Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (“Agreement”) is made as of the 26th day of May, 2016,
between Neos Therapeutics, a Delaware corporation (the “Company”), and Juergen
A. Martens, Ph.D., EMTM (the “Executive”).

 

WHEREAS, the Company desires to employ the Executive and the Executive desires
to be employed by the Company beginning on May 31, 2016 (the “Effective Date”)
on the terms contained herein.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein
contained and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties agree as follows:

 

1.                                      Employment.

 

(a)                                 Term.  The term of this Agreement shall
commence on the Effective Date and continue until terminated in accordance with
the provisions hereof (the “Term”).

 

(b)                                 Position and Duties.  During the Term, the
Executive shall serve as the Chief Technology and Operations Officer of the
Company, and shall have supervision and control over and responsibility for the
day-to-day business and affairs of the Company and shall have such other powers
and duties as may from time to time be prescribed by the Chief Executive Officer
of the Company, provided that such duties are consistent with the Executive’s
position or other positions that he may hold from time to time.  The Executive
shall devote his full working time and efforts to the business and affairs of
the Company.  Notwithstanding the foregoing, the Executive may serve on other
boards of directors with the approval of the Board of Directors of the Company
(the “Board”) (which approval will not be unreasonably withheld), or engage in
religious, charitable or other community activities as long as such services and
activities are disclosed to the Board and do not materially interfere with the
Executive’s performance of his duties to the Company as provided in this
Agreement.

 

2.                                      Compensation and Related Matters.

 

(a)                                 Base Salary.  During the Term, the
Executive’s initial annual base salary shall be $340,000.  The Executive’s base
salary shall be reviewed annually by the Board or the Compensation Committee of
the Board.  The base salary in effect at any given time is referred to herein as
“Base Salary.”  The Base Salary shall be payable in a manner that is consistent
with the Company’s usual payroll practices for senior executives.

 

(b)                                 Incentive Compensation.  During the Term,
the Executive shall be eligible to receive cash incentive compensation as
determined by the Board or the Compensation Committee from time to time.  The
Executive’s initial target annual incentive compensation shall be 35 percent of
his Base Salary.  Except as otherwise provided herein, to earn incentive
compensation, the Executive must be employed by the Company on the day such
incentive compensation is paid.

 

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(c)                                  Sign-On Bonus.  The Executive shall receive
a sign-on bonus in the amount of $30,000, less applicable tax withholdings (the
“Sign-On Bonus”).  The Sign-On Bonus shall be paid within 30 days following the
Effective Date, subject to the Executive’s employment through such payment
date.  In the event that the Executive’s employment is terminated by the Company
for Cause (as defined below) or by the Executive without Good Reason (as defined
below) within 12 months following the Effective Date, the Executive agrees to
repay the Company the Sign-On Bonus within 30 days of such termination.

 

(d)                                 Initial Equity Award.  Subject to approval
by the Board or the Compensation Committee, in connection with the commencement
of the Executive’s employment, the Executive shall be granted an option to
purchase 150,000 shares of Common Stock of the Company (the “Option”) pursuant
to the Company’s 2015 Stock Option and Incentive Plan.  The Option shall have an
exercise price equal to the fair market value of the Common Stock on the date of
grant and shall be subject to vesting over four years from the Effective Date,
with 25% of the shares of Common Stock subject to the Option vesting on each of
the first four anniversaries of the Effective Date, subject to the Executive’s
continued employment through each such date.

 

(e)                                  Relocation.  The Executive’s principal
place of employment shall be in Grand Prairie, Texas. The Company will reimburse
the Executive up to a maximum of $10,000 for travel to and from the Executive’s
residence in Connecticut and the Grand Prairie, Texas facility and for temporary
living expenses in the Grand Prairie, Texas area until the date on which the
Executive relocates to the Grand Prairie, Texas area, subject to such reasonable
substantiation and documentation as may be specified by the Company from time to
time.  In addition, the Executive shall be eligible for reimbursement for
expenses up to a maximum of $15,000 resulting from relocating his residence to
the Grand Prairie, Texas area, subject to such reasonable substantiation and
documentation as may be specified by the Company from time to time.  In the
event that the Executive’s employment is terminated by the Company for Cause or
by the Executive without Good Reason within 12 months following the Effective
Date, the Executive agrees to repay the Company any travel, temporary living and
relocation expenses paid or reimbursed by the Company pursuant to this
Section 2(e) within 30 days of such termination.

 

(f)                                   Expenses.  The Executive shall be entitled
to receive prompt reimbursement for all reasonable expenses incurred by him
during the Term in performing services hereunder, in accordance with the
policies and procedures then in effect and established by the Company for its
senior executive officers.

 

(g)                                  Other Benefits.  During the Term, the
Executive shall be eligible to participate in or receive benefits under the
Company’s employee benefit plans in effect from time to time, subject to the
terms of such plans.

 

(h)                                 Vacations.  During the Term, the Executive
shall be entitled to accrue up to 21 paid vacation days in each year, which
shall be accrued ratably.  The Executive shall also be entitled to all paid
holidays given by the Company to its executives.

 

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3.                                      Termination.  During the Term, the
Executive’s employment hereunder may be terminated without any breach of this
Agreement under the following circumstances:

 

(a)                                 Death.  The Executive’s employment hereunder
shall terminate upon his death.

 

(b)                                 Disability.  The Company may terminate the
Executive’s employment if he is disabled and unable to perform the essential
functions of the Executive’s then existing position or positions under this
Agreement with or without reasonable accommodation for a period of 180 days
(which need not be consecutive) in any 12-month period.  If any question shall
arise as to whether during any period the Executive is disabled so as to be
unable to perform the essential functions of the Executive’s then existing
position or positions with or without reasonable accommodation, the Executive
may, and at the request of the Company shall, submit to the Company a
certification in reasonable detail by a physician selected by the Company to
whom the Executive or the Executive’s guardian has no reasonable objection as to
whether the Executive is so disabled or how long such disability is expected to
continue, and such certification shall for the purposes of this Agreement be
conclusive of the issue.  The Executive shall cooperate with any reasonable
request of the physician in connection with such certification.  If such
question shall arise and the Executive shall fail to submit such certification,
the Company’s determination of such issue shall be binding on the Executive. 
Nothing in this Section 3(b) shall be construed to waive the Executive’s rights,
if any, under existing law including, without limitation, the Family and Medical
Leave Act of 1993, 29 U.S.C. §2601 et seq. and the Americans with Disabilities
Act, 42 U.S.C. §12101 et seq.

 

(c)                                  Termination by Company for Cause.  The
Company may terminate the Executive’s employment hereunder for Cause.  For
purposes of this Agreement, “Cause” shall mean any of the following:  (i) the
Executive’s material breach of any agreement with the Company, including the
Confidential Information and Intellectual Property Agreement between the Company
and the Executive, dated May 26, 2016 (the “Confidentiality Agreement”), the
provisions of Section 8 of this Agreement, the Code of Conduct or any other
material policy that may result in material injury to the Company; (ii) the
Executive’s conviction of a felony or any other crime involving dishonesty,
breach of trust, moral turpitude, or physical harm to any person (including the
Company or any of its employees); (iii) the Executive’s act of fraud or
intentional misrepresentation in connection with the Executive’s duties or
otherwise in connection with the business of the Company, that may result in
material injury to the Company; (iv) the Executive’s material and repeated
breach in the performance of duties under this Agreement, including
insubordination or failure to implement or follow a lawful policy or directive
of the Company, provided that if such failure is curable, it is not cured within
20 days following written notice thereof from the Board; or (v) the Executive’s
commission of an act, or omission, of gross negligence or willful misconduct in
the performance of the Executive’s duties that may, in the reasonable
determination of the Company, result in material injury to the Company.

 

(d)                                 Termination Without Cause.  The Company may
terminate the Executive’s employment hereunder at any time without Cause.  Any
termination by the Company of the Executive’s employment under this Agreement
which does not constitute a

 

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termination for Cause under Section 3(c) and does not result from the death or
disability of the Executive under Section 3(a) or (b) shall be deemed a
termination without Cause.

 

(e)                                  Termination by the Executive.  The
Executive may terminate his employment hereunder at any time for any reason,
including but not limited to Good Reason.  For purposes of this Agreement, “Good
Reason” shall mean, without the Executive’s consent, the occurrence of any of
the following: (i) the Company materially breaches any term of this Agreement,
and such breach causes or is likely to cause material harm to the Executive;
(ii) there is a change in the Executive’s responsibilities that represents a
material and adverse change from the Executive’s overall responsibilities, taken
as a whole; (iii) there is a Change in Control that results in a change in the
Executive’s responsibilities that represents a material and adverse change from
the Executive’s overall responsibilities, taken as a whole; (iv) the Executive’s
Base Salary is substantially reduced or diminished; or (v) the Executive’s place
of employment is relocated by the Company more than a 50-mile radius from Grand
Prairie, Texas (it being understood and agreed that the Executive may be
required to travel in connection with Company business and none of such travel
shall constitute or give rise to “Good Reason”).  The Executive’s voluntary
termination shall be deemed to have occurred for Good Reason for purposes of
this Agreement only if (x) the Executive provides written notice to the Company
within 30 days after the Executive becomes aware of circumstances giving rise to
Good Reason, (y) the Company fails to correct the circumstances giving rise to
Good Reason within 30 days following the receipt of such notice (the “Cure
Period”) and (z) the Executive resigns within 30 days following the end of the
Cure Period.  If the Company cures the Good Reason condition during the Cure
Period, Good Reason shall be deemed not to have occurred.

 

(f)                                   Notice of Termination.  Except for
termination as specified in Section 3(a), any termination of the Executive’s
employment by the Company or any such termination by the Executive shall be
communicated by written Notice of Termination to the other party hereto.  For
purposes of this Agreement, a “Notice of Termination” shall mean a notice which
shall indicate the specific termination provision in this Agreement relied upon.

 

(g)                                  Date of Termination.  “Date of Termination”
shall mean:  (i) if the Executive’s employment is terminated by his death, the
date of his death; (ii) if the Executive’s employment is terminated on account
of disability under Section 3(b) or by the Company for Cause under Section 3(c),
the date on which Notice of Termination is given; (iii) if the Executive’s
employment is terminated by the Company under Section 3(d), the date on which a
Notice of Termination is given; (iv) if the Executive’s employment is terminated
by the Executive under Section 3(e) without Good Reason, 30 days after the date
on which a Notice of Termination is given, and (v) if the Executive’s employment
is terminated by the Executive under Section 3(e) with Good Reason, the date on
which a Notice of Termination is given after the end of the Cure Period. 
Notwithstanding the foregoing, in the event that the Executive gives a Notice of
Termination to the Company, the Company may unilaterally accelerate the Date of
Termination and such acceleration shall not result in a termination by the
Company for purposes of this Agreement.

 

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4.                                      Compensation Upon Termination.

 

(a)                                 Termination Generally.  If the Executive’s
employment with the Company is terminated for any reason, the Company shall pay
or provide to the Executive (or to his authorized representative or estate)
(i) any Base Salary earned through the Date of Termination, unpaid expense
reimbursements (subject to, and in accordance with, Section 2(f) of this
Agreement) and unused vacation that accrued through the Date of Termination on
or before the time required by law but in no event more than 30 days after the
Executive’s Date of Termination; and (ii) any vested benefits the Executive may
have under any employee benefit plan of the Company through the Date of
Termination, which vested benefits shall be paid and/or provided in accordance
with the terms of such employee benefit plans (collectively, the “Accrued
Benefit”).

 

(b)                                 Termination by the Company Without Cause or
by the Executive with Good Reason.  During the Term, if the Executive’s
employment is terminated by the Company without Cause as provided in
Section 3(d), or the Executive terminates his employment for Good Reason as
provided in Section 3(e), then the Company shall pay the Executive his Accrued
Benefit.  In addition, subject to the Executive signing a separation agreement
containing, among other provisions, a general release of claims in favor of the
Company and related persons and entities, confidentiality, return of property
and non-disparagement, in a form and manner satisfactory to the Company (the
“Separation Agreement and Release”) and the Separation Agreement and Release
becoming fully effective, all within the time frame set forth in the Separation
Agreement and Release:

 

(i)                                     the Company shall pay the Executive an
amount equal to the sum of: (a) one times the Executive’s Base Salary then in
effect, plus (b) any incentive compensation that has been earned, but remains
unpaid as of the Date of Separation, (as determined by the Board or the
Compensation Committee)  (the “Severance Amount”).  Notwithstanding the
foregoing, if the Executive breaches any of the provisions of the
Confidentiality Agreement or Section 8 of this Agreement, all payments of the
Severance Amount shall immediately cease; and

 

(ii)                                  if the Executive was participating in the
Company’s group health plan immediately prior to the Date of Termination and
elects COBRA health continuation, then the Company shall pay to the Executive a
monthly cash payment for 12 months or the Executive’s COBRA health continuation
period, whichever ends earlier, in an amount equal to the monthly employer
contribution that the Company would have made to provide health insurance to the
Executive if the Executive had remained employed by the Company; and

 

(iii)                               the amounts payable under this
Section 4(b) shall be paid out in substantially equal installments in accordance
with the Company’s payroll practice over 12 months commencing within 60 days
after the Date of Termination; provided, however, that if the 60-day period
begins in one calendar year and ends in a second calendar year, the Severance
Amount shall begin to be paid in the second calendar year by the last day of
such 60-day period; provided, further, that the initial payment shall include a
catch-up payment to cover amounts retroactive to the day immediately following
the Date of

 

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Termination.  Each payment pursuant to this Agreement is intended to constitute
a separate payment for purposes of Treasury Regulation Section 1.409A-2(b)(2).

 

5.                                      Change in Control Payment.  The
provisions of this Section 5 set forth certain terms of an agreement reached
between the Executive and the Company regarding the Executive’s rights and
obligations upon the occurrence of a Change in Control of the Company.  These
provisions are intended to assure and encourage in advance the Executive’s
continued attention and dedication to his assigned duties and his objectivity
during the pendency and after the occurrence of any such event.  These
provisions shall apply in lieu of, and expressly supersede, the provisions of
Section 4(b) regarding severance pay and benefits upon a termination of
employment, if such termination of employment occurs within 12 months after the
occurrence of the first event constituting a Change in Control.  These
provisions shall terminate and be of no further force or effect beginning 12
months after the occurrence of a Change in Control.

 

(a)                                 Change in Control.  During the Term, if
within 12 months after a Change in Control, the Executive’s employment is
terminated by the Company without Cause as provided in Section 3(d) or the
Executive terminates his employment for Good Reason as provided in Section 3(e),
then, subject to the signing of the Separation Agreement and Release by the
Executive and the Separation Agreement and Release effective all within the time
frame set forth in the Separation Agreement and Release,

 

(i)                                     the Company shall pay the Executive a
lump sum in cash in an amount equal to one times the sum of (A) the Executive’s
then current Base Salary (or the Executive’s Base Salary in effect immediately
prior to the Change in Control, if higher) plus (B) the Executive’s target
annual incentive compensation for the then-current year; and

 

(ii)                                  notwithstanding anything to the contrary
in any applicable option agreement or stock-based award agreement, all stock
options and other stock-based awards held by the Executive shall immediately
accelerate and become fully exercisable or nonforfeitable as of the Date of
Termination; and

 

(iii)                               if the Executive was participating in the
Company’s group health plan immediately prior to the Date of Termination and
elects COBRA health continuation, then the Company shall pay to the Executive a
monthly cash payment for 12 months or the Executive’s COBRA health continuation
period, whichever ends earlier, in an amount equal to the monthly employer
contribution that the Company would have made to provide health insurance to the
Executive if the Executive had remained employed by the Company; and

 

(iv)                              The amounts payable under this
Section 5(a) shall be paid or commence to be paid within 60 days after the Date
of Termination; provided, however, that if the 60-day period begins in one
calendar year and ends in a second calendar year, such payment shall be paid or
commence to be paid in the second calendar year by the last day of such 60-day
period.

 

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(b)                                 Additional Limitation.

 

(i)                                     Anything in this Agreement to the
contrary notwithstanding, in the event that the amount of any compensation,
payment or distribution by the Company to or for the benefit of the Executive,
whether paid or payable or distributed or distributable pursuant to the terms of
this Agreement or otherwise, calculated in a manner consistent with Section 280G
of the Code and the applicable regulations thereunder (the “Aggregate
Payments”), would be subject to the excise tax imposed by Section 4999 of the
Code, then the Aggregate Payments shall be reduced (but not below zero) so that
the sum of all of the Aggregate Payments shall be $1.00 less than the amount at
which the Executive becomes subject to the excise tax imposed by Section 4999 of
the Code; provided that such reduction shall only occur if it would result in
the Executive receiving a higher After Tax Amount (as defined below) than the
Executive would receive if the Aggregate Payments were not subject to such
reduction.  In such event, the Aggregate Payments shall be reduced in the
following order, in each case, in reverse chronological order beginning with the
Aggregate Payments that are to be paid the furthest in time from consummation of
the transaction that is subject to Section 280G of the Code:  (1) cash payments
not subject to Section 409A of the Code; (2) cash payments subject to
Section 409A of the Code; (3) equity-based payments and acceleration; and
(4) non-cash forms of benefits; provided that in the case of all the foregoing
Aggregate Payments all amounts or payments that are not subject to calculation
under Treas. Reg. §1.280G-1, Q&A-24(b) or (c) shall be reduced before any
amounts that are subject to calculation under Treas. Reg. §1.280G-1,
Q&A-24(b) or (c).

 

(ii)                                  For purposes of this Section 5(b), the
“After Tax Amount” means the amount of the Aggregate Payments less all federal,
state, and local income, excise and employment taxes imposed on the Executive as
a result of the Executive’s receipt of the Aggregate Payments.  For purposes of
determining the After Tax Amount, the Executive shall be deemed to pay federal
income taxes at the highest marginal rate of federal income taxation applicable
to individuals for the calendar year in which the determination is to be made,
and state and local income taxes at the highest marginal rates of individual
taxation in each applicable state and locality, net of the maximum reduction in
federal income taxes which could be obtained from deduction of such state and
local taxes.

 

(iii)                               The determination as to whether a reduction
in the Aggregate Payments shall be made pursuant to Section 5(b)(i) shall be
made by a nationally recognized accounting firm selected by the Company (the
“Accounting Firm”), which shall provide detailed supporting calculations both to
the Company and the Executive within 15 business days of the Date of
Termination, if applicable, or at such earlier time as is reasonably requested
by the Company or the Executive.  Any determination by the Accounting Firm shall
be binding upon the Company and the Executive.

 

(c)                                  Definitions.  For purposes of this
Section 5, the following terms shall have the following meanings:

 

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“Change in Control” shall mean the consummation of any of the following:

 

(i)                                     A sale of all or substantially all of
the assets of the Company on a consolidated basis to an unrelated person or
entity; or

 

(ii)                                  A merger, reorganization or consolidation
in which the outstanding shares of common stock of the Company are converted
into or exchanged for shares of the successor entity and the holders of the
Company’s outstanding voting power immediately prior to such transaction do not
own at least a majority of the outstanding voting power of the surviving entity
immediately upon the completion of such transaction; or

 

(iii)                               The sale of all or a majority of the common
stock of the Company to an unrelated person or entity; or

 

(iv)                              Any other transaction in which the holders of
the Company’s outstanding voting power immediately prior to such transaction do
not own at least a majority of the outstanding voting power of the surviving
entity in the transaction immediately upon the completion of such transaction.

 

6.                                      Section 409A.

 

(a)                                 Anything in this Agreement to the contrary
notwithstanding, if at the time of the Executive’s separation from service
within the meaning of Section 409A of the Code, the Company determines that the
Executive is a “specified employee” within the meaning of
Section 409A(a)(2)(B)(i) of the Code, then to the extent any payment or benefit
that the Executive becomes entitled to under this Agreement on account of the
Executive’s separation from service would be considered deferred compensation
otherwise subject to the 20 percent additional tax imposed pursuant to
Section 409A(a) of the Code as a result of the application of
Section 409A(a)(2)(B)(i) of the Code, such payment shall not be payable and such
benefit shall not be provided until the date that is the earlier of (A) six
months and one day after the Executive’s separation from service, or (B) the
Executive’s death.  If any such delayed cash payment is otherwise payable on an
installment basis, the first payment shall include a catch-up payment covering
amounts that would otherwise have been paid during the six-month period but for
the application of this provision, and the balance of the installments shall be
payable in accordance with their original schedule.

 

(b)                                 All in-kind benefits provided and expenses
eligible for reimbursement under this Agreement shall be provided by the Company
or incurred by the Executive during the time periods set forth in this
Agreement.  All reimbursements shall be paid as soon as administratively
practicable, but in no event shall any reimbursement be paid after the last day
of the taxable year following the taxable year in which the expense was
incurred.  The amount of in-kind benefits provided or reimbursable expenses
incurred in one taxable year shall not affect the in-kind benefits to be
provided or the expenses eligible for reimbursement in any other taxable year
(except for any lifetime or other aggregate limitation applicable to medical
expenses).  Such right to reimbursement or in-kind benefits is not subject to
liquidation or exchange for another benefit.

 

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(c)                                  To the extent that any payment or benefit
described in this Agreement constitutes “non-qualified deferred compensation”
under Section 409A of the Code, and to the extent that such payment or benefit
is payable upon the Executive’s termination of employment, then such payments or
benefits shall be payable only upon the Executive’s “separation from service.” 
The determination of whether and when a separation from service has occurred
shall be made in accordance with the presumptions set forth in Treasury
Regulation Section 1.409A-1(h).

 

(d)                                 The parties intend that this Agreement will
be administered in accordance with Section 409A of the Code.  To the extent that
any provision of this Agreement is ambiguous as to its compliance with
Section 409A of the Code, the provision shall be read in such a manner so that
all payments hereunder comply with Section 409A of the Code.  Each payment
pursuant to this Agreement is intended to constitute a separate payment for
purposes of Treasury Regulation Section 1.409A-2(b)(2).  The parties agree that
this Agreement may be amended, as reasonably requested by either party, and as
may be necessary to fully comply with Section 409A of the Code and all related
rules and regulations in order to preserve the payments and benefits provided
hereunder without additional cost to either party.

 

(e)                                  The Company makes no representation or
warranty and shall have no liability to the Executive or any other person if any
provisions of this Agreement are determined to constitute deferred compensation
subject to Section 409A of the Code but do not satisfy an exemption from, or the
conditions of, such Section.

 

7.                                      Intellectual Property.  The Executive
acknowledges that all discoveries, concepts, ideas, inventions, innovations,
improvements, developments, methods, designs, analyses, drawings, reports,
patent applications, copyrightable work and mask work (whether or not including
any confidential information) and all registrations or applications related
thereto, all other proprietary information and all similar or related
information (whether or not patentable) which relate to the Company’s or any of
its affiliates’ actual or anticipated business, research and development or
existing or future products or services and which are conceived, developed or
made by the Executive (whether alone or jointly with others) while employed by
the Company and its affiliates, whether before or after the date of this
Agreement (collectively referred to as “Work Product”), are the property of the
Company or such affiliated companies.  The Executive shall promptly disclose
such Work Product to the Board and, at the Company’s expense, perform all
actions reasonably requested by the Board (whether during or after the period of
employment) to establish and confirm such ownership (including, without
limitation, executing and delivering assignments, consents, powers of attorney
and other instruments).  The Executive acknowledges that all Work Product shall
be deemed to constitute “works made for hire” under the U.S. Copyright Act of
1976, as amended.

 

8.                                      Confidential Information, Noncompetition
and Cooperation.  The Executive agrees that he is bound by the terms of the
Confidentiality Agreement.

 

(a)                                 The Executive agrees that all property
(including, without limitation, all equipment, tangible proprietary information,
documents, records, notes, contracts and computer-generated materials) furnished
to or created or prepared by the Executive incident to the

 

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Executive’s employment belongs to the Company and shall be promptly returned to
the Company upon termination of the Executive’s employment.

 

(b)                                 Upon termination of the Executive’s
employment, the Executive shall be deemed to have resigned from any and all
offices and directorships then held with the Company and its affiliates. 
Following any termination of employment, the Executive shall reasonably
cooperate with the Company (i) in the winding up of pending work on behalf of
the Company and the orderly transfer of work to other employees, and (ii) in the
defense of any action brought by any third party against the Company that
relates to the Executive’s employment by the Company; provided, that in each
case the Company shall reimburse the Executive for any reasonable and documented
out-of-pocket fees and expenses incurred by the Executive in connection with
such cooperation.

 

(c)                                  The Executive acknowledges that in the
course of the Executive’s employment with the Company, the Executive will become
familiar with the Company’s and its affiliates’ trade secrets and with other
confidential and proprietary information and that the Executive’s services will
be of special, unique and extraordinary value to the Company and its
affiliates.  Therefore, the Executive agrees that the Executive shall not,
during the Term and for a period of one (1) year thereafter, directly or
indirectly, either for himself or for any other person or entity or otherwise,
(i) participate in any business or enterprise (including, without limitation,
any division, group or franchise of a larger organization), engaged, anywhere
within North America at the time of termination (the “Restricted Territory”), in
the business of developing or commercializing controlled release, ion exchange
resin based pharmaceutical products, or any other business in which the
Executive would be required to employ, reveal or otherwise utilize trade secrets
of the Company and its affiliates used prior to termination that may result in a
material injury to the Company (with it being understood that the term
“participate in” shall include, without limitation, having any direct or
indirect interest in any person or entity, whether as a sole proprietor, owner,
stockholder, partner, joint venturer, creditor or otherwise, or rendering any
direct or indirect service or assistance to any person or entity -whether as a
director, officer, manager, supervisor, employee, agent, consultant, advisor or
otherwise); provided that, nothing herein shall prohibit the Executive from
being a passive owner of not more than two percent (2%) of the outstanding stock
of any class of an entity which is publicly traded so long as the Executive has
no active participation in the business of such corporation; (ii) induce or
attempt to induce any customer, supplier, licensee or other business relation of
the Company or any of its subsidiaries to cease doing business with the Company
or any such subsidiary or in any way interfere with the relationship between any
such customer, supplier, licensee or business relation and the Company and any
such subsidiary; or (iii) induce or attempt to induce any employee of the
Company or its affiliates to leave the employ of the Company or any such
affiliated company, or in any way interfere with the relationship between the
Company and any of its affiliates and any employee thereof, or hire or otherwise
engage any person who was an employee of the Company or any of its affiliated
companies within one year before any such hiring would take place.

 

(d)                                 The Executive agrees that he will not
directly or indirectly, individually or in concert with others, make any
statement calculated or likely to have the effect of undermining or disparaging
the business or the business reputation of the Company or its affiliates or
their respective employees, officers, directors, customers, suppliers,
successors and

 

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assigns, including, without limitation, negative comments about any such person
or company, its management methods, policies and/or practices. Notwithstanding
the foregoing, nothing herein shall prohibit the Executive from responding
accurately and fully to any question, inquiry or request made in connection with
any governmental inquiry, investigation, review, audit or proceeding, any legal
proceeding or claim (whether in court, arbitration or otherwise) of any nature,
or as otherwise required by law.

 

(e)                                  If, at the time of enforcement of this
Section 8, a court holds that the restrictions stated herein are unreasonable
under circumstances then existing, the parties hereto agree that the maximum
duration, scope or geographical area reasonable under such circumstances shall
be substituted for the stated period, scope or area and that the court shall be
allowed to revise the restrictions contained herein to cover the maximum
duration, scope and area permitted by law.  Because the Executive’s services are
unique and because the Executive has access to confidential and proprietary
information of the Company and its business, the parties hereto agree that money
damages would not be an adequate remedy for any breach of Section 8 of this
Agreement.  Therefore, in the event of a breach or threatened breach of
Section 8 of this Agreement, the Company or its successors or assigns may, in
addition to other rights and remedies existing in their favor and
notwithstanding anything herein to the contrary, apply to any court of competent
jurisdiction for specific performance and/or injunctive or other equitable
relief in order to enforce or prevent any violations of, the provisions hereof
(without posting a bond or other security).

 

(f)                                   The Executive acknowledges that the
provisions of this Section 8 are in consideration of the Executive’s employment
with the Company and additional good and valuable consideration as set forth in
this Agreement.  The Executive agrees and acknowledges that the restrictions
contained in Section 8 do not preclude the Executive from earning a livelihood,
nor do they unreasonably impose limitations on the Executive’s ability to earn a
living.  The Executive acknowledges (i) that the business of the Company and its
affiliates will be conducted throughout the Restricted Territory,
(ii) notwithstanding the state of formation or principal office of the Company
and its affiliates, or any of their respective executives or employees
(including the Executive), it is expected that the Company will have business
activities and have valuable business relationships within its industry
throughout the Restricted Territory, and (iii) as part of the Executive’s
responsibilities, the Executive may be traveling throughout the Restricted
Territory in furtherance of the Company’s and its affiliates’ business and its
relationships.  The Executive acknowledges that the potential harm to the
Company of the non-enforcement of Section 8 outweighs any potential harm to the
Executive of its enforcement by injunction or otherwise.  The Executive
acknowledges that the Executive has carefully read this Agreement and has given
careful consideration to the restraints imposed upon the Executive by this
Agreement and is in full accord as to their necessity for the reasonable and
proper protection of confidential and proprietary information of the Company and
its subsidiaries now existing or to be developed in the future.  The Executive
acknowledges that each and every restraint imposed by this Agreement is
reasonable with respect to scope, duration, and geographical area.

 

9.                                      Arbitration of Disputes.  Any
controversy or claim arising out of or relating to this Agreement or the breach
thereof or otherwise arising out of the Executive’s employment or the
termination of that employment (including, without limitation, any claims of
unlawful

 

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employment discrimination whether based on age or otherwise) shall, to the
fullest extent permitted by law, be settled by arbitration in any forum and form
agreed upon by the parties or, in the absence of such an agreement, under the
auspices of the American Arbitration Association (“AAA”) in Delaware in
accordance with the Employment Dispute Resolution Rules of the AAA, including,
but not limited to, the rules and procedures applicable to the selection of
arbitrators.  In the event that any person or entity other than the Executive or
the Company may be a party with regard to any such controversy or claim, such
controversy or claim shall be submitted to arbitration subject to such other
person or entity’s agreement.  Judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof.  This
Section 8 shall be specifically enforceable. Notwithstanding the foregoing, this
Section 8 shall not preclude either party from pursuing a court action for the
sole purpose of obtaining a temporary restraining order or a preliminary
injunction in circumstances in which such relief is appropriate; provided that
any other relief shall be pursued through an arbitration proceeding pursuant to
this Section 9.

 

10.                               Consent to Jurisdiction.  To the extent that
any court action is permitted consistent with or to enforce Section 9 of this
Agreement, the parties hereby consent to the jurisdiction of the Superior Court
of the State of Delaware and the United States District Court for the District
of Delaware.  Accordingly, with respect to any such court action, the Executive
(a) submits to the personal jurisdiction of such courts; (b) consents to service
of process; and (c) waives any other requirement (whether imposed by statute,
rule of court, or otherwise) with respect to personal jurisdiction or service of
process.

 

11.                               Integration.  This Agreement constitutes the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all prior agreements between the parties concerning such subject
matter, provided that the Confidentiality Agreement is in full force and effect.

 

12.                               Withholding.  All payments made by the Company
to the Executive under this Agreement shall be net of any tax or other amounts
required to be withheld by the Company under applicable law.

 

13.                               Successor to the Executive.  This Agreement
shall inure to the benefit of and be enforceable by the Executive’s personal
representatives, executors, administrators, heirs, distributees, devisees and
legatees.  In the event of the Executive’s death after his termination of
employment but prior to the completion by the Company of all payments due him
under this Agreement, the Company shall continue such payments to the
Executive’s beneficiary designated in writing to the Company prior to his death
(or to his estate, if the Executive fails to make such designation).

 

14.                               Enforceability.  If any portion or provision
of this Agreement (including, without limitation, any portion or provision of
any section of this Agreement) shall to any extent be declared illegal or
unenforceable by a court of competent jurisdiction, then the remainder of this
Agreement, or the application of such portion or provision in circumstances
other than those as to which it is so declared illegal or unenforceable, shall
not be affected thereby, and each portion and provision of this Agreement shall
be valid and enforceable to the fullest extent permitted by law.

 

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15.                               Survival.  The provisions of this Agreement
shall survive the termination of this Agreement and/or the termination of the
Executive’s employment to the extent necessary to effectuate the terms contained
herein.

 

16.                               Waiver.  No waiver of any provision hereof
shall be effective unless made in writing and signed by the waiving party.  The
failure of any party to require the performance of any term or obligation of
this Agreement, or the waiver by any party of any breach of this Agreement,
shall not prevent any subsequent enforcement of such term or obligation or be
deemed a waiver of any subsequent breach.

 

17.                               Notices.  Any notices, requests, demands and
other communications provided for by this Agreement shall be sufficient if in
writing and delivered in person or sent by a nationally recognized overnight
courier service or by registered or certified mail, postage prepaid, return
receipt requested, to the Executive at the last address the Executive has filed
in writing with the Company or, in the case of the Company, at its main offices,
attention of the Board.

 

18.                               Amendment.  This Agreement may be amended or
modified only by a written instrument signed by the Executive and by a duly
authorized representative of the Company.

 

19.                               Governing Law.  This is a Delaware contract
and shall be construed under and be governed in all respects by the laws of the
State of Delaware, without giving effect to the conflict of laws principles of
such State.  With respect to any disputes concerning federal law, such disputes
shall be determined in accordance with the law as it would be interpreted and
applied by the United States Court of Appeals for the Third Circuit.

 

20.                               Counterparts.  This Agreement may be executed
in any number of counterparts, each of which when so executed and delivered
shall be taken to be an original; but such counterparts shall together
constitute one and the same document.

 

21.                               Successor to Company.  The Company shall
require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business or
assets of the Company expressly to assume and agree to perform this Agreement to
the same extent that the Company would be required to perform it if no
succession had taken place.  Failure of the Company to obtain an assumption of
this Agreement at or prior to the effectiveness of any succession shall be a
material breach of this Agreement.

 

22.                               Gender Neutral.  Wherever used herein, a
pronoun in the masculine gender shall be considered as including the feminine
gender unless the context clearly indicates otherwise.

 

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IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the
Effective Date.

 

 

Neos Therapeutics, Inc.

 

 

 

 

 

By:

/s/ Richard Eisenstadt

 

Name:

Richard Eisenstadt

 

Title:

Chief Financial Officer

 

 

 

Executive

 

 

 

 

 

/s/ Juergen A. Martens

 

Juergen A. Martens, Ph.D., EMTM

 

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