Exhibit 10.1

SOLENO THERAPEUTICS, INC.

EMPLOYMENT AGREEMENT

This Employment Agreement (the “Agreement”) is entered into effective as of
November 11, 2020, (the “Effective Date”) by and between Soleno Therapeutics,
Inc. (the “Company”), and James Mackaness (“Executive”).

1.    Duties and Scope of Employment.

(a)    Positions and Duties. This employment agreement between the Executive and
the Company will commence on the Effective Date, as defined above. Executive
will serve as Chief Financial Officer of the Company. Executive will render such
business and professional services in the performance of his duties, consistent
with Executive’s position within the Company, as will reasonably be assigned to
him by the Company’s CEO. The CEO may modify Executive’s job title and duties as
it deems necessary and appropriate in light of the Company’s needs and interests
from time to time. The period of Executive’s employment under this Agreement is
referred to herein as the “Employment Term.”

(b)    Obligations. During the Employment Term, Executive will perform his
duties faithfully and to the best of his ability and will devote substantially
all of Executive’s business efforts and time to the Company. For the duration of
the Employment Term, Executive agrees not to actively engage in any other
employment, occupation or consulting activity for any direct or indirect
remuneration that would impact in any material respect Executive’s ability to
perform Executive’s duties and obligations hereunder.

2.    At-Will Employment. The parties agree that Executive’s employment with the
Company will be “at-will” employment and may be terminated at any time with or
without Cause or notice. Executive understands and agrees that neither his job
performance nor promotions, commendations, bonuses or the like from the Company
give rise to or in any way serve as the basis for modification, amendment, or
extension, by implication or otherwise, of his employment with the Company.
However, as described in this Agreement, Executive may be entitled to severance
benefits depending on the circumstances of Executive’s termination of employment
with the Company.

3.    Term of Agreement. This Agreement will have a term running from the
Effective Date through the first anniversary of the Effective Date (the “Initial
Term”). On the first anniversary of the Effective Date, this Agreement will
renew automatically for additional one (1) year terms (each an “Additional
Term”), unless either party provides the other party with written notice of
non-renewal at least thirty (30) days prior to the date of automatic renewal. If
Executive becomes entitled to benefits under Section 8 during the term of this
Agreement, the Agreement will not terminate until all of the obligations of the
parties hereto with respect to this Agreement have been satisfied.

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4.    Compensation.

(a)    Base Salary. Commencing on the Effective Date, the Company will pay
Executive an annual salary of $350,000 as compensation for his services (the
“Base Salary”). The Base Salary will be paid periodically in accordance with the
Company’s normal payroll practices and be subject to the usual, required
withholding. Executive’s Base Salary will be subject to review and adjustments
will be made based upon the Company’s normal performance review practices.

(b)    Annual Bonus. Executive will be eligible to participate in any bonus
plans or programs maintained from time to time by the Company on such terms and
conditions as determined by the Company’s Board of Directors (the “Board”) or
its compensation committee (the “Committee”), including eligibility for a bonus
of up to thirty percent (30%) of Executive’s Base Salary, upon achievement of
performance objectives to be determined by the Board in its good faith
discretion (the “Target Bonus”). Any earned bonus will be paid in the next
regular payroll period after the Board or the Committee determines that it has
been earned, but in no event shall the bonus be paid after the later of (i) the
fifteenth (15th) day of the third (3rd) month following the close of the
Company’s fiscal year in which the bonus is earned, or (ii) March 15 following
the calendar year in which the bonus is earned.

(c)    Equity. Following the Effective Date, the Board will grant Executive an
option to purchase 300,000 shares of the Company’s common stock at an exercise
price equal to the fair market value of Company common stock per share on the
date of grant (the “Option”). Subject to the acceleration provisions below, the
Option will vest as to 1/4th of the shares subject to the Option on the one year
anniversary of the Effective Date, and as to 1/48th of the shares subject to the
Option monthly thereafter on the same day of each month as the Effective Date,
so that the Option will be fully vested and exercisable on the fourth
anniversary of the Effective Date, subject to Executive continuing to provide
services to the Company through the relevant vesting dates. The Option will be
subject to the terms, definitions and provisions of the Company’s 2020
Inducement Equity Incentive Plan (the “2020 Plan”) and the stock option
agreement between Executive and the Company (the “Option Agreement”), both of
which documents are incorporated herein by reference. Executive will be eligible
to receive additional awards of stock options, restricted stock units or other
equity awards pursuant to any plans or arrangements the Company may have in
effect from time to time. The Board or the Committee of the Board will determine
in its discretion within Executive will be granted any such equity awards and
the terms of any such award in accordance with the terms of any applicable plan
or arrangement that may be in effect from time to time.

5.    Employee Benefits. During the Employment Term, Executive will be entitled
to participate in the employee benefit plans currently and hereafter maintained
by the Company of general applicability to other senior executives of the
Company, including, without limitation, the Company’s group medical, dental,
vision, disability, life insurance, and flexible-spending account plans. The
Company reserves the right to cancel or change the benefit plans and programs it
offers to its employees at any time.

 

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6.    Vacation. Executive will be entitled to receive paid annual vacation in
accordance with Company policy for other senior executive officers.

7.    Expenses. The Company will reimburse Executive for reasonable travel,
entertainment or other expenses incurred by Executive in the furtherance of 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. Such expenses must be pre-approved by the Company.

8.    Severance. If the Company, after the Initial Term, terminates Executive’s
employment without Cause (excluding death or Disability) or if Executive resigns
from such employment for Good Reason, and, in each case, Executive signs and
does not revoke a standard release of claims with the Company in a form
acceptable to the Company and subject to Section 9 below, then Executive will
receive, in addition to Executive’s salary payable through the date of
termination of employment and any other employee benefits earned and owed
through the date of termination, the following benefits from the Company:

(a)    continuing payments of severance pay in accordance with the Company’s
normal payroll policies at a rate equal to Executive’s Base Salary rate, as is
then in effect, for (x) six (6) months from the date of such termination without
Cause or resignation for Good Reason, if such termination or resignation occurs
prior to three (3) months before a Change in Control of the Company, or
(y) twelve (12) months from the date of such termination without Cause or
resignation for Good Reason, if such termination or resignation occurs within
three (3) months prior to, or six (6) months following a Change of Control of
the Company;

(b)    if such termination or resignation occurs within three (3) months prior
to, or six (6) months following, a Change in Control of the Company, then one
hundred percent (100%) of any Equity Awards held by Executive as of the date of
such termination without Cause or resignation for Good Reason shall immediately
vest and become fully exercisable (to the extent applicable);

(c)     if such termination or resignation occurs within three (3) months prior
to, or six (6) months following, a Change in Control of the Company, then
Executive shall receive fifty percent (50%) the annual Target Bonus opportunity
for the year in which employee is terminated without Cause or resigns for Good
Reason; and

(d)    if Executive elects continuation coverage pursuant to the Consolidated
Budget Reconciliation Act of 1985 (“COBRA”) within the time period prescribed
pursuant to COBRA for Executive and Executive’s eligible dependents, then the
Company will reimburse Executive on the last day of each month after his
employment termination date for the COBRA premiums paid during such period for
such coverage (at the coverage levels in effect immediately prior to Executive’s
termination) for a period ending (x) six (6) months, if such termination or
resignation occurs prior to three (3) months before a Change in Control of the
Company, or (y) twelve (12) months, if such termination or resignation occurs
within three (3) months prior to, or six (6) months following a

 

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Change in Control of the Company; provided, that such coverage shall end upon
such earlier date that Executive and/or Executive’s eligible dependents become
covered under similar plans. Notwithstanding the foregoing, if the Company
determines in its sole discretion that it cannot provide the benefit described
in this Section 8(b) without potentially violating, or being subject to an
excise tax under, applicable law (including, without limitation, Section 2716 of
the Public Health Service Act), the Company will in lieu thereof provide to
Executive a taxable monthly payment, payable on the last day of a given month,
in an amount equal to the monthly COBRA premium that Executive would be required
to pay to continue Executive’s group health coverage in effect on the
termination of employment date (which amount will be based on the premium for
the first month of COBRA coverage), which payments will be made regardless of
within Executive elects COBRA continuation coverage and will commence on the
month following Executive’s termination of employment and will end on the
earlier of (A) the date upon which Executive obtains other employment or (B) the
date the Company has paid an amount equal to six (6) or twelve (12) payments,
per the terms of this agreement. For the avoidance of doubt, the taxable
payments in lieu of COBRA reimbursements may be used for any purpose, including,
but not limited to continuation coverage under COBRA, and will be subject to all
applicable tax withholdings.

9.    Conditions to Receipt of Severance; No Duty to Mitigate.

(a)    Separation Agreement and Release of Claims. The payment of any severance
set forth in Section 8 above is contingent upon Executive signing and not
revoking the Company’s standard separation and release of claims agreement upon
Executive’s termination of employment and such agreement becoming effective no
later than sixty (60) days following Executive’s employment termination date
(such deadline, the “Release Deadline”). In no event will severance payments be
paid or provided until the release actually becomes effective. Any severance
payments or benefits under this Agreement will be paid on, or, in the case of
installments, will not commence until, the sixtieth (60th) day following
Executive’s separation from service, or if later, such time as required by
Section 9(c). Except as required by Section 9(c), any installment payments that
would have been made to Executive during the sixty (60) day period immediately
following his separation from service but for the preceding sentence will be
paid to Executive on the sixtieth (60th) day following Executive’s separation
from service and the remaining payments will be made as provided in the
Agreement.

(b)    Confidential Information Agreement. Executive’s receipt of any payments
or benefits under Section 8 will be subject to Executive continuing to comply
with the terms of his Confidential Information Agreement (as defined in
Section 12), unless Executive is engaged in Protected Activity (as discussed in
Section 23).

 

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(c)    Section 409A.

(i)    Notwithstanding anything to the contrary in this Agreement, no severance
pay or benefits payable upon separation that is payable to Executive, if any,
pursuant to this Agreement, when considered together with any other severance
payments or separation benefits that are considered deferred compensation
(together, the “Deferred Payments”) under Section 409A of the Internal Revenue
Code, as amended (the “Code”) and the final regulations and official guidance
thereunder (“Section 409A”) will be payable until Executive has a “separation
from service” within the meaning of Section 409A.

(ii)    Notwithstanding anything to the contrary in this Agreement, if Executive
is a “specified employee” within the meaning of Section 409A at the time of his
termination (other than due to death), then the Deferred Payments, if any, that
are payable within the first six (6) months following his separation from
service, will become payable on the first payroll date that occurs on or after
the date six (6) months and one (1) day following the date of Executive’s
separation from service. All subsequent Deferred Payments, if any, will be
payable in accordance with the payment schedule applicable to each payment or
benefit. Notwithstanding anything herein to the contrary, if Executive dies
following his separation from service, but prior to the six (6) month
anniversary of the separation from service, then any payments delayed in
accordance with this Section 9(c) will be payable in a lump sum as soon as
administratively practicable after the date of Executive’s death and all other
Deferred Payments will be payable in accordance with the payment schedule
applicable to each payment or benefit. Each payment, installment and benefit
payable under this Agreement is intended to constitute a separate payment for
purposes of Section 1.409A-2(b)(2) of the Treasury Regulations.

(iii)    Any severance payment that satisfies the requirements of the
“short-term deferral” rule set forth in Section 1.409A-1(b)(4) of the Treasury
Regulations shall not constitute Deferred Payments for purposes herein. Any
amount paid under this Agreement that qualifies as a payment made as a result of
an involuntary separation from service pursuant to Section 1.409A-1(b)(9)(iii)
of the Treasury Regulations that does not exceed the Section 409A Limit (as
defined below) will not constitute Deferred Payments for purposes herein.

(iv)    For purposes of this Agreement, “Section 409A Limit” means the lesser of
two (2) times: (x) Executive’s annualized compensation based upon the annual
rate of pay paid to Executive during Executive’s taxable year preceding
Executive’s taxable year of Executive’s termination of employment as determined
under Treasury Regulation 1.409A-1(b)(9)(iii)(A)(1) and any Internal Revenue
Service guidance issued with respect thereto, or (y) the maximum amount that may
be taken into account under a qualified plan pursuant to Section 401(a)(17) of
the Code for the year in which Executive’s employment is terminated.

(v)    The foregoing provisions are intended to comply with or be exempt from
the requirements of Section 409A so that none of the severance payments and
benefits to be provided hereunder will be subject to the additional tax imposed
under Section 409A, and any ambiguities herein will be interpreted to so comply.
Executive and the Company agree to work together in good faith to consider
amendments to this Agreement and to take such reasonable actions which are
necessary, appropriate or desirable to avoid imposition of any additional tax or
income recognition prior to actual payment to Executive under Section 409A.

 

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(d)    No Duty to Mitigate. Executive will not be required to mitigate the
amount of any payment contemplated by this Agreement, nor will any earnings that
Executive may receive from any other source reduce any such payment.

10.    Definitions.

(a)    Cause. For purposes of this Agreement, “Cause” means: (i) Executive’s act
of personal dishonesty in connection with his responsibilities as an employee
that is intended to result in Executive’s substantial personal enrichment;
(ii) Executive being convicted of, or pleading no contest or guilty to, (x) a
misdemeanor that the Company reasonably believes has had or will have a material
detrimental effect on the Company, or (y) any felony; (iii) Executive’s gross
misconduct; (iv) Executive’s willful and continued failure to perform the duties
and responsibilities of his position after there has been delivered to Executive
a written demand for performance from the Company that describes the basis for
the Company’s belief that Executive has not substantially performed his duties
and Executive has not corrected such failure within thirty (30) days of such
written demand; or (v) Executive’s material violation of any written Company
employment policy or standard of conduct, including a material breach of the
Confidential Information Agreement.

(b)    Change in Control. For purposes of this Agreement, “Change in Control”
has the same meaning assigned to such term in the 2020 Plan.

(c)    Disability. For purposes of this Agreement, “Disability” means
Executive’s inability to perform Executive’s duties due to Executive’s physical
or mental incapacity, as reasonably determined by the Board or its designee, for
an aggregate of 180 days in any 365 consecutive day period.

(d)    Equity Awards. For purposes of this Agreement, “Equity Awards” means
Executive’s outstanding stock options, stock appreciation rights, restricted
stock units, performance shares, performance stock units and any other Company
equity compensation awards.

(e)    Good Reason. For purposes of this Agreement, “Good Reason” means
Executive’s resignation within thirty (30) days following the expiration of any
Company cure period (discussed below) following the occurrence of one or more of
the following, without Executive’s consent: (i) a material reduction in
Executive’s Base Salary, excluding the substitution of substantially equivalent
compensation and benefits, that is not generally applicable to all Company
senior management or employees of the Company generally; (ii) a material
reduction of Executive’s authority, duties or responsibilities, unless Executive
is provided with a comparable position; provided, however, that a reduction in
authority, duties, or responsibilities solely by virtue of the Company being
acquired and made part of a larger entity within as a subsidiary, business unit
or otherwise (as, for example, when the Chief Executive Officer of the Company
remains as such following an acquisition where the Company becomes a wholly
owned subsidiary of the

 

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acquirer, but is not made the Chief Executive Officer of the acquiring
corporation) will not constitute “Good Reason”; or (iii) a material change in
the geographic location of Executive’s primary work facility or location;
provided, that a relocation of fifty (50) miles or less from Executive’s then
present location or to Executive’s home as his primary work location will not be
considered a material change in geographic location. In order for an event to
qualify as Good Reason, Executive must not terminate employment with the Company
without first providing the Company with written notice of the acts or omissions
constituting the grounds for “Good Reason” within ninety (90) days of the
initial existence of the grounds for “Good Reason” and a reasonable cure period
of not less than thirty (30) days following the date of such notice, and such
grounds must not have been cured during such time.

11.    Limitation on Payments. In the event that the payments or benefits
provided for in this Agreement or otherwise payable to Executive (collectively,
the “Payments”) (i) constitute “parachute payments” within the meaning of
Section 280G of the Code and (ii) but for this Section 11, would be subject to
the excise tax imposed by Section 4999 of the Code, then Executive’s the
Payments will be either:

(a)    delivered in full, or

(b)    delivered as to such lesser extent which would result in no portion of
such Payments being subject to excise tax under Section 4999 of the Code,

whichever of the foregoing amounts, taking into account the applicable federal,
state and local income taxes and the excise tax imposed by Section 4999, results
in the receipt by Executive on an after-tax basis, of the greatest amount of
Payments, notwithstanding that all or some portion of such Payments may be
taxable under Section 4999 of the Code. If a reduction in Payments constituting
“parachute payments” is necessary so that the Payments are delivered to a lesser
extent, reduction will occur in the following order: (i) reduction of cash
payments, which shall occur in reverse chronological order such that the cash
payment owed on the latest date following the occurrence of the event triggering
such excise tax will be the first cash payment to be reduced; (ii) reduction of
acceleration of vesting of equity awards, which shall occur in the reverse order
of the date of grant for such stock awards (i.e., the vesting of the most
recently granted stock awards will be reduced first); and (iii) reduction of
other benefits paid or provided to the Executive, which shall occur in reverse
chronological order such that the benefit owed on the latest date following the
occurrence of the event triggering such excise tax will be the first benefit to
be reduced. If more than one equity award was made to the Executive on the same
date of grant, all such awards shall have their acceleration of vesting reduced
pro rata. In no event shall the Executive have any discretion with respect to
the ordering of payment reductions.

Unless the Company and Executive otherwise agree in writing, any determination
required under this Section 11 will be made in writing by a nationally
recognized firm of independent public accountants selected by the Company (the
“Accountants”), whose determination will be conclusive and binding upon
Executive and the Company for all purposes. For purposes of making the
calculations required by this Section 11, the Accountants may make reasonable
assumptions and approximations concerning applicable taxes and may rely on
reasonable, good faith interpretations

 

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concerning the application of Sections 280G and 4999 of the Code. The Company
and Executive will furnish to the Accountants such information and documents as
the Accountants may reasonably request in order to make a determination under
this Section. The Company will bear all costs the Accountants may reasonably
incur in connection with any calculations contemplated by this Section 11.

12.    Confidential Information. Executive confirms his continuing obligations
under the Company’s standard At-Will Employment, Proprietary Information and
Invention Assignment Agreement (the “Confidential Information Agreement”) dated
on or about the date hereof.

13.    Assignment. This Agreement will be binding upon and inure to the benefit
of (a) the heirs, executors and legal representatives of Executive upon
Executive’s death and (b) any successor of the Company. Any such successor of
the Company will be deemed substituted for the Company under the terms of this
Agreement for all purposes. For this purpose, “successor” means any person,
firm, corporation or other business entity which at any time, within by
purchase, merger or otherwise, directly or indirectly acquires all or
substantially all of the assets or business of the Company. None of the rights
of Executive to receive any form of compensation payable pursuant to this
Agreement may be assigned or transferred except by will or the laws of descent
and distribution. Any other attempted assignment, transfer, conveyance or other
disposition of Executive’s right to compensation or other benefits will be null
and void.

14.    Notices. All notices, requests, demands and other communications called
for hereunder will be in writing and will be deemed given (i) on the date of
delivery if delivered personally; (ii) one (1) day after being sent by a
well-established commercial overnight service; or (iii) four (4) days after
being mailed by registered or certified mail, return receipt requested, prepaid
and addressed to the parties or their successors at the following addresses, or
at such other addresses as the parties may later designate in writing:

If to the Company:

Soleno Therapeutics, Inc.

Attn: Chief Executive Officer

203 Redwood Shores Pkwy Suite 500

Redwood City, CA 94065

If to Executive:

at the last residential address known by the Company.

15.    Severability. In the event that any provision hereof becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement will continue in full force and effect without said
provision.

16.    Integration. This Agreement, together with the 2020 Plan, Option
Agreement and the Confidential Information Agreement represents the entire
agreement and understanding between the parties as to the subject matter herein
and supersedes all prior or contemporaneous agreements within written or oral.
This Agreement may be modified only by agreement of the parties by a written
instrument executed by the parties that is designated as an amendment to this
Agreement.

 

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17.    Waiver of Breach. The waiver of a breach of any term or provision of this
Agreement, which must be in writing, will not operate as or be construed to be a
waiver of any other previous or subsequent breach of this Agreement.

18.    Headings. All captions and section headings used in this Agreement are
for convenient reference only and do not form a part of this Agreement.

19.    Tax Withholding. All payments made pursuant to this Agreement will be
subject to withholding of applicable taxes.

20.    Governing Law. This Agreement will be governed by the laws of the State
of California (with the exception of its conflict of laws provisions).

21.    Acknowledgment. Executive acknowledges that he has had the opportunity to
discuss this matter with and obtain advice from his private attorney, has had
sufficient time to, and has carefully read and fully understands all the
provisions of this Agreement, and is knowingly and voluntarily entering into
this Agreement.

22.    Counterparts. This Agreement may be executed in counterparts, and each
counterpart will have the same force and effect as an original and will
constitute an effective, binding agreement on the part of each of the
undersigned.

23.    Protected Activity. Nothing in this Agreement limits or prohibits
Executive from filing a charge or complaint with, or otherwise communicating or
cooperating with or participating in any investigation or proceeding that may be
conducted by, any federal, state or local government agency or commission,
including the Securities and Exchange Commission, the Equal Employment
Opportunity Commission, the Occupational Safety and Health Administration, and
the National Labor Relations Board (“Government Agencies”), including disclosing
documents or other information as permitted by law, without giving notice to, or
receiving authorization from, the Company. Notwithstanding, in making any such
disclosures or communications, Executive must take all reasonable precautions to
prevent any unauthorized use or disclosure of any information that may
constitute confidential information of the Company to any parties other than the
Government Agencies. Executive is not permitted to disclose the Company’s
attorney-client privileged communications or attorney work product.

 

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IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case
of the Company by their duly authorized officers, as of the day and year first
above written.

 

COMPANY:    SOLENO THERAPEUTICS, INC.    By:    /s/ Anish Bhatnagar, M.D.   
Date: November 11, 2020 Anish Bhatnagar, MD    Chief Executive Officer   
EXECUTIVE:    By:    /s/ James Mackaness    Date: November 10, 2020 James
Mackaness   

[SIGNATURE PAGE TO JAMES MACKANESS EMPLOYMENT AGREEMENT]

 

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