Item
5.02
Departure of Directors or Certain
Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Appointment
of Chief Clinical and Regulatory Officer
On
August 31, 2016, the Company appointed Sharron Gargosky, PhD to the position of Chief Clinical and Regulatory Officer of the Company
effective September 1, 2016. In this role she will lead the Company’s clinical and device programs.
Before
her appointment to the position of Chief Clinical and Regulatory Officer, Dr. Gargosky, age 52, had been serving as Head of Clinical
Development and Operations in a consulting capacity for the Company since February 2016. Prior to joining the Company, Dr. Gargosky
was the Chief Technical and Operations Officer of Prima BioMed Ltd., an Australian-based global biotechnology company. Before
joining Prima BioMed, Dr. Gargosky served in positions of increasing clinical and scientific responsibility at biopharmaceutical
companies including Pulse Health LLC, Hyperion Therapeutics, Medicis, and Pharmacia. She has also consulted on pharmaceutical
drug and biologic development as a member of ILMU Consulting LLC. Dr. Gargosky received her PhD from the University of Adelaide,
Australia and completed her postdoctoral fellowship at Stanford University.
Executive
Employment Agreement
In
connection with the commencement of Dr. Gargosky’s employment, the Company entered into an employment agreement with Dr.
Gargosky (the “Employment Agreement”). A summary of the principal terms of the Employment Agreement is provided below,
but this summary does not purport to be complete and is qualified in its entirety by reference to the full text of the Employment
Agreement, a copy of which is filed as an Exhibit hereto.
The
Employment Agreement is effective as of September 1, 2016 and provides for the following, among other things: (a) a base annual
salary of $300,000; (b) eligibility to receive an annual bonus at the discretion of the Board of Directors; (c) as an inducement
material to entering into employment with the Company, the grant of a stock option award to purchase up to 270,000 shares of the
Company’s common stock described in further detail under the heading “Inducement Stock Option Award” below;
and (d) if Dr. Gargosky is terminated other than for cause, by death or by disability, or if she terminates her employment with
the Company for good reason, then she will be entitled to receive from the Company (i) severance payment equal three (3) months
of her then-current base annual salary, if such termination takes place after six (6) months of employment but before one (1)
year of employment; (ii) severance payment equal to six (6) months of her then-current base annual salary, if such termination
takes place after one (1) year of employment but before two (2) years of employment, or (iii) severance payment equal to one (1)
year of her then-current base annual salary, if such termination takes place after two (2) years of employment. Any severance
will be paid, less applicable statutory deductions and withholdings, as salary continuation (and not as a lump sum) over the applicable
period and in accordance with the Company’s standard payroll practices.
Under
the terms of the Employment Agreement, (i) the term “for cause” is defined to mean (a) commission of a crime involving
dishonesty, breach of trust, or physical harm to any person; (b) willful engagement in conduct that is in bad faith and materially
injurious to the Company, including but not limited to, misappropriation of trade secrets, fraud or embezzlement; (c) commission
of a material breach of the Employment Agreement, which breach is not cured within 20 days after written notice to Dr. Gargosky
from the Company; (d) willful refusal to implement or follow a lawful policy or directive of the Company, which breach is not
cured within 20 days after written notice to Dr. Gargosky from the Company; or (e) engagement in misfeasance or malfeasance demonstrated
by a pattern of failure to perform job duties diligently and professionally; and (ii) the term “good cause” is defined
to mean any one or more of the following events without Dr. Gargosky’s consent: (a) a reduction in the amount of Dr. Gargosky’s
base compensation in a manner that disproportionately adversely affects Dr. Gargosky as compared to other senior management of
the Company; or (b) any material change in Dr. Gargosky’s duties, authority or responsibilities with the Company relative
to the duties, authority or responsibilities in effect immediately prior to such change; provided in either case that the Company
shall have 15 business days following its receipt of written notice from Dr. Gargosky to cure any such event before it is deemed
an event constituting “good cause.”
Inducement
Stock Option Award
In
connection with Dr. Gargosky’s appointment and pursuant to the terms of her Employment Agreement, effective as of September
1, 2016, the Company granted to Dr. Gargosky a stock option to purchase 270,000 shares of the Company’s common stock at
an exercise price equal to the closing price of the Company’s common stock on the date of the grant of the award, to vest
as follows: 25% of the shares underlying the award vested on the date of grant, and the remaining 75% of the shares underlying
the award shall vest in 36 equal monthly installments thereafter. The stock option has a term of 10 years and will generally be
forfeited if not exercised before the expiration of that term, or after the three- (3)-month period following the date of termination
of Dr. Gargosky’s employment with the Company (if earlier).
The
stock option was granted pursuant to approval of the Compensation Committee of the Company’s Board of Directors outside
the Company’s 2011 Stock Incentive Plan, pursuant to an inducement stock option award agreement with terms substantially
similar to those of non-qualified stock options granted under the Company’s 2011 Stock Incentive Plan.