Exhibit 10.2

EXECUTIVE EMPLOYMENT AGREEMENT

for

JONATHAN G. DRACHMAN, MD

This Executive Employment Agreement (the “Agreement”), made between Aquinox
Pharmaceuticals, Inc., a Delaware corporation (the “Company”), and Jonathan G.
Drachman, MD (the “Executive” and, collectively with the Company, the
“Parties”), is entered into as of August 5, 2019, to be effective as of the
Effective Date (as defined below).

WHEREAS, Executive is the Chief Executive Officer of Neoleukin
Therapeutics, Inc. (“Neoleukin”);

WHEREAS, the Company is entering into an Agreement and Plan of Merger with
Neoleukin (the “Merger Agreement”), pursuant to which the Company will acquire
Neoleukin pursuant to a merger (the “Merger”) of a wholly owned subsidiary of
the Company with and into Neoleukin, with Neoleukin surviving the Merger;

WHEREAS, the Company desires for Executive to provide services to the Company
following the closing of the Merger (the “Closing”, and the date of the closing,
the “Effective Date”), and wishes to provide Executive with certain compensation
and benefits in return for such employment services; and

WHEREAS, Executive wishes to be employed by the Company and to provide personal
services to the Company in return for certain compensation and benefits.

NOW, THEREFORE, in consideration of the mutual promises and covenants contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Parties hereto agree as
follows:

1. Employment by the Company.

1.1 Employment. This Agreement shall govern the terms of Executive’s employment
with the Company, effective as of the Effective Date; provided that this
Agreement shall automatically terminate and shall have no force or effect if the
Merger Agreement is terminated in accordance with its terms and the Closing does
not occur.

1.2 Position. Executive shall serve as the Company’s Chief Executive Officer.
During the term of Executive’s employment with the Company, Executive will
devote Executive’s best efforts and substantially all of Executive’s business
time and attention to the business of the Company.

1.2 Duties and Location. Executive shall perform such duties as are typically
performed by a Chief Executive Officer. Executive will report to the Company’s
Board of Directors. Executive’s primary office location shall be the Company’s
office located in Seattle, Washington.

 

1.

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1.3 Policies and Procedures. The employment relationship between the Parties
shall be governed by the general employment policies and practices of the
Company, except that when the terms of this Agreement differ from or are in
conflict with the Company’s general employment policies or practices, this
Agreement shall control.

2. Compensation.

2.1 Salary. For services to be rendered hereunder, Executive shall receive a
base salary at the rate of Three Hundred and Fifty Thousand U.S. Dollars
($350,000) per year (such base salary, as may be increased (but decreased) from
time to time, the “Base Salary”), subject to standard payroll deductions and
withholdings and payable in accordance with the Company’s regular payroll
schedule.

2.2 Bonus. Executive will be eligible for an annual discretionary bonus of up to
50% of Executive’s Base Salary (the “Annual Bonus”). Whether Executive receives
an Annual Bonus for any given year, and the amount of any such Annual Bonus,
will be determined by the Company’s Board of Directors (the “Board”) in its sole
discretion based upon the Company’s and Executive’s achievement of objectives
and milestones to be determined on an annual basis by the Board. Annual Bonuses
are typically paid no later than March 15th of the year following the applicable
bonus year. Executive will not be eligible for, and will not earn, any Annual
Bonus (including a prorated bonus) if Executive’s employment terminates for any
reason before any Annual Bonus is paid, except as otherwise expressly provided
in Section 6.2 or Section 6.3 below.

3. Standard Company Benefits. Executive shall be entitled to participate in all
employee benefit programs for which Executive is eligible under the terms and
conditions of the benefit plans that may be in effect from time to time and
provided by the Company to its employees.

4. Expenses. The Company will reimburse Executive for reasonable travel,
entertainment or other expenses incurred by Executive in furtherance or in
connection with the performance of Executive’s duties hereunder, in accordance
with the Company’s expense reimbursement policy as in effect from time to time.

5. Equity. On or as soon as practicable following the Effective Date, as an
inducement to enter into this Agreement, the Company will grant Executive an
option (the “Stock Option”) to purchase 1,650,000 shares of the Company’s common
stock with a per-share exercise price equal to the fair market value of a share
of the Company’s common stock on the date of grant, as determined by the Board.
1/4 of the shares underlying the Stock Option will vest and become exercisable
on the one-year anniversary of the grant date, and 1/48th of the shares
underlying the Stock Option will vest and become exercisable on a monthly basis
thereafter, such that 100% of the shares underlying the Stock Option shall be
vested and exercisable as of the four-year anniversary of the grant date, in
each case so long as Executive remains employed by the Company through each
applicable vesting date. The Stock Option will be subject to terms and
conditions consistent with those provided in the Company’s 2014 Equity Incentive
Plan, and will be governed in all respects by the terms of the stock option
agreement to be entered into between Executive and the Company. Further details
regarding the Stock Option will be provided to Executive upon approval of such
grant by the Board.

 

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6. Termination of Employment; Severance.

6.1 At-Will Employment. Executive’s employment relationship is at-will. Either
Executive or the Company may terminate the employment relationship at any time,
with or without Cause or advance notice. In the event Executive’s employment
relationship is terminated for any reason, Executive shall be entitled to
receive Executive’s earned but unpaid Base Salary, unreimbursed business
expenses properly incurred by Executive pursuant to Section 4 and any other
compensation or benefit earned by or owed to (but not yet paid to) Executive
through and including the date of termination, payable in a lump sum on the next
regularly scheduled payroll date following the date on which Executive’s
employment terminated, or at such other date as shall be specified under the
terms of the employee benefit plan pursuant to which such compensation or
benefit is payable.

6.2 Severance Benefits for Termination Without Cause or Resignation with Good
Reason Unrelated to a Change of Control. In the event Executive’s employment
with the Company is terminated by the Company without Cause or Executive resigns
for Good Reason prior to a Change of Control (as defined below) or more than
twelve (12) months following a Change of Control, provided that Executive
remains in compliance with the terms of this Agreement and subject to Section 7
below, the Company shall provide Executive with the following severance
benefits:

(i) The Company shall pay Executive, as severance, the equivalent of nine
(9) months of Executive’s Base Salary in effect as of the date of Executive’s
employment termination. This severance will be paid in the form of salary
continuation, payable on the Company’s regular payroll dates, subject to
standard payroll deductions and withholdings, starting on the 60th day after
Executive’s termination date, with the first payment to include those payments
that would have occurred earlier but for the 60-day delay.

(ii) Provided that Executive is then eligible for and timely elects continued
coverage under COBRA, the Company shall pay Executive’s COBRA premiums to
continue Executive’s coverage (including coverage for eligible dependents, if
applicable) through the period starting on Executive’s termination date and
ending on the earliest to occur of: (a) nine (9) months following Executive’s
termination date; (b) the date Executive becomes eligible for group health
insurance coverage through a new employer; or (c) the date Executive ceases to
be eligible for COBRA continuation coverage for any reason, including plan
termination. In the event Executive becomes covered under another employer’s
group health plan or otherwise ceases to be eligible for COBRA during this time
period, Executive must immediately notify the Company of such event.
Notwithstanding the foregoing, if the Company determines, in its sole
discretion, that it cannot pay the COBRA premiums without a substantial risk of
violating applicable law, the Company instead shall pay to Executive, on the
first day of each calendar month, a fully taxable cash payment equal to the
applicable COBRA premiums for that month, subject to applicable tax
withholdings, for the remainder of the COBRA premium period. Executive may, but
is not obligated to, use such payments toward the cost of COBRA premiums.

 

3.

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(iii) The Company shall pay Executive an amount equal to one year of bonus pay,
to be calculated at target, pro-rated based on the portion of the plan year
elapsed as of the date of termination, payable in a lump sum, less deductions
and withholdings, at the same time as the first severance payment in
Section 6.2(i) above.

(iv) The unvested equity-based incentive compensation awards then held by
Executive that would have vested and become exercisable in the twelve (12) month
period immediately following the date of termination shall be accelerated and
shall be deemed immediately vested and exercisable as of Executive’s last day of
employment; provided that, in the case of any unvested equity-based incentive
compensation awards that are subject to performance-based vesting terms as of
the date of such termination (whether prior to or following a Change in
Control), the treatment of such performance-based vesting conditions shall be
governed by the applicable equity plan and award agreement.

6.3 Severance Benefits for Termination Without Cause or Resignation with Good
Reason Related to a Change of Control. In the event Executive’s employment with
the Company is terminated by the Company without Cause or Executive resigns for
Good Reason during the twelve (12) month period immediately following a Change
of Control, and provided that Executive remains in compliance with the terms of
this Agreement and subject to Section 7 below, the Company shall provide
Executive with the following severance benefits:

(i) The Company shall pay Executive, as severance, the equivalent of twelve
(12) months of Executive’s base salary in effect as of the date of Executive’s
employment termination. This severance will be paid in the form of salary
continuation, payable on the Company’s regular payroll dates, subject to
standard payroll deductions and withholdings, starting on the 60th day after
Executive’s termination date, with the first payment to include those payments
that would have occurred earlier but for the 60-day delay.

(ii) Provided that Executive is then eligible for and timely elects continued
coverage under COBRA, the Company shall pay Executive’s COBRA premiums to
continue Executive’s coverage (including coverage for eligible dependents, if
applicable) through the period starting on Executive’s termination date and
ending on the earliest to occur of: (a) twelve (12) months following Executive’s
termination date; (b) the date Executive becomes eligible for group health
insurance coverage through a new employer; or (c) the date Executive ceases to
be eligible for COBRA continuation coverage for any reason, including plan
termination. In the event Executive becomes covered under another employer’s
group health plan or otherwise ceases to be eligible for COBRA during this time
period, Executive must immediately notify the Company of such event.
Notwithstanding the foregoing, if the Company determines, in its sole
discretion, that it cannot pay the COBRA premiums without a substantial risk of
violating applicable

 

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law, the Company instead shall pay to Executive, on the first day of each
calendar month, a fully taxable cash payment equal to the applicable COBRA
premiums for that month, subject to applicable tax withholdings, for the
remainder of the COBRA premium period. Executive may, but is not obligated to,
use such payments toward the cost of COBRA premiums.

(iii) The Company shall pay Executive an amount equal to one year of bonus pay,
to be calculated at target, payable in a lump sum, less deductions and
withholdings, at the same time as the first severance payment in Section 6.3(i)
above. For the avoidance of doubt, the amount payable pursuant to this
Section 6.3(iii) shall not be subject to proration based on the portion of the
year elapsed as of the date of termination.

(iv) The vesting of all unvested equity-based incentive compensation awards then
held by Executive shall be accelerated such 100% of the shares underlying such
awards shall be deemed immediately vested and exercisable; provided that, in the
case of any unvested equity-based incentive compensation awards that are subject
to performance-based vesting terms as of the date of such termination, the
treatment of such performance-based vesting conditions shall be governed by the
applicable equity plan and award agreement.

6.4 Termination for Cause; Resignation Without Good Reason; Death or Disability.

(i) If Executive resigns without Good Reason or the Company terminates
Executive’s employment for Cause, Executive shall not be entitled to receive any
payments or benefits under this Agreement, other than as set forth in
Section 6.1. In addition, Executive shall resign from all positions and
terminate any relationships as an employee, advisor, officer or director with
the Company and any of its affiliates, each effective on the date of
termination.

(ii) Executive’s employment shall terminate automatically upon the death or
Total Disability of Executive. “Total Disability” shall mean Executive’s
inability, with reasonable accommodation, to perform the duties of his position
for a period or periods aggregating ninety (90) calendar days in any period of
one hundred eighty days (180) consecutive days as a result of physical or mental
illness, loss of legal capacity or any other cause beyond Executive’s control.
Executive and the Company hereby acknowledge that Executive’s ability to perform
the duties specified in Section 1 is the essence of this Agreement. Termination
hereunder shall be deemed to be effective (a) at the end of the calendar month
in which Executive’s death occurs or (b) immediately upon a determination by the
Board (or the Compensation Committee thereof) of Executive’s Total Disability.
In the case of termination of employment under this Section 6.3(ii), Executive
shall not be entitled to receive any payments or benefits under this Agreement,
other than as set forth in Section 6.1.

7. Conditions to Receipt of Severance Benefits. The receipt of the severance
benefits set forth in Section 6.2 and Section 6.3 above will be subject to
Executive signing and not revoking a separation agreement and release of claims
in a form reasonably satisfactory to the Company (the “Separation Agreement”) no
later than 60

 

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days following the date of termination. No severance benefits will be paid or
provided unless and until the Separation Agreement becomes effective. Executive
shall also resign from all positions and terminate any relationships as an
employee, advisor, officer or director with the Company and any of its
affiliates, each effective on the date of termination.

8. Section 409A. It is intended that all of the severance benefits and other
payments payable under this Agreement satisfy, to the greatest extent possible,
the exemptions from the application of Code Section 409A provided under Treasury
Regulations 1.409A-1(b)(4), 1.409A-1(b)(5) and 1.409A-1(b)(9), and this
Agreement will be construed to the greatest extent possible as consistent with
those provisions, and to the extent no so exempt, this Agreement (and any
definitions hereunder) will be construed in a manner that complies with
Section 409A. All payments and benefits that are payable upon a termination of
employment hereunder shall be paid or provided only upon the Executive’s
“separation from service” from the Company (within the meaning of Code
Section 409A). For purposes of Code Section 409A (including, without limitation,
for purposes of Treasury Regulation Section 1.409A-2(b)(2)(iii)), Executive’s
right to receive any installment payments under this Agreement (whether
severance payments, reimbursements or otherwise) shall be treated as a right to
receive a series of separate payments and, accordingly, each installment payment
hereunder shall at all times be considered a separate and distinct payment.
Notwithstanding any provision to the contrary in this Agreement, if Executive is
deemed by the Company at the time of Executive’s termination to be a “specified
employee” for purposes of Code Section 409A(a)(2)(B)(i), and if any of the
payments upon termination set forth herein and/or under any other agreement with
the Company are deemed to be “deferred compensation”, then to the extent delayed
commencement of any portion of such payments is required in order to avoid a
prohibited distribution under Code Section 409A(a)(2)(B)(i) and the related
adverse taxation under Section 409A, such payments shall not be provided to
Executive prior to the earliest of (i) the expiration of the six-month period
measured from the date of Executive’s termination with the Company, (ii) the
date of Executive’s death or (iii) such earlier date as permitted under
Section 409A without the imposition of adverse taxation. Upon the first business
day following the expiration of such applicable Code Section 409A(a)(2)(B)(i)
period, all payments deferred pursuant to this Paragraph shall be paid in a lump
sum to Executive, and any remaining payments due shall be paid as otherwise
provided herein or in the applicable agreement. No interest shall be due on any
amounts so deferred.

9. Definitions.

9.1 Cause. For purposes of this Agreement, “Cause” for termination will mean:
(a) a material breach of any of Executive’s obligations or duties pursuant to
this Agreement, which remains uncured seven days after Executive becomes aware
of the breach by formal written notification by the Company; (b) gross
negligence or willful misconduct in the course of employment; (c) any action or
activity that is contrary to applicable insider trading rules or any other
applicable securities rules or legislation; or (d) a material act or omission
involving substantial dishonesty or fraud that harms or would reasonably be
expected to harm the Company.

 

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9.2 Good Reason. For purposes of this Agreement, Executive shall have “Good
Reason” for resignation from employment with the Company if any of the following
actions are taken by the Company without Executive’s prior written consent:
(a) any material and adverse change to Executive’s position, authority,
responsibilities, or job location in effect under this Agreement; (b) any
material reduction in base salary or bonus opportunity as provided under this
Agreement; (c) an assignment to Executive of any duties materially inconsistent
with Executive’s status as Chief Executive Officer; or (d) any failure to secure
the agreement of any successor entity to fully assume the Company’s obligations
under this Agreement. In order to resign for Good Reason, Executive must provide
written notice to the Board within 60 days after the first occurrence of the
event giving rise to Good Reason setting forth the basis for Executive’s
resignation, allow the Company at least 30 days from receipt of such written
notice to cure such event, and if such event is not reasonably cured within such
period, Executive must resign from all positions Executive then holds with the
Company not later than 90 days after the expiration of the cure period.

9.3 Change of Control. For purposes of this Agreement, “Change of Control” means
the occurrence of one or more of the following: (a) a merger, a consolidation, a
reorganization or an arrangement that results in a transfer of more than fifty
percent (50%) of the total voting power of the Company’s outstanding securities
to a person or a group of persons different from a person or a group of persons
holding those securities immediately prior to such transaction (other than the
Company or a person that directly or indirectly controls, is controlled by, or
is under common control with, the Company); (b) a direct or indirect sale or
other transfer of beneficial ownership of securities of the Company possessing
more than fifty percent (50%) of the total combined voting power of the
Company’s outstanding securities to a person or a group of persons different
from a person or a group of persons holding those securities immediately prior
to such transaction (other than the Company or a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Company); (c) a direct or indirect sale or other transfer of the right to
appoint more than fifty percent (50%) of the directors of the Board or otherwise
directly or indirectly control the management, affairs and business of the
Company to a person or a group of persons different from a person or a group of
persons holding this right immediately prior to such transaction (other than the
Company or a person that directly or indirectly controls, is controlled by, or
is under common control with, the Company); (d) a direct or indirect sale or
other transfer of all or substantially all of the assets of the Company to a
person or a group of persons different from a person or a group of persons
holding those assets immediately prior to such transaction (other than the
Company or a person that directly or indirectly controls, is controlled by, or
is under common control with, the Company); or (e) a complete liquidation,
dissolution or winding-up of the Company; provided, however, that a Change in
Control will not be deemed to have occurred if such Change in Control results
solely from the issuance, in connection with a bona fide financing or series of
financings by the Company, of voting securities of the Company or any rights to
acquire voting securities of the Company which are convertible into voting
securities.

 

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10. Proprietary Information Obligations. As a condition of employment, Executive
has previously executed and shall continue to abide by the Company’s standard
form of Confidential Information, Invention Assignment Agreement (the
“Confidentiality Agreement”).

11. Outside Activities During Employment.

11.1 Non-Company Business. Except with the prior written consent of the Board,
Executive will not during the term of Executive’s employment with the Company
undertake or engage in any other employment, occupation or business enterprise,
other than ones in which Executive is a passive investor. Executive may engage
in civic and not-for-profit activities so long as such activities do not
materially interfere with the performance of Executive’s duties hereunder.

11.2 No Adverse Interests. Executive agrees not to acquire, assume or
participate in, directly or indirectly, any position, investment or interest
known to be adverse or antagonistic to the Company, its business or prospects,
financial or otherwise.

12. Dispute Resolution. To ensure the timely and economical resolution of
disputes that may arise in connection with Executive’s employment with the
Company, Executive and the Company agree that any and all disputes, claims, or
causes of action arising from or relating to the enforcement, breach,
performance, negotiation, execution, or interpretation of this Agreement,
Executive’s employment, or the termination of Executive’s employment, including
but not limited to statutory claims, shall be resolved to the fullest extent
permitted by law by final, binding and confidential arbitration, by a single
arbitrator, in Seattle, Washington conducted by JAMS, Inc. (“JAMS”) under the
then applicable JAMS rules or by another arbitration company if mutually agreed
upon by Executive and Board. By agreeing to this arbitration procedure, both
Executive and the Company waive the right to resolve any such dispute through a
trial by jury or judge or administrative proceeding. The Company acknowledges
that Executive will have the right to be represented by legal counsel at any
arbitration proceeding. The arbitrator shall: (a) have the authority to compel
adequate discovery for the resolution of the dispute and to award such relief as
would otherwise be permitted by law; and (b) issue a written arbitration
decision, to include the arbitrator’s essential findings and conclusions and a
statement of the award. The arbitrator shall be authorized to award any or all
remedies that Executive or the Company would be entitled to seek in a court of
law. The Company shall pay all JAMS’ arbitration fees in excess of the amount of
court fees that would be required of Executive if the dispute were decided in a
court of law. Nothing in this Agreement is intended to prevent either Executive
or the Company from obtaining injunctive relief in court to prevent irreparable
harm pending the conclusion of any such arbitration. Any awards or orders in
such arbitrations may be entered and enforced as judgments in the federal and
state courts of any competent jurisdiction.

 

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13. General Provisions.

13.1 Notices. Any notices provided must be in writing and will be deemed
effective upon the earlier of personal delivery (including personal delivery by
fax) or the next day after sending by overnight carrier, to the Company at its
primary office location and to Executive at the address as listed on the Company
payroll.

13.2 Severability. Whenever possible, each provision of this Agreement will be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction to the extent possible in
keeping with the intent of the parties.

13.3 Waiver. Any waiver of any breach of any provisions of this Agreement must
be in writing to be effective, and it shall not thereby be deemed to have waived
any preceding or succeeding breach of the same or any other provision of this
Agreement.

13.4 Complete Agreement. This Agreement, together with the Confidentiality
Agreement, constitutes the entire agreement between Executive and the Company
with regard to this subject matter and is the complete, final, and exclusive
embodiment of the Parties’ agreement with regard to this subject matter. This
Agreement is entered into without reliance on any promise or representation,
written or oral, other than those expressly contained herein, and it supersedes
any other such promises, warranties or representations. It is entered into
without reliance on any promise or representation other than those expressly
contained herein, and it cannot be modified or amended except in a writing
signed by a duly authorized officer of the Company.

13.5 Counterparts. This Agreement may be executed in separate counterparts, any
one of which need not contain signatures of more than one party, but all of
which taken together will constitute one and the same Agreement.

13.6 Headings. The headings of the paragraphs hereof are inserted for
convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.

13.7 Successors and Assigns. This Agreement is intended to bind and inure to the
benefit of and be enforceable by Executive and the Company, and their respective
successors, assigns, heirs, executors and administrators, except that Executive
may not assign any of his duties hereunder and he may not assign any of his
rights hereunder without the written consent of the Company, which shall not be
withheld unreasonably.

 

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13.8 Tax Withholding and Indemnification. All payments and awards contemplated
or made pursuant to this Agreement will be subject to withholdings of applicable
taxes in compliance with all relevant laws and regulations of all appropriate
government authorities. Executive acknowledges and agrees that the Company has
neither made any assurances nor any guarantees concerning the tax treatment of
any payments or awards contemplated by or made pursuant to this Agreement.
Executive has had the opportunity to retain a tax and financial advisor and
fully understands the tax and economic consequences of all payments and awards
made pursuant to the Agreement.

13.9 Choice of Law. All questions concerning the construction, validity and
interpretation of this Agreement will be governed by the laws of the State of
Washington.

[Remainder of Page Intentionally Left Blank]

 

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IN WITNESS WHEREOF, the Parties have executed this Agreement on the day and year
first written above.

 

AQUINOX PHARMACEUTICALS, INC, INC. By:  

/s/ Kamran Alam

Name:   Kamran Alam Title:   Chief Financial Officer JONATHAN G. DRACHMAN, MD

/s/ Jonathan G. Drachman, M.D.

[Signature Page to J. Drachman Employment Agreement]