EX-10.2






Exhibit 10.2




SEVERANCE AND CHANGE IN CONTROL AGREEMENT




This Agreement (the “Agreement”) is entered into as of the 2nd day of June, 2008 by and
between Altus Pharmaceuticals Inc., a Delaware corporation (the “Company”), and Georges
Gemayel, Ph.D. (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 mean: (i) Executive’s failure to follow the
reasonable instructions of the Board or otherwise perform Executive’s duties hereunder for thirty
(30) days after a written demand for performance is delivered to Executive on behalf of the
Company, which demand specifically identifies the manner in which the Company alleges that
Executive has not substantially followed such instructions or otherwise performed Executive’s
duties; (ii) material violation by Executive of the Company’s Code of Conduct; (iii) Executive’s
willful misconduct that is materially injurious to the Company (whether from a monetary perspective
or otherwise); (iv) Executive’s willful commission of an act constituting fraud with respect to the
Company; (v) conviction of Executive for a felony under the laws of the United States or any state
thereof; or (vi) Executive’s material breach of Executive’s obligations under Section 8 hereof,
provided that the Company first provides Executive with written notice of such material breach. A
final determination of whether Cause exists under this Agreement, including but not limited to any
determination of whether any act or omission of Executive constitutes a “material” violation of the
Company’s Code of Conduct, a “material” breach of this Agreement, or is “materially injurious” to
the Company, shall be made by the Board.



If Executive’s employment is terminated by the Company for Cause, all compensation and
benefits provided to Executive by the Company pursuant to this Agreement or otherwise shall cease
as of the Termination Date, except that the Company shall pay Executive all Base Salary owed to
Executive for work performed prior to the Termination Date, plus the cash value of any accrued but
unused vacation and paid time off, as of the Termination Date.



(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 any action by the Company
without Executive’s prior written consent which results in (i) any requirement by the Company that
Executive perform Executive’s principal duties outside a radius of 50 miles from the Company’s
Cambridge or planned Waltham, MA location; (ii) any material diminution in Executive’s title,
position, duties, responsibilities or authority, including Executive’s ceasing to serve as
the Company’s President and Chief Executive Officer as determined by the Board of Directors or the
Board of Directors does not recommend he continue to serve as a member of the Board; (iii) a
reduction in Executive’s base salary (unless such reduction is effected in connection with a
general and proportionate reduction of salaries for all members of the management team) or any
reduction of Executive’s target bonus amount to less than 50% of Executive’s annual salary or such
higher target amount if increased at the Compensation Committee’s discretion; (iv) any Change of
Control (as defined in this Agreement) involving the Company which results in Executive’s ceasing
to serve as the Chief Executive Officer for the surviving entity and for all direct and indirect
parent organizations thereof; or (v) the Company materially breaches any of its obligations to
Executive pursuant to this Agreement and/or the “Offer Letter” dated May 21, 2008 (incorporated
herein by reference). To be eligible for any benefits under this agreement pursuant to a
termination for Good Reason, Executive shall be required to provide notice to the Company of the
existence of any of the foregoing events within fifteen (15) days of the initial occurrence of the
event.  Upon such notice, the Company shall have a period of fifteen (15) days to remedy such event
and not be required to provide benefits to Executive on account of such event.



(d) Base Salary. As used herein, “Base Salary” shall mean Executive’s annual base
salary at the time of termination, 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 either (i)
involuntarily terminated by action of the Company other than for Cause or (ii) Executive terminates
Executive’s employment voluntarily for Good Reason, 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.



(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 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.



(c) Acceleration of Initial Stock Option Grant. In the Company’s sole discretion, and
conditioned upon appropriate approval from the Compensation Committee, the Company may accelerate
to the date of termination all, a portion, or none of the Executive’s then unvested stock options
related to the initial stock option grant.



(d) 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.



(e) No Duplication. In the event that Executive is eligible for Change in Control
Severance under Section 3 below, Executive 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 twenty-four (24) 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.



(b) Separation Bonus. Within forty-five (45) days following Executive’s termination,
payment of a separation bonus in an amount equal to two (2) times the target annual bonus to which
the Executive may have been entitled for the year in which Executive is terminated.



(c) Acceleration of Stock Options and/or Other Equity Grants. Executive’s unvested
stock options and/or other unvested equity awards will vest in full in accordance with the
Company’s executive stock option agreements.



(d) COBRA Payments. Upon completion of the appropriate COBRA1/ 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 Executive’s severance compensation) for the 18 month COBRA
eligibility period following such termination, to the same extent that such insurance is provided
to similarly situated Company executives.



(e) 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 Executive’s termination of employment and the date on which Executive begins new full-time
employment, and Executive hereby agrees to notify the Company immediately upon obtaining new
full-time employment.



(f) No Duplication. In the event that Executive is eligible for Standard Severance
under Section 2 above and the eligibility for Standard Severance has not occurred
within a period of one (1) year following a Change in Control, Executive 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
Section 409A of the Code 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 Covenants. Executive acknowledges and agrees that this Agreement provides
Executive 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 agrees to the following restrictive covenants:



(a) While Executive is employed by the Company and for the term of the Severance Period, or
if the Severance Period is longer than twelve (12) months, the first twelve (12) months of the
Severance Period (the “Non-Competition Period”), the Executive shall not, directly or indirectly,
whether as owner, partner, investor, consultant, agent, employee, co-venturer or otherwise, compete
with the Company or any affiliate, parent or subsidiary of the Company or undertake any planning
for any business competitive with the Company or any affiliate, parent or subsidiary of the
Company. For the purpose of this section, “compete” or “competitive” means to engage or
participate (whether for compensation or without compensation) in any commercial research or
commercial project which is the same or substantially similar (in purpose, objective or result) to
any research or project in which the Executive engaged or participated in, for or on behalf of the
Company or any affiliate, parent or subsidiary of the Company during the Non-Competition Period.



(b) During the Non-Competition Period, the Executive shall not recruit or otherwise solicit
or induce any employees of the Company or any affiliate, parent or subsidiary of the Company to
terminate their employment with, or otherwise cease their relationships with, the Company or any
affiliate, parent or subsidiary of the Company.



(c) The restrictions against competition set forth in paragraph 8(a) are considered by the
parties to be reasonable for the purposes of protecting the business of the Company.  However, if
any such restriction is found by any court of competent jurisdiction to be unenforceable because it
extends for too long a period of time or over too great a range of activities or in too broad a
geographic area, it shall be interpreted to extend only over the maximum period of time, range of
activities or geographic areas as to which it may be enforceable.



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.



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:



Chairman of the Board



Altus Pharmaceuticals Inc.



640 Memorial Drive



Cambridge, MA 02139



With a copy to:



General Counsel



Altus Pharmaceuticals Inc.



640 Memorial Drive



Cambridge, MA 02139




If to Executive:



Georges Gemayel, Ph.D.



[Address]



(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 any prior employee, non-disclosure and invention agreement entered into between the Executive
and the Company, 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
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.



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 any employee, non-disclosure and invention
agreement) shall be decided in accordance with the dispute resolution mechanism provided for by
such contract or agreement.



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.



[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]




1/ “COBRA” is the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended.



1



IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first
above written.



ALTUS PHARMACEUTICALS INC.



By: /s/ David Pendergast



Date: May 21, 2008



EXECUTIVE:



/s/ Georges Gemayel



Georges Gemayel




Date: May 21, 2008




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