**Exhibit10.1**

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**EMPLOYMENT AGREEMENT**

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**THISEMPLOYMENT AGREEMENT** (the “Agreement”) is made andentered into effective as of October 1, 2003, by and between MaximPharmaceuticals, Inc., (the “Company”), and Kurt R. Gehlsen, Ph.D.(“Executive”).  The Company andExecutive are hereinafter collectively referred to as the “Parties,” andindividually referred to as a “Party.”

 

**RECITALS**

 

**A.**                                    TheCompany desires assurance of the association and services of Executive in orderto retain Executive’s experience, skills, abilities, background and knowledge,and is willing to engage Executive’s services on the terms and conditions setforth in this Agreement.

 

**B.**                                    Executivedesires to be in the employ of the Company, and is willing to accept suchemployment on the terms and conditions set forth in this Agreement.

 

**AGREEMENT**

 

In consideration of the foregoing recitals and the mutual promises andcovenants herein contained, and for other good and valuable consideration, theParties, intending to be legally bound, agree as follows:

 

1.                                       **EMPLOYMENT.**

 

1.1                                 The Company herebyemploys Executive, and Executive hereby accepts continued employment by theCompany, upon the terms and conditions set forth in this Agreement, effectiveas of the date first set forth above (“Commencement Date”).  This Agreement shall continue in effect untilterminated pursuant to Section 5 below.

 

1.2                                 Executive shall be theSenior Vice-President and Chief Scientific Officer of the Company (or aposition of at least comparable status) and shall serve in such other capacityor capacities as the Chief Executive Officer and/or the Company’s Board ofDirectors (“Board”) may from time to time prescribe.

 

1.3                                 Executive shall do andperform all services, acts or things necessary or advisable to manage andconduct the business of the Company, which are (i) consistent with the Bylawsof the Company and (ii) subject to the direction and policies from time to timeestablished by the Board and/or the Chief Executive Officer.

 

1.4                                 Unless the Partiesotherwise agree in writing, during the term of this Agreement, Executive shallperform the services he is required to perform pursuant to this Agreement atthe Company’s offices, located at 8899 University Center Lane, Suite 400 or atany other place at which the Company maintains an office; provided, however,that the Company may from time to time require Executive to travel temporarilyto other locations in connection with the Company’s business.

 

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2.**             LOYALAND CONSCIENTIOUS PERFORMANCE; NONCOMPETITION.**

 

2.1                                 During his employmentby the Company, Executive shall devote his full business energies, interest,abilities and productive time to the proper and efficient performance of hisduties under this Agreement.

 

2.2                                 During the term ofthis Agreement, Executive shall not engage in competition with the Company,either directly or indirectly, in any manner or capacity, as adviser,principal, agent, partner, officer, director, employee, member of anyassociation or otherwise, in any phase of the business of developing,manufacturing and marketing of products which are in the same field of use orwhich otherwise compete with the products or proposed products of the Company.

 

2.3                                 Ownership byExecutive, as a passive investment, of less than one percent (1%) of theoutstanding shares of capital stock of any corporation with one or more classesof its capital stock listed on a national securities exchange or publiclytraded in the over-the-counter market shall not constitute a breach of thisparagraph.

 

3.                                       **COMPENSATIONOF EXECUTIVE.**

 

3.1                                 While employed by theCompany, as compensation for proper and satisfactory performance of all dutiesto be performed hereunder, the Company shall pay Executive an annual basesalary of Two Hundred Eighty Thousand Dollars, $280,000 per year (the “BaseSalary”), payable in regular periodic payments in accordance with Companypolicy.  Such salary shall be proratedfor any partial year of employment on the basis of a 365-day fiscal year.  In addition, Executive will be eligible foran incentive bonus of up to 25% of base salary, based upon defined milestones.

 

3.2                                 Executive’scompensation may be changed from time to time by mutual agreement of Executiveand the Board.

 

3.3                                 All of Executive’scompensation shall be subject to customary withholding taxes and any other employmenttaxes as are commonly required to be collected or withheld by the Company.

 

3.4                                 Executive shall beentitled to vacation and illness days consistent with the Company’s standardpractice for its employees generally.

 

3.5                                 Executiveshall, at the discretion of the Board, be entitled to participate in thebenefits for which he is eligible under the terms and conditions of thestandard Company benefits which may be in effect from time to time and providedby the Company.

 

4.                                       **EXPENSEREIMBURSEMENT.**

 

4.1                                 Executive shall beentitled to receive prompt reimbursement of all reasonable business and travelexpenses incurred by Executive in connection with the business of theCompany.  Such expenses must be properlyaccounted for under the policies and procedures established by the Company.

 

5.                                       **TERMINATION.**

 

5.1                                 The Company mayterminate Executive’s employment under this Agreement “for cause” by deliveryof written notice to Executive specifying the cause or causes relied upon forsuch termination.  Any notice of terminationdelivered pursuant to this Section 5.1 shall effect

 

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termination as of the date specified in such notice or, in the event nosuch date is specified, on the last day of the month in which such notice isdelivered or deemed delivered as provided in Section 9 below.  If Executive’s employment under thisAgreement is terminated by the Company for cause under this section, Executiveshall be entitled to receive only accrued Base Salary and other accruedbenefits required by law, prorated to the date of termination.  Executive will not be entitled to severancepay, pay in lieu of notice or any other such compensation.  Grounds for the Company to terminate thisAgreement “for cause” shall be limited to the occurrence of any of thefollowing events:

 

5.1.1                        Executive’smaterial breach of any provision of this Agreement;

 

5.1.2                        Executive’sengaging or in any manner participating in any activity which is competitivewith or intentionally injurious to the Company or which violates any provisionof Section 7 of this Agreement;

 

5.1.3                        Executive’scommission of any fraud against the Company or use or appropriation for hispersonal use or benefit of any funds or properties of the Company;

 

5.1.4                        Executive’sconviction of any crime involving dishonesty or moral turpitude;

 

5.1.5                        Conduct byExecutive which in good faith and reasonable determination of the Boarddemonstrates gross unfitness to serve.

 

Any notice of termination given pursuant to this Section 5.1 shalleffect termination as of the date specified in such notice or, in the event nosuch date is specified, on the last day of the month in which such notice isdelivered or deemed delivered as provided in Section 9 below.

 

5.2                                 TheCompany may terminate the Executive’s employment at any time without cause upondelivery of written notice to the Executive. Any notice of termination given pursuant to this Section 5.2 shalleffect termination as of the date specified in such notice or, in the event nosuch date is specified, on the last day of the month in which such notice isdelivered or deemed delivered as provided in Section 9 below.  If such termination shall occur under thisSection 5.2, then in lieu of all other remedies, and upon the Executive’sfurnishing to the Company an effective waiver and release of claims (in a formacceptable to the Company), Executive shall be entitled to continuation of BaseSalary and health benefits for a period of six (6) months from said date oftermination with such Base Salary continuation to be at the rate set forth inSection 3.1 or, if greater, at the rate of Executive’s then current salaryin effect as of the date of termination.

 

5.3                                 The parties maymutually agree at any time to terminate this Agreement upon such terms andconditions as may be agreed upon in writing.

 

5.4                                 This Agreement shallterminate without notice upon the date of Executive’s death or the date whenExecutive becomes “completely disabled” as that term is defined inSection 6.2.  In the event oftermination due to death or complete disability, Executive or his estate orpersonal representative, as the case may be, shall be entitled to receive onlyaccrued Base Salary and other accrued benefits required by law, prorated to thedate of Executive’s death or the date when Executive becomes completelydisabled.

 

5.5                                 Notwithstanding anyprovision to the contrary herein, unless otherwise provided herein or unlessotherwise provided by law, Executive may at any time terminate his employmentwith the Company hereunder.  In suchevent, the Company shall not be liable to Executive for the 

 

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payment of any amount other than accrued Base Salary and other accruedbenefits required by law, prorated to the date of termination.  The effective date of termination ofExecutive’s employment under this Section 5.5 shall be determined by theBoard upon its receipt of notice of such termination.  Executive will not be entitled to severance pay, pay in lieu ofnotice or any other such compensation.

 

6.**                                       DEATHOR DISABILITY DURING TERM OF EMPLOYMENT.**

 

6.1                                 Upon termination ofExecutive’s employment pursuant to Section 5.4, Executive or his estate orpersonal representative, as the case may be, shall be entitled to receiveExecutive’s Base Salary and benefits for a period of one month following thedate of death or the date when Executive becomes completely disabled.

 

6.2                                 The term “completelydisabled” as used in this Agreement shall mean the inability of Executive toperform the essential functions of his position under this Agreement by reasonof any incapacity, physical or mental, which the Board of the Company, basedupon medical advice or an opinion provided by a licensed physician acceptableto the Board of the Company and approved by the Executive, which approval shallnot be unreasonably withheld, determines to have incapacitated Executive fromsatisfactorily performing any or all essential functions of his position forthe Company during the foreseeable future. Based upon such medical advice or opinion, the determination of theBoard of the Company shall be final and binding and the date such determinationis made shall be the date of such complete disability for purposes of thisAgreement.

 

7.**                                       CONFIDENTIALINFORMATION; NONSOLICITATION.**

 

7.1                                 Executive recognizesthat his employment with the Company will involve contact with information ofsubstantial value to the Company, which is not generally known in the trade,and which gives the Company an advantage over its competitors who do not knowor use it, including but not limited to, techniques, designs, drawings,processes, inventions, developments, equipment, prototypes, sales and customerinformation, and business and financial information relating to the business,products, practices and techniques of the Company (hereinafter referred to as“Confidential Information”).  Executivewill at all times regard and preserve as confidential such ConfidentialInformation obtained by Executive from whatever source and will not, eitherduring his employment with the Company or thereafter, publish or disclose anypart of such Confidential Information in any manner at any time, or use thesame except on behalf of the Company, without the prior written consent of theCompany.  As a condition of thisAgreement, Executive will sign and return a copy of the Company’s “ProprietaryInformation and Inventions Agreement,” attached as Exhibit A.

 

7.2                                 While employed by theCompany and for one (1) year thereafter, the Executive agrees that in order toprotect the Company’s confidential and proprietary information fromunauthorized use, that Executive will not, either directly or through others,solicit or attempt to solicit any employee, consultant or independentcontractor of the Company to terminate his or her relationship with the Companyin order to become an employee, consultant or independent contractor to or forany other person or business entity; or the business of any customer, vendor ordistributor of the Company which, at the time of termination or one (1) yearimmediately prior thereto, was listed on Company’s customer, vendor ordistributor list.

 

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8.                                       **ASSIGNMENTAND BINDING EFFECT.**

 

8.1                                 This Agreement shallbe binding upon and inure to the benefit of Executive and Executive’s heirs,executors, personal representatives, assigns, administrators and legalrepresentatives.  Because of the uniqueand personal nature of Executive’s duties under this Agreement, neither thisAgreement nor any rights or obligations under this Agreement shall beassignable by Executive.  This Agreementshall be binding upon and inure to the benefit of the Company and itssuccessors, assigns and legal representatives.

 

9.                                       **NOTICES.**

 

9.1                                 All notices or demandsof any kind required or permitted to be given by the Company or Executive underthis Agreement shall be given in writing and shall be personally delivered (andreceipted for) or mailed by certified mail, return receipt requested, postageprepaid, addressed as follows:

 
| 9.1.1  |   | If to the Company:                 |
|--------|--------|------------------------------------|
|   |   |                               |
|   |   | **Larry Stambaugh**                |
|   |   | **Maxim  Pharmaceuticals, Inc.**   |
|   |   | **8899 University Center Lane**    |
|   |   | **Suite 400**                      |
|   |   | **San Diego, CA  92122** |
|   |   |                               |
| 9.1.2  |   | If to Executive:                   |
|   |   |                               |
|   |   | **Kurt R. Gehlsen**                |
|   |   | **Maxim  Pharmaceuticals, Inc.**   |
|   |   | **8899 University Center Lane**    |
|   |   | **Suite 400**                      |
|   |   | **San Diego, CA  92122** |

 

Any such written notice shall be deemed received when personallydelivered or three (3) days after its deposit in the United States mail asspecified above.  Either Party maychange its address for notices by giving notice to the other Party in themanner specified in this section.

 

10.                                 **CHOICE OF LAW.**

 

10.1                           This Agreement is made inSan Diego, California.  This Agreementshall be construed and interpreted in accordance with the laws of the State ofCalifornia.

 

11.                                 **INTEGRATION.**

 

11.1                           This Agreement contains thecomplete, final and exclusive agreement of the Parties relating to the subjectmatter of this Agreement, and supersedes all prior oral and written employmentagreements or arrangements between the Parties.

 

12.                                 **AMENDMENT.**

 

12.1                           This Agreement cannot beamended or modified except by a written agreement signed by Executive and theCompany.

 

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13.                                 **WAIVER.**

 

13.1                           No term, covenant orcondition of this Agreement or any breach thereof shall be deemed waived,except with the written consent of the Party against whom the wavier inclaimed, and any waiver or any such term, covenant, condition or breach shallnot be deemed to be a waiver of any preceding or succeeding breach of the sameor any other term, covenant, condition or breach.

 

14.                                 **SEVERABILITY.**

 

14.1                           The finding by a court ofcompetent jurisdiction of the unenforceability, invalidity or illegality of anyprovision of this Agreement shall not render any other provision of thisAgreement unenforceable, invalid or illegal. Such court shall have the authority to modify or replace the invalid orunenforceable term or provision with a valid and enforceable term or provisionwhich most accurately represents the parties’ intention with respect to theinvalid or unenforceable term or provision.

 

15.                                 **INTERPRETATION; CONSTRUCTION.**

 

15.1                           The headings set forth inthis Agreement are for convenience of reference only and shall not be used ininterpreting this Agreement.  This Agreementhas been drafted by legal counsel representing the Company, but Executive hasbeen encouraged, and has consulted with, his own independent counsel and taxadvisors with respect to the terms of this Agreement.  The Parties acknowledge that each Party and its counsel hasreviewed and revised, or had an opportunity to review and revise, thisAgreement, and the normal rule of construction to the effect that anyambiguities are to be resolved against the drafting party shall not be employedin the interpretation of this Agreement.

 

16.                                 **REPRESENTATIONS AND WARRANTIES.**

 

16.1                           Executive represents andwarrants that he is not restricted or prohibited, contractually or otherwise,from entering into and performing each of the terms and covenants contained inthis Agreement, and that his execution and performance of this Agreement willnot violate or breach any other agreements between Executive and any otherperson or entity.

 

17.                                 **COUNTERPARTS.**

 

17.1                           This Agreement may beexecuted in two counterparts, each of which shall be deemed an original, all ofwhich together shall contribute one and the same instrument.

 

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**INWITNESS WHEREOF**, the Parties have executed thisAgreement as of the date first above written.

 
|   | The Company:                                                  |
|--------|---------------------------------------------------------------|
|   |                                                          |
|   | **MAXIM  PHARMACEUTICALS, INC.**                              |
|   |                                                          |
|   |                                                          |
|   | By:  /s/ Larry G. Stambaugh                              |
|   | Larry G. Stambaugh                                            |
|   | Chairman of the Board, President and Chief  Executive Officer |
|   |                                                          |
|   |                                                          |
|   | **EXECUTIVE:**                                                |
|   |                                                          |
|   |                                                          |
|   | /s/ Kurt R. Gehlsen                                           |
|   | Kurt R. Gehlsen                                               |

 

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