Exhibit 10.1


 


	
  March 11, 2005

  	
   

  	
  Confidential

  



 


 


 


 


Larry G. Stambaugh


Maxim Pharmaceuticals, Inc.


8899 University Center Lane, Suite 400


San Diego, CA 92122


 


Dear Larry:


 


Maxim Pharmaceuticals, Inc. (the “Company”) values the
contributions that you have made to date, your qualifications and the skills
you have demonstrated.  We feel that you
can continue to make a serious and valuable contribution to the Company and
help the Company achieve success in its new strategic initiatives.


 


RETENTION BONUS:  The Company
wishes to retain your services and to incentivize you to continue as an
employee.  Accordingly, subject to the
limitations contained herein, if you remain continuously employed with the
Company through the earlier of the consummation of a Change of Control or
September 30, 2005 (such earlier date referred to hereinafter as the “Target Date”), and
provided that you have not received any type of Disciplinary Action, the
Company will pay you a bonus in an amount
equal to $225,000, minus the standard withholdings and deductions (the “Retention Bonus”).  The Retention Bonus will be paid in six equal
monthly installments on the last day of each month starting on the Target Date,
and is in addition to your base salary.


 


TRANSITION BONUS:  In addition to
the Retention Bonus, in the event the Company consummates a Change of Control,
the Company wishes to retain your services and to incentivize you to continue
as an employee following the Change of Control through a transition period of
at least three months.  Accordingly,
subject to the limitations contained herein, if you remain continuously
employed with the Company for at least three months but not longer than six
months following the consummation of a Change of Control, and provided that you
have not received any type of Disciplinary Action, the Company will pay you a
lump sum additional bonus in an amount
equal to $225,000, minus the standard withholdings and deductions, payable as
of your last day of employment with the Company (the “Transition Bonus”);
provided, however, that the Transition Bonus shall not ever become payable in
the event your employment continues past six months from the date of
consummation of the Change of Control. 
Notwithstanding the foregoing, in the event you are terminated by
the Company (or its successor) without Cause (as defined below) any time during
the first six months following the consummation of a Change of 


 





















 


Control (and provided that you have not
received any type of Disciplinary Action during the first three such months), the
Transition Bonus shall immediately become payable in full on the date of such
termination.


 


SUCCESS BONUS:  In order to incentivize you to identify and
consummate a Change of Control or other strategic transaction which
significantly preserves or increases value to the shareholders of the Company,
the Board of Directors may authorize the Company to pay you an additional bonus
in an amount up to $225,000, minus the
standard withholdings and deductions (the “Success Bonus”).  The Success Bonus shall be a discretionary
bonus payable in a lump sum upon consummation of a Change of Control or other
strategic transaction which the Board of Directors determines to have preserved
or increased value to the shareholders of the Company based upon factors
considered relevant by the Board at the time a definitive agreement relating to
such transaction is approved.


 


RETENTION OPTION:  In addition,
subject to the limitations contained herein, if you remain continuously
employed with the Company through the date of grant (which will be within the
next sixty (60) days), the Company will grant you a nonstatutory stock option
under the Company’s 2001 Incentive Stock Option Plan to purchase 150,000 shares
of the Company’s Common Stock, at an exercise price equal to the fair market
value of the Company’s Common Stock on the date of grant (the “Retention Option”).  Thereafter, provided that you remain
continuously employed by the Company, the Retention Option will vest in six
equal monthly installments on the last day of each month starting on the Target
Date.  If your employment with the
Company is terminated for any reason, then the Retention Option shall cease
vesting from the date of such termination. 
All vested options shall be exercisable for five years from the date of
grant without regard to your continued employment with the Company.


 


Notwithstanding the foregoing, if, at any
time following a Change in Control (as defined below), your employment with the
Company is involuntarily terminated by the Company without Cause (as defined
below) or you voluntarily terminate your employment with the Company for Good
Reason (as defined below), then the Retention Bonus shall be paid to you in a
lump sum (to the extent not already paid to you prior to such time) and your
Retention Option shall become fully vested and exercisable (to the extent not
already fully vested and exercisable prior to such time).


 


For purposes of this letter the terms Change
in Control, Cause, Good Reason and Disciplinary Action shall be defined as
follows:


 


                “Change in Control”
shall mean a transaction (excluding in each case transactions in which
securities are purchased from the Company for the principal purpose of raising
capital for the Company) in which one of the following occurs: (i) any person or related group of persons
(other than the Company or an affiliate of the Company) directly acquires
beneficial ownership (within the meaning of Rule 13d-3 of the Securities
Exchange Act of 1934) of securities possessing more than fifty percent (50%) of
the total combined voting power of the Company’s outstanding securities; (ii)
(A) a merger or consolidation occurs in which the Company is not the surviving
entity, or 


 





















 


(B) any reverse merger occurs in which the
Company is the surviving entity, or (C) any merger involving a subsidiary of
the Company occurs in which the Company is a surviving entity, but in each case
in which holders of the Company’s outstanding voting securities immediately
prior to such transaction, as such, do not hold, immediately following such
transaction, securities possessing fifty percent (50%) or more of the total
combined voting power of the surviving entity’s outstanding securities (in the
case of clause (A)) or the Company’s outstanding voting securities (in the case
of clauses (B) and (C)); or (iii) all or substantially all of the Company’s
assets are sold or transferred other than in connection with an internal
reorganization of the Company or the Company’s complete liquidation (other than
a liquidation of the Company into a wholly-owned subsidiary).


 


“Cause”  shall mean of any of the following events:
(i) your material breach
of any provision of this Agreement or any other agreement you have entered into
with the Company; (ii) your engaging or in any manner participating in any
activity which is competitive with or intentionally injurious to the Company or
which violates any material provision of an agreement between you and the
Company; (iii) your commission of any fraud against the Company or use or
appropriation for your personal use or benefit of any funds or properties of
the Company; (iv) your conviction of any crime involving dishonesty or moral
turpitude; or (v) conduct by you which in good faith and reasonable
determination of the Board demonstrates gross unfitness to serve.


 


                “Good Reason” shall
mean the occurrence of one or more of the following, without your express
written consent:  (i) a significant
reduction in your base salary as in effect immediately prior to such reduction
for any reason other than in connection with, and proportionate to, a
company-wide pay reduction; and (ii) a relocation of your principal workplace
by more than fifty (50) miles.


 


                “Disciplinary Action”
shall mean a notice provided to you in writing by the Board of Directors
stating that (i) you
have violated a written policy of the Company; (ii) you have engaged or
participated in an activity which is competitive with or intentionally
injurious to the Company or which violates a material provision of an agreement
between you and the Company; (iii) you have used, or appropriated for your
personal use or benefit, funds or properties of the Company; (iv) you have
repeatedly failed to satisfactorily perform your job duties; or (v) you have
refused or failed to follow lawful and reasonable directions of the Board of
Directors.


 


We believe that you will be able to make a
significant contribution to the Company’s future efforts.  One of the critical factors in the Company’s
future success will be the contribution of key employees such as you.


 


Please
keep in mind that you will continue to be bound by the Company’s policies and
this letter is not intended to change your status as an at-will employee with
the Company.  As with all employees at
the Company, you or the Company may terminate your employment at any time for
any reason whatsoever, with or without cause or advance notice.


 





















 


This
agreement constitutes the full and complete expression of our arrangement with
respect to the Retention Bonus, the Transition Bonus, the Success Bonus and the
Retention Option and supersedes any prior oral commitments or
representations.  This agreement cannot
be modified except by a written instrument approved and signed by both you and
an independent member of the Company’s Board of Directors acting on behalf of
the Company.


 


Sincerely,


 


	
  /s/ Wayne Yetter

  	
   

  	
   

  	
   

  
	
  Wayne Yetter

  	
   

  	
   

  



Chairman of the Compensation Committee


of the Board of Directors


 


Accepted:


 


 


 


 


	
  /s/ Larry G. Stambaugh

  	
   

  	
  Date: 

  	
  3/11/05

  
	
  Larry G. Stambaugh