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Exhibit 10.3
SEVERANCE AND
CHANGE IN CONTROL AGREEMENT
This
Agreement (the “Agreement”) is entered into as of the
17th day of May, 2007 by and between Altus Pharmaceuticals Inc., a
Delaware corporation (the “Company”), and
(the
“Executive”).
WHEREAS Executive is employed by the Company, and because of
such employment, possesses detailed knowledge of the Company and
its business and operations;
WHEREAS Executive’s continued service to the Company
is very important to the future success of the Company;
WHEREAS the Company desires to enter into this Agreement to
provide Executive with certain financial protection in the event
that Executive’s employment terminates under certain
circumstances, and thereby to provide Executive with incentives to
remain with the Company
WHEREAS the Board of Directors of the Company (the
“Board”) acting through the Compensation Committee has
determined that it is in the best interests of the Company to enter
into this Agreement.
NOW
THEREFORE for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and
Executive agree as follows:
1.
Definitions .
(a)
Cause . As used herein, “Cause” shall include
(and is not limited to): (i) dishonesty with respect to the Company
or any affiliate, parent or subsidiary of the Company; (ii)
insubordination; (iii) substantial malfeasance or nonfeasance
of duty; (iv) unauthorized disclosure of confidential
information; (v) Executive’s breach of any material
provision of any employment, consulting, advisory, non-disclosure,
non-competition, or similar material agreement between Executive
and the Company, which breach, where reasonably subject to cure, is
not cured to the satisfaction of the Board within ten
(10) days after notice to Executive by the Company of such
breach; or (vi) conduct substantially prejudicial to the
business of the Company or any affiliate, parent or subsidiary of
the Company. The Board shall have sole discretion to determine the
existence of “Cause,” and its determination will be
conclusive on Executive and the Company; provided that the Board
may delegate its power to act under this paragraph (a) to a
committee of the Board in which case the determination of such
committee shall be conclusive. “Cause” is not limited
to events which have occurred prior to the termination of
Executive’s service, nor is it necessary that the
Board’s finding of “Cause” occur prior to such
termination. If the Board determines, subsequent to
Executive’s termination of service, that either prior or
subsequent to Executive’s termination Executive engaged in
conduct which would constitute “Cause,” then Executive
shall have no right to any benefit or compensation under this
Agreement.
(b)
Change In Control . As used herein, a “Change in
Control” shall mean:
(i) the shareholders of the Company approve: (a) any
consolidation or merger of the Company (x) where the
shareholders of the Company, immediately prior to the consolidation
or merger, would not, immediately after the consolidation or
merger, beneficially own, directly or indirectly, shares
representing in the aggregate more than 50% of the combined
voting power of all the
outstanding securities of the corporation issuing cash or
securities in the consolidation or merger (or of its ultimate
parent corporation, if any) or (y) where the members of the
Board, immediately prior to the consolidation or merger, would not,
immediately after the consolidation or merger, constitute more than
50% of the board of directors of the corporation issuing cash or
securities in the consolidation or merger (or of its ultimate
parent corporation, if any); (b) any sale, lease, exchange or
other transfer (in one transaction or a series of transactions
contemplated or arranged by any party as a single plan) of all or
substantially all of the assets of the Company; or (c) any
plan or proposal for the liquidation or dissolution of the
Company;
(ii) individuals who, as of the date hereof, constitute the
entire Board (the “Incumbent Directors”) cease for any
reason to constitute at least 50% of the Board, provided that any
individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company’s
shareholders, was approved by a vote of at least a majority of the
then Incumbent Directors shall be, for purposes of this Agreement,
considered as though such individual were an Incumbent Director;
or
(iii) any “person,” as such term is used in
Section 13(d) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”) (other than the Company, any
employee benefit plan of the Company or any entity organized,
appointed or established by the Company for or pursuant to the
terms of such plan), together with all “affiliates” and
“associates” (as such terms are defined in
Rule 12b-2 under the Exchange Act) of such person, shall
become the “beneficial owner” or “beneficial
owners” (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act), directly or indirectly, of securities of the Company
representing in the aggregate 25% or more of either: (a) the then
outstanding shares of the Common Stock of the Company or
(b) the combined voting power of all then outstanding
securities of the Company having the right under ordinary
circumstances to vote in an election of the Board (“Voting
Securities”) (in either such case, other than as a result of
acquisitions of such securities directly from the Company).
Notwithstanding the foregoing, a “Change in Control” of
the Company shall not be deemed to have occurred for purposes of
the foregoing clause (iii) solely as the result of an
acquisition of securities by the Company which, by reducing the
number of shares of Common Stock or other Voting Securities
outstanding, increases: (a) the proportionate number of shares
of Common Stock beneficially owned by any person to 25% or more of
the Common Stock then outstanding, or (b) the proportionate
voting power represented by the Voting Securities beneficially
owned by any person to 25% or more of the combined voting power of
all then outstanding Voting Securities; provided, however, that if
any person referred to in clause (a) or (b) of this
sentence shall thereafter become the beneficial owner of any
additional shares of Common Stock or other Voting Securities (other
than pursuant to a stock split, stock dividend or similar
transaction), then a “Change in Control” shall be
deemed to have occurred for purposes of the foregoing clause
(iii).
(c)
Good Reason . As used herein, a “Good Reason”
shall mean: (i) Executive, as a condition of remaining an
employee of the Company, is required to relocate at least 50 miles
from Executive’s then-current location of employment;
(ii) there occurs a material adverse change in
Executive’s duties, authority or responsibilities which
causes Executive’s position with the Company to become of
significantly less responsibility or authority than
Executive’s position was immediately prior to the Change in
Control; or (iii) there occurs a material reduction in
Executive’s base salary from Executive’s base salary
received immediately prior to the Change in Control, provided
that any notice of termination by Executive for Good Reason
shall be given by Executive within fifteen (15) days of
Executive’s becoming aware of the occurrence of the facts
giving rise to such Good Reason. For purposes of this Agreement,
“Good Reason” shall be interpreted in a manner, and
limited to the extent necessary, so that it will not cause adverse
tax consequences for either party with respect to Section 409A
of the Internal Revenue Code of 1986, as amended (“Code
Section 409A”), and any successor statute, regulation
and guidance thereto.
(d)
Base Salary . As used herein, “Base Salary”
shall mean Executive’s annual base salary, excluding
reimbursements, bonuses, benefits, and amounts attributable to
stock options and other non-cash compensation.
2.
Standard Severance . In the event that
Executive’s employment is involuntarily terminated by action
of the Company other than for Cause, Executive shall receive the
following (subject to Executive’s execution of a release of
claims as described in Section 7 ):
(a)
Severance Payments . Continuation of payments in an amount
equal to Executive’s then-current Base Salary for a six
(6) month period (the “Severance Period,” if
Section 2 applies) less all customary and required
taxes and employment-related deductions, in accordance with the
Company’s normal payroll practices (provided such payments
will be made at least monthly).
(b)
Separation Bonus . In the Company’s sole discretion,
and conditioned upon appropriate approval from the Compensation
Committee, within forty-five (45) days following
Executive’s termination the Company may pay Executive a
separation bonus not to exceed fifty percent (50%) of the target
annual bonus to which Executive may have been entitled for the year
in which Executive is terminated, prorated for the portion of the
year in which Executive was employed, provided any such payments
will be made within forty-five (45) days following
Executive’s termination with the Company.
(c)
COBRA Payments . Upon completion of the appropriate COBRA
forms, and subject to all the requirements of COBRA, the Company
shall continue Executive’s participation in the
Company’s health and dental insurance plans at the
Company’s cost (except for Executive’s co-pay, if any,
which shall be deducted from Executive’s severance
compensation) for the 18 month COBRA eligibility period
following termination, to the same extent that such insurance is
provided to similarly situated Company executives, provided
that this benefit will cease and the Company will be under no
obligation to provide it if Executive has become eligible for
coverage under another employer’s group coverage, and
Executive hereby agrees to notify the Company promptly and in
writing should that occur.
(d)
No Duplication . In
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