Sample Business Contracts

Employment Agreement - CytoTherapeutics Inc. and Sandra Nusinoff Lehrman

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                                                                   July 2, 1996

Sandra Nusinoff Lehrman, MD
60 Watch Hill
East Greenwich, RI 02818-1677

Dear Sandra:

        This letter will confirm our understanding regarding your employment by
CytoTherapeutics, Inc. (the "Company") as President and Chief Operating Officer.

        1. Joining the Company. You will begin your employment with the Company
on the Starting Date, which will be July 22, 1996, unless we mutually agree on
an alternative Starting Date.

        2. Position and Duties. As President and Chief Operating Officer, you
will devote your full business time and best efforts to the advancement of the
Company's interests and to the performance of your duties and responsibilities
on the behalf of the Company, as these may be designated from time to time by
the Company's Chief Executive Officer. Those duties and responsibilities may
include without limitation various matters related to the Company's research
and development programs and clinical trials; the establishment by the Company
of, and performance under, corporate partnerships and other similar
arrangements; relationships with outside researchers and collaborators; human
resources; the execution and review of compliance with strategic, marketing and
operations plans; responsibility for various financial matters; general
management of the day-to-day operations of the Company and such other duties
and responsibilities as may be assigned to you from time to time by the
Company's Chief Executive Officer. In addition, at the first Board of Directors
meeting following your employment by the Company, you shall be elected as a
member of the Board of Directors of the Company (the "Board").

        3. Salary and Bonuses.

                a. Your base salary will be at the rate of $230,000 per year,
subject to review and adjustment from time to time by the Board, in its sole
discretion. Your base salary, as from time to time adjusted, is referred to in
this letter as your "Base Salary".

                b. In addition to your Base Salary, no later than two weeks
following the Starting Date, you will be paid a one-time cash bonus of $50,000.
If you terminate your employment with the Company other than for "good reason"
(as defined in Paragraph 7(d) within twelve (12) months of the Starting Date,
you will repay such bonus to the Company. Further bonuses, if any, may be paid
from time to time by the Board in its sole discretion.

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        4. Stock Options. Through the Company's Stock Option Plan, and subject
to the terms and conditions of such Plan, you will receive options to acquire
175,000 shares of common stock of the Company (the "Option Shares"). The
exercise price of these options will be determined as follows: You will receive
the maximum number of Incentive Stock Options (ISOs) as permitted by the
Internal Revenue Code; the remaining options will be issued as Non-Qualified
options at an option price equal to $11.00 or equal to the closing sale price
on the Starting Date, whichever is lower. Subject to your continued employment
by the Company, these options will vest over 48 months, as follows: (i) there
will be no vesting during the first twelve months; (ii) options to acquire
shares will vest on the first anniversary of your Starting Date; and (iii)
options to acquire 1/48th of such Option Shares will vest each month thereafter
for the next 36 months.

        5. Benefits. You will be entitled to participate in any or all employee
benefit plans, medical and dental insurance plans, life insurance, disability
income plans, savings plans and other benefit plans from time to time in effect
for senior management of the Company generally, except to the extent that such
plans are duplicative of benefits otherwise provided to you under this
Agreement. Such participation shall be subject to (i) the terms of the
applicable plan documents, (ii) generally applicable policies of the Company
and (iii) the discretion of the Board of Directors or any administrative or
other committee provided for in or contemplated by such plan. To the extent not
provided pursuant to the foregoing provisions of this Paragraph, the Company
shall provide you with life insurance in an amount equal to no less than the
lesser of (i) two times your base salary or (ii) $500,000, subject to any
requirement of the plan to show proof of good health.

        6. Confidentiality and Restricted Activities. You agree that some
restrictions on your activities during and after employment are necessary to
protect the goodwill, Confidential Information and other legitimate interests
of the Company;

                a. During your employment and thereafter, except as required by
applicable law or for the proper performance of your duties and
responsibilities hereunder, you shall not disclose to any other person,
corporation or other entity, or use for your own benefit or gain or otherwise,
any Confidential Information (as defined below). You understand that this
restriction shall continue to apply after your employment terminates,
regardless of the reason for such termination.

                b. While your are employed by the Company and for a period of
one (1) year thereafter you shall not, directly or indirectly, engage in any
activity, whether as owner, partner, investor, consultant, employee, agent or
otherwise, that is competitive with the business of the Company.

                c. You further agree that during your employment and for one
(1) year thereafter, you will not, directly or indirectly, attempt to hire any
employee of the Company, assist in such hiring by any other person, corporation
or entity, otherwise solicit, induce or encourage any employee of the Company
to terminate his or her relationship with the Company.

                d. You agree that you will not, during your employment with
the Company, improperly use or disclose any proprietary information or trade
secrets of any former or concurrent employer, or other such person or entity
with whom you have an agreement or duty to keep in confidence information
acquired by you in confidence, if any; and that you will not bring onto Company
premises any unpublished document or


<PAGE>   3
proprietary information belonging to any such employer, person or entity,
unless consented to in writing by such employer, person or entity.

                e. At the time of leaving the Company's employ, you will
deliver to the Company (and not keep in your possession or deliver to anyone
else) any and all devices, records, data, notes, reports, proposals, lists,
correspondence, specifications, drawings, blueprints, sketches, materials,
equipment, other documents or property, or reproductions of any
aforementioned items developed by you pursuant to your employment with the
Company, or otherwise belonging to the Company, its successors or assigns, or
containing or constituting Confidential Information.

                f. You agree that the Company shall, in addition to any other
remedies available to it, be entitled to preliminary and permanent injunctive
relief against any breach by you of the covenants contained in this Paragraph
6, without having to post bond. In the event that any provisions of this
Paragraph shall be determined by any court of competent jurisdiction to be
unenforceable by reason of its being extended over too great a time, too large
a geographic area or too great a range of activities, it shall be interpreted
to extend only over the maximum period of time, geographic area or range of
activities as to which it may be enforceable.

                g. For purposes of this Agreement:

                        i. A business shall be deemed to be competitive with
the Company if it engages or proposes to engage in any business activity (i)
utilizing or seeking to develop technology capable of utilizing the
transplantation of cells as a therapeutic agent for the diagnosis, prevention or
treatment of human disease, injury or condition or (ii) in any field the
Company is currently pursuing or has pursued within the previous two years.

                        ii. Confidential Information means any and all
information of whatever type (including, without limitation, data, results,
technology and all other information) of or relating to the Company including,
without limitation, information relating to (1) the development, research,
testing, production and marketing activities of the Company, (2) the products
and services of the Company, (3) patients and clinical trails, (4) the costs,
sources of supply and strategic plans of the Company, (5) the identity and
special needs of the customers of the Company, (6) patents, trade secrets and
other intellectual property and (7) people and organizations with whom the
company has business relationships and those relationships. Confidential
Information also includes comparable information that the Company has received
or may receive in the future of or relating to third parties where the Company
has a duty to keep such information confidential. Confidential Information does
not, however, include information that has become publicly known and generally
available other than through a wrongful act by you.

        7. Termination and Termination Benefits. Your employment with the
Company is "at will", which means that either you or the Company may terminate
your employment at any time, with or without cause or good reason.

                a. The Company may terminate your employment other than for
"cause" at any time upon written notice to you and, in that event, (i) the
Company will continue to pay you your Base Salary for the Severance Period (as
defined below) or until you obtain other employment, whichever occurs first and
(ii) all options which would have become vested during such Severance Period
shall be treated as vested at the time of such termination. If, under these
circumstances, you obtain other employment within the


<PAGE>   4
Severance Period, the Company will pay you the amount, if any, by which your
Base Salary exceeds your total compensation from your new employment for the
remainder of the Severance Period. The Severance Period shall be six months
plus two weeks for each completed continuous year of employment with the
Company, up to a maximum period of nine months. Notwithstanding any other
provision of this Agreement, if the value of your Option Compensation is
greater than eight times your Base Salary, the Company shall have no obligation
to continue to pay your Base Salary following your termination. Option
Compensation shall mean an amount equal to the sum of the following
(determined, in each case, by reference to the last closing sale price of the
Company's Common Stock prior to the date of your termination and including
options awarded to you by the Company pursuant to this Agreement or otherwise):
(i) the aggregate spread on all your vested but unexercised in-the-money stock
options; (ii) the market value of any stock of the Company obtained by you on
exercise of your stock options and still held by you, less the aggregate
exercise price paid by you to obtain such stock; and (iii) the proceeds
realized by you on the sale of any stock obtained by you on exercise of your
stock options, less the aggregate exercise price paid by you to obtain such
stock. In the event that you purchase stock from the Company (other than
through the Company's Employee Stock Purchase Plan, the Company's 401(K) plan
or as part of and on the same terms as a public or private offering of
securities to investors) or are granted stock by the Company, Option
Compensation shall also include (i) an amount equal to the market value of any
such stock still owned by you, less the amount paid by you for such stock and
(ii) the amount realized by you on the sale of any such stock sold by you, less
the amount paid by you for such stock. For these purposes, the Company's stock
shall be considered to have a "value" only if there is a market for the stock
or the Company will agree to repurchase such options provided the Company has
sufficient liquidity. Stock options will not continue to vest after your
termination in the event of a resignation without good reason or termination
with cause.

        b. The Company may terminate your employment upon written notice to you
in the event that you become disabled during your employment through any
illness, injury, accident or condition of either physical or psychological
nature and, as a result, you are unable to perform substantially all of your
duties and responsibilities hereunder for ninety (90) days during any three
hundred and sixty-five calendar days. In that event, the Company will continue
to pay you your Base Salary (i) for a period of six (6) months following such
termination; (ii) until you obtain other employment; or (iii) until you become
eligible for disability income under any disability income plan provided by the
Company, whichever of these events shall occur first.

        c. The Company may terminate your employment hereunder for cause at any
time upon written notice to you setting forth in reasonable detail the nature
of such cause. The following as determined by the Company in its reasonable
judgment, shall constitute "cause" for termination:

        (1) Your failure to perform, or material negligence in the performance
        of, (i) your principal duties and responsibilities to the Company
        (which, to the extent assigned to you, shall include those duties and
        responsibilities described in Section 2) or (ii) any other of your
        duties and responsibilities following written notice from the Company
        and a 10-business day opportunity to cure any curable failure or

        (2) Any misconduct by you which is substantially injurious to the
        business or interests of the Company;

<PAGE>   5
        (3) Your violation of any federal, state or local law, regulation or
        other requirement applicable to the business of the Company;
        (4) Your conviction of, plea of "no contest" to, any felony; or

        (5) Any material breach by you of any provision of this Agreement.

        d. You may terminate your employment at any time, with or without good
reason, upon written notice to the Company. If you terminate your employment
with good reason, the Company will be obligated to you to the same extent as if
the Company had terminated your employment other than for cause, and the
Provisions of Paragraph 7 (a), including the acceleration of option vesting and
the limitations on the Company's obligations contained therein, shall apply.
The following shall constitute "good reason" for termination: material breach
by the Company of any provision of this Agreement which breach continues for
more than ten (10) business days following written notice from you to the
Company setting forth in reasonable detail the nature of such breach.

        e. If you resign other than for good reason or your employment is
terminated by the Company for cause, the Company shall have no further
obligation to you other than for Base Salary earned through the date of
termination. No severance pay or other benefits of any kind will be provided.

    8. Withholding. All payments and reimbursements made by the Company under
this Agreement shall be reduced by any tax or other amounts required to be
withheld by the Company under applicable law.

    9. Assignment. This Agreement shall inure to the benefit of the Company and
any successor of the Company by reorganization, merger, consolidation or
liquidation and any assignee of all or substantially all of the business or
assets of the Company or any division or line of business of the Company with
which you are associated. The Company requires your personal services and you
may not assign this Agreement.

    10. Waiver. Except as otherwise expressly provided in this Agreement, no
waiver of any provision hereof shall be effective unless made in writing and
signed by the waiving party. The failure of either party to require performance
of any term or obligation of this Agreement, or the waiver by either party of
any breach of this Agreement, shall not prevent any subsequent enforcement of
such term or obligation or be deemed a waiver of any subsequent breach.

    11. Severability. Should any provision of this Agreement, or portion
thereof, be found invalid in any circumstance, such invalidity shall not affect
any other provision or circumstance, and such provision shall be construed by
limiting it so as to be enforceable to the maximum extent compatible with
applicable law.

    12. Notices. Any notices, requests, demands and other communications
provided for by this Agreement shall be in writing and shall be effective when
delivered in person or deposited in the United States mail, postage prepaid,
registered or certified, and addressed to you at your last known address on the
books of the Company or, in the case of the Company, at its main office,
attention of the Chief Executive Officer.

    13. Captions. The captions and headings in this Agreement are for
convenience only and in no way define or describe the scope or content of any
provision of this Agreement.

<PAGE>   6
        14.  Entire Agreement.  This Agreement sets forth the entire agreement
and understanding between you and the Company and supersedes all prior
communications, agreements and understandings, written and oral, with respect to
the terms and conditions of your employment. This Agreement may not be changed
or modified except by an agreement in writing signed by you and the Chief
Executive Officer or other specifically authorized representative of the

        15.  Governing Law.  This Agreement shall be governed, construed and
enforced in accordance with the laws of Rhode Island, without regard to
principles of conflicts of law.

        16.  No Conflicting Agreements.  You hereby represent to the Company
that neither your execution and delivery of this Agreement nor your acceptance
of employment with the Company nor your anticipated service as President, Chief
Operating Officer and a Director of the Company will conflict with or result in
a breach of any of the terms, conditions or provisions of any agreement to which
you are a party or any order, injunction, judgment or decree of any court or
governmental authority or any court or governmental authority or any arbitration
award applicable to you.

        17.  Inventions.  You hereby represent to the Company and agree that,
except as described on Exhibit A, you have no inventions, original works of
authorship, developments, improvements or trade secrets that were made by you
prior to your employment with the Company and which relate to the Company's
current or proposed business, products, or research and development. You will
promptly make full written disclosure to the Company, hold in trust for the
Company's sole right and benefit, and hereby assign to the Company or its
designee, all of your right, title and interest in any and all inventions,
original works of authorship, developments, concepts, improvements or trade
secrets, whether or not patentable or registerable under copyright or similar
laws, that you may solely or jointly conceive, develop, reduce to practice or
cause to be conceived or developed, or reduced to practice, during the period of
time you are employed by the Company (collectively referred to as the
"Inventions"). You further acknowledge that all original works of authorship
made by you solely or jointly with others within the scope of your employment
and protectible by copyright are "works made for hire", as that term is defined
in the United States Copyright Act. You agreed to keep and maintain adequate and
current records of all inventions made by you solely or jointly with others
during the term of your employment with the Company. Such records will be in the
form of notes, sketches, drawings or any other format that may be specified by
the Company. These records will be available through, and remain the sole
property of, the Company at all times. You agree to assist the Company or its
designee, at the Company's expense, in every proper way, to secure the
Company's rights in the Inventions and copyrights, including the disclosure to
the Company of all pertinent information and data with respect thereto, the
execution of all applications, specifications, oaths, assignments and all other
instruments that the Company shall deem necessary in order to apply for and
obtain such rights, and in order to assign and convey to the Company, its
successors, designees and nominees the sole and exclusive right, title, and
interest in and to such Inventions, and any copyrights, patents, or other
intellectual property rights relating thereto, both during your employment by
the Company and thereafter. In the event that the Company is unable for any
reason to secure or to prosecute any patent application with respect to such
Invention (including, without limitation, renewals, extensions, continuations,
divisions or continuations in part thereof), you hereby irrevocably designate
and appoint the Company and its duly authorized officers and agents, as your
agents and attorney-in-fact to act for and in your behalf and 


<PAGE>   7
instead of you, to execute and file any such application and to do all other
lawfully permitted acts to further the prosection and issuance of patents
thereon with the same legal force and effect as if executed by you. You agree
that you will assist the Company in the prosecution and enforcement of the
Company's intellectual property after termination of your employment, at the
Company's expense.

        18.  Compliance With Agreement.  The Company's obligations under this
Agreement and its obligation to deliver stock under the terms of the stock
options granted pursuant to the terms of this Agreement (or otherwise granted
to you during the course of your employment) are conditioned on your compliance
with the terms and conditions of this Agreement and the accuracy of the
representations made to the Company by you herein.

        If the foregoing is acceptable to you, please sign the enclosed copy of
this letter in the space provided below and return it to me, whereupon this
letter and such copy will constitute a binding agreement between you and the
Company on the basis set forth above as of the date of the first above written.

                                        Sincerely yours,

                                        CYTOTHERAPEUTICS, INC.

                                   By:  /s/ Seth A. Rudnick, MD
                                        Chief Executive Officer

Accepted and agreed:

/s/ Sandra Nusinoff Lehrman, MD

Date: _________________________