SEPARATION AND GENERAL RELEASE AGREEMENT
Exhibit 10.33
This SEPARATION AND GENERAL RELEASE AGREEMENT (the “Agreement”) is made and entered into between Innovate Biopharmaceuticals, Inc., a Delaware corporation (the “Company”), and June X. Xxxxxxxx, MD, PhD (“Executive”). Throughout the remainder of the Agreement, the Company and Executive may be collectively referred to as “the parties.”
Executive was employed as Chief Medical Officer and Chief Operating Officer of the Company pursuant to an employment agreement between the parties dated March 9, 2018 (the “Employment Agreement”). Executive is also a party to a Proprietary Information, Inventions, Non-Competition and Non-Solicitation Agreement with the Company, dated March 9, 2018 (the “Proprietary Information Agreement”).
Executive’s employment terminated without cause as of November 16, 2018. The parties wish to provide for the payment of severance benefits to Executive under her Employment Agreement as set forth in this Agreement.
Executive represents that she has carefully read this entire Agreement, understands its consequences, and voluntarily enters into it.
NOW THEREFORE, in consideration of the above and the mutual promises set forth below, Executive and the Company agree as follows:
1.SEPARATION. Executive’s employment with the Company terminated on November 16, 2018 (the “Separation Date”). Pursuant to Section 5(d) of the Employment Agreement, as of the Separation Date, Executive no longer held any officer positions with the Company. Executive will be paid all accrued unused vacation on the first regularly scheduled payroll date which occurs at least 5 days after the Separation Date.
2.SEPARATION BENEFITS. In consideration of the release of claims and other promises contained herein and on the condition that Executive fully complies with her obligations under this Agreement and the Proprietary Information Agreement, the Company will provide Executive with the following provided that this Agreement has become effective under Section 8 of this Agreement:
(a) Severance Pay. Pursuant to Section 5(c)(ii)(1) of the Employment Agreement, the Company shall pay to Executive Three Hundred Twenty Thousand and 00/100 Dollars ($320,000) (less applicable withholdings), payable in equal installments over a twelve (12) month period in accordance with the Company’s current payroll schedule commencing on the Company’s first regularly scheduled pay date following the Effective Date of this Agreement pursuant to Section 8, subject to Section 15(c).
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(b) Benefits. Pursuant to Section 5(c)(ii)(2) of the Employment Agreement, conditioned on Executive’s eligibility for, and Executive’s proper and timely election to continue health insurance benefits under COBRA after the Separation Date, reimbursement of the additional costs actually incurred by Executive for continuing such benefits at the same level in which Executive participated prior to the Separation Date for the shorter of (i) to twelve (12) months following the Separation Date or (ii) until Executive obtains reasonably comparable coverage, with such reimbursements to commence on the first regular payroll date following the Effective Date of this Agreement pursuant to Section 8, subject to Section 15(c). Such reimbursements are subject to Executive providing appropriate proof of the costs for such premiums.
(c) Equity Awards. For the avoidance of doubt, and subject to approval by the Company’s stockholders of the proposed amendment to the Company’s 2012 Omnibus Incentive Plan (the “Plan”) to, among other things, increase the number of shares authorized for issuance thereunder, Executive shall (i) be vested in 155,206 options to purchase shares of the common stock of the Company, pursuant to the terms of the Notice of Grant of Non-Qualified Stock Option Award, dated September 7, 2018, and (ii) be vested in 19,379 options to purchase shares of the common stock of the Company, pursuant to the terms of the Notice of Grant of Incentive Stock Option Award, dated September 7, 2018. All such options shall be subject to the terms of the applicable award agreements and the Plan. For the avoidance of doubt, all options that are unvested as of the Separation Date shall be forfeited, regardless of whether Executive provides consulting services following the Separation Date. Subject to approval of the appropriate committee of the Company’s Board of Directors, the exercise period for Executives vested options shall be extended to six (6) months from the Separation Date. Executive acknowledges that such extension may alter the treatment of certain options for tax purposes, and Executive agrees that any such adverse tax consequences will be Executive’s responsibility, and not the Company’s.
(d) Other Benefits. As of the Separation Date, Executive shall not be entitled to medical, dental, vision, life, disability, accidental death and dismemberment insurance benefits, or any other employee benefits, and shall not be an active participant in the Company’s 401(k) Plan (the “401(k) Plan”) or any other plan of any type. For the avoidance of doubt, Executive will not be eligible to contribute to her 401(k) plan from any payments received under this Agreement after the Separation Date, except for her regular salary paid through the Separation Date. Nothing in this Agreement, however, shall be deemed to limit Executive’s continuation coverage rights under COBRA or Executive’s vested rights, if any, under the 401(k) Plan or any other Company plan, and the terms of those plans shall govern.
3.PROPRIETARY INFORMATION AGREEMENT. Executive is subject to the Proprietary Information, Inventions, Non-Competition and Non-Solicitation Agreement, dated March 9, 2018 (the “Proprietary Information Agreement”). Executive acknowledges and agrees that Executive will continue to be bound by and subject to the Proprietary Information Agreement, in accordance with its terms, and that she will forfeit all benefits under this Agreement should Executive breach such Proprietary Information Agreement; provided, however, that the parties agree that the definition of the “Company Business” set forth in Section
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3.4(b) of the Proprietary Information Agreement shall be amended to delete the phrase “, and INN-108, for the treatment of ulcerative colitis”. The parties also agree that the length of the Post Employment Restricted Period in Section 3 of the Proprietary Information Agreement is limited to 36 weeks. Pursuant to Section 7 of the Proprietary Information Agreement, Executive has or will return all Company property to the Company at a mutually agreed upon time.
4.COOPERATION. Executive agrees that she will assist and cooperate with the Company in connection with the defense or prosecution of any claim that may be made against or by the Company, or in connection with any ongoing or future investigation or dispute or claim of any kind involving the Company, including any proceeding before any arbitral, administrative, judicial, legislative, or other body or agency, including testifying in any proceeding to the extent such claims, investigations or proceedings relating to services performed or required to be performed by Executive, pertinent knowledge possessed by Executive, or any act or omission by Executive. Executive further agrees to perform all acts and execute and deliver any documents that may be reasonably necessary to carry out the provisions of this Section 4. The Company shall reimburse Executive for reasonable expenses incurred in connection with such cooperation.
5.RELEASE. In consideration of the benefits conferred by this AGREEMENT, EXECUTIVE (ON BEHALF OF HERSELF AND HER FAMILY MEMBERS, HEIRS, ASSIGNS, EXECUTORS AND OTHER REPRESENTATIVES), RELEASES THE COMPANY AND ITS PAST, PRESENT AND FUTURE PARENTS, SUBSIDIARIES, AFFILIATES, AND ITS AND/OR THEIR PREDECESSORS, SUCCESSORS, ASSIGNS, AND ITS AND/OR THEIR PAST, PRESENT AND FUTURE OFFICERS, DIRECTORS, EXECUTIVES, OWNERS, INVESTORS, STOCKHOLDERS, ADMINISTRATORS, BUSINESS UNITS, ENEFIT PLANS (TOGETHER WITH ALL PLAN ADMINISTRATORS, TRUSTEES, FIDUCIARIES AND INSURERS) AND AGENTS (COLLECTIVELY, “RELEASEES”) FROM ALL CLAIMS AND WAIVES ALL RIGHTS, KNOWN OR UNKNOWN, SHE MAY HAVE OR CLAIM TO HAVE IN EACH CASE RELATING TO HER EMPLOYMENT WITH THE COMPANY, OR HER SEPARATION THEREFROM, arising before the execution of this Agreement by Executive, including but not limited to claims: (i) for discrimination, harassment or retaliation arising under any federal, state or local laws, or the equivalent applicable laws of a foreign country, prohibiting age (including but not limited to claims under the Age Discrimination in Employment Act of 1967 (ADEA), as amended, and the Older Worker Benefit Protection Act of 1990 (OWBPA)), sex, national origin, race, religion, disability, veteran status or other protected class discrimination, the Family and Medical Leave Act, as amended (FMLA), and/or harassment or retaliation for protected activity; (ii) for compensation, commission payments, bonus payments and/or benefits including but not limited to claims under the Fair Labor Standards Act of 1938 (FLSA), as amended, the Employee Retirement Income Security Act of 1974, as amended (ERISA), the Family and Medical Leave Act, as amended (FMLA), and similar federal, state, and local laws, or the applicable laws of any foreign country; (iii) under federal, state or local law, or the applicable laws of any foreign country, of any nature whatsoever, including but not limited to constitutional, statutory and common law; (iv) under any employment agreement, severance plan or other benefit plan; and (v) for attorneys’ fees. Executive specifically waives her right to bring or participate in any class or collective action against the Company. Provided, however, that this release does not apply to claims by
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Executive: (aa) for workers’ compensation benefits or unemployment benefits filed with the applicable state agencies; (bb) for vested pension or retirement benefits including under the Company’s 401(k) plan; (cc) to continuation coverage under COBRA, or equivalent applicable law; (dd) to rights that cannot lawfully be released by a private settlement agreement; or (ee) to enforce, or for a breach of, this Agreement (the “Reserved Claims”). For the purpose of implementing a full and complete release and discharge, Executive expressly acknowledges that this Agreement is intended to include in its effect, without limitation, all claims which she does not know or suspect to exist in her favor at the time of execution hereof, and that this Agreement contemplates the extinguishment of any such claim or claims.
6.COVENANT NOT TO XXX. In consideration of the benefits offered to Executive, Executive will not xxx Releasees on any of the released claims or on any matters relating to her employment arising before the execution of this Agreement other than with respect to the Reserved Claims, including but not limited to claims under the ADEA, or join as a party with others who may xxx Releasees on any such claims; provided, however, this paragraph will not bar a challenge under the OWBPA to the enforceability of the waiver and release of ADEA claims set forth in this Agreement, the Reserved Claims, or where otherwise prohibited by law. If Executive does not abide by this paragraph, then (i) she will return all monies received under this Agreement and indemnify Releasees for all expenses incurred in defending the action, and (ii) Releasees will be relieved of their obligations hereunder.
7.RIGHT TO REVIEW. The Company delivered this Agreement, containing the release language set forth in Sections 5 and 6, to Executive through her legal counsel on November 20, 2018 (the “Notification Date”), and hereby informs Executive that it desires that she have adequate time and opportunity to review and understand the consequences of entering into it. The Company advises Executive as follows: (a) Executive should consult with her attorney prior to executing this Agreement; and (b) Executive has 21 days from the Notification Date within which to consider it. Executive must return an executed copy of this Agreement to the Company on or before the 22nd day following the Notification Date. Executive acknowledges and understands that she is not required to use the entire 21-day review period and may execute and return this Agreement at any time before the 22nd day following the Notification Date. If, however, Executive does not execute and return an executed copy of this Agreement on or before the 22nd day following the Notification Date, this Agreement shall become null and void. This executed Agreement shall be returned to: Xxxxxxxx X. Xxxxxx, Counsel to the Company, Smith, Anderson, Blount, Dorsett, Xxxxxxxx & Xxxxxxxx, X.X. Xxx 0000, Xxxxxxx, XX 00000.
8.REVOCATION. Executive may revoke the Agreement during the seven (7) day period immediately following her execution of it. This Agreement will not become effective or enforceable until the revocation period has expired (the “Effective Date”). To revoke this Agreement, a written notice of revocation must be delivered to: Xxxxxxxx X. Xxxxxx, Counsel to the Company, Smith, Anderson, Blount, Dorsett, Xxxxxxxx & Xxxxxxxx, X.X. Xxx 0000, Xxxxxxx, XX 27602).
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9.AGENCY CHARGES/INVESTIGATIONS. Nothing in this Agreement prohibits or prevents Executive from filing a charge with or participating, testifying, or assisting in any investigation, hearing, whistleblower proceeding or other proceeding before any federal, state, or local government agency (e.g. EEOC, NLRB, SEC., etc.) (each, a “Government Agency”), nor does anything in this Agreement preclude, prohibit, or otherwise limit, in any way, Executive’s rights and abilities to contact, communicate with, report matters to, or otherwise participate in any whistleblower program administered by any such agencies. Executive further understands that this Agreement does not limit Executive’s or the Company’s ability to communicate with any Government Agency or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency in connection with reporting a possible securities law violation, or other violation of law, without notice to the Company. Nothing in this Agreement or any other agreement limits Executive’s right to receive an award for information provided to any Government Agency/SEC staff.
10.NONDISPARAGEMENT. Executive agrees that she shall not at any time make, publish or communicate to any person or entity or in any public forum any defamatory or disparaging remarks, comments or statements concerning the Company, or any of its employees or officers, and existing and prospective customers, suppliers, investors and other associated third parties, now or in the future. The foregoing restrictions will not apply to any statements that are made truthfully in response to a subpoena or other compulsory legal process. The Company agrees that none of the members of the Board of Directors or the current President of the Company will make statements about Executive that are disparaging, defaming or derogatory; provided, however, that nothing in this Section 10 will prevent the Company from providing information requested by subpoena, court order, regulation, law, in response to a request from a government agency, or in response to a request from an insurance company, investor or other business.
11.DISCLAIMER OF LIABILITY. Nothing in this Agreement is to be construed as either an admission of liability or admission of wrongdoing on the part of either party, each of which denies any liabilities or wrongdoing on its part.
12.GOVERNING LAW. This Agreement shall be construed, interpreted, and governed in accordance with and by North Carolina law and the applicable provisions of federal law, including but not limited to the ADEA and the OWBPA (“Applicable Federal Law”). Any and all claims, controversies, and causes of action arising out of or relating to this Agreement, whether sounding in contract, tort, or statute, shall be governed by the laws of the state of North Carolina, including its statutes of limitations, except for Applicable Federal Law, without giving effect to any North Carolina conflict-of-laws rule that would result in the application of the laws of a different jurisdiction. Both Executive and the Company acknowledge and agree that the state or federal courts located in North Carolina have personal jurisdiction over them and over any dispute arising under this Agreement, and both Executive and the Company irrevocably consent to the jurisdiction of such courts.
13.ENTIRE AGREEMENT. Except as expressly provided herein, or in the Proprietary Information Agreement, this Agreement: (i) supersedes and cancels all other
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understandings and agreements, oral or written, with respect to Executive’s employment with the Company; (ii) supersedes all other understandings and agreements, oral or written, between the parties with respect to the subject matter of this Agreement; and (iii) constitutes the sole agreement between the parties with respect to this subject matter. Each party acknowledges that: (i) no representations, inducements, promises or agreements, oral or written, have been made by any party or by anyone acting on behalf of any party, which are not embodied in this Agreement; and (ii) no agreement, statement or promise not contained in this Agreement shall be valid. No change or modification of this Agreement shall be valid or binding upon the parties unless such change or modification is in writing and is signed by the parties.
14.SEVERABILITY; SEPARATE AND INDEPENDENT COVENANTS. If any portion, provision, or part of this Agreement is held, determined, or adjudicated by any court of competent jurisdiction to be invalid, unenforceable, void, or voidable for any reason whatsoever, each such portion, provision, or part shall be severed from the remaining portions, provisions, or parts of this Agreement, and such determination or adjudication shall not affect the validity or enforceability of such remaining portions, provisions, or parts.
15.SECTION 409A OF THE INTERNAL REVENUE CODE.
(a) Parties’ Intent. The parties intend that all payments or benefits hereunder shall either qualify for an exemption from or comply with the applicable rules governing non-qualified deferred compensation under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and the regulations thereunder (collectively, “Section 409A”) and all provisions of this Agreement shall be construed in a manner consistent with such intention. If any provision of this Agreement (or of any award of compensation, including equity compensation or benefits) would cause Executive to incur any additional tax or interest under Section 409A, the Company shall, upon the specific request of Executive, use its reasonable business efforts to in good faith reform such provision to be exempt from, or comply with, Code Section 409A; provided, that to the maximum extent practicable, the original intent and economic benefit to Executive and the Company of the applicable provision shall be maintained, and the Company shall have no obligation to make any changes that could create any material additional economic cost or loss of material benefit to the Company. Notwithstanding the foregoing, the Company shall have no liability with regard to any failure to comply with Section 409A, provided that the Company acted in good faith and in a prudent manner to comply with Section 409A. If a payment that is deferred compensation subject to Section 409A is subject to satisfaction of a release requirement and the period for satisfying the release requirement begins in one calendar year and ends in the following calendar year (the “Release Satisfaction Period”), then any amount becoming payable during the Release Satisfaction Period shall not be paid until the later calendar year.
(b) Separation from Service. A termination of employment or separation from service shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits that constitute nonqualified deferred compensation within the meaning of Section 409A upon or following a termination of employment or separation from service unless such termination also constitutes a “Separation
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from Service” within the meaning of Section 409A and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment,” “separation from service” or like terms shall mean Separation from Service.
(c) Delayed Distribution to Specified Employees. If the Company determines in accordance with Sections 409A and 416(i) of the Code and the regulations promulgated thereunder, in the Company’s sole discretion, that a delay in benefits provided under this Agreement is necessary to comply with Code Section 409A(A)(2)(B)(i) since Executive is a Specified Employee thereunder, then any post separation payments and any continuation of benefits or reimbursement of benefit costs provided by this Agreement, and not otherwise exempt from Section 409A, shall be delayed for a period of six (6) months following the date of Executive’s separation from service (the “409A Delay Period”). In such event, any post separation payments and the cost of any continuation of benefits provided under this Agreement that would otherwise be due and payable to Executive during the 409A Delay Period shall not commence until, and shall be made to Executive in a lump sum cash amount on the first business day after the date that is six (6) months following Executive’s Separation from Service and in such event the initial payment shall include a catch-up amount covering amounts that would otherwise have been paid during the six-month period following Executive’s Separation from Service.
(d) Installment Payments. All payments made under this Agreement shall be deemed to be series of separate payments, with each installment being treated as a separate payment. The time and form of payment of any compensation may not be deferred or accelerated to the extent it would result in an impermissible acceleration or deferral under Section 409A.
16.OTHER TAXES. Executive shall have sole responsibility for the payment of any and all income taxes and/or excise taxes arising from or due on account of any payment made or benefit provided by the Company under this Agreement.
17.COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, and all of which taken together shall constitute one and the same instrument. Any party hereto may execute this Agreement by signing any such counterpart.
18.WAIVER OF BREACH. A waiver of any breach of this Agreement shall not constitute a waiver of any other provision of this Agreement or any subsequent breach of this Agreement.
(Signature Page Follows)
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(Signature page to Separation and General Release Agreement)
IN WITNESS WHEREOF, the parties have entered into this Agreement as of the day and year written below.
By: /s/ Xxxxxxxxxxx Xxxxx
Name: Xxxxxxxxxxx Prior________________
Title: CEO
Date: Nov 23, 2018
JUNE X. XXXXXXXX, MD, PHD
By: /s/ June. X. Xxxxxxxx
Date: Nov 23, 2018
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