Employment Letter dated May 31, 2017, between Oncternal Therapeutics, Inc. and James B. Breitmeyer, M.D., Ph.D
May 31, 2017
James Breitmeyer, M.D., Ph.D.
7572 Northern Lights
San Diego, CA 92127
Re: Employment Letter
Oncternal Therapeutics, Inc. (the Company) is pleased to confirm the terms of your employment with the Company as set forth in this letter (this Agreement). Your employment with the Company was effective February 1, 2017.
DUTIES. You shall continue to serve as, and shall perform such duties as are customarily associated with the position of, President and Chief Executive Officer and such other duties as are assigned to you by the Board of Directors of the Company (the Board). You shall report to the Board and shall perform your services on a full-time basis. You shall devote your full working time and attention to the business affairs of the Company.
COMPENSATION. Your compensation will be as follows:
BASE SALARY. You will receive an annual base salary of $475,000.00 for all hours worked to be paid in accordance with the Companys customary payroll procedures.
ANNUAL BONUS. In addition to your base salary, you may be eligible to earn an annual cash performance bonus under the Companys bonus plan, if and when such a bonus plan is approved from time to time by the Board. In the event the Board implements an annual bonus plan, your maximum annual bonus will be a percentage of your base salary actually paid for the year to which such annual bonus relates. The Board will consult with you in good faith in evaluating the annual target bonus amounts. You must be employed by the Company on the date of payment of such annual bonus in order to be eligible to receive such annual bonus. You hereby acknowledge and agree that nothing contained herein confers upon you any right to an annual bonus in any year, and that whether the Company pays you an annual bonus and the amount of any such annual bonus will be determined by the Company in its sole discretion.
BENEFITS. You shall be eligible to participate in all of the employee benefit plans or programs the Company generally makes available to similarly situated employees, pursuant to the terms and conditions of such plans. You will initially be entitled to 20 days of paid time off each year, accruing on a monthly basis, and all holidays observed by the Company each year. The Company reserves the right to change compensation and benefits provided to its employees from time to time in its discretion.
WITHHOLDING. All amounts payable to you will be subject to appropriate payroll deductions and withholdings.
Subject to your continued compliance with the Companys Proprietary Information and Inventions Agreement, if your employment is terminated by the Company without Cause (as defined below) (and other than by reason of your death or Disability (as defined below)) or you resign for Good Reason (as defined below), you shall be entitled to receive, in lieu of any severance benefits to which you may otherwise be entitled under any severance plan or program of the Company, the benefits provided below:
Your fully earned but unpaid base salary, through the date such termination is effective at the rate then in effect, and all other amounts or benefits to which you are entitled under any compensation, retirement or benefit plan of the Company at the time of your termination of employment in accordance with the terms of such plans, including, without limitation, any continuation of benefits required by COBRA or applicable law;
Your monthly base salary as in effect immediately prior to the date of your termination of employment for 6 months (the Severance Period), payable in accordance with the Companys usual payroll practices (and in any event no less frequently than monthly), with the first installment commencing on the first payroll date that is 60 days following the date of your termination of employment (and any installment payments which would otherwise have been paid to you before the 60th day following the date of your termination of employment will be paid together with the first installment) (provided, however, that in the event such termination by the Company without Cause or resignation for Good Reason occurs following the occurrence of either a Qualifying Financing(s) (as defined below) or a Change in Control (as defined below), the Severance Period shall be increased to 12 months and the cash severance shall instead be paid in a lump sum on the Companys first regularly-scheduled payroll date after the effective date of the Release (as defined below)); and
For the Severance Period (or, if earlier, (1) the date on which the applicable continuation period under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (COBRA) expires or (2) the date you become eligible to receive the equivalent or increased healthcare coverage by means of subsequent employment or self-employment) (such period, the COBRA Coverage Period), if you and/or your eligible dependents who were covered under the Companys health insurance plans as of the date of your termination of employment elect to have COBRA coverage and are eligible for such coverage, the Company shall pay for or reimburse you on a monthly basis for an amount equal to (A) the monthly premium you and/or your covered dependents, as applicable, are required to pay for continuation coverage pursuant to COBRA for you and/or your eligible dependents, as applicable, who were covered under the Companys health plans as of the date of your termination of employment (calculated by reference to the premium as of the date of your termination of employment) less (B) the amount you would have had to pay to receive group health coverage for you
|and/or your covered dependents, as applicable, based on the cost sharing levels in effect on the date of your termination of employment. If any of the Companys health benefits are self-funded as of the date of your termination of employment, or if the Company cannot provide the foregoing benefits in a manner that is exempt from Section 409A (as defined below) or that is otherwise compliant with applicable law (including, without limitation, Section 2716 of the Public Health Service Act), instead of providing the payments or reimbursements as set forth above, the Company shall instead pay to you the foregoing monthly amount as a taxable monthly payment for the COBRA Coverage Period (or any remaining portion thereof). You shall be solely responsible for all matters relating to continuation of coverage pursuant to COBRA, including, without limitation, the election of such coverage and the timely payment of premiums. You shall notify the Company immediately if you become eligible to receive the equivalent or increased healthcare coverage by means of subsequent employment or self-employment.|
In addition, you shall be entitled to the following additional Stock Award (as defined below) acceleration under the circumstances described below:
Upon a Change in Control, 50% of your unvested Stock Awards shall be automatically accelerated immediately prior to the occurrence of such Change in Control.
In the event your termination by the Company without Cause or your resignation for Good Reason occurs within 90 days prior to or at any time following a Change in Control, the vesting and/or exercisability of all of your outstanding unvested Stock Awards (as defined below) shall be automatically accelerated in full on the later of (a) the date of your termination of employment or (b) the date of the Change in Control.
Upon the termination of your employment by reason of your death or Disability (as defined below), the vesting and/or exercisability of all of your outstanding unvested Stock Awards (as defined below) shall be automatically accelerated in full on the date of your termination of employment.
The foregoing provisions are hereby deemed to be a part of each Stock Award and to supersede any less favorable provision in any agreement or plan regarding such Stock Award. For purposes of this Agreement, Stock Awards means all stock options, restricted stock and such other awards granted pursuant to the Companys stock option and equity incentive award plans or agreements and any shares of stock issued upon exercise thereof; provided, however, Stock Awards shall not include the founders shares issued to you pursuant to that certain Restricted Stock Purchase Agreement dated as of February 26, 2016, as amended, the terms of which agreement shall govern the accelerated vesting of such shares.
As a condition to your receipt of any post-termination payments and benefits pursuant to the preceding paragraphs, you shall execute and not revoke a general release of all claims in favor of the Company (the Release) in a form acceptable to the Company. In the event the Release does not become effective within the 55-day period following the date of your termination of employment, you will not be entitled to the aforesaid payments and benefits.
For purposes of this Agreement, Cause means any of the following: (a) your unauthorized use or disclosure of confidential information or trade secrets of the Company or any material breach of a written agreement between you and the Company, including without limitation a material breach of any employment, consulting, confidentiality, non-compete, non-solicit or similar agreement; (b) your commission of, indictment for or the entry of a plea of guilty or nolo contendere by you to, a felony under the laws of the United States or any state thereof or any crime involving dishonesty or moral turpitude (or any similar crime in any jurisdiction outside the United States); (c) your gross negligence or willful misconduct or your willful or repeated failure or refusal to substantially perform assigned duties; or (d) any act of fraud, embezzlement, material misappropriation or dishonesty committed by you against the Company. The foregoing definition shall not in any way preclude or restrict the right of the Company or any successor or affiliate thereof to discharge or dismiss you for any other acts or omissions, but such other acts or omissions shall not be deemed, for purposes of this Agreement, to constitute grounds for termination for Cause.
For purposes of this Agreement, a Change in Control shall have the meaning given to such term in the Companys 2015 Equity Incentive Plan.
For purposes of this Agreement, Disability shall mean a permanent and total disability within the meaning of Section 22(e)(3) of the Code, as it may be amended from time to time.
For purposes of this Agreement, Good Reason shall mean the occurrence of any of the following events or conditions without your consent: (a) a change in your position with the Company (or its subsidiary employing you) that materially reduces your authority, duties or responsibilities; (b) a material diminution in the level of your base compensation, except in connection with a general reduction in the base compensation of the Companys personnel with similar status and responsibilities; (c) a relocation of your place of employment by more than 50 miles, provided that such change, reduction or relocation is effected by the Company (or its subsidiary employing you) without your consent; or (d) any material breach by the Company of its obligations to you under this agreement. Notwithstanding the foregoing, Good Reason shall only exist if you shall have provided the Company with written notice within 60 days of the initial occurrence of any of the foregoing events or conditions, and the Company or any successor or affiliate fails to eliminate the conditions constituting Good Reason within 30 days after receipt of written notice of such event or condition from you. Your resignation from employment with the Company for Good Reason must occur within six months following the initial occurrence of one of the foregoing events or conditions.
For purposes of this Agreement, Qualifying Financing(s) shall mean the consummation of one or more equity financings yielding, within any 6 month period, aggregate gross proceeds to the Company of at least $20,000,000 in which investors purchase shares of the Companys Series C preferred stock or other equity securities.
To the extent applicable, this Agreement shall be interpreted in accordance with Section 409A of the Internal Revenue Code of 1986, as amended (the Code), and Department of Treasury regulations and other interpretive guidance issued thereunder. To the extent that any provision in this Agreement is ambiguous as to its compliance with Section 409A of the Code, the provision shall be read in such a manner that no payments payable under this Agreement shall be subject to an additional tax as defined in Section 409A(a)(1)(B) of the Code. For purposes of Section 409A of the Code, the right to a series of installment payments under this Agreement shall be treated as a right to a series of separate payments. For purposes of this Agreement, all references to your termination of employment shall mean your separation from service (as defined in Treasury Regulation Section 1.409A-1(h)). If you are a specified employee (as defined in Section 409A of the Code), as determined by the Company in accordance with Section 409A of the Code, on the date of your termination of employment, to the extent that the payments or benefits under this Agreement are subject to Section 409A of the Code and the delayed payment or distribution of all or any portion of such amounts to which you are entitled under this Agreement is required in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, then such portion deferred pursuant to this paragraph shall be paid or distributed to you in a lump sum on the earlier of (a) the date that is six months and one day following your separation from service (as defined in Treasury Regulation Section 1.409A-1(h)), (b) the date of your death or (c) the earliest date as is permitted under Section 409A of the Code. Any remaining payments due under this Agreement shall be paid as otherwise provided herein.
Any reimbursement of expenses or in-kind benefits payable under this Agreement shall be made in accordance with Treasury Regulation Section 1.409A-3(i)(1)(iv) and shall be paid on or before the last day of your taxable year following the taxable year in which you incurred the expenses. The amount of expenses reimbursed or in-kind benefits payable in one year shall not affect the amount eligible for reimbursement or in-kind benefits payable in any other taxable year of yours, and your right to reimbursement for such amounts shall not be subject to liquidation or exchange for any other benefit.
SECTION 280G; LIMITATIONS ON PAYMENT.
If any payment or benefit you will or may receive from the Company or otherwise (a 280G Payment) would (a) constitute a parachute payment within the meaning of Section 280G of the Code, and (b) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the Excise Tax), then any such 280G Payment provided pursuant to this Agreement (a Payment) shall be equal to the Reduced Amount. The Reduced Amount shall be either (x) the largest portion of the Payment that would result in no portion of the Payment (after reduction) being subject to the Excise Tax or (y) the largest portion, up to and including the total, of the Payment, whichever amount (i.e., the amount determined by clause (x) or by clause (y)), after taking into account all applicable federal, state and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in your receipt, on an after-tax basis, of the greater economic benefit notwithstanding that all or some portion of the Payment may be subject to the Excise Tax. If a reduction in a Payment is required pursuant to the preceding
|sentence and the Reduced Amount is determined pursuant to clause (x) of the preceding sentence, the reduction shall occur in the manner (the Reduction Method) that results in the greatest economic benefit for you. If more than one method of reduction will result in the same economic benefit, the items so reduced will be reduced pro rata (the Pro Rata Reduction Method).|
Notwithstanding any provision herein to the contrary, if the Reduction Method or the Pro Rata Reduction Method would result in any portion of the Payment being subject to taxes pursuant to Section 409A that would not otherwise be subject to taxes pursuant to Section 409A, then the Reduction Method and/or the Pro Rata Reduction Method, as the case may be, shall be modified so as to avoid the imposition of taxes pursuant to Section 409A as follows: (A) as a first priority, the modification shall preserve to the greatest extent possible, the greatest economic benefit for you as determined on an after-tax basis; (B) as a second priority, Payments that are contingent on future events (e.g., being terminated without Cause), shall be reduced (or eliminated) before Payments that are not contingent on future events; and (C) as a third priority, Payments that are deferred compensation within the meaning of Section 409A shall be reduced (or eliminated) before Payments that are not deferred compensation within the meaning of Section 409A.
Unless you and the Company agree on an alternative accounting firm or law firm, the accounting firm engaged by the Company for general tax compliance purposes as of the day prior to the effective date of the Change in Control transaction shall perform the foregoing calculations. If the accounting firm so engaged by the Company is serving as accountant or auditor for the individual, entity or group effecting the Change in Control transaction, the Company shall appoint a nationally recognized accounting or law firm to make the determinations. The Company shall bear all expenses with respect to the determinations by such accounting or law firm required to be made hereunder. The Company shall use commercially reasonable efforts to cause the accounting or law firm engaged to make the determinations hereunder to provide its calculations, together with detailed supporting documentation, to you and the Company within 15 calendar days after the date on which your right to a 280G Payment becomes reasonably likely to occur (if requested at that time by you or the Company) or such other time as requested by you or the Company.
If you receive a Payment for which the Reduced Amount was determined pursuant to clause (x) above and the Internal Revenue Service determines thereafter that some portion of the Payment is subject to the Excise Tax, you agree to promptly return to the Company a sufficient amount of the Payment (after reduction pursuant to clause (x) above) so that no portion of the remaining Payment is subject to the Excise Tax. For the avoidance of doubt, if the Reduced Amount was determined pursuant to clause (y) above you shall have no obligation to return any portion of the Payment pursuant to the preceding sentence.
EXPENSES. You will be entitled to reimbursement for all ordinary and reasonable out-of-pocket business expenses which are reasonably incurred by you in furtherance of the Companys business, with appropriate documentation and in accordance with the Companys standard policies.
ATTORNEYS FEES. The Company shall reimburse you for attorneys fees incurred by you in consulting regarding and negotiating the terms of this Agreement, up to a maximum of five thousand dollars ($5,000).
COMPANY POLICIES AND PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT. As an employee of the Company, you shall be expected to abide by all of the Companys policies and procedures and the Companys employee handbook, if any. You have previously executed the Companys form of Proprietary Information and Inventions Agreement, which shall survive termination of your employment with the Company and the termination of this Agreement. You acknowledge that a remedy at law for any breach or threatened breach by you of the provisions of the Proprietary Information and Inventions Agreement would be inadequate, and you therefore agree that the Company shall be entitled to injunctive relief in case of any such breach or threatened breach. The Company may modify, revoke, suspend or terminate any of the terms, plans, policies and/or procedures described in the employee handbook, if any, or as otherwise communicated to you, in whole or part, at any time, with or without notice.
OTHER AGREEMENTS. You represent and agree that your performance of your duties for the Company shall not violate any agreements, obligations or understandings that you may have with any third party or prior employer. You agree not to make any unauthorized disclosure or use, on behalf of the Company, of any confidential information belonging to any of your former employers. You also represent that you are not in unauthorized possession of any materials containing a third partys confidential and proprietary information. While employed by the Company, you will not engage in any business activity in competition with the Company nor make preparations to do so. In the event that you wish to undertake a business activity outside the scope of your employment by the Company, which activity you believe entails no conflict with the Companys activities, you agree to inform the Company of your intentions prior to the initiation of such outside business activity, and you furthermore agree to abide by the Companys decision as to whether or not there is no conflict. If, in the Companys sole determination, a conflict exists or is likely to develop, you agree not to undertake such outside business activity.
AT-WILL EMPLOYMENT. Your employment with the Company will be at-will at all times, including after your introductory, probationary period, meaning that either you or the Company will be entitled to terminate your employment at any time and for any reason, with or without cause. Any contrary representations that may have been made to you are superseded by this offer. This Agreement in no way represents a fixed-term employment contract. This is the full and complete agreement between you and the Company on this term. Although your job duties, title, compensation and benefits, as well as the Companys personnel policies and procedures, may change from time to time, the at-will nature of your employment may only be changed in an express written agreement signed by you and a duly authorized officer of the Company.
NON-INTERFERENCE. While employed by the Company, and for one year immediately following the date on which you terminate employment or otherwise cease providing services to the Company, you agree not to interfere with the business of the Company by (a) soliciting or attempting to solicit any employee or consultant of the Company to terminate such employees or consultants employment or service in order to become an employee, consultant or independent contractor to or for any other person or entity or (b) soliciting or attempting to solicit any vendor, supplier, customer or other person or entity either directly or indirectly, to direct his, her or its purchase of the Companys products and/or services to any person, firm, corporation, institution or other entity in competition with the business of the Company. Your duties under this paragraph shall survive termination of your employment with the Company and the termination of this Agreement.
DISPUTE RESOLUTION. Unless otherwise prohibited by law or specified below, all disputes, claims and causes of action, in law or equity, arising from or relating to this Agreement or its enforcement, performance, breach, or interpretation shall be resolved solely and exclusively by final and binding arbitration held in San Diego, California through Judicial Arbitration & Mediation Services/Endispute (JAMS) under the then existing JAMS arbitration rules applicable to employment disputes. The rules may be found online at www.jamsadr.com. The Company shall pay the arbitrators fees and any filing fees associated with initiating a claim. This paragraph is intended to be the exclusive method for resolving any and all claims by the parties against each other relating to your employment; provided that you will retain the right to file administrative charges with or seek relief through any government agency of competent jurisdiction, and to participate in any government investigation, including but not limited to (a) claims for workers compensation, state disability insurance or unemployment insurance; (b) claims for unpaid wages or waiting time penalties brought before the California Division of Labor Standards Enforcement (provided that any appeal from an award or from denial of an award of wages and/or waiting time penalties shall be arbitrated pursuant to the terms of this paragraph; and (c) claims for administrative relief from the United States Equal Employment Opportunity Commission and/or the California Department of Fair Employment and Housing (or any similar agency in any applicable jurisdiction other than California); provided, further, that you will not be entitled to obtain any monetary relief through such agencies other than workers compensation benefits or unemployment insurance benefits. Further, nothing in this paragraph is intended to prevent either party from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration, including without limitation injunctive relief, in any court of competent jurisdiction pursuant to California Code of Civil Procedure § 1281.8 or any similar statute of an applicable jurisdiction. Seeking any such relief shall not be deemed to be a waiver of such partys right to compel arbitration. Each party in any such arbitration shall be responsible for its own attorneys fees, costs and necessary disbursement; provided, however, that if one party refuses to arbitrate and the other party seeks to compel arbitration by court order, if such other party prevails, it shall be entitled to recover reasonable attorneys fees, costs and necessary disbursements. Each party warrants that it has had the opportunity to be represented by counsel in the negotiation and execution of this Agreement, including the attorneys fees provision herein. Both you and the Company expressly waive your right to a jury trial.
SEVERABILITY. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provisions had never been contained herein.
SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and inure to the benefit of and be enforceable by you and the Company, and their respective successors, assigns, heirs, executors and administrators, except that you may not assign any of your duties hereunder and you may not assign any of your rights hereunder, without the written consent of the Company, which shall not be withheld unreasonably.
ENTIRE AGREEMENT. This Agreement and the Proprietary Information and Inventions Agreement constitute the complete, final and exclusive embodiment of the entire agreement between you and the Company with respect to the terms and conditions of your employment specified herein and therein. This Agreement and the Proprietary Information and Inventions Agreement supersede any other such promises, warranties, representations or agreements between you and the Company, including, without limitation, that certain offer letter issued to you by the Company dated August 7, 2015 (although the provisions of such offer letter regarding your obligation to repay your signing bonus in the event of your voluntary termination of employment prior to the second anniversary of your receipt of such bonus shall survive and continue to apply). This Agreement may not be amended or modified except by a written instrument signed by you and a duly authorized officer of the Company.
GOVERNING LAW. This Agreement will be governed by and construed in accordance with the laws of the State of California without regard to the conflicts of law provisions thereof.
Please acknowledge your acceptance by returning a signed copy of this Agreement to our attention.
Oncternal Therapeutics, Inc.
|/s/ David Johnson|
|Name: David Johnson|
|Title: Chairman of the Board|
Agreed and Accepted:
I have read and understood this Agreement and hereby acknowledge, accept and agree to the terms as set forth above.
|/s/ James Breitmeyer||Date:||May 31, 2017|
|James Breitmeyer, M.D., Ph.D.|