Eterna Therapeutics Inc

Introduction

When determining executive officer compensation, and the various components that comprise it, our Compensation Committee evaluates and considers publicly available executive officer compensation survey data to present a competitive compensation package to attract and retain top talent, including an appropriate level of salary, performance-based bonus and equity incentives. Typically, the Compensation Committee evaluates competitive market benchmark data for a given executive role. Additionally, the Compensation Committee is authorized to engage outside advisors and experts to assist and advise the Compensation Committee on matters relating to executive compensation. In 2023, the Compensation Committee retained the services of Pearl Meyer, an independent compensation consultant, to review the cash and equity compensation package to be offered to Mr. Luther prior to his appointment as our Chief Executive Officer.

Our Chief Executive Officer presents compensation recommendations to the Compensation Committee with respect to the executive officers other than himself. The Compensation Committee considers such recommendations, in conjunction with possible input from the Compensation Committee’s independent compensation consultant, in making compensation decisions or recommendations to the full Board. The full Board participates in evaluating the performance of our executive officers, except that our Chief Executive Officer does not participate when the Board evaluates his or her performance and is not present during voting or deliberations regarding his or her performance or compensation matters.

Compensation-Related Risk Assessment

Our Compensation Committee assesses and monitors whether any of our compensation policies and programs are reasonably likely to have a material adverse effect on our Company. The Compensation Committee and management do not believe that the Company presently maintains compensation policies or practices that are reasonably likely to have a material adverse effect on the Company’s risk management or create incentives that could lead to excessive or inappropriate risk taking by employees. In reaching this conclusion, the Compensation Committee considered all components of our compensation program and assessed any associated risks. The Compensation Committee also considered the various strategies and measures employed by the company that mitigate such risk, including: (i) the overall balance achieved through our use of a mix of cash and equity, annual and long-term incentives and time-and performance-based compensation; (ii) our use of multi-year vesting periods for equity grants; and (ii) the oversight exercised by the Compensation Committee over performance metrics, if any, established for performance-based bonuses and its administration of our equity incentive plans.

Compensation Recoupment (Clawback) Policy

In 2023, we adopted a clawback policy providing for the recovery of erroneously-awarded incentive-based compensation related to the three fiscal years preceding the date on which the company is required to prepare an accounting restatement. The clawback policy complies with the requirements of Nasdaq’s listing rules.

Named Executive Officers

Under applicable SEC rules and regulations, our “named executive officers” are all individuals who served as our principal executive officer during 2023, our two most highly compensated executive officers (other than our principal executive officer) who were serving as executive officers at December 31, 2023, and up to two additional individuals who would have been one of our top two most highly compensated executive officer had they been serving as an executive officer at the end of 2023. Our 2023 named executive officers are identified in the table below:

Summary Compensation Table

The following table sets out the compensation for our Named Executive Officers for the years ended December 31, 2023 and December 31, 2022:

Narrative to Summary Compensation Table

The following is a discussion of each component of our executive compensation program for 2023.

Base Salary

Each of our named executive officers receives a base salary. The base salary is the fixed cash compensation component of our executive compensation program and it recognizes individual performance, time in role, scope of responsibility, leadership skills and experience. The base salary compensates an executive for performing his or her job responsibilities on a day-to-day basis. Generally, base salaries are reviewed annually company-wide and adjusted (upward or downward) when appropriate based upon individual performance, expanded duties, changes in the competitive marketplace and, with respect to upward adjustments, if we are, financially and otherwise, able to pay it. We try to offer competitive base salaries to help attract and retain executive talent.

In December 2023, upon the recommendation of the Compensation Committee, the Board approved an increase to Ms. Gurrola’s annual base salary from $220,000 to $275,000. In addition, the Board approved a lump sum payment of $33,542 to Ms. Gurrola, representing the additional amount of salary Ms. Gurrola would have received had the increase to her annual base salary taken effect as of May 5, 2023.

Bonus and Incentive Compensation

In addition to base salaries, our Compensation Committee has the authority to award discretionary annual bonuses to our named executive officers based on corporate and individual performance. Each year, the Compensation Committee or the Board may establish performance goals, which may be based on measures such as revenue, achievement of certain research and development milestones, completion of a strategic transaction, and other metrics the directors and management believe to provide proper incentives for achieving long-term shareholder value. The Board retains full discretion over performance evaluation and the amount of any bonuses to be paid to a named executive officer. Annual bonuses, if any, are intended to reward the individual performance of each named executive officer. In addition to an assessment of corporate and individual performance, the determination of the amount of a named executive officer’s bonus may vary from year to year depending on our financial condition and conditions in the industry in which we operate. The amount of such bonuses increase with executive rank so that, as rank increases, a greater portion of total annual cash compensation is based on annual corporate and individual performance.

For the year ended December 31, 2023, no performance goals were established for any named executive officer, however, the Compensation Committee approved a discretionary spot bonus to be paid to Ms. Gurrola in the amount of $50,050 to reward her individual performance during the year.

Under the terms of his offer, Dr. Angel was eligible to receive a performance bonus equal to two percent of the gross proceeds that we actually received under licensing, option, collaboration, partnership, joint venture, settlement, and similar agreements that we enter into, or other actions, judgments, or orders, that generate cash proceeds to us, that are originated, negotiated and/or entered into by us during Dr. Angel’s employment, subject to certain conditions. During 2023, Dr. Angel received $13,000 in performance bonus payments as a result of an exclusive option and license agreement we entered into with a third party.

Equity-Based Compensation Programs

Historically we have issued stock options to our employees, including our named executive officers, to provide a means whereby our employees may develop a sense of proprietorship and personal involvement in our development and financial success, and to encourage them to devote their best efforts to us, thereby advancing our interests and the interests of stockholders. The Board believes that the granting of equity awards promotes continuity of management and increases incentive and personal interest in our welfare by those who are primarily responsible for shaping and carrying out our long-range plans and pursuing our growth and financial success.

In 2023, we granted to Dr. Angel a time-based incentive stock option covering 132,003 shares of common stock, of which 110,043 shares vested immediately on the grant date and the remaining 21,960 shares vest in 35 substantially equal monthly installments on the first day of each month thereafter, subject to his continuous service. In connection with Dr. Angel’s resignation effective December 31, 2023, all unvested options were immediately cancelled, and he has 90 days from the date of termination of his employment to exercise any vested options, at which time any unexercised vested options will be cancelled.

Benefits and Perquisites

Employee Benefit Plans

Named executive officers are eligible to participate in our employee benefit plans, including our medical, disability and life insurance plans, in each case, on the same basis as all of our other employees. Our employee benefit plans are designed to assist in attracting and retaining skilled employees. We also maintain a 401(k) plan for the benefit of our eligible employees, including the named executive officers, as discussed below.

401(k) Plan

We maintain a retirement savings plan, or 401(k) plan, that provides eligible U.S. employees with an opportunity to save for retirement on a tax advantaged basis. Under the 401(k) Plan, eligible employees may defer up to 90% of their compensation subject to applicable annual contribution limits imposed by the Internal Revenue Code of 1986, as amended (the “Code”), and limits imposed by non-discrimination testing. Our employees’ pre-tax contributions are allocated to each participant’s individual account and participants are immediately and fully vested in their contributions. The 401(k) plan is intended to be qualified under Section 401(a) of the Code with the 401(k) plan’s related trust intended to be tax exempt under Section 501(a) of the Code. As a tax-qualified retirement plan, contributions to the 401(k) plan and earnings on those contributions are not taxable to the employees until distributed from the 401(k) plan. Beginning on January 1, 2023, we began matching employees’ contributions at a rate of 100% of the first 3% of the employee’s contribution and 50% of the next 2% of the employee’s contribution, for a maximum match of 4%.

Pension Benefits

We do not maintain any pension benefit or retirement plans other than the 401(k) Plan.

Nonqualified Deferred Compensation

We do not maintain any nonqualified deferred compensation plans.

Named Executive Officer Employment Agreements and Change in Control Arrangements

The following descriptions summarize the principal terms of our employment agreements with our named executive officers.

Matthew Angel

On December 30, 2022, we entered into an offer letter with Dr. Angel effective on January 1, 2023 with respect to terms of his employment as our Chief Executive Officer and President. The compensatory terms of the offer letter, including equity awards, were approved by the Compensation Committee. Dr. Angel’s hiring, and his offer letter, were approved by the Board.

From May 24, 2022 until he was appointed as Chief Executive Officer and President, Dr. Angel served as our interim Chief Executive Officer and President. Dr. Angel did not receive any salary or other cash compensation during his tenure as interim Chief Executive Officer and President.

Under the terms of his offer letter, we paid Dr. Angel an annual base salary of $350,000. We also paid Dr. Angel a cash signing bonus of $210,959, which represented the salary Dr. Angel would have earned for the period during which he served as interim Chief Executive Officer and President.

Dr. Angel was eligible to receive a performance bonus equal to two percent of the gross proceeds that we actually received pursuant to all licensing, option, collaboration, partnership, joint venture, settlement, other similar agreements that we entered into, or other actions, judgments, or orders that generate cash proceeds to us, that are originated, negotiated and/or entered into by us during Dr. Angel’s employment (commencing on May 26, 2022), subject to certain conditions.

In accordance with the terms of his offer letter, in January 2023, we granted to Dr. Angel a time-based incentive stock option covering 132,003 shares of common stock, of which 110,043 shares vested immediately on the grant date and the remaining 21,960 shares vest in 35 substantially equal monthly installments on the first day of each month thereafter, subject to his continuous service.

Dr. Angel resigned as our Chief Executive Officer and President effective December 31, 2023. Upon termination of Dr. Angel’s employment, all unvested options were immediately cancelled, and Dr. Angel has 90 days from the date of termination of his employment to exercise any vested options, at which time any unexercised vested options will be cancelled.

For information on related party transactions with Dr. Angel, see Item 13, Certain Relationships and Related Transactions, and Director Independence.

Sandra Gurrola

We entered into an employment agreement, dated as of June 16, 2021, with Sandra Gurrola, which provides for our at-will employment of Ms. Gurrola commencing on June 21, 2021 and continuing until terminated by us or Ms. Gurrola. Ms. Gurrola’s employment agreement provides for an annual base salary of $220,000, which amount is subject to periodic review by the Board or the Compensation Committee. Ms. Gurrola is also eligible to receive an annual cash bonus award in an amount up to 35% of her base salary upon achievement of agreed upon performance targets. The bonus will be determined by the Board or the Compensation Committee and paid annually by March 15 in the year following the performance year on which such bonus is based.

In accordance with the terms of her employment agreement, in June 2021, Ms. Gurrola was granted 1,750 restricted stock units, 25% of which vests on each anniversary of the grant date over four years. Vesting generally requires Ms. Gurrola’s continued employment through the relevant vesting date.

If Ms. Gurrola’s employment is terminated by us without Cause (as defined in the employment agreement) or by Ms. Gurrola for Good Reason (as defined in the employment agreement), we will pay Ms. Gurrola all amounts accrued but unpaid as of the effective date of such termination, as well as continuation of her salary and benefits for the following six-month period. Notwithstanding the foregoing, if a termination of employment without Cause or for Good Reason occurs within 90 days before or 12 months after a Change in Control (as defined in the employment agreement), Ms. Gurrola will receive the benefits described in the preceding sentence, but the continuation of her salary and benefits will be for 12-month period, and, in addition, Ms. Gurrola will receive a lump-sum payment of her target bonus and the restricted stock units granted to her in June 2021 will fully vest. Any such severance benefits under the employment agreement are contingent on Ms. Gurrola entering into and not revoking a general release of claims in favor of our company.

Andrew Jackson

We entered into an amended and restated employment agreement, dated as of May 10, 2022, which provided for our at-will employment of Mr. Jackson commencing on May 31, 2022 and continuing until terminated by us or Mr. Jackson. Mr. Jackson resigned as our Chief Financial Officer on May 4, 2023.

Under the terms of his employment agreement, we paid Mr. Jackson an annual base salary of $415,000. Mr. Jackson was also eligible to receive an annual cash bonus award in an amount up to 40% of his base salary upon achievement of agreed upon performance targets. The bonus would be determined by the Board or the Compensation Committee and paid annually by March 15 in the year following the performance year on which such bonus was based.

In accordance with the terms of his employment agreement, Mr. Jackson received a time-based nonqualified stock option covering 33,239 shares of common stock, 25% of which would vest on the first anniversary of the employment agreement’s effective date, and the remainder would vest ratably on a monthly basis over the three-year period thereafter. Vesting generally required Mr. Jackson’s continued employment through the relevant vesting date. Due to Mr. Jackson’s termination prior to the first anniversary of the employment agreement’s effective date, none of the shares subject to such option vested and all 33,239 shares were immediately cancelled upon his termination.

We entered into a separation agreement and general release with Mr. Jackson on May 2, 2023, pursuant to which, we paid Mr. Jackson a continuation of his salary for the following six-month period as well as reimbursement of up to six months of his COBRA premiums in exchange for Mr. Jackson entering into and not revoking a general release of claims in favor or our company.

Outstanding Equity Awards at 2023 Fiscal Year-End

The following table summarizes the number of shares of our common stock underlying outstanding equity incentive plan awards for each named executive officer as of December 31, 2023.

Employment Agreement with Current Chief Executive Officer

Sanjeev Luther was appointed as our President and Chief Executive Officer effective January 1, 2024. Mr. Luther did not serve as one of our executive officers during 2023, and is therefore not one of our 2023 named executive officers.

We entered into an employment agreement, dated as of December 19, 2023, with Mr. Luther, which provides for at-will employment until terminated by us or Mr. Luther. Mr. Luther’s employment agreement provides for an annual base salary of $550,000, which amount is subject to periodic review by the Board or the Compensation Committee. Mr. Luther also received a one-time signing bonus of $75,000.

Mr. Luther is eligible to receive an annual cash bonus award in an amount up to 50% of his base salary upon achievement of agreed upon performance targets. The bonus will be determined by the Board or the Compensation Committee and paid annually by March 15 in the year following the performance year on which such bonus is based.

In accordance with the terms of his employment agreement, Mr. Luther was granted an equity award on January 1, 2024, consisting of 1,685,218 non-qualified stock options, which will vest over a four-year period, with 25% of the options vesting on the first anniversary of the grant date, and the remaining options vesting monthly over the remaining three years. Vesting generally requires Mr. Luther’s continued employment through the relevant vesting date.

If Mr. Luther’s employment is terminated by us without Cause (as defined in his employment agreement) or by Mr. Luther for Good Reason (as defined in his employment agreement), we will pay Mr. Luther all amounts accrued but unpaid as of the effective date of such termination, as well as a lump sum payment equal to nine months of his salary, as well as up to nine months of continued benefits. Mr. Luther will also be paid a pro-rata performance bonus equal to (x) the performance bonus Mr. Luther would have received based on actual performance for such fiscal year if Mr. Luther had remained employed for the entire fiscal year multiplied by (y) a fraction, the numerator of which is the number of days Mr. Luther was employed during such fiscal year. Notwithstanding the foregoing, if a termination without Cause or for Good Reason occurs beginning upon the occurrence of a Change in Control (as defined in the employment agreement) and ending on the first anniversary of the occurrence of the Change in Control (“Change in Control Protection Period”), Mr. Luther will receive the benefits described in the preceding sentence, but the lump sum severance payment and the payment of benefits will be for a 12-month period and he will receive 100% of his target bonus. In addition, all outstanding and unvested equity awards granted to Mr. Luther during his employment will become immediately vested and exercisable upon such date of termination during the Change in Control Protection Period and will be exercisable for a period of 12 months following the date of termination during the Change in Control Protection Period. Any such severance benefits under the employment agreement are contingent on Mr. Luther entering into and not revoking a general release of claims in favor of our company.

Director Compensation

We have a non-employee director compensation program to compensate our non-employee directors for their service in such capacity with annual retainers and equity compensation as described below. However, since August 2022, we have not compensated our non-employee directors in accordance with our non-employee director compensation program. Our Compensation Committee and Board are assessing our non-employee director compensation program, and if and when we restart compensating our non-employee directors for their service in such capacity, the elements of our non-employee director compensation program may be different from what is described below.

The Board and the Compensation Committee designed our non-employee director compensation program to reward directors for their contributions to our success, align the director compensation program with stockholder interests, and provide competitive compensation necessary to attract and retain high quality non-employee directors. We do not pay fees to any of our directors for meeting attendance.

2023 Director Compensation

During 2023, we did not compensate any of our directors, in either cash or equity, for their service in such capacity. On January 1, 2024, we granted to Dorothy Clarke a stock option to purchase 84,261 shares of our common stock as compensation for her services as a member of our Board from August 28, 2023 until December 31, 2023, for which she had previously not been compensated.

As of December 31, 2023, none of our directors held any outstanding equity awards other than William Wexler, who held a stock option to purchase 15,895 shares of our common stock. As of December 31, 2023, Gregory Fiore, a former director who resigned from our Board effective October 4, 2023, held stock options to purchase 10,742 shares of our common stock, which expired unexercised 90 days following the date of his resignation.