Exhibit 10.3
PRAECIS PHARMACEUTICALS INCORPORATED
PROMISSORY NOTE
$1,000,000.00 DATE: MAY 16, 2002
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FOR VALUE RECEIVED, the undersigned, Xxxxxxx X. Xxxxxx (the
"Borrower"), hereby promises to pay to PRAECIS PHARMACEUTICALS INCORPORATED, a
Delaware corporation (including its successors, the "Company"), or to the legal
holder of this Promissory Note (this "Note") at the time of payment (the
Company, or such other legal holder, being sometimes referred to as the
"Holder"), in lawful money of the United States of America the principal sum of
ONE MILLION DOLLARS ($1,000,000.00), or such lesser amount as shall be
outstanding hereunder from time to time (the "Principal Sum"). No interest shall
accrue on the Principal Sum.
This Note is subject to the following further terms and conditions:
1. PAYMENT UPON MATURITY. The Principal Sum then outstanding shall
become due and payable on the tenth anniversary of the date of this Note set
forth above (such date being referred to herein as the "Loan Advancement Date"
and such tenth anniversary being referred to as the "Maturity Date"). If such
tenth anniversary of the date of this Note is a Saturday, Sunday or legal
holiday, then the Maturity Date shall be deemed to be the next succeeding
business day after such tenth anniversary. The Borrower agrees to repay on the
Maturity Date the Principal Sum outstanding on the Maturity Date.
2. ACCELERATION OF DUE DATE. Upon (i) the Borrower's voluntary
termination of employment with the Company, other than for Good Reason, or (ii)
termination by the Company of the Borrower's employment with the Company for
Cause, the Holder may at any time thereafter declare, by written notice to the
Borrower as provided in paragraph 5 hereof, the entire outstanding Principal Sum
immediately due and payable. In addition, the entire outstanding Principal Sum
shall automatically become due and payable upon the occurrence of any of the
following events: (a) the Borrower making an assignment for the benefit of
creditors or (b) any petition being filed by or against the Borrower under any
provision of any state or federal law or statute alleging that the Borrower is
unable to pay debts as they mature
or under any provision of the United States Bankruptcy Code. Upon the Principal
Sum becoming due and payable pursuant to this Section 2, the Borrower shall
immediately pay to the Holder the entire Principal Sum then outstanding.
3. LOAN FORGIVENESS. For each 12-month period that the Borrower remains
continuously employed by the Company from the Loan Advancement Date through the
tenth anniversary of such date, ten percent (10%) of the original Principal Sum
shall be forgiven and deemed for all purposes no longer to be owed or
outstanding.
4. PAYMENT AND PREPAYMENT. All payments and prepayments of the
Principal Sum shall be made to the Holder in lawful money of the United States
of America at the principal offices of the Company (or at such other place as
the Holder shall notify the Borrower in writing). The Borrower may, at his
option, prepay all or any portion of the Principal Sum in whole or in part at
any time or from time to time without penalty or premium. Upon full and final
payment, or forgiveness, of the Principal Sum, this Note shall be cancelled by
the Holder and surrendered by the Holder to the Borrower.
5. NOTICE. For the purposes of this Note, notices, demands and all
other communications provided for herein shall be in writing and shall be deemed
to have been duly given when delivered by hand (including by reputable overnight
courier) or seven (7) business days after being mailed by United States
certified or registered mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Borrower:
Xxxxxxx X. Xxxxxx
00 Xxxxxxxxxxx Xxxxx
Xxxxxxxxxxxxx, Xxx Xxxxxx 00000
If to the Company:
PRAECIS PHARMACEUTICALS INCORPORATED
000 Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxxx X. XxXxxxxxxx
or to such other address as the Borrower or the Holder shall have furnished to
the other in writing in accordance herewith, except that notices of change of
address shall be effective only upon receipt.
6. WAIVER OF JURY TRIAL. THE HOLDER (BY ACCEPTANCE HEREOF) AND THE
BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHTS THEY MAY HAVE
TO A JURY TRIAL IN ANY AND ALL DISPUTES BETWEEN THE HOLDER AND THE BORROWER
HEREUNDER.
7. MISCELLANEOUS.
(a) If the Borrower fails to pay the Principal Sum in full when due
(whether at the Maturity Date or upon acceleration pursuant to Section 2), the
Holder may, at its option, at any time and in any order, exercise any and all
rights and remedies available at law or in equity. The Borrower hereby agrees to
pay in full upon demand all reasonable attorney's fees (whether or not legal
action is instituted) and costs of suit incurred by the Holder in connection
with collection of or enforcement of its rights under this Note. All rights and
remedies shall be cumulative and may be exercised by the Holder in such order as
the Holder may determine.
(b) No delay or failure by the Holder in the exercise of any right
or remedy hereunder shall constitute a waiver thereof, and no single or partial
exercise by the Holder of any right or remedy hereunder shall preclude any other
or future exercise thereof or the exercise of any other right or remedy. The
waiver by the Holder of a breach or default by the Borrower hereunder shall not
operate or be construed as a waiver of any subsequent breach or default
hereunder.
(c) The Borrower hereby waives protest, demand, notice of nonpayment
and all other notices in connection with the delivery, acceptance, payment or
enforcement of this Note. Time is of the essence in respect of the provisions of
this Note.
(d) The provisions of this Note are severable and the invalidity or
unenforceability of any provision shall not alter or impair the remaining
provisions of this Note.
(e) No modification of this Note shall be binding upon or
enforceable against the Holder unless agreed to in writing by the Holder.
(f) No provision hereof shall confer upon the Borrower the right to
continue in the employment of the Company, any of its affiliates or any of their
respective successors or affect any rights which the Company or any of its
affiliates or successors may have to terminate the employment of the Borrower.
(g) The provisions of this Note shall be governed by and construed
in accordance with substantive laws of the State of Delaware.
(h) This Note shall be binding upon and enforceable against the
Borrower and his heirs, executor(s) and personal representatives, and shall
inure to the benefit of and be enforceable by the Company and any other Holder.
This Note may not be assigned or transferred by the Borrower, but may be
assigned or transferred by the Company.
(i) Capitalized terms used but not defined in this Note shall have
the respective meanings ascribed thereto in the letter agreement dated April 24,
2002 (executed by the Borrower on May 9, 2002) between the Borrower and PRAECIS
PHARMACEUTICALS INCORPORATED, an executed copy of which is attached to this Note
as Exhibit A.
IN WITNESS WHEREOF, this Note has been duly executed and delivered to
the Company by the Borrower on the date first above written.
BORROWER
/s/ XXXXXXX X. XXXXXX
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Xxxxxxx X. Xxxxxx
EXHIBIT A
April 24, 2002
Xx. Xxxxxxx X. Xxxxxx
00 Xxxxxxxxxxx Xxxxx
Xxxxxxxxxxxxx, Xxx Xxxxxx 00000
Dear Xxxx:
We are pleased to confirm our offer for the position of President and Chief
Operating Officer of PRAECIS PHARMACEUTICALS INCORPORATED ("PRAECIS" or the
"Company"), reporting to me. We are looking forward to having you join our
management team.
BASE PAY - Your annual base salary will be $350,000, paid in 26 increments in
the amount of $13,461.54 per pay period.
MANAGEMENT BONUS - You will be eligible to participate in the Company's
Executive Management Bonus Plan (the "Bonus Plan"). The targeted value of your
bonus award will be 40% of your annual base salary. Your actual bonus will be
based upon the attainment of performance related objectives established annually
and approved by the Board of Directors. Awards under the Bonus Plan are in the
form of cash and fully vested stock options as determined in accordance with the
terms of the Bonus Plan. A copy of the Bonus Plan is enclosed for your
reference.
STOCK OPTIONS - The Chairman of the Board will recommend to the Board of
Directors an award of stock options to purchase 600,000 shares of PRAECIS common
stock ("Common Stock"), at a per-share exercise price equal to the fair market
value of the Common Stock on the date the stock options are granted, and in
accordance with the terms of the Company's Second Amended and Restated 1995
Stock Plan (as it may be amended from time to time, the "Stock Plan"). A copy of
the Stock Plan is enclosed for your reference. These stock options will vest and
become exercisable over a period of five years as follows: 20% of the total
grant shall vest and become exercisable on the first anniversary of your date of
hire; and 1.67% of the total grant will vest and become exercisable monthly
thereafter for the subsequent 48 month-period, provided that you remain an
employee of the Company at such times. Notwithstanding the foregoing, these
stock options, and any additional stock options granted to you under the Stock
Plan, shall automatically become fully vested and exercisable immediately upon
the occurrence of a Change of Control (as defined below), if at such time you
are employed by the Company.
The stock option agreement(s) between you and the Company with respect to these
options, and any additional stock options granted to you under the Stock Plan,
will be in the Company's standard form, except that such stock options
agreement(s) will provide for automatic acceleration of vesting and
exercisability as set forth in the immediately preceding sentence, and will also
provide that immediately upon a Change of Control, the section of each such
stock option agreement captioned "No Exercise of Option if Employment Terminated
for Misconduct" shall automatically cease to be of any force or effect and,
accordingly, no termination of your employment with the Company upon or after a
Change of Control will be, or will be deemed to be, a termination for
"Misconduct" for purposes of such stock option agreement(s).
LOAN - You will be granted an interest free loan in the amount of $1,000,000,
effective and paid on your first day of employment with the Company or as soon
as practicable thereafter. The loan will carry a term of ten years and will be
forgiven at the end of each twelve-month period in the amount of 10% of the face
value, subject to your continued employment on such dates. Each year, the amount
forgiven under the loan shall be reported to the Internal Revenue Service
("IRS") as income to you. In addition, during the term of the loan, the IRS will
assess imputed interest on the outstanding loan balance each year. The Company
is also required to report the amount of such imputed interest as income to you.
In the event that within the ten-year period, you voluntarily terminate your
employment with the Company, other than for Good Reason (as defined below), or
you are terminated by the Company for Cause (as defined below), the amount of
the loan not forgiven as of the effective date of such termination will become
immediately due and payable to PRAECIS. You hereby authorize PRAECIS to deduct
all (or a portion) of the outstanding balance of the loan from any moneys
PRAECIS owes you (including your final paycheck). You understand that you must
repay to PRAECIS any balance remaining after such deduction is made. The loan
will be evidenced by a Promissory Note which will be executed and delivered by
you at the time the loan is made.
ANNUAL STOCK OPTIONS - You will be eligible to receive an additional award of
stock options each year under the Stock Plan. The Chairman of the Board will
recommend to the Board of Directors a target award of stock options to purchase
shares of Common Stock each year. The actual award will be determined by the
Board of Directors based upon your performance.
FUTURE STOCK OPTION GRANT - When and if you are elected to the position of Chief
Executive Officer of the Company, the Chairman of the Board will recommend to
the Board of Directors a one-time additional award of stock options to purchase
shares of Common Stock. The actual award will be determined by the Board of
Directors based upon your performance.
CHANGE OF CONTROL SEVERANCE BENEFITS - If a Change of Control occurs and your
employment with the Company is terminated upon, or within a one-year period
following, the effective date of such Change of Control by (i) the Company,
other than for Cause (as defined below), or (ii) you for Good Reason, you shall
be entitled to a lump sum payment equal to either (A) your annual salary for the
year in which such Change of Control occurs, plus the full amount of your target
award under the Bonus Plan for that year, if such termination occurs during the
first twelve months of your employment with the Company, or (B) two times the
sum of (x) your annual salary for the year in which such Change of Control
occurs and (y) the full amount of your target award under the Bonus Plan for
that year, if such termination occurs at any time after the first anniversary of
your employment with the Company. In addition, in the event of such termination,
then for a period of either (i) one year following the effective date of such
termination, if such termination occurs during the first twelve months of your
employment with the Company, or (ii) two years following the effective date of
such termination, if such termination occurs at any time after the first
anniversary of your commencement of employment with the Company, the Company
shall at its sole cost and expense maintain in full force and effect for your
benefit (and the benefit of your spouse and children, if applicable) the
long-term disability and medical and dental insurance coverage maintained by the
Company and as in effect immediately prior to the Change of Control or, if more
favorable to you (and your spouse and children, if applicable), as in effect
immediately prior to the occurrence of the first event or circumstance
constituting Good Reason; provided that if the general terms and conditions of
such insurance do not permit the continued coverage of you (and of your spouse
and children, if applicable) as provided above, the Company shall, provide or
arrange to provide you (and your spouse and children, if applicable) for the
applicable period as provided above, at its sole cost and expense, with such
insurance coverage having benefits substantially similar (with no reduction in
benefits) to those which you (and you spouse and children, if applicable) would
otherwise have been entitled had the continued coverage of you (and of your
spouse and children, if applicable) as provided above been permitted under the
general terms and conditions of such insurance.
WITHHOLDING - The Company may withhold from any amounts payable hereunder such
federal, state, local or foreign taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
PARACHUTE TAX TREATMENT - In the event that any payment or benefit you receive
from the Company or an affiliate (collectively, the "Payments") would be subject
to
the excise tax (the "Excise Tax") imposed on "excess parachute payments"
pursuant to Section 4999 of the Internal Revenue Code of 1986, as amended, then
the Payments shall be reduced to the extent necessary so that no portion of the
Payments is subject to the Excise Tax, provided that such reduction shall occur
only if (A) the net amount of such Payments, as so reduced (and after
subtracting the net amount of federal, state and local income taxes on such
reduced Payments) is greater than (B) the net amount of such Payments without
such reduction (but after subtracting the net amount of federal, state and local
income taxes on such Payments and the amount of Excise Tax to which you would be
subject in respect of such unreduced Payments). Determinations with respect to
the preceding sentence shall be made by the Company's auditors which were
serving as such prior to the Change of Control, in consultation with tax counsel
selected by the Company.
CERTAIN DEFINITIONS - For the purposes of this agreement:
A "Change of Control" shall occur if:
(i) any individual, entity or "person" (within the meaning of Section 13(d)(3)
or Section 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), other than the Company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, or any corporation
owned directly or indirectly by the stockholders of Company in substantially the
same proportion as their ownership of stock of the Company, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing more than 50% of the
combined voting power of the Company's then outstanding securities entitled to
vote generally for the election of directors;
(ii) individuals who, as of the date hereof, constitute the Company's Board of
Directors (as of the date hereof, the "Incumbent Board") cease for any reason to
constitute a majority of the Company's Board of Directors, provided that any
person becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company's stockholders, was approved by a vote of
at least a majority of the directors then comprising the Incumbent Board (other
than an election or nomination of an individual whose initial assumption of
office is in connection with an actual or threatened election contest relating
to the election of the directors of the Company, as such terms are used in Rule
14a-11 of Regulation 14A under the Exchange Act) shall be, for purposes of this
agreement, considered as though such person were a member of the Incumbent
Board;
(iii) the stockholders of the Company approve a merger or consolidation of the
Company or any direct or indirect subsidiary of the Company with any other
entity
or entities (whether or not the Company would be the surviving corporation),
other than a merger or consolidation which would result in the voting securities
of the Company outstanding immediately prior to such merger or consolidation
representing (either by remaining outstanding or by being converted into or
exchanged for voting securities of the surviving entity or any parent thereof),
immediately after such merger or consolidation, more than 50% of the combined
voting power of the voting securities of such surviving entity or any parent
thereof entitled to vote generally for the election of directors; or
(iv) the stockholders of the Company approve a plan of complete liquidation of
the Company or an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets.
"Cause" shall mean: (i) your substantial and continuing willful failure to
perform your assigned duties (other than any such failure resulting from
incapacity due to injury or physical or mental illness), which failure is not
cured within 30 days after a written demand for substantial performance is
delivered to you by the Company at the direction of the Company's Board of
Directors which specifically identifies the manner in which you have not
substantially performed your assigned duties, and provided you have had a
reasonable opportunity, after receipt of such written demand, to be heard (and
to be represented by counsel) at a meeting of the Company's Board of Directors,
or (ii) (A) your conviction of a felony (other than unintentional motor vehicle
felonies) or (B) your engaging in gross misconduct which is materially and
demonstrably injurious to the Company, provided (in the case of this clause (B))
you have received written notice from the Company at the direction of the Board
of Directors specifically identifying the acts or omissions constituting such
gross misconduct and you have had a reasonable opportunity, after receipt of
such notice, to be heard (and to be represented by counsel) at a meeting of the
Company's Board of Directors. For purposes of this definition, no act or failure
to act shall be considered "willful" unless it is done, or omitted to be done,
in bad faith or without reasonable belief that the action or omission was in the
best interests of the Company.
"Good Reason" shall mean: (i) any adverse and material alteration or diminution
in your position, title or responsibilities as contemplated by this letter
agreement, if the Company does not remedy such alteration or diminution within
30 days following notice from you; (ii) any material reduction of your annual
base salary or targeted bonus opportunity, in each case as then in effect; or
(iii) following your relocation to the greater Boston area, any relocation of
the Company's offices at which you are employed which increases your daily
commute by more than 50 miles on a round trip basis.
RELOCATION - Upon written acceptance of this offer, the Company will be happy to
assist in defraying your reasonable relocation expenses. This will include
moving your personal and household effects to your permanent residence in the
Boston area, and selling your current home in New Jersey.
In addition, PRAECIS will pay reasonable costs associated with two house-hunting
trips to the Boston area for you and members of your immediate family. If
necessary, PRAECIS will also pay for reasonable interim housing rental for you
to help facilitate your transfer to the Boston area and the reasonable costs for
you to travel to and from New Jersey prior to your family relocating to the
Boston area.
Relocation allowances are subject to U.S. Federal Income Tax in accordance with
federal statutes. The Company will provide a tax gross-up payment for those
allowances that are taxable.
If you have any questions regarding your relocation benefits please do not
hesitate to call Xxxx Xxxxxxxx, Vice President, Human Resources, at (781)
795-4306.
In the event that you voluntarily terminate your employment with PRAECIS within
one year from your date of hire, you must refund to the Company, on or before
your last day of employment, all payments made to you or on your behalf by the
Company in connection with your relocation. You hereby authorize the Company to
deduct all relocation moneys you owe to the Company from any moneys the Company
owes you (including your final paycheck). You understand that you must repay to
PRAECIS any balance remaining after that deduction is made.
BENEFITS -- PRAECIS maintains a comprehensive employee benefits program in which
you will be eligible to participate. These benefits include: health, dental,
prescription, vision, life and long-term disability insurance; three weeks of
vacation per year (accrued at a rate of 1.25 days per month); twelve
statutory/Company designated holidays each year; and the ability to participate
in the Company's 401(k) Plan and Employee Stock Purchase Plan.
CONTINGENCIES -- this offer is contingent upon the successful completion of:
o Execution of Proprietary Information and Inventions Agreement
and Conflict of Interest Policy, both of which are enclosed
herewith (to be signed and returned with this signed offer
letter).
o Proof of employment eligibility to be provided within three
days of employment. Enclosed is an Employment Eligibility
Verification Form (1-9). Please read the form carefully and
bring it and any necessary documentation with you on your
first day of employment.
LEGAL FEES -- If a Change of Control has occurred, the Company shall pay to you
or as you direct all legal fees and expenses incurred by you or on your behalf
in seeking in good faith to obtain or enforce any benefit or right provided by
this agreement or in connection with any tax audit or proceeding to the extent
attributable to the application of section 4999 of the Code to any payment or
benefit provided hereunder. Such payments shall be made within five (5) business
days after your delivery to the Company of written request for payment
accompanied by invoices reflecting such fees and expenses incurred as to which
payment is being requested. You shall be entitled to seek specific performance
of your rights under this paragraph during the pendency of any dispute or
controversy arising under or in connection with this agreement, and in such
event the Company will not assert that there is an adequate remedy at law.
SUCCESSORS -- This agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns (whether direct or indirect, by
purchase, merger, consolidation or otherwise). The Company will require any
assignee(s) or transferee(s) of all or substantially all of assets of the
Company to assume expressly and agree to perform this agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such assignment or transfer had taken place. As used in this agreement,
"Company" shall mean the Company as hereinbefore defined and its successors and
assigns as aforesaid. This agreement is personal to you and without the prior
written consent of the Company shall not be assignable by you except by will or
the laws of descent and distribution. This agreement shall inure to the benefit
of and be enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If you
should die while any amount would still be payable to you hereunder if you had
continued to live, all such amounts shall be paid in accordance with the terms
of this agreement to your devisee, legatee or other designee or legal
representative.
MISCELLANEOUS -- This agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, without reference to principles of
conflict of laws. The captions of this agreement are not part of the provisions
hereof and shall have no force or effect. This agreement may not be amended or
modified otherwise than by a written agreement executed by the parties hereto or
their respective successors or assigns or, in your case, legal
representative(s). No delay or omission by a party in exercising any right under
this agreement shall operate as a waiver of that of any other right. A waiver or
consent given by a party on any one occasion shall be effective only in that
instance and shall not be construed as a bar or waiver of any right on any other
occasion. In case any provision of this agreement shall be invalid, illegal or
otherwise unenforceable, the validity, legality and enforceability of the
remaining provisions shall in no way be affected or impaired
thereby. The captions of the sections of this agreement are for convenience of
reference only and in no way define, limit or affect the scope or substance of
any section of this agreement. This agreement may be executed in counterparts,
each of which when executed shall be deemed to be an original but which taken
together shall constitute one and the same agreement.
By signing this agreement, you understand that your employment with PRAECIS is
at-will. Therefore, your employment can terminate, with or without cause, and
with or without notice, at any time, at your option or the Company's option, and
the Company can terminate or change all other terms and conditions of your
employment, with or without cause, and with or without notice, at any time;
provided that this sentence is not intended to, and shall not, limit or impair
in any manner your rights and the Company's obligations hereunder or under any
other written agreement between you and the Company.
We look forward to your joining PRAECIS and are confident that you will
contribute positively to our growth.
Sincerely yours,
PRAECIS PHARMACEUTICALS INCORPORATED
By: /s/ XXXXXXX X. XXXXXX
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Xxxxxxx X. Xxxxxx, Ph.D.
Chairman of the Board, Chief Executive
Officer and President
Your signature below indicates that you have read, understand and agree to the
terms and conditions of this agreement. Please retain a copy of this document
for your files and return the executed original to the attention of Xxxx
Xxxxxxxx, Vice President, Human Resources.
Agreed and Accepted by:
/s/ XXXXXXX X. XXXXXX
--------------------------
Xxxxxxx X. Xxxxxx
Date: MAY 9, 2002
---------------------
Employment Start Date: MAY 9, 2002
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Enclosures
