Document:

stro-ex1011_205.htm

Exhibit 10.11

August 8, 2018

 

Linda Fitzpatrick 720 Endfield Way

Hillsborough, CA 940 l 0

 

 

Dear Linda,

 

We are very pleased to present this offer of employment to you for the position of Chief People and Communications Officer at Sutro Biopharma (the "Company"), reporting to William Newell, CEO. This letter sets forth the terms and conditions of our proposal for your employment. You may accept this offer by signing and returning a copy of it to me as provided below.

 

You will receive an annual salary of $360,000 which will be paid semi-monthly in accordance with the Company' s annual payroll procedures. On the first payroll period, following your employment, you will receive a sign on bonus of $50,000, less applicable taxes. Furthermore, in each calendar year during your employment with the Company, you will be eligible to receive an annual bonus dependent on performance objectives, which will be based on company objectives established by the Company's Board of Directors at their discretion.  Your target bonus will be equal to forty percent (40%) of your base salary, assuming the achievement of such performance objectives as determined solely by the Company's Board of Directors. Any bonus that you earn will be paid to you within two and one-half (2-1/2) months of the end of the calendar year in which it is earned, and shall be paid in cash, less any usual, required withholding. You will be eligible for full bonus consideration for 2018. As an employee, you will also be eligible to receive certain employee benefits including health insurance, life insurance and disability insurance, with reasonable and customary coverages and deductibles or copayments. Annually, you will receive 25 days of Paid Time Off (PTO) which will be earned and accrued at the rate of 2.08 days per month. A summary of the Company' s benefits is included with this letter.

 

In addition, if you decide to join the Company, it will be recommended that the Company's Board of directors grant you an option to purchase shares, at a number to be determined, based upon a full compensation analysis by Radford, of the Company's capital stock calculated on a fully diluted basis at the time of grant. The price per share shall be equal to the fair market value per share of the Company' s Common Stock on the grant date as determined by the Company' s Board of Directors. For this grant, you will begin vested on the date of your employment at the rate of 1/48, per month, over a four year period. the rate of 1/48 per month will vest in equal monthly installments subject to your continuous service with the Company. You will be eligible to receive additional stock option grants in the future at the discretion of the Company' s Board of Directors.

 

 

These option grants shall be subject to the terms and conditions of the Company's Stock Option Plan and Stock Option Agreement, including vesting requirements which require your continued employment with the Company. No right to any stock is earned or accrued until such time that vesting occurs, nor does the grant confer any right to continue vesting or employment.

 

The Company will support a reasonable number of external relationships and appointments providing that these do not provide a conflict of interest nor constitute a time commitment which would preclude you from fully performing your duties as Chief People and Communications Officer. All relationships will require prior approval by William Newell and our IP Counsel.

 

The Company will indemnify you to the maximum extent that its officers and employees are entitled to indemnification pursuant to the Company's Certificate of lncorporation and bylaws for any acts or omissions by reason of being an officer or employee of the Company during your employment. At all times during your employment, the Company shall maintain in effect a directors and officers liability insurance policy with you as a covered officer.

If your employment with the Company is terminated by the Company due to an Involuntary Termination (as defined below), you will receive: (i) continued payment of your base salary (less applicable tax withholdings) for twelve (12) months following such termination, with such amounts to be paid in accordance with the Company's normal payroll policies; provided, however, that any payments otherwise scheduled to be made prior to the effective date of the Release (namely, the date it can no longer be revoked) shall accrue and be paid in the first payroll date that follows such effective date with subsequent payments occurring on each subsequent Company payroll date; (ii) twelve (12) months of accelerated vesting on all outstanding Company stock options; (iii) payment of a pro-rata portion of the your annual bonus (less applicable tax withholdings) for the performance year in which your termination occurs, with such pro-rata portion calculated based upon the number of days that you were employed during such performance year divided by the total number of days in such performance year, payable as a lump sum payment on the Release effective date (namely, the date it can no longer be revoked) ; and (iv) reimbursement for premiums paid for continued health benefits for you (and any eligible dependents) under the Company's health plans until the earlier of (A) twelve (12) months following your termination date or (B) the date upon which you and your eligible dependents become covered under similar plans; provided, however, that you validly elect to continue coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended. Reimbursements for health premiums will be made as soon as administratively practicable following approval of the reimbursement (or, if later, following the date you are first entitled to such reimbursements under this paragraph) and to the extent that such amounts are taxable not later than the end of the calendar year in which the expense was incurred.

 

If your employment with the Company is terminated by the Company due to an Involuntary Termination (as defined below) and such termination occurs on or within twelve (12) months following a Change of Control (as defined below), then, you will receive accelerated vesting as to 100% of any then non-exercisable option shares under any of your option grants.

 

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The receipt of any benefits pursuant to the two prior paragraphs above will be subject to you signing and not revoking a separation agreement and release of claims substantially in the form attached to this offer letter as Exhibit A (the "Release"), provided that such release becomes effective no later than sixty (60) days following your termination date or such earlier date required by the Release (such deadline, the "Release Deadline'").  If the Release does not become effective by the Release Deadline, you will forfeit any rights to severance or benefits under this letter. and in no event will severance payments or benefits be paid or provided until the Release actually becomes effective.  In the  event your termination  occurs at a time during the calendar  year where the Release could become effective in the calendar year following the calendar year in which your termination occurs, then any severance payments or benefits under this letter that would be considered Deferred Compensation Separation Benefits (as defined on Exhibit B hereto) will be paid on the first payroll date to occur during the calendar year following the calendar year in which such termination occurs, or, if later, (i) the Release Deadline, (ii) such time as required by the payment schedule applicable to each payment or benefit as set forth  in Exhibit  B, or (iii) such time as required by this paragraph.

 

For the purposes of this offer letter, "Involuntary Termination" means (i) your involuntary discharge by the Company for reasons other than Cause (as defined below); or (ii) your voluntary resignation within ninety (90) days following the end of the Cure Period (as defined below) as a result of the occurrence of any of the following without your consent: (a) a material diminution in your authority, duties or responsibilities; (b) a material breach of this letter agreement by the Company; or (c) a material diminution in your base compensation (other than a reduction generally applicable to executive officers of the Company implemented for expense management purposes); provided, however, that you must provide written notice to the Company of the condition that could constitute an “Involuntary Termination" event pursuant to the provisions of section (ii) of this paragraph within ninety (90) days of the initial existence of such condition and such condition must not have been remedied by the Company within thirty (30) days (the "Cure Period") of such written notice.

 

"Change of Control" means the occurrence of any of the following events: (i) any consolidation or merger of the Company with or into any other corporation or other entity or person, or any other corporate reorganization, in which the stockholders of the Company immediately prior to such consolidation, merger or reorganization, own less than fifty percent (50%) of the voting power of the surviving entity (or if the surviving entity is a wholly-owned subsidiary, its parent) immediately after such consolidation, merger or reorganization; (ii) a transaction or series of related transactions to which the Company is a party or a tender offer in which in excess of fifty percent (50%) of the Company's voting power is transferred; or (iii) a sale, lease conveyance or other disposition of all or substantially all of the assets of the Company that occurs over a period of not more than twelve (12) months. Notwithstanding the foregoing, in no event shall (A) an initial public offering of Common Stock pursuant to a registration statement filed with the Securities and Exchange Commission; (B) any equity financing (including the issuance of convertible debt) of the Company in a single transaction or a series of transactions; or

 

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(C) a transaction whose primary purpose is to change the state of the Company's incorporation and/or to create a holding company that will be owned in substantially the same proportions by the persons who held the Company's securities before such transaction constitute a Change of Control for purposes of this offer letter.

"Cause” means (i) an unauthorized use or disclosure of the Company's confidential information or trade secrets, which use or disclosure causes material harm to the Company; (ii) a deliberate material failure in the performance of your duties as Chief Business Officer or any other duties as pertaining to employees of the Company generally, which is not cured within fifteen (15) days after receiving written notification of such failure form the Board of Directors or the Chief Executive Officer; (iii) conviction of, or pleas of "guilty” or "no contest" to, a felony under the laws of the United States or any state thereof; (iv) gross misconduct, which is not cured within fifteen (15) days after receiving written notification of such misconduct form the Board of Directors or the Chief Executive Officer; or (v) a continued failure to perform assigned duties customarily performed by a Chief Business Officer of a corporation of similar size, which is not cured within fifteen (15) days after receiving written notification of such failure form the Board of Directors or the Chief Executive Officer.

The Company is excited about your joining and looks forward to a beneficial and productive relationship. Neve1iheless, you should be aware that your employment with the Company is for no specified period and constitutes at-will employment. As a result, you are free to resign at any time, for any reason or for no reason. Similarly, the Company is free to conclude its employment relationship with you at any time, with or without cause, and with or without notice. We request that, in the event of resignation, you give the Company at least two weeks' notice. You should also note that the Company may modify job titles, salaries and benefits from time to time as it deems necessary.

 

The Company reserves the right to conduct background investigations and/or reference checks on all of its potential employees. Your job offer, therefore, is contingent upon a clearance of such a background investigation and/or reference check. if any.

 

For purposes of federal immigration law, you will be required to provide to the Company documentary evidence of your identity and eligibility for employment in the United States. Such documentation must be provided to us within three (3) business days of your date of hire, or our employment relationship with you may be terminated.

 

We also ask that, if you have not already done so, you disclose to the Company any and all agreements relating to your prior employment that may affect your eligibility to be employed by the Company or limit the manner in which you may be employed. It is the Company's understanding that any such agreements will not prevent you from performing the duties of your position and you represent that such is the case. Moreover, you agree that, during the term of your employment with the Company, you will not engage in any other employment, occupation, consulting or other business activity directly related to the business in which the Company is now

 

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involved or becomes involved during the term of your employment, nor will you engage in any other activities that conflict with your obligations to the Company without the prior written consent of the Chief Executive Officer; provided, however, that your continuing appointment at Columbia University shall not require further written consent. Similarly, you agree not to bring any third party confidential information to the Company, including that of your former employer, and that in performing your duties for the Company you will not in any way utilize any such information.

 

As a Company employee, you will be expected to abide by the Company's rules and standards. Specifically, you will be required to sign an acknowledgment that you have read and that you understand the Company's rules of conduct, which are included in the Company Handbook.

 

As a condition of your employment, you are also required to sign and comply with an At­ Will Employment, Confidential Information, Invention Assignment and Arbitration Agreement which requires, among other provisions, the assignment of patent rights to any invention made during your employment at the Company, and non-disclosure of Company proprietary information. In the event of any dispute or claim relating to or arising out of our employment relationship, you and the Company agree that (i) any and all disputes between you and the Company shall be fully and finally resolved by binding arbitration, (ii) you are waiving any and all rights to a jury trial but all court remedies will be available in arbitration, (iii) all disputes shall be resolved by a neutral arbitrator who shall issue a written opinion, (iv) the arbitration shall provide for adequate discovery, and (v) the Company shall pay all costs associated with arbitration fees. Please note that we must receive your signed Agreement before your first day of employment.

 

Notwithstanding anything to the contrary in this letter, any severance or other benefits to which you may become entitled to pursuant to this letter will be subject to the terms provided in Exhibit B hereto.

 

We would propose that your first day of employment be on or before September 4, 2018. Should you be willing and able to begin employment sooner, followed by your planned time away, we would welcome the start of your employment at the earliest possible date and would treat the subsequent time away as w1paid time off. This letter, along with any agreements relating to proprietary rights between you and the Company, set forth the terms of your employment with the Company and supersede any prior representations or agreements including, but not limited to, any representations made during your recruitment, interviews or pre-employment negotiations, whether written or oral. This letter, including, but not limited to, its at-will employment provision, may not be modified or amended except by a written agreement signed by the Chief Executive Officer of the Company and you. This offer of employment will terminate if it is not accepted, signed and returned by July 30, 2018.

 

We look forward to your favorable reply and to working with you at Sutro Biopharma!

 

[signature page follows]

 

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To indicate your acceptance of the letter, please sign and date this letter in the space provided below and return it to me. A duplicate original is enclosed for your records.

 

Sincerely,

 

 

____________________

William J. Newell

 

Agreed to and accepted:

 

Signature: ______________

 

Printed Name: ___________

 

Date:_________________

Enclosures:

Duplicate Original Letter

Exhibit A: General Release of All Claims Exhibit B: Section 409A Provisions

At-Will Employment. Confidential Information, Invention Assignment and Arbitration Agreement

Sutro Biopharma Benefits Guide

 

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EXHIBIT A

 

GENERAL RELEASE OF ALL CLAIMS

 

In consideration of the severance benefits to be provided to Linda Fitzpatrick by Sutro Biopharma, Inc. (the “Company”), pursuant to the terms of the letter you entered into with the Company dated as of August 8, 2018 (the “Agreement”). You, on your own behalf and on behalf of your heirs, executors, administrators, and assigns, hereby fully and forever release and discharge the Company and its directors, officers, employees, agents, successors, predecessors, subsidiaries, parent, stockholders, employee benefit plans and assigns (together called “the Releases”’), from all known and unknown claims and causes of action including, without limitation, any claims or causes of action arising out of or relating in any way to your employment with the Company, including the termination of that employment.

 

Eight days after you sign (and do not revoke) this General Release of All Claims (''Release”), provided that it is not signed earlier than your cessation of employment, you will be entitled to the severance benefits or change of control benefits set forth in the Agreement, subject to any other requirements set forth therein or on Exhibit B thereto, that are conditioned on this Release.

 

You understand and agree that this Release is a full and complete waiver of all claims, including (without limitation) claims to attorneys' fees or costs, claims of wrongful discharge, constructive discharge, breach of contract, breach of the covenant of good faith and fair dealing, harassment, retaliation, discrimination, violation of public policy, defamation, invasion of privacy, interference with a leave of absence, personal injury, fraud or emotional distress and any claims of discrimination or harassment based on sex, age, race, national origin, disability or any other basis under Title VII of the Civil Rights Act of 1964, the Fair Labor Standards Act, the Equal Pay Act of 1963, the Americans With Disabilities Act, the Age Discrimination in Employment Act of 1967 (ADEA), the California Labor Code, the California Fair Employment and Housing Act, the California Family Rights Act, the Family Medical Leave Act or any other federal or state law or regulation relating to employment or employment discrimination. You further understand and agree that this waiver includes all claims, known and unknown, to the greatest extent permitted by applicable law.

 

You also hereby agree that nothing contained in this Release shall constitute or be treated as an admission of liability or wrongdoing by the Releasees or you.

In addition, you hereby expressly waive any and all rights and benefits conferred upon you by the provisions of Section 1542 of the Civil Code of the State of California, which states as follows:

 

A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.

 

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If any provision of this Release is found to be unenforceable, it shall not affect the enforceability of the remaining provisions and the court shall enforce all remaining provisions to the full extent permitted by law.

 

You agree to provide, at the Company's expense, including reimbursement of your time and/or the reasonable fees and expenses of your counsel, reasonable cooperation and complete and accurate information to the Company (voluntarily, without requiring a subpoena or other compulsion of law) in the event of litigation against the Company and/or its officers or directors. You also agree that you will not assist any person in bringing or pursuing any claim or action of any kind against the Company, unless pursuant to subpoena or other compulsion of law.

 

This Release constitutes the entire agreement between you and Releases' with regard to the subject matter of this Release. It supersedes any other agreements, representations or understandings, whether oral or written and whether express or implied, which relate to the subject matter of this Release except as otherwise set forth in the Agreement. However, this Release covers only those claims that arose prior to the execution of this Release. Execution of this Release does not bar any claim that arises hereafter, including (without limitation) a claim for breach of the Agreement.

 

You understand that you have the right to consult with an attorney before signing this Release. You have 21 days after receipt of this Release to review and consider this Release, discuss it with an attorney of your own choosing, and decide to execute it or not execute it. You also understand that you may revoke this Release during a period of seven days after you sign it and that this Release will not become effective for seven days after you sign it (and then only if you do not revoke it). In any event, this Release is not to be signed, and will not become effective, prior to your cessation of employment. In order to revoke this Release, within seven days after you execute this Release you must deliver to William Newell, at the Company, a letter stating that you are revoking it.

 

You understand that if you choose to revoke this Release within seven days after you sign it, you will not receive the severance benefits set forth in the Agreement that are conditioned on this Release and the Release will have no effect.

 

You agree not to disclose to others the terms of this Release, except that you may disclose such information to your spouse and to your attorney or accountant in order for such attorney or accountant to render services to you related to this Release.

 

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You state that before signing this Release, you:

 

	
 
	
•
	
Have read it,

	
 
	
•
	
Understand it,

	
 
	
•
	
Know that you are giving up important rights,

	
 
	
•
	
Are aware of your right to consult an attorney before signing it, and

	
 
	
•
	
Have signed it knowingly and voluntarily.

 

Date: -- - - - - - - - - - -

	
 
	
By:
	
  Linda Fitzpatrick
	
 

 

 

	
 
	

	
 
	
 

 
 

 

TO BE SIGNED UPON CESSATION OF EMPLOYMENT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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EXHIBIT B SECTION 409A

(a)Notwithstanding anything to the contrary in the letter, no Deferred Compensation Separation Benefits (as defined below) will become payable under the letter until you have a

“separation from service" within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the "Code"), and any proposed or final regulations and guidance promulgated thereunder ("Section 409"). Further, if you are a “specified employee" within the meaning of Section 409A at the time of your termination (other than due to death), and the severance or other benefits payable to you, if any, pursuant to the letter, when considered together with any other severance payments or separation benefits, are considered deferred compensation under Section 409A (together, the “Deferred Compensation Separation Benefits"), such Deferred Compensation Separation Payments that are otherwise payable within the first six (6) months following your termination of employment will become payable on the first payroll date that occurs on or after the date six (6) months and one (1) day following the date of your termination of employment (or such later date as is required to avoid the imposition of additional tax under Section 409A). All subsequent Deferred Compensation Separation Benefits, if any, will be payable in accordance with the payment schedule applicable to each payment or benefit. Notwithstanding anything herein to the contrary, if you die following your termination but prior to the six (6) month anniversary of your termination (or any later delay date), then any payments delayed in accordance with this paragraph will be payable in a lump sum as soon as administratively practicable after the date of your death and all other Deferred Compensation Separation Benefits will be payable in accordance with the payment schedule applicable to each payment or benefit. Each payment and benefit payable under the letter is intended to constitute separate payments for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations.

	
 
	
(b)
	
Any amount paid under the letter that satisfies the requirements of the “short-term deferral" rule set forth in Section l. 409A-l(b)(4) of the Treasury Regulations shall not constitute Deferred Compensation Separation Benefits for purposes of section (a) above.
	
 

 

(c)Any amount paid under the letter that qualifies as a payment made as a result of an involuntary separation from service pursuant to Section l. 409A-l(b)(9)(iii) of the Treasury Regulations that does not exceed the Section 409A Limit shall not constitute Deferred Compensation Separation Benefits for purposes of section (a) above. For purposes of this section (c),"Section 409A Limit" will mean the lesser of two (2) times: (i) your annualized compensation based upon the annual rate of pay paid to you during the Company's taxable year preceding the Company' s taxable year of your termination of employment as determined under Treasury Regulation l.409A-l(b)(9)(iii)(A)(I) and any Internal Revenue Service guidance issued with

 

 

 

respect thereto; or (ii) the maximum amount that may be taken into account under a qualified plan pursuant to Section 401(a)(l7) of the Code for the year in which your employment is terminated.

	
 
	
(d)
	
For purposes of Section 409A, any right to receive any installment payments pursuant to this letter will be treated as a right to receive a series of separate and distinct payments under Section l.409A-2(b)(2)(iii) of the Treasury Regulations.
	
 

	
 
	
(e)
	
Reimbursement. To the extent that any taxable reimbursements of expenses or in- kind benefits are provided, they shall be made in accordance with Section 409A, including, but not limited to the following provisions:
	
 

	
 
	
i)
	
The amount of any such expense reimbursement or in-kind benefit provided during a service provider's taxable year shall not affect any expenses eligible for reimbursement in any other taxable year;
	
 

 

	
 
	
ii)
	
The reimbursement of the eligible expense shall be made no later than the last day of the service provider's taxable year that immediately follows the taxable year in which the expense was incurred; and
	
 

	
 
	
iii)
	
The right to any reimbursement shall not be subject to liquidation or exchange for another benefit or payment.
	
 

(e)        The foregoing provisions are intended to comply with the requirements of Section 409A so that none of the severance payments and benefits to be provided under the letter will be subject to the additional tax imposed under Section 409A, and any ambiguities herein will be interpreted to so comply. You and the Company agree to work together in good faith to consider amendments to the letter and to take such reasonable actions which are necessary, appropriate or desirable to avoid imposition of any additional tax or income recognition prior to actual payment to you under Section 409A.stro-ex1024_531.htm

 

Exhibit 10.24

SUTRO BIOPHARMA, INC.

SEVERANCE AND CHANGE IN CONTROL PLAN

SECTION 1

PURPOSE

The Board of Sutro Biopharma, Inc., a Delaware corporation (together with its subsidiaries, the “Company”), considers it in the best interests of the stockholders of the Company to reinforce the continued attention and dedication of certain key employees of the Company to their duties of employment without personal distraction or conflict of interest, including as a result of the possibility or occurrence of a change in control of the Company.  Accordingly, the Company will provide designated individuals with rights to receive severance payments and other benefits upon a Covered Termination pursuant to this Severance and Change in Control Plan (this “Plan”), as set forth below. 

SECTION 2

ELIGIBILITY

2.1.Eligibility for Participation.  Except to the extent the Committee provides otherwise, or except as the Committee specifically excludes an otherwise Eligible Employee, each Eligible Employee will automatically participate in the Plan upon hiring with a title of, or promotion to a title of, Vice President or above (including all SVPs, EVPs or C-Level employees).  If required by the Committee, participation in this Plan will be contingent upon such Participant executing and delivering to the Company of an acknowledgement of participation in the form attached hereto, as Exhibit A (as such form may be amended or modified by the Board, a “Participation Agreement”), provided that if the Committee does not expressly require it, no Participation Agreement will be necessary to participate in this Plan. 

2.2. Termination of Participation.  An individual shall cease to be a Participant on the date that such individual terminates service with the Company or otherwise ceases to qualify as an Eligible Employee for any reason, in each case other than in connection with a Covered Termination.

SECTION 3

SEVERANCE PAYMENTS AND BENEFITS

3.1.Covered Termination outside the Change in Control Period.  If any Participant experiences a Covered Termination other than during a Change in Control Period, the Participant shall be entitled to receive his or her Accrued Benefits and, subject to the requirements of Section 3.3, the following payments and benefits:

(a)Cash Severance.  An amount equal to the sum of: 

(i) the product of (A) the Participant’s Severance Multiplier multiplied by (B) the Participant’s Base Salary.  Payment of such Base Salary severance pursuant this Section 3.1(a)(i) shall be made in monthly installments, beginning with the first regular payroll date occurring after 

1

 

 

the sixtieth (60th) day following the date of the Covered Termination, with any payments that would have occurred prior to such date payable in a lump sum without interest on such first payment date; and 

(ii) Participant’s  bonus for the year in which the Covered Termination occurs based actual achievement of the applicable metrics multiplied by a fraction, the numerator of which is the number of days for which the Participant was employed by the Company during such bonus period and the denominator of which is the total number of calendar days in such bonus period (the “Prorated Actual Bonus”).  The  Prorated Actual Bonus will be paid at such time that the Company makes payment to all of its similarly situated employees under the applicable bonus plan.

(b)Continued Healthcare Coverage.  If the Participant elects to receive continued healthcare coverage pursuant to the provisions of COBRA, the Company shall continue the Participant’s coverage and directly pay, or reimburse the Participant for, the premium for the Participant and the Participant’s covered dependents through the earlier of (i) the number of months following the Participant’s Covered Termination equal to the Participant’s COBRA Severance Period and (ii) the date that the Participant and the Participant’s covered dependents become eligible for coverage under another employer’s plans (the “Continuation Period”); provided, that as soon as administratively practicable following the date the Release becomes effective, the Company shall pay to the Participant a cash lump-sum payment equal to the monthly premiums that would have been paid on behalf of the Participant had such payments commenced on the date of the Covered Termination.  Notwithstanding the foregoing, the Company may elect at any time during the Continuation Period that, in lieu of paying or reimbursing the premiums, the Company shall instead provide the Participant with a monthly cash payment equal to the amount the Company would have otherwise paid pursuant to this Section 3.1(b), less applicable tax withholdings.

(c)Equity Awards.  Each then-outstanding and unvested Equity Award held by the Participant shall automatically become vested, and if applicable, exercisable and any forfeiture restrictions or rights of repurchase thereon shall lapse, in each case with respect to that number of shares underlying his or her outstanding Equity Awards as of the date of the Covered Termination that would have become vested if Participant had continued in employment or other service with the Company for a number of months equal to the Acceleration Multiplier; provided that any performance-based vesting criteria shall be treated in accordance with the applicable award agreement or other applicable equity incentive plan governing the terms of such equity award.  

3.2.Covered Termination within the Change in Control Period.  If any Participant experiences a Covered Termination during a Change in Control Period, then in lieu of the payments provided in Section 3.1 hereof, the Participant shall be entitled to receive his or her Accrued Benefits and, subject to the requirements of Section 3.3, the following payments and benefits:

(a)Cash Severance.  An amount equal to the sum of: 

(i) the product of (A) the Participant’s CIC Severance Multiplier multiplied by (B) the Participant’s Base Salary;

(ii) the product of (A) the Participant’s CIC Bonus Multiplier multiplied by (B) the 

2

 

 

Participant’s Target Bonus; and 

(iii) the Participant’s Target Bonus for the year in which the Covered Termination occurs multiplied by a fraction, the numerator of which is the number of days for which the Participant was employed by the Company during such bonus period and the denominator of which is the total number of calendar days in such bonus period; 

provided that in clauses (i),(ii) and (iii), such amounts shall be calculated at the rate equal to the higher of (x) the rate in effect immediately prior to the Participant’s Covered Termination and (y) the rate in effect immediately prior to the Change in Control.  The foregoing amounts shall be payable in a cash lump-sum, less applicable withholdings, which payment will be made no later than the first regular payroll date occurring after the sixtieth (60th) day following the date of the Covered Termination. 

(b)Continued Healthcare Coverage.  If the Participant elects to receive continued healthcare coverage pursuant to the provisions of COBRA, the Company shall continue a Participant’s benefit plan coverage and directly pay, or reimburse the Participant for, the premium for the Participant and the Participant’s covered dependents through the earlier of (i) the number of months following the Participant’s Covered Termination, equal to the Participant’s CIC COBRA Period and (ii) the date that the Participant and the Participant’s covered dependents become eligible for coverage under another employer’s plans (the “CIC Continuation Period”); provided that as soon as administratively practicable following the date the Release becomes effective, the Company shall pay to the Participant a cash lump-sum payment equal to the monthly premiums that would have been paid on behalf of the Participant had such payments commenced on the date of the Covered Termination.  Notwithstanding the foregoing, the Company may elect at any time during the CIC Continuation Period that, in lieu of paying or reimbursing the premiums, the Company shall instead provide the Participant with a monthly cash payment equal to the amount the Company would have otherwise paid pursuant to this Section 3.2(b), less applicable tax withholdings.

(c)Equity Awards.  Each then-outstanding and unvested Equity Award held by the Participant shall automatically become vested, and if applicable, exercisable and any forfeiture restrictions or rights of repurchase thereon shall lapse, in each case with respect to 100% of the shares underlying his or her outstanding Equity Awards as of the date of the Covered Termination for the Participant; provided that any performance-based vesting criteria shall be treated in accordance with the applicable award agreement or other applicable equity incentive plan governing the terms of such equity award.  Any award that is not assumed or substituted for following a Change in Control shall accelerate in full.

3.3.Release.  No Participant will be eligible for the severance payments and benefits described in Section 3.1 or Section 3.2, as applicable, unless the Participant has executed a general release of all claims that the Participant may have against the Company (or its successor) or entities or persons affiliated with the Company (or its successor), in the form prescribed and to be provided to the Participant by the Company (or its successor) (the “Release”), and such Release becomes effective on or before the 60th day following date of the Covered Termination.  If the Participant fails to return the Release on or before such deadline, or if the Participant revokes the Release, then the Participant will not be entitled to any severance payments or benefits described in Section 

3

 

 

3.1 or Section 3.2, as applicable.

3.4.Section 280G; Limitation on Payments.  Notwithstanding anything in this Plan to the contrary, if any payment or distribution to a Participant pursuant to this Plan or otherwise (“Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then such Payment shall either be (A) delivered in full or (B) delivered as to such lesser extent as would result in no portion of such Payment being subject to the Excise Tax, whichever of the foregoing amounts, after taking into account the applicable federal, state and local income taxes and the Excise Tax, results in the receipt by the Participant on an after-tax basis of the largest payment, notwithstanding that all or some portion of the Payment may be taxable under Section 4999 of the Code.  The accounting firm engaged by the Company for general audit purposes as of the date prior to the effective date of the Change in Control, or such other person or entity as determined in good faith by the Company, shall perform the foregoing calculations and the Company shall bear all expenses with respect to the determinations by such accounting firm required to be made hereunder.  Any good faith determinations of the accounting firm made pursuant to this Section 3.4 shall be final, binding and conclusive upon all parties.  Any reduction in payments and/or benefits pursuant to the foregoing shall be made in accordance with Section 409A of the Code in the following order (1) Payments that do not constitute “nonqualified compensation” subject to Section 409A of the Code shall be reduced first; and (2) all other Payments shall then be reduced as follows:  (a) reduction of cash payments; (b) cancellation of accelerated vesting of equity awards other than stock options, if any; (c) cancellation of accelerated vesting of stock options, and (d) reduction of other benefits payable to the Participant.   

SECTION 4

ADMINISTRATION

4.1Administration; Duties and Powers of the Committee.  The Compensation Committee of the Board (the “Committee”) shall have the duties, power and authority to conduct the general administration of the Plan in accordance with its provisions and shall have the power to:  

(a)determine which Eligible Employee shall be selected as Participants, including non-executive Eligible Employees, and the tiers at which any such Eligible Employees shall participate;

(b)make any determinations concerning the Plan, including whether any individual is an Eligible Employee or Participant and whether a Covered Termination or other termination of service has occurred;

(c)construe and interpret this Plan, any Participation Agreement and any other agreement or document executed pursuant to this Plan, and modify any Participation Agreement as it shall deem necessary;

(d)subject to any limitations under the Plan or applicable laws, prescribe, amend and rescind rules and regulations as it shall deem necessary for the efficient administration of the Plan; and

(e)make all other decisions and determinations (including factual determinations) as the Board may deem necessary or advisable in carrying out its duties and responsibilities or exercising its powers.

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4.2Delegation of Authority.  The Committee may from time to time delegate to a committee of one or more members of the Committee the authority to take any actions pursuant to Section 4.1 to the extent permitted by the Charter of the Compensation Committee.  Any delegation hereunder shall be subject to the restrictions and limits that the Committee specifies and the time of such delegation, and the Committee may, at any time rescind the authority so delegated or appoint a new delegate.  In its sole discretion, the Board may, at any time and from time to time, exercise any and all rights and duties of the Committee under the Plan except with respect to matters which under applicable securities laws and exchange listing rules are required to be determined in the sole discretion of the Committee.  Any references in this Plan to the Committee shall be construed as a reference to the committee to which the Committee has delegated such authority, if any.  

4.3Decisions Binding.  Any determination made by the Committee with respect to this Plan or any Participation Agreement shall be final, binding and conclusive on all parties.

Section 5

TERM; Amendment; termination

The initial term of this Plan shall be for a period commencing on the Effective Date and ending on the third anniversary of the Effective Date, and shall thereafter automatically renew for successive three-year periods, unless earlier terminated in accordance with this section.  The Plan may otherwise be amended, modified, suspended or earlier terminated by the Committee, in its sole discretion.  Notwithstanding anything herein to the contrary, in no event shall any amendment, modification, suspension or termination adversely affect the rights of any Participant who is then receiving or entitled to receive payments or benefits under the Plan, without the prior written consent of such Participant. 

SECTION 6

COVENANTS

6.1.Non-Solicitation.  As a condition of participation in this Plan, each Participant shall have agreed, in addition to any non-solicitation obligation in existence in any other agreement with the Company (including any offer letter, employment agreement or proprietary information or confidentiality agreement), that during the 12-month period following the Participant’s termination of service with the Company for any reason, the Participant shall not in any capacity, whether directly or indirectly, solicit or attempt to solicit away from the Company any of its officers or employees; provided, however, that a general advertisement to which an employee of the Company responds shall in no event be deemed to result in a breach of this Section 6.1.  

6.2.Cooperation .  For the period commencing on the effective date of his or her Covered Termination and ending on the one-year anniversary of such date, each Participant shall cooperate with the Company and use his or her best efforts to assist the Company with the transition of his or duties to a successor.  

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SECTION 7

SUCCESSORS; ASSIGNMENT 

7.1Successors.  The Company shall require any successor (whether pursuant to a Change in Control, direct or indirect, and whether by purchase, merger, consolidation, liquidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform the obligations under this Plan in the same manner and to the same extent as the Company would be required to perform in the absence of such a succession of the Company. 

7.2Assignment by Participants.  This Plan and the rights of each Participant hereunder shall inure to the benefit of, and be enforceable by, each Participant and the Company, and their respective successors, assigns, heirs, executors and administrators; provided, however, that a Participant may not assign any of his or her duties hereunder and may not assign any of his or her rights hereunder without the express written consent of the Company.  If a Participant should die while any amount would still be payable to the Participant hereunder had the Participant continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of Plan to the Participant’s estate.

SECTION 8

MISCELLANEOUS PROVISIONS

8.1Section 409A.  

(a)Separation from Service; Installments.  For purposes of this Plan, no payment will be made to any Participant upon termination of the Participant’s employment unless such termination constitutes a “separation from service” within the meaning of Section 409A of the Code.  It is intended that the right of any Participant to receive installment payments pursuant to this Plan shall be treated as a right to receive a series of separate and distinct payments for purposes of Section 409A of the Code.  It is further intended that all payments and benefits hereunder satisfy, to the greatest extent possible, the exemption from the application of Section 409A of the Code (and any state law of similar effect) provided under Treasury Regulation Section 1.409A-1(b)(4) (as a “short-term deferral”) and are otherwise exempt from or comply with Section 409A of the Code.  Accordingly, to the maximum extent permitted, this Plan shall be interpreted in accordance with that intent.  To the extent necessary to comply with Section 409A of the Code, if the designated payment period for any payment under this Plan begins in one taxable year and ends in the next taxable year, the payment will commence or otherwise be made in the later taxable year.

(b)Specified Employee.  For purposes of Section 409A of the Code, if the Company determines that a Participant is a “specified employee” under Section 409A(a)(2)(B)(i) of the Code at the time of his or her separation from service, then to the extent delayed commencement of any portion of the payments or benefits to which the Participant is entitled pursuant to this Plan is required in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, such portion shall not be provided to the Participant until the earlier (i) the expiration of the six-month period measured from the Participant’s separation from service or (ii) the date of the Participant’s death. As soon as administratively practicable following the expiration of the applicable Section 409A(2)(B)(i) period, all payments deferred pursuant to the preceding sentence 

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shall paid in a lump-sum to the Participant and any remaining payments due pursuant to the Plan shall be paid as otherwise provided herein.   

8.2Withholding Taxes.  All payments made under this Plan shall be subject to reduction to reflect such federal, state, local foreign or other taxes or charges as are required to be withheld pursuant to any applicable law or regulation.

8.3Source of Payments.  All payments provided under this Plan shall be paid in cash from the general funds of the Company, and no special or separate fund or other segregation of assets shall be required to be made to assure payment.  To the extent that any person acquires a right to receive payments from the Company under this Plan, such right shall be no greater than the right of an unsecured creditor of the Company.

8.4Dispute Resolution.  To ensure efficient and economical resolution of any and all disputes that might arise in connection with this Plan, all such disputes shall be settled by arbitration conducted before one arbitrator sitting in the State of California, or such other location agreed by the parties hereto, in accordance with the rules for expedited resolution of employment disputes of the American Arbitration Association then in effect.  The arbitrator shall issue a written decision that contains the essential findings and conclusions on which the decision is based and such determination shall be final and binding on the parties.  The Company shall pay the arbitrator’s fees and arbitration expenses and any other costs associated with the arbitration or arbitration hearing that are unique to arbitration; provided that the Participant may voluntarily pay up to one-half of the costs and fees, or if the Company is successful in any legal or equitable action against the Participant, the Company shall be entitled to seek reimbursement from the Participant of up to one-half of the arbitration fees.

8.5Notice.  Notices and all other communications contemplated by this Plan shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by United States Post Office, by registered or certified mail, postage prepaid, addressed to the other party.  In the case of the Company, mailed notices shall be addressed to its corporate headquarters and directed to the attention of the General Counsel (and in the case of any communication from the General Counsel to the Company, the General Counsel will direct it to the Chief Executive Officer).  In the case of any Participant, mailed notices shall be addressed to the Participant at the Participant’s home address that the Company has on file for the Participant.

8.6Severability.  The invalidity or unenforceability of any provision or provisions of this Plan shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect.

8.7At-Will Employment.  Nothing in this Plan or any Participation Agreement shall confer upon any Participant any right to employment or continuation of employment.  The Company and each Participant shall each have reserved the right terminate employment of the Participant at any time and for any reason, with or without cause or prior notice.

8.8Choice of Law.  The validity, interpretation, construction and performance of this Plan shall be governed by the laws of the State of California (without regard to choice-of-law provisions). 

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8.9Waiver.  No waiver by the Board or any Participant at any time of any breach by the other party of, or compliance with, any condition or provision of this Plan to be performed by such other party shall be deemed a waiver of any other provision at that time, or of the same or any other provision at any prior or subsequent time.

8.10Entire Agreement. This Plan, together with any Participation Agreement, shall constitute the entire agreement between the Company and each Participant with regard to cash payments, benefits or equity acceleration in connection with a termination of employment or a Change in Control.  All understandings and agreements preceding the date of execution of a Participant’s Participation Agreement as they apply to any subject matter other than cash payments, benefits and equity acceleration in connection with a termination of employment or a Change in Control shall not be superseded and shall remain fully in effect.  All prior understandings and agreements with respect to cash payments, benefits and equity acceleration in connection with a termination of employment or a Change in Control shall be superseded by this Plan and the Participation Agreement. 

SECTION 9

DEFINITIONS

Capitalized terms not otherwise defined in the Plan shall have the meanings set forth below:

9.1“Acceleration Multiplier” means (i) 18 months for Tier 1 Participants, (ii) 15 months for Tier 2 Participants and (iii) 9 months for Tier 3 Participants.

9.2“Accrued Benefits” means the Participant’s accrued but unpaid base salary or wages, any annual bonus that has been earned for the Company’s prior fiscal year, but not yet paid, accrued vacation pay (if applicable), unreimbursed business expenses for which proper documentation is provided, and other vested amounts and benefits earned by (but not yet paid to) or owed to the Participant under any applicable employee benefit plan of the Company through and including the date of the Covered Termination. 

9.3“Base Salary” means the Participant’s annual base salary in effect on the date of the Participant’s Covered Termination, provided, that, in the case of a Covered Termination due to Good Reason, such rate shall be that in effect immediately prior to the actions that resulted in the Covered Termination.

9.4“Board” means the Board of Directors of the Company.

9.5“Cause” means the Participant’s (i) unauthorized use or disclosure of the Company’s confidential information or trade secrets, which use or disclosure causes material harm to the Company; (ii) deliberate material failure in the performance of Participant’s duties or any other duties as pertaining to employees of the Company generally which is not cured within fifteen (15) days after receiving written notification of such failure from the Board of Directors or the Chief Executive Officer; (iii) conviction of, or pleas of “guilty”•or “no contest” to a felony under the laws of the United States or any state thereof; (iv) gross misconduct; or (v) continued failure to perform assigned duties customarily performed by the Participant’s role at a corporation of similar size, which is not cured within fifteen (15) days after receiving written notification of such failure from the Board of Directors or the Chief Executive Officer.

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9.6 “COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended. 

9.7“Code” means the Internal Revenue Code of 1986, as amended.

9.8“Change in Control” means the occurrence of any of the following events: (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the total voting power represented by the Company’s then outstanding voting securities; or (ii) the consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets; or (iii) the consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) more than fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation; provided that the event also qualifies as a change in control under U.S. Treasury Regulation 1.409A-3(i)(5)(v) or 1.409A-3(i)(5)(vii).

9.9“Change in Control Period” means the period commencing on the effective date of a Change in Control and ending eighteen (18) months following a Change in Control.

9.10“CIC Bonus Multiplier” means (i) 1.5 times Participant’s target annual cash bonus for Tier 1 Participants, (ii) 1.25 times Participant’s target annual cash bonus for Tier 2 Participants and (iii) 0.75 times Participant’s target annual cash bonus for Tier 3 Participants. 

9.11“CIC Severance Multiplier” means (i) 1.5 times Participant’s Base Salary for Tier 1 Participants, (ii) 1.25 times the Participant’s Base Salary for Tier 2 Participants and (iii) 0.75 times the Participant’s Base Salary for Tier 3 Participants.

9.12“CIC COBRA Severance Period” means (i) 18 months for Tier 1 Participants, (ii) 15 months for Tier 2 Participants and (iii) 9 months for Tier 3 Participants. 

9.13“COBRA Severance Period” means (i) 18 months for Tier 1 Participants, (ii) 15 months for Tier 2 Participants and (iii) 9 months for Tier 3 Participants.

9.14“Covered Termination” means (a) the termination of a Participant’s employment by the Company or any subsidiary, as applicable, without Cause, or (b) the Participant’s termination of his or her employment with the Company or any subsidiary, as applicable, for Good Reason.  A Covered Termination shall not include a termination of any Participant’s employment by reason of the Participant’s death or disability, the termination of a Participant’s employment for Cause or the Participant’s termination of his or her employment without Good Reason. 

9.15“Eligible Employee” means a U.S.-based employee of the Company or any of its subsidiaries with a title of Vice President or above, unless such individual is party to an individual agreement with the Company that provides for severance upon a qualifying termination of employment which is not superseded by this Plan.

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9.16“Effective Date” means the date on which is Plan is adopted and approved by the Committee or otherwise specified by the Committee.

9.17“Equity Award” means all options to purchase shares of Company common stock as well as any and all other stock-based awards granted to the Participant, including but not limited to restricted stock, restricted stock units and stock appreciation rights.

	
9.18
	
“Good Reason”  means the occurrence of one or more of the following without the Participant’s consent: (i) a material reduction in Participant’s level of duties, responsibility and/or scope of authority; (ii) a material reduction in Participant’s base salary (other than a reduction generally applicable to all similarly situated Participants and in generally the same proportion as for Participant implemented for expense management purposes); (iii) a requirement for Participant to relocate to an office that is more than fifty (50) miles from the location of the Participant’s primary work location at the time of such relocation; and (iv) for the CEO of the Company, a change in reporting such that the CEO does not report to the board of directors of the ultimate parent company, and for any Tier 3 Participant that directly reports to the Company CEO, a change in reporting to report to someone other than the Company CEO or the CEO of the ultimate parent company during a Change in Control Period; provided, however, that a resignation for Good Reason will not be deemed to have occurred unless the Participant (a) provides the Company with written notice of Participant’s intention to terminate his or her employment for Good Reason within ninety (90) calendar days after the occurrence of the event that Participant believes would constitute Good Reason and (b) Participant provides the Company with the Company Cure Period following receipt of such notice in which to cure the event giving rise to such Good Reason termination, and (c) Participant’s resignation is effective within ten (10) calendar days of the earlier of expiration of the Company Cure Period or written notice from the Company that it will not undertake to cure the condition set forth in set forth in subclauses (i) through (iv).

9.19“Participant” means each Eligible Employee or any other employee selected by the Committee pursuant to Section 2 hereof.

9.20“Severance Multiplier” means (i) 1.5 times the Participant’s Base Salary for Tier 1 Participants, (ii) 1.25 times the Participant’s Base Salary for Tier 2 Participants and (iii) 0.75 times the Participant’s Base Salary for Tier 3 Participants.  

9.21“Target Bonus” means the Participant’s target annual cash bonus (assuming achievement of performance goals at 100% of target) for the fiscal year in which the Covered Termination occurs.

9.22“Tier 1 Participant” means the Company’s Chief Executive Officer.

9.23“Tier 2 Participant” means a Participant who is a C-level executive. 

9.24“Tier 3 Participant” means a Participant who is a Vice President or a Senior Vice President level employee. 

* * * * *

 

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EXHIBIT A

PARTICIPATION AGREEMENT

Sutro Biopharma, Inc.

Severance And Change In Control Plan

Sutro Biopharma, Inc., a Delaware corporation (the “Company”), pursuant to its Change in Control Severance Plan, as may be amended from time to time (the “Plan”), hereby designates _____________ as a Participant in the Plan at the level indicated below:  

☐ Tier 1 Participant

☐Tier 2 Participant

☐Tier 3 Participant

By his or her signature below, the Participant hereby acknowledges and agrees that:

	
 
	
(i)
	
The Participant has received and reviewed a copy of the Plan;

	
 
	
(ii)
	
Any payment or benefit under the Plan shall be subject to the terms and conditions of this Participation Agreement and the Plan; 

	
 
	
(iii)
	
The Participant accepts as binding, conclusive and final all decisions or interpretations of the Board (as defined in the Plan) arising under the Plan;

	
 
	
(iv)
	
 This Participation Agreement, together with the Plan, shall constitute the entire agreement between the Company and the Participant with regard to cash payments, benefits or equity acceleration in connection with a termination of employment or a Change in Control.  All prior understandings and agreements with respect to cash payments, benefits and equity acceleration in connection with a termination of employment or a Change in Control shall be superseded by this Plan and the Participation Agreement. 

					
	
SUTRO BIOPHARMA, INC.
	
PARTICIPANT

	
By:
	
 
	
By:
	
 

	
 
	
 
	
 
	
 

	
Print Name:

Title:
	
Print Name:

Date:

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