Exhibit 10.4


 


EMPLOYMENT AGREEMENT


 


This EMPLOYMENT
AGREEMENT (this “Agreement”) is made as of the 15th day of January, 2019 (the “Effective Date”),
between Vallon Pharmaceuticals, Inc. (the “Company”) and David Baker (“Executive”). In consideration
of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:


 


1.       Employment
Term. The Company shall employ Executive, and Executive accepts employment with the Company, upon the terms and subject to
the conditions set forth in this Agreement, for the period beginning on the Effective Date and ending on the Date of Termination
(as defined in Section 4(e) of this Agreement) (the “Term”).


 


2.       Terms
of Employment.


 


(a)       Position
and Duties. During the Term, Executive shall be employed by the Company as President and Chief Executive Officer and shall
have such duties, responsibilities and authorities as are customarily associated with his position (including, but not limited
to, the general management of the affairs of the Company) and such additional duties and responsibilities consistent with his positions
as may, from time to time, be properly and lawfully assigned to him. Executive shall report directly to the Board of Directors
of the Company (the “Board”). Executive shall act at all times in compliance in all respects with the policies,
rules and decisions adopted from time to time by the Company and perform all of the duties and obligations required of him by this
Agreement in a loyal and conscientious manner.


 


(b)       Board
Service. During the Term, the Company shall cause the nominating committee of the Board or its equivalent (the “Nominating
Committee”) to nominate Executive to serve as a member of the Board each year Executive’s term of Board service
is to be slated for reelection to the Board. If, during the Term, the Company’s stockholders vote in favor of the Nominating
Committee’s nomination of Executive to serve as a member of the Board, Executive agrees to serve in such capacity and also
agrees that any such Board service shall be without additional compensation.


 


(c)       Engaging
in Other Activities. During the Term, Executive shall devote his full time and attention to the Company and its affiliates
and shall not be employed by or provide services to any other person or entity, except that Executive shall be permitted (i) to
continue providing services under existing consulting agreements that he discloses to the Board before the Effective Date, as long
as he concludes such services within 90 days after the Effective Date; and (ii) to provide services to any person or entity with
permission of the Board or its Chairperson. During the Term, it shall not be a violation of this Agreement for Executive, subject
to the requirements of Section 8 hereof, to (i) serve on civic, charitable or religious boards or engage in other activities for
such organizations, (ii) with the consent of the Board, which consent shall not be unreasonably withheld, serve on up to two corporate
boards unrelated to the Company (and retain all compensation in whatever form for such service), and (iii) manage personal investments,
so long as such activities (individually or in the aggregate) do not interfere with the performance of Executive’s responsibilities
as set forth in Sections 2(a) or 2(b) of this Agreement or Executive’s fiduciary duties to the Company.


 






    


     


    

 





(d)       Location.
Executive shall perform his duties and responsibilities hereunder principally at the Company’s corporate headquarters; provided
that Executive may be required under reasonable business circumstances to travel outside of such location in connection with performing
his duties under this Agreement.


 


(e)       Affiliates.
Executive agrees to serve, without additional compensation, as an officer and director of each of the other members of the Company’s
affiliates, as determined by the Company. As used in this Agreement, the term “affiliate” shall mean any entity
controlled by, controlling, or under common control with, the Company.


 


3.        Compensation
and Benefits.


 


(a)       Base
Salary. During the Term, the Company shall pay Executive an annualized base salary (“Annual Base Salary”)
of $300,000, payable in regular installments in accordance with the Company’s normal payroll practices. During the Term,
the Annual Base Salary shall be reviewed by the Board or a committee thereof at such time as the salaries of other senior vice
presidents of the Company are reviewed generally, but no less frequently than once a year. Executive shall receive a 10% increase
in Annual Base Salary on the date the Company raises gross proceeds of $4 million (or more) by way of either a private or public
offering of the Company’s common stock, or some combination of the two (the “$4 Million Raise”). The Annual
Base Salary shall not be reduced other than in connection with an across-the-board salary reduction which applies in a comparable
manner to other similarly-situated executives of the Company. If so increased or reduced, then such adjusted salary will thereafter
be the Annual Base Salary for all purposes under this Agreement.


 


(b)       Annual
Incentives. For each fiscal year during the Term commencing with January 1, 2019, Executive shall be eligible to participate
in an annual bonus plan under terms and conditions no less favorable than other similarly-situated executives of the Company; provided
that Executive’s target annual bonus opportunity shall be 50% of his Annual Base Salary (or such higher amount as determined
by the Board or a committee thereof from time to time). Executive’s payment under the annual bonus plan shall be based on
the extent to which the performance objectives established by the Board or a committee thereof have been achieved; such objectives
shall be established in consultation with Executive and communicated to him by the end of January of the applicable year. Unless
a different payment date is established in the bonus plan by the Company, the bonus payment shall be made in a single lump sum
within two and one-half months following the end of the Company’s fiscal year. Except as set forth in Section 5(b) below,
Executive must be employed on the last day of the fiscal year to receive payment of any annual bonus earned for that fiscal year.
Nothing contained in this Section 3(b) will guarantee Executive any specific amount of bonus compensation or prevent the Company
from establishing performance goals and targets applicable only to Executive.


 


(c)       Stock
Option. The stock option granted to Executive on October 1, 2018 covering 1,875,000 shares of the Company’s common stock
shall become fully vested and exercisable on the Effective Date, notwithstanding anything to the contrary contained in the related
award agreement. Within 30 calendar days after the Effective Date, the Company shall recommend to the Board or a committee thereof
to grant Executive an additional option to purchase up to 2% of the fully diluted common shares of the Company (the “Stock
Option”) under the Company’s 2018 Equity Incentive Plan (the “Equity Plan”). The Stock Option
shall have an exercise price per share equal to the “Fair Market Value” (as defined in the Equity Plan) of a share
of the Company’s common stock on the date of grant. The Stock Option shall vest in installments and become exercisable as
follows: 50% on the date the Company closes a firm-commitment underwritten public offering of the Company’s common stock
pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “Public Funds Raise”),
and 50% on the earlier of (i) date the Company’s common stock is listed for trading on the Nasdaq Stock Market’s National
Market, the New York Stock Exchange or another exchange or marketplace approved the Board (the “Exchange Listing”),
or (ii) the achievement of a market capitalization for the Company equal to $50 million or more. In order for the Stock Option
to vest, Executive must remain employed by the Company through the applicable vesting date; provided, however, if Executive’s
employment terminates because of a Qualifying Termination (as defined in Section 5(b) below), and such termination occurs in the
period between (x) the Company’s execution of a definitive agreement for a Public Funds Raise or an Exchange Listing, as
the case may be, and (y) the occurrence of such Public Funds Raise or Exchange Listing, then the portion of the Stock Option that
would otherwise have vested upon such Public Funds Raise or Exchange Listing shall vest immediately upon such Qualifying Termination.
In the event of a “Change in Control” (as defined in the Equity Plan), any unvested portion of the Stock Option
shall accelerate and become fully vested immediately prior to such Change in Control. Except as specifically provided in this
Section 3(e), the Stock Option shall be granted upon the terms, and subject to the conditions, of the Equity Plan and the award
agreement evidencing the grant of the Stock Option, as provided to senior executives of the Company generally. During the Term,
the Company may, but shall have no obligation to, grant additional equity compensation awards to Executive under this Agreement
or under the Equity Plan.


 






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(f)       PTO.
During the Term, Executive shall be eligible for at least four (4) weeks paid time off (“PTO”) per year in accordance
with the Company’s policies in effect from time to time for its senior vice presidents generally. Executive may carry over
up to one (1) week of unused PTO into the next following year only.


 


(g)       Expense
Reimbursement. Executive shall be reimbursed for all reasonable travel and other out-of-pocket expenses actually and properly
incurred by Executive prior to and during the Term in connection with carrying out his duties hereunder in accordance with the
Company’s policies in effect from time to time for its senior executives generally.


 


(h)       Benefits.
During the Term, and except as otherwise provided in this Agreement, Executive shall be eligible to participate in all
welfare, perquisite, fringe benefit, insurance, retirement and other benefit plans, practices, policies and programs,
maintained by the Company and its affiliates applicable to senior executives of the Company generally, in each case as
amended from time to time, including a car allowance of $500 per month, a life insurance benefit equal to two times his
Annual Base Salary, timely replacement of, and reimbursement of monthly charges related to, telephone and computer equipment
reasonably required by Executive to perform his duties hereunder, and membership in one airline club. In addition, during the
Term, to the extent the Company maintains a Simple IRA or a 401(k) plan, it shall match Executive’s elective deferrals
thereunder on a dollar-for-dollar basis (i.e., one dollar matched by the Company for each dollar of elective deferral by
Executive) up to 3% of Executive’s Annual Base Salary, subject to applicable IRS limits. The Company shall also
purchase short and long term disability coverage for Executive. The Company presently has no group medical and dental plan.
Until it establishes such a plan, the Company shall reimburse Executive for the cost that he is paying for medical and dental
insurance on his own.


 


4.       Termination
of Employment.


 


(a)       Death
and Disability. Executive’s employment shall terminate automatically upon Executive’s death. If the Company determines
in good faith that the Disability (as defined below) of Executive has occurred during the Term, it may give to Executive written
notice in accordance with Section 11 of this Agreement of its intention to terminate Executive’s employment; provided that
(i) such notice is provided no later than 150 calendar days following the determination of Executive’s Disability, and (ii)
Executive has not returned to full-time employment during the period between such determination and the giving of such notice.
In such event, Executive’s employment shall terminate effective on the 30th calendar day after receipt of such notice by
Executive (the “Disability Effective Date”), provided that, within the 30 calendar days after such receipt,
Executive shall not have returned to full-time performance of Executive’s duties. For purposes of this Agreement, “Disability”
shall mean the inability of Executive to perform the essential duties of the position held by Executive by reason of any medically
determined physical or mental impairment that is reasonably expected to result in death or lasts for 120 calendar days in any one-year
period, all as determined by an independent licensed physician mutually acceptable to the Company and Executive or Executive’s
legal representative.


 


(b)       Cause.
Executive’s employment with the Company may be terminated by the Company with or without Cause. For purposes of this Agreement,
 “Cause” shall mean: (i) the continued failure of Executive to perform Executive’s duties as set forth
in Section 2 hereof or Executive’s material disregard of the reasonable and lawful directives of the Company (in each case
other than any such failure resulting from any medically determined physical or mental impairment) that is not cured by Executive
within 20 calendar days after a written demand for performance is delivered to Executive by the Company which specifically identifies
the manner in which the Company believes that Executive has not performed Executive’s duties or disregarded a directive of
the Board; (ii) Executive’s commission of any material act of fraud, misappropriation or embezzlement against or in connection
with the Company or any of its affiliates or their respective businesses or operations; (iii) Executive’s commission of,
or indictment for or otherwise being formally charged with, any crime involving dishonesty or for any felony; (iv) the engaging
by Executive in misconduct that is materially detrimental to the financial condition or business reputation of the Company or any
of its affiliates, including due to any adverse publicity; or (v) a material breach by Executive of his obligations under Section
8, or his representations under Section 9, of this Agreement. In addition to the notice and opportunity to cure set forth in subsection
(i) above, to the extent that any of the grounds set forth in subsections (ii), (iv) or (v) above is capable of being cured, the
Company shall not have Cause unless it has furnished Executive with written notice specifically identifying the conduct allegedly
giving rise to Cause, and he has failed to cure such ground within 20 days of the delivery of such notice.


 






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(c)       Good
Reason. Executive’s employment with the Company may be terminated by Executive with or without Good Reason. For
purposes of this Agreement, “Good Reason” shall mean the occurrence of any of the following without
Executive’s consent: (i) a material reduction by the Company of Executive’s title, duties, responsibilities,
authority or reporting relationship set forth in Section 2(a); provided that the loss of the title of “President”
will not, in and of itself, constitute Good Reason if the individual who is appointed President reports directly or
indirectly to Executive; (ii) a material reduction by the Company of Executive’s Annual Base Salary (other than as
provided in Section 3(a) of this Agreement); (iii) a material breach of the Company of this Agreement or of any other
agreement between Executive and the Company; or (iv) a material change in geographic location at which Executive must
principally perform services under this Agreement from the Company’s offices at which Executive was principally
employed (the Company has determined that a relocation of more than 25 miles would constitute such a material change). A
termination of Executive’s employment by Executive under Sections 4(c)(i), (ii),(iii) or (iv) shall not be deemed to be
for Good Reason unless (x) Executive gives notice to the Company of the existence of the event or condition constituting Good
Reason within 30 calendar days after becoming aware of the initial occurrence or existence of such event or condition, and
(y) the Company fails to cure such event or condition within 30 calendar days after receiving such notice. Additionally,
Executive must terminate his employment within 90 calendar days after the initial occurrence of the circumstance constituting
Good Reason for such termination to be “Good Reason” hereunder.


 


(d)       Notice
of Termination. Any termination by the Company for Cause, or by Executive for Good Reason, shall be communicated by Notice
of Termination to the other party in accordance with Section 11. For purposes of this Agreement, a “Notice of Termination”
means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s
employment under the provision so indicated, and (iii) if the Date of Termination (as defined below) is other than the date of
receipt of such notice, specifies the Date of Termination.


 


(e)       Date
of Termination. “Date of Termination” means, as applicable, the date of Executive’s death, the Disability
Effective Date, or the date on which the termination of Executive’s employment by the Company for Cause or without Cause
or by Executive for Good Reason or without Good Reason is effective.


 


(f)       Resignation
from All Positions. Notwithstanding any other provision of this Agreement, upon the termination of Executive’s employment
for any reason, unless otherwise requested by the Board, Executive shall immediately resign from all positions that he holds or
has ever held with the Company and its affiliates, including the Board and the boards of directors or committees of the Company’s
affiliates. Executive hereby agrees to execute any and all documentation to effectuate such resignations upon request by the Company,
but he shall be treated for all purposes as having so resigned upon termination of his employment, regardless of when or whether
he executes any such documentation.


 


5.       Severance
Payments.


 


(a)       Any
Termination of Employment. If, during or at the expiration of the Term, Executive’s employment with the Company and its
affiliates shall terminate for any reason or no reason, then:


 





(i)       Accrued
Benefits. The Company shall pay, or cause to be paid, to Executive the sum of: (A) the portion of Executive’s Annual
Base Salary earned through the Date of Termination, to the extent not previously paid, (B) the amount of any annual bonus that
has been earned by Executive for a completed fiscal year or other measuring period preceding the Date of Termination, but has not
yet been paid to Executive, and (C) any unreimbursed business expenses to the extent reimbursable in accordance with the Company’s
reimbursement policies (the sum of the amounts described in clauses (A) through and including (C) shall be referred to as the “Accrued
Benefits”). The Accrued Benefits shall be paid to Executive in a single lump sum within 30 calendar days after the Date
of Termination.


 






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(ii)       Other
Benefits. To the extent not previously paid or provided, the Company shall pay or provide, or cause to be paid or provided,
to Executive (or his estate) any other amounts or benefits (including, as applicable, any payment of long-term incentive awards)
required to be paid or provided or which Executive is eligible to receive under any plan, program, policy or practice or contract
or agreement of the Company, including any benefits to which Executive is entitled under the Consolidated Omnibus Budget Reconciliation
Act (such other amounts and benefits described in this Section 5(a)(ii) shall be hereinafter referred to as the “Other
Benefits”) in accordance with the terms and normal procedures of each such plan, program, policy or practice or contract
or agreement, based on accrued and vested benefits through the Date of Termination.


 


(b)       Good
Reason, Other than for Cause. If, during the Term, the Company shall terminate Executive’s employment other than
for death, Disability or Cause, or if Executive shall terminate employment for Good Reason (in either case, a
 “Qualifying Termination”), then, in addition to providing the Accrued Benefits and Other Benefits, as set forth
in Section 5(a) above, and subject to Sections 6 and 8(f) below, the Company shall pay to Executive the Annual Base Salary,
as of the Date of Termination, for the Severance Period (defined below), payable over the Severance Period in regular
installments in accordance with the Company’s normal payroll practices as they may exist from time to time, with the
installments that otherwise would be paid prior to the first payroll date following the date the Release described in Section
6 becomes effective and irrevocable in accordance with its terms (the “Release Effective Date”) being paid
(without interest) on such payroll date in a lump sum and the remaining installments being paid as otherwise scheduled
assuming payments had begun immediately after the Date of Termination. For purposes of this Agreement, the
 “Severance Period” means, prior to the $4 Million Raise, the period beginning on the Date of Termination
and ending 2 months thereafter; on and after the $4 Million Raise, the period beginning on the Date of Termination and ending
4 months thereafter; and on and after the first Exchange Listing, the period beginning on the Date of Termination and ending
6 months thereafter, plus one additional month for each year of completed employment during the period commencing on the date
of the first Exchange Listing (up to a maximum of 6 additional months, so that total severance does not ever exceed 12
months). In the event of a Qualifying Termination, (i) the Company shall also provide Executive with medical and dental
insurance benefits during the Severance Period, either by reimbursing Executive for the cost of obtaining such insurance on
his own if the Company does not have a medical and dental insurance plan in place at the time, or, if the Company does have
such a plan in place, and provided that Executive enrolls in COBRA, by paying the portion of the COBRA premium equal to the
premium amount charged to active employees for such coverage; and (ii) Executive will be eligible to receive an annual
incentive under the annual bonus plan for the fiscal year during which the Date of Termination occurs, based on actual
performance results during the entire fiscal year and without regard to any discretionary adjustments that have the effect of
reducing the amount of the annual incentive (other than discretionary adjustments applicable to all senior executives who did
not terminate employment), pro-rated based on the number of days in the Company’s fiscal year through (and including)
the Date of Termination (“Prorated Annual Incentive”), which, if earned, shall be payable in a single lump sum at
the same time that payments are made to other participants in the annual bonus plan for that fiscal year; provided, however,
that Executive shall be entitled to such a Prorated Annual Incentive only if Executive was employed by the Company for at
least six months during the fiscal year in which the Date if Termination occurred. If a Qualifying Termination occurs within
a period of one year after a Change in Control, Executive shall be entitled to all of the payments and benefits set forth in
this Section 5(b), except that the Severance Period shall be the period beginning on the Date of Termination and ending in 12
months thereafter.


 


(c)       Section
280G. Notwithstanding anything in this Agreement to the contrary, in the event it shall be determined that any accrual, acceleration,
payment, benefit or distribution by the Company or any of its affiliated companies to or for the benefit of Executive (whether
paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise) (a “Payment”)
would be an excess parachute payment within the meaning of section 280G of the Internal Revenue Code of 1986, as amended (the “Code”)
(such excess only, an “Excess Payment”), then Executive shall forfeit all Excess Payments if the after-tax value
to Executive of the Payments, as reduced by such forfeiture, would be greater than the after-tax value to Executive of the Payments
absent such forfeiture. The forfeiture of Excess Payments, if applicable, shall be applied to the severance described in Section
5(b) hereof, then to cancellation of accelerated vesting of performance-based equity awards (based on the reverse order of the
date of grant), then to cancellation of accelerated vesting of other equity awards (based on the reverse order of the date of grant),
and then to any other Payments on a pro-rata basis. All determinations required to be made under this Section 5(c), including whether
and when a Payment is subject to section 280G of the Code, and the value of a Payment for purposes of section 280G of the Code,
and the assumptions to be utilized in arriving at such determination, shall be made by an accounting firm with expertise in such
matters designated by the Company (the “Accounting Firm”). The Company will direct the Accounting Firm to provide
its determination and detailed supporting calculations both to the Company and Executive within 15 business days after the date
of the event giving rise to the Payment or such other time as is requested by the Company. Any determination by the Accounting
Firm shall be binding upon the Company and Executive. All fees and expenses of the Accounting Firm for services performed pursuant
to this Section 5(c) shall be borne solely by the Company.


 






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6.       Release.
Notwithstanding anything contained herein to the contrary, the Company shall not be obligated to make any payment or provide any
benefit under Section 5(b), hereof unless: (a) Executive or Executive’s legal representative first executes within 21 calendar
days after the Date of Termination (or such longer period as required by applicable law) a release of claims agreement in the form
attached hereto as Exhibit A, with such changes as the Company, after consulting with Executive or Executive’s legal
representative, may determine to be required or reasonably advisable in order to make the release enforceable and otherwise compliant
with applicable law (the “Release”); (b) Executive does not revoke the Release; and (c) the Release becomes
effective and irrevocable in accordance with its terms.


 





7.       Full
Settlement. The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which
the Company or any of its affiliates may have against Executive or others, except as otherwise may be provided in Section 8 hereof.
In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts
payable to Executive under any of the provisions of this Agreement and such amounts shall not be reduced whether or not Executive
obtains other employment.


 


8.       Executive’s
Covenants.


 


(a)       Confidentiality.
During the Term and thereafter, Executive agrees to keep secret and confidential, and not to use or disclose to any third parties,
except as directly required for Executive to perform Executive’s responsibilities for the Company under this Agreement, any
of the Company’s Confidential Information (as defined in paragraph (k) below) acquired by Executive during the course of,
or in connection with, Executive’s employment with the Company. Executive acknowledges that the Confidential Information
is the exclusive property of the Company. Upon termination of Executive’s employment with the Company, for any reason, or
at the request of the Company at any time, Executive shall promptly return to the Company all property then in Executive’s
possession, custody or control belonging to the Company, including all Confidential Information. Executive shall not retain any
copies of correspondence, memoranda, reports, notebooks, drawings, photographs or other documents in any form whatsoever (including
information contained in computer or other electronic memory or on any computer or electronic storage device) relating in any way
to the affairs of the Company and which were entrusted to Executive or obtained by Executive at any time during the Term.


 


(b)       Assignment
of Rights. Executive shall promptly disclose to the Company and hereby assigns and transfers to the Company all of Executive’s
right, title and interest in and to:


 


(i)       any
and all patents, inventions, discoveries, concepts, processes, methods, formulas, techniques, trade secrets, know-how, and related
rights, whether or not patentable; and


 


(ii)       any
and all copyrights and works of authorship, whether or not copyrightable,


 


if and only to the extent that such intellectual
property was conceived, created or reduced to tangible form by Executive in the course of performing his duties for the Company,
and either relates to the business of the Company, or was conceived, created or reduced to tangible form with the use or
assistance of the Company’s facilities, materials or personnel. Without limiting the generality of the foregoing, this assignment
requirement applies to applications for U.S. or foreign letters patent and copyright registration granted upon such inventions,
discoveries, and works of authorship and similar items as hereinabove set forth.


 






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Executive shall deliver to the
Company any and all instruments necessary to confirm complete ownership by the Company of any and all rights as described
above, and upon the failure of Executive to furnish such documents, this Agreement shall constitute such documentation for
all purposes. Executive further agrees during and after Executive’s employment by the Company, to cooperate fully,
including giving testimony in support of Executive’s inventorship, as may be necessary in the opinion of the Company to
obtain and/or maintain letters patent and to vest the entire ownership of such letters patent with the Company.


 


(c)       Non-Competition.
Executive and the Company agree that Executive is being employed in an important fiduciary capacity with the Company, that the
Company is engaged in a highly competitive business and that Executive will have access to the Company’s Confidential Information.
Executive and the Company further agree that it is appropriate to place reasonable limits as set forth herein on Executive’s
ability to compete with the Company to protect and preserve the legitimate business interests and goodwill of the Company. Executive
agrees that, during the Term and thereafter during the Protection Period (as defined in paragraph (k) below), Executive will not,
directly or indirectly (in a business capacity where Executive could use specialized knowledge, training, skill or expertise, Confidential
Information, or customer contacts obtained from the Company to the detriment of the Company), own, manage, operate, join, control,
finance or participate in the ownership, management, operation, control or financing of, or be connected as an officer, director,
employee, partner, principal, agent, representative, or consultant to any business or activity that is Competitive with the Company
(as defined in paragraph (k) below). After the end of the Term, the covenant in this Section 8(c) shall restrict Executive’s
conduct within the Restricted Area (as defined in paragraph (k) below). Executive agrees that in his position, it is expected that
Executive will receive Confidential Information related to the Restricted Area and if Executive was permitted to engage in competition
with the Company within the Restricted Area, it would lead to unfair competition and it would be a significant disadvantage to
the Company that would likely cause irreparable harm. Notwithstanding the foregoing, the ownership of not more than two percent
(2%) of the outstanding securities of any company listed on any public exchange or regularly traded in the over-the-counter market,
assuming Executive’s involvement with any such company is solely that of a security holder, shall not constitute a violation
of this Section 8(c).


 


(d)       Customer
Non-Solicitation. Executive agrees that, during the Term and thereafter during the Protection Period, Executive will not, directly
or indirectly (in a capacity where Executive could use specialized knowledge, training, skill or expertise, Confidential Information,
or customer contacts or information obtained from the Company to the detriment of the Company): (i) on behalf of a business that
is Competitive with the Company, solicit, attempt to solicit, call on, or accept business from any Customer (as defined in paragraph
(k) below); or (ii) in any manner cause or attempt to cause any Customer to divert, terminate, limit, modify or fail to enter into
any existing or potential business relationship with the Company.


 


(e)       Employee
Non-Solicitation. Executive agrees that, during the Term and thereafter during the Protection Period, Executive will not directly
or indirectly engage, solicit, hire, attempt to hire, or encourage any current employee or former employee (limited to former employees
whose employment has been terminated or concluded for less than 6 months) of the Company to leave or terminate his or her employment
relationship with the Company.


 


(f)       Non-Disparagement.
Executive agrees that he will not do or say anything that could reasonably be expected to disparage or impact negatively the
name or reputation in the marketplace of the Company or any of its affiliates, employees, officers, directors, stockholders,
members, principals or assigns. Subject to Executive’s continuing obligations to comply with Section 8(a) (Confidential
Information) hereof, nothing in this Section 8(f) shall preclude Executive from responding truthfully to any legal process or
truthfully testifying in a legal or regulatory proceeding, provided that, to the extent permitted by law and Section 8(i)
hereof, Executive promptly informs the Company of any such obligation prior to participating in any such proceedings. The
Company, defined for purposes of this Section 8(f) as the Board and its individual members, agrees in turn that it will not
do or say anything that could reasonably be expected to disparage or impact negatively the name or reputation in the
marketplace of Executive, provided that nothing in this Section 8(f) shall prevent the Company from responding truthfully to
any legal process or truthfully testifying in a legal or regulatory proceeding.


 






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(g)       Divisible
Provisions. The individual terms and provisions of this Section 8 are intended to be separate and divisible provisions and
if, for any reason, any one or more of them is held to be invalid or unenforceable, neither the validity nor the enforceability
of any other provision of this Section 8 shall thereby be affected. It is the intention of Executive and the Company that the potential
restrictions on Executive’s solicitation and future employment imposed by this Section 8 be reasonable in both duration and
geographic scope and in all other respects. If for any reason any court of competent jurisdiction shall find any provisions of
this Section 8 unreasonable in duration or geographic scope or otherwise, Executive and the Company agree that the restrictions
and prohibitions contained herein may be modified by a court of competent jurisdiction and shall be effective to the fullest extent
allowed under applicable law in such jurisdiction.


 


(h)       Injunctive
Relief and Remedies. In event of a breach or threatened breach of any of Executive’s duties and obligations under this
Section 8, the Company shall be entitled, in addition to any other legal or equitable remedies it may have in connection therewith
(including any right to damages it may suffer), to (i) seek temporary, preliminary and permanent injunctive relief restraining
such breach or threatened breach, (ii) cease making payments or providing benefits under Section 5 of this Agreement (other than
paragraph 5(a) thereof), and (iii) seek any other relief obtainable through statutory or common law means (including, but not limited
to, applicable trade secrets law). Executive hereby expressly acknowledges that the harm that might result to the Company’s
business as a result of any noncompliance by Executive with the provisions of this Section 8 may be largely irreparable. The restrictions
stated in this Section 8 are in addition to and not in lieu of protections afforded to trade secrets and confidential information
under applicable law. Nothing in this Section 8 is intended to or shall be interpreted as diminishing or otherwise limiting the
Company’s right under applicable law to protect its trade secrets and confidential information.


 


(i)       Protected
Activity. Nothing contained in this Agreement, or any other agreement, policy, practice, procedure, directive or
instruction maintained by the Company shall prohibit Executive from reporting possible violations of federal, state or local
laws or regulations to any federal, state or local governmental agency or commission (a “Government
Agency”) or from making other disclosures that are protected under the whistleblower provisions of federal, state
or local laws or regulations. Executive does not need prior authorization of any kind to make any such reports or disclosures
to any Government Agency and Executive is not required to notify the Company that Executive has made such reports or
disclosures. Nothing in this Agreement limits any right Executive may have to receive a whistleblower award or bounty for
information provided to any Government Agency. Executive hereby acknowledges that the Company has informed Executive, in
accordance with 18 U.S.C. § 1833(b), that Executive may not be held criminally or civilly liable under any federal or
state trade secret law for the disclosure of a trade secret where the disclosure: (i) is made in confidence to a federal,
state, or local government official, either directly or indirectly, or to an attorney, and solely for the purpose of
reporting or investigating a suspected violation of law; or (ii) is made in a complaint or other document filed in a lawsuit
or other proceeding, if such filing is made under seal.


 


(j)       Notification/Survival.
To enable the Company to monitor Executive’s compliance with the obligations imposed by this Section 8, Executive agrees
to inform the Company during the Protection Period, of the identity of any subsequent employer and Executive’s new job title.
Executive agrees that he will disclose the existence of this Section 8 to any subsequent employer. Following the expiration of
the Term or this Agreement, this Section 8 shall survive and be of full force and effect.


 


(k)       Definitions.
As used in this Section 8, the following definitions shall apply


 


“Company”
means the Company and its subsidiaries and affiliates.


 


“Competitive
with the Company” means a person, entity, business or activity that focuses on the development and commercialization
of abuse deterrent biopharmaceutical products for the treatment of Attention-deficit/hyperactivity disorder, or ADHD, or any other
proprietary biopharmaceutical products in development by the Company during Executive’s employment hereunder.


 






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“Confidential
Information” means information pertaining to the business of the Company that is generally not known to or readily
ascertainable to the industry in which the Company competes, and that gives or tends to give the Company a competitive
advantage over persons who do not possess such information or the secrecy of which is otherwise of value to the Company in
the conduct of its business regardless of when and by whom such information was developed or acquired, and regardless of
whether any of these are described in writing, copyrightable or considered copyrightable, patentable or considered
patentable. Confidential Information includes, but is not limited to, the Company’s trade secrets, financial
information or plans, pricing and profit information, sales and marketing information or plans, business or strategic plans,
information concerning methods of operation, proprietary systems or software, legal or regulatory information, cost and
pricing information or policies, information concerning new or potential products or markets, clinical data, medical or other
data relating to participants in clinical trials, or research and/or analysis, information related to present and potential
customers, vendors and suppliers (including, but not limited to, lists, contact information, requirements, contract terms,
and pricing), methods of operations, research and development, product information, business technical information, including
technical data, techniques, solutions, test methods, quality control systems, processes, design specifications, technical
formulas, procedures and information, all agreements, schematics, manuals, studies, reports, and statistical information
relating to the Company, all formulations, database files, information technology, strategic alliances, products, services,
programs and processes used or sold, and all software licensed or developed by the Company, computer programs, systems and/or
software, ideas, inventions, business information, know-how, improvements, designs, redesigns, creations, discoveries and
developments of the Company. Confidential Information includes all forms of the information, whether oral, written or
contained in electronic or any other format.


 


“Customer”
means any actual or potential customer or client of the Company that (i) Executive knows to have been engaged as a customer or
client of the Company during the 1 year period prior to the Date of Termination, (ii) Executive knows to have been contacted by
the Company during the 1 year period prior to the Date of Termination or (iii) about which Executive had been provided or had access
to Confidential Information during his employment with the Company.


 


“Protection
Period” means the applicable Severance Period; provided, however, that such period shall be extended for an additional
period of time equal to the time that elapses from the commencement of a breach of the covenants contained in this Section 8 until
the termination of such breach.


 


“Restricted
Area” means the geographic area or areas where Executive conducted activities on behalf of the Company (including its
Affiliates). It is intended as of the Effective Date that the Restricted Area will include the entire United States, as Executive
is engaged to provide services and has duties related to this entire geographic area.


 


9.       Representations.
Executive hereby represents and warrants to the Company that Executive is not party to any contract, understanding, agreement
or policy, whether or not written, with his current employer (or any other previous employer) or otherwise, that would be breached
by Executive’s entering into, or performing services under, this Agreement. Executive further represents that he has disclosed
to the Company in writing all material threatened, pending, or actual claims against Executive that are unresolved and still outstanding
as of the Effective Date, in each case of which he is aware, resulting or arising from his service with his current employer (or
any other previous employer) or his membership on any boards of directors.


 


10.       Cooperation.
During the Term and thereafter, Executive shall cooperate with the Company and its affiliates, without additional consideration,
in any internal investigation or administrative, regulatory, or judicial proceeding as reasonably requested by the Company including,
without limitation, Executive’s being available to the Company and its affiliates upon reasonable notice for interviews and
factual investigations, appearing at the Company’s request to give testimony without requiring service of a subpoena or other
legal process, volunteering to the Company all pertinent information, and turning over to the Company all relevant documents that
are or may come into Executive’s possession, all at times and on schedules that are reasonably consistent with Executive’s
other permitted activities and commitments and otherwise taking into account Executive’s reasonable business obligations.
Executive shall be reimbursed for the reasonable expenses Executive incurs in connection with any such cooperation and/or assistance
and shall receive from the Company hourly compensation equal to the Annual Base Salary immediately prior to the Date of Termination
divided by 2,200 hours, in each case in connection with any assistance or cooperation that occurs after the Date of Termination.
Any such reimbursements or per diem compensation shall be paid to Executive no later than the 15th day of the month immediately
following the month in which such expenses were incurred or such cooperation and/or assistance was provided (subject to Executive’s
timely submission to the Company of proper documentation with respect thereto).


 






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11.       Notices.
Any notice provided for in this Agreement shall be in writing and shall be either personally delivered, sent by electronic mail,
or sent by reputable overnight carrier, in each case with proof of receipt, to the recipient. Notices to Executive shall be sent
to the address of Executive most recently provided to the Company. Notices to the Company should be sent to Vallon Pharmaceuticals,
Inc., at the address of its corporate headquarters, Attention: Ofir Levi. Any notice under this Agreement will be deemed to have
been given when so delivered, sent or mailed.


 


12.       Severability.
The invalidity or unenforceability of any particular provision in this Agreement shall not affect the other provisions hereof,
and this Agreement shall be construed in all respects as if the invalid or unenforceable provision were omitted.


 


13.       Complete
Agreement. This Agreement, along with the Indemnity Agreement between Executive and the Company dated as of the Effective Date,
embodies the complete agreement and understanding between the parties with respect to the subject matter hereof and effective as
of its date supersedes and preempts any prior understandings, agreements or representations by or between the parties, written
or oral, which may have related to the subject matter hereof in any way, including the consulting agreement between Executive and
the Company dated as of January 15, 2018 (“Consulting Agreement”), which shall be considered null and void as
of the Effective Date, except that (a) in accordance with the Consulting Fee and Expenses sections of Exhibit A to the Consulting
Agreement, Consultant shall be paid all consulting fees and be reimbursed for all expenses incurred through the Effective Date,
and (b) in accordance with the Performance Bonus section of Exhibit A to the Consulting Agreement, Consultant shall be paid the
cash bonuses of $50,000 and $100,000 upon achievement of Milestone #1 and Milestone #2, respectively (for the avoidance of doubt,
notwithstanding the second paragraph of Section 2 of the Consulting Agreement, Consultant shall be paid 100% of the applicable
bonus upon achievement of the applicable milestone, despite the termination of the Consulting Agreement and regardless of how long
after such termination the applicable milestone is achieved). Executive must be employed by the Company on the date the applicable
milestone is achieved, except that (i) if Executive’s employment is terminated by the Company for any reason within two months
prior to successful completion of the milestone, then 100% of the associated cash bonus shall be paid to Consultant upon achievement
of the milestone, and (ii) if Company terminates Executive’s employment for any reason between two and four months prior
to successful completion of the milestone, then 50% of the associated cash bonus shall be paid to Consultant upon achievement of
the milestone). The payments and benefits provided under Section 5 shall be in full satisfaction of the Company’s obligations
to Executive upon his termination of employment.


 


14.       Withholding
of Taxes. The Company and its affiliates may withhold from any amounts payable under this Agreement all federal, state, city
or other taxes as the Company and its affiliates are required to withhold pursuant to any law or government regulation or ruling.


 


15.       Successors
and Assigns.


 


(a)       This
Agreement is personal to Executive, and, without the prior written consent of the Company, shall not be assignable by
Executive other than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be
enforceable by Executive’s legal representatives.


 


(b)       This
Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. Except as provided in Section
15(c), without the prior written consent of Executive this Agreement shall not be assignable by the Company, except to an affiliate.


 


(c)       The
Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially
all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform it if no such succession had taken place. “Company”
means the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid that assumes and agrees
to perform this Agreement by operation of law or otherwise.


 






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16.       Choice
of Law. This Agreement shall be governed, construed, interpreted and enforced in accordance with the substantive laws of the
Commonwealth of Pennsylvania , without regard to conflicts of law principles. The parties hereto irrevocably agree to submit to
the jurisdiction and venue of the federal and state courts located in Philadelphia, Pennsylvania in any court action or proceeding
brought with respect to or in connection with this Agreement.


 


17.       Amendment
and Waiver. The provisions of this Agreement may be amended or waived only with the prior written consent of the Company and
Executive, and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall affect the validity,
binding effect or enforceability of this Agreement.


 


18.       Section
409A Compliance.


 


(a)       In
General. The intent of the parties is that payments and benefits under this Agreement comply with Section 409A of the Code
(“Section 409A”) or are exempt therefrom and, accordingly, to the maximum extent permitted, this Agreement shall
be interpreted and administered so as to be in compliance therewith.


 


(b)       Separation
from Service. A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement
providing for the payment of any amounts or benefits subject to Section 409A upon or following a termination of employment unless
such termination is also a “separation from service” within the meaning of Section 409A, and for purposes of any such
provision of this Agreement, references to a “termination,” “termination of employment” or like terms shall
mean “separation from service” within the meaning of Section 409A.


 


(c)       Reimbursements
or In-Kind Benefits. With regard to any provision herein that provides for reimbursement of costs and expenses or in-kind
benefits, except as permitted by Section 409A: (i) the right to reimbursement or in-kind benefits shall not be subject to
liquidation or exchange for another benefit; (ii) the amount of expenses eligible for reimbursement, or in-kind benefits,
provided during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be
provided, in any other taxable year; and (iii) such payments shall be made on or before the last day of Executive’s
taxable year following the taxable year in which the expense occurred, or such earlier date as required hereunder.


 


(d)       Six
Month Delay. Notwithstanding anything contained in this Agreement to the contrary, if Executive is a “specified employee,”
as determined under the Company’s policy for identifying specified employees on the Date of Termination, then to the extent
required in order to comply with Section 409A, all payments, benefits or reimbursements paid or provided under this Agreement that
constitute a “deferral of compensation” within the meaning of Section 409A, that are provided as a result of a “separation
from service” within the meaning of Section 409A and that would otherwise be paid or provided during the first six months
following such Date of Termination shall be accumulated through and paid or provided (without interest), within 20 calendar days
after the first business day that is more than six months after the date of his separation from service (or, if Executive dies
during such six-month period, within 20 calendar days after Executive’s death).


 


(e)       Payment
Dates. Whenever a payment under this Agreement specifies a payment period with reference to a number of days (e.g.,
 “within 20 calendar days after the Release described in Section 6 becomes effective and irrevocable”), the actual date
of payment within the specified period shall be within the sole discretion of the Company. In the event the payment period under
this Agreement for any nonqualified deferred compensation commences in one calendar year and ends in a second calendar year, the
payments shall not be paid (or installments commenced) until the later of the first payroll date of the second calendar year, or
the date that such Release becomes effective and irrevocable, to the extent necessary to comply with Section 409A. For purposes
of Section 409A, Executive’s right to receive any “installment” payments pursuant to this Agreement shall be
treated as a right to receive a series of separate and distinct payments.


 






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19.       Counterparts.
This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed
to be one and the same agreement. A signed copy of this Agreement delivered by electronic mail or other means of electronic transmission
shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.


 


IN WITNESS
WHEREOF, the parties have caused this Agreement to be executed as of the date first written above.


 


	 	VALLON PHARMACEUTICALS, INC.
     
	 	 
	 	/s/Ofir
    Levi
	 	By:	Ofir Levi
	 	Its:	Interim Chief Executive Officer
	 	 
	 	EXECUTIVE  
	 	 
	 	/s/
    David Baker
	 	David Baker  






 






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Execution Version


 


EXHIBIT A

GENERAL RELEASE


 


This General Release
(this “Release”) is made and entered into as of this [●] day of [●], 20[●], by and between
Vallon Pharmaceuticals, Inc. (the “Company”) and David Baker (“Executive”).


 


1.       Employment
Status. Executive’s employment with the Company and its affiliates terminated effective as of [●], 20[●]
(the “Separation Date”).


 


2.       Payments
and Benefits. Upon the effectiveness of the terms set forth herein, the Company shall provide Executive with the benefits set
forth in Section 5(b) of the Employment Agreement between Executive and the Company dated as of January 15, 2019 (the “Employment
Agreement”), upon the terms, and subject to the conditions, of the Employment Agreement. Executive agrees that Executive
is not entitled to receive any additional payments as wages, vacation or bonuses except as otherwise provided under Section 5(b)
of the Employment Agreement.


 


3.       No
Liability. This Release does not constitute an admission by the Company, or any of its parents, subsidiaries, affiliates, divisions,
officers, directors, partners, agents, or employees, or by Executive, of any unlawful acts or of any violation of federal, state
or local laws.


 


4.       Release.
In consideration of the payments and benefits set forth in Section 2 above, Executive for herself, his heirs, administrators,
representatives, executors, successors and assigns does hereby irrevocably and unconditionally release, acquit and forever
discharge the Company and each of its parents, subsidiaries, affiliates, divisions, successors, assigns, officers, directors,
partners, agents, attorneys, and former and current employees, including without limitation all persons acting by, through,
under or in concert with any of them (collectively, “Releasees”), and each of them, from any and all
claims, demands, actions, causes of action, costs, attorney fees, and all liability whatsoever, whether known or unknown,
fixed or contingent, which Executive has, had, or may ever have against the Releasees relating to or arising out of
Executive’s employment or separation from employment with the Company, from the beginning of time and up to and
including the date Executive executes this Release. This Release includes, without limitation, (i) law or equity claims; (ii)
contract (express or implied) or tort claims; (iii) claims for wrongful discharge, retaliatory discharge, whistle blowing,
libel, slander, defamation, unpaid compensation, intentional infliction of emotional distress, fraud, public policy, contract
or tort, and implied covenant of good faith and fair dealing; (iv) claims arising under any federal, state, or local laws of
any jurisdiction that prohibit age, sex, race, national origin, color, disability, religion, veteran, military status, sexual
orientation, or any other form of discrimination, harassment, or retaliation (including without limitation under the Age
Discrimination in Employment Act of 1967 as amended by the Older Workers Benefit Protection Act (“ADEA”),
the National Labor Relations Act, Executive Order 11246, the Employee Retirement Income Security Act of 1974, the Worker
Adjustment and Retraining Notification Act, Title VII of the Civil Rights Act of 1964 as amended by the Civil Rights Act of
1991, Section 1981 of the Civil Rights Act of 1966, the Equal Pay Act of 1962, the Americans with Disabilities Act of 1990,
the Rehabilitation Act of 1973, the Family and Medical Leave Act of 1993, the Consolidated Omnibus Budget Reconciliation Act
(COBRA), the Genetic Information Non-discrimination Act, the Sarbanes-Oxley Act, the Employee Polygraph Protection Act, the
Uniformed Services Employment and Reemployment Rights Act of 1994, the Equal Pay Act, the Lilly Ledbetter Fair Pay Act, the
Post-Civil War Civil Rights Act (42 U.S.C. §§1981-1988), or any other foreign, federal, state or local law or
judicial decision), (v) claims arising under the Employee Retirement Income Security Act (excluding claims for amounts that
are vested benefits or that Executive is otherwise entitled to receive under any employee benefit plan of the Company or any
of its affiliates in accordance with the terms of such plan and applicable law), and (vi) any other statutory or common law
claims related to Executive’s employment with the Company or the separation of Executive’s employment with the
Company; provided, however, that nothing herein shall release any obligation of the Company under the Employment
Agreement.


 






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5.       Protected
Activity. Nothing contained in this Release limits Executive’s ability to file a charge or complaint with any federal,
state or local governmental agency or commission (a “Government Agency”). In addition, nothing in this Release
or any other Company agreement, policy, practice, procedure, directive or instruction shall prohibit Executive from reporting possible
violations of federal, state or local laws or regulations to any Government Agency or making other disclosures that are protected
under the whistleblower provisions of federal, state or local laws or regulations. Executive does not need prior authorization
of any kind to make any such reports or disclosures and Executive is not required to notify the Company that Executive has made
such reports or disclosures. If Executive files any charge or complaint with any Government Agency, and if the Government Agency
pursues any claim on Executive’s behalf, or if any other third party pursues any claim on Executive’s behalf, Executive
waives any right to monetary or other individualized relief (either individually, or as part of any collective or class action)
that arises out of alleged facts or circumstances on or before the effective date of this Release; provided that nothing in this
Release limits any right Executive may have to receive a whistleblower award or bounty for information provided to the Securities
and Exchange Commission or other Government Agency.


 


6.       Bar.
Executive and the Company acknowledge and agree that if he or it should hereafter make any claim or demand or commence or threaten
to commence any action, claim or proceeding against the other party with respect to any cause, matter or thing which is the subject
of the releases under Section 4 of this Release, this Release may be raised as a complete bar to any such action, claim or proceeding,
and the applicable Releasee may recover from the other party all costs incurred in connection with such action, claim or proceeding,
including attorneys’ fees.


 


7.       Governing
Law. This Release shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, without
regard to conflicts of laws principles.


 


8.       Acknowledgment.
Executive has read this Release, understands it, and voluntarily accepts its terms, and Executive acknowledges that he has been
advised by the Company to seek the advice of legal counsel before entering into this Release, and has been provided with a period
of at least twenty-one (21) days in which to consider entering into this Release. Executive acknowledges and agrees that the payments
and benefits provided under Section 2 of this Release represent substantial value over and above that to which Executive would
otherwise be entitled.


 





9.       Revocation.
Executive has a period of seven (7) days following the execution of this Release during which Executive may revoke this Release
by delivering written notice to the Company, and this Release shall not become effective or enforceable until such revocation period
has expired. Executive understands that if he revokes this Release, it will be null and void in its entirety, and he will not be
entitled to any payments or benefits provided in this Release, including without limitation those under Section 2 above.


 


10.       Miscellaneous.
This Release is the complete understanding between Executive and the Company in respect of the subject matter of this Release and
supersedes all prior agreements relating to the same subject matter. Executive has not relied upon any representations, promises
or agreements of any kind except those set forth herein in signing this Release. In the event that any provision of this Release
should be held to be invalid or unenforceable, each and all of the other provisions of this Release shall remain in full force
and effect. If any provision of this Release is found to be invalid or unenforceable, such provision shall be modified as necessary
to permit this Release to be upheld and enforced to the maximum extent permitted by law.


 






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11.       Counterparts.
This Release may be executed by the parties hereto in counterparts, which taken together shall be deemed one original.


 


	 	VALLON PHARMACEUTICALS, INC.
	 	 
	 	[Form of release – Do not sign]
	 	 
	 	 
	 	By:
	 	Its:
	 	 
	 	EXECUTIVE
	 	 
	 	[Form of release – Do not sign]
	 	 
	 	 
	 	David Baker  






 








    A-3