Document:

exv10w32

Exhibit 10.32

Vanda Pharmaceuticals Inc.

9605 Medical Center Drive, Suite 300

Rockville, MD 20850

December 17, 2008

Mr. Steven A. Shallcross

Dear Steve:

          This letter (the “Agreement”) confirms the agreement between you and Vanda Pharmaceuticals
Inc. (the “Company”) regarding the termination of your employment with the Company.

          1. Termination Date. Your employment with the Company will terminate on January 9, 2009 (the
“Termination Date”).

          2. Effective Date and Revocation. You have up to 45 days after you receive this Agreement to
review it. You are advised to consult an attorney of your own choosing (at your own expense)
before signing this Agreement. Furthermore, you have up to seven days after you sign this
Agreement to revoke it. If you wish to revoke this Agreement after signing it, you may do so by
delivering a letter of revocation to me. If you do not revoke this Agreement, the eighth day after
the date you sign it will be the “Effective Date.” Because of the seven-day revocation period, no
part of this Agreement will become effective or enforceable until the Effective Date.

          3. Salary and Vacation Pay. On the Termination Date, the Company will pay you $7,840 (less
all applicable withholding taxes and other deductions). This amount represents all of your salary
earned from January 1, 2009 through the Termination Date. On December 31, 2008, the Company will
pay you $12,320.00(less all applicable withholding taxes and other deductions). This amount
represents all of your accrued but unused vacation time. You acknowledge that, prior to the
execution of this Agreement, you were not entitled to receive any additional money from the Company
and that the only payments and benefits that you are entitled to receive from the Company in the
future are those specified in this Agreement.

          4. Bonus. Although you otherwise would not have been entitled to receive any bonus for 2008,
the Company will pay you $72,800(less all applicable withholding taxes and other deductions) on
December 31, 2008. This amount represents 100% of your target bonus for 2008.

          5. Severance Pay. Although you otherwise would not have been entitled to receive any
severance pay from the Company, the Company will continue paying you an amount equal to your
current base salary (less all applicable withholding taxes) for 12 months in

 

 

Mr. Steven A. Shallcross

December 17, 2008

Page 2

accordance with the Company’s standard payroll procedures, starting after the Effective Date.
The aggregate amount of these severance payments is equal to $291,200 (less all applicable
withholding taxes). If you breach any provision of this Agreement, no additional severance
payments will be made but this Agreement will remain in effect.

          6. COBRA Premiums. You will receive information about your right to continue your group
health insurance coverage under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”) after
the Termination Date. In order to continue your coverage, you must file the required election
form. If you sign this Agreement and elect to continue group health insurance coverage, then the
Company will pay the employer portion of the monthly premium under COBRA for yourself and, if
applicable, your dependents until the earliest of (a) the end of the period of 12 months following
the month in which the Termination Date occurs, (b) the expiration of your continuation coverage
under COBRA or (c) the date when you become eligible for health insurance in connection with new
employment or self-employment. You acknowledge that you otherwise would not have been entitled to
any continuation of Company-paid health insurance.

          7. Stock Options. The Company granted you one or more options to purchase shares of its
Common Stock, as set forth in the report attached hereto as Exhibit A (the “Options”). As of the
Termination Date, you would have been vested in the number of shares set forth in Exhibit A.
However, if you sign this Agreement, you will become vested in additional shares through March 31,
2009 as outlined in Exhibit A. Normally, the Options would have been exercisable with respect to
the vested shares at any time until the date three months after the Termination Date. However, if
you sign this Agreement, the Options will be exercisable with respect to the vested shares at any
time until the date six months after the Termination Date. The Options will expire with respect to
the vested shares on the date six months after the Termination Date, and they will expire with
respect to the unvested shares on the Termination Date. The Options may not be exercised with
respect to the additional shares until the Effective Date. You acknowledge that, by the original
terms of the Options, no additional shares would have vested. In all other respects, the Stock
Option Agreements relating to the Options will remain in full force and effect, and you agree to
remain bound by those Agreements. Any other Stock Option Agreements between you and the Company
will also remain in full force and effect. You acknowledge and agree that you have no rights
relating to the Company’s stock other than those enumerated in this Section 7 and in Section 8.

          8. Release of All Claims. In consideration for receiving the severance benefits described
above, to the fullest extent permitted by law, you waive, release and promise never to assert any
claims or causes of action, whether or not now known, against the Company or its predecessors,
successors or past or present subsidiaries, stockholders, directors, officers, employees,
consultants, attorneys, agents, assigns and employee benefit plans with respect to any matter,
including (without limitation) any matter related to your employment with the Company or the
termination of that employment, including (without limitation) claims to attorneys’ fees or costs,
claims of wrongful discharge, constructive discharge, emotional distress, defamation, invasion of
privacy, fraud, breach of contract or breach of the covenant of good faith and fair dealing and any
claims of discrimination or harassment based on sex, age, race, national origin,

2

 

Mr. Steven A. Shallcross

December 17, 2008

Page 3

disability or any other basis under Title VII of the Civil Rights Act of 1964, the Age
Discrimination in Employment Act of 1967, the Americans with Disabilities Act and all other laws
and regulations relating to employment. However, this release covers only those claims that arose
prior to the execution of this Agreement and only those claims that may be waived by applicable
law. Execution of this Agreement does not bar any claim that arises hereafter, including (without
limitation) a claim for breach of this Agreement.

          9. No Admission. Nothing contained in this Agreement will constitute or be treated as an
admission by you or the Company of liability, any wrongdoing or any violation of law.

          10. Other Agreements. At all times in the future, you will remain bound by your Proprietary
Information and Inventions Agreement with the Company, which you signed on November 14, 2005, and a
copy of which is attached as Exhibit B. Except as expressly provided in this Agreement, this
Agreement renders null and void all prior agreements between you and the Company and constitutes
the entire agreement between you and the Company regarding the subject matter of this Agreement.
This Agreement may be modified only in a written document signed by you and a duly authorized
officer of the Company.

          11. Company Property. You represent that you have returned to the Company all property that
belongs to the Company, including (without limitation) copies of documents that belong to the
Company and files stored on your computer(s) that contain information belonging to the Company.

          12. Confidentiality of Agreement. You agree that you will not disclose to others the
existence or terms of this Agreement, except that you may disclose such information to your spouse,
attorney or tax adviser if such individuals agree that they will not disclose to others the
existence or terms of this Agreement.

          13. No Disparagement. You agree that you will never make any negative or disparaging
statements (orally or in writing) about the Company or its stockholders, directors, officers,
employees, products, services or business practices, except as required by law.

          14. Severability. If any term of this Agreement is held to be invalid, void or unenforceable,
the remainder of this Agreement will remain in full force and effect and will in no way be
affected, and the parties will use their best efforts to find an alternate way to achieve the same
result.

          15. Choice of Law. This Agreement will be construed and interpreted in accordance with the
laws of the State of Maryland (other than their choice-of-law provisions).

          16. Execution. This Agreement may be executed in counterparts, each of which will be
considered an original, but all of which together will constitute one agreement. Execution of a
facsimile copy will have the same force and effect as execution of an original, and a facsimile
signature will be deemed an original and valid signature.

3

 

Mr. Steven A. Shallcross

December 17, 2008

Page 4

          17. Acknowledgement. You acknowledge that you have been provided with a notice, as required
by the Older Workers Benefit Protection Act of 1990, that contains information about the
individuals who are being terminated in this reduction in force, the eligibility factors for
receiving severance pay, the time limits applicable to receiving severance pay, the job titles and
ages of the employees terminated in this reduction in force, and the ages of the employees with the
same job titles who have not been terminated in this reduction in force. (See Exhibit C.)

          Please indicate your agreement with these terms by signing below and returning this document
to me.

	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 	 	Very truly yours,	 	 
	 
	 	 	 	 	 	 
	 	 	Vanda Pharmaceuticals Inc.	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	/s/ Mihael H. Polymeropoulos	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:
	 	Chief Executive Officer	 	 
	 

	 	 	 	 	 	 

I agree to the terms of this Agreement, and I am voluntarily signing this release of all claims. I
acknowledge that I have read and understand this Agreement, and I understand that I cannot pursue
any of the claims and rights that I have waived in this Agreement at any time in the future.

	 	 	 
	 

	 	 
	/s/ Steve Shallcross
	 	 
	 
	 	 
	Signature of Steve Shallcross
	 	 

4exv10w34

EXHIBIT 10.34

MIDDLEBROOK PHARMACEUTICALS, INC.

AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT

          THIS AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) is made
this 8th day of April 2008 by and between Edward M. Rudnic, Ph.D., a resident of
Potomac, Maryland, (the “Employee”), and Middlebrook Pharmaceuticals, Inc., a corporation
organized and existing under the laws of the State of Delaware and formerly known as Advancis
Pharmaceutical Corporation (the “Company”).

BACKGROUND

          The Company is engaged in the business of developing, improving and promoting antibiotic
therapies and the delivery and dosage of antibacterials, as well as extending the market and patent
life of important anti-infectives and oncology (as may be modified or expanded by the Company
during the term of this Agreement, collectively and individually, the “Business”).

          The Company desires to employ the Employee and the Employee desires to be employed by the
Company, upon the terms and conditions set forth in this Agreement.

          NOW, THEREFORE, in consideration of the mutual covenants and obligations contained herein, and
intending to be legally bound, the parties, subject to the terms and conditions set forth herein,
agree as follows:

          1. Employment and Term. The Company hereby employs the Employee and the Employee
hereby accepts employment with the Company, as President & CEO (the “Position”), commencing
on January 1, 2000 (the “Commencement Date”). Employee is employed by the Company on an at
will basis. The Employee shall be entitled to terminate this Agreement at any time upon ninety
(90) days prior written notice to the Company. The Company shall be entitled to terminate this
Agreement at any time subject to the provisions of Section 8 hereof. (The entire period of time
during which the Employee is employed by the Company is referred to herein as the “Term”).

          2. Duties. During the Term, the Employee shall serve the Company faithfully and to
the best of his/her ability and shall devote his/her full time, attention, skill and efforts to the
performance of the duties required by or appropriate for the Position. Subject to the oversight of
the Board of Directors, the Employee shall (i) have responsibility for the exercise of the
executive authority of the Company, being the general and active management of the business of the
Company and the carrying into effect of all orders and resolutions of the Board of Directors, which
executive authority may be delegated by the Employee to other officers and/or employees of the
Company, and (ii) such duties and responsibilities as may be assigned to him/her from time to time
by the Board of Directors. The Employee shall perform such duties and responsibilities at the
Company’s facility located in Germantown, Maryland or at such other location as may be mutually
agreed upon by the Company and the Employee in accordance with the business needs of the Company.
The Employee, as President & CEO shall report to the

 

 

Board of Directors. The Board of Directors of the Company shall use all reasonable efforts to
cause the Employee to be elected as a member of the Board of Directors.

          3. Other Business Activities. Except with the prior written consent of the Company in
its sole discretion, the Employee shall not engage, directly or indirectly, during the Term, in any
other business activities or pursuits whatsoever, except activities in connection with charitable
or civic activities, personal investments and serving as an executor, trustee or in other similar
fiduciary capacity; provided that any such activities do not interfere with the performance of
his/her responsibilities and obligations pursuant to this Agreement.

          4. Compensation. The Company shall pay the Employee, and the Employee hereby agrees
to accept, as compensation for all services to be rendered to the Company and for the Employee’s
intellectual property covenants and assignments and covenant not to compete, as provided in
Sections 6 and 7 hereof, the compensation set forth in this Section 4.

               4.1 Salary. The Company shall pay the Employee a base salary at the annual rate of
Four Hundred Thirty Two Thousand Six Hundred Forty Dollars ($432,640.00) (as the same may hereafter
be adjusted, the “Salary”) during the Term of this Agreement. The Salary shall be
inclusive of all applicable income, social security and other taxes and charges that are required
by law to be withheld by the Company (collectively, “Taxes”) and shall be paid and withheld
in accordance with the Company’s normal payroll practice for its executive employees from time to
time in effect. The Salary shall be subject to increase at the option and in the sole discretion
of the Company based upon the demonstrated performance of the Employee.

               4.2 Bonus. Upon the execution of this Agreement, the Employee shall be eligible to be
awarded an annual cash bonus, which bonus shall be determined by the Board of Directors of the
Company (the “Board of Directors”) and shall be at a target amount of fifty percent (50%)
of Salary paid during such applicable period, less Taxes, provided that the Employee shall have
achieved all of his/her performance objectives established for such period. Such bonus shall be
determined and paid no later than the 15th day of the third month of such succeeding calendar year.

               4.3 Fringe Benefits. The Employee shall be entitled to participate in the following
programs and receive the following benefits (collectively, the “Benefits”) in accordance
with the following provisions.

                    (a) The Employee shall be entitled to participate in any retirement, health or dental programs
generally made available to executive employees of the Company.

                    (b) The Employee shall be entitled to participate in all vacation, life and disability
insurance and other fringe benefit programs of the Company to the extent and on the same terms and
conditions as are accorded to other executive employees of the Company.

Page 2 of 16

 

               4.4 Reimbursement of Expenses. During the Term, the Employee shall be reimbursed for
items of travel, food and lodging and miscellaneous expenses reasonably incurred by him/her on
behalf of the Company, provided that such expenses are incurred, documented and submitted to the
Company, all in accordance with the reimbursement policies of the Company as in effect from time to
time. For purposes of satisfying Section 409A of the Internal Revenue Code of 1986, as amended
(the “Code”), the parties agree that the amounts reimbursed under this Section 4.4 for one
calendar year shall not affect the amounts reimbursed for other calendar years, and reimbursement
payments, if any, shall in all events be made no later than the 15th day of the third month of the
calendar year following the calendar year in which the applicable expense is incurred.

          5. Confidentiality. The Employee recognizes and acknowledges that the Proprietary
Information (as hereinafter defined) is a valuable, special and unique asset of the Company. As a
result, both during the Term and thereafter, the Employee shall not, without the prior written
consent of the Company, for any reason either directly or indirectly divulge to any third-party or
use for his/her own benefit, or for any purpose other than the exclusive benefit of the Company,
any confidential, proprietary, business and technical information or trade secrets of the Company
or of any subsidiary or affiliate of the Company (the “Proprietary Information”) revealed,
obtained or developed in the course of his/her employment with the Company. Proprietary
Information shall include any confidential or proprietary information or trade secrets relating to
any patents or other intellectual property assigned by the Employee to the Company. Proprietary
Information also shall include, but shall not be limited to the intangible personal property
described in Section 6(b) hereof and, in addition, technical information, including research
design, results, techniques and processes; apparatus and equipment design; computer software;
technical management information, including project proposals, research plans, status reports,
performance objectives and criteria, and analyses of areas for business development; and business
information, including project, financial, accounting and personnel information, business
strategies, plans and forecasts, customer lists, customer information and sales and marketing
plans, efforts, information and data. In addition, “Proprietary Information” shall include
all information and materials received by the Company or Employee from a third party subject to an
obligation of confidentiality and/or non-disclosure. Nothing contained herein shall restrict the
Employee’s ability to make such disclosures during the course of his/her employment as may be
necessary or appropriate to the effective and efficient discharge of the duties required by or
appropriate for the Position or as such disclosures may be required by law. Furthermore, nothing
contained herein shall restrict the Employee from divulging or using for his/her own benefit or for
any other purpose any Proprietary Information that is readily available to the general public so
long as such information did not become available to the general public as a direct or indirect
result of the Employee’s breach of this Section 5. Failure by the Company to mark any of the
Proprietary Information as confidential or proprietary shall not affect its status as Proprietary
Information under the terms of this Agreement.

          6. Property.

               6.1 Removal and Distribution. All right, title and interest in and to Proprietary
Information shall be and remain the sole and exclusive property of the Company. During the Term,
the Employee shall not remove from the Company’s offices or premises any

Page 3 of 16

 

documents, records, notebooks, files, correspondence, reports, memoranda or similar materials of or
containing Proprietary Information, or other materials or property of any kind belonging to the
Company, unless necessary or appropriate in accordance with the duties and responsibilities
required by or appropriate for the Position and, in the event that such materials or property are
removed, all of the foregoing shall be returned to their proper files or places of safekeeping as
promptly as possible after the removal shall serve its specific purpose. The Employee shall not
make, retain, remove and/or distribute any copies of any of the foregoing for any reason
whatsoever, except as may be necessary in the discharge of the assigned duties and shall not
divulge to any third person the nature of and/or contents of any of the foregoing or of any other
oral or written information to which he may have access or with which for any reason he may become
familiar, except as disclosure shall be necessary in the performance of the duties; and upon the
termination of his/her employment with the Company, the Employee shall return to the Company all
originals and copies of the foregoing then in his/her possession or under his/her control, whether
prepared by the Employee or by others.

               6.2 Developments.

                    (a) The Employee acknowledges that all right, title and interest in and to any and all
writings, documents, inventions, discoveries, ideas, developments, information, computer programs
or instructions (whether in source code, object code, or any other form), algorithms, formulae,
plans, memoranda, tests, research, designs, innovations, systems, analyses, specifications, models,
data, diagrams, flow charts, and/or techniques (whether patentable or non-patentable or whether
reduced to written or electronic form or otherwise) that the Employee creates, makes, conceives,
discovers or develops, either solely or jointly with any other person, at any time during the Term,
whether during working hours or at the Company’s facility or at any other time or location, and
whether upon the request or suggestion of the Company or otherwise, (collectively,
“Intellectual Work Product”) shall be the sole and exclusive property of the Company. The
Employee shall promptly disclose to the Company all Intellectual Work Product, and the Employee
shall have no claim for additional compensation for the Intellectual Work Product, except for any
excluded Intellectual Work Product that is wholly unrelated to the pharmaceutical industry, in the
broadest sense, provided that such Intellectual Work Product is not conceived, discovered or
developed, either solely or jointly with any other person during working hours or at the Company’s
facility or using any other Company resource.

                    (b) The Employee acknowledges that all the Intellectual Work Product that is copyrightable
shall be considered a work made for hire under United States Copyright Law. To the extent that any
copyrightable Intellectual Work Product may not be considered a work made for hire under the
applicable provisions of the United States Copyright Law, or to the extent that, notwithstanding
the foregoing provisions, the Employee may retain an interest in any Intellectual Work Product, the
Employee hereby irrevocably assigns and transfers to the Company any and all right, title, or
interest that the Employee may have in the Intellectual Work Product under copyright, patent, trade
secret and trademark law, in perpetuity or for the longest period otherwise permitted by law,
without the necessity of further consideration. The Company shall be entitled to obtain and hold
in its own name all copyrights, patents, trade secrets, and trademarks with respect thereto.

Page 4 of 16

 

                    (c) The Employee shall reveal promptly all information relating to any such Intellectual
Property to the Board of Directors, and, at the Company’s expense, shall cooperate with the Company
and execute such documents as may be necessary or appropriate (i) in the event that the Company
desires to seek copyright, patent or trademark protection, or other analogous protection,
thereafter relating to the Intellectual Work Product, and when such protection is obtained, renew
and restore the same, or (ii) to defend any opposition proceedings in respect of obtaining and
maintaining such copyright, patent or trademark protection, or other analogous protection.

                    (d) In the event the Company is unable after reasonable effort to secure the Employee’s
signature on any of the documents referenced in Section 6.2 (c) hereof, whether because of the
Employee’s physical or mental incapacity or for any other reason whatsoever, the Employee hereby
irrevocably designates and appoints the Company and its duly authorized officers and agents as the
Employee’s agent and attorney-in-fact, to act for and on the behalf and stead to execute and file
any such documents and to do all other lawfully permitted acts to further the prosecution and
issuance of any such copyright, patent or trademark protection, or other analogous protection, with
the same legal force and effect as if executed by the Employee.

                    (e) The Employee represents that the innovations, designs, systems, analyses, ideas, and all
copyrights, patents, trademarks and trade names, or similar intangible personal property
(collectively, the “Pre-existing Property”) identified on Schedule I hereof
comprise all of the innovations, designs, systems, analyses, ideas and all copyrights, patents,
trademarks and trade names, or similar intangible personal property that the Employee has made or
conceived of prior to the date hereof, and same are excluded from the operation of the other
provisions of this Section 6.2. In the event that the Employee learns of any Pre-existing Property
that he inadvertently failed to include in Schedule I, and the circumstances surrounding the
failure of such inclusion are reasonably satisfactory to the Company, the Employee and the Company
shall jointly amend Schedule I to include such property.

          7. Covenant not to Compete.

               7.1 Restrictions. Provided that the Company is in compliance with Section 8.6 hereof,
if applicable, the Employee shall not, during the Term and for a period of two (2) years thereafter
(the “Restricted Period”), except as an employee of the Company and in order to carry out
the Employee’s duties hereunder, do any of the following directly or indirectly without the prior
written consent of the Company in its sole discretion:

                    (a) engage or participate, directly or indirectly, in any business activity competitive with
the Business or the business of the Company or any of the Company’s subsidiaries or affiliates as
conducted during the Term;

                    (b) become interested (as owner, stockholder, lender, partner, co-venturer, director, officer,
employee, agent, consultant or otherwise) in any person, firm, corporation, association or other
entity engaged in any business that is competitive with the

Page 5 of 16

 

Business or of the business of the Company or any subsidiary or affiliate of the Company as
conducted during the Term, or become interested in (as owner, stockholder, lender, partner,
co-venturer, director, officer, employee, agent, consultant or otherwise) any portion of the
business of any person, firm, corporation, association or other entity where such portion of such
business is competitive with the Business of the Company or the business of any subsidiary or
affiliate of the Company as conducted during the Term (notwithstanding the foregoing, the Employee
may hold not more than one percent (1%) of the outstanding securities of any class of any
publicly-traded securities of a company that is engaged in activities referenced in this Section
7.1.

                    (c) solicit, call on or transact or engage in any business activity with, either directly or
indirectly, any (i) customer with whom the Company shall have dealt at any time during the one (1)
year period immediately preceding the termination of the Employee’s employment hereunder, or (ii)
corporate partner, collaborator, independent contractor or supplier with whom the Company shall
have dealt at any time during the one (1) year period immediately preceding the termination of the
Employee’s employment hereunder;

                    (d) influence or attempt to influence any then current or prospective supplier, customer,
corporate partner, collaborator, or independent contractor of the Company to terminate or modify
any written or oral agreement or course of dealing with the Company; or

                    (e) influence or attempt to influence any person either (i) to terminate or modify an
employment, consulting, agency, distributorship or other arrangement with the Company, or (ii) to
employ or retain, or arrange to have any other person or entity employ or retain, any person who
has been employed or retained by the Company as an employee, consultant, agent or distributor of
the Company at any time during the one (1) year period immediately preceding the termination of the
Employee’s employment hereunder.

               7.2 Acknowledgment. The Employee acknowledges that he has carefully read and
considered the provisions of this Section 7. The Employee acknowledges that the foregoing
restrictions will limit his/her ability to earn a livelihood in a business competitive with the
Business, but he nevertheless believes that he has received and will receive sufficient
consideration and other benefits in connection with the payment by the Company of the compensation
set forth in Sections 4 and 8.6 to justify such restrictions, which restrictions the Employee does
not believe would prevent him/her from earning a living in businesses that are not competitive with
the Business and without otherwise violating the restrictions set forth herein.

          8. Early Termination. The Employee’s employment hereunder may be terminated during
the Term upon the occurrence of any one of the events described in this Section 8. Upon
termination, the Employee shall be entitled only to such compensation and benefits as described in
this Section 8. The word “termination” as used throughout the Agreement with respect to the
Employee’s employment hereby refers to a “separation from service” by the Employee from the
Company, as defined by Treasury Regulation §1.409A-1(h).

Page 6 of 16

 

               8.1 Involuntary Termination.

                    (a) Termination for Disability.

                         (i) In the event of the disability of the Employee such that the Employee is unable to perform
the duties and responsibilities hereunder to the full extent required by this Agreement by reasons
of illness, injury or incapacity for a period of more than one hundred eighty (180) consecutive
days or more than one hundred eighty (180) days, in the aggregate, during any three hundred
sixty-five (365) day period (“Disability”), the Company shall have the right to terminate
Employee’s employment hereunder by written notice to the Employee.

                         (ii) In the event of a termination of the Employee’s employment hereunder pursuant to Section
8.1(a)(i), the Employee will be entitled to receive all accrued and unpaid (as of the date of such
termination) Salary and applicable Benefits; provided that the Employee has complied with all of
his/her obligations under this Agreement and continues to comply with all of his/her surviving
obligations hereunder listed in Section 10 and a pro-rata percentage of the bonus (provided in
Section 4.2) for the last fiscal year of the Company prior to the date of Employee’s termination.
All the foregoing payments shall be paid within thirty (30) days following the termination date.
Except as specifically set forth in this Section 8.1(a)(ii) or as provided by applicable law, the
Company shall have no liability or obligation to the Employee for compensation or benefits
hereunder by reason of, or subsequent to, such termination.

                    (b) Termination by Death. In the event that the Employee dies during the Term, the
Employee’s employment hereunder shall be terminated thereby and the Company shall pay to the
Employee’s executors, legal representatives or administrators an amount equal to the accrued and
unpaid portion of the Salary for the month in which he dies and a pro-rata percentage of the bonus
(provided in Section 4.2) for the last fiscal year of the Company prior to the date of Employee’s
termination. All the foregoing payments shall be paid within thirty (30) days following the
termination date. Except as specifically set forth in this Section 8.1(b) or as provided by
applicable law, the Company shall have no liability or obligation hereunder to the Employee’s
executors, legal representatives, administrators, heirs or assigns or any other person claiming
under or through him/her by reason of or subsequent to the Employee’s death.

               8.2 Termination for Cause.

                    (a) The Company shall have the right to terminate the Employee’s employment hereunder at any
time for “cause” upon written notice to the Employee. For purposes of this Agreement, “cause”
shall mean the Employee’s (including, if the Employee is not a natural person, any employee of or
contractor to the Employee who is involved, directly or indirectly, in the provision of services to
the Company) (a) dishonesty, embezzlement, theft or fraudulent misconduct; (b) abuse of a
controlled substance that materially impairs the performance of the Employee’s duties to the
Company; (c) conduct adverse to the business, interests, or reputation of the Company; (d) material
breach of any of the terms hereof or of any

Page 7 of 16

 

agreement between the Company and the Employee, (including, but not limited to, terms relating to
non-disclosure, non-competition and invention assignment) which, if curable, remains uncured thirty
(30) days after the Employee receives written notice of such breach; or (e) commission of a felony.

                    (b) In the event of a termination of the Employee’s employment hereunder pursuant to Section
8.2(a), the Employee shall be entitled to receive all accrued but unpaid (as of the effective date
of such termination) Salary and Benefits. All the foregoing payments shall be paid within thirty
(30) days following the termination date. All Salary and Benefits shall cease at the time of such
termination, subject to the requirements of applicable law. Except as specifically set forth in
this Section 8.2, the Company shall have no liability or obligation hereunder by reason of or
subsequent to such termination.

               8.3 Termination by the Company Without Cause. Notwithstanding anything to the
contrary set forth herein, the Company shall have the right to terminate the Employee’s employment
hereunder at any time before or after a Change in Control (as defined below), for any reason or no
reason, with or without cause, effective upon the date designated by the Company upon written
notice to the Employee.

               8.4 Termination for Good Reason Following a Change in Control.

                    (a) The Employee shall have the right to terminate the Employee’s employment hereunder at any
time for Good Reason within twelve (12) months following a Change in Control.

                    (b) “Good Reason” means the occurrence of any one of the following without the Employee’s
consent:

          (i) any requirement that the Employee relocate, by more than thirty-five (35)
miles, from the principal location where the Employee performs services for the
Company;

          (ii) any material diminution in the Employee’s authority, duties or
responsibilities (other than a change due to a Disability); or

          (iii) any material reduction in the Employee’s Salary or bonus.

Notwithstanding the forgoing, an event that is or would constitute grounds for a
resignation for a Good Reason shall not constitute such grounds for a resignation for
Good Reason if: (A) Employee does not send a notice of termination to the Company
within thirty (30) days after the event occurs; or (B) the Company reverses the action
or cures the default that would give rise to a termination for a Good Reason within
thirty (30) days after the delivery of the notice of termination.

Page 8 of 16

 

                    (c) “Change in Control” means: (i) the acquisition (other than from the Company) in
one or more transactions by any Person, as defined below, of the beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended) of
thirty-three percent (33%) or more of (A) the then outstanding shares of the securities of the
Company, or (B) the combined voting power of the then outstanding securities of the Company
entitled to vote generally in the election of directors (the “Company Voting Stock”); (ii)
the closing of a sale or other conveyance of assets representing fifty percent (50%) or more of the
fair market value of the Company’s consolidated assets (in a single transaction or in a series of
related transactions); (iii) the dissolution or liquidation of the Company; (iv) a change in the
composition of the Board of Directors, as a result of which, fewer than one-half of the incumbent
directors after such change are directors who either (A) had been directors of the Company
twenty-four (24) months prior to such change or (B) were elected, or nominated for election, to the
Board of Directors with the approval of at least a majority of the directors who had been the
Company’s directors twenty-four (24) months prior to such change and who were still in office at
the time of the election or nomination; or (v) the effective time of any merger, share exchange,
consolidation, or other business combination involving the Company if immediately after such
transaction persons who hold a majority of the outstanding voting securities entitled to vote
generally in the election of directors of the surviving entity (or the entity owning one hundred
percent (100%) of such surviving entity) are not persons who, immediately prior to such
transaction, held a majority of the Company Voting Stock; provided, however, that a Change in
Control shall not include (X) a public offering of capital stock of the Company; (Y) any
distribution of capital stock of the Company by a partnership or limited liability company to a
partner of such partnership or member of such limited liability company in respect of the interest
of such partner or member and without the payment of additional consideration; or (Z) any
transaction pursuant to which shares of capital stock of the Company are transferred or issued to
any trust, charitable organization, foundation, family partnership or other entity controlled
directly or indirectly by, or established for the benefit of any of the current or former executive
officers of the Company or their immediate family members (including spouses, children,
grandchildren, parents, and siblings, in each case to include adoptive relations), or transferred
to any such immediate family members. For purposes of this definition of Change in Control, a
“Person” means any individual, entity or group within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended, other than: employee benefit plans
sponsored or maintained by the Company or by affiliates controlled by the Company, or an
underwriter of the common stock of the Company in a registered public offering.

               8.5 Termination for Good Reason In the Event of
a Potential Change in Control.

                    (a) The Employee shall have the right to terminate the Employee’s employment hereunder at any
time following a Potential Change in Control if after a Potential Change in Control there is a Good
Reason event and such Good Reason event was the result of a request or direction given by a Person
seeking to effectuate a Change in Control.

                    (b) “Potential Change in Control” means (i) the Company enters into a definitive
agreement, the consummation of which would result in the occurrence of

Page 9 of 16

 

a Change in Control; or (ii) any Person publicly announces an intention to take actions which,
if consummated, would constitute a Change in Control.

               8.6 Severance Benefits. In the event of a termination of the Employee’s employment
hereunder without cause before or after a Change in Control pursuant to Section 8.3 or for Good
Reason within twelve (12) months following a Change in Control pursuant to Section 8.4(a) or
following a Potential Change in Control pursuant to Section 8.5, the Employee shall be entitled to
receive the following:

                    (a) All accrued but unpaid (as of the effective date of such termination) Salary and a
pro-rata percentage of the bonus (provided in Section 4.2) for the last fiscal year of the Company
prior to the date of the Employee’s termination provided that the Employee has complied with all of
his/her obligations under this Agreement and continues to comply with all of his/her surviving
obligations hereunder listed in Section 10. All the foregoing payments shall be paid within
thirty (30) days following the termination date. All Salary shall cease at the time of such
termination, except as required under applicable law. Except as specifically set forth in this
Section 8, the Company shall have no liability or obligation hereunder by reason of or subsequent
to such termination.

                    (b) Severance pay in the form of a lump sum payment within sixty (60) days of such
termination, in an amount equal to the present value of the Salary that the Employee would have
earned if the Employee had continued working for the Company during the twenty four (24) month
period immediately following the Employee’s date of termination, where such present value is to be
determined using a discount rate equal to the applicable short-term federal rate prescribed under
Section 1274(d) of the Code in effect for the month prior to the month in which the Employee’s
termination of employment under Sections 8.3 or 8.4 occurs. Such payment shall be subject to all
Taxes.

                    (c) All Benefits to which he was entitled on the date preceding his/her termination for a
period of twenty four (24) additional months following termination, made in accordance with any
terms applicable to such Benefits. All reimbursements and in-kind benefits provided under this
Section 8.6(c), shall be made or provided in accordance with the requirements of Section 409A of
the Code, including, where applicable, the requirement that (i) any reimbursement shall be for
expenses incurred during the Employee’s lifetime (or during a shorter period of time specified in
this Agreement), (ii) the amount of expenses eligible for reimbursement, or in-kind benefits
provided, during a calendar year may not affect the expenses eligible for reimbursement, or in-kind
benefits to be provided, in any other calendar year, (iii) the reimbursement of an eligible expense
will be made on or before the last day of the calendar year following the year in which the expense
is incurred (or such earlier date if specified in this Agreement), and (iv) the right to
reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.

                    (d) Except as provided in subsections (a), (b) and (c) above, the Company shall have no
liability or obligation by reason of or subsequent to the termination of the employment
relationship between the Company and the Employee.

Page 10 of 16

 

                    (e) Notwithstanding anything in this Agreement to the contrary, in no event shall the Company
be obligated to pay or distribute to Employee any amount that constitutes nonqualified deferred
compensation within the meaning of Section 409A of the Code earlier than the earliest permissible
date under Section 409A of the Code that such amount could be paid without additional taxes or
interest being imposed under Section 409A of the Code.

          9. Representations, Warranties and Covenants of the Employee.

               9.1 Restrictions. The Employee represents and warrants to the Company that:

                    (a) There are no restrictions, agreements or understandings whatsoever to which the Employee
is a party which would prevent or make unlawful the Employee’s execution of this Agreement or the
Employee’s employment hereunder, or which is or would be inconsistent or in conflict with this
Agreement or the Employee’s employment hereunder, or, except as set forth in any agreements
previously provided to the Company, would prevent, limit or impair in any way the performance by
the Employee of the obligations hereunder; and

                    (b) The Employee has disclosed to the Company all restraints, confidentiality commitments or
other employment restrictions that he has with any other employer, person or entity.

               9.2 Obligations to Former Employers. The Employee covenants that in connection with
his/her provision of services to the Company, he shall not breach any obligation (legal, statutory,
contractual or otherwise) to any former employer or other person, including, but not limited to
obligations relating to confidentiality and proprietary rights.

               9.3 Obligations Upon Termination. Upon and after his/her termination or cessation of
employment with the Company and until such time as no obligations of the Employee to the Company
hereunder exist, the Employee (i) shall provide a complete copy of this Agreement to any
prospective employer or other person, entity or association engaged in the Business, with whom or
which the Employee proposes to be employed, affiliated, engaged, associated or to establish any
business or remunerative relationship prior to the commencement thereof and (ii) shall notify the
Company of the name and address of any such person, entity or association prior to his/her
employment, affiliation, engagement, association or the establishment of any business or
remunerative relationship.

          10. Survival of Provisions. The provisions of this Agreement set forth in Sections 5,
6, 7, 8, 9, 10, 19 and 20 hereof shall survive the termination of the Employee’s employment
hereunder.

          11. Successors and Assigns. This Agreement shall inure to the benefit of and be
binding upon the Company and the Employee and their respective successors, executors,
administrators, heirs and/or assigns; provided that neither party shall make any assignment of

Page 11 of 16

 

this Agreement or any interest herein, by operation of law or otherwise, without the prior written
consent of the other party.

          12. Notice. Any notice hereunder by either party shall be given by personal delivery
or by sending such notice by certified mail, return-receipt requested, or telecopied, addressed or
telecopied, as the case may be, to the other party at its address set forth below or at such other
address designated by notice in the manner provided in this section. Such notice shall be deemed
to have been received upon the date of actual delivery if personally delivered or, in the case of
mailing, two (2) days after deposit with the U.S. mail, or, in the case of facsimile
transmission, when confirmed by the facsimile machine report.

(a) if to the Company, to:

MiddleBrook Pharmaceuticals, Inc.

20425 Seneca Meadows Parkway

Germantown, Maryland 20876

Attention: Human Resources

Facsimile: (301) 944-6700

(b) if to the Employee, to:

Edward M. Rudnic, Ph.D.

13517 Maidstone Lane

Potomac, MD 20854

          13. Entire Agreement; Amendments. This Agreement contains the entire agreement and
understanding of the parties hereto relating to the subject matter hereof, and merges and
supersedes all prior and contemporaneous discussions, agreements, amendments and understandings of
every nature between the parties hereto relating to the employment of the Employee with the
Company. This Agreement may not be changed or modified, except by an agreement in writing signed
by each of the parties hereto.

          14. Waiver. The waiver of the breach of any term or provision of this Agreement shall
not operate as or be construed to be a waiver of any other or subsequent breach of this Agreement.

          15. Governing Law. This Agreement shall be construed and enforced in accordance with
the laws of the State of Delaware, without regard to the principles of conflicts of laws of any
jurisdiction.

          16. Invalidity. If any provision of this Agreement shall be determined to be void,
invalid, unenforceable or illegal for any reason, the validity and enforceability of all of the
remaining provisions hereof shall not be affected thereby. If any particular provision of this
Agreement shall be adjudicated to be invalid or unenforceable, such provision shall be deemed
amended to delete therefrom the portion thus adjudicated to be invalid or unenforceable, such
amendment to apply only to the operation of such provision in the particular jurisdiction in

Page 12 of 16

 

which such adjudication is made; provided that, if any provision contained in this Agreement shall
be adjudicated to be invalid or unenforceable because such provision is held to be excessively
broad as to duration, geographic scope, activity or subject, such provision shall be deemed amended
by limiting and reducing it so as to be valid and enforceable to the maximum extent compatible with
the applicable laws of such jurisdiction, such amendment only to apply with respect to the
operation of such provision in the applicable jurisdiction in which the adjudication is made.

          17. Section Headings. The section headings in this Agreement are for convenience
only; they form no part of this Agreement and shall not affect its interpretation.

          18. Number of Days. In computing the number of days for purposes of this Agreement,
all days shall be counted, including Saturdays, Sundays and legal holidays; provided that, if the
final day of any time period falls on a Saturday, Sunday or day which is a legal holiday in
Delaware or Maryland, then such final day shall be deemed to be the next day which is not a
Saturday, Sunday or legal holiday.

          19. Specific Enforcement. The Employee acknowledges that the restrictions contained
in Sections 5, 6, and 7 hereof are reasonable and necessary to protect the legitimate interests of
the Company and its affiliates and that the Company would not have entered into this Agreement in
the absence of such restrictions. The Employee also acknowledges that any breach by him/her of
Sections 5, 6, or 7 hereof will cause continuing and irreparable injury to the Company for which
monetary damages would not be an adequate remedy. The Employee shall not, in any action or
proceeding to enforce any of the provisions of this Agreement, assert the claim or defense that an
adequate remedy at law exists. In the event of such breach by the Employee, the Company shall have
the right to enforce the provisions of Sections 5, 6, and 7 of this Agreement by seeking injunctive
or other relief in any court, and this Agreement shall not in any way limit remedies of law or in
equity otherwise available to the Company.

          20. Consent to Suit. Subject to the provisions of Section 21 hereof, any legal
proceeding arising out of or relating to this Agreement shall be instituted in the Court of
Chancery of New Castle County, or if such court does not have jurisdiction or will not accept
jurisdiction, in any state or federal court of general jurisdiction in the State of Delaware, and
each of the Company and the Employee hereby consents to the personal and exclusive jurisdiction of
such court and hereby waives any objection that either party may have to the laying of venue of any
such proceeding and any claim or defense of inconvenient forum. If an action at law or in equity
is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to recover, in addition to any other relief, reasonable attorneys’ fees, costs and
disbursements.

          21. Arbitration. Subject to the last sentence of this Section 21, if any dispute
arises over the terms of this Agreement between the parties to this Agreement, either Employee or
Company may submit the dispute to binding arbitration within thirty (30) days after such dispute
arises, to be governed by the evidentiary and procedural rules of the American Arbitration
Association (Commercial Arbitration). Employee and Company shall mutually select one (1)
arbitrator within ten (10) days after a dispute is submitted to arbitration. In the

Page 13 of 16

 

event that the parties do not agree on the identity of the arbitrator within such period, the
arbitrator shall be selected by the American Arbitration Association. The arbitrator shall hold a
hearing on the dispute in Wilmington, Delaware within thirty (30) days after having been selected
and shall issue a written opinion within fifteen (15) days after the hearing. The arbitrator shall
also decide on the allocation of the costs of the arbitration to the respective parties, but
Employee and Company shall each be responsible for paying the fees of their own legal counsel, if
legal counsel is obtained. Either Employee or Company, or both parties, may file the decision of
the arbitrator as a final, binding and unappealable judgment in a court of appropriate
jurisdiction. Notwithstanding the foregoing provisions of this Section 21 to the contrary, matters
in which an equitable remedy or injunctive relief is sought by a party, including but not limited
to the remedies referred to in Section 19 hereof, shall not be required to be submitted to
arbitration, if the party seeking such remedy or relief objects thereto, but shall instead be
subject to the provisions of Sections 19 and 20 hereof.

          22. Counterparts. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, and all of which together shall be deemed to be one and the same
instrument.

          23. Authorization. In connection with the execution of this Agreement, the Employee
shall be provided with a copy of the resolutions of the Board of Directors authorizing the
execution of this Agreement on behalf of the Company.

[SIGNATURES ON FOLLOWING PAGE]

Page 14 of 16

 

          IN WITNESS WHEREOF, the parties have caused this Executive Employment Agreement to be executed
the day and year first written above.

	 	 	 	 	 
	 	MIDDLEBROOK PHARMACEUTICALS, INC.

 	 
	 	By:  	/s/ R. Gordon Douglas
 	 
	 	 	R. Gordon Douglas, M.D. 	 
	 	 	Chairman, Board of Directors 	 
	 
	 	 	 
	 	     /s/ Edward M. Rudnic
 	 
	 	Edward M. Rudnic, Ph.D. 	 
	 	 	 

Page 15 of 16

 

	 	 	 	 	 

Schedule I

Preexisting Property:

Page 16 of 16

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