Document:

EX-10.5

 

Exhibit 10.5

BIODEL INC.

2005 NON-EMPLOYEE DIRECTORS’ STOCK OPTION PLAN

ADOPTED MARCH 20, 2007

APPROVED BY STOCKHOLDERS MARCH 20, 2007

EFFECTIVE DATE: _______________, 2007

1. PURPOSES.

     (A) ELIGIBLE OPTION RECIPIENTS. The persons eligible to receive Options are the Non-Employee
Directors of the Company.

     (B) AVAILABLE OPTIONS. The purpose of the Plan is to provide a means by which Non-Employee
Directors may be given an opportunity to benefit from increases in value of the Common Stock
through the granting of Nonstatutory Stock Options.

     (C) GENERAL PURPOSE. The Company, by means of the Plan, seeks to retain the services of its
current Non-Employee Directors, to secure and retain the services of new Non-Employee Directors and
to provide incentives for such persons to exert maximum efforts for the success of the Company and
its Affiliates.

2. DEFINITIONS.

     (A) “AFFILIATE” means any parent corporation or subsidiary corporation of the Company, whether
now or hereafter existing, as those terms are defined in Sections 424(e) and (f), respectively, of
the Code.

     (B) “ANNUAL GRANT” means an Option granted annually to all Non-Employee Directors who meet the
specified criteria pursuant to Section 6(b).

     (C) “ANNUAL MEETING” means the annual meeting of the stockholders of the Company.

     (D) “BOARD” means the Board of Directors of the Company.

     (E) “CAPITALIZATION ADJUSTMENT” has the meaning ascribed to that term in Section 11(a).

     (F) “CODE” means the Internal Revenue Code of 1986, as amended.

     (G) “COMMITTEE” means a committee of one or more members of the Board appointed by the Board
in accordance with Section 3(c).

     (H) “COMMITTEE GRANT” means an Option granted annually to all Non-Employee Directors who
meet the specified criteria pursuant to Section 6(c).

     (I) “COMMON STOCK” means the common stock of the Company.

 

 

     (J) “COMPANY” means Biodel Inc., a Delaware corporation.

     (K) “CONSULTANT” means any person, including an advisor, who (i) is engaged by the Company or
an Affiliate to render consulting or advisory service and is compensated for such service or (ii)
is serving as a member of the Board of Directors of an Affiliate and is compensated for such
service. However, service solely as a Director, or payment of a fee for such service, shall not
cause a Director to be considered a “Consultant” for purposes of the Plan.

     (L) “CONTINUOUS SERVICE” means that the Optionholder’s service with the Company or an
Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated. The
Optionholder’s Continuous Service shall not be deemed to have terminated merely because of a change
in the capacity in which the Optionholder renders service to the Company or an Affiliate as an
Employee, Consultant or Director or a change in the entity for which the Optionholder renders such
service, provided that there is no interruption or termination of the Optionholder’s Continuous
Service. For example, a change in status from a Non-Employee Director of the Company to a
Consultant of an Affiliate or an Employee of the Company will not constitute an interruption of
Continuous Service. The Board or the chief executive officer of the Company, in that party’s sole
discretion, may determine whether Continuous Service shall be considered interrupted in the case of
any leave of absence approved by that party, including sick leave, military leave or any other
personal leave. Notwithstanding the foregoing, a leave of absence shall be treated as Continuous
Service for purposes of vesting in an Option only to such extent as may be provided in the
Company’s leave of absence policy or in the written terms of the Optionholders’s leave of absence.

     (M) “CORPORATE TRANSACTION” means the occurrence, in a single transaction or in a series of
related transactions, of any one or more of the following events:

          (I) a sale or other disposition of all or substantially all, as determined by the Board in its
discretion, of the consolidated assets of the Company and its Subsidiaries;

          (II) a sale or other disposition of at least ninety percent (90%) of the outstanding
securities of the Company;

          (III) a merger, consolidation or similar transaction following which the Company is not the
surviving corporation; or

          (IV) a merger, consolidation or similar transaction following which the Company is the
surviving corporation but the shares of Common Stock outstanding immediately preceding the merger,
consolidation or similar transaction are converted or exchanged by virtue of the merger,
consolidation or similar transaction into other property, whether in the form of securities, cash
or otherwise.

     (N) “DIRECTOR” means a member of the Board of Directors of the Company.

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     (O) “DISABILITY” means the inability of a person, in the opinion of a qualified physician
acceptable to the Company, to perform the major duties of that person’s position with the Company
or an Affiliate of the Company because of the sickness or injury of the person.

     (P) “EMPLOYEE” means any person employed by the Company or an Affiliate. However, service
solely as a Director, or payment of a fee for such service, shall not cause a Director to be
considered an “Employee” for purposes of the Plan.

     (Q) “ENTITY” means a corporation, partnership or other entity.

     (R) “EXCHANGE ACT” means the Securities Exchange Act of 1934, as amended.

     (S) “FAIR MARKET VALUE” means, as of any date, the value of the Common Stock determined as
follows:

          (I) If the Common Stock is listed on any established stock exchange or traded on the Nasdaq
National Market or the Nasdaq SmallCap Market, the Fair Market Value of a share of Common Stock
shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as
quoted on such exchange or market (or the exchange or market with the greatest volume of trading in
the Common Stock) on the last market trading day prior to the day of determination, as reported in
The Wall Street Journal or such other source as the Board deems reliable.

          (II) In the absence of such markets for the Common Stock, the Fair Market Value shall be
determined in good faith by the Board.

     (T) “INITIAL GRANT” means an Option granted to a Non-Employee Director who meets the specified
criteria pursuant to Section 6(a).

     (U) “IPO DATE” means the effective date of the initial public offering of the Common Stock.

     (V) “NON-EMPLOYEE DIRECTOR” means a Director who is not an Employee.

     (W) “NONSTATUTORY STOCK OPTION” means an Option not intended to qualify as an incentive stock
option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.

     (X) “OFFICER” means a person who is an officer of the Company within the meaning of Section 16
of the Exchange Act and the rules and regulations promulgated thereunder.

     (Y) “OPTION” means a Nonstatutory Stock Option granted pursuant to the Plan.

     (Z) “OPTION AGREEMENT” means a written agreement between the Company and an Optionholder
evidencing the terms and conditions of an individual Option grant. Each Option Agreement shall be
subject to the terms and conditions of the Plan.

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     (AA) “OPTIONHOLDER” means a person to whom an Option is granted pursuant to the Plan or, if
applicable, such other person who holds an outstanding Option.

     (BB) “OWN,” “OWNED,” “OWNER,” “OWNERSHIP” A person or Entity shall be deemed to “Own,” to have
“Owned,” to be the “Owner” of, or to have acquired “Ownership” of securities if such person or
Entity, directly or indirectly, through any contract, arrangement, understanding, relationship or
otherwise, has or shares voting power, which includes the power to vote or to direct the voting,
with respect to such securities.

     (CC) “PLAN” means this Biodel Inc. 2005 Non-Employee Directors’ Stock Option Plan.

     (DD) “RULE 16B-3” means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule
16b-3, as in effect from time to time.

     (EE) “SECURITIES ACT” means the Securities Act of 1933, as amended.

     (FF) “SUBSIDIARY” means, with respect to the Company, (i) any corporation of which more than
fifty percent (50%) of the outstanding capital stock having ordinary voting power to elect a
majority of the board of directors of such corporation (irrespective of whether, at the time, stock
of any other class or classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time, directly or indirectly, Owned by the Company,
and (ii) any partnership in which the Company has a direct or indirect interest (whether in the
form of voting or participation in profits or capital contribution) of more than fifty percent
(50%).

3. ADMINISTRATION.

     (A) ADMINISTRATION BY BOARD. The Plan shall be administered by the Board unless and until the
Board delegates administration of the Plan to a Committee, as provided in Section 3(c).

     (B) POWERS OF BOARD. The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:

          (I) To determine the provisions of each Option to the extent not specified in the Plan.

          (II) To construe and interpret the Plan and Options granted under it, and to establish, amend
and revoke rules and regulations for its administration. The Board, in the exercise of this power,
may correct any defect, omission or inconsistency in the Plan or in any Option Agreement, in a
manner and to the extent it shall deem necessary or expedient to make the Plan fully effective.

          (III) To effect, at any time and from time to time, with the consent of any adversely affected
Optionholder, (1) the reduction of the exercise price of any outstanding

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Option under the Plan, (2)
the cancellation of any outstanding Option under the Plan and the grant in substitution therefor of
(A) a new Option under the Plan or another equity plan of the Company covering the same or a
different number of shares of Common Stock, (B) cash and/or (C) other valuable consideration (as
determined by the Board, in its sole discretion), or (3) any other action that is treated as a
repricing under generally accepted accounting principles.

          (IV) To amend the Plan or an Option as provided in Section 12.

          (V) To terminate or suspend the Plan as provided in Section 13.

          (VI) Generally, to exercise such powers and to perform such acts as the Board deems necessary
or expedient to promote the best interests of the Company and that are not in conflict with the
provisions of the Plan.

     (C) DELEGATION TO COMMITTEE. The Board may delegate administration of the Plan to a Committee
or Committees of one or more members of the Board, and the term “COMMITTEE” shall apply to any
person or persons to whom such authority has been delegated. If administration is delegated to a
Committee, the Committee shall have, in connection with the administration of the Plan, the powers
theretofore possessed by the Board, including the power to delegate to a subcommittee any of the
administrative powers the Committee is authorized to exercise (and references in this Plan to the
Board shall thereafter be to the Committee or subcommittee), subject, however, to such resolutions,
not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board.
The Board may abolish the Committee at any time and revest in the Board the administration of the
Plan.

     (D) EFFECT OF BOARD’S DECISION. All determinations, interpretations and constructions made by
the Board in good faith shall not be subject to review by any person and shall be final, binding
and conclusive on all persons.

4. SHARES SUBJECT TO THE PLAN.

     (A) SHARE RESERVE. Subject to the provisions of Section 11(a) relating to Capitalization
Adjustments, the shares of Common Stock that may be issued pursuant to Options shall not exceed in
the aggregate Five Hundred Thousand (500,000) shares of Common Stock.

     (B) REVERSION OF SHARES TO THE SHARE RESERVE. If any Option shall for any reason expire or
otherwise terminate, in whole or in part, without having been exercised in full, the shares of
Common Stock not acquired under such Option shall revert to and again become available for issuance
under the Plan. If any shares subject to an Option are not delivered to an Optionholder because
such shares are withheld for the payment of taxes or the Option is exercised through a reduction of
shares subject to the Option (i.e., “net exercised”), the number of shares that are not delivered
to the Optionholder as a result thereof shall remain available for issuance under the Plan. If the
exercise price of an Option is satisfied by tendering shares of Common Stock held by the Optionholder (either by actual delivery or attestation), then the number of shares so tendered shall remain available for issuance under the Plan.

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     (C) SOURCE OF SHARES. The shares of Common Stock subject to the Plan may be unissued shares or
reacquired shares, bought on the market or otherwise.

5. ELIGIBILITY. The Options, as set forth in Section 6, automatically shall be granted under
the Plan to all Non-Employee Directors who meet the criteria specified in Section 6.

6. NON-DISCRETIONARY GRANTS.

     (A) INITIAL GRANTS. Without any further action of the Board, each person who is serving as a
Non-Employee Director on the IPO Date automatically shall, on the IPO Date, be granted an Initial
Grant to purchase twenty five thousand (25,000) shares of Common Stock on the terms and conditions
set forth herein. Additionally, without any further action of the Board, each person who after the
IPO Date is elected or appointed for the first time to be a Non-Employee Director automatically
shall, upon the date of his or her initial election or appointment to be a Non-Employee Director,
be granted an Initial Grant to purchase twenty five thousand (25,000) shares of Common Stock on the
terms and conditions set forth herein.

     (B) ANNUAL GRANTS. Without any further action of the Board, on the date of each Annual
Meeting, commencing with the Annual Meeting next following the IPO Date, each person who is then a
Non-Employee Director automatically shall be granted an Annual Grant to purchase ten thousand
(10,000) shares of Common Stock on the terms and conditions set forth herein; provided, however,
that if the person has not been serving as a Non-Employee Director for the entire period since the
preceding Annual Meeting, then the number of shares subject to such Annual Grant shall be reduced
pro rata for each full quarter prior to the date of grant during which such person did not serve as
a Non- Employee Director.

7. OPTION PROVISIONS. Each Option shall be in such form and shall contain such terms and
conditions as required by the Plan. Each Option shall contain such additional terms and conditions,
not inconsistent with the Plan, as the Board shall deem appropriate. Each Option shall include
(through incorporation of provisions hereof by reference in the Option or otherwise) the substance
of each of the following provisions:

     (A) TERM. No Option shall be exercisable after the expiration of ten (10) years from the date
on which it was granted.

     (B) EXERCISE PRICE. The exercise price of each Option shall be one hundred percent (100%) of
the Fair Market Value of the Common Stock subject to the Option on the date the Option is granted.

     (C) CONSIDERATION. The purchase price of Common Stock acquired pursuant to an Option shall be
paid, to the extent permitted by applicable law, either (i) in cash at the time the
Option is exercised or (ii) at the discretion of the Board either at the
time of the grant of the Option or subsequent thereto (1) by delivery to the Company of other
Common Stock at the time
the Option is exercised, (2) by a “net exercise” of the Option (as further described below), (3)
pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board
that, prior to the issuance of Common Stock, results in either the receipt of cash (or check)

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by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the
Company from the sales proceeds or (4) in any other form of legal consideration that may be
acceptable to the Board. Unless otherwise specifically provided in the Option, the purchase price
of Common Stock acquired pursuant to an Option that is paid by delivery to the Company of other
Common Stock acquired, directly or indirectly from the Company, shall be paid only by shares of the
Common Stock of the Company that have been held for more than six (6) months (or such longer or
shorter period of time required to avoid a charge to earnings for financial accounting purposes).
In the case of a “net exercise” of an Option, the Company will not require a payment of the
exercise price of the Option from the Participant but will reduce the number of shares of Common
Stock issued upon the exercise by the largest number of whole shares that has a Fair Market Value
that does not exceed the aggregate exercise price. With respect to any remaining balance of the
aggregate exercise price, The Company shall accept a cash payment from the Participant. Shares of
Common Stock will no longer be outstanding under an Option (and will therefore not thereafter be
exercisable) following the exercise of such Option to the extent of (i) shares used to pay the
exercise price of an Option under a “net exercise”, (ii) shares actually delivered to the
Participant as a result of such exercise and (iii) shares withheld for purposes of tax withholding.

     (D) TRANSFERABILITY. An Option is transferable by will or by the laws of descent and
distribution. An Option also may be transferable upon written consent of the Company if, at the
time of transfer, a Form S-8 registration statement under the Securities Act is available for the
exercise of the Option and the subsequent resale of the underlying securities. In addition, an
Optionholder may, by delivering written notice to the Company, in a form provided by or otherwise
satisfactory to the Company, designate a third party who, in the event of the death of the
Optionholder, shall thereafter be entitled to exercise the Option.

     (E) VESTING. Options shall vest in full immediately upon grant.

     (F) TERMINATION OF CONTINUOUS SERVICE. In the event an Optionholder’s Continuous Service
terminates for any reason, the Optionholder may exercise his or her Option (to the extent that the
Optionholder was entitled to exercise it as of the date of termination) but only within such period
of time ending on the expiration of the term of the Option as set forth in the Option Agreement.
If, after termination, the Optionholder does not exercise his or her Option within the time
specified in the Option Agreement, the Option shall terminate.

8. SECURITIES LAW COMPLIANCE. The Company shall seek to obtain from each regulatory commission
or agency having jurisdiction over the Plan such authority as may be required to grant Options and
to issue and sell shares of Common Stock upon exercise of the Options; provided, however, that this
undertaking shall not require the Company to register under the Securities Act the Plan, any Option
or any Common Stock issued or issuable pursuant to any such Option. If, after reasonable efforts,
the Company is unable to obtain from any such regulatory commission or agency the authority which
counsel for the Company deems necessary for the lawful issuance and sale of Common Stock under the
Plan, the Company shall be relieved from any liability for failure to issue and sell Common Stock upon exercise of such Options unless
and until such authority is obtained.

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9. USE OF PROCEEDS FROM STOCK. Proceeds from the sale of Common Stock pursuant to Options shall
constitute general funds of the Company.

10. MISCELLANEOUS.

     (A) STOCKHOLDER RIGHTS. No Optionholder shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares of Common Stock subject to such Option unless
and until such Optionholder has satisfied all requirements for exercise of the Option pursuant to
its terms.

     (B) NO SERVICE RIGHTS. Nothing in the Plan or any instrument executed or Option granted
pursuant thereto shall confer upon any Optionholder any right to continue to serve the Company as a
Non-Employee Director or shall affect the right of the Company or an Affiliate to terminate (i) the
employment of an Employee with or without notice and with or without cause, (ii) the service of a
Consultant pursuant to the terms of such Consultant’s agreement with the Company or an Affiliate or
(iii) the service of a Director pursuant to the Bylaws of the Company or an Affiliate, and any
applicable provisions of the corporate law of the state in which the Company or the Affiliate is
incorporated, as the case may be.

     (C) INVESTMENT ASSURANCES. The Company may require an Optionholder, as a condition of
exercising or acquiring Common Stock under any Option, (i) to give written assurances satisfactory
to the Company as to the Optionholder’s knowledge and experience in financial and business matters
and/or to employ a purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters and that he or she is capable of
evaluating, alone or together with the purchaser representative, the merits and risks of exercising
the Option; and (ii) to give written assurances satisfactory to the Company stating that the
Optionholder is acquiring the Common Stock subject to the Option for the Optionholder’s own account
and not with any present intention of selling or otherwise distributing the Common Stock. The
foregoing requirements, and any assurances given pursuant to such requirements, shall be
inoperative if (1) the issuance of the shares of Common Stock upon the exercise or acquisition of
Common Stock under the Option has been registered under a then currently effective registration
statement under the Securities Act or (2) as to any particular requirement, a determination is made
by counsel for the Company that such requirement need not be met in the circumstances under the
then applicable securities laws. The Company may, upon advice of counsel to the Company, place
legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate
in order to comply with applicable securities laws, including, but not limited to, legends
restricting the transfer of the Common Stock.

     (D) WITHHOLDING OBLIGATIONS. To the extent provided by the terms of an Option Agreement, the
Company may in its sole discretion, satisfy any federal state or local tax withholding obligation
relating to an Option by any of the following means (in addition to the Company’s right to withhold
from any compensation paid to the Participant by the Company) or
by a combination of such means: (i) causing the Optionholder to tender a cash payment; (ii)
withholding shares of Common Stock from the shares of Common Stock issued or otherwise

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issuable to
the Optionholder in connection with the Option; or (iii) via such other method as may be set forth
in the Option Agreement.

11. ADJUSTMENTS UPON CHANGES IN COMMON STOCK.

     (A) CAPITALIZATION ADJUSTMENTS. If any change is made in, or other event occurs with respect
to, the Common Stock subject to the Plan, or subject to any Option, without the receipt of
consideration by the Company (through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate structure or other
transaction not involving the receipt of consideration by the Company (each a “CAPITALIZATION
ADJUSTMENT”), the Plan will be appropriately adjusted in the class(es) and maximum number of
securities subject both to the Plan pursuant to Section 4 and to the nondiscretionary Options
specified in Section 6, and the outstanding Options will be appropriately adjusted in the class(es)
and number of securities and price per share of Common Stock subject to such outstanding Options.
The Board shall make such adjustments, and its determination shall be final, binding and
conclusive. (Notwithstanding the foregoing, the conversion of any convertible securities of the
Company shall not be treated as a transaction “without receipt of consideration” by the Company.)

     (B) DISSOLUTION OR LIQUIDATION. In the event of a dissolution or liquidation of the Company,
then all outstanding Options shall terminate immediately prior to the completion of such
dissolution or liquidation.

     (C) CORPORATE TRANSACTION. In the event of a Corporate Transaction, any surviving corporation
or acquiring corporation may assume or continue any or all Options outstanding under the Plan or
may substitute similar stock options for Options outstanding under the Plan (including, but not
limited to, options to acquire the same consideration paid to the stockholders of the Company, as
the case may be, pursuant to the Corporate Transaction). In the event that any surviving
corporation or acquiring corporation does not assume or continue all such outstanding Options or
substitute similar stock options for all such outstanding Options, then with respect to Options
that have been not assumed, continued or substituted, the Options shall terminate if not exercised
(if applicable) at or prior to the effective time of such Corporate Transaction.

12. AMENDMENT OF THE PLAN AND OPTIONS.

     (A) AMENDMENT OF PLAN. Subject to the limitations, if any, of applicable law, the Board, at
any time and from time to time, may amend the Plan. However, except as provided in Section 11(a)
relating to Capitalization Adjustments, no amendment shall be effective unless
approved by the stockholders of the Company to the extent stockholder approval
is necessary to satisfy the requirements of applicable law.

     (B) STOCKHOLDER APPROVAL. The Board, in its sole discretion, may submit any other amendment to
the Plan for stockholder approval.

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     (C) NO IMPAIRMENT OF RIGHTS. Rights under any Option granted before amendment of the Plan
shall not be impaired by any amendment of the Plan unless (i) the Company requests the consent of
the Optionholder and (ii) the Optionholder consents in writing.

     (D) AMENDMENT OF OPTIONS. The Board, at any time, and from time to time, may amend the terms
of any one or more Options, including, but not limited to, amendments to provide terms more
favorable than previously provided in the agreement evidencing an Option, subject to any specified
limits in the Plan that are not subject to Board discretion; provided, however, that the rights
under any Option shall not be impaired by any such amendment unless (i) the Company requests the
consent of the Optionholder and (ii) the Optionholder consents in writing.

13. TERMINATION OR SUSPENSION OF THE PLAN.

     (A) PLAN TERM. The Board may suspend or terminate the Plan at any time. No Options may be
granted under the Plan while the Plan is suspended or after it is terminated.

     (B) NO IMPAIRMENT OF RIGHTS. Suspension or termination of the Plan shall not impair rights and
obligations under any Option granted while the Plan is in effect except with the written consent of
the Optionholder.

14. EFFECTIVE DATE OF PLAN. The Plan shall become effective on the IPO Date, but no Option shall
be exercised unless and until the Plan has been approved by the stockholders of the Company, which
approval shall be within twelve (12) months before or after the date the Plan is adopted by the
Board.

15. CHOICE OF LAW. The law of the state of New York shall govern all questions concerning the
construction, validity and interpretation of this Plan, without regard to such state’s conflict of
laws rules.

10EX-10.6

 

Exhibit 10.6

EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (“Agreement”) is made and entered into as of December 30, 2004 and
amended and restated effective March 20, 2007 by and among Biodel Inc., a Delaware corporation with
an address at 6 West Kenosia Avenue, Danbury, CT 06810-7352 (“BIODEL”, “Employer” or the
“Company”), and Solomon S. Steiner, Ph.D., an individual residing 24 Old Wagon Road, Mt. Kisco, New
York 10509 (“Employee”).

W I T N E S S E T H:

     WHEREAS, Employer desires to secure the services of Employee as President and Chief Executive
Officer; and

     WHEREAS, Employee desires to enter into the employ of Employer in accordance with the terms
and conditions herein set forth;

     WHEREAS, the parties entered into an agreement as of December 30, 2004;

     WHEREAS, the parties wish to amend such agreement so that such agreement as so amended shall
read in its entirety as follows

     NOW, THEREFORE, in consideration of the premises and of the covenants and agreements of the
parties herein set forth, the parties hereto hereby covenant and agree as follows:

          1. Position of Employment. Subject to the terms and conditions hereof, Employer
hereby agrees to employ the services of Employee as President and Chief

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Executive Officer and Employee hereby accepts such employment and agrees to serve the Company
in such capacity. Employee shall have the duties, authority and responsibilities customarily
associated with the offices of President and Chief Executive Officer and shall report to the
Company’s Board of Directors. During the period that Employee is employed by Employer, Employee
shall devote substantially all of his business time and attention to the performance of the duties
described herein. Notwithstanding the foregoing, Employee shall be entitled to serve on the Board
of Directors of Vyteris, Inc. and the Boards of other Companies if approved by the Company’s Board
of Directors, to pursue charitable endeavors and to participate in professional organizations,
provided that such activities do not interfere in any material respect with the performance by
Employee of his duties hereunder. Employee shall at all time act in good faith in the performance
of his duties. Employee agrees to abide by the rules, regulations, instructions, personnel
practices and policies of the Company and any changes therein which may be adopted from time to
time by the Company applicable to employees generally, including, but not limited to, those
relating to the protection of the Company’s proprietary trade secrets and confidential information.

     2. Contract Term. Unless terminated earlier pursuant to Section 4 below,
the initial term of Employee’s employment under this Agreement shall be for the period from the
date of this Agreement (the “Commencement Date”) to December 30, 2007 (the “Initial Termination
Date”). Following the Initial Termination Date, this Agreement shall be automatically renewed for
successive one-year terms (each, a “Renewal Term”) unless, at least three months prior to the
Initial Termination Date or the expiration of a Renewal Term, as applicable, Employee or BIODEL in
his or its respective sole discretion notifies the other party in writing of his or its intent to
terminate this Employment Agreement as

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of the Initial Termination Date or the expiration of a Renewal Term, as applicable. The term of
Employee’s employment hereunder, including any renewal periods pursuant to the immediately
preceding sentence, shall be hereafter referred to as the “Contract Term.” Notwithstanding the
foregoing, if a Change of Control occurs during the Contract Term, the Contract Term shall
automatically extend for a period of two (2) years from the effective date of Change of Control and
shall automatically terminate at the end of such period. “Change of Control” shall have the
Definition set forth in Appendix A hereto, which is hereby incorporated by reference.

     3. Salary and Additional Benefits.

          3.1 Employer shall pay to Employee and Employee agrees to accept as compensation for his
services to be rendered hereunder, an initial base salary of Two Hundred and Fifty Thousand Dollars
($250,000) (“Base Salary”) per year for the period commencing with the Commencement Date and ending
on the completion of the Contract Term, payable in equal installments on the 15th and last day of
each month. In the event the Board of Directors shall by resolution increase the base salary, then
this agreement shall be deemed so amended as of the effective date of such resolution or such other
date specified in such resolution.

          3.2 During the term of this Agreement, Employee, as President and CEO, shall be entitled to
receive an annual year-end bonus in cash in an amount of not more than sixty percent (60%) of Base
Salary as determined by the Board of Directors. At the time the Board of Directors considers the
Employee’s bonus but not less than

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annually, the Board of Directors shall also consider an award to the employee of stock or options
to acquire stock under any stock award plan then in effect.

          3.3 Employee shall be entitled to vacations, at such times as Employee shall reasonably
determine, of at least four weeks each year of employment hereunder.

          3.4 In addition to the foregoing, Employee shall also(i) participate in and be entitled to
receive medical insurance and other benefits substantially equivalent to the normal benefits
provided by BIODEL to its employees generally and (ii) participate in various retirement, welfare,
fringe benefit and executive perquisite plans, programs and arrangements of the Company to the
extent the senior executives of the Company generally are eligible for participation under the
terms of such plans, programs and arrangements including, without limitation, plans, programs and
arrangements for the granting of options to purchase securities of the Company or other equity
based compensation. Employee acknowledges the right of Employer to change, amend, or terminate any
of the benefits referred to in this paragraph, at any time in a manner which does not discriminate
between Employee and other company employees who are eligible to participate in such benefits.

          3.5 Employer shall reimburse Employee for any ordinary, necessary and reasonable travel,
maintenance and entertainment expenses incurred by the Employee in the course of his duties under
this Agreement, in accordance with the Employer’s customary policies and practices in effect from
time to time, upon submission to the Employer of appropriate vouchers and receipts evidencing the
same.

4

 

          3.6 The Company shall pay a mandatory bonus of $250,000 (payable to Steiner Ventures) upon (a)
stockholders equity of the Company exceeding $20mm, (b) if any class of securities of the Company
are registered under the Securities Act of 1933, (b) the Company enters into stategic partnership
with an initial advance, payment or investment of $5 mm, or (d) five years from the date of
execution. Such bonus shall be paid in any event, including, without limitation, whether or not
the employeed is then employed by the Company and whether or not the employee is then deceased.

     4. Termination. The employment of the Employee by the Company pursuant to this
Agreement shall terminate upon the occurrence of any of the following:

          4.1 Expiration of the Contract Term in accordance with Section 2;

          4.2 At the election of the Company, for cause, upon written notice by the Company to the
Employee. For the purposes of this Section 4.2, cause for termination shall be deemed to exist upon
(a) a good faith finding by the Board of Directors of the Company of (i) failure of the Employee to
perform in any material respect his assigned duties for the Company customarily associated with the
Office of Chief Executive Officer, which failure continues for ten (10) days subsequent to written
notice from the Company to the Employee of such failure, or (ii) dishonesty, gross negligence or
misconduct not involving any exercise of business judgment in good faith relating to the
performance of his duties for the Company; (b) the conviction of the Employee of, or the entry of a
pleading of guilty or nolo contendere by the Employee to, any crime involving moral turpitude or
any felony; or (c) the material breach by the Employee of any terms of

5

 

this Agreement, which breach continues for ten (10) days subsequent to written notice from the
Company to the Employee of the breach;

          4.3 Upon the death or, at the election of the Company, disability of the Employee. As used in
this Agreement, the term “disability” shall mean the inability of the Employee, due to a physical
or mental disability, for a period of 180 days, whether or not consecutive, during any 360-day
period to perform the services contemplated under this Agreement. A determination of disability
shall be made by a physician satisfactory to both the Employee and the Company; provided that if
the Employee and the Company do not agree on a physician, the Employee and the Company shall each
select a physician and these two together shall select a third physician, whose determination as to
disability shall be binding on all parties. Nothing herein shall be construed to violate any
Federal or State law including the Family and Medical Leave Act of 1993, 29 U.S.C.S. §2601 et
seq., and the Americans With Disabilities Act, 42 U.S.C.S. §12101 et seq.

          4.4 The Company may terminate the employment of the Employee at any time without cause
immediately upon giving the Employee 30 days’ prior written notice of termination or payment in
lieu of notice. The Employee may terminate his employment at any time for good reason immediately
upon giving the Employer thirty (30) days prior written notice of termination. For the purpose of
this Section 4.4, good reason for termination shall exist upon (i) the material breach by the
Company of any terms of this Agreement which breach continues for ten (10) days subsequent to
written notice from the Employee to the Company of the breach or (ii) the assignment of the
Employee of any duties inconsistent in any material respect with the Employee’s positions with the
Company as set forth in this Agreement (including status, offices and

6

 

titles), authority, duties or responsibilities as contemplated by this Agreement or any action by
the Company which results in a material diminution in such positions, authority, duties or
responsibilities, excluding for this purpose any isolated, insubstantial and inadvertent action not
taken in bad faith and which is promptly remedied by the Company.

     5. Effect of Termination.

          5.1 Termination for Cause. In the event the Employee’s employment is
terminated for cause pursuant to Section 4.2, the Company shall pay to the Employee the
compensation and benefits which would otherwise be payable or accrued to him through the last day
of his actual employment by the Company.

          5.2 Termination for Death or Disability. If the Employee’s employment is terminated
by death or because of disability pursuant to Section 4.3, the Company shall pay to the estate of
the Employee or to the Employee, as the case may be, the compensation and benefits which would
otherwise be payable or accrued to the Employee through the date of his termination and an
additional six months because of death or disability. The Company will continue health benefits for
one year after the date of termination.

          5.3 Termination Without Cause. If the Employee’s employment is terminated (a) at the
election of the Company pursuant to Section 4.4 without cause, or (b) at the election of the
Employee pursuant to Section 4.4 for good reason, and in consideration of the post-termination
non-compete and non-solicitation agreement set forth in Section 6, the Company shall pay to the
Employee the compensation and benefits payable or accrued to him under Section 4 (including the
provision of medical insurance,

7

 

disability and life insurance), at the times provided in Section 4, through the longer of (x) two
(2) years following the termination date or (y) the balance of the term of this Agreement.

     6. Non-Compete and Non-Solicitation.

          6.1 The Employee recognizes that his willingness to enter into the restrictive
covenants contained in this Section 6 are a critical condition precedent to the willingness of
BIODEL to enter into and perform under this Agreement. The Employee also acknowledges that the
restrictions contained in this Section 6 will not materially or unreasonably interfere with the
Employee’s ability to earn a living. The Employee acknowledges that the restrictions contained in
this Section 6 are necessary to protect the legitimate interests of BIODEL and to ensure that
Employee will not reveal or use BIODEL’s confidential, proprietary or trade secret information or
unfairly compete with BIODEL after his termination.

          6.2 During the Contract Term and, in the event the Employee’s employment is terminated for
cause pursuant to Section 4.2, through the day immediately prior to the first anniversary of the
termination date, or, if the Employee’s employment is terminated (a) at the election of the Company
pursuant to Section 4.4 without cause, or (b) at the election of the Employee pursuant to Section
4.4 for good reason, for so long as the Company shall pay to the Employee the compensation and
benefits payable or accrued to him under Section 4 (including the provision of medical insurance,
disability and life insurance), at the times provided in Section 4, the Employee will not directly
or indirectly:

8

 

               (a) as an individual proprietor, partner, stockholder, officer, employee, consultant,
director, joint venturer, investor, agent, distributor, dealer, representative, lender, or in any
other capacity whatsoever (other than as the holder of outstanding stock or equity of another
entity), engage in the business of delivering insulin by the oral, sublingual or injectable route
of administration; or

               (b) recruit, solicit or induce, or attempt to induce, any employee or employees of the Company
to terminate their employment with, or otherwise cease their relationship with, the Company, or
hire any such employee; or

               (c) knowingly solicit, divert, limit or take away, or attempt to divert or to take away, the
business or patronage of any of the clients, customers, dealers, distributors, representatives or
accounts, or prospective clients, customers, dealers, distributors, representatives or accounts, of
the Company which were contacted, solicited or served by employees of the Company while the
Employee was employed by the Company.

          6.3. In the event that any court of competent jurisdiction determines that the duration or the
geographic scope, or both, of the non-competition and non-solicitation provisions set forth in this
Section 6 are unreasonable and that such provisions are to that extent unenforceable, the parties
hereto agree that the provisions shall remain in full force and effect for the greatest time period
and in the greatest area that would not render them unenforceable.

          6.4 The restrictions contained in this Section 6 are necessary for the protection of the
Company’s legitimate interests, confidential, proprietary or trade secret information, or goodwill;
or to protect the Company from the misuse or disclosure of its

9

 

confidential, proprietary or trade secret information; or to protect the Company from unfair
competition. The Employee agrees that any breach of this Section 6 will cause the Company
substantial and irreparable damage and therefore, in the event of any such breach, in addition to
such other remedies which may be available, the Company shall have the right to seek specific
performance and injunctive relief.

          6.5 The Employee agrees that the duration and geographic restrictions imposed in this
Agreement are fair and reasonable and are reasonably required for the protection of the Company.
To the extent any portion of this Agreement, or any portion of any provision of this Agreement, is
held to be invalid or unenforceable, it shall be revised to reflect most nearly the parties’ intent
and the remainder of the provision or provisions of this Agreement shall be unaffected and shall
continue in full force and effect.

          6.6 For purposes of this Section 6 and Section 7, the “Company” refers to the Company and any
of its affiliates.

     7. Confidential Information

          7.1. By executing this Agreement, the Employee recognizes and agrees that he is
employed in a position with the Company in which he will have access to certain confidential and
proprietary information concerning the business of the Company which is of great value to the
Company and which, if used in competition with the Company, would render great and irreparable harm
to the Company. Such information includes, but is not limited to, information relating to business
operations; services; network; systems; strategic business plans; marketing plans; long-range
goals; assets and liabilities; technical and engineering methods, processes, and/or know-how;
research and

10

 

development activities; products; computer software and programs; marketing data; pricing; product
designs; discoveries; inventions; budgets; projections; customers and suppliers; development plans,
strategies and forecasts; new products and services; and financial statements. This information is
provided to the Employee solely for use in the course of his employment with, and for the benefit
of, the Company.

          7.2. To ensure that such confidential information provided to the Employee is maintained in
confidence by him and not used by him to unfairly compete with the Company, the Employee shall not,
during the course of the Employee’s employment and at any time within two (2) years thereafter
following the termination of his employment (regardless of whether the Employee’s termination is
voluntary or involuntary, or with or without cause), divulge, furnish or make accessible to anyone,
or use in any way other than in furtherance of the interests of the Company: (i) any confidential,
proprietary or secret knowledge or information which the Employee has acquired or become acquainted
with, or will acquire or become acquainted with, during the course of the Employee’s employment
with the Company; (ii) any confidential or proprietary information concerning the Company’s
customers, including but not limited to, information concerning a customers need, practice or
preferences; (iii) any confidential, proprietary or trade secret research and development
activities of the Company; and (iv) any other confidential, proprietary or trade secret information
relating to the business of the Company. The Employee agrees that this restriction applies to all
such information regardless of whether such information was developed by him. This restriction
shall not apply to information (i) which is or becomes public knowledge through no fault of the
Employee, (ii) is known to the Employee at the time of its

11

 

disclosure as shown by his prior written records, or (iii) is disclosed to the Employee by a third
party who is under no confidential obligation to the Company. The Employee further agrees that
upon request by the Company, or upon the termination of the Employee’s employment, the Employee
will immediately return to the Company any and all such information in the Employee’s possession or
under the Employee’s control.

     8. Representations and Warranties of the Employee. The Employee represents and
warrants to the Company as follows:

          8.1. All facts concerning the Employee’s background, education, experience and employment
history as described to the Company in writing are true and correct;

          8.2 The Employee’s execution of this Agreement and employment with the Company does not and
will not conflict with any obligations that the Employee has to any current or former employer, any
other individual, corporation, partnership, association, trust or any other entity or organization,
including any instrumentality of government;

          8.3 All files, records, compilations, reports, studies, manuals, memoranda, notebooks,
documents, financial reports and statements, correspondence, and other confidential information
whether prepared by the Employee or otherwise coming into the possession of the Employee, and all
copies thereof, are, and shall remain, the exclusive property of the Company, and shall be
delivered to the Company as soon as reasonably practicable and at the expense of the Company in the
event of the Employee’s termination or at any other time if requested by the Company.

12

 

          8.4 The Employee acknowledges that the Company may, and contemplates, purchasing “key man life
insurance” on Employee with the Company as sole benificiary.

          8.5 The Employee confirms that all IP created or owned by Steiner Ventures, since it’s
inception in April, 2003 belongs to the Comapany.

     9. Indemnification. Employer shall indemnify Employee and hold him harmless against
any and all claims and liabilities asserted against Employee which arise in connection with the
performance of Employee’s duties and responsibilities while acting in Employee’s capacity as an
employee of Employer, except Employer shall not be obligated to indemnify or hold Employee harmless
against any claim or liability which arises out of Employee’s bad faith or intentional misconduct.

     10. Property Rights. With respect to information, inventions and discoveries
developed, made or conceived of by Employee, either alone or with others, at any time during
Employee’s employment by the Company and whether or not within working hours, arising out of such
employment or pertinent to any field of business or research in which, during such employment, the
Company is engaged or (if such is known to or ascertainable by Employee) is considering engaging,
Employee agrees:

          10.1 that all such information, inventions and discoveries, whether or not patented or
patentable, shall be and remain the exclusive property of the Company;

          10.2 to disclose promptly to an authorized representative of the Company all such information
in Employee’s possession as to possible applications and uses thereof;

13

 

          10.3 not to file any patent application relating to any such invention or discovery except
with the prior written consent of an authorized officer of the Company;

          10.4 that Employee hereby waives and releases any and all rights Employee may have in and to
such information, inventions and discoveries and hereby assigns to the Company and/or its nominees
all of Employee’s right, title and interest in them, and all Employee’s right, title and interest
in any patent, patent application, copyright or other property right based thereon. Employee hereby
irrevocably designates and appoints the Company and each of its duly authorized officers and agents
as Employee’s agent and attorney-in-fact to act for Employee and in Employee’s behalf and stead to
execute and file any document and to do all other lawfully permitted acts to further the
prosecution, issuance and enforcement of any such patent, patent application, copyright or other
property right with the same force and effect as if executed and delivered by Employee; and

          10.5 at the request of the Company and without expense to Employee, to execute such documents
and perform such other acts as the Company deems necessary or appropriate for the Company to obtain
patents on such inventions in a jurisdiction or jurisdictions designated by the Company, and to
assign to the Company or its designee such inventions and any patent applications and patents
relating thereto.

     11. Notices. All notices required or permitted under this Agreement shall be in
writing and shall be deemed effective upon personal delivery or upon deposit in the United States
Post Office, by registered or certified mail, postage prepaid, addressed to the other party at the
address shown above, or at such other address or addresses as either party shall designate to the
other in accordance with this Section 10.

14

 

     12. Governing Law. This Agreement shall be construed, interpreted and enforced in
accordance with the internal laws (and not the law of conflicts) of the State of New York.

     13. Jurisdiction. Except as otherwise provided for herein, each of the parties (a)
submits to the exclusive jurisdiction of any state court sitting in New York County, New York or
federal court sitting in the Southern District of New York in any action or proceeding arising out
of or relating to this Agreement, (b) agrees that all claims in respect of the action or proceeding
may be heard and determined in any such court and (c) agrees not to bring any action or proceeding
arising out of or relating to this Agreement in any other court. Each of the parties waives any
defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives
any bond, surety or other security that might be required of any other party with respect thereto.
Any party may make service on another party by sending or delivering a copy of the process to the
party to be served at the address and in the manner provided for giving of notices in Section 13.
Nothing in this Section 13, however, shall affect the right of any party to serve legal process in
any other manner permitted by law.

     14. Survival. The provisions of Sections 6, 7, 8, 9, 10, 11, 12 and 13
shall survive the termination of this Agreement.

     15. Pronouns. Whenever the context may require, any pronouns used in this Agreement
shall include the corresponding masculine, feminine or neuter forms, and the singular forms of
nouns and pronouns shall include the plural, and vice versa.

15

 

     16. Entire Agreement. This Agreement constitutes the entire agreement between the
parties and supersedes all prior agreements and understandings, whether written or oral, relating
to the subject matter of this Agreement.

     17. Amendment. This Agreement may be amended or modified only by a written
instrument executed by all of the parties hereto.

     18. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of all of the parties hereto and their respective successors and assigns, including
any corporation with which or into which the Company may be merged or which may succeed to its
assets or business; provided, however, that the obligations of the Employee are personal and shall
not be assigned by him.

     19. Miscellaneous.

          19.1 No delay or omission by either party in exercising any right under this
Agreement shall operate as a waiver of that or any other right. A waiver or consent given by the
Company on any one occasion shall be effective only in that instance and shall not be construed as
a bar or waiver of any right on any other occasion.

          19.2 The captions of the sections of this Agreement are for convenience of reference only and
in no way define, limit or affect the scope or substance of any section of this Agreement.

          19.3 In case any provision of this Agreement shall be invalid, illegal or otherwise
unenforceable, the validity, legality and enforceability of the remaining provisions shall in no
way be affected or impaired thereby.

16

 

     IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first
written above.

	 	 	 	 	 
	 	 	BIODEL INC.
	 
	 	 	 	 
	 

	 	By:
	 	/s/ F. Scott Reding
	 

	 	 	 	 
	 	 	Name: F. Scott Reding

Title: Chief Financial Officer and Treasurer
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	/s/ Solomon S. Steiner
	 	 	 
	 	 	Solomon S. Steiner

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APPENDIX A

For purposes of this Agreement, a “Change of Control” shall be deemed to have occurred, if any one
of the following events occurs:

(a) the acquisition by any person or group of beneficial ownership of more than
50% of the outstanding shares of Common Stock of the Company, or, if there are
then outstanding any other voting securities of the Company, such acquisition
of more than 50% of the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors, except for any of the following acquisitions of beneficial ownership
of Common Stock or other voting securities of the Company: (i) by the Company
or any Employee benefit plan (or related trust) sponsored or maintained by the
Company or any entity controlled by the Company; (ii) by Solomon S. Steiner; or
(iii) by any person or entity during the lifetime Solomon S. Steiner if the
shares acquired were beneficially owned by Solomon S. Steiner immediately prior
to their acquisition and the acquisition is a transfer to a trust, partnership,
corporation or other entity in which Solomon S. Steiner owns a majority of the
beneficial interests;

(b) the Company sells all or substantially all of its assets (or consummates
any transaction having a similar effect) or the Company merges or consolidates
with another entity or completes a reorganization unless the holders of the
voting securities of the Company outstanding immediately prior to the
transaction own immediately after the transaction in approximately the same
proportions 50% or more of the combined voting power of the voting securities
of the entity purchasing the assets or surviving the merger or consolidation or
the voting securities of its parent company, or, in the case of a
reorganization, 50% or more of the combined voting power of the voting
securities of the Company; Notwithstanding the foregoing, any purchase or
redemption of outstanding shares of Common Stock or other voting securities by
the Company resulting in an increase in the percentage of outstanding shares or
other voting securities beneficially owned by any person or group shall be
deemed to constitute a reorganization; however, no increase in the percentage
of outstanding shares or other voting securities beneficially owned by Solomon
S. Steiner or any person or entities referred to in (a)(i) or (iii) above
resulting from any redemption of shares or other voting securities by the
Company shall result in a Change of Control;

(c) the Company is liquidated; or

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(d) the Board (if the Company continues to own its business) or the board of
directors or comparable governing body of any successor owner of its business
(as a result of a transaction which is not itself a Change of Control) consists
of a majority of directors or members who are not Incumbent Directors. For
purposes of this Agreement, (A) “voting securities” means securities whose
holders are entitled to vote in the election of all or a majority of the
authorized number of directors at the time the determination of ‘voting
securities” status is being made and (B) 50% or more of the combined voting
power shall refer to the voting power to elect a majority of the authorized
number of directors determined at that time. “Voting securities” shall not
include preferred stock or other securities whose holders are entitled to vote
in the election of all or a majority of the authorized number of directors upon
the occurrence of some event or circumstance which has not occurred and such
rights to vote are not in effect at the time of the determination of “voting
securities” status. Preferred stock and other securities whose holders are then
entitled to vote for less than a majority of the authorized number of
directors, shall not be considered “voting securities.”

19

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