Document:

exv10w1

 

Exhibit 10.1

[CYTRX LETTERHEAD]

	 	 	 
	Dr. Scott Wieland

	 	April 29, 2005
	27525 Puerta Real, Suite 100-314
	 	 
	Mission Viejo, CA 92691
	 	 

Dear Dr. Wieland:

     On behalf of CytRx Corporation (the “Company”), I am pleased to offer you the position
of Vice President, Clinical and Regulatory Affairs of CytRx Corporation. Speaking for myself, as
well as the other members of the Company’s management team, we are all very impressed with your
credentials and we look forward to your future success in this position.

     Your responsibilities will be those assigned to you from time to time by your supervisor, Dr.
Jack Barber, including but not limited to those described in Schedule 1.

     You will be paid a bi-weekly salary of $7,916.66, less all applicable deductions, which is
equivalent to a gross sum of $190,000 on an annualized basis. Your salary will be payable pursuant
to the Company’s regular payroll policy. You will also be eligible for a discretionary bonus
opportunity, payable in cash, stock or any combination thereof. Any salary change and bonus will be
determined by the Board of Directors of the Company based upon your personal performance, the
Company’s financial performance, achieving your milestones and other factors. The determinations
of the Board of Directors of the Company with respect to such bonus and any salary review shall be
final and binding.

     The Company will provide you with the opportunity to participate in the standard benefits
plans currently available to other similarly situated employees, including medical, dental and
vision insurance, subject to any eligibility requirements imposed by such plans. In addition, you
will be entitled to two (2) weeks vacation your first year, in addition to the Company’s standard
paid holidays, as such holidays may change from time to time.

     In connection with the commencement of your employment, the Board of Directors of the Company
will grant you an option to purchase 100,000 shares of CytRx Common Stock (NASDAQ: CYTR) with an
exercise price equal to the fair market value at the close of business on your first day of
employment. This option shall vest over a three-year period, with one-third of the option shares
vesting on each of the first three anniversaries of the first day of your employment. Vesting will,
of course, depend on your continued employment with the Company. The option will be a
non-qualified stock option and will be subject to the terms of the Company’s stock option plan and
the Stock Option Agreement between you and the Company, a copy of which you will be required to
execute as a condition of the grant. In addition, you will be required to comply with any Company
policies governing securities trades by Company personnel.

     As an employee of the Company, you will have access to certain Company confidential
information and you may, during the course of your employment, develop certain information or
inventions, which will become the property of the Company. As a condition of your employment, you
will be required to sign the Company’s Confidential Information and Invention Assignment Agreement,
a copy of which is enclosed for your review and execution (the “Confidentiality
Agreement”), prior to or on your Start Date (as defined below). We wish to impress upon you
that we do not wish you to bring with you any confidential and proprietary material of any former
employer or to violate any other obligation to

 

 

your former employers. Also, by accepting this offer, you represent that you are not subject
to any restrictions that prevent you from working at the Company.

     As a condition of employment, you will be required to authorize the Company to conduct a
background investigation. This offer is contingent upon a positive outcome of such an
investigation, as well as your ability to provide to the Company documentary evidence of your
identity and eligibility for employment in the United States. Such documentation must be provided
to us within three (3) business days of the Start Date, or our employment relationship with you
will be terminated.

     Your employment with the Company will be on an “at will” basis, meaning that either you or the
Company may terminate your employment at any time for any reason or no reason, without further
obligation or liability. This is the full and complete agreement between us on this term.

     You hereby represent that you are not presently bound by any employment agreement,
confidential or proprietary information agreement or similar agreement with any current or previous
employer that would impose any restriction on your acceptance of this offer or that would interfere
with your ability to fulfill the responsibilities of your position with the Company. You agree to
abide by the Company’s strict policy that prohibits any new employee from using or bringing with
them from any prior employer any confidential information, trade secrets, proprietary materials or
processes of such former employers.

     While you render services to the Company, you agree that you will not engage in any other
employment, consulting or other business activity without the prior written consent of the Company.
While you render services to the Company, you also will not assist any person or entity in
competing with the Company, in preparing to compete with the Company or in hiring any employees or
consultants of the Company.

     You agree that there were no promises or commitments made to you regarding your employment
with the Company except as set forth in this letter. This letter, together with the
Confidentiality Agreement, set forth the terms of your employment with the Company and supersede
any prior representations or agreements, whether written or oral. This letter may not be modified
or amended except by a written agreement, signed by the Company and by you.

     We are all delighted to be able to extend you this offer and look forward to working with you.
To indicate your acceptance of the Company’s offer and to acknowledge that you have read,
understood and agreed to the terms and conditions of this offer, please sign and date this letter
in the space provided below and return it to me, along with a signed and dated copy of the
Confidentiality Agreement, on or before Friday April 29, 2005. The Company requests that you begin
work in this new position on or before Monday, May 2, 2005. Please indicate the date (either on or
before the aforementioned date) on which you expect to begin work in the space provided below (the
“Start Date”).

	 	 	 
	

	 	Very truly yours,
	 
	 	 
	

	 	CYTRX CORPORATION.
	 
	 	 
	

	 	By: /s/ MATTHEW NATALIZIO
	 
	 	 
	

	 	Matthew Natalizio
	

	 	Chief Financial Officer

 

 

I HAVE READ AND I UNDERSTAND THE TERMS OF THE OFFER SET OUT ABOVE. AS INDICATED BY MY SIGNATURE
BELOW, I ACCEPT THE OFFER AS OUTLINED ABOVE. I FURTHER ACKNOWLEDGE AND AGREE THAT, AS A CONDITION
OF MY EMPLOYMENT, FROM TIME TO TIME, I MAY BE REQUIRED TO REVIEW AND ACKNOWLEDGE OTHER DOCUMENTS
WHICH MAY INCLUDE, WITHOUT LIMITATION, THE COMPANY’S EMPLOYEE HANDBOOK AND POLICIES GOVERNING
SECURITIES TRADES BY COMPANY PERSONNEL. NO FURTHER COMMITMENTS WERE MADE TO ME AS A CONDITION OF
EMPLOYMENT:

	 	 	 
	Scott Wieland, Ph.D.
	 	 
	 
	 	 
	/s/ SCOTT WIELAND
	 	 
	

	 	 
	Signature
	 	 
	 
	 	 
	April 29, 2005
	 	 
	

	 	 
	Date
	 	 

Anticipated Start Date: April 29, 2005

Attachment A: Confidential Information and Invention Assignment Agreement

CC: J. Barberexv10w1

 

Exhibit 10.1

*** INDICATES MATERIAL HAS BEEN OMITTED PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION. A COMPLETE COPY OF THIS AGREEMENT HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

United Healthcare

A UnitedHealth Group Company

Simeon A. Schindelman, President

UnitedHealthcare Small Business Group

MN012-N123 5901 Lincoln Drive Edina MN 55436

Tel 952 992 4394 Fax 952 992 5112

simeon_schindelman@uhc.com

Cell 612 6692559

March 11, 2005

Mr. Richard Rawson

President

Administaff of Texas, Inc.

19001 Crescent Springs Drive

Kingwood, TX 77339

Via: UPS Next Day Air, email and facsimile

Dear Richard:

Attached are what we believe to be the relevant terms and conditions of proposed modifications to
the existing contracts between UnitedHealthcare Insurance Company (“UnitedHealthcare”) and
Administaff of Texas, Inc. (“Administaff”). Upon execution, this letter and the attached term
sheet (Exhibit A) will constitute an agreement as to the principal terms of an amendment to the
Minimum Premium Financial Agreement, the Minimum Premium Administrative Services Agreement and the
Security Deposit Agreement (collectively referred to herein as the “definitive agreements”) between
UnitedHealthcare and Administaff to be prepared and executed by the parties. Except as otherwise
set forth herein, the terms and conditions of any eventual modifications to the definitive
agreements would be only as set forth in any subsequent amendment(s) signed by the parties.

Administaff and UnitedHealthcare acknowledge and agree that the terms and conditions of this letter
and the attached Exhibit A, including the existence thereof, are subject to the provisions of
Section 5(e) of the Minimum Premium Administrative Services Agreement by and between Administaff
and UnitedHealthcare, as amended (relating to publicity of the arrangement). As such, Administaff
and UnitedHealthcare each agree not to make any unauthorized disclosure or public announcement
concerning the subject matter hereof without the written consent of the other.

If this letter and the terms set forth in Exhibit A are in accordance with your understanding of
the proposed modifications to our existing contracts, please sign below and return an executed copy
to me via facsimile at (952) 992-5112. Should you have any questions, please contact me at
952-992-4394.

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Sincerely,

	 	 	 	 	 
	/s/ Simeon A. Schindelman

	 	  	 	 
	Simeon A. Schindelman

	 	 	 	 
	President, Small Business,

	 	 	 	 
	UnitedHealthcare

	 	 	 	 
	 
	 	 	 	 
	 
	 	Agreed to and accepted this 11th day of
March, 2005.
	 
	 	 	 	 
	 
	 	Administaff of Texas, Inc.
	 
	 	 	 	 
	

	 	By
	 	/s/ Richard A. Rawson
	

	 	 	 	 
	 
	 	 	 	 
	

	 	Its
	 	President
	

	 	 	 	 

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EXHIBIT A

UnitedHealthcare/Administaff

Proposed Term Sheet

March 11, 2005

For consistency, clarity and ease of communication, this term sheet uses defined terms from both
the Minimum Premium Financial Agreement and the Minimum Premium Administrative Services Agreement
(including any subsequent amendment to each agreement) between Administaff and UnitedHealthcare.

A. Profit/Risk Charge

UnitedHealthcare has agreed to reduce its profit/risk charge from *** to ***. To accomplish
this objective, the MP Financial Agreement will be amended effective January 1, 2005 such
that the Maximum Monthly Employer Benefit Obligation will be *** of the Quoted Premium for
each Medical Policy and the MP Premium will be *** of the Quoted Premium for each Medical
Policy. The percentages contained in the immediately preceding sentence assume an estimated
premium tax expense of *** and, in order to maintain a profit/risk charge of ***, such
percentages may require future modification consistent with changes to the actual incurred
premium tax expense.

B. Security Deposit

Effective as of the date of execution of an amendment to the definitive agreements
incorporating the terms of this letter agreement, the Security Deposit Agreement will be
terminated, including any related obligation of either Administaff or UnitedHealthcare under
the Security Deposit Agreement or any other agreement between the parties; provided,
however, that UnitedHealthcare shall retain the right to draw upon the Accumulated Surplus
for the purposes currently set forth in Section 3.a. of the Security Deposit Agreement and
that the right to draw against the Accumulated Surplus shall be in addition to, and not in
lieu of, any other remedy available at law or in equity to UnitedHealthcare, and any such
draw by UnitedHealthcare shall not cure Administaff’s failure to pay amounts due, without
UnitedHealthcare’s express written consent; provided further, any such amounts drawn by
UnitedHealthcare shall reduce any damages recoverable from Administaff under such other
remedies to the extent that such damages do not take into consideration the amounts
previously drawn by UnitedHealthcare. Beginning 30 days after the execution of this
agreement, the balance of the Security Deposit will be reduced by applying $5.5 million of
such balance towards the premium and daily claim funding obligations of Administaff. In
addition, upon termination of the Security Deposit Agreement, UnitedHealthcare will
immediately begin applying the balance of funds maintained by Administaff under the terms of
the Security Deposit Agreement

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(including all applicable interest credits thereon) towards
all premium and daily claim funding obligations of Administaff until such balance is
exhausted.

C. Accumulated Surplus

Contemporaneous with the termination of the Security Deposit Agreement, the parties will act
in good faith to operate under the terms of the existing financial agreements with an
Accumulated Surplus of no more or less than $11,000,000. Effective as of the date of
execution of an amendment to the definitive agreements incorporating the terms of this
letter agreement, the Accumulated Surplus will be credited with interest by UnitedHealthcare
at a rate and in a manner which is substantially similar to the interest crediting
provisions contained in the Security Deposit Agreement as such agreement was in effect on
March 1, 2005.

If pursuant to a Quarterly Review or Annual Review, as applicable, the Accumulated Surplus
is determined to be in excess of $11,000,000, commencing 15 days after such determination
has been made, UnitedHealthcare will waive Administaff’s Claims Account funding obligations,
if any, for a period and in an amount sufficient to cause the Accumulated Surplus to be no
more than $11,000,000. If pursuant to a Quarterly Review or Annual Review, as applicable,
the Accumulated Surplus is determined to be less than $11,000,000, within 15 days after such
determination has been communicated in writing to Administaff, Administaff will pay an
additional amount of premium to UnitedHealthcare in an amount sufficient to cause the
Accumulated Surplus to be $11,000,000. The determination of the amount of the Accumulated
Surplus for this purpose will be based on the revised Accumulated Surplus calculations for
the calendar quarter immediately preceding the most recently completed calendar quarter that
is the subject of such Quarterly Review or Annual Review, as applicable. The Accumulated
Surplus calculation will not take into account any amount(s) reserved for *** coverage (and
therefore the amount of the Accumulated Surplus will not be reduced by any amount(s)
reserved for *** liability). Notwithstanding anything herein to the contrary, unless
otherwise set forth in any subsequent amendment relating to this item C, the obligations for
each party set forth in this paragraph will not commence until the Accumulated Surplus
amount for the first Arrangement Quarter of 2005 has been determined (which determination is
expected to occur on or about ***).

The total amount of Administaff’s Claims Account funding obligations waived by
UnitedHealthcare with respect to any Arrangement Quarter will be included as “claims paid”
for purposes of section 2.a. of Exhibit A, Appendix II (Methodology for Establishing Monthly
Payable Rates) of the Minimum Premium Financial Agreement when determining the Monthly
Payable Rate for any subsequent Arrangement Quarter for which the Monthly Payable Rate has
not yet

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been established and communicated to Administaff. However, the Accumulated
Surplus/Deficit amount will no longer be taken into consideration when determining Monthly
Payable Rates.

The parties agree to amend Exhibit A of the Minimum Premium Financial Agreement to revise
the quarterly and annual accountings. Pursuant to the amended Exhibit A, required premium
for all historic and future accounting periods will be determined by dividing *** factor
applicable to that accounting period. Actual premiums paid by Administaff for the
applicable accounting period will be added to Administaff’s MP claim obligations for that
period and compared to the required premium (calculated in accordance with the
 preceding sentence) to determine the surplus or deficit results for each such accounting
period. As such, no further adjustments to any administrative fee, profit and/or premium
tax charge will be necessary in connection with the return of surplus (if any) to
Administaff, provided there are no subsequent changes to incurred claims for that accounting
period.

In addition, Administaff hereby acknowledges and agrees that UnitedHealthcare waived
$1,954,028.35 of fourth quarter 2004 Additional Quarterly Premium that was payable in the
First Arrangement Quarter of 2005. The 2004 accounting will reflect the waiver of fourth
quarter 2004 Additional Quarterly Premium in the manner set forth above.

D. Three Year Commitment

UnitedHealthcare and Administaff have a mutual interest in committing to certain material
financial terms for at least three years. Thus, any amendment to the definitive agreements
between the parties relating to items A and C above will include a commitment that these
financial terms will remain in effect for at least three years beginning January 1, 2005.
To clarify, absent extraordinary and unforeseen circumstances, the parties intend that, with
respect to the 2005, 2006 and 2007 Arrangement Years, neither party will attempt to
negotiate a further amendment to or modification of (i) the profit/risk charge, (ii)
management of the Accumulated Surplus (including the amount of any Accumulated Surplus
consistently maintained by UnitedHealthcare) or (iii) any other material financial term of
the then current agreement(s) between UnitedHealthcare and Administaff.

E. Large Claim Pooling

UnitedHealthcare will provide Administaff with a pooling option for Arrangement Years 2005,
2006 and/or 2007 under which claims per individual covered employee or dependent in excess
of $1,000,000 that are incurred within a

5

 

12-month calendar year period and paid within ***
months (e.g. claims incurred between 1-1-05 and 12-31-05 and paid by ***) will be excluded
from Administaff’s claims experience. If this pooling option is elected with respect to any
such Arrangement Year, the Accumulated Deficit or Accumulated Surplus, as determined by the
Quarterly Reviews and the Annual Review of that Arrangement Year, will exclude individual
claimant medical claims in excess of $1,000,000. The premium (Pool Charge) for this pooling
option, if elected, in the 2005 Arrangement Year is *** per covered employee per month. For
example, assuming that the number of covered Worksite Employees for each month of 2005
remains constant at 46,871, the annual Pool Charge for the 2005 Arrangement Year would be
the product of (i) 46,871 multiplied by *** and (ii) 12 months, which would equal
approximately ***. Actual 2005 Arrangement Year charges will be based on actual number of
covered Worksite Employees for each month of 2005. The Pool Charge rates for Arrangement
Years 2006 and 2007 will not exceed *** and *** per employee per month, respectively. To
elect the pooling option, Administaff must notify UnitedHealthcare in writing of its
election on or before February 1st of the Arrangement Year to which such option relates;
provided, however, that with respect to the 2005 Arrangement Year, UnitedHealthcare will
provide additional terms and conditions of the pooling option, if any, within 15 days
of the date this term sheet is executed, and Administaff will then have 30 days to provide
written notification of its acceptance or rejection of the pooling option for the 2005
Arrangement Year. Should UnitedHealthcare determine to provide a pooling option for any
Arrangement Year subsequent to 2007, the Pool Charge rates and terms relating to any such
subsequent year are subject to modification by UnitedHealthcare.

F. Eligibility Reporting and Review

To better align eligibility policies applicable to Administaff membership with policies
applicable to other UnitedHealthcare customers, the MP Services Agreement will be amended to
indicate that, effective December 31, 2005, reporting of retroactive Participant
terminations (excluding COBRA Participants) to UnitedHealthcare will be limited to no more
than 31 days. However, Administaff will continue to have up to 60 days to report any other
retroactive Participant eligibility changes to UnitedHealthcare.

In recognition of the additional risk UnitedHealthcare is assuming, commencing with the
second quarter of 2005 Quarterly Review meeting (which is expected to occur on or about
***), Administaff will supply the following medical risk management activity reports to
UnitedHealthcare on a quarterly basis at the applicable Quarterly and Annual Review
meetings:

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Reports for *** During the Review Quarter

1) ***

2) ***

3) ***

In addition, the parties will work together in good faith to establish by August 15, 2005 an
appropriate mechanism to ensure Administaff’s compliance with Section 6(b)(ii) of the
Minimum Premium Administrative Services Agreement regarding the Employer Medical Insurance
Contribution Rate for each New Client.

Reports for *** as of the End of the Review Quarter

1) ***

2) ***

3) ***

In addition to the reports noted above, representatives from Administaff and
UnitedHealthcare will meet no more than one time in any twelve-month period to allow
UnitedHealthcare the opportunity to review and comment on Administaff’s *** subject to
applicable confidentiality provisions of the existing agreements. Further, Administaff and
UnitedHealthcare will work together to provide additional information to help

UnitedHealthcare better understand Administaff’s management of new customer accounts.

G. Conversion to *** Products

As soon as commercially practicable, Administaff will begin the process of transitioning
Participants currently enrolled in UnitedHealthcare *** products to the ***
products, subject to Administaff’s determination of the adequacy of the proposed provider
networks in each geographic area; provided, however, that substantially all existing
UnitedHealthcare *** business shall be converted to the *** products by ***, and
no additional UnitedHealthcare *** products (other than the *** products remaining after
January 1, 2006, if any) will be offered to Participants under the Administaff Group Health
Plan thereafter, and in any event, all Administaff *** business will be converted to a ***
product by ***.

7

 

H. Exclusivity and Additional Markets

The parties have agreed to possible modifications to the exclusivity and related market
provisions of the definitive agreements as described below. In that regard, through the
course of detailed market discussions, Administaff and UnitedHealthcare will determine the
circumstances under which a modified carrier offering will be a viable alternative to the
current approach in any or all of the following *** markets beginning in ***:

***

Item *** above is subject to the provisions of the definitive agreements regarding the
offering of additional carriers in a market exclusive to UnitedHealthcare. In addition, in
no event will Administaff be expected to expand its inclusion of UnitedHealthcare products
in any market or manner that would reasonably be expected to *** in
that market or adversely impact its *** in that market.

I. Reporting Obligations

Section 4(e) of the Minimum Premium Administrative Services Agreement shall be amended such
that UnitedHealthcare will notify Administaff if the prescription drug payments attributable
to Administaff business are, on average, more than *** per member per month *** prescription
drug payments for all of UnitedHealthcare’s fully insured commercial business.

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