Document:

Exhibit 10.5

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of January 2, 2015 (the “Effective Date”) by and between Zynerba Pharmaceuticals, Inc., a Delaware corporation (the “Employer”) and Richard A. Baron (the “Employee”).

 

Recitals

 

WHEREAS, the Employer desires to employ the Employee and the Employee desires to be employed by the Employer upon the terms and conditions hereinafter set forth.

 

NOW, THEREFORE, in consideration of the premises and covenants set forth herein, and intending to be legally bound hereby, the parties to this Agreement hereby agree as follows:

 

1.                                      Duties.  The Employer agrees that the Employee shall serve as Chief Financial Officer of the Employer.  The Employee shall report to the Chief Executive Officer of the Employer. The Employee agrees to be so employed by the Employer and to devote his best efforts and substantially all of his business time to advance the interests of the Employer and to perform such executive, managerial, administrative and financial functions as are required to develop the Employer’s business and to perform such other duties that are consistent with the Employee’s position.  Nothing set forth herein shall prohibit the Employee from engaging in personal investing activities, provided such activities do not conflict with the business of the Employer and are consistent with the Employer’s internal trading policies.  The Employee shall be permitted to serve on the boards of directors of other entities whose businesses are not competitive with the Employer in accordance with Employer policy.

 

2.                                      Term.  This Agreement is effective as of the Effective Date, and, from and after the Effective Date, will govern the Employee’s employment by the Employer until that employment ceases in accordance with the terms of this Agreement.

 

3.                                      Compensation.

 

(a)                                 Salary.  The Employee shall be paid a base salary at the annual rate of $300,000 (the “Base Salary”) in accordance with the Employer’s regular payroll practices.  The Board of Directors of the Company (“Board”) or the Compensation Committee of the Board (the “Compensation Committee”) shall review the Base Salary at least annually at the end of each calendar year pursuant to the normal performance review policies for senior level executives.

 

(b)                                 Incentive Compensation.

 

(i)                                     The Employee shall participate in all short-term and long-term incentive programs, including equity compensation programs, established by the Employer for its senior level executives generally, at levels determined by the Board or the Compensation Committee.  The Employee’s incentive compensation shall be subject to the terms of the applicable plans and shall be determined based on the Employee’s individual performance and Employer performance as determined by the Board or the Compensation

 

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Committee and shall be awarded, if at all, at the discretion of the Employer.  Any annual incentive compensation earned by the Employee shall be paid on or after January 1, but not later than March 15 of the fiscal year following the fiscal year for which the annual incentive compensation is earned.

 

(ii)           Employee’s target annual discretionary bonus shall be forty percent (40%) of Employee’s Base Salary, subject to the achievement of goals to be mutually agreed upon by the Employee and the Board or Compensation Committee.

 

(iii)          Upon the Effective Date of this Agreement, Employee shall receive 120,000 non-qualified stock options to purchase an aggregate of Employer common stock at an exercise price of $2.116402 per share and in accordance with the terms of a Non-qualified Stock Option Grant attached hereto as Exhibit A (the “Initial Options”).  Twenty-five percent (25%) of the Initial Options shall vest upon the closing of the sale of shares of Employer’s common stock to the public in a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended (an “IPO”).  The remaining Initial Options shall vest ratably over twelve quarters following the closing of the IPO.

 

(iv)          In addition, upon the closing of the IPO, Employer will provide Employee with additional non-qualified stock options to purchase an aggregate number of additional shares of Employer common stock such that, immediately subsequent to such closing of an IPO, Employee, should he exercise such options, shall hold at least 1.3% of the issued and outstanding capital stock of Employer on a Fully Diluted Basis (the “Additional Options”). The Additional Options will have the same terms as the Initial Options, provided that the Additional Options shall have a per share exercise price equal to the closing price of Employer common stock on the date of the grant (which shall be the closing date of the IPO) and shall vest ratably over sixteen quarters following the closing of the IPO.  Notwithstanding any term contained herein or in any Grant Instrument to the contrary, if the Employee (A) dies while employed by or providing service to the Employer; or (B) ceases to be employed by, or to provide service to, the Employer on account of the Employee’s Total Disability all vested and exercisable Grants held by Employee on such date shall remain exercisable (by Employee or by Employee’s representative) for a period of twelve (12) months following death or Total Disability (or until the expiration date of the applicable Grant, if earlier).

 

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(c)                                  Retirement and Welfare Benefits.  The Employee shall participate in employee retirement and welfare benefit plans made available to the Employer’s senior level executives as a group or to its employees generally, as such retirement and welfare plans may be in effect from time to time and subject to the eligibility requirements of the plans.  Nothing in this Agreement shall prevent the Employer from amending or terminating any retirement, welfare or other employee benefit plans or programs from time to time as the Employer deems appropriate.

 

(d)                                 Reimbursement of Expenses; Vacation.  The Employee shall be reimbursed for all normal items of travel, entertainment and miscellaneous business expenses reasonably incurred by the Employee on behalf of the Employer, provided that such expenses are documented and submitted in accordance with the reimbursement policies of the Employer as in effect from time to time (subject to Section 9 of this Agreement).  The Employee shall be entitled to vacation and sick leave in accordance with the Employer’s applicable leave policies.

 

4.                                      Termination.

 

(a)                                 Death.  This Agreement shall automatically terminate effective as of the date of the Employee’s death, in which event the Employer shall have no further obligation or liability under this Agreement except that the Employer shall pay to the Employee’s estate:  (i) any portion of the Employee’s Base Salary for the period up to the Employee’s date of death that has been earned but remains unpaid; and (ii) any benefits that have been earned, accrued and are due to the Employee under the terms of the employee benefit plans of the Employer, which benefits shall be paid in accordance with the terms of those plans.  Any equity that is unvested at the time of Employee’s death shall be treated in accordance with the applicable equity plan.

 

(b)                                 Total Disability.  In the event of the Employee’s Total Disability (as defined below), the Employer may terminate the employment of the Employee, to the extent permitted by law, immediately upon written notice to the Employee, in which event, the Employer shall have no further obligation or liability under this Agreement except that the Employer shall pay to the Employee:  (i) any portion of the Employee’s Base Salary for the period up to the date of termination that has been earned but remains unpaid; and (ii) any benefits that have been earned, accrued and are due to the Employee under the terms of the employee benefit plans of the Employer, which benefits shall be paid in accordance with the terms of those plans.  Any equity that is unvested at the time of Employee’s Total Disability shall be treated in accordance with the applicable equity plan.

 

(c)                                  Termination by the Employer for Cause.  Subject to any applicable right to cure under Section 4(g)(i), the Employer may terminate the Employee’s employment at any time, effective immediately, for Cause upon written notice to the Employee.  In the event that the Employer terminates the Employee pursuant to this Section 4(c), the Employer shall have no further obligation or liability under this Agreement, except that the Employer shall pay to the Employee: (i) any portion of the Employee’s Base Salary for the period up to the Termination Date that has been earned but remains unpaid; and (ii) any benefits that have been earned, accrued and are due to the Employee under the terms of the employee benefit plans of the Employer, which benefits shall be paid in accordance with the terms of those plans.

 

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(d)                                 Termination by the Employer Without Cause; Termination by the Employee for Good Reason.  The Employer may terminate the employment of the Employee for any reason other than those specified in Section 4(b) or 4(c) upon thirty (30) days written notice (or the payment of Base Salary and benefit continuation in lieu of such thirty (30) day notice) to the Employee.  In addition, the Employee may terminate his employment at any time, including, without limitation, upon written notice to the Employer for Good Reason in accordance with the requirements of Section 4(g)(vi).

 

If after (x) the first anniversary of the Effective Date of this Agreement or (y) the consummation of the Employer’s Initial Public Offering (“IPO”), or (z) the consummation of a private placement resulting in at least $15,000,000 in gross proceeds to the Employer, the Employee terminates his employment for Good Reason (as such term is defined herein), or the Employer terminates the Employee for any reason other than those specified in Section 4(b) or 4(c) hereof, then the Employer shall pay to the Employee:

 

(i)                                     any portion of the Employee’s Base Salary for the period up to the Termination Date that has been earned but remains unpaid;

 

(ii)                                  any benefits that have been earned, accrued and are due to the Employee under the terms of any employee benefit plans of the Employer, which benefits shall be paid in accordance with the terms of those plans; and

 

(iii)                               subject to the execution and nonrevocation by the Employee of a release satisfactory to the Employer (the “Release) and the Employee’s compliance with all terms and provisions of this Agreement that survive the termination of the Employee’s employment by the Employer, the Employer shall provide the Employee with the payments and benefits set forth below in (A), (B) and (C).  Notwithstanding any provision of this Agreement to the contrary, in no event shall the timing of the Employee’s execution of the Release, directly or indirectly result in the Employee designating the calendar year of payment and to the extent payment could be made in more than one taxable year, payment shall be made in the later taxable year. Moreover, such release must be executed, if at all, no later than sixty (60) days following the date of Employee’s separation from service from Employer. The payments and benefits for such termination are limited to:

 

(A)                               Severance in an amount equal to salary continuation of Employee’s Base Salary at the rate in effect at the time of the Employee’s termination for a period of twelve (12) months following the effective date of the Release; and

 

(B)                               Continued medical and dental coverage at the same level in effect at the time of the Termination Date (or generally comparable coverage) for a period of twelve (12) months following the Termination Date for himself and, where applicable, his spouse and dependents, at the same premium rates as may be charged from time to time for employees generally, as if the Employee had continued in employment during such twelve (12) month period.  If applicable, the health care continuation period shall run concurrently with the foregoing twelve (12) month period; and

 

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(C)                               Pro rata vesting of all outstanding unvested stock options and other equity-based awards held by the Employee that would have vested had the Employee remained employed for twelve months following the Termination Date.

 

(D)                               The Exercise of all vested equity awards by Employee at the termination of employment (except on account of death or disability as indicated in Sections 4(a) and (b)) shall be governed by the terms of the applicable equity plan adopted by Employer.

 

(e)                                  Effect of a Change of Control.  Notwithstanding any provision of Section 4(d) to the contrary, (A) if Employee’s employment is terminated pursuant to Section 4(d) within the ninety (90) day period preceding a Change of Control or on or within twelve (12) months following a Change of Control; or (B) Employee resigns employment within thirty (30) days of the effective date of a Change of Control, upon such termination or resignation, Employee shall be entitled to the same payments and benefits described in Section 4(d) above, subject to execution and nonrevocation of the Release and the Employee’s compliance with all terms and provisions of this Agreement that survive the termination of the Employee’s employment by the Employer, provided that in addition to the severance and other benefits set forth in Section 4(d) (iii) (A)-(C), one hundred percent (100%) of all outstanding unvested stock options and other equity-based awards held by the Employee as of the Termination Date shall become fully vested and exercisable (to the extent applicable) as of the Termination Date; (iii) all outstanding stock options and other equity-based awards held by the Employee as of the Termination Date that become vested pursuant to (ii) above or that are vested as of the Termination Date shall remain exercisable (to the extent applicable) until the earlier of (x) the three (3) year anniversary of the Termination Date and (y) the expiration date of the relevant stock option or other equity-based award; and (iv) provided the Change of Control results in net proceeds per share of capital stock to investors in excess of two times the Series 1 price per share, then Employee shall receive Employee’s targeted annual bonus of the year in which the Termination Date occurs, without regard to whether the relevant Employee and Employer goals have been achieved.

 

Notwithstanding anything set forth in this Agreement to the contrary, if any payment or benefit, including severance benefits, that the Employee would receive from the Employer in connection with a Change of Control or otherwise (“Payment”) would (i) constitute a “parachute payment” within the meaning of section 280G of the Code and (ii) but for this sentence, be subject to the excise tax imposed by section 4999 of the Code (the “Excise Tax”), then such Payment shall be reduced to the Reduced Amount.  The “Reduced Amount” shall be either (A) the largest portion of the Payment that would result in no portion of the Payment being subject to the Excise Tax or (B) the largest portion, up to and including the total, of the Payment, whichever amount, after taking into account all applicable federal, state and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in the Employee’s receipt, on an after-tax basis, of the greater amount of the Payment notwithstanding that all or some portion of the Payment may be subject to the Excise Tax.  If a reduction in payments or benefits (or a cancellation of the acceleration of vesting of stock options or other equity-based awards) constituting “parachute payments” is necessary so that the Payment equals the Reduced Amount, such reduction and/or cancellation of acceleration shall occur in the order that provides the maximum economic benefit to the Employee.  In the event that acceleration of vesting of a stock option or other equity-based award is to be reduced, such

 

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acceleration of vesting also shall be canceled in the order that provides the maximum economic benefit to the Employee.

 

The Employer shall appoint a nationally recognized accounting firm with appropriate subject matter expertise to make the determinations required under this Section 4(e).

 

The Employer shall bear all expenses with respect to the making of the determinations by such accounting firm required to be made under this Section 4(e), up to a maximum of $25,000.  The accounting firm engaged to make the determinations under this Section 4(e) shall provide its calculations, together with detailed supporting documentation, to the Employer and the Employee as soon as practicable after the date on which the Employee’s right to a Payment is triggered (if requested at that time by the Employer or the Employee) or such other time as requested by the Employer or the Employee.  If the accounting firm determines that no Excise Tax is payable with respect to a Payment, either before or after the application of the Reduced Amount, it shall furnish the Employer with an opinion reasonably acceptable to the Employee that no Excise Tax will be imposed with respect to such Payment.  Any good faith determinations of the accounting firm made under this Section 4(e) shall be final, binding, and conclusive upon the Employer and the Employee.

 

(f)                                   Elective Termination by Employee.  Employee may voluntarily terminate his employment with the Employer without Good Reason at any time upon thirty (30) days prior written notice, which termination shall become effective upon the thirtieth (30) day after the receipt of such notice.  In the event that the Employee terminates his employment pursuant to this Section 4(f), the Employer shall have no further obligation or liability for compensation or benefits, except that the Employer shall pay to the Employee:(A) any portion of the Employee’s Base Salary for the period up to the Termination Date that has been earned but remains unpaid; and (B) any benefits that have been earned, accrued and are due to the Employee under the terms of the employee benefit plans of the Employer, which benefit s shall be paid in accordance with the terms of those plans.

 

(g)                                 Definitions.

 

(i)                                     “Cause” shall be deemed to exist with respect to any termination of employment by the Employer for any of the following reasons:

 

(1)                                 the Employee’s engagement in conduct constituting breach of fiduciary duty, gross negligence or willful misconduct relating to the Employer or the performance of the Employee’s duties;

 

(2)                                 the Employee’s continued failure to perform the Employee’s material duties in a satisfactory manner after written notice specifying the areas in which performance is unsatisfactory and, if subject to cure, the Employee’s failure to perform within thirty (30) days after such notice;

 

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(3)                                 the Employee’s commission of any act of fraud with respect to the Employer;

 

(4)                                 the Employee’s violation of any covenants or agreements in favor of the Employer regarding confidentiality, non-competition and/or non-solicitation; or

 

(5)                                 the Employee’s conviction of a felony or a crime involving moral turpitude under the laws of the United States or any state or political subdivision thereof.

 

Any notice required to be provided to the Employee under clause (2) of this definition of “Cause” shall state that failure to cure within the applicable period will result in termination for Cause.

 

(ii)                                  “Change of Control” shall mean:

 

(1)                                 any person or entity becomes the beneficial owner, directly or indirectly, of securities of the Employer representing greater than 50% (>50%) percent of the total voting power of all its then outstanding voting shares;

 

(2)                                 a merger or consolidation of the Employer 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;

 

(3)                                 a sale of substantially all of the assets of the Employer or a liquidation or dissolution of the Employer.

 

(4)                                 But in no event shall “Change of Control” mean an initial public offering (“IPO”) of the Employer’s stock or any investment by any individual or entity that does not result in the right of such individual or entity to appoint a majority of the Employer’s Board.

 

(iii)                               “Code” shall mean the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder.

 

(iv)                              “Fair Market Value” means, for so long as the common stock of Employer is not publicly traded or, if publicly traded, is not subject to reported transactions requirements, the Fair Market Value per share shall be as determined reasonably and in good faith by the Board or the Compensation Committee through any reasonable valuation method authorized under section 409A of the Code.

 

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(v)                                 “Fully Diluted” means, the number of outstanding shares of common stock as of any date, equal to the sum of (i) the common shares outstanding on such date plus (ii) the maximum number of common shares issuable upon the conversion of the preferred shares outstanding on such date plus (iii) the maximum number of common shares issuable upon the exercise, conversion or exchange of all outstanding options, warrants and other securities exercisable or exchangeable for, or convertible into, common shares.

 

(vi)                              “Good Reason” shall be deemed to exist with respect to any termination of employment by the Employee for any of the following reasons:

 

(1)                                 a material reduction in the Employee’s duties and responsibilities, which for purposes of this Agreement means the assignment to Employee of any duties or responsibilities which are materially inconsistent with or adverse to the Employee’s then current duties, responsibilities, positions and/or titles with the Employer;

 

(2)                                 a material reduction of the Employee’s then-current base salary or target bonus opportunity;

 

(3)                                 the requirement that the Employee regularly report to work at a location that is more than fifty (50) miles from the location of the Employee’s employment as of the Effective Date;

 

(4)                                 a material breach of this Agreement by the Employer; or

 

(5)                                 in the event of the assignment of this Agreement to a third party, the failure of the assignee or successor entity to agree to be bound to the terms of this Agreement;

 

(6)                                 the consummation of a Change of Control of the Employer, as such term is defined herein.

 

provided, however, that except with respect to Section 4(g)(vi)(6) above, for any of the foregoing to constitute Good Reason, the Employee must provide written notification of his intention to resign within ninety (90) days after the Employee first knows or first has reason to know of the occurrence of any such event or condition, and, the Employer must have thirty (30) business days from the date of receipt of such notice to effect a cure of the event or condition constituting Good Reason.  If the Employer fails to effect a cure of the event or condition constituting Good Reason, the Employee must actually resign from employment within thirty (30) days following the expiration of the foregoing cure period.  In

 

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the event of a cure of such event or condition constituting Good Reason by the Employer, such event or condition shall no longer constitute Good Reason.

 

(vii)                           “Grant” shall mean a stock option, stock appreciation right, stock award, stock unit or other stock based award granted to Employee.

 

(viii)                        “Grant Instrument shall mean the written agreement that sets forth the terms and conditions of a Grant, including any amendments thereto.

 

(ix)                              “Termination Date” shall mean the date on which the Employee’s employment with the Employer terminates in accordance with the applicable provisions of this Agreement.

 

(x)                                 “Total Disability,” shall mean an illness, incapacity or a mental or physical condition that renders the Employee unable, despite the provision, if requested, of a reasonable accommodation as that term is defined in the Americans with Disabilities Act, to perform the essential functions of his employment position for a continuous period of six (6) months or more.

 

(h)                                 No Mitigation.  The Employee shall not be required to mitigate the amount of any payment provided for in this Section 4 by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Section 4 be reduced by any compensation earned by the Employee as the result of employment by another employer or self-employment, by retirement benefits, by offset against any amounts (other than loans or advances to the Employee by the Employer) claimed to be owed by the Employee to the Employer, or otherwise, provided, however, that if Employee becomes eligible for a group health insurance plan during the Severance period, then Employee shall notify Employer of same and Employer shall be relieved of the obligation to make any premium contributions to the continuation of Employee’s health insurance coverage.

 

5.                                      Non-Disclosure; Non-Competition and Prior Agreements.

 

(a)                                 Non-Disclosure.  The Employee acknowledges that in the course of performing services for the Employer, the Employee will obtain knowledge of the Employer’s business plans, products, processes, software, know-how, trade secrets, formulas, methods, models, prototypes, discoveries, inventions, improvements, disclosures, names and positions of employees and/or other proprietary and/or confidential information (collectively the “Confidential Information”).  The Employee agrees to keep the Confidential Information secret and confidential and not to publish, disclose or divulge to any other party, and the Employee agrees not to use any of the Confidential Information for the Employee’s own benefit or to the detriment of the Employer without the prior written consent of the Employer, whether or not such Confidential Information was discovered or developed by the Employee.  The Employee also agrees not to divulge, publish or use any proprietary and/or confidential information of others that the Employer is obligated to maintain in confidence.

 

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(b)                                 Non-Competition.  The Employee agrees that, during his employment by the Employer hereunder and for an additional period of twelve (12) months after the termination of the Employee’s employment hereunder for any reason, neither the Employee nor any corporation or other entity in which the Employee may be interested as a partner, trustee, director, officer, employee, agent, shareholder, lender of money or guarantor, or for which he performs services in any capacity (including as a consultant or independent contractor) shall at any time during such period be engaged, directly or indirectly, in any Competitive Business (as that term is hereinafter defined).  The Employee shall not solicit or, if the Employee owns or has the right to acquire more than five percent (5%) of the fully-diluted equity of the employing entity or its affiliates, hire, directly or indirectly, any person that was employed by Employer during the six (6) month period immediately preceding the Employee’s termination of employment with the Employer.  For purposes of this Section 5(b) the term “Competitive Business” shall mean any job, role, or specific responsibilities within a firm, company, or business organization that competes directly with the Employer’s business as in effect at the time of the Employee’s termination of employment with the Employer or in a business area planned in writing by the Employer before the Termination Date for entry within twelve (12) months of the Termination Date at the time of the Employee’s termination of employment with the Employer.  The foregoing prohibition shall not prevent any employment or engagement of the Employee, after termination of employment with the Employer, by any firm, company, or business organization engaged in a Competitive Business as long as the activities of any such employment or engagement, in any capacity, do not involve work on matters related to any business, product or service being developed, manufactured, marketed, distributed or planned in writing by the Employer at the time of the Employee’s termination of employment with the Employer.  The Employee’s ownership of no more than one percent (1%) of the outstanding voting stock of a publicly traded company shall not constitute a violation of this Section 5(b).  The Employee is entering into this covenant not to compete in consideration of the agreements of the Employer in this Agreement, including but not limited to, the agreement of the Employer to provide the severance and other benefits to the Employee upon a termination of employment pursuant to Section 4(d) hereof and the agreement of the Employer to provide the severance and other benefits upon a Change of Control in accordance with the terms of Section 4(e).

 

(c)                                  Prior Agreements.  The Employee represents and warrants to the Employer that there are no restrictions, agreements or understandings whatsoever to which the Employee is a party that would prevent or make unlawful the Employee’s execution of this Agreement or the Employee’s employment hereunder, is or would be inconsistent or in conflict with this Agreement or the Employee’s employment hereunder, or would prevent, limit or impair in any way the performance by the Employee of the obligations hereunder.

 

6.                                      Inventions and Discoveries.

 

(a)                                 Disclosure.  The Employee shall promptly and fully disclose to the Employer, with all necessary detail, all developments, know-how, discoveries, inventions, improvements, concepts, ideas, formulae, processes and methods (whether copyrightable, patentable or otherwise) made, received, conceived, acquired or written by the Employee (whether or not at the request or upon the suggestion of the Employer, solely or jointly with others), during the period of his employment with the Employer that (i) result from, arise out of, or relate to any work, assignment or task performed by the Employee on behalf of the Employer,

 

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whether undertaken voluntarily or assigned to the Employee within the scope of his responsibilities to the Employer, or (ii) were developed using the Employer’s facilities or other resources or in Employer time, or (iii) result from the Employee’s use or knowledge of the Employer’s Confidential Information, or (iv) relate to the Employer’s business or any of the products or services being developed, manufactured or sold by the Employer or that may be used in relation therewith (collectively referred to as “Inventions”).  The Employee hereby acknowledges that all original works of authorship that are made by the Employee (solely or jointly with others) within the above terms and that are protectable by copyright are “works made for hire,” as that term is defined in the United States Copyright Act.  The Employee understands and hereby agrees that the decision whether or not to commercialize or market any Invention developed by the Employee solely or jointly with others is within the Employer’s sole discretion and for the Employer’s sole benefit and that no royalty shall be due to the Employee as a result of the Employer’s efforts to commercialize or market any such Invention.

 

(b)                                 Assignment and Transfer.  The Employee agrees to assign and transfer to the Employer all of the Employee’s right, title and interest in and to the Inventions, and the Employee further agrees to deliver to the Employer any and all drawings, notes, specifications and data relating to the Inventions, and to sign, acknowledge and deliver all such further papers, including applications for and assignments of copyrights and patents, and all renewals thereof, as may be necessary to obtain copyrights and patents for any Inventions in any and all countries and to vest title thereto in the Employer and its successors and assigns and to otherwise protect the Employer’s interests therein.  The Employee shall not charge the Employer for time spent in complying with these obligations.  If the Employer is unable because of the Employee’s mental or physical incapacity or for any other reason to secure the Employee’s signature to apply for or to pursue any application for any United States or foreign patents or copyright registrations covering Inventions or original works of authorship assigned to the Employer as above, then the Employee hereby irrevocably designates and appoints the Employer and its duly authorized officers and agents as the Employee’s agent and attorney in fact, to act for and in the Employee’s behalf and stead to execute and file any such applications and to do all other lawfully permitted acts to further the prosecution and issuance of letters patent or copyright registrations thereon with the same legal force and effect as if executed by the Employee.

 

(c)                                  Records.  The Employee agrees that in connection with any research, development or other services performed for the Employer, the Employee will maintain careful, adequate and contemporaneous written records of all Inventions, which records shall be the property of the Employer.

 

7.                                      Employer Documentation.  The Employee shall hold in a fiduciary capacity for the benefit of the Employer all documentation, disks, programs, data, records, drawings, manuals, reports, sketches, blueprints, letters, notes, notebooks and all other writings, electronic data, graphics and tangible information and materials of a secret, confidential or proprietary information nature relating to the Employer or the Employer’s business that are in the possession or under the control of the Employee.

 

8.                                      Injunctive Relief.  The Employee acknowledges that his compliance with the agreements in Sections 5, 6, and 7 hereof is necessary to protect the good will and other proprietary interests of the Employer and that he is one of the principal executives of the

 

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Employer and conversant with its affairs, its trade secrets and other proprietary information.  The Employee acknowledges that a breach of any of his agreements in Sections 5, 6 and 7 hereof will result in irreparable and continuing damage to the Employer for which there will be no adequate remedy at law; and the Employee agrees that in the event of any breach of the aforesaid agreements, the Employer and its successors and assigns shall be entitled to injunctive relief and to such other and further relief as may be proper.

 

9.                                      Application of Section 409A of the Internal Revenue Code.

 

(a)                                 Compliance.  This Agreement shall be interpreted to avoid any penalty sanctions under section 409A of the Code.  If any payment or benefit cannot be provided or made at the time specified herein without incurring sanctions under section 409A of the Code, then such benefit or payment shall be provided in full at the earliest time thereafter when such sanctions will not be imposed.  For purposes of section 409A of the Code, all payments to be made upon a termination of employment under this Agreement may only be made upon a “separation from service” under section 409A of the Code, each payment made under this Agreement shall be treated as a separate payment, and the right to a series of installment payments under this Agreement is to be treated as a right to a series of separate payments.  In no event shall the Employee, directly or indirectly, designate the calendar year of payment.  All reimbursements provided under this Agreement shall be made or provided in accordance with the requirements of section 409A of the Code, including, where applicable, the requirement that (i) any reimbursement is for expenses incurred during the Employee’s lifetime (or during a shorter period of time specified in this Agreement), (ii) the amount of expenses eligible for reimbursement during a calendar year may not affect the expenses eligible for reimbursement in any other calendar year, (iii) the reimbursement of an eligible expense will be made on or before the last day of the calendar year following the year in which the expense is incurred, and (iv) the right to reimbursement is not subject to liquidation or exchange for another benefit.

 

(b)                                 Payment Delay.   Notwithstanding any provision in this Agreement to the contrary, if at the time of the Employee’s termination of employment with the Employer, the Employer has securities which are publicly-traded on an established securities market and the Employee is a “specified employee” (as defined in section 409A of the Code) and it is necessary to postpone the commencement of any severance payments otherwise payable pursuant to this Agreement as a result of such termination of employment in order to prevent any accelerated or additional tax under section 409A of the Code, then the Employer shall postpone the commencement of the payment of any such payments or benefits hereunder (without any reduction in such payments or benefits ultimately paid or provided to the Employee) that are not otherwise paid within the short-term deferral exception under section 409A of the Code and are in excess of the lesser of two (2) times (i) the Employee’s then-annual compensation or (ii) the limit on compensation then set forth in section 401(a)(17) of the Code, until the first payroll date that occurs after the date that is six (6) months following the Employee’s “separation from service” with the Employer (as defined under section 409A of the Code).  If any payments are postponed due to such requirements, such postponed amounts shall be paid in a lump sum to the Employee, and any installment payments due to the Employee shall recommence, on the first payroll date that occurs after the date that is six (6) months following the Employee’s “separation from service” with the Employer.  If the Employee dies during the postponement period prior to the payment of the postponed amount, the amounts withheld on account of section 409A of the

 

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Code shall be paid to the personal representative of the Employee’s estate within sixty (60) days after the date of the Employee’s death.

 

10.                               Supersedes Other Agreements.  This Agreement supersedes and is in lieu of any and all other employment arrangements between the Employee and the Employer.

 

11.                               Amendments.  Any amendment to this Agreement shall be made in writing and signed by the parties hereto.

 

12.                               Enforceability.  If any provision of this Agreement shall be invalid or unenforceable, in whole or in part, then such provision shall be deemed to be modified or restricted to the extent and in the manner necessary to render the same valid and enforceable, or shall be deemed excised from this Agreement, as the case may require, and this Agreement shall be construed and enforced to the maximum extent permitted by law as if such provision had been originally incorporated herein as so modified or restricted or as if such provision had not been originally incorporated herein, as the case may be.

 

13.                               Governing Law.  This Agreement shall be governed in all respects by the laws of the Commonwealth of Pennsylvania without regard to the conflicts of laws principles of any jurisdiction.  Any legal proceeding arising out of or relating to this Agreement shall be instituted in the Pennsylvania state or Federal courts.  Employee hereby consents to the personal and exclusive jurisdiction of such court and hereby waives any objection that the Employee may have to the laying of venue of any such proceeding and any claim or defense of inconvenient forum.

 

14.                               Jury Waiver. The Employer and Employee hereby waive trial by jury for all actions arising from or relating to any breaches or claimed breaches of this Agreement, or any circumstance or matter arising from or relating to Employee’s employment by Employer.

 

15.                               Assignment.

 

(a)                                 By the Employer.  The rights and obligations of the Employer under this Agreement shall inure to the benefit of, and shall be binding upon, the successors and assigns of the Employer.  This Agreement may be assigned by the Employer without the consent of the Employee.  The Employer shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Employer to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Employer would be required to perform it if no such succession had taken place. Unless expressly provided otherwise, “Employer” as used herein shall mean the Employer as defined in this Agreement and any successor to its business and/or assets as aforesaid.

 

(b)                                 By the Employee.  This Agreement and the obligations created hereunder may not be assigned by the Employee, but all rights of the Employee hereunder shall inure to the benefit of and be enforceable by his heirs, devisees, legatees, executors, administrators and personal representatives.

 

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16.                               Notices.  All notices required or permitted to be given hereunder shall be in writing and shall be deemed to have been given when mailed by certified mail, return receipt requested, or delivered by a national overnight delivery service addressed to the intended recipient as follows:

 

If to the Employer:

Zynerba Pharmaceuticals, Inc.

170 N. Radnor-Chester Road, Suite 350

Radnor, PA  19087
 Attention:  General Counsel

 

If to the Employee:

Richard A. Baron

214 Price Avenue

Narberth, PA  19072

 

Any party may from time to time change its address for the purpose of notices to that party by a similar notice specifying a new address, but no such change shall be deemed to have been given until it is actually received by the party sought to be charged with its contents.

 

17.                               Waivers.  No claim or right arising out of a breach or default under this Agreement shall be discharged in whole or in part by a waiver of that claim or right unless the waiver is supported by consideration and is in writing and executed by the aggrieved party hereto or his or its duly authorized agent.  A waiver by any party hereto of a breach or default by the other party hereto of any provision of this Agreement shall not be deemed a waiver of future compliance therewith, and such provisions shall remain in full force and effect.

 

18.                               Indemnification.  Employer agrees to indemnify, defend and hold harmless, Employee to the maximum extent permitted by law and under the by-laws and articles of incorporation of the Employer, as well as to cover Employee under any indemnification agreements or arrangements maintained by the Employer for its directors and officers from time to time, subject to the terms and conditions thereof. Employer specifically acknowledges and agrees the obligations set forth herein include but are not limited to any and all claims, demands, investigations, suits or actions for any and all liabilities, losses, damages, penalties, costs or expenses of every kind whatsoever (including but not limited to court costs, legal fees, awards or settlements) arising out of, in connection with or related to any negligent or intentional act, error or omission of Employer, any predecessor entity of Employer, or any of their respective current or former directors, officers, employees, representatives or agents prior to the Effective Date of this Agreement.

 

19.                               Survival of Covenants.  The provisions of Sections 5 through 18 hereof shall survive the termination of this Agreement.  Furthermore, any other provision of this Agreement that, by its terms, is intended to continue beyond the termination of the Employee’s employment shall continue in effect thereafter.

 

[signature page follows]

 

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IN WITNESS WHEREOF, this Agreement has been executed by the parties as of the date first above written.

 

	
 
    	
ZYNERBA   PHARMACEUTICALS, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Armando Anido
    
	
 
    	
 
    	
Armando   Anido
    
	
 
    	
 
    	
Chief   Executive Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
EMPLOYEE
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/ Richard A. Baron
    
	
 
    	
Richard A. Baron
    

 

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EXHIBIT A

NON-QUALIFIED STOCK OPTION AGREEMENT

 

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ZYNERBA PHARMACEUTICALS, INC.
 2014 OMNIBUS INCENTIVE COMPENSATION PLAN

 

NONQUALIFIED STOCK OPTION GRANT

 

This NONQUALIFIED STOCK OPTION GRANT AGREEMENT (this “Agreement”), dated as of January 2, 2015 (the “Date of Grant”), is delivered by Zynerba Pharmaceuticals, Inc. (the “Company”) to Richard Baron (the “Grantee”).

 

RECITALS

 

A.                                    The Zynerba Pharmaceuticals, Inc. 2014 Omnibus Incentive Compensation Plan (the “Plan”) provides for the grant of options to purchase shares of common stock of the Company. The Board of Directors of the Company (the “Board”) has decided to make a stock option grant as an inducement for the Grantee to promote the best interests of the Company and its stockholders.

 

B.                                    The Board is authorized to appoint a committee to administer the Plan. If a committee is appointed, all references in this Agreement to the “Board” shall be deemed to refer to the committee.

 

NOW, THEREFORE, the parties to this Agreement, intending to be legally bound hereby, agree as follows:

 

1.                                      Grant of Option. Subject to the terms and conditions of Agreement and the Plan, the Company hereby grants to the Grantee a nonqualified stock option (the “Option”) to purchase 120.000 shares of common stock of the Company (“Shares”) at an exercise price of $2.116402 per Share. The Option shall become exercisable according to Paragraph 2 below.

 

2.                                      Vesting and Exercisability of Option. The Option shall become vested and exercisable in accordance with the following vesting schedule if the Grantee is employed by, or providing service to, the Employer (as defined in the Plan) on the applicable vesting date:

 

Twenty five percent (25%) upon the closing of the sale of shares of the Company’s common stock to the public in a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended (an “IPO”), with (he balance vesting in twelve equal quarterly installments thereafter.

 

The vesting and exercisability of the Option is cumulative, but shall not exceed 100% of the Shares subject to the Option. If the foregoing schedule would produce fractional Shares, the number of Shares for which the Option becomes vested and exercisable shall be rounded down to the nearest whole Share.

 

 

3.                                      Term of Option.

 

(a)                                 The Option shall have a term often years from the Date of Grant and shall terminate at the expiration of that period, unless it is terminated at an earlier date pursuant to the provisions of this Agreement or the Plan.

 

(b)                                 The Option shall automatically terminate upon the happening of the first of the following events:

 

(i)                                     The expiration of the 90-day period after the Grantee ceases to be employed by, or provide service to, the Employer, if the termination is for any reason other than Disability, death or Cause (as defined in the Plan).

 

(ii)                                  The expiration of the one-year period after the Grantee ceases to be employed by, or provide service to, the Employer on account of the Grantee’s Disability.

 

(iii)                               The expiration of the one-year period after the Grantee ceases to be employed by, or provide service to, the Employer, if the Grantee dies while employed by, or providing service to, the Employer or within 90 days after the Grantee ceases to be so employed or provide such services on account of a termination described in subparagraph (i) above.

 

(iv)                              The date on which the Grantee ceases to be employed by, or provide service to, the Employer for Cause. In addition, notwithstanding the prior provisions of this Paragraph 3, if the Grantee engages in conduct that constitutes Cause after the Grantee’s employment or service terminates, the Option shall immediately terminate, and the Grantee shall automatically forfeit all Shares underlying any exercised portion of the Option for which the Company has not yet delivered the Share certificates, upon refund by the Company of the exercise price paid by the Grantee for such Shares.

 

Notwithstanding the foregoing, in no event may the Option be exercised after the date that is immediately before the tenth anniversary of the Date of Grant. Any portion of the Option that is not exercisable at the time the Grantee ceases to be employed by, or provide service to, the Employer shall immediately terminate.

 

4.                                      Exercise Procedures.

 

(a)                                 Subject to the provisions of Paragraphs 2 and 3 above, the Grantee may exercise part or all of the exercisable Option by giving the Company written notice of intent to exercise in the manner provided in this Agreement, specifying the number of Shares as to which the Option is to be exercised and the method of payment. Payment of the exercise price shall be made in accordance with procedures established by the Board from time to time based on type of payment being made but, in any event, prior to issuance of the Shares. The Grantee shall pay the exercise price (i) in cash, (ii} unless the Board determines otherwise, by delivering Shares owned by the Grantee and having a Fair Market Value (as defined in the Plan) on the date of exercise at least equal to the exercise price or by attestation (on a form prescribed by the Board) to ownership of Shares having a Fair Market Value on the date of exercise at least equal to the exercise price, (iii) by payment through a broker in accordance with procedures permitted by Regulation T of the Federal Reserve Board, (iv) by surrender of all or any part of the vested

 

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Shares for the Option is exercisable to the Company for an appreciation distribution payable in shares of common stock with a Fair Market Value at the lime of the Option surrender equal to the dollar amount by which the then Fair Market Value of the shares of common stock subject to the surrendered portion exceeds the aggregate exercise price payable for those shares, or (v) by such other method as the Board may approve. The Board may impose from time to time such limitations as it deems appropriate on the use of Shares of the Company to exercise the Option.

 

(b)                                 The obligation of the Company to deliver Shares upon exercise of the Option shall be subject to all applicable laws, rules, and regulations and such approvals by governmental agencies as may be deemed appropriate by the Board, including such actions as Company counsel shall deem necessary or appropriate to comply with relevant securities laws and regulations.

 

(c)                                  All obligations of the Company under this Agreement shall be subject to the rights of the Company as set forth in the Plan to withhold amounts required to be withheld for any taxes, if applicable. Subject to Board approval, the Grantee may elect to satisfy any tax withholding obligation of the Employer with respect to the Option by having Shares withheld up to an amount that does not exceed the minimum applicable withholding tax rate for federal (including FICA), state and local tax liabilities.

 

5.                                      Change of Control. The provisions of the Plan applicable to a Change of Control (as defined in the Plan) shall apply to the Option, and, in the event of a Change of Control, the Board may take such actions as it deems appropriate pursuant to the Plan.

 

6.                                      Restrictions on Exercise. Except as the Board may otherwise permit pursuant to the Plan, only the Grantee may exercise the Option during the Grantee’s lifetime and, after the Grantee’s death, the Option shall be exercisable (subject to the limitations specified in the Plan) solely by the legal representatives of the Grantee, or by the person who acquires the right to exercise the Option by will or by the laws of descent and distribution, to the extent that the Option is exercisable pursuant to this Agreement.

 

7.                                      Grant Subject to Plan Provisions. This grant is made pursuant to the Plan, the terms of which are incorporated herein by reference, and in all respects shall be interpreted in accordance with the Plan. The grant and exercise of the Option are subject to interpretations, regulations and determinations concerning the Plan established from time to time by the Board in accordance with the provisions of the Plan, including, but not limited to, provisions pertaining to (a) rights and obligations with respect to withholding taxes, (b) the registration, qualification or listing of the Shares, (c) changes in capitalization of the Company and (d) other requirements of applicable law. The Board shall have the authority to interpret and construe the Option pursuant to the terms of the Plan, and its decisions shall be conclusive as to any questions arising hereunder.

 

8.                                      No Employment or Other Rights. The grant of the Option shall not confer upon the Grantee any right to be retained by or in the employ or service of the Employer and shall not interfere in any way with the right of the Employer to terminate the Grantee’s employment or service at any time. The right of the Employer to terminate the Grantee’s employment or service at any time for any reason is specifically reserved.

 

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9.                                      No Stockholder Rights, Neither the Grantee, nor any person entitled to exercise the Grantee’s rights in the event of the Grantee’s death, shall have any of the rights and privileges of a stockholder with respect to the Shares subject to the Option, until certificates for Shares have been issued upon the exercise of the Option.

 

10.                               Assignment and Transfers. Except as the Board may otherwise permit pursuant to the Plan, the rights and interests of the Grantee under this Agreement may not be sold, assigned, encumbered or otherwise transferred except, in the event of the death of the Grantee, by will or by the laws of descent and distribution. In the event of any attempt by the Grantee to alienate, assign, pledge, hypothecate, or otherwise dispose of the Option or any right hereunder, except as provided for in this Agreement, or in the event of (he levy or any attachment, execution or similar process upon the rights or interests hereby conferred, the Company may terminate the Option by notice to the Grantee, and the Option and all rights hereunder shall thereupon become null and void. The rights and protections of the Company hereunder shall extend to any successors or assigns of the Company and to the Company’s parents, subsidiaries, and affiliates. This Agreement may be assigned by the Company without the Grantee’s consent.

 

11.                               Applicable Law. The validity, construction, interpretation and effect of this instrument shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to the conflicts of laws provisions thereof.

 

12.                               Notice. Any notice to the Company provided for in this instrument shall be addressed to the Company in care of the General Counsel at 170 N. Radnor Chester Road, Suite 350, Radnor, PA 19087 and any notice to the Grantee shall be addressed to such Grantee at the current address shown on the payroll of the Employer, or to such other address as the Grantee may designate to the Employer in writing. Any notice shall be delivered by hand, sent by telecopy or enclosed in a properly sealed envelope addressed as stated above, registered and deposited, postage prepaid, in a post office regularly maintained by the United States Postal Service.

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the Company has caused its duly authorized officers to execute and attest this Agreement, and the Grantee has executed this Agreement, effective as of the Date of Grant.

 

	
 
    	
ZYNERBA PHARMACEUTICALS, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Armando Anido
    
	
 
    	
Name: Armando Anido
    
	
 
    	
Title: Chief Executive Officer
    

 

I hereby accept the Option described in this Agreement, and I agree to be bound by the terms of the Plan and this Agreement. I hereby further agree that all the decisions and determinations of the Board shall be final and binding.

 

	
 
    	
Grantee:
    	
/s/ Richard Baron
    
	
 
    	
 
    	
Richard Baron
    

 

5Exhibit 10.6

 

SEVERANCE AGREEMENT AND RELEASE OF CLAIMS

 

THIS AGREEMENT is being entered into between and among Zynerba Pharmaceuticals, Inc., f/k/a AllTranz, Inc. on behalf of and for the benefit of itself, its shareholders, officers, directors, employees, agents, predecessors, successors and assigns (hereinafter collectively referred to as “Employer”) and Audra Stinchcomb, on behalf of and for the benefit of herself, her heirs, assigns and representatives (hereinafter referred to as “Employee”) to resolve all differences (collectively “the parties”).

 

WHEREAS, Employee was employed by Employer as the Chief Scientific Officer;

 

WHEREAS, the parties now desire to terminate their relationship;

 

WHEREAS, the parties desire to enter into this Agreement to resolve all issues between them arising out of and related to Employee’s employment and termination from employment;

 

NOW, THEREFORE, in consideration of the mutual promises contained herein and intending to be legally bound hereby, the parties agree as follows:

 

1.             Employee’s employment with Employer was terminated effective as of August 31, 2014 (“Termination Date”);

 

2.             In consideration for this Agreement, and Employee’s release of claims and other obligations hereunder, Employer shall, no sooner than the eighth (8th) day following Employee’s execution of this Agreement, pay to Employee severance in the amount of $60,000.00, less applicable withholding taxes and deductions (“Severance”).  The Severance shall be paid no later than the next regularly scheduled payday following the expiration of the revocation period set forth in Section 21 below.

 

3.             Except as set forth in this Agreement, Employee understands she will receive no other wages, bonus, severance or other similar payments or benefits from Employer.

 

4.             Employee acknowledges that the consideration set forth above in Section 2(a) is more than the Employer is required to provide to her and includes benefits to which she is not otherwise entitled.  Employee further acknowledges that she is receiving such consideration in exchange for entering into this Agreement and complying with all of her obligations hereunder. Employee also acknowledges that nothing herein represents any admission of wrongdoing or violation of any law or duty by Employer or of any of the Released Parties (defined below).

 

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5.             Employee agrees to submit final travel and expense reports to Employer by September 30, 2014 and to cooperate in the immediate return of all Employer property, including, without limitation, all documents, data, presentations, business plans and any confidential or proprietary Employer information, with the exception of information concerning the patents and applications related to: “Methods and Compositions for Enhancing the Viability of Microneedle Pores” as set forth on Exhibit A attached hereto (the “Exhibit A Information”).

 

6.             Employee, (for herself, her heirs, executors, administrators and assigns) hereby releases Employer and its respective predecessors, affiliates, subsidiaries and all present, former and future directors, employees, officers, agents, representatives, direct or indirect owners of such entities (collectively “Released Parties”), from all claims or demands which she may have based on or relating to her employment with Employer or the termination of that employment. This includes a release of any rights or claims which Employee may have under Title VII of the Civil Rights Act of 1964, as amended, which prohibits discrimination in employment based on race, color, national origin or sex; the Age Discrimination in Employment Act of 1967, which prohibits discrimination based on age; the Equal Pay Act, which prohibits paying men and women unequal pay for equal work; the Americans with Disabilities Act of 1990, which prohibits discrimination against disabled persons; the Vocational Rehabilitation Act of 1973, which prohibits discrimination against handicapped persons or any other federal, state or local laws or regulations prohibiting employment discrimination.  Employee also releases Employer from any claim for breach of contract, wrongful discharge, any claim that Employer dealt with her unfairly or any other claims arising under common law which relate, in any way, to her employment with Employer or the termination thereof.  This Release covers claims that Employee knows about, and those that she may not know about, up through the date of this Release; provided, however, that this release does not cover and Employee does not release claims relating to the failure by Employer or any successor or assignee of Employer to provide the benefits or make the payments set forth herein.  Nothing in this Agreement is intended to waive or release any rights that may not be waived or released by Employee, by virtue of any provision of state or federal law, including but not limited to workers’ compensation and unemployment insurance.  The Released Parties are intended third-party beneficiaries of this release and this release may be enforced by each of them in accordance with the terms hereof in respect of rights granted to such Released Parties hereunder.

 

7.             Employee promises never to file any claim or lawsuit against the Released Parties or allow any other party acting on her behalf to file any claim or lawsuit against the Released Parties based on any claims that are

 

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released in Section 6. This Agreement does not otherwise prohibit the filing of a charge or complaint with the EEOC or participation in any investigation or proceeding conducted by the EEOC; however the Employee will not participate in any recoveries which may result therefrom to the extent permitted by law (including, but not limited to, attorneys’ fees, costs and/or liquidated damages).

 

8.             Employee acknowledges that she has not caused or permitted any complaint, charge, lawsuit or any other action or proceeding whatsoever to be filed against the Released Parties based on her employment or the separation of that employment or the operations of Released Parties to date.

 

9.             Employee agrees not to disclose any provisions of this Agreement to anyone other than her immediate family, attorneys or financial advisors who will be informed of and bound by this confidentiality provision, unless they are required by law to make a disclosure of such provisions.  However, both Employee and Employer agree that this Agreement may be used as evidence in a lawsuit in which Employee or Employer alleges a breach of the promises made herein.

 

10.          Employee recognizes that nothing herein is meant to preclude the Released Parties from recovering attorneys’ fees or costs specifically authorized under federal or state law in any subsequent litigation between the Parties.  The Released Parties are likewise not waiving their right to any restitution, recoupment or setoff against Employee which is permitted by law should Employee later sue the Released based on claims released herein.

 

11.          Employee agrees not to make, publicly or privately, any disparaging remarks or otherwise make statements that would injure the business or reputation of the Employer, including its officers, managers, members, directors, partners, shareholders, agents or employees.

 

12.          Employee acknowledges that in the course of performing services for the Employer, she has obtained knowledge of the Employer’s business plans, products, processes, software, know-how, trade secrets, formulas, methods, models, prototypes, data, discoveries, inventions, improvements, disclosures, names and positions of employees and/or other proprietary and/or confidential information (collectively the “Confidential Information”, which does not include the Exhibit A information).  In consideration of this Agreement, the Employee agrees to keep the Confidential Information secret and confidential and not to publish, disclose or divulge it to any other party, and the Employee agrees not to use any of the Confidential Information for the Employee’s own benefit or to the detriment of the Employer without the prior written consent of the Employer, whether or not such

 

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Confidential Information was discovered or developed by the Employee.  The Employee also agrees not to divulge, publish or use any proprietary and/or confidential information of others that the Employer is obligated to maintain in confidence.

 

13.          The Employee represents that she has fully disclosed to Employer, with all necessary detail, any and all developments, know-how, discoveries, inventions, improvements, concepts, ideas, formulae, processes and methods (whether copyrightable, patentable or otherwise) made, received, conceived, acquired or written by the Employee (whether or not at the request or upon the suggestion of the Employer, solely or jointly with others), during the period of her employment with the Employer that (i) resulted from, arose out of, or related to any work, assignment or task performed by the Employee on behalf of the Employer, whether undertaken voluntarily or assigned to the Employee within the scope of her responsibilities to the Employer, or (ii) were developed using the Employer’s facilities or other resources or in Employer time, or (iii) resulted from the Employee’s use or knowledge of the Employer’s Confidential Information, or (iv) related to the Employer’s business or any of the products or services being developed, manufactured or sold by the Employer or that may be used in relation therewith (collectively referred to as “Inventions”).  In further consideration of this Agreement, Employee hereby does assign and transfer to the Employer all of the Employee’s right, title and interest in and to the Inventions, and the Employee further agrees to deliver to the Employer any and all drawings, notes, specifications and data relating to the Inventions, and to sign, acknowledge and deliver all such further papers, including applications for and assignments of copyrights and patents, and all renewals thereof, as may be necessary to obtain copyrights and patents for any Inventions in any and all countries and to vest title thereto in the Employer and its successors and assigns and to otherwise protect the Employer’s interests therein.  If the Employer is unable because of the Employee’s mental or physical incapacity or for any other reason to secure the Employee’s signature to apply for or to pursue any application for any United States or foreign patents or copyright registrations covering Inventions or original works of authorship assigned to the Employer as above, then the Employee hereby irrevocably designates and appoints the Employer and its duly authorized officers and agents as the Employee’s agent and attorney in fact, to act for and in the Employee’s behalf and stead to execute and file any such applications and to do all other lawfully permitted acts to further the prosecution and issuance of letters patent or copyright registrations thereon with the same legal force and effect as if executed by the Employee.

 

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14.          Employee also agrees that for a period of two (2) years after the Termination Date, Employee will not:

 

a.                                      acquire an interest in or become engage in or employed by, either directly or indirectly, any business or activity which develops, markets or sells transdermal or topical drugs containing tetrahydrocannabinol or cannabidiol, including any prodrugs thereof, anywhere in the world;

 

b.                                      willfully or intentionally interfere with or damage any relationship between Employer and any of its clients, customers, suppliers or consultants; or (except solely after September 30, 2014 with respect to Berkeley Loftin) entice, induce or solicit, directly or indirectly, any then current employee of Employer to leave Employer to work with Employee or any entity with which Employee becomes affiliated.

 

15.          Employee acknowledges and agrees that for so long as she is a stockholder of Employer, she remains bound by the Third Amended and Restated Stockholders Agreement dated May 6, 2014 (the “Stockholder’s Agreement”).  Employee further agrees that for so long as she remains a stockholder of Employer, she shall provide all such cooperation as a stockholder of Employer as Employer may request in order to effect a transaction which has been approved by the Board of Directors of Employer, including, without limitation, the following:

 

a.                                      Public Offering Related Transactions.

 

(i)                                     If Employer plans to engage in any public offering, the Board of Directors may (in its sole discretion), as of immediately prior to such public offering, cause Employer to undertake a transaction (a “Pre-Public Offering Transaction”) pursuant to which (x) Employer and/or any of its subsidiaries will be reorganized, merged, combined, liquidated or similarly restructured to a form that is preferable in the public context (as determined by Employer) and/or (y) stockholders of Employer will receive, or will be required to exchange their shares of capital stock of Employer for the securities to be offered in the public offering.

 

(ii)                                  Employee agrees that, in Employee’s capacity as a stockholder of Employer, Employee shall (x) vote, or grant proxies relating to the shares of capital stock of Employer at the time held by Employee to vote, all of such shares of capital stock in favor of any Pre-

 

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Public Offering Transaction or proposed public offering, if, and solely to the extent that, approval of stockholders of Employer is required in order to effect the Pre-Public Offering Transaction or the proposed public offering, (y) execute and deliver such agreements, instruments and certificates as are required to consummate the Pre-Public Offering Transaction and (z) take such other actions as may be necessary, appropriate or desirable to consummate the Pre-Public Offering Transaction.

 

b.                                      No Other Proxies, Voting or Other Agreements.  Except as may be approved by Employer in writing, Employee shall not grant any proxy or enter into or agree to be bound by any voting trust with respect to any shares of capital stock of Employer other than as set forth in this Agreement nor shall Employee enter into any agreements or arrangements of any kind with any person with respect to any of the shares of capital stock of Employer on terms which conflict with the provisions of this Agreement, including, but not limited to, agreements or arrangements with respect to the acquisition, disposition or voting of shares of Employer’s capital stock inconsistent herewith.  Employee shall not transfer any shares of capital stock of Employer unless and until the transferee has provided Employer with a written agreement, in form and substance satisfactory to Employer, agreeing to be bound by the provisions of this Section.

 

16.          The Employer agrees:

 

a.                                      that Employer will not willfully or intentionally interfere with or damage any relationship between Employee and any of her clients, customers, suppliers or consultants;

 

b.                                      that Employer, by its officers and directors, will not make, publicly or privately, any disparaging remarks or otherwise make statements that would injure the business or reputation of Employee;

 

c.                                       that Employer will not use or authorize others to use the name of Employee in any advertising or publicity material or make any form of representation or statement with regard to the Employee (except as required by any law or regulatory agency) which would constitute an express or implied endorsement by the Employee of any commercial product or service;

 

d.                                      that it acknowledges that, as of the date it executes this Agreement, is aware of no claims against Employee relating to her employment by Employer (or its predecessors in interest), except with respect to claims or potential claims by the National Institutes of Health or any other government,

 

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legal, regulatory or private entity arising out of or relating to the prepayment of funds under NIH Grant number 5RC2DA028984-02, as to which Employer is in the process of addressing;

 

e.                                       that after it terminates the lease at 1122 Oak Hill Drive in Lexington on or about October 31, 2014 (the “Lease Termination Date), provided Employee has made arrangements to enter into a lease for such premises by October 31, 2014, it will transfer, free of charge all of the office and lab equipment currently on the premises (specifically excluding any computer servers and any computers or other hardware not connected to HPLCs and LC/MS/MS equipment) (the “Equipment”) to Employee on an “AS IS” basis and without any warranties whatsoever, as to which Equipment, she assumes all responsibility and liability;

 

f.                                        that if Employee enters into a lease agreement for the Oak Hill Drive space effective on or after the Lease Termination Date, and Employer is notified of such prior to October 31, 2014, Employer will work with the landlord of that space to allow the equipment to remain in place for a reasonable period (not to exceed 60 days) after the Employer vacates the premises until her lease becomes effective; and

 

g.                                       that Employer will provide to the Employee (i) a directory of the folders on the computer servers to which the Employee previously had access no later than October 15, 2014 and will entertain any reasonable request by Employee for any non-confidential materials stored on said servers; and (ii) will use reasonable efforts to locate and provide copies of relevant excerpts from laboratory notebooks relating to Exhibit A within a reasonable time after Employee executes this Agreement.

 

17.          If one or more provisions of this Agreement shall for any reason be held to be unenforceable such provision or provisions may be modified by any appropriate judicial body so that they are valid and/or enforceable.  If any provision is stricken, the remaining provisions of this Agreement shall remain valid and enforceable.

 

18.          This Agreement is the entire agreement between Employee and Employer regarding the termination of Employee’s employment and any other prior agreements between them, with the exception of (a) the Stockholder’s Agreement, (b) the Stock Transfer Agreement entered into contemporaneously with this Agreement, (c) the Patent Assignment Agreement, also entered into contemporaneously, and (d) the side letter agreement entered into contemporaneously, are hereby terminated and shall have no further force and effect.  Employee acknowledges that in executing this Agreement she has not relied upon any representation, statement or promise

 

7

 

made by Employer, other than those explicitly set forth in this Agreement. This Agreement shall be binding upon the Employer and Employee and their successors, heirs and assigns.  Any modification of this Agreement must be made in writing and signed by Employee and Employer.

 

19.          This Agreement shall be governed in all respects by the laws of the State of Delaware without regard to the conflicts of laws principles of any jurisdiction.  Any lawsuit arising from or related to this Agreement shall be brought exclusively before an appropriate state or federal court sitting in Delaware and each party hereby consents to the jurisdiction of any such court.

 

20.          Employee understands that she was given a period of forty-five (45) days to review and consider this Agreement before signing it.  Employee understands that she may use as much of this forty-five (45) day period as she wishes prior to signing.  Because this Agreement includes a waiver and release of claims under the Age Discrimination in Employment Act, federal law provides that Employee may have forty-five (45) days from receipt of the Agreement to review the general release contained herein and the disclosure information attached hereto as Exhibit B (which is provided pursuant to the Older Workers Benefit Protection Act) before executing it.

 

21.          Employee may revoke this Agreement within seven (7) days of her signing it. Revocation can be made by delivering a written notice of revocation to Philip Waggenheim, President, c/o 712 5th Avenue, 22nd floor, New York, NY 10019.  For this revocation to be effective, written notice must be received no later than the close of business on the seventh (7th) day after Employee signs the Agreement.  If Employee revokes this Agreement, it shall not be effective or enforceable and Employee will not receive the payment and benefits described in Section 2(a) herein.

 

22.          Employee acknowledges that she was advised to consult with an attorney before signing this Agreement and she was represented by an attorney in the negotiation of this Agreement.

 

23.          EMPLOYEE ACKNOWLEDGES THAT SHE HAS READ THIS AGREEMENT, UNDERSTANDS IT AND IS VOLUNTARILY ENTERING INTO IT. EMPLOYEE IS HEREBY INSTRUCTED TO READ THIS AGREEMENT CAREFULLY, AS IT CONTAINS A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS.

 

[SIGNATURE PAGE FOLLOWS]

 

8

 

	
Witness:
    	
 
    
	
 
    	
 
    
	
/s/ Audra Stinchcomb
    	
 
    
	
 
    	
 
    
	
Dated:
    	
9/26/14
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
Witness:
    	
 
    
	
 
    	
 
    
	
Zynerba Pharmaceuticals, Inc.
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/ Philip Wagenheim
    	
 
    
	
Title:
    	
President
    	
 
    
	
Dated:
    	
9/26/14
    	
 
    

 

9

 

EXHIBIT A

 

The United States and international patents and applications related to: “Methods and Compositions for Enhancing the Viability of Microneedle Pores” as set forth on the attached.

 

10

 

Microneedles/Cox Inhibitors

 

“Methods and Compositions for Enhancing the Viability Microneedle Pores”

 

 

11

 

EXHIBIT B

 

DISCLOSURE INFORMATION PROVIDED PURSUANT TO THE OLDER WORKERS
 BENEFIT PROTECTION ACT

 

Eligibility Factors and Time Limitations Applicable to
  Eligible Employees for Severance Benefits

 

Alltranz, Inc. (the “Company”) has decided to terminate the employment of a certain number of its employees.  Employees receiving notification of termination of their employment in connection therewith may be eligible to receive certain severance benefits in exchange of (and subject to) the attached General Release.

 

Each selected employee age 40 or over will have at least forty-five (45) days from the employee’s separation date to provide the Company with a fully executed General Release in order to receive severance benefits.  Employees age 40 and over who timely execute and return the General Release will have a period of seven (7) days from the date that the General Release is signed to revoke it by delivering written notice of revocation as provided in the General Release.

 

The job titles and ages of all of the Company Employees affected by the terminations who are, and are not selected for termination are listed below.

 

	
Titles
    	
 
    	
Age
    	
 
    	
Selected
    	
 
    	
Not Selected
    
	
Founder/CSO
    	
 
    	
48
    	
 
    	
X
    	
 
    	
 
    
	
Senior Scientist, Pharmaceutical & Drug   Delivery
    	
 
    	
41
    	
 
    	
 
    	
 
    	
X
    
	
Senior Scientist, Medicinal Chemistry,   Pharmaceutics & Drug Delivery
    	
 
    	
37
    	
 
    	
X
    	
 
    	
 
    
	
Senior Scientist, Drug Design & Discovery
    	
 
    	
54
    	
 
    	
X
    	
 
    	
 
    
	
Global Laboratory Operations Manager &   Senior Scientist
    	
 
    	
41
    	
 
    	
X
    	
 
    	
 
    
	
R&D Operations
    	
 
    	
43
    	
 
    	
X
    	
 
    	
 
    

 

12

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