Document:

Exhibit 10.47

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF
THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED
WITH AN ASTERISK [*], HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.

 

Execution Copy

 

Exclusive Patent And Know-How License Agreement

 

THIS AGREEMENT dated as of November 5, 2008 (the “Effective Date”) is
between:

 

(1)           UNIVERSITY
OF SOUTHAMPTON (“Southampton”), an institution
incorporated by Royal Charter with registration number RC000668 and whose
administrative offices are at Highfield, Southampton, United Kingdom, SO17 1BJ;
and

 

(2)           CELLDEX RESEARCH CORPORATION,  a company incorporated in
the State of Delaware with offices located at 222 Cameron Drive, Phillipsburg,
NJ 08865, U.S.A., and its parent corporation, CELLDEX
THERAPEUTICS, INC.,  a company
incorporated in the State of Delaware with offices located at 119 Fourth
Avenue, Needham, MA 02494-2725, U.S.A. (collectively, “Celldex”).

 

RECITALS:

 

(A)          Professor Martin Glennie and colleagues
within Cancer Sciences at Southampton have determined that [*] as vaccines for the treatment of disorders that may
benefit from immune stimulation;

 

(B)           Southampton
filed a UK National patent application entitled [*],
included in the Patents, to protect this invention. Southampton also has
generated an [*], included in the Materials;

 

*Confidential

 

1

 

(C)           The research programme conducted by Professor Martin
Glennie and colleagues which generated the Intellectual Property (as defined
below) was funded by Tenovus, a cancer charity registered in England and Wales
under number 1054015. Under the terms and conditions of Tenovus grant funding,
Tenovus have co-ownership rights in the Intellectual Property.  Pursuant to an Assignment Agreement dated 29 February 2008,
Tenovus’ rights in the Licensed IP have vested in Cancer Research Technology
Ltd, Sardinia House, Sardinia Street, London WC2A 3NL, England (“CRT”).
Southampton and CRT are therefore co-owners of the Licensed IP.  Under the terms of the CRT Agreement dated October 13,
2008 attached hereto as Schedule 2, CRT has granted Southampton the
rights to grant exclusive licenses to the Patents, Materials and Know How;

 

(D)          Southampton wishes to continue to carry out further research
and development on the application of its [*] for
treating disorders that may benefit from immune stimulation. Southampton wishes
to retain the right to license the combination of its Materials and [*] to Third Parties;

 

(E)           Celldex wishes to seek to generate its own [*] and to develop an adjuvant/vaccine based on [*];

 

(F)           Celldex seeks rights to the Intellectual
Property to undertake the proposed development and to manufacture, have
manufactured, import, sell and use adjuvants/vaccines incorporating [*] antibodies and/or to secure sublicenses with Third
Parties; and

 

(G)           Southampton
is willing to provide Celldex rights to the Intellectual Property subject to
the provisions of this Agreement.

 

IT IS AGREED as follows:

 

*Confidential

 

2

 

1.             Definitions

 

In this
Agreement, the following words shall have the following meanings:

 

	
  Academic
  Partner

  	
   

  	
  means a
  charitable body or academic institution or any non-for-profit entity (or similar
  entity).

  
	
   

  	
   

  	
   

  
	
  Academic
  Research

  	
   

  	
  means
  academic, non-commercial research and teaching conducted alone or in
  collaboration with other Academic Partners. For the avoidance of doubt,
  Academic Research excludes any Sponsored Research.

  
	
   

  	
   

  	
   

  
	
  Affiliate

  	
   

  	
  Means any
  company, partnership or other entity which directly or indirectly Controls,
  is Controlled by or is under common Control with any other entity.

  
	
   

  	
   

  	
   

  
	
  Claims

  	
   

  	
  Means all
  demands, claims and liability (whether criminal or civil, in contract, tort
  or otherwise) for losses, damages, legal costs and other expenses of any
  nature whatsoever and all costs and expenses (including legal costs) incurred
  in connection therewith.

  
	
   

  	
   

  	
   

  
	
  Combination
  Product

  	
   

  	
  Means a
  product that contains a Licensed Product and at least one other essential
  functional component.

  
	
   

  	
   

  	
   

  
	
  Commercial
  Partner

  	
   

  	
  Means any
  entity which is not an Academic Partner.

  
	
   

  	
   

  	
   

  
	
  Confidential
  Information

  	
   

  	
  Means
  proprietary information and trade secrets or confidential information
  relating to the business affairs or finances of the other Party supplied or
  otherwise made available to them or coming into their possession in relation
  to the performance of this Agreement, irrespective of form.

  
	
   

  	
   

  	
   

  
	
  Control

  	
   

  	
  Means direct
  or indirect beneficial ownership of 50% (or, outside a Party’s home
  territory, such lesser percentage as is the maximum, permitted level of
  foreign investment) or more of the share capital, stock or other
  participating interest carrying the right to vote or to

  

 

3

 

	
   

  	
   

  	
  distribution
  of profits of that Party, as the case may be.

  
	
   

  	
   

  	
   

  
	
  Cover(ed)

  	
   

  	
  Means, with
  respect to any Patent and the subject matter at issue, that, but for a
  license granted under a Valid Claim of such Patent, the manufacture, use,
  sale, offer for sale, or importation of the subject matter at issue would
  infringe such Valid Claim on a country-by-country basis, or, in the case of a
  Patent that is a patent application, would infringe a Valid Claim on a
  country-by-country basis in such patent application if it were to issue as a
  patent.

  
	
   

  	
   

  	
   

  
	
  Diligent
  and Reasonable Efforts

  	
   

  	
  Means, with
  respect to the efforts to be expended by a Party with respect to the
  objective that is the subject of such efforts, such reasonable, good faith
  efforts and resources to accomplish such objective that such Party would
  normally use to accomplish a similar objective under similar circumstances,
  it being understood and agreed that with respect to the development or
  commercialization of a Licensed Product, such efforts shall be similar to
  those efforts and resources commonly used by that Party to develop or
  commercialize a product owned by it or to which it otherwise has rights that
  is at a similar stage of development or product life and is of similar market
  potential as the relevant Licensed Product, taking into account product
  labelling or anticipated labelling, present and future market potential, past
  performance of Licensed Products and such Party’s own pharmaceutical products
  that are of similar market potential, financial return, medical and clinical
  considerations, present and future regulatory environment and competitive
  market conditions, all as measured by the facts and circumstances at the time
  such efforts are due. Diligent and Reasonable
  Efforts shall be secured through the reporting obligations of
  Section 5.2 and Southampton’s right of termination of Section 5.4. 

   

  Diligent and
  Reasonable Efforts shall be determined on a market-by-market and
  indication-by-indication basis for a particular Licensed Product, and it is
  anticipated that the level of effort will be

  

 

4

 

	
   

  	
   

  	
  different
  for different markets, and will change over time, reflecting changes in the
  status of the Licensed Product and the market(s) involved.

  
	
   

  	
   

  	
   

  
	
  Effective
  Date

  	
   

  	
  Means the
  effective date of this Agreement as set forth above.

  
	
   

  	
   

  	
   

  
	
  Field

  	
   

  	
  Means all
  therapeutic or prophylactic uses, including uses as adjuvants or vaccines, in
  the Territory of [*], alone
  or in combination with any other pharmaceutical agent, other than the
  Southampton Field.

  
	
   

  	
   

  	
   

  
	
  Intellectual Property

  	
   

  	
  Means the Patents, Materials, Know-how, and
  Confidential Information.

  
	
   

  	
   

  	
   

  
	
  Know-how

  	
   

  	
  Means
  Confidential Information in the form of technical information in the Field
  relating to the Patents, Materials and/or Licensed Products and developed by
  or under the supervision of Professor Martin Glennie prior to the Effective
  Date and specifically set forth on Schedule 1 Part B hereof and
  transferred to Celldex prior to the end of the Extended Transfer Period
  pursuant to Section 3.1 hereof, including any utility models and registered designs, together with
  applications for any of the foregoing and the right to apply for any of the
  foregoing, copyrights, database rights and design rights and in which
  Southampton has the necessary rights to enable it to grant the license set
  out in Clause 2.1.2.

  
	
   

  	
   

  	
   

  
	
  Licensed
  Products

  	
   

  	
  Means any
  and all products in the Field that are developed, manufactured, sold or
  otherwise supplied by Celldex or its sub-licensee (including any Affiliate of
  Celldex) and (a) which is Covered by the Patents in the country of
  manufacture and/or sale, and/or (b) incorporate or was developed making
  use of any of the Know-how and/or Materials.

  
	
   

  	
   

  	
   

  
	
  Materials

  	
   

  	
  Means [*] thereof generated by Celldex, its Affiliates or
  sub-licensees.

  

 

*Confidential

 

5

 

	
  Net
  Receipts

  	
   

  	
  Means the
  amount of any payment (excluding Value Added Tax) and the value of any non
  monetary receipt (subject to the provisions below) obtained by, or due to,
  Celldex or its Affiliate, in relation to the sub-licensing (including the
  grant of any option over a sub-license) of any of the Intellectual Property
  and including any of the following:

   

  (a)        up-front, milestone (whether at the stage of development,
  marketing or otherwise), success, bonus, maintenance and periodic (including
  annual) payments due under any sub-license agreement;

   

  (b)        payments in respect of the funding of research or development
  activities related to any Licensed Product, to the extent that such payments
  exceed a reasonable level of payment for such activities;

   

  (c)        where any sub-license is to be granted under cross licensing
  arrangements, the value of any cross license obtained under such
  arrangements, solely to the extent that the value of such cross license has
  been independently valued in and is easily ascertainable from a separate
  non-exclusive arms-length agreement between the cross licensor and an
  independent Third Party;

   

  (d)        any premium paid over the fair market value of shares, options or
  other securities in respect of any of the share capital of Celldex or its
  Affiliate;

   

  (e)        any loan, guarantee or other financial benefit made or given other
  than on normal market terms; and

   

  (f)         payments in the form of any shares, options or other securities
  that are not freely transferable and that are obtained from a Third Party,
  valued at the time such shares, options, or other securities are monetized.
  Net receipts in the form of freely transferable shares, options, or other
  securities 

  

 

6

 

	
   

  	
   

  	
  shall be
  subject to Section 4.6.1;

   

  but
  excluding (i) any payments in respect of the funding of research or
  development activities related to any Licensed Product not included in (b) above,
  (ii) any payment at the fair market value for shares, options or other
  securities in respect of any of the share capital of Celldex or its
  Affiliate, (iii) any sum of money falling within the definition of Net
  Sales Value, or (iv) any non-monetary value received with the exception
  of Third Party shares, options or other securities as set forth above.

  
	
   

  	
   

  	
   

  
	
  Net
  Sales Value

  	
   

  	
  Means the
  invoiced price of Licensed Products sold by Celldex, its Affiliates or its
  sub-licensees under any of the Intellectual Property to independent Third
  Parties in arm’s length transactions exclusively for money or, where the sale
  is not at arm’s length and exclusively for money the price that would have
  been so invoiced if it had been at arm’s length and exclusively for money
  after deduction of all documented:

   

  (a)        normal trade discounts actually granted and any credits actually
  given for rejected or returned Licensed Products including, those granted on
  account of price adjustments, billing errors, rejected goods, damaged or defective
  goods, recalls, returns, rebates, chargeback rebates, reimbursements or
  similar payments granted or given to wholesalers or other distributors,
  buying groups, health care insurance carriers or other institutions;

   

  (b)        costs of packaging, insurance, carriage and freight, provided in
  each case that the amounts are separately charged on the relevant invoice;

   

  (c)        value added tax or other sales tax; and

   

  (d)        import duties or similar applicable government levies;

   

  (e)        bad debts related to such Licensed Product to the extent actually
  written-off;

  

 

7

 

	
   

  	
   

  	
  provided
  that such deductions do not exceed reasonable and customary amounts in the
  markets in which such sales occurred.

   

  In the case
  of Combination Products, Net Sales Value means the gross amount billed or
  invoiced on sales of the Combination Product less the deductions set forth
  above, multiplied by a proration factor that is determined as follows:

   

  (i)    If all essential functional components of
  the Combination Product were sold separately during the same or immediately
  preceding Sales Year, the proration factor shall be determined by the formula
  [A/(A+B)], where A is the aggregate gross sales price of each of the
  essential functional components including the Licensed Product during such
  period when sold separately from the other essential functional components,
  and B is the aggregate gross sales price of each of the essential functional
  components excluding the Licensed Product during such period when sold separately
  from the Licensed Product components, the periods not being more than 12
  months from date of proration; or

   

  (ii)   If all essential functional components of
  the Combination Product were not sold separately during the same or
  immediately preceding Sales Year (i.e., if at least one of the essential
  functional components was not sold separately), the proration factor shall be
  determined by the formula [C/C+D], where C is the fair market value of the
  Licensed Product essential functional components during the prior Sales Year
  and D is the fair market value of the other essential functional components
  during the prior Sales Year with such fair market values being determined in
  good faith by agreement of the Parties.

   

  Sales
  between Celldex, its Affiliates and sub-licensees shall not be considered for
  the purposes of this definition unless there is no subsequent sale to a
  person who is not Celldex, its Affiliate or sub-licensee in an arm’s length
  transaction exclusively for money.

  

 

8

 

	
  Parties

  	
   

  	
  Means
  Southampton, and Celldex, and “Party” shall mean any of them.

  
	
   

  	
   

  	
   

  
	
  Patents

  	
   

  	
  Means any
  and all of the patents, patent applications, author certificates, inventor
  certificates, utility models (i) owned or otherwise controlled by
  Southampton as of the Effective Date that relate to the Field, including the
  patents and patent applications referred to in Schedule 1 Part A, and
  (ii), owned or otherwise controlled by Southampton during the Term that
  relate to the Field, including in each case any continuations, continuations
  in part, extensions, reissues, re-examination, divisions, renewals,
  substitutions, confirmations, registrations, revalidations and additions of
  or to them, and any patents, patent applications, supplementary protection
  certificates and similar rights that are based on or derive priority from the
  foregoing and related international or foreign patents and applications
  anywhere in the world.

  
	
   

  	
   

  	
   

  
	
  Phase I Trial

  	
   

  	
  Means a clinical trial generally
  consistent with U.S. 21 C.F.R. §312.21(a) or any foreign counterpart
  thereof initiated by or on behalf of Celldex with respect to a Licensed
  Product anywhere in the Territory.

  
	
   

  	
   

  	
   

  
	
  Phase II Trial

  	
   

  	
  Means a clinical trial generally consistent with U.S. 21 C.F.R.
  §312.21(b) or any foreign counterpart thereof, including without
  limitation a Phase IIa study, initiated by or on behalf of Celldex with
  respect to a Licensed Product anywhere in the Territory.

  
	
   

  	
   

  	
   

  
	
  Phase III Trial

  	
   

  	
  Means a clinical trial generally consistent with U.S. 21 C.F.R.
  §312.21(c) or any foreign counterpart thereof, including without
  limitation a Phase II/III study, initiated by or on behalf of Celldex with

  

 

9

 

	
   

  	
   

  	
  respect to a Licensed Product anywhere in the Territory

  
	
   

  	
   

  	
   

  
	
  Sales
  Year

  	
   

  	
  Means each
  period of a year commencing on the first day of July that follows the
  date of first commercial sale by Celldex or any sub-licensee for the first
  Licensed Product, or on any anniversary of that date.

  
	
   

  	
   

  	
   

  
	
  Sponsored
  Research

  	
   

  	
  means
  research undertaken at the request of, or in collaboration with, any entity
  which is a Commercial Partner where any resulting Intellectual Property is
  encumbered in favour of such entity.

  
	
   

  	
   

  	
   

  
	
  Southampton
  Field

  	
   

  	
  Means all
  therapeutic or prophylactic uses, including uses as adjuvants or vaccines, in
  the Territory of [*] in
  combination with the Southampton-proprietary [*] thereof
  where such use includes the in vivo administration
  of such [*] and such [*] to
  a mammal or the in vitro use of such [*]and such [*], wherein
  the [*].

  
	
   

  	
   

  	
   

  
	
  Term

  	
   

  	
  Means the
  term of this Agreement as set forth in Clause 8.1.

  
	
   

  	
   

  	
   

  
	
  Territory

  	
   

  	
  Means the
  world

  
	
   

  	
   

  	
   

  
	
  Third
  Party

  	
   

  	
  Means an
  entity or person other than Southampton or Celldex or their respective
  Affiliates and sub-licensees under this Agreement.

  
	
   

  	
   

  	
   

  
	
  Tobacco Party

  	
   

  	
  means any corporation, company, partnership or
  other organisation or person with a material interest in the tobacco
  industry;

  

 

*Confidential

 

10

 

	
  Valid
  Claim

  	
   

  	
  means a
  claim of an issued (granted) and unexpired patent, or a claim of a pending
  patent application, where such pending application has been pending for less
  than ten (10) years from its earliest priority date, or a claim of an
  issued (granted) and unexpired patent issued from such a pending patent
  application during or after such ten (10) year period, which in any of
  the foregoing cases has not been withdrawn, cancelled, abandoned, disclaimed,
  or held permanently revoked, unenforceable or invalid by a decision of an administrative
  agency or court or other governmental agency of competent jurisdiction,
  unappealable or unappealed within the time allowed for appeal, and which has
  not been admitted to be invalid or unenforceable through reissue or
  disclaimer or otherwise;

  

 

2              Grant of rights

 

2.1           Subject to Clause 2.4, Southampton hereby grants to Celldex, subject
to the provisions of this Agreement:

 

2.1.1        an
exclusive non-transferable (except as expressly permitted under this Agreement)
license in the Field under the Patents, with the right to sublicense, subject
to clause 2.3 below, to research, develop, manufacture, have manufactured, use,
import, offer for sale and sell Licensed Products in the Territory;

 

2.1.2        an
exclusive license in the Field to use the Know-How, with the right to
sub-license, subject to clause 2.3 below, to research, develop, manufacture,
have manufactured, use, import, offer for sale and sell Licensed Products in
the Territory;

 

2.1.3        an
exclusive license in the Field to use the Materials subject to clause 2.3

 

11

 

below, solely
for research and development purposes. 
For the avoidance of doubt Celldex shall not humanise any of the
Materials nor administer the Materials, or any substances contacted with the Materials,
to human subjects.

 

2.2           The Parties shall execute such formal licenses as may be necessary
or appropriate for registration with Patent Offices and other relevant
authorities in particular territories. 
In the event of any conflict in meaning between any such license and the
provisions of this Agreement, the provisions of this Agreement shall
prevail.  The Parties shall use
reasonable endeavours to ensure that, to the extent permitted by relevant
authorities, this Agreement shall not form part of any public record.

 

2.3           Celldex shall be entitled to grant sub-licenses of its rights under
this Agreement to any person and any sub-license granted shall contain the
right to grant further sub-licenses, provided that:

 

2.3.1        a
sub-license shall include obligations on the sub-licensee which are equivalent
to relevant obligations on Celldex under this Agreement;

 

2.3.2        within
sixty (60) days of the grant of any sub-license Celldex shall provide to
Southampton a true copy of it, in English, and Celldex shall disclose the terms
of any such sub-license agreement only to the extent that such terms impact
payments due from Celldex to Southampton, and to the extent that a sub-licensee
permits Celldex to disclose the terms of such a sub-license agreement; and

 

2.3.3        Celldex
shall not be relieved of any of its obligations under this agreement as a
result of such sub-license, including but not limited to its obligation to make
payments under Section 4, and its obligation to commercialize the Licensed
Technology under Section 5; and

 

2.3.4        [*].

 

*Confidential

 

12

 

2.4           Reserved
Rights

 

2.4.1        The
Parties acknowledge that under the terms of the CRT Agreement, CRT has reserved
its rights to a worldwide, perpetual, irrevocable, fully paid-up, royalty-free,
non-exclusive right in and to the Intellectual Property for CRT to conduct
Academic Research (such right may be licensed by CRT solely to Academic
Partners, including, for the avoidance of doubt, any researchers funded or employed
by Tenovus and/or Cancer Research UK) the (“CRT Reserved Rights”).

 

2.4.2        Southampton
reserves a worldwide, perpetual, irrevocable, fully paid-up, royalty-free,
non-exclusive right in and to the Intellectual Property for Southampton and its
Affiliates, to conduct Academic Research. 
For the avoidance of doubt, such rights shall include the right to
provide Materials to Academic Partners under limited material transfer
agreement with substantially similar terms to those set out in Schedule 3.

 

2.4.3        In no event, however, shall Southampton or CRT have the right to
conduct Sponsored Research relating to the Patents, Know-How or Materials in
the Field and/or the Licensed Products.

 

2.4.4        Except for the licenses expressly granted by this Clause 2,
Southampton reserves all its rights. For the avoidance of doubt, such
reservation of rights includes the exclusive right for Southampton and its
Affiliates to use, license and sublicense Patents, Know-how and Materials for
the research and development, manufacture, having manufactured, use, import,
offer for sale and sale, of pharmaceutical product solely in the Southampton
Field.

 

2.5           Celldex shall ensure that all of the Licensed Products marketed by
it and its sub-licensees are of satisfactory quality and comply with all
applicable laws and regulations in each part of the Territory.

 

3              Know-how
and Confidential Information

 

3.1           Southampton shall transfer the Know-how to Celldex within eight (8) months
after the 

 

13

 

Effective
Date (“Transfer Period”).  Celldex and
Southampton shall cooperate in arranging meetings as reasonably necessary for
the effective transfer of the Know-how. 
On conclusion of the Transfer Period Celldex shall confirm in writing to
Southampton that transfer of the Know-how is complete, or provide details to
Southampton of any outstanding Know-how which Celldex considers to have not
been transferred. Southampton shall thereafter have thirty (30) days to
transfer such outstanding Know-how to Celldex, or confirm to Celldex that no
such Know-how exists (together with the Transfer Period, the “Extended Transfer
Period”).

 

3.2           Celldex acknowledges that the Know-how is at an early stage of
development.  Accordingly, specific
results cannot be guaranteed and any results, materials, information or other
items (together “Delivered Items”) provided under this Agreement are provided “as
is” and without any express or implied warranties, representations or
undertakings. As examples, but without limiting the foregoing, Southampton
gives no warranty that Delivered Items are of merchantable or satisfactory
quality, are fit for any particular purpose, comply with any sample or
description, or are viable, uncontaminated, safe or non-toxic, provided that
Southampton will notify Celldex prior to transferring such Delivered Items to
Celldex of any dangerous or harmful properties of such Delivered Items actually
known by Southampton at the time of such transfer.

 

3.3           Celldex undertakes that for
a period of 10 years from the Effective Date or for so long as any substantial
part of the Know-how remains subject to the obligations of confidence of Clause
3.4, whichever is the shorter, it shall protect the Know-how as Confidential
Information and shall not use the Know-how for any purpose except as expressly
licensed hereby and in accordance with the provisions of this Agreement.

 

3.4           Each Party (“Receiving Party”) undertakes:

 

3.4.1        to maintain as secret and confidential all Confidential Information
obtained directly or indirectly from the other Party (“Disclosing Party”) in
the course of or in anticipation of this Agreement and to respect the
Disclosing Party’s rights therein;

 

14

 

3.4.2        to use the same exclusively for the purposes of this Agreement;

 

3.4.3        to disclose the same only to those of its employees, directors,
Affiliates, advisors, contractors and sub-licensees pursuant to this Agreement
(if any) to whom and to the extent that such disclosure is reasonably necessary
for the purposes of this Agreement; and

 

3.4.4        to procure that each of its employees, directors, Affiliates,
advisors, contractors and sub-licensees are bound by appropriate
confidentiality and non-use obligations in respect of Confidential Information
belonging to the other Party.

 

3.5           The provisions of Clause 3.4 shall not apply to Confidential
Information which the Receiving Party can demonstrate by reasonable, written
evidence:

 

3.5.1        was, prior to its receipt by the Receiving Party from the Disclosing
Party, in the possession of the Receiving Party and at its free disposal; or

 

3.5.2        is subsequently disclosed to the Receiving Party without any
obligations of confidence by a Third Party without any obligation of confidence
to the Disclosing Party and who has not derived it directly or indirectly from
the Disclosing Party; or

 

3.5.3        is or becomes generally available to the public through no act or
default of the Receiving Party or its agents, employees, Affiliates or
sub-licensees; or

 

3.5.4        the Receiving Party is required to disclose to the courts of any
competent jurisdiction, or to any government regulatory agency or financial
authority, provided that the Receiving Party shall (i) inform the
Disclosing Party as soon as is reasonably practicable, and (ii) at the Disclosing
Party’s request seek to persuade the court, agency or authority to have the
information treated in a confidential manner, where this is possible under the
court, agency or authority’s procedures.

 

15

 

3.6           Southampton
may disclose the existence and terms of this Agreement without prior approval
to Tenovus, registered charity number 1054015 and Cancer Research Technology
the technology transfer company wholly owned by Cancer Research UK, registered
charity number 4325234 and any other third Party(ies) who have funded some or
all of the development of the Intellectual Property, and whose consents are
required for Southampton to enter into this Agreement, provided that Tenovus
and such other Third Party(ies) are bound by appropriate confidentiality and
non-use obligations in respect of Confidential Information under this
Agreement.

 

4      Payments

 

4.1           In consideration for the rights granted hereunder, during the Term
and subject to Clause 4.4, Celldex shall pay to Southampton:

 

4.1.1        Within thirty (30) days after the Effective Date an upfront license
fee in the amount of [*];

 

4.1.2        The sum of [*] within
thirty (30) days after the initial human dosing study of the first Licensed
Product to achieve such milestone in the Field;

 

4.1.3        The sum of [*] within
thirty (30) days after the first human dosing in the first phase II study of
the first Licensed Product to achieve such milestone in the Field;

 

4.1.4        The sum of [*] within thirty (30) days after the first human dosing in
the first phase III study of the first Licensed Product to achieve such
milestone in the Field;

 

4.1.5        The sum of [*] within
thirty (30) days after the first submission for regulatory approval in the
Territory with respect to the first Licensed Product to achieve such milestone
in the Field .

 

*Confidential

 

16

 

4.1.6        The sum of [*] within
thirty (30) days after the first commercial sale of the first Licensed Product
to achieve such milestone in the Field.

 

For the
avoidance of doubt each of the sums due under Sections 4.1.2-4.1.6 shall be
payable only once, on the first Licensed Product in the Field to achieve each
given milestone of Sections 4.1.2-4.1.6

 

4.2           During the Term, Celldex shall pay to Southampton on a
country-by-country and Licensed Product-by-Licensed Product basis (i) a
royalty of [*] of Net Sales Value of all
Licensed Products Covered by at least one Valid Claim of the Patents, or (ii) a
royalty of [*] of Net Sales Value of all Licensed
Products that are not Covered by at least one Valid Claim of the Patents and,
incorporates or makes use of any Know-how which remains subject to the
provisions of Clause 3.4 hereof or incorporates or makes use of any Materials,
sold or otherwise supplied by Celldex, its Affiliates and/or its sub-licensees.
For avoidance of doubt, the royalties payable under these Sections 4.2(i) and
4.2(ii) are mutually exclusive, and only one or the other, but not both,
may be payable on the sale of a given Licensed Product.

 

4.3           During the Term, and subject to Clause 4.4, Celldex shall pay to
Southampton on a country-by-country and Licensed Product-by-Licensed Product
basis (i) a royalty of [*] of Net
Receipts received with respect to all Licensed Products sublicensed hereunder
and Covered by at least one Valid Claim of the Patents, or (ii) a royalty
of [*] of Net Receipts received with
respect to all Licensed Products sublicensed hereunder and not Covered by at
least one Valid Claim of the Patents and which incorporates or makes use of any
Know-how which remains subject to the provisions of Clause 3.4 hereof or
incorporates or makes use of any Materials. 
For avoidance of doubt, the royalties payable under these Sections 4.3(i) and
4.3(ii) are mutually exclusive, and only one or the other, but not both,
may be payable with respect to such Licensed Products sublicensed hereunder.

 

*Confidential

 

17

 

4.4           In the event any of the milestone events set forth in Clauses
4.1.2-4.1.6 above are first achieved by a sub-licensee of Celldex or its
Affiliates, the amount payable to Southampton by Celldex will be the greater of
(i) the milestone amount set forth in the applicable Section 4.1.2-4.1.6,
or (ii) the amount payable to Southampton under Clause 4.3 on the Net
Receipts received by Celldex from such sub-licensee as a result of such
sub-licensee first achieving such milestone.

 

4.5           No lump sum payments shall be refundable or creditable against any
other sum or lump sum payable by Celldex for any reason

 

4.6           Non-monetary consideration:

 

4.6.1        Where Net Receipts are in the form of freely-transferable shares in
the share capital of a sub-licensee, Celldex shall pay the royalty due under
this Agreement on such Net Receipts by causing the appropriate percentage
number of such freely-transferable shares to be transferred to, and registered
in the name of Southampton.

 

4.7           Royalties to Third Parties.

 

In the event
that Celldex is obligated to pay a royalty to a Third Party in order to avoid
infringement arising from the manufacture, having manufactured, sale, offer for
sale, use or importation of Licensed Products, then Celldex shall be entitled
to offset [*] of such royalties paid to such
Third Parties against the royalty payable to Southampton under this Clause 4
provided that in no event shall the royalties payable to Southampton under
Clause 4 be reduced by more than [*] of the
royalty that would have been payable in the absence of this clause on Net Sales
Value in the aggregate. The deductions referred to in this Clause shall only be
made where the infringement of the Third Party patent arises from the use of
the inventions claimed in the Patents, and not from the use of any other
intellectual property that Celldex chooses to use in the manufacture and sale
of any Licensed Product.

 

*Confidential

 

18

 

4.8           Floor on reductions.

 

In no event
shall the reductions of royalty provided for under this Agreement result in the
royalty payable to Southampton in respect of any individual royalty-bearing
Licensed Product being reduced below (i) [*] of
Net Sales Value for a royalty payable under Section 4.2(i), or [*] of Net Sales Value for a royalty payable under Section 4.2(ii).

 

4.9           Payment
frequency.

 

Royalties due
under this Agreement shall be paid within 60 days of the end of each year
ending on 30 June, in respect of sales of Licensed Products made and Net
Receipts generated during such Sales Year and shall continue to pay royalties
at such intervals until no further royalties are due following termination as
set out in Clause 8. For the avoidance of doubt if sales commence during a
Sales Year then royalties shall be due and payable on the first 30 June following
the commencement of sales for that part of the Sales Year to which sales
relate.

 

4.10         Celldex
shall make the payments due to Southampton in pounds sterling.  Where Celldex receives payment in a currency
other than pounds sterling, Celldex shall convert the relevant sum due to
Southampton into pounds sterling. 
Celldex shall use the conversion rate of such other currency as quoted
by National Westminster Bank plc in London as at the close of business on the
last business day of the Sales Year with respect to which the payment is
made.  If by law, regulation, or fiscal
policy of a particular country, conversion into pound sterling or transfer of
funds of a convertible currency to the United Kingdom is restricted or forbidden,
Celldex shall give Southampton prompt notice in writing and shall pay the
royalty and other amounts due through such means or methods as are lawful in
such country as Southampton

 

*Confidential

 

19

 

may reasonably
designate.  Failing the designation by
Southampton of such lawful means or methods within thirty (30) days after such
notice is given by Celldex, Celldex shall deposit such royalty payment or other
amount in local currency to the credit of Southampton in a recognized banking
institution selected by Celldex and identified in a written notice to
Southampton, and such deposit shall fulfil all obligations of Celldex to
Southampton with respect to such royalties payment or other amount.

 

4.11                           All sums due under this Agreement:

 

4.11.1      shall be inclusive of any income tax or other charges or taxes,
excluding Value Added Tax, and shall not be increased beyond the sums described
in Clauses 4.1-4.3 to offset any income tax or other charges or taxes, that are
to be paid by Southampton, provided, however, that Celldex may deduct from such
sums due under this Agreement any withholding or other taxes or charges as
Celldex is required to deduct to comply with applicable laws.   The Parties shall cooperate and take all
steps reasonably and lawfully available to them to avoid deducting such taxes
or other charges and to obtain double taxation relief.  If Celldex is required to make any such
deduction it shall provide Southampton with such certificates or other
documents as it can reasonably obtain to enable Southampton to obtain
appropriate relief from double taxation of the payment in question;

 

4.11.2      shall be made by the due date, failing which Southampton may charge
interest on any outstanding amount on a daily basis at a rate equivalent to 3%
per annum above the National Westminster Bank plc base lending rate then in
force in London.

 

4.12                           Celldex shall:

 

4.12.1      keep at its normal place of business detailed and up to date records
and accounts showing the quantity, description and value of Licensed Products
sold by it, and the amount of sublicensing revenues received by it in respect 

 

20

 

of
Licensed Products, on a country by country basis, and being sufficient to
ascertain the payments due under this Agreement.  Such records and accounts shall be kept for
six (6) years following the end of the year to which they relate.

 

4.12.2      make such records and accounts available, on reasonable notice, for
inspection no more than once per calendar year during business hours by an
independent certified public accountant appointed by Southampton and reasonably
acceptable to Celldex for the purpose of verifying the accuracy of any
statement or report given by Celldex to Southampton under this clause 4.  The accountant shall be required to keep
confidential all information learnt during any such inspection, and disclose to
Southampton only such details as may be necessary to report on the accuracy of
Celldex’ statement or report. 
Southampton shall be responsible for the accountant’s charges unless the
accountant certifies that there is an underpayment of five percent or more in
any royalty statement, in which case Celldex shall pay his charges in respect
of that inspection.

 

4.12.3      Ensure that Southampton has the same rights as those set out in this
Clause 4.12 in respect of any sub-licensees of Celldex which is sub-licensed
under the Patents or Know-how pursuant to this Agreement.

 

4.13         All payments made to Southampton under this Agreement shall be made
to the following bank account, details of which may change from time to time on
written notice from Southampton to Celldex:

 

Fortis Bank SA/NV UK Branch

Account:
35962001

Sort Code
40-52-62

IBAN
GB54GEBA40526235962001

Swift GEBAGB22

 

And include the following reference: 3332

 

21

 

5          Commercialisation

 

5.1           Celldex shall use Diligent and Reasonable Efforts to develop and
commercially exploit at least one Licensed Product in the Field and Territory.

 

5.2           Without
prejudice to the generality of Celldex’s obligations under Clause 5.1, Celldex
shall provide every six months to Southampton an updated, written development
plan, showing all past, current and projected activities taken or to be taken
by Celldex to bring Licensed Products to market and maximise the sale of
Licensed Products in the Territory.  The
first plan shall be due on the 30th of June following the Effective Date
and then 31st December and the 30th of June each year
thereafter until this Agreement is terminated. 
Receipt of any such plan by Southampton shall not be taken to waive or
qualify Celldex’s obligations under Clause 5.1.

 

5.3           Celldex
shall be exclusively responsible for the technical and commercial development
and manufacture of Licensed Products and for incorporating any modifications or
developments thereto that may be necessary or desirable and for all Licensed
Products sold or supplied, and accordingly Celldex shall indemnify the
Southampton Indemnitees in the terms of Clause 7.3.1.  It may, however, subcontract or sub-license
such activities in accordance with accepted industrial practices.

 

5.4           In the
event that Celldex fails to materially comply with the obligations set forth in
Section 5.1, such failure will be deemed to be a material breach of this
Agreement subject to the termination provisions of Sections 8.2.1 and 8.2.1.1,
provided however that Celldex shall have ninety (90) days to remedy such breach
or to otherwise negotiate with Southampton a mutually acceptable schedule to
fulfil the diligence obligations of Section 5.1, and Southampton agrees
that its acceptance of such a schedule shall not be unreasonably withheld or
delayed.

 

6      Intellectual Property

 

6.1       From the Effective Date Southampton shall be responsible for the
prosecution and maintenance of the Patents and Celldex shall reimburse
Southampton for future and ongoing costs and expenses incurred in such
prosecution and maintenance of the 

 

22

 

Patents
within fourteen days of notification in writing from Southampton setting out
such costs and expenses. Celldex agrees to reimburse such reasonable costs and
expenses up to a total of [*] per year.
Reimbursement of any such costs and expenses in excess of a total of [*] in any given calendar year will be subject to the prior
written agreement of Celldex, which will not unreasonably be refused.

 

6.2       Southampton shall:

 

6.2.1     endeavour to obtain granted patents in the name of Southampton
pursuant to each of the Patents;

 

6.2.2     subject to clause 6.2.4, consult with Celldex regarding which
national territories to pursue and comply with reasonable requests of Celldex
on which such territories to pursue and choice of patent counsel, and
Southampton shall not discontinue prosecution of any of the Patents in any
territory without Celldex’s consent provided that Celldex provide Southampton
with requests not to file or to discontinue prosecution of any of the Patents
in any territory within 14 days of Southampton consulting Celldex.

 

6.2.3     subject to clause 6.2.4, consult with Celldex in relation to all
changes to patent claims or specifications that would have the effect of
reducing or limiting the extent of the patent coverage and comply with
reasonable requests of Celldex in connection with any such changes;

 

6.2.4     Southampton shall keep Celldex fully-informed of the status of the
Patents and will promptly provide Celldex with copies of all substantive
documentation submitted to, or received from, the patent offices or other
authority in connection therewith.  With
respect to any substantive submissions or elections that Southampton is
required to or otherwise intends to submit to a patent office or other
authority, Southampton shall provide a draft of such submission to Celldex

 

*Confidential

 

23

 

at least
thirty (30) days prior to the deadline for or the intended filing date of such
submission, whichever is earlier (or as soon as possible if Southampton has
less than thirty (30) days’ notice of a deadline for submission).  Celldex shall have the right to review and
comment upon any such submission by Southampton to a patent office, and will
provide such comments, if any, no later than ten (10) days prior to the
applicable deadline or intended filing date. 
Southampton shall consider in good faith all comments provided by
Celldex.  If Southampton disagrees with
any comment provided by Celldex, Southampton shall provide Celldex with an
explanation for such disagreement.  If Celldex
does not accept Southampton’s explanation, then Celldex shall have final
decision-making authority with respect to any Patent containing any claims that
relate solely to the Field or to a Licensed Product, provided, however, that if
Celldex decides to abandon prosecution of any potentially patentable claims in
an application, Southampton may file such claims in any available further
application at its own cost and expense.;

 

6.2.5              pay all official fees in respect of the Patents as and when due;

 

6.2.6              In the event that Celldex elects not to reimburse Southampton for
any of its reasonable costs and expenses in filing, prosecuting or maintaining
any of the Patents (an “Unsupported Patent”) in any of the United States,
France, Germany, Italy, Spain, United Kingdom, China, India, Canada or Japan
(each, a “Major Market Country”), and provided that such Unsupported Patent is
unrelated to any Patents which Celldex continues to support in such Major
Market Country, then the license granted to Celldex under 2.1.1 shall terminate
forthwith solely with respect to such Unsupported Patent in such unsupported
Major Market Country only.  For the
avoidance of doubt, Southampton shall be free to undertake such filing,
prosecution or maintenance at its own expense, and dispose of such rights, in
such Unsupported Patent in such unsupported Major Market Country only at its
sole discretion.  In the event that
Celldex elects not to reimburse Southampton for an Unsupported Patent in any country
other than a Major Market Country (each, a “non-Major Market Country”), and
provided that such Unsupported Patent is unrelated to any Patents which Celldex
continues to support in such 

 

24

 

non-Major Market Country, then the license granted to Celldex under
2.1.1 shall become non-exclusive forthwith solely with respect to such
Unsupported Patent in such unsupported non-Major Market Country only.  For the avoidance of doubt, Southampton shall
be free to undertake such filing, prosecution or maintenance at its own expense
in such Unsupported Patent in such unsupported non-Major Market Country only at
its sole discretion.

 

6.2.7              The Parties shall cooperate with each other in obtaining patent term
extension, such as extension under 35 U.S.C. § 156, patent term restoration or
supplemental protection certificates or their equivalents in any country in the
Territory where applicable to Patents exclusively licensed to Celldex under
this Agreement.

 

6.3        Infringement of the Patents

 

6.3.1              Each Party shall inform the other Party promptly if it becomes aware
of any infringement or potential infringement of any of the Patents to which
Celldex has a current license under the terms of this Agreement, and the
Parties shall consult with each other to decide the best way to respond to such
infringement

 

6.3.2              If the Parties fail to agree on a joint programme of action,
including how the costs of any such action are to be borne and how any damages
or other sums received from such action are to be distributed, then Celldex
shall be entitled to take action against the Third Party at its sole expense,
subject to the following provisions of this Clause 6.

 

6.3.3              Before starting any legal action under Clause 6, Celldex shall
consult with Southampton as to the advisability of the action or settlement,
its effect on the good name of Southampton, the public interest, and how the
action should be conducted.

 

6.3.4              Celldex shall reimburse Southampton for any reasonable expenses
incurred in assisting it in such action. Celldex shall pay Southampton
royalties, in 

 

25

 

accordance
with Clause 4, on any compensatory damages received from such action as if such
damages were Net Sales Value on the sale of Licensed Products or Net Receipts,
depending on the nature of the payment. 
Celldex shall retain any enhanced damages or attorneys fees received
from such action.

 

6.3.5              Celldex shall have the right to join Southampton to any suit, at
Celldex’s own expense, to enforce such rights if necessary to establish
standing to bring such suit, subject to being indemnified and secured in a
reasonable manner as to any costs, damages, expenses or other liability, and
Southampton shall have the right to be separately represented by its own
counsel at its own expense.  In addition,
Southampton reserves the right to join in any suit, at Southampton’s own
expense, to enforce such rights.

 

6.4        Infringement of Third Party
rights

 

6.4.1              If any warning letter or other notice of infringement is received by
a Party, or legal suit or other action is brought against a Party, alleging
infringement of Third Party rights in the manufacture, use or sale of any
Licensed Product or use of any Patents, that Party shall promptly provide full
details to the other Parties, and the Parties shall discuss the best way to
respond.

 

6.4.2              Celldex
shall have the right but not the obligation to defend such suit and shall have
the right to settle with such Third Party, provided that if any action or
proposed settlement involves the making of any statement, express or implied,
concerning the validity of any Patent, the consent of Southampton must be
obtained before taking such action or making such settlement, such consent not
to be unreasonably withheld or delayed.

 

7      Warranties

 

7.1       Southampton warrants and undertakes as follows:

 

7.1.1     Under the terms of the employment contracts between Southampton and
its 

 

26

 

employees, Southampton owns, or in the case of Know-how at the time of
transfer to Celldex of such Know-how shall own, such employees’ entire right,
title and interest in the rights under the Patents, Know How and Materials,
that it has entered into the CRT Agreement, a true copy of which is attached
hereto as Schedule 2, that the CRT Agreement is in full force and
effect, that neither party to the CRT Agreement is in breach of that agreement,
and to Southampton’s knowledge there are no current facts or circumstances that
would give rise to a claim of breach of the CRT Agreement by either party to
that agreement, and that so far as it is aware having undertaken reasonable
diligence, it has the right and authority to license the Patents, Know How and
Materials and enter into this Agreement;

 

7.1.2     It has not done, and shall not do nor agree to do during the
continuation of this Agreement any of the following things if to do so would be
inconsistent with the exercise by Celldex of the rights granted to it under
this Agreement, namely:

 

7.1.2.1              other than as stated herein, grant or agree to grant any rights in
the Patents in the Field in the Territory with the exception of the provisions
of Clause 6.2.6 above.

 

7.1.2.2              assign, mortgage, charge or otherwise transfer any of the Patents in
the Territory or  any of its rights or obligations
under this Agreement, with the exception of the provisions of Clause 6.2.6
above.

 

7.1.3     As of the Effective Date,
Southampton and CRT are the sole registered proprietors and sole owners of the
Patents and such Patents are free from any claims or encumbrances except as
expressly stated herein; under the CRT Agreement, Southampton is solely and
beneficially entitled to the Patents free from any claims or encumbrances
whatsoever (subject to 7.2);  Southampton
has full right, power and authority to grant the licenses granted by it under
this Agreement and to enter into and perform its obligations under this
Agreement, and except for the CRT Agreement, neither Southampton nor CRT has
any agreement or arrangement (including any licenses of right and/or compulsory

 

27

 

license or any other permissions), nor
subject to Clause 2.4, will enter into any such agreement or arrangement with a
Third Party with respect to use of or interest in such Patents in the Field
during the continuation of this Agreement. 
Southampton hereby undertakes that it shall not, during the term of this
Agreement, modify, amend, terminate or allow termination of the CRT Agreement.

 

7.1.4     As of the Effective Date, Southampton and CRT are the sole
registered proprietors and sole owners and are beneficially entitled to any
relevant Know-How in existence as of the Effective Date and Materials,
Southampton has full right, power and authority to grant the licenses granted
by it under this Agreement and to enter into and perform its obligations under
this Agreement, and, except as set forth in Clause 7.1.6,  Southampton does not have, and subject to
Clause 2.4, will not enter into during the continuation of the Agreement, any
agreement or arrangement (including any licenses of right and/or compulsory
license or any other permissions) with a Third Party with respect to use of or
interest in such Know How and Materials in the Field.  With respect to Know-how arising after the
Effective Date and during the Extended Transfer Period, Southampton shall seek
to obtain all rights necessary to enable the grant of the license set out in
Clause 2.1.2.  Southampton shall ensure
that such rights are obtained by Southampton prior to any transfer of such
Know-how to Celldex.

 

7.1.5     As of the Effective Date it is not aware of any prior art, other
than that already disclosed to Celldex in writing in the form of the Due
Diligence Report, prepared by Hunton and Williams and dated July 31 2006,
and UK Patent Office Search Report, which could have a material effect on the
allowability or validity of the Patents. As of the Effective Date no Third
Party has notified Southampton in writing that any of the Patents are invalid
or unenforceable.

 

7.1.6     As of the Effective Date, it has granted three Material Transfer
Agreements for the Know-How and Material to academic institutions for research
purposes only.  True copies of which are
attached hereto as Schedule 3.

 

28

 

7.1.7     As of the Effective Date and having made no specific enquiry, it is
not aware and has not been notified that practice of the Patents or
commercialisation of Licensed Products infringes or would infringe the rights
of any Third Party

 

7.1.8     As of the Effective Date and so far as it is aware, having made no
specific enquiry of any Third Party, there is no subsisting infringement by any
Third Party of any of the Patents or other Intellectual Property assigned or
licensed under this Agreement.

 

7.2                       No other warranties

 

7.2.1           Southampton and Celldex acknowledge that, in entering into this
Agreement, it does not do so in reliance on any representation, warranty or
other provision except as expressly provided in this Agreement, and any
conditions, warranties or other terms implied by statute or common law are
excluded from this Agreement to the fullest extent permitted by law.

 

7.2.2           Without limiting the scope of clause 7.2.1 above and except as set
forth in clause 7.2.1 above, Southampton does not make any representation nor
give any warranty or undertaking except to the extent set forth above:

 

7.2.2.1     as to the efficacy or usefulness of the Intellectual Property; or

 

7.2.2.2     that any of the Patents is or will be valid or subsisting or (in the
case of an application) will proceed to grant; or

 

7.2.2.3     that the use of any of the Intellectual Property, the manufacture,
sale or use of the Licensed Products or the exercise of any of the rights
granted under this Agreement will not infringe any other intellectual property
or other rights of any other person; or

 

7.2.2.4     that the Intellectual Property or any other information communicated
by Southampton to Celldex under or in connection with this Agreement will
produce Licensed Products of satisfactory quality or 

 

29

 

fit for the purpose for which Celldex intended; or

 

7.2.2.5     as imposing any obligation on
Southampton to bring or prosecute actions or proceedings against Third Parties
for infringement or to defend any action or proceedings for revocation of any
of the Patents; or

 

7.2.2.6     as imposing any liability on Southampton in the event that any Third
Party supplies Licensed Products to customers located in the Territory.

 

7.3                                 Indemnity

 

7.3.1        Celldex
shall indemnify and hold harmless Southampton, CRT and Tenovus and their
Affiliates, and respective officers, directors, Council members, employees,
researchers and representatives (together, the “Southampton Indemnitees”)
against any and all Third Party Claims that may be asserted against or suffered
by any of the Southampton Indemnitees and which relate to the use by Celldex or
any of its sub-licensees of the Intellectual Property or otherwise in
connection with the development, manufacture, use or sale of or any other
dealing in any of the Licensed Products by Celldex or any of its sub-licensees,
or subsequently by any customer or any other person, including Claims based on
product liability laws, provided, however, that such indemnification shall not
apply to any Claim to the extent directly attributable to (i) a breach by
Southampton of any of the warranties or representations set forth in Clause
7.1; (ii) negligent activities or intentional misconduct of the
Southampton Indemnitees, or (iii) the settlement of a claim, suit, action,
or demand by Southampton Indemnitees without the prior approval of
Celldex.  In addition, Celldex shall put
in place (prior to first commercial sale of a Licensed Product) product
indemnity insurance in an amount not less than [*]

 

*Confidential

 

30

 

for injuries
to any one person arising out of a single occurrence or for injuries to all
persons arising out of a single occurrence which shall last for the term of
this agreement and extend for at least 6 years after expiry or termination of
this Agreement and shall send a copy of such insurance documentation to
Southampton.

 

7.3.2        Southampton
shall indemnify Celldex and its Affiliates and sub-licensees and their
respective officers, directors, employees, researchers and representatives
(together, the “Celldex Indemnitees”) against all Third Party Claims that may
be asserted against or suffered by any of the Celldex Indemnitees arising
solely out of breach by Southampton or its Affiliates of the representations
and warranties of Clause 7.1, provided, however, that such indemnification
shall not apply to any Claim to the extent directly attributable to (i) negligent
activities or intentional misconduct of the Celldex Indemnitees, or (ii) the
settlement of a claim, suit, action, or demand by Celldex Indemnitees without
the prior approval of Southampton.

 

7.3.3.       As a condition precedent to a Party’s (the “Indemnifying Party”)
obligations to indemnify, defend and hold harmless any Southampton Indemnitee
or Celldex Indemnitee (collectively, an “Indemnified Party”) pursuant to Clause
7.3.1 or 7.3.2 above, the Indemnified Party shall immediately notify in
writing, and provide a copy to, the Indemnifying Party of any complaint,
summons or other written or verbal notice that the Indemnified Party receives
of any claim that may be subject to such obligations.  An Indemnified Party’s failure to deliver
written notice, to the extent prejudicial to the Indemnifying Party’s ability
to defend such claim, shall relieve the Indemnifying Party of liability to the
Indemnified Party under Clause 7.3.1 or 7.3.2 hereof, as applicable.  The Indemnified Party shall allow the
Indemnifying Party the control of the defence and settlement thereof, and
assist in such defence and settlement as the Indemnifying Party may reasonably
request in connection with the defence and settlement of the claim (at the
Indemnifying Party’s sole cost and expense), and the Indemnifying Party shall
assume the defence thereof with counsel mutually satisfactory to the Parties;
provided, that the 

 

31

 

Indemnified
Party shall have the right to participate in any such proceeding with counsel
of its choosing at its own expense.  No
Indemnified Party may settle a claim or action covered by this Clause 7 without
the prior written consent of the Indemnifying Party (which consent shall not be
unreasonably withheld, delayed or conditioned). 
Any payment made by an Indemnified Party in violation of this Clause 7.3.3
to settle any such claim or action shall be at its own cost and expense.

 

7.3.4.       Limitation of liability. Except for the
obligations set forth in this clause 7, and unless otherwise expressly stated
in this agreement, in no event will either party be liable to the other for
lost revenue, lost profits, or lost savings or any consequential, incidental,
special exemplary, punitive or indirect damages to the other party, however
caused, in connection with this agreement, even if the party has notice of the
possibility of such damages.

 

8                                         Duration and Termination

 

8.1                                 This
Agreement shall come into effect on the Effective Date and, unless terminated
earlier in accordance with this Clause 8, shall continue in force on a
country-by-country basis and expire on the later of (the “Term”):

(i) the
date of expiration or termination of the last to expire or last to terminate
Valid Claim that Covers the Licensed Products on sale in such country on such
date of expiration or termination of such Valid Claim; or

(ii) the
date that is ten (10) years after the date of the first commercial sale of
the first Licensed Product in such country.

 

8.2                                 Early
termination

 

8.2.1        Without prejudice to any other right or remedy, any Party may
terminate this Agreement at any time by notice in writing to the other Party (“Other
Party”), such notice to take effect as specified in the notice:

 

8.2.1.1.    if the Other Party is in material breach of this Agreement and, in
the 

 

32

 

case of
a breach capable of remedy within 90 days, the breach is not remedied within 90
days of the Other Party receiving notice specifying the breach and requiring
its remedy; or

 

8.2.1.2     if: (A) the Other Party becomes insolvent or unable to pay its
debts as and when they become due, (B) an order is made or a resolution is
passed for the winding up of the Other Party (other than voluntarily for the
purpose of solvent amalgamation or reconstruction), (C) a liquidator,
administrator, administrative receiver, receiver or trustee is appointed in
respect of the whole or any part of the Other Party’s assets or business, (D) the
Other Party makes any composition with its creditors, (E) the Other Party
ceases to continue its business, or (F) as a result of debt and/or
maladministration the other Party takes or suffers any similar or analogous
action.

 

8.2.2        Southampton may terminate this
Agreement by giving written notice to Celldex in accordance with the provisions
of Clause 5.4

 

8.2.3        Celldex may terminate this Agreement at any time by providing 6
months notice in writing to Southampton. 
A Party’s right of termination under this Agreement, and the exercise of
any such right, shall be without prejudice to any other right or remedy
(including any right to claim damages) that such Party may have in the event of
a breach of contract or other default by the other Party.

 

8.3                        Consequences
of termination

 

8.3.1        Upon termination of this Agreement by expiry under Clause 8.1, or by
Celldex pursuant to Clause 8.2.1, the licenses granted to Celldex under Clause
2 shall become non-exclusive, perpetual, irrevocable, fully-paid up and royalty
free.

 

8.3.2       Upon termination of this Agreement by Southampton pursuant to Clause
8.2.1 or 8.2.2, or by Celldex pursuant to Clause 8.2.3, then:

 

33

 

8.3.2.1     Celldex and its sub-licensees shall be entitled to sell, use or
otherwise dispose of (subject to payment of royalties under Clause 4) any
unsold or unused stocks of the Licensed Products for a period of 6 months
following the date of termination;

 

8.3.2.2     subject to 8.3.2.1 above, Celldex shall no longer be licensed to use
or otherwise exploit in any way, either directly or indirectly, the Patents, in
so far and for as long as any of the Patents remains in force, or the Know-how;

 

8.3.2.3     subject to 8.3.2.1 above, Celldex shall consent to the cancellation
of any formal license granted to it, or of any registration of it in any
register, in relation to any of the Patents;

 

8.3.2.4     subject as provided in this Clause
8.3, and except in respect of any accrued rights, neither Party shall be under
any further obligation to the other; and

 

8.3.2.5     Notwithstanding anything to the contrary contained herein, in the
event the Agreement or any license right thereunder terminates for any reason
other than an uncured breach by Celldex that is caused directly or indirectly
by its sub-licensee, and the sub-license to such sub-licensee is in force and
effect as of the date of such termination, such sub-licensee shall automatically
become a direct licensee of Southampton under the terms and conditions of this
Agreement,  such direct license to be of
the same scope licensed by Celldex to such sub-licensee under such sub-license,
provided that nothing herein shall be construed to require (i) Southampton
to assume obligations to such sub-licensee that are beyond those obligated to
Celldex hereunder, or (ii) such sub-licensee to make any payments to
Southampton that are in excess of those amounts that would have been due from
Celldex to Southampton under this Agreement had this Agreement not been
terminated. Southampton agrees that any 

 

34

 

sub-licensee
under this Agreement shall be deemed to be a Third Party beneficiary of the
provisions of this Section 8.3.2.5 as such provisions apply to such
sub-licensee. Southampton as a charitable body it retains the right to decline
taking on a sub licensee as a direct licensee if that sub licensee is a Tobacco
Party or involved in the weapons industry or is known to be involved in
unethical business practices such as exploitation of child labour .

 

8.3.3        Upon termination of this
Agreement by Southampton pursuant to Clause 8.2.1 or 8.2.2, then at Southampton’s
written request, received by Celldex within fourteen (14) days after the
effective termination date, the Parties shall negotiate in good faith the terms
of an agreement between them on reasonable commercial terms taking full account
in such circumstances of the stage of development and Celldex’s financial
investment in the Licensed Products to that stage, as well as other factors,
under which Celldex would:

 

8.3.3.1     transfer to Southampton exclusively all clinical and other data
relating to the development of Licensed Products;

 

8.3.3.2     to the extent possible, seek to have any product licenses, pricing
approvals and other permits and applications transferred into the name of
Southampton or its nominee;

 

8.3.3.3     grant Southampton an exclusive, worldwide license, with the rights
to grant sub-licenses, under any non-severable improvements and other
intellectual property owned or controlled by Celldex relating to the Licensed
Products; and

 

8.3.3.4     grant Southampton and/or its nominee the right to continue to use
any product name that had been applied to the Licensed Products prior to
termination of this Agreement.

 

8.3.4        Upon termination of this Agreement for any reason the provisions of
clauses 3, 4 (solely in respect of sales made prior to termination or under
clause 

 

35

 

8.3.2(1)),
7.3, 8.3 and 9 shall remain in force. 
Upon expiration or termination of this Agreement pursuant to clause 8.1,
or termination by Celldex pursuant to clause 8.2.1, clause 2 shall also remain
in force.

 

9                                         General

 

9.1                                 Force majeure

 

No Party shall
have any liability or be deemed to be in breach of this Agreement for any
delays or failures in performance of this Agreement which result from
circumstances beyond the reasonable control of that Party, including without
limitation labour disputes involving that Party.  The Party affected by such circumstances
shall promptly notify the other Parties in writing when such circumstances
cause a delay or failure in performance and when they cease to do so.

 

9.2                                 Severability

 

If any provision of this
Agreement is declared by any judicial or other competent authority to be void,
voidable, illegal or otherwise unenforceable then the remaining provisions of
this Agreement shall continue in full force and effect.  The judicial or other competent authority
making such determination shall have the power to limit, construe or reduce the
duration, scope, activity and/or area of such provision, and/or delete specific
words or phrases as necessary to render such provision enforceable.

 

9.3                                 Waiver

 

Failure or delay by any
party to exercise any right or remedy under this Agreement shall not be deemed
to be a waiver of that right or remedy, or prevent it from exercising that or
any other right or remedy on that occasion or on any other occasion.

 

9.4                                 Entire
Agreement and Amendments

 

9.4.1        This Agreement constitutes
the entire Agreement and understanding of the parties relating to the subject
matter of this Agreement and supersedes all 

 

36

 

prior oral or written
agreements, representations, understandings or arrangements between the parties

 

9.4.2        The parties acknowledge
that they are not relying on any agreement, understanding, arrangement,
warranty, representation or term which is not set out in this Agreement

 

9.4.3        Nothing in this Clause 9.4
shall operate to:

 

9.4.3.1     exclude any provision
implied into this Agreement by law and which may not be excluded by law; or

 

9.4.3.2     limit or exclude any
liability, right or remedy to a greater extent than is permissible under law.

 

9.4.4        No change may be made to
this Agreement except in writing signed by the duly authorised representatives
of each of the parties.

 

9.5                                 Relationship of
the Parties

 

9.5.1        Nothing in this Agreement
shall create, evidence or imply any agency, partnership or joint venture
between the parties.

 

9.5.2        No party shall act or
describe itself as an agent of any of the other parties nor shall a party
represent that it has any authority to make commitments or the behalf of the
other party.

 

9.6                                 Assignment and
Sub-contracting

 

This Agreement
is personal to the parties and neither party shall assign, transfer,
sub-license, sub-contract, charge or otherwise deal in its rights or
obligations under this Agreement except as expressly provided in the Agreement,
except that Celldex may assign or transfer its rights or obligations to any
purchaser of Celldex or of the relevant business or assets of Celldex to which
the rights or obligations under this Agreement relate.

 

37

 

9.7        Interpretation.

 

In this Agreement:

 

9.7.1        the headings are used for convenience only and shall not affect its
interpretation;

 

9.7.2        references to persons shall include incorporated and unincorporated
persons; references to the singular include the plural and vice versa; and
references to the masculine include the feminine;

 

9.7.3        references to Clauses and
Schedules mean clauses of, and schedules to, this Agreement;

 

9.7.4        references in this Agreement to termination shall include
termination by expiry; and

 

9.7.5        where the word “including” is used it shall be understood as meaning
“including without limitation”.

 

9.8        Notices

 

9.8.1        Any notice to be given under this Agreement shall be in writing and
shall be sent by first class mail or air mail, or by fax (confirmed by first
class mail or air mail) to the address of the relevant Party set out below:

 

Mylène Ployaert,

Assistant Director, Centre for Enterprise &
Innovation,

John Fairclough Centre, Building #27

University of Southampton

Highfield, Southampton

SO17 1BJ

 

Celldex Research Corporation

Senior Vice President, Business Development

222 Cameron Drive

Suite 400

Phillipsburg, NJ 08865

 

38

 

Celldex Therapeutics, Inc.

Chief Executive Officer

119 Fourth Avenue

Needham, MA 02494-2725

 

9.8.2        Notices sent as above shall be
deemed to have been received three working days after the day of posting (in
the case of inland first class mail), or seven working days after the date of
posting (in the case of air mail), or on the next working day after
transmission (in the case of fax messages, but only if a transmission report is
generated by the sender’s fax machine recording a message from the recipient’s
fax machine, confirming that the fax was sent to the number indicated above and
confirming that all pages were successfully transmitted).

 

9.9        Publicity

 

Either party has the right
to publish that they have entered into this agreement and information about
this agreement and the party wishing to publish such information shall send a
copy to the other party for reference at least twenty four hours prior to
publication.

 

9.10      Law and
Jurisdiction.

 

The validity, construction
and performance of this Agreement shall be governed by English law and the
parties accept the exclusive jurisdiction of the English courts in respect
thereto.

 

9.11      Further
action

 

Each Party
agrees to execute, acknowledge and deliver such further instruments, and 

 

39

 

do all further
similar acts, as may be necessary or appropriate to carry out the purposes and
intent of this Agreement.  At the request of Celldex, Southampton
agrees to execute any such further documents or other instruments as may be
necessary to register or record the exclusive licenses herein at any and all
Patent Offices as may be deemed appropriate by Celldex in its discretion, and
Southampton shall cooperate with Celldex as necessary to effect such
registration or recordal.

 

9.12      Third parties

 

Except for the rights of CRT as provided in Clause
2.4, the rights of the Southampton Indemnitees as provided in Clause 7.3 and
the rights of sub-licensees under Clause 8.3.2.5, which may be enforced by
those persons in their own right, this Agreement does not create any right
enforceable by any person who is not a party to it (“Third Party”) under the
Contracts (Rights of Third Parties) Act 1999, but this Clause does not affect
any right or remedy of a Third Party which exists or is available apart from
that Act.  The Parties may amend, renew,
terminate or otherwise vary all or any of the provisions of this Agreement,
including Clauses 7.3 and 8.3.2.5, without the consent of the Indemnitees.

 

[The
Remainder of this Page Intentionally Left Blank]

 

40

 

AGREED by the
Parties through their authorised signatories:-

 

	
  For and
  on behalf of

  	
   

  	
  For and
  on behalf of

  
	
   

  	
   

  	
   

  
	
  University
  of Southampton

  	
   

  	
  Celldex
  Therapeutics, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Sue
  Sundstrom

  	
   

  	
  /s/ Anthony
  S. Marucci

  
	
  Signed

  	
   

  	
  Signed

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Sue Sundstrom

  	
   

  	
  Anthony S.
  Marucci

  
	
  Print Name

  	
   

  	
  Print Name

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Director,
  Life Science Enterprise

  	
   

  	
  President
  and CEO

  
	
  Title

  	
   

  	
  Title

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  24
  November 2008

  	
   

  	
  November 11,
  2008

  
	
  Date

  	
   

  	
  Date

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  For and
  on behalf of

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Celldex
  Research Corporation

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Anthony
  S. Marucci

  	
   

  	
   

  
	
  Signed

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Anthony S.
  Marucci

  	
   

  	
   

  
	
  Print Name

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  President
  and CEO

  	
   

  	
   

  
	
  Title

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  November 11,
  2008

  	
   

  	
   

  
	
  Date

  	
   

  	
   

  

 

41

 

SCHEDULE 1

 

Part A — Patents

 

[*]

[*]

 

Part B — Materials
and Know-how

 

Materials to include: [*]

 

Know-How to include:

 

Know-how in
developing functional [*] that is:

 

1)                                      [*]

 

2)                                     [*]

 

3)                                     [*]

 

4)                                     [*]

 

5)                                     [*]

 

AND excluding
any generic methods or information which have applications outside the Field.

 

*Confidential

 

42

 

SCHEDULE 2

 

CRT AGREEMENT

 

43

 

SCHEDULE 3

 

MTA’s

 

44Exhibit 10.14

 

UTSTARCOM,
INC.

 

2006
EQUITY INCENTIVE PLAN

 

(As
Amended and Restated February 18, 2009)

 

1.                                       Purposes
of the Plan.  The purposes of this
Plan are:

 

·                                          to
attract and retain the best available personnel for positions of substantial
responsibility,

 

·                                          to
provide incentives to individuals who perform services to the Company, and

 

·                                          to
promote the success of the Company’s business.

 

The
Plan permits the grant of Incentive Stock Options, Nonstatutory Stock Options,
Restricted Stock, Restricted Stock Units, Stock Appreciation Rights,
Performance Units, Performance Shares and other stock or cash awards as the
Administrator may determine.

 

2.                                       Definitions.  As used herein, the following definitions
will apply:

 

(a)                                  “Administrator”
means the Board or any of its Committees as will be administering the Plan, in
accordance with Section 4 of the Plan.

 

(b)                                 “Affiliate” means any corporation or
any other entity (including, but not limited to, partnerships and joint
ventures) controlling, controlled by, or under common control with the Company.

 

(c)                                  “Annual
Revenue” means the Company’s or a business unit’s net sales for the Performance
Period, determined in accordance with generally accepted accounting principles;
provided, however, that prior to the Performance Period, the Administrator
shall determine whether any significant item(s) shall be excluded or
included from the calculation of Annual Revenue with respect to one or more
Participants.

 

(d)                                 “Applicable
Laws” means the requirements relating to the administration of equity-based
awards under U.S. state corporate laws, U.S. federal and state securities laws,
the Code, any stock exchange or quotation system on which the Common Stock is
listed or quoted and the applicable laws of any foreign country or jurisdiction
where Awards are, or will be, granted under the Plan.

 

(e)                                  “Award”
means, individually or collectively, a grant under the Plan of Options,
Restricted Stock, Restricted Stock Units, Stock Appreciation Rights,
Performance Units, Performance Shares and other stock or cash awards as the
Administrator may determine.

 

 

(f)                                    “Award
Agreement” means the written or electronic agreement setting forth the
terms and provisions applicable to each Award granted under the Plan.  The Award Agreement is subject to the terms
and conditions of the Plan.

 

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

 

(h)                                 “Cash
Collections” means the actual cash or other freely negotiable
consideration, in any currency, received in satisfaction of accounts receivable
created by the sale of any Company products or services.

 

(i)                                     “Change
in Control”  Before the February 18,
2009 amendment and restatement of the Plan, Change in Control means the
occurrence of any of the following events means the occurrence of any of the
following events:

 

(i)            Any “person” (as such term is used
in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial
owner” (as defined in Rule 13d-3 of the Exchange Act), directly or
indirectly, of securities of the Company representing fifty percent (50%) or
more of the total voting power represented by the Company’s then outstanding
voting securities;

 

(ii)           The consummation of the sale or
disposition by the Company of all or substantially all of the Company’s assets;

 

(iii)          A change in the composition of the
Board occurring within a two-year period, as a result of which fewer than a
majority of the directors are Incumbent Directors.  “Incumbent Directors” means directors who
either (A) are Directors as of the effective date of the Plan, or (B) are
elected, or nominated for election, to the Board with the affirmative votes of
at least a majority of the Incumbent Directors at the time of such election or
nomination (but will not include an individual whose election or nomination is
in connection with an actual or threatened proxy contest relating to the
election of directors to the Company); or

 

(iv)          The consummation of a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity or its parent) at least fifty percent (50%) of the total
voting power represented by the voting securities of the Company or such
surviving entity or its parent outstanding immediately after such merger or
consolidation.

 

On or after the February 18,
2009 amendment and restatement of the Plan, Change in Control means the
occurrence of any of the following events:

 

(i)            A change in the ownership of the
Company  which occurs on the date
that any one person, or more than one person acting as a group, (“Person”)
acquires ownership of the stock of the Company that, together with the stock
held by such Person, constitutes more than fifty percent (50%) of the total
voting power of the stock of the Company; provided, however, that for purposes
of this subsection (i), the acquisition of additional stock by any one Person,
who is considered to own more than fifty percent (50%) of the total voting
power of the stock of the Company will not be considered a Change in Control;
or

 

2

 

(ii)           A change in the effective control of the Company which occurs on the
date that a majority of members of the Board is replaced during any twelve (12)
month period by Directors whose appointment or election is not endorsed by a
majority of the members of the Board prior to the date of the appointment or
election.  For purposes of this clause
(ii), if any Person is considered to effectively control the Company, the
acquisition of additional control of the Company by the same Person will not be
considered a Change in Control; or

 

(iii)          A change in the ownership of a substantial portion of the Company’s
assets which occurs on the date that any Person acquires (or has acquired
during the twelve (12) month period ending on the date of the most recent
acquisition by such person or persons) assets from the Company that have a
total gross fair market value equal to or more than fifty percent (50%) of the
total gross fair market value of all of the assets of the Company immediately
prior to such acquisition or acquisitions; provided, however, that for purposes
of this subsection (iii), the following will not constitute a change in the
ownership of a substantial portion of the Company’s assets: (A) a transfer
to an entity that is controlled by the Company’s stockholders immediately after
the transfer, or (B) a transfer of assets by the Company to: (1) a
stockholder of the Company (immediately before the asset transfer) in exchange
for or with respect to the Company’s stock, (2) an entity, fifty percent
(50%) or more of the total value or voting power of which is owned, directly or
indirectly, by the Company, (3) a Person, that owns, directly or
indirectly, fifty percent (50%) or more of the total value or voting power of
all the outstanding stock of the Company, or (4) an entity, at least fifty
percent (50%) of the total value or voting power of which is owned, directly or
indirectly, by a Person described in this subsection (iii)(B)(3).  For purposes of this subsection (iii), gross
fair market value means the value of the assets of the Company, or the value of
the assets being disposed of, determined without regard to any liabilities associated
with such assets.

 

For purposes of this Section 2(i),
Persons will be considered to be acting as a group if they are owners of a
corporation that enters into a merger, consolidation, purchase or acquisition
of stock, or similar business transaction with the Company.

 

Notwithstanding the
foregoing provisions of this definition, a transaction shall not be deemed a
Change in Control unless the transaction qualifies as a change in control event
within the meaning of Code Section 409A.

 

(j)                                     “Code”
means the Internal Revenue Code of 1986, as amended.  Any reference to a section of the Code herein
will be a reference to any successor or amended section of the Code.

 

(k)                                  “Committee”
means a committee of Directors or of
other individuals satisfying Applicable Laws appointed by the Board in
accordance with Section 4 hereof.

 

(l)                                     “Common
Stock” means the common stock of the Company.

 

(m)                               “Company”
means UTStarcom, Inc., a Delaware corporation, or any successor thereto.

 

(n)                                 “Consultant”
means any person, including an advisor, engaged by the Company or its
Affiliates to render services to such entity.

 

3

 

(o)           “Customer Satisfaction MBOs”
means as to any Participant, the objective and measurable individual goals set
by a “management by objectives” process and approved by the Administrator,
which goals relate to the satisfaction of external or internal customer
requirements.

 

(p)           “Determination Date” means the
latest possible date that will not jeopardize the qualification of an Award
granted under the Plan as “performance-based compensation” under Section 162(m) of
the Code.

 

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

 

(r)            “Disability” means total and
permanent disability as defined in Section 22(e)(3) of the Code, provided that in the case of Awards other
than Incentive Stock Options, the Administrator in its discretion may determine
whether a permanent and total disability exists in accordance with uniform and
non-discriminatory standards adopted by the Administrator from time to time.

 

(s)           “Earnings Per Share” means as
to any Performance Period, the Company’s Net Income or a business unit’s Pro
Forma Net Income, divided by a weighted average number of Shares outstanding
and dilutive common equivalent Shares deemed outstanding.

 

(t)            “Employee” means any person,
including Officers and Directors, employed by the Company or its Affiliates.  Neither service as a Director nor payment of
a director’s fee by the Company will be sufficient to constitute “employment”
by the Company.

 

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

 

(v)           “Fair Market Value” means, as
of any date, the value of Common Stock as the Administrator may determine in
good faith by reference to the price of such stock on any established stock
exchange or a national market system on the day of determination if the Common
Stock is so listed on any established stock exchange or a national market
system.  If the Common Stock is not
listed on any established stock exchange or a national market system, the value
of the Common Stock will be determined by the Administrator in good faith.

 

(w)          “Fiscal Year” means the fiscal year of the Company.

 

(x)            “Incentive Stock Option”
means an Option that by its terms qualifies and is otherwise intended to
qualify as an incentive stock option within the meaning of Section 422 of
the Code and the regulations promulgated thereunder.

 

(y)           “Net Income” means as to any Performance
Period, the income after taxes of the Company determined in accordance with generally
accepted accounting principles, provided that prior to the Performance Period,
the Administrator shall determine whether any significant item(s) shall be
included or excluded from the calculation of Net Income with respect to one or
more participants.

 

(z)            “New Orders” means as to any Performance
Period, the firm orders for a system, product, part, or service that are being
recorded for the first time as defined in the Company’s order recognition
policy.

 

4

 

(aa)         “Nonstatutory Stock Option”
means an Option that by its terms does not qualify or is not intended to
qualify as an Incentive Stock Option.

 

(bb)         “Officer” means a person who is
an officer of the Company within the meaning of Section 16 of the Exchange
Act and the rules and regulations promulgated thereunder.

 

(cc)         “Operating Profit” means as to
any Performance Period, the difference between revenue and related costs and
expenses, excluding income derived from sources other than regular activities
and before income deductions.

 

(dd)         “Option” means a stock option
granted pursuant to the Plan.

 

(ee)         “Parent” means a “parent
corporation,” whether now or hereafter existing, as defined in Section 424(e) of
the Code.

 

(ff)           “Participant” means the holder of an outstanding Award.

 

(gg)         “Performance Goals” will have
the meaning set forth in Section 11 of the Plan.

 

(hh)         “Performance Period” means any
Fiscal Year of the Company or such other period as determined by the
Administrator in its sole discretion.

 

(ii)           “Performance Share” means an
Award denominated in Shares which may be earned in whole or in part upon
attainment of Performance Goals or other vesting criteria as the Administrator
may determine pursuant to Section 10.

 

(jj)           “Performance Unit” means an
Award which may be earned in whole or in part upon attainment of Performance
Goals or other vesting criteria as the Administrator may determine and which
may be settled for cash, Shares or other securities or a combination of the
foregoing pursuant to Section 10.

 

(kk)         “Period of Restriction” means
the period during which the transfer of Shares of Restricted Stock are subject
to restrictions and therefore, the Shares are subject to a substantial risk of
forfeiture.  Such restrictions may be
based on the passage of time, the achievement of target levels of performance,
or the occurrence of other events as determined by the Administrator.

 

(ll)           “Plan” means this 2006 Equity
Incentive Plan.

 

(mm)       “Pro Forma Net Income” means as to
any business unit for any Performance Period, the Net Income of such business
unit, minus allocations of designated corporate expenses.

 

(nn)         “Product Shipments” means as to
any Performance Period, the quantitative and measurable number of units of a
particular product that shipped during such Performance Period.

 

(oo)         “Restricted Stock” means Shares issued pursuant to an Award of
Restricted Stock under Section 8 of the Plan, or issued pursuant to the
early exercise of an Option.

 

5

 

(pp)         “Restricted Stock Unit” means a bookkeeping entry representing
an amount equal to the Fair Market Value of one Share, granted pursuant to Section 9.  Each Restricted Stock Unit represents an
unfunded and unsecured obligation of the Company.

 

(qq)         “Return on Designated Assets”
means as to any Performance Period, the Pro Forma Net Income of a business
unit, divided by the average of beginning and ending business unit designated
assets, or Net Income of the Company, divided by the average of beginning and ending
designated corporate assets.

 

(rr)           “Return on Equity” means, as
to any Performance Period, the percentage equal to the value of the Company’s
or any business unit’s common stock investments at the end of such Performance
Period, divided by the value of such common stock investments at the start of
such Performance Period, excluding any common stock investments so designated
by the Administrator.

 

(ss)         “Return on Sales” means as to
any Performance Period, the percentage equal to the Company’s Net Income or the
business unit’s Pro Forma Net Income, divided by the Company’s or the business
unit’s Annual Revenue.

 

(tt)           “Rule 16b-3” means Rule 16b-3
of the Exchange Act or any successor to Rule 16b-3, as in effect when
discretion is being exercised with respect to the Plan.

 

(uu)         “Section 16(b)” means Section 16(b) of
the Exchange Act.

 

(vv)         “Service Provider” means an
Employee, Director or Consultant.

 

(ww)       “Share” means a share of the
Common Stock, as adjusted in accordance with Section 14 of the Plan.

 

(xx)          “Stock Appreciation Right”
means an Award, granted alone or in connection with an Option, that pursuant to
Section 7 is designated as a Stock Appreciation Right.

 

(yy)         “Subsidiary” means a “subsidiary
corporation,” whether now or hereafter existing, as defined in Section 424(f) of
the Code.

 

(zz)          “Successor Corporation” has the
meaning given to such term in Section 14(c) of the Plan.

 

3.                                       Stock Subject to the Plan.

 

(a)           Stock Subject to the Plan.  Subject to the provisions of Section 14 of the Plan, the maximum aggregate
number of Shares that may be awarded and sold under the Plan is 4,500,000
Shares plus (i) any
Shares that, as of the date of stockholder approval of this Plan, have been
reserved but not issued pursuant to any awards granted under the Company’s 1997
Stock Plan (the “1997 Plan”), the Company’s Amended 2001 Director Option
Plan (the “2001 Plan”), and the Company’s 2003 Non-Statutory Stock
Option Plan (the “2003 Plan”) and are not subject to any awards granted
thereunder, and (ii) any Shares subject to stock options or similar awards
granted under the 1997 Plan, the 2001 Plan, and the 2003 Plan that expire or otherwise
terminate without 

 

6

 

having been exercised in
full and Shares issued pursuant to awards granted under the 1997 Plan, the 2001
Plan, and the 2003 Plan that are forfeited to or repurchased by the Company.  The Shares may be authorized, but unissued,
or reacquired Common Stock.

 

(b)           Lapsed Awards.  If an Award expires or becomes unexercisable
without having been exercised in full, or, with respect to Restricted Stock,
Restricted Stock Units, Performance Shares or Performance Units, is forfeited
to or repurchased by the Company, the unpurchased Shares (or for Awards other
than Options and Stock Appreciation Rights, the forfeited or repurchased Shares)
which were subject thereto will become available for future grant or sale under
the Plan (unless the Plan has terminated). 
With respect to
Stock Appreciation Rights, all of the Shares covered by the Award (that is,
Shares actually issued pursuant to a Stock Appreciation Right, as well as the
Shares that represent payment of the exercise price) will cease to be available
under the Plan.  However, Shares
that have actually been issued under the Plan under any Award will not be
returned to the Plan and will not become available for future distribution
under the Plan; provided, however, that if unvested Shares of Restricted Stock,
Restricted Stock Units, Performance Shares or Performance Units are repurchased
by the Company or are forfeited to the Company, such Shares will become
available for future grant under the Plan. 
Shares used to pay the tax and exercise price of an Award will not become
available for future grant or sale under the Plan.  To the extent an Award under the Plan is paid
out in cash rather than Shares, such cash payment will not result in reducing
the number of Shares available for issuance under the Plan.  Notwithstanding the foregoing and, subject to
adjustment provided in Section 14, the maximum number of Shares that may
be issued upon the exercise of Incentive Stock Options will equal the aggregate
Share number stated in Section 3(a), plus, to the extent allowable under Section 422
of the Code, any Shares that become available for issuance under the Plan under
this Section 3(b).

 

4.                                       Administration
of the Plan.

 

(a)                                  Procedure.

 

(i)            Multiple Administrative Bodies.  Different Committees with respect to
different groups of Service Providers may administer the Plan.

 

(ii)           Section 162(m).  To the extent that the Administrator
determines it to be desirable to qualify Awards granted hereunder as “performance-based
compensation” within the meaning of Section 162(m) of the Code, the
Plan will be administered by a Committee of two or more “outside directors”
within the meaning of Section 162(m) of the Code.

 

(iii)          Rule 16b-3.  To the extent desirable to qualify
transactions hereunder as exempt under Rule 16b-3, the transactions
contemplated hereunder will be structured to satisfy the requirements for
exemption under Rule 16b-3.

 

(iv)          Other Administration.  Other than as provided above, the Plan will
be administered by (A) the Board or (B) a Committee, which committee
will be constituted to satisfy Applicable Laws.

 

(b)                                 Powers
of the Administrator.  Subject to the
provisions of the Plan, and in the case of a Committee, subject to the specific
duties delegated by the Board to such Committee, the Administrator will have
the authority, in its discretion:

 

7

 

(i)            to determine the Fair Market Value;

 

(ii)           to select the Service Providers to
whom Awards may be granted hereunder;

 

(iii)          to determine the terms and
conditions, not inconsistent with the terms of the Plan, of any Award granted
hereunder;

 

(iv)          to construe and interpret the terms of
the Plan and Awards granted pursuant to the Plan;

 

(v)           to prescribe, amend and rescind rules and
regulations relating to the Plan, including rules and regulations relating
to sub-plans established for the purpose of satisfying applicable foreign laws;

 

(vi)          to modify or amend each Award (subject
to Section 19(c) of
the Plan).  Notwithstanding the previous
sentence, the Administrator may not modify or amend an Option or Stock
Appreciation Right to reduce the exercise price of such Option or Stock
Appreciation Right after it has been granted (except for adjustments made
pursuant to Section 14), and neither may the Administrator cancel any
outstanding Option or Stock Appreciation Right and immediately replace it with a
new Option or Stock Appreciation Right with a lower exercise price;

 

(vii)         to authorize any person to execute on behalf
of the Company any instrument required to effect the grant of an Award
previously granted by the Administrator;

 

(viii)        to allow a Participant to defer the
receipt of the payment of cash or the delivery of Shares that would otherwise
be due to such Participant under an Award pursuant to such procedures as the
Administrator may determine; and

 

(ix)           to make all other determinations
deemed necessary or advisable for administering the Plan.

 

(c)                                  Effect
of Administrator’s Decision. 
The Administrator’s decisions, determinations and interpretations will
be final and binding on all Participants and any other holders of Awards.

 

5.                                       Eligibility.  Nonstatutory Stock Options, Restricted Stock,
Restricted Stock Units, Stock Appreciation Rights, Performance Units, Performance
Shares and such other cash or stock awards as the Administrator determines may
be granted to Service Providers.  Incentive Stock Options may be granted only
to employees of the Company or any Parent or Subsidiary of the Company.

 

6.                                       Stock
Options.

 

(a)                                  Limitations.  Each Option will be designated in the Award
Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.  However, notwithstanding such designation, to
the extent that the aggregate Fair Market Value of the Shares with respect to
which Incentive Stock Options are exercisable for the first time by the
Participant during any calendar year 

 

8

 

(under all plans of the Company and any Parent or
Subsidiary) exceeds $100,000, such Options will be treated as Nonstatutory
Stock Options.  For purposes of this Section 6(a),
Incentive Stock Options will be taken into account in the order in which they
were granted.  The Fair Market Value of
the Shares will be determined as of the time the Option with respect to such
Shares is granted.

 

(b)                                 Number
of Shares.  The Administrator will
have complete discretion to determine the number of Options granted to any
Participant, provided that during any Fiscal Year, no Participant will be
granted Options covering more than 1,000,000 Shares.  Notwithstanding the foregoing limitation, in
connection with a Participant’s initial service as an Employee, an Employee may
be granted Options covering up to an additional 2,000,000 Shares.

 

(c)                                  Term
of Option.  The Administrator will
determine the term of each Option in its sole discretion.  Any Option granted under the Plan will not be
exercisable after the expiration of seven (7) years from the date of grant
or such shorter term as may be provided in the Award Agreement.  Moreover, in the case of an Incentive Stock
Option granted to a Participant who, at the time the Incentive Stock Option is granted,
owns stock representing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or any Parent or
Subsidiary, the term of the Incentive Stock Option will be five (5) years
from the date of grant or such shorter term as may be provided in the Award
Agreement.

 

(d)                                 Option
Exercise Price and Consideration.

 

(i)            Exercise Price.  The per share exercise price for the Shares
to be issued pursuant to exercise of an Option will be determined by the
Administrator, but will
be no less than 100% of the Fair Market Value per Share on the date of
grant.  In addition, in the case
of an Incentive Stock Option granted to an Employee who, at the time the
Incentive Stock Option is granted, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price will be no less than 110% of
the Fair Market Value per Share on the date of grant.  Notwithstanding
the foregoing provisions of this Section 6(c), Options may be granted with
a per Share exercise price of less than 100% of the Fair Market Value per Share
on the date of grant pursuant to a transaction described in, and in a manner
consistent with, Section 424(a) of the Code.  The Administrator may not modify or amend an
Option to reduce the exercise price of such Option after it has been granted
(except for adjustments made pursuant to Section 14 of the Plan) nor may
the Administrator cancel any outstanding Option and replace it with a new
Option, Stock Appreciation Right, or other Award with a lower exercise price,
unless, in either case, such action is approved by the Company’s stockholders.

 

(ii)           Waiting Period and Exercise Dates.  At the time an Option is granted, the Administrator
will fix the period within which the Option may be exercised and will determine
any conditions that must be satisfied before the Option may be exercised.

 

(iii)          Form of Consideration.  The Administrator will determine the
acceptable form(s) of consideration for exercising an Option, including
the method of payment, to the extent permitted by Applicable Laws.

 

9

 

(e)                                  Exercise
of Option.

 

(i)            Procedure for Exercise; Rights as
a Stockholder.  Any Option granted
hereunder will be exercisable according to the terms of the Plan and at such
times and under such conditions as determined by the Administrator and set
forth in the Award Agreement.  An Option
may not be exercised for a fraction of a Share.

 

An Option will be deemed
exercised when the Company receives: (i) notice of exercise (in such form
as the Administrator specify from time to time) from the person entitled to
exercise the Option, and (ii) full payment for the Shares with respect to
which the Option is exercised (together with an applicable withholding
taxes).  No adjustment will be made for a
dividend or other right for which the record date is prior to the date the
Shares are issued, except as provided in Section 14 of the Plan.

 

(ii)           Termination of Relationship as a
Service Provider.  If a Participant
ceases to be a Service Provider, other than upon the Participant’s termination
as the result of the Participant’s death or Disability, the Participant may
exercise his or her Option within such period of time as is specified in the
Award Agreement to the extent that the Option is vested on the date of
termination (but in no event later than the expiration of the term of such
Option as set forth in the Award Agreement). 
In the absence of a specified time in the Award Agreement, the Option
will remain exercisable for three (3) months following the Participant’s
termination.  Unless otherwise provided
by the Administrator, if on the date of termination the Participant is not
vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option will revert to the Plan. 
If after termination the Participant does not exercise his or her Option
within the time specified by the Administrator, the Option will terminate, and
the Shares covered by such Option will revert to the Plan.

 

(iii)          Disability of Participant.  If a Participant ceases to be a Service
Provider as a result of the Participant’s Disability, the Participant may
exercise his or her Option within such period of time as is specified in the
Award Agreement to the extent the Option is vested on the date of termination
(but in no event later than the expiration of the term of such Option as set
forth in the Award Agreement).  In the
absence of a specified time in the Award Agreement, the Option will remain
exercisable for twelve (12) months following the Participant’s
termination.  Unless otherwise provided
by the Administrator, if on the date of termination the Participant is not
vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option will revert to the Plan. 
If after termination the Participant does not exercise his or her Option
within the time specified herein, the Option will terminate, and the Shares
covered by such Option will revert to the Plan.

 

(iv)          Death of Participant.  If a Participant dies while a Service
Provider, the Option may be exercised following the Participant’s death within
such period of time as is specified in the Award Agreement to the extent that
the Option is vested on the date of death (but in no event may the option be
exercised later than the expiration of the term of such Option as set forth in
the Award Agreement), by the Participant’s designated beneficiary, provided
such beneficiary has been designated prior to Participant’s death in a form
acceptable to the Administrator.  If no
such beneficiary has been designated by the Participant, then such Option may
be exercised by the personal representative of the Participant’s estate or by
the person(s) to whom the Option is transferred pursuant to the
Participant’s will or in accordance with the laws of descent and
distribution.  In the absence of a
specified time in the Award Agreement, the Option will remain 

 

10

 

exercisable for twelve (12) months following
Participant’s death.  Unless otherwise
provided by the Administrator, if at the time of death Participant is not
vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option will immediately revert to the Plan.  If the Option is not so exercised within the
time specified herein, the Option will terminate, and the Shares covered by
such Option will revert to the Plan.

 

(v)           Other Termination.  A Participant’s Award Agreement may also
provide that if the exercise of the Option following the termination of
Participant’s status as a Service Provider (other than upon the Participant’s
death or Disability) would result in liability under Section 16(b), then
the Option will terminate on the earlier of (A) the expiration of the term
of the Option set forth in the Award Agreement, or (B) the 10th day after
the last date on which such exercise would result in such liability under Section 16(b).  Finally, a Participant’s Award Agreement may
also provide that if the exercise of the Option following the termination of
the Participant’s status as a Service Provider (other than upon the Participant’s
death or disability) would be prohibited at any time solely because the
issuance of Shares would violate the registration requirements under the
Securities Act, then the Option will terminate on the earlier of (A) the
expiration of the term of the Option, or (B) the expiration of a period of
three (3) months after the termination of the Participant’s status as a
Service Provider during which the exercise of the Option would not be in
violation of such registration requirements.

 

7.                                       Stock
Appreciation Rights.

 

(a)                                  Grant
of Stock Appreciation Rights. 
Subject to the terms and conditions of the Plan, a Stock Appreciation
Right may be granted to Service Providers at any time and from time to time as
will be determined by the Administrator, in its sole discretion.

 

(b)                                 Number
of Shares.  The Administrator will
have complete discretion to determine the number of Stock Appreciation Rights
granted to any Participant, provided that during any Fiscal Year, no
Participant will be granted Stock Appreciation Rights covering more than 1,000,000
Shares.  Notwithstanding the foregoing
limitation, in connection with a Participant’s initial service as an Employee,
an Employee may be granted Stock Appreciation Rights covering up to an
additional 2,000,000 Shares.

 

(c)                                  Exercise
Price and Other Terms.  The
Administrator, subject to the provisions of the Plan, will have complete
discretion to determine the terms and conditions of Stock Appreciation Rights
granted under the Plan, provided, however, that the exercise price will be not less than 100% of the Fair Market Value
of a Share on the date of grant.  The
Administrator may not modify or amend a Stock Appreciation Right to reduce the
exercise price of such Stock Appreciation Right after it has been granted
(except for adjustments made pursuant to Section 14 of the Plan) nor may
the Administrator cancel any outstanding Stock Appreciation Right and replace
it with a new Stock Appreciation Right, Option, or other Award with a lower
exercise price, unless, in either case, such action is approved by the Company’s
stockholders.

 

(d)                                 Stock
Appreciation Right Agreement.  Each
Stock Appreciation Right grant will be evidenced by an Award Agreement that
will specify the exercise price, the term of the Stock Appreciation Right, the
conditions of exercise, and such other terms and conditions as the
Administrator, in its sole discretion, will determine.

 

11

 

(e)                                  Expiration
of Stock Appreciation Rights.  A
Stock Appreciation Right granted under the Plan will expire upon the date
determined by the Administrator, in its sole discretion, and set forth in the
Award Agreement.  Notwithstanding the foregoing,
the rules of Section 6(e) also will apply to Stock Appreciation
Rights.

 

(f)                                    Payment
of Stock Appreciation Right Amount. 
Upon exercise of a Stock Appreciation Right, a Participant will be
entitled to receive payment from the Company in an amount determined by
multiplying:

 

(i)            The difference between the Fair
Market Value of a Share on the date of exercise over the exercise price; times

 

(ii)           The number of Shares with respect to
which the Stock Appreciation Right is exercised.

 

At the discretion of the
Administrator, the payment upon Stock Appreciation Right exercise may be in
cash, in Shares of equivalent value, or in some combination thereof.

 

8.                                       Restricted
Stock.

 

(a)                                  Grant
of Restricted Stock.  Subject to the
terms and provisions of the Plan, the Administrator, at any time and from time
to time, may grant Shares of Restricted Stock to Service Providers in such
amounts as the Administrator, in its sole discretion, will determine.

 

(b)                                 Restricted
Stock Agreement.  Each Award of
Restricted Stock will be evidenced by an Award Agreement that will specify the
Period of Restriction, the number of Shares granted, and such other terms and
conditions as the Administrator, in its sole discretion, will determine.  Notwithstanding the foregoing sentence,
during any Fiscal Year no Participant will receive more than an aggregate of 300,000
Shares of Restricted Stock; provided, however, that in connection with a
Participant’s initial service as an Employee, an Employee may be granted an
aggregate of up to an additional 600,000 Shares of Restricted Stock.  Unless the Administrator determines
otherwise, Shares of Restricted Stock will be held by the Company as escrow
agent until the restrictions on such Shares have lapsed.

 

(c)                                  Transferability.  Except as provided in this Section 8,
Shares of Restricted Stock may not be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated until the end of the applicable Period of
Restriction.

 

(d)                                 Other
Restrictions.  The Administrator, in
its sole discretion, may impose such other restrictions on Shares of Restricted
Stock as it may deem advisable or appropriate.

 

(e)                                  Removal
of Restrictions.  Except as otherwise
provided in this Section 8, Shares of Restricted Stock covered by each
Restricted Stock grant made under the Plan will be released from escrow as soon
as practicable after the last day of the Period of Restriction.  The Administrator, in its discretion, may
accelerate the time at which any restrictions will lapse or be removed.

 

12

 

(f)            Voting Rights.  During the Period of Restriction, Service
Providers holding Shares of Restricted Stock granted hereunder may exercise
full voting rights with respect to those Shares, unless the Administrator
determines otherwise.

 

(g)           Dividends and Other Distributions.  During the Period of Restriction, Service
Providers holding Shares of Restricted Stock will be entitled to receive all
dividends and other distributions paid with respect to such Shares unless
otherwise provided in the Award Agreement. 
If any such dividends or distributions are paid in Shares, the Shares
will be subject to the same restrictions on transferability and forfeitability
as the Shares of Restricted Stock with respect to which they were paid.

 

(h)           Return of Restricted Stock to
Company.  On the date set forth in
the Award Agreement, the Restricted Stock for which restrictions have not
lapsed will revert to the Company and again will become available for grant
under the Plan.

 

9.                                       Restricted
Stock Units.

 

(a)           Grant.  Restricted Stock Units may be granted at any
time and from time to time as determined by the Administrator.  Each Restricted Stock Unit grant will be
evidenced by an Award Agreement that will specify such other terms and
conditions as the Administrator, in its sole discretion, will determine,
including all terms, conditions, and restrictions related to the grant, the
number of Restricted Stock Units and the form of payout, which, subject to Section 9(d),
may be left to the discretion of the Administrator.  Notwithstanding anything to the contrary in
this subsection (a), during any Fiscal Year of the Company, no Participant will
receive more than an aggregate of 300,000 Restricted Stock Units; provided,
however, that in connection with a Participant’s initial service as an
Employee, an Employee may be granted an aggregate of up to an additional 600,000
Restricted Stock Units.

 

(b)           Vesting Criteria and Other Terms.  The Administrator will set vesting criteria
in its discretion, which, depending on the extent to which the criteria are
met, will determine the number of Restricted Stock Units that will be paid out
to the Participant.  After the grant of
Restricted Stock Units, the Administrator, in its sole discretion, may reduce
or waive any restrictions for such Restricted Stock Units.  Each Award of Restricted Stock Units will be
evidenced by an Award Agreement that will specify the vesting criteria, and
such other terms and conditions as the Administrator, in its sole discretion,
will determine.

 

(c)           Earning Restricted Stock Units.  Upon meeting the applicable vesting criteria,
the Participant will be entitled to receive a payout as specified in the Award
Agreement.  Notwithstanding the
foregoing, at any time after the grant of Restricted Stock Units, the
Administrator, in its sole discretion, may reduce or waive any vesting criteria
that must be met to receive a payout.

 

(d)           Form and Timing of Payment.  Payment of earned Restricted Stock Units will
be made as soon as practicable after the date(s) set forth in the Award
Agreement.  The Administrator, in its
sole discretion, may pay earned Restricted Stock Units in cash, Shares, or a
combination thereof.  Shares represented
by Restricted Stock Units that are fully paid in cash again will be available
for grant under the Plan.

 

13

 

(e)           Cancellation.  On
the date set forth in the Award Agreement, all unearned Restricted Stock Units
will be forfeited to the Company.

 

10.                                 Performance
Units and Performance Shares.

 

(a)           Grant of Performance Units/Shares.  Performance Units and Performance Shares may
be granted to Service Providers at any time and from time to time, as will be
determined by the Administrator, in its sole discretion.  The Administrator will have complete
discretion in determining the number of Performance Units/Shares granted to
each Participant provided that during any Fiscal Year, (a) no Participant
will receive Performance Units having an initial value greater than $2,000,000,
and (b) no Participant will receive more than 300,000 Performance
Shares.  Notwithstanding the foregoing
limitation, in connection with a Participant’s initial service as an Employee,
an Employee may be granted up to an additional 600,000 Performance Shares and
additional Performance Units having an initial value up to $2,000,000.

 

(b)           Value of Performance Units/Shares.  Each Performance Unit will have an initial
value that is established by the Administrator on or before the date of
grant.  Each Performance Share will have
an initial value equal to the Fair Market Value of a Share on the date of
grant.

 

(c)           Performance Objectives and Other
Terms.  The Administrator will set
performance objectives or other vesting provisions (including, without
limitation, continued status as a Service Provider) in its discretion which,
depending on the extent to which they are met, will determine the number or
value of Performance Units/Shares that will be paid out to the Participant.  The Administrator may set performance
objectives based upon the achievement of Company-wide, divisional, or
individual goals, or any other basis determined by the Administrator in its
discretion.  Each Award of Performance
Units/Shares will be evidenced by an Award Agreement that will specify the
Performance Period, and such other terms and conditions as the Administrator,
in its sole discretion, will determine.

 

(d)           Earning of Performance
Units/Shares.  After the applicable
Performance Period has ended, the holder of Performance Units/Shares will be
entitled to receive a payout of the number of Performance Units/Shares earned
by the Participant over the Performance Period, to be determined as a function
of the extent to which the corresponding performance objectives or other
vesting provisions have been achieved. 
After the grant of a Performance Unit/Share, the Administrator, in its
sole discretion, may reduce or waive any performance objectives or other
vesting provisions for such Performance Unit/Share.

 

(e)           Form and Timing of Payment of
Performance Units/Shares.  Payment of
earned Performance Units/Shares will be made as soon as practicable after the
expiration of the applicable Performance Period.  The Administrator, in its sole discretion,
may pay earned Performance Units/Shares in the form of cash, in Shares (which
have an aggregate Fair Market Value equal to the value of the earned
Performance Units/Shares at the close of the applicable Performance Period) or
in a combination thereof.

 

14

 

(f)            Cancellation of Performance
Units/Shares.  On the date set forth
in the Award Agreement, all unearned or unvested Performance Units/Shares will
be forfeited to the Company, and again will be available for grant under the Plan.

 

11.                                 Performance
Goals.  The granting and/or vesting
of Awards of Restricted Stock, Restricted Stock Units, Performance Shares and
Performance Units and other incentives under the Plan may be made subject to
the attainment of performance goals relating to one or more business criteria
within the meaning of Section 162(m) of the Code and may provide for
a targeted level or levels of achievement (“Performance Goals”) including one
or more of the following measures: (a) Annual Revenue, (b) Cash
Collections, (c) Customer Satisfaction MBOs, (d) Earnings Per Share, (e) Net
Income, (f) New Orders, (g) Operating Profit, (h) Pro Forma Net
Income, (i) Return on Designated Assets, (j) Return on Equity, (k) Return
on Sales, and (l) Product Shipments. 
Any Performance Goals may be used to measure the performance of the
Company as a whole or a business unit of the Company and may be measured
relative to a peer group or index.  The
Performance Goals may differ from Participant to Participant and from Award to
Award.  Any criteria used may be (i) measured
in absolute terms, (ii) compared to another company or companies, (iii) measured
against the performance of the Company as a whole or a segment of the Company
and/or (iv) measured on a pre-tax or post-tax basis (if applicable).  Prior to the Determination Date, the
Administrator will determine whether any significant element(s) will be
included in or excluded from the calculation of any Performance Goal with
respect to any Participant.

 

12.                                 Leaves
of Absence/Transfer Between Locations. 
Unless the Administrator provides otherwise, vesting of Awards granted
hereunder will be suspended during any unpaid leave of absence.  A Service Provider will not cease to be an
Employee in the case of (i) any leave of absence approved by the Company
or (ii) transfers between locations of the Company or between the Company and
its Affiliates.  For purposes of
Incentive Stock Options, no such leave may exceed ninety (90) days, unless
reemployment upon expiration of such leave is guaranteed by statute or
contract.  If reemployment upon
expiration of a leave of absence approved by the Company is not so guaranteed,
then three (3) months following the ninety-first (91st) day of such leave any Incentive Stock
Option held by the Participant will cease to be treated as an Incentive Stock
Option and will be treated for tax purposes as a Nonstatutory Stock Option.

 

13.                                 Transferability
of Awards.  Unless determined
otherwise by the Administrator, an Award may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner other than by will or
by the laws of descent or distribution and may be exercised, during the
lifetime of the Participant, only by the Participant.  With the approval of the Administrator, a
Participant may, in a manner specified by the Administrator, (a) transfer
an Award to a Participant’s spouse or former spouse pursuant to a
court-approved domestic relations order which relates to the provision of child
support, alimony payments or marital property rights, and (b) transfer an
Option by bona fide gift and not for any consideration, to (i) a member or
members of the Participant’s immediate family, (ii) a trust established
for the exclusive benefit of the Participant and/or member(s) of the
Participant’s immediate family, (iii) a partnership, limited liability
company of other entity whose only partners or members are the Participant
and/or member(s) of the Participant’s immediate family, or (iv) a
foundation in which the Participant and/or member(s) of the Participant’s
immediate family control the management of the foundation’s assets.  For purposes of this Section 13, “immediate
family” shall mean the Participant’s spouse, former spouse, children,
grandchildren, parents, grandparents, siblings, nieces, nephews, parents-in-law,
sons-in-law, daughters-in-law, 

 

15

 

brothers-in-law,
sisters-in-law, including adoptive or step relationships and any person sharing
the Participant’s household (other than as a tenant or employee).

 

14.                                 Adjustments;
Dissolution or Liquidation; Merger or Change in Control.

 

(a)           Adjustments.  In the event that any dividend
or other distribution (whether in the form of cash, Shares, other securities,
or other property), recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of Shares or other securities of the Company, or other
change in the corporate structure of the Company affecting the Shares occurs, the
Administrator, in order to prevent diminution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, shall adjust
the number and class of Shares that may be delivered under the Plan and/or the
number, class, and price of Shares covered by each outstanding Award, and
the numerical Share limits set forth in Sections 3, 6, 7, 8, 9 and 10.

 

(b)           Dissolution or Liquidation.  In the event of the proposed dissolution or
liquidation of the Company, the Administrator will notify each Participant as
soon as practicable prior to the effective date of such proposed
transaction.  To the extent it has not
been previously exercised, an Award will terminate immediately prior to the
consummation of such proposed action.

 

(c)           Change in Control.  In the event of a Change in Control, each
outstanding Award will be assumed or an equivalent option or right substituted
by the successor corporation or a Parent or Subsidiary of the successor
corporation (the “Successor Corporation”).  In the event that the Successor Corporation
refuses to assume or substitute for the Award, the Participant will fully vest
in and have the right to exercise all of his or her outstanding Options and
Stock Appreciation Rights, including Shares as to which such Awards would not
otherwise be vested or exercisable, all restrictions on Restricted Stock will
lapse, and, with respect to Restricted Stock Units, Performance Shares and
Performance Units, all Performance Goals or other vesting criteria will be
deemed achieved at target levels and all other terms and conditions met.  In addition, if the Successor Corporation
refuses to assume or substitute an Option or Stock Appreciation Right in the
event of a Change in Control, the Administrator will notify the Participant in
writing or electronically that the Option or Stock Appreciation Right will be
fully vested and exercisable for a period of time determined by the
Administrator in its sole discretion, and the Option or Stock Appreciation
Right will terminate upon the expiration of such period.

 

For the purposes of this
subsection (c), an Award will be considered assumed if, following the Change in
Control, the Award confers the right to purchase or receive, for each Share
subject to the Award immediately prior to the Change in Control, the
consideration (whether stock, cash, or other securities or property) or, in the
case of a Stock Appreciation Right upon the exercise of which the Administrator
determines to pay cash or a Performance Share or Performance Unit which the
Administrator can determine to pay in cash, the fair market value of the
consideration received in the merger or Change in Control by holders of Common
Stock for each Share held on the effective date of the transaction (and if
holders were offered a choice of consideration, the type of consideration
chosen by the holders of a majority of the outstanding Shares); provided,
however, that if such consideration received in the Change in Control is not
solely common stock of the Successor Corporation, the Administrator may, with
the consent of the Successor Corporation, provide for the consideration to be
received upon the exercise of an Option or Stock Appreciation Right or upon the

 

16

 

payout of a Restricted Stock
Unit, Performance Share or Performance Unit, for each Share subject to such
Award (or in the case of an Award settled in cash, the number of implied shares
determined by dividing the value of the Award by the per share consideration
received by holders of Common Stock in the Change in Control), to be solely
common stock of the Successor Corporation equal in fair market value to the per
share consideration received by holders of Common Stock in the Change in
Control.

 

Notwithstanding anything
in this Section 14(c) to the contrary, an Award that vests, is earned
or paid-out upon the satisfaction of one or more Performance Goals will not be
considered assumed if the Company or its successor modifies any of such Performance
Goals without the Participant’s consent; provided, however, a modification to
such Performance Goals only to reflect the Successor Corporation’s post-Change
in Control corporate structure will not be deemed to invalidate an otherwise
valid Award assumption.

 

15.                                 Tax
Withholding

 

(a)           Withholding Requirements.  Prior to the delivery of any Shares or cash
pursuant to an Award (or exercise thereof), the Company will have the power and
the right to deduct or withhold, or require a Participant to remit to the
Company, an amount sufficient to satisfy federal, state, local, foreign or
other taxes required to be withheld with respect to such Award (or exercise
thereof).

 

(b)           Withholding Arrangements.  The Administrator, in its sole discretion and
pursuant to such procedures as it may specify from time to time, may permit a
Participant to satisfy such tax withholding obligation, in whole or in part by (without
limitation) (a) paying cash, (b) electing to have the Company
withhold otherwise deliverable cash or Shares having a Fair Market Value equal
to the minimum amount required to be withheld, (c) delivering to the
Company already-owned Shares having a Fair Market Value equal to the amount
required to be withheld, or
(d) selling a sufficient number of Shares otherwise deliverable to the
Participant through such means as the Administrator may determine in its sole
discretion (whether through a broker or otherwise) equal to the amount required
to be withheld.  The amount of the
withholding requirement will be deemed to include any amount which the Administrator
agrees may be withheld at the time the election is made, not to exceed the
amount determined by using the maximum federal, state or local marginal income
tax rates applicable to the Participant with respect to the Award on the date
that the amount of tax to be withheld is to be determined.  The Fair Market Value of the Shares to be
withheld or delivered will be determined as of the date that the taxes are
required to be withheld.

 

16.                                 No
Effect on Employment or Service. 
Neither the Plan nor any Award will confer upon a Participant any right
with respect to continuing the Participant’s relationship as a Service Provider
with the Company, nor will they interfere in any way with the Participant’s
right or the Company’s right to terminate such relationship at any time, with
or without cause, to the extent permitted by Applicable Laws.

 

17.                                 Date
of Grant.  The date of grant of an
Award will be, for all purposes, the date on which the Administrator makes the
determination granting such Award, or such other later date as is determined by
the Administrator.  Notice of the
determination will be provided to each Participant within a reasonable time
after the date of such grant.

 

17

 

18.                                 Term
of Plan.  Subject to Section 22  of the Plan, the Plan will become effective upon its
adoption by the Board.  It will continue
in effect for a term of ten (10) years unless terminated earlier under Section 19  of the Plan.

 

19.                                 Amendment
and Termination of the Plan.

 

(a)           Amendment and Termination.  The Administrator may at any time amend,
alter, suspend or terminate the Plan.

 

(b)           Stockholder Approval.  The Company will obtain stockholder approval
of any Plan amendment to the extent necessary and desirable to comply with
Applicable Laws.

 

(c)           Effect of Amendment or Termination.  No amendment, alteration, suspension or
termination of the Plan will impair the rights of any Participant, unless
mutually agreed otherwise between the Participant and the Administrator, which
agreement must be in writing and signed by the Participant and the
Company.  Termination of the Plan will
not affect the Administrator’s ability to exercise the powers granted to it
hereunder with respect to Awards granted under the Plan prior to the date of
such termination.

 

20.                                 Conditions
Upon Issuance of Shares.

 

(a)           Legal Compliance.  Shares will not be issued pursuant to the
exercise of an Award unless the exercise of such Award and the issuance and
delivery of such Shares will comply with Applicable Laws and will be further
subject to the approval of counsel for the Company with respect to such
compliance.

 

(b)           Investment Representations.  As a condition to the exercise of an Award,
the Company may require the person exercising such Award to represent and
warrant at the time of any such exercise that the Shares are being purchased
only for investment and without any present intention to sell or distribute
such Shares if, in the opinion of counsel for the Company, such a
representation is required.

 

21.                                 Inability
to Obtain Authority.  The inability
of the Company to obtain authority from any regulatory body having
jurisdiction, which authority is deemed by the Company’s counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, will relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority will not have been obtained.

 

22.                                 Stockholder
Approval.  The Plan will be subject
to approval by the stockholders of the Company within twelve (12) months after
the date the Plan is adopted.  Such
stockholder approval will be obtained in the manner and to the degree required
under Applicable Laws.

 

18

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