Document:

Employment Letter Agreement between Panacos Pharm., Inc. and Graham P. Allaway

 Exhibit 10.1 
 July 10, 2006 
 Graham P. Allaway, Ph.D. 
 14205 White Water Way 
 Darnestown, MD 20878 
 Dear Graham, 
 On behalf of Panacos Pharmaceuticals, Inc. (“Panacos” or the “Company”), I am very pleased
to confirm the terms of your promotion to President. The following summarizes the terms of your compensation in your new position and sets forth other terms and conditions of your promotion. Of course, not all of the terms and requirements of your
employment can be set forth in this letter, and I encourage you to contact Stephen Andre or me with any questions you may have. 
 1. Position: Your
position will be as President and Chief Operating Officer, reporting to the CEO or Acting CEO. We expect that you will perform any and all duties and responsibilities associated with this position, as determined by the CEO or Acting CEO, in a
satisfactory manner and to the best of your abilities at all times. 
 2. Effective Date/Nature of Relationship: You will assume the role of President
on July 10, 2006. No provision of this letter shall be construed to create an express or implied employment contract, or a promise of employment for any specific period of time. Your employment at Panacos continues to be at-will employment,
which may be terminated by you or Panacos at any time for any reason with or without advance notice. 
 3. Compensation/Benefits: Your Base Pay as
President shall be annualized at $275,000 minus customary deductions for federal and state taxes and the like, and shall be paid in accordance with the Company’s usual payroll practices. This Base Pay shall take effect as of June 14, 2006.
You will also be eligible to receive an Annual Cash Bonus each calendar year, targeted at 35% of your annual Base Pay, provided that you must be employed by the Company at the time of payment. The award and amount (which may be less than or
greater than the target amount) of any Annual Cash Bonus shall be determined at the sole discretion of Panacos, and shall be based on the Company’s assessment of your achievement of mutually agreed upon performance goals (both individual and
Company) and your continued employment with the Company. Any Annual Cash Bonus will be paid within sixty (60) days following the end of the calendar year to which it relates. 
 In connection with your promotion, and subject to the approval of the Panacos Board of Directors, you will be granted 60,000 shares of Panacos restricted common stock, pursuant to the terms of Section 5 below and
a formal restricted stock agreement and subject to the applicable stock plan. Neither the formal restricted stock agreement nor any applicable Panacos stock plan creates any obligation on the Company’s part to employ you for any particular
period of time. The restrictions on the restricted stock will lapse on May 31, 2007, provided that you must be employed as of that date. In addition, all then-unvested stock options granted to you on June 1, 2004 (totaling 70,534
shares) shall vest on May 31, 2007, subject to your continued employment on that date. 

 In addition to your compensation, you may continue to take advantage of various benefits offered by the Company,
including Panacos’s medical, disability and life insurance, dependent care and medical flexible spending plans, 401(k) plan, and paid vacation and holiday time. These benefits, of course, may be modified or discontinued from time to time at the
sole discretion of the Company. Where a particular benefit is subject to a formal plan (for example, medical insurance or life insurance), eligibility to participate in and receive any particular benefit is governed solely by the applicable plan
document. Vacation and holidays are governed by Company policy. 
 4. Confidentiality: This promotion is contingent on your execution of the attached
Employee Non-Disclosure, Non-Competition and Inventions Agreement. This Agreement is necessary to protect the Company’s trade secrets, confidential information and/or goodwill. 
 5. Termination of Employment/Severance and Other Benefits: As stated, your employment with Panacos is at-will, which means that either you or Panacos may end the employment relationship at any time, for any
reason, with or without notice. Notwithstanding the foregoing, if you are terminated as set forth in this section, the Company will provide you with the severance and benefits set forth in this section, conditioned upon your timely execution of a
separation agreement, in a form acceptable to the Company, containing a general release of claims against the Company; provided that this Section 5 shall be limited to the minimum extent necessary to comply with Section 409A of the
Internal Revenue Code of 1986, as amended, or any successor statute, regulation and guidance thereto (collectively “Code Section 409A”), so that it will not cause adverse tax consequences with respect to Code Section 409A.

 a. If your employment is terminated by the Company without Cause (as defined in the Addendum, attached hereto) or if you resign for Good
Reason (as defined in the Addendum): (i) the Company will pay you severance of one year’s Base Pay, paid out over time in accordance with the Company’s then-current payroll practices; (ii) the Company will continue to pay its
portion of the cost to continue your medical and dental coverage for one year following the termination date, pursuant to COBRA; (iii) any stock options that would have vested during the twelve (12) month period following the termination
date (had such termination not occurred) will accelerate and vest as of the termination date; and (iv) you will have twelve (12) months from the date of your termination to exercise any vested stock options, provided that such extension
may cause the options to become non-qualified options. 
 b. If, within twelve months following a Change of Control (as defined in the
Addendum), your employment is terminated by you for Good Reason (as defined in the Addendum) or by the Company for reasons other than Cause (as defined in the Addendum), then in lieu of 5(a): (i) the Company will pay you severance of one
year’s Base Pay, paid out over time in accordance with the Company’s then-current payroll practices; (ii) the Company will continue to pay its portion of the cost to continue your medical and dental coverage for one year following the
termination date, pursuant to COBRA; (iii) on the effective date of such termination or resignation, any outstanding options shall accelerate and become automatically exercisable and the restrictions on any restricted stock then held by you
shall lapse; and (iv) you will have twelve (12) months from the date of your termination to exercise any exercisable stock options, provided that such extension may cause the options to become non-qualified options. 
 6. Miscellaneous: This letter, together with the attached Addendum, the Employee Non-Disclosure, Non-Competition and Inventions Agreement, and your relevant stock
option agreements and restricted stock agreement, constitutes our entire offer regarding the terms and conditions of your continued employment with the Company and your promotion. It supersedes any prior agreements or other promises or statements
(whether oral or written) regarding the offered terms. 

 You acknowledge and agree that the Company does not guarantee the tax treatment or tax consequences associated with any
payment or benefit arising under this Agreement, including but not limited to consequences related to Code Section 409A. If so requested by you, the Company will negotiate in good faith and with you will jointly execute an amendment to modify
this offer letter to the extent necessary to comply with the requirements of Code Section 409A; provided, that no such amendment shall increase the total financial obligation of Company under this offer letter. 
 The terms of your employment shall be governed by the law of the State of Maryland, without giving effect to conflict of law principles. By accepting this offer of
promotion, you agree that any action, demand, claim or counterclaim in connection with your employment with Panacos, or any separation of employment (whether voluntary or involuntary) from Panacos, shall be resolved in a court of competent
jurisdiction in the Commonwealth of Maryland by a judge alone, and you waive and forever renounce your right to a trial before a civil jury. 
 You may
accept this offer of employment and the terms and conditions hereof by signing the enclosed additional copy of this letter and returning it to Stephen Andre. 
 Sincerely, 
  

	
	 /s/ Peyton Marshall

	 Peyton Marshall

	 CFO and Acting CEO

 Agreed and Accepted: 
  

	
	 /s/ Graham P. Allaway

	 Graham P. Allaway, Ph.D.

  

			
	 Date:
	 	 July 10, 2006

		 	(Please date after you sign)

 ADDENDUM 
 (a) For purposes hereof, “Cause” shall mean willful misconduct by Graham P. Allaway, Ph.D. (“Allaway”) or willful failure by Allaway to perform his responsibilities to the Company (including, without limitation, breach
by Allaway of any provision of any employment, consulting, advisory, non-disclosure, non-competition or other similar agreement between Allaway and the Company) that continues for fifteen (15) days after the Company has given written notice to
Allaway specifying in reasonable detail the manner in which Allaway has failed to perform such duties or comply with such directions. 
 (b) For purposes
hereof, “Good Reason” means any of the following, if implemented without Allaway’s consent: 
 i. the loss of the titles of
President and Chief Operating Officer, which the Company or its successor has failed to remedy within fifteen (15) days following Allaway’s delivery to the Company or its successor of written notice of such loss of title;

 ii. an alteration of Allaway’s direct reporting structure such that he no longer reports directly to the CEO/Acting CEO of the
Company or its successor; 
 iii. a reduction in Allaway’s Base Pay following a merger or acquisition; or 
 iv. material breach by the Company or its successor of the terms of Allaway’s employment agreement with the Company or its successor (including the
failure to grant equity promised thereunder). 
 (c) For purposes hereof, a “Change of Control” means the occurrence of any of the following
events, but only to the extent each of the following is interpreted in a manner consistent with the meaning of “a change in the ownership or effective control of the corporation, or in the ownership of a substantial portion of the assets of the
corporation” under Code Section 409A, and limited to the extent necessary so that it will not cause adverse tax consequences with respect to Code Section 409A: 
 i. a merger or consolidation in which: 
 1. the Company is a constituent party, or 
 2. a subsidiary of the Company is a constituent
party and the Company issues shares of its capital stock pursuant to such merger or consolidation, 
 In the case of (1) or
(2) above, except any such merger or consolidation involving the Company or a subsidiary in which the holders of capital stock of the Company immediately prior to such merger or consolidation continue to hold immediately following such merger
or consolidation at least 51%, by voting power and economic interest, of the capital stock of (A) the surviving or resulting entity or (B) if the surviving or resulting entity is a wholly owned subsidiary of another entity immediately
following such merger or consolidation, the parent entity of such surviving or resulting entity; or 
 ii. the sale, in a single transaction
or series of related transactions, 

 1. by the Company of all or substantially all of the assets of the Company (except where
such sale is to a wholly owned subsidiary of the Company) or 
 2. by the stockholders of the Company of at least 51%, by
voting power and economic interest, of the then-outstanding capital stock of the Company.Form of Notes issued in 2004 and 2005 Private Placement Offerings

    
      
        

      
Exhibit 4.1 Form
      of
      Notes issued in 2004 and 2005 Private Placement Offerings 

    

      

      FORM
        OF

      PROMISSORY
        NOTE ISSUED WITH RESPECT TO 

      2004
        AND 2005 PRIVATE PLACEMENT OFFERINGS

      

      

      
        	 $_____________	
                  ,
                  2004/5 

              
	 	
                 Date

              

      

       

       

      

      

      FOR
        VALUE
        RECEIVED, Tankless Systems Worldwide, Inc., a Nevada corporation ("Borrower"),
        promises to pay ________________________, or his assignee, the principal
        sum of
___________________________
        Dollars
        ($_____________), plus annual interest at the rate of ten percent (10%).
        Interest on this Promissory Note shall be due and payable on April __, 2004,
        July __, 2004, October __, 2004 and January __, 2005. This Promissory Note
        shall
        mature and the principal amount hereof shall be due and payable on  [1
        yr
        from date of issue] .
        Said
        principal and interest shall be payable at 14500 N. Northsight Boulevard,
        Suite
        101, Scottsdale, Arizona 85260, or at such other place as the payee, or legal
        holder or owner (hereinafter referred to as the "Holder") of this Promissory
        Note may from time to time designate in writing.

      

      As
        additional interest to Holder, upon payment of the principal sum hereof the
        Borrower shall issue to the Holder restricted shares of Borrower's Common
        Stock
        equal to one-half share for each $1.00 advanced by Holder pursuant to this
        Promissory Note. 

      

      The
        principal of this Promissory Note may be prepaid in whole or in part at any
        time
        without penalty. Any partial prepayment shall be applied against the accrued
        interest outstanding, if any, and shall not extend or postpone the due date
        of
        the principal and interest described above, unless the Holder of this Promissory
        Note shall otherwise agree in writing. 

      

      If
        the
        Maker shall, prior to the maturity date of this Promissory Note, as set forth
        in
        the first paragraph hereof, issue shares of its common stock for cash in
        an
        amount in excess of $500,000 in the aggregate (“Equity Financing”), then in such
        event, the maturity date of this Promissory Note shall automatically accelerate,
        without the necessity of any action on the part of the Holder, and the principal
        amount hereof, together with all accrued but unpaid interest hereon, shall
        be
        immediately due and payable out of the proceeds of such Equity Financing.
        

      

      It
        is
        agreed that if this Promissory Note is not paid when due as described herein,
        the Holder hereof shall be issued, on or before twenty-one (21) days following
        its maturity date, restricted shares of Borrower's Common Stock at the value
        of
        $1.00 per share as full payment of the outstanding principal and accrued
        interest on this Promissory Note (i.e., 25,000 shares for $25,000 of principal).
        [Note: Beginning with Bridge Loans made after August 15, 2004, this paragraph
        was not included in the Promissory Notes issued.]

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      The
        maker
        and endorsers hereof severally waive presentment for payment, protest, notice
        of
        non-payment and of protest, and agree to any extension of time of payment
        and
        partial payments before, at or after maturity, and if this Promissory Note
        or
        interest thereon is not paid when due, or suit is brought, agree to pay all
        reasonable costs of collection, including a reasonable amount of money for
        attorney's fees. 

      

      This
        Promissory Note shall be construed and interpreted in accordance with the
        laws
        of the State of Arizona.

      

      IN
        WITNESS WHEREOF, Tankless Systems Worldwide, Inc. has caused this Promissory
        Note to be executed on ______________, 2004/5 by its duly authorized President.
        

       

      

        

      

      
        	 	 	 
	 	Tankless
                Systems
                Worldwide, Inc. 
	 
 	 
 	 
 
	 	By:  	 
	 	
                
Thomas
                Kreitzer, Chief Executive Officer

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