Exhibit 10.3
SEVERANCE AGREEMENT
This SEVERANCE AGREEMENT (this “Agreement”) is made and entered into as of September 6, 2018 by and between Manuel C. Alves Aivado, M.D., Ph.D. (“Executive”) and Aileron Therapeutics, Inc. (the “Company”).
WHEREAS, Executive serves as President and Chief Executive Officer of the Company, and the Company desires to continue to retain the services of Executive; and
WHEREAS, the Company is entering into this Agreement in order to provide certain compensation and benefits to Executive in the event Executive’s employment with the Company is terminated under certain circumstances.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and Executive agree as follows:
| 1.3 | “Change in Control Event” means |
| common stock of the Company (the “Outstanding Company Common Stock”) or (y) the combined voting power of the then-outstanding securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this Subsection 1.3.1, the following acquisitions shall not constitute a Change in Control Event: (A) any acquisition directly from the Company or (B) any acquisition by any corporation pursuant to a Business Combination (as defined below) which complies with clauses (x) and (y) of Subsection 1.3.2 of this definition; |
| 1.3.2 | the consummation of a merger, consolidation, reorganization, recapitalization or share exchange involving the Company or a sale or other disposition of all or substantially all of the assets of the Company (a “Business Combination”), unless, immediately following such Business Combination, each of the following two conditions is satisfied: (x) the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination represent more than 50% of the then-outstanding shares of common stock or other common equity and the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors or other governing body, respectively, of the resulting or acquiring entity in such Business Combination (which shall include, without limitation, an entity which as a result of such transaction owns the Company or substantially all of the Company’s assets either directly or through one or more subsidiaries) (such resulting or acquiring corporation is referred to herein as the “Acquiring Entity”) and (y) no Person (excluding any employee benefit plan (or related trust) maintained or sponsored by the Company or by the Acquiring Entity) beneficially owns, directly or indirectly, 50% or more of the then-outstanding shares of common stock of the Acquiring Entity, or of the combined voting power of the then-outstanding securities of such entity entitled to vote generally in the election of directors or other governing body (except to the extent that such ownership existed prior to the Business Combination); or |
| 1.3.3 | the liquidation or dissolution of the Company; |
provided that such Change in Control Event also satisfies Treasury Regulation Section 1.409A-3(i)(5) where required for compliance with Section 409A of the Internal Revenue Code and the guidance issued thereunder (“Section 409A”).
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| 1.6 | “Good Reason” means (i) a material diminution in the nature or scope of Executive’s duties, responsibilities, or authority; (ii) a material reduction in Executive’s base salary then in effect; (iii) a material reduction by the Company in the kind or level of employee benefits to which Executive is entitled immediately prior to such reduction with the result that the overall benefits package is materially reduced, other than a reduction comparable to reductions generally applicable to similarly situated employees of the Company; or (iv) the Company’s requiring Executive’s ongoing and regular services to be performed at a location more than fifty (50) miles from the geographic location at which Executive was providing services before such requirement which, as of the date of this Agreement, shall include Watertown, Massachusetts and Exton, Pennsylvania. In order to terminate Executive’s employment for Good Reason, Executive must (w) give notice to the Company of Executive’s intention to resign for Good Reason within ninety (90) days after the occurrence of the event (or series of events) that Executive asserts entitles Executive to resign for Good Reason, (x) state in that notice the event that Executive considers to provide Executive with Good Reason to resign, (y) provide the Company with at least thirty (30) days after Executive’s notice to cure the event, and (z) if the event is not cured within such thirty-day cure period, resign for Good Reason within thirty (30) days after the end of the thirty-day cure period. |
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3. | Change in Control. |
| 3.1.3 | Pay to Executive, on the Payment Date, a lump sum equal to one and one-half times (1.5x) Executive’s target bonus award for the year in which the Date of Termination occurs without regard to whether the performance goals applicable to such target bonus had been established or satisfied at the Date of Termination. |
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| 3.1.4 | Notwithstanding the terms of any stock option agreement, restricted stock agreement or other stock award (“Equity Award”), other than terms more favorable to Executive, effective as of the Termination Date, accelerate the vesting of all Equity Awards held by Executive at the Termination Date (other than Equity Awards that vest on the basis of performance and do not provide solely for time-based vesting), such that such Equity Awards shall become 100% vested. |
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| 6.3 | If, as of the date of Executive’s “separation from service” from the Company, Executive is a “specified employee” (within the meaning of Section 409A), then: |
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| 10.3 | No Guarantee of any Tax Consequences. The Company makes no guarantee of any tax consequences with respect to any payment hereunder including, without limitation, under Section 409A. |
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Aileron Therapeutics, Inc.
490 Arsenal Way
Watertown, MA 02472
Attention: Chief Executive Officer
Wilmer Cutler Pickering Hale and Dorr, LP
60 State Street
Boston, MA 02109
Attention: Stuart Falber
At the most recent address maintained
by the Company in its personnel records
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| 10.8 | Not Employment Contract. Executive acknowledges that this Agreement does not constitute a contract of employment, does not imply that the Company will continue his employment for any period of time and does not change the at-will nature of his employment. |
| 10.11 | Representations. Executive hereby acknowledges that he understands this Agreement and enters into this Agreement voluntarily. |
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IN WITNESS THEREOF, Executive has hereunto set his hand, and the Company has caused this Agreement to be executed in its name and on its behalf, all as of the day and year first above written.
AILERON THERAPEUTICS, INC. |
| MANUEL C. ALVES AIVADO, M.D., PH.D. | |
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/s/ Jeff Bailey |
| /s/ Manuel C. Alves Aivado | |
Name: | Jeff Bailey |
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Title: | Chairman |
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