Exhibit 10.6

 

June 23, 2004

 

REVISED

 

James E. Barrett, PhD

31 Tweed Boulevard

Upper Grandview, New York 10960

 

Dear Dr. Barrett:

 

On behalf of Adolor Corporation (the “Company”), we would like to offer you the
position of Chief Scientific Officer and President, Research, reporting directly
to Dr. David Jackson, Sr. Vice President, Research and Development. This offer
is contingent upon our receipt of employment and education references that meet
our standards of acceptability as well as the completion of a satisfactory
criminal background check in compliance with the Fair Credit Reporting Act.

 

In this position, you will receive a Base Salary of $27,375.00 per month, the
equivalent of $328,500 on an annual basis, subject to the normal payroll
withholding taxes in accordance with the Company’s customary practices. Adolor’s
current pay practice is to make direct payroll deposits on alternate Fridays.

 

Benefits

 

As a full time employee, you will be eligible to participate in the Company’s
employee benefit programs. Currently these benefits include:

 

  • Medical, prescription, and vision benefits through Blue Cross/Blue Shield’s
Personal Choice plan or Keystone plan, and dental insurance coverage through
MetLife. As is the current practice in our industry, we ask that employees
contribute a portion of the medical and dental insurance premiums. Your medical
and dental insurance will be effective on the first day of the month following
your start date.

 

  • Short Term Disability and Long Term Disability insurance, at no cost to you.
These benefits are effective the first day of your employment.

 

  • A company paid term life insurance plan equivalent to twice your annual
salary up to a maximum of $400,000, at no cost to you. This benefit is effective
the first day of your employment.

 

  • A 401(k) Retirement Savings Plan is available through The Principal Life
Insurance Company to all employees on the first day of the month following
enrollment and once you meet the plan requirements. The 401(k) Plan is provided
to help you prepare for your retirement through pre-tax savings. The Company
will make matching contributions to your 401(k) account according to the plan
provisions.

 

  • Four weeks of vacation on an annual basis. Every month you will accrue one
twelfth of your annual vacation amount for use throughout the year. As a new
hire, your vacation accrual will be pro-rated your first year based on your hire
date.

 

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  • Eight (8) company holidays, and two (2) floating holidays per calendar year
that can be scheduled by you. You will be eligible for all company holidays that
follow your start date.

 

  • Access to an Employee Resource Program for you and your eligible dependents.

 

You should be aware that benefits are subject to change at the discretion of the
Company.

 

Incentive Compensation

 

You will also be eligible to participate in the Company’s cash incentive
compensation plan. Bonuses are discretionary, and are subject to the approval of
the Board of Directors. Your annual bonus target will be 30% of your base salary
based on your performance against individual objectives and the achievement of
company milestones. You are not eligible for a bonus payment until after
completion of 90 days of employment. As a new hire, your bonus payment may be
pro-rated your first year based on your hire date. These bonus payments are
currently paid out shortly following year-end and you must be employed by the
company to receive any bonus.

 

Sign On Bonus

 

You will be eligible to receive a $50,000 sign on bonus. Twenty-Five Thousand
Dollars ($25,000) will be provided to you following the first 30 days of
employment and the remaining Twenty-Five Thousand Dollars ($25,000) will be
provided to you at the end of 90 days of continuous employment. Both of these
checks are subject to normal payroll taxes. If you should voluntarily resign
your position with Adolor or are terminated for cause within one year of your
start date, you are responsible to the company for full reimbursement of this
sign-on bonus in the amount of $50,000.

 

Relocation

 

It is agreed that you will relocate from Upper Grandview, NY to the Suburban
Philadelphia area. To assist you in the relocation of you and your family,
Adolor Corporation is pleased to offer Relocation Benefits for Homeowners as
outlined in the attached Relocation Assistance Policy.

 

Relocation benefits will include:

 

  1. Reasonable costs associated with the sale of your current residence at 31
Tweed Boulevard, Upper Grandview, NY to include commission, related taxes, title
insurances, and related fees.

 

  2. Temporary living assistance for a period of up to 60 days.

 

  3. One home-finding trip not to exceed five days.

 

  4. Reasonable costs associated with the purchase of a new property in the
Suburban Philadelphia area to include related fees, title insurance, and home
inspection services.

 

  5. Shipment of household goods from your current residence (including packing)
to your new residence. If necessary, temporary storage of household good for up
to 60 days will be included.

 

  6. Actual and reasonable travel costs associated with you and your family
members moving to your new location.

 

Applicable and approved expenses will be grossed-up for federal and state taxes.

 

Please contact Alex DiGiacomo, Human Resources Manager, with any questions and
before initiating any aspect of the relocation process. We will coordinate an
introduction between you and a consultant from Prudential Fox Roach, our
corporate relocation assistance vendor.

 

Confidential

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It is agreed that if you voluntarily leave Adolor, within twelve (12) months
following your relocation, you will be required to reimburse the company for all
expenses incurred for your relocation.

 

Annual Performance Review

 

Your individual performance will be evaluated during our annual review process.
Currently, our annual review process takes place at the end of each calendar
year, followed by the merit increase process in January. You will receive a
review during our 2004 review cycle, which will include a review of your cash
compensation and stock options. As a new hire, your merit increase may be
pro-rated your first year based on your hire date.

 

Stock Option Program

 

Upon joining the Company, you will have the opportunity to participate in the
Company’s stock option program. Subject to the approval of the Compensation
Committee, you will be offered an option to purchase 100,000 shares of Adolor’s
common stock. These options will be subject to the terms of the Adolor
Corporation’s 2003 Stock-Based Incentive Compensation Plan (“Plan”). A copy of
the Plan is attached for your reference. The options will be Incentive Stock
Options to the maximum extent available under tax regulations and your right to
purchase the stock (exercise a portion of the option) will vest in equal monthly
amounts over a 48-month period commencing on your start date, subject to an
initial three month waiting period.

 

At the time of the annual review, if your performance is satisfactory or better,
you will be considered for additional discretionary option grants.

 

Termination of Employment

 

You will have the right to terminate your employment hereunder with or without
Good Reason (as defined below), as provided below, and the Company will have the
right to terminate your employment hereunder with or without Cause or (as
defined below), as provided below. Except as provided for in the immediately
following paragraph, if your employment hereunder is terminated at any time (i)
by you for Good Reason following 15 days prior written notice to the Company, or
(ii) by the Company without Cause, or if a Change in Control occurs and your
employment hereunder is terminated at any time during the 90 days before or the
first twelve months following such Change in Control (i) by you for Good Reason
following 15 days prior written notice to the Company, or (ii) by the Company
without Cause, you will be entitled to receive from the Company (a) in twelve
monthly installments a payment in gross amount equal to the sum of (i) your Base
Salary and (ii) the bonus amount paid to you for your performance during the
immediately preceding calendar year, (b) continuation of similar benefits in
effect as of the date of termination for a period of one year following the date
of termination at the Company’s sole expense, (c) immediate payment of any
unpaid expense reimbursements, deferred compensation and unused accrued vacation
days through the date of termination, (d) the ability to exercise all equity
interests in the Company that have vested up through the date of termination
during the period of one year following the date of termination, and (e) any
other payments and/or benefits which you are entitled to receive under the terms
and provisions of any of the employee pension, incentive, or welfare benefit
plans of the Company.

 

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) your Base Salary through the date of such termination, (b)
immediate payment of any unpaid expense reimbursements, deferred compensation
and unused accrued vacation days through the date of termination, and (c) 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.

 

Confidential

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If your employment is terminated due to your death, your estate will be entitled
to receive from the Company (a) Base Salary continuation through the end of the
month in which your death occurs, (b) a pro-rated bonus payment for the year of
death equal to the bonus amount paid to you for your performance during the
immediately preceding calendar year multiplied by a fraction, the numerator of
which is the number of days from and including January 1 of such year through
the date of your death and the denominator of which is 365, (c) immediate
payment of any unpaid expense reimbursements, deferred compensation and unused
accrued vacation days through the date of death or such termination, and (d) 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.

 

In the event of any termination of your employment, you will be under no
obligation to seek other employment and there will be no offset against any
amounts due to you hereunder on account of any remuneration attributable to any
subsequent employment that you may obtain. Any amounts due under “Termination of
Employment” are in the nature of severance payments, or liquidated damages, or
both, and are not in the nature of a penalty. Notwithstanding the foregoing, the
Company’s obligation to provide continuation of benefits under the welfare
benefit plans described above shall cease if you become eligible for other
health insurance benefits at the expense of a new employer. You agree to notify
a duly authorized officer of the Company, in writing, immediately upon
acceptance of any employment following the date of termination of your
employment which provides you with eligibility for health insurance benefit.

 

For purposes of the Agreement, “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 Agreement, 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.

 

For purposes of the Agreement, “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 title or position, 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 title and position and/or as set forth above; (iii) your
Base Salary is decreased by the Company, or your benefits under any of the
Company’s employee pension or welfare plans or programs are in aggregate
materially decreased; or (iv) the Company fails to pay your compensation,
employee benefits or reimbursements when due; provided that in the event of a
Change in Control, “Good Reason” shall also include the relocation of your
principal office location to a site that is more than 50 miles from your then
current principal office.

 

For purposes of the Agreement, “Change in Control” means (A) the consummation of
a merger or consolidation of the Company in which the stockholders of the
Company immediately prior to such merger or consolidation, would not,
immediately after the merger or consolidation, beneficially own (as such term is
defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended),
directly or indirectly, shares representing the aggregate 50% or more of the
combined voting power of the securities of the corporation issuing cash or
securities in the merger or consolidation (or of its ultimate parent
corporation, if any); or (B) the stockholders of the Company approve a plan of
complete liquidation or dissolution of the Company, or there is consummated an
agreement for the

 

Confidential

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sale or disposition by the Company of all or substantially all of the Company’s
assets, other than a sale or disposition by the Company of all or substantially
all of the Company’s assets to an entity, at least 50% of the combined voting
power of the voting securities of which are owned by persons in substantially
the same proportion as their ownership of the Company immediately prior to such
sale.

 

Miscellaneous Items

 

You will receive a Company cell phone or Blackberry that is paid monthly by
Adolor with the understanding that you comply with the Company Policy regarding
its use.

 

Conditions of Employment

 

As a condition of employment with the company, which you understand to be
at-will employment, we require that you sign the enclosed Employee
Noncompetition, Nondisclosure and Development Agreement and return it to me.
This offer will expire at 5:00 p.m. on Friday, June 25, 2004 unless you accept
it prior to that time. If you wish to accept this offer based on the terms
defined in this letter, please call me at 484-595-1080 Please sign, date, and
return the enclosed copy together with the signed Employee Noncompetition,
Nondisclosure and Development Agreement in the envelope enclosed. Please do not
fax either of these documents to Adolor.

 

Dr. Barrett, we sincerely hope that you will accept our offer and we are eager
to have you join Adolor Corporation. We would anticipate, if you accept our
offer, that your employment would begin on a mutually agreed upon date. We are
looking forward to working with you and supporting you in your work so that your
contributions lead the Company to even greater future success.

 

Please feel free to call me if you have any questions about this offer or any
other aspect of Adolor.

 

Sincerely,

 

/s/ Denise B. Kerton

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Denise B. Kerton

Vice President, Human Resources

 

I acknowledge receipt of this offer and understand that I will be an at-will
employee and that this offer letter does not constitute an employment contract.
   

/s/ James E. Barrett

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  6/26/04

Signature

  Date

Please provide the following information for Human Resources Use ONLY

   

 

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Social Security #

  Middle Initial

 

 

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Anticipated Start Date

   

 

Confidential