Exhibit 10.47




 




SQUARE ACQUISITION CORP.




 




KEY EMPLOYEE AGREEMENT


FOR


J. MILTON HARRIS




 




This Employment Agreement (“Agreement”) is entered

into as of the 29th day of June, 2001, by and between J. Milton Harris

(“Executive”) and Square Acquisition Corp., an Alabama Corporation (the

“Company”).  The Company is a wholly

owned subsidiary of Inhale Therapeutic Systems, Inc., a Delaware corporation

(the “Parent”).




 




Whereas, the Company desires to

employ Executive to provide personal services to the Company, and wishes to

provide Executive with certain compensation and benefits in return for his

services; and




 




Whereas, Executive wishes to be

employed by the Company and provide personal services to the Company in return

for certain compensation and benefits;




 




Now Therefore, in consideration

of the mutual promises and covenants contained herein, it is hereby agreed by

and between the parties hereto as follows:




 




1.                                      Employment by the Company.




 




1.1          The

effective date of this Agreement shall be the Closing Date as defined in that

certain Agreement and Plan of Merger and Reorganization dated May 22, 2001, as

amended, (the “Reorganization Agreement”) between and among the Company,

Parent, Shearwater Corporation, an Alabama Corporation, J. Milton Harris and

Puffinus, L.P.  If the transaction in

the Reorganization Agreement does not close, this Agreement shall have no

effect, and shall not be binding on the Company or on Executive.




 




1.2          Subject

to terms set forth herein, the Company agrees to employ Executive in the

position of President, Square Acquisition Corp. and Executive hereby accepts

such employment effective as of the Closing Date (the “Employment Date”).  During the term of his employment with the

Company, Executive will devote his best efforts and substantially all of his

business time and attention (except for vacation periods and reasonable periods

of illness or other incapacities permitted by the Company’s general employment

policies) to the business of the Company.




 




1.3          Executive

shall perform such duties as are customarily associated with his then current

title, consistent with the Bylaws of the Company and as required by the

Company’s Board of Directors (the “Board”).




 




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1.4          The

employment relationship between the parties shall also be governed by the

general employment policies and practices of the Company, including those

relating to protection of confidential information and assignment of

inventions, except that when the terms of this Agreement differ from or are in

conflict with the Company’s general employment policies or practices, this

Agreement shall control.




 




2.                                      Compensation.




 




2.1          Target

Compensation. 

Executive shall receive for services to be rendered hereunder an

annualized target compensation of $405,600, subject to standard deductions and

withholdings (the “Target Compensation”). 

The Target Compensation consists of a Base Salary and a Target Variable

Compensation.




 




(a)           Base

Salary.  Executive

shall receive an annualized salary of $312,000 (“Base Salary”), payable in

accordance with the Company’s standard payroll practices.




 




(b)           Target

Variable Compensation. 

The Executive shall receive an annual variable salary target of $93,600

(representing 100% performance) (the “Target Variable Compensation”) dependent

upon the Company’s performance measured against clearly defined and numerically

weighted goals approved by the Board of Directors of the Company twice a year,

either prior to or promptly after the six-month time period to which the goals

apply.  The Target Variable Compensation

will be made in two payments per year, subject to standard deductions and

withholdings.  In order to be eligible

to receive each payment of the Target Variable Compensation, Executive must be

an active employee of the Company on the date each payment is awarded.




 




2.2          Standard

Benefits. 

Executive shall be entitled to all rights and benefits for which he is

eligible under the terms and conditions of the standard benefits of Parent

which may be in effect from time to time and provided by Parent to its

employees generally.




 




2.3          Equity

Compensation. 

Subject to the approval by the Option Grant Subcommittee of the Parent’s

Board of Directors, Executive shall be granted an option to purchase

100,000  shares of Parent’s Common Stock

(the “Option”), at fair market value as determined by Parent’s Board as of the

date of grant, pursuant to Parent’s 2000 Non-Officer Equity Incentive Plan (the

“Plan”).  Except as set forth in Section

6.1 below, the shares governed by the Option shall vest as follows: 20%

(12/60th) of the shares governed by the Option shall vest on the first

anniversary of the Employment Date and an additional 1.67% (1/60th) of the

shares governed by the Option shall vest monthly beginning one month following

the first anniversary of the Employment Date until such time as 100% of the

shares governed by the Option shall be vested. 

The Option shall be governed by the terms and conditions set forth in

the Plan, and in the applicable written stock option agreement and grant

document.




 




3.                                      Proprietary Information Obligations.




 




3.1          Agreement.  Executive agrees to execute and abide by the

Proprietary Information and Inventions Agreement attached hereto as Exhibit A.




 




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3.2          Remedies.  Executive’s duties under the Proprietary

Information and Inventions Agreement shall survive termination of his

employment with the Company.  Executive

acknowledges that a remedy at law for any breach or threatened breach by him of

the provisions of the Proprietary Information and Inventions Agreement would be

inadequate, and he therefore agrees that the Company shall be entitled to

injunctive relief in case of any such breach or threatened breach.




 




4.                                      Noncompetition Agreement.




 




4.1          Agreement.  Executive agrees to execute and abide by the

Noncompetition Agreement attached hereto as Exhibit B.




 




4.2          Remedies.  Executive’s duties under the Noncompetition

Agreement shall survive termination of his employment with the Company.  Executive acknowledges that a remedy at law for

any breach or threatened breach by him of the provisions of the Noncompetition

Agreement would be inadequate, and he therefore agrees that the Company shall

be entitled to injunctive relief in case of any such breach or threatened

breach.




 




5.                                      Outside Activities.




 




5.1          Except

as permitted in Section 5.4, and except with the prior written consent of the

Company’s Board of Directors, Executive will not during the term of this

Agreement undertake or engage in any other employment, occupation or business

enterprise, other than ones in which Executive is a passive investor.  Executive may engage in civic and

not-for-profit activities so long as such activities do not materially

interfere with the performance of his duties hereunder.




 




5.2          Except

as permitted by Sections 5.3 and 5.4, Executive agrees not to acquire, assume

or participate in, directly or indirectly, any position, investment or interest

known by him to be adverse or antagonistic to the Company, Parent, Parent’s

subsidiaries, its or their respective businesses or prospects, financial or

otherwise.




 




5.3          Except

as permitted in Section 5.4, during the term of his employment by the Company,

except on behalf of the Company, Executive will not directly or indirectly,

whether as an officer, director, stockholder, partner, proprietor, associate,

representative, consultant, or in any capacity whatsoever engage in, become

financially interested in, be employed by or have any business connection with

any other person, corporation, firm, partnership or other entity whatsoever

which were known by him to compete directly with the Company, Parent, or

Parent’s subsidiaries, throughout the world, in any line of business engaged in

(or planned to be engaged in) by the Company, Parent, or Parent’s subsidiaries;

provided, however, that anything above to the contrary notwithstanding, he may

own, as a passive investor, securities of any competitor corporation, so long

as his direct holdings in any one such corporation shall not in the aggregate

constitute more than 1% of the voting stock of such corporation.




 




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5.4          Notwithstanding

anything to the contrary in this Agreement or the Noncompetition Agreement,

Executive is permitted to be a shareholder in and act as a director on the

Board of Directors of Expression Genetics (“EG”), which entity is developing,

securing, promoting, manufacturing, marketing, licensing, seeking regulatory

approval, distributing and similar related activities regarding: (i)

polyethylene glycol (“PEG”) molecules, PEG derivatives, PEG Hydrogels and other

polymeric materials used in combination with genetic materials by any route of

delivery or method of expression, and (ii) other gene delivery and gene

expression technologies, any part or all of which may be useful in the

treatment of diseases, pre-operative and post-operative complications, and

other medically related matters, and any successor entity or assignee of all or

substantially all of the assets of EG (an “EG Successor”), so long as such

activities do not interfere with his duties hereunder.  Further, in the event that EG or an EG

Successor should liquidate, dissolve or wind-up its business operations during

the Noncompetition Period (as defined in the Noncompetition Agreement), then

Executive may provide substantially similar services to one entity in existence

at any given time with a similar scope of activity, so long as such activity

does not interfere with his duties hereunder. 

For the purpose of this Agreement, genetic material shall mean any nucleotide

capable of carrying genetic information, nucleic acid sequence capable of

carrying genetic information or composition thereof capable of carrying genetic

information.  In the event that the

business of either the Parent or the Company extends to gene delivery and/or

gene expression technologies, including any activity as set forth in Sections

5.4(i) or (ii) above, then the Company shall provide written notice to

Executive and within 30 days thereafter, Executive shall terminate all

activities as a director of EG, or if applicable, such similar services with an

EG Successor, although Executive may maintain shareholder or similar status

with EG or, if applicable, may maintain shareholder or similar status with an

EG successor .




 




6.                                      Termination of Employment.




 




6.1                               Termination

Without Cause.




 




(a)           The

Company shall have the right to terminate Executive’s employment with the

Company at any time without Cause.  In

the event that Executive’s employment is terminated for any reason, either with

or without Cause, he agrees to immediately resign from any and all other

employment, officer or director positions that he holds with the Company, its

parent, or any affiliated entity.




 




(b)           In

the event the Company terminates Executive’s employment without Cause on or

before the fourth anniversary of the Employment Date, Executive shall be

entitled to (i) continuation of Base Salary in effect at the time of

termination for a period of twelve (12) months following the date of

termination and (ii) accelerated vesting of the Option such that, in addition

to the number of shares vested as of the date of termination pursuant to the

Schedule set forth in Section 2.3 above, the number of shares that would have

vested over the 12 month period following such date of termination had the

Executive’s employment not been terminated without Cause shall be deemed vested

as of the date of termination.




 




(c)           In

the event the Company terminates Executive’s employment without Cause after the

fourth anniversary of the Employment Date and prior




 




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to the fifth anniversary of the Employment Date,

Executive shall be entitled to (i) continuation of Base Salary in effect at the

time of termination until the fifth anniversary of the Employment Date and (ii)

accelerated vesting of the Option such that, in addition to the number of

shares vested as of the date of termination pursuant to the Schedule set forth

in Section 2.3 above, the number of shares that would have vested during the

period from the date of termination until the fifth anniversary of the

Employment Date had the Executive’s employment not been terminated without

Cause shall be deemed vested as of the date of termination.




 




6.2                               Termination

for Cause.




 




(a)           The

Company shall have the right to terminate Executive’s employment with the

Company at any time for Cause.




 




(b)           “Cause”

for termination shall mean:  (a)

indictment or conviction of any felony; (b) participation in any fraud against

the Company; (c)  intentional damage to

any property of the Company; or (d) intentional breach of this Agreement,

including Exhibits A and B.




 




(c)           In

the event Executive’s employment is terminated at any time with Cause, he will

not be entitled to severance pay, pay in lieu of notice or any other such

compensation.




 




6.3                               Voluntary

Or Mutual Termination.




 




(a)           Executive

may voluntarily terminate his employment with the Company at any time, after

which no further compensation will be paid to Executive. In the event that

Executive terminates his employment with the Company for any reason, he will

immediately resign from any and all other employment, officer or director

positions that he holds with the Company, its parent, or any affiliated entity.




 




(b)           In

the event Executive voluntarily terminates his employment, he will not be

entitled to severance pay, pay in lieu of notice or any other such

compensation.




 




7.             Release.  Upon termination of Executive’s employment, Executive shall

provide the Company with an executed and effective release substantially in the

form attached hereto as Exhibit C (the “Release”), as a condition of receipt of

any severance benefits provided under Section 6.1 of this Agreement.  With respect to Executive’s stock options,

unless Executive has provided the Company with an executed and effective Release,

any acceleration of Executive’s stock options as provided in Section 6.1 of

this Agreement shall be null and void and Executive’s stock options in such

event will be vested and may be exercised following the date of termination

only to the extent provided under their original terms in accordance with the

applicable stock option plan, and the applicable option agreements.




 




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8.                                      Cooperation with Company.




 




8.1          Cooperation

Obligation. 

During and after the term of Executive’s employment, Executive will

cooperate with the Company and Parent in responding to the reasonable requests

of the Company’s Chairman of the Board, CEO or General Counsel, in connection

with any and all existing or future litigation, arbitrations, mediations or

investigations brought by or against the Company, Parent, or its or their

respective affiliates, agents, officers, directors or employees, whether

administrative, civil or criminal in nature, in which the Company reasonably deems

Executive’s cooperation necessary or desirable.  In such matters, Executive agrees to provide the Company with

reasonable advice, assistance and information, including offering and

explaining evidence, providing sworn statements, and participating in discovery

and trial preparation and testimony. 

Executive also agrees to promptly send the Company copies of all

correspondence (for example, but not limited to, subpoenas) received by

Executive in connection with any such legal proceedings, unless Executive is

expressly prohibited by law from so doing. The failure by Executive to

cooperate fully with the Company in accordance with this Section 8 will be a

material breach of the terms of this Agreement which will result in all

commitments of the Company to make additional payments to Executive or

accelerate vesting of the Option under Section 6.1 becoming null and void.




 




8.2          Expenses

and Fees.  The

Company will reimburse Executive for reasonable out-of-pocket expenses incurred

by Executive as a result of his cooperation with the obligations described in

Section 8.1, within thirty (30) days of the presentation of appropriate

documentation thereof, in accordance with the Company’s standard reimbursement

policies and procedures. After termination of Executive’s employment, the

Company will also pay Executive a reasonable fee in the amount of $200 per hour

for the time Executive devotes to matters as requested by the Company under

Section 8.1 (“the Fees”). The Company will not deduct or withhold any amount

from the Fees for taxes, social security, or other payroll deductions, but will

instead issue an IRS Form 1099 with respect to the Fees. Executive acknowledges

that in cooperating in the manner described in Section 8.1, he will be serving

as an independent contractor, not a Company employee, and he will be entirely

responsible for the payment of all employment taxes and any other taxes due and

owing as a result of the payment of Fees. 

Executive hereby indemnifies the Company, Parent, and its and their

respective officers, directors, agents, attorneys, employees, shareholders,

subsidiaries, and affiliates and holds them harmless from any liability for any

taxes, penalties, and interest that may be assessed by any taxing authority

with respect to the Fees, with the exception of the employer’s share of

employment taxes subsequently determined to be applicable, if any.




 




9.                                      General Provisions.




 




9.1          Representation

Regarding Compensation From Prior Employment.  Executive hereby represents and warrants

that all amounts due to him in connection with employment prior to the

Employment Date have been timely paid in full, and he hereby acknowledges that

he is owed no compensation due to such prior employment.




 




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9.2          Notices.  Any notices provided hereunder must be in

writing and shall be deemed effective upon the earlier of personal delivery

(including personal delivery by fax) or the third day after mailing by first

class mail, to the Company at its primary office location and to Executive at

his address as listed on the Company payroll.




 




9.3          Severability.  Whenever possible, each provision of this

Agreement will be interpreted in such manner as to be effective and valid under

applicable law, but if any provision of this Agreement is held to be invalid,

illegal or unenforceable in any respect under any applicable law or rule in any

jurisdiction, such invalidity, illegality or unenforceability will not affect

any other provision or any other jurisdiction, but this Agreement will be reformed,

construed and enforced in such jurisdiction as if such invalid, illegal or

unenforceable provisions had never been contained herein.




 




9.4          Waiver.  If either party should waive any breach of

any provisions of this Agreement, he or it shall not thereby be deemed to have

waived any preceding or succeeding breach of the same or any other provision of

this Agreement.




 




9.5          Complete

Agreement.  This

Agreement and its Exhibits constitute the entire agreement between Executive

and the Company and it is the complete, final, and exclusive embodiment of

their agreement with regard to this subject matter, superceding any and all

agreements entered into between the Executive and the Company or Shearwater

Corporation.  It is entered into without

reliance on any promise or representation other than those expressly contained

herein, and it cannot be modified or amended except in a writing signed by an

officer of the Company.




 




9.6          Counterparts.  This Agreement may be executed in separate

counterparts, any one of which need not contain signatures of more than one

party, but all of which taken together will constitute one and the same

Agreement.




 




9.7          Headings.  The headings of the sections hereof are

inserted for convenience only and shall not be deemed to constitute a part

hereof nor to affect the meaning thereof.




 




9.8          Successors

and Assigns.  This

Agreement is intended to bind and inure to the benefit of and be enforceable by

Executive, the Company, the Parent, and its and their respective successors,

assigns, heirs, executors and administrators, except that Executive may not

assign any of his duties hereunder; and Executive may not assign any of his

rights hereunder without the written consent of the Company, which shall not be

withheld unreasonably.




 




9.9          Attorney

Fees.  If either

party hereto brings any action to enforce his or its rights hereunder, the

prevailing party in any such action shall be entitled to recover his or its

reasonable attorneys’ fees and costs incurred in connection with such action.




 




9.10        Choice of

Law.  All

questions concerning the construction, validity and interpretation of this

Agreement will be governed by the law of the State of Alabama.




 




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In Witness Whereof, the parties have executed this Agreement

on the day and year first above written.




 




	

   


  	

  Square Acquisition Corporation


  
	

   


  	

   


  	

   


  
	

   


  	

  By:


  	

  /s/ Ajit S. Gill


  	

   


  
	

   


  	

   


  	

      Ajit S. Gill


  
	

   


  	

   


  	

      Chairman and President


  
	

   


  	

   


  	

   


  
	

   


  	

  Date:


  	

  June 29, 2001


  	

   


  
	

  Accepted and agreed this


  29th day of June, 2001.


  	

   


  	

   


  
	

   


  	

   


  	

   


  
	

  /s/ J. Milton Harris


  	

   


  	

   


  	

   


  
	

  J. Milton Harris


  	

   


  	

   


  
					





 




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