-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, T/lCJX5ZVNae/n5G/p51LWtlOxrszs/PUu/CaSLF6PnLaT2zEgDnGGTyNNEO3HFZ 9exuNdpiyOfUDs30zsmdjg== 0001188112-06-000867.txt : 20060329 0001188112-06-000867.hdr.sgml : 20060329 20060329172800 ACCESSION NUMBER: 0001188112-06-000867 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20060327 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20060329 DATE AS OF CHANGE: 20060329 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LPATH, INC CENTRAL INDEX KEY: 0001251769 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] IRS NUMBER: 161630142 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-50344 FILM NUMBER: 06719870 BUSINESS ADDRESS: STREET 1: 6335 FERRIS SQUARE STREET 2: SUITE A CITY: SAN DIEGO STATE: CA ZIP: 92121 BUSINESS PHONE: 858-678-0800 MAIL ADDRESS: STREET 1: 6335 FERRIS SQUARE STREET 2: SUITE A CITY: SAN DIEGO STATE: CA ZIP: 92121 FORMER COMPANY: FORMER CONFORMED NAME: LPATH INC DATE OF NAME CHANGE: 20051202 FORMER COMPANY: FORMER CONFORMED NAME: NEIGHBORHOOD CONNECTIONS INC DATE OF NAME CHANGE: 20040323 FORMER COMPANY: FORMER CONFORMED NAME: JCG INC DATE OF NAME CHANGE: 20030702 8-K 1 t8k-9591.txt 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): MARCH 27, 2006 LPATH, INC. (Exact name of registrant specified in charter) NEVADA 000-50344 16-1630142 (State of Incorporation) (Commission File Number) (IRS Employer Identification No.) 6335 FERRIS SQUARE, SUITE A, SAN DIEGO, CA 92121 (Address of principal executive offices) (Zip Code) (858) 678-0800 Issuer's Telephone Number Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): |_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT 1. On March 28, 2006, Lpath, Inc. (the "Company") closed a private equity financing round in the aggregate amount of $396,000 whereby investors purchased an aggregate of 208,423 Units (the "Private Placement"). Each Unit was priced at $1.90 and consisted of two shares of the Company's common stock and a warrant to purchase one share of common stock at $1.50 per share. The Units sold under the Private Placement were purchased by unaffiliated accredited investors (as defined in Rule 501 of Regulations D promulgated under the Securities Act of 1933, as amended), and thus subject to an exemption from registration under the applicable federal securities laws. Investors in the Private Placement have been granted certain registration rights with respect to the shares of common stock underlying the Units. 2. On March 27, 2006, following the approval of the Company's Compensation Committee and Board of Directors, the Company entered into the following agreements with its key officers and/or consultants as described below. (i) Scott R. Pancoast, Chief Executive Officer and President. Mr. Pancoast will be paid a base salary of $330,000 per annum, effective as of January 1, 2006. Mr. Pancoast may be granted bonuses and stock options at the discretion of the Board, upon review and recommendation by the Compensation Committee. (ii) Gary Atkinson, Vice President and Chief Financial Officer. Mr. Atkinson will be paid a base salary of $210,000 per annum, effective as of February 6, 2006. Mr. Atkinson may be granted bonuses and stock options at the discretion of the Board, upon review and recommendation by the Compensation Committee. (iii) William Garland, consultant, Vice President, Development. Professor Garland will be paid a base of $170,000.00 per annum, effective as of January 1, 2006. Services rendered by Professor Garland in excess of 36 hours (up to 44 hours) per week will be compensated at the rate of $100 per hour and any hours in excess of 44 hours per week will be paid at $150 per hour. Professor Garland was also granted stock options in connection with his Consulting Agreement. (iv) Roger Sabbadini, consultant, Vice President, Chief Scientific Officer. Professor Sabbadini will be paid a base fee of $9,670.00 per month. In addition, the Company will pay San Diego State University, where Professor Sabbadini is a faculty member, a fixed amount of $57,683.27 to enable Professor Sabbadini to devote more time to his activities with the Company. Professor Sabbadini may be granted bonuses and stock options at the discretion of the Board, upon review and recommendation by the Compensation Committee. Forms of the agreements entered by the Company with such persons are attached hereto under Exhibits 99.1 to 99.4, respectively. ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS. Exhibits 99.1 Form of Employment Agreement between Lpath, Inc. and Scott R. Pancoast dated as of January 1, 2006. 99.2 Form of Employment Agreement between Lpath, Inc. and Gary Atkinson dated as of February 6, 2006. 99.3 Form of Consultant Agreement between Lpath, Inc. and William Garland dated as of January 1, 2006. 99.4 Form of Consultant Agreement between Lpath, Inc. and Roger Sabbadini dated as of February 1, 2006. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Lpath, Inc. By: /s/ Scott Pancoast -------------------------------------- Name: Scott Pancoast Title: President and Chief Executive Officer Dated: March 29, 2006 EX-99.1 2 tex99_1-9591.txt EX-99.1 Exhibit 99.1 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT ("Agreement") is made as of January 1, 2006, at San Diego, California among LPATH, INC., a Nevada corporation (the "Company"), and SCOTT R. PANCOAST ("Employee") with reference to the following facts: In consideration of their respective promises contained herein, the parties hereto agree as follows: 1. EMPLOYMENT Employee and the Company now desire to memorialize the terms and conditions associated with the Employee's hiring as Chief Executive Officer and President, which terms and conditions shall be contained in this Agreement. 2. EMPLOYEE'S DUTIES Employee shall, while contributing his services hereunder: (a) Serve the Company in the capacity set forth in Section 1, or in such other similar chief executive capacity as the Company's Board of Directors (hereinafter, referred to as "the Board") may direct, on a full-time basis and exclusive to the Company [excluding the agreed-upon duties relating to Western States Investment Corporation ("WSIC")], using his best efforts, skills, and diligence in the performance of such duties, at such place or places as may be required for valid business reasons and as determined in the reasonable determination of the Board; (b) Report to the Board and perform the duties and exercise the powers assigned or vested in him by the Board; (c) Comply with and conform to any lawful instructions or directions given or made by the Board, and faithfully, industriously, diligently, and to the best of Employee's ability, experience, and talents, serve the Company and perform all of the duties that may be required by the terms and conditions of this Agreement to the reasonable satisfaction of the Board, so as to promote the Company's business interests; and (d) Devote himself diligently to the business interests of the Company and personally attend thereto at all times during usual business hours and during such other times as the Board may reasonably require, except in case of incapacity through illness or accident, in which case he shall furnish to the Board such evidence thereof as it may reasonably require; however, Company understands, and finds acceptable, that (i) Employee still serves on the Board of Directors of various WSIC portfolio companies ("Portfolio Boards") and/or monitors such portfolio companies' performance and still serves on the board of publicly-traded 1 iVOW, Inc. (ii) that Employee will not join any other Boards unless granted permission by Company's Board of Directors, (iii) upon a change of control with respect to any of the Portfolio Boards, Employee will resign, unless granted permission otherwise by the Company's Board of Directors, and (iv) WSIC has agreed to reimburse the Company for the time and effort Employee expends serving on the Portfolio Boards. 3. COMPENSATION In consideration of the performance by Employee of his duties hereunder, the remuneration of Employee shall be (and the Company shall pay to Employee): (a) A base salary ("Salary") of $330,000 per annum payable in accordance with the Company's normal payroll procedure, subject to normal payroll deductions. (b) Paid vacation, which shall accrue at the rate of four weeks per year. (c) Other benefits and perquisites normally available to executives of the Company, as may be changed from time to time. (d) Such additional remuneration as Employee and the Company shall negotiate after January 1, 2006. In addition, the Company shall, at least on an annual basis, review Employee's stock-option/stock-grant holdings and make reasonable efforts to keep the level of such holdings competitive with companies that are similar to the Company or, in the alternative, provide to Employee its good-faith business reasons for not doing so. 4. EXPENSES The Company shall pay on behalf of Employee or reimburse Employee (against Employee's submission to the Company of proper receipts therefore) for all expenses properly incurred by him in the course of his employment hereunder or otherwise in connection with the business of the Company in accordance with Company policies, as such policies may be established and revised by the Board from time to time. 5. AT-WILL EMPLOYMENT Employee and the Company understand and expressly agree that Employee's employment with the Company is at-will, is not for a specified term, and may be terminated by the Company or by Employee at any time, with or without notice and with or without cause. While not required, as a courtesy, the parties shall attempt if possible to give thirty (30) days' notice of termination. This clause shall not be interpreted to conflict with Employee's at-will employment status. Employee and the Company further understand 2 and agree that no representation contrary to this section is valid, and that this section may not be augmented, contradicted, or modified in any way, by any representative or agent of the Company or any other person, except by a writing signed by Employee and by the Board. 6. TERMINATION 6.1 Upon termination for any reason, including voluntary resignation, Employee shall: (a) be entitled to the compensation set forth in Section 3(a) hereof, prorated to the effective date of such termination. (b) remain subject to the provisions of the Proprietary Information and Inventions Agreement, in the form attached hereto as Exhibit A, signed concurrently herewith. (c) be entitled to receive a termination payment for any accrued, unused vacation. (d) not be entitled to severance, unless as provided in Section 6.2. 6.2 If Company terminates the employment of Employee without Cause (to be defined later in this section), the Company will, in addition to the provisions of Section 6.1, and in exchange for Employee's execution of a full and complete release of all claims as described herein: (i) Pay Employee one year's base compensation if the termination occurs BEFORE there has been a Corporate Transaction (to be defined later in this section) or pay Employee 18 months' base compensation if the termination occurs AFTER there has been a Corporate Transaction. Such payments are to be made in accordance with the Company's normal payroll procedures with normal payroll deductions. (ii) Continue to provide to Employee all heath-care benefits, and other benefits that might apply, for the remainder of the month in which the termination occurs and reimburse Employee for Employee's COBRA coverage for another twelve-month period beyond that, or for an 18-month period if the termination occurs AFTER there has been a Corporate Transaction. (iii) Accelerate a certain amount of Employee's unvested stock options, as follows: (a) If the termination occurs BEFORE there has been a Corporate Transaction, Company will (i) accelerate-vest by 24 months Employee's unvested stock options, unvested stock grants, and any other such assets that vest over time, unless the termination occurs after December 31, 2006, in which case the accelerated vesting shall be 18 months, and (ii) allow 3 Employee up to 24 months to exercise such options, except to the extent that any such options expire before the end of this 24-month period or to the extent that earlier exercise is required by the Company to effect a sale or a merger. (b) If the termination occurs within 24 months AFTER there has been a Corporate Transaction, Company will (i) accelerate vest by 24 months Employee's unvested stock options, unvested stock grants, and any other such assets that vest over time and (ii) allow Employee up to 24 months to exercise such options except to the extent that any such options expire before the end of this 24-month period. . (iv) The term "Cause" is defined to mean conduct that in the good faith judgment of the Board constitutes a material breach of duty and is to include one or more of the following that results in a material adverse impact to the Company: falsification of company documents, fraud, moral turpitude, theft, embezzlement, criminal conduct, indictment on felony criminal charges, serious violations of Company policies, material breach of Employee's employment agreement, extended or repeated absence from work that in the reasonable judgment of the Board is unjustified, inability to perform duties for a period of thirty (30) or more days without reasonable excuse and notice, or insubordination (E.G., refusal to carry out the reasonable instructions of the Board). If the material breach of duty is reasonably curable, Company shall provide notice to Employee of such breach of duty and shall give Employee a 30-day cure period. Refusal to relocate to a facility more than 50 miles from the current facility is NOT considered Cause. (v) The term "Corporate Transaction" is defined to mean (a) a transaction whereby the Company is party to a merger or consolidation whereby the Company is NOT the surviving entity and whereby the transaction results in the voting securities of the Company outstanding immediately prior thereto failing to continue to represent (either by remaining outstanding or by being converted into voting securities of the surviving or another entity) at least fifty (50%) percent of the combined voting power of the voting securities of the Company or such surviving or other entity outstanding immediately after such merger or consolidation; or (b) the sale or disposition of all or substantially all of the Company's assets (or consummation of any transaction having similar effect). (vi) Employee will be eligible for no other severance compensation, benefits, or vesting other than that which is provided for in this Section 6.2 when he is terminated. A condition precedent to the Company's obligation to fulfill the severance terms in this Section 6.2 shall be Employee's execution of a full and complete release of all claims against the Company, its Board, officers, agents, and affiliates in reasonable form as provided by the Company. Nothing in this severance provision supersedes or in any way alters the at-will provisions of Section 5 above. (vii) Employee agrees that he will surrender to the Company, at its request, or at the conclusion of his employment, all accounts, notes, data, sketches, drawings and 4 reproductions, and copies thereof, any of which (a) relate in any way to the business, products, practices, or techniques of the Company, (b) contain Confidential Information, whether or not created by him, or (c) come into his possession by reason of his employment with the Company; and Employee agrees further that all of the foregoing are the property of the Company. 7. LOYAL PERFORMANCE 7.1 Employee shall not, during the period of his employment by the Company, engage in any employment or activity in any business competitive with the Company. Employee agrees to notify the Company in writing of any outside employment or business activity, including the name of the business and the general nature of employee's involvement, during the period of Employee's employment with the Company. 7.2 If, at any time during the period ending two years after Employee has ceased to be an employee of the Company (or of any subsidiary or affiliate of the Company), whether or not pursuant to this agreement, Employee: (a) directly or indirectly engages with... (b) assists or has an active interest in, whether as owner, partner, shareholder, joint venturer, corporate officer, director, employee, consultant, principal, agent, trustee or licensor, or in any other similar capacity whatsoever (provided that ownership of not more than two percent of the outstanding stock of a corporation traded on a National securities exchange or quoted on NASDAQ OTC shall not of itself be viewed as assisting or having an active interest)... or (c) enters the employment of or acts as an agent for or advisor or consultant to... ... any person, firm, partnership, association, corporation, business organization, entity, or enterprise (the Business") that is, or is about to become, directly or indirectly, engaged in any business or program that competes directly with or is substantially similar to any business or program that the Company (or any subsidiary or affiliate of the Company) was involved in (or was in the planning or development stage) during the 120-day period immediately prior to Employee's ceasing to provide services to the Company (or any subsidiary or affiliate of the Company) [such business or program shall include, but not be limited to, those that involve: (a) any composition of matter or method that is protected by (i) any Company trade secret or (ii) any Company intellectual property that is either issued, pending, or filed at the time of termination or (b) the use, research or development, for any therapeutic or diagnostic purpose, of (i) any sphingolipid, (ii) any lysophosphatidic acid, or (iii) any component of their respective pathways], then Employee shall immediately notify Company in writing of such involvement, including the name of the Business and the nature of Employee's involvement, and Employee 5 agrees to fully respond to reasonable questions by the Company regarding such involvement and to provide such further assurances reasonably requested by Company that Employee is not and will not be in breach of the Proprietary Information and Inventions Agreement attached hereto as Exhibit A. 7.3 Employee will not, at any time, without prior written consent of the Company: (a) Directly or indirectly take any action or make or cause to be made any statements which would disparage the reputation of the Company or any subsidiary or affiliate of the Company; or (b) Induce or attempt to influence any employee or consultant of the Company or any of its or their subsidiaries or affiliates to terminate his or her employment. 7.4 Nothing contained in this Section 7 is intended to supersede or alter in any way the provisions of the Proprietary Information and Inventions Agreement attached hereto as Exhibit A. 8. CONFIDENTIALITY MATTERS 8.1 It is an express condition to the employment of Employee by Company that Employee sign and deliver a Proprietary Information and Inventions Agreement in the form attached hereto as Exhibit A concurrently with the execution of this Agreement. 8.2 The covenants contained in the Proprietary Information and Inventions Agreement constitute separate covenants. If in any judicial proceeding, a court shall hold that any of the covenants set forth in the Proprietary Information and Inventions Agreement is not permitted by applicable laws, Employee and Company agree that such provision shall and is hereby reformed to the maximum time, geographic, or occupational limitations permitted by such laws. Further, in the event a court shall hold unenforceable any of the separate covenants deemed included herein, then such unenforceable covenant or covenants shall be deemed eliminated from the provisions of this Agreement for the purpose of such proceeding to the extent necessary to permit the remaining separate covenants to be enforced in such proceeding. Employee and Company further agree that the covenants in the Proprietary Information and Inventions Agreement shall each be construed as a separate agreement independent of any other provisions of this Agreement, and the existence of any claim or cause of action by Employee against the Company whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of any of the covenants set forth in the Proprietary Information and Inventions Agreement. 6 9. ACKNOWLEDGMENT Employee acknowledges that he has been advised by Company to consult with independent counsel of his own choice, at his expense, as to the entering into this Agreement, that he has had the opportunity to do so, and that he has taken advantage of the opportunity to the extent that he desires. Employee further acknowledges that he has read and that he understands this Agreement, is fully aware of its legal effect, and has entered into it freely based on his own judgment and such professional advice as he has seen fit to obtain. 10. ARBITRATION Employee and the Company agree that in the event of any dispute concerning, arising out of, or related in any way to this Agreement, such dispute shall be submitted to arbitration. Except as otherwise provided for herein, the disputes subject to this agreement to arbitrate include, to the fullest extent allowable by law, all potential claims between Employee and Company including, but not limited to, breach of contract, tort, discrimination, harassment, wrongful termination, compensation and benefits claims, constitutional claims and claims for the violation of any local, state or federal statute, ordinance or regulation. Arbitration proceedings may be commenced by either party by giving the other party written notice thereof and proceeding thereafter in accordance with the rules and procedures of the American Arbitration Association and California law. Any such arbitration shall take place before a single arbitrator only in San Diego, California. Any such arbitration shall be governed by and be subject to the applicable laws of the State of California and the then-prevailing rules of the American Arbitration Association (the "AAA"). If the parties are unable to agree on a single neutral arbitrator, the arbitrator shall be selected pursuant to the AAA rules. The arbitrator's award in any such arbitration shall be final and binding, and a judgment upon such award may be entered and enforced by any court of competent jurisdiction. EACH PARTY TO THIS AGREEMENT UNDERSTANDS THAT BY AGREEING TO ARBITRATE THEIR DISPUTES, THEY ARE GIVING UP THEIR RIGHT TO HAVE THEIR DISPUTES HEARD IN A COURT OF LAW AND, IF APPLICABLE, BY A JURY. Company shall bear the costs of the arbitrator, the forum, and filing fees. Each party shall bear its own respective attorney's fees and all other costs, unless otherwise required or allowed by law and awarded by the arbitrator. 11. VIOLATION OF THE PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT Employee agrees and acknowledges that the violation of any of the provisions contained in the Proprietary Information and Inventions Agreement attached hereto as Exhibit A would cause irreparable injury to the Company, the remedy at law for any violation or threatened violation thereof would be inadequate, and that the Company shall be entitled to temporary and permanent injunctive or other equitable relief without the necessity of proving actual damages. Employee agrees that such relief shall be available in a court of law in San Diego, California, regardless of the arbitration provisions contained in Section 10 of this Agreement. 7 12. MISCELLANEOUS 12.1 Amendment. This Agreement may not be modified or amended without the express prior written consent of the Company and Employee. 12.2 Notices. All notices required or permitted under this Agreement shall be in writing, shall be sent either certified mail, return receipt requested, or by facsimile transmission and mailed or sent to the relevant party at its address or facsimile number set out below (or such other address or facsimile number as the addressee has given to the other parties in accordance with the terms of this Section): TO THE COMPANY: Lpath, Inc. 6335 Ferris Square, Suite A San Diego, CA 92121 Facsimile (858) 678-0900 TO THE EMPLOYEE: Scott Pancoast Any notice, demand or other communication so addressed to the relevant party shall be deemed to have been delivered (a) if given or made by certified letter, return receipt requested, when actually delivered to the relevant party; and (b) if given or made by facsimile, upon receipt of a transmission report confirming receipt. 12.3 Entire Agreement. This Agreement and the Exhibits attached hereto contain the entire agreement of the parties regarding the employment of Employee, and there are no other promises or conditions regarding Employee's employment in any other agreement, whether oral or written. This Agreement shall terminate and supersede any previous employment agreements or arrangements between Employee and Company. 12.4 Assignment. The rights and obligations of the Company under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of the respective corporation. Employee shall not be entitled to assign any of his rights or obligations under this Agreement. 12.5 Sections. References herein to Sections are to the sections in this Agreement, unless the context requires otherwise. 12.6 Headings. The section headings are inserted for convenience only and shall not affect the construction of this Agreement. 12.7 Rules of Construction. Unless the context requires otherwise, words importing the singular include the plural and vice versa, and words importing a gender include every gender. 8 12.8 Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained therein. 12.9 Survival. Any variation in salary or conditions mutually agreed upon after the effective date of this Agreement shall not constitute a new agreement; instead, the terms and conditions of this Agreement, except as to such variation, shall continue in force. 12.10 Waiver. The failure of either party to enforce any provision of this Agreement shall not be construed as a waiver or limitation of that party's right to subsequently enforce and compel strict compliance with every provision of this Agreement. 12.11 Interpretation. This Agreement shall not be construed against any party on the grounds that such party drafted the Agreement or caused it to be drafted. 12.12 Governing Law. This Agreement shall be governed by the laws of the State of California. Any controversy or claim arising out of or relating to this Agreement or the breach thereof, whether involving remedies at law or equity, shall be adjudicated in San Diego, California. 12.13 No Conflicting Agreements. Employee represents and warrants to the Company that he is not a party to or bound by any confidentiality, noncompetition, nonsolicitation or other agreement or restriction which could conflict with or be violated by the performance of Employee's duties to the Company under this Agreement or otherwise. Employee agrees that he will not disclose to the Company, use, or induce the Company to use, any invention or confidential information belonging to any third party. 9 IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first written above. THE COMPANY EMPLOYEE By: ---------------------------------- ---------------------------------- Its: Signature --------------------------------- ---------------------------------- Print Name 10 EX-99.2 3 tex99_2-9591.txt EX-99.2 Exhibit 99.2 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT ("AGREEMENT") is made as of February 6, 2006, at San Diego, California among LPATH, INC., a Nevada corporation (the "Company"), and GARY J. G. ATKINSON ("Employee") with reference to the following facts: In consideration of their respective promises contained herein, the parties hereto agree as follows: 1. EMPLOYMENT Employee and the Company now desire to memorialize the terms and conditions associated with Employee's hiring as Vice President and Chief Financial Officer, which terms and conditions shall be contained in this Agreement. 2. EMPLOYEE'S DUTIES Employee shall, while contributing his services hereunder: (a) Serve the Company in the capacity set forth in Section 1, or in such other similar chief financial capacity as the Company's Chief Executive Officer ("CEO") or the Audit Committee of the Board of Directors (hereinafter, referred to as "the Board") may direct, on a full-time basis and exclusive to the Company [excluding the agreed-upon duties relating to Western States Investment Corporation ("WSIC")--see below], using his best efforts, skills, and diligence in the performance of such duties, at such place or places as may be required for valid business reasons and as determined in the reasonable determination of the Board; (b) Report to the CEO and, in some instances, to the Audit Committee of the Board and perform the duties and exercise the powers assigned or vested in him by the CEO or the Audit Committee; (c) Comply with and conform to any lawful instructions or directions given or made by the CEO and the Audit Committee, and faithfully, industriously, diligently, and to the best of Employee's ability, experience, and talents, serve the Company and perform all of the duties that may be required by the terms and conditions of this Agreement to the reasonable satisfaction of the CEO and the Audit Committee, so as to promote the Company's business interests; and (d) Devote himself diligently to the business interests of the Company and personally attend thereto at all times during usual business hours and during such other times as the Board may reasonably require, except in case of incapacity through illness or accident, in which case he shall furnish to the CEO such evidence thereof as it may reasonably require; however, the Company understands, and finds acceptable, that (i) Employee still provides consulting 1 services to WSIC and serves on the board of First Future Credit Union, (ii) that Employee will not join any other Boards unless granted permission by the Company's CEO and the Board, and (iii) in exchange for providing consulting services, WSIC has agreed to reimburse the Company on an hourly basis that reasonably reflects the fully-allocated costs of Employee. 3. COMPENSATION In consideration of the performance by Employee of his duties hereunder, the remuneration of Employee shall be (and the Company shall pay to Employee): (a) Effective February 6, 2006, a base salary ("Salary") of $210,000 per annum payable in accordance with the Company's normal payroll procedure, subject to normal payroll deductions. (b) Paid vacation, which shall accrue at the rate of four weeks per year. (c) Other benefits and perquisites normally available to executives of the Company, as may be changed from time to time. (d) Such additional remuneration as Employee and the Company shall negotiate after February 6, 2006. In addition, the Company shall, at least through June 30, 2007, periodically review Employee's stock-option/stock-grant holdings and consider making additional grants of stock options to offset dilution (that may occur from time to time as a result of future financings and future exercise of warrants and options) of Employee's initial 1.25% (of outstanding shares) ownership percentage. 4. EXPENSES The Company shall pay on behalf of Employee or reimburse Employee (against Employee's submission to the Company of proper receipts therefore) for all expenses properly incurred by him in the course of his employment hereunder or otherwise in connection with the business of the Company in accordance with the Company policies, as such policies may be established and revised by the Board from time to time. 5. AT-WILL EMPLOYMENT Employee and the Company understand and expressly agree that Employee's employment with the Company is at-will, is not for a specified term, and may be terminated by the Company or by Employee at any time, with or without notice and with or without cause. While not required, as a courtesy, the parties shall attempt if possible to give thirty (30) days' notice of termination. This clause shall not be interpreted to conflict with Employee's at-will employment status. Employee and the Company further understand 2 and agree that no representation contrary to this section is valid, and that this section may not be augmented, contradicted, or modified in any way, by any representative or agent of the Company or any other person, except by a writing signed by Employee and by the Board. 6. TERMINATION 6.1 Upon termination for any reason, including voluntary resignation, Employee shall: (a) be entitled to the compensation set forth in Section 3(a) hereof, prorated to the effective date of such termination. (b) remain subject to the provisions of the Proprietary Information and Inventions Agreement, in the form attached hereto as Exhibit A, signed concurrently herewith. (c) be entitled to receive a termination payment for any accrued, unused vacation. (d) not be entitled to severance, unless as provided in Section 6.2. 6.2 If the Company terminates the employment of Employee without Cause (to be defined later in this section), the Company will, in addition to the provisions of Section 6.1, and in exchange for employee's execution of a full and complete release of all claims as described herein: (i) Pay Employee seven months' base compensation if the termination occurs BEFORE there has been a Corporate Transaction (to be defined later in this section) or pay Employee twelve months' base compensation if the termination occurs AFTER there has been a Corporate Transaction. Such payments are to be made in accordance with the Company's normal payroll procedures with normal payroll deductions. (ii) Continue to provide to Employee all heath-care benefits, and other benefits that might apply, for the remainder of the month in which the termination occurs and reimburse Employee for Employee's COBRA coverage for another seven-month period beyond that, or for a twelve-month period if the termination occurs AFTER there has been a Corporate Transaction. (iii) If the termination occurs within 24 months AFTER there has been a Corporate Transaction: (a) accelerate-vest by 24 months Employee's unvested stock options, unvested stock grants, and any other such assets that vest over time and (b) allow Employee up to 24 months to exercise such options except to the extent that any such options expire before the end of this 24-month period or to the extent that earlier exercise is required by the Company to effect a sale or a merger. 3 (iv) The term "Cause" is defined to mean conduct that in the good faith judgment of the Board constitutes a material breach of duty and is to include one or more of the following: falsification of company documents, fraud, moral turpitude, theft, embezzlement, criminal conduct, indictment on felony criminal charges, serious violations of the Company policies, material breach of Employee's employment agreement, extended or repeated absence from work that in the reasonable judgment of the Board is unjustifiable, inability to perform duties for a period of thirty (30) or more days without reasonable excuse and notice, or insubordination (E.G., refusal to carry out the reasonable instructions of the Board). If the material breach of duty is reasonably curable, the Company shall provide notice to Employee of such breach of duty and shall give Employee a 30-day cure period. Refusal to relocate to a facility more than 50 miles from the current facility is NOT considered Cause. (v) The term "Corporate Transaction" is defined to mean (a) a transaction whereby the Company is party to a merger or consolidation whereby the Company is NOT the surviving entity and whereby the transaction results in the voting securities of the Company outstanding immediately prior thereto failing to continue to represent (either by remaining outstanding or by being converted into voting securities of the surviving or another entity) at least fifty (50%) percent of the combined voting power of the voting securities of the Company or such surviving or other entity outstanding immediately after such merger or consolidation; or (b) the sale or disposition of all or substantially all of the Company's assets (or consummation of any transaction having similar effect). (vi) Employee will be eligible for no other severance compensation, benefits, or vesting other than that which is provided for in this Section 6.2 when he is terminated. A condition precedent to the Company's obligation to fulfill the severance terms in this Section 6.2 shall be Employee's execution of a full and complete release of all claims against the Company, its Board, officers, agents, and affiliates in reasonable form as provided by the Company. Nothing in this severance provision supersedes or in any way alters the at-will provisions of Section 5 above. (vii) Employee agrees that he will surrender to the Company, at its request, or at the conclusion of his employment, all accounts, notes, data, sketches, drawings and reproductions, and copies thereof, any of which (a) relate in any way to the business, products, practices, or techniques of the Company, (b) contain Confidential Information, whether or not created by him, or (c) come into his possession by reason of his employment with the Company; and Employee agrees further that all of the foregoing are the property of the Company. 7. LOYAL PERFORMANCE 7.1 Employee shall not, during the period of his employment by the Company, engage in any employment or activity in any business competitive with the Company. Employee agrees to notify the Company in writing of any outside employment or business activity, 4 including the name of the business and the general nature of employee's involvement, during the period of Employee's employment with the Company. 7.2 If, at any time during the period ending two years after Employee has ceased to be an employee of the Company (or of any subsidiary or affiliate of the Company), whether or not pursuant to this agreement, Employee: (a) directly or indirectly engages with... (b) assists or has an active interest in, whether as owner, partner, shareholder, joint venturer, corporate officer, director, employee, consultant, principal, agent, trustee or licensor, or in any other similar capacity whatsoever (provided that ownership of not more than two percent of the outstanding stock of a corporation traded on a National securities exchange or quoted on NASDAQ/OTC shall not of itself be viewed as assisting or having an active interest)... or (c) enters the employment of or acts as an agent for or advisor or consultant to... ... any person, firm, partnership, association, corporation, business organization, entity, or enterprise (the Business") that is, or is about to become, directly or indirectly, engaged in any business or program that competes directly with or is substantially similar to any business or program that the Company (or any subsidiary or affiliate of the Company) was involved in (or was in the planning or development stage) during the 120-day period immediately prior to Employee's ceasing to provide services to the Company (or any subsidiary or affiliate of the Company) [such business or program shall include, but not be limited to, those that involve: (a) any composition of matter or method that is protected by (i) any the Company trade secret or (ii) any the Company intellectual property that is either issued, pending, or filed at the time of termination or (b) the use, research or development, for any therapeutic or diagnostic purpose, of (i) any sphingolipid, (ii) any lysophosphatidic acid, or (iii) any component of their respective pathways], then Employee shall immediately notify the Company in writing of such involvement, including the name of the Business and the nature of Employee's involvement, and Employee agrees to fully respond to reasonable questions by the Company regarding such involvement and to provide such further assurances reasonably requested by the Company that Employee is not and will not be in breach of the Proprietary Information and Inventions Agreement attached hereto as Exhibit A. 7.3 Employee will not, at any time, without prior written consent of the Company: (a) Directly or indirectly take any action or make or cause to be made any statements which would disparage the reputation of the Company or any subsidiary or affiliate of the Company, or (b) Induce or attempt to influence any employee or consultant of the Company or 5 any of its or their subsidiaries or affiliates to terminate his or her employment. 7.4 Nothing contained in this Section 7 is intended to supersede or alter in any way the provisions of the Proprietary Information and Inventions Agreement attached hereto as Exhibit A. 8. CONFIDENTIALITY MATTERS 8.1 It is an express condition to the employment of Employee by the Company that Employee sign and deliver a Proprietary Information and Inventions Agreement in the form attached hereto as Exhibit A concurrently with the execution of this Agreement. 8.2 The covenants contained in the Proprietary Information and Inventions Agreement constitute separate covenants. If in any judicial proceeding, a court shall hold that any of the covenants set forth in the Proprietary Information and Inventions Agreement is not permitted by applicable laws, Employee and the Company agrees that such provision shall and is hereby reformed to the maximum time, geographic, or occupational limitations permitted by such laws. Further, in the event a court shall hold unenforceable any of the separate covenants deemed included herein, then such unenforceable covenant or covenants shall be deemed eliminated from the provisions of this Agreement for the purpose of such proceeding to the extent necessary to permit the remaining separate covenants to be enforced in such proceeding. Employee and the Company further agree that the covenants in the Proprietary Information and Inventions Agreement shall each be construed as a separate agreement independent of any other provisions of this Agreement, and the existence of any claim or cause of action by Employee against the Company whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of any of the covenants set forth in the Proprietary Information and Inventions Agreement. 9. ACKNOWLEDGMENT Employee acknowledges that he has been advised by the Company to consult with independent counsel of his own choice, at his expense, as to the entering into this Agreement, that he has had the opportunity to do so, and that he has taken advantage of the opportunity to the extent that he desires. Employee further acknowledges that he has read and that he understands this Agreement, is fully aware of its legal effect, and has entered into it freely based on his own judgment and such professional advice as he has seen fit to obtain. 10. ARBITRATION Employee and the Company agree that in the event of any dispute concerning, arising out of, or related in any way to this Agreement, such dispute shall be submitted to arbitration. Except as otherwise provided for herein, the disputes subject to this Agreement to arbitrate include, to the fullest extent allowable by law, all potential claims between 6 Employee and the Company including, but not limited to, breach of contract, tort, discrimination, harassment, wrongful termination, compensation and benefits claims, constitutional claims and claims for the violation of any local, state or federal statute, ordinance or regulation. Arbitration proceedings may be commenced by either party by giving the other party written notice thereof and proceeding thereafter in accordance with the rules and procedures of the American Arbitration Association and California law. Any such arbitration shall take place before a single arbitrator only in San Diego, California. Any such arbitration shall be governed by and be subject to the applicable laws of the State of California and the then-prevailing rules of the American Arbitration Association (the "AAA"). If the parties are unable to agree on a single neutral arbitrator, the arbitrator shall be selected pursuant to the AAA rules. The arbitrator's award in any such arbitration shall be final and binding, and a judgment upon such award may be entered and enforced by any court of competent jurisdiction. EACH PARTY TO THIS AGREEMENT UNDERSTANDS THAT BY AGREEING TO ARBITRATE THEIR DISPUTES, THEY ARE GIVING UP THEIR RIGHT TO HAVE THEIR DISPUTES HEARD IN A COURT OF LAW AND, IF APPLICABLE, BY A JURY. Company shall bear the costs of the arbitrator, the forum, and filing fees. Each party shall bear its own respective attorney's fees and all other costs, unless otherwise required or allowed by law and awarded by the arbitrator. 11. VIOLATION OF THE PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT Employee agrees and acknowledges that the violation of any of the provisions contained in the Proprietary Information and Inventions Agreement attached hereto as Exhibit A would cause irreparable injury to the Company, the remedy at law for any violation or threatened violation thereof would be inadequate, and that the Company shall be entitled to temporary and permanent injunctive or other equitable relief without the necessity of proving actual damages. Employee agrees that such relief shall be available in a court of law in San Diego, California, regardless of the arbitration provisions contained in Section 10 of this Agreement. 12. MISCELLANEOUS 12.1 Amendment. This Agreement may not be modified or amended without the express prior written consent of the Company and Employee. 12.2 Notices. All notices required or permitted under this Agreement shall be in writing, shall be sent either certified mail, return receipt requested, or by facsimile transmission and mailed or sent to the relevant party at its address or facsimile number set out below (or such other address or facsimile number as the addressee has given to the other parties in accordance with the terms of this Section): TO THE COMPANY: Lpath, Inc. 6335 Ferris Square, Suite A San Diego, CA 92121 Facsimile (858) 678-0900 7 TO THE EMPLOYEE: Gary Atkinson Any notice, demand or other communication so addressed to the relevant party shall be deemed to have been delivered: (a) if given or made by certified letter, return receipt requested, when actually delivered to the relevant party; and (b) if given or made by facsimile, upon receipt of a transmission report confirming receipt. 12.3 Entire Agreement. This Agreement and the Exhibits attached hereto contain the entire agreement of the parties regarding the employment of Employee, and there are no other promises or conditions regarding Employee's employment in any other agreement, whether oral or written. This Agreement shall terminate and supersede any previous employment agreements or arrangements between Employee and the Company. 12.4 Assignment. The rights and obligations of the Company under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of the respective corporation. Employee shall not be entitled to assign any of his rights or obligations under this Agreement. 12.5 Sections. References herein to Sections are to the sections in this Agreement, unless the context requires otherwise. 12.6 Headings. The section headings are inserted for convenience only and shall not affect the construction of this Agreement. 12.7 Rules of Construction. Unless the context requires otherwise, words importing the singular include the plural and vice versa, and words importing a gender include every gender. 12.8 Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained therein. 12.9 Survival. Any variation in salary or conditions mutually agreed upon after the effective date of this Agreement shall not constitute a new agreement; instead, the terms and conditions of this Agreement, except as to such variation, shall continue in force. 12.10 Waiver. The failure of either party to enforce any provision of this Agreement shall not be construed as a waiver or limitation of that party's right to subsequently enforce and compel strict compliance with every provision of this Agreement. 8 12.11 Interpretation. This Agreement shall not be construed against any party on the grounds that such party drafted the Agreement or caused it to be drafted. 12.12 Governing Law. This Agreement shall be governed by the laws of the State of California. Any controversy or claim arising out of or relating to this Agreement or the breach thereof, whether involving remedies at law or equity, shall be adjudicated in San Diego, California. 12.13 No Conflicting Agreements. Employee represents and warrants to the Company that he is not a party to or bound by any confidentiality, noncompetition, nonsolicitation or other agreement or restriction which could conflict with or be violated by the performance of Employee's duties to the Company under this Agreement or otherwise. Employee agrees that he will not disclose to the Company, use, or induce the Company to use, any invention or confidential information belonging to any third party. 9 IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first written above. THE COMPANY EMPLOYEE By: ---------------------------------- ---------------------------------- Its: Signature --------------------------------- ---------------------------------- Print Name 10 EX-99.3 4 tex99_3-9591.txt EX-99.3 Exhibit 99.3 [LOGO] Lpath CONSULTANT AGREEMENT THIS CONSULTANT AGREEMENT ("Agreement") is entered into as of January 1, 2006 ("Effective Date"), by and between William Garland ("Consultant"), and Lpath, Inc., a Nevada corporation (the "Company"). In consideration of the retention of Consultant as a scientific consultant and independent contractor to the Company, and of the compensation received by Consultant from the Company, the Company and Consultant hereby agree as follows: 1. DESCRIPTION OF SERVICES. (a) CONSULTANT. Consultant will advise the Company as an independent contractor in areas of science relevant to the Company's business, including in the areas drug discovery and development, and such other areas as requested by the Company. In performing these services, Consultant will report to the Company's Chief Executive Officer. Consultant's title will be "Vice President, Development" or some other similar title, as the Company may from time to time decide upon, that contains the phrase "Vice President." (b) EXCLUSIVITY. Unless as otherwise agreed to in writing, Consultant will during the term of this Agreement, work exclusively with the Company on matters relating to (a) any composition of matter or method that is protected by (i) any Company trade secret or (ii) any Company intellectual property that is the subject of an issued patent or pending patent application, or (b) the use, research, or development, for any therapeutic, prophylactic, or diagnostic purpose of (i) any sphingolipid or sphingolipid metabolite, (ii) any lysophosphatidic acid or lysophosphatidic acid metabolite, or (iii) any component of their respective biosynthetic/metabolic pathways, as well as molecules that specifically interact with any these components (the "Field"). Consultant represents that (i) all of his current consulting or other business obligations, and (ii) all restrictions or policies of other entities with whom Consultant has a business relationship that may limit or restrict Consultant's consulting or other activities or impact rights to inventions or other technology resulting from such activities, are in no way conflicting with this Agreement. Consultant agrees that he has not entered into, and will not enter into, any written or oral agreement with any entity, company, or person that is or may be (or has the potential to be) a competitor of the Company in the Field (a "Competitor"). Consultant understands that while he is a Consultant to the Company, he is not to breach any obligation of confidentiality that he may have to others. 2. TERM OF AGREEMENT AND TIME COMMITMENT. The consulting services provided under the terms of this Agreement will commence on January 1, 2006. This contract will end on December 31, 2007 (the "Term"), unless terminated earlier in accordance with this Agreement. Unless otherwise directed by the Company, Consultant will work a minimum of 36 hours per week on the Company projects during the term of this Agreement, and will generally be present 1 at the Company's facilities four (4) days per week. 3. COMPENSATION. (a) CASH COMPENSATION. (i) BASE COMPENSATION. For all services rendered, Consultant will be paid $170,000.00 per year, calculated on a weekly basis for 52 weeks of 36 hours per week. Consultant will provide to the Company weekly accountings of his time and will be paid monthly, based on those accountings and the terms of this Agreement. The Consultant understands that he is not an employee or director of the Company, and that he is not entitled to receive any benefits offered by the Company to its employees or directors, including any employee benefit program, unemployment benefits, or otherwise. Consultant shall be responsible for reporting his activities to the relevant governmental agencies, and he understands that the Company will not withhold from his compensation hereunder any amount for payment of any federal, state, or local taxes that may be due as a result of Consultant's provision of services hereunder, and that the Consultant has sole responsibility to pay such taxes, if any, and to file such returns as may be required by applicable laws and regulations. (ii) COMPENSATION FOR HOURS IN EXCESS OF 36 PER WEEK. Any hours in excess of 36 hours per week will first be offset against the Deficient Hour Accrual, which is understood to mean the accumulation, from previous weeks under this Agreement, of hours UNDER the 36-hour-per-week "threshold" that have yet to be offset against hours worked by Consultant in a week in excess of 36 hours. If the balance of the Deficient Hour Accrual is zero or has been fully offset, hours worked beyond 36 in one week will be compensated as follows: For the first 8 hours worked in excess of 36 per week, Consultant will be compensated at an hourly rate of $100 per hour. For hours in excess of 44 per week, Consultant will be compensated at an hourly rate of $150 per hour, it being understood that the Company reserves the right to direct Consultant to work no more than 36 hours per week, in which event Consultant shall not be entitled to be compensated for more than 36 hours per week. (iii) DEFERRAL OF EXCESS HOURS. Consultant, at his discretion, may elect to defer any hours in excess of 48 hours per week to a future date to be applied to weeks when the Consultant works less than 36 hours. The Company may unilaterally defer 50% of those hours in excess of 48 per week to be applied to a future week when Consultant works less than 36 hours. (b) STOCK OPTIONS. The Company will recommend to its Board of Directors (the "Board") that Consultant be granted options to purchase 100,000 shares of the Company's common stock. The date of the grant will be determined by the date of the Board action, and the option exercise price will be equal to the fair market value on the grant date. The options will vest over 4 years, with a one-year cliff. The options will expire 10 years after the grant date. (c) OTHER COMPENSATION. At the Company's discretion, it may recommend to its Board that the Company grant Consultant additional compensation as follows: (i) A restricted-stock grant of up to 30,000 shares of the Company's common stock after the Company's product candidate achieves initial entry into man during the Term. (ii) Other discretionary compensation (in the form of either cash or stock options) may be considered in conjunction with grants to all executives for corporate achievements, such as corporate collaborations or strategic partnerships, achieved during the 2 Term. The amount of such additional compensation, if any, will be based on the value of the transaction and the relative contribution of any executive to the successful outcome, as determined by the Board. (iii) TRAVEL COMPENSATION. Consultant will be paid $50 per hour for travel time while traveling on Company-authorized trips over 100 miles from both the Company's facility and from Consultant's home. Work performed at the site of travel or while traveling is considered part of Consultant's base 36 hour work week, and shall not be subject to this provision. (d) SOLE COMPENSATION. The fees and other compensation provided in this section 3 constitute Consultant's sole compensation for rendering services to the Company. 4. INDEPENDENT CONTRACTOR. During the Term, Consultant's relationship with the Company shall at all times be that of an independent contractor, and nothing in this Agreement will be construed to create any agency or employer-employee relationship between the Company and Consultant. Except as expressly provided herein or as may otherwise be authorized in advance in writing by the Company, Consultant shall have no authority to act on behalf of or to enter into any contract, incur any liability or obligation, or make any representation on behalf of the Company. The Company agrees that during the term of this Agreement, or any extension or renewal thereof, Consultant may be employed by other persons, firms, or corporations; PROVIDED, HOWEVER, that the provisions of this Agreement will be strictly observed by Consultant with respect to such other persons, firms, or corporations. All such consulting or employment relationships must be disclosed in writing to the Company's Chief Executive Officer. Since Consultant shall not be an employee of the Company, it is understood that Consultant shall not be entitled to any of the benefits under the Company's retirement or group insurance plans or any other employee benefits. Consultant is solely responsible for all taxes, withholdings, and other similar local, state, U.S., or international statutory obligations, including, without limitation, workers compensation insurance, Social Security, federal, state or any other employee payroll taxes; and Consultant agrees to defend, indemnify, and hold the Company harmless from any and all claims made by any entity on account of an alleged failure by Consultant to satisfy any such tax or withholding obligations. In the performance of all services hereunder, Consultant will comply with all applicable laws and regulations. 5. NON-COMPETITION. During the Term, and for a period of one year following the expiration or termination of this Agreement, Consultant agrees that he will not provide services as an owner, partner, shareholder, joint venturer, corporate officer, director, employee, consultant, principal, agent, trustee or licensor, or in any other similar capacity whatsoever, for any person, firm, partnership, association, corporation, business organization, entity, or enterprise that is, or is about to become, directly or indirectly, engaged in any business or program that competes directly with or is substantially similar to any business or program that the Company (or any subsidiary or affiliate of the Company) was involved in (or was in the planning or development stage) during the 120-day period immediately prior to Consultant's ceasing to provide services to the Company or any subsidiary or affiliate of the Company; such business or program shall include, but not be limited to, those directly involved with or relating to the Field (such involvement shall hereinafter be called "Competitive Activities"). 3 If, at any time during the period of TWO years following the expiration or termination of this Agreement, Consultant is involved in any Competitive Activities, then Consultant shall immediately notify the Company in writing of such involvement, including the name of the Business and the nature of Consultant's involvement, and Consultant agrees to fully respond to reasonable questions by the Company regarding such involvement and to provide such further assurances reasonably requested by the Company that Consultant is not and will not be in breach of the Proprietary Information and Inventions Agreement attached hereto as Exhibit A. 6. NO CONFLICT WITH EXISTING AGREEMENTS. The Company hereby acknowledges that it does not desire to acquire from Consultant any secret or confidential know-how or information which Consultant may have acquired from others. Accordingly, Consultant represents and warrants that Consultant is free to divulge to the Company, without any obligation to, or violation of any right of others, any and all information, practice or techniques which Consultant will describe, demonstrate, divulge or in any other manner make known to the Company during Consultant's performance of services hereunder. 7. CONSULTANT INVENTIONS. Consultant will promptly disclose and assign to the Company, or any persons designated by it, all improvements, inventions, formulae, processes, techniques, know-how and data, whether or not patentable, made or conceived or reduced to practice or learned by Consultant, either alone or jointly with others, during the period of his/her retention by the Company as a Consultant that (a) arises from or while providing services under this Agreement and which are related to or useful in the business of the Company, or (b) result from tasks assigned Consultant by the Company, or (c) are funded by the Company, or (d) result from use of equipment or premises owned, leased, or contracted for by the Company (all said improvements, inventions, formulae, processes, techniques, know-how and data shall be collectively hereinafter called "Inventions"). Such obligation to disclose Inventions shall continue for one year after expiration or termination of this Agreement with respect to anything that would be an Invention if made, conceived, reduced to practice, or learned during the Term. Consultant further agrees as to all Inventions to assist the Company at any time, and not just during the term of this Agreement, in any and all countries in connection with securing ,enforcing, defending, and maintaining such intellectual property protection as the Company deems reasonable, which assistance shall include the execution of documents, including those to acknowledge assignment to the Company or persons designated by it, of Consultant's entire worldwide right, title, and interest therein. In the event that the Company is unable for any reason whatsoever to secure Consultant's signature to any lawful and necessary document required to apply for or execute any patent application with respect to an invention(s) (including reissues, renewals, extensions, continuations, divisions or continuations in part thereof), Consultant hereby irrevocably designates and appoints the Company and its duly authorized officers and agents, as Consultant's agents and attorneys-in-fact to act for and in Consultant's behalf and instead of Consultant, to execute and file any such application and to do all other lawful acts to further the prosecution and issuance of patents thereon with the same legal force and effect as if executed by Consultant. 8. NON-DISCLOSURE AND NON-USE. The parties acknowledge that the Company possesses and will possess information that has been created, discovered or developed by, or has otherwise become known to, the Company (including, without limitation, information created, discovered, invented, developed, or made known by or to Consultant arising specifically out of 4 his retention as an Consultant by the Company), and/or in which property rights have been assigned or otherwise conveyed or disclosed to the Company, which information has commercial value in the business in which the Company is engaged or intends to engage. All of the aforementioned information is hereinafter called "Proprietary Information." By way of illustration, but not limitation, Proprietary Information includes Inventions, trade secrets, research results, processes, formulae, data and know-how, improvements, inventions, techniques, marketing plans, strategies, forecasts and customer lists. Proprietary Information also includes any information which the Company has received from a third party which the Company is obligated to treat as confidential or proprietary. All Proprietary Information shall be the sole property of the Company and its assigns, and the Company and its assigns shall be the sole owner of all patents and other rights in connection therewith. Consultant hereby assigns to the Company any and all worldwide rights, title, and interest Consultant may have or acquire in all Proprietary Information. At all times during his retention as a Consultant by the Company and at all times after expiration or termination of this Agreement, Consultant will keep in confidence and trust all Proprietary Information and will not disclose, sell, use, lecture upon, publish, or otherwise disseminate any bona fide or potential Proprietary Information without the prior written consent of the Company. 9. COMPANY MATERIALS. All documents, data, records, apparatus, equipment, chemicals, molecules, organisms, and other physical property, whether or not pertaining to Proprietary Information, furnished to Consultant by the Company or a third party or produced by Consultant or others in the course of performance under this Agreement shall be and remain the sole property of the Company and shall be returned promptly to the Company, along with any copy, duplicate, or reproduction thereof, as and when requested by the Company. Should the Company not so request, Consultant shall return and deliver all such property upon expiration or termination of this Agreement for any reason, and Consultant will not take with him any such property or any reproduction of such property upon such expiration or termination. 10. COMPANY PROPERTY. All Proprietary Information, and all title, patents, patent rights, copyrights, mask work rights, trade secret rights, and other intellectual property and rights anywhere in the world (collectively "Rights") in connection therewith, shall be the sole property of the Company. Consultant hereby assigns to the Company any Rights Consultant may have or acquire in such Proprietary Information. At all times, both during the term of this Agreement and after its expiration or termination, Consultant will keep in confidence and trust and will not use or disclose any Proprietary Information without the prior written consent of an officer of the Company . 11. NON-SOLICITATION. Consultant acknowledges and agrees that the Company's employees and its staff relationships with such employees are valuable assets. Therefore, Consultant further agrees that during the term of this Agreement and for a two-year period following expiration or termination of this Agreement, he will not, as principal, independent contractor, partner, member, employer, agent, consultant, shareholder, investor, or in any other individual or representative capacity whatsoever: directly or indirectly solicit, raid, entice, or induce any employee or consultant of the Company to be employed by any person, firm, or corporation. 12. TERMINATION. The initial term of this Agreement will be through December 31, 5 2007. At the Company's option, this Agreement will also terminate upon notice to Consultant in the event of Consultant's inability for any reason to perform Consultant's services. Upon such termination of this Agreement or upon expiration of the term of this Agreement, the Company's obligation to pay any compensation, except for services or expenses already accrued or incurred under Section 2, will immediately cease and terminate. Termination of this Agreement for any reason will not affect Consultant's obligations under Sections 4, 5, 7, 8, 9, 10, 11, 16, and 17, which Sections shall survive expiration or termination of this Agreement. (a) TERMINATION WITHOUT CAUSE OR BY CONSULTANT. If the Company terminates this Agreement without Cause (defined below in section 12(c)) prior to December 31, 2007, Consultant will be paid $100,000.00 within 30 days of termination, and all stock options that would otherwise have vested prior to the end of this agreement will immediately become vested. A condition precedent to the Company's obligation to fulfill the payment and vesting obligations in this Section 12(a) shall be Consultant's execution of a full and complete release of all claims against the Company, its Board, officers, agents, and affiliates in reasonable form as provided by the Company. If Consultant terminates this Agreement by providing notice to the Company, which termination shall be effective immediately, Consultant's right to further compensation, including the receipt of stock, vesting of stock options, etc. shall cease immediately upon termination. (b) TERMINATION FOLLOWING CHANGE OF CONTROL. If the Company (or its successor or assignee) terminates this Agreement without Cause within 18 months (or such shorter period representing the balance of the term of this Agreement) following a change of control at the Company, Consultant will be paid $170,000 within 30 days of termination, and all unvested stock options granted to Consultant will immediately become vested. A condition precedent to the Company's obligation to fulfill the payment and vesting obligations in this Section 12(b) shall be Consultant's execution of a full and complete release of all claims against the Company, its Board, officers, agents, and affiliates in reasonable form as provided by the Company. For purposes of this Agreement, "CHANGE OF CONTROL" shall mean (a) the Company is party to a merger or consolidation whereby the Company is NOT the surviving entity and whereby the transaction results in the voting securities of the Company outstanding immediately prior thereto failing to continue to represent (either by remaining outstanding or by being converted into voting securities of the surviving or another entity) at least fifty (50%) percent of the combined voting power of the voting securities of the Company or such surviving or other entity outstanding immediately after such merger or consolidation; or (b) the sale or disposition of all or substantially all of the Company's assets (or consummation of any transaction having similar effect). (c) TERMINATION FOR CAUSE. If Consultant is terminated for Cause, Consultant will not be entitled to additional compensation due to the termination, effective immediately as of the date the Company provides Consultant notice of such termination. Stock option vesting will cease at the date of notice of such termination. For purposes of this Agreement, "CAUSE" shall mean (i) gross negligence or willful misconduct in the performance of duties to the Company where such gross negligence or willful misconduct has resulted or is likely to result in substantial and material damage to the Company or its subsidiaries; (ii) repeated absence from the Company that in the reasonable judgment of the Company is unjustified; (iii) a material or willful violation of any federal or state law which results or is likely to result in substantial and 6 material harm to the company or its standing and reputation; (iv) commission of any act of fraud with respect to the Company; (v) conviction of a felony or a crime involving moral turpitude causing material harm to the standing and reputation of the Company, or (vi) during the Term Consultant provides services to a Competitor, in each case as determined in good faith by the Board. The Company and Consultant agree that any disagreement regarding the propriety of such a Termination for Cause will be submitted to a mediator, whose decision will be considered binding by both parties. The mediator will be selected by mutual agreement between the Company and the Consultant. 13. RESPONSIBILITY OF CONSULTANT. Except for purposes of Section 12, the Company agrees not to hold Consultant responsible for any inaccuracies, errors, or omissions in the information or advice given, or for loss or damage resulting for the use of such information or advice given. 14. REMEDIES. Consultant acknowledges and agrees that a breach of this Agreement will result in immediate, irreparable, and continuing damage to the Company for which there will be no adequate remedy at law; and agrees that in the event of any such breach or violation or any threatened or intended breach or violation of this Agreement, the Company and its successors and assigns will be entitled to temporary, preliminary and permanent injunctive relief and/or restraining orders enjoining and restraining such breach or violation or such threatened or intended breach or violation and/or other equitable relief (without needing to post any bond or other security) in addition to such other and further relief as may be proper. 15. AMENDMENTS; WAIVERS; NOTICES. This Agreement may be modified, amended, or supplemented only by a written instrument duly executed by Consultant and an officer of the Company, with proper approvals from the Company's Board of Directors. No term or condition or the breach thereof will be deemed waived, unless it is waived in writing and signed by the party against whom the waiver is claimed. Any waiver or breach of any term or condition will not be deemed to be a waiver of any preceding or succeeding breach of the same or any other term or condition. The failure of any party to insist upon strict performance of any term or condition hereunder will not constitute a waiver of such party's right to demand strict compliance therewith in the future. Any notice given by one party to the other pursuant to this Agreement shall be in writing and shall be deemed to have been effectively given (i) upon receipt when delivered personally, (ii) one (1) day after sending when sent overnight by a nationally recognized overnight courier (E.G., FedEx), or (iii) five (5) days after mailing when sent by certified U.S. mail, postage prepaid, to the following address: If to the Company: Lpath, Inc. Attn: Scott Pancoast 6335 Ferris Sq., Suite A San Diego, CA 92121 If to Consultant, the address set forth below his signature. 16. GOVERNING LAW; JURISDICTION AND VENUE. This Agreement will be governed by and construed in accordance with the laws of the State of California, without regard to principles of conflicts of law. Except as otherwise expressly provided in this Agreement, the parties agree that any dispute regarding the interpretation or validity of this Agreement will be 7 subject to the exclusive jurisdiction of the state and federal courts in and for the County of San Diego, California, and each party hereby agrees to submit to the personal and exclusive jurisdiction and venue of such courts. 17. ARBITRATION. Except as otherwise expressly provided in this Agreement, Consultant and the Company hereby agree to submit to final and binding arbitration relating to: (i) any and all disputes arising out of or relating to this Agreement its interpretation, enforcement, breach, or performance hereunder, including the provision of services rendered under its terms, or (ii) termination of Consultant's services hereunder. Any arbitration shall be conducted in San Diego, California and shall be before a single, neutral arbitrator selected by the parties, in accordance with the rules of the American Arbitration Association (the "AAA") for Employment Disputes. If the parties are to be unable to agree on a single neutral arbitrator, the arbitrator shall be selected pursuant to the AAA rules. The arbitrator shall have the power to enter any award that could be entered by a judge of a trial court of the State of California, and only such power, and shall follow the law. The parties agree to abide by and perform any award rendered by the arbitrator. The arbitrator shall issue the award in writing and therein state the essential findings and conclusions on which the award is based. Judgment on the award may be entered in any court having jurisdiction thereof. In no event shall the demand for arbitration be made after the date when institution of legal or equitable proceedings based on such claim, dispute, or other matter in question would be barred by the applicable statute of limitations. This agreement to arbitrate shall be specifically enforceable under the prevailing arbitration law, and shall be in accordance with the procedures established for arbitration in the California Code of Civil Procedure. Both Consultant and the Company understand that by agreeing to arbitrate their disputes, they are giving up their right to have their disputes heard in a court of law and, if applicable, by a jury. The Company would bear the costs of the arbitrator, the forum, and any filing fees for any arbitration initiated by the company, or any arbitration initiated by Consultant where Consultant is the prevailing party. If the Company prevails in an arbitration initiated by Consultant, the parties shall equally share the costs of the arbitrator, the forum, and any filing fees. Each of Consultant and the Company shall bear its own respective attorney's fees and all other costs, unless otherwise required or allowed by law and awarded by the arbitrator. This provision shall survive termination of this Agreement. 18. COUNTERPARTS. This Agreement may be executed in multiple copies, each of which will be deemed an original and all of which will constitute a single agreement binding on all parties. 19. ENTIRE AGREEMENT. This Agreement (together with documents and agreements entered into herewith) constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements and understandings. Each party to this Agreement acknowledges that no representations, inducements, promises or agreements have been made by any party, or any one acting on behalf of any party, that are not embodied in this Agreement with respect to the subject matter hereof. 20. REPRESENTATION. By executing this Agreement, Consultant acknowledges that he understands and agrees that he has been encouraged, and had the opportunity to, consult with his/her own personal attorney in connection with this Agreement. 21. ASSIGNMENT. Due to the personal nature of the consulting services to be rendered 8 by Consultant hereunder, Consultant may not assign this Agreement, in whole in part, or any of his rights or obligations hereunder, except that Consultant may assign his right to receive compensation hereunder for purposes of estate planning. The Company may assign its rights and obligations hereunder without restriction. Subject to the foregoing, this Agreement will inure to the benefit of and be binding upon each of the heirs, assigns, and successors of the respective parties. 22. SEVERABILITY. If any provision of this Agreement shall be declared invalid, illegal, or unenforceable, such provision shall be modified to the extent necessary to render it compliant with applicable law, and, to the extent it cannot be so modified, such provision shall be severed from this Agreement and the remaining provisions shall continue in full force and effect. [Remainder of This Page Intentionally Left Blank] 9 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. CONSULTANT THE COMPANY LPATH, INC. a Nevada corporation By: - ---------------------------------- ---------------------------------- Signature Signature William Garland Scott Pancoast, President & CEO - ---------------------------------- ---------------------------------- Printed Name Printed Name and Title - ---------------------------------- ---------------------------------- Date Date [SIGNATURE PAGE TO CONSULTANT AGREEMENT] EX-99.4 5 tex99_4-9591.txt EX-99.4 Exhibit 99.4 [LOGO] Lpath CONSULTANT AGREEMENT THIS CONSULTANT AGREEMENT ("Agreement") is entered into as of February 1, 2006 ("Effective Date"), by and between Roger Sabbadini, Ph.D. ("Consultant"), and Lpath, Inc., a Nevada corporation (the "Company"). In consideration of the retention of Consultant as a scientific consultant and independent contractor to the Company, and of the compensation received by Consultant from the Company, the Company and Consultant hereby agree as follows: 1. DESCRIPTION OF SERVICES. (a) CONSULTANT. Consultant will advise the Company as an independent contractor in areas of science relevant to the Company's business, including in the area of lysolipids (as well as any component in lysolipid signaling pathways) as potential targets for drug discovery (the "Project"). (b) EXCLUSIVITY. Unless as otherwise agreed to in writing, Consultant will, during the term of this Agreement, work exclusively with the Company on matters relating to (a) any composition of matter or method that is protected by (i) any Company trade secret or (ii) any Company intellectual property that is either issued, pending, or filed at the time of termination or (b) the use, research, or development, for any therapeutic or diagnostic purpose, of (i) any sphingolipid or sphingolipid metabolite, (ii) any lysophosphatidic acid or lysophosphatidic acid metabolite, or (iii) any component of their respective biosynthetic/metabolic pathways, as well as molecules that specifically interact with any of these components (the "Field"). The Company acknowledges that Consultant is a faculty member of the California State University (the "University"), and the Company recognizes that Consultant's primary responsibility is to the University. In connection with his University faculty position, Consultant may have entered into certain agreements with the University relating to ownership of intellectual property rights, conflicts of interest, and other matters, and may be subject to certain policy statements of the University (collectively, the "University Agreements"). If any provision of this Agreement is in conflict with the University Agreements to which Consultant is subject or a party, then the University Agreements will govern to the extent of such conflict, and the conflicting provisions of this Agreement will not apply. If requested, Consultant agrees to promptly furnish the Company with copies of such University Agreements. Notwithstanding this, Consultant represents that (i) all of his current consulting activities or consultancy obligations, and (ii) all restrictions or policies of the University that may limit or restrict Consultant's consulting activities or limiting rights to inventions resulting from such activities are in no way conflicting with this Agreement. Other than with respect to the University, Consultant agrees that he has not entered into, and will not enter into, any written or oral agreement with any entity, company, or person that is or may be (or has the potential to be) a competitor of the Company in the Field. 1 Consultant understands that while he is a Consultant to the Company, he is not to breach any obligation of confidentiality that he has to others, Consultant agrees that the provision of any requested consulting services performed hereunder will not be conducted on time that is required to be devoted to the University or any other third party. Unless otherwise agreed, Consultant agrees not use the funding, resources, and/or facilities of the University or any other third party to perform his obligations under this Agreement, and not to perform his obligations under this Agreement in a manner that would give the University or any third party rights to any technology or intellectual property. 2. TIME COMMITMENT. Subject to his obligations to the University, Consultant will devote a significant portion of the normal workweek, as well as some time outside the normal workweek, to provide scientific and intellectual property-related counsel to personnel working on projects on behalf of the Company. 3. COMPENSATION. (a) CASH COMPENSATION. For all services rendered, the Consultant will be paid the sum of $9,670.00 per month ("Direct Compensation"). In addition, the Company will pay San Diego State University, where Consultant is a faculty member, the sum of $57,683.27 ($41,982 + 37.4% fringe benefit rate) to enable Consultant to devote more time to his activities with Company. However, Consultant will abide by the "Professional Activities, External" section of the San Diego State University Policy file. Such amounts are subject to change from time to time as mutually agreed to by the parties. Consultant understands that, while serving in his capacity as a consultant to the Company under this Agreement, he is not a salaried employee of the Company, and that he is not entitled to receive any benefits offered by the Company, unless otherwise agreed. Consultant is responsible for reporting his activities to the relevant governmental agencies, and he understands that the Company will not withhold from his compensation hereunder any amount for payment of any federal, state, or local taxes that may be due as a result of Consultant's provision of services hereunder, and that the Consultant has sole responsibility to pay such taxes, if any, and to file such returns as may be required by applicable laws and regulations. (b) OTHER COMPENSATION. At the Company's discretion, it may recommend to its Board of Directors that the Company grant Consultant additional compensation in the form of stock options. (c) EXPENSE REIMBURSEMENT. Reasonable out-of-pocket expenses incurred by Consultant while providing services hereunder (including reasonable travel expenses incurred in connection with providing such consulting services) will be reimbursed promptly by the Company, subject to customary verification in a form reasonably acceptable to the Company. (d) SOLE COMPENSATION. The foregoing fees, other compensation, and reimbursement of expenses are Consultant's sole compensation for rendering services to the Company pursuant to this Agreement. 4. INDEPENDENT CONTRACTOR. Under this Agreement, Consultant's relationship with the Company shall at all times be that of an independent contractor, and nothing in this Agreement shall be construed to create any agency or employer-employee relationship between the Company and Consultant. Except as expressly provided herein or as may otherwise be 2 authorized in advance in writing by the Company, Consultant shall have no authority to act on behalf of or to enter into any contract, incur any liability or obligation, or make any representation on behalf of the Company, unless advance approval is obtained from the Chief Executive Officer. The Company agrees that during the term of this Agreement, or any extension or renewal thereof, Consultant may be employed by other persons, firms, or corporations, including the University; PROVIDED, HOWEVER, that the provisions of this Agreement will be strictly observed by Consultant with respect to such other persons, firms, or corporations. Since Consultant will not be an employee of the Company, it is understood that Consultant shall not be entitled to any of the benefits under the Company's retirement or group insurance plans or any other employee benefits. Consultant is solely responsible for all taxes, withholdings, and other similar local, state, U.S., or international statutory obligations, including, without limitation, workers compensation insurance, Social Security, federal, state, or any other employee payroll taxes; and Consultant agrees to defend, indemnify, and hold the Company harmless from any and all claims made by any entity on account of an alleged failure by Consultant to satisfy any such tax or withholding obligations. In the performance of all services hereunder, Consultant will comply with all applicable laws and regulations. 5. NON-COMPETITION AND NON-SOLICITATION. During the Term, and for a period of one year following the expiration or termination of this Agreement, Consultant agrees that he will not provide services as an owner, partner, shareholder, joint venturer, corporate officer, director, employee, consultant, principal, agent, trustee or licensor, or in any other similar capacity whatsoever, for any person, firm, partnership, association, corporation, business organization, entity, or enterprise that is, or is about to become, directly or indirectly, engaged in any business or program that competes directly with or is substantially similar to any business or program that the Company (or any subsidiary or affiliate of the Company) was involved in (or was in the planning or development stage) during the 120-day period immediately prior to Consultant's ceasing to provide services to the Company or any subsidiary or affiliate of the Company; such business or program shall include, but not be limited to, those directly involved with or relating to the Field (such involvement shall hereinafter be called "Competitive Activities"). If, at any time during the a period of TWO years following the expiration or termination of this Agreement, Consultant is involved in any Competitive Activities, then Consultant shall immediately notify Company in writing of such involvement, including the name of the Business and the nature of Consultant's involvement, and Consultant agrees to fully respond to reasonable questions by the Company regarding such involvement and to provide such further assurances reasonably requested by the Company that Consultant is not and will not be in breach of the Proprietary Information and Inventions Agreement attached hereto as Exhibit A. Consultant acknowledges and agrees that the Company's employees and its staff relationships with such employees are valuable assets. Therefore, Consultant further agrees that during the term of this Agreement and for a two-year period following expiration or termination of this Agreement, he will not, as principal, independent contractor, partner, member, employer, agent, consultant, shareholder, investor, or in any other individual or representative capacity whatsoever: directly or indirectly solicit, raid, entice, or induce any employee or consultant of the Company to be employed by any person, firm, or corporation. 3 6. NO CONFLICT WITH EXISTING AGREEMENTS. The Company hereby acknowledges that it does not desire to acquire from Consultant any secret or confidential know-how or information that Consultant may have acquired from others. Accordingly, Consultant represents and warrants that Consultant is free to divulge to the Company, without any obligation to, or violation of any right of others, any and all information, practice or techniques which Consultant will describe, demonstrate, divulge or in any other manner make known to the Company during Consultant's performance of services hereunder. 7. CONSULTANT INVENTIONS. Subject to his University obligations, Consultant will promptly disclose and assign to the Company, or any persons designated by it, all improvements, inventions, formulae, processes, techniques, know-how and data, whether or not patentable, made or conceived or reduced to practice or learned by Consultant, either alone or jointly with others, during the period of his retention by the Company as an Consultant that (a) arises from or while providing services under this Agreement and which are related to or useful in the business of the Company, or (b) result from tasks assigned Consultant by the Company, or (c) are funded by the Company, or (d) result from use of equipment or premises owned, leased, or contracted for by the Company (all said improvements, inventions, formulae, processes, techniques, know-how and data shall be collectively hereinafter called "Inventions"). Such obligation to disclose Inventions shall continue for one year after expiration or termination of this Agreement with respect to anything that would be an Invention if made, conceived, reduced to practice, or learned during the term hereof. Consultant further agrees as to all Inventions to assist the Company at any time, and not just during the term of this Agreement, in any and all countries in connection with securing ,enforcing, defending, and maintaining such intellectual property protection as the Company deems reasonable, which assistance shall include the execution of documents, including those to acknowledge assignments to the Company or persons designated by it, of Consultant's entire worldwide right, title, and interest therein. In the event that the Company is unable for any reason whatsoever to secure Consultant's signature to any lawful and necessary document required to apply for or execute any patent application with respect to an invention(s) (including reissues, renewals, extensions, continuations, divisions or continuations in part thereof), Consultant hereby irrevocably designates and appoints the Company and its duly authorized officers and agents, as Consultant's agents and attorneys-in-fact to act for and in Consultant's behalf and instead of Consultant, to execute and file any such application and to do all other lawful acts to further the prosecution and issuance of patents thereon with the same legal force and effect as if executed by Consultant. 8. NON-DISCLOSURE AND NON-USE. The parties acknowledge that the Company possesses and will possess information that has been created, discovered or developed by, or has otherwise become known to, the Company (including without limitation, information created, discovered, developed, invented, or made known by or to Consultant arising specifically out of his retention as an Consultant by the Company), and/or in which property rights have been assigned or otherwise conveyed or disclosed to the Company, which information has commercial value in the business in which the Company is engaged or intends to engage. All of the aforementioned information is hereinafter called "Proprietary Information." By way of illustration, but not limitation, Proprietary Information includes Inventions, trade secrets, research results, processes, formulae, data and know-how, improvements, inventions, techniques, marketing plans, strategies, forecasts and customer lists. Proprietary Information also includes 4 any information which the Company has received from a third party which the Company is obligated to treat as confidential or proprietary. All Proprietary Information shall be the sole property of the Company and its assigns, and the Company and its assigns shall be the sole owner of all patents and other rights in connection therewith. Consultant hereby assigns to the Company any and all worldwide rights, title, and interest Consultant may have or acquire in all Proprietary Information. At all times during his retention as an Consultant by the Company and at all times after expiration or termination of this Agreement, Consultant will keep in confidence and trust all Proprietary Information and will not disclose, sell, use, lecture upon, publish, or otherwise disseminate any bona fide or potential Proprietary Information without the written consent of the Company. 9. COMPANY MATERIALS. All documents, data, records, apparatus, equipment, chemicals, molecules, organisms and other physical property, whether or not pertaining to Proprietary Information, furnished to Consultant by the Company or a third party or produced by Consultant or others in the course of performance under this Agreement shall be and remain the sole property of the Company and shall be returned promptly to the Company, along with any copy, duplicate, or reproduction thereof, as and when requested by the Company. Should the Company not so request, Consultant shall return and deliver all such property upon expiration or termination of this Agreement for any reason, and Consultant will not take with him any such property or any reproduction of such property upon such expiration or termination. 10. COMPANY PROPERTY. All Proprietary Information and all title, patents, patent rights, copyrights, mask work rights, trade secret rights, and other intellectual property and rights anywhere in the world (collectively "Rights") in connection therewith shall be the sole property of the Company. Consultant hereby assigns to the Company any Rights Consultant may have or acquire in such Proprietary Information. At all times, both during the term of this Agreement and after its expiration or termination, Consultant will keep in confidence and trust and will not use or disclose any Proprietary Information without the prior written consent of an officer of the Company. 11. TERM AND TERMINATION. This Agreement expires December 31, 2010, but is terminable prior to that date by either party at any time, with or without advance notice, and with or without "Cause" (see definition below). "Cause" is defined to mean: (i) conduct that in the good faith judgment of the Company constitutes a material breach of Consultant's duty, (ii) lack of sufficient progress with respect to a project or task assigned to Consultant, leading the Company--in good faith--to conclude that any such project is not viable, or (iii) Consultant's inability for any reason to provide consulting services for a period exceeding 90 days. Should the agreement terminate due to Consultant's refusal to continue to provide consulting services due to the Company's relocation of its corporate headquarters to a facility more than 50 miles from the current facility, this would not be considered Cause. If the Company hires Consultant as an employee and terminates this contract in the process, this would be considered Cause. If the Company terminates the agreement without Cause, the Company will pay to Consultant an additional seven months of Direct Compensation, and any stock options that would have vested had it not been for the application of a "cliff" waiting period will vest. 5 In the event the Company undergoes a change of control (i.e., if the Company is acquired or merges with another corporation whereby the Company is NOT the surviving entity and whereby the shareholders of the Company end up with less than 50% ownership of the merged entity), after which the Agreement is terminated without Cause (by the Company or its successors), the Company will then pay to Consultant an additional twelve months of Direct Compensation. In addition, if such termination occurs within 24 months following the change of control, any unvested stock options previously granted to Consultant will accelerate-vest by an additional 24 months, and Consultant will have up to 12 months to exercise any or all of his then-vested stock options. A condition precedent to the Company's obligation to fulfill the payment and vesting obligations in this Section 11 shall be Consultant's execution of a full and complete release of all claims against the Company, its Board, officers, agents, and affiliates in reasonable form as provided by the Company. Compensation for activities beyond the scope and timeframe of this Agreement will be negotiated as deemed necessary. Upon expiration or notice of termination of this Agreement, the Company's obligation to pay any compensation, except for services or expenses already accrued or incurred under Section 2, will immediately cease and terminate. Sections 4, 5, 7, 8, 9, 10, 11, 12, 15, 16, and 20 shall survive expiration or termination of this Agreement. 12. RESPONSIBILITY OF CONSULTANT. The Company agrees not to hold Consultant responsible for any inaccuracies, errors, or omissions in the information or advice given, or for loss or damage resulting for the use of such information or advice given. 13. REMEDIES. Consultant acknowledges and agrees that a breach of this Agreement will result in immediate, irreparable, and continuing damage to the Company for which there will be no adequate remedy at law; and agrees that in the event of any such breach or violation or any threatened or intended breach or violation of this Agreement, the Company and its successors and assigns will be entitled to temporary, preliminary and permanent injunctive relief and/or restraining orders enjoining and restraining such breach or violation or such threatened or intended breach or violation and/or other equitable relief (without needing to post any bond or other security) in addition to such other and further relief as may be proper. 14. AMENDMENTS; WAIVERS; NOTICES. This Agreement may be modified, amended, or supplemented only by a written instrument duly executed by Consultant and the President of the Company. No term or condition or the breach thereof will be deemed waived, unless it is waived in writing and signed by the party against whom the waiver is claimed. Any waiver or breach of any term or condition will not be deemed to be a waiver of any preceding or succeeding breach of the same or any other term or condition. The failure of any party to insist upon strict performance of any term or condition hereunder will not constitute a waiver of such party's right to demand strict compliance therewith in the future. Any notice given by one party to the other pursuant to this Agreement shall be in writing and shall be deemed to have been effectively given (i) upon receipt when delivered personally, (ii) one (1) day after sending when sent overnight by a nationally recognized overnight courier (e.g., FedEx), or (iii) five (5) days after mailing when sent by certified U.S. mail, postage prepaid, to the following address: 6 If to the Company: Lpath, Inc. Attn: Scott Pancoast 6335 Ferris Square, Suite A San Diego, CA 92121-3249 If to Consultant, the address set forth below his/her signature. 15. GOVERNING LAW; JURISDICTION AND VENUE. This Agreement will be governed by and construed in accordance with the laws of the State of California, without regard to principles of conflicts of law. Except as otherwise expressly provided in this Agreement, the parties agree that any dispute regarding the interpretation or validity of this Agreement will be subject to the exclusive jurisdiction of the state and federal courts in and for the County of San Diego, California, and each party hereby agrees to submit to the personal and exclusive jurisdiction and venue of such courts. 16. ARBITRATION. Except as otherwise expressly provided in this Agreement, Consultant and the Company hereby agree to submit to final and binding arbitration relating to: (i) any and all disputes arising out of or relating to this Agreement its interpretation, enforcement, breach, or performance hereunder, including the provision of services rendered under its terms, or (ii) termination of Consultant's consulting services hereunder. Any arbitration shall be conducted in San Diego, California and shall be before a single, neutral arbitrator selected by the parties, in accordance with the rules of the American Arbitration Association (the "AAA") for Employment Disputes. If the parties are to be unable to agree on a single neutral arbitrator, the arbitrator shall be selected pursuant to the AAA rules. The arbitrator shall have the power to enter any award that could be entered by a judge of a trial court of the State of California, and only such power, and shall follow the law. The parties agree to abide by and perform any award rendered by the arbitrator. The arbitrator shall issue the award in writing and therein state the essential findings and conclusions on which the award is based. Judgment on the award may be entered in any court having jurisdiction thereof. In no event shall the demand for arbitration be made after the date when institution of legal or equitable proceedings based on such claim, dispute, or other matter in question would be barred by the applicable statute of limitations. This agreement to arbitrate shall be specifically enforceable under the prevailing arbitration law, and shall be in accordance with the procedures established for arbitration in the California Code of Civil Procedure. Both Consultant and the Company understand that by agreeing to arbitrate their disputes, they are giving up their right to have their disputes heard in a court of law and, if applicable, by a jury. The Company shall bear the costs of the arbitrator, the forum, and any filing fees. Each of the Consultant and the Company would bear its own respective attorney's fees and all other costs, unless otherwise required or allowed by law and awarded by the arbitrator. This provision will survive termination of this Agreement. 17. COUNTERPARTS. This Agreement may be executed in multiple copies, each of which will be deemed an original and all of which will constitute a single agreement binding on all parties. 18. ENTIRE AGREEMENT. This Agreement (together with documents and agreements entered into herewith) constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements and 7 understandings. Each party to this Agreement acknowledges that no representations, inducements, promises or agreements have been made by any party, or any one acting on behalf of any party, that are not embodied in this Agreement with respect to the subject matter hereof. 19. REPRESENTATION. By executing this Agreement, Consultant acknowledges that he/she understands and agrees that he/she has been encouraged, and had the opportunity to, consult with his/her own personal attorney in connection with this Agreement. 20. ASSIGNMENT. Due to the personal nature of the consulting services to be rendered by Consultant hereunder, Consultant may not assign this Agreement, in whole in part, or any of his rights or obligations hereunder, except that Consultant may assign his right to receive compensation hereunder for purposes of estate planning. The Company may assign its rights and obligations hereunder without restriction. Subject to the foregoing, this Agreement will inure to the benefit of and be binding upon each of the heirs, assigns, and successors of the respective parties. 21. SEVERABILITY. If any provision of this Agreement shall be declared invalid, illegal, or unenforceable, such provision shall be modified to the extent necessary to render it compliant with applicable law, and, to the extent it cannot be so modified, such provision shall be severed from this Agreement and the remaining provisions shall continue in full force and effect. [Remainder of This Page Intentionally Left Blank] 8 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. CONSULTANT THE COMPANY LPATH, INC. - ------------------------------------ a Delaware corporation (Signature) ROGER SABBADINI, PH.D. By: - ------------------------------------ ---------------------------------- (Printed Name) (Signature) Scott Pancoast, President & C.E.O. ------------------------------------- (Printed Name and Title) [SIGNATURE PAGE TO CONSULTANT AGREEMENT] 9 -----END PRIVACY-ENHANCED MESSAGE-----