ADIL Adial Pharmaceuticals Inc

 

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): November 1, 2024

 

Adial Pharmaceuticals, Inc.

(Exact name of registrant as specified in charter)

 

Delaware

(State or other jurisdiction of incorporation)

 

001-38323		82-3074668
(Commission File Number)		(IRS Employer Identification No.)

 

4870 Sadler Road, Ste 300

Glen Allen, VA 23060

(Address of principal executive offices and zip code)

 

(804) 487-8196

(Registrant’s telephone number including area code)

 

 

(Former Name and Former Address)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of registrant under any of the following provisions:

 

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12(b) 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))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbols		Name of each exchange on which registered
Common Stock		ADIL		The Nasdaq Stock Market LLC ((Nasdaq Capital Market)

 

Indicate by check mark whether the registrant is an emerging growth company as defined in in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company ☒

 

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

 

On November 1, 2024, Adial Pharmaceuticals, Inc. (the “Company”) entered into a Separation Agreement and Release, dated November 1, 2024 (the “Separation Agreement”), with Joseph Truluck, the Company’s Chief Financial Officer. Pursuant to the Separation Agreement, Mr. Truluck will receive: (i) from November 1, 2024 through December 31, 2024, 100% of his current base salary during which period he would serve until November 15, 2024 as the Company’s Chief Financial Officer and thereafter as a consultant to the Company, (ii) from January 1, 2025 through March 31, 2025, 50% of his current base salary as a consultant to the Company and (iii) from and after March 31, 2025, $350 an hour as a consultant to the Company on an as needed basis.

 

The Separation Agreement contains a general release of all claims against the Company and its current and former officers, directors, employees and agents, and a non-disparagement clause relating to the Company or any released party.

 

The foregoing description of the Separation Agreement does not purport to be complete and is subject to, and qualified in its entirety by reference to, the full text of the Separation Agreement, a copy of which is attached hereto as Exhibit 10.1 and incorporated herein by reference.

 

On November 1, 2024, the Company’s board of directors effective November 16, 2024 appointed Vinay Shah, age 61, as the Company’s Chief Financial Officer.

 

Vinay Shah served as the Chief Financial Officer of Virpax Pharmaceuticals, Inc. (NASDAQ: VRPX) from June 2023 until October 2024 and as the Chief Financial Officer of Aravive, Inc. from October 2018 until June 2022. Mr. Shah also served as the Chief Financial Officer of Aravive Biologics, Inc. from 2010 until June 2022, initially as a consultant and from 2017 as an employee. Mr. Shah brings more than 20 years of financial management experience in the medical device and biopharmaceutical industries to our company. From 2008 until 2016, he served in various positions at Pacira Pharmaceuticals Inc., a specialty pharmaceutical company, including Executive Director of Finance and Executive Director of Strategy Analytics, initially as a consultant and since 2010 as an employee. Before Pacira Pharmaceuticals Inc., Mr. Shah worked for Cardinal Health’s medical device group in various finance management positions. The group was subsequently consolidated and spun off as CareFusion and then sold to Becton, Dickinson and Company. His prior work experience includes positions at Pricewaterhouse Coopers LLP and KPMG in India and the Middle East. Mr. Shah received a Bachelor of Commerce degree from Ranchi University in India. He is a Chartered Accountant from the Institute of Chartered Accountants in India and has an MBA from W.P. Carey School of Business at Arizona State University.

 

In connection with his appointment, the Company entered into an employment agreement with Mr. Shah (the “Shah Employment Agreement”) to employ Mr. Shah as the Company’s Chief Financial Officer for a three-year term effective November 16, 2024 at an annual base salary of $315,000, with a discretionary bonus of up to 30% of his base salary upon achievement of objectives as may be determined by the Company’s board of directors. The Employment Agreement provides that Mr. Shah will be eligible to receive a grant of stock options for 40,000 shares of common stock pursuant to the Company’s 2017 Equity Incentive Plan (the “Plan”), with the vesting terms, number of shares underlying the option and other terms of the grant to be determined at the discretion of the Company’s Board of Directors (subject to the shares being available in the Plan at the time of the grant), six (6) months’ severance for a without cause termination of employment and twelve (12) months’ severance for a without cause termination of employment following a change of control of the Company.

 

There are no family relationships between Mr. Shah and any of the Company’s directors or executive officers. In addition, except as set forth above, Mr. Shah is not a party to any transaction, or series of transactions, required to be disclosed pursuant to Item 404(a) of Regulation S-K.

 

The foregoing description of the Shah Employment Agreement does not purport to be complete and is subject to, and qualified in its entirety by reference to, the full text of the Shah Employment Agreement, a copy of which is attached hereto as Exhibit 10.2 and incorporated herein by reference.

 

Item 9.01. Financial Statements and Exhibits.

 

(d) Exhibits.

 

Exhibit Number		Description
10.1		Separation Agreement between Adial Pharmaceuticals, Inc. and Joseph Truluck, dated November 1, 2024
10.2		Employment Agreement between Adial Pharmaceuticals, Inc. and Vinah Shah, dated November 1, 2024
99.1		Press Release issued by Adial Pharmaceuticals, Inc.
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

 

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.

 

Dated: November 5, 2024	ADIAL PHARMACEUTICALS, INC.
	By:	/s/ Cary J. Claiborne
	Name:	Cary J. Claiborne
	Title:	President and Chief Executive Officer

 

 

2

Exhibit 10.1

 

4870 Sadler Road, Ste 300 Glen Allen, VA 23060 USA +1.804.487.8196 www.adialpharma.com

 

VIA FEDEX AND U.S. MAIL

 

November 1, 2024

 

Personal and Confidential

 

Joseph Truluck

1534A Wilhelmina Rise

Honolulu, HI 96816

 

Re: Separation and Release

 

Dear Joe:

 

This letter follows up our discussion concerning your resignation of your position with Adial Pharmaceuticals, Inc. (the “Company”). In recognition of your long service and dedication to the Company, the Company is proposing a separation agreement (the “Agreement”) as follows:

 

1. Separation From Employment. On the expressed condition that you sign and return this Agreement by 6:00 pm (EDT) on November 1, 2024 and do not subsequently revoke such execution and agreement, the Company agrees to the following services and compensation:

 

(a) For the period which runs from November 1, 2024 through November 15, 2024, you will retain your current position as the Chief Financial Officer of the Company and continuing receiving the salary and benefits provided for under your current employment agreement with the Company (“Period 1”), and Company and you acknowledge and agree that the end of Period 1 will be deemed to be the end of your employment with the Company, with any further services to be rendered pursuant to the Consulting Agreement attached hereto as Attachment “A” and by this reference incorporated herein;

 

(b) For the period which runs from November 16, 2024 through December 31, 2024, you will render services to the Company pursuant to Attachment “A” and by this reference incorporated herein. For this period and on the condition there is no breach or default on your part, you will be paid pursuant to Attachment A (“Period 2”);

 

(c) For the period which runs from January 1, 2025 through March 31, 2025, you will render services to the Company pursuant to Attachment A. For this period and on the condition there is no breach or default on your part, you will be paid pursuant to Attachment A (“Period 3”); and

 

(d) For the period which runs from April 1, 2025 through March 31, 2026, you will render services, if any, to the Company pursuant to Attachment A. For this period and on the condition there is no breach or default on your part, you will be paid, if anything, pursuant to Attachment A (“Period 4”).

 

 

Personal and Confidential

Joseph Truluck

Page 2

 

2. Withholding, Expenses and Employment. The Company reserves the right to withhold from any payments to you all sums that it is required or allowed to withhold pursuant to applicable tax withholding laws, regulations, and/or garnishment actions. You shall remain solely responsible for any and all income or other taxes due by you or assessed against you on payments made to you.

 

3. Benefits and Miscellaneous

 

(a) Unemployment Compensation. The Company makes no representations concerning your eligibility for unemployment compensation. You acknowledge and understand that any determination as to your eligibility for unemployment compensation is made solely by the applicable state agency.

 

(b) Other Benefits. Except as specifically set forth in this Agreement, and except as to any vested benefits, if any, your right to, and participation in, all employee benefit plans of the Company shall terminate as of the end of Period 1 in accordance with the specific terms of each plan. To the extent you have any vested assets in any employee benefit plan of the Company, the status and treatment of any such assets shall be governed by the applicable terms of such plan.

 

(c) Bonus. Subject to ratification by the Compensation Committee of the Board of Directors at its sole discretion, the Company will calculate your Annual Bonus on the basis of the full year 2024 (i.e. will not pro-rate) on the schedule and in the manner specified in section 3.2 of your present Employment Agreement, as amended.

 

(d) Miscellaneous. Company further agrees to the following:

 

(i) Company will continue to directly pay for your co-working space until the end of Period 3 at its present monthly rate of Three Hundred Ninety-three Dollars ($393) per month;

 

(ii) Blank Rome will provide you with an opinion regarding the tradability of any shares you hold at Vstock at the end of Period Three; and

 

(iii) Company will accord you with consultation rights in connection with press releases, if any, in connection with your resignation, provided, however, the sole and final decision and approval shall be with Adial.

 

4. Return of Company Property.

 

(a) As provided for in the Employment Agreement, you agree to return to the Company, as applicable, the originals and all copies, whether in print, electronic or other form, of: (i) all proprietary or confidential information and trade secrets of the Company; (ii) all Company and customer files, written materials, records and other documents, whether made by you or which came into your possession during the course of your employment with the Company (collectively “Documents”); (iii) all identification cards, keys, security passes or other means of access to Company facilities; (iv) all credit cards, telephone cards, telephones, computer or other office equipment not otherwise carved out hereinunder; (v) all usernames and passwords for Company computers, software or services known by your or in your possession; and (vi) any other property of the Company in your possession, custody or control. All such property must be returned on or before your Separation Date.

 

 

Personal and Confidential

Joseph Truluck

Page 3

 

(b) Notwithstanding the foregoing, the Company will allow you to retain (i) the Company issued computer in your possession with its peripherals (keyboards, monitors, etc.), on the condition that you transfer all Company data and files to the Company and then delete such data and files from the computer; and (ii) the right to use the models you have created for Company on the condition that all Company data and files are redacted.

 

5. Non-Disparagement. It is a material condition of this Agreement that unless required by law, you agree that you will not directly or indirectly make or ratify any statement, public or private, oral or written, to any person that disparages, either professionally or personally, the Company or any Released Party (as defined below) or that is derogatory in any respect to the Company or any Released Party, whether or not you believe such statement to be truthful.

 

6. Confidentiality of this Agreement. You agree to keep the existence, terms and negotiation of this Agreement strictly confidential and shall not disclose these matters to anyone, in words or in substance, except: (a) your attorneys, financial advisors, and immediate family members, provided that they first agree to keep all such matters confidential; (b) to any taxing authority and the office of unemployment in connection with any requirement to provide information thereto; and (c) to the extent required by law or to the extent necessary to enforce rights under this Agreement; provided however that if you anticipate or are required to make disclosure pursuant to subparagraph (c), you shall inform the Company’s Chief Executive Officer at least ten (10) business days in advance of any such disclosure whenever possible, and otherwise with as much advance notice as possible. Nothing in this Agreement shall limit the rights of any government agency or any party’s right of access to, participation or cooperation with any government agency. You may also share the provisions of the confidentiality, non-disclosure and/or ownership provisions, in relevant part, which are part of any agreement(s) between you and the Company, with parties whom you are in material discussions to enter into a business relationship with, at their expressed request. Notwithstanding the foregoing, you may disclose that you have left the Company’s employ by mutual agreement and on terms fully acceptable to both parties.

 

7. Mutual Non-Filing of Complaint or Charges. As of the date of this Agreement, (a) you represent that you have not filed or asserted any cause of action, claim, charge or other action or proceeding against the Company or any Released Party (as defined below); and (b) the Company hereby represents that it has not filed or asserted any cause of action, claim, charge or other action or proceeding against you.

 

8. Release, Acknowledgement and Non-interference. As a material inducement to the Company to enter into this Agreement, and in consideration of the transitional pay and benefits and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, you, on behalf of yourself, your heirs, your immediate family, administrators, representatives, executors, successors, and assigns (collectively “Releasors”), hereby irrevocably and unconditionally release, acquit, and forever discharge the Company, Adial Pharmaceuticals, Inc., and their predecessors, parents, subsidiaries, affiliates, divisions, any related entities, successors and assigns, and all of their current and former agents, officers, directors, shareholders, partners, employees, consultants, members, trustees, fiduciaries, representatives, attorneys and all persons acting by, through, under or in concert with any of them (collectively, the “Released Parties” and individually “Released Party”) from any and all claims, suits, charges, complaints, liabilities, obligations, promises, agreements, damages, causes of action, demands, losses, debts, costs, indemnities, attorneys fees and expenses of any nature whatsoever, at law and equity or otherwise, whether known, unknown, suspected, unsuspected, disclosed and undisclosed (the “Claims”) which you have, had or claim to have against any Released Party or is in any way connected with your employment relationship with Company from the beginning of time up to and including the date you sign this Agreement (“General Release”). This General Release of Claims is intended to have the broadest possible application and shall include, without limitation, Claims relating to your employment and separation from employment with the Company, Claims of discrimination and retaliation, Claims under tort, contract, the common law or any federal, state or local statute or regulation, public policy, constitutional or other statutory claims, including, without limitation, the Civil Rights Act of 1964, the Americans with Disabilities Act, the Age Discrimination in Employment Act, the Older Workers’ Benefit Protection Act, the Family and Medical Leave Act, the Fair Labor Standards Act, the Equal Pay Act, the Employee Retirement Income Security Act (regarding unvested benefits), the Civil Rights Act of 1991, Section 1981 of U.S.C. Title 42, the Fair Credit Reporting Act, the Worker Adjustment and Retraining Notification Act, the National Labor Relations Act, the Uniform Services Employment and Reemployment Rights Act, the Genetic Information Nondiscrimination Act, the Consolidated Omnibus Budget Reconciliation Act of 1985, the Immigration Reform and Control Act, Hawaii Discriminatory Practices law (HRS §§ 378-1 to 378-6), Hawaii Whistleblowers’ Protection Act (HRS §§ 378-61 to 378-69), Hawaii Dislocated Workers Act (HRS §§ 394B-1 to 394B-13), Hawaii Family Leave Law (HRS §§ 398-1 to 398-29), Hawaii Civil Rights Act (HRS §§ 368-1 to 368-17), Hawaii Occupational Safety and Health Law (HRS §§ 396-1 to 396-19), all of their amendments (as applicable), any related discrimination statutes and ordinances, any associated claims of retaliation, any and all claims arising under any other laws or regulations relating to employment or employment discrimination, Claims for wrongful discharge, Claims for the payment of any salary, wages, bonuses, commissions, vacation pay, severance pay or benefits, Claims of detrimental reliance, and all other statutory, common law or other Claims of any nature whatsoever, to the fullest extent permitted by law. This General Release of Claims does not apply to any claims concerning a breach of this Agreement, claims for any vested benefits under employee benefit plans of the Company, any rights to benefits under applicable workers’ compensation statutes or government-provided unemployment benefits, rights to indemnification and defense that exist under Company policies, bylaws or the common law, and/or any claims arising after the date you sign this Agreement. With respect to the Claims you are waiving herein, you acknowledge that you are waiving your right to receive money or any other personal relief in any action instituted by you or on your behalf by any other person, entity or government agency. You further agree not to interfere in the business operations of the Company, including without limitation, inducing or attempting to induce another party to take actions that would be adverse to the Company.

 

 

Personal and Confidential

Joseph Truluck

Page 4

 

9. Notice and Right to Consider. You are advised to consult with an attorney before executing this Agreement. In any event, you should thoroughly review and understand the effect of this Agreement and its General Release before signing this Agreement. You may take up to 21 days from the date you receive this letter to complete your review and sign it. You acknowledge that if you sign this Agreement by November 1, 2024 or otherwise prior to the expiration of the 21-day period, that you did so voluntarily. The parties expressly agree that any modifications to this Agreement, whether material or not, shall not extend the 21-day period you have to consider this Agreement. You will also have a state statutory period of 7 days following your execution of this Agreement to revoke it (the “Revocation Period”). For purposes of clarification and the removal of doubt, the Revocation Period shall commence immediately upon Company’s receipt of this Agreement executed by you. If you wish to revoke your acceptance of this Agreement, you must submit your revocation in writing to the Company’s General Counsel at the Company’s headquarters within the Revocation Period. The terms of this Agreement shall not become effective or enforceable until after the expiration of the Revocation Period provided that there has been no revocation .

 

10. Miscellaneous.

 

(a) Non-Admission. This Agreement does not constitute an allegation, admission or acknowledgment by any party of any unlawful or improper act or conduct, all of which is expressly denied.

 

(b) Entire Agreement. This Agreement, the Employment Agreement, and the related Proprietary Information And Invention Assignment Agreement (the “PIIA”), constitute the full understanding and entire agreement between you and the Company and supersede any other agreements of any kind, whether oral or written, formal or informal. You are reminded that you shall remain bound by any continuing obligations to preserve the Company’s trade secrets, intellectual property, and confidential information set forth in the Employee Agreement and PIIA and to assign Inventions to the Company as delineated in the PIIA. You represent and acknowledge that in signing this Agreement, you have not relied upon any representation or statement of the Company or its personnel not set forth in this Agreement.

 

(c) Waiver. The parties agree that the failure of a party at any time to require performance of any provision of this Agreement shall not affect, diminish, obviate or void in any way the party’s full right or ability to require performance of the same or any other provision of this Agreement at any time thereafter.

 

(d) Successor and Assigns. This Agreement shall inure to the benefit of and shall be binding upon you, your heirs, administrators, representatives, executors, successors and assigns and upon the successors and assigns of the Company. If you die before receiving the payments herein, the payments will be made to your estate.

 

(e) Governing Law, Jurisdiction, and Venue. Executive and Company acknowledge and agree that this Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia for any claim, applied without reference or regard to any principles of conflict of laws of any jurisdiction. The parties further agree that the exclusive venue for any claim arising out of, related to, or in connection with this Agreement shall be in the state or federal courts within Richmond, Virginia.

 

 

Personal and Confidential

Joseph Truluck

Page 5

 

(f) Severability. This Agreement is intended to be severable. Should any portion, term or provision of this Agreement be declared or determined by any court to be illegal, invalid or unenforceable, the validity of the remaining portions, terms and provisions, and the application of such portion, term or provision in circumstances other than those as to which it is so declared illegal or unenforceable, shall not be affected thereby, and the illegal, invalid or unenforceable portion, term or provision shall be valid and enforceable to the fullest extent permitted by applicable law.

 

(g) Construction. The headings of the paragraphs of this Agreement are for convenience only and are not binding on any interpretation of this Agreement. The doctrine of contra proferentem shall not apply to this Agreement, and if an ambiguity exists in this Agreement or any specific provision thereto, neither the Agreement nor the provision shall be construed against the party which drafted this Agreement or relevant provision.

 

If this Agreement is acceptable, please sign and date the Agreement below and return it to me within the time period specified hereinabove, as relevant.

 

We wish you every success for the future.

 

	Sincerely,
	/s/ Cary J. Claiborne
	Cary J. Claiborne
	CEO

 

By signing this Agreement, I state that I have read it, I understand it, I agree with everything in it and I have signed it knowingly and voluntarily.

 

/s/ Joseph Truluck
Joseph Truluck

 

Date: November 1, 2024

 

 

ATTACHMENT “A”

 

CONSULTING AGREEMENT

 

This Consulting Agreement (this “Agreement”) is made by and between Adial Pharmaceuticals, Inc. (the “Company”) and Joseph Truluck (“Consultant”) effective November 16, 2024 (the “Effective Date”).

 

Recitals

 

Whereas, Consultant wishes to provide consultation services to Company, and the Company wishes Consultant to render such services, all in accordance with the terms hereof.

 

Now, therefor, for and in consideration of the premises and the mutual promises, covenants, and agreements set forth herein, Consultant and the Company agree to the following terms and conditions regarding this Agreement.

 

1. Services. Consultant shall provide to the Company the services set forth in Exhibit A, as, when and where requested by Company (the “Services”), which such Exhibit A by this reference is incorporated herein all in accordance with the terms and conditions of this Agreement.

 

2. Term. Unless terminated in accordance with the provisions of this Agreement, the Services provided by Consultant to the Company shall be performed during the term set forth in Exhibit A. Expiration or termination of this Agreement shall not affect accrued rights or obligations of the parties. The provisions of Paragraphs 4, 5, 6, and 7 of this Agreement will survive any termination of this Agreement.

 

3. Compensation. For providing the Services as defined herein and on the condition Consultant is not in material breach or default of this Agreement, the Company shall deliver to Consultant the consideration described in Exhibit A.

 

4.  Confidential Information. Consultant recognizes and acknowledges that, without limitation, the Company’s trade secrets, know-how and proprietary processes as they exist from time to time as well as other confidential and proprietary information, including, without limitation, the Company’s confidential business plans, preclinical and clinical data, operations and procedures, manufacturing methods and techniques, processes, formulas, designs, products, regulatory status and strategies, technical infrastructure, financial information (collectively, “Confidential Information”) are and shall be the exclusive property of the Company. Consultant shall hold all Confidential Information in strict confidence. Further, Consultant shall not, during and after the term of consultancy to the Company, in whole or in part, disclose any Confidential Information to any person, firm, corporation, association or other entity for any reason or purposes whatsoever. These restrictions shall not apply to such information which Consultant can establish by written proof:

 

i. were known to Consultant as evidenced by written documentation, other than under binder of secrecy, prior to advising to the Company;

 

 

ii. have passed into the public domain prior to or after their development by or for the Company, or their disclosure to the Company, other than through acts or omissions attributable to Consultant; or

 

iii. were subsequently obtained, other than under binder of secrecy, from a third party not acquiring the information under an obligation of confidentiality from the disclosing party.

 

The Company has taken and shall continue to take all reasonable measures to protect the confidentiality of Confidential Information because of its great value to the Company. Consultant shall not disclose to the Company any confidential information, proprietary material or trade secrets belonging to any current or former employer or other third party. Consultant agrees that there will be no publication or other release of information about this Agreement, or the contents or subject matter thereof, such as by press release or otherwise, without the prior written consent of the Company in each instance.

 

In the event that Consultant is requested in any proceeding to disclose any Confidential Information, Consultant shall give the Company prompt and prior written notice of such request so that the Company may seek an appropriate protective order. If, in the absence of a protective order, Consultant is nonetheless compelled by order or subpoena of any court or tribunal of competent jurisdiction to disclose Confidential Information, Consultant may disclose such information to the minimum degree necessary without liability hereunder; provided, that, Consultant shall give the Company prior written notice of the Confidential Information to be disclosed as far in advance of its disclosure as is practicable and use Consultant’s best efforts to obtain assurances that confidential treatment will be accorded to such Confidential Information.

 

5.  Ownership of Intellectual Property.

 

a)  Consultant hereby transfers and assigns to the Company, or to any person or entity designated by the Company, Consultant’s entire right, title, and interest in and to all of the results and proceeds of Consultant’s Services, including, without limitation and as applicable, data, statistical analysis, writings, inventions, ideas, concepts, methods, discoveries, developments and improvements (including, but not limited to, information regarding small molecule antagonists, targets, cell lines, cell culture, manufacturing methods, animal models, assay procedures, clinical development plans, and clinical trial protocols), whether patented or unpatented, and material subject to copyright, made, conceived developed or reduced to practice by Consultant, solely or jointly, arising out of the performance of the Services, whether or not conducted at the Company’s facilities (all of which are collectively referred to herein as “Inventions”). The Company shall own and have title to any Inventions made during the term of this Agreement. Consultant shall communicate promptly and disclose to the Company, in such form as the Company may request, all information, details and data pertaining to any Inventions; and Consultant hereby assigns, and shall promptly execute and deliver to the Company such formal transfers and assignments and such other papers and documents and shall give such testimony as may be necessary or required of Consultant to grant and assign, to the Company all rights in and to any and all copyrights, Inventions, discoveries, and improvements resulting from or arising out of Consultant’s performance in connection with this Agreement or pursuant thereto, which Consultant may make, conceive or reduce to practice, either solely or jointly with any other person and permit the Company to file and prosecute patent applications and, as to material subject to copyright, to obtain copyrights thereof. Consultant acknowledges that all copyrightable materials developed or produced by Consultant during the performance of the Services constitute “works made for hire” pursuant to the United States Copyright Act (17 U.S.C. Section 101), as amended, and the copyright of which shall be owned solely, completely and exclusively by the Company.

 

 

Consultant further agrees that all letters patent that may be granted therefore, and all reissues or reexaminations thereof, shall be for the sole use and benefit of the Company and it shall at once become entitled thereto.

 

b)  Any assignment of copyright hereunder includes all rights of paternity, integrity, disclosure and withdrawal and any other rights that may be known as or referred to as “moral rights” (collectively “Moral Rights”). To the extent such Moral Rights cannot be assigned under applicable law and to the extent the following is allowed by the laws in the various countries where Moral Rights exist, Consultant hereby waives such Moral Rights and consents to any action of the Company that would violate such Moral Rights in the absence of such consent. Consultant agrees to confirm any such waivers and consents from time to time as requested by the Company.

 

c)  If and to the extent that the ownership of any of Consultant’s results and proceeds from Consultant’s Services, in whole or in part, does not automatically vest in Company” for any reason, then this Agreement shall automatically operate as an irrevocable transfer and assignment of any and all right, title, and interest in such results and proceeds by Consultant to Company, in perpetuity and throughout the universe, including all neighboring rights therein of the relevant intellectual property (and all renewals and extensions of such intellectual property) without the necessity of any further consideration, and Company shall be entitled to obtain and hold exclusively in its own name all copyrights and patents in respect of such results and proceeds. No expiration, termination or cancellation of this Agreement or default under this Agreement by any party shall affect Company’s exclusive ownership of the foregoing and/or any of the rights granted herein. Company shall have the rights to use, refrain from using, change, modify, adapt, add to and subtract from all such results and proceeds, as Company in its sole and final discretion shall determine. To the extent that any preexisting rights are embodied or reflected in the results and proceeds of Consultant’s Services, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Consultant hereby grants to Company without condition the irrevocable, perpetual, non-exclusive, royalty-free right and license throughout the universe to use, reproduce, display, perform, distribute copies of, and prepare derivative works based upon such preexisting rights and any derivative works thereof, and authorize others to do any or all of the foregoing.

 

d)  Consultant agrees without condition to perform any acts that may be deemed necessary by Company to evidence more fully the transfer of all results and proceeds of Consultant’s Services to Company. 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 on behalf and instead of Consultant to execute and file any documents pursuant to this Section 5 and enforce the Company’s rights under this Agreement.

 

 

6.  Consultant Documents; Equipment. During the term of this Agreement and thereafter, Consultant shall not remove from or maintain outside Company’s offices and facilities, or make copies of in any form, of any data, documents, records, notebooks, files, correspondence, reports, memoranda, computer tapes, computer disks or similar materials of or containing confidential information of the type identified in Sections 4 and 5 hereinabove, or other materials or property of any kind, unless necessary in accordance with Consultant’s duties hereunder and prior written authorization therefor has been given to Consultant in writing by Company. In the event that any such data, materials or property is so removed or maintained, or copied, all of the foregoing shall be returned to their proper files or places of safekeeping as promptly as possible after the removal shall have served its specific purpose, and all copies of the foregoing shall be returned or destroyed at the written direction of Company.

 

Immediately upon the Company’s request and promptly upon termination of this Agreement, Consultant shall deliver to the Company, without limitation, all data, memoranda, notes, records, reports, photographs, drawings, plans, papers or other documents made or compiled by Consultant or made available to Consultant during the term of this Agreement, and copies or abstracts thereof, whether or not of a secret or confidential nature (collectively, the “Consultant Documents”) as well as any equipment provided to Consultant by the Company or at Company’s expense (“Equipment”). Both Consultant Documents and Equipment shall be and are the exclusive property of the Company to be used by Consultant only in the performance of its duties for the Company.

 

Consultant shall create and maintain written records of the data derived from the Services performed, as applicable, in a timely, accurate, complete, and legible manner (“Project Data”). Consultant shall maintain the Project Data in compliance with the terms and conditions of this Agreement and all applicable federal, state, local, and applicable national laws and regulations. Consultant shall maintain the Project Data in a professional manner so as to permit Company to utilize and review the Project Data in full without disclosing to Company any third party confidential or proprietary information in any review that Company may perform hereunder. Consultant shall not destroy any Project Data without Company’s prior written consent in each instance. Consultant shall make the Project Data available for Company’s inspection and copying at all times. Promptly upon completion or termination of Consultant’s Services, Consultant shall transfer to Company all Project Data.

 

As applicable and if specified that Company and/or its agents or subcontractors are to provide Consultant with any materials necessary to perform the Services (“Materials”), Consultant shall use such Materials solely for the purpose of performing the Services specified and, unless specifically required to perform the Services as agreed to in a prior written agreement with Company, shall not reverse engineer or otherwise attempt to determine the structure, composition or components of the Materials or generate analogs or derivatives of any Materials. Consultant shall not supply such Materials, or any portion thereof, to any third parties unless necessary to perform the Services specified, and on the condition that Company is given prior written notice in each instance. Consultant will use the Materials in compliance with applicable federal, state, local, and applicable national laws and regulations, including, but not limited to, any laws or regulations relating to the testing, storage, transportation, packaging, labeling, or other authorized use of the Materials.

 

 

7. Consultant Representations and Warranties: Consultant hereby represents, warrants, and covenants to Company that Consultant has the skills and experience to perform the Services required hereunder, and Consultant acknowledges that Company is relying on Consultant’s skill and expertise in the foregoing performance of the Services and Consultant agrees to notify Company in writing whenever Consultant does not have the necessary skill and experience to fully perform hereunder; Consultant shall perform all Services in a first class professional manner consistent with the level of care, skill, practice, and judgment exercised by other professionals in performing services of a similar nature to Consultant’s Services under similar circumstances, with the requisite skills, qualifications, and licenses needed to carry out such Services; any documentation or reports provided to Company shall be accurate and complete; Consultant will not, in the course of conducting the Services, infringe or misappropriate any intellectual property right of any third party; and the Services performed and the results and proceeds of Consultant’s Services will fully conform to the specifications, requirements, and other terms of this Agreement, and in the event of a breach of this warranty, without limiting any other rights or remedies Company may have, Consultant shall, at Company’s’ option, promptly re-perform the non-conforming Services at no additional charge to Company. Consultant shall indemnify and hold harmless Company and its subsidiaries, parent company, commonly held entities, and their respective directors, officers, employees and agents (“Company Indemnitees”) from any claim, loss, or expense (“Claims”) incurred or arising from Consultant’s negligence, willful misconduct, unlawful actions, or breach of this Agreement, or any alleged infringement or misappropriation of third party intellectual property rights in connection with the performance of any Services.

 

8.  Independent Contractor Status; No Employment Created. Consultant acknowledges that the relationship of Consultant to the Company is at all times that of an independent contractor. This Agreement does not constitute, and shall not be construed as constituting, an employment relationship between the Company and any persons or as an undertaking by the Company to hire Consultant or any persona as an employee of the Company. The Company will not provide Consultant with an office or any other space from which to conduct the Services, and Consultant shall have the sole control and discretion as to where to perform the Services. Consultant will perform the Services free of the direction and control of the Company, but consistent with the objectives it sets, and will bear the benefit/risk of any profit or loss from rendering the Services. Consultant will not be considered an employee of the Company for any purpose, including without limitation, any Company employment policy or any employment benefit plan, and will not be entitled to any benefits under any such policy or benefit plan (including without limitation Workers Compensation insurance). The Company will not withhold any federal, state or local employment taxes on Consultant’s behalf. Consultant will be solely responsible for the payment of all federal, state and local taxes and contributions imposed or required on income, and for all unemployment insurance, social security contributions and any other payment.

 

9.  Invalidity. If any provision of this Agreement shall be adjudicated or otherwise determined to be void, invalid, unenforceable or illegal for any reason, the validity and enforceability of all the remaining provisions hereof shall not be affected thereby, and this Agreement shall be deemed to be amended by the parties to delete therefrom the portion thus determined or otherwise adjudicated to be void, invalid, unenforceable or illegal, such amendment to apply only to the operation of such provision in the specific jurisdiction in which such adjudication or other determination is made. In addition, if any provision of this Agreement is adjudicated or otherwise determined to be invalid or unenforceable because such provision is held or otherwise determined to be excessively broad as to duration, geographic scope, activity or subject, such provision shall be deemed amended by limiting and reducing it to the minimum degree necessary so as to be valid and enforceable with the applicable laws of the jurisdiction in which such adjudication or determination is made, and such amendment shall only apply to the operation of such provision in such jurisdiction.

 

 

10.  Miscellaneous.

 

a)  Governing Law; This Agreement shall be governed by and construed and enforced in accordance with the federal and state laws of the Commonwealth of Virginia, United States, without reference to any conflict of laws principles therein. The exclusive venue for any claim arising out of, related to, or in connection with this Agreement shall be in the state or federal courts within Richmond, Virginia.

 

b)  Entire Agreement. This Agreement and the Separation and Release Agreement November 1, 2024 embody the entire agreement and understanding between the parties hereto and supersedes all prior oral or written agreements and understandings relating to the subject matter hereof. No statement, representation, warranty, covenant or agreement of any kind not set forth in this Agreement shall affect, or be used to interpret, change or restrict, the express terms and provisions of this Agreement.

 

c)  Assignment. The rights and obligations of Consultant and the Company hereunder shall inure to the benefit of, and shall be binding upon, their respective successors and assigns; provided, however, that nothing contained in this Agreement shall restrict or limit the Company, in any manner whatsoever, from assigning any or all of its rights, benefits or obligations under this Agreement to any affiliate of the Company or in connection with a merger, acquisition or other corporate transaction, in either case, without the necessity of obtaining Consultant’s consent. Consultant’s rights and obligations under this Agreement may not be assigned without the prior written consent of the Company.

 

d)  Modification and Amendment. This Agreement shall not be modified, amended or extended except by an instrument in writing signed by or on behalf of the parties hereto.

 

e)  Counterparts. This Agreement may be executed in one or more counterparts each of which will be deemed an original, but all of which together shall constitute one and the same instrument. Signatures to this Agreement transmitted by facsimile transmission, by electronic mail in “portable document format” (“.pdf”) form, or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing the original signatures, and shall be deemed original signatures by both parties.

 

f)  Interpretation. The parties hereto acknowledge and agree that (i) the rule of construction to the effect that any ambiguities are resolved against the drafting party, and (ii) the terms and provisions of this Agreement, shall be construed fairly as to all parties hereto and not in favor of or against a party, regardless of which party was generally responsible for the preparation of this Agreement.

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the day and year first above written.

 

Adial Pharmaceuticals, Inc. (“Company”)			Joseph Truluck (“Consultant”)
By:			By:
Name:	Cary Claiborne		Name:	Joseph Truluck
Title:	CEO

 

 

Exhibit A

 

1.

Term: The Agreement shall be effective as of the Effective Date and shall expire as provided for hereinbelow, unless earlier terminated by either party (the “Term”) as provided below. Expiration or termination of this Agreement shall not affect accrued rights or obligations of the parties. Either the Company or Consultant may terminate this Agreement at any time, effective immediately, for a material breach which remains uncured for seven (7) days after written notice thereof is given to the defaulting party. In addition, either party may terminate this Agreement at any time and for any or no reason by providing at least sixty (60) days prior written notice of such termination to the other party. The parties agree to the following schedule:

 

a.

Period 1 is not applicable to this Agreement;

b.

Period 2 (defined below) will run from November 16, 2024 to December 31, 2024;

c.

Period 3 (defined below) will run from January 1, 2025 to March 31, 2025; and

d.

Period 4 (defined below) will run from April 1, 2025 to March 31, 2026.

 

2.

Services. Consultant agrees to render consulting services for in support of the Company and Company’s Chief Financial Officer (“Services”) including, without limitation, a continuation of any and all services Consultant rendered during his employment with Company. Consultant shall report to Company’s CFO and CEO. It is anticipated that Consultant will provide the Services initially on a full time basis transitioning to a part-time basis, as follows:

 

a.

Period 1 is not applicable to this Agreement;

b.

Period 2 - Consultant shall render full-time services, as, when and where requested by Company, which shall be deemed to be no less than 30 hours per week.

c.

Period 3 - Consultant shall render part-time services, as, when and where requested by Company, which shall be deemed to be no less than 15 hours per week.

d.

Period 4 - Consultant shall render services on an as-needed basis, if at all, with no retainer fees or guaranteed minimum number of hours.

 

3.

Compensation for Services: Provided Consultant is not in breach or default of this Agreement or the Separation Agreement, Company shall pay Consultant as follows:

 

a.

Period 1 is not applicable to this Agreement;

b.

Period 2 - $24,033/month;

c.

Period 3 - $$12,016/month; and

d.

Period 4 - $350/hour, billable in quarter-hour increments.

e.

 

4.

Options: In consideration for consulting services, Consultant’s previously granted incentive options shall vest and be maintained as follows:

 

a.

Period 1 is not applicable to this Agreement;

b.

Period 2 – Consultant’s previously granted options will continue to vest on their agreed schedule to the end of the period;

c.

Period 3 and Period 4 – All unvested options will be cancelled at the beginning of period 3, vested options will be maintained until 90 days after the end of Period 4, when any unexercised options will be cancelled.

 

 

 

Exhibit 10.2

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (this “Agreement”) is entered into as of November 16, 2024 (the “Effective Date”) by and between Adial Pharmaceuticals, Inc., a Delaware corporation, (the “Company”), and Vinay K. Shah (the “Executive”).

 

Recitals

 

WHEREAS, the Company desires to employ the Executive as a full-time Chief Financial Officer of the Company and the Executive desires to accept employment with the Company upon the terms and conditions hereinafter set forth.

 

NOW THEREFORE, in consideration of the premises and the mutual covenants hereinafter set forth, and intending to be legally bound hereby, it is hereby agreed as follows:

 

Agreement

 

1. Definitions.

 

1.1. “Affiliate” means as to any Person, any other Person that directly or indirectly controls, or is under common control with, or is controlled by, such first Person. As used in this definition, “control” (including, with its correlative meanings, “controlled by” and “under common control with”) shall mean possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of voting equity interests, by contract or otherwise). For the avoidance of doubt, each member of the Company Group (other than the Company) is an Affiliate of the Company.

 

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

 

1.3. “Cause” means the Executive’s: (i) conviction for, or entering of a plea of guilty or nolo contendere (or its equivalent under any applicable legal system) with respect to: (A) a felony or (B) any crime involving moral turpitude; (ii) commission of fraud, misrepresentation, embezzlement or theft against any Person; (iii) engaging in any intentional activity that injures or would reasonably be expected to injure (monetarily or otherwise), in any material respect, the reputation, the business or a business relationship of the Company or any of its Affiliates; (iv) gross negligence or willful misconduct in the performance of the Executive’s duties to the Company or its Affiliates under this Agreement, or willful refusal or failure to carry out the lawful instructions of the Board that are consistent with the Executive’s title and position; or (v) breach of any Restrictive Covenant (as defined below) or material breach or violation of any other provision of this Agreement, of a written policy or code of conduct of the Company or any of its Affiliates (as in effect from time to time) or any other agreement between the Executive and the Company or any of its Affiliates. Except when such acts constituting Cause which, by their nature, cannot reasonably be expected to be cured, the Executive shall have twenty (20) days following the delivery of written notice by the Company of its intention to terminate the Executive’s employment for Cause within which to cure any acts constituting Cause. Following such twenty (20) day cure period, and if the reason stated in the notice is not cured, the Executive shall be given five (5) business days prior written notice to appear (with or without counsel) before the full Board for the opportunity to present information regarding his views on the alleged Cause event. After the Company provides the original notice of its intent to terminate Executive’s employment for Cause, the Company may suspend the Executive, with pay, from all his duties and responsibilities and prevent him from accessing the Company’s or its Affiliates’ premises or contacting any personnel of the Company or any of its Affiliates until a final determination on the hearing is made. The Executive will not be terminated for Cause until a majority of the independent directors approve such termination following the hearing.

 

1.4. “Change of Control” means: (i) the accumulation (if over time, in any consecutive twelve (12) month period), whether directly, indirectly, beneficially or of record, by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended) of 50.1% or more of the shares of the outstanding voting securities of the Company, whether by merger, consolidation, sale or other transfer of shares (other than a merger or consolidation where the stockholders of the Company immediately prior to the merger or consolidation are immediately after such merger or consolidation the direct or indirect beneficial owners of a majority of the voting securities of the entity that survives such merger or consolidation), (ii) a sale of all or substantially all of the assets of the Company and its Subsidiaries, determined on a consolidated basis; (iii) a merger or consolidation of the Company in which its voting securities immediately prior to the merger or consolidation do not represent, or are not converted into securities that represent, a majority of the voting power of all voting securities of the surviving entity immediately after the merger or consolidation; or (iv) during any period of twelve (12) consecutive months, the Continuing Directors cease for any reason to constitute at least a majority of the Board even if one of such Continuing Directors were to resign and not be replaced by a Continuing Director; provided, however, that the following acquisitions shall not constitute a Change of Control for the purposes of this Agreement: (A) any acquisitions of voting securities or securities convertible, exercisable or exchangeable into voting securities directly from the Company or (B) any acquisition of voting securities or securities convertible, exercisable or exchangeable into voting securities by any employee benefit plan (or related trust) sponsored by or maintained by the Company or any of its Subsidiaries; provided further, that a transaction will not be a Change of Control unless it satisfies the requirements of Treasury Regulation 1.409A-3(i)(5)(v), (vi) or (vii).

 

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

 

1.6. “Company Group” means the Company and the direct and indirect Subsidiaries of the Company.

 

1.7. “Company Invention” means any Invention that is Invented by the Executive (alone or jointly with others) (i) in the course of, in connection with, or as a result of the Executive’s employment or other service with any member of the Company Group (whether before, on or after the Effective Date), (ii) at the direction or request of any member of the Company Group, or (iii) through the use of, or that is related to, facilities, equipment, Confidential Information, other Company Inventions, intellectual property or other resources of any member of the Company Group, whether or not during the Executive’s work hours.

 

 

1.8. “Confidential Information” shall mean all information of a sensitive, confidential or proprietary nature respecting the business and activities of any member of the Company Group or any of their respective Affiliates, or the predecessors and successors of any member of the Company Group or any of their respective Affiliates, including, without limitation, the terms and provisions of this Agreement (except for the terms and provisions of Sections 4.4 through 4.17), and the clients, customers, suppliers, computer or other files, projects, products, computer disks or other media, computer hardware or computer software programs, marketing plans, financial information, methodologies, Inventions, know-how, research, developments, processes, practices, approaches, projections, forecasts, formats, systems, data gathering methods and/or strategies of any member of the Company Group or any of their respective Affiliates. “Confidential Information” also includes all information received by the Company or any other member of the Company Group under an obligation of confidentially to a third party. Notwithstanding the foregoing, Confidential Information shall not include any information that is generally available, or is made generally available, to the public other than as a result of a direct or indirect unauthorized disclosure by the Executive or any other Person subject to a confidentiality obligation.

 

1.9. “Continuing Director” means an individual who: (i) at the beginning of the preceding twelve (12) month period, was a director of the Board, and (ii) any new director whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least a majority of the directors then still in office who either were directors at the beginning of the 12-month period or whose election or nomination for election was previously so approved.

 

1.10. “Disability” means that the Executive has been unable, as reasonably determined by the Board (excluding the Executive) in good faith, to perform the Executive’s duties under this Agreement for a period of ninety (90) consecutive days or for a total of one hundred and twenty (120) days (whether or not consecutive) during any period of twelve (12) consecutive months, as a result of injury, illness or any other physical or mental impairment.

 

1.11. “Good Reason” means any of the following actions taken by the Company without the Executive’s prior written consent: (i) a material reduction in the Executive’s duties, responsibilities or authority; (ii) a reduction of the Executive’s Base Salary (defined below); (iii) failure or refusal of a successor to the Company to either materially assume the Company’s obligations under this Agreement or enter into a new employment agreement with the Executive on terms that are materially similar to those provided under this Agreement, in any case, in the event of a Change of Control; (iv) relocation of the Executive’s primary work location that results in an increase in the Executive’s one-way driving distance by more than twenty-five (25) miles from the Executive’s then-current principal residence; or (v) a material breach of this Agreement by the Company. Notwithstanding the foregoing, Good Reason shall not be deemed to exist unless: (A) the Executive gives the Company written notice within sixty (60) days after the occurrence of the event which the Executive believes constitutes the basis for Good Reason, specifying the particular act or failure to act which the Executive believes constitutes the basis for Good Reason, (B) the Company fails to cure such act or failure to act within thirty (30) days after receipt of such notice and (C) the Executive terminates his employment within thirty (30) days after the end of such thirty (30) day cure period specified in clause (B).

 

1.12. “Invented” means made, conceived, invented, authored, or first actually reduced to practice (in any case, whether partially or fully).

 

1.13. “Invention” means any invention, formula, therapy, diagnostic technique, discovery, improvement, idea, technique, design, method, art, process, methodology, algorithm, machine, development, product, service, technology, strategy, software, work of authorship or other Works (as defined in Section 4.13), trade secret, innovation, trademark, data, database, or the like, whether or not patentable, together with all intellectual property rights therein.

 

1.14. “Person” means an individual, partnership, limited liability company, corporation, association, joint stock company, trust, joint venture, unincorporated organization, investment fund, any other business entity and a governmental entity or any department, agency or political subdivision thereof.

 

1.15. “Subsidiary” means, with respect to any Person, any other Person in which such first Person has a direct or indirect equity ownership interest of at least 50%.

 

1.16. “Term of Employment” means the period commencing on the date hereof and ending on the third (3^rd) anniversary of Executive’s employment under this Agreement.

 

1.17. “Termination Date” means the date the Executive’s employment with the Company terminates for any reason.

 

 

2. Employment.

 

2.1. Executive’s Representations. The Executive represents that: (i) the Executive is entering into this Agreement voluntarily and that the Executive’s employment hereunder and compliance with the terms and conditions hereof will not conflict with or result in the breach by the Executive of any agreement to which the Executive is a party or by which the Executive may be bound and (ii) in connection with the Executive’s employment with the Company or any other member of the Company Group, the Executive will not: (A) violate any non-competition, non-solicitation or other similar covenant or agreement by which the Executive is or may be bound or (B) use any confidential or proprietary information that the Executive may have obtained in connection with the Executive’s employment or engagement with any other Person.

 

2.2. Position; Duties and Responsibilities. During the Term of Employment, the Executive shall be employed as the Company’s Chief Financial Officer, with such duties and responsibilities that are consistent with such position as may be assigned by the Board from time to time. In addition, during the Term of Employment, the Executive shall serve in such other officer and/or director positions with any member of the Company Group (for no additional compensation) as may be determined by the Board from time to time. The Executive further agrees that, during the Term of Employment, he shall not knowingly take any action that is contrary to, or in conflict with, the best interests of the Company Group.

 

2.3. Reporting; Outside Activities. During the Term of Employment, the Executive shall report to the Chief Executive Officer, and the Executive shall diligently and conscientiously devote all Executive’s business time, attention, energy, skill and best efforts as necessary to the business and affairs of the Company Group. The Executive may also: (i) continue to serve as a member of the board of or as an advisor, consultant or employee to any organization listed in Exhibit A hereto, (ii) serve on other boards or as an advisor as may be approved by the Board in its sole discretion, (iii) engage in educational, charitable and civic activities and (iv) manage the Executive’s personal and business investments and affairs, so long as such activities: (A) do not, individually or in the aggregate, interfere with the performance of the Executive’s duties under this Agreement and (B) are not contrary to the interests of the Company Group or competitive in any way with the Company Group. Subject to the foregoing, during the Term of Employment, the Executive shall not, directly or indirectly, render any services of a business, commercial, or professional nature to any other Person, whether for compensation or otherwise, without the prior written consent of the Board (excluding the Executive), which consent shall not be unreasonably withheld.

 

3. Compensation and Other Benefits.

 

3.1. Base Salary. During the Term of Employment, the Executive shall initially receive an initial base salary per annum of Three Hundred Fifteen Thousand ($315,000) Dollars, payable in cash in accordance with the Company’s normal payroll practices as in effect from time to time. During the Term of Employment, the Board may periodically review the Executive’s base salary and the Board may, in its sole discretion, set such base salary to an amount it determines to be appropriate, provided, however, that any reduction will qualify as Good Reason under Section 1.11. The Executive’s base salary, as may be in effect from time to time, is referred to herein as “Base Salary.”

 

 

3.2. Annual Bonus. During the Term of Employment, the Executive shall be eligible to earn an annual performance bonus based on the achievement of the performance goals established by the Board or a committee thereof in its sole discretion, with an annual target bonus opportunity of thirty percent (30%) of the Base Salary and the potential to earn a higher bonus for above target performance, with the amount of any such bonus to be determined in the sole discretion of the Board or a committee thereof, in any case, excluding the Executive (the “Annual Bonus”). Any Annual Bonus earned for any performance period may be paid in cash or any equity or equity-based awards (or any combination thereof), as determined in the sole discretion of the Board or a committee thereof, in any case, excluding the Executive, with such determination to be made before January 1 of the performance period to which such Annual Bonus relates (or such later date permitted under Section 409A (as defined below)). Any earned Annual Bonus that is payable in cash shall be paid in a lump sum, and any earned Annual Bonus that is payable in equity or equity-based awards shall be granted, in any case, by no later than the first March 15^th to occur after the end of the applicable performance period. The Board (excluding the Executive) shall act in good faith in determining the value of the portion of any earned Annual Bonus that will be paid in the form of equity or equity-based awards. Except as set forth in Section 4.2, the Executive must be employed by the Company on the bonus payment date in order to receive an earned Annual Bonus with respect to any performance period.

 

3.3. Equity Grants. During the Term of Employment, the Executive shall be eligible for equity or equity-based awards that may be granted to the Executive at such times, in such amounts and in such manner as the Board (excluding the Executive) may determine in its sole discretion, but, in good faith, taking into account the roles of and responsibilities of Executive relative to industry norms for similar positions. Executive will initially be eligible for an award of 40,000 incentive stock options to purchase shares of the Company’s common stock, at an exercise price equal to the per share price of the Company’s common stock at the time, with the vesting terms, number of shares underlying the option and other terms of the grant to be determined at the discretion of the Board of Directors, all in accordance with the Company’s equity incentive plan (the “Plan”) and as to be set forth in a Stock Option Grant Notice. The aforementioned stock option grant is subject to the shares being available in the Plan at the time of the grant.

 

3.4. Expense Reimbursement. During the Term of Employment, the Company shall reimburse the Executive’s reasonable and necessary business expenses incurred in connection with performing the Executive’s duties hereunder in accordance with its then-prevailing policies and procedures for expense reimbursement (which shall include appropriate itemization and substantiation of expenses incurred).

 

3.5. Benefit Plans; Vacation. During the Term of Employment, the Executive shall be entitled to participate in all broad-based employee benefit plans and programs maintained from time to time for the benefit of the Company’s employees (e.g., medical, dental and disability benefits) to the extent that the Executive satisfies the eligibility requirements of such plans or programs (including, without limitation, minimum hours worked) and subject to applicable law and the terms and conditions of such plans or programs; provided, however, that the Company may amend, modify or terminate any such plans or programs at any time in its discretion. During the Term of Employment, the Executive shall be entitled to twenty five (25) days of paid time off per calendar year (pro-rated for partial years), subject to the Company’s paid time off policy, as in effect from time to time.

 

4. Termination; Restrictive Covenants. Upon the Termination Date, the Executive shall be deemed to have immediately resigned from any and all officer, director and other positions the Executive then holds with the Company and its Affiliates (and this Agreement shall constitute notice of resignation by the Executive without any further action by the Executive), and the Executive agrees to execute and deliver such further instruments as are requested by the Company in furtherance of the foregoing. Except as expressly provided in Section 4.2, all rights the Executive may have to compensation and employee benefits from the Company or its Affiliates shall terminate immediately upon the Termination Date.

 

4.1. General. The Company may terminate the Term of Employment and the Executive’s employment at any time, with or without Cause or due to Disability, upon written notice to the Executive. The Executive may terminate the Term of Employment and the Executive’s employment for Good Reason or for any other reason at any time upon not less than thirty (30) days’ prior written notice to the Company; provided, that following its receipt of the Executive’s notice of termination, the Company may elect to reduce the notice period and cause the Termination Date to occur earlier, and action by the Company shall entitle the Executive to notice pay, severance pay or benefits or pay in lieu of notice or lost wages or benefits. In addition, the Term of Employment and the Executive’s employment with the Company shall terminate immediately upon the Executive’s death.

 

 

4.2. Separation Payments.

 

4.2.1. General. Except as otherwise provided in this Section 4.2, in the event that the Executive’s employment with the Company terminates for any reason, the Executive (or the Executive’s estate or legal representative, as applicable) shall be entitled to receive only: (i) the cash portion of the Base Salary earned but unpaid through the Termination Date, paid in accordance with the Company’s normal payroll policies (or at such earlier time as required by applicable law), (ii) any accrued but unused vacation in accordance with the Company’s policies and applicable law, (iii) any unreimbursed business expenses incurred prior to the Termination Date that are otherwise reimbursable, with such expenses to be reimbursed in accordance with the Company’s expense reimbursement policies (as may be in effect from time to time), and (iv) any vested benefits earned by the Executive under any employee benefit plan of the Company or its Affiliates under which the Executive was participating immediately prior to the Termination Date, with such benefits to be provided in accordance with the terms of the applicable employee benefit plan (the items described in the foregoing clauses (i) through (iv), collectively, the “Accrued Benefits”). All other rights the Executive may have to compensation and employee benefits from the Company or its Affiliates, other than as set forth in Sections 4.2.2 or 4.2.3, shall immediately terminate upon the Termination Date.

 

4.2.2. Death and Disability. In the event that the Executive’s employment is terminated due to the Executive’s death or by the Company due to Disability, in either case, during the Term of Employment, then in addition to the Accrued Benefits, and subject to Section 4.2.4, the Executive (or the Executive’s estate or legal representative, as applicable) shall be entitled to receive: (i) the Annual Bonus earned in the fiscal year immediately preceding the fiscal year in which such termination occurred, to the extent that such Annual Bonus is unpaid as of the Termination Date, with such amount to be payable in cash and/or fully vested shares of the Company’s common stock (as determined by the Company in its sole discretion) at the same time as if no such termination had occurred (the “Unpaid Prior Year Bonus”); (ii) the Annual Bonus for the year in which the Termination Date occurs, but multiplied by a fraction (A) the numerator of which is the number of days in the fiscal year that have transpired through the Termination Date and (B) the denominator of which is the number of days in such fiscal year (to be paid in cash and/or fully vested shares of the Company’s common stock (as determined by the Company in its sole discretion) at the same time as if no such termination had occurred); (iii) if the Executive and his eligible dependents are eligible for, and timely elect COBRA continuation coverage, the Company shall reimburse the Executive (or the Executive’s estate or legal representative, as applicable) for the COBRA premiums for the Executive and his eligible dependents under the Company’s medical, dental and vision benefit plans for a period of 12 months following the Termination Date (the “COBRA Benefit”); provided, however, that notwithstanding the foregoing, the COBRA Benefit shall not be provided to the extent that it would result in any fine, penalty or tax on the Company or any of its Affiliates (under Section 105(h) of the Code or the Patient Protection and Affordable Care Act of 2010, or otherwise); provided further, that the COBRA Benefit shall cease earlier if the Executive or his dependents become eligible for health coverage under the health plan of another employer; and (iv) to the extent the following will not result in a violation of Section 409A, with respect to each equity award received by Executive from the Company or any of its direct or indirect parent companies that is outstanding as of the Termination Date, accelerated vesting immediately upon the Termination Date of, (I) with respect to any such equity award received in payment of Base Salary or an Annual Bonus, 100% of such equity award and, (II) with respect to any equity award not described in clause (I), the greater of (x) the portion of the unvested equity award that would have become vested within 12 months after the Termination Date had the Executive remained employed by the Company during such 12-month period (without regard for the vesting schedule set forth in any applicable plan or agreement governing such equity award) or (y) the portion of the unvested equity award that is subject to accelerated vesting (if any) upon such termination under the applicable equity plan or award agreement; provided, however, that any equity awards that are subject to the satisfaction of performance goals shall be deemed earned at not less than target performance; and provided, further, that, with respect to any equity award that is in the form of a stock option or stock appreciation right, the option or stock appreciation right shall remain outstanding and exercisable for 12 months following the Termination Date or, if longer, such period following the Termination Date as provided under the applicable equity plan or award agreement (but in no event beyond the expiration date of the applicable option or stock appreciation right). All other rights the Executive may have to compensation and employee benefits from the Company or its Affiliates, other than as set forth in this Section 4.2.2, shall immediately terminate upon the Termination Date.

 

4.2.3. Termination Without Cause or for Good Reason. If, during the Term of Employment, the Executive’s employment is terminated by the Company without Cause (and not due to death or Disability) or by Executive for Good Reason, in either case, then the Executive shall be entitled to receive the Accrued Benefits and, subject to Section 4.2.4: (i) the Unpaid Prior Year Bonus, with such amount to be payable in cash and/or fully vested shares of the Company’s common stock (as determined by the Company in its sole discretion) at the same time as if no such termination had occurred; (ii) the Annual Bonus for the year in which the Termination Date occurs, but multiplied by a fraction (A) the numerator of which is the number of days in the fiscal year that have transpired through the Termination Date and (B) the denominator of which is the number of days in such fiscal year (to be paid in cash and/or fully vested shares of the Company’s common stock (as determined by the Company in its sole discretion) at the same time as if no such termination had occurred); (iii) continuation of the Base Salary as of the Termination Date for six (6) months following the Termination Date, with all portions of such Base Salary to be paid in cash in equal installments in accordance with the Company’s normal payroll policies, with the first such payment to be made on the sixtieth (60^th) day following the Termination Date and to include a catch-up covering any payroll dates between the Termination Date and the date of the first payment, and (iv) the COBRA Benefit for a period of twelve (12) months following the Termination Date; provided, however, that notwithstanding the foregoing, the COBRA Benefit shall not be provided to the extent that it would result in any fine, penalty or tax on the Company or any of its Affiliates (under Section 105(h) of the Code or the Patient Protection and Affordable Care Act of 2010, or otherwise); provided further, that the COBRA Benefit shall cease earlier if the Executive (or his dependents) become eligible for health coverage under the health plan of another employer. All other rights the Executive may have to compensation and employee benefits from the Company or its Affiliates, other than as set forth in this Section 4.2.3, shall immediately terminate upon the Termination Date.

 

 

4.2.4. Termination Without Cause or for Good Reason – In Connection with a Change of Control. If, during the Term of Employment, the Executive’s employment is terminated by the Company without Cause (and not due to death or Disability) or by Executive for Good Reason, in either case, (A) upon or within 24 months following a Change of Control or (B) within 60 days prior to such Change of Control, then the Executive shall be entitled to receive the Accrued Benefits and, subject to Section 4.2.5: (i) the Unpaid Prior Year Bonus, with such amount to be payable in cash and/or fully vested shares of the Company’s common stock (as determined by the Company in its sole discretion) at the same time as if no such termination had occurred; (ii) a lump sum payment equal to twelve (12) times the Executive’s monthly Base Salary (at the highest rate in effect during the 12 month period commencing on the date of such Change of Control) and the higher of Executive’s target Annual Bonus opportunity and the Annual Bonus paid to Executive with respect to the fiscal year immediately preceding the fiscal year in which such termination occurred, with such payment to be paid in cash on the first payroll date after the effective date of the release with all revocation periods having expired unexercised (as described in Section 4.2.5) and in all events no later than 70 days after such termination and (iii) a payment equal to 12 times the monthly COBRA premium for Executive and his eligible dependents (at the rate in effect for Executive’s coverage at the time of his termination, regardless of whether Executive elects COBRA coverage), with two-thirds of such payment to be paid in cash on the first payroll date after the effective date of the release with all revocation periods having expired unexercised (as described in Section 4.3.5) and in all events no later than 70 days after such termination, and with the remaining one-third to be paid according to the same schedule as the COBRA Benefit is provided in clause (iii) of Section 4.2.3 (i.e., in installments over 12 months following the Termination Date). Notwithstanding the foregoing, in the event that a termination described in clause (B) of this Section 4.2.4 occurs, then the payments described in clauses (ii) and (iii) of this Section 4.2.4 shall be paid over the same 12-month period and in the same manner as set forth in clauses (iii) and (iv) of Section 4.2.3, respectively, rather than being paid in a lump sum. In addition, if (and only if), during the Term of Employment, the Executive’s employment is terminated by the Company without Cause (and not due to death or Disability) or by Executive for Good Reason, in either case, upon or within 24 months following a Change of Control, then, to the extent the following will not result in a violation of Section 409A, the Executive shall be entitled to, in addition to the Accrued Benefits and the payments set forth in the foregoing clauses (i) through (iii), and subject to Section 4.2.5, immediate and full accelerated vesting of all equity awards received by Executive from the Company or any of its direct or indirect parent companies that are outstanding as of the Termination Date without regard for the vesting schedule set forth in any applicable plan or agreement governing such equity awards; provided that, any equity awards that are subject to the satisfaction of performance goals shall be deemed earned at not less than target performance; and provided, further, that, with respect to any equity award that is in the form of a stock option or stock appreciation right, the option or stock appreciation right shall remain outstanding and exercisable for 24 months following the Termination Date (but in no event beyond the expiration date of the applicable option or stock appreciation right). All other rights the Executive may have to compensation and employee benefits from the Company or its Affiliates, other than as set forth in this Section 4.2.4, shall immediately terminate upon the Termination Date.

 

4.2.5  Release Requirement. Payment and provision of the benefits set forth in Sections 4.2.2 or 4.2.3 (other than the Accrued Benefits) is subject to the Executive’s (or, as applicable, the Executive’s estate’s or legal representative’s) execution of a general release of claims and covenant not to sue in form and substance satisfactory to the Company, such that such release becomes effective, with all revocation periods having expired unexercised, within sixty (60) days after the Termination Date . Notwithstanding the foregoing, if such sixty (60) day period ends in a calendar year after the calendar year in which the Executive’s employment terminates, then to the extent required by Section 409A, any severance payment set forth in Sections 4.2.2 or 4.2.3 (other than the Accrued Benefits) that would have been made during the calendar year in which the Executive’s employment terminates instead shall be withheld and paid on the first payroll date in the calendar year after the calendar year in which the Executive’s employment terminates, with all remaining payments to be made as if no such delay had occurred.

4.3 Violation of Restrictive Covenants. Without limiting the remedies provided to the Company and its Affiliates as set forth in this Article 4, upon the Executive’s breach of any of the Restrictive Covenants (as defined below), other than any immaterial and unintentional breach by the Executive of the confidentiality obligations set forth in Section 4.11, the Company will have no obligation to continue to pay or provide any of the compensation or benefits under Section 4.2 (other than the Accrued Benefits) and the Executive shall repay to the Company any amounts paid under Section 4.2 (other than the Accrued Benefits) after such breach occurred.

 

4.4 Restrictive Covenants. As an inducement and as essential consideration for the Company to enter into this Agreement, and in exchange for other good and valuable consideration, the Executive hereby agrees to the restrictive covenants contained in Sections 4.5 through 4.17 (the “Restrictive Covenants”). The Company and the Executive agree that the Restrictive Covenants are essential and narrowly tailored to preserve the goodwill of the business of the Company and its Affiliates, to maintain the confidential and trade secret information of the Company and its Affiliates, and to protect other legitimate business interests of the Company and its Affiliates, and that the Company would not have entered into this Agreement without the Executive’s agreement to the Restrictive Covenants. For purposes of the Restrictive Covenants, each reference to “Company,” “Company Group” and “Affiliate,” shall also refer to the predecessors and successors of the Company, the members of the Company Group and any of their Affiliates (as the case may be).

 

 

4.5 Non-Competition. During the period commencing on the Effective Date and ending twenty four (24) months after the Termination Date (the “Restrictive Period”), regardless of the reason for Executive’s termination of employment, the Executive shall not, in any state of the United States or European Union where the Company conducts business as of the Termination Date, engage in, or own, manage, operate or control, or participate in the ownership, management, operation or control of any business or entity that develops, sells or provides products or services competitive with the products or services developed, sold or provided by any member of the Company Group at the time of cessation of the employment of Executive. Notwithstanding the foregoing, nothing in this Section 4.5 shall prevent the Executive from owning, as a passive investor, up to five percent (5%) of the securities of any entity that are publicly traded on a national securities exchange. For the avoidance of doubt, nothing in this Section 4.5 prevents the Executive from working in the pharmaceutical industry as long as such positions and activities are not competitive with the business of the Company Group. As used in this Section 4.5, “competitive” shall mean products or services using the same mechanism of action or for the treatment of the same (or substantially similar) indication. Executive agrees that this covenant is reasonable with respect to its duration, geographical area, and scope.

 

4.6 Customer Non-Solicitation. During the period commencing on the Effective Date and ending twelve (12) months after the Termination Date, regardless of the reason for Executive’s termination of employment, the Executive shall not (except on the Company’s behalf during the Executive’s employment with the Company), for purposes of providing products or services that are competitive with those provided by any member of the Company Group, on the Executive’s own behalf or on behalf of any other Person, solicit any customer or client of any member of the Company Group with whom the Executive had contact, solicited, or served within the twelve (12) months prior to the Termination Date.

 

4.7 Customer Non-Acceptance. During the period commencing on the Effective Date and ending twelve (12) months after the Termination Date, regardless of the reason for Executive’s termination of employment, the Executive shall not (except on the Company’s behalf during the Executive’s employment with the Company), for purposes of providing products or services that are competitive with those provided by any member of the Company Group, on the Executive’s own behalf or on behalf of any other Person, accept business from any customer or client of any member of the Company Group with whom the Executive had contact, solicited, or served within the twelve (12) months prior to the Termination Date.

 

4.8 Employee and Independent Contractor Non-Solicitation. During the period commencing on the Effective Date and ending twelve (12) months after the Termination Date, regardless of the reason for Executive’s termination of employment, the Executive shall not (except on the Company’s behalf during the Term of Employment), on the Executive’s own behalf or on behalf of any other Person, solicit for employment or engagement any individual who: (A) is employed by, or an independent contractor of, any member of the Company Group at the time of such solicitation or (B) was employed by, or an independent contractor of, any member of the Company Group within twelve (12) months prior to such solicitation.

 

4.9 Employee and Independent Contractor Non-Acceptance. During the period commencing on the Effective Date and ending twenty four (24) months after the Termination Date, regardless of the reason for Executive’s termination of employment, the Executive shall not (except on the Company’s behalf during the Term of Employment), on the Executive’s own behalf or on behalf of any other Person, employ or engage any individual who (A) is employed by, or an independent contractor of, any member of the Company Group at the time of such employment or engagement or (B) was employed by, or an independent contractor of, any member of the Company Group within twelve (12) months prior to such employment or engagement.

 

 

4.10 Non-Disparagement. During the Term of Employment and at all times thereafter, neither the Company nor the Executive shall, directly or through any other Person make any public or private statements (whether orally, in writing, via electronic transmission, or otherwise) that disparage, denigrate or malign the other party or any of the Company’s respective businesses, products, services, activities, operations, affairs, reputations or prospects; or any of the Company’s respective officers, employees, directors, partners (general and limited), agents, members or shareholders. For purposes of clarification, and not limitation, a statement shall be deemed to disparage, denigrate or malign the other party if such statement could be reasonably construed to adversely affect the opinion any other Person may have or form of such first Person. The foregoing limitations shall not be violated by truthful statements made by the Executive or the Company: (i) to any governmental authority or (ii) which are in response to legal process, required governmental testimony or filings, or administrative or arbitral proceedings (including, without limitation, depositions in connection with such proceedings).

 

4.11 Confidentiality; Return of Property. During the Term of Employment and for a period of seven (7) years thereafter, the Executive shall not, without the prior express written consent of the Company, directly or indirectly, use on the Executive’s behalf or on behalf of any other Person, or divulge, disclose or make available or accessible to any Person, any Confidential Information, other than when required to do so in good faith to perform the Executive’s duties and responsibilities hereunder while employed by any member of the Company Group, when required to do so by a lawful order of a court of competent jurisdiction, any governmental authority or agency, or any recognized subpoena power, or in connection with reporting possible violations of federal law or regulation to any governmental agency or entity, or making other disclosures that are protected under the whistleblower provisions of federal law or regulation. In the event that the Executive becomes legally compelled (by oral questions, interrogatories, request for information or documents, subpoena, criminal or civil investigative demand or similar process) to disclose any Confidential Information, then prior to such disclosure, the Executive will provide the Board with prompt written notice so that the Company may seek (with the Executive’s cooperation) a protective order or other appropriate remedy and/or waive compliance with the provisions of this Agreement. In the event that such protective order or other remedy is not obtained, then the Executive will furnish only that portion of the Confidential Information which is legally required, and will cooperate with the Company in the Company’s efforts to obtain reliable assurance that confidential treatment will be accorded to the Confidential Information. In addition, the Executive shall not create any derivative work or other product based on or resulting from any Confidential Information (except in the good faith performance of the Executive’s duties under this Agreement while employed by any member of the Company Group). The Executive shall also proffer to the Board’s designee, no later than the Termination Date (or upon the earlier request of the Company), and without retaining any copies, notes or excerpts thereof, all property of the Company and its Affiliates, including, without limitation, memoranda, computer disks or other media, computer programs, diaries, notes, records, data, customer or client lists, marketing plans and strategies, and any other documents consisting of or containing Confidential Information, that are in the Executive’s actual or constructive possession or which are subject to the Executive’s control at such time. To the extent the Executive has retained any such property or Confidential Information on any electronic or computer equipment belonging to the Executive or under the Executive’s control, the Executive agrees to so advise Company and to follow Company’s instructions in permanently deleting all such property or Confidential Information and all copies. Notwithstanding the foregoing, in accordance with the Defend Trade Secrets Act of 2016, the Executive shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (a) is made (I) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, and (II) solely for the purpose of reporting or investigating a suspected violation of law; or (b) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.

 

 

4.12 Ownership of Inventions. The Executive acknowledges and agrees that all Company Inventions (including all intellectual property rights arising therein or thereto, all rights of priority relating to patents, and all claims for past, present and future infringement, misappropriation relating thereto), and all Confidential Information, hereby are and shall be the sole and exclusive property of the Company (collectively, the “Company IP”). The Executive further acknowledges and agrees that any rights arising in the Executive in any Invention Invented by the Executive, whether alone or jointly with others, during the twelve (12) months following the Termination Date and relating in any way to work performed by the Executive for any member of the Company Group during the Executive’s employment with or service for any member of the Company Group (“Post-employment Inventions”), shall hereby be deemed to be Company Inventions and the sole and exclusive property of the Company; provided, however, that the Board (excluding the Executive) in its sole discretion may elect to compensate the Executive for any Post- employment Inventions. For consideration acknowledged and received, the Executive hereby irrevocably assigns, conveys and sets over to the Company all of the Executive’s right, title and interest in and to all Company IP. The Executive acknowledges and agrees that the compensation received by the Executive for employment or services provided to the Company is adequate consideration for the foregoing assignment. The Executive further agrees to disclose in writing to the Board any Company Inventions (including, without limitation, all Post-employment Inventions), promptly following their conception or reduction to practice. Such disclosure shall be sufficiently complete in technical detail and appropriately illustrated by sketch or diagram to convey to one skilled in the art of which the Company Invention pertains, a clear understanding of the nature, purpose, operations, and other characteristics of the Company Invention. The Executive agrees to execute and deliver such deeds of assignment or other documents of conveyance and transfer as the Company may request to confirm in the Company or its designee the ownership of the Company Inventions, without compensation beyond that provided in this Agreement. The Executive further agrees, upon the request of the Company and at its expense, that the Executive will execute any other instrument and document necessary or desirable in applying for and obtaining patents in the United States and in any foreign country with respect to any Company Invention. The Executive further agrees, whether or not the Executive is then an employee or other service provider of any member of the Company Group, upon request of the Company, to provide reasonable assistance, at the Company’s sole expense, with respect to the perfection, recordation or other documentation of the assignment of Company IP hereunder, and the enforcement of the Company’s rights in any Company IP, and to cooperate to the extent and in the manner reasonably requested by the Company, subject to the Executive’s then schedule, in any litigation or other claim or proceeding (including, without limitation, the prosecution or defense of any claim involving a patent) involving any Company IP covered by this Agreement, with compensation at the Executive’s customary hourly rate, together with all reasonable out-of-pocket expenses incurred by the Executive in satisfying the requirements of this Section 4.12 shall be paid by the Company or its designee. The Executive shall not, on or after the date of this Agreement, directly or indirectly challenge the validity or enforceability of the Company’s ownership of, or rights with respect to, any Company IP, including, without limitation, any patent issued on, or patent application filed in respect of, any Company Invention.

 

4.13 Works for Hire. The Executive also acknowledges and agrees that all works of authorship, in any format or medium, and whether published or unpublished, created wholly or in part by the Executive, whether alone or jointly with others: (i) in the course of, in connection with, or as a result of the Executive’s employment or other service with any member of the Company Group (whether before or after the Effective Date), (ii) at the direction or request of any member of the Company Group, or (iii) through the use of, or that is related to, facilities, equipment, Confidential Information, other Company Inventions, intellectual property or other resources of any member of the Company Group, whether or not during the Executive’s work hours (“Works”), are works made for hire as defined under United States copyright law, and that the Works (and all copyrights arising in the Works) are owned exclusively by the Company and all rights therein will automatically vest in the Company without the need for any further action by any party. To the extent any such Works are not deemed to be works made for hire, for consideration acknowledged and received, the Executive hereby waives any “moral rights” in such Works and the Executive hereby irrevocably assigns, transfers, conveys and sets over to the Company or its designee, without compensation beyond that provided in this Agreement, all right, title and interest in and to such Works, including without limitation all rights of copyright arising therein or thereto, and further agrees to execute such assignments or other deeds of conveyance and transfer as the Company may request to vest in the Company or its designee all right, title and interest in and to such Works, including all rights of copyright arising in or related to the Works.

 

 

4.14 Cooperation. During and after the Term of Employment, the Executive agrees to cooperate with the Company Group in any internal investigation, any administrative, regulatory, or judicial proceeding or any dispute with a third party concerning issues about which the Executive has knowledge or that may relate to the Executive or the Executive’s employment with the Company. The Executive’s obligation to cooperate hereunder includes, without limitation, being available to the Company Group upon reasonable notice for interviews and factual investigations, appearing in any forum at the Company Group’s request to give testimony (without requiring service of a subpoena or other legal process), volunteering to the Company Group pertinent information, and turning over to the Company Group all relevant documents which are or may come into the Executive’s possession. The Company shall promptly compensate the Executive at his usual and customary hourly rate, plus reimburse the Executive for the reasonable out of pocket expenses incurred by the Executive in connection with such cooperation.

 

4.15 Injunctive Relief. The Executive acknowledges and agrees that the Company and its Affiliates will have no adequate remedy at law and would be irreparably harmed if the Executive breaches or threatens to breach any of the Restrictive Covenants. The Executive agrees that the Company and its Affiliates shall be entitled to equitable and/or injunctive relief to prevent any breach or threatened breach of any of the Restrictive Covenants, and to specific performance of each of the terms thereof, in each case, in addition to any other legal or equitable remedies that the Company and its Affiliates may have, as well as the costs and reasonable attorneys’ fees it/they incur in enforcing any of the Restrictive Covenants. The Executive further agrees that: (i) any breach or claimed breach of the provisions set forth in this Agreement by, or any other claim the Executive may have against, the Company or any of its Affiliates will not be a defense to enforcement of any Restrictive Covenant and (ii) the circumstances of the Executive’s termination of employment with the Company will have no impact on the Executive’s obligations to comply with any Restrictive Covenant. The Restrictive Covenants are intended for the benefit of the Company and each of its Affiliates. Each Affiliate of the Company is an intended third party beneficiary of the Restrictive Covenants, and each Affiliate of the Company, as well as any successor or assign of the Company or such Affiliate, may enforce the Restrictive Covenants. The Executive further agrees that the Restrictive Covenants are in addition to, and not in lieu of, any non-competition, non-solicitation, protection of confidential information or intellectual property, or other similar covenants in favor of the Company or any of its Affiliates by which the Executive may be bound.

 

4.16 Tolling During Periods of Breach. The parties hereto agree and intend that the Restrictive Covenants (to the extent not perpetual) be tolled during any period that the Executive is in breach of any such Restrictive Covenant, with such tolling to cease with respect to a Restrictive Covenant once the Executive is in compliance with such Restrictive Covenant, so that the Company and its Affiliates are provided with the full benefit of the restrictive periods set forth herein.

 

4.17 Notification of New Employer. In the event that the Executive is employed or otherwise engaged by any other Person following the Termination Date and during the Restrictive Period, the Executive agrees to notify, and consents to the notification by Company and its Affiliates of, such Person of the Restrictive Covenants.

 

5 Miscellaneous.

 

5.1 Applicable Law. Executive and Company acknowledge and agree that this Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia for any claim, applied without reference to any principles of conflict of laws. The parties further agree that the exclusive venue for any claim arising out of, related to, or in connection with this Agreement shall be in the state or federal courts within Richmond, Virginia.

 

 

5.2 Mediation. Any controversy, dispute or claim arising out of or relating to this Agreement, Executive’s employment or service with any member of the Company Group or the termination thereof shall, if not settled by direct negotiation between the parties, be subject to non-binding mediation under the Employment Arbitration Rules and Mediation Procedures of the American Arbitration Association (“AAA”) as in effect on the date of the notice of demand for mediation. Any demand for mediation by either party shall be made in writing and served upon the other party and shall set forth with reasonable specificity the basis of the dispute and the relief sought. Any mediation hereunder shall be conducted before an independent mediator mutually selected by the parties. If the parties are unable to agree to a mediator within ten (10) days after the receipt of a demand for mediation by either party, the mediator will be chosen by alternatively striking from a list of five mediators obtained by the Company from AAA, and the Executive shall have the first strike. The mediation hearing will occur at a time and place convenient to the parties in the Commonwealth of Virginia. Notwithstanding the foregoing, any claims under Section 4.15 are exempt from this Section 5.2 and may be brought in any court of competent jurisdiction without mediation.

 

5.3 Venue; WAIVER OF JURY TRIAL. In the event that any controversy, dispute or claim arising out of or relating to this Agreement, Executive’s employment or service with any member of the Company Group or the termination thereof is not settled through mediation pursuant to Section 5.2, both the Executive and the Company agree to appear before and submit exclusively to the jurisdiction of the federal courts located in Charlottesville, Virginia with respect to such controversy, dispute or claim (or if such controversy, dispute or claim may not be brought in federal court, the state courts located in Charlottesville, Virginia). Both the Executive and the Company also agree to waive, to the fullest possible extent, the defense of an inconvenient forum or lack of jurisdiction. THE COMPANY AND THE EXECUTIVE HEREBY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THE EXECUTIVE’S EMPLOYMENT BY, OR SERVICE WITH, ANY MEMBER OF THE COMPANY GROUP OR THE TERMINATION THEREOF, OR THIS AGREEMENT OR THE VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR ENFORCEMENT THEREOF (WHETHER ARISING IN CONTRACT, EQUITY, TORT OR OTHERWISE).

 

5.4 Amendments. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives.

 

5.5 Notices. All notices and other communications hereunder shall be in writing, and shall be given by hand-delivery to the other party, by reputable overnight courier, or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

 

To the Company:	Adial Pharmaceuticals, Inc.
	4870 Sadler Road, Suite 300
	Glen Allen, VA 23060
	Attention: Chief Executive Officer
With a copy (which copy shall not constitute notice) to:	Blank Rome, LLP Time-Life Building 1271 6th Avenue
	New York, New York 10020 Attention: Leslie Marlow
To the Executive:	at the residence address most recently filed with the Company;

 

or to such other address as any party shall have furnished to the other in writing in accordance herewith. All such notices shall be deemed to have been duly given: (i) when delivered personally to the recipient, (ii) one (1) business day after being sent to the recipient by reputable overnight courier service (charges prepaid); or (iii) four (4) business days after being mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid.

 

  

5.6 Indemnification. The Parties agree to enter the Indemnification Agreement attached at Exhibit B hereto.

 

5.7 Withholding. The Company may withhold from any amounts payable under this Agreement such federal, state or local income taxes as are required to be withheld pursuant to any applicable law or regulation.

 

5.8 Code Section 409A Compliance.

 

5.8.1. The provisions of this Agreement are intended to comply with Section 409A of the Code and any final regulations and guidance promulgated thereunder (“Section 409A”) or an exemption thereunder and shall be construed in a manner consistent with the requirements for avoiding taxes or penalties under Section 409A. The Company and Executive agree to work together in good faith to consider amendments to this Agreement and to take such reasonable actions which are necessary, appropriate or desirable to avoid imposition of any additional tax or income recognition prior to actual payment or provision of benefit to Executive under Section 409A.

 

5.8.2 To the extent that Executive will be reimbursed for costs and expenses or in-kind benefits, except as otherwise permitted by Section 409A, (a) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit, (b) the amount of expenses eligible for reimbursement, or in-kind benefits, provided during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year; provided that the foregoing clause (b) shall not be violated with regard to expenses reimbursed under any arrangement covered by Section 105(b) of the Code solely because such expenses are subject to a limit related to the period the arrangement is in effect and (c) such payments shall be made on or before the last day of the taxable year following the taxable year in which Executive incurred the expense.

 

5.8.3 A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits upon or following a termination of employment unless such termination constitutes a “Separation 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” or like terms shall mean Separation from Service.

 

5.8.4 Any payments under this Agreement that may be excluded from Section 409A either as separation pay due to an involuntary separation from service or as a short-term deferral shall be excluded from Section 409A to the maximum extent possible. Each installment payable hereunder shall constitute a separate payment for purposes of Treasury Regulation Section 1.409A-2(b), including Treasury Regulation Section 1.409A-2(b)(2)(iii). Each payment that is made within the terms of the “short-term deferral” rule set forth in Treasury Regulation Section 1.409A-1(b)(4) is intended to meet the “short-term deferral” rule. Each other payment is intended to be a payment upon an involuntary termination from service and payable pursuant to Treasury Regulation Section 1.409A-1(b)(9)(iii), et. seq., to the maximum extent permitted by that regulation, with any amount that is not exempt from Section 409A being subject to Section 409A.

 

 

5.8.5 Notwithstanding anything to the contrary in this Agreement, if Executive is a “specified employee” within the meaning of Section 409A at the time of Executive’s termination, then only that portion of the severance and benefits payable to Executive pursuant to this Agreement, if any, and any other severance payments or separation benefits which may be considered deferred compensation under Section 409A that is payable on account of the Executive’s termination (other than by reason of death) (together, the “Deferred Compensation Separation Benefits”) that are due to Executive on or within the six (6) month period following Executive’s termination will accrue during such six (6) month period and will become payable in one lump sum cash payment on the date that is six (6) months and one (1) day following the date of Executive’s termination of employment. All subsequent Deferred Compensation Separation Benefits, if any, will be payable in accordance with the payment schedule applicable to each payment or benefit. Notwithstanding anything herein to the contrary, if Executive dies following termination but prior to the six (6) month anniversary of Executive’s termination date, then any payments delayed in accordance with this paragraph will be payable in a lump sum as soon as administratively practicable after the date of Executive’s death (but not earlier than such payment would have been made absent such death) and all other Deferred Compensation Separation Benefits will be payable in accordance with the payment schedule applicable to each payment or benefit.

 

5.8.6 Notwithstanding anything herein to the contrary, neither the Company nor any of its Affiliates shall have any liability to the Executive or to any other Person if the payments and benefits provided in this Agreement that are intended to be exempt from or compliant with Section 409A are not so exempt or compliant.

 

5.9 Excess Parachute Payments under Code Section 280G. Notwithstanding any other provisions of this Agreement, if any “payments” (including, without limitation, any benefits or transfers of property or the acceleration of the vesting of any benefits) in the nature of compensation under any arrangement that is considered contingent on a Change of Control for purposes of Section 280G of the Code, together with any other payments that the Executive has the right to receive from the Company or any corporation that is a member of an “affiliated group” (as defined in Section 1504(a) of the Code without regard to Section 1504(b) of the Code) of which the Company is a member or from any other Person, would constitute a “parachute payment” (as defined in Section 280G(b)(2) of the Code), such “payments” may, at the Executive’s sole election, be reduced to the largest amount that will result in no portion of such “payments” being subject to the excise tax imposed by Section 4999 of the Code. Any such reduction in “payments” shall be applied first against the latest scheduled cash payments; then current cash payments; then any equity or equity derivatives that are included under Section 280G of the Code at full value rather than accelerated value (with the highest value reduced first); then any equity or equity derivatives included under Section 280G of the Code at an accelerated value (and not at full value), with the highest value reduced first (as such values are determined under Treasury Regulation Section 1.280G-1, Q&A 24); and finally any other non-cash benefits will be reduced (in the order of latest scheduled payments to earliest scheduled payments). All calculations hereunder shall be performed by a nationally recognized independent accounting firm selected by the Company, with the full cost of such firm being borne by the Company. Any determinations made by such firm shall be final and binding on the Executive and the Company.

 

5.10 Severability. The terms and provisions of this Agreement are intended to be separate and divisible provisions and if, for any reason, any one or more of them is held to be invalid or unenforceable, neither the validity nor the enforceability of any other provision of this Agreement shall thereby be affected. It is the intention of the parties to this Agreement that the Restrictive Covenants be reasonable in duration, geographic scope and in all other respects. The Executive agrees that the Restrictive Covenants, including, without limitation, the duration, geographic scope and activity restrictions of each restriction, are reasonable in light of the Executive’s senior position. However, if for any reason any court of competent jurisdiction shall find any provisions of the Restrictive Covenants unreasonable in duration or geographic scope or otherwise, it is the intention of the parties that the restrictions and prohibitions contained therein shall be modified by the court to be effective to the fullest extent allowed under applicable law in such jurisdiction.

 

 

5.11 Captions. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect.

 

5.12 Counterparts. This Agreement may be executed in counterparts and delivered by facsimile transmission or electronic transmission in “portable document format,” each of which shall be an original and which taken together shall constitute one and the same document.

 

5.13 Entire Agreement. This Agreement and the Proprietary Information and Invention Assignment Agreement executed by the Executive and the Company contain the entire agreement concerning the subject matter hereof and supersedes all prior agreements, understandings, discussions, negotiations and undertakings, whether written or oral, between the parties and their Affiliates relating to such subject matter. Notwithstanding the foregoing, the provisions of any consulting agreement executed by the Executive and the Company that survives termination thereof shall remain in full force and effect

 

5.14 Survivorship. The provisions of Article 1, Article 5, Section 2.1 and Sections 4.4 through 4.17 shall survive the termination of the Executive’s employment with the Company and this Agreement in accordance with their terms.

 

5.15 Successors and Assigns. The Company may assign, without the Executive’s consent, its rights and/or delegate its obligations under this Agreement to any successor of the Company, whether by operation of law, agreement or otherwise (including, without limitation, any Person who acquires all or a substantial portion of the business of the Company Group (whether direct or indirect and whether structured as a stock sale, asset sale, merger, recapitalization, consolidation or other transaction)) and, in connection with any such delegation of its obligations hereunder (but only so long as such assignee or delegee has consented in writing to be bound by the obligations hereunder) shall be released from such obligations hereunder. This Agreement may not be assigned by the Executive. Except as otherwise provided herein, this Agreement shall bind and inure to the benefit of and be enforceable by the Executive, the Company and their respective successors and permitted assigns.

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the Effective Date.

 

ADIAL PHARMACEUTICALS, INC:			EXECUTIVE:
By:	/s Cary J. Claiborne		By:	/s/ Vinay K. Shah
Name:	Cary J. Claiborne		Name:	Vinay K. Shah
Title:	Chief Executive Officer

 

 

Exhibit A

Board, Advisory, Consultant, Employee Positions

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit B

Indemnification Agreement

 

[See attached]

 

 

 

 

 

 

 

 

 

 

INDEMNIFICATION AGREEMENT

 

This Indemnification Agreement (the “Agreement”) is made and entered into this November 1, 2024, by and between Adial Pharmaceuticals Inc., a Delaware corporation (the “Company”, which term shall include, where appropriate, any Entity (as hereinafter defined) controlled directly or indirectly by the Company), and Vinay K. Shah (the “Indemnitee”).

 

WHEREAS, it is essential to the Company that it be able to retain and attract as directors and officers the most capable persons available;

 

WHEREAS, increased corporate litigation has subjected directors and officers to litigation risks and expenses, and the limitations on the availability of directors and officers liability insurance have made it increasingly difficult for the Company to attract and retain such persons;

 

WHEREAS, the Company’s Certificate of Incorporation, as amended, and Bylaws (the “Certificate” and the “Bylaws”, respectively), provide that the Company is authorized to indemnify its directors and officers to the fullest extent permissible by applicable law and permit it to make other indemnification arrangements and agreements;

 

WHEREAS, the Company desires to provide Indemnitee with specific contractual assurance of Indemnitee’s rights to full indemnification against litigation risks and expenses (regardless, among other things, of any amendment to or revocation of the Certificate or Bylaws or any change in the ownership of the Company or the composition of its board of directors (the “Board of Directors”));

 

WHEREAS, the Company intends that this Agreement provide Indemnitee with greater protection than that which is provided by the Certificate and Bylaws; and

 

WHEREAS, Indemnitee is relying upon the rights afforded under this Agreement in becoming or continuing as a director and/or officer of the Company.

 

NOW, THEREFORE, in consideration of the promises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows:

 

1. Definitions.

 

(a) “Corporate Status” describes the status of a person who is serving or has served (i) as a director and/or officer of the Company, (ii) in any capacity with respect to any employee benefit plan of the Company or (at the request of the Company) any employee benefit plan of any other Entity, or (iii) as a director and/or officer of any other Entity at the request of the Company. For purposes of subsections (ii) and (iii) of this Section 1(a), if Indemnitee is serving or has served as a director and/or officer of a Subsidiary (as defined below), or in any capacity with respect to any employee benefit plan of a Subsidiary, Indemnitee shall be deemed to be serving at the request of the Company. If Indemnitee is an employee of the Company, Corporate Status shall not include actions taken by Indemnitee in any capacity other than as a director and/or officer or as a representative of any employee benefit plan.

 

(b) “Entity” shall mean any corporation, partnership, limited liability company, joint venture, trust, foundation, association, organization or other legal entity.

 

 

(c) “Expenses” shall mean all fees, costs and expenses incurred by Indemnitee in connection with any Proceeding (as defined below), including, without limitation, reasonable attorneys’ fees, disbursements and retainers (including, without limitation, any such fees, disbursements and retainers incurred by Indemnitee pursuant to Sections 11 and 12(c) of this Agreement), fees and disbursements of expert witnesses, private investigators and professional advisors (including, without limitation, accountants and investment bankers), court costs, transcript costs, fees of experts, travel expenses, duplicating, printing and binding costs, telephone and fax transmission charges, postage, delivery services, secretarial services and other disbursements and expenses.

 

(d) “Indemnifiable Expenses”, “Indemnifiable Liabilities” and “Indemnifiable Amounts” shall have the meanings ascribed to those terms in Section 3(a) below.

 

(e) “Liabilities” shall mean judgments, damages, liabilities, losses, penalties, excise taxes, fines and amounts paid in settlement.

 

(f) “Proceeding” shall mean any threatened, pending or completed claim, action, suit, arbitration, alternate dispute resolution process, investigation, administrative hearing, appeal or any other proceeding, whether civil, criminal, administrative, arbitrative or investigative, whether formal or informal, including a proceeding initiated by Indemnitee pursuant to Section 11 of this Agreement to enforce Indemnitee’s rights hereunder.

 

(g) “Subsidiary” shall mean any corporation, partnership, limited liability company, joint venture, trust or other Entity of which the Company owns (either directly or through or together with another Subsidiary of the Company) either (i) a general partner, managing member or other similar interest or (ii) (A) 50% or more of the voting power of the voting capital equity interests of such corporation, partnership, limited liability company, joint venture or other Entity or (B) 50% or more of the outstanding voting capital stock or other voting equity interests of such corporation, partnership, limited liability company, joint venture or other Entity.

 

(h) “to the fullest extent permissible by applicable law” shall include, but not be limited to: (i) the fullest extent permitted by the provisions of the General Corporation Law of the State of Delaware (the “DGCL”) that authorize or contemplate additional or supplementary indemnification by agreement, or the corresponding provisions of any amendment to or replacement of the DGCL or such provisions thereof; and (ii) the fullest extent authorized or permitted by any amendments to or replacements of the DGCL adopted after the date of this Agreement that increase the extent to which a corporation may indemnify its directors and/or officers.

 

2. Services of Indemnitee. In consideration of the Company’s covenants and commitments hereunder, Indemnitee agrees to serve or continue to serve as a director and/or officer of the Company. However, this Agreement shall not impose any obligation on Indemnitee or the Company to continue Indemnitee’s service to the Company beyond any period otherwise required by law or by other agreements or commitments of the parties, if any.

 

3. Agreement to Indemnify. The Company agrees to hold harmless and indemnify Indemnitee to the fullest extent permissible by applicable law as follows:

 

(a) Proceedings. Subject to the exceptions contained in Section 4(a) below, if Indemnitee was or is a party or is threatened to be made a party to any Proceeding by reason of Indemnitee’s Corporate Status, Indemnitee shall be indemnified by the Company against all Expenses and Liabilities actually and reasonably incurred or paid by Indemnitee in connection with such Proceeding (referred to herein as “Indemnifiable Expenses “and “Indemnifiable Liabilities”, respectively, and collectively as “Indemnifiable Amounts”).

 

 

(b) Conclusive Presumption Regarding Standard of Care. In making any determination required to be made under Delaware law with respect to entitlement to indemnification hereunder, the person, persons or entity making such determination shall presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee submitted a request therefor in accordance with Section 5 of this Agreement, and the Company shall have the burden of proof to overcome that presumption in connection with the making by any person, persons or Entity of any determination contrary to that presumption.

 

4. Exceptions to Indemnification. Subject to Section 20 below, Indemnitee shall be entitled to indemnification under Section 3(a) above in all circumstances and with respect to each and every specific claim, issue or matter involved in the Proceeding out of which Indemnitee’s claim for indemnification has arisen to the fullest extent permissible by applicable law, except as follows:

 

(a) Proceedings. If indemnification is requested under Section 3(a) and it has been finally adjudicated by a court of competent jurisdiction that, in connection with such specific claim, issue or matter, Indemnitee failed to act (i) in good faith and (ii) in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, or, with respect to any criminal Proceeding, Indemnitee had reasonable cause to believe that Indemnitee’s conduct was unlawful, Indemnitee shall not be entitled to payment of Indemnifiable Amounts hereunder to the extent that they arise out of such claim, issue or matter.

 

(b) Insurance Proceeds. To the extent payment is actually made to the Indemnitee under a valid and collectible insurance policy maintained at the expense of the Company in respect of Indemnifiable Amounts in connection with such specific claim, issue or matter, Indemnitee shall not be entitled to payment of Indemnifiable Amounts hereunder except in respect of any excess of such Indemnifiable Amounts beyond the amount of payment under such insurance.

 

5. Procedure for Payment of Indemnifiable Amounts. Indemnitee shall submit to the Company a written request specifying the Indemnifiable Amounts for which Indemnitee seeks payment under Section 3 of this Agreement and the basis for the claim. The Company shall pay such Indemnifiable Amounts to Indemnitee promptly, but in no event later than thirty (30) calendar days after receipt of such request. At the request of the Company, Indemnitee shall furnish such documentation and information as are reasonably available to Indemnitee and necessary to establish that Indemnitee is entitled to indemnification hereunder.

 

6. Indemnification for Expenses of a Party Who is Wholly or Partly Successful. Notwithstanding any other provision of this Agreement, and without limiting any such provision, to the extent that Indemnitee is, by reason of Indemnitee’s Corporate Status, a party to and is successful, on the merits or otherwise, in any Proceeding, Indemnitee shall be indemnified to the fullest extent permissible by applicable law against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify to the fullest extent permissible by applicable law Indemnitee against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with each successfully resolved claim, issue or matter. For purposes of this Agreement, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, by reason of settlement, judgment, order or otherwise, shall be deemed to be a successful result as to such claim, issue or matter.

 

 

7. Effect of Certain Resolutions. Neither the settlement nor termination of any Proceeding nor the failure of the Company to award indemnification or to determine that indemnification is payable shall create a presumption that Indemnitee is not entitled to indemnification hereunder. In addition, the termination of any Proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent shall not create a presumption that Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, had reasonable cause to believe that Indemnitee’s action was unlawful.

 

8. Agreement to Advance Expenses; Undertaking. The Company shall advance to the fullest extent permissible by applicable law all Expenses actually and reasonably incurred by or on behalf of Indemnitee in connection with any Proceeding in which Indemnitee is involved by reason of such Indemnitee’s Corporate Status within thirty (30) calendar days after the receipt by the Company of a written statement from Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Advances shall be unsecured and interest free. Advances shall be made without regard to Indemnitee’s ability to repay the expenses and without regard to Indemnitee’s ultimate entitlement to indemnification under the other provisions of this Agreement. To the extent required by Delaware law, Indemnitee hereby undertakes to repay any and all of the amount of Indemnifiable Expenses paid to Indemnitee if it is finally determined by a court of competent jurisdiction that Indemnitee is not entitled under this Agreement to indemnification with respect to such Expenses. This undertaking is an unlimited general obligation of Indemnitee.

 

9. Procedure for Advance Payment of Expenses. Indemnitee shall submit to the Company a written request specifying the Indemnifiable Expenses for which Indemnitee seeks an advancement under Section

8 of this Agreement, together with documentation evidencing that Indemnitee has incurred such Indemnifiable Expenses.

 

10. Indemnification for Expenses of a Witness. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his or her Corporate Status, a witness in any Proceeding to which Indemnitee is not a party, he or she shall be indemnified by the Company to the fullest extent permissible by applicable law against all Expenses actually and reasonably incurred by him or her or on his or her behalf in connection therewith.

 

11. Remedies of Indemnitee.

 

(a) Right to Petition Court. In the event that Indemnitee makes a request for payment of Indemnifiable Amounts under Sections 3 and 5 above or a request for an advancement of Indemnifiable Expenses under Sections 8 and 9 above and the Company fails to make such payment or advancement in a timely manner pursuant to the terms of this Agreement, Indemnitee may petition the Court of Chancery of the State of Delaware to enforce the Company’s obligations under this Agreement.

 

(b) Burden of Proof. In any judicial proceeding brought under Section 11(a) above, the Company shall have the burden of proving that Indemnitee is not entitled to payment of Indemnifiable Amounts hereunder.

 

(c) Expenses. The Company agrees to reimburse Indemnitee in full for any Expenses in connection with any Proceeding incurred by Indemnitee in connection with investigating, preparing for, litigating, defending or settling any action brought by Indemnitee under Section 11(a) above, or in connection with any claim or counterclaim brought by the Company in connection therewith, whether or not Indemnitee is successful in whole or in part in connection with any such action, except to the extent that it has been finally adjudicated by a court of competent jurisdiction that such reimbursement would be unlawful.

 

(d) Failure to Act Not a Defense. The failure of the Company (including its Board of Directors or any committee thereof, independent legal counsel or stockholders) to make a determination concerning the permissibility of the payment of Indemnifiable Amounts or the advancement of Indemnifiable Expenses under this Agreement shall not be a defense in any action brought under Section 11(a) above, and shall not create a presumption that such payment or advancement is not permissible.

 

 

12. Defense of the Underlying Proceeding.

 

(a) Notice by Indemnitee. Indemnitee agrees to notify the Company promptly upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding which may result in the payment of Indemnifiable Amounts or the advancement of Indemnifiable Expenses hereunder; provided, however, that the failure to give any such notice shall not disqualify Indemnitee from the right, or otherwise affect in any manner any right of Indemnitee, to receive payments of Indemnifiable Amounts or advancements of Indemnifiable Expenses unless the Company’s ability to defend in such Proceeding is materially and adversely prejudiced thereby.

 

(b) Defense by Company. Subject to the provisions of the last sentence of this Section 12(b) and of Section 12(c) below, the Company shall have the right to defend Indemnitee in any Proceeding which may give rise to the payment of Indemnifiable Amounts hereunder; provided, however, that the Company shall notify Indemnitee of any such decision to defend within ten (10) calendar days of the Company’s receipt of notice of any such Proceeding under Section 12(a) above. The Company shall not, without the prior written consent of Indemnitee, consent to the entry of any judgment against Indemnitee or enter into any settlement or compromise which (i) includes an admission of fault of Indemnitee or (ii) does not include, as an unconditional term thereof, the full release of Indemnitee from all liability in respect of such Proceeding, which release shall be in form and substance reasonably satisfactory to Indemnitee. This Section 12(b) shall not apply to a Proceeding brought by Indemnitee under Section 11(a) above or pursuant to Section 20 below.

 

(c) Indemnitee’s Right to Counsel. Notwithstanding the provisions of Section 12(b) above, in any Proceeding to which Indemnitee is a party by reason of Indemnitee’s Corporate Status, at the Indemnittee’s option Indemnitee shall have the right to retain counsel of Indemnitee’s choice, at the expense of the Company, to represent Indemnitee in connection with any such matter and the Expenses incurred by Indemnitee in any such matter shall constitute Indemnifiable Expenses.

 

13. Representations and Warranties of the Company. The Company hereby represents and warrants to Indemnitee as follows:

 

(a) Authority. The Company has all necessary power and authority to enter into, and be bound by the terms of, this Agreement, and the execution, delivery and performance of the undertakings contemplated by this Agreement have been duly authorized by the Company.

 

(b) Enforceability. This Agreement, when executed and delivered by the Company in accordance with the provisions hereof, shall be a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or similar laws affecting the enforcement of creditors’ rights generally.

 

14. Insurance. The Company shall, from time to time, make the good faith determination whether or not it is practicable for the Company to obtain and maintain a policy or policies of insurance with a reputable insurance company providing the Indemnitee with coverage for losses from wrongful acts. For so long as Indemnitee shall have Corporate Status, Indemnitee shall be named as an insured in all policies of director and officer liability insurance in such a manner as to provide Indemnitee the same rights and benefits as are accorded to the most favorably insured of the Company’s officers and directors. If, at the time of the receipt of a notice of a claim pursuant to the terms of this Agreement, the Company has director and officer liability insurance in effect, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policies. Notwithstanding the foregoing, the Company shall have no obligation to obtain or maintain such insurance if the Company determines in good faith that such insurance is not reasonably available, if the premium costs for such insurance are disproportionate to the amount of coverage provided, or if the coverage provided by such insurance is limited by exclusions so as to provide an insufficient benefit.

 

 

15. No Duplication of Payments. The Company shall not be liable under this Agreement to make any payment in connection with any claim made against Indemnitee to the extent Indemnitee has otherwise actually received payment under any insurance policy, provision of the Certificate or the Bylaws or otherwise of the amounts otherwise indemnifiable hereunder. The Company’s obligation to indemnify or advance Expenses hereunder to Indemnitee as a result of the Indemnitee’s Corporate Status with an Entity other than the Company shall be reduced by any amount Indemnitee has actually received as indemnification or advancement of Expenses from such other Entity.

 

16. Contract Rights Not Exclusive. The rights to payment of Indemnifiable Amounts and advancement of Indemnifiable Expenses provided by this Agreement shall be in addition to, but not exclusive of, any other rights which Indemnitee may have at any time under applicable law, the Certificate or Bylaws, or any other agreement, vote of stockholders or directors (or a committee of directors) or otherwise, both as to action in Indemnitee’s official capacity and as to action in any other capacity as a result of Indemnitee’s serving as a director of the Company.

 

17. Successors. This Agreement shall be (a) binding upon all successors and assigns of the Company (including any transferee of all or a substantial portion of the business, stock and/or assets of the Company and any direct or indirect successor by merger or consolidation or otherwise by operation of law) and (b) binding on and shall inure to the benefit of the heirs, personal representatives, executors and administrators of Indemnitee. This Agreement shall continue for the benefit of Indemnitee and such heirs, personal representatives, executors and administrators after Indemnitee has ceased to have Corporate Status.

 

18. Change in Law. To the extent that a change in Delaware law (whether by statute or judicial decision) or the Certificate shall permit broader indemnification or advancement of expenses than is provided under the terms of the Bylaws and this Agreement, Indemnitee shall be entitled to such broader indemnification and advancements, and this Agreement shall be deemed to be amended to such extent.

 

19. Severability. Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement, or any clause thereof, shall be determined by a court of competent jurisdiction to be illegal, invalid or unenforceable, in whole or in part, such provision or clause shall be limited or modified in its application to the minimum extent necessary to make such provision or clause valid, legal and enforceable, and the remaining provisions and clauses of this Agreement shall remain fully enforceable and binding on the parties.

 

20. Indemnitee as Plaintiff. Except as provided in Section 11(c) of this Agreement and in the next sentence, Indemnitee shall not be entitled to payment of Indemnifiable Amounts or advancement of Indemnifiable Expenses with respect to any Proceeding brought by Indemnitee against the Company, any Subsidiary, any Entity which it controls, any director or officer thereof or any third party, unless the Board of Directors has consented to the initiation of such Proceeding or the Company provides indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law. This Section shall not apply to counterclaims or affirmative defenses asserted by Indemnitee in an action brought against Indemnitee.

 

 

21. Modifications and Waivers; Counterparts. Except as provided in Section 18 above with respect to changes in Delaware law which broaden the right of Indemnitee to be indemnified by the Company or to receive advancements, no supplement, modification or amendment of this Agreement shall be binding unless executed in writing by each of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions of this Agreement (whether or not similar), nor shall such waiver constitute a continuing waiver. This Agreement may also be executed and delivered by facsimile signature and in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same Agreement.

 

22. General Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given (a) when delivered by hand, (b) when transmitted by facsimile and receipt is acknowledged during normal business hours, and if not, the next business day after transmission or (c) if mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed:

 

(i)

If to Indemnitee, to:

 

at the residence address most recently filed with the Company

 

(ii)

If to Company, to:

 

Adial Pharmaceuticals, Inc.

4870 Sadler Road, Suite 300

Glen Allen, VA 23060

Attention: Chief Executive Officer

 

With a copy (which copy shall not constitute notice) to:

 

Blank Rome, LLP

Time-Life Building

1271 6^th Avenue

New York, New York 10020

Attention: Leslie Marlow

 

or to such other address as may have been furnished in writing in the same manner by any party to the others.

 

23. Governing Law; Consent to Jurisdiction; Service of Process. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without regard to its rules of conflict of laws. Each of the Company and Indemnitee hereby irrevocably and unconditionally consents to submit to the exclusive jurisdiction of the Court of Chancery of the State of Delaware and the courts of the United States of America located in the State of Delaware (the “Delaware Courts”) for any litigation arising out of or relating to this Agreement and the transactions contemplated hereby (and agrees not to commence any litigation relating thereto except in such courts), waives any objection to the laying of venue of any such litigation in the Delaware Courts and agrees not to plead or claim in any Delaware Court that such litigation brought therein has been brought in an inconvenient forum. Each of the parties hereto agrees, (a) to the extent such party is not otherwise subject to service of process in the State of Delaware, to appoint and maintain an agent in the State of Delaware as such party's agent for acceptance of legal process, and (b) that service of process may also be made on such party by prepaid certified mail with a proof of mailing receipt validated by the United States Postal Service constituting evidence of valid service. Service made pursuant to (a) or (b) above shall have the same legal force and effect as if served upon such party personally within the State of Delaware. For purposes of implementing the parties’ agreement to appoint and maintain an agent for service of process in the State of Delaware, each such party does hereby appoint The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801, as such agent and each such party hereby agrees to complete all actions necessary for such appointment. Upon written application by Indemnitee to the Company, the Company shall, on an annual basis, reimburse Indemnitee the annual fee charged by The Corporation Trust Company to serve as Indemnitee’s agent for service of process within 30 days following the written application for reimbursement.

 

 

24. Joinders. Subsidiaries of the Company may from time to time join this Agreement by signing a joinder in substantially the form attached hereto as Exhibit A. The Company and all Subsidiaries that have joined this Agreement shall be jointly and severally liable for all obligations of the Company under this Agreement.

 

25. Assignment. Except as otherwise set forth herein, neither this Agreement nor any of the rights, interests or obligations hereunder may be assigned by any party hereto, without the prior written consent of all of the other parties hereto.

 

26. Entire Agreement. Without limitation to the Certificate and the Bylaws, this Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof.

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the Effective Date.

 

ADIAL PHARMACEUTICALS, INC.			EXECUTIVE:
By:			By:
Name:	Cary J. Claiborne		Name:	Vinay K. Shah
Title:	Chief Executive Officer

 

 

 

Exhibit 99.1

 

 

Adial Pharmaceuticals Appoints Vinay Shah as Chief Financial Officer

 

Glen Allen, VA – November 5, 2024 – Adial Pharmaceuticals, Inc. (NASDAQ: ADIL) (“Adial” or the “Company”), a clinical-stage biopharmaceutical company focused on developing therapies for the treatment and prevention of addiction and related disorders, today announced the appointment of Vinay Shah as the Company’s Chief Financial Officer, effective November 16, 2024.

 

Vinay Shah is an accomplished Chief Financial Officer with over 25 years of experience in the pharmaceutical, biopharmaceutical, and healthcare sectors, specializing in financial strategy, investor relations, and operational efficiency. Most recently, Mr. Shah served as the CFO at Virpax Pharmaceuticals, Inc. (Nasdaq: VRPX), where he focused on implementing fundraising and strategic initiatives, oversaw investor relations, and managed all financial operations. Previously, at Aravive, Inc. (Nasdaq: ARAV), Mr. Shah helped raise over $150 million and played integral roles in a major reverse merger and out-licensing efforts in China. At Pacira Pharmaceuticals, Inc. (Nasdaq: PCRX), he partnered on the company’s IPO, contributing to S-1 preparation, financial audits, and SEC compliance. His background also includes finance leadership roles at Cardinal Health, Inc. and Jostens Learning Corporation, where he advanced supply chain operations and international business efforts. He began his career with auditing positions at KPMG Peat Marwick and Price Waterhouse Coopers. He received his BA degree from Ranchi University in India and his MBA from Arizona State University in finance.

 

“We are thrilled to welcome Vinay as our new Chief Financial Officer,” said Cary Claiborne, CEO of Adial Pharmaceuticals. “Vinay brings a wealth of experience in financial strategy within the pharmaceutical industry, and his proven leadership in driving successful capital markets strategies will be invaluable as we advance AD04 and our strategic goals. Additionally, I would like to thank Joe Truluck for his numerous contributions to Adial over the years and wish him the best in his future endeavors.”

 

“I am excited to join the talented team at Adial Pharmaceuticals during this pivotal time,” said Vinay Shah. “Adial’s commitment to developing innovative treatments that address critical unmet needs aligns with my own passion for advancing impactful healthcare solutions. I look forward to contributing to Adial’s growth and supporting their strategic objectives as we work to deliver value for our patients, partners, and shareholders.”

 

On November 1, 2024, Joseph Truluck notified the CEO of the Company of his decision to resign from his position as the Company’s Chief Financial Officer to pursue other opportunities. Mr. Truluck will remain an employee of the Company until November 15, 2024 and has entered into a consulting agreement with Adial, through March 31, 2025, in order to aid in an orderly transition. Mr. Truluck’s resignation was not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies, or practices, including any matters concerning the Company’s controls or any financial or accounting-related matters or disclosures.

 

About Adial Pharmaceuticals, Inc.

 

Adial Pharmaceuticals is a clinical-stage biopharmaceutical company focused on the development of therapies for the treatment and prevention of addiction and related disorders. The Company’s lead investigational new drug product, AD04, is a genetically targeted, serotonin-3 receptor antagonist, therapeutic agent for the treatment of Alcohol Use Disorder (AUD) in heavy drinking patients and was recently investigated in the Company’s ONWARD™ pivotal Phase 3 clinical trial for the potential treatment of AUD in subjects with certain target genotypes identified using the Company’s proprietary companion diagnostic genetic test. ONWARD showed promising results in reducing heavy drinking in heavy drinking patients, and no overt safety or tolerability concerns. AD04 is also believed to have the potential to treat other addictive disorders such as Opioid Use Disorder, gambling, and obesity. Additional information is available at www.adial.com.

 

 

If you are interested in exploring partnership opportunities with Adial, we invite you to reach out to us (BD@adialpharma.com) to discuss how our joint efforts can bring about positive change in the millions of patients who are struggling with addiction.

 

Forward-Looking Statements

 

This communication contains certain “forward-looking statements” within the meaning of the U.S. federal securities laws. Such statements are based upon various facts and derived utilizing numerous important assumptions and are subject to known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Statements preceded by, followed by or that otherwise include the words “believes,” “expects,” “anticipates,” “intends,” “projects,” “estimates,” “plans” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may” and “could” are generally forward-looking in nature and not historical facts, although not all forward-looking statements include the foregoing. The forward-looking statements include statements regarding the expected contribution of Mr. Shah, advancing AD04 and our strategic goals, delivering value for our patients, partners, and shareholders and the potential of AD04 to treat other addictive disorders such as opioid use disorder, gambling, and obesity. Any forward-looking statements included herein reflect our current views, and they involve certain risks and uncertainties, including, among others, Mr. Shah’s ability to contribute to our growth and support our strategic objectives, our ability to pursue our regulatory strategy, our ability to advance ongoing partnering discussions, our ability to obtain regulatory approvals for commercialization of product candidates or to comply with ongoing regulatory requirements, our ability to develop strategic partnership opportunities and maintain collaborations, our ability to obtain or maintain the capital or grants necessary to fund our research and development activities, our ability to complete clinical trials on time and achieve desired results and benefits as expected, regulatory limitations relating to our ability to promote or commercialize our product candidates for specific indications, acceptance of our product candidates in the marketplace and the successful development, marketing or sale of our products, our ability to maintain our license agreements, the continued maintenance and growth of our patent estate and our ability to retain our key employees or maintain our Nasdaq listing. These risks should not be construed as exhaustive and should be read together with the other cautionary statement included in our Annual Report on Form 10-K for the year ended December 31, 2023, subsequent Quarterly Reports on Form 10-Q and current reports on Form 8-K filed with the Securities and Exchange Commission. Any forward-looking statement speaks only as of the date on which it was initially made. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, unless required by law.

 

Contact:

 

Crescendo Communications, LLC

David Waldman / Alexandra Schilt

Tel: 212-671-1020

Email: ADIL@crescendo-ir.com

 

 

 

 

v3.24.3

Cover	Nov. 01, 2024
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Nov. 01, 2024
Entity File Number	001-38323
Entity Registrant Name	Adial Pharmaceuticals, Inc.
Entity Central Index Key	0001513525
Entity Tax Identification Number	82-3074668
Entity Incorporation, State or Country Code	DE
Entity Address, Address Line One	4870 Sadler Road
Entity Address, Address Line Two	Ste 300
Entity Address, City or Town	Glen Allen
Entity Address, State or Province	VA
Entity Address, Postal Zip Code	23060
City Area Code	804
Local Phone Number	487-8196
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock
Trading Symbol	ADIL
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	true
Elected Not To Use the Extended Transition Period	false

---