Aradigm
Corporation (the “Company”), is pleased to offer you
the position of President and Chief Executive Officer
(“CEO”), on the following terms. Your employment shall
commence as soon as possible on a date to be mutually agreed upon
by you and the Company (the “Employment Commencement
Date”), and in any event is anticipated to be no later than
August 8, 2006.
You will serve
in an executive capacity and shall perform the duties of CEO as
commonly associated with this position, as specified in the Bylaws
of the Company, and as required by the Board of Directors of the
Company (the “Board”). You will report to the Board. As
a current director, you will continue to serve on the Board.
However, if your employment with the Company terminates, you agree
to promptly tender your resignation from the Board if you are
requested to do so by a majority of the Board in
writing.
You will work
at the Company’s corporate headquarters which are currently
located in Hayward, California, subject to necessary business
travel. During your employment with the Company, you will devote
your best efforts and substantially all of your business time and
attention (except for vacation periods and reasonable periods of
illness or other incapacity permitted by the Company’s
general employment policies) to the business of the Company. Your
employment relationship with the Company shall also be governed by,
and you will be required to comply with, the general employment
policies and practices of the Company (except that if the terms of
this letter differ from or are in conflict with the Company’s
general employment policies or practices, this letter will
control), including but not limited to the policies set forth in
the Company’s Employee Handbook, as may be in effect from
time to time. The Company reserves the right to change the
Company’s general employment policies and procedures, from
time to time in its discretion.
Your initial
annual base salary will be $320,000, less standard payroll
deductions and withholdings. You will be paid in bi-weekly
installments on the Company’s standard paydays in accordance
with Company practice and policy. Although the Board will consider
increasing your annual base salary after you have been employed for
at least one year, it is not required to increase your base
salary.
The Company
will also pay you a special “sign on” bonus of
$100,000, which will be paid to you on your first day of employment
with the Company, less standard deductions and
withholdings.
In addition,
you will be eligible to earn an annual performance bonus of up to
$160,000, consisting of two separate components, as
follows:
Bonus Based
on Corporate Performance Goals : You will be eligible to earn an annual bonus
(up to $80,000 or 25% of base pay, whichever is greater), based on
corporate performance goals, as determined by the Board and CEO
annually. For purposes of calculating this bonus, performance
levels will be determined as having been either
“minimum,” “expected,” or
“maximum” levels (computed as 8.3%, 16.7% or 25% of
base salary, respectively). As defined herein, and referred to in
the Company’s Change of Control Agreement and Executive
Officer Severance Plan, CEO’s “target bonus”
based on Corporate Performance Goals is 16.7% of CEO’s base
salary.
Bonus Based
on Personal Performance Goals : You will also be eligible to earn an annual
bonus (up to $80,000 or 25% of base pay, whichever is greater),
based upon your meeting personal performance goals that the Board
and CEO agree to in writing on an annual basis (including, by way
of example only, certain financial, business and management goals).
For purposes of calculating this bonus, performance levels will be
determined as having been either “minimum,”
“expected,” or “maximum” levels (computed
as 8.3%, 16.7% or 25% of base salary, respectively). As defined
herein, and referred to in the Company’s Change of Control
Agreement and Executive Officer Severance Plan, CEO’s
“target bonus” based on Corporate Performance Goals is
16.7% of CEO’s base salary.
For the period
from the Employment Commencement Date to December 31, 2006,
you will be eligible to earn a prorated bonus in accordance with
the foregoing, but you will not otherwise be provided any partial
or prorated bonuses. The Board will determine whether you have
earned a bonus and the amount of any such bonus. You must be an
employee in good standing on the bonus calculation date to earn and
be eligible to receive a bonus. Your compensation terms (including
base salary and bonus eligibility) are subject to review and change
in the discretion of the Board (or any authorized committee
thereof).
Subject to
Board approval, the Company will issue you an option (the
“Option”) to purchase 500,000 shares of the
Company’s common stock under the Company’s 2005 Equity
Incentive Plan (the “Plan”) at an exercise price equal
to the fair market value of the stock as of the date of grant as
determined by the Board. The Option will be subject to a four-year
vesting period subject to your continued service to the Company (as
defined in the Plan), with twenty-five percent (25%) of the shares
subject to the Option vesting on the one year anniversary of your
vesting commencement date, and one-forty-eighth (1/48
th ) of the shares subject to the Option vesting
for each month of your continued service thereafter. The Option
will be governed in full by the terms and conditions of the Plan
and your individual Option agreement.
In addition,
you will be eligible to earn a one-time stock bonus of 100,000
shares under the Plan based on the achievement of performance
objectives to be determined by the Board that will be designed, to
provide you with a reasonable opportunity to earn this bonus by the
end of 2008. However, the value of this stock bonus shall be
limited to $1,000,000 and, therefore, if the per share value of the
Company’s common stock exceeds $10.00 when the bonus is
earned (as
determined by
the Board at that time), the number of shares subject to your stock
bonus shall be reduced accordingly.
You will be
eligible to participate in the Company’s standard employee
benefit plans in accordance with the terms and conditions of the
plans and applicable policies which may be in effect from time to
time, and provided by the Company to its executive employees
generally , including the Executive Officer Severance
Benefit Plan and a Change of Control Agreement, as well as group
medical and dental insurance coverage, disability insurance
coverage, life insurance coverage, 401(k) Plan, paid vacation, and
Company holidays. You will receive additional information
concerning the Company’s benefit plans after you commence
employment. The Company may modify its benefits programs from time
to time in its discretion.
In order to
assist you and your spouse with the move from Australia to the Bay
Area, we will reimburse you for reasonably documented moving and
temporary housing expenses up to $75,000. Any taxes that may be due
in respect of such reimbursement will be your
responsibility.
Proprietary Information
and Inventions Agreement
As a condition
of employment, you are required to sign and abide by the
Company’s Proprietary Information and Inventions Agreement
(the “Proprietary Information Agreement”), a form of
which is attached hereto as Attachment A .
The Company
will enter into its standard form of Indemnity Agreement with you,
a copy of which is attached as Attachment B .
Protection Of Third
Party Information
In your work
for the Company, you will be expected not to make unauthorized use
or disclosure of any confidential information or materials,
including trade secrets, of any former employer or other third
party to whom you have an obligation of confidentiality. Rather,
you will be expected to use only that information generally known
and used by persons with training and experience comparable to your
own, which is common knowledge in the industry or otherwise legally
in the public domain, or which is otherwise provided or developed
by the Company. By accepting employment with the Company, you are
representing to us that you will be able to perform your duties
within the guidelines described in this paragraph. You represent
further that you have disclosed to the Company any contract you
have signed that may restrict your activities on behalf of the
Company in any manner.
Throughout your
employment with the Company, you may engage in civic and
not-for-profit activities so long as such activities do not
interfere with the performance of your duties hereunder or present
a conflict of interest with the Company. Subject to the
restrictions set forth herein and with the prior written consent of
the Board, you may serve as a director of other corporations and
may devote a reasonable amount of your time to other types of
business or public activities not expressly mentioned in this
paragraph. The Board may rescind consent, in its sole discretion,
to your service as a director of all other corporations or
participation in other business or public activities, if it
determines that such activities compromise or threaten to
compromise the Company’s business interests or conflict with
your duties to the Company.
During your
employment by the Company, except on behalf of the Company, you
will not directly or indirectly serve as an officer, director,
stockholder, employee, partner, proprietor, investor, joint
venturer, associate, representative or consultant of any other
person, corporation, firm, partnership or other entity whatsoever
known by you to compete with the Company (or is planning or
preparing to compete with the Company), anywhere in the world, in
any line of business engaged in (or planned to be engaged in) by
the Company; provided, however, that you may purchase or otherwise
acquire up to (but not more than) one percent (1%) of any class of
securities of any enterprise (but without participating in the
activities of such enterprise) if such securities are listed on any
national or regional securities exchange.
At-Will Employment
Relationship
Your employment
relationship with the Company is at-will. Accordingly, subject to
the Company’s obligations, if any, under the Executive
Officer Severance Plan or your Change of Control Agreement, both
you and the Company may terminate the employment relationship at
any time, with or without cause, and with or without advance
notice.
This letter,
including the attached Proprietary Information Agreement, the
Indemnity Agreement and your Change of Control Agreement,
constitutes the complete, final and exclusive embodiment of the
entire agreement between you and the Company with regard to the
subject matter hereof. It is entered into without reliance on any
promise or representation, written or oral, other than those
expressly contained herein, and it supersedes any other agreements,
promises, warranties or representations concerning its subject
matter. Changes in your employment terms, other than those changes
expressly reserved herein to the Company’s or the
Board’s discretion, can only be pursuant to a written
agreement approved by the Board and signed by you and a
duly-authorized representative of the Board. This letter agreement
will bind the heirs, personal representatives, successors and
assigns of both you and the Company, and inure to the benefit of
both you and the Company, their heirs, successors and assigns. If
any provision of this letter agreement is determined to be invalid
or unenforceable, in whole or in part, this determination shall not
affect any other provision of this letter agreement and the
provision in question shall be modified so as to be rendered
enforceable in a manner consistent with the intent of the parties
insofar as possible under applicable law. This letter agreement
shall be construed and enforced in accordance with the laws of the
State of California without regard
to conflicts of
law principles. Any waiver of a breach of this letter agreement, or
rights hereunder, shall be in writing and shall not be deemed to be
a waiver of any successive breach or rights hereunder. This letter
agreement may be executed in counterparts which shall be deemed to
be part of one original, and facsimile signatures shall be
equivalent to original signatures.
As required by
law, this offer is subject to satisfactory proof of your identity
and right to work in the United States.
If the terms of
this offer are agreeable to you, please sign and return this letter
by July 14, 2006 to indicate your acceptance of employment
with the Company on the terms set forth herein.
Sincerely,
Aradigm
Corporation
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/s/ Virgil
Thompson
Virgil
Thompson
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Understood,
Accepted and Agreed:
EMPLOYEE PROPRIETARY
INFORMATION
AND INVENTIONS AGREEMENT
In consideration
of my employment or continued employment by Aradigm
Corporation (the " Company ”), and the
compensation now and hereafter paid to me, I hereby agree as
follows:
1.1
Recognition of Company’s Rights; Nondisclosure. At all
times during my employment and thereafter, I will hold in strictest
confidence and will not disclose, use, lecture upon or publish any
of the Company’s Proprietary Information (defined below),
except as such disclosure, use or publication may be required in
connection with my work for the Company, or unless an officer of
the Company expressly authorizes such in writing. I will obtain
Company’s written approval before publishing or submitting
for publication any material (written, verbal, or otherwise) that
relates to my work at Company and/or incorporates any Proprietary
Information. I hereby assign to the Company any rights I may have
or acquire in such Proprietary Information and recognize that all
Proprietary Information shall be the sole property of the Company
and its assigns.
1.2
Proprietary Information. The term “ Proprietary
Information ” shall mean any and all confidential and/or
proprietary knowledge, data or information of the Company. By way
of illustration but not limitation, “ Proprietary
Information ” includes (a) information relating to
products, know-how, drawings, clinical data, test data, formulas,
methods, samples, developmental or experimental work, (hereinafter
collectively referred to as “ Inventions ”); and
(b) information regarding plans for research, development,
manufacturing, new products, marketing and selling, business plans,
budgets and unpublished financial statements, licenses, prices and
costs, suppliers and customers; and (c) information regarding
the skills and compensation of other employees of the Company.
Notwithstanding the foregoing, it is understood that, at all such
times, I am free to use information which is generally known in the
trade or industry, which is not gained as result of a breach of
this Agreement, and my own, skill, knowledge, know-how and
experience to whatever extent and in whichever way I
wish.
1.3 Third
Party Information. I understand, in addition, that the Company
has received and in the future will receive from third parties
confidential or proprietary information (“ Third Party
Information ”) subject to a duty on the Company’s
part to maintain the confidentiality of such information and to use
it only for certain limited purposes. During the term of my
employment and thereafter, I will hold Third Party Information in
the strictest confidence and will not disclose to anyone (other
than Company personnel who need to know such information in
connection with their work for the Company) or use, except in
connection with my work for the Company, Third Party Information
unless expressly authorized by an officer of the Company in
writing.
1.4 No
Improper Use of Information of Prior Employers and Others.
During my employment by the Company I will not improperly use or
disclose any confidential information or trade secrets, if any, of
any former employer or any other person to whom I have an
obligation of confidentiality, and I will not bring onto the
premises of the Company any unpublished documents or any property
belonging to any former employer or any other person to whom I have
an obligation of confidentiality unless consented to in writing by
that former employer or person. I will use in the performance of my
duties only information which is generally known and used by
persons with training and experience comparable to my own, which is
common knowledge in the industry or otherwise legally in the public
domain, or which is otherwise provided or developed by the
Company.
2.
ASSIGNMENT OF INVENTIONS.
2.1
Proprietary Rights. The term “ Proprietary Rights
” shall mean all trade secret, patent, copyright, mask work
and other intellectual property rights throughout the
world.
2.2 Prior
Inventions. Inventions, if any, patented or unpatented, which I
made prior to the commencement of my employment with the Company
are excluded from the scope of this Agreement. To preclude any
possible uncertainty, I have set forth on Exhibit B
(Previous Inventions) attached hereto a complete list of all
Inventions that I have, alone or jointly with others, conceived,
developed or reduced to practice or caused to be conceived,
developed or reduced to practice prior to the commencement of my
employment with the Company, that I consider to be my property or
the property of third parties and that I wish to have excluded from
the scope of this Agreement (collectively referred to as “
Prior Inventions ”). If disclosure of any such Prior
Invention would cause me to violate any prior confidentiality
agreement, I understand that I am not to list such Prior Inventions
in Exhibit B but am only to disclose a cursory name for
each such invention, a listing of the party(ies) to whom it belongs
and the fact that full disclosure as to such inventions has not
been made for that reason. A space is provided on
Exhibit B for such purpose. If no such disclosure is
attached, I represent that there are no Prior Inventions. If, in
the course of my employment with the Company, I incorporate a Prior
Invention into a Company product, process or machine, the Company
is hereby granted and shall have a nonexclusive, royalty-free,
irrevocable, perpetual, worldwide license (with rights to
sublicense through multiple tiers of sublicensees) to make, have
made, modify, use and sell such Prior Invention. Notwithstanding
the foregoing, I agree that I will not incorporate, or permit to be
incorporated, Prior Inventions in any Company Inventions without
the Company’s prior written consent.
2.3 Assignment
of Inventions. Subject to Sections 2.4, and 2.6, I hereby
assign and agree to assign in the future (when any such Inventions
or Proprietary Rights are first reduced to practice or first fixed
in a tangible medium, as applicable) to the Company all my right,
title and interest in and to any and all Inventions (and all
Proprietary Rights with respect thereto) whether or not patentable
or registrable under copyright or similar statutes, made or
conceived or reduced to practice or learned by me, either alone or
jointly with others, during the period of my employment with the
Company. Inventions assigned to the Company, or to a third party as
directed by the Company pursuant to this Section 2, are
hereinafter referred to as “ Company Inventions
.”
2.4
Nonassignable Inventions. This Agreement does not apply to an
Invention which qualifies fully as a nonassignable Invention under
Section 2870 of the California Labor Code (hereinafter "
Section 2870 ”). I have reviewed the notification
on Exhibit A (Limited Exclusion Notification) and agree
that my signature acknowledges receipt of the
notification.
2.5 Obligation
to Keep Company Informed. During the period of my employment
and for six (6) months after termination of my employment with the
Company, I will promptly disclose to the Company fully and in
writing all Inventions authored, conceived or reduced to practice
by me, either alone or jointly with others. In addition, I will
promptly disclose to the Company all patent applications filed by
me or on my behalf within a year after termination of employment.
At the time of each such disclosure, I will advise the Company in
writing of any Inventions that I believe fully qualify for
protection under Section 2870; and I will at that time provide
to the Company in writing all evidence necessary to substantiate
that belief. The Company will keep in confidence and will not use
for any purpose or disclose to third parties without my consent any
confidential information disclosed in writing to the Company
pursuant to this Agreement relating to Inventions that qualify
fully for protection under the provisions of Section 2870. I
will preserve the confidentiality of any Invention that does not
fully qualify for protection under Section 2870.
2.6 Government
or Third Party. I also agree to a
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