Offer Letter and Employment Agreement by and between the Registrant and Steven D. Harr, M.D., dated as of September 27, 2018
Exhibit 10.6
SANA BIOTECHNOLOGY, INC.
1616 Eastlake Avenue East
Seattle, Washington 98102
September 24, 2018
Steven D. Harr, M.D.
| Re: | Employment Terms |
Dear Steve:
Sana Biotechnology, Inc. (the “Company”), is pleased to offer you fulltime employment in the exempt position of Chief Executive Officer, effective as of September 4, 2018 (the date you actually commence employment, your “Commencement Date”), in which you will be responsible for such duties as are normally associated with such position or as otherwise determined by the Board of Directors of the Company (the “Board”). You will report directly to the Board, and will be initially headquartered in our offices located at the address in our letterhead, or such other location as the Company may designate, except for such travel as may be necessary to fulfill your responsibilities. While employed as Chief Executive Officer, you will also serve as a member of the Board. In the course of your employment with Company, you will be subject to and required to comply with all company policies, and applicable laws and regulations.
You will be paid a base salary at the monthly rate of $41,666.67 (subject to required tax withholding and other authorized deductions). Your base salary will be payable in accordance with the Company’s standard payroll policies and subject to adjustment pursuant to the Company’s policies as in effect from time to time.
In addition to your base salary, you will be eligible for an annual cash bonus, at the discretion of the Board. Your target annual bonus shall be 50% of your base salary, but the actual amount of your annual bonus may be more or less (and may equal zero). Any annual bonus awarded to you shall be paid within two and a half months following the year to which the annual bonus relates and will be contingent upon your continued employment through the applicable payment date. 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.
On July 27, 2018, the Company issued you 2,730 shares of the Company’s common stock (the “Restricted Shares”), which, pursuant to a Restricted Stock Purchase Agreement you entered into with the Company, became subject to a risk of forfeiture in the event you terminate employment with the Company. As of the Commencement Date, 12.5% of the total number of Restricted Shares will vest, and the risk of forfeiture thereon lapse. On each monthly anniversary
Steven D. Harr, M.D.
September 24, 2018
Page 2
of the Commencement Date thereafter, 1/48th of the remaining 87.5% of the total number of Restricted Shares shall vest, and the risk of forfeiture thereon shall lapse, subject to your continued provision of services to the Company through the applicable vesting date, such that, assuming continued services, the Restricted Shares shall be fully vested and no longer subject to a risk of forfeiture on the fourth anniversary of the Commencement Date. Notwithstanding the foregoing, upon a Change in Control, and provided that you remain an employee of the Company through the closing date of such Change in Control, the vesting of 75% of the then-unvested Restricted Shares shall accelerate. It is the intention of the parties to this letter that these Restricted Shares, together with future equity awards granted to you, will result in you holding Company common stock or options to purchase Company common stock that together represent ownership, or the right to purchase, an aggregate of 4% to 5% of the fully diluted capitalization of the Company at the time of an initial public offering of the Company’s common stock.
As soon as administratively practicable following the closing of the Company’s Series A and B Preferred Stock financings, if your ownership percentage (considering the aggregate of any options to purchase shares of Company common stock, restricted shares of Company common stock (including the Restricted Shares) or other shares or rights to purchase Company common stock then held by you but, excluding for this purpose, any shares of the Company’s Preferred Stock purchased by you (your “Existing Holdings”)) of the fully-diluted stock of the Company (inclusive of shares available for issuance as part of the Company’s 2018 Equity Incentive Plan but excluding any Preferred Stock purchased by you) is less than 5.25%, the Board will grant you an equity award (the “Top-Up Award”) such that your ownership percentage of the Company on a fully-diluted basis (inclusive of shares available for issuance as part of the Company’s 2018 Equity Incentive Plan but excluding any Preferred Stock purchased by you) including your Existing Holdings and the Top-Up Award equals no less than 5.25%. The Board will make a determination at that time of such grant(s), in good faith, as to whether the Top-Up Award will be in the form of a restricted stock award or an option to purchase common stock (“Top-Up Option”). Any Top-Up Option will have an exercise price per share equal to the per share fair market value of the Company’s common stock on the date of grant, as determined by the Board. The Top-Up Award will vest (and become exercisable), or, if applicable, the risk of forfeiture shall lapse, in respect of 25% of the total number of shares underlying the Top-Up Award on the first anniversary of the grant date and 1/48th of the total number of shares initially underlying the Top-Up Award on each monthly anniversary thereafter, subject to your continued provision of services to the Company through the applicable vesting date. Each Top-Up Award will otherwise be subject to the 2018 Equity Incentive Plan and an equity award agreement to be entered into between you and the Company.
You will be eligible to receive future stock options and other equity awards in the discretion of the Board.
You will be eligible to participate in all of the employee benefits and benefit plans that the Company generally makes available to its regular fulltime employees. You will be eligible for paid time off, vacation and/or paid sick leave in accordance with applicable law and Company policy.
The Company requires that, as a full-time employee, you devote your full business time, attention, skill, and efforts to the tasks and duties of your position as assigned by the Company. If you wish to request consent to provide services (for any or no form of compensation) to any other person or business entity while employed by the Company, please discuss that with me in advance of accepting another position.
Steven D. Harr, M.D.
September 24, 2018
Page 3
As a condition of employment, you will be required (1) to sign and comply with an At-Will Employment Agreement, a copy of which is attached hereto as Exhibit A, which, among other things, prohibits unauthorized use or disclosure of Company proprietary information; (2) to sign and return a satisfactory I-9 Immigration form attached hereto as Exhibit B and provide sufficient documentation establishing your employment eligibility in the United States of America (enclosed is a list of acceptable INS Form I-9 documentation); and (3) to provide satisfactory proof of your identity as required by U.S. law.
By signing below, you represent that your performance of services to the Company will not violate any duty which you may have to any other person or entity (such as a present or former employer), including obligations concerning providing services (whether or not competitive) to others, confidentiality of proprietary information and assignment of inventions, ideas, patents or copyrights, and you agree that you will not do anything in the performance of services hereunder that would violate any such duty.
Notwithstanding any of the above, your employment with the Company is “at will.” This means that it is not for any specified period of time and can be terminated by you or by the Company at any time, with or without advance notice, and for any or no particular reason or cause. It also means that your job duties, title and responsibility and reporting level, work schedule, compensation and benefits, as well as the Company’s personnel policies and procedures, may be changed with prospective effect, with or without notice, at any time in the sole discretion of the Company.
If your employment with the Company is terminated as a result of your death, your estate or beneficiary shall be entitled to any unpaid annual bonus for a year prior to the year of termination and a pro rata annual bonus for the year of termination, in each case, to be paid as soon as administratively practicable following the date of such termination.
Without limiting the foregoing, if at any time other than during a Change in Control Period (as defined below) your employment with the Company is terminated by the Company without Cause (other than due to your death or disability) or you resign for Good Reason (each, as defined herein) and you deliver to the Company a general release of all claims against the Company and its affiliates in a form reasonably acceptable to the Company (a “Release”) that becomes effective and irrevocable within 60 days following such termination of employment, then you shall be entitled to receive (i) continuing payments of severance pay (less applicable withholding taxes) for a period of twelve (12) months to be paid periodically in accordance with the Company’s normal payroll policies at a rate equal to the sum of your monthly base salary rate and one-twelfth of your target annual bonus, in each case as in effect immediately prior to your termination (but without taking into account any reduction of your base salary or target annual bonus in breach of this letter), less applicable withholdings, with such installments to commence on the first payroll date following the date the Release becomes effective and irrevocable, with the first installment to include any amount that would have been paid had the Release been effective and irrevocable on your termination date and (ii) direct payment or reimbursement for premiums for continued health, vision and dental benefit coverage through COBRA for you, your spouse and dependents at the same level of coverage as in effect for you on the day immediately preceding the day of termination of employment for a period ending on the earlier of (a) twelve (12) months after the date of termination of employment and (b) the date you are eligible to receive health, vision and dental benefits through a new employer. If your employment with the Company is terminated for any reason except for Cause, or if you terminate your employment for Good Reason, you shall be entitled to receive any earned but unpaid annual bonus for the year prior to the year of termination and a pro rata annual bonus for the year of termination, payable in accordance with the
Steven D. Harr, M.D.
September 24, 2018
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Company’s normal payment practice for such annual bonuses. In addition, concurrent with the termination of your employment with the Company, you may (at the Company’s sole discretion) be provided the opportunity to enter into a consulting agreement (the “Consulting Agreement”) with the Company with a twelve (12) month term (the “Consulting Term,” and the last day of the Consulting Term, the “Final Consulting Date”), which would: (x) provide for annual consulting fees equal to your annual salary as in effect on the date of your termination of your employment, (y) require that you provide, or be available to provide, services to the Company in your areas of expertise on an exclusive basis within the Company’s industry during the Consulting Term, and (z) provide that the vesting of each equity award held by you will be accelerated in respect of that number of shares of Company common stock that would have vested had you remained employed for the twelve (12) months immediately following your termination date and (iv) each stock option held by you that is vested on your termination date (after giving effect to any accelerated vesting provided in connection with your termination of employment) will remain exercisable until the earlier of 90 days after the Final Consulting Date or the original expiration date thereof. All other terms and conditions of the Consulting Agreement will be mutually agreed between you and the Company.
Further notwithstanding the foregoing, if at any time during a Change in Control Period your employment with the Company is terminated by the Company without Cause (other than due to your death or disability) or you resign for Good Reason and you deliver to the Company a Release that becomes effective and irrevocable within 60 days following such termination of employment, then, in lieu of the benefits provided in the preceding paragraph, you shall be entitled to receive (i) your base salary at the rate in effect immediately prior to your date of termination during the period of time commencing on the termination date and ending on the eighteen (18) month anniversary of your date of termination plus 1.5 times your target annual bonus, paid in a single cash lump sum, less applicable withholdings, on the first payroll date following the date the Release becomes effective and irrevocable, with the first installment to include any amount that would have been paid had the Release been effective and irrevocable on your termination date, (ii) direct payment or reimbursement for premiums for continued health, vision and dental benefit coverage through COBRA for you, your spouse and dependents at the same level of coverage as in effect for you on the day immediately preceding the day of termination of employment for a period ending on the earlier of (a) eighteen (18) months after the date of termination of employment and (b) the date you are eligible to receive health, vision and dental benefits through a new employer, (iii) the vesting of each equity award held by you will be accelerated in respect of all of the shares of Company common stock subject thereto and (iv) each stock option held by you that is vested on your termination date (after giving effect to any accelerated vesting provided in connection with your termination of employment) will remain exercisable until the earlier of the 90 days after your termination date or the original expiration date thereof.
For purposes of this offer letter, the term “Cause” means: (i) a willful act of dishonesty made by you in connection with your responsibilities as an employee, (ii) your conviction of, or plea of nolo contendere to, a felony or any crime involving fraud, embezzlement, or a material violation of federal or state law by you, any of which that the Board reasonably determines in good faith has had or will have a material detrimental effect on the Company’s reputation or business;, (iii) your willful and material unauthorized use or disclosure of any proprietary information or trade secrets of the Company or any other party to whom you owe an obligation of nondisclosure as a result of your relationship with the Company; (iv) your willful material breach of any obligations under any written agreement or covenant with the Company; or (v) your continued substantial failure to perform your employment duties (other than as a result of your physical or mental incapacity). No termination for Cause under (iv) or (v) shall be effectuated until after you have received a written demand of performance from the Board that specifically sets forth the factual basis for the Board’s determination that you have not substantially performed your duties and have failed to cure such non-performance to the Board’s reasonable satisfaction within thirty (30) business days after receiving such notice. For purposes of this definition, no act or failure to act shall be considered willful unless it is done in bad faith and without reasonable intent that the act or failure to act was in the best interest of the Company. Any act, or failure to act, based upon authority or instructions given to you pursuant to a resolution duly adopted by the Board or based on the advice of counsel for the Company will be conclusively presumed to be done or omitted to be done by you in good faith and in the best interest of the Company.
Steven D. Harr, M.D.
September 24, 2018
Page 5
For purposes of this offer letter, the term “Good Reason” means your resignation within 30 days following expiration of any Cure Period (as defined below) following the occurrence of one or more of the following, without your written consent: (i) a material reduction in your base salary or target annual bonus; (ii) a material diminution of your title, duties, responsibilities or reporting lines; (iii) a change in the location of your employment of more than 50 miles; (iv) failure of the Company to timely grant the Restricted Shares; or (v) you are not elected or re-elected as, or otherwise ceasing to be a member of the Board.. No event will be considered Good Reason unless (a) you have given written notice to the Company of your intention to terminate your employment for Good Reason, describing the grounds for such action, no later than 90 days after the first occurrence of such circumstances, (b) you have provided the Company with at least 30 days in which to cure the circumstances (the “Cure Period”), and (c) if the Company is not successful in curing the circumstance, you end your employment within thirty days after the end of the Cure Period.
For purposes of this offer letter, the term “Change in Control” shall have the meaning ascribed such term in the Company’s 2018 Equity Incentive Plan, provided, that such event constitutes a “change in control event” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”).
For purposes of this offer letter, the term “Change in Control Period” shall mean the period commencing three (3) months prior to a Change in Control and ending twelve (12) months after the Change in Control.
No amount deemed deferred compensation subject to Section 409A of the Code shall be payable pursuant to this offer letter unless your termination of employment constitutes a “separation from service” with the Company within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended, and the Department of Treasury regulations and other guidance promulgated thereunder. For purposes of Section 409A of the Code (including, without limitation, for purposes of Treasury Regulation Section 1.409A-2(b)(2)(iii)), your right to receive any installment payments under this offer letter shall be treated as a right to receive a series of separate payments and, accordingly, each such installment payment shall at all times be considered a separate and distinct payment. To the extent that any reimbursements payable pursuant to this offer letter are subject to the provisions of Section 409A of the Code, any such reimbursements payable to you pursuant to this offer letter shall be paid to you no later than December 31 of the year following the year in which the expense was incurred, the amount of expenses reimbursed in one year shall not affect the amount eligible for reimbursement in any subsequent year, and your right to reimbursement under this offer letter will not be subject to liquidation or exchange for another benefit.
You are not required to seek other employment or otherwise mitigate the value of any severance benefits contemplated by this offer letter, nor will any such benefits be reduced by any earnings or benefits that you may receive from any other source, except as otherwise expressly set forth above with respect to continued group life, health, vision and dental benefits.
In addition to any indemnification provided by the Company’s organizational documents, the Company will enter into an indemnification agreement with you as an officer in the form used for other officers.
Steven D. Harr, M.D.
September 24, 2018
Page 6
Notwithstanding anything to the contrary contained in this letter, to the extent that any of the payments and benefits provided for under this letter or any other agreement or arrangement between the Company and you (collectively, the “Payments”) (i) constitute a “parachute payment” within the meaning of Section 280G of the Code and (ii) but for this paragraph, would be subject to the excise tax imposed by Section 4999 of the Code, then the Payments shall be reduced to the extent necessary so that no portion of such Payments retained by you shall be subject to excise tax under Section 4999 of the Code; provided, however, such reduction shall only occur if after taking into account the applicable federal, state and local income taxes and the excise tax imposed by Section 4999, such reduction results in your receipt on an after-tax basis, of the greatest amount of benefits under this letter, notwithstanding that all or some portion of such benefits may be taxable under Section 4999 of the Code. In the event of a determination that such reduction is to take place, reduction shall occur in the following order: first, reduction of cash payments, which shall occur in reverse chronological order such that the cash payment owed on the latest date following the occurrence of the event triggering such excise tax will be the first cash payment to be reduced; second, cancellation of accelerated vesting of equity awards, which shall occur in the reverse order of the date of grant for such stock awards (i.e., the vesting of the most recently granted stock awards will be reduced first); and third, reduction of employee benefits, which shall occur in reverse chronological order such that the benefit owed on the latest date following the occurrence of the event triggering such excise tax will be the first benefit to be reduced. If two or more equity awards are granted on the same date, each award will be reduced on a pro-rata basis. Notwithstanding the foregoing, to the extent the Company submits any payment or benefit payable to you under this letter or otherwise to the Company’s stockholders for approval in accordance with Treasury Reg. Section 1.280G-1 Q&A 7, the foregoing provisions shall not apply following such submission and such payments and benefits will be treated in accordance with the results of such vote, except that any reduction in, or waiver of, such payments or benefits required by such vote will be applied without any application of discretion by you and in the order prescribed by this paragraph. In no event shall you have any discretion with respect to the ordering of payment reductions. Unless you and the Company otherwise agree in writing, any determination required under this paragraph shall be made in writing by the Company’s independent public accountants (the “Accountants”), whose determination shall be conclusive and binding upon you and the Company for all purposes. For purposes of making the calculations required by this paragraph, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely in reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and you shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this paragraph. The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this paragraph. If any Payments would be subject to excise tax imposed by Section 4999 but for this paragraph, but would not be subject to such excise tax if the stockholder approval requirements of Section 280G(b)(5) of the Code are satisfied, the Company shall use its reasonable best efforts to cause such payments to be submitted for such approval prior to the event giving rise to such payments. If the limitation set forth in this paragraph is applied to reduce an amount payable to you, and the Internal Revenue Service successfully asserts that, despite the reduction, you have nonetheless received payments which are in excess of the maximum amount that could have been paid to you without being subjected to any excise tax, then, unless it would be unlawful for the Company to make such a loan or similar extension of credit to you, you may repay such excess amount to the Company as though such amount constitutes a loan to you made at the date of payment of such excess amount, bearing interest at 120% of the applicable federal rate (as determined under Section 1274(d) of the Code in respect of such loan).
Steven D. Harr, M.D.
September 24, 2018
Page 7
If you accept this offer, this letter and the At-Will Employment Agreement shall constitute the complete agreement between you and Company with respect to the terms and conditions of your employment. Any prior or contemporaneous representations (whether oral or written) not contained in this letter or the At-Will Employment Agreement or contrary to those contained in this letter or the At-Will Employment Agreement, that may have been made to you are expressly cancelled and superseded by this offer.
This offer letter shall be interpreted and construed in accordance with the laws of the State of Washington without regard to any conflicts of laws principles. While other terms and conditions of your employment may change in the future, the at-will nature of your employment may not be changed, except in a subsequent letter or written agreement, signed by you and the Chief Financial Officer of the Company.
(Signature Page Follows)
Please sign and date this letter and the At-Will Employment Agreement, and return it to me by email at ***@*** by September 28, 2018 if you wish to accept employment at the Company under the terms described above, after which time this offer of employment will expire. If you accept our offer, we would like you to commence your employment with us as soon as practicable.
If you have any questions, regarding this letter or employment with the Company, please feel free to contact me by phone at ###-###-#### or by email at ***@***. We look forward to your favorable reply and to a productive and enjoyable work relationship.
| Sincerely, |
| SANA BIOTECHNOLOGY, INC. |
| /s/ Paul Thurk |
| Paul Thurk |
| Member of the Board of Directors |
| Accepted by: |
| /s/ Steven D. Harr, M.D. |
| Steven D. Harr, M.D. |
| September 27, 2018 |
| Date: |
SANA BIOTECHNOLOGY, INC.
AT-WILL EMPLOYEE AGREEMENT
As a condition of my employment with Sana Biotechnology, Inc. (the “Company”), and in consideration of my employment with the Company and my receipt of the compensation paid to me by the Company now and in the future, I agree to the following:
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