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these duties, and shall be a member of the Executive Team. In the performance of theseduties, Naftzger shall devote his knowledge, skill, attention, energies and all of his businesstime, and shall comply with all of Unilife’s policies, rules, and procedures, as they may beamended from time to time. Naftzger shall not engage in any endeavor that would conflict with therendition of his services to Unilife, either directly or indirectly, without the prior writtenconsent of Unilife; provided, however, Naftzger may participate in civic, charitable, educational,industry and professional organizations, to the extent that such participation does not interferewith the performance of his duties hereunder; and Naftzger may also serve on corporate boards andcommittees, but only with the prior written consent of Unilife.     (b) Notwithstanding the responsibilities and duties contained in Section 2(a) above, Naftzgeracknowledges that all material decisions relating to the management of Unilife’s business will bemade by the Board of Directors of Unilife. In addition, any decisions which have the capacity toaffect significantly the financial standing of Unilife must be referred to the Board of Directorsof Unilife which will have ultimate control in respect of these matters.3. Compensation.     (a) Base Salary. Naftzger shall be paid an annual base salary of Two Hundred ThousandDollars ($200,000.00) payable in accordance with Unilife’s standard payroll practices. Naftzger’sbase salary will be subject to the customary withholding and employment taxes, as required by law,with respect to compensation paid by an employer to an employee. At the discretion of the Board ofDirectors of Unilife, Naftzger shall be eligible for increases in base salary. Further, Unilifewill not reduce Naftzger’s base salary to less than what is agreed to herein.     (b) Bonus. Naftzger shall be eligible to participate in Unilife’s Incentive BonusPlan in amounts and percentages as annually determined by Unilife’s Board of Directors and ChiefExecutive Officer. For calendar year 2010, the potential cash bonus amount will be thirty percent(30%) of base salary, prorated based on the number of days employed in 2010. For calendar years2011 and 2012, Naftzger’s annual target cash bonus shall be a minimum of thirty percent (30%) ofbase salary. Bonuses are subject to achievement of such goals and objectives as the CompensationCommittee of the Board of Directors, upon recommendation of the Chief Executive Officer, determinesin a set of Key Performance Indicators. Any bonus payable for a calendar year shall be paid in alump-sum payment in the following calendar year on or before March 15. Naftzger’s bonuses will besubject to the customary withholding and employment taxes, as required by law, with respect tocompensation paid by an employer to an employee.4. Benefits.     (a) Benefits Generally Available to Unilife Employees. Naftzger shall be eligible toparticipate in Unilife’s benefits programs (including any equity incentive plan of Unilife or itsaffiliates), as they may change from time to time. The benefits provided
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to Naftzger will be the same as the benefits provided to other similarly situated Unilifeemployees, and may be changed upon expiration or other termination of the current benefitscontracts. For further information, Naftzger should review any applicable benefit plan documents,which will govern the terms of the benefits. Notwithstanding the above, Unilife agrees to requesta waiver of the waiting period for health benefits for Naftzger and his spouse and will repayNaftzger for any negative tax consequences of such waiver. Alternatively, Unilife will payNaftzger’s current COBRA payment until such time as he is eligible for benefits.     (b) Vacation. Naftzger shall also receive four (4) weeks of paid vacation percalendar year. Any unused vacation days may be carried over or paid in lieu thereof, to the extentallowed by Unilife’s policy for similarly situated employees.     (c) Equity Plans. All incentive compensation and stock-based compensation thatNaftzger may receive from Unilife shall be subject to any policy adopted by Unilife, now orhereafter existing, that imposes on Naftzger stock ownership requirements, stock holdingrequirements, stock liquidation restrictions or recoupment provisions provided that suchrequirements, restrictions and recoupment provisions also apply to similarly situated members ofsenior management. Any stock options and other stock-based awards that Naftzger may receive fromUnilife shall be governed by the applicable, underlying award agreement.     (d) Expenses. Unilife shall reimburse Naftzger for all reasonable and necessaryexpenses incurred by him in carrying out his duties under this Agreement in accordance withUnilife’s business expense policies, including without limitation, requirements withrespect to reporting, documentation and payment of such expenses. All such expenses shall be paidno later than December 31st of the calendar year following the year in which suchexpenses were incurred.5. Indemnification. Unilife agrees to provide Naftzger with indemnification equivalent tothat provided to other members of senior management and pursuant to Unilife’s Directors andOfficers insurance policies, as amended from time to time.6. Termination and Pay upon Termination.     (a) General Rule. In the event that Unilife terminates this agreement and Naftzger’semployment without Cause as defined herein, including employment termination due to Unilife’selection not to renew this agreement where Naftzger was willing and able to continue performingservices under the terms of this agreement, Unilife will pay Naftzger:     (i) his base salary, at the rate in effect immediately before the date that Naftzger’semployment terminates, for twelve (12) months, in accordance with Unilife’s standard payrollpractices then in effect, commencing on the fifteenth (15th) day after the datethat Naftzger’s employment terminates and the
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General Release provided for in Section 10 of this Agreement becomes irrevocable; and     (ii) provided that Naftzger is eligible for and timely elects to receive COBRA healthcare continuation coverage, the cost of Naftzger’s COBRA health care continuation coveragepremiums for twelve (12) months, commencing on the first of the month immediately after themonth which includes the date that Naftzger’s employment terminates and the General Releaseprovided for in Section 10 of this Agreement becomes irrevocable.In the event that Naftzger terminates this agreement for any reason, including Naftzger’s electionnot to renew the agreement, Naftzger shall not receive any compensation or benefits from the timethat he ceases to devote full time and attention to Unilife’s business, and, if Naftzger terminatesthis agreement prior to June 30, 2012, Naftzger shall repay Unilife an amount equal to theaggregate cost incurred by Unilife under Section 9 of this Agreement in connection with Naftzger’srelocation to Pennsylvania, unless such termination is due to Naftzger’s death, total disability ortermination of employment under the terms of Section 6(b) of this Agreement in connection with aChange in Control , as defined below. The obligation to repay the expense of relocation may bewaived by the Compensation Committee of the Board of Directors in its sole discretion. Inaddition, Naftzger agrees to provide Unilife with thirty (30) days advance written notice of hisintent to terminate his employment, whether during the initial term or any renewal thereof. Upontermination of this agreement, the parties will be relieved of their duties and obligations, exceptthat the rights and obligations of Unilife under this Section 6(a) shall remain in full force andeffect until all appropriate payments have been made to Naftzger and the rights and obligations ofNaftzger set forth in Sections 7 and 8 below shall remain in full force and effect and shallsurvive the expiration or termination of this agreement, regardless of the reason(s) fortermination. Upon termination of this agreement, Naftzger shall not have any further contact withany customers of Unilife until the expiration of the conditions of Section 8 of this Agreement.     (b) Termination Following a Change in Control.     (i) Termination Pay. Notwithstanding paragraph (a) immediately above, in theevent that Naftzger’s employment is terminated coincident with a Change in Control asdefined in subparagraph (iii) immediately below, then Unilife in lieu of and not induplication of the severance compensation provided for in paragraph (a) immediately above,shall pay Naftzger:     (A) his base salary, at the rate in effect immediately before the date thatNaftzger’s employment terminates, for eighteen (18) months, in accordance withUnilife’s standard payroll practices then in effect, commencing on the fifteenth(15th) day after the date that Naftzger’s employment terminates and theGeneral Release provided for in Section 10 of this Agreement becomes irrevocable,
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     (B) provided that Naftzger is eligible for and timely elects to receive COBRAhealth care continuation coverage, the cost of Naftzger’s COBRA health carecontinuation coverage premiums for eighteen (18) months, commencing on with thefirst of the month immediately after the month which includes the date thatNaftzger’s employment terminates and the General Release provided for in Section 10of this Agreement becomes irrevocable,     (C) payment of a lump-sum amount, equal to the amount of the bonus, if any,earned by and paid to Naftzger for the last completed fiscal year prior to the yearin which his employment terminates, which will be payable on the fifteenth(15th) day after the date that Naftzger’semployment terminates and the General Release provided for in Section10 of this Agreement becomes irrevocable, and     (D) notwithstanding anything to the contrary, all of his outstanding andunvested options and other stock-based awards shall vest immediately upon suchtermination of employment following the Change in Control.Notwithstanding anything to the contrary, if the Change in Control trigger is a change in AlanShortall no longer being Chief Executive Officer of Unilife, Naftzger shall have the option tovoluntarily resign in the event of such a Change in Control, and receive the severance benefits setforth in this Section 6(b)(i), however, Naftzger must exercise such resignation right in writingwithin one hundred and eighty (180) days of such Change in Control event or, in the absence of suchwritten resignation, he shall be deemed to have acknowledged that no Change in Control has occurredfor purposes of this Section 6(b)(i).     (ii) Definition of “Cause”. “Cause” will mean any one or more of thefollowing:     (A) material neglect of assigned duties, willful misconduct in connection withthe performance of duties, or refusal to perform assigned duties (other than byreason of disability) which continues uncured for thirty (30) days following receiptof written notice of such deficiency from the Chief Executive Officer, specifyingthe scope and nature of the deficiency;     (B) an act of dishonesty;     (C) engaging in illegal conduct or committing a crime;     (D) being the subject of disciplinary action by any disciplinary body governingattorneys, losing his license to practice law or otherwise
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becoming disqualified topractice law or represent Unilife as counsel in Pennsylvania or any otherjurisdiction in which Naftzger is currently authorized to practice law or becomesauthorized to practice law while employed by Unilife;     (E) engaging in any act of moral turpitude that causes material harm to Unilifeor its reputation;     (F) breaching, in any material respect, the terms of any agreement withUnilife; or     (G) commencement of employment with any other employer while an employee ofUnilife without the prior written consent of the Chief Executive Officer.Any determination of “Cause” as used herein will be made in good faith by the ChiefExecutive Officer.     (iii) Definition of “Change in Control”. “Change in Control” means a: (i)Change in Ownership of Unilife Corporation, (ii) Change in Effective Control of UnilifeCorporation, (iii) Change in the Ownership of Assets of Unilife Corporation, all asdescribed herein and construed in accordance with section 409A of the Internal Revenue Codeof 1986, as amended (the “Code”), or (iv) a change in the Chief Executive Officer wherebythe position is no longer held by Alan Shortall.     (A) A Change in Ownership of Unilife Corporation shall occur on the date thatany one Person acquires, or Persons Acting as a Group (or Group) acquire, ownershipof the capital stock of Unilife Corporation that, together with the stock held bysuch Person or Group, constitutes more than fifty percent (50%) of the total fairmarket value or total voting power of the capital stock of Unilife Corporation.However, if any one Person is, or Persons Acting as a Group are, considered to ownmore than fifty percent (50%) of the total fair market value or total voting powerof the capital stock of Unilife Corporation, the acquisition of additional stock bythe same Person or Persons Acting as a Group is not considered to cause a Change inOwnership of Unilife Corporation or to cause a Change in Effective Control ofUnilife Corporation. An increase in the percentage of capital stock owned by anyone Person, or Persons Acting as a Group, as a result of a transaction in whichUnilife Corporation acquires its stock in exchange for property will be treated asan acquisition of stock.     (B) A Change in Effective Control of Unilife Corporation shall occur on thedate a majority of members of the Board of Directors of Unilife Corporation isreplaced during any twelve (12)-month period by directors whose appointment orelection is not endorsed by a majority of
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the members of the Board of Directors ofUnilife Corporation before the date of the appointment or election.     (C) A Change in the Ownership of Assets of Unilife Corporation shall occur onthe date that any one Person acquires, or Persons Acting as a Group acquire (or hasor have acquired during the twelve (12)-month period ending on the date of the mostrecent acquisition by such Person or Persons), assets (including tangible/realproperty and intangible property (such as goodwill)) from Unilife Corporation thetotal gross fair market value of which is more than fifty percent (50%) of the totalgross fair market value of all of the assets of Unilife Corporation immediatelybefore such acquisition or acquisitions. For this purpose, gross fair market valuemeans the value of the assets of Unilife Corporation, or the value of the assetsbeing disposed of, determined without regard to any liabilitiesassociated with such assets.     (D) The following rules of construction apply in interpreting the definition ofChange in Control:     (I) A Person means any individual, entity or group within the meaningof Section 13(d) (3) or 14(d) (2) of the Securities Exchange Act of 1934, asamended, other than employee benefit plans sponsored or maintained byUnilife Corporation and by entities controlled by Unilife Corporation or anunderwriter of the capital stock of Unilife Corporation in a registeredpublic offering.     (II) Persons will be considered to be Persons Acting as a Group if theyare owners of a corporation that enters into a merger, consolidation,purchase or acquisition of stock, or similar business transaction with thecorporation. If a Person owns stock in both corporations that enter into amerger, consolidation, purchase or acquisition of stock, or similartransaction, such shareholder is considered to be acting as a Group withother shareholders only with respect to the ownership in that corporationbefore the transaction giving rise to the change and not with respect to theownership interest in the other corporation. Persons will not be consideredto be acting as a Group solely because they purchase assets of the samecorporation at the same time or purchase or own stock of the samecorporation at the same time, or as a result of the same public offering.     (III) For purposes of this Section 6(b), fair market value shall bedetermined in accordance with Code Section 409A.     (IV) A Change in Control shall not include a transfer to a relatedperson as described in Code section 409A or a public offering of capitalstock of Unilife Corporation.
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     (E) For purposes of this Section 6(b), Code section 318(a) applies to determinestock ownership. Stock underlying a vested option is considered owned by theindividual who holds the vested option (and the stock underlying an unvested optionis not considered owned by the individual who holds the unvested option). Forpurposes of the preceding sentence, however, if a vested option is exercisable forstock 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 individualwho holds the option.7. Confidential Information.     (a) Naftzger acknowledges that Unilife has a valuable property interest in all aspects of itsbusiness relationships with its customers, clients, vendors and suppliers. In the course ofNaftzger’s work with Unilife, Naftzger will become aware of and familiar with secret andconfidential information of Unilife relating to its customers, clients, vendors and suppliers, andits internal business operations. Secret and confidential information includes, but is not limitedto, Unilife’s business plans, customer lists, customer data, marketing plans, supplier and vendorlists and cost information, software and computer programs, data processing systems and informationcontained therein, financial statements, financial data, acquisition and divestiture plans, and anyother trade secrets or confidential or proprietary information, documents, reports, plans, or data,of or about Unilife that is not already available to the public.     (b) Naftzger agrees that he will not, without the written consent of Unilife, during the termof this agreement or thereafter, disclose or make any use of secret and confidential information,except as may be required in the performance of his duties under Section 2 of this agreement.Naftzger agrees that, following the termination of his employment with Unilife for any reason, hewill never use secret and confidential information to compete with Unilife in any manner, and hewill never disclose any secret and confidential information to any other business or individual,unless such secret or confidential information is: (i) publicly known through no breach of theprovisions of this Section 7 by either party, (ii) lawfully disclosed by a third party, or (iii)disclosed pursuant to legal requirement or court order. In no event shall any disclosure made toinvestment banking firms or private equity firms at the request of Unilife and as part ofNaftzger’s duties ever be considered a violation of this Section 7.     (c) Upon termination of this agreement, Naftzger shall surrender to Unilife all records andall paper and/or electronic copies made of those records that pertain to any aspect of the businessof Unilife, including all secret and confidential information.
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8. Agreement Not To Compete.     (a) In consideration for continued employment by Unilife and the benefits of this agreement,Naftzger agrees to be bound by the covenant not to compete as set forth in Section 8 of thisagreement below.     (b) Naftzger agrees that during the term of this agreement and for a period of two (2) yearsfollowing the termination of this agreement for any reason, he will not, directly or indirectly:     (i) render services to, become employed by, be engaged as a consultant by, own, orhave a financial or other interest in (either as an individual, partner, joint venture,owner, manager, employee, partner, officer, director, independent contractor, or othersimilar role) any business that is engaged in any business activity that is in competitionwith the activities of Unilife, as of the date of the termination of this agreement.     (ii) induce, offer, assist, encourage, or suggest that another business or enterpriseoffer employment to or enter into a consulting arrangement with any individual who isemployed by Unilife, or induce, offer, assist, encourage, or suggest that any Unilifeemployee terminate her or her employment with Unilife, or accept employment with any otherbusiness or enterprise.     (c) In the event that Naftzger commits any breach of Section 8(b) above, Naftzger acknowledgesthat Unilife would suffer substantial and irreparable harm and damages. Accordingly, Naftzgerhereby agrees that in such event, Unilife shall be entitled to temporary and/or permanentinjunctive relief, without the necessity of proving damage, to enforce the provisions of thisSection, all without prejudice to any and all other remedies that Unilife may have at law or inequity and that Unilife may elect or invoke. Naftzger agrees that if any of the provisions of thisSection are or become unenforceable, the remainder hereof shall nevertheless remain binding uponhim to the fullest extent possible, taking into consideration the purposes and spirit of thisagreement. Any invalid or unenforceable provision is to be reformed to the maximum time,geographic and/or business limitations permitted by applicable laws, so as to be valid andenforceable.     (d) Naftzger expressly acknowledges and agrees that the restrictive covenants set forth inSections 7 and 8 above are absolutely necessary to protect the legitimate business interests ofUnilife, because he is employed in a position of trust and confidence and is provided withextensive access to Unilife’s most confidential and proprietary trade secrets, and has significantinvolvement in important business relationships, which constitute the goodwill of Unilife.Naftzger further agrees and acknowledges that these restrictive covenants are reasonable, will notrestrict him from earning a livelihood following the termination of employment, and are intended bythe parties to be enforceable following termination of employment for any reason.     (e) In the event that Unilife must bring legal action to enforce or seek a remedy for anybreach of the provisions of Sections 7 or 8 of this agreement and
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Naftzger is found by a court tohave breached any of these provisions, Naftzger agrees to reimburse Unilife for any and allexpenses, including attorneys’ fees and court costs, incurred by it in enforcing the terms of theseSections of the agreement.9. Relocation and Temporary Housing Expenses.(a) Unilife shall pay Naftzger $75,000 (the “Relocation Payment”), to assist Naftzger in payingNaftzger’s relocation expenses associated with his move to Pennsylvania in connection with hisemployment by Unilife. The Relocation Payment will be paid in a lump sum to him on or before July16, 2010. If Naftzger incurs actual, reasonable and customary relocation expenses during the firstyear of his employment that exceed $75,000 (for items such as closing costs relating to the sale ofNaftzger’s current house, payment for moving Naftzger’s household goods to Pennsylvania, includingpacking, unpacking, and insurance, storage of Naftzger’s household goods for a maximum of sixmonths while Naftzger and his family are in temporary housing, and the cost of movingup to two vehicles) (“Excess Relocation Expenses”), he may provide the Chief Executive Officer withdocumentation of such Excess Relocation Expenses, and the Chief Executive Officer may elect, in hisdiscretion, to reimburse Naftzger for all or part of such Excess Relocation Expenses. In additionto the Relocation Payment and Excess Relocation Expenses, Unilife will reimburse Naftzger for thereasonable cost of temporary housing in Pennsylvania for up to six months and will reimburseNaftzger and for the reasonable expenses associated with two house-hunting trips by Naftzger andhis spouse. Reimbursement of such costs and expenses will be made upon the request of Naftzger,subject to Naftzger’s providing reasonable documentation of the reimbursable costs and expenses.(b) Any taxes payable with respect to the payments made by Unilife to Naftzger pursuant to thisSection 9, including without limitation the Relocation Payment, shall be the sole responsibility ofNaftzger, and Unilife will follow federal, state and local tax regulations with regard to thereporting of such payments. Unilife shall withhold applicable federal, state and local taxes usingthe percentage method for supplemental income (i.e., flat tax of 25% for federal income taxes andthe applicable flat rate for FICA, state and local taxes).10. General Release. As a condition of receiving the severance compensation and benefitsdescribed in Section 6, Unilife and Naftzger will execute a mutual general release of claims (whichis in a form acceptable to Unilife). Such general release would not include rights to previouslyvested options or claims for any compensation earned (including, without limitation, accruedvacation), or reimbursement of expenses incurred, through the date of termination. Such releasemust be agreed to, executed and irrevocable no later than 30 days following Naftzger’s terminationdate.11. Dispute Resolution. Any controversy, claim or dispute involving the parties (or theiraffiliated persons) directly or indirectly concerning this agreement shall be finally settled bybinding arbitration held in Harrisburg, Pennsylvania by one arbitrator (who is mutually
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acceptable to both parties as well as licensed to practice law in the Commonwealth of Pennsylvania) inaccordance with the rules of employment arbitration then followed by the American ArbitrationAssociation or any successor to the functions thereof. The arbitrator shall apply Pennsylvania lawin the resolution of all controversies, claims and disputes and shall have the right and authorityto determine how his or her decision or determination as to each issue or matter in dispute may beimplemented or enforced. Any decision or award of the arbitrator shall be final and conclusive forboth Naftzger and Unilife (and its affiliates), and there shall be no appeal there from other thancauses of appeal allowed by the Federal Arbitration Act. Unilife shall bear all costs of thearbitrator in any action brought under this agreement. The arbitrator shall have the power toaward attorney’s fees and arbitration costs to the prevailing party, if the award of attorney’sfees and litigation costs would be permitted by a court. The parties hereto agree that any actionto compel arbitration may be brought in the appropriate Pennsylvania state or federal court, and inconnection with such action to compel, the laws of the Commonwealth of Pennsylvania and the FederalArbitration Act shallcontrol. Application may also be made to such court for confirmation of any decision or award ofthe arbitrator, for an order of the enforcement and for any other remedies, which may be necessaryto effectuate such decision or award. The parties hereto hereby consent to the jurisdiction of thearbitrator and of such court and waive any objection to the jurisdiction of such arbitrator andcourt.12. Non-waiver. A waiver of any provision of this agreement by either party shall notprevent either party from enforcing that provision or any other provision hereof.13. Assignment. This agreement is personal and may not be assigned by Naftzger. Anyassignment of this agreement between Unilife (or its successor) and its affiliates (and theirsuccessors) shall not constitute a termination of Naftzger’s employment hereunder. This agreement(including the Restrictive Covenants set forth in Sections 7 and 8) shall inure to the benefit ofand be binding upon any successor to Unilife. The parties specifically understand and agree thatthe non-compete provisions of Section 8 will inure to the benefit of a successor and that Naftzgerwill remain bound by these provisions in the event of a sale or corporate reorganization ofUnilife.14. Severability. Each provision of this agreement is severable and distinct from, andindependent of, every other provision hereof. If one provision hereof is declared void, theremaining provisions shall remain in effect. Any provision of this agreement which is prohibitedor unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective only to theextent of such prohibition or unenforceability without invalidating or affecting the remainingprovisions hereof, and any such prohibition or unenforceability in any jurisdiction shall notinvalidate or render unenforceable such provision in any other jurisdiction.15. Entire Agreement. This agreement contains the entire agreement of the partiesconcerning the employment relationship and supersedes any prior agreements or understandingsbetween the parties concerning the terms and conditions of Naftzger’s employment, whether oral orwritten; provided, however, that Naftzger’s equity grants
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shall be governed by the equity grantdocuments; provided further, that any stock options or other stock-based awards provided toNaftzger shall be governed by Unilife’s stock incentive plans as they are amended from time totime, except as provided herein. The parties acknowledge, in entering into this agreement thatthey have not relied upon any promise or inducement not specifically set forth herein. Any changesto this agreement must be in writing and signed by both parties.16. Section 409A.     (a) This agreement is intended to comply with, or otherwise be exempt from, Code section 409Aand any regulations and Treasury guidance promulgated thereunder, and Unilife shall be required tointerpret the terms of this agreement as necessary to comply with the requirements of Code section409A.     (b) Unilife shall undertake to administer, interpret, and construe this agreement in a mannerthat does not result in the imposition on Naftzger of any additional tax, penalty, or interestunder Code section 409A.     (c) Unilife and Naftzger agree that they will execute any and all amendments to this agreementpermitted under applicable law as they mutually agree in good faith may be necessary to ensurecompliance with the distribution provisions of Code section 409A or as otherwise needed to ensurethat this agreement complies with that section.     (d) The preceding provisions, however, shall not be construed as a guarantee by Unilife of anyparticular tax effect to Naftzger under this agreement. Unilife shall not be liable to Naftzgerfor any payment made under this agreement that is determined to result in an additional tax,penalty, or interest under Code section 409A, nor for reporting in good faith any payment madeunder this agreement as an amount includible in gross income under that section.     (e) For purposes of Code section 409A, the right to a series of installment payments underthis agreement shall be treated as a right to a series of separate payments.     (f) With respect to any reimbursement of future expenses of, or any provision of in-kindbenefits to, Naftzger, as specified under this agreement, such reimbursement of expenses orprovision of in-kind benefits shall be subject to the following conditions: (i) the expenseseligible for reimbursement or the amount of in-kind benefits provided in one taxable year shall notaffect the expenses eligible for reimbursement or the amount of in-kind benefits provided in anyother taxable year, except for any medical reimbursement arrangement providing for thereimbursement of expenses referred to in Code section 105(b); (ii) the reimbursement of an eligibleexpense shall be made no later than the end of the year after the year in which such expense wasincurred; and (iii) the right to reimbursement or in-kind benefits shall not be subject toliquidation or
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exchange for another benefit. Any tax gross-up payment shall be made by no laterthan the end of the calendar year following the year in which Naftzger remits the taxes.     (g) “Termination of employment,” “resignation,” or words of similar import, as used in thisagreement means, for purposes of any payments under this agreement that are payments of deferredcompensation subject to Code section 409A, Naftzger’s “separation from service” as defined in thatsection.     (h) If a payment obligation under this agreement arises on account of Naftzger’s separationfrom service while Naftzger is a “specified employee” (as defined under Code section 409A anddetermined in good faith by the Unilife), any payment of “deferred compensation” (as defined underTreasury regulation section 1.409A-1(b)(1), after giving effect to the exemptions in Treasuryregulation sections 1.409A-1(b)(3) through (b)(12)) that is scheduled to be paid within six (6)months after such separation from service shall accrue without interest and shall be paid within 15days after the end of the six-month period beginning on the date of such separation from serviceor, ifearlier, within 15 days after the appointment of the personal representative or executor ofNaftzger’s estate following his death.17. Excise Tax on Parachute Payments. Naftzger shall bear all expense of, and besolely responsible for, all federal, state, local or foreign taxes due with respect to any paymentreceived hereunder, including, without limitation, any excise tax imposed by Code section 4999;provided, however, that any payment or benefit received or to be received by Naftzger in connectionwith a Change in Control or the termination of Naftzger’s employment (whether payable pursuant tothe terms of this Agreement (“Contract Payments”) or any other plan, arrangements or agreement withUnilife or any affiliate (collectively with the Contract Payments, the “Total Payments”) shall bereduced to the extent necessary so that no portion thereof shall be subject to the excise taximposed by Code section 4999 but only if, by reason of such reduction, the net after-tax benefitreceived by Naftzger shall exceed the net after-tax benefit that would be received by Naftzger ifno such reduction was made.     For purposes of this Section 17, “net after-tax benefit” shall mean (i) the total of allpayments and the value of all benefits which Naftzger receives or is then entitled to receive fromUnilife that would constitute “excess parachute payments” within the meaning of Code section 280G,less (ii) the amount of all federal, state, local and foreign income taxes payable with respect tothe foregoing calculated at the maximum marginal income tax rate for each year in which theforegoing shall be paid to Naftzger (based on the rate in effect for such year as set forth in theCode or other applicable tax law as in effect at the time of the first payment of the foregoing),less (iii) the amount of excise taxes imposed with respect to the payments and benefits describedin (i) above by Code section 4999.     The foregoing determination shall be made by a nationally recognized accounting firm (the“Accounting Firm”) selected by Unilife and reasonably acceptable to Naftzger (which may be, butwill not be required to be, Unilife’s independent auditors). The
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Accounting Firm shall submit itsdetermination and detailed supporting calculations to both Naftzger and Unilife within fifteen (15)days after receipt of a notice from either Unilife or Naftzger that Naftzger may receive paymentswhich may be “parachute payments.” If the Accounting Firm determines that a reduction is requiredby this Section 17, the Contract Payments consisting of cash severance shall be reduced to theextent necessary so that no portion of the Total Payments shall be subject to the excise taximposed by Code section 4999, and Unilife shall pay such reduced amount to Naftzger in accordancewith the terms of this agreement. If the Accounting Firm determines that none of the TotalPayments, after taking into account any reduction required by this Section 17, constitutes a“parachute payment” within the meaning of Code section 280G, it will, at the same time as it makessuch determination, furnish Naftzger and Unilife an opinion that Naftzger has substantial authoritynot to report any excise tax under Code section 4999 on his federal income tax return.     Naftzger and Unilife shall each provide the Accounting Firm access to and copies of any books,records, and documents in the possession of Naftzger or Unilife, as thecase may be, reasonably requested by the Accounting Firm, and otherwise cooperate with theAccounting Firm in connection with the preparation and issuance of the determinations andcalculations contemplated by this Section 17. The fees and expenses of the Accounting Firm for itsservices in connection with the determinations and calculations contemplated by this Section 17shall be borne by Unilife.18. Counterparts. This agreement may be executed on separate counterparts, each of whichis deemed to be an original and all of which taken together constitute one and the same agreement.19. Interpretation. The captions and headings of this agreement are not part of theprovisions hereof and shall have no force or effect.20. Notices. Any notices, requests, demands and other communications provided for by thisagreement shall be sufficient if in writing and if hand delivered, sent by overnight courier, orsent by registered or certified mail to Naftzger at the last address he has filed in writing withUnilife or, in the case of Unilife, to Unilife’s Chief Executive Officer at Unilife’s principalexecutive offices.21. Governing Law. The terms of this agreement shall be governed by and construed inaccordance with the laws of the Commonwealth of Pennsylvania without giving effect to provisionsthereof regarding conflict of laws.22. Continuing Legal Education and Bar Membership Reimbursement. Unilife agrees toreimburse Naftzger for all the costs associated with maintaining his license to practice law,including but not limited to licensing fees, bar membership fees, the cost of continuing legaleducation (and time off with pay to attend such seminars).23. Naftzger represents and warrants to Unilife that he is not bound by any restrictive covenantsand has no prior or other obligations or commitments of any kind that
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would in any wayprevent, restrict, hinder or interfere with Naftzger’s acceptance of employment or theperformance of all duties and services hereunder to the fullest extent of Naftzger’s abilityand knowledge.     IN WITNESS WHEREOF, and wishing to be legally bound, the parties have executed this agreementas of the date first above written.     UNILIFE CORPORATION: J. Christopher Naftzger:     By: /s/ Alan Shortall /s/ J. Christopher Naftzger       Name: Alan Shortall    Title: Chief Executive Officer  
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