Exhibit 10.2
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May 9,2001
Mr. Steven M. Rauscher
312 Carlisle Lane
Lake Forest, IL 60045
Dear Steven:
This letter will confirm our offer to you of employment with Genome
Therapeutics Corp. (the "Company"), under the terms and conditions that follow:
1. POSITION AND DUTIES. Effective October 26, 2000, you will be employed
by the Company as its President and Chief Executive Officer reporting directly
to the Board of Directors of the Company (the "Board"). You will have all powers
and duties consistent with this position including the power to be the principal
decision maker for the Company, subject to the direction of the Board. You agree
that, while employed by the Company, you will devote substantially your full
business time and your best efforts to fulfill faithfully, responsibly and to
the best of your ability your duties under this agreement. Subject to Board
review and approval, time and efforts devoted to membership on boards of other
non-competing corporations will be deemed time and efforts in fulfilling your
duties under this agreement and otherwise related to the Company's business and
affairs. You warrant that you are free to enter into and fully perform this
agreement and are not subject to any employment, confidentiality, non-
competition or other agreement which conflicts with this agreement.
2. COMPENSATION AND BENEFITS. During your employment, as compensation for
all services performed by you for the Company and its subsidiaries, the Company
will provide you the following pay and benefits:
a. BASE SALARY. The Company will pay you a base salary at the rate
of Three Hundred Sixty Thousand Dollars ($360,000) per year, payable in
accordance with the Company's regular payroll practices and subject to increase
from time to time by the Board of Directors of the Company (the "Board") in its
discretion (such base salary as in effect from time to time, the "Base Salary").
b. BONUS COMPENSATION. Beginning in fiscal year 2001, you will be
eligible to receive an annual management incentive bonus based on the Company's
achievement of enhanced share value and certain other operating and financial
goals set by the Board. The amount of this bonus, if any, will be determined by
the Board and will range from 0 - 40% of your Base Salary. The Company
acknowledges that the Board has approved an initial target incentive of $108,000
for fiscal year 2001 if all target goals are
met. Subject to Board approval, half of any annual bonus will be paid in cash
and half will be paid in options on the Company's common stock.
c. RESTRICTED STOCK AND STOCK OPTIONS. On October 26, 2000, you were
granted: (i) 24,000 shares of restricted common stock of the Company; and (ii)
options on 540,000 shares of the Company's common stock, which grants are
subject to the vesting and other terms set forth in your Restricted Stock and
Stock Option Award Agreements.
d. PARTICIPATION IN EMPLOYEE BENEFIT PLANS. You will be entitled to
participate in all employee benefit plans from time to time in effect on the
same basis as other executive employees of the Company, except to the extent
such plans are duplicative of benefits otherwise provided to you under this
agreement. Your participation will be subject to the terms of the applicable
plan documents and applicable Company policies.
e. VACATIONS AND OTHER BENEFITS. You will be entitled to five (5)
weeks of vacation per year, in addition to holidays observed by the Company.
Vacation may be taken at such times and intervals as you shall determine,
subject to the business needs of the Company. Up to two weeks of unused vacation
in any year may be carried over into the next year but any such carry-over shall
not be cumulative (i.e., no more than two weeks may be carried over in any given
year). In addition, the Company will pay for you to have an annual comprehensive
medical exam. Also, the Company will obtain and pay the premiums on a life
insurance policy covering you with a benefit payable to your named beneficiaries
of at least One Million Eighty Thousand Dollars ($1,080,000). The Company shall
also provide you with a cellular telephone and a reasonably acceptable home
personal computer.
f. EXPENSE REIMBURSEMENT. The Company shall reimburse you, upon
proper accounting, for reasonable business expenses and disbursements you incur
in the course of the performance of your duties under this agreement. The
Company shall make an annual payment of $10,000 in lieu of automobile, health or
other club allowance. In addition, the Company shall pay you any additional
amount necessary to compensate you for any tax you may incur by reason of such
reimbursement payment (the "Gross Up Amount") and any additional amount
necessary to compensate you for any tax incurred by reason of payment of the
Gross Up Amount.
g. RELOCATION REIMBURSEMENT. The Company shall reimburse you, upon
proper accounting, for reasonable and customary expenses up to $100,000 incurred
by you in the course of relocating to the Boston, Massachusetts area. In
addition, the Company shall pay you any additional amount necessary to
compensate you for any tax you may incur by reason of such reimbursement payment
(the "Gross Up Payment") and any additional amount necessary to compensate you
for any tax incurred by you by reason of the Gross Up Payment. You must submit
all claims for reimbursement under this paragraph by July 1, 2002. The Company
shall not have any obligation to pay any claims pursuant to this paragraph after
such date.
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3. CONFIDENTIAL INFORMATION AND RESTRICTED ACTIVITIES. You acknowledge
that, in consideration for your employment with the Company, you have agreed to
and executed a joinder dated November 17, 2000 to Genome Therapeutics'
Intellectual Property Policy, including Appendix I thereof ("Invention,
Assignment, Non-Disclosure and Covenant Not To Compete"), which imposes certain
non-competition, non-solicitation and non-disclosure restrictions on you (such
joinder referred to hereinafter as the "Intellectual Property and Non-Compete
Agreement").
4. TERMINATION OF EMPLOYMENT. Your employment under this agreement shall
continue until one party delivers to the other party a written notice of
termination setting forth the reason, if any, for the termination. If you
terminate your employment without Good Reason (as defined below), you will give
the Company two month's written notice.
a. If this agreement is terminated by reason of your death or
disability, the Company shall pay or provide to you, or to your heirs or estate
in the event of your death, (i) all Accrued Obligations (as defined below) in a
lump sum in cash within thirty (30) days after the Termination Date (as defined
below), (ii) all benefits accrued by you as of the Termination Date under all
qualified and non-qualified retirement, pension, profit sharing and similar
plans of the Company in the time and manner provided under the terms of such
plans, and (iii) your pro rata bonus entitlement. If the agreement is terminated
by reason of your disability, the Company will continue to pay, for twelve (12)
months from the Termination Date (A) your Base Salary in effect on the
Termination Date and (B) all amounts and other benefits to which you would have
been entitled if you had continued to be employed by the Company for such 12-
month period. You will be deemed to be disabled upon the earlier of (i) the end
of a six (6) consecutive month period during which, by reason of physical or
mental injury or disease, you are unable to perform substantially all your usual
and customary duties under this agreement and (ii) the date that a reputable
physician selected jointly by the Board and yourself (or if you are clearly
unqualified to make a selection, the person then authorized to make health care
decisions on your behalf, or if none, your spouse) determines in writing that
you will, by reason of physical or mental injury or disease, be unable to
perform substantially all of your usual and customary duties under this
agreement for a period of at least six (6) consecutive months. Upon the Board's
reasonable request, you will submit to a medical examination for the purpose of
determining the existence, nature and extent of any such disability, and the
Board shall promptly give you written notice of any determination of your
disability and of the decision of the Board to terminate your employment by
reason thereof. All payments made by the Company under this paragraph 4.a. will
be reduced dollar-for-dollar by the amount of disability benefits, if any, paid
to you in accordance with any disability policy or program of the Company.
Except as otherwise provided by law, all other obligations of the Company under
this agreement shall cease forthwith.
b. If you are discharged for Cause (as defined below) or you resign
without Good Reason, the Company shall (i) pay you all Accrued Obligations in a
lump sum in cash within thirty (30) days after the Termination Date, and (ii)
provide all benefits
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accrued as of the Termination Date under all qualified and non-qualified
retirement, pension, profit sharing and similar plans of the Company in the
manner and time provided under the terms of such plans and arrangements. Except
as otherwise provided by law, all other obligations of the Company under this
agreement shall cease forthwith.
c. If you are discharged without Cause or resign with Good Reason,
then the Company shall (i) pay all Accrued Obligations in a lump sum in cash
within thirty (30) days after the Termination Date, (ii) continue to pay your
Base Salary and provide all other benefits in paragraph 2 of this agreement for
the lesser of twelve (12) months after the Termination Date or the period of
time that it takes you to find comparable employment (such lesser period being
the "Severance Period"), and (iii) provide all benefits accrued as of the end of
the Severance Period under all qualified and non-qualified retirement, pension,
profit sharing and similar plans of the Company in the time and manner provided
under the terms of such plans. Except as otherwise provided by law, all other
obligations of the Company under this agreement shall cease forthwith.
d. If within two years of a Change of Control (as defined below) of
the Company, (i) you are terminated other than for Cause, or (ii) you terminate
your employment with the surviving company due to the fact that (a) the
surviving company takes any action that results in a material diminution in your
position, authority or duties as such position, authority or duties existed
immediately prior to the Change of Control or (b) the surviving company takes
any action that would require you to have your principal place of work changed
to any location outside a thirty-five mile radius of the City of Boston, then,
in the case of either (i) or (ii), the Company will continue to pay your Base
Salary in effect on the Termination Date and provide you with the benefits set
forth in paragraph 2 of this agreement for a period of eighteen (18) months from
the Termination Date. The Company will also pay you on the Termination Date any
Base Salary earned but not paid through the Termination Date. In addition, your
remaining unvested options and non-exercisable restricted shares will
immediately fully vest and become exercisable for a period equal to the lesser
of two years from the Termination Date or until the final exercise date of the
options as determined in the applicable stock option agreement between yourself
and the Company. All severance payments will be payable in accordance with the
normal payroll practices of the Company. If you are eligible for severance
payments under this paragraph 4.d., then the provisions of paragraph 4.c. above
shall not apply to such termination.
e. For purposes of this agreement, the following capitalized terms
have the meaning as set forth below:
(i) "Accrued Obligations" shall mean, as of the Termination
Date, the sum of (A) your Base Salary through the Termination Date to the
extent not theretofore paid, (B) the amount of any bonus, vested incentive
compensation, deferred compensation and other cash compensation accrued as
of the Termination Date to the extent not theretofore paid, and (C) any
vacation pay, expense reimbursements and other cash entitlements accrued as
of the Termination Date to
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the extent not theretofore paid. Amounts shall be deemed to accrue ratably
over the period during which they are earned.
(ii) "Cause" shall mean: (i) your material failure to perform
(other than by reason of disability), or material negligence in the
performance of, your duties and responsibilities to the Company or any of
its subsidiaries; (ii) your material breach of this agreement or any other
agreement between you and the Company or any of its subsidiaries; (iii) the
commission of a felony or other crime involving an act of moral turpitude;
or (iv) a material act of dishonesty or breach of trust on your part
resulting or intended to result, directly or indirectly, in a personal gain
or enrichment at the expense of the Company.
(iii) A "Change of Control" shall be deemed to have occurred if
and when: (i) the Company executes an agreement of acquisition, merger, or
consolidation which contemplates that after the effective date provided for
in the agreement, all or substantially all of the business and/or assets of
the Company shall be controlled by another corporation or other entity;
provided, however, for purposes of this clause (i) that (A) if such an
agreement requires as a condition precedent approval by the Company's
shareholders of the agreement or transaction, a Change of Control shall not
be deemed to have taken place unless and until such approval is secured,
and (B) if immediately after such effective date the voting shareholders of
such other corporation or entity shall be substantially the same as the
voting shareholders of the Company immediately prior to such effective
date, the execution of such agreement shall not, by itself, constitute a
"Change of Control;" (ii) any "person" (as such term is used in Sections
13(d) or 14(d)(2) of the Securities Exchange Act of 1934) becomes the
beneficial owner, directly or indirectly, of securities of the Company that
represent 35% or more of the votes that could then be cast in an election
for members of the Company's Board; or (iii) during any period of 24
consecutive months, commencing after the effective date of this Agreement,
individuals who at the beginning of such 24-month period were directors of
the Company shall cease to constitute at least a majority of the Company's
Board, unless the election of each director who was not a director at the
beginning of such period has been approved in advance by directors
representing at least two thirds of (A) the directors then in office who
were directors at the beginning of the 24-month period, or (B) the
directors specified in clause (A) plus directors whose election has been so
approved by directors specified in clause (A).
(iv) "Good Reason" shall mean: (i) any action by the Company
that results in a material diminution in your position, authority or duties
with the Company, excluding any isolated, insubstantial or inadvertent
action not taken in bad faith and which is promptly remedied by the
Company; (ii) material failure of the Company to provide you compensation
and benefits in accordance with the terms of paragraph 2 of this agreement
for more than ten business days after notice from you specifying in
reasonable detail the nature of the failure or (iii) a Change of Control.
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(v) "Termination Date" shall mean (A) in the event of
discharge for Cause or resignation for Good Reason, the date a Notice of
Termination is received by the non-terminating party, (B) in the event of a
discharge without Cause or resignation without Good Reason, the date
specified in the written notice to the non-terminating party, which date
shall be no less than thirty (30) days from the date of such written
notice, (C) in the event of your death, the date of your death, and (D) in
the event of termination of your employment by reason of disability, the
date you receive written notice of such termination (or, if later, six (6)
months from the date your disability began).
5. MISCELLANEOUS. This agreement sets forth the entire agreement between
you and the Company and replaces all prior and contemporaneous communications,
agreements and understandings, written or oral, with respect to the terms and
conditions of your employment; provided, however, that you and the Company
acknowledge and agree that the Intellectual Property and Non-Competition
Agreement shall remain in full force and effect. This agreement may not be
modified or amended, and no breach shall be deemed to be waived, unless agreed
to in writing by you and an expressly authorized representative of the Board.
This agreement may be executed in two or more counterparts, each of which shall
be an original and all of which together shall constitute one and the same
instrument. This is a Massachusetts contract and shall be governed and construed
in accordance with the laws of the Commonwealth of Massachusetts, without regard
to the conflict of laws principles thereof. All payments made hereunder shall be
net of any tax or other amount required to be withheld by the Company by law.
Neither you nor the Company may make any assignment of this agreement or any
interest in it, by operation of law or otherwise, without the prior written
consent of the other; provided, however, that the Company may assign its rights
and obligations under this agreement without your consent to one of its
subsidiaries or to any Person that acquires substantially all the assets of the
Company, by means of a merger or otherwise. Your obligations to the Company
under the Intellectual Property and Non-Competition Agreement shall remain in
full force and effect.
6. NOTICES. Any notices provided for in this agreement shall be in
writing and shall be effective when delivered in person or deposited in the
United States mail, postage prepaid, and addressed to you at your last known
address on the books of the Company or, in the case of the Company, to it at its
principal place of business, attention of the Chairman of the Board, or to such
other address as either party may specify by notice to the other actually
received.
7. BINDING EFFECT. This agreement shall be binding upon and inure to the
benefit of your heirs and representatives and the successors and assigns of the
Company. The Company shall require any successor (whether direct or indirect, by
purchase, merger, reorganization, consolidation, acquisition of property or
stock, liquidation, or otherwise) to all or a significant portion of its assets,
by agreement in form and substance satisfactory to you, expressly to assume and
agree to perform this agreement in the same manner and to the same extent that
the Company would be required to perform this agreement if no such
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succession had taken place. Regardless of whether such agreement is executed,
this agreement shall be binding upon any successor of the Company in accordance
with the operation of law and such successor shall be deemed the "Company" for
purposes of this agreement.
If the foregoing is acceptable to you, please sign this letter in the space
provided and return it to me no later than May 23, 2001. At the time you sign
and return it this letter will take effect as a binding agreement between you
and the Company on the basis set forth above. The enclosed copy is for your
records.
Sincerely yours, Accepted and Agreed:
Robert J. Hennessey --------------------
Chairman of the Board Steven M. Rauscher
Date:
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Norbert Riedel, Ph.D.
Chairman of the Compensation Committee
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