Exhibit 10.23

Execution Copy

 

EXECUTIVE EMPLOYMENT AGREEMENT

 

THIS EXECUTIVE EMPLOYMENT AGREEMENT (the “Agreement”), is entered into as of
March 9, 2018 (the “Effective Date”) by and between Innovate Biopharmaceuticals,
Inc., a Delaware corporation (the “Company”), and June S. Almenoff, MD, PhD (the
“Executive”).

 

WITNESSETH:

 

WHEREAS, the Company wishes to employ the Executive, and the Executive desires
to accept employment with the Company, upon the terms and conditions of this
Agreement.

 

NOW, THEREFORE, in consideration of the foregoing, of the mutual promises
herein, and of other good and valuable consideration, including the employment
of the Executive by the Company and the compensation to be received by the
Executive from the Company from time to time, and specifically the compensation
to be received by the Executive pursuant to Section 4 hereof, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending
legally to be bound, hereby agree as follows:

 

1.            Employment. As of the Effective Date, the Company hereby employs
the Executive and the Executive hereby accepts employment as the Chief Medical
Officer (“CMO”) and Chief Operating Officer (“COO”) of the Company upon the
terms and conditions of this Agreement. The Executive shall report to the Chief
Executive Officer (“CEO”) of the Company. As of the Effective Date, the parties
agree that the Agreement for Consulting Services dated January 4, 2018, between
the Parties shall terminate.

 

2.            Duties.

 

(a)         The Executive shall faithfully perform all duties of the Company
related to the position or positions held by the Executive, including but not
limited to all duties set forth in this Agreement and/or in the Bylaws of the
Company related to the position or positions held by the Executive and all
additional duties that are prescribed from time to time by the Board or other
designated officers of the Company, such as the CEO and the Executive Chairman
(“EC”). The Executive shall devote the Executive’s full time and attention to
the performance of the Executive’s duties and responsibilities on behalf of the
Company and in furtherance of its best interests; provided, however, that the
Executive, subject to the Executive’s obligations hereunder, shall also be
permitted to make personal investments, perform reasonable volunteer services
and, with the written prior consent of the Company, serve on outside boards of
directors for non-profit or for profit corporations. The Company is aware that
Executive is currently serving on some outside boards, and the Company and
Executive will discuss and agree in writing about whether and on what basis
Executive will continue in such roles. The Executive shall comply with all
written Company policies, standards, rules and regulations (the “Company
Policies”) and all applicable government laws, rules and regulations that are
now or hereafter in effect. The Executive acknowledges receipt of copies of all
written Company Policies that are in effect as of the date of this Agreement.

 

 

 

 

(b)         Executive’s base of operation shall be in the Company’s offices in
Raleigh, North Carolina, subject to reasonable business travel and reasonable
telecommuting.

 

3.            Term. The term of this Agreement shall continue until terminated
by either party as set forth in Section 5 of this Agreement (the “Term”).

 

4.            Compensation. During the Term, as compensation for the services
rendered by the Executive under this Agreement, the Executive shall be entitled
to receive the following (all payments are subject to applicable withholdings):

 

(a)         Base Salary. Executive shall be paid an annual salary in the amount
of $320,000 (less applicable withholdings), which shall be payable in accordance
with the then-current payroll schedule of the Company (the “Base Salary”). The
Executive’s salary will be reviewed periodically and may be increased from time
to time by the Company at its discretion.

 

(b)         Bonuses. Executive shall be eligible to participate in any bonus or
similar incentive plan adopted by the Company as approved by the Board of
Directors (“Board”) for executives at Executive’s level. The amount awarded, if
any, to the Executive under any bonus or incentive plan shall be in the
discretion of the Board or any committee administering such plan. Executive’s
bonus, if any, shall be subject to the terms and conditions of any plan or
program adopted or approved by the Board.

 

(c)         Equity. Executive shall be eligible to participate in any equity
compensation plan or similar program adopted by the Company when approved by the
Board and, if applicable, the Company’s shareholders, for executives at
Executive’s level. The amount awarded, if any, to the Executive under any such
plan shall be in the discretion of the Board or any committee administering such
plan and shall be subject to the terms and conditions of any plan or program
adopted or approved by the Board. Subject to the approval of the appropriate
plan, as noted above, and the approval of the specific grant by the Board, the
Company will make an initial grant to Executive of 700,000 options to purchase
shares of common stock of the Company, priced at fair market value at the time
of grant. Such grant will be effective when made, following approval by the
Board, and shall be subject to terms and conditions to be imposed by the Board
under its plans or programs, which the parties anticipate will include, among
other things: (i) vesting on a monthly basis over a four (4) year period
conditioned upon continued employment with the Company, with 10% of such grant
vesting as of the effective date of such grant; and (ii) all unvested options
will immediately vest in full upon the occurrence of a change in control that
will be defined in the equity plan document that will be developed.

 

(d)         Benefits. The Executive shall be entitled to receive those benefits
provided from time to time to other executive employees of the Company, in
accordance with the terms and conditions of the applicable plan documents;
provided that the Executive meets the eligibility requirements thereof. All such
benefits are subject to amendment or termination from time to time by the
Company without the consent of the Executive or any other employee of the
Company.

 

(e)         Paid Time Off. The Executive shall be entitled to four weeks of paid
time off (“PTO”) to be taken in accordance with the Company’s standard PTO
policies.

 

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(f)          Business Expenses. The Company will reimburse Executive for
reasonable travel, entertainment, and other expenses incurred by Executive in
the furtherance of the performance of Executive’s duties hereunder, in
accordance with the Company’s expense reimbursement policy for senior executives
as in effect from time to time. Provided, however, that the Company will make
the reimbursement only if the corresponding expense is incurred during the term
of this Agreement and the reimbursement is made on or before the last day of the
calendar year following the calendar year in which the expense is incurred, the
amount of expenses eligible for such reimbursement during a calendar year will
not affect the amount of expenses eligible for such reimbursement in another
calendar year, and the right to such reimbursement is not subject to liquidation
or exchange for another benefit from the Company.

 

5.            Termination. This Agreement and the Executive’s employment by the
Company shall or may be terminated, as the case may be, as follows:

 

(a)         Termination by the Executive. The Executive may terminate this
Agreement and Executive’s employment by the Company:

 

(i)             for “Good Reason” (as defined herein). For purposes of this
Agreement, “Good Reason” shall mean, the existence, without the consent of the
Executive, of any of the following events: (A) the Executive’s duties and
responsibilities are substantially reduced or diminished; (B) the Executive’s
base salary is reduced by more than 15% from the level prior to such reduction,
except for an across the board reduction in base salary for all executive
officers (C) the Company materially breaches its obligations under this
Agreement; or (D) the Executive’s place of employment is relocated by more than
50 miles. In addition to any requirements set forth above, in order for any of
the above events to constitute “Good Reason”, the Executive must (X) inform the
Company of the existence of the event within 90 days of the initial existence of
the event, after which date the Company shall have no less than 30 days to cure
the event which otherwise would constitute “Good Reason” hereunder and (Y) the
Executive must terminate employment with the Company for such “Good Reason” no
later than two years after the initial existence of the event which prompted the
Executive’s termination.

 

(ii)            Other than for Good Reason 30 days after notice to the Company.

 

(b)         Termination by the Company. The Company may terminate this Agreement
and the Executive’s employment by the Company upon notice to the Executive (or
personal representative):

 

(i)             at any time and for any reason;

 

(ii)            upon the death of the Executive, in which case this Agreement
shall terminate immediately; provided that, such termination shall not prejudice
any benefits payable to the Executive’s spouse or beneficiaries which are fully
vested as of the date of death;

 

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(iii)           if the Executive is “permanently disabled” (as defined herein),
in which case this Agreement shall terminate immediately; provided that, such
termination shall not prejudice any benefits payable to the Executive, the
Executive’s spouse or beneficiaries which are fully vested as of the date of the
termination of this Agreement. For purposes of this Agreement, the Executive
shall be considered “permanently disabled” when a qualified medical doctor
mutually acceptable to the Company and the Executive or the Executive’s personal
representative shall have certified in writing that: (A) the Executive is
unable, because of a medically determinable physical or mental disability, to
perform substantially all of the Executive’s duties, with or without a
reasonable accommodation, for more than 180 calendar days measured from the last
full day of work; or (B) by reason of mental or physical disability, it is
unlikely that the Executive will be able, within 180 calendar days, to resume
substantially all business duties and responsibilities in which the Executive
was previously engaged and otherwise discharge the Executive’s duties under this
Agreement; or

 

(iv)          "for cause" (as defined herein). “For cause” shall be determined
by the Company and shall mean:

 

A.       Any material breach of the terms of this Agreement by the Executive, or
the material failure of the Executive to diligently perform the Executive’s
duties for the Company or the Executive’s material failure to achieve her
objectives specified by the Board; provided, however, that the Company must
first provide Executive with written notice of the grounds under this Section
5(b)(iv)(A) and a period of ten (10) business days in which to cure such
grounds;

 

B.       The Executive’s unauthorized use of the Company’s tangible or
intangible property (excluding incidental use) or Executive’s breach of the
Proprietary Information Agreement (as defined herein) or any other similar
agreement regarding confidentiality, intellectual property rights,
non-competition or non-solicitation;

 

C.       Any material failure to comply with material Company Policies,
applicable government laws, rules and regulations and/or directives of the
Board;

 

D.       The Executive’s use of illegal drugs or any illegal substance, or the
Executive’s use of alcohol in any manner that materially interferes with the
performance of the Executive’s duties under this Agreement;

 

E.       Any dishonest or illegal action (including, without limitation,
embezzlement) or any other action whether or not dishonest or illegal by the
Executive which is materially detrimental to the interest and well-being of the
Company, including, without limitation, harm to its reputation;

 

F.       The Executive’s failure to fully disclose any material conflict of
interest that the Executive may have with the Company in a transaction between
the Company and any third party which is materially detrimental to the interest
and well-being of the Company; or

 

G.       Any adverse action or omission by the Executive which would be required
to be disclosed pursuant to public securities laws or which would limit the
ability of the Company or any entity affiliated with the Company to sell
securities under any Federal or state law or which would disqualify the Company
or any affiliated entity from any exemption otherwise available to it.

 

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(c)         Obligations of the Company Upon Termination.

 

(i)             Upon the termination of this Agreement: (A) by the Executive
pursuant to paragraph 5(a)(ii); or (B) by the Company pursuant to paragraph
5(b)(ii), (iii), or (iv) the Company shall have no further obligations hereunder
other than the payment of all compensation and other benefits payable to the
Executive through the date of such termination which shall be paid on or before
the Company’s next regularly scheduled payday unless such amount is not
then-calculable, in which case payment shall be made on the first regularly
scheduled payday after the amount is calculable.

 

(ii)            Upon termination of this Agreement: (A) by the Executive
pursuant to paragraph 5(a)(i); or (B) by the Company pursuant to paragraph
5(b)(i) and provided that the Executive first executes and does not revoke a
release and settlement agreement in the form acceptable to the Company within
the time period then-specified by the Company but in any event no later than
sixty (60) days after the date of termination (the “Release”): (1) the Company
shall pay the Executive an amount equal to twelve (12) months of Executive’s
then-current Base Salary (less all applicable deductions) payable in
installments in accordance with the then-current generally applicable payroll
schedule of the Company commencing on the first regularly scheduled pay date of
the Company processed after Executive has executed, delivered to the Company and
not revoked the Release; (2) conditioned on Executive’s proper and timely
election to continue the Company’s health insurance benefits under COBRA, or
under applicable state law, reimbursement of the additional costs incurred by
Executive for continuing such benefits at the same level in which Executive
participated prior to the date Executive’s employment terminated for the shorter
of (a) to twelve (12) months from the date of termination or (b) until the
Executive obtains reasonably comparable coverage, with such reimbursements to
begin at the same time as severance pay set forth in Section 5(c)(ii)(A).

 

(d)         Resignation as Officer and Director. Upon termination of this
Agreement and the Executive’s employment hereunder for any reason by either
party, the Executive shall be deemed to have resigned from all offices and
positions the Executive may hold with the Company at such time including without
limitation Board membership and/or positions as an officer of the Company.

 

6.           Proprietary Information Agreement. The terms of the Proprietary
Information, Inventions, Non-Competition and Non-Solicitation Agreement by and
between the Company and the Executive, entered into simultaneously herewith (the
“Proprietary Information Agreement”) and any other similar agreement regarding
confidentiality, intellectual property rights, non-competition or
non-solicitation between the Company and the Executive, are hereby incorporated
by reference and are a material part of this Agreement.

 

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7.            Representations and Warranties.

 

(a)         The Executive represents and warrants to the Company that the
Executive’s performance of this Agreement and as an employee of the Company does
not and will not breach any noncompetition agreement or any agreement to keep in
confidence proprietary information acquired by the Executive in confidence or in
trust prior to the Executive's employment by the Company. The Executive
represents and warrants to the Company that the Executive has not entered into,
and agrees not to enter into, any agreement that conflicts with or violates this
Agreement.

 

(b)         The Executive represents and warrants to the Company that the
Executive has not brought and shall not bring with the Executive to the Company,
or use in the performance of the Executive's responsibilities for the Company,
any materials or documents of a former employer which are not generally
available to the public or which did not belong to the Executive prior to the
Executive’s employment with the Company, unless the Executive has obtained
written authorization from the former employer or other owner for their
possession and use and provided the Company with a copy thereof.

 

8.            Indemnification.

 

(a)          By the Employee. The Executive shall indemnify and hold harmless
the Company, its directors, officers, stockholders, agents, and employees
against all claims, costs, expenses, liabilities, and lost profits, including
amounts paid in settlement, incurred by any of them as a result of Executive
engaging in actions that constitute Cause under Section 5(b)(iv)B, E, F or G of
this Agreement or the breach by the Executive of any provision of Section 6
and/or 7 of this Agreement.

 

(b)         By the Company. The Company will indemnify and hold harmless the
Executive from any liabilities and expenses arising from Executive’s actions as
an officer, director or employee of the Company to the fullest extent permitted
by law, excepting any unauthorized acts, intentional or illegal conduct which
breaches the terms of this or any other agreement or Company policy, including
but not limited to the Proprietary Information Agreement.

 

9.              Notices. All notices, requests, consents, approvals, and other
communications to, upon, and between the parties shall be in writing and shall
be deemed to have been given, delivered, made, and received when: (a) personally
delivered; (b) deposited for next day delivery by Federal Express, or other
similar overnight courier services; (c) transmitted via telefacsimile or other
similar device to the attention of the Company President with receipt
acknowledged; or (d) three days after being sent or mailed by certified mail,
postage prepaid and return receipt requested, addressed to the Company at 8480
Honeycutt Road, Suite 120, Raleigh, NC 27615, and to the Executive at the
address set forth by the signature page below.

 

10.            Effect. This Agreement may be assigned by the Company to its
successors in interests. This Agreement shall be binding on and inure to the
respective benefit of the Company and its successors and assigns and the
Executive and Executive’s personal representatives.

 

11.            Entire Agreement. This Agreement and the Proprietary Information
Agreement and any other similar agreement regarding confidentiality,
intellectual property rights, non-competition or non-solicitation constitute the
entire agreement between the parties with respect to the matters set forth
herein and supersede all prior agreements and understandings between the parties
with respect to the same.

 

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12.            Severability. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision.

 

13.            Amendment and Waiver. A waiver of any breach of this Agreement
shall not constitute a waiver of any other provision of this Agreement or any
subsequent breach of this Agreement. No provision of this Agreement may be
amended, modified, deleted, or waived in any manner except by a written
agreement executed by the parties.

 

14.            Section 409A Matters. This Agreement is intended to comply with
the requirements of Section 409A of the Internal Revenue Code of 1986, as
amended and the Treasury Regulations and other applicable guidance thereunder
(“Section 409A”). To the extent that there is any ambiguity as to whether this
Agreement (or any of its provisions) contravenes one or more requirements of
Section 409A, such provision shall be interpreted and applied in a matter that
does not result in a Section 409A violation. Without limiting the generality of
the above:

 

(a)         For clarity, the severance benefits specified in this Agreement (the
“Severance Benefits”) are only payable upon a “separation from service” as
defined in Section 409A. The Severance Benefits shall be deemed to be series of
separate payments, with each installment being treated as a separate payment.
The time and form of payment of any compensation may not be deferred or
accelerated to the extent it would result in an impermissible acceleration or
deferral under Section 409A.

 

(b)         To the extent this Agreement contains payments which are subject to
Section 409A (as opposed to exempt from Section 409A), the Executive’s rights to
such payments are not subject to anticipation, alienation, sale, transfer,
pledge, encumbrance, attachment or garnishment and, where applicable, may only
be transferred by will or the laws of descent and distribution.

 

(c)         To the extent the Severance Benefits are intended to be exempt from
Section 409A as a result of an “involuntary separation from service” under
Section 409A, if all conditions necessary to establish the Executive’s
entitlement to such Severance Benefits have been satisfied, all Severance
Benefits shall be paid or provided in full no later than December 31st of the
second calendar year following the calendar year in which the Executive’s
employment terminated unless another time period is applicable.

 

(d)         If the Employee is a “specified employee” (as defined in Section
409A) on the termination date and a delayed payment is required by Section 409A
to avoid a prohibited distribution under Section 409A, then no Severance
Benefits that constitute “non-qualified deferred compensation” under Section
409A shall be paid until the earlier of (i) the first day of the 7th month
following the date of Employee’s “separation from service” as defined in Section
409A, or (ii) the date of Employee’s death. Upon the expiration of the
applicable deferral period, all payments deferred under this clause shall be
paid in a lump sum and any remaining severance benefits shall be paid per the
schedule specified in this Agreement.

 

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(e)         The Company makes no representation that this Agreement will be
exempt from or compliant with Section 409A and makes no affirmative undertaking
to preclude Section 409A from applying, but does reserve the right to
unilaterally amend this Agreement as may be necessary or advisable to permit the
Agreement to be in documentary and operational compliance with Section 409A
which determination will be made in the sole discretion of the Company.

 

15.          Governing Law. This Agreement shall be construed, interpreted, and
governed in accordance with and by North Carolina law and the applicable
provisions of federal law (“Applicable Federal Law”). Any and all claims,
controversies, and causes of action arising out of or relating to this
Agreement, whether sounding in contract, tort, or statute, shall be governed by
the laws of the state of North Carolina, including its statutes of limitations,
except for Applicable Federal Law, without giving effect to any North Carolina
conflict-of-laws rule that would result in the application of the laws of a
different jurisdiction. Both Executive and the Company acknowledge and agree
that the state or federal courts located in North Carolina have personal
jurisdiction over them and over any dispute arising under this Agreement, and
both Executive and the Company irrevocably consent to the jurisdiction of such
courts.

 

16.          Consent to Jurisdiction and Venue. Each of the parties agrees that
any suit, action, or proceeding arising out of this Agreement may be instituted
against it in the state or federal courts located in Wake County, North
Carolina. Each of the parties hereby waives any objection that it may have to
the venue of any such suit, action, or proceeding, and each of the parties
hereby irrevocably consents to the personal jurisdiction of any such court in
any such suit, action, or proceeding.

 

17.          Counterparts. This Agreement may be executed in more than one
counterpart, each of which shall be deemed an original, and all of which shall
be deemed a single agreement.

 

18.          Headings. The headings herein are for convenience only and shall
not affect the interpretation of this Agreement.

 

[The remainder of this page is intentionally left blank.]

 

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

 

  COMPANY:       Innovate Biopharmaceuticals, InC.       By: /s/ Christopher
Prior       June S. Almenoff, MD, PhD       /s/ June S. Almenoff       Address:

 

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