Exhibit 10.24

 

INNOVATE BIOPHARMACEUTICALS, INC.

 

NON-EMPLOYEE DIRECTOR COMPENSATION POLICY

 

February 22, 2018

 

Non-employee members of the board of directors (the “Board”) of Innovate
Biopharmaceuticals, Inc. (the “Company”) shall be eligible to receive cash and
equity compensation as set forth in this Non-Employee Director Compensation
Policy (this “Policy”). The cash and equity compensation described in this
Policy shall be paid or be made, as applicable, automatically and without
further action of the Board, to each member of the Board who is not an employee
of the Company or any parent or subsidiary of the Company (each, a “Non-Employee
Director”), who may be eligible to receive such cash or equity compensation,
unless such Non-Employee Director declines the receipt of such cash or equity
compensation by written notice to the Company. This Policy shall become
effective on the date hereof (the “Effective Date”) and shall remain in effect
until it is revised or rescinded by further action of the Board. This Policy may
be amended, modified or terminated by the Board at any time in its sole
discretion. The terms and conditions of this Policy shall supersede any prior
cash and/or equity compensation arrangements for service as a member of the
Board between the Company and any of its Non-Employee Directors and between any
subsidiary of the Company and any of its non-employee directors.

 

1. Cash Compensation.

 

(a) Annual Retainers. Each Non-Employee Director shall receive an annual
retainer of $40,000 for service on the Board.

 

(b) Additional Annual Retainers. In addition, a Non-Employee Director shall
receive the following annual retainers:

 

(i) Chairman of the Board. A Non-Employee Director serving as Chairman of the
Board shall receive an additional annual retainer of $35,000 for such service.

 

(ii) Audit Committee. A Non-Employee Director serving as Chairperson of the
Audit Committee shall receive an additional annual retainer of $25,000 for such
service. A Non-Employee Director serving as a member of the Audit Committee
(other than the Chairperson) shall receive an additional annual retainer of
$7,500 for such service.

 

(iii) Compensation Committee. A Non-Employee Director serving as Chairperson of
the Compensation Committee shall receive an additional annual retainer of
$15,000 for such service. A Non-Employee Director serving as a member of the
Compensation Committee (other than the Chairperson) shall receive an additional
annual retainer of $7,500 for such service.

 

(iv) Nominating and Corporate Governance Committee. A Non-Employee Director
serving as Chairperson of the Nominating and Corporate Governance Committee
shall receive an additional annual retainer of $15,000 for such service. A
Non-Employee Director serving as a member of the Nominating and Corporate
Governance Committee (other than the Chairperson) shall receive an additional
annual retainer of $7,500 for such service.

 

(c) Payment of Retainers. The annual retainers described in Sections 1(a) and
1(b) shall be earned on a quarterly basis based on a calendar quarter and shall
be due and payable as soon as practicable after the first day of the quarter in
which such services are to be rendered (i.e., as soon as practicable after
January 1, April 1, July 1 and October 1). In the event a Non-Employee Director
is appointed or elected during the course of any quarter, such Non-Employee
Director shall receive a prorated portion of the retainer(s) otherwise payable
to such Non-Employee Director for such calendar quarter pursuant to Sections
1(a) and 1(b), with such prorated portion determined by multiplying such
otherwise payable retainer(s) by a fraction, the numerator of which is the
number of days during which the Non-Employee Director serves as a Non-Employee
Director or in the applicable positions described in Section 1(b) during the
applicable calendar quarter and the denominator of which is the number of days
in the applicable calendar quarter.

 

   

 

 

2. Equity Compensation. Non-Employee Directors shall be granted the equity
awards described below. The awards described below shall be granted under and
shall be subject to the terms and provisions of any applicable Company equity
incentive plan then-maintained by the Company (the “Equity Plan”) and shall be
granted subject to the execution and delivery of award agreements, including
attached exhibits, in substantially the forms previously approved by the Board.
All applicable terms of the Equity Plan apply to this Policy as if fully set
forth herein, and all equity grants hereunder are subject in all respects to the
terms of the Equity Plan. Notwithstanding anything else to the contrary herein,
awards shall only be made pursuant to this policy if there are sufficient
authorized but unissued shares reserved under the Equity Plan for such awards.
If there are not sufficient authorized but unissued shares so reserved, the
awards shall be made as soon as reasonably practicable after a sufficient number
of additional shares become available under the Equity Plan for such awards.

 

(a) Annual Awards. A Non-Employee Director who (i) serves on the Board as of the
date of any annual meeting of the Company’s stockholders (an “Annual Meeting”)
after the Effective Date and (ii) will continue to serve as a Non-Employee
Director immediately following such Annual Meeting shall be automatically
granted, on the date of such Annual Meeting, an option to purchase the number of
shares of the Company’s common stock (at a per-share exercise price equal to the
closing price per share of the Company’s common stock on the date of such annual
meeting (or on the last preceding trading day if the date of the annual meeting
is not a trading day) that have an aggregate fair value on the date of grant of
$75,000 (or in the case of the Chairman of the Board, $125,000) (as determined
in accordance with ASC 718) (with the number of shares of Common Stock
underlying each such award subject to adjustment as provided in the Equity
Plan). At such Non-Employee Director’s written election at least 30 days prior
to the date of grant, such grant may instead be in the form of restricted stock
units of the Company having equivalent value (using the Black Scholes valuation
methodology) to the value of the annual award to be paid. Any such election will
remain in effect until revoked by such Non-Employee Director, provided that any
such revocation is made at least 30 days prior to the date of grant. The awards
described in this Section 2(a) shall be referred to as the “Annual Awards.” For
the avoidance of doubt, a Non-Employee Director elected for the first time to
the Board at an Annual Meeting shall only receive an Annual Award in connection
with such election, and shall not receive any Initial Award (as defined below)
on the date of such Annual Meeting as well.

 

(b) Initial Awards. Except as otherwise determined by the Board, each
Non-Employee Director who is initially elected or appointed to the Board on any
date other than the date of an Annual Meeting (including directors appointed to
the Board in connection with the consummation of the Company’s reverse merger
transaction on January 29, 2018, to the extent such individual has not been
previously granted an award in anticipation of Board service) shall be
automatically granted, on the date of such Non-Employee Director’s initial
election or appointment (such Non-Employee Director’s “Start Date”), an option
to purchase shares of the Company’s common stock (at a per-share exercise price
equal to the closing price per share of the Company’s common stock on the date
of such election or appointment (or on the last preceding trading day if such
date is not a trading day) that have an aggregate fair value on such
Non-Employee Director’s Start Date equal to the product of (i) $75,000 (or in
the case of the Chairman of the Board, $125,000) (as determined in accordance
with ASC 718), and (ii) a fraction, the numerator of which is (x) 365 minus (y)
the number of days in the period beginning on the date of the Annual Meeting
immediately preceding such Non-Employee Director’s Start Date and ending on such
Non-Employee Director’s Start Date (or, with respect to Initial Awards granted
to directors appointed to the Board in connection with the consummation of the
Company’s reverse merger transaction on January 29, 2018, zero) and the
denominator of which is 365 (with the number of shares of Common Stock
underlying each such award subject to adjustment as provided in the Equity
Plan). At such Non-Employee Director’s written election before the date of
grant, such grant may instead be in the form of restricted stock units of the
Company having equivalent value (using the Black Scholes valuation methodology)
to the value of the annual award to be paid. The awards described in this
Section 2(b) shall be referred to as “Initial Awards.”  For the avoidance of
doubt, no Non-Employee Director shall be granted more than one Initial Award.

 

(c) Termination of Service of Employee Directors. Members of the Board who are
employees of the Company or any parent or subsidiary of the Company who
subsequently terminate their service with the Company and any parent or
subsidiary of the Company and remain on the Board will not receive an Initial
Award pursuant to Section 2(b) above, but to the extent that they are otherwise
eligible, will be eligible to receive, after termination from service with the
Company and any parent or subsidiary of the Company, Annual Awards as described
in Section 2(a) above.

 

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(d) Vesting of Awards Granted to Non-Employee Directors. Each Initial Award
shall vest in full on the date that is the one year anniversary of the date of
grant. Each Annual Award shall vest and become exercisable in 12 equal monthly
installments, such that each such award shall be fully vested and exercisable on
the first anniversary of the date of grant. In all cases, vesting shall be
subject to the Non-Employee Director’s continued service on the Board as a
Non-Employee Director through each applicable vesting date. No portion of an
Annual Award or Initial Award that is unvested or unexercisable at the time of a
Non-Employee Director’s termination of service on the Board as a Non-Employee
Director shall become vested and exercisable thereafter. All of a Non-Employee
Director’s Annual Awards and Initial Awards shall vest in full immediately prior
to the occurrence of a Change in Control (as defined in the Equity Plan), to the
extent outstanding at such time.

  

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