exv10w56






Exhibit 10.56




AMENDED AND RESTATED

EMPLOYMENT AGREEMENT 




     THIS AMENDED AND RESTATED AGREEMENT (the “Agreement”), dated the 18th day
of December, 2008 and made effective as of August 22, 2007 (the “Effective Date”) by and
between NUCRYST Pharmaceuticals Inc., a Delaware corporation (together with its successors and
assigns, the “Company”) and Thomas E. Gardner (the “Executive”).



W
I T N E
S S E T
H:




     WHEREAS NUCRYST Pharmaceuticals Corp. (the “Parent”) and the Executive entered into an
employment agreement dated as of August 21, 2007 (the “Employment Agreement”);



     AND WHEREAS the Company is a wholly owned subsidiary of the Parent;



     AND WHEREAS the Employment Agreement was assigned by the Parent to, and assumed by, the
Company as of the Effective Date;



     AND WHEREAS the Company and the Executive have agreed to amend and restate the Employment
Agreement as set forth herein and that this Agreement from and after the Effective Date shall
replace and supersede the Employment Agreement in all respects;



     NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and for
other good and valuable consideration, the receipt of which is mutually acknowledged, the Company
and the Executive agree that the Employment Agreement is amended and restated as follows:



     1. Definitions. Capitalized terms not otherwise defined herein shall have the
meanings set forth in Exhibit A.



     2. Term of Employment. The Company hereby employs the Executive under this Agreement,
and the Executive hereby accepts such employment, for the Term of Employment. The Term of
Employment shall commence as of August 22, 2007 (the “Start Date”) and shall end on
December 31, 2008; provided, however, that the Term of Employment shall thereafter be
automatically extended for an unlimited number of additional one-year periods on the same terms
unless either Party shall give the other written notice at least sixty (60) days prior to the
then-scheduled date of expiration of the Term of Employment that such Party is electing not to so
extend the Term of Employment. Notwithstanding the foregoing, the Term of Employment may be
earlier terminated in strict accordance with the provisions of Section 8.



     3. Positions, Duties and Location.



          (a) During the Term of Employment, the Executive:




 









 








               (i) shall serve as the President, Chief Executive Officer and Chairman of the Board of
Directors (the “Board”) of each of the Company and the Parent; shall have all authorities,
duties and responsibilities customarily exercised by an individual serving in those positions in a
corporation of the size and nature of the Company and the Parent; may be assigned such additional
duties and responsibilities, consistent with the foregoing, as the Board of each of the Company and
the Parent may from time to time reasonably determine; and shall report solely and directly to the
Board of each of the Company and the Parent;



               (ii) shall faithfully serve the Company and the Parent and at all times act in and promote the
best interests of the Company and the Parent, shall devote substantially all of his business time
and efforts to the Company and the Parent and shall not, without the prior approval of the Board of
the Parent, carry on or engage in any other business or occupation or become a director, officer,
employee or agent of or hold any position or office with any other company or business entity,
provided that nothing herein shall preclude the Executive from: (A) serving on the boards of a
reasonable number of trade associations and charitable organizations with the approval of the Board
of the Parent, such approval not to be unreasonably withheld, (B) engaging in charitable activities
and community affairs, (C) accepting and fulfilling a reasonable number of speaking engagements,
(D) serving on the boards of directors and holding the other positions disclosed in the Executive’s
notification letter, dated the Start Date, to the Board of the Parent, and (E) managing his
personal investments and affairs (which may include serving as an officer, director or employee of
a family held company); provided that such activities do not in the aggregate interfere with the
proper performance of his duties and responsibilities hereunder, violate any provision hereof, or
otherwise create any conflict of interest with respect to his duties and responsibilities
hereunder; and



               (iii) shall comply with all rules, regulations, policies and procedures of the Company and the
Parent as in effect from time to time, including the Code of Conduct, Whistleblower Policy,
Disclosure Policy and Insider Trading Policy of the Company and the Parent and any rules or
policies that may be adopted by the Company or the Parent from time to time to restrict or prohibit
actual or perceived conflicts of interest.



          (b) During the Term of Employment, the Executive’s principal office, and place of employment,
shall be in Wakefield, Massachusetts or such other location in the U.S. as may be determined by the
Executive with the approval of the Board of the Parent. The Executive acknowledges that he will be
required to travel frequently to other locations in which the Company and the Parent conduct their
activities, including Canada.




          (c) During the Term of Employment, the Executive will promptly, fully and frankly disclose to
the Company and the Parent in writing:




               (i) the nature and extent of any interest the Executive has or may have, directly or
indirectly, in any contract or transaction or proposed contract or transaction of or with the
Company, the Parent or any of their respective Affiliates; and



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               (ii) every office the Executive may hold or acquire, and every property the Executive may
possess or acquire, whereby a duty or interest might be created directly or indirectly in conflict
with the interest of the Company or the Parent or with the Executive’s obligations under this
Agreement.



     4. Base Salary. Commencing as of the Start Date, the Executive shall receive an
annualized Base Salary of $400,000, payable in accordance with the regular payroll practices
applicable to senior executives of the Company but no less frequently than monthly. The Base
Salary shall be reviewed no less frequently than annually during the Term of Employment for
increase in the discretion of the Board of the Parent (or its Compensation Committee). The Base
Salary shall not be decreased at any time, or for any purpose, during the Term of Employment
(including, without limitation, for the purpose of determining benefits due under Section 8)
without the prior written consent of the Executive. The Executive shall not receive any additional
director fees for his service as a member of the Board of either the Company or the Parent.



     5. Annual Incentive Awards. The Executive shall be entitled to an annual incentive
award in respect of each calendar year that ends during the Term of Employment if he meets or
exceeds bonus criteria established as described below. The Executive’s annual target award
opportunity shall be no less than 50% of his annualized Base Salary beginning with calendar year
2008, and the annual bonus criteria shall be as determined by the Board of the Parent (or its
Compensation Committee) in good faith and in consultation with the Executive. In lieu of a
pro-rated annual incentive award for calendar year 2007, the Executive was granted Restricted Stock
Units vesting on the Start Date under the NUCRYST Pharmaceuticals Corp. 1998 Equity Incentive Plan,
as amended (the “1998 Plan”), and pursuant to the terms and conditions of a Restricted
Stock Unit Award Agreement in the form attached hereto as Exhibit B, in an amount equal to $100,000
based on the per share price of stock of the Parent at the close of the NASDAQ market on August 21,
2007. The Executive shall be paid his annual incentive award in respect of each calendar year
commencing with the 2008 calendar year no later than the earlier of (x) the date occurring on or
after January 1 of the calendar year following the calendar year to which the annual incentive
award relates that other senior executives of the Company are paid their annual incentive awards
for such year and (y) as soon as practicable on or after the date on which the Company has
sufficiently final financial data to calculate the Executive’s annual incentive award, provided
such payment shall occur on or after January 1 of the calendar year following the calendar year to
which the annual incentive award relates, but in no event later than March 15 of such following
year.



     6. Long-Term Incentives.



          (a) As of the Start Date, the Executive was granted nonqualified stock options under the 1998
Plan, and pursuant to the terms and conditions of a Stock Option Award Agreement in the form
attached hereto as Exhibit C for the purchase of five hundred thousand (500,000) shares of the
common stock of the Parent (the “Shares”) at the NASDAQ market per



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share closing price on August 21, 2007. The stock options described in this Section 6(a) will
vest and become exercisable in accordance with the following schedule: (i) options with respect to
166,667 Shares will vest and become exercisable on the Start Date, (ii) options with respect to
166,667 Shares will vest and become exercisable on the first anniversary of the Start Date, and
(iii) options with respect to 166,666 Shares will vest and become exercisable on the second
anniversary of the Start Date, provided (except to the extent otherwise provided in Section
8 below) that the Executive is employed by the Company on such vesting date. The stock options
described in this Section 6(a) will expire on the earlier of (x) the tenth anniversary of the Start
Date or (y) such earlier date as may be specified in this Agreement.




          (b) If the Executive is employed by the Company on December 31, 2008, then on January 1, 2009,
if neither the Executive nor the Company has given a notice of non-extension in accordance with
Section 2 hereof and if in the judgment of the Board of the Parent (or its Compensation Committee)
such grant is appropriate in view of the Executive’s satisfactory performance, the Executive shall
be granted on such date nonqualified stock options under the 1998 Plan and pursuant to the terms
and conditions of a Stock Option Award Agreement in the form attached hereto as Exhibit C for the
purchase of a number of Shares equal to the 2008 Grant Amount at the NASDAQ market per share
closing price on December 31, 2008, or if such grant date falls within a trading blackout period
under the Parent’s Insider Trading Policy, then such nonqualified stock option grant shall occur on
the first business day following the expiration of such blackout period, in which case the option
exercise price shall be the NASDAQ market per share closing price on the last trading day prior to
such grant date (the “2008 Option Grant Effective Date”). The “2008 Grant Amount” shall
mean a number of Shares such that, when added to the Restricted Stock Units granted to the
Executive pursuant to Section 5 above and the stock options granted to the Executive pursuant to
Section 6(a) above, the Executive will have received grants with respect to seven hundred thousand
(700,000) Shares pursuant to this Agreement. The stock options described in this Section 6(b) will
vest and become exercisable in accordance with the following schedule: (i) options with respect to
one-third of the Shares will vest and become exercisable on the 2008 Option Grant Effective Date,
(ii) options with respect to one-third of the Shares will vest and become exercisable on the first
anniversary of the 2008 Option Grant Effective Date, and (iii) options with respect to one-third of
the Shares will vest and become exercisable on the second anniversary of the 2008 Option Grant
Effective Date, provided (except to the extent otherwise provided in Section 8 below) that
the Executive is employed by the Company on such vesting date. The stock options described in this
Section 6(b) will expire on the earlier of (x) the tenth anniversary of the 2008 Option Grant
Effective Date or (y) such earlier date as may be specified in this Agreement.




          (c) During the Term of Employment, the Executive shall be eligible, in the sole discretion of
the Board of the Parent, for additional and other incentives (including, without limitation,
additional Stock Option grants and participation in any bonus pool that may from time to time be
put into effect in connection with any actual or potential sale of the Company, the Parent or their
respective business), at a level, and on terms and conditions, that are commensurate with his
positions and responsibilities at the Company and the Parent and
appropriate in light of corresponding awards (if any) to other senior executives of the
Company or the Parent.




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     7. Other Benefits.



          (a) Employee Benefits. During the Term of Employment, the Executive shall be entitled
to participate in all employee benefit plans, programs and arrangements made available generally to
senior executives of the Company, including, without limitation, pension, profit-sharing, income
deferral, savings and other retirement plans or programs, medical, dental, vision, hearing,
prescription drug, hospitalization, short term and long-term disability and life insurance plans
and programs, accidental death and dismemberment protection, travel accident insurance, and any
other employee benefit plans, programs or arrangements that may from time to time be made
available, including any plans, programs or arrangements that supplement the above-listed types of
plans, programs or arrangements, whether funded or unfunded; provided, however, that nothing in
this Agreement shall be construed to require the Company to establish or maintain any such plans,
programs or arrangements except as expressly set forth herein.




          (b) Fringe Benefits, Perquisites and Vacations. During the Term of Employment, the
Executive shall be entitled to participate in all fringe benefits and perquisites available to
senior executives of the Company generally; shall be entitled to receive such additional fringe
benefits and perquisites as the Company may, in its discretion, from time to time provide; and
shall be entitled to no less than twenty (20) days’ paid vacation per calendar year (which, if not
used, may be carried over from year to year up to a maximum of twenty (20) days).




          (c) Reimbursement of Business and Other Expenses. The Executive shall be reimbursed
for all expenses reasonably incurred by him in connection with his duties and responsibilities
under this Agreement, subject to documentation in accordance with reasonable policies previously
communicated to him in writing. The Company shall also, upon presentation of appropriate
documentation, promptly pay the Executive up to a maximum of five thousand dollars ($5,000) per
month for up to twelve (12) months from the Start Date for temporary living expenses in the Boston
area. With respect to any expenses eligible for reimbursement, the Executive shall submit claims
for reimbursement to the Company within 90 days of the date the expense is incurred and the Company
will reimburse the Executive within 60 days of the date the claims were submitted.




     8. Termination of Employment.



          (a) Termination Due to Death. In the event that the Executive’s employment hereunder
is terminated due to his death, his estate or his beneficiaries (as the case may be) shall be
entitled to the following:




               (i) Base Salary for a period of ninety (90) days following the date of death payable in
accordance with the Company’s regular payroll practices;



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               (ii) payment of a Pro-Rata Annual Incentive Award for the year in which his death occurs, with
such payment made no later than the 65th day following the date of death;



               (iii) full vesting, as of the date of death, of all Restricted Stock Units to the extent that
such Restricted Stock Units were then scheduled to become vested on or before the first anniversary
of the date of death; and



               (iv) full vesting and exercisability, as of the date of death, for all outstanding Stock
Options to the extent that such Stock Options were then scheduled to become vested or exercisable
on or before the first anniversary of the date of death, each such Stock Option to remain
exercisable for the lesser of (x) one year following the date of death and (y) the remainder of its
stated term.



          (b) Termination Due to Disability. In the event that the Executive’s employment
hereunder is involuntarily terminated by the Company due to Disability, he shall be entitled to the
following:




               (i) payment of a Pro-Rata Annual Incentive Award for the year in which his employment
terminates, with such payment made no later than the 65th day following the Termination
Date;



               (ii) full vesting, as of the Termination Date, of all Restricted Stock Units to the extent
that such Restricted Stock Units were then scheduled to become vested on or before the first
anniversary of the Termination Date; and



               (iii) full vesting and exercisability, as of the Termination Date, for all outstanding Stock
Options to the extent that such Stock Options were then scheduled to become vested or exercisable
on or before the first anniversary of the Termination Date, each such Stock Option to remain
exercisable for the lesser of (x) one year following the Termination Date and (y) the remainder of
its stated term.



          No termination of the Executive’s employment for Disability shall be effective unless the
Party terminating his employment first gives fifteen (15) days’ written notice of such termination
to the other Party. The Parties acknowledge that the definition of Disability contained in Exhibit
A hereto differs from the definition of Disability contained in the 1998 Plan, and the Parties
confirm their intent that the definition contained in Exhibit A govern for all purposes under this
Agreement, including for purposes of determining the vesting and exercisability of Restricted Stock
Units and Stock Options under this Section 8(b).




          (c) Termination by the Company for Cause.




               (i) No termination of the Executive’s employment hereunder by the Company for Cause shall be
effective as a termination for Cause unless such termination is



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pursuant to the affirmative vote of a majority of the then members of the Parent’s Board after
a Board meeting at which the Executive has been given an opportunity to be heard on the question
whether Cause exists. For purposes of this Agreement, “Cause” shall mean (A) the
Executive’s willful and material breach of the terms of this Agreement; (B) the Executive’s
commission of any felony or any crime involving moral turpitude; (C) gross neglect or gross
misconduct by the Executive in connection with his position, duties or responsibilities hereunder;
(D) the Executive’s willful and unjustified refusal to perform his duties hereunder; (E) theft,
fraud, misappropriation or material dishonesty by the Executive involving the property or affairs
of the Company or the Parent; (F) the Executive’s chronic absenteeism; (G) the Executive’s lack or
performance due to chronic alcoholism or other form of substance abuse; or (H) the failure of any
of the Executive’s representations and warranties contained in Section 13(b)(ii) below to be true
and correct, causing a third party to seek money damages or injunctive or other relief from the
Company or the Parent; provided, however, that the Executive shall be permitted ten (10)
days’ written notice and opportunity to cure (assuming a cure can be effected within ten (10) days)
prior to a termination based on clause (A), (D), (F) or (G).



               (ii) In the event that the Executive’s employment hereunder is terminated by the Company for
Cause in accordance with Section 8(c)(i), he shall be entitled to (A) the continued right to
exercise any Stock Options, to the extent that such Stock Options are vested or exercisable as of
the Termination Date, each such Stock Option to remain exercisable for the lesser of (x) thirty
(30) days following the Termination Date and (y) the remainder of its stated term and (B) the
benefits described in Section 8(h)(i).



          (d) Termination Without Cause. In the event that the Executive’s employment hereunder
is terminated by the Company, other than for Disability in accordance with Section 8(b), for Cause
in accordance with Section 8(c)(i), or by expiration of the Term of Employment pursuant to notice
of non-extension in accordance with Section 2 given by the Company, he shall be entitled to:




               (i) an amount equal to one year’s Base Salary, at the annualized rate in effect on the
Termination Date, payable in a lump sum on the 65th day following the Termination Date,
provided that the Executive executes a release of all claims against the Company and the Parent
that becomes effective prior to such payment date;



               (ii) payment of a Pro-Rata Annual Incentive Award for the year in which his employment
terminates, with such payment made on the 65th day following the Termination Date,
provided that the Executive executes a release of all claims against the Company and the Parent
that becomes effective prior to such payment date;



               (iii) full vesting, as of the Termination Date, of all Restricted Stock Units to the extent
that such Restricted Stock Units were then scheduled to become vested on or before the first
anniversary of the Termination Date; and



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               (iv) full vesting and exercisability, as of the Termination Date, for all outstanding Stock
Options to the extent that such Stock Options were then scheduled to become vested or exercisable
on or before the first anniversary of the Termination Date, each such Stock Option to remain
exercisable for the lesser of (x) one year following the Termination Date and (y) the remainder of
its stated term.



     (e) Constructive Termination Without Cause. In the event that a Constructive
Termination Without Cause occurs, the Executive shall have the same entitlements as provided under
Section 8(d) for a termination by the Company without Cause.




     (f) Voluntary Termination. In the event that the Executive terminates his employment
hereunder prior to the then-scheduled expiration of the Term of Employment on his own initiative,
other than for Disability or by a Constructive Termination Without Cause, he shall give the Company
at least ninety (90) days’ written notice of such termination and shall have the same entitlements
as provided in Section 8(c)(ii) in the case of a termination by the Company for Cause. A voluntary
termination under this Section 8(f) shall not be deemed a breach of this Agreement.




     (g) Expiration of Term of Employment. In the event that the Executive’s employment
hereunder terminates by expiration of the Term of Employment pursuant to notice of non-extension
from the Company in accordance with Section 2 and provided the Executive was otherwise willing and
able to accept an extension of the term of this Agreement and continue to provide his services
hereunder, the Executive shall be entitled to:




               (i) the amount as provided in Section 8(d)(i) in the case of a termination by the Company
without Cause payable at the time provided in Section 8(d)(i);



               (ii) the Executive’s incentive award in respect of his final year of employment, payable in
accordance with Section 5 above;



               (iii) full vesting, as of the Termination Date, of all Restricted Stock Units to the extent
that such Restricted Stock Units were then scheduled to become vested on or before the first
anniversary of the Termination Date; and



               (iv) full vesting and exercisability, as of the Termination Date, for all outstanding Stock
Options to the extent that such Stock Options were then scheduled to become vested or exercisable
on or before the first anniversary of the Termination Date, each such Stock Option to remain
exercisable for the lesser of (x) one year following the Termination Date and (y) the remainder of
its stated term.



     
(h) Miscellaneous.



               (i) On any termination of the Executive’s employment hereunder, he shall be entitled to:



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               (A) Base Salary through the Termination Date payable in accordance
with the Company’s regular payroll practices;




               (B) a lump-sum payment in respect of accrued but unused vacation days at his Base
Salary rate in effect as of the Termination Date, with such payment made within sixty
(60) days following the Termination Date, provided that if the payment of such accrued
vacation pay constitutes nonqualified deferred compensation with the meaning of and
subject to Section 409A of the United States Internal Revenue Code of 1986, as amended,
and the United States Internal Revenue Service (“IRS”) regulations thereunder
(collectively, “Code Section 409A”), then, if the Executive is a “specified employee”
(within the meaning of Code Section 409A) at the Termination Date and to the extent
required in order to comply with the requirements of Code Section 409A, such payment
shall, notwithstanding the foregoing and if the termination of employment constitutes a
“separation from service” (within the meaning of Code Section 409A), be made on the
first payroll date occurring on or after the first day of the seventh month following
the Termination Date;




               (C) other or additional benefits in accordance with the applicable terms of
applicable plans, programs and arrangements of the Company and its Affiliates
(including, without limitation, those described in Sections 5, 6, 7, 9 and 10 of this
Agreement and in any Stock Option or Restricted Stock Unit Award Agreement); and




               (D) payment, as herein provided, of all amounts owed to him in connection with the
termination, such payments to be made by wire transfer of same day funds to the extent
reasonably requested by the Executive.



               (ii) In the event of any termination of the Executive’s employment hereunder, the Executive
shall be under no obligation to seek other employment or otherwise mitigate the obligations of the
Company under this Agreement, and there shall be no offset against amounts due the Executive under
this Agreement on account of any remuneration or other benefit earned or received by the Executive
after such termination. Any amounts due under this Section 8 are considered to be reasonable by
the Company and are not in the nature of a penalty.



               (iii) There shall be no contractual or similar restrictions on the Executive’s activities
following the Termination Date other than as expressly set forth in this Agreement.



     9. Change in Control.



          (a) In addition to the benefit separately provided and described in Section 8(d)(i), 8(e)
(solely to the extent attributable to the entitlement cross-referenced to Section 8(d)(i)) or




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8(g)(i) (whichever shall apply), but in lieu of the benefits described in, as applicable,
Section 8(d)(ii) through 8(d)(iv), Section 8(e) (to the extent relating to the benefit entitlements
cross-referenced to Section 8(d)(ii) through 8(d)(iv)) and Section 8(g)(ii) through 8(g)(iv), in
the event of the Executive’s involuntary separation from service from the Company and its
Affiliates without Cause within the meaning of Code Section 409A (for purpose of this Agreement, a
“Separation from Service”), which shall also include a Constructive Termination Without Cause and a
Separation from Service on account of the non-extension of this Agreement by the Company, that
occurs within one hundred and twenty (120) days prior to, or within twelve (12) months following, a
Change in Control, the following benefits shall be provided:




               (i) the Executive shall be entitled to an amount equal to one (1) year’s Base Salary, at the
annualized rate in effect on the date of the Separation from Service, payable in a lump sum on the
first payroll date occurring on or after the first day of the seventh month following the date of
the Executive’s Separation from Service, provided the Executive executes release of all claims
against the Company and the Parent that becomes effective prior to such payment date;



               (ii) any outstanding Stock Options shall become fully vested and exercisable and shall remain
exercisable for the lesser of (x) one year following the Termination Date and (y) the stated term
of such Stock Option;



               (iii) any outstanding Restricted Stock Units shall become fully vested;



               (iv) any other amounts, entitlements and benefits in which the Executive is not yet vested
shall become fully vested (and thus nonforfeitable) to the extent that such vesting does not
conflict with the applicable terms of the applicable benefit plans, programs and arrangements of
the Company and its Affiliates; and



               (v) the Executive shall be entitled to additional or other benefits (if any) in accordance
with the applicable terms of applicable plans, programs and arrangements of the Company and its
Affiliates.



          (b) If the aggregate of all amounts and benefits due to the Executive, under this Agreement or
any other plan, program, agreement or arrangement of the Company or any of its Affiliates, which,
if received by the Executive in full, would constitute “parachute payments” as such term is defined
in and under Section 280G of the Code (collectively, “Change of Control Benefits”), reduced
by all federal, state and local taxes applicable thereto, including the excise tax imposed pursuant
to Section 4999 of the Code, is less than the amount the Executive would receive, after taxes, if
the Executive received aggregate Change of Control Benefits equal to only three (3) times the
Executive’s “base amount”, as defined in and under Section 280G of the Code, less $1.00, then the
amount payable pursuant to Section 9(a)(i) shall be reduced or eliminated to the extent necessary
so that the Change of Control Benefits received by the Executive will not constitute parachute
payments (provided that reduction in such cash Change of Control Benefits can achieve this
objective). The determinations with respect to this Section




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9(b) shall be made by an independent auditor (the “Auditor”) paid by the Company. The
Auditor will be the Company’s regular independent auditor unless the Executive reasonably objects
to the use of that firm, in which event the Auditor will be a nationally recognized United States
public accounting firm chosen by the Executive in consultation with the Company.




          (c) It is possible that after the determinations and selections made pursuant to Section 9(b)
the Executive will receive Change of Control Benefits that are, in the aggregate, either more or
less than the limitations provided in Section 9(b) (hereafter referred to as an “Excess
Payment” or “Underpayment”, respectively). If it is established, pursuant to a final
determination of a court or an Internal Revenue Service proceeding that has been finally and
conclusively resolved, that an Excess Payment has been made, such Excess Payment shall be deemed
for all purposes to be a loan to the Executive made on the date the Executive received the Excess
Payment and the Executive shall repay the Excess Payment to the Company on demand, together with
interest on the Excess Payment at the applicable federal rate (as defined in and under Section
1274(d) of the Code) from the date of the Executive’s receipt of such Excess Payment until the date
of such repayment. In the event that it is determined (i) by a court of competent jurisdiction, or
(ii) by the Auditor upon request by the Executive or the Company, that an Underpayment has
occurred, the Company shall pay an amount equal to the Underpayment to the Executive within twenty
(20) days of such determination together with interest on such amount at the applicable federal
rate from the date such amount would have been paid to the Executive until the date of payment, but
in no event shall such payment be made prior to the first payroll date occurring on or after the
first day of the seventh month following the Termination Date.




     10. Indemnification.



          (a) As of the Effective Date, the Executive and the Parent entered into an Indemnity Agreement
in the form attached hereto as Exhibit D (the “Indemnity Agreement”).




          (b) During the Term of Employment and thereafter until the sixth (6th) anniversary
of the Termination Date, the Company or any of its Affiliates shall provide directors’ and
officers’ liability insurance coverage to the Executive that is no less favorable to him in any
respect (including, without limitation, with respect to scope, exclusions, amounts, and
deductibles) than the directors’ and officers’ liability insurance coverage (if any) then being
provided to any other present or former senior executive or director of the Parent, provided that
doing so does not, after the Term of Employment, increase the cost of such insurance to the Company
or any of its Affiliates by more than ten thousand dollars ($10,000) per annum.




     11. Restrictive Covenants.



          (a) Confidentiality, Disclosure of Information.




               (i) The Executive recognizes and acknowledges that the Executive has had and will have access
to Confidential Information (as defined below) relating to the business



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or interests of the Company and its Affiliates or of persons with whom the Company or its
Affiliates may have business relationships. Except as permitted herein, the Executive will not
during the Term of Employment, or at any time thereafter, use, disclose, lecture upon, publish or
permit to be known by any other person or entity any Confidential Information of the Company or its
Affiliates (except (w) to the Company, to any of its then current Affiliates, or to any authorized
(or apparently authorized) agent or representative of the foregoing, (x) in connection with
performing his duties hereunder, (y) when required to do so by law or by a court, governmental
agency, legislative body or arbitrator with apparent jurisdiction to order him to divulge, disclose
or make accessible such information or (z) in confidence to an attorney or other professional
advisor for the sole purpose of securing professional advice). In the event the Executive is
requested or becomes legally compelled by subpoena or other similar legal process to disclose any
Confidential Information, he will provide the Company with prompt written notice of such compulsion
or other legal process so that the Company or its Affiliates may seek a protective order or other
appropriate remedy and/or waive compliance with the provisions of this Section 11(a). In the event
such protective order or other remedy is not obtained, or that the Company waives compliance with
the provisions of this Section 11(a), the Executive will furnish only that portion of the
Confidential Information that is legally required and will exercise reasonable efforts to obtain
reliable assurances that confidential treatment will be accorded the Confidential Information. The
term “Confidential Information” means information relating to the Company’s and its
Affiliates’ business affairs, proprietary technology, trade secrets, patented processes,
information regarding plans for research, development, new products, marketing and selling,
research and development data, know-how, market studies and forecasts, competitive analyses,
pricing policies, employee lists, employment agreements (other than this Agreement), information
about the skills and compensation of the Company’s and its Affiliates’ employees, personnel
policies, the substance of agreements with customers, suppliers and others, marketing arrangements,
customer lists, commercial arrangements, or any other information relating to the Company’s and its
Affiliates’ business that is not generally known to the public (other than through a breach of
this Agreement). This obligation shall continue until such Confidential Information becomes
publicly available, other than pursuant to a breach of this Section 11 by the Executive, regardless
of whether the Executive continues to be employed by the Company.



               (ii) It is also understood and agreed that the Company and/or its Affiliates have received and
in the future will receive information from third parties (“Third Party Information”)
subject to a duty on the part of the Company and/or its Affiliates to maintain the confidentiality
of such information and to use it only for certain limited purposes. During the Term of Employment
and thereafter, the Executive agrees to hold Third Party Information in the strictest confidence
and not to disclose Third Party Information to anyone (other than personnel of the Company or its
Affiliates who need to know such information in connection with their work for the Company or its
Affiliates) or to use Third Party Information, except in connection with his work for the Company
and its Affiliates and in compliance with the obligations of the Company and its Affiliates to
third parties regarding confidentiality and use.



               (iii) It is further agreed and understood by and between the parties to



12









 







this Agreement that all “Company Materials,” which include, but are not
limited to, computers, computer software, computer disks, tapes, printouts, source, HTML and other
code, flowcharts, schematics, designs, graphics, drawings, photographs, charts, graphs, notebooks,
customer lists, sound recordings, other tangible or intangible manifestation of content, and all
other documents whether printed, typewritten, handwritten, electronic, or stored on computer disks,
tapes, hard drives, or any other tangible medium, as well as samples, prototypes, models, products
and the like, shall be the exclusive property of the Company or its Affiliates and, upon
termination of Executive’s employment with the Company, and/or upon the request of the Company, all
Company Materials, including copies thereof, as well as all other property of the Company or its
Affiliates then in the Executive’s possession or control, shall be returned to and left with the
Company; provided that the Executive shall be entitled to retain (x) his personal rolodex
and correspondence files, if, and to the extent that, such items do not contain Confidential
Information and (y) documents relating to his compensation, entitlements and benefits.



          (b) Inventions Discovered by Executive. The Executive shall promptly disclose to the
Company any invention, improvement, discovery, trade secret, data, program, process, formula, or
method or other intellectual property, whether or not patentable or copyrightable, conceived or
first reduced to practice by the Executive, either alone or jointly with others, during the Term of
Employment (or, if based on any Confidential Information, at any time during or after the Term of
Employment) (a) which pertains to any line of business activity, research or investigations of the
Company or its Affiliates, whether then conducted or then being planned by the Company or its
Affiliates, with which the Executive was or is involved, (b) which is developed using time,
material or facilities of the Company or its Affiliates, whether or not during working hours or on
the premises of the Company or its Affiliates, or (c) which relates to or is suggested by any of
the Executive’s work during the Term of Employment, whether or not during normal working hours
(collectively “Inventions”). To the fullest extent permitted by applicable law, the
Executive hereby assigns to the Company or its nominee all of the Executive’s right, title and
interest in and to any such Inventions. During and after the Term of Employment, the Executive
shall execute any documents necessary to perfect the assignment of such Inventions to the Company
or its nominee and to enable the Company or its nominee to apply for, obtain and enforce patents,
trademarks and copyrights in any and all countries on such Inventions, including, without
limitation, the execution of any instruments and the giving of evidence and testimony, without
further compensation, during the Term of Employment, beyond the Executive’s agreed compensation and
thereafter at the Company’s sole expense. Without limiting the foregoing, the Executive further
acknowledges that all original works of authorship by the Executive, whether created alone or
jointly with others, related to the Executive’s employment with the Company and which are
protectable by copyright, are “works made for hire” within the meaning of the United States
Copyright Act, 17 U.S.C. § 101, as amended, and the copyright of which shall be owned solely,
completely and exclusively by the Company or its nominee. If any Invention is considered to be
work not included in the categories of work covered by the United States Copyright Act, 17 U.S.C. §
101, as amended, such work is hereby assigned or transferred completely and exclusively to the
Company or its nominee. The



13









 






Executive hereby irrevocably designates counsel to the Company as the Executive’s agent and
attorney-in-fact to do all lawful acts necessary to apply for and obtain patents and copyrights and
to enforce the Company’s rights under this Section. This Section 11(b) shall survive the
termination of the Executive’s employment under this Agreement. Any assignment of copyright
hereunder includes all rights of paternity, integrity, disclosure and withdrawal and any other
rights that may be known as or referred to as “moral rights” (collectively “Moral Rights”).
To the extent such Moral Rights cannot be assigned under applicable law and to the extent the
following is allowed by the laws in the various countries where Moral Rights exist, the Executive
hereby waives such Moral Rights and consents to any action of the Company that would violate such
Moral Rights in the absence of such consent. The Executive agrees to confirm any such waivers and
consents from time to time as reasonably requested by the Company.




          (c) Non-Competition and Non-Solicitation.  The Executive acknowledges that the Company
and its Affiliates have invested substantial time, money and resources in the development and
retention of Inventions, Confidential Information (including trade secrets), customers, accounts
and business partners, and further acknowledges that during the course of the Executive’s
employment with the Company the Executive will have access to Inventions and Confidential
Information (including trade secrets), and will be introduced to existing and prospective
customers, accounts and business partners of the Company and its Affiliates. The Executive
acknowledges and agrees that any and all “goodwill” associated with any existing or prospective
customer, account or business partner and relating to the business of the Company or its Affiliates
belongs exclusively to the Company or its Affiliates, including, but not limited to, any goodwill
relating to the business of the Company or its Affiliates that is created during the Term of
Employment as a result of direct or indirect contacts or relationships between the Executive and
any existing or prospective customers, accounts or business partners. Additionally, the Parties
acknowledge and agree that the Executive possesses skills that are special, unique or extraordinary
and that the value of the Company and the Parent depends upon his use of such skills on their
behalf during the Term of Employment.




     In recognition of this, the Executive covenants and agrees that:



               (i) During the Term of Employment, and for a period of one (1) year after the Termination
Date, the Executive may not, without the prior written consent of an officer that has been
authorized to give such consent by the Parent’s Board, manage, operate, advise, invest in, give
financial assistance to or otherwise engage or participate, directly or indirectly (whether as an
officer, director, employee, agent, servant, owner, partner, principal, consultant, independent
contractor, representative, stockholder, member or in any other capacity whatsoever) in, any
business, enterprise or undertaking that carries on in any place throughout the world any business,
work, research, development or investigation (collectively, “Business”) that competes with
any Business carried on by the Company or the Parent during or after the Term of Employment
(“Competitive Business”) or that sells, offers, manufactures, distributes, develops or
supplies anywhere throughout the world any products or services that compete with those sold,
offered, manufactured, distributed or developed by the Company or the Parent during



14









 







or after the Term of Employment (“Competitive Products”); provided that the
Executive may in any event (x) participate after the Termination Date in a Competitive Business or
in a business offering Competitive Products if his association is with a separately managed and
operated division, subsidiary or affiliate of such a business and such division, subsidiary or
affiliate does not carry on a Competitive Business or offer Competitive Products and he has no
business communications with employees of any division, subsidiary or affiliate of the business
that does carry on a Competitive Business or offer Competitive Products regarding the business of
the competitive division, subsidiary or affiliate, and (y) acquire, solely as an investment and
through market purchases, and not as part of any control group, up to 2% of the outstanding
securities of any publicly-traded entity.



               (ii) During the Term of Employment, and for a period of one (1) year thereafter, the Executive
may not entice, solicit or encourage any person who is or was, at the time of or within six (6)
months prior to such enticement, solicitation or encouragement, an employee or independent
contractor of the Company or any of its Affiliates to leave the employ of the Company or any of its
Affiliates, to sever his engagement with the Company or any of its Affiliates or to become
affiliated with any business, enterprise or undertaking in which the Executive, directly or
indirectly, has an interest, absent prior written consent to do so from an officer that has been
authorized to give such consent by the Parent’s Board.



               (iii) During the Term of Employment, and for a period of one (1) year thereafter, the
Executive may not, directly or indirectly, solicit any customer, prospective customer, vendor,
strategic partner or business associate of the Company or any of its Affiliates for the purpose of
offering Competitive Products or for the purpose of encouraging or enticing such Person to cease
doing business with the Company or any of its Affiliates, to reduce its relationship with the
Company or any of its Affiliates or to refrain from establishing or expanding a relationship with
the Company or any of its Affiliates.



          (d) Provisions Necessary and Reasonable.




               (i) The Executive agrees that (A) the provisions of Sections 11(a), 11(b) and 11(c) of this
Agreement are necessary and reasonable to protect the Confidential Information, Inventions, and
goodwill of the Company and its Affiliates; (B) the specific temporal, geographic and substantive
provisions set forth in Section 11(c) of this Agreement are reasonable and necessary to protect the
business interests of the Company and its Affiliates in part because such business is international
in scope; and (C) in the event of any breach of any of the covenants set forth herein, the Company
and/or its Affiliates would suffer substantial irreparable harm and would not have an adequate
remedy at law for such breach.



               (ii) If any of the covenants contained in Sections 11(a), 11(b) and 11(c) hereof, or any part
thereof, are hereafter construed to be invalid or unenforceable, the same shall not affect the
remainder of the covenant or covenants, which shall be given full effect without regard to the
invalid portions.



15









 





               (iii) If any of the covenants contained in Sections 11(a), 11(b) and 11(c) hereof, or any part
thereof, are held to be unenforceable by a court of competent jurisdiction because of the temporal
or geographic scope of such provision or the area covered thereby, the Parties agree that the court
making such determination shall have the power to reduce the duration and/or geographic area of
such provision and, in its reduced form, such provision shall be enforceable.



               (iv) In the event of any actual or threatened breach by the Executive of any of the provisions
of Sections 11(a), 11(b) and 11(c), the Company and its Affiliates shall be entitled to seek an
injunction restraining the Executive from violating such provision. The Parties agree that any
such action may be initiated and maintained in the federal or state courts located in the State of
Massachusetts, without posting any bond or security, and the Parties consent to the personal
jurisdiction of such courts for such purpose. The seeking of any such injunction shall not affect
the Company’s right to seek and obtain damages on account of any such actual or threatened breach.



     12. Assignability; Binding Nature.



          (a) This Agreement shall be binding upon and inure to the benefit of the Parties and their
respective successors, heirs (in the case of the Executive) and permitted assigns.




          (b) No rights or obligations of the Company under this Agreement may be assigned or
transferred by the Company except that such rights and obligations may be assigned or transferred
pursuant to a reconstruction, amalgamation, merger, consolidation or other combination in which the
Company is not the continuing entity, or a sale or liquidation of all or substantially all of the
business and assets of the Company, provided that the assignee or transferee is the successor to
all or substantially all of the business and assets of the Company and such assignee or transferee
expressly assumes the liabilities, obligations and duties of the Company as set forth in this
Agreement. In the event of any reconstruction, amalgamation, merger, consolidation, other
combination, sale of business and assets, or liquidation as described in the preceding sentence,
the Company shall use its best efforts to cause such assignee or transferee to promptly and
expressly assume the liabilities, obligations and duties of the Company hereunder.




          (c) No rights or obligations of the Executive under this Agreement may be assigned or
transferred by the Executive other than his rights to compensation and benefits, which may be
transferred only by will or operation of law, except as provided in Section 15(d).




     13. Representations.



          (a) The Company represents and warrants that (i) it is fully authorized by action of its Board
(and of any other Person or body whose action is required) to enter into this Agreement and to
perform its obligations under it; (ii) the execution, delivery and performance of this Agreement by
it does not violate any applicable law, regulation, order, judgment or decree



16









 






or any agreement, plan or corporate governance document to which it is a party or by which it
is bound; (iii) upon the execution and delivery of this Agreement by the Parties, this Agreement
shall be a valid and binding obligation of the Company, enforceable against it in accordance with
its terms, except to the extent that enforceability may be limited by applicable bankruptcy,
insolvency or similar laws affecting the enforcement of creditors’ rights generally; and (iv) it
shall obtain the assumption in writing of its obligations under this Agreement by any successor to
all or substantially all of its business or assets within 15 days after any reconstruction,
amalgamation, combination, merger, consolidation, sale, liquidation or similar transaction.




          (b) The Executive represents and warrants that (i) the execution, delivery and performance of
this Agreement by him do not violate any applicable law, regulation, order, judgment or decree to
which the Executive is a party or by which he is bound, (ii) the execution, delivery and
performance of this Agreement by him do not and will not violate or conflict with any contractual
or other provision or restriction to which the Executive is subject or by which he may be bound,
and (iii) upon the execution and delivery of this Agreement by the Executive and the Company, this
Agreement shall be a valid and binding obligation of the Executive, enforceable against him in
accordance with its terms, except to the extent that enforceability may be limited by applicable
bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally.




     14. Notices. Any notice, consent, demand, request, or other communication given to a
Person in connection with this Agreement shall be in writing and shall be deemed to have been given
to such Person (a) when delivered personally to such Person or (b), provided that a written
acknowledgment of receipt is obtained, five (5) days after being sent by prepaid certified or
registered mail, or two (2) days after being sent by a nationally recognized overnight courier, to
the address (if any) specified below for such Person (or to such other address as such Person shall
have specified by ten (10) days’ advance notice given in accordance with this Section 14, in the
case of the Company only, on the first business day after it is sent by facsimile to the facsimile
number set forth below (or to such other facsimile number as shall have specified by ten (10) days’
advance notice given in accordance with this Section 14), with a confirmatory copy sent by
certified or registered mail or by overnight courier in accordance with this Section 14.



	 	 	 
	If to the Company:

	 	NUCRYST Pharmaceuticals Inc.
	 

	 	10102 — 114 Street
	 

	 	Fort Saskatchewan, Alberta
	 

	 	Canada T8L 3W4
	 

	 	Attn: General Counsel
	 

	 	Fax: (780) 992-5601
	 
	 	 
	With a copy to:

	 	Maureen W. McCarthy, Esq.
	 

	 	126 Waverly Place, #3E
	 

	 	New York, NY 10011






17









 






	 	 	 
	If to the Executive:

	 	The address of his principal residence
as it appears in the Company’s records,
with a copy to him (during the Term of
Employment) at his principal office at
the Company.
	 
	 	 
	If to a beneficiary
of the Executive:

	 	The address most recently specified by
the Executive or beneficiary.






     15. Miscellaneous.



          (a) Entire Agreement.  This Agreement contains the entire understanding and agreement
between the Parties concerning the subject matter hereof and supersedes all prior agreements,
understandings, term sheets, discussions, negotiations and undertakings, whether written or oral,
between them relating to this Agreement. In the event of any inconsistency between any provision
of this Agreement and any provision of any employee handbook, personnel manual, program, policy or
arrangement of the Company or any of its Affiliates or any provision of any agreement, plan, or
corporate governance document of any of them, the provisions of this Agreement shall control unless
the Executive otherwise agrees in a writing that expressly refers to the provision of this
Agreement whose control he is waiving.




          (b) Amendment or Waiver. No provision in this Agreement may be amended unless such
amendment is set forth in a writing that expressly refers to this Agreement and that is signed by
the Executive and by an authorized officer of the Company. No waiver by any Person of any breach
of any condition or provision contained in this Agreement shall be deemed a waiver of any similar
or dissimilar condition or provision at the same or any prior or subsequent time. To be effective,
any waiver must be set forth in a writing signed by the waiving Person and must specifically refer
to the condition(s) or provision(s) of this Agreement being waived.




          (c) Headings. The headings of the Sections and sub-sections contained in this
Agreement are for convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.




          (d) Beneficiaries/References. The Executive shall be entitled, to the extent
permitted under applicable law, to select and change a beneficiary or beneficiaries to receive any
compensation or benefit hereunder following the Executive’s death by giving the Company written
notice thereof. In the event of the Executive’s death or a judicial determination of his
incompetence, references in this Agreement to the Executive shall be deemed, where appropriate, to
refer to his beneficiary, estate or other legal representative.




          (e) Survivorship. Except as otherwise set forth in this Agreement, the respective
rights and obligations of the Parties hereunder shall survive any termination of the Executive’s
employment.




18









 








          (f) Severability. To the extent that any provision or portion of this Agreement shall
be determined to be invalid or unenforceable for any reason, in whole or in part, the remaining
provisions of this Agreement shall remain in full force and effect so as to achieve the intentions
of the Parties as set forth in this Agreement, to the maximum extent possible.




          (g) Withholding Taxes. The Company may withhold from any amounts or benefits payable
under this Agreement taxes that are required to be withheld pursuant to any applicable law or
regulation.




          (h) Executive’s Acknowledgement. The Executive acknowledges that he fully understands
the terms of this Agreement, that he knowingly and voluntarily, of his own free will without any
duress, being fully informed and after due deliberation, accepts its terms as his own free act.
The Executive further acknowledges that he has had the opportunity to seek the advice of counsel in
connection with his entry into this Agreement.  




          (i) Governing Law. This Agreement shall be governed, construed, performed and
enforced in accordance with its express terms, and otherwise in accordance with the laws of the
State of Massachusetts, without reference to principles of conflict of laws; provided, however,
that the Indemnity Agreement, the Restricted Stock Unit Award Agreement and the Stock Option Award
Agreements shall be governed by and construed in accordance with the laws of the Province of
Alberta, Canada. The Parties agree that any claim arising out of or relating to this Agreement,
any other agreement between the Executive and the Company or any of its Affiliates, the Executive’s
employment with the Company or the termination thereof may be initiated and maintained in the
federal or state courts located in the State of Massachusetts, and the Parties consent to the
personal jurisdiction of such courts. Claims arising out of or relating to the Indemnity
Agreement, the Restricted Stock Unit Award Agreement and the Stock Option Award Agreement may be
brought in the courts of the Province of Alberta, Canada, and the Parties consent to the personal
jurisdiction of such courts for such purpose.




          (j) Counterparts. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original and all of which together shall be deemed to be one and the same
instrument.




          (k) Code Section 409A. It is the intention of the Company, Parent and the Executive that, to
the extent any amounts or benefits payable under or pursuant to this Agreement represent
nonqualified deferred compensation that is or may be subject to Code Section 409A, the provisions
of this Agreement shall be interpreted and administered in a manner (including, as may be necessary
or appropriate, amendments or interpretations of this Agreement with retroactive and/or prospective
effect) that will enable such amounts or benefits to satisfy the requirements of Code Section 409A
(either pursuant to qualifying for an exemption from coverage under Code Section 409A or satisfying
the substantive provisions for compliance with such section). The Executive agrees and understands
that, notwithstanding anything in this Agreement to the contrary (including, but not limited to,
any provisions in this Agreement that



19









 






refer or relate to Code Section 409A), neither the Company nor the Parent (or any subsidiary,
associate or affiliate thereof) makes any representation, covenant or warranty that amounts payable
under or in accordance with this Agreement (including any plan, program, agreement or arrangement
referred to herein) comply with Code Section 409A. The Executive acknowledges and agrees that the
provisions of this Agreement reflect solely the Company’s and Parent’s attempt to seek compliance
with Code Section 409A and that no guarantees or assurances of any kind are hereby provided to the
Executive or any other person who has or may have an interest in any benefits or amounts payable
hereunder with respect to such compliance.




          Notwithstanding anything in this Agreement to the contrary, to the extent nonqualified
deferred compensation that is subject to the requirements of Code Section 409A is payable to the
Executive pursuant to this Agreement on account of his “separation from service” (within the
meaning of Code Section 409A) (if at such time the Executive is a “specified employee” within the
meaning of Code Section 409A), then, to the extent required in order to comply with the
requirements of Code Section 409A, such compensation shall be paid on the first payroll date
occurring on or after the first day of the seventh month following the date of the Executive’s
separation from service, provided, however, if such compensation is otherwise payable on a later
date, it shall be paid on such later date and not on the first payroll date occurring on or after
the first day of the seventh month following the Executive’s separation from service.




     IN WITNESS WHEREOF, the undersigned have executed this Agreement effective as of the Effective
Date.



	 	 	 	 	 	 	 
	 	 	NUCRYST Pharmaceuticals Inc.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Carol L. Amelio 
	 	 
	 

	 	Name:	 	Carol L. Amelio	 	 
	 

	 	Title:	 	Vice President, General Counsel 

and Corporate Secretary	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ David McDowell 
	 	 
	 

	 	Name:	 	David McDowell	 	 
	 

	 	Title:	 	Vice President, Operations	 	 
	 

	 	 	The Executive	 	 
	 
	 	 	 	 	 	 
	 	 	/s/ Thomas E. Gardner	 	 
	 	 	 	 	 
	 	 	Thomas E. Gardner	 	 






20









 






EXHIBIT A




DEFINITIONS




          a. “Affiliate” of a Person shall mean any Person that directly or indirectly controls,
is controlled by, or is under common control with, such Person.




          b. “Agreement” shall mean this Amended and Restated Employment Agreement, which
includes for all purposes its Exhibits.




          c. “Associate” shall have the meaning ascribed to such term in the Business
Corporations Act (Alberta), as the same may be amended from time to time, and any successor
legislation thereto.




          d. “Base Salary” shall mean the salary provided for in Section 4 or any increased
salary granted to the Executive pursuant to Section 4.




          e. “Change in Control” shall mean the occurrence of a transaction or series of
transactions, either alone or in conjunction with other events or transactions, as a result of
which:




               i. any “person,” as such term is currently used in Section 13(d) of the Securities
Exchange Act of 1934, as amended (other than the Executive or any of his Associates or The Westaim
Corporation [“Westaim”] or its Affiliates), becomes (directly or indirectly) a “beneficial
owner,” as such term is currently used in Rule 13d-3 promulgated under that Act, of more than
fifty percent (50%) of the Voting Securities of the Parent (measured either by number of Voting
Securities or by number of votes entitled to be cast), whether through the acquisition of
previously issued and outstanding Voting Securities, or of Voting Securities that have not been
previously issued, or any combination thereof, or any other transaction having a similar effect,
unless the acquisition of such Voting Securities is approved by a majority of Incumbent Directors
(as defined below);



               ii. fifty percent (50%) or more of the issued and outstanding Voting Securities become subject
to a voting trust in which neither the Executive nor any or his Associates nor Westaim nor any of
its Affiliates participate;



               iii. a majority of the members of the Board of the Parent are removed from office at any
annual or special meeting of shareholders of the Parent, or a majority of the directors of the
Parent (calculated without including the Executive) resign from office in the course of any 60-day
period, unless the vacancies created thereby are either (A) filled by appointments made by the
remaining members of the Board of the Parent or (B) are filled by nominees proposed by the Board of
the Parent, the Executive or any of his Associates or Westaim; or



21









 





               iv. (x) the Parent combines with another entity and is the surviving entity, or (y) all or
substantially all of the assets or business of the Parent is disposed of pursuant to a sale,
merger, consolidation, liquidation or other transaction or series of transactions, unless
the holders of Voting Securities of the Parent immediately prior to such combination, sale, merger,
consolidation, liquidation or other transaction or series of transactions (collectively, a
“Triggering Event”) own, directly or indirectly and immediately following such Triggering Event, by
reason of their ownership of Voting Securities of the Parent immediately prior to such Triggering
Event, more than fifty percent (50%) of the Voting Securities (measured both by number of
securities and by voting power) of: (q) in the case of a combination in which the Parent is the
surviving entity, the surviving entity and (r) in any other case, the entity (if any) that succeeds
to substantially all of the business and assets of the Parent.



     For purposes of the definition of Change in Control, the term “Incumbent Directors”
means the members of the Board of the Parent on the Effective Date; provided that any
individual becoming a director subsequent to such date whose election or nomination for election
was supported by two-thirds of the directors who then comprised the Incumbent Directors shall be
considered to be an Incumbent Director.



     It is understood and agreed that no Change in Control shall be deemed to exist or occur as a
result of any alteration in the current equity ownership of, or the current voting control over,
the Parent that is a direct consequence of Westaim’s realignment of its ownership interests in the
Parent, including but not limited to any transfer by Westaim of its interests; provided, however,
that if Westaim transfers fifty percent (50%) or more of the issued and outstanding Voting
Securities to a bona fide third party purchaser from Westaim in an arms’ length negotiated
transaction, the occurrence of such transfer shall constitute a Change in Control.



          f. “Code” shall mean the Internal Revenue Code of 1986, as amended. Any reference to
a particular section of the Code shall include any provision that modifies, replaces or supersedes
such section.




          g. “Company” shall have the meaning set forth in the preamble to this Agreement.




          h. “Constructive Termination Without Cause” shall mean a termination by the Executive
of his employment hereunder (or, for purposes of Section 9, a Separation from Service) following
the occurrence of any one or more of the following events (with respect to which the Executive does
not provide his express prior written consent), and with respect to which the Company has not fully
cured the basis for such termination within the applicable cure period, provided that the Executive
has provided written notice to the Company of the occurrence of the event within 20 days of the
initial existence of the event and, following its receipt of such notice, the Company has been
afforded 30 days to cure the condition or conditions giving rise to the constructive termination
event:




22









 








               i. any failure to continue the Executive as the Chief Executive Officer of the Parent and as a
member of its Board;



               ii. the appointment or election of any employee of the Parent other than the Executive as
Chairman of the Board of the Parent;



               iii. any material diminution in the Executive’s duties or authorities as the Chief Executive
Officer and Chairman of the Board of the Parent; or any change in the reporting structure so that
the Executive reports to a Person or Persons other than the Board of the Parent or its Chairman; or



               iv. any material breach by the Company of any of its obligations under Sections 3 through 7, 9
or 10 or of any of its representations or warranties in Section 13(a) or of any material breach by
the Parent of any material term of, or representation in, the Indemnity Agreement or any Stock
Option or Restricted Stock Unit agreement, equity grant agreement, or long-term incentive
agreement.



     If, in accordance with the foregoing, the Executive provides notice of a constructive
termination event and the Company fails to cure the condition or conditions giving rise to the
constructive termination event, such termination of the Executive’s employment hereunder shall
occur and be effective on the last day of the applicable cure period.



          i. “Disability” shall mean the Executive’s inability, due to physical or mental
incapacity, to substantially perform his duties and responsibilities hereunder for ninety (90)
consecutive days or an aggregate of one hundred and twenty (120) days in any one year period, as
determined by an approved medical doctor. For this purpose, an approved medical doctor shall mean
a medical doctor selected by the Parties. If the Parties cannot agree on a medical doctor, each
Party shall select a medical doctor and the two doctors shall select a third who shall be the
approved medical doctor for this purpose.




          j. “Effective Date” shall have the meaning set forth in the preamble to this
Agreement.




          k. “Executive” shall have the meaning set forth in the preamble to this Agreement, as
modified by Section 15(d).




          l. “Parent” shall have the meaning set forth in the preamble to this Agreement.




          m. “Parties” shall mean the Company and the Executive.




          n. “Person” shall mean any individual, corporation, partnership, limited liability
company, joint venture, trust, estate, board, committee, agency, body, employee benefit plan, or
other person or entity.




23









 








          o. “Pro-Rata Annual Incentive Award” shall mean an amount equal to the product
obtained by multiplying (x) the greater of (m) the Executive’s target annual
incentive award for the year of termination (which target award shall, for this purpose, be deemed
to be no less than 30% of his annualized Base Salary) and (n) the aggregate annual
incentive award he earned from the Company for the prior year times (y) a fraction, the
numerator of which is the number of days he was employed hereunder during the year of termination
and the denominator of which is 365.




          p. “Restricted Stock Units” shall mean any compensatory restricted securities of the
Parent or any of its Affiliates; any compensatory share units, phantom securities or analogous
rights granted by or on behalf of the Parent or any of its Affiliates; and any security or right
received in respect of any of the foregoing securities or rights.




          q. “Start Date” shall have the meaning specified in Section 2.




          r. “Stock Option” shall mean any compensatory option to acquire securities of the
Parent or of any of its Affiliates; any compensatory stock appreciation right, phantom stock option
or analogous right granted by or on behalf of the Parent or any of its Affiliates; and any security
or right received in respect of any of the foregoing options or rights.




          s. “Term of Employment” shall mean the period specified in Section 2.




          t. “Termination Date” shall mean the date on which the Executive’s employment
hereunder terminates in accordance with this Agreement.




          u. “Voting Securities” shall mean issued and outstanding securities of the Parent of
any class or classes having general voting power, under ordinary circumstances in the absence of
contingencies, to elect one or more members of the Board of the Parent.




24









 








EXHIBIT B




FORM OF RESTRICTED STOCK UNIT AWARD AGREEMENT




NUCRYST PHARMACEUTICALS CORP.




RESTRICTED STOCK UNIT AWARD AGREEMENT



GRANT of Restricted Stock Units made on August ___, 2007 (the “Grant Date”)



TO:     Thomas E. Gardner (the “Participant”)



BY:     NUCRYST Pharmaceuticals Corp. (the “Company”)




     WHEREAS, on December 21, 2005, the Board of Directors of the Company (the “Board”) approved
and adopted the Company’s 1998 Equity Incentive Plan (as amended) (the “Plan”) and the Plan was
subsequently approved by the Toronto Stock Exchange; and



     WHEREAS, pursuant to the Plan, awards of Restricted Stock Units may be granted to persons
including executives of the Company and members of the Board;



     WHEREAS, the Participant and the Company are parties to an Employment Agreement, dated as of
August 21, 2007 (the “Employment Agreement”), whereby the Participant has agreed to serve, and the
Company has agreed to engage the Participant, as the Company’s President and CEO and as Chairman of
the Board, subject to the terms of the Employment Agreement; and



     WHEREAS, pursuant to the Employment Agreement and by resolution of the Board made on August ___
2007, the Board granted the Restricted Stock Unit award provided for herein to the Participant in
connection with the Participant’s services to the Company, such grant to be the subject of the
terms set forth herein;



     NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties
hereto agree as follows:



1. Equity Incentive Plan



The grant by the Company to the Participant of Restricted Stock Units by this Award Agreement is
made pursuant to the terms and conditions of the Plan. This Award Agreement and the terms and
conditions of the grant of Restricted Stock Units are subject in all respects to the terms and
conditions of the Plan, which is made a part of this Award Agreement. The Participant, by
acceptance of this Award Agreement, agrees to be bound by the Plan (and any regulations that may be
established under the Plan) and acknowledges receipt of a copy of the Plan and this Award
Agreement. Terms that are defined in the Plan and not otherwise defined in this Award Agreement
shall have the same meaning when used in this Award Agreement as in the Plan.




2. Grant of Restricted Stock Units



The Company grants to the Participant, effective the Grant Date,                      Restricted Stock Units
(defined in the Plan and this Award Agreement as “Restricted Stock Units” or individually as a
“Restricted Stock Unit”), subject to the terms and conditions of this Award Agreement and the Plan.




25









 








3. Vesting and Restrictions



All of the Restricted Stock Units shall be 100% vested as of the Grant Date; provide however that
none of such Restricted Stock Units or the underlying Common Shares may be sold, exchanged,
transferred, pledged, hypothecated, or otherwise disposed of by the Participant, whether
voluntarily, involuntarily, or by operation of law (collectively, “Prohibited Dispositions”) until
the expiration of the Restricted Period and any purported Prohibited Disposition shall be void and
unenforceable against the Company; provided that the designation of a beneficiary shall not
constitute a Prohibited Disposition. The “Restricted Period” shall be the period commencing on the
Grant Date and ending on ending on the date the Participant is no longer a director or an executive
officer of the Company.




4. Issuance of Common Shares



The Company shall register the name of the Participant as the owner of the Common Shares with
respect to which the Restricted Stock Units relate, subject to the restrictions in this Award
Agreement, and shall notify the person or entity maintaining the stock records of the Company of
this Award Agreement and the terms, conditions, and restrictions applicable to such Common Shares
(hereinafter called the “Restricted Shares”). Any stock certificates evidencing such Restricted
Shares shall remain in the physical custody of the Company or a custodian designated by the Company
until the restrictions described in section 3 of this Award Agreement lapse. After the
restrictions in section 3 of this Award Agreement lapse, and subject to applicable withholding of
taxes, one or more unlegended stock certificates in respect of the Restricted Shares shall be
delivered to the Participant. For the avoidance of doubt, such delivery shall be made as soon as
practicable after the expiration of the Restricted Period.




5. Rights as a Stockholder; Dividends



The Participant shall be the record owner of the Restricted Shares unless and until such shares are
sold or otherwise disposed of, and as record owner shall be entitled to all rights of a common
stockholder of the Company, including without limitation, voting rights, if any, with respect to
the Restricted Shares.




6. Restrictive Legend



All stock certificates representing Restricted Shares shall have affixed thereto a legend in
substantially the following form, in addition to any other legends that may be required under
federal or state securities laws:




     TRANSFER OF THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY IS RESTRICTED PURSUANT TO THE
TERMS OF THE RESTRICTED STOCK AWARD AGREEMENT, DATED AUGUST ___, 2007 BETWEEN NUCRYST
PHARMACEUTICALS CORP. AND THOMAS E. GARDNER. A COPY OF SUCH AGREEMENT IS ON FILE AT THE OFFICES OF
NUCRYST PHARMACEUTICALS CORP.



7. Distributions and Adjustments





	 	(a)	 	If there is any change in the number or character of the Common Shares (through
merger, consolidation, reorganization, recapitalization, stock split, stock dividend,
or otherwise), prior to the conclusion of the Restricted Period, the Participant shall
receive such number and type of securities or other consideration on the same basis and
at the same time as other shareholders, provided that such securities or other
consideration shall be subject to




26









 






	 	 	 	the same Restricted Period, if any, as the Restricted Shares to which such
securities or other consideration relate are subject to, and shall be released from
the Restricted Period at the same time as such Common Shares were to be released.






	 	(b)	 	Any additional Common Shares, any other securities of the Company and any other
property (other than cash dividends) distributed prior to the conclusion of the
Restricted Period with respect to the Restricted Shares shall be subject to the same
restrictions, terms and conditions as apply to such Restricted Shares.
	 
	 	(c)	 	Any cash dividends payable prior to the conclusion of the Restricted Period
with respect to the Restricted Shares shall be paid to, and retained by, the
Participant as though the restrictions did not apply.
	 
	 	(d)	 	Any additional Common Shares, securities and other property distributed with
respect to the Restricted Shares prior to the conclusion of the Restricted Period shall
be promptly deposited with the Company or the custodian designated by the Company to be
held in custody in accordance with section 4 of this Award Agreement and shall have
affixed thereto the same legend as was affixed to the Restricted Shares in accordance
with section 6 of this Award Agreement.





8. Beneficiary



The Participant may file with the Company a written designation of a beneficiary on such form as
may be prescribed by the Company and may, from time to time, amend or revoke such designation. If
no designated beneficiary survives the Participant, the executor or administrator of the
Participant’s estate shall be deemed to be the Participant’s beneficiary.




9. General Matters





	 	(a)	 	Restricted Stock Units are not transferable or assignable
	 
	 	(b)	 	This Award Agreement is not an employment contract and nothing in this Award
Agreement shall be deemed to create in any way whatsoever any obligation on the
Participant’s part to continue to work for the Company (or any subsidiary of the
Company), or of the Company (or any subsidiary of the Company) to continue to employ
the Participant.
	 
	 	(c)	 	This Award Agreement, the Employment Agreement and the Plan constitute the
entire agreement between the parties relating to the grant of Restricted Stock Units
herein to the Participant and supersede all prior communications, representations and
negotiations in respect thereto. In the event of any inconsistencies between this
Award Agreement and the Plan, such matters shall be governed by the terms and
provisions of the Plan.
	 
	 	(d)	 	For the grant of the Restricted Stock Units to be effective, this Award
Agreement must be executed by the Participant and returned to the Company.
	 
	 	(e)	 	The Participant acknowledges that the Company may be required to disclose to
the securities regulatory authorities, the Exchange or other regulatory authorities
duly authorized to make such request, the name, address and telephone number of the
Participant and the number of Restricted Stock Units granted. If required by
applicable securities legislation, regulations, rules, policies or orders or by any
securities




27









 






	 	 	 	commission, the Exchange or other regulatory authority, the Participant will, in a
timely manner, execute, deliver, file and otherwise assist the Company in filing,
such reports, undertakings, and other documents with respect to the Restricted Stock
Units as may be required or requested by the Company to enable the Company to comply
with applicable securities legislation, regulations, rules, policies or orders or
the requirements of any securities commission or other regulatory authority or the
Exchange.






	 	(f)	 	Time shall be of the essence in this Award Agreement.
	 
	 	(g)	 	This Award Agreement shall be governed by the laws of the Province of Alberta.
The parties agree that any disputes under this Award Agreement shall be resolved by the
courts of Alberta and each of the parties irrevocably attorn to the non-exclusive
jurisdiction thereof with respect to all such matters and the transactions contemplated
herein.
	 
	 	(h)	 	The Participant acknowledges that neither the Plan or this Award Agreement
restricts the Company’s ability to conduct its business (including, but not limited to,
such decisions as transactions with related parties, new product development efforts,
cancellation of existing products, mergers and acquisitions, or corporate dissolution)
regardless of the effect those decisions may have on the value of Restricted Stock
Units.




The Company and the Participant have executed this Award Agreement on the ___day of August, 2007.




	 	 	 	 	 
	NUCRYST PHARMACEUTICALS CORP.	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	 	 	 
	Thomas E. Gardner (Participant)	 	 






28









 






EXHIBIT C




FORM OF STOCK OPTION AWARD AGREEMENT




NUCRYST PHARMACEUTICALS CORP.




STOCK OPTION AWARD AGREEMENT



GRANT of Options made as of                     , 200___(the “Grant Date”)



TO:      Thomas E. Gardner (the “Participant”)



BY:      NUCRYST Pharmaceuticals Corp. (the “Company”)




     WHEREAS, on December 21, 2005, the Board of Directors of the Company (the “Board”) approved
and adopted the Company’s 1998 Equity Incentive Plan (as amended) (the “Plan”) and the Plan was
subsequently approved by the Toronto Stock Exchange; and



     WHEREAS, pursuant to the Plan, awards of Options may be granted to persons including
executives of the Company and members of the Board;



     WHEREAS, the Participant and the Company are parties to an Employment Agreement, dated as of
August 21, 2007 (the “Employment Agreement”), whereby the Participant has agreed to serve, and the
Company has agreed to engage the Participant, as the Company’s President and CEO and as Chairman of
the Board, subject to the terms of the Employment Agreement; and



     WHEREAS, pursuant to the Employment Agreement and by resolution of the Board made on
                     ___, 200_, the Board approved a grant of Options provided for herein to the
Participant, such grant to be effective the Grant Date and subject to the terms set forth herein;



     NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties
hereto agree as follows:



1. Equity Incentive Plan



The grant by the Company to the Participant of Options by this Award Agreement is made pursuant to
the terms and conditions of the Plan. This Award Agreement and the terms and conditions of the
grant of Options are subject in all respects to the terms and conditions of the Plan, which is made
a part of this Award Agreement. The Participant, by acceptance of this Award Agreement, agrees to
be bound by the Plan (and any regulations that may be established under the Plan) and acknowledges
receipt of a copy of the Plan and this Award Agreement. Terms that are defined in the Plan and not
otherwise defined in this Award Agreement shall have the same meaning when used in this Award
Agreement as in the Plan.




2. Grant of Options



The Company grants to the Participant, effective the Grant Date,                      options (defined in
the Plan and this Award Agreement as “Options” or individually as an “Option”) to purchase Common
Shares of the Company (which Common Shares, when purchased by the exercise of Options, are defined
as “Optioned Shares”), subject to the terms and conditions of this Award Agreement and the Plan.
The grant of Options herein is intended to be a grant of non-qualified stock options and shall not
be treated or
construed as a grant of an “incentive stock option” as that term is used in Code Section 422, or
any successor provision thereof.




29









 








3. Option Price



The exercise price of each Option (which is defined in the Plan as the “Option Price”) is $                    .




4. Expiry Date



The Options shall terminate on, and may not be exercised in whole or in part after, 5:00 p.m.
(Edmonton, Alberta, Canada time) on                      [insert here the 10th anniversary of
the Grant Date] (the “Expiry Date”), unless earlier terminated in accordance with the terms of the
Plan or this Award Agreement.




5. Vesting



Unless otherwise set forth in this Award Agreement, the Options shall vest and shall become
exercisable:





	 	(a)	 	as to 1/3 of the Options on the Grant Date;
	 
	 	(b)	 	as to 1/3 Options on the first anniversary of the Grant Date; and
	 
	 	(c)	 	as to 1/3 Options on the second anniversary of the Grant Date.





6. Change of Control



Notwithstanding section 5 above, in the event that the Participant’s employment under the
Employment Agreement is terminated prior to the Expiry Date and within 120 days prior to, or within
12 months following, a Change of Control in a termination governed by Section 8(d), 8(e) or 8(g) of
the Employment Agreement (relating to terminations without cause or non-extension of the Employment
Agreement by the Company), the Options shall immediately become fully vested and exercisable as to
all the Optioned Shares and shall remain exercisable until the earlier of (x) one year following
the date on which the Participant’s employment under the Employment Agreement terminates (the
“Termination Date”) and (y) the Expiry Date. “Change of Control” shall have the meaning ascribed
to such term in the Employment Agreement.




7. Other Accelerated Vesting



Notwithstanding section 5 above, in the event that the Participant’s employment under the
Employment Agreement terminates prior to the Expiry Date due to his death or Disability (as such
term is defined in the Employment Agreement), or in the event that the Participant’s employment
under the Employment Agreement is terminated prior to the Expiry Date in a termination governed by
Section 8(d), 8(e) or 8(g) of the Employment Agreement (relating to terminations without cause or
non-extension of the Employment Agreement by the Company) but not governed by section 6 above, the
Options shall immediately become fully vested and exercisable to the extent that such Options were
then scheduled to become vested or exercisable on or before the first anniversary of the
Termination Date and shall remain exercisable until the earlier of (x) one year following the
Termination Date and (y) the Expiry Date.




8. Termination



If the Participant ceases to be employed under the Employment Agreement before the Expiry Date,
then


30









 






except as otherwise provided in sections 6 and 7 above, the vesting of all Options shall stop
immediately upon the Termination Date, and any Options that have vested as at the Termination Date
shall remain in force and can be exercised by the Participant in accordance with the following
provisions:





	 	(a)	 	If the Termination Date occurs for any reason other than the reasons described
in sections 6 and 7 above, then the Participant will have 30 days after the Termination
Date or until the Expiry Date (whichever is earlier) to exercise all or any portion of
his vested Options.
	 
	 	(b)	 	If the Termination Date occurs by reason of death, Disability or any other
reason described in section 6 or 7 above, then the Participant (or his personal legal
representative) will have one year after the Termination Date or until the Expiry Date
(whichever is earlier) to exercise all or any portion of his vested Options.




At the end of the periods specified above or the Expiry Date, whichever is earlier, all of the
Options shall terminate and be of no further force or effect. “Termination Date” is defined in
section 6 above, and in no event shall any period during which the Participant is in receipt of or
entitled to be in receipt of severance pay serve to extend the Termination Date.




9. Method of Exercise of Options and Payment



The Options shall be exercised (in accordance with the provisions of this Award Agreement and the
Plan) from time to time by giving notice in writing to the Company and setting forth the number of
Options being exercised. Such notice shall be accompanied by cash or certified check payable to the
Company, or any other form of payment satisfactory to the Company, in the full amount of the
purchase price for the Optioned Shares being purchased (such purchase price being equal to the
number of Options being exercised times the Option Price) plus payment of any applicable federal,
state, provincial or local taxes, or any other taxes which the Company may be obligated to collect
as a result of the issue or transfer of Optioned Shares upon such exercise of the Options. The
Participant shall provide the Company with any additional documents that the Company may require.
As soon as reasonably practicable after the proper exercise of any Options, the Company shall issue
to the Participant a share certificate representing the Optioned Shares acquired.




10. Certain Adjustments





	 	(a)	 	If there is any change in the number or character of the Common Shares (through
merger, consolidation, reorganization, recapitalization, stock split, stock dividend,
or otherwise) prior to the Participant’s exercise of all of the Options, appropriate
adjustments shall be made in the number or kind of securities subject to this Option,
and/or in the exercise price or other terms and conditions applying to this Option, so
as to avoid dilution or enlargement of the rights of the Participant under this Option
and of the value represented by it.
	 
	 	(b)	 	If the Company is a party to a merger or reorganization with one or more other
corporations, whether or not the Company is the surviving or resulting entity, or if
the Company consolidates with or into one or more other corporations, or if the Company
is liquidated or sells or otherwise disposes of substantially all of its assets to
another corporation (hereinafter referred to as a “Transaction”), in any case while any
Options remain outstanding, (i) after the effective date of the Transaction this Option
shall remain outstanding and shall be exercisable in Common Shares
or, if applicable, shares of such stock or other securities, cash or property as the holders of Common
Shares received pursuant to the terms of the Transaction; and (ii) the Company’s Board
may, in its sole discretion subject to the applicable provisions of Code section 409A,
accelerate the time




31









 






	 	 	 	for exercise of this Option, so that from and after a date prior to the effective
date of the Transaction this Option shall be exercisable in full.





11. General Matters





	 	(a)	 	Options are not transferable or assignable.
	 
	 	(b)	 	This Award Agreement is not an employment contract and nothing in this Award
Agreement shall be deemed to create in any way whatsoever any obligation on the
Participant’s part to continue to work for the Company (or any subsidiary of the
Company), or of the Company (or any subsidiary of the Company) to continue to employ
the Participant.
	 
	 	(c)	 	The Participant acknowledges that the Company may be required to disclose to
the securities regulatory authorities, the Exchange or other regulatory authorities
duly authorized to make such request, the name, address and telephone number of the
Participant and the number of Options granted. If required by applicable securities
legislation, regulations, rules, policies or orders or by any securities commission,
the Exchange or other regulatory authority, the Participant will, in a timely manner,
execute, deliver, file and otherwise assist the Company in filing, such reports,
undertakings, and other documents with respect to the Options as may be required or
requested by the Company to enable the Company to comply with applicable securities
legislation, regulations, rules, policies or orders or the requirements of any
securities commission or other regulatory authority or the Exchange.
	 
	 	(d)	 	This Award Agreement, the Employment Agreement and the Plan constitute the
entire agreement between the parties relating to the grant of Options to the
Participant and supersede all prior communications, representations and negotiations in
respect thereto.
	 
	 	(e)	 	For the grant of the Options to be effective, this Award Agreement must be
executed by the Participant and returned to the Company.
	 
	 	(f)	 	This Award Agreement shall be governed by the laws of the Province of Alberta.
The parties agree that any disputes under this Award Agreement shall be resolved by the
courts of Alberta and each of the parties irrevocably attorn to the non-exclusive
jurisdiction thereof with respect to all such matters and the transactions contemplated
herein.
	 
	 	(g)	 	Time shall be of the essence of this Award Agreement.
	 
	 	(h)	 	The Participant acknowledges that neither the Plan nor this Award Agreement
restricts the Company’s ability to conduct its business (including, but not limited to,
such decisions as transactions with related parties, new product development efforts,
cancellation of existing products, mergers and acquisitions, or corporate dissolution)
regardless of the effect those decisions may have on the value of Options.
	 
	 	(i)	 	The Participant shall not have any of the rights and privileges of a
shareholder of the Company by virtue of being granted Options.




The Company and the Participant have executed this Award Agreement on the ___day of                     ,
200___.




32









 








	 	 	 	 	 
	NUCRYST PHARMACEUTICALS CORP.	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	 	 	 
	Thomas E. Gardner (Participant)	 	 






33









 





EXHIBIT D




FORM OF INDEMNITY AGREEMENT




INDEMNITY AGREEMENT



THIS AGREEMENT made as of the 22nd day of August, 2007.



BETWEEN:




NUCRYST Pharmaceuticals Corp.

a corporation incorporated under the laws of Alberta

(the “Corporation”);




OF THE FIRST PART




- and-




Thomas E. Gardner, a businessman

(the “Executive”)




OF THE SECOND PART




WHEREAS:



A. The Executive is an officer and/or director of the Corporation and/or a subsidiary, or associate
or affiliate (as those terms are defined in the Business Corporations Act (Alberta)) of the
Corporation, or a body corporate of which the Corporation is or was a shareholder or creditor or
any other body corporate of which the Executive is an officer and/or director at the request of the
Corporation (collectively referred to herein as a “Subsidiary”).



B. The Corporation considers it desirable and in the best interests of the Corporation to enter
into this Agreement to set out the circumstances and manner in which the Executive may be
indemnified in respect of certain liabilities which the Executive may incur as a result of his
acting as a director and/or officer of the Corporation or any Subsidiary;




     NOW THEREFORE THIS AGREEMENT WITNESSETH THAT in consideration of the Executive serving as a
director and/or officer of the Corporation or any Subsidiary, and the sum of ONE DOLLAR ($1.00)
paid by the Executive to the Corporation (the receipt and sufficiency of which is acknowledged by
the Corporation) and in consideration of the mutual promises and covenants herein contained, the
parties agree as follows:



1. General Indemnity



1.1 Except in respect of an action by or on behalf of the Corporation or any Subsidiary to procure
a judgement in its favour, the Corporation agrees, to the full extent allowed by law, to


34









 






indemnify and hold harmless the Executive, his heirs and legal representatives, from and against
any and all costs, charges, expenses, fees, damages, or liabilities (including legal or other
professional fees), without limitation, and whether incurred alone or jointly with others, which
the Executive may suffer, sustain, incur or be required to pay arising out of or incurred in
respect of any action, suit, proceeding, investigation or claim which may be brought, commenced,
made, prosecuted or threatened against the Executive or any of the other directors or officers of
the Corporation or any Subsidiary or which the Executive may be required to participate in or
provide evidence in respect of (any of the same hereinafter being referred to as a ‘Claim’)
howsoever arising and whether arising in law, equity or under statute, regulation or governmental
ordinance of any jurisdiction, for or in respect of any act, deed, matter or thing done, made,
permitted or omitted by the Executive arising out of, or in connection with or incidental to the
affairs of the Corporation or any Subsidiary or the exercise by the Executive of his powers or the
performance of his duties as a director or officer of the Corporation or of any Subsidiary (of
which he was in the past, is now, or in the future may become an officer or director) including,
without limitation, any and all costs, charges, expenses, fees, damages, or liability which the
Executive may suffer, sustain or incur or be required to pay in connection with investigating,
initiating, defending, appealing, preparing for, providing evidence in, instructing and receiving
the advice of his own or other counsel, or any amount paid to settle any claim or satisfy any
judgment, fine or penalty, PROVIDED THAT the indemnity provided for herein will not be available to
the extent that it is finally determined by a court of competent jurisdiction that in so acting:





	 	(a)	 	the Executive was not acting honestly and in good faith with a view
to the best interests of the Corporation or any Subsidiary (as the case may
require); and
	 
	 	(b)	 	in the case of a criminal or administrative action or proceeding that
is enforced by a monetary penalty, the Executive did not have reasonable grounds
for believing that his conduct was lawful.




1.2 With the approval of a competent court having jurisdiction, the Corporation shall indemnify the
Executive, his heirs and legal representatives, in respect of an action by or on behalf of the
Corporation or a Subsidiary to procure a judgment in its favour, to which the Executive is made a
party by reason of being or having been a director or officer of the Corporation or any Subsidiary,
from and against all losses, judgments, costs, charges and expenses, including any amount paid to
settle the action or satisfy any judgment, actually or reasonably incurred by him in connection
with or as a result of the said action provided that:





	 	(a)	 	the Executive was acting honestly and in good faith with a view to
the best interests of the Corporation or any Subsidiary; and
	 
	 	(b)	 	in the case of a criminal or administrative action or proceeding that
is enforced by a monetary penalty, the Executive had reasonable grounds for
believing that his conduct was lawful.





2. Specific Indemnity for Statutory Obligations




     Without limiting the generality of the provisions of Section 1 hereof, the Corporation agrees,
to the full extent permitted by law, to indemnify and save the Executive harmless from



35









 




and against any and all costs, charges, expenses, fees, and liabilities arising by operation of
statute and incurred by or imposed upon the Executive in relation to the affairs of the Corporation
or any Subsidiary in the Executive’s capacity as director or officer thereof, including but not
limited to, all statutory obligations to creditors, employees, suppliers, contractors,
subcontractors, and any government or any agency or division of any government, whether federal,
provincial, state, regional, or municipal.




3. Taxation Indemnity




     Without limiting the generality of the provisions of Section 1 hereof, the Corporation agrees
that the payment of any indemnity to or reimbursement of the Executive hereunder shall include any
amount the Executive may be required to pay on account of applicable income or goods or services
taxes arising out of the payment of such indemnity or reimbursement, provided however that any
amount required to be paid with respect to such taxes shall be payable by the Corporation only upon
such Executive remitting or being required to remit any amount payable on account of such taxes.



4. Partial Indemnification




     If the Executive is determined to be entitled under any provisions of this Agreement to
indemnification by the Corporation for some or a portion of the costs, charges, expenses, fees,
damages, or liabilities incurred in respect of any Claim, but not for the total amount thereof, the
Corporation shall nevertheless indemnify the Executive for the portion hereof to which the
Executive is determined by a court of competent jurisdiction to be entitled.



5. No Presumption as to Absence of Good Faith




     The determination of any Claim by judgment, order, settlement or conviction, or upon a plea of
“nolo contendere” or its equivalent, shall not, of itself, create any presumption for the purposes
of this Agreement that the Executive did not act honestly and in good faith with a view to the best
interests of the Corporation or, in the case of a criminal or administrative action or proceeding,
that he did not have reasonable grounds for believing that his conduct was lawful (unless the
judgment or order of the Court specifically finds otherwise) or that the Executive had committed
willful neglect or gross default.



6. Determination of Right to Indemnification




     If the payment of an indemnity hereunder requires the approval of a court, under the
provisions of the Business Corporations Act (Alberta) or otherwise, either the Corporation
or the Executive may apply to a court of competent jurisdiction for an order approving such
indemnity by the Corporation of the Executive pursuant to this Agreement.



7. Pre-payment of Expenses




     Costs, charges, expenses, and fees incurred by the Executive in investigating, defending,
appealing, preparing for, providing evidence in, instructing and receiving the advice of his
counsel in regard to any Claim or other mater for which the Executive may be entitled to an
indemnity or reimbursement hereunder shall, at the request of the Executive, be paid or



36









 







reimbursed by the Corporation in advance or forthwith upon such amount being due and payable, it
being understood and agreed that if it is ultimately determined by a court of competent
jurisdiction that the Executive was not entitled to be so indemnified, or was not entitled to be
fully so indemnified, then the Executive shall indemnify and hold harmless the Corporation, for
such amount, or the appropriate portion thereof, so paid or reimbursed.



8. Other Rights and Remedies Unaffected




     The indemnification and payment provided in this Agreement shall not derogate from or exclude
any rights to which the Executive may be entitled under any provision of the Business Corporations
Act (Alberta) or otherwise at law, the articles or by-laws of the Corporation or any Subsidiary,
this Agreement, any applicable policy of insurance, guarantee or third-party indemnity, any vote of
shareholders of the Corporation, or otherwise, both as to matters arising out of his capacity as a
director and/or officer of the Corporation or a Subsidiary, or as to matters arising out of any
other capacity in which the Executive may act for or on behalf of the Corporation or any
Subsidiary.



9. Insurance




     Subject to availability at a reasonable cost to the Corporation, the Corporation shall, at its
cost, purchase and maintain standard directors’ and officers’ liability insurance for the benefit
of the Executive against any liability incurred by him,


9.1 in his capacity as a director or officer of the Corporation, except where the liability relates
to his failure to act honestly and in good faith with a view to the best interests of the
Corporation, or



9.2 in his capacity as a director or officer of a Subsidiary, except where the liability relates to
his failure to act honestly and in good faith with a view to the best interests of that body
corporate.




10. Notices of the Proceedings




     The Executive shall give reasonable notice, in writing, to the Corporation upon his being
served with any statement of claim, writ, notice of motion, indictment, subpoena, investigation
order, or other document commencing or continuing any Claim involving the Corporation or the
Executive. The Corporation agrees to notify the Executive, in writing, forthwith upon it or any of
its Subsidiaries being served with any statement of claim, writ, notice of motion, indictment,
subpoena, investigation order, or other document commencing or continuing any Claim involving the
Executive.



11. The Corporation and Executive to Cooperate




     The Corporation and the Executive shall, from time to time, provide such information and
cooperation to the other, as the other may reasonably request, in respect of all matters hereunder.



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12. Effective Timing




     This Agreement shall be deemed to have effect as and from the first date that the Executive
became a director and/or officer of the Corporation or of any Subsidiary.



13. Extensions, Modifications




     This Agreement is absolute and unconditional and the obligations of the Corporation shall not
be affected, discharged, impaired, mitigated, or released by the extension of time, indulgence or
modification which the Executive may extend or make with any person regarding any Claim against the
Executive in connection with his duty as director or officer of the Corporation or any Subsidiary
or in respect of any liability incurred by him as a director or officer of the Corporation or any
Subsidiary.



14. Insolvency




     The liability of the Corporation under this Agreement shall not be affected, discharged,
impaired, mitigated, or released by reason of the discharge or release of the Executive in any
bankruptcy, insolvency, receivership, or other similar proceeding of creditors.



15. Multiple Proceedings




     No action or proceeding brought or instituted under this Agreement and no recovery pursuant
thereto shall be a bar or defense to any further action or proceeding which may be brought under
this Agreement.



16. Modification




     No modification of this Agreement shall be valid unless the same is in writing and signed by
the Corporation and the Executive.



17. Termination




     The obligations of the Corporation shall not terminate or be released upon the Executive
ceasing to act as a director or officer of the Corporation or any Subsidiary at any time or times.
The Corporation’s obligations may be terminated or released only by a written instrument executed
by the Executive.



18. Notices




     Any notice to be given by one party to the other shall be sufficient if delivered by hand,
deposited in any post office in Canada or the United States, registered, postage prepaid, or sent
by means of electronic transmission, addressed, as the case may be:




	 	(a)	 	to the Corporation at its registered office, which as of the date hereof is:
	 
	 	 	 	NUCRYST Pharmaceuticals Corp.

10102 — 114th Street




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	 	 	 	Fort Saskatchewan, Alberta

Canada T8L 3W4

Attention: Vice President, General Counsel

                  & Corporate Secretary

	 	 	 	Tel: (780) 992-5626

Fax: (780) 992-5601


	 
	 	 	 	with a copy to:


	 
	 	 	 	NUCRYST Pharmaceuticals

50 Audubon Road, Suite B

Wakefield, Massachusetts USA 01880

Attention: President

Fax: (781) 246-6012





     (b) to the Executive at his most current address shown in the records of the
Corporation, which as of the date hereof is:



                                                                      



                                                                      



          Tel:                                                     


or at such other address of which notice is given by the parties pursuant to the provisions of this
section. Such notice shall be deemed to have been received when delivered, if delivered, and if
mailed, on the fifth business day (exclusive of Saturdays, Sundays and statutory holidays) after
the date of mailing. Any notice sent by means of electronic transmission shall be deemed to have
been given and received on the day it is transmitted, provided that if such day is not a business
day then the notice shall be deemed to have been given and received on the next business day
following. In the case of an interruption of the postal service, all notices or other
communications shall be delivered or sent by means of electronic transmission as provided above.




19. Governing Law




     This Agreement shall be governed by and construed in accordance with the laws of the Province
of Alberta and all disputes arising under this Agreement shall be referred to and the parties
hereto irrevocably attorn to the jurisdiction of the courts of Alberta. Any rule of construction to
the effect that any ambiguity is to be resolved against the drafting party shall not be applicable
in the interpretation of this Agreement.



20. Further Assurances




     The Corporation and the Executive agree that they shall do all such further acts, deeds or
things and execute and deliver all such further documents as may be necessary or



39









 







advisable for the purpose of assuring and conferring on the Executive the rights hereby created or
intended, and of giving effect to and carrying out the intention or facilitating the performance of
the terms of this Agreement.



21. Interpretation




     Wherever the singular or masculine are used in this Agreement, the same shall be construed as
meaning the plural or the feminine or body corporate and whenever the plural is used in this
Agreement the same shall be construed as meaning the singular.



22. Invalid Terms Severable




     If any term, provision, covenant or condition of this Agreement is held by a court of
competent jurisdiction to be invalid, void or unenforceable, then the offending provision(s) shall
be read down to the extent necessary to make it or them valid and enforceable or, if not capable of
being read down, shall be severed from the balance of this Agreement and the remainder of this
Agreement shall remain in full force and effect and shall in no way be affected, impaired or
invalidated by the offending provisions, provided that the Agreement remains substantially capable
of performance without adversely affecting the rights of the parties.



23. Binding Effect




     All of the agreements, conditions and terms of this Agreement shall extend to and be binding
upon the Corporation and its successors and assigns, including any entity continuing as a result of
any reorganization of the Corporation (such as amalgamation, merger or arrangement) and shall enure
to the benefit of and may be enforced by the Executive and his heirs, executors, administrators,
and other legal representatives, successors and assigns.



24. Independent Legal Advice




     The Executive acknowledges that he has been advised to obtain independent legal advice with
respect to entering into this Agreement, that he has obtained such independent legal advice or has
expressly waived such advice, and that he is entering into this Agreement with full knowledge of
the contents hereof, of his own free will and with full capacity and authority to do so.



25. Power and Authority of the Corporation




     The Corporation represents and warrants to the Executive that this Agreement, when executed
and delivered by the Corporation, will constitute a legal, valid and binding obligation of the
Corporation and, subject to the provisions of the Business Corporations Act (Alberta) and to any
approval of the Court required thereunder, that this Agreement and the obligations hereunder are
enforceable against the Corporation in accordance with the terms hereof and that the execution and
delivery of this Agreement and the performance thereof by the Corporation has been duly and
properly authorized by all necessary corporate action.



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26. Legal Fees




     Any reference in this Agreement to “fees” shall without limitation include legal fees, and
legal fees shall without limitation include all court costs and expenses and all reasonable legal
fees and disbursements on a solicitor and own client full indemnity basis. If any action is
instituted by the Executive under this Agreement to enforce or interpret any terms hereof then the
Executive shall be entitled to be paid all fees incurred by the Executive with respect to such
action, unless as part of such action, the court of competent jurisdiction determines that the
assertions made by the Executive as a basis for such action are not made in good faith or were
frivolous.



     IN WITNESS WHEREOF the Corporation and the Executive have hereunto set their hands and seals
effective as of the day and year first above written.



	 	 	 	 	 
	NUCRYST PHARMACEUTICALS CORP.	 	 
	 
	 	 	 	 
	Per:
	 	 	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	 	 	 
	THOMAS E. GARDNER	 	 






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