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EXHIBIT 10.46
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of March 15,1996, by and
between Genome Therapeutics Corp. (hereinafter called the "Corporation"), a
Massachusetts Corporation, and Robert J. Hennessey, an individual with a
residence in Fairfield, Connecticut (hereinafter called the "Executive");
WlTNESSETH THAT:
WHEREAS, the Corporation desires to employ the Executive as its
Chairman, President and Chief Executive Officer; and
WHEREAS, the Executive desires to accept such employment offered by the
Corporation;
NOW, THEREFORE, the Corporation and the Executive, each intending to be
legally bound, hereby mutually covenant and agree as follows:
1. EMPLOYMENT AND TERM.
(a) EMPLOYMENT. The Corporation hereby offers to employ
the Executive as the the Chairman, President and Chief Executive Officer of the
Corporation, and the Executive here by accepts such employment, for the term set
forth In Paragraph 1(b).
(b) TERM. The term of the Executive's employment under
this Agreement shall commence on March 15, 1996 and end on March 14, 1998
subject to earlier expiration of such term as provided in Paragraph 7. The term
of this Agreement shall be extended automatically as of March 14, 1998 and each
annual anniversary date thereof unless, no later than ninety (90) days prior to
any such renewal date, either the Board of Directors of the Corporation (the
"Board"), on behalf of the Corporation, or the Executive gives written notice to
the other, in accordance with Paragraph 12, that the term of this Agreement
shall not be so extended. The termination of the employment of the Executive by
reason of the giving of the notice contemplated by the foregoing sentence by
either party shall be deemed for all purposes of this Agreement as a termination
of employment by reason of the expiration of the term of this Agreement and not
a termination by reason of the conduct of a party.
2. DUTIES. During the period of employment as provided in
Paragraph 1(b) hereof, the Executive shall serve as Chairman, President and
Chief Executive Officer of the Corporation and shall report directly to the
Board. The Executive shall have all powers and duties consistent
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with such positions including the power to be the principal decision maker for
the Corporation, subject to the direction of the Board. The Executive shall
devote substantially his entire time during normal business hours (reasonable
sick leave and vacations excepted) and best reasonable efforts to fulfill
faithfully, responsibly and to the best of his ability his duties hereunder;
provided, however, that the Corporation acknowledges that the Executive may be
required to spend one working day per month thereafter during the term of this
Agreement on matters unrelated to the business and affairs of the Corporation.
Time and efforts devoted to membership on boards of other corporations shall be
deemed time and efforts fulfilling the Executive's duties hereunder and not
unrelated to the business and affairs of the Corporation.
3. EXECUTIVE COVENANTS. In order to induce the Corporation to
enter into this Agreement, the Executive hereby agrees as follows:
(a) CONFIDENTIALITY. Except for and on behalf of the
Corporation with the consent of or as directed by the Board, the Executive shall
keep confidential and shall not divulge to any other person or entity, during
the term of employment or thereafter, any of the business secrets or other
confidential information regarding the Corporation and its subsidiaries which
has not otherwise become public knowledge; PROVIDED, HOWEVER, that nothing in
this Agreement shall preclude the Executive from disclosing information (i) to
parties retained to perform services for the Corporation or its subsidiaries, or
(ii) under any other circumstances to the extent such disclosure is, in the
reasonable judgment of the Executive, appropriate or necessary to further the
best interests of the Corporation or its subsidiaries, or (iii) as may be
required by law.
(b) RECORDS. All papers, books and records of every kind
and description relating to the business and affairs of the Corporation and its
subsidiaries, whether or not prepared by the Executive, other than personal
notes and files prepared by or at the direction of the Executive, shall be the
sole and exclusive property of the Corporation, and the executive shall, at the
expense of the Corporation, surrender them to the Corporation at any time upon
request by the Board.
4. SALARY.
(a) BASE SALARY. For services performed by the Executive
for the Corporation pursuant to this Agreement during the period of employment
as provided in Paragraph 1(b) hereof, the Corporation shall pay the Executive a
base salary at the rate of at least $260,000 per year, payable in substantially
equal installments in accordance with the Corporation's regular payroll
practices. Any compensation which may be paid to the Executive under any
additional compensation or incentive plan of the Corporation or which may be
otherwise authorized from time to time by the Board (or an appropriate committee
thereof) shall be in addition to the base salary to which the Executive shall be
entitled under this Agreement.
(b) SALARY INCREASES. During the period of employment as
provided in Paragraph 1(b)
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hereof, the base salary of the Executive shall be annually reviewed by the Board
to determine whether or not the same should be increased in light of the duties
and responsibilities of the Executive and the performance thereof, and, if it is
determined that an increase is merited, such increase shall be promptly put into
effect and the base salary of the Executive as so increased shall constitute the
base salary of the Executive for purpose of Paragraph 4(a). For each year
beginning after December 31, 1996, the base salary of the Executive shall be
increased by a minimum amount equal to (i) the Executive's base salary for the
preceding year multiplied by (ii) the percentage increase if any in the Consumer
Price Index - Boston Region and the base salary of the Executive as so increased
shall constitute the base salary of the Executive for the purposes of Paragraph
4 (a).
5. BONUS. For each calendar year during the term of employment as
provided in Paragraph 1(b), commencing with calendar year 1996, the Executive
shall be eligible to receive a bonus based on the Corporation's achievement of
enhanced share value and certain operating and financial goals in such year.
Such annual operating and financial goals and the amount of such bonus, if any,
shall be determined by the Board, with a target range of 25-50% of base salary.
The Corporation acknowledges that the Board has approved a bonus of $50,000 for
the year ending March 16, 1996 and the Corporation does hereby agree to pay the
same in full on that date.
6. OTHER BENEFITS. In addition to the base salary to be paid to
the Executive pursuant to Paragraph 4 and the bonuses which may be paid to the
Executive pursuant to Paragraph 5, the Executive shall also be entitled to the
following;
(a) STOCK OPTIONS. (i) The Corporation acknowledges that
(x) the Board on December 21, 1995 awarded the Executive, subject to shareholder
approval, stock options covering an aggregate of 300,000 shares of Common Stock
$.01 par value, of the Corporation ("Common Stock") and (y) such award was
approved by all requisite action at a special meeting of shareholders of the
Corporation held on February 16, 1996. In each calendar year during the term of
this Agreement these options shall vest and become exercisable in the maximum
amount that can vest and become exercisable and also qualify as an Incentive
Stock Option ("Incentive Stock Options") as defined in Section 422(b) of the
Internal Revenue Code of l986, as amended (the "Code"). These options are
intended to qualify as Incentive Stock Options and shall be deemed to have been
granted under the 1995 Stock Option Plan of the Corporation and shall be
governed by the terms and provisions of such plan except as inconsistent with
the terms and provision of this Agreement in which event the terms and
provisions of this Agreement shall govern and control to the extent such terms
and provisions do not adversely affect the status of such options as Incentive
Stock Option. The options granted hereunder not qualifying as Incentive Stock
Option shall be nonqualified options not granted under any plan of the
Corporation.
The options once vested shall remain exercisable until the tenth (10th)
anniversary of the
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date of grant except as provided in Paragraph 6 (v) and will be non-transferable
inter vivos except to or for the benefit of members of the Executive's immediate
family and will be transferable upon the Executive's death by will or other
testamentary disposition or by any applicable statute in the event of intestacy.
The Executive's immediate family shall mean and include the Executive and his
spouse, their issue, their parents, their siblings, the descendants of their
siblings and the spouse of each of the foregoing. The nonqualified options shall
vest on December 21, 2000 (the "Normal Vesting Date"); PROVIDED, HOWEVER, that
the vesting of such option may be accelerated as follows: (x) 75,000 of the
nonqualified options will become fully vested at such times as average Per Share
Closing Price of the Common Stock for ten trading days during a period of twenty
consecutive trading days equals or exceed $10.25 (the "First Accelerated Vesting
Date"), (y) 100,000 of the nonqualified options will become fully vested at such
times as average Per Share Closing Price of the Common Stock for ten trading
days during a period of twenty consecutive trading days equals or exceed $12.25
(the "Second Accelerated Vesting Date") and (z) 125,000 of the nonqualified
options will become fully vested at such times as average Per Share Closing
Price of the Common Stock for ten trading days during a period of twenty
consecutive trading days equals or exceed $14.25 (the "Third Accelerated Vesting
Date"). The per share exercise price of each of the foregoing options shall be
$8.87, the fair market value of the Common Stock on the date of grant, to wit,
December 21, 1995. At the option of the Executive, all or any portion of the
exercise price of any option may be paid by surrendering options for
cancellation in which event the Executive will receive credit against the
exercise price of options to be exercised in the amount of the difference
between the exercise price of the option so surrendered and the then Per Share
Closing Price of the shares subject to the surrendered options.
(ii) Except as otherwise provided in clauses (iii) and (v) below,
the Executive must be employed by the Corporation on the First Accelerated
Vesting Date, Second Accelerated Vesting Date and Third Accelerated Vesting Date
in order to be entitled to thereafter exercise the respective options which have
become fully vested on such dates. The Executive need not be employed by the
Corporation on the Normal Vesting Date to be entitled to thereafter exercise the
options which have become fully vested on such date.
(iii) Notwithstanding the foregoing, the options shall be fully
vested and be immediately exercisable upon the occurrence of a Change in Control
(as defined in Paragraph 10(b)).
(iv) For purposes of this Paragraph 6(a), "average Per Share
Closing Price" shall mean the average of the high and low prices of the Common
Stock on the National Association of Securities Dealers' Automated Quotation
(National Market) System as reported in the WALL STREET JOURNAL - EASTERN
EDITION.
(v) In the event the Executive's employment with the Corporation
terminates because the Corporation discharges him for Cause pursuant to
Paragraph 7(b) or the Executive resigns
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without Good Reason pursuant to Paragraph 7(c), then the Executive shall have at
least three (3) months following the Date of Termination (as defined in
Paragraph 7(d)) to exercise all or any portion of the options described in
Paragraph 6(a) and all other options heretofore granted to the Executive by the
Corporation that have become fully vested prior to the Date of Termination (or
such longer period as may be determined by the Board). In the event the
Executive's employment with the Corporation terminates because the Corporation
discharges him without Cause pursuant to Paragraph 7(b) or the Executive resigns
with Good Reason pursuant to Paragraph 7(c), then all options described in
Paragraph 6(a) and all other options heretofore granted to the Executive by the
Corporation which have not previously vested, if any, shall become fully vested
and the Executive or his permitted transferees may exercise all or any portion
of such options at any time prior to ten (10) years from the respective dates of
grant. In the event the Executive's employment with the Corporation terminates
because of the expiration of the term of this agreement, the death or disability
of the Executive or any other reason not contemplated by the preceding two
sentences of this Paragraph 6 (v), then all or any portion of all options
described in Paragraph 6(a) and all other options heretofore granted to the
Executive by the Corporation that have become fully vested prior to the Date of
Termination (or such longer period as may be determined by the Board) and
options, if any, which become exercisable on the Normal Vesting Date shall be
exercisable by the Executive or his permitted transferees at any time prior to
ten (10) years from the respective dates of grant except that options, if any,
which become exercisable on the Normal Vesting Date shall not be exercisable
until such date.
(vi) The number of Shares of Common Stock covered by the options
described in clause (i) above and the exercise price shall be appropriately
adjusted to reflect any stock split, stock dividend or other similar
recapitalization effected by the Corporation after the date of this Agreement.
(vii) Reference is made a certain employment agreement made and
entered into as of February 28, 1992 by and between the Corporation pursuant to
which the Corporation has previously granted the Executive options covering
1,600,000 shares of Common Stock. The Corporation acknowledges that the options
previously granted to the Executive are fully vested and currently exercisable
at an exercise price of $1.625 per share. The parties agree that the terms and
conditions of the options previously granted to the Executive are hereby amended
to the extent necessary so that the terms and conditions of this Agreement which
are not expressly made applicable to the options previously granted to the
Executive are the same as the terms and conditions of options granted under this
Agreement except that (x) none of the vesting provisions of this Agreement shall
apply to the options previously granted to the Executive, (y) the exercise price
of the options previously granted to the Executive shall be $1.625 per share,
and (z) any period calculated by reference to date of grant in this Agreement
with respect to the options previously granted to the Executive shall be
calculated from February 28, 1993.
(viii) "Registrable Shares" shall mean the shares of Common Stock
issuable upon exercise of the options described in clause (i) above as well as
the shares of Common Stock
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issuable upon exercise of the options previously granted to the Executive. The
Corporation covenants and agrees with the Executive that it will, as soon as
reasonably practicable but not later than the expiration of the "lockup period"
for the currently contemplated registered offering of Common Shares, register
the Registrable Shares not previously registered under the Securities Act of
1933, as amended (the "Securities Act"). Thereafter and during the period the
Executive is employed by the Corporation and for a period of one (1) year
thereafter if such employment was terminated by the Corporation other than for
Cause or by the Executive for Good Reason or by the expiration of the term of
this Agreement, the Corporation shall file such amendments and supplements and
take such other action as may be reasonably necessary to keep a prospectus
current and available for use by the Executive to dispose of Registrable Shares
in the manner determined by him from time to time which shall include, but not
be limited to, an underwritten public offering. Thereafter for a period ending
upon the earlier to occur of (x) the date upon which the Executive and all
permitted transferees owns Registrable Shares having in the aggregate a then
market value of less than $500,000 as determined from the then average Per Share
Closing Price or (y) the expiration of seven (7) years from the date hereof, the
Executive and each permitted assignee shall have unlimited "piggy back"
registration rights on any form appropriate for a secondary distribution and one
"demand" registration right. The "demand" right shall be exercisable by the
Executive or, in the event of his death, by permitted transferees holding at
least 51% of the shares sought to be registered. The Corporation will comply
with applicable state securities laws except that the Corporation shall not be
required to qualify to do business in any jurisdiction where it is not already
so qualified. The Corporation will pay the costs of the foregoing except
underwriting discounts and commissions and the fees of counsel to the Executive
and permitted transferees, if any. For so long as the Executive or any permitted
transferee holds any Registrable Shares, and with a view to making available to
the Executive the benefits of Rule 144 promulgated under the Securities Act and
any other rule or regulation of the Commission that may at any time permit a
sale of securities of the Corporation to the public without registration, the
Corporation agrees that if and when it shall otherwise be required to file
reports under the Securities Exchange Act of 1934 (the "Exchange Act") to use
its best efforts to (i) file with the Securities and Exchange Commission in a
timely manner all reports and other documents required of the Corporation under
the Exchange Act; and (ii) furnish to the Executive or permitted transferee so
long as such the Executive or permitted transferee owns any Registrable Shares
upon request at any time a written statement by the Corporation that it has
complied with the reporting requirements of Rule 144 and of the Securities Act
and the Exchange Act, a copy of the most recent annual or quarterly report of
the Corporation, and such other reports and documents so filed by the
Corporation as may be reasonably requested in availing the Executive or
permitted transferee of any rule or regulation of the Commission permitting the
selling of any such securities without registration.
(ix) Upon request of the Executive from time to time the Board
will consider authorizing loans from the Corporation to the Executive for the
purpose of enabling the Executive to exercise options and retain the underlying
stock.
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(b) PARTICIPATION IN BENEFIT PLANS. The Executive shall
be entitled to participate in various retirement, welfare, fringe benefit and
executive perquisite plans, programs and arrangements of the Corporation to the
extent the senior executives of the Corporation generally are eligible for
participation under the terms of such plans, programs and arrangements.
(c) EXPENSE REIMBURSEMENT. The Corporation shall
reimburse the Executive, upon the proper accounting, for reasonable business
expenses and disbursements incurred by him in the course of the performance of
his duties under this Agreement.
(d) VACATION AND HOLIDAYS. The Executive shall be
entitled to six (6) weeks of vacation during each year of this Agreement, or
such greater period as the Board shall approve, and to paid holidays given by
the Corporation to its senior executives generally, without reduction in salary
or other benefits.
(e) MEDICAL EXAM. The Corporation will pay for an annual
comprehensive medical exam (and appropriate diagnostics) for the Executive.
(f) REIMBURSEMENT. The Corporation shall reimburse the
Executive, upon proper accounting, for reasonable expenses incurred by him in
the course of relocating to the Boston, Massachusetts area. The Corporation
shall reimburse the Executive for tax, legal and other professional services
obtained in connection with the review of the terms of this Agreement up to
$2,500. In addition, the Corporation shall reimburse the Executive for
professional services in connection with financial planning up to $7,500
annually.
7. TERMINATION. Unless earlier terminated in accordance with the
provisions of this Paragraph 7 or of Paragraph 10, the Corporation shall
continue to employ the Executive and the Executive shall remain employed by the
Corporation during the entire term of this Agreement as set forth in Paragraph
1(b). Paragraph 8 hereof sets forth certain obligations of the Corporation in
the event that the Executive's employment hereunder is terminated. Certain
capitalized terms used in this Paragraph 7 and in Paragraph 8 hereof are defined
in Paragraph 7(d) below.
(a) DEATH OR DISABILITY. Except as set forth in Paragraph
10 and to the extent otherwise provided in Paragraph 8(b) with respect to
certain post-Date of Termination payment obligations of the Corporation, this
Agreement shall terminate immediately as of the Date of Termination in the event
of the Executive's death or in the event that the Executive becomes disabled. In
the event of the Executive's death his heirs or estate shall be paid pro rata
bonus entitlement. The Executive 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, the Executive has been unable to perform
substantially the Executive's usual and customary duties under this Agreement
and (ii) the date that a reputable physician selected jointly by the Board and
the Executive (or if the Executive is clearly unqualified to make such
selection, the person then authorized to make health care decisions for the
Executive or, if none, the Executive's spouse)
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determines in writing that the Executive will, by reason of physical or mental
injury or disease, be unable to perform substantially all of the Executive's
usual and customary duties under this Agreement for a period of at least six (6)
consecutive months. If any questions arises as to whether the Executive is
disabled, upon reasonable request therefor by the Board, the Executive shall
submit to a medical examination for the purpose of determining the existence,
nature and extent of any such disability. In accordance with Paragraph 12, the
Board shall promptly give the Executive written notice of any such determination
of the Executive's disability and of the decision of the Board to terminate the
Executive's employment by reason thereof. In the event of disability, until the
Date of Termination, the base salary payable to the Executive under Paragraph 4,
hereof shall be reduced dollar-for-dollar by the amount of disability benefits,
if any, paid to the Executive in accordance with any disability policy or
program of the Corporation.
(b) DISCHARGE FOR CAUSE OR RESIGNATION FOR GOOD REASON.
In accordance with the procedures hereinafter set forth, the Board may discharge
the Executive from his employment hereunder for Cause and the Executive may
resign from his employment hereunder for Good Reason. Except to the extent
otherwise provided in Paragraph 8(a) (in the case of a discharge for Cause) or
Paragraph 8(c) (in the case of a resignation for Good Reason) with respect to
certain post-Date of Termination obligations of the Corporation, this Agreement
shall terminate immediately as of the Date of Termination in the event the
Executive is discharged for Cause or resigns for Good Reason. Any discharge of
the Executive by the Board for Cause or resignation by the Executive for Good
Reason shall be communicated by a Notice of Termination to the Executive (in the
case of discharge) or the Board (in the case of resignation) given in accordance
with Paragraph 12 of this Agreement. For purposes of this Agreement, a "Notice
of Termination" means a written notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated and
(iii) specifies the termination date (which date shall in all events be no less
than thirty (30) days after the giving of such notice). In the case of a
discharge of the Executive for Cause, the Notice of Termination shall include a
copy of a resolution duly adopted by the Board at a meeting of the Board called
and held for such purpose, finding that, in the opinion of the Board, the
Executive was guilty of conduct constituting Cause. No purported termination of
the Executive's employment for Cause shall be effective without a Notice of
Termination.
(c) TERMINATION FOR OTHER REASONS. The Corporation may
discharge the Executive without Cause by giving written notice to the Executive
in accordance with Paragraph 12 at least one hundred and twenty (120) days prior
to the Date of Termination. The Executive may resign from his employment without
Good Reason by giving written notice to the Corporation in accordance with
Paragraph 12 at least sixty (60) days prior to the Date of Termination. Except
to the extent otherwise provided in Paragraphs 6(a)v and 8(a) or Paragraphs 8(c)
and 10, this Agreement shall terminate immediately as of the Date of Termination
in the event the Executive is discharged without Cause or resigns without Good
Reason.
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(d) DEFINITIONS. For purposes of this Paragraph 7 and
Paragraphs 8 and 10 hereof, the following capitalized terms shall have the
meanings set forth below:
(i) "ACCRUED OBLIGATIONS" shall mean, as of the Date of
Termination, the sum of (A) the Executive's base salary under Paragraph 4
through the Date of Termination to the extent not theretofore paid, (B) the
amount of any bonus, incentive compensation, deferred compensation and other
cash compensation accrued by the Executive as of the Date of Termination to the
extent not theretofore paid and (C) any vacation pay, expense reimbursements and
other cash entitlements accrued by the Executive as of the Date of Termination
to the extent not theretofore paid. For the purpose of this Paragraph 7(d)(i),
amounts shall be deemed to accrue ratably over the period during which they are
earned.
(ii) "CAUSE" shall mean any of the following: (A) any demonstrable
act of willful misconduct by the Executive in the performance of his duties or
obligations to the Corporation, which shall not include any exercise of business
judgment in good faith, or (B) conviction of the Executive of a felony involving
the personal dishonesty of the Executive, or (C) a material act of dishonesty or
breach of trust on the part of the Executive resulting or intended to result
directly or indirectly in material personal gain or enrichment at the expense of
the Corporation.
(iii) "DATE OF TERMINATION" shall mean (A) in the event of a
discharge of the Executive by the Board for Cause or a resignation by the
Executive for Good Reason, the date the Executive (in the case of discharge) or
the Board (in the case of resignation) receives of a Notice of Termination, as
the case may be, (B) in the event of a discharge of the Executive without Cause
or a resignation by the Executive without Good Reason, the date specified in the
written notice to the Executive (in the case of discharge) or the Corporation
(in the case of resignation) which date shall be no less than thirty (30) days
from the date of such written notice, (C) in the event of the Executive's death,
the date of the Executive's death, and (D) in the event of termination of the
Executive's employment by reason of disability pursuant to Paragraph 7(a), the
date the Executive receives written notice of such termination (or, if later,
six (6) months from the date the Executive's disability began).
(iv) "GOOD REASON" shall mean any of the following: (A) the
assignment of the Executive of any duties inconsistent in any material respect
with the Executive's positions with the Corporation as set forth in this
Agreement (including status, offices and titles), authority, duties or
responsibilities as contemplated by Paragraph 2, or any action by the
Corporation which results in a material diminution in such positions, authority,
duties or responsibilities, excluding for this purpose any isolated,
insubstantial and inadvertent action not taken in bad faith and which is
promptly remedied by the Corporation; (B) a Change in Control; or (C) any
failure by the Corporation to comply with any of the provisions of this
Agreement, other than any isolated, insubstantial and inadvertent failure not
occurring in bad faith and which is promptly remedied by the Corporation.
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8. OBLIGATIONS OF THE CORPORATION UPON TERMINATION.
(a) DISCHARGE FOR CAUSE OR RESIGNATION WITHOUT GOOD
REASON. In the event of a discharge of the Executive for Cause pursuant to
Paragraph 7(b) or resignation by the Executive without Good Reason pursuant to
Paragraph 7(c):
(i) the Corporation shall pay to the Executive all Accrued
Obligations in a lump sum in cash within thirty (30) days after the Date of
Termination; and
(ii) the Executive shall be entitled to receive all benefits
accrued by him as of the Date of Termination under all qualified and
nonqualified retirement, pension, profit sharing and similar plans of the
Corporation in such manner and at such time as are provided under the terms of
such plans and arrangements; and
(iii) except as otherwise provided by law, all other obligations of
the Corporation hereunder shall cease forthwith.
(b) DEATH OR DISABILITY. (i) In the event this Agreement
terminates pursuant to Paragraph 7(a) by reason of the death or disability of
the Executive, the Corporation shall pay all Accrued Obligations to the
Executive, or to this heirs or estate in the event of the Executive's death, in
a lump sum in cash within thirty (30) days after the Date of Termination; and
(ii) In the event this Agreement terminates pursuant to Paragraph
7(a) by reason of the disability of the Executive, the Corporation shall
continue to pay to the Executive, for a period of twelve (12) months fro the
Date of Termination, reduced dollar-for-dollar by the amount of any disability
benefits paid to the Executive in accordance with any disability policy or
program of the Corporation, without duplication of any such reduction pursuant
to Paragraph 7(a), (A) the Executive's base salary in effect on the Date of
Termination as determined under Paragraph 4; and (B) all amounts and provide all
other benefits to which Executive would have been entitled as if he had
continued to be employed by the Corporation for such 12 month period; and
(iii) In the event this Agreement is terminated pursuant to
Paragraph 7(a) by reason of the death or disability of the Executive, the
Executive, or his beneficiary, heirs or estate in the event of the Executive's
death, shall be entitled to receive all benefits accrued by him as of the Date
of Termination under all qualified and nonqualified retirement, pension, profit
sharing and similar plans of the Corporation in such manner and at such time as
are provided under the terms of such plans and arrangements; and
(iv) In the event this Agreement is terminated pursuant to
Paragraph 7(a) by reason of the death or disability of the Executive, except as
otherwise provided by law, all other obligations of the Corporation hereunder
shall cease forthwith.
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(c) DISCHARGE WITHOUT CAUSE OR RESIGNATION FOR GOOD
REASON. In the event that the Executive is discharged other than for Cause or
the Executive resigns with Good Reason pursuant to Paragraph 7(b).
(i) the Corporation shall pay all Accrued Obligations to the
Executive in a lump sum in cash within thirty (30) days after the Date of
Termination; and
(ii) for the greater of twelve (12) months after the Date of
Termination or the then- remaining term of this Agreement (taking into account
any extensions of such term in effect immediately prior to the Date of
Termination pursuant to Paragraph 1(b)), the Corporation shall continue to pay
the Executive (A) the Executive's salary in effect on the Date of Termination as
determined under Paragraph 4; and (B) all bonus entitlement amounts and provide
all other benefits set forth in Paragraphs 5 and 6 to which Executive would have
been entitled as if he had continued to be employed by the Corporation for such
period of twelve (12) months or the remaining term of this Agreement; and
(iii) the Executive shall be entitled to receive all benefits
accrued by him as of the termination of the period specified in clause (ii)
above under all qualified and nonqualified retirement, pension, profit sharing
and similar plans of the Corporation in such manner and at such time as are
provided under the terms of such plans; and
(iv) except as otherwise provided by law, all other obligations of
the Corporation hereunder shall cease forthwith.
9. NON-COMPETITION. The Executive agrees that (a) during the
terms of his employment hereunder (b) for a period of twelve (12) months
following the date of Termination in the event that the Executive is discharged
other than for Cause or the Executive resigns with good Reason pursuant to
Paragraph 7(b), (c) for a period of three (3) months following the Date of
Termination in the event that the Executive is discharged for Cause, and (d) for
a period of twelve (12) months following the Date of Termination in the event
that the Executive resigns without Good Reason, he will not, directly or
indirectly (a) own, manage, operate, control or participate in any manner in the
ownership, management, operation or control of, or be connected as an officer,
employee, partner, director, principal, consultant, agent or otherwise with, or
have any financial interest in, or aid or assist anyone else in the conduct of,
any business, venture or activity which is the same, engaged in the business of
gene mapping, gene sequencing, or other such gene research related enterprise,
or otherwise competes with, any business, venture or activity being conducted at
the Date of Termination by the Corporation, or by any group, division or
subsidiary of the Corporation, in any areas where such business is being
conducted at the Date of Termination, or (b) recruit or otherwise seek to induce
any employees of the Corporation or any of its subsidiaries to terminate their
employment or violate any agreement with or duty to the Corporation or any of
its subsidiaries. It is understood and agreed that, for the purposes of the
foregoing provisions of this Paragraph 9, (i) no business, venture or activity
shall be deemed to
12
be a business, venture or activity conducted by the Corporation or any group,
division or Subsidiary of the Corporation, unless not less than 20% of the
Corporation's consolidated assets are devoted to, such business, venture or
activity; and (ii) no business, venture or activity conducted by any entity by
which the Executive is employed or in which he is interested or with which he is
connected or associated shall be deemed competitive any business, venture or
activity conducted by the Corporation unless it is one from which 20% or more of
its consolidated assets are devoted. Furthermore, ownership of stock not to
exceed 2% of the voting stock of any publicly held corporation shall not, of
itself, constitute a violation of this Paragraph 9.
10. CHANGE IN CONTROL. (a) In the event that the Executive's
employment is terminated by the Corporation within 12 months following a Change
in Control (as hereinafter defined) for any reason other than Cause, the
Corporation will continue all the Executive's benefits for a period of two (2)
years and pay the Executive, in lieu of any other payments provided in this
Agreement, a lump sum cash payment, payable within 30 days of his termination,
equal to the sum of (A) twice the amount of the base salary and bonus paid to
the Executive for the calendar year preceding the year in which the Change in
Control occurs, and (B) all Accrued Obligations to the Executive.
(b) For purposes of this Agreement, a "Change in Control"
shall be deemed to have occurred if and when:
(i) the Corporation 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
Corporation 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 Corporation's shareholders of
the agreement or transaction, a Change in Control shall not be deemed to have
taken place unless and until such approval is secured and, (B) if the voting
shareholders of such other corporation or entity shall, immediately after such
effective date, be substantially the same as the voting shareholders of the
Corporation immediately prior to such effective date, the execution of such
agreement shall not, by itself, constitute a "Change in Control;" or
(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 Corporation represent 35% or more
of the votes that could then be cast in an election for members of the
Corporation'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-monthly period were directors of the Corporation shall cease to constitute at
least a majority of the Corporation's Board, unless the election of each
director who was not a director at the beginning of such period has been
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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).
(c) Upon the occurrence of any breach by the Corporation
of this Agreement within the meaning of Paragraph 10(d), below, the Executive
may give the Corporation written notice of his intention to resign effective the
30th day following the date of such notice. If the corporation does not fully
remedy such breach within 15 days of the date of such notice, the Executive's
resignation will become effective on such 30th day. If the Executive resigns in
accordance with this paragraph, his employment will be deemed to have been
terminated by the Corporation for reasons other than Cause (and he will be
deemed to have offered to continue to provide services to the Corporation), and
he will be entitled to all the payments and rights and benefits described in
Paragraph 10(a).
(d) The following events are breaches by the Corporation
of this Agreement within the meaning of this Paragraph 10(d):
(i) any reduction of, or failure to pay, the Executive's base
salary as described in Paragraph 4 above;
(ii) any failure to provide the benefits required by Paragraph 6
above;
(iii) the assignment to the Executive of any duties inconsistent in
any material respect with his position (including status, offices and titles),
authority, duties or responsibilities as contemplated by Paragraph 2 above or
any other action by the Corporation which results in a material diminution of
such position, authority, duties or responsibilities, excluding for this purpose
any isolated, insubstantial and inadvertent action not taken in bad faith; and
(iv) the relocation of the Corporation's principal executive
offices, or any event that causes the Executive to have his principal place of
work changed to any location outside the Greater Boston, Massachusetts,
Metropolitan Area.
(e) If the Executive is dismissed by the Corporation for
Cause, he will not be entitled to any of the payments or benefits provided under
Paragraph 10(a) above.
(f) Termination of employment due to the death or
disability of the Executive will not be considered at termination for purposes
of this Paragraph 10.
(g) If the Executive dies following a termination of
employment which entitled him to benefits under this Paragraph 10 but prior to
receipt of all such benefits, his beneficiary (as designated to the Corporation
in writing) or, if none, his estate, will be entitled to
14
receive all unpaid amounts due hereunder.
11. BINDING EFFECT. This Agreement shall be binding upon and inure
to the benefit of the heirs and representatives of the Executive and the
successors and assigns of the Corporation. The Corporation 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 the Executive, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent that the Corporation would
be required to perform this Agreement if no such succession had taken place.
Regardless of whether such agreement is executed, this Agreement shall be
binding upon any successor of the Corporation in accordance with the operation
of law and such successor shall be deemed the "Corporation", for purposes of
this Agreement.
12. NOTICES. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered by hand or mailed within the continental United States
by first class certified mail, return receipt requested, postage prepaid,
addressed as follows:
(a) if to the Board or the Corporation to:
Genome Therapeutics Corp.
100 Beaver Street
Waltham, Massachusetts 02154-8440
(b) to the Executive, to:
Robert J. Hennessey
550 Wellington Drive
Fairfield, Connecticut 06430
Such addresses may be changed by written notice sent to the other party at the
last recorded address of that party.
13. No Assignment. Except as otherwise expressly provided herein,
this Agreement is not assignable by any party and no payment to be made
hereunder shall be subject to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or other charge.
14. Execution in Counterparts. This Agreement may be executed by
the parties hereto in two or more counterparts, each of which shall be deemed to
be an original, but all such counterparts shall constitute one and the same
instrument, and all signatures need not appear on any one counterpart.
15
15. JURISDICTION AND GOVERNING LAW. Jurisdiction over disputes
with regard to this Agreement shall be exclusively in the courts of The
Commonwealth of Massachusetts, and this Agreement shall be construed and
interpreted in accordance with and governed by the laws of The Commonwealth of
Massachusetts, other than the conflict of laws provisions of such laws.
16. NO MITIGATION REQUIRED. The Executive shall not be required to
mitigate damages or the amount of any payment provided for under this Agreement
by seeking other employment or otherwise, nor shall the amount of any payment
provided for under this Agreement be reduced by any compensation earned by the
Executive as the result of employment by another employer or otherwise after the
Date of Termination.
17. SEVERABILITY. If any provision of this Agreement shall be
adjudged by any court of competent jurisdiction to be invalid or unenforceable
for any reason, such judgment shall not affect, impair or invalidate the
remainder of this Agreement.
18. PRIOR UNDERSTANDINGS. This Agreement embodies the entire
understanding of the parties hereof, and supersedes all other oral or written
agreements or understandings between them regarding the subject matter hereof.
No change, alteration or modification hereof may be made except in a writing,
signed by each of the parties hereto. The headings in this Agreement are for
convenience and reference only and shall not be construed as part of this
Agreement or to limit or otherwise affect the meaning hereof.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
Attest: GENOME THERAPEUTICS CORP.
- --------------------- By:
-------------------------------
Chairman Compensation Committee
of the Board
EXECUTIVE
----------------------------------
Robert J. Hennessey