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Exhibit 10.1
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 Sheldon
Berkle (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 that supplement
the protections set forth in the May 6, 2005 Offer Letter
entered into between the Executive and the Company (the
“Offer Letter”) (attached as Exhibit A, hereto) 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 have the
meaning assigned to it in the Offer Letter. In addition,
“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 have the meaning assigned to it in the Offer
Letter.
(c)
Good Reason . As used herein, a “Good Reason”
shall have the meaning assigned to it in the Offer Letter, except
that “reduction in base salary” shall be replaced with
“material reduction in base salary.” 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 twelve
(12) 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 one hundred percent (100%) 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 his severance compensation) the
18 month COBRA eligibility period following termination, to
the same extent that such insurance is provided to similarly
situated Company executives.
(d)
House And Automobile Lease . Assumption of payments under
Executive’s house and automobile leases in the Boston area
for a twelve (12) month period following termination (or, if
shorter, until the expiration of the respective terms of such
leases), up to an aggregate payment of twenty-five thousand dollars
($25,000).
(e)
No Duplication . In the event that Executive is eligible for
Change in Control Severance under Section 3 below, he
shall not be eligible for and shall not receive the Standard
Severance as provided in this Section 2 .
3.
Change In Control Severance . In the event
that a Change in Control occurs and within a period of one
(1) year following the Change in Control, either:
(i) Executive’s employment is involuntarily terminated
by action of the Company other than for Cause, or
(ii) Executive terminates Executive’s employment
voluntarily for Good Reason, then 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 an eighteen
(18) month period (the “Severance Period,” if
Section 3 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 . Within forty-five (45) days
following Executive’s termination, payment of a separation
bonus in an amount equal to one-and-a-half (1.5) times the target
annual bonus to which the Executive may have been entitled for the
year in which Executive is terminated.
(c)
COBRA Payments . Upon completion of the appropriate COBRA
1/ forms, and subject to all the requirements of COBRA,
continuation of 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 his severance compensation) during the
Severance Period, to the same extent that such insurance is
provided to similarly situated Company executives.
(d)
Outplacement . Direct payment of up to $15,000 of bona fide
outplacement services, provided that the outplacement company
engaged by Executive provides reasonably detailed invoices for such
services to the Sr. Director, Human Resources at the Company within
the outplacement company’s normal billing cycle. Payment is
limited to services received by Executive between the date of his
termination of employment and the date on which he begins new
full-time employment, and Executive hereby agrees to notify the
Company immediately upon obtaining new full-time employment,
provided that all payments must be made before the end of the
second year following the year in which Executive terminates
employment.
(e)
House And Automobile Lease . Assumption of payments under
Executive’s house and automobile leases in the Boston area
for a twelve (12) month period (or, if shorter, until the
expiration of the respective terms of such leases), up to an
aggregate payment of twenty-five thousand dollars ($25,000).
(f)
No Duplication . In the event that Executive is eligible for
Standard Severance under Section 2 above, he shall
not be eligible for and shall not receive the Change in Control
Severance as provided in this Section 3 .
4. No
Severance . In the event that Executive’s
employment is terminated for any reason other than those outlined
in Sections 2 or 3 , then Executive shall have
no right to the severance payments/benefits provided under this
Agreement.
5.
Distribution Limitation . If any payment or
benefit Executive would receive under this Agreement, when combined
with any other payment or benefit Executive receives pursuant to a
Change in Control (for purposes of this section, a
“Payment”) would: (i) constitute a
“parachute payment” within the meaning of
Section 280G of the Internal Revenue Code of 1986, as amended
(the “Code”); and (ii) but for this sentence, be
subject to the excise tax imposed by Section 4999 of the Code
(the “Excise Tax”), then such Payment shall be either:
(x) the full amount of such Payment; or (y) such lesser amount
(with cash payments being reduced before stock option compensation)
as would result in no portion of the Payment being subject to the
Excise Tax, whichever of the foregoing amounts, taking into account
the applicable federal, state and local employments taxes, income
taxes, and the Excise Tax, results in Executive’s receipt, on
an after-tax basis, of the greater amount of the Payment
notwithstanding that all or some portion of the Payment may be
subject to the Excise Tax.
6.
Timing Of Payments . Notwithstanding any other
provision with respect to the timing of payments under
Sections 2 or 3 , if, at the time of
Executive’s termination, Executive is deemed to be a
“specified employee” of the Company (within the meaning
of Code Section 409A(a)(2)(B)(i) and any successor statute,
regulation and guidance thereto (“Code
Section 409A”)), then limited only to the extent
necessary to comply with the requirements of Code
Section 409A, any payments to which Executive may become
entitled under Sections 2 or 3 which are
subject to Code Section 409A (and not otherwise exempt from
its application) will be withheld until the first (1st) business
day of the seventh (7th) month following the termination of
Executive’s employment, at which time Executive shall be
paid an aggregate amount equal to the accumulated, but unpaid,
payments otherwise due to Executive under the terms of
Sections 2 or 3 .
7.
Release of Claims . The Company shall not be
obligated to pay Executive any of the compensation set forth in
Sections 2 and 3 unless and until Executive
has executed a timely full and general release of all claims
against the Company and any affiliate, parent or subsidiary and its
and their officers, directors, employees, and agents, in a form
satisfactory to the Company.
8.
Restrictive Covenant . Executive acknowledges
and agrees that this Agreement provides him with payments and
benefits above and beyond those which the Company already is
providing Executive. In exchange for the payments and benefits
provided herein, as well as other good and valuable consideration,
Executive hereby acknowledges and reaffirms his confidentiality,
non-competition and non-solicitation covenants under the Offer
Letter.
9. No
Impact On Employment Status . This Agreement is not
intended to confer, and shall not be interpreted as conferring, any
additional employment rights on Executive, and has no impact on
either party’s right to terminate Executive’s
employment under contract or applicable law.
10.
Enforceability; Reduction . If any provision
of this Agreement shall be deemed invalid or unenforceable as
written, this Agreement shall be construed, to the greatest extent
possible, or modified, to the extent allowable by law, in a manner
which shall render it valid and enforceable and any limitation on
the scope or duration of any provision necessary to make it valid
and enforceable shall be deemed to be a part thereof. No invalidity
or unenforceability of any provision contained herein shall affect
any other portion of this Agreement.
1/ “ COBRA ” is the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended.
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11.
Notices .
(a) All notices, requests, consents and other communications
hereunder shall be in writing, shall be addressed to the receiving
party’s address set forth below or to such other address as a
party may designate by notice hereunder, and shall be either
(i) delivered by hand, (ii) made by telex, telecopy or
facsimile transmission, (iii) sent by overnight courier, or
(iv) sent by registered or certified mail, return receipt
requested, postage prepaid.
If to the
Company:
General
Counsel
Altus
Pharmaceuticals Inc.
125 Sidney
Street
Cambridge,
MA 02139
With a
copy to:
Jonathan
L. Kravetz, Esq.
Mintz,
Levin, Cohn, Ferris, Glovsky & Popeo, P.C.
1
Financial Center
Boston, MA
02111
If to
Executive:
Sheldon
Berkle
(b) All notices, requests, consents and other communications
hereunder shall be deemed to have been given either (i) if by
hand, at the time of the delivery thereof to the receiving party at
the address of such party set forth above, (ii) if made by
telex, telecopy or facsimile transmission, at the time that receipt
thereof has been acknowledged by electronic confirmation or
otherwise, (iii) if sent by overnight courier, on the next
business day following the day such notice is delivered to the
courier service, or (iv) if sent by registered or certified
mail, on the 5th business day following the day such mailing is
made.
12.
Entire Agreement / No Duplication of Compensation or
Benefits . This Agreement, along with the Offer
Letter (as modified by this Agreement), embodies the entire
agreement and understanding between the parties hereto with respect
to the subject matter hereof and supersedes all prior oral or
written agreements and understandings relating to the subject
matter hereof. No statement, representation, warranty, covenant or
agreement of any kind not expressly set forth in this Agreement
shall affect, or be used to interpret, change or restrict, the
express terms and provisions of this Agreement. The Offer Letter
remains in effect to the extent still applicable, provided that
paragraphs 6 and 10 thereof are no longer of any force or effect.
The terms of Sections 2 and 3 above shall
replace any agreement, policy or practice which otherwise would
obligate the Company to provide any severance compensation and/or
benefits to Executive, provided that this provision shall
not be construed to otherwise limit Executive’s rights to
payments or benefits provided under any pension plan (as defined in
Section 3(2) of the Employee Retirement Income Security Act of
1974, as amended), deferred compensation, stock, stock option or
similar plan sponsored by the Company.
13.
Modifications and Amendments . The terms and
provisions of this Agreement may be modified or amended only by
written agreement executed by all parties hereto. Any such
amendment shall comply with the requirements of Code
Section 409A, if applicable.
14.
Waivers and Consents . The terms and
provisions of this Agreement may be waived, or consent for the
departure therefrom granted, only by written document executed by
the party entitled to the benefits of such terms or provisions. No
such waiver or consent shall be deemed to be or shall constitute a
waiver or consent with respect to any other terms or provisions of
this Agreement, whether or not similar. Each such waiver or consent
shall be effective only in the specific instance and for the
purpose for which it was given, and shall not constitute a
continuing waiver or consent.
15.
Assignment . The rights and obligations under
this Agreement may not be assigned by either party hereto without
the prior written consent of the other party.
16.
Benefit . All statements, representations,
warranties, covenants and agreements in this Agreement shall be
binding on the parties hereto and shall inure to the benefit of the
respective successors and permitted assigns of each party hereto.
Nothing in this Agreement shall be construed to create any rights
or obligations except among the parties hereto, and no person or
entity shall be regarded as a third-party beneficiary of this
Agreement.
17.
Arbitration . Any controversy, dispute or
claim arising out of or in connection with this Agreement will be
settled by final and binding arbitration to be conducted in Boston,
Massachusetts pursuant to the national rules for the resolution of
employment disputes of the American Arbitration Association then in
effect. The decision or award in any such arbitration will be final
and binding upon the parties, and judgment upon such decision or
award may be entered in any court of competent jurisdiction, or
application may be made to any such court for judicial acceptance
of such decision or award and an order of enforcement. In the event
that any procedural matter is not covered by the aforesaid rules,
the procedural law of Massachusetts will govern. Any disagreement
as to whether a particular dispute is arbitrable under this
Agreement shall itself be subject to arbitration in accordance with
the procedures set forth herein. Notwithstanding the foregoing, any
right or obligation arising out of or concerning any separate
contract or agreement between the parties (including but not
limited to the Offer Letter (as modified by this Agreement) shall
be decided in accordance with the dispute resolution mechanism
provided for by such contract or agreement.
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18.
Governing Law / Jurisdiction / Service of Process
. This Agreement and the rights and obligations of the
parties hereunder shall be construed in accordance with and
governed by the law of the Commonwealth of Massachusetts, without
giving effect to the conflict of law principles thereof. Any legal
action or proceeding with respect to this Agreement that is not
subject to arbitration pursuant to Section 17 will be
brought in the courts of the Commonwealth of Massachusetts in
Middlesex Country or of the United States of America for the
District of Massachusetts, sitting in Boston. By execution and
delivery of this Agreement, each of the parties hereto accepts for
itself and in respect of its property, generally and
unconditionally, the exclusive jurisdiction of the aforesaid
courts. Each of the parties hereto irrevocably consents to the
service of process of any of the aforementioned courts in any such
action or proceeding by the mailing of copies thereof by certified
mail, postage prepaid, to the party at its address set forth in
Section 11 .
19.
Counterparts . This Agreement may be executed
in one or more counterparts, and by different parties hereto on
separate counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same
instrument.
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IN WITNESS
WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
ALTUS
PHARMACEUTICALS INC.
By:
/s/ Jonathan Lieber
Vice President and Chief Financial Officer
Date: 5/17/07
EXECUTIVE:
/s/ Sheldon Berkle
Sheldon Berkle
Date:
5/10/07
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EXHIBIT A
May 6, 2005
Mr. Sheldon Berkle
Dear Shelly:
We are very pleased to
extend an offer for you to join Altus Pharmaceuticals
Inc. (“Altus” or the “Company”) as
President, Chief Executive Officer and a
member of the Board of Directors. Through the discussions the Board
of Directors
has had with you during the interview process, we have been
impressed with your
substantial pharmaceutical industry experience, track record of
accomplishments,
strong business intellect, and overall leadership skills. Our
impressions have
been reinforced by the extremely positive set of reference calls
that we also
conducted. We believe you are well qualified to assume the Chief
Executive
Officer role at Altus and have every confidence that you will be
successful in
this capacity.
Commensurate with this
position, the Board is prepared to offer you an
exceptional compensation package. The position provides an
annualized base
salary of $400,000 which will be paid on a biweekly basis. In
addition to your
base salary, you will have the opportunity to earn an annual
performance bonus
of up to 50% of your earned salary based on achievement of a series
of personal
and Company objectives that the Board of Directors and you will
define annually.
For 2005, objectives will be recommended by you for the
Board’s review and
approval within thirty days after the Commencement Date (as defined
below). The
2005 performance bonus will be awarded based on achievement against
these
objectives and prorated based on the Commencement Date.
You will begin employment
as Altus’ President and Chief Executive Officer on May
9, 2005 (the “Commencement Date”), working two days per
week through May 31 in
order to accelerate your transition. During this period you will be
paid at the
rate of two-fifths of your base salary. Starting on June 1,
2005, your work
schedule will shift to full-time, and your salary will
commensurately increase.
You will also be eligible
for a $150,000 loan from the Company on the
Commencement Date. Based on your continued employment, the loan
will be forgiven
as to $75,000 on each of the first and second anniversaries of the
Commencement
Date. Should you voluntarily terminate your employment before
either
anniversary, the outstanding loan amount as of that date will be
repaid by you
to the Company. Please note that if you resign for good reason (as
defined
below), it will not be considered a voluntary termination by you of
your
employment, and you will have no repayment obligation.
<PAGE>
Mr. Sheldon Berkle
May 6, 2005
Page 2 of 16
You will also have no
repayment obligation if your employment is terminated by
Altus, except if such termination is for cause (as defined
below).
You will also be entitled
to 12 months severance at a rate equal to your
then-current base salary in the event that (1) Altus
terminates your employment
without cause or you resign for good reason, or (2) you resign
for good reason
within 6 months after a change in control (as defined below).
The Company will
also, in such circumstances, assume payments under your house and
automobile
leases in the Boston area for the 12-month severance period (or, if
shorter,
until the expiration of the respective terms of such leases), up to
an aggregate
of $25,000.
The President and Chief
Executive Officer position provides you an initial grant
of stock options exercisable for a total of 1,300,000 shares of
common stock at
an exercise price of $1.71 per share, the fair market value of
Altus’ common
stock on the Commencement Date. This is a significant equity award
and should be
viewed as a source of substantial long-term wealth creation
potential assuming
you achieve success in leading the Company. One quarter of the
options will vest
on the first anniversary of the Commencement Date. After this time,
an
additional 1/48th of the total underlying option grant will vest on
a monthly
basis, such that all the options will be vested after four years.
The options
will have a ten-year term and will be subject to customary terms
and conditions
set forth in a stock option agreement that we will provide you. In
addition to
this initial grant, the Board of Directors would also plan to make
annual stock
option grants to you based on the performance of the Company.
Your employment will be
subject to employee non-disclosure and inventions
assignment covenants, as well as non-competition and
non-solicitation covenants,
as set forth in the agreement annexed to this letter as
Appendix A.
In addition to this
compensation, you will be entitled to 5 weeks of paid
vacation annually, together with standard employee benefits which
may be changed
from time to time as the Company deems appropriate. A description
of current
benefits is set forth on Appendix B
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