Document:

Exhibit 10.34

 

SUPPLEMENTAL MABA AMENDMENT TO

STRATEGIC ALLIANCE AGREEMENT

 

This Amendment to the Strategic Alliance Agreement (this “Amendment”) is entered into effective as of October 3, 2011 (the “Effective Date of this Amendment”), between Theravance, Inc., a Delaware corporation (“Theravance”) and Glaxo Group Limited, a private company limited by shares registered under the laws of England and Wales (“GSK”) and amends and supplements the Strategic Alliance Agreement entered into as of March 30, 2004, as amended and supplemented on September 13, 2004, February 11, 2005, February 8, 2006, February 27, 2006, February 27, 2009, June 22, 2009 and July 16, 2010 (the “Agreement”).  All capitalized terms not defined in this Amendment shall have the meaning ascribed to them in the Agreement.

 

WHEREAS, GSK desires to receive from Theravance and Theravance desires to grant to GSK the right to Develop and Commercialize additional Muscarinic Antagonist-Beta2 Agonist (“MABA”) compounds discovered by Theravance on an exclusive, worldwide basis in order to combine Theravance’s and GSK’s activities with respect to MABA compounds in accordance with the terms and conditions of the Agreement as amended and supplemented by this Amendment.

 

NOW, THEREFORE, in consideration of the foregoing premises and the representations, covenants and agreements contained herein, Theravance and GSK, intending to be legally bound, hereby agree as follows:

 

1.                                      Definitions:

 

1.1                               “Combination Supplemental MABA Alliance Product” means a Supplemental MABA Alliance Product that contains one or more therapeutically active agents in addition to the Theravance Compound.

 

1.2                               “MABA Alliance Product” shall mean the Alliance Product GSK961081 discovered in the course of the MABA Alliance Program.

 

1.3                               “MABA Alliance Program” shall mean the Alliance Program in respect of which GSK exercised its Opt-In Right on 21 March 2005.

 

1.4                               “Supplemental MABA Alliance Products” shall mean the following Theravance Compounds: [***], and each such Supplemental MABA Alliance Product can be used as a single agent and/or in combination with other therapeutically active components for human pharmaceutical applications.  The term “Supplemental MABA Alliance Product” shall also include any formulation of excipients, stabilizers, propellants, or other components necessary to prepare and deliver a pharmaceutically effective dose of such Theravance Compound and any other therapeutically active component together with any delivery device.

 

***CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

 

 

1.5                               “Supplemental MABA Alliance Program” shall mean all activities with respect to the Development and Commercialization of the Supplemental MABA Alliance Products.

 

1.6                               “Supplemental MABA Development Milestone” shall have the meaning set forth in Section 6.2(i) of this Amendment.

 

1.7                               “Supplemental MABA Technology Transfer Package” means all Theravance Confidential Information and Theravance Know-How relating to the Supplemental MABA Alliance Products.  Any material supplied by Theravance to GSK as contemplated hereunder shall comply with any specification agreed by GSK and Theravance.

 

1.8                               Notwithstanding the definition of the term “Alliance Product” in the Agreement, “Alliance Product” shall include the Supplemental MABA Alliance Products in the following sections of Article 1:  Sections 1.8, 1.19, 1.21, 1.22, 1.24, 1.33, 1.34, 1.41, 1.46, 1.47, 1.58, 1.59, 1.69, 1.71, 1.75, 1.85 through 1.90, 1.93, 1.94, 1.103, 1.110 through 1.112, 1.116, 1.117, 1.121 and 1.122.

 

1.9                               Notwithstanding the definition of the term “Alliance Program” in the Agreement, “Alliance Program” shall include the Supplemental MABA Alliance Program in the following sections of Article 1:  Sections 1.9 and 1.33.

 

2.                                      License.  Notwithstanding the definition of the term “Alliance Product” in the Agreement, “Alliance Product” shall include the Supplemental MABA Alliance Products in Article 2 of the Agreement.

 

3.                                      Governance.

 

3.1                               Notwithstanding the definition of the term “Alliance Product” in the Agreement, “Alliance Product” shall include the Supplemental MABA Alliance Products in Sections 3.2 through 3.6 of the Agreement; provided, however, that:

 

(i)                                     In Section 3.2.3(g), reference to GSK’s termination rights under Article 14 shall also include GSK’s termination rights under Section 10.2 of this Amendment.

 

3.2                               Notwithstanding the definition of the term “Alliance Program” in the Agreement, “Alliance Program” shall include the Supplemental MABA Alliance Program in Sections 3.2.3 and 3.3, and the Parties hereby agree that it is appropriate for one Joint Program Committee to manage both the MABA Alliance Program and the Supplemental MABA Alliance Program.

 

3.3                               The Parties hereby agree to amend and restate Section 3.2.5(b) of the Agreement with respect to all Alliance Products and Supplemental MABA Alliance Products as follows:

 

“With respect to any issue, if the Joint Steering Committee cannot reach consensus within ten (10) Business Days after the matter has been brought to the Joint Steering Committee’s attention, then such issue shall be referred to the Chief

 

***CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

 

 

Executive Officer of Theravance and either the Chairman of GSK R&D (if the issue relates to a discovery and/or development matter) or the Chief Executive Officer of GSK (or one of his direct reports designated by him) (if the issue relates to a commercial matter) (collectively, the “Officers”) for resolution.  The Parties accept that the use of the Officers for resolution of any unresolved issues will be on an exceptional basis.  In the event that the use of the Officers occurs on more than two occasions in any consecutive twelve (12) month period and such disputes are not related to Commercial Conflict issues, then GSK will from then on retain the final vote within the Joint Steering Committee for all issues other than Commercial Conflict.  If the Officers are unable to reach consensus within thirty (30) days after the matter has been referred to them, the final decision on such disputed issue will reside with GSK; provided, however, that if the disputed issue involves [***], then the final decision will be made by binding arbitration (“Arbitration”).  Either Party can initiate Arbitration on [***] to the other Party.  The Arbitration shall be conducted pursuant to the American Arbitration Association (“AAA”) Commercial Arbitration Rules then in effect, except that notwithstanding those rules, the following provisions shall apply to the Arbitration hereunder.

 

(i)                                     Panel.  The Arbitration shall be conducted by a panel of three (3) arbitrators (the “Arbitration Panel”) in [***].  The Arbitration Panel shall consist of one arbitrator selected by each of the Parties from a pool of arbitrators to be presented to the Parties by AAA from the AAA’s National Roster.  Each of these two arbitrators shall have expertise in pharmaceutical product Development and Commercialization, and these two arbitrators shall jointly select the chairman from a pool of arbitrators to be presented to the Parties by AAA from the AAA’s National Roster.

 

(ii)                                  Process.  The time periods set forth in the AAA rules shall be followed, unless a Party can demonstrate to the Arbitration Panel that the urgency of the dispute or other reasons warrant contraction of one or more of the timetables.  For good cause shown, the Arbitration Panel may contract such timetables.  Within such time frames, each Party shall have the right to conduct such discovery as would be permitted by the Federal Rules of Civil Procedure.  Interpretation of and enforcement of this Section 3.2.5(b) shall be governed by the Federal Arbitration Act.  The Arbitration Panel shall apply the Federal Rules of Evidence to the hearing.  The fees of the Arbitration Panel and AAA shall be paid by the losing Party, which shall be designated by the Arbitration Panel or in such proportions as may be designed by the Arbitration Panel where a Party does not prevail with respect to all issues.

 

(iii)                               Confidentiality.  The Arbitration proceeding shall be confidential and the Arbitration Panel shall issue appropriate protective orders to safeguard each Party’s Confidential Information.  Except as required by Law, no Party shall make (or instruct the Arbitration Panel to make) any public announcement with respect to the proceedings or decision of the Arbitration Panel without prior written consent of each other Party.  The existence of a dispute submitted to

 

***CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

 

 

Arbitration, and the outcome, shall be kept in confidence by the Parties and the Arbitration Panel except as, in the opinion of either Party’s counsel, may be required by Law.

 

(iv)                              Findings of Arbitration Panel. The decision of the Arbitration Panel will be final and binding on the Parties; provided that either Party shall retain all rights to bring an action against the other for damages and other monetary relief related to or arising out of the issue decided by the Arbitration Panel.”

 

4.                                      Material and Tech Transfer; Development.  Article 4 of the Agreement shall not apply to the Supplemental MABA Alliance Products and instead the Parties agree as follows:

 

4.1                               Delivery of Supplemental MABA Alliance Products.  As soon as reasonably practicable but in any event within [***] after the Effective Date of this Amendment, Theravance shall deliver to GSK existing stock of each Supplemental MABA Alliance Product as well as the Supplemental MABA Technology Transfer Package.  For the avoidance of doubt, Theravance’s delivery of material and information pursuant to this Section 4.1 constitutes the entirety of Theravance’s information and material delivery obligations with regard to the Supplemental MABA Alliance Program, and Theravance shall be responsible for no further research or development of the Supplemental MABA Alliance Products thereafter provided that in the event that Theravance does obtain any further information in respect of the Supplemental MABA Alliance Products, it shall promptly disclose such information to GSK.

 

4.2                               Obligations for Development.

 

(i)                                     GSK hereby agrees to exercise Diligent Efforts to move one Supplemental MABA Alliance Product forward in Development provided always that it is understood and hereby acknowledged by the Parties that any GSK decision to pursue Development of a Combination Supplemental MABA Alliance Product as against a single agent Alliance Product (or vice versa) and/or a certain Supplemental MABA Alliance Product as opposed to any other Supplemental MABA Alliance Product shall not, for the avoidance of doubt, constitute a breach of GSK’s Diligent Efforts obligations under the Agreement or this Amendment.  GSK shall have the overall responsibility for, and use Diligent Efforts in, the performance of all such Development activities which shall include, where applicable, relevant regulatory filings (as contemplated under Article 8 of the Agreement) for any such Supplemental MABA Alliance Product(s) moved forward in Development.  Further, GSK shall use Diligent Efforts to advance such Supplemental MABA Alliance Product(s) through Development in accordance with the Go/No-Go checkpoints identified in the then-current Development Plan for such Supplemental MABA Alliance Product. GSK shall also use Diligent Efforts to develop an optimal formulation of such Supplemental MABA Alliance Product.  As of the Effective Date of this Amendment, GSK shall bear all subsequent costs and expenses associated with the Development of any Supplemental MABA Alliance Product.

 

(ii)                                  For the avoidance of doubt, it is each Party’s intention that [***] such time as [***] from the MABA Alliance Program or the Supplemental MABA Alliance Program; [***] Theravance Compounds in the MABA Alliance Program and the Supplemental

 

***CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

 

 

MABA Alliance Program and [***] pursuant to Section 14.5.2(b) of the Agreement, as amended by Section 10.3 of this Amendment.  [***] Develop at least one Supplemental MABA Alliance Product and [***] Develop the MABA Alliance Product pursuant to the Agreement, [***] the Supplemental MABA Alliance Program pursuant to the terms of Section 14.5.2(b) of the Agreement, as amended by Section 10.3 of this Amendment, and Theravance shall be entitled to develop and commercialize all compounds from such program outside of the Alliance alone or with a Third Party pursuant to Section 14.5 of the Agreement as amended by this Amendment.

 

(iii)                               The Specific Alliance Product Development & Commercialization Appendix applicable to the MABA Alliance Program shall apply to the Supplemental MABA Alliance Program except where otherwise decided by the Joint Program Committee or the Joint Steering Committee, as applicable, save that the Technology Transfer Appendix shall be as set out in Schedule 4.2(iii) to this Amendment.

 

4.3                               Decisions with Respect to Supplemental MABA Alliance Products.

 

(i)                                     GSK shall have the sole discretion with respect to Development decisions for Supplemental MABA Alliance Products subject to and in accordance with Sections 3.2.5 and 3.3.5 of the Agreement, as amended by this Amendment, and Section 4.2 of this Amendment.

 

(ii)                                  GSK will provide the Joint Program Committee with (i) a notification within thirty (30) days of the initiation (i.e. the first person dosed) of any Study involving a Supplemental MABA Alliance Product, and (ii) a “top line results” report within [***] following the last person dosed/last visit in any Study involving a Supplemental MABA Alliance Product.

 

4.4                               Development Timelines.  It is hereby acknowledged that the Parties’ mutual strategic objective is to move one Supplemental MABA Alliance Product into Development at the earliest opportunity ([***]), to initiate and undertake clinical Development of at least one Supplemental MABA Alliance Product having regard to progress made with respect to the MABA Alliance Product currently in clinical Development and to move at least one MABA Alliance Product or one Supplemental MABA Alliance Product into subsequent Commercialization at the earliest opportunity.  GSK will consult with the Joint Program Committee and will share, modify and further develop all applicable Development Plans and timelines in that forum.  GSK will use Diligent Efforts to secure the necessary resources and will keep the Joint Program Committee informed on the progress of individual studies and activities relating to Supplemental MABA Alliance Products in accordance with Section 3.2.3 of the Agreement as amended by this Amendment.

 

4.5                               Activity Outside of the Alliance.

 

(i)                                     The Parties hereby agree that for so long as the Supplemental MABA Alliance Products have not been returned to Theravance pursuant to Section 14.5.2(b) of the Agreement, neither GSK nor Theravance shall, whether alone or with a Third Party, conduct a clinical study with respect to a MABA compound (or product containing a MABA compound) outside of the Agreement or this Amendment.

 

***CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

 

 

(ii)                                  The Parties however acknowledge that the research, Development and Commercialization objectives of the Alliance are intended to be complementary to GSK’s other research, development and commercialization efforts outside the Alliance.  Accordingly and subject to the provisions of Section 4.5(i) of this Amendment, the Parties agree that GSK shall be free to discover and develop other compounds for the treatment of diseases targeted by Supplemental MABA Alliance Products outside of this Amendment and the Agreement, subject to GSK’s obligations under this Amendment and under the Agreement with respect to any Supplemental MABA Alliance Product and the MABA Alliance Product.

 

5.                                      Commercialization.  Notwithstanding the definition of the term “Alliance Product” in the Agreement, “Alliance Product” shall include the Supplemental MABA Alliance Products in Sections 5.1 through 5.3 of the Agreement.

 

6.                                      Financial Provisions.

 

6.1                               Up-Front Payment.  Section 6.1 of the Agreement shall not apply to the Supplemental MABA Alliance Products and instead GSK shall, within [***] of the Effective Date of this Amendment, pay to Theravance a non-refundable amount of One Million United States Dollars ($1,000,000).

 

6.2                               Milestones.  Except as otherwise set forth below, Section 6.2 of the Agreement shall not apply to the Supplemental MABA Alliance Products and instead the following Development milestone payment terms shall apply:

 

(i)                                     In further consideration for the acquisition of license rights relating to the Supplemental MABA Alliance Products under the Theravance Patents and Theravance Know-How, GSK shall also pay to Theravance the payments set forth below for each such Development milestone achieved (each, a “Supplemental MABA Development Milestone”); provided always that each such payment shall be made only one time upon the first achievement of such Supplemental MABA Development Milestone by the first Supplemental MABA Alliance Product, regardless of how many times such Supplemental MABA Development Milestones are achieved by one or more Supplemental MABA Alliance Products and regardless of whether the Supplemental MABA Alliance Product is a single-agent or a Combination Supplemental MABA Alliance Product, and no payment shall be owed for a Supplemental MABA Development Milestone which is not achieved (except that, upon achievement of a Development Milestone for a particular Supplemental MABA Alliance Product, any previous Development Milestone for that Supplemental MABA Alliance Product for which payment was not made shall be deemed achieved and payment therefore shall be made).  The Development milestones specified in Section 6.2.2 of the Agreement for “Filing for Regulatory Approval” and “Launch” shall apply to the Supplemental MABA Alliance Products and, when applied to the Supplemental MABA Alliance Products, shall constitute Supplemental MABA Development Milestones.

 

	
Milestones 
    	
 
    	
Amount
    	
 
    
	
Initiation of   [***]
    	
 
    	
[***]
    	
 
    
	
Successful   Completion of [***]
    	
 
    	
[***]
    	
 
    

 

***CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

 

 

	
Initiation of [***]
    	
 
    	
[***]
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Filing for   Regulatory Approval and Launch milestones as per Section 6.2.2 of the Agreement
    	
 
    

 

Notwithstanding the definition of the term “Alliance Product” in the Agreement, “Alliance Product” shall include the Supplemental MABA Alliance Products in the definitions specified in Section 6.2.2, and all of the definitions set forth in Section 6.2.2 shall apply to the Supplemental MABA Alliance Products.

 

(ii)                                  Notification and Payment.  In the event a Supplemental MABA Alliance Product achieves a Supplemental MABA Development Milestone, GSK shall promptly, but in no event more than [***] after the achievement of each such Supplemental MABA Development Milestone, notify Theravance in writing of the achievement of same. For all Supplemental MABA Development Milestones achieved GSK shall promptly, but in no event more than [***] after notification of the achievement of each such Supplemental MABA Development Milestone, remit payment to Theravance for such Supplemental MABA Development Milestone.

 

6.3                               Royalties.  Section 6.3 of the Agreement shall not apply to the Supplemental MABA Alliance Products and instead the following royalties shall apply to net sales of any Supplemental MABA Alliance Product:

 

(i)  Patent Royalty.  As further consideration for the acquisition of license rights under the Theravance Patents under this Amendment, and in those Countries of the Territory in which there is a Valid Claim of a Theravance Patent covering the Supplemental MABA Alliance Product in the Country of sale at the time such Net Sales occur (for the avoidance of doubt, “covering” as used in this Section and subsequent Sections shall include the making, using, selling, offering for sale, or importing the Supplemental MABA Alliance Product), GSK shall pay Theravance, within [***] after the end of each Calendar Quarter, royalty payments for each such Supplemental MABA Alliance Product based on Net Sales in such Calendar Quarter on a Country by Country basis, as follows:

 

	
[***]
    	
 
    	
[***]
    	
 
    
	
[***]
    	
 
    	
[***]
    	
 
    
	
[***]
    	
 
    	
[***]
    	
 
    

 

(ii)                                  Decreased Royalty.  As further consideration for the acquisition of license rights under the Theravance Patents under this Amendment, and in those Countries of the Territory where an obligation to pay royalties under Section 6.3(i) of this Amendment has applied during the Term but is no longer applicable (as a result of subsequent expiration or termination of the last Valid Claim of a Theravance Patent covering the Supplemental MABA Alliance Product in the Country of sale at the time such Net Sales occur), GSK shall pay Theravance, within [***] after the end of each Calendar Quarter, royalty payments for each such Supplemental MABA Alliance Product based on Net Sales in such Calendar Quarter on a Country by Country basis, as follows:

 

***CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

 

 

	
[***]
    	
 
    	
[***]
    	
 
    
	
[***]
    	
 
    	
[***]
    	
 
    
	
[***]
    	
 
    	
[***]
    	
 
    

 

(iii)                               Know-How Royalty.  As further consideration for the acquisition of Theravance Know-How by GSK under this Amendment, and in those countries which are not subject to the royalty obligation referred to in Section 6.3(i) or (ii) of this Amendment, GSK shall pay Theravance, within [***] after the end of each Calendar Quarter, royalty payments for each such Supplemental MABA Alliance Product based on Net Sales in such Calendar Quarter on a Country by Country basis, as follows:

 

	
[***]
    	
 
    	
[***]
    	
 
    
	
[***]
    	
 
    	
[***]
    	
 
    
	
[***]
    	
 
    	
[***]
    	
 
    

 

(iv)                              Royalty on Combination Supplemental MABA Alliance Products.  For the purpose of determining royalty payments on Supplemental MABA Alliance Products, if the Combination Supplemental MABA Alliance Product is commercialized, then (irrespective of (a) whether the relevant Theravance single agent in such Combination Supplemental MABA Alliance Product is also separately commercialized for which Theravance is receiving separate royalty payments and (b) how many therapeutically active agents are contained in such Combination Supplemental MABA Alliance Product) [***] of the royalty rates referred to in Section 6.3(i), (ii) and (iii) of this Amendment inclusive (whichever is applicable) shall apply.

 

(v)                                 Estimates.  The quarterly royalty payments made hereunder may be based on estimated Net Sales.  Within thirty (30) days after the end of each Calendar Quarter, GSK shall calculate the actual amount of Net Sales for the previous Calendar Quarter and either credit or debit the difference between such actual and projected amount on the succeeding Calendar Quarter’s royalty payment to Theravance. GSK will also provide Theravance with those estimates of future Net Sales as it provides in accordance with its own internal procedures.

 

(vi)                              Duration of Royalty Payments.

 

(a)                                 Commencement.  All royalties payable hereunder shall be paid on a Country-by-Country basis from the date of first commercial sale of each Supplemental MABA Alliance Product in a particular Country.

 

(b)                                 Duration of Full Patent Royalties.  Royalty obligations under Section 6.3(i) of this Amendment in each Country of the Territory shall remain until the expiration or termination of the last Valid Claim of a Theravance Patent covering the Supplemental MABA Alliance Product in such Country.

 

(c)                                  Duration of Decreased Patent Royalties.  Royalty obligations under Section 6.3(ii) of this Amendment in each Country of the Territory shall apply for a maximum period of [***] from First Commercial Sale of the relevant Supplemental MABA

 

***CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

 

 

Alliance Product in each such Country (where, for the avoidance of doubt, such period would include, and not be additional to, the time for which a full patent royalty was previously payable under Section 6.3(i)).

 

(d)                                 Duration of Know-How Royalties.      Royalty obligations under Section 6.3(iii) of this Amendment in each Country of the Territory shall apply for a maximum period of ten (10) years from First Commercial Sale of the relevant Supplemental MABA Alliance Product in each such Country.

 

6.4                               In each of the following Sections of the Agreement, notwithstanding the definition of the term “Alliance Product” in the Agreement, “Alliance Product” shall include the Supplemental MABA Alliance Products:  Sections 6.4 through 6.10 (except that references to Sections 6.1, 6.2 and 6.3 in Section 6.9 shall instead refer to Sections 6.1, 6.2 and 6.3 of this Amendment).

 

7.                                      Communications, Promotional Materials and Samples; Regulatory Matters; Orders and Supply and Returns; Confidential Information.

 

7.1                               Notwithstanding the definition of the term “Alliance Product” in the Agreement, “Alliance Product” shall include the Supplemental MABA Alliance Products in Articles 7 through 10 of the Agreement provided that the transfer of the stock of Supplemental MABA Alliance Products to GSK shall take place pursuant to Section 4.1 of this Amendment and not Section 9.2.1 of the Agreement.

 

8.                                      Representations and Warranties.

 

8.1                               Mutual.  Theravance and GSK each represents and warrants to the other as of the Effective Date of this Amendment the representations and warranties set forth in Section 11.1 of the Agreement, except that references therein to “this Agreement” shall refer instead to the Agreement as amended by this Amendment.

 

8.2                               Additional GSK.  GSK further represents, warrants and covenants to Theravance as of the Effective Date of this Amendment that:

 

(i)                                     neither GSK nor any of its Affiliates is a Party to or otherwise bound by any oral or written contract or agreement that will result in any Person obtaining any interest in, or that would give to any Person any right to assert any claim in or with respect to, any of GSK’s rights granted under this Amendment; and

 

(ii)                                  GSK’s valuation of the Supplemental MABA Alliance Products does not meet the size-of-transaction threshold for reporting under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

 

8.3                               Additional Theravance.  Theravance further represents and warrants and covenants to GSK as of the Effective Date of this Amendment that:

 

***CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

 

 

(i)                                     Theravance has not received notice from any Third Party of a claim that an issued patent of such Third Party would be infringed by the manufacture, distribution, marketing or sale of the Supplemental MABA Alliance Products;

 

(ii)                                  To Theravance’s knowledge, none of Theravance’s current patent rights relating to the Supplemental MABA Alliance Products are subject to any pending or any threatened re-examination, opposition, interference or litigation proceedings;

 

(iii)                               Theravance has not received notice from any Third Party of a claim asserting the invalidity, misuse, unregisterability or unenforceability of any of Theravance’s current patent rights relating to the Supplemental MABA Alliance Products, or challenging its right to use or ownership of any of Theravance’s current patent rights relating to the Supplemental MABA Alliance Products or Theravance’s know-how relating to the Supplemental MABA Alliance Products, or making any adverse claim of ownership thereof;

 

(iv)                              Theravance has not received notice from any Third Party that any trade secrets or other intellectual property rights of such Third Party would be misappropriated by the development and reduction to practice of Theravance’s current patent rights relating to the Supplemental MABA Alliance Products and Theravance’s know-how relating to the Supplemental MABA Alliance Products; and

 

(v)                                 Theravance will not at any time during the Term disclose to any Third Party(ies) and/or publish in the public domain any proprietary and secret Theravance Know-How relating to the Supplemental MABA Alliance Products that is proprietary and secret as of the Effective Date of this Amendment.

 

8.4                               The Parties hereby agree to amend and restate Section 11.4 of the Agreement with respect to all Alliance Products and Supplemental MABA Alliance Products as follows:

 

“Each Party hereby covenants and agrees during the Term that it shall carry out its obligations or activities hereunder in accordance with (i) the terms of this Agreement; (ii) all applicable Laws (which shall include without limitation applicable anti-corruption laws); and (iii) GSK’s ‘Prevention of Corruption — Third Party Guidelines’.”

 

8.5                               Notwithstanding the definition of the term “Alliance Product” in the Agreement, “Alliance Product” shall include the Supplemental MABA Alliance Products in Section 11.5.

 

9.                                      Indemnification; Patents and Inventions.  Notwithstanding the definition of the term “Alliance Product” in the Agreement, “Alliance Product” shall include the Supplemental MABA Alliance Products in Articles 12 and 13 of the Agreement, and notwithstanding the definition of the term “Alliance Program” in the Agreement, “Alliance Program” shall include the Supplemental MABA Alliance Program in Article 13; provided, however, that:

 

9.1                               in the context of Supplemental MABA Alliance Products, (i) references to the “Alliance Program Acceptance Date” shall instead refer to the Effective Date of this

 

***CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

 

 

Amendment and (ii) reference to Article 14 (in Section 13.6) shall refer to Article 14 of the Agreement as amended by this Amendment.

 

9.2                               For the avoidance of doubt, pursuant to the fourth sentence of the second paragraph of Section 13.1, GSK shall reimburse Theravance for all reasonable expenses incurred from the Effective Date to the Effective Date of this Amendment in connection with OUS patent applications corresponding to the Supplemental MABA Alliance Products.

 

9.3                               the proviso to Section 13.1.5 of the Agreement shall be taken to refer also to GSK’s proprietary Gemini technology.

 

10.                               Termination.

 

10.1                        Notwithstanding the definition of the term “Alliance Product” in the Agreement, “Alliance Product” shall include the Supplemental MABA Alliance Products in Sections 14.1 and 14.2 of the Agreement; provided, however, that GSK may terminate the Development and Commercialization of the Supplemental MABA Alliance Products pursuant to Section 10.2 of this Agreement.

 

10.2                        GSK Right to Terminate Development and Commercialization of the Supplemental MABA Alliance Products.  GSK shall have the right to terminate Development or Commercialization of any or all Supplemental MABA Alliance Products on a country-by-country basis upon the provision of ninety (90) days written notice to Theravance.  In the event of termination of the Supplemental MABA Alliance Program under this Section 10.2, each Supplemental MABA Alliance Product shall be a “Terminated Respiratory Development Alliance Product” or “Terminated Respiratory Commercialized Alliance Product” (as the case may be) which GSK shall return to Theravance pursuant to Section 14.5.2(b) or 14.5.3(b), respectively, of the Agreement and Theravance shall be entitled to develop and commercialize all compounds from such programs outside of the Alliance alone or with a Third Party.  For the avoidance of doubt, the provisions of this Section 10.2 do not affect the rights of GSK to terminate Development of the MABA Alliance Program pursuant to Section 14.3 of the Agreement or, after First Commercial Sale of the MABA Alliance Product, to terminate Commercialization of the MABA Alliance Program pursuant to Section 14.4 of the Agreement.

 

10.3                        Notwithstanding the definition of the term “Alliance Product” in the Agreement, “Alliance Product” shall include the Supplemental MABA Alliance Products in Sections 14.5.1, 14.5.2(b), 14.5.3(b), and 14.6 through 14.8 of the Agreement; provided, however, that:

 

(i)                                     In Section 14.5.2(b) of the Agreement, any Supplemental MABA Alliance Product shall constitute an “alternative Respiratory Development Alliance Product” for any other Supplemental MABA Alliance Product or for any Theravance Compound in the MABA Alliance Program;

 

(ii)                                  The final sentence of Section 14.5.2(b)(iv) is hereby amended to replace “Terminated Respiratory Commercialized Alliance Product” with “Terminated Respiratory Development Alliance Product” and the Parties agree that “GSK Property” shall also include GSK’s proprietary Gemini technology;

 

***CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

 

 

(iii)                               Section 14.5.2(b)(vii) shall not apply to the Supplemental MABA Alliance Products, but it shall continue to apply to the Theravance Compound in the MABA Alliance Program;

 

(iv)                              In Section 14.5.3(b) of the Agreement, any Supplemental MABA Alliance Product shall constitute an “alternative Respiratory Alliance Product” for any other Supplemental MABA Alliance Product or for any Theravance Compound in the MABA Alliance Program; and

 

(v)                                 In Section 14.7 of the Agreement, in the context of Supplemental MABA Alliance Products, the reference to Section 6.2 of the Agreement shall instead refer to Section 6.2 of this Amendment.

 

10.4                        Notwithstanding the definition of the term “Alliance Program” in the Agreement, “Alliance Program” shall include the Supplemental MABA Alliance Program in Article 14.

 

11.                               Reversion Programs.  Notwithstanding Section 4.2.2 of the Agreement regarding the timing and process pursuant to which GSK may exercise its Opt-In Right with respect to the two remaining non-respiratory Additional Discovery Programs (the AT1 Receptor-Neprilysin Inhibitor (ARNI) program and the Monoamine Reuptake Inhibitor (MARIN) program) (collectively, the “Remaining Additional Discovery Programs”), GSK hereby releases Theravance from the Diligent Efforts and funding obligations set forth in Section 4.1 and Section 4.2 of the Agreement with respect to the Remaining Additional Discovery Programs, irrevocably waives its Opt-In Right with respect to the Remaining Additional Discovery Programs and designates each such program a Reversion Program effective upon the Effective Date of this Amendment.  Accordingly, on the Effective Date of this Amendment each of the Remaining Additional Discovery Programs shall revert in full to Theravance and Theravance shall be entitled to pursue development and commercialization of all compounds from such programs outside the Alliance alone or with a Third Party.

 

12.                               Investor Relations Planning.  As of the Effective Date of this Amendment, the Parties shall have agreed upon a public communications plan regarding this Amendment and the transactions contemplated hereby.

 

13.                               Supplemental MABA Alliance Program Closing Condition.  The obligation of each Party to consummate the transactions contemplated by this Amendment is subject to the satisfaction of the following condition (the “Supplemental MABA Closing Condition”):  All filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and any other similar laws that are necessary in any jurisdiction with respect to the transaction contemplated hereby shall have been made and any required waiting period under such laws shall have expired or been terminated and any Governmental Authority in a jurisdiction with an applicable mandatory pre-closing waiting period that has power under or authority to enforce such laws shall have, if applicable, approved, cleared or decided neither to initiate proceedings or otherwise intervene in respect of the transaction contemplated hereby nor to refer the transaction to any other competent Governmental Authority.  Each Party shall use good faith efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other Party in doing,

 

***CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

 

 

all things necessary, proper or advisable to consummate and make effective the transaction contemplated by this Amendment, including, but not limited to satisfaction of the Supplemental MABA Closing Condition and each Party shall keep the other Party reasonably apprised of the status of matters relating to the completion of same.  In connection with the foregoing, the Parties shall use all reasonable efforts to make any such filing(s), if applicable, within five (5) business days of the Effective Date of this Amendment.  In connection with the foregoing, the Parties hereby agree to negotiate in good faith to make as soon as practicable any modification or amendment to this Amendment that is required by the United States Federal Trade Commission, Department of Justice or equivalent Governmental Authority, provided that no Party shall be required to agree to any modification or amendment that, in the reasonable opinion of such Party’s external legal or financial counsel, would be adverse to such Party. This Agreement may be terminated by either Party upon written notice any time after December 31, 2011 if the transactions contemplated by this Agreement shall not have been consummated by December 31, 2011 due to failure to satisfy the Supplemental MABA Closing Condition; provided, however, that the terminating Party shall not have breached in any material respect its obligations under this Amendment in any manner that shall have been the proximate cause of, or resulted in, the failure to satisfy the Supplemental MABA Closing Condition or otherwise to consummate the transactions contemplated by this Amendment by such date.

 

14.                               Entire Agreement.  This Amendment and the Agreement constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof.

 

15.                               Governing Law.  This Agreement shall be construed, and the respective rights of the Parties determined, according to the substantive law of the State of Delaware notwithstanding the provisions governing conflict of laws under such Delaware law to the contrary, except matters of intellectual property law which shall be determined in accordance with the intellectual property laws relevant to the intellectual property in question.  Each Party hereby irrevocably submits to the exclusive jurisdiction of said Court in respect of any claim relating to the validity, interpretation and enforcement of this Amendment, and hereby waives, and agrees not to assert, as a defense in any action, suit or proceeding in which any such claim is made that it is not subject thereto or that such action suit or proceeding may not be brought or is not maintainable in such courts, or that the venue thereof may not be appropriate or that this agreement may not be enforced in or by such courts.

 

16.                               Severability.  In the event of the invalidity of any provisions of this Amendment or if this Amendment contains any gaps, the Parties agree that such invalidity or gap shall not affect the validity of the remaining provisions of this Amendment.  The Parties will replace an invalid provision or fill any gap with valid provisions which most closely approximate the purpose and economic effect of the invalid provision or, in case of a gap, the parties’ presumed intentions.  In the event that the terms and conditions of this Amendment are materially altered as a result of the preceding sentences, the Parties shall renegotiate the terms and conditions of this Amendment in order to resolve any inequities.  Nothing in this Amendment shall be interpreted so as to require any Party to violate any applicable laws, rules or regulations.

 

17.                               Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument.

 

***CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

 

 

IN WITNESS WHEREOF, the parties hereby have executed this Amendment on the dates written below.

 

	
 
    	
THERAVANCE, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
Date:   October 3, 2011
    	
By:
    	
/s/   Rick E Winningham
    
	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
Rick   E Winningham
    
	
 
    	
 
    	
 
    
	
 
    	
Title:
    	
Chief   Executive Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
GLAXO   GROUP LIMITED
    
	
 
    	
 
    
	
 
    	
 
    
	
Date:   October 3, 2011
    	
By:
    	
/s/   Paul Williamson
    
	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
Paul   Williamson
    
	
 
    	
 
    	
 
    
	
 
    	
Title:
    	
Corporate   Director
    

 

SIGNATURE PAGE TO AMENDMENT TO STRATEGIC ALLIANCE AGREEMENTExhibit 10.11

 

POLYPORE INTERNATIONAL, INC.

 

2007 STOCK INCENTIVE PLAN

 

(Amended and Restated Effective as of November 30, 2011)

 

1.           Purpose and Effective Date.

 

(a)           Purpose of the Plan.  The purpose of the Plan is to assist the Company in attracting, retaining, motivating and rewarding certain key employees, officers, directors and consultants of the Company and its Affiliates, and promoting the creation of long-term value for stockholders of the Company by closely aligning the interests of such individuals with those of such stockholders.  The Plan authorizes the award of Stock-based incentives to Eligible Persons to encourage such persons to expend their maximum efforts in the creation of stockholder value.

 

(b)           Original Effective Date.  The Plan was initially adopted by the Board on June 22, 2007 and effective as of the date upon which the Company commenced its initial public offering pursuant to an effective registration statement, which was June 28, 2007.

 

(c)           Restatement Effective Date.  The Plan was previously amended and restated as of May 12, 2011 and this amendment and restatement shall be effective as of November 30, 2011.

 

2.           Definitions.

 

For purposes of the Plan, the following terms shall be defined as set forth below:

 

(a)           “Affiliate” means, with respect to any entity, any other entity that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with, such entity.

 

(b)           “Award” means any Option, Restricted Stock or other Stock-based award granted under the Plan.

 

(c)           “Award Agreement” means an agreement between the Company and a Participant, including an Option Agreement or Restricted Stock Agreement, setting forth the terms and conditions applicable to an Award granted to the Participant under this Plan.  The Award Agreement may be in such form as the Committee shall determine, including a master agreement with respect to all or any types of Awards supplemented by an Award notice issued by the Company.

 

(d)           “Board” means the Board of Directors of the Company.

 

(e)           “Cause” means, in the absence of any employment agreement between a Participant and the Employer otherwise defining Cause, (i) fraud or embezzlement on the part of Participant in the course of his or her employment or services, (ii) personal dishonesty or acts of gross negligence or gross misconduct, which, in each case, is demonstrably and materially injurious to the Company or any of its Affiliates (iii) a Participant’s intentional engagement in

 

 

conduct that is materially injurious to the Company or any of its Affiliates, (iv) a Participant’s conviction by a court of competent jurisdiction of, or pleading “guilty” or “no contest” to, (x) a felony or (y) any other criminal charge (other than minor traffic violations) which could reasonably be expected to have a material adverse impact on the reputation or business of the Company or any of its Affiliates; (v) public or consistent drunkenness by a Participant or his or her illegal use of narcotics which is, or could reasonably be expected to become, materially injurious to the reputation or business of the Company or any of its Affiliates or which impairs, or could reasonably be expected to impair, the performance of a Participant’s duties to the Company or any of its Affiliates; or (vi) willful failure by a Participant to follow the lawful directions of a superior officer or the Board, unless such failure did not occur in bad faith and is cured promptly after written notice of such failure is given to the Participant by such superior officer or the Board, or such direction otherwise constitutes Good Reason.  In the event there is an employment agreement between a Participant and the Employer defining Cause, “Cause” shall have the meaning provided in such agreement.

 

(f)                                    “Change in Control” means:

 

(i)            a change in ownership or control of the Company effected through a transaction or series of transactions (other than an offering of Stock to the general public through a registration statement filed with the Securities and Exchange Commission) whereby any “person” or related “group” of “persons” (as such terms are used in Sections 13(d) and l4(d)(2) of the Exchange Act), other than the Company or any of its Affiliates, or an employee benefit plan maintained by the Company or any of its Affiliates, directly or indirectly acquires “beneficial ownership” (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company possessing more than fifty percent (50%) of the total combined voting power of the Company’s securities outstanding immediately after such acquisition;

 

(ii)           the date upon which individuals who, as of the Effective Date, constitute the Board (the “Incumbent Board”), cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board; or

 

(iii)          the sale or disposition, in one or a series of related transactions, of all or substantially all of the assets of the Company to any “person” or “group” (as such terms are defined in Sections l3(d)(3) and 14(d)(2) of the Exchange Act) other than the Company’s Affiliates.

 

(g)                                 “Code” means the Internal Revenue Code of 1986, as amended from time to time, including regulations thereunder and successor provisions and regulations thereto.

 

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(h)           “Committee” means the Board or such other committee appointed by the Board consisting of two or more individuals.

 

(i)            “Company” means Polypore International, Inc., a Delaware corporation.

 

(j)            “Covered Employee” means an individual who is considered a “covered employee” within the meaning of Section 162(m) of the Code.

 

(k)           “Disability” means, in the absence of any employment agreement between a Participant and the Employer otherwise defining Disability, the permanent and total disability of a person within the meaning of Section 22(e)(3) of the Code.  In the event there is an employment agreement between a Participant and the Employer defining Disability, “Disability” shall have the meaning provided in such agreement.

 

(l)            “Effective Date” means the date upon which the Company commenced an initial public offering pursuant to an effective registration statement.

 

(m)          “Eligible Person” means (i) each employee of the Company or of any of its Affiliates, including each such person who may also be a director of the Company and/or its Affiliates; (ii) each non-employee director of the Company and/or its Affiliates; (iii) each other person who provides substantial services to the Company and/or its Affiliates and who is designated as eligible by the Committee; and (iv) any person who has been offered employment by the Company or its Affiliates; provided, that such prospective employee may not receive any payment or exercise any right relating to an Award until such person has commenced employment with the Company or its Affiliates.  An employee on an approved leave of absence may be considered as still in the employ of the Company or its Affiliates for purposes of eligibility for participation in the Plan.

 

(n)           “Employer” means either the Company or an Affiliate of the Company that the Participant (determined without regard to any transfer of an Award) is principally employed by or provides services to, as applicable.

 

(o)           “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, including rules thereunder and successor provisions and rules thereto.

 

(p)           “Expiration Date” means the date upon which the term of an Option expires, as determined under Section 6(b) hereof.

 

(q)           “Fair Market Value” means, as of any date when the Stock is listed on one or more national securities exchanges, the closing price reported on the principal national securities exchange on which such Stock is listed and traded on the date of determination.  If the Stock is not listed on an exchange, or representative quotes are not otherwise available, the Fair Market Value shall mean the amount determined by the Board in good faith to be the fair market value per share of Stock.

 

(r)            “Option” means a conditional right, granted to a Participant under Section 6 hereof, to purchase Stock at a specified price during specified time periods.  Options under the

 

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Plan are not intended to qualify as “incentive stock options” meeting the requirements of Section 422 of the Code.

 

(s)                                  “Option Agreement” means a written agreement between the Company and a Participant evidencing the terms and conditions of an individual Option grant.

 

(t)                                    “Participant” means an Eligible Person who has been granted an Award under the Plan, or if applicable, such other person or entity who holds an Award.

 

(u)                                 “Performance Award” means an Award granted under Section 9, which is subject to the attainment of one or more Performance Goals during a Performance Period, as established by the Committee in its discretion.

 

(v)                                 “Performance Goals” means the criteria and objectives designated by the Committee that must be met during the Performance Period as a condition of the Participant’s receipt of a Performance Award, as described in Section 9(c) hereof.

 

(w)                               “Performance Period” means the period designated by the Committee during which the Performance Goals with respect to a Performance Award shall be measured.

 

(x)                                   “Plan” means this Polypore International, Inc. 2007 Stock Incentive Plan, as amended from time to time.

 

(y)                                 “Qualified Member” means a member of the Committee who is a “Non-Employee Director” within the meaning of Rule 16b-3 under the Exchange Act and an “outside director” within the meaning of Regulation 1.162-27(e) under Section 162(m) of the Code.

 

(z)                                   “Restricted Stock” means Stock granted to a Participant under Section 7 hereof that is subject to certain restrictions and to a risk of forfeiture.

 

(aa)                            “Restricted Stock Agreement” means a written agreement between the Company and a Participant evidencing the terms and conditions of an individual Restricted Stock grant.

 

(bb)                          “Securities Act” means the Securities Act of 1933, as amended from time to time, including rules thereunder and successor provisions and rules thereto.

 

(cc)                            “Stock” means the Company’s Common Stock, par value $0.01 per share, and such other securities as may be substituted for such stock pursuant to Section 10 hereof.

 

3.           Administration.

 

(a)           Authority of the Committee.  Except as otherwise provided below, the Plan shall be administered by the Committee.  The Committee shall have full and final authority, in each case subject to and consistent with the provisions of the Plan, to (i) select Eligible Persons to become Participants; (ii) grant Awards; (iii) determine the type, number of shares of Stock subject to, and other terms and conditions of, and all other matters relating to, Awards; (iv) prescribe Award Agreements (which need not be identical for each Participant) and rules and

 

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regulations for the administration of the Plan; (v) construe and interpret the Plan and Award Agreements and correct defects, supply omissions, or reconcile inconsistencies therein; (vi) suspend the right to exercise Awards during any period that the Committee deems appropriate to comply with applicable securities laws, and thereafter extend the exercise period of an Award by an equivalent period of time; and (vii) make all other decisions and determinations as the Committee may deem necessary or advisable for the administration of the Plan.  The foregoing notwithstanding, the Board shall perform the functions of the Committee for purposes of granting Awards under the Plan to non-employee directors.  In any case in which the Board is performing a function of the Committee under the Plan, each reference to the Committee herein shall be deemed to refer to the Board, except where the context otherwise requires.  Any action of the Committee shall be final, conclusive and binding on all persons, including, without limitation, the Company, its Affiliates, Eligible Persons, Participants and beneficiaries of Participants.

 

(b)           Manner of Exercise of Committee Authority.  At any time that a member of the Committee is not a Qualified Member, (i) any action of the Committee relating to an Award intended by the Committee to qualify as “performance-based compensation” within the meaning of Section 162(m) of the Code may be taken by a subcommittee, designated by the Committee or the Board, composed solely of two or more Qualified Members (a “Qualifying Committee”) and (ii) any action relating to an Award granted or to be granted to a Participant who is then subject to Section 16 of the Exchange Act in respect of the Company may be taken either by such a Qualifying Committee, or by the Committee but with each such member who is not a Qualified Member abstaining or recusing himself or herself from such action; provided, that upon such abstention or recusal, the Committee remains composed of two or more Qualified Members.  Any action authorized by such a Qualifying Committee or by the Committee upon the abstention or recusal of such non-Qualified Member(s) shall be deemed to be the action of the Committee for purposes of the Plan.  The express grant of any specific power to the Committee, and the taking of any action by the Committee, shall not be construed as limiting any power or authority of the Committee.

 

(c)           Delegation.  To the extent permitted by applicable law, the Committee may delegate to officers or employees of the Company or any of its Affiliates, or committees thereof, the authority, subject to such terms as the Committee shall determine, to perform such functions, including but not limited to administrative functions, as the Committee may determine appropriate.  The Committee may appoint agents to assist it in administering the Plan.  Notwithstanding the foregoing or any other provision of the Plan to the contrary, any Award granted under the Plan to any person or entity who is not an employee of the Company or any of its Affiliates shall be expressly approved by the Committee.

 

(d)           Section 409A.  The Committee shall take into account compliance with Section 409A of the Code in connection with any grant of an Award under the Plan, to the extent applicable.

 

4.           Shares Available Under the Plan.

 

(a)           Number of Shares Available for Delivery.  Subject to adjustment as provided in Section 10 hereof, the total number of shares of Stock reserved and available for

 

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delivery in connection with Awards under the Plan shall be 4,751,963.  Shares of Stock delivered under the Plan shall consist of authorized and unissued shares or previously issued shares of Stock reacquired by the Company on the open market or by private purchase.

 

(b)           Share Counting Rules.  The Committee may adopt reasonable counting procedures to ensure appropriate counting, avoid double counting (as, for example, in the case of tandem or substitute awards) and make adjustments if the number of shares of Stock actually delivered differs from the number of shares previously counted in connection with an Award.  To the extent that an Award expires or is canceled, forfeited, settled in cash or otherwise terminated without a delivery to the Participant of the full number of shares to which the Award related, the undelivered shares will again be available for grant.  Shares withheld in payment of the exercise price or taxes relating to an Award and shares equal to the number surrendered in payment of any exercise price or taxes relating to an Award shall not be again available for Awards under the Plan.

 

(c)           Individual Limitations.  Notwithstanding anything to the contrary herein, during any time that the Company is subject to Section 162(m) of the Code:  (i) the maximum number of shares of Stock with respect to which Options and stock appreciation rights (to the extent granted as an Award under the Plan) may be granted to any individual in any one calendar year shall not exceed 1,000,000, (ii) the maximum number of shares of Stock with respect to which Awards (other than Options or stock appreciation rights) consisting of or covering shares of Stock (whether such Awards may be settled in shares of Stock and/or cash) may be granted to any individual in any one calendar year shall not exceed 1,000,000, and (iii) the maximum cash payment that may be made to any individual in any one calendar year pursuant to any cash-based Performance Award shall not exceed $3,000,000.  The share limitations in this Section 4(c) shall be subject to adjustment pursuant to Section 10 to the extent such adjustment will not affect the status of any Award intended to qualify as performance-based compensation under Section 162(m) of the Code.

 

5.           Vesting.

 

The Committee shall determine the time or times at which an Award will vest, become exercisable or the restrictions thereon shall lapse and the terms on which an Award requiring exercise will become and remain exercisable, provided, however, that except as otherwise provided herein, (a) for Awards to employees and non-employee directors of the Employer that vest (or for which the restrictions lapse, as applicable) based on the lapse of time or otherwise without being subject to attainment of one or more performance goals, the period over which the Award shall vest (or the restrictions shall lapse, as applicable) shall not be less than three (3) years from the date of grant; and (b) for Awards to employees and non-employee directors of the Employer that are contingent on the achievement of one or more performance goals (including Performance Awards), the Award shall not vest (or the restrictions shall not lapse) in less than one (1) year.  Notwithstanding the foregoing, the Committee may provide at the time of grant of an Award or thereafter for accelerated vesting (or lapse of restrictions) in connection with the Participant’s death, Disability, a Change in Control, changes in applicable laws, or, subject to the minimum vesting periods above, at any other time. Notwithstanding anything herein to the contrary, up to a maximum of ten percent (10%) of the aggregate shares of Stock authorized for issuance under Section 4(a) of the Plan (as subject to adjustment in

 

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accordance with Section 10 of the Plan) may be subject to Awards that do not satisfy the minimum vesting periods and/or that provide for acceleration upon other circumstances.

 

6.           Options.

 

(a)           General.  Options may be granted to Eligible Persons in such form and having such terms and conditions as the Committee shall deem appropriate.  The provisions of separate Options shall be set forth in an Option Agreement, which agreements need not be identical.

 

(b)           Term.   The term of each Option shall be set by the Committee at the time of grant; provided, however, that no Option granted hereunder shall be exercisable after the expiration of ten (10) years from the date it was granted.

 

(c)           Exercise Price.  The exercise price per share of Stock covered by an Option shall be set by the Committee at the time of grant, provided that the exercise price may not be less than the Fair Market Value per share of Stock on the date of grant, except in the case of substitute awards granted upon assumption of, or in substitution for, outstanding awards previously granted by another entity in connection with a corporation transaction such as a merger, consolidation or acquisition of stock or property to the extent permitted by applicable law.

 

(d)           Payment for Stock.  Payment for shares of Stock acquired pursuant to Options granted hereunder shall be made in full, upon exercise of the Options: (i) in immediately available funds in United States dollars, or by certified or bank cashier’s check; (ii) by delivery of a notice of “net exercise” to the Company, pursuant to which the Participant shall receive the number of shares of Stock underlying the Options so exercised reduced by the number of shares of Stock equal to the aggregate exercise price of the Options divided by the Fair Market Value on the date of exercise; (iii) by delivery of shares of Stock having a value equal to the exercise price; or (iv) by any other means approved by the Committee.  Anything herein to the contrary notwithstanding, if the Committee determines that any form of payment available hereunder would be in violation of Section 402 of the Sarbanes-Oxley Act of 2002, such form of payment shall not be available.

 

(e)           Vesting.  Subject to Section 5, Options shall vest and become exercisable in such manner, on such date or dates, or upon the achievement of performance or other conditions, in each case, as may be determined by the Committee and set forth in the Option Agreement.   Unless otherwise specifically determined by the Committee, the vesting of an Option shall occur only while the Participant is employed or rendering services to the Employer, and all vesting shall cease upon a Participant’s termination of employment or services with the Employer for any reason.  If an Option is exercisable in installments, such installments or portions thereof which become exercisable shall remain exercisable until the Option expires.

 

(f)            Transferability of Options.  An Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Participant only by the Participant.  Notwithstanding the foregoing, Options shall be transferable to the extent provided in the Option Agreement or otherwise determined by the Committee.

 

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(g)                                 Termination of Employment or Service.  Except as may otherwise be provided by the Committee in the Option Agreement or as otherwise determined by the Committee:

 

(i)            If prior to the Expiration Date, a Participant’s employment or service, as applicable, with the Employer terminates for any reason other than (A) by the Employer for Cause, or (B) by reason of the Participant’s death or Disability, (1) all vesting with respect to the Options shall cease, (2) any unvested Options shall expire as of the date of such termination, and (3) any vested Options shall remain exercisable until the earlier of the Expiration Date or the date that is ninety (90) days after the date of such termination.

 

(ii)           If prior to the Expiration Date, a Participant’s employment or service, as applicable, with the Employer terminates by reason of such Participant’s death or Disability, (A) all vesting with respect to the Options shall cease, (B) any unvested Options shall expire as of the date of such termination, and (C) any vested Options shall expire on the earlier of the Expiration Date or the date that is twelve (12) months after the date of such termination due to death or Disability of the Participant.  In the event of a Participant’s death, the Options shall remain exercisable by the person or persons to whom a Participant’s rights under the Options pass by will or the applicable laws of descent and distribution until its expiration, but only to the extent the Options were vested by such Participant at the time of such termination due to death.

 

(iii)          If prior to the Expiration Date, a Participant’s employment or service, as applicable, with the Employer is terminated by the Employer for Cause, all Options (whether or not vested) shall immediately expire as of the date of such termination.

 

Notwithstanding the foregoing, any outstanding Options held by a Participant whose employment or service, as applicable, with the Employer terminates by reason of such Participant’s termination by the Employer without Cause or retirement may become or remain exercisable on such terms and conditions provided by the Committee.

 

7.           Restricted Stock.

 

(a)           General.  Restricted Stock granted hereunder shall be in such form and shall contain such terms and conditions as the Committee shall deem appropriate.  The terms and conditions of each Restricted Stock grant shall be evidenced by a Restricted Stock Agreement, which agreements need not be identical.  Subject to the restrictions set forth in Section 7(b), except as otherwise set forth in the applicable Restricted Stock Agreement, the Participant shall generally have the rights and privileges of a stockholder as to such Restricted Stock, including the right to vote such Restricted Stock.  Unless otherwise set forth in a Participant’s Restricted Stock Agreement, cash dividends and stock dividends, if any, with respect to the Restricted Stock shall be withheld by the Company for the Participant’s account, and shall be subject to forfeiture to the same degree as the shares of Restricted Stock to which such dividends relate.  Except as otherwise determined by the Committee, no interest will accrue or be paid on the amount of any cash dividends withheld.

 

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(b)           Restrictions on Transfer.  In addition to any other restrictions set forth in a Participant’s Restricted Stock Agreement, until such time that the Restricted Stock has vested pursuant to the terms of the Restricted Stock Agreement, the Participant shall not be permitted to sell, transfer, pledge, or otherwise encumber the Restricted Stock.  Notwithstanding anything contained herein to the contrary, the Committee shall have the authority to remove any or all of the restrictions on the Restricted Stock subject to Section 5.

 

(c)           Certificates.  Restricted Stock granted under the Plan may be evidenced in such manner as the Committee shall determine.  If certificates representing Restricted Stock are registered in the name of the Participant, the Committee may require that such certificates bear an appropriate legend referring to the terms, conditions and restrictions applicable to such Restricted Stock, that the Company retain physical possession of the certificates, and that the Participant deliver a stock power to the Company, endorsed in blank, relating to the Restricted Stock.  Notwithstanding the foregoing, the Committee may determine, in its sole discretion, that the Restricted Stock shall be held in book entry form rather than delivered to the Participant pending the release of the applicable restrictions.

 

(d)           Termination of Employment or Service.  Except as may otherwise be provided by the Committee in the Restricted Stock Agreement or as otherwise determined by the Committee, if, prior to the time that the Restricted Stock has vested, a Participant’s employment or service, as applicable, terminates for any reason, (i) all vesting with respect to the Restricted Stock shall cease, and (ii) as soon as practicable following such termination, the Company shall repurchase from the Participant, and the Participant shall sell, any unvested shares of Restricted Stock at a purchase price equal to the original purchase price paid for the Restricted Stock, or if the original purchase price is equal to $0, such unvested shares of Restricted Stock shall be forfeited by the Participant to the Company for no consideration as of the date of such termination.

 

8.           Other Stock-Based Awards.

 

The Committee is authorized, subject to limitations under applicable law, to grant to Participants such other Awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Stock, as deemed by the Committee to be consistent with the purposes of the Plan.  Subject to Section 5, such Awards may be granted to Eligible Persons in such form and having such terms and conditions as the Committee shall deem appropriate.  The provisions of each other Stock-based Award shall be evidenced by an Award Agreement, which agreements need not be identical.  To the extent that such an Award is intended to be a stock appreciation right that qualifies as “performance-based compensation” within the meaning of Section 162(m) of the Code, the applicable exercise price or grant value with respect to the stock appreciation right shall not be less than the Fair Market Value on the date of grant of the shares of Stock to which the stock appreciation right pertains.

 

9.           Performance Awards.

 

(a)           Performance Awards.  Subject to the terms of the Plan (including the limits in Section 4(c)), the Committee may designate an Award of Restricted Stock or other Stock-based award as a Performance Award based upon a determination that the Participant is or

 

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may become a Covered Employee and the Committee wishes such Awards to qualify for the exemption from the limitation on deductibility imposed by Section 162(m) of the Code.  Performance Awards shall be contingent upon the attainment of one or more Performance Goals. The provisions of this Section 9 shall control to the extent inconsistent with Sections 7 and 8 and such Performance Awards shall be subject to the terms and conditions set forth below.

 

(b)           Award Agreement.  Each grant of a Performance Award shall be evidenced by an Award Agreement in such form as the Committee shall determine.  The Award Agreement shall specify the number of shares of Stock to which the Performance Award pertains (if applicable), the Performance Goals applicable to such Performance Award, the length of the Performance Period, and such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall determine.

 

(c)           Performance Goals.  The Committee shall establish one or more Performance Goals for the Participant that are objectively determinable (i.e., such that a third party with knowledge of the relevant facts could determine whether the goals have been met).  Such Performance Goals must be established in writing by the Committee within ninety (90) days after the beginning of the Performance Period (or, if earlier, by the date on which twenty-five percent (25%) of the Performance Period has elapsed) or within such other time period prescribed by Section 162(m) of the Code, provided, that achievement of the Performance Goals must be substantially uncertain at the time they are established.  Such Performance Goals shall be based on one or more of the following, as determined in the sole discretion of the Committee:  stock price; market share; earnings per share (basic or diluted); net income; pre-tax operating income; earnings (including after-tax earnings or earnings before or after any one or more of interest, taxes, depreciation, and amortization); profits (including gross or net profits, after-tax profits or pre-tax profits); revenues; financial return ratios; total stockholder return; enterprise value; cash flow measures (including operating cash flow, free cash flow, and cash flow return on investment); cash position; return on equity; return on investment; return on assets (gross or net); return on capital; sales; expense measures (including levels of operating expense and expense reduction levels); debt levels (including borrowing capacity); debt to equity ratio; debt to capitalization ratio; consummation of debt offerings; reduction of debt; debt rating; consummation of equity offerings; contractual compliance (including obtaining waivers of non-compliance or amendments of contractual covenants); measures of customer satisfaction; growth in assets, sales, or market share; gross or operating margins; or strategic business objectives based on meeting specified revenue goals, market penetration goals, geographical business expansion goals, cost targets or goals relating to acquisitions or divestitures.  Performance Goals may be based on the performance of the Company and/or its Affiliates, based on one or more Affiliates, divisions, business units or subsidiaries, or based on any combination of the foregoing.  Performance Goals also may be expressed by reference to the Participant’s individual performance with respect to any of the foregoing criteria.  The Committee may adjust or modify Performance Goals for a Performance Period if the Company is involved in a merger, acquisition or divestiture transaction that has any material effect on the Performance Goals established at the time of grant only to the extent that such adjustment or modification would not affect the status of any Performance Award intended to qualify as performance-based compensation under Section 162(m) of the Code.

 

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Performance Goals may be expressed in such form as the Committee shall determine, including either in absolute or relative terms (including, but not by way of limitation, by comparison to a pre-established target, to previous years or to other companies or other external measures, including peer companies or an index), in percentages, in terms of growth over time or otherwise, provided that the Performance Goals meet the requirements hereunder.  Performance Goals need not be based upon an increase or positive result under one of the above criteria and could include, for example, maintaining the status quo or the limitation of economic losses (measured in such case by reference to the specific criteria).  When establishing the Performance Goals, the Committee may specify that the Performance Goals shall be determined either before or after taxes and shall be adjusted to exclude items such as (i) asset write-downs or impairment charges; (ii) the effect of unusual or extraordinary charges or income items or other events, including acquisitions or dispositions of businesses or assets, restructurings, discontinued operations, reductions in force, refinancing/restructuring of short term and/or long term debt, or other extraordinary non-recurring items as described in management’s discussion and analysis of financial condition and results of operations appearing in the Company’s annual report to stockholders for the applicable year or quarterly report for the applicable quarter; (iii) the effect of currency fluctuations or foreign exchange rates; (iv) litigation or claim expenses, judgments or settlements; or (v) changes in accounting principles or tax laws or other laws or provisions affecting reported results.  The Performance Goals established by the Committee may be (but need not be) particular to a Participant and/or different each Performance Period.

 

The Committee also may establish subjective Performance Goals for Participants, but the subjective Performance Goals may be used only to reduce, and not increase, the Performance Award otherwise payable under the Plan.  The Committee can establish other performance measures for Awards granted to Participants that are not intended to qualify under the performance-based compensation provisions of Section 162(m) of the Code.

 

(d)           Payment.  Prior to the vesting, settlement, payment or delivery, as the case may be, of a Performance Award, the Committee shall certify in writing the extent to which the applicable Performance Goals and any other material terms of the Performance Award have been achieved or exceeded for the applicable Performance Period.  Notwithstanding the satisfaction of any Performance Goals, the Committee may, in its discretion, reduce the number of shares or amount paid under a Performance Award based on such criteria as it determines (including, but not limited to, individual merit).  In no event may the Committee waive achievement of the Performance Goal requirements for a Covered Employee except to the extent any such waiver would comply with the rules for “performance-based compensation” under Section 162(m) of the Code.

 

(e)           Code Section 162(m).  The Committee shall have the power to impose such other restrictions on Performance Awards as it may deem necessary or appropriate to ensure that such Performance Awards satisfy all requirements for “performance-based compensation” within the meaning of Section 162(m) of the Code.  Nothing contained in the Plan shall be construed to limit the authority of the Company or the Committee to adopt other compensation arrangements, including an arrangement not intended to be performance-based compensation under Section 162(m) of the Code.

 

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10.          Adjustment for Recapitalization, Merger, etc.

 

(a)           Capitalization Adjustments.  The aggregate number of shares of Stock that may be granted or purchased pursuant to Awards (as set forth in Section 4 hereof), the number of shares of Stock covered by each outstanding Award, and the price per share thereof in each such Award shall be equitably and proportionally adjusted or substituted, as determined by the Committee, as to the number, price or kind of a share of Stock or other consideration subject to such Awards (i) in the event of changes in the outstanding Stock or in the capital structure of the Company by reason of stock splits, reverse stock splits, recapitalizations, reorganizations, mergers, consolidations, combinations, exchanges, or other relevant changes in capitalization occurring after the date of grant of any such Award (including any Corporate Event (as defined below)); (ii) in connection with any extraordinary dividend declared and paid in respect of shares of Stock, whether payable in the form of cash, stock or any other form of consideration; or (iii) in the event of any change in applicable laws or any change in circumstances which results in or would result in any substantial dilution or enlargement of the rights granted to, or available for, Participants in the Plan.

 

(b)           Corporate Events.  Notwithstanding the foregoing, except as may otherwise be provided in an Award Agreement, in the event of (i) a merger or consolidation involving the Company in which the Company is not the surviving corporation; (ii) a merger or consolidation involving the Company in which the Company is the surviving corporation but the holders of shares of Stock receive securities of another corporation and/or other property, including cash; (iii) a Change in Control; or (iv) the reorganization or liquidation of the Company (each of (i), (ii), (iii) or (iv), a “Corporate Event”), in lieu of providing the adjustment set forth in subsection (a) above, the Committee may, in its discretion, cancel any or all vested and/or unvested Awards as of the consummation of such Corporate Event, and provide that holders of Awards so cancelled will receive a payment in respect of cancellation of their Awards based on the amount of the per share consideration being paid for the Stock in connection with such Corporate Event, less, in the case of Options and other Awards subject to exercise, the applicable exercise price; provided, however, that holders of (A) Options shall only be entitled to consideration in respect of cancellation of such Awards if the per share consideration less the applicable exercise price is greater than zero, and (B) “performance vested” Awards shall only be entitled to consideration in respect of cancellation of such Awards to the extent that applicable performance criteria are achieved prior to or as a result of such Corporate Event, and shall not otherwise be entitled to payment in consideration of cancelled unvested Awards.  Payments to holders pursuant to the preceding sentence shall be made in cash, or, in the sole discretion of the Committee, in the form of such other consideration necessary for a holder of an Award to receive property, cash or securities (or a combination thereof) as such holder would have been entitled to receive upon the occurrence of the transaction if the holder had been, immediately prior to such transaction, the holder of the number of shares of Stock covered by the Award at such time (less any applicable exercise price).

 

(c)           Fractional Shares.  Any such adjustment may provide for the elimination of any fractional share which might otherwise become subject to an Award.

 

11.          Forfeiture and Clawback Events.

 

(a)           An Award Agreement may provide that, notwithstanding any other provision of this Plan to the contrary, upon the occurrence of certain events (including, but not

 

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limited to, termination of employment or service for Cause, breach of confidentiality or other restrictive covenants that apply to the Participant, engaging in competition against the Company, or other conduct or activity by the Participant that is detrimental to the business or reputation of the Company), whether during or after termination, in addition to any forfeitures due to a vesting schedule or termination of employment or service and any other penalties or restrictions that may apply under any employment agreement, state law, or otherwise, the Participant’s rights and benefits with respect to an Award will be subject to reduction, forfeiture or recoupment, including without limitation, that the Participant will forfeit and/or the Company will reduce or recoup:

 

(i)            any and all Awards granted to the Participant under the Plan, including Awards that have become vested and exercisable; and/or

 

(ii)           the profit the Participant has realized on the exercise of any Options, as specified in an Award Agreement.

 

(b)           All Awards granted under the Plan are also subject to the terms and conditions of any policy regarding clawbacks, forfeitures, or recoupments adopted by the Company.

 

12.          Use of Proceeds.

 

The proceeds received from the sale of Stock pursuant to the Plan shall be used for general corporate purposes.

 

13.          Rights and Privileges as a Stockholder.

 

Except as otherwise specifically provided in the Plan, no person shall be entitled to the rights and privileges of stock ownership in respect of shares of Stock which are subject to Awards hereunder until such shares have been issued to that person.

 

14.          Employment or Service Rights.

 

No individual shall have any claim or right to be granted an Award under the Plan or, having been selected for the grant of an Award, to be selected for a grant of any other Award.  Neither the Plan nor any action taken hereunder shall be construed as giving any individual any right to be retained in the employ or service of the Company or an Affiliate of the Company.

 

15.          Compliance With Laws.

 

The obligation of the Company to deliver Stock upon vesting and/or exercise of any Award shall be subject to all applicable laws, rules, and regulations, and to such approvals by governmental agencies as may be required.  Notwithstanding any terms or conditions of any Award to the contrary, the Company shall be under no obligation to offer to sell or to sell and shall be prohibited from offering to sell or selling any shares of Stock pursuant to an Award unless such shares have been properly registered for sale pursuant to the Securities Act with the Securities and Exchange Commission or unless the Company has received an opinion of counsel, satisfactory to the Company, that such shares may be offered or sold without such registration

 

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pursuant to an available exemption therefrom and the terms and conditions of such exemption have been fully complied with.  The Company shall be under no obligation to register for sale or resale under the Securities Act any of the shares of Stock to be offered or sold under the Plan or any shares of Stock issued upon exercise or settlement of Awards.  If the shares of Stock offered for sale or sold under the Plan are offered or sold pursuant to an exemption from registration under the Securities Act, the Company may restrict the transfer of such shares and may legend the Stock certificates representing such shares in such manner as it deems advisable to ensure the availability of any such exemption.

 

16.          Withholding Obligations.

 

As a condition to the vesting and/or exercise of any Award, the Committee may require that a Participant satisfy, through deduction or withholding from any payment of any kind otherwise due to the Participant, or through such other arrangements as are satisfactory to the Committee, the minimum amount of all Federal, state and local income and other taxes of any kind required or permitted to be withheld in connection with such vesting and/or exercise.  The Committee, in its discretion, may permit shares of Stock to be used to satisfy tax withholding requirements and such shares shall be valued at their Fair Market Value as of the settlement date of the Award; provided, however, that the aggregate Fair Market Value of the number of shares of Stock that may be used to satisfy tax withholding requirements may not exceed the minimum statutorily required withholding amount with respect to such Award.

 

17.          Amendment of the Plan or Awards.

 

(a)           Amendment of Plan.  The Board at any time, and from time to time, may amend the Plan; provided, however, that any such amendment shall be subject to stockholder approval to the extent that stockholder approval is necessary to satisfy applicable requirements of the Code (including, but not limited to Section 162(m) thereof), the requirements of any securities exchange or quotation systems on which the Stock may be listed or quoted or any other applicable law or regulation.

 

(b)           Amendment of Awards.  The Board or the Committee, at any time, and from time to time, may amend the terms of any one or more Awards; provided, however, that the rights under any Award shall not be impaired by any such amendment unless the Participant consents in writing.  Notwithstanding the foregoing, except in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, or exchange of shares), the terms of outstanding Awards may not be amended to reduce the exercise price of outstanding Options or stock appreciation rights or cancel outstanding Options or stock appreciation rights in exchange for cash, other Awards or Options or stock appreciation rights with an exercise price that is less than the exercise price of the original Options or stock appreciation rights without stockholder approval.

 

18.          Termination or Suspension of the Plan.

 

The Board may suspend or terminate the Plan at any time.  Unless sooner terminated, the Plan shall terminate on the day before the tenth (10th) anniversary of the date the Plan was

 

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adopted by the Board.  No Awards may be granted under the Plan while the Plan is suspended or after it is terminated.

 

19.          Miscellaneous.

 

(a)           Participants Outside of the United States.  The Committee may modify the terms of any Award under the Plan made to or held by a Participant who is then a resident or primarily employed outside of the United States in any manner deemed by the Committee to be necessary or appropriate in order that such Award shall conform to laws, regulations and customs of the country in which the Participant is then a resident or primarily employed, or so that the value and other benefits of the Award to the Participant, as affected by foreign tax laws and other restrictions applicable as a result of the Participant’s residence or employment abroad, shall be comparable to the value of such Award to a Participant who is a resident or primarily employed in the United States.  An Award may be modified under this Section 19(a) in a manner that is inconsistent with the express terms of the Plan, so long as such modifications will not contravene any applicable law or regulation or result in actual liability under Section 16(b) of the Exchange Act for the Participant whose Award is modified.

 

(b)           No Liability of Committee Members.  No member of the Committee shall be personally liable by reason of any contract or other instrument executed by such member or on his or her behalf in his or her capacity as a member of the Committee nor for any mistake of judgment made in good faith, and the Company shall indemnify and hold harmless each member of the Committee and each other employee, officer or director of the Company to whom any duty or power relating to the administration or interpretation of the Plan may be allocated or delegated, against any cost or expense (including counsel fees) or liability (including any sum paid in settlement of a claim) arising out of any act or omission to act in connection with the Plan unless arising out of such person’s own fraud or willful bad faith; provided, however, that approval of the Board shall be required for the payment of any amount in settlement of a claim against any such person.  The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company’s certificate or articles of incorporation or by-laws, each as may be amended from time to time, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.

 

(c)           Payments Following Accidents or Illness.  If the Committee shall find that any person to whom any amount is payable under the Plan is unable to care for his or her affairs because of illness or accident, or is a minor, or has died, then any payment due to such person or his or her estate (unless a prior claim therefor has been made by a duly appointed legal representative) may, if the Committee so directs the Company, be paid to his or her spouse, child, relative, an institution maintaining or having custody of such person, or any other person deemed by the Committee to be a proper recipient on behalf of such person otherwise entitled to payment.  Any such payment shall be a complete discharge of the liability of the Committee and the Company therefor.

 

(d)           Compliance with Code Section 162(m).  It is generally intended that the Plan comply fully with and meet all of the requirements of Section 162(m) of the Code with respect to Options granted hereunder.  At all times when the Committee determines that

 

15

 

compliance with the performance-based compensation exception under Section 162(m) of the Code is required or desired, all Performance Awards granted under this Plan also shall comply with the requirements of Section 162(m) of the Code, and the Plan must be resubmitted to the stockholders of the Company as necessary to enable Options, stock appreciation rights and Performance Awards to qualify as performance-based compensation thereunder (which rules currently require that the stockholders reapprove the Plan no later than the first stockholders meeting that occurs in the fifth year following the year in which the stockholders previously approved the Plan).  In addition, in the event that changes are made to Section 162(m) of the Code to permit greater flexibility with respect to any Award or Awards under the Plan, the Committee may make any adjustments it deems appropriate.  The Committee may, in its discretion, determine that it is advisable to grant Awards that shall not qualify as “performance-based compensation” and may grant Awards without satisfying the requirements of Section 162(m) of the Code.

 

(e)           Compliance with Code Section 409A.  It is generally intended that the Plan and all Awards hereunder either comply with or meet the requirements for an exemption from Section 409A of the Code and the Plan shall be operated and administered accordingly.  No Award (or modification thereof) shall provide for a deferral of compensation (within the meaning of Section 409A of the Code) that does not comply with Section 409A of the Code and the Award Agreement shall incorporate the terms and conditions required by Section 409A of the Code, unless the Committee, at the time of grant (or modification, as the case may be), provides that the Award is not intended to comply with Section 409A of the Code.  Notwithstanding anything in the Plan to the contrary, the Committee may amend or vary the terms of Awards under the Plan in order to conform such terms to the requirements of Section 409A of the Code.  To the extent an Award does not provide for a deferral of compensation (within the meaning of Section 409A of the Code), but may be deferred under a nonqualified deferred compensation plan established by the Company, the terms of such nonqualified deferred compensation plan shall govern such deferral, and to the extent necessary, are incorporated herein by reference.  Notwithstanding any other provisions of the Plan or any Award Agreement, the Company does not guarantee to any Participant (or any other person with an interest in an Award) that the Plan or any Award hereunder complies with or is exempt from Section 409A of the Code, and shall not have any liability to or indemnify or hold harmless any individual with respect to any tax consequences that arise from any such failure to comply with or meet an exemption under Section 409A of the Code.

 

(f)            Governing Law.  The Plan shall be governed by and construed in accordance with the internal laws of the State of Delaware without reference to the principles of conflicts of laws thereof.

 

(g)           Funding.  No provision of the Plan shall require the Company, for the purpose of satisfying any obligations under the Plan, to purchase assets or place any assets in a trust or other entity to which contributions are made or otherwise to segregate any assets, nor shall the Company maintain separate bank accounts, books, records or other evidence of the existence of a segregated or separately maintained or administered fund for such purposes.  Participants shall have no rights under the Plan other than as unsecured general creditors of the Company, except that insofar as they may have become entitled to payment of additional

 

16

 

compensation by performance of services, they shall have the same rights as other employees under general law.

 

(h)           Reliance on Reports.  Each member of the Committee and each member of the Board shall be fully justified in relying, acting or failing to act, and shall not be liable for having so relied, acted or failed to act in good faith, upon any report made by the independent public accountant of the Company and its Affiliates and upon any other information furnished in connection with the Plan by any person or persons other than such member.

 

(i)            Titles and Headings.  The titles and headings of the sections in the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.

 

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