Document:

exv10w47

Exhibit 10.47

EMPLOYMENT AGREEMENT

     This EMPLOYMENT AGREEMENT (“Agreement”), effective as of January 1, 2009, is by and
between EntreMed, Inc., a Delaware corporation having its principal office at 9640 Medical Center
Drive, Rockville, MD 20850 (the “Company”) and Mark R. Bray (the “Executive”).

     FOR AND IN CONSIDERATION of the mutual premises, agreements and covenants contained herein,
the parties hereto, intending to be legally bound, do hereby agree as follows:

1. Employment; Position and Duties.

Subject to the terms hereof, the Company hereby agrees to employ Executive during the Term (as
hereafter defined) to act as, and to exercise all of the powers and functions of its Vice
President, Research, and to perform such acts and duties and to generally furnish such services to
the Company and its subsidiaries (if any) as is customary for a senior management person with a
similar position in like companies. Among other things, and subject to change at the discretion of
the Executive Committee of the Board of Directors (the “Board”), the Executive shall be
responsible for leading the research support for the Company’s clinical activities, including drug
candidate trials for ENMD 2076. Executive shall report directly to the Executive Committee of the
Board or such other senior officers of the Company as designated from time to time by the Executive
Committee, and have such other powers, duties and responsibilities as the Executive Committee shall
from time to time reasonably prescribe. Executive will be a member of the Company’s Senior
Management Team and Business Development Team. Executive hereby agrees to accept such employment
and shall perform and discharge faithfully, diligently, and to the best of his abilities such
duties and responsibilities and shall devote sufficient working time and efforts to the business
and affairs of the Company and its subsidiaries.

2. Place of Employment.

While Executive is employed by the Company during the Term, Executive shall conduct his duties and
responsibilities hereunder primarily from the Company’s offices located in Toronto, Canada (except
for routine and customary business travel), or from such other location in the Toronto, Canada
metropolitan area as designated from time to time by the Executive Committee. Executive shall
travel to the Company’s Rockville, Maryland offices for business matters from time to time, as
determined by Executive or as requested.

3. Compensation

     a. Base Salary. While the Company employs the Executive during the Term, the Company
shall pay to Executive an annual base salary (“Base Salary”) of no less than USD$200,000,
payable in accordance with the Company’s customary payroll policy for its Canadian employees. Such
Base Salary shall be paid to Executive in Canadian Dollars, based upon the exchange rate of
Canadian Dollars to United States Dollars in effect on January 1, 2009.

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     b. Base Salary Adjustments. Executive’s Base Salary shall be reviewed at least
annually in accordance with the Company’s customary practices for its executives. The Board or a
committee thereof may make such adjustments, as it deems appropriate in its sole discretion;
provided, however, in no event shall the Company pay Executive a Base Salary of less than
USD$200,000, unless the change to Executive’s Base Salary was applicable to the annual base salary
of all senior executives of the Company in substantially the same manner.

     c. Incentive Compensation. While the Company employs Executive during the Term,
Executive’s annual incentive compensation (“Incentive Compensation”) shall be targeted at
25% of base compensation, the exact amount of which shall be determined by the Board or a committee
thereof in its sole discretion. Executive shall be eligible for Incentive Compensation commencing
at the start of the Initial Term. Such bonus, if any, shall be paid within ninety (90) days
following the last day of each fiscal year of the Company.

     d. Certain Other Benefits. Throughout the Term, Executive shall be entitled to
participate in any and all employee benefit plans and arrangements which are available to senior
executive officers of the Company, including without limitation, group medical, disability and life
insurance plans, and Company’s Directors and Officers (D&O) insurance policy. Executive shall also
be afforded no fewer than twenty-three (23) days paid time off (PTO) pursuant to policies fixed by
the Company.

     e. Expenses. The Company shall pay or reimburse Executive for all reasonable business
expenses actually paid or incurred by Executive while Executive is employed by the Company during
the Term subject to reasonable documentation and in accordance with the Company’s business expense
reimbursement policy.

4. Term.

The term of this Agreement shall be the period commencing on January 1, 2009 and continuing for one
year (the “Initial Term”); provided, however, that the Term of this Agreement shall be
extended automatically for successive one year periods (each one-year extension a “Successor
Term” and together with the Initial Term referred to herein as the “Term”) unless
written notice of nonextension is provided by either party to the other party at least sixty (60)
days prior to the end of the Initial Term or any Successor Term. In the event that this Agreement
is not extended at the end of the Initial Term or any Successor Term and thereby terminates, only
paragraphs 6, 7, 8(d), 8(g), 8(h), 8(i) and 11 shall survive such termination, except that
Executive shall be entitled to receive compensation and benefits to the extent expressly provided
herein or by the terms of any of the Company’s compensation and benefit plans, programs or policies
or as required by applicable law.

5. Stock Options.

On January 27, 2009, the Company granted stock options to Executive covering 140,000 shares of
common stock with a per share exercise price equal to the closing price of the Company’s stock on
the date of grant. Such options will vest as to 25% of the covered shares on the date of grant,
and shall vest as to the remaining covered shares in cumulative 25% share increments on each of the
first, second, and third anniversary of the date of grant, if Executive is then employed by the
Company. Other periodic stock and incentive stock option grants to Executive, if any, while the
Company employs Executive during the Term shall be determined by the Board or a committee thereof
in its discretion.

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In the event of a termination pursuant to paragraph 8(d) hereof or a
resignation pursuant to paragraph 9 hereof, for which purposes sections 10(a) and
10(c) of this Agreement shall control, all vested options held by Executive on the effective date
of such termination or resignation shall be exercisable in accordance with the terms of such grants
until the later of the date set forth in such grant or twelve (12) months following Executive’s
date of termination, but in no event beyond the expiration date of the relevant option. Upon a
change in control, as defined in the option agreement, all unvested options shall vest and become
exercisable immediately in accordance with the terms of the option agreement. Except as set
forth herein, the terms of the stock option grants under this paragraph 5 shall be otherwise in
accordance with and subject to the terms of the Company’s 2001 Long Term Incentive Plan or
successor plan and such terms and conditions as the Board or a committee thereof may specify.

6. Unauthorized Disclosure.

During the Term and at all times thereafter, Executive shall not, without the written consent of
the Company, or except as required by applicable law, disclose to any person, other than a person
to whom disclosure is reasonably necessary or appropriate in connection with the performance by
Executive of his duties as an executive officer of the Company, any material confidential
information obtained by Executive while in the employ of the Company with respect to the businesses
of the Company or any of its subsidiaries, including but not limited to, operations, pricing,
contractual or personnel data, products, discoveries, improvements, trade secrets, license
agreements, marketing information, suppliers, dealers, principles, customers, or methods of
distribution, or any other confidential information the disclosure of which Executive knows, or in
the exercise of reasonable care should know, will be damaging to the Company; provided, however,
that confidential information shall not include any information known generally to the public or to
persons in the industry of which the Company’s business is a part (in each case, other than as a
result of unauthorized disclosure by Executive) or any information otherwise considered by the
Company not to be confidential.

7. Indemnification. 

     a. The Company shall defend, indemnify and hold harmless Executive if he is made a party, or
threatened to be made a party, to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative, or investigative (a “Proceeding”), because he is
or was an officer or director of the Company or any of its subsidiaries, affiliates, or successors,
or because he is or was serving in a fiduciary capacity with respect to employee benefit plans of
the Company, whether or not the basis of such Proceeding is alleged action in an official capacity
or otherwise, against all Expenses incurred or suffered by him in connection with such Proceeding
to the fullest extent authorized by the General Corporation Law of the State of Delaware and any
other applicable law in effect from time to time, and such indemnification shall continue as to
Executive even if he ceases to be an officer or director or is no longer employed by the Company,
and shall inure to the benefit of Executive’s heirs, executors and administrators.

     b. As used in this Agreement, the term “Expenses” shall include, without limitation, damages,
losses, judgments, liabilities, fines, penalties, excise taxes, settlements and reasonable costs,
reasonable attorneys’ fees, reasonable accountants’ fees, and reasonable disbursements and costs of
attachment or similar bonds, investigations, and any reasonable expenses of establishing a right to
indemnification under this Agreement.

     c. Expenses incurred by Executive in connection with any Proceeding shall be paid by the
Company upon presentation of appropriate documentation and a giving by Executive of
any undertakings required by applicable law.

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8. Termination.

     a. Upon Death. If Executive dies while employed by the Company during the Term, his
estate shall be entitled to receive payment of Base Salary through the last day of the six (6)
months following the month in which his death occurred, payable over six (6) months at the
Company’s normal pay periods. If, in respect of the fiscal year in which Executive dies the Board
or a committee thereof determines in its discretion that he would otherwise have been entitled to
receive Incentive Compensation under subparagraph 3(c) by reason of the operations of the Company
during such fiscal year, Executive’s estate shall be entitled to receive a pro rata portion of his
Incentive Compensation for such fiscal year. Such pro rata portion shall equal the product of (x)
the full amount of such Incentive Compensation, and (y) a fraction, the numerator of which is the
number of days in the fiscal year of Executive’s death prior to the date of death, and the
denominator of which is the total number of days in such fiscal year.

     b. Termination Upon Disability. The Company may terminate Executive’s employment
hereunder during the Term at the end of any calendar month in the event of his Disability by giving
to Executive written notice of termination. In the event of any such termination pursuant to this
subparagraph 8(b), Executive shall be entitled to receive his Base Salary, payable in accordance
with the Company’s customary payroll policy for it executives, through the last day of the six (6)
months following the month in which the date of termination occurred. If in respect of the fiscal
year in which Executive’s employment terminates pursuant to this subparagraph 8(b) the Board or a
committee thereof determines in its discretion that he would otherwise have been entitled to
receive Incentive Compensation under subparagraph 3(c) by reason of the operations of the Company
during such fiscal year, Executive shall be entitled to receive a pro rata portion of his Incentive
Compensation for such year. Such pro rata portion shall equal the product of (x) the full amount
of such Incentive Compensation, and (y) a fraction, the numerator of which is the number of days in
the fiscal year of Executive’s termination on account of Disability prior to the date of
termination, and the denominator of which is the total number of days in such fiscal year.

     c. Termination for Cause. The Company may terminate Executive’s employment hereunder
at any time during the Term for Cause by giving to Executive written notice of termination that
specifies the reasons for and date of termination, subject to the terms of sub-paragraph 10(a)
hereunder. Upon any such termination for Cause under this subparagraph 8(c), the Company shall pay
to Executive Base Salary through the date of termination, including the benefits provided at
paragraph 3(d), and the Company shall have no further obligations under this Agreement.

     d. Termination Without Cause. The Company may terminate Executive’s employment with
the Company at any time during the Term, for any reason and without Cause, by giving him written
notice thirty (30) days prior to the date of termination. Until the effective date of any such
termination, the Company shall continue to pay to Executive the full compensation specified in this
Agreement, including the benefits provided at paragraph 3(d). Following the date of termination,
Executive shall make himself reasonably available to members of the Board and other senior managers
and officers of the Company to assist in the transition of responsibilities and information to
others and to facilitate the orderly conduct of business operations. Upon termination, the Company
shall have no other financial obligations to Executive under any compensation or benefit plan,
program or policy and Executive’s participation in the Company’s compensation and benefit plans,
programs and policies shall cease as of the date of
Executive’s termination except as set forth herein or as expressly provided under the terms of any
such plans, programs or policies, or as required by applicable law.

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However, in addition to the
above, if Executive is terminated (i) pursuant to this subparagraph 8(d) or (ii) the Term is not
extended in accordance with Section 4 and for any reason other than Cause, the Company shall (i)
pay Executive a severance amount equal to six (6) months Base Salary over the following six (6)
months at the Company’s normal pay periods, and (ii) provide Executive coverage under the Company’s
health insurance program, under the same terms as are available to other senior executive officers
of the Company, for a period of six (6) months, after which Executive would be eligible for COBRA
continuation coverage, or until he has obtained substantially equivalent new coverage, as
determined by the Board or a committee thereof in its discretion, through successor employment,
whichever occurs sooner. If, in respect of the fiscal year in which Executive’s employment
terminates pursuant to this subparagraph 8(d), the Board or a committee thereof determines in its
discretion that he would otherwise have been entitled to receive Incentive Compensation under
subparagraph 3(c) by reason of the operations of the Company during such fiscal year, Executive
shall be entitled to receive a pro rata portion of his Incentive Compensation for such year. Such
pro rata portion shall equal the product of (x) the full amount of such Incentive Compensation, and
(y) a fraction, the numerator of which is the number of days in the fiscal year of Executive’s
termination without Cause prior to the date of termination, and the denominator of which is the
total number of days in such fiscal year.

     e. Resignation for Other than Good Reason. Executive may voluntarily terminate his
employment with the Company during the Term for any reason upon at least thirty (30) days prior
written notice, which specifies the effective date of termination. Until the effective date of
such termination, the Company shall continue to pay his the full compensation specified in this
Agreement, including the benefits provided at paragraph 3(d), provided he continues to perform his
duties during this period. Thereafter, the Company shall have no further obligations to him under
this Agreement. This subparagraph 8(e) shall not apply to Executive’s resignation for Good Reason
pursuant to paragraph 9 hereof.

     f. No Mitigation. The parties hereto acknowledge and agree that, in the event
Executive’s employment with the Company is terminated pursuant to this paragraph 8, he shall not be
required to mitigate his damages by affirmatively seeking other employment. Further, except as
provided in subparagraph 8(d)(ii) above, the amount of any payment or benefit provided for in this
Agreement shall not be reduced by any compensation earned by him or benefit provided to him as the
result of employment by another employer or otherwise.

     g. Non-Competition. For the period of two and a half months after termination of
employment with the Company, Executive shall not, as an individual, principal, agent, employee,
consultant or otherwise, directly or indirectly, or with respect to any company or entity with
which the Company has concluded partnership, licensing, joint research and development or other
similar business agreements during his employment with the Company, render any services to any firm
or company or any division or subsidiary of any firm or company, engaged in the development or
commercialization of compounds, analogs or derivatives of those compounds that (a) are of a similar
type, that is, small molecules, (for example, but not limited to, small peptidomimetic molecules),
(b) have more than one mechanism of action and cellular pathway in common with; and (c) are within
the same field (i.e. oncology or inflammation) as, those being developed and or
commercialized by the Company during the Term (“Competing Company”). In addition, for an
additional period of six (6) months after the two and half-month period set forth above and subject
to Section 6 hereof, Executive only may provide services to such a Competing Company if Executive
does not work on, or furnish confidential information regarding, any matter related to such
compounds defined above.

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     h. Non-Disparagement. During the Term and thereafter, Executive shall not communicate
negatively about or otherwise disparage the Company or its products or each and any of the released
parties described in subparagraph 8(i) in any way whatsoever except as may be required for truthful
sworn testimony or in connection with a legal or administrative proceeding, report, claim or
dispute. The Company, acting in its official capacity, shall not make any public false,
disparaging or derogatory statements in connection with or concerning Executive’s service to the
Company except as may be required for truthful sworn testimony or in connection with a legal or
administrative proceeding, report, claim or dispute. After termination, in the event Executive
materially breaches any of the conditions set forth herein or in any other paragraph of this
Agreement, the Company may discontinue the provision of any payment or benefits to him under this
Agreement, and in such event he shall forfeit his entitlement to any further termination payments
or benefits under this Agreement. After termination, in the event the Company materially breaches
any of the conditions set forth herein or in any other paragraph of this Agreement, the Executive
may pursue any remedies available to him at law.

     i. Release. In consideration of Executive’s receipt of severance benefits subject to
and in accordance with subparagraphs 8(b) and (d) and paragraph 9 of this Agreement, Executive
agrees that, upon his first receipt and acceptance of any such benefits, he shall have released and
forever discharged the Company, its subsidiaries and affiliates, successors and assigns,
predecessors and all of their respective officers, directors, employees and agents and employee
benefits plans from all claims, demands, liabilities and causes of action arising out of facts or
occurrences arising or occurring at any time up to and including the time of Executive’s
termination or resignation, whether known or unknown, and the parties hereto contemplate that this
release shall be broadly construed.

9. Resignation for Good Reason.

If Executive has Good Reason during the Term, Executive may resign at any time during the Term by
providing at least thirty (30) days prior written notice to the Company that specifies the reason
for, and the effective date of, his resignation. If Executive resigns during the Term for Good
Reason, such resignation shall be deemed a Termination without Cause under subparagraph 8(d) hereof
and Executive shall receive the compensation and benefits provided under subparagraph 8(d) hereof
as if he had been terminated without Cause.

10. Definitions.

     a. “Cause” shall mean Executive’s (i) habitual drunkenness or drug addiction, (ii) material
failure to perform and discharge his duties and responsibilities hereunder, (iii) misconduct that
is materially and significantly injurious to the Company, (iv) conviction of a felony involving the
personal dishonesty of Executive or moral turpitude, (v) conviction of any crime or offense
involving the property of the Company or (vi) material breach of Executive’s obligations under this
Agreement, provided, however, with regard to Section 10(a)(ii) and 10(a)(vi) above, the parties
exclude for this purpose an action not taken in bad faith that is remedied by Executive promptly
upon receipt of written notice thereof given to the Company.

     b. “Disability” shall mean the Executive’s incapacity due to physical or mental illness which
prevents the proper performance of Executive’s duties as set forth herein or established pursuant
hereto for ninety (90) days in any twelve (12) month period of the Term. A qualified independent
physician mutually selected by the Company and the Executive shall determine any questions as to
the existence or extent of illness or incapacity of Executive, upon which the Company and Executive
cannot agree.

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The determination of such physician certified in writing to the Company and to the Executive shall be final and conclusive for all purposes
of this Agreement. For purposes of the disability provisions of this Agreement, if the Executive
is unable to act on his own behalf due to incapacity, any person legally authorized to do so may
act on the Executive’s behalf.

     c. “Good Reason” shall mean the occurrence of any of the following events during the Term:
(A) the assignment to Executive of any duties inconsistent in any material respect with Executive’s
position, authority, duties or responsibilities as of the commencement of the Term or any other
action by the Company which results in a diminution in any material respect in such position,
duties or responsibilities, excluding for this purpose an isolated and inadvertent action not taken
in bad faith that is remedied by the Company promptly after receipt of written notice thereof given
by Executive; (B) a reduction by the Company in Executive’s annual Base Salary as in effect on the
date hereof or subsequently in effect hereunder, except as agreed to by Executive, unless such
change was applicable to all senior executives of the Company; (C) the failure by the Company to
continue to provide Executive with benefits substantially similar to those enjoyed by him under any
of the Company’s pension, life insurance, medical, health and accident, disability or other welfare
plans in which he was participating as of the commencement of the Term or subsequently in effect
hereunder, unless such change was applicable to all senior executives of the Company; (D) the
failure by the Company to pay to Executive any deferred compensation when due under any deferred
compensation plan or agreement applicable to him; (E) the failure by the Company to honor in any
material respect the terms and provisions of this Agreement; or (F) a requirement by the Company
that Executive conduct his duties and responsibilities from a permanent location more than fifty
(50) miles from the place of employment, as defined in paragraph 2 herein.

11. Miscellaneous.

     a. Assignments and Binding Effect. The respective rights and obligations of the
parties under this Agreement shall be binding upon the parties hereto and their heirs, executors,
administrators, successors, and assigns, including, in the case of the Company, any other
corporation or entity with which the Company may be merged or otherwise combined and, in the case
of Executive, his estate or other legal representatives.

     b. No Assignment of Benefits. Except as otherwise provided herein or by applicable
law, no right or interest of the Executive under this Agreement shall be assignable or
transferable, in whole or in part, either directly or by the operation of law or otherwise,
including without limitation execution, levy, garnishment, attachment, pledge or in any manner; no
attempted transfer thereof shall be effective.

     c. Governing Law. This Agreement shall be governed as to its validity, interpretation
and effect by the laws of the State of Maryland, without reference to its conflict of laws
provisions.

     d. Severability. In the event that any provision or portion of this Agreement shall
be determined to be invalid, illegal, or unenforceable for any reason, the remaining provisions and
portions of this Agreement shall remain in full force and effect to the fullest extent permitted by
law. Such invalid, illegal or unenforceable provision(s) shall be deemed modified to the extent
necessary to make it (them) valid, legal, and enforceable.

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     e. Withholding. All amounts payable hereunder shall be paid net of any applicable
withholding required under federal, state or local laws and any additional withholding to which
Executive has agreed.

     f. Entire Agreement; Amendments. This Agreement constitutes the entire Agreement and
understanding of the Company and Executive with respect to the terms of Executive’s employment with
the Company and supersedes all prior discussions, understandings and agreements with respect
thereto.

     g. Captions. All captions and headings used herein are for convenient reference only
and do not form part of this Agreement.

     h. Waiver. No provision of this Agreement may be modified, waived or discharged
unless such modification, waiver or discharge is agreed to in writing and signed by the Executive
and the Board or its delegate. The failure of the Company or the Executive to insist upon strict
compliance with the terms of this Agreement or the failure of the Company or the Executive to
assert any right the Company or the Executive may have hereunder shall not be deemed a waiver of
such provision or right or any other provision of this Agreement.

     f. Notice. Any notice or communication required or permitted under this Agreement
shall be made in writing and shall be delivered by hand, or mailed by registered or certified mail,
return receipt requested, first call postage prepaid, addressed as follows:

If to Executive:

Mark R. Bray

c/o EntreMed, Inc.

101 College Street

5-706

Toronto, Ontario

Canada, M5G1L7

If to the Company:

EntreMed, Inc.

9640 Medical Center Dive

Rockville, Maryland 20850

Attn.: General Counsel

With a copy to:

Arnold & Porter LLP

555 12th St., N.W.

Washington, D.C. 20004

Attn: Richard E. Baltz

     g. Counterparts. This Agreement may be executed in counterparts, each of which shall
constitute one and the same agreement.

[Remainder of this Page Intentionally Left Blank]

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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of January 1,
2009.

	 	 	 	 	 
	 	EXECUTIVE

 	 
	 	
 	 
	 	Mark R. Bray 	 
	 	 	 
	 
	 	ENTREMED, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Cynthia Wong Hu 	 
	 	 	Title:  	Chief Operating Officer, General Counsel & Secretary 	 
	 

9exv10w23

Exhibit 10.23

Vanda Pharmaceuticals Inc.

Amended and Restated Employment Agreement

          This Employment Agreement (this “Agreement”) was entered into as of February 10, 2005 by and
between Mihael H. Polymeropoulos (the “Employee”) and Vanda Pharmaceuticals Inc.,
a Delaware corporation (the “Company”). This Agreement is hereby amended and restated as of
November 4, 2008.

          1. Duties and Scope of Employment.

               (a) Position. For the term of his employment under this Agreement (“Employment”), the Company
agrees to employ the Employee in the position of Chief Executive Officer. The Employee shall be
subject to the supervision of, and shall have such authority as is delegated to him by, the board
of directors of the Company (the “Board”), consistent with his position as Chief Executive Officer.
The Employee hereby accepts such employment and agrees to undertake the duties and
responsibilities normally inherent in such position and such other duties and responsibilities as
the Board shall from time to time reasonably assign to him consistent with his position as Chief
Executive Officer.

               (b) Obligations to the Company. During the term of his Employment, the Employee shall devote
his full business efforts and time to the Company. During the term of his Employment, without the
prior written approval of the Board, the Employee shall not render services in any capacity to any
other person or entity and shall not act as a sole proprietor or partner of any other person or
entity or as a shareholder owning more than five percent of the stock of any other corporation.
The Employee shall comply with the Company’s policies and rules, as they may be in effect from time
to time during the term of his Employment.

               (c) No Conflicting Obligations. The Employee represents and warrants to the Company that he
is under no obligations or commitments, whether contractual or otherwise, that are inconsistent
with his obligations under this Agreement. The Employee represents and warrants that he will not
use or disclose, in connection with his employment by the Company, any trade secrets or other
proprietary information or intellectual property in which the Employee or any other person has any
right, title or interest and that his employment by the Company as contemplated by this Agreement
will not infringe or violate the rights of any other person or entity. The Employee represents and
warrants to the Company that he has returned all property and confidential information belonging to
any prior employers.

          2. Cash and Incentive Compensation.

               (a) Salary. The Company shall pay the Employee as compensation for his services a base salary
at a gross annual rate of not less than $362,250. Such salary shall be payable in accordance with
the Company’s standard payroll procedures. (The annual compensation specified in this
Subsection (a), together with any increases in such compensation

 

 

that the Company may grant from time to time, is referred to in this Agreement as “Base
Compensation.”)

               (b) Incentive Bonuses. The Employee shall be eligible to be considered for an annual
incentive bonus with a target amount equal to 40% of his Base Compensation (the “Annual Target
Bonus”). Such bonus (if any) shall be awarded based on objective or subjective criteria
established in advance by the Board. The determinations of the Board with respect to such bonus
shall be final and binding. Any incentive bonus for a fiscal year shall in no event be paid later
than 21/2 months after the close of such fiscal year.

               (c) Stock Options. Subject to the approval of the Board, the Company shall grant the Employee
an incentive stock option covering 918,400 shares of the Company’s Common Stock. Such option shall
be granted as soon as reasonably practicable after the date of this Agreement. The per-share
exercise price of such option shall be equal to the fair market value of one share of the Company’s
Common Stock on the date of grant. The term of such option shall be 10 years, subject to earlier
expiration in the event of the termination of the Employee’s Employment. The Employee shall vest
in 25% of the option shares after the first 12 months of continuous service and shall vest in the
remaining option shares in equal monthly installments over the next three years of continuous
service. The option shall accelerate and become vested with respect to 100% of the option shares
if, after a Change in Control, (i) the Employee’s Employment is terminated by the Company for
reasons other than Cause or (ii) the Employee’s Employment is terminated by the Employee for Good
Reason.1 The grant of such option shall be subject to the other terms and conditions
set forth in the Company’s stock plan governing the option, and the Company’s standard form of
stock option agreement.

          3. Vacation and Employee Benefits. During the term of his Employment, the Employee shall be
eligible for 25 paid vacation days each year in accordance with the Company’s standard policy for
similarly situated employees, as it may be amended from time to time. During the term of his
Employment, the Employee shall be eligible to participate in any employee benefit plans maintained
by the Company for similarly situated employees, subject in each case to the generally applicable
terms and conditions of the plan in question and to the determinations of any person or committee
administering such plan.

          4. Business Expenses. During the term of his Employment, the Employee shall be authorized to
incur necessary and reasonable travel, entertainment and other business expenses in connection with
his duties hereunder. The Company shall reimburse the Employee for such expenses upon presentation
of an itemized account and appropriate supporting documentation, all in accordance with the
Company’s generally applicable policies.

          5. Term of Employment.

               (a) Basic Rule. The Company agrees to continue the Employee’s Employment, and the Employee
agrees to remain in Employment with the Company, from the

 

			
	1	 	Certain capitalized terms are defined in Section 9.

2

 

date of this Agreement until the date when the Employee’s Employment terminates pursuant to
Subsection (b) or (c) below. The Employee’s Employment with the Company shall be “at will,”
meaning that either the Employee or the Company may terminate the Employee’s Employment at any
time, with or without cause. Any contrary representations which may have been made to the Employee
shall be superseded by this Agreement. This Agreement shall constitute the full and complete
agreement between the Employee and the Company on the “at will” nature of the Employee’s
Employment, which may only be changed in an express written agreement signed by the Employee and a
duly authorized officer of the Company.

               (b) Termination. The Company may terminate the Employee’s Employment at any time and for any
reason (or no reason), and with or without cause, by giving the Employee notice in writing. The
Employee may terminate his Employment by giving the Company 14 days’ advance notice in writing.
The Employee’s Employment shall terminate automatically in the event of his death.

               (c) Permanent Disability. The Company may terminate the Employee’s Employment due to
Permanent Disability by giving the Employee 30 days’ advance notice in writing. In the event that
the Employee satisfactorily resumes the performance of substantially all of his duties hereunder
before the termination of his Employment under this Subsection (c) becomes effective, the notice of
termination shall automatically be deemed to have been revoked.

               (d) Rights Upon Termination. Except as expressly provided in Section 6, upon the termination
of the Employee’s Employment pursuant to this Section 5, the Employee shall only be entitled to the
compensation, benefits and reimbursements described in Sections 2, 3 and 4 for the period preceding
the effective date of the termination. The payments under this Agreement shall fully discharge all
responsibilities of the Company to the Employee.

               (e) Termination of Agreement. This Agreement shall terminate when all obligations of the
parties hereunder have been satisfied. The termination of this Agreement shall not limit or
otherwise affect any of the Employee’s obligations under Section 7.

          6. Termination Benefits.

               (a) General Release. Any other provision of this Agreement notwithstanding, Subsections (b)
and (c) below shall not apply unless the Employee (i) has executed a general release (in a form
prescribed by the Company) of all known and unknown claims that he may then have against the
Company or persons affiliated with the Company and (ii) has agreed not to prosecute any legal
action or other proceeding based upon any of such claims. The Company shall deliver the form of
release to the Employee within 30 days after his Separation. The Employee shall execute the
release within the period set forth in the form.

               (b) Severance Pay. If, during the term of this Agreement, a Separation occurs because the
Company terminates the Employee’s Employment for any reason other than Cause or Permanent
Disability, or because the Employee terminates his Employment within six months after a condition
constituting Good Reason arises, then the Company shall pay the Employee:

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               (i) Base Compensation. His Base Compensation for a period of 12 months
following the Separation (the “Continuation Period”). Such Base Compensation shall
be paid at the rate in effect at the time of the Separation and in accordance with
the Company’s standard payroll procedures. The salary continuation payments shall
commence within 30 days after the Employee returns the release described in
Subsection (a) above.

               (ii) Bonus Compensation. A bonus (the “Severance Bonus”) in an amount
determined as follows:

               (A) If the Separation occurs prior to the first anniversary of
the date of this Agreement, the Severance Bonus shall be equal to a
pro-rata portion of the anticipated first-year Annual Target Bonus
as determined by the Board in good faith.

               (B) If the Separation occurs on or following the first
anniversary of the date of this Agreement and prior to the third
anniversary of the date of this Agreement, the Severance Bonus shall
be equal to the greater of (I) the most recent Annual Target Bonus
and (II) the average of Annual Target Bonuses awarded for the prior
years.

               (C) If the Separation occurs on or following the third
anniversary of the date of this Agreement, the Severance Bonus shall
be equal to the greater of (I) the most recent Annual Target Bonus)
and (II) the average of Annual Target Bonuses awarded for the prior
three years.

The Severance Bonus shall be payable in accordance with the Company’s standard
payroll procedures within 30 days after the Employee returns the release described
in Subsection (a) above.

               (c) Health Insurance. If Subsection (b) above applies, and if the Employee elects to continue
his health insurance coverage under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”)
following the Separation, then the Company shall pay the Employee’s monthly premium under COBRA
until the earliest of (i) the close of the Continuation Period, (ii) the expiration of the
Employee’s continuation coverage under COBRA and (iii) the date when the Employee is offered
substantially equivalent health insurance coverage in connection with new employment or
self-employment.

          7. Non-Solicitation, Non-Disclosure and Non-Competition. The Employee has entered into a
Proprietary Information and Inventions Agreement with the Company, which agreement is incorporated
herein by reference.

          8. Successors.

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               (a) Company’s Successors. This Agreement shall be binding upon any successor (whether direct
or indirect and whether by purchase, lease, merger, consolidation, liquidation or otherwise) to all
or substantially all of the Company’s business and/or assets. For all purposes under this
Agreement, the term “Company” shall include any successor to the Company’s business and/or assets
which becomes bound by this Agreement.

               (b) Employee’s Successors. This Agreement and all rights of the Employee hereunder shall
inure to the benefit of, and be enforceable by, the Employee’s personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and legatees.

          
9. Definitions. For all purposes under this Agreement:

               “Change in Control” shall mean (i) the consummation of a merger or consolidation of the
Company with or into another entity, if persons who were not stockholders of the Company
immediately prior to such merger or consolidation own immediately after such merger or
consolidation 50% or more of the voting power of the outstanding securities of each of (A) the
continuing or surviving entity and (B) any direct or indirect parent corporation of such continuing
or surviving entity; or (ii) the sale, transfer or other disposition of all or substantially all of
the Company’s assets. A transaction shall not constitute a Change in Control if its sole purpose
is to change the state of the Company’s incorporation or to create a holding company that will be
owned in substantially the same proportions by the persons who held the Company’s securities
immediately before such transaction.

               “Cause” shall mean (i) an unauthorized use or disclosure of the Company’s confidential
information or trade secrets, which use or disclosure causes material harm to the Company; (ii) a
material breach of any agreement between Employee and the Company; (iii) a material failure to
comply with the Company’s written policies or rules; (iv) conviction of, or plea of “guilty” or “no
contest” to, a felony under the laws of the United States or any state thereof; (v) gross
negligence or willful misconduct which causes material harm to the Company; or (vi) a continued
failure to perform assigned duties after receiving written notification of such failure from the
Board.

               “Good Reason” shall mean any of the following events: (i) the Employee’s receipt of notice
that his principal workplace will be relocated more than 30 miles; (ii) a reduction in the
Employee’s base salary by more than 10%, unless pursuant to a Company-wide reduction affecting all
employees proportionately; or (iii) a change in the Employee’s position with the Company that
materially reduces his level of authority or responsibility (including without limitation failure
to nominate him as a director of the Company). A condition shall not be considered “Good Reason”
unless the Employee gives the Company written notice of such condition within 90 days after such
condition comes into existence and the Company fails to remedy such condition within 30 days after
receiving the Employee’s written notice.

               “Permanent Disability” shall mean that the Employee, at the time notice is given, has failed
to perform his duties under this Agreement for a period of not less than 90 consecutive days as the
result of his incapacity due to physical or mental injury, disability or illness.

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               “Separation” shall mean a “separation from service,” as defined in the regulations under
Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”).

          10. Miscellaneous Provisions.

               (a) Notice. Notices and all other communications contemplated by this Agreement shall be in
writing and shall be deemed to have been duly given when personally delivered or when mailed by
overnight courier, U.S. registered or certified mail, return receipt requested and postage prepaid.
In the case of the Employee, mailed notices shall be addressed to him at the home address which he
most recently communicated to the Company in writing. In the case of the Company, mailed notices
shall be addressed to its corporate headquarters, and all notices shall be directed to the
attention of its Secretary.

               (b) Modifications and Waivers. No provision of this Agreement shall be modified, waived or
discharged unless the modification, waiver or discharge is agreed to in writing and signed by the
Employee and by an authorized officer of the Company (other than the Employee). No waiver by
either party of any breach of, or of compliance with, any condition or provision of this Agreement
by the other party shall be considered a waiver of any other condition or provision or of the same
condition or provision at another time.

               (c) Whole Agreement. No other agreements, representations or understandings (whether oral or
written and whether express or implied) which are not expressly set forth in this Agreement have
been made or entered into by either party with respect to the subject matter hereof. This
Agreement and the Proprietary Information and Inventions Agreement contain the entire understanding
of the parties with respect to the subject matter hereof.

               (d) Tax Matters. All payments made under this Agreement shall be subject to reduction to
reflect taxes or other charges required to be withheld by law. For purposes of Section 409A of the
Code, each periodic salary continuation payment under Section 6(b)(i) is hereby designated as a
separate payment. If the Company determines that the Employee is a “specified employee” under
Section 409A(a)(2)(B)(i) of the Code and the regulations thereunder at the time of his Separation,
then (i) the payments under Section 6(b), to the extent not exempt from Section 409A of the Code,
shall commence on the earliest practicable date that occurs more than six months after the
Employee’s Separation and (ii) the payments that otherwise would have been made during the first
six months following the Employee’s Separation shall be paid in a lump sum on the first day of the
seventh month after his Separation. The Company shall not have a duty to design its compensation
policies in a manner that minimizes the Employee’s tax liabilities, and the Employee shall not make
any claim against the Company or the Board related to tax liabilities arising from the Employee’s
compensation.

               (e) Choice of Law. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Maryland (except their provisions governing
the choice of law).

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               (f) Severability. The invalidity or unenforceability of any provision or provisions of this
Agreement shall not affect the validity or enforceability of any other provision hereof, which
shall remain in full force and effect.

               (g) Arbitration. Any controversy or claim arising out of or relating to this Agreement or the
breach thereof, or the Employee’s Employment or the termination thereof, shall be settled in the
State of Maryland, by arbitration in accordance with the National Rules for the Resolution of
Employment Disputes of the American Arbitration Association. The decision of the arbitrator shall
be final and binding on the parties, and judgment on the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof. The parties hereby agree that the arbitrator
shall be empowered to enter an equitable decree mandating specific enforcement of the terms of this
Agreement. The Company and the Employee shall share equally all fees and expenses of the
arbitrator. The Employee hereby consents to personal jurisdiction of the state and federal courts
located in the State of Maryland for any action or proceeding arising from or relating to this
Agreement or relating to any arbitration in which the parties are participants.

               (h) No Assignment. This Agreement and all rights and obligations of the Employee hereunder
are personal to the Employee and may not be transferred or assigned by the Employee at any time.
The Company may assign its rights under this Agreement to any entity that assumes the Company’s
obligations hereunder in connection with any sale or transfer of all or a substantial portion of
the Company’s assets to such entity.

               (i) Counterparts. This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and the same
instrument.

[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]

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          IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the
Company by its duly authorized officer, as of the date first written above.

	 	 	 	 	 	 	 
	 	 	/s/ Mihael H. Polymeropoulos	 	 
	 	 	 	 	 
	 	 	Mihael H. Polymeropoulos	 	 
	 
	 	 	 	 	 	 
	 	 	Vanda Pharmaceuticals Inc.	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	/s/ Steven A. Shallcross
 

	 	 
	 
	 	 	 	 	 	 
	 	 	Title: Chief Financial Officer	 	 

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