Exhibit 10.1

 

Genome Therapeutics Corp.

 

March 12, 2003

 

By hand delivery

 

Mr. Robert J. Hennessey

503 Sable Court

Cheshire, Connecticut 06410

 

Dear Robert:

 

The purpose of this letter (the “Agreement”) is to confirm the agreement between
you and Genome Therapeutics Corp. (the “Company”) concerning your retirement as
an employee of the Company, as follows:

 

1.    Effective Date of Retirement. Your employment with the Company will
terminate effective as of April 1, 2003 (the “Retirement Date”). As part of this
Agreement, the Company’s Board of Directors invites you to stand for election as
a director at the Company’s Annual Meeting to be held in May 2003 and to receive
the same compensation for your services as other non-employee board members. You
also hereby agree to resign as the Company’s Chairman of its Board of Directors
at the Company’s Annual Meeting of Stockholders to be held in May 2003, or
earlier if requested to do so by the Company’s Board of Directors, and to
participate in the election of a successor Chairman.

 

2.    Final Salary and Vacation Pay and Resignations. You acknowledge that, upon
receipt of $10,000.52 on or prior to April 1, 2003, you will have received pay
for all work you performed for the Company, to the extent not previously paid,
as well as pay, at your final base rate of pay, for any vacation days you had
earned, but not used, as of the Retirement Date determined in accordance with
Company policy and as reflected on the books of the Company.

 

3.    Modifications to Options. Your option to purchase 630,000 shares of the
Company’s common stock for an exercise price of $1.625 per share (the
“Outstanding 1993

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Option”) currently expires on March 15, 2003. The Company hereby agrees to
extend the period in which you may exercise your Outstanding 1993 Option as
follows:

 

Number of Shares

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Expiration Date

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157,500

 

September 30, 2003

78,750

 

December 31, 2003

78,750

 

March 31, 2004

78,750

 

June 30, 2004

78,750

 

September 30, 2004

78,750

 

December 31, 2004

78,750

 

March 15, 2005

Total: 630,000

   

 

Upon exercise of any part of the Outstanding 1993 Option, the number of shares
purchased pursuant to such exercise shall be deemed to be shares from the
earliest period set forth in the above table for which shares remain available
and exercisable.

 

You and the Company also agree that you may not pay the exercise price on any
part of your Outstanding 1993 Option or any part of your stock option
exercisable for 300,000 shares of the Company’s common stock at an exercise
price of $8.87 per share by surrendering options to the Company for cancellation
and receiving credit against the exercise price for the difference between the
exercise price of the option surrendered and the per share closing price of the
shares of common stock subject to the surrendered option; provided, that to the
extent permitted by law, you may exercise your options through “broker’s
exercise” transactions with a third-party broker-dealer.

 

4.    Other Benefits. If you were enrolled in the Company’s medical and dental
plans on the Retirement Date, you may elect to continue your participation and
that of your eligible dependents in those plans for a period of time under the
federal law known as “COBRA.”

 

5.    Withholding. All payments made by the Company under this Agreement shall
be reduced by any tax or other amounts required to be withheld by the Company
under applicable law and all other deductions authorized by you.

 

6.    Acknowledgement of Full Payment. You acknowledge and agree that the
payments provided for under paragraph 2 of this Agreement and the other
consideration to which you are entitled under this Agreement are in complete
satisfaction of any and all compensation due to you from the Company, whether
for services provided to the Company, severance payments or otherwise, and that,
except as expressly provided under this Agreement, no further compensation is
owed to you. For the avoidance of doubt, you acknowledge and agree that you are
owed no benefits, payments or other compensation pursuant to the terms of your
employment agreement with the Company dated May 9, 2001 (the “Employment
Agreement”). You shall be

 

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entitled to earn future compensation as a member of the Company’s board of
directors.

 

7.    Status of Employee Benefits, Paid Time Off and Stock Options. Except as
otherwise expressly provided in paragraph 4 of this Agreement, your
participation in all employee benefit plans of the Company will end as of the
Retirement Date, in accordance with the terms of those plans. You will not
continue to earn vacation or other paid time off after the Retirement Date. Your
rights and obligations with respect to any stock options granted to you by the
Company which had vested as of the Retirement Date shall be governed by the
applicable stock option plan and any agreements or other requirements applicable
to those options, as modified by this Agreement.

 

8.    Miscellaneous.

 

(a)    This Agreement constitutes the entire agreement between you and the
Company and supersedes all prior and contemporaneous communications, agreements
and understandings, whether written or oral, with respect to your employment,
its termination and all related matters, excluding only (i) Section 2(c) of your
Employment Agreement, solely to the extent not inconsistent with the terms of
this Agreement and expressly excluding the last sentence of such Section and
(ii) Section 3 of your Employment Agreement, all of which shall remain in full
force and effect in accordance with their terms.

 

(b)    This Agreement may not be modified or amended, and no breach shall be
deemed to be waived, unless agreed to in writing by you and the Chief Executive
Officer of the Company or his expressly authorized designee. The captions and
headings in this Agreement are for convenience only and in no way define or
describe the scope or content of any provision of this Agreement.

 

(c)    The obligation of the Company to make payments to you or on your behalf
under this Agreement is expressly conditioned upon your continued full
performance of your obligations under this Agreement and under the Employment
Agreement.

 

If the terms of this Agreement are acceptable to you, please sign, date and
return it to me by March 15, 2003. Upon your execution of this Agreement, it
will take effect as a legally-

 

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binding agreement between you and the Company on the basis set forth above. The
enclosed copy of this Agreement, which you should also sign and date, is for
your records.

 

Sincerely,

 

GENOME THERAPEUTICS CORP.

 

By: /s/ Norbert Riedel                            

      Chairman of the Compensation Committee

 

Accepted and agreed:

 

Signature: /s/ Robert Hennessey            

                 Robert J. Hennessey

 

Date: March 14, 2003

 

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