Document:

Employment Offer Letter Agreement with Laura K. Shawver, Ph.D.

 EXHIBIT 10.5 
 

 
 April 1, 2002 
 Laura Shawver, Ph.D. 
 [Address] 
 Dear Laura:

 I am pleased to confirm in writing our offer to you to join Phenomix Corporation (“Phenomix”) as its President and
Chief Executive Officer, reporting to the Phenomix board of directors. The entire board of directors and management of Phenomix look forward to your helping us build Phenomix into a world class organization. If you accept this offer, we are assuming
that you will commence employment not later than June 15, 2002. 
 The terms of your employment are as follows: 
 1. Salary. You will receive a base salary of $27,083.33 per month (equivalent to $325,000 per year). Your base salary will be subject to review
annually by Phenomix’s board of directors. 
 2. Common Stock Options. 
 a. Initial Grant. You will receive an incentive stock option to acquire 600,000 shares of common stock of Phenomix under
Phenomix’s 2001 Stock Option Plan. The stock option will be immediately exercisable on the grant date, but Phenomix will retain a right to repurchase the shares if you cease to be an employee, consultant or director of Phenomix for any reason.
The number of shares subject to Phenomix’s right of repurchase will be reduced over the period of your employment by 150,000 shares on the first anniversary of your start date, and thereafter by 12,500 shares at the end of each month so that
Phenomix’s right to repurchase shall have expired with respect to all of the option shares on the fourth anniversary of your start date. The exercise price of the stock options will be the fair market value of Phenomix’s common stock as
determined by the board of directors on the grant date (or, if later, your start date), which price is expected to be $.105 per share. 
 b. Bonus Grants. At the end of each of the first three years of your employment with Phenomix, you will be eligible to receive a bonus stock option grant to acquire 50,000 shares of common stock of Phenomix
(for a potential total of 150,000 shares). The board of directors will grant such stock options based on your attainment of performance milestones, which milestones are to be mutually agreed upon by you and the board of directors. The exercise price
of the additional stock options will be the fair market value of Phenomix’s common stock as determined by the board of directors on the grant date 
 Phenomix Corporation, 11099 North Torrey Pines Road, La Jolla, California 92037 858-731-5201 telephone 858-731-5225 facsimile 

 Dr. Laura Shawver 
 April 1, 2002 
 Page 2 
  

 3. Transition Benefits. 
 a. Relocation Assistance. Phenomix will reimburse you for the reasonable and customary out-of-pocket expenses associated with
(1) the sale of your existing residence and purchase of a new residence in San Diego, including real estate commissions on the sale of your existing residence and reasonable and customary closing expenses paid by you and (2) the relocation
of your family and household goods to San Diego, including travel to San Diego. The reimbursement of expenses listed in (1) and (2) above shall not exceed $100,000. In addition, Phenomix will pay temporary housing expenses in San Diego for
a period not to exceed six months and $2,000 per month. In the event that you voluntarily terminate your employment within one year of your start date, you will repay Phenomix any amounts paid to you under this paragraph. 
 b. Bridge Loan. In addition, in the event that you purchase a residence in San Diego before you sell your existing residence,
Phenomix will make you a personal bridge loan of up to $600,000. The bridge loan will bear interest at 2.88% or, if higher, the lowest rate that would avoid imputed interest for federal income tax purposes, and all principal and interest shall be
paid on the earlier of (1) the closing of the sale of your existing residence and (2) six months from the date of the loan. 
 c. Health Insurance. Phenomix will reimburse you for the amount of any payments made by you to continue your health insurance coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA) to the
extent required for the period between the time you leave your current employer and the time that you are eligible for coverage under Phenomix’s health insurance plan, which shall be substantially similar in coverage and eligibility for
dependents, including, without limitation, domestic partners. 
 4. Mortgage Assistance. 
 a. Loan. To assist with your purchase of a residence in San Diego, Phenomix will make you loan of up to $600,000, secured by a
second deed of trust on the residence (the “Loan”). We expect that the Loan will be interest free, provided that you (after consulting with your tax attorney) agree that the Loan meets the required conditions for an employee
relocation loan under the Internal Revenue Code; otherwise the Loan will bear interest at the lowest rate that would avoid imputed interest for federal income tax purposes (which is currently 4.565%). The principal and any interest shall be paid
within five years. For so long as you continue to serve as an employee of Phenomix, Phenomix will pay you bonuses over a period of five years equal to the principal amount of the Loan (including any accrued interest) less $200,000 (the
“Bonus Amount”). The Bonus Amount will be paid coincident with your required repayments of the Loan, as follows: 12.5% of the Loan on each of the first and second anniversaries of the Loan date, 18.75% of the Loan on the
third anniversary of the Loan date, 25% of the Loan on the fourth anniversary of the Loan date and 31.25% of the Loan on the fifth anniversary of the Loan date (which bonuses will constitute taxable income for which withholding tax will be payable).

 b. Housing-Related Option Grant. In addition, at the time the Loan is made, you will receive a nonqualified stock
option to acquire 20,000 shares of common stock of Phenomix under Phenomix’s 2001 Stock Option Plan. The stock option grant will become vested and exercisable with respect to all 20,000 shares on the fifth anniversary of the Loan date. The
exercise 

 Dr. Laura Shawver 
 April 1, 2002 
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price of the stock options will be the fair market value of Phenomix’s common stock as determined by the board of directors on the grant date. If the
fair market value of the shares covered by the stock option does not equal $200,000 on the date that the Loan becomes due, Phenomix will pay you a one time cash bonus equal to the difference between the fair market value of the shares and $200,000.
The fair market value of the shares will be determined in accordance with the provisions of Phenomix’s 2001 Stock Option Plan. 
 5.
Board Seat. Phenomix will take appropriate actions to elect you to its board of directors. 
 6. Other Benefits. In addition to
the benefits specifically described in this letter, you will be entitled to Phenomix’s standard executive benefits, which will include health insurance coverage and vacation of not less than three weeks per year. 
 7. Proprietary Information. Prior to the commencement of your employment, you will be required to sign Phenomix’s standard employee
innovations and proprietary rights assignment agreement, a copy of which is attached hereto. 
 8. At Will Employment. Your employment
with Phenomix will be “at will,” which means that you have the right to terminate your employment with Phenomix at any time and that Phenomix reserves for itself an equal right to terminate the relationship. Nothing in this letter is
intended to modify this at will employment relationship. 
 9. Severance. In the event you are terminated by Phenomix without
“cause” or your employment ceases due to “constructive termination” (as such terms are defined below), (x) you will be entitled to severance pay in an amount equal to six months’ base salary (which will be payable in
semi-monthly installments), (y) you will have a period of one year from your termination date to repay the Loan made under paragraph 4a and (z) the nonqualified stock option referred to in paragraph 4b will become fully vested . These
benefits are contingent upon your delivering to Phenomix an appropriate release. In the event that you voluntarily leave Phenomix or you are terminated by Phenomix with cause, no severance pay will be due to you. “Cause” shall mean
(a) fraud or illegal acts; (b) material violation with consequential damages to Phenomix of Phenomix agreements, including Phenomix’s confidential information and inventions agreement. “Constructive termination” shall mean
without your consent (i) the assignment to you of any duties or a reduction in your duties, either of which results in a significant diminution in your responsibilities with Phenomix below those responsibilities normally assigned to an
executive officer of a company, (ii) a material reduction in your base salary or bonus as in effect immediately before such reduction, (iii) a material reduction in the kind or level of employee benefits to which you are entitled
immediately prior to such reduction, with the result that your overall benefits package is substantially reduced, or (iv) the relocation of your employment to a facility or location more than 50 miles from the current location of Phenomix.

 10. Change of Control Incentive Program. Within the next two board meetings following your start date, the board of directors of
Phenomix will consider and adopt a “change of control” incentive program for its executive team. Such program will provide for accelerated vesting of stock options and severance in connection with a change of control based on advice from
Phenomix’s advisors on corporate governance and tax issues. 

 Dr. Laura Shawver 
 April 1, 2002 
 Page 4 
  

 11. Arbitration. In the event of any dispute arising out of or relating to your employment
relationship or its termination (including without limitation claims for breach of contract, wrongful termination, or age, race, sex, disability or other discrimination) that it is not resolved by good faith negotiations between the parties, you and
Phenomix agree fully, finally and exclusively to arbitrate the dispute in binding arbitration under the Employment Dispute Resolution Rules of the American Arbitration Association in San Diego County, California, rather than litigate the dispute in
court; provided that this arbitration provision will not apply to any dispute relating to or arising out of the alleged misuse or misappropriation of Phenomix’s trade secrets or proprietary information. In the event of arbitration, the
arbitrator shall be allowed to assess costs and impose any statutorily available remedies. Phenomix will bear any administrative costs associated with the arbitration. 
 12. Authorization to Work. Federal government regulations require that all prospective employees present documentation verifying their identity and demonstrating that they are authorized to work in the United
States. 
 13. Entire Agreement. This letter agreement and Phenomix’s standard employee innovations and proprietary rights
assignment agreement contain the entire agreement with respect to your employment with Phenomix and supersede any prior or contemporaneous representations or agreements. The terms of this offer may only be changed by written agreement, although
Phenomix may from time to time, in its sole discretion, adjust the compensation and benefits paid to you and its other employees, as well as job titles and responsibilities. In case any provision of the letter agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 
 Should you have any questions with regard to any of the items indicated above, please call me. Kindly indicate your consent to this letter agreement by signing and returning a copy of this letter to me by April 8, 2002. 
 I am enthusiastic about your joining Phenomix and look forward to working with you. 
  

	
	Very truly yours,
	
	/s/ John Diekman
	
	 John Diekman
 Chairman of the
Board

  

	
	ACCEPTED AND APPROVED:
	
	Date: April 8, 2002
	
	/s/ Laura Shawver
	Laura Shawver, Ph.D.Employment Offer Letter Agreement with Julie Cherrington, Ph.D.

 EXHIBIT 10.6 
 

 
 TERMS OF EMPLOYMENT 
 1. Employer: Phenomix Australia Pty Ltd. (“Phenomix”). 
 2. Employee: Julie
Cherrington Ph.D. (“Employee”). 
 3. Title: President, Phenomix Australia Pty. Ltd. 
 4. Commencement Date: October 31, 2003 (“Start Date”). 
 5. Level of Commitment: Full-time basis. 
 6. Reports to: Laura K. Shawver, Ph.D. 
 7. Assignment: Initial position will be located at the Canberra, Australia
location for a minimum of one year. When international assignment is completed and you return to the United States you will be employed by Phenomix Corporation and receive a title to be determined although not less than Senior Vice
President/Executive Vice President of Research and Development. 
 8. Salary: AUS$250,000 per year inclusive of superannuation (with
any amounts greater than social security tax to be reimbursed by Phenomix) or social security, to be earned and paid in semi-monthly installments, payable in arrears, less applicable withholding tax, payroll deductions and any fringe benefits tax
liability. Upon return to the United States salary will be US$250,000 plus any merit increase awarded which will not be less than industry average. 
 9. Transition Benefits to Australia: Phenomix will pay reasonable and customary moving and transitional accommodation expenses of Employee to Canberra, Australia, provided that such moving and transitional accommodation expenses
combined shall not exceed US$30,000.00 and provided further that written documentation of such expenses is provided to Phenomix within 90 days of hire date. In addition, Phenomix will provide you with a housing allowance not to exceed US$2,500 a
month and use of a mid-size car while located in Canberra, Australia. Alternatively, at the election of Phenomix, Phenomix will reimburse you the cost to lease or purchase a car (“Car Cost”) plus pay a tax “Gross-up” so that the
net Phenomix reimbursement to you in connection with the car, after taking into account the increase in your personal taxes because of Phenomix’ payment of the Car Cost and the Gross-up, equals the Car Cost. In addition, Phenomix will provide
you with an additional US$25,000 to assist you with you incidental relocation expenses, which amount shall be non-accountable and paid to you on January 15, 2004. If you should voluntarily terminate your employment with Phenomix within two
years, US$25,000 will be immediately due and payable. 

 10. Transition Benefits to Phenomix Corporation: Phenomix Corporation will pay reasonable and
customary moving and transitional accommodation expenses upon return to San Diego, California, provided that such moving and transitional accommodation expenses combined shall not exceed US$50,000.00 and provided further that written documentation
of such expenses is provided to Phenomix Corporation within 90 days of return date. In addition, Phenomix Corporation shall pay all closing costs on the sale of your residence in San Francisco and on the purchase of your residence, as it is
described in Section 11 herein. 
 11. Mortgage Assistance: Loan. To assist with your purchase of a residence in San
Diego, upon your return to the United States, Phenomix Corporation will make you a loan of US$150,000.00, secured by a second deed of trust on the residence (the “Loan”). We expect that the Loan will be interest free, provided that
you (after consulting with your tax attorney) agree that the Loan meets the required conditions for an employee relocation loan under the Internal Revenue Code; otherwise the Loan will bear interest at the lowest rate that would avoid imputed
interest for federal income tax purposes (which is currently 3.15%). The principal and any interest shall be paid within five years. For so long as you continue to serve as an employee of Phenomix Corporation, Phenomix Corporation will pay you
bonuses in equal amounts over the remainder of the period of five years equal to the principal amount of the Loan (including any accrued interest). The bonus amount will be paid coincident with your required repayments of the Loan (which bonuses
will constitute taxable income for which withholding tax will be payable). Upon voluntary termination, the outstanding balance of the Loan will be due and payable within 30 days of such termination. Additional terms shall be as set forth in the
employee loan documents. 
 Notwithstanding the foregoing, you understand that, pursuant to the Sarbanes-Oxley Act of 2002, you may be
required to prepay the Loan at such time as the Company’s securities become publicly traded. In such event, the Company will pay you a bonus coincident with the required prepayment in the amount of such prepayment, provided that the bonus can
be paid under the Sarbanes-Oxley Act or other applicable law. 
 12. Stock Option: Phenomix Corporation will recommend that its Board
of Directors, at the next Board meeting following the Start Date, grant to Employee a stock option to acquire 400,000 shares of common stock of Phenomix Corporation at an exercise price equal to the fair market value of the Company’s
common stock on the date of grant. As of the last Board meeting, the Board determined the fair market value to be $0.105 per share. Such stock option grant will be on customary terms, provided that the stock options will become vested and
exercisable over a period of four years, with 25% of options becoming vested and exercisable on the first anniversary of the Start Date, and the remaining 75% becoming vested and exercisable monthly over months 13 through 48 following the Start
Date. 
  

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 13. Bonus: 
 a. Guaranteed Bonus: 
  

	 	i.	Bonus Amount: While in Australia you will receive an annual bonus of US$100,000 to be paid equally (US$25,000.00 or the prorated portion thereof upon return to the United
States) every three months. In the event Employee is required to pay income tax in Australia and the US on salary earned in Australia which is not otherwise offset by corresponding tax deductions, Phenomix will increase the bonus to cover the
non-deductible amounts and any additional taxes incurred. 

 b. Discretionary Performance-Based Bonus:

  

	 	i.	Bonus Amount: You will be eligible to receive an annual, performance-based monetary bonus of up to 20% of your annual salary. 

  

	 	ii.	Performance Criteria: Performance criteria will be subject to approval by the Board of Directors. 

 c. Mortgage Assistance Repayment Bonus: 
  

	 	i.	Bonus Amount: This bonus amount is described in Section 11 herein. 

 14. Benefits: Employee and partner shall be entitled to customary employee benefits, in addition to base salary such as group health insurance coverage and other fringe benefits offered by Phenomix to other
employees at a similar level of responsibility. 
 15. Phenomix’s Policies: Employee will be required to comply with customary
Phenomix policies, including without limitation, maintaining the confidentiality of Phenomix’s confidential information, assigning to Phenomix inventions made by Employee during the term of employment, and not pursuing competitive activities
during the term of employment. Employee will be required to sign Phenomix’s standard employee confidential information and inventions agreement, a copy of which is attached hereto. 
 16. Duration: Employee’s employment with Phenomix will be “at will,” which means that Employee has the right to terminate
employment with Phenomix at any time and that Phenomix reserves for itself an equal right to terminate the relationship. Nothing in this Agreement is intended to modify this at will employment relationship. 
 17. Severance: In the event: (1) there has been a “Change of Control” of the Company, (2) you are a full-time employee at the
time of the Change of Control, and (3) within three hundred sixty five (365) calendar days from and including the date of the Change of Control, your employment is involuntarily terminated for any reason (other than for “Cause”
or your death or disability), upon executing a release of liability with the Company you shall be eligible to receive a severance payment in an amount equal to six months’ base salary, the transition benefit described under paragraph 9 will be
forgiven and you will have one year from your termination date to repay the Loan made under paragraph 11. 
 As used herein, “Change
of Control” means the occurrence of any 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) becomes the “beneficial owner” (as defined
in Rule 13d-3 of the 

  

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Securities Exchange Act of 1934), directly or indirectly, of securities of the Company representing 50% or more of the total voting power represented by the
Company’s then outstanding voting securities; (b) the consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets; (c) the consummation of a merger or consolidation of the Company
with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity or its parent) at least fifty percent 50% of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or
consolidation; or (d) a change in the composition of the Board of Directors, as a result of which fewer than a majority of the directors are Incumbent Directors. “Incumbent Directors” means directors who either (1) are directors
of the Company as of the date hereof, or (2) are elected, or nominated for election, to the Board of Directors with the affirmative votes of at least a majority of those directors whose election or nomination was not in connection with any
transaction described in clauses (a), (b) or (c) or in connection with an actual or threatened proxy contest relating to the election of directors of the Company. As used herein “Cause,” shall mean (a) fraud or
illegal acts; (b) material violation with consequential damages to the Company of Company agreements, including the Company’s confidential information and inventions agreement; (c) material failure to perform your job function to a
reasonable standard after notice of such failure has been given to you by the Board of Directors and you have had a 15 business-day period to cure such failure or (d) any other reason deemed cause under applicable California law. 
 REVIEWED AND APPROVED: 
  

					
	April 27, 2003	 		 	PHENOMIX CORPORATION
			
	 	 		 	/s/ Laura K. Shawver
		 		 	Laura K. Shawver, Ph.D.
		 		 	President & Chief Executive Officer
			
	April 27, 2003	 		 	EMPLOYEE
			
	 	 		 	/s/ Julie M. Cherrington
		 		 	Julie M. Cherrington, Ph.D.

  

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