Document:

exv10w3

 

EXHIBIT 10.3

SEPARATION AGREEMENT

          This Separation Agreement (“Agreement”) is made and entered into as of
April 1, 2004 (“Effective Date”), by and between Interstate Hotels & Resorts,
Inc., a Delaware corporation (successor in interest to MeriStar Hotels &
Resorts, Inc.) (“IHR”), Interstate Management Company L.L.C., a Delaware
limited liability company (successor in interest to MeriStar Management Company
L.L.C.) (“IMC”) (collectively, the “Company”), and Paul W. Whetsell
(“Executive”).

          WHEREAS, the Company and the Executive are parties to an Executive
Employment Agreement dated November 1, 2001 (the “Employment Agreement”); and

          WHEREAS, the Company and the Executive have twice amended that Employment
Agreement, once on July 31, 2002 and once on December 13, 2002; and

          WHEREAS, the Company and the Executive have agreed to terminate their
employment relationship and end the Term of the Employment Agreement on the
basis of the terms set forth in this Agreement.

          NOW THEREFORE, AND IN CONSIDERATION of the mutual promises of the parties
to this Agreement, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:

     1. Termination. The Employment Agreement and Executive’s employment shall
be terminated effective at midnight on March 31, 2004 (“Termination Date”).
Executive’s termination is agreed by the parties to be without Cause pursuant
to Section 5(b) of the Employment Agreement. The termination of Executive’s
employment will not affect his role as Chairman of the Board of Directors of
IHR (the “Board of Directors”). The parties shall, contemporaneously with
their execution of this Agreement, execute a side letter governing certain
terms and conditions of Executive’s service as Chairman of the Board of
Directors.

     2. Benefits. Except as provided for in this Agreement, immediately
following the Termination Date the Company shall cease providing and/or sharing
the cost of all benefits that had been provided to the Executive in connection
with his employment, including but not limited to health and dental insurance;
life insurance; stock option and other incentive compensation plans (except as
provided for in this Agreement); other insurance; pension, profit-sharing and
bonus plans; expense reimbursement; and car allowances; provided however, that
Executive shall continue to be eligible to participate in all benefit plans
available to members of the Board of Directors for as long as Executive serves
as a Director, including, but not limited to, the Company’s deferred
compensation plan.

     3. Severance and Other Obligations Upon Termination. Provided the
Revocation Period set forth below has expired without revocation, the Company
shall provide

 

 

Executive the following severance benefits in lieu of the benefits
contemplated in Executive’s employment agreement:

          (a) Executive shall be granted restricted stock with a face value
equivalent to one million five hundred and sixty-two thousand five hundred
dollars ($1,562,500) pursuant to the Restricted Stock Agreement attached as
Exhibit A to this Agreement. The restricted stock granted pursuant to this
Section 3(a) shall be valued at the average ten-day trailing closing price on
the New York Stock Exchange of IHR’s publicly traded common stock (the
“Valuation Price”), measured from the Effective Date of this Agreement. In the
event that use of the aforementioned average ten-day trailing closing price
would result in a grant in excess of 250,000 shares of restricted stock, the
grant shall be limited to 250,000 shares and the difference in value between
the grant of 250,000 shares and $1,562,500 shall be paid to Executive in cash
(the “Cash Payment”). At the Executive’s direction, the Company will reimburse
the Executive the amount the Executive owes for federal and state taxes,
assuming that Mr. Whetsell is paying at the then highest marginal tax rate for
federal and state income tax purposes, for the vesting of the 250,000 shares
and the Cash Payment of the whether paid through withholdings or directly by
the Executive in one or more payments no later than 10 days prior to such tax
amount being due.

               The Company anticipates that the grant of restricted stock pursuant to
this Section 3(a) will not trigger the applicable provisions of Section 280G of
the Internal Revenue Code. The Company will indemnify Executive, as currently
provided for in the Employment Agreement, if the Internal Revenue Service takes
the position at anytime in the future that Section 280G was triggered by the
payments and/or grants made pursuant to this Agreement.

          (b) All unvested stock options Executive currently holds in IHR shall vest
immediately upon expiration of the Revocation Period, provided there has been
no revocation. If at any time executive ceases his service as Chairman, for
whatever reason and whether voluntary or involuntary, all unexercised vested
stock options shall remain exercisable until the earlier of (i) one year after
the last day that Executive held the position of Chairman, or (ii) the
expiration date of the option.

          (c) Executive currently holds 156,542 unvested restricted shares which
will vest in accordance with the Restricted Stock Agreement attached as Exhibit
B to this Agreement. At the Executive’s direction, the Company will reimburse
the Executive the amount the Executive owes for federal and state taxes,
assuming that Mr. Whetsell is paying at the then highest marginal tax rate for
federal and state income tax purposes, for the vesting of the 156,542 shares
whether paid through withholdings or directly by the Executive in one or more
payments no later than 10 days prior to such tax amount being due.

          (d) In all respects except as provided for expressly in this Agreement,
all restricted stock granted pursuant to this Agreement or otherwise shall be
governed by the applicable Restricted Stock Agreement.

          (e) All payments set forth above will be subject to applicable taxes and
withholding.

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     4. At the time of the disposition of any asset held by MeriStar Investment
Partners, L.P. (the “MIP Portfolio”), the Company shall pay Executive a bonus
payment in an amount equal to the lesser of (i) an amount equal to any portion
of Executive’s initial investment in the portfolio ($142,500) (the “Executive
Investment”) that he has not yet received; or (ii) an amount equal to a pro
rata portion of Executive’s initial investment in the MIP portfolio (less
amounts previously received by Executive) calculated on the basis of IHR’s
cumulative return of its initial investment in the MIP portfolio. By way of
illustration, the parties agree that if one asset in the MIP Portfolio is sold
(prior to any other assets in the MIP Portfolio being sold) and there is a
return to IHR of 10% of IHR’s initial capital investment, then the Executive
will receive a payment pursuant to the Section equal to 10% of the Executive
Investment. If subsequently, the remainder of the MIP portfolio is disposed of
for an amount equal to ninety five percent (95%) of the IHR’s initial capital
investment therein, then the Executive will receive an additional payment equal
to ninety percent (90%) of the amount of Executive’s Investment. In the event
that IHR receives a sum greater than its initial investment upon disposition of
the MIP portfolio, the Company may, in its sole discretion increase Executive’s
bonus payment under this Section 4 by an amount deemed appropriate by the
Company.

     5. Acknowledgments.

          (a) Executive acknowledges that the payments and other benefits set forth
in this Agreement fully satisfy any and all obligations the Company has under
the Employment Agreement and that the Company has no obligation to make any
other payments or provide any other benefits to the Executive except (i) as set
forth in this Agreement and (ii) for any unreimbursed expenses Mr. Whetsell has
or will incur in connection with his activities on behalf of the Company.
Executive waives any rights to any other payments or benefits from the Company
not provided for in this Agreement.

          (b) Executive agrees to comply with all ongoing obligations set forth in
the Employment Agreement. Without limiting the foregoing, Executive
acknowledges and agrees that he shall comply with the restrictions related to
the preservation of confidential information, the restrictions that prohibit
Executive from soliciting Company employees for employment, as set forth in and
according to the terms of Sections 7 and 8 of the Employment Agreement. The
Company agrees that it shall indemnify Executive as provided for in the
Employment Agreement, including but not limited to the provisions of Section
4(i) of the Employment Agreement, and shall provide Executive all excise tax
payments as required by Section 5(k) of the Employment Agreement, should such
indemnification or excise tax payments be required according to the terms of
Sections 4(i) and 5(k), respectively. Nothing in this Section 5(b) shall be
construed as imposing on Executive or Company any obligations that are not
imposed by the Employment Agreement.

          (c) The Company acknowledges that it has no present knowledge of any
conduct by Executive as of the Effective Date that would constitute a violation
of the Employment Agreement or otherwise provide the Company grounds to
terminate Executive’s employment for Cause as defined therein.

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     6. Non-Disclosure.

          (a) Executive agrees to keep the terms of this Agreement and the
discussions leading to the Agreement confidential and not to disclose the terms
to any person (other than his immediate family, his legal counsel, and his
financial and tax advisors or as required by law or court order) without
express prior written consent from the Company. Notwithstanding the foregoing,
however, Executive and the Company agree that the terms of Executive’s
Employment Agreement are already public knowledge and therefore are not subject
to non-disclosure.

          (b) Notwithstanding any other provisions of this Agreement, any party to
this Agreement (and each employee, representative, or other agent of such
party) may disclose to any and all persons, without limitation of any kind, the
tax treatment and tax structure of the transaction and all materials of any
kind (including opinions and other tax analyses) that are provided to the party
relating to such tax treatment and tax structure, provided that in connection
with any such disclosure all references to the settlement amount paid pursuant
to this Agreement, and other figures from which the settlement amount may be
estimated or calculated, shall be redacted.

          (c) No provision of this Agreement shall be construed as prohibiting
Executive from providing truthful and accurate information in response to a
valid subpoena issued by a court of competent jurisdiction or other duly
authorized entity. However, Executive agrees to notify the Company by
contacting a Company officer promptly before complying with such a subpoena, so
that the Company may protect its interests, including moving to quash the
subpoena if necessary.

          (d) Except as provided in Paragraph 6(c) above, and as necessary to
enforce the terms of this Agreement, each party agrees that no part of this
Agreement is to be construed as used as, or admitted into evidence in any
proceeding of any character, judicial, administrative or otherwise.

     7. Non-Disparagement. Executive shall make no statements disparaging the
Company, any of its affiliates, any of its officers, directors, or employees,
or any of its business practices. The Company’s directors and officers shall
make no statements disparaging the Executive.

     8. Waiver and Release.

          (a) In consideration of the severance payments and other benefits outlined
in this Agreement, Executive, for himself, his attorneys, heirs, executors,
administrators, successors, and assigns, does hereby fully and forever release
and discharge Interstate Hotels & Resorts, Inc., Interstate Management Co.,
LLC, their parent, subsidiary, and affiliate corporations, and all related
companies, as well as all predecessors, successors, assigns, directors,
officers, partners, agents, employees, former employees, heirs, executors,
attorneys, and administrators (hereinafter “Releasees”) from all suits, causes
of action, and/or claims, demands or entitlements of any nature whatsoever,
whether known, unknown, or unforeseen,

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which he has or may have against the Releasees arising out of or in connection
with his employment by the Company (other than the obligations imposed on the
Company pursuant to this Agreement), the termination of his employment, or any
event, transaction, or matter occurring or existing on or before the date on
which he executes this Agreement. Executive agrees, without limiting the
generality of this Waiver and Release, not to file or otherwise institute any
claim or lawsuit seeking damages or other relief and not to otherwise assert
any claims that are lawfully released herein. Executive further hereby
irrevocably and unconditionally waives any and all rights to recover any relief
or damages concerning the claims that are lawfully released herein. Executive
represents and warrants that he has not previously filed or joined in any such
claims, demands or entitlements against the Releasees and that he will
indemnify and hold harmless the Releasees from all liabilities, claims,
demands, costs, expenses and/or attorneys’ fees incurred as a result of any
such claims.

EXECUTIVE HEREBY ACKNOWLEDGES AND AGREES

THAT THIS RELEASE IS A GENERAL RELEASE.

          (b) This Release specifically includes, but is not limited to, all claims
relating to Executive’s employment and the termination of that employment, all
claims of breach of contract, employment discrimination (including, but not
limited to, discrimination on the basis of race, sex, religion, national
origin, age, pregnancy, disability or any other protected status, and coming
within the scope of Title VII of the Civil Rights Act, the Age Discrimination
in Employment Act, the Older Workers Benefit Protection Act, the Americans with
Disabilities Act, and the Family & Medical Leave Act, all as amended, or any
other applicable state, federal, or local law), claims under the Employee
Retirement Income Security Act, as amended, claims under the Fair Labor
Standards Act, as amended (or any other applicable federal, state or local
statute relating to payment of wages), claims under the Uniformed Services
Employment and Reemployment Rights Act of 1994, and the Veterans’ Reemployment
Rights Law of 1940, as amended, and claims concerning recruitment, hiring,
discharge, promotions, transfers, right to reemployment, salary rate, severance
pay, stock options, wages or benefits due, sick leave, holiday pay, vacation
pay, life insurance, any other leave, group medical insurance, any other fringe
benefits, worker’s compensation, termination, employment status, libel,
slander, defamation, intentional or negligent misrepresentation and/or
infliction of emotional distress, together with any and all tort, contract, or
other claims which might have been asserted by Executive or on his behalf in
any suit, charge of discrimination, or claim against the Releasees.

          (c) Executive acknowledges that he has been given an opportunity of
twenty-one (21) days to consider this Release and that he has been encouraged
by Company to discuss fully the terms of this Release with legal counsel of his
own choosing. Executive may, if he so desires, execute this Agreement prior to
the expiration of the 21-day consideration period. Moreover, for a period of
seven (7) days following his execution of this Release (“Revocation Period”),
Executive shall have the right to revoke the waiver of claims arising under the
Age Discrimination in Employment Act, a federal statute that prohibits
employers from discriminating against employees who are age 40 or over. If he
elects to revoke this Waiver and Release within this seven-day period, he must
inform Company by delivering a written notice of revocation to Shane Brennan no
later than 5:00 p.m. on the seventh calendar day following his execution of
this Waiver and Release. However, if Executive elects to exercise this
revocation

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right, this Agreement shall be voided in its entirety at the election of
Company and Company shall be relieved of all obligations to make any payments
required under this Agreement. If Executive does not revoke this Release, he
understands and agrees that it will become fully enforceable immediately after
the seven day revocation period has expired.

     9. General Terms.

          (a) Governing Law. This Agreement shall be governed by the laws of the
State of Delaware, without regard to its conflicts of laws principles.

          (b) Non-Admissions. This Agreement does not constitute an admission of
liability or wrongdoing on the part of the Company, Executive, or any of the
Releasees.

          (c) Consideration. Executive affirms that the terms stated herein are the
only consideration for executing this Agreement, that no other representations,
promises, or agreements of any kind have been made to him, by any person or
entity whatsoever to cause him to execute this Agreement.

          (d) Entire Agreement. This Agreement contains and constitutes the entire
understanding and agreement by and among the parties and supersedes and cancels
all previous negotiations, agreements, commitments, and writings in connection
with the termination of Executive’s employment. The Employment Agreement shall
continue to bind Executive and Company according to its terms and with regard
to all ongoing obligations and commitments, except that to the extent any
provision of this Agreement is inconsistent with any provision of the
Employment Agreement, the terms of this Agreement shall control.

          (e) Release and Discharge. This Agreement may not be released,
discharged, modified or supplemented except in a writing signed by the Chief
Executive Officer of the Company and Executive.

          (f) Binding Agreement. This Agreement shall be binding upon and inure to
the benefit of the parties and their respective representatives, successors and
permitted assigns; however, this Agreement is a personal contract calling for
the provision of unique services by the Executive, and the Executive’s rights
and obligations hereunder may not be sold, transferred, assigned, pledged or
hypothecated by the Executive.

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[SIGNATURE PAGE FOLLOWS]

     EXECUTIVE STATES THAT HE IS SIGNING THIS AGREEMENT KNOWINGLY AND
VOLUNTARILY AND THAT HE HAS NOT BEEN COERCED INTO SIGNING THIS AGREEMENT.

     THE UNDERSIGNED STATE THAT THEY HAVE CAREFULLY READ THIS AGREEMENT, THAT
THEY KNOW AND UNDERSTAND ITS TERMS, AND THEY SIGN IT FREELY.

     IN WITNESS WHEREOF, the parties have duly executed this Agreement:

	 	 	 	 	 
	 	 	EXECUTIVE
	 
	 	 	 	 
	 	 	

Paul W. Whetsell
	 
	 	 	 	 
	 	 	INTERSTATE HOTELS & RESORTS, INC.
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	

	

	 	Name:	 	 
	

	 	 	 	

	

	 	Title:	 	 
	

	 	 	 	

	 
	 	 	 	 
	 	 	INTERSTATE MANAGEMENT COMPANY, L.L.C.
	 
	 	 	 	 
	 	 	By: Interstate Operating Company, L.P.,

its member
	 
	 	 	 	 
	 	 	By: Interstate Hotels & Resorts, Inc.,

its general partner
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	

	

	 	Name:	 	 
	

	 	 	 	

	

	 	Title:	 	 
	

	 	 	 	

7exv10w51

 

Exhibit 10.51

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (“Agreement”) is made effective as of the 15th day
of June, 2004 by and between ENTREMED, INC., a Delaware corporation having its
principal office at 9640 Medical Center Drive, Rockville, MD 20850 (the
“Company”), and James S. Burns (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 the
Executive during the Term (as hereafter defined) to act as, and to exercise
all of the powers and functions of, its President and Chief Executive Officer
(“CEO”) and to perform such acts and duties and to generally furnish such
services to the Company and its subsidiaries (if any) as are customary for a
senior management person with a similar position in like companies. At all
times Executive shall report directly to the Board of Directors of the
Company (“Board”) and shall have such specific powers, duties and CEO
responsibilities as the Board of Directors of the Company (the “Board”) shall
from time to time reasonably prescribe. 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 full working time and efforts to the business and affairs of the
Company and its subsidiaries. During the Term, it shall not be a violation of
this Agreement for Executive to serve on corporate, civic or charitable
boards or committees or engage in other activities that are consistent with
the Company’s Code of Ethics and other Company policies, so long as Executive
notifies the Board or an appropriate committee thereof in advance and such
service or activities do not significantly interfere with the performance of
Executive’s responsibilities hereunder.

Subject to applicable Delaware law, the Company agrees to use its best
efforts to cause Executive to be appointed, as soon as practicable hereafter,
as a member of the Board to the class of directors with the term expiring at
the 2005 annual meeting of the shareholders. The Company shall thereafter use
its best efforts to cause the Executive to be nominated for a seat on the
Board at the next annual meeting of the Company’s shareholders, it being
acknowledged that such nomination is subject to applicable Delaware law. If
the Executive ceases to be an employee of the Company for any reason,
Executive agrees that he shall immediately resign as a member of the Board.

2.  Place of Employment.

While Executive is employed by the Company during the Term, Executive shall
be required to conduct his duties and responsibilities hereunder primarily
from the Company’s principal offices (except for routine and customary
business travel).

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3.  Compensation.

     a. Base Salary. While Executive is employed by the Company during
the Term, the Company shall pay to Executive an annual minimum base salary
(“Base Salary”) of $360,000, payable in accordance with the Company’s
customary payroll policy for its executives.

     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
increases in Executive’s Base Salary as it deems appropriate in its
discretion.

     c. Incentive Compensation. As soon as practical after the
execution of this Agreement and thereafter not later than sixty (60) days
after the commencement of each fiscal year during the Term, the Board or a
committee thereof shall meet with the Executive and, after consulting with
Executive, establish performance goals and objectives for Executive and for
the Company for the fiscal year. If such performance goals and objectives are
satisfied by the Executive and the Company as reasonably determined by the
Board or a committee thereof, the Executive shall receive incentive
compensation (“Incentive Compensation”), if Executive is employed by the
Company at the end of the fiscal year, equal to forty percent (40%) of
Executive’s Base Pay or such greater amount as may be determined by the Board
or a committee thereof. Notwithstanding the foregoing, Executive’s Incentive
Compensation opportunity for the fiscal year ending December 31, 2004 shall be
prorated based on the portion of such fiscal year that is within the Tenn.

     d. Certain Other Benefits. While Executive is employed by the
Company during 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, retirement and life insurance plans, and automobile
expense reimbursement allowances. Executive shall also be afforded 30 days
“paid time off” per year 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 the date hereof
and continuing through and including June 15, 2007 (the “Initial Term”);
provided, however, that the term of this Agreement shall be automatically
extended 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

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any Successor Term. The provision by the Company of a notice of nonextension
shall be deemed to be a termination without Cause under subparagraph 8(d)
hereof. In the event such notice is given and this Agreement is thereby
terminated and/or this Agreement is terminated for any other reason, only
paragraphs 6, 7, 8(e), 8(f), 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 and policies or as required
by applicable law.

5.  Stock Options.

In addition to the grant described herein, the Board or a committee thereof
may, in its discretion, make periodic stock and incentive stock option grants
to Executive, while Executive is employed by the Company during the Term. As
an initial grant, effective as of the date hereof (the “Initial Grant”),
Executive shall be granted stock options covering 500,000 shares with a per
share exercise price equal to the fair market value of a share of Company
common stock on the date of grant, which options shall vest as to 125,000
covered shares immediately upon the date of the grant, and shall vest as to
the remaining covered shares in cumulative 125,000 share increments on each of
the first, second, and third anniversary dates of the Initial Grant, if
Executive is then employed by the Company. The terms of the stock option
grants under this paragraph 5 shall be 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. In
the event of a termination without Cause pursuant to subparagraph 8(d) hereof
or a resignation for Good Reason pursuant to paragraph 9 hereof, stock option
grants to Executive, if any, which by their terms would have vested during the
twelve (12) month or eighteen (18) month, as applicable, severance period set
forth in subparagraph 8(d) if Executive had been employed by the Company
during such severance period will continue to vest (subject to the accelerated
vesting provided by subparagraph 8(d) hereof in the event of a termination
without Cause occurring after the first anniversary of the commencement of the
Term and paragraph 9 hereof in the event of a resignation for Good Reason)
during such period and be exercisable in accordance with the terms of such
grants until the first anniversary of the Executive’s termination, but in no
event beyond the full term of the relevant option.

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 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, principals, 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

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confidential information shall not include any information known generally to
the public (other than as a result of unauthorized disclosure by Executive) or
any information so otherwise considered by the Company not to be confidential.

7.  Indemnification.

     a. The Company shall 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 the 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.

8.  Termination

     a. Termination 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 twelve (12) months following the month
in which his death occurred, payable over such twelve (12) 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

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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 its executives, through the
last day of the twelve (12) 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. The effective date
of any such termination shall be the date specified by the Company which date
may be any date on or after the date notice of such termination is provided to
Executive. Executive’s employment may be terminated for Cause only by a
resolution of the Board finding that in the good faith opinion of the Board
that Executive engaged in conduct that constitutes Cause. Prior to adoption of
any such resolution, Executive shall (i) be given reasonable notice of the
proposed resolution upon which the proposed termination for Cause is based,
and (ii) have the opportunity to be heard before the Board. Upon any such
termination for Cause under this subparagraph 8(c), the Company shall pay to
him his Base Salary through the date of termination, 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 prior written notice which specifies
the date of termination. Until the effective date of any such termination, the
Company shall continue to pay to him the full compensation specified in this
Agreement. Following termination, Executive shall make himself reasonably
available to members of the Board and to 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. If
Executive is terminated pursuant to this subparagraph 8(d) or the Company
provides written notice on nonextension of this Agreement in accordance with
Section 4 hereof, the Company shall (i) pay Executive a severance amount equal
to twelve (12) months Base Salary over the following twelve (12) month period
at the Company’s normal pay periods, and (ii) provide Executive, at no
charge to Executive, COBRA continuation coverage under the Company’s
health insurance

5

 

program for a period of twelve (12) months 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, during the Term, Executive is terminated without Cause
within eighteen (18) months of the effective date of this Agreement, the
phrase “twelve (12) months” in the preceding sentence shall be replaced in
each place it appears with the phrase “eighteen (18) months.” 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. If, during the Term, Executive is terminated without Cause
after the first anniversary of the effective date of this Agreement,
notwithstanding anything in this Agreement to the contrary, all of Executive’s
unexpired and unvested stock options shall become vested on the effective date
of such termination.

     e. Non-competition. For a period of twelve (12) months after
termination of Executive’s active employment with the Company, Executive shall
not, as an individual, principal, agent, employee, consultant or otherwise,
directly or indirectly, in the United States or, with respect to any company
or entity in Europe or Canada with whom Executive or the Company has concluded
partnership, licensing or other similar business development agreements on
behalf of and 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 research, development or commercialization of compounds,
analogs or derivatives of those compounds that compete directly with those
being researched, developed and/or commercialized by the Company during the
Term. Moreover, for a period of twelve (12) months after the termination of
Executive’s employment with the Company, Executive shall not take any action,
without the prior written consent of the Company, to assist Executive’s
successor employer or any other entity in recruiting or hiring any other
employee who was an employee of the Company during Executive’s employment.
This prohibition includes (i) identifying to such successor employer or its
agents or such other entity, the person or persons who have special knowledge
concerning the Company or its inventions, processes, methods or confidential
affairs. (ii) commenting to Executive’s successor employer or its agents or
such other entity about the quantity of work, quality of work, special
knowledge or personal characteristics of any person who is still employed by
the Company. Executive also agrees that he will not provide such information
to a prospective employer or to an executive search firm during interviews
preceding possible employment.

     f. 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,

6

 

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 communicate
negatively about or otherwise disparage Executive in any way, except as may
be required for truthful sworn testimony or in connection with a legal or
administrative proceeding, report, claim or dispute. In the event Executive
breaches any of the conditions set forth herein or in any other paragraph of
this Agreement, the Company shall discontinue the provision of any payment or
benefits to him under this Agreement and he shall forfeit his entitlement to
any further payments or benefits under this Agreement.

     g. 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 date of termination. Until the effective date of such
termination, the Company shall continue to pay him the full compensation
specified in this Agreement, provided he continues to perform his duties
during this period. Thereafter, the Company shall have no further
obligations to him under this Agreement, except as expressly provided herein
or as provided under the terms of any of the Company’s compensation and
benefit plans, programs or policies, or as required by applicable law. This
subparagraph 8(g) shall not apply to the Executive’s resignation for Good
Reason pursuant to paragraph 9 hereof.

     h. 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, or he resigns for Good Reason pursuant to paragraph 9
hereof, 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.

     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 benefit plans from all claims, demands,
liabilities and causes of action arising out of facts or occurrences arising
or occurring at any time, up to an including the time of Executive’s
termination, 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 written notice to the Company that
specifies the reason for, and the effective date of, his termination. 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

7

 

subparagraph 8(d) hereof as if he had been terminated without Cause
and, notwithstanding anything in this Agreement to the contrary, all of
Executive’s unexpired and unvested stock options shall become vested on the
effective date of such resignation.

10.  Definitions.

     a. “Cause” shall mean Executive’s (i) refusal to perform any material
duties reasonably required of the Executive by the Board (other than by
reason of disability), after reasonable demand for substantial performance is
delivered by or on behalf of the Board specifically identifying the manner in
which the Board believes the Executive has not performed his duties; (ii)
conviction involving personal dishonesty or moral turpitude; (iii)
perpetration of a dishonest act against or breach of fiduciary duty toward
the Company; (iv) willful act or omission that is injurious in any material
respect to the financial condition or business reputation of the Company; or
(v) habitual drunkenness or drug addiction.

     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) consecutive
days in any twelve (12) month period of the Term. Any questions as to the
existence or extent of illness or incapacity of Executive, upon which the
Company and Executive cannot agree, shall be determined by a qualified
independent physician selected by the Company and approved by the Executive.
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. “Change of Control” shall mean (i) any Person or Persons acting
together, excluding the employee benefit plans of the Company, acquire or
become the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act or any successor provisions thereto), directly or indirectly of
securities of the Company representing fifty one percent (51%) or more of the
combined voting power of the Company’s then outstanding securities; (ii) the
Company consummates a merger, consolidation, share exchange, division or other
reorganization or transaction of the Company ( a “Fundamental Transaction”)
with any other corporation, other than a Fundamental Transaction which would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least sixty
percent (60%) of the combined voting power immediately after such Fundamental
Transaction of (A) the Company’s outstanding securities, (B) the surviving
entity’s outstanding securities or (C) in the case of a division, the
outstanding securities of each entity resulting from the division; (iii) the
shareholders of the Company approve a plan of complete liquidation or
winding-up of the Company or the Company consummates the sale or disposition
(in one transaction or a series of transactions) of all or substantially all
of the Company’s assets; or (iv) during any period of twenty-four consecutive months, individuals who at the beginning of such
period

8

 

constituted the Board (including for this purpose any new director
whose election or nomination for election by the Company’s shareholders was
approved by a vote of at least two thirds of the directors then still in
office who were directors at the beginning of such period) cease for any
reason to constitute at least a majority of the Board.

     d. “Exchange Act” shall mean the Securities Exchange Act of 1934, as
amended from time to time.

     e. "Good Reason” shall mean the occurrence of any of the following events
after a Change of Control: (A) the assignment to Executive of any duties
inconsistent in any material respect with Executive’s position, authority,
duties or responsibilities immediately prior to the Change of Control 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; (C) the Company’s requiring Executive to be
based at any office or location that is more than fifty (50) miles from
Executive’s office or location as of immediately prior to the Change of
Control; (D) 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 immediately prior to
the Change of Control, unless such change was applicable to all senior
executives of the Company; (E) the failure by the Company to pay to Executive
any deferred compensation when due under any deferred compensation plan or
agreement applicable to him; or (F) the failure by the Company to honor in any
material respect the terms and provisions of this Agreement.

     f. “Person” shall have the meaning given in Section 3(a)(9) of the
Exchange Act and shall also include any syndicate or group deemed to be a
“person under Section 13(d)(3) of the Exchange Act.

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.

9

 

     c. Governing Law. This Agreement shall be governed as to its
validity, interpretation and effect by the laws of the State of Delaware,
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.

     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 except
with respect to those agreements relating to the assignment of patents and
inventions and a Combined Non-disclosure and Patent Employee Agreement to
which Executive acknowledges signing and which will remain in effect.

     g. Captions. All captions and heading 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 such officer as may be specifically
designated by the Board or its delegee. The Company’s or the Executive’s
failure 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.

     i. 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
class postage prepaid, addressed as follows:

If to Executive:

James S. Burns

c/o EntreMed, Inc.

9640 Medical Center Drive

Rockville, Maryland 20850

With a copy to:

10

 

Paul Skelly, Esq.

Hogan & Hanson LLP

555 13th St N.W.

Washington, DC 20004

If to the Company:

EntreMed, Inc.

9640 Medical Center Drive

Rockville, Maryland 20850

Attn.: General Counsel

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

IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective
as of the date first above written.

 

 

	 	 	 	 	 
	 	 	/s/ James S. Burns
	 	 	
 
	 	 	Executive
	 
	 	 	 	 
	 	 	EntreMed, Inc.
	 
	 	 	 	 
	 	 	/s/ Michael Tarnow
	

	 	By:	 	 
	

	 	 	 	
 

11

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