Document:

EXHIBIT
10.54

 

STOCK
PURCHASE AGREEMENT

THIS STOCK PURCHASE AGREEMENT (the “Agreement”) is
entered into as of January 26, 2006 (the “Effective Date”) by and between AVI
BioPharma, Inc., an Oregon corporation having its principal place of business
at One SW Columbia, Suite 1105, Portland, Oregon 97258 (the “Company”), and
Chiron Corporation, a Delaware corporation having its principal place of
business at 4560 Horton Street, Emeryville, California 94608, U.S.A. (the “Purchaser”).

BACKGROUND

WHEREAS, Company and Purchaser have entered into that
certain License Agreement of even date herewith (the “License Agreement”) under
which Purchaser agreed to license certain patent rights to Company in exchange
for milestone and royalty payments; and

WHEREAS, Company wishes to sell and issue stock to
Purchaser in lieu of the first milestone payment due under the License
Agreement;

NOW, THEREFORE, in
consideration of the above premises and the mutual covenants contained herein,
the parties hereto agree as follows:

1.             PURCHASE
AND SALE OF STOCK

 

1.1.         Sale and Issuance of Stock. 
Subject to the terms and conditions of this Agreement, the Purchaser
agrees to purchase at the Closing and the Company agrees to sell and issue to
the Purchaser at the Closing shares of Company common stock with a fair market
value of $500,000 (the “Shares”).  The
number of shares issued to Purchaser will equal the result obtained by dividing
$500,000 by the average daily closing share price of Company common stock, as
reported by the Nasdaq National Market (“Nasdaq”) for the ten (10) consecutive
trading days ending three (3) trading days prior to the date of execution of
the License Agreement (the “Issue Price”). 
The sale and issuance of the Shares will be in lieu of the $500,000 cash
payment otherwise due to Purchaser upon IND filing for Company’s product
candidate, AVI-4065, as set forth in Section 3.1.1(a) of the License Agreement.

1.2.         Closing; Delivery. 
The purchase and sale of the Shares shall take place remotely upon
execution of this Agreement (such time and place, the “Closing”).  No later than the first business day
following the Closing, the Company shall cause its transfer agent to
electronically transmit to the Purchaser’s or its designee’s account with The
Depository Trust Company (“DTC”) all of the Shares being purchased by the
Purchaser at such Closing.

1.3.         Price Protection. 
If Purchaser sells all of the Shares during the 60 days following the
Closing (the “Sales Period”) and Purchaser sells no more than 75,000 Shares
during any calendar week during the Sales Period, Company shall pay to
Purchaser funds equal to the excess of $500,000 over the Net Proceeds received
by Purchaser from the sale of Shares during the Sales Period, where “Net
Proceeds” equals gross proceeds less (a) in the event that Purchaser uses a
discount broker of its election in connection with such sale, less the broker

 

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commissions for
such sale, or (b) in the event that Purchaser uses a non-discount broker in
connection with such sale, the broker commissions that a discount broker would
reasonably charge for an equivalent sale.   
If Purchaser sells some, but not all, of the Shares during the Sales
Period and Purchaser sells no more than 75,000 Shares during any calendar week
during the Sales Period, Company shall pay to Purchaser funds equal to the
excess of the Aggregate Issue Value of the Shares sold during the Sales Period
over the Net Proceeds received by Purchaser from such sales, where “Aggregate
Issue Value” equals the Issue Price multiplied by the number of Shares sold
during the Sales Period.

1.3.1.      Notice. 
Any payment under Section 1.3 shall be due and payable ten (10) days
following delivery of written notice from Purchaser to Company of the amount
due under Section 1.3 (which notice shall specify in reasonable detail the
number of Shares sold and the Net Proceeds from such sales).

1.3.2.      Limitation. 
During the Sales Period, Purchaser agrees not to acquire any shares of
Company common stock (or options, warrants or rights to acquire such shares)
nor engage in any short selling, hedging or arbitrage activities with respect
to Company common stock.  If Purchaser
sells more than 75,000 Shares during any calendar week or if Purchaser engages
in trading activity prohibited under this Section 1.3, Company’s obligations
under Section 1.3 shall terminate and be of no further effect.

1.4.         Profit Sharing. 
If Purchaser sells all of the Shares during the Sales Period, Purchaser
shall retain all Net Proceeds received upon the sale of such Shares, up to
$550,000. If Purchaser sells some, but not all, of the Shares during the Sales
Period, Purchaser shall retain all Net Proceeds received upon the sale of such
Shares during the Sales Period, up to an amount equal to one hundred and ten
percent (110%) of the Aggregate Issue Value of the Shares sold during the Sales
Period.  Any Net Proceeds from the sale
of Shares during the Sales Period in excess of one hundred and ten percent
(110%) of the Aggregate Issue Value shall be shared equally by Purchaser and
Company.  Any payment under this Section
1.4 shall be due and payable thirty (30) days after the last day of the Sales
Period.

1.5.         Transfer of Shares. 
A transfer of Shares by Purchaser to Purchaser’s Affiliate or in connection
with a Change of Control shall not be deemed a sale of Shares for purposes of
Sections 1.3 or 1.4.

1.5.1.      “Affiliate” means, with respect to a party, any
corporation, partnership, joint venture or other business arrangement which is
controlled by, controlling or under common control with such party, and shall
include any direct or indirect beneficial ownership of more than fifty percent
(50%) of the voting stock or participating profit interest of such corporation
or other business entity.

1.5.2.      “Change of Control” means (i) a merger or
consolidation of the Purchaser with or into another corporation or other
entity, (ii) the sale or transfer of all or substantially all of the properties
and assets of the Purchaser, or (iii) any purchase by any individual, entity or
group of affiliated individuals or entities (“Person”) of shares of capital
stock of the Purchaser (either through a negotiated stock purchase or a tender

 

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for such shares),
the effect of which is that such Person that did not beneficially own a
majority of the voting power of the outstanding shares of capital stock of the
Purchaser immediately prior to such purchase beneficially owns at least a
majority of such voting power immediately after such purchase.

2.             REPRESENTATIONS
AND WARRANTIES OF THE COMPANY

 

The Company hereby represents and warrants to the
Purchaser that the following representations are true and complete at and as of
the Effective Date and the Closing.  For
purposes of these representations and warranties (other than those in Sections
2.2, 2.5, 2.6, 2.7 and 2.9), the term “Company” shall include any subsidiaries
of the Company, unless otherwise expressly noted herein.

2.1.         Organization, Good Standing,
Corporate Power and Qualification.  The Company
is a corporation duly organized, validly existing and in good standing under
the laws of the State of Oregon and has all requisite corporate power and
authority to carry on its business as presently conducted and as proposed to be
conducted.  The Company is qualified to
do business as a foreign corporation and is in good standing in each state or
jurisdiction where such qualification is necessary because of the business it
conducts, except where such failure to qualify would not have, and would not be
reasonably expected to have, a material adverse effect on the business, assets
(including intangible assets), liabilities, financial condition, results of
operations, or prospects of the Company (“Material Adverse Effect”).

2.2.         Authorization. 
All corporate action required to be taken by the Company’s Board of
Directors and stockholders in order to authorize the Company to enter into this
Agreement, to issue the Shares at the Closing, to register the Shares under the
Securities Act, and to list the Shares on Nasdaq has been taken or will be
taken prior to the Closing.  All action
on the part of the officers of the Company necessary for the execution and
delivery of this Agreement, the performance of all obligations of the Company
under this Agreement to be performed as of the Closing, and the issuance and
delivery of the Shares has been taken or will be taken prior to the
Closing.  This Agreement, when executed
and delivered by the Company, shall constitute valid and legally binding
obligations of the Company, enforceable against the Company in accordance with
its respective terms except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance, or other laws of
general application relating to or affecting the enforcement of creditors’
rights generally, (ii) as limited by laws relating to the availability of
specific performance, injunctive relief, or other equitable remedies, or (iii)
to the extent the indemnification provisions contained in this Agreement may be
limited by applicable federal or state securities laws.

2.3.         Compliance with Laws and Other
Instruments.  The Company is not in violation or default
(i) of any provision of its Articles of Incorporation or its Bylaws, (ii) of
any instrument, judgment, order, writ or decree, (iii) under any note,
indenture or mortgage, (iv) under any lease, agreement, contract or purchase
order to which it is a party or by which it is bound, or (v) of any provision
of federal or state statute, rule or regulation applicable to the Company,
except to the extent that such violation or default enumerated above would not
have, and would not be reasonably expected to have, a Material Adverse
Effect.  The execution, delivery and
performance of this Agreement and the consummation of the transactions

 

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contemplated by
this Agreement will not (A) result in or constitute, with or without the
passage of time and/or the giving of notice, any such violation or default, (B)
be in conflict with any such provision, instrument, judgment, order, writ,
decree, contract or agreement, or (C) constitute, with or without the passage
of time and/or the giving of notice, an event which results in the creation of
any lien, charge or encumbrance upon any assets of the Company or the
suspension, revocation, forfeiture or non-renewal of any material permit or
license applicable to the Company.

2.4.         SEC Filings. 
Company has timely filed with the Securities and Exchange Commission
(the “SEC”) all required reports, schedules, forms, statements and other
documents, including exhibits and all other information incorporated therein
and has filed a shelf registration and prospectus supplement related to the
registration of the Shares (collectively, the “SEC Filings”).    The SEC Filings (i) at the time filed,
complied in all material respects with the applicable requirements of the
Securities Act of 1933, as amended (the “Securities Act”), and the Securities
Exchange Act of 1934, as amended, as the case may be, and the rules and
regulations of the SEC promulgated thereunder, and (ii) did not at the time
they were filed (or if amended or superseded by a filing prior to the Effective
Date of this Agreement, then on the date of such filing) contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.  There are no written comments of the staff of
the SEC related to the SEC Filings that remain unresolved that would have, or
would reasonably be expected to have, a Material Adverse Effect.

2.4.1.      Financial Statements. 
The financial statements included in the SEC Filings (i) complied as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, (ii) were
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved (except as may be indicated in
the notes thereto), and (iii) fairly presented in all material respects the
consolidated financial position of the Company and its subsidiaries as of the
dates thereof, and the results of their operations and cash flows for the
periods specified.

2.4.2.      No Material Change. 
Except as identified and described in the SEC Filings filed prior to the
Effective Date of this Agreement, there has not been any fact, event, change,
development, or circumstance that would have, or would reasonably be expected
to have, a Material Adverse Effect.

2.5.          Governmental Consents and
Filings.  No consent,
approval, order or authorization of, or registration, qualification,
designation, declaration or filing with, any federal, state or local
governmental authority is required on the part of the Company in connection
with the consummation of the transactions contemplated by this Agreement,
except for shelf registration filings pursuant to Rule 415 under the Securities
Act and applicable state securities laws, which have been made.

2.6.         Valid Issuance of Shares. 
The Shares, when issued, sold and delivered in accordance with the terms
and for the consideration set forth in this Agreement, will be validly

 

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issued, fully paid
and non-assessable and free of restrictions on transfer other than liens or
encumbrances created by or imposed by the Purchaser.  Subject to the filings described in Section
2.7 below, the Shares will be issued in compliance with all applicable federal
and state securities laws.

2.7.         Registration of Shares. 
The Shares, when issued, sold and delivered to Purchaser under this
Agreement, shall be issued pursuant to a prospectus supplement, declared effective
by the SEC, to the Company’s shelf registration statement on file with the SEC,
and as such shall be deemed unrestricted securities under the Securities Act of
1933 and all other applicable federal and state securities laws and shall, upon
issuance, sale and delivery, be immediately tradable by Purchaser without any
restriction created under any contract, agreement or similar instrument or
pursuant to any federal or state statute, rule or regulation.

2.8.         Disclosure. 
After giving effect to the filings described in Section 2.7 above and
except for the existence of this Agreement and the License Agreement, which
will be disclosed in a public announcement in accordance with Section 9.3 of
the License Agreement, neither the Company nor any other person acting on its
behalf has provided Purchaser or its agents or counsel with any information
that constitutes material, non-public information.  The Company understands and confirms that the
Purchaser will rely on the foregoing representations in effecting sales
transactions on Nasdaq in the common stock of the Company during the Sales
Period and thereafter.

2.9.         Listing. 
The Shares, when issued, sold and delivered to Purchaser under this
Agreement, shall be listed on Nasdaq. 
The Company common stock is validly listed on Nasdaq.  Company is in compliance with the listing
requirements of Nasdaq and does not reasonably anticipate that its common stock
will be delisted by Nasdaq for the foreseeable future.  There are no proceedings pending, or to the
Company’s knowledge threatened, against the Company relating to the continued
listing of the Company common stock on Nasdaq. 
The Company has not received any written notice of, nor to the Company’s
knowledge is there any basis for, the delisting of the Company common stock
from Nasdaq.

3.             REPRESENTATIONS
AND WARRANTIES OF THE PURCHASER

 

The Purchaser hereby represents and warrants to the
Company that the following representations are true and complete as of the date
of the Closing, except as otherwise indicated.

3.1.         Authorization. 
The Purchaser has full power and authority to enter into this
Agreement.  This Agreement, when executed
and delivered by the Purchaser, shall constitute valid and legally binding
obligations of the Purchaser, enforceable against the Purchaser in accordance
with its respective terms except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance, or other laws of
general application relating to or affecting the enforcement of creditors’
rights generally, (ii) as limited by laws relating to the availability of
specific performance, injunctive relief, or other equitable remedies, or (iii)
to the extent the indemnification provisions contained in this Agreement may be
limited by applicable federal or state securities laws.

 

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3.2.         Trading. 
The Purchaser has not traded in Company stock, or derivative securities,
in the 30-day period prior to or during the 10-day period over which the Issue
Price is determined.

4.             CONDITIONS
TO THE PURCHASER’S OBLIGATIONS AT CLOSING

 

The obligations of the Purchaser to purchase Shares at
the Closing are subject to the fulfillment, on or before the Closing, of each
of the following conditions, unless otherwise waived:

4.1.         Representations and Warranties. 
The representations and warranties of the Company contained in Section 2
shall be true and correct in all material respects at and as of such Closing,
except that any such representations and warranties shall be true and correct
in all respects where such representation and warranty is qualified with
respect to materiality.

4.2.         Performance. 
The Company shall have performed and complied with all covenants,
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by the Company on or before such
Closing, including without limitation all filings necessary for the shelf
registration of the Shares.

4.3.         Compliance Certificate. 
The President of the Company shall deliver to the Purchaser at the
Closing a certificate certifying that the conditions specified in Sections 4.1
and 4.2 have been fulfilled.

4.4.         Qualifications. 
All authorizations, approvals or permits, if any, of any governmental
authority or regulatory body of the United States or of any state that are
required in connection with the lawful issuance, sale, registration and listing
of the Shares pursuant to this Agreement shall be obtained and effective as of
such Closing.

4.5.         License Agreement. 
The Company and Purchaser shall have executed and delivered the License
Agreement.

4.6.         Proceedings and Documents. 
All corporate and other proceedings in connection with the transactions
contemplated at the Closing and all documents incident thereto shall be
reasonably satisfactory in form and substance to the Purchaser, and the
Purchaser (or its counsel) shall have received all such counterpart original
and certified or other copies of such documents as reasonably requested.  Such documents may include good standing certificates.

5.             CONDITIONS TO THE COMPANY’S OBLIGATIONS AT CLOSING

The obligations of the Company to issue and sell
Shares to the Purchaser at the Closing are subject to the fulfillment, on or
before the Closing, of each of the following conditions, unless otherwise
waived:

5.1.         Representations and Warranties. 
The representations and warranties of the Purchaser contained in Section
3 shall be true and correct in all material respects as of such Closing.

 

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5.2.         License Agreement. 
The Company and Purchaser shall have executed and delivered the License
Agreement.

6.             REMEDIES

 

If at the Closing, any of the conditions to Purchaser’s
obligations to close set forth in Section 4 (other than Section 4.5) are not
satisfied, or waived in the sole discretion of Purchaser, Company shall make a
$500,000 cash payment to Purchaser, in lieu of issuing the Shares pursuant to
Section 1.1.  Any such payment is due and
payable at the Closing, and any amounts paid after the date of the Closing
shall bear interest in accordance with Section 3.2.3 of the License Agreement.

7.             INDEMNIFICATION

 

Company shall indemnify, defend and hold harmless
Purchaser and its affiliates and the officers, directors, employees, agents and
representatives of Purchaser and its affiliates from and against any and all
claims, threatened claims, damages, losses, costs (including reasonable
attorneys’ and experts’ fees and expenses), suits, proceedings or liabilities
of any kind arising out of acts or omissions that constitute a breach of this
Agreement by the Company, including without limitation a breach of any of the
representations and warranties of the Company in Section 2.  Company shall have the right to control the
defense, negotiation and settlement of any claim for which it has the
obligation to provide indemnification, and Purchaser shall cooperate with and
provide reasonably requested assistance to the Company in the defense of any
such claim.

8.             GENERAL

 

8.1.         Survival of Warranties. 
Unless otherwise set forth in this Agreement, the representations and
warranties of the Company and the Purchaser contained in or made pursuant to
this Agreement shall survive the execution and delivery of this Agreement and
the Closing and shall in no way be affected by any investigation or knowledge
of the subject matter thereof made by or on behalf of the Purchaser or the
Company.

8.2.         Assignment. 
Company shall not assign any of its rights or obligations under this
Agreement without the prior written consent of the Purchaser.  Purchaser may, without Company’s consent,
assign any or all of its rights or obligations under this Agreement to any
third party, including without limitation to an Affiliate of Purchaser,
provided however that such third party agrees to be bound by the terms of this
Agreement.

8.3.         Successors and Assigns. 
The terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the Parties.  Nothing in this Agreement, express or implied,
is intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.

8.4.         Waivers and Modifications. 
The failure of any party to insist on the performance of any obligation
hereunder shall not be deemed to be a waiver of such obligation.

 

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Waiver of any
breach of any provision hereof shall not be deemed to be a waiver of any other
breach of such provision or any other provision.  No waiver, modification, release or amendment
of any obligation under or provision of this Agreement shall be valid or
effective unless in writing and signed by all parties hereto.

8.5.         Notices. 
All notices or other communications required or permitted hereunder
shall be in writing and delivered personally or by facsimile transmission (and
promptly confirmed by personal delivery, registered or certified mail or
overnight courier), mailed by registered or certified mail (return receipt
requested), postage prepaid, or sent by nationally-recognized overnight courier
service, addressed as follows

If to Purchaser:

 

Chiron Corporation

4560 Horton Street

Emeryville, California 94068-2916

Attention: Treasury

Fax: (510) 923-8373

Copy to: Office of the General Counsel

Fax: (510) 654-5360

 

If to Company:

 

AVI BioPharma, Inc.

One SW Columbia, Suite 1105

Portland, Oregon 97258

Attention: President

Fax: (503) 227-0751

Copy to: Vice President, Business Development

Fax: (503) 227-0751

or to such other address or facsimile number as the
party to whom notice is to be given may have furnished to the other party in
writing in accordance herewith.  Any such
communication shall be deemed to have been given (a) when delivered, if
personally delivered or sent by facsimile transmission on a business day; (b)
on the business day after dispatch, if sent by nationally-recognized overnight
courier; and (c) on the third (3rd) business day following the date of mailing,
if sent by mail.  In addition to any
notices required or permitted hereunder, the parties shall use the contact
information below for purposes of providing payment or accounting information
set forth in Sections 1.3 or 1.4 of this Agreement:

If to Purchaser:

 

Chiron Corporation

4560 Horton Street

Emeryville, California 94068-2916

Attention: Treasury

Tel: (510) 923-2783

Fax: (510) 923-8373

 

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If to Company:

 

AVI BioPharma, Inc.

4575 SW Research Way, Suite 200

Corvallis, Oregon 97333

Attn: Chief Financial Officer

Tel: (541) 753-3635

8.6.         Choice of Law. 
This Agreement shall be governed by and shall be construed in accordance
with the laws of the State of California without regard to the conflicts of
laws provisions thereof.

8.7.         Dispute Resolution. 
Any dispute arising out of or in connection with this Agreement shall be
resolved by the parties in the following manner:

8.7.1.      Informal Settlement. 
Either party may initiate resolution of such controversy by providing to
the other party a brief and concise statement of the initiating party’s claims,
together with relevant facts supporting them, and referring to this Section
9.  For a period of sixty (60) days from
the date of such statement, or such longer period as the parties may agree in
writing, the parties shall make good faith efforts to settle the dispute.  Such efforts shall include full presentation
of the parties’ respective positions before their respective designated senior
executives.

8.7.2.      Arbitration. Any controversy or claim arising out of
or relating to this Agreement or the validity, inducement, or breach thereof,
shall be settled by binding arbitration before three arbitrators in accordance
with the Commercial Arbitration Rules of the American Arbitration Association (“AAA”)
then pertaining, except where those rules conflict with this provision, in
which case this provision controls.  The
parties hereby consent to the jurisdiction of the federal district court for
the district in which the arbitration is held for the enforcement of this
provision and the entry of judgment on any award rendered hereunder.  Should such court for any reason lack
jurisdiction, any court with jurisdiction shall enforce this clause and enter
judgment on any award.  Each arbitrator
shall be an attorney who has at least fifteen (15) years of experience with a
law firm or corporate law department of over twenty-five (25) lawyers or was a
judge of a court of general jurisdiction. 
The arbitration shall be held in San Francisco, California or such other
place as the parties agree, and in rendering the award the arbitrators must
apply the substantive law of California (except where that law conflicts with
this clause), except that the interpretation and enforcement of this
arbitration provision shall be governed by the Federal Arbitration Act.  The arbitrators shall be neutral,
independent, disinterested, impartial and shall abide by the Code of Ethics for
Arbitrators in Commercial Disputes approved by the AAA.  Within forty-five (45) days of initiation of
arbitration, each party shall select its arbitrator. The third arbitrator shall
be mutually agreed upon by the two arbitrators chosen by the parties.  In the event that the two arbitrators cannot
agree on a third arbitrator within sixty (60) days of their approval then AAA
shall appoint an arbitrator who shall be an

 

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attorney who has
at least fifteen (15) years of experience with a law firm or corporate law
department of over twenty-five (25) lawyers or was a judge of a court of
general jurisdiction.  The parties shall
reach agreement upon and thereafter follow procedures assuring that the
arbitration will be concluded and the award rendered within no more than eight
(8) months from selection of the arbitrators. 
Failing such agreement, the AAA will design and the parties will follow
procedures that meet such a time schedule. 
Each party has the right before or, if the arbitrator cannot hear the
matter within a acceptable period, during the arbitration to seek and obtain
from the appropriate court provisional remedies such as attachment, preliminary
injunction, replevin, etc., to avoid irreparable harm, maintain the status quo
or preserve the subject matter of the arbitration.

8.8.         Entire Agreement. 
This Agreement and the License Agreement together constitute the entire
agreement between the parties as to the subject matter hereof, and supersede
all prior negotiations, representations, agreements and understandings
regarding the same.

8.9.         Counterparts.  This
Agreement may be executed in counter­parts with the same effect as if both
parties had signed the same document.  All such counterparts shall be deemed an
original, shall be construed together and shall constitute one and the same
instrument.

8.10.       Severability.  If any provision hereof should be
held invalid, illegal or unenforceable in any respect, then, to the fullest
extent permitted by applicable law, (a) all other provisions hereof shall
remain in full force and effect and shall be liberally construed in order to
carry out the intent of the parties as nearly as may be possible, and (b) the
parties agree to use their best efforts to negotiate a provision, in
replacement of the provision held invalid, illegal or unenforceable, that is
consistent with applicable law and accomplishes, as nearly as possible, the
original intention of the parties with respect thereto.  To the fullest extent permitted by applicable
law, each party hereby waives any provision of law that would render any
provision hereof prohibited or unenforceable in any respect.

8.11.       Construction. 
Headings and captions used in this Agreement are for convenience only,
in no way define, describe, extend or limit the scope or intent of this
Agreement or the intent of any provision contained in this Agreement, and are
not to be used in the interpretation of this Agreement. Except where the
context otherwise requires, wherever used, the singular shall include the
plural, the plural shall include the singular, the use of any gender shall be
applicable to all genders and the word “or” is used in the inclusive
sense.  The term “including” as used
herein shall mean including, without limiting the generality of any description
preceding such term.  The language of
this Agreement shall be deemed to be the language mutually chosen by the
parties, and no rule of strict construction shall be applied against either
party.

[Remainder
of Page Left Intentionally Blank]

 

 

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IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date set forth above.

	
  CHIRON CORPORATION

  	
  AVI BIOPHARMA, INC.

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
  Name:  Craig A. Wheeler

  	
  Name:  Alan P. Timmins

  
	
   

  	
   

  
	
   Title:  President, Chiron BioPharmaceuticals

  	
  Title:
   President and Chief Operating Officer

  
						

 

 

 

11Exhibit 10.1

 

MOTHERS
WORK, INC.

 

2005
EQUITY INCENTIVE PLAN

 

SECTION 1.         Purpose; Definitions. The
purposes of the Mothers Work, Inc. 2005 Equity Incentive Plan (the “Plan”)
are to: (a) enable Mothers Work, Inc. (the “Company”) and its
affiliated companies to recruit and retain highly qualified personnel;
(b) provide those personnel with an incentive for productivity; and
(c) provide those personnel with an opportunity to share in the growth and
value of the Company.

 

For purposes
of the Plan, the following terms will have the meanings defined below, unless
the context clearly requires a different meaning:

 

( )    “Affiliate”
means, with respect to a Person, a Person that directly or indirectly controls,
is controlled by, or is under common control with such Person.

 

( )    “Award”
means an award of Options, SARs, Restricted Stock or Restricted Stock Units
made under this Plan.

 

( )    “Award
Agreement” means, with respect to any particular Award, the written
document that sets forth the terms of that particular Award.

 

( )    “Board”
means the Board of Directors of the Company, as constituted from time to time; provided, however, that if the Board appoints a Committee to
perform some or all of the Board’s administrative functions hereunder,
references to the “Board” will be deemed to also refer to that Committee in
connection with matters to be performed by that Committee.

 

(a)   “Cause”
means (i) conviction of, or the entry of a plea of guilty or no contest
to, a felony or any other crime that causes the Company or its Affiliates
public disgrace or disrepute, or adversely affects the Company’s or its
Affiliates’ operations or financial performance, (ii) gross negligence or
willful misconduct with respect to the Company or any of its Affiliates,
including, without limitation fraud, embezzlement, theft or proven dishonesty
in the course of employment; (iii) alcohol abuse or use of controlled
drugs other than in accordance with a physician’s prescription; or
(iv) material breach of any agreement with or duty owed to the Company or
any of its Affiliates. Notwithstanding the foregoing, if a Participant and the
Company (or any of its Affiliates) have entered into an employment agreement,
consulting agreement or other similar agreement that specifically defines “cause,”
then with respect to such Participant, “Cause” shall have the meaning defined
in that employment agreement, consulting agreement or other agreement.

 

(b)   “Change
in Control” means the occurrence of any of the following, in one
transaction or a series of related transactions: (i) any “person” (as such term
is used in Sections 13(d) and 14(d) of the Exchange Act) becoming a “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing more than 50% of the
voting power of 

 

 

the Company’s then outstanding securities; (ii) a consolidation, share exchange,
reorganization or merger of the Company resulting in the stockholders of the
Company immediately prior to such event not owning at least a majority of the
voting power of the resulting entity’s securities outstanding immediately
following such event; (iii) the sale or other disposition of all or
substantially all the assets of the Company, (iv) a liquidation or dissolution
of the Company, or (v) any similar event deemed by the Board to constitute a
Change in Control for purposes of this Plan.

 

(c)   “Code”
means the Internal Revenue Code of 1986, as amended from time to time, and any
successor thereto.

 

(d)   “Committee”
means a committee appointed by the Board in accordance with Section 2 of
the Plan.

 

(e)   “Director”
means a member of the Board.

 

(f)    “Disability”
means a condition rendering a Participant Disabled.

 

(g)   “Disabled”
will have the same meaning as set forth in Section 22(e)(3) of the Code.

 

(h)   “Exchange
Act” means the Securities Exchange Act of 1934, as amended.

 

(i)    “Fair
Market Value” means, as of any date: (i) if the Shares are not then
publicly traded, the value of such Shares on that date, as determined by the
Board in its sole and absolute discretion; or (ii) if the Shares are
publicly traded, the closing price for a Share on the principal national
securities exchange on which the Shares are listed or admitted to trading or,
if the Shares are not listed or admitted to trading on any national securities
exchange, but are traded in the over-the-counter market, the closing sale price
of a Share or, if no sale is publicly reported, the average of the closing bid
and asked quotations for a Share, as reported by The Nasdaq Stock Market, Inc. (“Nasdaq”)
or any comparable system or, if the Common Stock is not listed on Nasdaq or a
comparable system, the closing sale price of a Share or, if no sale is publicly
reported, the average of the closing bid and asked prices, as furnished by two
members of the National Association of Securities Dealers, Inc. who make a
market in the Common Stock selected from time to time by the Company for that
purpose.

 

(j)    “Incentive
Stock Option” means any Option intended to be an “Incentive Stock Option”
within the meaning of Section 422 of the Code.

 

(k)   “Non-Employee
Director” will have the meaning set forth in Rule 16b-3(b)(3)(i)
promulgated by the Securities and Exchange Commission under the Exchange Act,
or any successor definition adopted by the Securities and Exchange Commission; provided, however, that the Board or the Committee may, to
the extent that it deems necessary to comply with Section 162(m) of the
Code or regulations thereunder, require that each “Non-Employee Director” also
be an “outside director” as that term is defined in regulations under
Section 162(m) of the Code.

 

(l)    “Non-Qualified
Stock Option” means any Option that is not an Incentive Stock Option.

 

2

 

(m)  “Option”
means any option to purchase Shares (including Restricted Stock, if the Board
so determines) granted pursuant to Section 5 hereof.

 

(n)   “Parent”
means, in respect of the Company, a “parent corporation” as defined in
Sections 424(e) of the Code

 

(o)   “Participant”
means an employee, consultant, Director, or other service provider of or to the
Company or any of its respective Affiliates to whom an Award is granted.

 

(p)   “Person”
means an individual, partnership, corporation, limited liability company,
trust, joint venture, unincorporated association, or other entity or
association.

 

(q)   “Restricted
Stock” means Shares that are subject to restrictions pursuant to Section
8 hereof.

 

(r)    “Restricted Stock Unit” means a right granted under and subject to restrictions pursuant to Section
8 hereof.

 

(s)   “SAR” means a stock appreciation right
granted under the Plan and described in Section 6 hereof.

 

(t)    “Shares”
means shares of the Company’s common stock, par value $.01, subject to
substitution or adjustment as provided in Section 3(c) hereof.

 

(u)   “Subsidiary”
means, in respect of the Company, a subsidiary company as defined in
Sections 424(f) and (g) of the Code.

 

SECTION 2.         Administration.
The Plan will be administered by the Board; provided, however, that the Board may at any time appoint a
Committee to perform some or all of the Board’s administrative functions
hereunder; and provided further, that the
authority of any Committee appointed pursuant to this Section 2 will be
subject to such terms and conditions as the Board may prescribe and will be
coextensive with, and not in lieu of, the authority of the Board hereunder.

 

Subject to the
requirements of the Company’s by-laws and certificate of incorporation any
other agreement that governs the appointment of Board committees, any Committee
established under this Section 2 will be composed of not fewer than two
members, each of whom will serve for such period of time as the Board
determines; provided, however,
that if the Company has a class of securities required to be registered under
Section 12 of the Exchange Act, all members of any Committee established
pursuant to this Section 2 will be Non-Employee Directors. From time to
time the Board may increase the size of the Committee and appoint additional
members thereto, remove members (with or without cause) and appoint new members
in substitution therefor, fill vacancies however caused, or remove all members
of the Committee and thereafter directly administer the Plan.

 

The Board will
have full authority to grant Awards under this Plan and determine the terms of
such Awards. Such authority will include the right to:

 

3

 

(a)   select the
persons to whom Awards are granted (consistent with the eligibility conditions
set forth in Section 4);

 

(b)   determine
the type of Award to be granted;

 

(c)   determine
the number of Shares, if any, to be covered by each Award;

 

(d)   establish
the vesting or forfeiture terms of each Award;

 

(e)   determine
whether and under what circumstances an Option may be exercised without a
payment of cash under Section 5(d); and

 

(f)    determine
whether, to what extent and under what circumstances Shares and other amounts
payable with respect to an Award may be deferred either automatically or at the
election of the Participant.

 

The Board will
have the authority to adopt, alter and repeal such administrative rules,
guidelines and practices governing the Plan as it, from time to time, deems
advisable; to establish the terms and form of each Award Agreement; to
interpret the terms and provisions of the Plan and any Award issued under the
Plan (and any Award Agreement); and to otherwise supervise the administration
of the Plan. The Board may correct any defect, supply any omission or reconcile
any inconsistency in the Plan or in any Award Agreement in the manner and to
the extent it deems necessary to carry out the intent of the Plan.

 

All decisions
made by the Board pursuant to the provisions of the Plan will be final and
binding on all persons, including the Company and Participants. No Director
will be liable for any good faith determination, act or omission in connection
with the Plan or any Award.

 

SECTION 3.         Shares Subject to the Plan.

 

(a)   Shares
Subject to the Plan. The Shares to be subject to or related to Awards under
the Plan will be authorized and unissued Shares of the Company, whether or not
previously issued and subsequently acquired by the Company. The maximum number
of Shares that may be issued in respect of Awards under the Plan is 500,000. The
Company will reserve for the purposes of the Plan, out of its authorized and
unissued Shares, such number of Shares. Notwithstanding the foregoing, no
individual may granted Options or SARs with respect to more than 200,000 Shares
in any calendar year. In addition, not more than 250,000 Shares will be issued
hereunder in respect of Restricted Stock or Restricted Stock Units

 

(b)   Effect
of the Expiration or Termination of Awards. If and to the extent that an
Option or SAR expires, terminates or is canceled or forfeited for any reason
without having been exercised in full, the Shares associated with that Option
or SAR will again become available for grant under the Plan. Similarly, if and
to the extent an Award of Restricted Stock or Restricted Stock Unit is
canceled, forfeited or repurchased for any reason, the Shares subject to that
Award will again become available for grant under the Plan. In addition, if any
Share is withheld pursuant to Section 11(e) in settlement of a tax
withholding obligation associated with an Award, that Share will again become
available for grant under the Plan.

 

4

 

(c)   Other
Adjustment. In the event of any recapitalization, stock split or
combination, stock dividend or other similar event or transaction affecting the
Shares, equitable substitutions or adjustments may be made by the Board, in its sole and absolute discretion: (i) to
the aggregate number, class and/or issuer of the securities reserved for
issuance under the Plan; (ii) to the number, class and/or issuer of
securities subject to outstanding Awards; and (iii) to the exercise price
of outstanding Options or SARs.

 

(d)   Change
in Control. Notwithstanding anything to the contrary set forth in the Plan,
upon or in anticipation of any Change in Control, the Board may, in its sole
and absolute discretion and without the need for the consent of any
Participant, take one or more of the following actions contingent upon the
occurrence of that Change in Control: (i) cause any or all outstanding Options
or SARs to become vested and/or immediately exercisable, in whole or in part;
(ii) cause any or all outstanding Restricted Stock or Restricted Stock Units to become non-forfeitable, in whole or in
part; (iii) cancel any Option in exchange for a substitute option in a manner
consistent with the requirements of Treas. Reg. §1.424-1(a)
(notwithstanding the fact that the original Option may never have been intended
to satisfy the requirements for treatment as an Incentive Stock Option); (iv)
cancel any Restricted Stock, Restricted Stock Units or SAR in exchange for
restricted stock, restricted stock units or stock appreciation rights in
respect of the capital stock of any successor corporation or its parent; (v)
cancel any Option or SAR in exchange for cash and/or other substitute
consideration with a value equal to (A) the number of Shares subject to that
Option or SAR, multiplied by (B) the difference, if any, between the Fair
Market Value per Share on the date of the Change in Control and the exercise
price of that Option or SAR; provided, that
if the Fair Market Value per Share on the date of the Change in Control does
not exceed the exercise price of any such Option or SAR, the Board may cancel
that Option or SAR without any payment of consideration therefor; or (vi)
cancel any Restricted Stock Unit in exchange for cash and/or other substitute
consideration with a value equal to the Fair Market Value per Share on the date
of the Change in Control. In the discretion of the Board, any cash or
substitute consideration payable upon cancellation of an Award may be subjected
to vesting terms substantially identical to those that applied to the cancelled
Award immediately prior to the Change in Control.

 

SECTION 4.         Eligibility. Employees,
Directors, consultants, and other individuals who provide services to the
Company or its Affiliates are eligible to be granted Awards under the Plan; provided, however, that only employees of
the Company, its Parent or a Subsidiary are eligible to be granted Incentive
Stock Options.

 

SECTION 5.         Options. Options
granted under the Plan may be of two types: (i) Incentive Stock Options or
(ii) Non-Qualified Stock Options. Any Option granted under the Plan will
be in such form as the Board may at the time of such grant approve. Without
limiting the generality of Section 3(a), any or all of the Shares
reserved for issuance under Section 3(a) may be issued in respect of
Incentive Stock Options.

 

The Award
Agreement evidencing any Option will incorporate the following terms and
conditions and will contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Board deems appropriate in its
sole and absolute discretion:

 

5

 

(a)   Option
Price. The exercise price per Share purchasable under any Option will be
determined by the Board and will not be less than 100% of the Fair Market Value
per Share on the date of the grant. However, any Incentive Stock Option granted
to any Participant who, at the time the Option is granted, owns more than 10%
of the voting power of all classes of shares of the Company, its Parent or a
Subsidiary will have an exercise price per Share of not less than 110% of Fair
Market Value per Share on the date of the grant.

 

(b)   Option
Term. The term of each Option will be fixed by the Board, but no Option
will be exercisable more than 10 years after the date the Option is granted. However,
any Incentive Stock Option granted to any Participant who, at the time such
Option is granted, owns more than 10% of the voting power of all classes of
shares of the Company, its Parent or a Subsidiary may not have a term of more
than five years. No Option may be exercised by any person after expiration of
the term of the Option.

 

(c)   Exercisability.
Options will vest and be exercisable at such time or times and subject to such
terms and conditions as determined by the Board.

 

(d)   Method
of Exercise. Subject to the terms of the applicable Award Agreement, the
exercisability provisions of Section 5(c) and the termination provisions
of Section 7, Options may be exercised in whole or in part from time to
time during their term by the delivery of written notice to the Company
specifying the number of Shares to be purchased. Such notice will be
accompanied by payment in full of the purchase price, either by certified or
bank check, or such other means as the Board may accept. As determined by the
Board, in its sole discretion, payment of the exercise price of an Option may
be made in the form of previously acquired Shares based on the Fair Market
Value of the Shares on the date the Option is exercised; provided,
however, that, in the case of an Incentive Stock Option, the right
to make a payment in the form of previously acquired Shares may be authorized
only at the time the Option is granted.

 

No Shares will
be issued upon exercise of an Option until full payment therefor has been made.
A Participant will not have the right to distributions or dividends or any
other rights of a stockholder with respect to Shares subject to the Option
until the Participant has given written notice of exercise, has paid in full
for such Shares, if requested, has given the representation described in Section
11(a) hereof and fulfills such other conditions as may be set forth in the
applicable Award Agreement.

 

(e)   Incentive
Stock Option Limitations. In the case of an Incentive Stock Option, the
aggregate Fair Market Value (determined as of the time of grant) of the Shares
with respect to which Incentive Stock Options are exercisable for the first
time by the Participant during any calendar year under the Plan and/or any
other plan of the Company, its Parent or any Subsidiary will not exceed
$100,000. For purposes of applying the foregoing limitation, Incentive Stock
Options will be taken into account in the order granted. To the extent any
Option does not meet such limitation, that Option will be treated for all
purposes as a Non-Qualified Stock Option.

 

(f)    Termination
of Service. Unless otherwise specified in the applicable Award Agreement,
Options will be subject to the terms of Section 7 with respect to
exercise upon or following termination of employment or other service.

 

6

 

(g)   Transferability
of Options. Except as may otherwise be specifically determined by the Board
with respect to a particular Option: (i) no Option will be transferable by the
Participant other than by will or by the laws of descent and distribution, and
(ii) during the Participant’s lifetime, an Option will be exercisable only by
the Participant (or, in the event of the Participant’s Disability, by his
personal representative).

 

SECTION 6.         Stock
Appreciation Rights.

 

(a)   Nature
of Award. Upon the exercise of a SAR, its holder will be entitled to
receive an amount equal to the excess (if any) of: (i) the Fair Market
Value of the Shares covered by such SAR as of the date such SAR is exercised,
over (ii) the Fair Market Value of the Shares covered by such SAR as of
the date such SAR was granted. Such amount may be paid in either cash and/or
Shares, as determined by the Board in its sole and absolute discretion.

 

(b)   Terms
and Conditions. The Award Agreement evidencing any SAR will incorporate the
following terms and conditions and will contain such additional terms and
conditions, not inconsistent with the terms of the Plan, as the Board deems
appropriate in its sole and absolute discretion:

 

(i)            Term
of SAR. Unless otherwise specified in the Award Agreement, the term of a
SAR will be ten years.

 

(ii)           Exercisability.
SARs will vest and become exercisable at such time or times and subject to such
terms and conditions as will be determined by the Board at the time of grant.

 

(iii)          Method
of Exercise. Subject to terms of the applicable Award Agreement, the
exercisability provisions of Section 6(b)(ii)and the termination
provisions of Section 7, SARs may be exercised in whole or in part from
time to time during their term by delivery of written notice to the Company
specifying the portion of the SAR to be exercised.

 

(iv)          Termination
of Service. Unless otherwise specified in the Award Agreement, SARs will be
subject to the terms of Section 7 with respect to exercise upon
termination of employment or other service.

 

(v)           Non-Transferability.
Except as may otherwise be specifically determined by the Board with respect to
a particular SAR: (A) SARs may not be sold, pledged, assigned, hypothecated,
gifted, transferred or disposed of in any manner either voluntarily or
involuntarily by operation of law, other than by will or by the laws of descent
or distribution, and (B) during the Participant’s lifetime, SARs will be
exercisable only by the Participant (or, in the event of the Participant’s
Disability, by his personal representative).

 

SECTION 7.         Termination of Service. Unless otherwise specified with respect to
a particular Option or SAR in the applicable Award Agreement, Options or SARs
granted hereunder will be exercisable after termination of service only to the
extent specified in this Section 7.

 

7

 

(a)   Termination
by Reason of Death. If a Participant’s service with the Company or any
Affiliate terminates by reason of death, any Option or SAR held by such
Participant may thereafter be exercised, to the extent then exercisable or on
such accelerated basis as the Board may determine at or after grant, by the
legal representative of the estate or by the legatee of the Participant under
the will of the Participant, for a period expiring (i) at such time as may
be specified by the Board at or after grant, or (ii) if not specified by
the Board, then 12 months from the date of death, or (iii) if sooner than
the applicable period specified under (i) or (ii) above, upon the
expiration of the stated term of such Option or SAR.

 

(b)   Termination
by Reason of Disability. If a Participant’s service with the Company or any
Affiliate terminates by reason of Disability, any Option or SAR held by such
Participant may thereafter be exercised by the Participant or his personal
representative, to the extent it was exercisable at the time of termination, or
on such accelerated basis as the Board may determine at or after grant, for a
period expiring (i) at such time as may be specified by the Board at or
after grant, or (ii) if not specified by the Board, then 12 months from the
date of termination of service, or (iii) if sooner than the applicable
period specified under (i) or (ii) above, upon the expiration of the stated
term of such Option or SAR.

 

(c)   Cause.
If a Participant’s service with the Company or any Affiliate is terminated for
Cause: (i) any Option or SAR not already exercised will be immediately and
automatically forfeited as of the date of such termination, and (ii) any
Shares for which the Company has not yet delivered share certificates will be
immediately and automatically forfeited and the Company will refund to the
Participant the Option exercise price paid for such Shares, if any.

 

(d)   Other
Termination. If a Participant’s service with the Company or any Affiliate
terminates for any reason other than death, Disability or Cause, any Option or
SAR held by such Participant may thereafter be exercised by the Participant, to
the extent it was exercisable at the time of such termination, or on such
accelerated basis as the Board may determine at or after grant, for a period expiring
(i) at such time as may be specified by the Board at or after grant, or
(ii) if not specified by the Board, then 90 days from the date of
termination of service, or (iii) if sooner than the applicable period
specified under (i) or (ii) above, upon the expiration of the stated term of
such Option or SAR.

 

SECTION 8.         Restricted Stock.

 

(a)   Issuance.
Restricted Stock may be issued either alone or in conjunction with other Awards.
The Board will determine the time or times within which Restricted Stock may be
subject to forfeiture, and all other conditions of such Awards. The purchase
price for Restricted Stock may, but need not, be zero. The prospective
recipient of an Award of Restricted Stock will not have any rights with respect
to such Award, unless and until such recipient has delivered to the Company an
executed Award Agreement and has otherwise complied with the applicable terms
and conditions of such Award.

 

(b)   Certificates.
A share certificate will be issued in connection with each Award of Restricted
Stock. Such certificate will be registered in the name of the Participant
receiving 

 

8

 

the Award, and will bear the following legend and/or any other legend
required by this Plan, the Award Agreement or by applicable law:

 

THE TRANSFERABILITY OF THIS CERTIFICATE AND
THE SHARES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS OF THE
MOTHERS WORK, INC. 2005 EQUITY INCENTIVE PLAN AND AN AWARD AGREEMENT ENTERED
INTO BETWEEN [THE PARTICIPANT] AND MOTHERS WORK, INC. COPIES OF THAT PLAN AND
AGREEMENT ARE ON FILE IN THE PRINCIPAL OFFICES OF MOTHERS WORK, INC. AND WILL
BE MADE AVAILABLE TO THE HOLDER OF THIS CERTIFICATE WITHOUT CHARGE UPON REQUEST
TO THE SECRETARY OF THE COMPANY.

 

Share
certificates evidencing Restricted Stock will be held in custody by the Company
or in escrow by an escrow agent until the restrictions thereon have lapsed. As
a condition to any Award of Restricted Stock, the Participant may be required
to deliver to the Company a share power, endorsed in blank, relating to the
Shares covered by such Award.

 

(c)   Restrictions
and Conditions. The Award Agreement evidencing the grant of any Restricted
Stock will incorporate the following terms and conditions and such additional
terms and conditions, not inconsistent with the terms of the Plan, as the Board
deems appropriate in its sole and absolute discretion:

 

(i)            During
a period commencing with the date of an Award of Restricted Stock and ending at
such time or times as specified by the Board (the “Restriction Period”),
the Participant will not be permitted to sell, transfer, pledge, assign or
otherwise encumber Restricted Stock awarded under the Plan. The Board may
condition the lapse of restrictions on Restricted Stock upon the continued employment
or service of the recipient, the attainment of specified individual or
corporate performance goals, or such other factors as the Board may determine,
in its sole and absolute discretion.

 

(ii)           Except
as provided in this paragraph (ii) or the applicable Award Agreement, once
the Participant has been issued a certificate or certificates for Restricted
Stock, the Participant will have, with respect to the Restricted Stock, all of
the rights of a stockholder of the Company, including the right to vote the
Shares, and the right to receive any cash distributions or dividends. The
Board, in its sole discretion, may require cash distributions or dividends to
be subjected to the same Restriction Period as is applicable to the Restricted
Stock with respect to which such amounts are paid, or, if the Board so
determines, reinvested in additional Restricted Stock to the extent Shares are
available under Section 3(a) of the Plan. Any distributions or dividends
paid in the form of securities with respect to Restricted Stock will be subject
to the same terms and conditions as the Restricted Stock with respect to which
they were paid, including, without limitation, the same Restriction Period.

 

9

 

(iii)          Subject
to the provisions of the applicable Award Agreement, if a Participant’s service
with the Company and it Affiliates terminates prior to the expiration of the
applicable Restriction Period, the Participant’s Restricted Stock that then
remains subject to forfeiture will then be forfeited automatically.

 

(iv)          If
and when the Restriction Period expires without a prior forfeiture of the
Restricted Stock subject to such Restriction Period (or if and when the
restrictions applicable to Restricted Stock are removed pursuant to Section
3(d) or otherwise), the certificates for such Shares will be replaced with
new certificates, without the restrictive legends described in Section 8(b)
applicable to such lapsed restrictions, and such new certificates will be
delivered to the Participant, the Participant’s representative (if the
Participant has suffered a Disability), or the Participant’s estate or heir (if
the Participant has died).

 

SECTION 9.         Restricted Stock Units.
Subject to the other terms
of the Plan, the Board may grant Restricted Stock Units to eligible individuals
and may impose conditions on such units as it may deem appropriate. Each
Restricted Stock Unit shall be evidenced by an Award Agreement in the form that
is approved by the Board and that is not inconsistent with the terms and
conditions of the Plan. Each Restricted Stock Unit will represent a right to
receive from the Company, upon fulfillment of any applicable conditions, an
amount equal to the Fair Market Value (at the time of the distribution) of one
Share. Distributions may be made in cash and/or Shares. All other terms
governing Restricted Stock Units, such as vesting, time and form of payment and
termination of units shall be set forth in the applicable Award Agreement.

 

SECTION 10.       Amendments
and Termination.
The Board may amend, alter or discontinue the Plan at any time. However,
except as otherwise provided in Section 3, no amendment, alteration or
discontinuation will be made which would impair the rights of a Participant
with respect to an Award without that Participant’s consent or which, without
the approval of such amendment within 365 days of its adoption by the Board by
the Company’s stockholders in a manner consistent with Treas. Reg. § 1.422-3,
would: (i) increase the total number of Shares reserved for issuance
hereunder, or (ii) change the persons or class of persons eligible to
receive Awards.

 

SECTION 11.       General Provisions.

 

(a)   The Board
may require each Participant to represent to and agree with the Company in
writing that the Participant is acquiring securities of the Company for
investment purposes and without a view to distribution thereof and as to such
other matters as the Board believes are appropriate.

 

(b)   All
certificates for Shares or other securities delivered under the Plan will be
subject to such share-transfer orders and other restrictions as the Board may
deem advisable under the rules, regulations and other requirements of the
Securities Act of 1933, as amended, the Exchange Act, any stock exchange upon
which the Shares are then listed, and any other applicable federal or state
securities law, and the Board may cause a legend or legends to be put on any
such certificates to make appropriate reference to such restrictions.

 

10

 

(c)   Nothing
contained in the Plan will prevent the Board from adopting other or additional
compensation arrangements, subject to stockholder approval if such approval is
required.

 

(d)   Neither the
adoption of the Plan nor the execution of any document in connection with the
Plan will: (i) confer upon any employee of the Company or an Affiliate any
right to continued employment or engagement with the Company or such Affiliate,
or (ii) interfere in any way with the right of the Company or such Affiliate
to terminate the employment of any of its employees at any time.

 

(e)   No later
than the date as of which an amount first becomes includible in the gross
income of the Participant for federal income tax purposes with respect to any
Award under the Plan, the Participant will pay to the Company, or make
arrangements satisfactory to the Company regarding the payment of, any federal,
state or local taxes of any kind required by law to be withheld with respect to
such amount. Unless otherwise determined by the Board, the minimum required
withholding obligations may be settled with Shares, including Shares that are
part of the Award that gives rise to the withholding requirement. The
obligations of the Company under the Plan will be conditioned on such payment
or arrangements and the Company will have the right to deduct any such taxes
from any payment of any kind otherwise due to the Participant.

 

SECTION 12.       Effective
Date of Plan. Subject
to the approval of the Plan by the Company’s stockholders within 12 months of
the Plan’s adoption by the Board, the Plan will become effective on the date
that it is adopted by the Board.

 

SECTION 13.       Term
of Plan. The
Plan will continue in effect until terminated in accordance with Section 10;
provided, however, that no Incentive
Stock Option will be granted hereunder on or after the 10th anniversary of the
date of stockholder approval of the Plan (or, if the stockholders approve an
amendment that increases the number of shares subject to the Plan, the 10th
anniversary of the date of such approval); but provided further,
that Incentive Stock Options granted prior to such 10th anniversary
may extend beyond that date.

 

SECTION 14.       Invalid
Provisions. In the event that any provision of this Plan
is found to be invalid or otherwise unenforceable under any applicable law,
such invalidity or unenforceability will not be construed as rendering any
other provisions contained herein as invalid or unenforceable, and all such
other provisions will be given full force and effect to the same extent as though
the invalid or unenforceable provision was not contained herein.

 

SECTION 15.       Governing Law. The Plan
and all Awards granted hereunder will be governed by and construed in
accordance with the laws and judicial decisions of the Commonwealth of Pennsylvania,
without regard to the application of the principles of conflicts of laws.

 

11

 

SECTION 16.       Board
Action. Notwithstanding
anything to the contrary set forth in the Plan, any and all actions of the Board
or Committee, as the case may be, taken under or in connection with the Plan
and any agreements, instruments, documents, certificates or other writings
entered into, executed, granted, issued and/or delivered pursuant to the terms
hereof, will be subject to and limited by any and all votes, consents,
approvals, waivers or other actions of all or certain stockholders of the
Company or other persons required by:

 

(a)   the Company’s
Certificate of Incorporation (as the same may be amended and/or restated from
time to time);

 

(b)   the Company’s
Bylaws (as the same may be amended and/or restated from time to time); and

 

(c)   any other
agreement, instrument, document or writing now or hereafter existing, between
or among the Company and its stockholders or other persons (as the same may be
amended from time to time).

 

SECTION 17.       Notices. Any notice to
be given to the Company pursuant to the provisions of this Plan must be given
in writing and addressed, if to the Company, to its principal executive office
to the attention of its Chief Financial Officer (or such other person as the
Company may designate in writing from time to time), and, if to a Participant,
to the address contained in the Company’s personnel files, or at such other
address as that Participant may hereafter designate in writing to the Company. Any
such notice will be deemed duly given: if delivered personally or via
recognized overnight delivery service, on the date and at the time so
delivered; if sent via telecopier or email, on the date and at the time
telecopied or emailed with confirmation of delivery; or, if mailed, five (5)
days after the date of mailing by registered or certified mail.

 

12

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