8-K

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): May 21, 2008

Altus Pharmaceuticals Inc.
__________________________________________
(Exact name of registrant as specified in its charter)

Delaware	0-51711	04-3573277
_____________________ (State or other jurisdiction	_____________ (Commission	______________ (I.R.S. Employer
of incorporation)	File Number)	Identification No.)
640 Memorial Drive, Cambridge, Massachusetts		02139
_________________________________ (Address of principal executive offices)		___________ (Zip Code)

Registrant’s telephone number, including area code: 617-299-2900

Not Applicable
______________________________________________
Former name or former address, if changed since last report

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[  ]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[  ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[  ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[  ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

(a), (b) and (f): Not applicable.

(c): On May 22, 2008, Altus Pharmaceuticals Inc. (the "Company") announced that the Board of Directors has appointed Georges Gemayel, Ph.D. as the Company’s President and Chief Executive Officer and a member of its Board of Directors commencing on June 2, 2008 (the "Commencement Date"). Dr. Gemayel, age 47, was most recently an Executive Vice President at Genzyme Corporation responsible for its global transplant, renal, hospital and biosurgery businesses. Prior to joining Genzyme in 2003, Dr. Gemayel held positions of increasing responsibility over 16 years at Hoffman-LaRoche. Dr. Gemayel completed his doctorate in pharmacy (Pharm D) at St. Joseph University in Beirut and earned a Ph.D. in pharmacology at Paris-Sud University. Dr. Gemayel serves as a director of Adolor Corporation, a publicly-traded biotechnology company.

In connection with Dr. Gemayel’s appointment as President and Chief Executive Officer, the Company extended an offer lette r (the "Offer Letter") to Dr. Gemayel and entered into a Severance and Change in Control Agreement effective on the Commencement Date with Dr. Gemayel (the "Severance and Change in Control Agreement"). Pursuant to the terms of the Offer Letter, Dr. Gemayel will receive an initial annualized base salary of $540,000. Dr. Gemayel will also have the opportunity to earn an annual performance bonus of up to 50% (which may by increased at the discretion of the Company's Compensation Committee) of his earned salary, based on the achievement of a series of personal and Company objectives that the Company’s Compensation Committee and Dr. Gemayel will define annually. For 2008, such objectives will be recommended by Dr. Gemayel for the Board of Director’s review and approval within 30 days after the Commencement Date, and the performance bonus for 2008 will be awarded based on achievement of these objectives and prorated based on the Commencement Date. Pursuant to the Offer Letter, Dr. Gemayel is also entitled to participate in employee benefits offered by the Company to its executive employees.

In addition, on the Commencement Date, Dr. Gemayel will be granted stock options to purchase up to 900,000 shares of the Company's common stock at an exercise price per share equal to the closing price of the Company’s common stock on the Commencement Date. The total grant will be comprised of options to purchase 560,000 shares under the Company’s Amended and Restated 2002 Employee, Director and Consultant Stock Plan, as amended (the "2002 Stock Plan") and an inducement grant of a non-qualified option to purchase 340,000 shares. The inducement award will be granted in reliance upon NASDAQ Marketplace Rule 4350(i)(1)(A)(iv). Both the option grant under the 2002 Stock Plan and the inducement grant will have a ten-year term. The first 25 percent of all such options will vest on the first anniversary of Dr. Gemayel’s employment with the Company, and the remaining 75 percent will vest quarterly over the following three years, subject to continued employment or service through each relevant vesting date. The inducement award will be granted on substantially identical terms and conditions as those contained in the Company’s 2002 Stock Plan. Within one year following a Change in Control (as defined in the 2002 Stock Plan), in the event that Dr. Gemayel’s employment is terminated without Cause (as defined in the 2002 Stock Plan) or he resigns under certain circumstances set forth in the 2002 Stock Plan, Dr. Gemayel’s options will be fully vested and immediately exercisable as of the date of his last day of employment, unless the options have otherwise expired or been terminated pursuant to their terms or the terms of the 2002 Stock Plan.

Under the Severance and Change in Control Agreement, in the event of a termination of Dr. Gemayel’s employment without Cause or resignation with Good Reason, in each case within one year following a Change in Control (as such capitalized terms are defined in the Severance and Change in Control Agreement), Dr. Gemayel is entitled to receive the following:

• salary continuation of his then-current base salary for a period of 24 months;

• payment of an amount equal to two times his target bonus for the applicable year;

• outplacement assistance up to a maximum of $15,000; and

• continuation of health benefits for up to 18 months.


In the event of a termination without Cause in other circumstances or resignation with Good Reason, Dr. Gemayel is entitled to receive the following:

• salary continuation of his then-current base salary for a period of 12 months;

• payment, in the Company's discretion and subject to approval by the Compensation Committee, of an amount up to his target bonus for the applicable year, prorated according to length of service during the applicable year;

• in the Company's sole discretion and subj ect to approval by the Compensation Committee, acceleration of vesting of all, a portion, or none of the unvested shares underlying the option granted to Dr. Gemayel on the Commencement Date; and

• continuation of health benefits for up to 18 months, provided that, if Dr. Gemayel becomes eligible to receive substantially similar benefits under another health plan, the Company's obligation to continue such payments will cease.

Receipt of any benefits under the Severance and Change in Control Agreement at the time of termination will be conditioned on Dr. Gemayel executing a written release of the Company from any and all claims arising in connection with his employment. The Severance and Change in Control Agreement includes Dr. Gemayel's agreement not to compete with the Company for 12 months following termination.

(d): In connection with the appointment of Dr. Gemayel as President and Chief Executive Officer, the Board of Directors will appoint Dr. Gemayel as a Class I member of the Board of Directors to serve for a term expiring at the 2009 Annual Meeting of Stockholders. Dr. Gemayel will not serve on any committees of the Board of Directors.

The disclosure provided under Item 5.02(c) above is incorporated herein by reference.

(e): The disclosure provided under Item 5.02(c) above is incorporated herein by reference.

The descriptions of the Offer Letter and Severance and Change in Control Agreement are qualified in their entirety by the full text of Offer Letter and Severance and Change in Control Agreement, both of which are filed herewith as Exhibit 10.1 and 10.2, respectively.

Item 7.01 Regulation FD Disclosure.

On May 22, 2008, the Company issued a press release announcing the appointment of Dr. Gemayel as set forth in Item 5.02 of this Current Report on Form 8-K. A copy of the press release is furnished with this Current Report on Form 8-K and attached hereto as Exhibit 99.1. Exhibit 99.1 shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act.

Item 9.01 Financial Statements and Exhibits.

Exhibit No. Description

10.1 Offer Letter dated May 21, 2008 between Altus Pharmaceuticals Inc. and Georges Gemayel, Ph.D.

10.2 Severance and Change in Control Agreement dated as of June 2, 2008.

99.1 Press release issued by the Company on May 22, 2008.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	Altus Pharmaceuticals Inc.
May 27, 2008	By:	Jonathan I. Lieber
		Name: Jonathan I. Lieber
		Title: Senior Vice President, Chief Financial Officer and Treasurer

Exhibit Index

Exhibit No.	Description
10.1	Offer Letter dated May 21, 2008 between Altus Pharmaceuticals Inc. and Georges Gemayel, Ph.D.
10.2	Severance and Change in Control Agreement dated as of June 2, 2008
99.1	Press Release issued by the Company on May 22, 2008

EX-10.1

Exhibit 10.1

Altus Pharmaceuticals, Inc.

May 21, 2008

Georges Gemayel, Ph.D.
[Address]

Dear Georges:

We are pleased to extend to you an offer to join Altus Pharmaceuticals Inc. (“Altus” or the “Company”) as President and Chief Executive Officer and a member of the Board of Directors. Through the discussions the Board of Directors has had with you during the interview process, we have been impressed with your substantial pharmaceutical industry experience, track record of accomplishments, strong business intellect, and overall leadership skills. Our impressions have been reinforced by the extremely positive set of reference calls that we also conducted. We believe you are well qualified to assume the Chief Executive Officer role at Altus and have every confidence that you will be successful in this capacity.

Commensurate with this position, the Compensation Committee of the Board of Directors offers you the following exceptional compensation package. The position provides an initial annualized base salary of $540,000 which will be paid on a biweekly basis. Annually beginning in 2009, you will be eligible for salary increases at the discretion of the Compensation Committee. In addition to your base salary, you will have an opportunity to earn an initial target annual performance bonus of 50% of your earned salary based on achievement of a series of personal and Company objectives that the Board of Directors acting through the Compensation Committee and you will define annually. For 2008, objectives will be recommended by you for the Board’s review and approval thirty days after the Commencement Date (as defined below). The 2008 performance bonus will be awarded based on achievement against these objectives and prorated based on the Commencement Date. As part of the Compensation Committee’s annual executive compensation review process, the Committee will review the target bonus level and, at its discretion, may increase the target bonus opportunity consistent with market practices and Altus’ compensation philosophy.

The President and Chief Executive Officer position will provide you with an initial grant of stock options exercisable for a total of 900,000 shares of Altus common stock at an exercise price on the closing price of our common stock price as of your first day of employment. Your stock options will vest over a four-year schedule so long as you remain an employee. The first twenty-five percent of your shares will vest on your anniversary date, and the remaining seventy-five percent will vest quarterly over the remaining three years. Within 12 months following a Change in Control, in the event you are terminated without Cause or you resign for Good Reason, your unvested options will vest in full in accordance with our executive stock option agreements. In the event you are terminated without Cause or you resign for Good Reason in other circumstances, all, a portion or none of the unvested options may be accelerated to the date of termination at the discretion of the Company. The options will have a ten-year term and will be subject to customary terms and conditions set forth in a stock option agreement that we will provide to you. In addition to this initial grant, the Board of Directors would also plan to make annual stock option grants and/or other equity awards to you based on the performance of
Georges Gemayel
May 21, 2008
Page 2

the Company, commensurate with your position and consistent with market equity grant practices and the then existing stock option plan approved by the shareholders as administered in the discretion of the Compensation Committee.

In accordance with the terms of the enclosed Severance and Change in Control Agreement, you will also be entitled to severance at a rate equal to your then-current base salary (1) for twenty-four (24) months in the event Altus terminates your employment without Cause or you resign for Good Reason within one year following a Change in Control, or (2) for twelve (12) months in
the event Altus terminates your employment without Cause or you resign for Good Reason in other circumstances. You will be entitled to two (2) times your then-current target bonus in the event Altus terminates your employment without Cause or you resign for Good Reason within one year following a Change in Control. In the event Altus terminates your employment without Cause or you resign for Good Reason in other circumstances, you will be eligible, in the discretion of the Company, to receive a Separation Bonus not to exceed your target annual bonus for the year of termination prorated for the portion of the year you were employed. Your severance benefits will also include health insurance benefit continuation as set forth in the agreement and a customary non-competition covenant during the term of the applicable severance period.

As used in this letter, “Cause”, “Change in Control” and “Good Reason” have the meanings set forth in our customary stock option agreement and your Severance and Change in Control Agreement

Altus offers a competitive and comprehensive benefits program. All employees are eligible to participate in the program, which includes group health, dental, life, and long and short-term disability insurance. You are also eligible to participate in our matching 401k plan, in accordance with plan guidelines. You will also be entitled to four weeks of paid vacation annually, personal time and observed as well as floating holidays.

Your offer of employment is subject to your agreement to Altus’ standard employee non-disclosure and inventions agreement and the Severance and Change in Control Agreement. We have included a copy of these agreements with this offer. Please bring the signed copies with you on your first day.

Your offer of employment is also subject to completion of a customary background check. Please sign and return the consent forms so that we can initiate the process. In addition, the Federal government requires that we verify the employment eligibility of all new employees. On your first day, please bring two forms of identification (valid driver’s license, original birth certificate, passport, original social security card, etc) demonstrating you are legally eligible to work in the United States. This information is required to complete the INS (Immigration and Naturalization Service) form I-9.

Georges Gemayel
May 21, 2008
Page 3

We hope you find the Altus offer and position attractive and look forward to your favorable response. Please return one copy of this letter indicating your acceptance to me.

Sincerely,

/s/ David Pendergast
David Pendergast, Ph.D.
Executive Chairman

I accept the terms of employment offered in this letter.

Signature: /s/ Georges Gemayel

Date: May 21, 2008

Commencement Date: June 2, 2008

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 COBRA^1/ 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.

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

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

News Release Exhibit 99.1
Contact information:
John A. Jordan
Senior Director, Corporate Communications
617-299-2852

ALTUS PHARMACEUTICALS APPOINTS GEORGES GEMAYEL
CHIEF EXECUTIVE OFFICER AND MEMBER OF BOARD OF DIRECTORS

CAMBRIDGE, Mass. – May 22, 2008 — Altus Pharmaceuticals Inc. (NASDAQ: ALTU), today announced the appointment of Georges Gemayel, Ph.D. as Chief Executive Officer and a member of the Company’s Board of Directors, effective June 2, 2008. Dr. Gemayel joins Altus Pharmaceuticals from Genzyme Corporation where he was Executive Vice President and a company officer. Dr. David Pendergast, who was serving as Executive Chairman, will continue as Chairman of the Altus Board.

“Georges is the ideal person to lead Altus. He is a proven leader with extensive industry experience and skills spanning operations management, clinical development, regulatory strategy, corporate alliance management, product launch and marketing,” said Dr. David Pendergast, Chairman of Altus’ Board of Directors. “Throughout his tenures at Genzyme and Roche, Georges has demonstrated exceptional leadership and vision as well as the ability to deliver results by driving programs through clinical and operational challenges. He has a track record of successfully building commercial teams and working with collaborators to maximize product opportunities, and we are delighted that he will be guiding the Company forward.”

“I am honored to join Altus at this critical time in the Company’s history. I believe the Company’s technology, pipeline of protein therapeutics and enzyme replacement therapies hold tremendous clinical potential and value,” commented Dr. Gemayel. “I look forward to working with the entire Altus team on achieving our near-term goals, driving Trizytek™ toward commercialization and building long-term value for our shareholders.”

Dr. Gemayel joined Genzyme in 2003. He was responsible for the company’s therapeutics, transplant, renal and biosurgery businesses. Before he joined Genzyme, Dr. Gemayel worked for the health care company Hoffman-LaRoche for 16 years. There he served as vice president of the U.S. Specialty Care Business with responsibilities for oncology, transplantation, hepatitis, HIV and dermatology. He also was the general manager of Hoffman-LaRoche Portugal. Dr. Gemayel completed his doctorate in pharmacy at St. Joseph University in Beirut and earned a Ph.D. in pharmacology at Paris-Sud University.

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In connection with joining the Company, Dr. Gemayel will be granted stock options to purchase up to 900,000 shares of common stock of Altus Pharmaceuticals at an exercise price per share equal to the closing price of the Company’s common stock on June 2, 2008, the first day of Dr. Gemayel’s employment with the Company. The total grant will be comprised of options to purchase 560,000 shares under the Company’s stock option plan and an inducement grant of a non-qualified option to purchase 340,000 shares. The inducement award was granted in reliance upon NASDAQ Marketplace Rule 4350 (i)(1)(A)(iv). Both the option grant under the stock option plan and the inducement grant will have a ten-year term. The first 25 percent of all such options will vest on the first anniversary of Dr. Gemayel’s employment with the Company, and the remaining 75 percent will vest quarterly over the following three years, subject to continued employment or service through each relevant vesting date. The inducement award will be granted on substantially identical terms and conditions as those contained in the Company’s stock option plan.

About Altus Pharmaceuticals Inc.
Altus Pharmaceuticals, headquartered in Cambridge, MA, is a biopharmaceutical company focused on the development and commercialization of oral and injectable protein therapeutics for patients with gastrointestinal and metabolic disorders. The Company’s website is http://www.altus.com. Trizytek™ is a trademark of Altus Pharmaceuticals.

Safe Harbor Statement
Certain statements in this news release concerning Altus’ business are considered “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, those relating to the employment of Dr. Georges Gemayel. Any or all of the forward-looking statements in this press release may turn out to be wrong. They can be affected by inaccurate assumptions Altus might make or by known or unknown risks and uncertainties, including, but not limited to uncertainties as to the future success of ongoing and planned clinical trials; and the unproven safety and efficacy of products under development. Consequently, no forward-looking statement can be guaranteed, and actual results may vary materially. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in Altus’ reports to the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended December 31, 2007. However, Altus undertakes no obligation to publicly update forward-looking statements, whether because of new information, future events or otherwise.

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