EXHIBIT 10.4

 

EMPLOYMENT AGREEMENT

 

This employment agreement (the “Agreement”) is entered into by and between
Bassam Damaj, Ph.D. (“you” or “your”) and Innovus Pharmaceuticals, Inc., a
Nevada corporation (the “Company”). This Agreement has an effective date of
January 22, 2013 (the “Effective Date”).

 

In consideration of the mutual covenants and promises made in this Agreement,
you and the Company agree as follows:

 

1.        Position and Responsibilities. As of the Effective Date, you will be
employed by the Company as the Company’s sole President and Chief Executive
Officer (“PCEO”). As PCEO, you shall report directly to the Company’s Board of
Directors (the “Board”). You shall be the Company’s most senior executive
officer and shall have the duties, responsibilities and authority that are
customarily associated with such position. Your office will be located at the
Company’s headquarters at 4275 Executive Square, Suite 207, San Diego CA, 92037.

 

You shall also serve as a member of the Board and the Company agrees that, while
you are employed by the Company and/or possess more than 1% of its outstanding
stock, it will nominate you to continue to serve as a member of the Board
whenever your seat on the Board is up for re-election. Nothing herein shall
preclude you from (i) serving, with the prior written consent of the Company, as
a member of the board of directors or advisory boards (or their equivalents in
the case of a non-corporate entity) of non-competing businesses and charitable
organizations, (ii) engaging in charitable activities and community affairs, and
(iii) managing your personal investments and affairs. The Company hereby
acknowledges your ownership of (or relationship with) the entities identified in
Exhibit A and consents to such ownership or relationship for so long as such
entities continue to be a non-competing business with the Company.

 

2.         Term. Your employment with the Company is at-will and either you or
the Company may terminate your employment at any time and for any reason, with
or without Cause/Good Reason (as each are defined below), in each case subject
to the terms and provisions of this Agreement. Unless terminated earlier, this
Agreement will extend through the fifth anniversary of the Effective Date
(“Expiration Date”); provided, however, on such fourth anniversary of the
Effective Date (and on each subsequent anniversary thereafter) the Expiration
Date will automatically be extended by an additional year unless either party
has provided written notice to the other party before the applicable anniversary
that such party will not agree to so extend the Agreement.

 

3.        Salary, Bonus, Equity Incentives, Benefits and Indemnification. For
avoidance of doubt, the Board may delegate its authority and responsibilities
under this Section 3 to a committee of members of the Board.

 

(a)       Base Salary. Commencing on the Effective Date, you will be paid an
annual base salary of $375,000.00 (the “Base Salary”) for your services as PCEO,
payable in the time and manner that the Company customarily pays its employees
provided that you will receive pro-rata payments of Base Salary at least once
each calendar month (subject to the going concern exception described below). On
the first anniversary on the Effective Date your Base Salary will be increased
to $440,000 and it will continue at this rate through the day before the second
anniversary of the Effective Date. Your Base Salary shall also be reviewed
periodically by the Board and may be increased (but not decreased) by the Board
provided however that in any event on each anniversary of the Effective Date
(commencing on the second anniversary of the Effective Date) your Base Salary
shall increase by at least 10%. Notwithstanding the foregoing, to the extent
that payment of such Base Salary would jeopardize the Company’s ability to
continue as a going concern, such payments shall not be made and shall instead
be accrued and paid to you when payment would no longer so jeopardize the
Company. If payments of Base Salary are accrued in accordance with the foregoing
then such unpaid amounts shall be provided to you in cash upon the earlier of
the Board’s determination that payment can be made without so jeopardizing the
Company or the date when the Company’s auditors have determined that there is no
longer substantial doubt about the Company’s ability to continue as a going
concern (such earlier date is the “Accrued Salary Payment Date”). The Company
shall administer payment of the Base Salary to at all times be in compliance
with the short-term deferral provisions of Section 409A of the Internal Revenue
Code of 1986 as amended (the “Code”).

 

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(b)       Bonuses. You will be eligible to participate in any bonus programs as
set forth by the Board. In addition, during each Company fiscal year you will be
eligible to earn an annual cash bonus based on performance objectives reasonably
established by the Board and after considering input from you and which will be
communicated in writing to you within the first 75 days of the applicable fiscal
year. Your annual target cash bonus amount will be equal to 75% of your then
annual Base Salary rate (with such rate determined as of the day after the
applicable anniversary of the Effective Date for such fiscal year). The actual
amount of the annual bonus paid to you, if any, shall be determined by the Board
in its sole discretion and may be more or less than the target amount. If your
employment ends during any given fiscal year for any reason and whether or not
you execute the Mutual Release described in Section 6(d), you will be paid a
pro-rata amount of the target bonus determined by the percentage of time you
were employed during the fiscal year. If your employment ends for any reason
after the completion of a fiscal year but before the payment of the annual bonus
and whether or not you execute the Mutual Release described in Section 6(d), you
shall remain eligible to receive the full bonus amount based on achievement of
the applicable performance objectives. In all cases, any such bonus shall be
paid to you during the first two and a half months of the fiscal year that
follows the applicable performance fiscal year.

 

(c)       Compensatory Equity. The Company shall grant you restricted Stock
Units (“RSU”) covering 6,000,000 shares of the Company’s common stock (the “RSU
Grant”). 2,000,000 shares of the RSU Grant shall be vested at grant. Subject to
your continued Service, the remaining 4,000,000 shares shall vest in eight
pro-rata equal installments on a quarterly basis over the following two years
with the first such installment occurring on April 1, 2013. The vested portion
of the RSU Grants shall be settled with a like number of Company common shares
on the earlier of (i) your Termination Date, (ii) a Change in Control of the
Company (as defined below), or (iii) the seventh anniversary of the Effective
Date. The RSU Grant shall be granted to you as soon as practicable after the
Company has filed with the Securities and Exchange Commission an effective
registration statement covering the RSU Grant and its underlying shares.

 

For purposes of this Agreement, the RSU Grant and any other Company compensatory
equity grants issued to you shall be collectively referred to herein as
“Compensatory Equity”. To the extent you receive any stock options, stock
appreciation rights or similar derivative securities, you shall be entitled to
exercise the vested portion of such awards until the earliest of the tenth
anniversary of the grant date of the award or the third anniversary of your
Termination Date (as defined below). In connection with any award of
Compensatory Equity (including the RSU Grant), you shall be permitted at your
election to satisfy the applicable exercise price and/or tax withholding
obligations via share withholding with the shares that are surrendered to the
Company valued at their then fair market value as of the applicable vesting or
settlement date(s).

 

You shall be eligible for additional grants of Compensatory Equity in order to
ensure that you have competitive equity compensation. All grants of Compensatory
Equity shall be issued pursuant to: (i) a Board-approved employee stock
incentive plan (the “Plan”) and (ii) an effective registration statement filed
(and maintained) by the Company with the Securities and Exchange Commission in
accordance with the Securities Act of 1933, as amended.

 

Additionally, all outstanding unvested Compensatory Equity awards shall fully
vest and become exercisable (to the extent exercise is required) upon the
earlier of a Change in Control occurring during your Service (as defined below).
You may also elect to establish a trading plan for Company securities in
accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”). For purposes of this Agreement and your Compensatory
Equity, “Service” shall mean service by you as an employee, director and/or
consultant of the Company (or any subsidiary or parent or affiliated entity of
the Company).

 

(d)       Benefits. Commencing with the Accrued Salary Payment Date, you will be
entitled to participate, on no less favorable terms provided to any other
Company officer, in all Company employee benefit plans and programs at the time
or thereafter made available to Company senior executive officers including,
without limitation, any savings or profit sharing plans, deferred compensation
plans, stock option incentive plans, group life insurance, accidental death and
dismemberment insurance, hospitalization, surgical, major medical and dental
coverage, vacation, sick leave (including salary continuation arrangements),
long-term disability, holidays and other employee benefit programs sponsored by
the Company. On and after the Accrued Salary Payment Date, the Company will
provide you with life insurance coverage for the benefit of your heirs with a
face amount of not less than two times your Base Salary that is in effect as of
the Effective Date.

 

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Notwithstanding the foregoing, commencing with the Effective Date and thereafter
on each anniversary of the Effective Date, you shall incrementally accrue 30
days of paid vacation time. Such accrued vacation time will not be subject to
any maximum accrual limits and any unused portion shall be paid to you in cash
on your last day of employment with the Company applying your then annual Base
Salary rate. Moreover, when you travel on Company business, you shall be
entitled to fly in first class on international flights and on business class
for domestic flights. Additionally, the Company shall pay for you to maintain
club memberships with American Airlines, United Airlines and Delta and other
major airline clubs commencing on the Effective Date and continuing through the
second anniversary of your Termination Date.

 

(e)       Indemnification. In the event that you are made a party or threatened
to be made a party to any action, suit, or proceeding, whether civil, criminal,
administrative, or investigative (a “Proceeding”), by reason of your employment
with, or serving as an officer or director of, the Company, the Company shall
indemnify and hold you harmless, and defend you to the fullest extent authorized
by the laws of the state in which the Company is incorporated, as the same exist
and may hereafter be amended, against any and all claims, demands, suits,
judgments, assessments, and settlements (collectively the “Claims”), including
all expenses incurred or suffered by you in connection therewith and such
indemnification shall continue as to you even after you are no longer providing
Service, and shall inure to the benefit of your heirs, executors, and
administrators. The Company shall have the right to undertake, with counsel or
other representatives of its own choosing, the defense or settlement of any
Claims. In the event that the Company shall fail to notify you, within ten days
of its receipt of your written notice, that the Company has elected to undertake
such defense or settlement, or if at any time the Company shall otherwise fail
to diligently defend or pursue settlement of such Claims, then you shall have
the right to undertake the defense, compromise, or settlement of such Claims, in
which event the Company shall hold you harmless from any legal fees incurred by
you for your counsel. Neither you nor the Company shall settle any Claims
without the prior written consent of the other, which consent shall not be
unreasonably withheld or delayed. Regardless of which party is conducting the
defense of any such Claims, the other party, with counsel or other
representatives of its own choosing and at its sole cost and expense, shall have
the right to consult with the party conducting the defense of such Claims and
its counsel or other representatives concerning such Claims and you and the
respective counsel or other representatives shall cooperate with respect to such
Claims. The party conducting the defense of any such Claims and its counsel
shall in any case keep the other party and its counsel (if any) fully informed
as to the status of such Claims and any matters relating thereto. You and the
Company shall provide to the other such records, books, documents, and other
materials as shall reasonably be necessary for each to conduct or evaluate the
defense of any Claims, and will generally cooperate with respect to any matters
relating thereto. This Section 3(d) shall remain in effect after this Agreement
is terminated, regardless of the reasons for such termination. The
indemnification provided to you pursuant to this Section 3(d) shall not
supersede or reduce any indemnification provided to you under any separate
agreement, or the By-Laws of the Company; in this regard, it is intended that
this Agreement shall expand and extend your rights to receive indemnification.
The Company shall maintain a directors and officers liability insurance policy
(including coverage through the sixth anniversary of cessation of all of your
services to the Company) covering you in your capacity as an officer and
director of the Company and any Company affiliate.

 

4.       Expense Reimbursement. You will be promptly reimbursed for all
reasonable business expenses (including, but without limitation, travel
expenses) upon the properly completed submission of requisite forms and receipts
to the Company.

 

5.       Change in Control (a) Definition. For purposes of this Agreement,
“Change in Control” shall mean a “change in control event” as defined under
Treasury Regulation Section 1.409A-3(i)(5)) as in effect on the Effective Date
or any change in control definition provided by the Plan.

 

(b)       Code Section 280G. In the event that it is determined that any payment
or distribution of any type to or for your benefit made by the Company, by any
of its affiliates, by any person who acquires ownership or effective control or
ownership of a substantial portion of the Company’s assets (within the meaning
of Section 280G of the Code or by any affiliate of such person, whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise (the “Total Payments”), would be subject to the excise tax imposed
by Section 4999 of the Code or any interest or penalties with respect to such
excise tax (such excise tax, together with any such interest or penalties, are
collectively referred to as the “Excise Tax”), then such payments or
distributions or benefits shall be payable either:

 

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(i)       in full; or

 

(ii)       as to the maximum value of such lesser amount which would result in
no portion of such payments or distributions or benefits being subject to the
Excise Tax.

 

You shall receive the greater, on an after-tax basis, of (i) or (ii) above.

 

If the Total Payments must be reduced as provided in the previous paragraph, the
reduction shall occur in the following order: (1) reduction of cash payments for
which the full amount is treated as a "parachute payment" (as defined under Code
Section 280G and its regulations); (2) cancellation of accelerated vesting (or,
if necessary, payment) of cash awards for which the full amount in not treated
as a parachute payment; (3) reduction of any continued employee benefits and (4)
cancellation of any accelerated vesting of equity awards. In selecting the
equity awards (if any) for which vesting will be reduced under clause (4) of the
preceding sentence, awards shall be selected in a manner that maximizes the
after-tax aggregate amount of reduced Total Payments provided to you, provided
that if (and only if) necessary in order to avoid the imposition of an
additional tax under Section 409A of the Code, awards instead shall be selected
in the reverse order of the date of grant. For the avoidance of doubt, for
purposes of measuring an equity compensation award's value to you when
performing the determinations under the preceding paragraph, such award's value
shall equal the then aggregate fair market value of the vested shares underlying
the award less any aggregate exercise price less applicable taxes. Also, if two
or more equity awards are granted on the same date, each award will be reduced
on a pro-rata basis.

 

All mathematical determinations and all determinations of whether any of the
Total Payments are parachute payments that are required to be made under this
Section 5(b), shall be made by a nationally recognized independent audit firm
selected by the Company (the “Accountants”), who shall provide their
determination, together with detailed supporting calculations regarding the
amount of any relevant matters, both to the Company and to you. Unless you
consent in writing, the Accountants may not be an audit firm that is then
providing services in any capacity to the person or entity that is acquiring the
Company. Such determinations shall be made by the Accountants using reasonable
good faith interpretations of the Code. As expressly permitted by Treasury
Regulations section 1.280G-1 Q/A-32, with respect to performing any present
value calculations that are required in connection with this Section 5(b), you
and the Company each affirmatively elect to utilize the Applicable Federal Rates
("AFR") that are in effect as of the Effective Date and the Accountants shall
therefore use such AFRs in their determinations and calculations. If the
Accountants determine that no excise tax under Section 4999 of the Code is
payable with respect to a Total Payment, it shall furnish the Company and you
with an opinion reasonably acceptable to you that no such excise tax under
Section 4999 of the Code will be imposed with respect to such Total Payments.
The Company shall pay the fees and costs of the Accountants which are incurred
in connection with this Section 5(b).

 

6.       Consequences of Termination of Employment. For purposes of this
Agreement, your last day of employment with the Company is the “Termination
Date”. Upon termination of your employment for any reason, you shall receive
payment or benefits from the Company covering the following: (i) all unpaid
salary and unpaid vacation accrued through the Termination Date, (ii) any
payments/benefits to which you are entitled under the express terms of any
applicable Company employee benefit plan, (iii) any unreimbursed valid business
expenses for which you have submitted properly documented reimbursement requests
(iv) your then outstanding Compensatory Equity as governed by their applicable
terms and (v) a new computer laptop, new cell phone and new Pad (or similar
device) commensurate in quality with the devices you held immediately before the
Termination Date (collectively, (i) through (v) are the “Accrued Pay”). Except
if your employment was terminated by the Company for Cause, you may continue to
serve on the Board after your Termination Date.

 

After termination of your employment for any reason and whether or not the
Mutual Release described in Section 6(d) is executed by you, the Company shall
pay the entire premiums for your Company group medical, dental and vision
insurance coverage for you and your dependents for 12 months after the
Termination Date with coverage no less favorable than as of immediately before
your Termination Date (the “Continuing Health Coverage”). If it becomes
unreasonable for the Company to continue to pay for this Continuing Health
Coverage for you (or imposes adverse tax consequences on you) because of changes
in applicable law then the Company shall make the premium payments to you on an
after-tax basis.

 

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You will also be eligible for other post-employment payments and benefits as
provided in this Agreement including without limitation any unpaid bonus amounts
described in Section 3(b). Within no later than 90 days after the later of your
Termination Date or the date that you are not considered to be a ten percent
shareholder under Section 16 of the Exchange Act, you shall no longer be
considered a Company affiliate and the Company shall use commercially reasonable
efforts to facilitate the timely removal of any restrictive legends on any
shares of Company common stock then held by you.

 

(a)       For Cause. For purposes of this Agreement, your employment may be
terminated by the Company for “Cause” as a result of the occurrence of one or
more of the following:

 

(i)       Your commission of fraud or other unlawful conduct in your performance
of duties for the Company;

 

(ii)       Your conviction of, or a plea of “guilty” or “no contest" to, a
felony under the laws of the United States or any state thereof, if such felony
either is work-related or materially impairs your ability to perform services
for the Company; or

 

(iii)       Your willful material breach of this Agreement.

 

For purposes of the foregoing, no act, or failure to act, on your part shall be
considered “willful” unless done, or omitted to be done, by you other than in
good faith, and without reasonable belief that your action or omission was in
furtherance of the interests of the Company. The foregoing shall is an exclusive
list of the acts or omissions that shall be considered “Cause” for the
termination of your employment by the Company. The Board shall provide you with
30 days advance written notice specifically detailing the basis (and factual
circumstances) for the termination of your employment for Cause. During the 30
day period after you have received such notice, you shall have an opportunity to
cure or remedy such alleged Cause events and to present your case to the full
Board (with the assistance of your own counsel). A termination shall be deemed
for Cause only if, following such 30 day period, at least 75% of the group
consisting of the members of the Board other than you vote affirmatively that
your termination is for Cause. You shall continue to receive all of the
compensation and benefits provided by this Agreement during the 30 day
cure/remedy period.

 

(b)       Without Cause or for Good Reason or Death or Disability. The Company
may terminate your employment without Cause or for Disability at any time with
thirty days advance written notice or you may resign your employment for Good
Reason (as defined below in Section 6(b)(iii)) or your employment may also be
terminated due to your death or by you due to your Disability (each of the
foregoing, a “Qualifying Termination”). Any notice of termination by the Company
that is not covered by Section 6(a) must specify whether it was a termination
without Cause or due to your Disability. Without your prior written consent,
once the Company has provided you with such a notice of termination under this
Section 6(b) then it may not rescind such notice nor may it modify the terms of
your severance benefits described in this Agreement. For purposes of this
Agreement, “Disability” is defined to occur when you are unable to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or which has lasted
or can be expected to last for a continuous period of not less than twelve (12)
months. If your employment is terminated due to a Qualifying Termination, then
you will be eligible to receive the following benefits subject to your timely
compliance with Section 6(d) and further provided that no payments for such
Qualifying Termination shall be made until on or after the date of a “separation
from service” within the meaning of Code Section 409A:

 

(i)       The Company shall provide you with a cash payment equal in the
aggregate to the product of 1.5 multiplied by the sum of your then annual Base
Salary and your annual target bonus amount (the “Severance Payment”). However,
if your Termination Date occurs during the 24 months after a Change in Control
of the Company then the Severance Payment shall instead equal two times the sum
of your then annual Base Salary and your annual target bonus amount. The
Severance Payment shall be paid to you in a single cash lump sum payment within
fifteen days following the effective date of the Mutual Release described in
Section 6(d). To the extent necessary to comply with Code Section 409A, if the
timing of when you execute the Mutual Release would affect which tax year that
such Severance Payment could be paid then the Severance Payment shall be paid in
the second tax year.

 

(ii)       The Company shall provide the Continuing Health Coverage (or coverage
no less favorable to you than the Continuing Health Coverage) for 24 months
after the Termination Date (rather than for only 12 months after the Termination
Date). If it becomes unreasonable for the Company to continue to pay for this
Continuing Health Coverage for you (or it imposes adverse tax consequences on
you) because of changes in applicable law then the Company shall make the
premium payments to you on an after-tax basis. Additionally, all outstanding
unvested Compensatory Equity awards shall fully vest and become exercisable (to
the extent exercise is required) as of your Termination Date.

 

(iii)       For purposes of this Agreement, you may resign your employment from
the Company for “Good Reason” within one year after the date that any one of the
following events described in subparts (1) through (5) (any one of which will
constitute “Good Reason”) has first occurred without your written consent. Your
resignation for Good Reason will only be effective if the Company has not cured
or remedied the Good Reason event within 30 days after its receipt of your
written notice of the Good Reason event. Such notice of your intention to resign
for Good Reason must be provided to the Company within 90 days of the initial
existence of a Good Reason event. This “Good Reason” definition and process is
intended to comply with the safe harbor provided under Treasury Regulation
Section 1.409A-1(n)(2)(ii) and shall be interpreted accordingly.

 

(1)You have incurred a material diminution in your responsibilities, duties or
authority (it shall be deemed to be a material diminution of your duties,
authority or responsibilities if you are no longer a member of the Board (other
than due to your voluntary resignation from the Board or death or Disability) or
are no longer the sole PCEO of the Company (or if the Company has a parent
entity, then you must be its sole PCEO and a member of the board of directors of
the Company’s ultimate parent entity));

 

(2)Your workplace has been relocated to a new location that is more than 25
miles away from your work location that is specified in Section 1;

 

(3)Any material reduction of your Base Salary or target bonus amount;

 

(4)The Company does not extend the Expiration Date of this Agreement as provided
in Section 2; or

 

(5)The Company has materially breached any provision of this Agreement including
without limitation the failure to timely pay you the compensation or benefits
owed to you under this Agreement.

 

You shall not be required to mitigate the amount of any payment or benefit
contemplated by this Section 6(b), nor shall any such payment or benefit be
reduced by any earnings or benefits that you may receive from any other source.
If any cash payments that are owed to you under this Agreement are not paid to
you within fifteen days of their due date, then the Company will additionally
owe you interest on such late payments, payable on a monthly basis while any
overdue amount is still outstanding, with interest accruing at the then
prevailing prime rate, compounded daily.

 

(c)       Voluntary Termination. In the event you voluntarily terminate your
employment with the Company without Good Reason and not due to Disability, you
will not be entitled to the Severance Payment but will receive your Accrued Pay
plus the other post-termination payments that are not predicated on a Qualifying
Termination. You agree to provide the Company with at least 15 days advance
written notice of your intention to resign without Good Reason.

 

(d)       Mutual Release of Claims. Subject to the next sentence, as a condition
to receiving (and continuing to receive) the payments and benefits provided in
Section 6(b), you must within not later than forty-five (45) days after your
Termination Date, execute (and not revoke) and deliver to the Company a Mutual
Release Of All Claims And Covenant Not To Sue agreement (the “Mutual Release”)
in the form attached as Exhibit B hereto. However, this requirement for you to
provide an executed Mutual Release shall not be applicable if your employment
was terminated due to your death or Disability. The Company shall have the
obligation to prepare and execute said Mutual Release and tender such
Company-executed Mutual Release to you on or before your Termination Date.

 

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7.       Proprietary Information and Inventions Agreement; Confidentiality. You
will be required, as a condition of your employment with the Company, to execute
the Company’s form of proprietary information and inventions agreement
(“Confidentiality Agreement”).

 

8.       Assignability; Binding Nature. Commencing on the Effective Date, this
Agreement will be binding upon you and the Company and your respective
successors, heirs, and assigns. This Agreement may not be assigned by you except
that your rights to compensation and benefits hereunder, subject to the
limitations of this Agreement, may be transferred by will or operation of law.
No rights or obligations of the Company under this Agreement may be assigned or
transferred except in the event of a merger or consolidation in which the
Company is not the continuing entity, or the sale or liquidation of all or
substantially all of the assets of the Company provided that the assignee or
transferee is the successor to all or substantially all of the assets of the
Company and expressly in writing assumes the Company’s obligations under this
Agreement. The Company will require any such purchaser, successor or assignee to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform if no such
purchase, succession or assignment had taken place. Your rights and obligations
under this Agreement shall not be transferable by you by assignment or otherwise
provided, however, that if you die, all amounts then payable to you hereunder
shall be paid in accordance with the terms of this Agreement to your devisee,
legatee or other designee or, if there be no such designee, to your estate.

 

9.       Governing Law; Arbitration. This Agreement will be deemed a contract
made under, and for all purposes shall be construed in accordance with, the laws
of California.

 

Except as may be permitted below on this section 9, the parties agree that any
dispute between the parties arising out of or relating to the negotiation,
execution or performance of this Agreement shall be settled by expedited binding
arbitration in accordance with the Employment Arbitration Rules and Mediation
Procedures of the American Arbitration Association. The location for the
arbitration shall be San Diego, California. The arbitration award shall be made
within sixty (60) days of the filing of the notice of intention to arbitrate
(demand), and the arbitrator(s) shall agree to comply with this schedule before
accepting appointment. Any award made by such arbitrator(s) shall be final,
binding and conclusive on the parties for all purposes, and judgment upon the
award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. The parties each agree that the arbitration provisions of
this Agreement shall provide each party with its exclusive remedy, and each
party expressly waives any right it might have to seek redress in any other
forum, except as otherwise expressly provided in this Agreement. By electing
arbitration as the means for final settlement of all claims, the parties hereby
waive their respective rights to, and agree not to, sue each other in any action
in a Federal, State or local court with respect to such claims, but may seek to
enforce in court an arbitration award rendered pursuant to this Agreement. The
parties specifically agree to waive their respective rights to a trial by jury,
and further agree that no demand, request or motion will be made for trial by
jury. In the event that either party brings an action under Section 9 to enforce
or effect its rights under or relating to this Agreement (a “Proceeding”), the
prevailing party shall be entitled to recover its costs and expenses, including
the costs of mediation, arbitration, litigation, court fees, and reasonable
attorneys’ fees incurred in connection with such an action. The Company shall
pay for all arbitration-specific costs.

 

If you are determined by the arbitrator to be the prevailing party in any
Proceeding where the Company was found to have materially breached this
Agreement, then, in addition to being awarded your costs and expenses, you shall
be entitled to: (i) interest on any late payments, calculated at a rate equal to
the Prime Rate (as then quoted in the Wall Street Journal), compounded daily,
and (ii) the acceleration of payment for all remaining payments owed to you, so
that the unpaid balance (including accrued interest) shall be paid in a single
lump sum within ten business days of the issuance of the arbitrator’s award. You
may also be awarded any economic damages arising from the Company’s breach, as
may be determined in the arbitrator in the Proceeding.

 

In addition to the remedies set forth above, the parties hereby agree that they
shall be entitled to enforce their rights under this Agreement specifically
(without posting a bond or other security). All such rights and remedies shall
be cumulative and non-exclusive, and may be exercised singularly or
concurrently. The parties agree that irreparable harm would occur in the event
that any of the provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached. Each party agrees that, in
the event of any breach or threatened breach by any other party of any covenant
or obligation contained in this Agreement, the non-breaching party shall be
entitled to seek and obtain: (i) a decree or order of specific performance to
enforce the observance and performance of such covenant or obligation, and (ii)
an injunction restraining such breach or threatened breach.

 

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10.       Taxes. All payments made by the Company hereunder to you or your
estate or beneficiaries will be subject to tax withholding pursuant to any
applicable laws or regulations. This Agreement and its payments are intended to
be exempt from or comply with the requirements of Code Section 409A and the
Company shall use its best efforts to ensure that there are no violations of
Code Section 409A. If any taxes under Code Section 409A are imposed on you, then
the Company shall within thirty days of the determination that there would be an
imposition of such taxes provide you with a payment that will cover the costs of
any Code Section 409A taxes, excise taxes, penalties and interest along with any
taxes imposed on such payment so that you will on an after-tax basis (applying
the then highest aggregate marginal tax rates) be no worse off than if no Code
Section 409A taxes, excise taxes, penalties or interest had been imposed.
Notwithstanding any provision in the Agreement to the contrary, if upon your
“separation from service” within the meaning of Code Section 409A, you are then
a “specified employee” (as defined in Code Section 409A), then to the extent
necessary to comply with Code Section 409A and avoid the imposition of taxes
under Code Section 409A, the Company shall defer payment of “nonqualified
deferred compensation” subject to Code Section 409A payable as a result of and
within six (6) months following such “separation from service” under this
Agreement until the earlier of (i) the first business day of the seventh month
following your “separation from service,” or (ii) ten (10) days after the
Company receives notification of your death. Additionally, the reimbursement of
expenses or in-kind benefits provided pursuant to this Agreement shall be
subject to the following conditions: (1) the expenses eligible for reimbursement
or in-kind benefits in one taxable year shall not affect the expenses eligible
for reimbursement or in-kind benefits in any other taxable year; (2) the
reimbursement of eligible expenses or in-kind benefits shall be made promptly,
subject to the Company’s applicable policies, but in no event later than the end
of the year after the year in which such expense was incurred; and (3) the right
to reimbursement or in-kind benefits shall not be subject to liquidation or
exchange for another benefit. The provisions of this Section 10 shall survive
any termination of this Agreement or your employment.

 

11.       Entire Agreement. Except as otherwise specifically provided in this
Agreement, this Agreement contains all the legally binding understandings and
agreements between you and the Company pertaining to the subject matter of this
Agreement and supersedes all such agreements, whether oral or in writing,
previously entered into between the parties. In the event of any conflict in
terms between this Agreement and any other agreement executed by and between you
and the Company or any Company plan or policy, the terms of this Agreement shall
prevail and govern.

 

12.       No Offset or Mitigation. No severance or other payments or benefits
made to you under this Agreement may be offset by the Company or by any other
party. You shall have no duty of mitigation with respect to any severance or
other payments or benefits made to you under this Agreement.

 

13.       Notice. Any notice that the Company is required to or may desire to
give you shall be given by personal delivery, recognized overnight courier
service, email, telecopy or registered or certified mail, return receipt
requested, addressed to you at your address of record with the Company, or at
such other place as you may from time to time designate in writing. Any notice
that you are required or may desire to give to the Company hereunder shall be
given by personal delivery, recognized overnight courier service, email,
telecopy or by registered or certified mail, return receipt requested, addressed
to the Company’s General Counsel at its principal office, or at such other
office as the Company may from time to time designate in writing. The date of
actual delivery of any notice under this Section 13 shall be deemed to be the
date of delivery thereof.

 

14.       Waiver; Severability. No provision of this Agreement may be amended or
waived unless such amendment or waiver is agreed to by you and the Company in a
writing that specifically references this Section 14 . No waiver by you or the
Company of the breach of any condition or provision of this Agreement will be
deemed a waiver of a similar or dissimilar provision or condition at the same or
any prior or subsequent time. Except as expressly provided herein to the
contrary, failure or delay on the part of either party hereto to enforce any
right, power, or privilege hereunder will not be deemed to constitute a waiver
thereof. In the event any portion of this Agreement is determined to be invalid
or unenforceable for any reason, the remaining portions shall be unaffected
thereby and will remain in full force and effect to the fullest extent permitted
by law.

 

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15.       Voluntary Agreement, Nondisparagement. Each party represents that it
has the power and authority to enter into this Agreement. Each party
acknowledges that it has been advised to review this Agreement with its own
legal counsel and other advisors of its choosing and that prior to entering into
this Agreement, each has had the opportunity to review this Agreement with its
attorney and other advisors and have not asked (or relied upon) the other party
or other party’s counsel to represent it in this matter. Each party further
represents that each has carefully read and understands the scope and effect of
the provisions of this Agreement and that each is fully aware of the legal and
binding effect of this Agreement. This Agreement is executed voluntarily by each
party and without any duress or undue influence on the part or behalf of the
other party. The Company agrees that the Board and its executive officers will
not make (or direct the Company or any of its affiliates, employees or agents to
make) any written or oral communications that could reasonably be considered to
be disparaging of you (or your family members) in any respect including, but not
limited to, your personal performance, abilities or reputation.

 

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Please acknowledge your acceptance and understanding of this Agreement by
signing and returning it to the undersigned. A copy of this signed Agreement
will be sent to you for your records.

 

 

 

ACKNOWLEDGED AND AGREED:                 INNOVUS PHARMACEUTICALS, INC.   BASSAM
DAMAJ, Ph.D.       /s/Henry J. Esber, Ph.D.   /s/Bassam Damaj BY:       Henry J.
Esber, Ph.D.     TITLE:  Director    

 

9

 

 

EXHIBIT A

 

R&D Healthcare, Inc.

 

Atlas Biotechnology Development

 

10

 

 

Exhibit B

 

MUTUAL RELEASE OF ALL CLAIMS AND COVENANT NOT TO SUE PURSUANT
TO AGREEMENT

 

1.       PARTIES. The parties to this Agreement and Release are Bassam Damaj
(“Executive”) and Innovus Pharmaceuticals, Inc., a Nevada corporation, (the
“Company”).

 

2.       RECITALS. This Release is made with reference to the following facts:

 

Executive and Company are parties to an Employment Agreement dated January 22,
2013. That Employment Agreement provides that the Executive must execute a
mutual general release and covenant not to sue within not later than forty-five
(45) days after Executive’s Termination Date (as defined in the Employment
Agreement) in order for Executive to receive the severance payment and benefits
under the Employment Agreement. This Release is the mutual general release and
covenant not to sue required by the Employment Agreement.

 

3.       EXECUTIVE’S PROMISES. In consideration for the promises and payments
contained in the Employment Agreement, each party agrees as follows:

 

3.1       Executive hereby covenants not to sue and also waives, releases and
forever discharges Company, its parent company, divisions, subsidiaries,
officers, directors, agents, employees, stockholders, affiliates and successors
from any and all claims, causes of action, damages or costs of any type
Executive may have against Company or its current and former parent company,
divisions, subsidiaries, officers, directors, employees, agents, stockholders,
successors or affiliates (the “Released Parties”), and the Released Parties
similarly covenant not to sue and also waive, release and forever discharge
Executive from any and all claims, causes of action, damages or costs of any
type that the Released Parties may have against Executive, including without
limitation those arising out of or relating to Executive’s employment with
Company, or Executive’s separation of employment. This waiver and release
includes, but is not limited to, claims, causes of action, damages or costs
arising under or in relation to Company’s employee handbook and personnel
policies, or any oral or written representations or statements made by officers,
directors, employees or agents of Company, or under any state or federal law
regulating wages, hours, compensation or employment, or any claim for breach of
contract or breach of the implied covenant of good faith and fair dealing, or
any claim for stock, stock options, warrants, or phantom stock or equity of any
kind or any claim for wrongful termination, or any discrimination claim on the
basis of race, sex, sexual orientation, gender, age, religion, marital status,
national origin, physical or mental disability, medical condition, or any claim
arising under the federal Age Discrimination in Employment Act, the Equal Pay
Act, the California Family Rights Act, the Pregnancy Discrimination Act, the
Family Medical Leave Act, the California Labor Code, the California Wage Orders,
Title VII of the Civil Rights Act, the Fair Employment and Housing Act, the
California Labor Code Private Attorneys General Act of 2004, the California Wage
Orders, and Business and Professions Code Section 17200, et seq.

 

Notwithstanding the foregoing, with respect to Executive’s release, this Release
does not release (a) claims that cannot be released as a matter of law,
(b) claims arising after the effective date of this Release including those
under the Employment Agreement, (c) claims to enforce any of Executive’s rights
to post-termination benefits provided by the Employment Agreement, (d) claims
for indemnification or coverage under a directors and officers liability
insurance policy as provided in the Employment Agreement or under any other
contract or under applicable law, (e) claims to enforce any of Executive’s
vested benefits under any employee benefit plan of the Company including without
limitation his Compensatory Equity (as defined in the Employment Agreement), (f)
Executive’s right to file a charge, testify, assist, or cooperate with the EEOC
or to file a claim under the Fair Labor Standards Act, or (g) Executive’s rights
arising solely as a shareholder of the Company.

 

3.2       The waiver and release set forth in paragraph 3.1 applies to claims of
which either party does not currently have knowledge and each party specifically
waives the benefit of the provisions of Section 1542 of the Civil Code of the
State of California which reads as follows: “A general release does not extend
to claims which the creditor does not know or suspect to exist in his or her
favor at the time of executing the release, which if known by him or her must
have materially affected his or her settlement with the debtor.”

 

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4.       CONSULTATION, REVIEW, AND REVOCATION. In accordance with the Age
Discrimination in Employment Act of 1967 (“ADEA”) as amended by the Older
Workers Benefit Protection Act, Executive is advised to consult with an attorney
before signing this Release. Executive is given a period of 45 days in which to
consider whether to enter into this Release. Executive does not have to utilize
the entire 45 day period before signing this Release, and may waive this right.
If Executive does enter into this Release, he may revoke the Release within 7
days after the execution of the Release. Any revocation must be in writing and
must be received by the Company no later than midnight of the seventh day after
execution by Executive. The Release is not effective or enforceable until after
this 7-day period has passed without revocation.

 

5.       MISCELLANEOUS.

 

5.1       This Release shall be deemed to have been executed and delivered
within the State of California, and the rights and obligations of the parties
hereunder shall be construed and enforced in accordance with, and governed by,
the laws of the State of California.

 

5.2       This Release is the entire agreement between the parties with respect
to the subject matter hereof and supersedes all prior and contemporaneous oral
and written agreements and discussions. This Release may be amended only by an
agreement in a writing signed by the parties.

 

5.3       This Release is binding upon and shall inure to the benefit of the
parties hereof, their respective agents, employees, representatives, officers,
directors, divisions, subsidiaries, affiliates, parent company, assigns, heirs,
partners, successors in interest and stockholders, including any successor
company of the Company.

 

5.4       Each party agrees that it has read this Release and has had the
opportunity to ask questions, seek counsel and time to consider the terms of the
Release. Each party has entered into this Release freely and voluntarily.

 

5.5       The parties agree that any dispute or controversy arising from or
related to this Release shall be decided by final and binding arbitration as
provided in the Employment Agreement.

 

 

 

BASSAM DAMAJ (“Executive”)

 

_______________________________

 

 

 

Date:___________________________

 

INNOVUS PHARMACEUTICALS INC. (“Company”)

 

By: ___________________________________

 

Its: ___________________________________

 

Date: ___________________________________

 

 

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