Document:

Exhibit
10.5

 

EXECUTIVE
EMPLOYMENT AGREEMENT

William
B. Stilley, III

 

This
Executive Employment Agreement (this “Agreement”) is effective as of December 6, 2010 (the “Effective Date”),
between ADial Pharmaceuticals, LLC, a Virginia limited liability company (the “Company”), and William B. Stilley,
III (“Executive”).

 

RECITALS:

 

A.      The
Board of Directors of the Company (the “Board”), as defined in the Company’s Operating Agreement dated
November 23, 2010 (the “Operating Agreement”), believes that it is in the best interests of the Company and
its Members to employ and compensate Executive in return for his diligent service to the Company.

 

B.       The
Company and Executive wish to enter into this Agreement for the benefit of the Company, its Members and Executive.

 

AGREEMENT:

 

In
consideration of the promises and undertakings set forth herein and other good and valuable consideration, the receipt and sufficiency
of which are acknowledged, the Company and Executive agree as follows:

 

	1.	Certain
                                         Definitions. For purposes of this Agreement, the following terms denoted by capitalization
                                         of initial letters shall have the definitions ascribed below:

 

		(a)	“Annual
                                         Salary” means the greater of (i) two hundred ten thousand dollars ($210,000);
                                         or (ii) the highest gross annual salary rate payable to Executive by the Company, any
                                         wholly owned subsidiary of the Company or any Successor (as defined herein) prior to
                                         the effective date of termination of this Agreement.

 

		(b)	“Cause”
                                         shall be determined by majority vote of the Board, in good faith, and shall mean: (A)
                                         Executive’s - continued failure to substantially perform Executive’s duties
                                         with the Company (other than any such failure resulting from Executive’s incapacity
                                         due to physical or mental illness, or any actual or anticipated failure of Executive’s
                                         performance after the Company’s issuance of a notice of termination or Executive’s
                                         issuance of a notice of termination for Good Reason), after a written demand for substantial
                                         performance is delivered to Executive by the Board, which demand specifically identifies
                                         the manner in which the Board believes that Executive has not substantially performed
                                         Executive’s duties, and after receipt of which demand Executive shall have had
                                         a thirty (30) day period within which to cure such failure; (B) Executive’s - misconduct
                                         which is demonstrably and materially injurious to the Company, monetarily or otherwise;
                                         or (C) Executive’s felony conviction for a violation of a criminal law. Without
                                         limitation to the foregoing, “Cause” does not include acts or omissions attributable
                                         to bad judgment or negligence, unless due to, habitual and continued bad judgment or
                                         negligence.

 

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		(c)	“Employment
                                         Date” means the date Executive reports for work with the Company as shown below
                                         the signature block of this Agreement.

 

		(d)	“Good
                                         Reason” means, without Executive’s express written consent, the occurrence
                                         of any of the following events:

 

		(i)	the
                                         assignment to Executive of duties neither appropriate for a senior level executive of
                                         an entity like the Company, or the assignment to Executive of any duties that Executive
                                         believes in good faith to entail a substantial increase in Executive’s exposure
                                         to potential personal liability (whether or not indemnifiable by the Company) or a substantial
                                         increase in occupational risk to Executive’s personal health or safety; or

 

		(ii)	a
                                         reduction by the Company in Executive’s salary without Executive's consent: or

 

		(iii)	the
                                         failure by the Company, without Executive’s consent, to pay to Executive any portion
                                         of Executive’s salary, bonus, or any compensation due to Executive under any deferred
                                         compensation program, or to pay any benefit under any employee compensation, benefit
                                         or welfare plan then in effect, within ten (10) business days of the date such compensation
                                         or benefit is due; or

 

		(iv)	the
                                         failure by the Company to provide Executive with vacation and related benefits (or compensation
                                         in lieu thereof) to which Executive is entitled under this Agreement; or

 

		(v)	the
                                         assignment of Executive without Executive's consent, to an office or location more than
                                         one hundred twenty (120) miles from the City of Charlottesville , Virginia (other than
                                         on a temporary basis not exceeding on average five (5) days per month in any three (3)
                                         month period); or

 

		(vi)	the
                                         breach by the Company of this Agreement;

 

provided,
however, that none of the events set forth in foregoing clauses (i) - (vi) will constitute “Good Reason” unless and
until Executive provides the Company with written notice of the event and thirty (30) days to cure or remedy such event, except
that if after any such event is cured once and it reoccurs, or if any of the foregoing events occur after more than three distinct
non-recurring events are cured, no notice and opportunity to cure or remedy will be required before such event constitutes Good
Reason.

 

		(e)	“Material
                                         Transaction” means the consummation of any of the following: (A) any transaction
                                         or series of related transactions by the Company or its equity holders in which a majority
                                         of the Company’s voting power is transferred to one or more persons or entities
                                         who were not previously equity holders of the Company, (B) any merger or consolidation
                                         of the Company with or into any other entity, after which the Members of the Company
                                         do not hold, either directly or indirectly, a majority of the voting equity of the surviving
                                         entity, (C) the sale, conveyance, exclusive license or other disposition of a material
                                         portion of the business and/or assets of the Company to a non-affiliated entity (it being
                                         agreed, by way of illustration and not limitation, that the sale, conveyance, exclusive
                                         license or other disposition of either, or both, of the Company’s drug candidates
                                         currently designated as AD/04 and AD/01 to a non-affiliated entity shall constitute a
                                         Material Transaction).

 

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		(f)	“Membership
                                         Units” shall as such term is defined in the Operating Agreement.

 

		(g)	“Nondisclosure
                                         Agreement” shall have the meaning stated in Section 13 below.

 

		(h)	“Personal
                                         Items” shall have the meaning stated in Section 5(c) below.

 

		(i)	“Right
                                         of Repurchase” shall have the meaning stated in Section 10 below.

 

		(j)	“Successor”
                                         shall mean any person, firm, corporation or other business entity which at any time,
                                         whether by purchase, merger, consolidation or otherwise, directly or indirectly, acquires
                                         all or substantially all of the business and/or assets of the Company.

 

		(k)	“Term”
                                         shall have the meaning stated in Section 2 below.

 

	2.	Term.
                                         Unless earlier terminated as provided herein, the initial term of this Agreement will
                                         commence on the Effective Date and continue for a period of one year from the Effective
                                         Date; provided, however, that commencing on such one-year anniversary date and on each
                                         annual anniversary of such date thereafter, the term of this Agreement will automatically
                                         be renewed for additional one (1) year terms unless, not later than thirty (30) days
                                         prior to the end of the initial term or any renewal term, either party has given written
                                         notice to the other party that it does not wish to renew this Agreement. Notwithstanding
                                         the foregoing, it is understood and agreed that in the event this Agreement is terminated
                                         as a result of the Company or any Successor giving such notice of non-renewal, the Company’s
                                         or such Successor’s obligations under Sections 7 and 8 shall survive and be enforceable
                                         under the terms hereof to the same extent as if this Agreement remained in effect. The
                                         initial term of this Agreement and all renewals thereof are referred to herein as the
                                         “Term.”

 

	3.	Positions.
                                         The Company hereby employs Executive and Executive hereby accepts employment effective
                                         as of the Effective Date. During the Term, Executive shall serve as a member of the Board,
                                         as described in the Operating Agreement; and, commencing on the Employment Date and during
                                         the Term, Executive shall serve as Chief Executive Officer of the Company, as described
                                         in the Operating Agreement.

 

	4.	Salary
                                         and Bonus.

 

		(a)	Salary.
                                         Effective as of the Employment Date, Executive’s Annual Salary will be Two Hundred
                                         Ten Thousand Dollars ($210,000), which Annual Salary may be increased from time to time
                                         by the Board; provided, however, that from the Employment Date until the occurrence of
                                         the Milestone Bonus Trigger, all amounts payable as Annual Salary which exceed $60,000
                                         (on an annual basis) (the “Milestone Bonus Amounts”) shall not be
                                         paid to Executive, but will accrue, interest free. All such accrued amounts shall be
                                         paid to Executive on the Company’s next regular payroll date following the occurrence
                                         of the Milestone Bonus Trigger, and thereafter Executive shall be paid based on Executive’s
                                         full annual base salary rate. The “Milestone Bonus Trigger” shall
                                         mean the earliest to occur of the following events:

 

		(i)	The
                                         Company or its members, in a single transaction or a series of transactions, receives
                                         at least One Million Dollars ($1,000,000.00) in aggregate gross proceeds, including,
                                         without limitation, through the issuance of equity interests, debt, cancellation of indebtedness,
                                         or sale of assets;

 

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		(ii)	The
                                         consummation of a Material Transaction;

 

		(iii)	A
                                         liquidation or dissolution of the Company.

 

In
the event Executive’s employment is terminated for any reason by the Company or by Executive prior to the occurrence of
the Milestone Bonus Trigger, Executive shall forfeit all rights to receive the Milestone Bonus Amounts.

 

		(b)	Bonuses;
                                         Six-Month Review. Six (6) months after the Effective Date, the Board (or its designated
                                         subcommittee) will review Executive’s performance and will establish a bonus and
                                         equity plan (including without limitation, an annual bonus plan) for Executive commensurate
                                         with such plans customarily established for executives with similar responsibilities
                                         and performance. Additionally, Executive shall be eligible to participate in all bonus
                                         or similar incentive plans adopted from time to time by the Board. Any bonuses awarded
                                         to Executive, unless otherwise specifically provided by the Board or committee administering
                                         such plan or program, shall be paid no later than March 15 of the year following the
                                         year in which such bonus was earned.

 

	5.	Benefits
                                         and Personal Items.

 

		(a)	Health
                                         Insurance and other Benefits. Commencing on the Employment Date and during the Term,
                                         the Company will provide comprehensive health insurance for Executive and his immediate
                                         family and dependents. Additionally, Executive will be entitled to receive any other
                                         benefits, and participate in any other retirement, profit sharing, life insurance, disability
                                         insurance and other benefit plans as may be offered by the Company to its senior executives
                                         or other employees as of the Effective Date or thereafter.

 

		(b)	Vacation,
                                         Personal Days, Sick Days, and Holidays. During the Term, Executive will be entitled
                                         to twenty (20) days of paid vacation per year, two (2) paid personal days per year and
                                         ten (10) paid sick days per year. Additionally, the Company will establish a holiday
                                         schedule of not less than ten (10) holidays per fiscal year. Upon termination of Executive’s
                                         employment, the Company shall pay Executive an amount equal to any accrued but unused
                                         vacation within thirty (30) days of such termination.

 

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		(c)	Personal
                                         Items. During the Term, the Company will provide Executive with a (i) personal laptop
                                         computer, (ii) a personal digital assistant and (iii) a cell phone (items (ii) and (iii)
                                         may be one item) (collectively the “Personal Items”). The Company
                                         agrees that it is in the Company’s best interests to allow Executive to use the
                                         Personal Items for Executive’s personal use and Executive is authorized to do so.
                                         Notwithstanding any provision to the contrary herein, in the Nondisclosure Agreement
                                         or in any other agreement between the Company and Executive, the Company acknowledges
                                         and agrees that any such personal information, data, software or other material contained
                                         in or stored on any of the Personal Items (“Personal Materials”) shall
                                         be and remain the sole property of Executive. The Company agrees that the Personal Materials
                                         shall be deemed the confidential information of Executive and the Company shall not review,
                                         access or disclose any of such Personal Materials without the prior written consent of
                                         Executive. Further, the Company agrees that upon termination of Executive’s employment
                                         for any reason, Executive shall be entitled to retain all Personal Materials (and if
                                         returning the Personal Items to the Company upon termination, remove all Personal Materials
                                         from the Personal Items prior to return) and a copy of Executive’s calendar and
                                         contacts, whether residing or stored on the Personal Items or otherwise.

 

	6.	Business
                                         Expenses. The Company shall pay, or reimburse Executive for all reasonable expenses
                                         incurred by Executive related to conduct of the business of the Company; provided that
                                         the Executive complies with the Company’s reasonable policies for the reimbursement
                                         or advancement of business expenses that are now or hereafter in effect.

 

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

 

		(a)	Termination
                                         upon Expiration of the Term. This Agreement and Executive’s employment by the
                                         Company shall terminate upon the expiration of the Term if either party provides written
                                         notice of non-renewal pursuant to Section 2 hereof.

 

		(b)	Termination
                                         by Executive. Executive may terminate this Agreement and his employment by the Company
                                         (i) for Good Reason, or (ii) otherwise at any time and for any reason upon sixty (60)
                                         days’ notice to the Company.

 

		(c)	Termination
                                         by the Company. The Company may terminate this Agreement and Executive’s employment
                                         by the Company upon notice to Executive (or his personal representative (as applicable):
                                         (i) at any time and for any reason upon written notice to Executive; (ii) for Cause;
                                         (iii) upon Executive’s death in which case this Agreement shall terminate immediately;
                                         provided that such termination shall not prejudice any benefits payable to Executive’s
                                         heirs or beneficiaries which are fully vested as of the date of death and provided further
                                         that all “Membership Units” in the Company previously issued to Executive
                                         that would have been released from the Right of Repurchase over the next six (6) months
                                         of Executive’s employment will immediately become fully released from such Right
                                         of Repurchase as of the date of termination; or (iv) if Executive is “permanently
                                         disabled” in which case this Agreement shall terminate immediately; provided that
                                         such termination shall not prejudice any benefits payable to Executive, Executive’s
                                         spouse or beneficiaries which are fully vested as of the date of the termination of this
                                         Agreement and provided further that all restricted Membership Units in the Company previously
                                         issued to Executive that would have been released from the Right of Repurchase over the
                                         next six (6) months of Executive’s employment will immediately become fully released
                                         from such Right of Repurchase as of the date of termination. For purposes of this Agreement,
                                         Executive shall be considered “permanently disabled” when a qualified
                                         medical doctor mutually acceptable to the Company and Executive or Executive’s
                                         personal representative shall have certified in writing that: (A) Executive is unable,
                                         because of a medically determinable physical or mental disability, to perform the essential
                                         functions of Executive’s job, with or without a reasonable accommodation, for more
                                         than one hundred and eighty (180) calendar days measured from the last full day of work;
                                         or (B) by reason of mental or physical disability, it is unlikely that Executive will
                                         be able, within one hundred and eighty (180) calendar days, to resume the essential functions
                                         of Executive’s job, with or without a reasonable accommodation, and to otherwise
                                         discharge Executive’s duties under this Agreement. Executive shall continue to
                                         be compensated as otherwise provided herein during such 180-day period, except that any
                                         compensation due to Executive may be reduced by the amount of disability income, if any,
                                         provided by a Company sponsored disability plan.

 

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	8.	Company
                                         Obligations upon Termination.

 

		(a)	If
                                         Executive’s employment with the Company (A) is terminated: (i) by the Company for
                                         Cause, (ii) by the Company pursuant to Section 7(c)(iii) or (iv), or (iii) by Executive
                                         pursuant to Section 7(b)(ii); or (B) if Executive elects not to renew the Term, the Company
                                         shall have no further obligations hereunder other than the payment of all compensation
                                         and other benefits accrued or payable to Executive through the date of such termination
                                         which shall be paid on or before the Company’s next regularly scheduled payday
                                         unless such amount is not then-calculable, in which case payment shall be made on the
                                         first regularly scheduled payday after the amount is calculable.

 

		(b)	If
                                         Executive’s employment with the Company (A) is terminated: (i) by the Company without
                                         Cause or (ii) by Executive for Good Reason; or (B) if the Company elects not to renew
                                         the Term, Executive shall receive from the Company:

 

		(i)	An
                                         amount equal to the sum of (A) Executive’s then-current Annual Salary (as defined
                                         in Section 1(a)) and (B), payable in twelve (12) equal monthly installments on the first
                                         business day of each calendar month following the month in which termination of employment
                                         occurs;

 

		(ii)	Payment
                                         of health, dental insurance premiums for Executive and his family under the Company’s
                                         then existing group health plan(s), for a period of eighteen (18) months following termination.
                                         In the event Executive and his family shall, for any reason, no longer be eligible participants,
                                         Executive shall be entitled, for each remaining month of such 18-month benefit, to payment
                                         of the amount of the gross aggregate monthly premium(s) last paid for Executive and his
                                         family under such plan(s). Such amount may be paid monthly or in one lump sum, at the
                                         Company’s discretion. Executive shall be responsible for any taxes due on such
                                         payments;

 

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		(iii)	Without
                                         any further payment from Executive, Executive’s Company-owned Personal Items. Executive
                                         may, at Executive’s option within 14 days after termination, return the cellular
                                         phone to the Company, in which event the Company shall pay any termination or other fees
                                         related to the cellular phone or the cellular phone plan; and

 

		(iv)	The
                                         immediate lapsing of six (6) months of the Company’s Right of Repurchase.

 

	9.	Excise
                                         Tax. If Executive on the date of Executive’s termination of employment is a
                                         “specified employee” (as defined in Section 409A of the Internal Revenue
                                         Code of 1986, as amended (the “Code”), and the regulations promulgated
                                         thereunder (“Section 409A”)), notwithstanding the provisions of Section
                                         8, if and solely to the extent required in order to avoid the imposition on Executive
                                         of any excise tax under Section 409A, the payment of any severance or other payments
                                         under Section 8 shall not commence until, and shall be made on, the first business day
                                         after the date that is six (6) months following the date of Executive’s termination
                                         of employment, and in such event the initial payment shall include a catch-up amount
                                         covering amounts that would otherwise have been paid during the six-month period following
                                         Executive’s termination date.

 

	10.	Membership
                                         Interests; Right of Repurchase. As of the Effective Date, Executive has purchased
                                         and owns 700,000 Membership Units. The Company shall have a right of repurchase (the
                                         “Right of Repurchase”) with respect to 560,000 of such Membership
                                         Units (the “Remaining Units”). The Right of Repurchase shall lapse
                                         according to the following schedule: the Remaining Units shall become fully released
                                         from the Right of Repurchase at the rate of 1/48th of such Remaining Units
                                         per month commencing on the Effective Date, such that all of the Remaining Units shall
                                         be released from the Right of Repurchase on the fourth annual anniversary of the Effective
                                         Date. In addition, the Right of Repurchase shall lapse on an accelerated basis as to
                                         100% of the Remaining Units upon the consummation of a Material Transaction or upon a
                                         liquidation or dissolution of the Company. If Executive’s employment is terminated
                                         for any reason prior to the expiration of the Right of Repurchase, the Company shall
                                         have the right to repurchase such of the Remaining Units as are subject to the Right
                                         of Repurchase as of the date of termination for the original amount of $0.00001 per Membership
                                         Unit paid by Executive for such Remaining Units to be repurchased. The Company shall
                                         deliver written notice (the “Notice”) to Executive within sixty (60) days
                                         of termination of employment of its election to exercise such Right of Repurchase as
                                         to the Remaining Units still subject to the Right of Repurchase; otherwise the Right
                                         of Repurchase shall expire at the end of such 60-day period. If Company delivers the
                                         Notice, then the units will be purchased by the Company on the date -twelve (12) months
                                         after such Notice (the “Purchase Date”). If a Material Transaction occurs
                                         before the Purchase Date, then the Right of Repurchase shall lapse for any and all Remaining
                                         Units and Executive shall retain ownership of all Membership Units owned by Executive
                                         at the time of Executive’s termination.

 

	11.	No
                                         Obligation to Mitigate. Executive will not be required to mitigate the amount of
                                         any payment or benefit provided for in this Agreement by seeking other employment or
                                         otherwise, nor will the amount of any payment or benefit provided for in this Agreement
                                         be reduced by any compensation or benefit earned by Executive as the result of employment
                                         by another employer, by retirement benefits, by offset or otherwise; provided, that payments
                                         by a Successor designated as payments under this Agreement will be credited against the
                                         obligations under this Agreement whether or not the paying entity is the Company.

 

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	12.	Section
                                         409A. To the extent that any provision of this Agreement is subject to Section 409A,
                                         such provision is intended to comply with Section 409A. Deferral or acceleration of any
                                         payment contemplated by this Agreement which is subject to Section 409A is strictly prohibited
                                         unless specifically permitted by Section 409A; Executive’s rights to any payments
                                         subject to Section 409A are not subject to anticipation, alienation, sale, transfer,
                                         pledge, encumbrance, attachment or garnishment and, where applicable, may only be transferred
                                         by will or the laws of descent and distribution; and to the fullest extent permitted
                                         by law, each payment and payment rights hereunder shall be treated as a separate payment
                                         for purposes of Section 409A. 

 

	13.	Nondisclosure
                                         and Inventions Assignment. Prior to this Agreement becoming effective, Executive
                                         will execute the Company’s standard Employee Nondisclosure and Assignment of Inventions
                                         Agreement (“Nondisclosure Agreement”), a copy of which is attached
                                         to this agreement as Exhibit A.

 

	14.	Withholding.
                                         Notwithstanding any withholding policy or procedure which the Company may have adopted
                                         or may adopt with respect to withholding from distributions paid to Executive as a Member
                                         of the Company, the Company or its Successor shall be entitled to reduce any payments
                                         due hereunder by normal withholdings required by law.

 

	15.	Indemnification.
                                         The Company shall indemnify Executive, to the maximum extent permitted by applicable
                                         law, against all costs, damages, liabilities, losses, charges and expenses of any kind
                                         incurred or sustained by Executive in connection with any action, suit or proceeding
                                         to which Executive may be a party or in which Executive may be a witness by reason of
                                         Executive’s being an officer, manager or executive of the Company or any subsidiary
                                         or affiliate of or Successor to the Company. If, after the resolution of an action in
                                         which Executive is found in a final, non-appealable judgment by a U.S. court of competent
                                         jurisdiction to be at fault due to willful misconduct of Executive, then Executive shall
                                         reimburse the Company for a reasonable apportionment of reasonable legal fees actually
                                         incurred by the Company directly related to defending Executive against such claim. In
                                         addition, Executive shall be entitled to full coverage under any directors’ and
                                         officers’ liability insurance policy maintained by the Company for one or more
                                         officers of the Company or members of the Board, and, to the extent that any indemnification
                                         is offered to any employee, officer, director or other agent of the Company, that has
                                         any terms that are more broad and/or beneficial to the indemnitee than the above, then
                                         the indemnification provided to Executive hereunder will be automatically amended to
                                         include such increased terms.

 

	16.	Notices.
                                         For the purpose of this Agreement, notices and all other communications provided for
                                         in the Agreement will be in writing and will be deemed to have been duly given when:
                                         (a) personally delivered; (b) deposited for next day delivery by Federal Express, or
                                         other similar overnight courier services; or (c) three days after being mailed by certified
                                         or registered mail, return receipt requested, postage prepaid, addressed to the party
                                         at its last known address, after reasonable inquiry, provided that all notices to the
                                         Company will be directed to the attention of its Secretary, or to such other address
                                         as either party may have furnished to the other in writing in accordance herewith.

 

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	17.	Survival.
                                         Notwithstanding the termination of Executive’s employment, the parties’ rights
                                         and obligations shall survive to the extent that any performance is required under this
                                         Agreement after the expiration or termination of such employment.

 

	18.	No
                                         Consequential or Special Damages. In no event shall either of the parties be liable
                                         to the other for consequential or special damages of any kind or nature.

 

	19.	Dispute
                                         Resolution

 

		(a)	Any
                                         dispute or disagreement arising out of or in connection with this Agreement, including
                                         without limitation its validity and interpretation, shall be negotiated in good faith
                                         by the parties upon either party submitting a written request to the other to negotiate.
                                         The request to negotiate may include a request for mediation in which event the parties
                                         will act in good faith to agree upon a single mediator and to mediate the dispute. If
                                         the dispute is not settled by negotiation or if no mediator is agreed upon within thirty
                                         (30) days of the request, or if a mediator is agreed upon and the dispute is not settled
                                         through mediation within ninety (60) days of the request, the dispute shall be submitted
                                         to arbitration, and shall be finally settled, in accordance with the Commercial Rules
                                         of the American Arbitration Association by a single arbitrator in Charlottesville, Virginia.

 

		(b)	In
                                         arriving at his or her award the arbitrator shall make every effort to find a solution
                                         to the dispute in the provisions of this Agreement and shall give full effect to all
                                         parts hereof. However, if a solution cannot be found in the provisions of this Agreement,
                                         the arbitrator shall apply the local domestic law of the Commonwealth of Virginia; provided,
                                         however, that the arbitrator shall have no authority to modify any provisions of this
                                         Agreement or to award a remedy for a dispute involving this Agreement other than a benefit
                                         specifically provided under or by virture of this Agreement. Both parties shall make
                                         disclosure of all materials relevant to the dispute at the request of the other, and
                                         any disputes over such disclosure shall be resolved by the arbitrator.

 

		(c)	The
                                         award of the arbitrator shall be final and binding upon the parties. Judgment upon the
                                         award may be entered in any court having jurisdiction. An application may be made to
                                         any such court for a judicial acceptance of the award and an order for enforcement.

 

		(d)	Each
                                         party shall be responsible for its own expenses relating to the conduct of any mediation
                                         or arbitration provided for hereunder (including reasonable attorney’s fees and
                                         expenses), and the parties shall share evenly the fees of any mediator, and of the American
                                         Arbitration Association and any arbitrator.

 

	20.	Binding
                                         Effect. The obligations of the parties will be binding on and inure to the benefit
                                         of their respective heirs, successors, assigns, personal representatives and affiliates,
                                         including, without limitation, any Successors. Any Successor shall be deemed substituted
                                         for the Company under the terms of this Agreement.

 

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	21.	Integration.
                                         This Agreement and the Nondisclosure Agreement constitute the parties’ entire agreement
                                         with respect to the subject matter hereof and supersede all prior agreements and understandings
                                         between the parties with respect to the same. Subject to the provisions of Section 2
                                         for automatic Term renewal, a waiver, discharge, amendment, modification or termination
                                         of this Agreement or any provision hereof will be valid and effective only if in writing
                                         and executed by both parties hereto. A written waiver of a right, remedy or obligation
                                         under a provision of this Agreement will not constitute a waiver of the provision itself,
                                         a waiver of any succeeding right, remedy or obligation under the provision, or a waiver
                                         of any other right, remedy, or obligation under this Agreement. Any delay or failure
                                         by a party in enforcing any obligation or in exercising any right or remedy will not
                                         operate as a waiver of it or affect that party’s right later to enforce the obligation
                                         or exercise the right or remedy, and a single or partial exercise of a right or remedy
                                         by a party does not preclude any further exercise of it or the exercise of any other
                                         right or remedy of that party.

 

	22.	Severability.
                                         If any provision of this Agreement is held by a court or other tribunal of competent
                                         jurisdiction to be invalid, void or unenforceable in any respect or with respect to any
                                         matter, such provision in all other respects and with respect to all other matters, and
                                         the remaining provisions with respect to all matters, will nevertheless continue in full
                                         force and effect without being impaired or invalidated and will be enforceable to the
                                         full extent permitted by law.

 

	23.	Governing
                                         Law. This Agreement will be governed by and construed in accordance with the laws
                                         of the Commonwealth of Virginia as such laws are applied to agreements entered into and
                                         to be performed entirely within the Commonwealth of Virginia between Virginia residents.

 

	24.	Construction.
                                         Unless the context of this Agreement otherwise requires, (a) words of any gender will
                                         be deemed to include each other gender; (b) the words “herein,” “hereof’
                                         and “hereunder” and other words of similar import refer to this Agreement
                                         as a whole and not to any particular article, section, paragraph, or other subdivision,
                                         (c) words using the singular or plural in number will also include the plural or singular
                                         in number, respectively; (d) the terms “Section” or “subsection”
                                         will refer to the specified Section or subsection of this Agreement; (e) the terms of
                                         any provision of the Code, or any other statute, regulation or form, or part thereof,
                                         will be deemed also to refer to successor provisions to such provisions; and (f) the
                                         headings of the sections of this Agreement are inserted for convenience only and will
                                         not be deemed to constitute part of this Agreement or to affect its construction.

 

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

 

    	 	Page 10 of 11

    

    

 

WITNESS
the following duly authorized signatures:

 

	ADial Pharmaceuticals, LLC	 	EXECUTIVE:

	 	 	 	 	 
	By:	/s/
    Bankole A. Johnson	 	By:	/s/
    William B. Stilley, III
	 	Bankole
    A. Johnson	 	 	William
    B. Stilley, III
	 	Chairman	 	 	 

  

Employment
Date Certification

 

I
hereby certify that I reported for work with the Company on December 6, 2010 (the “Employment Date”)
and that a copy of this certification has been provided to the Company.

 

	By:	/s/
    William B. Stilley, III	 
	 	William
    B. Stilley, III	 

 

    	 	Page 11 of 11

    

    

 

Exhibit
A

 

Company’s
Employee Nondisclosure and Assignment of Inventions Agreement

 

(Attached)

 

     

    

    

 

ADIAL
PHARMACEUTIALS, L.L.C

CONFIDENTIALITY,
NON-DISCLOSURE AND

OWNERSHIP
OF EMPLOYEE DEVELOPMENTS AGREEMENT

 

As
an employee of ADial Pharmaceutials, L.L.C. (“Employer”), I hereby agree to observe all the provisions of this Agreement,
as well as all other rules and policies that the Employer may announce from time to time.

 

Section
1

AVOIDANCE
OF CONFLICT OF INTEREST

 

1.1
While employed by Employer, I will not engage in any other business activity that conflicts with my duties to Employer. Under
no circumstances will I work for any competitor or have any financial interest in any competitor of Employer; provided, however,
that this Agreement does not prohibit investment of a reasonable part of my assets in the stock or securities of any competitor
whose stock or securities are traded on a national exchange.

 

Section
2

OWNERSHIP
OF EMPLOYEE DEVELOPMENTS

 

2.1
While employed by Employer, I will devote my inventive skills only to Employer, Employer shall be entitled to own and control
all proprietary technology and all technological and business ideas and inventions, whether patentable or unpatentable, including,
without limitation, discoveries, formulas, processes, machines, manufactures, compositions, compounds, accounting methods, business
and financial plans and other financial, operating, and training ideas, methods, processes, and materials, including, without
limitation, works of expression and all copyrights in such works (collectively “Ideas, Inventions and Works”), that
are developed, created, or conceived by me during employment, to the extent that they relate to Employer's current or potential
business. Accordingly, I will disclose, deliver, and assign, and hereby do assign, to Employer all such Ideas, Inventions and
Works, and I agree to execute all documents, patent applications, and arrangements necessary to further document such ownership
and/or assignment and to take whatever other steps may be needed to give Employer the full benefit of them. Without limitation
to the foregoing, I specifically agree that all copyrightable Ideas, Inventions and Works (“Copyrightable Works”)
generated or developed during my employment by me during employment, to the extent that they relate to Employer's current or potential
business, including but not limited to computer programs and documentation, shall be considered works made for hire under the
copyright laws of the United States and shall, upon creation, be owned exclusively by Employer. To the extent that any such Copyrightable
Works, under applicable law, may not be considered works made for hire, I hereby assign to Employer the ownership of all copyrights
in such Copyrightable Works, without the necessity of any further consideration, and Employer shall be entitled to register and
hold in its own name all copyrights in respect of such Copyrightable Works.

 

Section
3

CONFIDENTIALITY;
RETURN OF MATERIALS

 

3.1
I recognize that my position with Employer requires considerable responsibility and trust, and, in reliance on my loyalty, Employer
may entrust me with highly sensitive confidential, restricted, and proprietary information involving trade secrets and confidential
information.

 

3.2
For purposes of this Agreement, a “Trade Secret” is any scientific or technical information, design, process, procedure,
formula, or improvement that is valuable and not generally known to competitors of Employer. “Confidential Inforzmation”
is any data or information, other than Trade Secrets, that is material, competitively sensitive, and not generally known by the
public, such as, by way of example only, Employer’s business plans, prospective and actual collaborators and product development
plans.

 

3.3
I will not use or disclose any Trade Secrets of Employer during my employment and for so long afterwards as the pertinent information
or data remain Trade Secrets, whether or not the Trade Secrets are in written or tangible form, except as required to perform
my duties for Employer.

 

     

    

    

 

3.4
I will not use or disclose any Confidential Information of Employer during my employment and for so long afterwards as the pertinent
information or data remain Confidential Information, but in no event for longer than three (3) years after termination of my employment,
whether or not the Confidential Information is in written or tangible form, except as required to perform my duties for Employer.

 

3.5
Upon the request of Employer and, in any event, upon the termination of my employment, I will leave with Employer all materials
of any nature whatsoever involving any Trade Secrets or Confidential Information of Employer, including, without limitation,
all computer programs, documentation, memoranda, notes, records, drawings, manuals, or other documents pertaining to Employer's
business or my employment (including all copies thereof).

 

Section
4

NO
INTERFERENCE WITH PERSONNEL RELATIONS

 

4.1
During my employment with Employer and for a period of twelve (12) months afterwards, I will not knowingly solicit, entice, or
persuade any other employees of Employer to leave the services of Employer for any reason.

 

Section
5

MISCELLANEOUS

 

5.1
This Agreement shall inure to the benefit of, and be binding upon, Employer and its subsidiaries and affiliates, together with
their successors and assigns, and me, together with my executor, administrator, personal representative, heirs, and legatees.

 

5.2
This Agreement merges and supersedes all prior agreements, undertakings, covenants, or conditions, whether oral or written, express
or implied, to the extent they contradict or conflict with the provisions hereof.

 

5.3
Although it is understood that my employment was and now is, and that my continued employment is and will be, contingent on the
acceptance and observance of this Agreement, this Agreement shall not be construed to modify the terms of my employment or the
status of my employment.

 

IN
WITNESS WHEREOF, I have accepted and executed this Agreement as of the 3rd day of December 2010.

 

	EMPLOYEE:	 	 	EMPLOYER:
	 	 	 	 	 
	/s/ William B. Stilley	 	ADIAL PHARMACEUTICALS, L.L.C.
	Name: William
    B.
    Stilley                                      	 	 	 
	Social
    Security No. #####                                   	 	By:	/s/
    Bankole A. Johnson
	Address:
    #####                                                    	 	 	Bankole A. Johnson
	Charlottesville,
    VA 29911                   	 	 	ChairmanExhibit 10.12 

 

THIS INSTRUMENT CONTAINS A CONFESSION
OF JUDGMENT PROVISION WHICH CONSTITUTES A WAIVER OF IMPORTANT RIGHTS YOU MAY HAVE AS A DEBTOR AND ALLOWS THE CREDITOR TO OBTAIN
A JUDGMENT AGAINST YOU WITHOUT ANY FURTHER NOTICE. THIS INSTRUMENT FURTHER CONTAINS A WAIVER OF JURY TRIAL PROVISION WHICH CONSTITUTES
A WAIVER OF IMPORTANT RIGHTS YOU MAY HAVE AS A DEBTOR.

 

 

PROMISSORY NOTE (this “Note”)

 

	US$35,000.00	 	November 24, 2016
	 	 	Charlottesville, VA

  

For value received, Bankole A. Johnson, with address for purposes
hereunder of 11020 Hunters View Road, Ellicott City, MD 21042-6109 (“Johnson") promises to pay to the order of ADial
Pharmaceuticals, L.L.C., a Virginia limited liability company ("ADial"), at 204 East High Street, Charlottesville, VA
22902, (or at such other place as ADial may designate in writing) the sum of $35,000.00 (thirty-five thousand and no/100 dollars)
with interest on or before June 6, 2017 (the "Due Date") under the payment schedule attached hereto as Schedule 1.

 

		1.	Interest. Interest will be calculated at an annual percentage rate of five percent (5%), compounded monthly, beginning
January 6, 2017, until paid in full. Any amounts outstanding under this Note on the 6th day of each month shall be added
to the principal balance of this Note on such date and accrue interest thereafter.

 

		2.	Prepayment. Johnson may prepay this Note (in whole or in part) at any time prior to the Due Date without penalty.

 

		3.	Events of Default. The following are events of default by Johnson (“Default”) under this Note:

 

		a.	the failure of Johnson to pay the amounts due hereunder on or before the date stated on Schedule 1;

		b.	the death of Johnson;

		c.	the filing of bankruptcy proceedings involving Johnson as a Debtor;

		d.	the application for appointment of a receiver for Johnson;

		e.	the making of a general assignment for the benefit of Johnson's creditors;

		f.	the insolvency of Johnson; or

		g.	if Johnson breaches any other term herein.

 

		4.	Effect of Default. Upon a Default, this Note and any other obligations of Johnson to ADial, shall become due immediately,
without demand or notice and this Note shall, notwithstanding the rate stated in Section 1 above, then bear an interest rate of
18% (eighteen percent) per annum (or the maximum amount allowed by law, whichever is less) on any outstanding amounts with interest
compounding monthly. In the event of Default, Johnson will reimburse all reasonable attorney or other collection fees and expenses
incurred by ADial in collecting any amounts due.

 

    	 		 

    	 

    

 

Additionally, Johnson recognizes and agrees that
failure to pay the amounts due under Schedule 1 will cause severe hardship to ADial, including, without limitation, the use of
precious management time and effort, extreme mental and emotional stress on management and its members, and loss of prestige; therefore,
after Default, for each day any amount due hereunder is outstanding, Johnson shall pay to ADial liquidated damages in the amount
of $200.00 (two hundred dollars) per day or the maximum amount per day allowed by law, whichever is less, beginning 15 (fifteen)
days after the failure to make timely payment of any amount due and continuing until all amounts due hereunder are paid in full.

 

Furthermore, Johnson has executed the Irrevocable
Proxy attached as Exhibit A, which proxy shall only become effective in the event that Johnson fails to timely pay the amounts
due hereunder on or before the dates stated on Schedule 1 and which Irrevocable Proxy shall only remain effective until all amounts
then due and owing hereunder are paid in full, thereby curing said default.

 

		5.	Johnson Waivers. Johnson waives demand, protest, notice of nonpayment and any and all lack of diligence or delays in
collection or enforcement of this Note. No renewal or extension of this Note, delay in enforcing any right of ADial under this
Note, or assignment by ADial of this Note shall affect the liability of Johnson. All rights of ADial under this Note are cumulative
and may be exercised concurrently or consecutively at ADial's option. Johnson may not assign this Note.

 

Further, in the event of Default for failure to
make timely payment of any amount due hereunder,

 

		(a)	Johnson agrees to garnishment of his wages as allowed by Maryland law and hereby agrees to such garnishment and waives any
defense against such garnishment; and

 

		(b)	In addition to any other waivers herein, Johnson specifically waives any defense of the amount and value of the daily liquidated
damages stated in Section 4 above as being $200.00 per day.

 

		6.	Right of Offset. Any amounts that may come due from ADial to Johnson, or any entity controlled by him, including, without
limitation, the trusts described in ADial’s records as En Fideicomiso De Mi Vida 11/23/2010, En Fideicomiso De Mis Suenos
11/23/2010, and En Fideicomiso De Mi Amor 11/23/2010, due to the ownership of equity interests in ADial or otherwise, may first
be used to pay amounts that are due or will be due under this Note (i.e., ADial shall have a right to forgive a portion of this
Note in lieu of paying any amounts that otherwise would be payable to Johnson in his capacity as a member of ADial).

 

		7.	Prohibition of Transfer. Until this Note is retired as paid in full, Johnson shall not assign or transfer any membership
units of ADial owned or controlled by him, including, without limitation, the membership units owned by the trusts described in
ADial’s records as En Fideicomiso De Mi Vida 11/23/2010, En Fideicomiso De Mis Suenos 11/23/2010, and En Fideicomiso De Mi
Amor 11/23/2010, and any such assignment or transfer will be null and void and not recognized by ADial.

 

		8.	Choice of Law & Venue. This Note will be deemed to have been made and delivered in Charlottesville, VA and will
be governed in all respects by the internal laws of the Commonwealth of Virginia without regard to the principles of conflict of
laws. Johnson and ADial each hereby (i) agrees that any legal action arising out of or relating to this Note shall be instituted
exclusively in Charlottesville General District Court (the “Court”), (ii) waives any objection to the venue for any
reason whatsoever, (iii) irrevocably consents to the jurisdiction of the Court in any such action, and (iv) agrees to accept and
acknowledge service or any and all process that may be served in any such action in the Court.

 

    	 	2	 

    	 

    

 

 

		9.	WAIVER OF RIGHT TO JURY TRIAL. JOHNSON HEREBY WAIVES TRIAL BY JURY IN REGARD TO ANY CAUSES OF ACTION, CLAIMS, OBLIGATIONS,
DAMAGES OR ANY COMPLAINTS, WHICH JOHNSON MAY HAVE ARISING OUT OF THIS NOTE AND IN REGARD TO ANY ACTION, OR PROCEEDING, WHICH ADIAL
MAY BRING TO ENFORCE ANY PROVISION OF THIS NOTE. BY THE EXECUTION OF THIS NOTE, JOHNSON HEREBY REPRESENTS THAT JOHNSON IS REPRESENTED
BY COMPETENT COUNSEL WHO HAS FULLY AND COMPLETELY ADVISED JOHNSON OF THE MEANING AND RAMIFICATION OF THE WAIVER OF THE RIGHT TO
A TRIAL BY JURY OR THAT HE HAD AMPLE OPPORTUNITY TO SEEK SUCH ADVICE OF COUNSEL BUT ELECTED NOT TO DO SO.

 

		10.	CONFESSION OF JUDGMENT. THE UNDERSIGNED HEREBY MAKES, CONSTITUTES AND APPOINTS BRIAN S. JOHNSON, ESQUIRE, OF CHARLOTTESVILLE,
VA AS THE UNDERSIGNED’S TRUE AND LAWFUL ATTORNEY-IN-FACT, WITH FULL POWER AND AUTHORITY FOR THE UNDERSIGNED, IN THE UNDERSIGNED’S
NAME, PLACE AND STEAD, TO CONFESS JUDGMENT ON THE UNDERSIGNED’S BEHALF IN THE CIRCUIT COURT OF THE CITY OF CHARLOTTESVILLE,
VIRGINIA, IN THE EVENT OF A DEFAULT HEREUNDER FOR ALL AMOUNTS OWING UNDER THIS NOTE AS SHOWN ON THE RECORDS OF ADIAL. THIS POWER
OF ATTORNEY IS A POWER OF ATTORNEY COUPLED WITH AN INTEREST AND MAY NOT BE TERMINATED BY THE UNDERSIGNED, ITS SUCCESSORS AND ASSIGNS.

 

		11.	Headings. Heading are for organizational purposes only and have no effect on this Note.

 

		12.	Invalid Provisions. If any provisions of this Agreement shall be held to be invalid or unenforceable, the remaining
provisions shall continue to be valid and enforceable, and if by limiting any such provision it would become valid or enforceable,
then such provision shall be deemed to be written, construed, and enforced as so limited.
	 	 	 

	By:	/s/ Bankole A. Johnson              (seal)	 	 
	 	Bankole A. Johnson	 	 

 

    	 	3	 

    	 

    

 

 

 

COMMONWEALTH OF VIRGINIA

CITY/COUNTY OF _______________________, to-wit:

 

The foregoing instrument was acknowledged
before me ________________________________, Notary Public, this ____ day of November, 2016, by _________________.

 

 

	 	 	 	 
	 	 	Notary Public	 

Registration Number __________________

My commission expires: ___/____/20____

 

    	 	4	 

    	 

    

 

 

Schedule 1

Payment Schedule

 

 

 

 

    	 	5	 

    	 

    

IRREVOCABLE PROXY

 

The undersigned, a member of ADial Pharmaceuticals, L.L.C.,
a Virginia limited liability company (the “Company”), hereby irrevocably (to the fullest extent permitted by law) appoints
and constitutes the Board of Directors of the Company as the attorney and proxy of the undersigned with full power of substitution
and re-substitution, to the full extent of the undersigned’s rights with respect to (a) the outstanding membership units
of the Company owned of record by the undersigned or controlled by the undersigned as of the date of this proxy, including, without
limitation, the membership units originally owned by John F. Riccardi’s that were subjected to a proxy in favor of the undersigned
and the membership units owned by the trusts with names En Fideicomiso De Mi Vida 11/23/2010, En Fideicomiso De Mis Suenos 11/23/2010,
and En Fideicomiso De Mi Amor 11/23/2010 in the Company’s records and (b) any and all other membership units of the Company
that the undersigned may acquire on or after the date hereof (membership units in (a) and (b) are, collectively, the “Units”).
The undersigned warrants that there are no other irrevocable proxies in place covering the Units as of the signing of this Proxy,
and upon the execution hereof, any other prior proxies that may have been given by the undersigned with respect to any of the Units
are hereby revoked. The undersigned further agrees that no subsequent proxies will be given with respect to any of the Units, and
if given in violation of this explicit agreement, they shall be of no force or effect.

 

The attorney and proxy named above will be empowered, and may
exercise this proxy, to vote the Units at any time at any meeting of the members of the Company, however called, or in connection
with any solicitation of written consents from the members of the Company, on all matters to come before the members, including
but not limited to the approval of the sale and issuance of additional membership units by the Company. Notwithstanding anything
else herein, the undersigned retains the sole right to, and does not grant a right to sell, vote to sell, or otherwise commit to
sell or hypothecate the Units.

 

This proxy shall be binding upon the heirs, estate, executors,
personal representatives, successors and assigns of the undersigned (including any transferee of any of the Units).

 

This proxy shall be construed in accordance with, and governed
in all respects by, the internal laws of the Commonwealth of Virginia (without giving effect to principles of conflicts of laws).

 

This proxy is related to that certain Promissory Note between
the undersigned and the Company dated November 24, 2016 (the “Note”) and subject to the terms of Section 4 of the Note.

 

This proxy shall be automatically canceled and of no further
effect upon the retirement of the Note as fully paid and is not cancellable for any other reason.

 

Dated: November 24, 2016

 

	Signed:	/s/ Bankole A. Johnson                 (seal)	 	 
	 	Bankole A. Johnson	 	 

    	 	6	 

    	 

    

 

 

 

COMMONWEALTH OF VIRGINIA

CITY/COUNTY OF _______________________, to-wit:

 

The foregoing instrument was acknowledged
before me ________________________________, Notary Public, this ____ day of November, 2016, by _________________,

 

 

	 	 	 	 
	 	 	Notary Public	 

 

Registration Number __________________

My commission expires: ___/____/20____

 

    	 	7

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