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Item 5.02.
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Departure of Directors
or Certain Officers; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
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On June 15, 2017, we entered into an employment agreement with
Gregory A. Gould, effective June 16, 2017, to serve as our Chief Financial Officer. Mr. Gould has been serving as our Chief Financial
Officer on a part-time basis since April 2015.
The agreement is identical to the two-year employment agreement
entered into effective April 16, 2017, with Jarrett Disbrow, our Chief Operating Officer, except for the positon that Mr. Gould
is to occupy.
The agreement is for a term of 24 months beginning on June 16,
2017, subject to termination by us with or without Cause (as defined below) or as a result of Mr. Gould’s disability,
or by Mr. Gould with or without Good Reason (as defined below). Mr. Gould is entitled to receive $250,000 in annual salary, plus
a discretionary performance bonus with a target of 125% of his base salary, based on his individual achievements and company performance
objectives established by the board or the compensation committee in consultation with Mr. Gould. Mr. Gould is also eligible to
participate in the benefit plans maintained by us from time to time, subject to the terms and conditions of such plans.
We agreed to issue to Mr. Gould on or promptly after August
1, 2017 stock options to purchase shares of our common stock in an amount agreed upon by us and Mr. Gould, and commensurate with
Mr. Gould’s role as a senior executive at our company. The exercise price will be the last sale price of our common stock
as reported during the period immediately preceding the date of grant, and in accordance with our 2015 Stock Option and Incentive
Plan, and will vest as follows: 50% will vest on the date of grant; 25% will vest 365 days after the date of grant; and 25% will
vest 730 days after the date of grant. All such options will vest in full upon a Change in Control (as defined below), death, disability,
or termination with or without Cause or for Good Reason.
In the event Mr. Gould’s employment is terminated without
Cause by us or Mr. Gould terminates his employment with Good Reason, we will be obligated to pay him any accrued compensation and
a lump sum payment equal to two times his base salary in effect at the date of termination, as well as continued participation
in our health and welfare plans for up to two years. All vested stock options will remain exercisable from the date of termination
until the expiration date of the applicable award. So long as a Change in Control is not in effect, then all options which are
unvested at the date of termination without Cause or for Good Reason shall be accelerated as of the date of termination such that
the number of option shares equal to 1/24
th
the number of option shares multiplied by the number of full months of Mr.
Gould’s employment will be deemed vested and immediately exercisable by Mr. Gould. Any unvested options over and above the
foregoing shall be cancelled and of no further force or effect, and will not be exercisable by Mr. Gould.
“Good Reason” means, without Mr. Gould’s written
consent, there is:
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a material reduction of the level of Mr. Gould’s compensation (excluding any bonuses) (except where there is a general
reduction applicable to the management team generally, provided, however, that in no case may the base salary be reduced below
$250,000);
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a material reduction in Mr. Gould’s overall responsibilities or authority, or scope of duties (it being understood that
the occurrence of a Change in Control shall not, by itself, necessarily constitute a reduction in Mr. Gould’s responsibilities
or authority); or
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a material change in the principal geographic location at which Mr. Gould must perform his services (it being understood that
the relocation to a facility or a location within 40 miles of the State Capitol Building in Denver, Colorado will not be deemed
material).
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“Cause” means:
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willful malfeasance or willful misconduct by Mr. Gould in connection with his employment;
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gross negligence in performing any of his duties;
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conviction of, or entry of a plea of guilty to, or entry of a plea of nolo contendere with respect to, any crime, other than
a traffic violation or infraction which is a misdemeanor;
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willful and deliberate violation of any of our policies;
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unintended but material breach of any written policy applicable to all employees adopted by us which is not cured to the reasonable
satisfaction of the board within 30 days of notice;
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unauthorized use or disclosure of any of our proprietary information or trade secrets or that of any other party as to which
Mr. Gould owes an obligation of nondisclosure as a result of Mr. Gould’s relationship with us;
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willful and deliberate breach of his obligations under the employment agreement; or
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any other material breach by officer of any of his obligations which is not cured to the reasonable satisfaction of the board
within 30 days of notice.
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The severance benefits described above are contingent on Mr.
Gould executing a general release of claims.
In the event of a Change in Control, all stock options, restricted
stock and other stock-based grants granted or may be granted in the future by us to Mr. Gould will immediately vest and become
exercisable and all restrictions thereon will lapse.
“Change in Control” means the occurrence of any
of the following events:
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the acquisition by 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”)) (the “Acquiring Person”), other than our company, or any
of our subsidiaries, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more
of the combined voting power or economic interests of our then outstanding voting securities entitled to vote generally in the
election of directors (excluding any issuance of securities by us in a transaction or series of transactions made principally for
bona fide equity financing purposes); or
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the acquisition of our company by another entity by means of any transaction or series of related transactions to which we
are party (including, without limitation, any stock acquisition, reorganization, merger or consolidation but excluding any issuance
of securities by us in a transaction or series of transactions made principally for bona fide equity financing purposes) other
than a transaction or series of related transactions in which the holders of our voting securities outstanding immediately prior
to such transaction or series of related transactions retain, immediately after such transaction or series of related transactions,
as a result of shares in us held by such holders prior to such transaction or series of related transactions, at least a majority
of the total voting power represented by our outstanding voting securities or such other surviving or resulting entity (or if we
or such other surviving or resulting entity is a wholly-owned subsidiary immediately following such acquisition, its parent); or
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the sale or other disposition of all or substantially all of our assets in one transaction or series of related transactions.
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The employment agreement is filed as Exhibit 10.1 to this Report
and is incorporated herein by reference. The foregoing description of the employment agreement is not complete and is qualified
in its entirety by reference to Exhibit 10.1.
Mr. Gould has held senior management positions in the life sciences
industry for over 20 years. Prior to joining Aytu BioScience on a full-time basis, he split his time between Aytu and Ampio Pharmaceuticals,
Inc. from April 2015 until June 2017. Prior to joining Ampio Pharmaceuticals in June 2014, he provided financial and operational
consulting services to the biotech industry through his consulting company, Gould, LLC. Mr. Gould was Chief Financial Officer,
Treasurer and Secretary of SeraCare Life Sciences from November 2006 until the company was sold to Linden Capital Partners in April
2012. During the period from July 2011 until April 2012, Mr. Gould also served as the Interim President and Chief Executive Officer
of SeraCare. Mr. Gould has held several other executive positions at publicly traded life sciences companies including the Chief
Financial Officer role at Atrix Laboratories, Inc., an emerging specialty pharmaceutical company focused on advanced drug delivery.
During Mr. Gould’s tenure at Atrix, he was instrumental in the negotiation and sale of the company to QLT, Inc. He also played
a critical role in the management of several licensing agreements including the global licensing agreement with Sanofi-Synthelabo
of the Eligard® product line. Mr. Gould was the Chief Financial Officer at Colorado MedTech, Inc., a publicly traded medical
device design and manufacturing company, where he negotiated the transaction to sell the company to KRG Capital Partners. Mr. Gould
began his career as an auditor with Arthur Andersen, LLP. He currently serves on the board of directors of CytoDyn, Inc., a publicly
traded drug development company pursuing anti-viral agents for the treatment of HIV. Mr. Gould graduated from the University of
Colorado with a BS in Business Administration and is a Certified Public Accountant.
There have been no transactions between Mr. Gould and our company
other than the compensation that he has received for serving as our Chief Financial Officer on part-time basis since April 2015
and the purchase by him of our securities on the same terms as other investors at the time of such investment.