Exhibit 10.3

 

ARALEZ PHARMACEUTICALS INC.

2016 LONG-TERM INCENTIVE PLAN

 

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TABLE OF CONTENTS

 

 

 

Page

1.

History; Effective Date

1

 

 

 

2.

Purposes of the Plan

1

 

 

 

3.

Terminology

1

 

 

 

4.

Administration

1

 

 

 

 

(a)

Administration of the Plan

1

 

 

 

 

 

(b)

Powers of the Administrator

1

 

 

 

 

 

(c)

Delegation of Administrative Authority

3

 

 

 

 

 

(d)

Non-Uniform Determinations

3

 

 

 

 

 

(e)

Limited Liability; Advisors

3

 

 

 

 

 

(f)

Indemnification

3

 

 

 

 

 

(g)

Effect of Administrator’s Decision

3

 

 

 

 

5.

Shares Issuable Pursuant to Awards

3

 

 

 

 

(a)

Initial Share Pool

3

 

 

 

 

 

(b)

Adjustments to Share Pool

4

 

 

 

 

 

(c)

Code Section 162(m) Individual Limits

4

 

 

 

 

 

(d)

ISO Limit

5

 

 

 

 

 

(e)

Source of Shares

5

 

 

 

 

6.

Participation

5

 

 

 

7.

Awards

5

 

 

 

 

(a)

Awards, In General

5

 

 

 

 

 

(b)

Minimum Restriction Period for Full Value Awards

6

 

 

 

 

 

(c)

Stock Options

6

 

 

 

 

 

(d)

Limitation on Reload Options

7

 

 

 

 

 

(e)

Stock Appreciation Rights

7

 

 

 

 

 

(f)

Repricing

8

 

 

 

 

 

(g)

Stock Awards

8

 

 

 

 

 

(h)

Stock Units

9

 

 

 

 

 

(i)

Performance Shares and Performance Units

10

 

 

 

 

 

(j)

Other Stock-Based Awards

10

 

 

 

 

 

(k)

Qualified Performance-Based Awards

11

 

 

 

 

 

(l)

Awards to Participants Outside the United States

12

 

 

 

 

 

(m)

Limitation on Dividend Reinvestment and Dividend Equivalents

12

 

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Page

8.

Withholding of Taxes

13

 

 

 

9.

Transferability of Awards

13

 

 

 

10.

Adjustments for Corporate Transactions and Other Events

14

 

 

 

 

(a)

Mandatory Adjustments

14

 

 

 

 

 

(b)

Discretionary Adjustments

14

 

 

 

 

 

(c)

Adjustments to Performance Goals

14

 

 

 

 

 

(d)

Statutory Requirements Affecting Adjustments

15

 

 

 

 

 

(e)

Dissolution or Liquidation

15

 

 

 

 

11.

Change in Control Provisions

15

 

 

 

 

(a)

Termination of Awards

15

 

 

 

 

 

(b)

Continuation, Assumption or Substitution of Awards

16

 

 

 

 

 

(c)

Other Permitted Actions

16

 

 

 

 

 

(d)

Section 409A Savings Clause

16

 

 

 

 

12.

Substitution of Awards in Mergers and Acquisitions

16

 

 

 

13.

Compliance with Securities Laws; Listing and Registration

17

 

 

 

14.

Section 409A Compliance

17

 

 

 

15.

Plan Duration; Amendment and Discontinuance

18

 

 

 

 

(a)

Plan Duration

18

 

 

 

 

 

(b)

Amendment and Discontinuance of the Plan

18

 

 

 

 

 

(c)

Amendment of Awards

19

 

 

 

 

16.

General Provisions

19

 

 

 

 

(a)

Non-Guarantee of Employment or Service

19

 

 

 

 

 

(b)

No Trust or Fund Created

19

 

 

 

 

 

(c)

Status of Awards

19

 

 

 

 

 

(d)

Subsidiary Employees

20

 

 

 

 

 

(e)

Governing Law and Interpretation

20

 

 

 

 

 

(f)

Use of English Language

20

 

 

 

 

 

(g)

Recovery of Amounts Paid

20

 

 

 

 

17.

Glossary

20

 

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1.                                      History; Effective Date.

 

ARALEZ PHARMACEUTICALS INC., a company formed under the laws of the Province of
British Columbia, Canada (“Aralez”), has established the ARALEZ PHARMACEUTICALS
2016 LONG-TERM INCENTIVE PLAN, as set forth herein, and as the same may be
amended from time to time (the “Plan”). The Plan was adopted by the Board of
Directors of Aralez (the “Board”) on December 11, 2015. The Plan shall become
and is effective as of the consummation of the transactions contemplated by the
Merger Agreement (the “Effective Date”).

 

2.                                      Purposes of the Plan.

 

The Plan is designed to:

 

(a)                                 promote the long-term financial interests
and growth of Aralez and its Subsidiaries (together, the “Company”) by
attracting and retaining management and other personnel and key service
providers with the training, experience and ability to enable them to make a
substantial contribution to the success of the Company’s business;

 

(b)                                 motivate management personnel by means of
growth-related incentives to achieve long-range goals; and

 

(c)                                  further the alignment of interests of
Participants with those of the shareholders of Aralez through opportunities for
increased stock or stock-based ownership in Aralez.

 

Toward these objectives, the Administrator may grant stock options, stock
appreciation rights, stock awards, stock units, performance shares, performance
units, and other stock-based awards to eligible individuals on the terms and
subject to the conditions set forth in the Plan.

 

3.                                      Terminology.

 

Except as otherwise specifically provided in an Award Agreement, capitalized
words and phrases used in the Plan or an Award Agreement shall have the meaning
set forth in the glossary at Section 17 of the Plan or as defined the first
place such word or phrase appears in the Plan.

 

4.                                      Administration.

 

(a)                                 Administration of the Plan.  The Plan shall
be administered by the Administrator.

 

(b)                                 Powers of the Administrator.  The
Administrator shall, except as otherwise provided under the Plan, have plenary
authority, in its sole and absolute discretion, to grant Awards pursuant to the
terms of the Plan to Eligible Individuals and to take all other actions
necessary or desirable to carry out the purpose and intent of the Plan. Among
other things, the Administrator shall have the authority, in its sole and
absolute discretion, subject to the terms and conditions of the Plan to:

 

(i)                                     determine the Eligible Individuals to
whom, and the time or times at which, Awards shall be granted;

 

(ii)                                 determine the types of Awards to be granted
any Eligible Individual;

 

(iii)                             determine the number of Common Shares to be
covered by or used for reference purposes for each Award or the value to be
transferred pursuant to any Award;

 

(iv)                              determine the terms, conditions and
restrictions applicable to each Award (which need not be identical) and any
shares acquired pursuant thereto, including, without limitation, (A) the
purchase price of any Common Shares, (B) the method of payment for shares
purchased pursuant to any Award, (C) the method for satisfying any tax
withholding obligation arising in connection with any Award, including by the
withholding or delivery of Common Shares, (D) subject to

 

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Section 5(f) and 7(b), the timing, terms and conditions of the exercisability,
vesting or payout of any Award or any shares acquired pursuant thereto, (E) the
Performance Goals applicable to any Award and the extent to which such
Performance Goals have been attained, (F) the time of the expiration of any
Award, (G) the effect of the Participant’s Termination of Service on any of the
foregoing, and (H) all other terms, conditions and restrictions applicable to
any Award or shares acquired pursuant thereto as the Administrator shall
consider to be appropriate and not inconsistent with the terms of the Plan;

 

(v)                                 subject to Sections 7(f), 7(k), 10(c) and
15, modify, amend or adjust the terms and conditions of any Award;

 

(vi)                              subject to Section 7(b), accelerate or
otherwise change the time at or during which an Award may be exercised or
becomes payable and waive or accelerate the lapse, in whole or in part, of any
restriction, condition or risk of forfeiture with respect to such Award;
provided, however, that, except in connection with death, disability or a Change
in Control, no such change, waiver or acceleration shall be made with respect to
a Qualified Performance-Based Award if the effect of such action would cause the
Award to fail to qualify for the Section 162(m) Exemption or shall be made to
any Award that is considered “deferred compensation” within the meaning of
Section 409A of the Code if the effect of such action is inconsistent with
Section 409A of the Code;

 

(vii)                           determine whether an Award will be paid or
settled in cash, Common Shares, or in any combination thereof and whether, to
what extent and under what circumstances cash or Common Shares payable with
respect to an Award shall be deferred either automatically or at the election of
the Participant;

 

(viii)                       for any purpose, including but not limited to,
qualifying for preferred or beneficial tax treatment, accommodating the customs
or administrative challenges or otherwise complying with the tax, accounting or
regulatory requirements of one or more jurisdictions, adopt, amend, modify,
administer or terminate sub-plans, appendices, special provisions or supplements
applicable to Awards regulated by the laws of a particular jurisdiction, which
sub-plans, appendices, supplements and special provisions may take precedence
over other provisions of the Plan, and prescribe, amend and rescind rules and
regulations relating to such sub-plans, supplements and special provisions;

 

(ix)                              establish any “blackout” period, during which
transactions affecting Awards may not be effectuated, that the Administrator in
its sole discretion deems necessary or advisable;

 

(x)                                 determine the Fair Market Value of Common
Shares or other property for any purpose under the Plan or any Award;

 

(xi)                              administer, construe and interpret the Plan,
Award Agreements and all other documents relevant to the Plan and Awards issued
thereunder, and decide all other matters to be determined in connection with an
Award;

 

(xii)                           establish, amend, rescind and interpret such
administrative rules, regulations, agreements, guidelines, instruments and
practices for the administration of the Plan and for the conduct of its business
as the Administrator deems necessary or advisable;

 

(xiii)                       correct any defect, supply any omission or
reconcile any inconsistency in the Plan or in any Award or Award Agreement in
the manner and to the extent the Administrator shall consider it desirable to
carry it into effect; and

 

(xiv)                       specify that vesting conditions in respect of Awards
shall not extend beyond applicable limitations such that the Award complies at
all times with the exception in paragraph (k) of the

 

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definition of “salary deferral arrangement” in subsection 248(1) of the Income
Tax Act (Canada) or comparable legislation of any jurisdiction; and

 

(xv)                          otherwise administer the Plan and all Awards
granted under the Plan.

 

(c)                                  Delegation of Administrative Authority. 
The Administrator may designate officers or employees of the Company to assist
the Administrator in the administration of the Plan and, to the extent permitted
by applicable law and stock exchange rules, the Administrator may delegate to
officers or other employees of the Company the Administrator’s duties and powers
under the Plan, subject to such conditions and limitations as the Administrator
shall prescribe, including without limitation the authority to execute
agreements or other documents on behalf of the Administrator; provided, however,
that such delegation of authority shall not extend to the granting of, or
exercise of discretion with respect to, Awards to Eligible Individuals who are
“covered employees” within the meaning of Section 162(m) of the Code or officers
under Section 16 of the Exchange Act.

 

(d)                                 Non-Uniform Determinations.  The
Administrator’s determinations under the Plan (including without limitation,
determinations of the persons to receive Awards, the form, amount and timing of
such Awards, the terms and provisions of such Awards and the Award Agreements
evidencing such Awards, and the ramifications of a Change in Control upon
outstanding Awards) need not be uniform and may be made by the Administrator
selectively among Awards or persons who receive, or are eligible to receive,
Awards under the Plan, whether or not such persons are similarly situated.

 

(e)                                  Limited Liability; Advisors.  To the
maximum extent permitted by law, no member of the Administrator shall be liable
for any action taken or decision made in good faith relating to the Plan or any
Award thereunder. The Administrator may employ counsel, consultants,
accountants, appraisers, brokers or other persons. The Administrator, Aralez,
and the officers and directors of Aralez shall be entitled to rely upon the
advice, opinions or valuations of any such persons.

 

(f)                                   Indemnification.  To the maximum extent
permitted by law, by Aralez’s Memorandum and Articles of Association, and by any
directors’ and officers’ liability insurance coverage which may be in effect
from time to time, the members of the Administrator and any agent or delegate of
the Administrator who is a director, officer or employee of Aralez or an
Affiliate shall be indemnified by Aralez against any and all liabilities and
expenses to which they may be subjected by reason of any act or failure to act
with respect to their duties on behalf of the Plan.

 

(g)                                  Effect of Administrator’s Decision.  All
actions taken and determinations made by the Administrator on all matters
relating to the Plan or any Award pursuant to the powers vested in it hereunder
shall be in the Administrator’s sole and absolute discretion, unless in
contravention of any express term of the Plan, including, without limitation,
any determination involving the appropriateness or equitableness of any action.
All determinations made by the Administrator shall be conclusive, final and
binding on all parties concerned, including Aralez, its shareholders, any
Participants and any other employee, consultant, or director of Aralez and its
Affiliates, and their respective successors in interest. No member of the
Administrator, nor any director, officer, employee or representative of Aralez
shall be personally liable for any action, determination or interpretation made
in good faith with respect to the Plan or Awards.

 

5.                                      Shares Issuable Pursuant to Awards.

 

(a)                                 Initial Share Pool.  As of the Effective
Date, the number of Common Shares issuable pursuant to Awards that may be
granted under the Plan (the “Share Pool”) shall be equal to the sum of
(i) 2,300,000 Common Shares plus (ii) the number of unallocated Common Shares
available for issuance as of the Effective Date under the POZEN, Inc. 2010
Omnibus Equity Compensation Plan that are not then subject to outstanding
Awards, and (iii) the number of unallocated Common Shares available for issuance
as of the Effective Date under the Amended and Restated Option Plan of

 

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Tribute Pharmaceuticals Canada Inc. (“Tribute”) that are not then subject to
outstanding Awards and (iv) the number of Common Shares required to cover each
stock option granted in substitution of stock options held by employees of
Tribute in connection with the pending business combination between Tribute and
Aralez.

 

(b)                                 Adjustments to Share Pool.  On and after the
Effective Date, the Share Pool shall be adjusted, in addition to any adjustments
to be made pursuant to Section 10 of the Plan, as follows:

 

(i)                                     The Share Pool shall be reduced, on the
date of grant, by one share for each stock option or stock appreciation right
granted under the Plan and by 1.59 shares for each stock award, stock unit,
Performance Share and/or Other Stock-Based Award granted under the Plan;
provided that Awards that are valued by reference to Common Shares but are
required to be paid in cash pursuant to their terms shall not reduce the Share
Pool;

 

(ii)                                 If and to the extent options or stock
appreciation rights originating from the Share Pool terminate, expire, or are
canceled, forfeited, exchanged, or surrendered without having been exercised, or
if any stock awards, stock units, Performance Shares and/or Other Stock-Based
Awards are forfeited, the Common Shares subject to such Awards shall again be
available for Awards under the Share Pool, and shall increase the Share Pool by
one share for each stock option or stock appreciation right and 1.59 shares for
each stock award, stock unit, Performance Share and/or Other Stock-Based Award
issued in connection with such Award or by which the Award is valued by
reference;

 

(iii)                             Notwithstanding the foregoing, the following
Common Shares shall not become available for issuance under the Plan: (A) shares
tendered by Participants, or withheld by the Company, as full or partial payment
to the Company upon the exercise of stock options granted under the Plan;
(B) shares reserved for issuance upon the grant of stock appreciation rights, to
the extent the number of reserved shares exceeds the number of shares actually
issued upon the exercise of the stock appreciation rights; and (C) shares
withheld by, or otherwise remitted to, the Company to satisfy a Participant’s
tax withholding obligations upon the lapse of restrictions on stock awards or
the exercise of stock options or stock appreciation rights granted under the
Plan.

 

(c)                                  Code Section 162(m) and Other Individual
Limits.  Subject to adjustment as provided in Section 10 of the Plan:

 

(i)                                     the maximum number of Common Shares that
may be made subject to Awards granted under the Plan during a calendar year to
any one person in the form of stock options or stock appreciation rights is, in
the aggregate, 1,000,000 shares;

 

(ii)                                 the maximum number of Common Shares that
may be made subject to Awards granted under the Plan during a calendar year to
any one person in the form of Performance Awards is, in the aggregate, 1,000,000
shares, and

 

(iii)                             in connection with Awards granted under the
Plan during a calendar year to any one person in the form of Performance Shares,
the maximum cash amount payable thereunder is the amount equal to the number of
shares made subject to the Award, as limited by Section 5(c)(ii), multiplied by
the Fair Market Value as determined as of the payment date; and

 

(iv)                              in connection with Awards granted under the
Plan during a calendar year to any one person in the form of Performance Units,
the maximum cash amount payable under such Performance Units is $5,000,000;

 

provided, however, that each of the limitations set forth above in clauses (i),
(ii) and (iii) of this Section 5(c) shall be multiplied by two when applied to
Awards granted to any individual during the calendar year in which such
individual first commences service with Aralez or a Subsidiary; and provided,
further, that the limitations set forth above in clauses (ii) and (iii) of this
Section 5(c) shall be

 

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multiplied by the number of calendar years over which the applicable Performance
Period spans (in whole or in part), if the Performance Period is longer than
12 months’ duration, when applied to Performance Awards. If an Award is
terminated, surrendered or canceled in the same year in which it was granted,
such Award nevertheless will continue to be counted against the limitations set
forth above in this Section 5(c) for the calendar year in which it was granted.

 

(d)                                 ISO Limit.  Subject to adjustment pursuant
to Section 10 of the Plan, the maximum number of Common Shares that may be
issued pursuant to stock options granted under the Plan that are intended to
qualify as Incentive Stock Options within the meaning of Section 422 of the Code
shall be equal to the number of shares in the Share Pool as of the Effective
Date of the Plan.

 

(e)                                  Source of Shares.  The Common Shares with
respect to which Awards may be made under the Plan shall be shares authorized
for issuance under Aralez’s memorandum and articles of association but unissued,
or issued and reacquired, including without limitation shares purchased in the
open market or in private transactions.

 

(f)                                   Stock Exchange Limits.

 

(i)                                     The number of Common Shares subject to
Awards granted to any one Participant shall be determined by the Board, but no
one Participant shall be granted Awards which exceed, in aggregate, the maximum
number permitted by the Toronto Stock Exchange, or such other stock exchange on
which Aralez’s securities are listed for trade from time to time (the
“Exchange”).

 

(ii)                                 Subject to the aggregate limit and
adjustment provisions in Section 5 of this Plan, the aggregate number of Common
Shares that may be issued pursuant to the exercise of Awards under the Plan and
all other security based compensation arrangements (as such term is defined in
section 613 of the TSX Company Manual) of the Company are subject to the
following additional limitations:

 

(A)                               in the aggregate, no more than 10% of the
issued and outstanding Common Shares (on a non-diluted basis) may be reserved at
any time for insiders (as defined in the Securities Act (Ontario) and includes
an associate and Affiliate, as defined in the Securities Act (Ontario)
(“Insider(s)”) under the Plan, together with all other security based
compensation arrangements of the Company; and

 

(B)                               the number of securities of the Company issued
to Insiders, within any one year period, under all security based compensation
arrangements, cannot exceed 10% of the issued and outstanding Common Shares.

 

6.                                      Participation.

 

Participation in the Plan shall be open to all Eligible Individuals, as may be
selected by the Administrator from time to time. The Administrator may also
grant Awards to Eligible Individuals in connection with hiring, recruiting or
otherwise, prior to the date the individual first performs services for Aralez
or a Subsidiary; provided, however, that such Awards shall not become vested or
exercisable, and no shares shall be issued to such individual, prior to the date
the individual first commences performance of such services.

 

7.                                      Awards.

 

(a)                                 Awards, In General.  The Administrator, in
its sole discretion, shall establish the terms of all Awards granted under the
Plan consistent with the terms of the Plan. Awards may be granted individually
or in tandem with other types of Awards, concurrently with or with respect to
outstanding Awards. All Awards are subject to the terms and conditions of the
Plan and as provided in the Award Agreement, which shall be delivered to the
Participant receiving such Award upon, or as promptly as is

 

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reasonably practicable following, the grant of such Award. Unless otherwise
specified by the Administrator, in its sole discretion, or otherwise provided in
the Award Agreement, an Award shall not be effective unless the Award Agreement
is signed or otherwise accepted by Aralez and the Participant receiving the
Award (including by electronic delivery and/or electronic signature). Unless the
Administrator determines otherwise, any failure by the Participant to sign and
return the Award Agreement within such period of time following the granting of
the Award as the Administrator shall prescribe shall cause such Award to the
Participant to be null and void. The Administrator may direct that any stock
certificate evidencing shares issued pursuant to the Plan shall bear a legend
setting forth such restrictions on transferability as may apply to such shares
pursuant to the Plan.

 

(b)                                 Minimum Restriction Period for Full Value
Awards.  Except as provided below and notwithstanding any provision of the Plan
to the contrary, each Full Value Award granted under the Plan shall be subject
to a minimum Restriction Period of 12 months from the date of grant if vesting
of or lapse of restrictions on such Award is based on the satisfaction of
Performance Goals and a minimum Restriction Period of 36 months from the date of
grant, applied in either pro rata installments or a single installment, if
vesting of or lapse of restrictions on such Award is based solely on the
Participant’s satisfaction of specified service requirements with the Company.
If the grant of a Performance Award is conditioned on satisfaction of
Performance Goals, the Performance Period shall not be less than 12 months’
duration, but no additional minimum Restriction Period need apply to such Award.
Except as provided below and notwithstanding any provision of the Plan to the
contrary, the Administrator shall not have discretionary authority to waive the
minimum Restriction Period applicable to a Full Value Award, except in the case
of death, disability, retirement, or a Change in Control. The provisions of this
Section 7(b) shall not apply and/or may be waived, in the Administrator’s
discretion, with respect to up to the number of Full Value Awards that is equal
to 10% of the aggregate Share Pool as of the Effective Date.

 

(c)                                  Stock Options.

 

(i)  Grants.  A stock option means a right to purchase a specified number of
Common Shares from Aralez at a specified price during a specified period of
time. The Administrator may from time to time grant to Eligible Individuals
Awards of Incentive Stock Options or Nonqualified Options; provided, however,
that Awards of Incentive Stock Options shall be limited to employees of Aralez
or of any current or hereafter existing “parent corporation” or “subsidiary
corporation,” as defined in Sections 424(e) and 424(f) of the Code,
respectively, of Aralez, and any other Eligible Individuals who are eligible to
receive Incentive Stock Options under the provisions of Section 422 of the Code.
No stock option shall be an Incentive Stock Option unless so designated by the
Administrator at the time of grant or in the applicable Award Agreement.

 

(ii)  Exercise.  Stock options shall be exercisable at such time or times and
subject to such terms and conditions as shall be determined by the
Administrator; provided, however, that Awards of stock options may not have a
term in excess of ten years’ duration unless required otherwise by applicable
law. The exercise price per share subject to a stock option granted under the
Plan shall not be less than the Fair Market Value of one Common Share on the
date of grant of the stock option, except as provided under applicable law or
with respect to stock options that are granted in substitution of similar types
of awards of a company acquired by Aralez or a Subsidiary or with which Aralez
or a Subsidiary combines (whether in connection with a corporate transaction,
such as a merger, combination, consolidation or acquisition of property or
stock, or otherwise) to preserve the intrinsic value of such awards. Should the
expiry date of a stock option fall within a period during which the relevant
Participant is prohibited from exercising a Nonqualified Option due to trading
restrictions imposed by the Company pursuant to any policy of the Company
respecting restrictions on trading that is in effect at that time (a “blackout
period”) or within nine Business Days following the expiration of a blackout
period, such expiry date of the Nonqualified Option shall be automatically
extended without any further act or formality to that date which is

 

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the tenth Business Day after the end of the blackout period, such tenth Business
Day to be considered the expiry date for such Nonqualified Option for all
purposes under the Plan. The ten Business Day period referred to in this
paragraph may not be extended by the Board.

 

(iii)  Termination of Service.  Except as provided in the applicable Award
Agreement or otherwise determined by the Administrator, to the extent stock
options are not vested and exercisable, a Participant’s stock options shall be
forfeited upon his or her Termination of Service.

 

(iv)  Additional Terms and Conditions.  The Administrator may, by way of the
Award Agreement or otherwise, determine such other terms, conditions,
restrictions, and/or limitations, if any, of any Award of stock options,
provided they are not inconsistent with the Plan.

 

(d)                                 Limitation on Reload Options.  The
Administrator shall not grant stock options under this Plan that contain a
reload or replenishment feature pursuant to which a new stock option would be
granted automatically upon receipt of delivery of Common Shares to Aralez in
payment of the exercise price or any tax withholding obligation under any other
stock option.

 

(e)                                  Stock Appreciation Rights.

 

(i)  Grants.  The Administrator may from time to time grant to Eligible
Individuals Awards of stock appreciation rights. A stock appreciation right
entitles the Participant to receive, subject to the provisions of the Plan and
the Award Agreement, a payment having an aggregate value equal to the product of
(i) the excess of (A) the Fair Market Value on the exercise date of one Common
Share over (B) the base price per share specified in the Award Agreement, times
(ii) the number of shares specified by the stock appreciation right, or portion
thereof, which is exercised. The base price per share specified in the Award
Agreement shall not be less than the lower of the Fair Market Value on the date
of grant or the exercise price of any tandem stock option to which the stock
appreciation right is related, or with respect to stock appreciation rights that
are granted in substitution of similar types of awards of a company acquired by
Aralez or a Subsidiary or with which Aralez or a Subsidiary combines (whether in
connection with a corporate transaction, such as a merger, combination,
consolidation or acquisition of property or stock, or otherwise) such base price
as is necessary to preserve the intrinsic value of such awards.

 

(ii)  Exercise.  Stock appreciation rights shall be exercisable at such time or
times and subject to such terms and conditions as shall be determined by the
Administrator; provided, however, that stock appreciation rights granted under
the Plan may not have a term in excess of ten years’ duration unless required
otherwise by applicable law. The applicable Award Agreement shall specify
whether payment by Aralez of the amount receivable upon any exercise of a stock
appreciation right is to be made in cash or Common Shares or a combination of
both, or shall reserve to the Administrator or the Participant the right to make
that determination prior to or upon the exercise of the stock appreciation
right. If upon the exercise of a stock appreciation right a Participant is to
receive a portion of such payment in Common Shares, the number of shares shall
be determined by dividing such portion by the Fair Market Value of a Common
Share on the exercise date. No fractional shares shall be used for such payment
and the Administrator shall determine whether cash shall be given in lieu of
such fractional shares or whether such fractional shares shall be eliminated.

 

(iii)  Termination of Service.  Except as provided in the applicable Award
Agreement or otherwise determined by the Administrator, to the extent stock
appreciation rights are not vested and exercisable, a Participant’s stock
appreciation rights shall be forfeited upon his or her Termination of Service.

 

(iv)  Additional Terms and Conditions.  The Administrator may, by way of the
Award Agreement or otherwise, determine such other terms, conditions,
restrictions, and/or limitations, if any, of any Award of stock appreciation
rights, provided they are not inconsistent with the Plan.

 

7

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(f)                                   Repricing.  Notwithstanding anything
herein to the contrary, except in connection with a corporate transaction
involving Aralez (including, without limitation, any stock dividend, stock
split, extraordinary cash dividend, recapitalization, reorganization, merger,
consolidation, split-up, spin-off, combination, or exchange of shares), the
terms of options and stock appreciation rights granted under the Plan may not be
amended, after the date of grant, to reduce the exercise price of such options
or stock appreciation rights, nor may outstanding options or stock appreciation
rights be canceled in exchange for (i) cash, (ii) options or stock appreciation
rights with an exercise price or base price that is less than the exercise price
or base price of the original outstanding options or stock appreciation rights,
or (iii) other Awards, unless such action is approved by Aralez’s shareholders.

 

(g)                                  Stock Awards.

 

(i)  Grants.  The Administrator may from time to time grant to Eligible
Individuals Awards of unrestricted Common Shares or Restricted Stock
(collectively, “Stock Awards”) on such terms and conditions, and for such
consideration, including no consideration or such minimum consideration as may
be required by law, as the Administrator shall determine, subject to the
limitations set forth in Section 7(b). Stock Awards shall be evidenced in such
manner as the Administrator may deem appropriate, including via book-entry
registration.

 

(ii)  Vesting.  Restricted Stock shall be subject to such vesting, restrictions
on transferability and other restrictions, if any, and/or risk of forfeiture as
the Administrator may impose at the date of grant or thereafter. The Restriction
Period to which such vesting, restrictions and/or risk of forfeiture apply may
lapse under such circumstances, including without limitation upon the attainment
of Performance Goals, in such installments, or otherwise, as the Administrator
may determine. In the event that the Administrator conditions the grant or
vesting of a Stock Award upon the attainment of Performance Goals, or the
attainment of Performance Goals together with the continued service of the
Participant, the Administrator may, prior to or at the time of grant, designate
the Stock Award as a Qualified Performance-Based Award. Subject to the
provisions of the Plan and the applicable Award Agreement, during the
Restriction Period, the Participant shall not be permitted to vote, sell,
assign, transfer, pledge or otherwise encumber shares of Restricted Stock.

 

(iii)  Rights of a Shareholder; Dividends.  Except to the extent restricted
under the Award Agreement relating to the Restricted Stock, a Participant
granted Restricted Stock shall have all of the rights of a shareholder of Common
Shares including, without limitation, the right to vote Restricted Stock upon
the expiry of the Restriction Period. Subject to shareholder approval, cash
dividends declared payable on Common Shares shall be paid, with respect to
outstanding Restricted Stock, either as soon as practicable following the
dividend payment date or deferred for payment to such later date as determined
by the Administrator, and shall be paid in cash or as unrestricted Common Shares
having a Fair Market Value equal to the amount of such dividends or may be
reinvested in additional shares of Restricted Stock as determined by the
Administrator; provided, however, that dividends declared payable on Restricted
Stock that is granted as a Performance Award shall be held by Aralez and made
subject to forfeiture at least until achievement of the applicable Performance
Goal related to such shares of Restricted Stock. Stock distributed in connection
with a stock split or stock dividend, and other property distributed as a
dividend, shall be subject to restrictions and a risk of forfeiture to the same
extent as the Restricted Stock with respect to which such Common Shares or other
property has been distributed. As soon as is practicable following the date on
which restrictions on any shares of Restricted Stock lapse, Aralez shall deliver
to the Participant the certificates for such shares or shall cause the shares to
be registered in the Participant’s name in book-entry form, in either case with
the restrictions removed, provided that the Participant shall have complied with
all conditions for delivery of such shares contained in the Award Agreement or
otherwise reasonably required by Aralez.

 

8

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(iv)  Termination of Service.  Except as provided in the applicable Award
Agreement, upon Termination of Service during the applicable Restriction Period,
Restricted Stock and any accrued but unpaid dividends that are at that time
subject to restrictions shall be forfeited; provided that, subject to the
limitations set forth in Section 7(b), the Administrator may provide, by rule or
regulation or in any Award Agreement, or may determine in any individual case,
that restrictions or forfeiture conditions relating to Restricted Stock will be
waived in whole or in part in the event of terminations resulting from specified
causes, and the Administrator may in other cases waive in whole or in part the
forfeiture of Restricted Stock.

 

(v)  Additional Terms and Conditions.  The Administrator may, by way of the
Award Agreement or otherwise, determine such other terms, conditions,
restrictions, and/or limitations, if any, of any Award of Restricted Stock,
provided they are not inconsistent with the Plan.

 

(h)                                 Stock Units.

 

(i)  Grants.  The Administrator may from time to time grant to Eligible
Individuals Awards of unrestricted stock Units or Restricted Stock Units on such
terms and conditions, and for such consideration, including no consideration or
such minimum consideration as may be required by law, as the Administrator shall
determine, subject to the limitations set forth in Section 7(b). Restricted
Stock Units represent a contractual obligation by Aralez to deliver a number of
Common Shares, an amount in cash equal to the Fair Market Value of the specified
number of shares subject to the Award, or a combination of Common Shares and
cash, in accordance with the terms and conditions set forth in the Plan and any
applicable Award Agreement.

 

(ii)  Vesting and Payment.  Restricted Stock Units shall be subject to such
vesting, risk of forfeiture and/or payment provisions as the Administrator may
impose at the date of grant. The Restriction Period to which such vesting and/or
risk of forfeiture apply may lapse under such circumstances, including without
limitation upon the attainment of Performance Goals, in such installments, or
otherwise, as the Administrator may determine. In the event that the
Administrator conditions the vesting and/or lapse of risk of forfeiture of
Restricted Stock Units upon the attainment of Performance Goals, or the
attainment of Performance Goals together with the continued service of the
Participant, the Administrator may, prior to or at the time of grant, designate
the Award of Restricted Stock Units as a Qualified Performance-Based Award.
Common Shares, cash or a combination of Common Shares and cash, as applicable,
payable in settlement of Restricted Stock Units shall be delivered to the
Participant as soon as administratively practicable, but no later than 30 days,
after the date on which payment is due under the terms of the Award Agreement
provided that the Participant shall have complied with all conditions for
delivery of such shares or payment contained in the Award Agreement or otherwise
reasonably required by Aralez, or in accordance with an election of the
Participant, if the Administrator so permits, that meets the requirements of
Section 409A of the Code.

 

(iii)  No Rights of a Shareholder; Dividend Equivalents.  Until Common Shares
are issued to the Participant in settlement of stock Units, the Participant
shall not have any rights of a shareholder of Aralez with respect to the stock
Units or the shares issuable thereunder. The Administrator may grant to the
Participant the right to receive Dividend Equivalents on stock Units, on a
current, reinvested and/or restricted basis, subject to such terms as the
Administrator may determine provided, however, that Dividend Equivalents payable
on stock Units that are granted as a Performance Award shall, rather than be
paid on a current basis, be accrued and made subject to forfeiture at least
until achievement of the applicable Performance Goal related to such stock
Units.

 

(iv)  Termination of Service.  Upon Termination of Service during the applicable
deferral period or portion thereof to which forfeiture conditions apply, or upon
failure to satisfy any other conditions precedent to the delivery of Common
Shares or cash to which such Restricted Stock

 

9

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Units relate, all Restricted Stock Units and any accrued but unpaid Dividend
Equivalents with respect to such Restricted Stock Units that are then subject to
deferral or restriction shall be forfeited; provided that, subject to the
limitations set forth in Section 7(b), the Administrator may provide, by rule or
regulation or in any Award Agreement, or may determine in any individual case,
that restrictions or forfeiture conditions relating to Restricted Stock Units
will be waived in whole or in part in the event of termination resulting from
specified causes, and the Administrator may in other cases waive in whole or in
part the forfeiture of Restricted Stock Units.

 

(v)  Additional Terms and Conditions.  The Administrator may, by way of the
Award Agreement or otherwise, determine such other terms, conditions,
restrictions, and/or limitations, if any, of any Award of stock Units, provided
they are not inconsistent with the Plan.

 

(i)                                     Performance Shares and Performance
Units.

 

(i)  Grants.  The Administrator may from time to time grant to Eligible
Individuals Awards in the form of Performance Shares and Performance Units.
Performance Shares, as that term is used in this Plan, shall refer to Common
Shares or Units that are expressed in terms of Common Shares, the issuance,
vesting, lapse of restrictions on or payment of which is contingent on
performance as measured against predetermined objectives over a specified
Performance Period. Performance Units, as that term is used in this Plan, shall
refer to dollar-denominated Units valued by reference to designated criteria
established by the Administrator, other than Common Shares, the issuance,
vesting, lapse of restrictions on or payment of which is contingent on
performance as measured against predetermined objectives over a specified
Performance Period. The applicable Award Agreement shall specify whether
Performance Shares and Performance Units will be settled or paid in cash or
Common Shares or a combination of both, or shall reserve to the Administrator or
the Participant the right to make that determination prior to or at the payment
or settlement date.

 

(ii)  Performance Criteria.  The Administrator shall, prior to or at the time of
grant, condition the grant, vesting or payment of, or lapse of restrictions on,
an Award of Performance Shares or Performance Units upon (A) the attainment of
Performance Goals during a Performance Period or (B) the attainment of
Performance Goals and the continued service of the Participant. The
Administrator may, prior to or at the time of grant, designate an Award of
Performance Shares or Performance Units as a Qualified Performance-Based Award.
The length of the Performance Period, the Performance Goals to be achieved
during the Performance Period, and the measure of whether and to what degree
such Performance Goals have been attained shall be conclusively determined by
the Administrator in the exercise of its absolute discretion. Performance Goals
may include minimum, maximum and target levels of performance, with the size of
the Award or payout of Performance Shares or Performance Units or the vesting or
lapse of restrictions with respect thereto based on the level attained. An Award
of Performance Shares or Performance Units shall be settled as and when the
Award vests or at a later time specified in the Award Agreement or in accordance
with an election of the Participant, if the Administrator so permits, that meets
the requirements of Section 409A of the Code.

 

(iii)  Additional Terms and Conditions.  The Administrator may, by way of the
Award Agreement or otherwise, determine such other terms, conditions,
restrictions, and/or limitations, if any, of any Award of Performance Shares or
Performance Units, provided they are not inconsistent with the Plan.

 

(j)                                    Other Stock-Based Awards.  The
Administrator may from time to time grant to Eligible Individuals Awards in the
form of Other Stock-Based Awards. Other Stock-Based Awards in the form of
Dividend Equivalents may be (A) awarded on a free-standing basis or in
connection with another Award other than a stock option or stock appreciation
right, (B) paid currently or credited to an account for the Participant,
including the reinvestment of such credited amounts in Common Shares

 

10

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equivalents, to be paid on a deferred basis, and (C) settled in cash or Common
Shares as determined by the Administrator; provided, however, that Dividend
Equivalents payable on Other Stock-Based Awards that are granted as a
Performance Award shall, rather than be paid on a current basis, be accrued and
made subject to forfeiture at least until achievement of the applicable
Performance Goal related to such Other Stock-Based Awards. Any such settlements,
and any such crediting of Dividend Equivalents, may be subject to such
conditions, restrictions and contingencies as the Administrator shall establish.

 

(k)                                 Qualified Performance-Based Awards.

 

(i)  Stock Options and Stock Appreciation Rights.  The provisions of the Plan
are intended to ensure that all stock options and stock appreciation rights
granted hereunder to any Participant who is or may be a “covered employee”
(within the meaning of Section 162(m)(3) of the Code) in the tax year in which
such stock option or stock appreciation right is expected to be deductible to
Aralez or a Subsidiary qualify for the Section 162(m) Exemption, and all such
Awards shall therefore be considered Qualified Performance-Based Awards, and the
Plan shall be interpreted and operated consistent with that intention.

 

(ii)  Grant Process for Performance Awards.  When granting any Award other than
a stock option or stock appreciation right, the Administrator may designate such
Award as a Qualified Performance-Based Award, based upon a determination that
(A) the recipient is or may be a “covered employee” (within the meaning of
Section 162(m)(3) of the Code) with respect to such Award and (B) the
Administrator wishes such Award to qualify for the Section 162(m) Exemption. For
any Award so designated as a Qualified Performance-Based Award, the
Administrator shall take steps to ensure that the terms of any such Award (and
of the grant thereof) shall be consistent with such designation (including,
without limitation, that all such Awards be granted by a committee composed
solely of “outside directors” (within the meaning of Section 162(m) of the Code)
and that the Performance Goals be established, in writing, by the Administrator
within the time period prescribed by Section 162(m) of the Code). The
Performance Goals established by the Administrator for each Qualified
Performance-Based Award shall be objective such that a third party having
knowledge of the relevant facts could determine whether or not any Performance
Goal has been achieved, or the extent of such achievement, and the amount, if
any, which has been earned by the Participant based on such performance. The
Administrator may retain in an Award Agreement the discretion to reduce (but not
to increase) the amount or number of Qualified Performance-Based Awards which
will be earned based on the achievement of Performance Goals. When the
Performance Goals are established, the Administrator shall also specify the
manner in which the level of achievement of such Performance Goals shall be
calculated and the weighting assigned to such Performance Goals.

 

(iii)  Certification and Payment.  Following completion of the applicable
Performance Period, and prior to any, as applicable, grant, vesting, lapse of
restrictions on or payment of a Qualified Performance-Based Award, the
Administrator shall determine in accordance with the terms of the Award and
shall certify in writing whether the applicable Performance Goal(s) were
achieved, or the level of such achievement, and the amount, if any, earned by
the Participant based upon such performance. For this purpose, approved minutes
of the meeting of the Administrator at which certification is made shall be
sufficient to satisfy the requirement of a written certification. No Qualified
Performance-Based Awards will be granted, become vested, have restrictions lapse
or be paid, as applicable, for a Performance Period until such certification is
made by the Administrator. The amount of a Qualified Performance-Based Award
actually granted, vested, or paid to a Participant, or on which restrictions
shall lapse, may be less than the amount determined by the applicable
Performance Goal formula, at the discretion of the Administrator to take into
account additional factors that the Administrator may deem relevant to the
assessment of individual or

 

11

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corporate performance for the Performance Period or otherwise, subject to the
terms and conditions of the applicable Award Agreement.

 

(iv)  Performance Goals.  Performance Goals may be applied on a per share or
absolute basis and relative to one or more Performance Metrics, or any
combination thereof, and may be measured pursuant to U.S. generally accepted
accounting principles (“GAAP”), non-GAAP or other objective standards in a
manner consistent with Aralez’s or its Subsidiary’s established accounting
policies, all as the Administrator shall determine at the time the Performance
Goals for a Performance Period are established. The Administrator may, in its
sole discretion, provide that one or more objectively determinable adjustments
shall be made to the manner in which one or more of the Performance Goals is to
be calculated or measured to take into account, or ignore, one or more of the
following: (1) items related to a change in accounting principle; (2) items
relating to financing activities; (3) expenses for restructuring or productivity
initiatives; (4) other non-operating items; (5) items related to acquisitions;
(6) items attributable to the business operations of any entity acquired by the
Company during the Performance Period; (7) items related to the sale or
disposition of a business or segment of a business; (8) items related to
discontinued operations that do not qualify as a segment of a business under
U.S. generally accepted accounting principles; (9) items attributable to any
stock dividend, stock split, combination or exchange of stock occurring during
the Performance Period; (10) any other items of significant income or expense
which are determined to be appropriate adjustments; (11) items relating to
unusual or extraordinary corporate transactions, events or developments,
(12) items related to amortization of acquired intangible assets; (13) items
that are outside the scope of the Company’s core, on-going business activities;
(14) changes in foreign currency exchange rates; (15) items relating to changes
in tax laws; (16) certain identified expenses (including, but not limited to,
cash bonus expenses, incentive expenses and acquisition-related transaction and
integration expenses); (17) items relating to asset impairment charges; or
(18) items relating to gains or unusual or nonrecurring events or changes in
applicable law, accounting principles or business conditions. For all Awards
intended to qualify as Qualified Performance-Based Awards, such determinations
shall be made within the time prescribed by, and otherwise in compliance with,
Section 162(m) of the Code.

 

(v)  Non-delegation.  No delegate of the Administrator is permitted to exercise
authority granted to the Administrator under Section 4 to the extent that the
exercise of such authority by the delegate would cause an Award designated as a
Qualified Performance-Based Award not to qualify for, or to cease to qualify
for, the Section 162(m) Exemption.

 

(l)                                     Awards to Participants Outside the
United States.  The Administrator may grant Awards to Eligible Individuals who
are foreign nationals, who are located outside the United States or who are not
compensated from a payroll maintained in the United States, or who are otherwise
subject to (or could cause Aralez or a Subsidiary to be subject to) tax, legal
or regulatory provisions of countries or jurisdictions outside the United
States, on such terms and conditions different from those specified in the Plan
as may, in the judgment of the Administrator, be necessary or desirable in order
that any such Award shall conform to laws, regulations, and customs of the
country or jurisdiction in which the Participant is then resident or primarily
employed or to foster and promote achievement of the purposes of the Plan.

 

(m)                             Limitation on Dividend Reinvestment and Dividend
Equivalents.  Reinvestment of dividends in additional Restricted Stock at the
time of any dividend payment, and the payment of Common Shares with respect to
dividends to Participants holding Awards of stock Units, shall only be
permissible if sufficient shares are available under the Share Pool for such
reinvestment or payment (taking into account then outstanding Awards). In the
event that sufficient shares are not available under the Share Pool for such
reinvestment or payment, such reinvestment or payment shall be made in the form
of a grant of stock Units equal in number to the Common Shares that would have
been obtained by such

 

12

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payment or reinvestment, the terms of which stock Units shall provide for
settlement in cash and for Dividend Equivalent reinvestment in further stock
Units on the terms contemplated by this Section 7(m).

 

8.                                      Withholding of Taxes.

 

Participants and holders of Awards shall pay to Aralez or its Affiliate, or make
arrangements satisfactory to the Administrator for payment of, any Tax
Withholding Obligation in respect of Awards granted under the Plan no later than
the date of the event creating the tax or social insurance contribution
liability. The obligations of Aralez under the Plan shall be conditional on such
payment or arrangements. Unless otherwise determined by the Administrator, and
subject always to applicable law, Tax Withholding Obligations may be settled in
whole or in part with Common Shares, including unrestricted outstanding shares
surrendered to Aralez and unrestricted shares that are part of the Award that
gives rise to the Tax Withholding Obligation, having a Fair Market Value on the
date of surrender or withholding equal to the statutory minimum amount (and not
any greater amount) required to be withheld for tax or social insurance
contribution purposes, all in accordance with such procedures as the
Administrator establishes. Aralez or its Affiliate may deduct, to the extent
permitted by law, any such Tax Withholding Obligations from any payment of any
kind otherwise due to the Participant or holder of an Award.

 

9.                                      Transferability of Awards.

 

(a)                                 General Nontransferability Absent
Administrator Permission.  Except as otherwise determined by the Administrator,
and in any event in the case of an Incentive Stock Option or a tandem stock
appreciation right granted with respect to an Incentive Stock Option, no Award
granted under the Plan shall be transferable by a Participant otherwise than by
will or the laws of descent and distribution. The Administrator shall not permit
any transfer of an Award for value. An Award may be exercised during the
lifetime of the Participant, only by the Participant or, during the period the
Participant is under a legal disability, by the Participant’s guardian or legal
representative, unless otherwise determined by the Administrator. Awards granted
under the Plan shall not be subject in any manner to alienation, anticipation,
sale, transfer, assignment, pledge, or encumbrance, except as otherwise
determined by the Administrator; provided, however, that the restrictions in
this sentence shall not apply to the Common Shares received in connection with
an Award after the date that the restrictions on transferability of such shares
set forth in the applicable Award Agreement have lapsed. Nothing in this
paragraph shall be interpreted or construed as overriding the terms of any
Aralez stock ownership or retention policy, now or hereafter existing, that may
apply to the Participant or Common Shares received under an Award.

 

(b)                                 Administrator Discretion to Permit Transfers
Other Than For Value.  Except as otherwise restricted by applicable law, the
Administrator may, but need not, permit an Award, other than an Incentive Stock
Option or a tandem stock appreciation right granted with respect to an Incentive
Stock Option, to be transferred to a Participant’s Family Member (as defined
below) as a gift or pursuant to a domestic relations order in settlement of
marital property rights. The Administrator shall not permit any transfer of an
Award for value. For purposes of this Section 9, “Family Member” means any
child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former
spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, or sister-in-law, including adoptive
relationships, any person sharing the Participant’s household (other than a
tenant or employee), a trust in which these persons have more than fifty percent
of the beneficial interest, a foundation in which these persons (or the
Participant) control the management of assets, and any other entity in which
these persons (or the Participant) own more than fifty percent (50%) of the
voting interests. The following transactions are not prohibited transfers for
value: (i) a transfer under a domestic relations order in settlement of marital
property rights; and (ii) a transfer to an entity in

 

13

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which more than fifty percent of the voting interests are owned by Family
Members (or the Participant) in exchange for an interest in that entity.

 

10.                               Adjustments for Corporate Transactions and
Other Events.

 

(a)                                 Mandatory Adjustments.  In the event of a
merger, consolidation, stock rights offering, statutory share exchange or
similar event affecting Aralez (each, a “Corporate Event”) or a stock dividend,
stock split, reverse stock split, separation, spinoff, reorganization,
extraordinary dividend of cash or other property, share combination or
subdivision, or recapitalization or similar event affecting the capital
structure of Aralez (each, a “Share Change”) that occurs at any time after
adoption of this Plan by the Board (including any such Corporate Event or Share
Change that occurs after such adoption and coincident with or prior to the
Effective Date), the Administrator shall, with the approval of the Exchange (if
required), make equitable and appropriate substitutions or proportionate
adjustments to (i) the aggregate number and kind of Common Shares or other
securities on which Awards under the Plan may be granted to Eligible
Individuals, (ii) the maximum number of Common Shares or other securities with
respect to which Awards may be granted during any one calendar year to any
individual, (iii) the maximum number of Common Shares or other securities that
may be issued with respect to Incentive Stock Options granted under the Plan,
(iv) the number of Common Shares or other securities covered by each outstanding
Award and the exercise price, base price or other price per share, if any, and
other relevant terms of each outstanding Award, and (v) all other numerical
limitations relating to Awards, whether contained in this Plan or in Award
Agreements; provided, however, that any fractional shares resulting from any
such adjustment shall be eliminated; and, provided further, that in no event
shall the exercise price per Common Share of a stock option or stock
appreciation right, or subscription price per Common Share or any other Award,
be reduced to an amount that is lower than the par value of a Common Share.

 

(b)                                 Discretionary Adjustments.  In the case of
Corporate Events, the Administrator may, with the approval of the Exchange (if
required), make such other adjustments to outstanding Awards as it determines to
be appropriate and desirable, which adjustments may include, without limitation,
(i) the cancellation of outstanding Awards in exchange for payments of cash,
securities or other property or a combination thereof having an aggregate value
equal to the value of such Awards, as determined by the Administrator in its
sole discretion (it being understood that in the case of a Corporate Event with
respect to which shareholders of Aralez receive consideration other than
publicly traded equity securities of the ultimate surviving entity, any such
determination by the Administrator that the value of a stock option or stock
appreciation right shall for this purpose be deemed to equal the excess, if any,
of the value of the consideration being paid for each Common Share pursuant to
such Corporate Event over the exercise price or base price of such stock option
or stock appreciation right shall conclusively be deemed valid and that any
stock option or stock appreciation right may be cancelled for no consideration
upon a Corporate Event if its exercise price or base price equals or exceeds the
value of the consideration being paid for each Common Share pursuant to such
Corporate Event), (ii) the substitution of securities or other property
(including, without limitation, cash or other securities of Aralez and
securities of entities other than Aralez) for the Common Shares subject to
outstanding Awards, and (iii) the substitution of equivalent awards, as
determined in the sole discretion of the Administrator, of the surviving or
successor entity or a parent thereof (“Substitute Awards”).

 

(c)                                  Adjustments to Performance Goals.  The
Administrator may, in its discretion, adjust the Performance Goals applicable to
any Awards to reflect any unusual or non-recurring events and other
extraordinary items, impact of charges for restructurings, discontinued
operations and the cumulative effects of accounting or tax changes, each as
defined by generally accepted accounting principles or as identified in Aralez’s
consolidated financial statements, notes to the consolidated financial
statements, management’s discussion and analysis or other Aralez filings with
the Securities and Exchange Commission; provided, however, that, except in
connection with death, disability or a Change in Control,

 

14

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no such adjustment shall be made if the effect would be to cause an Award that
is intended to be a Qualified Performance-Based Award to no longer constitute a
Qualified Performance-Based Award. If the Administrator determines that a change
in the business, operations, corporate structure or capital structure of Aralez
or the applicable subsidiary, business segment or other operational unit of
Aralez or any such entity or segment, or the manner in which any of the
foregoing conducts its business, or other events or circumstances, render the
Performance Goals to be unsuitable, the Administrator may modify such
Performance Goals or the related minimum acceptable level of achievement, in
whole or in part, as the Administrator deems appropriate and equitable;
provided, however, that, except in connection with death, disability or a Change
in Control, no such modification shall be made if the effect would be to cause
an Award that is intended to be a Qualified Performance-Based Award to no longer
constitute a Qualified Performance-Based Award.

 

(d)           Statutory Requirements Affecting Adjustments.  Notwithstanding the
foregoing: (A) any adjustments made pursuant to Section 10 to Awards that are
considered “deferred compensation” within the meaning of Section 409A of the
Code shall be made in compliance with the requirements of Section 409A of the
Code; (B) any adjustments made pursuant to Section 10 to Awards that are not
considered “deferred compensation” subject to Section 409A of the Code shall be
made in such a manner as to ensure that after such adjustment, the Awards either
(1) continue not to be subject to Section 409A of the Code or (2) comply with
the requirements of Section 409A of the Code; (C) in any event, the
Administrator shall not have the authority to make any adjustments pursuant to
Section 10 to the extent the existence of such authority would cause an Award
that is not intended to be subject to Section 409A of the Code at the date of
grant to be subject thereto; and (D) any adjustments made pursuant to Section 10
to Awards that are Incentive Stock Options shall be made in compliance with the
requirements of Section 424(a) of the Code.

 

(e)                                  Dissolution or Liquidation.  Unless the
Administrator determines otherwise, all Awards outstanding under the Plan shall
terminate upon the dissolution or liquidation of Aralez.

 

11.                               Change in Control Provisions.

 

(a)                                 Termination of Awards.  Notwithstanding the
provisions of Section 11(b), in the event that any transaction resulting in a
Change in Control occurs, outstanding Awards will terminate upon the effective
time of such Change in Control unless provision is made in connection with the
transaction for the continuation or assumption of such Awards by, or for the
issuance therefor of Substitute Awards of, the surviving or successor entity or
a parent thereof. Solely with respect to Awards that will terminate as a result
of the immediately preceding sentence and except as otherwise provided in the
applicable Award Agreement:

 

(i)                                     the outstanding Awards of stock options
and stock appreciation rights that will terminate upon the effective time of the
Change in Control shall, immediately before the effective time of the Change in
Control, become fully exercisable and the holders of such Awards will be
permitted, immediately before the Change in Control, to exercise the Awards;

 

(ii)                                  the outstanding shares of Restricted Stock
the vesting or restrictions on which are then solely time-based and not subject
to achievement of Performance Goals shall, immediately before the effective time
of the Change in Control, become fully vested, free of all transfer and lapse
restrictions and free of all risks of forfeiture;

 

(iii)                               the outstanding shares of Restricted Stock
the vesting or restrictions on which are then subject to and pending achievement
of Performance Goals shall, immediately before the effective time of the Change
in Control and unless the Award Agreement provides for vesting or lapsing of
restrictions in a greater amount upon the occurrence of a Change in Control,
become vested, free of transfer and lapse restrictions and risks of forfeiture
in such amounts as if the applicable

 

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Performance Goals for the unexpired Performance Period had been achieved at the
target level set forth in the applicable Award Agreement;

 

(iv)                              the outstanding Restricted Stock Units,
Performance Shares and Performance Units the vesting, earning or settlement of
which is then solely time-based and not subject to or pending achievement of
Performance Goals shall, immediately before the effective time of the Change in
Control, become fully earned and vested and shall be settled in cash or Common
Shares (consistent with the terms of the Award Agreement after taking into
account the effect of the Change in Control transaction on the shares) as
promptly as is practicable, subject to any applicable limitations imposed
thereon by Section 409A of the Code; and

 

(v)                                 the outstanding Restricted Stock Units,
Performance Shares and Performance Units the vesting, earning or settlement of
which is then subject to and pending achievement of Performance Goals shall,
immediately before the effective time of the Change in Control and unless the
Award Agreement provides for vesting, earning or settlement in a greater amount
upon the occurrence of a Change in Control, become vested and earned in such
amounts as if the applicable Performance Goals for the unexpired Performance
Period had been achieved at the target level set forth in the applicable Award
Agreement and shall be settled in cash or Common Shares (consistent with the
terms of the Award Agreement after taking into account the effect of the Change
in Control transaction on the shares) as promptly as is practicable, subject to
any applicable limitations imposed thereon by Section 409A of the Code.

 

Implementation of the provisions of this Section 11(a) shall be conditioned upon
consummation of the Change in Control.

 

(b)                                 Continuation, Assumption or Substitution of
Awards.  The administrator may specify, on or after the date of grant, in an
award agreement or amendment thereto, the consequences of a Participant’s
Termination of Service that occurs coincident with or following the occurrence
of a Change in Control, if a Change in Control occurs under which provision is
made in connection with the transaction for the continuation or assumption of
outstanding Awards by, or for the issuance therefor of Substitute Awards of, the
surviving or successor entity or a parent thereof.

 

(c)                                  Other Permitted Actions.  In the event that
any transaction resulting in a Change in Control occurs, the Administrator may
take any of the actions set forth in Section 10 with respect to any or all
Awards granted under the Plan.

 

(d)                                 Section 409A Savings Clause. 
Notwithstanding the foregoing, if any Award is considered to be a “nonqualified
deferred compensation plan” within the meaning of Section 409A of the Code, this
Section 11 shall apply to such Award only to the extent that its application
would not result in the imposition of any tax or interest or the inclusion of
any amount in income under Section 409A of the Code.

 

12.                               Substitution of Awards in Mergers and
Acquisitions.

 

Awards may be granted under the Plan from time to time in substitution for
assumed awards held by employees, officers, consultants or directors of entities
who become employees, officers, consultants or directors of Aralez or a
Subsidiary as the result of a merger or consolidation of the entity for which
they perform services with Aralez or a Subsidiary, or the acquisition by Aralez
of the assets or stock of the such entity. The terms and conditions of any
Awards so granted may vary from the terms and conditions set forth herein to the
extent that the Administrator deems appropriate at the time of grant to conform
the Awards to the provisions of the assumed awards for which they are
substituted and to preserve their intrinsic value as of the date of the merger,
consolidation or acquisition transaction. To the extent permitted by applicable
law and marketplace or listing rules of the primary securities market or
exchange on which the Common Shares are listed or admitted for trading, any
available shares

 

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under a shareholder-approved plan of an acquired company (as appropriately
adjusted to reflect the transaction) may be used for Awards granted pursuant to
this Section 12 and, upon such grant, shall not reduce the Share Pool.

 

13.                               Compliance with Securities Laws; Listing and
Registration.

 

(a)                                 The obligation of Aralez to sell or deliver
Common Shares with respect to any Award granted under the Plan shall be subject
to all applicable laws, rules and regulations, including all applicable federal,
state or foreign (non-United States) securities laws, or foreign (non-United
States) securities laws and the obtaining of all such approvals by governmental
agencies as may be deemed necessary or appropriate by the Administrator. If at
any time the Administrator determines that the delivery of Common Shares under
the Plan is or may be unlawful under the laws of any applicable jurisdiction, or
federal, state or foreign (non-United States) securities laws, the right to
exercise an Award or receive Common Shares pursuant to an Award shall be
suspended until the Administrator determines that such delivery is lawful. If at
any time the Administrator determines that the delivery of Common Shares under
the Plan would or may violate the rules of any exchange on which Aralez’s
securities are then listed for trading, the right to exercise an Award or
receive Common Shares pursuant to an Award shall be suspended until the
Administrator determines that such delivery would not violate such rules. If the
Administrator determines that the exercise or nonforfeitability of, or delivery
of benefits pursuant to, any Award would violate any applicable provision of
securities laws or the listing requirements of any stock exchange upon which any
of Aralez’s equity securities are listed, then the Administrator may postpone
any such exercise, nonforfeitability or delivery, as applicable, but Aralez
shall use all reasonable efforts to cause such exercise, nonforfeitability or
delivery to comply with all such provisions at the earliest practicable date.

 

(b)                                 Each Award is subject to the requirement
that, if at any time the Administrator determines, in its absolute discretion,
that the listing, registration or qualification of Common Shares issuable
pursuant to the Plan is required by any securities exchange or under any state,
federal or foreign (non-United States) law, or the consent or approval of any
governmental regulatory body is necessary or desirable as a condition of, or in
connection with, the grant of an Award or the issuance of Common Shares, no such
Award shall be granted or payment made or Common Shares issued, in whole or in
part, unless listing, registration, qualification, consent or approval has been
effected or obtained free of any conditions not acceptable to the Administrator.

 

(c)                                  In the event that the disposition of Common
Shares acquired pursuant to the Plan is not covered by a then current
registration statement under the Securities Act of 1933, as amended (the
“Securities Act”), and is not otherwise exempt from such registration, such
Common Shares shall be restricted against transfer to the extent required by the
Securities Act or regulations thereunder, and the Administrator may require a
person receiving Common Shares pursuant to the Plan, as a condition precedent to
receipt of such Common Shares, to represent to Aralez in writing that the Common
Shares acquired by such person is acquired for investment only and not with a
view to distribution and that such person will not dispose of the Common Shares
so acquired in violation of federal, state or foreign securities laws and
furnish such information as may, in the opinion of counsel for the Company, be
appropriate to permit the Company to issue the Common Shares in compliance with
applicable federal, state or foreign securities laws. If applicable, all
certificates representing such Common Shares shall bear applicable legends as
required by federal, state or foreign securities laws or stock exchange
regulation.

 

14.                               Section 409A Compliance.

 

It is the intention of Aralez that any Award that constitutes a “nonqualified
deferred compensation plan” within the meaning of Section 409A of the Code shall
comply in all respects with the requirements of Section 409A of the Code to
avoid the imposition of any tax or interest or the

 

17

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inclusion of any amount in income pursuant to Section 409A of the Code, and the
terms of each such Award shall be construed, administered and deemed amended, if
applicable, in a manner consistent with this intention. Notwithstanding the
foregoing, neither Aralez nor any of its Affiliates nor any of its or their
directors, officers, employees, agents or other service providers will be liable
for any taxes, penalties or interest imposed on any Participant or other person
with respect to any amounts paid or payable (whether in cash, Common Shares or
other property) under any Award, including any taxes, penalties or interest
imposed under or as a result of Section 409A of the Code. Any payments described
in an Award that are due within the “short term deferral period” as defined in
Section 409A of the Code shall not be treated as deferred compensation unless
applicable law requires otherwise. For purposes of any Award, each amount to be
paid or benefit to be provided to a Participant that constitutes deferred
compensation subject to Section 409A of the Code shall be construed as a
separate identified payment for purposes of Section 409A of the Code. For
purposes of Section 409A of the Code, the payment of Dividend Equivalents under
any Award shall be construed as earnings and the time and form of payment of
such Dividend Equivalents shall be treated separately from the time and form of
payment of the underlying Award. Notwithstanding any other provision of the Plan
to the contrary, with respect to any Award that constitutes a “nonqualified
deferred compensation plan” within the meaning of Section 409A of the Code, any
payments (whether in cash, Common Shares or other property) to be made with
respect to the Award that become payable on account of the Participant’s
separation from service, within the meaning of Section 409A of the Code, while
the Participant is a “specified employee” (as determined in accordance with the
uniform policy adopted by the Administrator with respect to all of the
arrangements subject to Section 409A of the Code maintained by Aralez and its
Affiliates) and which would otherwise be paid within six months after the
Participant’s separation from service shall be accumulated (without interest)
and paid on the first day of the seventh month following the Participant’s
separation from service or, if earlier, within 15 days after the appointment of
the personal representative or executor of the Participant’s estate following
the Participant’s death. Notwithstanding anything in the Plan or an Award
Agreement to the contrary, in no event shall the Administrator exercise its
discretion to accelerate the payment or settlement of an Award where such
payment or settlement constitutes deferred compensation within the meaning of
Code section 409A unless, and solely to the extent that, such accelerated
payment or settlement is permissible under Treasury Regulation
section 1.409A-3(j)(4).

 

15.                               Plan Duration; Amendment and Discontinuance.

 

(a)                                 Plan Duration.  The Plan shall remain in
effect, subject to the right of the Board or the Compensation Committee to amend
or terminate the Plan at any time, until the earlier of (a) the earliest date as
of which all Awards granted under the Plan have been satisfied in full or
terminated and no Common Shares approved for issuance under the Plan remain
available to be granted under new Awards or (b) the tenth anniversary of the
transactions contemplated by the Merger Agreement. No Awards shall be granted
under the Plan after such termination date. Subject to other applicable
provisions of the Plan, all Awards made under the Plan on or before the tenth
anniversary of the transactions contemplated in the Merger Agreement, or such
earlier termination of the Plan, shall remain in effect until such Awards have
been satisfied or terminated in accordance with the Plan and the terms of such
Awards. Notwithstanding the continuation of the Plan, no Award (other than a
stock option or stock appreciation right) that is intended to be a Qualified
Performance-Based Award shall be granted on or after the fifth anniversary of
the Effective Date unless the material terms of the applicable performance
goals, within the meaning of Treasury Regulation Section 1.162-27(e)(4)(i), are
approved by the shareholders of Aralez no later than the first shareholder
meeting that occurs in the fifth year following the Effective Date.

 

(b)                                 Amendment and Discontinuance of the Plan. 
The Board or the Compensation Committee may, without shareholder approval,
amend, alter or discontinue the Plan, but no amendment, alteration or
discontinuation shall be made which would materially impair the rights of a
Participant with respect

 

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to a previously granted Award without such Participant’s consent, except such an
amendment made to comply with applicable law or rule of any securities exchange
or market on which the Common Shares are listed or admitted for trading or to
prevent adverse tax or accounting consequences to Aralez or the Participant.
Notwithstanding the foregoing, no such amendment shall be made without the
approval of Aralez’s shareholders to the extent such amendment would
(A) materially increase the benefits accruing to Participants under the Plan,
(B) materially increase the number of Common Shares which may be issued under
the Plan or to a Participant, (C) materially expand the eligibility for
participation in the Plan, (D) eliminate or modify the prohibition set forth in
Section 7(f) on repricing of stock options and stock appreciation rights,
(E) lengthen the maximum term or lower the minimum exercise price or base price
permitted for stock options and stock appreciation rights, or (F) modify the
prohibition on the issuance of reload or replenishment options. Except as
otherwise determined by the Board or Compensation Committee, termination of the
Plan shall not affect the Administrator’s ability to exercise the powers granted
to it hereunder with respect to Awards granted under the Plan prior to the date
of such termination.

 

(c)                                  Amendment of Awards.  Subject to
Section 7(f), the Administrator may unilaterally amend the terms of any Award
theretofore granted, but no such amendment shall materially impair the rights of
any Participant with respect to an Award without the Participant’s consent,
except such an amendment made to cause the Plan or Award to comply with
applicable law, applicable rule of any securities exchange on which the Common
Shares are listed or admitted for trading, or to prevent adverse tax or
accounting consequences for the Participant or the Company or any of its
Affiliates. For purposes of the foregoing sentence, an amendment to an Award
that results in a change in the tax consequences of the Award to the Participant
shall not be considered to be a material impairment of the rights of the
Participant and shall not require the Participant’s consent.

 

16.                               General Provisions.

 

(a)                                 Non-Guarantee of Employment or Service. 
Nothing in the Plan or in any Award Agreement thereunder shall confer any right
on an individual to continue in the service of Aralez or any Affiliate or shall
interfere in any way with any right of Aralez or any Affiliate may have to
terminate such service at any time with or without cause or notice and whether
or not such termination results in (i) the failure of any Award to vest or
become payable; (ii) the forfeiture of any unvested or vested portion of any
Award; and/or (iii) any other adverse effect on the individual’s interests under
any Award or the Plan. No person, even though deemed an Eligible Individual,
shall have a right to be selected as a Participant, or, having been so selected,
to be selected again as a Participant. To the extent that an Eligible Individual
who is an employee of a Subsidiary receives an Award under the Plan, that Award
shall in no event be understood or interpreted to mean that Aralez is the
Participant’s employer or that the Participant has an employment relationship
with Aralez.

 

(b)                                 No Trust or Fund Created.  Neither the Plan
nor any Award shall create or be construed to create a trust or separate fund of
any kind or a fiduciary relationship between Aralez and a Participant or any
other person. To the extent that any Participant or other person acquires a
right to receive payments from Aralez pursuant to an Award, such right shall be
no greater than the right of any unsecured general creditor of Aralez.

 

(c)                                  Status of Awards.  Awards shall be special
incentive payments to the Participant and shall not be taken into account in
computing the amount of salary or compensation of the Participant for purposes
of determining any pension, retirement, death, severance or other benefit under
(a) any pension, retirement, profit-sharing, bonus, insurance, severance or
other employee benefit plan of Aralez or any Affiliate now or hereafter in
effect under which the availability or amount of benefits is related to the
level of compensation or (b) any agreement between (i) Aralez or any Affiliate
and (ii) the Participant, except as such plan or agreement shall otherwise
expressly provide.

 

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(d)                                 Subsidiary Employees.  In the case of a
grant of an Award to an Eligible Individual who provides services to any
Subsidiary, Aralez may, if the Administrator so directs, issue or transfer the
Common Shares, if any, covered by the Award to the Subsidiary, for such lawful
consideration as the Administrator may specify, upon the condition or
understanding that the Subsidiary will transfer the Common Shares to the
Eligible Individual in accordance with the terms of the Award specified by the
Administrator pursuant to the provisions of the Plan. All Common Shares
underlying Awards that are forfeited or canceled after such issue or transfer of
shares to the Subsidiary shall revert to Aralez.

 

(e)                                  Governing Law and Interpretation.  The
validity, construction and effect of the Plan, of Award Agreements entered into
pursuant to the Plan, and of any rules, regulations, determinations or decisions
made by the Administrator relating to the Plan or such Award Agreements, and the
rights of any and all persons having or claiming to have any interest therein or
thereunder, shall be determined exclusively in accordance with applicable United
States federal laws and the laws of the state of North Carolina without regard
to its conflict of laws principles. The captions of the Plan are not part of the
provisions hereof and shall have no force or effect. Except where the context
otherwise requires: (i) the singular includes the plural and vice versa; (ii) a
reference to one gender includes other genders; (iii) a reference to a person
includes a natural person, partnership, corporation, association, governmental
or local authority or agency or other entity; and (iv) a reference to a statute,
ordinance, code or other law includes regulations and other instruments under it
and consolidations, amendments, re-enactments or replacements of any of them.

 

(f)                                   Use of English Language.  The Plan, each
Award Agreement, and all other documents, notices and legal proceedings entered
into, given or instituted pursuant to an Award shall be written in English,
unless otherwise determined by the Administrator. If a Participant receives an
Award Agreement, a copy of the Plan or any other documents related to an Award
translated into a language other than English, and if the meaning of the
translated version is different from the English version, the English version
shall control.

 

(g)                                  Recovery of Amounts Paid.  Except as
otherwise provided by the Administrator, Awards granted under the Plan shall be
subject to any and all policies, guidelines, codes of conduct, or other
agreement or arrangement adopted by the Board or Compensation Committee with
respect to the recoupment, recovery or clawback of compensation (collectively,
the “Recoupment Policy”) and/or to any provisions set forth in the applicable
Award Agreement under which Aralez may recover from current and former
Participants any amounts paid or Common Shares issued under an Award and any
proceeds therefrom under such circumstances as the Administrator determines
appropriate. The Administrator may apply the Recoupment Policy to Awards granted
before the policy is adopted to the extent required by applicable law or rule of
any securities exchange or market on which Common Shares are listed or admitted
for trading, as determined by the Administrator in its sole discretion.

 

17.                               Glossary.

 

Under this Plan, except where the context otherwise indicates, the following
definitions apply:

 

“Administrator” means the Compensation Committee, or such other committee(s) or
officer(s) duly appointed by the Board or the Compensation Committee to
administer the Plan or delegated limited authority to perform administrative
actions under the Plan, and having such powers as shall be specified by the
Board or the Compensation Committee; provided, however, that at any time the
Board may serve as the Administrator in lieu of or in addition to the
Compensation Committee or such other committee(s) or officer(s) to whom
administrative authority has been delegated. With respect to any Award to which
Section 16 of the Exchange Act applies, the Administrator shall consist of
either the Board or a committee of the Board, which committee shall consist of
two or more directors, each of whom is intended to be, to the extent required by
Rule 16b-3 of the Exchange Act, a “non-employee director” as defined in
Rule 16b-3 of the Exchange Act and an “independent director” to the extent

 

20

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required by the rules of the national securities exchange that is the principal
trading market for the Common Shares, and with respect to any Award that is
intended to be a Qualified Performance-Based Award, the Administrator shall
consist of two or more directors, each of whom is intended to be, to the extent
required by Section 162(m) of the Code, an “outside director” as defined under
Section 162(m) of the Code; provided, that with respect to Awards made to a
member of the Board who is not an employee of the Company, “Administrator” means
the Board. Any member of the Administrator who does not meet the foregoing
requirements shall abstain from any decision regarding an Award and shall not be
considered a member of the Administrator to the extent required to comply with
Rule 16b-3 of the Exchange Act or Section 162(m) of the Code.

 

“Affiliate” means any entity, whether now or hereafter existing, which controls,
is controlled by, or is under common control with, Aralez or any successor to
Aralez. For this purpose, “control” (including the correlative meanings of the
terms “controlled by” and “under common control with”) shall mean ownership,
directly or indirectly, of 50% or more of the total combined voting power of all
classes of voting securities issued by such entity, or the possession, directly
or indirectly, of the power to direct the management and policies of such
entity, by contract or otherwise.

 

“Aralez” means Aralez Pharmaceuticals Inc., a company organized under the laws
of the province of British Colombia, Canada.

 

“Award” means any stock option, stock appreciation right, stock award, stock
unit, Performance Share, Performance Unit, and/or Other Stock-Based Award,
whether granted under this Plan.

 

“Award Agreement” means the written document(s), including an electronic writing
acceptable to the Administrator, and any notice, addendum or supplement thereto,
memorializing the terms and conditions of an Award granted pursuant to the Plan
and which shall incorporate the terms of the Plan.

 

“Board” means the Board of Directors of Aralez.

 

“Business Day” means a day, other than a Saturday, Sunday or statutory holiday,
when banks are generally open in the City of Toronto, or the City of New York
for the transaction of banking business.

 

“Change in Control” means the first of the following to occur: (i) a Change in
Ownership of Aralez, (ii) a Change in Effective Control of Aralez, or (iii) a
Change in the Ownership of Assets of Aralez, as described herein and construed
in accordance with Code section 409A.

 

(i)                                     A “Change in Ownership of Aralez” shall
occur on the date that any one Person acquires, or Persons Acting as a Group
acquire, ownership of the capital stock of Aralez that, together with the stock
held by such Person or Group, constitutes more than 50% of the total fair market
value or total voting power of the capital stock of Aralez. However, if any one
Person is, or Persons Acting as a Group are, considered to own more than 50%, on
a fully diluted basis, of the total fair market value or total voting power of
the capital stock of Aralez, the acquisition of additional stock by the same
Person or Persons Acting as a Group is not considered to cause a Change in
Ownership of Aralez or to cause a Change in Effective Control of Aralez (as
described below). An increase in the percentage of capital stock owned by any
one Person, or Persons Acting as a Group, as a result of a transaction in which
Aralez acquires its stock in exchange for property will be treated as an
acquisition of stock.

 

(ii)                                  A “Change in Effective Control of Aralez”
shall occur on the date either (A) a majority of members of Aralez’s Board is
replaced during any 12-month period by directors whose appointment or election
is not endorsed by a majority of the members of Aralez’s Board before the date
of the appointment or election, or (B) any one Person, or Persons Acting as a
Group, acquires (or has acquired during the 12-month period ending on the date
of the most recent acquisition by such Person or Persons) ownership of stock of
Aralez possessing 50% or more of the total voting power of the stock of Aralez.

 

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(iii)                               A “Change in the Ownership of Assets of
Aralez” shall occur on the date that any one Person acquires, or Persons Acting
as a Group acquire (or has or have acquired during the 12-month period ending on
the date of the most recent acquisition by such Person or Persons), assets from
Aralez that have a total gross fair market value equal to or more than 50% of
the total gross fair market value of all of the assets of Aralez immediately
before such acquisition or acquisitions. For this purpose, gross fair market
value means the value of the assets of Aralez, or the value of the assets being
disposed of, determined without regard to any liabilities associated with such
assets.

 

The following rules of construction apply in interpreting the definition of
Change in Control:

 

(A)                               A “Person” means any individual, entity or
group within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended, other than employee benefit plans sponsored or
maintained by Aralez and by entities controlled by Aralez or an underwriter,
initial purchaser or placement agent temporarily holding the capital stock of
Aralez pursuant to a registered public offering.

 

(B)                               Persons will be considered to be Persons
Acting as a Group (or Group) if they are owners of a corporation that enters
into a merger, consolidation, purchase or acquisition of stock, or similar
business transaction with the corporation. If a Person owns stock in both
corporations that enter into a merger, consolidation, purchase or acquisition of
stock, or similar transaction, such shareholder is considered to be acting as a
Group with other shareholders only with respect to the ownership in that
corporation before the transaction giving rise to the change and not with
respect to the ownership interest in the other corporation. Persons will not be
considered to be acting as a Group solely because they purchase assets of the
same corporation at the same time or purchase or own stock of the same
corporation at the same time, or as a result of the same public offering.

 

(C)                               A Change in Control shall not include a
transfer to a related person as described in Code section 409A or a public
offering of capital stock of Aralez.

 

(D)                               For purposes of the definition of Change in
Control, Section 318(a) of the Code applies to determine stock ownership. Stock
underlying a vested option is considered owned by the individual who holds the
vested option (and the stock underlying an unvested option is not considered
owned by the individual who holds the unvested option). For purposes of the
preceding sentence, however, if a vested option is exercisable for stock that is
not substantially vested (as defined by Treasury Regulation §1.83-3(b) and (j)),
the stock underlying the option is not treated as owned by the individual who
holds the option.

 

“Code” means the Internal Revenue Code of 1986, as amended from time to time,
and any successor thereto, the Treasury Regulations thereunder and other
relevant interpretive guidance issued by the Internal Revenue Service or the
Treasury Department. Reference to any specific section of the Code shall be
deemed to include such regulations and guidance, as well as any successor
section, regulations and guidance.

 

“Common Shares” means common shares in the capital of Aralez, without par value,
and any capital securities into which they are converted.

 

“Company” means Aralez and its Subsidiaries, except where the context otherwise
requires. For purposes of determining whether a Change in Control has occurred,
Company shall mean only Aralez.

 

“Compensation Committee” means the Compensation Committee of the Board.

 

“Dividend Equivalent” means a right, granted to a Participant, to receive cash,
Common Shares, stock Units or other property equal in value to dividends paid
with respect to a specified number of Common Shares.

 

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“Effective Date” means the date of consummation of the transactions contemplated
by the Merger Agreement.

 

“Eligible Individuals” means (i) officers and employees of, and other
individuals, including non-employee directors, who are natural persons providing
bona fide services to or for, Aralez or any of its Subsidiaries, provided that
such services are not in connection with the offer or sale of securities in a
capital-raising transaction and do not directly or indirectly promote or
maintain a market for Aralez’s securities, (ii) prospective officers, employees
and service providers who have accepted offers of employment or other service
relationship from Aralez or a Subsidiary; and (iii) consultants who are natural
persons providing bona fide services to or for, Aralez or any of its
Subsidiaries, provided that such services are not in connection with the offer
or sale of securities in a capital-raising transaction and do not directly or
indirectly promote or maintain a market for Aralez’s securities.

 

“Exchange” means collectively, the Toronto Stock Exchange and the NASDAQ or any
such exchange in Canada or the United States on which Common Shares are listed
and posted for trading.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended from time
to time, and any successor thereto. Reference to any specific section of the
Exchange Act shall be deemed to include such regulations and guidance issued
thereunder, as well as any successor section, regulations and guidance.

 

“Fair Market Value” means, on a per share basis as of any date, unless otherwise
determined by the Administrator:

 

(i)                                     if the principal market for the Common
Shares (as determined by the Administrator if the Common Shares are listed or
admitted to trading on more than one exchange or market) is a national
securities exchange or an established securities market, the official closing
price per Common Share for the regular market session on that date on the
principal exchange or market on which the Common Shares are then listed or
admitted to trading or, if no sale is reported for that date, on the last
preceding day on which a sale was reported, all as reported by such source as
the Administrator may select;

 

(ii)                                  if the principal market for the Common
Shares is not a national securities exchange or an established securities
market, but the Common Shares are quoted by a national quotation system, the
average of the highest bid and lowest asked prices for the Common Shares on that
date as reported on a national quotation system or, if no prices are reported
for that date, on the last preceding day on which prices were reported, all as
reported by such source as the Administrator may select; or

 

(iii)                               if the Common Shares are neither listed or
admitted to trading on a national securities exchange or an established
securities market, nor quoted by a national quotation system, the value
determined by the Administrator in good faith by the reasonable application of a
reasonable valuation method, which method may, but need not, include taking into
account an appraisal of the fair market value of the Common Shares conducted by
a nationally recognized appraisal firm selected by the Administrator.

 

Notwithstanding the preceding, for foreign, federal, state and local income tax
reporting purposes and for such other purposes as the Administrator deems
appropriate, the Fair Market Value shall be determined by the Administrator in
accordance with uniform and nondiscriminatory standards adopted by it from time
to time.

 

“Full Value Award” means an Award that results in Aralez transferring the full
value of a Common Share under the Award, whether or not an actual share of stock
is issued. Full Value Awards shall include, but are not limited to, stock
awards, stock units, Performance Shares, Performance Units that

 

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are payable in Common Shares, and Other Stock-Based Awards for which Aralez
transfers the full value of a Common Share under the Award, but shall not
include Dividend Equivalents.

 

“Incentive Stock Option” means any stock option that is designated, in the
applicable Award Agreement or the resolutions of the Administrator under which
the stock option is granted, as an “incentive stock option” within the meaning
of Section 422 of the Code and otherwise meets the requirements to be an
“incentive stock option” set forth in Section 422 of the Code.

 

“Merger Agreement” means the Agreement and Plan of Merger and Arrangement, dated
as of June 8, 2015, among Tribute Pharmaceuticals Canada Inc., POZEN Inc., the
Company and certain other entities, as amended.

 

“Nonqualified Option” means any stock option that is not an Incentive Stock
Option.

 

“Other Stock-Based Award” means an Award of Common Shares or any other Award
that is valued in whole or in part by reference to, or is otherwise based upon,
Common Shares, including without limitation Dividend Equivalents.

 

“Participant” means an Eligible Individual to whom one or more Awards are or
have been granted pursuant to the Plan and have not been fully settled or
cancelled and, following the death of any such person, his successors, heirs,
executors and administrators, as the case may be.

 

“Performance Award” means a Full Value Award, the grant, vesting, lapse of
restrictions or settlement of which is conditioned upon the achievement of
performance objectives over a specified Performance Period and includes, without
limitation, Performance Shares and Performance Units.

 

“Performance Goals” means the performance goals established by the Administrator
in connection with the grant of Awards based on Performance Metrics or other
performance criteria selected by the Administrator; provided, however, that in
the case of Qualified Performance-Based Awards, such performance goals shall be
based on the attainment of specified levels of one or more Performance Metrics.

 

“Performance Period” means that period established by the Administrator during
which any Performance Goals specified by the Administrator with respect to such
Award are to be measured.

 

“Performance Metrics” means criteria established by the Administrator relating
to any of the following, as it may apply to an individual, one or more business
units, divisions, or Affiliates, or on a company-wide basis, and in absolute
terms, relative to a base period, or relative to the performance of one or more
comparable companies, peer groups, or an index covering multiple companies:

 

(i)  Earnings or Profitability Metrics:  any derivative of revenue;
earnings/loss (gross, operating, net, or adjusted); earnings/loss before
interest and taxes (“EBIT”); earnings/loss before interest, taxes, depreciation
and amortization (“EBITDA”); profit margins; operating margins; expense levels
or ratios; provided that any of the foregoing metrics may be adjusted to
eliminate the effect of any one or more of the following: interest expense,
asset impairments or investment losses, early extinguishment of debt or
stock-based compensation expense;

 

(ii)  Return Metrics:  any derivative of return on investment, assets, equity or
capital (total or invested);

 

(iii)  Investment Metrics:  relative risk-adjusted investment performance;
investment performance of assets under management;

 

(iv)  Cash Flow Metrics:  any derivative of operating cash flow; cash flow
sufficient to achieve financial ratios or a specified cash balance; free cash
flow; cash flow return on capital; net cash provided by operating activities;
cash flow per share; working capital;

 

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(v)  Liquidity Metrics:  any derivative of debt leverage (including debt to
capital, net debt-to-capital, debt-to-EBITDA or other liquidity ratios);

 

(vi)  Stock Price and Equity Metrics:  any derivative of return on shareholders’
equity; total shareholder return; stock price; stock price appreciation; market
capitalization; earnings/loss per share (basic or diluted) (before or after
taxes); and/or

 

(vii)  Strategic Metrics:  product research and development; completion of an
identified special project; clinical trials; regulatory filings or approvals;
patent application or issuance; manufacturing or process development; sales or
net sales; market share; market penetration; economic value added; customer
service; customer satisfaction; inventory control; balance of cash, cash
equivalents and marketable securities; growth in assets; key hires; employee
satisfaction; employee retention; business expansion; acquisitions,
divestitures, joint ventures or financing; legal compliance or safety and risk
reduction.

 

“Performance Shares” means a grant of stock or stock Units the issuance, vesting
or payment of which is contingent on performance as measured against
predetermined objectives over a specified Performance Period.

 

“Performance Units” means a grant of dollar-denominated Units the value, vesting
or payment of which is contingent on performance against predetermined
objectives over a specified Performance Period.

 

“Plan” means this Aralez Pharmaceuticals Inc. 2016 Long-Term Incentive Plan, as
set forth herein and as it may be amended from time to time.

 

“Qualified Performance-Based Award” means an Award intended to qualify for the
Section 162(m) Exemption, as provided in Section 7(k).

 

“Restricted Stock” means an Award of Common Shares to a Participant that may be
subject to certain transferability and other restrictions and to a risk of
forfeiture (including by reason of not satisfying certain Performance Goals).

 

“Restricted Stock Unit” means a right granted to a Participant to receive Common
Shares or cash at the end of a specified deferral period, which right may be
conditioned on the satisfaction of certain requirements (including the
satisfaction of certain Performance Goals).

 

“Restriction Period” means, with respect to Full Value Awards, the period
commencing on the date of grant of such Award to which vesting or
transferability and other restrictions and a risk of forfeiture apply and ending
upon the expiration of the applicable vesting conditions, transferability and
other restrictions and lapse of risk of forfeiture and/or the achievement of the
applicable Performance Goals (it being understood that the Administrator may
provide that vesting shall occur and/or restrictions shall lapse with respect to
portions of the applicable Award during the Restriction Period in accordance
with Section 7(b)).

 

“Section 162(m) Exemption” means the exemption from the limitation on
deductibility imposed by Section 162(m) of the Code that is set forth in
Section 162(m)(4)(C) of the Code.

 

“Subsidiary” means any corporation or other entity in an unbroken chain of
corporations or other entities beginning with Aralez if each of the corporations
or other entities, or group of commonly controlled corporations or other
entities, other than the last corporation or other entity in the unbroken chain
then owns stock or other equity interests possessing 50% or more of the total
combined voting power of all classes of stock or other equity interests in one
of the other corporations or other entities in such chain or otherwise has the
power to direct the management and policies of the entity by contract or by
means of appointing a majority of the members of the board or other body that
controls the affairs of the entity; provided, however, that solely for purposes
of determining whether a

 

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Participant has a Termination of Service that is a “separation from service”
within the meaning of Section 409A of the Code or whether an Eligible Individual
is eligible to be granted an Award that in the hands of such Eligible Individual
would constitute a “nonqualified deferred compensation plan” within the meaning
of Section 409A of the Code , a “Subsidiary” of a corporation or other entity
means all other entities with which such corporation or other entity would be
considered a single employer under Sections 414(b) or 414(c) of the Code.

 

“Tax Withholding Obligation” means any federal, state, local or foreign
(non-United States) income, employment or other tax or social insurance
contribution required by applicable law to be withheld in respect of Awards.

 

“Termination of Service” means the termination of the Participant’s employment
or consultancy with, or performance of services for, Aralez and its
Subsidiaries. Temporary absences from employment because of illness, vacation or
leave of absence and transfers among Aralez and its Subsidiaries shall not be
considered Terminations of Service. With respect to any Award that constitutes a
“nonqualified deferred compensation plan” within the meaning of Section 409A of
the Code, “Termination of Service” shall mean a “separation from service” as
defined under Section 409A of the Code to the extent required by Section 409A of
the Code to avoid the imposition of any tax or interest or the inclusion of any
amount in income pursuant to Section 409A of the Code. A Participant has a
separation from service within the meaning of Section 409A of the Code if the
Participant terminates employment with Aralez and all Subsidiaries for any
reason. A Participant will generally be treated as having terminated employment
with Aralez and all Subsidiaries as of a certain date if the Participant and the
entity that employs the Participant reasonably anticipate that the Participant
will perform no further services for Aralez or any Subsidiary after such date or
that the level of bona fide services that the Participant will perform after
such date (whether as an employee or an independent contractor) will permanently
decrease to no more than 20 percent (20%) of the average level of bona fide
services performed (whether as an employee or an independent contractor) over
the immediately preceding 36-month period (or the full period of services if the
Participant has been providing services for fewer than 36 months); provided,
however, that the employment relationship is treated as continuing while the
Participant is on military leave, sick leave or other bona fide leave of absence
if the period of leave does not exceed six months or, if longer, so long as the
Participant retains the right to reemployment with Aralez or any Subsidiary.

 

“Total and Permanent Disability” means, with respect to a Participant, except as
otherwise provided in the relevant Award Agreement, that a Participant is
(i) unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment that can be expected to
last until the Participant’s death or result in death, or (ii) determined to be
totally disabled by the Social Security Administration or other governmental or
quasi-governmental body that administers a comparable social insurance program
outside of the United States in which the Participant participates and which
conditions the right to receive benefits under such program on the Participant
being unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment that can be expected to
last until the Participant’s death or result in death. The Administrator shall
have sole authority to determine whether a Participant has suffered a Total and
Permanent Disability and may require such medical or other evidence as it deems
necessary to judge the nature and permanency of the Participant’s condition.

 

“Unit” means a bookkeeping entry used by Aralez to record and account for the
grant of the following types of Awards until such time as the Award is paid,
cancelled, forfeited or terminated, as the case may be: stock units, Restricted
Stock Units, Performance Units, and Performance Shares that are expressed in
terms of units of Common Shares.

 

{end of document}

 

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