Exhibit 10.23

 

One Kendall Square Suite B14202, Cambridge MA 02139 USA

 

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September 30, 2015

 

Deirdre Cunnane

287 Commonwealth Avenue, #5

Boston, MA 02115

 

Dear Deirdre:

 

On behalf of Catabasis Pharmaceuticals, Inc. (the “Company”), I am pleased to
set forth the terms of your employment with the Company, should you accept our
offer:

 

You will be employed to serve on a full-time basis as Senior Vice President,
General Counsel, effective November 30, 2015. In this role, you will initially
report to Jill Milne, Chief Executive Officer, and have such duties and
responsibilities as are customary for such a position and as are otherwise
assigned to you from time to time by the Company.

 

Your base salary will be at the rate of $27,083 per month ($325,000 on an
annualized basis), less all tax and other withholdings as required by law. Such
base salary may be adjusted from time to time in accordance with normal business
practice and in the sole discretion of the Company.

 

Following the end of each calendar year and subject to the approval of the
Company’s Board of Directors (the “Board”), you will be eligible for a retention
and performance bonus of up to 30% of your then current annualized base salary,
based on your performance and the Company’s performance during the applicable
calendar year, as determined by the Board in its sole discretion. You must be
employed by the Company on the date on which bonuses are paid in order to be
eligible for and to earn a bonus, as it also serves as an incentive to remain
employed by the Company.  Any bonus would be pro-rated for the 2015 calendar
year.

 

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You may participate in any benefit programs that the Company establishes and
makes available to its employees from time to time, provided you are eligible
under (and subject to all provisions of) the plan documents governing those
programs. Benefits are subject to change at any time in the Company’s sole
discretion.

 

You will be eligible for a maximum of 3 weeks of paid vacation per calendar
year. The number of vacation days for which you are eligible shall accrue at the
rate of 1.25 days per month that you are employed during such calendar year.

 

Subject to the approval of the Board, the Company will grant you an option (the
“Option”) under the Company’s Amended and Restated 2015 Equity Incentive Plan
(the “Plan”) for the purchase of an aggregate of 47,200 shares of common stock
of the Company at a price per share equal to the fair market value at the time
of Board approval. The Option shall be subject to all terms, vesting schedules
and other provisions set forth in the Plan and in a separate option agreement.
The Option will be subject to 4-year vesting, commencing as of your employment
start date, and will be subject to a 12-month cliff, with 25% vesting on the
first anniversary of the grant date and an additional 1/48th vesting each month
thereafter. The Option will be an incentive stock option to the maximum extent
permitted by law.

 

If the Company terminates your employment without Cause (as defined below) or
you resign employment with the Company for Good Reason (as defined below), you
shall be eligible to receive severance pay constituting of an amount equal to
six months of your base salary as in effect at the time of your termination,
payable in accordance with the Company’s regular payroll procedures
proportionately over such six month period, (such period, the “Severance
Period’’) less applicable taxes and withholding.  You will also receive payment
during the Severance Period of premiums under the Consolidated Omnibus Budget
Reconciliation Act (“COBRA”) for continued health benefit (medical and dental)
coverage (for so long as you are eligible for and timely elect such continuation
coverage under COBRA and remain eligible for participation in such plans under
applicable law and plan terms and such payment of premiums does not result in
taxation of or penalties on the Company or any participant). No severance
benefits (the cash payments, the COBRA premiums), or the equity acceleration
described below shall be paid under this offer letter unless you first execute
and do not revoke a waiver and release in the form prepared by the

 

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Company within 60 days following the date of termination, which provides for a
release of any and all claims that you have or might have against the Company.
The severance payments shall be paid or commence on the first payroll period
following the date the waiver and release becomes effective (the “Payment
Date”).    Notwithstanding the foregoing, if the 60th day following the date of
termination occurs in the calendar year following the termination, then the
Payment Date shall be no earlier than January 1st of such subsequent calendar
year. The distribution of any severance payments shall be subject to the
provisions of Exhibit A attached hereto.  In addition, in the event the Company
terminates your employment without Cause or you resign your employment with the
Company for Good Reason within twelve months following a Change of Control,
notwithstanding the terms of any stock option agreement, restricted stock
agreement or other stock award (“Equity Awards”), the vesting of all Equity
Awards held by you on the date of termination or resignation shall be
automatically accelerated, effective as of the date of termination or
resignation, such that such Equity Awards shall become l00% fully vested.

 

For purposes of this offer letter, “Cause” for termination shall be deemed to
exist upon (a) a good faith finding by the Company of (i) your failure to
satisfactorily perform your assigned duties for the Company, or (ii) your
dishonesty, gross negligence or misconduct; (b) your indictment or conviction
of, or the entry of a pleading of guilty or nolo contendere by you to, any crime
involving moral turpitude or any felony; or (c) your violation of any of the
terms of the Restrictive Covenant Agreements (as defined below).

 

For purposes of this Offer letter, “Change of Control” means:

 

(a)                                 the acquisition by an individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) of
beneficial ownership of any capital stock of the Company if, after such
acquisition, such Person beneficially owns (within the meaning of Rule 13d-3
promulgated under the Exchange Act) 50% or more of the combined voting power of
the then-outstanding securities of the Company entitled to vote generally in the
election of directors (the “Outstanding Company Voting Securities”); provided,
however, that for purposes of this subsection (a), the following acquisitions
shall not constitute a Change in Control Event: (x) any acquisition directly
from the Company (excluding an acquisition pursuant to the exercise, conversion
or exchange of any security exercisable for, convertible into or exchangeable
for common stock or voting securities of

 

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the Company, unless the Person exercising, converting or exchanging such
security acquired such security directly from the Company or an underwriter or
agent of the Company), or (y) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any corporation
controlled by the Company; or

 

(b)                                 the consummation of a merger, consolidation,
reorganization, recapitalization or statutory share exchange involving the
Company or a sale or other disposition of all or substantially all of the assets
of the Company (a “Business Combination”), unless, immediately following such
Business Combination all or substantially all of the individuals and entities
who were the beneficial owners of the Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 50% of the combined voting power of the then-outstanding
securities entitled to vote generally in the election of directors,
respectively, of the resulting or acquiring corporation in such Business
Combination (which shall include, without limitation, a corporation which as a
result of such transaction owns the Company or substantially all of the
Company’s assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership of the Outstanding Company
Voting Securities immediately prior to such Business Combination: provided that,
where required to avoid additional taxation under Section 409A, the event that
occurs must also be a “change in the ownership or effective control of a
corporation,  or a change in the ownership of a substantial portion of the
assets of a corporation” as defined in Treasury Regulation
Section 1.409A-3(i)(5).

 

For purposes of this offer letter, Good Reason shall mean the occurrence of any
of the following: a material diminution in your base salary; a material
diminution in your authority, duties or responsibilities; a material change in
the geographic location at which you must perform service; or material breach by
the Company of its obligations under this offer letter.

 

No resignation will be treated as resignation for Good Reason unless (x) you
have given written notice to the Company of your intention to terminate your
employment for Good Reason, describing the grounds for such action, no later
than 90 days after the first occurrence of such circumstances, (y) you have
provided the Company with at least 30 days in which to cure the circumstances,
and (z) if the Company is not successful in curing the circumstance, you end
your

 

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employment within 30 days following the cure period in (y).

 

You will be required to execute the enclosed Invention and Non-Disclosure
Agreement and Non-Competition and Non-Solicitation Agreement (collectively, the
“Restrictive Covenant Agreements”) as a condition of employment. You represent
that you are not bound by any employment contract, restrictive covenant or other
restriction preventing you from entering into employment with or carrying out
your responsibilities for the Company, or which is in any way inconsistent with
the terms of this letter.

 

You agree to provide to the Company, within three days of your hire date,
documentation of your eligibility to work in the United States, as required by
the Immigration Reform and Control Act of 1986. You may need to obtain a work
visa in order to be eligible to work in the United States. If that is the case,
your employment with the Company will be conditioned upon your obtaining a work
visa in a timely manner as determined by the Company.

 

This letter shall not be construed as an agreement, either expressed or implied,
to employ you for any stated term, and shall in no way alter the Company’s
policy of employment at will, under which both you and the Company remain free
to terminate the employment relationship for any reason, with or without Cause,
at any time, with or without notice. Nothing in this letter shall be construed
as an agreement, either express or implied, to pay you any compensation or grant
you any benefit beyond the end of your employment with the Company, except as
otherwise explicitly set forth herein. This letter supersedes all prior
understandings, whether written or oral, relating to the terms of your
employment.

 

If this letter correctly sets forth the terms under which you will be employed
by the Company, please sign the enclosed duplicate of this letter in the space
provided below and return it to me, along with signed copies of the Restrictive
Covenant Agreements, by October 7.  If you do not accept this offer by
October 7, 2015, this offer will be deemed revoked.

 

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Very Truly Yours,

 

 

 

 

By:

 

 

Name:

Jill C. Milne

 

Title:

Chief Executive Officer

 

The foregoing correctly sets forth the terms of my at-will employment by
Catabasis Pharmaceuticals, Inc. I am not relying on any representations other
than those set forth above.

 

 

 

 

 

 

 

 

Date:

 

Name:

Deirdre A. Cunnane

 

 

 

 

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Exhibit A

 

Payments Subject to Section 409A

 

1.                                      Subject to this Exhibit A, payments or
benefits under the offer letter shall begin only upon the date of your
“separation from service” (determined as set forth below) which occurs on or
after the termination of your employment. The following rules shall apply with
respect to distribution of the payments and benefits, if any, to be provided to
you under the offer letter, as applicable:

 

(a)                                 It is intended that each installment of the
payments and benefits provided in the offer letter shall be treated as a
separate “payment” for purposes of Section 409A of the Internal Revenue Code and
the guidance issued thereunder (“Section 409A”). Neither the Company nor you
shall have the right to accelerate or defer the delivery of any such payments or
benefits except to the extent specifically permitted or required by
Section 409A.

 

(b)                                 If, as of the date of your “separation from
service” from the Company, you are not a “specified employee” (within the
meaning of Section 409A), then each installment of the payments and benefits
shall be made on the dates and terms set forth in the offer letter.

 

(c)                                  If, as of the date of your “separation from
service” from the Company, you are a “specified employee” (within the meaning of
Section 409A), then:

 

(i)                                     Each installment of the payments and
benefits due under the offer letter that, in accordance with the dates and terms
set forth herein, will in all circumstances, regardless of when your separation
from service occurs, be paid within the short-term deferral Period (as defined
under Section 409A) shall be treated as a short-term deferral within the meaning
of Treasury Regulation Section 1.409A-1(b)(4) to the maximum extent permissible
under Section 409A and shall be paid on the dates and terms set forth in the
offer letter; and

 

(ii)                                  Each installment of the payments and
benefits due under the offer letter that is not described in this Exhibit A,
Section 1(c)(i) and that would, absent this subsection, be paid within the
six-month period following your “separation from service” from the Company shall
not be paid until the date that is six months and one day after such separation
from service (or, if earlier, your death), with any such installments that are
required to be delayed being accumulated during the six-month period and paid in
a lump sum on the date that is six months and one day following your separation
from service and any subsequent installments, if any, being paid in accordance
with the dates and terms set forth herein; provided, however, that the preceding
provisions of this sentence shall not apply to any

 

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installment of payments and benefits if and to the maximum extent that that such
installment is deemed to be paid under a separation pay plan that does not
provide for a deferral of compensation by reason of the application of Treasury
Regulation 1.409A-1(b)(9)(iii) (relating to separation pay upon an involuntary
separation from service). Any installments that qualify for the exception under
Treasury Regulation Section 1.409A-1(b)(9)(iii) must be paid no later than the
last day of your second taxable year following the taxable year in which the
separation from service occurs.

 

2.                                      The determination of whether and when
your separation from service from the Company has occurred shall be made and in
a manner consistent with, and based on the presumptions set forth in, Treasury
Regulation Section 1.409A-1(h). Solely for purposes of this Exhibit A,
Section 2, “Company” shall include all persons with whom the Company would be
considered a single employer under Section 414(b) and 414(c) of the Code.

 

3.                                      All reimbursements and in-kind benefits
provided under the offer letter shall be made or provided in accordance with the
requirements of Section 409A to the extent that such reimbursements or in-kind
benefits are subject to Section 409A.

 

4.                                      The Company makes no representation or
warranty and shall have no liability to you or to any other person if any of the
provisions of the offer letter (including this Exhibit) are determined to
constitute deferred compensation subject to Section 409A but that do not satisfy
an exemption from, or the conditions of, that section.

 

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