Document:

Exhibit
10.1

 

EMPLOYMENT
AGREEMENT

 

EMPLOYMENT AGREEMENT (the
“Agreement”) is made as of the  1st day of December, 2004, by
and between Albany Molecular Research, Inc., a Delaware corporation (the “Company”),
and Mark T. Frost. (the “Employee”).

 

WHEREAS, the Employee is
a key employee of the Company; and

 

WHEREAS, the parties
hereto desire to assure that the Employee’s knowledge and familiarity with the
business of the Company will continue to be available to the Company after the
date hereof.

 

NOW, THEREFORE, in
consideration of the mutual promises and covenants herein contained, the
parties agree as follows:

 

1.                                       Employment.  Subject to the provisions of Section 6,
the Company hereby employs the Employee and the Employee accepts such
employment upon the terms and conditions hereinafter set forth.

 

2.                                       Term
of Agreement.  The term of this
Agreement shall commence on and as of the date hereof (the “Effective Date”)
and shall remain in effect for a period of two (2) years from the Effective
Date (the “Term”).  The Term shall be
renewed automatically for periods of one (1) year (each a “Renewal Term”)
commencing at the second anniversary of the Effective Date and on each
subsequent anniversary thereafter, unless notice that this Agreement will not
be extended is given by either the Employee or the Company not less than sixty
(60) days prior to the expiration of the Term (as extended by any Renewal
Term).

 

3.                                       Capacity.

 

(a)                                  Duties.  During the Term of Employment, the Employee
shall report directly to the Chairman, CEO and President or other designated
Senior Manager and (i) shall serve as an Employee of the Company with the title
Chief Financial Officer (CFO), (ii) shall perform such duties and
responsibilities as may be reasonably determined by the Chairman, CEO and
President consistent with the Employee’s title and position, duties and
responsibilities as an Employee of the Company as of the Effective Date;
provided that such duties and responsibilities shall be within the general area
of the Employee’s experience and skills, and (iii) shall render all services
incident to the foregoing.

 

(b)                                 Extent
of Service.  The Employee agrees to
diligently serve the interests of the Company and shall devote substantially
all of his working time, attention, skill and energies to the advancement of
the interests of the Company and its subsidiaries and affiliates and the
performance of his duties and responsibilities hereunder; provided that nothing
in this Agreement shall be construed as preventing the Employee from (i)
investing the Employee’s assets in any entity in a manner not prohibited by Section 7
and in such form or manner as shall not require

 

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any material activities
on the Employee’s part in connection with the operations or affairs of the
entities in which such investments are made, or (ii) engaging in religious,
charitable or other community or non-profit activities that do not impair the
Employee’s ability to fulfill the Employee’s duties and responsibilities under
this Agreement.

 

4.                                       Compensation.

 

(a)                                  Salary.  During the Term of Employment, the Company
shall pay the Employee a salary (the “Base Salary”) at an annual rate as shall
be determined from time to time by Chairman, CEO and President or other
appropriate person of the Company consistent with the general policies and
practices of the Company and subject to periodic review in accordance with the
policies and practices of the Company; provided, however, that in no event
shall such rate per annum be less than $260,000.00.  Such salary shall be subject to withholding
under applicable law and shall be payable in periodic installments in
accordance with the Company’s usual practice for its Employees, as in effect
from time to time.

 

(b)                                 Bonus.  Commencing on the first annual compensation
determination date established by the Company during the Term of Employment and
on each such date thereafter, the Company shall review the performance of the
Company and of the Employee during the prior year, and the Company may provide
the Employee with additional compensation as a bonus in accordance with any
bonus plan then in effect from time to time for Employees of the Company. Any
such bonus plan shall have such terms as may be established in the sole
discretion of the Board of Directors of the Company or the Compensation
Committee of the Board of Directors or their designate.

 

5.                                       Benefits.

 

(a)                                  Regular
Benefits.  During the Term of
Employment, the Employee shall be entitled to participate in any and all
medical, dental, pension and life insurance plans, disability income plans and
other employee benefit plans as in effect from time to time for Employees of
the Company.  Such participation shall be
subject to (i) the terms of the applicable plan documents, (ii) generally
applicable policies of the Company and (iii) the discretion of the Board of
Directors of the Company or the administrative or other committee provided for
in, or contemplated by, such plan. 
Compliance with this Section 5(a) shall in no way create or be
deemed to create any obligation, express or implied, on the part of the Company
or any subsidiary or affiliate of the Company with respect to the continuation
of any benefit or other plan or arrangement maintained as of or prior to the
Effective Date or the creation and maintenance of any particular benefit or
other plan or arrangement at any time after the Effective Date.

 

(b)                                 Reimbursement
of Expenses.  The Company shall
promptly reimburse the Employee for all reasonable business expenses incurred
by the Employee during the Term of Employment in accordance with the Company’s
practices for Employees of the Company, as in effect from time to time.

 

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(c)                                  Vacation.  During the Term of Employment, the Employee
shall receive at least three (3) weeks paid vacation annually or such greater
amount as is in accordance with the Company’s practices for Employees of the
Company, as in effect from time to time.

 

6.                                       Termination
of Employment.  Notwithstanding the
provisions of Section 2, the Employee’s employment under this Agreement
shall terminate under the following circumstances set forth in this Section 6.

 

For purposes of this
Agreement, “Date of Termination” means (i) if the Employee’s employment
is terminated by his death as provided in Section 6(c), the date of his
death; (ii) if the Employee’s employment is terminated due to his permanent
disability as provided in Section 6(c), the date on which notice of
termination is given; (iii) if the Employee’s employment is terminated under Section 6(e),
sixty (60) days after the date on which notice of termination is given; and
(iv) if the Employee’s employment is terminated under Section 6(f), the
date on which the applicable cure period expires.

 

(a)                                  Mutual
Consent.  The Employee’s employment
under this Agreement may be terminated at any time by the mutual consent of the
Employee and the Company on such terms as both parties shall mutually agree.

 

(b)                                 Termination
by the Company for Cause.  The
Employee’s employment under this Agreement may be terminated by the Company for
“cause” at any time upon written notice to the Employee without further
liability on the part of the Company. 
For purposes of this Agreement, a termination shall be for “cause” if:

 

(i)                                     the
Employee shall commit an act of fraud, embezzlement, misappropriation or breach
of fiduciary duty against the Company or any of its subsidiaries or affiliates
or shall be convicted by a court of competent jurisdiction or shall plead
guilty or nolo contendere to any felony or any crime involving moral turpitude;

 

(ii)                                  the
Employee shall commit a material breach of any of the covenants, terms or
provisions of Section 7 or 8 hereof which breach has not been cured within
fifteen (15) days after delivery to the Employee by the Company of written
notice thereof;

 

(iii)                               the
Employee shall commit a material breach of any of the covenants, terms or
provisions hereof (other than pursuant to Section 7 or 8 hereof) which
breach has not been remedied within thirty (30) days after delivery to the Employee
by the Company of written notice thereof; or

 

(iv)                              the
Employee shall have disobeyed reasonable written instructions from the
Chairman, CEO and President, or other appropriate person which are consistent
with the terms and conditions of this Agreement or shall have deliberately,
willfully, substantially and continuously failed to perform the Employee’s
duties hereunder, after written notice and under circumstances effectively
constituting a voluntary resignation of the Employee’s position with the Company.

 

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Upon termination for
cause as provided in this Section 6(b), (A) all obligations of the Company
under this Agreement shall thereupon immediately terminate other than any
obligations with respect to earned but unpaid Base Salary and (B) the Company
shall have any and all rights and remedies under this Agreement and applicable
law.

 

(c)                                  Death;
Disability.  The Employee’s
employment under this Agreement may be terminated by the Company upon the
earlier of death or permanent disability (as defined below) of the Employee
continuing for a period of one hundred eighty (180) days.  Upon any such termination of the Employee’s
employment, all obligations of the Company under this Agreement shall thereupon
immediately terminate other than any obligations with respect to (i) earned but
unpaid salary through the Date of Termination; provided that Base Salary
payments as provided by Section 4(a) shall continue to be made to the
Employee (or his estate) through the Term (as extended by any Renewal Term) but
only if and to the extent payments to the Employee or his estate under any
applicable disability or life insurance policy is less than the amount the
Employee would otherwise receive as Base Salary hereunder, (ii) Bonus payments
with respect to the calendar year within which such termination occurred on the
basis of and to the extent contemplated in any bonus plan then in effect with
respect to senior Employee officers of the Company, pro-rated on the basis of
the number of days of the Employee’s actual employment hereunder during such
calendar year through the Date of Termination, and (iii) in the case of
permanent disability, continuation at the Company’s expense of health insurance
benefits (medical and dental) until the first anniversary of the Date of
Termination to the extent permitted under the Employee’s group health insurance
policy.  As used herein, the term “permanent
disability” or “permanently disabled” means the inability of the Employee, by
reason of injury, illness or other similar cause, to perform a major part of
his duties and responsibilities in connection with the conduct of the business
and affairs of the Company.  The Company
shall provide written notice to the Employee of the termination of his
employment hereunder due to permanent disability.

 

(d)                                 Voluntary
Termination by the Employee.  At any
time during the Term of Employment, the Employee may terminate his employment
under this Agreement upon sixty-(60) days’ prior written notice to the Company.  Upon termination by the Employee as provided
in this Section 6(d), all obligations of the Company under this Agreement
shall thereupon immediately terminate other than any obligations with respect
to earned but unpaid Base Salary.

 

(e)                                  Termination
by the Company Without Cause.  The
Company may terminate the Employee’s employment under this Agreement at any
time without “cause” (as defined in Section 6(b)) by the Company upon
sixty-(60) days’ prior written notice to the Employee.  Upon any such termination of the Employee’s
employment, all obligations of the Company under this Agreement shall thereupon
immediately terminate other than any obligations with respect to earned but
unpaid Base Salary and bonus under Section 4.  In addition, subject to the Employee signing
a general release of claims in a form and manner satisfactory to the Company,
the Company shall continue to pay the Employee his Base Salary at the rate then
in effect pursuant to Section 4(a) for a period of one (1) year from the
Date of Termination and shall pay to the Employee in monthly installments over
such one year period, an amount equal to the Employee’s cash bonus, if any,
received in respect of the immediately preceding year pursuant to

 

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Section 4(b).

 

(f)                                    Termination
by the Employee upon Company Breach. 
The Employee shall have the right to terminate his employment hereunder
upon written notice to the Company in the event of (i) a material adverse
change or diminution in the nature or scope of the powers, functions, titles,
duties or responsibilities of the Employee that is adverse to the Employee or
(ii) a breach by the Company of any of its material obligations hereunder, in
each case after the Employee has given written notice to the Company specifying
such default by the Company and giving the Company a reasonable time, not less
than thirty (30) days, to conform its performance to its obligations
hereunder.  The failure of the Employee
to give notice of any of the foregoing events shall not under any circumstances
constitute a waiver of the Employee’s right to terminate his employment and
receive the amounts payable under this Section 6(f).  Upon any such termination of the Employee’s
employment, all obligations of the Company under this Agreement shall thereupon
immediately terminate other than any obligations with respect to earned but
unpaid Base Salary and bonus under Section 4.  In addition, subject to the Employee signing
a general release of claims in a form and manner satisfactory to the Company,
the Company shall continue to pay the Employee his Base Salary at the rate then
in effect pursuant to Section 4(a) for a period of one (1) year from the
Date of Termination and shall pay to the Employee in monthly installments over such
one-year period, an amount equal to the Employee’s cash bonus, if any, received
in respect of the immediately preceding year pursuant to Section 4(b).

 

(g)                                 Termination
Pursuant to a Change of Control.  If
there is a Change of Control, as defined below, during the Term of Employment,
the provisions of this Section 6(g) shall apply and shall continue to
apply throughout the remainder of the Term (as extended by any Renewal
Term).  If, within one (1) year following
a Change of Control, the Employee’s employment is terminated by the Company
without cause (in accordance with Section 6(e) above) or by the Employee
for “Good Reason” (as defined in Section 6(g)(ii) below), the Company
shall pay to the Employee (or the Employee’s estate, if applicable) a lump sum
amount equal to one (1) time the sum of (x) the Employee’s Base Salary at the
rate then in effect pursuant to Section 4(a), plus (y) an amount
equal to the Employee’s cash bonus, if any, received in respect of the
immediately preceding year pursuant to Section 4(b).

 

(i)                                     “Change
of Control” shall mean the occurrence of any one of the following events:

 

(A)                              any “person”
as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934, as amended (the “Act”) (other than the Company, any of its
subsidiaries, or any trustee, fiduciary or other person or entity holding
securities under any employee benefit plan or trust of the Company or any of
its subsidiaries and other than Thomas E. D’Ambra, Ph.D.), together with all “affiliates”
and “associates” (as such terms are defined in Rule 12b-2 under the Act) of
such person, shall become the “beneficial owner” (as such term is defined in
Rule 13d-3 under the Act), directly or indirectly, of securities of the Company
representing twenty-five percent (25%) or more of the combined voting power of
the Company’s then outstanding securities having the right to vote in an
election of the Company’s

 

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Board of Directors (“Voting
Securities”) (in such case other than as a result of an acquisition of
securities directly from the Company);

 

(B)                                persons
who, as of the Effective Date, constitute the Company’s Board of Directors (the
“Incumbent Directors”) cease for any reason, including, without limitation, as a
result of a tender offer, proxy contest, merger or similar transaction, to
constitute at least a majority of the Board; provided that any person
becoming a director of the Company subsequent to the Effective Date shall be
considered an Incumbent Director if such person’s election was approved by or
such person was nominated for election by either (1) a vote of at least a
majority of the Incumbent Directors or (2) a vote of at least a majority of the
Incumbent Directors who are members of a nominating committee comprised, in the
majority, of Incumbent Directors; but provided  further that any
such person whose initial assumption of office is in connection with an actual
or threatened election contest relating to the election of members of the Board
of Directors or other actual or threatened solicitation of proxies or consents
by or on behalf of a person other than the Board, including by reason of
agreement intended to avoid or settle any such actual or threatened contest or
solicitation, shall not be considered an Incumbent Director; or

 

(C)                                the
stockholders of the Company shall approve (1) any consolidation or merger of
the Company where the stockholders of the Company, immediately prior to the
consolidation or merger, would not, immediately after the consolidation or
merger, beneficially own (as such term is defined in Rule 13d-3 under the Act),
directly or indirectly, shares representing in the aggregate more than fifty
percent (50%) of the voting shares of the corporation issuing cash or
securities in the consolidation or merger (or of its ultimate parent
corporation, if any), (2) any sale, lease, exchange or other transfer (in one
transaction or a series of transactions contemplated or arranged by any party
as a single plan) of all or substantially all of the assets of the Company or
(3) any plan or proposal for the liquidation or dissolution of the Company.

 

Notwithstanding the
foregoing, a “Change of Control” shall not be deemed to have occurred for
purposes of the foregoing clause (A) solely as the result of an acquisition of
securities by the Company which, by reducing the number of shares of Voting
Securities outstanding, increases the proportionate number of shares of Voting
Securities beneficially owned by any person to twenty-five percent (25%) or more
of the combined voting power of all then outstanding Voting Securities; provided,
however, that if any person referred to in this sentence shall
thereafter become the beneficial owner of any additional shares of Voting
Securities (other than pursuant to a stock split, stock dividend, or similar
transaction or as a result of an acquisition of securities directly from the
Company), then a “Change of Control” shall be deemed to have occurred for
purposes of the foregoing clause (A).

 

(ii)                                  “Good
Reason” shall mean the occurrence of any of the following:

 

(A)                              a
material adverse change or diminution in the nature or scope of the powers,
functions, titles, duties or responsibilities of the Employee that is adverse
to the Employee;

 

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(B)                                a
breach by the Company of any of its material obligations hereunder;

 

(C)                                the
failure by the Company to obtain an effective agreement from any successor to
assume and agree to perform this Agreement; or

 

(D)                               the
relocation of the offices at which the Employee is principally employed as of
the Change of Control to a location more than fifty (50) miles from such
offices, which relocation is not approved by the Employee.

 

(iii)                               The
Employee shall provide the Company with reasonable notice and an opportunity to
cure any of the events listed in Section 6(g)(ii) and shall not be
entitled to compensation pursuant to this Section 6(g) unless the Company
fails to cure within a reasonable period of not less than thirty (30) days; and

 

(iv)                              It
is the intention of the Employee and of the Company that no payments by the
Company to or for the benefit of the Employee under this Agreement or any other
agreement or plan, if any, pursuant to which the Employee is entitled to
receive payments or benefits shall be nondeductible to the Company by reason of
the operation of Section 280G of the Internal Revenue Code of 1986, as
amended (the “Code”), relating to parachute payments or any like statutory or
regulatory provision.  Accordingly, and
notwithstanding any other provision of this Agreement or any such agreement or
plan, if by reason of the operation of said Section 280G or any like
statutory or regulatory provision, any such payments exceed the amount which
can be deducted by the Company, such payments shall be reduced to the maximum
amount which can be deducted by the Company. 
To the extent that payments exceeding such maximum deductible amount
have been made to or for the benefit of the Employee, such excess payments
shall be refunded to the Company with interest thereon at the applicable
Federal rate determined under Section 1274(d) of the Code, compounded
annually, or at such other rate as may be required in order that no such
payments shall be nondeductible to the Company by reason of the operation of
said Section 280G or any like statutory or regulatory provision.  To the extent that there is more than one
method of reducing the payments to bring them within the limitations of said Section 280G
or any like statutory or regulatory provision, the Employee shall determine
which method shall be followed; provided that if the Employee fails to
make such determination within forty-five (45) days after the Company has given
notice of the need for such reduction, the Company may determine the method of
such reduction in its sole discretion.

 

(h)                                 No
Mitigation.  Without regard to the
reason for the termination of the Employee’s employment hereunder, the Employee
shall be under no obligation to mitigate damages with respect to such
termination under any circumstances and in the event the Employee is employed
or receives income from any other source, there shall be no offset against the
amounts due from the Company hereunder.

 

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7.                                       Non-Competition
and No Solicitation.

 

(a)                                  Because
the Employee’s services to the Company are special and because the Employee has
access to the Company’s confidential information, during the Term of Employment
and for a period of twelve (12) months following the termination, the Employee
shall not, without the express written consent of the Company, directly or
indirectly, engage, participate, invest in, be employed by or assist, whether
as owner, part-owner, shareholder, partner, director, officer, trustee,
employee, agent or consultant, or in any other capacity, any Person (as
hereinafter defined) other than the Company and its affiliates in the
Designated Industry (as hereinafter defined); provided, however, that nothing
herein shall be construed as preventing the Employee from making passive
investments in a Person in the Designated Industry if the securities of such
Person are publicly traded and such investment constitutes less than one
percent (1%) of the outstanding shares of capital stock or comparable equity
interests of such Person.

 

(b)                                 For
purposes of this Agreement, the following terms have the following meanings:

 

“Person” means an
individual, a corporation, an association, a partnership, a limited liability
company, an estate, a trust and any other entity or organization; and

 

“Designated Industry”
means the business of providing chemistry research and development services to
pharmaceutical and biotechnology companies involved in drug development and
discovery and any and all activities related thereto, including, without limitation,
medicinal chemistry, chemical development, biocatalysis, analytical chemistry
services and small-scale manufacturing and any other business conducted by the
Company during the Employee’s employment with the Company.

 

(c)                                  For
a period of twelve (12) months following the termination of this Agreement for
any reason, the Executive shall not, directly or indirectly, alone or as a
member of any partnership or limited liability company or entity, or as an
officer, director, shareholder, or employee of any corporation or entity  (a) solicit or otherwise encourage any
employee or independent contractor of the Company to terminate his/her
relationship with the Company, or (b) recruit, hire or solicit for employment
or for engagement as an independent contractor, any person who is or was
employed by the Company at any time during the Executive’s employment with the
Company.  This paragraph shall not apply
to persons whose employment and/or retention with the Company has been
terminated for a period of twenty four (24) months or longer.

 

8.                                       Confidentiality.  In the course of performing services
hereunder and otherwise, the Employee has had, and it is anticipated that the
Employee will from time to time have, access to confidential records, data,
customer lists, trade secrets, technology and similar confidential information
owned or used in the course of business by the Company and its subsidiaries and
affiliates (the “Confidential Information”). 
The Employee agrees (i) to hold the Confidential Information in strict
confidence, (ii) not to disclose the Confidential Information to any Person

 

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(other than in the
regular business of the Company), and (iii) not to use, directly or indirectly,
any of the Confidential Information for any competitive or commercial purpose;
provided, however, that the limitations set forth above shall not apply to any
Confidential Information which (A) is then generally known to the public, (B)
became or becomes generally known to the public through no fault of the
Employee, or (C) is disclosed in accordance with an order of a court of
competent jurisdiction or applicable law. 
Upon termination of the Employee’s employment with the Company, all
data, memoranda, customer lists, notes, programs and other papers and items,
and reproductions thereof relating to the foregoing matters in the Employee’s
possession or control, shall be returned to the Company and remain in its
possession.  This Section 8 shall
survive the termination of this Agreement for any reason.

 

9.                                       Conflicting
Agreements.  The Employee hereby
represents and warrants that the execution of this Agreement and the
performance of his obligations hereunder will not breach or be in conflict with
any other agreement to which he is a party or is bound, and that he is not now
subject to any covenants which would affect the performance of his obligations
hereunder.  As of the Effective Date, the
Employee is not performing any other duties for, and is not a party to any
similar agreement with, any Person competing with the Company or any of its
affiliates.

 

10.                                 Severability.  In case any of the provisions contained in
this Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, any such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement, but
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision had been limited or modified (consistent with its general intent) to
the extent necessary to make it valid, legal and enforceable, or if it shall
not be possible to so limit or modify such invalid, illegal or unenforceable
provision or part of a provision, this Agreement shall be construed as if such
invalid, illegal or unenforceable provision or part of a provision had never
been contained in this Agreement.

 

11.                                 Litigation
and Regulatory Cooperation.  During
and after the Employee’s employment, the Employee shall cooperate fully with
the Company in the defense or prosecution of any claims or actions now in
existence or which may be brought in the future against or on behalf of the
Company which relate to events or occurrences that transpired while the
Employee was employed by the Company. 
The Employee’s full cooperation in connection with such claims or
actions shall include, but not be limited to, being available to meet with
counsel to prepare for discovery or trial and to act as a witness on behalf of
the Company at mutually convenient times. 
During and after the Employee’s employment, the Employee also shall
cooperate fully with the Company in connection with any investigation or review
of any federal, state or local regulatory authority as any such investigation
or review relates to events or occurrences that transpired while the Employee
was employed by the Company.  The Company
shall reimburse the Employee for any reasonable out-of-pocket expenses incurred
in connection with the Employee’s performance of obligations pursuant to this Section 11.  This Section 11 shall survive the
termination of this Agreement for any reason.

 

12.                                 Arbitration
of Disputes.  Any dispute or
controversy arising under or in connection with this Agreement shall be settled
exclusively by arbitration in Albany, New York,

 

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in accordance with the
rules of the American Arbitration Association then in effect.  Judgment may be entered in any court having
jurisdiction.  In the event that the
Company terminates the Employee’s employment for cause under Section 6(b)
and the Employee contends that cause did not exist, then the Company’s only
obligation shall be to submit such claim to arbitration and the only issue
before the arbitrator will be whether the Employee was in fact terminated for
cause.  If the arbitrator determines that
the Employee was not terminated for cause by the Company, then the only
remedies that the arbitrator may award are (i) payment of amounts which would
have been payable if the Employee’s employment had been terminated under Section 6(e),
(ii) the costs of arbitration, (iii) the Employee’s attorneys’ fees, and (iv)
all rights and benefits granted or in effect with respect to the Employee under
the Company’s stock option plans and agreements with the Employee pursuant
thereto, with the vesting and exercise of any stock options and the
forfeitability of any stock-based grants held by the Employee to be governed by
the terms of such plans and the related agreements between the Employee and the
Company.  If the arbitrator finds that
the Employee’s employment was terminated for cause, the arbitrator will be
without authority to award the Employee anything, and the parties will each be
responsible for their own attorneys’ fees, and they will divide the costs of
arbitration equally.  Furthermore, should
a dispute occur concerning the Employee’s mental or physical capacity as
described in Section 6(c), a doctor selected by the Employee and a doctor
selected by the Company shall be entitled to examine the Employee.  If the opinion of the Company’s doctor and
the Employee’s doctor conflict, the Company’s doctor and the Employee’s doctor
shall together agree upon a third doctor, whose opinion shall be binding.  This Section 12 shall survive the
termination of this Agreement for any reason.

 

13.                                 Specific
Performance.  Notwithstanding Section 12
hereof, it is specifically understood and agreed that any breach of the
provisions of this Agreement, including, without limitation, Sections 7 and 8
hereof, by the Employee is likely to result in irreparable injury to the
Company and its subsidiaries and affiliates, that the remedy at law alone will
be inadequate remedy for such breach and that, in addition to any other remedy
it may have, the Company shall be entitled to enforce the specific performance
of this Agreement by the Employee and to seek both temporary and permanent
injunctive relief (to the extent permitted by law), without the necessity of
proving actual damages.  To the extent
that any court action is permitted consistent with or to enforce Section 7
or 8 of this Agreement, the parties hereby consent to the jurisdiction of the
courts of the State of New York, for the County of Albany and the United States
District Court for the Northern District of New York.  Accordingly, with respect to any such court
action, the Employee (i) submits to the personal jurisdiction of such courts,
(ii) consents to service of process, and (iii) waives any other requirement
(whether imposed by statute, rule of court or otherwise) with respect to
personal jurisdiction or service of process.

 

14.                                 Notices.  All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given (i) when delivered by hand, (ii) when transmitted by facsimile and
receipt is acknowledged, or (iii) if mailed by certified or registered mail
with postage prepaid, on the third business day after the date on which it is
so mailed:

 

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To the Company:

 

Albany Molecular
Research, Inc.

26 Corporate Circle

PO Box 15098

Albany, New York
12212-5098

Facsimile:  (518) 464-0289

Attention: Chairman and Chief
Executive Officer

 

To the Employee:

 

Mark T. Frost

26 Corporate Circle

P.O. Box 15098

Albany, New York
12212-5098

 

or to such other address
of which any party may notify the other parties as provided above.  Notices shall be effective as of the date of
such delivery or mailing.

 

15.                                 Amendment;
Waiver.  This Agreement shall not be
amended, modified or discharged in whole or in part except by an Agreement in
writing signed by both of the parties hereto. 
The failure of either of the parties to require the performance of a
term or obligation or to exercise any right under this Agreement or the waiver
of any breach hereunder shall not prevent subsequent enforcement of such term
or obligation or exercise of such right or the enforcement at any time of any
other right hereunder or be deemed a waiver of any subsequent breach of the
provision so breached, or of any other breach hereunder.

 

16.                                 Successors
and Assigns.  This Agreement shall
inure to the benefit of successors of the Company by way of merger,
consolidation or transfer of all or substantially all of the assets of the
Company, and may not be assigned by the Employee.

 

17.                                 Entire
Agreement.  This Agreement constitutes
the entire agreement between the parties concerning the subjects hereof and
supersedes all prior understandings and agreements between the parties relating
to the subject matter hereof.

 

18.                                 Governing
Law.  This Agreement shall be
construed and regulated in all respects under the laws of the State of New
York.

 

19.                                 Counterparts.  This Agreement may be executed in
counterparts, each of which when so executed and delivered shall be taken to be
an original, but such counterparts shall together constitute one and the same
document.

 

[Remainder of Page
Intentionally Left Blank]

 

11

 

IN WITNESS WHEREOF, the
parties have executed this Agreement as of the day and year first above
written.

 

 

	
   

  	
  ALBANY MOLECULAR RESEARCH,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/
  Thomas E. D’Ambra

  	
   

  
	
   

  	
   

  	
  Thomas E. D’Ambra,
  Ph.D.

  	
   

  
	
   

  	
   

  	
  Chairman, CEO and
  President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EMPLOYEE:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  /s/ Mark T. Frost 

  	
   

  
	
   

  	
  Mark T. Frost

  
	
   

  	
  CFO

  

 

12Exhibit 10.2

 

INCENTIVE STOCK OPTION AGREEMENT

 

UNDER THE ALBANY MOLECULAR RESEARCH, INC.

1998 STOCK OPTION AND INCENTIVE PLAN

 

	
  Name of
  Optionee:

  	
  Mark T. Frost

  
	
  Number of Option
  Shares:

  	
  120,000

  
	
  Option Exercise
  Price per Share:

  	
  $11.11

  
	
  [FMV
  (Average of high and low sale prices on Grant Date) or 110% of FMV if a 10%
  Owner]

  
	
  Grant Date:

  	
  December 3,
  2004

  
	
  Expiration Date:

  	
  December 3,
  2014

  

 

Pursuant
to the Albany Molecular Research, Inc. 1998 Stock Option and Incentive Plan, as
amended through the date hereof (the “Plan”), Albany Molecular Research, Inc.
(the “Company”) hereby grants to the Optionee named above an option (the “Stock
Option”) to purchase on or prior to the Expiration Date specified above all or
any part of the number of shares of Common Stock, par value $.01 per share (the
“Stock”), of the Company specified above at the Option Exercise Price per Share
specified above subject to the terms and conditions set forth herein and in the
Plan.

 

1.                                       Vesting
Schedule.  No portion of this Stock
Option may be exercised until such portion shall have vested.  Except as set forth below, and subject to the
discretion of the Administrator (as defined in Section 2 of the Plan) to
accelerate the vesting schedule hereunder and the acceleration of vesting
in accordance with Sections 3(c) and 17 of the Plan, (a) twenty-five
percent (25%) of this Stock Option shall be fully vested and exercisable on the
first anniversary of the Grant Date, (b) an additional six and one-quarter
percent (6.25%) of this Stock Option shall be fully vested and exercisable on
the fifteen (15) month anniversary of the Grant Date, and quarterly thereafter,
and (c) one hundred percent (100%) of this Stock Option shall be fully vested
and exercisable on the fourth anniversary of the Grant Date.(1)  Once vested, this Stock Option shall continue
to be exercisable at any time or times prior to the close of business on the
Expiration Date, subject to the provisions hereof and of the Plan.

 

(1) Max. of $100,000 per
yr.

 

 

2.                                       Manner
of Exercise.

 

(a)                                  The
Optionee may exercise this Stock Option only in the following manner:  from time to time on or prior to the
Expiration Date of this Stock Option, the Optionee may give written notice to
the Company of his or her election to purchase some or all of the vested Option
Shares purchasable at the time of such notice. 
This notice shall specify the number of Option Shares to be purchased.

 

Payment of the purchase
price for the Option Shares may be made by one or more of the following
methods:  (i) in cash, by certified
or bank check or other instrument acceptable to the Administrator;
(ii) through the delivery (or attestation to the ownership) of shares of
Stock, valued at Fair Market Value on the exercise date, that have been
purchased by the Optionee on the open market or that have been beneficially
owned by the Optionee for at least six months, and are not then subject to
restrictions under any Company plan, if permitted by the Administrator in its
discretion; (iii) by the Optionee delivering to the Company a properly
executed exercise notice together with irrevocable instructions to a broker to
promptly deliver to the Company cash or a check payable and acceptable to the
Company to pay the purchase price, provided that in the event the
Optionee chooses to pay the purchase price as so provided, the Optionee and the
broker shall comply with such procedures and enter into such agreements of
indemnity and other agreements as the Administrator shall prescribe as a
condition of such payment procedure; (iv) by the Optionee delivering to the
Company a promissory note if the Board of Directors has expressly authorized
the loan of funds to the Optionee for the purpose of enabling or assisting the
Optionee to effect the exercise of his or her Stock Option, provided
that at least so much of the exercise price as represents the par value of the
Stock shall be paid other than with a promissory note; or (v) with the consent
of the Administrator, a combination of (i), (ii), (iii) and (iv) above.  Payment instruments will be received subject
to collection.

 

The delivery of
certificates representing the Option Shares will be contingent upon the Company’s
receipt from the Optionee of full payment for the Option Shares, as set forth
above and any agreement, statement or other evidence that the Company may
require to satisfy itself that the issuance of Stock to be purchased pursuant
to the exercise of this Stock Option under the Plan and any subsequent resale
of the shares of Stock will be in compliance with applicable laws and regulations.  In the event an Optionee chooses to pay the
purchase price by previously-owned shares of Stock through the attestation
method described in clause (ii) of the preceding paragraph, the number of
shares of Stock transferred to the Optionee upon exercise of this Stock Option
shall be net of the number of shares attested to.

 

(b)                                 Certificates
for the shares of Stock purchased upon exercise of this Stock Option shall be
issued and delivered to the Optionee upon compliance to the satisfaction of the
Administrator with all requirements under applicable laws or regulations in
connection with such issuance and with the requirements hereof and of the
Plan.  The determination of the
Administrator as to such compliance shall be final and binding on the
Optionee.  The Optionee shall not be
deemed to be the holder of, or to have any of the rights of a holder with
respect to,

 

 

any shares of Stock
subject to this Stock Option unless and until this Stock Option shall have been
exercised pursuant to the terms hereof, the Company shall have issued and
delivered the shares to the Optionee, and the Optionee’s name shall have been
entered as the stockholder of record on the books of the Company.  Thereupon, the Optionee shall have full
voting, dividend and other ownership rights with respect to such shares of
Stock.

 

(c)                                  The
minimum number of shares with respect to which this Stock Option may be
exercised at any one time shall be 100 shares, unless the number of shares with
respect to which this Stock Option is being exercised is the total number of
shares subject to exercise under this Stock Option at the time.

 

(d)                                 Notwithstanding
any other provision hereof or of the Plan, no portion of this Stock Option
shall be exercisable after the Expiration Date hereof.

 

3.                                       Termination
of Employment.  If the Optionee’s
employment by the Company or a Subsidiary (as defined in the Plan) is
terminated, the period within which to exercise the Stock Option may be subject
to earlier termination as set forth below.

 

(a)                                  Termination
Due to Death.  If the Optionee’s
employment terminates by reason of death, any Option held by the Optionee shall
become fully exercisable and may thereafter be exercised by the Optionee’s
legal representative or legatee for a period of twelve (12) months from the date
of death or until the Expiration Date, if earlier.

 

(b)                                 Termination
Due to Disability.  If the Optionee’s
employment terminates as a result of the inability of the Optionee, by reason
of injury, illness or other similar cause, to perform a major part of his or
her duties and responsibilities in connection with the conduct of the business
and affairs of the Company, any Option held by the Optionee shall become fully
exercisable and may thereafter be exercised by the Optionee for a period of
twelve (12) months from the date of termination or until the Expiration Date,
if earlier.  The death of the Optionee
during the 12-month period provided in this Section 3(b) shall extend such
period for another twelve (12)
months from the date of death or until the Expiration Date, if earlier.

 

(c)                                  Termination
for Cause.  If the Optionee’s
employment terminates for Cause (as defined below), any Option held by the
Optionee shall terminate immediately and be of no further force and effect.

 

For purposes of this
Agreement, “Cause” shall have the meaning set forth in any Employment Agreement
by and between the Company and the Optionee, or if there is no such Employment
Agreement, termination of the Optionee’s employment for any of the following
reasons shall constitute termination for “Cause” for purposes hereof:

 

(i)                                     dishonest
statements or acts of the Optionee with respect to the Company, any Subsidiary
or any affiliate of the Company;

 

 

(ii)                                  commission
by or indictment of the Optionee for (A) a felony or (B) any misdemeanor
involving moral turpitude, deceit, dishonesty or fraud (“indictment,” for these
purposes, meaning an indictment, probable cause hearing or any other procedure
pursuant to which an initial determination of probable or reasonable cause with
respect to such offense is made);

 

(iii)                               commission,
in the reasonable judgment of the Administrator, of any act involving a
violation of any procedure or policy of the Company;

 

(iv)                              failure
to perform to the reasonable satisfaction of the Chief Executive Officer or the
President of the Company a substantial portion of the Optionee’s duties and
responsibilities as an employee of the Company, which failure continues, in the
reasonable judgment of the Chief Executive Officer or the President of the
Company, after written notice to the Optionee thereof and after a 30-day cure
period expires;

 

(v)                                 gross
negligence, willful misconduct or insubordination of the Optionee with respect
to the Company, any Subsidiary or any affiliate of the Company; or

 

(vi)                              material
breach by the Optionee of any of the Optionee’s obligations under any agreement
with the Company, including, without limitation, that certain Employee
Innovation, Proprietary Information and Post-Employment Activity Agreement by
and between the Company and the Optionee.

 

(d)                                 Other
Termination.  If the Optionee’s
employment terminates for any reason other than those set forth in
Sections 3(a), 3(b) or 3(c) of this Agreement, and unless otherwise
determined by the Committee, any Option held by the Optionee may be exercised,
to the extent exercisable on the date of termination, for a period of three (3)
months from the date of termination or until the Expiration Date, if
earlier.  Any Option that is not
exercisable at such time shall terminate immediately and be of no further force
or effect.

 

The Administrator’s determination of the reason for
termination of the Optionee’s employment shall be conclusive and binding on the
Optionee and his or her representatives or legatees.

 

4.                                       Incorporation
of Plan.  Notwithstanding anything
herein to the contrary, this Stock Option shall be subject to and governed by
all the terms and conditions of the Plan. 
In the event of any discrepancy or inconsistency between this Agreement
and the Plan, the terms and conditions of the Plan shall control.  Capitalized terms in this Agreement shall
have the meaning specified in the Plan, unless a different meaning is specified
herein.

 

5.                                       Transferability.  This Agreement is personal to the Optionee,
is non-assignable and is not transferable in any manner, by operation of law or
otherwise, other than by will or the laws of

 

 

descent and
distribution.  This Stock Option is
exercisable, during the Optionee’s lifetime, only by the Optionee, or by the
Optionee’s legal representative or guardian in the event of the Optionee’s
incapacity.

 

6.                                       Status
of the Stock Option.  This Stock
Option is intended to qualify as an “incentive stock option” under Section 422
of the Internal Revenue Code of 1986, as amended (the “Code”), but the Company
does not represent or warrant that this Stock Option qualifies as such.  The Optionee should consult with his or her
own tax advisors regarding the tax effects of this Stock Option and the
requirements necessary to obtain favorable income tax treatment under Section 422
of the Code, including, but not limited to, holding period requirements.  If the Optionee intends to dispose or does
dispose (whether by sale, gift, transfer or otherwise) of any Option Shares
within the one-year period beginning on the date after the transfer of such
shares to him or her, or within the two-year period beginning on the day after
the grant of this Stock Option, he or she will notify the Company within 30
days after such disposition.

 

7.                                       Miscellaneous.

 

(a)                                  Notice
hereunder shall be given to the Company at its principal place of business, and
shall be given to the Optionee at the address set forth below, or in either
case at such other address as one party may subsequently furnish to the other
party in writing.

 

(b)                                 This
Stock Option does not confer upon the Optionee any rights with respect to
continuance of employment by the Company or any Subsidiary.

 

(c)                                  Pursuant
to Section 15 of the Plan, the Administrator may at any time amend or
cancel any outstanding portion of this Stock Option, but no such action may be
taken which adversely affects the Optionee’s rights under this Agreement
without the Optionee’s consent.

 

(d)                                 This
Agreement may be executed in one or more counterparts, each of which shall be
an original, but all of which shall together constitute one instrument.

 

 

	
  ALBANY MOLECULAR
  RESEARCH, INC.

  
	
   

  
	
  By: /s/ Thomas
  E. D’Ambra

  	
   

  
	
   

  
	
  Name:  Thomas E. D’Ambra

  	
   

  
	
   

  
	
  Title:  Chairman, CEO and President

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