Exhibit 10.1

 

Adolor Corporation

700 Pennsylvania Drive

Exton, Pennsylvania 19341

 

August 1, 2005

 

Mr. David Madden

 

Dear: Mr. Madden,

 

Adolor Corporation, a Delaware corporation (the “Company”), is pleased to offer
you a position as the interim President and Chief Executive Officer of the
Company, commencing on August 8, 2005 (your “Start Date”) for a period of up to
one year, to serve at the pleasure of the Company’s Board of Directors (the
“Board”). This offer and your employment with the Company are subject to the
terms and conditions of this offer letter (the “Offer Letter”).

 

Positions and Responsibilities

 

In respect of the positions set forth above, commencing on your Start Date, you
will have the duties, responsibilities and authority normally associated with
the offices and positions of president and chief executive officer of a
corporation, including, without limitation, complete operational and management
authority with respect to, and complete responsibility for, the overall
operations and day-to-day business and affairs of the Company. You will be
expected to assist the Board in the recruitment of a successor president and
chief executive officer.

 

Duties

 

During your employment as an at-will employee of the Company, you will devote
substantially all of your business time to the business and affairs of the
Company and you will use your reasonable best efforts to perform faithfully and
efficiently the duties and responsibilities contemplated by the Offer Letter,
provided, however, that there will be no restriction on your ability to (a)
manage your personal, financial, and legal affairs, and (b) serve on civic or
charitable boards or committees and other boards of entities that do not compete
with the Company upon prior notice to the Board. It is understood that you will
be not be relocating your primary residence and that you will generally work
from home at least two days per week.

 

Compensation and Stock Option Grant

 

If you decide to take this position, you agree to serve without a salary and the
Board will grant to you on the Start Date options to purchase 300,000 shares of
the Company’s Common Stock at an exercise price based on the closing price of
the Company’s Common Stock on the date immediately preceding your Start Date
(the

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“Options”). The Options shall vest on the first anniversary of their grant date;
provided however that the acceleration of vesting of the options shall occur on
the earlier of the following dates: (i) the date that a successor president and
chief executive officer is named by the Board; (ii) the date that your
employment as President and Chief Executive Officer of the Company is terminated
by the Board of Directors without Cause (as defined below); or (iii) the date
that you resign as President and Chief Executive Officer of the Company with
Good Reason. In the event of your inability to serve as President and Chief
Executive Officer of the Company as a result of your death or Disability, the
Options shall vest ratably up to the date of such termination. To the extent
permitted, the Options will be Incentive Stock Options and will be issued under
the Adolor Corporation 2003 Stock-Based Incentive Compensation Plan (the “2003
Plan”) and any amount not permitted to be issued under the 2003 Plan will be
issued under the Company’s Amended and Restated 1994 Equity Compensation Plan
(the “1994 Plan”). It is the intention of the parties that termination of your
service as interim President and Chief Executive Officer provided that you
continue as a Director of the Company shall not be a termination of service
under either the 1994 Plan or the 2003 Plan. The Options shall have a ten-year
term from the date of grant, subject to earlier termination pursuant to the
terms of the stock option plan under which the Options have been granted.

 

Benefits

 

You will be entitled to participate in all benefit programs maintained by the
Company (including annual vacation of at least four weeks and medical, dental,
life insurance and disability plans) that may be provided to the Company’s
senior executives from time to time.

 

Termination of Employment

 

In the event your employment is terminated (i) by you voluntarily without Good
Reason or (ii) by the Company for Cause, you will only be entitled to receive
from the Company (a) immediate payment of any unpaid expense reimbursements,
deferred compensation and unused accrued vacation days through the date of
termination, and (b) any other payments and/or benefits which you are entitled
to receive under the terms and provisions of any employee pension, incentive or
welfare benefit plans of the Company.

 

For purposes of the Offer Letter, “Cause” means (a) your conviction (including a
plea of guilty or nolo contendere) of a felony under federal law or the law of
the state in which such action occurred, (b) the commitment by you of an
intentional act of fraud, embezzlement, or theft in connection with your duties
in the course of your employment with the Company, or your engagement in gross
negligence in the course of your employment with the Company or (c) your willful
and deliberate failure to perform your employment duties in any material
respect. For purposes of the Offer Letter, an act or omission on your part shall
be deemed “intentional” or gross negligence only if it was done by you in bad
faith, not merely an error in judgment, and without reasonable belief that the
act or omission was in the best interest of the Company.

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For purposes of the Offer Letter “Good Reason” means and will be deemed to exist
if, without your prior express written consent, (i) you are assigned any duties
or responsibilities inconsistent in any respect with the scope of the duties or
responsibilities associated with your titles or positions, as set forth and
described above; (ii) you suffer a material change in the duties,
responsibilities, reporting rights or obligations, or effective authority
associated with your titles and positions and/or as set forth above; or (iii)
you fail to be nominated to the Board or you are removed from the Board for any
reason other than Cause.

 

For purposes of the Offer Letter, “Disability” means your inability to render,
for a period of six consecutive months, services hereunder by reason of
permanent disability, as determined by the written medical opinion of an
independent medical physician mutually acceptable to you and the Company. If you
and the Company cannot agree to such an independent medical physician, each will
appoint one medical physician and those two physicians will appoint a third
physician who will make such a determination.

 

Expense Reimbursement

 

We understand that you will not be relocating your primary residence and the
Company will reimburse you for your travel and temporary living expenses
(grossed up for tax effect) as well as additional expense reimbursement in
accordance with the Company’s then current policies governing expense
reimbursement for your out-of-pocket costs incurred by you in the performance of
your duties hereunder.

 

Non-competition/No Solicitation/Confidentiality

 

As a condition of employment, you will be expected to abide by Company rules and
regulations and sign and comply with the Company’s Employee Noncompetition,
Nondisclosure and Development Agreement, which prohibits unauthorized use or
disclosure of Company proprietary information and certain competitive
activities.

 

Miscellaneous

 

The Offer Letter is personal to you and without the prior express written
consent of the Company, will not be assignable by you. The Offer Letter will
inure to the benefit of and be enforceable by your heirs, beneficiaries, and/or
legal representatives. The Offer Letter will inure to the benefit of and be
binding upon the Company and its respective successors and assigns. The Company
will require any successor to all or substantially all of its business and/or
assets, whether directly or indirectly, by purchase, merger, consolidation,
acquisition of stock or otherwise, by an agreement in form and substance
satisfactory to you, expressly to assume and agree to perform the Offer Letter
in the same manner and to the same extent as the Company would be required to
perform if no such succession had taken place.

 

To indicate your acceptance of the Company’s offer, please sign and date both
copies of the Offer Letter in the space provided below and return one
fully-executed and dated copy to the Company. Please keep one fully-executed and
dated copy for your records. This Offer Letter, along with any agreements and
plans referenced herein or

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relating to proprietary rights between you and the Company, contains the entire
agreement between you and the Company concerning the subject matter hereof and
supersedes any prior representations or agreements, whether written or oral. The
Offer Letter will be governed and construed in accordance with the laws of the
State of Delaware, applied without reference to principles of conflict of laws
thereof. All notices and other communications hereunder will be in writing and
will be given by hand-delivery to the other parties or by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:

 

If to you:    Mr. David Madden If to the Company:    Adolor Corporation      700
Pennsylvania Drive      Exton, Pennsylvania 19341      Attention: General
Counsel

 

or to such other address as any party has furnished to the others in writing in
accordance herewith. Notices and communications will be effective when actually
received by the addressee. The captions of the Offer Letter are not part of the
provisions hereof and will have no force or effect. You will be entitled to
select (and change) a beneficiary or beneficiaries to receive any compensation
or benefit payable hereunder following your death, and you may change such
election, in either case by giving the Company written notice thereof. In the
event of your death or a judicial determination of your incompetence, reference
in the Offer Letter to you will be deemed, where appropriate, to refer to your
beneficiary(ies), estate or other legal representative(s). The respective rights
and obligations of the parties hereunder will survive the termination of the
Offer Letter for any reason to the extent necessary to the intended provision of
such rights and the intended performance of such obligations. The Offer Letter
may not be modified or amended except in writing, signed both by the Company and
you.

 

We appreciate your consideration of this Offer Letter.

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    Sincerely,     ADOLOR CORPORATION     By:  

/s/ Claude Nash

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        Claude Nash, Ph.D.         Director, Chairman Compensation Committee
AGREED TO AND ACCEPTED:        

/s/ David Madden

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  Dated: August 1, 2005