EX-10.7 7 a2236172zex-10_7.htm EX-10.7 EMPLOYMENT AGREEMENT
This Employment Agreement (“Agreement”) is made as of the 2nd day of July, 2018 between Rubius Therapeutics, Inc., a Delaware corporation (the “Company”), and Torben Straight Xxxxxx, Ph.D. (the “Executive”) and is effective as of the closing of the Company’s first underwritten public offering of its equity securities pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “Effective Date”).
2. Compensation and Related Matters.
(a) Death. The Executive’s employment hereunder shall terminate upon the Executive’s death.
to perform the essential functions of the Executive’s then existing position or positions with or without reasonable accommodation, the Executive may, and at the request of the Company shall, submit to the Company a certification in reasonable detail by a physician selected by the Company to whom the Executive or the Executive’s guardian has no reasonable objection as to whether the Executive is so disabled or how long such disability is expected to continue, and such certification shall for the purposes of this Agreement be conclusive of the issue. The Executive shall cooperate with any reasonable request of the physician in connection with such certification. If such question shall arise and the Executive shall fail to submit such certification, the Company’s determination of such issue shall be binding on the Executive. Nothing in this Section 3(b) shall be construed to waive the Executive’s rights, if any, under existing law including, without limitation, the Family and Medical Leave Act of 1993, 29 U.S.C. §2601 et seq. and the Americans with Disabilities Act, 42 U.S.C. §12101 et seq.
or omissions constituting the grounds for “Good Reason” within 60 days of the initial existence of the grounds for “Good Reason,” (x) the Executive must cooperate in good faith with the Company’s efforts, for a cure period of 30 days following the date of written notice (the “Cure Period”), to remedy the grounds for “Good Reason,” (y) such grounds must not have been cured during the Cure Period, and (z) the Executive must terminate the Executive’s employment within 60 days following the Cure Period. If the Company cures the grounds for “Good Reason” during the Cure Period, “Good Reason” shall be deemed not to have occurred.
4. Compensation Upon Termination.
(b) Termination by the Company Without Cause or by the Executive with Good Reason. During the Term, if the Executive’s employment is terminated by the Company without Cause as provided in Section 3(d), or the Executive terminates the Executive’s employment for Good Reason as provided in Section 3(e), then the Company shall pay the Executive the Accrued Benefit. In addition, subject to the Executive signing a separation agreement in substantially the form attached hereto as Exhibit A (the “Separation Agreement and Release”) and the Separation Agreement and Release becoming fully effective, all within the
time frame set forth in the Separation Agreement and Release but in no event more than 60 days after the Date of Termination:
(i) the Company shall pay the Executive an amount equal to nine months of the Executive’s Base Salary (the “Severance Amount”). Notwithstanding the foregoing, if the Executive breaches any of the provisions contained in the Restrictive Covenants Agreement, all payments of the Severance Amount shall immediately cease; and
(ii) if the Executive properly elects to receive benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), nine months of COBRA premiums for the Executive and the Executive’s eligible dependents at the Company’s normal rate of contribution for employees for the Executive’s coverage at the level in effect immediately prior to the Date of Termination; provided, however, if the Company determines that it cannot pay such amounts without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act), provided that the Executive is enrolled in the Company’s health care programs immediately prior to the Date of Termination, the Company will in lieu thereof provide to the Executive a taxable monthly payment in an amount equal to the portion of the COBRA premiums for the Executive and the Executive’s eligible dependents to continue the Executive’s group health coverage in effect on the Date of Termination at the Company’s normal rate of contribution for employee coverage at the level in effect immediately prior to the Date of Termination for a period of nine months. For the avoidance of doubt, the taxable payments described above may be used for any purpose, including, but not limited to, continuation coverage under COBRA; and
(iii) the amounts payable under Section 4(b)(i) and (ii), to the extent taxable, shall be paid out in substantially equal installments in accordance with the Company’s payroll practice over nine months commencing on the first payroll date following the effective date of the Separation Agreement and Release and, in any case, within 60 days after the Date of Termination; provided, however, that if the 60-day period begins in one calendar year and ends in a second calendar year, the Severance Amount to the extent it qualifies as “non-qualified deferred compensation” within the meaning of Section 409A of the Code, shall begin to be paid no earlier than the first Company payroll date in the second calendar year and, in any case, by the last day of such 60-day period; provided, further, that the initial payment shall include a catch-up payment to cover amounts retroactive to the day immediately following the Date of Termination. Each payment pursuant to this Agreement is intended to constitute a separate payment for purposes of Treasury Regulation Section 1.409A-2(b)(2).
termination of employment, if such termination of employment occurs within 12 months after the occurrence of the first event constituting a Change in Control. These provisions shall terminate and be of no further force or effect beginning 12 months after the occurrence of a Change in Control.
(i) the Company shall pay the Executive a lump sum in cash in an amount equal to one times the sum of (A) the Executive’s then current Base Salary (or the Executive’s Base Salary in effect immediately prior to the Change in Control, if higher) plus (B) the Executive’s target annual incentive compensation for the then-current year; and
(ii) except as otherwise expressly provided in any applicable option agreement or other stock-based award agreement, effective as of the later of (i) the Date of Termination, or (ii) the effective date of the Separation Agreement and Release (the “Accelerated Vesting Date”), all stock options and other stock-based awards held by the Executive that are subject to time-based vesting (the “Time-Based Equity Awards”) shall immediately accelerate and become fully exercisable or nonforfeitable. Notwithstanding anything to the contrary in the applicable plans and/or award agreements governing the Time-Based Equity Awards any termination or forfeiture of unvested shares underlying the Time-Based Equity Awards that could vest pursuant to this Section 5(a)(ii) and otherwise would have occurred on or prior to the Accelerated Vesting Date will be delayed until the Accelerated Vesting Date and will occur only to the extent the Time-Based Equity Awards do not vest pursuant to this Section 5(a)(ii). Notwithstanding the foregoing, no additional vesting of the Time-Based Equity Awards shall occur during the period between the Executive’s Date of Termination and the Accelerated Vesting Date; and
(iii) if the Executive properly elects to receive benefits under COBRA, 12 months of COBRA premiums for the Executive and the Executive’s eligible dependents at the Company’s normal rate of contribution for employees for the Executive’s coverage at the level in effect immediately prior to the Date of Termination; provided, however, if the Company determines that it cannot pay such amounts without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act), provided that the Executive is enrolled in the Company’s health care programs immediately prior to the Date of Termination, the Company will in lieu thereof provide to the Executive a taxable monthly payment in an amount equal to the portion of the COBRA premiums for the Executive and the Executive’s eligible dependents to continue the Executive’s group health coverage in effect on the Date of
Termination at the Company’s normal rate of contribution for employee coverage at the level in effect immediately prior to the Date of Termination for a period of 12 months. For the avoidance of doubt, the taxable payments described above may be used for any purpose, including, but not limited to, continuation coverage under COBRA; and
(iv) The amounts payable under Sections 5(a)(i) and (iii), to the extent taxable, shall be paid or commence to be paid on the first payroll date following the effective date of the Separation Agreement and Release and, in any case, within 60 days after the Date of Termination; provided, however, that if the 60-day period begins in one calendar year and ends in a second calendar year, such payments to the extent they qualify as “non-qualified deferred compensation” within the meaning of Section 409A of the Code, shall be paid or commence no earlier than the first Company payroll date in the second calendar year and, in any case, by the last day of such 60-day period.
(i) Anything in this Agreement to the contrary notwithstanding, in the event that the amount of any compensation, payment or distribution by the Company to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, calculated in a manner consistent with Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), and the applicable regulations thereunder (the “Aggregate Payments”), would be subject to the excise tax imposed by Section 4999 of the Code, then the Aggregate Payments shall be reduced (but not below zero) so that the sum of all of the Aggregate Payments shall be $1.00 less than the amount at which the Executive becomes subject to the excise tax imposed by Section 4999 of the Code; provided that such reduction shall only occur if it would result in the Executive receiving a higher After Tax Amount (as defined below) than the Executive would receive if the Aggregate Payments were not subject to such reduction. In such event, the Aggregate Payments shall be reduced in the following order, in each case, in reverse chronological order beginning with the Aggregate Payments that are to be paid the furthest in time from consummation of the transaction that is subject to Section 280G of the Code: (1) cash payments not subject to Section 409A of the Code; (2) cash payments subject to Section 409A of the Code; (3) equity-based payments and acceleration; and (4) non-cash forms of benefits; provided that in the case of all the foregoing Aggregate Payments all amounts or payments that are not subject to calculation under Treas. Reg. §1.280G-1, Q&A-24(b) or (c) shall be reduced before any amounts that are subject to calculation under Treas. Reg. §1.280G-1, Q&A-24(b) or (c).
(ii) For purposes of this Section 5(b), the “After Tax Amount” means the amount of the Aggregate Payments less all federal, state, and local income, excise and employment taxes imposed on the Executive as a result of the Executive’s receipt of the Aggregate Payments. For purposes of determining the After Tax Amount, the Executive shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation applicable to individuals for the calendar year in which the determination is to be made, and state and local income taxes at the highest marginal rates of individual
taxation in each applicable state and locality, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes.
(iii) The determination as to whether a reduction in the Aggregate Payments shall be made pursuant to Section 5(b)(i) shall be made by a nationally recognized accounting firm selected by the Company (the “Accounting Firm”), which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the Date of Termination, if applicable, or at such earlier time as is reasonably requested by the Company or the Executive. Any determination by the Accounting Firm shall be binding upon the Company and the Executive.
6. Compensation Upon Termination by the Company Other than for Cause, Disability or Death on or Prior to November 30, 2018 or by the Executive with Good Reason on or Prior to January 29, 2019. These provisions shall apply in lieu of, and expressly supersede, the provisions of Section 4 and Section 5(a) regarding severance pay and benefits upon (i) termination of the Executive’s employment by the Company without Cause as provided in Section 3(d), if such termination of employment occurs on or prior to November 30, 2018, or (ii) the Executive’s termination of the Executive’s employment for Good Reason as provided in Section 3(e), if the Executive provides Notice of Termination on or prior to January 29, 2019.
(a) During the Term, if the Executive’s employment is terminated by the Company without Cause as provided in Section 3(d) and such termination occurs on or prior to November 30, 2018, or the Executive terminates the Executive’s employment for Good Reason as provided in Section 3(e) and the Executive provides Notice of Termination on or prior to January 29, 2019, then the Company shall pay the Executive the Accrued Benefit. In addition, subject to the Executive signing the Separation Agreement and Release and the Separation Agreement and Release becoming fully effective, all within the time frame set forth in the Separation Agreement and Release but in no event more than 60 days after the Date of Termination:
(i) the Company shall pay the Executive an amount equal to twelve months of the Executive’s Base Salary (the “Cause Severance Amount”). Notwithstanding the foregoing, if the Executive breaches any of the provisions contained in the Restrictive Covenants Agreement, all payments of the Cause Severance Amount shall immediately cease; and
(ii) effective as of the Accelerated Vesting Date, 50% of the unvested portion of all Time-Based Equity Awards held by the Executive shall immediately accelerate and become fully exercisable or nonforfeitable. Notwithstanding anything to the contrary in the applicable plans and/or award agreements governing the Time-Based Equity Awards any termination or forfeiture of unvested shares underlying the Time-Based Equity Awards that could vest pursuant to this Section 6(a)(ii) and otherwise would have occurred on or prior to the Accelerated Vesting Date will be delayed until the Accelerated Vesting Date and will occur only to the extent the Time-Based Equity
Awards do not vest pursuant to this Section 6(a)(ii). Notwithstanding the foregoing, no additional vesting of the Time-Based Equity Awards shall occur during the period between the Executive’s Date of Termination and the Accelerated Vesting Date.
(b) In addition, if the Executive’s employment is terminated by the Company without Cause as provided in Section 3(d) or if the Company changes the Executive’s title, in each case prior to November 30, 2018, then in addition to the payments and benefits set forth in Section 6(a), subject to the Executive signing the Separation Agreement and Release and the Separation Agreement and Release becoming fully effective, all within the time frame set forth in the Separation Agreement and Release but in no event more than 60 days after the Date of Termination:
(i) the Company shall pay the Executive an amount equal to the Executive’s Base Salary through November 30, 2018;
(ii) the Company shall pay the Executive an amount equal to the Executive’s annual incentive compensation for the full year of 2018; and
(iii) the portion of all Time-Based Equity Awards held by the Executive that would have vested and, if applicable, become exercisable, had the Executive remained employed with the Company through January 29, 2019 shall accelerate and become exercisable or nonforfeitable as of the later of the date of title change, if applicable, and the Accelerated Vesting Date. Notwithstanding anything to the contrary in the applicable plans and/or award agreements governing such Time-Based Equity Awards, any termination or forfeiture of unvested shares underlying the Time-Based Equity Awards that could vest pursuant to the foregoing and otherwise would have occurred on or prior to the Accelerated Vesting Date will be delayed until the Accelerated Vesting Date and will occur only to the extent the Time-Based Equity Awards do not vest pursuant to this Section 6(b)(ii). Notwithstanding the foregoing, no additional vesting of the Time-Based Equity Awards shall occur during the period between the Executive’s Date of Termination and the Accelerated Vesting Date.
(c) the amounts payable under Section 6(a)(i) and 6(b)(i) shall be paid out in substantially equal installments in accordance with the Company’s payroll practice over the relevant continuation period, commencing on the first payroll date following the effective date of the Separation Agreement and Release and, in any case, within 60 days after the Date of Termination; provided, however, that if the 60-day period begins in one calendar year and ends in a second calendar year, the Severance Amount to the extent it qualifies as “non-qualified deferred compensation” within the meaning of Section 409A of the Code, shall begin to be paid no earlier than the first Company payroll date in the second calendar year and, in any case, by the last day of such 60-day period; provided, further, that the initial payment shall include a catch-up payment to cover amounts retroactive to the day immediately following the Date of Termination. Each payment pursuant to this Agreement is intended to constitute a separate payment for purposes of Treasury Regulation Section 1.409A-2(b)(2). The amount payable under Section 6(a)(ii) shall be paid or commence to be paid on the first payroll date following the effective date of the Separation Agreement and Release and, in any case, within 60 days after the Date of Termination; provided, however, that if the 60-day period begins in one calendar year and ends
in a second calendar year, such payments to the extent they qualify as “non-qualified deferred compensation” within the meaning of Section 409A of the Code, shall be paid or commence no earlier than the first Company payroll date in the second calendar year and, in any case, by the last day of such 60-day period.
(a) Anything in this Agreement to the contrary notwithstanding, if at the time of the Executive’s separation from service within the meaning of Section 409A of the Code, the Company determines that the Executive is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code, then to the extent any payment or benefit that the Executive becomes entitled to under this Agreement on account of the Executive’s separation from service would be considered deferred compensation otherwise subject to the 20 percent additional tax imposed pursuant to Section 409A(a) of the Code as a result of the application of Section 409A(a)(2)(B)(i) of the Code, such payment shall not be payable and such benefit shall not be provided until the date that is the earlier of (A) six months and one day after the Executive’s separation from service, or (B) the Executive’s death. If any such delayed cash payment is otherwise payable on an installment basis, the first payment shall include a catch-up payment covering amounts that would otherwise have been paid during the six-month period but for the application of this provision, and the balance of the installments shall be payable in accordance with their original schedule.
(b) All in-kind benefits provided and expenses eligible for reimbursement under this Agreement shall be provided by the Company or incurred by the Executive during the time periods set forth in this Agreement. All reimbursements shall be paid as soon as administratively practicable, but in no event shall any reimbursement be paid after the last day of the taxable year following the taxable year in which the expense was incurred. The amount of in-kind benefits provided or reimbursable expenses incurred in one taxable year shall not affect the in-kind benefits to be provided or the expenses eligible for reimbursement in any other taxable year (except for any lifetime or other aggregate limitation applicable to medical expenses). Such right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.
(c) To the extent that any payment or benefit described in this Agreement constitutes “non-qualified deferred compensation” under Section 409A of the Code, and to the extent that such payment or benefit is payable upon the Executive’s termination of employment, then such payments or benefits shall be payable only upon the Executive’s “separation from service.” The determination of whether and when a separation from service has occurred shall be made in accordance with the presumptions set forth in Treasury Regulation Section 1.409A-1(h).
(d) The parties intend that this Agreement will be administered in accordance with Section 409A of the Code. To the extent that any provision of this Agreement is ambiguous as to its compliance with Section 409A of the Code, the provision shall be read in such a manner so that all payments hereunder comply with Section 409A of the Code. Each payment pursuant to this Agreement is intended to constitute a separate payment for purposes of Treasury Regulation Section 1.409A-2(b)(2). The parties agree that this Agreement may be amended, as
reasonably requested by either party, and as may be necessary to fully comply with Section 409A of the Code and all related rules and regulations in order to preserve the payments and benefits provided hereunder without additional cost to either party.
(e) The Company makes no representation or warranty and shall have no liability to the Executive or any other person if any provisions of this Agreement are determined to constitute deferred compensation subject to Section 409A of the Code but do not satisfy an exemption from, or the conditions of, such Section.
8. Confidential Information, Noncompetition and Cooperation.
9. Consent to Jurisdiction. The parties hereby consent to the jurisdiction of the state and federal courts of the Commonwealth of Massachusetts. Accordingly, with respect to any such court action, the Executive (a) submits to the personal jurisdiction of such courts; (b) consents to service of process; and (c) waives any other requirement (whether imposed by statute, rule of court, or otherwise) with respect to personal jurisdiction or service of process.
and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.
18. Governing Law. This is a Massachusetts contract and shall be construed under and be governed in all respects by the laws of the Commonwealth of Massachusetts, without giving effect to the conflict of laws principles thereof.
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Rubius Therapeutics, Inc. | |
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/s/ Xxxxx Xxxxxxx | |
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By: |
Xxxxx Xxxxxxx, M.D. |
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Its: |
Chief Executive Officer |
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EXECUTIVE | |
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/s/ Torben Straight Xxxxxx | |
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Xxxxxx Straight Xxxxxx, Ph.D. |
Exhibit A
Separation Agreement and Release
THIS SEPARATION AGREEMENT AND RELEASE is entered into between Torben Straight Xxxxxx, Ph.D. (the “Executive”) as a condition to receiving the severance benefits (“Severance Benefits”) to be provided to the Executive by Rubius Therapeutics, Inc. (the “Company”) pursuant to the Employment Agreement, dated July 2, 2018, between the Executive and the Company (the “Employment Agreement”), which is incorporated herein by reference.
Subject to the terms of the Executive Agreement, the Executive is eligible to receive the severance benefits set forth in Section 4 or Section 5, as applicable, of the Employment Agreement (the “Severance Benefits”) upon the terms and conditions of this Separation Agreement and Release.
including such options or equity issued pursuant to Time-Based Equity Awards, as such term is defined in the Employment Agreement.
(a) He or she has read and understands the legal and binding effect of this document and that he or she is hereby advised in writing to consult an attorney before signing this Separation Agreement and Release;
(b) He or she has relied solely on his or her own judgment and/or that of his or her attorney regarding the consideration for and the terms of this Separation Agreement and Release and is signing this Separation Agreement and Release knowingly and voluntarily of his or her own free will;
(c) He or she is not entitled to the Severance Benefits unless he or she agrees to and complies fully with the terms of this Separation Agreement and Release;
(d) He or she has been given at least [ days] to consider this Separation Agreement and Release, and if he or she chose to sign this Separation Agreement and Release in fewer than [ days] from receipt, that decision was entirely knowing and voluntary;
(e) To accept this Separation Agreement and Release, he or she must deliver a signed Separation Agreement and Release to the [Insert Address] within [ days] of the Executive’s receipt of this Separation Agreement and Release. The signed Separation Agreement and Release should be delivered to:
[Insert Address]
The Executive further understands that he or she may revoke this Separation Agreement and Release within seven (7) days after signing by written notice within such period to the [Insert Address] at the street address or the email address above. The Executive further understands that this Separation Agreement and Release is not effective or enforceable until after the seven (7) day period of revocation has expired without revocation, and that if he or she revokes this Separation Agreement and Release within the seven (7) day revocation period, he or she will not receive the Severance Benefits;
(f) He or she has read and understands the Separation Agreement and Release and further understands that it includes a general release of any all known and unknown, foreseen and unforeseen claims presently asserted or
otherwise arising through the date of his or her signing of this Separation Agreement and Release that he or she may have against any of the Released Parties; and,
(g) No statements made or conduct by any of the Released Parties has in any way coerced or unduly influenced him or her to execute this Separation Agreement and Release.
(h) By signing below the Executive acknowledges and reaffirms any agreement that the Executive has entered into with any of the Released Parties relating to confidentiality, assignment of inventions, noncompetition and/or nonsolicitation (the “Restrictive Covenants”).
(i) Other than as set forth in Section 4 or Section 5 of the Employment Agreement, all stock options and other stock-based awards held by the Executive shall be governed by the applicable equity incentive plan and award agreements.
9. Governing Law. This Separation Agreement and Release shall be governed by the laws of the Commonwealth of Massachusetts excluding the choice of law rules thereof.
EXECUTIVE: |
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Torben Straight Xxxxxx, Ph.D. |
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Witness |
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Exhibit B
Restrictive Covenants Agreement