the Optionee had been the
holder of record of the number of Shares which were then subject to such
Option.  In addition to the foregoing, in
the event of a Change of Control or in the event that the shareholders of the
Company (or the Board of Directors, if shareholder action is not required) and
the shareholders of the other constituent corporation (or its board of
directors if shareholder action is not required) have approved a definitive
share exchange agreement which contemplates a Change of Control, Options
granted pursuant to the Plan shall become immediately exercisable in full.

 

A “Change of Control” shall be deemed to have
occurred upon the earliest to occur of the following events: (i) the date the
shareholders of the Company (or the Board of Directors, if shareholder action
is not required) approve a plan or other arrangement pursuant to which the
Company will be dissolved or liquidated, or (ii) the date the shareholders of
the Company (or the Board of Directors, if shareholder action is not required)
approve a definitive agreement to sell or otherwise dispose of substantially
all of the assets of the Company, or (iii) the date the shareholders of the
Company (or the Board of Directors, if shareholder action is not required) and
the shareholders of the other constituent corporation (or its board of
directors if 

 

11

 

shareholder action is not
required) have approved a definitive agreement to merge or consolidate the
Company with or into such other corporation, other than, in either case, a
merger or consolidation of the Company in which holders of shares of the
Company’s Common Stock immediately prior to the merger or consolidation will
have at least a majority of the ownership of common stock of the surviving
corporation (and, if one class of common stock is not the only class of voting
securities entitled to vote on the election of directors of the surviving
corporation, a majority of the voting power of the surviving corporation’s
voting securities) immediately after the merger or consolidation, which common
stock (and, if applicable, voting securities) is to be held in the same
proportion as such holders’ ownership of Common Stock of the Company
immediately before the merger or consolidation, or (iv) the date any entity,
person or group, within the meaning of Section 13(d)(3) or Section 14(d)(2) of
the Securities Exchange Act of 1934, as amended, other than the Company or any
of its subsidiaries, any employee benefit plan (or related trust) sponsored or
maintained by the Company or any of its subsidiaries or Anne-Marie Corner,
Daniel Malamud and Alex Adler, in the aggregate, (directly or indirectly,
either individually or together with any member of their immediate family or a
trust for the benefit of them or any member of their immediate family) shall no
longer be the beneficial owner of, or have obtained voting control over, at
least fifteen percent (15%) of the outstanding shares of the Company’s Common
Stock.

 

10.           Adjustments
on Changes in Capitalization. The aggregate number of Shares and class of Shares as to which Options
may be granted hereunder, the number and class or classes of Shares covered by
each outstanding Option and the Option Price thereof shall be appropriately
adjusted in the event of a stock dividend, stock split, recapitalization or
other change in the number or class of issued and outstanding equity securities
of the Company resulting from a subdivision or consolidation of the Common
Stock and/or, if appropriate, other 

 

12

 

outstanding equity securities or a
recapitalization or other capital adjustment (not including the issuance of
Common Stock on the conversion of other securities of the Company which are
convertible into Common Stock) affecting the Common Stock which is effected
without receipt of consideration by the Company. The Committee shall have
authority to determine the adjustments to be made under this Section, and any
such determination by the Committee shall be final, binding and conclusive.

 

11.           Amendment of the Plan. The
Board of Directors of the Company may amend the Plan from time to time in such
manner as it may deem advisable. Nevertheless, the Board of Directors of the
Company may not change the class of individuals eligible to receive an ISO or
increase the maximum number of shares as to which Options may be granted
without obtaining approval, within twelve months before or after such action,
by vote of a majority of the votes cast at a duly called meeting of the
shareholders at which a quorum representing a majority

 

of
all outstanding voting stock of the Company is, either in person or by proxy,
present and voting on the matter, or by a method and in a degree that would be
treated as adequate under applicable state
law in the case of an action requiring shareholder approval. No amendment to
the Plan shall adversely affect any outstanding Option, however, without the
consent of the Optionee.

 

12.           No Commitment to Retain. The
grant of an Option pursuant to the Plan shall
not be construed to imply or to constitute evidence of any agreement, express
or implied, on  the part of the
Company or any Affiliate to retain the Optionee in the employ of the Company or
an Affiliate or as a member of the Company’s Board of Directors or in any other
capacity.

 

13.           Withholding of Taxes. Whenever the Company proposes
or is required to deliver or transfer Shares in connection with the exercise of
an Option, the Company shall have the right to (a) require the recipient to
remit or otherwise make available to the Company an 

 

13

 

amount sufficient to satisfy
any federal, state and/or local withholding tax requirements prior to the delivery or transfer of any certificate or
certificates for such Shares or (b) take whatever other action it deems
necessary to protect its interests with respect to tax liabilities. The
Company’s obligation to make any delivery or transfer of Shares shall be
conditioned on the Optionee’s compliance, to the Company’s satisfaction, with
any withholding requirement.

 

14

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00074-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00074-of-00352.parquet"}]]