Exhibit 10.16

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of
November 15, 2015 (the “Effective Date”) by and between Egalet Corporation, a
Delaware corporation (the “Company”) and Paul C. Varki J.D, M.P.H (the
“Executive”).

 

WITNESSETH:

 

WHEREAS, the Company desires to employ the Executive, and the Executive desires
to be employed by the Company, each upon the terms set forth herein.

 

NOW, THEREFORE, in consideration of the mutual promises and covenants contained
herein and intending to be legally bound hereby, the Company and the Executive
agree as follows.

 

1.           Employment. The Company hereby agrees to employ the Executive, and
the Executive hereby accepts employment by the Company, for the period and upon
the terms and conditions contained in this Agreement.

 

2.           Term. The Executive’s term of employment with the Company under
this Agreement shall begin on the Effective Date and shall continue on an
at-will basis until that employment ceases in accordance with Section 6 for any
reason (the “Term”).

 

3.           Office and Duties.

 

(a)           During the Term, the Executive shall serve as the Senior Vice
President and General Counsel of the Company, as well as in any other position
to which the Executive is appointed by the Company’s Board of Directors (the
“Board”). The Executive shall report to the Company’s Chief Executive Officer or
his designee(s)] and shall perform such duties and have such responsibilities as
the Company’s Chief Executive Offi9er or his designee(s) may determine from time
to time and which are consistent with Executive’s then current position with the
Company.

 

(b)           During the Term, the Executive shall devote all of his working
time, energy, skill and best efforts to the performance of his duties hereunder
in a manner that will faithfully and diligently further the business and
interests of the Company.

 

(c)           During the Te1m, the Executive shall not be engaged in any
business activity which, in the reasonable judgment of the Board, conflicts with
the Executive’s duties hereunder, whether or not such activity is pursued for
pecuniary advantage. Should the Executive wish to provide any services to any
other person or entity other than the Company or to serve on the board of
directors of any other entity or organization, the Executive shall submit a
written request to the Board for consideration and approval by the Board in its
sole discretion.

 

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4.           Compensation.

 

(a)           For all of the services rendered by the Executive hereunder during
the Term, the Executive shall receive an a1111ual base salary of $340,000 (the
“Base Salary”), payable in accordance with the Company’s regular payroll
practices in effect from time to time. The Base Salary will be reviewed on or
about December 1, 2016 and annually thereafter by the Board to determine if any
increase is appropriate, and if Executive’s Base Salary is increased, then the
term “Base Salary” as used in this Agreement shall mean the amount of the
Executive’s Base Salary then in effect at the applicable time.

 

(b)           During the Term, the Executive shall be eligible to receive an
annual bonus (pro-rated for the first fiscal year of the Term) with a target
amount equal to 35% of the Base Salary (the “Annual Bonus”), in accordance with
the terms and conditions of the Annual Incentive Bonus Plan attached hereto as
Exhibit A, as amended from time to time. Subject to the Executive’s continued
employment through the payment date (except as otherwise provided in this
Agreement), the Annual Bonus, if any, shall be paid to the Executive on the date
the Company pays bonuses to its executives generally for the year to which such
Annual Bonus relates

 

(c)           During the Term, the Executive shall be entitled to participate in
the Company’s employee benefit plans, including without limitation, any health,
dental, vision and 401(k) plans maintained by the Company, on the same terms and
conditions as may from time to time be applicable to the Company’s other
executive officers, as such employee benefit plans may be in place from time to
time.

 

(d)           The Executive shall be entitled to a minimum of twenty (20) days
of vacation per year (prorated for any partial year worked), in accordance with
Company’s policy as in effect from time to time. The Executive shall also be
entitled to sick days and paid holidays in accordance with the Company’s policy
as in effect from time to time.

 

(e)           During the Term, the Executive shall be reimbursed by the Company
for all necessary and reasonable expenses, professional dues, continuing
education fees including without limitation any fees and expenses related to the
maintenance of professional licenses, and membership dues incurred by him in
connection with the performance of his duties hereunder. The Executive shall
keep an itemized account of such expenses, together with vouchers and/or
receipts verifying the same. Any such expense reimbursement will be made in
accordance with the Company’s policies governing reimbursement of expenses as
are in effect from time to time.

 

(f)           All payments and benefits made pursuant to this Agreement shall be
subject to such withholding as the Company reasonably believes is required by
any applicable federal, state, local or foreign law.

 

5.           Representations of Executive. The Executive represents to the
Company that (i) there are no restrictions, agreements or understandings
whatsoever to which the Executive is a party that would prevent, or make
unlawful, his execution of this Agreement and his employment hereunder; (ii) his
execution of this Agreement and his employment hereunder shall not constitute a
breach of any contract, agreement or understanding, oral or written, to which he
is a party, or by which he is bound, and (iii) he is of full capacity and free
and able to execute this Agreement and to enter into employment with the
Company.

 

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6.           Termination.  The Term shall continue until the termination of the
Executive’s employment with the Company as provided below.

 

(a)           Death or Disability.  If the Executive dies or becomes Disabled,
the Term and the Executive’s employment with the Company shall immediately
terminate. Upon such a termination of employment, the Company shall

 

(i)           pay to the Executive (or his estate, beneficiary or legal
representative, as the case may be), within thirty (30) days following such
termination of employment, all accrued but unpaid Base Salary and all accrued
but unused vacation;

 

(ii)           reimburse the Executive (or his estate, beneficiary or legal
representative, as the case may be) for all reimbursable expenses that have not
been reimbursed as of such termination of employment, with such reimbursement to
occur in accordance with the procedures set forth in Section 4(e); and

 

(iii)           pay the Executive any earned but unpaid annual bonus for the
year immediately preceding the year of termination at the time the Company pays
bonuses with respect to such year to its executives generally.

 

For purposes of this Agreement, “Disabled” means that in the opinion of a
qualified physician, mutually acceptable to the Company and the Executive, by
reason of any medically determinable physical or mental impairment that can be
expected to result in death or can be expected to last for a continuous period
of not less than twelve (12) months, the Executive (x) is unable to engage in
any substantial gainful activity or (y) has been receiving income replacement
benefits for a period of not less than three (3) months under an accident and
health plan covering employees of the Company. The termination of employment
described herein shall not affect the Executive’s right to continued eligibility
to disability benefits under the Company’s long-term disability coverage or
plan.

 

(b)           For Cause. During the Term, the Company may terminate the
Executive’s employment for Cause upon written notice. Upon such a termination of
employment, the Executive shall be entitled to only those benefits described in
clauses (i) and (ii) of Section 6(a). For purposes of this Agreement, “Cause”
means

 

(i)           a material breach of this Agreement by the Executive that is not
susceptible to remedy or cure, or if susceptible to remedy or cure, is not
remedied or cured to the satisfaction of the Board within ten (10) business days
following written notice from the Board to the Executive specifying the manner
in which the Executive has breached this Agreement and, if applicable, the
specific remedy or cure sought;

 

(ii)           the commission by the Executive of a felony or a crime involving
moral turpitude (whether or not related to the Executive’s employment), or any
other act or omission involving dishonesty or fraud with respect to the Company
or any of its affiliates or causing material harm to the standing or reputation
of the Company, or the Executive’s drug abuse or repeated intoxication; or 

 

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(iii)           the Executive’s failure to perform his duties hereunder other
than by reason of death or Disability, after written notice from the Board
specifying the manner in which the Executive has failed to perform his duties
and, if such failure is susceptible to cure, the failure of the Executive to
cure such non-pe1formance to the satisfaction of the Board within ten (10)
business days following such written notice, including, if applicable, the
specific remedy or cure sought.

 

(c)           Without Cause. During the Term, the Company may terminate the
Executive’s employment with the Company at any time without Cause upon thirty
(30) days’ prior written notice; provided,  however, that during such notice
period, the Board, in its sole discretion, may -relieve the Executive of all of
his duties, responsibilities and authority with respect to the Company and may
restrict Executive’s access to Company property; provided,  further, that the
Board’s exercise of such discretion shall not constitute Good Reason (as defined
below). Upon such a termination of employment, the Company shall

 

(i)           provide the Executive with those benefits described in clauses (i)
and (ii) of Section 6(a);

 

(ii)           pay the Executive any earned but unpaid annual bonus for the year
immediately preceding the year of te1mination at the time the Company pays
bonuses with respect to such year to its executives generally;

 

(iii)           continue providing the Executive with Base Salary for a period
of 12 months following the date of such termination of employment (the
“Severance Period”), with such Base Salary to be paid in accordance with the
Company’s regular payroll practice as if no such termination of employment had
occurred; provided,  however, that the Executive’s right to receive the payments
set forth in this clause (ii) of Section 6(c) shall be conditioned on the
Executive’s continued compliance with Sections 8 and 9 hereof and such payments
shall not begin until the Executive signs and does not subsequently revoke a
release of claims within sixty (60) days following such termination of
employment, in substantially the form attached hereto as Exhibit B; provided,
 further, that if such sixty (60) day period spans two calendar years, any
payment set forth in this Section 6(c)(ii) that, but for this proviso,
would have been paid prior to the Company’s first payroll date in such second
calendar year, shall not be paid until such payroll date (but only to the extent
required to comply with Section 409A of the Internal Revenue Code of 1986, as
amended (the “Code”));

 

(iv)           during the po11ion of the Severance Period during which the
Executive and the Executive’s eligible dependents are eligible for COBRA
coverage, reimburse the Executive and the Executive’s eligible dependents for
their COBRA premiums less any amounts that the Executive would have been
required to contribute for coverage under the Company’s health plans had the
Executive remained employed by the Company, with such reimbursement to occur in
accordance with the procedures set forth in Section 4(e); provided,  however,
that if, at any time during the Severance Period, the Executive and the
Executive’s eligible dependents cease to be eligible for COBRA coverage (except
as a result of Executive’s becoming eligible for coverage under the medical
plans of a subsequent employer), the Company shall reimburse the Executive all
reasonable premium costs incurred by the Executive to provide private health
insurance coverage for the Executive and the Executive’s eligible dependents
that

 

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is substantially equivalent to the health insurance by which the Executive and
the Executive’s eligible dependents were covered on the date of the Executive’s
termination less any amounts that the Executive would have been required to
contribute for such coverage had the Executive remained employed by the Company,
until the earlier of (x) the termination of the Severance Period and (y) the
date on which the Executive becomes eligible for coverage under the medical
plans of a subsequent employer; and

 

(v)           provide any stock-based compensation due to the Executive pursuant
to any written agreement between the Executive and the Company, on the te1ms and
conditions set forth therein.

 

(d)           Termination by Executive for Good Reason. During the Term, the
Executive may resign his employment for Good Reason. Upon such a termination,
the Executive shall be entitled to those benefits described in Section 6(c) as
though the Executive had been terminated by the Company without Cause. For
purposes of this Agreement, “Good Reason” means the occurrence of any of the
following circumstances:

 

(i)           a material diminution of the Executive’s authorities, duties,
responsibilities or status (including offices, titles or reporting
relationships) as an employee of the Company from those then in effect or the
assignment to the Executive of duties or responsibilities inconsistent with his
then current position;

 

(ii)           the Company’s relocation of the Executive’s principal job
location or office that increases the Executive’s one-way commute by more than
fifty (50) miles; or

 

(iii)           a reduction in the Executive’s Base Salary or benefits (other
than a reduction in benefits that applies to the Executive and all other
similarly positioned employees);

 

provided, that the events set forth in items (i), (ii) and (iii) of this Section
6(d) occur without the Executive’s express written consent; and provided
further, that that no such occurrence of any of the events set forth in items
(i), (ii) and (iii) of this Section 6(d) shall constitute Good Reason unless the
Executive notifies the Company in writing of his intent to resign for Good
Reason within 30 days following the occurrence of such circumstance and the
Company fails to cure such circumstances within 30 days following receipt of
such notice.

 

(e)           Termination by Executive without Good Reason. During the Term, the
Executive may resign his employment without Good Reason upon ninety (90) days
prior written notice. Upon such a termination of employment, the Executive shall
be entitled to only those benefits described in clauses (i) and (ii) of Section
6(a).

 

(f)           Termination by the Company without Cause or by the Executive for
Good Reason within 24 Months after a Change in Control. Notwithstanding anything
herein to the contrary, if, during the Term, the Executive’s employment is
terminated by the Company without Cause or by the Executive for Good Reason, in
each case, within 24 months after a Change in Control, the Executive shall be
entitled to those benefits described in Section 6(c);

 

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provided that for purposes of applying clauses (ii) and (iii) of Section 6(c),
“Severance Period” shall be a period of 24 months following the date of such
termination of employment.

 

For purposes of this Agreement, “Change in Control” means, after the Effective
Date (and not including the initial public offering of the Company, which shall
not be treated as a Change in Control for purposes of this Agreement), any of
the following events: (A) a “person” (as such term in used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the “1934 Act”)),
other than a trustee or other fiduciary holding securities under an employee
benefit plan of the Company or a corporation owned, directly or indirectly, by
the stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company, is or becomes the “beneficial owner” (as
defined in Rule 13D-3 under the 1934 Act), directly or indirectly, of securities
of the Company representing fifty percent (50%) or more of the combined voting
power of the Company’s then outstanding securities; (B) during any period of two
consecutive years, individuals who at the begiru1ing of such period constitute
the Board and any new director (other than a director designated by a person who
has entered into an agreement with the Company to effect a transaction described
in clauses (A), (C) or (D) hereof) whose election by the Board or nomination for
election by the Company’s stockholders was approved by a vote of at least
two-thirds of the directors then still in office who either were directors at
the beginning of the period or whose election or nomination for election was
previously approved, cease for any reason to constitute a majority thereof; (C)
the Company merges or consolidates with any other corporation, other than in a
merger or consolidation that · 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) at least fifty percent (50%) of the combined voting power of
the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation; or (D) the complete liquidation
of the Company or the sale or other disposition of all or substantially all of
the Company’s assets; provided that no event shall constitute a Change in
Control hereunder unless such event is also a “change in control event” as
defined in Section 409A of the Code.

 

(g)           Any severance or termination pay granted in this Section 6 will be
the sole and exclusive remedy, compensation or benefit due to the Executive or
his estate upon any termination of the Executive’s employment (without limiting
the Executive’s rights under any disability, life insurance or deferred
compensation arrangement in which the Executive participates at the time of such
termination of employment).

 

7.           Certain Company Remedies.   The Executive acknowledges that his
promised services and covenants, including with9ut limitation the covenants in
Sections 8 and 9 hereof, are of a special and unique character, which give them
peculiar value, the loss of which cannot be reasonably or adequately compensated
for in an action at law, and that, in the event there is a breach hereof by the
Executive, the Company will suffer irreparable harm, the amount of which will be
impossible to ascertain. Accordingly, the Company shall be entitled, if it so
elects, to institute and prosecute proceedings in any court of competent
jurisdiction, either at law or in equity, to obtain damages for any breach of
this Agreement, or to enjoin the Executive from committing any act in breach of
this Agreement. The remedies granted to the Company in this Agreement are
cumulative and are in addition to remedies otherwise available to the Company at
law or in equity. If the Executive violates any of the restrictions contained in
this Agreement,

 

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the restrictive period shall not run in favor of the Executive from the time of
commencement of any such violation until such time as such violation shall be
cured by the Executive to the satisfaction of the Company.

 

8.           Restrictive Covenants.

 

(a)           Confidentiality. During the Term and at all times thereafter, the
Executive shall, and shall cause his or her affiliates and representatives to
keep confidential and not disclose to any other person or entity or use for his
own benefit or the benefit of any other person or entity any confidential
proprietary information, technology, know-how, trade secrets (including all
results of research and development), product formulas, industrial designs,
franchises, inventions or other intellectual property regarding the Company oi
its business and operations (“Confidential Information”) in his possession or
control. The obligations of the Executive under this Section 8(a) shall not
apply to Confidential Information which (i) is or becomes generally available to
the public without breach of the commitment provided for in this Section; (ii)
is required to be disclosed by law, order or governmental authority; (iii)
information that is independently developed by the Executive after termination
of all employment with the Company or its affiliates, without the use of or
reliance on any Confidential Information and (iv) information which becomes
known to the Executive after termination of all employment with the Company or
its affiliates, on a non-confidential basis from a third-party source if such
source was not subject to any confidentiality obligation; provided,  however,
that, in case of clause (ii), the Executive shall notify the Company as early as
reasonably practicable prior to disclosure to allow the Company or its
affiliates to take appropriate measures to preserve the confidentiality of such
Confidential Information. During the Term and at all times thereafter, the
Executive shall, and shall cause his affiliates and his representatives to, keep
confidential and not disclose to any other person or entity any of the terms of
this Agreement, except as required by applicable law, in connection with the
enforcement by the Executive of his rights hereunder.

 

(b)           Non-Competition; Non-Solicitation.

 

(i)           During the period beginning on the Effective Date and ending 12
months following the date on which the Executive’s employment with the Company
is terminated for any reason (the “Non-Compete Period”), the Executive covenants
and agrees not to, and shall cause his affiliates not to, directly or indirectly
anywhere in the world, conduct, manage, operate, engage in or have an ownership
interest in any business or enterprise that (A) manufactures, sells, distributes
or develops abuse deterrent orally delivered pharmaceuticals, (B) uses any
trademarks, tradenames or slogans similar to those of the Company or its
affiliates; or (C) is engaged in any other activities that are otherwise
competitive with the business of the Company or its affiliates as conducted or
proposed (and actively in process) to be conducted as of the termination date
(collectively the “Business”). Notwithstanding anything herein to the contrary,
if the Executive’s employment with the Company is terminated by the Company
without Cause or by the Executive for Good Reason, in each case, within 24
months following a Change in Control, the Non-Compete Period shall be a period
of 24 months. Notwithstanding the foregoing, nothing herein shall preclude the
Executive from performing any duties as a stockholder, director, employee,
consultant or agent of Company or its affiliates or owning, directly or
indirectly, in the aggregate less than 5% of any business competitive with the
Company or its affiliates that is subject to the reporting obligations of the
1934 Act.

 

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(ii)           During the Non-Compete Period, the Executive shall not, and shall
cause his affiliates to not, directly or indirectly, call-on, solicit or induce
any customer or other business relationship of the Company or its affiliates for
the provision of products or services related to the business of the Company or
in any other manner that would otherwise interfere with the business
relationship between the Company and its affiliates and their respective
customers and other business relationships.

 

(iii)           During the Non-Compete Period, the Executive shall not, and
shall cause his affiliates to not, directly or indirectly, call-on, solicit or
induce, any employee of the Company or its affiliates to leave the employ of, or
terminate its relationship with, the Company or its affiliates for any reason
whatsoever, nor shall the Executive offer or provide employment (whether such
employment is for the Executive or any other business or enterprise), either on
a full-time, part-time or consulting basis, to any person who then currently is,
or within six (6) months immediately prior thereto was, an employee or
independent contractor of the Company; provided,  however, the foregoing shall
not prohibit a general solicitation to the public through general advertising or
similar methods of solicitation not specifically directed at employees of the
Company.

 

(iv)           The Executive acknowledges and agrees that the provisions of this
Section 8 are reasonable and necessary to protect the legitimate business
interests of the Company and its affiliates. The Executive shall not contest
that the Company’s and the Company’s affiliates’ remedies at law for any breach
or threat of breach by the Executive or any of his or her affiliates of the
provisions of this Section 8 will be inadequate, and that the Company and its
affiliates shall be entitled to an injunction or injunctions to prevent breaches
of the provisions of this Section 8 and to enforce specifically such terms and
provisions, in addition to any other remedy to which the Company or its
affiliates may be entitled at law or equity. The restrictive covenants contained
in this Section 8 are covenants independent of any other provision of this
Agreement or any other agreement between the parties hereunder and the existence
of any claim which the Executive may allege against the Company under any other
provision of this Agreement or any other agreement will not prevent the
enforcement of these covenants.

 

(v)           The Executive expressly acknowledges that the covenants contained
in this Section 8(b) are a material part of the consideration bargained for by
the Company and, without the agreement of the Executive to be bound by such
covenants, the Company would not have agreed to enter into this Agreement.

 

(vi)           If any of the provisions contained in this Section 8(b) shall for
any reason be held to be excessively broad as to duration, scope, activity or
subject, then such provision shall be construed by limiting and reducing it, so
as to be valid and enforceable to the maximum extent compatible with the
applicable law or the determination by a court of competent jurisdiction.

 

9.           Intellectual Property; Company Property.

 

(a)           Inventions Retained and Licensed.  The Executive has attached
hereto, as Exhibit C, a list describing any inventions, original works
of authorship, developments, improvements, and trade secrets which were made by
the Executive prior to the

 

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Effective Date (collectively referred to as “Prior Inventions”) which belong to
the Executive, which relate to the Company’s products or research and
developments and which are not assigned to the Company hereunder; or, if no such
Prior Inventions are listed, the Executive represents that there are no such
Prior Inventions. The Executive agrees that he will not incorporate, or permit
to be incorporated, any Prior Invention owned by the Executive or in which the
Executive has an interest into a Company product, process or machine without the
Company’s prior written consent. Notwithstanding the foregoing sentence, if, in
the course of his employment with the Company, the Executive incorporates into a
Company product, process or machine a Prior Invention owned by the Executive or
in which the Executive has an interest, the Company is hereby granted and shall
have a nonexclusive, royalty-free, irrevocable, perpetual, worldwide license to
make, have made, modify, use and sell such Prior Invention as part of or in
connection with such product, process or machine.

 

(b)           Assignment of Inventions. The Executive agrees that he will
promptly make full written disclosure to the Company, will hold in trust for the
sole right and benefit of the Company, and does hereby assign to the Company, or
its designee, all right, title, and interest in and to any and all inventions,
original works of autho1·ship, developments, concepts, improvements, designs,
discoveries, ideas, trademarks or trade secrets, whether or not patentable or
capable of registration under copyright or similar laws, which the Executive may
solely or jointly conceive or develop or reduce to practice, or cause to be
conceived or developed or reduced to practice, during the time the Executive is
in the employ of the Company (collectively referred to as ‘‘Inventions”) except
as provided in Section 9(e). The Executive further acknowledges that all
original works of authorship which are made by him (solely or jointly with
others) within the scope of and during the period of his employment with the
Company and which are protectable by copyright are “works made for hire” as that
term is defined in the United States Copyright Act. The Executive understands
and agrees that the decision whether or not to commercialize or market any
Invention developed by him solely or jointly with others is within the Company’s
sole discretion and for the Compay’s sole benefit and that no royalty will be
due to the Executive as a result of the Company’s efforts to commercialize or
market any such Invention.

 

(c)           Maintenance of Records. The Executive agrees to keep and maintain
adequate and Current written records of all Inventions made by him (solely or
jointly with others) during the Term. The records will be in the form of notes,
sketches, drawings, and any other format that may be specified by the Company.
The records will be available to and remain the sole property of the Company at
all times.

 

(d)           Patent and Copyright Registrations. The Executive agrees to assist
the Company, or its designee, at the Company’s expense, in every proper way to
secure the Company’s rights in the Inventions and any copyrights, patents, mask
work rights or other intellectual property rights relating thereto in any and
all countries, including, but not limited to, the disclosure to the Company of
all pertinent information and data with respect thereto, the execution of all
applications, specifications, oaths, assignments and all other instruments which
the Company shall deem necessary in order to apply for and obtain such rights
and in order to assign and convey to the Company, its successors, assigns, and
nominees the sole and exclusive rights, title and interest in and to such
Inventions, and any copyrights, patents, mask work rights or other intellectual
property rights relating thereto. The Executive further agrees that his

 

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obligation to execute or cause to be executed, when it is in his power to do so,
any such instrument or papers shall continue after the termination of the Term.
If the Company is unable because of the Executive’s mental or physical
incapacity or for any other reason to secure the Executive’s signature to apply
for or to pursue any application for any United States or foreign patents or
copyright registrations covering Inventions· or original works of authorship
assigned to the Company as above, then the Executive hereby irrevocably
designates and appoints the Company and its duly authorized officers and agents
as the Executive’s agent and attorney in fact, to act for and on the Executive’s
behalf and stead to execute and file any such applications and to do all other
lawfully permitted acts to further the prosecution and issuance of letters
patent or copyright registrations thereon with the same legal force and effect
as if executed by the Executive.

 

(e)           Exception to Assignments. The Executive understands that the
provisions of this Agreement requiring assignment of Inventions to the Company
shall not apply to any Invention that the Executive has developed entirely on
his own time without using the Company’s equipment, supplies, facilities, trade
secret information or Confidential Information except for those Inventions that
either (i) relate at the time of conception or reduction to practice of the
Invention to the Company’s business, or actual or demonstrably
anticipated research or development of the Company or (ii) result from any work
that the Executive performed for the Company. The Executive will advise the
Company promptly in writing of any Inventions that the Executive believes meet
the foregoing criteria and not otherwise disclosed on Exhibit C.

 

(f)           Upon the termination of his employment for any reason, the
Executive shall deliver to the Company all memoranda, books, papers, letters,
and other data, and all copies of the same, which were made by the Executive or
otherwise came into his possession or under his control at any time prior to the
termination of this Agreement, and which in any way relate to the business of
the Company as conducted or as planned to be conducted on the date of the
termination.

 

10.           Survival of Representations. The provisions of Sections 7, 8 and 9
shall survive the termination, for any reason, of the Executive’s employment
with the Company or of this Agreement.

 

11.           Key Person Insurance. If the Company wishes to purchase a life
insurance policy on the Executive or other insurance policy relating to the loss
of the Executive’s services, the Executive agrees to submit to a customary
insurance medical examination, if necessary, and otherwise cooperate with the
Company in any reasonable manner with respect to obtaining any such insurance
policy.

 

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12.           Miscellaneous.

 

(a)           Neither the failure, nor any delay, on the part of either party to
exercise any right, remedy, power or privilege under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, remedy, power or privilege preclude any other or further exercise of the
same, or of any other right, remedy, power or privilege, nor shall any waiver of
any right, remedy, power or privilege with respect to any occurrence be
construed as a waiver of such right, remedy, power or privilege with respect to
any other occurrence. No waiver shall be effective unless it is in writing and
is signed by the party asserted to have granted such waiver.

 

(b)           This Agreement and all questions relating to its validity,
interpretation, performance and enforcement (including, without limitation,
provisions concerning limitations of actions), shall be governed by and
construed in accordance with the laws of the State of Delaware (notwithstanding
any conflict-of-laws doctrines of such state or other jurisdiction to the
contrary), and without the aid of any canon, custom or rule of law requiring
construction against the draftsman.

 

(c)           This Agreement is intended to comply with Code Section 409A, and
the parties hereto agree to interpret, apply and administer this Agreement in
the least restrictive manner necessary to comply therewith and without resulting
in any increase in the amounts owed hereunder by the Company. If the Executive’s
termination of employment hereunder does not constitute a “separation from
service” within the meaning of Code Section 409A, then any amounts payable
hereunder on account of a termination of the Executive’s employment and which
are subject to Code Section 409A shall not be paid until the Executive has
experienced a “separation from service” within the meaning of Code Section 409A.
If, and only if, the Executive is a “specified employee” (as defined in Code
Section 409A) and a payment or benefit provided for in this Agreement would be
subject to additional tax under Code Section 409A if such payment or benefit is
paid within six (6) months after the Executive’s separation from service, then
such payment or benefit shall not be paid (or commence) during the six-month
period immediately following the Executive’s separation from service except as
provided in the immediately following sentence. In such an event, any payment or
benefits that otherwise would have been made or provided during such six-month
period and that would have incurred such additional tax under Code Section 409A
shall instead be paid to the Executive in a lump-sum cash payment on the first
day following the termination of such six-month period or, if earlier, within
ten (10) days following the date of the Executive’s death. No reimbursement or
in-kind benefit shall be subject to liquidation or exchange for another benefit
and the amount available for reimbursement, or in-kind benefits provided, during
any calendar year shall not affect the amount available for reimbursement, or
in-kind benefits to be provided, in a subsequent calendar year. Any
reimbursement to which the Executive is entitled hereunder shall be made no
later tha11the last day of the _calendar year following the calendar year in
which such expenses were incurred. Each payment hereunder shall be treated as a
separate payment in a series of separate payments pursuant to Treasury
Regulation Section 1.409A-2(b)(2)(iii).

 

(d)           All notices, requests, demands and other communications required
or permitted under this Agreement shall be in writing and shall be deemed to
have been duly given, made and received only when delivered (personally, by
courier service such as Federal

 

11

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Express, or by other messenger), when sent by facsimile transmission (with
electronic confirmation of receipt) or three (3) days after deposit in the
United States mails, registered or certified mail, postage prepaid, return
receipt requested, addressed as follows:

 

If to the Executive: the Executive’s home address on record with the Company.

 

If to the Company:

 

Egalet Corporation

460 E. Swedesford Road

Wayne, PA 19087

Attention: Chief Executive Officer

 

Any party may alter the addresses to which communications or copies are to be
sent by giving notice of such change of address in conformity with the
provisions of this paragraph for the giving of notice.

 

(e)           The rights and obligations of both parties under this Agreement
shall inure to the benefit of and shall be binding upon their heirs, successors
and assigns, but shall not be assigned without the written consent of both
parties; provided, however, that the Company may make such an assignment in
connection with a sale of substantially all of the assets or other change of
control of the Company.

 

(t)           This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original as against any party whose signature
appears thereon, and all of which shall together constitute one and the same
instrument. This Agreement shall become binding when one or more counterpa11s
hereof, individually or taken together, shall bear the signatures of all of the
parties reflected hereon as the signatories.

 

(g)           The provisions of this Agreement are independent of and separable
from each other, and no provision shall be affected or rendered invalid or
unenforceable by virtue of the fact that for any reason any other provision or
provisions may be invalid or unenforceable in whole or in part.

 

(h)           This Agreement contains the entire understanding among the parties
hereto with respect to the subject matter hereof, and supersedes all prior and
contemporaneous agreements and understandings, inducements or conditions,
express or implied, oral or written, between the parties hereto except as herein
contained (including without limitation any prior employment agreements between
the parties hereto). The express terms hereof control and supersede any course
of performance and/or usage of the trade inconsistent with any of the terms
hereof. This Agreement may not be modified or amended other than by an agreement
in writing.

 

(i)           The section headings in this Agreement are for convenience only,
form no part of this Agreement and shall not affect its interpretation.

 

(j)Words used herein, regardless of the number and gender specifically used,
shall be deemed and construed to include any other number, singular or plural,
and any other gender, masculine, feminine or neuter, as the context indicates is
appropriate.

 

 

 

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

 

 

 

 

 

 

 

 

EGALET CORPORATION

 

 

 

 

 

By:

Picture 1 [eglt20151231ex101649259001.jpg]

 

 

 

 

Name: Robert Radie

 

 

 

Title: President and CEO

 

 

 

 

 

 

 

 

 

 

EXECUTIVE

 

 

Picture 3 [eglt20151231ex101649259002.jpg]

OCTOBER 22, 2015

 

 

Paul C. Varki J.D, M.P.H

 

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EXHIBIT A

 

[ANNUAL INCENTIVE BONUS PLAN]

 

 

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EXHIBIT B

 

RELEASE OF CLAIMS

 

This RELEASE OF CLAIMS (this “Release”) is given on this 22 day of OCTOBER,
 2015 by Paul C. Varki J.D, M.P.H (the “Executive”).

 

WHEREAS, the Executive’s employment with Egalet Corporation, a Delaware
corporation, (the “Company”), has terminated; and

 

WHEREAS, pursuant to Section 6(c) of the Employment Agreement by and between the
Company and the Executive dated as of November 15, 2015 (the “Employment
Agreement”), the Company has agreed to pay the Executive certain amounts and to
provide certain benefits, subject to his execution and non-revocation of this
Release. All te1ms used but not defined herein shall have the meanings ascribed
to such terms in the Employment Agreement.

 

NOW THEREFORE, in consideration of these premises and the mutual promises
contained herein, and intending to be legally bound hereby, the Executive agrees
as follows:

 

1.           Consideration. The Executive acknowledges that: (i) the payments
set forth in Section 6(c) of the Employment Agreement constitute full settlement
of all his rights under the Employment Agreement, (ii) he has no entitlement
under any other severance or similar arrangement maintained by the Company or
any of its Affiliates, and (iii) except as otherwise provided specifically in
this Release, the Company does not and will not have any other liability or
obligation to the Executive by reason of the cessation of his employment. The
Executive further acknowledges that, in the absence of his execution of this
Release, the payments and benefits specified in Section 6(c)(iii) of the
Employment Agreement would not otherwise be due to him.

 

2.           Executive’s Release. The Executive on his own behalf and together
with his heirs, assigns, executors, agents and representatives hereby generally
releases and discharges the Company and its predecessors, successors (by merger
or otherwise), parents, subsidiaries, affiliates and assigns, together with each
and every of their present, past and future officers, managers, directors,
shareholders, members, general partners, limited partners, employees and agents
and the heirs and executors of same, and all other persons or entities who/that
might be claimed to be jointly or severally liable with any of the persons or
entities named previously (herein collectively referred to as the “Releasees”)
from any and all suits, causes of action, complaints, obligations, demands,
common law or statutory claims of any kind, whether in law or in equity, direct
or indirect, known or unknown (hereinafter “Claims”), which the Executive ever
had, now has or may have against the Releasees, or any one of them arising at
any time up to and including the date of the this Release. This Release
specifically includes, but is not limited to:

 

b.           any and all Claims arising out of or relating to the Executive’s
employment with the Company or the termination thereof;

 

 

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c.           any and all Claims for wages and benefits including, without
limitation, salary, stock options, stock, royalties, license fees, health and
welfare benefits, severance pay, vacation pay, and bonuses;

 

d.           any and all Claims for wrongful discharge, breach of contract,
whether express or implied, and Claims for breach of implied covenants of good
faith and fair dealing;

 

e.           any and all Claims for alleged employment discrimination on the
basis of race, color, religion, sex, age, national origin, veteran status,
disability, handicap or any other protected characteristic, or retaliation in
violation of any federal, state or local statute, ordinance, judicial precedent
or executive order, including but 11ot limited to claims for discrimination or
retaliation under the following statutes: Title VII of the Civil Rights Act of
1964, 42 U.S.C.§2000e et seq.; the Civil Rights Act of 1866, 42 U.S.C. §1981;
the Civil Rights Act of 1991; the Age Discrimination in Employment Act, as
amended, 29 U.S.C. §621 et seq.; the Older Workers Benefit Protection Act 29
U.S.C. §§ 623, 626 and 630; the Rehabilitation Act of 1972, as amended, 29
U.S.C. §701 et se; the Americans with Disabilities Act, 42 U.S.C. §12101 et
seq.; the Family and Medical Leave Act of 1993, 29 U.S.C. §2601, et seg.; the
Fair Labor Standards Act, as amended, 29 U.S.C. §201, et seq.; the Fair Credit
Reporting Act, as amended, 15 U.S.C. §1681, et seq.; and the Employee Retirement
Income Security Act of 1974, as amended, 29 U.S.C. §1000, et seq. (“BRISA”) or
any comparable state statute or local ordinance;

 

f.           any and all Claims under any federal or state statute relating to
employee benefits or pensions;

 

g.           any and all Claims in tort, including but not limited to, any
Claims for assault, battery, misrepresentation, defamation, interference with
contract or prospective economic advantage, intentional or negligent infliction
of emotional distress, duress, loss of consortium, invasion of privacy and
negligence; and

 

h.           any and all Claims for attorneys’ fees and costs.

 

The Executive expressly represents that he has not filed a lawsuit or initiated
any other administrative proceeding against any Releasee. The Executive further
promises not to initiate a lawsuit or to bring any other Claim against any
Releasee asserting a Claim that is released by this Release. If he does so, and
the action is found to be barred in whole or in part by this Release, the
Executive agrees to pay the attorneys’ fees and costs, or the proportions
thereof, incurred by the applicable Releasee in defending against those Claims
that are found to be barred by this Release. This Release will not prevent the
Executive from filing a charge with the Equal Employment Opportunity Commission
(or similar state agency) or participating in any investigation conducted by the
Equal Employment Opportunity Commission (or similar state agency); provided,
however, that any claims by the Executive for personal relief in connection with
such a charge or investigation (such as reinstatement or monetary damages) would
be ban-ed. Furthermore, nothing in this Release precludes the Executive from
challenging the validity of this Release under the requirements of the Age
Discrimination in Employment Act, and the Executive shall not be responsible for
reimbursing the attorneys’ fees and costs of the Releasees in connection with
such a challenge to the validity of the Release. The Executive acknowledges,
however, that the Release applies to all Claims that he has under the Age
Discrimination in Employment Act, and that, unless the Release is held to be
invalid, all of the

 

 

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Executive’s Claims under the Age Discrimination in Employment Act shall be
extinguished by execution of this Release.

 

3.           Acknowledgment.  The Executive understands that the release of
Claims contained in this Release extends to all of the aforementioned Claims and
potential Claims which arose on or before the date that the Executive signs this
Release, whether now known or unknown, suspected or unsuspected, and that this
constitutes an essential term of this Release. The Executive further understands
and acknowledges the significance and consequences of this Release and of each
specific release and waiver, and expressly consents that this Release shall be
given full force and effect to each and all of its express terms and provisions,
including those relating to unknown and uncompensated Claims, if any, as well as
those relating to any other Claims specified herein. The Executive hereby waives
any right or Claim that the Executive may have to employment, reinstatement or
re-employment with the Company.

 

4.           Remedies. All remedies at law or in equity shall be available to
the Releasees for the enforcement of this Release. This Release may be pleaded
as a full bar to the enforcement of any Claim released by this Release that the
Executive may assert against the Releasees.

 

5.           No Admission of Liability. This Release is not to be construed as
an admission of any violation of any federal, state or local statute, ordinance
or regulation or of any duty owed by the Company to the Executive. The Executive
acknowledges that the Company specifically denies any such violations.

 

6.           Severability. If any term or provision of this Release shall be
held to be invalid or unenforceable for any reason, then such term or provision
shall be ineffective to the extent of such invalidity or unenforceability
without invalidating the remaining terms or provisions hereof, and such term or
provision shall be deemed modified to the extent necessary to make it
enforceable.

 

7.           Advice of Counsel; Revocation Period. The Executive is hereby
advised to seek the advice of counsel prior to signing this Release. The
Executive hereby acknowledges that the Executive is acting of his own free will,
that he has been afforded a reasonable time to read and review the terms of this
Release, and that he is voluntarily executing this Release with full knowledge
of its provisions and effects. The Executive further acknowledges that he has
been given at least TWENTY-ONE (21) days within which to consider this Release
and that he has SEVEN (7) days following his execution of this Release to revoke
his acceptance, with this Release not becoming effective until the 7Mday
revocation period has expired. If the Executive elects to revoke his acceptance
of this Release, this Release shall not become effective and Executive must
provide written notice of such revocation by certified mail (postmarked no later
than seven days after the date the Executive accepted this Release) to:

 

Egalet Corporation

640 E. Swedesford Road

Wayne, PA 19087

Attention: Chief Executive Officer

 

8.Representations and Warranties. The Executive represents and warrants that he
has not assigned any claim that he purports to release hereunder and that he has
the full power

 

 

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and authority to enter into this Release and bind each of the persons and
entities that the Executive purports to bind. The Executive further represents
and warrants that he is bound by, and agrees to be bound by, his post-employment
obligations set forth in the Restrictive Covenant Agreement.

 

9.           Governing Law. This Agreement shall be governed by the laws of the
State of Delaware without regard to the conflict of law principles of any
jurisdiction. Any legal proceeding arising out of or relating to this Release
will be instituted in a state or federal court in the State of Delaware, and the
Executive hereby consents to the personal and exclusive jurisdiction of such
court(s) and hereby waives any objection(s) that he may have to personal
jurisdiction, the laying of venue of any such proceeding and any claim or
defense of inconvenient forum.

 

IN WITNESS WHEREOF, the Executive has executed this Release on the elate first
above written.

 

 

 

Picture 4 [eglt20151231ex101649259002.jpg]

10/22/15

 

 

Paul C. Varki. J.D, M.P.H

 

 

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EXHIBIT C

 

Proprietary/Confidentiality Schedules

 

 

 

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