Document:

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                                                                    EXHIBIT 10.1

                          [LEXICON GENETICS LETTERHEAD]

                                February 19, 2003

Dr. Alan S. Nies

Dear Alan:

         We are pleased to invite you to become the Chairman of the Medical
Advisory Board of, and a special consultant to, Lexicon Genetics Incorporated
(which, together with its subsidiaries and affiliates, is referred to as the
"Company" or "Lexicon"). The purpose of this letter agreement (this "Agreement")
is to set forth our mutual understanding of the terms and conditions under which
you would provide consulting services in those capacities, as set forth below.

         1.       Consulting Services. As the Chairman of the Medical Advisory
Board of, and a special consultant to, Lexicon, you will provide such consulting
and advisory services as may be requested by Arthur T. Sands, M.D., Ph.D., the
Company's President and Chief Executive Officer, relating to: (i) evaluation of
the Company's drug discovery programs; (ii) establishment of strategies for
clinical development of potential products arising from such programs; (iii)
identification and, as appropriate, recruitment or engagement of key personnel,
consultants and service providers to oversee and conduct the Company's clinical
development efforts; (iv) evaluation of the clinical development potential of
in-licensing and acquisition candidates; (v) provision of assistance and advice
relating to the establishment of drug discovery collaborations and alliances;
and (vi) such other consulting and advisory services relating to the Company's
clinical development efforts as you and the Company may agree. You will devote
up to 24 days annually (approximately two days a month on average) to providing
such services to the Company under this Agreement, on a schedule and at times
reasonably agreed upon by you and Dr. Sands.

         2.       Compensation. As full consideration for your services as
Chairman of the Medical Advisory Board of, and a special consultant to, the
Company and your obligations under this Agreement, you will receive fees of
$75,000 per year, payable in 12 monthly installments. In addition, you will be
reimbursed for your reasonable, ordinary and necessary travel expenses incurred
by you at the Company's prior request in connection with your performance of
your services under this Agreement.

         3.       Stock Option. In further consideration for your services as
Chairman of the Medical Advisory Board of, and a special consultant to, the
Company and your obligations under this Agreement, the Company will grant you an
option under its 2000 Equity Incentive Plan (the "Plan") to purchase 2,500
shares of the Company's common stock at a purchase price per share equal to the
fair market value of the common stock, determined in accordance with the Plan,
on the date your service in such capacities commences, such options vesting at a
rate of one-fourth of the total amount for each year of service to the Company
hereunder. Such option grant shall be evidenced by a separate stock option
agreement and governed by the terms of such agreement and the Plan.

<PAGE>

Dr. Alan S. Nies
February 19, 2003
Page 2

         4.       Confidential Information.

                  (a)      In the course of your service as Chairman of the
         Medical Advisory Board of, and a special consultant to, the Company,
         you may learn or be exposed, orally, visually, electronically or in
         writing, to inventions, discoveries, improvements, materials, data,
         technology, processes, formulas, know-how, trade secrets, ideas and
         other information which we consider proprietary or confidential
         ("Confidential Information"). You agree to hold any Confidential
         Information disclosed to you by the Company or learned by you from the
         Company in conjunction with your services under this Agreement in
         strict confidence and to take all reasonable precautions to protect
         such Confidential Information, not to disclose any such Confidential
         Information to any third party, and to use such Confidential
         Information only in furtherance of your services under this Agreement;
         provided that your nondisclosure obligation shall not apply to the
         extent such Confidential Information (i) is already in the public
         domain or hereafter enters the public domain other than through your
         acts or omissions in violation of this Agreement; (ii) is already known
         to you, as may be shown by competent written records; (iii) is
         hereafter received by you without restriction as to confidentiality or
         use from a third party lawfully entitled so to disclose same in such
         manner; or (iv) is hereafter generated by you, other than in
         performance of your services under this Agreement, without the use of
         any Confidential Information, facilities or personnel of the Company.
         Information shall not be deemed to be within the foregoing exceptions
         merely because such information is embraced by more general information
         in the public domain or in your possession. All Confidential
         Information (and any copies and notes thereof) shall remain the sole
         property of the Company.

                  (b)      You agree not to disclose or otherwise make available
         to the Company any information that you possess under an obligation of
         confidentiality to a third party. You may disclose to the Company any
         information made available generally to the scientific community at
         large through published reports or public presentations prior to
         disclosure to the Company.

         5.       Inventions and Discoveries.

                  (a)      You hereby assign and transfer to the Company all of
         your right, title and interest throughout the world in all inventions,
         discoveries, improvements, materials, data, works of authorship and
         other intellectual property, whether or not patentable or subject to
         copyright, which may be made, written or conceived by you in the course
         of, or arising as a result of, your performance of your services as
         Chairman of the Medical Advisory Board of, and a special consultant to,
         the Company, in whole or in part and whether alone or in conjunction
         with others (collectively, "Intellectual Property"). All such
         Intellectual Property shall be the sole property of the Company or its
         nominee.

                  (b)      You shall promptly disclose any Intellectual Property
         in writing to the Company in order to permit the Company to claim
         rights to which it may be entitled under this Agreement. The Company
         shall have full power and authority to file and prosecute patent
         applications and copyright registrations throughout the world with
         respect to all Intellectual Property, and to procure and maintain
         patents and copyrights with respect thereto. You agree, at the
         Company's reasonable request and expense, to

<PAGE>

Dr. Alan S. Nies
February 19, 2003
Page 3

         sign, execute and acknowledge, or cause to be signed, executed and
         acknowledged, any applications, assignments, instruments and other
         documents, and to perform such other acts, as the Company may deem
         necessary, useful or convenient to confirm and vest in the Company or
         its nominee all right, title and interest throughout the world in and
         to any Intellectual Property and all patent, copyright and other
         intellectual property rights and protections therein, and to assist the
         Company in procuring, maintaining, enforcing and defending such patent,
         copyright and other intellectual property rights and protections
         throughout the world. You agree to treat all such Intellectual Property
         as Confidential Information under this Agreement.

         6.       Conflicting Engagements.

                  (a)      During your service as Chairman of the Medical
         Advisory Board of, and a special consultant to, the Company, you agree
         that you will not, without previously notifying the Company in writing,
         directly or indirectly, whether alone or in association with others, in
         the United States of America or in any foreign nation, state or
         jurisdiction, become associated with, render advisory, consulting or
         other services to, or become employed by any other person or entity
         (collectively referred to as "Third Party Competitors") engaging in
         clinical development of a drug in direct conflict or competition with a
         drug development program being conducted by the Company. You agree to
         disclose to the Company any proposed relationship with a Third Party
         Competitor (a "Proposed Relationship") at least 60 days prior to the
         establishment of a confidential relationship between you and such Third
         Party Competitor. Upon such disclosure, the Company may consent to the
         Proposed Relationship in writing, may proffer written consent subject
         to condition precedent regarding certain restrictions on the scope
         and/or field of the Proposed Relationship, or may terminate this
         Agreement.

                  (b)      Subject to your obligations with respect to
         Confidentiality and Intellectual Property under Sections 4 and 5 of
         this Agreement, nothing in this Agreement shall prohibit you from
         continuing your duties under any consulting or advisory agreement that
         predates this Agreement, and which has been disclosed to the Company in
         writing prior to the effective date of this Agreement.

         7.       Term and Termination. You will render your advisory and
consulting services to the Company and serve as Chairman of the Company's
Medical Advisory Board for an initial period of one year commencing upon the
date of your signature accepting the provisions of this Agreement on the
signature page. The term of this Agreement shall be automatically renewed for
additional one-year terms on each anniversary unless either party gives 30 days'
advance written notice of non-renewal. This Agreement may be terminated (i) at
any time by either party, with or without cause, upon 30 days' advance written
notice to the other party and (ii) by either party for breach of this Agreement
by the other party that, where curable, is not cured within 10 business days
after written notice of such breach is delivered to the breaching party.

         8.       Independent Contractor. For purposes of this Agreement, you
will be deemed an independent contractor and not an employee or agent of
Lexicon. In this connection, you will not be eligible for, nor entitled to, any
employee benefits that we normally extend to our employees, and we will not
withhold any taxes from the compensation paid to you, all of which shall be your
responsibility. The manner in which you render your services under this
Agreement will be

<PAGE>

Dr. Alan S. Nies
February 19, 2003
Page 4

within your reasonable control and discretion. You have no express or implied
authority to incur any liability, or to make any decision or to create any
binding obligation, on our behalf.

         9.       Reference to Affiliation. The Company may reference your
service as Chairman of the Company's Medical Advisory Board, but will not
otherwise use your name without your prior written consent.

         10.      Compliance with Laws and Procedures. To the extent you provide
services under this Agreement on our premises, you agree to observe our business
hours, as well as our rules, policies and security procedures concerning conduct
and the health, safety and protection of persons and property. You will comply
with all applicable governmental laws, ordinances, rules and regulations
applicable to the performance of your services under this Agreement.

         11.      Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Texas as
they apply to contracts entered into and wholly to be performed in Texas.

         12.      Enforcement. You agree that a breach of any of the
restrictions set forth in the provisions of this Agreement would cause the
Company irreparable injury and damage, and that, in the event of any breach or
threatened breach, the Company, in addition to all other rights and remedies at
law or in equity, shall have the right to enforce the specific performance of
such restrictions and to apply for injunctive relief against their violation.

         13.      Survival of Terms. The provisions of Sections 4, 5 and 11
through 19 hereof shall survive termination of this Agreement.

         14.      Successors and Assigns. You may not assign this Agreement
without the written consent of the Company. This Agreement shall be binding on
your heirs, executors, administrators and legal representatives and the
Company's successors and assigns.

         15.      Severability. The invalidity or unenforceability of any
provision of this Agreement (or portion thereof) shall not affect the validity
or enforceability of any other provision of this Agreement, and if such
provision (or portion thereof) is so broad as to be unenforceable, it shall be
interpreted to be only as broad as is enforceable.

         16.      Entire Agreement. This Agreement constitutes the sole and
complete agreement of the parties with respect to the matters included herein,
and supersedes any previous oral or written agreement, if any, relating to the
subject matters included herein.

         17.      Amendment and Waiver. This Agreement may not be amended or
supplemented in any way, nor may the benefit of any provision hereof be waived,
except by a written agreement duly executed by both you and the Company.

         18.      No Conflict. You represent that the performance of your
obligations and duties under this Agreement does not conflict with any
obligations or duties, express or implied, that you may have to third parties.

<PAGE>

Dr. Alan S. Nies
February 19, 2003
Page 5

         19.      Construction. Each party to this Agreement has had the
opportunity to review this Agreement with legal counsel. This Agreement shall
not be construed or interpreted against any party on the basis that such party
drafted or authored a particular provision, parts of or the entirety of this
Agreement.

         If the foregoing correctly sets forth our mutual understanding, please
so indicate by signing this letter in the space provided below and return it to
the Company at the above address, whereupon this Agreement shall constitute a
binding contract between us and our legal representatives, successors, and
assigns.

                                       Very truly yours,

                                       LEXICON GENETICS INCORPORATED

                                       By:  /s/ Arthur T. Sands
                                           -------------------------------------
                                           Arthur T. Sands, M.D., Ph.D.
                                           President and Chief Executive Officer

ACCEPTED AND AGREED TO ON THE DATE SET FORTH BELOW:

By: /s/ Alan S. Nies
    --------------------------------
    Alan S. Nies, M.D.

Date: February 24, 2003

<PAGE>

                          [LEXICON GENETICS LETTERHEAD]

                                  June 24, 2003

Dr. Alan S. Nies

Dear Alan:

         This letter serves as the consent of Lexicon Genetics Incorporated (the
"Company") to the assignment of your rights and obligations under that certain
letter agreement dated February 19, 2003 between you and Lexicon (the
"Agreement") to Nies Consulting LP (the "Partnership").

         As a condition to the foregoing assignment, you agree that you will
personally provide all consulting and advisory services on behalf of the
Partnership and that you remain individually bound by Sections 4
(Confidentiality), 5 (Inventions and Discoveries) and 6 (Conflicting
Engagements) of the Agreement.

         If the foregoing correctly sets forth our mutual understanding, please
so indicate by signing this letter in the space provided below and return it to
the Company at the above address.

                                     Very truly yours,

                                     LEXICON GENETICS INCORPORATED

                                     By:  /s/ Arthur T. Sands
                                         ---------------------------------------
                                         Arthur T. Sands, M.D., Ph.D.
                                         President and Chief Executive Officer

ACCEPTED AND AGREED TO ON THE DATE SET FORTH BELOW:

By: /s/ Alan S. Nies
    -------------------------
    Alan S. Nies, M.D.

Date: June 25, 2003exv10w1

 

Exhibit 10.1

April 1, 2004

Wayne F. C. Hosking, Jr.

1825 Elgin Drive

Vienna, Virginia 22182

Dear Wayne:

     On behalf of The Allied Defense Group, Inc. (the “Company”), I am very
pleased to offer you the position of Vice President for Corporate Strategic
Development. This letter agreement clarifies and confirms the terms of your
employment with the Company.

	1.	 	POSITIONS; START DATE

     As Vice President for Corporate Strategic Development, you shall have the
duties and responsibilities customarily associated with such position and such
duties as may be assigned to you by the Chief Executive Officer or the Chief
Operating Officer of the Company. You will report directly to the Chief
Operating Officer of the Company. Your office will be at the Company’s
headquarters, located at 8000 Towers Crescent Drive, Suite 260, Vienna,
Virginia 22182. You agree not to actively engage in any other employment,
occupation or consulting activity that conflicts with the interests of the
Company. Unless we mutually agree otherwise, you will commence employment on
April 12, 2004 (the “Start Date”).

	2.	 	SALARY

     Your salary will be $14,166.66 per month ($170,000.00 annualized), payable
monthly in accordance with the Company’s standard payroll practice and subject
to applicable withholding taxes. Because your position is exempt from overtime
pay, your salary will compensate you for all hours worked. Your salary will be
reviewed and effective annually by the Compensation Committee and any
adjustments will be effective as of the date determined by the Compensation
Committee.

	3.	 	SIGNING BONUS

     As a one-time cash “signing bonus” you will be paid $20,000.00 on the
Start Date. You are encouraged to use a substantial portion of this amount to
purchase shares of the Company’s common stock via the Company’s employee stock
purchase plan.

	4.	 	BONUS

     In addition to your salary, commencing with respect to calendar year 2004,
you will be eligible to earn an annual bonus of up to 35% of your base salary
if you meet or exceed certain performance standards which will be mutually
determined by you, the Chief Executive Officer and the Chief Operating Officer
and approved by the Compensation Committee. The

 

 

performance standards will be mutually determined and approved prior to
the beginning of each calendar year (except the performance standards for the
balance of calendar year 2004 will be determined within thirty (30) days of the
Start Date). You will be eligible for an annual bonus for any calendar year
only if you remain employed with the Company as of December 31 of such calendar
year. The bonus will be payable within ten (10) days of the public release by
the Company of its financial results for the relevant calendar year. The bonus
will be payable, at your election, in cash and/or shares of Company common
stock.

	5.	 	BENEFITS

     You will also be entitled, during the term of your employment, to such
employee benefits as the Company may offer from time to time, subject to
applicable eligibility requirements, including but not limited to the right to
participate in the Company’s 401(k) plan. You will be entitled to three (3)
weeks paid vacation.

	6.	 	STOCK OPTION

     As we have discussed, our compensation structure is weighted towards
equity ownership because we believe we will create the most value for the
Company and its shareholders over time by having employees think and act like,
and therefore be, owners. To this end, and subject to approval by the
Compensation Committee, you will be granted a five (5) year option to purchase
40,000 shares of Company common stock, which will vest as to 8,000 shares on
December 30, 2004 and at the rate of 8,000 shares on the first day of January
of each of 2005, 2006, 2007 and 2008, provided you remain in the employ of the
Company on said dates. The options will provide for accelerated vesting upon a
Change of Control (as defined below). The strike price will be the fair market
value per share of such stock on the last trading day immediately preceding the
Start Date. The options will be incentive stock options to the extent
permissible under the Internal Revenue Service Code and Regulations and to the
extent available under the Company’s 2001 stock plan. Your option will be
documented by delivery to you of a stock option agreement. The Committee will
consider and may in its discretion issue future option grants to you based on
your performance, the Company’s operating results and other appropriate
factors.

     For purposes hereof, the term “Change of Control” means:

(i) the acquisition (other than by the Company) by any person,
entity or “group” within the meaning of Section 13(d) or 14(d) of
the Securities Exchange Act of 1934 (the “Exchange Act”)
(excluding, for this purpose, the Company or its subsidiaries or
any employee benefit plan of the Company or its subsidiaries which
acquires beneficial ownership of voting securities of the Company)
of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act), of 50% or more of either the
then outstanding shares of common stock or the combined voting
power of the Company’s then outstanding capital stock entitled to
vote generally in the election of directors; or

2

 

(ii) individuals who, as of the date hereof, constitute the Board
of Directors (as of the date hereof the “Incumbent Board”) cease
for any reason to constitute at least a majority of the Board,
provided that any person becoming a director subsequent to the date
hereof 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 person were a member of the Incumbent Board; or

(iii) approval by the shareholders of the Company of (x) a
reorganization, merger, consolidation or share exchange, in each
case, with respect to which persons who were the shareholders of
the Company immediately prior to such reorganization, merger,
consolidation or share exchange do not, immediately thereafter, own
more than 50% of the combined voting power entitled to vote
generally in the election of directors of the reorganized, merged,
consolidated or other surviving company’s then outstanding voting
securities, (y) a liquidation or dissolution of the Company or (z)
the sale of all or substantially all of the assets of the Company.

	7.	 	TERMINATION OF EMPLOYMENT

     Your employment may be terminated at any time by you or by the Company
with or without Cause, without prior written notice. This at-will employment
relationship cannot be changed except in writing signed by the Chief Executive
Officer of the Company or the Chairman of the Compensation Committee. The
following matters will provide the Company with justification for termination
of your employment with “Cause”:

     (a) your conviction of any act by you of fraud or embezzlement;

     (b) your conviction of any felony involving an act of dishonesty, moral
turpitude, deceit or fraud;

     (c) your conviction of any act of dishonesty or misconduct (whether in
connection with your responsibilities as an employee of the Company or
otherwise) that either materially impairs the Company’s business, goodwill or
reputation or materially compromises your ability to represent the Company with
the public; or

     (d) your material failure to perform your lawful duties to the Company
after receiving written notice from the Company describing such failure in
reasonable detail.

	8.	 	PAYMENTS UPON TERMINATION OF EMPLOYMENT

     Nothing in this Agreement shall be construed to prevent us from
terminating your employment hereunder, with or without Cause. If you terminate
your employment or if the Company terminates your employment with or without
Cause, the Company will pay you any accrued and unpaid base salary (subject to
normal withholding and other deductions) to the effective date of termination
of your employment. In addition, if your employment with the

3

 

Company is terminated by the Company without Cause or if you terminate
your employment with the Company following (i) a material adverse alteration or
diminution in the nature or status of your authority, duties or
responsibilities from those in effect immediately prior to such change, or (ii)
a reduction in your base salary: (a) you will be entitled to receive Severance
Pay (as herein defined); (b) you will be entitled to receive Continuing
Benefits (as herein defined); and (c) any non-vested stock option which is
scheduled to vest as of the next January 1 will vest as of the date of the
termination of your employment in an amount equal to the amount scheduled to
vest as of said January 1 multiplied by a fraction, the numerator of which
shall be the number of days of the then current calendar year up to and
including the date of termination and the denominator of which will be 365.
For purposes hereof: “Severance Pay” means (i) payments equal to your base
salary at the time of the termination payable in monthly installments
throughout the period ending six (6) months from the date of employment
termination (which period shall be extended to twelve (12) months for any
termination on or after April 15, 2005); and (ii) an amount equal to the
average annual bonus earned by you (whether paid or deferred) for the three
most recent annual periods or such shorter period if the termination occurs
before you have served for three annual periods (such amount shall be payable
within forty-five (45) days after the end of the applicable calendar year); and
“Continuing Benefits” means medical, dental, vision, long-term care, life and
disability insurance coverage and any post-employment entitlement for six (6)
months following the termination (which period shall be extended to twelve (12)
months for any termination on or after April 15, 2005) at levels comparable to
that provided immediately prior to your termination (all at the cost of the
Company except for any contributions paid by you prior to the termination).
Notwithstanding the foregoing, if such termination occurs within twelve (12)
months following a Change of Control, the Severance Pay shall be payable, at
your election, either in a lump sum within thirty (30) days of the date of
employment termination or in periodic payments over a period not to exceed
three (3) years.

	9.	 	NON-COMPETITION

     For a one (1) year period from and after termination of your employment
for any reason (except if such termination occurs within twelve (12) months
following a Change of Control), you shall not engage, directly or indirectly,
either on your own behalf or on behalf of any other person, firm, corporation
or other entity, in any business competitive with any business of the Company
(or any of its subsidiaries), in the geographic area or areas in which Company
(or any of its subsidiaries) is conducting business at the time of termination
of your employment, or own more than 5% of any such firm, corporation or other
entity. Upon any violation of the foregoing sentence, you will forfeit any
remaining amounts payable to you hereunder in addition to any other remedies
available to the Company as a result of the violation.

	10.	 	CONFIDENTIALITY

     With your employment comes the responsibility that you will honor any
confidentiality agreements you have signed with other entities. If you have
any confidential information or trade secrets, written, or otherwise known by
you, you agree not to bring them to the Company, and you agree not to use them
in any way. You attest that you have not signed a “non-competition” agreement
or any other agreement that would prohibit you from working here.

4

 

	11.	 	ADDITIONAL PROVISIONS

     The terms described in this letter agreement will be the terms of your
employment, and this letter supersedes any previous discussions or offers. Any
additions or modifications of these terms would have to be in writing and
signed by you and the Chief Executive Officer of the Company or the Chairman of
the Compensation Commission.

     The validity, interpretation, construction and performance of this letter
agreement shall be governed by the laws of the State of Delaware (except their
provisions governing the choice of law).

     If you agree that this letter agreement evidences our agreement concerning
your employment with the Company, please indicate so by signing both copies of
this letter retaining one for your files. This offer and all terms of
employment stated in this letter agreement will expire if you have not returned
a signed copy to me on or prior to April 9, 2004.

     We are very excited about you joining us. I look forward to a productive
and mutually beneficial working relationship. Please let me know if I can
answer any questions for you about any of the matters outlined in this letter
agreement.

	 	 	 
	

	 	Sincerely,
	 
	 	 
	

	 	/s/ John G. Meyer, Jr.
	

	 	 
	

	 	John G. Meyer, Jr.,

President and Chief Executive Officer

ACCEPTANCE

I accept employment with The Allied Defense Group, Inc. under the terms set
forth in this letter agreement:

	 	 	 
	/s/ Wayne F. C. Hosking, Jr.

	 	 
	 	 	 

	Wayne F. C. Hosking, Jr., Esq.
	 	 

5

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