EMPLOYMENT AGREEMENT

Exhibit 10.1

EMPLOYMENT AGREEMENT

           AGREEMENT (the "Agreement"), dated as of December 4, 2006 by and between NOVADEL PHARMA INC., a Delaware corporation with principal executive offices at 25 Minneakoning Rd., Flemington, New Jersey 08822 (the "Company"), and DAVID H. BERGSTROM, Ph.D. residing at 15 Kerby Lane, Mendham, New Jersey 07945-2901 (the "Executive").

W I T N E S S E T H:

           WHEREAS, the Company desires to employ the Executive as Chief Operating Officer of the Company, and the Executive desires to serve the Company in that capacity, upon the terms and subject to the conditions contained in this Agreement;

           NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties hereto hereby agree as follows:

           1.       Employment .

           The Company agrees to employ the Executive, and the Executive agrees to be employed by the Company, upon the terms and subject to the conditions of this Agreement.

           2.       Term .

           The employment of the Executive by the Company as provided in Section 1 shall be for a period of three (3) years commencing on the date hereof, unless sooner terminated in accordance with the provisions of Section 8 below (the " Term ").

           3.        Duties; Best Efforts; Place of Performance .

           (a)     The Executive shall initially serve as Chief Operating Officer of the Company and shall perform, subject to the direction of the Chief Executive Officer, such duties as are customarily performed by the Chief Operating Officer. The Executive shall also have such other powers and duties as may be from time to time prescribed by the Chief Executive Officer or Board of Directors of the Company provided that the nature of the Executive’s powers and duties so prescribed shall not be inconsistent with the Executive’s position and duties hereunder.

           (b)      The Executive shall devote substantially all of his business time, attention and energies to the business and affairs of the Company and shall use his best efforts to advance the best interests of the Company and shall not, during the Term, be actively engaged in any other business activity, whether or not such business activity is pursued for gain, profit or other pecuniary advantage, that will interfere with the performance by the Executive of his duties hereunder or the Executive’s availability to perform such

duties or that will adversely affect, or negatively reflect upon, the Company. Notwithstanding the above, Executive may hold external directorships or executive positions with the advance approval of the Company’s Board of Directors.

           (c)      The duties to be performed by the Executive hereunder shall be performed primarily at the office of the Company in Flemington, New Jersey, subject to reasonable travel requirements on behalf of the Company.

           4.        Compensation . As full compensation for the performance by the Executive of his duties under this Agreement, the Company shall pay the Executive as follows:

           (a)      Base Salary. The Company shall pay the Executive a base salary (the "Base Salary") at a rate of $300,000 per annum, payable in equal semi-monthly installments during the Term. The Executive’s Base Salary shall be subject to annual review by the Compensation Committee of the Board of Directors and may be increased, but not decreased, from time to time at the discretion of the Compensation Committee of the Board of Directors.

           (b)      Bonus. The company shall pay the Executive a cash bonus of $100,000 for the period commencing on January 1, 2007 and ending on December 31, 2007, such bonus will be paid in January 2008. In the remaining years of the contract, the Executive shall be eligible to receive a bonus equal to 30% (thirty percent) of his base salary, provided, however, that such bonus shall be payable only upon the successful achievement of certain performance milestones related to the Executive’s role in the Company, which milestones shall be defined and enumerated by mutual agreement between the Executive and the President & Chief Executive Officer of the Company within the first month of Executive’s term of employment, and again at the same time in each succeeding year of Executive’s term of employment with the Company. The amount of Bonus paid to the Executive shall be increased or decreased from time to time at the discretion of the Compensation Committee of the Board.

           (c)      Withholding. The Company shall withhold all applicable federal, state and local taxes and social security and such other amounts as may be required by law from all amounts payable to the Executive under this Section 4.

           (d)      Stock Options and Restricted Shares. On the first day of employment, and as additional compensation for the services to be rendered by the Executive pursuant to this Agreement, the Company shall grant the Executive non-qualified stock options (" Stock Options ") to purchase 900,000 shares of Common Stock of the Company. Such option grant will have a term of ten (10) years. The stock options shall vest upon

• • · 12.5% upon FDA acceptance of NDA submission for zolpidem

    · 12.5% upon FDA acceptance of NDA submission for sumatriptan

    · 12.5% upon Board of Directors approval and successful implementation of portfolio plan for next generation compounds

     

    · 12.5% upon CEO approval and successful implementation of organization plan to address issues in analytical, clinical and regulatory

    · 15% upon completion of a Board of Directors approved licensing deal for zolpidem

    · 15% upon completion of a Board of Directors approved licensing deal for sumatriptan

    · 20% at Board of Directors discretion upon completion of approved licensing deal for zolpidem or sumatriptan

subject, in each case, to the provisions of Section 9 below.

           If the Agreement is not renewed by the Executive beyond its initial term and the Company wishes to renew the Agreement beyond the initial term without substantial change in the terms of this Agreement, but not including Section 4 (d), then such options which have not vested will expire upon termination. In connection with such grant, the Executive shall enter into the Company’s standard stock option agreement which will incorporate the foregoing vesting schedule and the Stock Option related provisions contained in Section 9 below. The exercise price of said 900,000 shares shall be equal to 100% of the Fair Market Value (trading price) on the first date of employment. Such option grants are not incentive stock options, as such, research of taxation for these stock option grants shall be the sole responsibility of the Executive.

           On the first day of employment, and as additional compensation for the services to be rendered by the Executive pursuant to this Agreement, the Company shall grant the Executive 100,000 shares of restricted stock (" Restricted Shares ") pursuant to the Company’s 2006 Equity Incentive Plan. The grant price of said 100,000 Restricted Shares shall be equal to 100% of the Fair Market Value (trading price) on the first date of employment. Such Restricted Shares grant shall contain restrictions that will vest ratably over a three-year period ending on the third anniversary of the grant so that 33,333 shares of the Company’s Stock will vest on the first anniversary of the grant, the second anniversary of the grant, and 33,334 shares of the Company’s Stock will vest on the third anniversary of the grant, subject to the provisions of Section 9 below. If (i) the Executive’s employment is terminated prior to end of term by the Company other than as a result of the Executive’s death or Disability and other than for reasons specified in Sections 9(b) or (c), or (ii) the Executive’s employment is terminated by the Executive for Good Reason or the Company provides notice to Executive this Employment agreement will not be renewed, then all Restricted Shares that are subject to forfeiture as of the termination date or nonrenewal date shall be forfeited and returned to the Company.

           In addition to the equity awards contemplated under this Section 4(b), the Executive shall be eligible for additional annual grants of Stock Options and other equity awards at the discretion of the Compensation Committee of the Board of Directors.

           (e)      Expenses. The Company shall reimburse the Executive for all normal, usual and necessary expenses incurred by the Executive in furtherance of the business

and affairs of the Company, including reasonable travel and entertainment, upon timely receipt by the Company of appropriate vouchers or other proof of the Executive’s expenditures and otherwise in accordance with any expense reimbursement policy as may from time to time be adopted by the Company.

           (f)      Other Benefits. The Executive shall be entitled to all rights and benefits for which he shall be eligible under any benefit or other plans including, without limitation, dental, medical, medical reimbursement and hospital plans, supplemental life insurance plans, pension plans, employee stock purchase plans, profit sharing plans, bonus plans and other so-called "fringe" benefits) as the Company shall make available to its senior executives from time to time.

           (g)      Vacation. The Executive shall, during the Term, be entitled to a vacation of five (5) weeks per annum commencing January 1, 2007, in addition to holidays observed by the Company. The Executive shall not be entitled to carry any vacation forward to the next year of employment.

           5.         Confidential Information and Inventions .

           (a)      The Executive recognizes and acknowledges that in the course of his duties he is likely to receive confidential or proprietary information owned by the Company, its affiliates or third parties with whom the Company or any such affiliates has an obligation of confidentiality. Accordingly, during and after the Term, the Executive agrees to keep confidential and not disclose or make accessible to any other person or use for any other purpose other than in connection with the fulfillment of his duties under this Agreement, any Confidential and Proprietary Information (as defined below) owned by, or received by or on behalf of, the Company or any of its affiliates. "Confidential and Proprietary Information" shall include, but shall not be limited to, confidential or proprietary scientific or technical information, data, formulas and related concepts, business plans (both current and under development), client lists, promotion and marketing programs, trade secrets, or any other confidential or proprietary business information relating to development programs, costs, revenues, marketing, investments, sales activities, promotions, credit and financial data, manufacturing processes, financing methods, plans or the business and affairs of the Company or of any affiliate or client of the Company. The Executive expressly acknowledges the trade secret status of the Confidential and Proprietary Information and that the Confidential and Proprietary Information constitutes a protectable business interest of the Company. The Executive agrees: (i) not to use any such Confidential and Proprietary Information for himself or others; and (ii) not to take any Company material or reproductions (including but not limited to writings, correspondence, notes, drafts, records, invoices, technical and business policies, computer programs or disks) thereof from the Company’s offices at any time during his employment by the Company, except as required in the execution of the Executive’s duties to the Company. The Executive agrees to return immediately all Company material and reproductions (including but not limited, to writings, correspondence, notes, drafts, records, invoices, technical and business policies,

computer programs or disks) thereof in his possession to the Company upon request and in any event immediately upon termination of employment.

           (b)      The Executive agrees not to disclose or publish any of the Confidential and Proprietary Information, or any confidential, scientific, technical or business information of any other party to whom the Company or any of its affiliates owes an obligation of confidence, at any time during or after his employment with the Company. Such restriction does not apply to Executive’s utilization of that information in furtherance of Company’s normal business objectives.

           (c)      The Executive agrees that all inventions, discoveries, improvements and patentable or copyrightable works (" Inventions ") initiated, conceived or made by him, either alone or in conjunction with others, during the Term, other than those Inventions listed on Schedule 6(c) attached hereto, shall be the sole property of the Company to the maximum extent permitted by applicable law and, to the extent permitted by law, shall be "works made for hire" as that term is defined in the United States Copyright Act (17 U.S.C.A., Section 101). The Company shall be the sole owner of all patents, copyrights, trade secret rights, and other intellectual property or other rights in connection therewith. The Executive hereby assigns to the Company all right, title and interest he may have or acquire in all such Inventions; provided, however, that the Board of Directors of the Company may in its sole discretion agree to waive the Company’s rights pursuant to this Section 5(c) with respect to any Invention that is not directly or indirectly related to the Company’s business. The Executive further agrees to assist the Company in every proper way (but at the Company’s expense) to obtain and from time to time enforce patents, copyrights or other rights on such Inventions in any and all countries, and to that end the Executive will execute all documents necessary:

           (d)      The Executive acknowledges that while performing the services under this Agreement the Executive may locate, identify and/or evaluate patented or patentable inventions having commercial potential in the fields of pharmacy, pharmaceutical, biotechnology, healthcare, technology and other fields which may be of potential interest to the Company or one of its affiliates (the "Third Party Inventions"). The Executive understands, acknowledges and agrees that all rights to, interests in or opportunities regarding, all Third-Party Inventions identified by the Company, any of its affiliates or either of the foregoing persons’ officers, directors, employees (including the Executive), agents or consultants during the Employment Term shall be and remain the sole and exclusive property of the Company or such affiliate and the Executive shall have no

rights whatsoever to such Third-Party Inventions and will not pursue for himself or for others any transaction relating to the Third-Party Inventions which is not on behalf of the Company.

           (e)      The provisions of this Section 5 shall survive any termination of this Agreement, but shall not apply during or after Executive’s employment term to information or inventions of other entities that Executive may serve as a director with prior Board of Directors approval.

           6.        Non-Competition, Non-Solicitation and Non-Disparagement .

           (a)      The Executive understands and recognizes that his services to the Company are special and unique and that in the course of performing such services the Executive will have access to and knowledge of Confidential and Proprietary Information (as defined in Section 5) and the Executive agrees that, during the Term and for a period of eight