This AGREEMENT
(the “Agreement”) is made as of April 6, 2009 (the
“Effective Date”), by and between EPIX Pharmaceuticals,
Inc. (the “Employer” or the “Company”), and
Elkan Gamzu, Ph.D. (the “Executive”). In consideration
of the mutual covenants contained in this Agreement, the Employer
and the Executive agree as follows:
1.
Employment . The Employer agrees to employ the Executive and
the Executive agrees to be employed by the Employer on the terms
and conditions set forth in this Agreement.
2.
Capacity . The Executive shall serve the Employer as Chief
Executive Officer (“CEO”). As CEO, the Executive shall
have authority and responsibility for the general control and
supervision of the Employer’s business and, subject to the
determination of the Employer’s Board of Directors (the
“Board of Directors”), shall constitute an officer
position pursuant to Section 16 of the Securities Exchange Act
of 1934, as amended. The Executive shall work at the
Employer’s Lexington, Massachusetts office.
3.
Term . Subject to the provisions of Section 6, the
Executive’s employment is “at will” and may be
terminated by either the Employer or Executive for any reason, or
for no reason, at any time.
4.
Compensation and Benefits . The regular compensation and
benefits payable to the Executive under this Agreement shall be as
follows:
(a)
Salary . Beginning on the Effective Date, the Employer shall
pay the Executive a salary at the annual rate of $162,500 for all
services rendered by the Executive under this Agreement (the
“Initial Salary”). The Employer shall continue to pay
the Executive the Initial Salary through the date the Executive
notifies the Employer that he desires to receive an increase in his
annual base salary rate (the “Notification Date”).
Within one month of the Notification Date, the Employer shall begin
to pay the Executive a salary for all services rendered by the
Executive under this Agreement at the annual rate of $325,000 (the
“Post-Notification Salary”), subject to increase from
time to time in the discretion of the Board of Directors or the
Compensation Committee of the Board of Directors (the
“Compensation Committee”). The Executive’s annual
base salary in effect at any given time is referred to herein as
“Base Salary.” The Base Salary shall be payable in
periodic installments in accordance with the Employer’s usual
practice for its senior executives, but not less frequently than
once every two weeks.
(b)
Annual Bonus . Beginning with the fiscal year ending
December 31, 2009, the Executive shall be eligible for an
annual bonus upon the Company meeting its annual goals, under terms
established by the Board of Directors or the Compensation Committee
with such terms as may be established in the sole discretion of the
Board of Directors or Compensation Committee. Bonus payments for
each fiscal year, as approved by the Board of Directors or
Compensation Committee, shall be paid between January 1 and
March 15 of the following fiscal year. The Executive’s
target annual bonus will be 50% of the higher of his Base Salary or
the Post-Notification Salary.
(c)
Special Bonus . Upon the consummation by the Company of a
“Restructuring and Financing Event” (as defined below),
or any “COC Event” (as defined below), the Executive
shall be eligible for a special bonus of $100,000, less any
required deductions or withholdings. For purposes of this
Agreement, a Restructuring and Financing Event means that each of
the following occur: (a) the monetization by the Company of
its rights to Vasovist resulting in gross proceeds of at least
$25 million; (b) the elimination of at least 85% of the
Company’s outstanding 3% Convertible Senior Notes due 2024
through a restructuring, exchange for cash and/or common stock of
the Company, or similar transaction approved by the Board of
Directors; and (c) the consummation of one or more sales of
debt, equity, or equity-linked securities of the Company or
committed funds from one or more newly executed collaborations or
licensing agreements resulting in aggregate cash proceeds to the
Company of at least $20 million. For purposes of this
Agreement, COC Event means any of the following: (a) any
consolidation or merger of the Company in which the Company is not
a continuing or surviving corporation or pursuant to which shares
of the Company would be converted into cash, securities, or other
property, other than a consolidation or merger of the Company in
which the holders of shares immediately prior to the consolidation
or merger maintain voting control of the resulting entity
immediately after the consolidation or merger; (b) any sale,
lease, exchange or other transfer (in one transaction or a series
of related transactions) of all or substantially all the assets of
the Company; or (c) any transaction or series of transactions,
including in the event of an investment in the Company, following
which a person or a group of persons acting together shall obtain a
“controlling interest” (which shall mean the direct or
indirect ownership of more than 50% of the outstanding voting
shares or other ownership interest of the Company, or the power to
elect or appoint more than 50% of the members of the
Company’s board of directors).
(d)
Stock Options . In consideration of the covenants contained
in this Agreement, the Executive is eligible to receive a long-term
incentive award of 400,000 shares of the Company’s common
stock in the form of stock options (the “Options”). It
is intended that the Options constitute incentive stock options
within the meaning of Section 422 of the Internal Revenue Code
of 1986, as amended, (the “Code”) to the extent
permitted under IRC Regulation 1.422-4. To the extent the
$100,000 annual limitation set forth in such regulation is
exceeded, the Options shall be non-qualified. The stock option
grant will vest over four years, with 25% vesting on the date that
is three months after the date of grant (the “Cliff Vesting
Amount”) and the remainder vesting in equal quarterly
installments on the two year, three year, and four year anniversary
of the date of grant (the “Quarterly Vesting Amount”).
The Cliff Vesting Amount is subject to acceleration such that
100,000 shares shall be vested upon (i) the monetization by
the Company of its rights to Vasovist resulting in gross proceeds
of at least $25 million, and (ii) the elimination of at
least 85% of the Company’s outstanding 3% Convertible Senior
Notes due 2024 through a restructuring, exchange for cash and/or
common stock of the Company, or similar transaction approved by the
Board of Directors (clause (i) and (ii) collectively
referred to as the “Restructuring”). In addition, the
Quarterly Vesting Amount is subject to acceleration under the
following circumstance: following the Restructuring, 50% of the
Quarterly Vesting Amount scheduled to vest will accelerate, such
that 150,000 shares of the Quarterly Vesting Amount, to the extent
not already vested, shall be vested, upon the consummation of one
or more sales of debt, equity, or equity-linked securities of the
Company or committed funds from one or more newly executed
collaborations or licensing agreements resulting in aggregate cash
proceeds to the Company of at least $20 million. Also, upon
termination of the Executive’s employment without Cause (as
set forth in Section 6(c) below) no more than eighteen
(18) months following
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the date of the
consummation of a COC Event or upon the Executive’s
termination of his employment with Good Reason (as set forth in
Section 6(b) below) no more than eighteen (18) months
following the date of the consummation of a COC Event, the Cliff
Vesting Amount and the Quarterly Vesting Amount are subject to
acceleration such that the Cliff Vesting Amount and the Quarterly
Vesting Amount shall be vested in their entirety to the extent not
already vested. The Board of Directors reserves the right to
provide Executive with future long-term incentive awards in its
sole discretion. The stock option grant and any other grant shall
be subject to the Employer’s Stock Option Plan and any
relevant grant agreement.
(e)
Regular Benefits . The Executive shall also be entitled to
participate in any employee benefit plans, medical insurance plans,
life insurance plans, disability income plans, retirement plans,
expense reimbursement plans and other benefit plans which the
Employer may from time to time have in effect for all or most of
its senior executives. Such participation shall be subject to the
terms of the applicable plan documents, generally applicable
policies of the Employer, applicable law and the discretion of the
Board of Directors, the Compensation Committee or any
administrative or other committee provided for in or contemplated
by any such plan. Nothing contained in this Agreement shall be
construed to create any obligation on the part of the Employer to
establish any such plan or to maintain the effectiveness of any
such plan which may be in effect from time to time.
(f)
Taxation of Payments and Benefits . The Employer shall
undertake to make deductions, withholdings and tax reports with
respect to payments and benefits under this Agreement to the extent
that it reasonably and in good faith believes that it is required
to make such deductions, withholdings and tax reports. Payments
under this Agreement shall be in amounts net of any such deductions
or withholdings. Nothing in this Agreement shall be construed to
require the Employer to make any payments to compensate the
Executive for any adverse tax effect associated with any payments
or benefits or for any deduction or withholding from any payment or
benefit.
5. Extent
of Service . During the Executive’s employment under this
Agreement, the Executive shall, subject to the direction and
supervision of the Board of Directors, devote the Executive’s
full business time, best business judgment, skill and knowledge to
the advancement of the Employer’s interests and to the
discharge of the Executive’s duties and responsibilities
under this Agreement. Nothing herein shall limit the
Executive’s rights to provide services in a non-operative
role and/or to serve in a non-operative role on the board of
directors of other corporations, provided that the Executive
receives approval in advance, in writing, by the Board of
Directors, whose approval shall not be unreasonably withheld.
Nothing in this Agreement shall be construed as preventing the
Executive from:
(a) investing
the Executive’s assets in any company or other entity in a
manner not prohibited by Section 7(d) of this Agreement and in such
form or manner as shall not require any material activities on the
Executive’s part in connection with the operations or affairs
of the companies or other entities in which such investments are
made;
(b) engaging
in religious, charitable or other community or non-profit
activities that do not impair the Executive’s ability to
fulfill the Executive’s duties and responsibilities under
this Agreement; or
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(c) serving
on the board of directors of any companies for which Executive
receives approval in advance, in writing, by the Board of
Directors.
6.
Termination and Termination Benefits . The Executive’s
employment under this Agreement shall terminate under the following
circumstances set forth in this Section 6.
(a)
Termination by the Employer for Cause . The
Executive’s employment under this Agreement may be terminated
for Cause without further liability on the part of the Employer
effective immediately upon a vote of the Board of Directors and
written notice to the Executive. Only the following shall
constitute “Cause” for such termination:
(i)
willful misappropriation of the funds or property of the
Employer;
(ii)
the conviction for, the admission or confession to, or the plea of
“guilty” or “no contest” to (A) a
felony or (B) any crime involving moral turpitude, deceit,
dishonesty, or fraud;
(iii)
willful and material failure (other than by reason of the
Executive’s physical or mental illness, incapacity or
disability) to perform to the reasonable satisfaction of the Board
of Directors a substantial portion of the Executive’s duties
and responsibilities assigned or delegated under this Agreement,
which failure continues, in the reasonable judgment of the Board of
Directors, for at least thirty (30) days after written notice
of the scope and nature of such failure given to the Executive by
the Board of Directors;
(iv)
gross negligence or willful misconduct of the Executive with
respect to the performance of duties assigned by the Employer that
has an effect that is materially adverse to the business assets
(including intangible assets), liabilities, financial condition,
property, or results of operations of the Employer; or
(v)
material breach by the Executive of any of the Executive’s
obligations under Section 7 of this Agreement.
(b)
Termination by the Executive . The Executive’s
employment under this Agreement may be terminated by the Executive
without “Good Reason” (as defined below) by written
notice to the Board of Directors at least sixty (60) days
prior to such termination. For the purposes of this Agreement, Good
Reason shall mean (i) any reduction in the higher of
Executive’s Base Salary or the Post-Notification Salary;
(ii) the relocation of the Executive’s primary place of
employment to a location more than 100 miles from Lexington,
Massachusetts; (iii) any failure by the Employer to pay the
Executive his compensation or provide him his benefits, as set
forth herein, which is not cured within ten (10) days after
the receipt of written notice by the Employer of a description of
the breach; or (iv) a COC Event. The Executive’s
employment under this Agreement may be terminated by the Executive
with Good Reason at any time following the occurrence of events
(i) through (iv) as set forth above. For the purposes of this
Agreement, Good Reason shall also mean (v) a material
reduction of the Executive’s responsibilities, duties or
authority. The Executive’s employment under this Agreement
may be terminated by the Executive with Good Reason following the
occurrence of event (v) as set forth above only upon
compliance with the “Good Reason Process” (hereinafter
defined). Good
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Reason Process
shall mean that (1) the Executive reasonably determines in
good faith that his responsibilities, duties, or authority have
been materially reduced (a “Material Reduction”); (2)
the Executive notifies the Employer in writing of a Material
Reduction within 60 days of the occurrence of such condition;
(3) the Executive cooperates in good faith with the
Employer’s efforts, for a period not less than 30 days
following such notice (the “Cure Period”), to remedy
the Material Reduction; (4) notwithstanding such efforts, the
Material Reduction continues to exist; and (5) the Executive
terminates his employment within 60 days after the end of the
Cure Period. If the Employer cures the Material Reduction condition
during the Cure Period, the Executive’s termination of his
employment on the basis of that condition shall be considered a
termination without Good Reason.
(c)
Termination by the Employer Without Cause . Subject to the
payment of Termination Benefits pursuant to Section 6(d), the
Executive’s employment under this Agreement may be terminated
by the Employer without Cause upon 60 days’ written
notice to the Executive. The Executive’s employment shall not
be considered to be terminated without Cause if the
Executive’s employment terminates by reason of death or
disability pursuant to Section 6(e).
(d)
Certain Termination Benefits . Unless otherwise specifically
provided in this Agreement or otherwise required by law, all
compensation and benefits payable to the Executive under this
Agreement shall terminate on the date of termination of the
Executive’s employment under this Agreement. If the
Executive’s employment with the Company is terminated for any
reason, the Company shall pay or provide to the Executive any
earned but unpaid salary and any unpaid expense reimbursement on or
before the time required by law but in no event more than thirty
(30) days after the date of the Executive’s termination.
Notwithstanding the foregoing, in the event of termination of the
Executive’s employment with the Employer pursuant to Section
6(c) above or termination by the Executive with Good Reason
pursuant to Section 6(b) above, the Employer shall provide to the
Executive the following termination benefits (“Termination
Benefits”), provided that the Executive executes (and does
not revoke) a general release of claims (the &ldq
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