Document:

EX-10.1

 

Exhibit 10.1

August 17, 2006                              

Mr. Brian Reagan

c/o BioScrip, Inc.

10050 Crosstown Circle

Eden Prairie, MN 55344

	 	Re: 	 	Severance Agreement

Dear Brian:

     This will confirm our agreement that if you are terminated by BioScrip, Inc. (the “Company”)
(or any successor) other than for “Cause” (as defined below) or if you terminate your employment
with the Company (or any successor) for “Good Reason” (as defined below), you will be entitled to
receive severance payments equal to one (1) year of salary at your then current salary level,
payable in accordance with the Company’s then applicable payroll practices and subject to all
applicable federal, state and local withholding, and (ii) all outstanding securities contemplated
to be issued under the terms of the Company’s 2001 Incentive Stock Plan granted to you and held by
you at the time of termination shall vest and become immediately exercisable and shall otherwise be
exercisable in accordance with their terms and conditions. If your employment with the Company is
terminated for any reason whatsoever, whether by you or the Company, the Company would not be
liable for, or obligated to pay you any stock or cash bonus compensation, incentive or otherwise,
or any other compensation contemplated hereby not already paid, earned or accrued as of the date of
such termination, and no other benefits shall accrue or vest subsequent to such date.

     For purposes of this Agreement, “Cause” shall mean any of the following: (i) commission by
you of criminal conduct which involves moral turpitude; (ii) acts which constitute fraud or
self-dealing by or on the part of you against the Company or any of its subsidiaries, including,
without limitation, misappropriation or embezzlement; (iii) your willful engagement in conduct
which is materially injurious to the Company or any of its subsidiaries; (iv) your gross misconduct
in the performance of duties as an employee of the Company, including, without limitation, failure
to obey lawful written instructions of the Board of Directors of the Company, any committee thereof
or any executive officer of the Company or failure to correct any conduct which constitutes a
breach of any written agreement between you and the Company or of any written policy promulgated by
the Board of Directors of either the Company, any committee thereof or any executive officer of the
Company, in either case after not less than ten days’ notice in writing to you of the Company’s
intention to terminate you if such failure is not corrected within the specified period (or after
such shorter notice period if the Company in good faith deems such shorter notice period to be
necessary due to the possibility of material injury to the Company).

     For purposes of this Agreement, “Good Reason” shall mean the existence of any one or more of
the following conditions that shall continue for more than 30 days following written notice thereof
by you to the Company: (i) the assignment to you of duties materially inconsistent with your
position or positions with the Company; (ii) the reduction of your then current annual salary rate,
without your consent; or (iii) the relocation of your principal location of employment more than 50
miles from your current location without your consent.

 

 

Mr. Brian Reagan

August 17, 2006

Page 2

     This letter agreement constitutes the entire understanding of the parties with respect to the
subject matter hereof. This agreement shall be construed in accordance with, and its
interpretation shall otherwise be governed by, the laws of the State of New York, without giving
effect to principles of conflicts of law.

     This letter supersedes and replaces the change of control severance agreement between the
Company and yourself dated as of June 14, 2004 as well as the penultimate paragraph of the
employment letter agreement dated July 18, 2005 between the Company and yourself, both of which
shall be of no further force and effect.

     Kindly signify your agreement to the foregoing by signing below and forward an executed copy
to me for our files.

	 	 	 	 	 
	 	Sincerely,

BioScrip, Inc.

 	 
	 
	 	By:  	/s/ Barry A. Posner
 	 
	 	 	Barry A. Posner, EVP and General Counsel 	 
	 	 	 	 
	 

	 	 	 	 	 
	Agreed and Accepted

on this 17th day of July, 2006:

 	 	 
	 
	/s/ Brian Reagan
 	 	 
	Brian Reagan<PAGE>
                                                                    Exhibit 10.1

                              EMPLOYMENT AGREEMENT

      This Employment Agreement (this "Agreement"), is executed and entered into
by and between Nastech Pharmaceutical Company Inc., a Delaware corporation (the
"Company"), with offices at 3450 Monte Villa Parkway, Bothell, Washington and
Gordon C. Brandt, M.D., an individual resident in the State of Washington (the
"Executive"), effective August 17, 2006 (the "Effective Date").

                                   WITNESSETH:

      WHEREAS, the Company and the Executive wish to enter into this Agreement
which shall set forth the Executive's terms of employment as Executive Vice
President of Clinical Research & Medical Affairs;

      NOW THEREFORE, in consideration of the mutual promises and agreements
herein and for other good and valuable consideration the receipt and sufficiency
of which are hereby mutually acknowledged, the Company and the Executive agree
as follows:

      1. Application and Effectiveness of Agreements. Effective as of the
Effective Date, this Agreement shall govern (i) the employment relationship
between the Company and the Executive and (ii) other matters as set forth
herein. Other agreements, as applicable, between the Company and the Executive
shall continue to govern the employment of the Executive by the Company prior to
the Effective Date and matters growing out of that employment.

      2. Employment; Responsibilities and Authority; Definitions.

            (a) Subject to the terms and conditions of this Agreement, the
Company shall employ the Executive as its Executive Vice President of Clinical
Research & Medical Affairs during the Employment Period (as defined in Section
3, below) and the Executive shall perform such acts and duties and furnish such
services to the Company and its Subsidiaries (as defined below) as the Chief
Executive Officer shall from time to time direct.

            (b) Subject to the terms and conditions of this Agreement, the
Executive hereby accepts such employment and agrees to devote his full time and
continuous best efforts to the duties provided for herein.

            (c) For purposes of this Agreement: (1) the "Business of the
Company" means the description of the Company's business as is described in Part
I, Item 1 of the Company's most recent Annual Report on Form 10-K filed with the
U.S. Securities and Exchange Commission, and (2) the term "Subsidiary" means a
corporation or other entity that is at least majority owned, directly or
indirectly, by the Company.

      3. Term; Employment Period. The "Employment Period" under this Agreement
shall commence on the Effective Date and shall terminate at the close of
business on June 30, 2009 unless it is (a) extended by written agreement between
the parties or by continuing employment of the Executive by the Company as
provided in the following sentence or (b) earlier terminated pursuant to Section
11 hereof. If the Executive shall remain in full-time

<PAGE>

employment by the Company beyond what would otherwise be the end of the
Employment Period without any written agreement between the parties, this
Agreement and the Employment Period shall be deemed to continue on a
month-to-month basis and either party shall have the right to terminate the
Executive's employment hereunder at the end of any ensuing calendar month on
written notice of at least thirty (30) days.

      4. Salary. For services rendered to the Company during the Employment
Period, the Company shall compensate the Executive with a base salary, payable
in semi-monthly installments, which initially shall be two hundred and
seventy-five thousand dollars ($275,000) per annum commencing on the Effective
Date and which shall thereafter be set by the Board of Directors of the Company
(the "Board") and/or the Chief Executive Officer from time to time as determined
by the Board and/or the Chief Executive Officer.

      5. Incentive Cash Compensation.

            (a) For the Company's fiscal year that began on January 1, 2006, and
for each subsequent fiscal year or portion thereof during the Employment Period,
the Executive shall also be eligible to receive incentive cash compensation
based on the Executive's performance in relation to the performance areas and
performance targets which the Chief Executive Officer and/or the Board shall
determine and communicate to the Executive as described below (the "Annual Bonus
Plan"). The targeted amount of such Annual Bonus Plan shall be forty percent
(40%) of the Executive's base salary for such year; provided, however, that the
Executive and the Company acknowledge that the amount actually paid to the
Executive pursuant to this Section 5 for any fiscal year or portion thereof may
be more or less than said targeted amount.

            (b) The Chief Executive Officer, upon consultation with the Board,
shall establish performance criteria for determination of the incentive cash
compensation that will be payable to the Executive with respect to each fiscal
year of the Company. To the extent possible, such criteria shall be established,
as to each fiscal year, prior to the end of the first month of such fiscal year.
As an example, such performance criteria may be comprised of several designated
performance areas and one or more performance targets in each area. The Company
acknowledges that the business objectives heretofore used in determining the
Executive's incentive cash compensation have been, and that the performance
areas and performance targets referred to herein shall continue to be, based
largely on the input and recommendations of the Company's Chief Executive
Officer and that, in exercising its review and supervisory role with respect to
the determination and adoption of those performance areas and performance
targets, the Board or the Compensation Committee of the Board (the "Compensation
Committee"), as the case may be, shall act reasonably and in consultation and
cooperation with the Chief Executive Officer and consistently with past
practice.

            (c) As soon as practical, and absent unforeseen circumstances no
later than ninety (90) days following the end of each fiscal year of the
Company, the Chief Executive Officer and/or the Board, shall determine,
reasonably and in good faith, the extent to which the applicable performance
criteria for such fiscal year shall have been achieved and, accordingly, shall
cause the appropriate amount of incentive cash compensation to be paid to the
Executive. If unforeseen developments occur that in the opinion of the Chief
Executive Officer make the performance areas and/or targets previously
determined unachievable, infeasible, or inadvisable

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<PAGE>

-- and therefore inappropriate as a measure of the performance of the Executive
-- the Chief Executive Officer and/or the Board shall consider in good faith the
extent to which the actual performance of the Executive nevertheless warrants
payment of the amounts that would have been payable if the performance criteria
had been achieved; and, to such extent, payment shall be made to the Executive.

      6. Stock Options. The Company and the Executive hereby acknowledge that
the Board or the Compensation Committee has granted, and may, in the discretion
of the Board or the Compensation Committee, in the future grant, to the
Executive options to purchase shares of common stock of the Company
(collectively, whether granted prior to or after the Effective Date, the
"Outstanding Options"). The terms of the grant agreements granting such
Outstanding Options shall govern the rights and obligations of the Executive
with respect thereto, subject, however, to the provisions of Sections 12 and 21
of this Agreement, if and as applicable.

      7. Restricted Shares. The Company and the Executive hereby acknowledge
that the Board or the Compensation Committee has issued, and may, in the
discretion of the Board or the Compensation Committee, in the future issue, to
the Executive restricted shares of common stock of the Company (collectively,
whether issued prior to or after the Effective Date, the "Outstanding Restricted
Shares"). The terms of the grant agreements issuing such Outstanding Restricted
Shares shall govern the rights and obligations of the Executive with respect
thereto, subject, however, to the provisions of Sections 12 and 21 of this
Agreement, if and as applicable.

      8. Reserved.

      9. Benefits. During the Employment Period, the Company shall provide or
cause to be provided to the Executive at least such employee benefits as are
provided to other executive officers of the Company.

      10. Paid Time Off. The Executive shall be entitled to paid time off in
accordance with the Company's policies in effect from time to time for executive
officers of the Company.

      11. Termination.

            (a) Executive's employment by the Company shall be "at will." In
other words, either the Company or the Executive may terminate Executive's
employment by the Company at the end of any calendar month, with or without
Cause or Good Reason (as such terms are defined below), in its or his sole
discretion, upon thirty (30) days' prior written notice of termination. In
addition, the Executive's employment by the Company shall be terminated by his
death or Disability (as defined below). Termination of the Executive's
employment as provided for herein shall terminate the Employment Period.

            (b) For purposes of this Agreement, in the case of a termination of
the Executive's employment hereunder by the Executive, the term "Good Reason"
shall have the meaning set forth for it below; in the case of a termination of
the Executive's employment hereunder by the Company, the term "Cause" shall have
the meaning set forth for it below; and the other terms set out below in this
Section 11 shall have the meanings provided for them respectively:

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<PAGE>

                  (i) "Good Reason" shall mean (i) any substantial diminution in
the Executive's authority or role as Executive Vice President of Clinical
Research & Medical Affairs; (ii) failure of the Company to pay to the Executive
any amounts of base salary and/or incentive cash compensation as provided for in
Sections 4 or 5 above, or to honor promptly any of its obligations or
commitments regarding stock options or other benefits referred to in Sections 7,
9, and/or 10 above, or to honor promptly any of its other material obligations
hereunder; or (iii) a material demotion in the Executive's title or status.

                  (ii) "Cause" shall mean (i) the Executive's willful and
repeated failure to perform his duties hereunder or to comply with any
reasonable and proper direction given by the Chief Executive Officer if such
failure of performance or compliance is not cured within thirty (30) days
following receipt by the Executive of written notice from the Company containing
a description of such failures and non-compliance and a demand for immediate
cure thereof; (ii) the Executive being found guilty in a criminal court of an
offense involving moral turpitude; (iii) the Executive's commission of any
material act of fraud or theft against the Company; or (iv) the Executive's
material violation of any of the material terms, covenants, representations or
warranties contained in this Agreement if such violation is not cured within
thirty (30) days following receipt by the Executive of written notice from the
Company containing a description of the violation and a demand for immediate
cure thereof.

            (c) "Disability" shall mean total and permanent disability as
defined in Section 22(e)(3) of the Internal Revenue Code of 1986, as amended.

            (d) "Termination Date" shall mean (i) if this Agreement is
terminated on account of death, the date of death; (ii) if this Agreement is
terminated for Disability, the date that such Disability is established; (iii)
if this Agreement is terminated by the Company or by the Executive prior to June
30, 2009, the effective date of the termination as provided in Section 11(a)
hereof; or (iv) if this Agreement expires by its terms, June 30, 2009.

      12. Severance.

            (a) Subject to Section 21 hereof, if (i) the Company terminates the
employment of the Executive prior to June 30, 2009 against his will and without
Cause, or (ii) the Executive terminates his employment prior to June 30, 2009
for Good Reason, then (A) Executive shall be entitled to receive base salary,
incentive cash compensation (determined on a pro-rated basis as to the year in
which the Termination Date occurs), pay for accrued but unused paid time off,
and reimbursement for expenses pursuant to Section 13 hereof through the
Termination Date plus a lump sum equal to twelve (12) months of the Executive's
specified base salary hereunder at the rate in effect on the Termination Date,
and (B) notwithstanding the vesting and exercisability provisions otherwise
applicable to Outstanding Options and the restrictions applicable to Outstanding
Restricted Shares, all of such options shall be fully vested and exercisable
upon such termination and shall remain exercisable as specified in the option
grant agreements, and all of such restricted shares shall thereon become
immediately and fully vested. Except to the extent that more time is required to
determine any of the incentive compensation amounts, the Company shall pay the
cash amounts provided for in this Section within thirty (30) days after the six
(6) month anniversary of the date of such termination (but no later than the end
of the calendar year in which such six (6) month anniversary occurs); provided,
however, that pay for

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<PAGE>

accrued but unused paid time off shall be paid as soon as practicable following
such termination, and that to the extent that Section 409A of the Internal
Revenue Code of 1986 and any guidance or regulations issued thereunder, as
amended, do not require the effectuation of the six (6) month delay described
above with respect to any other cash amounts provided for in this Section, the
Company shall pay such cash amounts within thirty (30) days after the date of
such termination (but no later than the end of the calendar year in which such
termination occurs). Notwithstanding the foregoing, the Company shall not be
required to pay any severance pay for any period following the Termination Date
if the Executive shall have materially violated the provisions of Section 18,
19, or 20 of this Agreement and such violation is not cured within thirty (30)
days following receipt of written notice from the Company containing a
description of the violation and a demand for immediate cure.

            (b) Subject to Section 21 hereof, if (A) the Executive voluntarily
terminates his employment prior to June 30, 2009 other than for Good Reason or
(B) the Executive's employment is terminated by the Company prior to June 30,
2009 for Cause, then the Executive shall be entitled to receive salary, pay for
accrued but unused paid time off, and reimbursement of expenses pursuant to
Section 13 hereof through the Termination Date only; vesting of Outstanding
Options and Outstanding Restricted Shares shall cease on such Termination Date;
any then un-vested Outstanding Options shall terminate (with the then-vested
Outstanding Options vested and exercisable as specified in the option grant
agreements). The Company shall pay the cash amounts provided for in this Section
within thirty (30) days after the six (6) month anniversary of the date of such
termination (but no later than the end of the calendar year in which such six
(6) month anniversary occurs); provided, however, that pay for accrued but
unused paid time off shall be paid as soon as practicable following such
termination, and that to the extent that Section 409A of the Internal Revenue
Code of 1986 and any guidance or regulations issued thereunder, as amended, do
not require the effectuation of the six (6) month delay described above with
respect to any other cash amounts provided for in this Section, the Company
shall pay such cash amounts within thirty (30) days after the date of such
termination (but no later than the end of the calendar year in which such
termination occurs).

            (c) Subject to Section 21 hereof, if the Executive's employment is
terminated prior to June 30, 2009 due to death or Disability, the Executive (or
his estate or legal representative as the case may be) shall be entitled to
receive (i) salary, reimbursement of expenses pursuant to Section 13 hereof, and
pay for any unused paid time off accrued through the Termination Date; (ii) a
pro-rated amount of incentive cash compensation for the fiscal year in which the
Termination Date occurs; and (iii) a lump sum equal to base salary at the rate
in effect on the date of such termination for the lesser of (a) twelve (12)
months and (b) the remaining term of this Agreement at the time of such
termination. In such case, vesting of the Outstanding Options and Outstanding
Restricted Shares shall cease on such Termination Date, and any then un-vested
Outstanding Options shall terminate (with the then-vested Outstanding Options
vested and exercisable as specified in the option grant agreements). Except to
the extent that more time is required to determine any of the incentive
compensation amounts, the Company shall pay the cash amounts provided for in
this Section on the thirtieth (30th) day following the Executive's death, or if
termination is due to Disability, within thirty (30) days after the six (6)
month anniversary of the date of such termination (but no later than the end of
the calendar year in which such six (6) month anniversary occurs); provided,
however, that to the extent that Section 409A of the Internal Revenue Code of
1986 and any guidance or regulations

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<PAGE>

issued thereunder, as amended, do not require the effectuation of the six (6)
month delay described above with respect to any cash amounts provided for in
this Section upon termination due to Disability, the Company shall pay such cash
amounts within thirty (30) days after the date of such termination (but no later
than the end of the calendar year in which such termination occurs).

            (d) In addition to the provisions of Section 12(a), 12(b), or 12(c),
hereof, as the case may be, to the extent COBRA shall be applicable or as
provided by law, the Executive shall be entitled to continuation of group health
plan benefits for the periods provided by law following the Termination Date if
the Executive makes the appropriate election and payments; provided, further,
that if the Executive is entitled to severance under Section 12(a) hereof, and
the Executive elects COBRA coverage under a group health plan maintained by the
Company, the Company shall continue to contribute towards the cost of such
coverage for the Executive and his dependents for the six (6) month period
following his Termination Date, at the same rate which was in effect upon the
date of such termination of employment.

            (e) Subject to Section 21 hereof, the Executive acknowledges that,
upon termination of his employment, he is entitled to no other compensation,
severance or other benefits other than those specifically set forth or referred
to in this Agreement.

      13. Expenses. The Company shall pay or reimburse the Executive for all
expenses that are reasonably incurred by him in furtherance of his duties
hereunder and such further expenses as may be authorized and approved by the
Company from time to time.

      14. Facilities and Services. The Company shall furnish the Executive with
office space, secretarial and support staff, and such other facilities and
services as shall be reasonably necessary for the performance of his duties
under this Agreement.

      15. Mitigation Not Required. In the event this Agreement is terminated,
the Executive shall not be required to mitigate his losses or the amounts
otherwise payable hereunder by seeking other employment or otherwise. The
Executive's acceptance of any other employment shall not diminish or impair the
amounts otherwise payable to the Executive hereunder.

      16. Place of Performance. The Executive shall perform his duties at the
main offices of the Company subject to reasonable travel requirements which may
be authorized and directed from time to time by the Chief Executive Officer.

      17. Insurance and Indemnity. With respect to his service hereunder, the
Company shall maintain, at its expense, customary directors' and officers'
liability and errors and omissions insurance covering the Executive and, if such
coverage is available at reasonable cost, for all other executive officers and
directors of the Company, in an amount both deemed appropriate by the Company
and available in the marketplace. To the extent such defense and indemnification
are not fully and irrevocably provided by Company-supplied insurance, the
Company shall defend and indemnify the Executive, to the fullest extent
permitted by law, from and against any liability asserted against or incurred by
the Executive (a) by reason of the fact that the Executive is or was an officer,
director, employee, or consultant of the Company or any

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<PAGE>

affiliate or related party or is or was serving in any capacity at the request
of the Company for any other corporation, partnership, joint venture, trust,
employment benefit plan or other entity or enterprise or (b) in connection with
any action(s), omission(s), or occurrence(s) during the course of such service
or such status as an officer, director, employee, or consultant of or to any of
the foregoing. The Company's obligations under this Section 17 shall survive the
termination of the Executive's employment hereunder and any termination of this
Agreement.

      18. Non-Competition.

            (a) The Executive agrees that, except in accordance with his duties
under this Agreement on behalf of the Company, he will not during the Employment
Period: participate in, be employed in any capacity by, serve as director,
consultant, agent or representative for, or have an interest, directly or
indirectly in, any enterprise which is engaged in the business of developing,
licensing, or selling technology, products or services which are directly
competitive with the Business of the Company or any of its Subsidiaries or with
any technology, products or services being actively developed, with the bona
fide intent to market same, by the Company or any of its Subsidiaries at the
time in question; provided, however, that interests in publicly-traded entities
that constitute less than a five percent (5%) interest in such entities, and do
not otherwise constitute control either directly or indirectly of such entities,
which interests were acquired or are held for investment purposes, shall not be
deemed to be a violation of this paragraph.

            (b) In addition, the Executive agrees that, for a period of six (6)
months after the end of the Executive's employment by the Company (unless such
employment is terminated due to a breach of the terms hereof by the Company in
failing to pay to the Executive all sums due him under the terms hereof or to
honor any of its other obligations under this Agreement, in which event the
following shall be inapplicable), the Executive shall not (1) own, either
directly or indirectly or through or in conjunction with one or more members of
his or his spouse's family or through any trust or other contractual
arrangement, a greater than five percent (5%) interest in, or otherwise control
either directly or indirectly, or (2) participate in, be employed in any
capacity by, or serve as director, consultant, agent or representative for, any
partnership, corporation, or other entity which is engaged in the business of
developing, licensing, or selling technology, products or services which are
directly competitive with the Business of the Company or any of its Subsidiaries
as of the termination of the Executive's employment with the Company or which
are directly competitive with any technology, products, or services being
actively developed by the Company or any of its Subsidiaries, with the bona fide
intent to market same, as of the termination of the Executive's employment at
the Company; provided, however, that employment or service as a consultant,
agent or representative shall not be subject to the foregoing limitation in this
Section 18(b) to the extent that such employment or service would not be
directly competitive with and/or adverse to the Business of the Company or any
of its Subsidiaries or with and to any products or services being offered by the
Company or any of its Subsidiaries at the date such employment terminated or
then being actively developed, with the bona fide intent to market same, by the
Company or any of its Subsidiaries.

            (c) Executive further agrees, for twelve (12) months following the
end of the Executive's employment by the Company (unless such employment is
terminated due to a breach of the terms hereof by the Company as described in
Section 12(b) above), to refrain from directly or indirectly soliciting or
hiring the Company's collaborative partners, consultants,

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certified research organizations, principal vendors, licensees or employees
except any such solicitation in connection with activities that would not be
directly competitive with and/or adverse to the Business of the Company or any
of its Subsidiaries or with and to any products or services being offered by the
Company or any of its Subsidiaries at the date such employment terminated or
then being actively developed, with the bona fide intent to market same, by the
Company or any of its Subsidiaries.

            (d) Executive further agrees, while employed by the Company and for
twelve (12) months following the end of the Executive's employment by the
Company (unless such employment is terminated due to a breach of the terms
hereof by the Company as described in Section 12(b) above), that he will not,
directly or indirectly, as a sole proprietor, member of a partnership or as a
stockholder, investor, officer or director of a corporation, or as an employee,
agent, associate or consultant of any person, firm or corporation, other than
for the exclusive benefit of the Company or any of its Subsidiaries, solicit or
accept business from, or perform or supervise the performance of any services
related to such business for, (i) any client of the Company or any of its
Subsidiaries who was a client during the Executive's employment with the
Company, (ii) any clients or prospective clients of the Company or any of its
Subsidiaries who were solicited or serviced, directly or indirectly, by the
Executive, in whole or in part, or (iii) any former client of the Company or any
of its Subsidiaries who was a client within one (1) year prior to the
Executive's termination of employment and who was solicited or serviced,
directly or indirectly, by the Executive, or by those supervised, directly or
indirectly, by the Executive, in whole or in part, in connection with activities
that would be directly competitive with and/or adverse to the Business of the
Company or any of its Subsidiaries or with and to any products or services being
offered by the Company or any of its Subsidiaries at the date such employment
terminated or then being actively developed, with the bona fide intent to market
same, by the Company or any of its Subsidiaries.

            (e) The Executive hereby agrees that damages and any other remedy
available at law would be inadequate to redress or remedy any loss or damage
suffered by the Company upon any breach of the terms of this Section 18 by the
Executive, and the Executive therefore agrees that the Company, in addition to
recovering on any claim for damages or obtaining any other remedy available at
law, also may enforce the terms of this Section 18 by injunction or specific
performance, and may obtain any other appropriate remedy available in equity.

      19. Assignment of Patents. Executive shall disclose fully to the Company
any and all discoveries he shall make and any and all ideas, concepts or
inventions he shall conceive or make that are related or applicable to the
Business of the Company or of any of its Subsidiaries or to any other products,
services, or technology in medicine or the health sciences in which the Company
shall during the Employment Period undertake, or actively and in good faith
consider, research or commercial involvement; provided, however, that either (a)
such discovery(ies), idea(s), concept(s) and/or invention(s) are made by the
Executive during the Employment Period or (b) such discovery(ies), idea(s),
concept(s) and/or invention(s) are made by the Executive during the period of
six (6) months after his employment terminates and are in whole or in part the
result of his work with the Company. Such disclosure is to be made promptly
after each such discovery or conception, and each such discovery, idea, concept
or invention will become and remain the property of the Company, whether or not
patent applications are filed thereon. Upon the request and at the expense of
the Company, the Executive shall (i) make application through

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the patent solicitors of the Company for letters patent of the United States and
any and all other countries at the discretion of the Company on such
discoveries, ideas and inventions, and (ii) assign all such applications to the
Company, or at its order, without additional payment by the Company except as
otherwise agreed by the Company and the Executive. The Executive shall give the
Company, its attorneys and solicitors, reasonable assistance in preparing and
prosecuting such applications and, on request of the Company, execute such
papers and do such things as shall be reasonably necessary to protect the rights
of the Company and vest in it or its assigns the discoveries, ideas or
inventions, applications and letters patent herein contemplated. Said
cooperation shall also include such actions as are reasonably necessary to aid
the Company in the defense of its rights in the event of litigation. This
Section 19 shall not apply to any invention for which no equipment, supplies,
facilities, or trade secret information of the Company or its Subsidiaries was
used, and which was developed entirely on the Executive's own time, unless (i)
the invention relates directly to the Business of the Company or of any of its
Subsidiaries or to the actual or demonstrably anticipated research or
development of the Company or of any of its Subsidiaries, or (ii) the invention
results from any work performed by the Executive for the Company.

      20. Trade Secrets.

            (a) In the course of the term of this Agreement, it is anticipated
that the Executive shall have access to secret or confidential technical,
scientific and commercial information, records, data, formulations,
specifications, systems, methods, plans, policies, inventions, material and
other knowledge that is (are) specifically related or applicable to the Business
of the Company or of any of its Subsidiaries or to any other products, services,
or technology in medicine or the health sciences in which the Company shall
during the Employment Period undertake, or actively and in good faith consider,
research or commercial involvement and that is/are owned by the Company or its
Subsidiaries ("Confidential Material"). The Executive recognizes and
acknowledges that included within the Confidential Material are the following as
they may specifically relate or be applicable to the Company's drug delivery
business or technology, or to current or specifically contemplated future drug
delivery products or services: the Company's confidential commercial
information, technology, formulations, STA-T (Systemic Transnasal Absorption
Technology) and know-how, methods of manufacture, chemical formulations, device
designs, pending patent applications, clinical data, pre-clinical data and any
related materials, all as they may exist from time to time, and that such
material is or may be valuable special, and unique aspects of the Company's
business. All such Confidential Material shall be and remain the property of the
Company. Except as required by his duties to the Company, the Executive shall
not, directly or indirectly, either during the term of his employment or at any
time thereafter, disclose or disseminate to anyone or make use of, for any
purpose whatsoever, any Confidential Material. Upon termination of his
employment, the Executive shall promptly deliver to the Company all Confidential
Material (including all copies thereof, whether prepared by the Executive or
others) which are in the possession or under the control of the Executive. The
Executive shall not be deemed to have breached this Section 20 if the Executive
is compelled by legal process or order of any judicial, legislative, or
administrative authority or body to disclose any Confidential Material.

            (b) The Executive hereby agrees that damages and any other remedy
available at law would be inadequate to redress or remedy any loss or damage
suffered by the Company upon

                                       9
<PAGE>

any breach of the terms of this Section 20 by the Executive, and the Executive
therefore agrees that the Company, in addition to recovering on any claim for
damages or obtaining any other remedy available at law, also may enforce the
terms of this Section 20 by injunction or specific performance, and may obtain
any other appropriate remedy available in equity.

      21. Payment and Other Provisions After Change of Control.

            (a) In the event the Executive's employment with the Company is
terminated either by the Company or by the Executive (other than because of the
Executive's death or Disability) following the occurrence of a Change of Control
(regardless of whether such termination is for Good Reason or for Cause or
otherwise) and the date of such termination is prior to June 30, 2009 and within
one (1) year following the occurrence of such Change of Control, then the
Executive shall be entitled to receive from the Company, in lieu of the
severance payment otherwise payable pursuant to Section 12 hereof, salary,
expense reimbursement, and pay for unused paid time off through the termination
date and, in addition, the following:

                  (i) Additional Amount Based on Base Salary. A lump-sum amount
equal to the greater of: (a) twelve (12) months of Executive's specified base
salary hereunder, and (b) the balance of Executive's specified base salary
hereunder to the end of the term of this Agreement;

                  (ii) Incentive Cash Compensation. The amount of the
Executive's incentive cash compensation for the fiscal year in which the date of
termination occurs (determined on a pro-rated basis) plus an additional lump-sum
amount equal to forty percent (40%) of the Executive's base salary for such
year; and

                  (iii) Other Benefits. Notwithstanding the vesting and/or
exerciseability provisions otherwise applicable to Outstanding Options and the
vesting and restriction provisions applicable to Outstanding Restricted Shares,
all such stock options shall be fully vested and exercisable, and all such
restricted shares shall be fully vested, upon a Change of Control and, in the
case of the options, shall remain exercisable as specified in the option grant
agreements, and subject to the right of the Company to direct the sale of shares
in connection with a Change of Control.

Except to the extent that more time is required to determine the incentive cash
compensation payable pursuant to Section 21(a)(ii) hereof, the Company shall pay
the cash amounts provided for in this Section 21(a) within thirty (30) days
after the six (6) month anniversary of the date of such termination (but no
later than the end of the calendar year in which such six (6) month anniversary
occurs).

            (b) For purposes of this Agreement, the term "Change of Control"
shall mean:

                  (i) The acquisition by any individual, entity or group (within
the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934,
as amended (the "Exchange Act") or any successor provision) (any of the
foregoing hereafter a "Person") of forty percent (40%) or more of either (a) the
then outstanding shares of Capital Stock of the Company

                                       10
<PAGE>

(the "Outstanding Capital Stock") or (b) the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in the
election of directors (the "Voting Securities"), provided, however, that such an
acquisition by one of the following shall not constitute a change of control:
(1) the Company or any of its Subsidiaries, or any employee benefit plan (or
related trust) sponsored or maintained by the Company or any of its Subsidiaries
or (2) any Person that is eligible, pursuant to Rule 13d-1(b) under the Exchange
Act, to file a statement on Schedule 13G with respect to its beneficial
ownership of Voting Securities, whether or not such Person shall have filed a
statement on Schedule 13G, unless such Person shall have filed a statement on
Schedule 13D with respect to beneficial ownership of forty percent (40%) or more
of the Voting Securities or (3) any corporation with respect to which, following
such acquisition, more than sixty percent (60%) of both the then outstanding
shares of common stock of such corporation and the combined voting power of the
then outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding Capital Stock or Voting
Securities immediately prior to such acquisition in substantially the same
proportions as their ownership, immediately prior to such acquisition, of the
Outstanding Capital Stock or Voting Securities, as the case may be; or

                  (ii) Individuals who, as of the Effective Date, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board and Dr. Steven C. Quay ceases to be the Chief Executive
Officer of the Company, provided that any individual becoming a director
subsequent to the Effective Date whose election or nomination for election by
the Company's shareholders was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of the
Directors of the Company (as such terms are used in Rule 14a-11 of Regulation
14A, or any successor section, promulgated under the Exchange Act); or

                  (iii) Approval by the shareholders of the Company of a
reorganization, merger or consolidation (a "Business Combination"), in each
case, with respect to which all or substantially all holders of the Outstanding
Capital Stock and Voting Securities immediately prior to such Business
Combination do not, following such Business Combination, beneficially own,
directly of indirectly, in substantially the same proportions, more than sixty
percent (60%) of, respectively, the then outstanding shares of common stock and
the combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may be, of the
corporation resulting from the Business Combination; or

                  (iv) A complete liquidation or dissolution of the Company; or

                  (v) A sale or other disposition of all or substantially all of
the assets of the Company other than to a corporation with respect to which,
following such sale or disposition, more than sixty percent (60%) of the then
outstanding shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors are then owned beneficially, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Capital

                                       11
<PAGE>

Stock or Voting Securities Immediately prior to such sale or disposition in
substantially the same proportions as their ownership of the Outstanding Capital
Stock and Voting Securities, as the case may be, immediately prior to such sale
or disposition.

      22. Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and personally delivered (including
by regular messenger service, signature required) or sent by registered or
certified mail, return receipt requested, to both his office and his residence,
in the case of notices directed to the Executive, or to its principal office,
Attn.: Chief Executive Officer, in the case of notices directed to the Company,
or to such other address and/or addressee as the party to whom such notice is
directed shall have designated for this purpose by notice to the other in
accordance with this Section. Such notices shall be effective upon personal
delivery or three (3) days after mailing.

      23. Entire Agreement; Waiver. This Agreement contains the entire
understanding of the parties with respect to the subject matter hereof (it being
acknowledged, however, that the Company and the Executive have entered and may
enter into certain grant agreements relating to Outstanding Options and
Outstanding Restricted Shares, which shall be effective in accordance with the
terms thereof to the extent consistent with the terms of this Agreement). This
Agreement may not be changed orally but only by an instrument in writing, signed
by the party against whom enforcement of any waiver, change, modification or
discharge is sought. Waiver of or failure to exercise any rights provided by
this Agreement in any respect shall not be deemed a waiver of any further or
future rights.

      24. Binding Effect; Assignment. The rights and obligations of this
Agreement shall bind and inure to the benefit of any successor of the Company by
reorganization, merger or consolidation, or any transferee of all or
substantially all of the Company's business or properties. The Executive's
rights hereunder are personal to and shall not be transferable nor assignable by
the Executive.

      25. Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.

      26. Governing Law; Arbitration. This agreement shall be construed in
accordance with and governed for all purposes by the laws of the State of
Washington applicable to contracts made and to be performed wholly within such
state. Except as otherwise provided in Sections 18(e) and 20(b) of this
Agreement, any dispute or controversy arising out of or relating to this
Agreement shall be settled by arbitration in accordance with the rules of the
American Arbitration Association, and judgement upon the award may be entered in
any court having jurisdiction thereover. The arbitration shall be held in King
County, Washington or in such other place as the parties hereto may agree.

      27. Further Assurances. Each of the parties agrees to execute,
acknowledge, deliver and perform, and cause to be executed, acknowledged,
delivered and performed, at any time and from time to time, all such further
acts, deeds, assignments, transfers, conveyances, powers of attorney and/or
assurances as may be necessary or proper to carry out the provisions or intent
of this Agreement.

                                       12
<PAGE>

      28. Severability. The parties agree that if any one or more of the terms,
provisions, covenants or restrictions of this Agreement shall be determined by a
court of competent jurisdiction to be invalid, void, or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated.

      29. Counterparts. This Agreement may be executed in several counterparts,
and all counterparts so executed shall constitute one agreement, binding on the
parties hereto, notwithstanding that both parties are not signatory to the
original or the same counterpart.

      IN WITNESS WHEREOF, NASTECH PHARMACEUTICAL COMPANY INC. has caused this
instrument to be signed by a duly authorized officer and the Executive has
hereunto set his hand as of the day and year first above written.

      COMPANY:       NASTECH PHARMACEUTICAL COMPANY INC.

                     By:  /s/ Steven C. Quay, M.D., Ph. D.
                          --------------------------------
                          Name:  Steven C. Quay, M.D., Ph.D.
                          Title: Chief Executive Officer

      EXECUTIVE:          /s/ Gordon C. Brandt, M.D.
                          --------------------------------
                          Name:  Gordon C. Brandt, M.D.
                          Title: Executive Vice President of Clinical Research &
                          Medical Affairs

                                       13

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