Exhibit 10.4


 


SEVERANCE AGREEMENT


 


This Agreement is entered into as of the 1st day of December, 2008 (the
“Effective Date”) by and between
ImmunoGen, Inc., a Massachusetts corporation (the “Company”)
and James J. O’Leary, M.D. (the “Executive”).


 


WHEREAS, the Company recognizes that the Executive’s service to the
Company is very important to the future success of the Company;


 


WHEREAS, the Executive desires to enter into this Agreement to provide
the Executive with certain financial protection in the event that his
employment terminates under certain conditions following a change in control of
the Company; and


 


WHEREAS the Board of Directors of the Company (the “Board”) 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 the Executive
hereby agree as follows:


 


1.             Definitions.


 


(a)           Cause.  For
purposes of this Agreement, “Cause”
shall mean that the Executive has (i) intentionally committed an act or
omission that materially harms the Company; (ii) been grossly negligent in
the performance of the Executive’s duties to the Company; (iii) willfully
failed or refused to follow the lawful and proper directives of the Board or
the CEO; (iv) been convicted of, or pleaded guilty or nolo
contendre, to a felony; (v) committed an act involving moral
turpitude; (vi) committed an act relating to the Executive’s employment or
the Company involving, in the good faith judgment of the Board, material fraud
or theft; (vii) breached any material provision of this Agreement or any
nondisclosure or non-competition agreement between the Executive and the
Company, as all of the foregoing may be amended prospectively from time to
time; or (viii) breached a material provision of any code of conduct or
ethics policy in effect at the Company, as all of the foregoing may be amended
prospectively from time to time.


 


(b)           Change in Control.  For
purposes of this Agreement, a “Change in Control”
shall mean the occurrence of any of the following events; provided  that
“Change in Control” shall be interpreted in a manner, and limited to the extent
necessary, so that it will not cause adverse tax consequences for either party
with respect to Section 409A of the Internal Revenue Code of 1986, as
amended (the “Code”), and Treasury
Regulations 1.409A-3(i)(5), and any successor statute, regulation and
guidance thereto:


 


(i)            Ownership.  Any “Person” (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934,
as amended) becomes the “Beneficial Owner” (as defined in Rule 13d-3 under
said Act), directly or indirectly, of securities of the Company representing
50% or more of the total voting power represented by the Company’s then


 


Executive Severance Agreement (18)


 

















 


outstanding voting securities (excluding for this purpose any such
voting securities held by the Company or its Affiliates (as defined in the
Company’s 2006 Employer, Director and Consultant Equity Incentive Plan) or by
any employee benefit plan of the Company) pursuant to a transaction or a series
of related transactions which the Board does not approve; or


 


(ii)           Merger/Sale
of Assets.  (A) A merger or
consolidation of the Company whether or not approved by the Board, other than a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into voting securities of the
surviving entity or the parent of such corporation) at least 50% of the total
voting power represented by the voting securities of the Company or such
surviving entity or parent of such corporation, as the case may be,
outstanding immediately after such merger or consolidation; or (B) the
stockholders of the Company approve an agreement for the sale or disposition by
the Company of all or substantially all of the Company’s assets; or


 


(iii)          Change in Board Composition.  A change in the composition of the Board, as
a result of which fewer than a majority of the directors are Incumbent
Directors.  “Incumbent Directors” shall
mean directors who either (A) are directors of the Company as of November 11,
2006, or (B) are elected, or nominated for election, to the Board with the
affirmative votes of at least a majority of the Incumbent Directors at the time
of such election or nomination (but shall not include an individual whose
election or nomination is in connection with an actual or threatened proxy contest
relating to the election of directors to the Company).


 


(c)           Disability.  For purposes of this
Agreement, “Disability”
shall mean that the Executive (i) is unable to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment which can be expected to result in death or can be expected to last
for a continuous period of not less than twelve (12) months, or (ii) is,
by reason of any medically determinable physical or mental impairment which can
be expected to result in death or can be expected to last for a continuous
period of not less than twelve (12) months, receiving income replacement
benefits for a period of not less than three (3) months under a Company-sponsored
group disability plan.  Whether the Executive has a Disability will
be determined by a majority of the Board based on evidence provided by one or
more physicians selected by the Board and approved by the Executive, which
approval shall not be unreasonably withheld.


 


(d)           Good Reason.  For purposes of this
Agreement, “Good Reason” shall mean the
occurrence of one or more of the following without the Executive’s consent: (i) a
change in the principal location at which the Executive performs his duties for
the Company to a new location that is at least forty (40) miles from the
prior location; (ii) a material change in the Executive’s authority,
functions, duties or responsibilities as an executive of the Company, which would cause his position with
the Company to become of less responsibility, importance or scope than his highest
position with the Company at any time from the date of this Agreement to
immediately prior to the Change in Control, provided, however,
that such material change is not in connection with the termination of the
Executive’s employment by the Company for Cause or death or Disability and
further provided that it shall not be considered a material change if the
Company becomes a subsidiary of another entity and the Executive continues to
hold a position in the subsidiary that is at least as high as the highest
position he held with the Company at any time from the date of this Agreement
to


 


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immediately
prior to the Change in Control; (iii) a material reduction in the Executive’s
annual base salary or (iv) a material reduction in the Executive’s target
annual bonus as compared to the target annual bonus set for the previous fiscal
year.


 


2.             Term of Agreement.  The
term of this Agreement (the “Term”) shall commence on the Effective Date and
shall continue in effect for two (2) years; provided, however,
that commencing on second anniversary of the Effective Date and continuing each
anniversary thereafter, the Term shall automatically be extended for one (1) additional
year unless, not later than nine (9) months before the conclusion of
the Term, the Company or the Executive shall have given notice not to extend
the Term; and further  provided, however, that if a Change
in Control shall have occurred during the Term, the Term shall expire on the
last day of the twenty-fourth (24th)
month following the month in which such Change in Control occurred.  Notice of termination or termination of this
Agreement shall not constitute Cause or Good Reason (both terms as defined
above).


 


3.             Termination; Notice; Severance Compensation.


 


(a)           In
the event that within a period of two (2) months before or two (2) years
following the consummation of a Change in Control the Company elects to
terminate the Executive’s employment other than for Cause (but not including
termination due to the Executive’s Disability), then the Company shall give the
Executive no less than sixty (60) days advance notice of such termination
(the “Company’s Notice Period”); provided  that the Company may
elect to require the Executive to cease performing work for the Company so long
as the Company continues the Executive’s full salary and benefits during the
Company’s Notice Period.


 


(b)           In
the event that within a period of two (2) months before or two (2) years
following the consummation of a Change in Control the Executive elects to
terminate his employment for Good Reason, then the Executive shall give the
Company no less than thirty (30) days and no more than sixty (60)
days advance notice of such termination (the “Executive’s Notice Period”); provided
that the Company may elect to require the Executive to cease performing
work for the Company so long as the Company continues the Executive’s full
salary and benefits during the Executive’s Notice Period.  In order to effect a termination for Good
Reason pursuant to this Agreement, the Executive must notice his intent to
terminate for Good Reason not later than ninety (90) days following the
occurrence of the Good Reason.


 


(c)           In
the event that within a period of two (2) months before or two (2) years
following the consummation of a Change in Control the Executive’s employment
with the Company is terminated by the Company other than for Cause (but not
including termination due to the Executive’s death or Disability), or by the
Executive for Good Reason, then, contingent upon the Executive’s execution of a
release of claims against the Company in a form reasonably acceptable to the
Company (the “Release”) the Executive shall
be entitled to, in addition to any amounts due to the Executive for services
rendered prior to the termination date:


 


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(i)  the Executive’s
target annual bonus for the fiscal year in which such termination occurs at one
hundred percent (100%) of such target annual bonus, pro-rated by the
number of calendar days in which the Executive is employed by the Company
during the applicable year, including any applicable Notice Period, and less
any amount of the target annual bonus for the applicable year previously paid
to the Executive, which shall be paid no later than sixty (60) days after the
Executive’s termination of employment, provided  that the Release
is executed and effective by then; and


 


(ii)  a lump sum payment from the
Company in an amount equal to one and one-half (1.5) times the Executive’s
Annual Salary, which shall be paid no later than sixty (60) days after the
Executive’s termination of employment, provided  that the Release
is executed and effective by then;


 


(iii)  all outstanding options,
restricted stock and other similar rights held by the Executive, which shall
become one hundred percent (100%) vested; and


 


(iv)  continuation of medical insurance coverage for the Executive
and the Executive’s family, subject to COBRA and subject to the Executive’s
payment of a premium co-pay related to the coverage that is no less favorable
than the premium co-pay charged to active employees of the Company electing the
same coverage, for eighteen (18) months from the Separation Date; provided
that the Company shall have no obligation to provide such coverage if the
Executive fails to elect COBRA benefits in a timely fashion or if the Executive
becomes eligible for medical coverage with another employer.


 


For
purposes of this Agreement, “Annual Salary” shall mean the Executive’s annual base
salary then in effect or, if higher, in effect at the time of the Change in
Control, excluding reimbursements and amounts attributable to stock options and
other non-cash compensation; and the “Severance Compensation”
shall mean the compensation set forth in (ii), (iii), and (iv) above.


 


(d)           Notwithstanding
any other provision with respect to the timing of payments, if, at the time of the
Executive’s termination, the Executive is deemed to be a “specified employee”
(within the meaning of Code Section 409A, and any successor statute,
regulation and guidance thereto) of the Company, then limited only to the
extent necessary to comply with the requirements of Code Section 409A, any
payments to which the Executive may become entitled under this Agreement 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 the Executive’s employment, at which time the Executive
shall be paid an aggregate amount equal to the accumulated, but unpaid,
payments otherwise due to the Executive under the terms of this Agreement.


 


(e)           If
any payment or benefit the Executive would receive under this Agreement, when
combined with any other payment or benefit the Executive receives pursuant to a
Change in Control (“Payment”) would (i) constitute a “parachute payment”
within the meaning of Code Section 280G, 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 less amount 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 the Executive’s
receipt, on an after-tax basis, of the 


 


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greater
amount of the Payment, notwithstanding that all or some portion of the Payment
may be subject to the Excise Tax.  The Company
shall determine in good faith which payment(s) or benefit(s) to
reduce based on what provides the best economic result for the Executive.  The Company shall provide the Executive with
sufficient information to make such determination and to file and pay any
required taxes.


 


4.             No Duplication of Compensation.  The
Severance Compensation shall replace, and be provided in lieu of, any severance
or similar compensation that may be provided to the Executive under any other
agreement or arrangement in relation to termination of employment; provided,
however, that this prohibition against duplication shall not be
construed to otherwise limit the 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.


 


5.             No Mitigation.  If
the Executive’s employment with the Company terminates following a Change in
Control, the Executive is not required to seek other employment or to attempt
in any way to reduce any amounts payable to the Executive by the Company
pursuant to Section 3 or Section 15. 
Except as set forth in Section 4, the amount of any payment or
benefit provided for in this Agreement shall not be reduced by any compensation
earned by the Executive as the result of employment by another employer, by
retirement benefits, by offset against any amount claimed to be owed by the
Executive to the Company, or otherwise.


 


6.             Confidentiality, Non-Competition, and
Assignment of Inventions.  The Company’s obligations under this
Agreement are contingent upon the Executive’s execution of the Company’s
Proprietary Information, Inventions, and Competition Agreement (the “Proprietary
Information Agreement”).  The parties
agree that the obligations set forth in the Proprietary Information Agreement
shall survive termination of this Agreement and termination of the Executive’s
employment, regardless of the reason for such termination.


 


7.             Enforceability.  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.  No invalidity or
unenforceability of any provision contained herein shall affect any other portion
of this Agreement.


 


8.             Notices.  Except as otherwise
specifically provided herein, any notice required or permitted by this
Agreement shall be in writing and shall be delivered as follows with notice
deemed given as indicated: (i)  by personal delivery when delivered
personally; (ii) by overnight courier upon written verification of
receipt; (iii) by telecopy or facsimile transmission upon acknowledgment
of receipt of electronic transmission; or (iv) by certified or registered
mail, return receipt requested, upon verification of receipt.  Notices to the Executive shall be sent to the
last known address in the Company’s records or such other address as the Executive
may specify in writing.  Notices to the
Company shall be sent to the Company’s CEO and Lead Director, or to such other
Company representative as the Company may specify in writing.


 


9.             Claims for Benefits.  All
claims by the Executive for benefits under this Agreement shall be directed to
and determined by the Board and shall be in writing.  Any denial by the Board of a claim for
benefits under this Agreement shall be delivered to the Executive in writing
and shall set forth the specific reasons for the denial and the specific
provisions of this Agreement relied upon. 
The 


 


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Board
shall afford a reasonable opportunity to the Executive for a review of the
decision denying a claim and shall further allow the Executive to appeal to the
Board a decision of the Board within sixty (60) days after notification by
the Board that the Executive’s claim has been denied.


 


10.           Modifications and Amendments.  The
terms and provisions of this Agreement may be modified or amended only by
written agreement executed by the Company and the Executive.  The Company and the Executive agree that they
will jointly execute an amendment to modify this Agreement to the extent
necessary to comply with the requirements of Code Section 409A, or any
successor statute, regulation and guidance thereto; provided  that
no such amendment shall increase the total financial obligation of the Company
under this Agreement.


 


11.           Waivers and Consents.  The
terms and provisions of this Agreement may be waived, or consent for the
departure therefrom granted, only by a 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.


 


12.           Binding Effect; Assignment.  The
Agreement will be binding upon and inure to the benefit of (a) the heirs,
executors and legal representatives of the Executive upon the Executive’s death
and (b) any successor of the Company. 
Any such successor of the Company will be deemed substituted for the
Company under the terms of the Agreement for all purposes.  For this purpose, “successor” means any
person, firm, corporation or other business entity which at any time, whether
by purchase, merger or otherwise, directly or indirectly acquires all or
substantially all of the assets or business of the Company.  None of the rights of the Executive to
receive any form of compensation payable pursuant to the Agreement may be
assigned or transferred except by will or the laws of descent and
distribution.  Any other attempted
assignment, transfer, conveyance or other disposition of the Executive’s right
to compensation or other benefits will be null and void.


 


13.           Governing Law.  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.


 


14.           Jurisdiction and Service of Process.  Any
legal action or proceeding with respect to this Agreement shall be brought in
the courts of the Commonwealth of Massachusetts or of the United States of
America for the District of Massachusetts. 
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 jurisdiction of the aforesaid courts.


 


15.           Attorneys’ Fees.  The
Company shall pay to the Executive all legal fees and expenses incurred by the
Executive in disputing in good faith any issue hereunder relating to the
termination of the Executive’s employment, in seeking in good faith to obtain or
enforce any benefit or right provided by this Agreement.  Such payments shall be made within five (5) business
days after delivery of the Executive’s written requests for payment accompanied
with such evidence of fees and expenses incurred as the Company reasonably may
require.


 


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16.           Withholding.  The Company is authorized to withhold, or to
cause to be withheld, from any payment or benefit under the Agreement the full
amount of any applicable withholding taxes.


 


17.           Tax Consequences.  The
Company does not guarantee the tax treatment or tax consequences associated
with any payment or benefit arising under this Agreement.


 


18.           Acknowledgment.  The Executive acknowledges that he has had
the opportunity to discuss this matter with and obtain advice from his private
attorney, has had sufficient time to, and has carefully read and fully
understands all the provisions of the Agreement, and is knowingly and
voluntarily entering into the Agreement.


 


19.           Counterparts.  This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.


 


20.           Section 409A.  The parties hereto intend that this Agreement
comply with the requirements of Code Section 409A and related regulations
and Treasury pronouncements.  If any
provision provided herein results in the imposition of an additional tax under
the provisions of Code Section 409A, the Executive and the Company agree
that such provision will be reformed to avoid imposition of any such additional
tax in the manner that the Executive and the Company mutually agree is
appropriate to comply with Code Section 409A.


 


 


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


 


	
   

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  IMMUNOGEN, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Mitchel Sayare

  
	
   

  	
  Name:
  Mitchel Sayare, Ph.D.

  
	
   

  	
  Title:
  Chairman and Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EXECUTIVE:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ James O’Leary

  
	
   

  	
  Name: James J. O’Leary, M.D.

  



 


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