**Exhibit10.1**

 

**EMPLOYMENTAGREEMENT**

 

**EMPLOYMENT AGREEMENT** (“Agreement”) made and entered into effective as of May 6, 2003 (the“Effective Date”), by and between **GENAISSANCEPHARMACEUTICALS, INC.** (the “Corporation”), a Delaware corporationwith its principal office at 5 Science Park, New Haven, Connecticut, 06511, and**BEN D. KAPLAN** (“Executive”), anindividual who resides at 527 Mountain Road, West Hartford, Connecticut 06117.

 

**WHEREAS**, the Corporation and Executive desire to enter into this Agreement toset forth the terms and conditions of their employment relationship, commencingas of the Effective Date;

 

**NOW, THEREFORE**, in consideration of the mutual covenants and agreements containedherein, and other good and valuable consideration, the receipt and sufficiencyof which is hereby acknowledged, the parties agree as follows:

 

1.                                        Employment.  The Corporation shall employExecutive in the capacity of Senior Vice President and Chief Financial Officer(“CFO”) of the Corporation during the term of this Agreement, and Executivehereby accepts such employment, on the terms and conditions hereinafter setforth.  Executive represents that hisemployment by the Corporation pursuant to this Agreement does not violate anyagreement, covenant or obligation to which he is a party or by which he isbound.

 

2.                                       Duties.  During the term of thisAgreement, Executive shall perform all duties, consistent with his position asCFO in order to advance the Corporation’s financial affairs and relatedbusiness efforts, assigned or delegated to him by the Chief Executive Officerof the Corporation (the “CEO”), and normally associated with the position ofCFO, including, without limitation, formulating financial policy and plans andproviding overall direction for the accounting, tax, insurance, budget, credit,treasury and management information reporting functions of theCorporation.  He shall devote all of hisfull business time and best efforts to the advancement of the interests andbusiness of the Corporation.

 

3.                                       Term.  The term of this Agreementshall begin on the Effective Date, and shall expire on the fourth anniversaryof the Effective Date, unless earlier terminated as provided in this Agreement(the “Initial Term”).  Upon expirationof the Initial Term and any subsequent term or extension thereof, thisAgreement shall automatically be extended for an additional term of one (1)year, unless Executive or the Corporation elect to terminate this Agreement inaccordance with the provisions of Section 12 of this Agreement (the “InitialTerm”, together with any subsequent terms or extensions, until termination orexpiration in accordance with the provisions of this Agreement, shall bereferred to herein as the “Employment Term”). If Executive continues in the employ of the Corporation after the end ofany Employment Term when no extension of this Agreement has been effected, thenExecutive’s continued employment by the Corporation shall, notwithstandinganything to the contrary expressed or implied herein, be terminable by theCorporation at will.

 

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4.                                       Compensation.  Ascompensation for any and all services to be rendered by Executive to theCorporation pursuant to this Agreement, the Corporation shall pay Executive andprovide Executive with the following compensation and benefits, which Executiveagrees to accept in full satisfaction for his services:

 

a.                                       Base Salary.  The Corporation shall payExecutive a Base Salary, payable in equal installments at such paymentintervals as are the usual payroll practices of the Corporation, at an annualrate of $210,000, less such deductions or amounts to be withheld as shall berequired by applicable law or as may be allowed at the request of Executive(the “Base Salary”).  The Base Salaryshall be reviewed annually by the Board in the fourth quarter of each fiscalyear of the Corporation and shall be adjusted (effective as of January 1 of thenext fiscal year) by such amount, if any, as the CEO, in his sole discretion,shall determine and the Board, in its sole discretion, shall approve.

 

b.                                      Bonus.  Provided Executive firstmeets the Corporation’s expectations for his performance during the EmploymentTerm and remains employed on the date of payment, Executive shall be eligiblefor a discretionary bonus (a “Discretionary Bonus”) of up to sixty percent(60%) of his base compensation as determined by the CEO in his sole discretionand approved by the Board in its sole discretion based upon Executive’sachievements in meeting his performance goals and those of the Corporation forits most recently ended fiscal year. Goals shall be established after the commencement of the Employment Termand then in the first quarter of each subsequent fiscal year. For the firstfiscal year of employment, the bonus amount will be prorated based upon theeffective date of the Employment Agreement. Each Discretionary Bonus may be payable in cash, stock options, and/orrestricted stock upon such terms and conditions as determined by the CEO.  The Corporation shall pay any DiscretionaryBonus by the end of the first quarter of the following fiscal year.  As any bonus paid to Executive isdiscretionary, the payment of any bonus in a year must not be construed asrequiring the payment of a bonus in any other year.

 

c.                                       Benefits.

 

(i)                                     Executive shall be entitled to participate,to the extent he is eligible, in all group insurance programs, health, medical,dental, and disability plans (including, without limitations, the Corporation’s401(k) plan), and other employee benefit plans which the Corporation mayhereafter in its sole and absolute discretion make available generally to itsemployees (other than any incentive compensation or equity ownership plan), butthe Corporation shall not be required to establish or maintain any such programor plan.

 

(ii)                                  Executive shall be entitled to four (4) weekspaid vacation during each calendar year, in accordance with the Corporation’svacation policies.  Such vacation may betaken at such time or times as is reasonably consistent with the Corporation’svacation policies and the performance by Executive of his duties

 

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and responsibilities underthis Agreement.  Up to one week ofunused vacation time in one year may be carried over and used in the subsequentyear.

 

(iii)                               Executive shall be entitled to participate inthe Corporation’s 2000 Amended and Restated Equity Incentive Plan (the “Plan”)and the Corporation shall use its best efforts to cause the Board or theapplicable committee of the Board to grant Executive a one-time initial option,having a ten-year term, to purchase 200,000 shares of the Corporation’s commonstock at an exercise price per share equal to the price in effect at the closeof business on the effective date of the employment agreement (the “Option”).  The Option shall vest quarterly eachcalendar year over a forty-eight (48) month period during the Employment Term,such that 1/16 of the Option shall vest each quarter year, with acceleratedvesting in the event of Executive’s death or permanent disability or the terminationof this Agreement for other than For Cause or his exercise of his rights underSections 12(f) or 12(k).  Executiveunderstands and agrees that any stock rights granted to Executive shall besubject to the provisions of the Plan and any separate written agreementsembodying the grant of the rights that are required by the Plan.  The rights shall be set forth in a separateagreement embodying the grant of the rights which shall be otherwise in theform stipulated in the Plan.  To theextent that there is any conflict between the vesting provisions of thisAgreement and the provisions of the Plan, the provisions of this Agreementshall govern.

 

(iv)                              The Corporation shall purchase and throughoutthe Employment Term pay the premiums for a $1,000,000 policy of term lifeinsurance insuring the life of Executive (subject to his meeting thesuitability requirements of the insurer). Executive shall be the owner of such policy and entitled to all of therights of ownership including designation of the beneficiary thereof.

 

(v)                                 Subject to reasonable guidelines adopted bythe Board, throughout the Employment Term, the Corporation shall pay the costsof dues for membership in professional organizations whose activities arereasonably related to the business of the Corporation.

 

(vi)                              The Corporation shall provide Executive witha policy of long-term disability insurance with reasonable coverages, whichshall include the payment of benefits equal to at least sixty percent (60%) ofExecutive’s Base Salary during the disability coverage period, and theCorporation shall pay the premiums or a portion thereof (as specifiedhereafter) for such disability insurance policy up to the cost charged by theinsurer to insure a healthy 46-year old male, non-smoker.

 

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d.                                      Taxes.  All compensation and benefitsare subject to applicable withholding taxes, federal, state, and local, and anyother proper deductions.

 

e.                                       Benefit Plans. Executive understands that the Corporation may amend, change, or cancelits employment policies and benefit plans at any time as allowed by law or byany applicable plan documents.

 

5.                                       Business Expenses.  TheCorporation shall pay, or reimburse Executive for, the reasonable and necessarybusiness expenses of Executive incurred in the performance of his dutieshereunder, provided Executive provides timely and reasonable documentationthereof in accordance with the rules and regulations of the Corporationrelating thereto.

 

6.                                       Compliance with Policies. Executive acknowledges and agrees that, except as set forth in thisAgreement, compliance with the Corporation’s policies, practices and proceduresis a term and condition of his employment under this Agreement.

 

7.                                       Inventions and Improvements. Executive acknowledges, covenants and agrees that the Corporation shallbe the sole owner of all the fruits and proceeds of Executive’s services to theCorporation, including but not limited to all writings, inventions,discoveries, designs, systems, processes, software or other improvementsrelating to the business or products of the Corporation, whether or notpatentable, registerable, or copyrightable, which Executive may, alone or withothers, conceive, create, develop, produce or make during or as a result of hisemployment with the Corporation (collectively, the “Invention”), free and clearof any claims by Executive of any kind or character whatsoever other thanExecutive’s rights to compensation under this Agreement.  Executive agrees that he shall disclose eachof the Inventions promptly and completely to the Corporation, and shall, at therequest of the Board, execute such assignments, certificates or otherinstruments as the Board or the Corporation from time to time deem necessary ordesirable to evidence, establish, maintain, perfect, protect, enforce or defendthe Corporation’s right, title and interest in or to any or all of theInventions.  Executive agrees that he isbound by the terms of a certain Employee Agreement on Ideas, Inventions, andConfidential Information, to be signed on his first day of employment (the“Inventions Agreement”), which shall continue in full force and effectaccording to its terms and nothing in this Agreement shall be interpreted orconstrued as modifying the Inventions Agreement.  To the extent that there is any conflict between the provisionsof this Section and the provisions of the Inventions Agreement, the provisionsof the Inventions Agreement shall govern.

 

8.                                       Non-Disclosure of Confidential Information.

 

a.                                       Executive acknowledges that, in and as aresult of his employment by the Corporation, he will be making use of,acquiring and/or adding to the Corporation’s Confidential Information (ashereinafter defined).  As a materialinducement to the Corporation to employ Executive and to pay Executive thecompensation and benefits set forth in this Agreement, Executive covenants andagrees that he shall not, at any time during or following the term of hisemployment with the Corporation, directly or indirectly divulge or disclose forany purposes whatsoever, any Confidential Information that has been obtainedby, or disclosed to, him as a result of his employment with the

 

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Corporation.  For purposes ofthis Agreement, “Confidential Information” means, collectively, allconfidential matters and materials of the Corporation, including withoutlimitation, (i) the Corporation’s proprietary information, inventions, tradesecrets, knowledge, data, know-how, intellectual property, systems, procedures,manuals, pricing policies, operational methods and information relating to theCorporation’s products, processes, formulae, business plans, marketing plansand strategies, pricing strategies, customer lists, and all other subjectmatters pertaining to the business and/or financial affairs of the Corporation;(ii) the Corporation’s information regarding plans and strategies for research,development, new products, future business plans, budgets and unpublishedfinancial statements, licenses, prices and costs; (iii) information regardingthe skills and compensation of other employees of the Corporation; and (iv)information disclosed in confidence to the Corporation by a third party with aduty on the Corporation to maintain the confidentiality of suchinformation.  The term “ConfidentialInformation” shall not include any information that (x) has been made availablegenerally to the public either by the Corporation or by a third party with theCorporation’s consent, unless such information became available as a result ofany action by Executive in violation of this Agreement, any other agreement, orher obligations under law, or (y) has been made available as a result of afinal award, order, or ruling by an arbitration tribunal or a court of competentjurisdiction that has determined that such Confidential Information may bedisclosed.

 

b.                                      If Executive is required by a court,arbitration tribunal, or governmental agency (by oral questions,interrogatories, requests for information or documents, subpoena, civilinvestigation demand or similar process) to disclose any ConfidentialInformation, Executive may disclose such Information to such court, tribunal,or agency without liability hereunder, provided, that Executivefirst provides the Corporation with notice of any such requirement(s) aspromptly as practicable, but in any case with sufficient timeliness to enablethe Corporation to seek an appropriate protective order and/or waive itscompliance with the relevant provisions of this Agreement.

 

9.                                       Covenants Against Competition.

 

a.                                       Non-Solicitation of Employees. While employed by the Corporation and for a period of six (6) months,followed by a second period of six (6) months, for a total period of twelve(12) months, from the date of termination of Executive’sEmployment Term with the Corporation for any reason, Executive shall notdirectly or indirectly solicit, induce or encourage any of the Corporation’semployees (except Marcia Passavant, in the event she is employed by theCorporation) to terminate their employment with the Corporation or to acceptemployment with any competitor, supplier, client, agent or broker of theCorporation, nor shall Executive cooperate with any others in doing orattempting to do so.  As used in thisparagraph, the term “solicit, induce or encourage” includes, but is not limitedto, (i) initiating communications with any employee of the Corporation relatingto possible employment or independent contractor relationship, (ii) offeringbonuses or additional compensation to encourage any employee of the Corporationto terminate his or her employment with the Corporation and accept employmentwith a competitor, supplier, client, agent or broker of the Corporation, or(iii)

 

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referring any employee ofthe Corporation to recruiters, personnel or agents employed by competitors,suppliers, clients, agents or brokers of the Corporation.

 

b.                                      Non-Compete.  While Executive is employedby the Corporation and for a period of six (6) months, followed by a secondperiod of six (6) months, for a total period of twelve (12) months, from the date of termination of Executive’s Employment Term for anyreason, Executive shall not directly or indirectly, as a principal, agent,contractor, employee, employer, partner, shareholder or in any other capacityengage in or perform any managerial or executive services (a) for anycorporation, partnership, individual or entity (i) which is engaged in abusiness competitive with the Corporation or affiliate of the Corporation inany state where Executive had any duties or responsibilities while working orperforming services for the Corporation, (ii) which is a competitor of theCorporation or affiliate of the Corporation, or (iii) which is engaged in abusiness competitive with the Corporation or affiliate of the Corporationwithin 50 miles of any laboratory or facility owned or operated by theCorporation or affiliate of the Corporation in the United States, or (b) to anycustomer of the Corporation or affiliate of the Corporation

 

c.                                       For the purposes of this Agreement:

 

(i)                                     The term “engaged in a business competitivewith the Corporation” means directly or indirectly engaging in the business ofpharmacogenomics or in the same or any similar business as the Corporation orany of its affiliates in any manner whatsoever, including without limitation asa proprietor, partner, investor, shareholder, member, director, officer,employee, consultant, independent contractor or otherwise, within anygeographic area in which the Corporation’s products or services are offered ordistributed;

 

(ii)                                  The term “affiliate” means any legal entitythat directly or indirectly through one or more intermediaries controls, iscontrolled by, or is under common control with the Corporation; and

 

(iii)                               The term “customer” means any business,company, person, and any other entity to whom the Corporation or any of itsaffiliates has provided any product or service, whether or not forcompensation, within a period of two (2) years prior to the time Executiveceases to be employed by the Corporation.

 

d.                                      Exclusion for Investments. None of the provisions of this Section 9 shall prohibit Executive frominvesting in securities listed on a national securities exchange or activelytraded over-the-counter so long as such investments are not greater than fivepercent (5%) of the outstanding securities of any issuer of the same class orissue.

 

10.                                 Reasonableness of Restrictions.

 

a.                                       Executive has carefully read and consideredthe provisions of Section 8 and Section 9, and, having done so,agrees that:

 

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(i)                                     The restrictions set forth in Section 8 andSection 9, including but not limited to the character, duration, andgeographical area of restriction, are fair and reasonable and are reasonablyrequired for the protection of the good will and other legitimate businessinterests of the Corporation and its affiliates, officers, directors,shareholders, and other employees;

 

(ii)                                  Executive has received adequate considerationfor such obligations; and

 

(iii)                               Such obligations do not prevent Executivefrom earning a livelihood.

 

b.                                      If, notwithstanding the foregoing, any of theprovisions of Section 8 or Section 9 shall be held to be invalid orunenforceable, the remaining provisions thereof shall nevertheless continue tobe valid and enforceable as though the invalid and unenforceable parts had notbeen included therein.  If any provisionof Section 8 or Section 9 is determined by a court of competent jurisdictionthat the character, duration, geographical scope, or related aspects areunreasonable in light of the circumstances as they then exist, then it is theintention of the parties that Section 8 and/or Section 9 shall be construed bythe court in such a manner as to impose only those restrictions on the conductof Executive that are reasonable in light of the circumstances as they thenexist and as are necessary to assure the Corporation of the intended benefit ofthis Agreement and such restrictions, as so modified, shall become andthereafter be the maximum restriction in such regard, and the restriction shallremain enforceable to the fullest extent deemed reasonable by such court.

 

11.                                 Remedies for Breach of Executive’s Covenantsof Non-Disclosure and Non-Competition.  Executive recognizes andagrees that the Corporation’s remedy at law for any breach of Section 8 orSection 9 would be inadequate as such a breach would cause irreparable harm tothe Corporation, and he agrees that, for any actual or threatened breach ofsuch provisions, the Corporation shall, in addition to such other remedies asmay be available to it at law or in equity, be entitled to injunctive reliefand to enforce its rights by an action for specific performance.  All of the Corporation’s remedies for anybreach of this Agreement shall be cumulative and the pursuit of any one remedyshall not exclude the Corporation’s pursuit of any other remedies.

 

12.                                 Termination and Severance.

 

a.                                       Death.  In the event that Executivedies during the Employment Term, this Agreement shall terminate automaticallyupon his death, upon which event Executive’s legal representatives shall beentitled to receive, and the Corporation shall pay or cause to be paid toExecutive’s legal representatives, any Base Salary and other compensation orbenefits accrued but as yet unpaid on the date of Executive’s death.

 

b.                                      Incapacity or Disability.  Ifduring the Employment Term, Executive is prevented from performing the dutiesor fulfilling responsibilities of his employment

 

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under this Agreement byreason of any incapacity or disability for a continuous period of six (6)months, as determined by an independent qualified physician selected by theCorporation and reasonably acceptable to Executive (or his representative),then the Corporation may terminate Executive’s employment hereunder, butExecutive shall continue to be eligible to receive any benefits to which he maybe entitled under the terms of any long-term disability plan or insurancepolicy maintained by the Corporation for its employees.  In the event of such incapacity ordisability, the Corporation shall continue to pay full compensation toExecutive in accordance with the terms of this Agreement until the date of suchtermination.

 

c.                                       By Corporation for Cause.  TheCorporation may, upon written notice to Executive, terminate Executive’semployment hereunder For Cause; provided that the Corporation shall firstprovide Executive with an opportunity to be heard by the Board on any proposedtermination for cause by the Board.  Forpurposes of this Agreement, the term “For Cause” shall mean (i) Executive’smaterial breach of this Agreement; (ii) Executive’s material failure to adhereto any policy of the Corporation generally applicable to  employees of the Corporation if Executivehas been given a reasonable opportunity to comply with such policy or cure hisfailure to comply; (iii) Executive’s appropriation (or attempted appropriation)of a business opportunity of the Corporation, including attempting to secure orsecuring any personal profit in connection with any transaction entered into onbehalf of the Corporation; (iv) Executive’s misappropriation (or attemptedmisappropriation) of any of the Corporation’s funds or property; (v)Executive’s conviction of, or the entering of a guilty plea or plea of nocontest with respect to, a felony, the equivalent thereof, or any other crimewith respect to which imprisonment is a possible punishment or of a lessercrime having as its predicate element fraud, dishonesty or misappropriation ofproperty of the Corporation; (vi) Executive’s willful misconduct orinsubordination; (vii) Executive’s physical or mental disability or otherinability to perform the essential functions of her position, with or withoutreasonable accommodation, if Executive is not eligible for the benefits inSection 12(b); (viii) Executive’s engaging in bad faith or gross negligence inthe performance of  his duties underthis Agreement as determined in good faith by the Board; or (ix) any otherconduct of Executive sufficiently detrimental to the Corporation so as towarrant immediate termination of Executive’s employment with the Corporation.

 

In the event oftermination For Cause of Executive’s employment, Executive’s right to receivecompensation and other benefits hereunder (other than any Base Salary and anyvacation accrued but as yet unpaid on the effective date of such termination)shall terminate on the effective date of such termination, and Executive shallnot be entitled to any severance payments or other benefits.

 

d.                                      Termination by the Corporation without Cause.  TheCorporation may elect to terminate Executive’s employment at any time withoutcause upon written notice to Executive. In the event of such termination without cause, Executive shall beentitled to a severance payment in an amount equal to 125% of Executive’s BaseSalary as of the date of termination, such payment to be made in equalinstallments over a twelve (12) month period on the Corporation’s usual payperiods.

 

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e.                                       Nonrenewal of Agreement.  TheCorporation may elect to not renew or extend this Agreement at any time withoutcause upon written notice to Executive not later than thirty (30) days prior tothe end of any Initial Term or any extended Employment Term.  In the event of a nonrenewal ornon-extension pursuant to this Paragraph, Executive’s rights to receivecompensation and other benefits (other than any Base Salary and vacationaccrued but as yet unpaid on the effective date of such termination) shallterminate at the expiration of the Initial Term or Employment Term.  In the event of such termination, Executiveshall be entitled to a severance payment following the end of such Initial Termor Employment Term in an amount equal to 125% of Executive’s Base Salary as ofthe date of termination, such payment to be made in equal installments over atwelve (12) month period on the Corporation’s usual pay periods.

 

f.                                         By Executive for Certain Reasons. Executive may, at his option, upon at least thirty (30) days writtennotice to the Corporation, terminate his employment hereunder, if theCorporation, without Executive’s express written consent, (i) removes him as anofficer of the Corporation, (ii) demotes him from CFO, (iii) assigns him dutiesmaterially inconsistent with the position and/or duties described in Sections 1or 2, (iv) materially diminishes his responsibilities and/or duties describedin Sections 1 or 2, (v) breaches any material obligations to Executive underthis Agreement, or (vi) the Corporation moves to a new location more thanthirty-five (35) miles from its existing location at 5 Science Park, New Haven,Connecticut.  Upon any termination byExecutive under this Paragraph the Corporation shall be obligated to payExecutive the severance payments specified in Section 12(d).

 

g.                                      By Executive Following Change of Control. Executive may, at his option, upon thirty (30) days written notice tothe Corporation, terminate his employment hereunder for Good Reason (ashereinafter defined) following a Change of Control of the Corporation.  Upon any termination by Executive under thisParagraph, the Corporation shall be obligated to pay Executive a severancepayment in an amount equal to 150% of Executive’s Base Salary as of the date oftermination, such payment to be made in equal installments over an eighteen(18) month period on the Corporation’s usual pay periods.

 

h.                                      Good Reason Defined.  Forpurposes of this Agreement, the term “Good Reason” means, during the twelve(12) month period following a Change of Control, without Executive’s expresswritten consent, the occurrence of any of the following circumstances:

 

(i)                                     the assignment to Executive of any dutiesinconsistent (except in the nature of a promotion) with the position in theCorporation that he held immediately prior to the Change of Control orsubstantial adverse alteration in the nature or status of his position orresponsibilities or the conditions of his employment from those in effectimmediately prior to the Change of Control;

 

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(ii)                                  a reduction, other than a de minimisreduction, by the Corporation in Executive’s annual Base Salary as in effect onthe date hereof, as the same may be increased from time to time;

 

(iii)                               the failure by the Corporation to continue ineffect any material compensation or benefit plan in which Executiveparticipates immediately prior to the Change of Control unless an equitablearrangement (embodied in an ongoing substitute or alternative plan) has beenmade with respect to such plan, or the failure by the Corporation to continueExecutive’s participation therein (or in such substitute or alternative plan)on a basis not materially less favorable, both in terms of the amount ofbenefits provided and the level of his participation relative to otherparticipants, than existed immediately prior to the Change of Control; or

 

(iv)                              the failure by the Corporation or itssuccessor or any surviving entity to maintain Executive as the Chief FinancialOfficer of the top level operating company affiliated with the Corporation orits successor or surviving entity.

 

i.                                          Change of Control Defined.  Forpurposes of this Agreement, a “Change of Control” shall be deemed to haveoccurred if the transaction is of a nature that would be required to bereported in response to Item l(a) of the Current Report on Form 8-K, as ineffect on January 1, 2003, pursuant to Section 13 or 15(d) of the Securities ExchangeAct of 1934 (the “Exchange Act”); provided that, without limitation, such a“Change in Control” shall be deemed to have occurred if: (i) a third Person,including a “group” as such term is used in Section 13(d)(3) of the ExchangeAct, other than the trustee of any employee benefit plan of the Corporation,becomes the beneficial owner, directly or indirectly, of 35% or more of thecombined voting power of the Corporation’s outstanding voting securitiesordinarily having the right to vote for the election of directors of theCorporation; (ii) during any period of twenty-four (24) consecutive monthsindividuals who, at the beginning of such consecutive twenty-four (24) monthperiod, constitute the Board of Directors of the Corporation (the “Board”) ceasefor any reason (other than retirement upon reaching normal retirement age,disability, or death) to constitute at least a majority of the Board; providedthat any person becoming a director subsequent to the date hereof whoseelection, or nomination for election by the Corporation’s shareholders, wasapproved by a vote of at least three quarters of the directors comprising theIncumbent Board shall be, for purposes of this Agreement, considered as thoughsuch person were a member of the Incumbent Board; or (iii) the Corporationshall cease to be a publicly owned corporation having its outstanding CommonStock listed on the New York Stock Exchange or quoted in the NASDAQ National orSmall Cap Market System, except where the delisting is related to a privatepurchase of the Corporation’s stock by a group consisting of the Corporation’scurrent officers.

 

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Forthese purposes, a “Change of Control” also shall not be deemed to have occurredwhere with respect to any transaction otherwise constituting a “Change ofControl,” the Corporation’s CEO and CFO are reasonably expected to maintaintheir existing positions with the Corporation.

 

Forthese purposes, Incumbent Board means the Board as in existence twenty-four(24) months prior to the date the action is being considered.  Notwithstanding the foregoing, if theIncumbent Board specifically determines that any transaction does notconstitute a Change of Control for purposes of this Agreement suchdetermination shall be conclusive and binding.

 

j.                                          Person Defined.  Forpurposes of this Agreement, the term “Person” means any individual,corporation, association, partnership, limited partnership, limited liabilitycompany, limited liability partnership, organization, business, joint venture,sole proprietorship, governmental agency, entity or subdivision or other entityof any kind or nature.

 

k.                                       Voluntary Termination by Executive. Executive may, at his option, upon sixty (60) days prior written noticeto the Corporation, terminate his employment hereunder.  In the event of a voluntary termination ofhis employment by the Executive pursuant to this Paragraph, Executive’s rightsto receive compensation and other benefits (other than any Base Salary andvacation accrued but as yet unpaid on the effective date of such termination)shall terminate on the effective date of such termination, and Executive shallnot be entitled to any severance payments or other benefits.

 

l.                                          Eligibilityfor Severance; Requirement of Release. Except as provided in Sections 12(d), 12(e), 12(f), and 12(g), Executiveshall not be eligible for or entitled to any severance payments in the event oftermination of his employment hereunder. No severance shall be paid under this Agreement unless Executive firstexecutes and agrees to be bound by a release of all claims, on a form providedby the Corporation, which releases any and all claims that Executive has ormight have against the Corporation and which contains terms customary in suchagreements.

 

m.                                    Resignation.  In the event of terminationof  his employment other than for death,Executive shall be deemed to have resigned from all positions held in theCorporation, including without limitation any position as a director, officer,agent, trustee, or consultant of the Corporation or any affiliate of theCorporation.  Upon request of theCorporation, Executive shall promptly sign and deliver to the Corporation anyand all documents reflecting such resignations as of the date of termination ofher employment.

 

13.                                 Vesting upon Change in Control.  Anystock options and restricted stock granted to Executive by the Corporationshall accelerate and immediately vest upon the occurrence of the followingevents: if (a) any “person,” as such term is used in Sections 13(d) and 14(e)of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”)(other than the Corporation, any trustee or other fiduciary holding securitiesunder an employee benefit plan of the Corporation, or any corporation owned directlyor indirectly by the stockholders of the

 

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Corporation in substantially the sameproportion as their ownership of stock in the Corporation) is or becomes the“Beneficial Owner” (as defined in Rule 13d-3 under the Exchange Act), directlyor indirectly, of securities of the Corporation representing 50% or more of thecombined voting power of the Corporation’s then outstanding securities (otherthan as a result of acquisitions of such securities from the Corporation); (b)individuals who, as of the date hereof, constitute the Board of Directors ofthe Corporation (the “Incumbent Board”) cease for any reason to constitute atleast a majority of the Board, provided that any person becoming a director afterthe date hereof whose election, or nomination for election by the Corporation’sstockholders, was approved by a majority of the directors then comprising theIncumbent Board (other than an election or nomination of an individual whoseinitial assumption of office is in connection with an actual or threatenedelection contest relating to the election of the directors of the Corporation)shall be, for purposes of this Agreement, considered to be a member of theIncumbent Board; (c) the stockholders of the Corporation approve a merger orconsolidation of the Corporation with any other corporation, other than (i) amerger or consolidation that would result in the voting securities of theCorporation outstanding immediately prior thereto continuing to represent(either by remaining outstanding or by being converted into voting securitiesof the surviving entity) more than 50% of the combined voting power of thevoting securities of the Corporation or such surviving entity outstandingimmediately after such merger or consolidation or (ii) a merger orconsolidation effected to implement a recapitalization of the Corporation (orsimilar transaction) in which no “person” (as defined above, acquires more than20% of the combined voting power of the Corporation’s then outstandingsecurities; or (d) the stockholders of the Corporation approve a plan ofcomplete liquidation of the Corporation or an agreement for the sale ordisposition of the Corporation of all or substantially all of the Corporation’sassets.

 

14.                                 Payment or Benefit in Connection with Changein Control.

 

a.                                       Notwithstanding any other provision of thisAgreement, in the event that any payment or benefit received or to be receivedby the Executive (i) is deemed to be in connection with a Change in Control (whetherpayable pursuant to the terms of this Agreement or any other plan, arrangementor agreement with the Corporation, its successors, any person whose actionsresult in a Change in Control or any corporation (“Affiliates”) affiliated (orwhich, as a result of the completion of the transactions causing a Change inControl will become affiliated) with the Corporation within the meaning ofSection 1504 of the Internal Revenue Code of 1986, as amended (the “Code”)(collectively with the payments and benefits pursuant to this Agreement ifdeemed to be paid pursuant to a Change in Control, “Total Payments”) and (ii)is determined by the Corporation’s independent certified accounting firm (the“Tax Advisor”) that such amount exceeds 2.99 times the base amount (as suchterm is defined under Section 280G(b)(3) of the Code) but that is less than 4times the base amount and that an excise tax is payable by Executive underSection 4999 of the Code, then the amount of payments to the Executive shall bereduced so that the payments do not exceed the limits then set forth in Section280G of the Code.

 

b.                                    Notwithstandingany other provisions of this Agreement or the provisions

 

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of Section (a) above, in the event that the TotalPayments received or to be received by Executive in connection with a Change inControl would be subject (in whole or part), to an excise tax pursuant toSection 4999 of the Code (such tax hereinafter referred to as the “Excise Tax”)because the amount of the Total Payments equals or exceeds four (4) times thebase amount (as such term is defined under Section 280G(b)(3) of the Code),then the Total Payments shall be grossed up to the extent necessary to reflectany Excise Taxes due by Executive and the income taxes attributable thereto sothat the Executive will be entitled to a net amount equal to the Total Payments(the “Grossed-Up Payment”).  Forpurposes of determining whether and the extent to which the Total Payments willbe subject to the Excise Tax, (i) no portion of the Total Payments the receiptor enjoyment of which Executive shall have effectively waived in writing priorto the date of this termination of employment shall be taken into account, (ii)no portion of the Total Payments shall be taken into account which in theopinion of tax counsel selected by Corporation does not constitute a “parachutepayment” within the meaning of Section 280G(b)(2) of the Code, (including byreason of Section 280(b)(4)(A) of the Code) and, in calculating the Excise Tax,no portion of such Total Payment shall be taken into account which constitutesreasonable compensation for services actually rendered, within the meaning ofSection 280G(b)(4)(B) of the Code, in excess of the base amount as defined inSection 280G(b)(3) of the Code allowable to such reasonable compensation, and(iii) the value of any non-cash benefit or any deferred payment or benefitincluded in the Total Payments shall be determined by Corporation in accordancewith the principles of Sections 280G(d)(3) and (4) of the Code.  Prior to the thirtieth day following thedate of Executive’s termination of employment, Corporation shall provideExecutive with its calculation of the amounts referred to in this Section andsuch supporting materials as are reasonably necessary for Executive to evaluateCorporation’s calculations but the Corporation’s calculations shall be used forpurposes of any payments pursuant to this Section.

 

c.                                       Ifthe Corporation’s Tax Advisor determines that the Total Payments received or tobe received by Executive fall under subparagraph (a) above and upon audit bythe Internal Revenue Service the IRS determines that an Excise Tax is due andpayable due to the amount of the Total Payments received by Executive, then theCorporation agrees to make a Grossed-Up Payment calculated in the same manneras provided in subparagraph (b).

 

d.                                      In the event of any IRS auditconcerning to the Total Payments payable or paid to Executive, the Corporationmay in its sole discretion choose to respond to the audit.  If the Corporation chooses not to respond,then it shall be the sole responsibility of Executive to respond to the audit.

 

15.                                 Waiver.  A party’s failure to insiston compliance or enforcement of any provision of this Agreement shall notaffect the validity or enforceability or constitute a waiver of futureenforcement of that provision or of any other provision of this Agreement bythat party or any other party.

 

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16.                                 Governing Law. This Agreement shall in all respects be subject to, and governed by, thelaws of the State of Connecticut without reference to its conflict of laws

 

17.                                 Severability.  Theinvalidity or unenforceability of any provision in the Agreement shall not inany way affect the validity or enforceability of any other provision and thisAgreement shall be construed in all respects as if such invalid orunenforceable provision had never been in the Agreement.

 

18.                                 Notice.  Any and all notices requiredor permitted herein shall be in writing and shall be deemed to have been dulygiven (a) when delivered if delivered personally, (b) on the fifthday following the date of deposit in the United States mail if sent firstclass, postage prepaid, or by certified mail, or (c) one day afterdelivery to a nationally recognized overnight courier service.  The parties’ respective addresses for suchnotices shall be those set forth below, or such other address or addresses aseither party may hereafter designate in writing to the other.

 
| If to the Corporation: | Genaissance  Pharmaceuticals, Inc.    |
|------------------------|---------------------------------------|
|                   | Five Science Park, Suite  2103        |
|                   | New Haven, CT  06511-1966        |
|                   | Attention: Kevin Rakin                |
|                   | Facsimile No.: (203)  492-4473        |
|                   |                                  |
| With a copy to:        | Robinson & Cole LLP               |
|                   | 280 Trumbull Street                   |
|                   | Hartford, CT 06103-3597               |
|                   | Attention: Felicia  DeDominicis, Esq. |
|                   | Facsimile No.: (860)  275-8299        |
|                   |                                  |
| If to Employee:        | Ben D. Kaplan                         |
|                   | 527 Mountain Road                     |
|                   | West Hartford, CT 06117               |

 

19.                                 Assignment.  This Agreement shall inure tothe benefit of, and shall be binding upon, the parties hereto and theirrespective successors, assigns, heirs, and legal representatives, including anyentity with which the Corporation may merge or consolidate or to which all orsubstantially all of its assets may be transferred.  The duties and covenants of Executive under this Agreement, beingpersonal, may not be delegated.

 

20.                                 Amendments.  This Agreement may be amendedat any time by mutual consent of the parties hereto, with any such amendment tobe invalid unless in writing and signed by the Corporation and Executive andexpressly referring to this Agreement.

 

21.                                 Entire Agreement. This Agreement contains the entire agreement and understanding by andbetween Executive and the Corporation with respect to the employment ofExecutive and supersedes all existing agreements between the Corporation andExecutive with respect to such subject matter. No representations, promises, agreements, or understandings, written ororal, relating to the employment of Executive by the Corporation, or any of itsofficers,

 

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directors, employees, or agents, notcontained herein shall be of any force or effect, provided that, Sections 5, 6,7, 8, and 9 shall be supplemental to any other agreement of Executive with theCorporation related to the matters identified therein.

 

22.                                 No Undue Influence; Construction. This Agreement is executed voluntarily and without any duress or undueinfluence.  Executive acknowledges thathe has read this Agreement and executed it with his full and free consent.  No provision of this Agreement shall beconstrued against any party by virtue of the fact that such party or itscounsel drafted such provision or the entirety of this Agreement.

 

23.                                 References to Gender and Number Terms.  Inconstruing this Agreement, feminine or number pronouns shall be substituted forthose masculine in form and vice versa, and plural terms shall be substitutedfor singular and singular for plural in any place in which the context sorequires.

 

24.                                 Counterparts; Headings; Sections. This Agreement may be executed in multiple counterparts, each of whichshall be considered to have the force and effect of any original but all ofwhich taken together shall constitute but one and the same instrument.  The various headings in this Agreement areinserted for convenience only and are not part of the Agreement.  All references to “Sections” and“Paragraphs” in this Agreement refer to the various corresponding sections andparagraphs of this Agreement.

 

25.                                 Survival.  The covenants and agreementscontained in Sections 5 through 9 shall survive any termination of Executive’semployment with the Corporation.

 

26.                                 Arbitration.  Executive and the Corporationshall submit any disputes arising under this Agreement to an arbitration panelconducting a binding arbitration in Hartford, Connecticut or at such otherlocation as may be agreeable to the parties, in accordance with the NationalRules for the Resolution of Employment Disputes of the American ArbitrationAssociation in effect on the date of such arbitration (the “Rules”), andjudgment upon the award rendered by the arbitrator or arbitrators may beentered in any court having jurisdiction thereof; provided, however,that nothing herein shall impair the Corporation’s right to seek equitablerelief for any breach or threatened breach of Section 8 or Section 9.  The award of the arbitrators shall be finaland shall be the sole and exclusive remedy between the parties regarding any claims,counterclaims, issues or accountings presented to the arbitration panel.  The parties hereto further agree that thearbitration panel shall consist of one (1) person mutually acceptable tothe Corporation and Executive, provided that if the parties cannot agreeon an arbitrator within thirty (30) days of filing a notice of arbitration, thearbitration panel shall consist of three (3) persons, one selected by theCorporation, one selected by Executive (or his representative) and one selectedby the arbitrators so selected by the parties hereto, or if the parties heretocannot agree, selected by the manager of the principal office of the AmericanArbitration Association in Hartford County in the State of Connecticut.  Each party will pay for the fees andexpenses of its own attorneys, experts, witnesses, and preparation andpresentation of proofs and post-hearing briefs (unless the party prevails on aclaim for which attorney’s fees and expenses are recoverable under the Rulesand those amounts are included as part of the award).  Any action to enforce or vacate the arbitrator’s award shall begoverned by the federal Arbitration Act, if applicable, and

 

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otherwise by applicable state law.  If either the Corporation or Executivepursues any claim, dispute or controversy against the other in a proceedingother than the arbitration provided for herein, the responding party shall beentitled to dismissal or injunctive relief regarding such action and recoveryof all costs, losses and attorney’s fees related to such action.  Executive acknowledges and expressly agreesthat this arbitration provision constitutes a voluntary waiver of trial by juryin any action or proceeding to which Executive and the Corporation may beparties arising out of or pertaining to this Agreement.

 

 

THENEXT PAGE IS THE SIGNATURE PAGE

 

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**IN WITNESS WHEREOF**, the Corporation and Executive have duly executed this Agreement onthe dates set forth below.

 
|   | CORPORATION:                               |                     |
|--------|--------------------------------------------|--------------------------|
|   |                                       |                     |
|   | GENAISSANCE  PHARMACEUTICALS, INC.         | WITNESS:                 |
|   |                                       |                     |
|   |                                       |                     |
|   | By:                                        | /s/ Kevin Rakin          |   | /s/ Jennifer Barretta |
|   | Name:  Kevin Rakin                    | Name:  Jennifer Barretta |
|   | Its  President and Chief Executive Officer |                     |
|   |                                       |                     |
|   | Date:                                      | May 8, 2003              |   |   |
|   |                                       |                     |
|   | EXECUTIVE:                                 | WITNESS:                 |
|   |                                       |                     |
|   | /s/ Ben D. Kaplan                          |                     | /s/ Jennifer  Barretta |
|   | Name:  Ben D. Kaplan                       | Name:  Jennifer Barretta |
|   |                                       |                     |
|   |                                       |                     |
|   | Date:                                      | May  8, 2003             |   |   |
|        |                                            |                          |  |  |  |  |  |  |

 

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